Comcast Defends MFNs in FCC Video Inquiry - Broadcasting & Cable

Comcast Defends MFNs in FCC Video Inquiry

Says they are pro-competitive or, at worse, benign
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Comcast is telling the FCC that independent and diverse content producers have a wealth of distribution options, including on Comcast and NBCU outlets, and that contract provisions including most favored nation clauses (MFNs) and alternative distribution methods (ADMs) are pro-competitive or at least 'benign."

It also says that complaints about program bundling, minimum penetration and PEG channel access are meritless.

That came in its response to the FCC's Notice of Inquiry into access by independent programmers to distribution platforms, both traditional and over-the-top.

In launching the inquiry last month, FCC chairman Tom Wheeler and commissioner Mignon Clyburn signaled there were access issues that needed a hard look, including with contractual terms on pricing and online access.

Comcast countered in its filing that there is neither a compelling policy reason nor plausible legal authority for the FCC to get more involved than it is in carriage negotiations and says the NOI "strains to see a glass half-empty, when in fact the glass is overflowing."

Comcast says that in the current, "ultracompetitive marketplace," there is no reason for the FCC to raise extraneous issues like MFNs and PEG programming and deem them market obstacles that need investigating.

Comcast also raises First Amendment issues with a government inquiry into particular classes of programming "especially with regulatory expansion in mind," and adds that such expansion would "not withstand judicial scrutiny."

Comcast says the level of the NOI's focus on MFNs and ADMs is "unjustified." Both have reportedly been used to prevent online distribution, though Comcast takes aim at that characterization.

Comcast says they need to be looked at in the context of complicated negotiations. The MFNs are insurance policies to prevent distributors, and their customers, from being "shut out" of better deals extended to others, and ADMs are consistent with the longstanding practice of licensing content to various platforms in different windows to "help ensure that the programming for which a distributor is providing valuable consideration in order to benefit its customers is not immediately available for free online or otherwise in a window that encroaches on the initial exhibition window, which would undermine the value of what a distributor purchased."

Comcast says that programmers assume "significant economic risks" in carrying cable nets and pay "considerable" license fees. MFNs and ADMs reduce transaction costs, it says, and risks and uncertainties, which may in fact be greater for new networks.

The terms of those contracts, said Comcast, "are usually the product of significant give-and take, not 'insistence' or 'demands,' by one party."

Comcast conceded there is a context in which such contracts could (italics Comcast's) be used anticompetitively and as a sword rather than a shield. Comcast said that is not the case generally, including the agreements Comcast and NBCU are party to.

The FCC is expected to impose some form of MFN-related condition on its expected approval of the Charter-Time Warner Cable deal. That would be deal-specific and not apply more widely, but it would give a sense of where an FCC majority fell on the spectrum.

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