In Re Applications of TELEPROMPTER
TRANSMISSION OF KANSAS, INC, TELEPROMPTER TRANSMISSION OF NEW MEXICO, INC,
TELEPROMPTER TRANSMISSION OF OREGON, INC. For Consent to Transfer Control of 17
Stations in the Domestic Public Point to Point Microwave Radio Service from
Irving B. Kahn, H. J. Schlafly et al., Transferors, to William M. Jennings,
Jack Kent Cooke, Hughes Aircraft Co. et al., Transferees; In Re Applications of
TELEPROMPTER FLORIDA
CATV CORP., LAKE WORTH, PALM SPRINGS, RIVIERA BEACH, AND WEST PALM BEACH, FLA.
For Consent to Transfer Control of TelePrompTer Corp., parent company of
TelePrompTer Florida CATV Corp., from Irving B. Kahn, H. J. Schlafly et al.,
Transferors, to Irving B. Kahn, H. J. Schlafly, Hughes Aircraft Co., William
Jennings et al., Transferees and SANTA MARIA VALLEY CABLE TV, INC., SANTA
MARIA, AND ORCUTT, CALIF, T.V. RECEPTORS, INC., SAN BERNARDINO, CALIF., H &
B COMMUNICATIONS CORP., RENO AND SPARKS, NEV. JACK KENT COOKE, INC., WINONA,
MINN. AND LA CROSSE, WIS. For Consent to Transfer Control of Licensees or
Permittees of Eight Community Antenna Relay Stations, from H & B American
Corp., Transferor, to TelePrompTer Corp., Transferee; In Re Applications of
TELEPROMPTER CORP., PROPOSED TRANSFEREE OF CONTROL, AND THE FOLLOWING LICENSEES:
AMERICAN CABLEVISION CO., AMERICAN CABLEVISION OF WEST VIRGINIA, INC. CARIBOU
T.V., INC., ELMIRA VIDEO, GREAT FALLS COMMUNITY CABLE T.V. CO., H & B
COMMUNICATIONS CORP, HI DESERT T.V. CABLE, INC., HIGHLINE COMMUNITY ANTENNA
SERVICE, HOLLY HILL CABLE T.V., INC., JACK KENT COOKE, INC., JACK KENT COOKE,
INC., KAISER TELEPROMPTER OF HAWAII, LEESVILLE CABLE TELEVISION, INC. LEESVILLE
CABLE TELEVISION, INC., SANTA MARIA VALLEY CABLE T.V., INC., T.V. RECEPTORS,
INC., TELEPROMPTER CABLE TELEVISION TELEPROMPTER OF COQUILLE, INC.,
TELEPROMPTER CORP., TELEPROMPTER ELECTRONICS CORP., TELEPROMPTER ELECTRONICS
CORP, TELEPROMPTER OF LIBERAL, INC., TELEPROMPTER OF LOS GATOS, TELEPROMPTER
MANHATTAN CATV CORP., TELEPROMPTER MANHATTAN CATV CORP, TELEPROMPTER OF SANTA
CRUZ, TELEPROMPTER TRANSMISSION OF KANSAS, TELEPROMPTER TRANSMISSION OF OREGON,
INC., TELEPROMPTER TRANSMISSION OF OREGON, INC. For Consent to Transfer of Control of 80 Stations in the Safety
and Special Radio Services
File
No. 1601-C1-TC-(12)70; File No. 1602-C1-TC-70; File No. 1603-C1-TC-(4)70; File
No. BTC-6044; File No. BTC-6045; File No. BTC-6046; File No. BTC-6047; File No.
BTC-6048; File Numbers: 7582-2-T/C-1B-100 296-CA-70; 7583-1-T/C-IB-100
7589-1-T/C-IB-100 7588-4-T/C-IB-100 7136-32-IB-T/C-100X; 7585-1-T/C-IB-100
7586-3-T/C-IB-100 7587-1-T/C-IB-100 294-CA-70 7584-3-T/C-1B-100 292-CA-70
295-CA-70 7597-1-T/C-1B-100 7598-1-T/C-1B-100 7599-1-T/C-1B-100
7590-1-T/C-1B-100 7591-1-T/C-1B-100 290-CA-70 7596-4-T/C-1B-100
09567-3-T/C-1B-100; 7592-1-T/C-1B-100 9568-1-T/C-1B-100 293-CA-70
09569-3-T/C-1B-100; 7593-1-T/C-1B-100 7594-9-T/C-1B-100 291-CA-70
09570-7-T/C-1B-100
FEDERAL
COMMUNICATIONS COMMISSION
25 F.C.C.2d 469
RELEASE-NUMBER: FCC 70-859
August
14, 1970 Released
Adopted
August 5, 1970
JUDGES:
BY THE
COMMISSION: COMMISSIONER BARTLEY DISSENTING; COMMISSIONERS COX AND H. REX LEE
CONCURRING AND ISSUING STATEMENTS; COMMISSIONER
JOHNSON DISSENTING AND ISSUING STATEMENT.
OPINION:
[*470]
1. On October 6, 1969,
TelePrompTer Corporation (TelePrompTer) and H & B American Corporation (H
& B) filed the above-captioned applications for Commission consent to the
transfer of control of various radio facilities which would result from a proposed
merger between them which would leave TelePrompTer as the surviving
entity. n1 On November 5, 1969, Comtel Inc. (Comtel), operator of a CATV system at
New York, New York, filed a "Petition to Deny" pursuant to [*471]
Section 309(d) of the Communications Act, directed against the grant of
the above-captioned common carrier applications (File Nos. 1601-C1-TC-(12)-70,
1602-C1-TC-70, and 1603-C1-TC-(4)-70).
TelePrompTer and H & B opposed Comtel's pleading. In addition, the Commission has sought the
views of the Department of Justice, which are appended hereto.
n1 On May 21, 1970, shareholders of
the companies approved the proposed merger.
