Groups Seek Ownership Cap for Cable

Aug 15, 2005  •  Post A Comment

Watchdog group representatives recommended last week that the Federal Communications Commission adopt regulations that would place strict limits on the ownership of cable systems. The proposed restrictions would bar cable TV companies from acquiring systems that would push the company’s combined reach above a certain level, with the cap varying depending upon the type of ownership and the consolidated market power of the owner.

The recommendations call for setting caps between 20 percent and 30 percent of the nation’s multichannel TV subscribers. As it stands, cable TV operators face no explicit FCC restriction on their ability to acquire new cable TV properties.

In a filing at the FCC last week, the National Cable & Telecommunications Association said competition for viewers from direct broadcast satellite companies and emerging competition from telephone companies make a new regulatory limit unnecessary.

But in its own comments at the FCC, a coalition of watchdog groups-Consumers Union, Consumer Federation of America and Free Press-said strict limits are needed to curb the power of the cable TV industry giants to raise rates for consumers and determine which programming networks can be launched.

The issue is percolating now because the FCC in May announced that it was seeking a new round of comments in a long-pending proceeding to set limits on the ownership of cable TV systems-restrictions originally mandated in the Cable TV Act of 1992.

Previous agency regulations on the subject barred cable operators from owning systems serving more than 30 percent of the nation’s subscribers.

In 2001 a federal appeals court threw out the limits, contending that they hadn’t been adequately justified. The FCC sought comments on new regulations that year but never followed through by adopting new limits.

Now the FCC is looking at the issue anew, and the deadline for comments was last week. Once the agency digests the public comments, it is free to adopt new regulations on the topic-including rules that could bar further consolidation in the cable TV industry.

In comments filed with the FCC last week on behalf of the cable TV industry, NCTA warned that new ownership limits could severely impede the ability of cable TV companies to compete with telephone companies in offering broadband packages of video, voice and data services.

New Argument

In a new wrinkle in the argument, the watchdog groups suggested setting different ownership caps for different cable companies, depending on where they own systems.

Under this approach, cable companies such as Comcast that own clustered systems in major markets would be penalized, facing a dramatically lower overall subscriber limit than some of their industry colleagues-based on the argument that operators with clustered systems in major markets have the most marketplace clout.

Comcast is the only cable company currently close to a 30 percent cap, according to industry sources. With its pending acquisition of Adelphia Communications systems, Comcast has said it would have a total of 26.8 million subscribers, or 28.9 percent of all multichannel video subscribers.

But under the discount system envisioned by the watchdog groups, Comcast’s total reach would exceed its new cap-calculated by the groups to be 25 percent of multichannel video subs-by 4 million subscribers before the Adelphia subscribers are added, the groups said in their comments.

Said Comcast, in its own comments to the FCC: “The video programming marketplace today is extraordinarily vibrant and competitive and there are no signs that program producers are having difficulty delivering, or that consumers are having difficulty receiving, video programming. Given these dynamics, it will be exceedingly difficult for the commission to justify a limit on cable ownership that can pass judicial muster.”

Adding some new heft to the issue is that the watchdog groups had generated 19,245 FCC comments from individuals supporting their cause as of the agency’s deadline last week. Industry representatives have dismissed the importance of such filings, which appear to be mostly e-mail form filings that are featured on Free Press’s Web site.