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Court grills FCC, Tennis Channel in Comcast discrimination suit

By Alina Selyukh

WASHINGTON (Reuters) - U.S. Court of Appeals judges on Monday hit hard against the Federal Communications Commission and Tennis Channel in a case alleging Comcast Corp discriminated against the sports network, even raising the possibility of rendering the entire case moot because it might have been filed too late.

A three-judge panel raised a number of technical concerns with the arguments of the regulator and the sports channel - including an underpinning one of timing - as it weighs whether Comcast can be required to distribute the network to as many subscribers as it does its own affiliated sports channels.

In what Comcast has called "dramatic regulatory overreach," the FCC in 2012 sided with Tennis Channel and an administrative law judge, ruling that the top U.S. cable operator unfairly placed the channel in a more expensive and thus less-watched tier than its own Golf Channel and NBC Sports Network.

The rule, reached by a 3-2 commission vote along party lines, required Comcast to put Tennis Channel on par with its own sports network. It was the first time a cable network prevailed over a cable operator under the FCC's 1993 federal anti-discrimination program carriage rules.

Comcast has argued that the FCC's requirement infringed upon its freedom of editorial judgment and freedom of speech, but Judge Harry Edwards repeatedly brought the conversation back to the question whether Tennis Channel's complaint came too late.

"You can't come up at any time eight or 10 years later and say, 'You know what, I hate the contract," Edwards said.

Tennis Channel filed its complaint with the FCC in 2010 after signing the contract with Comcast in 2005. Comcast said the contract stipulated the placement, and an old FCC rule limited timing of disputes of such agreements to one year.

The FCC said the timing was fair because the complaint came within a year of notifying Comcast of its intent to do so as well as Comcast turning down the request to be moved to a higher viewing tier.

"If you are essentially upset about the contract, too bad," Edwards said, calling the regulator's new interpretation of its own statute of limitations "ridiculous."

Tennis Channel argues that an earlier complaint would have been "premature" because at the time it could not have been compared to the popular Golf Channel and Versus sports networks.

But in late 2008 it gained rights to the U.S. Open and high-definition ability, making it more competitive. A lower tier, it now says, deprives it of advertising revenue and higher per-subscriber fees collected from Comcast for content.

Judge Stephen Williams raised concerns about the unclear financial implications of requiring Comcast to move Tennis Channel as the FCC and the network say that Comcast weighed the costs of having Tennis Channel in a higher viewing tier but did not adequately analyze the benefits. Comcast argues that it did, and found none.

Judge Brett Kavanaugh delved more into the question of freedom of speech. The U.S. Congress differentiates how much regulatory power can be wielded over companies that can dictate market prices and those that cannot, and Kavanaugh said so-called "non-market powers" could not be forced to "carry the speech they don't like."

That aligned with the arguments of Comcast's lawyer, Miguel Estrada. "If there's no market power consideration, I am entitled under the First Amendment to like my speech better than yours," he said.

As long as the case remains outside of the arguments about Comcast being such a market power, Kavanaugh said that forcing the cable operator to change how they treat Tennis Channel "seems contrary to our traditions."

The court is expected to decide in the next few months based on Monday's arguments and written briefs submitted earlier.

The case is Comcast Cable Communications, LLC v. Federal Communications Commission, U.S. Court of Appeals for the D.C. Circuit, No. 12-1337.

(Reporting by Alina Selyukh; editing by Ros Krasny and Leslie Adler)

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