The Federal Communications Commission placed a condition on News Corp.'s acquisition of DirecTV that aims to stop the company from jacking up prices of its regional sports networks.
There had been concern that with Fox Sports Net affiliates and DirecTV both owned by News Corp., the parent company would seek higher licensing fees for regional sports programming. If cable operators balked at the price tag, then DirecTV would become the de facto exclusive carrier of regional sports networks in some regions, giving the satellite service a competitive advantage over cable.
Recognizing this possibility, the FCC mandated that any dispute with a cable operator regarding the cost of a News Corp.-owned sports channel will be settled via arbitration. Until a decision is handed down by an arbitrator, the channel will remain available under the terms of the expired contract. This rule will be in effect for six years.
The FCC ruling delineated that "the arbitrator is directed to choose the final offer of the party that most closely approximates the fair market value of the programming," a decision that can be based on contracts for other RSNs as well as any other evidence either side chooses to present.
Experts praised the FCC's decision for putting the necessary barriers in place that will maintain a fair playing field when it comes to regional sports networks and carriage agreements.
But some noted that the FCC ruling does not include any protection for new regional sports networks seeking distribution deals. Should a team, cable operator or independent programmer try to launch its own regional sports network, as many are planning to do in the next few years, there is little remedy if DirecTV refuses to carry the new network.
"That may be of particular interest for regional sports networks that would compete directly with Fox's RSNs and are looking for initial carriage," said Jim Martin, the former COO of Fox Sports Net and now a consultant to Denver's Kroenke Sports and Entertainment, which is considering launching a regional sports network that would compete with Fox Sports Net Rocky Mountain. "I would hate to see them frozen out or have difficulty getting carriage on DirecTV."
The FCC ruling does mandate that neither News Corp. nor DirecTV can discriminate against unaffiliated programming services, but does not specifically offer a remedy to competitive regional sports networks that feel they are being treated unfairly.
A scathing dissent penned by FCC Commissioner Jonathan S. Adelstein said the FCC ruling did not go far enough in offering consumers protection on several fronts. Among the many points he raised is that the six-year guidelines regarding regional sports networks do not, in his view, last long enough.
