Henderson, Nev.— After nearly two years of trying to negotiate a master carriage deal for regional sports channels, the National Cable Television Cooperative last week filed for mandatory arbitration to determine how much independent cable operators will have to pay to carry seven Fox Sports Net networks.
The NCTC is seeking arbitration on behalf of 30 of its members, which the co-op declined to identify. The NCTC is authorized to act as bargaining agent for those operators under conditions placed on the sale of satellite service DirecTV to FSN parent News Corp. in 2004, according to NCTC president Jeffrey Abbas.
“While we had hoped to get the value [of the networks] determined through negotiation, we weren’t able to do so,” he added.
The cooperative first filed a notice of intent on Dec. 28 to seek binding arbitration for carriage of seven regional sports networks: FSN Florida, FSN North, FSN Northwest, FSN Ohio, SportsSouth, FSN South and FSN Southwest. Last week, it acted on that intent, Abbas said, by seeking resolution with the American Arbitration Association.
“We received notice from the NCTC to arbitrate on behalf of some of its smaller members, and we will continue to proceed according to [Federal Communications Commission] rules,” an FSN spokesman said. “We look forward to an amicable resolution.”
For the arbitration, the NCTC produced a proposed agreement of terms for a pact with FSN that would invoke most-favored-nation status for its members. Abbas said. FSN had two days to respond with its own proposed set of terms, Abbas said. The sports network could not comment at press time Friday on whether it had delivered a response to the AAA.
In effect, the NCTC is trying to get the lowest price FSN has agreed to for its channels as the market value that is stipulated in a final agreement.
Abbas said that he could not establish what the value of each channel is in the proposed agreement, because FSN included confidentiality clauses in the agreements it signed with the NCTC’s members. In effect, NCTC members are prohibited from telling the cooperative — even acting as their bargaining agent — what the current terms of their deals are.
Putting the two sides’ positions in writing for an arbitrator to review and seek details on market prices establishes a “bid” and an “ask” price. An arbitrator picks one or the other — nothing in between.
The NCTC’s arbitration filing comes after nearly two years of trying to negotiate agreements with the networks, Abbas said. “We had to do it now,” he added, because there are only three years left on a six-year window where the NCTC could seek mandatory, binding arbitration under terms stipulated by regulators on News Corp.’s acquisition of DirecTV from Hughes Electronics in 2004.
News Corp., a programmer, became a nationwide distributor of TV programming at that point. As part of the deal, the company is required to bargain in good faith on carriage of its channels with other distributors, such as cable operators.
Late last year, News Corp. agreed to sell its stake in DirecTV to John Malone’s Liberty Media. That deal is expected to be completed this year.
The 30 members’ deals with the FSN services expired Dec. 31, Abbas said. They were operating under the prior terms and now, with the notice and with NCTC now seeking a binding decision, FSN can’t drop the distributors.
The move could, nonetheless, lead to negotiation, while the arbitrator is reviewing the case and coming to a decision, Abbas said. With arbitration, one party wins and one loses. “Now,’’ he said, “you want to talk about it?’’