**DISSENTING STATEMENT OF**

**COMMISSIONER ROBERT M. MCDOWELL**

*Re: The Commission's Cable Horizontal and Vertical Ownership Limits*;
*Implementation of Section 11 of the Cable Television Consumer
Protection and Competition Act of 1992*; *Implementation of Cable Act
Reform Provisions of the Telecommunications Act of 1996*; *Review of the
Commission's Regulations Governing Attribution of Broadcast and
Cable/MDS Interests*; *Review of the Commission's Regulations and
Policies Affecting Investment in the Broadcast Industry*; *Reexamination
of the Commission's Cross-Interest Policy*.

What we have before today us may be the "Ghost of Christmas Past."
Almost seven years ago, the court rejected the FCC's attempt to impose a
30 percent cable ownership cap. So what is the majority doing today?
It's sending back up to the very same court the very same 30 percent
cap. Maybe this is really the "Ghost of Christmas Present" then. In
Charles Dickens' tale, "A Christmas Carol," that ghost carried the
specters of "Ignorance" and "Want." Today's order does the same. This
order goes out of its way to remain ignorant of current market
conditions which obviate a need for a cap. And the order is wanting for
any sustainable legal or evidentiary justification to trample on the
First Amendment, in defiance of the court's 2001 warning. Certainly, the
ghost of the future will foretell an inescapable fate for this order.
Its dark, cold epitaph is all but carved on its tomb. This order *will
be overturned* by the D.C. Circuit. Even Ebeneezer Scrooge would pry a
few coins from his miserly hands to place that bet.

My dissent is focused on three primary concerns:

1\) The cap is out-of-date, is bad public policy and is not needed in
today's market;

2\) The court is sure to strike down the cap again; and

> 3\) The cap is contrary to the existing policy goals of *this*
> Commission by creating regulatory *dis*parity and asymmetry.

I.  **[The Cap Is Out-of-Date]{.underline}.**

In 1992, Congress authorized the Commission, through Section 613, to
"prescribe rules and regulations establishing reasonable limits on the
number of cable subscribers a person is authorized to reach" in order to
prevent any "cable operator or group of cable operators" from "unfairly
imped\[ing\]... the flow of video programming from the video programmer
to the consumer."[^1] In instructing the Commission to craft these
rules, however, Congress was clear that the Commission must "make sure
such rules and regulations reflect the dynamic nature of the
communications marketplace" and must not "impose limitations which would
impair the development of diverse and high quality video programming."
[^2] Congress also required the Commission to "take particular account
of the market structure" of the cable industry and "account for any
efficiencies and other benefits that might be gained through increased
ownership."[^3]

When Congress enacted this section, vertical integration between cable
operators and programmers was at about 57 percent, which sparked
legitimate concerns regarding potential exclusion of independent
programmers by cable companies. In contrast, vertical integration today
stands at less than 15 percent. The unwritten story here is that, back
then, fewer than 100 national programming networks existed; now there
are about 550. That's more diversity, not less.

In 1992, the average consumer had a "choice" of only one subscription
video provider. Today, the average consumer has a choice of at least
three such providers, and sometimes five. In 2001, when the court last
looked at the cap, DirecTV and Echostar had a combined 16 million
subscribers with an 18 percent market share. Today, they serve over 30
million consumers and have grown to a 30 percent market share. These two
companies are now the second and third largest subscription video
service providers. DirecTV is now 54 percent bigger, and Echostar is 92
percent bigger. In the meantime, cable's video subscribership is 4
percent *smaller*.

And there are other differences. In 1992 and 2001, phone companies were
not in the video business. Now they are - big time. For instance,
Verizon alone has almost 1 million video subscribers. Cable overbuilders
are much more viable as well. In 1992, there was no public Internet, let
alone Internet video. Today there is so much Internet video, that
YouTube alone requires more bandwidth than the *entire Internet* did in
2000. And that's not counting new ventures such as Joost, Cinema Now,
Movielink and others that allow consumers to avoid traditional
subscription video paradigms altogether. In fact, as the FCC's own
research shows, by July 2006, 107 million Americans viewed video online
and about 60 percent of U.S. Internet users download videos.[^4]
Furthermore, today's video market will only become more competitive as
broadcasters beam new HDTV and multi-cast video programming,
over-the-air, for *free*, and as wireless providers build out powerful
new platforms using our recently-auctioned Advanced Wireless Services
spectrum and the 700 MHz spectrum being auctioned next month.

