October 11, 2017

ACA: Comcast Uses Regional Sports Networks To Limit Consumer Choice, Slow Broadband Adoption

To Offer Comcast’s Popular RSNs, Comcast Rivals Must Limit Their Sale Of An Increasingly Popular Basic Cable-Broadband Combo

PITTSBURGH, Oct. 11 2017 – The American Cable Association is concerned that in seeking competitive advantage over some rival distributors, Comcast Corp. is harming adoption of broadband and online TV programming combos, thus slowing overall broadband deployment, by insisting on contract terms for its popular regional sports networks (RSNs) that require rivals to limit sales of the local TV station “basic cable” programming tier.

“Many consumers that want to opt out of the big cable bundle in favor of a less expensive alternative are gravitating to a bundle that includes just the basic cable tier (essentially local TV stations) plus broadband Internet access and then relying on over-the-top video services to gain access to a more limited amount of cable programming more narrowly tailored to their specific interests,” ACA President and CEO Matthew M. Polka said.

He added, “Comcast, it seems, is standing in the way of ACA members that want to help their customers escape the burdens of the big and expensive expanded basic bundle of channels, while at the same time aggressively marketing a bundle of networks very similar to the broadcast basic tier to its own customers through its new ‘Instant TV’ service.”

ACA spelled out its concerns in comments (attached) filed Oct. 10 with the FCC in connection with the agency’s 19th “Annual Assessment of the Status of Competition in the Market for the Delivery of Video Programming.”

In these comments, ACA highlighted the fact that vertical integration – where programming and multichannel video programming distributor (MVPD) networks are commonly owned – continues to pose a threat to competition and consumers.

ACA noted two near-term events that further underscore the need for program access protections: (1) the impending merger between AT&T and Time Warner Inc. that will result in a must-have block of cable programming networks (including HBO, TBS, TNT, and CNN) being under the control of a large MVPD; and (2) the expiration on Jan. 20, 2018, by their terms, of program access conditions placed on the Comcast-NBCU merger. These merger conditions provided additional protections beyond the FCC’s program access rules to ensure that Comcast’s rivals have the ability to access Comcast’s must-have programming, including the NBC owned and operated (O&O) local broadcast television stations, the bundle of extremely popular national cable programming networks controlled by NBCU, and RSNs that hold exclusive rights to carry local and regional sports events in many major markets.

One means for ACA members to help their subscribers avoid having to purchase 50 or more cable programming networks found on the “expanded basic” tier is by offering just the basic tier coupled with broadband Internet access, where online video distributors like Netflix, Hulu and Amazon Prime are available at more attractive price points than the expanded basic tier that is the home of pricey networks such as ESPN, Disney Channel, and Fox News Channel.

By longstanding industry practice, nearly all cable programmers have agreed to exclude basic cable-only subscribers from so-called minimum penetration requirements which mandate the percentage of MVPD subscribers that must receive the programming. This allows MVPDs to place the more expensive (and potentially unwanted) cable programming like expensive sports programming on the expanded basic tier while leaving them free to broadly market basic cable-broadband Internet bundles without triggering penalties.

Comcast, through its licensing agreements for RSNs with a number of ACA members, has unilaterally decided that ACA members should no longer be able to sell the basic broadcast service tier, coupled with broadband Internet, in a totally unrestricted fashion.

As a result, an MPVD must either dampen demand for the service by, for example, raising the price of the broadcast basic tier or essentially cease to offer a true basic tier/broadband combination that does not include a large number of costly cable programming networks. Either outcome will clearly harm consumers and potentially slow the overall adoption of broadband by denying some consumers access to the video/broadband package of services that is most attractive to them.

ACA believes that it is no coincidence that the programmer adopting this restrictive practice – Comcast-NBCU – is a vertically integrated provider of MVPD and broadband Internet access services. The ACA members that are being disadvantaged by this practice directly compete with Comcast, the second-largest MVPD and the largest broadband provider.

Meanwhile, as Comcast-NBCU interferes with its competitors’ ability to offer consumers a broadcast basic tier of service on an unrestricted basis, Comcast is aggressively marketing a bundle of networks very similar to the broadcast basic tier to its own broadband customers through its ‘Instant TV’ service.

ACA is concerned that following expiration of the Comcast-NBCU merger conditions in three months, Comcast will introduce the same sort of anti-consumer practices to licensing agreements for national cable programming networks with the National Cable Television Cooperative (NCTC), the programming-buying arm for hundreds of ACA members.

NCTC’s current agreement is set to expire less than 10 months after the Comcast-NBCU merger conditions sunset. Both ACA and NCTC fear that NCTC will be less able to resist Comcast’s unreasonable, anti-consumer and anti-competitive demands without the threat of being able to ask to submit the dispute to baseball-style arbitration to determine fair and reasonable terms and conditions and without the ability to file a program access complaint with the FCC.

“The threat that Comcast-NBCU will further expand its use of this practice to licensing agreements for national cable programming networks following the impending expiration of the merger conditions should concern policymakers,” Polka said.

About the American Cable Association: Based in Pittsburgh, the American Cable Association is a trade organization representing nearly 750 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/