**Before the Corrected**

**Federal Communications Commission**

**Washington, D.C. 20554**

In the Matter of )

)

)

Implementation of the Cable )

Television Consumer Protection ) CS Docket No. 98-82

and Competition Act of 1992 )

)

Implementation of Cable Act Reform Provisions ) CS Docket No. 96-85

of the Telecommunications Act of 1996 )

)

Review of the Commission's )

Cable Attribution Rules )

**REPORT AND ORDER**

**Adopted: October 8, 1999 Released: October 20, 1999**

By the Commission: Commissioner Furchtgott-Roth concurring in part,
dissenting in part and issuing a statement; Commissioner Tristani
approving in part, dissenting in part and issuing a statement.

**Table of Contents**

###  Paragraph {#paragraph .unnumbered}

I. Introduction 1

II\. Background 2

A. The Cable Attribution Rules 2

B. Questions Raised in the *Cable Attribution Notice* 7

C. Summary of the Decisions of this Order 11

III\. Report and Order 15

A. The General Attribution Standard 15

1\. Background 15

2\. Comments 16

a\. Industry Differences 17

b\. The Cable Operators' Control Proposal 22

3\. Discussion 33

B. Voting Equity Benchmark 40

1\. Comments 41

2\. Discussion 45

C. Passive Institutional Investor Benchmark 52

1\. Background 52

2\. Comments 53

3\. Discussion 55

a\. The Appropriate Passive Institutional Investor Benchmark 55

b\. Definition of Passive Institutional Investors 56

D. Partnership Interests 57

1\. Comments 57

2\. Discussion 61

E. Directors and Officers 65

1\. Comments 65

2\. Discussion 66

F. Limited Liability Companies 70

1\. Comments 70

2\. Discussion 71

G. Single Majority Shareholder Exemption and an Equity plus Debt Rule 74

1\. Background 74

2\. Comments 76

3\. Discussion 81

a\. Single Majority Shareholder Exemption 81

b\. Equity plus Debt Rule 82

H. Program Access Attribution Standard 93

1\. Background 93

2\. Comments 95

3\. Discussion 102

I. Cable Reform Issues 113

1\. Effective Competition 113

a\. Background 113

b\. Comments 119

c\. Discussion 126

i\. LEC Test 126

ii\. Competing Provider Test 131

2\. Cable-Telco Buy-Outs 134

a\. Background 134

b\. Comments 136

c\. Discussion 137

J. Transition Issues 138

IV\. Final Regulatory Flexibility Analysis 142

V. Paper Work Reduction Act 174

VI\. Ordering Clauses 176

Appendix A -- Rule Changes

Appendix B -- List of Commenters

Appendix C -- Cable Alliances and Partnerships

**I. Introduction**

1.  This *Report and Order* resolves the issues presented for comment in
    the *Notice of Proposed Rulemaking* ("*Cable Attribution Notice")*
    in this proceeding,[^1] as well as two related issues raised in the
    *Cable Reform Notice*.[^2] In the *Cable Attribution Notice*, we
    initiated a review of our cable attribution rules, which define what
    constitutes an "attributable" or "cognizable interest" that triggers
    application of various Commission rules relating to the provision of
    cable television services (the "substantive cable rules"). In this
    *Report and Order*, we adopt amendments that will more accurately
    identify interests that confer on their holders the ability to
    influence or control the operations of the held entity or create the
    type of economic incentives that the substantive cable rules are
    intended to address. In this regard, our amendments to the cable
    attribution rules mirror to a certain extent those amendments we
    recently made to the broadcast attribution rules; thus, our
    reasoning herein largely incorporates and reiterates the reasoning
    set forth in the *Broadcast Attribution Report and Order*. [^3]

# II. Background {#ii.-background .unnumbered}

**A. The Cable Attribution Rules**

2.  A variety of statutory provisions and Commission rules govern the
    conduct of cable television system operators or other entities in
    terms of both ownership interests that they may hold in other cable
    operators or competitive firms, or in terms of their conduct when
    they own, are owned by, or are owned in common with a "video
    programmer," a "satellite cable programming provider," or with other
    entities. For each of these statutory provisions or rules it is
    necessary to identify what types of ownership interests or other
    relationships are sufficient that two legally separate entities
    should be treated as if they were commonly owned or managed or
    subject to significant common influence. The rules define that level
    of interest that brings the substantive statutory provision or rule
    in play to be an "attributable interest." Thus, for example, the
    Communications Act, Section 613(f)(1)(A), instructs the Commission

to prescribe rules and regulations establishing reasonable limits on the
number of cable subscribers a person is authorized to reach through
cable systems owned by such person**, or** in which such person has **an
attributable interest**. . . .[^4]

Section 628(b) provides that:

It shall be unlawful for a cable operator, a satellite cable programming
vendor in which a cable operator has **an attributable interest**, or a
satellite broadcast programming vendor to engage in unfair methods of
competition or unfair or deceptive acts or practices, the purpose or
effect of which is to hinder significantly or to prevent any
multichannel video programming distributor from providing satellite
cable programming or satellite broadcast programming to subscribers or
consumers.[^5]

The attribution rules seek to identify those corporate, financial,
partnership, ownership and other business relationships that confer on
their holders a degree of ownership or other economic interest, or
influence or control over an entity engaged in the provision of
communications services such that the holders should be subject to the
Commission's regulation.

3.  Depending on the particular substantive rule and objective to be
    accomplished, a variety of different attribution standards are used
    in the Commission's rules. In the cable television area, there are,
    generally speaking, two strains of attribution rules: the "general
    attribution standard" and the so-called "program access attribution
    standard."[^6] The general standard is based on, but not identical
    to, the broadcast attribution rules.[^7] Under the general
    attribution standard, voting stock interests of 5% or more are
    attributable.[^8] For passive institutional investors, voting stock
    interests of 10% or more are attributable.[^9] Non-voting stock
    interests, options, warrants and debt are not attributable.[^10] The
    general attribution standard provides a "single majority
    shareholder" exception to the voting stock threshold, which provides
    that a minority shareholder's voting interests will not be
    attributed where a single shareholder owns more than 50% of the
    outstanding voting stock.[^11] Partnership interests and direct
    ownership interests are attributable regardless of the level of
    equity invested.[^12] However, the interests of "insulated" limited
    partners are not attributed.[^13] Directors and officers are also
    deemed to have an attributable interest.[^14] The general
    attribution standard rules at issue in this proceeding are those
    that are used in conjunction with the cable horizontal ownership
    limits rule[^15] and the vertical channel occupancy limits
    rule.[^16] We applied the broadcast or general attribution standard
    to the horizontal limits and channel occupancy limits rules because
    they constitute broad structural rules designed to promote
    competition and diversity in the video-programming marketplace.[^17]

4.  The Commission adopted the program access attribution standard for
    cable rules that are designed not only to promote competition and
    diversity, but also to deter specific discriminatory or improper
    conduct.[^18] The program access attribution standard captures more
    investment interests than the general attribution standard. Under
    the program access standard, the single majority shareholder and
    insulated limited partner exceptions do not apply. In addition,
    nonvoting stock and limited partnership equity interests of 5% or
    more are attributable.[^19] The program access attribution standard
    rules at issue in this proceeding are used in conjunction with the
    following rules: program access,[^20] carriage of an unaffiliated
    programmer,[^21] SMATV/cable cross‑ownership prohibition,[^22] asset
    transfers between a cable operator and an affiliate,[^23] rate
    pass-throughs for the programming services of an affiliated
    programmer,[^24] leased access[^25] and open video systems.[^26]

5.  This *Report and Order* will also adopt final rules for the
    definition of the term "affiliate" for purposes of the local
    exchange carrier ("LEC") portion of the "effective competition"
    test,[^27] and the cable-telco buy-out provisions enacted in the
    Telecommunications Act of 1996.[^28] We asked for comment on the
    appropriate definition of an affiliate under these rules in the
    *Cable Reform Notice*.[^29] However, because the *Cable Attribution
    Notice* initiated a more general review of the cable affiliation and
    attribution rules,[^30] we decided to address these two issues in
    this proceeding.[^31] We incorporate the *Cable Reform* comments
    into the record of this proceeding and rely on them in order to
    issue these final rules.[^32]

6.  Finally, we note that the *Broadcast Attribution* proceeding
    addressed the attribution rules that apply to the cable/broadcast
    station and cable/MMDS cross‑ownership prohibitions; thus we do not
    address those rules in this *Report and Order*.[^33]

**B. Questions Raised in the *Cable Attribution Notice***

7.  The *Cable Attribution Notice,* independently and through reference
    to the *Broadcast Attribution Notice,* sought comment on a number of
    issues relating to the attribution standards, including: (1) whether
    to increase the voting stock benchmark from 5 percent to 10 percent
    and the passive institutional investor benchmark from 10 percent to
    20 percent; (2) whether to expand the category of passive
    investors; (3) whether and, if so, under what circumstances to
    attribute nonvoting shares; (4) whether to retain the single
    majority shareholder exemption from attribution; (5) whether to
    revise our insulation criteria for limited partners; (6) how to
    treat interests in limited liability companies ("LLCs") and other
    new business forms under the attribution rules; and (7) how to treat
    financial relationships and multiple business interrelationships
    that, although not individually attributable, should be treated as
    attributable interest when held in combination.

8.  In addition to the issues raised in the initial *Broadcast
    Attribution Notice*, the *Broadcast Attribution Further Notice*
    explored additional proposals to increase the precision of the
    attribution rules. First, we invited comment on whether we should
    add a new equity/debt attribution rule. Under such a rule, where an
    interest holder is a program supplier or same-market media entity,
    we would attribute its otherwise non-attributable equity and/or debt
    interests in a media entity subject to the cross-ownership rules if
    those aggregated interests exceed a specified benchmark, proposed to
    be set at 33 percent.[^34] Second, we invited comments on a
    Commission staff study of attributable ownership interests in
    broadcast television stations, appended to the *Broadcast
    Attribution Further Notice*, and on the implications of this study
    regarding the impact of the proposed attribution rule changes,
    particularly as to the voting stock benchmarks.[^35]

9.  In addition to asking for comment on how these broadcast issues
    pertain to the cable industry, in the *Cable Attribution Notice* we
    asked for comment on (1) the proposed "equity plus debt" addition to
    the current cable attribution rules, and specifically those
    relationships in the cable context that may provide sufficient
    incentive and ability for an otherwise nonattributable interest
    holder to exert attributable influence or control; (2) the
    attribution of certain contractual or other business relationships
    in the cable context (including affiliations that allow different
    cable entities to purchase programming, technology or equipment on
    common terms) that may implicate diversity and competition concerns,
    irrespective of debt or equity; (3) the impact of raising the stock
    ownership benchmark for active and passive investors in the cable
    context, particularly seeking empirical data and analysis similar to
    the Commission staff study on the same subject in the broadcasting
    context; (4) whether to retain, modify, or eliminate the single
    majority shareholder exemption; and (5) whether a transition period
    or grandfathering of existing interests is appropriate if we decide
    to adopt more restrictive attribution rules.[^36]

10. We also asked for comment on whether and how we should re-evaluate
    the application of the program access attribution standard to
    certain of the rules described above, such as the program access and
    program carriage rules. Finally, we sought comment on whether and
    how any changes in our cable attribution rules should affect our
    various definitions of "affiliate."[^37] In particular, we sought
    comment on whether and how those affiliation rules that are
    expressly based on our cable attribution rules should change if the
    underlying attribution rules are changed.[^38] In the *Cable
    Attribution Notice*, we asked for comment on whether there were any
    relevant differences between the cable and broadcasting industries
    that would support a cable attribution standard that would differ
    from the broadcast attribution standard.[^39] In this regard, we
    sought comment on any differences in, among other things, the
    ownership, financing or management structures of the cable industry
    and the broadcast industry that might warrant a different
    attribution standard.[^40]

**C. Summary of the Decisions of this Order**

11. In general, we conclude that the cable industry's ownership and
    management structures do not in any relevant way differ from those
    of the broadcast industry such that the cable attribution rules
    should differ from the broadcast attribution rules. Thus, a large
    portion of this *Report and Order* will incorporate by reference the
    reasoning set forth in the *Broadcast Attribution Report and Order*.
    Where certain cable attribution rules depart from the broadcast
    attribution rules, the reasons for the departure are discussed. This
    *Report and Order* takes the following specific actions with regard
    to the cable attribution rules:

\(1\) retain the 5% voting stock attribution benchmark, but raise the
passive institutional investor voting stock benchmark to 20%;

\(2\) retain the current definition of passive institutional investor;

\(3\) apply the limited partnership insulation criteria to limited
liability companies;

\(4\) amend the insulation criteria for attribution of limited
partnership interests for purposes of the horizontal ownership and
channel occupancy limits rules;

\(5\) amend the waiver standard for the attribution of directors and
officers for purposes of the horizontal ownership and channel occupancy
limits rules;

\(6\) eliminate the single majority shareholder rule;

\(7\) adopt a 33% equity plus debt attribution rule that act as an
exception to the insulated limited partner exception and the current
exemptions from the attribution of non-voting equity and debt; and

\(8\) adopt certain transitional provisions relating to the application
of these new rules to existing interests.

12. In addition, we clarify which entities are covered by the program
    access attribution standard. Under our substantive cable rules, such
    as the program access rule, it is arguable that the general
    attribution standard is applied to determine who or what constitutes
    a cable operator while the program access attribution standard is
    applied to determine who or what constitutes a programming vendor or
    other entity covered by the rule. Because the program access
    attribution standard was intended to apply to all entities under the
    rules where this standard applies, and because these substantive
    rules are designed to deter specific misconduct by all covered
    entities, we will amend these rules in order to clarify that the
    program access attribution standard applies to all entities covered
    by those rules. To reflect these clarifications of the attribution
    rules, we will amend our rules' various definitions of the term
    "affiliate" where appropriate.

13. With regard to the *Cable Reform* issues, we adopt the general cable
    attribution standard for the cable-telco buyout prohibition rule
    because that rule closely resembles the cable/SMATV cross-ownership
    rule, which is designed to promote competition. For the LEC
    affiliate prong of the effective competition test, we maintain the
    10% voting equity benchmark proposed in the *Cable Reform Notice*,
    but devise a new attribution rule for the LEC test.

14. Finally, we reject the cable operators' proposals that we discard
    the attribution rules in favor of an actual control approach to
    identifying cognizable interests. Such an approach would not
    accurately capture potentially influential or controlling interests,
    and would not be workable.

# III. Report and Order {#iii.-report-and-order .unnumbered}

**A. The General Attribution Standard**

**1. Background**

15. In the *Cable Attribution Notice*, we requested comments relating to
    the general structure of the attribution rules; invited parties to
    discuss recent developments in the cable industry, including
    strategic alliances, partnerships, system swaps, mergers and
    acquisitions, relevant to application of these rules; and asked
    whether there were any differences in the ownership, financing or
    management structures, industry health, typical stockholdings,
    informal business arrangements, or outside financial claims of the
    cable industry and broadcast industry that would warrant different
    cable attribution rules.[^41] This prompted a number of parties to
    suggest wholesale revisions to the traditional tools of the
    attribution rules. We address these comments first.

> **2. Comments**

16. Cable operators generally, including NCTA, TCI, [^42] and MediaOne,
    argue that the cable horizontal ownership rules should not continue
    to follow the broadcast attribution rules because market conditions
    are different for the cable industry, new cable transactions
    allegedly insulate cable multiple system operators ("MSOs") from
    control over the newly created entities, and the Commission should
    adopt a "control" test for attribution. In response, alternative
    multichannel video programming distributors ("MVPDs") and a
    broadcaster argue that the market has not changed since the
    attribution rules were first enacted and that a "control" approach
    would not accurately capture influence and would not be workable.

> **a. Industry Differences**

17. TCI argues that the Commission has in the past distinguished between
    different industries when it rejected a request that the broadcast
    attribution standard be applied to the telephone carrier/cable
    cross-ownership rule "largely because these two categories of
    multiple ownership rules relate at least in part to different
    industries, affect the interests of different parties, and have
    disparate underlying objectives."[^43]

18. TCI notes that the purpose of the ownership rules is to promote
    competition and diversity. TCI contends that cable systems, unlike
    broadcasters, do not generally compete with each other in the same
    geographic areas for subscribers, local advertising revenues or
    programming.[^44] As a result, TCI argues that the analysis of
    ownership concentration, competition, collusion and program
    diversity should be different for cable than for broadcasting.[^45]
    TCI, Comcast and NCTA argue that concerns regarding diversity are
    different for cable because, unlike a broadcaster, a cable operator
    provides dozens of channels to satisfy consumers.[^46] Thus, NCTA
    argues that the ability of a minority interest in a cable system to
    significantly influence the viewing options available to a community
    cannot be equated with the magnitude of influence that a minority
    interest exerts on a single broadcast station that may only provide
    one programming option.[^47]

19. MediaOne argues that the operators have not discouraged the
    development of new cable programming services.[^48] By upgrading its
    systems from 550 MHz to 750 MHz, MediaOne states that it is adding
    30 new analog channels, at least half of which will benefit
    unaffiliated programmers.[^49] In addition, given the growth of
    direct broadcast satellite ("DBS") services, such as DIRECTV, which
    offers over 175 channels of cable programming, MediaOne states there
    is no longer reason for concern that operators will discourage new
    programming.[^50] To compete with DBS, MediaOne states that
    operators must make diligent efforts to expand their channel
    capacity for new cable networks, regardless of an operator's
    interest in promoting affiliated programming.[^51]

20. TCI argues that the evidence indicates that vertically integrated
    cable operators do not disfavor unaffiliated programmers in terms of
    rates or carriage.[^52] In addition, TCI asserts that vertical
    mergers benefit consumers because a large, vertically integrated
    cable operator is better positioned than a stand-alone operator to
    know and satisfy consumers' viewing preferences.[^53] Moreover,
    investors in cable operators are interested in the financial
    performance of the operator and will not, TCI asserts, tolerate
    actions designed to foreclose viewpoints or opinions for ideological
    purposes. Thus, widely held operators, TCI asserts, are prevented
    from controlling the viewpoints of the services they carry.[^54]

21. Disputing the cable industry's arguments regarding the purposes of
    the applicable cable ownership rules, DIRECTV argues that the
    purpose of the various rules implicated in this proceeding is to
    check the bargaining power that MSOs have regarding programmers and
    the emerging MVPDs.[^55] DIRECTV and Univision argue that the MSOs
    have not shown that the market has changed or that their behavior
    has changed, especially with regard to program access and must
    carry.[^56] DIRECTV notes that Comcast has refused to sell its
    Philadelphia regional sports network to DBS providers on the grounds
    that the program access rules do not apply to the terrestrial
    delivery of vertically integrated programming.[^57] Univision states
    that regulatory safeguards such as must carry do not protect its
    cable network or its satellite-delivered network and that over half
    of its affiliated low-power stations are not entitled to must carry
    rights.[^58]

**b. The Cable Operators' Control Proposal**

22. TCI and others, focusing on the horizontal ownership rules, argue
    that the current attribution standards impair the ability of cable
    operators to produce significant consumer benefits, realize
    efficiencies, and enhance competition in telephony and high speed
    data. Adelphia *et al*., Time Warner, NCTA, TCI, Cablevision,
    MediaOne and Comcast propose various alternatives to the attribution
    rules where the investor would certify that it does not exercise
    control over the cable system at issue.[^59] MediaOne, NCTA and TCI
    propose that minority interests not be attributable if the investor
    certifies that it does not control the company's programming.[^60]
    Regardless of the cable operator's interest or investment in a
    particular system, Adelphia *et al.* proposes that the Commission
    adopt a rule where a cable operator would be deemed to not "control"
    a system for horizontal ownership attribution purposes if it could
    certify that it (1) cannot dictate programming decisions, (2) does
    not control a majority of the governing board or committee, (3) does
    not prepare the operating or capital budget (but can review the
    budget prepared by the managing partner), (4) does not control
    personnel matters, (5) cannot dictate the use of particular
    technology, (6) does not have the unilateral right to acquire a
    controlling interest in the venture.[^61] Adelphia *et al.* argues
    that a cable operator's super-majority approval rights over the sale
    of assets, dissolution or change of status of an entity are not
    indicia of control for attribution purposes.[^62]

23. NCTA argues that unless an investor has control over a cable system,
    it is difficult to discern how diversity is implicated because there
    is little risk that a minority investor will restrict a company's
    editorial control.[^63] TCI argues that an attribution standard
    based on operational control is the least restrictive and most
    efficient method for the Commission to identify attributable
    interests. TCI states that attempting to identify "influential"
    interests in a set of rules is difficult given the alternative ways
    in which an interest holder's influence might be limited by factors
    which the rules do not examine.[^64] TCI argues that a bright line
    test, such as the 5% equity interest benchmark, does not necessarily
    identify interests that posed a threat to the purpose of the
    ownership rules and therefore unnecessarily limits beneficial
    investments.[^65] The cross-interest policy, which was adopted to
    identify influential interests not specifically addressed by the
    attribution rules, examined potential influential interests on a
    case-by-case basis. TCI argues that this ad hoc approach is slow and
    expensive.[^66] TCI argues that the Commission permits regulated
    entities to self-certify in a variety of other circumstances because
    self-certification is efficient and less costly and does not impose
    an overbroad restriction or require a case-by-case
    determination.[^67]

24. RCN argues that a "control" approach would not be workable because
    it is vague, would require the devotion of significant resources to
    a case-by-case analysis of each system, and would invite the
    creation of carefully designed corporate interests that would
    indicate lack of control on paper but would not reflect the actual
    influence that such interests would carry.[^68] RCN observes that
    the practicalities of corporate decision-making are different from
    structures set forth on paper. RCN argues that a rational
    decision-maker will make decisions in the best interests of its
    investors, whether the investors vote or not.[^69] CU states that
    cable operators need little or no direct ownership in a cable system
    in order to exert pressure with contractual rights.[^70] CU states
    that partners who have minimal ownership use methods to protect
    their interests by creating options, put-sell provisions, and rights
    of refusal provisions in partnership agreements.[^71]

25. NCTA asserts that the Commission has endeavored to "permit
    arrangements \[under the attribution rules\] in which a particular
    ownership or positional interest involves minimal risk of influence,
    in order to avoid unduly restricting the means by which investment
    capital may be made . . . ."[^72] Most of the cable operators argue
    that the current rules interfere with the benefits of clustering
    their systems.[^73] They argue that clustering benefits subscribers
    by enabling cable operators to lower costs; improve current
    services; more efficiently deploy new, innovative services such as
    internet, interactive video and telephony; develop and distribute
    regional programming services; and provide centralized, more
    responsive customer service.[^74]

26. AT&T, TCI, NCTA and MediaOne argue that the Commission should take
    into account not only the benefits to video programming, but also
    the benefits that clustering and economies of scale offer for
    bundled voice, data and cable services.[^75] They argue that the
    Commission should consider the benefits of enabling cable operators
    to compete with incumbent local exchange carriers ("ILECs") to
    provide these services.[^76] Cable operators argue that they cannot
    compete with ILECs without being able to form larger clusters
    comparable in size to the areas served by some of the newly merged
    ILECs, which are not subject to subscriber limitations and are able
    to enjoy the benefits of economies of scale.[^77]

27. Adelphia *et al.* argue that there are numerous benefits to their
    alliances with TCI: (1) TCI partners are able to create more
    efficient and larger regional clusters, (2) Falcon and Insight will
    be able to maintain a presence in the cable market unlike other
    independent cable operators who have been forced to sell, (3) TCI
    partners benefit from TCI's capital and technical experience,
    and (4) their alliances with TCI have enabled the partners to reach
    a critical mass so that they are able to offer better, less
    expensive technology to subscribers.[^78] As a result of clustering
    and TCI's financial, technical and programming support, TCA and
    Bresnan argue that they are able to rebuild their systems to provide
    hybrid fiber coaxial ("HFC") architecture which enables them to
    provide more channel capacity, multiplexed networks, advanced
    pay-per-view programming, internet service and telephony.[^79]

28. Cablevision acquired approximately 800,000 subscribers from TCI in
    the New York area, which brought Cablevision's number of subscribers
    to more than 2.5 million in the New York metropolitan area.[^80]
    Cablevision argues that without TCI's involvement, Cablevision would
    not have been able to cluster its systems and develop an economy of
    scale that would have permitted it to achieve the economic benefits
    of clustering. Through clustering, Cablevision argues that it was
    able to successfully develop local programming because there are
    more local subscribers.[^81]

29. DIRECTV and Ameritech argue that an MSO's subscribers do not pay
    lower costs simply because of the purported efficiencies of
    clustering. Rather, MSOs, they reason, are able to charge lower
    costs because they use their large size to obtain programming on
    more favorable terms than smaller companies: "Because this advantage
    is not grounded in superior efficiency, it is a barrier to effective
    competition in the multichannel video services industry."[^82] TCI
    argues that if another cable operator cannot achieve the scale
    necessary to achieve lower programming costs, it should be
    attributed to that cable operator's unpopularity with consumers
    rather than the fact that another cable operator is able to obtain
    lower programming costs.[^83]

30. RCN argues that how the MSOs will compete with LECs is irrelevant to
    this proceeding.[^84] RCN and Univision argue that TCI's stake in
    Cablevision and its joint ventures with *Adelphia* *et al.* will
    give TCI an important voice in their business plans, harm consumers,
    and impede competition.[^85] Ameritech argues that TCI's system
    swaps and joint ventures have significantly increased TCI's market
    power by giving it access to more subscribers.[^86] For example,
    Ameritech notes that TCI's contribution of 850,000 subscribers to
    Cablevision now gives TCI an attributable interest in Cablevision's
    3.5 million subscribers.[^87] Given these joint ventures coupled
    with its ownership of Satellite Services, Inc. ("SSI") (a TCI
    subsidiary that sells to TCI partners "\[m\]any of the popular
    networks. . . at rates which are lower than those which would
    otherwise be obtainable"[^88]), TCI can obtain, Ameritech asserts,
    virtually any terms it wants from a cable programmer, including
    exclusivity and steep discounts from even unaffiliated cable
    programmers.[^89] Univision states that given TCI's investment in
    the joint ventures, it is implausible that the small cable operators
    will ignore any "suggestions" that TCI might make.[^90] RCN notes
    that the FTC approval of the TCI/Cablevision transaction was based
    on an antitrust analysis, rather than the public interest analysis
    that the Commission should apply under Section 613 of the
    Communications Act, and is therefore irrelevant to this
    proceeding.[^91]

31. Cablevision argues that its transaction with TCI enhances
    competition by enabling Cablevision to compete with Bell Atlantic,
    DIRECTV and RCN.[^92] Furthermore, Cablevision argues that TCI's
    transactions actually reduce TCI's market power by transferring
    subscribers to another company.[^93] Time Warner argues that the
    structure of TCI's joint ventures will not pose an anticompetitive
    risk.[^94]

32. If the control certification proposals discussed above are not
    accepted or if an operator cannot make the necessary certification,
    Adelphia *et al.* argues that as long as the operator owns 50% or
    less of a venture and does not have managerial control, the operator
    should be attributed with only its pro rata share of the venture's
    subscribers.[^95] Likewise, Time Warner and MediaOne propose that an
    MSO should only be attributed with the percentage of a corporation
    or a partnership's subscribers that equals the MSOs percentage
    equity interest in the corporation or partnership.[^96] For example,
    if an MSO holds a 25% interest in a partnership, MediaOne argues
    that only 25% of the partnership's subscribers should be attributed
    to the MSO.[^97]

**3. Discussion**

33. The cable operators focus their arguments on the attribution rules
    applicable to the horizontal ownership rules. However, the cable
    operators have not presented a valid basis for a radical departure
    from our attribution rules framework, a framework that Congress
    found appropriate for the Commission to consider for the horizontal
    ownership rules.[^98] The cable operators have not shown differences
    in the ownership, financing or management structures between the
    cable and broadcast industries that would warrant creating such a
    different type of attribution standard for the cable horizontal
    ownership or other cable rules.

34. Cable operators argue that the programming market has evolved so
    that even large MSOs have a limited impact on programming, and the
    attribution rules associated with the horizontal ownership rules
    inhibit cable clustering. In addition, they argue that the cable
    attribution rules should be different from the broadcast attribution
    rules because, unlike broadcasters, cable operators generally do not
    compete on the local level and the purposes of the broadcast and
    cable rules are different. These arguments are more appropriately
    addressed to the scope of the horizontal ownership rule itself,
    rather than the attribution rules. As we recently stated in the
    *Broadcast Attribution Report and Order*,

> The attribution rules are designed to attribute entities that wield
> significant influence on core operations of the licensee. It is the
> ownership rules that limit investment based on our core policies of
> diversity and competition.[^99]

Arguments with respect to the status of the programming market, vertical
integration, non-cable competitors and cable clustering were properly
raised and resolved in our companion *Horizontal Ownership Third Report
and Order*.[^100] Any changes to the horizontal ownership limits should
be accomplished directly through an alteration of the limit rather than
through a manipulation of what is considered to be ownership.[^101]

35. In any event, we disagree with NCTA and TCI's argument that
    differences in the services that cable operators and broadcasters
    provide in the local market present a basis for establishing
    different sets of attribution standards for the local broadcast
    ownership rules and the cable horizontal ownership rules. What is
    relevant here is the market to which the rules are directed and the
    purposes of the rules. The appropriate market for an analysis of the
    horizontal ownership rules is the national market, not the local
    market.[^102] In the horizontal ownership limits statute, Section
    613, Congress directed the Commission to set limits on the
    concentration of ownership at the national level.[^103] Congress was
    concerned that the anticompetitive effects of increased
    concentration at the national level might reduce the availability of
    diverse programming content.[^104] Thus, although the local
    broadcast rules and the horizontal ownership rules address different
    markets, their purposes are the same: both sets of rules are
    designed to promote competition within the industry and a diversity
    of viewpoints and programming.[^105] Given that the cable horizontal
    ownership limits and the broadcast ownership rules serve similar
    purposes, it is appropriate, with certain exceptions discussed
    below, to use the same attribution standards for these rules. As
    discussed below, the cable operators do not persuade us that the
    broadcast attribution standards do not accurately capture equity or
    debt interests that convey influence or control.

