By Fawn Johnson, Dow Jones

WASHINGTON (Dow Jones)–A federal court on Friday vacated a rule from the Federal Communications Commission dictating that cable operators can’t serve more than 30% of subscribers in a single market, stating the cap is “arbitrary and capricious.”

The unusual decision is a victory for Comcast Corp. (CMCSA), which challenged the rule, as well as several other cable operators that joined Comcast in the case, including Time Warner Cable (TWC).

Comcast is the only cable company in danger of bumping up against the FCC’s cap. Without it, Comcast can freely acquire more cable systems.

The rule was approved in 2007 on divided 3-2 vote by the FCC, under the leadership of then-chairman Kevin Martin.

Martin, a Republican, was forced to rely on the support of the two Democratic commissioners in order to get the requisite three votes for the ownership cap. The other two Republicans on the independent five-member body voted against it.

In vacating the rule, the U.S. Court of Appeals for the District of Columbia said the FCC “failed to demonstrate that allowing a cable operator to serve more than 30% of all cable subscribers would threaten to reduce either competition or diversity in programming.”

The court also said the FCC’s “dereliction in this case is particularly egregious” because the commission failed to fully consider the competition brought to the paid TV market by satellite providers such as The DirecTV Group Inc. (DTV) and the Dish Network Corp (DISH).

In previous litigation on the topic, the court expressly asked the FCC to consider competition from other providers, the court said.

Verizon Communications Inc. (VZ) and AT&T Inc. (T) also have launched paid TV services designed to directly compete with cable TV.

Comcast wasn’t immediately available for comment.

The advocacy group Media Access Project, or MAP, represented the groups supporting the 30% cap in the case – CCTV Center for Media & Democracy, United Church of Christ and the Center for Creative Community.

MAP President Andrew Jay Schwartzman said supporters of the cap will consult with the FCC on whether Supreme Court review is feasible. “This is not the end of the fight,” he said.

-By Fawn Johnson, Dow Jones Newswires; 202-862-9263; fawn.johnson@dowjones.com