A federal judge has dismissed claims by Sky Angel U.S. LLC, an internet-based television service, that C-SPAN violated the antitrust laws by favoring traditional cable providers.

Although Judge Rudolph Contreras of the U.S. District Court for the District of Columbia dismissed Sky Angel’s antitrust claims, he also granted the internet television service leave to replead in Sky Angel U.S. LLC v. National Cable Satellite Corporation.

In November 2012, Sky Angel filed an antitrust complaint alleging that the National Cable Satellite Corporation – doing business as the non-profit television programming provider C-SPAN – conspired to restrain trade in the “real-time multichannel video programming distribution market.”  C-SPAN had entered into an affiliation agreement in 2009 to provide programming to Sky Angel’s television service, which delivers television programs through a high-speed internet connection and set-top boxes.  C-SPAN, however, allegedly breached the agreement by terminating service after allowing programs to air on Sky Angel for just three days. 

Sky Angel asserts that C-SPAN’s pulling of its legislative programs violated antitrust laws because C-SPAN’s executive board members, who also work for the most successful for-profit television networks, conspired to keep Sky Angel from competing in the market.

Judge Rudolph Contreras of the District Court for the District of Columbia disagreed and found Sky Angel failed to state a claim because the complaint did not include the basic factual elements needed to prove that a conspiracy or monopoly existed.

Sky Angel’s conspiracy claim, for example, did not cite any board votes or scheduled meetings to show an agreement was made between the executive board members. “Merely pleading that multiple entities hold positions on a board of directors does not establish a horizontal agreement,” the court held.  

The complaint also failed to properly define relevant product and geographic markets, which were essential elements of Sky Angel’s monopoly claim.  The product market was described as “real-time, multichannel video programming distribution services.”  However, when listing product substitutes as part of the market definition, Sky Angel did not explain why online video providers such as Hulu or Netflix were not included as interchangeable products.  The court found that television service providers compete in “individual metropolitan and regional markets” that can span the United States, rather than in the nationwide market alleged by Sky Angel.

While the court dismissed the conspiracy and monopoly claims, it also found that Sky Angel did adequately allege an antitrust injury, and granted Sky Angel leave to file an amended complaint.

Online video distributor Sky Angel LLC has filed an antitrust complaint against C-SPAN in the U.S. District Court for the District of Columbia, accusing the news broadcaster of violating the antitrust laws by favoring traditional cable providers.

Unlike traditional cable companies, Sky Angel provides customers with a receiver box that uses an Internet connection to deliver more than 50 channels of “programs that are encouraging, inspiring, and rooted in Godly principles.”

According to the complaint in Sky Angel U.S. LLC v.  National Cable Satellite Corp., the National Cable Satellite Corp., doing business as C-SPAN, agreed to provide its programming through the Sky Angel service in 2009.  Sky Angel alleges that C-SPAN then reversed its decision for anticompetitive purposes and cut service to Sky Angel after only three days.  According to Sky Angel, C-SPAN’s Board of Directors, composed of executives from cable companies, caused C-SPAN to withhold its programming from Sky Angel, and to boycott Sky Angel.

Sky Angel is seeking damages against C-SPAN for violating the antitrust laws and an injunction that would require C-SPAN to honor the terms of its contract with Sky Angel for 10 years.

The lawsuit is Sky Angel’s second attempt at seeking antitrust remedies to increase competition in the online video distribution market.

In 2010, Discovery Communications denied Sky Angel access to both Discovery Channel and Animal Planet programming.  Sky Angel reacted by filed an access complaint with the Federal Communications Commission.

Although the FCC ruled against Sky Angel’s 2010 complaint, the FCC has expressed concern that traditional cable providers have a competitive advantage over alternative video distributors (such as Sky Angel).  “An entity attempting to enter the online video distribution marketplace must obtain a robust, if not comprehensive, programming library to offer consumers,” the FCC stated in a 2012 competition report.

Sky Angel has sought access to Discovery’s and potentially other programming based on its argument that it qualifies for program access as a “Multichannel Video Programming Distributor” (“MVPD”) under the Communications Act and the FCC’s rules.  The FCC has not granted Sky Angel such status, but on March 30 of this year, citing Sky Angel’s Discovery application, issued a Public Notice (Docket No. 12-83) requesting comment as to whether an Online Video Distributor of programming, such as Sky Angel, should be considered an MVPD.