The Federal Communications Commission (FCC) has waived certain restriction preventing domestic cable operators from acquiring local exchange carriers (LECs), admitting that such mergers could lead to the introduction of stronger competition to large telecoms carriers. On Monday the US watchdog approved a request by trade group the National Cable & Telecommunications Association (NCTA) to relax rules dating back to the Telecommunications Act of 1996 that prohibited cable firms from acquiring more than a 10% stake in any LEC within the cable firm’s franchise area.
With the Telecommunications Act of 1996, Congress sought to encourage facilities-based competition by facilitating the competitive entry of LECs and cable operators into each other’s markets. While the Act allowed cable operators to construct telecoms networks and allows LECs to construct cable systems, section 652 of the Act prohibited buyouts and certain other transactions between cable operators and LECs, subject to certain exceptions. The FCC previously noted that this ‘overall statutory scheme contemplates vigorous competition between LECs and cable operators, with appropriate safeguards to avoid elimination of potential sources of competition’.
However, in this week’s ruling the FCC notes: ‘Moreover, the Commission has recognised that mergers among non-dominant providers in a specific market are unlikely to raise competitive concerns. The loss of one competitor from the market [the acquisition of a competitive LEC] is unlikely to materially decrease the amount of bottleneck facilities in the market. Such transactions often pose little risk of competitive harm and in fact increase competition with entrenched incumbent providers, and thus would likely put downward pressure on the rates offered by incumbents’.
FCC chairman Julius Genachowski commented: ‘Today’s order reflects our commitments to streamline processes and promote competition. By bringing the review of cable-CLEC transactions in line with that of other similar transactions, while maintaining our own review and an important role for local authorities, we ensure that transactions that promote competition and expand broadband service deliver benefits to consumers more quickly’.