FCC Passes 30% Cap on Cable Operators’ Subscriber Counts

Federal Communications Commission chairman Kevin Martin, joined by the two commission Democrats, voted officially Tuesday to cap cable operators’ subscriber counts at 30% of all multichannel-video subscribers and to open an inquiry into limits on the number of affiliated cable channels an operator can carry.

The vote was no surprise, since that bipartisan majority already voted the item on circulation earlier and Martin telegraphed his desire to retain that 30% cap since at least March.

His fellow Republicans were highly critical of the decision. It came in response to the D.C. Court of Appeals, which said in 2001 that the FCC had not justified its 30% cap, suggested that it had not sufficiently taken direct-broadcast satellite competition into account and offered up a 60% cap as possible.

Commissioner Deborah Taylor Tate, saying that cable was no longer the gatekeeper it may once have been, added that it was tough to see how a 30% cap was justifiable given the court's direction.

Commissioner Robert McDowell agreed. With the D.C. Court having rejected the same 30% cap seven years ago, he said, and citing DBS, the FCC was sending the same 30% cap back to the same court at a time when DBS was twice as big.

Evoking A Christmas Carol, McDowell said it was like the Ghost of Christmas Past, but also like the Ghost of Christmas Present in that it was ignorant of marketplace reality and wanting in any sustainable justification. And like the Ghost of Christmas Future, he added, its inescapable fate would be a cold, dark epitaph: “This order will be overturned by the court."

He added, "The majority have concocted an unconstitutional cure for illness that does not exist.”

Martin said he thought the order was responsive to the courts, but he added that it was in response to concerns expressed in media-ownership hearings about further consolidation.

He said the FCC chose not to loosen national or local TV-ownership caps and similarly decided not to raise the cable-ownership cap beyond 30%.

McDowell had said that the decision penalized cable and created an unlevel playing field, but Martin pointed out that the cap also applied to telephone companies' video subscribers. It does not apply to satellite, however.

The cable operator closest to that cap, Comcast, was not happy with the decision.

"The record simply does not support the divided commission vote to impose the same ownership cap that the D.C. Circuit ruled unconstitutional over six years ago, when there was a lot less competition in the video marketplace," executive vice president David L. Cohen said.

"It is also perverse to see the commission approving huge mergers by the Bell companies while now telling cable companies -- which compete toe-to-toe with the Bells to offer consumers a real choice for video, Internet and phone services -- that they may not also grow larger and achieve the same efficiencies,” he added. “We remain highly confident that the federal courts will agree that the commission's decision is not supported by the record and that this cap is unconstitutional.”

While National Cable & Telecommunications President Kyle McSlarrow was pleased that the FCC did not consider a multicast must-carry mandate, as some had suggested it would as part of a separate item on localism adopted at the same meeting as the cap, that cap was a different story, saying it was headed back to court..

"[I] 2001, the U.S. Court of Appeals soundly rejected on First Amendment grounds the precise cable ownership cap that the Commission adopted again today," he asid. "The Court of Appeals found such a cap to be unjustified and out of touch with the competitive marketplace as it existed six years ago.  In the intervening years, competition among satellite, telephone and cable companies and the variety and amount of independent programming has only increased.  

"We are confident that a court will again reject conclusions driven by a political agenda to target the cable industry that are completely at odds with the realities of a dynamic and competitive marketplace that is providing greater consumer choice and value."

John Eggerton

Contributing editor John Eggerton has been an editor and/or writer on media regulation, legislation and policy for over four decades, including covering the FCC, FTC, Congress, the major media trade associations, and the federal courts. In addition to Multichannel News and Broadcasting + Cable, his work has appeared in Radio World, TV Technology, TV Fax, This Week in Consumer Electronics, Variety and the Encyclopedia Britannica.