FCC Releases 30% Cable-Subscriber Cap Order

Federal Communications Commission Suggests that Cap Should Actually Be 28%

By John Eggerton -- Broadcasting & Cable, 2/11/2008 3:41:00 PM

The Federal Communications Commission released its final order on the establishment of a 30% horizontal cap on cable ownership, although it suggested that the cap should be 28%, according to its new formula, but it bumped the number up to 30% for the sake of consistency and because, it suggested, a couple of points' worth of viewers isn't a deal-breaker.

The FCC -- actually chairman Kevin Martin and a pair of Democrats -- last fall voted to restore the 30% national cap on the number of multichannel-video subscribers a cable operator can reach, saying that it wanted to make sure no cable operator or group of operators could "impede the flow of programming to its consumers" because of its size.

Republicans Robert McDowell and Deborah Taylor Tate dissented, with McDowell saying that the cap was unecessary, unjustified and would be thrown out by the court.

The D.C. Federal Appeals court had asked the commission to justify its previous 30% limit, which the FCC said it did this time around by determining that a new network needed an unimpeded path to at least 70% (apparently more like 72%) of the nation's mulitchannel-video subscribers, which left it with the 30% cap (or 28% if you are being technical).

The commission also said it will continue to count satellite and other competitors in calculating the cable cap. But it will not count the Internet, mobile phones, or video rentals, it added.

The FCC said it would not discount satellite-TV subscribers, which consumer groups had asked it to do, adding that direct-broadcast satellite was not as attractive to advertisers.

At the time of the 3-2 vote, which the chairman achieved with the votes of Democrats Jonathan Adelstein and Michael Copps, Martin also explained retaining the cap by saying that it was part of an overall decision that no further media-ownership deregulation beyond modification of the broadcast-newspaper broadcast cross-ownership rule was in the public interest.

Comcast, the nation's largest cable operator, is the only MSO close to that figure at about 27% of multichannel-video subscribers, which leads to the whole issue of 28% versus 30%.

While the FCC said when it voted that it was setting the cap at 30%, it said in the order that using its new formula for calculating viability of new networks, it came up with "a result of 28," which it added means that "as long as the largest cable operator does not serve more than 28% of all MVPD [multichannel-video-programming distributor] subscribers, that operator cannot significantly undermine the viability of a programming network by refusing to carry the network."

But then the commission said it was rounding up to 30% because that was the cap it has been enforcing in the absence of a decision on what cap it should be enforcing.

"Therefore, for consistency, we adjust the limit slightly upward, from 28% to 30%," the commission said Monday in the order. "This small upward adjustment is unlikely to cause harm," it concluded. "We do not believe this minor adjustment will adversely affect our ability to provide the protection the statute requires. Moreover, this adjustment will have no affect on the largest cable operator in the market today [Comcast] because it would satisfy either a 28% or 30% limit."

National Cable & Telecommunications Association agreed with McDowell that the FCC's new (old) cap will not withstand judicial scrutiny. "In 2001, the U.S. Court of Appeals soundly rejected on First Amendment grounds the precise cable ownership cap that the Commission adopted," said NCTA spokesman Brian Dietz. " The Court of Appeals found such a cap to be unjustified and out of touch with the competitive marketplace as it existed six years ago.  In the intervening years, competition among satellite, telephone and cable companies and the variety and amount of independent programming has only increased.  We are confident that a court will again reject conclusions that are completely at odds with the realities of a dynamic and competitive marketplace that is providing greater consumer choice and value.”