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Time Warner opines that it makes no difference whether the SMATV system is a new construction or an acquired existing system. Time Warner Comments at 3.  Y>-x!34.` ` In support of its position, Time Warner cites cases in which the Commission has refused to extend unregulated SMATV status to facilities that serve only single family  Y-homes,@ Yr-ԍxSee, e.g., Leacom, Inc., 31 R.R.2d 156 (1974); Sanwick Cablevision, Inc., 48 FCC 2d 563 (1974). and a Commission decision finding that interconnected systems that are comprised of a cable system portion and a "SMATV portion" are subject to regulation as cable systems  Y-in their entirety.3AM  Y!-ԍxMassachusetts Community Antenna Television Commission, 64 RR 2d 173 (1987) (a system serving both singlefamily homes and MDUs, which was located entirely on private property and interconnected by hard wire, is a cable system under Section 602(6)(B)).3 Time Warner further proposes that even where a cable system provides a commonlyowned SMATV system with at least seventyfive percent of its programming by microwave or other nonhardwired means, the two should be deemed to be a single system," A0*(("  Y-thereby subjecting the SMATV system to all of the cable system's franchise obligations.KB Yy-ԍxTime Warner Petition at 4.K   Y-x"35.` ` Multivision, on the other hand, asserts that neither standalone, nor integrated,  Y-SMATV systems should be subject to local cable franchise requirementsKCy Y-ԍxMultivision Petition at 4.K because SMATV facilities that serve subscribers in one or more MDUs under common ownership, control, or management and do not use public rights of way are excluded from the definition of a cable  Yv-system (Section 602(7) of the Communications Act),Dv* YQ -ԍxFCC v. Beach Communications, Inc., ___ U.S. ___, 113 S. Ct. 2096 (1993). and are not subject to the franchise  Y_-requirement of Section 621(b) of the Communications Act.GE_ Y -ԍx47 U.S.C. 541(b).G According to Multivision, because SMATV systems are not "cable systems," the Communications Act does not confer authority on the Commission or local governments to force SMATV systems owned by cable  Y -operators to comply with local franchise requirements.MF  YY-ԍxMultivision Petition at 45.M   Y -x#36.` ` Multivision argues that there are no public policy reasons for subjecting SMATV systems to the franchise terms because: (a) local governments do not have jurisdiction since SMATV systems do not use public rights of way; (b) the entity in control of the development (i.e., the landlord, developer, condominium board or homeowner's association) does not need the protection of the local government because it has bargaining power equivalent to that of the cable operator, and it is better positioned to determine the needs of the development's multichannel video subscribers; and (c) the terms of the SMATV  YK-system's service agreement are the result of arm's length negotiations.@GK?  Y;-ԍxId. at 5.@ Further, Multivision adds that it is inappropriate to impose another level of regulatory requirements on SMATV service because economies of providing service to customers in MDUs are different, and franchise requirements will conflict with the terms and conditions of the private SMATV  Y-service contracts, thereby creating confusion and legal ambiguity.@H  Y!-ԍxId. at 6.@ Multivision also believes that requiring SMATV systems to be operated in accordance with franchise agreements will deny residents of buildings where SMATV service is offered of amenities and benefits they  Y-would otherwise be able to enjoy.:I  Y&-ԍxId.:  X- "XI0*(("Ԍ Y- x$37.` ` Discussion. As we discussed above, Time Warner is correct in its assertion that a SMATV system that is interconnected with a franchised cable system ceases to be a SMATV system, and customers that receive programming through the former SMATV  Y-facilities must be served by the cable operator in accordance with its franchise obligations.FJ Y6-ԍxSupra para. 12.F By adding Section 613(a)(2) to the Communications Act, Congress has required cable operators to comply with their franchise obligations even where the facilities used would otherwise qualify for the SMATV exception to the definition of a cable system. Therefore, Time Warner and NPCA are correct in their assertions that a franchised cable operator's use of "SMATV facilities" in accordance with franchise obligations does not constitute service "separate and apart" from franchised cable service, and therefore, does not constitute a violation of the crossownership restriction.  Y -x%38.` ` We reject Multivision's argument that we lack authority to require franchised cable operators to operate SMATV systems under their ownership, control or management within their franchise areas in accordance with their franchise obligations. As we discussed more fully above, we conclude that Section613(a)(2) clearly restricts cable system operators  Y-from offering SMATV service inconsistent with its franchised cable service.XK{ Y-ԍxWe note that the revisions we adopt today do not alter the subsection of the rule that grandfathers inconsistent but previously authorized ownership arrangements predating  Y-enactment of Section 11 of the 1992 Cable Act. See Appendix B, Section 76.501(e)(1), as revised.X Moreover, we believe that Section613(a)(2) applies to all parts of the particular franchise area served by the cable system that is prohibited from offering SMATV service separate and apart from its franchised cable service. The revised rules that we adopt today are, therefore, fully consistent with Section613(a)(2).  Y-x&39.` ` We also reject Multivision's argument that there are no public policy reasons for requiring cable operators to operate SMATV systems in accordance with their franchise obligations. Absent the requirement that cable operators who seek to offer multichannel video service within their franchise area through SMATV facilities must operate such system in accordance with their contract with that municipality and applicable laws, franchised cable operators could construct, acquire, or operate unregulated multichannel video programming distribution systems within their franchise areas, thereby avoiding the rate regulation provisions of the 1992 Cable Act, and our bulk discount regulations. We further note that the record in this proceeding does not contain evidence supporting Multivision's contentions regarding service contract negotiations or the bargaining power of the entities in control of MDUs. " K0*(("Ԍ Y-x'40.` ` We further reject Multivision's contention that the economies of providing SMATV service in an MDU are sufficiently different from those involved in providing franchisewide cable service that a cable operator acquiring a cable system should not be required to operate the SMATV system in accordance with its franchise agreement requirements. Multivision's argument is premised on two flawed assumptions: (a)that SMATV systems attain 100% subscriber penetration within MDUs; and (b)cable operators are unable to offer bulk rates. Multivision provides no evidence to support its suggestion  Y_-that SMATV systems typically reach 100% penetration. In fact, we recently found evidence  YH-that indicates this assumption is incorrect.LH Y -ԍxE.g., 1994 Competition Report 93, 9 FCC Rcd at 7489. See also Clearview Cable  Y -TV, Inc., DA 941172, 8, 9 FCC Rcd 6144, 6145 (CSB 1994) (SMATV system subscriber penetration rate of 66.9%). Furthermore, we note that although Section 623(d) of the Communications Act requires a cable operator to have a uniform rate structure throughout the area served by its cable system, cable operators are permitted to offer bulk discount rates if they are made available to all similarly sized MDUs in the franchise area, and the cable operator demonstrates that it receives some economic benefit from offering the  Y -discount.mM~ O Y-ԍx 47 U.S.C. 543(d). See also Implementation of the 1992 Cable Act: Rate  Y-Regulation & BuyThrough Prohibition, Third Order on Reconsideration, 9 FCC Rcd 4316  Y-(1994). In the 1993 Rate Report & Order, the Commission observed that cable systems often offer bulk discounts to subscribers in MDUs, and expressed a desire that bulk discounts not be used as a means of displacing competition from alternative MVPDs, such as SMATV  Yh-operators. 1993 Rate Report & Order 424, 8 FCC Rcd at 5898.m   X -Xx C.` ` SMATV Operators' Sales or Assignments   X-x` ` of Access Rights to Cable Operators  Yb-x(41.