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DSNP v. Armstrong Petition for De Novo Review

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Released: August 31, 2011

Federal Communications Commission

DA 11-1483

REDACTED VERSION RELEASED AUGUST 31, 2011

Before the

Federal Communications Commission

Washington, D.C. 20554

In the Matter of
)
)

DIRECTV Sports Net Pittsburgh, LLC,
)
File No. CSR-8480-P
Petitioner,
)
)

v.
)
)

Armstrong Utilities, Inc.,
)
Respondent.
)

ORDER ON REVIEW

Adopted: August 10, 2011

Released: August 10, 2011

By the Chief, Media Bureau:

TABLE OF CONTENTS

Heading
Paragraph #
I.
INTRODUCTION .................................................................................................................................. 1
II. BACKGROUND .................................................................................................................................... 2
A. Liberty Media Order Arbitration Conditions................................................................................... 2
B. The Armstrong/DSNP Arbitration ................................................................................................... 5
III. DISCUSSION......................................................................................................................................... 8
A. Definition of Fair Market Value .................................................................................................... 10
B. The Impact of an MVPD's Subscriber Numbers and Revenues Generated on RSN
Carriage Terms............................................................................................................................... 11
C. Analysis of Final Offers................................................................................................................. 13
1. Analysis of Rates..................................................................................................................... 13
a. The DSNP Final Offer ...................................................................................................... 14
(i) Support for Proposed Rates ........................................................................................ 14
(a) Averaging Methodology ...................................................................................... 14
(b) PSPPE .................................................................................................................. 19
(ii) Analysis of DSNP's Proposed Rates.......................................................................... 21
b. The Armstrong Final Offer ............................................................................................... 23
(i) Support for Proposed Rates ........................................................................................ 23
(a) Historical Benchmark Analysis ........................................................................... 23
(ii) Analysis of Armstrong's Proposed Rates................................................................... 29
(a) Armstrong's Rates Compared to the Cohort Affiliates' Rates............................. 29
(b) Armstrong's Rates Compared to Comcast's Rates .............................................. 31
c. Conclusion ........................................................................................................................ 40
2. Analysis of Other Rate Terms ................................................................................................. 41
a. Renewal Rate Increase...................................................................................................... 42
b. Annual Escalator............................................................................................................... 47
c. Timing of the Annual Escalator ........................................................................................ 49
d. Number of Games ............................................................................................................. 51

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e. Conclusion ........................................................................................................................ 53
3. Analysis of Non-Rate Terms ................................................................................................... 54
a. Use of [REDACTED] Games to Cure Shortfalls............................................................. 55
b. Rebate for Shortfalls in Professional Games .................................................................... 57
c. [REDACTED] as a Recoverable Surcharge Cost ............................................................ 60
d. [REDACTED ]...................................................................................... 62
e. Lifeline Definition and Lifeline Tier Exclusion................................................................ 64
f.
Advertising Avails and Advertising Exclusivities ............................................................ 69
g. Carriage of FSNP in the Event of an NCTC Agreement. ................................................. 71
h. Conclusion ........................................................................................................................ 73
4. Recovery of Programming Costs............................................................................................. 74
IV. CONCLUSION .................................................................................................................................... 76
V. ORDERING CLAUSES....................................................................................................................... 77
Appendix A
-
Rates for Armstrong Under DSNP's Final Offer
Appendix B
-
Rates for Armstrong Under Armstrong's Final Offer

I.

INTRODUCTION

1.
In this Order, we consider a Petition filed by DIRECTV Sports Net Pittsburgh, LLC
("DSNP") seeking de novo review of an arbitrator's decision in favor of Armstrong Utilities, Inc.
("Armstrong") in a dispute concerning the fair market value of the right to carry Fox Sports Net
Pittsburgh ("FSNP"), a Regional Sports Network ("RSN") owned by DSNP.1 The arbitration proceeding
was conducted pursuant to a condition established by the Commission in the Liberty Media Order.2 For
the reasons set forth below, we deny DSNP's Petition and conclude, consistent with the arbitrator's
decision, that the Armstrong final offer most closely approximates the fair market value of the
programming carriage rights at issue.

II.

BACKGROUND

A.

Liberty Media Order Arbitration Conditions

2.
In the Liberty Media Order, the Commission approved the transfer of control of
DIRECTV Group, Inc. ("DIRECTV") from the News Corporation ("News Corp.") to Liberty Media Corp
("Liberty Media"), subject to certain conditions.3 As part of the transaction, Liberty Media acquired three
RSNs formerly owned by News Corp. FSNP, Fox Sports Net Northwest, and Fox Sports Net Rocky


1 See DIRECTV Sports Net Pittsburgh, LLC, Petition for De Novo Review, File No. CSR-8480-P (filed April 13,
2011) ("DSNP Petition" or "Petition"). The parties proposed a briefing schedule to the Media Bureau, which the
Media Bureau approved. Pursuant to this schedule, Armstrong filed an Opposition to the DSNP Petition on May 4,
2011. See Armstrong Utilities, Inc., Opposition to Petition for De Novo Review, File No. CSR-8480-P (filed May 4,
2011) ("Armstrong Opposition" or "Opposition"). DSNP filed a Reply to the Armstrong Opposition on May 17,
2011. See DIRECTV Sports Net Pittsburgh, Reply, File No. CSR-8480-P (filed May 17, 2011) ("DSNP Reply" or
"Reply"). The parties requested confidential treatment of certain competitively sensitive information that appears in
their pleadings and in the underlying arbitration record. We have redacted certain information in the public version
of this Order in accordance with the parties' requests for confidentiality.
2 See Applications for Consent to the Assignment and/or Transfer of Control of Licenses, News Corporation. and
The DIRECTV Group, Inc., Transferors, to Liberty Media Corporation., Transferee,
Memorandum Opinion and
Order, 23 FCC Rcd 3265, 3346 (2008), Appendix B, Condition IV, A "Commercial Arbitration Remedy"
("Liberty Media Order").
3 See id. at 3305-06, 88.
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Mountain.4 In approving the transaction, the Commission found that the combined entity's vertical
integration would provide it with "increased incentive and ability, post-transaction, to temporarily
foreclose its RSN programming" from other MVPDs.5 To mitigate this harm, the Commission accepted
Liberty Media's offer to abide by the same arbitration conditions with respect to RSNs that the
Commission adopted previously in approving News Corp.'s acquisition of a de facto controlling interest
in DIRECTV.6
3.
These conditions provide that when negotiations fail to produce a mutually acceptable set of
price, terms, and conditions for carriage of a non-broadcast RSN that is owned, managed, or controlled by
Liberty Media, an MVPD may choose to submit the dispute to commercial arbitration.7 The conditions
require each party to submit a "final offer" for carriage of the RSN at issue.8 Within 30 days of the
arbitrator's appointment, the arbitrator must issue a decision choosing the final offer that "most closely
approximates the fair market value of the programming carriage rights at issue."9 The arbitrator may not
choose a final offer that "does not permit the Liberty Media RSN to recover a reasonable share of the
costs of acquiring the programming at issue."10
4.
Within 30 days of the date of publication of the arbitrator's award, a party aggrieved by
the award may file with the Commission a petition seeking de novo review.11 In reviewing the award, the
Commission must examine the same evidence presented to the arbitrator.12 The Commission must choose
the final offer that "most closely approximates the fair market value of the programming carriage rights at
issue."13 The Commission must issue its findings and conclusions not more than 60 days after receipt of
the petition, which may be extended for one period of 60 days.14 Although not explicitly stated in the
conditions, the Commission's de novo review must also assess whether the final offer selected "does not
permit the Liberty Media RSN to recover a reasonable share of the costs of acquiring the programming at
issue."15


4 See id. at 3305, 87.
5 Id. at 3305-06, 88.
6 See id.; see also General Motors Corp. and Hughes Electronics Corp., Transferors, and the News Corporation,
Transferee
, Memorandum Opinion and Order, 19 FCC Rcd 473, 552-55, 172-77 and 677-79, Appendix F,
Condition III (2004) ("News/Hughes Order").
7 See Liberty Media Order, 23 FCC Rcd at 3346, Appendix B, Condition IV, 1.
8 See id. at 3346-47, Appendix B, Condition IV, A "Commercial Arbitration Remedy," 6, 8, 10.
9 See id. at 3347, Appendix B, Condition IV, B "Rules of Arbitration," 1, 3.
10 See id. at 4.
11 See id. at 3348, Appendix B, Condition IV, C "Review of Final Award by the Commission," 1.
12 See id. at 3.
13 See id.
14 See id. at 1
15 See id. at 3347, Appendix B, Condition IV, B "Rules of Arbitration," 4. Although this requirement is stated in
the rules applicable to the arbitration but not stated in the rules applicable to the Commission's de novo review, we
find no basis to disregard this requirement when conducting a de novo review. Moreover, we note that neither party
here contends that the Commission on de novo review can disregard this requirement.
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B.

The Armstrong/DSNP Arbitration

5.
Armstrong is a cable operator in Pittsburgh, among other areas.16 DSNP is the owner of
FSNP, one of the RSNs subject to the Liberty Media Order arbitration conditions.17 FSNP carries the
games of Major League Baseball's Pittsburgh Pirates and the National Hockey League's Pittsburgh
Penguins.18 Armstrong carried FSNP pursuant to an affiliation agreement that began in October 2005 and
terminated on [REDACTED].19 While the parties attempted to negotiate a renewal of this agreement
prior to its expiration, those negotiations were unsuccessful.20
6.
On [REDACTED], Armstrong submitted a demand for arbitration pursuant to the
Liberty Media Order arbitration conditions.21 Armstrong's arbitration demand included its final offer for
carriage of FSNP.22 DSNP submitted its final offer for Armstrong's carriage of FSNP on [REDACTED],
2010.23 Although the Liberty Media Order conditions require arbitrations to be completed within 30 days
from the date the arbitrator is appointed,24 the parties agreed to waive this deadline.25 On October 18,
2010, the arbitrator appointed by the American Arbitration Association, Ms. Melissa D. Hubbard, Esq.
(the "Arbitrator"), approved a Confidentiality Agreement and Protective Order proposed by the parties.26
On November 24, 2010, the Arbitrator approved a stipulation concerning the production and use of
certain agreements between each of the parties and Comcast.27


16 See Armstrong Opposition at 12; Proposed Findings of Fact Submitted by Armstrong Utilities, Inc. (Feb. 11,
2011), at 8-9 ("Armstrong Proposed Findings of Fact").
17 See DSNP Petition at 11; Proposed Findings of Fact of Respondent DIRECTV Sports Net Pittsburgh, LLC (Feb.
11, 2011), at 2 ("DSNP Proposed Findings of Fact").
18 See DSNP Petition at 11; DSNP Proposed Findings of Fact at 2.
19 See Affiliation Agreement between Armstrong Utilities, Inc. and Fox Sports Net Pittsburgh LLC (effective Oct.
24, 2005), JX-1 ("2005 Armstrong/FSNP Agreement").
20 See DSNP Petition at 13.
21 See Armstrong Utilities, Inc., Demand for Arbitration ([REDACTED]). Armstrong's notice of intent to arbitrate
kept the 2005 Armstrong/FSNP Agreement in place pending the outcome of the arbitration. See Liberty Media
Order
, 23 FCC Rcd at 3346, Appendix B, Condition IV, A "Commercial Arbitration Remedy," 3; Armstrong
Opposition at 13.
22 See Affiliation Agreement between DIRECTV Sports Net Pittsburgh, LLC, and Armstrong Utilities, Inc., JX-33
("Armstrong Final Offer").
23 See Affiliation Agreement between DIRECTV Sports Net Pittsburgh, LLC, and Armstrong Utilities, Inc., JX-34
("DSNP Final Offer").
24 See Liberty Media Order, 23 FCC Rcd at 3347, Appendix B, Condition IV, B "Rules of Arbitration," 1.
25 See Report on Preliminary Telephonic Hearings, at 1 (Oct. 12, 2010); Report on Preliminary Hearing and
Scheduling Order, at 2 (Oct. 19, 2010).
26 See Confidentiality Agreement and Protective Order (Oct. 18, 2010) ("CAPO").
27 See Stipulation Concerning Confidentiality of Specified Comcast Contracts (Nov. 24, 2010) ("Comcast
Stipulation"). On October 28, 2010, the Arbitrator issued subpoenas to DIRECTV, Comcast, and News Corp.
("Respondents") to produce certain documents. See Subpoenas to Comcast Corporation, News Corp., and DirecTV
(Oct. 28, 2010). The Arbitrator later amended these subpoenas to be hearing subpoenas instead, which would
require the Respondents to produce documents and other information at the hearing and to present substantive
testimony about those materials. See Arbitrator's Order (Nov. 19, 2010). The Respondents did not comply with the
subpoenas. See Armstrong Opposition at 56-57. The Respondents filed a Petition for Declaratory Ruling with the
Commission asking for a ruling that (i) the Federal Arbitration Act ("FAA") and state laws do not govern
(continued....)
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7.
The parties engaged in extensive document discovery.28 Experts for each party submitted
reports and rebuttal reports.29 The parties submitted pre-hearing briefs on January 19, 2011.30 The
hearing began on January 24, 2011 and concluded on January 28, 2011.31 The parties submitted proposed
findings of fact on February 11, 2011.32 On March 14, 2011, the Arbitrator issued her ruling in favor of
Armstrong, finding that its final offer most closely approximated the fair market value of FSNP.33 On
April 13, 2011, DSNP filed a Petition for De Novo Review of the Arbitrator's decision.34

III.

DISCUSSION

8.
As discussed below, we conclude that the rates in the Armstrong final offer most closely
approximate fair market value and that, although certain non-rate terms tend to favor the DSNP final
offer, these non-rate terms do not tip the scales in favor of finding that the DSNP final offer most closely
approximates fair market value. As an initial matter, we note that the Liberty Media Order arbitration
(Continued from previous page)


arbitrations brought pursuant to Commission merger orders, including the Liberty Media Order; (ii) an arbitrator
appointed under these merger orders has no jurisdiction or authority to compel third-party participation in the
arbitration proceeding, through discovery, pre-hearing or hearing testimony, or otherwise; and (iii) the arbitration
conditions in these merger orders authorize only limited party discovery and do not authorize third-party subpoenas.
See Public Notice, Joint Petition for Declaratory Ruling that the Liberty Order Does Not Authorize Third-Party
Subpoenas
, 26 FCC Rcd 411 (MB 2011). Armstrong argues that this Petition for Declaratory Ruling is moot
because the hearing concluded and the Arbitrator issued an award without the benefit of the subpoenaed
information. See Armstrong Opposition at 56.
28 See DSNP Proposed Findings of Fact at 3-4.
29 Experts submitting reports on behalf of DSNP were Mark C. Wyche, Bortz Media and Sports Group; and Robert
Thompson, Principal, Thompson Sports Group, LLC. See Expert Report of Mark C. Wyche, RX-50 (Jan. 10, 2011)
("Wyche Expert Report"); Expert Report of Robert L. Thompson, RX-74 (Jan. 8, 2011) ("Thompson Expert
Report"); Rebuttal Report of Mark C. Wyche, RX-64 (Jan. 15, 2011) ("Wyche Rebuttal Expert Report"); Rebuttal
Report of Robert L. Thompson, RX-75 (Jan. 15, 2011) ("Thompson Rebuttal Expert Report"). Experts submitting
reports on behalf of Armstrong were Lindsay A. Gardner, Senior Advisor at Oak Tree Capital Management; and
Stephen E. Siwek, Consultant at Economists, Inc. See Expert Analyses and Opinions of Lindsay Gardner, CX-44
(Jan. 3, 2011) ("Gardner Expert Report"); Expert Report of Stephen E. Siwek, CX-46 (Jan. 3, 2011) ("Siwek Expert
Report"); Rebuttal Expert Report of Lindsay Gardner, CX-48 (Jan. 15, 2011) ("Gardner Rebuttal Expert Report");
Rebuttal Report of Stephen E. Siwek, CX-47 (Jan. 14, 2011) ("Siwek Rebuttal Expert Report").
30 See DIRECTV Sports Net Pittsburgh, LLC, Pre-Hearing Brief (Jan. 19, 2011) ("DSNP Pre-Hearing Brief");
Armstrong Utilities, Inc., Pre-Hearing Brief (Jan. 19, 2011) ("Armstrong Pre-Hearing Brief").
31 At the hearing, the following witnesses appeared on behalf of DSNP: Stephen Tucker, Chief Financial Officer,
DSNP; Patrick Crumb, Executive Vice President of Business Affairs/General Counsel, DSNP; Mark C. Wyche,
Bortz Media and Sports Group; and Robert Thompson, Principal, Thompson Sports Group, LLC. See Testimony of
Stephen Tucker, Hr'g Tr. at 1084 ("Tucker Test."); Testimony of Patrick Crumb, Hr'g Tr. at 1359-60 ("Crumb
Test."); Testimony of Mark C. Wyche, Hr'g Tr. at 874 ("Wyche Test."); Testimony of Robert Thompson, Hr'g Tr.
at 1263-64 ("Thompson Test."). The following witnesses appeared on behalf of Armstrong: Jeffrey A. Ross,
President, Armstrong; David Wittman, Vice President of Cable Marketing, Armstrong; Lindsay A. Gardner, Senior
Advisor at Oak Tree Capital Management; and Stephen E. Siwek, Consultant at Economists, Inc. See Testimony of
Jeffrey A. Ross, Hr'g Tr. at 107 ("Ross Test."); Testimony of David Wittman, Hr'g Tr. at 268 ("Wittman Test");
Testimony of Lindsay A. Gardner, Hr'g Tr. at 303-04 ("Gardner Test."); Testimony of Stephen E. Siwek, Hr'g Tr. at
547 ("Siwek Test.").
32 See DSNP Proposed Findings of Fact; Armstrong Proposed Findings of Fact.
33 See Award of Arbitrator (March 14, 2011) ("Award").
34 See DSNP Petition.
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conditions place important limitations on our de novo review of the final offers. First, the conditions
instruct us to select the final offer that "most closely approximates the fair market value of the
programming carriage rights at issue."35 That is, we must select one final offer or the other.36 We do not
have the discretion to craft our own affiliation agreement by selecting some terms from one final offer
and other terms from the other final offer or by imposing our own terms. In addition, we are not required
to assess whether the final offers reflect the actual market value of FSNP. Indeed, even if each final offer
varies greatly from what we expect to be the actual fair market value of FSNP, we are required to select
the final offer that "most closely approximates the fair market value of the programming carriage rights at
issue."37 Second, we may not select a final offer that does not permit the RSN "to recover a reasonable
share of the costs of acquiring the programming at issue."38 Third, we must examine the same evidence
that was presented to the Arbitrator.39 We may not hold another evidentiary hearing or allow the parties
to adduce new evidence.40 Fourth, we must act on the Petition for De Novo Review no later than 60 days
after it was filed, but we may extend this review period one time for an additional 60 days.41 We have
previously issued a 60-day extension, thereby establishing August 11, 2011 as the deadline for our
decision here.42
9.
Below, we begin by discussing the definitions of "fair market value" put forth by the
parties as well as a key aspect of marketplace negotiations for RSN programming i.e., an MVPD that
has a greater number of subscribers and generates more revenue for an RSN will obtain better rates,
terms, and conditions for carriage of the RSN than an MVPD that has fewer subscribers and generates
less revenue. We then analyze the final offers submitted by DSNP and Armstrong, which contain
different rates (i.e., per-subscriber rates for the programming), other rate terms (e.g., renewal rate resets,
annual escalators), and non-rate terms (e.g., advertising availabilities, curing of shortfalls in games).
Below, we assess each of these aspects of the final offers and also consider whether the final offers will
allow DSNP to "recover a reasonable share of the costs of acquiring the programming at issue." As
discussed in further detail below, based on our de novo review of the evidence and arguments in the
arbitration proceeding, we find that the Armstrong final offer most closely approximates the fair market
value of the programming carriage rights for FSNP and that there is no evidence demonstrating that the
Armstrong final offer will not allow DSNP to "recover a reasonable share of the costs of acquiring the


35 See Liberty Media Order, 23 FCC Rcd at 3348, Appendix B, Condition IV, C "Review of Final Award by the
Commission," 3.
36 The Commission has explained that final offer arbitration, whereby each party submits a final offer and the
arbitrator is required to choose the offer that most closely approximates fair market value, "has the attractive `ability
to induce two sides to reach their own agreement, lest they risk the possibility that a relatively extreme offer of the
other side may be selected by the arbitrator.'" See News/Hughes Order, 19 FCC Rcd at 552, 174 (quoting Steven
J. Brams, Negotiation Games: Applying Game Theory to Negotiation and Arbitration, Routledge, 2003 at 264).
37 See Liberty Media Order, 23 FCC Rcd at 3348, Appendix B, Condition IV, C "Review of Final Award by the
Commission," 3.
38 See id. at 3347, Appendix B, Condition IV, B "Rules of Arbitration," 4.
39 See id. at 3348, Appendix B, Condition IV, C "Review of Final Award by the Commission," 3.
40 See TCR Sports Broadcasting Holding, L.L.P., d/b/a Mid-Atlantic Sports Network v. Time Warner Cable Inc.,
Memorandum Opinion and Order, 25 FCC Rcd 18099, 18099, 1 n.5 (2010).
41 See Liberty Media Order, 23 FCC Rcd at 3348, Appendix B, Condition IV, C "Review of Final Award by the
Commission," 3.
42 See DIRECTV Sports Net Pittsburgh, LLC v. Armstrong Utils., Inc., Order, DA 11-1022 (MB 2011).
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programming at issue." We conclude that this ruling is amply supported by the arbitration record, which
establishes these findings by a preponderance of the evidence.

A.

