[Federal Register Volume 63, Number 134 (Tuesday, July 14, 1998)]
[Proposed Rules]
[Pages 37812-37815]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 98-18038]
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FEDERAL COMMUNICATIONS COMMISSION
47 CFR Part 76
[MM Docket No. 92-264; FCC 98-138]
Horizontal Ownership Limits
AGENCY: Federal Communications Commission
ACTION: Proposed rule.
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SUMMARY: In the Further Notice of Proposed Rulemaking (``Further
Notice''), the Commission seeks comment on possible revisions of the
cable television horizontal ownership rules and the method by which
horizontal ownership is calculated. The Commission seeks comment on
whether, in light of evolving market conditions, the horizontal
ownership limit should remain at 30% of homes passed nationwide by
cable, and also seeks comment on the 35% minority-control allowance.
The Further Notice also seeks comment on whether the Commission should
revise the rules to consider the presence in the market of all
multichannel video programming providers (``MVPDs'') rather than cable
operators alone, and whether to base the limit on actual subscribers
rather than on homes passed. The Further Notice is part of a companion
Memorandum Opinion and Order on Reconsideration which is summarized
elsewhere in this issue of the Federal Register.
DATES: Comments are due on or before August 14, 1998, and reply
comments are due on or before September 3, 1998.
FOR FURTHER INFORMATION CONTACT: John Norton, Cable Services Bureau,
(202) 418-7200.
SUPPLEMENTARY INFORMATION: This is a synopsis of the Commission's
Further Notice of Proposed Rulemaking, MM Docket No. 92-264, FCC 98-138
adopted June 23, 1998, and released June 26, 1998. The full text of
this decision is available for inspection and copying during normal
business hours in the FCC Reference Center (Room 239), 1919 M Street,
NW, Washington, D.C. 20554, and may be purchased from the Commission's
copy contractor, International Transcription Service, (202) 857-3800,
1231 20th Street, NW, Washington, D.C. 20036.
Synopsis of the Notice of Proposed Rulemaking
1. In the Second Report and Order in MM Docket No. 92-264, 58 FR
60135, November 15, 1993 (``Second Report and Order''), the Commission
adopted the horizontal ownership rules, which provide that no person
may hold attributable interests in cable systems reaching more than 30%
of all homes passed nationwide by cable. In the Second Report and
Order, the Commission stated that it planned to review subscriber
limits every five years to determine whether such limits are reasonable
under the prevailing market conditions and whether such limits continue
to serve the objectives for which they were adopted. The rules in
question were adopted in 1993, and the Commission believes that it is
appropriate to review these rules to address intervening changes in the
communications marketplace.
2. In the Further Notice, the Commission seeks comment on whether
30% remains the appropriate horizontal ownership limit in light of
evolving market conditions. The current rules further allow ownership
of additional cable systems reaching up to 35% of cable homes passed,
provided such additional cable systems are minority-controlled. The
purpose of the 35% minority-control allowance was to encourage
diversity of viewpoints by fostering increased minority participation
and ownership in the cable industry, through increased multiple systems
operator (``MSO'') investment in minority-owned cable systems. The
Commission seeks comment on the constitutionality of the minority-
control allowance in light of the Supreme Court's decision in Adarand
Constructors, Inc. v. Pena, 515 U.S. 200 (1995). Recognizing that the
minority-control allowance has never been utilized by any MSO, the
Commission also seeks comment on the effectiveness of this rule and on
the development of alternative rules to promote minority participation
consistent with the standards set forth in Adarand.
3. The Commission also seeks comment on two specific issues
concerning the method of ownership calculation: (1) whether the rules
should consider the presence in the market of all MVPDs rather than
cable operators alone, and (2) whether the rules should be based on
actual subscriber numbers rather than on homes passed. The rules
proposed in the Further Notice would
[[Page 37813]]
provide that, in calculating a cable MSO's market share, the numerator
would consist of the MSO's cable subscribers plus its non-cable MVPD
subscribers, and the denominator would consist of the total number of
cable subscribers plus non-cable MVPD subscribers nationwide. In
addition to these proposed rule changes, the Commission seeks comment
as to whether the method of ownership calculation should be modified in
some way to support cable overbuild competition.
