Comcast holds the line on Big Ten

When the Big Ten Network went live in late August, its organizers say, they had high hopes that its coverage of the storied athletic conference would be happily received by cable companies seeking to attract passionate college sports fans.

But the young network quickly ran into a force with the raw power of one of Penn State coach Joe Paterno's 315-pound defensive tackles - Comcast Corp.

The nation's largest cable company has refused to carry the network on its 24-million-customer system, blacking out some Big Ten football games for millions of fans.

The biggest Big Ten games - think Penn State vs. Ohio State - will continue to appear on ESPN and ABC, but most others are now the exclusive province of the new network that Comcast has so far declined to carry.

In recent weeks, the Philadelphia company has aggressively attacked the start-up network in radio and full-page newspaper ads in Philadelphia, Pittsburgh, Chicago and other big cities. It calls the network's proposed subscriber fee a "Big Ten tax."

"We won't soak the American consumer," company executive vice president David L. Cohen said.

In fact, the network wouldn't charge viewers a nickel; it expects Comcast to pay a fee for every subscriber who gets the network. That is why the network wants to be on the cable system's enhanced basic tier, which is seen by millions more viewers than the extra-cost sports tier that Comcast has proposed it be carried on.

The Big Ten Network says it expected to take in more than $60 million a year in revenue by appearing on Comcast's expanded basic tier. Instead, the Philadelphia cable company has offered a deal for basically $2.5 million by placing it on the sports tier, which costs an additional $5 per month and is seen by only 4 percent of Comcast's subscribers.

Being limited to a sports tier would cripple the new network financially, its top executives say. "The network can't survive on a sports tier," Big Ten Network president Mark Silverman said. "They have to know that."

The controversy has taken on the overtones of a "nasty political campaign," he said.

The cable sports wars, like the one between the National Football League and Comcast, are back.

This time, it's not a league of professional franchises but the 11 college teams in the Big Ten Conference - teams such as the Penn State Nittany Lions, Wisconsin Badgers and Ohio State Buckeyes.

Hundreds of millions of dollars are at stake for college athletic programs. Comcast says that if the Big Ten makes its network a success, other college sports conferences could launch copycat 24-hour networks, driving up programming costs.

The dispute vividly illustrates the Economics 101 concept of the market power that Comcast wields thanks to its control over the television programming flowing into one out of every five U.S. households. It can make or break a national network.

It also strikes at a simmering point in the cable industry. Cable companies sell bundles of channels to customers; some experts think they should sell individual channels, the so-called "a la carte" option.

"There's a lot of pie on the table," said Stephen Ross, a law professor and director of the Penn State Institute for Sports Law Policy and Research in State College. "People are willing to pay big money for Big Ten sports in the Midwest."

He calls Comcast and the Big Ten "dueling monopolists," with Comcast owning a monopoly on cable customers in many of its franchise areas and the Big Ten Conference owning monopoly control over Big Ten sports content.

Ross said the dispute pointed out the benefits of "a la carte" pricing, or allowing customers to buy individual channels.

Comcast has opposed "a la carte" pricing because, the company says, it would reduce advertising revenue and increase subscriber fees for customers. Customers foot the bill as Comcast passes along increased programming costs in annual rate increases.

In this case, the company has made a point of saying it will not include the Big Ten Network on its expanded basic tier of 70 channels because the network is expensive and the company does not intend to force people to pay for something they do not want.

The distinction is lost on John Mutarelli, a Penn State senior who missed the Nittany Lions' Sept. 29 matchup against the University of Illinois, which was carried on the Big Ten Network. He gets Comcast cable service in his apartment in State College.

"I don't care about the Food Network and some of the other channels," Mutarelli said. "So I can't see how they can justify saying that many people don't want [the Big Ten Network], because many people I know do want it," he said.

The per-subscriber fees that Comcast would have to pay the network would amount to $13.20 a year, or $1.10 a month, making it more expensive than other broad-interest or sports-tier channels, Comcast said. The network asserts that it has never pitched that price to Comcast; it says that because of its size, Comcast likely would pay about 90 cents per month per subscriber in Big Ten states, and just a dime for subscribers elsewhere.

In partnership with the Fox Cable Networks, the Big Ten Network has come up with a "scheme to stick it to their fans and cable customers," Cohen said. He said he believed the network should renegotiate its rights deal to bring its costs down.

The Big Ten Conference, the nonprofit group that negotiates broadcast deals for its 11 universities, formed the network with Fox in 2006. The Big Ten Conference owns 51 percent of the network; Fox owns the rest.

The network bought the rights to 400 Big Ten games for $50 million to $60 million a year. But it gets to show only the games that are not picked up by the Walt Disney Co.'s ESPN and ABC networks. The Disney networks have a separate 10-year, $1 billion deal to broadcast the most attractive Big Ten football and basketball games.

The Big Ten Network has bought second-tier game content, Comcast officials say - leftovers is a word they use a lot.

In Chicago's gentrifying River North neighborhood, the Big Ten Network operates out of a former Montgomery Ward warehouse that is a $5 taxi ride from the heart of downtown.

The eighth-floor offices exude a cheery college ambience, with athletic flags hanging from the rafters and low, modern chairs decorated with college logos.

Employees such as Akisha Lockhart, 23, are mostly in their their 20s and early 30s. The buzz builds on Friday afternoons as the company prepares for its "tailgate party" show and the big games on Saturday.

In an interview in his office, Silverman said the Big Ten Network was similar to two Comcast-owned sports networks: Golf Channel and Versus, both carried on Comcast's expanded basic tier. If Comcast owned part of the Big Ten Network, Silverman said, the expanded basic tier would not be an issue.

Comcast says the Golf Channel is cheaper to carry on its system than the Big Ten Network. Versus, which has the rights to the National Hockey League and the Tour de France, has been carried on basic cable for more than a decade, spokesman John Demming said. Comcast said ownership of the new network had nothing to do with its decision to put it on a sports tier.

Jim Delany, the Big Ten commissioner, said the network was organized to get Big Ten teams more television exposure. It will broadcast football and basketball games, but it also will carry women's field hockey; men's ice hockey, wrestling and tennis; and men's and women's volleyball.

Revenue paid to the conference by the network, about $5 million for each Big Ten school, will fund university athletic programs, Delany said.

Last year, the Big Ten Conference collected $127 million that was distributed to its member universities, according to a government filing.

Delany said he believed that the money the new network paid for Big Ten games was fair and that the conference was copying what Comcast had done with its regional sports networks.

So far, the Big Ten Network says, it has signed a total of 140 cable and satellite providers with 6.5 million customers in the eight states with Big Ten universities. About 10 percent of those customers come from cable systems that the network says have signed deals in the last 10 days.

Silverman and Delany believe customers will ask for the Big Ten Network when the basketball season gets going, forcing Comcast and other big cable companies, such as Time Warner, to carry it.

DirecTV, the satellite service that distributes the new network, and others have spent $20 million promoting the Big Ten Network, Comcast's Cohen noted. But he said: "We are seeing, essentially, no impact from that campaign. The market is proving that they are overreaching."

So, both sides are placing bets. The network is waiting for Comcast to cave in the face of rabid Big Ten fans demanding the service. Comcast expects the network to eventually settle for the sports tier.

"Comcast is willing to suffer viewer defection during these high-stakes games of cat-and-mouse," said Hal Singer, a Georgetown University law professor.