2. TelePrompTer and H & B are both CATV
multiple system operators. Comtel
operates a CATV system using telephone company channel facilities at New York
City where it competes with TelePrompTer, and will compete with the entity
resulting from the proposed merger. In
these circumstances, we hold that Comtel is a "party in interest"
within the meaning of Section 309(d) of the Act. Federal Communications Commission v. Sanders Brothers Radio
Station, 309 U.S. 470.
BACKGROUND
3. TelePrompTer and H & B are publicly-held
corporations traded on the American Stock Exchange. On January 26, 1970, the appropriate officers of TelePrompTer and
H & B executed a "Plan and Agreement of Merger" which provides
that shares of H & B common stock outstanding on the effective date of the
merger shall be exchanged into shares of TelePrompTer common at the rate of one
share of TelePrompTer common for each 3 1/8 (3.125) shares of H & B
common. As of August 31, 1969, there
were 1,064,862 shares of TelePrompTer common stock outstanding and 4,972,102
shares of H & B common outstanding.
Thus, TelePrompTer will issue approximately 1,591,072 additional shares
for H & B's outstanding common stock so there would then be approximately
2,656,000 shares of TelePrompTer outstanding.
Thereafter, original TelePrompTer shareholders will own 1,064,862 shares
of TelePrompTer common (40%), and H & B shareholders will own 1,591,072
shares of TelePrompTer common (60%).
The parties agree that although the present shareholders of H & B
will hold 60% of the outstanding shares of the surviving Corporation,
TelePrompTer's present management will continue in control.
4. TelePrompTer Corporation is principally in
the cable television business. After
the merger, TelePrompTer will own and operate the following CATV systems,
including 63 now owned by H & B:
TelePrompTer/ *
|
|
Number of |
|
Location |
Subscribers |
|
Tuscaloosa, Alabama |
7,232 |
|
Los Angeles, California |
20,733 |
|
Riviera Beach, California |
1,330 |
|
Santa Cruz, California |
16,640 |
|
Holly Hill, Florida |
1,374 |
|
Hawaii Kai, Honolulu, Hawaii |
2,497 |
|
Liberal, Kansas |
2,450 |
|
Cut Bank, Montana |
1,160 |
|
Great Falls, Montana |
6,522 |
|
Shelby, Montana |
644 |
|
Farmington, New Mexico |
3,792 |
|
Silver City, New Mexico |
2,416 |
|
Borough of Manhattan, New York |
21,782 |
|
Elmira, New York |
21,067 |
|
Newburgh, New York |
7,653 |
|
Coquille, Oregon |
1,509 |
|
Eugene, Oregon |
15,985 |
|
Johnstown, Pennsylvania |
16,674 |
|
Greenwood, South Carolina |
1,807 |
|
Rawlins, Wyoming |
2,027 |
* Information prepared as of June
19, 1970. [*472]
Outstanding
Franchises
|
Mobile, Alabama |
West Palm Beach, Florida ** |
|
Chickasaw, Alabama |
Lake Worth, Florida ** |
|
Prichard, Alabama |
Lantana, Florida ** |
|
Saraland, Alabama |
Boynton Beach, Florida ** |
|
Fairhope, Alabama |
Palm Springs, Florida ** |
|
Daphne, Alabama |
Mangonia Park, Florida ** |
|
Loxley, Alabama |
Plantation, Florida ** |
|
Jackson, Alabama |
Palm Beach County, Florida ** |
|
Bay Minette, Alabama |
Boca Raton, Florida |
|
Bayou La Batre, Alabama |
St. Petersburg, Florida ** |
|
Las Gatos, California ** |
Jupiter, Florida ** |
|
Woodlake, California ** |
Hillsborough County, Florida |
|
Santa Clara County, California ** |
Pahokee, Florida |
|
Bethel, Connecticut |
Hamilton Township, New Jersey |
|
Middletown, Connecticut |
Newark, New Jersey ** |
|
Portland, Connecticut |
Trenton, New Jersey |
|
East Hampton, Connecticut |
Mt. Vernon, New York ** |
|
Cromwell, Connecticut |
Islip, New York ** |
|
Middlefield, Connecticut |
Yorktown, New York |
|
Danbury, Connecticut |
Tacoma, Washington |
** Indicates under construction with
less than 100 subscribers each.
H & B
American *
|
|
Number of |
|
Location |
Subscribers |
|
Dathan, Alabama |
3,418 |
|
Prescott, Arizona |
2,822 |
|
Camarillo, California |
169 |
|
Fort Bragg, California |
2,264 |
|
Hi Desert, California |
2,441 |
|
Milpitas, California |
251 |
|
Sierra Madre, California |
2,667 |
|
Simi Valley, California |
2,686 |
|
Trousdale, California |
405 |
|
Twentynine Palms, California |
2,218 |
|
Ukiah, California |
2,547 |
|
Willits, California |
1,402 |
|
Trinidad, Colorado |
2.928 |
|
Marianna, Florida |
841 |
|
Quincy, Florida |
488 |
|
Galena, Illinois |
964 |
|
Leesville, Louisiana |
2.962 |
|
Caribou, Maine |
3,446 |
|
Madawaska, Maine |
1,506 |
|
Calumet, Michigan |
2,209 |
|
Iron Mountain, Michigan |
3,359 |
|
Sault Ste. Marie, Michigan |
2,150 |
|
Brainerd, Minnesota |
3,330 |
|
Columbia Falls, Montana |
753 |
|
Hamilton, Montana |
601 |
|
Polson, Montana |
484 |
|
Whitefish, Montana |
1,413 |
|
Lovington, New Mexico |
1,306 |
|
Portales, New Mexico |
1,223 |
|
Tucumcari, New Mexico |
1,496 |
|
Portland, Oregon |
290 |
|
Commerce, Texas |
1,884 |
|
Graham, Texas |
2,142 |
|
Edmundson, New Brunswick, Canada |
2,049 |
|
Florence, Alabama |
13,770 |
|
Lompoc, California |
9,407 |
|
San Bernardino, California |
7,244 |
|
San Marino, California |
9,574 |
|
Lewiston, Idaho |
5,781 |
|
Pocatello, Idaho |
5,985 |
|
Dubuque, Iowa |
11,898 |
|
Escanaba, Michigan |
4,968 |
|
Ironwood, Michigan |
3,552 |
|
Rochester, Minnesota |
9,661 |
|
Winona, Minnesota |
6,292 |
|
Kalispell, Montana |
3,684 |
|
Missoula, Montana |
6,861 |
|
Reno, Nevada |
6,413 |
|
Keene, New Hampshire |
5,467 |
|
Cape May, New Jersey |
6,627 |
|
Ocean City, New Jersey |
5,853 |
|
Ventnor, New Jersey |
8,750 |
|
Wildwood, New Jersey |
7,349 |
|
Jamestown, New York |
8,342 |
|
Palestine, Texas |
3,610 |
|
Richland, Washington |
4,332 |
|
walla Walla, Washington |
5,966 |
|
Wenatchee, Washington |
3,976 |
|
Clarksburg, West Virginia |
11,186 |
|
Fairmont, West Virginia |
8,160 |
|
Morgantown, West Virginia |
5,504 |
|
LaCrosse, Wisconsin |
5,837 |
|
Sault Ste. Marie, Ontario, Canada |
4,805 |
* Information prepared as of June
19, 1970. [*473]
Outstanding Franchises
|
Tucson, Arizona |
Elwood, Indiana |
|
Guadalupe, California |
Duluth, Minnesota |
|
