Last year, the Federal Communications Commission (FCC) ruled that Comcast broke cable competition rules by carrying the Tennis Channel on a programming tier less widely distributed than the one on which Comcast carried the Golf Channel and Versus. According to the FCC, "Comcast owned Golf Channel and Versus in whole" at the time of the programming decision and "deliberately discriminated against Tennis Channel and in favor of Golf Channel and Versus on the basis of affiliation." The FCC ordered Comcast to put the Tennis Channel into the more preferable programming tier and pay a fine of $375,000.

This was "the first time that a cable operator was found in violation of federal anti-discrimination program carriage rules, established by the agency in 1993," the Los Angeles Times noted. But Comcast appealed, and today the US Court of Appeals for District of Columbia Circuit ruled unanimously (PDF) that the FCC got the decision wrong.

The judges pointed out numerous flaws in the FCC's reasoning. Comcast argued that its decision to put Tennis Channel on a more expensive tier than Comcast's own sports channels was a "straight up financial analysis" rather than an attempt to harm the channel. Comcast rejected a proposal from Tennis Channel in 2009 because it would have required Comcast to pay extra fees to the Tennis Channel to carry it on a more prominent package and it wouldn't have generated enough revenue to offset the increased fees, the ruling states. Because "the record simply lacks material evidence that the Tennis proposal offered Comcast any commercial benefit," there is no way to disprove Comcast's contention that its decision was based just on the numbers, the judges ruled.

The unanimous decision authored by Senior Circuit Judge Stephen Williams was followed by concurrent opinions from two judges who criticized the FCC's case. Court of Appeals Judge Brett Kavanaugh wrote that Section 616 of the Federal Communications Act "does not bar vertical integration or vertical contracts that favor affiliated video programming networks, absent a showing that the video programming distributor at least has market power in the relevant market." Comcast apparently has no such market power, as Kavanaugh wrote that "[t]he FCC erred in concluding that Section 616 may apply to a video programming distributor without market power."

Kavanaugh continued:

How, then, did the FCC reach the opposite conclusion in this case? The short answer is that the FCC badly misread the statute. Contrary to the plain language of Section 616, the FCC stated that the term “unreasonably” modified “discriminating,” not “restrain”—even though Section 616 says it applies only to discriminatory conduct that “unreasonably restrain[s]” the ability of a competitor to compete fairly. Because the FCC did not read Section 616 as written, it did not recognize the antitrust term of art “unreasonably restrain” that is apparent on the face of the statute. That erroneous reading of the text, in turn, led the FCC to mistakenly focus on the effects of Comcast’s conduct on a competitor (the Tennis Channel) rather than on overall competition. That was a mistake because the goal of antitrust law (and thus of Section 616) is to promote consumer welfare by protecting competition, not by protecting individual competitors.

Kavanaugh further wrote that the "Supreme Court has squarely held that a video programming distributor such as Comcast both engages in and transmits speech, and is therefore protected by the First Amendment... Therefore, under these circumstances, the FCC cannot tell Comcast how to exercise its editorial discretion about what networks to carry any more than the Government can tell Amazon or Politics and Prose or Barnes & Noble what books to sell; or tell the Wall Street Journal or Politico or the Drudge Report what columns to carry; or tell the MLB Network or ESPN or CBS what games to show; or tell SCOTUSblog or How Appealing or The Volokh Conspiracy what legal briefs to feature."

Besides all that, Senior Circuit Judge Harry Edwards said the Tennis Channel's complaint should never have been considered, because it was too late. The Tennis Channel and Comcast struck an agreement in 2005 after the Tennis Channel "sought distribution of its content on Comcast’s less broadly distributed sports tier, a package of 10 to 15 sports networks that Comcast’s subscribers can access for an extra $5 to $8 per month."

The 2009 negotiations were spurred by the Tennis Channel wanting to renegotiate that original agreement. The Tennis Channel's complaint "raises a claim that the contract provisions giving Comcast unfettered authority to determine whether to carry Tennis Channel on its Sports Tier or some other tier violate Section 616," Edwards wrote. But the Communications Act gives the Tennis Channel only one year to appeal the terms of the contract, meaning the 2010 complaint was four years too late, Edwards wrote.

Comcast welcomed today's decision. According to Reuters, "[t]he FCC had no comment on its plans to advance the case."