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{ O - # X \ P 6G ; IP# эId. at para. 12.e
X -
18. ` ` Several petitioners contend that a cable operator should not be allowed to convert
d(# its cable system into an open video system, regardless of the circumstances. Metropolitan Dade
d(# County asserts that effective competition is not an adequate precondition to ensure consumers are
d(#l offered a real choice and that the open video system alternative was created to stimulate
d(# competition in the video marketplace, not to enable cable operators to escape the cable
X -
d(# franchising process. 6 ? MM
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d(# # X \ P 6G ; IP# эDade County Petition at 3. But see U S West Opposition at 34 (the Commission's decision to allow cable
operators to convert to open video if they are subject to effective competition serves the public interest).6 Michigan Cities, et al. argue that permitting nonLEC entry into the open
d(# video system marketplace will discourage competition because LECs will have less incentive to
X
-
d(# enter the market if all competitors receive the same regulatory benefits. u @
F MM
y O - # X \ P 6G ; IP# эMichigan Cities, et al. Petition at 7.u Michigan Cities, et al.
d(#x also oppose the exception provided for certain cable systems not subject to effective competition,
d(#y arguing that the exception is overly broad because there are a variety of reasons why facilities
X
- based competition may be unlikely to develop in a particular cable franchise area. J A
MM
{ O . -
d(#j # X \ P 6G ; IP# эId. at 89 (citing Annual Assessment of the Status of Competition in the Market for the Delivery of Video
{ O - Programming, First Report in CS Docket No. 9448, 9 FCC Rcd 7442, 755054 (1994)).J
X y -
19. ` ` Michigan Cities, et al. claim that various references to "common carriers," "local
d(# exchange carriers," and "telephone companies" in the statute and its legislative history
X K -
d(# demonstrate Congress' intent to limit the open video system option to LECs. w B K2
MM
y O . - # X \ P 6G ; IP# эMichigan Cities, et al. Petition at 34.w According to
d(#i Michigan Cities, et al., allowing nonLECs to become open video system operators is inconsistent
d(#j with the plain language of the 1996 Act, and thus the Commission incorrectly concluded that it
X -
d(#j had the authority under Section4(i) to permit such a result. ` C MM
{ O y! - # X \ P 6G ; IP# эId. at 67.` The National League of Cities, et
d(# al. assert that Congress could not have intended cable operators to become open video system
X -
d(# operators because it would defeat the purposes of certain provisions of the Communications Act. D T
MM
y O $ - # X \ P 6G ; IP# эNational League of Cities, et al. Petition at 1719.
d(# For example, they argue that conversion to an open video system would enable a cable operator:
d(#y (a)to avoid a franchise renewal agreement with updated public, educational, and governmental " D ,-(-(ZZ "
d(#L ("PEG") requirements; (b)to evade the cabletelco buyout restrictions; and (c)to circumvent a
X -
d(#K local franchising authority's decision to deny the renewal of the cable operator's franchise. Y E MM
{ O b - # X \ P 6G ; IP# эId. Y The
d(# National League of Cities, et al. also argues that the Commission's decision is inconsistent with
d(# the statute's use of cable operators' PEG and franchise fee obligations as a yardstick for open
X - video system operators. ` F Z MM
{ O - # X \ P 6G ; IP# эId. at 17. `
X v -
2 20. ` ` U S West urges the Commission to clarify that cable operators may become open
d(# video system operators upon the termination of their franchise agreements, even in the absence
X H -
d(#y of effective competition. h G H MM
y O - # X \ P 6G ; IP# эU S West Petition at 34.h U S West argues that the Commission's contractual concerns would
X 1 -
d(# not apply once a franchise agreement has terminated. 1 H 1| MM
{ O ^ - ԍId.1 The National League of Cities, et al., on
d(# the other hand, is concerned that cable operators will simply declare themselves open video
X
- system operators upon the expiration of their franchise agreements, rather than seek renewal. = I Z
MM
{ O -
d(# ԍNational League of Cities, et al. Petition at 17. See also Michigan Cities, et al. Opposition at 1112 (allowing
d(# cable operators to convert to open video upon the termination of their franchise agreements would not stimulate
competition).=
X -
21. ` ` Other petitioners claim that all cable operators, without limitation, should be
d(#> allowed to convert their cable systems to open video systems. NCTA and Cox petition the
d(# Commission to eliminate its general restriction that cable operators may not become open video
d(#1 system operators within their cable franchise areas until they are subject to effective
X y -
d(#K competition. " J y0
MM
{ O Z -
d(# ԍNCTA Petition at 78; Cox Petition at 810. But see Michigan Cities, et al. Opposition at 9 (the Commission's
"effective competition" restriction is a necessary limitation on the ability of cable operators to switch to open video)." NCTA asserts that the inherent design of an open video system, allowing multiple
d(#i programming providers to compete for subscribers, obviates the need for an effective competition
X K -
d(# requirement. = K K MM
y O - ԍNCTA Petition at 78.= NCTA argues that Congress would have limited the open video system option to
d(# areas already served by franchised cable operators if it had intended open video systems to exist
X -
d(# only in areas served by more than one provider. 7 L MM
{ O " - ԍId. at 7.7 Cox argues that it is inconsistent to preclude
d(# cable operators that may eventually become subject to effective competition from converting to
d(# an open video system, while allowing an exception for cable operators that can demonstrate that
X -
d(# facilitiesbased competition is infeasible in their franchise areas. = M MM
y O 5' - ԍCox Petition at 910.= Cox reasons that, by allowing "
< M ,-(-(ZZ "
d(#N this exception, the Commission implicitly recognizes that the primary reason for reduced
d(#. regulatory burdens for open video systems is not to foster facilitiesbased competition, but to
X -
d(# foster competition among competing programmers on an open platform. 1 N MM
{ O K - ԍId.1 Cox further contends
d(# that there are no countervailing public policy reasons for imposing an artificial disadvantage upon
d(# incumbent cable operators in contradiction of the Commission's acknowledgement that the same
X - options generally should be available to all entities. p O Z MM
{ O - ԍId. at 8 (citing Second Report and Order at para. 18).p
X _ -
A 22. ` ` Comcast argues that the Commission's decision to permit cable operators that are
d(#Z subject to effective competition to convert to open video systems is rendered meaningless by the
d(# qualification that the terms of an existing local franchise agreement remain enforceable until the
X -
d(# termination of the agreement. > P MM
y O - ԍComcast Petition at 5.> Comcast claims that this restriction eliminates the primary
d(# incentive for operating an open video system, i.e., relief from many of the Title VI obligations
X
-
d(# and regulations. 1 Q
| MM
{ O - ԍId.1 Comcast reasons that, when a cable operator converts its cable system to an
d(# open video system, local franchising authorities lose their authority under Section 624 to enforce
X -
d(# certain franchise requirements, since that provision is inapplicable to open video systems. 7 R MM
{ O } - ԍId. at 6.7 In
d(#k response, Alliance for Community Media, et al. assert that there is "no legal principle which
d(#k permits unilateral abrogation of existing contractual commitments to permit an entity to take
X y -
d(#. advantage of an elective deregulatory option." 6 S Zy MM
{ O -
d(# ԍAlliance for Community Media, et al. Opposition at 3 (emphasis in original). See also Michigan Cities, et al.
