Cable-Ownership Rules Still Up in Air

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

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

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

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

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

Some lawyers said it seemed strange that the agency would
give 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 its
measurement of cable horizontal ownership from a percentage of cable homes passed to a
percentage of subscribers to cable, direct-broadcast satellite and other
multichannel-video distributors.

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

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

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

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

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

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

Schwartzman added that MAP was leaning toward appealing the
rules.

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

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

Daniel Brenner, senior vice president of law and regulatory
policy at the National Cable Television Association, said the NCTA had to poll its members
before deciding whether to appeal the new rules. But the NCTA and AT&T have already
voiced 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 DBS
market, it's pretty hard to say that cable doesn't face competition in most homes."

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