` ` NPCA seeks clarification of a footnote in the First Report & Order,vNb  Y-ԍxFirst Report & Order 124 n. 106, 8 FCC Rcd at 6846 n.106.v which provides that "where a SMATV contract has been terminated by either party, we would not  Y6-prohibit a cable operator from providing cable service over preexisting facilities."EO6H  Y/ -ԍxNPCA Petition at 15.E NPCA states that "[w]ithin the CATV and SMATV industries, this language has been interpreted as prohibiting a SMATV operator from assigning its contractual rights in favor of the local  Y-cable operator since the assignment of a contract does not cause its termination.":P  Y$-ԍxId.: NPCA argues that SMATV operators should be subject to the same rules that apply to MMDS"P0*(("  Y-operators, who can sell or assign access rights and internal wiring.GQ Yy-ԍxId. at 2, 1315.G We conclude that our decision to permit cable operators to acquire SMATV facilities within their service areas renders moot NPCA's concerns regarding conveyances of access contracts and distribution  Y-facilities. Therefore, we do not further address those issues.R{ Y-ԍxWe note, however, that we may address MDU wiring concerns in connection with our resolution of the pending petitions for reconsideration of the home wiring rules. 47  Y-C.F.R. 76.802; Implementation of the 1992 Cable Act (Cable Home Wiring), Report &  Y -Order, 8FCC Rcd 1435 (1993), recon. pending (MM Docket No.92260).   X-Xx D.X` ` Grandfathering (#`  Y_-x)42.` ` Section 613(a)(2)(A) of the Act provides that the Commission shall waive the ownership restrictions for all existing MMDS and SMATV services that were "owned by a  Y1-cable operator on the date of enactment of this paragraph."MS1 Y-ԍx47 U.S.C. 533(a)(2)(A).M The Wireless Cable Association International, Inc. ("WCA") and Oklahoma Western Telephone Company ("Oklahoma Western"), request reconsideration or clarification of the rules adopted in the  Y -First Report & Order pertaining to the appropriate dates for grandfathering of permissible  Y -combinations.(T  Y$-ԍxPetition for Partial Reconsideration filed by the Wireless Cable Association International, Inc. ("WCA Petition") at 4; Petition for Clarification or Reconsideration filed by Oklahoma Western Telephone Company ("Oklahoma Western Petition") at 45.( In addition, Time Warner argues that we should permit cable operators to consummate any transactions involving the acquisition of SMATV systems within their service areas, if those acquisitions had been agreed to prior to the effective date of the 1992  Y-Cable Act.KU  Yb-ԍxTime Warner Petition at 6.K  Yd-x*43.` ` Discussion. In two separate Erratum to the First Report & Order the Mass Media Bureau responded to WCA's and Oklahoma Western's concerns and corrected the relevant MMDScable and SMATVcable crossownership rules to grandfather authorized  Y!-combinations in existence as of October5, 1992.V!  Y"-ԍxImplementation of Sections 11 & 13 of the 1992 Cable Act (Horizontal and Vertical  Y#-Ownership Rules, Crossownership Rules and AntiTrafficking Provisions), Erratum,  Yx$-8FCCRcd 6212 (MMB 1993); Implementation of Sections 11 & 13 of the 1992 Cable Act (Horizontal and Vertical Ownership Rules, Crossownership Rules and AntiTrafficking  YL&-Provisions), Erratum, 8 FCC Rcd 6884 (MMB 1993).  However, we decline to follow Time Warner's suggestion that we also grandfather arrangements between private parties that were" -V0*((" agreed to prior to December 4, 1992. First, the statutory language refers to interests "owned" on the enactment date. We believe this language restricts grandfathering to crossownerships actually in existence at that time, not to merely contemplated or planned arrangements. Second, Congress expressly provided for the grandfathering of MMDS and SMATV crossownership interests as of the enactment of Section 613. We believe that this was intentional: most other provisions of the 1992 Cable Act went into effect on its effective date December4, 1992. Had Congress envisioned allowing additional crossownership, it would have set the effective date of the crossownership provision at the effective date of the 1992 Cable Act, not the enactment date, in order to allow parties negotiating transactions an opportunity to close by December 4, 1992. We believe that the fact that Congress specified the enactment date of the statute as the effective date for this provision demonstrates its intent that only crossownership arrangements in existence and authorized as of October 5, 1992, were to be grandfathered.   X - III.Xx ANTITRAFFICKING (#  Y-x+44.` ` Background. Section 617 of the Communications Act establishes a threeyear holding requirement for cable systems that, with certain exceptions, restricts the ability of a cable operator to sell or otherwise transfer ownership in a cable system within a thirtysix  YM-month period following either the acquisition or initial construction of the system.aWM Y-ԍxCommunications Act 617, 47 U.S.C. 537.a The statute 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  Y-control with, the seller, assignor, or transferor."hXy Y-ԍxCommunications Act 617(c), 47 U.S.C. 537(c). h Section 617 also authorizes the Commission to grant waivers in cases of default, foreclosure or other financial distress, and on a casebycase basis where a waiver serves the public interest; provides that certain subsequent transfers of systems are not subject to the holding requirement; and imposes a 120day time limit on local franchise authority action on a request for approval of a transfer  YP-of a cable system held for three or more years.yYP* Y+!-ԍxCommunications Act 617(b), (d)(e); 47 U.S.C. 537(b), (d)(e).y  Y"-x,45.` ` In the First Report & Order, we adopted rules that: (a)implement the statutory antitrafficking provision; (b) delineate specific instances where waiver requests  Y-will be favorably reviewed; and (c) institute a blanket waiver for small systems.Z Y&-ԍxFirst Report & Order 991, 8 FCC Rcd at 683041; see 47 C.F.R. 76.502. We concluded that Congressional intent underlying the antitrafficking provision was to restrict"Z0*(( !" profiteering transactions and other transfers that are likely to adversely affect cable rates or service in the local franchise area, but not to inhibit investment in the cable industry or delay  Y-or disrupt legitimate cable transactions.8[  YK-ԍxFirst Report & Order 11, 21, 36, 8 FCC Rcd at 6830, 6831, 6833. Both the  Y6-legislative history and the First Report & Order contain references to "profiteering" as behavior that the antitrafficking statutory provision and rules are designed to prevent.  Y -S.Rep. No. 92, supra, at 120; First Report & Order 11, 21, 8 FCC Rcd at 683031. "Profiteering" is defined, however, as "[t]aking advantage of unusual or exceptional  Y-circumstances to make excessive profits; e.g. selling of scarce or essential goods at inflated  Y -prices during time of emergency or war." Black's Law DictionaryĠ1090 (5th ed. 1979). Therefore, on reconsideration we recognize that the term "profiteering" is a misnomer as it has been used with respect to the antitrafficking rules. We believe Congress passed the antitrafficking provision of the 1992 Cable Act, not because of a concern about "profiteering," but rather because of a concern over speculative purchases and sales of cable systems made for the purpose of realizing quick profits from increases in values, which could overburden systems with debt and thereby lead to higher rates and reduced services for subscribers.8   Y-x-46.` ` Specifically, we determined that the threeyear holding requirement applies to  Y-transactions involving changes in ownership that constitute a transfer of control.g\o  Y-ԍxFirst Report & Order 23, 8 FCC Rcd at 6832.g We interpreted the exemptions as applying to changes of control that are the result of tax exempt transactions, involuntary transfers and transfers involving municipallyowned cable systems,  YH-and pro forma transfers or assignments.`]H" Y-ԍxId. 5773, 8 FCC Rcd at 683739.` We determined that the statutory 120day time period for local franchise authority review of a request for approval of the transfer of a cable system owned for three or more years commences when the cable operator submits a transfer request to the local franchise authority that contains all the information required by Commission regulations and by the terms of the franchise agreement or applicable state or  Y -local law.v^  Y]-ԍxId. 8486, 8 FCC Rcd at 6840; 47 C.F.R. 76.502(i)(1).v We adopted a blanket waiver of the Commission's antitrafficking rules for  Y -transfers of cable systems serving 1,000 or fewer subscribers._  Y -ԍxFirst Report & Order 91, 8 FCC Rcd at 6841. As with any antitrafficking waiver granted by the Commission, whether a small system blanket waiver or an individual waiver, the underlying transfer remains subject to receipt of local franchise authority transfer approval where such approval is required by the terms of the franchise agreement or applicable state or local law.  We also adopted a rule providing for favorable consideration of requests by multiple system operators ("MSOs") for waivers of the antitrafficking rules for the purpose of facilitating the transfer or sale of multiple systems if twothirds of the subscribers of the systems being sold or transferred are"{_0*((;"  Y-served by systems owned for three or more years.s` Yy-ԍxId. 52, 8 FCC Rcd at 6836; 47 C.F.R. 76.502(g)(1).s   X-Xx A.X` ` Local Franchise Authority Consideration (#`  X-x` ` of Transfer Requests  U-XxX` `  1.X The 120Day Period for Review of Transfer  Uv-x` `  Requests for Cable Systems Held for Three Years  YH-x.47.