d(# Opposition at 1011 (nothing in the 1996 Act indicates that Congress intended to abrogate existing franchise
agreements).6 Alliance for Community Media, et al. further
d(# argue that, because Title VI has not been rescinded, the enforcement powers of local franchising
X M -
d(# authorities under Section 624 remain intact. ] T M MM
y O - ԍAlliance for Community Media, et al. Opposition at 3.] NATOA claims that exempting cable operators
X 6 - from their franchise obligations would constitute a taking of local government property. > U 6R
MM
y O 9! - ԍNATOA Opposition at 8.>
X -
B 23. ` ` Cox and NCTA assert that the Commission incorrectly concluded that Section
d(# 653(a)(1) authorizes it to restrict the ability of cable operators that also provide local exchange
X -
d(# service within their cable franchise areas to convert to open video. V V MM
y O m& - ԍCox Petition at 4; NCTA Petition at 67.V Cox asserts that this
d(#i conclusion contradicts the Commission's determination that the first sentence of Section 653(a)(1) " r V ,-(-(ZZ "
d(# permits LECs to operate open video systems in their telephone service areas "without
X -
d(#k qualification." : W MM
y O b - ԍCox Petition at 4.: Cox argues that the Commission's interpretation of the second sentence of
d(#= Section 653(a)(1) would lead to the false conclusion that the Commission could also determine
d(# when "any other person" that is providing local exchange service could become an open video
X -
d(#> system operator. 1 X X MM
{ O - ԍId.1 Cox claims that the Commission wrongly views the second sentence as
d(#O providing an exception limiting which LECs can operate open video systems without
d(#y qualification, while the more reasonable construction is that the second sentence permits other
d(#. entities, in addition to LECs, to operate open video systems when deemed by the Commission
X H -
d(# to serve the public interest, convenience, and necessity. F Y ZH MM
{ O -
d(#< ԍId. at 5. See also NCTA Petition at 67 (arguing that the language of Section 653(a)(1) plainly allows any
d(# entity that qualifies as a LEC to operate open video systems, regardless of whether the entity also fits into other legal
categories).F In response, Sprint asserts that Cox and
d(# NCTA's argument is based on the incorrect premise that a cable operator that becomes a LEC
d(# somehow loses its identity as a cable operator, even though it continues to provide cable
X
- services. A Z
MM
y O - ԍSprint Opposition at 34.A
W < ` ` 2. Discussion
X
-
A 24. ` ` We decline to modify our decision in the Second Report and Order to allow non
d(#= LECs to operate open video systems, and to allow cable operators that are subject to effective
d(# competition in their cable franchise areas to convert their cable systems to open video systems.
X d -
d(# As discussed at length in the Second Report and Order, we disagree with Michigan Cities, et al.
d(#K that our decision allowing nonLECs to operate open video systems is inconsistent with the plain
X 8 -
d(#< language of the 1996 Act or the Act's legislative history. 2 [ 8 MM
{ O -
d(# ԍSecond Report and Order at paras. 1417. We also described therein the availability of Section 4(i) as an
{ O O - alternative basis for our authority to permit cable operators to operate open video systems. Id. at paras. 2022. 2 As we explained in the Second Report
X # -
d(#x and Order, permitting nonLECs to become open video system operators is not only a permissible
d(# reading of the statute, but is most consistent with Congress' goal of opening all
d(# telecommunications markets to competition. Because our decision is consistent with the statute,
d(#. we also disagree that the Commission does not have the authority under Section 4(i) to permit
d(# nonLECs to become open video system operators. In addition, we disagree with the argument
d(#= of the National League of Cities, et al. that our decision to permit cable operators to convert to
d(# open video may defeat the purposes of other Title VI requirements that apply to cable operators.
d(# Congress established cable and open video systems as two distinct video delivery models, each
d(#i offering a particular combination of regulatory benefits and burdens. That an entity, by assuming
d(# the regulatory responsibilities of an open video system, may be relieved of regulatory
responsibilities relating to cable is neither novel nor improper. " ?
[ ,-(-(ZZ " Ԍ
X -
ԙ 25. ` ` While we believe that cable operators should be allowed to operate open video
d(# systems, we also decline to alter our decision that cable operators may do so in their existing
d(# cable franchise areas only if they are subject to "effective competition." As we stated in the
X -
d(#k Second Report and Order, the underlying premise of Section 653 is that open video system
d(#j operators would be new entrants in established markets, competing directly with an incumbent
X -
d(#y cable operator. R \ MM
{ O - ԍSecond Report and Order at para. 24.R We believe that Congress exempted open video system operators from much
d(#0 of Title VI regulation because, in the vast majority of cases, they will be competing with
X a -
d(#. incumbent cable operators for subscribers. 3 ] aZ MM
{ O l
- ԍId. 3 Our effective competition restriction implements
d(# Congress' intent by ensuring that, where it is the incumbent cable operator itself that seeks to
d(# enter the marketplace as an open video system operator, there is at least one other multichannel
d(#[ video programming provider competing in the market (or, if the cable operator enters under the
X
-
d(#x "low penetration" test for effective competition, t ^
MM
{ O - ԍSee Communications Act 623(l)(1)(A), 47 U.S.C. 543(l)(1)(A).t that it does not possess a level of market power
that Congress believed requires regulation).
X -
26. ` ` We are not convinced, as NCTA argues, that the potential presence of multiple
d(#? video programming providers on open video systems obviates the need for an effective
d(#i competition requirement. There is no assurance that any particular system will generate sufficient
d(#z competition between providers of "comparable" video programming services to qualify as a
X d -
d(#. meaningful standin for effective facilitiesbased competition. t _ d~ MM
{ O - ԍSee Communications Act 623(l)(1)(D), 47 U.S.C. 543(l)(1)(D).t Nor do we find significant the
d(# fact that Congress did not specify that open video systems may operate only in areas currently
d(# served by cable. Given that cable passes approximately 96% of all television households
d(# nationwide, we do not believe that any purposeful intent can be inferred from the fact that
d(#x Congress did not limit open video systems to only those areas already served by franchised cable
X - operators. ` MM
{ O -
d(#; ԍSee Annual Assessment of the Status of Competition in the Market for Delivery of Video Programming, Second
{ O | - Annual Report in CS Docket No. 9561, 11 FCC Rcd 2060, 2063 (1996) ("Second Competition Report").
X -
n 27. ` ` Moreover, the underlying competitive premise of Section 653 is not dependent on
d(# the contractual nature of the cable operator's franchise agreement. While we agree with U S
d(# West that the expiration of a franchise agreement may remove a contractual impediment to a
d(# cable operator's conversion to an open video system, the public interest rationale that gave rise
d(# to the effective competition restriction remains. So long as a cable operator has the ability to
d(# exercise market power i.e., is not subject to effective competition it has not met the
d(#- necessary precondition for operating an open video system. Thus, in response to U S West, we
d(#- find that it would not serve the public interest to allow incumbent cable operators, in the absence " " l ` ,-(-(ZZ "
d(#L of effective competition, to become open video system operators upon the termination of their
franchise agreements.
