*Pages 1--8 from Microsoft Word - 4894.doc* Federal Communications Commission FCC 00- 404 Before the Federal Communications Commission Washington, D. C. 20554 In the Matter of: ) ) DIRECTV, Inc., ) Complainant, ) ) v. ) CSR 5112- P ) COMCAST Corporation, ) COMCAST- SPECTACOR, L. P., ) COMCAST SPORTSNET ) Defendants; ) ) ) ECHOSTAR COMMUNICATIONS ) Corporation, ) Complainant, ) ) v. ) CSR 5244- P ) COMCAST Corporation, ) COMCAST- SPECTACOR, L. P., ) COMCAST SPORTSNET ) Defendants. ) ) ) Application for Review of Orders of the Cable ) Services Bureau Denying Program Access ) Complaints ) MEMORANDUM OPINION AND ORDER Adopted: November 9, 2000 Released: November 20, 2000 By the Commission: Commissioner Furchtgott- Roth concurring and issuing a statement. I. INTRODUCTION 1. By this Order, we consolidate the above- captioned proceedings involving COMCAST Corporation, COMCAST- SPECTACOR, L. P., COMCAST SPORTSNET (collectively referred to as “Comcast”), DIRECTV, Inc. (" DIRECTV"), and EchoStar Communications Corporation (" EchoStar”). In separate proceedings, DIRECTV and EchoStar (collectively referred to as “Complainants”) filed program access complaints alleging that Comcast violated Sections 628( b) and (c) of the Communications Act of 1934 and the Commission's regulations by engaging in discrimination and unfair practices and 1 Federal Communications Commission FCC 00- 404 2 exercising undue influence over the distribution of satellite cable programming. 1 The Cable Services Bureau (the "Bureau"), acting under delegated authority denied the complaints in both proceedings. 2 Complainants each filed an Application for Review requesting Commission review and reversal of the Bureau’s decision to dismiss the complaints. 2. In both of the Bureau’s Orders, the underlying facts and legal issues were essentially the same. In resolving EchoStar’s complaint, the Bureau relied substantially on the analysis set forth in the DIRECTV Order. 3 Because the EchoStar Order and DIRECTV Order presented essentially the same claim, we see good cause to consolidate the Applications for Review related thereto and will review both in this Order. 4 After examining the record, we deny the Applications for Review. II. BACKGROUND 3. Congress enacted the Cable Television Consumer Protection and Competition Act of 1992 (" 1992 Cable Act") 5 to promote competition, with the view that regulation would be transitional until the video programming distribution market becomes competitive. 6 In enacting the program access provisions, codified in Section 628 of the Communications Act, 7 Congress sought to minimize the incentive and ability of vertically integrated programming suppliers to favor affiliated cable operators over nonaffiliated cable operators or other multichannel video programming distributors (" MVPDs") in the sale of satellite cable and satellite broadcast programming. 8 1 See 47 U. S. C. §§ 554( b), (c); 47 C. F. R. §§ 76. 1001, 76.1002( a), (b). 2 DIRECTV v. Comcast, 13 FCC Rcd 21822 (CSB 1998) (" DIRECTV Order"); EchoStar v. Comcast, 14 FCC Rcd 2089 (CSB 1999) (" EchoStar Order"). 3 EchoStar Order, 14 FCC Rcd at ¶ 19. 4 RCN Telecom Services, Inc. (“ RCN”) filed a Motion to Consolidate and for Oral Argument seeking to consolidate with this proceeding RCN’s application for review of a Bureau decision involving terrestrial delivery of New York City sports programming. See RCN Telecom Services of New York, Inc., et al. v. Cablevision Systems Corp., et al., 14 FCC Rcd 17093 (CSB 1999). Cablevision and Comcast filed oppositions to RCN’s Motion to which RCN filed a reply. Although the instant proceeding and the RCN case facially involve the same underlying issue, we believe that the particular facts of each proceeding are sufficiently unique as to render consolidation inappropriate. Accordingly, RCN’s Motion is denied. 5 Pub. L. No. 102- 385, 106 Stat. 1460 (1992) (codified as amended in scattered sections of 47 U. S. C.). 6 1992 Cable Act § 2( b)( 2), 106 Stat. 1463. See also Communications Act § 601( 6), 47 U. S. C. § 521( 6) (" The purposes of this title are to . . . promote competition in cable communications and minimize unnecessary regulation that would impose an undue economic burden on cable systems.") 