To assess government's influence on business development, the telecommunications industry must remain aware of signals of future communications policy and regulatory trends. Proposed mergers among entities in the cable, programming, and telecommunications businesses provide an indication of the regulatory challenges ahead.(note 1)
The Federal
Communications Commission (FCC or Commission) must balance the
effects of consumer, economic, and industry trends as the
multimedia marketplace evolves. Business and legal interests must
endeavor to understand how the Commission generally views the
movement toward a broadband infrastructure. The Commission will
face several critical issues, including: (1) the reregulation of
the cable television business; (2) the rapidly evolving
relationships among cable operators, direct broadcast satellite
(DBS) ventures, multichannel programming vendors, and the broadcast
television networks; (3) the convergence of interests between
telephone and wireless services; (4) the evolution of telephone
companies into the multimedia marketplace; and (5) the
authorization of new wireless services, such as personal
communications services, which could permit access to an array of
voice, data, and video communications services regardless of a
subscriber's location. As the Commission faces each of these
challenges, it must balance various economic and public policy
factors to avoid unintended consequences, such as decreased
competition or delay in the implementation of new services.
I. Implications of Recent Mergers and Alliances(note 2)
Given the revival of megamerger
activity, it is important to distinguish today's mergers and
acquisitions from the leveraged buyouts of the 1980s. During the
1980s, American industry and the communications sector experienced
a movement toward concentration and vertical integration through
mergers and buyouts that were financed by debtespecially high yield
or junk bond mechanisms.(note 3) The
cable television industry evolved from a large number of smaller,
local cable operators into what is now a series of large multiple
system operators (MSOs) such as TCI and Time Warner. In addition,
a number of the MSOs became vertically integrated through ownership
interests in programming vendors.(note
4) These developments enabled individual MSOs to become
involved in both cable service and program development. These
capabilities, in turn, allowed them to offset their debt leverage
through cash flows derived from both distribution and programming
fees.
In 1993 there have been a series of proposed mergers and
alliances that will position major cable and telephone companies
for the future multimedia market. As these industries experience a
convergence of interests toward multimedia services, they will
combine television, telecommunications, and computers to transform
the way we interact with the information in our homes, automobiles,
and elsewhere.(note 5) Because the
expertise necessary to develop these new markets generally is not
found within one company, new alliances are being forged to
integrate the networking or programming expertise of particular
players and establish leadership in the development of a broadband
information superhighway.(note 6)
A. Descriptions of Recent Mergers and Alliances
1.
Bell Atlantic and Tele-Communications, Inc.
The proposed merger between Bell Atlantic and TCI(note 7) represents one of the largest mergers in
American history.(note 8) This
combination is significant due to its potential to shape the
interactive, multimedia future of the telecommunications
infrastructure by fostering the two-way switching necessary to
build connectivity and flexibility into the information
superhighway. The proposed merger symbolizes the immense capital
required to develop and deploy services in the multimedia world.(note 9)
The merger is likely to
face a number of reviews before Congress as well as the FCC, the
Federal Trade Commission (FTC), and the Department of Justice.
Specifically, Bell Atlantic will need to (1) seek a Justice
Department waiver from the 1984 Bell System divestiture rule that
bars any Bell company from the long-distance business, because
cable television satellite program transmissions cross phone
company Local Access and Transport Area (LATA) territories; (2)
obtain permission from 1600 municipal franchising authorities that
must approve the transfer of TCI's systems; (3) satisfy Congress
and the FTC that the merger will not restrain competition; and (4)
petition the Commission to transfer TCI's microwave radio licenses
to Bell Atlantic.(note 10)
2.
Proposed Mergers with Paramount Communications, Inc.
Various
entities are vying to acquire Paramount Communications, Inc. Viacom
initially offered $8.2 billion for Paramount.(note 11) Since that offer, there have been a
succession of counteroffers: QVC Network, Inc. (QVC) offered $9.5
billion; Viacom matched the QVC offer;(note 12) BellSouth is reportedly preparing a solo
bid in the takeover battle;(note 13)
and Turner Broadcasting reportedly has been considering an offer
with QVC.(note 14) Meanwhile, TCI
appears to be in a position to influence the acquisition, through
its investment in QVC. The telephone companies also are providing
funds, as shown by the NYNEX investment in Viacom. As in the
proposed Bell Atlantic/TCI merger, the prize in this endeavor is
the combination of programming and distribution networks.(note 15) The entity that ultimately
emerges from this series of market maneuvers will be well
positioned to enter the future multimedia marketplace.
