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Cap Schlap

Although the National Cable & Telecommunications Association (NCTA) and Comcast Corp. (Nasdaq: CMCSA, CMCSK) are protesting it, the Federal Communications Commission (FCC) 's newly-adopted 30 percent subscriber cap on the multichannel pay-TV universe has, at this point, much ado about nothing, says a top cable industry analyst. (See FCC Caps Cable .)

In a note issued Wednesday, Craig Moffett of Sanford C. Bernstein & Co. Inc. resets the fact that Comcast Corp. (Nasdaq: CMCSA, CMCSK), with about 27 percent of the U.S. multichannel universe, is the only MSO that potentially would be affected. But, when a coming transaction and general FCC weirdness are factored in, Comcast's footprint will shrink.

"Whether the cap has any practical implications... remains to be seen," Moffett explained. "Because of the convoluted math of 'attributed subscribers,' when Comcast closes its acquisition of half of Insight [Communications] in January, it will actually become 650K subscribers smaller in the eyes of the FCC." (See Comcast, Insight Divvy Up Midwest.)

That would still give Comcast the head room to acquire Cablevision Systems Corp. (NYSE: CVC)... assuming Cablevision would even be up for sale and Comcast would be inclined to buy. And those are some pretty big (and unfounded) assumptions.

Moffett also says a truly large acquisition by Comcast is a "moot point," as there aren't any for sale that fit the description. Among the larger ones, Cox Communications Inc. and Bright House Networks "are all happily independent, and happily private," he writes.

He also observes that the cap does not apply to DirecTV Group Inc. (NYSE: DTV) and EchoStar Satellite LLC , which, according to Moffett's estimates, collectively control 33 percent of the market, up from 18 percent when the cap was first proposed six years ago.

"That said, the existence of a cap applied to cable operators could provide yet another hurdle to any eventual merger plan for the satellite operators," he adds, noting again that there are no indications that such a deal is in the works today.

But if the satellite radio deal between XM Satellite Radio (Nasdaq: XMSR) and Sirius Satellite Radio does pass muster, "we would expect renewed speculation about another DirecTV/EchoStar merger attempt somewhere down the line," Moffett says.

Then again, the courts, as FCC Commissioner Robert McDowell predicted Tuesday, may overturn the cable cap. That will make this likely moot point in cable's regulatory history even mooter. Or does that make it ultra-moot? Super-moot?

— Jeff Baumgartner, Site Editor, Cable Digital News

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