[Federal Register Volume 60, Number 141 (Monday, July 24, 1995)]
[Rules and Regulations]
[Pages 37830-37835]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 95-17508]
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FEDERAL COMMUNICATIONS COMMISSION
47 CFR Part 76
[MM Docket No. 92-264, FCC 95-21]
Cable Television
AGENCY: Federal Communications Commission.
ACTION: Final rule; petition for reconsideration.
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SUMMARY: The Commission amends the cable television rules by permitting
cable television operators to acquire satellite master antenna
television (SMATV) systems within the cable television operator's
service area so long as any SMATV system owned by a cable television
operator within the operator's cable franchise area is operated in
accordance with the terms and conditions of the local cable franchise
agreement governing the cable television system. The Commission found
that the prior rule which prohibited such acquisitions was inconsistent
with the statutory provisions of section 11 of the Cable Television
Consumer Protection and Competition Act of 1992 (1992 Cable Act). The
Commission also affirms the regulatory framework implementing section
13 of the 1992 Cable Act that established a three-year holding
requirement for cable systems and concludes, based on its experience
with requests for waiver of the holding period, that such waiver
requests generally will be looked on favorably unless the request
raises serious concerns on its face or any objections to grant of the
waiver provide evidence of other public interest bases for concern.
EFFECTIVE DATE: August 23, 1995.
FOR FURTHER INFORMATION CONTACT:
Rebecca Dorch, Cable Services Bureau, (202) 416-0800.
SUPPLEMENTARY INFORMATION: In the Memorandum Opinion and Order on
Reconsideration of the First Report and Order (MO&O) in MM Docket No.
92-264, adopted January 12, 1995 and released January 30, 1995, the
Commission acts on petitions for reconsideration of the First Report
and Order (FR&O) in MM Docket No. 92-264, Implementation of Sections 11
and 13 of the 1992 Cable Act (Horizontal and Vertical Ownership Limits,
Cross-Ownership & Anti-Trafficking Provision), 8 FCC Rcd 6828 (1993),
58 FR 42013, August 6, 1993. All significant comments in the petitions
for reconsideration are considered and analyzed in light of the
Commission's statutory directives. The Commission adopts revisions to
the rules which, to the extent possible, minimize the regulatory
burdens placed on entities covered by the ownership and anti-
trafficking provisions of the 1992 Cable Act and which aim to reduce
unnecessary regulatory restrictions and promote competition within the
multichannel video distribution marketplace.
The complete text of the MO&O is available for inspection and
copying during normal business hours in the FCC Reference Center (room
239), 1919 M Street NW., Washington, DC, and also may be purchased from
the Commission's copy contractor, International Transcription Service,
at (202) 857-3800, 2100 M Street NW., Suite 140, Washington, DC 20037.
Regulatory Flexibility Act: No significant impact.
Synopsis of the Memorandum Opinion and Order on Reconsideration of
the First Report and Order
1. In this MO&O the Commission addresses petitions for
reconsideration of the FR&O in this proceeding, 58 FR 42013, August 6,
1993, in which it adopted rules implementing the cross-ownership and
anti-trafficking provisions of Sections 11 and 13 of the 1992 Cable
Act. In the FR&O, the Commission adopted a rule that prohibited cable
system operators from acquiring satellite master antenna television
(``SMATV'') systems within their actual service areas. On
reconsideration, the Commission finds that such a prohibition is
inconsistent with the statutory provision upon which it was based.
Consequently, the Commission revises that part of the rules that govern
cable operators' ownership of SMATV systems within their franchise
areas. The Commission believes its analysis and determination to revise
the ownership rules adopted in the FR&O more accurately reflects the
intent of Congress and comports with the meaning of Section 613(a)(2)
of the Communications Act of 1934, as amended by the 1992 Cable Act
(the ``Communications Act''). The Commission further affirms its
decision in the FR&O to adopt a regulatory framework implementing the
anti-trafficking provision of Section 13 of the 1992 Cable Act, finding
that the rules fulfill Congress' mandate and are consistent with the
goal of promoting competition in the multichannel video marketplace.
The Commission takes the opportunity, however, to clarify the manner in
which those rules apply to various transactions.
