FCC likely to cap growth for Comcast

FCC Chairman Kevin Martin is likely to get the votes today for new regulation restricting Comcast Corp. from making a mega-acquisition of another cable company, industry experts say.

The vote at the five-member Federal Communications Commission is the latest skirmish between the cable industry and Martin, its top regulator.

The new regulation would limit any one cable company to providing service to 30 percent of the nation's pay-TV homes.

Realistically, the only company this would handcuff is Comcast, the nation's largest cable provider. The Philadelphia company serves about 27 percent of the market, based on FCC guidelines, or 24.2 million subscribers. The new limit would allow it to grow an additional three million subscribers and no more.

Martin, a Republican who has criticized cable companies for rate increases and over indecency issues, aligned himself with Democratic Commissioners Michael Copps and Jonathan A. Adelstein to win passage of the subscriber limit, sources say.

Politicking inside the FCC - which many times takes place right up to the commission's meeting hour - could alter the outcome.

But a 3-2 vote appears locked down, sources said. Deborah Taylor Tate and Robert M. McDowell, the agency's other two Republican commissioners, are not likely to support the new regulation. Some powerful Republican lawmakers, such as Rep. John Boehner of Ohio, the House GOP leader, have said they do not believe it should be adopted.

"This is not targeting Comcast because it's Comcast," said Andrew Jay Schwartzman, president and chief executive officer of the Media Access Project, an advocacy group that wants the limit. "It's because Comcast is big enough."

Consumer groups say the limit would curb Comcast's market power when negotiating with national programming networks, such as the Big Ten Network or the Hallmark Channel, and its ability to set higher rates. A 1992 federal law requires that the FCC set a limit.

"I would hope this would be one step toward a more vibrant programming market, with more choices and lower prices for the public," Schwartzman said.

Comcast said that the courts already had ruled against a 30 percent limit and that it saw no reason to revisit the issue, contending that the company faces more competition. The direct-broadcast satellite industry has grown from 40,000 subscribers in 1994 to 30 million subscribers today, it says.

FCC spokeswoman Mary Diamond said the federal agency had no comment ahead of today's meeting.

Comcast says it would appeal the new regulation in the courts. But the company could be held to the 30 percent limit for years, restricting its growth through big acquisitions as the case works its way through the judicial system.

The proposed regulation is one of several factors weighing heavily on Comcast stock.

Others include a slowing economy and new competition from telephone companies offering video, such as Verizon Communication Inc.'s FiOS service. Comcast's stock price was trading slightly above $18 a share yesterday, off about 40 percent in the last year. Comcast shares fell 4 cents yesterday, closing at $18.10.

Comcast said the FCC was treating cable companies differently from telephone companies, which have merged into financial giants in recent years.

A new regulation on subscriber growth broadly hurts the stocks in the cable industry because it takes Comcast out of the acquisition hunt, industry officials note.

Since 1998, Comcast has made 14 cable acquisitions for billions of dollars, adding about 20 million subscribers to its Philadelphia-based system.

In contrast, the nation's No. 2 cable company, Time Warner Cable, has 13.5 million subscribers.

"The FCC record does not support imposition of a cap on the size of cable operators," Comcast executive vice president David L. Cohen said in a statement yesterday, "especially when the FCC is simultaneously allowing cable's satellite and telephone competitors to continue to grow without comparable constraints. We continue to believe that a 30 percent cap will not survive constitutional scrutiny and is unjustified on public policy grounds."