Alexandria, Indiana |
El Paso, Texas |
Under agreements made in 1966, Hughes Aircraft Company
and TelePrompTer, through jointly-held companies, are constructing and
operating CATV systems to serve portions of New York City and Los Angeles. TelePrompTer is also involved in related
fields such as the master antenna television business, closed circuit
television security and surveillance systems, closed circuit telecasting for
entertainment, sports events and business meetings. The transferee will also be engaged as a 50% participant in a
joint venture, Television Testing Company, with Audits and Surveys Company
Inc., for the purpose [*474] of utilizing CATV facilities to develop
market research services for television advertisers and broadcasters.
5. H & B Communications Corporation,
subsidiary of H & B American Corporation, is the licensee of Standard
Broadcast Station KNEZ, Lompoc, California.
H & B Communications has also filed an application (BPCT-4084) for a
construction permit for a new UHF television broadcast station to operate on
Channel 16, Dubuque, Iowa. These are
the only broadcast interests held by the parties to the merger; however, the
parties expect to relinquish the Dubuque application, and H & B has already
filed an application to dispose of KNEZ (BAL-6950). Comtel has not opposed these applications.
REQUEST FOR WAIVER OF SECTION 21.700 OF THE
COMMISSION'S RULES
6. TelePrompTer indicates that after the
transfer of control, TelePrompTer Transmission of Kansas, Montana division,
will provide a total of 24 channels of service to affiliated customers, but
only 14 channels to unaffiliated customers.
This would be contrary to the 50% non-affiliation requirement of Section
21.700 of the Rules. n3 Consequently, TelePrompTer requests a waiver of
Section 21.700 to permit the proposed transfer of control. In event the Commission determines that a
full waiver is not warranted, TelePrompTer requests a temporary waiver until
February 1, 1971. TelePrompTer's other
microwave systems would be in compliance with Section 21.700 after the merger.
n3 Section 21.700 of the Rules
provides that,
Authorizations for stations in this
service will be issued to existing and proposed communication common
carriers. Applications will be granted
only in cases where it is shown that (a) the applicant is legally, financially,
technically and otherwise qualified to render the proposed service, (b) there
are frequencies available to enable the applicant to render a satisfactory
service, and (c) the public interest, convenience or necessity would be served
by a grant thereof. In addition,
applications for stations to be used to relay television signals to community
antenna television systems must include a showing that at least 50 percent of
the customers (on the microwave system involved), including customers of any
interconnecting (carriers), receiving applicant's service are unrelated and
unaffiliated with the applicant, and that the proposed usage by such customers,
in terms of hours of use and channels delivered, constitutes at least 50
percent of the usage of applicant's microwave system. Applications which do not contain the showing required by this
section will be returned as unacceptable for filing.
TELEPROMPTER'S
SHOWING
7. In urging that the proposed merger is in the
public interest, TelePrompTer states that "a primary goal of the proposed
transaction is the enhancement of TelePrompTer's financial capability to engage
in quality program origination which will result in greater program diversity
for public television viewing." It has furnished an outline of its
programming plans to be implemented upon consummation of the merger. TelePrompTer states that the basic goals of
the plan are fourfold: (a) development of meaningful local program capacity at
the system level, (b) creation and production of new types of programming, (c)
acquisition of programming from independent sources outside of the traditional
network category, and (d) creation of a distribution [*475] system of such
programming for other independent CATV operations.
8. According to TelePrompTer, material of a
"syndicated" as well as local nature would be used, with the former
being distributed to unaffiliated systems at fair competitive prices. On the local level, the plan aims at
providing quality material, produced with professional skill. Local news and announcements, public service
programs (debates, meetings, interviews), and local entertainment, variety,
talent and sports shows will be designed to meet the local tastes and interests
of the viewing audience. TelePrompTer
also plans distribution to subscribers of centrally produced or procured shows
of general interest which are generally not featured on broadcast television
stations. For example, concerts, live
theatre performances, women's and children's programs, sports events, and the
like, would be taped by the central or regional studio and distributed to local
systems.
9. TelePrompTer asserts that the increased
capital and local outlets to be made available by the merger are essential to
successful implementation of the plan.
It notes that the Commission has always sought to foster localism and
diversity, key goals of its plan. It
further claims that a constructive contribution to program diversity on any
continuing basis is now beyond the means of most systems and that, without
adequate resources and a ready market, CATV origination will not be able to
make a substantial contribution for at least another ten years. CATV's present program origination capacity
is allegedly curtailed by relatively high production costs (including personnel
and equipment cost) and limited available program sources. Finally, it states: "One of the
principal objectives of the proposed merger is to overcome these inherent,
natural obstacles to origination capability in a manner beneficial to both
TelePrompTer and the cable TV industry, and ultimately to the public
interest."
