FCC Grants NCTA Petition for Forbearance to Allow Cable Companies to Acquire CLECs

September 17, 2012. The Federal Communications Commission (FCC) released an order [26 pages in PDF] that grants the National Cable & Telecommunications Association's (NCTA) petition for forbearance from the statutory ban on cable companies acquiring competitive local exchange carriers (CLECs) in the same markets.

The order concludes that "section 652(b) unambiguously prohibits a cable operator from acquiring any LEC providing telephone exchange service within the cable operator’s franchise area ...". However, the order also concludes that the "NCTA has demonstrated that the statutory criteria for forbearance are satisfied and justify granting, in part, its Petition for Forbearance. Specifically, we forbear from applying section 652(b) to acquisitions of competitive LECs."

FCC Commissioner Robert McDowell wrote in his statement that "this forbearance order promotes good public policy because it should spur competition in the telecommunications marketplace".

Section 652 of the Communications Act, which is codified at 47 U.S.C. § 572, provides in relevant part that "No cable operator or affiliate of a cable operator ... may purchase or otherwise acquire, directly or indirectly, more than a 10 percent financial interest, or any management interest, in any local exchange carrier providing telephone exchange service within such cable operator’s franchise area."

Section 10 of the Communications Act, which is codified at 47 U.S.C. § 160, provides in part that "the Commission shall forbear from applying any regulation or any provision of this chapter to a telecommunications carrier or telecommunications service, or class of telecommunications carriers or telecommunications services, in any or some of its or their geographic markets, if the Commission determines that -- (1) enforcement of such regulation or provision is not necessary to ensure that the charges, practices, classifications, or regulations by, for, or in connection with that telecommunications carrier or telecommunications service are just and reasonable and are not unjustly or unreasonably discriminatory; (2) enforcement of such regulation or provision is not necessary for the protection of consumers; and (3) forbearance from applying such provision or regulation is consistent with the public interest."

FCC Commissioner Ajit Pai wrote in his statement that "Today we take a modest but important step towards eliminating regulatory barriers to infrastructure investment. As I noted in Pittsburgh this past July, section 652 of the Communications Act places an unnecessary hurdle to transactions between cable operators and competitive local exchange carriers. When a cable operator purchases a competitive LEC, local competition is likely to increase and more infrastructure is likely to be deployed to serve the enterprise market. Congress entrusted the Commission with forbearance authority to eliminate counterproductive regulatory schemes just like this one, and I am glad we are exercising our authority today to do just that. The end result of our deregulatory action will be more robust, facilities-based competition."

Commissioner McDowell added that the "should undertake more forbearance actions on its own accord rather than waiting for outside parties to file costly petition".

Michael Powell, head of the NCTA, commended the FCC in a release "for removing outdated obstacles that have historically deterred pro-competitive transactions between cable operators and competitive local phone companies. 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."

Matthew Polka, head of the American Cable Association (ACA), stated in a release that the "ACA is pleased with today's FCC decision sought by the National Cable & Telecommunications Association because Section 652 acted to inhibit transactions between cable operators and CLECs -- transactions which have the potential to bring substantial benefits to consumers and further the public interest, including in smaller markets served by smaller providers."

The FCC adopted this order on September 12, but did not release it until September 17. It is FCC 12-111 in WC Docket No. 11-118.