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Reg. 5627 (Feb. 16, 1997) (available at http://www.fcc.gov). Earlier reports in compliance with this statutory  {OS- xrequirement were issued in 1994 and 1995. See Implementation of Section 19 of the 1992 Cable Act (Annual  {O- xAssessment of the Status of Competition in the Market for the Delivery of Video Programming), CS Docket No. 94 {O- x48, First Report, 9 FCC Rcd 7442 (1994) ("1994 Competition Report") and Annual Assessment of the Status of  {O- xCompetition in the Market for the Delivery of Video Programming, CS Docket No. 9561, Second Annual Report,  {O{- x11 FCC Rcd 2060 (1996) ("1995 Competition Report"). See also Annual Assessment of the Status of Competition  {OE- xiin the Market for the Delivery of Video Programming, CS Docket No. 9448, Notice of Inquiry, 9 FCC Rcd 2896  {O- x(1994); Annual Assessment of the Status of Competition in the Market for the Delivery of Video Programming, CS  {O- xDocket No. 9561, Notice of Inquiry, 10 FCC Rcd 7508 (1995); and Annual Assessment of the Status of Competition  {O- xin the Market for the Delivery of Video Programming, CS Docket No. 96133, Notice of Inquiry, 11 FCC Rcd 7413 (1996).  X - ` x2.` ` We recognize that much of the information we will need for the 1997 Competition  x=Report can be obtained from publicly available sources. In addition, a considerable amount of  xrelevant, and even necessary, information may be available in filings with the Commission in  xconnection with a variety of ongoing proceedings. We are not asking parties to repeat here the  xsubstance of comments that have been filed in other proceedings. Nonetheless, while we intend  xto look to publicly available sources and filings in other proceedings as sources of information,  xcommenters should feel free to comment or to provide information on any matter that they  xbelieve is relevant to the issues on which we will report. Commenters are invited to submit data,  xZinformation, and analysis regarding the cable industry, existing and potential competitors to cable  xsystems, and the prospects for increasing competition in markets for the delivery of video  xprogramming. Commenters are also invited to identify and comment on existing statutory  x?provisions they perceive as restraining competition or inhibiting development of robust  xcompetition in markets for the delivery of video programming. In particular, we seek comment  X- xregarding our conclusions in the 1996 Competition Report, current information and data regarding  X- xKchanges over the past year, and factbased projections for the future development of competition"^ ,-(-(ZZ"  xyin these markets. Commenters are also asked to provide any other information or analysis they deem relevant for this report.  X- ` x3.` ` In Section II of this Notice we solicit updated information on the cable industry  xand other competitors in markets for the delivery of video programming, technical advances that  xaffect competition, and industry and market structure issues. As competition to cable's position  xas the primary distributor of multichannel video programming continues to expand, our ability  xjto obtain timely and accurate data pertaining to all competing multichannel video programming  xdistributors ("MVPDs") becomes increasingly important. Equally important is our ability to draw  xcomparisons among MVPDs based on data and information derived from similar time periods.  x\Thus, we strongly encourage all MVPDs to provide the data and information sought in this  X - xNotice and to submit data and information responsive to Section II that is current as of June 30, 1997.  X - ` x4.` ` Section III describes Commission actions taken to implement those portions of  X - x\the Telecommunications Act of 1996 ("1996 Act")z 7 yO;-ԍxTelecommunications Act of 1996, Pub. L. No. 104104, 110 Stat. 56 (1996).z that were intended to remove barriers to  xcompetitive entry and to establish market conditions that promote competitive firm rivalry in  xvideo distribution markets. In this section, we request data and information on the effects of  xthese provisions on existing and potential distributors of video programming. Finally, as  Xf- xprovided in our Video Accessibility Report,P^fX7 {Oo-   xSee Implementation of Section 305 of the Telecommunications Act of 1996 Video Programming  {O9- xAccessibility, MM Docket No. 95176, Report, 11 FCC Rcd 19214 at 19271 142 (1996) ("Video Accessibility  {O-Report").P we seek information in Section IV on methods and  xschedules for providing greater accessibility to video programs for persons with visual disabilities.  X -   II.XxCHANGES IN MARKETS FOR THE DELIVERY OF VIDEO PROGRAMMING  X-SINCE LAST YEAR'S REPORT (#  X<x A. ` `  Competitors in Markets For the Delivery of Video Programming    X- ` x5.` ` Markets for the delivery of video programming are served by video distributors  xusing both wired and wireless technologies. Among the MPVDs using predominantly wired  xjdistribution technologies are cable systems, private cable or satellite master antenna television  x("SMATV") systems, and open video systems ("OVS"). Among those relying predominantly on  xwireless distribution technologies are overtheair broadcast television, multichannel multipoint  xLdistribution service ("MMDS"), instructional television fixed service ("ITFS"), local multipoint  xdistribution service ("LMDS"), direct broadcast satellite ("DBS") service, and home satellite dish  x("HSD") service. Other potential distribution mechanisms include interactive video and data services ("IVDS"), the Internet, and public utility companies. " ~,-(-(ZZ"Ԍ X- ` x6.` ` As in previous reports, we seek factual information and statistical data about the  x.status of video programming distributors using different technologies, and changes that have  X- xLoccurred in the past year.t7 {OK-ԍxSee Competition Reports, 19941996, supra note 2.t For each multichannel video programming distribution technology,  X- x-we request the following information:Z7 yO-ԍxWe seek information both in the form of industry aggregate data and company specific data. (a)the numbers of homes passed (for wired technologies)  X- xor the numbers of homes capable of receiving service (for wireless technologies);7 yO? -  ԍxThis includes the number of lineofsight homes for distribution technologies that require lineofsight for reception. (b)the  X- xnumbers of subscribers and penetration rates;+B7 yO -  LԍxTo the extent available, we also seek information on the numbers of subscribers to different levels of service  {OH -(e.g., basic, cable programming service or "CPS," premium, payperview, near videoondemand, etc.).