Before the
                   FEDERAL COMMUNICATIONS COMMISSION
                            Washington, D.C.  20554

In the Matter of                     )   
                                     )
TELEPORT COMMUNICATIONS -- NEW YORK  )
                                     )  File No.13135-CF-TC(3)-92
For Transfer of Control of Stations  )
WLU-372, WLW-316, and WLW-317 from   )
Merrill Lynch Group, Inc., to Cox    )
Teleport, Inc.                       )


                               REPLY OF THE
                 NATIONAL TELECOMMUNICATIONS AND INFORMATION
                              ADMINISTRATION


Thomas J. Sugrue                            Phyllis E. Hartsock   
       
Acting Assistant Secretary for              Acting Chief Counsel
Communications and Information                

William F. Maher, Jr.                       Jana Gagner
Associate Administrator                     Attorney

Tim Sloan
Office of Policy Analysis
 and Development



                                   National Telecommunications
                                   and Information Administration 
   


U.S. Department of Commerce
Room 4713
14th Street and Constitution Ave., N.W.
Washington, D.C.  20230
(202) 377-1816

May 27, 1992                        TABLE OF CONTENTS

Section                                                      Page



Summary                                                        i



I.   INTRODUCTION                                              1



II.  THE CROSSOWNERSHIP RESTRICTION DOES NOT APPLY TO COX      4
     TELEPORT BECAUSE TELEPORT DOES NOT HAVE A "TELEPHONE
     SERVICE AREA"



III. APPLYING THE CROSSOWNERSHIP RESTRICTION TO COX            8
     TELEPORT WOULD BE CONTRARY TO THE PURPOSE OF THE 
     RESTRICTION



IV.  APPLYING THE CROSSOWNERSHIP RESTRICTION TO COX           10
     TELEPORT WOULD BE INCONSISTENT WITH COMMISSION
     PRECEDENT



V.   CONCLUSION                                               12


                            SUMMARY    

     The United States Telephone Association's ("USTA") petition
arises from the proposed acquisition by Cox Enterprises ("Cox")
of a majority ownership interest in Teleport, a common carrier
certificated by the New York Public Service Commission to provide
telecommunications services throughout the state, including
Staten Island.  Through an affiliate, Cox holds a 50 percent
interest in Staten Island Cable.  USTA contends that Cox's
control of both Teleport and Staten Island Cable would violate
the telephone-cable crossownership restrictions set forth in the
Communications Act and Commission regulations.  USTA therefore
requests a Commission declaration that Cox's acquisition of
Teleport would violate the crossownership ban, so long as Cox
remains affiliated with Staten Island Cable.

     USTA's grievance appears to be against the crossownership
restriction itself, rather than its applicability vel non to Cox
Teleport.  NTIA shares USTA's concerns about the continuing
wisdom of that restriction, and we have repeatedly advocated its
elimination.  Allowing telephone companies to provide video
programming in their local service areas would significantly
increase competition in the video services market, which would,
in turn, yield lower prices to viewers, better service quality,
and greater programming diversity.  Further, allowing telephone
companies to participate fully in the video services market
should also stimulate development of the nation's
telecommunications infrastructure, with concomitant benefits for
all users, residential and business alike.

     Nevertheless, the Commission cannot cure the adverse effects
of the crossownership restriction by extending it to Cox
Teleport, as USTA requests.  To do so would be inconsistent with
the language and underlying purpose of that regulation.  It would
also be contrary, as USTA's petition itself demonstrates, to a
series of Commission decisions excluding common carriers similar
to Teleport from the crossownership prohibition.  For these
reasons, the Commission should deny USTA's petition.
                                        



                                Before the
                   FEDERAL COMMUNICATIONS COMMISSION
                            Washington, D.C.  20554

In the Matter of                     )   
                                     )
TELEPORT COMMUNICATIONS -- NEW YORK  )
                                     )  File No.13135-CF-TC(3)-92
For Transfer of Control of Stations  )
WLU-372, WLW-316, and WLW-317 from   )
Merrill Lynch Group, Inc., to Cox    )
Teleport, Inc.                       )

     
     The National Telecommunications and Information
Administration ("NTIA"), as the Executive branch agency
principally responsible for the development and presentation of
domestic and international telecommunications and information
policy, respectfully submits this reply in connection with the
petition filed by the United States Telephone Association
("USTA") to deny the above-captioned applications by Teleport
Communications ("Teleport") to transfer certain microwave
licenses from Merrill Lynch to Cox Teleport, Inc.  For the
reasons set forth below, the Commission should deny USTA's
petition, and allow the requested license transfers (and the
underlying transaction) to go forward. 

