Smaller MVPDs Face Higher Programming Costs Imposed By Charter/Malone-Related Content Providers
PITTSBURGH, November 13, 2015 – The American Cable Association called on the Federal Communications Commission to impose targeted conditions on the Charter-Time Warner Cable-Bright House Networks transaction to prevent “New Charter”-affiliated programmers Starz and Discovery Communications from imposing higher fees or less advantageous terms and conditions on rival multichannel video programming distributors (MVPD) negotiating carriage agreements with these important programmers post-merger.
“For nearly all ACA members that will compete directly in New Charter’s expanded footprint and purchase New Charter-affiliated programming, meaningful and enforceable conditions with active oversight over an extended period of time are essential to maintaining a competitive marketplace,” ACA President and CEO Matthew M. Polka said.
New Charter — which will become the second largest cable operator and third-largest MVPD with 17.3 million subscribers — will be affiliated with national cable programming assets that are highly important to competitive MVPDs through ownership and positional interests held by Dr. John Malone and Advance/Newhouse in Discovery Communications and ownership interests held by Dr. Malone in premium network Starz.
To blunt anticompetitive conduct by these New Charter-affiliated programmers, ACA proposed merger conditions in a filing with the FCC on Nov. 12 as part of the agency’s transaction review to determine whether it will serve the public interest.
In the comments, ACA said the creation of New Charter from the distribution assets of Charter, TWC and BHN and the resulting increases in vertical integration of Discovery and Starz with New Charter will significantly alter the competitive landscape in the affected markets.
ACA noted that Charter, et al., failed to disprove these basic facts concerning vertical harms. They devoted the bulk of their arguments to refuting claims of vertical harms by demonstrating that Discovery and Starz would not have an incentive to withhold, either permanently or temporarily, their programming from their affiliated MVPD’s rivals. ACA’s economic analysis, however, was not based on a foreclosure theory, but rather on a bargaining model analysis, which posits not that cable-affiliated programmers will withhold programming from rivals but, rather, will charge more.
Interestingly, Charter’s experts agreed with ACA that the transaction will cause prices to rise; the only dispute was how much for each impacted MVPD. ACA believes that any increase that results from vertical harm due to this transaction is unacceptable if not remediated, and that the increase in this case will be substantial and will harm competitors and consumers.
“ACA is pleased the FCC is exploring the ownership and positional interests of Dr. Malone that will permit him to exert influence or control over the programming prices, terms and conditions for the Discovery and Starz programming networks affiliated with New Charter through his various Liberty properties. We believe a thorough exploration of this web of interests will confirm ACA’s concerns,” Polka said.
About the American Cable Association: Based in Pittsburgh, the American Cable Association is a trade organization representing nearly 850 smaller and medium-sized, independent cable companies who provide broadband services for nearly 7 million cable subscribers primarily located in rural and smaller suburban markets across America. Through active participation in the regulatory and legislative process in Washington, D.C., ACA’s members work together to advance the interests of their customers and ensure the future competitiveness and viability of their business. For more information, visit https://acaconnects.org/