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Verizon Telephone Cos. et al. v. Madison Square Garden, L.P., et al.

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Released: September 22, 2011

Federal Communications Commission

DA 11-1594

REDACTED VERSION

Before the

Federal Communications Commission

Washington, D.C. 20554

In the Matter of
)
)

Verizon Telephone Companies and
)
File No. CSR-8185-P
Verizon Services Corp.,
)
Complainants,
)
)

v.
)
)

Madison Square Garden, L.P. and
)
Cablevision Systems Corp.,
)
Defendants
)

ORDER

Adopted: September 22, 2011

Released: September 22, 2011

By the Chief, Media Bureau

TABLE OF CONTENTS

Heading
Paragraph #
I.
INTRODUCTION .................................................................................................................................. 1
II. BACKGROUND .................................................................................................................................... 2
A. Commission's Rules Addressing Unfair Acts Involving Terrestrially Delivered, Cable-
Affiliated Programming ................................................................................................................... 2
B. Appeal of the 2010 Order ................................................................................................................ 5
C. Verizon's Complaint ........................................................................................................................ 6
III. DISCUSSION....................................................................................................................................... 10
A. Count I "Unfair Act" in Violation of Section 628(b) of the Act and Section 76.1001(a)
of the Rules .................................................................................................................................... 10
1. Verizon Properly Invoked the Framework Adopted in the 2010 Order.................................. 11
2. Verizon Has Demonstrated that Defendants Violated Section 628(b) of the Act and
Section 76.1001(a) of the Rules .............................................................................................. 12
a. Both MSG LP and Cablevision Are Proper Defendants to Count I.................................. 13
(i) MSG LP...................................................................................................................... 13
(ii) Cablevision................................................................................................................. 16
b. Defendants' Withholding of MSG HD and MSG+ HD from Verizon Is an
"Unfair Act"...................................................................................................................... 18
(i) The D.C. Circuit's Ruling in Cablevision II Affirms the Commission's
Authority to Address Whether Withholding Is an "Unfair Act" on a Case-by-
Case Basis................................................................................................................... 19
(ii) The Bureau Has Delegated Authority to Consider Whether Withholding Is an
"Unfair Act" ............................................................................................................... 23
(iii) Based on Established Precedent and Guidelines, Defendants' Withholding Is
an "Unfair Act"........................................................................................................... 24
(a) Defendants' Procompetitive Justifications for Withholding................................ 25
(b) Section 628(c)(4) Factors..................................................................................... 27

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(i) Development of Competition in Local and National MVPD Markets.......... 28
(ii) The Effect of Withholding on Alternative Video Providers to Incumbent
Cable Operators............................................................................................. 30
(iii) Attraction of Investment in New Programming ............................................ 31
(iv) The Effect on Diversity of Programming in the MVPD Market................... 34
(v) Duration of Withholding ............................................................................... 36
(vi) Conclusion..................................................................................................... 37
(c) MDU Order.......................................................................................................... 38
(d) Legitimate Business Justification......................................................................... 39
(e) FTC Definition..................................................................................................... 40
(f) Conclusion ........................................................................................................... 41
c. Defendants' Withholding of MSG HD and MSG+ HD from Verizon Has the
"Effect" of "Significantly Hindering" Verizon................................................................. 42
(i) The "Significant Hindrance" Standard ....................................................................... 43
(ii) The Record Supports Application of a Rebuttable Presumption of
"Significant Hindrance" for HD RSNs....................................................................... 46
(iii) Defendants Have Failed to Rebut the Presumption.................................................... 49
(a) Survey Evidence .................................................................................................. 51
(i) The Results of Defendants' Surveys Contradict Their Product Differentiation
Strategy.......................................................................................................... 53
(ii) Defendants' Survey Evidence Is Not Reliable .............................................. 54
(a) Defendants'/Radius Survey .................................................................... 54
(b) Defendants'/OTX Survey ....................................................................... 56
(c) Defendants' Win-Back Survey ............................................................... 59
(b) Non-Survey Evidence .......................................................................................... 61
(c) Conclusion ........................................................................................................... 68
3. Remedy.................................................................................................................................... 69
4. First Amendment ..................................................................................................................... 72
B. Count II Unreasonable Refusal to Sell........................................................................................ 76
C. Count III Evasion ........................................................................................................................ 78
D. Count IV Undue or Improper Influence...................................................................................... 80
E. Count V Discrimination .............................................................................................................. 81
IV. ORDERING CLAUSES....................................................................................................................... 82

I.

INTRODUCTION

1.
In this Order, we find that Madison Square Garden, L.P. ("MSG LP") and Cablevision
Systems Corporation ("Cablevision") (MSG LP and Cablevision together, the "Defendants") violated
Section 628(b) of the Communications Act of 1934, as amended (the "Act") and Section 76.1001(a) of
the Commission's rules based on our findings that (i) both MSG LP and Cablevision are proper
defendants; (ii) Defendants' withholding of the high definition ("HD") versions of the MSG and MSG+
networks from Verizon Telephone Companies and Verizon Services Corporation (collectively, "Verizon")
is an "unfair act";1 and (iii) this "unfair act" has the "effect" of "significantly hindering" Verizon from
providing a competing video service, including "satellite cable programming and satellite broadcast
programming," to subscribers and consumers in the New York and Buffalo Designated Market Areas


1 Throughout this Order, we use the term "unfair act" as shorthand for the phrase "unfair methods of competition or
unfair or deceptive acts or practices." 47 U.S.C. 548(b); see 47 C.F.R. 76.1001(a).
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("DMAs").2 Accordingly, we grant Count I of Verizon's program access complaint and order MSG LP to
enter into an agreement to license the MSG HD and MSG+ HD networks to Verizon on non-discriminatory
rates, terms, and conditions within 30 days of the release of this Order. For the reasons discussed herein, we
deny the remaining counts set forth in Verizon's complaint.

II.

BACKGROUND

A.

Commission's Rules Addressing Unfair Acts Involving Terrestrially Delivered,
Cable-Affiliated Programming

2.
Sections 628(b), 628(c)(1), and 628(d) of the Act3 grant the Commission broad authority
to prohibit "unfair acts" of cable operators, satellite cable programming vendors in which a cable operator
has an attributable interest, and satellite broadcast programming vendors that have the "purpose or effect"
of "hinder[ing] significantly or prevent[ing]" any multichannel video programming distributor ("MVPD")
from providing "satellite cable programming or satellite broadcast programming to subscribers or
consumers."4 Based on this broad grant of authority, the Commission adopted rules for the processing of
complaints alleging one or more of three "unfair acts" involving terrestrially delivered, cable-affiliated
programming: undue or improper influence, discrimination, and exclusive contracts.5 Among other
things, these rules require a complainant to demonstrate that the "unfair act" has the "purpose or effect" of
"significantly hindering or preventing" the complainant from providing satellite cable programming or
satellite broadcast programming to subscribers or consumers, as required by Section 628(b).6
3.
The Commission has recognized that some terrestrially delivered programming may be
non-replicable and sufficiently valuable to consumers that an "unfair act" regarding this programming


2 47 U.S.C. 548(b); 47 C.F.R. 76.1001(a). Verizon, Cablevision, and MSG LP are each a "Party" and are
collectively the "Parties."
3 Section 628 was passed as part of the Cable Television Consumer Protection and Competition Act of 1992 ("1992
Cable Act"). See Cable Television Consumer Protection and Competition Act of 1992, Pub. L. No. 102-385, 106
Stat. 1460 (1992).
4 See 47 U.S.C. 548(b) ("[I]t shall be unlawful for a cable operator, a satellite cable programming vendor in which
a cable operator has an attributable interest, or a satellite broadcast programming vendor to engage in unfair methods
of competition or unfair or deceptive acts or practices, the purpose or effect of which is to hinder significantly or to
prevent any multichannel video programming distributor from providing satellite cable programming or satellite
broadcast programming to subscribers or consumers."); 47 U.S.C. 548(c)(1); 47 U.S.C. 548(d).
5 See 47 C.F.R. 76.1001; Review of the Commission's Program Access Rules and Examination of Programming
Tying Arrangements
, First Report and Order, 25 FCC Rcd 746 (2010) ("2010 Order"), affirmed in part and vacated
in part sub nom. Cablevision Sys. Corp. et al. v. FCC
, 2011 WL 2277217 (D.C. Cir. June 10, 2011) ("Cablevision
II
"). We note that the Verizon Complaint was filed six months prior to release of the 2010 Order. See Verizon
Telephone Companies et al., Program Access Complaint, File No. CSR-8185-P (filed July 7, 2009) ("Verizon
Complaint
"). Many of the Parties' arguments from earlier stages of this proceeding pertain to the Commission's
statutory authority to address "unfair acts" involving terrestrially delivered, cable-affiliated programming pursuant
to Section 628(b). See, e.g., id. at 43-45; Defendants, Answer to Program Access Complaint, File No. CSR-
8185-P (filed July 28, 2009), at 23-33 ("Defendants' Answer"); Verizon Telephone Companies et al, Reply, File No.
CSR-8185-P (filed Aug. 13, 2009), at 3-14 ("Verizon Reply"). In the 2010 Order, the Commission interpreted
Section 628(b) and addressed arguments regarding the scope of this provision. See 2010 Order, 25 FCC Rcd at 757-
61, 19-24. Rather than repeating that analysis here, we incorporate by reference the Commission's interpretation of
Section 628(b) from the 2010 Order.
6 See 2010 Order, 25 FCC Rcd at 780-82, 50-51.
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presumptively but not conclusively has the purpose or effect set forth in Section 628(b).7 The
Commission has found that Regional Sports Networks ("RSNs") fall within this category.8 Accordingly,
rather than requiring litigants and the Commission staff to undertake repetitive examinations of RSN
precedent and the relevant historical evidence, the Commission allows complainants to invoke a
rebuttable presumption that an "unfair act" involving a terrestrially delivered, cable-affiliated RSN has the
purpose or effect set forth in Section 628(b).9 The Commission has explained that the defendant may
overcome the presumption by establishing that the "unfair act" does not have the prohibited purpose or
effect.10
4.
In addition, the Commission has concluded that HD programming is growing in
significance to consumers11 and that consumers do not consider the standard definition ("SD") version of
a particular channel to be an adequate substitute for the HD version due to the different technical
characteristics and sometimes different content.12 Accordingly, the Commission analyzes the HD version
of a network separately from the SD version with similar content for purposes of determining whether an
"unfair act" has the purpose or effect set forth in Section 628(b).13 Thus, the fact that a complainant
offers the SD version of a network to subscribers will not alone be sufficient to refute the complainant's


7 See id. at 750, 8 and 782-83, 52.
8 See id. at 782-83, 52. In establishing the RSN rebuttable presumption, the Commission relied on evidence in the
record supporting the conclusion that RSNs typically offer non-replicable content and are considered "must have"
programming by MVPDs. See id. at 768-69, 32 and 782-83, 52 nn. 205-206. The Commission also relied on an
empirical analysis performed in the 2006 Adelphia Order assessing the impact of the withholding of terrestrially
delivered, cable-affiliated RSNs on the market shares of Direct Broadcast Satellite ("DBS") operators. See id. at
768-69, 32 and 782, 52 n. 202 (citing Applications for Consent to the Assignment and/or Transfer of Control of
Licenses, Adelphia Communications Corporation, Assignors to Time Warner Cable, Inc., Assignees, et al.,
Memorandum Opinion and Order, 21 FCC Rcd 8203, 8271, 149 (2006) ("Adelphia Order") (concluding that
Comcast's withholding of the terrestrially delivered Comcast SportsNet Philadelphia RSN from DBS operators
caused the percentage of television households subscribing to DBS in Philadelphia to be 40 percent lower than what
it otherwise would have been; and concluding that Cox's withholding of the terrestrially delivered Cox-4 RSN from
DBS operators in San Diego caused the percentage of television households subscribing to DBS in that city to be 33
percent lower than what it otherwise would have been); Review of the Commission's Program Access Rules and
Examination of Programming Tying Arrangements
, MB Docket No. 07-198, Report and Order, 22 FCC Rcd 17791,
17818-19, 40 and 17876-82, Appendix B (addressing comments concerning the Adelphia Order study) (2007)
("2007 Order"), aff'd sub nom. Cablevision Sys. Corp. v. FCC, 597 F.3d 1306 (D.C. Cir. 2010) ("Cablevision I")).
The Commission defined an RSN in the same way the Commission has defined that term in previous merger
proceedings for purposes of adopting program access conditions: "any non-broadcast video programming service
that (1) provides live or same-day distribution within a limited geographic region of sporting events of a sports team
that is a member of Major League Baseball, the National Basketball Association, the National Football League, the
National Hockey League, NASCAR, NCAA Division I Football, NCAA Division I Basketball, Liga de Bisbol
Profesional de Puerto Rico, Baloncesto Superior Nacional de Puerto Rico, Liga Mayor de Ftbol Nacional de Puerto
Rico, and the Puerto Rico Islanders of the United Soccer League's First Division and (2) in any year, carries a
minimum of either 100 hours of programming that meets the criteria of subheading 1, or 10% of the regular season
games of at least one sports team that meets the criteria of subheading 1." See id. at 783-84, 53.
9 See id. at 782-83, 52.
10 See id.; see also id. at 750, 8.
11 See id. at 784-85, 54.
12 See id. at 784-85, 54-55.
13 See id. at 784-85, 54.
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showing that lack of access to the HD version has the purpose or effect set forth in Section 628(b).14
Similarly, in cases involving an RSN, withholding the HD feed is rebuttably presumed to cause
"significant hindrance" even if an SD version of the network is made available to competitors.15

B.

Appeal of the 2010 Order

5.
The Defendants in this case MSG LP and Cablevision each appealed the 2010 Order
to the United States Court of Appeals for the D.C. Circuit ("D.C. Circuit"). On June 10, 2011, the D.C.
Circuit issued a decision (i) affirming the Commission's interpretation of Section 628(b) as extending to
"unfair acts" involving terrestrially delivered, cable-affiliated programming;16 (ii) denying the
Defendants' facial First Amendment challenge to the Commission's interpretation of Section 628(b);17
(iii) rejecting as unripe a First Amendment challenge to the Commission's interpretation of Section
628(b) as applied in the New York City video market;18 (iv) upholding the Commission's decision to
establish a rebuttable presumption of "significant hindrance" for "unfair acts" involving RSNs and HD
RSNs under both First Amendment and Administrative Procedure Act ("APA") review;19 (v) affirming
under APA review the Commission's decision to hold a "satellite cable programming vendor in which a
cable operator has an attributable interest" liable for "unfair acts" involving terrestrially delivered
programming;20 and (vi) affirming under APA review the Commission's decision to hold each of the three
types of entity listed in Section 628(b) liable for the "unfair acts" of a terrestrially delivered programmer
that the entity wholly owns, controls, or with which it is under common control.21 The D.C. Circuit
vacated just one part of the 2010 Order the Commission's decision to treat certain acts involving
terrestrially delivered, cable-affiliated programming as categorically "unfair."22 As discussed in further
detail below, the D.C. Circuit's decision on this issue does not preclude the Media Bureau ("Bureau")
from assessing on a case-by-case basis whether an act is "unfair" under Section 628(b).23 The court's
mandate issued on July 27, 2011.24

C.

Verizon's Complaint

6.
Complainant Verizon is an MVPD as defined in Section 76.1000(e) of the Commission's
rules that provides video service to subscribers in the New York City metropolitan area and Upstate and
Western New York, among other areas, via a fiber network known as FiOS.25 Defendant Cablevision is a
cable operator as defined in Section 522(5) of the Act that provides video service in the New York City


14 See id. at 785, 55.
15 See id.
16 See Cablevision II, 2011 WL 2277217, at *6-*12.
17 See id. at *13-*15.
18 See id. at *15.
19 See id. at *17-*19.
20 See id. at *19-*20.
21 See id. at *20-*21.
22 See id. at *21-*24.
23 See infra 19-23.
24 See Judgment, File No. 10-1062 (D.C. Cir.).
25 See Verizon Complaint at ii, 14, and Declaration of Terry Denson and Benjamin Grad (July 7, 2009), at 5
("Denson/Grad Decl."); Defendants' Answer at 7.
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metropolitan area, among other areas.26 Defendant MSG LP owns and operates two RSNs: MSG and
MSG+.27 MSG owns exclusive rights to produce and exhibit within a certain geographic region the
games of the New York Knicks (of the National Basketball Association ("NBA")), New York Rangers (of
the National Hockey League ("NHL")), and Buffalo Sabres (of the NHL).28 MSG+ owns exclusive rights
to produce and exhibit within a certain geographic region the games of the New York Islanders (of the
NHL) and New Jersey Devils (of the NHL), and also televises local and national college football and
basketball games.29 MSG LP delivers the SD versions of MSG and MSG+ to cable operators via satellite
and delivers the HD versions of these networks via terrestrial facilities.30 At the time the Verizon
Complaint
was filed in July 2009, MSG LP was a wholly owned subsidiary of Cablevision.31 In February
2010, Madison Square Garden, Inc. ("MSG Inc.") was spun off from Cablevision, becoming a separate
public company.32 Defendant MSG LP is now a wholly owned subsidiary of MSG Inc.33 Despite this
spin off, Defendants admit that MSG LP is affiliated with Cablevision pursuant to the Commission's
attribution rules because Cablevision and MSG LP share a common controlling shareholder (the Dolan
family) and thus are under common control.34
7.
Verizon claims that Defendants have continually refused to provide Verizon with access
to the terrestrially delivered MSG HD and MSG+ HD networks in the New York and Buffalo DMAs.35
Verizon contends that Defendants initially refused to provide Verizon with access to the HD versions of
MSG and MSG+ in 2006 when the parties reached an agreement for Verizon to carry only the SD
versions of MSG and MSG+.36 Verizon claims that it again sought access to the HD versions in 2008
when Verizon was poised to enter the video market in Buffalo as well as later in 2008 in connection with
renewal negotiations for the SD versions.37 Verizon and MSG LP eventually reached a renewal
agreement for the SD versions only.38 Defendants admit that "Verizon has not been offered access to
MSG HD and MSG+ HD on any terms."39 Despite their withholding of MSG HD and MSG+ HD from


26 See Verizon Complaint at 17; Defendants' Answer at 70 ( 17).
27 See Verizon Complaint at 2, 19.
28 See id. at 20; Defendants' Answer at 71 ( 20).
29 See Verizon Complaint at 20; Defendants' Answer at 71 ( 20).
30 See Verizon Complaint at 21; Defendants' Answer at 10-14 ( 1-6), 50-52, and Declaration of Steven J. Pontillo
(July 28, 2009), at 11-20 ("Pontillo Decl.").
31 See Verizon Complaint at 19, 23; Defendants' Answer at 54 n.175.
32 See Madison Square Garden, L.P., Reply to Opposition to Dismiss MSG LP as a Party, File No. CSR-8185-P
(filed April 6, 2010) ("MSG LP Reply to Verizon Opposition to Motion to Dismiss"); Defendants, Answer to
Verizon's Supplement to Program Access Complaint, File No. CSR-8185-P (filed Oct. 13, 2010), at 100-101
("Defendants' Post-Discovery Answer to Supplement").
33 See Defendants' Post-Discovery Answer to Supplement at 100.
34 See id. at 101 n.361; see also Reply Brief of Verizon, File No. CSR-8185-P (filed Oct. 22, 2010), at 33 ("Verizon
Post-Discovery Reply Brief
").
35 See Verizon Complaint at 4-7, 26, 42-43; Denson/Grad Decl. at 11-22.
36 See Verizon Complaint at 4; Denson/Grad Decl. at 11; Defendants' Answer at 15 ( 7).
37 See Verizon Complaint at 4-5, 32-37; Denson/Grad Decl. at 12-13; Defendants' Answer at 15-16 ( 9).
38 See Verizon Complaint at 7, 37; Denson/Grad Decl. at 18.
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Verizon, Defendants have licensed these networks to many of Verizon's competitors in the New York
metropolitan area (including Cablevision, Time Warner, Comcast, DIRECTV, and RCN) and in the
Buffalo area (Time Warner, Comcast, and DIRECTV).40
8.
On June 19, 2009, Verizon notified Defendants of its intention to file a program access
complaint based on Defendants' refusal to provide Verizon with access to the HD versions of MSG and
MSG+.41 Defendants responded on June 29, 2009, stating that they had no legal obligation to provide
Verizon with access to the HD versions of MSG and MSG+ and that their refusal to do so was not
unreasonable, unfair, anticompetitive, or discriminatory.42 On July 7, 2009, Verizon filed its complaint,
raising five separate counts with respect to Defendants' withholding of MSG HD and MSG+ HD from
Verizon.43 Among other things, Verizon asks the Commission to provide a period not to exceed 30 days
for Defendants to negotiate nondiscriminatory terms and conditions for Verizon's access to MSG HD and
MSG+ HD.44 Defendants filed an Answer to the Verizon Complaint, to which Verizon filed a Reply.45
(Continued from previous page)


39 See Joint Letter from Evan T. Leo, Counsel for Verizon, and Christopher J. Harvie, Counsel for Defendants, to
Marlene H. Dortch, Secretary, FCC, File No. CSR-8185-P (Aug. 19, 2010), at 3 ("Parties' Aug. 19th Letter"); see
also Defendants' Post-Discovery Answer to Supplement
at 80 ("it is true that Verizon cannot obtain access to MSG
HD and MSG+ HD"); Defendants' Objections to Verizon's Improperly Propounded and Irrelevant Discovery
Requests, File No. CSR-8185-P (filed Sept. 14, 2010), at 5 ("The parties agree that Verizon sought a license to carry
MSG HD and MSG+ HD and that it was denied such a license.") ("Defendants' Sept. 14th Discovery Objection").
40 See Verizon Complaint at 1, 6, 31; Denson/Grad Decl. at 20; Defendants' Sept. 14th Discovery Objection at 5
("The parties also agree that MSG HD and MSG+ HD is licensed to other MVPDs, both competitive and outside of
Cablevision's footprint."); see also Defendants' Answer at 16 n.34, 60; Verizon Reply at 18-20; Defendants' Post-
Discovery Answer to Supplement
at 81-82.
41 See Verizon Complaint, Exhibit 2.
42 See id., Exhibit 3.
43 See id. at 41-63. At the request of the Parties, the Bureau adopted a Protective Order in this proceeding to
govern the submission of confidential material. See Verizon Telephone Companies et al. v. Madison Square Garden,
L.P. et al.
, Order, 25 FCC Rcd 3888 (MB 2010).
44 See Verizon Complaint at 26.
45 See generally Defendants' Answer; Verizon Reply. The Parties have also made a number of additional filings
outside of the authorized pleading cycle but prior to discovery. Defendants filed a Motion to Strike in Part the
Verizon Reply, alleging that a survey included with the Verizon Reply purporting to demonstrate the importance of
RSNs, including MSG HD and MSG+ HD, to subscribers in the New York and Buffalo DMAs was a new matter
that should have been provided in the Verizon Complaint. See Defendants, Motion to Strike in Part Verizon's
Reply, File No. CSR-8185-P (filed Aug. 31, 2009), at 1-7 ("Defendants' Motion to Strike Verizon Reply"); see also
Verizon Reply
at 24-26 and Exhibit 1 (Declaration of Chris Stella (Aug. 13, 2009) ("Stella Decl.") and Global
Marketing Research Services Survey of Paid Television Subscribers in NY and Buffalo Designated Market Areas
(Aug. 7, 2009) ("Verizon/GMRS Survey")). In their motion, Defendants also addressed the substance of the
Verizon/GMRS Survey, claiming that the survey is flawed and unreliable and that Verizon has mischaracterized its
conclusions. See Defendants' Motion to Strike Verizon Reply at 7-16 and Declaration of Hal Poret (Aug. 31, 2009)
("Poret Decl."); see also Verizon, Response to Defendants' Motion to Strike in Part Verizon's Reply, File No. CSR-
8185-P (filed Sept. 14, 2009) ("Verizon Response to Defendants' Motion to Strike Verizon Reply"); Defendants,
Reply to Verizon's Response to Defendants' Motion to Strike, File No. CSR-8185-P (filed Sept. 24, 2009)
("Defendants' Reply to Verizon Response to Motion to Strike"). In addition, Defendants later submitted their own
surveys purporting to demonstrate the importance (or lack thereof) of MSG HD and MSG+ HD to subscribers in the
New York and Buffalo DMAs, which Verizon claimed were flawed. See Defendants' Supplement in Response to
Verizon's Late-Filed Consumer Survey, File No. CSR-8185-P (filed March 15, 2010) ("Defendants' Supplement"),
Exhibit A (Declaration of Leslie Shifrin (March 15, 2010) ("Shifrin Decl.")), Exhibit B ("Radius Global Market
(continued....)
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While Verizon initially elected to prosecute Count I of its complaint under Section 628(d) pursuant to the
pre-2010 Order framework,46 Verizon subsequently filed a supplement to its complaint on June 28, 2010
to invoke the post-2010 Order framework.47
9.
During the course of the proceeding, each Party submitted discovery requests as well as
objections to the other Party's discovery requests.48 On August 9, 2010, the Bureau informed the Parties
(Continued from previous page)


Research Market Research Assessing Reasons for Choice of Television Provider" ("Defendants'/Radius
Survey
")), Exhibit C ("OTX Online Testing Exchange Assessing the Impact of Verizon Offering MSG HD/MSG+
HD on Verizon Customer Acquisition" ("Defendants'/OTX Survey")); Verizon, Response to Defendants' Motion for
Protective Order and to Supplement the Record, File No. CSR-8185-P (filed March 25, 2010) ("Verizon Response to
Defendants' Supplement
"); Defendants' Reply to Verizon's Response to Motion for Protective Order and to
Supplement the Record, File No. CSR-8185-P (filed April 6, 2010) ("Defendants' Reply to Verizon Response to
Supplement
"), Exhibit A (Declaration of Leslie Shifrin (April 6, 2010) ("Shifrin Reply Decl.")). In addition, MSG
LP filed a Motion to Dismiss MSG LP as a party to the proceeding, which Verizon opposed as late-filed. See
Madison Square Garden, L.P., Motion to Dismiss MSG LP as a Party, File No. CSR-8185-P (filed March 15, 2010)
("MSG LP Motion to Dismiss"); Verizon, Opposition to Motion to Dismiss MSG LP as a Party, File No. CSR-8185-
P (filed March 25, 2010) ("Verizon Opposition to MSG LP Motion to Dismiss"); MSG LP Reply to Verizon
Opposition to Motion to Dismiss
. The Parties also submitted additional substantive filings after the close of the
pleading cycle. See, e.g., Letter from William H. Johnson, Assistant General Counsel, Verizon, to Marlene H.
Dortch, Secretary, FCC, File No. CSR-8185-P (Feb. 12, 2010) ("Verizon Feb. 12th Letter"); Letter from Howard J.
Symons, Counsel for Defendants, to Marlene H. Dortch, Secretary, FCC, File No. CSR-8185-P (Feb. 25, 2010)
("Defendants' Feb. 25th Letter"). In the interest of acting on a complete record, we decline to strike any of these
post-pleading-cycle/pre-discovery filings and consider the substantive claims made therein in reaching a decision.
We have declined, however, Defendants' request to submit supplemental briefs on the issue of whether the record
supports a finding that Defendants have engaged in an "unfair act." See Email from Christopher J. Harvie, Counsel
for Defendants, to David S. Konczal, Assistant Division Chief, Policy Division, Media Bureau, FCC, File No. CSR-
8185-P (Aug. 1, 2011). The request was made on August 1, 2011, over ten months after the close of discovery in
this proceeding. See id. The parties have had a full opportunity to brief this issue, and the record on this issue
is well-developed. See Email from David S. Konczal, Assistant Division Chief, Policy Division, Media Bureau,
FCC to Christopher J. Harvie, Counsel for Defendants, File No. CSR-8185-P (Aug. 3, 2011); see also infra 22.
Moreover, the Bureau informed the parties on July 26, 2011, prior to Defendants' request for supplemental briefing,
that the Bureau intended to resolve the pending complaints in the near future, thus granting the Defendants' request
would have resulted in unnecessary delay. See Email from David S. Konczal, Assistant Division Chief, Policy
Division, Media Bureau, FCC to Howard J. Symons, Counsel for Defendants, File No. CSR-8185-P (July 26, 2011).
46 See infra n.54.
47 See Verizon Telephone Companies et al., Supplement to Program Access Complaint, File No. CSR-8185-P (filed
June 28, 2010) ("Verizon Supplement"); see also 2010 Order, 25 FCC Rcd at 751, 10, 756-57, 17, 785, 55,
789, 64 n.237.
48 Verizon initially filed a discovery request in August 2009, but later withdrew that request on March 29, 2010. See
Verizon, Complainant's First Request for the Production of Documents, File No. CSR-8185-P (filed Aug. 31, 2009);
Defendants' Sept. 14th Discovery Objection; Letter from William H. Johnson, Assistant General Counsel, Verizon,
to Nancy Murphy, Associate Bureau Chief, Media Bureau, FCC, File No. CSR-8185-P (March 29, 2010) ("Verizon
March 29th Letter
") (withdrawing discovery request). Two weeks later, on April 12, 2010, Verizon reinstated its
discovery request. See Letter from William H. Johnson, Assistant General Counsel, Verizon, to Marlene H. Dortch,
Secretary, FCC, File No. CSR-8185-P (April 12, 2010) ("Verizon April 12th Letter") (attaching Verizon,
Complainant's Amended First Request for the Production of Documents (April 12, 2010)). At the request of the
Bureau, Defendants submitted their discovery requests in July 2010. See Letter from Nancy Murphy, Associate
Bureau Chief, Media Bureau, FCC to Howard J. Symons, Counsel for Defendants, and Evan T. Leo, Counsel for
Verizon, File No. CSR-8185-P (June 23, 2010); Letter from Howard J. Symons, Counsel for Defendants, to Marlene
H. Dortch, Secretary, FCC, File No. CSR-8185-P (July 9, 2010) ("Defendants' July 9th Letter"); Defendants' First
Request for the Production of Documents, File No. CSR-8185-P (filed July 9, 2010); Defendants' First Set of
(continued....)
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that discovery was necessary for the resolution of Counts I, III, and V and directed the Parties to resolve
their outstanding discovery disputes.49 On August 19, 2010, the Parties submitted a joint letter describing
their agreement regarding the scope of discovery to be conducted.50 The Bureau established September
20, 2010 for the end of discovery, October 12, 2010 for post-discovery opening briefs, and October 22,
2010 for post-discovery reply briefs.51

III.

