Judge tosses cable caps

Mar 5, 2001  •  Post A Comment

In a stunning victory for the nation’s biggest cable TV companies, the federal appeals court in Washington Friday threw out several key Federal Communications Commission cable ownership regulations, including ones barring ownership of systems reaching more than 30 percent of the nation’s TV subscribers and prohibiting systems from filling more than 40 percent of their channel capacity with programming they own.
The FCC argued that the caps were necessary to prevent huge cable companies from getting bigger and dominating the rest of the industry. But AT&T and Time Warner, the cable industry’s largest operators, sued.
In its decision Friday, a three-member panel of the appeals court sided with the cable companies, holding that the FCC hadn’t provided adequate justification for its regulations.
“Constitutional authority to impose some limit is not authority to impose any limit imaginable,” said Judge Stephen Williams, who wrote the decision for the court and sent the case back to the FCC.
Among other things, Judge Williams charged that the FCC hadn’t paid sufficient heed to the competition cable is getting from direct broadcast satellite.
The court also rejected an FCC ruling preventing programmers from taking advantage of a loophole that shields some cable industry partnership investments from the FCC’s cap limits.
That’s an important issue for AT&T because its 25.5 percent interest in Time Warner Entertainment is through a limited partnership, and the FCC’s ruling precluded it from shielding that interest.
Also in its decision, the court accused the FCC of failing to adequately justify a decision to throw out its single-majority stockholder rule. That regulation said cable operators didn’t have to count toward the caps investments in systems controlled by a single majority shareholder.
Judge Williams said the 30 percent cap interfered with AT&T and Time Warner’s rights by “restricting the number of viewers to whom they can speak.” On the 40 percent programming cap, the judge added, “The vertical limit restricts their ability to exercise their editorial control over a portion of the content they transmit.”
In the wake of the ruling, AT&T declined comment on whether it will now seek to renegotiate the divestiture commitment it made to win FCC approval of its acquisition of MediaOne last year. At the time, AT&T needed to get rid of something because the acquisition gave it interests in systems reaching more than 40 percent of the nation’s multichannel TV subscribers.
“We’re pleased that the [court] agreed with the key arguments we presented in the case,” said Jim Cicconi, AT&T general counsel. “We’re continuing to review the opinion carefully and plan no further comment at this time.”
Kathy McKiernan, a spokeswoman for AOL Time Warner, said, “We are very pleased with the decision. It’s a good day for cable operators’ First Amendment rights.”
But Cheryl Leanza, deputy director of the activist Media Access Project, said the decision was “a loss for the viewing public.”