GSN, Cablevision Make Final Pitches in Retiering Case Oral ALJ Argument

"This is what discrimination looks like -- a disconnect between what Cablevision is doing and what the market is doing," said Paul Schmidt of Covington & Burling for GSN. Replied Jay Cohen of Paul Weiss, representing Cablevision, "You can't convert a circumstantial case into a direct case simply by saying it's direct. What happened was a good faith business decision."

Much of GSN's time Friday centered on evidence and testimony pointing to Cablevision's treating the network differently from its own WE tv and now-off-the-dial Wedding Central networks when it relocated GSN in 2011 from basic cable to a sports tier. While there was evidence Cablevision would have saved more money retiering WE tv than GSN, "they never thought about doing it," Schmidt said. "That's direct evidence of discrimination." So too is the millions of dollars owed Cablevision by those affiliated networks that it gave up by waiving certain contractual provisions, he said. When Sippel asked whether there might be any business justification for such a financial move, Schmidt said it was "exactly what Section 616 prohibits." That section of the Communications Act addresses unfair restraint of competition by a multichannel video programming distributor.

Cablevision argued its treating its affiliates better isn't itself direct discrimination, and that GSN lacks any direct evidence that Wedding Central's and WE tv's affiliation with Cablevision was the engine behind the retiering. The Enforcement Bureau also pointed to lack of direct evidence of affiliation-based discrimination when it issued an opinion last month recommending Sippel conclude Cablevision hasn't violated MVPD discrimination rules (see 1510150044).

Cablevision and the bureau are off-base when they say the discrimination claim fails since the cable company didn't relocate GSN as leverage to try to get the network's partial parent, DirecTV, to pick up Wedding Central, since that's not what GSN is claiming, Schmidt said. Instead, Cablevision saw the retiering as an opportunity to take advantage of, he said: "It's still illegal to come to us and say the way to get back is give our affiliate a benefit." While DirecTV ultimately ended up not carrying GSN, Cablevision also ended up talking with Sony about possibilities of reversing the retiering decision -- more evidence that it wasn't motivated by a Wedding Central quid pro quo, Cohen said.

While such Section 616 issues before the ALJ in the past have involved fledgling or low-viewed networks trying to compete, "what we have here is a thriving network," Cohen said. "It's competing. It's competing well." And moving GSN doesn't give any strategic advantage to Cablevision's affiliated networks, he said: “You’d pick a network WE tv thought was a real competitor.” Women aged 55 and up are GSN's largest audience, followed by men 55 and up, Cohen said, adding that WE tv's viewership among younger women is close to three times the size of GSN's. "Saying we both have women 18 and over in large numbers is a meaningless statistic," he said. If GSN's single largest audience is women aged 55 and up, why doesn't that make it a women's network, Sippel asked. While ESPN and History Channel have mostly male viewerships, that doesn't make them substitute networks or similarly situated, Cohen said.

Cablevision's argument the network suffered no relevant harm in the retiering since its profit and viewership have grown "is essentially 'if we don't put you out of business, Section 616 doesn't apply to us,'" Schmidt said. That Cablevision didn't reverse the retiering after the "incredible level of outrage" from customers is more evidence the expressed business justification -- cutting costs -- was pretext, Schmidt said. In fact, GSN was singled out not because it was unaffiliated with Cablevision but because it was expensive and out of contract, Cohen said, pointing to testimony that Cablevision also had considered dropping Travel Channel. "You can't drop a network willy nilly without violating the contract," he said.