Court throws out cable cap

30% subscriber limit called 'arbitrary'

NEW YORK -- A court has handed cable giants like Comcast a victory, doing away with an FCC cap on the percentage of subscribers controlled by a single operator.

The U.S. Court of Appeals threw out the FCC's 30% subscriber cap, calling it "arbitrary" and highlighting the intense competition from satellite operators and telecom firms that avoids cable control over programming.

"We applaud the court's decision to reject an unnecessary rule that can no longer be justified in a market where consumers are enjoying robust competition that is producing a wide variety of world-class services at affordable prices," National Cable & Telecommunications Assn. president and CEO Kyle McSlarrow said. "Today's decision is further affirmation that consumers are benefiting from a vibrant and competitive video marketplace that has undergone dramatic change and is providing more choice and better value than ever before."

The subscriber cap originally was put into place in 1993, struck down in court in 2001 and reinstated in 2007. It had implications only for Comcast, which controls about 25% of the U.S. pay TV market.

But analysts expect no run on acquisitions based on the court decision.

"We view this as largely a moral victory for Comcast, with little or no practical implication as it relates to potential M&A," Sanford C. Bernstein analyst Craig Moffett said. "The most commonly cited possible combinations (for example, Comcast for Cablevision, which accounts for about 3.2% of subscribers) could have proceeded even with the prior cap. Ditto Charter (which has about 5% of subscribers), which Comcast has looked at in the past and decided to pass. Cox Communications (privately held) would have pressed the limit but is not for sale."

Even without the cap, the FCC will review any major deals on a case-by-case basis.

"A mega-combination of Comcast and Time Warner Cable (13.6%), for example, which would easily eclipse 30%, would likely be blocked by the current administration anyway, whether or not the 30% ownership cap rule were in place," Moffett added.