FCC's Martin defends limit on cable companies

By Rachelle Younglai

WASHINGTON (Reuters) - The head of the U.S. Federal Communications Commission defended on Wednesday a proposal to limit the number of pay television subscribers a cable company can reach at 30 percent, saying telephone companies that deploy video would also be capped at that level.

The limit, which was struck down by a U.S. appeals court in 2001 because the FCC failed to sufficiently justify the limits it set, is being circulated among the five agency commissioners for their consideration.

"We are trying to create a regulatory environment that promotes competition in a lot of these services. What we have seen is that cable prices have increased by about 100 percent since 1996," FCC Chairman Kevin Martin told reporters after testifying at a House telecommunications and Internet subcommittee hearing.

Cable and telephone companies are in a pitched battle for customers to subscribe to video, Internet and telephone services.

"What the commission is trying to do is facilitate competition on the voice side and that often times benefits competitors like cable, but also increases competition on the video side, because what we have seen is dramatic increases in cable rates," Martin said.

The FCC rules struck down by the court had barred companies from owning systems reaching more than 30 percent of pay television customers and limited channels affiliated with the cable companies to no more than 40 percent of a system's menu.

Martin said he was confident the new proposal "would get through the courts," and pointed to changes in the marketplace such as increased regional consolidation by cable operators. He said that makes it easier for them to potentially raise rates and increase their buying power for content.

The National Cable & Telecommunications Association, which represents the biggest cable operators and programmers, rebuffed the idea and said: "When you look at the market today, the phone companies and cable are direct competitors for the triple-play of video, high-speed Internet and phone service."

"In this day and age, given the competitive environment, the right answer is to say there is no cap," said Kyle McSlarrow, chief executive of the association. "Any FCC order adopting the same 30 percent cap tossed out by the courts would be astonishing."

Martin and the four other FCC commissioners, appeared before the House panel for a broad hearing on FCC issues for the first time in at least three years.

The hearing, which lasted more than four hours, allowed lawmakers to air their frustrations and question commissioners on issues ranging from the deployment of broadband across the country and conditions surrounding the AT&T-BellSouth merger.

One lawmaker likened the gathering of the five commissioners to a Beatles reunion and many pressed for more frequent hearings.

Rep. John Dingell, chairman of the full House Energy and Commerce Committee, panned the commission on how it responds to consumers and complained that the agency has preempted local governments on matters involving municipal property.

"It makes me wonder whether we need to schedule an oversight hearing every month in order to keep the business of the Commission on track," he said.