Court Throws Out FCC's Cable Ownership Cap

On Friday, the US Court of Appeals for the DC Circuit vacated the Federal Communications Commission's rule that caps at 30% of all subscribers the market share any single cable television operator may serve. The court ruled the FCC's limit "arbitrary and capricious" and found the FCC was "derelict" in not giving satellite television service its due as a legitimate competitor.

"[T]he Commission has failed to demonstrate that allowing a cable operator to serve more than 30% of all cable subscribers would threaten to reduce either competition or diversity in programming," the court concluded. "First, the record is replete with evidence of ever increasing competition among video providers: Satellite and fiber optic video providers have entered the market and grown in market share since the Congress passed the 1992 Act, and particularly in recent years. Cable operators, therefore, no longer have the bottleneck power over programming that concerned the Congress in 1992. Second, over the same period there has been a dramatic increase both in the number of cable networks and in the programming available to subscribers. 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% of the market poses a threat either to competition or to diversity in programming."

National Cable & Telecommunications Association President & CEO Kyle McSlarrow responded saying, "We applaud the court's decision to reject an unnecessary rule that can no longer be justified in a market where consumers are enjoying robust competition that is producing a wide variety of world class services at affordable prices. Today's decision is further affirmation that consumers are benefiting from a vibrant and competitive video marketplace that has undergone dramatic change and is providing more choice and better value than ever before."

Andrew Jay Schwartzman, President and CEO of Media Access Project, said, "I'm disappointed, but not surprised. Although Congress directed the FCC to establish limits on cable ownership in 1992, the D.C. Circuit Court of Appeals has been disinclined to approve such regulations. It is hard to imagine that any rule the FCC could devise would ever withstand review under the standards established in today's decision. This is not the end of the fight. Big cable's anti-competitive ownership structure has increased prices and limited choices for the American public. 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."

FCC Commissioner Robert McDowell said, "It was clear in December 2007, when I dissented from the FCC decision to once again impose a 30 percent national cap on cable system ownership, that the effort to re-justify the very same cap that the D.C. Circuit first struck down in 2001 was even more vulnerable to court challenge the second time around. Despite the Commission staff's best efforts to provide post hoc empirical support for the chosen outcome, the court recognized that the 2007 analysis' aging data and questionable assumptions sat oddly against the facts about new - and successful - competitors to cable systems in the multichannel video marketplace. It should go without saying that, in the future, outcomes in our proceedings should be driven by the facts and law, rather than the other way around."