DISCUSSION

A.

Count I "Unfair Act" in Violation of Section 628(b) of the Act and Section
76.1001(a) of the Rules

10.
In Count I, Verizon alleges that Defendants' withholding of MSG HD and MSG+ HD
from Verizon is an "unfair act" that has the "effect" and "purpose" of "significantly hindering" Verizon
from providing "satellite cable programming or satellite broadcast programming to subscribers or
consumers," as prohibited by Section 628(b) of the Act and Section 76.1001(a) of the Commission's
rules.52 As discussed in greater detail below, we determine that Defendants violated these provisions
based on our findings that (i) both MSG LP and Cablevision are proper defendants; (ii) Defendants'
withholding of the HD versions of the MSG and MSG+ networks from Verizon is an "unfair act"; and (iii)
this "unfair act" has the "effect" of "significantly hindering" Verizon from providing a competing video
(Continued from previous page)


Interrogatories, File No. CSR-8185-P (filed July 9, 2010); Letter from William H. Johnson, Assistant General
Counsel, Verizon, to Marlene H. Dortch, Secretary, FCC, File No. CSR-8185-P (July 21, 2010); Verizon,
Objections to Defendants' First Request for the Production of Documents, File No. CSR-8185-P (filed July 21,
2010); Letter from Howard J. Symons, Counsel for Defendants, to Marlene H. Dortch, Secretary, FCC, File No.
CSR-8185-P (July 29, 2010) ("Defendants' July 29th Letter"); Letter from William H. Johnson, Assistant General
Counsel, Verizon, to Marlene H. Dortch, Secretary, FCC, File No. CSR-8185-P (Aug. 2, 2010).
49 See Letter from David S. Konczal, Assistant Division Chief, Policy Division, Media Bureau, FCC to Evan T. Leo,
Counsel for Verizon, and Howard J. Symons, Counsel for Defendants, File No. CSR-8185-P (Aug. 9, 2010), at 1
("Bureau Aug. 9th Letter").
50 See Parties' Aug. 19th Letter. In light of the settlement of the outstanding discovery disputes, the Parties' pending
discovery objections and the Defendants' request to refer the discovery disputes to an Administrative Law Judge are
moot. See Letter from Howard J. Symons, Counsel for Defendants, to Marlene H. Dortch, Secretary, FCC, File No.
CSR-8185-P (May 6, 2010); Defendants' July 29th Letter at 6.
51 See Letter from David S. Konczal, Assistant Division Chief, Policy Division, Media Bureau, FCC to Evan T. Leo,
Counsel for Verizon, and Howard J. Symons, Counsel for Defendants, File No. CSR-8185-P (Aug. 25, 2010), at 2.
The Parties agreed to a mutual exchange of opening briefs and reply briefs rather than the pleading schedule
established in the 2010 Order. See Parties' Aug. 19th Letter at 4; see also 2010 Order, 25 FCC Rcd at 789, 64
n.237. The Commission has established an aspirational goal of resolving program access complaints within five
months from the submission of a complaint for denial of programming cases, and within nine months for all other
program access complaints, such as price discrimination cases. See 2007 Order, 22 FCC Rcd at 17856, 107; see
also 2010 Order
, 25 FCC Rcd at 747, 1 n.2. In addition to a denial of programming, the present case involves
undue influence and evasion claims, thus the nine-month goal applies. While this would establish April 2010 as the
goal for resolving this complaint, this proceeding was further complicated by the intervening 2010 Order adopted in
January 2010 in which the Commission interpreted Section 628(b) and its application to terrestrially delivered,
cable-affiliated programming; the Defendants' appeal of the 2010 Order to the D.C. Circuit; Verizon's decision to
supplement its complaint in June 2010; and the Parties' decision to engage in extensive discovery. See
Implementation of the Cable Television Consumer Protection and Competition Act of 1992
, Report and Order, 13
FCC Rcd 15822, 15842-43, 41 (1998) (explaining that the aspirational goals for resolving program access cases do
not apply to cases involving complex discovery or extra pleadings based upon new information).
52 See Verizon Complaint at 41-45; Verizon Supplement at 4.
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service, including "satellite cable programming and satellite broadcast programming," to subscribers and
consumers in the New York and Buffalo DMAs.53 Accordingly, we grant Count I of Verizon's program
access complaint and order MSG LP to enter into an agreement to license the MSG HD and MSG+ HD
networks to Verizon on non-discriminatory rates, terms, and conditions within 30 days of the release of this
Order.
1.

Verizon Properly Invoked the Framework Adopted in the 2010 Order


11.
We reject Defendants' claim that Verizon waived its right to prosecute its complaint
pursuant to the post-2010 Order framework by initially requesting immediate Commission action on
Count I pursuant to Section 628(d) under the pre-2010 Order framework.54 Defendants allege that the
Commission adopted an "either/or" approach in the 2010 Order, such that an entity with a pending
complaint could elect either (i) to continue to prosecute the complaint pursuant to Section 628(d) under
the pre-2010 Order framework, or (ii) to prosecute the complaint under the post-2010 Order framework
by supplementing the complaint.55 Defendants argue that Verizon, by initially requesting immediate
Commission action on Count I pursuant to Section 628(d) under the pre-2010 Order framework, waived
any benefit from the post-2010 Order framework.56 We reject Defendants' arguments. The Commission
in the 2010 Order never stated or implied that an entity with a pending complaint could not initially elect
to prosecute its complaint pursuant to Section 628(d) under the pre-2010 Order framework and then to
subsequently supplement the complaint to take advantage of the post-2010 Order framework.57
Moreover, we note that the 2010 Order did not establish a deadline for filing a supplement to invoke the


53 Because we conclude below that Defendants' withholding of MSG HD and MSG+ HD from Verizon is an "unfair
act" that has the "effect" of "significantly hindering" Verizon from providing "satellite cable programming or
satellite broadcast programming to subscribers or consumers," we find it unnecessary to also address whether
Defendants' conduct has the "purpose" of "significantly hindering" Verizon. See 47 U.S.C. 548(b) (prohibiting
"unfair acts" that have the "purpose or effect" of "significantly hindering" an MVPD from providing satellite cable
programming or satellite broadcast programming to subscribers or consumers); 47 C.F.R. 76.1001(a) (same); see
also Verizon Complaint
at 40-42; Verizon Reply at 21-22; Opening Brief of Verizon, File No. CSR-8185-P (filed
Oct. 12, 2010), at 1-2, 6-9, 12 ("Verizon Post-Discovery Opening Brief"); Verizon Post-Discovery Reply Brief at 32;
Defendants' Post-Discovery Answer to Supplement at 6-7, 78; Verizon Post-Discovery Reply Brief at 32; Reply
Brief of Defendants, File No. CSR-8185-P (filed Oct. 22, 2010), at 13 ("Defendants' Post-Discovery Reply Brief").
54 See Defendants' Feb. 25th Letter at 2; see also Verizon Feb. 12th Letter at 1-4 (noting that the NBA and NHL
seasons were underway and urging prompt Commission action based on the existing record); Verizon March 29th
Letter
(withdrawing discovery request "[i]n the interest of obtaining a speedy resolution" based on the existing
record); Verizon April 12th Letter at 4 (stating that Verizon has "urged the Commission to grant our pending
complaint promptly before the end of the current sports seasons").
55 See Defendants' Feb. 25th Letter at 2; see also Letter from Howard J. Symons, Counsel for Defendants, to
Marlene H. Dortch, Secretary, FCC, File No. CSR-8185-P (April 19, 2010), at 1-2 ("Defendants' April 19th Letter");
Defendants' July 9th Letter at 2.
56 See Defendants' Feb. 25th Letter at 2; see also Defendants' April 19th Letter at 1-2; Defendants' July 9th Letter at
2.
57 The Commission stated that a complainant could continue to prosecute its complaint pursuant to Section 628(d)
under the pre-2010 Order framework and, "[i]n addition," could supplement its complaint to take advantage of the
post-2010 Order framework. See 2010 Order, 25 FCC Rcd at 751, 10; see also id. at 785, 55, 789, 64 n.237;
Letter from William H. Johnson, Assistant General Counsel, Verizon, to Marlene H. Dortch, Secretary, FCC, File
No. CSR-8185-P (April 26, 2010), at 2 (stating that the 2010 Order contemplates that complainants may
simultaneously continue to prosecute pending complaints and supplement those complaints to take advantage of the
post-2010 Order framework).
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post-2010 Order framework.58 In this case, Verizon initially elected to prosecute Count I under Section
628(d) pursuant to the pre-2010 Order framework.59 Before the Commission could act on that request,
Verizon requested instead to prosecute its complaint pursuant to the post-2010 Order framework.60 We
conclude that Verizon's election was authorized by the 2010 Order. We also reject Defendants' claim
that procedural fairness and principles of administrative efficiency and economy require Verizon to be
held to its initial decision to proceed pursuant to Section 628(d) under the pre-2010 Order framework.61
We find no basis in the record for concluding that Defendants were in any way prejudiced by Verizon's
actions.62 Indeed, nothing in the 2010 Order or the Commission's rules would have prevented Verizon
from continuing to prosecute its complaint pursuant to the pre-2010 Order framework, subsequently
withdrawing that complaint, and then refiling its complaint under the post-2010 Order framework.
2.

Verizon Has Demonstrated that Defendants Violated Section 628(b) of the
Act and Section 76.1001(a) of the Rules

12.
Section 628(b) of the Act and Section 76.1001(a) of the Commission's rules require a
complainant to establish three elements in order to demonstrate a violation of these provisions: (i) the
defendant is within one of the three categories of entities covered by these provisions (i.e., a cable
operator, a satellite cable programming vendor in which a cable operator has an attributable interest, or a
satellite broadcast programming vendor); (ii) the defendant (or a terrestrial cable programming vendor
that the defendant wholly owns, controls, or with which it is under common control) has engaged in an
"unfair act"; and (iii) the "purpose or effect" of the "unfair act" is to "significantly hinder or prevent" an
MVPD from providing satellite cable programming or satellite broadcast programming to subscribers or
consumers.63 For the reasons discussed below, we find that Verizon has established each element.


58 See 2010 Order, 25 FCC Rcd at 751, 10 (permitting complainants to file a supplement after the effective date of
the rules adopted in the 2010 Order, but not specifying a deadline for filing the supplement); see also id. at 785, 55
and 789, 64 n.237.
59 See supra n.54.
60 See Verizon April 12th Letter at 2 (stating that Verizon has requested Defendants to reconsider their refusal to
provide access to MSG HD and MSG+ HD and that, if they refuse, Verizon intends to supplement its complaint if
not granted by that time); Verizon Supplement at 1, 4-5 (stating that Defendants refused to provide access to MSG
HD and MSG+ HD after the effective date of the rules adopted in the 2010 Order and supplementing the complaint
accordingly). With respect to Count I, we note that Verizon has elected to prosecute this count pursuant to only the
post-2010 Order framework. See Parties' Aug. 19th Letter ("The Commission may proceed with respect to Count
One of Verizon's Complaint based on Cablevision's post-[2010] Order denial of Verizon's request to license MSG
HD and MSG+ HD and the post-[2010] Order framework for resolving such disputes. The Commission does not
need to apply the pre-[2010] Order framework to Count One."). Accordingly, we need not, and do not, consider
Defendants' claim that applying the Commission's interpretation of Section 628(b) in the 2010 Order to an act that
occurred prior to the 2010 Order is impermissibly retroactive. See Defendants' Feb. 25th Letter at 2-6; Letter from
Howard J. Symons, Counsel for Defendants, to Marlene H. Dortch, Secretary, FCC, File No. CSR-8185-P (April 2,
2010).
61 See Defendants' April 19th Letter at 1-2; see also Defendants' July 9th Letter at 2.
62 Similarly, we find no basis for concluding that Defendants were prejudiced by Verizon's decision to withdraw and
then to subsequently resubmit two weeks later its request for discovery. See supra nn.48, 54; Defendants' April 19th
Letter
at 2-4.
63 See 47 U.S.C. 548(b); 47 C.F.R. 76.1001(a).
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a.

Both MSG LP and Cablevision Are Proper Defendants to Count I

(i)

MSG LP

13.
Section 628(b) of the Act and Section 76.1001(a) of the Commission's rules apply to the
"unfair acts" of, among other entities, a "satellite cable programming vendor in which a cable operator
has an attributable interest."64 Defendants concede that (i) MSG LP is a "satellite cable programming
vendor"65 and (ii) a cable operator (Cablevision) has an attributable interest in MSG LP.66 While MSG
LP claims that a "satellite cable programming vendor" cannot be liable under Section 628(b) of the Act
and Section 76.1001(a) of the Commission's rules when the conduct at issue involves only terrestrial
programming and not satellite programming,67 this argument has been rejected by both the Commission68
and the D.C. Circuit.69 Accordingly, MSG LP is a proper defendant to Count I.
14.
The record also establishes that MSG LP is a "terrestrial cable programming vendor"
because it delivers MSG HD and MSG+ HD via terrestrial means.70 Defendants argue, however, that the
Commission's definition of "terrestrial cable programming vendor" excludes a "satellite cable


64 See 47 U.S.C. 548(b); 47 C.F.R. 76.1001(a); see also 47 U.S.C. 548(i)(2) (the "term `satellite broadcast
programming vendor' means a person engaged in the production, creation, or wholesale distribution for sale of
satellite cable programming, but does not include a satellite broadcast programming vendor").
65 See Defendants' Answer at 71 ( 22) ("Admitting that MSG is a `satellite cable programming vendor' only to the
extent that it licenses certain satellite cable programming not at issue in this case."); Pontillo Decl. at 13; MSG LP
Motion to Dismiss
at 3 ("MSG is also in the business of providing satellite-delivered services such as Fuse and the
standard definition MSG and MSG Plus program services").
66 See Defendants' Post-Discovery Answer to Supplement at 101 n.361.
67 See id. at 117-118 ("Where the only programming at issue is terrestrially-delivered, the entity delivering the
programming is not acting as a satellite cable programming vendor for purposes of any dispute under Section
628(b), and is therefore not subject to jurisdiction under that provision in such circumstances."); MSG LP Motion to
Dismiss
at 1-4.
68 See 2010 Order, 25 FCC Rcd at 779, 49 n.192 ("Nothing in the statute excludes an otherwise covered entity
from the reach of Section 628(b) simply because the conduct at issue is not covered by the statutorily defined
activities of a `cable operator' or `satellite cable programming vendor.' To the contrary, under Section 628(b), so
long as the provider itself meets the statutory definition of a covered entity, it is prohibited from engaging in any
unfair or deceptive acts or practices that hinder significantly or prevent any MVPD from providing satellite cable or
satellite broadcast programming to consumers.").
69 See Cablevision II, 2011 WL 2277217, at *19 ("In defining satellite cable vendors, Congress could have required
that an entity would be covered `only `when' or `to the extent' that it provides the regulation-triggering services.' . .
. But as the Commission recognized in its order, Congress imposed no such limitation.") (citations omitted).
70 See 47 C.F.R. 76.1000(m) (defining "terrestrial cable programming vendor"); 47 C.F.R. 76.1000(l) (defining
"terrestrial cable programming"). Defendants admit that MSG LP distributes MSG HD and MSG+ HD terrestrially
and that MSG LP is thus a "terrestrial cable programming vendor." See MSG LP Reply to Verizon Opposition to
Motion to Dismiss
at 1-2 ("The programming sought by Verizon in the instant Complaint, MSG HD and MSG+ HD,
is terrestrially-delivered . . . . [T]herefore, MSG is a terrestrial cable programming vendor . . . ."); see also
Defendants' Answer
at 10-14 ( 1-5); MSG LP Motion to Dismiss at 2 ("The only programming at issue in
Verizon's Complaint is the terrestrially-delivered MSG HD and MSG Plus HD services."); Defendants' Post-
Discovery Answer to Supplement
at 93 ("[T]he only programming at issue is terrestrially-delivered."). Contrary to
Defendants' claim, there was no "defect" in the Verizon Supplement. See Defendants' Post-Discovery Answer to
Supplement
at 93. Rather, the record clearly establishes that MSG HD and MSG+ HD are "terrestrial cable
programming" and that MSG LP is a "terrestrial cable programming vendor." There was no reason for Verizon to
re-establish in its Supplement what had already been established in the existing record.
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programming vendor," such that a single entity cannot be both a "terrestrial cable programming vendor"
and a "satellite cable programming vendor."71 Defendants claim that the Commission's definition means
that the only type of programmer that can qualify as a "terrestrial cable programming vendor" is one that
distributes only terrestrial cable programming.72 Thus, Defendants contend, because MSG LP distributes
"satellite cable programming" (MSG SD, MSG+ SD, Fuse)73 in addition to terrestrial cable programming,
it cannot be a "terrestrial cable programming vendor."74
15.
We find that Defendants' interpretation of the Commission's definition contradicts
established Commission precedent and would create a significant loophole that would eviscerate the
protections afforded by the program access rules applicable to both satellite-delivered and terrestrially
delivered programming. First, Defendants' interpretation contradicts the Commission's holding in the
2010 Order, which has been upheld by the D.C. Circuit, that a "satellite cable programming vendor" that
also distributes terrestrial cable programming can violate Section 628(b) of the Act to the extent it is
providing terrestrial cable programming.75 This holding indicates that the Commission expected entities
that distribute both satellite cable programming and terrestrial cable programming to be subject to
complaints under the procedures established in the 2010 Order. Second, we note that the Commission's
definition of "terrestrial cable programming vendor" mirrors Congress's definition of "satellite cable
programming vendor" in the 1992 Cable Act, which excludes a "satellite broadcast programming
vendor."76 Under Defendants' interpretation, a single entity cannot simultaneously be both a "satellite
cable programming vendor" and a "satellite broadcast programming vendor." Thus, Defendants' view
would mean that the only type of programmer that can qualify as a "satellite cable programming vendor"
is one that distributes only satellite cable programming, to the exclusion of satellite broadcast
programming. Such an interpretation would create a loophole in the rules applicable to satellite-delivered
programming whereby an entity that distributes satellite cable programming could avoid liability merely
by distributing some satellite broadcast programming as well. Congress, however, never stated or implied
any intention to create such a loophole. The Commission in the 2010 Order simply followed the
definitional structure used by Congress in the 1992 Cable Act. We can discern no reason for Congress in
the 1992 Cable Act or for the Commission in the 2010 Order to exclude programmers from certain
program access rules because they distribute more than one type of programming subject to the rules.
Rather, Congress's definition of "satellite cable programming vendor" and the Commission's definition
of "terrestrial cable programming vendor" reflect the definitions of the underlying programming these


71 See Defendants' Post-Discovery Answer to Supplement at 93-95; Defendants' Post-Discovery Reply Brief at 35;
see also 47 C.F.R. 76.1000(m) (defining "terrestrial cable programming vendor" as "a person engaged in the
production, creation, or wholesale distribution for sale of terrestrial cable programming, but does not include a
satellite broadcast programming vendor or a satellite cable programming vendor
") (emphasis added).
72 See Defendants' Post-Discovery Answer to Supplement at 94 n.339.
73 See Defendants' Answer at 71 ( 22) ("Admitting that MSG is a `satellite cable programming vendor' only to the
extent that it licenses certain satellite cable programming not at issue in this case."); Pontillo Decl. at 13; MSG LP
Motion to Dismiss
at 3 ("MSG is also in the business of providing satellite-delivered services such as Fuse and the
standard definition MSG and MSG Plus program services").
74 See Defendants' Post-Discovery Answer to Supplement at 93-95.
75 See Cablevision II, 2011 WL 2277217, at *19; 2010 Order, 25 FCC Rcd at 779, 49 n.192.
76 See 47 U.S.C. 548(i)(2) (defining "satellite cable programming vendor" as "a person engaged in the production,
creation, or wholesale distribution for sale of satellite cable programming, but does not include a satellite broadcast
programming vendor
") (emphasis added).
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vendors distribute, which are defined to exclude certain other types of programming.77 Thus, we find no
basis for interpreting the Commission's definitions to mean that a single entity cannot be both a
"terrestrial cable programming vendor" and a "satellite cable programming vendor."78
(ii)

Cablevision

16.
We also find that Cablevision is a proper defendant to Count I. In the 2010 Order, the
Commission established that an entity listed in Section 628(b) (i.e., a cable operator, a satellite cable
programming vendor in which a cable operator has an attributable interest, or a satellite broadcast
programming vendor) can be held liable for the "unfair act" of a terrestrial cable programming vendor
that it wholly owns, controls, or with which it is under common control.79 The D.C. Circuit upheld the
Commission's decision on this point.80 Here, Defendants concede that Cablevision (a "cable operator") is
under common control with MSG LP because it shares a common controlling shareholder with MSG LP
(the Dolan family).81
17.
Accordingly, because Cablevision (a "cable operator") is under common control with
MSG LP (a "terrestrial cable programming vendor"82 alleged to have engaged in an "unfair act" under
Section 628(b)), Cablevision is a proper defendant to Count I. Defendants object, however, to the
Commission's conclusion in the 2010 Order that a cable operator under common control with a terrestrial
cable programming vendor will be "deemed responsible" for the programmer's decision to withhold
programming from a competing MVPD because the programmer's actions are designed to benefit its
affiliated cable operator.83 The D.C. Circuit agreed with the Commission and upheld this decision.84 In


77 See 47 U.S.C. 548(i)(1) ("The term `satellite cable programming' has the meaning provided under section 605
of this title, except that such term does not include satellite broadcast programming.") (emphasis added); 47 C.F.R.
76.1000(l) (defining "terrestrial cable programming" as "video programming which is transmitted terrestrially or
by any other means other than satellite and which is primarily intended for direct receipt by cable operators for their
retransmission to cable subscribers, except that such term does not include satellite broadcast programming or
satellite cable programming
") (emphasis added).
78 Defendants contend that it would be "untenable" for the Commission (i) in determining whether MSG LP is a
proper defendant under a Section 628(b) claim, to classify MSG LP as a "satellite cable programming vendor" even
when it is acting as a distributor of terrestrial cable programming because it distributes other satellite programming
not at issue in the dispute; and (ii) in determining whether MSG LP is a "terrestrial cable programming vendor" for
purposes of the definition of that term in Section 76.1000(m), to rule that MSG LP is not a "satellite cable
programming vendor" when it acts as a distributor of terrestrial cable programming even though it also distributes
satellite programming not at issue in the dispute. See Defendants' Post-Discovery Reply Brief at 35 n.128. There is
no basis for Defendants' contention with respect to Section 76.1000(m), however, because we find that MSG LP is
both a "satellite cable programming vendor" and a "terrestrial cable programming vendor" under the applicable
definitions.
79 See 2010 Order, 25 FCC Rcd at 786-87, 57 ("We conclude that Section 628(b) allows complaints against the
entities listed in Section 628(b) based on the unfair acts of their affiliated programmers delivering programming by
terrestrial means, where the facts establish that the programmer is wholly owned by, controlled by, or under
common control with one or more of these entities.").
80 See Cablevision II, 2011 WL 2277217, at *19-*21.
81 See Defendants' Post-Discovery Answer to Supplement at 101 n.361; see also Verizon Post-Discovery Reply Brief
at 33.
82 See supra 14-15.
83 See Defendants' Post-Discovery Answer to Supplement at 118-119; see also 2010 Order, 25 FCC Rcd at 786-87,
57.
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any event, the record of this proceeding supports the Commission's conclusion on this issue. Defendants
assert that MSG LP "has entered into a mutually beneficial arrangement in which it receives value and
consideration in exchange for allowing Cablevision to continue to effectuate its product differentiation
strategy."85 Thus, Defendants contend, the Commission cannot presume that MSG LP's decision to
withhold programming from Verizon was designed to benefit Cablevision exclusively.86 While the record
reflects Defendants' position that Cablevision will benefit from this arrangement by differentiating its
video service and thereby providing it with a competitive advantage over Verizon,87 Defendants provide
no evidence of any "value and consideration" that MSG LP has received from this arrangement. In fact,
by foregoing licensing fees and advertising revenue by withholding MSG HD and MSG+ HD from
Verizon, MSG LP is acting counter to its economic interests in order to support Cablevision's product
differentiation strategy.88 Moreover, while Defendants assert that MSG LP receives "substantial
(Continued from previous page)


