Comcast Wins Appeal of FCC Ownership Cap

By Frank Ahrens
Washington Post Staff Writer
Saturday, August 29, 2009

Comcast, the nation's largest cable television provider, can grow bigger if it wants to, after a federal court decision on Friday that tossed out a rule preventing cable companies from controlling more than 30 percent of the U.S. market.

The rule, set by the Federal Communications Commission in 1993, has been in legal challenge nearly since its inception, with cable companies arguing that it was unconstitutional and the FCC and some consumer advocates saying it was necessary to prevent one company from controlling the market and gouging consumers. The FCC imposed the cap after Congress passed the 1992 Cable Act, which said the agency must set "reasonable limits" on the number of customers a cable company can have.

On Friday, the U.S. Court of Appeals for the District of Columbia Circuit vacated the FCC's rule, calling it "arbitrary and capricious." It said the agency did not sufficiently consider the competition to cable companies from satellite television providers DirecTV and Dish Network, thus agreeing with Comcast's argument.

"We are pleased the D.C. Circuit has vindicated our position," Comcast spokeswoman Sena Fitzmaurice said in a statement. "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."

Ben Scott, policy director of Free Press, which opposes further media consolidation, said the court's ruling will be bad for consumers.

"Today, consumers experience perpetual price hikes by large operators that already have market dominating purchasing power to decide the fate of new channels," Scott said in a statement. "The promises of lower prices through competition from satellite and telecom companies in the video business have never been realized."

Consumer groups note that cable bills have risen at three times the rate of inflation since passage of the 1996 Telecommunications Act, which largely deregulated the industry.

In a statement Friday, FCC Chairman Julius Genachowski said his agency "will take this decision fully into account in future action to implement the law," but made no mention of a possible appeal.

Comcast has about 25 percent of the cable market, with about 24 million customers. Time Warner Cable is second, with 13 million customers, according to the National Cable and Telecommunications Association, followed by Cox Communications, with more than 5 million customers.

By comparison, satellite provider DirecTV has more than 18 million U.S. customers, and rival Dish Network has 13.6 million. Altogether, satellite providers serve nearly as many customers as Comcast's four biggest rivals combined.

Comcast said it sought to overturn the FCC's 30-percent ownership cap because it considered the limit out-of-date in a modern media market, not necessarily because it plans to buy other cable companies. The company has said it thinks the 2002 acquisition of AT&T's 13 million customers gave Comcast the size it wants.

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