Court Tosses Cable Caps

Good news for AT&T and Time Warner—but one consumer group says the ruling is going to cost consumers, ask the FCC to establish new rules.

by ISP-Planet Staff [March 5, 2001]

The U.S. Court of Appeals for the District of Columbia Circuit issued its opinion in Time Warner Entertainment v. FCC overturning the Federal Communication Commission's cable ownership caps.

AT&T Corp. and Time Warner, Inc. petitioned for review of the FCC's cable ownership rules on First Amendment grounds. The FCC's horizontal rule imposes a 30 percent limit on the number of subscribers that may be served by a multiple cable system operator. Its vertical limit is set at 40 percent of channel capacity, reserving 60 percent for programming by non-affiliated firms.

Saving private industry
The three judge panel reversed and remanded both the horizontal and vertical limits. The Court followed the Supreme Court's ruling in Turner Broadcasting I that cable operators are "entitled to the protection of the speech and press provisions of the First Amendment."

The court, applying the intermediate scrutiny standard, then held that the horizontal limit interferes with petitioners' speech rights by restricting the number of viewers to whom they can speak.

The court ruling could save AT&T from selling key cable and programming assets to reduce its 42 percent share of the cable market as ordered by the FCC last year following its MediaOne acquisition. To get below the cap, AT&T has been negotiating to sell its 25.5 percent interest in Time Warner Entertainment to Time Warner but the two sides have been unable to agree on a price.

Choice limits
Gene Kimmelman, Consumers Union co-director, said the court's decision is an enormous loss and a devastating blow to consumers.

"It enables cable monopolies to consolidate further and expand their dominance of the television market by owning more cable systems and putting more of their own programming on those systems." Kimmelman said. "As large cable companies become more powerful, it becomes more difficult to get cable competition. It also creates a greater incentive for cable companies to limit programming choices to their own programs instead of providing a wider array of programming."

Kimmelman added that the court reaffirmed the FCC is under congressional mandate to establish ownership limits. It also reaffirmed that Congress acted within its authority in mandating the FCC to do so.

We will go back to the FCC to ask that it move as quickly as possible to establish new ownership limits that promote competition," Kimmelman said.

"With cable rates continuing to rise at three times the rate of inflation, it's more important than ever before for the FCC to establish new rules that will ensure competition and content diversity without interfering with the cable industry's First Amendment rights."

Rules redux
A rewrite of the rules would require a majority of support from five FCC commissioners, with three new members to be picked by Republican President George W. Bush in the coming months. The agency's new chairman, Michael Powell, disfavors ownership caps because he thinks they often outlive their usefulness.

"That's not to say that you can't make cases for them in limited circumstances," Powell said at the Precursor Group conference last week. "But, you know, I believe in antitrust'' law to deal with anti-competitive issues.

An FCC spokesperson said the agency was reviewing the decision and declined further comment.

—End