X -
o 28. ` ` We also continue to disagree with Cox's argument that the Commission has no
d(# authority to determine whether cable operators that are also LECs may operate open video
X -
d(#i systems. As explained in the Second Report and Order, the second sentence of Section 653(a)(1)
d(# authorizes the Commission to determine whether any cable operator may convert to open video,
X a -
d(#l regardless of other services it may also provide, including local exchange service. R a a MM
{ O - ԍSecond Report and Order at para. 25.R The
d(# Commission retains its authority over cable operators that also become LECs because, as Sprint
d(#- notes, a cable operator does not lose its identity as a cable operator simply by offering additional
X -
d(# types of services. K b Z MM
{ O '
- ԍSee Sprint Opposition at 34.K Finally, we disagree with Comcast that, since Title VI franchise agreements
d(# are unenforceable against open video system operators, conversion to open video should preempt
X
-
d(# the terms of a valid franchise agreement. ` c \
MM
{ O -
d(# ԍFranchise agreements are binding contracts. See Denver Area Educational Telecommunications Consortium,
{ O U -
d(# Inc. v. FCC, __U.S.__, 116 S. Ct. 2374, 2410 (1996) (Kennedy, J., concurring in part, concurring in the judgment
in part, and dissenting in part).` Comcast cites no basis for its belief that Congress
d(#i intended to give cable operators the discretion to revoke their franchise agreements at will, or that
d(#< requiring cable operators to abide by their valid agreements would be contrary to Congress' open
d(# video system framework. To the contrary, cable operators may operate open video systems only
d(# to the extent the Commission finds it serves the public interest, convenience and necessity. We
d(#L do not believe that it would be in the public interest to permit cable operators to abrogate their
d(# otherwise valid and enforceable franchise agreements in order to become open video system
operators.
X - B.` ` Certification Process
X -
W < ` ` 1. Background
X -
_ 29. ` ` Section 653(a)(1) requires open video system operators to certify compliance with
X -
d(#j the Commission's regulations under Section 653(b). d d MM
y O m - ԍCommunications Act 653(a)(1), 47 U.S.C. 573(a)(1).d The Commission must publish notice of
d(#j receipt of a certification filing and must approve or disapprove the certification within ten days
X ~ -
d(#K of receipt. 1 e ~ MM
{ O # - ԍId.1 In the Second Report and Order, the Commission found that Congress intended the
d(#l certification process to be streamlined and declined to impose extensive precertification
X R -
d(# requirements. V f R2
MM
{ O 5' - ԍSecond Report and Order at paras. 2830.V For example, open video system operators are not required to revise their cost " R f ,-(-(ZZ "
d(# allocation manuals prior to certification, but must certify that they will file changes to their
X -
d(#= manuals at least 60 days before the commencement of service. > g MM
{ O b - ԍId. at para. 33.> Comments or oppositions to
d(# a certification filing must be filed within five days of the Commission's receipt of the
X -
d(# certification. > h Z MM
{ O - ԍId. at para. 35.> Any certification filings that the Commission does not disapprove within ten days
X - of receipt will be deemed approved. 1 i MM
{ O A - ԍId.1
X v -
" 30. ` ` Several petitioners reiterate previous arguments that the Commission should require
d(# an open video system operator, as a precondition to certification: (a)to obtain the consent of
X H -
d(#K local governments for use of public rightsofway; j H~ MM
y O w -
d(#w ԍDade County Petition at 4; Village of Schaumburg Petition at 1; Alliance for Community Media, et al. Petition
at 1718. (b)to obtain approval from local franchising
X 1 -
d(# authorities regarding the manner in which PEG obligations will be fulfilled; 1 k 1 MM
{ O - ԍId.1 (c)to file a revised
X -
d(# cost allocation manual; u l h MM
y O 3 - ԍNCTA Petition at 34; Alliance for Community Media, et al. Petition at 1718.u and (d)to create a separate subsidiary to operate its open video
X
-
d(#- systems. ] m
MM
y O - ԍAlliance for Community Media, et al. Petition at 24.] Alliance for Community Media, et al. are concerned that using the dispute resolution
d(# process to resolve conflicts involving these issues will be unnecessarily cumbersome and
X -
d(# difficult. 6 n & MM
{ O -
d(# ԍId. at 17. See also NCTA Petition at 4 (urging the Commission to enforce compliance with its revised cost
{ O -
d(# allocation rules prior to the certification process, rather than engage in post facto proceedings and remedies). But
{ O -
d(# see USTA Opposition at 45 (extensive precertification requirements are unnecessary since "the Commission
developed an appropriate mechanism for dispute resolution should LEC compliance be in doubt").6 NCTA asserts that open video system operators must demonstrate compliance with
d(#. specific rules governing channel allocation and carriage rates, and the Commission must make
X
-
d(# "affirmative findings compliance" within the tenday review period. o "
v MM
{ O -
d(# ԍNCTA Petition at 36. But see USTA Opposition at 34 (requiring detailed filings incorporating non
d(# discrimination requirements would turn the certification process into a "back door" Section 214 requirement); MFS
d(# Communications Opposition at 4 (Congress required certification of compliance, not documentary proof of
compliance). In response to these
X - petitions, several parties expressed their opposition to precertification requirements. A p ` MM
y O $ -
d(# ԍU S West Opposition at 45 (adopting burdensome precertification requirements would deter LECs from
d(#
electing the open video system option, in contravention of Congress' intent); Residential Communications Opposition
d(# at 1011 (adopting stringent precertification requirements would contradict the language of the statute and would
d(#h violate the 1996 Act's procompetitive underpinnings); NYNEX Opposition at 35 (proponents of precertification " & o ,-(-(&' "
d(# requirements are merely seeking a competitive or negotiating advantage); MFS Communications Opposition at 35
(the Commission already considered and properly rejected the imposition of precertification requirements).A " p ,-(-(ZZ " Ԍ
X -
2 ԙ 31. ` ` The Telephone Joint Petitioners ask the Commission to reconsider its decision to
d(# require open video system operators to obtain Commission approval of their certifications prior
X -
d(# to the commencement of construction, when new physical plant is required. S q MM
y O - ԍTelephone Joint Petitioners Petition at 10.S These petitioners
d(#j argue that it is not the Commission's responsibility to "ensure that the public rightsofway are
X -
d(# disrupted only by those who are authorized to operate open video systems." f r MM
{ O
- ԍId. (quoting Second Report and Order at para. 34).f They contend that
d(# permission to use rightsofway is a matter for local governments and the owners of any private
d(# property that may be involved, and that cable operators are not required to obtain federal
X _ - certification before constructing in public rightsofway. 1 s _B MM
{ O R - ԍId.1
X 1 -
@ 32. ` ` Several petitioners claim that the Commission did not establish adequate procedures
d(# for providing notice of certification filings. The National League of Cities, et al. seek a
d(#L requirement that certifications specify which local governments are affected and are served on
X
-
d(# those local governments. ^ t
MM
y O q - ԍNational League of Cities, et al. Petition at 12 n.32.^ Failure to require adequate notice, they allege, violates due process
d(#j and hinders the ability of local authorities to apply the necessary management conditions over
X -
d(#. public rightsofway. @ u d MM
{ O - ԍId. at 1213 n.32.@ Municipal Services, et al. argue that, in order to provide municipalities
d(# a meaningful opportunity to respond within the fiveday period for comments and oppositions,
d(# an open video system operator must simultaneously notify a municipality that it is requesting a
X y -
d(#[ certification within the municipality's jurisdiction. y v Zy
MM
{ O -
d(#i ԍMunicipal Services, et al. Petition at 67. See also Alliance for Community Media, et al. Petition at 1516
d(# (requesting that open video system operators be required to provide local public notice in advance of filing for
certification and to include proof of notice in their certification filings).y In response, MFS Communications claims
d(# that these notice proposals are unnecessary because local governments will learn of any proposed
d(# open video system well in advance of its operation when the operator negotiates its PEG
X 4 - obligations and obtains any necessary rightsofway permits. K w 4 MM
y O ! - ԍMFS Communications Opposition at 5.K
W < ` ` 2. Discussion
X -
o 33. ` ` The Second Report and Order fully explains our reasons for not imposing pre
d(#z certification requirements regarding public rightsofway, PEG obligations, revisions to cost " w ,-(-(ZZ "
X -
d(#j allocation manuals, or separate subsidiaries. V x MM
{ O y - ԍSecond Report and Order at paras. 2830.V Petitioners have presented no new evidence or
arguments that would cause us to change our earlier conclusion.
