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File pnmc5021 (.txt & .wp) is in directory \pub\Public_Notices\Miscellaneous. ************************************************************************* Before the Federal Communications Commission Washington, D.C. 20554 ) ) In the Matter of ) ) ) BELL ATLANTIC-NEW JERSEY, INC. ) ) Election of Open Video System ) Option and Motion for Extension ) of Time to Complete Open Video ) System Transition ) ) ) ) ORDER Adopted: December 2, 1996 Released: December 2, 1996 By the Chief, Cable Services Bureau: INTRODUCTION 1. On October 7, 1996, Bell Atlantic-New Jersey, Inc. ("Bell Atlantic") filed FCC Form 1275, Certification for Open Video Systems. Also on October 7, 1996, Bell Atlantic filed an Election of Open Video System Option and Motion for Extension of Time to Complete OVS Transition ("Motion"). On October 17, 1996, Bell Atlantic was certified to operate an open video system in Dover Township, New Jersey. By this Order, we grant Bell Atlantic's motion for an extension of time from November 6, 1996 to March 1, 1997 to complete its transition from a video dialtone service to an open video system. 2. Bell Atlantic currently provides video transport in Dover Township, New Jersey over a system originally authorized on July 18, 1994 under the Commission's former video dialtone rules. The Telecommunications Act of 1996 repealed the Commission's video dialtone rules and policies. While video dialtone operators were not required to cease providing video service to their subscribers upon repeal, they were directed to select, prior to November 6, 1996, one of four statutorily-recognized video programming delivery options set forth in Section 651 of the Telecommunications Act: radio based, common carrier transmission, traditional cable, or open video. Pursuant to this Order, Bell Atlantic elected to provide video programming by means of an open video system under new Section 653 of the Communications Act. 3. In requiring this election, we realized that video dialtone operators would need time to evaluate their options and implement their choice. Therefore, we provided video dialtone operators ninety days from August 8, 1996 in which to effect a transition to one of the four options for providing video programming services. We also realized, however, that it would not be possible in all circumstances for a video dialtone operator to complete the transition in ninety days. In these instances, we stated that we would consider reasonable extensions of time based on a showing of good cause. Good cause requires findings that special circumstances warrant deviation from the rules or orders and that such deviation would be in the public interest. Bell Atlantic has requested such an extension, from November 6, 1996 to March 1, 1997 to complete its transition to an open video system. POSITIONS OF THE PARTIES 4. Bell Atlantic's Motion was put on Public Notice. Comments were timely filed by the New Jersey Cable Television Association ("NJCTA"), Clear Cablevision, Inc. d/b/a Adelphia Cable Communications ("Adelphia"), and an opposition was filed by Rainbow Programming Holdings, Inc. ("Rainbow"). Bell Atlantic filed a timely reply to these comments and the opposition. 5. In its motion, Bell Atlantic states that an extension of time is necessary for three reasons. First, Bell Atlantic claims additional time is necessary to comply with the open video enrollment provision. Bell Atlantic notes that Commission rules require that certification be obtained before the commencement of service, and that before service may begin, it must comply with the rule requiring notification and enrollment of video program providers. Bell Atlantic declares that it will conduct an open enrollment for the Dover Township system that will not close fewer than ninety days from the Commission's Public Notice of its Notice of Intent. Bell Atlantic's motion states that the earliest it could file a Notice of Intent would be October 18, 1996 resulting in a closing of the enrollment period no earlier than January 16, 1997, well past the November 6, 1996 deadline for effecting a transition. Second, Bell Atlantic states time is needed to meet its obligations under open video system rules to provide access for public, educational, and governmental ("PEG") use and to carry certain television broadcast signals ("must carry"). During the extension period, Bell Atlantic advises it will conclude arrangements to meet its obligations under the open video system rules to provide access for PEG use and must carry. Third, Bell Atlantic claims that in order to provide channels for PEG access and must carry, it must obtain additional equipment to encode analog signals for transmission on the digital system. According to Bell Atlantic, this equipment has been reserved but will take eight to twelve weeks for delivery and installation. Bell Atlantic also requests the extension ensure an orderly transition and avoid the disruption of service to customers currently receiving service over its network. 6. NJCTA states it does not oppose Bell Atlantic s motion, but suggests that the Commission condition Bell Atlantic s extension for transition on a complete investigation into the allocation of costs incurred in constructing and operating its existing video dialtone system. NJCTA asserts that there are fundamental issues yet to be addressed concerning the Commission's grant of Bell Atlantic s authorization for video dialtone, and that Bell Atlantic has not properly accounted for several years of construction and operation. NJCTA claims the proceedings concerning Bell Atlantic s video dialtone tariff have not been concluded, leaving cost allocation issues unresolved. NJCTA expresses concerns, as a result, regarding cross-subsidization and maintains an accounting is necessary to protect monopoly telephone rate payers from subsidizing Bell Atlantic s entry into the video market. NJCTA claims that several cost allocation issues are still unsettled, including Bell Atlantic s alleged failure to allocate or recognize the start up costs of its system; failure to allocate costs of pole attachments; and Bell Atlantic s alleged intent to allocate the costs of two-thirds of its telephone and video fiber network to telephony. Consequently, NJCTA asserts that without a resolution of these matters, the requested extension will result in Bell Atlantic's operating a system for over two years free from appropriate cost accounting rules. NJCTA submits that the Commission should now resolve the Dover Township tariff issues, or initiate a new investigation of Bell Atlantic's cost treatment of the system based on the transition from video dialtone to open video. 