It may be a rumor, but it's got the feel of fact. Word has it that the Federal Communications Commission may be considering a new ownership ceiling that would prevent cable industry leader Comcast (NASDAQ:CMCSA) from materially adding to its subscriber base, either through acquisition or by other means.
According to a legal advisor to FCC Commissioner Jonathan Adelstein, the commission is considering a proposal by its chairman, Kevin Martin, to prevent any one cable multisystems operator (MSO) from serving more than 30% of the nation's total cable customers. Following its acquisition of the last of the former Adelphia subscribers, Comcast today services nearly 25 million customers, or about 27% of the pay-TV market.
Until 2001, the FCC had a 30% cap on any one company's ability to serve the totality of pay-TV customers. In that year, however, the ceiling was struck down by a federal appeals court as an obstruction of free speech.
Chairman Martin is viewed by some as unfriendly to the cable operators. Indeed, medium-sized operator Mediacom (NASDAQ:MCCC) capitulated earlier this year in a scuffle with Sinclair Broadcasting (NASDAQ:SBGI) over payment for television program rebroadcasting, reportedly because of an impression that Martin would not support cable in any sort of battle with the broadcasters. He has apparently been concerned about rising cable rates and the operators' refusal to offer service plans with a la carte network-selection opportunities.
Comcast has grown rapidly to its present size. At the beginning of the current decade, its video subscriber base numbered about 6 million. In recent years, however, it has completed a number of cable acquisitions and, like its cable-industry brethren Time Warner Cable (NYSE:TWC), Cablevision (NYSE:CVC), and Mediacom, it has benefited from the attractiveness of its triple-play offering of video, data, and voice services.
In addition to its sizable group of cable television subscribers, Comcast also provides high-speed Internet connectivity to 11.5 million customers, and telephone service to about 2.5 million subscribers. Thanks to the pace of its subscriber additions in recent quarters, the company's share price has increased more than 45% during the past year.
So, Fools, we could be in for a skirmish worth watching. Comcast executives and the National Cable and Telecommunications Association both obviously oppose the implementation of any sort of subscriber ceiling. And with telephone companies Verizon (NYSE:VZ) and AT&T (NYSE:T) now providing their own triple-play packages in several locations -- to say nothing of the satellite companies' offerings -- the cable operators already face increasing competition.
Nevertheless, I continue to believe that Fools with an appetite for solid, well-managed media companies should keep a close eye on Comcast.
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Unfortunately for him, Fool contributor David Lee Smith does not own shares in any of the companies mentioned. He welcomes your comments or questions. The Fool has a disclosure policy.