+ (c)channel capacities, the numbers and types of  xychannels offered, and the numbers and types of services offered; and (d)industry revenues, in  xthe aggregate and by sources (e.g., subscriber revenues, advertising revenues, programming  xrevenues), expenditures, cash flows, and investments. In addition, we request information  x1regarding: (a)industry transactions, including information on mergers, acquisitions,  xconsolidations, swaps and trades, and crossownership; (b)other structural developments that  xaffect distributors' delivery of video programming; (c)regulatory and judicial developments that affect use of different technologies; and (d)the effects of the 1996 Act and its implementation.  X - ` x7.` ` In addition, for certain video distribution technologies we seek additional information, including:  Xy- ` XxX` ` (a) In the 1996 Competition Report, we noted that subscribership to existing DBS  Xd- ` services increased substantially since the 1995 Competition Report.Z d7 {O-ԍx1996 Competition Report at 38.Z We seek  ` 2information about the further development of existing and planned DBS services,  ` both full contiguous United States ("CONUS") and partial CONUS operations, and  ` any changes in proposed prices, program offerings, and launch dates. In providing  ` information regarding the numbers of subscribers and penetration levels of DBS  ` and HSD providers, we request data on the geographic locations of DBS and HSD  ` 4subscribers. We also seek data on the factors that may affect the extent of  ` 3satellite service penetration, including relative technical quality of the service,  ` exclusive programming services, access to network television broadcast signals,  ` access to alternative multichannel video service providers, access to local  ` broadcast signals, rates and customer service comparisons. To what extent are  ` oviewers switching from cable to satellite service and to what extent are satellite  ` _customers also simultaneously cable subscribers? To what extent are restrictions  ` on the ability of satellite service providers to deliver broadcast signals to";. ,-(-(ZZ"  ` subscribers under the compulsory copyright licensing provisions of the Copyright Act influencing the ability of satellite providers to compete? (#`  ` XxX` ` (b) The 1996 Act delineated four options for local exchange carriers ("LECs")  ` provision of video services: OVS, common carriage, radio communications, and  ` Pcable. We seek information on LEC entry into video distribution markets through  ` _each of these delivery options and the effect of such entry on competition. What  X_- ` changes, if any, have occurred since the 1996 Competition Report with respect to  XJ- ` LEC plans for video distribution? We also seek information regarding the extent  ` to which unaffiliated video programming providers, such as SMATVs, are being  ` carried on LEC common carriage platforms. For the carried providers, does this represent a change in business plans?(#`  X - ` XxX` ` (c) In the 1996 Competition Report, we noted that "overbuilds by nonLEC  X - ` entities continue to be limited."F 7 {O;-ԍxId. at 35.F We also reported on developments regarding  ` #franchised cable systems operated by LECs, both within their telephone services  X- ` $areas and outside those regions.T Z7 {O-ԍx1d. at 73, 75.T To update our information on the status of  ` competition from overbuilds, we request data on the number and location of  ` overbuilt markets, including maps and other information regarding the overlapping  ` %coverage areas of competing services. In addition, we request information  ` regarding the manner in which overbuilders market their services and the effect of overbuild competition on cable rates, services and service quality. (#`  ` XxX` ` (d) We seek information on the role of broadcast television in markets for the  ` delivery of multichannel video programming. First, we seek comment on the  ` extent to which distribution of local broadcast signals impacts competition in  ` 2markets for the delivery of video programming. In particular, we seek information  ` $on technological, copyright, competitive and other issues associated with the  ` distribution of local broadcast signals by video programming distributors not  ` currently subject to broadcast television signal carriage requirements. Second, we  ` solicit comment on the extent to which changes in ownership patterns in the  ` television broadcast industry and in broadcast networking (United Paramount, WB,  ` Home Shopping Network, and Paxson Communications Corporation) make  ` broadcasting more or less competitive with cable television and other multichannel  ` video service providers. Third, we seek information, particularly empirical  ` evidence and economic studies, regarding the extent to which broadcast television  ` ncompetes as a distribution medium with MVPDs and with other entertainment and"  ,-(-(ZZ"  ` Cinformation venues (such as radio or newspapers) for audiences and/or for  X-advertising revenue. 7 yOb-   ԍxIn the 1994 and 1995 Competition Reports, we noted that broadcast television stations are a significant  xLsupplier of programming in the market for the delivery of video programming, but that broadcast stations as  xtransmission medium do not have a significant constraining effect on the exercise of market power within markets  {O- xfor the delivery of video programming. 1994 Competition Report, 9 FCC Rcd at 749295 97102; 1995  {O-Competition Report, 11 FCC Rcd at 2115  115. (#` XxX` ` (#`  ` XxX` ` (e) We solicit information on video delivery competition for and within multiple  ` Adwelling units ("MDUs"). Is competition for or within MDUs more or less robust  ` than competition for individual residential subscribers? What factors influence  ` PMDU competition? Are there factors unique to the MDU market that have policy  ` &consequences for the regulatory process? What are the public interest  ` consequences of competition for exclusive access to MDUs versus competition within MDUs for subscribers? (#`  X - ` XxX` ` (f) In the 1996 Competition Report, we noted a decline in the market valuation  ` Cof the stock of publiclytraded equity interests in each of the top five cable  X - ` 3multiple system owners. $ |7 {O-  ԍx In the 1996 Competition Report, we indicated that as of midNovember, 1996, the market valuation of  xpubliclytraded equity interest in each of the top five cable multiple system owners was down 6 points from the  {O- xStandard & Poor's Index of the 500 largest publiclytraded companies in the United States. 