Washington -- Cable networks Outdoor Life and Speedvision
lost at the Federal Communications Commission two weeks ago in their bid to sign exclusive
programming deals with cable-system operators.
Owned in part by three MSOs, Outdoor Life and Speedvision
are covered by a federal law that prohibits exclusive contracts between cable operators
and cable operator-owned programmers, unless the FCC finds that such contracts would serve
the public interest.
Outdoor Life and Speedvision, relatively new start-up
networks, argued that exclusivity would help them to gain carriage and to attain
subscriber levels that would make them profitable. They sought FCC approval to sign deals
in 17 markets and Connecticut for four years, or until Dec. 31, 2001, whichever came
first.
But the request was controversial, with cable competitors
potentially foreclosed from obtaining the programming. BellSouth Corp. and Ameritech New
Media were among those that filed opposition comments.
In an action by the FCC's Cable Services Bureau, the
commission ruled that the request was too broad, covering 24 million cable homes, or 38
percent of the nation's total, and including seven of the top 10 TV markets.
"The proposed exclusivity withholds programming
services with nationwide appeal from emerging competitors to cable, such as cable
overbuilders, MMDS and telephone companies," the FCC said.
The networks are entitled to appeal the case to the five
FCC commissioners.
Roger Williams, executive vice president and chief
operating officer of Outdoor Life and Speedvision, said he was disappointed because
exclusivity is an important business tool in a programming market that he described as
highly competitive.
"I believe that we presented a compelling case for
exclusivity for this petition, based on what we perceived as our need for exclusivity, as
well as the limited nature of our request," Williams said. "We were not trying
to seek global exclusivity. It was a very limited application."
The request was limited in one respect because the networks
said they would not enforce exclusivity against direct-broadcast satellite carriers.
The FCC said granting the request would "adversely
affect competition" in the markets where the cable networks sought relief and found
no countervailing public-interest benefits.
"The commission's action shows a very commendable
sensitivity to the needs of competitors in the program-access pricing arena," said
Andrew Kreig, president of the Wireless Communications Association International (WCA),
the MMDS-industry group that fought Outdoor Life and Speedvision.
When Speedvision and Outdoor Life filed their request with
the FCC last July, they said obtaining exclusivity was essential to their survival.
In the decision, the FCC noted that last July, Speedvision
and Outdoor Life had about 5 million and 6 million cable subscribers, respectively, with
each having an additional 1.9 million DBS subscribers.
Over the last 12 months, the FCC said, Speedvision grew to
14.5 million subscribers and Outdoor Life to 13.5 million, without the right to enter into
exclusive contracts.
Cox Communications Inc., MediaOne Group and Comcast Corp.
are primary investors in Outdoor Life and Speedvision. A new partner, Fox/Liberty
Networks, took a 17 percent stake in each of the networks in March.
"Having Liberty/Fox come in was a great statement as
to the importance and the potential of both of these services, and it sort of helped with
credibility, if you will, in the industry," Williams said.
Nevertheless, Williams added, the marketplace reality is
that exclusivity drives cable penetration for networks like his.
"Exclusivity continues to be important to our
distributors," he said.