This order is unnecessary because the bottleneck threat to programming
distribution that existed in 1992 no longer exists. Deregulatory
policies have spurred new investment and competition in the marketplace.
As a result, new delivery platforms and new content providers have
sprouted up, supplanting the need for regulation. However, should a
programmer find that a cable operator is unfairly excluding its content
from carriage, and all other private sector avenues for resolution have
failed, then the statute and our regulations allow that programmer to
pursue a complaint here at the Commission. But, to date, only two such
complaints have been filed---which underscores the point that the
majority is concocting an unconstitutional cure for an illness that does
not exist. If a viewer wants specific programming not carried by a cable
operator, the viewer and the programmer both have a panoply of ways to
find each other -- certainly more than they had in 1992 or 2001. In
short, other less heavy-handed alternatives exist to address the
majority's concerns without having to resort to such archaic industrial
policy.

II. **[The Cap Is Sure to Be Struck Down Again by the
    Court]{.underline}.**

Today's 30 percent cap has a smaller chance of surviving appeal than did
the ill-fated and ill-advised 2001 30 percent cap. In 2001 in *Time
Warner Entertainment Co. v. FCC*, the D.C. Circuit rejected the 30
percent cable ownership cap and imposed a heavy burden on the Commission
to adopt any new cap on remand.[^5] The court found that the Commission
lacked an evidentiary basis for a 30 percent cap and, as a result, did
not meet its obligation under the First Amendment to show a "real risk"
of "non-conjectural harm" to programmers. The court also rejected the
Commission's argument that a 30 percent cap was justified in order to
"enhance diversity."

Indeed, the court stated that based on the marketplace evidence in 2001,
the Commission could justify *at most*, a 60 percent cap---*twice* the
number the majority adopts today.[^6] Specifically, the court maintained
that a 60 percent limit "might be appropriate as necessary to ensure
that programmers had an adequate 'open field' even in the face of
rejection by the largest company" and that the "present record supports
no more." In particular, the court found that the Commission had not
given sufficient weight to marketplace developments, especially the
increasing success of Direct Broadcast Satellite ("DBS"). The court
pointed out that because "DBS could be considered to 'pass every home in
the country'" its competitive effect is especially significant. The
Court admonished the Commission to account for this fact when
considering any new ownership cap. The majority's order does not clear
this hurdle, not by a mile. How can the same 30 percent limit that
*insufficiently* accounted for DBS in 2001 possibly satisfy the
requirements of *Time Warner II* today when DBS is roughly *twice as
large* a competitive presence as it was in 2001, and when other
competitors are competing vigorously with cable operators? The answer is
that it cannot.

III. **[The Cap Creates Regulatory *Dis*parity and
     Asymmetry]{.underline}.**

Placing a horizontal ownership cap on cable creates regulatory disparity
and asymmetry, all at a time when this Commission has been trying to
level the regulatory playing field by creating parity. Order after order
over the past few years has sought to change the stove-pipe paradigm of
old in an attempt to treat similar technologies and services alike, not
differently. Today's cap applies only to cable, not to satellite.
Furthermore, we don't cap the number of:

-   wireline telephone subscribers one company can have;

-   wireless subscribers one company can have; or

-   websites a company can own.

Even in the era of rapid technological convergence, such asymmetry will
only create market distortions that will inhibit investment and
innovation. How does that serve the public interest? In a world where
cable companies compete directly against telephone companies and others
to provide video, voice and data services, restricting the ability of
one group of competitors to achieve the economies of scale enjoyed by
others undermines years of efforts to spur intermodal competition and
violates the well-established principle of competitive neutrality. If
the majority sees so many flaws in the cable industry, it should remedy
those shortcomings by encouraging competition, as we did with our video
franchising order, not through unnecessary and unconstitutional
regulation. Likewise, it is ironic that those who are voting today to
*limit* cable company growth have consistently voted to *expand*
telephone company growth. Such a reversal of policy just for this one
sector defies logic.

IV. **[Conclusion]{.underline}.**

Today's item also contains a further notice of proposed rulemaking,
seeking comments regarding the cable attribution rules and the vertical
ownership limit. While I am not opposed to asking questions about the
attribution issues, the answers will make little sense with the 30
percent horizontal ownership cap in place. I hope that our consideration
of the vertical limit will be far better-reasoned than today's action.

For these reasons, I respectfully dissent from today's order.

[^1]: 47 U.S.C. § 533(f)(1)(A), (f)(2)(A).

[^2]: *Id.* at § 533(f)(2)(E), (f)(2)(G).

[^3]: *Id. at* § 533(f)(2)(C)-(D).

[^4]: News Release, FCC, *FCC Adopts 13^th^ Annual Report to Congress on
    Video Competition and Notice of Inquiry for the 14^th^ Annual
    Report* 4 (Nov. 27, 2007).

[^5]: *Time Warner Entertainment Co. v. FCC*, 240 F.3d 1126, 1134
    (D.C.Cir. 2001).

[^6]: *Id.* at 1136.