1996 Competition Report at 26 n.52. We also observe that the stock market valuation of  X - ` cable stocks continues to fluctuate. h 7 {O-ԍxGeraldine Fabrikant, Shareholders Pressure Cablevision, New York Times, Mar. 10, 1997, at D11. What, if anything, does this reflect regarding  ` 3the state of competition in the MVPD market and the regulations applicable to these markets? (#`  Xd- ` XxX` ` (g) We also note that cable rates have risen recently.d 7 {O-  ԍxIn the 1996 Competition Report, we reported that between January and November of 1996, the cable services  xYsegment of the Bureau of Labor Statistics Consumer Price Index ("CPI"), a measure of price increases, had increased  {O- xrelative to the CPI for all goods and services. 1996 Competition Report at 128. We note that, according to the  xCPI cable rates were flat in March 1997, marking the first such month for a considerable period. While all prices  xincreased 0.1%, according to the CPI, cable showed no change. U.S. Bureau of Labor Statistics, Monthly Labor  xReview, April 1997. In addition, we note that, over the period of cable rate regulation from April 1993 to the end  {O!- xof 1996, the cable CPI increased by 8.4%, compared with the general CPI of 10.2%. See Statistical Report on  {O"- xAverage Rates for Basic Service, Cable Programming and Equipment, MM Docket No. 92266, Report on Cable  {OW#- xIndustry Prices, 12 FCC Rcd 3239 at 324546 (1997)  1213. See also Hearings of the Senate Commerce, Science  {O!$-and Transportation Committee on Cable Competition, 105th Cong., 1st Sess.1 (Apr.10, 1997).  Are such changes  ` attributable to debt assumed for facilities upgrade purposes, increased  ` programming costs, simple exercise of market power, Commission rules, other  ` factors, or combinations of factors? Have the equipment aggregation rules had an",-(-(ZZ"  ` effect on rates? To what extent are cable operators implementing aggregated  ` equipment rates and to what extent are they restructuring their programming  ` packages and tiers of service as a result of actual or potential competition? We  ` $request information on the types of tier, equipment and rate restructuring that  ` cable operators are undertaking and seek comment on whether, and to what extent,  ` 3these efforts are intended to differentiate cable service from that of competing video services. (#`  WH<x B.` ` Technological Issues  X1-x  X - ` x8.` ` The 1996 Competition Report described various technological advances that may  X - xaffect industry structure and competition in markets for the delivery of video programming.b 7 {O~ -ԍx1996 Competition Report at 17084.b  x For this year's report, we seek updated information on developments in the deployment, or  xplanned deployment, of advanced technologies, such as digital compression, switched digital  xxservices and upgraded architectures. We seek data to update the information we presented about  xZthe different transmission facilities used for distribution of multichannel video programming, such  xas copper wire, coaxial cable, optical fiber, broadcast and other terrestrial radio frequency  x.communications, terrestrial microwave, satellites, and use of the Internet, and how they affect,  xand are likely to affect, industry structure and competition for the provision of video services.  xzWe seek information concerning the hybridization of different transmission media. We also  xrequest information on system configurations and designs that may facilitate competition, such  xas the ability to distribute different types of signals and provide different types of services over  xthe same transmission facility (e.g., digital, analog and telephone signals over a cable operator's  xfacility). In addition, we seek information about developments in settop boxes, including  xupdates on interoperability, portability and marketdriven standards. We also seek information  x]on whether multichannel video distributors are leasing or selling reception equipment to  xzsubscribers, and the competitive impact, if any, of these alternatives in markets where direct competition among multichannel video programming distributors exists.  Xg- ` "x9.` ` The use of digital forms of communication through various compression techniques  xallows for more efficient use of bandwidth by cable systems, satellite service providers, wireless  x=cable systems, and broadcast stations. The communications involved are also more flexible in  xthat different types of information audio, video, or data may be combined for distribution.  xWe seek information on what types of services telephony, Internet access, paging, or audio  xKare currently bundled or are planned to be bundled with video for distribution to subscribers, and  xthe extent to which bundled services may affect the relative competitive posture of competing  xMVPDs. We also seek comment on potential problems and new issues relevant to multichannel video distribution competition in a digital environment.  X#- x"#Z,-(-(ZZt""  X<xC.` ` Industry and Market Structure  X-x` ` 1.  Horizontal Concentration  X- ` x 10.` ` As in prior reports, we will provide updated information in the 1997 Competition  xzReport on the structure and rivalry of markets for the delivery of video programming. In the  Xw- x1996 Competition Report, we refined our definition of the relevant market,w7 {O-  ԍx1996 Competition Report at 11518. We continued to use the 1992 Cable Act's definition of  {O- xi"multichannel video programming service" as the relevant product market. Id. at 116. We found the relevant  x,geographic area for assessing MVPD competition was local, but rather than using the cable franchise as the relevant  xboundary, we concluded that "its extent can be defined by the overlap of the `footprints' of the various service  {O -providers." Id. at 118. posited alternative  Xb- xapproaches to measuring concentration in the average local market,Zb~7 yO -  ԍxWe looked at concentration in local markets by analyzing national subscribership shares as a surrogate for  x local concentration, and alternatively, by analyzing the numbers of competitors in a market with comparable deployed  {O!