3. NYNEX and Viacom
If one recognizes the building blocks of the technology
superhighway as (a) switching and (b) programming, the proposed
telephone company (telco) investments in cable systems and
programming begin to follow a discrete rationale.(note 16) On October 4, 1993, NYNEX and Viacom
announced the formation of a strategic relationship.(note 17) NYNEX will invest $1.2 billion in
Viacom, an amount that may be reduced by either party if the merger
of Viacom and Paramount is not completed by August 31, 1994.(note 18) The strategic alliance
between these two companies must be viewed in light of the larger
aggregation occurring between Viacom and Paramount, which bears a
strong resemblance to US West's linkage with Time Warner. If the
American market produces a supertechnology highway, it likely will
be a system of networks constructed through symbiotic, out-of-
region relationships between cable and telecommunications
companies.(note 19) Although our
regulatory structure bars the telephone companies from directly
providing video programming services in their regions, out-of-
region alliances are permitted;(note
20) thus, these ventures meld the complementary strengths of
telephone and cable companies. 4. US West and Time
Warner
US West completed the acquisition of a 25.51 percent stake in
Time Warner Entertainment on September 15, 1993.(note 21) To enable the required divestiture of
eight Time Warner cable systems located in US West service areas,
the Commission granted an eighteen-month waiver of its cable-telco
cross-ownership rules.(note 22) The
intent of this alliance is to build interactive networks to carry
communications, information, and entertainment. Time Warner will
obtain an infusion of $2.5 billion in cash and the ability to draw
upon US West's expertise in building and managing two-way switched
networks.(note 23) US West will get
a stake in the cable, entertainment, and media operations of Time
Warner, thus giving US West a platform from which to compete with
other local exchange telephone companies in providing local
services, particularly access services for long distance carriers
in their service areas.(note 24) In
addition, Time Warner's ability to draw on its programming strength
dovetails with US West's expertise in switching and telephone
operations. 5. BellSouth and Prime Management
BellSouth's acquisition of a 22.5 percent stake in Prime
Management has opened the door for that telephone company to gain
access to programming.(note 25) This
venture with the twenty-fourth largest cable operator in the
country provides BellSouth with an opportunity to test new market
servicesespecially interactive and pay-per-view television
services. By employing BellSouth's expertise in network
architecture with Prime Management's background in packaging,
pricing, and cable program distribution, the two companies place
themselves in a position to develop an interactive technology
highway in Las Vegas.(note 26)
Current developments signal that the broadband infrastructure of the future will evolve as a multimedia marketplace. As the cable, telecommunications, and computer industries evolve toward cooperative ventures, it is doubtful that any single entity will dominate the new multimedia marketplace because of the brisk pace of technological change.(note 28) The rate of change toward new market services will depend greatly upon the ongoing level of regulatory oversight. Several FCC rules still constrain cable and telephone company operations in any new alliance. In addition, major alliances are likely to face significant antitrust review.(note 29)
The timing of these strategic alliances are affected by several factors, including: (1) the regulatory implications for vertically integrated cable operators and programmers; (2) judicial challenges to the cable-telco cross-ownership rules; and (3) the remaining legal restrictions from the modified final judgment. Each of these measures affects the potential for growth in existing cable and telecommunications markets. Thus, while companies are responding to the rapid changes in technology by forming new strategic partnerships, they also must resolve regulatory and legal issues raised by these transactions.
