Ohio Spat to Arbitration

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In a preliminary victory for small cable operators, an arbitrator ruled that a contract dispute between Massillon Cable TV and FSN Ohio should proceed to arbitration under conditions set on News Corp. as part of its DirecTV acquisition.

Arbitrator Patricia Murphy issued an interim order finding April 26 in favor of Massillon, which maintained that its dispute with the Fox Cable-owned regional sports network was “arbitrable” under special conditions set on News Corp. in 2004 by the Federal Communications Commission as part of the DirecTV deal. Those conditions, the so-called Fox-Hughes order, gave distributors the option of submitting carriage disputes regarding News Corp.-owned regional sports networks to arbitration.

“Fox has argued that the scope of the Fox-Hughes order is very, very limited,” said Mark Palchick, Massillon's lawyer. “This says no: Where there is a dispute over price terms and conditions between a cable operator and a regional sports network, you have this remedy, because Fox, as a matter of law, has undue market power.”

Massillon and FSN Ohio have been directed to prepare their cases for an arbitration hearing on the case's merits.

Last week, lawyers for Fox Cable Networks parent News Corp. met with the FCC's Media Bureau to discuss the arbitrator's interim order.

Last Wednesday, News Corp. sent a letter to the FCC saying that FSN Ohio will be seeking an immediate review of the arbitrator's decision, looking to overturn it.

“This is just an interim order that doesn't even address Massillon's underlying claim,” Anthony Basich, FSN Ohio's attorney, said last week. “We believe that upon full FCC review — whether this happens now or at the end of the arbitration — the FCC will reaffirm the clear language of the News-Hughes conditions. Those conditions only allow arbitration of the terms of a new regional sports network carriage agreement, when there is no current agreement in place — and not arbitration of disputes under existing agreements.”

Massillon — which has more than 45,000 subscribers in Ohio — last October demanded arbitration against FSN Ohio of an ongoing contract dispute that they'd failed to resolve despite negotiations.

The sports channel one year ago lost carriage of Cleveland Indians Major League Baseball games to a new channel, SportsTime Ohio. As a result, Massillon wanted FSN Ohio “to adjust” its license fee. Fox Cable moved to dismiss the arbitration, claiming that a midterm contract dispute was not subject to arbitration.

But the arbitrator, selected by the two parties from a special American Arbitration Association panel, rejected FSN Ohio's argument, which was that the arbitration provisions of the FCC's conditions only applied in two limited situations: following the expiration of an existing contract or after a first-time request for such carriage.

“Fox's attempt to limit the effectiveness of the Fox/Hughes Order was clearly not consistent with the intent of the FCC's decision,” Massillon president Robert Gessner said in a prepared statement last week. “Now that we are past this initial delay, I look forward to the final decision of the arbitrator.”

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