The Hedge Fund Law Report

The definitive source of actionable intelligence on hedge fund law and regulation

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By Topic: Cable

  • From Vol. 2 No.36 (Sep. 9, 2009)

    What Does the Comcast Victory in the Cable Market Share Limit Case Reveal About the Obama Administration’s Regulatory Approach?

    Comcast Corp. scored a big legal victory when the U.S. Court of Appeals for the D.C. Circuit struck down a rule that restricted the percentage of all subscribers that any one cable operator may serve.  The Federal Communications Commission (FCC) had first imposed a 30% ownership cap in 1993 in an effort to limit the number of subscribers that large cable companies, such as Comcast, could serve.  Citing competition from satellite TV companies and the video services offered by phone companies, cable operators previously challenged the cap several times in court, but without success.  However, on August 28, 2009, Comcast, the only cable operator close to reaching the 30% limit, finally achieved a legal victory on this point.  The case, while very important to Comcast and other large cable operators, may do more than just permit cable operators to serve more than 30% of the market by number of subscribers: it may also provide insight into the regulatory philosophy of the Obama administration – in particular, how the administration approaches the definition of markets.  In a nutshell, the Comcast case suggests that in defining markets, the Obama administration may take technological innovation into account to a greater degree than its predecessor – which generally will result in a broader definition of markets.  How the Obama administration defines markets may have a fundamental impact on hedge funds that invest in regulated industries, including cable, telecom, pharma and energy.  For example, Harbinger Capital Partners reportedly is pursuing a multi-stage satellite phone venture that would require the purchase of significant amounts of radio spectrum, which in turn would require the acquisition of a satellite company or the merger of two smaller satellite companies.  These types of transactions would require FCC approval.  As a result, the regulatory approach taken by the Obama administration generally and by the FCC specifically can have a direct impact on how this venture, and others like it, proceed.  We detail the statutory and regulatory background of the Comcast case, as well as the court’s legal analysis, and discus the impact the case may have on the cable industry, and administrative law and enforcement under the Obama administration.

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