-capacity. 1996 Competition Report at  11922. and identified product  XK- xdifferentiation and entry conditions as factors affecting competition.NK7 {O-ԍxId. at  12328.N We seek comment on the  X4- xanalysis of market structure conditions in the 1996 Competition Report, and information and data  xnecessary to apply the analysis in the 1997 Competition Report. In particular, we seek  xinformation on changes in the number and market share of all MVPDs, and the effects of MVPD  xhorizontal concentration at the local, regional and national levels. In local markets where  xincumbent cable operators face competition from one or more other video programming  xkdistributors, we seek information on: (a)the identity of the competitors; (b)the distribution  xKtechnology used by each competitor; (c)the date that each competitor entered the market; (d)the  xlocation of the market, including whether it is predominantly urban or rural; (e)an estimate of  xthe subscribership and market share for the services of each competitor; (f)a description of the  x[service offerings of each competitor; (g)differentiation strategies each competitor is pursuing; and (h)the prices charged for the service offerings.  X"- ` x 11.` ` In the 1996 Competition Report, we noted that for purposes of examining national  xconcentration in markets for the distribution of multichannel video programming, it is appropriate  xto consider of the presence of all MVPDs, not just cable systems. Consequently, we seek  xkinformation and data regarding current national subscribership levels of all MVPDs. To the  xextent national concentration has increased or decreased for specific MVPDs, we seek comment  x[on the reasons for such changes, including whether such changes are the result of merger and acquisition activity, marketing strategies, or other factors.  Xl- ` x 12.` ` Mergers, acquisitions, consolidations and corporate restructuring are important  x[causes of change in industry structure and in the intensity of market competition. As we have  xinoted in prior reports, cable operators trade and swap systems to form regional clusters of service">2 ,-(-(ZZ"  X- xareas.S7 {Oy-ԍxId. at 137.S Broadcasters are consolidating station operations and ownership in record numbers.GZZ7 {O -  MԍxSee, e.g., Radio Rules Debated, Television Digest, Feb. 17, 1997 (DOJ Acting Antitrust Chief Joel Klein  x states that more than 1000 radio stations have been involved in transactions in the year following passage of the 1996 Act).G  X- xAnd, two Regional Bell Operating Company mergers have been announced.|7 {O-  jԍxPacific Telesis Group and SBC Communications, Inc., Memorandum Opinion and Order, FCC 9728, Report  {O- xNo. LB9632, 1997 WL 49594, Jan. 31, 1997; Public Notice, Bell Atlantic Corporation and NYNEX Corporation  {O - xSeek FCC Consent for Proposed Transfer of Control, Pleading Cycle Established (CCB Aug. 14, 1996); Public  {Ot - xNotice, Common Carrier Bureau Declares Bell AtlanticNYNEX Transfer of Control Proceedings `Restricted' for Ex  {O> -Parte Purposes, Tracking No. 960221, DA 961727 (CCB Oct. 18, 1996). The Commission  xseeks information on such events, their effects on industry structure, and impact on markets for  xthe delivery of video programming. In particular, we solicit maps that show the ownership  xpatterns that have resulted from industry restructuring. We also request information on the effects of these changes on competition in markets for the delivery of video programming.  X_-x` ` 2.  Vertical Integration  X1- ` % x 13.` ` In the 1997 Competition Report, we will update information on existing and  xplanned programming services, with particular focus on those programming services that are  x>affiliated with video programming distributors. Thus, we seek information on programming  xservices that are affiliated with cable operators, affiliated with other noncable video  xprogramming distributors, and unaffiliated with any MVPD. In particular, we seek information on:  X- ` _x(a) ` ` existing national and regional programming services, and the extent to which they  ` ~are affiliated with cable operators or other MVPDs, including the percentage of  ` ownership or amount and type of interest by each MVPD, the date such interest was acquired, and any changes since last year; (#`  X- ` Bx(b)` ` national and regional programming service launches and announced launches during the past year, and their MVPD affiliations;(#`  X- ` x(c)` ` the number of subscribers or nationwide share of subscribers for: (1)independent  ` programming networks; (2)national cable programming networks distributed by  ` Pcable systems; (3)national cable programming networks distributed by noncable  ` MVPDs; (4)national programming networks affiliated with noncable MVPDs  ` odistributed by cable systems; and (5)national programming networks affiliated with noncable MVPDs distributed by noncable distribution systems;(#` "N 6 ,-(-(ZZ"Ԍ X- ` 3Xx(d)X` ` the number of subscribers or market share of subscribers for: (1)independent  ` regional programming networks; (2)regional cable programming networks  ` distributed by cable systems; (3)regional cable programming networks distributed  ` by noncable MVPDs; (4)regional programming networks affiliated with non ` cable MVPDs distributed by cable systems; and (5)regional programming  ` networks affiliated with noncable MVPDs distributed by noncable distribution systems;(#`  XH- `  Xx(e)X` ` the extent to which national and regional programming services have affiliations with actual or potential MVPD competitors;(#`  X - ` EXx(f)X` ` audience ratings, prime time or all dayparts, of national and regional programming services;(#`  X - ` ~ Xx(g)X` ` whether a minimum level of subscribership is necessary to successfully launch  ` $new national and regional programming networks, whether there is a minimum  ` _subscribership level necessary for these networks to break even and survive, and  ` whether these levels vary depending on whether the new programming network  ` Ais vertically integrated with a MVPD. Have any national or regional programming  ` networks been launched exclusively on noncable distribution systems? Are there entry barriers that affect the launch of new programming networks? (#`  X- ` x(h)` ` the extent to which video programming distributors are acquiring proprietary  ` _rights, such as the purchase of sports teams, and the competitive strategy behind such acquisitions; and(#`  X- ` @Xx(i)X` ` changes in the relationships between program producers/providers and distributors,  ` nincluding whether producers/providers are paying for carriage on MVPDs instead  ` of being paid license fees by MVPDs, and, if so, what services are involved.  ` }What are the implications of such arrangements for competition and the supply of programming?(#`  X - ` x 14.` ` As in prior reports, we also will update the effectiveness of our program access,  X - xprogram carriage, and channel occupancy rules.\ 7 {O -  ԍx1996 Competition Report at 14966; 1995 Competition Report, 11 FCC Rcd 213542 15772; 1994  {OL!- xCompetition Report, 9 FCC Rcd at 752022, 752836 15859, 17398. The program access, carriage and channel occupancy rules govern relationships between cable operators and programming providers. In the 1996 Competition Report, we noted that  xthe program access rules, which are intended to ensure access by noncable MVPDs to satellite  xxdelivered programming produced by companies affiliated with cable operators, have been credited  X - xas a necessary factor in the development of DBS and MMDS.[ 7 {Oc&-ԍx1996 Competition Report at 150.[ We also observed, however, a  xconcern that the program access rules may be too narrowly focused to address some current"! ~,-(-(ZZ "  xissues related to access to programming. In addition, we note that the 1996 Act expanded the  xprogram access rules to apply to OVS operators and common carriers in the same manner as they  X- xyapply to cable operators.U7 yOK-ԍx47 C.F.R. 76.1004, 76.1507.U Therefore, we seek information on the effectiveness of the program  xaccess rules during the past year, including the effect of expansion of these rules to OVS  xjoperators and common carriers, and on any remaining issues of concern to video programming  xproviders or MVPDs. We request information that would help in assessing whether the program  xiaccess rules should be expanded or contracted in their coverage. We seek comment on the extent  x\to which there are programming distribution networks affiliated with noncable MVPDs and  xwhether such programming networks are available to competing MVPDs, including cable operators, on reasonable and nondiscriminatory terms.  X - ` 4x15.` ` We also seek comment on our leased access rules.} X7 yO -  ԍxThe leased access rules require cable operators to set aside channel capacity for commercial use of cable  {O- xby unaffiliated programmers. 47 C.F.R. 76.701, 76.970, 76.971, 76.975, 76.977. See also Implementation of  xSections of the Cable Consumer Protection and Competition Act of 1992: Rate Regulation Leased Commercial  {Of- x-Access, MM Docket No. 92266, Order on Reconsideration of the First Report and Order and Further Notice of Proposed Rulemaking, 11 FCC Rcd 16933 (1996).} In particular, we seek  x]comment on the impact of our recent revision of the formula for calculating the maximum  X - x{reasonable rate for leased access& 7 {O-  ԍx Implementation of Sections of the Cable Television Consumer Protection and Competition Act of 1992:  {O\- xLeased Commercial Access, CS Docket No. 9660, Second Report and Order and Second Order on Reconsideration  {O&- xof the First Report and Order, FCC 9727 (Feb. 4, 1997), summarized at 62 Fed. Reg. 11362 (Mar. 12, 1997). A petition for reconsideration is pending. on the carriage of leased access programming and on  x[competition in markets for the delivery of video programming. We specifically request data on  xKthe number of channels being used for leased access programming and the types of programming  xoffered on such channels. We also seek information on the extent to which leased access channels are used on a part time, rather than full time, basis. x  WK< xD.` ` Effect of Competition in Local Markets  (#`  X- ` x16.` ` In the 1996 Competition Report, we examined several case studies of local markets  X- xKwhere cable operators faced actual competition from MVPD entrants,b 7 {O -ԍx1996 Competition Report at 20133.b and found that incumbent  xcable operators were generally responding to competitive entry in two ways: increasing their  X- xservice offerings and lowering their prices.N 7 {O$-ԍxId. at 22931.N We seek updated information on the effects of  xyactual and potential competition in these local markets and in others where consumers have, or  x/soon will have, a choice between MVPDs. In particular, we seek information on incumbent  xMVPDs responses to anticipated and actual entry by competing MVPDs. Do the competitive" ,-(-(ZZ`"  xresponses focus on rates or on efforts to differentiate program service, technical performance or  xzcustomer service? In addition, we request identification of particular strategic behavior and  x/conduct by other MVPDs that affect competition in markets characterized by headtohead competition between or among MVPDs.  X- ` x17.` ` We also noted in the 1996 Competition Report that laws, regulations, and strategic  xkbehavior by incumbents can create impediments to entry and competition in markets for the  xjdelivery of video programming, and endeavored to briefly assess our efforts to reduce some of  XJ- x/those impediments.OJ7 {O -ԍxId. at 185200.O For example, we discussed our efforts regarding local restrictions on  X3- xreceiving equipment,G3Z7 {O> -ԍxId. at 186.G inside wiring rules,N 37 {O -ԍxId. at 18991.N and pole attachments.M!3~7 {Ob-ԍxId. at 195.M We request information  xregarding other existing or potential regulatory impediments that may have the effect of deterring  xLentry or preventing expansion of competitive opportunities in video program delivery markets.  X - ` x18.` ` In addition, we ask commenters to identify specific statutory provisions that are  xperceived as advancing or inhibiting competition or that have differential application and may  xdistort competition among MVPDs, or that restrain competitive opportunities within markets for  xthe delivery of multichannel video programming. Commenters are requested to provide specific  xjexamples of why or how such statutory provisions are not procompetitive. We seek comment  x.on such provisions regardless of whether they directly relate to the existing jurisdiction of the  xCommission if it is believed they effect competition in the MVPD market. Further, we ask  xcommenters to identify specific Commission rules, policies or regulations that ought be  xreexamined in light of current competitive opportunities within multichannel video programming markets.  