Broadband Cable Association of Pennsylvania


October 1, 2012

Dish Network Corp. wrongfully ended a television programming contract with AMC Networks Inc., leaving it with "massive financial losses," because of competition from a Dish rival, an AMC lawyer told a jury.

Cablevision Systems Corp., AMC's former owner, sued Dish in 2008 over a now-defunct high-definition satellite-TV service called Voom, claiming Dish breached their 15-year contract to offer the service to its 14 million subscribers. AMC, formerly known as Rainbow Media, seeks $2.4 billion in damages from Englewood, Colorado-based Dish, which split off its EchoStar equipment and satellite service in 2008. "My client, Rainbow Media HD, was wronged and betrayed by EchoStar, which backed out of a contract that lasted 15 years after two years and left my client with massive financial losses," Orin Snyder, a lawyer for AMC, said today in his opening statement in the trial in New York State Supreme Court in Manhattan.

Dish, the third-largest U.S. pay-TV company, contends that it terminated the Voom contract because Cablevision didn't spend the required $100 million a year on programming. "EchoStar was concerned that money be spent on the programming," James Bennett, a lawyer for Dish, said in his opening statement. "This case is about Voom's failure to fulfill that commitment," he said. "They spent $100 million on the business. Not on the programming." Snyder told the eight jurors that Dish wanted to get out of the contract because of a financial threat from a large competitor, satellite TV provider DirecTV. Cable networks such as CNN and MTV were beginning to offer HD programming at no extra cost to TV distributors like Dish and DirecTV, he said. "Dish was pre-empted by a rival announcing more HD channels at half the price," Snyder told the jury.

The trial, before Justice Richard Lowe, may last four weeks, lawyers said during jury selection. Charles Dolan, the 86-year-old chairman of both Cablevision and AMC, is scheduled to testify for AMC on Oct. 1. His son, James Dolan, the CEO of Bethpage, New York-based Cablevision, is also expected to testify. Cablevision spun off AMC Networks as a separate public company last year. The Dolans remain controlling shareholders in AMC. The lawsuit's implications go beyond any damages award. The trial may determine whether Dish viewers will again see AMC shows such as "Mad Men" and "Breaking Bad." Dish dropped AMC's four networks from its system in July, saying its programs didn't deliver the ratings to justify their price. AMC claims the removal was because of the lawsuit. "We've been off the platform for a couple of months now and we think we're off because of litigation and not because of anything related to what our prices are for programming," Joshua Sapan, the chief executive officer of AMC, said at an investor conference in Manhattan Sept. 12. He is expected to testify for AMC.

Dish accounted for 13 percent of AMC's subscribers, which can determine what advertisers and broadcasters pay the cable programming company. "Both sides have a lot of motivation to settle," Aditi Bagchi, a professor at Fordham Law School who teaches contracts, said in a phone interview. "Maybe they will renegotiate the terms on which Dish will carry AMC's channels." AMC's "Breaking Bad" won an Emmy Award on Sept. 23 for best supporting actor and the network's zombie-themed series, "The Walking Dead," won for prosthetic makeup. "Mad Men" was denied a chance to be named best dramatic TV series for the fifth year in a row, losing to Showtime's "Homeland." Bob Toevs, a spokesman for Dish, said the decision to drop AMC was "an entirely separate matter" from the lawsuit. "The channels were essentially a handful of popular shows," Toevs said in an interview. "For us, the equation didn't work.'

The case centers on the meaning of what constitutes spending "on the service," as described in the contract. AMC and Cablevision argued in their filings that an audit found Voom spent almost $103 million in 2006. Dish counters that this sum included corporate overhead expenses of at least $12 million, while the contract required the money to be spent on programming. Bennett told the jury today that evidence will show Voom spent only about $59 million in one year on programming. Before the jurors deliberate, Lowe will instruct them about Dish's destruction of e-mails before and after the lawsuit was filed. Lowe granted AMC's motion for sanctions, saying Dish should have anticipated a lawsuit and begun saving e-mails when it notified Voom it might terminate the contract. Dish said the e-mails were automatically deleted. Snyder told the jury in his opening remarks that Dish had "systematically destroyed evidence." Cable provider Comcast Corp. and DirecTV are the largest U.S. pay-TV companies. Dish fell 36 cents, or 1.2 percent, to $30.61 in Nasdaq Stock Market trading. AMC rose 14 cents to $43.52. Bloomberg

The government took a big step on Friday to aid the creation of new high-speed wireless Internet networks that could fuel the development of the next generation of smartphones and tablets, and devices that haven't even been thought of yet.