Definition of Fair Market Value

10.
Both parties, as well as the Arbitrator, put forth their interpretations of the term "fair
market value."43 Neither party objects to the Arbitrator's definition of "fair market value" as "the amount
at which property would change hands between a willing seller and a willing buyer when neither is acting
under compulsion and when both have reasonable knowledge of the relevant facts."44 Both parties also
agree that determining fair market value requires an analysis of comparable buyers of comparable
products.45

B.

The Impact of an MVPD's Subscriber Numbers and Revenues Generated on RSN
Carriage Terms

11.
The record establishes that a fundamental principle of marketplace negotiations for RSN
programming and, therefore, of determining fair market value is that an MVPD will receive better rates,
terms, and conditions for carriage of an RSN based on: (i) the number of subscribers the MVPD serves
(the more subscribers the MVPD serves, the lower the rate); and (ii) the revenue the MVPD generates for
the RSN (the more revenue the MVPD generates, the lower the rate).46 The parties agree that FSNP


43 See Award at 11, 68; Wyche Expert Report, RX-50 at 6 ("[W]illingness to pay in the marketplace is the primary
and most reliable measure of the fair market value of regional sports network pricing."); Siwek Expert Report, CX-
46 at 3 ("Fair Market Value is defined as the cash or cash-equivalent price at which property would change hands
between a willing buyer and a willing seller, both being adequately informed of the relevant facts and neither being
compelled to buy or sell."); Wyche Test., Hr'g Tr. at 879-80 ("Traditionally, fair market value is based on what a
willing seller will sell his product or service for and what a willing buyer will pay for that product or service.");
Gardner Test., Hr'g Tr. at 310-11 ("The rate that when isolating other matters, and other areas of business, the rate
that most closely reflects what a willing buyer and a willing seller would arrive at, reflective of the bundle of
services provided by the programmer and the value conferred on the service, including its size and relative size to its
peer group. . . .").
44 Award at 11, 68; see also DSNP Proposed Findings of Fact at 7; Armstrong Proposed Findings of Fact at 23.
DSNP disputes whether historical market transactions should play a role in a fair market value analysis. See DSNP
Petition at 40-41; DSNP Proposed Findings of Fact at 41-43. We address this issue below. See infra 28.
45 See DSNP Petition at 41-42, 62-63; Armstrong Proposed Findings of Fact at 22, 24; see also Award at 12, 72.
46 See Armstrong Proposed Findings of Fact at 1-2 ("All of the experts agreed that rates for distributors are driven by
the distributor's gross size (in terms of subscribers receiving the RSN) and by the distributor's value to the RSN (as
measured by total revenue contribution)."); id. at 12-13, 24, 43; Armstrong Opposition at 15 ("The rates that a
distributor pays are determined not just by the gross number of subscribers receiving the RSN, but by the total
revenue that that [sic] the distributor generates for the RSN."); Gardner Expert Report, CX-44 at 16-17 ("[A]n RSN
generally is expected to give its best rates to its largest distributors based on size and concentration of their
subscribership which receives the RSN programming in question. . . ."); Wyche Test., Hr'g Tr. at 897 (stating that
the largest rate discounts are reserved for the largest distributors in a market); id. at 937 (stating that comparability
of MVPDs is a function of their subscribers and revenue contribution); id. at 941 (stating that variation in rates paid
among MVPDs depends on subscriber numbers and revenue contribution); id. at 969 (same); see also DSNP
Proposed Findings of Fact at 27 ("Comcast dwarfs Armstrong in importance to DSNP whether measured in terms of
subscribers, total deal value or annual deal value."); Wyche Expert Report, RX-50 at 12-13 (stating that all
distributors within a range pay essentially the same rate, with that range typically based on the overall number of
subscribers); Thompson Expert Report, RX-74 at 4 (grouping distributors based on number of subscribers and
rates); DSNP Petition at 68 (stating that Comcast is the dominant distributor of FSNP whether measured based on
number of subscribers or gross revenue generated); Siwek Expert Report, CX-46 at 4 ("In a typical competitive
market, a high volume buyer can generally negotiate lower per unit prices than a lower volume buyer."); Siwek
(continued....)
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affiliates in the Pittsburgh area can be classified into one of three groups based on subscribers and
revenues: (i) Comcast (by far the largest MVPD in Pittsburgh, both in terms of subscribers and
revenues);47 (ii) the Cohort Affiliates (seven MVPDs, including Armstrong, each of which have
approximately [REDACTED] subscribers, account for approximately [REDACTED] percent of FSNP's
subscribers, and generate approximately [REDACTED] million in revenue annually for DSNP);48 and
(iii) small MVPDs (all of which have less than [REDACTED] subscribers).49 Table A below ranks the
various FSNP affiliates in terms of subscribers and revenue generated for DSNP. As discussed in further
detail below, while the parties agree that an MVPD that has a larger number of subscribers and generates
more revenue for an RSN generally will obtain better rates, terms, and conditions for carriage of the RSN
than an MVPD that has fewer subscribers and generates less revenue for the RSN, they disagree as to
whether Armstrong's subscriber numbers and revenues justify Armstrong receiving better rates than the
other Cohort Affiliates.50
(Continued from previous page)


Test., Hr'g Tr. at 554 ("[A] common principle in economics, [is] that the larger the distributor, all else equal, the
more revenue that's going to be generated."). We note that the Arbitrator made a similar finding. See Award at 15,
88 ("[A]ll of the industry experts agreed that the more valuable distributors of RSN programming (based on
numbers of subs and revenues paid to the RSNs) should receive lower rates on a comparative basis than those being
paid by less valuable distributors.").
47 See Chart: FSNP Subscriber Total Market Share 2010, RX-55; Chart: FSN Pittsburgh Subscriber Counts by Zone,
JX-208; Wyche Test., Hr'g Tr. at 883-84.
48 The Cohort Affiliates are composed of [REDACTED
]. See Chart: FSNP Subscriber Total Market
Share 2010, RX-55; Wyche Test., Hr'g Tr. at 884-85; see also Armstrong Proposed Findings of Fact at 12, 22;
DSNP Proposed Findings of Fact at 11-12.
49 See Chart: FSNP Subscriber Total Market Share 2010, RX-55; Chart: FSN Pittsburgh Subscriber Counts by Zone,
JX-208; JX-35, 36, and 44-162 (FSNP affiliation agreements with small MVPDs); Siwek Test., Hr'g Tr. at 567;
Wyche Test., Hr'g Tr. at 884; see also DSNP Proposed Findings of Fact at 13.
50 See infra 21, 28; see also Armstrong Proposed Findings of Fact at 25.
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Table A

MVPD Size in Terms of Subscribers (2010)51 MVPD Size in Terms of Revenues (2009)52

MVPD
# of Subs
MVPD
Annual Revenue
Generated for DSNP
in $millions

Comcast
[REDACTED]
Comcast
[REDACTED]
Cohort Affiliates
Cohort Affiliates
1. [REDACTED]
[REDACTED]
1. [REDACTED]
[REDACTED]
2. [REDACTED]
[REDACTED]
2. [REDACTED]
[REDACTED]
3. [REDACTED]
[REDACTED]
3. [REDACTED]
[REDACTED]
4. [REDACTED] [REDACTED]
4. [REDACTED]
[REDACTED]
5. [REDACTED]
[REDACTED]
5. [REDACTED]
[REDACTED]
6. [REDACTED]
[REDACTED]
6. [REDACTED]
[REDACTED]
7. [REDACTED]
[REDACTED]
7. [REDACTED]
[REDACTED]
Small MVPDs
[REDACTED]
Small MVPDs
Unknown
12.
While the number of subscribers served by an MVPD and the amount of revenue
generated by that MVPD are related (because the RSN charges the MVPD a per-subscriber fee), it is
possible that an MVPD with fewer subscribers than another MVPD will actually generate more revenue.
This is because RSNs charge MVPDs more for subscribers that are located closer to the home stadiums of
the teams the RSN carries (known as "zone pricing").53 The theory underlying zone pricing is that
subscribers closer to the home stadiums value the games more than subscribers located on the outskirts of
the viewing area.54 Comparing the subscriber and revenue figures for Armstrong and [REDACTED]
demonstrates the impact of zone pricing. While Armstrong trails [REDACTED] slightly in terms of
subscribers, Armstrong far exceeds [REDACTED] in terms of revenue generated for DSNP because
Armstrong has a greater number of subscribers in the zones closest to the stadiums where the teams play
and where DSNP charges a higher per-subscriber rate for carriage of FSNP.55


51 See Chart: FSNP Subscriber Total Market Share 2010, RX-55; Chart: FSN Pittsburgh Subscriber Counts by Zone,
JX-208; see also Wyche Test., Hr'g Tr. at 885.
52 Comcast's revenue figures are for 2011; all other revenue figures are for 2009. See Siwek Presentation, D-1 at 15
(citing Siwek Expert Report, CX-46, Appendix A at Charts 4, 5, 7-11, and 14); Siwek Test., Hr'g Tr. at 580-82;
Armstrong Proposed Findings of Fact at 12; Revenue from 2010 Comcast Affiliation Agreement Compared to
Revenue from Armstrong Final Offer and DSNP Final Offer, RX-104. Although [REDACTED] revenue
contribution has increased to [REDACTED] using its July 2010 subscriber numbers and 2011 rates, this still trails
Armstrong's revenue contribution from 2009. See DSNP Reply at 25.
53 See Gardner Expert Report, CX-44 at 16.
54 See Wyche Expert Report, RX-50 at 3. For FSNP, subscribers in the Pittsburgh area are divided into six zones.
See Gardner Expert Report, CX-44 at 16.
55 See Siwek Presentation, D-1 at 14-16.
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C.

Analysis of Final Offers

1.

Analysis of Rates

13.
The difference in the rates in the parties' final offers amounts to a total of [REDACTED]
over the course of the proposed five-year term (an average of [REDACTED] per year).56 In this section,
we assess the rates in the DSNP final offer and Armstrong's criticisms of those rates. We then assess the
rates in the Armstrong final offer and DSNP's criticisms of those rates. We conclude that the rates in the
Armstrong final offer most closely approximate the fair market value of the programming carriage rights
for FSNP.
a.

The DSNP Final Offer

(i)

Support for Proposed Rates

(a)

Averaging Methodology

14.
To calculate the rates in its final offer, DSNP averaged the rates in the affiliation
agreements between DSNP and three of the Cohort Affiliates [REDACTED
].57
DSNP concluded that these three Cohorts Affiliates were most comparable to Armstrong because (i) they
each negotiated renewals in [REDACTED], thus their affiliation agreements reflect current market
conditions;58 (ii) Armstrong and each of these Cohort Affiliates have a similar number of subscribers
([REDACTED]);59 and (iii) Armstrong and each of these Cohort Affiliates contribute approximately
[REDACTED] percent of DSNP's total subscribers and revenue.60 In response, Armstrong argues that
averaging the rates of other MVPDs has no basis in actual industry practice and bears no relation to fair
market value.61 Armstrong states that neither of DSNP's experts cited a single example of the use of
"averaging" to set rates in negotiations.62 Moreover, Armstrong notes that DSNP's CFO, Mr. Tucker,
could not recall an example outside of this litigation in which rates were proposed based on the average of
rates charged to other distributors.63
15.
DSNP's averaging methodology did not consider the rates paid by [REDACTED], one
of the Cohort Affiliates. DSNP excluded [REDACTED] because (i) its affiliation agreement includes no


56 That is, the rates in the DSNP final offer would result in Armstrong paying DSNP a total of [REDACTED] over
the course of the affiliation agreement, whereas the rates in the Armstrong final offer would result in Armstrong
paying DSNP a total of [REDACTED]. See Siwek Expert Report, CX-46 at 8; see also DSNP Proposed Findings
of Fact at 41. Both parties' final offers provide for a five-year term ([REDACTED] (the "final offer period")). See
Armstrong Final Offer, JX-33 at ARMSTRONG 005689, 3; DSNP Final Offer, JX-34 at DSNP 015052, 3.
57 See DSNP Petition at 35, 37; DSNP Proposed Findings of Fact at 35.
58 See DSNP Petition at 36-37, 42; Wyche Test., Hr'g Tr. at 888-89.
59 See DSNP Petition at 35-36, 39; Wyche Test., Hr'g Tr. at 888; DSNP Proposed Findings of Fact at 38.
60 See DSNP Petition at 35-36, 39; Wyche Test., Hr'g Tr. at 889. DSNP also notes that these three MVPDs are
sophisticated negotiators that negotiate deals with many RSNs nationwide. See DSNP Petition at 40 n.26; DSNP
Proposed Findings of Fact at 38.
61 See Armstrong Opposition at 42; Armstrong Proposed Findings of Fact at 47.
62 See Armstrong Opposition at 42; Armstrong Proposed Findings of Fact at 47; see also Wyche Test., Hr'g Tr. at
1065-67; Thompson Test., Hr'g Tr. at 1338-39.
63 See Armstrong Opposition at 42; Armstrong Proposed Findings of Fact at 47; see also Tucker Test., Hr'g Tr. at
1244-49.
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rates for [REDACTED], one of the three zones where Armstrong has subscribers;64 (ii) its affiliation
agreement is older (effective [REDACTED] and scheduled to expire [REDACTED]) and thus reflects
lower rates and a lower number of games offered;65 and (iii) it receives DSNP's full-time high-definition
("HD") feed by virtue of a prior agreement, and the value of the full-time HD feed is not reflected in the
rates in the [REDACTED] affiliation agreement.66 In response, Armstrong argues that DSNP's decision
to exclude the rates negotiated by [REDACTED] undermines the credibility of its averaging
methodology.67 Armstrong contends that DSNP should have included the rates negotiated by
[REDACTED] because (i) [REDACTED] has a similar distribution of subscribers among zones as
Armstrong and an overall number of subscribers that was [REDACTED] than [REDACTED] in 2010;68
(ii) [REDACTED], like Armstrong, accepted [REDACTED
];69 (iii) the
[REDACTED] affiliation agreement was negotiated [REDACTED] before the [REDACTED]
affiliation agreement, the rates of which DSNP included in its calculation;70 (iv) the [REDACTED]
affiliation agreement [REDACTED]as the [REDACTED] affiliation agreements, the rates of which
DSNP included in its calculation;71 and (v) the [REDACTED] affiliation agreement [REDACTED
] as the
[REDACTED] affiliation agreements.72
16.
DSNP's averaging methodology also did not include the rates paid by [REDACTED],
two of the Cohort Affiliates.73 DSNP excluded these rates because (i) each [REDACTED
], thus
rendering these affiliation agreements incomparable for the rights Armstrong was purchasing;74 (ii) the


64 See DSNP Petition at 61; Affiliation Agreement between [REDACTED
].
65 See DSNP Petition at 61-62; DSNP Proposed Findings of Fact at 36; [REDACTED] Agreement, JX-41 at DSNP
000083, 91; Wyche Test., Hr'g Tr. at 887-88, 1005-06.
66 See DSNP Petition at 61.
67 See Armstrong Opposition at 44-45 (citing Siwek Rebuttal Expert Report, CX-47 at 8-10; Gardner Rebuttal
Expert Report, CX-48 at 4-7); Armstrong Proposed Findings of Fact at 50-51.
68 See Armstrong Opposition at 45; Armstrong Proposed Findings of Fact at 50; Siwek Rebuttal Expert Report, CX-
47 at 9 ("Based upon subscriber information as of July 2010, [REDACTED] of Armstrong's subscribers and
[REDACTED] of [REDACTED] subscribers are in Zones 1 and 2, respectively."); Siwek Test., Hr'g Tr. at 825-26
(same); Chart: FSN Pittsburgh Rates as Paid by MVPD affiliates in Zones 1A through 6, JX-209.
69 See Armstrong Opposition at 45; Armstrong Proposed Findings of Fact at 50; Chart: FSN Pittsburgh Rates as Paid
by MVPD affiliates in Zones 1A through 6, JX-209; Wyche Test., Hr'g Tr. at 1005; see also infra 43;
[REDACTED]
].
70 See Armstrong Opposition at 45; Armstrong Proposed Findings of Fact at 51; [REDACTED
]; cf. Affiliation Agreement between [REDACTED
].
71 See Armstrong Opposition at 45; [REDACTED
].
72 See Armstrong Opposition at 45; Wyche Rebuttal Expert Report, RX-64, at 7.
73 See Armstrong Proposed Findings of Fact at 51.
74 See DSNP Petition at 57 (citing Affiliation Agreement between [REDACTED
]
(continued....)
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affiliation agreements do not include [REDACTED
];75 and (iii) the affiliation
agreements were negotiated in [REDACTED] and are now outdated.76

17.
In calculating its average, DSNP did not use the actual rates in the [REDACTED ]
affiliation agreements. Rather, DSNP increased or "normalized" these rates prior to averaging them to
account for the fact that neither of these MVPDs purchased the same carriage rights as Armstrong.77
Unlike Armstrong,78 [REDACTED] declined surcharges that would have provided it with [REDACTED
].79 Thus, to compare rates for a
comparable product, DSNP increased [REDACTED] rates by adding the surcharges for [REDACTED
].80 [REDACTED] agreed to the surcharge for the
[REDACTED ], but only in Zones [REDACTED]81 and not in [REDACTED] where [REDACTED]
had no subscribers.82 Thus, to compare rates for a comparable product, DSNP increased [REDACTED]
rates in Zones [REDACTED] by adding the surcharge [REDACTED
] that Armstrong agreed to
pay.83 In response, Armstrong argues that a fair market value analysis assesses what parties are willing to
pay and that failing to use the actual market rates that [REDACTED] have agreed to pay defies this
principle.84 Moreover, because many Armstrong subscribers are located in Zone [REDACTED
]
(Continued from previous page)


between [REDACTED
].
75 Each of DSNP's experts observed that the rates in the [REDACTED] are [REDACTED
]. See Wyche Test., Hr'g Tr. at 885-87; see also Thompson Expert Report, RX-74 at 5 (stating
that [REDACTED
]; DSNP Proposed Findings of Fact
at 35.
76 DSNP notes that [REDACTED
]. See DSNP Petition at 58 (citing Wyche Test., Hr'g Tr. at
705-06); DSNP Proposed Findings of Fact at 35.
77 See DSNP Petition at 36, 62-64; DSNP Proposed Findings of Fact at 36-38; Wyche Expert Report, RX-50 at 9-10.
78 See infra 43.
79 See DSNP Petition at 63 (citing Siwek Test., Hr'g Tr. at 574); DSNP Proposed Findings of Fact at 36-37.
[REDACTED] affiliation agreement was renewed in [REDACTED] before [REDACTED
]. See [REDACTED
].
80 See DSNP Petition at 63 (citing Wyche Test., Hr'g Tr. at 890); DSNP Proposed Findings of Fact at 37.
81 See DSNP Petition at 63-64 (citing [REDACTED
].
82 See id. at 64 (citing Wyche Test., Hr'g Tr. at 890); DSNP Proposed Findings of Fact at 37-38.
83 See DSNP Petition at 64 (citing Wyche Test., Hr'g Tr. at 890); DSNP Proposed Findings of Fact at 37-38.
84 See Armstrong Opposition at 46; Armstrong Proposed Findings of Fact at 24, 52-53; see also Wyche Expert
Report, RX-50 at 9-10; Wyche Test., Hr'g Tr. at 889-90, 1002, 1009-14; Chart: FSN Pittsburgh Rates as Paid by
MVPD affiliates in Zones 1A through 6, JX-209.
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while [REDACTED] subscribers are located in [REDACTED], Armstrong claims that DSNP cannot
presume that Armstrong and [REDACTED] would pay the same surcharge for additional games.85
18.
Discussion. We conclude that DSNP's approach of averaging the rates paid by three
FSNP affiliates that have fewer subscribers and generate less revenue than Armstrong is not probative of
the fair market value of the carriage rights at issue. As discussed above, the record supports the
fundamental principle that an MVPD with fewer subscribers and less revenue generated than another
MVPD will be subject to higher rates in the marketplace.86 Thus, averaging the rates of three MVPDs
that are smaller than Armstrong in terms of subscribers or revenue or both would be expected to result in
rates that are higher than what fair market value would dictate for Armstrong.87 As discussed below, the
rates in the DSNP final offer confirm this expectation.88 Moreover, even if DSNP had averaged the rates
of MVPDs comparable to Armstrong in terms of subscribers and revenue, we find no basis in the record
to conclude that averaging is an appropriate methodology for assessing fair market value. Indeed,
DSNP's witnesses could not cite examples of the use of an averaging methodology to propose rates either
in industry practice or previous litigation.89
(b)

PSPPE

19.
To support the claim that the DSNP final offer most closely approximates fair market
value, DSNP's expert, Mr. Wyche, put forth a per subscriber per professional event ("PSPPE") analysis
of 25 RSNs nationwide using data from 2009, 2010, and 2011.90 To arrive at a PSPPE figure for each
RSN studied, Mr. Wyche divided the average annual revenue per subscriber for each RSN by the number
of major professional events offered by the RSN.91 Mr. Wyche found that DSNP's PSPPE figure is equal
to or below the median and the average PSPPE figure in each year for all RSNs studied.92 DSNP argues
that the PSPPE analysis provides additional support for its claim that DSNP's rates reflect fair market
value.93 In response, Armstrong states that (i) Mr. Wyche did not cite an example of a PSPPE analysis
being used in the industry;94 (ii) the PSPPE analysis relied on rates from a third-party source (SNL