36. We also continue to believe that the cable operators' "control"
    proposals, which we previously rejected in the *Horizontal Ownership
    Second Report and Order*,[^106] do not take into account the variety
    of ways that an investor may exert influence or control over a
    company. An individual or firm does not need actual operational
    control over (or to be the management of) a company in order to
    exert influence and control over that company.[^107] As discussed
    below, equity, debt and partnership interests confer on their
    holders influence and control, regardless of whether the holders
    maintain operational control of the company.[^108] Moreover, the TCI
    transactions discussed in the record of this proceeding demonstrate
    the control proposal's lack of credibility.[^109] TCI's transactions
    include joint ventures where it has between a third and half the
    members of the board, rights of first refusal and supermajority
    rights or the right to veto fundamental decisions such as the sale
    of assets, declaration of bankruptcy, issuance of equity interests,
    consolidations, mergers, and capital calls. These rights clearly
    confer some degree of control or influence by TCI over the joint
    ventures. We agree with RCN and CU that, under these circumstances,
    it is more likely that a reasonable entity will consider the spoken
    or unspoken interests of its investors.

37. TCI's relationships with its partners demonstrates the influence
    that an investor can have over an entity even if the investor does
    not have actual, operational control over the entity's programming.
    Each of TCI's partners may take advantage of TCI's industry
    alliances, even if the partner is not required by TCI to do so. In
    the case of programming, each of TCI's partners can purchase at a
    low price cable programming networks that TCI has chosen to do
    business with.[^110] We find it unlikely that the TCI partners would
    purchase the same cable networks at a higher price from a company
    other than TCI's subsidiary, SSI. We agree with Ameritech that the
    programming purchases by TCI's partners from SSI extend TCI's power
    in the programming marketplace.[^111] Cable networks selected for
    carriage by TCI have a greater chance of being carried by the TCI
    partners. Conversely, cable networks not carried by TCI are placed
    at a disadvantage because they are required to compete with
    discounted SSI cable networks for carriage on the TCI partners'
    cable systems.

38. In addition, the control proposals would be unworkable and would not
    provide regulatory certainty.[^112] Under the control proposals,
    there are too many variables that the Commission and interested
    parties would have to weigh before a determination of non-control
    could be made. For example, the Commission would be required to
    examine, among other things, the contracts between the parties (such
    as contracts between TCI's programming distributor subsidiary SSI
    and the TCI affiliates), the entity's corporate documents, the prior
    and current course of dealings between the parties, the structure of
    their board and management, and the rights and obligations of the
    interested parties. Many of these factors are subject to change over
    time.

39. With regard to the proposal that an investor be apportioned a
    percentage of a cable system's subscribers equal to the investor's
    percentage equity interest, we find no basis in the statute or in
    fact or theory to support such a rule. This proposal assumes that
    there is some logical basis for attributing an investor only some
    proportional influence over a cable system commensurate with the
    investor's percentage equity interest or that there would be some
    equitable reason to proceed in this manner. Investor A's 25% equity
    interest in cable system X, however, does not limit investor A's
    influence to 25% of cable system X's subscribers or 25% of the
    decision made by the system. Investor A's 25% equity interest
    enables it to exert influence or control over all aspects of the
    operation of the system, including what programming the system
    selects for all of its subscribers

> **B. Voting Equity Benchmark**

40. We turn next to suggestions for more specific changes in the
    attribution rules and address first those provisions of the rules
    that apply in common to both the general and program access
    attribution provisions. For both types of rules a 5% voting equity
    interest would be considered an attributable interest. [^113] A
    number of parties have suggested that 5% is too low a number.

**1. Comments**

41. Bresnan, Time Warner, Chase, Mediacom and Comcast argue that the
    attribution standard for the cable horizontal ownership cap should
    be relaxed so that cable operators will have greater access to
    capital in order to upgrade their systems to true broadband
    service,[^114] to implement new technologies, such as digital
    television,[^115] and to increase investment in new programming
    services.[^116] Bresnan argues that TCI's ownership interest in it
    and TCI's assistance to it will benefit subscribers who will then
    have access to hundreds of channels of programming at low costs due
    to the cost efficiencies of Bresnan's partnership with TCI.[^117]
    Chase argues that the 5% voting interest threshold is simply too low
    a threshold for many institutions to invest.[^118] Chase reasons
    that raising the voting benchmark to10% will not give investors
    ultimate control over the company, but will recognize that investors
    must have some input to reduce the risk of the investment.[^119]

42. Except for the horizontal ownership attribution rules that Time
    Warner believes should be abolished, Time Warner argues that the
    Commission should raise the voting benchmark to at least 10% and
    could safely raise it to 20% in order to increase the availability
    of capital.[^120] NCTA argues that there has been no showing that an
    investor with a 5% interest has the ability to direct a system's
    core functions. NCTA notes that the Department of Interior uses a
    10% threshold for acreage limitations, the SEC uses a 10% threshold
    for insider trading rules, and the Department of Transportation uses
    a 10% threshold for certain reporting requirements. Time Warner
    states that the Commission uses higher benchmarks for other rules
    such as a 20% direct and 25% indirect equity interest held by aliens
    in broadcast properties and the 40% interest that small businesses
    or rural telephone companies are permitted to hold for purposes of
    the CMRS spectrum aggregation limit.[^121]

43. TCI challenges the voting equity benchmark bright line test on the
    grounds that the "size of the financial interest \[is\] a highly
    imprecise indicator of the extent to which the financial interest
    conveys control."[^122] TCI asserts that, in order to determine an
    investor's control, other factors must be examined, such as the
    composition of the board, who has authority over management, and the
    size of other minority shareholders.[^123] However, TCI also argues
    that a case by case analysis of such factors would be too costly in
    terms of time and money.[^124] TCI therefore proposes that the
    Commission adopt its control certification approach as a middle
    ground between a bright line test and a case by case analysis.

44. RCN argues that the program access standard should apply to the
    horizontal ownership rules in order to prevent cable companies from
    clustering in major markets and blocking RCN from those
    markets.[^125] Comcast states that RCN's request is based on little
    more than a desire to achieve a competitive advantage.[^126] Time
    Warner states that the need for investment far outweighs a
    theoretical risk of anticompetitive influence and that RCN's
    proposal runs counter to the deregulatory intent of the
    Telecommunications Act of 1996.[^127] Because RCN's clustering
    proposal is more appropriately addressed in the context of the
    substantive horizontal ownership rules, we do not address it
    here.[^128]

**2. Discussion**

45. In establishing voting equity provisions of the attribution rules,
    we focus on issues of control or influence. The attribution rules
    are intended to exempt from attribution ownership or positional
    interests that present minimal risk of influence in order to avoid
    unduly restricting access to capital but to attribute those
    interests that permit a significant potential for influence or
    control.[^129] Based on the record of this proceeding, our parallel
    review of the broadcast attribution rules, a review of similar
    standards by other regulatory agencies, and academic studies
    relating to corporate governance, we conclude that the existing 5%
    voting share benchmark better takes into account the relevant
    considerations than any alternative that has been proposed.[^130] We
    recognize that the dynamics of corporate life are varied and change
    over time. Thus, it is understandable that a provision of this type
    may be thought to be an ill fitting test of control or influence in
    some circumstances that might be revealed by a detailed review of
    the facts of particular situations. Such a particularized review
    process, however, would provide no certainty to parties planning
    transactions and would not necessarily lead to enduring conclusions
    even as to a particular entity. It is necessary therefore to analyze
    general benchmarks in order to develop a proper standard.

46. In earlier proceedings, we found, based on an ownership survey,
    that, in a widely-held corporation, a 5% shareholder is likely to be
    one of the largest 2 or 3 shareholders and therefore to be in a
    position to command the attention of management, and that a 5%
    benchmark was an appropriate threshold for attribution of interests
    in a closely-held corporation based on several possible ownership
    scenarios.[^131] There is a body of more recent academic evidence
    that tends to confirm our earlier conclusions, demonstrating that
    interest holders of 5% can likely exert considerable influence on a
    company's management and operational decisions. One recent study
    demonstrated that block trades involving 5 to 10 percent of a firm's
    voting stock resulted in a 27 percent turnover rate of the chief
    executive officer of the traded firm, that a 20 to 35 percent block
    trade resulted in a 40 percent turnover rate of the CEO, and that
    block trades over 35 percent of the voting equity resulted in a 56
    percent turnover rate.[^132] The turnover of the CEO was tracked
    over a one-year period following the date of the trade. These
    results, spanning an increasing level of ownership starting at 5
    percent, demonstrate a consistent relationship between ownership
    trades and the rate of replacement of top management. The results
    imply that investors who acquire and hold such large blocks of
    voting stock can influence the choice of management of the firms in
    which they invest.

47. Another study presents evidence that 5 percent or greater
    stockholders vote more actively than less-than-five percent
    shareholders, and they tend to vote more often against the
    recommendations of management in votes over corporate anti-takeover
    amendments.[^133] This study suggests that larger owners, starting
    at a 5 percent level of ownership, tend to be more active in
    influencing management than smaller owners. The two studies
    considered together provide evidence that ownership percentages
    starting at 5 percent can influence management policies.

48. Based on these studies, we therefore disagree with TCI's argument
    that the voting equity benchmark is too highly imprecise to be
    usable in the rules. Moreover, the voting equity benchmark is
    superior to a test requiring a case-by-case review of each and every
    cable transaction because it reduces regulatory costs, provides
    regulatory certainty, and permits planning of financial
    transactions.

49. We also disagree with commenters' arguments that the cable equity
    benchmark should conform to certain 10% benchmarks adopted by other
    federal agencies.[^134] Those agencies' rules serve different
    interests than the Commission's ownership rules. For example, the
    Department of Transportation's 10% rule is designed to identify
    substantial interests, and the SEC's insider trading rule is
    designed to prevent intrinsically illegal or undesirable activities.
    Our rule is more analogous to the SEC's 5% ownership reporting
    benchmark.[^135] Under the SEC 5% benchmark, any person who becomes
    a direct or indirect owner of more than 5% of any class of stock of
    a company must file a statement with the SEC.[^136] The general
    purpose of this reporting requirement is to ensure that investors
    are alerted to potential changes in control, which is similar to the
    attribution rule's goal of identifying interests which confer on
    their holders the potential for influence or control.[^137]

50. The commenters in this proceeding have not shown that other
    Commission attribution rules have similar purposes to the cable
    rules such that the attribution standards should be the same. The
    40% CMRS spectrum rule[^138] is designed to foster ownership by
    certain entities that have traditionally had difficulty gaining
    access to capital.[^139] Likewise, the commenters have not show how
    the alien ownership limits have objectives similar to the rules
    involved in this proceeding.[^140]

51. Regarding access to capital, we note that total capital available
    for cable investment is projected to double in 1999 at \$ 24.160
    billion from \$12.326 billion in 1992.[^141] Available capital has
    steadily grown from \$16,731 billion in 1996, \$21.396 billion in
    1997 and \$22.607 billion in 1998. In addition, in 1999, cable
    operators are projected to have approximately \$3.44 billion in
    surplus capital available.[^142] This dramatic increase in cable
    capital and capital surpluses decreases any cause for concern
    regarding the availability of capital.[^143] Nevertheless, to the
    extent there remain any capital concerns, as discussed below, we are
    raising the passive investor benchmark to 20%.

**C. Passive Institutional Investor Benchmark**

**1. Background**

52. Our attribution rules do not attribute voting stock interests held
    by "passive investors" of less than 10%.[^144] Passive investors are
    "investment companies, as defined by 15 U.S.C. § 80a-3, insurance
    companies and banks holding stock through their trust departments in
    trust accounts."[^145] In the *Attribution Order*, we concluded that
    these entities play passive roles because they lack the interest and
    the ability to actively participate in the firms in which they
    invest, and that setting a higher investment benchmark for such
    investors posed little risk of influence or control[^146]

**2. Comments**

53. Some commenters request that the passive ownership benchmark be
    raised and the definition of passive investor be expanded. To
    increase capital availability, Time Warner argues that the threshold
    should be raised to 20%,[^147] and TCI argues that it should be
    raised to 49%.[^148] NCTA argues that the Commission should relax
    the passive ownership benchmark because passive investors by
    definition are not involved in a system's core functions and raising
    the benchmark will increase the flow of capital.[^149] For small
    cable operators, NCTA argues that passive investments should not be
    attributable at all in order to give them more access to
    capital.[^150]

54. Mediacom, Chase and Comcast argue that institutional investors
    should be treated as passive investors.[^151] Chase argues that
    institutional investors invest in entities to obtain returns on
    their equity, not to harm the entities and diminish their profits;
    therefore, Chase argues that attribution standards for ownership
    rules should be distinguished from rules designed to control
    behavior, such as program access and program carriage.[^152] Chase
    asserts that investment companies should be permitted to control
    seats of the board so long as they do not control the board and do
    not participate in the day-to-day operations of the entity in
    question.[^153] Chase urges the Commission to recognize that
    investors must have some input to reduce the risk of the
    investment.[^154]

**3. Discussion**

**a. The Appropriate Passive Institutional Investor Benchmark**

55. For the reasons set forth in the *Broadcast Attribution Report and
    Order*, we will raise the cable passive investor benchmark to
    20%.[^155] We believe that the legal and fiduciary requirements that
    constrain a passive institutional investor will ensure their
    passivity with respect to the management and operational affairs of
    a company. In addition, we believe that raising the benchmark is a
    relatively safe way to increase access to capital while continuing
    to capture influential interests. We will not raise the benchmark
    higher than 20%. As we stated in the *Broadcast Attribution Report
    and Order*, we must act cautiously when relaxing the attribution
    rules so that the purpose of the rules is not undermined. Based on
    the record before us in the *Broadcast Attribution Proceeding*, we
    found that voting stock held by passive investors could become
    decisive in proxy disputes, and passive investors accordingly could
    not be considered equivalent to limited partners or non-voting
    shareholders.[^156]

**b. Definition of Passive Investors**

56. We will not expand the passive investor definition to include other
    types of investors. We are not convinced that other types of
    investors lack the interest or the ability to participate actively
    in companies in which they have invested.[^157] This is particularly
    true of public pension funds, many of which have apparently become
    increasingly active in proxy fights and other devices to put
    pressure on management perceived to be under-performing.[^158]
    Furthermore, commercial and investment bank activities do not fall
    under the same fiduciary restrictions, discussed above, that apply
    to bank trust departments. In addition, we have not been presented
    with sufficient evidence thus far to revise our earlier tentative
    conclusion not to include SBICs and SSBICs in the definition of
    passive investors.[^159] As we have noted, under certain
    circumstances, these entities are authorized to exercise control
    over debtor companies for temporary periods.[^160] Furthermore, an
    investment advisor, acting on behalf of its client, might exert the
    same level of influence or control as might the client. Therefore,
    unlike the categories currently defined as passive investors, we do
    not find evidence of regulatory or other safeguards ensuring that
    other types of investors will remain passive. While several
    commenters favored expanding the definition of the passive
    institutional investor category, they did not supply persuasive
    evidence or analysis to support their case and, in particular, to
    contradict evidence that these institutional investors can be
    actively involved in the companies in which they invest.[^161]
    Indeed, the record here shows that some classes of institutional
    investors believe they should have the right to control seats on the
    board and to be actively involved.[^162]

**D. Partnership Interests**

**1. Comments**

57. Under the Commission\'s current attribution rules governing
    partnership interests, general partners and non-insulated limited
    partnership interests are attributable, regardless of the amount or
    percentage of equity held. An exception from attribution applies
    only to those limited partners who meet the Commission\'s insulation
    criteria and certify that they are not materially involved in the
    management or operations of the partnership\'s media
    interests.[^163]

58. Time Warner argues that the attribution standards applicable to
    limited partnerships are overly restrictive in that a limited
    partnership investment no matter how small is attributable unless it
    is "insulated" under what Time Warner asserts are the Commission's
    overly-stringent standards.[^164] Time Warner states that the
    Commission should change its insulation criteria to make them
    consistent with federal and state securities regulations which
    require that limited partners in "business development companies" be
    given the right to vote to elect or remove their general partners.
    In addition, Time Warner argues that the Commission should permit
    investors to communicate with the partnership about their
    investments and to enter into arms-length contractual relationships
    with respect to the partnership's business, as nonvoting or *de
    minimus* voting shareholders in corporations are permitted to
    do**,** without being attributable.[^165] Finally, Time Warner
    argues that a limited partnership interest of less than 33% should
    not be attributable in any partnership with at least 20 limited
    partners if the partnership certifies that the interest holder will
    not be actively involved in the partnership's media affairs.[^166]

59. CU argues that the limited partner insulation exemption should be
    eliminated because, even though "insulated," limited partners
    nevertheless exercise some persuasion in partnership affairs that
    the attribution rules might not capture.[^167]

60. Bresnan argues that the Commission should not eliminate its
    insulated limited partner exception because it would frustrate
    Bresnan's ability to upgrade its systems.[^168] In addition, Bresnan
    argues that the Commission should apply its "single majority
    shareholder" exemption to partnerships because a minority
    shareholder does not have control, Bresnan asserts, over the
    entity.[^169]

**2. Discussion**

61. For the reasons set forth in the *Broadcast Report and Order*, we
    find no basis to alter our conclusion that limited partnership
    interests are distinct from corporate equity voting interests and
    that our limited partnership insulation criteria are necessary to
    identify partnership interests that confer influence or
    control.[^170] As we have previously found, partners in a limited
    partnership have the power, through contract, to determine their
    respective rights.[^171] As a result, the power of a limited partner
    to influence or control the operations of the partnership may not be
    proportional to the limited partner's equity interest, because the
    extent of its power may be modified by contract.[^172] Thus, the
    insulation criteria are designed to identify situations within which
    it is safe to presume that a limited partner will not be materially
    involved in the media management and operations of the
    partnership.[^173]

62. We decline to loosen the insulation criteria to accommodate widely
    held limited partnerships, such as "business development companies,"
    that are organized under federal and state laws that require that
    investors have powers to exert significant influence or control over
    their partnerships. Like partnerships, these new business entities
    have contractual flexibility for organizing their management,
    thereby giving their investors the contractual ability to determine
    their rights. More importantly, the federal and state laws that
    regulate business development companies and partnerships may permit
    and sometimes require those entities to organize themselves in a
    manner that would enable their members to exert significant
    influence or control over the partnership. Thus, federal and state
    laws may fail to provide sufficient assurances that a limited
    partner lacks the ability to be materially involved in the
    partnership's media activities, which is the central purpose of the
    insulation criteria. Accordingly, if an investor in a business
    development company cannot meet the insulation criteria because of a
    federal or state law, then the investor has the ability to
    significantly influence or control the company, which warrants
    attribution under our rules.[^174]

63. Nevertheless, for the horizontal ownership and channel occupancy
    limits rules,[^175] we agree with Time Warner that the insulation
    criteria should be revised. The horizontal ownership and channel
    occupancy limits are designed to address the ability of one MSO or a
    group of MSOs, by virtue of their size, to impede the flow of
    programming from the programmers to consumers.[^176] An MSO may
    extend its ability to affect the programming marketplace when it
    invests in other cable companies. However, where the MSO is not
    materially involved in the video-programming activities of a limited
    partnership, its investment does not extend its national programming
    power and the concerns of Section 613 are not implicated. In these
    circumstances where programming is not affected, the current
    insulation criteria prevent investments between companies whose
    combination may bring benefits to the public, such as cable
    broadband and telephony services and competition to the incumbent
    local exchange carriers or Internet. In order for the limited
    partnership to benefit from an investor's expertise in these areas,
    it is necessary to craft insulation criteria that will not prevent
    the investor from offering its services to the partnership so long
    as those services are unrelated to the partnership's
    video-programming activities.

64. Therefore, we will amend the insulation criteria referenced in
    footnote 163 above for the horizontal and channel occupancy limits
    rules to provide that a limited partnership interest shall be
    attributed to a limited partner unless the partnership certifies
    that this limited partner is not materially involved, directly or
    indirectly, in the management or operation of the
    video-programming-related activities of the partnership.[^177] In
    order to qualify for the insulated limited partnership exemption for
    purposes of these two rules, (1) the limited partner cannot act as
    an employee of the partnership if his or her functions, directly or
    indirectly, relate to the video-programming enterprises of the
    company; (2) the limited partner may not serve, in any material
    capacity, as an independent contractor or agent with respect to the
    partnership\'s video-programming enterprises; (3) the limited
    partner may not communicate with the licensee or general partners on
    matters pertaining to the day‑to‑day operations of its
    video-programming business; (4) the rights of the limited partner to
    vote on the admission of additional general partners must be subject
    to the power of the general partner to veto any such admissions; (5)
    the limited partner may not vote to remove a general partner except
    where the general partner is subject to bankruptcy proceedings, is
    adjudicated incompetent by a court of competent jurisdiction, or is
    removed for cause as determined by a neutral arbiter; (6) the
    limited partner may not perform any services for the partnership
    materially relating to its video-programming activities, except that
    a limited partner may make loans to or act as a surety for the
    business; and (7) the limited partner may not become actively
    involved in the management or operation of the video-programming
    businesses of the partnership. Certifications pursuant to these
    rules should be served on the Commission as described in the notes
    to these rules.[^178] In order for the Commission to accept the
    certification, the certification must be accompanied by facts, e.g.
    in the form of documents, affidavits or declarations, that
    demonstrate that the insulation criteria are satisfied.

#  E. Directors and Officers {#e.-directors-and-officers .unnumbered}

**1. Comments**

65. Time Warner makes three requests for clarification of the
    attribution rules. First, according to Time Warner, alleged "dicta"
    in Mass Media decisions suggests that the power of a shareholder to
    appoint a corporate director is in itself an attributable
    interest.[^179] Time Warner requests that the Commission expressly
    disaffirm this type of attributable interest. Second, Time Warner
    argues that the Commission's recusal standard for the directors and
    officers of a parent company with regard to a subsidiary is
    imprecise and overbroad.[^180] Third, Time Warner requests that the
    Commission clarify that, for purposes of Section 310(b) of the
    Communications Act, an alien entity may hold (1) noninsulated
    limited partnership interests in a broadcast licensee of up to 20%
    of equity or (2) indirect noninsulated limited partnership interests
    in a broadcast licensee of up to 25% of equity. Time Warner also
    requests that the Commission employ the multiplier to calculate the
    equity held indirectly by a noninsulated alien limited
    partner.[^181]

**2. Discussion**

66. Directors and officers are deemed to have an attributable interest
    in the entities that they serve. [^182] We disagree with Time Warner
    regarding the parameters of the directors and officers attribution
    rule. A party that has the right to appoint a director to the board
    of an entity has the ability to influence the entity's conduct by
    virtue of the director the party selects; thus under the directors
    and officers rule that party has an attributable interest in the
    entity.[^183] Likewise, if two entities share common directors or
    officers, or have employees that serve as directors or officers of
    the other entity, the directors and officers render the entities
    attributable because of the influence that directors and officers
    have over an entity.

67. Time Warner argues that the recusal standard for the officers and
    directors of a parent company with regard to a subsidiary is
    imprecise or overbroad.[^184] As a general matter, we believe that
    the recusal standard is appropriate. In addition to the guidance
    provided by the rule, 47 C.F.R. § 76.503(h) (officer or director's
    duties must be "wholly unrelated to the broadcast licensee or cable
    television system subsidiary"), the Commission has provided
    interpretative guidance in a series of decisions.[^185] We have
    stated that parties must take steps to prevent "the recused director
    from exercising authority or influence in areas that will affect"
    the subsidiary.[^186] For example, we have approved steps where the
    recused director is not involved in decisions or discussions
    regarding the particular subsidiary, financial reports are
    aggregated so that the subsidiary's performance figures are not
    separately displayed for the director, and reports to the director
    are redacted to remove information regarding the subsidiary.[^187]

68. For purposes of the horizontal ownership and channel occupancy
    rules,[^188] we will amend the matters for which a director or
    officer must recuse himself or herself in order to achieve the
    purpose of those rules. As discussed in Section III.D above, the
    horizontal ownership and channel occupancy rules are designed to
    place limits on a cable operator's programming power. As long as
    directors and officers appointed by a partial owner of a cable
    operator are not involved in the video-programming activities of the
    partially owned cable operator, the concerns of Section 613 that an
    MSO's programming power will be extended by its ownership interest
    are not implicated. Permitting directors or officers who have
    knowledge and expertise in areas other than video programming, such
    as telephony or Internet, to serve with a cable company will benefit
    the cable company as technologies converge. Therefore, to achieve
    these objectives for the horizontal ownership and channel occupancy
    limits rules, appointed or common directors and officers, and the
    partnership equivalent thereof, shall not be attributable if they do
    not participate in the video programming activities of either
    entity.[^189] To demonstrate that the officer or director meets the
    above-stated criteria, the relevant entity shall petition the
    Commission for a waiver as set forth in the rule.[^190]

69. Finally, we will not address Time Warner's request regarding alien
    ownership of broadcast licensees. The *Cable Attribution Notice* did
    not raise for comment the attribution rules applicable to those
    rules; therefore, this is not the appropriate forum to address Time
    Warner's request.

#  F. Limited Liability Companies {#f.-limited-liability-companies .unnumbered}

#  {#section .unnumbered}

**1. Comments**

# Chase and Mediacom request that we expand the insulated limited partner exception to include insulated members of limited liability companies LLCs.[^191] Mediacom argues that the insulation criteria will prevent an LLC investor from exerting control over management.[^192]

**2. Discussion**

70. For the reasons set forth in the *Broadcast Attribution Report and
    Order*, we will treat LLCs and other new business forms including
    registered limited liability partnerships ("RLLPs") under the same
    attribution rules that currently apply to limited
    partnerships.[^193] The insulation criteria applied above to limited
    partnerships will apply also to these new business forms.

71. State laws grant more liberal organizational powers to LLCs and
    RLLPs than to limited partnership forms. Thus, equity holders can
    retain their limited liability even though they participate in the
    management of the entity. Under these circumstances, we believe that
    it is important to apply the insulation criteria to assure that
    those equity holders that purport to be insulated from management
    are in fact so insulated. In addition, even when an LLC adopts a
    \"corporate form\" of organization, there is still sufficient
    discretion afforded by state law so that the owners of the
    enterprise may retain some level of operational control on their own
    part. The organizational restrictions applicable to corporations do
    not necessarily apply to LLCs.

