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U.S. court gives mixed ruling on FCC program carriage rules

Combination photo shows the CBS logo on stage during CBS portion the 2013 Winter Television Critics Association Press Tour in Pasadena and t
Combination photo shows the CBS logo on stage during CBS portion the 2013 Winter Television Critics Association Press Tour in Pasadena and t

WASHINGTON (Reuters) - A U.S. appeals court on Wednesday threw out part of a federal rule against cable television companies discriminating against independent networks by putting their stations behind high pay barriers, but invited a U.S. regulator to re-issue the regulation.

In 2011, the Federal Communications Commission, the top U.S. telecommunications regulator, made it easier for independent stations to file complaints about cable operators and said that in some cases, it may order the cable operator not to retaliate against the complaining company by, for example, dropping them.

Time Warner Cable Inc filed a lawsuit, arguing that the FCC violated its First Amendment rights to decide how it carries independent networks. It also argued that the FCC acted improperly by issuing the "standstill", or anti-retaliation portion of the rule, outside the Administrative Procedure Act, or APA, which is required for substantive regulations.

The U.S. Court of Appeals for the Second Circuit in New York rejected the cable companies' free speech challenge to the regulation. But it agreed that the anti-retaliation portion should have been put out under the APA, and rejected it, while acknowledging that the FCC will likely re-issue it.

Independent stations - the Tennis Channel is one of the most vocal - have complained about being put in a premium cable tier to avoid having their content compete with the cable provider's own station.

Acting FCC Chairwoman Mignon Clyburn said that she was pleased that Time Warner Cable's "free speech" argument was rejected.

"These rules remain necessary to prevent anticompetitive conduct by video programming distributors, and they empower consumers to access a rich and diverse mix of programming," she said in a statement.

Clyburn noted that the FCC remains free to adopt the "standstill" rule under the more stringent APA rule-making procedure but an FCC spokesman did not immediately say if or when the agency would do so.

Time Warner Cable said it was pleased that the appeals court tossed out the standstill requirement, saying that it "would have required a distributor to continue carrying a cable network based solely upon the filing of a program carriage complaint."

Time Warner Cable and the National Cable and Telecommunications Association, which was also a party to the lawsuit, were also pleased that the court noted "increased competition in the video programming industry," arguing that indicated that FCC regulation to preserve competition may be unnecessary.

John Bergmayer, a senior staff attorney with Public Knowledge, disagreed that increased competition meant FCC regulation was no longer needed. "Whether a cable company has 'bottleneck power' - control over the programming that comes into viewers' homes - should be a different question than whether it has 'market power,'" he said.

The case is Time Warner Cable Inc and National Cable and Telecommunications Association v. Federal Communications Commission. It is No. 11-4138(L) and 11-5152(Con)

(Reporting by Diane Bartz; Editing by Dan Grebler and Chris Reese)

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