84 See Cablevision II, 2011 WL 2277217, at *20 ("But the Commission has determined, reasonably in our view, that
discriminatory practices by terrestrial programmers will often be intended in part to benefit a cable operator under
common ownership. . . . For example, if a cable operator has one DBS competitor and one wireline competitor but
considers the latter a greater threat to its dominant position, exclusive arrangements between an affiliated terrestrial
programmer and the DBS company that keep must-have programming from the wireline company will redound to
the cable operator's benefit.") (citations omitted).
85 Defendants' Post-Discovery Reply Brief at 38.
86 See Defendants' Post-Discovery Answer to Supplement at 119.
87 See Defendants' Answer at 4-5 ("MSG HD and MSG+ HD represented a way not just for Cablevision to
differentiate itself from then-existing video competitors like DBS; it also constituted an investment in the future that
would differentiate Cablevision from all video programming providers cable and satellite."), at 7 (stating that
Defendants are not prohibited from "employing a lawful pro-competitive strategy of product differentiation, simply
because it may result in making Verizon's video offering less attractive to a subset of its potential customer base"),
at 15 ( 7) (stating that Defendants declined to license MSG HD and MSG+ HD to Verizon in order to "continue to
utilize MSG HD and MSG+ HD as a product differentiator for Cablevision"), at 34 (stating that Defendants opted to
"use MSG HD and MSG+ HD as a means of differentiating themselves in the marketplace"), at 38 (stating that
Defendants "regard MSG HD and MSG+ HD as a worthwhile way to differentiate the Cablevision video product
offering from FiOS TV"); Defendants' Post-Discovery Answer to Supplement at 6 ("Verizon lacks a license to
distribute MSG HD and MSG+ HD as a result of a product differentiation strategy aimed at distinguishing
Cablevision's video service offerings in New York and New Jersey."), at 79 ("[T]he decision not to license MSG
HD and MSG+ HD to Verizon was undertaken in furtherance of a product differentiation strategy designed to
distinguish Cablevision's video offering from Verizon."); see also id. at 81 (stating that forced sharing would
require a firm to share its "competitive advantages"), at 83 (stating that its product differentiation strategy "may
make Verizon's video program offerings appear less attractive to some small segment of customers"); see also
Defendants' Post-Discovery Reply Brief
at 38-39.
88 See Defendants' Answer at 55 (stating that there is nothing "undue for a vertically-integrated cable company to
forego distribution revenue that may be available from licensing its programming to an unaffiliated competitor in
order for the distribution arm of the business to differentiate its product offering"), at 56 ("Firms routinely opt to
forego revenue that might otherwise be gained from licensing an input to non-affiliates in order to benefit another
arm of a shared enterprise."); Defendants' Post-Discovery Reply Brief at 38; see also Verizon Complaint at 57
("But for its affiliation with Cablevision, Madison Square Garden, L.P. would have every incentive to sell [] both
the standard-definition and HD formats of its regional sports programming to Verizon in order to maximize its
revenues. Selling all formats of this programming to Verizon would allow Madison Square Garden, L.P. to increase
its revenue and corresponding profits, either through increased license fees or increased HD viewership leading to
increased advertising sales or sponsorship opportunities, or both. If Defendants were to do so, however, it would
result in lost subscribers for Cablevision . . . ."); Verizon Reply at 18 ("[A]part from its relationship with
Cablevision, MSG would have a financial incentive to license both feeds of the subject programming to Verizon.");
Verizon Post-Discovery Opening Brief at 17-18 ("Even after the Madison Square Garden entities were spun off to
(continued....)
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promotional, marketing and other benefits" from Cablevision, they provide no support for this assertion.89
Thus, Defendants have offered no facts that would undermine the Commission's conclusion in the 2010
Order
, as applied here, that MSG LP's withholding of MSG HD and MSG+ HD from Verizon is designed
to benefit Cablevision and that Cablevision (in addition to MSG LP) is therefore an appropriate defendant
under Count I.90
b.

Defendants' Withholding of MSG HD and MSG+ HD from Verizon
Is an "Unfair Act"

18.
In Count I, Verizon alleges that the Defendants have engaged in the "unfair act" of
withholding MSG HD and MSG+ HD from Verizon while at the same time licensing these networks to
certain of Verizon's competitors in the New York and Buffalo DMAs.91 As discussed in further detail
below, we conclude that (i) the D.C. Circuit's decision to vacate the Commission's ruling that
withholding of terrestrially delivered, cable-affiliated programming is categorically "unfair" does not
prevent the Commission from addressing on a case-by-case basis whether withholding is "unfair"; (ii)
Congress and the Commission have provided guidance on how to interpret the term "unfair act"; thus, the
issue of whether Defendants' withholding here is an "unfair act" does not present a new or novel issue
that would preclude Bureau action on delegated authority; and (iii) applying this precedent and guidance
to the facts presented, Verizon has satisfied its burden of demonstrating that Defendants' withholding in
this case is an "unfair act."92
(Continued from previous page)


become an independent, publicly-traded company, they still refuse to deal with Verizon, foregoing revenues (and
obligations to Madison Square Garden, L.P.'s independent shareholders) to help Cablevision fend off competition
from Verizon."); Verizon Post-Discovery Reply Brief at 33 and Declaration of Coleman Bazelon (Oct. 22, 2010), at
10 ("Bazelon Decl.").
89 See Defendants' Answer at 56.
90 See 2010 Order, 25 FCC Rcd at 786-87, 57. As noted above, MSG LP provides both satellite-delivered
programming and terrestrially delivered programming. Thus, even if Cablevision were not a proper defendant to
Count I, this would not undermine our finding that MSG LP is a proper defendant nor would it prevent us from
issuing a remedy. See supra 13.
91 See Verizon Complaint at 41-45 (referring to Defendants' withholding of MSG HD and MSG+ HD from
Verizon); Verizon Supplement at 1-4 (referring to Defendants' refusal to provide Verizon with access to MSG HD
and MSG+ HD); see also Verizon Complaint at 1, 6, 31; Denson/Grad Decl. at 20 (discussing other MVPDs
that have access to MSG HD and MSG+ HD); Verizon Supplement at 3 (same). Defendants admit that "Verizon has
not been offered access to MSG HD and MSG+ HD on any terms." See Parties' Aug. 19th Letter at 3. Despite
Defendants' claim, there was no requirement for Verizon to cite a specific Commission rule in its Supplement. See
Defendants' Post-Discovery Answer to Supplement
at 91.
92 We note that, in addition to letters filed by the Parties, Commission staff held a joint meeting on June 27, 2011
with the Parties to discuss the impact of the D.C. Circuit's decision on the complaint. See Letter from Michael E.
Glover, Senior Vice President and Deputy General Counsel, Verizon, to William T. Lake, Chief, Media Bureau,
FCC, File No. CSR-8185-P (June 15, 2011) ("Verizon June 15th Letter"); Letter from Howard J. Symons, Counsel
for Defendants, to William T. Lake, Chief, Media Bureau, FCC, File No. CSR-8185-P et al. (June 22, 2011)
("Defendants' June 22nd Letter"); Letter from Michael E. Glover, Senior Vice President and Deputy General
Counsel, Verizon, to William T. Lake, Chief, Media Bureau, FCC, File No. CSR-8185-P (June 24, 2011) ("Verizon
June 24th Letter
"); Letter from Howard J. Symons, Counsel for Defendants, to Marlene H. Dortch, Secretary, FCC,
File No. CSR-8185-P et al. (June 29, 2011) ("Defendants' June 29th Letter"); Letter from William H. Johnson,
Assistant General Counsel, Verizon, to Marlene H. Dortch, Secretary, FCC, File No. CSR-8185-P et al. (June 29,
2011) ("Verizon June 29th Letter").
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(i)

The D.C. Circuit's Ruling in Cablevision II Affirms the
Commission's Authority to Address Whether Withholding Is
an "Unfair Act" on a Case-by-Case Basis

19.
In the 2010 Order, the Commission defined three acts involving terrestrially delivered,
cable-affiliated programming as categorically "unfair" under Section 628(b): exclusive contracts,
discrimination, and undue or improper influence.93 The Commission defined these three acts as
categorically "unfair" because Congress had made a conclusive legislative judgment in Section 628(c)(2)
that these same acts are categorically "unfair" with respect to satellite-delivered, cable-affiliated
programming.94 Moreover, the Commission found that these acts involving terrestrially delivered, cable-
affiliated programming like comparable acts involving satellite-delivered, cable-affiliated programming
have the potential to impede entry into the video distribution market and to hinder existing competition
in the market.95 The D.C. Circuit disagreed, holding that the Commission cannot assume that
congressional judgments regarding satellite programming necessarily apply to terrestrial programming.96
Moreover, the D.C. Circuit explained that the Commission in deciding to label certain conduct as "unfair"
simply because it might negatively affect competition failed to consider whether that conduct is "unfair"
despite it being procompetitive in some cases.97 The D.C. Circuit stated:
[W]e take no position on the ultimate issue of exactly how the Commission should define
the inherently ambiguous statutory term "unfair." See Chevron, 467 U.S. at 84243. But if
the Commission believes that conduct involving the withholding of terrestrial programming
should be treated as categorically unfair, as opposed to assessing fairness on a case-by-
case basi
s or perhaps adopting a public interest exception mirroring the one for satellite
programming, see 47 U.S.C. 628(c)(2)(D), (c)(4), then it must grapple with whether its
definition of unfairness would apply to conduct that appears procompetitive and, if so,
whether that result would comport with section 628.98
The D.C. Circuit proceeded to "vacate that portion of the Commission's order treating certain acts of
terrestrially delivered programming withholding as categorically unfair and remand to the Commission
for further proceedings consistent with this opinion."99
20.
We find the court's language to be clear that the Commission may address on a case-by-
case basis whether conduct involving terrestrially delivered, cable-affiliated programming is "unfair."100


93 See 47 C.F.R. 76.1001(b).
94 See 2010 Order, 25 FCC Rcd at 778-79, 48; see also 47 U.S.C. 548(c)(2).
95 See 2010 Order, 25 FCC Rcd at 778-79, 48.
96 See Cablevision II, 2011 WL 2277217, at *21 (stating that the Commission "failed to justify its assumption that
just because Congress treated certain acts involving satellite programming as unfair, the same acts are necessarily
unfair in the context of terrestrial programming").
97 See id. at *23.
98 See id. at *24 (emphasis added).
99 See id.
100 Defendants speculate that the D.C. Circuit expected that the Commission would first conduct a rulemaking on
remand and then would conduct any case-by-case assessments after the remand proceeding is completed. See
Defendants' June 22nd Letter
at 5; Defendants' June 29th Letter at 5-6. We reject this view because there is no
discussion in the court's opinion as to when a remand proceeding must be conducted and whether it must precede
any case-by-case assessments. See Verizon June 24th Letter at 2-3.
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While Defendants do not dispute this point,101 they argue that the Commission must first conduct a notice-
and-comment rulemaking before it can adopt a case-by-case approach.102 According to Defendants, when
a court vacates an agency's order or rule, the effect is to return to the rule that existed before the vacated
rule took effect.103 Defendants argue that, prior to the 2010 Order, the Commission had reached a
definitive interpretation of its rules that withholding of terrestrially delivered programming can never be
"unfair."104 Citing D.C. Circuit precedent, Defendants argue that the Commission can change this
substantive interpretation of its rule only after a notice-and-comment rulemaking.105 We disagree. An
agency may, through adjudication, interpret an ambiguous term in its governing statute or its
regulations.106 While Defendants rely on D.C. Circuit precedent to claim that the Commission must
conduct a notice-and-comment rulemaking before the Commission can change its substantive
interpretation of the term "unfair," the pre-2010 Order decisions they cite do not purport to interpret the
term "unfair" in any Commission "rule." Rather, those decisions address the term "unfair" in Section
628(b) of the Act.107 As the D.C. Circuit has explained, an agency does not have to engage in notice-and-


101 See Defendants' June 22nd Letter at 5 ("the court did not rule out the assessment of `unfairness' on `a case-by-
case basis'").
102 See id. at 2-5; Defendants' June 29th Letter at 2-9.
103 See Defendants' June 22nd Letter at 2; Defendants' June 29th Letter at 2.
104 See Defendants' June 22nd Letter at 2; Defendants' June 29th Letter at 3. Defendants cite the following
Commission-level cases in support of their position. See DirecTV, Inc. v. Comcast Corp., 13 FCC Rcd 21822,
21838, 32 (CSB 1998) ("We are not persuaded that the facts alleged are sufficient to constitute a Section 628(b)
violation. . . . [W]e decline to find that, standing alone, Comcast's decision to deliver Comcast SportsNet
terrestrially and to deny that programming to DirecTV is `unfair.'"), aff'd, 15 FCC Rcd 22802, 22808 14 (2000)
(noting that the Bureau declined to find that "standing alone, [Comcast's] decision to deliver Comcast SportsNet
terrestrially and to deny that programming to [Complainants] is `unfair'" and stating that "[c]omplainants have
submitted nothing to cause us to question the Bureau's reasoning on this issue"); RCN Telecom Services of New
York, Inc. v. Cablevision Systems, Inc. et al
., 14 FCC Rcd 17093, 17105-06, 25 (CSB 1999) ("We are not
persuaded that the facts alleged are sufficient to establish a Section 628(b) violation. . . . [W]e decline to find that,
standing alone, Defendants' decision to deliver the overflow programming terrestrially via MetroChannels and to
deny that programming to Complainants is `unfair' under Section 628(b)."), aff'd, 16 FCC Rcd 12048, 12053, 15
(2001) (stating that "no basis exists to warrant reversal" of the Bureau's decision).
105 See Defendants' June 22nd Letter at 2-3; Defendants' June 29th Letter at 2-3 (citing Paralyzed Veterans v. D.C.
Arena L.P
., 117 F.3d 579, 586 (D.C. Cir. 1997); Alaska Professional Hunters Ass'n, Inc. v. FAA, 177 F.3d 1030,
1033-34 (D.C. Cir. 1999)).
106 See BP West Coast Products, LLC v. FERC, 374 F.3d 1263, 1272 (D.C. Cir. 2004) ("When Congress authorizes
an agency to adjudicate complaints arising under a statute, the agency's interpretations of that statute announced in
the adjudications are generally entitled to Chevron deference."); St. Luke's Hosp. v. Sebelius, 611 F.3d 900, 907
(D.C. Cir. 2010) ("Within the context of an agency adjudication, the Secretary generally may lawfully interpret a
regulation notwithstanding its retroactive effect.").
107 See DIRECTV, 15 FCC Rcd at 22084, 4 and 22807, 13; RCN, 16 FCC Rcd at 12049-50, 4 and 12053, 15.
At the time of these pre-2010 Order decisions, the Commission's rule (47 C.F.R. 76.1001) mirrored the
prohibition against "unfair acts" in Section 628(b) and did not give any additional content to the statutory term
"unfair." See Gonzales v. Oregon, 546 U.S. 243, 257 (2006) (stating that "the existence of a parroting regulation
does not change the fact that the question here is not the meaning of the regulation but the meaning of the statute"
and holding that heightened deference not due to Attorney General's interpretation of its regulation that merely
paraphrases statutory text).
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comment rulemaking to alter its interpretation of a statutory term.108 Accordingly, any alleged change in
the interpretation of the meaning of "unfair" is not an amendment to a "rule" requiring notice-and-
comment rulemaking. In any event, prior to the 2010 Order, the Commission never adopted a definitive
interpretation of its rules holding that conduct involving terrestrially delivered, cable-affiliated
programming, including withholding, is always "fair" or never "unfair." In fact, the Commission held
that "unfair acts" involving terrestrially delivered, cable-affiliated programming can be cognizable under
Section 628(b).109 The pre-2010 Order cases cited by Defendants merely establish that withholding of
terrestrially delivered, cable-affiliated programming is not unfair "standing alone" or on a per se basis.
The D.C. Circuit has agreed with this interpretation of the Commission's previous decisions.110 The
Commission never stated or implied that it could not rule in an individual case that withholding of
terrestrially delivered, cable-affiliated programming is "unfair" based on the facts presented. Thus, the
status quo ante with respect to "unfair acts" involving terrestrially delivered, cable-affiliated
programming does not preclude assessing such conduct on a case-by-case basis.111
21.
Defendants also argue that a rulemaking is envisioned by Section 628(c)(1) and, in any
event, is the appropriate vehicle to define whether conduct is "unfair" because this issue will impact more
than the parties to this complaint.112 We disagree. First, an agency is free to interpret statutes either
through rulemaking or adjudication.113 Second, Section 628(d) specifically authorizes case-by-case
adjudication as one option at the Commission's disposal for enforcing Section 628(b).114 Third, as
discussed below, our determination as to whether Defendants have engaged in an "unfair act" is based on


108 See Alaska Professional Hunters, 177 F.3d at 1034 ("an agency has less leeway in its choice of the method of
changing its interpretation of its regulations than in altering its construction of a statute"); Paralyzed Veterans, 117
F.3d at 586 ("The government is certainly correct in suggesting that the doctrine of deference to an agency's
interpretation of its own regulation and Chevron deference are analogous. But Congress . . . has said more,
specifically on the subject of regulations. Under the APA, agencies are obliged to engage in notice and comment
before formulating regulations, which applies as well to `repeals' or `amendments.'").
109 See 2010 Order, 25 FCC Rcd at 759-60, 22 ("The Commission itself has specifically held that unfair acts
involving terrestrially delivered, cable-affiliated programming can be cognizable under Section 628(b)."). While the
cases cited by the Commission pertained to moving programming from satellite to terrestrial delivery, the
Commission never stated or implied that this is the only conduct that might be "unfair" under Section 628(b).
110 See Cablevision II, 2011 WL 2277217, at *12 (noting that the "Commission pointed out that it had recognized
that complaints concerning terrestrial withholding might, under some circumstances, be cognizable under" Section
628(b) and stating further that the pre-2010 Order cases "addressed only the permissibility of an across-the-board
ban on terrestrial withholding").
111 We note that in the cases cited by Defendants, the Commission did not find any anticompetitive effect resulting
from the conduct at issue, thus there was no basis to deem the conduct at issue in those cases "unfair." See
DIRECTV
, 15 FCC Rcd at 22807, 13 (finding no basis to conclude that the conduct at issue precluded MVPDs
from providing satellite cable programming); RCN, 16 FCC Rcd at 12053, 15 (same). Conversely, as discussed
below, we find anticompetitive effects from the withholding at issue in this case. See infra Section III.A.2.c. We
proceed to weigh these anticompetitive effects against the procompetitive benefits of Defendants' withholding and
conclude that, on balance, the conduct at issue here is "unfair." See infra 24-41.
112 See Defendants' June 22nd Letter at 3-4; Defendants' June 29th Letter at 2, 5-7.
113 See SEC v. Chenery Corp., 332 U.S. 194, 202-03 (1947).
114 See 47 U.S.C. 548(d).
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applying well-known precedent and guidelines established by Congress and the Commission to the
specific facts of this case.115
22.
Defendants also contend that it would be unfair to the Parties if the Commission were to
proceed to address whether Defendants have engaged in an "unfair act" without first allowing
supplemental record development on the issue, including discovery and briefing.116 We find this
argument unavailing. Verizon's complaint was filed, and the pleading cycle closed, several months
before the Commission had established certain acts involving terrestrially delivered, cable-affiliated
programming as categorically "unfair" in the 2010 Order. As discussed below, Verizon put forth
evidence in its complaint as to whether Defendants' withholding amounted to an "unfair act," and
Defendants filed a response to those claims.117 Moreover, as discussed in further detail below, we apply
well-known precedent and guidelines to assess whether Defendants' withholding here is an "unfair act,"
including a test put forth by Defendants.118 All Parties have had ample opportunity, over the course of
more than two years, to address whether the conduct here is "unfair" under this precedent and guidelines.
(ii)

The Bureau Has Delegated Authority to Consider Whether
Withholding Is an "Unfair Act"

23.
Despite Defendants' claims to the contrary, the issue of whether Defendants' withholding
of MSG HD and MSG+ HD from Verizon is an "unfair act" is not a new or novel issue that would require
a Commission, rather than Bureau, decision.119 The following precedent and guidelines established by
Congress and the Commission require the Bureau to weigh the anticompetitive harms of an act against the
procompetitive benefits to determine whether or not, on balance, the act is "unfair." First, Congress has


115 See infra 24-41.
116 See Defendants' June 22nd Letter at 6; Defendants' June 29th Letter at 6-8.
117 See infra 25-26. As discussed above, Verizon filed a request for discovery in August 2009, to which
Defendants objected in September 2009, several months before the Commission had established certain acts
involving terrestrially delivered, cable-affiliated programming as categorically "unfair" in the 2010 Order. See
supra
n.48. Despite the need at the time to resolve the issue of whether Defendants' conduct was "unfair,"
Defendants took the position that discovery was "neither necessary nor proper"; that the Commission had "before it
all of the relevant evidence that it needs to decide this matter"; and that, even if the Commission rejected
Defendants' legal arguments, "the only potentially material fact would be the extent to which the lack of access to
MSG HD and MSG+ HD has caused competitive harm by `hinder[ing] significantly' or `preventing' Verizon from
providing satellite cable programming." Defendants' Sept. 14th Discovery Objection at 2-3, 10-11. Moreover, even
after release of the 2010 Order but before the D.C. Circuit's decision in Cablevision II, Defendants argued that
Verizon had not alleged one of the three acts deemed categorically "unfair" in the 2010 Order and that Verizon was
thus required to establish that Defendants had engaged in an "unfair act." See Defendants' Post-Discovery Answer
to Supplement
at 90 ("[Verizon's] Supplemental Complaint fails to allege and/or establish that it has been subject to
an unfair practice cognizable under the new rules adopted by the Commission in the [2010 Order]. The [2010
Order
] makes clear that, in addition to having the burden of proving competitive harm . . ., a program access
complainant also has the burden of proving that the Defendant has engaged in an `unfair practice' proscribed by the
Commission. While Defendants have acknowledged throughout this proceeding that Verizon has been declined a
license for MSG HD and MSG+ HD in furtherance of a product differentiation strategy, that circumstance does not,
in and of itself, constitute an unfair practice or relieve Verizon of its burden of proof regarding that element of its
claim under the new rules."). Thus, even after the release of the 2010 Order but before the D.C. Circuit's decision
in Cablevision II, Defendants' position was that Verizon had the burden to establish an "unfair act." Defendants had
every opportunity to pursue this issue during discovery and in their post-discovery briefs.
118 See infra 24-41.
119 See Defendants' June 22nd Letter at 4; Defendants' June 29th Letter at 9; see also 47 C.F.R. 0.283(c).
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set forth five factors in Section 628(c)(4) of the Act to assess when considering whether an exclusive
programming arrangement serves the "public interest." 120 In applying these factors, the Commission is
required to weigh the harms that an exclusive arrangement may cause in the video distribution market
against the benefits that may result in the video programming market.121 While Congress established
these factors for exclusive contracts involving satellite-delivered, cable-affiliated programming, we find,
consistent with Commission precedent, that they are also useful in assessing the potentially
anticompetitive and procompetitive aspects of withholding of terrestrially delivered, cable-affiliated
programming.122 Second, in the MDU Order,123 the Commission weighed the anticompetitive harms of
exclusive contracts between cable operators and owners of multiple dwelling units ("MDU") against the
procompetitive benefits of these contracts before concluding that these contracts are categorically
"unfair."124 Unlike the Section 628(c)(4) factors, which require the Commission to analyze the effects of
an exclusive arrangement in the video distribution and video programming markets, the MDU Order


120 See 47 U.S.C. 548(c)(4). This provision provides that, in determining whether an exclusive contract for
satellite-delivered, cable-affiliated programming in an area served by a cable operator is in the public interest, the
Commission shall consider "each of the following factors with respect to the effect of such contract on the
distribution of video programming in areas that are served by a cable operator: (A) the effect of such exclusive
contract on the development of competition in local and national multichannel video programming distribution
markets; (B) the effect of such exclusive contract on competition from multichannel video programming distribution
technologies other than cable; (C) the effect of such exclusive contract on the attraction of capital investment in the
production and distribution of new satellite cable programming; (D) the effect of such exclusive contract on
diversity of programming in the multichannel video programming distribution market; and (E) the duration of the
exclusive contract." 47 U.S.C. 548(c)(4); see also 47 C.F.R. 76.1002(c)(4).
121 See Time Warner Cable, Memorandum Opinion and Order, 9 FCC Rcd 3221, 3225, 25 (1994) ("Court TV
Exclusivity Petition
").
122 See Cablevision II, 2011 WL 2277217, at *22, *24 (explaining that, with the factors in Section 628(c)(4),
Congress "sought to balance the need for regulatory intervention in markets possessing significant barriers to
competition with its recognition that vertical integration and exclusive dealing arrangements are not always
pernicious and, depending on market conditions, may actually be procompetitive"); see also id. at *22 (noting that
the framework Congress adopted for exclusive arrangements involving satellite-delivered, cable-affiliated
programming "accords with the generally accepted view in antitrust and other areas that exclusive contracts may
have both procompetitive and anticompetitive purposes and effects") (citations omitted). For example, the
Commission previously found that exclusive arrangements play an important role in the growth and viability of local
cable news networks. See New England Cable News Channel, Memorandum Opinion and Order, 9 FCC Rcd 3231,
3236, 37-39 and 3237, 43 (1994) ("NECN Exclusivity Petition"); see also S. Rep. No. 102-92 (1991), at 28,
reprinted in 1992 U.S.C.C.A.N. 1133, 1161 ("The Committee believes that exclusivity can be a legitimate business
strategy where there is effective competition."); Implementation of Sections 12 and 19 of the Cable Television
Consumer Protection and Competition Act of 1992: Development of Competition and Diversity in Video
Programming Distribution and Carriage
, First Report and Order, 8 FCC Rcd 3359, 3385, 65 (1993) ("1993
Order
") ("Particularly with respect to new programming, we recognize that there may well be circumstances in
which exclusivity could be shown to meet the public interest test, especially when the launch of local origination
programming is involved that may rely heavily on exclusivity to generate financial support due to its more limited
appeal to a specific regional market."); see id. at 3385, 65 n.83 ("[I]t is possible that local or regional news
channels could be economically infeasible absent an exclusivity agreement.").
123 See Exclusive Service Contracts for Provision of Video Services in Multiple Dwelling Units and Other Real
Estate Developments,
Report and Order and Further Notice of Proposed Rulemaking, 22 FCC Rcd 20235 (2007)
("MDU Order"), aff'd sub nom. Nat'l Cable & Telecomm. Ass'n v. FCC, 567 F.3d 659 (D.C. Cir. 2009).
124 See id. at 20243, 16 and 20248-49, 26 ("We further find that although exclusivity clauses may in certain cases
be beneficial, at least in the short term, to consumers, the harms of exclusivity clauses outweigh their benefits.").
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requires a more general inquiry into the potential anticompetitive harms and procompetitive benefits of an
allegedly "unfair act."125 Third, the Commission's program access rules applicable to satellite-delivered,
cable-affiliated programming provide that withholding is permissible provided there is a "legitimate
business justification" for the conduct.126 If a defendant can demonstrate a "legitimate business
justification" for withholding content from a competitor (for example, due to a concern with the
distributor's history of defaulting on other programming contracts), then it is unlikely that the conduct can
be considered "unfair" under Section 628(b).
(iii)