4. In the Further Notice, the Commission recognizes that the MVPD
market has continued to evolve since our adoption of the horizontal
ownership rules. The Commission seeks comment on a proposal to revise
the rules to include alternative MVPDs in the measure of horizontal
concentration in order to reflect the emergence of competitors to cable
in the video marketplace, as well as potential MSO increases in market
power through acquisition of interests in other MVPDs. The Further
Notice seeks comment on whether such a rule revision--recognizing the
impact of all purchasers of video programming, not just cable
operators--would provide a more accurate measure of MSOs' market power.
5. The Commission also seeks comment on whether the proposed
revision of the horizontal ownership rules is consistent with the
Commission's authority under Section 613 of the Communications Act to
``prescribe rules and regulations establishing reasonable limits on the
number of cable subscribers a person is authorized to reach through
cable systems * * *.'' The proposal would result in a sliding or
adjustable cable horizontal ownership limit, under which the number of
subscribers a cable operator is authorized to reach through cable
systems would decrease in proportion with any increase in the number of
subscribers that entity reaches through other MVPD systems. Conversely,
the cable horizontal ownership limit would rise for a cable operator
that reaches fewer subscribers through other MVPD systems. The proposed
rules would impose no limit on the number of subscribers a cable
operator may reach through alternative MVPD systems. These rules also
would not apply to persons who have no attributable ownership interests
in cable systems. The Commission seeks comment on this proposal and on
whether it is consistent with the terms of the underlying statute,
given Section 613's focus on the cable industry and the establishment
of a cable subscribership limit rather than an MVPD subscribership
limit.
6. In the Further Notice, the Commission also seeks comment on the
possibility of changing the method of calculating the basis of the
horizontal ownership limits from potential reach, i.e., number of homes
passed, to actual reach, i.e., number of MVPD subscribers served, in
order to reflect an MVPD's actual purchasing power. In revisiting the
horizontal ownership rules, the Commission seeks comment on whether the
homes passed standard continues to be an accurate measure of horizontal
concentration and market power in today's marketplace, and whether the
easier to measure subscriber standard can be adapted for use in a
fashion that will not require an abrupt halt to the addition of new
subscribers to established cable systems. The Commission asks for
comment on the best method for counting subscribers, including those
residing in multi-dwelling units and commercial subscribers such as
hotels, bars, etc.
7. The Commission seeks comment on whether the greater accuracy
provided by a subscriber based standard outweighs the greater stability
provided by a homes passed standard. With regard to the argument that a
subscriber based standard may have the effect of discouraging
subscriber growth, the Commission seeks comment on whether system
operators would have a sufficient opportunity to anticipate the
approaching limit and to dispose of systems sufficient to stay under
the limit rather than to simply cease the addition of new subscribers.
8. The Commission asks commenters to address whether the proposed
revisions are consistent with the public interest objectives and the
Commission's legal authority under section 613 and 47 U.S.C. Secs. 151,
154, and 303. The Commission seeks comment on whether the proposed
horizontal ownership rules would provide a more accurate measure of
horizontal concentration and market power than the current rules. The
Commission also seeks comment on the practical impact of the proposed
rule changes on MSO ownership and operation. In particular, the
Commission asks that commenters address whether the proposed changes
would place any cable MSO in violation of the 30% horizontal ownership
limit and to provide specific factual information in support of any
such conclusions. The Commission seeks comment on whether it should
develop special rules to address situations where a cable MSO may
exceed the 30% limit as a result of subscriber growth within an
existing area of homes passed. The Commission further invites comment
on any other matters relevant to its proposals and tentative
conclusions.
Initial Regulatory Flexibility Analysis for the Further Notice of
Proposed Rulemaking
9. As required by Section 603 of the Regulatory Flexibility Act, 5
U.S.C. Sec. 603 (``RFA''), the Commission is incorporating an Initial
Regulatory Flexibility Analysis (``IRFA'') of the expected impact on
small entities of any policies or proposals contained in this Further
Notice. Written public comments concerning the effect of the proposals
in the Further Notice, including the IRFA, on small businesses are
requested. Comments must be identified as responses to the IRFA and
must be filed by the deadlines for the submission of comments in this
proceeding. The Commission shall send a copy of this Further Notice,
including the IRFA, to the Chief Counsel for Advocacy of the Small
Business Administration in accordance with paragraph 603(a) of the
Regulatory Flexibility Act.