` ` Pleadings. The National Association of Telecommunications Officers and Advisors, the National League of Cities, the United States Conference of Mayors and the National Association of Counties (collectively, "NATOA") believe that although the antitrafficking rules are based on a recognition of the role local franchising authorities have with respect to approving transfer requests, certain of the rules may encroach upon the traditional right of franchising authorities to review transfer requests, in contravention of the plain  Y -language and intent of Section 617.a { Y-ԍxPetition for Reconsideration and Clarification filed by NATOA ("NATOA Petition") at 2. NATOA argues that Section 617 of the Communications Act contains no limit on the information a franchising authority may require a cable operator to submit in connection with a request for approval of a sale or transfer, and challenges the propriety of the Commission's implementation of rules that limit the amount and type of information the local franchise authority may obtain from the cable operator to information specifically required by FCC Form 394, the terms of the franchise agreement or  Y6-applicable state or local law.@b6 Y-ԍxId. at 3.@  Y-x/48.` ` NATOA also argues that the 120day period should not begin to run until all information requested by the local franchise authority has been submitted and the local franchise authority so notifies the cable operator. The current rule, according to NATOA, inappropriately limits the duration of local franchising authorities' power to disapprove cable  Y-system transfers.Bc Y% -ԍxId. at 34.B   Y~-x049.` ` Time Warner and NCTA oppose NATOA's petition, asserting that extending the 120day period for franchise authority approval of transfers of control would provide local franchising authorities with extraordinary authority to require virtually any type of  Y9-information from cable operators, thereby effectively eviscerating the statutory time limit.`d9{ Ye&-ԍxNCTA Comments at 2; Time Warner Comments at 6. ` NCTA contends that the time limitation ensures that transfers of cable properties are not"", d0*((K" subjected to protracted approval processes, and that a definitive starting point for the 120day  Y-statutory period is necessary to prevent unwarranted and abusive delays.De Yb-ԍxNCTA Comments at 3.D Time Warner also contends that a time limitation is necessary to help ensure that local franchise authorities do not use the transfer approval process to extract concessions or effect inappropriate policy  Y-objectives.Kfy Y-ԍxTime Warner Comments at 7.K Time Warner further contends that the Commission's current rule is consistent  Y-with Congressional intent.:g* Yh -ԍxId.:  Y_-x150.` ` Discussion. Section 617(e) of the Communications Act sets a 120day time frame for local franchise authority action on requests for approval of transfers or assignments of control over cable systems held for more than three years, provided the local franchise  Y -agreement requires local franchise authority approval of a sale or transfer.Gh  Y-ԍx47 U.S.C. 537(e).G Our implementing rules provide for commencement of the 120day period when the cable operator has submitted a completed FCC Form 394 and any additional information required  Y -by the terms of the franchise agreement or applicable state or local law.Li  Y-ԍx47 C.F.R. 76.502(i)(1)L We concluded in  Y -the First Report & Order that local franchise authorities are permitted to request additional information they deem reasonably necessary to determine the qualifications of the proposed assignee or transferee, but that requests for information not explicitly required by the franchise agreement or local law will not toll the statutory 120day limitation unless the  Yf-franchise authority and the cable operator agree to an extension of time.wjf?  YV-ԍxFirst Report & Order 4, 8586, 8 FCC Rcd at 6829, 6840.w The rationale underlying this rule is to provide cable operators some degree of assurance and certainty that local franchise authorities will act promptly and not unduly delay consummation of proposed  Y!-transactions. We affirm the rule we adopted in the First Report & Order and, accordingly, deny NATOA's request that the 120day period not commence until the cable operator is affirmatively advised that the franchise authority has received all information it seeks.  Y-x251.` ` Section 617(e) provides that when a local franchise agreement grants the local franchise authority the right to review sales or transfers of cable systems held for three or more years, the franchise authority shall have 120 days to act upon any such request that  Y-contains the information required by Commission regulation or by the franchise authority.4kv  Y%&-ԍxSpecifically, Section 617(e) provides in relevant part that in the case of a cable system"'j0*((%&" owned for three or more years, "a franchising authority shall, if the franchise requires franchising authority approval of a sale or transfer, have 120 days to act upon any request for approval of such sale or transfer that contains or is accompanied by such information as is required in accordance with Commission regulations and by the franchising authority." 47U.S.C.537(e).4"k0*((" We have interpreted this language as a limitation on the information a cable operator must provide to trigger the 120day time period. While this language arguably could be interpreted to allow unlimited requests for information by the franchise authority, we do not believe that such an interpretation comports with the intent of Congress.  Y-x352.` ` In enacting Section 617(e), Congress imposed a 120day approval period on the sale or transfer of cable systems held for three or more years because Congress wanted to ensure that the local franchise approval process not unduly delay the consummation of transactions that do not implicate the concerns underlying the antitrafficking provision. The language of the statute and the legislative history reflect Congress' expectation that the Commission establish regulations designed to ensure that franchising authorities that possess the right to review transfer requests receive the information required to begin an evaluation  Y -of a request for approval of a sale or transfer of such a cable system.le  Y-ԍxH.R. Rep. No. 628, 102d Cong., 1st Sess. 120 (1992) (the "House Report"). We noted in the Notice of Proposed Rule Making in this proceeding that the language of the 1992 Cable Act implies that the 120day approval period will not commence unless a transfer request is accompanied by all information the Commission requires in connection with such  YG-transfer requests. Implementation of Sections11 & 13 of the 1992 Cable Act (Horizontal &  Y2-Vertical Ownership Limits, CrossOwnership Limitations & AntiTrafficking Provisions),  Y-Notice of Proposed Rule Making and Notice of Inquiry 22, 8 FCC Rcd at 214. Accordingly, we created FCC Form394 with the expectation that the information required by the form would establish the legal, technical, and financial qualifications of the proposed transferee or assignee. The legislative history also clearly establishes that Congress intended to allow local franchise authorities to request information that is required by the franchise agreement,  Yy-in addition to that required by Commission regulation.mNy3 Y]-ԍxH.R. Rep. No. 628, supra, at 120. In the discussion of Section 617(e) the House Report contains the statement that "[t]he amendment is not intended to limit, or to give the FCC authority to limit, local authority to require in franchises that cable operators provide  Y"-additional information or guarantees with respect to a cable sale or transfer." Id. Further, the House Report also states, in reference to the grant of waiver authority to the Commission that the "Committee does not intend that the 3year holding period requirement expand or restrict the current rights that any franchise authority may have concerning approval of  Y%-transfers or sales." Id. Consequently, we adopted rules requiring a cable operator seeking local franchise authority approval of a proposed transfer to submit any additional information provided by the terms of the franchise agreement. The"KIm0*((" rules we adopted provide that the franchise authority shall have 120 days from the submission of a completed FCC Form 394 and any additional information required by the terms of the franchise agreement or applicable state or local law, to act upon the waiver  Y-request.Mn Y4-ԍx47 C.F.R. 76.502(i)(1).M Thus, the cable operator is on notice that information requirements may exist in three locations and that the submission of all such information is necessary for the franchise authority to be bound by the 120day time period. To the extent the local franchise authority  Yv-seeks additional information, as we stated in the First Report & Order, cable operators are required to respond promptly by completely and accurately submitting all information  YJ-reasonably requested by the franchise authority..ozJy Yt -ԍxFirst Report & Order 86, 8 FCC Rcd at 6840. As we further stated in the First  Y_ -Report & Order, while franchise authorities are permitted to request additional information, "such requests for additional information, beyond the requirements of the franchise agreement or local law, will not toll or extend the 120day period unless the cable operator and franchise authority otherwise agree to an extension of time as provided by the statute."  