Cable Television

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