2. Section 11(a) of the 1992 Cable Act amended the Communications
Act by adding an ownership provision restricting multichannel
multipoint distribution service (``MMDS'') and SMATV ownership
interests by cable operators. That provision, now Section 613(a)(2) of
the Communications Act, prohibits a cable operator from holding a
license for MMDS, or from offering SMATV service that is separate and
apart from any franchised cable service, in any portion of the
franchise area served by that cable operator's cable system. It
grandfathers all such service in existence as of the date of enactment
of the 1992 Cable Act, and authorizes the Commission to waive the
requirements of the provision to the extent necessary to ensure that
all significant portions of a franchise area are able to obtain video
programming.
3. Section 13 of the 1992 Cable Act amended the Communications Act
by
[[Page 37831]]
establishing a three-year holding requirement for cable systems (the
``anti-trafficking provision''). That provision, now Section 617 of the
Communication Act, restricts the ability of a cable operator to sell or
otherwise to transfer ownership in a cable system within thirty-six
months following either the acquisition or initial construction of the
system by such operator. It also delineates specific exceptions to the
general rule and provides waiver authority to the Commission.
4. In this MO&O the Commission addresses the various petitions for
reconsideration and/or clarification, oppositions and replies filed
with respect to the FR&O and the rules adopted therein to implement the
ownership and anti-trafficking provisions of the 1992 Cable Act. The
Commission clarifies and modifies the regulations adopted in the FR&O
in several respects. These modifications are in furtherance of the
statutory objectives of the 1992 Cable Act, and are consistent with an
intent to eliminate artificial regulatory barriers to competitive and
efficient delivery of multichannel programming services to the American
public. In addition to responding to the parties' petitions, the
Commission clarifies several matters that have arisen during the course
of its administration of those regulations.
5. First, with respect to the SMATV ownership rules, the Commission
removes the prohibition against cable operators' acquisitions of SMATV
systems within their actual service areas based upon a revised
interpretation of the language of Section 11(a) of the 1992 Cable Act.
Second, the Commission affirms that any SMATV system owned by a cable
operator within the operator's franchise area must be operated in
accordance with the terms and conditions of the local franchise
agreement. The Commission concludes that the revised rules are more
fully supported by the statute and Congressional statements of intent
than were the rules adopted in the FR&O. The Commission further finds,
based on the record, that the policy of promoting competition to
traditional coaxial cable systems is at least as well served, if not
better served, by the revisions.
6. With respect to anti-trafficking, the Commission first affirms
the Commission's rules regarding action by franchise authorities on
requests for approval of transfers or assignments of cable systems that
have been held for three or more years. Second, the Commission
clarifies certain aspects of FCC Form 394. Third, the Commission
clarifies that a franchise authority may require approval of cable
system transfers or assignments if so required by state or local law.
Fourth, the Commission clarifies that the holding period does not
recommence upon the consummation of a transaction that is exempt from
the statutory three-year holding period. Fifth, the Commission
clarifies certain aspects of calculating the holding period. Sixth, the
Commission affirms the decision to grant a blanket waiver of the anti-
trafficking rules to small systems. Finally, based on experience with
waiver requests, the Commission concludes that it will generally look
favorably on requests for waiver of the anti-trafficking rules unless
the request raises serious concerns on its face or any objections
received to grant of the waiver provide evidence of other public
interest bases for concern.
7. The Commission first considers the statutory SMATV ownership
restrictions. The Commission notes that SMATV systems (also known as
``private cable systems'') are multichannel video programming
distribution systems are serve residential, multiple-dwelling units
(``MDUs''), and various other buildings and complexes, that a SMATV
system typically offers the same type of programming as a cable system,
and that the operation of a SMATV system largely resembles that of a
cable system--a satellite dish receives the programming signals,
equipment processes the signals, and wires distribute the programming
to individual dwelling units--with the primary difference between the
two being that a SMATV system typically is an unfranchised, stand-alone
system that serves a single building or complex, or a small number of
buildings or complexes in relatively close proximity to each other. The
Commission also notes that a SMATV system is defined under the
Communications Act by means of an exception to the definition of a
cable system: the term ``cable system'' means a facility, consisting of
a set of closed transmission paths and associated signal generation,
reception, and control equipment * * * but such term does not include *
* * (B) a facility that serves only subscribers in 1 or more multiple
unit dwellings under common ownership, control, or management, unless
such facility or facilities uses any public right-of-way; * * *.
