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File how2ftp (.txt & .wp) is in directory /pub/Bureaus/Miscellaneous/Public_Notices/ ***************************************************************** ******** $// MO&O, Cable Act of 1992, DA 96-282//$ $/ 1.106 Petitions for Reconsideration /$ $/ 76.1002 Specific Unfair Practices Prohibited /$ $/ 76.1003 Adjudicatory Proceedings /$ Before the FEDERAL COMMUNICATIONS COMMISSION Washington, D.C. 20554 DA 96-282 In the Matter of: ) ) CELLULARVISION ) OF NEW YORK, L.P. ) CSR 4478-P ) v. ) ) SPORTSCHANNEL ASSOCIATES ) ) Petition for Reconsideration -- ) Program Access ) ORDER ON RECONSIDERATION Adopted: March 4, 1996 Released: March 12, 1996 By the Chief, Cable Services Bureau: I. Introduction 1. In this Order, we deny the Petition for Reconsideration ("Petition") of SportsChannel Associates ("SportsChannel") filed on September 20, 1995. In its Petition, SportsChannel seeks reconsideration of a memorandum opinion and order issued by the Cable Services Bureau (the "Bureau"). The Order requires SportsChannel to sell its programming to CellularVision of New York, L.P. ("CellularVision"), a wireless, cellular-based multichannel video delivery system, on non-discriminatory terms within 45 days from the release date of the Order. For the reasons set forth below, we deny SportsChannel's Petition. II. The Bureau's Order 2. On August 24, 1995, the Bureau released an order responding to CellularVision's program access complaint against SportsChannel alleging discrimination in the sale of SportsChannel New York ("SCNY") satellite cable programming. The Bureau found that SportsChannel discriminated against CellularVision in the sale of SCNY programming in violation of Section 628(c)(2)(B) of the Communications Act and Section 76.1002(b) of the Commission's rules by unreasonably refusing to sell SCNY programming to CellularVision. The Bureau found that CellularVision had met its burden as complainant under the program access provisions by showing that: (i) SportsChannel is a vertically integrated satellite cable programming vendor that meets the attribution standards outlined in the Commission's rules; and (ii) SportsChannel had engaged in some form of non-price discrimination between CellularVision and other competing multichannel video programming distributors. The Bureau further found that SportsChannel did not meet its burden of establishing that it had a legitimate business reason for refusing to sell its SCNY programming to CellularVision. In particular, the Bureau found that SportsChannel's demand for adequate assurances that CellularVision's signal security system will protect SportsChannel's SCNY programming was reasonable. However, the Bureau also concluded that CellularVision had adequately addressed SportsChannel's concerns and that SportsChannel had no reasonable basis for its continued objection to CellularVision's signal security system. Thus, the Bureau found that SportsChannel did not have a legitimate business reason for refusing to provide SCNY programming to CellularVision. As a result, the Bureau ordered SportsChannel to sell its SCNY programming to CellularVision on non- discriminatory terms within 45 days from the release date of the Order. III. SportsChannel's Petition 3. SportsChannel, in its Petition, makes a two-pronged argument to support its assertion that the Bureau's Order must be vacated. First, SportsChannel argues that the factual predicate underlying the Bureau's Order is absent. That factual predicate, according to SportsChannel, is that CellularVision would implement the full capabilities, both video and audio encryption, of the Video PassPort signal security system manufactured by Titan Information Systems Corporation ("Titan") within a reasonable time after issuance of the Bureau's Order. CellularVision currently employs only the video encryption capability of the Video PassPort system. SportsChannel states that in preparing a licensing proposal for CellularVision following the release of the Bureau's Order, SportsChannel sought to confirm that CellularVision would be upgrading its signal security system to utilize both the audio and video encryption capabilities of the Video PassPort system within a reasonable period of time. In a letter to CellularVision dated September 13, 1995, SportsChannel requested that CellularVision "confirm that [it] will begin utilizing the full capabilities of the Video PassPort system no later than January 1, 1996." SportsChannel further states that CellularVision has taken the position that it is under no obligation to utilize the full capabilities of the Video PassPort system within a reasonable period of time. SportsChannel argues that because CellularVision will not provide any assurances that it will ever employ the full capabilities of the Video PassPort system, the factual predicate underlying the Bureau's Order is absent and the Bureau's Order therefore must be vacated. 4. Second, SportsChannel argues that the Order must be vacated because it effectively denies SportsChannel the opportunity to exercise its business judgment about the adequacy of CellularVision's signal security system. SportsChannel contends that the Bureau, in its Order, disregards SportsChannel's judgments regarding its signal security needs and substitutes the Bureau's own assessment of those needs. According to SportsChannel, the practical effect of the Bureau's Order is to nullify a programmer's ability to impose as a condition of carriage "reasonable requirements for creditworthiness, offering of service, and financial stability and standards regarding character and technical quality," as expressly permitted by Section 628(c)(2)(B)(i) of the Communications Act. 5. In its Opposition, CellularVision contends that the Bureau's Order was conditioned on CellularVision employing the signal security system currently in use by CellularVision, not the full capabilities of that system. CellularVision further contends that SportsChannel's demand that CellularVision implement the full capabilities of the Video PassPort system represents an attempt by SportsChannel to impose conditions that are contrary to the Bureau's Order. CellularVision also argues that SportsChannel's claim that it has not obtained adequate assurances regarding signal security is unwarranted, and that the Bureau correctly found that SportsChannel's continued concerns about the signal security system do not constitute a legitimate business reason for its refusal to sell. 6. In its Reply, SportsChannel reiterates its claim that the Bureau incorrectly substituted its own judgment concerning the adequacy of CellularVision's signal security system for SportsChannel's judgment. SportsChannel argues that there is no evidence that SportsChannel's signal security concerns were unreasonable, and that as long as there exists a reasonable basis for SportsChannel to be concerned with signal security, that issue appropriately remains a subject of negotiation between SportsChannel and CellularVision. IV. Discussion 7. We find that the arguments made by SportsChannel in its Petition do not warrant reversal of the Bureau's Order, and we therefore deny the petition for reconsideration. Our conclusions with respect to each of the objections raised by SportsChannel in its Petition are set forth below. 