Based on Established Precedent and Guidelines, Defendants'
Withholding Is an "Unfair Act"

24.
Applying the precedent and guidelines set forth above, as well as an additional test
advocated by Defendants, we find that Defendants' withholding of MSG HD and MSG+ HD from
Verizon is an "unfair act." As an initial matter, we note that Verizon as the complainant has the burden to
establish that Defendants' conduct is an "unfair act." Below, we begin by examining Defendants'
procompetitive justifications for their withholding of MSG HD and MSG+ HD from Verizon and then
apply the precedent and guidelines set forth above.
(a)

Defendants' Procompetitive Justifications for
Withholding

25.
Verizon has provided evidence that Defendants' decision to withhold MSG HD and
MSG+ HD from Verizon was intended to provide Cablevision with a competitive advantage over Verizon
in the video distribution market. Verizon provides various statements from Cablevision executives
referring to the significance of MSG HD and MSG+ HD as a competitive differentiator. For example,
Cablevision's Chief Operating Officer ("COO") stated that the refusal to sell MSG HD and MSG+ HD to
Verizon was one factor that would not only impede Verizon from obtaining new subscribers, but would
also cause Verizon to lose subscribers it had already gained.127 In response to questions regarding how


125 In the MDU Order, the Commission acknowledged the procompetitive aspects of granting cable operators
exclusive access to MDUs, such as helping to obtain financing to wire an entire building, attracting investment in
marginally attractive MDUs, and attracting an MVPD into a new real estate development. See id. at 20247-48,
24-25. The anticompetitive harms included denying residents a choice in MVPD service, barring new entry and
competition for both video services and bundled services, and discouraging the deployment of broadband facilities.
See id. at 20244-47, 17-23.
126 Withholding of satellite-delivered, cable-affiliated programming, also known as a "refusal to sell," is a form of
non-price discrimination under the program access rules. See 1993 Order, 8 FCC Rcd at 3364, 14 and 3412-13,
116. Such conduct is permissible if there is a legitimate business reason for the conduct. See id. at 3412-13, 116
("We believe that the Commission should distinguish `unreasonable' refusals to sell from certain legitimate reasons
that could prevent a contract between a vendor and a particular distributor, including (i) the possibility of parties
reaching an impasse on particular terms, (ii) the distributor's history of defaulting on other programming contracts,
or (iii) the vendor's preference not to sell a program package in a particular area for reasons unrelated to an existing
exclusive arrangement or a specific distributor."); Bell Atlantic Video Servs. Co. v. Rainbow Programming Holdings
Inc. and Cablevision Sys. Corp.
, Memorandum Opinion and Order, 12 FCC Rcd 9892, 9899, 18 (CSB 1997) ("We
find that BVS has met its burden of establishing the elements of a non-price discrimination claim [and] that
Defendants have not met their burden of establishing that Rainbow has legitimate business reasons for refusing to
sell its programming to BVS . . . .").
127 See Verizon Complaint at 30 (quoting Cablevision's COO as stating that one of the "factors he believed would
slow or reverse any subscriber flow to FiOS" was that "FiOS' video product lacks key components, specifically the
HD formats of MSG and Fox Sports NY [now MSG Plus] . . . .") (citing Craig Moffett et al., Bernstein Research,
Cablevision (CVC): Management Commentary Supports Bullish View . . . Capital Intensity Falls, and Margins
(continued....)
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Cablevision is competing with FiOS, Cablevision's COO emphasized that Cablevision's ability to provide
MSG HD and MSG+ HD provided a competitive advantage over Verizon.128 An internal Cablevision
memo specifically listed Verizon's lack of MSG HD and MSG+ HD as one of the factors that
distinguishes Cablevision from Verizon.129 In addition, Verizon provides evidence that Cablevision has
emphasized in advertisements in various media both its ability to offer MSG HD and MSG+ HD and
Verizon's inability to offer these same networks, thus demonstrating the importance of these networks.130
For example, Verizon provides numerous examples of Cablevision131 advertisements stating that (i) "iO
TV gives you every game of all 9 NY sports teams in spectacular High Definition.";132 (ii) "No one has
more NY sports in HD than iO TV.";133 (iii) "Get over 100 HD channels on iO TV. Including all these
FiOS doesn't have." (listing MSG HD and MSG+ HD);134 (iv) "FiOS doesn't have . . . every HD game of
all nine New York sports teams.";135 and (v) [REDACTED
].136
26.
Defendants do not dispute that their withholding of MSG HD and MSG+ HD from
Verizon is intended to provide Cablevision with a way to differentiate its service from Verizon and
(Continued from previous page)


Rise, at 4 (April 5, 2007)); see also Verizon Post-Discovery Opening Brief at 7. Defendants do not deny that
Cablevision's COO made this statement.
128 See Verizon Complaint at 3, 30 (quoting Cablevision's COO in response to a question regarding how
Cablevision is competing with Verizon FiOS TV as stating that "four of the nine professional sports teams in New
York. If you want to see them in HD, you have to get them from us.") (citing Statement of Tom Rutledge, COO,
Cablevision Systems Corp., Thomson StreetEvents, Cablevision Systems Corp. at UBS Global Media and
Communications Conference
, at 9 (Dec. 8, 2008)); see also Verizon Post-Discovery Opening Brief at 6-7.
Defendants do not deny that Cablevision's COO made this statement.
129 See Verizon Complaint, Exhibit 5 (Memo from John Bickham, President Cable and Communications,
Cablevision, to All Cable & Communications Employees (May 22, 2008) (attaching The Top 10 Facts Every
Cablevision Employee Should Know About Verizon and FiOS
)); Verizon Post-Discovery Opening Brief at 12 and
Appendix C (DEF000043) ([REDACTED
]).
130 See Verizon Complaint at 30 and Exhibit 4; Verizon Reply at 21; Verizon Post-Discovery Opening Brief at 8-9
and Appendices A and C; Verizon Post-Discovery Reply Brief at 9-10; Bazelon Decl. at 11; see also Verizon Post-
Discovery Opening Brief
at 12 and Appendix C (DEF000011, DEF00018) ([REDACTED
]).
131 Cablevision markets its video service under the "iO TV" name.
132 See, e.g., Verizon Complaint at Exhibit 4; Verizon Post-Discovery Opening Brief, Appendix A (VZ-MSG-
0000006); see also Verizon Complaint at 30 (noting that Cablevision's website (visited in February 2009)
emphasizes that Cablevision has "all the HD games of all 9 New York sports teams").
133 See, e.g., Verizon Complaint at Exhibit 4; Verizon Post-Discovery Opening Brief, Appendix A (VZ-MSG-
0000001); see also Verizon Complaint at 30 (noting that Cablevision's website (visited in February 2009)
emphasizes that Cablevision has the "most hi-def NY sports channels").
134 See Verizon Post-Discovery Opening Brief, Appendix A (VZ-MSG-0000021).
135 See id. (VZ-MSG-0000081).
136 See id. at Appendix C (DEF000022).
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thereby gain a competitive advantage.137 Defendants contend, however, that product differentiation
strategies are legitimate business decisions that are typically regarded as procompetitive.138 Defendants
claim two distinct consumer welfare benefits resulting from their withholding strategy: (i) more vigorous
competition in the video distribution market;139 and (ii) increased incentives of both Defendants and
Verizon to invest in their own programming.140
(b)

Section 628(c)(4) Factors

27.
In this section, we apply the five factors set forth in Section 628(c)(4) to Defendants'
withholding of MSG HD and MSG+ HD from Verizon.141 We conclude that the anticompetitive harms of
Defendants' withholding in the video distribution market outweigh any procompetitive benefits in the
video programming market.
(i)

Development of Competition in Local and
National MVPD Markets

28.
We find that the first factor under Section 628(c)(4) the effect of the exclusive
arrangement on "the development of competition in local and national [MVPD] markets" weighs
against Defendants' withholding of MSG HD and MSG+ HD from Verizon.142 In previous cases
applying Section 628(c)(4), the Commission has found that an exclusive arrangement harms competition
when the network withheld is "popular" and "established" and when other MVPDs have expressed an
interest in carrying the network.143 The record evidence here reflects that MSG HD and MSG+ HD are


137 See supra n.87.
138 See Defendants' Answer at 36 (stating that their decision to withhold MSG HD and MSG+ HD from Verizon
"promotes consumer welfare by enhancing output and intensifying competition among both content creators and
content distributors"); Bulow/Owen Study at 3 (stating that "the discretion to choose one's distribution channels, up
to and including the decision to use a single channel exclusively, usually is pro-competitive because it permits
sellers to differentiate their products to make them more attractive to consumers"); see also Defendants' Answer at
7-8, 20 ( 14), 34-38, 45 n.140, 56; Bulow/Owen Study at 1-9; Defendants' Feb. 25th Letter at 7, 9; Defendants'
Post-Discovery Answer to Supplement
at 6-7, 79-83, 99; Defendants' Post-Discovery Reply Brief at 5, 39.
139 See Bulow/Owen Study at 1; see also id. at 5 ("exclusivity . . . permits MVPDs to compete more vigorously by
differentiating their products" and that "markets with differentiated products are more likely to exhibit vigorous
price competition than markets with homogeneous products"), at 10 ("Product differentiation is competition in
`product space,' and it is no less important to promoting consumer welfare than price competition."); see also
Defendants' Answer
at 34-38; Defendants' Post-Discovery Answer to Supplement at 82-83; Defendants' Post-
Discovery Reply Brief
at 5.
140 See Bulow/Owen Study at 1; see also id. at 5 (stating that exclusivity can "increase both the quantity and quality
of video programming (and thus, presumably, the diversity of program content) by increasing incentives to invest in
programming"), 7-9, 11-12; Defendants' Post-Discovery Answer to Supplement at 79 n.287 ("[I]f a cable operator is
unable . . . to utilize programming it develops as a product differentiator, the incentive to invest in and develop new
programming diminishes, and program diversity will suffer."); see also Defendants' Answer at 34-38; Defendants'
Post-Discovery Answer to Supplement
at 79-82; Defendants' Post-Discovery Reply Brief at 39.
141 See 47 U.S.C. 548(c)(4); 47 C.F.R. 76.1002(c)(4).
142 See 47 U.S.C. 548(c)(4)(A); 47 C.F.R. 76.1002(c)(4)(i).
143 See Court TV Exclusivity Petition, 9 FCC Rcd at 3227, 37 (finding that Time Warner Cable's exclusive
arrangement with the "popular" Court TV network would limit the development of competition in the video
distribution market in New York City); NECN Exclusivity Petition, 9 FCC Rcd at 3235, 30-31 (finding that New
England Cable News ("NECN") channel's exclusive arrangement with cable operators would not have an effect on
competition in local or national video distribution markets that could not be offset by public interest benefits
(continued....)
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popular and established networks that virtually every MVPD in the New York and Buffalo DMAs is
either already carrying or has requested to carry.144 Moreover, the Commission has found that
competition may be harmed when an exclusive arrangement denies only one competitor in the market
from access to the network.145 As discussed below, we conclude that the withholding at issue here
"significantly hinders" at least one competitor (Verizon) from competing in the New York and Buffalo
DMAs which in turn harms consumers by limiting video competition in those markets.146 The impact on
competition is particularly acute here in light of the Commission's recognition that wireline entrants such
as Verizon pose a greater competitive threat than DBS to cable operators and data indicating that DBS
operators do not constrain the price of cable service to the extent that wireline MVPDs do.147
Accordingly, we find that this factor weighs against Defendants' withholding.
29.
To be sure, Defendants argue that their withholding of MSG HD and MSG+ HD from
Verizon will promote, rather than harm, competition by allowing Cablevision to differentiate its service
from Verizon and by encouraging Verizon to develop a competitive response, which might include
investing in its own programming.148 We do not dispute that product differentiation strategies may be
(Continued from previous page)


considering that no MVPD had requested carriage of NECN); see also NewsChannel, Memorandum Opinion and
Order, 10 FCC Rcd 691, 694, 21 (CSB 1994) (finding that NewsChannel's exclusive arrangement with cable
operators would not have an effect on competition in the video distribution market considering that no competitor
had expressed an interest in carry the channel and that NewsChannel was a new service with unknown demand that
"cannot be considered popular programming") ("NewsChannel Exclusivity Petition"); Cablevision Indus. Corp.,
Memorandum Opinion and Order, 10 FCC Rcd 9786, 9789, 19 (CSB 1995) (finding that the Sci-Fi Channel's
exclusive arrangement with cable operators would limit the development of competition in local video distribution
markets considering that the Sci-Fi Channel was a "popular" and "established" service with 16.3 million subscribers
nationwide) ("Sci-Fi Exclusivity Petition"); Outdoor Life Network and Speedvision Network, Memorandum Opinion
and Order, 13 FCC Rcd 12226, 12233-35, 14-17 (CSB 1998) (finding that the exclusive arrangements proposed
by Outdoor Life Network and Speedvision Network would limit the development of competition in local and
national video distribution markets considering that each network had 13.5-14.5 million subscribers nationwide and
that MVPDs had expressed an interest in carrying the networks) ("Outdoor Life/Speedvision Exclusivity Petition").
144 See supra 7 (noting other MVPDs that carry MSG HD and MSG+ HD); infra 47-48, 62 (noting popularity of
RSNs, including HD RSNs such as MSG HD and MSG+ HD).
145 See Court TV Exclusivity Petition, 9 FCC Rcd at 3227, 37 and 3228, 39 (finding that Time Warner Cable's
exclusive arrangement with Court TV would harm competition in the New York City video distribution market,
despite the fact that DBS providers could carry the network, because one SMATV operator would be denied access).
146 See infra Section III.A.2.c; see also infra nn.295, 304 (noting that Defendants' claim of robust competition is
belied by the fact that incumbent cable market share in the New York DMA far exceeds the national average and
that Cablevision has raised its rates in excess of inflation despite the number of competitors in the market).
147 See 2010 Order, 25 FCC Rcd at 765, 29; Implementation of Section 3 of the Cable Television Consumer
Protection and Competition Act of 1992, Statistical Report on Average Rates for Basic Service, Cable Programming
Service, and Equipment
, MM Docket No. 92-266, Report on Cable Industry Prices, 24 FCC Rcd 259, 261, 3 (MB
2009); see also Implementation of Section 3 of the Cable Television Consumer Protection and Competition Act of
1992, Statistical Report on Average Rates for Basic Service, Cable Programming Service, and Equipment
, MM
Docket No. 92-266, Report on Cable Industry Prices, 26 FCC Rcd 1769, 1785, 34 (MB 2011). Indeed, Defendants
concede that they license MSG HD and MSG+ HD to DBS operators because, unlike Verizon, DBS operators do not
offer voice or broadband service. See Defendants' Answer at 60-61; Bulow/Owen Study at 12; Defendants' Post-
Discovery Answer to Supplement
at 82; Defendants' Post-Discovery Reply Brief at 40; see also Verizon Reply at 19.
148 See Bulow/Owen Study at 1-9; see also supra 26.
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procompetitive in many instances,149 but the key distinction here is that the product differentiation
strategy involves non-replicable and popular RSN programming.150 As the Commission has explained,
"when programming is non-replicable and valuable to consumers, such as regional sports programming,
no amount of investment can duplicate the unique attributes of such programming, and denial of access to
such programming can significantly hinder an MVPD from competing in the marketplace."151 In other
words, given the non-replicable nature of the content on MSG HD and MSG+ HD, Verizon has no ability
to formulate a viable competitive response that would allow Verizon to compete for the many subscribers
that highly value these networks.152 Indeed, even if MSG LP's exclusive rights to the sports
programming shown on MSG HD and MSG+ HD were to expire at some point in the future, two of the
teams shown on MSG are owned by Cablevision, thus eliminating any potential chance Verizon might
have in the future to acquire the rights to these games.153


149 See 2007 Order, 22 FCC Rcd at 17835, 63 ("We recognize the benefits of exclusive contracts and vertical
integration . . ., such as encouraging innovation and investment in programming and allowing for `product
differentiation' among distributors.").
150 The games on MSG HD and MSG+ HD are not "replicated" on the SD versions of the networks that Verizon
carries. As the Commission has found previously, consumers do not consider the SD version of a particular channel
to be an adequate substitute for the HD version due to the different technical characteristics and sometimes different
content. See 2010 Order, 25 FCC Rcd at 784-85, 54-55.
151 Id. at 750-51, 9; see also id. ("If particular programming is replicable, our policies should encourage MVPDs or
others to create competing programming, rather than relying on the efforts of others, thereby encouraging
investment and innovation in programming and adding to the diversity of programming in the marketplace.").
152 Defendants note that Verizon has developed its own local news channel (FiOS 1) to differentiate its video
product. See Defendants' Answer at 19-20 ( 13), 38; Defendants' Feb. 25th Letter, Attachment at 8. As the
Commission has recognized previously, however, local and regional news channels are "readily replicable"
programming. 2010 Order, 25 FCC Rcd at 750-51, 9; Verizon Post-Discovery Reply Brief at 30 ([REDACTED

]); see also Verizon Reply at 6
("The fact that regional sports programming cannot be replicated means that competitors have nowhere to turn and
no ability to themselves create a suitable alternative for consumers. . . . [C]ompetitive providers simply lack the
option of investing in or developing their own substitute, given the extraordinary barriers to entry in sports
programming (e.g., leagues tightly limit team creation and many sports teams already have exclusive or nearly
exclusive programming contracts with a video programming network.")) and at 23; Verizon Post-Discovery Opening
Brief
at 14; Verizon Post-Discovery Reply Brief at 12-13, 27, 31-32; Bazelon Decl. at 8.
153 See Verizon Complaint at 8-9 ( 20) ("Defendants also own the underlying Knicks and Rangers franchises,
thereby ensuring that they will continue to control the television rights for these teams for the foreseeable future.");
Verizon Reply at 23 ("The fact of the matter is that Verizon cannot obtain this programming or create its own
programming to compete with HD regional sports programming no matter how great its investment."); Verizon
Post-Discovery Opening Brief
at 14 ("Defendants own the exclusive rights to produce and exhibit games of the New
York Knicks, New York Rangers, Buffalo Sabres, New York Islanders, and New Jersey Devils. Defendants also
own the underlying Knicks and Rangers franchises, thereby ensuring that they will continue to control the television
rights for these teams for the foreseeable future. Neither Verizon nor any other entity can establish new teams to
independently develop similar programming; league rules would prevent a new franchise."); id. at 15 ("Defendants'
ownership of the Knicks and Rangers franchises and rights to produce and exhibit the games means that Verizon
will not have a future right to bid for broadcast rights, creating a persistent barrier to effective competition from new
MVPDs seeking to broadcast this programming."); see also Verizon Reply at 6; Verizon Post-Discovery Reply Brief
at 12-13.
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(ii)

The Effect of Withholding on Alternative
Video Providers to Incumbent Cable
Operators

30.
We also find that the second factor the effect of the exclusive arrangement on
"competition from [MVPD] technologies other than cable" weighs against Defendants' withholding of
MSG HD and MSG+ HD from Verizon.154 In previous decisions, the Bureau has interpreted the term
"technologies other than cable" to mean alternative video providers that compete with incumbent cable
operators.155 Moreover, the Commission has found that this factor weighs against a proposed exclusive
arrangement even if some competitors are allowed to carry the network, as is the case with Defendants'
withholding strategy.156 We conclude below that the withholding of the popular and established MSG
HD and MSG+ HD networks at issue here "significantly hinders" at least one competitor (Verizon) from
serving as an alternative to incumbent cable operators in the New York and Buffalo DMAs.157
Accordingly, consistent with Commission precedent, we find that this factor weighs against Defendants'
withholding.
(iii)

Attraction of Investment in New
Programming

31.
We find no basis to conclude that the third factor the effect of the exclusive
arrangement on "the attraction of capital investment in the production and distribution of new . . . cable
programming" weighs in favor of Defendants' withholding of MSG HD and MSG+ HD from
Verizon.158 The Commission has noted that this factor recognizes that exclusive arrangements "are
typically used by suppliers to create incentives for distributors to aggressively promote and sell a
particular product" and "may be offered to engender distributor support for a fledgling service to help it
gain a foothold in the market."159 Moreover, the Commission has explained that when "a programmer
requires the ability to offer an added incentive to attract investment, carriage and support of the service,
such that without the incentive the programming service could not be launched or become viable,
exclusivity may be in the public interest."160 In previous cases, the Commission has found that this factor
weighs in favor of an exclusive arrangement when the network is a fledgling service that needs to offer


154 See 47 U.S.C. 548(c)(4)(B); 47 C.F.R. 76.1002(c)(4)(ii).
155 See Outdoor Life/Speedvision Exclusivity Petition, 13 FCC Rcd at 12233-34, 14-15 (referring to telephone
companies that "offer competition to incumbent cable operators"); Sci-Fi Exclusivity Petition, 10 FCC Rcd at 9789,
17 (stating that the first and second factors require the Commission to assess the development of competition to
"incumbent cable operators").
156 See Court TV Exclusivity Petition, 9 FCC Rcd at 3228, 39 (finding that this factor weighs against the proposed
exclusive arrangement despite the fact that the network was available to DBS operators); see also Sci-Fi Exclusivity
Petition
, 10 FCC Rcd at 9790, 21 (finding that this factor weighs against the proposed exclusive arrangement
despite the fact that the network was available to television receive-only and DBS operators); Outdoor
Life/Speedvision Exclusivity Petition
, 13 FCC Rcd at 12235-36, 19 (finding that this factor weighs against the
proposed exclusive arrangement despite the fact that the network was available to DBS operators); see also supra
7 (noting other MVPDs that carry MSG HD and MSG+ HD).
157 See infra Section III.A.2.c.
158 See 47 U.S.C. 548(c)(4)(C); 47 C.F.R. 76.1002(c)(4)(iii).
159 NECN Exclusivity Petition, 9 FCC Rcd at 3236, 33.
160 Id. at 3236, 34; see Court TV Exclusivity Petition, 9 FCC Rcd at 3228, 39; see also NewsChannel, 10 FCC
Rcd at 694-95, 23.
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exclusivity to distributors in order to obtain carriage and attract capital investments.161 The Commission
has found that this factor weighs against an exclusive arrangement when the network is established and
does not currently need to offer exclusivity in order to obtain carriage and attract capital investments.162
32.
MSG HD and MSG+ HD are established networks launched in the late 1990s with
exclusive rights to televise the games of five major professional sports teams, which is some of the most
valuable and popular programming available.163 Defendants have not asserted, nor could they credibly
claim, that MSG HD and MSG+ HD are fledgling services that MVPDs will carry and promote only if
they can be guaranteed exclusivity with respect to Verizon. The importance of MSG HD and MSG+ HD
to consumers means that MVPDs will carry these networks without any guarantee of exclusivity.164
Indeed, in explaining why they do not offer Verizon access to MSG HD and MSG+ HD in markets not
served by Cablevision, Defendants do not claim that the reason is because MVPDs in those markets have
demanded exclusivity with respect to Verizon as a condition for carriage of MSG HD and MSG+ HD.
Rather, Defendants claim that doing so would complicate Cablevision's product differentiation
strategy.165
33.
While Defendants put forth the theory that requiring MSG LP to share MSG HD and
MSG+ HD with Verizon will reduce the economic incentives of Cablevision to invest in the networks,166
they have put forth no evidence demonstrating that this theory motivated their withholding strategy. In
addition, Defendants put forth no evidence demonstrating that this withholding strategy has resulted in
increased investment in the networks or that it has improved the quantity and quality of programming on
the networks. At most, Defendants claim that MSG LP "has entered into a mutually beneficial
arrangement in which it receives value and consideration in exchange for allowing Cablevision to


161 See NECN Exclusivity Petition, 9 FCC Rcd at 3236, 33-39 (finding that a fledgling, start-up, regional news
channel with a limited potential subscriber base may need the ability to offer exclusivity in order to attract
investment, promotion, and carriage); see also NewsChannel, 10 FCC Rcd at 694-95, 23-26 (finding that a new
regional and local news channel with a limited potential subscriber base that requires distributors to install
equipment in each headend to receive the programming requires the ability to offer exclusivity in order to secure
carriage commitments and to ensure its financial viability).
162 See Court TV Exclusivity Petition, 9 FCC Rcd at 3228-29, 42-50 (finding that an established network with a
growing subscriber base and nationwide appeal did not require the ability to offer exclusivity in order to gain
acceptance or to attract capital investments for its production, promotion, distribution, or carriage); see also Sci-Fi
Exclusivity Petition
, 10 FCC Rcd at 9790, 23-26 (finding that exclusivity was not vital for the continued viability
of a popular and established network); Outdoor Life/Speedvision Exclusivity Petition, 13 FCC Rcd at 12237-40,
22-25 (finding that networks did not face unique hurdles that required exclusivity).
163 See infra 47 (noting ratings evidence indicating that RSNs are popular programming and that RSNs receive
significantly higher license fees than other types of programming); Defendants' Answer at 10-11 ( 1), 15 ( 7) and
Pontillo Decl. at 3 (stating that MSG HD was launched in the fall of 1998 and MSG+ HD was launched in the
spring of 1999).
164 See Court TV Exclusivity Petition, 9 FCC Rcd at 3228-29, 44 (noting that the popularity of a network "creates
incentives for all cable operators to market and add the service, particularly if a competitor carries it").
165 See Defendants' Answer at 61 n.197 (stating that licensing MSG HD and MSG+ HD to Verizon in areas not
served by Cablevision would "undercut Defendants' attempt to use those services as a product differentiator by
Cablevision . . . [by] dilut[ing] the efficacy of Defendants' marketing efforts, engender[ing] customer confusion, and
likely lead[ing] Verizon to intensify pressure to obtain the services for its subscribers living in areas served by
Cablevision"); see also Defendants' Post-Discovery Answer to Supplement at 82 n.297.
166 See Defendants' Answer at 37-38; Defendants' Post-Discovery Answer to Supplement at 79 n.287, 81, 107;
Bulow/Owen Study at 1, 4-5; see also supra 26.
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continue to effectuate its product differentiation strategy."167 Defendants provide no evidence concerning
the "value and consideration" that MSG LP has received from this arrangement. Nor have Defendants
provided any evidence that the "value and consideration" that MSG LP receives from Cablevision
exceeds the licensing fees and advertising revenues that MSG LP has foregone by withholding these
networks from Verizon. There is no dispute that MSG HD and MSG+ HD are established networks with
valuable and popular programming. Defendants have not alleged, let alone provided evidence, that the
continued development of these networks is contingent upon further financing from Cablevision, as
opposed to revenues earned from advertising and licensing fees charged to MVPDs.168 Even if MSG LP
were reliant on further financing from Cablevision, Defendants have not claimed that any alleged
financing from Cablevision would be unavailable if MSG LP licensed MSG HD and MSG+ HD to
Verizon.169 Similarly, Defendants assert that MSG LP receives "substantial promotional, marketing and
other benefits" from Cablevision, but they provide no support for this assertion and, in any event, do not
allege that Cablevision would cease such support if MSG LP licensed MSG HD and MSG+ HD to
Verizon.170 Accordingly, consistent with Commission precedent, we find that the third factor does not
weigh in favor of Defendants' withholding.
(iv)