COMTEL'S
OBJECTION
10. Comtel contends that the proposed
combination of what are now the first (H & B) and third (TelePrompTer)
largest CATV concerns in the United States in terms of subscribers served,
would create a dominant anti-competitive force in the emerging CATV
industry. It claims that there would be
undesirable effects on the ability of other concerns to compete for franchises,
for program material and for customers (where there is competition for such),
on the development and supply of equipment in the industry, and on standards of
operation considered to be the norm in this field. Pointing also to the circumstance that TelePrompTer's largest
single stockholder is Hughes Aircraft Company, Comtel urges that of primary
importance are the "rapidly expanding Hughes sports network, Hughes'
access to the lavish entertainment spectacles in Las Vegas, and Hughes'
capabilities in such areas as communication satellite technology." Comtel
claims that a hearing is necessary to determine whether the proposed [*476]
merger is consistent with antitrust policy, merger guidelines of the
Department of Justice, Section 7 of the Clayton Act, and policies of the
Commission under the Communications Act -- particularly in the area of
diversification of control over the media of mass communication.
DISCUSSION AND
CONCLUSIONS
11. It is settled, of course, that this
"Commission was not given the power to decide antitrust issues as
such" and that Commission action in an area such as this does not
"prevent enforcement of the antitrust laws in federal courts." United
States v. R.C.A., 358 U.S. 334, 346. However, federal antitrust policy may be
considered in determining whether Commission consent to the proposed merger and
transfer of control of the microwave facilities would serve the public interest
standard of the Communications Act. Id.
at 351; see also National Broadcasting Co. v. United States, 319 U.S. 190,
222-224. Accordingly, we have ascertained the views of the Department of
Justice on this matter, which are set forth in the attached Appendix. While the Department does not express any
opinion on Comtel's assertion of possible violation of Section 7 of the Clayton
Act and the Department's merger guidelines, it summarizes its views on
competitive effects as follows:
To summarize, we
believe that, in view of the present status of the CATV industry, the immediate
effect of the TPT-H&B merger competition described above may well be slight;
and indeed it may enable CATV to compete more strongly with the over-the-air
broadcasters who dominate the major television markets. On the other hand, the long-term competitive
effect of combining these relatively large, strong system operators into a
single industry leader may be substantial, if CATV should become the dominant
source of TV-type programming for the American public.
12. Comtel's allegations and the Department's
position as to the possible long-term effects of the proposed merger on the
developing CATV industry raise substantial questions that are clearly relevant
to the issue which it is the Commission's responsibility to decide -- namely,
whether the proposed merger is in the public interest as a matter of
communications policy. For the reasons
set forth below, we believe that the public interest would be served by
granting consent to the merger subject to the conditions specified herein.
13. We have concluded in the First Report and
Order in Docket No. 18397 that it is in the public interest to encourage CATV
systems to originate programming, both locally and through regional or national
interconnection (20 FCC 2d 201; see also, Memorandum Opinion and Order denying
reconsideration, FCC 70-677). In so
concluding we noted that "the successful inauguration of any new network
is not an easy matter, to a significant extent because of the high cost and
other difficulties in producing or otherwise procuring programming in
sufficient [*477] quantity and quality for network
operation" (20 FCC 2d at 203). TelePrompTer has made extensive
representations, upon which we rely, concerning its programming plans in the
event that the merger is approved. The
effectuation of these plans would be a promising step toward realization of our
goal of increased diversity of programming available to the public, both
through local origination and through regional or national distribution.
14. While it seems clear that the achievement of
a CATV network will require adequate capital and the availability of local
outlets, we do not think it appropriate to decide here whether successful CATV
network cablecasting operations would hinge on ownership and operation of CATV
systems, particularly in the nation's largest cities, or whether the total
systems involved in the merger constitute an undue concentration of
control. These questions are being
explored in the proceeding in Docket No. 18891, proposing limitations on
multiple ownership of CATV systems (Notice of Proposed Rule Making and Notice
of Inquiry released on July 1, 1970, FCC 70-674). We there stated (paragraph 12):
It is our
tentative belief that such ownership and operation is not fundamentally
necessary to network operations, which may be conducted through affiliation
with independently owned systems. To
the extent that it is claimed that CATV system ownership would facilitate
experimentation and innovation in program production, it would appear that CATV
networks could accomplish this within the framework of the proposed multiple
ownership provisions set forth in paragraphs 9 and/or 10, above. We are proposing to make such provisions
applicable across-the-board to CATV networks as well as others. Interested parties urging a more lenient
standard for CATV owners should support their position by a substantial showing
of need.
15. We think that these question should be
resolved in the proceedings in Docket No. 18891, in which all interested
persons will have an opportunity to be heard, rather than in a proceeding
limited to the parties before us here.
Our action here is subject to the outcome of that proceeding and any
rules there adopted will be applicable to TelePrompTer. n3
The further argument of Comtel with respect to the relationship between
TelePrompTer and Hughes does not, in our judgment, pose a situation which is
presently contrary to the public interest.
The various resources and capabilities of Hughes may facilitate the
development of a CATV network. We will
pay close attention to this situation and, in the event that adverse
consequences should develop, will take such action as may be necessary in the
public interest. In short, while the
merger may give rise to questions requiring future resolution, we think that
for the present the potential benefits to the
[*478] public (paragraph 13, above)
are the governing consideration.
Accordingly, we conclude that the public interest would be served by a
grant of the instant applications subject to the outcome of Docket No. 18891
and upon the condition discussed below.
n3 In the Second Report and Order in
Docket No. 18397 (FCC 70-673), promulgating rules with respect to
cross-ownership of CATV systems and television stations, the Commission
required divestiture to achieve compliance with the rules. As there stated (paragraph 7), it appears
that CATV systems are readily transferable.
