Cable companies will be allowed to acquire local phone companies, thanks to a Federal Communications Commission order released on Monday. Such deals are prohibited under a strict reading of the Telecommunications Act of 1996, although cable and telephone companies were permitted to enter into joint ventures, and under certain conditions, phone companies are permitted to acquire cable systems.
The order, technically a "limited forbearance," announces that the FCC will not apply the letter of the law, in an effort to "harmonize" the rules for both cable and telephone companies. In the order, the FCC pointed out that the "competitive effect of [such] mergers ... will be similar, irrespective of which of the merging parties initiates the purchase of the other."
Republicans on the FCC have been pushing for this deregulation move. Commissioner Robert McDowell said in a statement that the order "is consistent with my call for FCC policies that promote consumer choice offered through competition and abundance, rather than through regulation and its unintended consequences." Commissioner Ajit Pai called it a "modest but important step."
The National Cable and Telecommunications Association, which sought a reinterpretation of the legal language, argued that the legislative intent was to prevent a single company from having a local monopoly on pay TV and telephone. The order preserves the "two wires to the home," because it only applies to transactions between small, competitive phone carriers which typically lease access to telecommunications infrastructure from dominant, legacy carriers. The NCTA had sought a "declaratory ruling" on the issue, which was denied, and a petition for forbearance, which was granted.
Not surprisingly, the NCTA hailed the ruling. CEO and President Michael Powell said in a statement, "We commend the Commission for removing outdated obstacles that have historically deterred pro-competitive transactions between cable operators and competitive local phone companies."
American Cable Association President and CEO Matthew Polka said that mergers between cable companies and local carriers "have the potential to bring substantial benefits to consumers and further the public interest, including in smaller markets served by smaller providers."
FCC Chairman Julius Genachowski issued a terse, one-paragraph note on the order. The other two Democrats on the commission did not offer statements.