1) $//MO&O Denying KXLI's channel positioning request DA-95-63//$ 2) $/300.534 Channel positioning rights of local commercial television signals/$ 3) $/76.61 Disputes concerning carriage/$ 4) $/76.57 Channel Positioning/$ ///newjob/// $///DA 95-63, 1/20/95///$ Before the Federal Communications Commission Washington, D.C. 20554 DA-95-63 In re: ) ) Complaint of KX Acquisition, ) CSR-4165-M L.P. against KBL Cablesystems ) of Minneapolis L.P. and KBL ) Cablesystems of Southwest, Inc. ) both d/b/a Paragon Cable ) ) Minneapolis ) MN0180 Eden Prairie ) MN0196 Edina ) MN0917 Hopkins ) MN0198 Richfield ) MN0199 Minnetonka ) MN0200 ) Request for Channel Positioning ) MEMORANDUM OPINION AND ORDER Adopted: January 18, 1995 Released: January 25, 1995 By the Cable Services Bureau: SUMMARY OF PLEADINGS 1. On December 7, 1993, KX Acquisition L.P., licensee of KXLI-TV, Channel 41, St. Cloud, Minnesota ("KXLI"), filed the present complaint asking the Commission to require KBL Cablesystems of Minneapolis L.P. and KBL Cablesystems of Southwest, Inc. both d/b/a Paragon Cable ("Paragon") to reposition the KXLI's signal from channel 41 to channel 13 on the operator's systems serving Minneapolis, Eden Prairie, Edina, Hopkins, Richfield, and Minnetonka, Minnesota. Two parties filed oppositions to KXLI's channel positioning complaint: Paragon, the cable operator, opposed the complaint on January 6, 1994, and Twin Cities Public Television, Inc., licensee of noncommercial television station, KTCI-TV, Channel 17, St. Paul, Minnesota, ("TCPT" or "KTCI") filed an opposition on January 11, 1994. KXLI filed a consolidated reply on January 21, 1994 countering the arguments raised by both Paragon and KTCI in their oppositions. On February 7, 1994, KTCI filed a motion for leave to file a response to KXLI's reply, in addition to its response. On February 23, 1994, KXLI filed an opposition to KTCI's motion for leave to file a response, in addition to its motion to strike KTCI's response. 2. In its complaint, KLXI states it is a local commercial television station affiliated with the Home Shopping Network and that it is entitled to carriage on cable systems within the Minneapolis-St. Paul (St. Cloud), Minnesota ADI. According to KXLI, Paragon's cable systems are also located within the same ADI. KXLI argues that while it is now carried on channel 41, its over-the-air channel assignment, it has elected and is entitled to carriage on channel 13 on Paragon's cable systems because it occupied that channel assignment on July 19, 1985. KXLI asserts that the 1992 Cable Act and the Commission's rules give home shopping stations the right to select the channel position they occupied on that date, among other options. It contends that the Cable Act and our rules give it a clear legal priority to channel 13 over KTCI, the noncommercial television station which currently occupies that channel position through a mutual agreement with Paragon. Lastly, KXLI claims that "Paragon has offered no 'technical' reason why KXLI's election of channel position thirteen (13) cannot be accommodated." 3. KXLI details the following events in its complaint and related attachments. On May 12, 1993, KXLI sent Paragon its request for carriage, asking for channel 13 since that was the position it held on July 19, 1985. KXLI noted that while it was a "Home Shopping" station and was not then entitled to carriage, it considered changing its programming format by October 1, 1993 so that it could qualify as a must carry signal. On June 2, 1993, Paragon notified area broadcasters of their channel positions on its cable systems; this letter indicated that KXLI was not being carried. On June 16, 1993, KXLI responded to this notice with another request for carriage on channel 13, again noting its home shopping affiliation and reiterating its proposed format change. 4. On August 11, 1993, KXLI renewed its request for carriage and channel positioning on channel 13, this time as a "Home Shopping Network" affiliate following the Commission's new signal carriage ruling concerning home shopping stations. On September 7, 1993, without a response from the cable operator, and learning from newspaper articles and other sources that its signal was being carried on channel 41, KXLI notified Paragon of its failure to meet its channel positioning obligations. On October 25, 1993, Paragon responded to that notice and formally rejected the request for carriage on channel 13. KXLI then filed its complaint with the Commission after negotiations failed to resolve the dispute. 