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FCC Removes Prohibition on Cable-CLEC Mergers

Cable operators, which lack national coverage due to regional footprints, should encounter fewer obstacles when it comes to bringing broadband to multilocation business customers. That’s because the FCC, as anticipated, on Monday removed a years-old prohibition on cable-CLEC mergers.

"Todays order reflects our commitments to streamline processes and promote competition," said FCC Chairman Julius Genachowski in a prepared statement.

The results of the decision could be huge for the channel. Over the past couple of years, there’s been a wave of CLEC M&A (think EarthLink-One-STS-DeltaCom, MegaPath-Covad-Speakeasy, TelePacific-Covad Wireless-TelWest, Windstream-NuVox-PAETEC-KDL, Level 3-Global Crossing and so on). Such deals have created bigger providers with more network reach, giving agents and VARs the ability to sell nationwide coverage and capacity to business customers.

Cable companies, seeing the promise in business services, would like to have the same advantage. Indeed, consider what could happen if the cable providers start buying some of the CLECs that have filed for bankruptcy, or others that are fighting for profitability. 

The FCC’s Sept. 17 declaration comes after Comcast Business in late 2009 bought competitive local exchange carrier CIMCO Communications, the first transaction of its kind in the channel. The FCC approved that deal on a technicality having to do with when CIMCO started offering telephone exchange services. The point, however, is that Comcast, with CIMCO in tow, was the first cableco to charge into the channel, and with a CLEC’s assets to help it target business users. The channel stands to see more such activity and availability now that the FCC has reversed the prohibition.  

The FCC acted in a response to a petition from the National Telecommunications & Cable Association, which is led by former FCC Chairman Michael Powell.

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