The recent mergers and alliances reveal the most cost-effective means of building the technology superhighway.(note 30) Recognizing that industry profits and expansion will be attained through the sale of software, programming, and terminal equipment, market actors are developing alliances that will mitigate the costs of constructing and maintaining the underlying infrastructure.(note 31)
The Bell Atlantic/TCI merger and the NYNEX/Viacom alliance are examples of this type of potential synergy. Cable companies need access to switching and network capabilities. Thus, to pursue the multimedia future, cable companies must replace their existing one-way, coaxial-based networks with optic fiber-based interactive information superhighways. This presents two major problems. First, they have little experience in switched communications networks. Second, it will be a challenge to finance this infrastructure upgrade, which involves an estimated cost of $43 billion.(note 32)
Given that debt and equity
financing is likely to be more difficult to obtain under Commission
rules reregulating the cable television industry, recent
cooperative ventures are partially explained by the fact that
telephone companies can solve these problems. Telephone companies
need access to programming. Recent cable-telco alliances combine
programming and technology, giving both partners (1) expertise in
operating a highly reliable, switched network and a complex billing
system and (2) experience in packaging and marketing video services
over a broadband network.(note 33)
Several policy
views have been articulated in response to the recent series of
cable-telco alliances. One view is that these transactions signal
an industry shakeout.(note 34) This
scenario anticipates that there will be increasing concentration in
telecommunications markets and a decrease in the development of
effective competitive forces.(note
35) Some analysts indicate that the majority of
telecommunications markets probably have an oligopolistic
equilibrium, centered on a few core firms, with remaining small
firms supplying niche market demands.(note 36) In this regard, the worst-case
competitive scenario is the emergence of a one wire world, which
might result, for example, from the wholesale purchase (if
permitted by government) of the U.S. cable television industry by
the local exchange telephone industry. Another view is that
the emergence of a single wire monopoly over voice, data, and video
delivery appears rather unlikely.(note
37) There are presently three wires into the average American
home: telephone, cable, and electric wires.(note 38) Some of the electric utilities are
already major cable providers.(note
39) In addition, wireless technology could ultimately ensure an
alternate connection to users' premises. One example of the
vigorous innovation in this area is a technology that enables
wireline telephones to connect to, and utilize, wireless
networks.(note 40) At present, this
system is used to provide backup phone service in some hospitals
and for other applications, but the potential for wider application
is apparent. Further, the Commission recently has authorized mobile
personal communications services to provide voice and data services
throughout the United States.(note
41) Thus, ongoing technical developments improve the prospects
for multiple competitors in local exchange markets.(note 42) The impact of these mergers and
alliances on the industry will depend in large measure on the
response of regulatory policies in promoting and maintaining a
framework for effective competition. Regulators should maintain a
regulatory environment that will provide effective market
safeguards against potential anticompetitive behavior, such as
exclusive dealings between partners in strategic alliances, and
attempts to leverage control over essential facilities through
discrimination in providing access. During the past year, however,
Bell Atlantic, US West, BellSouth, and Southwestern Bell have
leaped aggressively into the cable television arena. A recent
ruling in the U.S. District Court for the Eastern District of
Virginia, Alexandria Division,(note
46) has the potential to reduce or eliminate the regulatory
barrier to cable-telco services within existing telephone regions.
The Chesapeake court found the programming prohibition of
the cable-telco cross-ownership statute unconstitutional.(note 47) What yields the greatest
opportunity for telephone companies is the underlying rationale of
this decision: regulations barring telephone companies from video
services violate the First Amendment.(note 48) The Chesapeake decision
has effectively sent a message to regulators and legislators alike
that the courts will take the lead in rearranging the
telecommunications industry. Industry representatives have
speculated that Congress will respond quickly to the recent
judicial activity by enacting legislation that will modify the ban
on telco cross-ownership as early as 1995.(note 49) Proposed bills would attempt to calm
consumer fears of monopolistic information services by limiting the
ability of telephone companies to purchase existing cable systems
within their service areas.(note 50)
Telephone companies have wasted no time in positioning themselves
to become an integral part of the requisite infrastructure by
searching to acquire and develop alliances with those cable
entities that can provide valuable programming sources. In our role
as regulators, we will need to review these actions in order to
ensure consumer protection, while also nurturing a growing
multimedia marketplace.