72. To reduce paperwork burdens, we will not routinely require the
    filing of organizational documents for LLCs. However, to remain
    consistent with our treatment of limited partnerships and insulation
    criteria, we will apply the same "non-involvement" requirements for
    LLC members who are attempting to insulate themselves from
    attribution that we require for limited partners who are attempting
    to insulate themselves.[^194] We will also require LLC members who
    seek not to be attributed to submit a statement that the relevant
    state statute authorizing LLCs permits an LLC member to insulate
    itself/himself in the manner required by our criteria, since our
    experience shows that state laws vary considerably with respect to
    the obligations and responsibilities of LLC members. This policy
    will help us to avoid any potential confidentiality concerns,
    referred to in the *Broadcast Attribution Notice*,[^195] which may
    arise if we require the filing of organizational documents.[^196]

**G. Single Majority Shareholder Exemption and an Equity Plus Debt
Rule**

**1. Background**

73. In the *Notice* in this proceeding and through cross-reference to
    the *Broadcast Attribution Notice*, we asked for comment on whether
    adjustments should be made in the general attribution rules to
    eliminate the single majority shareholder exemption. [^197] We also
    asked whether there should be an exemption to the single majority
    shareholder, debt and nonvoting equity exceptions in cases where a
    minority shareholder held a significant portion of an entity's
    equity (voting and nonvoting) and debt.[^198] We asked whether such
    a shareholder's interests in the entity might give the shareholder
    the ability to influence or control the entity. We asked for comment
    on a specific proposal for a new "equity or debt plus" ("EDP")
    attribution rule.[^199] The proposed EDP rule would ascribe an
    attributable interest to an investor that has an interest that
    exceeds 33% of the total assets (equity plus debt) of an entity and
    the investor is either (1) a program supplier of the entity or (2) a
    same-market media entity subject to the broadcast cross-ownership
    rules.[^200] Where an investor held an EDP interest, the nonvoting
    equity and single majority shareholder exceptions would not
    apply.[^201]

74. We also asked whether there are relationships in the cable context
    that would enable an otherwise nonattributable interest holder to
    exert significant influence or control that would warrant a new
    attribution rule capturing that interest.[^202] We asked whether
    contractual or other business relationships between cable entities
    (such as affiliations that allow cable entities to purchase
    programming, technology or equipment on common terms) implicated the
    diversity and competition concerns of the cable rules.[^203]

**2. Comments**

75. CU states that cable operators have a monopoly and need little or no
    direct ownership in a cable system in order to exert pressure with
    their retransmission consent and other contractual rights.[^204] CU
    states that partners who have minimal ownership use methods to
    protect their interests by creating options, put-sell provisions,
    and rights of refusal provisions in partnership agreements.[^205]
    Thus, CU supports the equity and debt test and proposes that debt
    and equity be regarded together under a new attribution rule.[^206]
    CU opposes relaxing the program access standard to permit an
    exemption where there is a single majority shareholder because
    vertically "integrated cable programmers . . . can use their assets
    to force business practices on supposedly dominant partners or
    shareholders."[^207]

76. TCI, Time Warner and NCTA argue that an EDP rule would not be
    appropriate for the cable industry.[^208] Noting that the EDP rule
    proposed in the *Broadcast Attribution Further Notice* is designed
    to capture currently unattributable interests by a program supplier
    in a broadcast station or interests by a media entity in another
    media entity within the same market, NCTA argues that these two
    types of interests are not present in the cable context.[^209] NCTA
    states that a cable operator typically does not compete with another
    operator within the same market.[^210] In addition, NCTA, Bresnan
    and Time Warner argue that a cable programmer is not likely to gain
    an investment in a cable operator that would enable the programmer
    to influence the cable operator in the same manner that a network
    can influence a local television station.[^211] Time Warner argues
    that the investments of the four major broadcast networks in their
    affiliated television stations do not prove that there is similar
    conduct in the cable industry.[^212]

77. NCTA argues that the Commission should keep the single majority
    shareholder exception because minority interest holders cannot
    direct the core operations of the entity. First, NCTA argues that
    there is no evidence that this exception has harmed competition or
    diversity. Second, NCTA argues that the exception permits
    investments in smaller cable operators, which is critical for the
    small operators' continued financial well being.[^213] TCI and
    Bresnan argue that an EDP rule would severely constrain access to
    capital when the cable industry needs additional capital for its
    transition to digital services and where cable is facing increasing
    competitive pressures.[^214] TCI argues that an EDP rule would only
    serve to capture influential interests, which TCI argues should not
    be attributable.[^215] Time Warner argues that nonvoting stock
    should remain unattributable because as a matter of corporate law a
    nonvoting shareholder cannot influence the day-to-day operations of
    a cable operator.[^216]

78. Time Warner argues the *Cable Attribution Notice* erroneously asked
    for the identification of "financial" and "other business
    relationships" that might confer influence or control. Time Warner
    asserts that those interests are not traditional formulations of an
    attributable interest.[^217] Time Warner states that attributing
    certain "contractual or other business relationships in the cable
    context (including affiliations that allow different cable entities
    to purchase programming, technology or equipment on common terms,
    analogous to JSAs and LMAs in the broadcast context)" would raise
    the same types of problems that the Commission faced with the cross
    interest policy.[^218] In particular, a cable operator or
    programmer, Time Warner asserts, would not know whether a proposed
    business relationship would fall under the rule without going
    through a burdensome and time-consuming process seeking a FCC
    ruling.[^219] In this regard, Time Warner argues that the
    cross-interest policy should be eliminated because the interests
    covered by the policy are not relevant to the cable or programming
    rules.[^220]

79. Time Warner and NCTA argue that current cable industry practices
    regarding the purchase of programming, technology and equipment do
    not raise the same concerns that broadcast station agreements
    do.[^221] In addition, Time Warner argues that the Commission does
    not have the statutory mandate to seek comment on how attributable
    interests might influence the "technology practices" of an
    entity.[^222] NCTA asserts that there is no record evidence that
    cable business relationships that may influence technology and
    equipment purchases harm the marketplace.[^223]

**3. Discussion**

**a. Single Majority Shareholder Exemption**

80. We will eliminate the single majority shareholder exemption from the
    general cable attribution rules. None of the parties in this
    proceeding provided evidence that they are using this exemption or
    presented credible arguments that it should be retained. Given our
    concern that a minority shareholder may be able to exert influence
    over a company even where a single majority shareholder exists, and
    given the lack of a record in this proceeding that the exemption
    should be retained, on balance we believe that it is appropriate to
    eliminate the exemption from the general cable attribution rules.

**b. Equity plus Debt Rule**

81. The "equity plus debt" proposal discussed in the *Cable Attribution
    Notice* will be incorporated into both the general and the program
    access attribution rules. We will tailor the rules to address the
    structure of the cable industry and to serve the particular purposes
    of each of the substantive cable rules at issue in this proceeding.
    The rule we adopt will act as an exception to the insulated limited
    partner, debt and nonvoting stock exemptions as follows: the cable
    equity and debt rule ("ED rule") will ascribe an attributable
    interest to an investor that holds an interest that exceeds 33% of
    the total asset value (equity plus debt) of the applicable entity.
    As a shorthand, we will use the term "total assets" herein to refer
    to the total asset value of the entity.[^224] We will define equity
    to include all stock, whether common or preferred and whether voting
    or nonvoting, and all partnership interests. Debt includes all
    liabilities, whether short-term or long-term. Total assets, by
    definition, are equal to the sum of all debt plus all equity.[^225]

82. The equity/debt approach is intended to resolve our concerns,
    expressed in the *Broadcast Attribution Notice*, that multiple
    nonattributable business interests could be combined to exert
    influence over entities.[^226] As we stated in the *Broadcast
    Attribution Notice*, we are concerned that our nonvoting stock, debt
    and insulated limited partner exemptions can permit nonattributable
    investments that could carry the potential for influence such that
    they implicate diversity and competition concerns and should be
    attributed. In adopting the ED rule, we affirm our conclusion in the
    *Broadcast Attribution Report and Order* that there is the potential
    for certain substantial investors or creditors to exert significant
    influence over key decisions, which may undermine the diversity of
    voices we seek to promote.[^227] They may, through their contractual
    rights and their ongoing right to communicate freely with the
    entity, exert as much, if not more, influence or control over some
    corporate decisions as voting equity holders whose interests are
    attributable.[^228] The current attribution rules are thus simply
    too broad with respect to certain currently nonattributable
    interests.

83. As we decided in the *Broadcast Attribution Report and Order*, we
    intend to aggregate the equity and debt interests of an investor
    (including both non-voting stock in whatever form it is held and
    voting stock) in the applicable entity for purposes of applying the
    investment threshold.[^229] Thus, when the investor's total
    investment in an entity, aggregating all debt and equity interests,
    exceeds 33% of all investment in the entity (the sum of all equity
    plus debt), that investment would be attributable. In aggregating
    the different classes of investment, equity and debt, we intend to
    use total assets (debt plus voting, non-voting, and preferred stock)
    as a base.[^230] We will not apply the percentage threshold
    separately to debt and to equity interests because this could lead
    to distortions in applying the ED rule, depending on the percentage
    of total assets that each class of interests comprises. For example,
    were we to apply the percentage thresholds separately, a company
    with only 10 percent of its capital from debt would be attributable
    to a creditor providing only 3.4 percent of the company's total
    assets, while any equity holder providing 32 percent of the total
    capital would be nonattributable.

84. We have decided to follow our decision in the *Broadcast Attribution
    Report and Order* to adopt a 33% investment threshold. In the
    *Broadcast Attribution* proceeding, some commenters advocated a
    higher threshold, while others advocated a lower threshold. ABC
    stated that a 50% threshold, rather than 33%, more realistically
    identifies the type and level of interest that conveys a realistic
    potential to control the core operations of a licensee. Paxson
    argued for a 25% benchmark, but only for the 4 major networks. MAP
    advocated a 20 percent benchmark. Viacom agreed with 33% in cases
    where the investor is contractually restricted from influencing
    budget, hiring and programming decisions, but argued for a 10%
    benchmark when contractual safeguards are not present. Viacom
    believed that an investment of even 10% of the capitalization of a
    station, particularly if coupled with the ability to influence
    station operations, carries as much influence as a 10% voting stake.
    CBS stated that the threshold should be set no lower than 33% to
    avoid prohibiting relationships the Commission has already deemed
    permissible.[^231]

85. In the *Broadcast Attribution* proceeding, we stated that a 50
    percent threshold would be inappropriately high.[^232] Our goal is
    not merely to attribute interests with the potential to control but
    also those with a realistic potential to exert significant
    influence. On the other hand, we found that the suggested thresholds
    of 25 percent or 10 percent appeared to be too low.[^233] In setting
    the threshold for attribution of these newly attributable interests,
    we must be cautious not to set the limit so low as to unduly disrupt
    capital flow to the cable industry. In addition, we believe that the
    threshold for attribution of nonvoting interests should be
    substantially higher than the attribution level for voting
    interests, which give the holder a ready means to influence the
    company. The proposed 33% threshold seems to be an appropriate and
    reasonable attribution threshold. We note that we have discretion to
    exercise our judgment in setting a percentage threshold in this
    regard and to draw an appropriate line, a challenging yet inevitable
    task for government agencies. We have employed a 33 percent
    benchmark applied in the context of the broadcast cross-interest
    policy, and that particular benchmark does not appear to have had a
    disruptive effect.[^234] In *Cleveland Television*, the Commission
    held that a one-third non-voting preferred stock interest by a
    broadcaster in another station in the same market conferred
    \"insufficient incidents of contingent control\" to violate the
    multiple ownership rules or the cross-interest policy, and that the
    holders, by virtue of ownership of the non-voting preferred stock
    interest would not retain the means to directly or indirectly
    control the station.[^235] More recently, we have applied *Cleveland
    Television*\'s 33 percent threshold in *Roy M. Speer*, where we
    limited the non-attributable equity holdings of a same-market
    television licensee in another local television station to 33
    percent.[^236] We will use this threshold in applying the ED rule
    but note that we could adjust the threshold later, if warranted.

86. We recognize that the attributable status of a particular investment
    could change, based, for example, on a change in the firm's assets,
    resulting in the investor's interests dropping below the 33 percent
    threshold, or vice versa.[^237] We will require parties to maintain
    compliance with the attribution criteria as any such changes occur.
    Where sudden, unforeseeable changes take place, however, we will
    afford parties a reasonable time, one year,[^238] to come into
    compliance with any ownership restrictions made applicable as a
    result of the change in attributable status.

87. We note that the broadcast EDP attribution rule has additional
    prongs that the cable ED rule does not. In order for the broadcast
    EDP rule to apply, an investor must not only have an interest that
    exceeds 33% of the total assets of the applicable entity, but must
    also either (1) provide over 15% of the entity's programming or (2)
    be a same-market media entity subject to the broadcast
    cross-ownership rules.[^239] These additional prongs were added to
    identify "those relationships that may trigger situations in which
    there is significant incentive and ability for the otherwise
    nonattributable interest holder to exert influence over the core
    operations of the licensee."[^240] We stated these prongs reflect
    our "recognition that the category or nature of the interest holder
    is important to whether an interest should be attributed."[^241]

88. In this regard, we explicitly identified two types of interest
    holders -- the major program supplier and the same-market media
    entity -- that would have the incentive and the means to exert
    influence over the broadcast licensee.[^242] The 15% programming
    prong was designed to capture interests of major television
    broadcast networks, among other substantial programmers, in local
    broadcast stations whereby the networks were extending their
    nationwide programming reach through previously unattributable
    relationships.[^243] Interests captured by the 15% programming EDP
    rule count toward the broadcast network's or other programmer's
    national ownership limit. The same-market entity prong was designed
    to capture controlling or influential interest in two media entities
    within the same market that would then trigger the local
    cross-ownership rules, thereby implicating the Commission's goals of
    promoting diversity and competition.[^244]

89. The cable ED attribution rule implicitly identifies relationships
    that confer on otherwise unattributable investors significant
    incentive and ability to exert influence over the core interests of
    the applicable entity. Thus, we do not find it necessary in the
    attribution rule to refer explicitly to the nature of the investor.
    With regard to the cable horizontal ownership limits, the
    competitive structure of the cable industry differs from that of the
    broadcast industry. As the cable operators in this proceeding have
    stated, unlike broadcasters, cable operators generally do not
    compete in the same markets. This lack of competition permits and
    encourages cable operators to form combinations with one another
    across markets, as established in this record,[^245] in ways that
    the broadcast industry does not. These combinations extend the reach
    of an MSO's influence and control over programming, thereby
    expanding its power in the national programming marketplace and
    accordingly triggering the purpose of the horizontal ownership
    limits. Because cable operators do not compete in the same markets,
    cable subscribers are limited to the programming selections that a
    single system chooses. One MSO thus has no incentive to distinguish
    itself through different programming from another MSO because they
    do not compete in the same market and likely hold interests in one
    another across markets.[^246] Because of this market structure, if
    an MSO has a significant ED interest in a system, that interest
    enables the MSO to significantly influence or control a cable
    system's core functions, such as programming, the heart of the
    horizontal ownership rule.[^247] Thus, the ED interest by itself
    implicates the concerns of the rules without the addition of an
    additional prong. We also believe that the ED attribution rule
    should be applied to the program access type attribution standard,
    for the reasons set forth in Section H below.

90. Finally, with regard to the same-market media entity cross-ownership
    prohibition rules at issue in this proceeding (47 C.F.R. §§
    76.501(d) (cable/SMATV cross-ownership), 76.505 (cable-telco buy-out
    prohibitions), and 76.905(b)(2) (effective competition), we will
    apply the broadcast EDP attribution test applied to the
    broadcast/cable cross-ownership prohibition rule for the reasons set
    forth in the *Broadcast Attribution Report and Order* because they
    serve the same purpose, promoting competition and diversity within a
    local media market.[^248]

91. We decline at this time to examine contract language on a
    case-by-case basis to determine whether the contract gives one of
    the parties thereto an attributable interest. We believe that a
    bright-line ED test is superior to a case-by-case analysis because
    it permits the planning of financial transactions and minimizes
    regulatory costs. Nevertheless, we retain discretion to review cases
    that present unique issues where the public interest requires such a
    review. Such cases might occur, for example, when there is
    substantial evidence that the combined interests held are so
    extensive that they raise an issue of significant influence such
    that the Commission's multiple ownership rules should be implicated,
    notwithstanding the fact that these combined interests do not come
    within the parameters of the ED rule. We do not intend for this type
    of review to replace the cross-interest policy that we abolished in
    the *Broadcast Attribution Report and Order*.[^249] We reserve the
    discretion to examine in the future whether contractual relations
    between cable entities that enable them to purchase programming,
    technology or equipment on common terms implicates the diversity and
    competition concerns of the cable rules.

**H. The Program Access Attribution Standard**

**1. Background**

92. The discussion above relates to attribution criteria that are common
    to both the "general" and "program access" attribution rules. There
    are important areas, however, where these two sets of rules differ.
    More particularly, the rules differ in that the program access
    attribution rules attribute nonvoting stock interests, attribute all
    partnership interests above 5%, and do not exempt what would
    otherwise be attributable interests because of the presence of a
    single majority shareholder.

93. We also asked for comment on whether and how we should re-evaluate
    the program access attribution standard. In particular, we sought
    comment on (1) whether the program access attribution standard
    serves the purposes for which it was intended; (2) whether the
    program access standard is over- or under-inclusive; (3) whether the
    program access attribution standard should be revised in relation to
    the broadcast attribution standard; (4) whether these two
    attribution standards should be treated as completely separate and
    independent formulations; and (5) whether, in view of the purposes
    it serves, we should require a more compelling showing before
    modifying the program access standard.[^250]

**2. Comments**

94. CU and DIRECTV argue generally that the program access rules should
    not be relaxed.[^251] WCA seeks clarification as to whether the
    "program access" attribution rules apply to all entities subject to
    the program access rule. WCA argues that there is currently a "gap"
    in the program access rules' definition of an attributable interest.
    WCA states that, although the program access rules are designed to
    address problems created by the common ownership of a cable company
    and a satellite cable programming vendor, the rules appear to apply
    only where a cable company has an attributable interest in a
    programming vendor and not vice versa.[^252] Section 76.1001 of our
    rules covers a "cable operator, \[a\] satellite programming vendor
    in which a cable operator has an attributable interest, \[and\] a
    satellite broadcast programming vendor."[^253] Because this language
    does not specifically state that the rule applies to an entity that
    holds an attributable interest in both a cable operator and a cable
    programmer, WCA states that some parties have asserted that the
    program access rules do not apply where a cable programmer holds an
    ownership interest in a cable operator.

95. For example, Microsoft Corporation maintains a 50% equity interest
    in the cable programmer MSNBC and an 11.5% non-voting stock interest
    in Comcast. According to WCA, Microsoft has argued that the program
    access rules' definition of attributable interest does not
    explicitly state that the definition applies to interests in cable
    companies; thus Microsoft has argued that its interest in Comcast is
    not attributable and that MSNBC is not covered by the program access
    rules.[^254] Based on this argument, Microsoft has never made MSNBC
    available to wireless cable operators or other alternative
    MVPDs.[^255]

96. WCA argues that Microsoft's argument defies common sense. Under
    Microsoft's interpretation, it would not hold an attributable
    interest in Comcast even if it held a sizable minority voting stock
    interest in that company. WCA also notes that Time Warner holds its
    cable systems and its cable programmers in separate subsidiaries,
    Time Warner Entertainment ("TWE") and Turner Broadcasting
    respectively. In addition, after the proposed AT&T and TCI merger,
    WCA states that AT&T will hold Liberty cable networks and the TCI
    systems in separate subsidiaries.[^256] WCA states that Time Warner
    and AT&T should not be able to argue that the Turner cable networks
    and the Liberty cable networks are exempt from the program access
    rules because Time Warner's 100% ownership of TWE and AT&T's 100%
    ownership of the TCI systems are not attributable.[^257]

97. WCA requests that the Commission amend Section 76.1000(b) to make it
    clear that common ownership of, or an attributable interest in, both
    a cable operator and a cable programmer will trigger the
    rules.[^258] WCA states that this was the intent of Congress[^259]
    and that the Commission has recognized that vertical integration
    also occurs where a cable programmer holds an ownership interest in
    a cable operator.[^260]

98. As a preliminary objection, MediaOne states that WCA should file a
    program access complaint to resolve this issue.[^261] Comcast and
    TCI argue that the Commission should not amend the program access
    rules because Section 628 of the Communications Act, which
    authorized the implementation of the rules, specifically addresses
    only situations where a cable operator has an attributable interest
    in a satellite cable programming vendor. Paragraphs (b) and
    (c)(2)(B) of Section 628 refer to a "satellite cable programming
    vendor\[s\] in which a cable operator has an attributable
    interest."[^262] Section 682(c)(2)(A) refers to a "cable operator
    which has an attributable interest in a satellite cable programming
    vendor."[^263] TCI and Comcast thus argue that the plain language of
    Section 628 cannot be read to apply to a third party noncable entity
    that holds simultaneous ownership interests in a cable operator and
    a satellite cable programming vendor.[^264] Moreover, TCI argues
    that, even if Section 628 could be read as WCA requests, the
    Commission should decline to grant WCA's request because the
    potential anticompetitive effects associated with vertical concerns
    do not warrant stringent Commission regulation.[^265]

99. WCA also requests that the Commission initiate a process to examine
    on a case-by-case basis whether unique and substantial non-ownership
    relationships between a cable operator and a nonvertically
    integrated cable programmer should be classified as *de facto*
    "attributable interests."[^266] WCA states that the consolidation of
    cable systems and new joint ventures between cable companies and
    cable programmers is further tightening the MSOs stranglehold over
    cable programming.[^267] Ameritech and WCA state that as a result, a
    number of nonaffiliated cable networks such as Fox News, MSNBC, Game
    Show Network, Eye on People, Home & Garden Television and TV Land
    act like vertically-integrated programmers and refuse to sell their
    products to alternative MVPDs.[^268] WCA proposes that the
    Commission develop procedural and proof requirements for a
    case-by-case approach that would capture these harmful relationships
    while preventing frivolous complaints against cable
    programmers.[^269]

100. Comcast argues that the Commission should deny this request because
     the program access rules already encompass non-ownership
     relationships that confer "actual working" control over cable
     operators.[^270] Comcast also argues that WCA has not presented any
     evidence that WCA has been denied video programming due to a joint
     venture that is not covered by Section 76.1000(b).[^271] TCI argues
     that the Commission should adopt TCI's control "certification
     proposal" as a less costly approach.[^272]

**3. Discussion**

**a. Changes to the Standard**

101. The proceeding before us raises the general question of whether the
     different attribution standards employed can be justified based on
     the underlying purposes of the different cable rules; whether for
     one set of rules it is justifiable to attribute any stock interest
     above the 5% level, even if it is non-voting stock, whereas other
     rules do not attribute nonvoting stock or other financial interests
     even if they represent a very significant portion of the total
     value of the entity involved. Because different rules address
     different economic interests and different policy objectives it is
     not illogical that different attribution criteria might be more
     appropriate for one set of rules than another. The rules derived
     from the broadcast attribution rules, including for example the
     horizontal ownership and channel occupancy rules, were discussed in
     terms of promoting competition and diversity and focused on the
     influence one entity was likely to have over another. When the
     program access attribution criteria, which are used, for example,
     in the program access, program carriage rules, and for certain rate
     regulation purposes, were adopted it was thought desirable to
     attribute more interests because these rules were designed not only
     to promote competition and diversity but to deter specific
     discriminatory or improper conduct by specific cable operators,
     programmers, or other entities. Having reviewed the rules in
     question we continue to believe that the program access attribution
     rules appropriately take into account the relevant considerations
     but that an ED rule should be added to capture debt interests. In
     addition, given the purposes of the various rules subject to this
     proceeding, we find it appropriate to switch the SMATV/cable
     cross-ownership rule from the program access attribution standard
     to the general attribution standard.

102. As discussed above, the rules covered by the "program access"
     attribution standard are designed to address specific misconduct
     that adversely affects competition and to focus on economic
     incentives to discriminate. These rules are triggered only where
     there have been allegations of specific misconduct based on a
     relationship between two specific parties. At that point, we
     examine the relationship between the parties, and because specific
     misconduct has been alleged, the relationship warrants stricter
     scrutiny. By contrast, the ownership rules, such as the horizontal
     limits and cable/broadcast cross-ownership, are not designed to
     identify misconduct *per se*, but rather are designed to act as
     structural safeguards against potential anticompetitive conduct.

103. Moreover, we note that, unlike the horizontal ownership and
     broadcast/cable cross-ownership prohibition, the program access
     type rules are not designed to limit ownership in entities covered
     by those rules. Rather, the program access type rules simply
     provide that if an investor holds an interest in an entity covered
     by the rules, that investor will be subject to the behavioral
     constraints of the program access type rules. Thus, attributing
     nonvoting equity and not permitting a single majority shareholder
     or insulated limited partner exemptions for these rules in no way
     deters investment in entities covered by these rules. In other
     words, the program access attribution standard's broader sweep does
     not raise the capital and investment concerns that the general
     attribution standard raises.

104. It is appropriate to attribute nonvoting equity and to not allow
     the insulated limited partnership and single majority shareholder
     exceptions to the "program access" type rules. By virtue of a
     significant nonvoting equity interest, one party has the incentive
     to influence or favor the other party, and all of the "program
     access" type rules are designed to prevent the harm caused by this
     type of influence or favoritism. For example, the program access
     rules identify investments where a cable operator has an incentive
     to influence a programmer to deny access to a cable competitor and
     the programmer has an incentive to favor the cable operator to keep
     its investor satisfied.[^273] The program carriage rules identify
     situations where an investor has a financial incentive to influence
     a cable operator not to carry unaffiliated programming so that the
     investor's interest in a favored affiliate is not harmed.[^274]
     Likewise, the leased access and open video systems rules identify
     situations where investors have incentives to favor programmers in
     which they have investments over other programmers.[^275] Finally,
     the rules governing asset transfers between a cable operator and an
     affiliate[^276] and rate pass-throughs for the programming services
     of an affiliated programmer[^277] target behavior favoring an
     investment. Thus, for the "program access" type rules, even if
     there is a single majority shareholder or the investor does own
     voting stock in a company, the investor has the incentive to
     influence the company, and the company has the incentive to keep
     its investor satisfied.

105. Allowing a limited partnership exception here would shield from the
     scope of these "program access" type rules the very kinds of
     relationships they are intended to address. A cable operator cannot
     insulate itself from its investment in a programmer when it is
     charged with denying carriage to unaffiliated programmers, vertical
     foreclosure that denies program access to another cable operator,
     or asset transfers or rate pass-throughs between the cable operator
     and the programmer. Moreover, to be covered by most of these rules,
     the parties would have had to enter into a contractual
     relationship, such as an affiliation agreement. Thus, the exemption
     for insulated limited partners could not apply because insulated
     limited partners are limited in terms of the contracts they may
     enter into with the partnership and still be exempt from
     attribution.

106. We also believe that it is appropriate to adopt an ED rule for the
     "program access" type rules. As discussed above, these rules are
     designed to identify specific misconduct between two parties, and
     their attribution rules are designed to identify interests that
     would confer on their holder the incentive to influence or favor
     the other party. A 33% ED interest would provide such an incentive.
     In addition, while the program access type attribution rules count
     nonvoting equity, they do not recognize debt. We find that the
     types of investors covered by the program access rules that hold
     over 33% of the total assets of an entity in the form of debt and
     equity would have the incentive to influence that entity.

107. Given the different purposes of the general and program access type
     attribution rules, it is appropriate to realign one of the cable
     rules. The program access type rules currently apply to the
     SMATV/cable cross‑ownership prohibition.[^278] However, because the
     SMATV/cable cross-ownership prohibition is a structural safeguard
     against anticompetitive conduct, we will now apply the general
     attribution standard to the SMATV/cable cross-ownership rule.

**b. WCA's Proposal**

108. We specifically asked for comment on whether the program access
     attribution standard was under-inclusive; thus, we disagree with
     MediaOne that WCA's request is not within the purview of the *Cable
     Attribution Notice*. Although the program access rule clearly sets
     forth in its provisions a program access attribution standard, we
     agree with WCA that it is not clear as to which entities are
     covered by the program access attribution standard with respect to
     the program access rule. We find that the program access
     attribution standard should be applied to all entities covered by
     the program access rule, including cable operators. Moreover, to
     the extent there is a lack of clarity with respect to the remainder
     of the "program access" type rules, we clarify that the program
     access attribution standard should be applied to all entities
     covered by the "program access" type rules.

109. For purposes of the program access rule, the issue is what person
     or entity constitutes a "cable operator" that holds an attributable
     interest in a programmer such that the program access rule is
     triggered.[^279] Congress defined the term "cable operator" in
     Section 602 of the Communication's Act as follows:

> \[T\]he term "cable operator" means any person or group of persons . .
> . who provides cable service over a cable system and directly or
> through one or more affiliates [owns a significant
> interest]{.underline} in such cable system. . . .[^280]

The Commission established the attribution rules to determine what
constitutes a "significant interest."[^281]

110. The program access attribution rules define what constitutes a
     "significant interest." The purpose of the program access rule, as
     well as all of the other rules covered by the program access
     attribution standard, is to deter discriminatory or improper
     conduct.[^282] These rules are designed to deter misconduct by all
     parties covered by the applicable rules, including cable operators.
     To the extent that there is any confusion regarding the definition
     of cable operator for purposes of these rules, we will amend these
     rules to make it clear that any party with an attributable interest
     in a cable operator under the program access attribution standard
     shall be treated as a cable operator for purposes of these
     rules.[^283] Thus, if a third party has an attributable interest in
     a cable operator under the program access attribution standard, it
     shall be treated as a cable operator for purpose of the program
     access type rules.

111. We decline to adopt WCA's proposal that we examine on a
     case-by-case basis whether the relationship between a cable
     operator and an unaffiliated cable programmer suggests that they
     are *de facto* affiliated. As noted above, we favor a bright line
     test in order to promote regulatory certainty.

