$//MO&O Granting WKC's Petition for Special Relief DA 95-568//$ $/300.537 Anti-trafficking/$ $/76.502(a) Anti-trafficking Waivers/$ $/76.7 Petitions for Special Relief/$ Before the FEDERAL COMMUNICATIONS COMMISSION Washington, D.C. 20554 In re: ) DA 95-568 ) Application of ) CSR- 4470-T W.K. Communications, Inc. ) ) Waiver of Section 76.502 of the ) Commission's Rules ) MEMORANDUM OPINION AND ORDER Adopted: March , 1995 Released: March , 1995 By the Cable Services Bureau: 1. On February 14, 1995, W.K. Communications, Inc. ("WKC") filed a request for waiver of 47 C.F.R. 76.502(a), the Commission's anti-trafficking rule, for certain cable systems in Kansas, Missouri, and Arkansas. WKC seeks this waiver to assure that the consummation of a merger transaction involving cable systems that WKC has controlled for less than three years will not violate the anti-trafficking rule. The waiver request is unopposed. 2. Section 76.502 of the Commission's Rules implements Section 617 of the Communications Act, as amended, which, with certain exceptions, restricts the ability of a cable operator to sell or otherwise transfer ownership in a cable system within a 36 month period following either the acquisition or initial construction of the system. Both the statutory provision and the rule provide, however, that in the case of a sale of multiple systems, subsequent transfers of one or more such systems to one or more third parties will be considered part of the initial transaction for purposes of the anti-trafficking provision. In addition, the Commission has broad discretion to grant waivers of the holding requirement. 3. The three-year holding requirement rule, and its underlying statutory provision, are aimed at restricting transactions and other transfers that are likely to adversely affect cable rates or service in the local franchise area, and are not intended to inhibit investment in the cable industry or delay or disrupt legitimate transactions. Recently, the Commission stated that unless a transaction raises serious concerns on its face or any objections filed provide other public interest bases for concern, requests for waiver of the three-year holding requirement will generally be looked on favorably. 4. The 1992 Cable Act expressly exempts from the restriction: "(1) any transfer of ownership interest in any cable system which is not subject to Federal income tax liability; (2) any sale required by operation of any law or any act of any Federal agency, any State or political subdivision thereof, or any franchising authority; and (3) any sale assignment, or transfer, to one or more purchasers, assignees, or transferees controlled by, controlling, or under common control with, the seller, assignor, or transferor. The Commission has interpreted the exemptions to apply to changes of control that are the result of tax exempt transactions, involuntary transfers and transfers involving municipally owned cable systems, and pro forma transfers or assignments. 5. WKC states that on September 19, 1994, it entered into a merger agreement whereby WT Acquisition Merger Corporation will be merged with and into WKC. WKC will be the surviving entity and will be a subsidiary of WT Acquisition Corporation ("WTA"). The parties have filed all relevant FCC applications for transfer of control of business radio and CARS licenses, and have received all appropriate franchising authority transfer approvals. According to WKC, the merger agreement requires consummation of the transaction by April 15, 1995. 6. The merger involves 30,513 subscribers and 17 headends. WKC is concerned with three headends located in Fairgrove, Seneca, and Noel, Missouri, each of which serves fewer than 1,000 subscribers and the three headends in Maryville, Boonville, and Neosho, Missouri each of which have more than 1,000 subscribers and have been held for less than three years. The subscriber total for the latter three systems is 9,119 subscribers or 29.89% of the subscribers involved in the merger. Petitioner notes that the Maryville system, with 4,157 subscribers, is due to reach its three year holding period in May 1995, just after the proposed consummation date. WKC asks the Commission to waive the anti-trafficking rule for those systems with fewer than 1,000 subscribers under the blanket exemption for small systems. As for the Maryville, Boonville, and Neosho systems, the operator requests that the Commission waive the rule because over two-thirds of the remaining MSO's subscribers have been held by WKC for over three years. Alternatively, WKC asks that the Commission apply its waiver standard liberally in case the "blanket waiver" small systems are included in the less-than-three-year subscriber count. 7. We will grant a waiver for the three systems serving fewer than 1,000 subscribers, pursuant to 47 C.F.R. 502(g)(2). We will also grant WKC's waiver request with respect to the three cable systems in Maryville, Boonville and Neosho. In ascertaining the subscriber count, we believe it is appropriate to include systems with fewer than 1,000 subscribers in the calculation of what percentage of total subscribers has been held for over three years. Applying this standard reveals that over two-thirds of the relevant subscribers have been held for over three years. We also note that the Maryville system will reach its three-year holding threshold just after the proposed merger consummation. Finally, consistent with our waiver policy, each of the franchising authorities has consented to the transaction. Based on the totality of the circumstances presented in WKC's waiver request, we find that grant of the subject petition would be consistent with the obligations under Section 617(d), and that such a waiver is in the public interest. 8. In view of the above, IT IS ORDERED that, the request for waiver of 47 C.F.R. 76.502(a) IS GRANTED. 9. This action is taken by the Chief, Cable Services Bureau pursuant to authority delegated by Section 0.321 of the Commission's rules. FEDERAL COMMUNICATIONS COMMISSION Meredith J. Jones Chief, Cable Services Bureau