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If you need the complete document, download the WordPerfect version or Adobe Acrobat version, if available. ***************************************************************** Before the Federal Communications Commission Washington, D.C. 20554 In the Matter of: ) ) ECHOSTAR COMMUNICATIONS ) CORPORATION ) ) v. ) File No. CSR-5138-P ) FOX/LIBERTY NETWORKS LLC ) ) FOX SPORTS NET LLC ) ) FOX SPORTS DIRECT ) ) Program Access Complaint ) MEMORANDUM OPINION AND ORDER Adopted: October 26, 1998 Released: October 28, 1998 By the Chief, Cable Services Bureau: 1. EchoStar Communications Corporation ("EchoStar") filed a program access complaint pursuant to Section 628(c)(2)(B) of the Communications Act of 1934, as amended ("Communications Act") and Section 76.1002(b) of the Commission's rules against Fox/Liberty Networks LLC, Fox Sports Net LLC and Fox Sports Direct (collectively "Fox"). EchoStar alleges that Fox has engaged in unlawful discrimination against EchoStar in the prices, terms and conditions that Fox imposes upon EchoStar for making available the regional sports programming that it controls. Fox filed an answer denying discrimination and requesting that the Commission dismiss the Complaint with prejudice. EchoStar filed a reply. For the reasons discussed below, EchoStar's program access complaint is dismissed with prejudice. I. BACKGROUND 2. In enacting the program access provisions, which are codified in Section 628 of the Communications Act, Congress was concerned about the market power of wired cable companies and vertically integrated cable programmers. The program access provisions were designed to ensure that competition to cable develops and to encourage competition from emerging competitors. Consistent with this purpose, Congress sought to minimize the incentive and ability of vertically integrated program suppliers to favor affiliated cable operators over nonaffiliated entities. 3. To achieve this purpose, Congress instructed the Commission, inter alia, to promulgate regulations that prohibit discrimination by a satellite cable programming vendor in which a cable operator has an attributable interest in the prices, terms, and conditions of sale or delivery of satellite cable programming among or between cable systems, cable operators, or other multichannel video programming distributors ("MVPDs") or their agents or buying groups. 4. The Commission stated in Implementation of Sections 12 and 19 of the Cable Television Consumer Protection and Competition Act of 1992 ("Program Access Order"), that discrimination exists "when the same or essentially the same programming service is sold to competing distributors at different prices or pursuant to different terms or conditions. Such discrimination is prohibited if not justified under one or more of the specific factors listed in the statute." II. THE FACTS 5. EchoStar, a provider of Direct Broadcast Satellite ("DBS") programming services, operates two DBS satellites that allow it to provide approximately 120 channels of digital television programming to subscribers throughout the continental United States. EchoStar states that it competes against cable operators in every cable franchise area and is therefore a "multichannel video programming distributor" ("MVPD") as defined by Section 76.1000(e) of the Commission's rules. 6. Fox/Liberty Networks LLC is a joint venture between The News Corporation Ltd. and the Liberty Media Group of Tele-Communications, Inc. ("TCI"). Fox Sports Net LLC and Fox Sports Direct are divisions of Fox/Liberty Networks LLC. TCI, a cable system operator, has an interest in Fox because TCI's Liberty Media Group is a 50% participant in the Fox/Liberty Networks LLC joint venture. 7. Fox Sports Net LLC controls a number of regional sports networks ("RSN"s). RSNs make their programming available to local cable operators within an RSN's geographic region. Each RSN features a mix of professional, collegiate, and other televised sports events, as well as other programming designed to appeal to viewers within its own geographic region. The regions are determined primarily by the geographic distribution rights granted to the RSNs in their licenses to televise local games played by teams in Major League Baseball ("MLB"), the National Basketball Association ("NBA"), and the National Hockey League ("NHL"). The NHL, NBA and MLB each designate the home market territories in which local telecasts of their respective teams can be distributed. RSNs do not have the right to license professional games for distribution outside a defined home market. 8. Fox Sports Direct packages the programming of various RSNs for sale to the Direct to Home ("DTH") satellite marketplace, which includes both TVRO (C-band) and DBS (Ku-band) services. There are seventeen RSNs packaged to the DBS market by Fox Sports Direct. Fox Sports Direct's contract with EchoStar conveys to EchoStar the rights to a package of sixteen RSNs that include a wide range of local and national programming. For the DBS market, the Fox Sports Direct package consists of three elements. The first part of the package relates to "in-region" programming, the programming of the RSN in an individual subscriber's home market, which Fox states is programming authorized by the RSNs for carriage solely on a basic tier. The second part of the package involves "out-of-region" programming which Fox states includes all of the non-professional regional and other programming to which RSNs have national distribution rights. The last part of the package includes "professional game feeds for national distribution" which Fox describes as the RSN's professional games for out-of-region national distribution. 