X -
a ! 34. ` ` In addition, we will maintain our rule that certification filings will be deemed
d(#? approved unless disapproved by the Commission within ten days. Petitioners have not
d(# demonstrated that affirmative approval is necessary to provide notice to outside parties or to
d(# assure adequate Commission review. Also, because certification precedes the operator's actual
d(# implementation of the Commission's rules, we disagree with NCTA that the Commission is
d(#y required, at this stage of the process, to do more than obtain adequate representations that the
d(# applicant will comply with the Commission's requirements. Further, we believe that any conflicts
d(#= that arise regarding the operator's conduct can be addressed more fully in the 180day dispute
d(# resolution process than in the tenday certification process. Finally, we will not modify our rule
d(# that, if new physical plant is required, open video system operators must obtain Commission
X -
d(# approval of their certification prior to the commencement of construction. H y Z MM
{ O - ԍSee Id. at para. 34.H This requirement
d(# poses no significant additional burden on operators and will inform local authorities which entities
have been granted enforceable rights to use the public rightsofway.
X y -
` " 35. ` ` We do believe, however, that it is appropriate for a local government to have a
d(# reasonable opportunity to respond to a certification filing that implicates its community. We
d(# therefore will revise FCC Form 1275, our proposed certification form, to require applicants to
d(#- list the names of the local communities in which they intend to operate, rather than describe them
X -
d(# generally. z MM
y O -
d(#K ԍA revised FCC Form 1275 and instructions, reflecting the changes herein, is attached at Appendix C. This
revised FCC Form 1275 is subject to approval by the Office of Management and Budget. This modification will reduce the potential for confusion or ambiguity by providing
d(# more useful and precise information to local communities. Because some local communities may
d(# not have ready access to the Internet or to the Commission's public notices, we will also require
d(# applicants for certification to serve a copy of their FCC Form 1275 filing on the clerk or other
d(#k designated official of all affected local communities on or before the date on which it is filed
d(#l with the Commission. Service by mail is complete upon mailing, but if mailed, the served
d(# documents must be postmarked at least three days prior to the filing of the FCC Form 1275 with
d(#= the Commission. Applicants also must inform the local communities that any oppositions and
d(#= comments must be filed with the Commission within five days of an applicant's filing and must
be served on the applicant. " N D z ,-(-(ZZ "
X - C.` ` Carriage of Video Programming Providers
W < ` ` 1. Notification and Enrollment of Video Programming Providers
V - ` ` a.Background
X v -
# 36. ` ` In the Second Report and Order, we stated that the Commission will: (a)issue a
d(#M Public Notice to announce receipt of an open video system operator's "Notice of Intent" to
d(#k establish an open video system; (b)list the Public Notice in the Commission's Daily Digest;
d(# (c)place the Notice of Intent on the Commission's Internet site; (d)make the Notice of Intent
d(# available for inspection in the Cable Services Bureau's Reference Room; and (e)require that the
d(#M Notice of Intent be served on all local cable television franchising authorities located in the
d(# anticipated service area of the open video system. In so doing, we specifically rejected
X -
d(# suggestions that an open video system operator's notice be disseminated directly to community
d(#j information providers, local newspapers, trade publications and the local media, among others.
d(#< We found that any benefits of additional distribution would be outweighed by the costs and that
X - the Commission's Public Notice process will disseminate the information. H { MM
{ O - ԍId. at paras. 4546.H
X d -
$ 37. ` ` On reconsideration, the Alliance for Community Media, et al. urge the Commission
d(#< to require an open video system operator to provide local notice of its intent to establish an open
d(# video system by placing the Notice of Intent in local newspapers and in telephone bill inserts, if
d(# the system operator is also a telephone company. They argue that the current requirements are
d(# insufficient for local and nonprofit program services because many people still do not have
d(# access to the Internet and those with access may not check the Commission's Internet site on a
d(# regular basis. Contrary to the Commission's finding, these parties assert that the additional cost
d(# imposed on an open video system operator of disseminating notice as they urge will not outweigh
d(#. the public interest benefits resulting from the increased diversity of programming provided by
X - these services. \ | Z MM
y O - ԍAlliance for Community Media, et al. Petition at 16.\
V g - ` ` b.Discussion
X 9 -
Q % 38. ` ` In the Second Report and Order we fully considered the costs and benefits of
d(# requiring an open video system operator to provide local notice of its intent to establish an open
X
-
d(#= video system. V }
MM
{ O # - ԍSecond Report and Order at paras. 4546.V The Alliance for Community Media, et al. do not provide additional evidence
X -
d(# concerning these costs or benefits. We reiterate our finding that dissemination of the Notice of
X -
d(# Intent as required under the Second Report and Order will be a sufficient means for an entity to
notify the public of its intention to establish an open video system.