W-Id..  Y -x453.` ` We believe Congress sought to provide a degree of regulatory certainty to cable operators when it established the 120day time period for franchise authority action on transfer requests pertaining to cable systems held for three or more years. We also believe that submission of the information required by FCC Form 394, the franchise agreement and state or local law, is sufficient to commence the 120day time period for local franchise authority action on the request. This conclusion provides a degree of certainty to the parties, comports with the legislative history and is consistent with our rulings with respect to  Y{-franchise authority action on rate regulation matters.cp{ Y-ԍxSee, e.g., Implementation of 1992 Cable Act (Rate Regulation), Second Order on  Y-Reconsideration, Fourth Report & Order & Fifth Notice of Proposed Rulemaking ("Second  Y-Rate Recon.") 147, 9 FCC Rcd 4119, 4188 (1994) (MM Docket 92266).c   UM-XxX` ` 2. FCC Form 394  `  Y-x554.` ` Pleadings. Multivision requests that the Commission delete from FCC Form 394 the question that asks the transferee/assignee about "any plans to change current terms and conditions of service and operations of the system as a consequence of the transaction for  Y-which approval is sought."KqD  Y#-ԍxMultivision Petition at 9.K Multivision asserts that the inquiry is difficult to answer; subjects the transferee to penalties under Section 1001 of Title 18 of the United States Code, and allegations of violating the transfer consent if plans do change; provides the local franchise authority an opportunity to weigh in on the transferee's plans; and does not focus" q0*(("  Y-on the transferee's qualifications.Cr Yy-ԍxId. at 910.C  Y-x655.` ` Discussion. Form 394 specifies the information requirements we deemed sufficient to establish the legal, technical and financial qualifications of the proposed transferee of a cable system held for three years. In developing the information requirements contained in Form394, we looked to the information required by the Commission in connection with transfer requests for broadcast licenses and CARS (microwave cable antenna  Ya-relay service) authorizations.gsa{ Y -ԍxFirst Report & Order 85, 8 FCC Rcd at 6840.g We also looked at the legislative history of Section 617 in developing the information requirements. We note that the House Report stated that such information may include "information concerning the transferee's plans for expanding (or eliminating) services to subscribers" and "detailed financial information showing the effect of  Y -the transfer or sale on rates and services."Wt . Y-ԍxH.R. Rep No. 628, supra, at 120.W We believe that the information sought in Form394 regarding plans to change the terms and conditions of service and operation of the system is appropriate. The question is directed at the transferee's current plans. We do not expect cable operators to be prescient, nor is the question intended to elicit uncertain future possibilities. We do not foresee cable operators being held to unreasonable or unrealistic expectations to foretell future events, or being held accountable for failing to predict the future course of events, as Multivision suggests. Moreover, truthful answers are not subject to the penalties of 18 U.S.C. 1001.  Y6-x756.` ` We note as a matter of clarification that transferees and assignees responding to the inquiry in Form 394 regarding their legal qualifications, in particular Question 5 of Section II pertaining to adverse findings or actions by courts and administrative bodies, should be guided by the character qualification policy statements adopted by the Commission  Y-in 1986 and 1990.du Yl-ԍxIn the Matter of Policy Regarding Character Qualifications In Broadcast Licensing,  YW-Report, Order and Policy Statement, 102 FCC 2d 1179 (1986), recon. granted in part,  YB-denied in part, 1 FCC Rcd 421, appeal dismissed sub nom., NABB v. FCC, No. 861179  Y- -(D.C. Cir. June 11, 1987); Policy Regarding Character Qualifications in Broadcast  Y!-Licensing, Policy Statement and Order, 5 FCC Rcd 3252 (1990), recon. granted in part, 6FCC Rcd 3448 (1991). d  Y-x857.` ` We also take this opportunity to clarify that Form 394 is to be used to apply for franchise authority approval to assign or transfer control of a cable system owned for three or more years. Form 394 is not intended for use by a cable operator seeking local franchise authority approval of an assignment or transfer of a cable system held for less than three years. "P) u0*((\"Ԍ U-ٙXx` ` 3. Review Premised Upon State or Local Law   Y-x958.` ` Pleadings. NATOA asserts that franchise authorities' right to review transfer requests may arise from state or local law or ordinance and that the Commission's rules should be clarified to expressly state that a local franchise authority has the right to review a  Y-transfer request if permitted under applicable state or local law.Ev Y-ԍxNATOA Petition at 6.E In support of its argument, NATOA asserts that the Commission recognizes the rights conferred by state or local law in other aspects of its rules, for example, by providing that a small system waiver of the threeyear holding period does not become effective until the transfer is approved by the local franchise authority where such approval is required by the terms of the franchise agreement or applicable state or local law.   Y -x:59.` ` Discussion. We agree with NATOA that where local or state law requires franchise authority approval of cable system transfers or assignments, local franchise authorities may require cable operators to obtain their approval, regardless of whether the franchise agreement so requires. We recognize in other aspects of the antitrafficking rules that local or state law may impose obligations upon the franchise authority, and extending express recognition to basic transfer decisions merely clarifies this matter. We are revising our rules accordingly.   U8-XxX` ` 4. Certifications of Compliance with x`  U!-x` `  the AntiTrafficking Provision  Y-x;60.` ` Pleadings. Multivision requests clarification as to whether cable operators must file certifications of compliance with the antitrafficking provision in connection with  Y-transactions that are exempt from the threeyear holding period.Mwy Y-ԍxMultivision Petition at 89.M It further requests that cable operators be authorized to submit certifications of compliance to the Commission rather  Y-than to local franchise authorities.@x* Yt-ԍxId. at 7.@ Multivision asserts that cable operators should be permitted to submit antitrafficking certifications to the Commission in every instance, but that, at a minimum, submission of the certification to the Commission should be permitted when the local franchise agreement does not require local consent to the transfer of the cable  Y=-system.:y= Y#-ԍxId.: Multivision argues that providing the certification to the local franchise authority serves no useful public policy purpose, interjects a federal issue into local processes, and invites delays because it offers local franchise authorities an opportunity to scrutinize and delay transactions outside the scope of local jurisdiction, and to interject their own inconsistent rulings which will adversely impact buyers, sellers, investor and lenders who"y0*(( !"  Y-need predictability and certainty.Bz Yy-ԍxId. at 78.B  Y-x<61.` ` Discussion. We stated in the First Report & Order that every assignment or transfer of a cable system requires a certification of compliance with the antitrafficking statutory provision. In particular, we required that a cable operator seeking to sell or transfer a cable system certify to the local franchise authority that: (a)the transfer complies with the antitrafficking rule; (b)the transferror is seeking or has obtained a waiver of the antitrafficking rule from the Commission; or (c) the transfer is otherwise exempt from the  YJ-antitrafficking rule.g{J{ Yv -ԍxFirst Report & Order 37, 8 FCC Rcd at 6833.g We also stated that, in the case of transactions that are exempt from the holding period, the certification submitted to the local franchise authority should "describe the nature of the transaction and identify the applicable exemption accompanied by  Y -a statement of the facts giving rise to the claimed exemption."V| . Y-ԍxId. 37, 8 FCC Rcd at 6834.V We further provided that "[l]ocal decisions regarding . . . eligibility for one of the exemptions . . . are reviewable by  Y -the FCC. . . ."V}  Yi-ԍxId. 39, 8 FCC Rcd at 6839.V  Y -x=62.