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from: NY Times

November 29, 2007
Size Limits for Cable Look Likely

By STEPHEN LABATON
WASHINGTON, Nov. 28 — Coming off a setback at the hands of the cable television industry, the head of the Federal Communications Commission moved to reassert himself on Wednesday by proposing that the commission quickly adopt a rule that would prevent Comcast, the nation’s biggest cable company, from becoming larger, commission officials said.

In a separate move, the chairman, Kevin J. Martin, said he had come up with a plan to enable the Chicago investor Samuel Zell to close the buyout of the Tribune Company by the end of December.

The crux of the plan involves granting Tribune a temporary waiver from media rules that restrict a company’s owning both a newspaper and television or radio station in the same city.

The two moves reflected Mr. Martin’s attempt to navigate a series of politically difficult proposals through a deeply divided commission. He is trying to strike alliances with the two Democratic commissioners on some issues and the two Republicans on others. The outcome will most likely determine for many years the rules governing the reach of the nation’s largest media conglomerates.

In the process, Mr. Martin has alienated powerful and politically connected executives from the cable TV industry, who have complained to the White House that his policies are inconsistent with the broader deregulatory agenda of the Bush administration. From the other side, he has been criticized by Democratic lawmakers about his efforts to loosen the restrictions on owning differing types of media properties in the same city.

In the case of the buyout being led by Mr. Zell, Tribune owns newspapers and radio and TV stations in five cities and cannot complete the acquisition without the commission’s approval.

Company lawyers had feared that the agency’s planned action on ownership rules would come too late for them to close the deal by the end of the year, as the company had hoped, to save more than $100 million in possible taxes and other expenses.

Mr. Martin said in a telephone conference call with reporters that his proposed order would enable the company to complete the buyout next month by granting Tribune a temporary exemption while the agency considers new rules that would loosen the broadcast-newspaper cross-ownership restrictions in the 20 largest markets, which he said he expected to complete next month.

The decisions on the cable rules and the Tribune deal are part of a broader battle at the commission over the ownership rules for the nation’s largest media companies.

They reflect Mr. Martin’s struggle to stake out what he says is a middle position between complete deregulation, as the industries have sought, and more vigorous government oversight, as consumer groups have demanded. In addition to the Tribune buyout, the commission is considering whether to approve the merger of the nation’s only two satellite radio companies.

Officials said that Mr. Martin notified other commissioners this week of the agenda for the agency’s next formal meeting on Dec. 18, and that it included a vote on his proposal to prohibit a cable company from controlling more than 30 percent of the market. Comcast is at about that level.

The proposal would also defer a final vote on a related plan to restrict a cable television company from providing more than 40 percent of its channels with shows from its affiliated programmers.

Officials said that it was possible that Mr. Martin could ultimately take the cable item off the agenda. But the officials and consumer groups lobbying on the issue said the two Democratic commissioners have told them in recent days that they would support the proposal, which would give Mr. Martin the three votes he needs from the five-member commission.

Mr. Martin has long complained that cable rates have risen significantly faster than inflation over the last decade. He also has said that there was not enough competition in the marketplace and that the cable companies have erected impediments to more diverse programming. He has urged the cable companies to offer à la carte plans that would let their customers pay only for the channels they watch.

Cable executives have replied that à la carte would be a disaster for consumers because the more popular programs subsidize the less popular ones. They have complained to senior White House officials and top lawmakers that Mr. Martin has overreached.

On Tuesday evening, Mr. Martin suffered a setback in promoting his agenda to more tightly regulate cable television when the commission voted to postpone a vote on his proposal to adopt a finding that the industry had grown so large that the commission’s regulatory authority over it should be expanded.

The cable concentration caps, as they are known, have long been the subject of debate and litigation at the commission. Six years ago a federal appeals court struck down a rule that was similar to the one Mr. Martin is now proposing.

The three-judge panel concluded that the commission had failed to provide an adequate justification to overcome the First Amendment rights of the cable companies.

The proposal has languished at the commission for months. By forcing a public vote at the same time that the agency is expected to consider loosening the media ownership rule, Mr. Martin could be seeking to improve his chances of success.

The two Democratic commissioners have strongly criticized the plan to loosen the media ownership rule because it could lead to greater industry consolidation. They have also indicated that they would vote for the cable cap.

At a hearing on Tuesday evening, one Democrat, Michael J. Copps, said: “Ever since I arrived at the commission six years ago, I have been deeply concerned about increasing concentration in the cable industry. I simply can’t see how American consumers benefit when a handful of vertically integrated media giants have so much control over so much content.”

And the other Democrat, Jonathan S. Adelstein, said that he voted to approve the item on Tuesday while it was circulating.

Still, the commission is certain to face strong lobbying against the measure by the industry.

Earlier this year, Brian L. Roberts, the chairman and chief executive of Comcast, met separately with commissioners to discuss a series of regulatory concerns, including a possible cap on ownership. The company has also filed a stream of economic studies and analyses that it has said demonstrate that limits on ownership could be more harmful to competition.

In a letter to the commission, the National Cable and Telecommunications Association said that since the 2001 court decision to strike down the cable ownership limits, the paid television market had become more competitive.

“Direct Broadcast Satellite has since shown itself to be a very effective competitor — and numerous additional competitors to incumbent cable operators have emerged,” the association said.