10. Need for, and Objectives of, the Proposed Rules. The 1992 Cable
Act and subsequent actions to implement it, and Section 11(c) of the
1992 Cable Act in particular, are intended to encourage competition in
the cable industry and prevent the exercise of undue market power by
large cable multiple systems owners. The Commission issues the Further
Notice to obtain comment on whether certain aspects of the Commission's
horizontal ownership rules should be revised to make them more
effective in serving the public interest objectives Congress charged
the Commission with protecting in Section 11(c).
11. Legal Basis. Authority for the actions proposed in this Further
Notice may be found in Sections 1, 4, 303, and 613 of the
Communications Act of 1934, as amended, 47 U.S.C. Secs. 151, 154, 303,
533.
12. Description and Estimate of the Number of Small Entities to
Which the Proposed Rules Will Apply. The RFA generally defines ``small
entity'' as having the same meaning as the terms ``small business,''
``small organization,'' and ``small governmental jurisdiction'' and
``the same meaning as the term `small business concern' under the Small
Business Act unless the Commission has developed one or more
definitions that are appropriate for its activities. A small business
concern is one which: (1) is independently owned and operated; (2) is
not dominant in its field of operation; and (3) satisfies any
[[Page 37814]]
additional criteria established by the Small Business Administration
(``SBA''). Pursuant to 5 U.S.C. Sec. 601(3), the statutory definition
of a small business applies ``unless an agency after consultation with
the Office of Advocacy of the SBA and after opportunity for public
comment, establishes one or more definitions of such term which are
appropriate to the activities of the agency and publishes such
definition(s) in the Federal Register.''
13. The SBA has developed a definition of small entities for cable
and other pay television services under Standard Industrial
Classification 4841 (SIC 4841), which covers subscription television
services, which includes all such companies with annual gross revenues
of $11 million or less. This definition includes cable systems
operators, closed circuit television services, direct broadcast
satellite services, multipoint distribution systems, satellite master
antenna systems and subscription television services. According to the
Census Bureau, there were 1,323 such cable and other pay television
services generating less than $11 million in revenue that were in
operation for at least one year at the end of 1992.
14. The Commission has developed its own definition of a ``small
cable company'' and ``small system'' for the purposes of rate
regulation. Under the Commission's rules, a ``small cable company,'' is
one serving fewer than 400,000 subscribers nationwide. Based on our
most recent information, the Commission estimates that there were 1,439
cable companies that qualified as small cable companies at the end of
1995. Since then, some of those companies may have grown to serve over
400,000 subscribers, and others may have been involved in transactions
that caused them to be combined with other cable companies.
Consequently, the Commission estimates that there are fewer than 1,439
small entity cable companies that may be affected by the proposal
adopted in the Notice. The Commission's rules also define a ``small
system,'' for the purposes of cable rate regulation, as a cable system
with 15,000 or fewer subscribers. The Commission does not request nor
does it collect information concerning cable systems serving 15,000 or
fewer subscribers and thus the Commission is unable to estimate at this
time the number of small cable systems nationwide.
15. The Communications Act also contains a definition of a ``small
cable operator,'' which is ``a cable operator that, directly or through
an affiliate, serves in the aggregate fewer than 1 percent of all
subscribers in the United States and is not affiliated with any entity
or entities whose gross annual revenues in the aggregate exceed
$250,000,000.'' The Commission has determined that there are 61,700,000
subscribers in the United States. Therefore, the Commission found that
an operator serving fewer than 617,000 subscribers is deemed a small
operator, if its annual revenues, when combined with the total annual
revenues of all of its affiliates, do not exceed $250 million in the
aggregate. Based on available data, the Commission finds that the
number of cable operators serving 617,000 subscribers or less totals
1,450. Although it seems certain that some of these cable system
operators are affiliated with entities whose gross annual revenues
exceed $250,000,000, the Commission is unable at this time to estimate
with greater precision the number of cable system operators that would
qualify as small cable operators under the definition in the
Communications Act. The Commission is likewise unable to estimate the
number of these small cable operators that serve 50,000 or fewer
subscribers in a franchise area.
16. Description of Projected Recording, Record keeping, and Other
Compliance Requirements. If the horizontal ownership rules are changed,
the Commission may have to change certain cable reporting requirements.
Cable entities also may have to adjust the organization of their
business interests in order to comply with any new rules that the
Commission may adopt.