Therefore, the Commission states that a SMATV system is different from
a cable system only in that it does not use ``closed transmission
paths'' to (a) serve buildings that are not commonly owned, controlled,
or managed; or (b) use a public right-of-way.
8. The Commission notes that the distinction between a SMATV system
and a cable system is based on the limited manner in which a SMATV
system provides its services: that when the service is no longer so
limited, the SMATV system ceases to be eligible for the statutory
exception and becomes a cable system. The Commission notes that if a
system's lines interconnect separately owned and managed buildings or
if the system's lines use public rights of way, the system is a cable
system for purposes of the Communications Act. The Commission states
that closed transmission path interconnection of a cable system and a
SMATV system will, therefore, cause the SMATV system to become a part
of the cable system.
9. Noting the prohibition in the statute that makes it ``unlawful
for a cable operator * * * to offer satellite master antenna television
service separate and apart from any franchised cable service, in any
portion of the franchise area served by that cable operator's cable
system, ``the Commission observes that the FR&O interpreted this
provision as restricting franchised cable operators from acquiring
existing SMATV systems within their actual service areas, but not
prohibiting all SMATV-cable cross-ownership within cable operators'
actual service areas. In particular, the Commission had previously
determined that cable operators are permitted to construct stand-alone
or integrated SMATV systems in their actual service areas, provided
such SMATV service is offered in accordance with the terms and
conditions of agreements with the local franchise authorities; that
common ownership of a SMATV system that itself qualifies as a ``cable
system under Section 602(7)(B) of the Communications Act and a separate
stand-alone SMATV system'' would also be permitted; that a cable
operator is permitted to acquire, or build, a stand-alone SMATV system
located in the unserved portions of the franchise area, provided such
cable-owned SMATV system is operated in accordance with the terms and
conditions of the cable franchise agreement; but that a cable operator
would not be allowed to acquire existing SMATV facilities within the
cable operator's actual service area for the purpose of providing cable
service. In reaching this conclusion the Commission concluded that
allowing cable operators to acquire existing SMATV facilities would
undermine competition between cable operators and SMATV providers,
[[Page 37832]]
reinforce existing cable monopolies, and reduce competitive
opportunities for SMATV providers within the cable service area.
10. The Commission reviews the arguments and positions of the
petitioners for reconsideration, including those that argue that it was
an error to prohibit cable operators from acquiring existing SMATV
systems within their service areas. The Commission decides to modify
the rules based upon a revised analysis of the language of Section
613(a)(2) and the Congressional intent underlying that provision. The
Commission notes that the modified rules are consistent with the
diversity and competitive considerations associated with the statutory
ownership restriction. The Commission concludes that the statutory
language means that cable operator may not offer SMATV service anywhere
in its franchised service area unless such service is offered together
with or as part of the cable service provided pursuant to its local
cable franchise agreement. In other words, if a cable operator offers
SMATV service to subscribers within its franchised service area, it
must offer this otherwise unregulated multichannel video programming
service to those subscribers pursuant to the same terms and conditions
upon which the regulated cable television service is offered to
subscribers within that same franchise. Thus, cable operators may not
use facilities that meet the statutorily-created SMATV exception to the
definition of a cable system to provide multichannel video programming
service that does not comply with franchise obligations or the
Commission's rules.
11. The Commission declines to adopt an interpretation of the
statutory language that suggests that the statute requires the physical
interconnection of commonly-owned cable systems and facilities that
would otherwise qualify for the SMATV exception. Rather, the Commission
concludes that the statutory ``separate and apart'' language refers to
the service, not the delivery system, and are used to limit cable
operators' ability to offer the unregulated SMATV service. Accordingly,
the Commission states its belief that the statutory language requires
cable operators to comply with all franchise requirements in their
delivery of multichannel video programming without regard to whether
any part of the facilities used might qualify as a SMATV system.
