Comcast has decided to challenge the Federal Communications Commission's "unofficial" cap on cable system ownership. In a filing earlier this month, Comcast criticized the FCC's 30 percent horizontal ownership cap, saying that limits on how many subscribers a given cable operator can service are no longer necessary.

In 1992, the FCC tweaked its cable-ownership regulations in response to a law passed by Congress. Concerned that cable networks would have too few distribution outlets if there was insufficient competition among cable providers, the FCC ruled that a cable company could serve no more than 30 percent of homes passed by cable companies in the US. Later that decade, the FCC changed its measurement metric, deciding to drop the homes-passed measurement and decreeing that no single cable operator could serve over 30 percent of all cable subscribers in the US.

The FCC's limit was challenged in court, and in 2001, a federal court overturned the limit and directed the FCC to come up with a new set of metrics. Instead of coming up with new criteria, however, the FCC has continued to enforce the 30 percent limit for mergers.

Comcast is hit hardest by the FCC's rules, as its 26.2 million subscribers account for just over 28 percent of the 96.8 million US residents with cable or satellite TV service.

Comcast: Times have changed

As required by the 1996 Telecommunications Act, the FCC is currently reviewing its media ownership rules. Those rules cover not only cable systems, but TV stations, radio stations, and newspapers as well. FCC Chairman Kevin Martin has indicated that he might be willing to spin off discussion of cable providers into a separate track.

In its filing, Comcast says that the rationale for limiting ownership no longer applies. Calling it a "relic that cannot be justified," Comcast says that "continuing, rapid development of competition in the video marketplace" obviate the need for ownership caps. The cable company points to the proliferation of video services on the Internet, over mobile phones, peer-to-peer, and video-on-demand services, as well as multicast TV broadcasters as evidence that cable, satellite, and broadcast networks have several means available to reach viewers.

"These new sources of video content have two major effects on the marketplace," Comcast argues. "First, they represent sources of fierce competition to cable operators. Second, and most importantly for this proceeding, they represent massive growth in the number and type of available platforms for the distribution of video programming, which have the effect of unleashing an unprecedented 'flow of video programming' to consumers."

Is TV like broadband?

The bigger question is whether further consolidation of the cable industry would benefit consumers. So far, the FCC's moves towards deregulation have arguably had a negative impact on consumers, especially when it comes to broadband. With the deregulation of DSL and cable Internet, consumers now have fewer choices for broadband. As a result, the US badly lags behind many western European and Asian countries when it comes to broadband availability, speed, and price.

Can the same be said of television? As is the case with broadband, competition is between modes of service (e.g., cable vs. satellite) than between providers themselves. In most US towns and cities, cable providers have exclusive franchise agreements that give them the exclusive right to offer programming within municipal boundaries (or in some cases, neighborhood boundaries). As a result, customers who want something more than over-the-air television programming can choose between a single cable provider andsometimestwo satellite providers. That situation is slowly changing for some people in Verizon and AT&T's service areas as they roll out their fiber networks and begin offering television programming, but the two telecoms will be hard pressed to pass 30 million homes with their new services by the end of the decade.

There are some important differences between broadband and television, however. As Comcast pointed out, consumers have other means of accessing TV programming. Fans of Desperate Housewives and other ABC shows can now view episodes online after the shows have aired. Shows are also available for download from the iTunes Store and other places online and some TV fans have succeeded in "replacing" cable TV with broadband, BitTorrent, and a media center PC.

It's apparent that the cable television industry faces new challenges from the Internet and other areas. That said, it is not clear how giving a big thumbs-up to consolidation in the cable industry will benefit consumers in the slightest.