A U.S. appeals court on Friday threw out a regulation that has limited cable companies to serving up to 30 percent of the country's subscription television market, a big victory for operators like Comcast Corp and Cablevision Corp.

The U.S. Court of Appeals for the D.C. Circuit ruled that the Federal Communications Commission's rule, adopted in late 2007, was arbitrary and capricious and vacated it. The regulation was first set in 1993 but has been repeatedly challenged.

The commission has 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 programing, the court said.

The judges pointed to rising competition among video providers, including satellite companies like DirecTV Group Inc as well as telephone companies like AT&T Inc and Verizon Communications Inc, which have been rolling out their own subscription television services.

Cable operators, therefore, no longer have the bottleneck power over programing that concerned the Congress in 1992. the court said. The FCC's cable ownership limit has been the focus of court challenges for years.

The latest ruling presents a major challenge for new FCC Chairman Julius Genachowski, a Democrat, who will now have to decide whether to appeal the decision to the Supreme Court, try to start from scratch, or abandon the regulation altogether.

(Reporting by Jeremy Pelofsky, editing by Gerald E. McCormick)

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