16. As indicated in paragraph 6 above,
TelePrompTer is seeking a waiver of Section 21.700 with respect to one of the
common carrier microwave systems involved in the applications. After the transfer of control, TelePrompTer
Transmission of Kansas, Montana division, would provide 24 Channels of service
to affiliated customers and 14 channels to unaffiliated customers, in violation
of the rule's requirement for at least 50 percent unaffiliated customers. We have occasionally waived the rule where
the imbalance was slight and it was shown that the carrier would shortly
achieve compliance. The disparity here
is much greater and TelePrompTer has not, other than through expressed hopes,
made any substantial showing of anticipated compliance such as might warrant a
temporary waiver. Under ordinary
circumstances, therefore, we would deny the request for a temporary
waiver. However, because of the
potential benefits cited above we feel constrained to grant a temporary and carefully
conditioned waiver which, on the one hand, will permit the proposed merger to
be consummated and, on the other hand, will provide us with reasonable
assurances that compliance with the 50% rule will be fully achieved by February
1, 1974. n4 We will condition our approval as set forth below.
n4 We note that several options are
available. For example, TelePrompTer
Transmission of Kansas might acquire more unaffiliated customers or transfer to
the CAR service. Or TelePrompTer might
sell some of the affiliated CATV systems or sell the carrier to an independent
entity. The means is up to
TelePrompTer, so long as it ceases violating the rule by February 1, 1971. Where the method of compliance requires
prior Commission authorization and such authorization has not been issued by
February 1, 1971, TelePrompTer will be considered to have made a good faith
effort to comply, provided that application for such authorization is made no
later than December 1, 1970.
17. In view of our reliance upon TelePrompTer's
representations as to its programming plans, we will also condition our
approval upon a requirement that it file annual reports setting forth in detail
its progress to date in implementing such proposals and the nature of its
current plans for future implementation.
18. Accordingly, IT IS ORDERED, That Comtel,
Inc.'s "Petition to Deny" IS HEREBY DENIED.
19. IT IS FURTHER ORDERED, That the
above-captioned applications ARE GRANTED subject to the outcome of the
proceedings in Docket No. 18891 and, in the case of the applications of
TelePrompTer Transmission of Kansas, Inc. (File No. 1601-C1-TC- (12)-70), upon
the further condition that TelePrompTer Corporation file with the Commission:
(a) At least 20
days prior to consummation of the merger a detailed plan showing how it
proposes to achieve compliance with Section 21.700 of the Commission's rules by
February 1, 1971 together with a timetable for effectuation of this plan,
(b) Progress
reports on the first day of each month after the [*479] merger is consummated
showing that the filed plan is being implemented on schedule, and
(c) An
application for Commission authorization of its plan by December 1, 1970, if
such authorization is needed to implement its plan of compliance.
20. IT IS FURTHER ORDERED, That TelePrompTer
Corporation SHALL FILE ANNUAL REPORTS, commencing on September 1, 1971, setting
forth in detail its progress towards implementing the programming proposals
described in the above-captioned applications and its plans for future
implementation.
21. IT IS FURTHER ORDERED, That the appropriate
instruments of authorization for the transfer of control of radio licensees BE
ISSUED subject to the above conditions.
FEDERAL COMMUNICATIONS COMMISSION, BEN F. WAPLE,
Secretary.
CONCURBY: COX; LEE
CONCUR:
CONCURRING
STATEMENT OF COMMISSIONER KENNETH A. COX
I concur in this
action in reliance on TelePrompTer's representations as to its program
plans. I think this merger will enhance
TPT's position as a franchise applicant, and that the combination of the
profits of the two parties and the increased borrowing power of the merged
company may improve its competitive position in acquiring or developing
programming. I agree, however, that
such increased size is not necessary to permit development of a cable
network. Presumably any entity able to
develop a substantial schedule of programs and to provide interconnection
facilities would be able to arrange for local distribution of its programming
over affiliated cable systems, since they will presumably be eager to get such
an additional service to offer to their subscribers. However, if the network also owns local systems in major markets,
it may be in a position to block development of additional cable networks by
refusing to open its facilities for their programming. I think the Commission should be alert to
this possibility.
CONCURRING
STATEMENT OF COMMISSIONER H. REX LEE
I concur in
approving the acquisition of H&B American's operating CATV systems and
franchises by Teleprompter Corporation.
These [*484] transfers present extremely complex
questions of antitrust law and national policies favoring competition. Because I am not entirely convinced of what
seems to be the Commission's approach to these questions, I can only give my
qualified approval.
In formulating
its view, the Commission is apparently deciding CATV has a pre-eminent role to
play as a competitive alternative to newspaper and broadcast media
influence. Thus, the Commission tends
to condone the formation of a new media concentration while, to some extent,
neglecting the benefits normally assumed to flow from competition within a
single industry. It seems to say that,
as a matter of national policy, competition within the CATV industry is less
important than the potential of CATV to emerge as a competitor to the power of
print and broadcast combinations. In
these terms, this merger is a healthy development -- encouraging the concentration
of CATV financial and technological resources to better facilitate an open
battle between giant competitors seeking Consumer appeal.
a large public
service is promised and expected to be achieved by the merger. The parties represent that the merger will
give great impetus to an interconnected cable network, that the resources and
locations of the two companies will secure the means of distributing programs
to small communities, and provide easy access to CATV affiliates on which a
cable network will depend.
With this
development, the merged company claims it will be able to amass the resources
for its own production of large scale cable program origination (eliminating
the present total dependence of CATV systems on the carriage of broadcast
signals), and, in addition, through its purchasing power stimilate competition
in the development of a new program production market made up of diverse and
unrelated sources.
This is the
promise and hopefully it will be fulfilled.
Much rides on it. The demand for
new program production and origination is a tall order to place on this merged
operation. But I believe our approval
is intended to have that result. If the
promise is not kept, public interest should require that we or the Justice
Department deal with the misrepresentation on which our approval will prove to
have been based. I, therefore, concur
in the Commission's action.
Teleprompter has asked the Government to give it a change to supply a
large quantity and quality of new services to the public. I agree that it should have that chance. It remains for Teleprompter to show what it
can do.
DISSENT:
DISSENTING
STATEMENT OF COMMISSIONER NICHOLAS JOHNSON
The FCC majority
today finds the public interest served by the merger of the nation's largest
cable television company (H & B American Corporation) with the nation's
third largest cable television company (TelePrompTer Corporation).
