DC Circuit Vacates FCC's 30% Cable Subscriber Cap
August 28, 2009. The U.S. Court of Appeals (DCCir) issued its opinion [21 pages in PDF] in Comcast v. FCC, a challenge by Comcast and others to the Federal Communications Commission's (FCC) rule that capped at 30% all subscribers the market share any single cable television operator may serve.
The Court of Appeals held that the rule is arbitrary and capricious, granted the petition for review, and vacated the rule.
Comcast filed with the Court of Appeals a petition for review of the FCC's Fourth Report and Order [96 pages in PDF], adopted on December 18, 2007, and released on February 11, 2008, in its proceeding titled, in part, "In the Matter of the Commission's Cable Horizontal and Vertical Ownership Limits". This R&O is FCC 07-219 in MM Docket No. 92-264, et seq.
The FCC issued this Fourth R&O, belatedly, in response to the Court of Appeals' 2001 opinion in Time Warner Entertainment Co. v. FCC, 240 F.3d 1126.
The National Cable and Telecommunications Association (NCTA), Time Warner, and other intervened in support of Comcast.
The Court of Appeals first noted that "A cable operator faces competition primarily from non-cable companies, such as those providing DBS service and, increasingly, telephone companies providing fiber optic service."
It concluded that the FCC "has failed to demonstrate that allowing a cable operator to serve more than 30% of all cable subscribers would threaten to reduce either competition or diversity in programming. First, the record is replete with evidence of ever increasing competition among video providers: Satellite and fiber optic video providers have entered the market and grown in market share since the Congress passed the 1992 Act, and particularly in recent years. Cable operators, therefore, no longer have the bottleneck power over programming that concerned the Congress in 1992. Second, over the same period there has been a dramatic increase both in the number of cable networks and in the programming available to subscribers."
The Court continued that "In view of the overwhelming evidence concerning ``the dynamic nature of the communications marketplace,´´ 47 U.S.C § 533(f)(2)(E), and the entry of new competitors at both the programming and the distribution levels, it was arbitrary and capricious for the Commission to conclude that a cable operator serving more than 30% of the market poses a threat either to competition or to diversity in programming."
The Court continued that the FCC's "dereliction in this case is particularly egregious", because the FCC failed to heed its instructions in the 2001 Time Warner opinion.
However, the Court of Appeals did not state that during the tenure of Kevin Martin as Chairman of the FCC, the FCC, and Martin in particular, frequently acted with malice towards the cable industry. It is only the function of the Court to decide the case or controversy before it.
The Court then concluded that the appropriate remedy is to vacate the order.
Judge Randolph wrote a concurring opinion in which he argued that the Administrative Procedure Act (APA) requires that any order found to be arbitrary and capricious, or unlawful, be vacated.
The Court of Appeals did not decide the issue of whether the FCC's rule violated the First Amendment of the Constitution.
FCC Chairman Julius Genachowski stated in a release 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. 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."
Kyle McSlarrow, head of the NCTA, stated in a release that "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. Today's decision is further affirmation that consumers are benefitting from a vibrant and competitive video marketplace that has undergone dramatic change and is providing more choice and better value than ever before."
Ken Ferree, head of the Progress & Freedom Foundation (PFF), stated in a release, "All I can say is thank goodness we have the DC Circuit as a backstop of rationality when the administrative agencies run amok. The FCC's latest effort to impose a national cable cap was nothing more than ``abracadabra -- here's the limit.´´ That's no way to run a government." See also, amicus brief filed by the PFF.
This case is Comcast Corporation v. FCC and USA, U.S. Court of Appeals for the District of Columbia, App. Ct. No. 08-1114, a petition for review of a final order of the FCC. Judge Ginsburg wrote the opinion of the Court of Appeals, in which Judge Kavanaugh joined. Judge Randolph wrote a concurring opinion.