The Effect on Diversity of Programming in
the MVPD Market

34.
We find no basis to conclude that the fourth factor the effect of the exclusive
arrangement on "diversity of programming in the [MVPD] market" weighs in favor of Defendants'
withholding of MSG HD and MSG+ HD from Verizon.171 The Commission has explained that an
exclusive arrangement "may promote diversity in the programming market when used to provide
incentives for cable operators to promote and carry a new and untested programming service."172 In


167 Defendants' Post-Discovery Reply Brief at 38.
168 See Court TV Exclusivity Petition, 9 FCC Rcd at 3229, 49 ("[A]s Court TV grows, more of its financial needs
may be met with outside revenue from licensing fees from competitors."); NECN Exclusivity Petition, 9 FCC Rcd at
3237-38, 48 ("As consumer demand for the service develops, cable operator reliance on exclusivity as an incentive
to continue to carry NECN should change. Moreover, NECN's losses in the future can eventually be lessened by the
revenue and increased advertising that can be generated from increased distribution through sales to competing
distributors.").
169 In applying the Section 628(c)(4) factors, the Commission has explained that it assesses whether exclusivity is
currently required to attract investment and carriage, not whether exclusivity was needed when the network was first
launched. See Court TV Exclusivity Petition, 9 FCC Rcd at 3228-29, 44; see also Defendants' Answer at 10-11 (
1) and Pontillo Decl. at 3 (stating that Cablevision was the only distributor willing to devote capital and channel
capacity to MSG HD and MSG+ HD when these networks were launched in 1998-1999). In any event, Defendants
concede that when Verizon began providing video service in New York in 2006, MSG HD and MSG+ HD had
already been in existence for seven years and were already carried by other MVPDs. See Defendants' Answer at 10-
11 ( 1), 15 ( 7), 34; see also id. at 13-14 ( 5) (noting that MSG LP began to license MSG HD and MSG+ HD to
other MVPDs in 2005); Verizon Complaint at 4 (stating that Verizon first began deploying FiOS in New York in
2006). Thus, when Verizon entered the market, MSG HD and MSG+ HD were already established and popular
networks, thereby undermining any suggestion that the networks were fledgling services dependent upon financing
from Cablevision or that Defendants were required to offer MVPDs exclusivity with respect to Verizon as an
inducement to carry the networks.
170 See Defendants' Answer at 56.
171 See 47 U.S.C. 548(c)(4)(D); 47 C.F.R. 76.1002(c)(4)(iv).
172 NECN Exclusivity Petition, 9 FCC Rcd at 3237, 40.
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previous cases, the Commission has found that this factor weighs in favor of exclusive arrangements for
new and untested networks,173 but not for established and successful networks.174
35.
As discussed above, MSG HD and MSG+ HD are established networks with valuable
and popular programming. Defendants do not allege that the continued carriage and development of these
networks is dependent on Defendants' withholding strategy. Thus, we find no basis to conclude that
Defendants' withholding strategy is needed to enhance diversity of programming. Defendants theorize,
however, that requiring MSG LP to share MSG HD and MSG+ HD with Verizon will reduce Verizon's
incentive to invest in its own programming, thereby reducing diversity of programming.175 As the
Commission has explained previously, however, RSN programming is non-replicable and "no amount of
investment can duplicate the unique attributes of such programming."176 Accordingly, consistent with
Commission precedent, we find that the fourth factor does not weigh in favor of Defendants' withholding.
(v)

Duration of Withholding

36.
We find that the fifth factor the duration of the exclusive arrangement weighs against
Defendants' withholding of MSG HD and MSG+ HD from Verizon.177 The Bureau has previously found
even a three-year exclusivity period to be excessive for a network that is popular and that MVPDs seek to


173 See id. at 3237, 40-43 (finding that exclusivity will promote the financial survival of a regional news service
and thereby enhance diversity of programming); see also NewsChannel, 10 FCC Rcd at 695, 27-29 (finding that
exclusivity will promote the successful launch and financial survival of a new and unique regional news service and
thereby enhance diversity of programming).
174 See Court TV Exclusivity Petition, 9 FCC Rcd at 3229, 51 (finding that exclusivity is not currently needed for
an existing and successful service and is therefore not needed to promote diversity of programming); see also Sci-Fi
Exclusivity Petition
, 10 FCC Rcd at 9791, 27-29 (finding that exclusivity is not currently needed for an existing
and successful service and is therefore not needed to promote diversity of programming); Outdoor Life/Speedvision
Exclusivity Petition
, 13 FCC Rcd at 12240, 26 (finding that exclusivity is not currently needed for a network with
13.5-14.5 million subscribers that various MVPDs seek to carry and is therefore not needed to promote diversity of
programming).
175 See Bulow/Owen Study at 7-9; see also Verizon Complaint, Exhibit 3 (Letter from Howard J. Symons, Counsel
for Defendants, to Stan Tugentman, Verizon (June 29, 2009), at 2 ("Verizon clearly has the resources to acquire,
invest in and develop its own programming.")); Defendants' Post-Discovery Answer to Supplement at 110.
176 2010 Order, 25 FCC Rcd at 750-51, 9; see also supra n.152 (noting that Verizon has invested in replicable
local news programming); Verizon Reply at 6 ("The fact that regional sports programming cannot be replicated
means that competitors have nowhere to turn and no ability to themselves create a suitable alternative for
consumers. . . . [C]ompetitive providers simply lack the option of investing in or developing their own substitute,
given the extraordinary barriers to entry in sports programming (e.g., leagues tightly limit team creation and many
sports teams already have exclusive or nearly exclusive programming contracts with a video programming
network).") and at 23; Verizon Post-Discovery Opening Brief at 14 ("Defendants own the exclusive rights to
produce and exhibit games of the New York Knicks, New York Rangers, Buffalo Sabres, New York Islanders, and
New Jersey Devils. Defendants also own the underlying Knicks and Rangers franchises, thereby ensuring that they
will continue to control the television rights for these teams for the foreseeable future. Neither Verizon nor any
other entity can establish new teams to independently develop similar programming; league rules would prevent a
new franchise."); Verizon Post-Discovery Reply Brief at 30 ([REDACTED
]); id. at 12-13, 27, 31-32; Bazelon Decl. at 8.
177 See 47 U.S.C. 548(c)(4)(E); 47 C.F.R. 76.1002(c)(4)(v).
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carry.178 The withholding here is of unlimited duration given that Defendants have provided no indication
that they will ever license MSG HD and MSG+ HD to Verizon on any terms.
(vi)

Conclusion

37.
The first, second, and fifth factors under Section 628(c)(4) suggest significant
anticompetitive harms resulting from Defendants' withholding of MSG HD and MSG+ HD from
Verizon. While the two remaining factors could potentially tip the scales in favor of a finding that
Defendants' withholding is procompetitive on balance, we find no basis on this record to conclude that
Defendants' withholding will promote the benefits of exclusive arrangements for the programming
market (i.e., attraction of capital investment or increased programming diversity). Accordingly, applying
the factors set forth in Section 628(c)(4) and the Commission's interpretation of those factors, we
conclude that the anticompetitive harms of Defendants' withholding are not offset by any procompetitive
benefits to the programming market.
(c)

MDU Order


38.
In the MDU Order, the Commission weighed the anticompetitive harms of exclusive
contracts between cable operators and MDU owners against the procompetitive benefits and concluded
that, on balance, these contracts are categorically "unfair."179 Applying this analysis here, we find two
significant anticompetitive harms resulting from Defendants' withholding. First, as discussed below,
Defendants' withholding "significantly hinders" a wireline entrant from competing in the New York and
Buffalo DMAs, which in turn harms consumers by limiting video competition in those markets.180
Second, as the Commission has recognized previously, an act that impedes the ability of an MVPD to
provide video service can also impede the ability of an MVPD to provide broadband services.181 These
anticompetitive harms, however, may be outweighed by the procompetitive benefits of withholding.182


178 See Sci-Fi Exclusivity Petition, 10 FCC Rcd at 9791, 30 n.78 (rejecting a three-year period of exclusivity given
that Sci-Fi Channel was a popular service that at least one MVPD had sought to carry). The Commission has
explained that in assessing the duration of an exclusive arrangement, it will "evaluate whether the proposed
exclusivity has been sufficiently tailored to provide exclusivity for the minimum time period reasonably required to
achieve the public interest benefits identified by the petitioner without imposing the kind of effect on the
development of competition in the distribution market that Congress sought to ameliorate through the program
access provisions." Court TV Exclusivity Petition, 9 FCC Rcd at 3226, 30; see also id. at 3230, 54 (finding a 15-
year period of exclusivity to be "excessive" and not consistent with the statute); NECN Exclusivity Petition, 9 FCC
Rcd at 3237-38, 44-51 (finding a seven-year period of exclusivity to be "reasonable" in light of the finding that
the public interest benefits of the proposed exclusive arrangement offset any effect on competition); Outdoor
Life/Speedvision Exclusivity Petition
, 13 FCC Rcd at 12240-41, 27 (finding it unnecessary to assess whether a
four-year period of exclusivity was appropriate in light of the lack of public interest benefits to offset the adverse
effects on competition in the local and national video distribution markets); NewsChannel, 10 FCC Rcd at 695-96,
30-35 (finding a seven-year period of exclusivity to be "reasonable" in light of the finding that the public interest
benefits of the proposed exclusive arrangement offset any effect on competition).
179 See MDU Order, 22 FCC Rcd at 20243, 16 and 20248-49, 26.
180 See infra Section III.A.2.c; see also supra 28.
181 See 2010 Order, 25 FCC Rcd at 771-72, 36 (stating that a "wireline firm's decision to deploy broadband is
linked to its ability to offer video" and that an act that "imped[es] the ability of MVPDs to provide video service . . .
can also impede the ability of MVPDs to provide broadband services").
182 See Cablevision II, 2011 WL 2277217, at *23 (stating that "labeling conduct unfair simply because it might in
some circumstances negatively affect competition in the video distribution market" fails to consider whether such
conduct should be treated as unfair "despite it being procompetitive in a given instance").
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The only procompetitive benefit put forth by Defendants is that their withholding strategy will allow
Cablevision to differentiate its service from Verizon, thereby leading to more vigorous competition in the
video distribution market and increasing the incentives of both Defendants and Verizon to invest in their
own programming.183 While we do not preclude the possibility that the facts in an individual case may
reveal that the procompetitive benefits of product differentiation outweigh the anticompetitive harms of
withholding, we find no basis to reach that conclusion on the facts presented here. As discussed above,
the key distinction in this case is that the content withheld from Verizon is non-replicable and popular
RSN programming that "no amount of investment can duplicate."184 Because Verizon has no ability to
formulate a viable competitive response that would allow Verizon to compete for the many subscribers
that highly value these networks, we find that the anticompetitive harms of Defendants' withholding
outweigh the procompetitive benefits.
(d)

Legitimate Business Justification

39.
The Commission's program access rules applicable to satellite-delivered, cable-affiliated
programming permit withholding provided there is a "legitimate business justification" for the conduct.185
The only justification put forth by Defendants is that their withholding strategy will allow Cablevision to
differentiate its service from Verizon.186 While we do not preclude the possibility that product
differentiation may be a legitimate business justification for withholding terrestrially delivered, cable-
affiliated programming based on the facts presented in an individual case, we decline to reach that
conclusion here given the non-replicable and popular nature of the content withheld from Verizon. We
find that product differentiation is not a legitimate business justification here because Verizon has no
ability to formulate a viable competitive response that would allow Verizon to compete for the many
subscribers who, today, highly value these networks.187
(e)

FTC Definition

40.
Defendants have put forth their own test for assessing whether conduct is "unfair," which
is based on the Federal Trade Commission's Unfairness Policy Statement.188 We find that Defendants'
withholding of MSG HD and MSG+ HD from Verizon is "unfair" under this test as well. We thus need
not decide how much weight should be given to Defendants' proposed test. The first factor requires the
conduct at issue to "present an imminent, substantial, non-speculative threat of injury to consumers (as
opposed to competitors)."189 As discussed later herein, Defendants' withholding "significantly hinders"
Verizon from competing in the New York and Buffalo video distribution markets, which in turn harms


183 See supra 26. As discussed above, there is no evidence of any procompetitive benefits from Defendants'
withholding strategy for the programming market. See supra 31-35.
184 2010 Order, 25 FCC Rcd at 750-51, 9; see also supra 29, 35.
185 See 1993 Order, 8 FCC Rcd at 3412-13, 116.
186 See supra 26.
187 See supra 29, 35.
188 See Defendants' June 22nd Letter at 5 (citing FTC Unfairness Policy Statement, Dec. 17, 1980, reprinted in Int'l
Harvester Co.,
104 F.T.C. 949 (1984)); see also 15 U.S.C. 45(n) ("The Commission shall have no authority under
this section or section 57a of this title to declare unlawful an act or practice on the grounds that such act or practice
is unfair unless the act or practice causes or is likely to cause substantial injury to consumers which is not reasonably
avoidable by consumers themselves and not outweighed by countervailing benefits to consumers or to
competition.").
189 See Defendants' June 22nd Letter at 5.
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consumers by limiting competition in those markets and by impeding broadband deployment.190 The
second factor requires that the conduct at issue "must not be outweighed by any countervailing benefits to
consumers or competition that the practice produces."191 As discussed above, we conclude that the
anticompetitive harms of Defendants' withholding outweigh any procompetitive benefits.192 The third
factor requires that the act impose an injury that consumers could not reasonably avoid by "survey[ing]
the available alternatives, choos[ing] those that are most desirable, and avoid[ing] those that are
inadequate or unsatisfactory."193 As the Commission has explained previously, RSNs such as MSG HD
and MSG+ HD are unique because they "purchase exclusive rights to show sporting events and sports
fans believe that there is no good substitute for watching their local and/or favorite team play an
important game."194 Moreover, the Commission has explained that RSN programming is "non-replicable
and valuable to consumers" and that "no amount of investment can duplicate the unique attributes of such
programming."195 Thus, by withholding MSG HD and MSG+ HD from Verizon, Defendants have
eliminated a competitive choice for those consumers who desire MSG HD and MSG+ HD.196
Accordingly, even applying the test advocated by Defendants, we find Defendants' withholding of MSG
HD and MSG+ HD from Verizon to be an "unfair act."
(f)

Conclusion

41.
After applying precedent and guidelines established by Congress and the Commission, as
well as an additional test advocated by Defendants, we conclude that the anticompetitive effects of
Defendants' withholding of MSG HD and MSG+ HD from Verizon outweigh any procompetitive
benefits and that Defendants' withholding is, on balance, an "unfair act."


190 See infra Section III.A.2.c; see also supra 28, 38.
191 See Defendants' June 22nd Letter at 5.
192 See supra 24-38.
193 See Defendants' June 22nd Letter at 5 (citing FTC Unfairness Policy Statement, Dec. 17, 1980, reprinted in Int'l
Harvester Co.,
104 F.T.C. 949 (1984)).
194 See General Motors Corporation and Hughes Electronics Corporation, Transferors and The News Corporation
Limited, Transferee
, Memorandum Opinion and Order, 19 FCC Rcd 473, 535, 133 (2004) ("News/Hughes
Order
").
195 2010 Order, 25 FCC Rcd at 750-51, 9.
196 The fact that Defendants make the SD versions of MSG and MSG+ available to Verizon does not change our
conclusion. See supra 4 and infra 48 (noting the Commission's conclusion, as well as additional evidence
supporting the conclusion, that HD programming is growing in significance to consumers and that consumers do not
consider the SD version of a particular channel to be an adequate substitute for the HD version due to the different
technical characteristics and sometimes different content). Moreover, the fact that Defendants make MSG HD and
MSG+ HD available to DBS operators does not change our conclusion. Not all consumers can receive DBS service
due to signal obstructions and difficulties with antenna siting. See 2007 Order, 22 FCC Rcd at 17879, Appendix B,
13 (noting impact of signal obstruction on DBS reception); United States Government Accountability Office,
Telecommunications: Direct Broadcast Satellite Subscribership Has Grown Rapidly, But Varies Across Different
Types of Markets
, GAO-05-257 (April 2005), at 4, 13-14 (noting impact of signal obstruction on DBS reception)
(available at http://www.gao.gov/new.items/d05257.pdf). Moreover, as discussed above, Defendants acknowledge
that DBS operators do not present consumers with the same competitive choice as a wireline entrant such as Verizon
because DBS operators do not offer voice or broadband service. See supra n.147. Moreover, the Commission has
found that DBS operators do not constrain the price of cable service to the extent that wireline entrants do. See id.
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c.

Defendants' Withholding of MSG HD and MSG+ HD from Verizon
Has the "Effect" of "Significantly Hindering" Verizon

42.
As discussed below, we conclude that Defendants' withholding of MSG HD and MSG+
HD from Verizon in the New York and Buffalo DMAs has the "effect" of "significantly hindering"
Verizon from providing a competing video service, including "satellite cable programming and satellite
broadcast programming," to subscribers and consumers in these DMAs.197 We begin by reviewing
Commission precedent on the "significant hindrance" standard. We then assess the "effect" of the conduct
at issue.
(i)

The "Significant Hindrance" Standard

43.
Defendants' claims notwithstanding, prior Commission decisions establish that the
"significant hindrance" standard does not require a complainant to demonstrate that it is completely
foreclosed from competing in the video distribution market or that its commercial viability is in
jeopardy.198 In 1993, in initially establishing the program access rules, the Commission stated that a
complainant alleging "significant hindrance" under Section 628(b) "must show that its ability to distribute
programming to customers has been hampered in some fashion" and that the Commission will focus on
whether the purpose or effect of the practice is "to hinder or harm the complainant relative to its
competitors."199 In 2007, the Commission found that MVPDs were "significantly hindered" as a result of
exclusive deals between cable operators and MDU owners, despite the fact that only 30 percent of
Americans lived in MDUs and the percentage of Americans living in an MDU subject to an exclusive


197 As an initial matter, Defendants claim that dismissal of the Verizon Complaint is warranted because Verizon is
not prevented or significantly hindered from providing any "satellite cable programming" or "satellite broadcast
programming" when the only programming being withheld is terrestrially delivered. See Defendants' Post-
Discovery Answer to Supplement
at 22-23; Defendants' Post-Discovery Reply at 7; see also Defendants' Answer at
31. The Commission, and now the D.C. Circuit, have considered and rejected this argument. See Cablevision II,
2011 WL 2277217, at *10-*11 ("The problem with petitioners' argument is that it wrongly assumes an MVPD's
lack of commercial attractiveness will never prevent or significantly hinder it from providing satellite
programming."); 2010 Order, 25 FCC Rcd at 768-69, 32, 770-71, 35, and 774-75, 39.
198 See Defendants' Post-Discovery Reply Brief at 5 ("Verizon has offered no evidence suggesting that the
commercial viability of FiOS TV is significantly impaired . . . ."), at 8 ("Verizon likewise has failed to present any
evidence that lack of access to MSG/+ HD renders its provision of video service in NY and NJ uneconomic or
commercially non-viable."), at 10-11 ("The record . . . offers no basis for concluding that the commercial viability of
Verizon's video offering is impaired in any material respect . . . ."); Defendants' Post-Discovery Answer to
Supplement
, Exhibit K (Bruce M. Owen, Bundling Undermines the RSN Presumption, at 9 ("Verizon is apparently
viable as a distributor of video services . . . .") ("Owen Study")); Defendants' Reply to Verizon Response to Motion
to Strike
at 3 (referring to a practice that "entirely forecloses entry into the relevant marketplace"); Defendants' Feb.
25th Letter
at 6-8 (stating that none of the evidence demonstrates that Verizon has been significantly hindered from
providing a competitively viable service); Defendants' Answer at 8 (stating that the evidence "is hardly suggestive
of a company whose competitive viability is being stymied or hindered significantly") and Exhibit 3 (Jeremy I.
Bulow and Bruce M. Owen, Analysis of Competition and Consumer Welfare Issues in Verizon's Access Complaint
Against Cablevision and Madison Square Garden, at 10 ("There is no evidence in the complaint that MSG's HD
program services are essential for entry (successful or otherwise) into the business. To the contrary, Verizon itself
offers apparently viable video distribution service in the Cablevision service areas without offering MSG HD and
MSG+ HD.") ("Bulow/Owen Study")); see also Verizon Post-Discovery Reply Brief at 14-17 (stating that
Defendants have misinterpreted the statutory standard to require a showing of complete foreclosure or that the
complainant's competitive viability is in doubt); Bazelon Decl. at 15-16.
199 1993 Order, 8 FCC Rcd at 3374, 41.
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deal is lower.200 The Commission prohibited all such exclusive deals, regardless of the size of the MDU
or the number of MDUs in a given market area.201 In the 2010 Order, the Commission explained that, in
attempting to demonstrate "significant hindrance," a complainant "cannot simply rely on the fact that
some impairment to providing service may have occurred because of its lack of access to cable-affiliated,
terrestrially delivered programming."202 In the same decision, the Commission found "significant
hindrance" when withholding of an RSN resulted in a 33 percent to 40 percent reduction in expected DBS
market share.203 Finally, in March 2010, the Commission addressed bulk billing arrangements, which
allow an MVPD to provide service to every resident of an MDU at a significant discount from the usual
retail rate.204 The Commission explained that these arrangements may deter a second video provider from
serving a building because residents would have to pay twice, thereby increasing the second provider's
cost to consumers.205 But, while the Commission acknowledged that these arrangements "may make
entry by other MVPDs marginally less attractive," it further found that these arrangements are not present
in most MDUs206 and that it did not have a basis for finding that they "significantly hinder" MVPDs from
providing service where the record demonstrated that "many" consumers are willing to pay twice for
video service and some MVPDs have wired MDUs for service despite the presence of bulk billing
arrangements.207
44.
Thus, rather than requiring an MVPD to demonstrate complete foreclosure or that its
commercial viability is in doubt, we believe this precedent establishes that the salient issue in assessing
"significant hindrance" is whether an MVPD has been hindered relative to its competitors and whether
the hindrance is substantial enough to eliminate the MVPD as a competitive choice for a meaningful
number of consumers. For example, in the MDU Order and 2010 Order, although the Commission found
that MVPDs were "significantly hindered," there was no indication that MVPDs were incapable of
competing in the marketplace or that they were poised to exit the market without access to MDU residents
or to an RSN.208 This precedent is consistent with Section 628(b), which prohibits "unfair acts" that have


200 See MDU Order, 22 FCC Rcd at 20235-36, 1, 20237, 3, 20239-41, 8-10, 20243-44, 16, and 20250-51,
29.
201 See id. at 20251, 33 and 20253-54, 38.
202 See 2010 Order, 25 FCC Rcd at 781, 51 n.200.
203 See id. at 768, 32 and 782, 52 n. 202. Based on this evidence, as well as the non-replicability of RSNs, the
Commission established a rebuttable presumption that withholding of an RSN results in "significant hindrance."
See supra 3.
204 See Exclusive Service Contracts for Provision of Video Services in Multiple Dwelling Units and Other Real
Estate Developments,
Second Report and Order, 25 FCC Rcd 2460, 2461, 2, 2463, 10, and 2470, 26 (2010).
205 See id. at 2461, 2 and 2464, 12.
206 See id. at 2464, 12.
207 See id. at 2470, 26 ("second MVPD providers wire MDUs for video service even in the presence of bulk billing
arrangements and [] many consumers choose to subscribe to those second video services"). The Commission also
found that exclusive marketing arrangements, whereby an MVPD has the exclusive right to certain means of
marketing its service to residents of an MDU, do not result in "significant hindrance." See id. at 2471-72, 31 and
2473, 36. The record indicated that these arrangements, which are not present in "most" MDUs, confer a slight
advantage on the MVPD subject to the arrangement, but there is no indication that they "significantly hinder"
competitors from providing service. See id. at 2473, 36.
208 See Verizon Post-Discovery Reply at 16 ("[I]n the MDU Order, the Commission prohibited exclusive access
arrangements that it found to significantly hinder competitive entry, even though cable incumbents made similar
(continued....)
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the purpose or effect "to hinder significantly or to prevent" an MVPD from providing programming to
subscribers or consumers.209 This language indicates that Congress intended "significant hindrance" to
mean something less than complete foreclosure, or prevention, from providing service. This
interpretation is also supported by the D.C. Circuit's decision upholding the 2010 Order. In rejecting
Defendants' argument that withholding of terrestrially delivered programming does not significantly
hinder an MVPD from providing "satellite cable programming or satellite broadcast programming," the
court explained that this argument "wrongly assumes an MVPD's lack of commercial attractiveness will
never prevent or significantly hinder it from providing satellite programming."210 The court also
explained that when an MVPD is denied access to "programming that customers want and that
competitors are unable to duplicate--like the games of a local team selling broadcast rights to a single
sports network--competitor MVPDs will find themselves at a serious disadvantage when trying to attract
customers away from the incumbent cable company."211
45.
We also reject Defendants' claim that the Commission should be guided exclusively by
antitrust precedent in applying the "significant hindrance" standard.212 Congress specifically adopted the
program access regime, including Section 628(b), as a new remedy separate and apart from antitrust
enforcement.213 Moreover, the Commission has previously explained that antitrust and program access
laws "address similar but not identical concerns."214
(Continued from previous page)


arguments there that new entrants could and did compete for consumers who did not live at properties covered by
such agreements.").
209 47 U.S.C. 548(b) (emphasis added).
210 Cablevision II, 2011 WL 2277217, at *10 (emphasis added).
211 See id.; see also id. at *11 ("But given petitioners' concession that the Commission can in principle regulate
terrestrial withholding when such withholding completely prevents an MVPD from competing, thus preventing that
MVPD from providing satellite programming, they have no basis for arguing that section 628 unambiguously
precludes the Commission from regulating where it has evidence that such withholding `hinder[s] significantly,' 47
U.S.C. 548(b), an MVPD from competing with the incumbent cable operator to deliver satellite programming to
customers.") (emphasis in original).
212 See Defendants' Post-Discovery Answer to Supplement at 47-48, 98-99; Owen Study at 3 n.5 and 9; Defendants'
Answer
at 45 n.140; Defendants' Feb. 25th Letter at 8-9.
213 See S. Rep. No. 102-92 (1991), at 29, reprinted in 1992 U.S.C.C.A.N. 1133, 1162 ("The legislation provides new
FCC remedies and does not amend existing antitrust laws. All antitrust and other remedies which can be pursued
under current law by multichannel video programming distributors are therefore unaffected by this section.").
214 See 1993 Order, 8 FCC Rcd at 3404, 102 ("[W]hile antitrust precedents and other regulatory approaches
address related concepts that might be particularly useful in defining the permissible factors for differentials, directly
importing these concepts into the Section 628 process risks confusing the two bodies of law involved, which address
similar but not identical concerns."); see also Court TV Exclusivity Petition, 9 FCC Rcd at 3226-27, 35 ("[I]t
would be flatly inconsistent with the Cable Act to find an exclusivity provision presumptively lawful simply because
it might not rise to the level of a Sherman Act violation."); Defendants' Post-Discovery Reply Brief at 15.
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(ii)

