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ACA Updates FCC With Deeper Analysis Of Its Comcast-NBCU Conditions

In a detailed filing, the American Cable Association provided the Federal Communications Commission with a thorough explanation of how ACA's narrowly drawn conditions would ameliorate the consumer and competitive harms stemming from the pending Comcast-NBCU transaction and improve upon past media merger conditions that ran into practical implementation problems.

"It's critically important for consumers and competition that regulators prevent Comcast-NBCU from using enhanced market power derived from the merger to raise consumer prices and undercut the level of competition in the marketplace. ACA's tightly contained conditions would, if adopted, ensure a healthy competitive balance by utilizing governmental mechanisms in the least intrusive way and only when absolutely necessary," American Cable Association President and CEO Matthew M. Polka said.

ACA's extensive Oct. 12 filing highlighted the rationale behind the following conditions in addition to others intended to temper both the vertical and horizontal harms attending this combination:

    * Comcast-NBCU must sell its NBC broadcast stations and regional sports networks (RSNs) on a stand-alone basis to all pay-TV distributors, meaning each NBC station and RSN cannot be bundled with carriage of any other video programming network.

    * All pay-television providers that cannot reach a mutual agreement with Comcast-NBCU may submit a dispute to binding baseball-style commercial arbitration. This arbitration remedy must apply not only to Comcast-NBCU's NBC stations and RSNs, but also to its national cable networks.

    * The general conditions applicable to all multichannel video programming distributors (MVPDs) and the special conditions for smaller ones must be available to more than just those operators that compete head-to-head with Comcast.

    * Comcast-NBCU shall be prohibited from requiring any pay-TV provider with 125,000 video subscribers or fewer locally to pay a fee for an NBC station or RSN that is 5% greater than the lowest fee paid by any other local pay-TV distributor for the market's NBC station or the area's RSN.

The intent of ACA's latest filing was to (1) provide a more comprehensive explanation of the manner in which its proposed Comcast-NBCU conditions narrowly target the transaction-specific harms; (2) document shortcomings in FCC conditions used to mitigate merger harms in similar transactions; and (3) recognize support for its views found in FCC filings of other parties concerned about the Comcast-NBCU deal.

ACA's filing explained that the relevant conditions the FCC placed on prior transactions - specifically News Corp.'s acquisition of DirecTV and the purchase of Adelphia Communications Corp. cable systems by Comcast and Time Warner Cable - were expected to lessen vertical harms similar to those associated with Comcast-NBCU. ACA noted that there was no significant horizontal combination of programming assets in either of these previous deals, and thus the FCC's conditions in these deals were not relevant to addressing the horizontal harms found in the Comcast-NBCU transaction.

Insofar as ACA is proposing new conditions, the trade group intended to address practical problems experienced with prior FCC conditions, and those harms arising from the horizontal combination of video programming assets. Tracking conditions the FCC imposed in previous transactions, ACA has proposed both general conditions applicable to all MVPDs and specific conditions applicable to smaller MVPDs with regard to Comcast-NBCU.

In its filing, ACA underscored the need for binding baseball-style commercial arbitration to be applied to all Comcast-NBCU's national cable networks. The FCC has already found the Big 4 network-affiliated local broadcast station signals and RSNs to be "must-have" for MVPDs to remain viable. ACA asserted that based on measured viewer preferences, Comcast-NBCU's suite of marquee national cable networks belongs in the same "must-have" category, justifying the arbitration remedy.

ACA's analysis explained the need for general conditions applicable to all pay-television providers and special conditions for smaller pay-television providers. ACA's proposal to extend the scope of the arbitration remedy beyond just MVPDs who compete head-to-head with Comcast is consistent with the FCC's approach taken in Adelphia-Time Warner-Comcast.  Absent a broader application, Comcast-NBCU would have an incentive to raise fees for affiliated programming sold to MVPDs not subject to the conditions simply to make it more difficult for aggrieved MVPDs and an arbitrator to determine actual fair-market value for the programming in dispute.

ACA has called on the FCC to require Comcast-NBCU to enter into stand-alone agreements for all broadcast stations and RSNs with all MVPDs. ACA explained that the FCC required stand-alone "final offers" to be submitted to an arbitrator in the News Corp.-DirecTV and Adelphia-Time Warner-Comcast mergers.  ACA noted that the rationale behind its stand-alone requirement was consistent with the FCC's understanding of the need for adequate comparables in an arbitration and would address the problem of baseball-style arbitration being too complex and costly.

ACA claimed that any successful arbitration process (1) must be a simple one; (2) must ensure that the arbitrator has access to comparable agreements, which, in this case,  would be stand-alone deals; and, (3) must prevent Comcast-NBCU from interfering with a fair-market-value determination of its programming.

ACA has proposed special relief (i.e., not binding baseball-style commercial arbitration) for smaller operators with 125,000 subscribers or fewer in the relevant market for covered programming because these operators cannot economically justify baseball-style commercial arbitration.  ACA found that arbitration remedies in the News Corp.-DirecTV and Adelphia-Time Warner-Comcast mergers were beyond the economic means of many small operators. Top executives at WOW! Internet Phone and Cable and Massillon Cable TV, both ACA members, put the cost of a single arbitration at about $1 million, calling it too expensive to be a viable option.  In FCC comments, DirecTV, agreeing that past arbitration remedies are sluggish and expensive, said they should be replaced with more efficient and cost-effective methods of dispute resolution.

As an affordable alternative to binding baseball-style commercial arbitration, ACA is urging the FCC to prevent Comcast-NBCU from charging eligible small cable operators 5% more than the lowest price paid by any MVPD for the same covered programming, meaning RSNs and local TV stations, and to adopt a low-cost traditional arbitration remedy to enforce this obligation.

ACA is also requesting a condition that requires Comcast-NBCU to negotiate in good faith with bargaining agents, including the National Cable Television Cooperative (NCTC) for Comcast-NBCU's national cable programming.

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