Court: FCC, Tennis Channel Failed to Make Discrimination Case Against Comcast

Finds insufficient evidence to support FCC decision; Tennis Channel vows to appeal
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A three-judge panel of the U.S. Court of Appeals for the
District of Columbia has unanimously ruled that Comcast did not violate the
FCC's program carriage rules.

"The Commission has failed to identify adequate
evidence of unlawful discrimination," the court concluded. It did not
reach issues regarding the First Amendment or statute of limitations.

In writing for the majority, Judge Stephen Williams wrote
that the court concluded that the commission "has nothing to refute
Comcast's contention that its rejection of Tennis' proposal was simply a
straight-up financial analysis." In essence, the court was agreeing with
Comcast that Tennis had not shown how its proposal of wider carriage provided
any business benefit to the cable operator that it would be forgoing to favor
its own co-owned networks.

Cable operators are allowed to discriminate in carriage so
long as it is not for anticompetitive reasons.

Comcast had been carrying Tennis on a sports tier ever
since, which costs extra, when in 2009 Tennis sought wider carriage and offered
analysis of how much it would cost Comcast for the extra carriage.

"Neither the analysis provided at the time, nor
testimony received in this litigation, made (much less substantiated)
projections of any resulting increase in revenue for Comcast, let alone revenue
sufficient to offset the increased fees."

According to an attorney familiar with the process, Tennis
Channel or the FCC--but likely both together--have 45 days to ask for a full
(en banc) review by the D.C. appeals court of the three-judge panel decision,
or 90 days if they took it directly to the Supreme Court. A spokesperson for
acting FCC chair Mignon Clyburn had no comment on the decision, or what could
become her first big decision--whether to appeal. Tennis Channel said it was
weighing its options on how to appeal.

We are pleased the Court of Appeals correctly rejected the
claim that we discriminated against Tennis Channel," said Sena
Fitzmaurice, VP, government communications, for Comcast. Tennis Channel
received exactly the carriage it bargained for and agreed to. Comcast's
decision to carry Tennis Channel was the product of legitimate business
considerations, not affiliation. As Comcast maintained from the start, those
facts did not and could not support the finding of discrimination necessary to
sustain a program carriage violation."

The National Cable & Telecommuinications Association, which filed an amicus brief in support of member Comcast, was also pleased with the decision and suggested to the FCC it should heed its message, which was to look more narrowly at the statute.

"We believe that the Court of Appeal's unanimous ruling in the Tennis Channel case provides important guidance for the Commission concerning the need to construe and apply the statute narrowly, as Congress intended, NCTA said in a statement,. "This is particularly true in light of today's highly competitive video marketplace and the First Amendment interests at stake. As Judge Kavanaugh wrote: "In restricting the editorial discretion of video programming distributors, the FCC cannot continue to implement a regulatory model premised on a 1990s snapshot of the cable market.'"

Tennis Channel said it would appeal the decision.

"While Tennis Channel appreciates the time and
consideration that the Circuit Court has given to this important FCC Order,
we're disappointed with today's decision and respectfully disagree," the
channel said in a statement. "Based on the merits of this particular case,
we believe that it is the obligation of the FCC to act in the public interest
to ensure a diverse marketplace of voices, as mandated by Congress when it
introduced the Cable Act. As a small, independent company defending ourselves
against one of the world's largest media conglomerates, we would love for this
long process to be justly resolved and behind us. However, Comcast's clear
pattern of discrimination against Tennis Channel in favor of the competing
networks that it owns - as detailed at length by the FCC - warrants further
review of the panel's decision and we intend to seek that review."

The FCC, in its first upholding of a program carriage
complaint, in July 2012 ruled 3-2 along party lines that the nation's largest
cable operator had discriminated against Tennis Channel in favor of Comcast's
own similarly situated co-owned programming networks Versus (now NBC Sports
Net) and Golf Channel. The FCC remedy was for Comcast to provide Tennis Channel
with the same level of distribution, whether that be basic or sports tier or
not carrying it at all -- that it provided its co-owned channels. That FCC
remedy had been stayed pending this decision, so Comcast has continued to carry
the channel on a sports tier, per its contract with Tennis.

Oral
argument was held Feb. 25
and even some supporters of Tennis Channel
conceded the court had been tough on its arguments. Between the serious First
Amendment issues with the FCC's carriage remedy expressed by Judge Brett
Kavanaugh and the contract issues on which Judge Harry Edwards focused, the FCC
appeared to have an uphill fight to keep its decision from being remanded back.

Following the hearing, sources on both sides of the case
expressed that sentiment following lengthy questioning Comcast argued that it
did not unreasonably restrain Tennis Channel's ability to compete and did not
discriminate on the basis of affiliation. Comcast said the FCC decision
violates the First Amendment and that, in any event, Tennis Channel filed its
complaint past the statute of limitations so it should be moot.

The FCC had argued that cable did not still have to have
bottleneck control of an MVPD market for the anti-discrimination provision of
the Cable Act to still hold sway, but that if the court found that a showing of
bottleneck control was necessary, the court should give it a chance to prove
that.

The decision could well have an impact on the years-long
carriage dispute between Cablevision Systems and GSN. An
FCC administrative law judge pushed back that hearing until mid-July
in
hopes of getting some guidance from the Tennis Channel decision.

The decision also came in the midst of some of
Tennis Channel's highest-profile coverage -- the French Open, when that
coverage is divided among ESPN, Tennis and Comcast-owned NBC.

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