Needless to say,
the rationale for this extraordinary conclusion is extremely hard to fathom --
especially in view of the long and very
[*485] thoughtful concerns
expressed by the Honorable Richard W. McLaren, Assistant Attorney General,
Antitrust Division, U.S. Department of Justice in his letter to Chairman Burch.
It is ironic
that, once again, at a time when this Commission professes to be interested in
formulating wise national communications policy in some area (here cable
television, including ownership standards, see, e.g., CATV, 23 F.C.C. 2d 833
(1970) [Dkt. No. 18891, June 24, 1970]), it is prepared to approve willy-nilly,
on a case-by-case basis, the corporate requests before it that may wholly gut
its general policies. Cf., Conglomerate
Corporation Licensees, 16 F.C.C. 2d 436 (1969) [Dkt. No. 18449, Feb. 7, 1969]
(general inquiry into conglomerate ownership of stations) and decisions on the
same day, John Poole Broadcasting Co., Inc., 16 F.C.C. 2d 458 (1969); Martin
Theatres of Georgia, Inc., 16 F.C.C. 2d 478 (1969); and Madison County
Broadcasting Co., Inc., 16 F.C.C. 2d 471 (1969) (approving major conglomerate
corporations' acquisition of additional broadcast properties).
The FCC has an
obligation to evaluate the merits of a merger of this significance on its own
motion. The absence of complainants
cannot be taken as evidence that the public interest will be affirmatively served.
Nevertheless, it
happens that in this case we do have a complaining party -- Comtel, Inc. --
which raises significant charges regarding the anticompetitive consequences of
this merger and urges us to at least hold a hearing.
In short, I
dissent to the Commission's approval of this merger, making the combined H
& B-TelePrompTer the most powerful CATV company in the nation. There are several basic reasons.
First, the
merger will substantially increase H & B-TelePrompTer's ability to acquire
additional franchises in presently un-franchised areas. Its size and power may make it extremely
difficult for locally-owned systems to develop.
Second, and more
important, the merger will substantially increase H & B-TelePrompTer's
ability to compete with other CATV systems for CATV-originated
programming. As the Justice Department
has pointed out, "the largest companies having the greatest resources and
capital will be able to acquire the best and most varied production programming
-- a fact that will most certainly be reflected in their ability to compete for
new and valuable franchises, and may even affect their power with respect to
smaller systems under an obligation to originate." (Comments of Department
of Justice, Appendix, at p. 7.)
The Justice Department
has warned that this merger may "result in the domination of the CATV
field," and may "inhibit the successful entry on a comparable scale
by other systems." (Justice, at p. 9.) I believe we are ignoring this
warning.
Third, we have
in our pending CATV ownership proceeding the proposal that no CATV system shall
own more than 50 systems nationally. H
& B-TelePrompTer will now own more than 100. We also [*486] propose to limit CATV ownership to one
system in the top three national Standard Metropolitan Statistical Areas
(SMSA's). H & B-TelePrompTer will
have systems in both New York and Los Angeles.
And finally, we propose to limit CATV ownership to a maximum of five
systems in any one state. H &
B-TelePrompTer Already has 13 in California, and seven in Montana. At the very least, our approval should be
conditioned upon adoption of these rules -- which would require a substantial
divestiture. I believe we should not
act until we have resolved these rulemaking proposals.
Fourth, Comtel
has raised a number of objections to this merger which the majority fails
adequately to address. The majority
does not seriously deal with the problems posed by this merger under Section 7
of the Clayton Act. The majority does
not address Comtel's argument that H & B-TelePrompTer will gain an unfair
competitive advantage in areas where it is in direct competition with other
CATV systems. And the majority does not
reply to Comtel's fear that H & B-TelePrompTer's power will enable it to
dictate technical standards to the CATV equipment supply industry, thereby
blocking many potentially valuable innovations or variations in equipment.
Accordingly,
rather than adopting a my-mind-is-made-up-don't-confuse-me-with-the-facts
stance, I would have granted Comtel's request for a hearing to at least develop
a factual record on these terribly significant issues.
APPENDIX:
APPENDIX
DEPARTMENT OF
JUSTICE
Washington, D.C.
20530, June 18, 1970.
Honorable DEAN BURCH
Chairman, Federal Communications
Commission
Washington, D.C. 20554.
DEAR MR.
CHAIRMAN: This is in response to your General Counsel's request that the
Department of Justice give the Commission its views on the competitive effects
of the proposed merger of TelePrompter Corporation (TPT) and H&B American
Corporation (H&B), now under consideration by the Commission. Our comments are based on information
received in the course of our investigation of this merger.
1. The
Acquiring Company -- TelePrompter Corp. (TPT)
TPT is the
fourth largest CATV operator in the country.
It entered the industry in 1959 by acquiring two operating systems in
New Mexico having about 4500 subscribers.
TPT has since acquired some 18 systems and secured franchises in several
locations, including valuable franchises covering 400,000 homes in the northern
half of Manhattan and in a 135 square mile section of Los Angeles.
On February 1,
1970, TPT owned, in whole or in part n1,
29 systems in at least 13 States (Alabama, California, Florida, Hawaii, Kansas,
Montana, New Jersey, New Mexico, New York, Oregon, Pennsylvania, South
Carolina, and Wyoming). Its subscribers
number in excess of 151,000.
n1 For example, the Manhattan and
Los Angeles franchises are held by a TPT-Hughes Aircraft venture.
TPT is also
engaged in a variety of other activities related to the CATV business, which is
its principal endeavor. These include:
(a) Its MATV
division engages in the installation, maintenance, service and leasing of
master antennas for TV reception as well as in the design, construction, repair
and maintenance of educational closed circuit TV systems, closed circuit TV
security and surveillance systems, and other custom-designed communications
facilities.
(b) Its Group
Communications Division produces closed circuit telecast and live productions
for such functions as entertainment and sports events and business
meetings. In June, 1969 TPT acquired
Filmation Associates, a company which produces animated cartoons for
television.