85 See Armstrong Opposition at 47 (citing Siwek Presentation, D-1 at 16; Ross Test., Hr'g Tr. at 115-17, 161-64,
258-59); Armstrong Proposed Findings of Fact at 53-54.
86 See supra 11.
87 As discussed above, while [REDACTED] has slightly more subscribers than Armstrong, it generates less than
half of the revenue that Armstrong generates for DSNP because Armstrong has a greater number of subscribers than
[REDACTED] in the zones closest to the stadiums where the teams play and where DSNP charges a higher per-
subscriber rate for carriage of FSNP. See supra 12.
88 See infra 21-22.
89 See Tucker Test., Hr'g Tr. at 1244-49; Wyche Test., Hr'g Tr. at 1065-67.
90 See DSNP Petition at 105; DSNP Reply at 54; DSNP Proposed Findings of Fact at 34; Wyche Rebuttal Expert
Report, RX-64 at 16-18.
91 See Wyche Rebuttal Expert Report, RX-64 at 16-17; Wyche Test., Hr'g Tr. at 911-12; DSNP Proposed Findings
of Fact at 34.
92 See Wyche Rebuttal Expert Report, RX-64 at 18; Figure 1: Normalized FSN Pittsburgh License Fees Are At or
Below RSN Industry Norms, RX-70; DSNP Proposed Findings of Fact at 34.
93 See DSNP Petition at 105; Wyche Rebuttal Expert Report, RX-64 at 18; DSNP Proposed Findings of Fact at 33-
34.
94 See Armstrong Opposition at 54; Armstrong Proposed Findings of Fact at 60.
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Kagan) and not real market rates;95 and (iii) Mr. Wyche did not state that the PSPPE analysis led to any
conclusions about which final offer was closer to fair market value, but only that it "helps directionally
suggest[] that [DSNP's] pricing structure is fair."96
20.
Discussion. We conclude that DSNP's PSPPE analysis is not probative of fair market
value. As DSNP's expert concedes, this analysis "helps directionally suggest[] that [DSNP's] pricing
structure is fair" when compared to other RSNs nationwide, but it does not address the salient issue of the
fair market value of the programming carriage rights for FSNP.97 The parties agree that assessing fair
market value requires an analysis of comparable buyers of comparable products.98 Comparing the PSPPE
figure for FSNP to the PSPPE figure for various RSNs nationwide does not attempt to analyze
comparable RSNs99 nor does it analyze the rates paid by comparable MVPDs.
(ii)

Analysis of DSNP's Proposed Rates

21.
The rates proposed by DSNP in its final offer, as well as a comparison to the rates paid
by other Cohort Affiliates for FSNP through 2013, are stated in Appendix A.100 As summarized in
Appendix A, the rates in the DSNP final offer would require Armstrong to pay higher rates than the three
Cohort Affiliates deemed most comparable to Armstrong by DSNP despite these MVPDs having fewer
subscribers and generating less revenue than Armstrong.101 For example, from 2010-2013, Armstrong
would pay [REDACTED] more per subscriber per month than [REDACTED] in Zone [REDACTED]
(a [REDACTED] higher rate) despite the fact that Armstrong has [REDACTED] more subscribers than


95 See Armstrong Opposition at 54; Armstrong Proposed Findings of Fact at 60.
96 See Armstrong Opposition at 54; Armstrong Proposed Findings of Fact at 60; see also Wyche Test., Hr'g Tr. at
912.
97 Wyche Test., Hr'g Tr. at 912.
98 See supra 10.
99 See DSNP Petition at 104 ("Although comparisons between and among other RSNs may be useful, such
comparisons have limitations because of differences in their geographic reach and population coverage, number of
professional teams and games offered, the proximity of other RSNs, their zone pricing structures, and other
factors."); Wyche Rebuttal Expert Report, RX-64 at 15-16 ("In my experience, the PSPPE measure is helpful but
does not fully account for the differences in RSNs I have already referenced."); Wyche Test., Hr'g Tr. at 909-12.
100 See Appendix A.
101 See id.; see also Siwek Rebuttal Expert Report, CX-47 at 4-5 (stating that the rates in the DSNP final offer would
"invert the historical ranking" of the Cohort Affiliates). By contrast, under the Armstrong final offer, Armstrong
would pay rates ranging from [REDACTED
] less than these three Cohort Affiliates. See Appendix B.
As discussed above, DSNP's averaging methodology considered only three Cohort Affiliates ([REDACTED
]). See supra 14. Moreover, DSNP did not use the actual rates in the [REDACTED] affiliation
agreements; rather, DSNP increased or "normalized" these rates prior to averaging them to account for the fact that
neither of these MVPDs purchased the same carriage rights as Armstrong. See supra 17. In comparing the rates
in the respective final offers with the rates paid by the other Cohort Affiliates, we adopt the approach put forth by
DSNP by only considering the three Cohort Affiliates deemed comparable by DSNP and by normalizing the
[REDACTED] rates as suggested by DSNP. See Appendices A and B. Even with this conservative approach, the
DSNP final offer would require Armstrong to pay higher rates than the other Cohort Affiliates. See Appendix A.
As Armstrong notes, if the lower actual rates paid by [REDACTED] were used, the disparity between Armstrong
and these Cohort Affiliates under the DSNP final offer would be greater. See Armstrong Opposition at 41-42. Cf.
Siwek Rebuttal Expert Report, CX-47 at Appendix A, Chart 1.
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[REDACTED] and generates [REDACTED] much revenue as [REDACTED] for DSNP.102 While
Armstrong would pay [REDACTED] less per subscriber per month than [REDACTED] in Zone
[REDACTED] (approximately [REDACTED] less), Armstrong would pay slightly more than
[REDACTED] in Zones [REDACTED] and [REDACTED].103 DSNP argues that this differential is de
minimis
104 and that Armstrong will return to paying less than [REDACTED] after these affiliates renew
their affiliation agreements [REDACTED].105 In addition, DSNP argues that because all of the Cohort
Affiliates have a similar number of subscribers and generate similar amounts of revenue for DSNP, they
should pay similar rates.106 Armstrong responds that DSNP has offered no data or testable benchmark to
support its claim that a distributor of Armstrong's size and value to DSNP should pay substantially the
same rates as smaller and less valuable DSNP distributors like [REDACTED
].107
22.
We conclude that the rates in the DSNP final offer are inconsistent with the fundamental
principle that an MVPD that has a greater number of subscribers and generates more revenue for an RSN
will obtain better rates, terms, and conditions for carriage of the RSN than an MVPD that has fewer
subscribers and generates less revenue for the RSN.108 The DSNP final offer violates this fundamental
principle by requiring Armstrong to pay higher rates than [REDACTED
] despite


102 See Appendix A; supra 11 and Table A. Armstrong would also pay a slightly higher rate than [REDACTED]
in Zones [REDACTED] and [REDACTED]. See Appendix A.
103 See Appendix A.
104 See DSNP Petition at 99-100; DSNP Proposed Findings of Fact at 49-50.
105 See DSNP Petition at 68.
106 See Wyche Test., Hr'g Tr. at 941 ("There's not a big enough variance in the subscribers of these affiliates or the
revenue contribution that they bring that would allow very much variation at all with respect to rates."); id. at 969
("My experience would suggest that the difference in these revenue contributions [between [REDACTED] and
Armstrong's [REDACTED]] would not suggest that there should be a significant variance in the rates. The only
revenue contribution that would afford such one would be a dominant provider, such as, in this case, Comcast,
which has [REDACTED] more subscribers than Armstrong."); Thompson Test., Hr'g Tr. at 1346-47 (stating that in
distinction to Comcast, which is "so much bigger than everyone else," "once you get down to . . . the lower half of
the affiliate ladder, the rates are going to be more or less all the same other than some timing related to when those
deals expire and what their annual increases are."); see also Wyche Expert Report, RX-50 at 12-13 ("With respect to
evaluating FSN Pittsburgh's volume discount practices, I believe that it is reasonable and appropriate . . . [that] all
distributors within a range pay essentially the same rate. The parameters of that range typically are based on the
overall numbers of subscribers . . . . However, if some other metric such as total percentage revenue contribution is
used . . . there are very clearly three tiers of affiliates . . . ."); DSNP Proposed Findings of Fact at 38-39.
107 See Armstrong Opposition at 43 ("[D]espite his years of experience, Mr. Wyche could not cite any actual data to
confirm his assertions as to how `variation' in distributor size does or does not impact rates let alone to confirm
that a distributor like Armstrong with [REDACTED] the DSNP subscribers as [REDACTED] and that contributes
[REDACTED] the revenue to DSNP would `typical[ly]' not also have at least a few percentage points `volume
discount' in its rates.") (emphasis in original) (citing Wyche Test., Hr'g Tr. at 939-44); Armstrong Proposed
Findings of Fact at 48; Siwek Expert Report, CX-46 at 2, 5 ("DSNP's Final Offer . . . clearly omits any recognition
of Armstrong's size in that it proposes that Armstrong pay rates higher than the smaller distributors." (emphasis in
original)); see also Armstrong Opposition at 2-3 ("DSNP's Final Offer is so far off-market that it would `flip'
Armstrong from paying the lowest rates among the `Cohort' cable affiliates to paying the highest in that group.")
(emphasis in original) and at 23-24; Armstrong Proposed Findings of Fact at 3-4, 43-45; Siwek Rebuttal Expert
Report, CX-47 at 5; Gardner Expert Report, CX-44 at 33-37; Gardner Test., Hr'g Tr. at 370-71; Wyche Test., Hr'g
Tr. at 1071 (conceding that the rates in the DSNP final offer would require Armstrong to pay rates similar to
[REDACTED
]).
108 See supra 11.
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Armstrong having more subscribers and generating more revenue for DSNP than these MVPDs. While
DSNP argues that the differential is de minimis, there is no basis in the record to support the theory that
fair market value would dictate that Armstrong pay similar rates let alone higher rates compared to
these three Cohort Affiliates given Armstrong's greater number of subscribers and value to DSNP. In
fact, as discussed in further detail below, Armstrong's historical benchmark analysis reveals that
Armstrong has not historically paid the same or higher rates for FSNP than all Cohort Affiliates that have
fewer subscribers and generate less revenue.109 While we do not preclude the possibility that there may
be circumstances in individual cases where fair market value would dictate that an MVPD with a greater
number of subscribers and revenue generated than another MVPD should pay a higher rate, DSNP has
alleged no facts here that would justify such treatment of Armstrong.
b.

The Armstrong Final Offer

(i)

Support for Proposed Rates

(a)

Historical Benchmark Analysis

23.
Armstrong's expert, Mr. Siwek, provided a "historical benchmark" analysis to support
Armstrong's claim that the rates in its final offer most closely approximate the fair market value of
carriage rights for FSNP.110 The theory underlying this analysis is that past market precedent is a valid
way to assess a proposed transaction and that the actual rates paid in actual market transactions are the
best measure of fair market value.111 Mr. Siwek's analysis (i) measured the percentage differences
between the rates for FSNP paid by Armstrong and the rates for FSNP paid by the other Cohort Affiliates
from 2005 through [REDACTED] (the "historic period");112 and (ii) tested which of the final offers
would most closely maintain those rate differentials after [REDACTED] (the "going forward" period).113
Siwek developed three models as part of this analysis: (i) the "Percentage Rate" model;114 (ii) the


109 See infra 28.
110 See Siwek Expert Report, CX-46 at 7-11; Siwek Test., Hr'g Tr. at 696 ("[M]y task was to look at which of the
final offers comes closest to [the fair market value] standard.").
111 See Armstrong Opposition at 26-27.
112 See Second Revised Chart 2: Historical Rate Comparison 2005-10, CX-136 (demonstrating that Armstrong has
received lower rates historically than the other Cohort Affiliates); Siwek Expert Report, CX-46 at 5-6 ("In the past,
the pattern of rates charged for FSN Pittsburgh appears to reflect rankings of distributors by size of subscribership.
As the second-largest cable system, Armstrong was assigned rates lower than other, smaller distributors
([REDACTED
])."); Siwek Expert Rebuttal Report, CX-47 at 4; Gardner
Test., Hr'g Tr. at 369-70; Siwek Test., Hr'g Tr. at 631-32; Armstrong Proposed Findings of Fact at 1 ("Armstrong
had consistently paid lower rates than each of [REDACTED
].") and at 43.
113 See Armstrong Opposition at 27; Armstrong Proposed Findings of Fact at 27-28; Siwek Expert Report, CX-46 at
7-11; Siwek Presentation, D-1.
114 This model assesses the average percentage difference between the rates Armstrong paid for FSNP and the rates
each of the other Cohort Affiliates paid for FSNP during the historic period (the "historical benchmark"). See
Armstrong Opposition at 29 (citing Siwek Test., Hr'g Tr. at 586-90); Armstrong Proposed Findings of Fact at 30-31.
Mr. Siwek then calculated the percentage difference between the rates Armstrong would pay under each final offer
and the rates that each of the Cohort Affiliates will pay in the going forward period. See Armstrong Opposition at
29 (citing Siwek Test., Hr'g Tr. at 586-90; Siwek Expert Rebuttal Report, CX-47, Appendix A at Charts 1, 2, 15-17;
Siwek Presentation, D-1 at 18-23); Armstrong Proposed Findings of Fact at 30-31. Mr. Siwek then analyzed the
difference between the going forward comparison for each final offer and the historical benchmarks to determine
which final offer most closely approximates fair market value. See Armstrong Opposition at 29; Armstrong
Proposed Findings of Fact at 30-31.
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"Contract Value" model;115 and (iii) the "Average and Aggregated Rate" model.116 According to Mr.
Siwek, the results of each model demonstrated that the rates in the Armstrong final offer were closer to
the historical benchmark than the rates in the DSNP final offer.117


115 Under this model, Mr. Siwek calculated contract value by multiplying the rates in each affiliation agreement by
the number of Armstrong subscribers to calculate the total "value" or revenue each affiliation agreement would
produce. See Armstrong Opposition at 30-31 (citing Siwek Presentation, D-1 at 25-26; Siwek Test., Hr'g Tr. at 599-
603); Armstrong Proposed Findings of Fact at 32-33. This model analyzes the difference between the contract value
produced by Armstrong during the historic period and the contract value it would have produced using the rates paid
by the Cohort Affiliates during the historic period (the "historical benchmark"). See Armstrong Opposition at 30-
31; Armstrong Proposed Findings of Fact at 32-33. Mr. Siwek then analyzed the difference between the contract
value Armstrong would produce using the rates in each final offer and the contract value it would produce using the
Cohort Affiliates' rates in the going forward period. See Armstrong Opposition at 31; Armstrong Proposed Findings
of Fact at 32-33. Mr. Siwek then analyzed the difference between the going forward comparison for each final offer
and the historical benchmarks to determine which final offer most closely approximates fair market value. See
Armstrong Opposition at 31; Armstrong Proposed Findings of Fact at 32-33.
116 To calculate historical benchmarks under this model, Mr. Siwek (i) calculated the averages of the rates paid by
Armstrong and the Cohort Affiliates in Zones 1, 2, and 4 for each six month period during the historic period; (ii)
summed the averages to produce "Average and Aggregate" numbers; and (iii) analyzed the difference between the
"Average and Aggregate" number for Armstrong during the historic period and the "Average and Aggregate"
number for each Cohort Affiliate during the historic period (the "historical benchmark"). See Armstrong Opposition
at 32-33 (citing Siwek Presentation, D-1 at 31-32; Siwek Test., Hr'g Tr. at 609-12); Armstrong Proposed Findings
of Fact at 33-35. Mr. Siwek then calculated "Average and Aggregate" numbers for the going forward period for
each Cohort Affiliate and for Armstrong using the rates in each final offer. See Armstrong Opposition at 32-33;
Armstrong Proposed Findings of Fact at 33-35. The going forward numbers for the Cohort Affiliates were then
compared to the going forward numbers for each final offer to measure their relative differences. See Armstrong
Opposition at 32-33; Armstrong Proposed Findings of Fact at 33-35. Mr. Siwek then analyzed the difference
between the going forward comparison for each final offer and the historical benchmarks to determine which final
offer most closely approximates fair market value. See Armstrong Opposition at 32-33; Armstrong Proposed
Findings of Fact at 33-35. Mr. Siwek did not calculate "Average and Aggregate" values for [REDACTED
]
because it has no Zone [REDACTED] customers. See Siwek Test., Hr'g Tr. at 614-15; see also Siwek Expert
Report, CX-46 at Chart 22.
117 See Siwek Test., Hr'g Tr. at 871 (stating that "the Armstrong Final Offer is consistently closer to the `historical
benchmark' than is the DSNP Final Offer"). Compared to the rates paid by [REDACTED], the models concluded
that the rates in the Armstrong final offer were [REDACTED] percentage points (Percentage Rate model),
[REDACTED] percentage points (Contract Value model), or [REDACTED] percentage points (Average and
Aggregated Rate Model) closer to the historical benchmark than the rates in the DSNP final offer. See Siwek Test.,
Hr'g Tr. at 855-61 (citing Siwek Corrected Presentation, CX-137 at 1-3). Compared to the rates paid by
[REDACTED], the models concluded that the rates in the Armstrong final offer were [REDACTED] percentage
points (Percentage Rate model), [REDACTED] percentage points (Contract Value model), or [REDACTED]
percentage points (Average and Aggregated Rate Model) closer to the historical benchmark than the rates in the
DSNP final offer. See Siwek Test., Hr'g Tr. at 595, 606-07, 614 (citing Siwek Presentation, D-1 at 21, 28, 34).
Compared to the rates paid by [REDACTED], the models concluded that the rates in the Armstrong final offer were
[REDACTED] percentage points (Percentage Rate model), [REDACTED] percentage points (Contract Value
model), or [REDACTED] percentage points (Average and Aggregated Rate Model) closer to the historical
benchmark than the rates in the DSNP final offer. See Siwek Test., Hr'g Tr. at 598, 606-07, 615 (citing Siwek
Presentation, D-1 at 23, 29, 35). Compared to the rates paid by [REDACTED], the models concluded that the rates
in the Armstrong final offer were [REDACTED] percentage points (Percentage Rate model) and [REDACTED]
percentage points (Contract Value model) closer to the historical benchmark than the rates in the DSNP final offer.
See Siwek Test., Hr'g Tr. at 598, 609 (citing Siwek Presentation, D-1 at 22, 30).
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24.
DSNP raises several criticisms of Armstrong's historical benchmark analysis. First,
DSNP argues that Armstrong did not attempt to calculate the current fair market value of the carriage
rights for FSNP; rather, it measured the proximity of the final offers to its historical benchmarks.118
According to DSNP, fair market value must be based on current and projected market conditions, not
historical market conditions based on rates contained in agreements negotiated over the course of a
decade.119 In response, Armstrong argues that its historical benchmark analysis is based on the standard
market valuation principle that "past market precedent is a valid and critical basis to value a proposed
transaction."120 Armstrong contends that while DSNP's experts assumed without analysis that there
would not be a significant variation in rates among the Cohort Affiliates, Armstrong's expert sought to
measure the actual rate differentials among the Cohort Affiliates from 2005 through 2010 and to test
which of the final offers would most closely approximate that structure going forward.121
25.
Second, DSNP argues that Mr. Siwek in calculating the historical benchmarks did not
know whether he was analyzing "comparable buyers" because he was unaware of how many subscribers
each affiliate had and whether Armstrong had a similar number of subscribers.122 According to DSNP, (i)
the [REDACTED] rates used for the 2005 through 2008 time period were negotiated when
[REDACTED] had only [REDACTED] FSNP subscribers, placing it outside of the Cohort Affiliate
group;123 and (ii) the [REDACTED] rates used for the 2005 through 2007 time period were negotiated
[REDACTED] when [REDACTED] had only approximately [REDACTED] FSNP subscribers, placing
it outside of the Cohort Affiliate group.124 Mr. Siwek compared these rates to the rates Armstrong
negotiated in 2005, when Armstrong had [REDACTED] subscribers and would be expected to negotiate
lower rates than these affiliates given its far greater subscriber numbers, thereby enlarging the rate
differentials between Armstrong and these affiliates.125 In response, Armstrong argues that the fact that


118 See DSNP Petition at 6, 40, 100-102 (citing Gardner Test., Hr'g Tr. at 508-09; Siwek Test., Hr'g Tr. at 691-92,
695-96); see also DSNP Reply at 3, 24; DSNP Proposed Findings of Fact at 50-52.
119 See DSNP Petition at 89; DSNP Proposed Findings of Fact at 41-43. DSNP emphasizes that a determination of
fair market value "must be based upon `prevalent, economic and market conditions' at the valuation date, not based
upon historical market conditions existing years before the transaction." See DSNP Petition at 40-41 (citing
Shannon P. Pratt, Robert F. Reilly & Robert P. Schweihs, Valuing Small Businesses and Professional Practices
(Business One Irwin 1986), CX-34 at 25; Siwek Test., Hr'g Tr. at 673-75); see also Wyche Expert Report, RX-50 at
6 (stating that evidence of what distributors "recently paid and have committed to pay in the future" for comparable
programming carriage rights forms "the primary basis for determining fair market value"); DSNP Proposed Findings
of Fact at 41-44.
120 See Armstrong Opposition at 26; see also id. at 35 ("A market-based benchmark is all the more necessary where,
as here, there is no `industry standard' for what volume or value discount a distributor of any particular size or value
should receive."); Armstrong Proposed Findings of Fact at 25; Gardner Test., Hr'g Tr. at 521.
121 See Armstrong Opposition at 27; Armstrong Proposed Findings of Fact at 25.
122 See DSNP Petition at 89-90, 92-95; DSNP Proposed Findings of Fact at 45-46; see also Siwek Test., Hr'g Tr. at
777-78.
123 See Siwek Rebuttal Expert Report, CX-47 at Chart 4 Subscriber Numbers Comparison.
124 See DSNP Petition at 94 (citing Gardner Test., Hr'g Tr. at 506-08; Siwek Test., Hr'g Tr. at 738-40, 785); DSNP
Proposed Findings of Fact at 45-46, 49.
125 See DSNP Petition at 94 n.61; see also Gardner Test., Hr'g Tr. at 507-08 (agreeing that an increase in subscribers
from [REDACTED ] would result in a more favorable renewal rate reset for the MVPD).
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some of the affiliates have grown in subscribership since 2005 is not a change to the market pricing
structure.126
26.
Third, DSNP argues that Mr. Siwek did not analyze comparable buyers of "comparable
products" because the programming carriage rights in each FSNP affiliation agreement differed.127 DSNP
contends that the affiliation agreements analyzed by Mr. Siwek contained different guarantees for the
minimum number of games and some included carriage of additional RSNs and other programming.128 In
addition, DSNP states that Mr. Siwek compared the [REDACTED] rates in the going forward period
without including any surcharges for the HD feed or additional Pirates games to allow for an accurate
comparison to the programming that Armstrong was receiving upon expiration of the 2005
Armstrong/FSNP Agreement.129 In response, Armstrong argues that the only variation in the
programming delivered to the affiliates arose in connection with DSNP's offer of an HD feed and a
package of additional Pirates games.130 Armstrong argues that this change affected the affiliates equally


