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Federal Court Tosses Out FCC Rule On Cable Caps

Ruling enables Comcast and competitors to expand

By Martin H. Bosworth
ConsumerAffairs.com

August 29, 2009

The court said that the FCC did not take competition from satellite television and fiber-optic providers into effect as competition for markets when making its calculations.

"In view of the overwhelming evidence concerning the dynamic nature of the communications marketplace, and the entry of new competitors at both the programming and the distribution levels, it was arbitrary and capricious for the Commission to conclude that a cable operator serving more than 30 percent of the market poses a threat either to competition or to diversity in programming," the court said.

"Considering the marketplace as it is today and the many significant changes that have occurred since 1992, the FCC has not identified a sufficient basis for imposing upon cable operators the 'special obligations,' represented by the 30 percent subscriber limit," the court added.

The ruling was a win for Comcast, the nation's largest cable company with 25 percent of the nation's customers, and a blow to the FCC and Congress. Congress authorized the FCC in 1992 to set limitations on the amount of market share cable companies could hold. The agency instituted the 30 percent rule, but it was twice thrown out in court. Former FCC chairman Kevin Martin reinstated the rule in 2007.

"We are pleased the DC Circuit has vindicated our position," said Comcast's executive director for government affairs, Sena Fitzmaurice. "This important decision affirms that rules must reflect the changing realities of the dynamic video marketplace where today consumers have more choice in video providers and channels than ever before."

Consumer groups such as Media Access Project were disappointed in the verdict, but vowed to fight back.

"Big cable's anti-competitive ownership structure has increased prices and limited choices for the American public," said Media Access Project's president, Andrew Schwartman. "Therefore, we will consult with the FCC on whether Supreme Court review is feasible. If not, we’ll be asking Congress to pass new legislation to insure more choice and lower prices for cable TV service."

Current FCC chairman Julius Genachowski said "The FCC staff is currently reviewing the Court's decision with respect to the limit previously adopted and the Commission will take this decision fully into account in future action to implement the law."

Under Martin's tenure, the FCC moved aggressively to limit cable companies' dominance in markets, even to the point of deliberately favoring legislation or rulings that enabled telecom companies to compete more easily.

Martin pushed for new video franchising rules that would enable telecom companies such as Verizon and AT&T to roll out services in neighborhoods without having to comply with local municipal rules--rules which their cable competitors were still subject to.

Martin also lobbied to outlaw exclusive service deals between cable companies and apartment buildings, which prevent renters from choosing other services. While the ruling was considered a win for lower-income families, it also mirrored the desires of telecom companies who wanted to compete in formerly closed markets.

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