FCC OKs Cable/CLEC Purchases

Does not declare the rule void, but agrees not enforcing it is in the interests of competition, including for special access and consumers

By John Eggerton -- Broadcasting & Cable, 9/17/2012 1:32:07 PM

It's been a good last few days for the National Cable and Telecommunications Association. In the wake of the FCC's circulation Sept. 14 of a draft order sunsetting exclusive cable programming contracts of vertically integrated operators, the commission Monday said it would allow cable operators to buy competitive local exchange carriers. Both were changes NCTA had sought.

The FCC said allowing the mergers would "likely speed the entry of cable operators into the market for telecommunications services provided to business customers [the special access competition the FCC is trying to promote] and will foster increased facilities-based competition for these services."

So, while the literal language of the prohibition applied to competitive local exchange carriers, the FCC saw the prohibition as preventing more competition for the real target, which was "entrenched" with incumbents like AT&T and Verizon.

The FCC actually denied NCTA's petition on Monday for a declaratory ruling that FCC rules do not prohibit those mergers, saying it unambiguously does. But in the same breath, or at least the same order, the FCC concluded that NCTA had demonstrated that the FCC should forbear from enforcing that prohibition because 1) the rules allow a CLEC to buy a cable operator, so allowing the transaction from the other direction "harmonizes" the rules and because 2) cable/CLEC mergers, which are usually with the non-dominant carrier -- so no AT&T or Verizon, for example -- potentially serve many pro-competitive goals.

The FCC has suspended its deregulatory triggers for special access service as it decides whether and how to reregulate those rates. Monday's forbearance is meant to be another move to spur competition in special access -- business rather than residential -- telecom service.

"Our public interest determination derives [in part] from our determination that a merger between a competitive LEC and a cable operator frequently can result in significant public interest benefits, in part because the transaction will foster facilities-based competition in the enterprise market, a long-standing goal of the Commission," the FCC said.

The other part of its public interest determination was that "we commend the Commission for removing outdated obstacles that have historically deterred pro-competitive transactions between cable operators and competitive local phone companies," said NCTA president Michael Powell. "The cable industry provides millions of American businesses and consumers with competitive digital voice services and today's decision will help ensure that more Americans can benefit from the savings and convenience that cable offers."

To forbear from enforcing the prohibition, the FCC had to conclude that: "(1) enforcement of the regulation is not necessary to ensure that the telecommunications carrier's charges, practices, classifications, or regulations are just, reasonable, and not unjustly or unreasonably discriminatory; (2) enforcement of the regulation is not necessary to protect consumers; and (3) forbearance from applying such provision or regulation is consistent with the public interest."

The FCC also pointed out that such purchases are still subject to its transaction review process, which is a shield from potential harmful effects.