The underpinning of the FCC's cable ownership restrictions and channel lineup requirements were upheld by a federal court Friday. The decision will have an immediate impact on the pending merger of AT & T and MediaOne, which faces likely divestiture orders as a condition of approval.
A three-judge panel ruled that the 1992 law ordering the FCC to prevent concentration in the cable industry is constitutional, rejecting challenges by Time Warner.
A second phase of the case is still pending. It would determine whether the specific FCC rules implementing the law are justified. Oral arguments are scheduled for Oct. 17.
But with last week's decision, the FCC will begin enforcement of the rules, which have been stayed since they were drafted eight years ago.
"I am pleased that the court has validated laws that promote programming diversity and protect consumers against undue consolidation in the cable television marketplace," said FCC Chairman William Kennard.
The rules and the statute on which they are based were challenged by Time Warner, which brought 15 separate court challenges to the 1992 Cable Act. With last week's decision, all the company's complaints have been dismissed.
Although Time Warner could appeal to the Supreme Court, the high court rarely reviews lower court decisions upholding U.S. law.
AT & T officials, desperate to head off any divestiture orders in the MediaOne deal, said they were not worried by the decision and predicted the true test would be the court's review of the specific rules later this year.
The FCC caps one cable system's reach at 30% of U.S. multichannel subs. Under the strictest reading of the rules, AT & T's reach would be 41% after the MediaOne deal. AT & T says its reach should be calculated at only 29%, negating the need for any divestiture orders.