Verizon Slams Cablevision at FCC for Refusing Carriage Deal
Verizon, seeking to snare TV customers, slammed Cablevision at the FCC for refusing a deal to let it carry the pay TV rival’s sports networks. Cablevision abused “monopoly power” in not following program access rules, repeatedly putting off a carriage deal for channels featuring the Boston Celtics and N.Y.’s Knicks and Rangers, said a Verizon FCC complaint. Cablevision shot back that the Bell should focus on carriage negotiations. Verizon faces challenges in getting permission to carry networks owned by other companies, said analysts.
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The spat gives the FCC another opportunity to back Bell- friendly policies, Verizon argued. Some analysts agreed. Chmn. Martin has repeatedly called speeding up telco entry into the video market a priority (CD March 20 p2). “The Commission and the video distribution industry are at a critical juncture…the ability to offer competitive video services is essential” for Verizon’s estimated $20 billion in FiOS TV and broadband spending to pay off, said the firm. “With respect to programming, the Commission can start here.”
Sports networks are a “pressure point” for Bells seeking access to channels owned by cable operators they compete with, said Medley Global Advisors analyst Christopher Stern. “If the FCC has both direct and indirect ways to get programmers to make their services available to the telephone companies,” the Commission will use that leverage, said Stern: “There will be a lot of pressure on cable networks to make their sports networks available.” Pay TV firms and congressmen have asked the FCC to bar exclusive sports program arrangements in reviewing the $17.6 billion Adelphia deal (CD March 2 p11).
Verizon wants the FCC to find Cablevision broke the law in refusing to sell rights to Fox Sports Network N.Y., Fox Sports Network New England and Madison Square Garden Network. The cable operator’s Rainbow unit controls those networks, said Verizon. It wants the Commission to require the “defendants immediately provide [sports] programming to Verizon under reasonable and nondiscriminatory terms.” The complaint came after 13 months of e-mail and phone volleys between the companies’ programming and legal executives. Discussions continue between the firms, said Cablevision’s PR firm. Verizon “recently acknowledged these negotiations can take a while. It would be more productive for Verizon to negotiate with us than file complaints,” said the PR statement. Cablevision wouldn’t comment further.
RCN said Verizon is on target in dealing with program access. “Verizon’s complaint on program access proves RCN has been right in voicing its concerns that long term it’s this issue, and especially sports, that’s going to determine whether the market will ever get competitive or not,” Senior Vp Richard Ramlall said. RCN belongs to a group including EchoStar that has voiced concern about the Adelphia deal’s potential to limit competition for local programming (CD Jan 18 p1).
If history is any guide, the parties will work out the dispute privately. The Commission gets few carriage complaints and doesn’t usually intervene in such matters, said an FCC official, who spoke generally, not addressing the Cablevision-Verizon matter. The only time the Commission intervened in such a complaint in recent years was a 1997 case involving Cablevision (CD July 18 p4). Several years later, Cablevision had a protracted carriage dispute with the network carrying the Yankees.
Cablevision has little incentive to strike a deal with Verizon, said independent analyst Dennis McAlpine: “I think they'll hold back unless someone forces them to do something.” Verizon, lacking programming of its own, has “nothing to trade, it’s pure competition against them,” he said. Verizon hasn’t agreed to carry any Rainbow national networks, including AMC and IFC, said a spokesman for the Bell.
Future Hurdles for Telcos
Verizon can expect more programming hurdles along with other telcos getting into video delivery because of how few customers it has, said analysts. The company said it will pay CBS owned and operated stations an undisclosed amount per subscriber (CD March 21 p11). The Wall Street Journal said the retransmission fee is 50 cents a customer in cash, which cable operators usually refuse. “Certainly, this sets a precedent for” Verizon and other Bells, said analyst Bruce Leichtman. Verizon wouldn’t comment on the rumored fee.
“The business is run based on eyeballs and the telcos don’t have any,” said Adi Kishore, a Yankee Group analyst. Investors are concerned telcos will be hurt by rising retransmission fees, said Sanford Bernstein analyst Craig Moffett: “Cash-for-retrans will mean higher costs for all pay TV operators.” But telcos will feel the most pressure, Moffett wrote investors. Without subscribers, telcos have no leverage in negotiating favorable carriage deals with programmers, he said.
“When you've got multiple distributors, content benefits,” said Stern. Verizon could benefit itself from the TV industry’s growing focus on mobile and portable devices because of its strong presence there, said Kishore. But for now, he said: “It’s clearly bad math. They [Verizon] are paying more and they will be charging less.”
Verizon said it’s getting more than just retransmission rights in the CBS deal. It includes VoD content from local stations and the national network, said a Verizon spokeswoman.