Comcast defeats FCC in DC Circuit


If cable giant Comcast wishes to grow past the 30% threshold of national cable market, it has now been unbridled by the US District Court for the District of Columbia Circuit. The FCC was slapped with what must be its most dreaded legal phrase, “arbitrary in capricious,” as it watch a regulation that has been in place since 1993 get shot down.

The proceeding focused on increased competition within the MVPD universe, both from significantly stronger DBS services and newly created telco entries, and on the theoretical ability of independent programmers to find a home for their channel in the face of a turndown from a key distributor.

The Court said that in two previous reviews, the FCC miraculously returned to the 30% ownership threshold, without adequate justification. It concluded that the FCC failed to show harm to programmers, and further concluded that the FCC would under remand somehow attempt to justify 30% again – so rather than permit that outcome, the Court completely vacated the cap, relying on antitrust law to protect consumers and associated businesses.

FCC Chairman Julius Genachoski revealed little of his thoughts in the matter in his reaction, stating “As part of the Cable Act, Congress required the Commission to adopt horizontal ownership limits to enhance effective competition in the cable television marketplace. The FCC staff is currently reviewing the Court’s decision with respect to the limit previously adopted and the Commission will take this decision fully into account in future action to implement the law.”

Robert McDowell, on the other hand, has been a critic of the cap and welcomed the decision. “It was clear in December 2007, when I dissented from the FCC decision to once again impose a 30 percent national cap on cable system ownership, that the effort to re-justify the very same cap that the D.C. Circuit first struck down in 2001 was even more vulnerable to court challenge the second time around,” he stated. “Despite the Commission staff’s best efforts to provide post hoc empirical support for the chosen outcome, the court recognized that the 2007 analysis’ aging data and questionable assumptions sat oddly against the facts about new – and successful – competitors to cable systems in the multichannel video marketplace. It should go without saying that, in the future, outcomes in our proceedings should be driven by the facts and law, rather than the other way around.”

Ben Scott of watchdog Free Press was very disappointed by the court’s action, saying, “It is regrettable that the court tossed out an important public interest protection against excessive media consolidation. Congressional intent in the Cable Act of 1992 is very clear – the goals of federal policy in the cable industry are to promote competition, consumer choice, and a diversity of programming. And yet today we have a cable cartel — the video industry is dominated by only a handful of large cable operators and studios. Today consumers experience perpetual price hikes by large operators that already have market dominating purchasing power to decide the fate of new channels. The promises of lower prices through competition from satellite and telecom companies in the video business have never been realized. We encourage the FCC not only to revisit cable ownership limits, but to examine a variety of policy proposals to achieve Congress’s goal to bring consumers more competition and more choice in the cable industry.”

RBR/TVBR observation: Two interested parties were mere shadows in this court proceeding – broadcasters and consumers. We could find no mention of the fact that the supposed increased competition in the MVPD marketplace has done nothing to stem the extreme rate increases charged to subscribers, who almost invariably have limited local options.

Given no shrift at all was the state of competition between local broadcasters and cable. Unlike MVPDs, broadcasters carry a public interest burden and are rightfully celebrated for their service to their communities and the nation in times of disaster or emergency.

But they are forced to compete with MVPDs for programming, a battle that they are losing – witness in particular the migration of major sports programming from broadcast to cable.

Judges, here is a simple example of the problem: Say there is great public interest in a boxing match between Bill O’Reilly and Keith Olbermann. In fact, we’d do pay per view to see that one – but it’s not going to pay per view. It’s up for bid. Broadcasters must top out at what the advertising market will bear. But cable too sells ads and can meet that price, and go higher – just jack up subscription rates again!

Broadcasters lose programming, cable subscribers lose cash and over-air-only viewers don’t get to see the program at all!

As MVPDs gradually monopolize the cream of the programming crop, local broadcasters will be further marginalized, and eventually will not be able to afford the infrastructure and personnel that are required to provide a decent local news program, much less vital emergency service.

The FCC needs to challenge this ruling with consumer wallets and broadcast survival as the lynchpins of its argument.