By Quandary Peak Research
Wave Broadband, a rival of telecom giant Comcast, has filed a complaint with the FCC, accusing the company of demanding “a punitive ransom totaling nearly $3.5 million” in order to continue airing Comcast-owned sports programming. It is the latest in a series of grievances taken to the FCC by Comcast’s competitors, who argue that the cable company’s price demands force them to raise their own prices for their customers, giving Comcast an unfair competitive advantage.
The Case So Far
Wave, which serves almost half a million subscribers and is Comcast’s largest cable competitor in Washington, Oregon, and California, filed the complaint against NBCUniversal and three Comcast-owned Regional Sport Networks (RSNs) in December 2017, alleging they withheld “must-have regional sports programming” and demanded compensation for access to content they were obligated to provide.
According to Wave, these withholdings “blatantly [violated]” Section 548(b) provisions, which are designed to “promote the public interest, convenience, and necessity by increasing competition and diversity in the multichannel video programming market” by prohibiting cable providers from deceiving, or using unfair methods, to prevent distributors from providing programming to consumers. Wave is asking for refunds and damages to the tune of $3,480,710.54 – the exact amount, plus interest, for the payments it made from July to December 2017 – as well as for the FCC to declare specific contract provisions null and void.
NBCUniversal, a subsidiary of Comcast, petitioned the FCC in January to throw out the complaint, arguing that a recent merger between Wave and nationwide broadband service provider RCN/Grande (which closed on January 24) means RSN distribution will be “governed by [the terms of the RCN] agreement”. Comcast also argued that the petition, which was filed during the last month of contract terms, is time-barred, as the FCC’s statute of limitations period had long since expired. It maintains that the terms of its licensing agreement are valid, arguing Wave wants to avoid its contractual obligations to be shielded from competition.
Unsurprisingly, Wave disagrees with the assessment. They believe that there is no time limit for petitioning Section 548(b), and accused Comcast RSNs of seeking an FCC declaration “…that any conduct by [a service provider], no matter how egregious, no matter how clearly it violates statutory prohibitions, if not complained about within one year of signing a multi-year agreement, cannot be restrained.” They alleged that Comcast is relying on procedural defenses to justify their conduct and asserted that the merger does not affect the fact that the payments were “wrongfully extracted, and should be returned.”
Why are Smaller Companies so Concerned about Comcast?
On the surface, this case seems to be about money, but Comcast’s perceived competitive advantages are ultimately driving the accusations. January saw the expiration of restrictions placed on Comcast in 2011, conditional to their purchase of NBCUniversal. These regulations, which competitors argued was necessary to guarantee fair competition, limited Comcast’s ability to take full advantage of the content it purchased in the NBCUniversal deal.
While some of the rules are permanent, smaller companies are still concerned that an unshackled Comcast will be able to throttle local TV-and-broadband rivals by virtue of their size and content library – Wave says licensing revenue from this content helps Comcast offset losses as users cut the cord from cable, “[destroying] the integrity of their economic justifications for strict enforcement of minimum distribution requirements in cable programming agreements” and ensuring an advantage over smaller rivals. Wave argues that Comcast will be collecting subscriber fees twice if Wave is forced to include RSNs in their basic package – once from Wave, and once from any online streaming service offering Comcast-owned content.
The American Cable Association (ACA), a lobby group representing the interests of roughly 800 mid-sized cable operators, is especially worried about the consequences from restriction removal with regard to minimum penetration policies; the ACA alleges that Comcast wants to redefine these policies, which require providers to distribute certain cable networks to a minimum percentage of its subscribers, in a way that makes it impossible for smaller providers to offer an inexpensive cable package without including higher-priced channels.
Wave says that it attempted to bring the minimum-penetration policy issue to the table as part of long-term renewal negotiations, but Comcast refused to engage in a meaningful way, instead demanding Wave include the RSN services in its basic package – or go dark. They maintained that this demand ultimately led to the series of payments in question, which bought Wave six months-worth of time to reach a permanent solution (and, eventually, to filing the FCC petitions in question).
Comcast, naturally, asserts no wrongdoing on their part. Their petition points out that Wave had agreed to minimum penetration requirements in contract negotiations multiple times, beginning in 2005, and that the FCC does not have the power to dictate minimum penetration terms. The FCC will have the final say, but have not yet ruled on the petition nor the motion to dismiss, allowing questions about Comcast’s size and competitive advantages to remain – for now.