12. The Commission reviews the legislative history and concludes
that in the context of the SMATV provision, Congress was unconcerned
with the manner in which SMATV systems are obtained by cable operators
and was mostly concerned with the manner in which such service is
``offered'' to subscribers in the cable operator's franchised service
area; i.e., ``separate and apart from any franchised cable service.''
Accordingly, on further analysis the Commission concludes that revising
the rule to eliminate the regulatory distinction between the
acquisition and construction of SMATV systems accurately and
appropriately interprets the statutory provision. The Commission
further explains its belief that the revisions more closely comport
with Congressional intent in enacting the SMATV ownership restriction.
13. The Commission also explains its belief that Congress's intent
to preclude franchised cable operators from owning SMATV services in
their franchise areas was not directed at the technology involved but
rather at prohibiting cable operators from using the SMATV exception to
offer service that does not comply with federal law and franchise
obligations. The Commission notes that its interpretation ensures
competitive opportunities for SMATV operators and is consistent with
the interpretation proffered in the FR&O where it also required cable
operators to comply with the terms and conditions of their franchise
agreements if they offered multichannel video programming services
through SMATV facilities in the unserved portions of their service
areas. The Commission further believes that the revisions are
consistent with the overall policy goals of the 1992 Cable Act.
14. The Commission finds that the record contains insufficient
evidence on which to base an economic analysis as to the workings of
the SMATV marketplace and on which to conclude with any degree of
certainty that either the rule adopted in the FR&O or the revision
would have particular economic consequences. Nevertheless, the
Commission notes that the availability of capital necessary to
construct a SMATV system is often dependent on the availability of exit
strategies, and in particular on the ability to recoup sunk costs by
being able to sell to a locally-franchised cable operator when that
operator is the only potential buyer and that the revision would
eliminate that constraint and level the competitive field for initial
entry.
15. Accordingly, the Commission reconsiders the decision in the
FR&O that cable operators may not acquire SMATV systems located within
their service areas, and in this MO&O, modifies the rules by permitting
cable operators to purchase SMATV systems located within their
franchise areas, provided they operate such systems in accordance with
the terms and conditions of their local franchise agreements. By this
action the Commission notes that it eliminates the regulatory
distinction drawn in the FR&O accorded disparate regulatory treatment
based upon distinctions between the construction and acquisition of
SMATV systems. The Commission concludes that the revised rule is more
consistent with and more accurately and appropriately interprets the
language of Section 613(a)(2) than the rule adopted in the First Report
& Order.
16. The Commission next addresses cable operators' use of SMATV
facilities within their franchise areas and rejects arguments that it
lacks authority to require franchised cable operators to operate SMATV
systems under their ownership, control or management within their
franchise areas in accordance with their franchise obligations, that
there are no public policy reasons for requiring cable operators to
operate SMATV systems in accordance with their franchise obligations,
and that the economies of providing SMATV service in an MDU are
sufficiently different from those involved in providing franchise-wide
cable service that a cable operator acquiring a cable system should not
be required to operate the SMATV system in accordance with its
franchise agreement requirements. The Commission notes that the
decision to permit cable operators to acquire SMATV facilities within
their service areas renders moot concerns regarding conveyances of
access contracts and distribution facilities. The Commission further
notes that in two separate Erratum to the FR&O the Mass Media Bureau
corrected the relevant MMDS-cable and SMATV-cable cross-ownership rules
to grandfather authorized combinations in existence as of October 5,
1992, as required by the statute. The Commission declines to also
grandfather arrangements between private parties that were merely
agreed to prior to December 4, 1992.
17. The Commission next addresses the anti-trafficking rules.
Section 617 of the Communications Act establishes a three-year holding
requirement for cable systems that, with certain exceptions, restricts
the ability of a cable operator to sell or otherwise transfer ownership
in a cable system within a thirty-six month period following either the
acquisition or initial construction of the system. The statute
expressly exempts from the
[[Page 37833]]
restriction: (1) any transfer of ownership interest in any cable system
which is not subject to Federal income tax liability; (2) any sale
required by operation of any law or any act of any Federal agency, any
State or political subdivision thereof, or any franchising authority;
and (3) any sale, assignment, or transfer, to one or more purchasers,
assignees, or transfees controlled by, controlling, or under common
control with, the seller, assignor, or transferor. Section 617 also
authorizes the Commission to grant waivers in cases of default,
foreclosure or other financial distress, and on a case-by-case basis
where a waiver serves the public interest; provides that certain
subsequent transfers of systems are not subject to the holding
requirement; and imposes a 120-day time limit on local franchise
authority action on a request for approval of a transfer of a cable
system held for three or more years.
