Court strikes down FCC rules on cable subscribers, programming

WASHINGTON (AP) _ A federal appeals court threw out government-imposed restrictions on the number of subscribers that a cable operator can serve. <br><br>A three-judge panel of the Court of Appeals for

Saturday, March 3rd 2001, 12:00 am

By: News On 6

WASHINGTON (AP) _ A federal appeals court threw out government-imposed restrictions on the number of subscribers that a cable operator can serve.

A three-judge panel of the Court of Appeals for the District of Columbia also voted Friday to invalidate limits on how many channels cable operators can fill with programming in which they have a financial interest.

The court concluded that the Federal Communications Commission could not support its reasoning for the restrictions, which were aimed at preserving diversity in the programming that consumers watch on their TV sets.

The court sent the rules back to the commission to see if it could offer a better rationale for the caps. The FCC said it was reviewing the decision.

The court's finding could prove helpful to AT&T, the nation's largest cable company. Because of its summer merger with MediaOne, AT&T, until Friday, was in violation of the restrictions the FCC imposed and had been ordered to shed some assets.

Specifically, the court threw out rules that forbid one company from serving more than 30 percent of all cable and satellite subscribers. It also struck down a restriction that prevents cable systems from carrying affiliated programming on more than 40 percent of their channels.

Consumer groups expressed dismay at the court decision. Without limits in place, they argue, cable companies will be able to grow too big and have a stranglehold over the content and information that reaches viewers.

``This opens the door to further consolidation among the large cable monopolies and expands their ability to load up their cable systems with their own programming,'' said Gene Kimmelman of Consumers Union.

AT&T and Time Warner _ the second largest cable operator _ had argued that the subscriber limit infringes on their First Amendment rights by restricting their ability to speak to as large an audience as possible.

Time Warner had complained that the rules on programming stifle their editorial control over some of the programming they carry.

The court noted that in creating such restrictions, the commission must be able to justify that its limits do not place greater burdens on free speech than necessary to advance important governmental interests. But the panel concluded that the FCC failed to strike that appropriate balance.

``Far from satisfying this test, the FCC seems to have plucked the 40 percent limit out of thin air,'' the court wrote of the agency's programming rule.

The court found that the 30 percent subscriber limit exceeded the agency's authority and that with the information before it, no more than a 60 percent cap could be justified.

Such an increase would allow cable companies to grow their businesses through mergers and acquisitions. It would also put AT&T, which serves 42 percent of cable and satellite subscribers, well under the limit.

Currently, the FCC has required AT&T to come below the ceiling by getting rid of some of its cable holdings, namely a 25 percent stake AT&T has in Time Warner Entertainment.

It's unclear whether and how the court's decision will change the merger requirements placed on AT&T. AT&T general counsel Jim Cicconi said the company was pleased with court decision but wouldn't comment further.

The court did reaffirm that the agency has the underlying authority to impose such limits. Last week, the Supreme Court turned down a challenge by Time Warner to Congress' authority to set such limits.