9. The following facts underlying EchoStar's complaint are not disputed by the parties. On June 26, 1996, EchoStar entered into an agreement ("RSN Distribution Agreement") with Liberty Satellite Sports, Inc. ("LSI") to distribute the regional sports programming controlled by LSI. LSI is a predecessor- in-interest to Fox Sports Direct. The RSN Distribution Agreement provides for a package of regional professional and non-professional sports programming to be delivered nationwide to DBS subscribers. 10. At a meeting held August 20, 1997, EchoStar inquired whether Fox was giving EchoStar cable-equivalent rates for the programming it received from Fox. At the conclusion of the meeting, Fox committed to send EchoStar new terms that would amend EchoStar's RSN Agreement with Fox. As a result, in a letter dated August 29, 1997, Fox offered to amend and extend its RSN Distribution Agreement with EchoStar. EchoStar notes that in the August 29, 1997 letter, Fox provided EchoStar with an offer of new rates responding "to [EchoStar's] request for fees more in line with a cable-equivalent fee." Before EchoStar could accept the offer, by letter dated September 5, 1997, Fox revoked the offer made to EchoStar in its August 29, 1997 letter. By letter dated September 24, 1997, EchoStar expressed dissatisfaction with Fox's decision to revoke the terms of its August 29, 1997 offer and gave Fox notice of its intent to file a program access complaint with the Commission. After additional letters between the parties failed to settle the dispute, EchoStar filed the instant program access complaint on October 27, 1997. IV. PROGRAM ACCESS ALLEGATIONS 11. EchoStar alleges that Fox has violated the Commission's program access rules by engaging in prohibited discrimination in prices, terms, and conditions in the sale of satellite cable programming to EchoStar. EchoStar alleges that the prices underlying Fox's August 29, 1997 offer to EchoStar and the rates left in place following the retraction of the offer for Fox's regional sports programming are discriminatory when compared to the rates in effect for certain similarly-situated cable licensees of Fox's programming. EchoStar also alleges that Fox has engaged in non-price discrimination because the terms and conditions, including tiering, packaging, and advertising availability, underlying both the August 29, 1997 offer and those left in place through the retraction of the offer are discriminatory and not required of other Fox licensees. 12. In response, Fox argues that Fox/Liberty Networks LLC and Fox Sports Net LLC are not proper parties to this proceeding because EchoStar has not negotiated with these parties in this matter and they are not signatories to the agreements at issue. In addition, Fox argues that EchoStar's program access complaint is barred by the one year limitations period that exists for filing program access complaints under the Commission's rules. Fox also asserts that EchoStar fails to demonstrate that Fox has engaged in either price discrimination or non-price discrimination. FSD maintains that a comparison between the program package purchased by EchoStar and program packages available to cable operators cannot form the basis of a program access complaint because the rights obtained by both parties are fundamentally different. 13. In reply, EchoStar notes that Fox/Liberty Networks LLC through Fox Sports Net LLC owns and controls most of the RSNs involved in the complaint and argues that the Commission should not allow a company to establish separate corporate subsidiaries in order to evade the program access rules. EchoStar also argues that although its complaint was filed more than a year after the execution of its contract with Fox Sports Direct, the August 29, 1997 letter sent by Fox Sports Direct to EchoStar was, by its own terms, an offer to sell programming. EchoStar contends that the letter started a new one year limitations period to began to run on that date. IV. DISCUSSION 14. For the reasons discussed below, we dismiss EchoStar's program access complaint against Fox as untimely filed. Fox alleges that EchoStar's program access complaint against Fox Sports Direct is barred by the one year limitations period applicable to such complaints. Section 76.1003(r)(1)-(3) of the Commission's rules, in pertinent part, states: Any complaint filed pursuant to this subsection must be filed within one year of the date on which one of the following occurs: (1) The satellite cable programming or satellite broadcast programming vendor enters into a contract with the complainant that the complainant alleges to violate one or more of the rules contained in this subpart; or (2) The satellite cable programming or satellite broadcast programming vendor offers to sell programming to the complainant pursuant to terms that the complainant alleges to violate one or more of the rules . . . ; or (3) The complainant has notified a cable operator, or a satellite cable programming vendor or a satellite broadcast programming vendor that it intends to file a complaint with the Commission based on a request to purchase or negotiate to purchase satellite cable programming or satellite broadcast programming, or a request to amend an existing contract pertaining to such programming pursuant to 76.1002(f) that has been denied or unacknowledged, allegedly in violation of one or more of the rules . . . . 