FOR RECORD ONLY $//MO&O, Time Warner Ent., Advance-Newhouse, Transfer of Control, DA 95 ----//$ $/300.308(b) Applications for Licenses/$ $/300.309(d) Action Upon Applications/$ $/300.310(d) Transfer of Licenses/$ Before the FEDERAL COMMUNICATIONS COMMISSION DA 95 - 580 Washington, D.C. 20554 In the Matter of ) ) Time Warner Entertainment Co., ) L.P., ) File Nos. CAR- 45134-08, et al. Advance/Newhouse Partnership, ) and Time Warner Entertainment- ) Advance/Newhouse Partnership ) Transfer of Control ) MEMORANDUM OPINION AND ORDER Adopted: March 21, 1995 Released: March 23, 1995 By the Chief, Cable Services Bureau: I. Introduction 1. On November 30, 1994, Time Warner Entertainment Co., L.P., ("TWE"), filed applications for authority to transfer, pursuant to Section 310(d) of the Communications Act, 47 U.S.C.  310(d), thirty Cable Television Relay Service (CARS) licenses from Advance/Newhouse Partnership ("Advance/Newhouse") and forty-three CARS licenses from TWE, as part of its proposed merger of the TWE and Advance/Newhouse cable systems into the Time Warner Entertainment-Advance/Newhouse Partnership ("the Partnership"). As explained below, the Bureau finds that approving the proposed license transfers will serve the public interest, convenience and necessity. Therefore, the Bureau grants the transfer applications. II. Background 2. Time Warner Entertainment Co., L.P. ("TWE"), was formed as a limited partnership and has, since June 30, 1992, owned and operated substantially all of the filmed entertainment, cable television and cable television programming businesses, as well as other businesses, previously owned and operated by Time Warner Inc. The Time Warner Cable division ("Time Warner Cable") of TWE operates TWE's cable television systems. Time Warner Cable's wholly and partially owned cable systems serve approximately 7.2 million cable subscribers located in 34 states. Time Warner Cable is the second-largest multiple system cable operator in the United States, owning or operating 22 of the largest 100 U.S. cable systems. TWE has total assets exceeding $17 billion. 3. Advance/Newhouse Partnership is a general partnership between Newhouse Broadcasting Corporation and a wholly-owned subsidiary of Advance Publications, Inc. Advance/Newhouse's cable television systems serve approximately 1.4 million subscribers. Newhouse Broadcasting Corp. is owned 50% by S.I. Newhouse, Jr. and 50% by Donald E. Newhouse. Metrovision, Inc., NewChannels Corp. and Vision Cable Communications, Inc. ("Vision"), each operate Advance/Newhouse's cable television systems and are subsidiaries of Newhouse Broadcasting Corp. Vision Cable of Pinellas, Inc. is a subsidiary of Vision Cable Southern Systems, Inc., which is a subsidiary of Vision Cable Communications, Inc. 4. TWE and Advance/Newhouse have formed a general partnership, the Partnership, to which Advance/Newhouse will contribute all of its cable television systems, with 1.4 million customers, along with certain related assets and TWE will contribute certain of its cable television systems (or TWE's interests therein), which serve approximately 2.8 million subscribers, and certain related assets. TWE will own a two-thirds equity interest in the Partnership and Advance/Newhouse will own a one-third equity interest. 5. As a result, TWE would have interests in cable systems that provide service to approximately 8.8 million subscribers, approximately 14.5% of the subscribers in the United States. The Partnership's total value has been estimated at approximately $8.4 billion. 6. The applications to transfer the Advance/Newhouse CARS licenses and the TWE CARS licenses to the Partnership were placed on public notice on December 7, 1994. A supplemental public notice was issued on December 19, 1994, establishing a pleading cycle for oppositions and replies. Talk TV, a Florida corporation which produces programming for distribution over cable television systems using a live call-in format, filed a Petition to Deny the transfer of the CARS licenses. Vision filed an Opposition to Talk TV's Petition, and Talk TV filed a Reply to Vision's Opposition. III. Petition to Defer and Deny and Opposition 7. In its Petition, Talk TV asserts that Vision is not qualified to be a Commission licensee and that, therefore, the Commission should deny the transfer applications, which would transfer the CARS licenses from Vision to a partnership in which Vision's parent will be a one-third owner. Talk TV alleges that Vision does not have the proper character to be a licensee because it improperly denied Talk TV's request to lease time on Vision's Clearwater, Florida cable television system. Talk TV has a pending lawsuit, which alleges that Vision's denial violates the Cable Act. 8. Talk TV asserts that the Commission should apply to CARS license applicants the qualification standards the Commission has established for broadcast applicants in the Policy Regarding Character Qualifications in Broadcast Licensing ("Character Policy Statement"). In that statement, the Commission said that in determining the qualifications for holding a Commission broadcast license, the Commission will examine an applicant's character, including past misconduct of an applicant. In making this determination, the Commission will consider the willfulness, frequency, and currency of an applicant's misconduct, the participation of an applicant's managers and owners, and any efforts made by an applicant to remedy the wrongdoing. Talk TV asserts that Vision's denial of Talk TV's leased access requests demonstrates willful violations of the Commission's rules, a type of misconduct encompassed by the Character Policy Statement. Talk TV asserts this is a sufficient reason to deny a license transfer to Vision. 