7 47 U. S. C. § 548. 8 1992 Cable Act § 2( a)( 5), 106 Stat. 1460- 61. 2 Federal Communications Commission FCC 00- 404 3 4. Section 628( b) of the Communications Act states that: [i] t shall be unlawful for a cable operator, a satellite cable programming vendor in which a cable operator has an attributable interest, or a satellite broadcast programming vendor to engage in unfair methods of competition or unfair or deceptive acts or practices, the purpose or effect of which is to hinder significantly or to prevent any multichannel video programming distributor from providing satellite cable programming or satellite broadcast programming to subscribers or consumers. 9 In Section 628( c), Congress instructed the Commission, inter alia, to promulgate regulations that: (A) establish effective safeguards to prevent a cable operator which has an attributable interest in a satellite cable programming vendor or a satellite broadcast programming vendor from unduly or improperly influencing the decision of such vendor to sell, or the prices, terms, and conditions of sale of, satellite cable programming or satellite broadcast programming to any unaffiliated multichannel video programming distributor; [and] 10 (B) prohibit discrimination by a satellite cable programming vendor in which a cable operator has an attributable interest or by a satellite broadcast programming vendor in the prices, terms, and conditions of sale or delivery of satellite cable programming or satellite broadcast programming among or between cable systems, cable operators, or other MVPDs or their agents or buying groups. . . . 11 5. In Implementation of Sections 12 and 19 of the Cable Television Consumer Protection and Competition Act of 1992: Development of Competition and Diversity in Video Programming Distribution and Carriage, First Report and Order (" Program Access Report and Order"), 12 the Commission concluded that non- price discrimination is included within the prohibition against discrimination set forth in Section 628( c)( 2)( B). While the Commission did not attempt to identify all types of non- price discrimination that could occur, the Commission stated that "one form of non- price discrimination could occur through a 9 47 U. S. C. § 548( b). 10 Communications Act § 628( c)( 2)( A), 47 U. S. C. § 548( c)( 2)( A). 11 Communications Act § 628( c)( 2)( B), 47 U. S. C. § 548( c)( 2)( B). Congress provided limited exceptions to this prohibition. A satellite programming vendor is not prohibited from: (i) imposing reasonable requirements for creditworthiness, offering of service, and financial stability and standards regarding character and technical quality; (ii) establishing different prices, terms, and conditions to take into account actual and reasonable differences in the cost of creation, sale, delivery, or transmission of satellite cable programming or satellite broadcast programming; (iii) establishing different prices, terms, and conditions which take into account economies of scale, cost savings, or other direct and legitimate economic benefits reasonably attributable to the number of subscribers served by the distributor; or (iv) entering into an exclusive contract that is permitted under subparagraph (D) [of this section]. Id. 12 8 FCC Rcd 3359 (1993). 3 Federal Communications Commission FCC 00- 404 4 vendor's 'unreasonable refusal to sell', or refusing to initiate discussions with a particular distributor when the vendor has sold its programming to that distributor's competitor." 6. "Satellite cable programming" is "video programming which is transmitted via satellite and which is primarily intended for the direct receipt by cable operators for their retransmission to cable subscribers." 13 "Satellite broadcast programming" is broadcast programming when such programming is retransmitted by satellite and the entity retransmitting such programming is not the broadcaster or an entity performing such retransmission on behalf of and with the specific consent of the broadcaster. 14 III. THE BUREAU'S ORDERS 7. As stated above, the facts in the DIRECTV Order and EchoStar Order are essentially the same. Comcast, a multiple system operator (“ MSO”) based in Philadelphia, debuted a new channel Comcast SportsNet (“ SportsNet”) on its and other cable operators’ cable systems in the Philadelphia market. 