In the latest overreach of power by the Federal Communications Commission (FCC), on July 24, 2012, the agency upheld a December 20, 2011 decision by an administrative law judge ordering Comcast to include the Tennis Channel in the same basic tier offering as the Golf Channel and NBC Sports.  This is perhaps the most egregious example of FCC micromanagement of the communications industry.

Comcast, a multichannel video programming distributor (MVPD), already offered the Tennis Channel to its subscribers in its premium package, as part of a contract agreement signed seven years ago.  The FCC exceeded all reasonable boundaries by overturning the agreement and dictating to Comcast that it must carry the Tennis Channel in the same basic package as the Golf Channel and NBC Sports.  The FCC found that the Tennis Channel had been subjected to discrimination in its tier placement on Comcast’s cable systems.  Adding insult to injury, the FCC slapped Comcast with a $375,000 fine to be paid to the owners of the Tennis Channel.

The FCC’s decision allows the agency to determine for all MVPDs how to provide tiered services, disregarding consumer desire, a cost-benefit analysis, and apparently contractual agreements.  According to a July 25, 2012 article in the New York Post, this decision could boost the number of households able to access the channel from 34 million to 50 million, and increase the Tennis Channel’s value from $300 to $400 million to nearly $1 billion.

In their dissenting views, Commissioners Robert McDowell and Ajit Pai reiterated that Comcast had acted within industry standards in locating the Tennis Channel to a different tier of services than the Golf Channel and NBC Sports (previously known as Versus).  Comcast has said it will appeal the decision in the courts.

This decision does not just affect one company.  It is not about a cable network wanting a better position on a cable provider’s service tier; it is about the FCC micromanaging MVPD contract negotiations without any regard to whether a channel is a good value to the MVPD and its subscribers.  It once again gives network broadcasters an upper hand at the negotiating table.  As Commissioners McDowell and Pai added in their concluding statement:

As a result, in order to shield themselves from discrimination complaints, Comcast and other MVPDs will be more likely to carry networks they do not want, on tiers with broader penetration, and at higher prices than ever before – at least if they are foolish enough to be willing to invest in content creation.  And the Commission should not kid itself.  These additional programming costs will come out of the pockets of consumers, not from MVPDs’ bottom lines.” — Joint dissenting statement of Commissioners Robert M. McDowell and Ajit Pai.

This decision by the FCC creates a dangerous and overbearing precedent by imposing the federal government’s will to override a binding contract and carefully negotiated agreements.  It is also in direct conflict with efforts in Congress to update and modernize the 1992 Cable Act to bring the law more in line with how consumers view television shows today.  This FCC decision is bad for the communications industry as a whole, and particularly bad for consumers who ultimately will pay higher prices for whatever the FCC arbitrarily decides should be included in basic television services.

Filed under: Telecommunications, Video