******************************************************** NOTICE ******************************************************** This document was converted from WordPerfect to ASCII Text format. Content from the original version of the document such as headers, footers, footnotes, endnotes, graphics, and page numbers will not show up in this text version. All text attributes such as bold, italic, underlining, etc. from the original document will not show up in this text version. Features of the original document layout such as columns, tables, line and letter spacing, pagination, and margins will not be preserved in the text version. If you need the complete document, download the WordPerfect version or Adobe Acrobat version, if available. ***************************************************************** DA 98-33 Before the FEDERAL COMMUNICATIONS COMMISSION Washington, D.C. 20554 In the Matter of ) ) Consolidated Application of ) Digital Broadcasting OVS, LLC and ) Digivid Inc., for a Determination of ) File No. ETC-97-17 Exempt Telecommunications Company Status ) under Section 34 of the Public Utility Holding ) Company Act of 1935, as added by ) Section 103 of the Telecommunications Act of 1996 ) ORDER Adopted: January 9, 1998 Released: January 9, 1998 By the Deputy General Counsel: I. Introduction 1. In this order, we grant the consolidated application filed on November 10, 1997 by Digital Broadcasting OVS, LLC and its affiliate, Digivid Inc. ("Applicants") for a determination that each is an "exempt telecommunications company" ("ETC") pursuant to section 34(a)(1) of the Public Utility Holding Company Act of 1935 ("PUHCA"), as added by section 103 of the Telecommunications Act of 1996. In so doing, we reject the arguments made in comments filed by the California Cable Television Association ("CCTA"). As explained below, we find that CCTA has provided the Commission with no convincing reason why the Commission should deny Applicants' consolidated application. We find that each Applicant individually satisfies the statutory criteria required for an affirmative determination of ETC status and the consolidated application is, therefore, granted. II. Discussion 2. We find that each Applicant meets the statutory requirements for a determination that it is an exempt telecommunications company as that term is defined in PUHCA section 34(a)(1), as amended. Specifically, the consolidated application states that Applicants are each engaged exclusively in the development and provision of telecommunications services, information services, other services or products subject to the jurisdiction of the Commission, and/or products or services that are related or incidental to the provision of such products or services, within the meaning of Section 34(a)(1) of PUHCA. These permitted activities include the development, marketing, and distribution of telecommunications equipment primarily focused on increasing the available capacity of the telecommunications industry's installed plant infrastructure. 3. Applicants also represent that they are each privately held companies and, as such, neither is, nor are their current shareholders, an associate, subsidiary or affiliate of either a registered or exempt public utility holding company as these terms are defined in PUHCA. Applicants state, however, that because they would like to raise equity capital to more fully develop its products and services, a determination of ETC status would permit them to avail themselves of potential partnering and investment opportunities with public utility holding companies -- an option that was unavailable to them prior to the enactment of the Telecommunications Act of 1996. 4. The Commission has rejected the argument raised by CCTA here that, under Section 34(a)(1), applicants must actually be providing permitted service(s) before they may apply for a determination of ETC status. Because of the language, structure and purpose of Section 34, the Commission has held that an entity is "engaged in the business of providing" telecommunications or other covered activities if the entity is established for the exclusive purpose of providing such services at the time it files its application with this Commission, because "a contrary interpretation would be antithetic to Congress's intent in promulgating Section 34 as part of Part II of the Telecommunications Act of 1996, entitled 'Development of Competitive Markets.'" Indeed, because Section 34(a)(1) only requires that an ETC "be engaged . . . in the business of providing" one or more permitted services, the Commission has held that a company that has been formed for the purpose of providing such a service is "engaged" in that business for purposes of Section 34(a)(1). For these reasons, the Commission also specifically rejected the argument that it must condition ETC determinations to require ETCs to begin providing service within a specific period of time, because, in the Commission's own words, there is no rational reason why an ETC which is "not yet actually providing service [would] unreasonably delay doing so." As such, the Commission held that the "imposition of such a requirement on an ETC -- or on any other lawful business for that matter -- could have a chilling effect on entry with no countervailing benefits." 5. Notwithstanding this decision, the Commission stated that to the extent that parties believe that an ETC determination may be a "sham" -- i.e., that an ETC unreasonably delays engaging in permitted activities -- then those parties may bring this information to the Commission's attention for appropriate action. The mere fact, raised by CCTA, that in the 14 months since the Commission certified the Applicants to operate as an Open Video System ("OVS") they have not deployed multichannel video facilities to provide OVS service or distribute video signals to consumers, does not support a conclusion that Applicants are engaged in a "sham" or acted in "bad faith" for purposes of an ETC determination. Accordingly, as CCTA has presented no probative evidence in this proceeding to indicate that the Applicants never intended to operate an OVS system, let alone that they intended to act in bad faith in filing this ETC application, we will not require the Applicants in this proceeding to begin providing service by a date certain as a condition of a determination of ETC status, as requested by CCTA. 6. Similarly, we reject CCTA's argument that Applicants' petition presents significant "public interest concerns" simply because, according to CCTA, Applicants seek to use a determination of ETC status as a "fishing expedition" to attract funds that they had failed to raise under another regulatory scheme. Contrary to CCTA's position, the ETC certification process does not require prospective applicants to demonstrate financial ability. More importantly, however, as noted on numerous other occasions, one of the primary reasons the Commission adopted a streamlined, straightforward ETC application process was to encourage, accelerate and facilitate additional new competitive investment and entry, consistent with the pro-competitive, de-regulatory thrust of the 1996 Act. Because of the already stringent requirements of PUHCA, the Commission reasoned that the goals of the 1996 Act would therefore best be served if telecommunications or information services companies who wish to negotiate with public utility holding companies can receive a determination of ETC status from the Commission prior to starting negotiations. In this way, the Commission prevents its regulatory approval process from becoming one of the numerous commercial uncertainties that can often otherwise prevent parties from consummating a transaction. Accordingly, as CCTA has presented no evidence to convince us to depart from this pro-competitive policy, we reject CCTA's arguments and grant Applicants' consolidated application. III. Conclusion and Ordering Clauses 7. Accordingly, IT IS ORDERED that the consolidated application of Digital Broadcasting OVS, LLC and Digivid Inc. IS GRANTED. IT IS FURTHER ORDERED that the Securities and Exchange Commission SHALL BE NOTIFIED of this determination. FEDERAL COMMUNICATIONS COMMISSION David H. Solomon Deputy General Counsel