15 Some of the programming on SportsNet came from two other cable networks that went dark upon SportsNet’s debut. 16 One of the dark channels had been distributed through terrestrial technology, and the other was delivered via satellite. Comcast distributes SportsNet only through terrestrial microwave and fiber technology. Complainants, direct broadcast satellite (“ DBS”) providers, unsuccessfully sought carriage rights for the SportsNet programming. 17 Subsequently, each filed a program access complaint alleging Comcast’s refusal to sell SportsNet programming to DBS providers constituted an impermissible refusal to sell prohibited by Section 628( c)( 2)( B). 18 Complainants maintained that if the regional sports programming were transmitted by satellite, Comcast’s refusal to sell would be an impermissible form of non- price discrimination. 19 Complainants argued that Comcast distributes SportsNet's programming through terrestrial means in order to evade application of the program access rules. 20 Complainants also alleged that Comcast’s actions constituted an unfair practice under Section 628( b) irrespective of Comcast’s reasons for adopting terrestrial distribution of SportsNet because the purpose or effect of Comcast’s actions was to hinder significantly or prevent DIRECTV and EchoStar from providing SportsNet to their subscribers. 21 13 47 U. S. C. § 601( d)( 1). 14 47 U. S. C. § 548( i)( 3). 15 SportsNet programming includes various professional and collegiate sporting events and other locally produces programming such as sports- related talk shows and sports news shows. DIRECTV Order, 13 FCC Rcd at 21826; EchoStar Order, 14 FCC Rcd at 2093. 16 The channels were SportsChannel Philadelphia and PRISM. DIRECTV Order, 13 FCC Rcd at 21825; EchoStar Order, 14 FCC Rcd at 2092. 17 DIRECTV Order, 13 FCC Rcd at 21826; EchoStar Order, 14 FCC Rcd at 2093. 18 47 U. S. C. § 548( c)( 2)( B). 19 DIRECTV Order, 13 FCC Rcd at 21827; EchoStar Order, 14 FCC Rcd at 2094. 20 DIRECTV Order, 13 FCC Rcd at 21827; EchoStar Order, 14 FCC Rcd at 2094. 21 DIRECTV Order, 13 FCC Rcd at 21827; EchoStar Order, 14 FCC Rcd at 2095. 4 Federal Communications Commission FCC 00- 404 5 8. Comcast responded that because it is terrestrially delivered, SportsNet is not satellite cable programming and falls outside of the scope of the program access provisions. 22 Comcast maintained that its motivation for terrestrial delivery was a rational and legitimate business decision based on a determination that terrestrial distribution was significantly less expensive than satellite distribution. 23 Comcast argued that because the 1992 Cable Act and the Commission’s rules exclude terrestrially delivered programming, it is entitled to makes its own determination whether or not to offer SportsNet to any MVPD. 24 9. The Bureau held that that Section 628( c) applies to satellite cable programming, not programming that was "previously" satellite- delivered, or the "equivalent" of satellite cable programming, or programming that would qualify as satellite cable programming, but for its terrestrial delivery. 25 Because the Bureau found that SportsNet was not satellite cable programming, it denied the Section 628( c) claims. 26 Additionally, the Bureau was not persuaded that the totality of the circumstances demonstrated an intent by Comcast to evade the program access rules. 27 The Bureau determined that Comcast’s decision to use existing terrestrial infrastructure could be explained based on reasons of logistics and economics. 28 10. Regarding the allegations of a violation of Section 628( b), the Bureau analyzed the scope of Section 628( b) and determined that in order to find a violation of Section 628( b), the Commission must make two independent determinations. 29 First, the Commission must determine that the defendant has engaged in unfair methods of competition or unfair or deceptive acts or practices. 30 Second, the Commission must determine that the unfair acts or practices, if found, had the purpose or effect of hindering significantly or preventing a MVPD from providing satellite cable programming to subscribers or consumers. 