Cable company limits may be eased

By Paul Davidson
USA Today

In a long-awaited move that could reshape the cable industry, regulators appear likely to ease sharply cable company size limits, while imposing some curbs to safeguard competition.

A draft recommendation by the Federal Communications Commission also may signal that the agency intends to bring a similar compromise approach to its overhaul of a range of media ownership limits early next year. Those changes are expected to permit big TV, radio and newspaper companies to get bigger.

The rule changes could determine whether two Honolulu TV stations — Fox affiliate KHON and CBS affiliate KGMB — can be kept by Indianapolis media conglomerate Emmis Communications Corp., which has owned both stations for nearly two years under temporary FCC exemptions.

People familiar with the matter say the draft cable proposal would allow a company to serve as much as 45 percent of cable and satellite households, compared with the current 30 percent.

The increase could spur the formation of more cable giants such as the recent AT&T merger. Comcast is now the nation's biggest cable provider.

But rather than set a 45 percent cap, the FCC staff tentatively is proposing a limit of 30 percent to 45 percent, to be based on competitive concerns of a merger.

For example, it might impose a lower limit on a proposed merger of companies with lots of programming and thus less incentive to carry rival channels.

Or a lower cap could be set for merged companies that would dominate a multistate region. Such dominance makes it easier to fight off satellite rivals, because a cable firm could pipe its own sports programming to its systems via fiber-optic lines. Federal law requires a cable company to give competitors access to its own channels — but only if they are delivered via satellite.

The proposal could change markedly before the five FCC commissioners vote in the next few weeks. But it likely reflects the views of chairman Michael Powell. An appeals court last year tossed out the 30 percent cable cap, saying the FCC had not justified it. The judges suggested a cap as high as 60 percent would ensure the survival of at least two big cable companies, providing options to programmers.

Powell has been skeptical of media ownership constraints. Analysts expected the Republican-controlled FCC to raise the cap to at least 40 percent rather than try to justify the 30 percent threshold.

It is unlikely the highly leveraged cable industry will try mergers that exceed even the 30 percent limit anytime soon, said Legg Mason analyst Blair Levin. Still, consumer advocates fret about purchases of local cable systems that give cable providers regional dominance.