**I. *Cable Reform* Issues**

**1. Effective Competition**

**a. Background**

112. In this section, we establish rules for the definitions of
     affiliate for purposes of the "LEC test" and the "competing
     provider test" of the effective competition rules. Under Section
     623 of the Communications Act, a cable operator is not subject to
     rate regulation if it is subject to effective competition in its
     franchise area.[^284] Section 623(l) as amended by the 1992 Cable
     Act provides three tests for determining effective
     competition.[^285] A cable system is exempt from rate regulation if
     any of the following three tests is met:

> \(A\) fewer than 30 percent of the households in the franchise area
> subscribe to the cable service of a cable system \[the "[low
> penetration test]{.underline}"\];
>
> \(B\) the franchise area is-
>
> \(i\) served by at least two unaffiliated multichannel video
> programming distributors each of which offers comparable video
> programming to at least 50 percent of the households in the franchise
> area; and
>
> \(ii\) the number of households subscribing to programming services
> offered by multichannel video programming distributors other than the
> largest multichannel video programming distributor exceeds 15 percent
> of the households in the franchise area \[the "[competing provider
> test]{.underline}"\]; or
>
> \(C\) a multichannel video programming distributor operated by the
> franchising authority for that franchise area offers video programming
> to at least 50 percent of the households in that franchise area \[the
> "[municipal provider test]{.underline}"\].[^286]

Number range level0Number range level1Number range level2Number range
level3Number range level4Number range level5Number range level6Number
range level7The 1996 Act adds a fourth test to Section 623(l).[^287]
Under the new test, a cable operator will be subject to effective
competition if comparable video programming is offered to subscribers
within the cable operator\'s franchise area by, or over the facilities
of, a LEC or its affiliate.[^288] Section 623(l)(1)(D)[^289] (the \"LEC
test\") provides that effective competition exists when:

\(D\) a local exchange carrier or its affiliate (or any multichannel
video programming distributor using the facilities of such carrier or
its affiliate) offers video programming services directly to subscribers
by any means (other than direct-to-home satellite services) in the
franchise area of an unaffiliated cable operator which is providing
cable service in that franchise area, but only if the video programming
services so offered in that area are comparable to the video programming
services provided by the unaffiliated cable operator in that area.

113. In the *Cable Reform Notice,* seeking comment on rules to implement
     this statutory change, the Commission sought comment on the
     definition of "affiliate" for purposes of the LEC test.[^290]
     Resolution of this issue was then transferred to this
     proceeding.[^291]

114. Although not specifically related to the effective competition
     test, the 1996 Act amended Title I, Section 3 of the Communications
     Act by adding a definition of "affiliate:"

> The Term "affiliate" means a person that (directly or indirectly) owns
> or controls, is owned or controlled by, or is under common ownership
> or control with another person. For purposes of this paragraph, the
> term \"own\" means to own an equity interest (or the equivalent
> thereof) of more than 10 percent. [^292]

In the *Cable Reform Notice*, we noted that this definition applies to
our rules "unless the context otherwise requires,"[^293] and that the
definition of "affiliate" in Title VI of the Communications Act
concerning cable television was not changed by Congress.[^294] As noted
above, Title VI provides:

> \[T\]he term "affiliate," when used in relation to any person, means
> another person who owns or controls, is owned or controlled by, or is
> under common ownership or control with, such person.[^295]

115. Given that Title VI does not set a percentage threshold as to
     ownership, we found that we have discretion to establish an
     ownership threshold other than 10% for purposes of Title VI.[^296]
     However, as an interim rule, we decided that it was reasonable to
     adopt the 10% threshold until this rulemaking was completed.[^297]
     We decided that active or passive equity interests of 10%, or the
     equivalent thereof, would constitute an affiliation. In addition,
     we concluded that affiliation could be established through de facto
     control and that we would determine on a "case-by-case" basis
     whether other interests besides equity would be "the equivalent" of
     an equity interest."[^298]

116. We tentatively concluded that, although the Title I definition was
     not mandated for use for purposes of Title VI, we found it
     reasonable to use this test for purposes of the LEC effective
     competition rule.[^299] We asked for comment on this proposal as
     well as whether passive ownership interests and beneficial
     interests should be included.[^300]

117. In addition, in the *Cable Attribution Notice*, we stated that we
     intended to review how and whether any changes in our cable
     attribution rules should affect our various definitions of
     "affiliate."[^301] In reviewing the effective competition rules, we
     ascertained that the "competing provider test" does not have its
     own specific definition of affiliate.[^302] The competing provider
     test provides that there is effective competition in certain
     circumstances where there are at least two "unaffiliated
     multichannel video programming distributors" in the franchise
     area.[^303] As discussed below, we will amend this rule to clarify
     its definition of the term "affiliate" to bring it into alignment
     with our other same market cross-ownership rules.

**b. Comments**

118. Cable operators argue that the Commission should adopt the Title I
     10% threshold or a lesser threshold for purposes of defining a LEC
     affiliate.[^304] They argue that both active and passive equity
     interests should be deemed attributable.[^305] They also argue that
     beneficial interests, options, warrants, and convertible debentures
     should be attributable as the "equivalents" of equity
     interests.[^306] Time Warner argues that the Commission should
     define the term "beneficial interest" in the same broad manner as
     the SEC in its Rule 13d-3 under the Securities and Exchange Act of
     1934.[^307] The cable operators argue that these types of
     "equivalent" interests should be attributable based on the
     Commission's policy of assessing ownership based on economic
     realities.[^308]

119. Some parties argue that the Commission should adopt a 5% threshold
     for the effective competition test.[^309] CCTA argues that LECs are
     using video service businesses as a defensive strategy to keep
     capital out of the hands of cable operators who seek to compete
     with LECs in telephony.[^310]

120. Time Warner proposes that the Commission modify FCC Form 430 to
     require wireless cable licensees to certify: (1) whether the
     licensee is LEC-affiliated; and (2) whether the entity offering
     service over the wireless facilities is LEC-affiliated.[^311] This
     certification requirement, according to Time Warner, would save
     public and private resources by eliminating the need to investigate
     the relationships for compliance with the Commission\'s
     rules.[^312]

121. LECs and public interest groups argue that the Title VI definition
     of affiliate should continue to govern the implementation of Title
     VI provisions, including the effective competition test.[^313]
     BellSouth states that the definition in Title VI is unambiguous and
     should be followed.[^314] GTE argues that the application of a 10%
     benchmark is arbitrary and does not comport with realities of
     telecommunications marketplace.[^315] Bell Atlantic argues that
     Commission should use Title VI definition because the use of
     specific thresholds are overly intrusive and burdensome.[^316] ICTA
     favors retaining the Title VI definition of "affiliate" in
     determining when effective competition exists, and urges the
     Commission to exclude beneficial or passive interests in this
     context.[^317]

122. RCN contends that the application of the Title I 10% benchmark to
     rules arising under Title VI would create a disparity in the
     regulatory treatment of cable affiliates and LEC affiliates.[^318]
     Under the Title I definition, RCN argues that the presence of any
     competitive MVPD in which a LEC has a passive, non-controlling 10%
     or greater equity investment would establish a basis for a cable
     operator to claim that effective competition exists in the market.
     Cable operators, on the other hand, would be unfairly advantaged
     because, RCN asserts, they would be considered "affiliated" with
     other entities only if actual control is established under the
     broader Title VI definition of \"affiliate.\"[^319] Accordingly,
     RCN argues that cable operators would be entitled to deregulation
     while maintaining a much higher ownership interest in a purported
     "unaffiliated" competing provider.[^320]

123. USTA opposes the application of the Title I benchmark in the Title
     VI context.[^321] USTA argues that the Commission has developed
     expertise in applying the Title VI definition of "affiliate" in
     attribution cases, and should continue to do so.[^322] USTA
     contends that Congress\' decision not to extend the Title I
     benchmark to the definition of \"affiliate\" contained in Title VI
     means that Congress did not intend to extend a benchmark to Title
     VI situations.[^323]

124. While SBC did not take a position on whether the Commission should
     adopt the Title I definition, SBC argues that the term \"beneficial
     interests\" is not commonly understood to constitute an ownership
     interest and therefore should not be deemed an "equivalent
     interest" under the Title I definition.[^324]

**C. Discussion**

**i. LEC Test**

125. We reaffirm our decision in the *Cable Reform Notice* that, given
     that Congress left Title VI's definition of affiliate unaltered,
     Title VI's definition continues to govern rules promulgated
     thereunder.[^325] In our discretion under Title VI, we believe it
     reasonable to adopt, with some modifications, the 10% threshold
     proposed in the *Cable Reform Notice* because we believe 10% will
     reasonably capture active LEC participation in a MVPD that may give
     the MVPD access to the resources of the LEC that Congress
     envisioned would be necessary to provide effective competition to
     cable.

126. Congress expected that the LECs would be robust competitors of
     cable operators because of their financial and technical
     resources.[^326] Congress also expected that the LECs would be
     effective competitors because their presence would be ubiquitous.
     [^327] Congress did not envision deregulation until competition was
     in place.[^328]

127. Thus, unlike the other cable attribution Number range level0Number
     range level1Number range level2Number range level3Number range
     level4Number range level5Number range level6Number range
     level7rules at issue in this order, which are designed to promote
     competition by ascertaining the minimum interest necessary for one
     entity to potentially influence another, the LEC test is designed
     to promote competition where a LEC participates in the ownership
     and operation of a MVPD to such an extent that the MVPD may truly
     enjoy the financial and technical resources of the LEC in order to
     compete with cable. Based on the distinct purpose here involved --
     to identify not the potential for influence but the existence of
     significant involvement -- we believe a higher attribution standard
     is in order for the LEC test.

128. More specifically, it is appropriate to set the equity threshold
     higher than the standard 5% threshold in order to serve this
     different purpose and to require greater LEC involvement in MVPDs
     before deregulation takes place based on this test. We set the
     equity threshold at 10% threshold to reflect when a LEC has become
     a MVPD competitor in the relevant market. Given our relatively
     limited experience with the LEC test to date, we hesitate to set
     the threshold higher than 10% at this time. Nevertheless, we
     reserve the option to raise the 10% threshold in the future if we
     determine that 10% does not accurately capture the entrance of LEC
     competition in the marketplace. The 10% threshold will apply to
     corporate voting stock and partnership interests. The 10% threshold
     will apply only to active LEC investors. An MVPD competitor cannot
     be effectively a LEC competitor by virtue of its affiliation with a
     LEC that is a passive investor only, unless the LEC has an ED
     interest in the MVPD. We believe that an ED investment, given its
     size, by a LEC gives an MVPD significant access to the resources of
     a LEC such that it can be presumed that there is effective LEC
     competition.[^329] The LEC effective competition test presumes,
     without any market share or market penetration test, that the
     presence of a LEC competitor or use of a LEC's facilities, given
     the LEC's identity, resources, and functions, has significance
     beyond that of other competitors. Consistent with this rationale we
     will not treat positional interests (officers and directors) or
     insulated limited partnership interests as creating attributable
     interests that would result in a finding of LEC effective
     competition because these interests would not give the MVPD access
     to the LEC's significant resources. Given that we have not adopted
     the Title I definition of affiliate, we need not determine what
     constitutes an interest "equivalent" to an equity interest.

129. We also decline to adopt Time Warner's proposal that we require
     wireless cable licensees to certify with the Commission whether
     they are LEC-affiliates and whether any entity offering services
     over their facilities is LEC affiliated. In the *Cable Reform
     Report and Order*, we adopted a mechanism for cable operators to
     obtain evidence from their competitors in order to establish
     effective competition.[^330]

**ii. Competing Provider Test**

130. As discussed above, in reviewing the effective competition rules,
     we ascertained that the "competing provider test" does not have its
     own specific definition of the term "affiliate."[^331] The
     competing provider test provides that there is effective
     competition in certain circumstances where there are at least two
     "unaffiliated multichannel video programming distributors" in the
     franchise area.[^332] Because the competing provider test provides
     the same function as our cross-ownership prohibitions, we will
     apply cable/SMATV cross-ownership attribution rules to determine
     whether two MVPDs serving the same market are "affiliated."

131. Given that the competing provider test does not have its own
     definition, the default definition in Part 76's definition section
     applies:

> When used in relation to any person, \[the term affiliate means\]
> another person who owns or controls, is owned or controlled by, or is
> under common ownership or control with, such person.[^333]

Our rules then define cognizable ownership and control interests under
this rule through our attribution rules.[^334] However, our rules do not
specify which attribution rules apply to the competing provider test.
Although, in the *Cable Attribution Notice*, we initiated a review of
our various definitions of "affiliate" in light of our attribution
rules,[^335] no party filed comments on the competing provider rule.

132. We find it appropriate to apply the general attribution rules to
     the competing provider test because it is designed to act as a
     structural safeguard in order to promote competition.[^336]
     Certainly we could not find that a cable operator faced effective
     competition in its franchise area if the "competing" MVPD was
     partially owned by the cable operator. The cable/SMATV
     cross-ownership attribution standards will capture interests that
     would enable their holders to engage in anticompetitive behavior.
     We will accordingly amend the competing provider rule to clarify
     its attribution standard.[^337]

**2. Cable-Telco Buy-Outs**

**a. Background**

133. Section 302 of the 1996 Act added Section 652 to the Communications
     Act. Section 652 provides in relevant part:

\(a\) Acquisitions By Carriers. No local exchange carrier or any
affiliate of such carrier owned by, operated by, controlled by, or under
common control with such carrier may purchase or otherwise acquire
directly or indirectly more than a 10 percent financial interest, or any
management interest, in any cable operator providing cable service
within the local exchange carrier\'s telephone service area.

\(b\) Acquisitions By Cable Operators. No cable operator or affiliate of
a cable operator that is owned by, operated by, controlled by, or under
common ownership with such cable operator may purchase or otherwise
acquire, directly or indirectly, more than a 10 percent financial
interest, or any management interest, in any local exchange carrier
providing telephone exchange service within such cable operator\'s
franchise area.[^338]

134. Number range level0Number range level1Number range level2Number
     range level3Number range level4Number range level5Number range
     level6Number range level7In the *Cable Reform Notice*, we
     implemented Section 652 by adopting its terms into our rules. We
     solicited comment regarding the definition of \"affiliate\" as that
     term is used in the context of the cable-telco buy-out
     provision.[^339]

**b. Comments**

135. Alliance argues that the Commission should interpret the term
     "affiliate" as broadly as possible in order to protect programming
     choices.[^340] BellSouth and USTA argue that the definition should
     capture only controlling interests pursuant to Title VI's
     definition of affiliate.[^341] Time Warner argues that the context
     of the cable-telco buyout prohibitions requires the same
     affiliation rules as the other cable cross-ownership rules.[^342]

**c. Discussion**

136. We agree with Time Warner that the cable-telco buyout prohibition
     rules should have the same affiliation rules as the other cable
     cross-ownership rules in this proceeding and therefore adopt these
     rules.[^343] Both the cable-telco buyout prohibition rules, adopted
     in the 1996 Act, and general rules are designed to promote
     competition in the market place for telecommunications
     services.[^344] We find nothing in the record to persuade us that
     the cable-telco rules should be any more broad or narrow that the
     other general cable cross-ownership rules.

**J. Transition Issues**

137. For the rules setting limits on ownership -- the horizontal
     ownership rule, the cable/SMATV cross-ownership prohibition rule,
     the cable-telco buyout prohibition, and the effective competition
     test, any interests acquired on or after June 26, 1998, the date
     that the *Cable Attribution Notice* was issued, will be subject to
     the new attribution rules adopted in this *Report and Order*. We
     believe this cutoff date is reasonable and appropriate since
     parties were on notice that the attribution rules were subject to
     change once the *Cable Attribution Notice* was adopted, and that
     any interests acquired on or after that date could be subject to
     any rule changes. Interests acquired before June 26, 1998 will be
     subject to the rules in existence on that date.

138. The grandfathering of interests under the ownership rules shall be
     permanent so long as the interest is not transferred. If the
     grandfathered interest is later assigned or transferred, the
     grandfathering will not transfer to the assignee or
     transferee.[^345] New owners cannot demonstrate the same equitable
     considerations that prompt us to grandfather existing owners whose
     current interests are now unavoidably placed in violation of the
     multiple ownership rules based on adoption of the new attribution
     rules. For non-grandfathered ownership interests that are now
     attributable, *i.e.*, those acquired on or after June 26, 1998, and
     which must be divested to comply with our ownership rules, we
     believe that a twelve-month period should be sufficient for parties
     to identify buyers.[^346]

139. For the remaining rules at issue in this proceeding, all interests
     acquired at any time will be subject to the rules adopted in this
     *Report and Order*. These remaining rules, such as the vertical
     channel occupancy limits and the program access rules, do not
     require that an investor divest any interests in order to comply
     with an ownership limit. Rather these rules prescribe that a cable
     operator behave in certain ways. There will be no grandfathering of
     interests covered by these remaining rules.

140. To the extent that compliance with our rules as a result of this
     Order poses a threat to a cable system\'s Y2K preparedness, the
     Commission will consider, on a case by case basis, petitions for
     forbearance of these rules until after the Year 2000 date rollover
     period.[^347]

## IV. Final Regulatory Flexibility Analysis {#iv.-final-regulatory-flexibility-analysis .unnumbered}

141. As required by the Regulatory Flexibility Act (\"FRA\"),[^348] an
     Initial Regulatory Flexibility Analysis (IRFA) was incorporated in
     the *Notice* *of Proposed Rulemaking* in CS Docket No. 98-82, FCC
     98-112. The Commission sought written public comment on the
     proposals in the *Notice*, including comment on the IRFA. This
     Final Regulatory Flexibility Analysis (\"FRFA\") conforms to the
     RFA.[^349]

**A. Need for, and Objectives of, this Report and Order**

142. The cable attribution rules define what constitutes a "cognizable
     interest" that triggers application of various Commission rules
     relating to the provision of cable television services. This
     *Report and Order* amends the attribution rules in order to better
     effectuate their intended goals as well as to make them more
     effective.

**B. Summary of Significant Issues Raised by Public Comments in Response
to the IRFA**

143. The cable operators argue generally that the attribution rules
     restrict the availability of capital.[^350] NCTA argues that
     passive investments in small cable operators should not be
     attributable in order to give these operators more access to
     capital.[^351] In addition, NCTA argues that the ED exception to
     the single majority shareholder exception will limit investments in
     small cable operators.[^352] None of the parties in this proceeding
     filed comments on how other issues raised in the *Notice* would
     impact small entities. Nevertheless, we discuss below how we
     considered the impact on small entities.

**C. Description and Estimate of the Number of Small Entities to Which
the Rule Will Apply**

144. The RFA generally defines \"small entity\" as having the same
     meaning as the terms \"small business,\" \"small organization,\"
     and \"small governmental jurisdiction\" and \"the same meaning as
     the term \'small business concern\' under the Small Business Act
     unless the Commission has developed one or more definitions that
     are appropriate for its activities.[^353] A small business concern
     is one which: (1) is independently owned and operated; (2) is not
     dominant in its field of operation; and (3) satisfies any
     additional criteria established by the Small Business
     Administration (\"SBA\").[^354] The Small Business Enforcement
     Fairness Act of 1996 (SBREFA) provision of the RFA also applies to
     nonprofit organizations and to governmental organizations such as
     governments of cities, counties, towns, townships, villages, school
     districts, or special districts with populations of less than
     50,000.[^355] Pursuant to 5 U.S.C. § 601(3), the statutory
     definition of a small business applies \"unless an agency after
     consultation with the Office of Advocacy of the SBA and after
     opportunity for public comment, establishes one or more definitions
     of such term which are appropriate to the activities of the agency
     and publishes such definition(s) in the Federal Register.\"

**Local Franchising Authorities**

145. There are 85,006 governmental entities in the United States.[^356]
     This number includes such entities as states, counties, cities,
     utility districts and school districts. We note that any official
     actions with respect to cable systems will typically be undertaken
     by local franchising authorities (\"LFAs\"), which primarily
     consist of counties, cities and towns. Of the 85,006 governmental
     entities, 38,978 are counties, cities and towns. The remainder are
     primarily utility districts, school districts, and states, which
     typically are not LFAs. Of the 38,978 counties, cities and towns,
     37,566 or 96%, have populations of fewer than 50,000. Thus,
     approximately 37,500 \"small governmental jurisdictions\" may be
     affected by the rules proposed in this *Notice*.

**Cable Services or Systems**

146. The SBA has developed a definition of small entities for cable and
     other pay television services under Standard Industrial
     Classification 4841 (SIC 4841), which covers subscription
     television services, which includes all such companies with annual
     gross revenues of \$11 million or less.[^357] This definition
     includes cable systems operators, closed circuit television
     services, direct broadcast satellite services, multipoint
     distribution systems, satellite master antenna systems and
     subscription television services. According to the Census Bureau,
     there were 1,423 such cable and other pay television services
     generating less than \$11 million in revenue that were in operation
     for at least one year at the end of 1992.[^358]

147. The Commission has developed its own definition of a \"small cable
     company\" and \"small system\" for the purposes of rate regulation.
     Under the Commission\'s rules, a \"small cable company,\" is one
     serving fewer than 400,000 subscribers nationwide.[^359] Based on
     our most recent information, we estimate that there were 1,439
     cable companies that qualified as small cable companies at the end
     of 1995.[^360] Since then, some of those companies may have grown
     to serve over 400,000 subscribers, and others may have been
     involved in transactions that caused them to be combined with other
     cable companies. Consequently, we estimate that there are fewer
     than 1,439 small entity cable companies that may be affected by the
     proposal adopted in this *Notice*. The Commission\'s rules also
     define a \"small system,\" for the purposes of cable rate
     regulation, as a cable system with 15,000 or fewer
     subscribers.[^361] We do not request nor do we collect information
     concerning cable systems serving 15,000 or fewer subscribers and
     thus are unable to estimate at this time the number of small cable
     systems nationwide.

148. The Communications Act also contains a definition of a \"small
     cable operator,\" which is \"a cable operator that, directly or
     through an affiliate, serves in the aggregate fewer than 1 percent
     of all subscribers in the United States and is not affiliated with
     any entity or entities whose gross annual revenues in the aggregate
     exceed \$250,000,000.\"[^362] The Commission has determined that
     there are 61,700,000 subscribers in the United States. Therefore,
     we found that an operator serving fewer than 617,000 subscribers is
     deemed a small operator, if its annual revenues, when combined with
     the total annual revenues of all of its affiliates, do not exceed
     \$250 million in the aggregate.[^363] Based on available data, we
     find that the number of cable operators serving 617,000 subscribers
     or less totals 1,450.[^364] Although it seems certain that some of
     these cable system operators are affiliated with entities whose
     gross annual revenues exceed \$250,000,000, we are unable at this
     time to estimate with greater precision the number of cable system
     operators that would qualify as small cable operators under the
     definition in the Communications Act.

**Satellite Master Antennae Television (\"SMATV\") Operators**

149. Industry sources estimate that approximately 5200 SMATV operators
     were providing service as of December 1995.[^365] Other estimates
     indicate that SMATV operators serve approximately 1.05 million
     residential subscribers as of September 1996.[^366] The ten largest
     SMATV operators together pass 815,740 units.[^367] If we assume
     that these SMATV operators serve 50% of the units passed, the ten
     largest SMATV operators serve approximately 40% of the total number
     of SMATV subscribers. Because these operators are not rate
     regulated, they are not required to file financial data with the
     Commission. Furthermore, we are not aware of any privately
     published financial information regarding these operators. Based on
     the estimated number of operators and the estimated number of units
     served by the largest ten SMATVs, we believe that a substantial
     number of SMATV operators qualify as small entities.

**Local Exchange Carriers (\"LECs\")**

150. Neither the Commission nor the SBA has developed a definition for
     small LECs. The closest applicable definition under the SBA rules
     is for telephone communications companies other than radiotelephone
     (wireless) companies.[^368] The most reliable source of information
     regarding the number of LECs nationwide is the data that we collect
     annually in connection with the TRS Worksheet.[^369] According to
     our most recent data, 1,410 companies reported that they were
     engaged in the provision of local exchange services.[^370] We do
     not have information on the number of carriers that are not
     independently owned and operated, nor what carriers have more than
     1,500 employees, and thus are unable at this time to estimate with
     greater precision the number of LECs that would qualify as small
     business concerns under SBA\'s definition. Consequently, we
     estimate that there are fewer than 1,347 small incumbent LECs.

**Cable Programmers**

151. The Commission has not developed a definition of small entities
     applicable to producers or distributors of cable television
     programs. Therefore, we will utilize the SBA classifications of
     Motion Picture and Video Tape Production (SIC 7812),[^371] and
     Theatrical Producers (Except Motion Pictures) and Miscellaneous
     Theatrical Services (SIC 7922).[^372] These SBA definitions provide
     that a small entity in the cable television programming industry is
     an entity with \$21.5 million or less in annual receipts for SIC
     7812, and \$5 million or less in annual receipts for SIC
     7922.[^373] Census Bureau data indicate the following: (a) there
     were 7,265 firms in the United States classified as Motion Picture
     and Video Production (SIC 7812), and that 6,987 of these firms had
     \$16.999 million or less in annual receipts and 7,002 of these
     firms had \$24.999 million or less in annual receipts;[^374]
     and (b) there were 5,671 firms in the United States classified as
     Theatrical Producers and Services (SIC 7922), and that 5627 of
     these firms had \$4.999 million or less in annual receipts.[^375]

**D. Description of Projected Reporting, Recordkeeping, and Other
Compliance Requirements**

152. This *Report and Order* permits investors in limited liability
     companies and registered limited liability partnerships to insulate
     their interests from attribution. In order to insulate their
     interests, investors must file a certification pursuant to 47
     C.F.R. § 76.501(f). Directors and officers may petition the
     Commission for a waiver of attribution under 47 C.F.R. § 76.501(f);
     47 C.F.R. § 76.503; 47 C.F.R. § 76.504. This *Report and Order*
     sets ownership and investment thresholds in entities covered by the
     Commission's cable rules, Section 76, that subject their investors
     to the cable rules. *See* Appendix A.

**E. Steps Taken to Minimize Significant Economic Impact on Small
Entities, and Significant Alternatives Considered**

153. We find that there are no significant alternatives to the rules and
     policies set forth in this *Report and Order* that would minimize
     the impact on small entities, and we note that no commenter
     proffered alternatives to these rules and policies that would
     address the concerns of the rules.

