Sept. 4 (Bloomberg) -- Time Warner Cable Inc. and a trade group won a U.S. court ruling freeing cable operators from a requirement to keep carrying independent channels during fee disputes.
The U.S. Appeals Court in New York said today that the Federal Communications Commission violated administrative rules by not giving sufficient notice in 2011 when it adopted the standstill requirement for continued carriage as disputes were resolved.
The court upheld the underlying rule that requires cable companies to offer fair terms to independent channels seeking display on multichannel systems.
“The challenged standstill rule was not promulgated in accordance” with the Administrative Procedures Act, the appeals court wrote in its opinion. The court said the FCC could try again to pass the rule following proper procedure.
“I am pleased that the court of appeals upheld the commission’s program carriage rules against constitutional challenge,” Mignon Clyburn, acting chairwoman of the FCC, said in an e-mailed statement. “These rules remain necessary to prevent anticompetitive conduct by video programming distributors, and they empower consumers to access a rich and diverse mix of programming.”
The FCC had ordered cable companies to continue contracts with independent networks as the agency heard disputes about terms for carrying the channels. The action was aimed at keeping cable companies from squelching competing video providers.
At the time, the National Cable & Telecommunications Association, the plaintiff alongside Time Warner Cable in today’s case, in an e-mailed statement from its president, Michael Powell, said the FCC’s action showed “a disturbing lack of appreciation of the potential impact of government intervention on consumers or the marketplace.”
Members of the Washington-based trade group include the largest U.S. cable company, Comcast Corp., and No. 2 Time Warner.
Justin Venech, a spokesman for New York-based Time Warner Cable, said in an e-mail that the company was pleased with the standstill ruling. Brian Dietz, a spokesman for the trade group, said he wasn’t immediately able to comment.
Requiring carriage during adjudication “could undermine good-faith business negotiations,” chill cable companies’ willingness to test new networks “and drive up programming costs for consumers,” Kathryn Zachem, Comcast’s senior vice president for regulatory and state legislative affairs, said in a phone call to an FCC official in 2011, according to a regulatory filing.
The FCC when it passed the rule said without a standstill, cable companies could retaliate against independent vendors that filed complaints by ceasing to carry their programming. Vendors may feel compelled to agree to cable company demands that violate U.S. rules rather than lose carriage, the FCC said in an order.
The case is Time Warner Cable Inc. v. Federal Communications Commission, 11-04138, U.S. Court of Appeals for the Second Circuit (Manhattan).