by John K. Hane and Paul A. Cicelski

Earlier today the United States Court of Appeals for the District of Columbia Circuit overturned a decision of the Federal Communications Commission that had prohibited any single cable television operator from serving more than 30 percent of all cable subscribers nationally.

In vacating the FCC’s rule, the Court held that the FCC’s action was “arbitrary and capricious” because the FCC did not adequately demonstrate that permitting a cable operator to serve more than 30 percent of subscribers would reduce “either competition or diversity in programming.”  The Court also determined that the FCC failed to fully consider the increased competition cable operators face from satellite and fiber optic cable providers as well as the fact that there has been a “dramatic increase” over the years both “in the number of cable networks and in the programming available to subscribers.”  Citing the “egregious” nature of the FCC’s actions, the Court vacated the 30 percent subscriber cap in its entirety.

The FCC adopted the cap under a provision of the 1992 Cable Act that requires the FCC to adopt rules to prevent cable consolidation from impeding the “flow of video programming” to consumers.  The practical effect of this decision may be limited, since any cable merger would still be subject to FCC and antitrust approvals.  Chairman Genachowski released a statement this afternoon stating that “As part of the Cable Act, Congress required the Commission to adopt horizontal ownership limits to enhance effective competition in the cable television marketplace” and that the FCC “will take this decision fully into account in future action to implement the law.”