18. The Commission reviews the conclusions drawn and the rules
adopted in the FR&O that: (a) Implemented the statutory anti-
trafficking provision; (b) delineated specific instances where waiver
requests will be favorably reviewed; and (c) instituted a blanket
waiver for small systems. The Commission notes that in the FR&O it
concluded that Congressional intent underlying the anti-trafficking
provision was to restrict profiteering transactions and other transfers
that are likely to adversely affect cable rates or service in the local
franchise area, but not to inhibit investment in the cable industry or
delay or disrupt legitimate cable transactions. In this MO&O the
Commission recognizes that the use of the term ``profiteering'' is a
misnomer in the context of anti-trafficking because the underlying
concern is over speculative purchases and sales of cable systems made
for the purpose of realizing quick profits from increases in values,
which could overburden systems with debt and thereby lead to higher
rates and reduced services for subscribers.
19. The Commission affirms the rules that provide local franchise
authorities a 120-day period for review of transfer requests for cable
systems held for three years and rejects arguments that the statute
does not limit the information a franchising authority may require a
cable operator to submit in connection with a request for approval of a
sale or transfer, that the rules impermissible limit the amount and
type of information the local franchise authority may obtain from the
cable operator and the duration of local franchising authorities' power
to disapprove cable system transfers, and that the 120-day period not
commerce until the cable operator is affirmatively advised that the
franchise authority has received all information it seeks. The
Commission notes that the rules provide that the franchise authority
shall have 120 days from the submission of a completed FCC Form 394 and
any additional information required by the terms of the franchise
agreement or applicable state or local law, to act upon the waiver
request. Thus, the cable operator is on notice that information
requirements may exist in three locations and that the submission of
all such information is necessary for the franchise authority to be
bound by the 120-day time period. To the extent the local franchise
authority seeks additional information, as stated in the FR&O, cable
operators are required to respond promptly by completely and accurately
submitting all information reasonably requested by the franchise
authority. The Commission believes that Congress sought to provide a
degree of regulatory certainty to cable operators when it established
the 120-day time period for franchise authority action on transfer
requests pertaining to cable systems held for three or more years. The
Commission also believes that submission of the information required by
FCC Form 394, the franchise agreement and state or local law, is
sufficient to commence the 120-day time period for local franchise
authority action on the request. The Commission states that this
conclusion provides a degree of certainty to the parties, comports with
the legislative history and is consistent with our rulings with respect
to franchise authority action on rate regulation matters.
20. The Commission rejects requests to revise FCC Form 394, but
clarifies that transferees and assignees responding to the inquiry
regarding their legal qualifications, in particular Question 5 of
Section II pertaining to adverse findings or actions by courts and
administrative bodies, should be guided by the charter qualification
policy statements adopted by the Commission in 1986 and 1990. The
Commission also clarifies that Form 394 is to be used to apply for
franchise authority approval to assign or transfer control of a cable
system owned for three or more years: it is not intended for use by a
cable operator seeking local franchise authority approval of an
assignment or transfer of a cable system held for less than three
years.
21. The Commission acknowledges that franchise authorities' right
to review transfer requests may arise from state or local law or
ordinance and where local or state law requires franchise authority
approval of cable system transfers or assignments, local franchise
authorities may require cable operators to obtain their approval,
regardless of whether the franchise agreement so requires. The
Commission rejects a suggestion that certifications of compliance with
the anti-trafficking rules should be filed with the Commission rather
than the local franchise authority. The Commission affirms its prior
determination to vest primary responsibility for enforcement of the
statutory anti-trafficking provision with local authorities and
reiterates that cable operators are obligated to submit anti-
trafficking certifications to the local franchise authorities for all
proposed transfers, assignments or sales of cable systems. The
Commission also clarifies that if local franchise authority approval of
an assignment or transfer of a cable system is not required and the
system has been held for three or more years, the cable operator is not
required to use FCC Form 394 solely for purposes of submission of the
anti-trafficking certification. Rather, in that circumstance, the cable
operator may submit its certification of compliance with the anti-
trafficking provision as a separate document.