` ` We reject Multivision's suggestion that certifications of compliance should be filed with the Commission rather than the local franchise authority. We determined in the  Y{-First Report & Order, consistent with the dual regulatory framework adopted in the 1992 Cable Act, to vest primary responsibility for enforcement of the statutory antitrafficking  YO-provision with local authorities.V~O Y-ԍxId. 36, 8 FCC Rcd at 6833.V We affirm that conclusion. Most cable systems must be  Y8-authorized by local authorities in order to provide service.8G  Y0-ԍxSee, e.g., Communications Act 621, 623, 47 U.S.C. 541, 543. Thus, nearly every cable system is subject to local jurisdiction. The fact that a local franchise agreement may not expressly provide for local franchise authority approval of a proposed sale or transfer of a  Y-cable system does not diminish the fact that local jurisdiction exists, or as noted in the First  Y-Report & Order, that local authorities are best positioned to monitor compliance with the  Y-holding period in the first instance.g  Yt#-ԍxFirst Report & Order 36, 8 FCC Rcd at 6833.g Moreover, as noted in the First Report & Order, we believe this procedure simplifies enforcement and minimizes administrative burdens on both  Y-cable operators and the Commission.V  Y&-ԍxId. 41, 8 FCC Rcd at 6834.V Multivision offers no new reasons for reversing our"`0*((" conclusion, and we reject the unsupported notion that local franchise authorities will interject uncertainty into the process. We thus reiterate that cable operators are obligated to submit antitrafficking certifications to the local franchise authorities for all proposed transfers, assignments or sales of cable systems.  Y-x>63.` ` We also take this opportunity to clarify that if local franchise authority approval of an assignment or transfer of a cable system is not required and the system has been held for three or more years, the cable operator is not required to use FCC Form 394 solely for purposes of submission of the antitrafficking certification. Rather, in that circumstance, the cable operator may submit its certification of compliance with the antitrafficking provision as a separate document.   X -Xx B.X` ` The Three Year Holding Period `  U - XxX` ` 1. Calculation of the Holding x`  U -x` `  Period for Exempt Transactions   Yy-x?64.` ` Pleadings. No party seeking reconsideration raised an issue regarding the timing of the commencement of the holding period. However, we have received a number  YM-of informal questions regarding this matter.M Y-ԍx For example, the law firm of Cole Raywid & Braverman ("CRB") informally sought clarification in a letter dated May 5, 1994, that has been placed in the record of this proceeding. Therefore, we take this opportunity to clarify the application of the rules in this area. The issue is whether the threeyear holding period commences anew when the transaction involves the transfer of a cable system that qualifies for one of the three exemptions. It has been informally suggested that such transactions do not invoke any of the concerns underlying Congress' adoption of the antitrafficking provision, and that imposing a new threeyear holding period on every exempt transaction would impede necessary and desirable transactions, frustrate Congress' purpose in granting the exemptions, and limit cable operators' "exit" strategies.  Y~-x@65.` ` Discussion. As noted above, we concluded in the First Report & Order that  Yi-the statutory exemptions from the threeyear holding period apply to pro forma, tax exempt, and involuntary transfers, and to transfers involving municipallyowned cable systems. However, we did not address the calculation of the holding period for transactions that utilize  Y&-one of the three statutory exemptions. In the NPRM, we alluded to the fact that a pro forma transfer would not cause a new threeyear holding period to commence, but were silent as to  Y-tax exempt and involuntary transactions.VK Y$-ԍxNPRM 17, 8 FCC Rcd at 213.V For the reasons set forth below, and consistent with the public interest and our broad waiver authority under Section 617(d), we clarify that consummation of an exempt transaction does not restart the calculation of a new threeyear" 0*((!" holding period.  Y-xA66.` ` First, we believe that no sound basis exists to require a new threeyear holding  Y-period to begin after every pro forma transfer. A pro forma transfer is, by its terms, not a substantial change of control. Such transactions do not raise the specter of speculation or exploitation of shortterm ownership that concerned Congress when it adopted the anti Yx-trafficking provision. Moreover, imposing a new holding period every time pro forma restructuring occurs would impose unnecessary burdens on the cable industry without providing any commensurate benefits.  Y -xB67.` ` Second, we note that Congress exempted involuntary transfers of control from the minimum holding requirement in part because it did not want to tie the hands of the courts or local franchise authorities, or unnecessarily create a defense against foreclosure.  Y -We concluded in the First Report & Order that involuntary transfers are generally  Y -necessitated by changed or unforeseen circumstances.g  Y=-ԍxFirst Report & Order 67, 9 FCC Rcd at 6838.g Indeed, we noted that such transfers would likely include involuntary transfers to effect bankruptcy, divorce or probate  Y-proceedings.:{ Y-ԍxId.: We believe that we would be imposing unnecessarily costly and burdensome obligations on those persons who acquire cable systems through involuntary transfer procedures if we were to require them to hold those systems for three years, or to obtain waivers of the statutory threeyear holding period in order to sell those systems. Consequently, we conclude that the holding period should not recommence upon the consummation of an involuntary transfer.  Y-xC68.` ` Third, Congress provided an exemption for tax exempt transactions because it concluded that such transactions do not implicate the concerns underlying the threeyear holding requirement. We believe applying the exemption to systems acquired pursuant to a tax exempt transaction is consistent with Congress' intent regarding treatment of such transactions. Moreover, we have seen no evidence to suggest that transactions that do not incur income tax liability will adversely affect cable subscriber rates and services. Consequently, we see no compelling basis to insist that such transactions be treated  YT-differently than pro forma and involuntary transfer transactions.\T. Y3!-ԍxWe note that this determination does not affect any holding requirement that may exist pursuant to other Commission policies, and in particular does not affect any holding period required for a minority tax certificate issued by the Commission pursuant to Section 1071 of the Internal Revenue Code. \ "?0*((="Ԍ U-Xx` ` 2. Multiple System Transfers   Y-xD69.` ` Pleadings. In a footnote, NATOA suggests that we should reconsider our decision to provide favorable treatment to MSO waiver requests, arguing that permitting the transfer of onethird of an MSO's systems that have not been held by the MSO for three or more years will have a greater impact on subscribers than even the small system blanket  Yx-waiver simply because of the number of subscribers served by MSO's.Jx Y-ԍxNATOA Petition at 8 n. 6.J  YJ-xE70.