Cablevision Systems Corporation; Analysis To Aid Public Comment

FEDERAL TRADE COMMISSION

[File No. 971-0095]

Cablevision Systems Corporation; Analysis To Aid Public Comment

AGENCY: Federal Trade Commission.

ACTION: Proposed consent agreement.

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SUMMARY: The consent agreement in this matter settles alleged

violations of federal law prohibiting unfair or deceptive acts or

practices or unfair methods of competition. The attached Analysis to

Aid Public Comment describes both the allegations in the draft

complaint that accompanies the consent agreement and the terms of the

consent order--embodied in the consent agreement--that would settle

these allegations.

DATES: Comments must be received on or before April 6, 1998.

ADDRESSES: Comments should be directed to: FTC/Office of the Secretary,

Room 159, 6th St. and Pa. Ave., NW., Washington, DC 20580.

FOR FURTHER INFORMATION CONTACT:

William Baer or Phillip Broyles, FTC/H-374, Washington, DC 20580. (202)

326-2932 or 326-2805.

SUPPLEMENTARY INFORMATION: Pursuant to Section 6(f) of the Federal

Trade Commission Act, 38 Stat. 721, 15 U.S.C. 46 and Section 2.34 of

the Commission's Rules of Practice (16 CFR 2.34), notice is hereby

given that the above-captioned consent agreement containing a consent

order to cease and desist, having been filed with and accepted, subject

to final approval, by the Commission, has been placed on the public

record for a period of sixty (60) days. The following Analysis to Aid

Public Comment describes the terms of the consent agreement, and the

allegations in the complaint. An electronic copy of the full text of

the consent agreement package can be obtained from the FTC Home Page

(for January 16, 1998), on the World Wide Web, at ``http://www.ftc.gov/

os/actions/htm.'' A paper copy can be obtained from the FTC Public

Reference Room, Room H-130, Sixth Street and Pennsylvania Avenue, NW.,

Washington, DC 20580, either in person or by calling (202) 326-3627.

Public comment is invited. Such comments or views will be considered by

the Commission and will be available for inspection and copying at its

principal office in accordance with Section 4.9(b)(6)(ii) of the

Commission's Rules of Practice (16 CFR 4.9(b)(6)(ii)).

Analysis To Aid Public Comment on the Provisionally Accepted Consent

Order

I. Introduction

The Federal Trade Commission (``Commission'') has accepted for

public comment from Cablevision Systems Corp. (``CVS'') an Agreement

Containing Consent Order (``Agreement'' or ``Proposed Consent Order'').

The Proposed Consent Order is designed to remedy likely anticompetitive

effects arising from CVS's proposed acquisition of certain cable

television systems presently owned and operated by Tele-Communications,

Inc. (``TCI'') in two relevant markets. This Agreement has been placed

on the public record for sixty (60) days for receipt of comments from

interested persons.

II. Description of the Parties and the Acquisition

CVS is the nation's sixth largest provider of cable television

services to approximately 2.9 million subscribers in 16 states. Through

its majority ownership of Rainbow Media Holdings, Inc., CVS also owns

interests in and manages a number of cable television programming

networks. TCI is the nation's largest provider of cable television

services, with over a 27% share of all U.S. cable television

households. Through its Liberty Media Corp. subsidiary, TCI also owns

an interest in a large number of cable programming networks.

On June 6, 1997, CVS and TCI entered an agreement (the

``acquisition'') whereby TCI will contribute to CVS cable television

systems in New Jersey and New York serving approximately 820,000

subscribers. TCI will receive CVS voting securities valued at

approximately $423 million.

III. The Complaint

The draft complaint accompanying the Proposed Consent Order alleges

that the acquisition would substantially lessen competition in

violation of Section 7 of the Clayton Act, as amended, 15 U.S.C.

Sec. 18, and Section 5 of the FTC Act, as amended, 15 U.S.C. Sec. 45.

