LITTLE ROCK — Comcast Corp., the biggest U.S. cable-television provider, won a legal victory Friday as a court threw out a rule limiting cable companies to 30 percent of the market.
The Federal Communications Commission failed to fully consider competition from companies such as DirecTV Group Inc.and Dish Network Corp., the U.S. Court of Appeals for the District of Columbia said. It called the FCC's action "arbitrary and capricious" and vacated the rule.
The ruling could spell an end to FCC attempts to limit the growth of cable companies, said Andrew Lipman, a Washingtonbased attorney. The court didn't offer the agency a chance to provide better reasons for the rule, as it did when judges rejectedthe limit in 2001, Lipman said.
The ruling is a "significant gain for cable and apparent big victory for Comcast," said Lipman, a partner in the media, telecommunications and technology practice at Bingham McCutchen LLP.
Cable companies still could face antitrust review as they grow, Lipman said.
"This important decision affirms that rules must reflect thechanging realities of the dynamic video marketplace where today consumers have more choice in video providers and channels than ever before," Sena Fitzmaurice, a spokesman for Philadelphia-based Comcast, said in an e-mailed comment.
FCC spokesman Jen Howard had no immediate comment.
The company serves about 25 percent of U.S. cable customers, Fitzmaurice said before the verdict was announced. The company reported 23.9 million video customers as of Aug. 6, down 2.7 percent from a year earlier.
The FCC in a 3-to-2 vote in December 2007 restored the ownership limit, which had been set aside by the same court in 2001. It told the court that a 30 percent limit would keep any cable operator from becoming so large that it could doom a chan-nel by refusing to carry it.
Comcast told the court that the limit violated its First Amendment right to speak to cable subscribers and that the FCC didn't account for an increase in provider choices available to customers. Satellite TV companies such as DirecTV and Dish doubled their number of subscribers in the seven years leading up to the FCC's decision, Comcast said in a brief.
Friday the court adopted Comcast's reasoning. It cited satellite companies and those that send programming over fiber-optic cables, such as Verizon Communications Inc. and AT&T Inc.
"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 for a threemember panel of the court.
Without the ownership limit, "Comcast would have new regulatory freedom to try to buy cable companies and systems, if it so desires," David Kaut, a Washington-based analyst for Stifel Nicolaus & Co., said in a July 21 note.
"They at least want to have that option," Kaut said before theverdict was announced. "This isn't just an academic exercise."
Comcast isn't likely to propose purchases of cable systems that would approach the contested limit, said Craig Moffett, a New York-based analyst with Sanford C. Bernstein & Co. For instance, he said, Comcast could buy Cablevision Systems Corp., which on July 30 reported 3.1 million basic video customers, without reaching 30 percent of the market.
"There's not really much to be gained by adding scale," Moffett said before the verdict.
Comcast shares rose 16 cents to close at $15.71 in Nasdaq Stock Market trading. The stock fell 7.9 percent this year before Friday.
Business, Pages 29, 34 on 08/29/2009