Program Carriage Appeal Shows Indies’ Desire for Regime That May Eventually Go to Supreme Court

Indies and vertically integrated operators are positioning themselves for an eventual Supreme Court case -- whether in this Time Warner Cable v. FCC appeal at the 2nd Circuit -- or more likely another case involving program access or carriage rules. That’s because the high court may eventually hear a case involving program contract rules that has import for its 1994 or 1997 Turner cases that upheld commission authority, according to interviews with executives and lawyers who favor the plaintiff and others favoring the defendant in the 2nd Circuit case (docket 11-4138). If a three-judge panel in another case over program carriage rules, Comcast v. FCC at the U.S. Court of Appeals for the D.C. Circuit, were to rule differently from the 2nd Circuit judges, that could set up the regime for a hearing before the Supreme Court, communications lawyers and executives noted in interviews Wednesday.

Both the Comcast and Time Warner Cable cases involve how the First Amendment squares with FCC program carriage rules, communications lawyers noted. Some said Carney, Chin and Raggi may be less likely than their D.C. Circuit colleagues to have pointed questions for whether last year’s commission order allowing the Media Bureau to require a standstill period for channels on cable operators as complaints are pending squares with free speech. Communications lawyers said that’s because the order doesn’t affect any single party since there’s no adjudication at hand, unlike Comcast where the company appealed a 2012 agency order requiring the Tennis Channel be distributed on the company’s systems as widely as the operator’s sports channels. FCC, NCTA and Time Warner Cable spokespeople had no comment for this story.

Public Knowledge, which filed an amicus brief at the 2nd Circuit supporting the FCC, wants to ensure the Turner cases don’t get overturned down the line, said Vice President Sherwin Siy. “Every single time you have a change of the rules, are you going to ... do Turner all over again,” he asked of operators. The order allowing standstill carriage should “be considered routine, and not the sort of thing where you raise a challenge” and appeal, he said. Competition from over-the-top video and other MVPDs to cable operators don’t negate the systems’ role as a gatekeeper in determining what channels get carried, Siy said. “Let’s wait to see if we're going to get an over-the-top provider designated as an MVPD, but even still you still have ... a considerable amount of power” an operator exerts over programming when it can favor its own content over indies, he continued.

The commission’s authority over cable programming decisions is “sitting on sand,” and lacks “a firm foundation,” said cable lawyer and consultant Steve Effros. “The more we have over-the-top video, and satellite and telephone and every other type of video you can name, the more difficult it’s going to be to sustain the notion that they can regulate one of them, with regard to their First Amendment rights.” If the D.C. Circuit finds for the FCC in Comcast over the Tennis Channel’s program carriage win -- which was a first for any such complaint at the agency -- “everybody else will use it as well” and other indies will file program carriage cases against operators, Effros predicted. A court will eventually rule against the commission on the issue, he said.

Time Warner Cable boils down to three issues, according to filings by the company, NCTA and indies at the 2nd Circuit and interviews with industry executives. The First Amendment issue is whether the FCC can require carriage of a channel over the cable operator’s opposition. The statutory issue is whether Section 616 of the Communications Act allows for such a standstill period. And Time Warner Cable and the NCTA said the FCC violated the Administrative Procedure Act by not giving specific notice in a 2007 rulemaking on which the order four years later relied that a standstill was envisioned. Because the “standstill rule did not alter existing rights or obligations” and “merely codified the FCC’s existing practices,” it was exempt from APA notice requirements, the government’s brief said. The agency’s “attempts to circumvent the notice requirement -- by labeling the rule ‘purely procedural’ or a ‘logical outgrowth’ of an unrelated proposal -- are unavailing,” Time Warner Cable said.

Bloomberg doesn’t “have direct skin in that game,” because it has no standstill related to its neighborhooding complaint that Comcast violated the terms of an FCC order last year approving the operator’s buy of control in NBCUniversal, Bloomberg government affairs head Greg Babyak said. “But we certainly believe the commission has authority to enforce that which they've annunciated, and that it’s good policy to do so,” he said. The 2nd Circuit case has “importance” on “its own terms and not necessarily what it would tee up down the pike” with any case heard by the Supreme Court, Babyak said: It’s good FCC Chairman Julius Genachowski decided to “push back hard at any efforts to undermine that authority” in Time Warner Cable. Bloomberg hasn’t decided whether to file an amicus supporting the commission in Comcast. The D.C. Circuit late this summer issued a stay of enforcing the commission’s order against the cable operator (CD Sept 4 p2).

"Contrary to big cable’s argument, discriminatory practices are not protected by the First Amendment under the disguise of editorial judgment,” said CEO Robert Herring of WealthTV. The indie lost its program carriage case against four major cable operators at the FCC and is appealing it at the 9th U.S. Circuit Court of Appeals. “If there were a standstill, it would cause a settlement much faster,” said Herring, who filed his complaint several years ago, before the agency had such authority. “A standstill prevents further discrimination once a complaint is filed. They can drag a case out until you run out of will or money or the resolution becomes moot.”