D.C. Circuit’s Tatel Skeptical of Cablevision Challenge to Program Access Rules

Those two judges and Judge Judith Rogers, presiding in case 10-1062, also asked extensive questions of the FCC. Questioning of both sides related to how much Congress had intended Section 628 of the 1992 Cable Act to apply to terrestrially delivered programming. In a 4-1 vote last year, the commission extended program access rules -- which bar channels affiliated with a cable operator from withholding their programming from other pay-TV companies when they're delivered by satellite -- to terrestrial programming case by case. Questions also involved whether the FCC had overstepped its bounds by saying it could bar terrestrial withholding when it hurts a telco-TV or DBS provider’s market share, not just when the action completely prevents the company from serving a market.

Tatel seemed as if he might vote in the commission’s favor, those aligned with the cable industry, the FCC and a neutral observer who watched the argument told us afterward. Jonathan Nuechterlein, representing AT&T and siding with the commission, along with DirecTV and Verizon, spoke near the argument’s end. “The legislative history doesn’t begin to show any congressional choice to limit this” only to satellite-sent programming, he said. “All Congress did is pull and establish a term from a different provision,” he added. “From a consumer’s perspective, the behind-the-scenes method of delivery is immaterial."

"Section 628 bristles with the word ’satellite,'” and so was intended to prevent exclusive carriage deals of cable channels distributed by satellite, not terrestrially such as by a fiber or other feed, lawyer Henk Brands, representing Cablevision, told the court. Asked by Griffith how to get around the NCTA case, he replied that “the type of conduct there was a different threat than it was here.” Brands said the Chevron threshold of judicial deference to regulatory agencies wasn’t met in this case. “If there’s doubt, it seems to me like we refer to the agency” and its interpretation, Tatel replied.

There would need to be evidence that withholding cable-affiliated channels delivered via terrestrial means would keep a pay-TV provider from entering a market, which wasn’t what the FCC did in the program access order, Brands said. Tatel then asked, “What unambiguously prevents the commission” from acting case by case on program access complaints. The agency said market share is at stake, not the ability to start selling subscription-video in an area, Brands said. The FCC “has moved the goalposts,” he said. Tatel responded that “in a way, this case looks a little easier” than NCTA: Cablevision v. FCC “seems to fall much closer to the core of the statute than NCTA did,” since the case at hand is dealing with companies that both deliver cable and own channels.

The FCC will act if shown that withholding a channel makes selling service “significantly harder” or prevents it, said Grey Pash, a lawyer for the commission. That fits with the agency’s case-by-case approach, he said. Asked by Tatel about whether withholding a local news channel was barred by the FCC, he said that may not present such a barrier to competition. Several lawyers at oral argument noted that most of the more than 500 cable channels are satellite delivered, with perhaps 50 networks sent by terrestrial means. Many are regional sports networks, which the program access order does address, and local news.

Rogers told Pash the agency’s order talks about lower market share, “but you can still provide” service. “And Congress was not concerned with that,” he said, noting that the legislation discussed satellite-delivered programming. “Significantly hinder has a meaning other than lowering market share,” the judge said. The commission “will work out the meaning on a case-by-case basis,” Pash replied. If a pay-TV company can’t get “access to must-have programming” then “it has no economic incentive” to operate in the market, he said. “There’s nothing in the statute that bars the FCC from acting on this.”

Tatel and Pash then engaged in an extended discussion of whether the commission also could have authority to bar cable operators from bundling Internet and phone service, since DBS companies can’t also deliver that. “Potentially,” said Pash. But “obviously there is some boundary to this,” he said. Tatel said Pash either must “concede that this does cover bundling, or I need to hear how I can write an opinion that covers terrestrially delivered programming.” Pash said the FCC’s order didn’t address bundling. Tatel replied: “That’s a fair point."

Tatel seemed “very skeptical about Cablevision’s argument,” said Senior Vice President Andrew Schwartzman of the Media Access Project, which filed a brief with the D.C. Circuit siding with the FCC in the case. “As Tatel views it, Cablevision has to prove that the commission’s position is completely at odds with the statutory language, because if there was ambiguity, the commission wins.” The judge took issue with the commission’s position on finding a limiting principle to Section 628, so that it’s not “a blank check” for the FCC to use in other ways, but “those questions are consistent with a finding in favor of the commission,” Schwartzman said. “The other two judges had very little to say, so it’s very hard to tell if they were in agreement."

Cablevision may win if it has shown that the FCC wrongly equated a pay-TV competitor’s market share with the test set out by Section 628(b), said cable lawyer Dan Brenner of Hogan Lovells. “Judge Rogers seemed to be interested in that point. But it was pretty clear that Judge Tatel was interested in the fact that the statute goes at it a bit more simplistically.” Cablevision may not be a harder case for the plaintiff to make than NCTA, because while the earlier case didn’t involve integration of cable programming and distribution, “it did block a competitor from competing and therefore from providing service” to a multiple dwelling unit that was under exclusive contract with a cable operator, “and therefore met the statutory provision that was the focus in today’s oral argument,” Brenner said.

Cablevision believes “the program access rules are not in the best interests of fair competition and consumers,” a spokesman said. “With three to five video providers in many markets and explosive growth in programming services, today the program access rules do nothing more than stifle innovation and product differentiation. The nation’s largest phone and satellite companies should be expected to compete based on their products and not on a regulatory bailout.”