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70/70 Rule Delay a Boon for Cable

Written By Brian Hicks

Posted November 27, 2007

The FCC boss may be hell-bent on breathing new life into a little known 70/70 provision in the Cable Communications Act of 1984. But when a 9:30 a.m. ET meeting is twice delayed, it’s a bit difficult to get anything done.

And if the meeting is still delayed, or eventually makes it to the trash heap, we’re looking for interest in stocks such as CMCSA, DISH and TWC.

Under the 70/70 rule, if the FCC finds that cable service is available to 70% of homes and 70% of those homes subscribe, regulation of the cable industry is warranted. Unfortunately for the FCC, while cable services are made available to 70% of homes, the percentage of those subscribing may be below 70%. And that wouldn’t be music to the FCC boss’ ears. The FCC’s Kevin Martin seems bent on pushing through proposals disliked by the cable industry, including a "a la carte service", which would allow subscribers to pick and choose channels instead of accepting bundled packages.

But like I said, the percentage of those subscribing may be under 70%. Just read the media headlines proclaiming declining cable subscriber numbers for proof of that, as cable loses subscribers to satellite operators.

Still, the FCC believes the rule has been met. But the problem is that the numbers are being provided by a sharply criticized report form Warren Communications, which even said its numbers should not be relied upon by the FCC.

As of now, three of five FCC commissioners are questioning the accuracy of the data, which delayed a 9:30 a.m. ET meeting to 11 a.m., then delayed indefinitely. It’s still unclear at 4:30 p.m. ET if the meeting will be held at all.

Even if the FCC eventually wins, the cable industry still has a legal leg to stand on. While some studies say cable has 70% market share, others estimate that 60% of homes have cable, with 25% of homes having satellite, and 15% having nothing.

Nothing is set in stone yet. Like I said, keep an eye on CMCSA, DISH and TWC.