9. Talk TV urges further that, rather than acting on the petition to deny at this time, the Commission may wish to defer action on the CARS transfer applications pending resolution of the court proceeding. Following resolution of that proceeding, the Commission could designate the applications for hearing. By proceeding in this manner, the Commission can avoid having both the Court and the Commission make factual determinations on the same matters. 10. In its Opposition, Vision asserts that (1) Talk TV has chosen an inappropriate vehicle by which to assert its leased access complaint, (2) Talk TV lacks standing to file a petition to deny, and (3) Talk TV's discussion of the Commission's remedies for licensee misconduct is inapplicable to the instant situation. Vision contends that a grant of the CARS license assignments would in no way affect Talk TV's ability, in its pending court action against Vision Cable of Pinellas, Inc., to recover damages and restore access to Vision's cable system. 11. Vision's first argument is that Section 612 of the Cable Television Consumer Protection and Competition Act of 1992 provides for specific and, by inference, exclusive remedies for persons with complaints arising under the Act's leased access provision. Vision states that the appropriate remedies are either a district court action or a petition to the Commission for relief. Vision argues that Talk TV has missed the 60-day procedural deadline set out in Commission rules for filing petitions for relief. Thus, Talk TV's only appropriate course of action is to pursue its pending court case. In these circumstances, Vision asserts, Talk TV should not be permitted to evade the leased access procedures by asserting its leased access claims in this CARS license transfer proceeding. 12. Vision's second argument is that Talk TV is not a "party in interest," and, therefore, lacks standing to object to the license transfer applications. Vision asserts that in order to file a petition to deny, Talk TV must show that it is a party in interest according to Section 309(d)(1) of the Communications Act, which states that any "party in interest" may file a petition to deny an application for a license. 13. Vision's third argument is that Talk TV's misconduct assertions are irrelevant to the Commission's determination of whether to approve the CARS transfer applications, because the Character Policy Statement cites factors only relevant to broadcast licensees, not to CARS licensees. Vision states that the FCC has recognized that character issues carry less weight in the context of non-broadcast licenses, such as CARS, than they do in the broadcast license context. Vision notes that in Cablecom-General, Inc., the Commission distinguished CARS licenses from broadcast licenses, the type of license discussed in the Character Policy Statement. Vision asserts that the Commission has stated that while "[b]roadcast licensees have a special responsibility for the content of the information which they disseminate to the public," "CARS licenses do not afford the licensee a medium to communicate directly with the public; but instead merely provide a medium by which the cable system operator relays programming produced by others between and among other communications facilities." Vision cites a Commission opinion stating that a CARS licensee "operates as a mere conduit for the transmission of information" and does not have "control or responsibility for the content of the information . . . which it transmits." For these reasons, Vision alleges that the broadcast standards set forth in the Character Policy Statement should not be applied to persons seeking to transfer CARS licenses and concludes that the misconduct assertions made by Talk TV should be dismissed. 14. In its Reply, Talk TV disagrees with Vision's argument that violations of the leased access rules may only be considered in a federal district court proceeding or in a complaint filed with the Commission. Talk TV contends that Section 309(d)(1) of the Communications Act establishes a broad right for any party in interest to file a petition to deny any application subject to Section 309(b) of the Communications Act, including applications for CARS licenses. 15. Talk TV also disagrees with Vision's claim that Talk TV lacks the requisite standing to file a petition to deny. Talk TV asserts that a party has standing to contest an action that results in a concrete economic injury to that party. Talk TV contends that it has suffered economic injury sufficient to give it standing. 16. Talk TV states that Vision's reliance on Cablecom is misguided, since that case involved the assignment of CARS licenses from RKO to a third party despite the findings of misconduct against RKO's broadcast stations. Talk TV asserts that the instant case is different from Cablecom because the proposed assignment will result in the formation of a partnership in which Vision's owners will have an interest. Thus, unlike Cablecom, the Petition questions the qualifications of both the transferor and transferee, rather than the transferor alone. Talk TV also cites language in Cablecom in which the Commission said that the decision "should not be read overly broad." IV. Discussion 17. Talk TV lacks the qualifications set by the Communications Act for filing a petition to deny. Section 309(d)(1) of the Act states that any "party in interest may file with the Commission a petition to deny any application." A party in interest has been defined as "an individual or entity which is able to establish that a grant of the instant application would result in, or be reasonably likely to result in, some injury of a direct, tangible or substantial nature." Talk TV's assertion that it will suffer injury as a result of the grant of the instant application is incorrect. Vision's allegedly improper denial of Talk TV's leased access requests, not the proposed license transfers, has been the proximate cause of Talk TV's injury, if any. Nonetheless, as in the Commission's Pinelands decision, the Bureau will consider the allegations made by Talk TV as part of the Commission's "independent public interest analysis." 