The Honorable William E. Kennard
Federal Communications Commission
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 To that end, Congress repealed a decade-old statutory ban on telephone-cable crossownership in the belief that "[t]elephone company competition with the entrenched cable operators would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.
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.
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).
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)