22. The Commission also clarifies that the three-year holding
period does not commence anew when the transaction involves the
transfer of a cable system that qualifies for one of the three
exemptions. The Commission believes that no sound basis exists to
require a new three-year holding period to begin after every pro forma
transfer because a pro forma transfer is, by its terms, not a
substantial change of control and such transactions do not raise the
specter of speculation or exploitation of short-term ownership that
concerned Congress when it adopted the anti-trafficking provision.
Moreover, imposing a new holding period every time pro forma
restructuring occurs would impose unnecessary burdens on the cable
industry without providing any commensurate benefits. The Commission
believes that unnecessarily costly and burdensome obligations would be
imposed on those persons who acquire cable systems through involuntary
transfer procedures if it were to require them to hold those systems
for three years, or to obtain waivers of the statutory three-year
holding period in order to sell those systems. With respect to tax
exempt transactions, the Commission believes that applying the
exemption to systems acquired pursuant to a tax exempt
[[Page 37834]]
transaction is consistent with Congress' intent regarding treatment of
such transactions and notes that it sees no compelling basis to insist
that such transactions be treated differently than pro forma and
involuntary transfer transactions.
23. The Commission declines to reconsider its decision to provide
favorable treatment to MSO waiver requests, but clarifies two aspects
of the MSO transfer rules. Section 617(b) of the Communications Act
provides that in the case of MSO transfers, if the terms of the sale
require the buyer to subsequently transfer ownership of one or more
such systems to one or more third parties, such transfers shall be
considered a part of the initial transaction. The implementing rules
specify that in order to qualify as part of the initial transaction, a
request for approval of the subsequent transfer must be filed with the
local franchise authority within ninety days of the closing date of the
original transfer and the closing date of the subsequent transfer must
be no later than ninety days following the grant of the transfer
approval by the local franchise authority. If local franchise approval
is not required, the rules specify that the subsequent transfer must be
completed within 180 days of the date of the closing of the original
transaction in order to qualify as part of the original transaction.
The rules do not address the situation where the subsequent transfer
involves multiple systems with differing franchise approval
requirements. The Commission thus concludes that where a subsequent
transfer involves both systems that require franchise approval and
systems that do not, the original transferee must complete the
subsequent transfers of all affected systems within 90 days of the date
the last system involved receives franchise authority approval of the
transfer.
24. The Commission also clarifies that the three-year holding
period does not begin anew when the system extends lines into existing
or new communities, or when the system integrates previously separate
communities through line extension. The Commission believes this
clarification renders the rules neutral as to system upgrades, and
permits expansion and deployment of new technologies without
potentially adverse regulatory consequences.
25. The Commission declines to revise its blanket waiver of the
three-year holding requirement for small systems at this time,
concluding that the decision in the FR&O that weighed and assessed
costs and benefits was precisely the type of consideration of the
public interest required under the Commission's waiver authority under
the Communications Act.
26. Finally, the Commission notes that its experience to date with
requests for waiver of the anti-trafficking rules has demonstrated that
systems owned less than three years are not being transferred or
assigned purely for purposes of quick economic gain. Rather, those
waiver requests have been premised upon proposed transfers involving
bankruptcy, systems barely over the subscriber limit established for
the small system blanket waiver, a system with no change in de facto
control and systems qualifying for treatment under our MSO transfer
rules. The Commission believes that it is appropriate, after one year
of strictly scrutinizing waiver requests, to revise its approach to
waiver requests. Thus, the Commission announces that it generally will
look favorably on waiver requests unless the transaction raises serious
concerns on its face or any objections we receive to grant of the
waiver provide other public interest bases for concern.