18. Vision has characterized Talk TV's Petition as an inappropriate vehicle for Commission consideration of Vision's alleged improper denial of Talk TV's leased access request. Talk TV, however, is not asking us to resolve its leased access complaint in the context of this Petition. Nor is it seeking relief for Vision's alleged violation of the leased access rules. Rather, Talk TV is asserting that the proposed license transfers will not serve the public interest because the character of one of the transferees, Vision, disqualifies it from receiving a license. As will be discussed below, a transferee's character is an appropriate factor to consider in determining whether Commission approval of a CARS license transfer application serves the public interest. 19. Section 310(d) provides that in granting a license transfer, the Commission must find that the "public interest, convenience, and necessity will be served" by the transfer. In Cablecom, the Commission noted that Section 310(b) of the Communications Act requires that transfer applications be construed as if the proposed transferee were applying ab initio for the license under Section 308(b) of the Act. Section 308(b) provides that applicants (including prospective transferees) "shall set forth such facts as the Commission . . . may prescribe as to the citizenship, character, and financial, technical, and other qualifications of the applicant to operate the station." In Teleprompter Corporation, the Commission stated that in evaluating CARS license transfers, "we must make a judgment as to how that applicant will conduct itself in the future. We look to an applicant's past conduct . . . as a guide to how an applicant is likely to operate its station in the future." Because of the different nature of the services provided the public by broadcast and CARS licensees, the Commission need not employ the same method in evaluating CARS license transfer applications as it uses for broadcast licensees. But in deciding whether to approve the transfer applications, the Commission must decide whether the Partnership is a "qualified applicant" transferee. Although in Cablecom, the Commission drew a number of important distinctions between CARS licensees and broadcast licensees, the Commission also noted "that there are no material questions as to the proposed transferee's qualifications to operate any of these stations." 20. The Commission's Character Policy Statement, which the Commission established for broadcast licensees, provides a reasonable analytic framework to use in determining whether the public interest would be served by approving a CARS license transfer to a particular transferee. The Commission has previously applied the character qualifications expressed in the Character Policy Statement when evaluating the character qualifications of prospective licensees for similar services. 21. In its Character Policy Statement, the Commission stated that "future inquiries into an applicant's basic character eligibility will be narrowed to focus on the likelihood that an applicant will deal truthfully with the Commission and comply with the Communications Act and our rules and policies." In examining the likelihood that, in the future, a licensee applicant will comply with the Act and the Commission's rules, the Commission considers "the willfulness of the misconduct, the frequency of such behavior, and its currency," as well as the seriousness of the misconduct, the nature of the participation, if any, of a licensee's managers and owners, and a licensee's efforts to remedy the wrong. 22. In order to be entitled to a hearing, a party must show that "a grant of the application would be prima facie inconsistent with the public interest." Courts have determined that "the decision of whether or not hearings are necessary or desirable is a matter in which the Commission's discretion is paramount." Talk TV's Petition proffers but a single instance of alleged, but unadjudicated, misconduct. Nor has it presented information suggesting that the alleged violation involves bad faith rather than simply a dispute over the application of the rules and their requirements. 23. Talk TV's Petition does not allege sufficiently egregious conduct by Vision to support a decision to defer granting the license transfers until after the court decides the leased access issues. Nor is it necessary to conduct an independent fact finding investigation on the leased access issue at this time. Further, assuming Talk TV's leased access allegations against Vision to be true, such conduct is an insufficient basis on which to deny the license transfer applications. Denial of a license to operate multiple cable systems is a significantly greater penalty than those prescribed by the Commission in its leased access rules. If, however, a subsequent decision demonstrates that Vision has violated the Communications Act or the Commission's rules or policies, or has engaged in anticompetitive conduct, then Talk TV may bring that decision to the Bureau's attention in a subsequent proceeding. 24. In the absence of any showing by Talk TV or anyone else that approval of the applications to transfer CARS licenses to the Partnership would not be in the public interest, the Bureau denies Talk TV's Petition. III. Ordering Clauses 25. Accordingly, IT IS ORDERED that the pending CARS license transfer applications referenced herein are GRANTED. 26. This action is taken by the Chief, Cable Services Bureau, pursuant to authority delegated by Section 0.321 of the Commission's Rules, 47 C.F.R.  0.321 (1993). FEDERAL COMMUNICATIONS COMMISSION Meredith J. Jones Chief, Cable Services Bureau