X-  X-III.xIMPLEMENTATION OF THE TELECOMMUNICATIONS ACT OF 1996  X- ` bx19.` ` A number of the provisions of the 1996 Act were intended to encourage  X- xcompetition in markets for the delivery of video programming.g"7 yOV!-ԍxH.R. Rep. No. 104458, 104th Cong., 2d Sess. 1 (1996).g The 1996 Competition Report  x.described the Commission's actions through 1996 to implement the provisions of the 1996 Act  xthat were expected to affect competition in markets for the delivery of video programming. In  XR- xthat report, we also discussed the initial effects of the revised regulatory policy on competition.  xIn the 1997 Competition Report, we would like to update our assessment of the effects of the  x various provisions of the 1996 Act on the status of competition. We seek comment on the impact of these various regulatory changes described below on competition. "  ",-(-(ZZ["Ԍ X- ` ԙx20.` ` There are ten specific changes from the 1996 Act relating to competition in video markets on which comment would be useful:  X-  ]xOVS. Section 653 of the Communications Acte#7 yO4-ԍxSection 651(a)(3)(4), 47 U.S.C. 571(a)(3)(4).e provides a new means of entering video  xprogramming market under the "open video system" ("OVS") rules. The new "OVS" framework  xpermits telephone companies and other providers of multichannel video programming to offer  xtheir own programming directly to subscribers provided they simultaneously offer to provide  xtransmission services to unaffiliated programming providers. The Commission has promulgated  XH- xxrules pursuant to this new statutory provision$HX7 {OQ -  ԍxImplementation of Section 302 of the Telecommunications Act of 1996 (Open Video Systems), CS Docket  {O - xNo. 9646, Report and Order and Notice of Proposed Rulemaking, 11 FCC Rcd 14639 (1996); Implementation of  {O - xSection 302 of the Telecommunications Act of 1996 (Open Video Systems), CS Docket No. 9646, Second Report  {O - xand Order, 11 FCC Rcd4652, (1996); Implementation of Section 302 of the Telecommunications Act of 1996 (Open  {Oy- xVideo Systems), CS Docket No. 9646, Third Report and Order and Second Order on Reconsideration, 11FCC Rcd  {OC- x20227 (1996); Implementation of Section 302 of the Telecommunications Act of 1996 (Open Video Systems), Second  {O - xOrder on Reconsideration, FCC 97129, 1997 WL 180209 (Apr. 15, 1997); Implementation of Section 302 of the  {O- xTelecommunications Act of 1996 (Open Video Systems), CS Docket No. 9646, Fourth Report and Order, FCC 97130  {O-(Apr. 15, 1997), summarized atĠ 62 Fed. Reg. 26235 (May 13, 1997). that are intended to facilitate both facilities based  xmarket entry and programming competition. The Commission has approved nine applications  xfor certification of proposed OVS operations. Of these applications, one was made by a LEC  x=and eight by others. We seek information on the plans of LECs and others with respect to the provision of video programming using the OVS rules.  X -  xPreemption of restrictions on overtheair reception devices. Section 207 of the 1996 Act  xdirected the Commission to "promulgate regulations to prohibit restrictions that impair a viewer's  xiability to receive video programming services through devices designed for overtheair reception  xof television broadcast signals, multichannel multipoint distribution service, or direct broadcast  Xb- x-satellite services."D%b: 7 yOM-ԍx1996 Act, sec. 207.D This provision is intended to ensure that consumers have access to a broad  x[range of video programming services and to foster competition among different types of video  xprogramming services. In response to this provision, the Commission promulgated rules that  X- xpreempt government and nongovernment restrictions on the installation of receiving equipment.& 7 {O -   ԍxSee Implementation of Section 207 of the Telecommunications Act of 1996 Restrictions on OvertheAir  {Ob!- xReception Devices: Television Broadcast and Multichannel Multipoint Distribution Service, CS Docket No. 9683,  {O,"- xNotice of Proposed Rulemaking, 11 FCC Rcd 15097 (1996). Petitions for reconsideration are pending. See also  xReport and Order and Further Notice of Proposed Rulemaking on Preemption of Local Zoning Regulation of Satellite  {O#- xEarth Stations, IB Docket No. 9559, Report and Order and Further Notice of Proposed Rulemaking, 11 FCC Rcd  yO$-5809 (1996).   x/What effect has the implementation of this provision had on competition in the markets for delivery of video programming? " J&,-(-(ZZ"Ԍ X-  mxChange in cable television definition. Section 602(7) of the Communications Act was  X- xMamended by the 1996 Act to narrow the definition of a cable system to exempt facilities that  x=serve buildings under different ownership, control, or management, provided that the facilities  X- xdo not use public rightsofway.'Z7 yO4-  ԍx1996 Act, sec.301(a)(2) (codified as Communications Act 602(7), 47 U.S.C.  22(7)). The redefinition  xeffectively eliminated the commonly owned building requirement for a SMATV system serving multiple buildings.  {O-This redefinition was recommended in the 1994 Competition Report, 9 FCC Rcd at 7558 252. Thus, it provided that a SMATV operator can expand service  xjto MDUs with different owners without obtaining a cable franchise, provided that the operator  xdoes not use a public rightofway. We request comment on the effect of this revised definition  x<on competition. Specifically, we seek information about any actual or planned entry or expansion by SMATV operators that was stimulated by this new provision in the law.  X1-  @xNew "effective competition" definition. Section 623 of the Communications Act was  xamended by 1996 Act to broaden the definition of effective competition so that the cable service  xrates of an incumbent cable operator are deregulated when a LEC or its affiliate (or any MVPD  xusing the facilities of such carrier or its affiliate) offers comparable video programming in the  X - xlocal franchise area by any means other than direct to home satellite ("DTH") services.( 7 {Op-  ԍx1996 Act, sec. 301(b)(3). See Implementation of Cable Act Reform Provisions of the Telecommunications  {O:-Act of 1996, CS Docket 9685, Order and Notice of Proposed Rulemaking, 11 FCC Rcd 5937 (1996). We  xjrequest comment on the effect of this change on competition and data on the rates charged for cable service in areas where LEC effective competition exists.  