U.S. court rejects FCC cable ownership limit

Fri Aug 28, 2009 2:50pm EDT
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By Jeremy Pelofsky and John Poirier

WASHINGTON (Reuters) - A U.S. court struck down a rule limiting a cable company to no more than 30 percent of the pay television market, a victory for companies like Comcast Corp that could spark a wave of industry mergers.

The U.S. Court of Appeals for the D.C. Circuit ruled on Friday that the Federal Communications Commission's rule, adopted in late 2007, was "arbitrary and capricious" and vacated it. The regulation was first set in 1993, but has been repeatedly challenged.

The court sharply criticized the FCC, saying the agency's "dereliction in this case is particularly egregious" because it failed to heed the court's past order to take other providers into consideration when setting a new cap.

"The commission has failed to demonstrate that allowing a cable operator to serve more than 30 percent of all cable subscribers would threaten to reduce either competition or diversity in programing," the court said.

The judges pointed to rising competition among video providers, including satellite companies like DirecTV Group Inc as well as telephone companies like AT&T Inc and Verizon Communications Inc, which have been rolling out their own subscription television services.

"Cable operators, therefore, no longer have the bottleneck power over programing that concerned the Congress in 1992." the court said.

Telephone and cable providers over the last few years have been jumping into each other's businesses so they can offer subscribers a package of television and communications services -- a bundle that can help boost their profits.

ROOM FOR MERGERS   Continued...