Cable Lawsuit Expected if FCC Approves 30% System Cap

A legal challenge by a cable operator is all but certain should the FCC reinstate an ownership cap (CD March 14 p1), industry lawyers said. Chmn. Martin drew fire from NCTA officials for circulating an order to revive a cap that had kept an operator from owning systems reaching more than 30% of U.S. pay-TV homes. NCTA hasn’t decided if it would sue over the ownership limits, but Pres. Kyle McSlarrow said he expects them to be challenged. In 2001, U.S. Appeals Court, D.C., remanded the rule in Time Warner v. FCC.

“Somebody’s going to challenge this if in fact it does go forward,” McSlarrow told reporters Thurs.: “If it’s 30%, given the record we've seen in the case, I think the court would look at it and say ‘What part of ‘You were wrong!’ don’t you understand?'” Another FCC rulemaking disliked by cable, the video franchise order, also is likely to be fought in court, McSlarrow told us. Cable gets a raw deal in an order released earlier this month that doesn’t let those already selling pay-TV immediately opt out of certain local rules that Bells are exempted from, McSlarrow said: “Everybody does expect the cities will sue… We haven’t made a decision.”

Cable officials contend the Time Warner ruling requires the Commission to explain why a cap should be reinstated. Martin sees ample reason for caps, he told reporters Wed. after a House Telecom Subcommittee hearing. If approved by fellow commissioners, the cap would withstand a challenge, he said.

Not so, said cable lawyers. Two industry lawyers said the FCC can’t document the public interest logic of reinstating the cap. “I don’t think there’s enough of a record,” one said: “McSlarrow is probably stating the conventional view that it couldn’t stand muster… I would assume the chairman would position it as in the basic interest of diversity.”

McSlarrow said such reasoning wouldn’t fly, citing increased video competition. Since 2001, DBS providers have added millions of customers and telcos started video sales, he said, likewise rejecting arguments by consumer advocates and others that cable faces little competition thanks to larger regional system clusters. “Whether or not you've got clusters, you still have that marketplace competition,” McSlarrow told reporters, saying an argument otherwise is “just a non sequitur.”

Increased video competition is a reason not to renew an FCC exclusive programming ban when it expires this year, McSlarrow said after unveiling ads touting cable. NCTA will weigh in on the retransmission consent debate on the Hill and at the FCC, a fight it had shied away from because its members include companies with broadcast and cable assets. That has changed, McSlarrow said: “But I don’t know if there is a silver bullet” to fix perceived problems. Martin and broadcasters say retransmission consent, in which TV stations negotiate for carriage with cable, works fine. - Jonathan Make