I.   INTRODUCTION

     USTA's petition arises from the proposed acquisition by Cox
Enterprises ("Cox") of a majority ownership interest in Teleport,[1] 
a common carrier certificated by the New York Public Service 
Commission to provide telecommunications services throughout the 
state, including Staten Island.[2]  Teleport also offers interstate 
services as a nondominant carrier subject to Commission regulation 
under Title II of the Communications Act.[3]  Through an affiliate, 
Cox holds a 50 percent interest in Staten Island Cable.  USTA 
contends that Cox's control of both Teleport and Staten Island Cable 
would violate the telephone-cable crossownership restrictions set 
forth in the Communications Act and Commission regulations.[4]  
USTA therefore requests a Commission declaration that Cox's 
acquisition of Teleport would violate the crossownership ban, so 
long as Cox remains affiliated with Staten Island Cable.[5]

     USTA's grievance appears to be against the crossownership
restriction itself, rather than its applicability vel non to Cox
Teleport.[6]  NTIA shares USTA's concerns about the continuing
wisdom of that restriction, and we have repeatedly advocated its
elimination.[7]  Allowing telephone companies to provide video
programming in their local service areas would significantly
increase competition in the video services market, which would,
in turn, yield lower prices to viewers, better service quality,
and greater programming diversity.  Further, allowing telephone
companies to participate fully in the video services market
should also stimulate development of the nation's 
telecommunications infrastructure, with concomitant benefits for
all users, residential and business alike.

     Nevertheless, the Commission cannot cure the adverse effects
of the crossownership restriction by extending it to Cox Teleport, 
as USTA requests.  To do so would be inconsistent with the language 
and underlying purpose of that regulation.  It would also be 
contrary, as USTA's petition itself demonstrates, to a series of 
Commission decisions excluding common carriers similar to Teleport 
from the crossownership prohibition.[8]  For these reasons, the 
Commission should deny USTA's petition.

II.  THE CROSSOWNERSHIP RESTRICTION DOES NOT APPLY TO COX
     TELEPORT BECAUSE TELEPORT DOES NOT HAVE A "TELEPHONE SERVICE
     AREA"                                                       

     USTA's contends that Cox's control of both Teleport and
Staten Island Cable brings Cox within the letter of the 
crossownership ban, which makes it unlawful:

     for any common carrier, subject in whole or in part to title
     II of [the Communications] Act, to provide video programming
     directly to subscribers in its telephone service area,
     either directly or indirectly through an affiliate owned by,
     operated by, controlled by, or under common control with the
     common carrier.[9]

As noted above, Teleport is a common carrier subject to Commission 
regulation under Title II.[10]  Further, Staten Island Cable, an 
affiliate of Teleport through Cox, provides video programming 
directly to subscribers in Staten Island. Accordingly, the 
affiliation between Teleport and Staten Island Cable would violate 
the crossownership restriction only if Teleport has a "telephone 
service area" in Staten Island.

     In addressing this question, two preliminary points are
pertinent.  First, because the phrase "telephone service area"
appears in a federal statute (the Communications Act), its
construction is a matter of federal law, to be determined
ultimately by a federal court.[11]  USTA's pleading is devoid of
any authority to the contrary.  Second, as the agency charged
with administering the Communications Act, the Commission is
authorized to construe the critical phrase in the first instance,
and its reading is entitled to deference from a reviewing court
on appeal.[12]

     The Commission has defined "telephone service area" to mean
a "local exchange service area" -- that is, an area in which a
firm offers "telephone exchange service," as defined by Section
3(r) of the Communications Act.[13]  In turn, the Commission has
for many years construed the latter term to encompass only "the
provision of two-way voice communications between individuals by
means of a central switching complex which interconnects all
subscribers within a geographic area."[14]

     USTA attempts to demonstrate that because the New York
Public Service Commission has authorized Teleport to provide
"local exchange switched telephone service," Teleport has a
"telephone service area" within the meaning of the crossownership
restriction.[15]  In doing so, USTA argues that the 
Communications Act empowers state authorities to define 
"telephone service area" for the purpose of applying the
crossownership restriction.[16]  Although Section 2(b) of the Act
may entitle state agencies to establish "telephone service areas"
for intrastate services, it in no way limits the Commission's
authority to define that term as it determines whether to apply
to a particular entity a provision of the Communications Act or a
regulation adopted by the Commission pursuant to that Act.