` ` Discussion. We concluded in the First Report & Order that application of a separate threeyear holding period to each system owned by a particular MSO may be inappropriate in some circumstances because common ownership may create economies of scale that benefit subscribers and common ownership of nearby cable systems may create  Y -operating efficiencies and allow expansion of service to previously unserved areas. y Y-ԍxFirst Report & Order 51, 8 FCC Rcd at 6836. In the First Report & Order we concluded that: (a) for initially constructed cable systems, the threeyear holding period is measured from the date on which service is activated to the system's first subscriber; and (b)for acquired systems, the holding period commences on the effective date of the closing  Y-of the transaction in which the system was acquired. First Report & Order 4647, 8FCCRcd at 6835. We also concluded that, rather than establish separate procedures for MSO transfers or impose uniform application of a separate holding requirement to each system owned by a particular MSO, we would treat waiver requests involving MSO transfers  Yf-favorably. Id. 5152, 8 FCC Rcd at 6836. We noted that the antitrafficking provision is not intended to thwart the development of systems or unnecessarily deter MSO transfers and that applying a separate holding requirement on each individual system could sacrifice some  Y#-of the benefits afforded by multiple system ownership. Id. We therefore determined that we would look favorably upon waiver applications if twothirds or more of the MSO's subscribers are served by systems owned for three or more years, and if an MSO transfers several systems in a single transaction and twothirds of the subscribers of the systems being transferred are served by systems the MSO owned for three years or  Y}-more.V}5 Yc-ԍxId. 52, 8 FCC Rcd at 6836.V NATOA does not offer any evidence that our MSO rules have had any adverse impact on subscribers nor does NATOA assert we erred in the rationale underlying the rules. Other than asserting that a large number of subscribers are served by MSOs, NATOA proffers no basis for reconsideration of our MSO transfer rules and we see no reason to revise these rules.  Y-xF71.` ` We take this opportunity, however, to clarify two aspects of our MSO transfer rules. First, Section 617(b) of the Communications Act provides that in the case of MSO transfers, "if the terms of the sale require the buyer to subsequently transfer ownership of one or more such systems to one or more third parties, such transfers shall be considered a"0*(("  Y-part of the initial transaction."G Yy-ԍx47 U.S.C. 537(b).G In the First Report & Order, we determined that subsequent transfers must be completed within a reasonable amount of time following completion of the original transaction in order to qualify for the treatment provided by the  Y-statutory provision.gy Y-ԍxFirst Report & Order 56, 8 FCC Rcd at 6836.g Our rules specify that in order to qualify as part of the initial transaction, a request for approval of the subsequent transfer must be filed with the local franchise authority within ninety days of the closing date of the original transfer and the closing date of the subsequent transfer must be no later than ninety days following the grant  Ya-of the transfer approval by the local franchise authority.[a, Y> -ԍxId.; 47 C.F.R. 76.502(e)(1993).[ If local franchise approval is not required, our rules specify that the subsequent transfer must be completed within 180 days of the date of the closing of the original transaction in order to qualify as part of the original  Y -transaction.g  Y-ԍxFirst Report & Order 56, 8 FCC Rcd at 6836.g  Y -xG72.` ` Our rules do not address the situation where the subsequent transfer involves multiple systems with differing franchise approval requirements. For example, if franchise authority approval is required for some but not all of the transfers, our rules could require the subsequent transfer of the system not requiring franchise authority approval to close within 180 days, while the subsequent transfer to the same party of the system requiring franchise authority approval could conceivably consume 300 or more days (90 days to file the request, 120 days or more for franchise approval and 90 days to close). Although we recognize that the parties could hold separate closings, or could complete the entire  Y6-transaction within 180 days,&6 Yy-ԍxThe transaction could be completed in 180 days if the approval request is filed within 30 days, the franchise authority acts within 120 days (assuming the original operator owned the system for three years) and closing occurs 30 days thereafter.& we are concerned that such a requirement would be inconsistent with our determination that the antitrafficking provisions are not intended to impede MSO transactions. While we continue to believe that subsequent transfers should occur within a reasonable amount of time, we conclude that where a subsequent transfer involves both systems that require franchise approval and systems that do not, the original transferee must complete the subsequent transfers of all affected systems within 90 days of the date the last system involved receives franchise authority approval of the transfer.  Y~-xH73.` ` Second, notwithstanding our determination to treat MSO transfers in a favorable fashion, some clarification is warranted regarding the basis for calculating subscribers served by systems held for three years. Generally, the commencement of the holding period is relatively straightforward, i.e., calculation of the holding period relates"9 0*(([" back to the date of activation of the system's first subscriber or the effective date of the  Y-closing of the transaction in which the system was acquired.7L Yb-ԍxWe note that a "cable system" is defined, in relevant part, in Section 602(7) of the Communications Act and Section 76.5 of our rules as a facility "consisting of a set of closed transmission paths and associated signal generation, reception, and control equipment that is designed to provide cable service which includes video programming and which is provided to multiple subscribers within a community." 47 U.S.C. 522(7); 47 C.F.R. 76.5. In terms of practical application of this definition, the parameters of a system are typically the  Y-area and subscribers served from a particular headend or connected set of headends. See,  Y -e.g., Second Rate Recon. 201, 22627, 9 FCC Rcd at 4218, 423132.7 The threeyear holding period does not begin anew when the system extends lines into existing or new communities, or when the system integrates previously separate communities through line extension. In other words, a large system that interconnects multiple communities via wire from a single headend calculates its holding period from either the date of activation of the system's first subscriber or the effective date of the closing of the transaction in which the system was acquired. However, a large system with multiple headends calculates the holding period for each system served by each headend. Our rule providing for favorable treatment of MSO transfers can be invoked in the event a multipleheadend MSO system is sold.  Y -xI74.` ` If a cable operator acquires an adjoining system served by a separate headend, the holding period for the adjoining system commences upon the date of the closing of the acquisition. The holding period attendant to the original system does not extend to the newly acquired system; rather, the newly acquired system maintains a separate threeyear holding period. If, however, the purchaser removes the headend serving the acquired system and interconnects the acquired system with the original system through line extension, the holding period for that particular system becomes the same as the holding period for the system into which it was integrated. In other words, when systems are interconnected and served from a single headend, they maintain a uniform holding period.  Y-xJ75.` ` We believe this clarification renders our rules neutral as to system upgrades, and permits expansion and deployment of new technologies without potentially adverse regulatory consequences. We further note that calculation of the holding period is for the purpose of determining whether it is necessary to seek a waiver from the Commission. The ultimate decision to approve a proposed transfer rests with the local franchise authority, if such authority is provided in the local franchise agreement or by state or local law.   X|-Xx C.X` ` Waivers `  YN-xK76.` ` Pleadings. NATOA contends that the Commission's blanket waiver of the threeyear holding requirement for small systems circumvents the "public interest" intent"9 0*(("  Y-behind the statutory waiver provision and should be eliminated.J Yy-ԍxNATOA Petition at 67, 9.J NATOA argues that by focusing on the "financial and administrative burdens" the holding period places upon small system operators as justification for the blanket waiver, the Commission ignored that the holding requirement is intended to protect subscribers from transactions that will likely have  Y-an adverse impact on cable rates or service.@y Y-ԍxId. at 7.@ NATOA asserts that the impact is significant: more than half of all cable systems serve less than 1,000 subscribers; small systems serve approximately 1.9 million subscribers nationwide; and the value of such systems is  Y_-conservatively placed at $3.8 billion.@_, Y< -ԍxId. at 8.@ Time Warner contends that the Commission properly weighed numerous public interest considerations before adopting the blanket small system waiver and notes that the waiver is anticipated to cover only 3.6% of all cable subscribers  Y -nationally.O  Y-ԍxTime Warner Comments at 1011.O  Y -xL77.