5. In its opposition, Paragon states that KXLI's complaint should be rejected because it conflicts with the channel positioning rights of KTCI. Paragon explains that in February 1991, it secured channels 15 to 22 on its cable systems with a mid-band trap to allow subscribers to choose among multiple levels of cable service without the need for converters. As a result of the trapping, Paragon repositioned KTCI from its over-the-air location on channel 17 to channel 13 so that the station could be available to all subscribers on the basic tier. KTCI guaranteed its channel positioning right to channel 13 through a mutual agreement with Paragon in April, 1993. Paragon asserts that forcing KTCI to be carried on channel 17 would require the removal of traps and undermine Paragon's ability to offer multiple levels of service. Paragon also notes that it did not "bump" KXLI when it relocated KTCI to channel 13 in 1991 because lost this cable channel slot when it went off-the-air in 1988. Finally, Paragon argues that, as a home shopping station, KXLI did not have signal carriage rights when it first elected channel 13 in June, 1993 and that when it could validly assert its rights after the Commission's home shopping station decision was released, it was too late because KTCI's request was first in time. Paragon urges the Commission to reject the complaint and maintain the status quo because this approach would be the least disruptive, especially for subscribers. 6. In its opposition, TCPT also asks the Commission to reject KXLI's channel positioning complaint. TCPT asserts that repositioning KXLI to channel 13 "will cause substantial disruption" to the audiences which watch KTCI and will impair the station's ability to serve minority and other special audiences residing in the Minneapolis, MN ADI with its "unique and distinctive" programming. TCPT explains that KTCI has occupied channel 13 for nearly three years and has developed a following among the operator's 116,000 cable subscribers over that time. TCPT then states that it reached a mutual agreement with Paragon regarding carriage of KTCI on channel 13 and that it would be "manifestly unfair" to allow KXLI to disrupt this channel positioning agreement at such a late date. TCPT also adds that Congress could not have intended, when it adopted Section 614(b)(6) of the Cable Act, "to require cable operators to displace a local television station in order to allow a television station to reclaim a channel position it lost because it went off-the-air." TCPT urges the Commission to treat KXLI as a new station and assign it to channel 41, its over-the-air channel position. 7. In its consolidated reply, KXLI asserts that it has the sole legal right to cable channel 13 because it was carried on that channel on July 19, 1985 and that KTCI does not have any statutory claim to channel 13 because the Commission's rules allow it to select only its over- the-air channel (channel 17) or the channel on which it was carried on July 19, 1985 (channel 3). It adds that nothing in the Commission's rules or the 1992 Cable Act suggests or permits a channel positioning agreement between a station and a cable operator to preclude the channel positioning rights of another must carry signal. KXLI also asserts that Paragon was on notice that it would assert its right to cable channel 13 because of the notifications it sent on May 12 and June 16, 1993 and that any agreements made between Paragon and TCPT for that channel directly contradict KXLI's rights. It also notes that, contrary to Paragon's characterization, KXLI's requests to work with the operator to resolve the situation amicably have met with nothing but resistance. 8. KXLI then claims that the arguments made by Paragon and TCPT in their oppositions are irrelevant or exaggerated. As an example, KXLI points out that while TCPT asserts the grant of KXLI's complaint will cause it hardship, it notes that the station earlier expressed no specific preference for channel 13. KXLI also attacks the amount and kind of programming KTCI broadcasts and then claims that the nature of KTCI's programming bears no relationship to the statutory scheme adopted by Congress for channel positioning rights. As for Paragon, KXLI argues that the cable operator has not presented any evidence to suggest that it cannot technically comply with its channel positioning obligations. Finally, KXLI argues that Paragon and KTCI are in effect asking the Commission to waive KXLI's statutory right to choose the cable channel on which its station was carried on July 19, 1985. It adds that the Commission has no power or authority to waive section 614(b)(6) of the 1992 Cable Act as it applies to KXLI. 9. In its motion for leave and response, TCPT attempts to correct