Tug Of War on Caps

Cable World, March 19, 2001 by David Connell

The Federal Communications Commission is fielding fallout from the court decision nullifying its 30% cable ownership cap.

AT&T and Viacom have asked the commission to delay ordered divestitures that would bring the companies under separate caps, with Viacom threatening to take the matter to court.

AT&T is seeking to move the May deadline by which it has been ordered to shed its interest in Time Warner Entertainment or spin off the Liberty Media Group to come in under the now defunct cap, according to an ex parte letter filed at the FCC.

AT&T VP-government affairs Betsy Brady had already asked Cable Services Bureau member Deborah Lathen to suspend the deadline during a meeting shortly after the court decision was leveled.

According to FCC sources, the commission is reviewing AT&T's request but has yet to decide what they will do with the deadline.

While AT&T wants the deadline pushed back, the company may still want to shed its interest in TWE in order to reduce some of its debt. However, the MSO has had trouble completing a deal with Time Warner because the FCC-imposed deadline has taken away AT&T's bargaining power.

By reversing its decision on the deadline, the commission could actually speed up AT&T's divestiture of TWE.

At the same time, the D.C. Circuit Court's ruling emboldened Viacom to threaten to bring its own suit against the 35% broadcast ownership cap. The FCC ordered the company to shed some broadcast stations by May 4 because its merger with CBS put it over the cap. Viacom filed an emergency petition asking the commission to postpone the divestiture before deciding to file a suit for interim relief.

Viacom gave the commission until the end of business March 16 to act on the petition or face legal action from the company. At presstime, the commission had yet to respond to the petition, and Viacom had not filed in the District Court.

The company is also part of a larger lawsuit against the broadcast ownership cap filed by the major networks currently pending in federal court.

Speaking at a National Association of Broadcasters conference last week, FCC Chairman Michael Powell began commenting on the cable cap decision, saying he was struck by the court's apparent negation of program diversity as a reason for retaining the rules.

Programming diversity is a cornerstone of the FCC's ownership rules and the current must carry obligations. If the cable cap ruling, in fact, sets a precedent against diversity, it could toll a death knell for several FCC rules down the road.

Meanwhile, the FCC denied a petition for reconsideration of its approval of the AT&T-MediaOne merger filed by the Consumers Union and other consumer advocates. The CU asked the commission to reverse its approval, claiming AT&T participated in "hundreds" of "undisclosed" meetings with commission staff that led to the conditions of the merger.

The meetings, Consumers Union added, were a violation of the FCC's ex parte rules.

The commission denied that it made any decisions regarding the merger or its conditions based on the meetings cited by the Consumers Union. It added that all decisions were based "only on a thorough review of the voluminous record compiled in [the AT&T MediaOne] proceeding."