Cable-Ownership Rules Still Up in Air

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Washington -- The adoption of new cable-ownership rules bythe Federal Communications Commission last month was only a small step in the direction offinality. Key legal issues stemming from litigation under the 1992 Cable Act are stillundecided.

The U.S. Court of Appeals for the District of ColumbiaCircuit is scheduled to hear oral arguments Dec. 3 on the constitutionality of theownership-limiting statute and the legality of the FCC's rules, which bar one company fromserving more than 30 percent of households capable of subscribing to cable.

But the December date could slide because Time WarnerEntertainment -- the Time Warner Inc. and MediaOne Group Inc. venture that includes cablesystems and programming assets -- is asking for a postponement. TWE wants time to digestand respond to the FCC's new rules. That request is pending.

Meanwhile, the FCC two weeks ago furnished the court with acopy of its new rules and filed a motion asking that all parties have the opportunity tofile briefs on them. The commission's request -- which would leave the Dec. 3 dateunchanged -- is also pending.

"It's still not entirely clear what the court is goingto do with this," an FCC lawyer said.

Some lawyers said it seemed strange that the agency wouldgive the court a copy of its new rules even though no one had appealed them.

On Oct. 8, the FCC, in a widely reported move, switched itsmeasurement of cable horizontal ownership from a percentage of cable homes passed to apercentage of subscribers to cable, direct-broadcast satellite and othermultichannel-video distributors.

Congress directed the agency to restrict cable ownership inorder to preclude one or two operators from dominating the programming networks.

"Cable operators," the FCC said, "still havethe power to decide which cable networks will 'make it,' even as channel capacitygrows."

The agency ruled that one cable company may not serve morethan about 24 million cable subscribers, or the equivalent of 30 percent of allmultichannel-video subscribers. The 24 million cap, which adjusts with growth in theoverall markets, currently translates to 36.7 percent of cable subscribers.

In jettisoning the old methodology, the FCC reasoned that asubscriber-based approach more accurately "reflects power in the programmingmarketplace than does the number of homes passed."

But the change didn't sit well with consumer groups. Theyclaimed that including satellite subscribers gave the cable industry -- mainly AT&TCorp. -- the ability to consolidate even further.

"It's very bad policy because it extends thehorizontal reach of cable operators. It's already too high, and we wanted 25percent," said Andrew Jay Schwartzman, executive director of Media Access Project, apublic-interest law firm.

Schwartzman added that MAP was leaning toward appealing therules.

But MAP has another option: It could ask the FCC toreconsider its policies. That request in itself could trigger a postponement of the Dec. 3court case. Appellate courts prefer not to make decisions about FCC rules that the agencyhas been asked to reconsider.

The cable industry, while supportive of the switch to asubscriber-based methodology, is unhappy with 30 percent. The industry pushed for 35percent -- equal to the number of households that can be served by a group of commonlyowned TV stations.

Daniel Brenner, senior vice president of law and regulatorypolicy at the National Cable Television Association, said the NCTA had to poll its membersbefore deciding whether to appeal the new rules. But the NCTA and AT&T have alreadyvoiced concern with 30 percent instead of 35 percent.

"We don't quite understand that," Brenner said."Our view has been for at the least the last year or two that with the thriving DBSmarket, it's pretty hard to say that cable doesn't face competition in most homes."