Bloomberg News

Verizon Asks FCC to Stop Cablevision's `Stonewalling' (Update6)

March 21, 2006

Verizon Communications Inc. (VZ:US) asked U.S. regulators to force Cablevision Systems Corp. (CVC:US) to give it access to sports programming for the New York Knicks basketball team and New York Rangers hockey games.

Cablevision, the largest cable-television operator in New York, has resisted Verizon's efforts to gain distribution rights to the company's sports programming in New York and New England for more than a year, Verizon said today in a statement.

The failure to reach an agreement has prevented Verizon from broadcasting events including Knicks and Boston Celtics basketball games and Rangers hockey games on its fiber-optic television service, known as FiOs. Cablevision and Rainbow Media Holdings LLC, its programming unit, have tried to stymie competition by resisting Verizon's attempts to negotiate ``at every turn,'' Verizon said in a complaint filed yesterday with the Federal Communications Commission.

``We think their behavior is outrageous for normal business commerce,'' Verizon spokesman Eric Rabe said. ``Essentially they have refused to negotiate with us.''

Rainbow Media spokesman Whit Clay said the company is ``in discussions'' with Verizon. ``It would be more productive for Verizon to negotiate with us than file complaints and issue press releases,'' Clay said today in an e-mailed statement.

Shares of New-York based Verizon, the No. 2 U.S. telephone company, rose 13 cents to $34.35 at 4 p.m. in New York Stock Exchange composite trading. Bethpage, New York-based Cablevision shares rose 41 cents to $26.55.

`Frustration'

Verizon said it has tried to negotiate with Cablevision and Rainbow Media since February 2005.

Verizon offers its television service in Massapequa Park, Nyack and South Nyack in New York, Reading and Woburn in Massachusetts, and cities in five other states. It is completing network upgrades and seeking approval to operate in more than 100 additional New York communities, and Cablevision is the incumbent cable operator in the majority of them, Verizon said. Verizon is also seeking franchises in dozens of Massachusetts communities.

Verizon asked the FCC to force Cablevision to provide access to two regional sports networks owned by Rainbow in New York and one in New England. The complaint doesn't seek monetary damages.

``Our interest here is to get the programming and be able to provide that to our customers,'' said Verizon Associate General Counsel Edward Shakin, the lead attorney in the case. ``We've resorted to litigation because of the frustration the business has felt in not being able to get Rainbow and Cablevision to even deal with us.''

No Timeline

The FCC doesn't have a time frame for ruling on Verizon's complaint. ``We take each matter on a case-by-case basis and there isn't a formal timeline on these proceedings,'' said FCC spokeswoman Rebecca Fisher.

Verizon hasn't struck deals to carry two New York regional sports networks that aren't owned by Cablevision -- the Yankees Entertainment and Sports (YES) Network and SportsNet New York. SportsNet New York, co-owned by Comcast Corp. (CMCSA:US), Time Warner Inc. (TWX:US) and the New York Mets, debuted March 16.

``We are negotiating with YES and SportsNet New York right now, and we're making good progress,'' Rabe said. ``In contrast to the Cablevision negotiations, these negotiations are actually happening.''

Video Franchises

Verizon has spent billions of dollars to build its high-speed fiber-optic network. The ability to offer video services in competition with cable is ``essential to support those network investments,'' it told the FCC in the complaint. ``Obtaining programming content is important for any new entrant to compete effectively,'' Verizon said.

Verizon said Rainbow indicated in informal discussions that it wouldn't begin negotiations with Verizon unless the company agreed not to bypass the local video-franchise process in areas where it would carry Rainbow's regional sports networks.

Verizon is seeking statewide video franchises in eight states including New York and Massachusetts. The company also is lobbying Congress to create federal video-franchise rules that would let phone companies bypass local and state regulators. Cable companies oppose rules that would do so.

In most states, phone companies must seek approval from local communities before offering Internet-based TV to compete with cable providers such as Time Warner Inc., Comcast Corp. and Cablevision. Verizon says the process of negotiating local franchises makes it difficult and costly to offer video services over those networks.

Texas, Virginia and Indiana have enacted laws to make it easier for phone companies to sell TV service in competition with cable.

To contact the reporter on this story: Molly Peterson in Washington at mpeterson9@bloomberg.net.

To contact the editor responsible for this story: Emma Moody in New York at emoody@Bloomberg.net.


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Companies Mentioned

  • VZ
    (Verizon Communications Inc)
    • $49.69 USD
    • 0.48
    • 0.97%
  • CVC
    (Cablevision Systems Corp)
    • $19.01 USD
    • -0.25
    • -1.32%
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