X-  Xy-  !xChanges in rate regulation provisions. A number of provisions of the 1996 Act directly  xaffect the cable industry and the regulation of its rates. Section 301(c) of the 1996 Act contains  ximmediately effective deregulatory provisions for small cable system operators, defined as cable  X4- xoperators in franchise areas where they serve 50,000 or fewer subscribers. )4F7 yO+-  /ԍx1996 Act, sec. 301(c). This deregulation is limited to the cable programming service ("CPS") tier unless the operator had only a single tier as of December 31, 1994, in which case all tiers are deregulated.  Section301(b) of the  xZ1996 Act contains deregulatory provisions for large cable system operators that take effect within  X- x!three years of enactment of the 1996 Act.*7 yOU-ԍx1996 Act, sec.301(b) (codified as Communications Act 623(m), 47 U.S.C. 543(m)). We request comment on the effect of these  xprovisions on competition and on the rates charged for cable service compared to those charged by competing MVPDs.  X-  xRate competition in multiple dwelling units. Section 623(d) of the Communications Act  xNcontains provisions that generally require cable operators to charge uniform rates in the  xgeographic areas they serve. This provision was amended in the 1996 Act so that it is"|. *,-(-(ZZ"  X- xZinapplicable to nonpredatory bulk discounts to MDUs.d+\7 {Oy-  ԍx1996 Act, sec.301 (codified as Communications Act 623(d), 47 U.S.C. 543(d). See Implementation of  {OC- xjCable Act Reform Provisions of the Telecommunications Act of 1996, CS Docket 9685, Order and Notice of Proposed Rulemaking, 11 FCC Rcd 5937 (1996).d We seek comment on the development  xin competition in MDUs and on the consequences of this change. How are these developments affecting competition?  X-  4xCompetition in MVPD "navigation" equipment markets. Section 629 of the  xCommunications Act was added in the 1996 Act and contains provisions to encourage  xcompetition in MVPD equipment markets. This section requires the Commission to adopt  xregulations to assure the commercial availability of navigation equipment, such as converter  x-boxes, interactive communications equipment and other equipment used by consumers to access  X1- xzmultichannel video programming services.,17 yO -ԍx1996 Act, sec.304 (codified as Communications Act 629, 47 U.S.C. 549). However, the Commission must not jeopardize  xsecurity of video programming services or impede the prevention of theft of service. To fulfill  X - xthis statutory requirement, the Commission adopted a Notice of Proposed Rulemaking seeking  X - xcomment on technical and economic issues related to the commercial availability of equipment.r-^ |7 {O-  lԍxImplementation of Section 304 of the Telecommunications Act of 1996 Commercial Availability of  {O- xNavigation Devices, CS Docket No. 9780, Notice of Proposed Rulemaking, FCC 9753 (Feb. 20, 1997), summarized  {O-at 62 Fed. Reg. 10011 (Mar. 5, 1997).r  xWe seek comment on developments in the equipment markets involved as they relate to this statutory provision.  X-  "xPublic utility company market entrants. Pursuant to Section 103 of the 1996 Act, the  xCommission established rules that enable public utility holding companies to enter into  xtelecommunications, information services and video markets and has approved exempt  XM- xtelecommunications company status for 24 companies..\M7 yO-  ԍx1996 Act, sec.103 (codified as Public Utility Holding Company Act of 1935  34, 15 U.S.C. 79z5c);  {Oh- xwImplementation of Section 34(a)(1) of the Public Utility Holding Company Act of 1935, as added by Section 103 of  {O2-the Telecommunications Act of 1996, GC Docket No. 96101, Report and Order, 11 FCC Rcd 11377 (1996). We seek information on the existing or  xpotential entry of public utility holding companies into the video marketplace and their effect on competition.  X-  ]xPole Attachment Regulation. Section 703 of the 1996 Act expands the application of the  x!pole attachment rate formula to include telecommunications carriers in addition to cable  X- xsystems./ 7 yOQ#-ԍx1996 Act, sec. 703 (codified as Communications Act 224, 47 U.S.C. 224). Section 224(a)(4) of the Communications Act now defines "pole attachment" as "any  xattachment by a cable system or provider of telecommunications service to a pole, duct, conduit,  X- xKor rightofway owned or controlled by a utility."J0m 7 yO&-ԍx47 U.S.C. 224(a)(4).J However, poles, ducts, conduits, or rightsof" 0,-(-(ZZQ"ԫ xyway owned or controlled by any railroad, cooperative, or any federal or any state entity are not  X- xconsidered utilities for this purpose and are exempt from this regulation.J17 yOb-ԍx47 U.S.C. 224(a)(1).J We seek comment  xon the effect on competition that this exemption has on entities offering telecommunications  xservices, including video services. In particular, we seek information to demonstrate whether the  xrates charged for pole attachments by cooperatives and municipalities, especially in rural areas,  X-impede or promote competition.2X7 {O-  ԍxSection 257 Proceeding to Identify and Eliminate Market Entry Barriers for Small Businesses, GN Docket No. 96113, Report, FCC 97164 175 (May 8, 1997).  X_-  xElimination of entrance barriers for entrepreneurs and small businesses. Finally, pursuant  XH- xzto Section 101 of the 1996 Act,3H7 yO -ԍx1996 Act, sec.101 (codified as Communications Act 257, 47 U.S.C. 257).Ĉ the Commission has instituted a proceeding to identify and  xeliminate market entry barriers for entrepreneurs and other small businesses in the provision and  X - xownership of telecommunications services.4 B7 {O -  ԍxSection 257 Proceeding to Identify and Eliminate Market Entry Barriers for Small Businesses, GN Docket No. 96113, Report, FCC 97164, (May 8, 1997). We seek comment on this provision in the context of general competitive developments in the markets for the delivery of video programming.  X - IV.xVIDEO DESCRIPTION  X - ` x21.` ` In our Video Accessibility Report to Congress required by Section 713(f) of the  xzCommunications Act, we concluded that the record before us was insufficient to assess the  X{- xappropriate methods and schedules for phasing video description into the marketplace.f5{7 yO-  LԍxCongress directed the Commission to commence an inquiry within six months of the enactment of the 1996  xAct and to report to Congress on its findings, including an assessment of the appropriate methods and schedules for  xphasing video descriptions into the marketplace, technical and quality standards for video descriptions, a definition  x,of programming for which video descriptions would apply, and other technical and legal issues that the Commission deems appropriate. 