31 The Bureau found that in enacting Section 628, Congress determined that while cable operators generally must make available to competing MVPDs vertically- integrated programming that is satellite- delivered, they do not have a similar obligation with respect to programming that is terrestrially-delivered. 32 Thus, given the prior finding that Comcast’s actions did not amount to an attempt to evade the Commission’s rules, the Bureau declined to find that, standing alone, Comcast’s decision to deliver SportsNet terrestrially and to deny that programming to the DBS providers is "unfair" under Section 628( b). 33 22 DIRECTV Order, 13 FCC Rcd at 21830; EchoStar Order, 14 FCC Rcd at 2096. 23 DIRECTV Order, 13 FCC Rcd at 21830; EchoStar Order, 14 FCC Rcd at 2097. 24 EchoStar Order, 14 FCC Rcd at 2098. 25 DIRECTV Order, 13 FCC Rcd at 21834; EchoStar Order, 14 FCC Rcd at 2099. 26 DIRECTV Order, 13 FCC Rcd at 21834; EchoStar Order, 14 FCC Rcd at 2099. 27 DIRECTV Order, 13 FCC Rcd at 21836; EchoStar Order, 14 FCC Rcd at 2101. 28 DIRECTV Order, 13 FCC Rcd at 21836; EchoStar Order, 14 FCC Rcd at 2101. 29 DIRECTV Order, 13 FCC Rcd at 21837; EchoStar Order, 14 FCC Rcd at 2102. 30 DIRECTV Order, 13 FCC Rcd at 21837; EchoStar Order, 14 FCC Rcd at 2102. 31 DIRECTV Order, 13 FCC Rcd at 21837; EchoStar Order, 14 FCC Rcd at 2102. 32 DIRECTV Order, 13 FCC Rcd at 21837; EchoStar Order, 14 FCC Rcd at 2102. 33 DIRECTV Order, 13 FCC Rcd at 21837; EchoStar Order, 14 FCC Rcd at 2102. 5 Federal Communications Commission FCC 00- 404 6 IV. DISCUSSION 11. Complainants offer three arguments in their Applications for Review for reversing the Bureau’s decision to deny the complaints. Complainants first argue that the Bureau erred in not finding that Comcast’s use of terrestrial delivery was intended to evade the program access obligations. 34 DIRECTV argues that the Bureau did not consider all of the evidence in the record and cites statements made by the President of Comcast before Congress and in Vanity Fair magazine as clear evidence of evasive intent. 35 Complainants also dispute the Bureau’s determination that Comcast’s decision to distribute SportsNet terrestrially was economically reasonable. 36 In addition, Complainants argue the Bureau erred in not finding Comcast’s conduct to be an unfair act and method of competition under Section 628( b). 37 12. After reviewing the record, we find no basis for overturning the Bureau's Orders. The Bureau determined that SportsNet was a cable channel that was terrestrially delivered, rather than satellite delivered, and so is outside of the direct coverage of Section 628( c). The language of Section 628( c) of the Communications Act expressly applies to "satellite cable programming and satellite broadcast programming." Given that statutory limitation, we believe the Bureau properly found that Section 628( c) had not been violated regardless of Comcast’s decision to deliver SportsNet terrestrially. 13. Complainants also maintain that the Bureau erred in not considering Comcast’s actions to be an unfair act under Section 628( b). 38 DIRECTV argues that moving programming to terrestrial delivery and refusing to sell to DBS providers is precisely the type of anti- competitive behavior Congress intended the Commission address under Section 628( b). 39 EchoStar argues that Section 628( b) has a broader scope than Section 628( c), requiring a separate evaluation regarding the refusal to sell the terrestrial programming. 40 We have reviewed the Bureau’s disposition of the complaints and find that its ruling was correct and that no basis exists to warrant reversal. We acknowledge that there may be some circumstances where moving programming from satellite to terrestrial delivery could be cognizable under 628( b) as an unfair method of competition or deceptive practice if it precluded competitive MVPDs from providing satellite cable programming. However, we agree with the Bureau that the facts alleged are not sufficient to constitute such a violation here. 14. The Bureau found that the service in question was not a service that was moved from satellite to terrestrial distribution, but is in fact a new service. 41 In addition, the Bureau noted the 34 DIRECTV Application for Review at 14; EchoStar Application for Review at 10. 