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FCC Caps Cable

As expected, the Federal Communications Commission (FCC) voted today in favor of an ownership cap that will have little near-term impact on cable operators other than the nation's largest, Comcast Corp. (Nasdaq: CMCSA, CMCSK).

In a 3-2 vote, the agency imposed a rule preventing U.S. cable MSOs from owning 30 percent or more of the pay-TV universe. The ownership limit, the FCC argued, will reduce the power an MSO has over the fate of young programmers seeking carriage on cable systems. (See FCC Adopts Cable Cap.)

FCC chairman Kevin Martin, a Republican, along with the two agency Democrats -- Michael Copps and Jonathan Adelstein -- voted in favor of the cap. Deborah Taylor Tate and Robert McDowell, both Republicans, dissented.

"This order goes out of its way to remain ignorant of current market conditions which obviate a need for a cap," McDowell said in a statement. "This order will be overturned [his emphasis] by the D.C. Circuit."

Comcast has about 27 percent of the pay-TV market, so the new rules would prevent the operator from making a substantial acquisition. Time Warner Cable Inc. (NYSE: TWC), the second largest cable operator with about 13.5 million basic video subscribers, has a share of just 14 percent.

Earlier reports suggested that a newly installed cap would block Comcast from buying Charter Communications Inc. and its 5.3 million subs, but not Cablevision Systems Corp. (NYSE: CVC), which has about 3.1 million customers. Charter has not indicated a desire to sell, and the Dolan family recently failed in its latest bid to take Cablevision private. (See Ending the Year With a Bang? and Cablevision Shareholders Reject Dolan Bid.)

In response, the National Cable & Telecommunications Association (NCTA) was quick to point out that the new rule comes six years after an appeals court rejected the idea on First Amendment grounds.

In a statement, NCTA president and CEO Kyle McSlarrow noted that competition among satellite, telcos, and cable operators has only increased since then. He called the FCC's decision a conclusion "driven by a political agenda to target the cable industry."

The decision is especially "perverse" given the FCC's thumbs-up to the various Bell company mergers, Comcast executive vice president David Cohen said in his written statement. "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," he added.

This vote was a close one, but Martin did obtain what was necessary to win the day. Late last month, Martin had less luck pushing new cable regulations based on the so-called "70/70" rule. The FCC, however, did approve new rules for cable contracts with multiple-dwelling units (MDUs), although the cable industry has threatened court action if the agency does not consider revising its stance on exclusive MDU deals already in place. (See FCC Demands Cable Sub Data and NCTA Seeks MDU Ruling Reversal .)

— Jeff Baumgartner, Site Editor, Cable Digital News

nextinning 12/5/2012 | 2:57:12 PM
re: FCC Caps Cable What's to discuss? The "rule" will be over-turned and Martin just secured the lead roll in the sequel to Dumb and Dumber.

"This order goes out of its way to remain ignorant of current market conditions which obviate a need for a cap," McDowell said in a statement. "This order will be overturned [his emphasis] by the D.C. Circuit."
Jeff Baumgartner 12/5/2012 | 2:57:11 PM
re: FCC Caps Cable yes, the new rule will be challenged posthaste...but it will be interesting to see how the debate evolves. but it was out of the ordinary to see a Commissioner forecast the demise of order. There's dissenting votes...and then there's dissenting votes.
iluv2fish 12/5/2012 | 2:57:09 PM
re: FCC Caps Cable Why would the vote come out this way?
What logic is used?
Who are they afraid of and why?

Jeff Baumgartner 12/5/2012 | 2:57:08 PM
re: FCC Caps Cable Logic? Martin's so-called cable vendetta? There are many in the cable industry noodling how those two go together.
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