` ` Discussion. In assessing the impact of the antitrafficking provision upon  Y -small business, pursuant to our obligations under the Communications Act,  Y-ԍxCommunications Act 623(i), 47 U.S.C. 543(i); see also, Regulatory Flexibility Act of 1980, 5 U.S.C. 603. we determined  Y -in the First Report & Order that: (a)cable systems serving rural areas with low population density are unlikely to be the subject of transactions that implicate the antitrafficking concerns; (b)the antitrafficking rules would create significant costs and impose administrative burdens on small systems, and may deter expansion of cable service to rural areas; (c) the expense and delay attendant to individual waiver requests may be prohibitive to small systems; and (d) a blanket waiver would reduce the burden on the Commission and  Y8-affect only a small number of cable subscribers.g8,  Y-ԍxFirst Report & Order 90, 8 FCC Rcd at 6841.g Consequently, we adopted a blanket antitrafficking waiver for small systems. We continue to believe that this weighing and assessing of costs and benefits was precisely the type of consideration of the public interest required under our waiver authority under the Communications Act, and consequently we affirm our small system blanket waiver. We reiterate, however, that the small system blanket waiver does not affect the rights of local franchise authorities to approve transfers or sales of small systems, to the extent such approval is provided for in local franchise agreements or by local or state law. Thus, while the blanket waiver provision exempts small systems from obtaining antitrafficking waivers from the Commission, the ultimate decision to approve or deny a transfer and assignment rests, in most cases, with the local franchise authority. "R! 0*((z"Ԍ Y-xM78.` ` Small systems are defined as systems that serve 1,000 or fewer subscribers  Y-from a single headend. Yb-ԍxFirst Report & Order 91, 8 FCC Rcd at 6841. See also Second Rate Recon. 201, 22627, 9 FCC Rcd at 4218, 423132. This definition currently applies throughout Part 76 of our rules.  Y-However, we note that we are in the process of reviewing this definition.d Y-ԍxImplementation of 1992 Cable Act (Rate Regulation), Fifth Order on Reconsideration  Y-& Further Notice of Proposed Rulemaking, 9 FCC Rcd 5327 (1994) (MM Docket No. 93215). To the extent any definitional changes are adopted, we will also consider appropriate changes to the small system waiver rule unless such changes would alter the fundamental basis of our analysis. In that event, we will address the continuing viability of the blanket antitrafficking waiver in light of those changes.  YH-xN79.` ` Finally, we take this opportunity to note that our experience to date with requests for waiver of the antitrafficking rule has demonstrated that systems owned less than three years are not being transferred or assigned purely for purposes of quick economic  Y -gain.h   Y-ԍxSee e.g., King Kable, Inc., 8 FCC Rcd 1515 (MMB 1993) (no antitrafficking  Y-concern where seller was in bankruptcy); D.D. Cable Partners, L.P., 9 FCC Rcd 590 (MMB 1994) (no antitrafficking concerns where systems barely exceeded small system blanket waiver limit and transaction resulted in consolidation of systems with adjacent systems);  YG-People's Cable, Inc., 9 FCC Rcd 6101 (CSB & MMB Oct. 21, 1994) (no antitrafficking concern where waiver necessitated by transfer of negative control within past three years);  Y-D.D. Cable Partners, L.P., 9 FCC Rcd 6109 (CSB, Oct. 24, 1994) (no antitrafficking concerns where systems barely exceeded small system blanket waiver limit and franchise  Y-authority approval acquired); HCCrown Corp., 9 FCC Rcd ___ (CSB, December 23, 1994) (transaction involving large MSO did not raise antitrafficking concerns were MSO had held systems serving twothirds of the subscribers involved in the transaction for more than three years).h Rather, those waiver requests have been premised upon proposed transfers involving bankruptcy, systems barely over the subscriber limit established for the small system blanket  Y -waiver, a system with no change in de facto control and systems qualifying for treatment under our MSO transfer rules. We believe that it is appropriate, after one year of strictly scrutinizing waiver requests, to revise our approach to waiver requests. In the future, we generally will look favorably on waiver requests unless the transaction raises serious concerns on its face or any objections we receive to grant of the waiver provide other public interest bases for concern. "M"0*(("Ԍ X- IV.xREGULATORY FLEXIBILITY ANALYSIS  Y-xO80.` ` Pursuant to the Regulatory Flexibility Act of 1980, 5 U.S.C. 601602, the Commission's final analysis is as follows:  Y-xP81.` ` Need and purpose of this action: This action is taken to address petitions for reconsideration of the antitrafficking and crossownership rules adopted by the Commissions to implement Sections 11 and 13 of the 1992 Cable Act.  Y1-xQ82.` ` Summary of the issues raised by the pubic comments in response to the Initial Regulatory Flexibility Analysis: There were no comments submitted in response to the Initial Regulatory Flexibility Analysis.  Y -xR83.` ` Significant alternatives considered: We have analyzed the comments submitted in light of our statutory directives and have formulated regulations which, to the extent possible, minimize the regulatory burden placed on entities covered by the ownership and antitrafficking provisions of the 1992 Cable Act. The Commission modifies its restriction on cable operators' acquisitions of SMATV systems within the portion of the franchised service area served by the cable operator. We affirm the limitation on the tolling of the statutory time frame for local franchise authorities' action on requests to approve the transfer of cable systems held for three or more years. These actions are aimed at reducing unnecessary regulatory restrictions and promoting competition within the multichannel video distribution marketplace.  Y-xS84.` ` Federal rules that overlap, duplicate or conflict with these rules: None.  X- V.xEFFECTIVE DATE  Y|-xT85.` ` Effective Date: The changes to the rules adopted in this Memorandum  Yg-Opinion and Order on Reconsideration of the First Report and Order will become effective thirty (30) days from the date of publication in the Federal Register.   X$- VI.xORDERING CLAUSES  Y-xU86.` ` Accordingly, IT IS ORDERED, that pursuant to the authority contained in Sections 2(a), 4(i), 4(j) and 303 of the Communications Act of 1934, as amended, and in the Cable Television Consumer Protection and Competition Act of 1992, Pub. L. No. 102385, the rules contained in Part 76 of the Commissions Rules, 47 C.F.R. Part 76, ARE AMENDED as set forth in Appendix B below, and will become effective 30 days after publication in the Federal Register.  YU%-xV87.` ` IT IS FURTHER ORDERED that, pursuant to the authority contained in Sections 2, 4, 303, 405 and 601 of the Communications Act of 1934, as amended, the  Y''-Memorandum Opinion and Order on Reconsideration of the First Report and Order,"''#0*((P("  Y-affirming in part and modifying in part, the First Report & Order in this proceeding, IS ADOPTED, as provided herein.  Y- xW88.` ` IT IS FURTHER ORDERED THAT the petitions for reconsideration or clarification, set forth in Appendix A, are granted and denied to the extent indicated above. x` `  hhFEDERAL COMMUNICATIONS COMMISSION x` `  hhWilliam F. Caton x` `  hhActing Secretary  Y{- "{$0*(("  Y-& APPENDIX A  X- MM Docket No. 92264 ă  Y-Parties Requesting Reconsideration or Clarification Wireless Cable Association International, Inc. ("WCA") Multivision Cable TV Corp. and Providence Journal Company ("Multivision") Time Warner Entertainment Company, L.P. ("Time Warner") National Association of Telecommunications Officers and Advisors, the National League of xCities, the United States Conference of Mayors, and the National Association of xCounties (collectively referred to as "NATOA") Oklahoma Western Telephone Company ("Oklahoma Western") National Private Cable Association, MSE Cable Systems, Cable Plus and Metropolitan xSatellite (collectively referred to as "NPCA")  Y -Parties Filing Oppositions National Cable Television Association ("NCTA") Time Warner  YL-Parties Filing Replies NATOA Cablevision Systems Corporation ("Cablevision") NCTA  Y-Ex Parte Contacts Cole Raywid & Braverman Gardner, Carton & Douglas Wiley, Rein & Fielding "!%0*0*0*"  Y- & ' APPENDIX B ă Part 76 of Title 47 of the United States Code of Federal Regulations is amended to read as follows:  Y-x1.` ` The authority for Part 76 continues to read as follows: AUTHORITY: 47 U.S.C. 152, 153, 154, 301, 303, 307, 308, 309, 532, 535, 542, 543, 552, 554.  Y -x2.` ` Section 76.501 is amended by revising subsections (d) and (e), redesignating subsection (e)(2)(i)(ii) as Note 5 and subsection (e)(2)(iii) as subsection (f), and moving the Notes to the end of the rule, as follows:  Y -*x*` ` * ** x(d) No cable operator shall offer satellite master antenna television service ("SMATV"), as that service is defined in Section 76.5(a)(2), separate and apart from any franchised cable service in any portion of the franchise area served by that cable operator's cable system, either directly or indirectly through an affiliate owned, operated, controlled, or under common control with the cable operator.  