154. The *Report and Order* retains the current 5 percent active voting
     stock attribution benchmark. We believe that our original decision
     to set a 5 percent benchmark to capture influential interests
     remains valid and will not unduly restrict capital availability.
     Further, we note cable capital expenditures have doubled in the
     past 7 years. To the extent that there are still concerns about not
     impeding capital flow to broadcasting, we believe that they will be
     adequately addressed since the *Report and Order* increases the
     passive investor benchmark.[^376]

155. The *Report and Order* increases the voting stock benchmark from 10
     percent to 20 percent for passive investors. We believe that
     increasing the passive investor benchmark to 20 percent will give
     cable operators increased access to investment capital, while
     preserving the Commission\'s ability to effectively enforce its
     ownership rules. This decision takes into account the special
     nature of the passive investor category, in terms of the legal and
     fiduciary requirements that constrain passive investors\'
     involvement in the management and operational affairs of the firms
     in which they invest. In addition, passive investors have become an
     increasingly important source of investment capital to the
     corporate sector.[^377]

156. Further, we note that the record in the *Broadcast Attribution*
     proceeding strongly supports an increase in the passive investor
     benchmark and supports our belief that such an increase will help
     assure that the attribution changes adopted herein will reinforce
     the trends in cable investment. We believe that increasing the
     passive investor benchmark is a relatively safe way to increase
     capital flows, without compromising the ability of our attribution
     rules to capture influential interests. The *Report and Order*
     retains the current definition of \"passive investors,\" which is
     limited to bank trust departments, insurance companies and mutual
     funds.[^378]

157. The *Report and Order* eliminates the single majority shareholder
     exemption and adopts an equity plus debt ("ED") attribution
     proposal, as a new rule that will function in addition to the other
     attribution rules. Under this new ED rule, where the investor's
     interest exceeds 33% of an entity's total asset value of the entity
     (equity plus debt), the interest will be attributable. The *Report
     and Order* refers to total asset value as \"total assets."[^379]

158. The ED rule reflects our current judgment as to the appropriate
     balance between our goal of maximizing the precision of the
     attribution rules by attributing all interests that are of concern,
     and only those interests, and our equally significant goals of not
     unduly disrupting capital flow and of affording ease of
     administrative processing and reasonable certainty to regulatees in
     planning their transactions. The bright-line ED test will provide
     more regulatory certainty than a case-by-case approach that
     requires review of contract language. Thus, the ED rule will permit
     planning of financial transactions, would also ease application
     processing, and would minimize regulatory costs.[^380]

159. We have no basis to conclude or reason to believe that the ED rule
     would unduly deter investment. The equity/debt proposal does not
     preclude investment by any entity; rather, it caps nonattributable
     investment levels for entities that have the potential to influence
     their investments. Additionally, to help assure that our actions
     today do not unduly impede capital flow to cable, we have raised
     the passive investor benchmark. As discussed above, we believe that
     because of the nature of passive investors, we may raise that
     benchmark consistent with our goal of maximizing the precision of
     the attribution rules.[^381]

160. While some commenters argued that applying the ED rule to program
     suppliers would curb investment, they do not provide empirical
     evidence to support this argument. We also note that the rule does
     not preclude investment, but merely provides that investments over
     a certain level will be deemed presumptively attributable.[^382]

161. Some commenters suggested that the insulated limited partnership
     criteria be modified to eliminate conflicts with state law.
     However, state and federal law provisions may fail to provide
     sufficient assurance that the limited partner will lack the ability
     to significantly influence or control the partnership\'s media
     activities.[^383]

162. We will not create exceptions for widely held limited partnerships,
     such as Business Development Companies, from the current insulation
     criteria applicable to limited partnerships or otherwise revise
     those insulation criteria. The essential character of these new
     business forms for determining attributable interests is the
     contractual flexibility they allow in setting up and managing the
     association. Therefore, we believe that the insulation criteria are
     needed for these business forms to insure the \"lack of material
     involvement\" on the part of investors. This would imply that in
     some limited number of cases, interests may not be insulated
     because of state laws that require investor rights that conflict
     with the insulation criterion. However, commenters have not
     provided sufficient evidence concerning the number or importance of
     such instances that would compel the Commission to create
     specialized exemptions for these specialized business forms. Since
     these entities are allowed greater contractual flexibility under
     state law than are limited partnerships, we believe that greater
     caution is warranted in dealing with these novel forms. Further, we
     have not been presented with evidence to demonstrate that the
     current insulation criteria are no longer valid or effective in
     achieving their goals.[^384]

163. Nevertheless, for the horizontal ownership and channel occupancy
     limits rules,[^385] we will amend the insulation criteria to
     provide that a limited partnership interest shall be attributed to
     a limited partner unless the partnership certifies that this
     limited partner is not materially involved, directly or indirectly,
     in the management or operation of the video-programming-related
     activities of the partnership. The horizontal ownership and channel
     occupancy limits are designed to address the ability of one MSO or
     a group of MSOs, by virtue of their size, to impede the flow of
     programming from the programmers to consumers. An MSO may extend
     its ability to affect the programming marketplace when it invests
     in other cable companies. However, where the MSO is not materially
     involved in the video-programming activities of a limited
     partnership, its investment does not extend its national
     programming power and the concerns of Section 613 are not
     implicated. In these circumstances where programming is not
     affected, the current insulation criteria prevent investments
     between companies whose combination may bring benefits to the
     public, such as cable broadband and telephony services and
     competition to the incumbent local exchange carriers or Internet.
     In order for the limited partnership to benefit from an investor's
     expertise in these areas, it is necessary to craft insulation
     criteria that will not prevent the investor from offering its
     services to the partnership so long as those services are unrelated
     to the partnership's video-programming activities.[^386]

164. We disagreed with Time Warner regarding the parameters of the
     directors and officers attribution rule. A party that has the right
     to appoint a director to the board of an entity has the ability to
     influence the entity's conduct by virtue of the director the party
     selects; thus under the directors and officers rule that party has
     an attributable interest in the entity. Likewise, if two entities
     share common directors or officers, or have employees that serve as
     directors or officers of the other entity, the directors and
     officers render the entities attributable because of the influence
     that directors and officers have over an entity.[^387]

165. As a general matter, we believe that the recusal standard for
     directors and officers of a parent company is appropriate. In
     addition to the guidance provided by the rule, 47 C.F.R. §
     76.503(h) (officer or director's duties must be "wholly unrelated
     to the broadcast licensee or cable television system subsidiary"),
     the Commission has provided interpretative guidance in a series of
     decisions. We have stated that parties must take steps to prevent
     "the recused director from exercising authority or influence in
     areas that will affect" the subsidiary. For example, we have
     approved steps where the recused director is not involved in
     decisions or discussions regarding the particular subsidiary,
     financial reports are aggregated so that the subsidiary's
     performance figures are not separately displayed for the director,
     and reports to the director are redacted to remove information
     regarding the subsidiary.[^388]

166. For purposes of the horizontal ownership and channel occupancy
     rules, we will amend the matters for which a director or officer
     must recuse himself or herself in order to achieve the purpose of
     those rules. As discussed in Section III.D above, the horizontal
     ownership and channel occupancy rules are designed to place limits
     on a cable operator's programming power. As long as directors and
     officers appointed by a partial owner of a cable operator are not
     involved in the video-programming activities of the partially owned
     cable operator, the concerns of Section 613 that an MSO's
     programming power will be extended by its ownership interest are
     not implicated. Permitting directors or officers who have knowledge
     and expertise in areas other than video programming, such as
     telephony or Internet, to serve with a cable company will benefit
     the cable company as technologies converge. Therefore, to achieve
     these objectives for the horizontal ownership and channel occupancy
     limits rules, appointed or common directors and officers, and the
     partnership equivalent thereof, shall not be attributable if they
     do not participate in the video programming activities of either
     entity. To demonstrate that the officer or director meets the
     above-stated criteria, the relevant entity shall petition the
     Commission for a waiver as set forth in the rule.[^389]

167. We will treat LLCs and RLLPs under the same attribution rules that
     currently apply to limited partnerships. The insulation criteria
     that currently apply to limited partnerships would apply without
     modification to these new business forms. Therefore, LLC or RLLP
     owners would be treated as attributable unless the owner can
     certify their lack of direct or indirect involvement in the
     management and operations of the media-related activities of the
     LLC or RLLP. We will not distinguish among LLCs based on whether
     they adopt a more centralized or decentralized form. We believe
     that this decision is justified for the reasons discussed in the
     *Broadcast Attribution Notice*, which were also supported in the
     record and fully discussed in the *Broadcast Report and
     Order*.[^390]

168. We will not routinely require the filing of organizational
     documents for LLCs. However, to remain consistent with our
     treatment of limited partnerships and insulation criteria, we will
     require the same \"non-involvement\" statement for LLC members who
     are attempting to insulate themselves. We will also require LLC
     members who submit the foregoing statement to submit a statement
     that the relevant state enabling statute authorizing LLCs permits
     an LLC member to insulate itself/himself in the manner required by
     our criteria, since our experience shows that state laws vary
     considerably with respect to the obligations and responsibilities
     of LLC members. This policy will help us to avoid any potential
     confidentiality concerns, referred to in the *Broadcast Attribution
     Notice*, which may arise if we require filing of organizational
     documents.[^391]

169. The *Report and Order* clarifies that the program access
     attribution standard applies to all entities covered by the program
     access type rules. The clarification will not restrict investment
     in entities covered by the program access type rules. Rather,
     investors in such entities will be subject to the behavioral
     guidelines of these rules. The *Order* also applies the general
     attribution standard to the cable/SMATV cross-ownership rule and
     applies the program access attribution standard to the vertical
     channel occupancy limits. In addition, the ED attribution rule is
     added to the program access attribution standard for the same
     reasons that it is added to the general attribution standard.[^392]

170. The *Report and Order* adopts the general attribution standard for
     the effective competition competing provider rule and the
     cable-telco buy-out prohibition. These two rules have the same
     purpose as the cable/SMATV cross-ownership rules and therefore
     warrant the same standard.[^393]

171. The *Report and Order* adopts a 10% voting equity and an ED
     interest attribution standard for the LEC prong of the effective
     competition test. The *Order* reasons that the LEC test warrants a
     different standard because it serves a different purpose than the
     other cable rules at issue. The effective competition test is
     designed to trigger when a LEC is actively involved in an MVPD.
     Thus, the LEC attribution standard is set higher than the broadcast
     attribution standard in order to encourage LEC involvement in an
     MVPD and to capture when a LEC is truly involved in the MVPD.[^394]

172. The *Report and Order* adopts grandfathering and transition
     measures for interests that become newly attributable pursuant to
     the new rules adopted.[^395]

**Report to Congress:** The Commission will send a copy of this *Report
and Order*, including this FRFA, in a report to Congress pursuant to the
Small Business Regulatory Enforcement Fairness Act of 1996, 5 U.S.C. §
801(a)(1)(A). A copy of this *Report and Order* and FRFA (or summary
thereof) will also be published in the Federal Register, pursuant to 5
U.S.C.A. § 604(b), and will be sent to the Chief Counsel for Advocacy of
the Small Business Administration.

**V. Paper Work Reduction Act**

173. The requirements adopted in this *Report and Order* have been
     analyzed with respect to the Paperwork Reduction Act of 1995 (the
     \"1995 Act\") and found to impose new or modified information
     collection requirements on the public. Implementation of any new or
     modified information collection requirements will be subject to
     approval by the Office of Management and Budget (\"OMB\"). The
     Commission, as part of its continuing effort to reduce paperwork
     burdens, invites the general public to take this opportunity to
     comment on the information collection requirements contained in
     this *Report and Order*, as required by the 1995 Act. Comments
     should address: (a) whether the proposed collection of information
     is necessary for the proper performance of the functions of the
     Commission, including whether the information shall have practical
     utility; (b) the accuracy of the Commission\'s burden
     estimates; (c) ways to enhance the quality, utility, and clarity of
     the information collected; and (d) ways to minimize the burden of
     the collection of information on the respondents, including the use
     of automated collection techniques or other forms of information
     technology.

174. Written comments by the public on the information collection
     requirements are due 60 days from date of publication of this
     *Report and Order* in the Federal Register. Comments should be
     submitted to Judy Boley, Federal Communications Commission, Room
     1-C804, 445 12th Street, S.W., Washington, DC 20554, or via the
     Internet to jboley@fcc.gov. For additional information on the
     information collection requirements, contact Judy Boley at (202)
     418-0214 or via the Internet at the above address.

**VI. Ordering Clauses**

175. Accordingly, IT IS ORDERED, pursuant to Sections 4(i), 303 and 612,
     613(f)(1)(A)&(B), 616, 623, 628 and 652 of the Communications Act
     of 1934, as amended, 47 U.S.C. §§ 154(i), 303, 532,
     533(f)(1)(A)&(B), 536(a), 543, 548(b), 572 and 573, that the
     amendments to discussed in this *Report and Order* and set forth in
     Attachment A ARE ADOPTED. These amendments shall become effective
     70 days after publication in the Federal Register, following OMB
     approval, unless a notice is published in the Federal Register
     stating otherwise.

176. IT IS FURTHER ORDERED that the Commission\'s Office of Public
     Affairs, Reference Operations Division, SHALL SEND a copy of this
     *Report and Order*, including the Final Regulatory Flexibility
     Analysis, to the Chief Counsel for Advocacy of the Small Business
     Administration in accordance with paragraph 603(a) of the
     Regulatory Flexibility Act, Pub. L. No. 96-354, 94 Stat. 1164, 5
     U.S.C.A. § 601 *et seq*.

FEDERAL COMMUNICATIONS COMMISSION

Magalie Roman Salas

Secretary

**Appendix A**

**Rule Changes**

Part 76 of Title 47 of the Code of Federal Regulations is amended to
read as follows:

PART 76 \-- MULTICHANNEL VIDEO AND CABLE TELEVISION SERVICE

1\. The authority citation for Part 76 continues to read as follows:

AUTHORITY: 47 U.S.C. 151, 152, 153, 154, 301, 302, 303, 303a, 307, 308,
309, 312, 315, 317, 325, 503, 521, 522, 531, 532, 533, 534, 535, 536,
537, 543, 544, 544a, 545, 548, 549, 552, 554, 556, 558, 560, 561, 571,
572, 573.

**Section 76.501 Cross-Ownership**

1\. Section 76.501 is amended by revising Notes 1, 2, 5 and 6 as
follows:

Note 1: Actual working control, in whatever manner exercised, shall be
deemed a cognizable interest.

Note 2: In applying the provisions of this section, ownership and other
interests in an entity or entities covered by this rule will be
attributed to their holders and deemed cognizable pursuant to the
following criteria:

\(a\) Except as otherwise provided herein, partnership and direct
ownership interests and any voting stock interest amounting to 5% or
more of the outstanding voting stock of a corporation will be
cognizable;

\(b\) Investment companies, as defined in 15 U.S.C. 80a‑3, insurance
companies and banks holding stock through their trust departments in
trust accounts will be considered to have a cognizable interest only if
they hold 20% or more of the outstanding voting stock of a corporation,
or if any of the officers or directors of the corporation are
representatives of the investment company, insurance company or bank
concerned. Holdings by a bank or insurance company will be aggregated if
the bank or insurance company has any right to determine how the stock
will be voted. Holdings by investment companies will be aggregated if
under common management.

\(c\) Attribution of ownership interests in an entity covered by this
rule that are held indirectly by any party through one or more
intervening corporations will be determined by successive multiplication
of the ownership percentages for each link in the vertical ownership
chain and application of the relevant attribution benchmark to the
resulting product, except that wherever the ownership percentage for any
link in the chain exceeds 50%, it shall not be included for purposes of
this multiplication. \[For example, if A owns 10% of company X, which
owns 60% of company Y, which owns 25% of \"Licensee,\" then X\'s
interest in \"Licensee\" would be 25% (the same as Y\'s interest since
X\'s interest in Y exceeds 50%), and A\'s interest in \"Licensee\" would
be 2.5% (0.1 x 0.25). Under the 5% attribution benchmark, X\'s interest
in \"Licensee\" would be cognizable, while A\'s interest would not be
cognizable.\]

\(d\) Voting stock interests held in trust shall be attributed to any
person who holds or shares the power to vote such stock, to any person
who has the sole power to sell such stock, and to any person who has the
right to revoke the trust at will or to replace the trustee at will. If
the trustee has a familial, personal or extra‑trust business
relationship to the grantor or the beneficiary, the grantor or
beneficiary, as appropriate, will be attributed with the stock interests
held in trust. An otherwise qualified trust will be ineffective to
insulate the grantor or beneficiary from attribution with the trust\'s
assets unless all voting stock interests held by the grantor or
beneficiary in the relevant entity covered by this rule are subject to
said trust.

\(e\) Subject to paragraph (i) of this Note, holders of non-voting stock
shall not be attributed an interest in the issuing entity. Subject to
paragraph (i) of this Note, holders of debt and instruments such as
warrants, convertible debentures, options or other non-voting interests
with rights of conversion to voting interests shall not be attributed
unless and until conversion is effected.

(f)(1) Subject to paragraph (i) of this Note, a limited partnership
interest shall be attributed to a limited partner unless that partner is
not materially involved, directly or indirectly, in the management or
operation of the media-related activities of the partnership and the
relevant entity so certifies. An interest in a Limited Liability Company
(\"LLC\") or Registered Limited Liability Partnership (\"RLLP\") shall
be attributed to the interest holder unless that interest holder is not
materially involved, directly or indirectly, in the management or
operation of the media-related activities of the partnership and the
relevant entity so certifies.

\(2\) In the case of a limited partnership, in order for an entity to
make the certification set forth in paragraph (g)(1) of this section, it
must verify that the partnership agreement or certificate of limited
partnership, with respect to the particular limited partner exempt from
attribution, establishes that the exempt limited partner has no material
involvement, directly or indirectly, in the management or operation of
the media activities of the partnership. In the case of an LLC or RLLP,
in order for an entity to make the certification set forth in paragraph
(g)(1) of this section, it must verify that the organizational document,
with respect to the particular interest holder exempt from attribution,
establishes that the exempt interest holder has no material involvement,
directly or indirectly, in the management or operation of the media
activities of the LLC or RLLP. The criteria which would assume adequate
insulation for purposes of these certifications are described in the
Memorandum Opinion and Order in MM Docket No. 83‑46, FCC 85‑252
(released June 24, 1985), as modified on reconsideration in the
Memorandum Opinion and Order in MM Docket No. 83‑46, FCC 86‑410
(released November 28, 1986). Irrespective of the terms of the
certificate of limited partnership or partnership agreement, or other
organizational document in the case of an LLC or RLLP, however, no such
certification shall be made if the individual or entity making the
certification has actual knowledge of any material involvement of the
limited partners, or other interest holders in the case of an LLC or
RLLP, in the management or operation of the media businesses of the
partnership or LLC or RLLP.

\(3\) In the case of an LLC or RLLP, the entity seeking insulation shall
certify, in addition, that the relevant state statute authorizing LLCs
permits an LLC member to insulate itself as required by our criteria.

\(g\) Officers and directors of an entity covered by this rule are
considered to have a cognizable interest in the entity with which they
are so associated. If any such entity engages in businesses in addition
to its primary media business, it may request the Commission to waive
attribution for any officer or director whose duties and
responsibilities are wholly unrelated to its primary business. The
officers and directors of a parent company of a media entity, with an
attributable interest in any such subsidiary entity, shall be deemed to
have a cognizable interest in the subsidiary unless the duties and
responsibilities of the officer or director involved are wholly
unrelated to the media subsidiary, and a certification properly
documenting this fact is submitted to the Commission. The officers and
directors of a sister corporation of a media entity shall not be
attributed with ownership of that entity by virtue of such status.

\(h\) Discrete ownership interests held by the same individual or entity
will be aggregated in determining whether or not an interest is
cognizable under this section. An individual or entity will be deemed to
have a cognizable investment if:

\(1\) The sum of the interests held by or through \"passive investors\"
is equal to or exceeds 20 percent; or

\(2\) The sum of the interests other than those held by or through
\"passive investors\" is equal to or exceeds 5 percent; or

\(3\) The sum of the interests computed under paragraph (i)(1) of this
section plus the sum of the interests computed under paragraph (i)(2) of
this section is equal to or exceeds 20 percent.

\(i\) Notwithstanding paragraphs (e) and (f) of this Note, the holder of
an equity or debt interest or interests in an entity covered by this
rule shall have that interest attributed if the equity (including all
stockholdings, whether voting or nonvoting, common or preferred, and
partnership interests) and debt interest or interests, in the aggregate,
exceed 33 percent of the total asset value (all equity plus all debt) of
that entity, provided however that:

\(1\) in applying the provisions of paragraph (i) of this note to §
76.501, § 76.505 and § 76.905(b)(2), the holder of an equity or debt
interest or interests in a broadcast station, cable system, SMATV or
multiple video distribution provider subject to § 76.501, § 76.505, or §
76.905(b)(2) (\"interest holder\") shall have that interest attributed
if the equity (including all stockholdings, whether voting or nonvoting,
common or preferred, and partnership interests) and debt interest or
interests, in the aggregate, exceed 33 percent of the total asset value
(defined as the aggregate of all equity plus all debt) of that entity;
and

\(i\) the interest holder also holds an interest in a broadcast station,
cable system, SMATV, or multiple video distribution provider that
operates in the same market, is subject to § 76.501, § 76.505, or §
76.905(b)(2) and is attributable without reference to this paragraph
(i); or

\(ii\) the interest holder supplies over fifteen percent of the total
weekly broadcast programming hours of the station in which the interest
is held.

\(2\) For purposes of applying subparagraph (i)(1), the term \"market\"
will be defined as it is defined under the rule that is being applied.

Note 5: Certifications pursuant to this section and these notes shall be
sent to the attention of the Cable Services Bureau, Federal
Communications Commission, 445 12^th^ Street, N.W. Washington, D.C.
20554.

Note 6: In applying paragraph (a) of § 76.501, no minority voting stock
interest will be cognizable if there is a single holder of more than 50%
of the outstanding voting stock of the corporation in which the minority
interest is held, provided however, that an investor that has an
interest under the terms of Note 2(i) of this section shall have that
interest attributed.

\* \* \* \* \*

**Section 76.503 National subscriber limits**

2\. Section 76.503 is amended by adding Note 2 as follows:

Note 1: *Attributable Interest* shall be defined by reference to the
criteria set forth in Notes 1-5 to § 76.501 provided however, that:

\(a\) Notes 2(f) and 2(g) to § 76.501 to shall not apply;

(b)(1) Subject to Note2(i) to § 76.501, a limited partnership interest
shall be attributed to a limited partner unless that partner is not
materially involved, directly or indirectly, in the management or
operation of the video programming-related activities of the partnership
and the relevant entity so certifies. An interest in a Limited Liability
Company (\"LLC\") or Registered Limited Liability Partnership (\"RLLP\")
shall be attributed to the interest holder unless that interest holder
is not materially involved, directly or indirectly, in the management or
operation of the video programming-related activities of the partnership
and the relevant entity so certifies.

\(2\) In the case of a limited partnership, in order for an entity to
make the certification set forth in paragraph (b)(1) of this section, it
must verify that the partnership agreement or certificate of limited
partnership, with respect to the particular limited partner exempt from
attribution, establishes that the exempt limited partner has no material
involvement, directly or indirectly, in the management or operation of
the video programming activities of the partnership. In the case of an
LLC or RLLP, in order for an entity to make the certification set forth
in paragraph (g)(1) of this section, it must verify that the
organizational document, with respect to the particular interest holder
exempt from attribution, establishes that the exempt interest holder has
no material involvement, directly or indirectly, in the management or
operation of the video programming activities of the LLC or RLLP. The
criteria which would assume adequate insulation for purposes of these
certifications are described in the *Report and Order*, FCC No. 99-288,
CS Docket No. 98-82 (released October 20, 1999). In order for the
Commission to accept the certification, the certification must be
accompanied by facts, e.g. in the form of documents, affidavits or
declarations, that demonstrate that these insulation criteria are met.
Irrespective of the terms of the certificate of limited partnership or
partnership agreement, or other organizational document in the case of
an LLC or RLLP, however, no such certification shall be made if the
individual or entity making the certification has actual knowledge of
any material involvement of the limited partners, or other interest
holders in the case of an LLC or RLLP, in the management or operation of
the video-programming activities of the partnership or LLC or RLLP.

\(3\) In the case of an LLC or RLLP, the entity seeking insulation shall
certify, in addition, that the relevant state statute authorizing LLCs
permits an LLC member to insulate itself as required by our criteria.

\(c\) Officers and directors of an entity covered by this rule are
considered to have a cognizable interest in the entity with which they
are so associated. If any such entity engages in activities other than
video-programming activities, it may request the Commission to waive
attribution for any officer or director whose duties and
responsibilities are wholly unrelated to the entity's video-programming
activities. In the case of common or appointed directors and officers,
if common or appointed directors or officers have duties and
responsibilities that are wholly unrelated to video-programming
activities for both entities, the relevant entity may request the
Commission to waive attribution of the director or officer. The officers
and directors of a parent company of a video-programming business, with
an attributable interest in any such subsidiary entity, shall be deemed
to have a cognizable interest in the subsidiary unless the duties and
responsibilities of the officer or director involved are wholly
unrelated to the video-programming subsidiary, and a certification
properly documenting this fact is submitted to the Commission. The
officers and directors of a sister corporation of a cable system shall
not be attributed with ownership of that entity by virtue of such
status.

\* \* \* \* \*

# Section 76.504 Limits on carriage of vertically integrated programming {#section-76.504-limits-on-carriage-of-vertically-integrated-programming .unnumbered}

3\. Section 76.504 is amended by deleting paragraph (h) and adding Note
1 as follows:

Note 1: *Attributable Interest* shall be defined by reference to the
criteria set forth in Notes 1-5 to § 76.501 provided however, that:

\(a\) Notes 2(f) and 2(g) to § 76.501 to shall not apply;

(b)(1) Subject to Note2(i) to § 76.501, a limited partnership interest
shall be attributed to a limited partner unless that partner is not
materially involved, directly or indirectly, in the management or
operation of the video programming-related activities of the partnership
and the relevant entity so certifies. An interest in a Limited Liability
Company (\"LLC\") or Registered Limited Liability Partnership (\"RLLP\")
shall be attributed to the interest holder unless that interest holder
is not materially involved, directly or indirectly, in the management or
operation of the video programming-related activities of the partnership
and the relevant entity so certifies.

\(2\) In the case of a limited partnership, in order for an entity to
make the certification set forth in paragraph (b)(1) of this section, it
must verify that the partnership agreement or certificate of limited
partnership, with respect to the particular limited partner exempt from
attribution, establishes that the exempt limited partner has no material
involvement, directly or indirectly, in the management or operation of
the video programming activities of the partnership. In the case of an
LLC or RLLP, in order for an entity to make the certification set forth
in paragraph (g)(1) of this section, it must verify that the
organizational document, with respect to the particular interest holder
exempt from attribution, establishes that the exempt interest holder has
no material involvement, directly or indirectly, in the management or
operation of the video programming activities of the LLC or RLLP. The
criteria which would assume adequate insulation for purposes of these
certifications are described in the *Report and Order*, FCC No. 99-288,
CS Docket No. 98-82 (released October 20, 1999). In order for the
Commission to accept the certification, the certification must be
accompanied by facts, e.g. in the form of documents, affidavits or
declarations, that demonstrate that these insulation criteria are met.
Irrespective of the terms of the certificate of limited partnership or
partnership agreement, or other organizational document in the case of
an LLC or RLLP, however, no such certification shall be made if the
individual or entity making the certification has actual knowledge of
any material involvement of the limited partners, or other interest
holders in the case of an LLC or RLLP, in the management or operation of
the video-programming activities of the partnership or LLC or RLLP.

\(3\) In the case of an LLC or RLLP, the entity seeking insulation shall
certify, in addition, that the relevant state statute authorizing LLCs
permits an LLC member to insulate itself as required by our criteria.

\(c\) Officers and directors of an entity covered by this rule are
considered to have a cognizable interest in the entity with which they
are so associated. If any such entity engages in activities other than
video-programming activities, it may request the Commission to waive
attribution for any officer or director whose duties and
responsibilities are wholly unrelated to the entity's video-programming
activities. In the case of common or appointed directors and officers,
if common or appointed directors or officers have duties and
responsibilities that are wholly unrelated to video-programming
activities for both entities, the relevant entity may request the
Commission to waive attribution of the director or officer. The officers
and directors of a parent company of a video-programming business, with
an attributable interest in any such subsidiary entity, shall be deemed
to have a cognizable interest in the subsidiary unless the duties and
responsibilities of the officer or director involved are wholly
unrelated to the video-programming subsidiary, and a certification
properly documenting this fact is submitted to the Commission. The
officers and directors of a sister corporation of a cable system shall
not be attributed with ownership of that entity by virtue of such
status.

\* \* \* \* \*

# Section 76.505 Prohibition on buy outs {#section-76.505-prohibition-on-buy-outs .unnumbered}

4\. Section 76.505 is amended by adding paragraphs (f) and (g):

\(f\) For purposes of this section, entities are affiliated if either
entity has an attributable interest in the other or if a third party has
an attributable interest in both entities.

\(g\) Attributable interest shall be defined by reference to the
criteria set forth in Notes 1-5 to § 76.501.

\* \* \* \* \*

Section 76.905 Standards for identification of cable systems subject to
effective competition

5\. Section 76.905 is amended by adding paragraphs (h) and (i):

\(h\) For purposes of paragraph (b)(2) of this section, entities are
affiliated if either entity has an attributable interest in the other or
if a third party has an attributable interest in both entities.
Attributable interest shall be defined by reference to the criteria set
forth in Notes 1-5 to § 76.501.

\(i\) For purposes of paragraph (b)(4) of this section, entities are
affiliated if either entity has an attributable interest in the other or
if a third party has an attributable interest in both entities.
Attributable interest shall be defined as follows:

\(1\) A 10% partnership or voting equity interest in a corporation will
be cognizable.

\(2\) Subject to paragraph (i)(3), a limited partnership interest of 10%
or more shall be attributed to a limited partner unless that partner is
not materially involved, directly or indirectly, in the management or
operation of the media-related activities of the partnership and the
relevant entity so certifies. An interest in a Limited Liability Company
(\"LLC\") or Registered Limited Liability Partnership (\"RLLP\") shall
be attributed to the interest holder unless that interest holder is not
materially involved, directly or indirectly, in the management or
operation of the media-related activities of the partnership and the
relevant entity so certifies. Certifications must be made pursuant to
the guidelines set forth in Note 2(f) to § 76.501.

\(3\) Notwithstanding paragraph (i)(2), the holder of an equity or debt
interest or interests in an entity covered by this rule shall have that
interest attributed if the equity (including all stockholdings, whether
voting or nonvoting, common or preferred, and partnership interests) and
debt interest or interests, in the aggregate, exceed 33 percent of the
total asset value (all equity plus all debt) of that entity.

\(4\) Discrete ownership interests held by the same individual or entity
will be aggregated in determining whether or not an interest is
cognizable under this section. An individual or entity will be deemed to
have a cognizable investment if the sum of the interests other than
those held by or through \"passive investors\" is equal to or exceeds
10%.

\* \* \* \* \*

Section 76.922 Rates for the basic service tier and cable programming
services tiers

6\. Section 76.922 is amended by adding paragraphs (f)(6)(i) and (ii):

(f)(6)(i) For purposes of this section, entities are affiliated if
either entity has an attributable interest in the other or if a third
party has an attributable interest in both entities.

\(ii\) Attributable interest shall be defined by reference to the
criteria set forth in Notes 1-5 to § 76.501 provided, however, that:

\(A\) The limited partner and LLC/LLP/RLLP insulation provisions of Note
2(f) shall not apply; and

\(B\) The provisions of Note 2(a) regarding five (5) percent interests
shall include all voting or nonvoting stock or limited partnership
equity interests of five (5) percent or more.

\* \* \* \* \*

# Section 76.924 Allocation to service cost categories {#section-76.924-allocation-to-service-cost-categories .unnumbered}

7\. Section 76.924 is amended by adding paragraphs (i)(6) and (i)(7):

(i)(6) For purposes of this section, entities are affiliated if either
entity has an attributable interest in the other or if a third party has
an attributable interest in both entities.

\(7\) Attributable interest shall be defined by reference to the
criteria set forth in Notes 1-5 to § 76.501 provided, however, that:

\(i\) The limited partner and LLC/LLP/RLLP insulation provisions of Note
2(f) shall not apply; and

\(ii\) The provisions of Note 2(a) regarding five (5) percent interests
shall include all voting or nonvoting stock or limited partnership
equity interests of five (5) percent or more.

