Supreme Court upholds 1992 Act MSO size limit (fwd)

[Heiko Recktenwald <uzs106@ibm.rhrz.uni-bonn.de>]

 From the Chicago Tribune

             February 21, 2001


                          COURT BACKS CABLE TV GROWTH LIMITS
                          JUSTICES REJECT TIME WARNER'S APPEAL OF 1992 LAW

                          By Tim Jones
                          Tribune Media Writer
                          February 21, 2001

                          The Supreme Court on Tuesday blocked an 
effort by the nation's second-largest cable television  operator to 
expand its business beyond government-imposed limits.

                          By refusing to hear an appeal from Time 
Warner Entertainment Co., the court effectively backed Congress' 
effort to limit the growth of cable operators, which have been 
consolidating rapidly in the
  past several years and, through mergers and acquisitions, thwarting 
the desire of Congress to create more cable competition for consumers.

                          Although the court's decision preserves the 
intent of the 1992 Cable Television Consumer Protection and 
Competition Act, many consumers may not feel particularly satisfied 
with the effects of the 9-year-old law. While Congress has moved to 
prevent cable concentration on a national
  scale--the limits on national reach that Time Warner was 
challenging--most individual markets, like  Chicago, are dominated by 
one cable operator. AT&T has more than 90 percent of the subscribers 
in the Chicago market.

                          Furthermore, cable rates have jumped more 
than 32 percent in the past five years, nearly three times the rate 
of inflation. And the competition for video services that does exist 
comes primarily from direct broadcast satellite television, which now 
has about 15 million subscribers nationwide,compared with about 70 
million for cable.

                          Creating competition has proven to be much 
more difficult than Congress ever envisioned. Mergers and the high 
cost of competing convinced many to stay out, even in a strong 
economy. Changing technology--particularly high-speed Internet 
access--became the growth engine for cable, not video  services.

                          While the dearth of competition is most 
easily measured in video service, cable operators are  interested in 
raising the caps on their reach in large part because of the access 
it would give them to expand in the areas of greatest 
growth--Internet access and telephony.

                          The court issued its decision Tuesday 
without comment, but was clear that the result most affects the two 
largest cable companies, AT&T Broadband (16.1 million cable 
subscribers) and Time Warner (13 million subscribers).

                          "The court feels this is really a matter for 
Congress to address," said Christopher Cinnamon, a  Chicago attorney 
who specializes in telecommunications law. A spokesman for Time 
Warner declined to comment.

                          After the passage of the 1992 law, the 
Federal Communications Commission adopted rules that limited cable 
operators from serving more than 30 percent of the nation's 
households. Time Warner argued that this restriction, as well as one 
limiting the number of channels a cable system can offer in which it 
owns a financial interest, violated its 1st Amendment rights and 
claimed Congress did not have the authority to set the limits.

                          Last May, a federal appeals court panel said 
the law "did not run afoul" of the 1st Amendment.

                          The actual limits set by the FCC are being 
challenged in a separate case, and a ruling is anticipated  at any 
time. In the meantime, AT&T has been lobbying Congress to raise the 
30 percent cap.

                          New FCC Chairman Michael Powell has 
suggested he is open to the easing of restrictions on  broadcast 
station ownership, including the one limiting the reach of television 
station owners to 35 percent of the nation's TV households.

                          But the commission would be reversing itself 
if it were to loosen the strictures on cable. Relaxing the cable 
limits to the benefit of AT&T and Time Warner could contradict the 
spirit of concessions the government extracted from America Online 
Inc. and Time Warner when the two companies  merged earlier this year 
and created a powerful cable and Internet giant. Consumer advocates 
and antitrust experts were concerned that the company's wide reach in 
cable would allow it to dominate Internet access and other services.

                          AT&T Corp., the nation's biggest cable 
operator, exceeded the 30 percent cap last year when it  acquired 
MediaOne Group Inc., then the sixth-largest cable operator. AT&T said 
it would sell its 25.5 percent share of Time Warner Entertainment and 
spin off the Liberty Media Group in an
effort to comply.