" ! | } ,-(-(ZZ " Ԍ
W <
z
` ` 2. Open Video System Operator Discretion Regarding Video Programming
W < Providers (#
V - ` ` a.Background
X -
_ & 39. ` ` In the Second Report and Order, we found that it would serve the public interest,
d(#/ convenience and necessity to permit an open video system operator to limit the ability of a
d(# competing, inregion cable operator, or a video programming provider affiliated with such a cable
X J -
d(#M operator, to obtain capacity on the open video system. J ~ J MM
{ O - ԍId. at para. 52.J We stated, however, that we will
d(# consider petitions from competing, inregion cable operators showing that facilitiesbased
d(#K competition will not be significantly impeded in their particular circumstances, such that the cable
d(#M operator should be granted access to the open video system. In this regard, we provided a
d(# specific exception for the situation where: (a) the competing, inregion cable operator and
d(# affiliated systems offer service to less than 20% of the households passed by the open video
d(# system; and (b) the competing, inregion cable operator and affiliated systems provide cable
X
- service to a total of less than 17,000 subscribers within the open video system's service area. D
Z MM
{ O - ԍId. at para. 56.D
X { -
' 40. ` ` On reconsideration, NCTA states that Section 653(b)(1)(a) directs the Commission
d(#x to promulgate rules that "prohibit an operator of an open video system from discriminating among
X M -
d(#Z video programming providers with regard to carriage on its open video system." o M MM
{ O - ԍNCTA Petition at 8 (citing Communications Act 653(b)(1)(A)).o NCTA argues
d(# that this provision requires the unqualified nondiscriminatory treatment of video programming
d(# providers by open video system operators, and that the Commission therefore erred in allowing
d(# an open video system operator to discriminate against one particular class of entities seeking
X - access, namely, cable operators. 1 ~ MM
{ O - ԍId.1
X -
( 41. ` ` In addition, NCTA and Cox dispute the Commission's reliance on Section
d(#> 653(a)(1) in distinguishing between cable operators and other potential video programming
X -
d(#x providers. S MM
y O V! - ԍNCTA Petition at 910; Cox Petition at 78.S Cox asserts that Section 653 only addresses who may operate an open video system
d(# and, that contrary to the Commission's findings, "has nothing to do with who may obtain capacity
d(# on an [open video] system." Cox argues that, if Congress had intended the provision to address
d(#] the access rights of video programming providers, it would have placed it with the other
d(# exceptions to the general prohibition against discrimination among video programming providers
d(# (e.g., PEG and mustcarry obligations), rather than in the section regarding the certification " " ,-(-(ZZ "
X - process. 1 MM
{ O y - ԍId.1
X -
) 42. ` ` Third, NCTA and Cox dispute the Commission's finding that an open video system
d(#k operator may limit the access of a cable operator but not other potential video programming
X -
d(# providers. Cox states that the Commission's finding in the Second Report and Order that, given
d(# Section 653(a)(1)'s reference to "any other person," the Commission erred in not permitting an
d(# open video system operator to also deny access to other multichannel video programming
d(# distributors, such as direct broadcast satellite ("DBS") services and wireless cable service
X J -
d(# providers. 9 JZ MM
{ O U - ԍId. at 67.9 NCTA states that the Commission's reasoning that allowing an open video system
d(# operator to limit access by cable operators would foster facilitiesbased competition compels the
X - Commission to allow system operators to also limit access by DBS and wireless providers. > MM
y O - ԍNCTA Petition at 910.>
X
-
3 * 43. ` ` Finally, NCTA argues that, having found in Section 653(a)(1) the discretion to
d(#L decide when cable operators may obtain open video system capacity, the Commission erred in
d(#x delegating this decision to the open video system operator. NCTA contends that it violates basic
d(# administrative law for a government agency to delegate its statutory authority to private parties
X - absent express authority to do so. | MM
{ O - ԍId. at 89 (citing, among others, Carter v. Carter Coal Co., 298 U.S. 238, 310 (1936)).
X d -
+ 44. ` ` In its opposition to these cable operators' petitions, MFS argues that Congress, in
d(#= enacting Section 653(a)(1), specifically authorized the Commission to limit cable operators' use
d(#i of open video systems to instances that are "consistent with the public interest, convenience and
X -
d(#z necessity." ~ MM
{ O - ԍMFS Communications Opposition at 67 (citing Communications Act 653(a)(1)).~ MFS states that, until open video system operators can establish meaningful
d(#k competition for cable operators, it would not be in the public interest to force these startup
d(#j entities to provide access to their competitors because: (a) it would allow cable operators to tie
d(# up capacity on an open video system without any reciprocal ability of the open video system
d(# operator to use the cable operator's facilities; (b) it would allow the cable operator to avoid its
d(# own construction costs; and (c) it would give cable operators access to confidential business plans
X - or information. f MM
{ O " - ԍId. at 78. See also NYNEX Opposition at 6.f
X g -
, 45. ` ` TeleTV disputes the cable operators' arguments that the 1996 Act gives incumbent
d(# cable operators an "unqualified" right to use open video systems. TeleTV argues that Section
d(# 653(b)(1)(A) must be read in conjunction with Section 653(a)(1), such that the discrimination " 9 2
,-(-(ZZ "
d(# "among video programming providers" forbidden under Section 653(b)(1)(A) must be
d(# discrimination among only those entities eligible to "provide video programming" under Section
X -
d(#1 653(a)(1). H MM
y O K - ԍTeleTV Opposition at 89.H Second, TeleTV rejects NCTA's assertion that the Commission erred in
d(# "delegating" its authority under Section 653(a)(1) to open video system operators. TeleTV states
d(# that the Commission has not delegated any statutory authority; rather, it has merely established
d(#i a specific exception to the general rule concerning cable operators' access to open video systems,
X v - which TeleTV contends is within the Commission's rulemaking authority. 8 vX MM
{ O - ԍId. at 10.8
X H -
3 - 46. ` ` The Staff of the FTC and DOJ Antitrust Division also dispute cable operators'
d(# assertions, stating that the Commission's approach is consistent with well established legal and
d(# economic principles. For example, the FTC and DOJ Antitrust Division state the Supreme Court
d(# has held that a restraint on competition, such as the Commission's rule permitting open video
d(#[ system operators to preclude access by cable operators, is reasonable if it enhances consumer
X -
d(# welfare. MM
{ O p -
d(# ԍFTC and DOJ Antitrust Division Opposition at 5 (citing, among others, NCAA v. Board of Regents, 468 U.S.
y O : - 85 (1984)). They assert that the Commission's approach will enhance consumer welfare by
d(# fostering competition among cable and telephone companies, which likely will reduce prices and
d(#L increase quality of service. The FTC and DOJ Antitrust Division also reject NCTA's argument
d(# that the Commission should have extended an open video system operator's ability to preclude
d(#/ access by cable operators to cover DBS and wireless service providers. The FTC and DOJ
d(# Antitrust Division explain that only cable operators possess market power in multichannel video
d(# programming distribution, and therefore may have different incentives than DBS and wireless
d(# providers, such as using open video mainly as a means to protect the market power of cable
X -
d(#= systems rather than as a means of expanding their penetration. 9 D MM
{ O - ԍId. at 68.9 The FTC and DOJ Antitrust
d(# Division emphasize that only an open video system, independent from competitors with market
X - power, will provide consumers with the benefits of competition. 7 MM
{ O v - ԍId. at 8.7
X -
. 47. ` ` The petitions of the Telephone Joint Petitioners generally support our rules
X -
d(#- concerning cable operators' access to open video systems. They seek clarification of the second
d(# prong of the exception to this general rule, where a competing, inregion cable system and its
d(# affiliated systems provide cable service to a total of less than 17,000 subscribers within the open
d(#j video system's service area. Specifically, the Telephone Joint Petitioners urge the Commission
d(# to clarify that this exception coincides with an exception to the cabletelephone buyout restriction
d(#L in the 1996 Act, which applies only to small, rural cable systems that have no more than 17,000
d(# subscribers in total and that are not owned by one of the 50 largest multiple cable system " h ,-(-(ZZ "
d(# operators ("MSOs"). These parties assert that our present rules may require an open video system
d(# operator whose system overlaps with a small portion of a cable system to allow a cable operator
d(#- to gain access to the open video system even though the cable operator is owned by large MSO,
d(#= and even though the large MSO in question also owns the incumbent cable system that might
d(#z overlap a majority of the open video system's service area. The Joint Telephone Petitioners
d(# believe that this approach will ensure that an open video system operator must lease capacity only
X v - to truly small, rural cable systems. V v MM
y O - ԍTelephone Joint Petitioners Petition at 1112.V
V H - ` ` b.Discussion
X -
/ 48. ` ` We find that the Second Report and Order fully considered most of the arguments
d(#L and evidence raised on reconsideration by NCTA and Cox, as described above. We explained
X
-
d(#\ in the Second Report and Order that Section 653(a)(1) specifically permits the Commission,
d(#k "consistent with the public interest, convenience and necessity" to determine when a cable
X -
d(#= operator may provide programming through an open video system. R X MM
{ O - ԍSecond Report and Order at para. 51.R We also fully explained
d(#K our construction of Section 653(b)(1)(A), which gives the Commission the discretion to determine
d(# when it is in the public interest, convenience and necessity for a cable operator either to become
X } -
d(#= an open video system operator H } MM
{ O - ԍId. at paras. 1322.H or to provide video programming over another entity's open
X f -
d(# video system. B f| MM
{ O - ԍId. at paras. 5156.B In the latter context, we determined that, because Section 653(a)(1) specifically
d(# addresses a cable operator's provision of video programming, the provision allows the
d(#] Commission to determine when to permit a cable operator to provide such programming,
d(# notwithstanding the 1996 Act's general nondiscrimination requirements contained in Section
X
-
d(# 653(b)(1)(A). D
MM
{ O - ԍId. at para. 51.D We therefore deny the petitions of NCTA and Cox to the extent they raise these
particular contentions.