27. Accordingly, the Commission: (1) denies in part and grants in
part the petitions for reconsideration of the FR&O filed by Wireless
Cable Association International, Inc. (``WCA''), Multivision Cable TV
Corp. and Providence Journal Company (``Multivision''), Time Warner
Entertainment Company, L.P. (``Time Warner''), National Association of
Telecommunications Officers and Advisors, the National League of
Cities, the United States Conference of Mayors, and the National
Association of Counties (collectively referred to as ``NATOA''),
Oklahoma Western Telephone Company (``Oklahoma Western''), National
Private Cable Association, MSE Cable Systems, Cable Plus and
Metropolitan Satellite (collectively referred to as ``NPCA''); (2)
adopts the MO&O; and (3) amends Section 76.501 and 76.502 of its rules.
List of Subjects in 47 CFR Part 76
Cable television.
Federal Communications Commission.
William F. Caton,
Acting Secretary.
47 CFR, Part 76, is amended as follows:
PART 76--CABLE TELEVISION SERVICE
1. The authority citation for part 76 continues to read as follows:
Authority: 47 U.S.C. Secs. 152, 153, 154, 301, 303, 307, 308,
309, 532, 535, 542, 543, 552, 554.
2. Section 76.501 is amended by revising paragraphs (d) and (e);
adding paragraph (f); transferring Notes 1 through 4 following
paragraph (b) to the end of the section and adding Note 5 to read as
follows:
Sec. 76.501 Cross-ownership.
* * * * *
(d) No cable operator shall offer satellite master antenna
television service (``SMATV''), as that service is defined in
Sec. 76.5(a)(2), separate and apart from any franchised cable service
in any portion of the franchise area served by that cable operator's
cable system, either directly or indirectly through an affiliate owned,
operated, controlled, or under common control with the cable operator.
(e) (1) A cable operator may directly or indirectly, through an
affiliate owned, operated, controlled by, or under common control with
the cable operator, offer SMATV service within its franchise area if
the cable operator's SMATV system was owned, operated, controlled by or
under common control with the cable operator as of October 5, 1992.
(2) A cable operator may directly or indirectly, through an
affiliate owned, operated, controlled by, or under common control with
the cable operator, offer service within its franchise area through
SMATV facilities, provided such service is offered in accordance with
the terms and conditions of a cable franchise agreement.
(f) The Commission will entertain requests to waive the
restrictions in paragraphs (d) and (e) of this section when necessary
to ensure that all significant portions of the franchise area are able
to obtain multichannel video service. Such waiver requests should be
filed in accordance with the special relief procedures set forth in
Sec. 76.7.
Note 1: * * *
* * * * *
Note 5: In applying the provisions of paragraphs (d) and (e) of
this section, control and an attributable ownership interest shall
be defined by reference to the definitions contained in Notes 1
through 4, provided however, that:
(a) The single majority shareholder provisions of Note 2(b) and
the limited partner insulation provisions of Note 2(g) shall not
apply; and
(b) The provisions of Note 2(a) regarding five (5) percent
interests shall include all voting or nonvoting stock or limited
partnership equity interests of five (5) percent or more.
[[Page 37835]]
3. Section 76.502 is revised to read as follows:
Sec. 76.502 Three-year holding requirement.
(a) Except as otherwise provided in this section, no cable operator
may sell, assign, or otherwise transfer controlling ownership of a
cable system within a three-year period following either the
acquisition or initial construction of such cable system by such cable
operator.
(b) For initially constructed cable systems, the three-year holding
period shall be measured from the date on which service is activated to
the system's first subscriber through the proposed effective date of
the closing of the transaction assigning or transferring control of the
cable system. The holding period for acquired systems shall be measured
from the effective date of the closing of the transaction in which
control of the cable system was acquired through the proposed effective
date of the closing of the transaction assigning or transferring
control of such cable system.
(c) A cable operator who seeks to assign or transfer control of a
cable system is required to certify to the local franchise authority
that the proposed assignment or transfer of control of such cable
system will not violate the three-year holding requirement. Such
certification shall be submitted to the franchise authority at the time
the cable operator submits a request for transfer approval to the local
franchise authority. If local transfer approval is not required by the
terms of the franchise agreement, certification of compliance with the
three-year holding requirement must be submitted to the franchise
authority no later than 30 days in advance of the proposed closing
dated of the transfer or assignment.
