Section 652 and Cable-CLEC Mergers

On June 21, 2011, the National Cable and Telecommunications Association filed a petition of regulatory forbearance with the Federal Communications Commission regarding Section 652 of the Communications Act. The petition requests the FCC not block mergers between competitive local exchange carriers and cable companies.

If granted, the petition would allow cable companies to buy failing local phone companies in competitive markets. Imposed 16 years ago in a very different and much less competitive marketplace, Section 652 allows the FCC to deny these mergers, granting an exception only when the commission is given both formal evidence that consumer benefits outweigh "anticompetitive effects" and that the local franchising authority has given approval. LFAs, often with no defined process for merger review, are along these lines allowed veto power.

The petition claim large cable companies

Opponents of the petition claim large cable companies would gain too much market power in rural locations with limited options. Proponents say this argument is flawed for three reasons. First, the market for telephony has grown beyond the traditional wireline carriers. AT&T must now compete with voice over Internet Protocol providers just as Skype and Vonage, mobile carriers like Verizon, and cable companies providing new access to landline services. Second, the proposed changes would allow cable firms to buy only telephone companies located in already-competitive markets, not ones with limited options. Third, antitrust concerns are already handled by several other executive agencies.

This blog post at NetCompetition concisely argues in favor of rule clarification and regulatory forbearance on Section 652, calling the current regulatory environment "anachronistic."

The American Consumer Institute

Writing for the American Consumer Institute, Zack Christenson uses the Microsoft antitrust case for instance the government's inability to understand the future evolution of research firms. "Without a foot in the door, large carriers and cable providers don't invest in the small markets served by these CLECs and a burdensome regulation meant to protect consumers becomes the single biggest obstacle to improving consumer outcomes," he writes.

This brief filed with the FCC by the National Cable and Telecommunications Association argues the FCC should clarify that Section 652 does not apply to cable-CLEC mergers or, at the very least, limit the power of local franchising authorities to stop or slow the mergers.