NOTICE ********************************************************* NOTICE ********************************************************* This document was originally prepared in Word Perfect. If the original document contained-- * Footnotes * Boldface & Italics --this information is missing in this version The document format (spacing, margins, tabs, etc.) is changed too. If you need the complete document, download the Word Perfect version. For information about downloading documents (FTP) see file how2ftp. File how2ftp (.txt & .wp) is in directory \pub\Public_Notices\Miscellaneous. ***************************************************************** ******** FOR FCC RECORD ONLY $//Denver Area Educational Telecom. Cons. vs. TCI et al., MO&O, DA 95-2261//$ $/76.975(h) Request for Waiver from Proposed Leased Access Rates/$ Before The FEDERAL COMMUNICATIONS COMMISSION Washington, D. C. 20554 DA 95-2261 In the Matter of ) Petition for Relief of ) ) DENVER AREA EDUCATIONAL ) TELECOMMUNICATIONS. CONSORTIUM, INC., ) Petitioner, ) ) vs. ) CSR 4595-L ) TELECOMUNICATIONS, INC., TCI OF COLORADO, INC., ) TCI CABLEVISION OF CENTRAL CONNECTICUT, TCI ) CABLEVISION OF COLORADO, INC., TCI CABLEVISION OF ) FLORIDA, INC., TCI CABLEVISION OF LOS ANGELES ) COUNTY, TCI CABLEVISION OF OAKLAND COUNTY, INC., ) TCI CABLEVISION OF SANTA CRUZ COUNTY, ) TRIBUNE-UNITED CABLE OF OAKLAND COUNTY, UNITED) ARTISTS CABLE ADVERTISING, UNITED ARTISTS CABLE ) CORPORATION OF EAST SAN FERNANDO VALLEY, UNITED ) CABLE TELEVISION OF BALDWIN PARK, INC., UNITED) CABLE TELEVISION OF BALTIMORE, L.P., UNITED CABLE ) TELEVISION OF JEFFERSON COUNTY, INC.,UNITED CABLE ) TELEVISION OF LOS ANGELES INC., UNITED CABLE ) TELEVISION OF SANTA CRUZ, INC., UNITED CABLE ) TELEVISION CORPORATION OF EASTERN CONNECTICUT,) UNITED CABLE TELEVISION OF COLORADO, INC., UNITED ) CABLE TELEVISION OF EAST SAN FERNANDO,LTD., UCTC ) OF LOS ANGELES COUNTY, INC., HERITAGE CABLEVISION ) OF TENNESSEE, INC., MOUNTAIN STATES VIDEO, ) MOUNTAIN STATES VIDEO, INC., MOUNTAIN STATES VIDEO ) COMMUNICATIONS CO. INC., COLORADO CABLEVISION ) COMPANY AND AMERICAN TELEVENTURE, INC., ) Respondents, ) ) For Leased Access Channels ) MEMORANDUM OPINION AND ORDER Adopted: October 31, 1995 Released: October 31, 1995 By the Chief, Cable Services Bureau: I. Introduction 1. On September 26, 1995, the Denver Area Educational Telecommunications Consortium, Inc. (herein "DAETC") filed a petition for special relief, pursuant to 47 C.F.R.  76.7 and 76.795, against Tele-Communications, Inc. and the other companies listed in the caption (herein collectively called "TCI") for violations of 47 C.F.R.  76.970. DAETC alleges that TCI has violated Section 76. 970 by increasing its rates for leased access channels in excess of the level permitted by Section 76.970. DAETC also filed concurrently with its petition an emergency petition for waiver of 47 C.F.R.  76.975(h), which would permit carriage of its leased access programming on seven of the TCI cable systems listed in the caption without full payment of the new rates, pending resolution of the underlying petition for relief. 2. On October 4, 1995, The Commission released a Public Notice of the petition for special relief and of the emergency petition. The Public Notice invited persons wishing to file comments regarding the emergency petition to do so no later than October 13, 1995 and to file reply comments no later than October 18, 1995. With regard to the underlying petition, comments were invited to be filed no later that November 3, 1995. 3. An opposition, responding both to the petition for special relief and to the emergency petition for waiver, was filed on behalf of TCI on October 13, 1995. DAETC filed a reply on October 18, 1995 addressing TCI's opposition to the emergency petition. 4. In this order we address only the emergency petition. Because we find that DAETC is not likely to succeed on the merits of its underlying petition, we deny the emergency petition for waiver. We will address in full the underlying petition for relief following expiration of the comment period provided by the Public Notice. II. Background 5. In 1984, Congress amended the Communications Act of 1934 by adding among other things a commercial leased access requirement, pursuant to which cable operators with 36 or more activated channels must set aside part of their channel capacity for use by programmers that are not affiliated with them. The Cable Television Consumer Protection and Competition Act of 1992 (the "1992 Cable Act") revisited the leased access requirement and directed the Commission to establish, among other things, rules for determining maximum reasonable rates, and reasonable terms and conditions, for commercial leased access. Pursuant to that Congressional directive, the Commission established regulations applicable to leased access channels in its proceedings in Implementation of Sections of the Cable Television Consumer Protection and Competition Act of 1992; Rate Regulation, MM Docket 92-266, (the Rate Order), 8 FCC Rcd 5631 (1993), at paras. 531-538. The leased access regulations relevant to this case are found at 47 C.F.R.  76.970 and 76.975. 