X -
Q 0 49. ` ` We also reject the cable operators' argument concerning access to open video
X -
d(# systems by DBS and wireless service providers. As explained in the Second Report and Order,
d(# and expanded upon by the Staff of the FTC and DOJ Antitrust Division, the 1996 Act expressed
d(# a clear preference for facilitiesbased competition between cable operators and telephone
d(#{ companies, and allowing an open video system operator generally to limit the ability of a
d(# competing, inregion cable operator to obtain capacity on its system would encourage cable
X = -
d(# operators to develop and upgrade their own wireline systems. > = MM
{ O & - ԍId. at para. 52.> In addition, as the Staff of the " = 2
,-(-(ZZ "
d(#j FTC and DOJ Antitrust Division argue, cable operators possess substantial market power, and
d(# because these markets have been protected by high entry barriers, cable operators have been able
X -
d(# to maintain prices above the level that would prevail if the market were competitive. MM
{ O K -
d(# ԍFTC and DOJ Antitrust Division Opposition at 5 (citing First Report and Order in the Matter of Annual
{ O - Assessment of the Status of Competition in Video Programming, 9 FCC Rcd 7442, 7545 (1994)). Because
d(#/ of this market power, cable operators may have different incentives for seeking open video
d(#k system capacity than would MVPDs that do not have such market power, such as DBS and
d(# wireless cable providers. For instance, a cable operator may have an incentive to see that the
d(# open video system is not successful, and thus may seek to obtain capacity merely to protect and
continue to exploit its market power.
X -
1 50. ` ` As the Staff of the FTC and DOJ Antitrust Division also point out, enabling a
d(#K cable operator to obtain open video system capacity means that less capacity will be available for
X
-
d(# use by the system operator and for other entities. 7
$ MM
{ O - ԍId. at 8.7 The open video system therefore could
d(# become a less attractive alternative for consumers, which would help preserve the cable operator's
d(# market power. We believe that these rationales currently do not apply to DBS or wireless cable
d(# providers because these MVPDs do not enjoy substantial market power. We therefore reaffirm
X -
d(# our conclusion in the Second Report and Order. However, at such time that DBS or wireless
d(#x cable providers possess sufficient market power to raise concerns similar to those associated with
existing inregion, competing cable operators, we will reexamine this conclusion.
X 6 -
2 51. ` ` We also disagree with NCTA's argument that the Commission impermissibly
d(# delegated to open video system operators the discretion to preclude cable operators from
d(# obtaining capacity on the system. In determining that Section 653(a)(1) allows the Commission
d(# to determine when a cable operator may access an open video system, we merely interpreted the
d(#> statute to allow the Commission to prescribe regulations to govern this situation. As aptly
d(# characterized by TeleTV, we adopted regulations that set forth the parameters for where a
d(# competing, inregion cable operator's access to an open video system may be limited, and for
d(#L where access may not be limited. In any case, we will modify our regulations to emphasize our
d(# decision that, pursuant to the second sentence of Section 653(a)(1), the public interest,
d(# convenience and necessity is served by generally prohibiting a competing, inregion cable
X P -
d(# operator from obtaining capacity on an open video system. As described in the Second Report
X ; -
d(# and Order, we believe that this approach will foster facilitiesbased competition and encourage
d(# competing, inregion cable operators to develop its own system rather than occupy open video
system capacity that could be used by another entity.
X -
3 52. ` ` We clarify that there are two exceptions to this general rule. First, a competing,
d(#- inregion cable operator may access an open video system when the open video system operator
d(# determines that it is in its interests to grant access. For example, as the Staff of the FTC and " ! ,-(-(ZZ "
d(# Antitrust Division state, an open video system operator may have less incentive to exclude a cable
d(# operator that is the most efficient provider of programming in part of the open video system's
X -
d(# service area. 7 MM
{ O K - ԍId.7 Moreover, an open video system operator may determine that the viability of its
d(# system is enhanced by carriage of video programming that is offered by the competing, inregion
d(# cable operator. We believe that it is not appropriate for the Commission to deny an open video
d(# system operator the independent business discretion to decide that a cable operator's presence on
d(#L its system may be beneficial. This business discretion may prove critical to the success of the
d(#i open video system, and we believe that because such success will foster competition in the video
d(#- delivery marketplace, this exception will serve the public interest. Second, a competing, inregion
d(# cable operator will be granted access to an open video system when such access will not
d(# significantly impede facilitiesbased competition. As previously determined, one situation in
d(#L which facilitiesbased competition will be deemed not to be significantly impeded is where: (a)
d(#j the competing, inregion cable operator and affiliated systems offer service to less than 20% of
d(# the households passed by the open video system; and (b) the competing, inregion cable operator
d(# and affiliated systems provide cable service to a total of less than 17,000 subscribers within the
d(# open video system's service area. We believe that this slightly modified approach continues to
d(# provide broad flexibility to administer the open video system and to allow market forces to
emerge as determinatives, thereby encouraging entities to deploy open video systems.
X K -
4 53. ` ` Finally, in response to the Telephone Joint Petitioners' petition, we clarify the
d(# specific exception under which a competing, inregion cable operator may access an open video
d(#z system. These parties argue that the exception may require an open video system operator
d(#i whose system overlaps with a small portion of a cable system to allow that cable system to obtain
d(# capacity on the open video system even though the cable system might be owned by a large MSO
d(# that also operates the cable system covering a majority of the open video system's service area.
d(#. We believe that the Telephone Joint Petitioners misunderstand when the exception will apply.
d(# We reiterate that, in order for a competing, inregion cable operator to fit within the exception,
d(# such a cable operator and its affiliated systems must serve a total of less than 17,000 subscribers
d(# within the open video system's service area, regardless of whether the systems are owned by or
d(#= affiliated with one of the 50 largest MSOs. Under the scenario posited by the Telephone Joint
d(# Petitioners, the cable system that overlaps the open video system service area only to a small
d(#\ degree would not have to be granted carriage on the open video system because that cable
d(# operator's subscribership, when combined with the subscribership of the affiliated cable system
d(# serving a majority of the open video system's service area, presumably would exceed 17,000.
