Cablevision's Bid Raises Ownership Problem

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Cablevision Systems Corp. affiliate DTV Norwich LLC agreed to pay $24.2 million for the New York City wireless-video and data license in a Federal Communications Commission auction that closed Tuesday.

But there is hitch: FCC rules might prohibit Cablevision from holding the license.

Under FCC auction rules, cable companies were barred from acquiring multichannel-video-distribution and data service (MVDDS) licenses that have coverage areas that substantially overlap their cable-system footprints. Cablevision is the dominant cable company in the New York market, with 2.9 million subscribers.

FCC officials plan to review DTV Norwich's ownership structure to determine whether a cross-ownership problem exists. Cablevision owns 49% of DTV Norwich. If that investment is considered noncontrolling, there might not be a cross-ownership violation, an FCC source said.

DTV Norwich was the auction's big winner, collecting 46 licenses for $84.6 million. The $24.2 million bid for New York was the highest the commission received for one license, followed by Los Angeles, also won by DTV Norwich, at $15 million.

The FCC raised $118.7 million from the auction for the U.S. Treasury.

In a client memo Thursday, Jessica Reif Cohen of Merrill Lynch & Co. said she expected Cablevision to resolve the New York ownership issue by going forward with the announced spinoff of its Voom direct-broadcast satellite unit.

"Licensing rules prevent cable operators, or entities with an attributable interest in cable operations, to have an interest in an MVDDS license covering the same geographic area. We interpret Voom's bid for New York City spectrum as another sign of CVC's commitment to the DBS spinoff," Reif Cohen said.

Voom spokeswoman Bo Park said the company declined to comment on the MVDDS auction.

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