WPCbE 2 BJ Z urier3|x 2x6X@`7X@HP LaserJet 4_230_1HPLAS4.PRS 4x  @\oeX@2 6FZ  3|x CourierCG Times^ f ^;C]ddCCCdCCCCddddddddddCCY~~vCN~sk~CCCddCYdYdYCdd88d8ddddJN8ddddYYdYd4dddddCddddddddd8YYYYYY~Y~Y~Y~YC8C8C8C8ddddddddddYdddddsdXdXXXddx|X~d~d|XdddddddC8ddddCdoddd|8|H~d<|8dtddddHHdlLlLlLkd|H|8~ddddddddXXXd~ddkd~ddxCddCCCWxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxNdddCYQQddddddFddddFCChhd44ddzzdddvooChdF"dhd9dCCzCddoddCdYds]zUvdYYCCCCz~ozoY~NYdYC8YooYdYzsdzdd~YYzozzz~CdzYzzzzCCdddddddzCsdYC\   pxtll\tll@\@\`LHP4M; Local Printer; LPT1tional)HL4MPCAD.PRSx  @\!vX@2RB f F 0vlh",tB^ f ^;C]ddCCCdCCCCddddddddddCCY~~vCN~sk~CCCddCYdYdYCdd88d8ddddJN8ddddYYdYd4dddddCddddddddd8YYYYYY~Y~Y~Y~YC8C8C8C8ddddddddddYdddddsdXdXXXddx|X~d~d|XdddddddC8ddddCdoddd|8|H~d<|8dtddddHHdlLlLlLkd|H|8~ddddddddXXXd~ddkd~ddxCddCCCWxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxNdddCYQQddddddFddddFCChhd44ddzzdddvooChdF"dhd9dCCzCddoddCdYds]zUvdYYCCCCz~ozoY~NYdYC8YooYdYzsdzdd~YYzozzz~CdzYzzzzCCdddddddzCsdYC\   pxtll\tll@\@\`LCourierCG TimesCG Times ItalicCourier Italica8DocumentgDocument Style StyleXX` `  ` 2opkk_a4DocumentgDocument Style Style . a6DocumentgDocument Style Style GX  a5DocumentgDocument Style Style }X(# a2DocumentgDocument Style Style<o   ?  A.  2vt %a7DocumentgDocument Style StyleyXX` ` (#` BibliogrphyBibliography:X (# a1Right ParRight-Aligned Paragraph Numbers:`S@ I.  X(# a2Right ParRight-Aligned Paragraph Numbers C @` A. ` ` (#` 2   M  a3DocumentgDocument Style Style B b  ?  1.  a3Right ParRight-Aligned Paragraph Numbers L! ` ` @P 1. ` `  (# a4Right ParRight-Aligned Paragraph Numbers Uj` `  @ a. ` (# a5Right ParRight-Aligned Paragraph Numbers _o` `  @h(1)  hh#(#h 2d$ !"d#a6Right ParRight-Aligned Paragraph Numbersh` `  hh#@$(a) hh#((# a7Right ParRight-Aligned Paragraph NumberspfJ` `  hh#(@*i) (h-(# a8Right ParRight-Aligned Paragraph NumbersyW"3!` `  hh#(-@p/a) -pp2(#p Tech InitInitialize Technical Style. k I. A. 1. a.(1)(a) i) a) 1 .1 .1 .1 .1 .1 .1 .1 Technical2"'$f%%t&a1DocumentgDocument Style Style\s0  zN8F I. ׃  a5TechnicalTechnical Document Style)WD (1) . a6TechnicalTechnical Document Style)D (a) . a2TechnicalTechnical Document Style<6  ?  A.   2)T''(c)a3TechnicalTechnical Document Style9Wg  2  1.   a4TechnicalTechnical Document Style8bv{ 2  a.   a1TechnicalTechnical Document StyleF!<  ?  I.   a7TechnicalTechnical Document Style(@D i) . 2=0*3*+e/a8TechnicalTechnical Document Style(D a) . Doc InitInitialize Document Stylez   0*0*0*  I. A. 1. a.(1)(a) i) a) I. 1. A. a.(1)(a) i) a)DocumentgPleadingHeader for Numbered Pleading PaperE!n    X X` hp x (#%'0*,.8135@8:><q*"xxxxWWxxxWWkkxxxK,H6X@`7h@ ?xxx,!x6Nhez7XH&High&Medium&DraftDo &Not PrintCopiesBy&WordPerfect2`E Y-#Xw PE37XP# D#Xw PE37XP#May 26, 1995 `&(#<DA 951175 Wesley R. Heppler, Esq. Paul Glist, Esq. Cole, Raywid & Braverman 1919 Pennsylvania Avenue, N.W. Washington, D.C. 200063458 Dear Mr. Heppler and Mr. Glist: This is in response to your letters of August 8, September 19, and October 28, 1994 on behalf of "numerous cable television programmers and operators," seeking clarification that in requesting approval of external programming cost pass throughs on the basic level of service pursuant to Section 76.922(d)(3) of the Commission's rules, cable television operators are not required to provide individual programming contracts that are confidential in nature to local franchising authorities. In order to provide local authorities with sufficient information to conduct the necessary review while maintaining the confidentiality of the contracts in question, you suggest use of a process similar to that previously adopted by the Commission in the SCIS Disclosure Order, 7 FCC Rcd 1526 (1992). You state that programming contracts between cable operators and programmers are nearly always confidential and that there would be practical and legal problems associated with maintaining the confidentiality of these contracts if franchising authorities are permitted to examine them. First, you state that with distribution of these contracts to a large number of franchising authorities, it would be impossible to maintain the confidentiality of these contracts. Second, you state that, in certain states, municipalities do not have the legal ability to maintain confidentiality because there is no recognition of the confidentiality of financial data and proprietary business information in those states and such information must, therefore, be treated as public information. Further, you state that programmers likely will seek to enforce the contract confidentiality provisions in these contracts and cable operators may be prevented from disclosing these contracts to franchising authorities. In light of these concerns, you recommend that a cable operator could provide support for the aggregate programming cost increases contained in the FCC Form 1210 by providing a certification from an independent accounting firm retained by the operator as to the appropriate programming cost increases or decreases. If the franchising authority wants further verification, you recommend that the franchising authority be permitted to ask the Commission to make an in camera review of the contracts. "(0*0*0*0*"Ԍ Under your proposed procedures, the firm making the certification would have to be a recognized and established accounting firm and the cost of the certification would be borne by the cable operator. The accounting firm would review the relevant programming contracts and calculate the appropriate programming cost increases or decreases. In making 3'3'Letterhead)HL4MPCAD.PRSx  3'3'Standardd)HL4MPCAD.PRSx  hڰ its independent verification, the accounting firm would, as necessary, complete the following tasks:  Y_-XX` ` 1. X Reconcile the accuracy of the number of subscribers from appropriate billing reports.