126 See Armstrong Opposition at 36. In addition, Armstrong notes that DSNP's averaging methodology suffers from
the same alleged flaw because it used rates that [REDACTED] negotiated [REDACTED] when [REDACTED]
had only [REDACTED] subscribers, which would place [REDACTED] outside of the Cohort Affiliate group. See
id
. (citing Affiliation Agreement between [REDACTED
]; Siwek Rebuttal Expert Report, CX-47 at 9; Letter from Robert L. Hoegle,
Counsel to DSNP to Jennifer R. Scullion, Counsel to Armstrong, JX-218 (Dec. 16, 2010) (attaching residential
FSNP subscriber numbers for [REDACTED
] for January 2009 and 2010)).
Based on its much lower subscriber numbers compared to Armstrong [REDACTED] would be expected to receive
higher rates than Armstrong, thereby inflating the average rate calculated by DSNP for Armstrong. See Siwek
Rebuttal Expert Report, CX-47 at 9.
127 See DSNP Petition at 90-92, 94-95, 98; DSNP Proposed Findings of Fact at 45.
128 See DSNP Petition at 90-91; Siwek Test., Hr'g Tr. at 771. DSNP notes that Mr. Siwek relied upon the following
agreements: (i) a [REDACTED] affiliation agreement between [REDACTED
], which included carriage terms
for [REDACTED] and included a maximum of only [REDACTED] or [REDACTED] Pirates games and
[REDACTED] or [REDACTED] Penguins games (see Affiliation Agreement between [REDACTED
]; see also Affiliation Agreement between [REDACTED
]; (ii) a [REDACTED]
affiliation agreement between [REDACTED], which included carriage terms for [REDACTED] and guaranteed
only [REDACTED] Major Events (not necessarily Penguins and Pirates games) (see Affiliation Agreement
between [REDACTED
]; (iii) a [REDACTED] affiliation agreement between [REDACTED], which
included carriage rights to [REDACTED
] and guaranteed only [REDACTED]
events without a specific number of Pirates or Penguins games (see [REDACTED
]; (iv) the [REDACTED
], which was negotiated as part of a
larger deal for [REDACTED] (see [REDACTED
]); and (v) the
[REDACTED
] carriage rights for [REDACTED] (see [REDACTED
]). See DSNP Petition at 83-85.
129 See DSNP Petition at 95 (citing Siwek Test., Hr'g Tr. at 780-81); Wyche Rebuttal Expert Report, RX-64 at 6.
130 See Armstrong Opposition at 36; see Chart: FSN Pittsburgh Subscriber Counts by Zone, JX-208 (showing Cohort
Affiliates broken out by zone and subscribership and noting which affiliates declined the additional games). Other
than [REDACTED], each of the other Cohort Affiliates took some or all of the additional programming by agreeing
to a surcharge. See Chart: FSN Pittsburgh Subscriber Counts by Zone, JX-208. [REDACTED] took the additional
programming and a rate increase as part of the [REDACTED] renewal of its affiliation agreement. See Term Sheet
between [REDACTED
] agreed to a surcharge for the additional Pirates games in Zones [REDACTED]
(continued....)
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such that the rates paid by each of the affiliates reflect the relative size and value differentials among the
affiliates.131
27.
Fourth, DSNP argues that Mr. Siwek compared the old rates in the 2005
Armstrong/FSNP Agreement with the new rates negotiated by the Cohort Affiliates in their recent
renewal agreements, thereby resulting in a greater disparity between Armstrong's rates and the Cohort
Affiliate's rates.132 In response, Armstrong argues that market rates are always a mixture of "old" and
"new" contract rates, but this does not invalidate the comparison.133 In addition, Mr. Siwek re-ran his
calculations to use only periods in which a comparison could be made between Armstrong's rates and the
rates paid under the agreement preceding each Cohort Affiliate's most recent renewal.134 According to
Armstrong, even under this revised analysis, the rates in the Armstrong final offer are closer to the
historical benchmarks with respect to [REDACTED
].135
(Continued from previous page)


and [REDACTED] only. See [REDACTED
]. See [REDACTED
].
131 See Armstrong Opposition at 36; see also Armstrong Proposed Findings of Fact at 52-55.
132 See DSNP Petition at 93, 97-98; DSNP Proposed Findings of Fact at 46-47. For example, Mr. Siwek compares
the rates in the 2005 Armstrong/FSNP Agreement (which had not yet been renewed) with: (i) [REDACTED] 2010
rates under the [REDACTED
]; (ii) [REDACTED] 2010 rates under the [REDACTED
]; and (iii) [REDACTED] 2010 rates under the [REDACTED
].
See Siwek Rebuttal Expert Report, CX-47, Appendix A at Revised Chart 2; Siwek Test., Hr'g Tr. at 746-48.
133 See Armstrong Opposition at 33-34 (citing Gardner Test., Hr'g Tr. at 342-44, 357-61, 423); Armstrong Proposed
Findings of Fact at 36. In addition, Armstrong notes that DSNP's averaging methodology suffers from the same
alleged flaw because it used rates from one [REDACTED] affiliation agreement ([REDACTED]) and two
affiliation agreements in [REDACTED
]. See Armstrong Opposition at 34; Armstrong
Proposed Findings of Fact at 36.
134 See Armstrong Opposition at 34-35; Armstrong Proposed Findings of Fact at 37; Siwek Test., Hr'g Tr. at 617-19;
Siwek Presentation, D-1 at 37-49. For example, under this "alternative historical periods" approach, the benchmark
period for [REDACTED] is 2005 through 2008 [REDACTED
]. See
Armstrong Opposition at 34; Siwek Presentation, D-1 at 37. DSNP argues that Mr. Siwek used the wrong 2008 rate
for [REDACTED] in conducting his historical benchmark analysis. See DSNP Petition at 96-97; DSNP Reply 20-
21; DSNP Proposed Findings of Fact at 48-49; see also Armstrong Opposition at 34, 38-39; Armstrong Proposed
Findings of Fact at 29-30. Armstrong argues that the rate it used came directly from an internal DSNP document in
the record and that DSNP never called any DSNP personnel at the hearing to contest the accuracy of the 2008 rate
for [REDACTED] used by Mr. Siwek. See Armstrong Opposition at 38-39 (citing Email from Dale Albright,
Director, Affiliate Relations, Liberty Sports Group to [REDACTED
];
Armstrong Proposed Findings of Fact at 29. DSNP responds that Armstrong should have relied on a different
internal DSNP document in the record that reflected [REDACTED
].
See DSNP Petition at 96-97 (citing Email from Steve Schwartz, Vice President, Affiliate Relations, Liberty Sports
[REDACTED
]); DSNP Reply 20-21; DSNP Proposed
Findings of Fact at 48-49. In any event, Armstrong notes that Mr. Siwek re-calculated the historical benchmarks
using only [REDACTED ] rates for [REDACTED ] (and omitting the 2008 rates) and concluded that
Armstrong's final offer was still closer to the historical benchmarks for [REDACTED] than DSNP's final offer.
See Armstrong Opposition at 34-35; Armstrong Proposed Findings of Fact at 37-38; Siwek Charts, CX-137; Siwek
Test., Hr'g Tr. at 852-61.
135 See Armstrong Opposition at 34; Armstrong Proposed Findings of Fact at 37; Siwek Presentation, D-1 at 37-49;
Siwek Test., Hr'g Tr. at 617-29.
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28.
Discussion. We disagree with DSNP's claim that Armstrong's historical benchmark
analysis is irrelevant in assessing which final offer most closely approximates fair market value. To be
sure, Armstrong's historical benchmark analysis may not be dispositive in attempting to calculate the
current actual fair market value of the carriage rights for FSNP. The Liberty Media Order arbitration
conditions, however, do not require us to determine whether each party has calculated the actual fair
market value of FSNP. Rather, we must determine which final offer "most closely approximates" fair
market value. DSNP's criticisms notwithstanding, there is no dispute that Armstrong's analysis
demonstrates at the very least that Armstrong has not historically paid the same or higher rates than all
other Cohort Affiliates that have fewer subscribers and generate less revenue than Armstrong.

(ii)

Analysis of Armstrong's Proposed Rates

(a)

Armstrong's Rates Compared to the Cohort
Affiliates' Rates

29.
The rates proposed in the Armstrong final offer, as well as a comparison to the rates paid
by other Cohort Affiliates, are stated in Appendix B.136 As summarized in Appendix B, the rates in the
Armstrong final offer would provide Armstrong with the following discounts for carriage of FSNP
relative to other Cohort Affiliates depending on the zone and the particular Cohort Affiliate being
compared: [REDACTED] per subscriber per month ([REDACTED] percent to [REDACTED] percent
discount) in 2010; [REDACTED] per subscriber per month ([REDACTED] percent to [REDACTED]
percent discount) in 2011; [REDACTED] per subscriber per month ([REDACTED] percent to
[REDACTED] percent discount) in 2012; [REDACTED] per subscriber per month ([REDACTED]
percent to [REDACTED] percent discount) in 2013.137 DSNP argues that these discounts are too high
and the rates are [REDACTED
].138 In response,
Armstrong argues that its rates are justified given Armstrong's size and value to DSNP relative to the
other Cohort Affiliates139 and because its rates are closer to the historical benchmarks than the rates in the
DSNP final offer.140 In any event, Armstrong argues that DSNP cannot claim that Armstrong's proposed
discount is too high relative to the Cohort Affiliates because DSNP never introduced evidence assessing
whether or not there are significant rate differentials among the Cohort Affiliates according to their
relative size and value.141
30.
We conclude that the difference between Armstrong's proposed rates and the rates the
Cohort Affiliates pay does not demonstrate that the rates in the Armstrong final offer are inconsistent with


136 See Appendix B; see supra n.101 (explaining that the rates set forth in Appendices A and B consider only the
three Cohort Affiliates deemed comparable by DSNP and normalize the [REDACTED] rates as suggested by
DSNP) .
137 See Appendix B.
138 See DSNP Petition at 64-73; DSNP Proposed Findings of Fact at 39-41; Wyche Test., Hr'g Tr. at 896-97; Wyche
Rebuttal Expert Report, RX-64 at 7-8; Thompson Expert Report, RX-74 at 6.
139 See Armstrong Opposition at 40-42; Siwek Expert Report, CX-46 at 2; Siwek Test., Hr'g Tr. at 582.
140 See Armstrong Opposition at 26-35; Siwek Test., Hr'g Tr. at 871 (stating that "the Armstrong Final Offer is
consistently closer to the `historical benchmark' than is the DSNP Final Offer"); see also supra 23.
141 See Armstrong Proposed Findings of Fact at 25 ("DSNP's experts simply asserted that the difference in
size/value among the Cohort Affiliates were not sufficient to yield material differences in rates . . . . But DSNP's
experts failed to cite any data or benchmark that could be tested to see whether their assertions were accurate."); see
also
Armstrong Opposition at 4, 27; supra n.107.
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fair market value. While DSNP argues that Armstrong's rates are too low and its discounts are too high
relative to the other Cohort Affiliates, the Liberty Media Order arbitration conditions do not require us to
determine whether each party has calculated the actual fair market value of FSNP. Rather, we are
required to determine which final offer "most closely approximates fair market value." Given the choice
between a final offer that is consistent with the fundamental principle of marketplace negotiations for
RSN programming that larger MVPDs will receive better rates and a final offer that violates this
principle, we find that the final offer consistent with this fundamental principle "most closely
approximates fair market value." Moreover, despite DSNP's concern that Armstrong's rates are too low,
Armstrong will still generate the most revenue by far among the Cohort Affiliates even with the allegedly
low rates in the Armstrong final offer.142 In addition, DSNP has presented no standards or benchmarks
that would allow us to assess whether a discount is too high as DSNP alleges.
(b)

Armstrong's Rates Compared to Comcast's Rates

31.
The record establishes that Comcast is by far the largest DSNP affiliate in terms of
subscribers143 and revenues generated.144 The record also establishes that no other affiliate is comparable
to Comcast in terms of importance to DSNP and that its rates should therefore be lower than the rates of
any other affiliate.145 Despite Comcast's size and value to DSNP relative to Armstrong, [REDACTED
].146 For example,
comparing the rates in the 2010 Comcast/DSNP Agreement 147 with the rates proposed in the Armstrong


142 Based on the rates in the Armstrong final offer, Armstrong would produce [REDACTED] in revenue for DSNP
in 2011. See Armstrong Opposition at 40; Armstrong Proposed Findings of Fact at 39; Siwek Presentation, D-1 at
54; Siwek Test., Hr'g Tr. at 637-38. The other Cohort Affiliates would produce [REDACTED] less revenue for
DSNP: [REDACTED
] less than Armstrong); [REDACTED
] less than
Armstrong); [REDACTED
] than Armstrong); and [REDACTED
] less than
Armstrong). See Armstrong Opposition at 40; Armstrong Proposed Findings of Fact at 39; Siwek Presentation, D-1
at 54; Siwek Test., Hr'g Tr. at 637-38.
143 See supra Table A. Comcast subscribers account for [REDACTED] of all subscribers to FSNP. See DSNP
Petition at 68 (citing Award at 8, 47; Wyche Test., Hr'g Tr. at 883-84; Thompson Test., Hr'g Tr. at 1274).
Armstrong has far fewer subscribers than Comcast ([REDACTED]). See supra Table A. Moreover, of Comcast's
[REDACTED] subscribers, over [REDACTED] are located in [REDACTED]. See Chart: FSN Pittsburgh
Subscriber Counts by Zone, JX-208.
144 See supra Table A.
145 See DSNP Petition at 69-70; DSNP Proposed Findings of Fact at 25-27; Gardner Expert Report, CX-44 at 20
("Comcast rates typically are lower even than the [REDACTED
].
I have not seen Comcast rates or agreements concerning FSN Pittsburgh. However, again, the subscriber numbers
alone confirm that Comcast should receive the best rates among distributors for FSN Pittsburgh (assuming that
Comcast has some reasonable mix of subscribers in various zones)."); Wyche Expert Report, RX-50 at 12-13 ("In
my opinion, Comcast alone stands apart from the other FSN Pittsburgh affiliates sufficiently to obtain a very
substantial volume discount by virtue of its [REDACTED] percent overall share of FSN Pittsburgh's paying
subscriber base."); Thompson Expert Report, RX-74 at 9 ("Because Comcast is the dominant distributor . . . of FSN
Pittsburgh . . ., I would expect the license fees paid by Comcast to be much lower than the license fees paid by any
other distributor of FSN Pittsburgh . . . . Given the leverage on the part of Comcast, I expect that there is a very
substantial percentage differential between the license fees paid by Comcast and the license fees payable by
Armstrong and the other cable distributors at the [REDACTED] to [REDACTED] subscriber level.").
146 See DSNP Petition at 6, 55, 71-73; DSNP Proposed Findings of Fact at 27-29.
147 On March 15, 2010, Comcast entered into an affiliation agreement with DSNP for carriage of FSNP from
January 1, 2010 through December 31, 2015. See Affiliation Agreement between Comcast Cable Communications,
(continued....)
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final offer: (i) Comcast would receive [REDACTED]148 or [REDACTED]149 discount relative to the
rates proposed by Armstrong150 (whereas the rates in the DSNP final offer would provide Comcast with a
[REDACTED] discount relative to Armstrong151); (ii) Armstrong would pay [REDACTED
];152 and (iii) Armstrong would pay [REDACTED
].153
32.
Armstrong notes that there is no dispute that Comcast will receive a discount relative to
Armstrong.154 [REDACTED
]. First, Armstrong contends that there is no "industry standard" for what discount a
(Continued from previous page)


LLC and DIRECTV Sports Net Pittsburgh, LLC (effective Jan. 1, 2010), RX-3 ("2010 Comcast/DSNP
Agreement").
148 To calculate this percentage, DSNP took the number of Comcast subscribers in 2010 in Zones 1, 2, and 4 (i.e.,
zones where both Comcast and Armstrong have subscribers); calculated the revenues generated using the rates in
Comcast's current contract by multiplying these subscriber figures by the rates in the 2010 Comcast/DSNP
Agreement for the final offer period (amounting to [REDACTED]); calculated the revenues generated using the
rates in the Armstrong final offer by multiplying these subscriber figures by the rates in the Armstrong final offer
(amounting to [REDACTED]); divided the two revenue figures to calculate the discount Comcast would receive
relative to the rates proposed by Armstrong ([REDACTED]). See DSNP Petition at 72-73; DSNP Proposed
Findings of Fact at 28-29; Chart: Revenue from 2010 Comcast Affiliation Agreement Compared to Revenue from
Armstrong Final Offer and DSNP Final Offer (Using 2010 Comcast Subscribers in Zones 1, 2 and 4), RX-104T;
Tucker Test., Hr'g Tr. at 1116, 1125-30.
149 To calculate this percentage, Armstrong took the number of Armstrong subscribers in each zone; calculated the
revenues generated using the rates in Comcast's current contract by multiplying the Armstrong subscriber figures by
the rates in the 2010 Comcast/DSNP Agreement for the final offer period (amounting to [REDACTED]); calculated
the revenues generated using the rates in the Armstrong final offer by multiplying the Armstrong subscriber figures
by the rates in the Armstrong final offer (amounting to [REDACTED]); divided the two revenue figures to calculate
the discount Comcast would receive relative to the rates proposed by Armstrong ([REDACTED]). See Armstrong
Opposition at 67 (citing Armstrong Proposed Findings of Fact at 72; Tucker Test., Hr'g Tr. at 1191-92). DSNP
states that this calculation would result in a discount of [REDACTED], not [REDACTED]. See DSNP Reply at 49
n.41.
150 By contrast, the rates in the Armstrong final offer would provide Armstrong with a discount ranging from
[REDACTED] percent to [REDACTED] percent relative to the other Cohort Affiliates, despite the fact that the
Cohort Affiliates (including Armstrong) each have [REDACTED] subscribers and generate [REDACTED] million
to [REDACTED] million in revenue for DSNP. See Appendix B; supra 29 and Table A.
151 See DSNP Petition at 73; DSNP Proposed Findings of Fact at 29; Chart: Revenue from 2010 Comcast Affiliation
Agreement Compared to Revenue from Armstrong Final Offer and DSNP Final Offer (Using 2010 Comcast
Subscribers in Zones 1, 2 and 4), RX-104T; Tucker Test., Hr'g Tr. at 1116, 1125-30.
152 See DSNP Petition at 71; DSNP Proposed Findings of Fact at 27-28.
153 See DSNP Petition at 71; DSNP Proposed Findings of Fact at 27-28. According to DSNP, at the end of the terms
of their respective agreements, Armstrong would be paying rates that are [REDACTED
] Comcast's rates in
Zone [REDACTED] (where Comcast has [REDACTED] subscribers compared to [REDACTED] for Armstrong)
and [REDACTED
] Comcast's rates in Zone [REDACTED] (where Comcast has approximately
[REDACTED]subscribers compared to [REDACTED] for Armstrong). See DSNP Petition at 72 (citing 2010
Comcast/DSNP Agreement, RX-3 at DSNP 007806, 5(b); Chart: Rates in Armstrong Final Offer (Siwek Chart 1),
RX-107); DSNP Proposed Findings of Fact at 28.
154 See Armstrong Opposition at 8, 55; supra 31.
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distributor of any particular size or value should receive.155 Armstrong's expert, Mr. Gardner, testified
that the discounts afforded to Comcast "can be anywhere from [REDACTED] percent,"156 but that he
had "no feel for, at all, as to what Comcast['s] discount might be here."157 DSNP notes that the
[REDACTED] discount it calculates that Comcast would receive relative to Armstrong falls outside of
the range put forth by Mr. Gardner.158
33.
Second, Armstrong explains that there is no reliable evidence in the record as to the
discount Comcast received relative to Armstrong prior to 2010.159 Armstrong claims that the record
included a term sheet that listed the "baseline rates" that Comcast paid for FSNP prior to 2010,160 but the
rates did not reflect [REDACTED
] and thus did not reflect
the actual, net effective rate paid by Comcast.161 Armstrong submits that, without knowing the discount
that Comcast received relative to Armstrong prior to 2010, there is no basis for assessing what that
discount should be now or which final offer proposes rates commensurate with that discount.162
34.
Third, Armstrong argues that there is no basis to conclude that the 2010 Comcast/DSNP
Agreement is comparable to the final offers here because no expert was allowed to review this affiliation
agreement.163 While the parties entered into a Confidentiality Agreement and Protective Order,164
Comcast deemed this agreement insufficient to satisfy the confidentiality provisions in the 2010
Comcast/DSNP Agreement.165 The parties agreed to a stipulation whereby a redacted version of the 2010
Comcast/DSNP Agreement was produced, provided that neither party's experts could review the redacted
agreement.166 Because no expert was allowed to review the 2010 Comcast/DSNP Agreement, Armstrong


