In a development that could open the door to new merger activity among the nation’s cable firms, the D.C. Circuit Court of Appeals last week overturned the FCC’s 30 percent cap on cable system ownership, concluding that the agency “failed to demonstrate that allowing a cable operator to serve more than 30 percent of all cable subscribers would threaten to reduce either competition or diversity in programming.” Issued last Friday, the decision hands a key victory to Comcast, the nation’s largest cable operator and petitioner in the case, which sought to overturn a 2007 FCC order mandating the cap. Comcast argued that the cap did not reflect realities of the current marketplace, in which satellite TV providers EchoStar and DirecTV and new IPTV offerings by AT&T and Verizon have made significant competitive inroads. The 2007 order, in turn, responded to a 2001 D.C. Circuit remand of a previous FCC ruling that capped Time Warner’s cable system ownership at 30 percent. Agreeing with Comcast’s contention that the FCC’s most recent attempt to impose the 30% cap was “arbitrary and capricious,” the threejudge panel took issue with FCC supporting data that failed to take into account “the impact of direct broadcast satellite [DBS] companies’ market share.” Circuit Judge Douglas Ginsburg also criticized the rationale behind the FCC’s market penetration rate calculations, asserting that, while the FCC admitted to leaving out data on DBS market share, the agency nevertheless attempted to justify that omission “with the questionbegging assertion that such data would not have materially changed the penetration rate.” As such, Ginsburg wrote that the FCC’s “dereliction in this case is particularly egregious,” considering that “the record is replete with evidence of ever-increasing competition among video providers” in a market in which cable operators “no longer have the bottleneck power over programming that concerned Congress” when it adopted the 1992 Cable Act. FCC Chairman Julius Genachowski pledged that the agency would “take this decision fully into account in future action to implement the law.”