Feds Not Appealing Cable Ownership Case

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Washington -- The federal government has decided not to seek Supreme Court
review of a lower court decision that struck down national limits on the size of
cable companies, a Justice Department source said Thursday.

The deadline for the Justice Department to file an appeal with the Supreme
Court was Aug. 2, but Deputy Solicitor General Lawrence Wallace made the
decision not to appeal on July 11, the DOJ source said.

DOJ's decision was not a big surprise. Several months ago, Federal
Communications Commission chairman Michael Powell said he preferred not to
appeal the ruling, which caused the FCC to suspend asset-sale merger conditions
on AT&T Corp. in connection with AT&T's merger with MediaOne Group Inc.

'There is no interest of the United States dramatically implicated by the
cable decision. I think it's a case you can't win in the Supreme Court,' Powell
told reporters in Las Vegas in April.

In March, a panel of the U.S. Court of Appeals for the District of Columbia
Circuit said an FCC rule restricting cable system ownership violated the First
Amendment. The rules said a cable operator could not serve more than 30 percent
of subscribers to cable, direct broadcast satellite, and other providers of
multichannel pay-TV. The U.S. has 87.5 million pay-TV subscribers, putting the
cap at about 26 million subscribers.

The court also struck down, as a First Amendment violation, an FCC rule that
said cable operators could not occupy more than 40 percent of their first 75
channels with affiliated programming.

In another key decision, the court also voided an FCC ownership attribution
rule, which stated that if a limited partner sold programming to the
partnership, all of the partnership's subscribers were attributable to both the
general partner and the limited partner.

This rule caused the FCC to attribute all of Time Warner Entertainment's
approximately 11 million cable subscribers to AT&T Corp., even though
AT&T owned 25 percent of TWE.

The court tossed these rules back to the FCC. W. Kenneth Ferree, chief of the
FCC's Cable Services Bureau, has ordered his staff to craft new ownership
proposals that will be released in a notice of proposed rulemaking in a few
months.

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