Court Gives Cable TV Giants Room to Grow

Rips FCC limit on subscribers as "egregious," "arbitrary and capricious."

Aug. 28, 2009 — -- Comcast has won a major legal battle to erase limits on the size of pay TV companies.

A federal court today sided with Comcast and tossed out an FCC cap on the percentage of TV subscribers that can be served by any one company.

The largest cable provider in the nation had argued it was an unconstitutional violation of free speech rights for the FCC to forbid cable companies from serving more than 30 percent of the subscribers in the United States.

A three-judge panel of the U.S. District Court of Appeals for the District of Columbia Circuit agreed in a strongly worded opinion that cast the FCC limit as "egregious" as well as "arbitrary and capricious."

The FCC had set the rules early in the Clinton administration as an effort to prevent any single provider from altogether taking over the pay TV market. But the judges argued cable companies are no longer the only game in town for expanded TV services.

"Much has changed in the subscription television industry since 1993," Judge Douglas Ginsburg wrote for the court. "The number of networks has increased five-fold and satellite television companies, which were bit players in the early '90s, now serve one-third of all subscribers."

Ginsburg also noted fiber optic video providers have emerged and "grown in market share."

The court had kicked the rules back to the FCC in 2001, asking the agency to recognize that the cable industry was starting to feel the heat from satellite providers.

"We expressly instructed the agency ... to consider fully" that competition, Ginsburg wrote. The FCC's "dereliction" in not doing so, he wrote, was "particularly egregious."

"The 30 percent subscriber cap has limited the ability of cable operators to communicate with the public for some 16 years, despite our determination eight years ago that a prior version of the rule was unconstitutional," Ginsburg wrote.

'Big Cable' Foe 'Disappointed' by Ruling

The Media Access Project's Andrew Schwartzman, who had defended the limits before the court, said he was "disappointed," but vowed to continue fighting Comcast.

"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," Schwartzman wrote in a prepared response to the ruling. "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."

Comcast released a statement this evening praising the ruling.

"We are pleased the D.C. Circuit has vindicated our position," said Sena Fitzmaurice, Comcast's executive director of corporate communications 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.

The cable industry's advocacy group, the National Cable Telecommunications Agency, also issued a celebratory statement.

"We applaud the court's decision to reject an unnecessary rule that can no longer be justified in a market where consumers are enjoying robust competition that is producing a wide variety of world class services at affordable prices," said Kyle McSlarrrow, the NCTA's president. "Today's 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."

While Comcast won this legal battle, it has a way to go in the court of public opinion.

Cable providers Comcast, Time Warner and Charter draw low marks on the American Customer Satisfaction Index, tracked by the University of Michigan. On a scale of 0 to 100, Comcast and Time Warner each scored 59 this year. The satellite provider DirectTV ranked first at 71, with Cox Communications cable at 66 and DISH Network at 64.