FCC Rethinks Over-the-Top Decision

Move could lead to default arbitration for Comcast/NBCU deals

Why This Matters

What Is the ‘Over-the-Top Condition’?

Comcast-owned programming networks agreed to abide by the following “benchmark” condition in the FCC Media Bureau’s NBCU order:

“The Benchmark Condition requires a C-NBCU Programmer to provide a requesting OVD with Online Video Programming if the OVD has an agreement for Comparable Programming with a peer programmer.” The programming that a C-NBCU Programmer is required to provide to the OVD must be on terms that are “economic[ally] equivalent” to the terms the OVD has received from the peer programmer.

The Benchmark Condition further specifies that “the economic equivalent should take account of…any difference in the value of the programming being sought relative to the Comparable Programming” and that “economic equivalent terms and conditions shall consist of the same basic Economic Model(s) for the Comparable Programming.” —JE

The FCC has long known it can’t please all the people all
the time. And last week, the nation’s largest cable operator found
itself on the short end of that axiom.

The FCC Media Bureau stayed its own decision from a little over three
months ago and ruled that, at least for now and perhaps for good, overthe-
top video distributors (OVDs) who seek access to Comcast/NBCUowned
programming do not have to make the terms of their agreements
with other programmers available to Comcast’s outside counsel or experts.

Comcast will now have to either trust OVDs when they say terms are
or are not comparable, or submit impasses to an outside arbitrator.

In the original Dec. 4 decision, the bureau clarified that “OVDs that
invoke the Benchmark Condition must disclose the terms of comparable
peer programming agreements to the extent necessary to enable
C-NBCU to carry out its obligations under the condition.”

That decision had been in response to Comcast’s request for a complementary
clarification, saying that if it were to provide similar terms, it
would have to know what the other terms were. While Comcast had
asked that the information be made available to company in-house executives,
the bureau decided it should only go to an outside entity.

Not wanting to make that info available to the competition—even
through outside counsel—CBS, News Corp., Viacom, Sony, Time Warner
and Disney filed a request Dec. 18 (joined by public interest group Public
Knowledge) for the stay and challenging the underlying condition.

Comcast fired back, saying it was “self-evident” that it could not comply
with the comparable terms and conditions benchmark unless it had those
comparables to begin with. Comcast also said that none of the OVDs it
was negotiating with for carriage of individual channels had made that info
available directly to the company. Of course, for now they won’t have to.

The benchmark condition requires Comcast/NBCU to make its content
available to OVDs on similar terms and conditions to deals those OVDs
have with other content providers (see What Is the ‘Over-the-Top Condition’?).

But the bureau actually dismissed that stay request, as well as opposition
to it by Comcast, and granted the stay on its own motion. “The Content
Companies raise significant issues, and we believe
that the public interest will be best served
by staying the Benchmark Condition Order to
allow the Commission an opportunity to address
those issues,” the bureau said.

The FCC may now decide that making the
terms of other deals available was not necessary
to fulfill the benchmark condition, or change its
mind and conclude that the condition was not in
the public interest, period.

In its recent annual report to the commission,
Comcast said it was negotiating deals with OVDs
for full-boat carriage. But the benchmark clarification does not apply to those deals because they
do not have the “similar terms” condition, as do
negotiations for individual channels. “The full freight condition doesn’t require
similar terms, so we wouldn’t need to see the other deals to enter into
negotiations,” said a Comcast source. In those deals, Comcast can negotiate
before the OVD has negotiated with anyone else. But because the OVD can’t
have more than 45% of its content be Comcast/NBCU channels, it can’t
launch until it has lined up 55% from a separate source.

Why did the bureau issue its own stay rather than simply grant the stay
requested by the content providers? The FCC had no comment at presstime.
According to a communications attorney who has been following the
case, the FCC doesn’t want to be perceived as taking sides. In addition, it
won’t have to meet the four-pronged test that an outside party’s challenge
would to warrant a stay. It also gives the bureau more time than if it were
simply the next volley in a challenge process that began late last year.

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