8. SportsChannel's claim that the Order must be vacated because it was granted only on the premise that audio encryption would be installed on CellularVision's system is contrary to the clear language of the Bureau's Order. SportsChannel is correct that both the Bureau's evidentiary findings regarding the adequacy of CellularVision's signal security measures and its Order requiring SportsChannel to sell its SCNY programming were premised on specific assumptions regarding the capabilities of the Video PassPort signal security system. However, contrary to SportsChannel's claim, the Bureau based its Order on the current capabilities of CellularVision's Video PassPort security system, not the potential full capabilities of the Video PassPort system. While the Bureau's Order acknowledged the potential audio encryption capability of the Video PassPort system, the Bureau's Order did not require the introduction of this technology to CellularVision's system. 9. In its Order, the Bureau conditioned its mandate that SportsChannel provide SCNY programming to CellularVision on the premise that: the Video Passport signal security system described by [Charles F.] Newby [Vice President and General Manager of the Broadcast Communications Division of Titan] in his February 14, 1995 letter to [Peter] Lubell [Director of Affiliate Engineering, Rainbow] and in the Newby Affidavit [attached to CellularVision's Reply] currently is employed by CellularVision on its Brighton Beach system and will be employed by CellularVision on systems in other locations within its authorized service area. The February 14, 1995 letter from Newby to Lubell and the Newby Affidavit cited in the Bureau's Order contain a description of the attributes of the Video PassPort system currently employed by CellularVision and of the full capabilities of the Video PassPort system. Both the February 14, 1995 letter and the Newby Affidavit make clear that the signal security system currently employed by CellularVision does not employ the full capabilities of the Video PassPort system. Thus, we reject SportsChannel's claim that, by incorporating a description of the potential audio encryption capability of CellularVision's signal security system in its Order, the Bureau required Cellularvision to implement the full capabilities of the Video PassPort system as a condition of its Order granting Cellularvision's program access complaint. 10. SportsChannel states that CellularVision's failure to employ the enhanced capabilities of the Video PassPort system is significant because it will materially increase the risk of signal theft. SportsChannel provides an affidavit from Peter D. Lubell, Director of Affiliate Engineering and Signal Integrity for Rainbow Network Communications, in which Lubell states that CellularVision does not employ an adequate means of protecting the audio portion of the signal because under the signal security system currently employed by CellularVision, the audio is transmitted in the clear in unscrambled form and therefore can be downconverted easily to be received on conventional television receivers. Lubell states that the alleged ease with which the audio signal can be downconverted increases the incentive for pirates to crack the video portion of the signal. However, SportsChannel's claim that CellularVision's signal security system leaves the SCNY signal vulnerable to theft is speculative. The fact that the audio portion of the signal may be delivered in the clear does not make it any easier for the would-be-pirate to crack the security for the video portion of the signal. We therefore are unpersuaded by SportsChannel's claim that the Bureau's Order leaves the SCNY signal vulnerable to theft on CellularVision's LMDS system. We note that our decision here does not preclude SportsChannel from requiring enhanced signal security measures from CellularVision in the future if there is evidence that CellularVision's signal security system does not adequately protect the SCNY programming. 11. We also reject SportsChannel's claim that the Order must be vacated because the Bureau substituted its own judgment concerning the adequacy of CellularVision's signal security system, thereby effectively denying SportsChannel the opportunity to exercise its own business judgment in this matter. While the program access provisions clearly allow programmers to refuse to provide programming for a legitimate business reason, such as concerns about signal security, the Commission cannot simply defer to a programmer's assessment of whether its concerns are reasonable. If that were the case, the prohibition contained in the Communications Act against discrimination in access to programming would be meaningless. The Commission clearly has the authority to determine whether, based on the record, a programming vendor's concerns are reasonable. As the Commission stated in the First Report and Order, it is the Commission's task to "distinguish 'unreasonable' refusals to sell from certain legitimate reasons that could prevent a contract." 12. In this case, the Bureau found, based on the record, that SportsChannel's stated concerns did not constitute a legitimate business reason for refusing to provide SCNY programming to CellularVision. The Bureau did not make an independent assessment of the adequacy of CellularVision's signal security system; rather, the Bureau found that the concerns raised by SportsChannel as the basis for its continued objection to selling SCNY programming to CellularVision were in fact addressed by CellularVision. Thus, we find that SportsChannel's claim that the Bureau exceeded the scope of its authority in finding that SportsChannel's stated concerns about the adequacy of CellularVision's signal security system did not constitute a legitimate business reason for refusing to provide SCNY programming to CellularVision is without merit. V. Ordering Clauses 13. Accordingly, IT IS ORDERED that the Petition for Reconsideration filed by SportsChannel Associates IS DENIED. 14. This action is taken by the Chief, Cable Services Bureau, pursuant to authority delegated by Section 0.321 of the Commission's rules. FEDERAL COMMUNICATIONS COMMISSION Meredith J. Jones Chief, Cable Services Bureau