Legal News

D.C. Circuit to Cable Companies: Let There Be No Limit to Your Size

By Ashby Jones

We didn’t know this, but dating to 1993, a Federal Communications Commission rule has placed limits on how big cable companies could grow: No single company could own more than 30% of the nation’s customers.

But that regime was thrown into serious jeopardy on Friday, over the FCC’s objections. The D.C. Circuit tossed out the rule as unconstitutional, citing increased competition in the pay-TV market from satellite and telephone companies. Click here for the WSJ story; here for the WaPo story; here for the opinion.

The court said the FCC “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.”

It’s not the first time the D.C. Circuit has struck down the rule. In 2001, the court ruled it unconstitutional, though the FCC instituted it again in 2007, arguing that consumers would be harmed by allowing large cable operators to grow any larger. The FCC narrowly agreed to reinstate the cap, with Republicans on the board dissenting with then-chairman Kevin Martin, who pushed for the change.

The decision by the FCC to reinstate the rule in 2007 left the members of the court none too pleased. The court said the FCC’s “dereliction in this case is particularly egregious” because the commission failed to fully consider the competition brought to the paid TV market by satellite providers such as The DirecTV Group Inc. and the Dish Network Corp.

“It is apparent that the Commission either cannot or will not fully incorporate the competitive impact of (satellite providers) and fiber optic companies” into its market analysis, the court said. “In light of the changed marketplace, the government’s justification for the 30% cap is even weaker now than in 2001 when we held the 30% cap unconstitutional.”

Although several cable companies joined in challenging the FCC’s 30% cap, Comcast was the only cable company in danger of bumping up against it, since the cable giant currently has about a 25% national market share.

Now, Comcast, Time Warner Cable and other operators could freely acquire more cable systems without the danger of running into regulatory hurdles at the FCC.

Comcast was represented by Gibson Dunn’s Miguel Estrada.

Full post as published by Law Blog - WSJ.com on August 31, 2009 (boomark / email).