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Editorial: Please Remove Your Cap

The FCC's deadline, make that one of its deadlines, for comments on competition in the multichannel video marketplace was Aug. 28. A D.C. federal appeals court wasn't an official commenter, but it might as well have been. The court delivered a message to the marketplace on that day that cable has plenty of competition, and the FCC has plenty of work left to do if it wants to impose a cap on the number of subs a cable operator can serve.

The court gave the commission one of those “arbitrary and capricious” smackdowns it should be used to by now. The bottom line was that for the second time, the FCC failed to justify its limit on cable subs. But the lines above that, in a unanimous decision, made the kind of case for a competitive marketplace that prompted the NCTA to quickly amend its own comment in the FCC proceeding to showcase them.

“[T]he Commission has failed to demonstrate that allowing a cable operator to serve more than 30% of all cable subscribers would threaten to reduce either competition or diversity in programming,” the court said. It added that the record was “replete” with evidence of increasing competition: “Cable operators, therefore, no longer have the bottleneck power over programming that concerned the Congress in 1992 [when the Cable Act was passed]. Second, over the same period there has been a dramatic increase both in the number of cable networks and in the programming available to subscribers.”

Wall Street reacted with a yawn, but that was because no operator is currently pushing the 30% cap the FCC unsuccessfully tried to defend. After Comcast, at 25% of subs, no one is even close. The company, the nation's largest MSO, could even have bought another major MSO and still not have topped the cap.

But the fact that the cable M&A market won't suddenly rev up is not the way to gauge this decision. The big victory was the message to anyone listening that DBS—and the Internet and, yes, even broadcasters—are legitimate alternatives that can't simply be dismissed with rhetorical hubris.

While in their own dueling comments in the FCC proceeding, broadcasters and MVPDs locked horns over retransmission consent and DMA reform, one thing they agreed on was that there was no lack of competition for eyeballs. Cable's sub count has been eaten into by DBS. Even telcos are making a small dent. Broadcasters have lost audience to what even they concede is the inevitable rise of cable and satellite. And everyone is trying to move at least some of their video model to the Web or lose even more ground.

Cable operators cannot rest on the victory, however. FCC Chairman Julius Genachowski reminded everyone that the Cable Act instructs the FCC to come up with a limit, so until a court goes all the way and strikes that down, the newly data-driven FCC could try to make a better case, or come up with a different standard.

But for the moment, the court has confirmed what anyone without a law degree, but with a clicker or a cellphone or a satellite dish or a mouse, could have told it: No one has a corner on the video market.