7. Similarly, the comments filed by Adelphia do not oppose an extension of time but request that the Commission shorten the time of the requested extension from March 1, 1997 to January 16, 1997. Adelphia also seeks the application of non-discrimination and other open video system requirements upon Bell Atlantic's video programming facility during the transition. Finally, Adelphia asks the Commission to adopt open video cost allocation rules and apply them to the Bell Atlantic facility. In support of these requests, Adelphia states Bell Atlantic's proposed extension will result in the continued operation of a facility free from either video dialtone or open video requirements. Adelphia asserts that Bell Atlantic could have filed for certification months ago. Adelphia notes that Bell Atlantic "conceded" open enrollment could be completed on January 16, 1997 and states that there is no reason Bell Atlantic needs two additional months to provide access for PEG and must carry. Adelphia also requests the application of open video system rules during the transition because Bell Atlantic has an activated system, has been granted open video system operator status, and already has at least one programmer. 8. Rainbow urges the Commission to deny Bell Atlantic's motion, but at the same time does not object to a legitimate and reasonable time for Bell Atlantic's transition. Rainbow specifies no alternative date, but requests that during the transition period Bell Atlantic should not be permitted to deny Rainbow access to its system. To the extent Bell Atlantic is allowed additional time to effect its transition, Rainbow requests that Bell Atlantic be barred from expanding its current subscriber base without being subject to any regulatory oversight. 9. Rainbow maintains that Bell Atlantic has failed to show the requisite good cause for an extension because Bell Atlantic has operated its video dialtone system in an anti-competitive and discriminatory manner. According to Rainbow, Bell Atlantic has discriminated against independent video programmers, including Rainbow. Rainbow refers to various instances of special treatment Bell Atlantic attempted to confer upon FutureVision, its sole programmer, and further states Bell Atlantic and FutureVision exercised unilateral control over equipment and software effectively denying Rainbow access to Bell Atlantic's system. In addition, Rainbow cites three reasons why granting Bell Atlantic's extension is contrary to the public interest. First, Rainbow reiterates that Bell Atlantic's service is operated in a discriminatory and anti-competitive manner. Second, because the Commission's investigation into Bell Atlantic's video dialtone tariff was not concluded, its rates, terms and conditions have never been found reasonable and non-discriminatory. Third, Rainbow states an extension is contrary to public interest because it would allow Bell Atlantic to operate an unregulated system to the detriment of future open video programmers and other multi-channel video service providers. Rainbow also claims that Bell Atlantic should have timely ordered the equipment it needs to comply with PEG use and must carry obligations because Bell Atlantic was aware of these obligations in February 1996. Finally, Rainbow asserts that Bell Atlantic's own inaction - voluntarily waiting two months to seek open video certification - does not constitute good cause to extend the transition period. Accordingly, Rainbow requests that the four-month extension request be denied. 10. Bell Atlantic does not directly reply to remarks concerning cost allocation issues of its video dialtone service. Rather, Bell Atlantic states that because these comments have previously been addressed in the proceeding concerning its video dialtone tariff, its reply addresses only those remaining arguments not addressed in the earlier proceeding. The first of these arguments is Adelphia and Rainbow's claim that granting an extension will allow Bell Atlantic to operate a facility free from either video dialtone or open video system requirements. Bell Atlantic responds by representing that it is already operating within the open video system rules and will continue to do so. Second, Bell Atlantic states Rainbow has misstated the facts in its allegations of discrimination and voluntary delay in ordering equipment. According to Bell Atlantic, the equipment Rainbow claims it was denied, was and continues to be readily available. In addition, Bell Atlantic notes that the equipment it needs to complete the transition to open video is not the same equipment Rainbow claims to have had difficultly obtaining. Furthermore, Bell Atlantic rejects Rainbow's allegation that it should have ordered the equipment months ago, knowing back in February 1996, that it would have to provide PEG and must carry access. Until the final open video rules were released, Bell Atlantic states it was not prepared to commit to a particular regulatory model. Because broadcast stations did not make their must carry elections until October 1, 1996, Bell Atlantic asserts it could not know beforehand how many stations it would have to provide for them as an open video system operator. 