Residents of Paramus and Hillsdale, New Jersey, will continue to benefit from competition for cable television service as a result of an agreement between the Federal Trade Commission and Cablevision Systems Corp. The agreement, announced today for public comment, would resolve antitrust concerns arising from Cablevision's proposed acquisition of certain Tele-Communications, Inc. ("TCI") cable operations in Northern New Jersey and New York. Both Paramus and Hillsdale are presently served by Cablevision and TCI. In order to maintain competition for cable service in these two towns, Cablevision would have to divest TCI's systems to a buyer approved by the Commission.
"Maintaining direct cable-to-cable competition is an important goal of the Commission," said William J. Baer, Director of the FTC's Bureau of Competition. "This agreement preserves competition, which ensures lower prices and better service for residents of Paramus and Hillsdale."
According to the FTC, Cablevision and TCI entered into an agreement last year under which Cablevision plans to acquire TCI cable systems in New Jersey, Long Island, and Rockland and Westchester Counties, New York, serving approximately 820,000 subscribers. In exchange, TCI will receive Cablevision voting securities valued at approximately $423 million.
Cablevision is the country's sixth largest provider of cable television services with approximately 2.9 million subscribers in 16 states. Its principal office and place of business is in Woodbury, New York. TCI is the country's largest cable television provider and serves 27 percent of all U.S. cable television households, approximately 18 million subscribers.
TCI is located in Englewood, Colorado.
According to the FTC's complaint outlining the charges, Cablevision's acquisition of TCI cable systems in Paramus and Hillsdale may substantially reduce competition because these two markets are highly concentrated with only Cablevision and TCI providing services. The acquisition, the complaint alleges, would significantly increase concentration in these two communities, leaving only Cablevision to provide cable television service, and thereby increasing the likelihood that the price of cable television services would increase, and/or the quality of that service would decrease.
The complaint alleges that the distribution of "multi-channel video programming" by technologies other than cable television -- direct broadcast satellite or multichannel multipoint distribution systems -- does not have a significant effect on prices charged by cable operators. Most cable television subscribers are not likely to switch to another technology in response to a small price increase by cable television providers. In addition, cable television operators do not typically change their prices in response to prices charged by other providers of multi-channel video programming.
In addition, according to the FTC, entry into the distribution of multi-channel video programming by cable television operators is costly, time consuming and highly unlikely, especially in an overbuild situation where there are already two providers competing for consumers.
The proposed agreement between the Commission and Cablevision would remedy the anticompetitive concerns in Paramus and Hillsdale by requiring the divestiture of TCI's cable systems in the two towns. Cablevision would have to obtain Commission approval of its buyer within six months after it signs the consent order. The company would not be required to complete the divestiture within this six-month period if the required municipal government approvals take longer to obtain. If Cablevision obtains the Commission's approval and files all necessary applications for municipal governmental approvals within this six-month period, the divestiture period would be extended by a period of time equal to the number of days that the municipal government takes to approve or disapprove the necessary applications. If Cablevision does not obtain Commission approval for an acquirer within the six-month period, the Commission may appoint a trustee to divest the Paramus and Hillsdale cable systems.
Under the agreement, Cablevision also would have to begin constructing a headend (the control center of a cable system) with the necessary technological capabilities to serve the cable systems if it has not obtained Commission approval within the required time.
To ensure that the buyer of TCI's systems in Paramus and Hillsdale is able to purchase needed programming, Cablevision would waive all existing exclusive rights, other than News 12 N.J. -- a local all-news network -- and not obtain any new exclusive rights to distribute programming in the two towns.
Cablevision also would have to maintain the competitiveness, viability, and marketability of the Paramus and Hillsdale cable systems until the divestiture is complete. Cablevision would be able to change the programming and channel line-up it offers only if it contemporaneously alters the programming and channel line up offered on the TCI assets that they are acquiring. In addition, Cablevision would be required to offer promotions to all current TCI subscribers equal to those offered to its own subscribers in the area.
The settlement agreement also contains recordkeeping and reporting provisions to allow the Commission to monitor compliance. The Commission vote to accept the proposed consent agreement for public comment was 4-0 with Commissioner Mary L. Azcuenaga not participating.
NOTE: Consent agreements are for settlement purposes only and do not constitute admissions of law violations. When the Commission issues a consent order on a final basis, it carries the force of law with respect to future actions. Each violation of such an order may result in a civil penalty of $11,000.
A summary of the consent agreement will be published in the Federal Register shortly and will be subject to public comment for 60 days, after which the Commission will decide whether to make it final. Comments should be addressed to the FTC, Office of the Secretary, 6th Street and Pennsylvania Avenue, N.W., Washington, D.C. 20580.
Copies of the complaint, consent agreement, and analysis of the agreement to assist in public comment are available on the Internet at the FTC's World Wide Web site at: http://www.ftc.gov or by calling 202-326-3627. Copies also are available from the FTC's Consumer Response Center, Room 130, 6th Street and Pennsylvania Avenue, N.W., Washington, D.C. 20580; 202-326-3128; TTY for the hearing impaired 1-866-653-4261. To find out the latest news as it is announced, call the FTC NewsPhone recording at 202-326-2710.
(FTC File No. 971 0095)