The industry has been on the defensive about the expensive set-top boxes that customers rent in order to receive cable television services.
In the past year, the issue of expensive cable set-top boxes has been an explosive one both in courts and in regulatory quarters. The latest development came on Friday when the 2nd Circuit Court of Appeals affirmed a decision to reject an antitrust lawsuit accusing Time Warner Cable of impermissibly tying premium cable television services to the leasing of these cable boxes.
The action reviewed by the 2nd Circuit was a consolidated, multidistrict suit that targeted TWC (now a part of Charter Communications) for allegedly abusing its market power over premium cable services in 53 markets. According to the complaint, consumers weren't able to use their own cable box to get certain cable television services like VOD programming, program guides, parental control devices and "start over" functionality.
In the majority opinion, 2nd Circuit judges Ralph Winter and Denny Chen write that to state a valid tying claim, plaintiffs must plausibly show that the sale of one product is conditioned on the purchase of a separate product, and that the seller has sufficient market power and uses actual coercion to convince a consumer to buy both products. Winter and Chen add that no tying arrangement can exist unless there is sufficient demand for the tied product separate from the tying product. With that framework, they conclude that cable boxes and premium cable services haven't plausibly been held up as separate, in-demand products.
"The Complaint alleges that, '[b]ut for Time‐Warnerʹs unlawful tying requirement ... there would be a thriving market in which consumers would have a choice in their purchase of cable boxes,'" states the opinion. "However, the Complaint lacks any allegation that there have ever been separate sales of set‐top boxes and cable services, whether or not 'premium,ʺ in the United States, even in markets where cable providers face competition and, more specifically, in markets where Premium Cable Services are available through competing fiber optic networks that do not use set‐top boxes."
Read full story at http://www.hollywoodreporter.com/thr-esq/time-warner-cable-gets-appellate-925353
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