Policy

Martin Backs 30% Cap

3/16/2007 8:00 PM Eastern

Washington — A cable provider would be barred from serving more than 30% of pay TV subscribers under a proposal backed by Federal Communications Commission chairman Kevin Martin, an agency official disclosed last Tuesday.

Martin's support for the 30% limit puts him at odds once again with cable's largest multiple-system operator, Comcast, which has advocated elimination of a rigid ownership limit, citing “revolutionary changes” in the video-programming-distribution market. In January, Martin ordered his staff to reject an important set-top box waiver from Comcast.

“A cap on the cable industry is something that both Comcast and the National Cable & Telecommunications Association have opposed, and we believe that the record in front of the FCC provides little support for a cable-ownership cap at any level and absolutely no support for a cap of 30%,” Comcast executive vice president David Cohen said.

Martin distributed a cable-ownership order to his four FCC colleagues last Monday, six years after an adverse court ruling forced the agency to draft new rules. Congress passed a cable-ownership law in 1992; since then, valid FCC rules have been in effect for just a few months, owing to court setbacks and FCC inaction.

“It's 30%,” Rudy Brioché, legal adviser to FCC Democrat Jonathan Adelstein, told reporters after an appearance last Tuesday at the Association of Cable Communicators (formerly the Cable Television Public Affairs Assoication) Forum 2007 here.

The FCC's next public meeting is March 22, but Brioché didn't think the agency would vote on the cable-ownership item then.

Martin is seeking to revive a 30% limit that a panel of the U.S. Court of Appeals for the D.C. Circuit invalidated in March 2001 as inconsistent with cable's First Amendment protections.

“The 2001 court rejection of the 30% cable cap was quite exacting, so it is not a given that a new 30% cap (if that is what the full FCC settles on) would withstand judicial review,” Stanford Group analyst Paul Gallant said in a client note last Thursday.

Martin, Brioché said, wants to launch a separate rulemaking on cable-ownership-attribution rules. The FCC's main rule — upheld in the same court ruling that killed the 30% cap — stated that if one cable company owns at least 5% of a second system operator, their subscriber totals are combined for purposes of applying the 30% cap.

Martin's office declined to comment on the ownership issues. At a House subcommittee hearing last Wednesday, Martin, while not confirming his support for 30%, stressed that he wasn't singling out cable operators.

“It would apply to telephone companies when they are providing video services as well,” Martin said.

When Rep. Chip Pickering (R-Miss) observed that no phone company is close to bumping into the 30% cap, Martin replied, “We'll leave that to the marketplace and see what kind of progress they end up making.”

The FCC does not limit a satellite-TV provider's growth, nor does it control the number of voice customers AT&T or Verizon Communications may serve.

“AT&T alone is larger than the entire cable industry,” NCTA president Kyle McSlarrow said in a separate ACC Forum appearance Tuesday.

Citing Kagan Research, Comcast recently told the FCC that it serves 26.2 million subscribers, or 27% of the country's 96.8 million pay TV subscribers. Under a 30% cap, Comcast could, in a few years, find itself having to turn away customers seeking to sign up for its fast-growing voice-video-data triple-play bundle.

The 30% cap would also effectively block Comcast from buying a cable company with more than 3 million subscribers.

Analyst Gallant noted that Comcast's inability to acquire cable systems was “a mild negative for smaller operators such as Mediacom, Cablevision, and Charter that might eventually be [buyout] targets.”

He also pointed out that an FCC rule that sidelined Comcast “might actually be indirectly positive for Time Warner Cable (which is only at 15%) by reducing competition from Comcast to acquire other small operators.”

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