" Z ,-(-(ZZ "
W <
z
` ` 3. Allocation of Open Video System Channel Capacity to Unaffiliated Video
W < Programming Providers (#
V - ` ` a.General Approach
X - ` ` (1) hhCBackground
X _ -
# 5 54. ` ` In the Second Report and Order, we permitted an open video system operator to
d(# implement its own method for allocating channel capacity to unaffiliated video programming
d(#Z providers, so long as capacity is allocated in an open, fair, nondiscriminatory manner. We stated
X - that the process must be verifiable and insulated from any bias by the system operator. D MM
{ O - ԍId. at para. 72.D
X
-
A 6 55. ` ` On reconsideration, NCTA reiterates arguments contained in its earlier comments
X -
d(#- that the Commission should adopt uniform rules for the allocation of open video system capacity
d(# because this approach will allow video programming providers to avoid an increase in their costs
d(#L of doing business by having to learn the allocation procedures in each jurisdiction where they
X -
d(# seek access. x Z MM
{ O - ԍNCTA Petition at 17 (citing NCTA Comments (filed April 1, 1996) at 1314).x NCTA adds that uniform rules also will relieve aggrieved programmers of the
d(#- "dual burdens" of initiating the complaint process and suffering any competitive imbalance while
X d - such a complaint is pending. 8 d MM
{ O - ԍId. at 18.8
X 6 -
7 56. ` ` NYNEX rejects NCTA's approach as unsupported by any evidence that it would
d(# benefit any party. NYNEX states that, even under NCTA's approach, parties still would have
d(# many issues to discuss, and that a "real and substantial loss" would result from the delay required
d(#= for the Commission to determine national standards. NYNEX believes that NCTA would have
X - the Commission stifle creativity among new entrants. > ~ MM
y O - ԍNYNEX Opposition at 5.>
X -
4 8 57. ` ` The Telephone Joint Petitioners also refute NCTA's argument that uniform
d(#- allocation rules will decrease video programming providers' costs of doing business. They argue
d(# that the existing primary outlet for video programming are cable systems, all of which have
d(#j varying practices for obtaining programming. The Telephone Joint Petitioners thus assert that
d(# programming vendors already incur the costs of accommodating multiplicity in pursuing access
d(#y to multichannel video programming distribution systems, and that there is no reason to believe
d(#. that dealing with open video system operators will be any more costly than dealing with cable " " ,-(-(ZZ "
X - operators. l z MM
y O y -
d(#< ԍTelephone Joint Petitioners Opposition at 23. On July 16, 1996, the Telephone Joint Petitioners filed a
d(# Motion to Accept LateFiled Opposition, stating that despite a good faith effort, they were unable to file their
{ O -
d(# opposition to petitions for reconsideration filed in response to the Second Report and Order by the July 15, 1996
d(# deadline. Pursuant to 47 C.F.R. 1.3 and 1.45, we hereby grant the Telephone Joint Petitioners' motion and will
d(# consider their opposition herein. We find good cause for accepting the pleading and that the public interest is served
d(#, because accepting the pleading will allow the Commission to consider the issues raised on reconsideration on a more
complete record.l
X - ` ` (2)hhCDiscussion
X -
9 58. ` ` NCTA's arguments were fully considered and addressed in the Second Report and
X -
d(# Order. NCTA offers no additional facts or arguments to support their position. Accordingly,
we decline to reconsider our previous conclusion.
V L - ` ` b.Reallocation of Channel Capacity
X - ` ` (1)hhCBackground
X
-
3 : 59. ` ` In the Second Report and Order, we required open video system operators to
X -
d(# allocate open capacity, if any is available, at least once every three years. R
MM
{ O - ԍSecond Report and Order at para. 92.R On reconsideration,
d(#i the Joint Telephone Petitioners urge the Commission to increase this period to at least once every
d(# five years. They state that it typically takes at least five years for a new programming service
d(# to become viable, and that such new services thus have sought carriage arrangements on cable
d(# systems of between five and ten years in duration. The Joint Telephone Petitioners state that, if
d(# an open video system operator knows it may have to reduce the number of channels it controls
d(#j on its system in three years in order to accommodate additional demand for carriage from other
d(#\ video programming providers, it will be unlikely to offer these new, independent channels a
X # - carriage agreement of longer than three years. S # MM
y O p - ԍJoint Telephone Petitioners Petition at 12.S
X - ` ` (2)hhCDiscussion
X -
; 60. ` ` Other parties urged the Commission to adopt a fiveyear period in the record for
X -
d(#Z the Second Report and Order. ,
MM
{ O # - ԍSee HBO Comments (in CS Docket No. 9646) at 78; NYNEX Comments (same) at 89. In requiring that an open video system operator reallocate open
d(# capacity at least every three years, we stated that requiring reallocation every three years will
d(# permit an open video system operator to sufficiently accommodate subsequent requests for
d(#z carriage by video programming providers, while not causing unreasonable disruption to the " m ,-(-(ZZ "
X -
d(#M system. V MM
{ O y - ԍSecond Report and Order at paras. 9697.V The Telephone Joint Petitioners do not provide evidence that would compel the
d(# Commission to reconsider that conclusion. We note in this regard that no new programming
d(#. service, which the Telephone Joint Petitioners assert would favor a longer reallocation period,
have filed for reconsideration in this proceeding.
V - ` ` c.Channel Positioning
X _ - ` ` (1)hhCBackground
X 1 -
# < 61. ` ` In the Second Report and Order, we permitted an open video system operator to
X -
d(# assign channel positions, subject to Section 653's nondiscrimination requirements. > Z MM
{ O '
- ԍId. at para. 99.> On
d(# reconsideration, the Alliance for Community Media, et al. state that an open video system
d(# operator still may discriminate against an unaffiliated video programming provider by offering
d(#Z a provider an unattractive channel or block of channels. They urge the Commission to reconsider
d(# its decision to allow an open video system operator to assign channel positions and require the
X
- involvement of an independent office or board to impartially assign channel positions. \
MM
y O F - ԍAlliance for Community Media, et al. Petition at 20.\
X { - ` ` (2)hhCDiscussion
X M -
S = 62. ` ` In the Second Report and Order we determined that the statute and our
d(# implementing regulations will prevent discrimination against unaffiliated video programming
d(# providers, notwithstanding an open video system operator's participation in the channel allocation
d(#/ process. We specifically rejected the assertions of commenters that an open video system
d(#> operator should be required to delegate responsibility for channel capacity allocation to an
X -
d(# independent entity. R | MM
{ O - ԍSecond Report and Order at para. 41.R The Alliance for Community Media, et al. do not present new facts or
d(# arguments to support the mandatory involvement of an independent entity. Accordingly, we
decline the Alliance for Community Media's request for reconsideration.