15. Fox argues that since Fox Sports Direct's contract with EchoStar was executed on June 26, 1996, the limitations period for bringing a complaint based on that agreement expired on June 26, 1997. Fox contends that Fox Sports Direct's August 29, 1997 letter to EchoStar offering to amend and extend the June 26, 1996 RSN Distribution Agreement does not start a new one year limitations period, or afford an independent basis for jurisdiction under the Commission's rules. According to Fox, allowing such a letter to form the basis for a complaint would not be in the public interest because it would eliminate the incentive for parties to negotiate amended contract terms after the limitations period has run because such negotiations could lead to a complaint being filed that extends to the beginning of the contract. 16. EchoStar responds that its complaint is not barred by the limitations period because the program access rules provide that several different events, not just the execution of a contract, also trigger the one year limitations period. EchoStar notes that a program access complaint must be filed within one year of the date that, inter alia, a "satellite cable programming . . . vendor offers to sell programming to the complainant pursuant to the terms that the complainant alleges to violate one or more of the rules . . . ." EchoStar contends that Fox Sports Direct's August 29, 1997 letter was, by its own terms, an offer to sell programming to EchoStar and that the August 29, 1997 letter triggers the beginning of a new limitations period. EchoStar argues that the execution of a contract and the offer of allegedly discriminatory rates, terms and conditions are two separate events that can trigger the program access limitations period. 17. We find that EchoStar's complaint is barred by the one year limitations period of Section 76.1003(r)(1). EchoStar and Liberty Satellite Sports, Inc., the predecessor in interest to Fox Sports Direct, entered into the RSN Distribution Agreement on June 26, 1996, the initial term of which ends on December 31, 2001. Pursuant to Section 76.1003(r)(1) of the Commission's rules, Echostar had one year from the date of entering into this contract with Liberty Satellite Sports, Inc./Fox Sports Direct to file a program access complaint with the Commission. Thus, EchoStar had until June 26, 1997 to file such a complaint. The instant program access complaint was filed by EchoStar on October 27, 1997. 18. EchoStar argues, however, that Fox's August 29, 1997 letter which offered to amend and extend the contract entered into by the parties on June 26, 1997 was, by its own terms, an offer to sell programming to EchoStar and therefore started a new one year limitations period. We agree with EchoStar to the extent that the Commission's rules allow that executing a contract and making an allegedly discriminatory offer are two separate events that can trigger the program access limitations period. In this case, however, EchoStar's one year time period in which to file a program access complaint with the Commission began when it entered into a contract with Liberty Satellite Sports, Inc./Fox Sports Direct on June 26, 1996 and ended on June 26, 1997. 19. Fox's subsequent August 29, 1997 letter did not revive the limitations period regarding the rates, terms and conditions of the June 26, 1996 contract. Nor can we view Fox's August 29 letter as a separate offer which triggered the limitations period. Section 76.1003(r)(1) provided EchoStar with the opportunity for one year following the June 26, 1996 execution of the RSN Distribution Agreement to file a program access complaint regarding the rates, terms, and conditions of that agreement. EchoStar did not bring its complaint within that period and is therefore time barred. 20. We believe that public policy requires that we avoid unnecessary regulatory interference regarding contracts entered into by consenting parties. The goals of development of competition and creation of diversity in video programming distribution, through the Commission's program access rules, is a limited exception to this policy. While we recognize that there is some underlying tension between avoiding interference in the area of contractual agreements and the program access policy of fostering competition and diversity through fair access to vertically-integrated programming, we believe that the limitations period resolves some of this tension by providing a limited period of time to contest allegedly unfair or discriminatory contracts and offers. After that limited time period has elapsed, the parties may renegotiate the terms of such contracts, but doing so will not subject such contracts once again to program access review unless they enter into a new contract. Because we are deciding this matter on procedural grounds, we find that there is no need to reach the merits of this proceeding. V. ORDERING CLAUSES 21. Accordingly, IT IS ORDERED that the program access complaint filed by EchoStar Communications Corporation against Fox/Liberty Networks LLC, Fox Sports Net LLC and Fox Sports Direct IS DISMISSED WITH PREJUDICE. 22. This action is taken by the Chief, Cable Services Bureau, pursuant to authority delegated by Section 0.321 of the Commission's rules. FEDERAL COMMUNICATIONS COMMISSION Deborah A. Lathen Chief, Cable Services Bureau