     It might be a closer question if Commission action were to
preempt state action in some way, but that is not the case here. 
The Commission's definition of a "telephone service area" for
purposes of the crossownership restrictions would not interfere
in any way with the states' freedom to define that term for any
other purposes within their jurisdiction.  USTA's unsubstantiated
assertions to the contrary are without merit.[17]

     It is readily apparent that Teleport does not provide
"telephone exchange service" as defined by the Commission and,
thus, the crossownership restriction does not apply to Teleport. 
Its network does not interconnect all of the telephone
subscribers within Staten Island, let alone New York City.[18] 
Moreover, because the bulk of Teleport's services are
non-switched,[19] it lacks the "central switching complex" that, 
in the Commission's view, characterizes the provision of "telephone 
exchange service."[20]  Finally, neither the Commission nor USTA's 
own members have ever treated Teleport as a provider of exchange 
service.[21]  Because Teleport does not provide "telephone exchange 
service," it does not have a "telephone service area" for purposes 
of the crossownership prohibition. Accordingly, the affiliation 
between Teleport and Staten Island Cable does not violate that 
restriction.

III. APPLYING THE CROSSOWNERSHIP RESTRICTION TO COX TELEPORT
     WOULD BE CONTRARY TO THE PURPOSE OF THE RESTRICTION    

     Excluding Cox Teleport from the crossownership restriction
is consistent with the intent and purpose of that prohibition. 
The Commission first adopted the crossownership restriction in
1970 to prevent telephone companies from using their monopoly
position in their local service areas to preempt the growth of
cable television service.[22]  The Commission concluded that the
companies could accomplish this by: (1) denying cable firms
access to essential facilities, such as poles and conduits, and
(2) improperly cross-subsidizing their cable operations from
monopoly telephone services.[23]

     Teleport does not own any telephone poles.[24]  Although it
does control some 31 miles of conduit,[25] those facilities would
not enable Teleport to deter entry by a competing cable system in
Staten Island or anywhere else.[26]  Additionally, Teleport has
no monopoly telecommunications services or revenues that could
fund a program of cross-subsidization.  The Commission has
"consistently held that when telephone common carriers . . . do
not control essential exchange facilities such as poles and
conduits, the concerns about exclusionary conduct which underlie
the rules are not implicated."[27]  Thus, not only does Cox
Teleport not come within the language of the crossownership
prohibition, subjecting the firm to that restriction would
clearly be contrary to its underlying purpose.


IV.  APPLYING THE CROSSOWNERSHIP RESTRICTION TO COX TELEPORT
     WOULD BE INCONSISTENT WITH COMMISSION PRECEDENT        

     Given the specific sorts of conduct that the crossownership
restriction was meant to address, it is not surprising that the
Commission has, as USTA acknowledges, progressively interpreted
that prohibition to exclude an ever-growing number of common
carriers.[28]  Significantly, many of those exempted carriers are
indistinguishable from Teleport.  For example, USTA asserts that
the Commission has ruled that the crossownership restriction does
not apply to nondominant carriers.[29]  USTA also concedes that
Teleport is a nondominant carrier for purposes of Title II.[30] 
Thus, USTA's own pleading suggests that the Commission has
already excluded Teleport from the crossownership
restriction.[31]

     Additionally, USTA points out that the Commission has
concluded that the crossownership restriction does not apply to
non-wireline cellular radio operators.[32]  The Commission's
stated rationale for that decision was that such firms "do not
have telephone service areas in the traditional sense."[33]  Yet,
in many ways, the services provided by cellular carriers are more
like "telephone exchange service" (which, as noted above,
determines whether they have "telephone service areas")[34] than
Teleport's offerings.  Accordingly, if non-wireline cellular
carriers are not subject to the crossownership prohibition, a
fortiori Cox Teleport should not be.

V.   CONCLUSION

     For the foregoing reasons, USTA's effort to extend the
crossownership prohibition to Cox Teleport is not required by the
language of the restriction, is contrary to its underlying
purpose, and is inconsistent with previous and long-standing
Commission precedents.  NTIA therefore respectfully requests that
the Commission deny USTA's petition.