35 DIRECTV Application for Review at 14. 36 DIRECTV Application for Review at 16; EchoStar Application for Review at 11. 37 DIRECTV Application for Review at 18; EchoStar Application for Review at 13. 38 DIRECTV Application for Review at 20; EchoStar Application for Review at 14. 39 DIRECTV Application for Review at 20. 40 EchoStar Application for Review at 14. 41 DIRECTV Order, 13 FCC Rcd at 21836. 6 Federal Communications Commission FCC 00- 404 7 evidence explaining the cost advantages of terrestrial delivery. 42 Neither EchoStar nor DIRECTV disputed these savings below or in this proceeding. Complainants argue that the Bureau erred in ignoring their stated willingness to offset the cost of uplinking SportsNet’s signal to satellite, which Complainants assert renders irrelevant Comcast’s legitimate business reasons for terrestrial distribution. 43 Complainants make assertions that each would be willing to share such costs, but the record contains no evidence that such offers were conveyed to Comcast other than through legal briefs filed during the program access proceeding. In addition, neither Complainant takes a position regarding how much of the uplink cost each would be willing to bear. 44 The Bureau, in the DIRECTV Order and EchoStar Order concluded that “given our prior finding that [Comcast’s] actions do not amount to an attempt to evade our rules, we decline to find that, standing alone, [Comcast’s] decision to deliver SportsNet terrestrially and to deny programming to [Complainants] is ‘unfair’ under Section 628( b).” 45 Complainants have submitted nothing to cause us to question the Bureau’s reasoning on this issue. V. ORDERING CLAUSES 15. Accordingly, IT IS ORDERED that DIRECTV’s Application for Review of the Cable Services Bureau's DIRECTV Order IS DENIED. 16. IT IS FURTHER ORDERED that EchoStar’s Application for Review of the Cable Services Bureau's EchoStar Order IS DENIED. FEDERAL COMMUNICATIONS COMMISSION Magalie Roman Salas Secretary 42 Comcast presented evidence indicating that cost savings of up to $1,680,000 per year could be achieved using existing terrestrial infrastructure in the Philadelphia market to deliver SportsNet. DIRECTV Order, 13 FCC Rcd at 21836; EchoStar Order, 14 FCC Rcd at 2101. The facts relied upon by the Bureau were supported by affidavits as required by 47 C. F. R. § 76. 1003( b)( 3). 43 DIRECTV Application for Review at 16; EchoStar Application for Review at 8. 44 Despite its purported willingness to bear part of the yearly multi- million dollar cost to uplink SportsNet, DIRECTV argues that its current expenditure of uplinking some Philadelphia sporting events at $5, 000 - $8, 000 per game is not cost effective. DIRECTV Application for review at 7 n. 21. 45 DIRECTV Order, 13 FCC Rcd at 21837; EchoStar Order, 14 FCC Rcd at 2102. 7 Federal Communications Commission FCC 00- 404 8 CONCURRING STATEMENT OF COMMISSIONER HAROLD FURCHTGOTT- ROTH Re: DirecTV, Inc. v Comcast Corp., et al.; Echostar Communications v. Comcast Corp., et al., Memorandum Opinion and Order, CSR 5112- P; CSR 5244- P. I join the Commission’s decision insofar as it concludes that terrestrially delivered programming is outside the coverage of section 628( c) and that Comcast’s actions were not unfair acts under section 628( b). I write separately to express my view on the other, separate allegation that the Bureau understood Echostar to raise in its complaint – that is, that the Commission should penalize Comcast for Comcast’s alleged “evasion” of the program access rules. See Memorandum Opinion and Order ¶ 9. The Commission’s order today does not expressly address our authority to sanction a party based on Echostar’s “evasion” theory, and I take its silence to indicate its disagreement with this novel proposition. I think it worth making clear, however, that nothing in the statute authorizes us to take action based solely on a party’s “evasion” of our rules, and petitioners have identified no legal basis whatsoever that might support this cause of action. To the extent that the Bureau thought it had authority to evaluate Comcast’s conduct to see if the company had run afoul of some unspecified duty not to “evade” the program access rules, the Bureau erred. 8