Summary
On August 29 the Federal Appeals Court tosses the 30% reach cap in the cable television industry set by the FCC, claiming the Commission's ruling was not justified in the current environment.
Analysis
Cable companies will now be able to acquire systems that reach more than the arbitrary 30% cap established by the FCC and tossed around in the courts for the past several years. On August 29 the Federal Appeals Court ruled against the FCC, effectively bringing an end to the cap.
This doesn't mean there is going to be a wave of cable system deals, but at least the door is open for companies like Comcast or Time Warner Cable to get bigger, which is important as these two giants continue to go toe-to-toe with the telecommunications operators Verizon and AT&T offering their version of multichannel television delivered through a fiber-based system.
But perhaps more important is the implication of this decision as the FCC looks towards its next review of overall media ownership rules, a requirement in place since the passage of the 1996 Telecommunications Act. If an audience cap in the cable industry is not justified, how then can an audience cap in terms of television ownership be justified?
In a declining television environment, the opportunity to add scale is certainly an option, especially for companies under the 39% television cap set by Congress a few years ago. It will be interesting to see if that cap is challenged by a combination of companies like News Corp., NBC Universal, CBS and Disney who would have the most to gain by acquiring more TV stations struggling to survive in a recessionary environment.
These actions could trigger more merger and acquisition in the media industries connected to television, especially as capital markets improve along with the general economy.
Alan Albarran consults with leading institutions through GLG
Analyses are solely the work of the authors and have not been edited or endorsed by GLG.
