Comcast’s “Racquet-eering” Shows Lessons For Internet’s FutureOctober 7, 2010
Every once in a while, an obscure bureaucratic notice can crack open some wide vistas of unintended understanding. So it was on October 5, when the Federal Communications Commission (FCC) issued a “hearing designation order” on a complaint filed by the Tennis Channel against Comcast.
In this case, we have a case of alleged discrimination against a growing and thriving cable channel that also provides a window into how the Internet would look if Comcast and the telephone companies had their way. As you might expect, the picture isn’t pretty.
Yet while the story on the surface is about cable programming, the story below the surface provides yet another cautionary tale (here’s a previous one in which AT&T shoves public-access channels down a rat-hole of a menu) about how the Internet could look if the big companies get their way.
It would be hard to find two sports more similar than tennis and golf. Both have their fans and players who follow the game through all the usual media, sometimes attend tournaments, and play their chosen sport, whether on public courts/courses or at private clubs.
And so it came to pass in the 500-channel universe that there were established channels dedicated to tennis and to golf. They are, respectively, Tennis Channel and Golf Channel. They are two racquets/clubs in a bag. They both cover major events in their respective sports. Tennis Channel has beefed up its live coverage of events the last couple of years, and Tennis now claims higher ratings for some of its major tournaments than Golf Channel does for its. Tennis has twice the number of hours of live coverage as does Golf. They both have features on instruction, travel and sports personalities. They go after viewers in the same demographic categories. They from time to time compete for programming. And, crucially, they compete for advertisers.
Both have carriage on cable systems and on satellite. Yet on Comcast systems, Golf Channel is on the basic digital tier, (center court) while Tennis is relegated to a premium digital sports tier (the far courts) where fewer viewers land.
That’s because, according to Tennis Channel, there is one crucial difference between Tennis and Golf. Comcast owns the Golf Channel. The channel started out as a joint venture between Comcast and Tribune, but Comcast bought out its partner in 2003 for $100 million for the 8.9 percent of the venture it didn’t own. (The agreement also included Comcast’s agreement to carry Chicago Cubs games and WGN network on its cable systems). Similarly, Tennis Channel launched in 2003, and Comcast started carrying it two years later, albeit on a premium tier, which requires a separate fee and which, coincidentally (or not) is filled with programmers not affiliated with Comcast.
Golf similarly started on a premium tier, but, according to Tennis Channel, got moved to basic when the ratings were too low. (For the record, there is another Comcast channel in the complaint, Versus, which has a more varied lineup than either Tennis or Golf.)
Tennis Channel wanted to move up (or down, depending on how you view such things), so it went to Comcast to ask how it might also be placed on a basic tier, and thus have millions of more viewers. The response from Comcast Vice President Madison Bond, as related by Tennis Channel CEO Ken Solomon, was chilling: Comcast would consider “repositioning” Tennis Channel only if Tennis Channel offered Comcast a financial “incentive.” Solomon said in a declaration filed with the complaint he took this to mean Comcast wanted a reduction in the license fee it pays Tennis Channel. Solomon said he is not aware that any of the channels Comcast owns were required to make such a switch from a small, premium tier, to basic. Tennis ultimately offered an “incentive,” but still was turned down.
Chances are this little dispute will never get past the first round. Filings are due Oct. 18, so look for a settlement around then because it would be in Comcast’s interests to make this go away as it chugs toward completing the purchase of NBC. The legal issues may not be resolved. (Then again, Comcast has in the past shown an interest in clearing its “good name,” when it contested the Commission’s enforcement order against it for throttling BitTorrent users, so who knows. After all, look how well that turned out.)
What’s more important here is what this case says about the future of the Internet. Remember that the telephone and cable companies are fighting ferociously for the right to have “paid prioritization” and to offer “managed services” that would, in theory, offer better service than the Internet at large. Given the description of Comcast’s behavior here, is there any doubt that the same business ethic would apply to these new categories of service for the Internet? Want to be a “managed service?” All you need do is offer an “incentive,” and then you may or may not join the privileged class, depending of course on whether there is an affiliated service to be protected.
In the cable-programming context, there is at least a mechanism for hashing out these types of disputes. In the broadband area, there is no cop on the beat because the FCC has no authority over broadband offerings of telecom carriers. This situation benefits the carriers, because it lets them do what they will, but don’t say it’s a “pro-business” environment. As in this case, Tennis Channel is a business also, and it has a legitimate grievance. The FCC is the traditional regulator of telecommunications carriers. Unless it is given the authority over broadband, there will be a double fault, as both the public and any non-carrier business will be at the mercy of those who own the networks.