   Respectfully submitted,


Thomas J. Sugrue                                          
Acting Assistant Secretary for           Phyllis E. Hartsock
Communications and Information           Acting Chief Counsel

William F. Maher, Jr.                     Jana Gagner
Associate Administrator                   Attorney

Tim Sloan                                       
Office of Policy Analysis
and Development


                                          National Telecommunications
                                          and Information Administration 
   


U.S. Department of Commerce
Room 4713
14th Street and Constitution Ave., N.W.
Washington, D.C.  20230
(202) 377-1816

May 27, 1992              

                       CERTIFICATE OF SERVICE

     I hereby certify that on the 27th day of May, 1992, copies of 
the foregoing "Reply of the National Telecommunications and 
Information Administration" were sent by first-class United States 
mail, postage prepaid, to the following:

               Martin T. McCue
               Vice President and General Counsel
               United States Telephone Association
               900 19th Street, N.W.
               Suite 800
               Washington, D.C.  20006

               William Malone
               Miller & Holbrooke
               1225 19th Street, N.W.
               Suite 400
               Washington, D.C.  20036

               Richard Singer
               Hopkins & Sutter
               888 16th Street, N.W.
               Washington, D.C.  20006

               Werner K. Hartenberger
               Dow, Lohnes & Albertson
               1255 23rd Street, N.W.
               Suite 500
               Washington, D.C.  20037


                                                                  
                                                      Cheryl A. Kinsey                             
             

-----------------------------------------------------------------------------

                                 ENDNOTES

[1]  Cox currently owns 12.5 percent of Teleport. 
     Tele-Communications Inc., the largest cable television company 
     owns 49.9 percent, with the balance held by Merrill Lynch.

[2]  Petition to Deny of the United States Telephone Association
     at 3, File No. 13135-CF-TC(3)-92 (filed May 1, 1992) ("USTA
     Petition").  Teleport also provides telecommunications
     services in California, Illinois, Massachusetts, New Jersey,
     and Texas.  See id. at 5 n.5. 

[3]  Id. at 8 n.7 (citing Comments of Teleport Communications
     Group in CC Docket No. 91-141 at 2 n.2 (filed Aug. 6,
     1991)).

[4]  See 47 U.S.C.  533(b)(1) (1988); 47 C.F.R.  63.54(a)
     (1991).

[5]  USTA Petition at 14.

[6]  See id. at 4-5 (USTA members subject to the crossownership
     restriction are hampered in competing with cable operators).

[7]  See, e.g., National Telecommunications and Information
     Administration, U.S. Dep't of Commerce, The NTIA
     Infrastructure Report:  Telecommunications in the Age of
     Information, NTIA Special Pub. 91-26, at 226-246 (Oct.
     1991); Communications Competitiveness and Infrastructure
     Modernization Act of 1990: Hearings on S.2800 Before the
     Subcomm. on Communications of the Senate Comm. on Commerce,
     Science and Transportation, 101st Cong., 2d Sess. 28-29
     (1990) (statement of Thomas J. Sugrue, Deputy Administrator
     of NTIA); Comments of NTIA in CC Docket No. 87-266 at 4-8
     (filed Feb. 3, 1992).

[8]  USTA Petition at 3-4 and the cases cited therein.

[9]  47 U.S.C.  533(b)(1) (1988).

[10] Supra note 3.

[11] See, e.g., Barrera v. Wheeler, 475 F.2d 1338, 1351-1352 (8th
     Cir. 1973); United States v. L.R. Foy Construction Co., 300
     F.2d 207 (10th Cir. 1962); United Parcel Serv., Inc. v.
     United States Postal Serv., 455 F. Supp. 857, 866 (E.D. Pa.
     1978), aff'd, 604 F.2d 1370 (3d Cir. 1979), cert. denied,
     446 U.S. 957 (1980).  Cf. Clearfield Trust Co. v. United
     States, 318 U.S. 363 (1943).

[12] Chemical Mfr's Ass'n v. National Resources Defense Council,
     470 U.S. 116, 125 (1985); CBS, Inc. v. FCC, 453 U.S. 367,
     382 (1981); Black Citizens for a Fair Media v. FCC, 719 F.2d
     407, 411 (D.C. Cir. 1983), cert. denied, 467 U.S. 1255
     (1984).

[13] Telephone Company-Cable Television Cross-Ownership Rules,
     Sections 63.54-63.58, 7 FCC Rcd 300, 323, para. 46 (1991)
     (Cable-Telco Order).  Section 3(r) provides that

          "Telephone exchange service" means service within
          a telephone exchange, or within a connected system
          of telephone exchanges within the same exchange
          area operated to furnish to subscribers
          inter-communicating service of the character
          ordinarily furnished by a single exchange, and which 
          is covered by the exchange service charge.

     47 U.S.C.  153(r) (1988).

[14] The Offshore Telephone Co., 3 FCC Rcd 4131, 4141 (1988)
     (quoting Domestic Public Radio Serv., 76 FCC 2d 273, 281
     (1980); Midwest Corp., 53 FCC 2d 294, 300 (1975)).  See also
     National Ass'n of Reg. Util. Comm'rs v. FCC, 533 F.2d 601,
     607 n.23 (D.C. Cir. 1976) ("`Telephone exchange' connotes a
     highly developed, interconnected system operated to provide
     `service of the character ordinarily furnished by a single
     [telephone] exchange.'") (quoting 47 U.S.C. 153 (r)).

