Washington -- Long-dormant cable-ownership rules could be
revived by the Federal Communications Commission in the weeks ahead, amid concerns that
the action may force Tele-Communications Inc. to alter some of its partnerships,
investments and joint ventures.
"[The commissioners] could take action on this any
day," an FCC source said.
The pending FCC action is also of particular concern to
Cablevision Systems Corp., which is one-third-owned by TCI.
Cablevision is worried that new FCC rules may restrict its
ability to buy additional cable systems because of its ownership ties to TCI, according to
documents filed with the FCC.
"That's why it's important for the
commission to act promptly, because we don't want to unduly impair the ability of
business to go ahead," an FCC source said.
Under FCC rules adopted in 1993, a cable operator may not
own systems that reach more than 30 percent of cable homes passed nationwide. The FCC
calls the cap a horizontal-integration limit.
The FCC also adopted cable-attribution rules, which define
ownership relationships so that cable operators will know whether their business
connections with one another bump into the 30 percent limit.
The 30 percent cap, authorized by the 1992 Cable Act, never
went into effect: The FCC froze it upon release after a federal district court held that
the cable law's imposition of a subscriber-reach limitation was unconstitutional. The
issue is pending before the U.S. Court of Appeals for the District of Columbia Circuit,
which has refused to advance the case until the FCC acts on petitions for reconsideration
of the 1993 rules.
FCC sources said the agency will get the ball rolling by
issuing two notices of proposed rulemaking.
The first will deal with the 30 percent cap, seeking
comment on whether it should be modified and on whether the stay should be lifted.
The second will ask whether the attribution rules need to
be changed -- in part to address the issue of whether TCI, which is downsizing from 14
million subscribers to under 10 million, has actually increased its influence by taking
ownership stakes in other cable operators and by forming joint ventures and partnerships.
FCC sources said TCI went to the FCC asking for
clarification of the rules when it was well into its restructuring.
"TCI asked us to straighten this out and to bring
clarification to these deals," an FCC source said.
The rules, for example, say that voting-stock interests
above 5 percent are attributable, as are common officers and directors.
In that context, TCI has an 8.9 percent voting stock in
Cablevision, and both TCI chairman and CEO John Malone and president and chief operating
officer Leo J. Hindery Jr. serve on Cablevision's board.
"You can't have common officers and
directors," an FCC source said. "Assuming that TCI is restricted by the 30
percent limit, [Cablevision] couldn't acquire another system anyplace."
Cablevision has made the point to the FCC that TCI's
minority interest could be viewed as nonattributable because of the controlling interest
of the Dolan family. FCC rules recognize a single-majority-shareholder exception, which
means that minority interests would not be attributable, but it is not clear whether the
Dolan-family interests meet the definition of a single majority shareholder.
"[Cablevision's] people are not, as far as I am
aware, arguing that this is not an attributable interest," an FCC source said.
FCC sources said revival of the horizontal cap -- in
conjunction with the attribution rules, as currently written -- could complicate life for
TCI and Cablevision.
"Some of the outside parties that have calculated this
said that if you took TCI and all of these deals, they were at 36 percent," an FCC
The source added that the agency has not independently
confirmed that TCI is above 30 percent.
"TCI went though all of these deals last year,"
another FCC source said, "and they knew as they were making these deals that two
things were not really pinned down in our cable rules."