(#  Y -X` ` 2.  Recalculate the "Cost of Old Programming per Tier" through a review of all programming contracts and contract rate cards.(#  Y -XX` ` 3. X Recalculate current programming cost through a review of all programming contracts and rate cards as of the appropriate regulatory external pass through quarterly date.  Yy-XX` ` 4. X Review channel line up cards for each relevant time period to determine changes in channels per tier. For each tier, recompute the programming cost calculations required by Module B in Form 1200 or Form 1210.(#  Y-XX` ` 5. X At the conclusion of the above procedures, if differences are found, the specific differences must be noted in the independent accountant's report.(# In conducting its independent verification, the accounting firm would follow the auditing standards adopted by the American Institute of Certified Public Accountants, Inc. for "Special Reports Applying AgreedUpon Procedures to Specified Elements, Accounts, or  Ye-Items of a Financial Statement." See Statement on Auditing Standards No. 35. If, after receiving the accounting certification from the cable operator, the local franchising authority desired further verification of programming costs, you propose that the  Y -franchising authority could request that the Commission undertake an in camera review of the programming contracts at issue. Upon such a request, a cable operator would be required to submit these contracts to the Commission for review. Local franchising authorities could not delay making their decision on the FCC Form 1210 while the request  Y!-for in camera review was pending before the Commission. Upon completion of an in  Y"-camera review of the contracts, the Commission would determine the accuracy of the Form 1210 figures supplied by the cable operator. The local authority would then be notified of  Yp$-the Commission's findings. If the Commission's in camera review ultimately determined"p$0*((%" that the programming cost figures provided by the cable operator were inaccurate,  Y-appropriate refunds and/or forfeitures could be ordered. J;> Yb<ԍ #Xw PE37XP#We have received several letters from cable programmers in support of your  YK-proposal and the reasoning that underlies it. (See Letters of Turner Broadcasting System, Inc., dated December 2, 1994; Arts & Entertainment Network, dated December 6, 1994; Lifetime Television, dated December 7, 1994; USA Networks, dated December 8, 1994; Black Entertainment Television, dated December 9, 1994; The Disney Channel, dated December 12, 1994; ESPN, Inc., dated December 13, 1994; and Donna C. Gregg of Wiley, Rein & Fielding, on behalf of E! Entertainment Television, Inc., dated December 19, 1994, forwarding letter of E! Entertainment Television, Inc., dated December 16, 1994.)   Y-We have received several letters objecting to your proposal.$x;> YF <ԍ #Xw PE37XP#See Letters from Mr. Joseph Van Eaton of Miller, Canfield, Paddock and Stone, client not identified, dated October 20, 1994; Mr. John W. Pestle and Mr. Patrick A. Miles of Varnum, Riddering, Schmidt & Howlett, on behalf of "over 200 franchising authorities," dated October 27, November 29 and December 5, 1994; and Mr. Norman M. Sinel of Arnold & Porter, on behalf of the National Association of Telecommunications Officers and Advisors, dated November 4, 1994.$ Among the objections raised in one or more of the responses are the following:  Yv-` ` 1. Your proposal conflicts with our rate regulation rules, which provide that local franchising authorities will have access to cable operators' proprietary information, even though such information may be publicly released pursuant to state or local law. (#  Y -` ` 2. There can be no modification of that policy without a formal rulemaking.(#  Y -XX` ` 3.X The 1992 Cable Act requires that rates be reviewed and set by local franchising authorities and the Commission, not by private parties.(#  Yy-XX` ` 4.X There is no reason why programming contracts should be treated differently from other proprietary information handled daily by state and local regulatory bodies.(#  Y-` ` 5. There is no evidence that local franchising authorities are not competent  Y-to maintain the confidentiality of programming contracts. (#  Y-XX` ` 6.X There is no evidence that cable operators are contractually bound to withhold the terms of programming contracts, or that such agreements would be legally enforceable.