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If you need the complete document, download the WordPerfect version or Adobe Acrobat version, if available. ***************************************************************** Before the Federal Communications Commission Washington, D.C. 20554 In the Matter of ) ) SouthEast Telephone, Ltd. ) ) Petition for Waiver of ) Section 652 Prohibition on Buy Outs) of the Telecommunications Act of 1934) ORDER Adopted: March 4, 1996 Released: March 6, 1996 By the Chief, Cable Services Bureau: I. INTRODUCTION 1. By this Order, we dismiss as unnecessary the petition for a waiver of Section 652 (the "Buy Out Prohibitions") of the Communications Act of 1934, as amended by Section 652 of the Telecommunications Act of 1996, filed by petitioner SouthEast Telephone, Ltd. ("SouthEast"). 2. SouthEast states that it intends to commence providing local exchange telephone service in the city of Pikeville, Kentucky where it currently owns a cable system that serves 94 subscribers. Apparently believing that the Buy Out Prohibitions apply to any situation where an existing cable company initiates telephone service within the cable company's franchise area, SouthEast filed this petition seeking a waiver of Section 652(b) of the Buy Out Prohibitions which applies to the purchase or acquisition by a cable operator of a local exchange carrier ("LEC") that provides telephone service within the cable operator's franchise area. 3. To obtain a waiver of the Buy Out Prohibitions, a petitioner must first obtain approval of a waiver from its local franchising authority and then petition the Commission for a waiver on one of the three grounds, discussed below, enumerated in 47 U.S.C.  572(d)(6)(A) and Section 76.505(d)(6)(i) of the Commission's rules. Following this procedure, SouthEast initially sought and obtained approval for a waiver from the local franchising authority of Pikeville. Then, pursuant to 47 U.S.C.  572(d)(6)(A) and Section 76.505(d)(6)(i) of the Commission's rules, SouthEast filed the instant petition seeking a waiver from the Commission of the restrictions of Section 652(b). SouthEast argued that the proposed transaction is in the public interest and its anticompetitive effects are clearly outweighed by the probable effect of the transaction in meeting the convenience and needs of the community to be served. II. DISCUSSION 4. The Buy Out Prohibitions of Section 652(b) do not apply to the facts as alleged in the petition. Accordingly, there is no prohibition for the Commission to waive. 5. Section 652(b) provides: ACQUISITIONS BY CABLE OPERATORS. No cable operator or affiliate of a cable operator that is owned by, operated by, controlled by, or under common ownership with such cable operator may purchase or otherwise acquire, directly or indirectly, more than a 10 percent financial interest, or any management interest, in any local exchange carrier providing telephone exchange service within such cable operator's franchise area. Thus, by its terms, this section applies only to acquisitions of, or joint ventures with, existing LECs by cable operators. That the statute applies only to acquisitions and joint ventures is further supported by the House and Senate Conference Report accompanying the Telecommunications Act of 1996 which provides: The conference agreement adopts the provisions of the Senate bill limiting acquisitions and prohibiting joint ventures between local exchange companies and cable operators that operate in the same market to provide video programming to subscribers or to provide telecommunications services in such market. 6. Section 652(d)(6) permits the Commission to waive the restrictions of Section 652(b) when (A) the Commission determines that, because of the nature of the market served by the affected cable system or facilities used to provide telephone exchange service-- (i) the affected cable operator or local exchange carrier would be subjected to undue economic distress by the enforcement of such provisions; (ii) the system or facilities would not be economically viable if such provisions were enforced; or (iii) the anticompetitive effects of the proposed transaction are clearly outweighed in the public interest by the probable effect of the transaction in meeting the convenience and needs of the community to be served; and (B) the local franchising authority approves of such waiver. 7. SouthEast states that it is not purchasing or otherwise acquiring an interest in an incumbent LEC that provides service in SouthEast's cable franchise area in Pikeville. Rather, SouthEast intends to itself commence offering local exchange telephone service in the franchise area of its Pikeville cable system. Thus, the restrictions of Section 652(b) do not apply here because SouthEast is not purchasing or acquiring a LEC. 8. Because the restrictions of Section 652(b) do not apply to SouthEast's proposed course of conduct, it follows that there are no restrictions for the Commission to waive under Section 652(d)(6). III. ORDERING CLAUSE 10. Accordingly, IT IS ORDERED that SouthEast's petition for a waiver is DISMISSED. 11. 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. FEDERAL COMMUNICATIONS COMMISSION Meredith J. Jones Chief, Cable Services Bureau