6. In the Rate Order, the Commission developed procedures that cable operators must follow to determine the maximum reasonable rate that a cable operator may charge any non- affiliated programmer for leased access. Sections 76.970(b), (c) and (d) of the rules describe the methodology to be used by cable operators for calculating a maximum reasonable rate for leased access channels. This methodology uses (a) the rates subscribers pay per channel for the services they receive and (b) the rates cable operators pay nonaffiliated programmers for programming (other than leased access programming) provided to subscribers. The difference between these two amounts is deemed to be the implicit fee that nonaffiliated programmers pay to be carried on the cable system. The highest implicit net fee thus determined becomes the maximum monthly rate that the operator may charge a programmer for leased access. 7. Section 76.975 provides procedures for the resolution of disputes involving leased access channels. Subsection (h) of that section provides that, during pendency of a dispute, a party seeking commercial leased channel capacity shall comply with the rates, terms and conditions prescribed by the cable operator. III. The Pleadings A. DAETC's Emergency Petition for Waiver of Section 76.975(h) 8. DAETC states that it is a nonprofit corporation that has been providing public affairs programming since 1989 on leased access channels on the basic tier of seven TCI cable systems in six major cable markets: Baltimore; Boulder and parts of the Denver suburbs; portions of suburban Detroit; parts of Los Angeles; Santa Cruz County, California, and some of the suburbs of Hartford, Connecticut. DAETC states that it is a completely advertiser supported programmer that receives no revenue from cable subscribers, and that its programming, denominated "The 90's Channel," does not carry home shopping or pay-per- view programming. 9. DAETC further states that it is currently serving approximately 600,000 subscribers under a channel lease agreement providing for carriage on the seven TCI cable systems. That agreement, which will expire October 31, 1995, is said to contain a confidentiality clause precluding disclosure of other terms of that agreement. DAETC states that requests for waiver of the confidentiality clause have been refused by TCI and that it cannot disclose how much it is currently paying for carriage. DAETC states further that it will be required by TCI to pay new rates that total over $240,000 each month to continue carriage after the October 31, 1995 expiration date, and that this amount is three times its total "surplus" for the fiscal year ended June 30, 1995 and 75% of its total revenue of $318,008 for the same period. DAETC asserts that it cannot afford to pay anything close to the proposed new rates and that, absent special relief, it will suffer irreparable injury by being forced to go off the air on October 31, 1995. 10. The emergency petition seeks a waiver of Section 76. 975(h) and an order that, pending resolution of the merits of the underlying petition, DAETC be permitted, instead of paying the rates proposed by TCI, (a) to pay a flat fee to each system, consisting of a proration of its entire annual surplus based on each systems proposed rates, or (b) to give TCI the right to sell 50% of available advertising spots on DAETC channels, or (c) to give TCI 50% of advertising revenue earned by DAETC from each channel. B. DAETC's Petition for Special Relief 11. DAETC's underlying petition requests an order requiring TCI to produce for Commission review all TCI documentation purporting to support its proposed new leased access rates to verify whether TCI's new rates have been calculated correctly under Section 76.970. DAETC also seeks a ruling (a) establishing that it may be charged a negative amount (i.e., receive payments from TCI), equal to the lowest per subscriber fee that TCI currently pays to a non-affiliated programmer on the same tier as The 90's Channel (the basic tier), and (b) finding that the current lease agreement between DAETC and TCI established a market rate in DAETC's services area. DAETC seeks an alternative ruling, in the event it is determined that TCI's rates are consistent with Section 76.970, suspending application of Section 76.970, enjoining TCI from charging rates calculated in accordance with Section 76.970, revising the fee formula to provide that leased access operators are entitled to payments equal to the lowest per subscriber fee paid by the operator to a non-affiliated programmer on the corresponding tier, barring cable operators from charging rates in excess of prevailing market rates, and finding that DAETC's existing agreements establish a market rate in its service area. C. TCI's Response to the Petitions 12. As noted earlier, TCI's opposition addresses both the emergency petition as well as the underlying petition for relief. TCI states that during the six years that DAETC's programming has been offered it consisted of two hours of taped programming each week, until recently when DAETC began to provide four hours of programming each week. Between weekly tape changes, TCI states that the same programming runs continuously, twenty-four hours a day, seven days a week, except that on weekends the programming may include several hours of infomercials. TCI states that DAETC's programming is currently being carried in the seven cable systems pursuant to two litigation settlement arrangements, the most recent of which expires on October 31, 1995. 