155 See Armstrong Opposition at 35; Armstrong Proposed Findings of Fact at 25; see also Siwek Test., Hr'g Tr. at
521, 559-60; Siwek Expert Report, CX-46 at 7-8.
156 Gardner Test., Hr'g Tr. at 726.
157 Id. at 729.
158 See DSNP Petition at 73; DSNP Proposed Findings of Fact at 29.
159 See Armstrong Opposition at 65-66; see also id. at 8 ("[N]o fact or expert witness testified to what the `discount'
has been or should be between Armstrong's rates and Comcast's rates. Nor could they. Key data was missing from
the record such that no one knows what Comcast had been paying prior to its recent 2010 renewal."); Armstrong
Proposed Findings of Fact at 70.
160See Armstrong Opposition at 65.
161 See id. at 65-66. At hearing, DSNP argued that it was unfair to look only at baseline rates without netting out
certain [REDACTED
]. See DSNP Reply at 48; Armstrong
Opposition at 65; Hr'g Tr. at 1207-09. Armstrong argued that, if these rate reductions were included, then certain
[REDACTED] that Comcast agreed to pay, which would raise the net effective rate, also needed to be included in
order to determine the actual, net effective rate paid by Comcast. See Armstrong Opposition at 65; Hr'g Tr. at 1209-
14. While DSNP calculated that Comcast received a [REDACTED] discount relative to Armstrong in Zone
[REDACTED] in 2009, Armstrong contends that the data are unreliable because they do not reflect the
[REDACTED
] made by Comcast to DSNP. See DSNP Petition at 72 n.49; Armstrong Opposition at 65-66;
DSNP Reply at 48.
162 See Armstrong Opposition at 66;Armstrong Proposed Findings of Fact at 71.
163 See Armstrong Opposition at 58-59; Armstrong Proposed Findings of Fact at 69.
164 See Confidentiality Agreement and Protective Order (Oct. 18, 2010).
165 See Armstrong Opposition at 57.
166 See Stipulation Concerning Confidentiality of Specified Comcast Contracts (Nov. 24, 2010) ("Comcast
Stipulation").
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notes that no expert could opine that the affiliation agreement was comparable for purposes of the fair
market value analysis.167 In response, DSNP notes that Armstrong agreed to the condition in the Comcast
Stipulation limiting expert review.168 DSNP also notes that the Arbitrator admitted the 2010
Comcast/DSNP Agreement into evidence; states that Armstrong represented to the Arbitrator that the
2010 Comcast/DSNP Agreement is relevant to the fair market value analysis; and argues that there was a
sufficient basis to deem the 2010 Comcast/DSNP Agreement comparable to the final offers here because
all involved the same number of Pirates and Penguins games, the same zones, and the same time
period.169 DSNP also notes that Armstrong's expert, Mr. Gardner, opined without reviewing the 2010
Comcast/DSNP Agreement that "subscriber numbers alone" dictate that Comcast should receive the best
rates among FSNP affiliates.170
35.
Fourth, Armstrong argues that there is no basis to conclude that the 2010 Comcast/DSNP
Agreement is comparable to the final offers because the 2010 Comcast/DSNP Agreement contains a
different "basket of rights" with unique and valuable provisions relative to the final offers and the Cohort
Affiliates' affiliation agreements.171 Armstrong argues that these provisions mean that no comparison can
be made between the rates in the 2010 Comcast/DSNP Agreement and the rates in the final offers without
an expert analysis of comparability.172 While experts were not allowed to review the 2010
Comcast/DSNP Agreement, they were asked at the hearing in general terms about these provisions and
testified that they are unusual or uniquely valuable.173 In response, DSNP notes that the affiliation
agreements upon which Armstrong's expert relied in his historical benchmark analysis could also be
described as containing a different "basket of rights" than the final offers here,174 yet Armstrong's expert


167 See Armstrong Opposition at 59; Armstrong Proposed Findings of Fact at 69. For example, when the Arbitrator
asked DSNP's expert, Mr. Wyche, for his opinion as to whether the 2010 Comcast/DSNP Agreement should be
considered a comparable affiliation agreement, Mr. Wyche responded, "I don't know because I didn't get to read the
contract." See Wyche Test., Hr'g Tr. at 936; Armstrong Opposition at 59 n.43; Armstrong Proposed Findings of
Fact at 69. When DSNP's counsel asked Armstrong's expert, Mr. Gardner, whether he would expect Armstrong to
receive a lower rate than Comcast for FSNP, he stated, "It's impossible for me to make a judgment on that . . . I
don't know what's in the Comcast deal." See Gardner Test., Hr'g Tr. at 731; Armstrong Opposition at 59 n.43;
Armstrong Proposed Findings of Fact at 69.
168 See DSNP Petition at 75 n.52; see also Comcast Stipulation.
169 See DSNP Reply at 41; see also DSNP Petition at 85.
170 See DSNP Reply at 42; Gardner Expert Report, CX-44 at 19-20.
171 See Armstrong Opposition at 62-64; Armstrong Proposed Findings of Fact at 72-75. Among other unique
provisions, the 2010 Comcast/DSNP Agreement includes [REDACTED
]. See Armstrong Opposition at 63; Armstrong Proposed Findings of Fact, Schedule A.
172 See Armstrong Opposition at 62-63; see id. at 9 ("Where, as here, it appears that one distributor is paying for a
custom-made `Ferrari,' while all the others are paying for off-the-line `Buicks,' there is no valid basis to compare
the rates each is paying for the different products."); Armstrong Proposed Findings of Fact at 5, 73.
173 See Armstrong Opposition at 64; Gardner Test., Hr'g Tr. at 402-09; Wyche Test., Hr'g Tr. at 989-92; Thompson
Test., Hr'g Tr. at 1326, 1335-37, 1340.
174 See DSNP Petition at 85; id. at 81 n.57 [REDACTED
].
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testified that he analyzed only the "actual rates paid" without analyzing these other provisions.175
According to DSNP, it would be a "double standard" for these other provisions to render the 2010
Comcast/DSNP Agreement as not comparable but to ignore these provisions in analyzing the affiliation
agreements underlying the historical benchmark analysis.176 Armstrong responds that there is no "double
standard" because (i) the provisions it cites from the 2010 Comcast/DSNP Agreement are unique to this
agreement and do not appear in the affiliation agreements underlying the historical benchmark analysis or
in the final offers;177 (ii) unlike with the 2010 Comcast/DSNP Agreement, experts were permitted to
review the affiliation agreements underlying the historical benchmark analysis to make an assessment as
to whether or not they were comparable to the final offers;178 and (iii) both sides treated the Cohort
Affiliates' affiliation agreements as comparable despite some variation in terms.179 DSNP argues that
Armstrong in agreeing to the Comcast Stipulation conceded that many provisions of the 2010
Comcast/DSNP Agreement were not relevant to this proceeding and could be redacted provided that
"pricing, minimum game content, or most favored nations provisions" were not redacted.180 Armstrong
disputes this characterization, arguing that it never agreed that "pricing, minimum game content, or most
favored nations provisions" were the only relevant provisions and that, despite the Comcast Stipulation,
the unique provisions in the 2010 Comcast/DSNP Agreement are now part of the record.181 In any event,
DSNP notes that its expert testified that non-rate terms, such as those Armstrong identifies as unique in
the 2010 Comcast/DSNP Agreement, are negotiated after rates are agreed upon and do not impact the
rates.182
36.
Fifth, Comcast (as a programmer) and DSNP's parent, DIRECTV183 (a distributor), were
negotiating deals pertaining to DIRECTV's carriage of Comcast RSNs and Comcast's Versus network at
the same time that Comcast (as a distributor) and DSNP were negotiating deals pertaining to Comcast's
carriage of DSNP and other DIRECTV-owned RSNs.184 Armstrong claims that these simultaneous deals


175 See DSNP Petition at 83 (citing Siwek Test., Hr'g Tr. at 769-76); DSNP Reply at 43 (stating that Armstrong's
expert, Mr. Siwek, in assessing the affiliation agreements used in his historical benchmark analysis, looked at only
the actual rates in those agreements and did not consider the provisions that Armstrong deems relevant in assessing
the 2010 Comcast/DSNP Agreement, such as what rights were obtained by the affiliate) (citing Siwek Test., Hr'g
Tr. at 552-53, 740-42); see also DSNP Petition at 85 (citing Siwek Test., Hr'g Tr. at 743-48).
176 See DSNP Petition at 74, 81 n.57; DSNP Reply at 44.
177 See Armstrong Opposition at 63-64; Armstrong Proposed Findings of Fact at 72-73; see also supra n.171.
178 See Armstrong Opposition at 63; see also Armstrong Proposed Findings of Fact at 69.
179 See Armstrong Opposition at 63-64.
180 See DSNP Petition at 82; see also id. at 75 (citing Comcast Stipulation at 3); DSNP Reply at 42; DSNP
Proposed Findings of Fact at 30.
181 See Armstrong Opposition at 57 n.41; see also Comcast Stipulation.
182 See DSNP Petition at 82; DSNP Reply at 42-43 ("Once the financial terms are agreed upon, the negotiation of the
other provisions does not affect those financial terms."); see also Thompson Test., Hr'g Tr. at 1289-90, 1301-02,
1347-49.
183 See Crumb Test., Hr'g Tr. at 1361; see also Armstrong Opposition at 13-14; Tucker Test., Hr'g Tr. at 1259-60
(DSNP's CFO, Mr. Tucker, testifying that DSNP shares its "budgets and operations and forecasts with DIRECTV"
and that "[o]ur numbers roll up into DIRECTV"); Armstrong Proposed Findings of Fact at 10-11.
184 See Crumb Test., Hr'g Tr. at 1367; Tucker Test., Hr'g Tr. at 1260-61; see also Armstrong Opposition at 59-60.
On the same day that the 2010 Comcast/DSNP agreement was executed, DIRECTV announced that it had reached
an agreement to resume carriage of Comcast's Versus network. See DSNP Petition at 78; Armstrong Opposition at
61; Armstrong Proposed Findings of Fact at 77-78.
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may have caused Comcast to agree to pay higher rates for FSNP than it otherwise would in order to
obtain favorable terms for DIRECTV's carriage of Comcast's networks.185 For example, Armstrong's
expert, Mr. Gardner, stated that:
The timing of the two agreements is consistent with my experience that a vertically-
integrated programmer/distributor such as Comcast can link together deals in which it is
selling programming (to an important distributor like DIRECTV) with deals in which
Comcast is agreeing (as a cable distributor) to pay DIRECTV (or, here, its wholly owned
subsidiary [DSNP]) for RSN programming. In such cases, Comcast is in a position to
pay extra for the RSN programming i.e., more than the market value in order to
effectively lower the price that DIRECTV is paying for Comcast's programming. This
allows each of the programming/seller sides to state high rates in their contracts (and,
thereby, build a record to artificially increase "market" rates), while in fact keeping the
net effective rate low.186
In response, DSNP notes that [REDACTED
].187 Armstrong notes, however, that [REDACTED
].188 According to Armstrong, there is no evidence as to
[REDACTED
].189 Moreover, Armstrong contends that the evidence demonstrates that the
[REDACTED


185 See Armstrong Opposition at 56 ("Comcast may well have decided internally or in discussions with DIRECTV's
highest executives i.e. those to which DSNP reports to `give' on rates to be paid for FSN Pittsburgh in exchange
for concluding lucrative deals under which DIRECTV would carry Comcast's programming."); id. at 59 ("An
analysis of the potential impact of the intertwining interests on Comcast's stated rates is necessary before those rates
can be considered a valid indicator of Fair Market Value."); Armstrong Proposed Findings of Fact at 70.
186 See Gardner Expert Report, CX-44 at 20-21; see also Siwek Rebuttal Expert Report, CX-47 at 7.
187 See [REDACTED
].
188 See Armstrong Opposition at 55, 61-62.
189 Id. at 55; see id. at 62.
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].190 According to DSNP, [REDACTED
].191 [REDACTED
].192
37.
We conclude that [REDACTED
] does not demonstrate that the rates in the Armstrong final offer are
inconsistent with fair market value. As an initial matter, there is no dispute that Comcast will receive a
discount relative to Armstrong based on the rates in the Armstrong final offer. Thus, the Armstrong final
offer is consistent with the fundamental principle of marketplace negotiations for RSN programming that
larger MVPDs will receive better rates.
38.
While DSNP argues that [REDACTED
],
we find the record to be inconclusive on this point. First, there is insufficient information in the record to
determine what discount would be appropriate for Comcast given its size relative to Armstrong. There is
no reliable evidence as to what discount Comcast received in prior years relative to Armstrong or what an
"industry standard" discount would be for Comcast relative to Armstrong. Accordingly, there is no basis
to assess whether a discount of [REDACTED
] is consistent with that past discount or with an
"industry standard" discount.
39.
Second, there is insufficient information in the record to determine what impact the
simultaneous negotiations between Comcast (as a programmer) and DIRECTV (a distributor) had on the
rates negotiated between Comcast (as a distributor) and DSNP. To the extent that a vertically integrated
RSN (in this case, DSNP) puts forth its affiliation agreement with a vertically integrated MVPD (in this
case, Comcast) as a comparable affiliation agreement for purposes of a fair market value analysis, we
would expect the vertically integrated RSN to produce credible evidence that other simultaneous
programming negotiations between the parties did not impact the rates in the agreement put forth as
comparable. Here, the best evidence of the impact of these simultaneous negotiations would come from
representatives of DSNP's parent company (DIRECTV) who were involved in the negotiations with
Comcast pertaining to DIRECTV's carriage of Versus and the Comcast RSNs. To be sure, Armstrong
did not name DIRECTV as a party to the arbitration, and DIRECTV declined to participate in
discovery.193 The salient issue here, however, is not whether DIRECTV should be compelled to come


190 See id. at 59-60; Armstrong Proposed Findings of Fact at 75-78. According to Armstrong, a number of
documents demonstrate that the 2010 Comcast/DSNP Agreement was negotiated and drafted at the same time that
Comcast was negotiating with DIRECTV (as distributor) to license the Comcast RSNs and Versus to DIRECTV.
See Armstrong Opposition at 59-60; Armstrong Proposed Findings of Fact at 75-78. For example, Armstrong states
that the evidence demonstrates that [REDACTED
].
191 See [REDACTED
].
192 See [REDACTED
]
193 Moreover, while the arbitrator issued a third-party subpoena to DIRECTV, DIRECTV did not comply with the
subpoena and instead filed a Petition for Declaratory Ruling with the Commission asking the Commission to rule
that third-party subpoenas are not permitted under the Liberty Media Order arbitration conditions. See Public
(continued....)
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forward with evidence. Rather, the salient issue is whether DSNP has provided sufficient evidence to
establish that the 2010 Comcast/DSNP Agreement is a comparable affiliation agreement for purposes of
this arbitration by demonstrating whether or not the rates in that agreement were impacted by the
simultaneous negotiations between Comcast and DSNP's parent, DIRECTV. Despite the importance of
establishing the comparability of the 2010 Comcast/DSNP Agreement, DSNP's parent (DIRECTV) did
not come forward to explain whether or not the rates in that agreement were impacted by the
simultaneous negotiations between DIRECTV and Comcast (as a programmer). At the very least,
[REDACTED
]. Accordingly, even if there was
evidence establishing that [REDACTED
], we cannot rely dispositively on the rates in the 2010
Comcast/DSNP Agreement because there is not firm evidence establishing that these rates were not
impacted by the simultaneous negotiations between Comcast and DIRECTV.194
c.

Conclusion

40.
Pursuant to the Liberty Media Order arbitration conditions, even if the final offers vary
greatly from what we believe to be the actual fair market value, we must select the final offer that "most
closely approximates the fair market value of the programming carriage rights at issue."195 Here, the
record establishes the fundamental principle of marketplace negotiations for RSN programming that an
MVPD that has a larger number of subscribers and generates more revenue for an RSN will obtain better
rates, terms, and conditions for carriage of the RSN than an MVPD that has fewer subscribers and
generates less revenue. The Armstrong final offer is consistent with this principle: Armstrong will pay
lower rates than MVPDs that have fewer subscribers and that generate less revenue for DSNP than
Armstrong. Moreover, Armstrong's historical benchmark analysis demonstrates that Armstrong has not
historically paid the same or higher rates than all other Cohort Affiliates that have fewer subscribers and
generate less revenue than Armstrong. Without any justification, the DSNP final offer violates this
principle: even assuming "normalized" rate calculations that favor DSNP and considering only a select
group of Cohort Affiliates put forth by DSNP, Armstrong would pay higher rates than MVPDs that have
fewer subscribers and that generate less revenue for DSNP than Armstrong. Moreover, for the reasons
discussed above, we conclude that neither of the methodologies put forth by DSNP either its averaging
methodology or its PSPPE analysis is probative of fair market value. Given this choice, we find that the
rates in the Armstrong final offer "most closely approximate the fair market value of the programming
carriage rights at issue."
2.

Analysis of Other Rate Terms

41.
In addition to the difference in the rates proposed, the DSNP and Armstrong final offers
differ with respect to other rate terms i.e., the renewal rate increase, the annual escalator, the timing of
the annual escalator, and the number of games to be provided. In this section, we assess each of these
(Continued from previous page)


Notice, Joint Petition for Declaratory Ruling that the Liberty Order Does Not Authorize Third-Party Subpoenas, 26
FCC Rcd 411 (MB 2011).
194 Because we find that the factors discussed in paragraphs 37-39 are sufficient to negate any claim that Comcast's
rates for FSNP demonstrate that Armstrong's proposed rates are inconsistent with fair market value, we need not
consider the remaining factors set forth by Armstrong for distinguishing Comcast's rates.
195 See Liberty Media Order, 23 FCC Rcd at 3348, Appendix B, Condition IV, C "Review of Final Award by the
Commission," 3.
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other rate terms and their impact on the fair market value analysis. We conclude that, on balance, these
other rate terms favor the Armstrong final offer as being more consistent with fair market value.
a.

Renewal Rate Increase

42.
The record reflects that RSNs at renewal try to obtain an increase in the rates the MVPD
was paying at the end of the previous affiliation agreement (known as a "renewal rate increase" or "rate
reset").196 Armstrong's expert, Mr. Gardner, testified that a renewal rate increase is typically in the range
of [REDACTED
], often reflecting an increase in the RSN's costs resulting from new rights
agreements signed with sports teams.197
43.
The parties disagree on how the renewal rate increase should be calculated here.
Armstrong notes that its rates increased by [REDACTED] in the 15 months prior to the [REDACTED]
expiration of the 2005 Armstrong/FSNP Agreement.198 First, in [REDACTED], Armstrong agreed to an
HD Surcharge (amounting to a [REDACTED] rate increase) to carry the full-time HD feed of FSNP.199
Second, in [REDACTED], three months prior to the expiration of the 2005 Armstrong/FSNP Agreement,
Armstrong agreed to a surcharge (amounting to approximately a [REDACTED] rate increase) to carry 36
additional Pirates games.200 In fact, Armstrong informed DSNP that the rate increases due to HD


196 See Gardner Expert Report, CX-44 at 23-24; Gardner Test., Hr'g Tr. at Tr. 348-50.
197 See Gardner Expert Report, CX-44 at 23; see also Gardner Test., Hr'g Tr. at 352, 493.
198 See Armstrong Opposition at 18 (citing Gardner Expert Report, CX-44 at 30).
199 When Armstrong executed the 2005 Armstrong/FSNP Agreement, Armstrong also executed an HD Events
Agreement pursuant to which FSNP agreed to provide [REDACTED] Pittsburgh Pirates games and [REDACTED]
Pittsburgh Penguins games to Armstrong in HD, but only for the period from [REDACTED
]. See Letter Agreement between Armstrong Utilities, Inc. and Fox Sports Net Pittsburgh LLC
([REDACTED]), JX-15 at 6, Schedule 1 ("[REDACTED] Armstrong/FSNP HD Events Agreement"). The
[REDACTED] Armstrong/FSNP HD Events Agreement expired on [REDACTED]. See id. DSNP launched a
full-time HD feed in early 2009, which Armstrong agreed to carry in [REDACTED] for a [REDACTED]
surcharge. See Ross Test., Hr'g Tr. at 201, 205; see also First Addendum to the Affiliation Agreement between
Armstrong Utilities Inc. and Fox Sports Net Pittsburgh, LLC, JX-38 ([REDACTED
]) ("[REDACTED]
Armstrong/FSNP HD Addendum"); Armstrong Proposed Findings of Fact at 14-15; DSNP Proposed Findings of
Fact at 14.
200 On September 11, 2009, DSNP offered Armstrong an additional 36 Pirates games for a surcharge. See Letter
from Dale Albright, Director, Affiliate Relations, DSNP to Jeffrey Ross, President, Armstrong Utilities, Inc.,
(September 11, 2009), CX-26 ("Sept. 2009 Pirates Offer"). In reply, Armstrong offered to formally start renewal
negotiations because it felt that the additional games should be a part of its renewal. See Ross Test., Hr'g Tr. at 148-
52; see also Letter from David Wittmann, VP of Cable Marketing, Armstrong to Dale Albright, Director, Affiliate
Relations, DSNP (December 3, 2009), CX-25. After DSNP renegotiated its agreement with the Pirates in March
2010, it again offered Armstrong the right to distribute an additional 36 Pirates games on a surcharge basis,
beginning with the 2010 MLB season. See DSNP Petition at 24 (citing Ross Test., Hr'g Tr. at 143; Gardner Test.,
Hr'g Tr. at 475-76; Wyche Test., Hr'g Tr. at 918-19). In [REDACTED], Armstrong agreed to this additional
surcharge. See DSNP Petition at 25 (citing Additional Events Addendum between Armstrong Utilities, Inc. and Fox
Sports Net Pittsburgh LLC ([REDACTED ]), JX-39 ("[REDACTED] Armstrong/DSNP Additional Events
Addendum")); see also Ross Test., Hr'g Tr. at 210. Armstrong notes that the "additional games" it would receive
were in fact games that it had distributed in previous seasons and included critical games, such as the Opening Day
game and numerous early season games, that it could not afford to decline without the risk of losing subscribers.
See Gardner Expert Report, CX-44 at 29; Ross Test., Hr'g Tr. at 158-63; Armstrong Proposed Findings of Fact at
15. Armstrong argues that this reflects DSNP's strategy to force Armstrong to accept an early rate reset under
pressure of losing critical games. See Gardner Expert Report, CX-44 at 28-29; Ross Test., Hr'g Tr. at 163-64.
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programming and the additional Pirates games were more appropriate for renewal discussions.201
Armstrong's expert, Mr. Gardner, testified that the standard renewal rate increase of [REDACTED
] is premised on the RSN offering an "improved and enhanced channel" that is not
reflected in old rates.202 Armstrong argues that the [REDACTED] rate increase it agreed to in the
previous 15 months already reflected the improvements in FSNP.203 Armstrong contends that the rates it
was paying as of [REDACTED] were fully reflective of the surcharges and the fair market value of
FSNP.204 Accordingly, Armstrong argues that there is no basis for it to pay a standard renewal rate
increase of [REDACTED
] on top of the [REDACTED] rate increase it already agreed to during
the previous 15 months.205 Rather, as summarized in Table B below, the renewal rate increase excluding
the surcharges under the Armstrong final offer would range from [REDACTED] to [REDACTED]
depending on the zone. When the surcharges are included in calculating the renewal rate increase under
the Armstrong final offer, the increase ranges from [REDACTED] to [REDACTED] depending on the
zone.
44.
DSNP argues that there is no basis for Armstrong to calculate a renewal rate increase by
including surcharges that it voluntarily agreed to prior to the expiration of the 2005 Armstrong/FSNP
Agreement.206 When the surcharges are excluded, DSNP notes that Armstrong's proposed
[REDACTED] to [REDACTED] renewal rate increase [REDACTED
].207 The renewal rate increase excluding the surcharges under the DSNP final offer
would range from [REDACTED