11. Bell Atlantic also replies that the suggested conditions to the extension are not necessary or appropriate. First, it states that there is no legal basis for NJCTA's request for an investigation into the allocation of costs incurred in Bell Atlantic's video dialtone system because the Commissions's rules on video dialtone were repealed with the passage of the Telecommunication's Act of 1996. Bell Atlantic again notes that it has already replied to NJCTA's comments regarding the video dialtone tariff. It was granted authority to operate the Dover Township system until final cost allocation rules are in place, and states it will comply with any new rules when they are finalized. Second, Bell Atlantic contends it will comply with the open video non-discrimination rules in its enrollment process, addressing Adelphia's request that this be required as a condition to the extension. Lastly, Bell Atlantic states that compliance with Rainbow's request that Bell Atlantic be prohibited from adding subscribers to its system until the transition is complete would leave Adelphia without competition during this time. Such a result would invalidate the Commission's recent determination that Adelphia was subject to effective competition as a result of FutureVision's programming on the Dover Township system. DISCUSSION 12. It is the policy of the Commission that extensions of time are not routinely granted. Upon review of Bell Atlantic's motion, the comments and opposition, and Bell Atlantic's reply, we conclude that Bell Atlantic has shown good cause for extending the date by which it must become an open video system to March 1, 1997. For the reasons stated below, we find that a grant of the requested extension will serve the public interest by ensuring an orderly transition of Bell Atlantic's system and allowing Bell Atlantic's subscribers to continue receiving service without disruption. 13. We do not agree with comments that during the transition period Bell Atlantic will be operating a facility free from regulatory requirements. While Bell Atlantic will not be an open video system operator until March 1, 1997, it must operate its facility in a manner consistent with the public interest during this transition period, including the obligation to adhere to its cost allocation responsibilities. 14. The comments of Adelphia and the NJCTA raise cost allocation issues. Adelphia urges the Commission to adopt immediately cost allocation rules and apply them to Bell Atlantic's integrated facility. NJCTA states that without ensuring the proper allocation of Bell Atlantic's costs incurred and to be incurred, the majority of initial construction of the Dover Township system could be massively cross-subsidized. Because a rulemaking is pending addressing these concerns, this is not the appropriate forum to address the cost allocation issues. We remind the parties that Bell Atlantic is currently prohibited by Commission rules from cross- subsidizing its video programming operation. In addition, Bell Atlantic has agreed to file any changes to its cost allocation manual 60 days prior to the commencement of service. Granting Bell Atlantic's motion does not relinquish these obligations. 15. We decline to adopt Rainbow s suggestion that Bell Atlantic be prohibited from expanding its subscriber base during the transition period. To impose such a condition would not promote the goals of the Telecommunications Act of 1996 to enhance competition and increase consumer choice. Rainbow s concern that Bell Atlantic will be allowed to add subscribers without any regulatory oversight is misplaced. Bell Atlantic will not be operating a system free from any regulatory oversight. We do not think that this proceeding, which is intended to determine whether Bell Atlantic should be granted until March 1, 1997 to transition to an open video system, is the forum for the range of complaints made against Bell Atlantic. Nor do we think it is appropriate to impose conditions on the extension, as advocated by Adelphia. To the degree a party thinks that Bell Atlantic's conduct merits a complaint, that party may pursue such a complaint with the Commission. 16. We find that Bell Atlantic has shown good cause in support of its request for an extension to March 1, 1997. Waiting until the final open video system rules were released in making its choice to select this delivery option does not constitute a delay, but is consistent with our statement that "after August 8, 1996, video dialtone operators will possess adequate information regarding their options to make such an election." We also disagree with the comments that Bell Atlantic could have known as early as February 1996 what its specific equipment needs for PEG use and must carry would be. Notably, the Commission's Order allowed Bell Atlantic until November 6, 1996 to notify us of its choice. Additionally, as Bell Atlantic correctly states, it could not have know before October 1996 its specific must carry obligations. Furthermore, our rules require an open enrollment period, prior to activation of the system, of not less than 90 days after Public Notice of filing the Notice of Intent. Bell Atlantic filed a Notice of Intent to Establish an Open Video System on October 31, 1996. The enrollment period will therefore expire on January 31, 1997 leaving Bell Atlantic approximately one month to complete its arrangements for PEG use and complete its transition. We do not find this time period excessive and agree with Bell Atlantic that it provides a reasonable period to protect against unforeseen delays. Granting the extension to March 1, 1997 will not prejudice any interested parties, fosters video competition, and ensures the orderly transition to an open video system in Dover Township. ORDERING CLAUSES 17. Accordingly, IT IS ORDERED, that the Motion of Bell Atlantic-New Jersey, Inc. to extend the time to complete its open video transition to March 1, 1997 is GRANTED. 18. This action is taken by the Chief, Cable Services Bureau, pursuant to the authority delegated by 0.321 of the Commission's rules, 47 C.F.R.  0.321. FEDERAL COMMUNICATIONS COMMISSION Meredith J. Jones Chief, Cable Services Bureau