An appellate court Friday overturned the Federal Communications Commission’s limit on the maximum number of subscribers any single cable system can reach — a move which could let number one Comcast grow even larger.
A three judge panel of the U.S. Court of Appeals for the District of Columbia overturned an FCC rule that bars any single cable provider from reaching more than 30 percent of cable subscribers, suggesting the rule was “arbitrary and capricious” and a “dereliction” of its duties.
“The commission has failed to demonstrate that allowing a cable operator to serve more than 30 perent of all cable subscribers would threaten to reduce either competition or diversity in programming in the face of ever increasing competition among video providers,” said the opinion written by two of the three judges. (The third filed a concurring opinion).
The FCC had argued the rule was needed to ensure that a single provider not exercise a life and death verdict over new channels. The FCC suggested that once a single cable system reached more than 30 percent of subscribers nationally, it had too much power over programming.
Comcast, joined by other cable systems, argued that the FCC rule was unjustified both because it applied only to cable systems — ignoring the growth of satellite systems — and because it ignored the number of new networks making it onto cable systems.
The judges sided with Comcast.
They rejected the FCC’s argument that satellite systems were not fully competitive both because of high costs and because the satellite providers can’t provide local phone or internet service.
The judges also termed the FCC’s claim that higher costs would deter viewers from switching to satellite systems as “feeble indeed.”
They also said that since 1992, when Congress originally acted to require the FCC to put limits into effect, satellite and fiber providers’ share of the cable pie has grown significantly.
“Cable operators no longer have the bottleneck power over programming that concerned Congress in 1992,” the judges said. “There has been a dramatic increase both in the number of cable networks and in the programming available to subscribers.”
The same court had overruled the 30 percent limit as “unconstitutional” eight years ago, but that time gave the FCC the chance to offer better justification, effectively leaving the rule in effect. This time the court overturned the rule.
Both Comcast and cable providers praised the decision.
“We are pleased the DC Circuit has vindicated our position,” said Sena Fitzmaurice, Comcast’s executive director, corporate and government affairs. “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.”
Kyle McSlarrow, president of the National Cable and Telecommunications Association, said the decision “is further affirmation that consumers are benefitting from a vibrant and competitive video marketplace that has undergone dramatic change and is providing more choice and better value than ever before.”
Consumer groups today promised to fight on and suggested they might urge the Obama administration to take the case to the Supreme Court or seek legislation.
“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,” said Andrew J. Schwartzman, president-CEO of the Media Access Project. “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.”
In a statement, FCC Chairman Julius Genachowski said the agency is reviewing the decision. “As part of the Cable Act, Congress required the commission to adopt horizontal ownership limits to enhance effective competition in the cable television marketplace," he 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.”