KXLI's characterization of its legal arguments and KXLI's description of the programming service offered by KTCI. TCPT argues that, contrary to KXLI's stance, the 1992 Cable Act gives noncommercial stations the right to negotiate a channel position with the cable operator and that such an agreement has the same statutory weight as KXLI's claim based on its carriage in July 1985. TCPT adds that since the Paragon-TCPT agreement implements the Commission's recommendation that broadcasters and operators should continue carrying stations in their current cable channels, the Commission cannot give KXLI a higher priority than KTCI. KTCI then asserts that KXLI's arguments about its programming should be ignored because the services the station provides serves the unique needs of minority residents in Minneapolis and surrounding communities. To support its position, KTCI recites several programming examples. 10. In its opposition to motion for leave and motion to strike, KXLI advances procedural and substantive arguments against KTCI. First, it asserts that KTCI's motion for leave should be denied because it is an unjustified attempt to argue new matters after the official pleading cycle has ended. KXLI claims that KTCI's unofficial pleading does not correct mischaracterizations but only advances a position it neglected to address in its opposition, namely, that mutual channel positioning agreements between operators and noncommercial stations are valid under Section 615(g)(5) of the 1992 Cable Act. KXLI then argues that KTCI's description of its programming has no relevance to this proceeding since they are not related to the issue of whether Paragon violated Section 76.57(a) of the Commission's rules. In addition, KXLI claims that KTCI's assertion that its programming serves the communities in its area is irrelevant because no connection is shown between the programming and the need to be placed on channel 13. For these reasons, KXLI requests that KTCI's response should be stricken and disregarded in this proceeding. DISCUSSION 11. On October 5, 1992, the Cable Television Consumer Protection and Competition Act of 1992 ("1992 Cable Act" or "Cable Act") became law. On March 11, 1993, the Commission adopted a Report and Order to implement the mandatory broadcast signal carriage ("must-carry") provisions of the Cable Act. Pursuant to the rules adopted in the Report and Order, cable systems were required to commence carriage of local broadcast stations entitled to must-carry status beginning June 2, 1993. By June 17, 1993 local broadcast stations were required to make their initial election of either must-carry or retransmission consent status and notify cable systems of their election. Those broadcast stations which elected must-carry status were required to notify the cable system of their preferred channel position at that time. Cable systems were required to commence carriage of noncommercial stations on December 4, 1992, the effective date of the 1992 Cable Act. Unlike their commercial counterparts, noncommercial stations are required to affirmatively demand carriage. 12. The 1992 Cable Act, however, did not immediately grant signal carriage rights to commercial television stations "predominantly utilized for the transmission of sales presentations or program length commercials" ("home shopping stations"). Rather, Congress instructed the Commission to commence a rulemaking to determine if the mandatory carriage of home shopping station signals served the public interest, convenience, and necessity. On July 2, 1993, the Commission adopted the Home Shopping Station Report and Order holding that home shopping stations are operating in the public interest and are qualified as local commercial television stations for the purposes of cable carriage. This order required affected television stations to assert their must carry rights within 30 days after publication of the rules in the Federal Register, which occurred on July 22, 1993. 13. The Cable Act and our rules offer three channel options available to a commercial broadcast station electing must-carry: 1) a station may elect to be carried on its over-the-air channel; or 2) on the channel on which it was carried on July 19, 1985; or 3) on the channel on which it was carried on January 1, 1992. For a noncommercial broadcast station, the Cable Act and our rules offer two channel options: 1) its over-the-air channel or 2) the channel on which it was carried on July 19, 1985. The statute and our rules also provide that a broadcast station may be carried "on such other channel as is mutually agreed upon by the station and the cable operator." 