(# "0*((~"Ԍ Y-ԙXX` ` 7.X There is no evidence of the alleged harm from disclosure of programming contracts, because much of the purportedly sensitive information is already available to cable competitors.(#  Y-XX` ` 8.X The periodic disclosure of programming contracts would foster competition and keep rates down by requiring cable operators to disclose their rates, thus permitting other cable operators and other multichannel video programming distributors to bargain more effectively for similar terms and conditions.(#  Y -XX` ` 9.X Accounting firms hired by cable operators would not be impartial arbiters, but would be biased in the cable operators' favor.(#  Y -XX` ` 10.X In camera Commission review would only extend the already protracted rate review process, and further tax the Commission's limited resources.(# ` ` After careful consideration of the various submissions, we decline to address the merits of your proposal here in the absence of a rulemaking proceeding. In our Third Order on Reconsideration of cable rate regulation, released March 30, 1994, we reaffirmed that local franchising authorities had the right to collect additional information including  Y-proprietary information that is "reasonably necessary to make a rate determination." (See  Y -Third Order on Reconsideration ("Order"), 9 FCC Rcd. 4316 (1994), at  7778.) ;> Y-#Xw PE37XP#эWe also stated that, in appropriate circumstances, the right of access to proprietary information could extend to other parties in a rate proceeding, and that franchising authorities should adopt procedures or protective agreements to ensure that the proprietary information  Y>-would not be disclosed to the public. (Order at  78, n. 42.) In obtaining proprietary information, we required franchising authorities to state clearly the reason each request was needed, and where related to an FCC Form 393 (and/or FCC form 1200/1205), to indicate the question or section of the form to which the request specifically  Y-relates. (Order at  77.) Once proprietary information is submitted, the Order specifically held that the confidentiality of such information should be determined on the state and local level, notwithstanding the fact that the operation of certain state or local laws might lead to the information's public disclosure: XX` ` We find it neither necessary nor desirable to preempt state and local laws governing access to information. Rate regulation of basic cable services has been designated by the Congress and this Commission as an essentially local matter, and it involves local businesses providing local services. Local (including state)"!40*(("" governments have instituted access laws to govern the confidentiality of the business information of the business entities in their respective jurisdictions as they have seen fit for their particular circumstances and interests. We see no reason sufficiently compelling to override that prerogative.x`  Yv-(Order at  79.)]v;> Y<ԍ #Xw PE37XP#These holdings were codified in 47 C.F.R.  76.938: "A franchising authority may require the production of proprietary information to make a rate determination . . . Public access to such proprietary information shall be governed by applicable state or local law."] No Petitions for Reconsideration were filed on this issue. In essence, your proposal would require us to issue a blanket exemption from our general rules for a single type of allegedly proprietary information i.e., programming contracts. Whatever the merits of that proposal, we believe that its adoption would constitute a clear modification rather than simply a clarification of the Commission's rules. We decline to consider such an action here without providing public notice and an opportunity for comment.  Nevertheless, we wish to emphasize that the Commission's ruling provides that franchising authorities may only request information that is "reasonably necessary" to their  Yy-ratesetting function. (Order at  77.) We believe that confidential programming contracts may contain a substantial amount of information that does not meet that standard, the production of which would unnecessarily risk the disclosure of sensitive business information. We therefore expect local franchising authorities to be judicious in their requests for programming contracts, to make sure that the information is needed, and to narrow their requests, if appropriate, to permit cable operators to submit only the specific information required. We urge franchising authorities and cable operators to adopt procedures that will achieve the proper balance between the franchising authority's right to review relevant information and the cable operator's interest in maintaining the confidentiality of sensitive business information. ` `  hh,VSincerely, ` `  hh,VMeredith J. Jones ` `  hh,VChief, Cable Services Bureau   O    O "!40*((""Ԍ Y-cc:Mr. Joseph Van Eaton, Esq. Mr. John W. Pestle, Esq. Mr. Norman M. Sinel, Esq. Mr. Nickolas Davatzes (A & E Network) Ms. Jane Tollinger (Lifetime Television) Mr. Stephen A. Brenner (USA Networks) Ms. Maurita K. Coley (BET) Mr. Frederick Kuperberg (Disney Channel) Mr. Bertram W. Carp (Turner Broadcasting) Mr. Mark Feldman (E! Entertainment Television) Ms. Donna C. Gregg, Esq. Mr. Edwin M. Durso (ESPN)