The Honorable William E. Kennard
Chairman
Federal Communications Commission
Room 814
1919 M Street, N.W.
Washington, D.C. 20554
Re: US West, Inc. and Continental Cablevision, Inc., Request for
Further Extension of Special Relief, File No. CSR-4788-X
Dear Chairman Kennard:
I am writing to offer the views of the National Telecommunications and
Information Administration (NTIA) on the above-captioned petition filed
by US West, Inc. (US West) on November 14, 1997. The company seeks a waiver
until July 31, 1998 of section 76.505(a) of the Commission's rules, which
generally bars a local exchange carrier such as US West from acquiring
a cable television system located within the carrier's telephone service
area.(1) Grant of the petition would extend
a "temporary" waiver of the "antibuyout" restriction issued in October
1996, in connection with US West's acquisition of Continental Cablevision.(2)
It would allow US West to retain ownership of cable systems in and around
St. Paul, Minnesota until such time as US West can transfer all of its
existing cable properties to a new and independent entity.(3)
In NTIA's view, the requested relief promises no public benefits that could
justify continued suspension of the antibuyout restriction, and the procompetitive
goals it was intended to promote. NTIA therefore recommends that the Commission
deny the petition.(4)
As you well know, the fundamental purpose of the Telecommunications
Act of 1996 was to promote competition in all telecommunications markets.(5)
Congress recognized, moreover, that it could advance that goal by encouraging
competition between telephone companies and cable systems serving the same
communities. To that end, Congress repealed a decade-old statutory ban
on telephone-cable crossownership in the belief that "[t]elephone company
competition with the entrenched cable operators would enable consumers
to benefit from lower rates, better quality service, improved maintenance,
and a larger diversity of new information services."(6)
Congress also understood, however, that telephone companies and cable companies
might have strong incentives to combine, rather than to combat, thereby
eliminating competition before it could arise. It therefore not only adopted
the antibuyout provision, but also incorporated within it "the most restrictive
provisions of the Senate bill and the House amendment in order to maximize
competition between local exchange carriers and cable operators within
local markets."(7) The antibuyout restriction
thus reflects Congress' judgment, which the Administration wholeheartedly
supports, that cable/telephone company mergers are in most cases contrary
to the public interest.(8)
In October 1996, the Chief of the Commission's Cable Services Bureau
determined that nothing in the Communications Act or the Commission's rules
barred the issuance of a temporary waiver of the antibuyout restriction,
so that US West could rid itself of in-region cable systems acquired from
Continental. The Chief concluded that suspending the restriction for "a
brief period"(9) was preferable to the probable
alternatives: (1) delaying completion of the US West-Continental merger
until the in-region systems could be sold; (2) terminating service to communities
served by the in-region cable systems until an alternative buyer could
be found; or (3) precipitating a "fire sale" of those systems.(10)
The considerations that may have warranted a temporary waiver of the
antibuyout restrict fifteen months ago do not justify an extension of that
waiver now. The US West-Continental merger has been completed. Indeed,
not only has US West had time to absorb the Continental systems, it has
had time to conclude that it should disgorge them. Further, denying the
instant petition will not mean either shutting down the Minnesota systems
or their hasty sale to a new buyer. It appears that, after a concerted
effort, US West has identified a firm that stands ready to acquire (and
to operate) those systems at a price that, until a few months ago, was
acceptable to US West.
US West seeks an extension of the temporary waiver because it has found
another potential operator that better suits its corporate interests. The
question presented by US West's petition is simple: Having given US West
ample time to find a buyer for the Minnesota systems, a buyer that US West
once found to be suitable, should the Commission give the company additional
time to effect a transfer that serves US West's private interests? NTIA
believes that the answer should be no. The petition virtually ignores the
public interest expressed in the antibuyout restriction, and focuses instead
on US West's private interests.(11) We
therefore respectfully request that the Commission deny US West's petition
and to establish a date certain (well in advance of July 1998) by which
time US West must terminate its ownership of the Minnesota systems.(12)
Thank you for your consideration of these views.
Sincerely,
Larry Irving
cc: Commissioner Susan Ness
Commissioner Harold Furchgott-Roth
Commissioner Michael Powell
Commissioner Gloria Tristani
1. 47 C.F.R. § 76.505(a) (1996). Section 76.505 is taken verbatim from section 652 of the Telecommunications Act of 1996. 47 U.S.C. § 652. Both the statute and the Commission's rules permit exceptions from the general restriction under specified conditions, none of which apply here. See 47 C.F.R. § 76.505(d)(1), (3)-(5). The rules also authorize the Commission to grant permanent waivers of the restriction in certain situations. See id. § 76.505(d)(6). US West has not requested such a waiver.
2. US West, Inc. and Continental Cablevision, Inc., 11 FCC Rcd 13260 (1996).
3. See "US West, Inc. Files Request for Further Extension of Special Relief, DA 97-2452 (Cable Svcs. Bur. rel. Nov. 21, 1997).
4. Lurking beneath the instant petition is a dispute between US West and CCTC Holdings, Inc. (Charter) over US West's efforts to terminate a contract to sell the Minnesota systems to Charter. NTIA takes no position on the merits of that dispute, nor on the question of which disposition of those systems would best serve subscribers. We note, however, that US West's plan to spin off its telephone and cable operations into two independent, publicly traded companies is subject to a number of uncertainties. It cannot be assumed, therefore, that the transaction will be complete by the July 31, 1998.
5. H. Conf. Rep. No. 104-458, 104th Cong., 2d Sess. 113 (1996), reprinted in 1996 U.S.C.C.A.N. 124. See also Letter from Lawrence R. Fullerton, U.S. Dep't of Justice, and Larry Irving, NTIA, to Chairman Reed E. Hundt 3-4 (Aug. 19, 1997) (filed in connection with Roseville Cable Co., Request for Waiver of Section 652(a) of the Telecommunications Act of 1996, Filed No. CSR-4869-B) (DOJ/NTIA Letter).
6. H. Rep. No. 104-204, 104th Cong., 1st Sess. 53 (1995), reprinted in 1996 U.S.C.C.A.N. 56.
7. Conference Report, supra note 5, at 174, 1996 U.S.C.C.A.N. at 187.
8. See DOJ/NTIA Letter, supra note 5.
9. US West, Inc. and Continental Cablevision, Inc., 11 FCC Rcd at 13271, ¶ 24.
10. Id. at 13273-13276, ¶¶ 29-34.
11. Although US West's contends that consumers would be better served because the Minnesota system would remain under the management and operation of the former Continental management, we believe that the uncertainties of the transfer outweigh any potential public benefit. See Request for Further Extension of Special Relief at 8, File No. CSR-4799-X (filed November 14, 1997)
12. Reply Comments of North Suburban Cable Communications Commission and South Washington County Cable Communications Commission at 6-7, US West, Inc. and Continental Cablevision, Inc. Petition for Special Relief Re: Section 76.505(a) of the Commission's Rules, File No. CSR-4788-X (filed Dec. 19, 1997)