(c) TPT operates
microwave transmission facilities which serve its own CATV systems and other
systems located in New Mexico, Kansas, Oregon and Montana. Moreover, according to a Standard &
Poor's report TPT has announced (March 24, 1970) that it would apply to the
Commission to use domestic communications satellite circuits.
(d) Under
agreement with Hughes Aircraft Co. (a 17% stockholder of TPT), TPT has
developed wideband transmission microwave equipment which is designed to use
radio frequencies for short-haul transmission of signals. In 1966, the Commission authorized the use
of this equipment; and in 1969, it set aside a portion of the 12.7-12.95 GHZ
band specifically for this type of short-haul transmission. Since the use of such microwave is likely to
be much cheaper than cable transmission over the same distance, TPT should benefit
both as a system operator and as a seller of this equipment to other CATV
system operators.
TPT reported
revenues of $11,494,294 and net income of $1,268,145 in 1969. Figures for the three months ended March 31,
1970 indicate that first quarter revenues were $3,074,881, with net income to
that date $512,595.
Standard &
Poor's reported that on April 21, 1970, TPT was considering the offering of up
to $30 million of convertible debentures to help finance construction and
possible development of its own television programming.
2. The
Acquired Company -- H&B American Corp. (H&B)
H&B is
currently the largest CATV operator in the United States. It entered the industry in 1960 with the
acquisition of nine systems covering six states. By 1965 it operated 25 systems in 12 states and served close to
80,000 subscribers. In the fall of
1968, H&B merged with American Cablevision, the second largest CATV system
at that time. The combination of
H&B and American Cablevision gave the combined company 62 systems in 22
states and approximately 230,000 subscribers.
It presently operates approximately 100 systems located in Alabama,
Arizona, California, Colorado, Florida, Idaho, Illinois, Iowa, Louisiana, Maine,
Michigan, Minnesota, Montana, Nevada, New Hampshire, New Jersey, New Mexico,
New York, Oregon, Texas, Washington, West Virginia, Wisconsin, and two
provinces of Canada.
In addition to
its CATV properties, H&B also owns a radio station in Lompoc, California,
which it has agreed to dispose of in order to facilitate the Commission
proceedings with respect to the TPT-H&B merger. It has diversified into two areas which it regards as
supplementary to its broadband cable holdings.
In 1967 it acquired Hanover House Industries, Inc., a mail order company
selling a variety of specialty items and gifts. H&B's announced purpose in acquiring Hanover House was to
develp a program under which such items could be offered for sale to CATV
subscribers via printed catalogs and TV.
In 1966, in conjunction with Audits and Surveys Company, Inc., the
second largest marketing research firm in the country, it formed Television
Testing Co. The purpose of the company
is to conduct market research for advertisers and broadcasters.
At the end of
its fiscal year, July 31, 1969, H&B reported revenues of $14,192,544, and
net income of $1,449,345. Its revenues
for the period ended January 31, 1970 were $7,973,975, with net income of
$660,964.
3. The CATV
Industry Structure
In spite of
regulatory limitations and restrictions employed by some telephone and utility
companies limiting the use of available distribution and cable facilities, the
industry has grown from 70 systems with 14,000 subscribers in January 1952 to
2,490 systems having 4,500,000 subscribers as of February 1, 1970. Part of the reason for this growth is that
CATV systems are attractive investments; once the system has been installed,
the owner can then project low operating and maintenance costs, liberal
depreciation allowances (which cause negligible net income in the early years
but a large cash flow), and a potential growth rate at least equal to the
population increase.
In its most
recent compilation (February 1, 1970) of CATV system owners and their
respective subscriber totals, the Television Factbook lists the 20 largest
companies as follows:
|
Rank |
Company |
Subscribers |
Percent of total |
|
1 |
H&B |
262,577 |
5.8 |
|
2 |
Cox Cable Communications |
175,000 |
3.9 |
|
3 |
American TV & Communications |
158,500 |
3.5 |
|
4 |
TPT |
151,007 |
3.4 |
|
5 |
CBS |
150,000 |
3.3 |
|
6 |
Jerrold Corp |
132,973 |
2.9 |
|
7 |
Harris Scope |
110,000 |
2.5 |
|
8 |
CableCom General |
94,449 |
2.1 |
|
9 |
Midwest Video |
88,000 |
1.9 |
|
10 |
Community TV |
87,800 |
1.9 |
|
11 |
Service Electric Co |
81,250 |
1.8 |
|
12 |
Genco Cable (LVO) |
80,000 |
1.8 |
|
13 |
TV Communications |
75,500 |
1.7 |
|
14 |
National Trans Video |
67,933 |
1.5 |
|
15 |
Cypress Communications |
54,909 |
1.2 |
|
16 |
Continental Transmission |
52,763 |
1.2 |
|
17 |
Reeves TeleCom |
50,642 |
1.1 |
|
18 |
United Artists |
42,200 |
under 1% |
|
19 |
Columbia Cable |
41,706 |
under 1% |
|
20 |
Continental Cable |
41,000 |
under 1% |
According to
TPT's submission to the FCC, concentration in the industry has not increased
since 1965: n2
n2 Our computations do show,
however, an increase of approximately 4% in the share held by the top 20
systems, over 1969 figures.
Acquisitions by multiple owners, and their continuing growth indicates a
probable trend towards increased concentration among the leading firms.
|
|
Grouping |
1965 |
1969 |
|
(1970) |
|
||
|
Two largest |
10.2 |
10.7 |
(9.7) |
|
Three largest |
14.3 |
14.1 |
(13.2) |
|
Four largest |
18.1 |
17.3 |
(16.6) |
|
Five largest |
20.8 |
20.2 |
(19.9) |
|
Six largest |
23.45 |
22.6 |
(22.8) |
|
Seven largest |
25.95 |
24.7 |
(25.3) |
|
Eight largest |
28.30 |
26.7 |
(27.4) |
According to an
analysis of the CATV industry published in August 1969, by Legg & Co., an investment
company, industry sources claim that by 1975 the total number of subscribers
will be close to 30 million.