The five-member Federal Communications Commission unanimously approved a sweeping, though preliminary, proposal to reclaim public airwaves now used for broadcast television and auction them off for use in wireless broadband networks, with a portion of the proceeds paid to the broadcasters. The initiative, which the F.C.C. said would be the first in which any government would pay to reclaim public airwaves with the intention of selling them, would help satisfy what many industry experts say is booming demand for wireless Internet capacity. Mobile broadband traffic will increase more than thirtyfold by 2015, the commission estimates. Without additional airwaves to handle the traffic, officials say, consumers will face more dropped calls, connection delays and slower downloads of data.

The F.C.C. will issue proposed rules for what it calls incentive auctions - the sale of airwaves that are voluntarily given up by broadcasters in exchange for a portion of the auction proceeds. A proposal detailing the program will be released next week, officials said. The commission will seek public comments over the coming months. "In this flat, competitive world, capital and talent can flow anywhere," Julius Genachowski, the F.C.C. chairman, said before the vote. "We're in a global bandwidth race. It's similar to the space race in that success will unleash waves of innovation that will go a long way toward determining who leads our global economy in the 21st century."

The auctions are not expected until 2014, but commission officials and Congress have estimated that the process could generate $15 billion in proceeds. About $7 billion of that would be set aside to build a nationwide emergency communications network for public safety officials, a yet-unfulfilled recommendation of the 9/11 Commission. The auction proposal received widespread acclaim from wireless companies, Internet trade groups and telecommunications experts - just about everyone, that is, except television broadcasters. Most broadcasters want to retain their airwaves, and they have disputed a brewing shortage of spectrum.

Industry lobbyists note that broadcasters gave up significant amounts of airwaves several years ago in the conversion of television signals to digital from analog format. That spectrum was auctioned in 2008, with no compensation to broadcasters, and industry officials grumble that many of the buyers of those airwaves have not used them yet. Gordon H. Smith, a former Republican senator from Oregon who is president of the National Association of Broadcasters, said on Friday that he thought the high expectations for the auction "may be premised on the mistaken belief that broadcasting is an industry in decline."

Some major broadcast groups, including CBS, which owns more than two dozen broadcast channels around the country, have said they do not intend to give up their broadcast spectrum. But Mr. Genachowski said he believed there were many small broadcasters, particularly independent, individually owned stations in urban areas, whose low profit margins and lack of original programming made them more likely to give up spectrum in the auctions. Also casting some wariness on the auction details were the commission's two Republican members, who warned against making the auction rules so complicated that they exclude potential bidders, lessening the chances the auctions will raise enough money for the public safety network and other uses.

Robert M. McDowell, a Republican commissioner, said that the agency must remain open to public and industry recommendations about how best to structure the auctions and the movement of broadcasters to new places on the electromagnetic spectrum. "In the past, regulatory efforts to over-engineer spectrum auctions have caused harmful, unintended consequences," Mr. McDowell said. The auction process will have three parts. In the first, the F.C.C. will conduct a reverse auction to determine which holders of broadcast television licenses will submit bids to voluntarily give up their spectrum rights in exchange for payment.

In addition to seeking the broadcasters that will give up their licenses and go off the air, the agency will also consider whether to allow alternatives, like agreeing to allow broadcasters to share spectrum with another station or to move from a UHF television channel to VHF, which occupies different spots on the dial. A second portion of the process involves repacking - essentially moving and squeezing together the remaining airwaves so they occupy a smaller portion of the spectrum band, known as UHF. Once those bands of newly available spectrum are identified, they would be auctioned in the traditional format, going to the highest bidders. Those three parts can be conducted either consecutively or concurrently, and the F.C.C. is seeking comment on that approach as well.

The F.C.C. also voted to begin a review of its mobile spectrum ownership policies, specifically whether it should revise its limits on how much spectrum any one wireless telecommunications company can own in a geographic area. The F.C.C. now limits companies to holding no more than one-third of an area's available airwaves. Big wireless companies have said those rules, put in place more than a decade ago, should be changed to allow bigger holdings by dominant carriers. Smaller wireless companies, however, say the F.C.C. should keep limits while also changing its counting method to give greater weight to the most attractive spectrum bands, on which signals travel further and more easily through obstacles like buildings. New York Times