In its 1992 Order authorizing video
dialtone service by telephone companies, the FCC determined that
telco entry in the video marketplace would accomplish: (1)
increased investment opportunities for the development of an
advanced telecommunications infrastructure; (2) additional
competition in the video and communications markets so that free
market forces, rather than government regulation, determine the
success or failure of new services; and finally, (3) a diversity of
video services in order to create additional opportunities for
consumer choice.(note 55) To fulfill
those goals, the Commission decided that telephone companies could
enter the market on a common carrier basis by supplying video
transport to programmers with open access and without
discrimination.(note 56) In
addition, the Commission recommended to Congress that it amend the
1984 Cable Act to allow telephone companies to provide video
programming in their service areas in order to serve the public
interest, subject to appropriate safeguards.(note 57) In supporting the relaxation of
various regulatory prohibitions on cable-telco matters, the
Commission must ensure that telephone companies do not create a
monopolistic environment in the video services market.(note 58) The Commission's video dialtone ruling
requires accounting and cost allocation measures to ensure that the
Bell Operating Companies do not cross-subsidize their video
dialtone services with revenues from basic, regulated telephone
services.(note 59) The Commission
must remain mindful of consumer interests while providing more
flexibility for telephone companies to offer video services in-
region.(note 60)
In order to assess the
implications of the new cable rulesboth its costs and benefitsthe
FCC must consider more than consumers' savings on monthly cable
bills. It is imperative that the Commission also evaluate the
economic consequences of the regulations on the future of cable and
the broadband network.(note 62) As
measured by potential regulatory disincentives for the offering of
new services and the potential regulatory impediments to investment
in the multichannel marketplace, the cable industry will be
economically challenged by the new cable regulations. As the
multimedia marketplace continues to evolve, the Commission and the
industry face collective responsibilities to implement cable
regulations without dire, unintended consequences. 2. Competitive Implications in the Multimedia
Marketplace
While the precise shape of the multimedia
future is only beginning to emerge, the variety of entities seeking
alliances indicate that access to programming is critical to those
interested in becoming viable competitors in the multimedia
environment. Technology is merging separate systems of passive,
one-way entertainment networks and two-way voice communications
networks of limited bandwidth into two-way interactive broadband
information highways. These highways will carry voice, data, and
video applications over broadband networks. 3. The Effect of the
Changes in the Cable-Telco Cross-Ownership Rules
Without
assurances that telephone companies would be more than a common
carrier conduit for program services, the regional telephone
companies have remained skeptical about entering the cable
television arena until recently. Their cautious investment approach
was not alleviated by the 1991 ruling that authorized Baby Bells to
participate in information services.(note 43) The Commission's 1992 video dialtone
ruling(note 44) also did not spur an
immediate outpouring of investment from the telephone industry.(note 45) Thus, until recently, the
regional Bell Companies have been assessing the video services
market from the sidelines. II. Overview of the Regulatory
Environment
As we move toward a multimedia marketplace, the Commission
must maintain balanced regulatory policies to ensure that the
consumer has competitive choices for program and telecommunications
services. In particular, the Commission now faces a number of
critical regulatory responsibilities in considering cable-telco
cross-ownership issues and in implementing the provisions of the
1992 Cable Act.(note 51)
A.
Cable-Telco Regulations
Under the 1984 Cable Act,(note
52) the Commission's cable-telco cross-ownership restrictions
prohibit telephone companies from providing programming within
their respective regions.(note 53)
In 1984, cable television was in its infancy and policymakers did
not want telephone companies to impede the fledgling cable
industry.(note 54) Almost ten years
later, cable has matured and no longer requires all of these
protections. As such, the Commission has begun to look more
favorably upon the entry of telephone companies into the video
marketplace. B. The
Challenge of the 1992 Cable Act
The 1992 Cable Act presents the FCC with significant
regulatory challenges. With respect to rules developed by the
Commission in response to the Act, the primary questions are: (1)
How much will consumers benefit from the 1992 Cable Act? (2) How
much will consumer cable bills be reduced? (3) How many competitive
service choices will there be for consumers? and (4) What quality
of service will be provided? The Commission's cable regulations are
intended to (1) reduce cable rates to a level consistent with
systems facing effective competition, (2) grant alternative
multichannel programming distributors greater access to cable
programming, and (3) grant broadcasters a choice between carriage
provisions or retransmission consent payments.(note 61) 1. FCC
Implementation of the 1992 Cable Act
Since the passage of the 1992 Cable Act, the Commission has
established rules regarding (1) cable rate regulation;(note 63) (2) program access to increase the
availability of multichannel programming through all distributors
(including DBS and wireless cable) by prohibiting unfair and
discriminatory practices of vertically integrated programmers in
selling programming to competing technologies;(note 64) (3) horizontal and vertical ownership
limits as structural measures to address concerns regarding
concentration and vertical integration;(note 65) and (4) must-carry and retransmission
consent rights for local broadcast stations.(note 66) In the absence of effective competition
to local cable systems, the Commission's effort to fulfill the
intent of Congress is guided by the overriding goals of improving
service and promoting competition in the multichannel video
marketplace.