\* \* \* \* \*

# Section 76.970 Commercial Leased Access {#section-76.970-commercial-leased-access .unnumbered}

8\. Section 76.970 is amended by renumbering paragraphs (c) through (h)
to read as paragraphs (d) through (i), revising paragraph (b) as
follows, and by adding a new paragraph (c):

\(b\) In determining whether an entity is an "affiliate" for purposes of
commercial leased access, entities are affiliated if either entity has
an attributable interest in the other or if a third party has an
attributable interest in both entities.

\(c\) Attributable interest shall be defined by reference to the
criteria set forth in Notes 1-5 to § 76.501 provided, however, that:

\(1\) The limited partner and LLC/LLP/RLLP insulation provisions of Note
2(f) shall not apply; and

\(2\) The provisions of Note 2(a) regarding five (5) percent interests
shall include all voting or nonvoting stock or limited partnership
equity interests of five (5) percent or more.

\* \* \* \* \*

**Subpart O \-- Competitive Access to Cable Programming**

# Section 76.1000 Definitions {#section-76.1000-definitions .unnumbered}

9\. Section 76.1000 is amended by revising paragraph (b) as follows:

\(b\) *Cognizable Interests*: In applying the provisions of this
subpart, ownership and other interests in cable operators, satellite
cable programming vendors or satellite broadcast programming vendors
will be attributed to their holders and subject the interest holders to
the rules of this subpart. Cognizable and attributable interests shall
be defined by reference to the criteria set forth in Notes 1-5 of §
76.501 provided, however, that:

\(1\) The limited partner and LLC/LLP/RLLP insulation provisions of Note
2(f) shall not apply; and

\(2\) The provisions of Note 2(a) regarding five (5) percent interests
shall include all voting or nonvoting stock or limited partnership
equity interests of five (5) percent or more.

\* \* \* \* \*

# Subpart Q -- Regulation of Carriage Agreements {#subpart-q-regulation-of-carriage-agreements .unnumbered}

# Section 76.1300 Definitions {#section-76.1300-definitions .unnumbered}

10\. Section 76.1300 is amended by renumbering paragraphs (b) through
(d) to read as paragraphs (c) to (e), revising paragraph (a) as follows,
and adding new paragraph (b):

\(b\) *Affiliated*. For purposes of this subpart, entities are
affiliated if either entity has an attributable interest in the other or
if a third party has an attributable interest in both entities.

\(c\) *Attributable Interest*. The term "attributable interest" shall be
defined by reference to the criteria set forth in Notes 1-5 to § 76.501
provided, however, that:

\(1\) The limited partner and LLC/LLP/RLLP insulation provisions of Note
2(f) shall not apply; and

\(2\) The provisions of Note 2(a) regarding five (5) percent interests
shall include all voting or nonvoting stock or limited partnership
equity interests of five (5) percent or more.

\* \* \* \* \*

# Section 76.1401 Effective competition and local exchange carriers {#section-76.1401-effective-competition-and-local-exchange-carriers .unnumbered}

11\. Section 76.1401 is deleted.

# Subpart S -- Open Video Systems {#subpart-s-open-video-systems .unnumbered}

# Section 76.1500 Definitions {#section-76.1500-definitions .unnumbered}

12\. Section 76.1500 is amended by renumbering paragraph (h) to read as
paragraph (i), revising paragraph (g) as follows, and adding new
paragraph (h):

\(g\) *Affiliated*. For purposes of this subpart, entities are
affiliated if either entity has an attributable interest in the other or
if a third party has an attributable interest in both entities.

\(h\) *Attributable Interest*. The term "attributable interest" shall be
defined by reference to the criteria set forth in Notes 1-5 to § 76.501
provided, however, that:

\(1\) The limited partner and LLC/LLP/RLLP insulation provisions of Note
2(f) shall not apply; and

\(2\) The provisions of Note 2(a) regarding five (5) percent interests
shall include all voting or nonvoting stock or limited partnership
equity interests of five (5) percent or more.

**Appendix B**

**Comments Filed in this Proceeding**

**[Comments]{.underline}**

Adelphia Communications Corp. ("Adelphia"), Falcon Holding Group LP
("Falcon"), Insight Communications Co., LP ("Insight") and Lenfest
Communications, Inc. ("Lenfest") (collectively "Adelphia *et al.*")

Ameritech New Media, Inc. ("Ameritech")

Bresnan Communications Co., LP ("Bresnan") and TCA Cable TV, Inc.
("TCA")

Cablevision Systems Corp. ("Cablevision")

Chase Capital Partners ("Chase")

Consumers Union, Consumer Federation of America, the Center for Media
Education, the Office of Communication, Inc. of the United Church of
Christ, and the Association of Independent Video and Filmmakers ("CU")

DIRECTV, Inc. ("DIRECTV")

Mediacom LLC ("Mediacom")

MediaOne Group, Inc. ("MediaOne")

National Cable Television Association ("NCTA")

RCN Telecom Services, Inc. ("RCN")

Tele-Communications, Inc. ("TCI")

Time Warner, Inc. ("Time Warner")

Wireless Communications Association International, Inc. ("WCA")

**[Reply Comments]{.underline}**

Adelphia Communications Corp. ("Adelphia"), Falcon Holding Group LP
("Falcon"), Insight Communications Co., LP ("Insight") and Lenfest
Communications, Inc. ("Lenfest") (collectively "Adelphia *et al.*")

Cablevision Systems Corp. ("Cablevision")

Chase Capital Partners ("Chase")

Comcast Cable Communications, Inc. ("Comcast")

DIRECTV, Inc. ("DIRECTV")

MediaOne Group, Inc. ("MediaOne")

RCN Telecom Services, Inc. ("RCN")

Tele-Communications, Inc. ("TCI")

Time Warner, Inc. ("Time Warner")

Univision Communications, Inc. ("Univision")

Wireless Communications Association International, Inc. ("WCA")

**[List of Commenters in Cable Reform Proceeding, CS Docket No.
96-85]{.underline}**

**[Commenters]{.underline}**

Alliance for Community Media, Consumer Project on Technology, and
Alliance for Communications Democracy

Allied Associated Partners, LP and GELD Information Systems

Bell Atlantic Corporation

BellSouth Corporation (\"BellSouth\")

Cable Telecommunications Association (\"CATA\")

Cablevision Systems Corporation (\"Cablevision\")

California Cable Television Association (\"CCTA\")

City and County of Denver, CO (\"Denver\")

City of Fairfield, CA (\"Fairfield\")

City of Indianapolis, IN (\"Indianapolis\")

Cole, Raywid, & Braverman (on behalf of Bresnan Communications Company,
LP, Charter Communications, Inc., Daniels Communications, Inc., Halcyon
Communications Partners, James Cable Partners, LP, Jones Intercable,
Inc., Rifkin & Associates, Inc., and TCA Cable TV, Inc. (\"Cole,
Raywid\"))

Comcast Cable Communications, Inc. (\"Comcast\")

Cook Jr., William A. (\"William Cook\")

Cox Communications, Inc. (\"Cox\")

C-Tec Cable Systems, Inc. and Mercom, Inc. (\"C-TEC and Mercom\")

Falcon Holding Group, LP (\"Falcon\")

Fleischman and Walsh, LLP (on behalf of Adelphia Communications
Corporation, Arizona Cable Telecommunications Association, Century
Communications Corporation, Charter Communications, Inc., Insight
Communications Co., State Cable TV Corp., and Suburban Cable TV Co. Inc.
(\"Fleischman\"))

FrontierVision Operating Partners, LP (\"FrontierVision\")

Greater Metro Cable Consortium, Metro Denver, CO (\"GMCC\")

GTE Service Corporation (\"GTE\")

Independent Cable & Telecommunications Association (\"ICTA\")

Kramer, Monroe & Wyatt (\"Kramer\")

Massachusetts Cable Television Commission (\"Massachusetts Cable
Commission\")

National Cable Television Association, Inc. (\"NCTA\")

National League of Cities and National Association of Telecommunications
Officers and Advisors (\"League of Cities and NATOA\")

National Telephone Cooperative Association (\"NTCA\")

New England Cable Television Association, Inc. (\"NECTA\")

New Jersey State Board of Public Utilities (\"New Jersey Board\")

New Jersey State Division of the Ratepayer Advocate (\"New Jersey
Ratepayer Advocate\")

New York City Department of Information Technology and
Telecommunications (\"New York City\")

New York State Department of Public Service (\"State of New York\")

OpTel, Inc. (\"OpTel\")

People for the American Way and Media Access Project

Residential Communications Network, Inc.

SBC Communications, Inc. and Southwestern Bell Video Systems, Inc.
(\"SBC\")

Small Cable Business Association (\"SCBA\")

State of California Agency (\"SMATV\")

Tele-Communications, Inc. (\"TCI\")

Time Warner Cable (Time Warner)

United States Small Business Administration (\"SBA\")

United States Telephone Association (\"USTA\")

United States Wireless Cable, Inc. and Wedgewood Communications, Inc.
(\"U.S. Wireless and Wedgewood\")

US WEST, Inc. (\"U.S. WEST\")

Wireless Cable Association International, Inc. (\"WCA\")

**[Reply Commenters]{.underline}**

Alliance for Community Media

Ameritech New Media, Inc. (\"Ameritech\")

Bell Atlantic Corporation

City of Atlanta, GA

City of Los Angeles, CA; National League of Cities; and National
Association of Telecommunications Officers & Advisors (\"Los Angeles,
League of Cities, and NATOA\")

City of Austin, TX (\"Austin\")

City of Lake Forest, IL (\"Lake Forest\")

City of Naperville, IL (\"Naperville\")

City of Rolling Meadows, IL (\"Rolling Meadows\")

Cole, Raywid, & Braverman (on behalf of Bresnan Communications Company,
LP, Charter Communications, Inc., Daniels Communications, Inc., Halcyon
Communications Partners, James Cable Partners, LP, Jones Intercable,
Inc., Rifkin & Associates, Inc., TCA Cable TV, Inc. (\"Cole, Raywid\"))

Comcast Cable Communications, Inc. (\"Comcast\")

Fleischman and Walsh, L.L.P (on behalf of Adelphia Communications
Corporation, Arizona Cable Telecommunications Association, Century
Communications Corporation, Charter Communications, Inc., Insight
Communications Co., State Cable TV Corp., and Suburban Cable TV Co. Inc.
(\"Fleischman\"))

General Electric Capital Corporation (\"GE Capital\")

Independent Cable & Telecommunications Association (\"ICTA\")

J.P. Morgan & Company, Brown Brothers Harriman & Co., Olympus Partners,
and First Union Capital Partners, Inc.

Massachusetts Cable Television Commission (\"Massachusetts Cable
Commission\")

Metropolitan Area Communications Commission representing Oregon
communities (\"MACC\")

Michigan, Illinois and Texas Communities

National Cable Television Association, Inc. (\"NCTA\")

New York City Department of Information Technology and
Telecommunications (\"New York City\")

OpTel, Inc. (\"OpTel\")

Small Cable Business Association (\"SCBA\")

Tele-Communications, Inc. (\"TCI\")

Time Warner Cable (\"Time Warner\")

United States Telephone Association (\"USTA\")

United States Wireless Cable, Inc. and Wedgewood Communications, Inc.
(\"U.S. Wireless and Wedgewood\")

US WEST, Inc. (\"U.S. WEST\")

Viacom, Inc. (\"Viacom\")

Village of Lincolnwood, IL (\"Lincolnwood\")

Wireless Cable Association International, Inc. (\"WCA\")

**APPENDIX C**

#  Cable Alliances and Partnerships {#cable-alliances-and-partnerships .unnumbered}

To assist with our analysis in this proceeding, we asked for comment on
the specifics of recently concluded cable transactions, such as cable
system partnerships, joint ventures, swaps, transfers, mergers and
acquisitions, particularly those transactions announced or consummated
in 1997 or thereafter.

For each transaction identified, we asked the commenters to note the
percentage and nature (e.g., voting or non-voting, limited or general
partnership, insulated or non-insulated, rights of conversion) of each
entity's ownership interests; the number of officers, directors, and
other key personnel appointed by each entity to a management committee,
board or other governing body; and the portion of the equity or debt
financing contributed by each entity. In addition, we asked for comment
on any authority or power held by each entity to review, veto or
otherwise influence the management or operation of the cable systems,
including core areas such as budget, personnel, programming, technology
and competitive practices.

We note that, since the comments in this proceeding were filed, many of
the alliances discussed below have changed.

**i. Comcast**

Comcast agreed to loan \$735,000,000 to Prime Communications, LLC, in
exchange for a 10-year note which is convertible to a 90% equity
interest in Prime once Prime rebuilds its Washington, D.C. area cable
systems. Until the note is converted, Prime will manage and operate its
systems. [^396] Prime serves approximately 430,000 customers, which
under our new ED rule will be attributable to Comcast.

**ii. MediaOne's Partnership with Time Warner**

MediaOne holds a 25.5% limited partnership interest in a partnership
with Time Warner, Time Warner Entertainment Co., LP ("TWE"). Thus, under
the Commission's attribution rules, TWE's 9.6 million subscribers are
attributed to MediaOne. MediaOne states that adding TWE's 9.6 million
subscribers to the 4.9 million subscribers that MediaOne alone serves
raises MediaOne's total number of subscribers to 14.5 million, which is
higher than Time Warner's 12 million subscribers.[^397] MediaOne states
that it cannot avail itself of the "insulated limited partner" exception
because one of the key purposes of the partnership was to combine Time
Warner and MediaOne's expertise in designing and testing Full Service
Networks.[^398] MediaOne asserts that it has not exercised any control
over the selection of programming on the TWE systems.[^399] According to
MediaOne, it directly serves only 8% of the nation's cable subscribers,
but because the TWE subscribers are attributed to MediaOne under the
current rules, MediaOne cannot acquire more than another 2.6 million
subscribers without violating the 30% horizontal ownership limits.[^400]

**iii. TCI's Joint Ventures, Affiliations and Investments**[^401]

As of January 20, 1999, TCI states that, based on our current
attribution rules, its cable systems pass 38,757,000 homes.[^402] Based
on 95.6 million total cable homes passed, TCI's systems pass 45% of the
market. With the exception of its investment in Time Warner, TCI's joint
ventures, affiliations and investments described below attribute those
entities' subscribers to TCI.

Adelphia *et al.* and Bresnan *et al.* state that each of TCI's
affiliates has the option to purchase cable networks from TCI's
subsidiary, Satellite Services, Inc. ("SSI"), but is not required to do
so.[^403] SSI purchases the distribution rights for cable program
networks.[^404] It provides "\[m\]any of the popular cable networks . .
. at rates which are lower than those which would otherwise be
obtainable."[^405] A TCI partner can selectively choose cable networks
from SSI's offerings and is free to separately contract for non-SSI
services.[^406]

**a) Time Warner**

TCI, through its subsidiary Liberty Media, holds a 10% equity interest
in Time Warner.[^407] Pursuant to a consent decree with the Federal
Trade Commission ("FTC"), Liberty Media exchanged its shares of Time
Warner common stock for a separate series of Time Warner common stock
with limited voting rights.[^408] Thus, Liberty Media's 10% equity
interest in Time Warner represents less than 1% of the voting power of
Time Warner's outstanding common stock.[^409]

**b) Adelphia Partnership**

TCI holds a 34.4% interest and Adelphia Communications Corp. holds a
65.6% interest in Parnassos, LP. The partnership serves approximately
465,000 subscribers and passes approximately 700,000 homes. Adelphia has
three members and TCI has two members on the five-member Parnassos
board. Unanimous consent of the board is required for fundamental
decisions such as the purchase/sale of assets, issuance of equity
interests, consolidation, mergers, and additional capital calls.[^410]
Adelphia manages the Parnassos partnership for a fee and states that it
has managerial control over programming choices, personnel, marketing,
and rebuilds. Parnassos purchases programming from SSI.[^411]

**c) Falcon and Insight Partnerships**

TCI holds a 47% interest in Falcon Communications, LP (a partnership
with Falcon Holding Group, Inc.) and a 50% interest in Insight
Communications of Indiana LLC (a partnership with Insight Communications
Co., LP). The Falcon partnership serves approximately 1 million
subscribers, and the Insight Partnership serves approximately 320,000
subscribers. The Falcon partnership agreement and the Insight agreement
give Falcon and Insight, respectively, the exclusive right to manage
their joint ventures with TCI, while TCI retains super majority rights
to approve fundamental decisions.[^412] Of the six-member Falcon
Communications, LP, advisory committee, Falcon will have three members,
TCI will have two members, and TCI and Falcon will jointly agree on a
sixth member.[^413] The Insight Communications of Indiana LLCs
management committee will consist of three Insight members and two TCI
members.[^414]

**d) Lenfest Communications, Inc.**

TCI holds a 50% corporate voting equity interest in Lenfest
Communications, Inc. ("LCI"). H.F. Lenfest ("Mr. Lenfest") and his three
children from whom he holds proxies own and control the remaining 50% of
LCI's stock. LCI serves approximately 1 million subscribers. Mr. Lenfest
has the right to designate a majority of the board's directors until
January 1, 2002, at which time the Lenfest family and TCI will have the
right to appoint an equal number of directors to the board. Mr. Lenfest
is LCI's president and CEO and is guaranteed these positions until
January 1, 2002. LCI states that TCI has no management control according
to an agreement with Mr. Lenfest.[^415] If LCI shareholders decide to
sell their shares, TCI has the right of first refusal.[^416] LCI
purchases a number of SSI channels, but has negotiated contracts with
channels non-affiliated with SSI and has declined to carry cable
networks affiliated with SSI due to LCI's insufficient channel
capacity.[^417] Although LCI contracted to use TCI's HITS digital
programming service, LCI states that it was under no obligation to do
so.[^418]

**e) Peak Cablevision**

TCI holds a 66.7% interest in Peak Cablevision, LLP (a partnership with
Fisher Communications, LLC). Peak Cablevision serves approximately
112,000 subscribers and passes approximately 179,000 homes. Fisher will
manage the Peak partnership for a fee, the four-member board will
consist of two TCI members and two Fisher members, and all decisions
will be made by a majority vote, except for major decisions, including
budgets, which require unanimous approval. TCI provides programming to
the partnership through SSI.[^419]

**f) Intermedia Capital Partners VI LP**

TCI and its president Leo Hindery have an undisclosed interest as
limited partners in Intermedia Capital Partners VI, LP.[^420] Intermedia
Capital Management VI, LLC is the general partner and manages the
partnership for a fee. Intermedia serves approximately 425,000
subscribers and passes approximately 646,000 homes. The partnership's
advisory committee consists of three TCI members, three Intermedia
members and three members from the Blackstone Group, a limited partner.
The advisory committee and the limited partners are prohibited from
taking part in the control, management or operation of the
partnership.[^421] TCI provides programming to the partnership through
SSI.[^422]

**g) Cablevision**

Cablevision acquired approximately 800,000 subscribers from TCI in the
New York area.[^423] In exchange for the subscribers, Cablevision gave
TCI a 33% equity interest in Cablevision, but because TCI has class A
stock, which has 1/10 the voting power of class B stock, TCI's voting
interest is 8.8%.[^424] Cablevision's chairman Charles F. Dolan has
control over 44.7% of the total voting power, and other Dolan family
members hold 36.8% of the total voting power.[^425] Cablevision argues
that TCI's control is limited in three other ways. First, for class
votes, TCI must vote its shares in direct proportion to the votes of
non-TCI Class shareholders; thus Cablevision argues that TCI has no
independent voting power. Currently there are only four class A
directors out of the 15 directors serving on the board. Second, TCI is
prohibited from joining a voting group or voting trust and from
obtaining beneficial ownership of more than an additional 10% of class A
shares. Third, while TCI is entitled to designate up to two class B
seats on the board, voting restrictions prohibit it from designating
additional directors. Because class B stockholders have the power to
appoint 75% of the board, the Dolan family has the ability to appoint a
majority of the board.[^426] Cablevision states that TCI has no
meaningful ability to exercise influence or control over Cablevision's
key decisions.[^427] Cablevision states that the Federal Trade
Commission ("FTC") found that the TCI/Cablevision transaction was not
anticompetitive after a review under the Hart-Scott-Rodino Act.[^428]
Cablevision serves approximately 3.6 million subscribers.[^429]

h\) Bresnan Communications Group, LP and TCA Cable Partners II

Bresnan Communications Company, LP, and TCI are forming a new
partnership, Bresnan Communications Group, LP ("BCG"). The new
partnership will serve 615,000 subscribers. Bresnan will be the sole
general partner and the managing partner with a 10% equity interest, TCI
will have a 50% limited partnership interest and Blackstone Capital
Partners III Merchant Banking Fund, LP, will have a 40% limited
partnership interest.[^430]

TCA Cable TV, Inc. and TCI formed a partnership, TCA Cable Partners II
("TCA II"), in which TCA holds an 80% general partnership interest, and
TCI holds a 20% general partnership interest.[^431] The partnership
serves approximately 300,000 subscribers. A committee consisting of
three TCA members and three TCI members governs TCA II. Management and
operation decisions require a majority vote of the committee, while
major matters require unanimous approval.[^432] Bresnan and TCA argue
that, despite TCI's equity involvement, TCA and Bresnan control the
budgets, make the personnel decisions, and make programming decisions
without TCI mandating any particular carriage.[^433] TCI states that TCA
manages the day-to-day operations of the general partnership for a fee,
and that TCI provides programming to the TCA II partnership through SSI
for a fee.[^434]

**Statement of Commissioner Harold W. Furchtgott-Roth,**

**Concurring in Part and Dissenting in Part**

**In the Matter of Implementation of the Cable Television Consumer
Protection and Competition Act of 1992, Review of the Commission\'s
Cable Attribution Rules, CS Docket No. 98-82.**

I respectfully dissent from the adoption of these cable attribution
rules. I agree, however, with certain decisions regarding cable reform.
I thus dissent in part and concur in part in this Report and Order.

*General Attribution Standards*

The instant cable attribution rules are based primarily on the newly
revised broadcast attribution rules. *See supra* at para. 11
(incorporating by reference the reasoning set forth in the *Broadcast
Attribution Report and Order*). Those rules are, with a few exceptions,
imported into the instant context.

For the reasons that I gave in my dissent from the broadcast attribution
rules, I must also dissent from these counting standards. *See*
Statement of Commissioner Harold W. Furchtgott-Roth, Dissenting in Part
and Concurring in Part, *In the Matter of the Commission\'s Regulations
Governing Attribution of Broadcast and Cable/MDS Interests, MM Docket
No. 94-150; Review of the Commission\'s Regulations and Policies
Affecting Investment in the Broadcast Industry, MM Docket No. 92-51;
Reexamination of the Commission\'s Cross-Interest Policy, MM Docket No.
87-154* (rel. Aug. 6, 1999). In short, I believe that we should have
taken these opportunities to simplify our attribution rules, instead of
creating additional layers of regulation such as the equity-debt-plus
test and reaching into heretofore uncharted areas such as pure debt
instruments.[^435]

With particular respect to the changes in the insulation criteria for
partnerships, I am sympathetic to the concerns that motivate the
Commission. I would prefer to address policy questions in the
substantive rule on the horizontal limit, however, not in the context of
the attribution rules. I fear that the \"materially involved in
programming activities\" test will prove too subjective to be
efficiently applied and enforced.

I am also troubled by the elimination of the single majority shareholder
exception. As I made clear in the *Broadcast Attribution Order*, this
rule provides at least some safe harbor to regulated entities in terms
of attribution. Against the backdrop of our vastly complicated
attribution rules, this exception \-- whether or not I would have
created it in the first instance \-- operates to provide at least one
clear instance where interests will not be attributable. Unless we
intend to start from scratch and come up with a streamlined attribution
system, I think we should retain the single majority shareholder
exception.

In this regard, I must note, again, a yawning inconsistency between the
broadcast item and this one: while we generally adhere to the broadcast
attribution framework for cable, the Commission departs from that
framework for the single majority shareholder rule in particular. If the
policy reasons animating the rule are persuasive in broadcast, then they
ought to work equally well here \-- especially given that the Commission
states that the industries are not so different that different
attribution rules are needed, as noted above. I see no rational
justification for retaining this exception for broadcasters but
repealing it for cable operators, and I do not think the Order provides
one.

*Cable Reform Issues*

I agree with the Commission\'s definition of the term \"affiliate\" for
purposes of the LEC effective competition provision of section 623(l).
*See supra* at paras. 120-125. In particular, while the Title I
definition does not control in this context, I think it wise to exercise
our discretion in light of Congress\' definition, as the Commission
does. I thus join in this decision. I would have used the same test,
however, for purposes of both the competing provider provision of
section 623(l) and the cable-telco buy-out rule, *cf.* *supra* at paras.
126-132, and thus dissent from that decision.

###  {#section-1 .unnumbered}

**STATEMENT OF COMMISSIONER GLORIA TRISTANI,**

# DISSENTING IN PART {#dissenting-in-part .unnumbered}

In the Matter of Implementation of the Cable Television Consumer
Protection and Competition Act of 1992, Implementation of the Cable Act
Reform Provisions of the Telecommunications Act of 1996, and Review of
the Commission's Cable Attribution Rules, CS Docket Nos. 98-82 and 96-85

I dissent from the majority's decision to modify the insulation criteria
for limited partnerships and to narrow the attribution standard for
officers and directors. These changes are ill-conceived, arbitrary and
will prove unworkable in practice.

First, the majority departs from established precedent without adequate
explanation. In adopting the broadcast attribution standard for purposes
of Section 613, the Commission found:

> \[T\]he objectives of the broadcast attribution model are consistent
> with our goals in establishing ownership standards for subscriber
> limits. In this regard, the broadcast attribution rules focus on
> ownership thresholds that enable a broadcast licensee to influence or
> control management or programming decisions. We believe these same
> issues are also relevant to addressing the concerns at issue in this
> proceeding relating to the ability of cable operators to unduly
> influence the programming marketplace.[^436]

Just last year, the Commission reiterated these views on
reconsideration.[^437]

Thus, the Commission has repeatedly recognized that it is one entity's
ability to influence or control the management *or* programming
decisions of another entity that implicate the concerns of Section 613.
The majority, however, acts as if it is writing on a blank slate by
ignoring the ability to influence or control a partnership's management
and focusing only on programming-related decisions. The majority does
not claim that the broadcast criteria, affirmed by the Commission only
two months ago, are wrong.[^438] But nor does the majority attempt to
explain why our prior precedent is wrong -- i.e., why the broadcast
attribution criteria really do not address the same issues regarding
influence and control over management and programming decisions at issue
here. Indeed, the majority would find any such attempt difficult, since,
in enacting Section 613, Congress expressed many of the same competition
and diversity concerns that underlie our broadcast ownership
rules.[^439]

The arbitrariness of the majority's decision is further evidenced by its
failure to apply its new rules across-the-board. As noted above, the
majority does not argue for a change in the broadcast attribution rules.
Nor does the majority change the attribution criteria that apply to our
other cable rules \-- including the cable/SMATV cross-ownership ban, the
cable-telco buy-out prohibition, and the competing provider prong of the
effective competition test -- that apply the broadcast attribution
standard. Nor does the majority explain, if programming decisions are
the only concern under Section 613, why it restricts its decision to
limited partnerships rather than applying it to all corporate
structures. For instance, the majority does not explain why we should
continue to attribute the interests of passive institutional investors,
if those investors remove themselves from programming-related
activities. If the attribution rules are changed for purposes of limited
partnerships under Section 613, logically either the same revisions
should apply to these other rules, or a good reason must be advanced why
they should not. The majority does neither.

Finally, I fear that the majority's belief that "programming activities"
can be neatly cordoned off from other management functions is illusory.
In the real world, the ability to influence a partnership's core
business activities inevitably involves the ability to at least
indirectly affect the various activities, such as programming, in which
the partnership is involved. Until today, the Commission has always
recognized this common sense proposition. In particular, the Commission
has always recognized that the potential influence of officers and
directors is significant, and should be attributable to a broadcaster or
cable operator whenever these individuals' duties relate to the media
activities of the company.[^440] Now, however, we are putting officers
and directors in the untenable position of determining, on the fly,
whether a particular budgetary or marketing decision improperly involves
them in "programming-related activities." Worse, the public's right to
the competition and diversity benefits of Section 613 depends on them
making the right decision. The public interest should not hang by so
thin a reed.

For these reasons, I dissent from today's decision to the extent it
amends our attribution rules governing limited partnerships, officers
and directors.

[^1]: *Notice of Proposed Rulemaking*, CS Docket 98-32, FCC 98-112 (rel.
    June 26, 1998) ("*Cable Attribution Notice*").

[^2]: *In re Implementation of Cable Act Reform Provisions of the
    Telecommunications Act of 1996*, *Order and Notice of Proposed
    Rulemaking*, CS Docket No. 96-85, 11 FCC Rcd 5937 (1996) ("*Cable
    Reform Notice*").

