Comcast and satellite companies at impasse over SportsNet programming

Posted: April 15, 2012

The Phillies are back, with high hopes and a couple big question marks named Utley and Howard. The Flyers have made it into the National Hockey League playoffs, and the Sixers are fighting to secure a postseason slot. Another Philadelphia April is halfway gone.

If you’re a sports fan and a cable subscriber, you could have caught much of this winter and spring’s action on Comcast SportsNet, which carries a majority of this city’s baseball, hockey and basketball games. But you still can’t watch most of your local teams’ games on Dish Network or DirecTV — unlike almost everywhere else in the country.

Philadelphia sports fans have been griping for years about Comcast’s hometown dominance, which leaves many complaining that they’re captive customers and others frustrated because they can’t get access to cable TV. But they have an especially good reason right now to be puzzled.

Over and over again, regulators and journalists have suggested that the problem has finally been solved — most recently thanks to promises that Comcast made last year to win regulatory approval for its acquisition of NBC Universal. But over and over again, nothing seems to change.

Since I’m among those who apparently spread false or premature hopes, and readers frequently ask about the topic, I decided to find out when they’ll finally see their favorite teams on the satellite services.

The bottom line: probably not very soon, thanks to an apparent impasse over pricing between Comcast and the satellite companies. They haven’t even been talking for the last couple months.

But before I elaborate, let’s review how we got into this situation, in which Philadelphia-area consumers are almost alone nationwide in suffering from a policy that long ago outgrew its usefulness — if it ever made any sense when applied to such “must-have” programming. Virtually everywhere else, the satellites now carry local sports.

After chipping away at it repeatedly, the Federal Communications Commission finally changed the crucial policy two years ago by closing the so-called “terrestrial loophole” in 1992’s Cable Act. The law required cable companies that owned content to share it with competitors, but applied that requirement only to content transmitted by satellite, not to content sent over land-based connections.

The loophole — Comcast prefers to call it the “terrestrial exemption” — for years allowed Comcast to just say no to satellite-TV providers and to that rare breed, the competitive cable company, when they wanted access to SportsNet.

The plain result was less competition here, as in other markets where local sports fans couldn’t get access to their teams’ games except from a dominant cable company. FCC staffers estimated in 2006 that satellite providers served 40 percent fewer households in the Philadelphia market than they would otherwise expect. DirecTV said that its market share here was down by more than 50 percent.

Why does this matter? DirecTV and its counterpart, Dish Network, have long been the main source of competitive service and pricing for pay-TV consumers who can’t afford or resist cable’s price tag. Where it’s available, Verizon’s FiOS offers fast Internet along with cable TV, but it’s a high-end alternative, not a long-term bargain. Nationwide, the FCC estimates that just 11 percent of cable subscribers have a competitive choice other than the satellite companies.

The cost of limited competition could be huge, according Barry Barnett, a lawyer who filed a 2003 class-action antitrust suit against Comcast that was finally cleared for trial Thursday by U.S. District Judge John R. Padova Jr. The lawsuit, which Padova partly rejected in last week’s ruling, centers on the deals and swaps for cable franchises that helped Comcast build a dominant footprint in the Philadelphia market. The suit contends that Comcast charged customers $875 million more from 2000 to 2009 than it would have been able to charge had there been more local competition, an allegation Comcast rejects.

Which brings us back to SportsNet and the satellites — an issue Padova has excluded from the case in part because it predates the franchise deals in question.

I asked Comcast executive vice president David L. Cohen last week why key competitors’ systems still lack Philadelphia’s SportsNet.

“The answer is very simple,” Cohen told me. “We have made formal offers both to DirecTV and Dish Network. There were negotiations. Neither one of the companies has expressed an interest in carrying the service at market rates.”

Neither Cohen nor the satellite companies was willing to discuss details, although Cohen said the proposed rates were comparable to those offered to Verizon and other competitors.

Derek Chang, executive vice president at DirecTV, sees it differently.

“We would like to carry the product on fair and reasonable terms. We don’t think we’ve gotten those at this point,” Chang said.

Cohen, by the way, hasn’t stopped defending the 1992 law’s controversial provision, saying it played a key role in fostering local sports programming comparable in quality to ESPN’s SportsCenter. Building it required an investment — “certainly tens of millions of dollars, and maybe more than that” — that might not have paid off otherwise.

“Comcast SportsNet Philadelphia was a poster child for that exemption,” Cohen said.

Chang says Comcast’s local dominance, which SportsNet also fostered, has left the Philadelphia company in a position where it can set prices for SportsNet as high as it wants. And Comcast, remade by the NBC deal into one of the nation’s leading owners of television and movie content, now has lots of extra bargaining chips.

“They win either way,” Chang said. “They’re either going to gouge our customers, or they’re going to withhold it from our customers.”

SportsNet may be the poster child for quality local sports programming. But it’s also the poster child for something else: the wishful thinking that says policymakers can wave wands, fix a market, and foster competition where it doesn’t really exist.

Con­tact Jeff Gelles at 215-854-2776 or jgelles@phillynews.com.

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