13. TCI states that it provided DAETC with proposed rates for the respective systems between February 6, 1995 and July 14, 1995, and that, in three instances, it provided revised rates based on corrected calculations following the filing of the petition. The quoted rates are as follows: City of Baltimore, Maryland $ 38,924.44* Denver Metro Headend (Basic) 109,033.56 Denver Metro Headend (Basic Expanded) 105,904.67 East San Fernando portion of the City of Los Angeles 28,331.00 Baldwin Park, Hacienda Heights, South Whittier La Puente 10,707.00 and Pico River, California Auburn Hills, Oakland, Rochester, Rochester Heights, 22,250.87* Troy, Berkeley, Clawson, Ferndale, Huntington Woods, Pleasant Ridge, and Royal Oak, Michigan Santa Cruz, Scotts Valley and Unincorporated Santa 15,522.00 Cruz County, California Vernon, Connecticut 8,341.49* ____________ * Rates as revised after the filing of the petition. 14. TCI defends these proposed rates by asserting that they have been determined in accordance with requirements of Section 76.970. It states that the rates for each cable system were calculated as follows: Monthly per channel charge to the customer less lowest monthly cost of programming (per service) equals per channel charge for leased access. Per channel charge for leased access multiplied by service level penetration equals leased access rate per subscriber. Leased access rate per subscriber multiplied by the number of subscribers equals total per channel charge. According to TCI, the rate calculations for the seven systems, which are accompanied by affidavits of respective company officials, show that the rates proffered to DAETC are not higher than the highest implicit net fees charged to non-affiliated programmers. 15. TCI asserts that merely because the proposed rates are higher than DAETC would like to pay does not mean that the rates are wrong nor does it provide any evidence that the highest implicit fees have been calculated incorrectly. Having calculated the rates in compliance with Section 76.970, TCI argues that it is irrelevant that they may be increased over what DAETC has been paying under the settlement arrangements. 16. Addressing the emergency waiver request in particular, TCI states that it has offered to carry DAETC's programming during the pendency of the dispute on a non- repetitive basis, for four hours, once a week, during the three prime time hours and one prime time fringe hour either before or after prime time. TCI states further that it will accept in the interim a rate equal to the allowed maximum monthly rate prorated to the four hours offered and without any upward adjustment for daypart, for carriage on the seven systems currently carrying the programming. TCI asserts that, therefore, it has not refused to carry DAETC's programming during pendency of the dispute, and that a "life and death" issue is not presented, but that DAETC has refused that offer. 17. TCI argues that the leased access provisions of the 1992 Cable Act are designed to promote competition and diversity in the delivery of video programming in a manner consistent with growth and development of cable systems, citing 47 U.S.C. 532(a). TCI asserts that the requested waiver in this case would not promote programming competition, because real competition comes only from commercially viable entities. It asserts that, after six years on TCI's systems, DAETC's programming has not established commercial viability, as made clear by DAETC's statements of inability to pay the proposed leased access rates. TCI asserts that the lack of commercial viability of DAETC's programming is further evidenced by the fact that, to its knowledge, no cable system, DBS, MMDS or wireless cable system, or commercial or public broadcast station is carrying DAETC's programming, other than TCI's seven systems where it is carried only pursuant to litigation settlement arrangements. TCI states that it has information that DAETC's programming may be carried on PEG channels in two locations, Boulder, Colorado and Alameda, California. TCI also asserts that the requested waiver, which would require continued repetitive showing of the four hour tape, is not required to achieve an element of video program diversity here. 18. TCI also asserts that requiring it to accept the payments offered by DAETC in lieu of the $240,000 implicit net fee value of the channel would result in imposition of irreversible penalties. TCI asserts that DAETC's admitted inability to pay the proposed charges strongly suggests that it would never recover the revenues lost from non-payment of the proposed charges, in the event that those charges are approved in this proceeding. TCI states in this connection that programming it is considering as replacements for DAETC's commercially inviable programming includes C-SPAN II, Faith and Values Channel, Home and Garden TV, Black Entertainment Television, Mind Extension University, and GEMS (Hispanic programming). IV. DAETC's Reply to the Opposition 19. In reply, DAETC reasserts its claim that it will be irreparably harmed by being effectively forced off the air if required to pay the rates TCI seeks to charge. It asserts that TCI would suffer no such injury, arguing that TCI has not shown that other programming stands ready to take the vacated channel at the charges TCI proposes. DAETC