The Record Supports Application of a Rebuttable
Presumption of "Significant Hindrance" for HD RSNs

46.
Because MSG HD and MSG+ HD are RSNs as defined by the Commission,215
Defendants' withholding of these networks from Verizon is subject to the rebuttable presumption of
"significant hindrance" established in the 2010 Order.216 Moreover, although Defendants license the SD
versions of MSG and MSG+ to Verizon, the Commission has established that this alone is not sufficient
to rebut the presumption applicable to the HD version.217 Verizon has put forth evidence that provides
additional support for the rebuttable presumption for HD RSNs. Although this evidence is not necessary
to bring the presumption into play, we nonetheless review the evidence given its presence in the record.
47.
In upholding the rebuttable presumption of "significant hindrance" for RSNs, the D.C.
Circuit explained that the Commission "advanced compelling reasons to believe that withholding RSN
programming is, given its desirability and non-replicability, uniquely likely to significantly impact the
MVPD market."218 Verizon has provided additional support for the Commission's conclusion that such
networks are non-replicable and critically important to consumers and competition.219 The record here
contains MSG LP's statements from a previous litigation conceding that close substitutes do not exist for


215 The record establishes that MSG HD and MSG+ HD satisfy the Commission's definition of an RSN. See supra
n.8 (defining RSN); Defendants' Answer at 71 ( 20) (admitting that MSG has exclusive rights to the New York
Knicks (NBA), New York Rangers (NHL), and Buffalo Sabres (NHL), among others, and that MSG+ has exclusive
rights to the New York Islanders (NHL) and New Jersey Devils (NHL), among others); see also Verizon Complaint
at 8 n.11 (stating that a small number of these teams' games are televised on national networks and that the majority
of the games are available only though MSG and MSG+).
216 See supra 3.
217 See supra 4.
218 Cablevision II, 2011 WL 2277217, at *18.
219 See supra n.8; 2010 Order, 25 FCC Rcd at 750, 8 and 782-83, 52. Defendants contend that the fact that
certain MVPDs choose not to carry certain RSNs in some markets demonstrates that RSNs are not indispensable.
See Defendants' Answer at 41; Defendants' Post-Discovery Answer to Supplement at 39. We do not find that this
undermines the rebuttable presumption because the record here contains no evidence of the circumstances that led to
the MVPDs' decision to refrain from carrying an RSN. See Verizon Post-Discovery Reply Brief at 25. For example,
the MVPDs' decision to refrain from carrying the RSNs may have been driven by the high cost of an RSN or an
RSN's demand for unreasonable terms; in such a situation, the fact of non-carriage may suggest that the RSN views
itself as providing indispensable, "must have" programming. In addition, while Defendants state that all content is
non-replicable due to copyright restrictions (see Defendants' Post-Discovery Reply Brief at 24; see also Defendants'
Post-Discovery Answer to Supplement
at 38), the Commission has previously recognized that RSNs are unique
because they "typically purchase exclusive rights to show sporting events and sports fans believe that there is no
good substitute for watching their local and/or favorite team play an important game." News/Hughes Order, 19 FCC
Rcd at 535, 133; see Verizon Post-Discovery Opening Brief at 14 ("Defendants own the exclusive rights to
produce and exhibit games of the New York Knicks, New York Rangers, Buffalo Sabres, New York Islanders, and
New Jersey Devils. Defendants also own the underlying Knicks and Rangers franchises, thereby ensuring that they
will continue to control the television rights for these teams for the foreseeable future. Neither Verizon nor any
other entity can establish new teams to independently develop similar programming; league rules would prevent a
new franchise."); see also id. at 15; Verizon Post-Discovery Reply Brief at 12-13; Verizon Reply at 6, 23. Moreover,
Defendants have previously recognized in statements to investors the significance of non-replicable content. See
Verizon Post-Discovery Answer to Supplement
at 7 (quoting Cablevision's COO as stating that Cablevision
"currently carr[ies] more regional HD than any of our competitors" and that Cablevision has "more HD and On
Demand HD that our competitors can't replicate") (citing Cablevision Q3 2007 Earnings Conference Call
Transcript
(Nov. 8, 2007)); see also Verizon Feb. 12th Letter, Attachment at 4.
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sports content.220 Moreover, the record contains additional evidence supporting the Commission's
conclusion that RSNs are highly valued by consumers and important for competition.221 This evidence
includes ratings demonstrating that RSNs are popular programming, [REDACTED
];222 evidence that RSNs receive significantly higher license fees than other types of
programming, thus indicating their value and importance to consumers;223 and results from a consumer
survey demonstrating that a significant number of consumers in New York and Buffalo watch RSNs.224
48.
The D.C. Circuit also upheld the rebuttable presumption of "significant hindrance" for
HD RSNs,225 and the record here provides further support for the Commission's conclusion regarding the
growing significance of HD RSNs to consumers.226 This includes evidence showing that sales of HDTV


220 See Verizon Reply at 23 (quoting MSG LP as stating in a complaint filed with a federal district court that
"`[c]lose substitutes do not exist'" for sports programming and that "`watching . . . major league men's professional
ice hockey is not reasonably interchangeable with watching . . . other sports or other leisure activities'") (quoting
Complaint, Madison Square Garden, L.P. v. National Hockey League, No. 07-CIV-8455 (S.D.N.Y.) (Sept. 28,
2007)); see also Verizon Post-Discovery Opening Brief at 15. These statements pertain specifically to hockey,
which accounts for four of the major professional sports teams shown on MSG HD and MSG+ HD.
221 See 2010 Order, 25 FCC Rcd at 750-51, 8-9 and 782-83, 52.
222 See Verizon Post-Discovery Reply Brief at 23-25; [REDACTED
].
223 See Verizon Complaint at 3; Verizon Feb. 12th Letter, Attachment at 1; Verizon Post-Discovery Opening Brief
at 13.
224 The Verizon/GMRS Survey entailed two telephone surveys of subscribers to paid video programming services in
the New York and Buffalo DMAs conducted between July 28 and August 4, 2009. See Stella Decl. at 3;
Verizon/GMRS Survey at 4. In the New York DMA, a total of 851 interviews were conducted, and the survey data
had a margin of error of +/- 3.4 percent at a confidence interval of 95 percent. See Stella Decl. at 5;
Verizon/GMRS Survey at 4. In the Buffalo DMA, a total of 658 interviews were conducted, and the survey data had
a margin of error of +/- 3.8 percent at a confidence interval of 95 percent. See Stella Decl. at 5; Verizon/GMRS
Survey
at 4. When asked how often they watch a regional sports channel, 39 percent of respondents in the New
York DMA and 32 percent of respondents in the Buffalo DMA stated at least several times per week. See
Verizon/GMRS Survey
at 2 and Question 8. In addition, when asked how important it is to watch a game of a team
they closely follow, 58 percent of respondents in the New York DMA and 66 percent of respondents in the Buffalo
DMA stated that it was "very important" or "somewhat important." See id. at Question 6. While Defendants
contend that there are a number of flaws with the Verizon/GMRS Survey, Defendants have identified no specific
issues pertaining to these two questions. See Defendants' Motion to Strike Verizon Reply at 7-16; Poret Decl.;
Defendants' Post-Discovery Answer to Supplement, Declaration of Professor Eric T. Bradlow (Oct. 11, 2010), at
10 ("Bradlow Decl."), Declaration of Professor Carol A. Scott (Oct. 12, 2010), at 9-11 ("Scott Decl."),
Declaration of Professor Dilip Soman (Oct. 11, 2010), at 10 ("Soman Decl."); Verizon Response to Defendants'
Motion to Strike Verizon Reply
at 12-13 (noting that, despite a typo in the survey results, all of the respondents
subscribed to cable or satellite television service and all of the respondents were responsible for making decisions
about which cable provider is used by the household).
225 See Cablevision II, 2011 WL 2277217, at *19.
226 See 2010 Order, 25 FCC Rcd at 784-85, 54-55. Among other evidence, the Commission in the 2010 Order
noted the following: DTV sales are growing at 50 percent per year; the Consumer Electronics Association ("CEA")
has estimated that, by 2011, the number of HDTVs sold in the United States will reach 170 million, which is roughly
(continued....)
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sets are growing, with a significant number of consumers in the New York and Buffalo DMAs owning
HDTV sets;227 those consumers that have purchased HDTV sets highly value HD programming;228 HD
homes are more likely to watch sports programming than non-HD homes;229 MVPDs have made large
(Continued from previous page)


one set for every two Americans; more than 45 percent of American households own an HD television set, up from
less than 20 percent in 2006; a 2005 CEA survey concluding that "45 percent of HDTV sports fans would consider
switching to another source of HD sports if superior to their current package." See id. at 784-85, 54 n.216.
227 See Verizon/GMRS Survey at Question 3 (67 percent of subscribers in the New York DMA and 57 percent of
subscribers in the Buffalo DMA have an HDTV set); Verizon Post-Discovery Opening Brief at 12 and Appendix C
(DEF000011) ([REDACTED
]); id. at 14 and Appendix C (DEF000080, DEF000210) (LRG/HDTV 2009 Report concluding
that (i) as of October 2009, nearly half of all households had an HDTV set and an additional 37 percent of
households were "very interested" or "somewhat interested" in purchasing HDTV in the next year; and (ii)
estimating an increase in the number of HD households from 67 million in 2010 to 105 million in 2014) (citing
Leichtman Research Group, HDTV 2009: Consumer Awareness, Interest and Ownership (4Q2009), at 6
("LRG/HDTV 2009 Report")); Bazelon Decl. at 11; see also Defendants' Post-Discovery Answer to Supplement at
37-38 (data from Leichtman Research Group indicating that 46 percent of U.S. households have an HDTV set, an
increase from 45 percent cited by the Commission in the 2010 Order) (citing Press Release, Leichtman Research
Group, Nearly Half of U.S. Households Have an HDTV Set (Nov. 30, 2009), available at
http://www.leichtmanresearch.com/ press/113009release.pdf).
228 See Verizon Complaint at 28 (2008 Nielsen data stating that 20 percent of consumers who have an HDTV set
and subscribe to HD service watch HD programs "every time" they watch television and 45 percent watch HD
"most of the time") (citing Mike Robuck, CTAM, Nielsen Research: Adult Viewers Still Prefer TVs for Viewing,
CedMagazine.com, July 1, 2009, available at http://www.cedmagazine.com/CTAM-Nielsen-research-Adult-
viewers-prefer-TV-viewing.aspx); id. (Horowitz Associates' State of Digital and Interactive TV 2008 study
concluding that 70 percent of HD homes watch HD programming every day) (citing George Winslow, HD Viewing
Patterns Equate to Fuzzy Math
, Multichannel News, Oct. 13, 2008, available at http://www.multichannel.com/
article/87774-HD_Viewing_Patterns_Equate_To_Fuzzy_Math.php); id. (2008 data from Knowledge Networks
finding that about one-third of people who have HDTV say they go straight to the HD section of their programming
guides) (citing Joe Mandese, Data Offers Clear Picture of Game-Changing Media Technology: It's HDTV, Media
Daily News, Aug. 19, 2008, available at http://www.mediapost.com/publications/?fa=Articles.showArticle&art_aid
=88768 ); Verizon Post-Discovery Opening Brief, Appendix C (DEF000133) (LRG/HDTV 2009 Report concluding
that 45 percent of respondents watch more programs in HD than programs not in HD); Verizon Post-Discovery
Reply Brief
at 29 ([REDACTED
]).
229 See Verizon Complaint at 27 and Verizon Post-Discovery Opening Brief at 21 (2008 Nielsen Report showing
higher levels of sports viewing and engagement in HD homes, with ratings for sporting events 20 percent higher in
HD homes compared to U.S. households as a whole) (citing Nielsen Special Report, 2008 a Banner Year in
Sports?
(2008), at 3-4, available at http://pl.nielsen.com/ trends/documents/ 2008ABannerYear inSports
December2008.pdf ("Nielsen 2008 Report")); Verizon Post-Discovery Opening Brief at 13-14 and Appendix C
(DEF000134, DEF000176, DEF000184) (LRG/HDTV 2009 Report finding that HDTV owners watch sports more
than average and that the highest percentage of HD viewers (30 percent) listed sports as the type of channel they
would add first); id., Appendix C (DEF000159) (LRG/HDTV 2009 Report finding that 40 percent of households
with incomes above $75,000 cite sports programming as their "first choice" of HD programming).
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investments to support the growing demand for HD;230 and both Verizon and Cablevision advertise their
HD offerings.231 The record also contains additional evidence supporting the Commission's conclusion
that, due to technical232 and content233 differences between SD and HD, consumers do not consider the SD
version of a particular channel to be an adequate substitute for the HD version.234 Moreover, we note that
both Congress and the United States Court of Appeals for the Ninth Circuit have recently recognized the
critical nature of HD programming in today's video marketplace.235


230 See Verizon Complaint at 29 (stating that Verizon and other MVPDs have made large investments to offer a
wider array of HD programming; citing Morgan Stanley estimate that cable and satellite companies will spend $13-
$14 billion to increase their HDTV capacity); Denson/Grad Decl. at 9 ("Because customer expectation for HD
sports is so strong, in every other market in which Verizon competes, it carries regional sports programming in HD
format where such programming is made available."); Verizon Post-Discovery Opening Brief at 12 and Appendix C
(DEF000045) ([REDACTED
]).
231 See Verizon Complaint at 30 and Exhibit 4 (providing Cablevision advertisements emphasizing its ability to
offer all nine New York sports teams in HD); Verizon Post-Discovery Opening Brief at 8-9 and Appendices A and C
(same); id. at 12 and Appendix C (DEF000011, DEF00018) ([REDACTED
]); Verizon Post-Discovery Reply Brief at 9-10
and Bazelon Decl. at 11 (noting Cablevision's advertising of sports in HD); Defendants' Answer at 18-19 ( 12)
and 44-45 (noting Verizon's advertising and statements emphasizing its HD offerings); Defendants' Post-Discovery
Answer to Supplement
at 44-45 and Exhibit C (noting Verizon's advertising and statements emphasizing its HD
offerings); Defendants' Post-Discovery Reply Brief, Exhibit A (noting Verizon's advertising and statements
emphasizing its HD offerings).
232 See Defendants' Answer at 48 (noting that HD has materially different resolution, depth, audio, and display than
SD); Verizon Post-Discovery Opening Brief at 10-11 and Appendix C (DEF002076) ([REDACTED
]); Verizon Post-Discovery Reply Brief at 7 ([REDACTED
]).
233 See Defendants' Answer at 48 and Declaration of Adam Levine (July 29, 2009), at 13 (noting that content may
differ between the SD and HD versions of a network) ("Levine July 2009 Decl.").
234 See 2010 Order, 25 FCC Rcd at 784-85, 54-55; Verizon Post-Discovery Reply Brief at 6 ("The record
confirms that the HD format of MSG and MSG+ is distinct from the standard definition feed, and that there is strong
independent consumer demand for HD programming generally . . . .").
235 In Section 207 of the Satellite Television Extension and Localism Act of 2010 ("STELA"), Congress accelerated
the timetable pursuant to which satellite providers that carry local stations in HD must carry "qualified
noncommercial educational television stations" in HD. See Pub. L. No. 111-175, 207, 124 Stat. 1218 (amending
47 U.S.C. 338 (2006)). In affirming a federal district court's decision denying a motion for a preliminary
injunction, the United States Court of Appeals for the Ninth Circuit explained that Congress in passing Section 207
"recognized whether a program is offered in HD affects whether viewers watch it." See DISH Network Corp. v.
FCC
, 636 F.3d 1139, 1149 (9th Cir. 2011), amended by 2011 WL 3449485 (Aug. 9, 2011). The court held "it was
reasonable for Congress to conclude that allowing satellite carriers to delay offering PBS in HD would lead to
anticompetitive results." See id. The court also cited a New York Times article "stating that shortly before
STELA's passage, half of the country was watching television in HD format and that `HD may limit the number of
channels that viewers turn to, because once they can watch programs in HD, they have little desire to watch anything
(continued....)
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(iii)

Defendants Have Failed to Rebut the Presumption

49.
The 2010 Order provides that a defendant to a complaint alleging an "unfair act"
involving a terrestrially delivered, cable-affiliated RSN will have the opportunity to rebut the presumption
of significant hindrance.236 As an initial matter, Defendants contend that the facts of the withholding at
issue in the Philadelphia and San Diego cases used to support the Commission's adoption of a rebuttable
presumption for RSNs are distinct from the facts of this case.237 Accordingly, Defendants argue that it
would be inappropriate to apply the rebuttable presumption in this case.238 We disagree that these
distinctions are meaningful. First, Defendants contend that the RSNs at issue in the previous cases had
exclusive rights to the games of all of the local major professional sports teams in the market, whereas the
present case involves only two of the four RSNs in the New York DMA.239 In fact, the percentage of
local major professional sports teams withheld in New York (44 percent) and Buffalo (50 percent) is
comparable or identical to the percentage withheld in the San Diego case (50 percent).240 Second,
(Continued from previous page)


of a lower quality.'" See id. (quoting Brian Stelter, Crystal-Clear, Maybe Mesmerizing, N.Y. Times, May 24, 2010,
B4).
Defendants claim that data in the record undermine the rebuttable presumption for HD RSNs. Based on data
indicating that 46 percent of U.S. households have an HDTV set (see supra n.227) and that 66 percent of those
households owning an HDTV set subscribe to HD service, Defendants claim that only 33 percent of households (46
percent * 66 percent) are capable of viewing HD RSN programming. See Defendants' Post-Discovery Answer to
Supplement
38 (2009 data from Magid Media Futures) (citing George Winslow, Mixed Picture: HD Penetration Up,
But Viewer Confusion Persists
, Multichannel News, Dec. 12, 2009, available at http://www.multichannel.com/
article/439945-Mixed_Picture_HD_Penetration_ Up_But_Viewer_ Confusion_ Persists.php?rssid=20059). We find
this percentage to be significant and that it supports, rather than undermines, the rebuttable presumption for HD
RSNs. See Bazelon Decl. at 10. Indeed, as discussed above, the Commission found that MVPDs were
"significantly hindered" as a result of exclusive deals between cable operators and MDU owners when the record
reflected that 30 percent of Americans lived in MDUs and the percentage of Americans living in an MDU subject to
an exclusive deal is lower. See supra 43.
236 See 2010 Order, 25 FCC Rcd at 782-83, 52.
237 See supra n.8; Defendants' Answer at 40 n.121; Defendants' Post-Discovery Answer to Supplement at 48-51, 64-
65, 115-16; Owen Study at 2-9; Defendants' Post-Discovery Reply Brief at 31-32 n.110.
238 See Defendants' Post-Discovery Answer to Supplement at 48-51, 64-65, 115-16; Defendants' Post-Discovery
Reply Brief
at 31-32 n.110.
239 See Defendants' Answer at 40 n.121; Defendants' Post-Discovery Answer to Supplement at 48 n.168;
Defendants' Post-Discovery Reply Brief at 31-32 n.110. In addition to MSG and MSG+, there are two additional
RSNs in the New York DMA: YES Network (showing the games of the New York Yankees of MLB and the New
Jersey Nets of the NBA) and SportsNet New York (showing the games of the New York Mets of MLB). See
Defendants' Post-Discovery Answer to Supplement
at 42-43, 49. Verizon has access to the SD and HD versions of
YES Network and SportsNet New York. See id.
240 By "local major professional sports," we refer to football (NFL), baseball (MLB), basketball (NBA), and hockey
(NHL) teams whose home stadiums are located in the applicable DMAs. In the New York DMA, there are nine
local major professional sports teams, four of which are withheld from Verizon: football (New York Giants and
New York Jets); baseball (New York Yankees and New York Mets); basketball (New York Knicks (withheld) and
New Jersey Nets); and hockey (New York Rangers (withheld), New York Islanders (withheld), and New Jersey
Devils (withheld)). In the Buffalo DMA, there are two local major professional sports teams, one of which is
withheld from Verizon: football (Buffalo Bills) and hockey (Buffalo Sabres (withheld)). In the San Diego DMA,
there are two local major professional sports teams, one of which is withheld from competitors: football (San Diego
Chargers) and baseball (San Diego Padres (withheld)). In addition, we note that the percentage of major
professional sports teams withheld in San Diego would be even less if out-of-DMA basketball and hockey teams
(continued....)
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Defendants note that the RSNs in the Philadelphia and San Diego cases show professional baseball
games, which they claim involve one of the nation's two most popular sports, whereas MSG HD and
MSG+ HD show professional basketball and hockey games only.241 The Commission, however, included
professional basketball and hockey, along with professional football, baseball, and other sports, in the
definition of an RSN and the accompanying rebuttable presumption.242 Had the Commission deemed
basketball or hockey as insufficiently popular or otherwise not relevant, it would not have included these
sports in the definition of an RSN. Third, Defendants note that the Philadelphia and San Diego cases
involved complete withholding (both SD and HD), whereas the present case involves withholding of only
the HD version of the RSNs.243 As discussed above, however, the Commission has already determined
that withholding the HD version is rebuttably presumed to cause "significant hindrance" even if an SD
version of the network is made available to competitors.244 Fourth, Defendants note that the Philadelphia
and San Diego cases assessed the impact of withholding on DBS operators only, whereas the present case
involves a wireline MVPD that bundles its video service with voice, data, and wireless services, which
Defendants claim decreases the competitive significance of any individual network.245 As discussed
below, however, Defendants offer no empirical support for the claim that bundling reduces the
importance of RSNs to consumers when making a choice in a video provider.246
50.
In any event, the 2010 Order provides a defendant with the opportunity to bring forth
evidence tending to show that distinctions such as these or other facts rebut the presumption that
Verizon has been significantly hindered.247 Defendants have the opportunity to introduce evidence
(Continued from previous page)


from the adjacent Los Angeles DMA that are available to MVPDs in San Diego are included in this analysis. We
also note that in the Philadelphia DMA, there are four local major professional sports teams, three of which were
withheld from DBS operators: football (Philadelphia Eagles); baseball (Philadelphia Phillies (withheld)); basketball
(Philadelphia 76ers (withheld)); and hockey (Philadelphia Flyers (withheld)). While the percentage of local major
professional sports teams withheld in Philadelphia (75 percent) is greater than in either New York or Buffalo, this
does not undermine the fact that the percentage of teams withheld in New York and Buffalo is similar to San Diego,
where the Commission found that withholding of an RSN resulted in "significant hindrance."
241 See Defendants' Post-Discovery Answer to Supplement at 116. Defendants do not provide support for the
assertion that baseball is "one of the nation's two most popular sports." See id. Even if true, Defendants do not
provide evidence that this is also true in the New York and Buffalo DMAs.
242 See supra n.8 (stating definition of RSN). Moreover, MSG LP has conceded in a previous litigation that close
substitutes do not exist for professional hockey. See supra n.220.
243 See Defendants' Answer at 42-43; Defendants' Feb. 25th Letter at 7; Defendants' Post-Discovery Answer to
Supplement
at 5-6, 48, 50-51, 116; Defendants' Post-Discovery Reply Brief at 31-32 n.110.
244 See supra 4.
245 See Defendants' Post-Discovery Answer to Supplement at 64-65; Owen Study at 2-9; Defendants' Post-Discovery
Reply Brief
at 31-32 n.110.
246 See infra 64.
247 The Commission adopted a rebuttable presumption for RSNs based on Commission precedent and the weight of
empirical data demonstrating that withholding of an RSN results in significant hindrance. See 2010 Order, 25 FCC
Rcd at 782-83, 52. The Commission specifically declined to adopt a per se prohibition on withholding of RSNs
because of data involving withholding of a single RSN in Charlotte which did not show a statistically significant
effect on predicted market share. See id. at 770-71, 35 (citing Adelphia Order, 21 FCC Rcd at 8271, 149 and
8271-72, 151 (concluding that withholding of a terrestrially delivered RSN in Charlotte did not show a statistically
significant effect on predicted market share, and noting that the RSN showed the games of the Charlotte Bobcats, a
relatively new team that did not yet have a strong enough following to induce large numbers of subscribers to switch
MVPDs)). Thus, despite the overwhelming evidence demonstrating the critical nature of RSNs to competition, the
(continued....)
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tending to show that, as they contend, these distinctions mean that Verizon's inability to access MSG HD
and MSG+ HD is "far less severe" than the withholding at issue in the Philadelphia and San Diego
cases.248 As Defendants note, a rebuttable presumption does not shift the burden of proof to Defendants;
rather, it requires Defendants to come forward with evidence that rebuts or meets the presumption.249
Here, Defendants have put forth two types of evidence to rebut the presumption: survey evidence and
non-survey evidence. With respect to the survey evidence, we find below that the results of the surveys
contradict the stated purpose of Defendants' product differentiation strategy and, in any event, the surveys
contain material flaws and deficiencies that render them insufficiently reliable to overcome the
Commission's presumption. With respect to the non-survey evidence, we find below that this evidence is
also unavailing because it fails to isolate the impact of the lack of MSG HD and MSG+ HD on the
willingness of consumers to choose Verizon. Thus, we conclude that Defendants have failed to rebut the
presumption that their withholding of MSG HD and MSG+ HD from Verizon has the "effect" of
"significantly hindering" Verizon.
(a)

Survey Evidence

51.
In the 2010 Order, the Commission declined to adopt specific evidentiary requirements
for assessing "significant hindrance," stating instead that the evidence required will vary based on the
facts and circumstances of each case.250 The Commission provided two illustrative examples of empirical
evidence that litigants might consider providing in assessing "significant hindrance."251 First, a litigant
might provide an appropriately crafted regression analysis that estimates what the complainant's market
share in the MVPD market would be if it had access to the programming and how that compares to its
actual market share.252 Second, a litigant might provide statistically reliable survey data indicating the
likelihood that customers would choose not to subscribe to or switch to an MVPD that did not carry the
withheld programming.253 The Commission explained that the reliability of the regression analysis,
survey data, or other empirical data will be assessed on a case-by-case basis.254
52.
In their effort to come forward with empirical evidence that would rebut the presumption,
Defendants have elected not to rely on a regression analysis. Rather, Defendants rely on three consumer
surveys purporting to demonstrate that MSG HD and MSG+ HD are not a significant factor to consumers
in the New York DMA and Buffalo DMA when choosing an MVPD. For the reasons discussed below,
we find that the results of these surveys contradict the stated purpose of Defendants' product
(Continued from previous page)


Commission recognized the possibility that the facts in certain cases may reveal that withholding of an RSN does
not result in significant hindrance.
248 See Defendants' Post-Discovery Answer to Supplement at 48.
249 See id. at 12-13, 115; Defendants' Post-Discovery Reply Brief at 31-32; see also Cablevision II, 2011 WL
2277217, at *17 ("Reviewing the Commission's order, we think it clear that its rebuttable presumptions shift only
the burden of production.").
250 See 2010 Order, 25 FCC Rcd at 785-86, 56.
251 See id.
252 See id.
253 See id.
254 See id.
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differentiation strategy and, in any event, they suffer from significant flaws and deficiencies that render
them unreliable for their intended purposes in this proceeding.255
(i)

The Results of Defendants' Surveys
Contradict Their Product Differentiation
Strategy

53.
As discussed above, Defendants' stated reason for withholding MSG HD and MSG+ HD
from Verizon is to provide Cablevision with a way to differentiate its service from Verizon and thereby
gain a competitive advantage.256 Indeed, Defendants and their experts state that they expect at least some
consumers in the New York DMA and Buffalo DMA to refrain from choosing Verizon because it lacks
MSG HD and MSG+ HD.257 Defendants' surveys, however, purport to demonstrate that the availability
of MSG HD and MSG+ HD is not a factor for consumers in the New York DMA and Buffalo DMA when
choosing an MVPD. If consumers attach no significance to the availability of MSG HD and MSG+ HD,
as Defendants' surveys purport to show, then it is hard to explain why Defendants stress the importance
of that HD programming in their public statements and their advertising.258 Moreover, in that instance
there appears to be no reason for Defendants to withhold these networks from Verizon. Instead,
Defendants would benefit by licensing this content to Verizon and earning increased licensing fees and
advertising revenues.259 Defendants do not attempt to explain the contradiction between the survey
results and their real-world actions, which further supports our conclusion below that these surveys
contain significant flaws and deficiencies that render them unreliable.


