Cable TV and the home field advantage

I received an email today from Scott Rosner, who recently had his op-ed article published in the Union Tribune.  With permission, I am re-posting his article here, titled “Cable TV and the Home Field Advantage”.  A pretty interesting article considering I have AT&T and don’t get access to those sports channels.  (Not that I watch all that many sports…but still!)  Check it out:

Cable TV and the home field advantage

By Scott Rosner

2:00 a.m. June 21, 2009

If consumers in San Diego and Philadelphia wanted to watch their hometown baseball teams play against each other recently, they could not go to just any television carrier. Each city is facing a squeeze play by their local cable companies: Cox owns Channel 4 in San Diego and Comcast owns Sportsnet in Philadelphia.

Since the dominant cable companies own these regional sports networks, guess who decides whether to allow others, such as satellite providers, to offer local games to consumers? That’s right, Cox and Comcast. If you’re a sports fan in either city who wants – and maybe needs – to root for the home team (including the Comcast-owned Sixers and Flyers in Philadelphia), you’re largely beholden to the cable company.

There are four main ways to receive home video service in the United States: traditional over-the-air broadcast, cable, satellite and now over lines from new competitors such as AT&T and Verizon, who have invested billions in infrastructure and marketing. This kind of competition is good because it means lower prices, more innovation and better customer service. It translates into lower bills for consumers as well as an increasing number of HD and non-HD channels, better DVR technology and bundled service. Consumers win as a result of this highly competitive marketplace.

That is, unless you are a sports fan living in San Diego or Philadelphia. The 1992 Cable Act has program access requirements that promote competition and diversity in video programming. The law prevents cable companies from acting in an unfair or anti-competitive manner when selling the huge amount of cable channels and programming that they own. So why isn’t what is happening in San Diego and Philadelphia illegal? In fact, it would be except for a technicality. At the moment the Federal Communications Commission is reviewing the rule that allows this to occur – the “terrestrial loophole” in the federal Cable Act. By their own admission, cable companies are taking advantage of this outdated exception to program-access laws. The loophole makes the law applicable only to satellite-delivered programming and not to programs delivered via a terrestrial signal. It’s a technicality that serves no rational purpose. Using it, cable companies are able to prevent their chief competitors – currently AT&T and DirecTV/DISH in San Diego and DirecTV/DISH in Philadelphia – from accessing the coveted sports networks.

The FCC has provided evidence that cable operators are using this loophole to keep out competition: In a 2007 order, the FCC noted that “withholding of terrestrially delivered cable-affiliated programming is a significant concern that can adversely impact competition in the video distribution market.” It specifically addressed the situation in San Diego and Philadelphia, stating “there is empirical evidence that such withholding has had a material adverse impact on competition in the video distribution market.”

According to a national research firm, in Philadelphia people are 43 percent less likely to live in a home with satellite service than they are in the rest of the United States because of cable’s lock on the home teams. In other words, of the nearly 6 million residents of the Philadelphia Direct Market Area, an additional 772,000 would have satellite service rather than cable if the area matched the national patter. In San Diego, there are 41 percent fewer households subscribing to satellite service than one would expect based on the national average. This translates to nearly 281,000 households. That’s more than 1 million homes in the two cities combined. No wonder the cable companies are withhold their prime programming from satellite companies.

Cable companies argue that because satellite providers such as DirecTV have exclusive programming of their own, such as the NFL Sunday Ticket package, this home-team monopoly is justified. However, the NFL Sunday Ticket, and sports packages like it, provide access to games played outside the home team’s territory. Unless a carrier has access to the home team, potential competitors simply can’t compete and local fans are forced into a “take it or leave it” deal with their cable company.

The loophole leaves fans perpetually stuck in the 1980s when they had little choice beyond over-the-air broadcasts or cable. The FCC should close this loophole in the law and make a serious statement about competition and consumer protection. Cable companies should not have the home field advantage over sports fans.

Rosner is associate director of the Wharton Sports Business Initiative at the University of Pennsylvania. He may be reached at .

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