17. Steps Taken to Minimize Significant Economic Impact on Small
Entities, and Significant Alternatives Considered. The actions proposed
in the Further Notice are intended to ensure that the Commission's
horizontal ownership rules are effective in preventing the exercise of
undue market power by large cable multiple systems owners and promote a
competitive, diverse and fair marketplace. Accordingly, as discussed in
the above descriptions of the proposed rule changes, the approaches
proposed in this Further Notice should promote fairness and diversity
for all cable systems, including the small entities listed above. The
Commission invites comments on these approaches, including comment on
whether alternative approaches will mitigate any unwarranted expenses
incurred by smaller entities by virtue of their size alone.
18. Federal Rules that Overlap, Duplicate or Conflict with the
Proposed Rules. None.
Paperwork Reduction Act
19. The proposals contained herein in the Further Notice have been
analyzed with respect to the Paperwork Reduction Act of 1995 (the
``1995 Act'') and found to impose modified information collection
requirements. Implementation of any new or modified requirements will
be subject to approval by the Office of Management and Budget
(``OMB''). The Commission, as part of its continuing effort to reduce
paperwork burdens, invites the general public to take this opportunity
to comment on the information collection requirements contained in this
Further Notice, as required by the 1995 Act. Comments should address:
(1) Whether the proposed collection of information is necessary for the
proper performance of the functions of the Commission, including
whether the information shall have practical utility; (2) the accuracy
of the Commission's burden estimates; (3) ways to enhance the quality,
utility, and clarity of the information collected; and (4) ways to
minimize the burden of the collection of information on the
respondents, including the use of automated collection techniques or
other forms of information technology.
20. Written comments by the public on the modified information
collection requirements are due August 14, 1998. OMB comments are due
August 31, 1998. Comments on the information collection requirements
contained herein should be submitted to Judy Boley, Federal
Communications Commission, Room 234, 1919 M Street, N.W., Washington,
DC 20554, or via the Internet to jboley@fcc.gov and to Timothy Fain,
OMB Desk Officer, 10236 NEOB, 725--17th Street, N.W., Washington, DC
20503 or via the Internet to fain__t@al.eop.gov. For additional
information on the information collection requirements, contact Judy
Boley at 202-418-0214 or via the Internet at the above address.
Procedural Provisions
21. Ex parte Rules--``Permit-but-Disclose'' Proceeding. This
proceeding will be treated as a ``permit-but-disclose'' proceeding
subject to the ``permit-but-disclose'' requirements under
Sec. 1.1206(b) of the rules. Ex parte presentations are permissible if
disclosed in accordance with Commission rules, except during the
Sunshine Agenda period when presentations, ex parte or otherwise, are
generally prohibited. Persons making oral ex parte presentations are
reminded
[[Page 37815]]
that a memorandum summarizing a presentation must contain a summary of
the substance of the presentation and not merely a listing of the
subjects discussed. More than a one or two sentence description of the
views and arguments presented is generally required. Additional rules
pertaining to oral and written presentations are set forth in Section
1.1206(b).
22. Filing of Comments and Reply Comments. Pursuant to applicable
procedures set forth in Secs. 1.415 and 1.419 of the Commission's
Rules, comments are due August 14, 1998, and reply comments are due
September 3, 1998. To file formally in this proceeding, you must file
an original plus four copies of all comments, reply comments, and
supporting comments. If you want each Commissioner to receive a
personal copy of your comments and reply comments, you must file an
original plus nine copies. You should send comments and reply comments
to Office of the Secretary, Federal Communications Commission, 1919 M
Street, NW, Washington, DC 20554. Comments and reply comments will be
available for public inspection during regular business hours in the
FCC Reference Center, Room 239, Federal Communications Commission, 1919
M Street NW, Washington DC 20554.
Ordering Clauses
23. Accordingly, it is ordered that, pursuant to sections 1, 4, 303
and 613 of the Communications Act of 1934, as amended, 47 U.S.C. 151,
154, 303 and 533, notice is hereby given of proposed amendments to the
Commission's rules, in accordance with the proposals, discussions and
statements of issues in the Further Notice and comment is sought
regarding such proposals, discussions and statements of issues.
24. It is further ordered that the Office of Public Affairs
Reference Operation Division shall send a copy of this Further Notice,
including the Initial Regulatory Flexibility Analysis, to the Chief
Counsel for Advocacy of the Small Business Administration.
List of Subject in 47 CFR Part 76
Cable television.
Federal Communications Commission.
Magalie Roman Salas,
Secretary.
[FR Doc. 98-18038 Filed 7-13-98; 8:45 am]
BILLING CODE 67129-01-P