[^3]: *See Regulations Governing Attribution of Broadcast and Cable/MDS
    Interests, Regulation and Policies Affecting Investment in the
    Broadcast Industry and Reexamination of the Commission\'s
    Cross-Interest Policy,* MM Docket Nos. 94-150, 92-51 and 87-154,
    *Report and Order* (rel. Aug. 6, 1999) ("*Broadcast Attribution
    Report and Order*"). The *Broadcast Attribution Report and* Order
    was issued after two notices for comment were issued. *See Notice of
    Proposed Rule Making, Review of the Commission\'s Regulations
    Governing the Attribution of Mass Media Interests*, MM Docket Nos.
    94-150, 92-51 and 87-154, FCC 94-324, 10 FCC Rcd 3606 (1995)
    (\"*Broadcast Attribution Notice*\"); *Further Notice of Proposed
    Rule Making, Regulations Governing Attribution of Broadcast and
    Cable/MDS Interests, Regulation and Policies Affecting Investment in
    the Broadcast Industry and Reexamination of the Commission\'s
    Cross-Interest Policy*, MM Docket Nos. 94-150, 92-51 and 87-154, FCC
    96-436, 11 FCC Rcd 19895 (1996) (\"*Broadcast Attribution Further
    Notice*\").

[^4]: 47 U.S.C. § 533(f)(1)(A) (emphasis added).

[^5]: 47 U.S.C. § 548(b) (emphasis added).

[^6]: For a history of how the cable attribution rules developed, *see
    Cable Attribution Notice* at paras. 2-9.

[^7]: *See id*.

[^8]: 47 C.F.R. § 76.501 n.2 (a).

[^9]: 47 C.F.R. § 76.501 n.2 (c).

[^10]: 47 C.F.R. § 76.501 n.2 (f).

[^11]: 47 C.F.R. § 76.501 n.2 (b).

[^12]: 47 C.F.R. § 76.501 n.2 (a).

[^13]: *See* 47 C.F.R. § 76.501 n.2 (g)(1) (a limited partner is
    "insulated" if the partnership certifies that the partner is "not
    materially involved, directly or indirectly, in the management or
    operation of the media activities of the partnership").

[^14]: 47 C.F.R. § 76.501 n.2 (h).

[^15]: 47 C.F.R. § 76.503.

[^16]: 47 C.F.R. § 76.504.

[^17]: *Implementation of Sections 11 & 13 of Cable Television Consumer
    Protection and Competition Act of 1992 \-- Horizontal and Vertical
    Ownership Limits,* *Second Report and Order*, MM Docket No. 92-264,
    8 FCC Rcd 8565, 8568-69, 8577-8579, 8593-8596 (1993) (\"*Horizontal
    Ownership Second Report and Order*\").

[^18]: *See Cable Attribution Notice* at paras. 5-8 and orders cited
    therein for discussion on why the restrictive attribution standard
    was selected to apply to the substantive cable rules at issue in
    this proceeding.

[^19]: *Id.* at para. 5; *see, e.g.,* 47 C.F.R. § 76.501(d) n.5
    (attribution rules for the cable/SMATV cross-ownership prohibition
    rule).

[^20]: 47 C.F.R. § 76.1001.

[^21]: 47 C.F.R. § 76.1300.

[^22]: 47 C.F.R. § 76.501(d).

[^23]: 47 C.F.R. § 76.924(i).

[^24]: 47 C.F.R. § 76.922(f)(6).

[^25]: 47 C.F.R. § 76.970(b).

[^26]: 47 C.F.R. § 76.1503(c).

[^27]: *See* Communications Act § 623(l)(1)(D), 47 U.S.C. §
    543(l)(1)(D).

[^28]: *See* Communications Act § 652, 47 U.S.C. § 572.

[^29]: *Cable Reform Notice*, 11 FCC Rcd 5937.

[^30]: *See Cable Attribution Notice* at para. 15 n.52 ("We seek comment
    on whether and how any changes in our cable attribution rules should
    affect our various definitions of 'affiliate.'").

[^31]: *See In re Implementation of Cable Act Reform Provisions of the
    Telecommunications Act of 1996*, *Report and Order*, CS Docket No.
    96-85, FCC No. 99-57 at paras. 25, 91(March 29, 1999) ("*Cable
    Reform Report and Order*").

[^32]: *See* Appendix B for a list of commenters in the *Cable Reform*
    proceeding.

[^33]: This *Report and Order* nevertheless amends the attribution notes
    to 47 C.F.R. § 76.501, which apply to the cable/broadcast station
    cross-ownership prohibition, because these notes are also used for
    our other cable rules. However, the amendments to these notes do not
    change the substance of the cable/broadcast attribution rules
    adopted in the *Broadcast Attribution Report and Order*.

[^34]: *Broadcast Attribution Further Notice* at paras. 8-25.

[^35]: *Id*. at paras. 36-38 and Commission staff study attached
    thereto.

[^36]: *Cable Attribution Notice* at para. 12.

[^37]: *See, e.g.,* 47 C.F.R. §§ 76.924(i), 76.970(b), 76.1500(g),
    76.1401(b).

[^38]: *Cable Attribution Notice* at para. 15.

[^39]: *Cable Attribution Notice* at para. 13.

[^40]: *Id.*

[^41]: *Cable Attribution Notice* at para. 16.

[^42]: On March 9, 1999, TCI merged with AT&T. TCI's cable systems are
    now owned by AT&T Broadband & Internet Services, Inc ("AT&T
    Broadband"), an AT&T subsidiary. TCI's programming subsidiary,
    Liberty Media Group, is now a separate subsidiary of AT&T. Because
    the comments in this proceeding were filed before the merger, we
    will identify TCI's comments as those filed by TCI.

[^43]: TCI Comments at 8 n.15 (*quoting Reexamination of the
    Commission's Rules and Policies Regarding the Attribution of
    Ownership Interests in Broadcast, Cable Television and Newspaper
    Entities, Memorandum Opinion and Order*, MM Docket 83-46, 58 R.R.2d
    604 at para. 22 (1985)).

[^44]: *Id.* at 12 n.26-27.

[^45]: *Id.* at 12 n.26-27.

[^46]: *Id.* at 15; NCTA Comments at 6; Comcast Reply Comments at 2.

[^47]: NCTA Comments at 6; *see also* Comcast Reply Comments at 5
    (little risk that a minority, non-controlling investor will exert
    significant influence over the multitude of carried cable networks).

[^48]: MediaOne Comments at 6. Since 1992, cable networks have increased
    from 67 to 162, and of the 88 new networks, over 62% are
    unaffiliated with any cable MSOs. In addition, of the 77 newly
    planned cable networks, only 5 are affiliated with MSOs. *Id.* at 7
    n.11 (*citing* *Annual Assessment of the Status of Competition in
    Markets for the Delivery of Video Programming, Fourth Annual
    Report*, 13 FCC Rcd 1034 Table F (1998) ("*1997 Competition
    Report*")).

[^49]: *Id.* at 10.

[^50]: *Id.* at 11; NCTA Comments at 6 (noting viewers can obtain
    alternative programming from other MVPDs).

[^51]: MediaOne Comments at 11. TCI also argues that there are more
    programming outlets available today than when the big three networks
    were dominant. These include additional broadcast networks and
    non-cable MVPDs that provide service to more than 12 million homes.
    TCI Comments at 15-16.

[^52]: TCI Comments at 37.

[^53]: *Id.* at 39.

[^54]: *Id.* at 40.

[^55]: DIRECTV Reply Comments at 2-3; *see also* WCA Reply Comments at 3
    (Commission should examine how liberalization of attribution rules
    will affect alternative MVPDs).

[^56]: DIRECTV Reply Comments at 2-3 (noting plethora of program access
    cases and the Commission\'s recent strengthening of the program
    access rules to provide damages); Univision Reply Comments at 4
    (noting that its San Francisco affiliate KDTV obtained on-channel
    cable carriage with 22 of TCI\'s 37 San Francisco systems only after
    the Commission ordered TCI to carry the affiliate in two 1998
    orders); *see also* Univision Reply Comments at 8. Univision states
    that TCI dropped Univision\'s cable network in favor of TCI\'s
    affiliate, Telemundo, another Spanish-language network, once TCI
    acquired a Denver system. *Id.* at 9-10.

[^57]: DIRECTV Reply Comments at 5.

[^58]: Univision Reply Comments at 6.

[^59]: Adelphia *et al.* Comments at 3; Time Warner Comments at 34-35
    (\"a 5% equity interest is so small as to be essentially
    irrelevant\"); Adelphia *et al.* Reply Comments at 3; Comcast Reply
    Comments at 3.

[^60]: MediaOne Comments at 25; MediaOne Reply Comments at 4; NCTA
    Comments at 10 (if an investor does not own 50% of more of a
    company's voting stock, the investor's interest should not be
    attributable if the investor certifies to the Commission that the
    investor cannot dictate programming decisions). TCI proposes that no
    interest, including a partnership interest, less than 10% be
    attributable. In cases where an MSO has an interest that is more
    than 10% and less than or equal to 50%, TCI argues that the interest
    should not be attributable if the MSO certifies that it will not
    control the company generally and specifically will not control the
    company with respect to programming, personnel, budget, and
    technological choices. TCI Comments at 2-3 n.3, 18-19.

[^61]: Adelphia *et al.* Comments at 20. Time Warner argues that a
    non-managing joint venture partner should be entitled to vote on
    budget matters without having an interest attributable to it. Time
    Warner Comments at 36.

[^62]: Adelphia *et al.* Comments at 12; *see also* Time Warner Comments
    at 35-37.

[^63]: NCTA Comments at 8.

[^64]: TCI Comments at 26 (*citing An Economic Analysis of the Effects
    of Partial Ownership Interests in Cable Systems* at 8, Stanley M.
    Besen, Daniel P. O'Brien, John Woodbury, and Serge X. Moresi (Aug.
    14, 1998) ("*Besen, O'Brien, Woodbury, and Moresi*") (attached to
    TCI Comments). For example, other large minority shareholders or a
    coalition of smaller shareholders might limit a minority
    shareholder's power. TCI Comments at 26; *Besen, O'Brien, Woodbury,
    and Moresi* at 8.

[^65]: TCI Comments at 28.

[^66]: TCI Comments at 30.

[^67]: TCI Comments at 20. For example, the Commission permits
    self-certification that a licensee does not cause unacceptable
    interference with the radio spectrum, an entity's passive investors
    are indeed passive, an applicant in a competitive bidding process is
    qualified to bid, an officer or director does not perform certain
    duties such that an interest should be attributed to the officer or
    director, and a limited partner's interest meets the insulation
    criteria. *Id.*

[^68]: RCN Comments at 14-15.

[^69]: RCN Reply Comments at 16.

[^70]: CU Comments at 3.

[^71]: *Id.* at 3.

[^72]: NCTA Comments at 9 (*citing Review of the Commission\'s
    Regulations Governing Attribution of Broadcast Interests*, MM Docket
    No. 94-150, 10 FCC Rcd. 3606, 3610 (1995)).

[^73]: MediaOne Comments at 30; NCTA Comments at 23.

[^74]: Cablevision Comments at 10, 13 (\"As the Commission has
    recognized, clustering can \'reduce costs and improve operating and
    management efficiencies,\' position cable operators to serve as an
    outlet for regional advertising, and \'enhance MSOs ability to
    compete successfully in the future with LECs and major electric
    utilities as providers of data transmission and local telephone
    services.\'\") (*quoting 1997 Competition Report*, 13 FCC Rcd at
    1115); Bresnan Comments at 6-7 (clustering systems lowers
    per-subscriber cost of new services because more people bear the
    cost); AT&T Comments at 11 (large customer base must be substantial
    to justify upgrading facilities to compete with ILECs); TCI Comments
    at 49-53; TCI Reply Comments at 19 (noting that a cable operator
    with a small subscriber base would not be able to recover its
    development costs for cable internet development); Bresnan Comments
    at 5, 22-23 (cable modems and digital cable television); NCTA
    Comments at 9 (clustering reduces duplicative costs); MediaOne
    Comments at 14; Time Warner Comments at 10; Adelphia *et al.* Reply
    Comments at 6; Comcast Reply Comments at 6; Cablevision Reply
    Comments at 7. MediaOne also argues that clustering enables MSOs to
    advertise their services in order to counter competition from other
    types of MVPDs. MediaOne Comments at 14.

[^75]: MediaOne Comments at 7; AT&T Comments at 5 (noting that two of
    the horizontal limits statutory factors require the Commission to
    examine \"any efficiencies and other benefits\" of increased
    ownership and \"the dynamic nature of the communications
    marketplace\"); TCI Comments at 46-49; NCTA Comments at 12
    (Commission should take note of convergence of technologies);
    MediaOne Reply Comments at 2 (current rules hinder its ability to
    deliver advanced services); Time Warner Reply Comments at 6.
    MediaOne states that by the end of 1998, over 2.4 million homes
    passed by its network will be able to receive high-speed Internet
    access service. MediaOne Comments at 17.

[^76]: AT&T Comments at 6-9; MediaOne Reply Comments at 9. NCTA and TCI
    note that an ILEC, Ameritech, opposes clustering. NCTA Reply
    Comments at 4; TCI Reply Comments at 15.

[^77]: Cablevision Comments at 3, 9-10 (arguing that clustering will
    enable cable operators to remain competitive with their rivals such
    as the newly merged Bell Atlantic/NYNEX/GTE and
    SBC/Pacific/Ameritech/SNET); Bresnan Comments at 6; Cablevision
    Reply Comments at 18-19; Comcast Reply Comments at 6; Time Warner
    Reply Comments at 8 (combined SBC/Ameritech and combined Bell
    Atlantic/GTE will respectively control 33.8% and 35.8% of the
    nation's local access telephone lines); AT&T Comments at 10; TCI
    Comments at 53-56; Time Warner Comments at 10; MediaOne Reply
    Comments at 9; NCTA Reply Comments at 4 (cable's potential as a
    competitive local exchange carrier is dependant on clustering);
    MediaOne notes that other cable competitors are also not limited to
    size limitations, such as DBS providers. *Id.* In MediaOne\'s
    largest region, the Northeast, it provides service to 1.2 million
    customers while the FCC-approved merger of Bell Atlantic and NYNEX
    provides 43,714,000 access lines. *Id.* at 18. MediaOne argues
    permitting clustering is the only affordable way to achieve these
    benefits and attract the capital that the LECs are capable of
    attracting. MediaOne Comments at 15. According to MediaOne, NYNEX
    saved more than 25% on a \$1.5 billion purchase as a result of its
    merger with BellAtlantic, and SBC and Ameritech project \$1 billion
    in annual savings from their planned merger. *Id.* at 18. The CLECs
    were able to raise \$15 billion over two year to construct local
    exchange facilities, and five regional bell operating companies and
    GTE invested \$24 billion in 1996 and \$26.3 billion in 1997 to
    enhance their networks for advanced data services. *Id.* at 20; *see
    also* MediaOne Reply Comments at 9.

[^78]: Adelphia *et al.* Comments at 11-12. Falcon also states that it
    was not able to obtain capital for upgrading its systems until it
    entered into an alliance with TCI. *Id.* at 10. LCI states that it
    has been able to benefit from the research and experience that only
    a large MSO like TCI can afford. *Id.* at 19.

[^79]: Bresnan *et al.* Comments at 7-12.

[^80]: Cablevision Comments at 4.

[^81]: Cablevision currently offers \"MSG Metro\" in the New York
    metropolitan area. MSG Metro consists of three channels that provide
    information and entertainment that reflect localized needs and
    interests. Cablevision Comments at 13 n.18. The ability to serve, as
    well as spread programming costs over, a greater number of
    subscribers in a geographically dense area increases the likelihood
    that a cable operator will develop local and regional programming.
    Bresnan Comments at 5.

[^82]: J. Dertouzos & S. Wildman, *Programming Access and Effective
    Competition in Cable Television* (Aug. 14, 1998) at i., attached to
    Comments of Ameritech. *See also* DIRECTV Reply Comments at 3-5; RCN
    Reply Comments at 9 (clustering gives MSOs ability to fight
    competition from emerging MVPDs).

[^83]: TCI Comments at 8.

[^84]: RCN Reply Comments at 17.

[^85]: RCN Comments at 10, 14; RCN Reply Comments at 16; Univision Reply
    Comments at 13.

[^86]: Ameritech Comments at 8.

[^87]: *Id.* at 8.

[^88]: *Adelphia et al.* Comments at 8.

[^89]: *Id.* at 9.

[^90]: Univision Reply Comments at 13.

[^91]: RCN Reply Comments at 9.

[^92]: Cablevision Reply Comments at 9.

[^93]: *Id.* at 18.

[^94]: Time Warner Reply Comments at 27.

[^95]: Adelphia *et al.* Comments at 20-21; *see also* Bresnan *et al.*
    Comments at 22 (at the very least, the Commission should attribute
    only the percentage of an operator\'s cable subscribers to an
    investor that equals the investor\'s equity interest in the entity).

[^96]: Time Warner Comments at 38; MediaOne Comments at 26-28.

[^97]: MediaOne Comments at 26-28.

[^98]: *See Report of the Senate Committee on Commerce, Science and
    Transportation*, S. Rep. No. 92, 102d Cong., 1st Sess. 80 (1991)
    ("*Senate Report*") ("In determining what is an attributable
    interest, it is the intent of the Committee that the FCC use the
    attribution criteria set forth in 47 C.F.R. § 73.3555 (notes) \[the
    broadcast attribution rules\] or other criteria the FCC may deem
    appropriate.").

[^99]: *Broadcast Attribution Report and Order* at para. 46.

[^100]: *See Implementation of Section 11(c) of the Cable Television
    Consumer Protection and Competition Act of 1992*, *Third Report and
    Order*, MM Docket No. 92-264, FCC No. 99-289 (Oct. 20, 1999)
    ("*Horizontal Ownership Third Report and Order*").

[^101]: *Broadcast Attribution Report and Order* at para. 46.

[^102]: *See Annual Assessment of the Status of Competition in Markets
    for the Delivery of Video Programming, Fifth Annual Report* at
    paras. 125, 152-153, CS Docket No. 98-102 (rel. Dec. 23, 1998)
    ("*1998 Competition Report*").

[^103]: *See* 47 U.S.C. § 533(f)(1)(A).

[^104]: *See* 47 U.S.C. § 533(f)((2)(A)-(G) for list of statutory
    factors that the statute directs the Commission to consider in order
    to preserving diverse and innovative programming. *See Horizontal
    Ownership Second Report and Order*, 8 FCC Rcd at 8568 ("Congress
    sought to prevent large, vertically integrated cable systems from
    creating barriers to entry for new programmers and from causing a
    reduction in the number of media voices available to consumers.").

[^105]: *See Cable Attribution Notice* at para. 4.

[^106]: *Horizontal Ownership Second Report and Order* at para. 35.

[^107]: *See In re Amendment of Parts 20 and 24 of the Commission's
    Rules: Broadband PCS Competitive Bidding and Commercial Mobile Radio
    Service Spectrum Cap*, Report and Order, WT Docket No. 98-205, FCC
    99-244 at para. 91 (Sept. 22, 1999) (rejecting control proposal for
    wireless rules).

[^108]: *See In re Amendment of Parts 20 and 24 of the Commission's
    Rules: Broadband PCS Competitive Bidding and Commercial Mobile Radio
    Service Spectrum Cap, Amendment of the Commission's Cellular/PCS
    Cross-Ownership Rule*, Report and Order WT Docket No. 96-59, GN
    Docket No. 90-314, FCC 96-278, 11 FCC Rcd 7824 at para. 121 (1996)
    (rejecting control proposal by noting that minority owner may exert
    influence by challenging business decisions, conducting or
    threatening litigation or by insisting upon business audits).

[^109]: *See* Attachment C for details of MSO transactions.

[^110]: *See* Adelphia *et al.* Comments at 8-9; Bresnan *et al.*
    Comments at 13.

[^111]: Given these joint ventures coupled with its ownership of SSI,
    TCI can obtain, Ameritech asserts, virtually any terms it wants from
    a cable programmer, including exclusivity and steep discounts from
    even unaffiliated cable programmers. Ameritech Comments at 8.

[^112]: *See In re Amendment of Parts 20 and 24 of the Commission's
    Rules: Broadband PCS Competitive Bidding and Commercial Mobile Radio
    Service Spectrum Cap*, Report and Order, WT Docket No. 98-205, FCC
    99-244 at para. 91 (Sept. 22, 1999) (rejecting control proposal for
    wireless rules).

[^113]: 47 C.F.R. § 501 n. 2(a).

[^114]: Bresnan Comments at 15-16; Time Warner Comments at 46; Comcast
    Reply Comments at 3-4; Time Warner Reply Comments at 23-25; Chase
    Comments at 3; Mediacom Comments at 2-6. MediaOne states that cable
    operators will spend between \$20 and \$28 billion to upgrade their
    systems to accommodate internet, telephony, and digital programming.
    MediaOne Comments at 7-8; *see also* NCTA Comments at 14.

[^115]: Time Warner Comments at 47-49

[^116]: Time Warner Comments at 49.

[^117]: Bresnan Comments at 17-18.

[^118]: Chase Comments at 4. Chase is an institutional investor that
    holds an attributable interest (less than 10%) in Mediacom, a cable
    systems operator, and a 23% interest in Wireless One, Inc.
    (\"Wireless One\"), a wireless cable service provider. Because
    Wireless One provides wireless services in some franchise areas
    served by Mediacom and because Chase\'s interest in both entities
    are currently attributable under the cable/MDS cross ownership
    restriction, Mediacom applied for and attained a twelve month waiver
    of the restriction. Mediacom Comments at 1-2. Chase and Mediacom
    also request that the Commission relax the more restrictive
    attribution standard applicable to the cable/MMDS cross-ownership
    rule. Chase Comments at 7-8; Mediacom Comments at 11-16. This issue
    was not raised in the *Cable Attribution Notice* and was in fact
    resolved in the *Broadcast Attribution Report and Order*.

[^119]: Chase Comments at 5.

[^120]: Time Warner Comments at 51-52 (Time Warner argues that Seagram
    Company Limited\'s 14.9% interest in Time Warner was not sufficient
    to dissuade Time Warner management from purchasing WTBS(TV)); *see
    also* Cablevision Reply Comments at 15 (recommending raising
    benchmark to 10%); Comcast Reply Comments at 3 (same).

[^121]: Time Warner Comments at 52-53.

[^122]: TCI Comments at 27 (*quoting* *Besen, O'Brien, Woodbury, and
    Moresi* at 8).

[^123]: TCI Comments at 27 (*citing Besen, O'Brien, Woodbury, and
    Moresi* at 8).

[^124]: TCI Comments at 30.

[^125]: RCN Comments at 16-17.

[^126]: Comcast Reply Comments at 8.

[^127]: Time Warner Reply Comments at 26.

[^128]: *See Horizontal Ownership Third Report and Order* at para.
    62**.**

[^129]: *Broadcast Attribution Notice*, 10 FCC Rcd at 3610.

[^130]: *See Broadcast Attribution Report and Order* at paras. 10-15.

[^131]: *Attribution of Ownership Interests*, 97 FCC 2d 997, 1005-08
    (1984) (*"Attribution Order*"); *on recon*., 58 RR 2d 604 (1985)
    (\"*Attribution Reconsideration*\"), *on further recon.*, 1 FCC Rcd
    802 (1986) *(\"Attribution Further Reconsideration*\").

[^132]: L.E. Ribstein, *Business Associations* 987 (1990).

[^133]: J.A. Brickley, R.C. Lease and C.W. Smith, *Ownership Structure
    and Voting on Anti-takeover Amendments*, 20 Journal of Financial
    Economics 267-291 (1988).

[^134]: *See Broadcast Attribution Report and Order* at para. 15 n.35.

[^135]: *See id.*

[^136]: Section 13(d)(1) of the Exchange Act, 15 U.S.C. § 78m(d)(1).

[^137]: *See Securities and Exchange Commission v. Savoy Industries,
    Inc.*, 587 F.2d 1149 (1978), *cert. denied*, 99 S.Ct. 1227 (1979).

[^138]: 47 C.F.R. § 20.6(d)(2).

[^139]: *Broadcast Attribution Notice*, 10 FCC Rcd at 3623 n.68.

[^140]: We also note that the alien ownership restrictions of Section
    310(b) of the Communications Act, as amended, apply only to
    "broadcast or common carrier or aeronautical en route or
    aeronautical fixed radio station" licenses. 47 U.S.C. § 310(b).

[^141]: Paul Kagan Associates, Inc., Cable TV Finance at 2 (May 28,
    1999) (noting that the cable industry is "celebrating two years of
    financial nirvana").

[^142]: *Id.*

[^143]: *See also Broadcast Attribution Report and Order* at para. 14
    (finding that the strength of the communications and financial
    markets alleviated concerns over capital availability).

[^144]: *See* 47 C.F.R. § 501 Note 2(c).

[^145]: *Id.*

[^146]: *Attribution Order* at para. 32.

[^147]: Time Warner Comments at 53.

[^148]: *Id.* at 51.

[^149]: NCTA Comments at 16; *see also* TCI Comments at 51 (passive
    investor safeguards will protect the public interest).

[^150]: NCTA Comments at 19.

[^151]: Mediacom Comments at 14-15; Comcast Comments at 3.

[^152]: Chase Comments at 2 n.2, 3-5.

[^153]: Chase Comments at 8; *see also* Mediacom Comments at 9 (Chase is
    not actively involved in the management or operations of Mediacom).

[^154]: Chase Comments at 5.

[^155]: *See Broadcast Attribution Report and Order* at paras. 17-22.
    For the text of the new rule, *see* Appendix A; 47 C.F.R. § 76.501.

[^156]: *Id.* at para. 22.

[^157]: *See* *Broadcast Attribution Report and Order* at para. 25.

[^158]: M.J. Roe, *Strong Managers, Weak Owners* 125 (1994). In the
    *Attribution Order,* we declined to classify pension funds as
    passive investors based on evidence that pension funds manage their
    own investments and actively pursue social goals in their investment
    policies. *Attribution Order*, 97 FCC 2d at 1014-15.

[^159]: In the *Attribution Order*, we declined to accord passive status
    to SBICs and MESBICs, noting the absence of compelling reason to
    alter the 5 percent benchmark for these entities and the fact that
    while these entities are generally prohibited from assuming control
    of the companies in which they invest, they are authorized to
    exercise control over debtor companies for temporary periods under
    specified conditions. *Attribution Order*, 97 FCC 2d at 1016-17 & n.
    45.

[^160]: *Attribution Notice*, 10 FCC Rcd at 3631, *citing* *Attribution
    Order*, 97 FCC 2d at 1016 & n. 45.

[^161]: Chase Comments at 5 (urging that investors must have some input
    in order to protect their investment).

[^162]: *Id.* at 5, 8.

[^163]: These \"insulation criteria\" include the following: (1) the
    limited partner cannot act as an employee of the partnership if his
    or her functions, directly or indirectly, relate to the media
    enterprises of the company; (2) the limited partner may not serve,
    in any material capacity, as an independent contractor or agent with
    respect to the partnership\'s media enterprises; (3) the limited
    partner may not communicate with the licensee or general partners on
    matters pertaining to the day‑to‑day operations of its business; (4)
    the rights of the limited partner to vote on the admission of
    additional general partners must be subject to the power of the
    general partner to veto any such admissions; (5) the limited partner
    may not vote to remove a general partner except where the general
    partner is subject to bankruptcy proceedings, is adjudicated
    incompetent by a court of competent jurisdiction, or is removed for
    cause as determined by a neutral arbiter; (6) the limited partner
    may not perform any services for the partnership materially relating
    to its media activities, except that a limited partner may make
    loans to or act as a surety for the business; and (7) the limited
    partner may not become actively involved in the management or
    operation of the media businesses of the partnership. *See
    Attribution Reconsideration*, 58 RR2d at 618‑20*, on reco*n., 1 FCC
    Rcd at 802‑03.

[^164]: Time Warner Comments at 55.

[^165]: *Id.* at 56-57 (giving a multiplicity of limited partners the
    right to remove a general partner does not give each limited partner
    significant influence or control).

[^166]: *Id.* at 57.

[^167]: CU Comments at 4.

[^168]: Bresnan Comments at 20.

[^169]: *Id*. Bresnan asserts that TCI\'s 20% general partnership
    interest in TCA II does not give TCI control over TCA II. Bresnan
    states that TCA II is governed by a partnership committee of five
    members, of which three are from TCA and two are from TCA. TCA has
    the explicit right to manage the day-to-day operations of the
    partnership and the right to purchase TCI\'s partnership interest,
    but TCI does not have the right to purchase TCA\'s interest. *Id.*

[^170]: *Broadcast Attribution Report and Order* at paras. 130-133; *see
    also Attribution Further Reconsideration*, 1 FCC Rcd at 803-04.

[^171]: *Id.*

[^172]: *Id.*

[^173]: *Id.*

[^174]: *See Broadcast Attribution Report and Order* at paras 131-132.

[^175]: 47 C.F.R. §§ 76.503, 76.504.

[^176]: *See* 47 U.S.C. § 613(f)(2)(A).

[^177]: *See* Appendix A, 47 C.F.R. §§ 76.503, 76.504.

[^178]: *See* Appendix A, 47 C.F.R. §§ 76.503, 76.504.

[^179]: Time Warner Comments at 64 (*citing Applications of Telemundo
    Group, Inc.*, 10 FCC Rcd 1104 at para. 24 n.8 (1994)).

[^180]: *Id.* at 65.

[^181]: *Id.* at 67.

[^182]: *See* 47 C.F.R. § 76.503(h).