(1) Receipt by the local franchise authority of a certification
containing a description of the transaction and indicating that the
cable system has been owned for three or more years, or that the
transferor has obtained or is seeking a waiver from the Commission, or
that the transaction is otherwise exempt under this section, shall
create a presumption that the proposed assignment or transfer of the
cable system will comply with the three-year holding requirement.
(2) A franchise authority that questions the accuracy of a
certification filed pursuant to this section must notify the cable
operator within 30 days of the filing of such certification, or such
certification shall be deemed accepted, unless the cable operator has
failed to provide any additional information reasonable requested by
the franchise authority within 10 days of such request.
(d) If an assignment or transfer of control involves multiple
systems and the terms of the transaction require the buyer to
subsequently transfer or assign one or more such systems to one or more
third parties, such subsequent transfers shall be considered part of
the original transaction for purposes of measuring the three-year
holding period.
(1) In order to qualify as part of the original transaction, a
request for approval of the subsequent transfer must be filed with the
local franchise authority within 90 days of the closing date of the
original transfer and the closing date of the subsequent transfer must
be no later than 90 days following the grant of transfer approval by
the local franchise authority.
(2) If local transfer approval is not required by the terms of the
cable franchise agreement, then a subsequent transfer must be completed
within 180 days of the date of the closing of the original transaction
in order to qualify as part of the original transaction.
(3) If a subsequent transfer involves transfers of multiple systems
to the same party, at least one of which requires local transfer
approval and at least one of which does not require local transfer
approval, the subsequent transfer must then be closed within 90 days of
the date the last system involved in the subsequent transfer receives
franchise authority approval of the transfer.
(e) Paragraph (a) of this section shall not apply to:
(1) Any assignment or transfer of control of a cable system that is
not subject to Federal income tax liability under the Federal Income
Tax Code;
(2) Any assignment or transfer of control of a cable system
required by operation of law or by any act, order or decree of any
Federal agency, any State or political subdivision thereof or any
franchising authority;
(3) Any assignment or transfer of control to one or more
purchasers, assignees or transferees controlled by, controlling, or
under common control with, the seller, assignor or transferor.
(f) Paragraph (a) of this section shall not apply to any assignment
or transfer of a cable system subject to paragraph (e) of this section.
(g) The Commission will consider requests for waivers from the
three-year holding requirement and, consistent with the public
interest, will grant waivers in appropriate cases of default,
foreclosure and financial distress. Waiver requests under this section
should be filed in accordance with the special relief procedures set
forth in Sec. 76.7. Waivers granted by the Commission will not become
effective, however, unless local franchise authority approval of a
transfer is obtained when such approval is required by the terms of the
franchise agreement or state or local law.
(1) The Commission will look favorably upon waiver requests
involving multiple system operators or transfers of multiple systems if
at least two-thirds of the subscribers of the system being transferred
are served by systems owned by the cable operator for three-years or
more.
(2) Conditioned upon receipt of local franchise authority transfer
approval, where such approval is required by the terms of the franchise
agreement or applicable state or local law, transfers of cable systems
serving 1,000 or fewer subscribers shall be subject to a blanket
Commission waiver.
(h) A cable operator may seek Commission review of a franchise
authority's decision regarding the application of the three-year
holding period to a particular transaction pursuant to the special
relief procedures set forth in Sec. 76.7.
(i) A cable system operator seeking to assign or transfer a cable
system it has held for three or more years must submit a completed copy
of FCC Form 394 to the local franchise authority if franchise authority
approval of the transfer is required by the terms of the franchise
agreement.
(1) A franchise authority shall have 120 days from the date of
submission of a completed FCC Form 394, together with all exhibits, and
any additional information required by the terms of the franchise
agreement or applicable state or local law to act upon such transfer
request.
(2) If the franchise authority fails to act upon such transfer
request within 120 days, such request shall be deemed granted unless
the franchise authority and the requesting party otherwise agree to an
extension of time.
[FR Doc. 95-17508 Filed 7-21-95; 8:45 am]
BILLING CODE 6712-01-M
