§572 Prohibition on Buy Outs

Summary

Local phone companies and their affiliates may not buy more than a 10% financial stake or take any management control in a cable company that offers service inside the phone company’s service area. Likewise, cable companies and their affiliates may not buy more than a 10% stake or take management control of a local phone company in the cable company’s franchise area. A phone company and a cable company that serve the same market may not form a joint venture or partnership to sell video or phone services directly to customers. A phone company may, with the cable operator’s agreement on price and terms, use a limited part of the cable system that runs from the last shared terminal to a customer’s home for a short, reasonable time as the FCC allows. There are several exceptions. A carrier may control or partner with small rural systems that serve places with fewer than 35,000 people, are outside an urbanized area, and meet other small-coverage tests (including serving less than 10% of the phone carrier’s households). Other exceptions let a phone company deal with certain cable systems in competitive TV markets (with conditions tied to May 1, 1995 market rankings), allow some cable systems under size and market limits (rules tied to June 1, 1995), and let smaller carriers (under $100,000,000 annual revenue) work with cable systems of 20,000 or fewer subscribers if no more than 12,000 are in an urbanized area. The FCC can also waive these rules if strict enforcement would cause severe financial harm, make the system nonviable, or if public benefits clearly outweigh harms, but a local franchising authority must approve. “Telephone service area” means the area where the carrier provided service on January 1, 1993; if service facilities are transferred later, the area follows the buyer.