Y-x(e) ` ` (1) A cable operator may directly or indirectly, through an affiliate owned, operated, controlled by, or under common control with the cable operator, offer SMATV service within its franchise area if the cable operator's SMATV system was owned, operated, controlled by or under common control with the cable operator as of October 5, 1992. x` ` (2) A cable operator may directly or indirectly, through an affiliate owned, operated, controlled by, or under common control with the cable operator, offer service within its franchise area through SMATV facilities, provided such service is offered in accordance with the terms and conditions of a cable franchise agreement. x(f) The Commission will entertain requests to waive the restrictions in paragraphs (d) and (e) of this section when necessary to ensure that all significant portions of the franchise area are able to obtain multichannel video service. Such waiver requests should filed in accordance with the special relief procedures set forth in Section 76.7.  Y- Note 1 :  Y -*x*` ` * **  X!-  Y"-Note 5 :` ` In applying the provisions of paragraphs (d) and (e), control and an attributable ownership interest shall be defined by reference to the definitions contained in Notes 1 4, provided however, that: x(a) The single majority shareholder provisions of Note 2(b) and the limited partner insulation provisions of Note 2(g) shall not apply; and x(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. "(&0*0*0*0*"Ԍ Y-ԙx3.` ` Section 76.502 is amended by deleting section (b), renumbering the remaining sections accordingly, adding sections (d)(3) and (f), revising section (g), and making grammatical language clarifications in sections (c), (c)(2), (h) and (i), as follows:  Y-xSec. 76.502 Threeyear holding requirement. [Revised]  Y-x(a)` ` Except as otherwise provided in this section, no cable operator may sell, assign, or otherwise transfer controlling ownership of a cable system within a threeyear period following either the acquisition or initial construction of such cable system by such cable operator.  Y2-x(b)` ` For initially constructed cable systems, the threeyear holding period shall be measured from the date on which service is activated to the system's first subscriber through the proposed effective date of the closing of the transaction assigning or transferring control of the cable system. The holding period for acquired systems shall be measured from the effective date of the closing of the transaction in which control of the cable system was acquired through the proposed effective date of the closing of the transaction assigning or transferring control of such cable system.  Y-x(c)` ` A cable operator who seeks to assign or transfer control of a cable system is required to certify to the local franchise authority that the proposed assignment or transfer of control of such cable system will not violate the threeyear holding requirement. Such certification shall be submitted to the franchise authority at the time the cable operator submits a request for transfer approval to the local franchise authority. If local transfer approval is not required by the terms of the franchise agreement, certification of compliance with the threeyear holding requirement must be submitted to the franchise authority no later than 30 days in advance of the proposed closing date of the transfer or assignment.  Y-x` ` (1) Receipt by the local franchise authority of a certification containing a description of the transaction and indicating that the cable system has been owned for three or more years, or that the transferor has obtained or is seeking a waiver from the Commission, or that the transaction is otherwise exempt under this section, shall create a presumption that the proposed assignment or transfer of the cable system will comply with the threeyear holding requirement.  YO-x` ` (2) A franchise authority that questions the accuracy of a certification filed pursuant to this section must notify the cable operator within 30 days of the filing of such certification, or such certification shall be deemed accepted, unless the cable operator has failed to provide any additional information reasonable requested by the franchise authority within 10 days of such request.  Y-x(d)` ` If an assignment or transfer of control involves multiple systems and the terms of the transaction require the buyer to subsequently transfer or assign one or more such systems to one or more third parties, such subsequent transfers shall be considered part of the original transaction for purposes of measuring the threeyear holding period.  Y#-x` ` (1) In order to qualify as part of the original transaction, a request for approval of the subsequent transfer must be filed with the local franchise authority within 90 days of the closing date of the original transfer and the closing date of the subsequent transfer must be no later than 90 days following the grant of transfer approval by the local franchise authority."$''0*((P("Ԍ Y-x` ` (2) If local transfer approval is not required by the terms of the cable franchise agreement, then a subsequent transfer must be completed within 180 days of the date of the closing of the original transaction in order to qualify as part of the original transaction.  Y-x` ` (3) If a subsequent transfer involves transfers of multiple systems to the same party, at least one of which requires local transfer approval and at least one of which does not require local transfer approval, the subsequent transfer must then be closed within 90 days of the date the last system involved in the subsequent transfer receives franchise authority approval of the transfer.  Y1-x(e)` ` Paragraph (a) of this section shall not apply to:  Y -x` ` (1) any assignment or transfer of control of a cable system that is not subject to Federal income tax liability under the Federal Income Tax Code;  Y -x` ` (2) any assignment or transfer of control of a cable system required by operation of law or by any act, order or decree of any Federal agency, any State or political subdivision thereof or any franchising authority;  Y -x` ` (3) any assignment or transfer of control to one or more purchasers, assignees or transferees controlled by, controlling, or under common control with, the seller, assignor or transferor.  Yb-x(f)` ` Paragraph (a) of this section shall not apply to any assignment or transfer of a cable system subject to paragraph (e) of this section.  Y4-x(g)` ` The Commission will consider requests for waivers from the threeyear holding requirement and, consistent with the public interest, will grant waivers in appropriate cases of default, foreclosure and financial distress. Waiver requests under this section should be filed in accordance with the special relief procedures set forth in Section 76.7. Waivers granted by the Commission will not become effective, however, unless local franchise authority approval of a transfer is obtained when such approval is required by the terms of the franchise agreement or state or local law.  Y-x` ` (1) The Commission will look favorably upon waiver requests involving multiple system operators or transfers of multiple systems if at least twothirds of the subscribers of the system being transferred are served by systems owned by the cable operator for threeyears or more.  Y7-x` ` (2) Conditioned upon receipt of local franchise authority transfer approval, where such approval is required by the terms of the franchise agreement or applicable state or local law, transfers of cable systems serving 1,000 or fewer subscribers shall be subject to a blanket Commission waiver.  Y-x(h)` ` A cable operator may seek Commission review of a franchise authority's decision regarding the application of the threeyear holding period to a particular transaction pursuant to the special relief procedures set forth in Section 76.7.  Y"-x(i)` ` A cable system operator seeking to assign or transfer a cable system it has held for three or more years must submit a completed copy of FCC Form 394 to the local franchise authority if franchise authority approval of the transfer is required by the terms of the franchise agreement.  Y:&-x` ` (1) A franchise authority shall have 120 days from the date of submission of a completed FCC Form 394, together with all exhibits, and any additional information"#'(0*((P(" required by the terms of the franchise agreement or applicable state or local law to act upon such transfer request.  Y-x` ` (2) If the franchise authority fails to act upon such transfer request within 120 days, such request shall be deemed granted unless the franchise authority and the requesting party otherwise agree to an extension of time. P