201 See Armstrong Opposition at 17 (citing Ross Test., Hr'g Tr. at 138-39, 140-41, 147-48; Letter from Jeffrey Ross,
President, Armstrong to Dale Albright, Director, Affiliate Relations, DSNP (Feb. 9, 2009), CX-9 ("Armstrong Feb.
2009 Letter")); Armstrong Proposed Findings of Fact at 14-15.
202 See Armstrong Opposition at 18, 24 (citing Gardner Test., Hr'g Tr. at 492-93).
203 See id. at 18 (citing Gardner Test., Hr'g Tr. at 318-19, 475-77, 487-93). Armstrong objected to DSNP's pressure
to accept a surcharge. See id. at 51 (citing Ross Test., Hr'g Tr. at 134-38, 142, 148-49, 156, 160-162; Email from
Jeffrey A. Ross, President, Armstrong to Dale Albright, Director, Affiliate Relations, DSNP (March 9, 2010), CX-
21; Gardner Expert Report, CX-44 at 11-12, 27-30). Armstrong claims that, although it agreed to the
[REDACTED] rate increase resulting from the surcharges, it expressed to DSNP its position that it should not be
subject to another [REDACTED
] renewal reset absent an increase in the value of the programming. See id. at
51-52 (citing Armstrong Pre-Hearing Brief at 15-17; Armstrong Feb. 2009 Letter, CX-9; Sept. 2009 Pirates Offer,
CX-26; Ross Test., Hr'g Tr. at 147-48); Armstrong Proposed Findings of Fact at 15.
204 See Armstrong Opposition at 17 (citing Wyche Rebuttal Expert Report, RX-64 at 8-9; Ross Test., Hr'g Tr. at
143-63).
205 See id. at 17-18; Armstrong Proposed Findings of Fact at 16 (stating that "DSNP's double-dipping was not
justified") and at 42-43; Gardner Expert Report, CX-44 at 25, 27-30; Gardner Test., Hr'g Tr. at 475-77, 492-93.
206 See DSNP Petition at 33, 46 (citing Ross Test., Hr'g Tr. at 172-73, 206-07). DSNP argues that the surcharges
were appropriate increases for additional services provided during the term of the 2005 Armstrong/FSNP
Agreement. For example, DSNP notes that Armstrong had accepted the [REDACTED] Armstrong/FSNP HD
Addendum more than 15 months before the 2005 Armstrong/FSNP Agreement expired on [REDACTED]. See id.
at 47 (citing 2009 Armstrong/FSNP HD Addendum, JX-38; Ross Test., Hr'g Tr. at 140, 205-06); see also DSNP
Proposed Findings of Fact at 13, 20. In addition, DSNP notes that Armstrong agreed to the surcharges through
executed addenda to the 2005 Armstrong/FSNP Agreement and admitted that they were implemented in accordance
with the terms of that agreement. See DSNP Petition at 48 (citing Ross Test., Hr'g Tr. at 207, 210-12); DSNP
Proposed Findings of Fact at 16, 20.
207 See DSNP Reply at 30-31 and Exhibit 1; DSNP Proposed Findings of Fact at 20-21.
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].208 When the surcharges are included in calculating the renewal
rate increase under the DSNP final offer, the increase ranges from [REDACTED
]
depending on the zone, which is [REDACTED
].

Table B

Comparison of Final Offer Rate Increases at Renewal209

Armstrong

Rates on

Zone

Expiration

DSNP Final Offer

Armstrong Final Offer

of 2005

Agreement

Rate

%
%

Rate

%
%

Increase

Increase

Increase

Increase

Without

With

Without

With

Surcharges Surcharges

Surcharges Surcharges

1
[Redacted]210
[Redacted]
[Redacted]
[Redacted]
[Redacted]211
[Redacted]
[Redacted]
2
[Redacted]
[Redacted]
[Redacted]
[Redacted]
[Redacted]
[Redacted]
[Redacted]
4
[Redacted]
[Redacted]
[Redacted]
[Redacted]
[Redacted]
[Redacted]
[Redacted]
45.
Armstrong contends that DSNP's proposed renewal rate increase is inconsistent with the
renewal rate increase negotiated by [REDACTED
].212 [REDACTED] affiliation
agreement with DSNP expired on [REDACTED].213 After DSNP offered the additional Pirates games to
its affiliates in September 2009, DSNP and [REDACTED] reached a renewal agreement in
[REDACTED].214 The charges for the additional programming were incorporated into the rates in the
renewal agreement,215 and those rates increased by [REDACTED] to [REDACTED] (depending on the


208 See DSNP Petition at 45; DSNP Proposed Findings of Fact at 20; see also Gardner Test., Hr'g Tr. at 494-97.
DSNP argues that this is also consistent with the renewal rate increase of [REDACTED] to [REDACTED]
between the 2005 Armstrong/FSNP Agreement and the previous Armstrong deal with FSNP. See DSNP Petition at
20.
209 See DSNP Petition at 45; DSNP Proposed Findings of Fact at 19-20; Wyche Rebuttal Expert Report, RX-64 at 9,
Table 2; Gardner Expert Report, CX-44 at 30-32, Charts 2-3; see also Siwek Test., Hr'g Tr. at 812-14.
210 See Siwek Rebuttal Expert Report, CX-47 at Appendix A, Revised Chart 2 and Appendix B, Rebuttal Chart 1a;
Siwek Test., Hr'g Tr. at 804-10. The Zone [REDACTED] rate reflects [REDACTED
] which were
weighted to account for subscribers in each zone. See Siwek Rebuttal Expert Report, CX-47 at Appendix A,
Revised Chart 2. These values are identical up through the fourth decimal point to the blended rate for Zone
[REDACTED] calculated by DSNP's expert, Mr. Wyche. See Siwek Test., Hr'g Tr. at 808; Wyche Rebuttal Export
Report, RX-64 at 9; see also DSNP Proposed Findings of Fact at 17, 19.
211 This rate represents the weighted average of the rates applicable to Zones [REDACTED] and [REDACTED] in
the Armstrong final offer, as calculated by Armstrong's expert, Mr. Siwek. See Siwek Rebuttal Expert Report, CX-
47 at Appendix A, Chart 1; Siwek Test., Hr'g Tr. at 811-12.
212 See Armstrong Opposition at 52-53.
213 See DSNP Reply at 30 n.24; [REDACTED] Agreement, JX-165 at DSNP 001916, 3.
214 See DSNP Reply at 30 n.24; [REDACTED
] Agreement, JX-167 at DSNP 002119.
215 Mr. Wyche, DSNP's expert, admitted that he did not know how much [REDACTED
] had been willing to
pay for the HD feed and the additional Pirates games because the surcharges were "baked" into the rates in the
(continued....)
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zone) from the rates in [REDACTED
] previous affiliation agreement.216 In contrast, the DSNP
final offer would have Armstrong pay the [REDACTED] surcharge for the additional programming, plus
a standard renewal rate increase.217 Thus, Armstrong claims that DSNP wants Armstrong to pay twice for
the same improvements for which [REDACTED] paid only once.218 DSNP responds that the annual rate
increase in [REDACTED] renewed affiliation agreement ranged from [REDACTED] to [REDACTED]
depending on the zone between 2009 (when [REDACTED] did not have the additional games) and 2010
(when [REDACTED] acquired the rights to the games), which it states "clearly reflect[s] the charges for
the additional games."219
46.
Discussion. We conclude that Armstrong's proposed renewal rate increase is more
consistent with fair market value than that proposed by DSNP. The record reflects that renewal rate
increases are intended to reflect improvements in the service,220 which Armstrong paid for in the form of
a [REDACTED] rate increase [REDACTED] prior to the expiration of the 2005 Armstrong/FSNP
Agreement as well as a [REDACTED] increase [REDACTED] prior to expiration.221 Adding a standard
renewal rate increase on top of these recent surcharges would effectively charge Armstrong twice for
these improvements.222 Our conclusion is further supported by DSNP's treatment of [REDACTED],
which was not required to pay both a surcharge for additional games and a renewal rate increase when it
renewed its affiliation agreement [REDACTED]. While DSNP claims that [REDACTED] paid for the
additional programming [REDACTED
], the only
(Continued from previous page)


[REDACTED] renewed affiliation agreement. See Wyche Test., Hr'g Tr. at 1020-21; Chart: FSN Pittsburgh
Subscriber Counts by Zone, JX-208; see also Armstrong Opposition at 48, 79; Armstrong Proposed Findings of Fact
at 54; DSNP Reply at 30 n.24.
216 See DSNP Reply at Exhibit 1; see also DSNP Petition at 97; Armstrong Opposition at 52 (citing Chart: FSN
Pittsburgh Subscriber Counts by Zone, JX-208; Wyche Test., Hr'g Tr. at 1020-21).
217 See supra Table B.
218 See Armstrong Opposition at 53.
219 See DSNP Reply at 30 n.24; [REDACTED
].
220 See Gardner Test., Hr'g Tr. at 492-93; see also Armstrong Opposition at 7-8, 18.
221 As discussed above, although Armstrong agreed to the surcharges during the term of its previous affiliation
agreement, it expressed concern regarding the potential of having to pay another increase at renewal. See supra
n.203.
222 DSNP claims that accepting Armstrong's argument that the surcharges agreed to during the previous contract
term should be included in the renewal rate increase would violate the Media Bureau's holding in Fox/Massillon that
the Commission's arbitration conditions do not apply to disputes arising under ongoing carriage agreements. See
DSNP Petition at 49; DSNP Reply at 30-31; see also Fox Sports Net Ohio, LLC v. Massillon Cable TV, Inc., Order
on Review, 25 FCC Rcd 16054, 16059, 8 (MB 2010) ("Fox/Massillon"). We disagree. The "threshold question at
issue" in Fox/Massillon was whether the MVPD "properly invoked the arbitration condition under the terms of the
News Corp.-Hughes Order before its existing carriage agreement . . . had expired." See Fox/Massillon, 25 FCC Rcd
at 16059, 9. There is no dispute here that Armstrong filed for arbitration in accordance with the terms of the
Liberty Media Order arbitration conditions. Moreover, as presented here, the issue of whether the surcharges agreed
to during the previous contract term should be included in the rate renewal increase is not a dispute regarding an
ongoing carriage agreement. Rather, this is one factor relevant to the fair market value analysis of the carriage rights
for FSNP.
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support DSNP provides for this assertion is to cite to the [REDACTED
].223 DSNP cites
no testimony or other evidence supporting this assertion.
b.

Annual Escalator

47.
The record reflects that RSN affiliation agreements typically include provisions
specifying annual rate increases (also known as "annual escalators"), which range from [REDACTED
] (according to Armstrong)224 or [REDACTED
] (according to DSNP).225
Armstrong notes that its final offer provides for annual rate increases of [REDACTED] in 2011,
[REDACTED] in 2012, [REDACTED] in 2013, and [REDACTED] in 2014, all of which fall within
what it claims to be the typical range of [REDACTED
].226 DSNP responds that this amounts to an
average annual escalator of [REDACTED], which is at the low end of the typical range put forth by
Armstrong, whereas the DSNP final offer provides for an annual increase of approximately
[REDACTED], which is in the middle of the typical range put forth by Armstrong.227 In addition, DSNP
argues that this [REDACTED] annual escalator is consistent with (i) the escalators in its recently
negotiated marketplace renewals with [REDACTED
];228 and (ii) [REDACTED
]
.229


223 See DSNP Reply at 30 n.24 (citing [REDACTED
]) and 51
n.34 (same).
224 See Gardner Expert Report, CX-44 at 24; Gardner Rebuttal Expert Report, CX-48 at 12-13; Gardner Test., Hr'g
Tr. at 351, 421.
225 According to Mr. Wyche, DSNP's expert, escalators for RSNs are typically in the [REDACTED
]
range, and a reasonable range would be [REDACTED
]. See DSNP Petition at 52 (citing Wyche Rebuttal
Expert Report, RX-64 at 12-13; Wyche Test., Hr'g Tr. at 903); DSNP Proposed Findings of Fact at 23. In addition,
DSNP produced rate cards for 15 Fox RSNs for 2008 through 2012 and summarized the escalators in 92 zones,
which revealed that the escalator in 85 percent of the zones was [REDACTED
]. See DSNP Petition at 52
(citing Wyche Rebuttal Expert Report, RX-64 at 12; Chart: FSN Escalator Summary, RX-69; Wyche Test., Hr'g Tr.
at 899-900); DSNP Proposed Findings of Fact at 22-23. Armstrong argues that these rate cards are entitled to no
weight because, among other things, no fact witness testified as to what they represent and there is no explanation of
whether the rates listed are actual rates, targets rates, average rates, or some other form of rates. See Armstrong
Opposition at 20.
226 See Armstrong Opposition at 19 (citing Armstrong Final Offer, JX 33 at ARMSTRONG 005695-96, 8(a)(i);
Ross Test., Hr'g Tr. 173-74).
227 See DSNP Petition at 51 (citing Wyche Test., Hr'g Tr. at 897-98; Thompson Test., Hr'g Tr. at 1283); DSNP
Proposed Findings of Fact at 21-22.
228 See DSNP Petition at 51 n.35; DSNP Proposed Findings of Fact at 21; Exhibit F: Comparison of FSN Pittsburgh
Annual Growth Rates for Zones 1, 2 and 4 Reflected in Recently Renewed Affiliate Agreements, RX-56; Ross Test.,
Hr'g Tr. at 895-99. Armstrong's President, Mr. Ross, testified that the annual escalators contained in the Armstrong
final offer were "on the high side compared to other deals that we were doing at the time." See Ross Test., Hr'g Tr.
at 174-75. DSNP, however, argues that the annual escalators in Armstrong's agreements with three other RSNs
ranged from [REDACTED] to [REDACTED], with escalators in six out of ten zones at [REDACTED ]. See
DSNP Petition at 53 (citing Chart: Percentage Rate Increases for Other RSNs Distributed by Armstrong, RX-73;
Wyche Test., Hr'g Tr. at 901-03); DSNP Proposed Findings of Fact at 24-25. In addition, Armstrong's affiliation
agreement with [REDACTED
] provides for a [REDACTED] annual rate increase. See DSNP Petition
at 53 (citing Ross Test., Hr'g Tr. at 226-30); DSNP Proposed Findings of Fact at 24-25.
229 See DSNP Petition at 51; DSNP Proposed Findings of Fact at 21; Tucker Test., Hr'g Tr. at 1092.
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48.
Discussion. We conclude that DSNP's proposed annual escalator most closely
approximates fair market value. While we might expect Armstrong to negotiate an annual escalator lower
than the [REDACTED] escalator negotiated by [REDACTED
] based on Armstrong's
greater value to DSNP, we find no basis in the record to conclude that this escalator should be as low as
[REDACTED], especially considering that the record evidence indicates that Armstrong has negotiated
higher annual escalators with other RSNs.230
c.

Timing of the Annual Escalator

49.
The parties dispute when the annual escalator should take effect. According to
Armstrong, the industry norm is for the annual escalator to take effect on the anniversary date of the
affiliation agreement so that the rate year coincides with the contract year.231 Consistent with this norm,
the Armstrong final offer proposes a rate increase on [REDACTED] of each year, the anniversary date of
the affiliation agreement.232 This results in four annual rate increases during the five-year term of the
agreement: [REDACTED], 2011; [REDACTED], 2012; [REDACTED], 2013; and [REDACTED],
2014.233 DSNP argues that the annual escalator in all of its affiliation agreements takes effect on
[REDACTED].234 Consistent with this practice, the DSNP final offer proposes a rate increase on
[REDACTED] of each year.235 DSNP also notes that Armstrong agreed to a [REDACTED] annual
escalator date in the 2005 Armstrong/FSNP Agreement despite that agreement having a [REDACTED]
anniversary date.236 A [REDACTED] annual escalator date as proposed by DSNP results in five annual
rate increases during the five-year term of the agreement: [REDACTED], 2011; [REDACTED], 2012;
[REDACTED], 2013; [REDACTED], 2014; and [REDACTED], 2015.237 This extra annual increase
would result in Armstrong paying an additional [REDACTED] to DSNP compared to Armstrong's final
offer.238

50.
Discussion. We conclude that Armstrong's proposal to have its annual escalator take
effect on the [REDACTED] anniversary date of the affiliation agreement most closely approximates fair
market value. While DSNP notes that the annual escalator in its affiliation agreements with the Cohort
Affiliates takes effect on [REDACTED], the evidence submitted by DSNP indicates that this is also the
anniversary date of each of these agreements.239 Thus, consistent with Armstrong's final offer, DSNP's


230 See supra n.228.
231 See Armstrong Opposition at 19; Gardner Expert Report, CX-44 at 32-33; Gardner Test., Hr'g Tr. at 350-51;
Ross Test., Hr'g Tr. at 121, 176.
232 See Armstrong Final Offer, JX-33 at ARMSTRONG 005695-96, 8(a)(i).
233 See Gardner Expert Report, CX-44 at 32; Ross Test., Hr'g Tr. at 175-76.
234 See DSNP Reply at 61 n.50 and Exhibit 1.
235 See DSNP Final Offer, JX-34 at DSNP 015081, Exhibit C.
236 See DSNP Petition at 55; DSNP Proposed Findings of Fact at 25; 2005 Armstrong/FSNP Agreement, JX-1 at
ARMSTRONG 000006-7, 6(a)(i).
237 See Armstrong Proposed Findings of Fact at 17; Gardner Expert Report, CX-44 at 32-33
238 See Armstrong Proposed Findings of Fact at 17; Gardner Expert Report, CX-44 at 32-33.
239 See DSNP Reply at Exhibit 1; [REDACTED
] anniversary
date) and [REDACTED
] escalator date); [REDACTED
] at
[REDACTED]
anniversary date and [REDACTED] escalator date); [REDACTED
]
anniversary date) and [REDACTED
] escalator date); see
also [REDACTED
] anniversary date and stating that "A
(continued....)
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practice is to have the rate year coincide with the contract year. While the Armstrong final offer differs
from other DSNP affiliation agreements in that its anniversary date is [REDACTED] rather than
[REDACTED], we find no basis in industry practice or in DSNP's past practices to impose a unique
requirement on Armstrong to pay an "annual" rate increase just [REDACTED] months after its
agreement begins, nor to impose an additional annual increase on Armstrong that other comparable
affiliates do not incur.240 While Armstrong was willing to agree to a [REDACTED] annual escalator in
the 2005 Armstrong/FSNP Agreement based on the particular facts of that negotiation, this does not lead
us to believe that fair market value dictates that Armstrong must agree to the same annual escalator date
in all future affiliation agreements when the evidence overwhelmingly reveals that this would not be
consistent with industry practice.241
d.