255 Because all three of these surveys contain significant flaws and deficiencies, and we do not know what other
evidence Defendants chose not to present, we assign no significance to the fact that the three studies lead to
convergent results. See Soman Decl. at 8, 20.
256 See supra n.87 and 25-26.
257 See Defendants' Answer at 7 (stating that withholding MSG HD and MSG+ HD from Verizon "may result in
making Verizon's video offering less attractive to a subset of its potential customer base"); Bulow/Owen Study at 10-
11 ("There is no doubt that Verizon would be better off, at least in the short run, if MSG HD and MSG+ HD were
available to it at a rate below Verizon's reservation price."); Defendants' Post-Discovery Answer to Supplement at
83 (stating that withholding MSG HD and MSG+ HD from Verizon "may make Verizon's video program offerings
appear less attractive to some small segment of customers"); see also supra 25 (noting statements from
Cablevision executives and Cablevision documents emphasizing the competitive importance of its competitors'
inability to offer MSG HD and MSG+ HD).
258 See Verizon Post-Discovery Reply Brief at 18 ("[I]f the programming at issue was not important to a significant
number of customers, why would Cablevision spend heavily on advertising that not only mentions but centers on
that programming? If the programming was not important to a significant number of consumers, why would
Defendants inform analysts that Cablevision's withholding of this programming will help shield it from competition
from Verizon?").
259 See Verizon Post-Discovery Opening Brief at 17 ("The importance of this programming is underscored by
Defendants' concerted efforts to deny access to Verizon's customers, no matter the Defendants' costs in foregone
revenue for MSG or collective litigation costs."); Bazelon Decl. at 10 ("[I]f the programming is not important to
consumers, its presence or absence will not significantly influence the consumers' choice of MVPD. From an
economic perspective, therefore, Defendants' withholding of the programming suggests they believe it will change
the choice of provider for a significant number of subs enough to overcome the losses in licensing fees as a result
of withholding the programming."); Verizon Reply at 21-22 ("If the HD product did not handicap Verizon's ability
to provide a meaningful competitive option to consumers, Cablevision would have no rational reason so adamantly
to withhold it."); see also Verizon Complaint at 23-24 ( 57); Verizon Reply at 18; Verizon Post-Discovery Opening
Brief
at 18.
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(ii)

Defendants' Survey Evidence Is Not Reliable

(a)

Defendants'/Radius Survey

54.
The Defendants'/Radius Survey entailed a telephone survey conducted in
February/March 2010 of 503 adults who subscribe to a pay television provider or rely on over-the-air
television reception; are decision-makers in their household for selecting a video provider; and live within
the New York DMA where Cablevision and Verizon FiOS TV service areas overlap.260 The survey used
open-ended, non-leading questions.261 Respondents could mention anything in response to the survey
questions.262 When asked for their reasons for selecting, switching to, or staying with their current video
service provider, [REDACTED
].263 Other factors were
mentioned far more frequently: price (70 percent), general satisfaction (67 percent), and customer
service/reliability (66 percent).264 The Defendants'/Radius Survey concludes that MSG HD and MSG+
HD are not "top of mind" or meaningful factors and, in fact, are [REDACTED
] for consumers when choosing a video provider.265
55.
We find this survey suffers from deficiencies that render it unreliable. Experts on behalf
of both Parties explain that an open-ended questioning technique has disadvantages, such as creating
difficulties in properly documenting the results.266 For example, to the extent that respondents stated they
would not switch video providers because they were "generally satisfied," one reason for their satisfaction
with their current provider may be that they receive MSG HD and MSG+ HD. While the study indicates
that exhaustive and non-directive probing was used to allow respondents to expand on their reasons for
selecting, switching to, or staying with their current video service provider,267 Defendants provide only a


260 See Defendants'/Radius Survey at 1. The survey did not include residents from the Buffalo DMA.
261 See id. at 2; Shifrin Decl. at 6; Shifrin Reply Decl. at 7; Defendants' Post-Discovery Answer to Supplement at
53.
262 See Defendants'/Radius Survey at 2; Shifrin Decl. at 6; Shifrin Reply Decl. at 7; Defendants' Post-Discovery
Answer to Supplement
at 53. Defendants provided declarations from experts in survey and data analysis opining that
the survey methodology was valid. See Bradlow Decl. at 19; Scott Decl. at 13; Soman Decl. at 15-16.
263 [REDACTED
]. See Defendants'/Radius Survey at 4.
264 See id.
265 Defendants'/Radius Survey at 1, 4; see also Defendants' Supplement at 2-3; Defendants' Post-Discovery Answer
to Supplement
at 51-53. Defendants provided declarations from experts in survey and data analysis opining that the
results demonstrate that subscribers attach low importance to local sports in HD as a factor in their choice of video
service provider. See Bradlow Decl. at 19; Scott Decl. at 6(b), 13; Soman Decl. at 15-16.
266 See Scott Decl. at 13; Bazelon Decl. at 19 (quoting a text on marketing research as stating "`[b]ecause of the
freedom allowed respondents, the responses to open-ended questions are often so vague that they can be
misclassified by coders in spite of the detailed instructions given them'") (quoting Dawn Iacobucci and Gilbert A.
Churchill, Marketing Research: Methodological Foundation, 9th Edition (Ohio: Thomson South-Western 2005) at
408); id. ("[O]nce coded, the data can be difficult to interpret and often are not subject to statistical analysis. In fact,
open-ended surveys are more typically deployed before concrete research questions are formed the open-ended
nature being less restrictive in eliciting information from subjects. In the current case, a specific research question
was known, making the need for open-ended questions unnecessary.").
267 See Shifrin Decl. at 6; Defendants'/Radius Survey at 2; Shifrin Reply Decl. at 8, 13; Defendants' Post-
Discovery Answer to Supplement
at 51-52, 61; Bradlow Decl. at 19; Soman Decl. at 16.
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broad outline and not the actual text of the questions and probing techniques used for the survey.268 This
omission renders it impossible to assess whether the probing questions asked were biased or misleading
and the nature and extent of the probing used to elicit responses. We also note, as Defendants' own
expert concedes, that the survey does not directly address the key issue of the impact of the lack of MSG
HD and MSG+ HD on the willingness of consumers to choose Verizon.269 While the Defendants'/Radius
Survey
concludes that MSG HD and MSG+ HD are not "top of mind" considerations, this does not
necessarily mean that these networks are not significant to many consumers.270 It is possible, for
example, that some respondents simply never thought of the possibility that they might lose MSG HD or
MSG+ HD programming. That MSG HD or MSG+ HD was not one of the first things that came to the
respondents' minds when attempting to recall their reasons for selecting, switching to, or staying with
their current video service provider does not mean that these networks are irrelevant in their decision-
making process.
(b)

Defendants'/OTX Survey

56.
The Defendants'/OTX Survey used a test versus control methodology.271 The respondents
were non-Verizon FiOS TV customers who are decision makers in their household for selecting a video
provider and who live in areas where Cablevision and Verizon FiOS TV service areas overlap.272 The
Control Group of 312 respondents saw an offer for Verizon FiOS TV that had no reference to MSG HD
or MSG+ HD, but did reference that Verizon FiOS TV offers "tons of sports, including all 9 NY sports
teams" (the "No-HD Offer").273 The Test Group of 317 respondents saw an offer for Verizon FiOS TV
that included a reference to MSG HD and MSG+ HD and touted the availability of "all 9 NY sports teams
in HD" (the "HD Offer").274 Based on these descriptions, the respondents were asked how likely they
would be to consider switching or not switching to Verizon.275 Based on the responses, the survey
concludes that the number of consumers more likely to choose Verizon FiOS TV with MSG HD and
MSG+ HD over Verizon FiOS TV without MSG HD and MSG+ HD is not statistically significant.276


268 See Defendants'/Radius Survey at 2-3 ("Other reasons Open/Ended (using non-directive probing)").
269 See Scott Decl. at 6(b) ("[T]his methodology does not address the question of whether or not consumers would
switch subscription television providers in order to receive MSG HD or MSG+ HD . . . ."); Verizon Post-Discovery
Reply Brief
at 19.
270 See Verizon Response to Defendants' Supplement at 3-4.
271 See Shifrin Decl. at 3; Defendants'/OTX Survey at 1; Shifrin Reply Decl. at 17; Defendants' Post-Discovery
Answer to Supplement
at 54.
272 See Defendants'/OTX Survey at 2.
273 See id. at 1 and Appendix at 3; see also Shifrin Decl. at 3; Defendants' Post-Discovery Answer to Supplement at
54.
274 See Defendants'/OTX Survey at 1 and Appendix at 1; see also Shifrin Decl. at 3; Defendants' Post-Discovery
Answer to Supplement
at 54.
275 See Defendants'/OTX Survey at 2; see also Defendants' Post-Discovery Answer to Supplement at 54. Defendants
provided declarations from experts in survey and data analysis opining that the survey methodology was valid. See
Bradlow Decl. at 20; Scott Decl. at 6(c), 14-16; Soman Decl. at 17.
276 See Shifrin Decl. at 8; Defendants'/OTX Survey at 3; Shifrin Reply Decl. at 17; Defendants' Post-Discovery
Answer to Supplement
at 53-54; see also Bradlow Decl. at 20; Scott Decl. at 6(c), 16; Soman Decl. at 17.
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57.
We find that the Defendants'/OTX Survey is flawed because there was no meaningful
difference between the offers viewed by the Control Group and the Test Group.277 The No-HD Offer
(used for the Control Group) did not make clear that MSG HD and MSG+ HD were not offered.278 For
example, the reference to "tons of sports, including all 9 NY sports teams" appeared directly after a
reference to "[m]ore than 335 all-digital channels, and over 70 in HD," which likely misled some
respondents to believe that the No-HD Offer included MSG HD and MSG+ HD.279 We do not find that
the channel line-up provided with the offer was sufficient to mitigate this flaw.280 We find it unlikely that
respondents viewing the No-HD Offer would scour a list of hundreds of channels to determine which
channels were included, especially considering that the first page of the offer specifically emphasized the
amount of sports and HD channels available, thereby implying that MSG HD and MSG+ HD were
included. The fact that the No-HD Offer mirrors Verizon's real-world advertisements, which do not
emphasize its lack of MSG HD and MSG+ HD, does not alter our conclusion.281 We would not expect
Verizon to emphasize in an advertisement those networks that it cannot offer. The purpose of the study,
however, was not to assess Verizon's advertisements but instead to determine specifically whether
respondents were more likely to choose Verizon FiOS TV with MSG HD and MSG+ HD than without
these networks.282 Thus, providing respondents viewing the No-HD Offer with an adequate indication
that MSG HD and MSG+ HD were not available was critical to the reliability of the study.283 Given the
misleading nature of the No HD Offer, however, it is entirely possible that some respondents assumed or
concluded that MSG HD and MSG+ HD were available, thereby undermining the survey results.284
Accordingly, we find the failure of the No-HD Offer to adequately indicate to respondents that MSG HD
and MSG+ HD were not available or at least to avoid implying that these channels were available
renders the Defendants'/OTX Survey unreliable.
58.
We nevertheless note for future guidance that the Defendants'/OTX Survey presents a
useful survey design for attempting to address the issue of whether withholding programming results in
"significant hindrance." The survey appropriately sought to isolate the key variable at issue in this case
the impact of the lack of MSG HD and MSG+ HD on the willingness of consumers to choose Verizon.
Absent the failure to adequately indicate to respondents viewing the No-HD Offer that MSG HD and


277 See Verizon Response to Defendants' Supplement at 4-5.
278 See Defendants'/OTX Survey, Appendix at 3.
279 See id.
280 See id., Appendix at 4; Shifrin Reply Decl. at 23; see also Verizon Response to Defendants' Supplement at 5.
281 See Shifrin Reply Decl. at 21, 23; see also Shifrin Decl. at 13-14; Bradlow Decl. at 20; Scott Decl. at
16; Soman Decl. at 17.
282 To the extent Verizon's advertisements (as depicted in the No-HD Offer) lead real-world consumers to believe
that Verizon offers MSG HD and MSG+ HD, such advertisements may entice consumers to consider switching to
Verizon, but we find it unlikely that consumers choose a video provider based solely on an advertisement. Rather,
we believe it likely that most consumers compare the offerings of different video providers and ensure that the video
service provider they select has the channels and features they desire before switching to that provider. Thus, in
order to determine whether respondents would be more likely to choose Verizon FiOS TV if it had MSG HD and
MSG+ HD than if it did not, it was critical to provide respondents viewing the No-HD Offer with an adequate
indication that MSG HD and MSG+ HD were not available.
283 To be sure, as Defendants' expert notes, overemphasizing the lack of a network may bias the study. See Shifrin
Reply Decl. at 20. The Defendants'/OTX Study, however, took this advice to an extreme by obscuring the absence
of MSG HD and MSG+ HD in the No-HD Offer and even implying that the networks were offered.
284 See Verizon Response to Defendants' Supplement at 4.
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MSG+ HD were not available, we would have proceeded to assess the results of the survey to determine
whether Defendants had rebutted the presumption of "significant hindrance."
(c)

Defendants' Win-Back Survey

59.
The Defendants' Win-Back Survey was an online survey conducted in August 2010 of
734 customers who accepted a Cablevision "win back" offer and switched from Verizon to Cablevision
between July 2009 and June 2010.285 The survey asked the following open-ended, non-leading questions,
to which respondents could answer with any reasons of their choosing:286
"(1) Why did you decide to leave Verizon FiOS TV service and subscribe to iO TV? Please be as
specific as possible and tell us all reasons that may have influenced your decision to leave Verizon
FiOS TV service and choose iO TV service; and (2) What was the one main reason for your decision
to leave Verizon FiOS TV service and choose iO TV service?"287
[REDACTED
.288
].289 Defendants contend that this demonstrates that absence of MSG
HD and MSG+ HD is not a significant factor in consumer choice of MVPD.290
60.
We find this survey suffers from flaws and deficiencies that render it unreliable as
support for Defendants' positions. As Verizon's expert explains, the study suffers from selection bias
because the sample is made up of customers who (i) initially selected Verizon, thereby indicating that
lack of MSG HD and MSG+ HD was not a significant factor to them, and (ii) find price to be an
important consideration, as demonstrated by their decision to accept a discounted offering to switch back
to Cablevision.291 The sample is skewed towards individuals who would not be expected to value MSG
HD and MSG+ HD highly (given their initial selection of Verizon) and who consider price a decisive
factor (given their acceptance of the discounted offer). Moreover, the survey was conducted online and
there is no indication of any probing performed to allow respondents to expand on their reasons for
switching.292 In addition, for the same reasons discussed above regarding the Defendants'/Radius Survey,


285 See Defendants' Post-Discovery Answer to Supplement at 54 n.191 and Exhibit G at 1.
286 See id.
287 Id. Defendants provided declarations from experts in survey and data analysis opining that the survey
methodology was valid. See Bradlow Decl. at 19; Scott Decl. at 19; Soman Decl. at 18.
288 See Defendants' Post-Discovery Answer to Supplement at 55 and Exhibit G.
289 See id.
290 See id. at 54. Defendants provided declarations from three experts in survey and data analysis opining that the
results demonstrate that the unavailability of MSG HD and MSG+ HD did not play a significant role in driving the
sampled customers back to Cablevision. See Bradlow Decl. at 18, 23; Scott Decl. at 20-21; Soman Decl. at
18.
291 See Bazelon Decl. at 20.
292 See Defendants' Post-Discovery Answer to Supplement at 54 n.191 and Exhibit G at 1.
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the Defendants' Win-Back Survey suffers from the following deficiencies: (i) the open-ended questioning
technique creates difficulties in properly documenting the results; and (ii) the survey does not directly
address the key issue of the impact of the lack of MSG HD and MSG+ HD on the willingness of
consumers to choose Verizon.293
(b)

Non-Survey Evidence

61.
We also find that the non-survey evidence put forth by Defendants does not
individually or collectively rebut the presumption of "significant hindrance." First, Defendants provide
evidence purporting to demonstrate Verizon's general success in the New York DMA despite the lack of
MSG HD and MSG+ HD. 294 This evidence includes the following: (i) the allegedly robust level of
competition in the New York DMA;295 (ii) statements Verizon has made regarding its success;296 (iii)
Verizon's decision to raise its rates;297 (iv) [REDACTED
];298 (v) Verizon's decision to
expand and market its service in the New York DMA;299 and (vi) the fact that Verizon's subscriber count
has increased,300 [REDACTED


293 See supra 55.
294 Defendants also provide evidence regarding Verizon's investment in its video-capable network throughout the
nation, its enterprise value, and its status as the seventh-largest MVPD in terms of subscribers nationwide. See
Defendants' Post-Discovery Answer to Supplement
at 3, 87-88; see also Defendants' Answer at 16-17 ( 10). This
pertains to nationwide data and not the pertinent issue of the impact of Defendants' withholding on the willingness
of consumers to choose Verizon in the New York and Buffalo DMAs.
295 See Defendants' Answer at 16-18 ( 10-11), 43-44, 65-66; Defendants' Post-Discovery Answer to Supplement at
6, 35-36. Defendants' claim of robust competition is belied by the fact that incumbent cable market share in the
New York DMA far exceeds the national average and that Cablevision has raised its rates in excess of inflation
despite the number of competitors in the market. See 2010 Order, 25 FCC Rcd at 763, 27 n.97 (citing Nielsen data
indicating that the share of MVPD subscribers held by "wired cable operators" in the New York DMA was 88.5
percent as of July 2009, while other data indicated that the market share held by cable operators nationwide was
approximately 63.5 percent); Defendants' Post-Discovery Answer to Supplement at 41 (stating that Cablevision's
2010 rate increases averaged about 3 percent); U.S. Department of Labor, Bureau of Labor Statistics, News Release,
Consumer Price Index December 2010, at 1 (stating that during 2010, the Consumer Price Index increased by 1.5
percent for all items and by 0.8 percent for all items less food and energy). Cablevision does not contend that
increases in costs, such as programming costs, are primarily responsible for its rate increases. While Defendants
state that all of New York City and virtually all other franchise areas in New York and New Jersey where FiOS TV
is offered are subject to "effective competition," the Commission has explained that the statutory "effective
competition" test serves a limited and defined purpose and is not relevant in assessing "significant hindrance." See
2010 Order
, 25 FCC Rcd at 763, 27 n.97; see also Defendants' Post-Discovery Answer to Supplement at 36.
296 See Defendants' Answer at 43-44; Defendants' Post-Discovery Answer to Supplement at 4, 24-26; Defendants'
Post-Discovery Reply Brief
at 2; see also Bradlow Decl. at 21; Soman Decl. at 19.
297 See Defendants' Post-Discovery Answer to Supplement at 40-41; see also Defendants' Answer at 8, 44;
Defendants' Feb. 25th Letter at 7, Attachment at 4.
298See Defendants' Post-Discovery Answer to Supplement at 32-35; Defendants' Post-Discovery Reply Brief at 8-9.
299 See Defendants' Answer at 17-18 ( 11); Defendants' Post-Discovery Answer to Supplement at 24, 41-42, 77 and
Highly Confidential Appendix, Tabs 6, 21.
300 See Defendants' Answer at 8, 17-18 ( 11), 43; Defendants' Post-Discovery Answer to Supplement at 26-27.
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,301
].302 Defendants' evidence purporting to demonstrate Verizon's general
success is contradicted by other evidence in the record indicating that [REDACTED
;303
;304


301 See Defendants' Post-Discovery Answer to Supplement at 27-29, 77 and Highly Confidential Appendix, Tabs 3,
22. We note that Verizon entered the video market in New York approximately five years ago with zero video
customers. See supra n.169. We do not find it dispositive that Verizon, as the new entrant in the video market,
would experience an increase in subscribership [REDACTED

].
302 See Defendants' Post-Discovery Answer to Supplement at 27-28; Defendants' Post-Discovery Reply Brief at 4,
29. [REDACTED
].
303 See Verizon Complaint at 4; [REDACTED
].
304 Nielsen data indicates that, as of July 2010, the share of multichannel video subscribers held by "wired cable
operators" in the New York DMA was 87.9 percent. See ADS and Wired-Cable Penetration by DMA: DMA
Household Universe (July 2010) (data available at http://www.tvb.org/planning_buying/184839/4729/72555).
[REDACTED
(continued....)
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].305 In any event, we find that Defendants' evidence,
standing alone, fails to rebut the presumption of "significant hindrance" because it fails to isolate how the
absence of MSG HD and MSG+ HD has impacted Verizon's ability to provide a competing video service.
As discussed above, the relevant inquiry in assessing "significant hindrance" is whether an MVPD has
been hindered relative to its competitors and whether the hindrance is substantial enough to eliminate the
MVPD as a competitive choice for a meaningful number of consumers.306 Defendants' evidence
purporting to demonstrate Verizon's general success in the New York DMA fails to isolate the impact of
the lack of MSG HD and MSG+ HD on the willingness of consumers to choose Verizon. We note that a
complainant attempting to establish that an "unfair act" has resulted in "significant hindrance" could not
simply rely on evidence that its service is generally performing poorly. Rather, the complainant would
need to provide evidence explaining how the "unfair act" has contributed to such performance. Likewise,
in coming forward with evidence to rebut the presumption here, Defendants cannot simply rely on what
they perceive to be Verizon's general success in the affected markets without isolating the impact of the
key variable here the presence or absence of MSG HD and MSG+ HD.307

62.
Second, Defendants claim that MSG HD has lower ratings than many well-known SD
channels, thereby undermining the claim that lack of these networks has a significant impact on
Verizon.308 Despite what they claim to be low ratings, however, Defendants continue to emphasize MSG
(Continued from previous page)


]. Thus, while the D.C. Circuit has stated that
evidence of robust competition in a market would provide "powerful evidence that [] terrestrial programming
withholding has no significant impact on the delivery of satellite programming," the record here contains no such
evidence. Cablevision II, 2011 WL 2277217, at *15.
305 [REDACTED
].
306 See supra 43-44.
307 While Defendants have attempted to provide such evidence with their surveys, we find that evidence flawed and
deficient for the reasons discussed above. See supra 51-60.
308 See Defendants' Answer at 41-42; Levine July 2009 Decl. at 14; Defendants' Post-Discovery Answer to
Supplement
at 37 and Declaration of Adam Levine (Oct. 12, 2010), at 6 (stating that MSG HD and MSG+ HD
have lower ratings than SD networks such as A&E, ABC, Bravo, CBS, CNN, ESPN, Food Network, Fox, HGTV,
Lifetime, MSG, MSG+, NBC, SNY, TNT, WE, USA, and YES) ("Levine Oct. 2010 Decl."); [REDACTED
(continued....)
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HD and MSG+ HD in advertisements and continue to withhold this programming from Verizon.309 As
with the survey results noted above, if Defendants believe that the ratings data mean that subscribers do
not significantly value MSG HD and MSG+ HD, then Defendants have little to gain from advertising the
availability of these networks and no reason to withhold these networks from Verizon and to forgo
substantial licensing fees and advertising revenue in the process. Defendants do not attempt to explain
this contradiction. Moreover, while the Commission has recognized the importance of ratings in
assessing the value of programming to viewers, it has also recognized that ratings "are not a perfect
predictor of consumer response to the withholding of a network."310 Ratings do not purport to measure
the intensity of some consumers' desire to view a network. While a network may have low ratings, it
may also have no good substitutes, thus prompting those subscribers who value the network to refrain
from subscribing to a video provider that does not carry the network. The Commission has recognized
that RSNs such as MSG HD and MSG+ HD are examples of networks that have "no good substitutes,"
explaining that RSNs "typically purchase exclusive rights to show sporting events and sports fans believe
that there is no good substitute for watching their local and/or favorite team play an important game."311
Thus, allegedly low ratings notwithstanding, those subscribers who value MSG HD and MSG+ HD are
likely reluctant to switch to an MVPD that does not offer these networks. In addition, ratings for HD
networks are currently understated because not all households have HDTVs.312 As the Commission
recognized in the 2010 Order, however, HD is growing in importance to consumers.313 While the ratings
for MSG HD and MSG+ HD may appear low at present, the ratings for MSG SD and MSG+ SD indicate
that the programming provided by those channels is popular,314 [REDACTED
].315 In light of the growing
significance of HD, we can expect ratings for the HD versions to continue to rise as more households
obtain HDTV sets and subscribe to HD service offerings.316
63.
Third, [REDACTED
,317
.318
(Continued from previous page)