14. While we read the 1992 Cable Act and the Commission's Rules to unambiguously state that there are two options--not three--available to a noncommercial broadcasters, the language of the statute also specifically allows cable operators and noncommercial broadcasters to mutually agree upon a different channel. This mechanism allows the two to negotiate a channel positioning option outside of the two proposed by the 1992 Cable Act's provisions. It is simply a way of saying that the parties have the flexibility to reach a result different from the two statutory options. 15. We therefore agree with Paragon and TCPT that the channel positioning agreement reached between the parties is valid and enforceable. We believe that mutual agreements between cable operators and commercial or noncommercial television stations have as much weight as the other channel positioning options under the 1992 Cable Act and our rules. Once an agreement is consummated, the channel positioning rights vest in the broadcast station. In this case, once KTCI acceded to channel 13 as its channel position by mutual agreement between itself and Paragon, the station can claim it to the exclusion of others. 16. We also believe that a broadcast station which first asserts a valid claim to a channel position has a legal priority over all stations subsequently requesting that same channel position. While we declined to adopt a formal priority structure for resolving conflicting channel positioning claims in our Report and Order, we did discuss a comparable first-in- time rule in our July 15, 1993, Clarification Order with regard to "default" must carry stations (i.e. those stations which did not affirmatively elect must carry status). In that Order we determined that, in the event of a conflict, stations making affirmative carriage elections have channel positioning priority over default stations because those making an election were first to take action to enforce their rights. 17. Here, we extend the logic of the Clarification Order to encompass situations where a qualified television broadcast station affirmatively asserts its channel positioning rights prior to other non-qualified television broadcast stations. On April 20, 1993, KTCI elected carriage on Paragon's cable systems and agreed to be positioned on channel 13. Subsequently, on May 12 and June 13, 1993, KXLI "elected" carriage and also chose channel 13 as its preferred channel position. However, KXLI did not have any must carry or channel positioning rights prior to our adoption of the Home Shopping Station Report and Order in July, 1993. Thus, its request for channel 13 in its May and June correspondence to Paragon had no force or effect. While it is true that Paragon was put on notice of KXLI's intentions, this point is inconsequential since KTCI, a qualified noncommercial television station, had acted first to enforce its carriage and channel positioning rights. 18. Similarly, we believe that Paragon has met its channel positioning obligations by placing KXLI on that station's remaining statutory choice. It is important to point out that KXLI is now carried by Paragon on channel 41, its over-the-air channel assignment. This channel position is one of the three options provided to full power commercial television stations by the 1992 Cable Act and the Commission's rules. We note that this is not the kind of situation which Congress attempted to remedy through the grant of channel positioning rights. That is, there is no evidence that Paragon has wielded its market power to the detriment of KXLI and unfairly reshuffled the station to several different channel positions on the cable system to serve its own needs. KXLI cannot claim it is disadvantaged by being placed on a cable channel it could have chosen under the law. 19. Finally, in our Report and Order, we recommended that cable operators and affected broadcast stations give serious consideration to the value of maintaining current channel positions. We reasoned that maintaining the status quo would be the least disruptive approach, particularly for subscribers. We believe that preserving the existing channel order on Paragon's several systems would be in the public interest because it reduces the possibility of any subscriber confusion. 20. In view of the above, the complaint filed KX Acquisition, L. P., licensee of KXLI- TV IS DENIED, in accordance with 614 of the Communications Act of 1934, as amended. See 47 U.S.C. 534. This action is taken pursuant to authority delegated by 0.321 of the Commission's rules, 47 C.F.R. 0.321. FEDERAL COMMUNICATIONS COMMISSION William H. Johnson Deputy Chief, Cable Services Bureau