Cable Operators Want FCC Cap Ruling Reversed

Saying FCC failed to perform a crucial market-power analysis on the industry
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Cable operators are pushing a federal appeals court to reverse the FCC's decision to re-impose a 30% cap on the percentage of cable subscribers operators may reach nationally, saying the FCC failed to perform a crucial market-power analysis on the industry.

The National Cable & Telecommunications Association and a handful of state cable associations and cable operators--notably Time Warner--filed a friend of the court brief in the Federal Court of Appeals for the D.C. Circuit backing Comcast's challenge to the decision by the FCC, under Chairman Kevin Martin, to re-impose the cap.
NCTA earlier this year signaled its desire to stand with Comcast, the nation's largest cable operator.

It had been thrown out in 2001 by the same court, which found wanting the FCC's defense of the rule. The commission concluded that allowing two companies to own 60% of the market would leave only 40% "open." The court said that the FCC was wrong to assume that two companies would collude to deny access to programming.

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.

Republican FCC commissioners Robert McDowell and Deborah Taylor Tate dissented, with McDowell saying that the cap was unnecessary, unjustified and would be thrown out by the court.

Comcast, closest to the cap at about 27% of subscribers, filed suit against the decision March 12.

NCTA and company argue that the FCC barely acknowledged the explosion of alternative, competing video delivery systems--satellite, the Internet, telocs-- and cited McDowell's comment that the FCC's order went out of its way to "remain ignorant of current market conditions which obviate a need for a cap."

Without that market power determination, they argue, the FCC cannot show that the harms it purports are not merely conjecture, much as it conjectured the 60% collusion in its earlier justification thrown out by the court.

NCTA and company said the cap hinders their ability to grow, to reach a larger audience, and to raise capital, all of which are crucial to remaining competitive in the marketplace.

Comcast executive vice president David Cohen told B&C back in February just what Comcast thought was wrong with the decision: "The record at the FCC provided absolutely no support for a horizontal ownership cap of 30% -- a position that has been supported by the courts," Cohen said at the time. "In an era of increased and intensifying competition among telephone, satellite and cable companies, the case for a 30% cap is even weaker than when the courts rejected it six years ago."

He also saw some telco favoritism in the move. “The FCC action in this case is perplexing from the same commission that approved the largest telecommunications deal in history with the AT&T merger," Cohen said in February, "as well as two other Bell company mega-mergers in the past three years. As these FCC decisions have strengthened the hands of our Bell competitors, it is unthinkable that the government would constrain the ability of cable companies like Comcast to compete with these colossal companies."

Martin said at the time of the vote that the fact that the FCC did not loosen the cap was similar to its decision not to lift, but only modify, the newspaper-broadcast cross-ownership ban--a sign that the agency listened to the complaints of anti-consolidation activists, in this case concluding that no further cable deregulation was in the public interest.

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