Supremes Pass on Cable-Cap Review

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The Supreme Court on Dec. 3 refused to review a lower-court decision that struck down a federal limit on how large cable companies may get at a time when the industry appears to be on the verge of further consolidation.

Several consumer groups asked the Supreme Court to take the case and reverse the lower court's ruling. Both the Justice Department and cable operators AT&T Corp. and Time Warner Entertainment L.P. had urged the court to reject the case.

The Justice Department told the high court that review was unnecessary because the FCC was actively considering establishing a new cable cap consistent with the ruling, which was made March 2 by a panel of the U.S. Court of Appeals for the D.C. Circuit.

"Today's decision by the Supreme Court is hardly surprising given that both the U.S. and the FCC saw no need or basis for a Supreme Court review of this matter — and the fact the FCC is re-examining the cable ownership rules," AT&T said in a statement last week.

Andrew Jay Schwartzman, president of the Media Access Project, a Washington public-interest law firm that represented the consumer groups, said he was "disappointed but not surprised" by the court's decision. He said the court seldom takes a case over the opposition of the Justice Department.

The D.C. Circuit voided an FCC rule that capped a cable operator's size at 30 percent of the 85-million-customer pay-TV market. The court said the limit violated the First Amendment.

The National Association of Broadcasters also urged the Supreme Court to take the case, claiming the cable industry should not use the First Amendment as a shield against economic regulation. The NAB declined to comment on the Supreme Court's action.

The Supreme Court's rejection of the case means cable is not encumbered by FCC ownership rules at a time when the industry's largest company — AT&T Broadband — appears to be in play. Interested possible buyers include such big MSOs as AOL Time Warner Inc., Cox Communications Inc. and Comcast Corp.

Were a big cable merger announced prior to the adoption of new FCC rules, the agency would still be free to review the deal under its public-interest standard. And either the Justice Department or the Federal Trade Commission would have to decide if the deal were consistent with antitrust laws designed to protect competition.

The Supreme Court has consistently refused to get involved in the cable-ownership debate, which has raged for almost a decade.

In 1999, a panel of the D.C. Circuit appeals court upheld the federal law authorizing the FCC to impose caps on the size of cable companies, as well as on the number of channels a cable operator may occupy with affiliated programming.

Time Warner Entertainment asked the Supreme Court to review the decision, but in February the high court declined to take the case, shifting the focus to the FCC's rules.

Although the D.C. Circuit struck down both the FCC's 30 percent cap and the channel-occupancy rule that set aside 60 percent of a cable operator's first 75 channels for unaffiliated programmers, the consumer groups asked the Supreme Court to review only the decision striking down the 30 percent cap.

In the FCC's new cable-ownership rulemaking, the first round of comments are due on Jan. 4.

Schwartzman said he plans to ask the FCC to place tighter limits on cable ownership. He said the agency should not structure the cap based on a cable operator's share of the entire pay-TV market — including 68 million cable subscribers and 17 million direct-broadcast satellite customers — but on its share of the cable-subscriber market, which would exclude DBS.

"I am confident that if they pay attention to what we are going to file next month, they will impose a reasonable cap," Schwartzman said.

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