[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