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from: Philly.com

FCC rules could stunt Comcast's growth
The agency, calling some cable firms dominant, may offer changes soon.

By Miriam Hill

Inquirer Staff Writer
Comcast Corp. and other cable companies may be forced to limit their growth and make their networks more accessible to independent programmers and other competitors under new rules the Federal Communications Commission is preparing.

The significant changes, expected to be proposed this month, would come from an FCC that has determined that cable companies, such as Philadelphia-based Comcast, are too dominant in the industry, senior commission officials said in a New York Times article published yesterday.

Comcast last night referred all questions to the National Cable and Telecommunications Association, or NCTA.

In an e-mailed statement, NCTA president Kyle McSlarrow said: "Every independent analysis of the marketplace shows that cable serves less than 70 percent of the nation's households and even the FCC staff concluded last year that cable was well short of this threshold."

Under the federal Cable Communications Act of 1984, the FCC may enact "any additional rules necessary to provide diversity of information sources" if cable service is available to at least 70 percent of households and at least 70 percent of those households subscribe.

Craig Moffett, a telecommunications analyst with the investment firm Sanford C. Bernstein, said the potential for more regulation was part of an ongoing battle between FCC chairman Kevin J. Martin and the industry.

"This is part of a broad pattern of anti-cable posturing from the FCC, but - as is the case with much of Martin's cable-bashing - the legal basis for the policy is unclear," Moffett said.

"The 70/70 rule requires that 70 percent of homes subscribe to cable services, and by all accounts we're nowhere close to that total today. By our estimate, there are 63 million cable subscribers in this country, and 116 million households. I may not be a math wizard, but that sounds like 54 percent to me."

The action would be a major change for the agency and the industry, which Congress deregulated in 1996. It could lead to more diverse programs, and consumer groups say it could lead to lower rates.

Heavily promoted by those groups and by Martin, a Republican, the decision would be a notable exception to the broad deregulatory policies of the Bush administration, the Times reported. Officials in various agencies have relaxed industry regulations and have chosen not to challenge big corporate mergers.

"The finding will provide the commission with additional authority to assure that there is opportunity for additional voices," Martin told the Times. "It is important that we continue to do all we can to make sure that consumers have more opportunities in terms of their programming, and that people who have access to the platform assure there are diverse voices."

The commission's conclusion that the cable industry has grown too large will be used to justify a raft of new cable-television rules and proposals. They include a cap that would prevent Comcast, the nation's largest cable company, from growing and other large cable companies, such as Time Warner, from making any new large cable acquisitions.

"The provision itself is a relic of decades-old regulation, and there is no basis for reviving it now," said McSlarrow, the NCTA president. "Twisting statistics in order to breathe life into this rule is simply another attempt to justify unnecessary government intrusion into a marketplace where competition is thriving and new technology is providing consumers more choices, better programming and exciting new interactive services."

In March, Martin proposed prohibiting a single cable operator from serving more than 30 percent of cable customers.

FCC spokesman David Fiske said last night that he could not comment on pending proposals.

Comcast, which began as a single cable system in Tupelo, Miss., has grown rapidly through acquisition in the last decade and now has a market share of about 27 percent.

But in the last three years, it has shifted its focus from growth through acquisition to adding new products, such as phone and Internet service.