TCR Sports Broad. Holding, L.L.P. v. Fed. Commc'ns Comm'n

• Decision Date: 14 May 2012
• Docket Number: No. 11–1151.,11–1151.
• Citation: 56 Communications Reg. (P&F) 50,679 F.3d 269
• Parties: TCR SPORTS BROADCASTING HOLDING, L.L.P., d/b/a Mid–Atlantic Sports Network, Petitioner, v. FEDERAL COMMUNICATIONS COMMISSION; United States of America, Respondents, Time Warner Cable Incorporated, Intervenor. Office of the Commissioner of Baseball; Media Access Project; Robert Litan; Robert Hahn, Amici Supporting Petitioner.
• Court: U.S. Court of Appeals — Fourth Circuit

679 F.3d 269

56 Communications Reg. (P&F) 50

TCR SPORTS BROADCASTING HOLDING, L.L.P., d/b/a Mid–Atlantic Sports Network, Petitioner,

v.FEDERAL COMMUNICATIONS COMMISSION; United States of America, Respondents,Time Warner Cable Incorporated, Intervenor.

Office of the Commissioner of Baseball; Media Access Project; Robert Litan; Robert Hahn, Amici Supporting Petitioner.

No. 11–1151.

United States Court of Appeals,Fourth Circuit.

Argued: Jan. 26, 2012.

Decided: May 14, 2012.

ARGUED:David C. Frederick, Kellogg, Huber, Hansen, Todd, Evans & Figel, PLLC, Washington, D.C., for Petitioner. Peter Karanjia, Federal Communications Commission, Washington, D.C., for Respondents. Jay Cohen, Paul, Weiss, Rifkind, Wharton & Garrison LLC, New York, New York, for Intervenor. ON BRIEF:Scott H. Angstreich, Jeffrey M. Harris, Kellogg, Huber, Hansen, Todd, Evans & Figel, PLLC, Washington, D.C., for Petitioner. Christine A. Varney, Assistant Attorney General, Catherine G. O'Sullivan, Nancy C. Garrison, United States Department of Justice, Washington, D.C.; Richard K. Welch, Acting Associate General Counsel, James M. Carr, Federal Communications Commission, Washington, D.C., for Respondents. Floyd Abrams, Landis C. Best, Cahill Gordon & Reindel LLP, New York, New York; Henk Brands, Andrew W. Croner, Paul, Weiss, Rifkind, Wharton & Garrison LLC, Washington, D.C., for Intervenor. Thomas J. Ostertag, Office of the Commissioner of Baseball, New York, New York; Lisa S. Blatt, Robert A. Garrett, R. Stanton Jones, Arnold & Porter LLP, Washington, D.C., for the Office of the Commissioner of Baseball, Amicus Supporting Petitioner. Chrystiane B. Pereira, Andrew Jay Schwartzman, Media Access Project, Washington, D.C., for Media Access Project, Amicus Supporting Petitioner. Arnold M. Weiner, Law Offices of Arnold M. Weiner, Baltimore, Maryland, for Robert Litan and Robert Hahn, Amici Supporting Petitioner.

Before TRAXLER, Chief Judge, and SHEDD and WYNN, Circuit Judges.

Affirmed by published opinion. Judge WYNN wrote the opinion, in which Chief Judge TRAXLER and Judge SHEDD concurred.

OPINION

WYNN, Circuit Judge:

TCR Sports Broadcasting Holding, L.L.P., d/b/a Mid–Atlantic Sports Network appeals an order of the Federal Communications Commission (“FCC”). Based on a review of its Media Bureau decision and the records below, the FCC found that Time Warner Cable Inc. (“Time Warner”) provided legitimate and non-discriminatory reasons for declining to carry Mid–Atlantic Sports Network programming on an analog tier in its North Carolina cable system.

On appeal, Mid–Atlantic Sports Network argues that the FCC's Order should be vacated and remanded because Time Warner engaged in unlawful discrimination, thereby violating Section 536 of the Telecommunications Act of 1934, as amended, and the FCC's program carriage rules. Because the FCC acted neither arbitrarily nor capriciously in rendering its Order, we conclude that the FCC acted within its discretion, and we deny the petition for review and affirm the FCC's Order.

I.

A.

Congress enacted the Cable Television Consumer Protection and Competition Act of 1992 (“the 1992 Cable Act”), Pub. L. No. 102–385, 106 Stat. 1460, which amended the Telecommunications Act of 1934, to address concerns about the possibly anticompetitive effects of the vertical integration of cable companies that own both video distribution facilities and programming content. See47 U.S.C. § 536(a). To that end, the 1992 Cable Act directed the FCC to promulgate regulations that “govern[ ] program carriage agreements and related practices between cable operators or other multichannel video programming distributors and video programming vendors.” 47 U.S.C. § 536(a).

In October 1993, the FCC established rules to prevent multichannel video programming distributors “from taking undue advantage of programming vendors through various practices, including coercing vendors to grant ownership interests or exclusive distribution rights to multichannel distributors in exchange for carriage on their systems.” Implementation of Sections 12 & 19 of the Cable Tele. Consumer Protect. & Competition Act of 1992 Dev. of Competition & Diversity in Video Programming Distrib. & Carriage, Second Report and Order, 9 F.C.C. Rcd. 2642, 2643, ¶ 1, 1993 WL 433631 (1993) (“Program Carriage Order ”); see also47 C.F.R. § 76.1301.