According to the draft complaint, the relevant line of commerce

(i.e., product market) is the distribution of multi-channel video

programming by cable television. The distribution of multi-channel

video programming by technologies other than cable television (e.g.,

Direct Broadcast Satellite (``DBS'') or Multichannel Multipoint

Distribution Systems (``MMDS'')) is not included in the relevant

product market because they do not have a significant price-

constraining effect on the prices charged by cable operators to

subscribers. Most cable television subscribers are not likely to switch

to another technology (e.g., DBS or MMDS) in response to a small price

increase by cable television providers. In addition, cable television

operators do not typically change their prices in response to prices

charged by other providers of multi-channel video programming.

According to the draft complaint, the relevant sections of the

country (i.e., the

[[Page 5546]]

geographic markets) in which to analyze the acquisition by CVS of

certain TCI cable television systems are the boroughs of Paramus and

Hillsdale, New Jersey. As alleged in the draft complaint, these markets

are highly concentrated, with only CVS and TCI providing cable

television service in Paramus and Hillsdale. The acquisition would

significantly increase concentration in Paramus and Hillsdale, with

only CVS left to provide cable television service.

According to the draft complaint, entry into the distribution of

multi-channel video programming by cable television is unlikely to be

timely or effective to prevent anticompetitive effects in the relevant

geographic markets.

CVS's acquisition of the TCI cable systems may substantially reduce

competition in the relevant geographic markets by eliminating actual

competition between CVS and TCI to serve existing neighborhoods,

hotels, and apartment complexes, by eliminating actual competition

between CVS and TCI to serve new residential homes, neighborhoods,

hotels, and apartment complexes, and by eliminating actual and

potential competition between CVS and TCI to extend their cable systems

throughout the relevant geographic area. Each of these effects

increases the likelihood that the price of cable television services

will increase, or the quality of that service will decrease in the

relevant sections of the country.

IV. Terms of the Proposed Consent Order

The Proposed Consent Order attempts to remedy the Commission's

competitive concerns about the acquisition. Under the terms of the

Proposed Consent Order, CVS must divest TCI's cable systems in Paramus

and Hillsdale, New Jersey, to a buyer or buyers approved by the

Commission. CVS must have a buyer approved by the Commission within six

(6) months after the date it signs the Agreement Containing Consent

Order. CVS is not required to complete the divestiture within this six-

month time period because municipal approvals can take in excess of

ninety (90) days. If CVS obtains the Commission's approval and files

all necessary applications for other governmental approvals (e.g.,

municipal approvals for franchise transfers) within this six-month

period, the divestiture period is extended by a period of time equal to

the number of days such other governmental body takes to approve or

disapprove the necessary applications.

If CVS has not obtained the Commission's approval for an acquirer

within the mandated six-month divestiture period, the Commission may

appoint a trustee to divest TCI's Paramus and Hillsdale cable systems.

To insure that the trustee can divest the assets, the Commission is

requiring that CVS begin constructing a headend with the necessary

technological capabilities to serve the Paramus and Hillsdale cable

systems if CVS has not obtained the Commission's approval of an

acquirer within the six-month divestiture period.

For a period of ten years from the date that the Proposed Consent

Order becomes final, CVS, with certain exceptions set forth in the

Proposed Consent Order, may not acquire any stock or related assets of

any entity engaged in providing cable television services in Paramus or

Hillsdale without giving the Commission prior notice.

V. Opportunity for Public Comment

The Proposed Consent Order has been placed on the public record for

sixty (60) days for receipt of comments by interested persons. Comments

received during this period will be come part of the public record.

After sixty (60) days, the Commission will again review the Agreement

and the comments received and will decide whether it should withdraw

from the Agreement or make final the Proposed Consent Order.

By accepting the Proposed Consent Order subject to final approval,

the Commission anticipates that the competitive problems alleged in the

complaint will be resolved. The purpose of this analysis is to invite

public comment on the Proposed Consent Order, in order to aid the

Commission in its determination of whether it should make final the

Proposed Consent Order contained in the Agreement. This analysis is not

intended to constitute an official interpretation of the Agreement and

Proposed Consent Order, nor is it intended to modify the terms of the

Proposed Consent Order in any way.

Donald S. Clark,

Secretary.

[FR Doc. 98-2573 Filed 2-2-98; 8:45 am]

BILLING CODE 6750-01-M