In responding to concerns about cable
reregulation, the Commission must weigh consumer and industry
interests while implementing regulations. With respect to cable
rate regulation, the Commission is currently (1) reconsidering the
structure of the benchmark mechanism and how possible refinements
might be built in, (2) establishing cost-of-service rules to govern
the process for cable operators to justify rates above the
benchmark levels, and (3) completing a survey of changes in program
service rates in response to the rate regulations.(note 67) In addition, the program access
provisions and the horizontal and vertical ownership limits
established by the 1992 Cable Act will have a significant influence
on the development of the multichannel marketplace as it moves
toward an information superhighway. As the industry works through
a critical transition from deregulated operations to a regulatory
environment, the Commission must responsibly manage this
environment to allow infrastructure choices to develop in
the future. In the interim, this will likely involve monitoring the
extent to which new programming can continue to emerge and become
available to all distributors. =s4a. Reduced Rates and the Level of Service
As an initial economic issue, the Commission must consider the
relationship between cable rates and the corresponding level of
service offered to consumers. Specifically, as cable rates are
eventually reduced (either in compliance with the benchmark
mechanism or based on a cost-of-service showing), consumers may
find these lower rates more attractive. However, they could also
experience a reduction in the quantity of packaged cable services
that operators or programming vendors are willing to provide at
lower rates. More program services may need to be offered a la
carte or in a variety of bundled premium channel packages to recoup
the necessary returns. Indeed, the Commission's preliminary survey
on changes in cable programming service rates between April 1,
1993, and September 1, 1993, revealed that several MSOs had
restructured services to offer unregulated packages of a la carte
offerings.(note 70) While some
consumers may be slow to notice a reduction in service, the effect
of reduced revenues and limits on available channel space may stall
the introduction of new programming services. With respect to
applications of the benchmark, cable companies predict they will
experience at least a 10 percent reduction in revenues and a 16 to
20 percent reduction in operating cash flow.(note 71) Without new financing, some companies
may be forced to forestall new services and other technological
improvements.(note 72) In terms of
the impact on programming services, Ted Turner has emphasized that
to the extent that cable regulations inhibit cable operators, they
will also inhibit programmers and discourage the launching of new
channels.(note 73) The
Washington Post recently noted in an editorial that
[m]embers of the cable industry . . . are saying that the rate
reductions may hurt programming quality by making it more difficult
for operators to invest in expanded channel capacity and other
high-tech communications services.(note
74) =s4b. Incentives for Investment
As another economic issue, the Commission must consider the
effect of the cable rules on investment, both by MSOs in the
development of their physical plant as well as from other sources.
With the future communications infrastructure lying in the
development of a variety of both wireline and wireless networks, it
is important that cable regulations avoid unnecessarily restricting
the cable industry from being a leader in the development of this
information system. The cable industry has significant
infrastructure investment, and can provide competitive
infrastructure alternatives, replacement jobs, and consumer choice
in a future broadband world of voice, video, and data services.
Indeed, the cable industry still holds many advantages over the
various competing distributors in its potential to capitalize on
the opportunities in building a broadband network. However, because
rate regulations will apply to a substantial amount of an average
cable system's revenues, cable operators will face significant new
constraints in meeting existing financial arrangements.(note 75) The industry also
faces pressure to invest in more efficient plant and equipment.
