FCC backs away from cable regulation plan

By Peter Kaplan

WASHINGTON (Reuters) - The Federal Communications Commission on Tuesday backed away from a proposal by the agency's chairman that would open the door to broader regulation of cable TV operators.

The FCC balked at a finding proposed by FCC Chairman Kevin Martin that cable companies subscribership levels had risen enough to justify sweeping regulation of the industry, voting instead to postpone a decision and approve more limited restrictions on the industry.

The restrictions include a measure that would limit the rates that cable operators can charge to lease spare channels to independent programmers.

But Martin was forced to drop other new regulations he had proposed to impose on cable, including one sought by the NFL that would have given broadcasters more leverage in negotiations with cable operators.

"Rejection of these items sends an important message that consumers are best served by marketplace forces, not government micromanagement," Kyle McSlarrow, the president of the industry's main trade group, said in a statement after Tuesday's vote.

The agreement came after a day of tough negotiations that began after Martin was unable to get a majority of the five commissioners to support the proposed finding.

Martin, a Republican, had earlier proposed that, as part of an annual report on video competition, the agency issue a finding that U.S. cable subscribership figures exceeded 70 percent in areas where the service is available.

Under U.S. law, that finding would give the agency more authority over companies such as Comcast Corp (CMCSA.O) and Time Warner Cable Inc (TWC.N).

But the idea ran into resistance from Martin's two fellow Republicans on the commission. They questioned the way Martin had arrived at the subscriber figures, saying they conflicted with previous reports on the issue.

On top of that, lobbyists with the cable industry waged a fierce campaign against Martin's initiatives, including meetings with White House officials.

Martin has criticized the cable TV industry over steeply increasing rates, over programming that some viewers find offensive and its reluctance to let customers choose individual channels on an a la carte basis.

Martin proposed to have the report rely on data from a communications industry trade publisher, which put U.S. cable subscribership at 71.4 percent.

Cable operators disputed the figure and said Martin's proposal was designed to pressure the industry into adopting the a la carte programming he favors.

Many Republicans, including lawmakers who have written to the FCC, have fundamental objections to imposing new federal regulations on an industry they say is competitive.

The two Democrats on the FCC had come under pressure from consumer groups, who support Martin's 70 percent finding and say previous estimates undercounted the number of cable subscribers.