Paying the price for sports TV: preventing the strategic misuse of the FCC's carriage regulations.

 
  I. INTRODUCTION 
 
 II. LEAGUE-OWNED NETWORKS AND REGIONAL SPORTS 
     NETWORKS 
     A. Background: Cable Sports and Vertical Integration 
     B. The Roots of the Dispute Between Cable Companies 
        and League-Owned Networks 
     C. Public Negotiations Between Cable Companies and 
        League-Owned Networks 
 
III. THE FCC's CARRIAGE DISCRIMINATION REGULATIONS 
     A. Carriage Discrimination Regulation in the 1992 Cable 
        Act & Analysis of the FCC's Implementation 
     B. Classic Sports Network v. Cablevision 
     C. TCR Sports Broadcasting Holding v. Comcast 
     D. Movement Within the FCC for Change to the 
        Discrimination Regulations 
 
 IV. THE FCC's CARRIAGE REGULATIONS ARE RIPE TO BE 
     EXPLOITED BY LEAGUED-OWNED CABLE SPORTS 
     NETWORKS IN A WAY THAT IS HARMFUL TO THE PUBLIC 
     A. How Could League-Owned Cable Sports Networks 
        Exploit the FCC's Regulations for Leverage in 
        Carriage Negotiations? 
     B. Exploitation of the FCC's Regulations by League-Owned 
        Cable Sports Networks Could Lead to 
        Unreasonable Price Increases for Cable Subscribers 
 
V. SOLUTIONS 
   A. Force Divestiture of RSNs by Cable Companies 
      Through Intervention or Non-Intervention 
   B. A la Carte 
   C. Add a Procedure That Allows Cable Companies to Seek 
      Dismissal of a Complaint if Discrimination Between 
      Networks is Reasonable 
   D. Mandatory Arbitration is Not a Reasonable Solution for 
      All Carriage Disputes 
 
 VI. CONCLUSION 

I. INTRODUCTION

Televised sporting events are an important part of American culture. Sports leagues and cable companies have embarked on courses of vertical integration (1) to reap the financial benefits of the public's love of sports. These parallel courses of vertical integration clash with the FCC's carriage regulations in a way that could cause cable prices to increase for the sports fan and non-sports fan alike.

FCC regulations prohibit vertically integrated cable companies from discriminating between affiliated and nonaffiliated networks. Many cable companies have vertically integrated by acquiring interests in regional sports networks (RSNs). A more recent phenomenon is the creation of cable networks by college and professional sports leagues. These leagues distribute exclusive content through vertically integrated cable networks. In some instances, because of the high prices sought by the league-owned networks, they have been unable to reach carriage agreements with cable companies. The league-owned networks could argue that cable companies are in violation of the FCC's anti-discrimination regulations by carrying their affiliated RSNs on favorable terms, but denying carriage to nonaffiliated league-owned sports networks.

This Note will argue that it would be an abuse of the FCC's regulations and against the public interest for league-owned sports networks to gain favorable carriage terms by using the anti-discrimination regulations. Sports content is expensive, and if the bargaining power of cable companies is hampered by the FCC's regulations, cable subscribers will face unreasonable price increases. The recent settlement of a carriage dispute between TCR, a cable network owned by a sports team, and Comcast, a cable company, resulted in a $2 per month increase in cable rates for 1.6 million people. If other league-owned sports networks are able to obtain similar results in their negotiations, cable subscribers, many of whom have no interest in sports programming, will face similar price increases. Despite the fact that forcing cable companies to add expensive sports networks would be against the interest of the majority of cable subscribers, the FCC has held that it is unreasonable, and therefore prohibited, for cable companies to deny carriage to expensive nonaffiliated sports networks.

This Note will discuss a variety of possible responses by policymakers. Congress could intervene by discouraging vertical integration by cable companies or moving to an a la carte cable regime. The FCC could respond independently by making clear that its regulations only prevent unreasonable discrimination, and that discrimination by cable companies that is consistent with the public interest is not prohibited. One proposed solution to carriage negotiation impasses, mandatory binding arbitration, is an unwise idea because it unjustifiably involves the government in carriage disputes that do not result from discrimination or coercion.

II. LEAGUE-OWNED NETWORKS AND REGIONAL SPORTS NETWORKS