[^183]: *See Telemundo Group*, 10 FCC Rcd 1104 at para. 24 n.8

[^184]: *See* 47 C.F.R. § 76.503(h).

[^185]: *See, e.g., Telemundo Group*, 10 FCC Rcd at 1106; *Turner
    Broadcasting System, Inc.,* 11 FCC Rcd 19595 at para. 43 (1996);
    *Craig O. McCaw*, 9 FCC Rcd 5836, 5915-16 (1994), *aff'd sub nom.*,
    *SBC Communications v. FCC*, 56 F.3d 1484 (D.C. Cir. 1995); *Viacom,
    Inc.*, 9 FCC Rcd 1577, 1579 (1994).

[^186]: *Turner Broadcasting*, 11 FCC Rcd 19595 at para. 20.

[^187]: *Telemundo Group*, 10 FCC Rcd at 1106.

[^188]: 47 C.F.R. §§ 76.503, 76.504.

[^189]: *See* Appendix A, 47 C.F.R. §§ 76.503, 76.504.

[^190]: *See* Appendix A, 47 C.F.R. §§ 76.503, 76.504.

[^191]: Chase Comments at 7-8; Mediacom Comments at 14.

[^192]: Mediacom Comments at 14.

[^193]: *Broadcast Attribution Report and Order* at paras. 138-140.

[^194]: *See* 47 C.F.R. § 76.501 note 2(g)(2).

[^195]: *Broadcast Attribution Notice*, 10 FCC Rcd at 3641.

[^196]: For the text of the new rule, *see* Appendix A; 47 C.F.R. §
    76.501.

[^197]: *Broadcast Attribution Notice*, 10 FCC Rcd at 3631-33, 3649;
    *Cable Attribution Notice* at para. 12.

[^198]: *Broadcast Attribution Notice*, 10 FCC Rcd at 3631-33, 3649;
    *Cable Attribution Notice* at para. 12.

[^199]: *Broadcast Attribution Further Notice*, 11 FCC Rcd at 19900-02.

[^200]: *Id.*

[^201]: *Id.*

[^202]: *Cable Attribution Notice* at para. 12.

[^203]: *Id.*

[^204]: CU Comments at 3.

[^205]: *Id*.

[^206]: *Id.* at 5.

[^207]: *Id*.

[^208]: NCTA Comments at 11-12; Time Warner Comments at 59. TCI argues
    that there is little or no record evidence demonstrating why debt
    and nonvoting equity interests should be attributable in the cable
    context. TCI Comments at 51.

[^209]: NCTA Comments at 11-12; *see also* MediaOne Reply Comments at 5.

[^210]: NCTA Comments at 11-12.

[^211]: NCTA Comments at 11-12; Bresnan Comments at 21 (while an EDP
    rule might make sense in the broadcast local cross-ownership context
    to keep one broadcaster from dominating a single local market, an
    EDP approach would not be appropriate in the horizontal ownership
    context); Time Warner Comments at 59-60 (unlike a local broadcast
    station, a local cable system is not beholden to and does not carry
    one programmer).

[^212]: Time Warner Comments at 53-54.

[^213]: NCTA Comments at 16-17.

[^214]: TCI Comments at 51; TCI Reply Comments at 15 (rule would stifle
    investment and inhibit technology innovation and programming
    development).

[^215]: TCI Comments at 51; TCI Reply Comments at 15.

[^216]: Time Warner Comments at 53.

[^217]: *Id.* at 41.

[^218]: *Id.* at 62-63 (*quoting Cable Attribution Notice* at para. 12).

[^219]: *Id.* at 63.

[^220]: *Id.* at 61; *see also* MediaOne Reply Comments at 5.

[^221]: NCTA Comments at 13; Time Warner Comments at 63.

[^222]: Time Warner Comments at 42.

[^223]: NCTA Comments at 13.

[^224]: For text of new rule, *see* Appendix A; 47 C.F.R. § 76.501 Note
    2(j).

[^225]: Pursuant to standard financial accounting practices, the
    left-hand side of the balance sheet (or total assets) equals the
    right-hand side of the balance sheet (or debt plus equity).

[^226]: *Broadcast Attribution Notice*, 10 FCC Rcd at 3649-52; *see also
    Broadcast Attribution Report and Order* at para. 39.

[^227]: *Broadcast Attribution Report and Order* at para. 48.

[^228]: *See* *Broadcast Attribution Further Notice*, 11 FCC Rcd
    19904-05.

[^229]: *See Broadcast Attribution Report and Order* at para. 61.

[^230]: For example, in the hypothetical case of a company with
    \$100,000 of total assets, and an investor who owns 34 percent of
    these total assets, the investment may take the form of \$30,000 of
    equity and \$4,000 of debt in the company, or alternatively, the
    investment may take the form of \$4,000 of equity and \$30,000 of
    debt in the company. In either case, if the investor owns a total of
    34 percent of the total asset value of the company, then the EDP
    rule will be triggered. In the *Broadcast Attribution Further
    Notice*, para. 22, we referred to the sum of all equity and all debt
    of the company as \"total capitalization.\" We now use the term,
    \"total assets,\" which we believe is a more rigorous accounting
    term for the aggregate of all equity and all debt and which refers
    to the total asset value of the company. Our intent, however,
    remains the same. That is, the sum of all equity and all debt of the
    company will be used as a base when we aggregate different classes
    of investment held by an investor for purposes of determining
    whether the aggregate limit is exceeded. In the *Broadcast
    Attribution Further Notice*, we sought comment as to whether
    preferred stock should be treated as equity or as debt for purposes
    of applying the threshold. *See* *Broadcast Attribution Further
    Notice* at para. 22. We believe that this issue will not be
    significant in most cases since we aggregate equity and debt.
    However, in an instance where it may be relevant, we will presume
    that nonvoting stock should be treated as equity, but we reserve the
    right to treat preferred stock as debt in an appropriate case where
    the stock has more of the indicia of debt.

[^231]: *See Broadcast Attribution Report and Order* at para. 63.

[^232]: *Id.* at para. 64.

[^233]: *Id.*

[^234]: *See Cleveland Television Corp.*, 91 FCC 2d 1129, 1132-35 (Rev.
    Bd. 1982), *review denied*, FCC 83-235 (1983), *aff\'d*, *Cleveland
    Television Corp. v. FCC*, 732 F.2d 962 (D.C. Cir. 1984)
    (\"*Cleveland Television*").

[^235]: *Cleveland Television*, 91 FCC 2d at 1132-35.

[^236]: 11 FCC Rcd 18393, 18442-43 (1996), *on recon*., 13 FCC Rcd 19911
    (1998).

[^237]: Such a change in the attributable status of an investment is
    also possible under our current attribution rules.

[^238]: This approach of permitting one year to come into compliance
    with the multiple ownership rules tracks our general approach with
    respect to non-grandfathered interests discussed in Section III.J.

[^239]: *Broadcast Attribution Report and Order* at para. 36.

[^240]: *Id.* at para. 47.

[^241]: *Id.*

[^242]: *Id.*

[^243]: *Id.* at para. 50, 56 n.121, 59 (at time of *Broadcast
    Attribution Report and Order*, based on staff analysis, the 15%
    standard covered only the four major networks, HSN, Paxnet,
    Telemundo, Univision, and WB but not UPN).

[^244]: *Id.* at para. 51.

[^245]: *See* Appendix C.

[^246]: *See id.*

[^247]: One transaction in particular demonstrates the potential
    influence that a debt holder may have over an entity: Comcast loaned
    \$735,000,000 to Prime in exchange for a ten-year note that is
    convertible into 90% of Prime's equity.

[^248]: *See Broadcast Attribution Report and Order* at paras. 51-53.
    The broadcast EDP attribution rule applies to the broadcast/cable
    and cable/MDS cross-ownership rules, 47 C.F.R. §§ 76.501(a), 21.912.

[^249]: *Broadcast Attribution Report and Order* at para. 112.

[^250]: *Cable Attribution Notice* at para. 14.

[^251]: CU Comments at 2, DIRECTV Comments at 2-8.

[^252]: WCA Comments at 7-9.

[^253]: 47 C.F.R. § 76.1001.

[^254]: WCA Comments at 9-10.

[^255]: WCA Comments at 14.

[^256]: WCA Reply Comments at 13.

[^257]: WCA Comments at 12; WCA Reply Comments at 13-14.

[^258]: WCA Comments at 7.

[^259]: WCA Comments at 7-8 n.16.

[^260]: WCA Comments at 11 (*citing Fourth Annual Report*, 13 FCC Rcd at
    1122 n.550).

[^261]: MediaOne Reply Comments at 12.

[^262]: Comcast Reply Comments at 9 (*quoting* 47 U.S.C. § 548(b)); TCI
    Reply Comments at 17).

[^263]: TCI Reply Comments at 17 (*quoting* 47 U.S.C. § 548(c)(2)(A)).

[^264]: *Id.*; TCI Reply Comments at 17 (WCA\'s interpretation is
    contrary to the plain language of the statute).

[^265]: *Id.* at 19.

[^266]: WCA Comments at 17.

[^267]: WCA Comments at 15-16.

[^268]: WCA Comments at 16.

[^269]: WCA Comments at 18.

[^270]: Comcast Reply Comments at 11 n.25 (*citing* 47 C.F.R. § 76.501,
    Note 1).

[^271]: *Id.* at 11.

[^272]: TCI Reply Comments at 20.

[^273]: *See* 47 C.F.R. § 76.1001.

[^274]: *See* 47 C.F.R. § 76.1300.

[^275]: *See* 47 C.F.R. § 76.970(b); 47 C.F.R. § 76.1503(c).

[^276]: *See* 47 C.F.R. § 76.924(i).

[^277]: *See* 47 C.F.R. § 76.922(f)(6).

[^278]: *See* 47 C.F.R. § 76.501(d).

[^279]: *See* 47 C.F.R. § 76.1001.

[^280]: 47 U.S.C. § 522((5)(A) (emphasis added); *see* 47 C.F.R.
    §76.5(cc).

[^281]: *See* 47 C.F.R. §76.5(bb).

[^282]: *See id.* at paras. 5-8.

[^283]: *See* Appendix; 47 C.F.R. § 76.1001; 47 C.F.R. § 76.1300; 47
    C.F.R. § 76.924; 47 C.F.R. § 76.922; 47 C.F.R. § 76.970; 47 C.F.R. §
    76.1500.

[^284]: 47 U.S.C. § 543(2).

[^285]: 47 U.S.C. § 543(l)(1)(A)-(C).

[^286]: *Id*. These tests were implemented in the Commission\'s rules at
    47 C.F.R. § 76.905(b)(1)-(3).

[^287]: 1996 Act § 301(b)(3), 110 Stat. 115; 47 U.S.C. § 543(l)(1)(D);
    *see* 47 C.F.R. § 76.905(b)(4).

[^288]: ^?^ 47 U.S.C. § 153(26) defines a LEC as:

    > any person that is engaged in the provision of telephone exchange
    > service or exchange access. Such term does not include a person
    > insofar as such person is engaged in the provision of a commercial
    > mobile service under section 332(c), except to the extent that the
    > Commission finds that such service should be included in the
    > definition of such term.

[^289]: 4 7 U.S.C. § 543(l)(1)(D).

[^290]: *Cable Reform Notice* at para. 77.

[^291]: *Cable Reform Report and Order* at para. 25.

[^292]: 1996 Act § 3(a) § 3(a), 110 Stat. 58, *codified at* 47 U.S.C. §
    153(1).

[^293]: 47 U.S.C. § 153.

[^294]: *Cable Reform Notice* at paras. 15-16.

[^295]: 47 U.S.C. § 522(2); *see also* 47 C.F.R. § 76.5(z).

[^296]: *Id.* at para. 16.

[^297]: *Id.*

[^298]: *Id.*

[^299]: *Id.* at para. 77.

[^300]: *Id.*

[^301]: *Cable Attribution Notice* at para. 15.

[^302]: 47 C.F.R. § 76.905(b)(2).

[^303]: *Id.*

[^304]: ^ ?^ *See, e.g.*, Cole Raywid Cable Reform ("CR") Comments at 7;
    New Jersey CR Comments at 10; MCTC CR Comments at 6; SCBA CR Reply
    Comments at 15.

[^305]: Cole Raywid CR Comments at 7; ICTA CR Comments at 3; New Jersey
    CR Comments at 10; MCTC CR Comments at 6; SCBA CR Reply Comments at
    15; Cox CR Comments at 13-14; Comcast CR Comments at 13-14;
    Fleischman CR Comments at 10-15; Time Warner CR Comments at 4.

[^306]: Cox CR Comments at 13-14; Comcast CR Comments at 13-14; Time
    Warner Comments at 4; Fleischman CR Comments at 10-15.

[^307]: Time Warner CR Comments at 8-9 (*citing* 17 C.F.R. § 240.13d-3;
    15 U.S.C. § 78(l)-(n)).

[^308]: Cox CR Comments at 15; Comcast CR Comments at 15; *see also*
    Fleischman Comments at 11.

[^309]: CCTA CR Comments at 9-11; Cole Raywid CR Comments at 6; NECTA CR
    Comments at 7.

[^310]: CCTA CR Comments at 9-10.

[^311]: Time Warner Comments at 10.

[^312]: *Id.*

[^313]: Bell Atlantic CR Comments at 2 (rejecting mechanical application
    of 10% rule); BellSouth CR Comments at 3-4; GTE CR Comments at 4-5;
    Alliance for Community Media, The Consumer Project on Technology,
    and The Alliance for Communications Democracy (\"Alliance\") CR
    Comments 2-3; ICTA CR Reply Comments at 2-3.

[^314]: BellSouth CR Comments at 4.

[^315]: *Id.* at 4.

[^316]: Bell Atlantic CR Comments at 2.

[^317]: ICTA CR Comments at 2.

[^318]: RCN CR Comments at 4-8; *see also* USTA CR Reply Comments at
    7-8.

[^319]: RCN CR Comments at 4.

[^320]: *Id.*

[^321]: ^    ?^USTA Comments at 9.

[^322]: ^    ?^*Id.*

[^323]: ^    ?^*Id*. at 10.

[^324]: ^    ?^ SBC CR Comments at 4. Time Warner observes, however,
    that SBC cites no authority for the contention that beneficial
    ownership is not ownership. Time Warner Reply Comments at 8.

[^325]: *Cable Reform Notice* at para. 16.

[^326]: *See* 141 Cong. Rec. S8243 (daily ed. June 13, 1995) (statement
    of Sen. Pressler) (\"Looming large on the fringes of the \[video
    programming services\] market are the telephone companies. The
    telephone companies pose a very highly credible competitive threat
    because of their specific identities, the technology they are
    capable of deploying, the technological evolution their networks are
    undergoing for reasons apart from video distribution, and, last but
    by no means least, their financial strength and staying power.\").

[^327]: *See* 142 Cong. Rec. S699 (daily ed. Feb. 1, 1996) (statement of
    Sen. Lott) ("\[T\]he people will get a choice in how they get their
    services."); Cong. Rec. H1149 (daily ed. Feb. 1, 1996) (statement of
    Cong. Fields) (looking for head-to-head competition from cable and
    telephone competitors); 142 Cong. Rec. H1156 (daily ed. Feb. 1,
    1996) (statement of Cong. Dingell) (\"No longer will consumers have
    just one company to choose from for the provision of local telephone
    or cable television service.\").

[^328]: 142 Cong. Rec. S688 (daily ed. Feb. 1, 1996) (statement of Sen.
    Hollings) (\"\[C\]ompetition is the best regulator of the
    marketplace. Until that competition exists, monopoly providers of
    services must not be able to exploit their monopoly power to the
    consumer\'s disadvantage. Timing is everything. Telecommunications
    services should be deregulated after, not before, markets become
    competitive.\").

[^329]: We disagree with Time Warner that options, warrants, and
    convertible debentures should generally be treated as beneficial
    interests under our rules creating an attribution simply because the
    SEC defines them to be beneficial interests if their owner can
    obtain voting stock through these securities within 60 days. *See*
    Time Warner CR Comments at 8-9 (*citing* 17 C.F.R. § 240.13d-3; 15
    U.S.C. § 78(l)-(n)). We do not believe that these types of
    securities demonstrate the type of current, active participation by
    a LEC envisioned by the LEC test, unless the amount of these
    securities that an investor holds is more than 33% of the total
    assets of a company. Therefore, subject to the ED rule, we will
    exclude these types of securities as well as any other types of
    nonvoting interests from attribution for purposes of the LEC test.

[^330]: *Cable Reform Report and Order* at para. 30; *see* 47 C.F.R. §
    76.911(c) ("If the evidence establishing effective competition is
    not otherwise available\[, when considering\] petitions filed
    seeking to demonstrate the presence of effective competition
    pursuant to § 76.905(b)(4) \[the LEC test\], the Commission may
    issue an order directing one or more persons to produce information
    relevant to the petition's disposition.").

[^331]: 47 C.F.R. § 76.905(b)(2).

[^332]: *Id.*

[^333]: 47 C.F.R. § 76.5(z). The attribution rules determine what
    constitutes ownership and control for purposes of this section.
    However, our review of the cable rules' various definitions of the
    term "affiliate" reveals that they omit a reference to Section
    76.5(z). Therefore, we will amend the appropriate cable rules to
    include a single definition of the term "affiliate" in order to
    incorporate the cable attribution rules into Section 76.5(z). This
    rule will provide, "Parties are affiliated if either entity has an
    attributable interest in the other or if a third party has an
    attributable interest in both entities." *See* Appendix A; 47 C.F.R.
    § 76.1300; 47 C.F.R. § 76.924; 47 C.F.R. § 76.922; 47 C.F.R. §
    76.970; 47 C.F.R. § 76.1500.

    In addition, in reviewing our rules for this proceeding, we
    ascertained that, although we had decided in previous orders that
    the restrictive attribution standard should apply to our programming
    pass-though rule and rule regarding transfers between affiliates,
    those rules omitted a reference to the applicable attribution
    standard. *See Cable Attribution Notice* at para. 8; *see* 47 C.F.R.
    §§ 76.922(f)(6), 76.924(i). Therefore, we will amend these rules to
    clarify the attribution standards for them. *See* Appendix A; 47
    C.F.R. §§ 76.922(f)(6), 76.924(i).

[^334]: 47 C.F.R. § 76.5(bb); 47 C.F.R. § 76.501 Notes.

[^335]: *Cable Attribution Notice* at para. 15.

[^336]: *See Cable Reform Notice* at para. 9.

[^337]: *See* Appendix A; 47 C.F.R. § 76.905(h).

[^338]: 47 U.S.C. § 572.

[^339]: *Cable Reform Notice*, 11 FCC Rcd at 5970

[^340]: Alliance CR Comments at 2-3; Alliance CR Reply Comments at 1-2.

[^341]: BellSouth CR Comments at 3-4; USTA CR Reply Comments at 9-11.

[^342]: Time Warner Comments at 31-32.

[^343]: For text of new rule, *see* Appendix A; 47 C.F.R. § 76.505.

[^344]: *See Cable Reform Notice* at para. 9; *Cable Attribution Notice*
    at paras. 4-6.

[^345]: This limitation on grandfathering of attributable interests is
    consistent with past Commission practice. *In re Applications of
    Stauffer Communications, Inc.*, 10 FCC Rcd. 5165 (1995); *In re
    Applications of Multimedia, Inc.*, 11 FCC Rcd. 4883 (1995).

[^346]: This 12-month transition period is consistent with previous
    Commission practice. *See Memorandum Opinion and Order and Further
    Notice of Proposed Rule Making* in MM Docket 91-140, 7 FCC Rcd 6387,
    6402 (1992) (\"Revision of Radio Rules and Policies\")
    (\"\...licensees currently engaged in time brokerage will have one
    year from the effective date of these rules to modify their time
    brokerage agreements to account for both the 15 percent attribution
    restriction and the 25 percent limitation on same-service,
    same-market simulcasting.\")

[^347]: *See* Federal Communications Commission *Year 2000 Network
    Stabilization Policy Statement* (Oct. 4, 1999).

[^348]: *See* 5 U.S.C. § 603. The RFA, *see* 5 U.S.C. § 601 *et. seq.*,
    has been amended by the Contract With America Advancement Act of
    1996, Pub. L. No. 104-121, 110 Stat. 847 (1996) (\"CWAAA\"). Title
    II of the CWAAA is the Small Business Regulatory Enforcement
    Fairness Act of 1996 (\"SBREFA\").

[^349]: *See* 5 U.S.C. § 604.

[^350]: *See, e.g.,* Time Warner Comments at 51-52 (arguing that
    Commission should raise the threshold to 10 to 20%); Cablevision
    Reply Comments at 15 (recommending raising the voting equity
    benchmark to 10%); Comcast Reply Comments at 3 (same); TCI Comments
    at 51; TCI Reply Comments at 15 (arguing that ED rule would stifle
    investment).

[^351]: NCTA Comments at 19.

[^352]: NCTA Comments at 16-17.

[^353]: 5 U.S.C. § 601(3) (incorporating by reference the definition of
    \"small business concern\" in 15 U.S.C. § 632).

[^354]: 15 U.S.C. § 632.

[^355]: 5 U.S.C. § 601(5).

[^356]: United States Dept. of Commerce, Bureau of the Census, *1992
    Census of Governments*.

[^357]: 13 C.F.R. §121.201.

[^358]: 1992 Census, *supra*, at Firm Size 1‑123. *See Memorandum
    Opinion and Order and Notice of Proposed Rule Making, Implementation
    of Sections of the Cable Telecommunications Consumer Protection and
    Competition Act of 1992, Rate Regulation and Cable Pricing
    Flexibility,* MM Docket No. 92-266 and CS Docket No. 96-157, 11 FCC
    Rcd 9517, 9531 (1996).

[^359]: 47 C.F.R. § 76.901(e). The Commission developed this definition
    based on its determinations that a small cable company is one with
    annual revenues of \$100 million or less. *Sixth Report and Order
    and Eleventh Order on Reconsideration*, *Implementation of Sections
    of the 1992 Cable Act: Rate Regulation,* MM Docket Nos. 92-266 &
    93-215, 10 FCC Rcd 7393 (1995).

[^360]: Paul Kagan Associates, Inc., *Cable TV Investor*, Feb. 29, 1996
    (based on figures for Dec. 30, 1995).

[^361]: 47 C.F.R. § 76.901(c).

[^362]: 47 U.S.C. § 543(m)(2).

[^363]: 47 C.F.R. § 76.1403(b).

[^364]: Paul Kagan Associates, Inc., *Cable TV Investor*, Feb. 29, 1996
    (based on figures for Dec. 30, 1995).

[^365]: *Id.* at para. 81.

[^366]: *Id.*

[^367]: *Id.*

[^368]: 47 C.F.R. § 121.201; SIC Code 4813.

[^369]: *Trends In Telephone Service*, Table 19.3 (Feb. 19, 1999)

[^370]: *Id.*

[^371]: \"Establishments primarily engaged in the production of
    theatrical and nontheatrical motion pictures and video tapes for
    exhibition or sale, including educational, industrial, and religious
    films. Included in the industry are establishments engaged in both
    production and distribution. Producers of live radio and television
    programs are classified in Industry 7922.\" *Standard Industrial
    Classification Manua*l, SIC 7812, Executive Office of the President,
    Office of Management and Budget (1987) (\"OMB SIC Manual\").

[^372]: \"Establishments primarily engaged in providing live theatrical
    presentations, such as road companies and summer theaters. . . .
    Also included in this industry are producers of . . . live
    television programs.\" OMB SIC Manual, SIC 7922.

[^373]: 13 C.F.R. § 121.201.

[^374]: U.S. Small Business Administration, *1992 Economic Census
    Industry and Enterprise Report*, Table 2D, SIC 7812, (U.S. Bureau of
    the Census data adapted by the Office of Advocacy of the U.S. Small
    Business Administration) (\"SBA 1992 Census Report\"). Because the
    Census data do not include a category for \$21.5 million, we have
    reported the closest increment below and above the \$21.5 million
    threshold. There is a difference of 15 firms between the \$16,999
    and \$24,999 million annual receipt categories. It is possible that
    these 15 firms could have annual receipts of \$21.5 million or less
    and would therefore be classified as small businesses.

[^375]: SBA 1992 Census Report, SIC 7922.

[^376]: *See* Section III.B above.

[^377]: *See* Section III.C above.

[^378]: *See id.*

[^379]: *See* Section III.G above.

[^380]: *See id.*

[^381]: *See id.*

[^382]: *See id.*

[^383]: *See* Section III.D above.

[^384]: *See id.*

[^385]: 47 C.F.R. §§ 76.503, 76.504.

[^386]: *See* Section III.D above.

[^387]: *See* Section III.E above.

[^388]: *See* Section III.E above.

[^389]: *See id.*

[^390]: *See* Section III.F above.

[^391]: *See id.*

[^392]: *See* Section III.H above.

[^393]: *See* Section III.I above.

[^394]: *See id.*

[^395]: *See* Section III.K above.

[^396]: *Comcast Corporation Enters Into Strategic Relationship with
    Prime Communications*, Press Release (Dec. 11, 1998).

[^397]: MediaOne Comments at 3. MediaOne's numbers here are not
    calculated according to the Commission's attribution rules.

[^398]: *Id.* at 4.

[^399]: *Id.* at 9; Affidavit of Jedd Palmer (\"MediaOne has not
    exercised any control over the selection of programming\" on the TWE
    systems).

[^400]: *Id.* at 5.

[^401]: On March 9, 1999, TCI merged with AT&T. TCI's cable systems are
    now owned by AT&T Broadband & Internet Services, Inc ("AT&T
    Broadband"), an AT&T subsidiary. TCI's programming subsidiary,
    Liberty Media Group, is now a separate subsidiary of AT&T. Because
    the comments in this proceeding were filed before the merger, for
    ease of reference, we will refer to AT&T Broadband as TCI.

[^402]: Letter to Magalie Roman Salas, FCC Secretary, from Douglas G.
    Garrett, TCI Senior Regulatory Counsel (Dec. 30, 1998)

[^403]: Adelphia *et al.* Comments at 8-9; Bresnan *et al.* Comments at
    13.

[^404]: Adelphia *et al.* Comments at 8.

[^405]: *Adelphia et. al* Comments at 8.

[^406]: *Id.*

[^407]: Tele-Communications, Inc. 1997 Stockholder Report, Liberty Media
    Group Assets, at 18.

[^408]: Tele-Communications, Inc. Merger Proxy Statement, Form DEF 14-A
    (Jan. 8, 1999).

[^409]: *Id.*

[^410]: TCI Comments at 42-43; Adelphia *et al.* Comments at 15.

[^411]: TCI Comments at 42-45; Adelphia *et al.* Comments at 15.

[^412]: Adelphia *et al.* Comments at 12, 14.

[^413]: *Id.* at 12-13.

[^414]: *Id.* at 14.

[^415]: *Id.* at 18.

[^416]: *Id.* at 20.

[^417]: *Id.* at 18-19.

[^418]: *Id.* at 19.

[^419]: TCI Comments at 46.

[^420]: *Id.*

[^421]: *Id.* at 47.

[^422]: *Id.*

[^423]: Cablevision Comments at 4.

[^424]: *Id.* at 15.

[^425]: *Id.* at 15-16.

[^426]: *Id.* at 16.

[^427]: *Id.* at 14, 17.

[^428]: *Id.* at 17.

[^429]: TCI Comments at 44.

[^430]: Bresnan *et al.* Comments at 3.

[^431]: TCI Comments at 49.

[^432]: Bresnan *et al.* Comments at 3-4 (major matters include
    fundamental changes to the partnership, significant purchases or
    sales of assets, and mergers, dissolution or bankruptcy).

[^433]: *Id.* at 13.

[^434]: TCI Comments at 49-50.

[^435]: I would also have allowed for *full* transferability of the
    interests grandfathered under this Report and Order. *Cf. supra* at
    para. 136.

[^436]: *See Second Report and* Order, 8 FCC Rcd 8565, 8581 (1993)
    (emphasis added). The Commission made a similar finding with respect
    to the channel occupancy limits. *Id*. at 8592.

[^437]: *See Memorandum Opinion and Order on Reconsideration and Further
    Notice of Proposed Rulemaking, Implementation of Section 11(c) of
    the Cable Television Consumer Protection and Competition Act of
    1992: Horizontal Ownership Limits*, 13 FCC Rcd 14462 (1998).

[^438]: *See Review of the Commission Regulations Governing Attribution
    of Broadcast and Cable/MMDS Interests*, FCC No. 99-207 (rel. Aug. 6,
    1999).

[^439]: For instance, Congress believed that unfair practices by large
    cable companies "could discourage entry of new programming services,
    restrict competition, impact adversely on diversity, and have other
    undesirable effects on program quality and viewer satisfaction."
    H.R. Rep. No. 102-628 at 43 (1992). Similarly, in express
    legislative findings, Congress determined that the cable industry's
    concentration posed potential "barriers to entry for new programmers
    and a reduction in the number of media voices available to
    consumers." 1992 Act, Sec. 2(a)(4), 106 Stat. 1460.

[^440]: *See, e.g.,* *Report and Order*, 97 FCC2d 997 (1984).