§ 76.505   Prohibition on buy outs.

   (a) No local exchange carrier or any affiliate of such carrier owned by,
   operated by, controlled by, or under common control with such carrier may
   purchase or otherwise acquire directly or indirectly more than a 10 percent
   financial  interest, or any management interest, in any cable operator
   providing  cable service within the local exchange carrier's telephone
   service area.

   (b) No cable operator or affiliate of a cable operator that is owned by,
   operated  by, controlled by, or under common ownership with such cable
   operator may purchase or otherwise acquire, directly or indirectly, more
   than a 10 percent financial interest, or any management interest, in any
   local exchange carrier providing telephone exchange service within such
   cable operator's franchise area.

   (c) A local exchange carrier and a cable operator whose telephone service
   area and cable franchise area, respectively, are in the same market may not
   enter into any joint venture or partnership to provide video programming
   directly to subscribers or to provide telecommunications services within
   such market.

   (d) Exceptions:

   (1) Notwithstanding paragraphs (a), (b), and (c) of this section, a local
   exchange carrier (with respect to a cable system located in its telephone
   service area) and a cable operator (with respect to the facilities of a
   local exchange carrier used to provide telephone exchange service in its
   cable franchise area) may obtain a controlling interest in, management
   interest in, or enter into a joint venture or partnership with the operator
   of such system or facilities for the use of such system or facilities to the
   extent that:

   (i) Such system or facilities only serve incorporated or unincorporated :

   (A) Places or territories that have fewer than 35,000 inhabitants; and

   (B) Are outside an urbanized area, as defined by the Bureau of the Census;
   and

   (ii) In the case of a local exchange carrier, such system, in the aggregate
   with any other system in which such carrier has an interest, serves less
   than 10 percent of the households in the telephone service area of such
   carrier.

   (2) Notwithstanding paragraph (c) of this section, a local exchange carrier
   may obtain, with the concurrence of the cable operator on the rates, terms,
   and conditions, the use of that part of the transmission facilities of a
   cable system extending from the last multi-user terminal to the premises of
   the end user, if such use is reasonably limited in scope and duration, as
   determined by the Commission.

   (3) Notwithstanding paragraphs (a) and (c) of this section, a local exchange
   carrier may obtain a controlling interest in, or form a joint venture or
   other partnership with, or provide financing to, a cable system (hereinafter
   in this paragraph referred to as “the subject cable system”) if:

   (i) The subject cable system operates in a television market that is not in
   the top 25 markets, and such market has more than 1 cable system operator,
   and  the  subject  cable  system is not the cable system with the most
   subscribers in such television market;

   (ii) The subject cable system and the cable system with the most subscribers
   in such television market held on May 1, 1995, cable television franchises
   from the largest municipality in the television market and the boundaries of
   such franchises were identical on such date;

   (iii) The subject cable system is not owned by or under common ownership or
   control  of  any  one  of  the 50 cable system operators with the most
   subscribers as such operators existed on May 1, 1995; and

   (iv) The system with the most subscribers in the television market is owned
   by or under common ownership or control of any one of the 10 largest cable
   system operators as such operators existed on May 1, 1995.

   (4) Paragraph (a) of this section does not apply to any cable system if:

   (i) The cable system serves no more than 17,000 cable subscribers, of which
   no less than 8,000 live within an urban area, and no less than 6,000 live
   within a nonurbanized area as of June 1, 1995;

   (ii) The cable system is not owned by, or under common ownership or control
   with, any of the 50 largest cable system operators in existence on June 1,
   1995; and

   (iii) The cable system operates in a television market that was not in the
   top 100 television markets as of June 1, 1995.

   (5) Notwithstanding paragraphs (a) and (c) of this section, a local exchange
   carrier with less than $100,000,000 in annual operating revenues (or any
   affiliate of such carrier owned by, operated by, controlled by, or under
   common control with such carrier) may purchase or otherwise acquire more
   than a 10 percent financial interest in, or any management interest in, or
   enter into a joint venture or partnership with, any cable system within the
   local exchange carrier's telephone service area that serves no more than
   20,000 cable subscribers, if no more than 12,000 of those subscribers live
   within an urbanized area, as defined by the Bureau of the Census.

   (6) The Commission may waive the restrictions of paragraphs (a), (b), or (c)
   of this section only if:

   (i) The Commission determines that, because of the nature of the market
   served by the affected cable system or facilities used to provide telephone
   exchange service:

   (A) The affected cable operator or local exchange carrier would be subjected
   to undue economic distress by the enforcement of such provisions;

   (B)  The system or facilities would not be economically viable if such
   provisions were enforced; or

   (C) The anticompetitive effects of the proposed transaction are clearly
   outweighed in the public interest by the probable effect of the transaction
   in meeting the convenience and needs of the community to be served; and

   (ii) The local franchising authority approves of such waiver.

   (e) For purposes of this section, the term “telephone service area” when
   used in connection with a common carrier subject in whole or in part to
   title II of the Communications Act means the area within which such carrier
   provided telephone exchange service as of January 1, 1993, but if any common
   carrier after such date transfers its telephone exchange service facilities
   to  another  common carrier, the area to which such facilities provide
   telephone exchange service shall be treated as part of the telephone service
   area of the acquiring common carrier and not of the selling common carrier.

   (f) For purposes of this section, entities are affiliated if either entity
   has  an  attributable interest in the other or if a third party has an
   attributable interest in both entities.

   (g) Attributable interest shall be defined by reference to the criteria set
   forth in Notes 1 through 5 to § 76.501.

   [ 61 FR 18977 , Apr. 30, 1996, as amended at  64 FR 67196 , Dec. 1, 1999]

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Subpart K—Technical Standards

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