The U.S. Court of Appeals for the District of Columbia affirmed most of a recent Federal Communications Commission decision to close the so-called "terrestrial loophole" in a 1992 cable law.
Under that law, a cable TV provider must let competitors carry any channel it owns if it uses satellite connections to transmit the channel to individual cable systems around the country. But until the FCC closed the loophole in January 2010, the provision didn't apply when cable operators sent programming over land-based networks instead.
Satellite providers and phone companies that offer subscription TV services long complained that big cable operators were exploiting that quirk in the law to deny them access to must-have programming, particularly regional sports networks.
Cox Communications Inc., for instance, has withheld access to San Diego Padres games from AT&T Inc.'s U-Verse video service. And Cablevision Systems Corp. has barred U-Verse and Verizon Communications Inc.'s FiOS video service from carrying the high-definition format of its Madison Square Garden networks, which broadcast the games of the New York Knicks, New York Rangers, New York Islanders and New Jersey Devils.
It was Cablevision that challenged the new FCC rule in court. Among other things, the company argued that the FCC lacked authority to close the terrestrial loophole and that the agency's actions violated the First Amendment. The court rejected those arguments.
In a statement, the FCC said it is pleased that the court affirmed its efforts "to promote competition and innovation in the delivery of video programming."
Satellite provider DirecTV also welcomed Friday's decision. "There is now no question that the FCC has the authority to prevent cable operators from exploiting that loophole to gain an unfair advantage over competing video programming providers," the company said in a statement.
Michael E. Glover, senior vice president and deputy general counsel for Verizon, called the ruling "good news for consumers." And Andrew Jay Schwartzman, senior vice president and policy director for the public interest group Media Access Project, predicted that the court decision will lead to "more choice and, perhaps, lower prices, for pay-TV services."
Still, Cablevision was quick to stress the fight is not over since the ruling does conclude that the FCC acted arbitrarily and capriciously by treating certain conduct involving exclusive terrestrial programming contracts as "categorically unfair." The court sent that matter back to the commission for reconsideration.
"Given the local and regional nature of terrestrial programming, such exclusives can be highly pro-competitive, particularly in markets like New York with as many as five video providers," Cablevision said in a statement. "Verizon and AT&T, the nation's two largest phone companies, should be required to compete based on the quality of their products and not by manipulating federal law."