47 U.S.C. 613(f).f Video  xdescription is an aural description of a program's key visual elements that are inserted during the  xjnatural pauses in the program's dialogue. It generally describes an action that is otherwise not  X6- xkreflected in the dialogue such as the movement of a person in a scene.}66L 7 {O3!-ԍxSee Video Accessibility Report, 11 FCC Rcd at 1925354 9495.} We decided in our  X- xReport that the best course was to continue to monitor the deployment of video description and  xthe development of standards for new video technologies that will afford greater accessibility of  x/video description. We further stated that in the context of the 1997 Competition Report we  xmwould gather and evaluate information regarding the deployment of secondary audio"6,-(-(ZZ"  X- xprogramming ("SAP") channelsY7D7 yOy-  ԍxVideo description requires the development of a second script and is transmitted using the SAP channel.  yOA- xjThe SAP channel allows for the delivery of a third audio track for a program in addition to the monaural and  xwstereophonic audio tracks. In order for a viewer to access the SAP channel, he or she must have a television or VCR  xZequipped to receive this channel. A consumer who has a television or VCR with SAP capability can activate this  xfeature to receive the video description or other audio, if available, in lieu of the primary soundtrack. At this time,  xhowever, not all broadcast television stations or other video distributors are able to transmit the SAP channel and  {O)- xJonly about half of the nation's homes have televisions or VCRs with the capability to receive the SAP channel.  See  {O-Video Accessibility Report, 11 FCC Rcd at 1925657 10005. Y and digital technology that will enable video providers and programmers to include video description.  X- ` x22.` ` In the Video Accessibility Report, the Commission found that any schedule for  xexpanding the use of video description depends, in part, on implementation of advanced digital  xtelevision which can make the distribution of additional audio channels feasible and facilitate the  Xx- ximplementation of video description.M8x7 {O-ԍxId. at 19270 139.M We concluded that funding also will effect any schedule  xfor the widespread use of video description since it appears that advertising support alone is  XJ- xunlikely to be sufficient to fund this service, given the costs involved.D9Jf 7 {Oa-ԍxId. 140.D Furthermore, we stated  xithat there are certain legal issues, such as copyright matters, that remain unresolved and are likely  X -to require a Federal reassessment of the applicability of existing laws.P: 7 {O-ԍxId. at 1927071 141.P  X - ` x23.` ` Accordingly, we seek data and information here regarding video description that  xwill permit us to provide Congress with additional findings on methods and schedules for  xLproviding greater accessibility to persons with visual disabilities. We request information and  xcomment on developments regarding the implementation of video description of video  X- xprogramming since the Video Accessibility Report was submitted to Congress. We specifically  xzsolicit data on the number of broadcast television stations and MVPDs currently capable of  xtransmitting and decoding a SAP signal and data on the costs of adding this capability. We  x<request information regarding the cost of providing video description for video programming and  xMpossible funding mechanisms. We also seek information on whether the implementation of  xdigital technologies will provide additional audio channels that would increase the feasibility of  xvideo description. We further ask commenters to focus on the specific methods and schedules  xfor ensuring that video programming includes descriptions, technical and quality standards and  x<other relevant legal and policy issues. Moreover, we request comment on any efforts by persons  x-with disabilities and the video programming industries regarding coordination in new technology  xstandard setting and funding mechanisms. We will use this additional record to better assess  X-those issues that were not fully addressed in the Video Accessibility Report.  Xk- "k :,-(-(ZZ"  X-V.xPROCEDURAL MATTERS x  X- ` x24.` ` This Notice is issued pursuant to authority contained in Sections 4(i), 4(j), 403, 613  xand 628(g) of the Communications Act of 1934, as amended. Pursuant to applicable procedures  xset forth in Sections 1.415 and 1.419 of the Commission's Rules, 47 C.F.R. 1.415 and 1.419,  X- xinterested parties may file comments on or before July 23, 1997, and reply comments on or  Xx- xbefore August 20, 1997. To file formally in this proceeding, participants must file an original  xand four copies of all comments, reply comments and supporting comments. If participants want  xeach Commissioner to receive a personal copy of their comments, an original plus nine copies  xmust be filed. We also encourage commenters to include a computer disk copy of their  xkcomments with their official filings whenever possible, as this will allow the comments to be  xeasily transferred to the Commission's Internet site. Submissions on disk should be on 3.5 inch  xdiskettes, formatted for Windows 3.1. These filings should be in WordPerfect 5.1 for Windows  X - xformat with the whole submission contained in one file. Comments and reply comments should  xjbe sent to the Office of the Secretary, Federal Communications Commission, Washington, D.C.  xM20554. Comments and reply comments will be available for public inspection during regular  xNbusiness hours in the FCC Reference Center (Room 239) of the Federal Communications Commission, 1919 M Street, N.W., Washington, D.C. 20554.  XM- ` $x25.` ` There are no ex parte or disclosure requirements applicable to this proceeding  X6-pursuant to 47 C.F.R.  1.1204(a)(4).@ x  X- ` Bx26.` ` Further information on this proceeding may be obtained by contacting Marcia  xGlauberman in the Cable Services Bureau at (202) 4187200 or Rebecca Dorch in the Office of General Counsel at (202) 4181880. XxX` ` X XXhhFEDERAL COMMUNICATIONS COMMISSION(#h x` ` X XXhhWilliam F. Caton(#h x` ` X XXhhActing Secretary