In legal victory, Comcast now able to gobble up more of cable market

In a major legal victory that Comcast executives are sure to be toasting over the weekend, the cable giant yesterday succeeded in convincing a federal judge to throw out a 1993 Federal Communications Commission rule limiting cable companies to 30 percent of the market. Comcast (CMCSA), the nation's largest cable company, currently has 25 percent of the U.S. cable market and will now, no doubt, seek more turf.

"We are pleased the D.C. Circuit has vindicated our position," Comcast spokesperson Sena Fitzmaurice said in a statement. "This important decision affirms that rules must reflect the changing realities of the dynamic video marketplace where today consumers have more choice in video providers and channels than ever before."

Still, consumer advocates are crying foul.

Ben Scott, policy director of D.C.-based Free Press, a consumer rights group that has doggedly fought Comcast in recent years, said the ruling will limit competition and hurt consumers.

"Today, consumers experience perpetual price hikes by large operators that already have market dominating purchasing power to decide the fate of new channels," Scott said in a statement. "The promises of lower prices through competition from satellite and telecom companies in the video business have never been realized."

The court's decision marks a key win for Comcast, which over the last two years has been battered by FCC rulings and consumer outrage over its controversial bandwidth restriction practices, which the company maintained merely constituted "responsible network management." In the face of intense public and regulatory opposition, Comcast ultimately adopted a new "protocol agnostic" network management policy (which means it says it won't discriminate against any type of online traffic, let's say providing slower service for video downloads from YouTube, over its own broadband internet video programming).

The recent battles between Comcast and the FCC have been heated, to say the least. In one example, the cable giant went as far last year as to pay people off the street to pack a public FCC hearing on network neutrality at Harvard. The meeting was then so crowded with disinterested parties -- some whom were photographed sleeping during the hearing -- that members of the public who really cared about the issue were blocked from attending. Comcast's stunt so outraged the FCC that the commission ordered a "do-over" hearing at Stanford, at which prominent open-internet advocate and panelist Lawrence Lessig lambasted the company and its tactics for several hours.

In yesterday's ruing, the U.S. Court of Appeals in Washington said the the FCC failed to appropriately factor in competition from companies such as DirecTV and Dish Network in its policy, and called the FCC's rule "arbitrary and capricious."

"In light of the changed marketplace, the government's justification for the 30 percent cap is even weaker now than in 2001 when we held the 30 percent cap unconstitutional," Judge Douglas Ginsburg wrote on behalf of the three-member appellate panel.

Andrew Lipman, a Washington- based partner in the media, telecommunications and technology practice at Bingham McCutchen LLP, called the ruling a "significant gain for cable and apparent big victory for Comcast," according to Bloomberg.

Comcast already controls about 25 percent of the cable market, with 23.9 million customers. Now that the 30 percent cap is removed, theoretically the sky is the limit on new market share. But, realistically, with competition from satellite TV, it's hard to see Comcast getting close to 50 percent -- maybe 35 percent.

Time Warner Cable (TWC) is currently second, with 13 million customers, followed by Cox Communications, with more than 5 million customers, according to the National Cable and Telecommunications Association.

Satellite provider DirecTV, meanwhile, has more than 18 million U.S. customers, while competitor Dish Network serves about 14 million. In other words, the two satellite providers have nearly as many customers as Comcast's four biggest rivals combined.

Despite the national significance of Friday's ruling, for many consumers, the real issue remains broadband choice at the local level. In many cities and towns, one or two companies dominate. Comcast may have won a key battle, but the war over broadband competition and concentration is far from over.

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