].
309 See supra n.87 and 25-26.
310 2007 Order, 22 FCC Rcd at 17817-18, 39.
311 News/Hughes Order, 19 FCC Rcd at 535, 133; see supra n.219.
312 See supra nn.226-227 (discussing percentage of households with HDTVs).
313 See supra 4.
314 See Verizon Post-Discovery Reply Brief at 23.
315 See supra n.222.
316 See supra 48.
317 See supra n.305.
318 See Defendants' Post-Discovery Answer to Supplement at 29-32; Defendants' Post-Discovery Reply Brief at 4,
27-29 and [REDACTED
].
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.319
.320
.321
].322 Defendants, however, have made no attempt to isolate the impact on Verizon's
market penetration of the key factor at issue in this case the presence or absence of MSG HD and
MSG+ HD.323 Defendants have stated that "regression analyses represent the Commission's preferred
means of assessing the impact of the lack of access to RSN programming," yet Defendants have made no
attempt to present such an analysis here using these market penetration data and other data obtained
during the course of discovery.324 While it may be difficult to perform a regression analysis,325 to the
extent a party relies on market share or penetration data in assessing "significant hindrance," such an
analysis is critical to isolate the impact of the variable at issue and to provide meaning to raw market
share or penetration figures. Accordingly, we find that these data standing alone do not specifically


319 See Defendants' Post-Discovery Answer to Supplement at 29; see also [REDACTED
].
320 See Defendants' Post-Discovery Answer to Supplement at 30-32; Defendants' Post-Discovery Reply Brief at 4,
27-29; [REDACTED
].
321 See Defendants' Post-Discovery Answer to Supplement at 30-32; Defendants' Post-Discovery Reply Brief at 27-
29; [REDACTED
].
322 [REDACTED
].
323 Indeed, in response to data provided by Verizon showing that Cablevision's market penetration is higher than
other incumbent cable operators in their respective service areas, Defendants stated that "[t]here are numerous
factors that bear upon the question of why Cablevision's penetration in its service area is higher than other MSOs in
their particular footprints," but that penetration figures alone do not "ascertain empirically whether the presence or
absence of HD RSN programming can be said to account for these differences." Defendants' Feb. 25th Letter at 12;
id. at 8 ("Verizon made no effort to offer any regression analysis that might demonstrate material differences in its
penetration levels in the NYMA relative to other markets, taking into account other relevant factors that might
explain such differences, arguably attributable to its lack of MSG HD and MSG+ HD."); see also Defendants' Post-
Discovery Reply Brief
at 25 [REDACTED
].
324 Defendants' Feb. 25th Letter at 8.
325 See Verizon Post-Discovery Opening Brief at 17 n.52.
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address the key issue of how the absence of MSG HD and MSG+ HD has impacted Verizon's ability to
provide a competing video service.326
64.
Fourth, noting that Verizon bundles video with voice, data, and wireless service,
Defendants argue that this increases the number of variables a consumer considers in choosing a provider
and diminishes the relevance of any single variable, such as the availability of an HD RSN.327 We find
this argument unavailing. There is no empirical data in the record to support the claim that bundling of
video, voice, data, and wireless service shrinks the importance of HD RSNs to consumers in selecting a
video provider.328 In fact, Defendants' decision to emphasize the availability of MSG HD and MSG+ HD
in its advertising indicates Defendants' view that this programming is significant to consumers despite
bundling.329
65.
Fifth, Defendants argue that Verizon's claim that it is "significantly hindered" without
MSG HD and MSG+ HD is belied by the fact that Verizon offers a large amount of sports and HD
programming and has touted the availability of this programming in its advertising and other public
statements.330 The Commission has rejected this same argument previously.331 As Defendants have
argued, the salient issue here is not the amount of sports or HD programming Verizon offers in general;
rather, the key issue is whether Verizon has been "significantly hindered" without MSG HD or MSG+
HD.332 The availability of other sports programming or other HD programming does not address the key


326 [REDACTED
] raw penetration numbers are not dispositive absent a regression analysis
isolating the magnitude of the impact of the lack of MSG HD and MSG+ HD.
327 See Defendants' Post-Discovery Answer to Supplement at 61-65; Owen Study; Defendants' Post-Discovery Reply
Brief
at 9-10.
328 See Verizon Post-Discovery Reply Brief at 22.
329 See supra 25; see also Verizon Post-Discovery Reply Brief at 22-23.
330 See Defendants' Answer at 18-19 ( 12), 39, 44-45; Defendants' Feb. 25th Letter at 7; Defendants' Post-
Discovery Answer to Supplement
at 4-6, 42-45; Bradlow Decl. at 12-13; Defendants' Post-Discovery Reply Brief
at 9-10, 13.
331 See 2010 Order, 25 FCC Rcd at 770, 34 ("The salient point for purposes of Section 628(b) is not the total
number of programming networks available or the percentage of these networks that are vertically integrated with
cable operators, but rather the popularity of the particular programming that is withheld and how the inability of
competitive MVPDs to access that programming in a particular local market may impact their ability to provide a
commercially attractive MVPD service.") (citing 2007 Order, 22 FCC Rcd at 12140, 38); see also Implementation
of the Cable Television Consumer Protection and Competition Act of 1992
Development of Competition and
Diversity in Video Programming Distribution: Section 628(c)(5) of the Communications Act: Sunset of Exclusive
Contract Prohibition
, Report and Order, 17 FCC Rcd 12124, 12139, 33 (2002) ("2002 Order") ("cable
programming be it news, drama, sports, music, or children's programming is not akin to so many widgets").
332 See Defendants' Post-Discovery Answer to Supplement at 17 ("The instant proceeding is not about whether HD
in general is important to consumers or whether Verizon's HD offerings in the aggregate are viable. It is about
(continued....)
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issue of how the absence of MSG HD and MSG+ HD has impacted Verizon's ability to provide a
competing video service.
66.
Sixth, Defendants provide evidence that [REDACTED
]333 and that Verizon's customer satisfaction
rating is higher than other MVPDs despite Verizon's lack of MSG HD and MSG+ HD.334 Both of these
factors are germane to the issue of whether current Verizon subscribers are satisfied with Verizon's
service, not whether potential subscribers, whom Verizon's business plan requires to be potentially
available to be won-over,335 would be unwilling to switch to Verizon given its lack of MSG HD and
MSG+ HD. Current Verizon subscribers have chosen Verizon despite its lack of MSG HD and MSG+
HD, thus indicating that the absence of these networks was not a critical factor in their choice of video
provider.
67.
Seventh, Defendants argue that [REDACTED
].336 We find this unavailing. The salient issue here is the significance of one particular
factor Verizon's inability to offer MSG HD and MSG+ HD. That there are other factors that may
impact Verizon's performance even more does not mean that access to MSG HD and MSG+ HD is
unnecessary for Verizon to compete effectively. In addition, [REDACTED
],337 RSNs are non-replicable and
have no close substitutes, thus eliminating Verizon's ability to match its competitors' offering of MSG
HD and MSG+ HD.338
(Continued from previous page)


whether the absence of MSG HD and MSG+ HD from the FiOS TV lineup significantly hinders Verizon from
delivering satellite cable programming.").
333 [REDACTED
]
334 See Defendants' Post-Discovery Answer to Supplement at 36-37; Defendants' Post-Discovery Reply Brief at 10.
335 See Verizon Complaint at 42 ("By withholding regional sports, Defendants are denying Verizon a necessary
component to compete effectively for the many customers who demand their regional sports in HD, and denying
those same consumers a meaningful competitive choice. Because these customers will not consider a competing
service that does not include their regional sports in HD, Verizon cannot provide them the programming that makes
up its service."); see also Verizon Post-Discovery Reply Brief at 16-17 (stating that while "Verizon has been able to
attract some consumers who may find HD regional sports as optional rather than mandatory, Section 628(b)
nonetheless condemns Defendants' unfair acts that deny a competitive choice to the many other consumers who do
insist on such programming").
336 See Defendants' Post-Discovery Answer to Supplement at 5, 66-78 and Highly Confidential Appendix, Tabs 14-
20; Defendants' Post-Discovery Reply Brief at 18-20; see also Verizon Post-Discovery Opening Brief at 10 and
Appendix B (VZ-MSG-0003396, VZ-MSG-0003509, VZ-MSG-0003515).
337 [REDACTED
]; see Defendants' Post-Discovery
Answer to Supplement at 5, 66-78 and Highly Confidential Appendix, Tabs 14-20; Defendants' Post-Discovery
Reply Brief
at 18-20.
338 See Verizon Post-Discovery Reply Brief at 29-30; Bazelon Decl. at 8.
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(c)

Conclusion

68.
In the 2010 Order, the Commission established a rebuttable presumption that
Defendants' withholding of MSG HD and MSG+ HD from Verizon has the "effect" of "significantly
hindering" Verizon from providing a competing video service, including "satellite cable programming
and satellite broadcast programming," to subscribers and consumers in the New York and Buffalo DMAs.
Verizon has submitted evidence buttressing the application of that presumption here. Defendants were
required to come forward with evidence that rebuts or meets the presumption and Verizon's evidence.
Defendants have put forth two types of evidence: survey evidence and non-survey evidence. With
respect to the survey evidence, we conclude above that the results of these surveys contradict the stated
purpose of Defendants' product differentiation strategy and, in any event, the surveys themselves contain
material flaws and deficiencies that render them unreliable. With respect to the non-survey evidence, we
conclude that this evidence fails to isolate the impact of the lack of MSG HD and MSG+ HD on the
willingness of consumers to choose Verizon. Because the evidence here fails to rebut the presumption as
supplemented by Verizon's evidence, we conclude that Defendants' withholding of MSG HD and MSG+
HD from Verizon has the "effect" of "significantly hindering" Verizon.339
3.

Remedy

69.
For the reasons set forth above, we conclude that Defendants have violated Section
628(b) of the Act and Section 76.1001(a) of the Commission's rules based on (i) their "unfair act" of
withholding MSG HD and MSG+ HD from Verizon; and (ii) our finding that this "unfair act" has the
"effect" of "significantly hindering" Verizon from providing a competing video service, including "satellite
cable programming and satellite broadcast programming," to subscribers and consumers in the New York
and Buffalo DMAs. The Commission's rules provide for broad remedies for violation of the program
access rules, including "the establishment of prices, terms, and conditions for the sale of programming to
the aggrieved [MVPD]."340 We establish the following remedies for Defendants' violation of our rules.
70.
First, we require MSG LP to enter into an agreement to license the MSG HD and MSG+
HD networks to Verizon on non-discriminatory rates, terms, and conditions within 30 days of the release
of this Order. We believe that 30 days will provide a sufficient time for MSG LP and Verizon to reach an
agreement on the terms of carriage while ensuring that Verizon receives prompt access to the
programming. In addition, in light of Defendants' steadfast withholding of this programming from
Verizon over the past several years, we are concerned that Defendants may use the negotiating process to
further delay Verizon's access to this programming by insisting that Verizon accept discriminatory rates,
terms, and conditions. To address this concern, we emphasize that MSG LP must offer to license MSG
HD and MSG+ HD to Verizon on non-discriminatory rates, terms, and conditions and, assuming
Verizon's acceptance, enter into such a contract with Verizon.341


339 We note that Verizon has submitted survey evidence in the record to demonstrate that Defendants' withholding
of MSG HD and MSG+ HD has "significantly hindered" Verizon. See supra n.45. Other than our reliance on
certain aspects of this survey to provide further support for the rebuttable presumption of "significant hindrance" for
HD RSNs (see supra nn.224, 227), we need not consider this survey evidence here in light of Defendants' failure to
rebut the presumption.
340 The Commission's rules also provide for damages and specify further that the remedies set forth in the rules are
"in addition to and not in lieu of the sanctions available under title V or any other provision of the Communications
Act." 47 C.F.R. 76.1003(h).
341 If MSG LP insists on discriminatory rates, terms, and conditions, we will consider that a violation of this Order
without requiring Verizon to demonstrate any further "significant hindrance."
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71.
Second, as discussed above, Cablevision is a proper defendant to Count I because it is
under common control with MSG LP and is deemed responsible (along with MSG LP) for the
withholding of MSG HD and MSG+ HD from Verizon.342 Accordingly, we require that Cablevision shall
not prevent or otherwise impede MSG LP from entering into the license agreement described above and
provide that Cablevision (along with MSG LP) shall be held responsible and subject to further remedies
including, but not limited to, forfeitures and other penalties, if MSG LP fails to enter into such an
agreement.
4.

First Amendment

72.
Our action here comports with the First Amendment. As an initial matter, to the extent
Defendants' First Amendment claims amount to a facial challenge to the rules adopted in the 2010
Order
,343 the D.C. Circuit has already rejected that challenge.344 To the extent that Defendants are
challenging our decision based on the facts of this case, we reject these claims.345 As the D.C. Circuit and
Commission have explained previously, the program access rules are subject to intermediate scrutiny,
under which government action will be upheld if it "furthers an important or substantial governmental
interest; if the governmental interest is unrelated to the suppression of free expression; and if the
incidental restriction on alleged First Amendment freedoms is no greater than is essential to the
furtherance of that interest."346 We discuss below how our action here satisfies each of these three
elements.
73.
First, in Time Warner, the court found that the governmental interest Congress intended
to serve in enacting the program access provisions was "the promotion of fair competition in the video
marketplace," and that this interest was substantial.347 Moreover, the court noted Congress's conclusion
that "the benefits of these provisions the increased speech that would result from fairer competition in
the video programming marketplace outweighed the disadvantages [resulting in] the possibility of
reduced economic incentives to develop new programming."348 We find that this governmental interest
remains substantial today. In both the 2007 Order and 2010 Order, the Commission noted that (i)
incumbent cable operators still have a dominant share of MVPD subscribers; (ii) there is evidence that
cable prices have risen in excess of inflation; and (iii) incumbent cable operators still own significant
programming.349 Based on these factors, the Commission concluded that "regulations intended to


342 See supra 16-17.
343 See Defendants' Post-Discovery Answer to Supplement at 104-109.
344 See Cablevision II, 2011 WL 2277217, at *13-*15.
345 See Defendants' Post-Discovery Answer to Supplement at 109-11.
346 Time Warner Entertainment Co. L.P. v. FCC, 93 F.3d 957, 978 (D.C. Cir. 1996) (quoting Turner Broadcasting
System, Inc. v. FCC,
512 U.S. 622, 662 (1994) (quoting United States v. O'Brien, 391 U.S. 367, 377 (1968))); see
also Cablevision II
, 2011 WL 2277217, at *13; Cablevision I, 597 F.3d at 1311; 2010 Order, 25 FCC Rcd at 775,
41; 2007 Order, 22 FCC Rcd at 17837-38, 65.
347 Time Warner, 93 F.3d at 978. Moreover, one of Congress' express findings in enacting the 1992 Cable Act was
that "[t]here is a substantial governmental and First Amendment interest in promoting a diversity of views provided
through multiple technology media." 1992 Cable Act, 2(a)(6).
348 Time Warner, 93 F.3d at 979 (citing S. Rep. No. 102-92 (1991), at 26-28, reprinted in 1992 U.S.C.C.A.N. 1133,
1159-61).
349 See 2010 Order, 25 FCC Rcd at 775-76, 42; 2007 Order, 22 FCC Rcd at 17837-38, 65; see also Cablevision
II
, 2011 WL 2277217, at *14.
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promote competition in the video distribution market in accordance with the objectives of Congress are
still warranted."350 All of these same factors are present in this case.
74.
Second, in Time Warner, the court held that the governmental objective served by the
statutory program access provisions was unrelated to the suppression of free expression.351 Similarly, our
decision here to address Defendants' withholding of MSG HD and MSG+ HD from Verizon is not based
on programming content but is instead intended to address the "significant hindrance" that results to
Verizon's ability to provide a competing video service and the harm to competition in the video
distribution market. Our action here responds to concerns about competition, not content. Thus, our
action is content-neutral and unrelated to the suppression of free speech.
75.
Third, any alleged restriction on speech resulting from our decision here "is no greater
than is essential to the furtherance" of Congress's interest in promoting competition in the video
distribution market.352 The Commission has explained previously that withholding of cable-affiliated
programming from rival MVPDs "may harm the ability of MVPDs to compete with incumbent cable
operators, thereby resulting in less competition in the marketplace to the detriment of consumers."353 We
conclude here that Defendants' withholding of MSG HD and MSG+ HD from Verizon has resulted in
such harm.354 By adopting a remedy that requires Defendants to license these networks to Verizon on a
non-discriminatory basis, our remedy is tailored to further the substantial governmental interest of
promoting competition in the video distribution market for the benefit of consumers.

B.

Count II Unreasonable Refusal to Sell

76.
In Count II, Verizon claims that because Defendants distribute the SD versions of MSG
and MSG+ via satellite, the underlying programming content on those networks must be considered
satellite-delivered regardless of whether a particular version of the programming content (such as the HD
version) is distributed terrestrially.355 Thus, Verizon contends that, although Defendants distribute MSG
HD and MSG+ HD via terrestrial facilitates, the underlying programming content is the same as that
displayed on MSG SD and MSG+ SD and therefore must be considered satellite-delivered programming
to which the program access rules adopted pursuant to Section 628(c) apply.356 Accordingly, Verizon
claims that Defendants' refusal to sell MSG HD and MSG+ HD to Verizon violates the program access


350 2010 Order, 25 FCC Rcd at 775-76, 42; see also 2007 Order, 22 FCC Rcd at 17837-38, 65.
351 See Time Warner, 93 F.3d at 978.
352 Id.
353 2010 Order, 25 FCC Rcd at 762-63, 26.
354 See supra Section III.A.2.c.
355 See Verizon Complaint at 46-51; Verizon Reply at 15-18; Verizon Supplement at 4. Verizon brought Count II
pursuant to Section 628(c) as well as Section 628(b). See Verizon Complaint at 50; Verizon Supplement at 4. We
interpret Verizon's Section 628(b) claim in Count II to be identical to Count I (i.e., that Defendants have engaged in
an "unfair act" of withholding MSG HD and MSG+ HD from Verizon that has the "purpose" or the "effect" of
"significantly hindering" Verizon). Because we consider this claim in addressing Count I, we will not consider it
again in addressing Count II. Accordingly, we strike Count II to the extent it is redundant with Count I.
356 See Verizon Complaint at 48-49; Verizon Reply at 15-18.
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rules applicable to satellite-delivered programming under Section 628(c), specifically the prohibition on
unreasonable non-price discrimination.357
77.
We reject Verizon's arguments and deny Count II. Having found that the SD and HD
versions of the same network have different technical characteristics and content and are not considered
adequate substitutes by consumers, the Commission in the 2010 Order concluded that it would treat the
HD version of a particular network as a distinct service from the SD version of the same network.358 The
record here supports that finding, demonstrating that the SD and HD versions of MSG and MSG+ have
different technical qualities as well as programming content.359 Even Verizon now concedes that "[t]he
record confirms that the HD format of MSG and MSG+ is distinct from the standard definition feed."360
Because the Commission has already established that the HD and SD versions of a network are distinct,
we decline to conclude that distributing the SD version of a network via satellite converts a terrestrially
delivered HD version of the same network into satellite-delivered programming subject to Section
628(c).361

C.

Count III Evasion

78.
In Count III, Verizon claims that Defendants have sought to evade the program access
rules applicable to satellite-delivered programming under Section 628(c) by distributing MSG HD and
MSG+ HD via terrestrial facilities.362 In response, Defendants contend that they have legitimate business
reasons for distributing MSG HD and MSG+ HD via terrestrial facilities.363 They explain that
Cablevision had an existing fiber network that was used to distribute MSG HD when it launched in 1998
and that satellite transponder costs would have been expensive and unnecessary.364 Defendants state that
they continue to believe that terrestrial distribution makes financial sense and note that switching now to
satellite delivery would add up-front costs for additional satellite uplink equipment and recurring monthly
costs for leasing transponder capacity.365 Moreover, they explain that the broad geographic distribution
provided by satellite technology is unnecessary for regional networks such as MSG HD and MSG+
HD.366 Defendants also submit that terrestrial distribution has certain technical advantages over satellite
distribution.367


357 See Verizon Complaint at 50. Unlike with terrestrially delivered programming, the rules applicable to satellite-
delivered programming adopted pursuant to Section 628(c) do not require a showing of "significant hindrance." See
1993 Order
, 8 FCC Rcd at 3377-78, 47-49.
358 See 2010 Order, 25 FCC Rcd at 784-85, 54-55.
359 See Defendants' Answer at 48-49, 59-60; Levine July 2009 Decl. at 13.
360 Verizon Post-Discovery Reply Brief at 6.
361 Because we deny Count II on other grounds, we will not consider Defendants' arguments regarding the impact on
Count II of a release agreed to by the Parties in connection with a previous program access dispute. See Defendants'
Answer
at 49-50.
362 See Verizon Complaint at 52-54.
363 See Defendants' Answer at 13-14 ( 4-6), 50-52; Pontillo Decl. at 14-20.
364 See Defendants' Answer at 51; Pontillo Decl. at 14.
365 See Defendants' Answer at 13 ( 5), 51; Pontillo Decl. at 17.
366 See Defendants' Answer at 14 ( 6); Pontillo Decl. at 17.
367 See Defendants' Answer at 14 ( 6), 52; Pontillo Decl. at 18-19.
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79.
The Bureau informed the Parties that discovery was necessary for the resolution of Count
III.368 Despite having the opportunity to obtain relevant information through discovery, however, Verizon
has put forth no evidence that supports its allegations concerning Defendants' reasons for distributing
MSG HD and MSG+ HD terrestrially. Based on this lack of evidence of evasion, we deny Count III.

D.

Count IV Undue or Improper Influence

80.
In Count IV, Verizon claims that Cablevision is exercising undue or improper influence
over MSG LP's decision to withhold MSG HD and MSG+ HD from Verizon, in violation of Section
628(c)(2)(A) of the Act and Section 76.1002(a) of the Commission's rules.369 Verizon alleges only a
violation of Section 628(c), which does not apply to the terrestrially delivered MSG HD and MSG+
HD.370 Verizon thus appears to be arguing that MSG HD and MSG+ HD should be considered satellite-
delivered because the underlying programming content is delivered via satellite on MSG SD and MSG+
SD,371 an argument we reject for the same reasons discussed above in denying Count II.372 Accordingly,
we deny Count IV.

E.

Count V Discrimination

81.
In Count V, Verizon alleges that Defendants violated Section 628(c) by refusing to sell
the satellite-delivered MSG SD and MSG+ SD to Verizon in a package along with MSG HD and MSG+
HD. 373 Verizon alleges that Defendants have offered and sold a package of the SD and HD versions of
MSG and MSG+ to other MVPDs.374 Among other arguments, Defendants assert in response that MSG
SD and MSG+ SD are licensed separately from MSG HD and MSG+ HD, thus precluding a claim that the
Defendants have treated Verizon differently than other MVPDs.375 The Bureau informed the Parties that
discovery was necessary for the resolution of Count V.376 Despite having the opportunity to obtain
relevant information through discovery, however, Verizon has put forth no evidence that would
undermine Defendants' assertions that MSG SD and MSG+ SD are licensed separately from MSG HD


368 See Bureau Aug. 9th Letter at 1.
369 See Verizon Complaint at 55-58; Verizon Supplement at 4.
370 See Defendants' Answer at 52-53. While the Verizon Complaint alleged a violation of only Section 628(c) in
Count IV, the Verizon Supplement adds an additional claim that Defendants have violated a rule adopted pursuant to
Section 628(b) in the 2010 Order which prohibits undue or improper influence involving terrestrially delivered,
cable-affiliated programming. See Verizon Supplement at 4. We deny Verizon's attempt to use its Supplement to
convert into a Section 628(b) claim what was originally filed as solely a Section 628(c) claim.
371 See Verizon Reply at 15-18.
372 See supra 77.
373 See Verizon Complaint at 59-63; Verizon Reply at 18-20 ("It is this discrimination in the terms of sale of the
standard definition programming, which is unquestionably satellite-delivered, that forms the basis of Verizon's
discrimination claim."); Verizon Supplement at 4. Verizon brought Count V pursuant to Section 628(c) as well as
Section 628(b). See Verizon Complaint at 60, 63; Verizon Supplement at 4. We interpret Verizon's Section
628(b) claim in Count V to be identical to Count I (i.e., that Defendants have engaged in an "unfair act" of
withholding of MSG HD and MSG+ HD from Verizon that has the "purpose" or the "effect" of "significantly
hindering" Verizon). Because we consider this claim in addressing Count I, we will not consider it again in
addressing Count V. Accordingly, we strike Count V to the extent it is redundant with Count I.
374 See Verizon Complaint at 61; Verizon Reply at 18-20.
375 See Defendants' Answer at 59-60; Levine July 2009 Decl. at 4, 13.
376 See Bureau Aug. 9th Letter at 1.
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and MSG+ HD. Based on this lack of evidence of discrimination in the sale of satellite-delivered
programming, we deny Count V.377

IV.

ORDERING CLAUSES

82.
Accordingly,

IT IS ORDERED

that, pursuant to Sections 4(i), 4(j), and 628 of the
Communications Act of 1934, as amended, 47 U.S.C. 154(i), 154(j), and 548, and Section 76.1001 of
the Commission's rules, 47 C.F.R. 76.1001, Count I of the above-captioned complaint filed by Verizon
Telephone Companies and Verizon Services Corporation against Madison Square Garden, L.P. and
Cablevision Systems Corporation

IS GRANTED

to the extent indicated herein.
83.

IT IS FURTHER ORDERED

that Madison Square Garden, L.P. shall enter into an
agreement to license the MSG HD and MSG+ HD networks to Verizon on non-discriminatory rates,
terms, and conditions within 30 days of the release of this Order and in accordance with the terms of this
Order.
84.

IT IS FURTHER ORDERED

that Cablevision Systems Corporation shall not prevent
or otherwise impede Madison Square Garden, L.P. from entering into the license agreement with Verizon
as required by this Order.
85.

IT IS FURTHER ORDERED

that both Cablevision Systems Corporation and Madison
Square Garden, L.P. shall be held responsible and subject to further remedies including, but not limited
to, forfeitures and other penalties, if Madison Square Garden, L.P. fails to enter into the license agreement
with Verizon as required by this Order.
86.

IT IS FURTHER ORDERED

that Counts II, III, IV, and V of the above-captioned
complaint filed by Verizon Telephone Companies and Verizon Services Corporation against Madison
Square Garden, L.P. and Cablevision Systems Corporation

ARE HEREBY DENIED

for the reasons
discussed herein.
87.

IT IS FURTHER ORDERED

that, pursuant to Section 76.1003(h)(1) of the
Commission's rules, 47 C.F.R. 76.1003(h)(1), this Order

SHALL BE EFFECTIVE

upon release.
88.
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


377 Because we deny Count V on other grounds, we will not consider Defendants' arguments regarding the impact
on Count V of a release agreed to by the Parties in connection with a previous program access dispute or whether
Count V was filed in compliance with the program access statute of limitations. See Defendants' Answer at 61-65.
61

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