August 22, 2011

ACA To FCC: Let Cablecos, CLECs Merge If They Want To

In its prolific efforts to assist small cable operators, the American Cable Association (ACA) has identified a way for providers to join forces with competitive local exchange carriers (CLECs) to compete against incumbent telephone companies and to gain more business accounts.

In comments filed today with the Federal Communications Commission (FCC), the ACA supports two petitions filed by the National Cable & Telecommunications Association that ask the agency to prevent or limit application of Sec. 652 to mergers and acquisitions between CLECs and cable operators. Added by the Telecommunications Act of 1996, Sec. 652 is designed to prohibit mergers between cable and incumbent telephone companies in the same local market. The FCC may grant waivers with the approval of local franchising authorities (LFAs) that oversee cable system operations.

"By and large, cable operators typically focus on serving residential customers, whereas CLECs traditionally focus on providing telecom services to business customers," says ACA President and CEO Matthew Polka. “Because of these complementary capabilities, both of which compete against incumbent telephone companies, cable company/CLEC mergers would give a CLEC access to a cable operator’s facilities-based network and reduce the CLEC’s operational costs.”

He adds, “Cable companies, meanwhile, can benefit from access to the CLEC’s back-office infrastructure and established relationships with business customers. Overall, these deals are likely to increase competition with the incumbent telephone companies.”

The ACA's argument is that mergers between cablecos and CLECs promote competition, which lowers rates and enhances service quality. As such, the FCC should conclude that cable/CLEC combinations fall outside cross-ownership prohibitions found in Sec. 652.

In its comments, ACA explained that Sec. 652’s purpose was to ban local mergers between established cable and phone providers, and not to ban or restrict mergers between cable operators and newly formed local telecommunications carriers that entered the market to take advantage of market-entry provisions in the 1996 Telecom Act. ACA notes that cable/CLEC mergers will produce none of the anti-competitive harms addressed by Sec. 652 because cable providers typically service residential customers while CLECs offer telecommunications to the enterprise or business markets. Further, the FCC and antitrust agencies can address any competitive concerns in regular reviews.

-Linda Hardesty