News

Massillon Cable Wins Its Case

11/16/2007 7:00 PM Eastern

Massillon Cable TV has won its case in arbitration against FSN Ohio, claiming it should pay less to carry that Fox-owned channel without Cleveland Indians Major League Baseball games.

Now the cable operator, with 46,000 subscribers in Massillon, Ohio, must wait to see whether the Federal Communications Commission will uphold the arbitrator’s decision, or grant FSN Ohio’s appeal and set aside the ruling.

Arbitrator Patricia Murphy, in an eight-page ruling, accepted the final offer that Massillon Cable submitted to FSN Ohio in the contract dispute. The decision had been rendered in September, but wasn’t public until it was filed with the FCC last week.

'FAIR-MARKET VALUE’

“I find the final offer submitted by Massillon is the offer that most closely approximates fair-market value of the programming carriage rights at issue,” Murphy wrote in her ruling regarding FSN Ohio and its parent, News Corp.’s Fox Cable Networks.

Charging that the sports channel’s conduct during the arbitration was “unreasonable,” Murphy also ordered FSN Ohio to reimburse Massillon Cable for the “excess affiliation fees” the operator has paid during the dispute, plus interest. FSN Ohio must also pay Massillon Cable’s legal costs, and for its financial consultants.

How much Massillon Cable was paying in license fees for FSN Ohio when it had the Indians, and how much the operator wanted its license fees reduced are not known. Those financial details are considered confidential and were redacted from the arbitrator’s ruling.

Massillon Cable had maintained it should get a license-fee adjustment because FSN Ohio no longer had carriage rights to marquee programming, namely Indians games. The regional sports network lost the Cleveland Indians rights in 2006 to the team-owned SportsTime Ohio.

Massillon Cable sought arbitration for its dispute with FSN Ohio under special conditions set by the FCC on News Corp. in 2004, as part of its acquisition of DirecTV and its parent, Hughes Electronics. Those conditions, under the so-called News-Hughes order, give distributors the option of submitting carriage disputes regarding Fox-owned regional sports channels to arbitration.

“Massillon was encouraged by the arbitration award and we look forward to the Commission upholding the arbitration award, because we believe that’s the firm intent of the Fox-Hughes order,” said Mark Palchick, the cable company’s lawyer.

FSN Ohio and Fox Cable have maintained from the get-go that their dispute with Massillon Cable shouldn’t be subject to arbitration and did not participate in the final arbitration hearing. FSN Ohio did not submit a final offer to the arbitrator, nor did it participate in the final hearing, in order to maintain a right to appeal the arbitrator’s ruling to the FCC.

“Obviously, we’re very pleased with the arbitrator’s decision,” Massillon Cable president Bob Gessner said. “We’re disappointed that Fox didn’t participate, as they should have. And of course, we will continue to pursue it vigorously during the de novo review procedure.”

'NEWS-HUGHES’ AT ISSUE

FSN Ohio attorney Tony Basich said he was pleased the FCC will now review the case, which he has sought from the beginning, and that he believes “the commission will reaffirm the clear language of its original News-Hughes conditions.”

According to Basich, “Those conditions only allow arbitration when an agreement has expired or involving a first-time distributor — not when there are disputes under existing agreements.”

During the arbitration, Massillon Cable had presented an economist, Steven Siwek, who provided testimony about FSN Ohio’s fair-market value with its current programming.

“The Fox Service currently consists of marquee programming [that is must-have regional sports programming] only of Cleveland Cavaliers Basketball,” Murphy wrote.

Gessner is chairman of the National Cable Television Cooperative, which has an arbitration hearing set for January regarding carriage deals for seven Fox Sports Net outlets.

September