The Federal Communications Commission (“FCC”) has granted in part a conditional petition for forbearance filed by the National Cable and Telecommunications Association (“NCTA”) that will make it easier for cable companies to acquire or obtain an interest in competitive local exchange carriers (“CLECs”) that are operating within a cable operator’s service area. In its petition, NCTA asked that the FCC limit or prevent the application of section 652 of the Communications Act of 1934 as it relates to the acquisition by a cable operator of a CLEC. While section 652(a) generally permits CLECs to acquire a cable operator and section 652(c) generally permits cable operator-CLEC joint ventures, section 652(b) generally prohibits cable operators from acquiring CLECs, unless the FCC has granted a waiver after affected local franchise authorities (“LFAs”) are provided an opportunity to object.

The FCC’s order declares that going forward, the Commission will “forbear from applying section 652(b) to the extent that it prohibits the acquisition of competitive LECs by cable operators, including their affiliates.” In adopting this approach, the Commission stated that “application of section 652(b) to transactions involving competitive LECs is not necessary to ensure that the charges, practices, classifications, or regulations by, for, or in connection with the relevant telecommunications services and providers are just and reasonable and are not unjustly or unreasonably discriminatory.” Under the new forbearance approach, proposed cable operator acquisitions of CLECs will continue to be reviewed in a streamlined manner under the public interest standard in section 214, but will no longer be required to obtain a waiver from the FCC and provide individual notices and the opportunity to object to all affected LFAs. However, the preexisting restrictions will continue to apply to acquisitions involving co-located cable operators and incumbent local exchange carriers.

In granting the petition, Commissioners have expressed that the decision would eliminate unnecessary hurdles in the transaction process, increase competition in the telecommunications marketplace and benefit consumers.