Amid this environment, small cable operators are highly leveraged
and face some of the most significant rate decreases. Consequently,
small operators are now falling behind other operators in capital
investment. Lenders have indicated that they are likely to respond
to the greater risk associated with small operators by placing more
restrictions on how they use their funds, when such funds are
available. In particular, special interest may be focused on
`optimizing' existing subscriber bases . . . by investing in
billing and collection systems rather than plant expansions.(note 76) It is significant that
these developments occur at a time when the American economy is
relatively unsteady and needs additional business investment and
industry growth. Given that the communications infrastructure of
the future lies in the development of a variety of networks, both
wireline and wireless, the Commission's cable regulations, and our
efforts to implement these rules, must not unnecessarily restrict
the cable industry from being a leader in the development of this
information system. Furthermore, we must avoid an unintended result
whereby larger, vertically integrated cable firms can absorb the
regulations, while smaller, nonintegrated cable systems suffer dire
consequences to their ongoing business operations. The Commission,
therefore, must consider how to refine its rate benchmarks and
develop reasonable cost-of-service rules that would preserve
investment opportunities in the multimedia marketplace of the
future. =s4c. Relationship to the Macroeconomy
As a final economic consideration, we must remember that
regulation of industries and technological development is linked to
the general level of growth in the economy. Historically, this
relationship has been clouded as regulators have reacted strongly
to dynamic industries by vigorously addressing industry flaws
through stringent regulations. Combined with investor reactions to
the changing climate for these industries, strong regulatory
actions create a pendulum effect of uncertainty and thereby
complicate the industry's opportunities for continued growth. After
a period of tremendous expansion and amid some notable oversights
in services and pricing, it is now the cable industry's turn to
endure regulatory scrutiny. As we refine the regulations in the
cable industry, the Commission must not replicate past regulatory
pendulum swings by seeking to balance the new rules with a need to
promote industry growth and investment incentives. Cable
regulations must not only provide program access for competing
services, but also should consider that cable companies will be
competitive players in the development of a full-service, broadband
multimedia infrastructure. Conclusion
Until recently, the cable and telecommunications industries have
faced a series of economic challengesparticularly in
responding to regulatory constraintsin their attempts to gain early
advantages in the future multimedia marketplace. The recent mergers
and alliances are forming a basis of cooperative efforts to combine
programming with technological advancements for the distribution of
services. These efforts will be necessary for the industry to
realize new multimedia opportunities. In order to ensure that these
opportunities are readily available to consumers through
competitive sourcesand to promote the full range of benefits
through a competitive broadband infrastructurethe relationship
between business development and regulation will become an
increasingly important determinant of choices available to our
society. Therefore, regulators must manage the transition to an
open marketplace by creating an environment that will foster
investment, and preserve the legitimate, dynamic, and competitive
aspects of both the cable and telecommunications industries.
Furthermore, we must allocate spectrum to new wireless services in
a manner that will promote additional viable competition in the
local exchange markets.
-----------
* Commissioner, Federal Communications
Commission, Washington, D.C. J.D. DePaul University College of Law;
B.A., M.A. Loyola University of Chicago. Commissioner Barrett has
served on the Commission since September 8, 1989. His current term
commenced with confirmation by the Senate on May 23, 1990, and
expires June 30, 1995. Prior to his service on the Commission, he
was a Commissioner on the Illinois Commerce Commission, which is
responsible for the regulation of telephone and other utilities
within the state. Commissioner Barrett is a former Chairman of the
National Association of Regulatory Utility Commissions' Committee
on Water, a member of that body's Committee on Communications, and
former president of the Mid-America Regulatory Commissioners.
Assisting him with this Article were Byron Marchant, the
Commissioner's Senior Legal Advisor; James Coltharp, a special
advisor to the Commissioner; and Dan Meyer, the Commissioner's
research assistant for the fall of 1993. Return to text
2. FCC Regulation and Future
Economic Challenges for Cable
Under the 1992 Cable Act,
the FCC is authorized to regulate significant aspects of the cable
business.(note 68) The sooner the
cable industry is subject to effective competition, the sooner our
regulatory framework will place less of a constraint on future
investment. One of the important provisions of the 1992 Cable Act
that will bring competition to the cable industry through program
access holds great potential to promote effective competition
within the cable market. Several Direct Broadcast Satellite (DBS)
proponents are endeavoring to launch services within the next
year.(note 69) Satellite C-band
service providers, wireless cable systems, and emergent 28 GHz
Local Multipoint Distribution Service (LMDS) systems also need
access to programming. The efficient implementation of the program
access regulations are crucial to achieving this reality.
Meanwhile, during the transition period to effective competition,
we must balance the Commission's regulatory efforts to provide
benefits to consumers, without causing unnecessary confusion in the
cable industry. As we go forward with these efforts, a number of
policy and economic considerations should guide the Commission's
thinking. 3. Collective
Responsibilities
As a result of the new economic challenges facing the cable
industry in the regulated environment, the Commission and the
industry will face several responsibilities collectively to ensure
that future opportunities for growth and infrastructure development
can actually occur. In refining its cable regulations, the
Commission should adjust its rate mechanism where necessary to
reflect common market factors. These factors include the density of
subscribers served by a cable operator (which will reflect unique
cost aspects of small and rural cable systems) and potential
regional economic factors within various economic zones of the
country. In addition, as the industry works through a critical
transition from deregulated operations to the new regulated
environment, the Commission must manage responsibly to allow
infrastructure choices to develop in the future. The
Commission must avoid making decisions that will inadvertently
create greater concentrations in the industry. Notes