Number of Games

51.
DSNP argues that the Armstrong final offer, unlike the DSNP final offer, would not
require DSNP to provide all of the Pirates and Penguins games that Armstrong was receiving at the
expiration of the 2005 Armstrong/FSNP agreement (approximately [REDACTED] Pirates games and
[REDACTED] Penguins games, or [REDACTED] games in total).242 Rather, DSNP notes that the
Armstrong final offer contains a "minimum content" provision that requires DSNP to deliver only
[REDACTED] Pirates games and [REDACTED] Penguins games ([REDACTED] games in total).243
DSNP contends that the allegedly low rates in the Armstrong final offer reflect this reduced number of
games, but that Armstrong nonetheless expects to receive the full complement of [REDACTED] Pirates
games and [REDACTED] Penguins games.244 In response, Armstrong argues that the "minimum
content" provision does not affect the number of games it will receive.245 According to Armstrong, the
(Continued from previous page)


`Contract Year' means each 12 month period during the Term commencing [REDACTED] and ending on
[REDACTED]") and [REDACTED
] escalator date).
240 To be sure, the record indicates that DSNP has current affiliation agreements with MVPDs that have a mid-year
anniversary date and a January 1 annual escalator date, but these agreements are with small MVPDs that are not
probative in assessing fair market value here. See, e.g., [REDACTED
] anniversary date) and
[REDACTED
] escalator date); [REDACTED
] anniversary date) and
[REDACTED
] (January 1 escalator date); see also Chart: FSN Pittsburgh Subscriber Counts by Zone, JX-
208 (stating the [REDACTED
] has a total of [REDACTED] subscribers and [REDACTED
] has a total of [REDACTED] subscribers).
241 See Ross Test., Hr'g Tr. at 115-18; Gardner Expert Report, CX-44 at 32-33.
242 Compare DSNP Final Offer, JX-34 at DSNP 015055, 5(d) with Armstrong Final Offer, JX-33 at
ARMSTRONG 005702, 8(k)(i); see also DSNP Petition at 28; DSNP Proposed Findings of Fact at 61-64.
243 See DSNP Petition at 28; DSNP Reply at 51; DSNP Proposed Findings of Fact at 62; see also Armstrong Final
Offer, JX-33 at ARMSTRONG 005702, 8(k)(i); Siwek Expert Report, CX-46 at 4 n.4 ("The Final Offers differ as
to the minimum number of such professional events that will be guaranteed each year.").
244 See DSNP Petition at 31-32; DSNP Reply at 51-52; DSNP Proposed Findings of Fact at 64; see also Gardner
Rebuttal Expert Report, CX-48 at 9 (stating that "Armstrong's Final Offer states that the 137 Pirates games is only a
`minimum content' requirement" and that "DSNP is free to provide more games if it chooses"); Armstrong
Proposed Findings of Fact at 19 ("Under Armstrong's Final Offer, DSNP can deliver more than the minimum
threshold number of games, as it has in the past."); Ross Test., Hr'g Tr. at 178, 252 (Armstrong's President, Mr.
Ross, stating that Armstrong expects to receive the same number of games as the prior year).
245 See Armstrong Opposition at 20-21; Armstrong Proposed Findings of Fact at 19; see also Gardner Test., Hr'g Tr.
at 373 (agreeing that the Armstrong final offer seeks the entirety of the service of FSNP). For example, the
(continued....)
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"minimum content" provision establishes only the point at which DSNP owes Armstrong a rebate due to
a shortfall in games.246 While the number of games stated in the DSNP final offer is greater than the
number stated in the Armstrong final offer, the DSNP final offer provides DSNP with a [REDACTED]
shortfall allowance before the rebate is triggered.247 Thus, Armstrong argues that the final offers
guarantee virtually the same number of games before a shortfall is triggered.248
52.
Discussion. We conclude that the Armstrong final offer and the DSNP final offer both
require DSNP to provide Armstrong with the full complement of Pirates games and Penguins games.
Thus, we reject DSNP's claim that the rates in the Armstrong final offer reflect a reduced number of
games relative to what Armstrong was receiving at the expiration of the 2005 Armstrong/FSNP
agreement. The definitions of the terms "Service" and "Delivery and Content" clearly indicate that the
Armstrong final offer requires DSNP to provide Armstrong with the full complement of Pirates games
and Penguins games. We also find that the "minimum content" provision is relevant for purposes of
determining whether Armstrong is entitled to a rebate for a shortfall in games, but this provision does not
mean that Armstrong is purchasing access to fewer games than other DSNP affiliates. This is supported
by testimony from DSNP's expert, Mr. Wyche, who stated that all DSNP affiliates received the same
number of games in 2009 (depending on whether they accepted a surcharge) despite the variation in
"minimum content" provisions in the DSNP affiliation agreements.249
e.

Conclusion

53.
With the exception of the annual escalator, we conclude that the other rate terms
discussed above favor the Armstrong final offer as being more consistent with fair market value. We do
not believe that Armstrong's annual escalator tips the scales in favor of finding that the DSNP final offer
most closely approximates fair market value considering that the (i) DSNP final offer would require
Armstrong to pay higher rates than MVPDs with fewer subscribers and that generate less revenue for
DSNP; (ii) neither of the methodologies put forth by DSNP is probative of fair market value; and (iii) on
balance, the other rate terms and non-rate terms favor the Armstrong final offer as being more consistent
with fair market value.250
3.

Analysis of Non-Rate Terms

54.
The DSNP and Armstrong final offers also differ with respect to certain non-rate terms.
In this section, we assess each of these non-rate terms and their impact on the fair market value analysis.
We conclude that, on balance, these non-rate terms favor the Armstrong final offer as being more
consistent with fair market value.
(Continued from previous page)


Armstrong final offer defines the "Service" that Armstrong is licensing as the [REDACTED
]. See Armstrong Final Offer, JX-33 at ARMSTRONG 005686, 1(k) (definition of
"Service"); see also Armstrong Opposition at 20-21; Armstrong Proposed Findings of Fact at 18. Moreover, the
Armstrong final offer provides that [REDACTED
]. See Armstrong Final Offer, JX-33 at ARMSTRONG 005689, 4(a) ("Delivery and Content").
246 See Armstrong Opposition at 21; Armstrong Proposed Findings of Fact at 19; see also Gardner Test., Hr'g Tr. at
374-75; Armstrong Final Offer, JX 33 at ARMSTRONG 005702-03, 8(k)(ii).
247 See Armstrong Opposition at 22, 25; Armstrong Proposed Findings of Fact at 19-20, 61; see also Gardner Test.,
Hr'g Tr. at 380-81; DSNP Final Offer, JX-34 at DSNP 015055-56, 5(d)(i)-(ii).
248 See Armstrong Opposition at 22; Armstrong Proposed Findings of Fact at 20.
249 See Armstrong Opposition at 21; Armstrong Proposed Findings of Fact at 20; Wyche Test., Hr'g Tr. at 1063-65.
250 See supra III.C.2 (other rate terms) and infra III.C.3 (non-rate terms).
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a.

Use of [REDACTED

] Games to Cure Shortfalls
55.
The final offer proposed by DSNP would allow DSNP to cure any shortfall in Pirates or
Penguins games by substituting [REDACTED] games.251 Armstrong's expert, Mr. Gardner, states that
[REDACTED] games are far less valuable than Penguins or Pirates games.252 The ability to substitute
[REDACTED] games does not appear in DSNP's affiliation agreements with [REDACTED
].253 DSNP notes, however, that this provision was taken directly
from its recent renewal agreement with [REDACTED].254 In addition, DSNP notes that the 2005
Armstrong/FSNP Agreement, as well as Armstrong's current affiliation agreement with [REDACTED],
allows for the substitution of [REDACTED
] to cure a shortfall.255 Moreover, DSNP
argues that any harm resulting from this provision is speculative, particularly given that (i) a shortfall is
highly unlikely given that DSNP's rights agreements do not expire until [REDACTED] (Penguins) and
[REDACTED] (Pirates) and those agreements require it to televise at least [REDACTED] Pirates games
and [REDACTED] Penguins games; and (ii) there is no [REDACTED] team currently in Pittsburgh nor
are there any plans to establish one.256

56.
Discussion. Given the absence of a similar provision in all but one of the other Cohort
Affiliates' affiliation agreements, we conclude that the provision in the DSNP final offer allowing for the
substitution of MLS games to cure a shortfall does not "most closely approximate fair market value." We
do not find dispositive the fact that [REDACTED] has agreed to this provision considering that
Armstrong is larger than [REDACTED] in terms of both subscribers and revenues generated.
b.

Rebate for Shortfalls in Professional Games

57.
The rebate provisions for shortfalls in professional games in the Armstrong and DSNP
final offers differ in two respects: (i) the rebate trigger; and (ii) the rebate formula. With respect to the
rebate trigger, the parties dispute whether their respective rebates are triggered by a shortfall in the
aggregate number of games or a shortfall in the games of individual professional teams. For example,
DSNP notes that the Armstrong final offer states that the "Pirates Baseline" ([REDACTED] regular


251 Armstrong's expert, Mr. Gardner, stated that because the DSNP final offer defines "Professional Events" to
include [REDACTED] games, its "Right to Cure" provision effectively permits it to substitute [REDACTED]
games for Penguins and Pirates games without incurring any obligation to pay rebates. See Gardner Expert Report,
CX-44 at 41 (citing DSNP Final Offer, JX-34 at DSNP 015055, 5(d)(i)).
252 See Armstrong Opposition at 70 (citing Gardner Test., Hr'g Tr. at 391-92); Armstrong Proposed Findings of Fact
at 61; see also Gardner Expert Report, CX-44 at 41 (stating that, given the huge disparity in ratings between
Penguins/Pirates and [REDACTED] games, no affiliate would be expected to agree to such terms allowing for their
substitution).
253 Armstrong lists the agreements which do not contain such a provision. See Armstrong Opposition at 70 (citing
[REDACTED
]; see also Armstrong Proposed
Findings of Fact at 62 n.15; Gardner Expert Report, CX-44 at 42-43.
254 See DSNP Petition at 107 (citing [REDACTED
]); DSNP
Reply at 56; DSNP Proposed Findings of Fact at 58-59.
255 See DSNP Petition at 107 (citing 2005 Armstrong/FSNP Agreement, JX-1 at ARMSTRONG 000011; Affiliation
Agreement between Armstrong Utilities, Inc. and [REDACTED
]); DSNP Proposed Findings of Fact at 58.
256 See DSNP Petition at 107-08 (citing Thompson Test., Hr'g Tr. at 1292); DSNP Proposed Findings of Fact at 58-
59.
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season games) is added to the "Penguins Baseline" ([REDACTED] regular season games) to arrive at an
"Aggregate Games Guarantee" ([REDACTED] games) and that a rebate is triggered based on a shortfall
in this Aggregate Games Guarantee.257 Armstrong argues that the DSNP final offer is also triggered by a
shortfall in the aggregate number of games.258 The rebate in the DSNP final offer is triggered based on a
shortfall below the "Pro Teams Aggregate Baseline," which is defined as "Pittsburgh Pirates:
[REDACTED] Pittsburgh Penguins: [REDACTED]."259 While Armstrong's expert understood this
rebate provision to be triggered based on a shortfall in the aggregate number of games
([REDACTED]),260 DSNP's witness testified that the rebate is triggered by a shortfall in the baseline for
each individual team.261 Armstrong disputes that the term "Pro Teams Aggregate Baseline" can be read
to refer to two individual team baselines.262
58.
With respect to the rebate formula, Armstrong argues that the DSNP final offer would
provide an unreasonably low rebate in the event of a shortfall.263 In response, DSNP argues that this
assumes that the rebate is triggered by a shortfall in the aggregate number of games rather than a shortfall
in the baseline for each individual team.264 Calculating the rebate based on a shortfall in the baseline for
each individual team, DSNP submits that the formula in the DSNP final offer would result in a greater
rebate than that provided in the Armstrong final offer.265
59.
Discussion. We conclude that the rebate provision in the DSNP final offer is more
favorable to Armstrong than the rebate provision in Armstrong's own final offer. We reach this


257 See DSNP Petition at 109 (citing Armstrong Final Offer, JX-33 at ARMSTRONG 005702, 8(k)(i)); DSNP
Proposed Findings of Fact at 64.
258 See Armstrong Opposition at 71; Armstrong Proposed Findings of Fact at 61.
259 See DSNP Final Offer, JX-34 at DSNP 015055, 5(d).
260 See Gardner Test., Hr'g Tr. at 380-81, 399.
261 See Tucker Test., Hr'g Tr. at 1153-55; see also DSNP Petition at 109; DSNP Reply at 57 ("Unlike the Armstrong
Final Offer, the DSNP Final Offer does not state that the two baselines are to be added together, and DSNP's
witness testified unequivocally that they are not to be added for purposes of calculating the shortfall rebate. . . . Had
DSNP intended that the denominator be [REDACTED] games, there would be no reason to separately state the
baselines for the Pirates and Penguins in the Final Offer.") (emphasis in original) (citations omitted); DSNP
Proposed Findings of Fact at 60.
262 See Armstrong Opposition at 71; Armstrong Proposed Findings of Fact at 62.
263 See Armstrong Opposition at 70; Gardner Expert Report, CX-44 at 44-45; Gardner Test., Hr'g Tr. at 397-401.
264 See DSNP Petition at 109-10; DSNP Proposed Findings of Fact at 60. The rebate formula in the DSNP final
offer would provide Armstrong with a pro rata refund of fees based on multiplying the following three figures: (i)
the percentage shortfall (the numerator of which is the shortfall of "Professional Events" below the "Pro Teams
Aggregate Baseline" and the denominator of which is the "Pro Teams Aggregate Baseline"); (ii) [REDACTED] of
the fees paid for the calendar year during which the shortfall occurred; (iii) the proportionate share of the team for
which there is a shortfall to all "Professional Events" offered (Pittsburgh Pirates: [REDACTED]; Pittsburgh
Penguins: [REDACTED]). See DSNP Final Offer, JX-34 at DSNP 015055, 5(d)(ii). If the first number (the
percentage shortfall) is calculated using a shortfall in the aggregate number of games rather than a shortfall in the
games of the individual professional teams, the rebate will be smaller. For example, if the shortfall is 30 Penguins
games and the first number is calculated using a shortfall in the aggregate number of games, the first number would
be [REDACTED]. If, however, the first number is calculated using the shortfall in Penguins games, the first
number would be larger ([REDACTED]), leading to a larger rebate.
265 See Wyche Rebuttal Expert Report, RX-64 at 13 and Exhibit 1; see also DSNP Petition at 109-10; DSNP
Proposed Findings of Fact at 60.
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conclusion based on DSNP's representations before the Arbitrator and the Commission that the rebate in
its final offer is triggered by a shortfall in the baseline for each individual team rather than the aggregate
number of games. Given our decision to select Armstrong's final offer, Armstrong must abide by its
arguably less favorable rebate provision. Accordingly, we find that this difference in the final offers does
not impact our fair market value analysis.
c.
[REDACTED] as a Recoverable Surcharge Cost
60.
Both final offers contain surcharge provisions which allow certain costs to be allocated to
Armstrong on a pro rata basis in the event DSNP offers additional professional games. While both final
offers would allow the costs of [REDACTED
] the programming to be allocated to
Armstrong on a pro rata basis, the DSNP final offer also includes [REDACTED] whereas the Armstrong
final offer does not.266 Armstrong argues that this would allow DSNP to pass through to Armstrong
undefined [REDACTED].267 DSNP disagrees, noting that the provision strictly limits costs to those
"directly attributable" to the additional games.268 Moreover, DSNP notes that the 2005 Armstrong/FSNP
Agreement as well as Armstrong's current affiliation agreement with [REDACTED
] do not include
any limitations on surchargeable costs, and thus [REDACTED] can be passed through to Armstrong
under those agreements.269 DSNP notes that Armstrong's own expert conceded that a limitation on
surchargeable costs is an improvement over affiliation agreements that do not contain such limitations.270
In addition, DSNP submits that Armstrong's [REDACTED] contract with DSNP agreeing to a surcharge
for additional Pirates games expressly includes [REDACTED] as a surchargeable cost.271 In its final
offer, Armstrong has proposed a surcharge provision that is similar to language found in DSNP's
affiliation agreements with [REDACTED] and [REDACTED], which do not include [REDACTED] as
a surchargeable cost.272
61.
Discussion. We conclude that the surcharge provision in the Armstrong final offer most
closely approximates fair market value. As an initial matter, the surcharge provisions in both final offers
are an improvement for Armstrong compared to those DSNP affiliation agreements that contain no


266 See DSNP Final Offer, JX-34 at DSNP 015056, 5(e); Armstrong Final Offer, JX-33 at ARMSTRONG 005699-
5700, 5(e).
267 See Gardner Expert Report, CX-44 at 46-49; Armstrong Opposition at 71; Armstrong Proposed Findings of Fact
at 63.
268 See DSNP Petition at 110 (citing DSNP Final Offer, JX-34 at DSNP 015056, 5(e)).
269 See id. at 111; DSNP Proposed Findings of Fact at 57; see also 2005 Armstrong/FSNP Agreement, JX-1 at
ARMSTRONG 000009-10; 2006 Armstrong/[REDACTED
]; Carriage
Agreement between Armstrong Utilities, Inc. and [REDACTED
].
270 See DSNP Petition at 111 (citing Gardner Test., Hr'g Tr. at 465 (agreeing that the terms of the DSNP final offer
were an improvement over the other agreements that did not have any limitation on surchargeable costs)).
271 See id. (citing [REDACTED] Armstrong/DSNP Additional Events Addendum, JX-39 at DSNP 000076); DSNP
Proposed Findings of Fact at 57; Gardner Test., Hr'g Tr. at 467-68.
272 See Gardner Expert Report, CX-44 at 48-49; [REDACTED]
].
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limitations on surchargeable costs.273 There is no evidence, however, that those DSNP affiliation
agreements that contain limits on surchargeable costs allow [REDACTED] to be allocated to the
MVPD.274 Accordingly, we find that DSNP's inclusion of [REDACTED] as surchargeable does not
"most closely approximate fair market value" when compared to the Armstrong final offer.
d.
[REDACTED]
62.
The DSNP final offer would [REDACTED
], whereas the Armstrong final
offer would allow [REDACTED
] rate if and when all the other distributors of FSNP agree to a
[REDACTED].275 DSNP contends that the renewals it has negotiated since late 2009, including the
[REDACTED] renewal in [REDACTED] and the [REDACTED] renewal in [REDACTED], all have
[REDACTED].276 DSNP also notes that Armstrong's [REDACTED] contract with DSNP agreeing to a
surcharge for additional Pirates games included only a [REDACTED].277 Armstrong counters that this
[REDACTED] surcharge agreement did not change the zone definitions from the 2005 Armstrong/FSNP
Agreement.278 Armstrong also notes that [REDACTED
] continue to each retain
[REDACTED
].279
63.
Discussion. We conclude that the [REDACTED
] in the DSNP final
offer most closely approximates fair market value. The record evidence here indicates that DSNP's most
recent affiliation agreements, including with [REDACTED
] as well as
with [REDACTED], include a [REDACTED] rate. We also agree with DSNP that the [REDACTED
] does not have a material impact on the rates for FSNP. As DSNP explains, when
[REDACTED
], subscribers in one former [REDACTED] will face a rate increase while
subscribers in the other former [REDACTED] will enjoy a rate decrease.280


273 See, e.g., [REDACTED
].
274 See supra n.272; see also [REDACTED
].
275 See DSNP Final Offer, JX-34 at DSNP 015081, Exhibit C; Armstrong Final Offer, JX-33 at ARMSTRONG
005695, 8(a)(i); see also DSNP Petition at 111-12; Armstrong Opposition at 72.
276 See DSNP Petition at 112; [REDACTED
].
277 See DSNP Petition at 112; 2010 Armstrong/DSNP Additional Events Addendum, JX-39 at DSNP 000076, 4.
278 See Armstrong Opposition at 73.
279 See id.; Armstrong Proposed Findings of Fact at 55; Wyche Test., Hr'g Tr. at 973-74.
280 See DSNP Reply at 58 ("The essence of a weighted average is that, to the extent that the average increases the
rate for the [REDACTED] subscribers, it decreases the rate for [REDACTED] subscribers such that there is no
adverse economic impact."); see id. at 13 n.7 ("Armstrong has approximately [REDACTED] FSNP subscribers in
[REDACTED] and over [REDACTED] subscribers in [REDACTED]. (JX-208). If the weighted average rate for
(continued....)
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e.

