Ownership Cap On US Cable Operators Comes Into Force

An ownership cap on US cable operators became effective Monday March 31, 2008. The cap limits the number of pay TV subscribers in the US a cable operator may serve at 30 percent nationwide. The Federal Communications Commission (the "FCC"), by a 3-2 majority decision, has re-imposed the cap fifteen years after it was first set in 1993. That original decision was struck down in 2001 by the US Court of Appeals as inadequately reasoned. The majority Commissioners have stated that the cap is still needed today to promote diversity of multichannel video programming and that more robust economic reasoning has been used in justifying the ownership limit. A suit challenging the cap has been filed in the DC Circuit. The cap only applies to cable and not satellite operators.

Background

The 30 percent cap has been set pursuant to a statutory directive that an ownership limit be imposed to prevent a single operator, or group of operators, from unfairly impeding the flow of multichannel video programming to consumers because of the operator's size. The statutory directive is found in the Cable Television Consumer Protection and Competition Act of 1992 (Pub. L. No. 102-385, 106 Stat. 1460), better known as the Cable Act of 1992, which amended 47 U.S.C. 533 of the Communications Act of 1934 ("Communications Act"). Section 613(f) of the Communications Act directed the FCC to establish reasonable limits on the number of subscribers a cable operator may serve (called a "horizontal limit") and on the number of channels a cable operator may devote to affiliated programming (called a "vertical limit").

The FCC implemented this provision in 1993 by imposing a horizontal ownership limit preventing cable operators from serving more than 30 percent of all US homes passed by cable and by imposing a vertical limit prohibiting a cable operator from carrying affiliated programming on more than 40 percent of its channels. The rationale for the horizontal limit was based on the FCC's estimation that a new cable programming network would need access to 40 percent of subscribers nationwide to be viable. A 30 percent ownership cap was designed to allow new programming networks access to a 40 percent "open field" by preventing the two largest cable operators from garnering more than 60 percent of the market. In October 1999, the FCC revised its methodology to permit a cable operator to reach 30 percent of all multichannel video programming distributor ("MVPD") subscribers in...