contends that it is likely to prevail on the merits because TCI's rates are so high as to be unaffordable by anyone, and that they defeat the purpose of the Commission's rules. It asserts that there are no other programmers on TCI's systems paying such rates. DAETC disagrees with the analysis of the waiver standard offered by TCI, asserting that TCI's offer to cut its air time some 98% hardly promotes diversity. It asserts that TCI's argument that competition can come only from commercial viability is completely circular, arguing that there is no such thing as a commercially viable leased access programmer and cannot be under rates established as TCI has done. V. Discussion 20. We have authority to waive the requirements of Section 76.975(h) if there is "good cause" to do so. 47 C.F.R. 1.3. However, we may exercise that discretion only where particular facts would make compliance with the underlying rule inconsistent with the public interest as expressed by the rule itself. A waiver is appropriate only if the particular facts presented here warrant the requested departure from the requirements of Section 76.975(h). To grant such departure, we must be able to articulate the nature of those special circumstances and explain how that departure will serve the public interest. The facts of this case do not permit us to conclude that a waiver is appropriate. 21. An essential part of DAETC's argument in support of its waiver request is that TCI's leased access rates are so high that it is unlikely to succeed in demonstrating that they have been determined in a manner consistent with Section 76.970. After a preliminary review of the information provided with TCI's response, we can find no merit in that argument. 22. The information submitted by TCI makes a prima facie showing that TCI developed its leased access rates in compliance with Section 76.970. It shows in each case that TCI properly subtracted the monthly cost of the lowest priced nonaffiliated programming on the system from the system's monthly per channel charge. It then multiplied that result by the service level penetration percentage, and then multiplied the resulting product by the number of subscribers of the respective systems. That is precisely the procedures required by Section 76.970(c). On the basis of that showing we find, preliminarily, that TCI appears to have followed the procedures prescribed by Section 76.970 and that the resulting monthly rates do not exceed the maximum net implicit fee in any case. It also appears that TCI is likely to succeed in demonstrating that the leased access rates proposed for the seven cable systems currently carrying DAETC's programming on a twenty-four, seven day a week basis have been determined in a manner consistent with Section 76.970. Because the weekly four hour programming tapes produced by DAETC may still be presented on these cable systems on a part time leased access channel at a fraction of the cost of a full time leased access channel, we have no reason to conclude that DAETC's programming cannot still be made available or that DAETC will be forced out of business, absent grant of the requested waiver. Also, we note that TCI has offered to carry the programming on a non-repetitive basis at a prorated rate during the pendency of this case. 23. DAETC argues that it presents a case similar to that presented in United Broadcasting Corp. v. TCI TKR of South Dade, Inc., 9 FCC Rcd. 3034 (Cable Ser. Bur. 1994), and United Broadcasting Corp.v. Rifkin/Narragansett S. Fl., L.P., 9 FCC Rcd. 3651 (Cable Ser. Bur. 1995), where waivers of Section 76. 975(h) were granted, pending resolution of underlying petitions for relief. However, the cases are distinguishable. First, in both of those cases, although the contracts under which the programming was being carried on the cable systems had expired, carriage was being continued under informal interim arrangements with the respective cable systems at the time the petitions were filed. Here, after existing contractual arrangements expire, no interim operating arrangements appear to have been agreed to. Also, the cited cases each involved only one cable system, whereas this case involves seven cable systems serving more that 600,000 subscribers in communities in disparate sections of the country. Further, unlike the cited cases, none of the interim payments DAETC has offered are reducible to specific monthly dollar amounts. For these reasons, it is not possible for us to conclude that the circumstances which permitted us to waive the requirements of Section 76.975(h) in those other cases are sufficiently present to permit the same conclusion here. VI. The Petition for Relief 24. We emphasize that this order addresses only the emergency petition and the matters raised therein in support of the request for waiver of Section 76.975(h). We will address the underlying petition for relief on the merits following expiration of the time provided by the Public Notice for the filing of comments thereon. VII. Ordering Paragraphs 25. For the foregoing reasons, IT IS ORDERED, pursuant to authority delegated by 0.321 of the Commission's rules, 47 C.F.R.  0.321, that the emergency petition of Denver Area Educational Telecommunications Consortium, Inc. IS DENIED. FEDERAL COMMUNICATIONS COMMISSION Meredith J. Jones Chief, Cable Services Bureau