Case buoys cap scrappers

Media dereg fans see court decision on cable reach as invitation to the party

The biggest players in the cable businesses are rejoicing over the court decision offering industry operators more freedom to merge with each other and to choose the channels they carry.

Although the ruling immediately affects only the cable business, many champions of broader media deregulation think it might be time to put some champagne on ice, too.

A three-judge panel of the federal appeals court in Washington ruled March 2 that the FCC failed to justify its 30% cap on one company's share of pay-TV subscribers. The FCC had argued the limit prevented any one operator from getting so big that it would have sufficient market power to block new programmers from entering the market. Writing for the court, Judge Stephen Williams said the FCC's "assumptions are mere conjecture."

Williams took an even dimmer view of a second restriction barring operators from devoting more than 40% of their first 75 channels to their own programming. This limit, he said, appeared to have been "plucked from thin air."

Noting that the Supreme Court only one week before upheld the 1992 law providing the basis for the caps, he scolded the FCC for not providing a stronger basis for its restrictions. "Constitutional authority to impose some limit is not authority to impose any limit imaginable," Williams wrote.

Many broadcast-industry attorneys say the court's decision gives them powerful legal support both for raising the 35% cap on a TV group's national audience share and for eliminating restrictions on owning two TV stations in the same market.

"Intellectually, the decision supports the case for relaxing the cap and provides some impetus for the FCC to act" on the TV group audience cap, said NBC lobbyist Robert Okun.

Okun also said the decision will have major influence when the same court, though not necessarily the same three-judge panel, rules on the major networks' challenge to the national broadcast cap later this year. The court has agreed to hear challenges to the cap by NBC, Fox and CBS.

Unaffiliated stations now may have a better chance to form duopolies in small markets, said David Donovan, lobbyist for the Association of Local Television Stations. ALTV is fighting to reduce the "voice test" that bars TV duopolies when fewer than eight unaffiliated stations would remain in a market.

Opponents of cross-industry-ownership restrictions also are invigorated by the decision.

"The court insisted that regulation be based on real live facts rather than conjecture," said John Sturm, president of the Newspaper Association of America, which is fighting to eliminate the ban on same-market TV/newspaper cross-ownership.

Of course, not all in the philosophically divided broadcast industry agree the decision will be so far-reaching. Jack Goodman, counsel for the National Association of Broadcasters, which defends the 35% cap on behalf of network affiliates afraid of losing contract leverage with their programming suppliers, said too much is being read into the decision. "It does mean the commission sooner or later will have to justify the numbers," he said. "But the court was not hostile to ownership caps as a way to preserve competition and diversity."

For cable, the broader effect may be to protect the industry from new mandates, such as open-access rules requiring cable companies to let competing Internet providers onto their broadband networks and expanded must-carry rules for local TV stations' digital signals.