Cable still seeking freedom from cap

Feb 26, 2001  •  Post A Comment

Despite a legal setback last week, the cable television industry is still hopeful it can sway the courts to grant at least partial relief from federal cable ownership regulations.
The industry was dealt a blow Feb. 20 when the U.S. Supreme Court declined to consider Time Warner Entertainment’s longstanding challenge of the restrictions, which bar cable operators from reaching more than 30 percent of the nation’s multichannel video subscribers.
The court’s action lets stand a lower court ruling upholding the constitutionality of the limits.
Time Warner had argued that provisions in the 1992 Cable Act mandating the rules violate the First Amendment rights of cable companies by curbing their ability to reach all consumers.
The company had drawn an analogy to newspapers, emphasizing that the courts would never limit the amount of newspaper subscribers nationwide. The Supreme Court did not explain why it won’t take the case.
Now Time Warner Entertainment and AT&T are banking on a separate challenge to the ownership rules that is pending before the U.S. Court of Appeals in Washington. Sources said the court could issue a decision very soon.
In this proceeding, the parties have challenged the FCC’s interpretation of the statute mandating the rules.
They contend the rules impose unfair burdens on cable companies, particularly the so-called attribution rule requiring cable companies to count toward their ownership caps all investments in which they own 5 percent or more of the voting equity, even if they don’t control how the systems are run.
One source last week speculated that, in the wake of the Supreme Court’s action, it’s unlikely the appeals court would throw out the FCC rules on constitutional grounds.
But the companies hope to score a victory on the attribution rule-they want the court to vacate the restriction and instruct the FCC to try again, this time making it less stringent.
AT&T has lobbied recently for legislation that loosens the attribution restriction so only a company that owns or controls a cable TV system or influences its program selections must count toward the cap.
AOL Time Warner, parent of Time Warner Entertainment, reaches about 20 percent of video subscribers through its divisions operating cable systems.
AT&T, which announced its merger with MediaOne Group in 1999, will be at the 29 percent level after it sheds properties to comply with FCC conditions imposed on the deal. Toward that end, the company has said it expects to spin off Liberty Media Group but could change its mind.
At 29 percent, there’s little growing room for the company to expand in the future.
AT&T is particularly concerned that under the current attribution rule, another company in which it owns a minority stake but has no control over might unilaterally take steps putting it over the cap, forcing further divestitures by AT&T. One of AT&T’s holdings is a 25 percent stake in TWE.
Even if the U.S. Supreme Court had taken the Time Warner case, AT&T says it’s locked into divesting some properties to satisfy FCC
requirements for its merger with
Beyond the courts, the cable industry may have its best shot at ownership relief from the FCC itself because the agency is now headed by the deregulatory-minded GOP Chairman Michael Powell. President George W. Bush and the Republican-controlled chambers of Congress could also prove a plus.