Any tennis player will tell you it’s better to have a first than second serve. Similarly, when it comes to TV channels looking for carriage, it’s better to be on a distributor’s first tier than a secondary, specialty tier. However, a recent United States Court of Appeals for the District of Columbia Circuit ruling in a dispute between The Tennis Channel and cable company Comcast affirms that networks face a high net to clear when seeking improved placement from their distributors even where it appears the distributors might be giving preferential treatment to their wholly-owned channels.
The dispute between Tennis and Comcast centered around whether Comcast’s refusal to place The Tennis Channel on Comcast’s “basic tier” along with Comcast’s wholly owned and affiliated sports channels, The Golf Channel and Versus (now the NBC Sports Network), constituted unlawful discrimination in violation of the Communications Act of 1934 which regulates multi-video platform distributors (MPVDs) like Comcast. Specifically, Section 616 of the Act prohibits discrimination by a distributor against unaffiliated networks “based on affiliation” and where the effect of the conduct is to “unreasonably restrain the ability of the unaffiliated programming vendor to compete fairly.”
Under the 2005 carriage contract between Tennis and Comcast, Comcast was given the right to carry Tennis on a “tier” of its own choosing and elected to place Tennis on its “sports tier”, which reaches a smaller audience than the basic tier and thus generates less licensing fees for its constituent channels. In 2009, Tennis requested to be bumped up to the basic tier and offered to charge Comcast a reduced per-subscriber fee. Comcast rejected the offer, and Tennis brought a claim before the FCC’s Media Bureau.
After hearing a volley of arguments, the FCC panel found that Tennis had established a prima facie case that its lower placement relative to The Golf Channel and Versus constituted unlawful discrimination based on affiliation. In doing so, the Commission declared that Comcast must carry Tennis on the same basic distribution tier as Golf and Versus. Advantage – Tennis.
Comcast appealed the decision to United States Court of Appeals for the District of Columbia Circuit. In a unanimous decision (3-love) the Court found in favor of Comcast on the basis that Tennis had offered no proof that its 2009 proposal would have led to increased profits for Comcast nor did they demonstrate consumer demand existed for such a change. The Court determined that Comcast’s financial analysis was justifiable grounds for rejecting Tennis’ offer and noted that “if the MVPD treats vendors differently based on a reasonable business purpose…there is no violation [of Section 616]”. In other words: Game, Set – Comcast.
An appeal seems likely, as Tennis Channel expressed disappointment with the ruling, stating that “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.”