Lifeline Definition and Lifeline Tier Exclusion

64.
The Lifeline provisions in the Armstrong and DSNP final offers differ in two respects:
(i) the definition of the Lifeline Basic Tier; and (ii) the Lifeline tier exclusion.281 With respect to the
definition of the Lifeline Basic Tier, the definition in the DSNP final offer is consistent with the 2005
Armstrong/FSNP Agreement, while the Armstrong final offer would expand the Lifeline Basic Tier to
include additional programming.282 Armstrong does not dispute that it seeks to broaden this definition
and states that it wants greater flexibility to develop lower cost packages for its customers.283
65.
Both final offers contain provisions requiring Armstrong to deliver FSNP to
[REDACTED] of Armstrong's total subscribers.284 Both final offers also allow Armstrong to exclude
Lifeline subscribers from the total number of subscribers before applying this percentage, provided that
the number of Lifeline subscribers does not exceed [REDACTED] (in the case of the Armstrong final
offer285) or [REDACTED] (in the case of the DSNP final offer286) of total subscribers. Thus, if
Armstrong has [REDACTED] subscribers, the Armstrong final offer would allow Armstrong to exclude
up to [REDACTED] Lifeline subscribers (i.e., [REDACTED]) from its total number of subscribers
before applying the [REDACTED] penetration requirement. This would require Armstrong to deliver
FSNP to at least [REDACTED] subscribers ([REDACTED]). This results in a required penetration
level of [REDACTED] of total subscribers (i.e., [REDACTED]).287 Under the DSNP final offer,
Armstrong could exclude up to [REDACTED] Lifeline subscribers (i.e., [REDACTED]) from its total
number of subscribers before applying the [REDACTED] penetration requirement. This would require
Armstrong to deliver FSNP to at least [REDACTED] subscribers ([REDACTED]). This results in a
required penetration level of [REDACTED] of total subscribers (i.e., [REDACTED]).288
(Continued from previous page)


[REDACTED] would `inflate' the amount paid by Armstrong for [REDACTED] subscribers, by definition it
would result in a reduction of the rate otherwise payable by Armstrong for the [REDACTED] subscribers . . . .").
281 A Lifeline tier is a low-cost package of programming that contains a limited number of channels. See Wittman
Test., Hr'g Tr. at 272.
282 Compare 2005 Armstrong/FSNP Agreement, JX-1 at ARMSTRONG 000001, 1(e) with Armstrong Final Offer,
JX-33 at ARMSTRONG 005685, 1(g); see also DSNP Petition at 113-14; DSNP Proposed Findings of Fact at 56.
[REDACTED
].
283 See Armstrong Opposition at 74; Wittman Test., Hr'g Tr. at 272-74.
284 Compare Armstrong Final Offer, JX-33 at ARMSTRONG 005685, 1(i) ("Permissible Tier") with DSNP Final
Offer, JX-34 at DSNP 015050, 1(h) ("Minimum Tier").
285 See Armstrong Final Offer, JX-33 at ARMSTRONG 005685, 1(i). Armstrong notes that its [REDACTED]
exclusion is consistent with the 2005 Armstrong/FSNP Agreement. See Wittman Test., Hr'g Tr. at 295.
286 See DSNP Final Offer, JX-34 at DSNP 015050, 1(h)
287 See DSNP Petition at 114; DSNP Proposed Findings of Fact at 57; Gardner Test., Hr'g Tr. at 453-56.
288 See DSNP Petition at 114; DSNP Proposed Findings of Fact at 56-57; Gardner Test., Hr'g Tr. at 453-56.
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66.
DSNP states that lowering the Lifeline exclusion from [REDACTED] to [REDACTED]
was required by its new rights agreement with the Pirates, which requires a minimum penetration of
[REDACTED].289 DSNP argues that, if Armstrong were to exclude Lifeline subscribers up to the
maximum of [REDACTED] as provided under the Armstrong final offer, Armstrong would deliver
FSNP to only [REDACTED] of its subscribers and thereby place DSNP in violation of its rights
agreement with the Pirates.290 Armstrong disputes that its [REDACTED] tier exclusion would conflict
with DSNP's rights agreement with the Pirates.291 Armstrong argues that DSNP's rights agreement with
the Pirates requires a minimum penetration of [REDACTED] across all systems carrying the games, not
on each individual system.292 Moreover, Armstrong notes that the required penetration level in the
[REDACTED
] is [REDACTED], thus undermining DSNP's claim that it must ensure that
Armstrong satisfies a [REDACTED] penetration requirement to enable DSNP to comply with the Pirates
deal.293
67.
DSNP argues that reducing the Lifeline exclusion to [REDACTED] does not mean that
Armstrong must limit its Lifeline subscribers to only [REDACTED] of its total subscribers.294 For
example, more than [REDACTED] of Armstrong's subscribers could subscribe to Lifeline service
provided that Armstrong delivers FSNP on basic to the remaining subscribers and satisfies the
[REDACTED] overall penetration requirement.295 In any event, DSNP notes that Mr. Wittman,
Armstrong's Vice President of Cable Marketing, testified that Lifeline service is offered to less than
[REDACTED] of Armstrong subscribers.296 Moreover, Armstrong's website states that Armstrong does
not offer Lifeline service at all.297 Armstrong does not dispute these facts or the testimony of DSNP's
expert, Mr. Thompson, that "Lifeline is not a significantly subscribed to level of service" at Armstrong.298


289 See DSNP Petition at 114; see also DSNP Proposed Findings of Fact at 56-57; [REDACTED
].
290 See DSNP Petition at 114; DSNP Proposed Findings of Fact at 56-57; Gardner Test., Hr'g Tr. at 453-56.
291 See Armstrong Opposition at 75 (citing Gardner Test., Hr'g Tr. at 540-41).
292 See id. at 75; Armstrong Proposed Findings of Fact at 64. Armstrong's expert, Mr. Gardner, stated that he "read
this as stating that FSN Pittsburgh can comply with this provision, provided the average is no less than
[REDACTED]." Gardner Test., Hr'g Tr. at 537-41; see Armstrong Proposed Findings of Fact at 64.
293 See Armstrong Opposition at 75 n.54; Armstrong Proposed Findings of Fact at 63-64; Gardner Test., Hr'g Tr. at
540-41.
294 See DSNP Petition at 114.
295 See id. For example, assuming Armstrong has [REDACTED] subscribers, it could exclude [REDACTED]
Lifeline subscribers ([REDACTED] of all subscribers) and still satisfy the required penetration level provided the
remaining [REDACTED] subscribers ([REDACTED
]) receive FSNP.
296 See id. (citing Wittman Test., Hr'g Tr. at 292-93).
297 See id. at 114-15 (citing Armstrong Frequently Asked Questions, RX-85 at FAQ 17 ("At this time, Armstrong
does not offer a lifeline package.")); DSNP Proposed Findings of Fact at 57.
298 See DSNP Petition at 115 (citing Thompson Test., Hr'g Tr. at 1291-92); DSNP Proposed Findings of Fact at 57;
Armstrong Opposition at 74. Armstrong states that it offers a Lifeline service today in "about 50 zip codes." See
Wittman Test., Hr'g Tr. at 269.
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68.
Discussion. We conclude that the provisions in the Armstrong final offer pertaining to
the Lifeline tier most closely approximate fair market value. As an initial matter, we find that the
difference in the proposed Lifeline tier exclusion percentages does not have a material impact on either
final offer. Whether the exclusion is set at [REDACTED] or [REDACTED], the record is clear that
Armstrong does not have a sufficient number of Lifeline subscribers to come close to this number at
present. Moreover, even if Armstrong did have a large base of Lifeline subscribers, the record evidence
here indicates that the required penetration level of [REDACTED] under the Armstrong final offer would
not place DSNP in violation of the [REDACTED] penetration requirement in its agreement with the
Pirates, as demonstrated by the [REDACTED] penetration requirement in the [REDACTED
]. Moreover, we find no basis to conclude that the definition of the Lifeline Basic Tier in
the Armstrong final offer is inconsistent with market-based terms considering that a recent FSNP
affiliation agreement negotiated by another Cohort Affiliate contains a similarly broad definition.299
f.

Advertising Avails and Advertising Exclusivities

69.
Both final offers allow Armstrong to use two minutes of advertising time per hour during
FSNP programming (called "ad avails").300 The final offers differ with respect to whether DSNP can
reserve exclusive advertising categories (called "ad exclusives"). The DSNP final offer would place no
restrictions on DSNP's ability to designate exclusive advertising categories,301 while the Armstrong final
offer does not contain any provision allowing DSNP to designate exclusive advertising categories.302
Armstrong's expert, Mr. Gardner, testified that the ad exclusives provision in the DSNP final offer would
allow DSNP to reserve broad categories of advertising to itself and thereby "undermine Armstrong's
ability to monetize the 2 minutes of commercial advertising time per hour."303 In response, DSNP argues
that RSN affiliation agreements uniformly contain ad exclusives;304 every one of Armstrong's affiliation
agreements with [REDACTED] contains ad exclusives;305 DSNP's affiliation agreements that provide for


299 See [REDACTED
].
300 See Armstrong Final Offer, JX-33 at ARMSTRONG 005703, 9(a); DSNP Final Offer, JX-34 at DSNP 015062-
63, 7(a). Although Armstrong did not have any ad avails under the 2005 Armstrong/FSNP Agreement, Armstrong
had two minutes of ad avails under its 2000 affiliation agreement for FSNP. See Gardner Test., Hr'g Tr. at 456;
2005 Armstrong/FSNP Agreement, JX-1; Affiliation Agreement between Armstrong Utilities, Inc. and Fox Sports
Net Pittsburgh, L.P. (effective April 1, 2000), JX-3 at ARMSTRONG 000032-33, 6; see also DSNP Petition at
115-16; DSNP Proposed Findings of Fact at 55-56.
301 See DSNP Final Offer, JX-34 at DSNP 015080, 7(b).
302 See DSNP Petition at 118; DSNP Proposed Findings of Fact at 55-56. Armstrong's expert, Mr. Gardner,
contends that nothing in the Armstrong final offer prevents DSNP from declaring ad exclusives. See Gardner Test.,
Hr'g Tr. at 534-35; Armstrong Proposed Findings of Fact at 65-66.
303 See Gardner Expert Report, CX-44 at 51-52.
304 Armstrong's expert, Mr. Gardner, admitted that it is "very common for [RSNs] to retain exclusive advertising
categories." See Gardner Test., Hr'g Tr. at 460. DSNP's expert, Mr. Thompson, stated that "advertising
exclusivities are contained in virtually every affiliation agreement I've ever seen." See Thompson Test., Hr'g Tr. at
1293; see also DSNP Proposed Findings of Fact at 55.
305 Armstrong's affiliation agreements with [REDACTED
(continued....)
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ad avails all contain ad exclusives;306 and DSNP's [REDACTED
].307 While
Armstrong does not dispute that RSN affiliation agreements often include ad exclusives, it argues that
DSNP's ad exclusive is not reflective of a market-based term because it is unrestricted in scope.308
70.
Discussion. We conclude that the ad exclusives provision in the DSNP final offer most
closely approximates fair market value. The record reflects that RSN affiliation agreements in general,
and the affiliation agreements that both DSNP and Armstrong have entered into in particular, contain ad
exclusives. Moreover, DSNP has entered into affiliation agreements with Cohort Affiliates containing the
broad ad exclusivity language contained in the DSNP final offer.309 There is no support, however, for the
proposal in the Armstrong final offer to have no provision pertaining to ad exclusives.
g.

Carriage of FSNP in the Event of an NCTC Agreement.

71.
In its final offer, Armstrong proposes to modify a provision of the 2005 Armstrong/FSNP
Agreement which allows Armstrong to "opt-out" of its affiliation agreement in favor of an agreement
negotiated by the National Cable Television Cooperative ("NCTC") for carriage of FSNP.310 Under the
2005 Armstrong/FSNP Agreement, Armstrong could "opt-out" provided that Armstrong (i) would carry
FSNP until the end of the contract term (June 30, 2010) (the "continued carriage" protection); and (ii)
would not move FSNP to a less-penetrated package or tier of services, or withdraw or discontinue
distribution of FSNP in any system (the "non-migration protection").311 The Armstrong final offer would
(Continued from previous page)


]; see also Thompson Expert Report, RX-74 at 4-6; Gardner Test., Hr'g Tr. 461-62; DSNP Proposed
Findings of Fact at 54.
306 See [REDACTED
].
307 See [REDACTED
]. The rights agreement requires DSNP
to afford to [REDACTED
]. Armstrong's expert, Mr. Gardner, acknowledged that DSNP must have ad exclusives to comply with its
rights agreement with the Pirates. See Gardner Test., Hr'g Tr. at 463. DSNP's expert, Mr. Thompson, testified that
ad exclusives are often required as a result of the terms of the rights agreements with sports teams that want to retain
advertising time for their sponsors. See Thompson Test., Hr'g Tr. at 1293-94; see DSNP Proposed Findings of Fact
at 54-55.
308 See Armstrong Opposition at 76; Gardner Expert Report, CX-44 at 52.
309 See [REDACTED
].
310 Compare 2005 Armstrong/FSNP Agreement, JX-1 at ARMSTRONG 000003, 3 with Armstrong Final Offer,
JX-33 at ARMSTRONG 005689, 3.
311 See 2005 Armstrong/FSNP Agreement, JX-1 at ARMSTRONG 000003, 3. Armstrong's President, Mr. Ross,
referred to the NCTC provision in the 2005 Armstrong/FSNP Agreement as "what I would call our standard NCTC
opt-in language." See Ross Test., Hr'g Tr. at 118-19.
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[REDACTED
].312 DSNP argues that this
provision is not sufficient to ensure that FSNP will be carried for the five-year term of the Armstrong
final offer;313 does not satisfy the requirement in the Liberty Media Order arbitration conditions that the
final offer have at least a three-year term;314 and is not standard in the marketplace (as evidenced by the
2005 Armstrong/FSNP Agreement).315 Armstrong responds by noting that the "opt-out" provision is just
one reason why the agreement may be terminated before the conclusion of its term (along with reasons
such as breach, default, and force majeure), but that does not change the five-year term of the
agreement.316 Moreover, Armstrong notes that DSNP and NCTC have not yet entered into an affiliation
agreement and that DSNP can seek to include the continued carriage and non-migration protections in any
agreement it eventually reaches with NCTC.317
72.
Discussion. We conclude that the NCTC "opt-out" provision in the Armstrong final offer
most closely approximates fair market value. Armstrong's ability and willingness to "opt-out" of its
affiliation agreement with DSNP in favor of an agreement negotiated by NCTC is dependent on two
conditions precedent: (i) DSNP must reach an affiliation agreement with NCTC; and (ii) Armstrong must
find the NCTC affiliation agreement with DSNP more favorable than its own affiliation agreement with
DSNP. We conclude that the theoretical potential for Armstrong to exercise its right to "opt-out" of its
affiliation agreement with DSNP does not reduce the five-year term of the Armstrong final offer any more
than the theoretical possibility that Armstrong will breach or default on the affiliation agreement. Thus,
we conclude that the "opt-out" provision does not cause the Armstrong final offer to violate the three-year
term requirement of the Liberty Media Order arbitration conditions. Moreover, we find no basis to
conclude that the "opt-out" provision in the Armstrong final offer is inconsistent with market-based terms
considering that a recent FSNP affiliation agreement negotiated by another Cohort Affiliate does not
contain continued carriage and non-migration protections.318
h.

Conclusion

73.
Under the Liberty Media Order arbitration conditions, we must select one final offer or
the other. 319 As discussed at the outset, we do not have the discretion to craft our own affiliation
agreement by selecting some terms from one final offer and other terms from the other final offer or by
imposing our own terms.320 As summarized in Table C below, we conclude that certain non-rate terms in
the final offers favor the DSNP final offer as being more consistent with fair market value, whereas other
non-rate terms favor the Armstrong final offer.


312 See Armstrong Final Offer, JX-33 at ARMSTRONG 005689, 3.
313 See DSNP Petition at 120; DSNP Proposed Findings of Fact at 65.
314 See DSNP Pre-Hearing Brief at 15 n.7; Liberty Media Order, 23 FCC Rcd at 3347, Appendix B, Condition IV,
A "Commercial Arbitration Remedy," 10.
315 See DSNP Petition at 120; DSNP Proposed Findings of Fact at 65.
316 See Armstrong Opposition at 77; Armstrong Proposed Findings of Fact at 21.
317 See Armstrong Opposition at 77-78; see also Armstrong Proposed Findings of Fact at 21.
318 See [REDACTED
].
319 See supra 8.
320 See id.
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Table C

Non-Rate Terms

Final Offer Most Closely

Approximating Fair Market Value

Use of [REDACTED] to Cure Shortfalls
Armstrong
Rebate for Shortfalls in Professional Games
DSNP
[REDACTED] as a Recoverable Surcharge Cost
Armstrong
[REDACTED ]
DSNP
Lifeline Definition and Lifeline Tier Exclusion
Armstrong
Advertising Avails and Advertising Exclusivities
DSNP
Carriage of FSNP in the Event of an NCTC Agreement
Armstrong
We do not believe that the non-rate terms favoring the DSNP final offer tip the scales in favor of finding
that the DSNP final offer most closely approximates fair market value considering that the (i) DSNP final
offer would require Armstrong to pay higher rates than MVPDs with fewer subscribers and that generate
less revenue for DSNP; (ii) neither of the methodologies put forth by DSNP is probative of fair market
value; and (iii) on balance, the other rate terms and non-rate terms favor the Armstrong final offer as
being more consistent with fair market value.321
4.

Recovery of Programming Costs

74.
Pursuant to the Liberty Media Order arbitration conditions, an RSN's costs are relevant
insofar as the conditions provide that an arbitrator may not select a final offer that does not permit the
RSN "to recover a reasonable share of the costs of acquiring the programming at issue."322 DSNP argues
that the rates in the Armstrong final offer do not reflect the increasing rights fees for professional sporting
events.323 DSNP contends that Armstrong did not consider that the rights fees DSNP pays for major
professional sporting events will increase by [REDACTED
]324 and that such fees account
for [REDACTED] DSNP's operating costs.325 In response, Armstrong notes that DSNP has admitted
that its operating margins are [REDACTED
].326


321 See supra III.C.2 (other rate terms) and III.C.3 (non-rate terms).
322 See Liberty Media Order, 23 FCC Rcd at 3347, Appendix B, Condition IV, B "Rules of Arbitration," 4.
323 See DSNP Petition at 103-04; see also DSNP Proposed Findings of Fact at 32-33.
324 See Tucker Test., Hr'g Tr. at 1086 (stating that professional rights fees are increasing over time at a rate of
[REDACTED]); see also Wyche Expert Report, RX-50 at 16-17; DSNP Proposed Findings of Fact at 32.
According to DSNP, the renewal of the Penguins rights agreement will result in an additional [REDACTED]
increase in annual rights fees beginning with the [REDACTED] Penguins season, further decreasing DSNP's
operating margin. See Tucker Test., Hr'g Tr. at 1087-89; see also Wyche Expert Report, RX-50 at 17; DSNP
Proposed Findings of Fact at 33. Armstrong disputes this claim, arguing that DSNP had not signed a renewal
agreement with the Penguins as of the January 2011 hearing. See Armstrong Opposition at 79; Armstrong Proposed
Findings of Fact at 67; Tucker Test., Hr'g Tr. at 1169-73.
325 See Tucker Test., Hr'g Tr. at 1086; but see Siwek Test., Hr'g Tr. at 686-87 (testifying that his "guess" was that
professional rights fees constituted "at least [REDACTED] percent; perhaps [REDACTED] percent of the
operating costs" of DSNP).
326 See Armstrong Opposition at 78; Armstrong Proposed Findings of Fact at 66-67. Armstrong's expert, Mr.
Gardner, opined that "RSN margins are in the range of approximately [REDACTED]." See Gardner Expert Report,
CX-44 at 12. DSNP's expert, Mr. Thompson, stated that DSNP's average operating margin will be [REDACTED
], which he opined was a "minimally acceptable level of return" and that a [REDACTED] return was "a
realistic target level" over time. Thompson Expert Report, RX-74 at 12; see also Wyche Expert Report, RX-50
(continued....)
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Moreover, Armstrong notes that the difference in the rates in the parties' final offers amounts to an
average of only [REDACTED] per year over the course of the proposed five-year term.327 Moreover,
DSNP's CFO, Mr. Tucker, testified that while the Armstrong final offer "will have a negative impact on
[DSNP's] overall margins," it will not drive DSNP down to a "zero margin."328
75.
Discussion. DSNP has not provided any evidence that demonstrates that the Armstrong
final offer will not enable DSNP to recover a reasonable share of the costs of acquiring programming for
FSNP. At most, the Armstrong final offer could reduce DSNP's expected profit margin, but this alone
provides no basis for rejecting the Armstrong final offer without a clear showing that the Armstrong final
offer will deny DSNP the ability to recover a reasonable share of its costs of acquiring programming.

IV.

CONCLUSION

76.
For the reasons set forth above, we deny DSNP's Petition and conclude, consistent with
the arbitrator's decision, that the final offer submitted by Armstrong most closely approximates the fair
market value of the programming carriage rights at issue and that there is no evidence demonstrating that
the Armstrong final offer will not enable DSNP to recover a reasonable share of the costs of acquiring
programming for FSNP.

V.

ORDERING CLAUSES

77.
Accordingly,

IT IS ORDERED

that, pursuant to Sections 4(i) and 4(j) of the
Communications Act of 1934, as amended, 47 U.S.C. 154(i), 154(j), the Petition for De Novo Review
filed by DIRECTV Sports Net Pittsburgh, LLC pursuant to the terms of the Liberty Media Order

IS
DENIED

.
78.
This action is taken pursuant to authority delegated by Section 0.283 of the
Commission's rules, 47 C.F.R. 0.283.
FEDERAL COMMUNICATIONS COMMISSION
William T. Lake
Chief, Media Bureau
(Continued from previous page)


at 16 ("RSNs typically achieve an average annual operating income margin `over time' between [REDACTED] and
[REDACTED]."); DSNP Proposed Findings of Fact at 32. DSNP's expert, Mr. Wyche, testified that
[REDACTED
]. See Wyche Test., Hr'g Tr. at 905-06.
327 See Armstrong Opposition at 78; supra 13. Armstrong opines that a review of DSNP's chart of operating
margins demonstrates that this differential will not seriously impact DSNP's margins. See Armstrong Opposition at
78 (citing Thompson Expert Report, RX-74 at Exhibit 5).
328 See Tucker Test., Hr'g Tr. at 1175-77; see also Wyche Test., Hr'g Tr. at 1051 (agreeing that he did not give an
opinion in his reports that the Armstrong final offer would prevent DSNP from recovering a reasonable portion of
costs to acquire the programming at issue); Thompson Test., Hr'g Tr. at 1315 (agreeing that he did not suggest in his
expert report nor did he testify that the Armstrong final offer would not permit DSNP to recover a reasonable share
of its costs).
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Appendix A

Rates for Armstrong Under the DSNP Final Offer329

Zone 1

[REDACTED]


329 See Wyche Expert Report, RX-50 at Tables 2, 3, and 4. These are actual rates for [REDACTED] in all zones.
These are not the actual rates for [REDACTED]. See id. at 9-10; supra 17. With respect to [REDACTED], (i)
its rates for [REDACTED
] rates, based on the relative number of
Armstrong subscribers in each sub-zone (see Wyche Expert Report, RX-50 at 10; Wyche Test., Hr'g Tr. at 890-91);
and (ii) its rates for Zones 2 and 4 are "normalized" to include [REDACTED
] (see Wyche Expert Report, RX-50 at 9-10; Wyche
Test., Hr'g Tr. at 890-91). With respect to [REDACTED], (i) its rates for [REDACTED
], based on the relative number of Armstrong subscribers in each sub-zone (see Wyche Expert Report, RX-
50 at 10; Wyche Test., Hr'g Tr. at 890-91); and (ii) its rates for Zones 1, 2, and 4 are "normalized" to include
[REDACTED
] (see
Wyche Expert Report, RX-50 at 9-10; Wyche Test., Hr'g Tr. at 890-91).
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Zone 2

[REDACTED]

Zone 4

[REDACTED]
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Appendix B

Rates for Armstrong Under the Armstrong Final Offer330

Zone 1

[REDACTED]


330 See Wyche Expert Report, RX-50 at Tables 2, 3, and 4. These are actual rates for [REDACTED] in all zones.
These are not the actual rates for [REDACTED]. See supra n.329 (explaining how rates were calculated). The
Armstrong rates are annualized because they increase in [REDACTED] of each year pursuant to the Armstrong
final offer, whereas the rates of the other listed Cohort Affiliates increase in [REDACTED] of each year. See
Wyche Expert Report, RX-54, Exhibit D. The Armstrong [REDACTED
], based on
the relative number of Armstrong subscribers in each sub-zone. See id.
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Zone 2

[REDACTED]

Zone 4

[REDACTED]
52

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