4. The Nature
of Competition in CATV
CATV operators
can "compete" in a variety of direct and indirect ways.
Although most
franchises are in form stated to be non-exclusive, CATV systems generally do
not compete directly with one another for subscribers in the same area. In the few instances where two systems have
attempted to operate in the same area, one has usually dropped out of the
"race" fairly early in the game.
n3 Providing local CATV service
therefore is generally regarded as being inherently monopolistic in that it is
uneconomic for more than one operator to string or lay coaxial cable in the
same area. n4 We are not certain whether this is a necessary
conclusion or whether more direct competition may be possible, at least in
heavily populated areas. The present
system of de facto local monopolies may have reflected the policies of the
telephone companies which have been in control of vital pole and duct
space. If this is so, the Commission's
recent changes in pole attachment and conduit policy, increasing the potential
number of occupants for any given pole or conduit, n5 may open up more direct competition between CATV
operators in the same area.
n3 See e.g., Jerrold Electronics
Corp. v. Wescoast Broadcasting Co., 341 F. 2d 353 (9th Cir. 1965), cert. denied
382 U.S. 817 (1966), which documents examples of small operators being
"squeezed" out of communities.
n4 Barnett, Cable Television and
Media Concentration, 22 Stan. L. Rev. 221, 239; Comments of the U.S. Department
of Justice, FCC Docket No. 18397, Sept. 5, 1969, at 5-6.
n5 See Notice of Proposed Rule
Making, Docket Nos. 16928, 16943 and 17098 (1968).
Beyond this CATV
operators can compete for subscribers in the same general area -- if not
subscribers to be reached by the same pole -- at least subscribers within a few
blocks of each other. n6 This is more a form of "yardstick"
competition -- but it may be a factor when franchises come up for renewal. It is most likely to occur in densely
populated metropolitan areas where more than one system is usually
franchised.
n6 Chances of this becoming a significant
reality are likely to be enhanced by the introduction of such innovative tools
as "shorthaul" microwave transmission equipment and receivers.
CATV operators
also compete for franchises in "new" or un-franchised areas; this is
possibly the most direct form of competition that exists now n7. It will
become less important as un-franchised areas cease to exist. CATV could also compete for franchises in
areas where established franchises have expired or where franchisees are unable
or unwilling to provide or to extend service; however, we have seen no evidence
that this is actually occurring.
n7 For example, the applications of
three cable firms are now awaiting final selection by the City Commission of
Tulsa, Oklahoma.
Programming is
another area of possible competition.
The advent of wide-spread and, perhaps, large scale origination, in
accordance with the Commission's recent orders, may stimulate competition for
the development and purchase of various types of programming. n8
This competition is likely to be especially keen among the large systems
serving metropolitan areas which must compete more strenuously against larger
numbers of broadcast television stations.
It is to be foreseen that the largest companies having the greatest
resources and capital, will be able to acquire the best and most varied
production programming -- a fact that will most certainly be reflected in their
ability to compete for new and valuable franchises, and may even affect their
power with respect to smaller systems under an obligation to originate.
n8 First Report and Order, FCC
Docket 18397, 20 FCC 2d 201 (1969).
The outgrowth of
such a situation may be a greater impetus toward rapid interconnection and the
development of CATV "networks." The natural hubs of these
interconnection systems or "networks" would, it seems, be the larger
CATV systems, which by virtue of their resources and locations will be most
able to secure, provide, and distribute programming to small systems. Thus competition among such large cable
systems for "network affiliates" is entirely possible in the near
future.
5. The Effect
of Merger
If this merger
is consummated, TPT will own (in whole or in part) approximately 129 systems
serving some 413,500 subscribers in 28 states -- approximately 10% of those
presently receiving CATV service. It
will have an untapped potential in its franchise areas. H&B's systems are on the average, about
50% "saturated." Thus, without additional franchises, and if all
homes in those franchise areas elected to receive service, H&B systems
could contribute additional subscribers almost equal in number to its current
262,500.
TPT, which has
apparently placed major attention on the acquisition of new properties, is
currently only about 9% saturated. It
holds potentially important franchises in major metropolitan areas
(particularly New York and Los Angeles) where CATV is likely to grow
substantially if existing regulatory restrictions are modified or
eliminated. This means that more than
one million potential subscribers already reside in its franchised areas. Therefore, if each system reached its full
potential the combined systems could reach in excess of 1.7 million
subscribers.
The size of CATV
system and its financial and technological resources will certainly be decisive
factors in the development and future of the competitive context outlined
above. These same advantages are sure
to have at least some effect, if only negligible, in those areas, such as new
franchises, where there is presently competition between systems. It is not unreasonable to posit that the
future may well see the accentuation of that effect. This merger would produce a clear leader among the largest CATV system
owners, and a leader whose position is reinforced by interests in technical
development and program production. By
doing so, this merger may lead to more immediate development of CATV's full
potential as an effective competitor of the broadcast and print media,
particularly in the larger markets.
However, the advantage inherent in such size and the special technical
and production capabilities of the merged company could also result in the
domination of the CATV field, and the growth of a single CATV
"network" whose early success might well inhibit the successful entry
on a comparable scale by other systems.
Such a development could have important prospective consequences with
respect, not only to possible competition for programming and "network
affiliates," but also to the maintenance of diversity in ideas,
viewpoints, and entertainment. It would
be of particular concern if CATV was to emerge as the predominate
video-communication medium -- as many have predicted it will. Obviously, the Commission must weigh and
evaluate these long term possibilities, as well as the more immediate effects
of this merger.
To summarize, we
believe that, in view of the present status of the CATV industry, the immediate
effect of the TPT-H&B merger competition described above may well be
slight; and indeed it may enable CATV to compete more strongly with the
over-the-air broadcasters who dominate the major television markets. On the other hand, the long-term competitive
effect of combining these relatively large, strong system operators into a
single industry leader may be substantial, if CATV should become the dominant
source of TV-type programming for the American public.
Sincerely yours,
RICHARD W. McLAREN,
Assistant Attorney General, Antitrust Division.