[15] USTA Petition at 9-10.

[16] Id. at 10-14.  In any event, it appears that the New York
     commission has never defined a "telephone service area" for
     Teleport.  See Opposition to Petition to Deny of Cox
     Teleport, Inc. at 15 n.14 and n.17, File No.
     13135-CF-TC(3)-92 (filed May 14, 1992) ("Cox
     Opposition").

[17] USTA Petition at 12-13.  The fact that the Commission has
     "acceded" to state certification of cellular radio provider
     does not bolster USTA's argument.  Id. at 11-12.  Although
     the Commission did not disturb the states' ability to
     certificate and regulate providers of intrastate cellular
     services, the Commission did define and license the
     geographic areas (i.e., the "telephone service areas") to be
     served by each facilities-based cellular carrier.

     USTA's suggestion that the Pole Attachment Act of 1978 gave
     cable operators access to utility poles and conduits is
     incorrect.  See id. at 13.  That statute specifically
     authorized the Commission to regulate pole attachment rates
     (if a utility chose to make such attachments available) if
     state agencies did not regulate.  The legislative history is
     explicit that the Pole Attachment Act was not intended to
     give cable systems a right of access to utility poles and
     conduits.  S. Rep. No. 580, 95th Cong., 2d Sess. 16 (1978),
     reprinted in 1978 U.S.C.C.A.N. 109, 124. 

[18] Opposition to Petition to Deny of Teleport
     Communications-New York at 19, File No. 13135-CF-TC(3)-92 
     (filed May 14,1992) ("Teleport Opposition").

[19] Cox Opposition at 13.

[20] Teleport Opposition at 19.

[21] Cox Opposition at 13 (concerning FCC treatment); Teleport
     Opposition at 20-21 (concerning the treatment of Teleport by
     New York Telephone and New Jersey Bell, both USTA members).

[22] See Section 214 Certificates, 21 FCC 2d 307, 324, recon. in
     part, 22 FCC 2d 746 (1970), aff'd sub nom. General Tel. Co.
     of the Southwest v. FCC, 449 F.2d 846 (5th Cir. 1971).

[23] Telephone Company-Cable Television Cross-Ownership Rules,
     Sections 63.54-63.58, 7 FCC Rcd at 322, para. 46 (citing
     Section 214 Certificates, 21 FCC 2d at 324).

[24] Teleport Opposition at 4; Cox Opposition at 10.

[25] Cox Opposition at 10.

[26] Teleport Opposition at 4-5.  For example, Staten Island
     Cable leases no facilities from Teleport.  Id. at 5. 
     Consequently, another firm could construct a competing cable
     system in Staten Island without dealing with Teleport.  In
     other words, Teleport could do nothing to impede entry by
     that second firm.

[27] Cable-Telco Order, 7 FCC Rcd at 322-23, para. 46.

[28] USTA Petition at 3-4.

[29] Id. at 3 (citing Section 214 Authorizations, 98 FCC 2d 354,
     356 (1984)).  In actuality, the order cited applies only to
     nondominant carriers "not affiliated with an exchange
     telephone common carrier."  Section 214 Authorizations, 98
     FCC 2d at 356 (emphasis in original).  As demonstrated supra
     at 4-8, Teleport cannot be classified as an "exchange
     telephone common carrier" under existing Commission
     precedents.

[30] Supra note 3.

[31] USTA has not argued that a firm deemed to be nondominant for
     purposes of Title II of the Communications Act should be
     treated as dominant for purposes of Title VI (which includes
     the crossownership restriction).  Cf. Morrison-Knudsen
     Constr. Co. v. Director, OWCP, 461 U.S. 624, 633 (1983)
     (presumption is that a word or phrase used in one part of a
     statute should mean the same thing in all other parts of
     that statute); Mohasco Corp. v. Silver, 447 U.S. 807, 826
     (1980) (same).

[32] USTA Petition at 4 (citing Implementation of the Cable
     Communications Policy Act of 1984, 58 R.R.2d 1, 16 (1985),
     recon., 60 R.R.2d 514 (1986), rev'd in part on other grounds
     sub nom. American Civil Liberties Union v. FCC, 823 F.2d
     1554 (D.C. Cir. 1987), cert. denied, 485 U.S. 959 (1988)).

[33] Implementation of the Cable Communications Policy Act of
     1984, 58 R.R.2d at 16.

[34] See text accompanying notes 13-14 supra.