Cable rails against possible FCC ownership cap

By Rachelle Younglai

WASHINGTON (Reuters) - The U.S. association of cable operators and programmers criticized on Thursday a government proposal to limit the number of subscribers a cable company can reach to 30 percent of the market.

"In this marketplace, certainly the record doesn't justify a cap," Kyle McSlarrow, chief executive of the National Cable & Telecommunications Association, said at a media briefing.

The limit, which was struck down by a U.S. appeals court in 2001, has been resurrected by the chairman of the Federal Communications Commission. It is currently being circulated among the five agency commissioners who vote on rulings.

McSlarrow pointed out that, when the court threw out the cap in 2001, satellite television operators DirecTV Group Inc. and EchoStar Communications Corp. "had not taken off."

"Now, not only do we have satellite, you have phone companies that have a very large footprint," he said.

AT&T Inc., the country's largest telecommunications company, has faced a declining traditional telephone business and has been expanding into Internet, wireless and TV services.

Verizon Communications, which has experienced strong growth in its Internet and mobile phone business, began offering television service through its FiOS technology in September 2005.

Since then, more than 200,000 customers have subscribed to Verizon's service. Although that is a fraction of what Comcast Corp., the country's biggest cable operator, holds.

"Their footprint is relevant," said McSlarrow, pointing out they will be able to roll out their video services to their existing customer base.

Earlier this week, FCC chairman Kevin Martin defended the proposal, saying telephone companies that deploy video would also be capped at 30 percent. He also noted changes in the market, such as increased reginal consolidation by cable operators, which he said makes it easier for them to potentially raise rates.

McSlarrow said he "did not understand that at all" and pointed out that the proposal was national not regional.