In developing these regulations, the FCC recognized “the congressional intent to prohibit unfair or anticompetitive actions without restraining the amount of multichannel programming available by precluding legitimate business practices common to a competitive marketplace.” Program Carriage Order, 9 FCC Rcd. at 2643, ¶ 1. Consequently, the FCC sought to promulgate program carriage rules consistent with the 1992 Cable Act “without unduly interfering with legitimate negotiating practices between multichannel video programming distributors and programming vendors.” Id.

In July 2006, subject to several conditions, the FCC approved Time Warner's and Comcast Corporation's purchase of Adelphia Communications Corporation's cable systems. See Applications for Consent to the Assignment and/or Transfer of Control of Licenses, Adelphia Commc'ns Corp., Assignors to Time Warner Cable, Inc., Assignees, et al., Memorandum Opinion & Order, 21 F.C.C. Rcd. 8203, 2006 WL 2136575 (2006) (“Adelphia Order ”). Because the FCC found the transaction had the potential to give Time Warner “an increased incentive to deny carriage to rival unaffiliated [regional sports networks (‘RSNs')] with the intent of forcing the RSNs out of business or discouraging potential rivals from entering the market, thereby allowing [Time Warner] to obtain the valuable programming for its affiliated RSNs,” the FCC adopted a condition providing RSNs ¹ with an alternative avenue for redress of alleged program carriage violations.²Id. at 8287, ¶ 189. Under that condition, in lieu of filing a complaint with the FCC, an RSN unaffiliated with any multichannel video programming distributor that is denied carriage by Time Warner may submit its carriage claim to commercial arbitration within thirty days after that denial. See id. at 8287–88, ¶¶ 190–191.

Further, within thirty days after publication of the arbitration decision, a party may file a petition with the FCC to challenge the arbitrator's award. Id. at 8339, Appendix B. The FCC reviews the arbitrator's award de novo and “examine[s] the same evidence that was presented to the arbitrator and ... choose[s] the final offer of the party that most closely approximates the fair market value of the programming carriage rights at issue.” Id.

B.

Mid–Atlantic Sports Network is an unaffiliated RSN that owns the rights to produce and exhibit nearly all of the games of two Major League Baseball franchises—the Baltimore Orioles and the Washington Nationals. Since its launch, Mid–Atlantic Sports Network has sought program carriage on the networks of multichannel video programming distributors throughout its television territory, which stretches from Pennsylvania to North Carolina.

Time Warner owns multiple cable systems in several states and is the largest provider of pay television service in North Carolina. All of Time Warner's customers subscribe to the “basic” tier, which includes broadcast stations and public access services, and approximately ninety percent of its customers further subscribe to the “cable programming services tier,” which includes services such as the Discovery Channel and A & E. J.A. 1034. The basic tier and cable programming services tiers are collectively referred to as the “analog tier.” Id. As Time Warner has upgraded its cable systems to allow for digital transmission, it has used its digital spectrum to provide a “digital basic tier,” which includes a multitude of additional video program services. Id. Approximately half of Time Warner's customers are digital basic subscribers.

Among other programming interests, Time Warner is affiliated with News 14, a regional service established by Time Warner in 2002 that provides local news and weather programming. News 14 telecasted games of the Charlotte Bobcats basketball team during the period of Time Warner's negotiations with Mid–Atlantic Sports Network. At the time that Mid–Atlantic Sports Network requested carriage on Time Warner's systems, Time Warner was also affiliated with Turner South, an RSN that held the distribution rights for several professional sports teams, including the Atlanta Thrashers hockey team, the Atlanta Hawks basketball team, and the Atlanta Braves baseball team.

C.

In March 2005, Mid–Atlantic Sports Network initiated negotiations with Time Warner for program carriage in North Carolina on an analog tier. During negotiations, Time Warner proposed carriage of Mid–Atlantic Sports Network programming on a digital sports tier or on an analog tier in Time Warner's cable systems only in eastern North Carolina. However, Mid–Atlantic Sports Network wanted program carriage on the statewide analog tier. In May 2007, negotiations broke down.

In June 2007, Mid–Atlantic Sports Network filed an arbitration demand with the American Arbitration Association, pursuant to the procedure established in the Adelphia Order. At an arbitration hearingheld in May 2008, Mid–Atlantic Sports Network argued that, among other things, in violation of Section 536(a)(a)(3) of the 1992 Cable Act, Time Warner engaged in discrimination by denying Mid–Atlantic Sports Network carriage on Time Warner's statewide analog tier, which Time Warner offered to its affiliated RSNs. On June 2, 2008, the arbitrator issued a Decision and Award in favor of Mid–Atlantic Sports Network, after determining that Mid–Atlantic Sports Network “carried its burden of proof to establish that [Time Warner] treated [Mid–Atlantic Sports Network] differently from [Time Warner's] affiliated RSNs.” ³ J.A. 709. The arbitrator found that Mid–Atlantic Sports Network competed with RSNs in which Time Warner has or had...