W < ` ` 4. Channel Sharing
V R - ` ` a.Background
X $ -
n > 63. ` ` In the Second Report and Order, we found that the statute permits an open video
d(# system operator to administer channel sharing on its system, and to determine whether to create
d(# shared channels for some or all of the duplicative programming on the system. We further
d(# clarified that each video programming provider offering a programming service that is placed on " ,-(-(ZZJ "
d(#Z a shared channel must reach its own agreement with the programming service to offer that service
d(#j to subscribers. We stated that, once the programming service has reached agreements with all
d(# of the relevant providers, additional consent of the programming service is not necessary for the
X - open video system operator to place the programming service on a shared channel. D MM
{ O 4 - ԍId. at paras. 102104.D
X -
? 64. ` ` On reconsideration, Alliance for Community Media, et al. argue that our channel
d(# sharing rules, taken in combination with our regulations governing carriage rates charged by an
d(# open video system operator, will allow an open video system operator to exercise unreasonable
d(# control over the programming on the platform. They assert that our rules will permit a system
d(# operator to refuse to place a programming service carried by an unaffiliated video programming
d(#= provider on a shared channel, thereby requiring that provider to lease a full channel instead of
d(#M only a prorata share of a channel if the programming was placed on a shared channel. The
d(# Alliance for Community Media, et al. believe that this could make it impossible for unaffiliated
d(#Z video programming providers to compete, and urges the Commission to modify its rules to ensure
d(#0 that an unaffiliated provider can avail itself of the benefits of channel sharing at its own
X
- request. \
Z MM
y O - ԍAlliance for Community Media, et al. Petition at 19.\
X y -
@ 65. ` ` ESPN argues on reconsideration that the Commission erred in not conditioning the
d(# placement of a programming service on a shared channel upon the consent of the programming
d(#j service. ESPN believes that all video programming providers must have the explicit permission
d(#j of a programming service in order to participate in a channel sharing arrangement with an open
d(# video system operator. If each provider has obtained such consent from the programming service,
d(#j ESPN states that it would be unnecessary for the system operator to obtain additional consent
X - from the programming service in order to place the service on a shared channel. = MM
y O - ԍESPN Petition at 23.=
X -
A 66. ` ` NCTA urges the Commission to state that any advertising availabilities ("ad
d(# avails") be shared on a proportional basis among all video programming providers carrying that
X -
d(# programming service. z MM
y O -
d(# ԍNCTA Petition at 1920. By "ad avails," we mean the time slots to be made available by a programming
service carried on a shared channel to video programming providers offering that service for local advertising. NCTA states that the revenue from the sale of these time slots is an
d(# increasingly important source of income for cable operators, and that if an open video system
d(# operator or its affiliates are able to receive all such revenues they will have a significant financial
X N - advantage over other video programming providers offering that programming service. 1 N MM
{ O $ - ԍId.1
X -
B 67. ` ` Both USTA and the Telephone Joint Petitioners reject ESPN's argument that " d ,-(-(ZZ "
d(#i programming services should be allowed to approve channel sharing arrangements. While USTA
d(#x believes that a video programming vendor should have the protections provided for in law, USTA
d(# believes that an open video system operator would not be the appropriate party "to become
d(#. enmeshed in any potential dispute" between a programming vendor and a video programming
d(#. provider. USTA states, that in practice, an open video system operator will need to be able to
d(# rely on the representations of a video programming provider that it may enter into channel
X v -
d(#< sharing arrangements. A v MM
y O - ԍUSTA Opposition at 1213.A The Telephone Joint Petitioners state that ESPN's approach would give
d(# programming services veto power over an open video system operator's decision to use shared
X H - channels, which would contravene the plain language of Section 653(b)(1)(C). U HX MM
y O Q - ԍTelephone Joint Petitioners Opposition at 14.U
V - ` ` b.Discussion
X
-
C 68. ` ` In response to the Alliance for Community Media, et al.'s petition, we first clarify
d(# that there is no requirement that a system operator charge a video programming provider a pro
X -
d(# rata fee because a programming service carried by that provider is placed on a shared channel. H MM
{ O W - ԍSee Section III.D., below.H
d(# Thus, even if a video programming provider's programming service is placed on a shared
d(# channel, the video programming provider may be required to pay the same rate as if the
d(# programming service was placed on a nonshared channel. We think this clarification addresses
d(#/ the Alliance for Community Media, et al.'s concern that an open video system operator will
d(# engage in rate discrimination by placing favored video programming providers' programming
d(# services on shared channels. We decline the Alliance for Community Media's request for
reconsideration on this issue.
X -
D 69. ` ` Second, ESPN argued that channel sharing should be conditioned on the approval
X -
d(# of programming services in its reply comments to the Notice. We fully considered those views
X -
d(# in the Second Report and Order, where we stated that so long as each video programming
d(# provider has the contractual right to offer a particular program service to subscribers, it is
d(# unnecessary for the open video system operator to obtain the consent of the programming service
X -
d(# in order to place that service on a shared channel. S z MM
{ O - ԍSecond Report and Order at para. 103.S In addition, we note that a programming
d(# service will be placed on a shared channel only if more than one video programming provider
d(#M secures the rights to offer the particular programming service to subscribers as part of their
d(# package of programming. We reiterate that channel sharing is merely a technical method by
d(#i which an open video system operator may enhance the efficiency of its system by using only one
d(# channel to carry programming offered by multiple video programming providers, and again
decline to adopt ESPN's proposal.
" ,-(-(ZZ; " Ԍ
X -
E 70. ` ` We agree with NCTA that ad avails associated with a programming service carried
d(#z by both the open video system operator or its affiliated video programming provider and an
d(# unaffiliated provider must be shared in an equitable manner. Examples of acceptable methods
d(#[ of sharing ad avails include apportioning the revenues from such ad avails on a per subscriber
d(# basis or apportioning the rights to sell the avails themselves. We will clarify that arrangements
d(# with regard to ad avails will be considered a term or condition of carriage, and an open video
X v - system operator must comply with Section 653(b)(1)(A) in negotiating their apportionment. M v MM
y O - ԍCommunications Act 653(b)(1)(A).M
W H <
z
P ` ` 5. Open Video System Operator CoPackaging of Video Programming
W 1 < Selected by Unaffiliated Video Programming Providers (#
V
- ` ` a.Background
X -
F 71. ` ` In the Second Report and Order we concluded that Section 653(b)(1)(B), which
d(# states that nothing in that section should be construed to limit "the number of channels that the
d(#M carrier and its affiliates may offer to provide directly to subscribers," permits an open video
d(#z system operator to enter into agreements to copackage the video programming selected by
d(# unaffiliated video programming providers with the operator's selected programming, and market
X d -
d(# the combined offerings as one package to subscribers. S dX MM
{ O m - ԍSecond Report and Order at para. 108.S In addition, we determined that an
d(# unaffiliated video programming provider may enter into such agreements with other unaffiliated
X 6 -
d(#M providers. 7 6 MM
{ O - ԍId.7 We also noted that Congress applied Section 616 of the Communications Act
d(# governing the regulation of carriage agreements to open video system operators, and that under
d(# this section, an open video system operator may not generally engage in anticompetitive behavior
X - with respect to unaffiliated video programming providers and programming services. ? | MM
{ O - ԍId. at para. 109.?
X -
G 72. ` ` ESPN argues on reconsideration that the Commission should require that co
d(# packaging arrangements be conditioned on the consent of any programming services involved.
d(# ESPN states that program license agreements frequently contain negotiated terms related to the
d(#0 marketing of a programming service, including packaging parameters and trademark use
d(# guidelines. In addition, programming services themselves often are under contractual restraints
d(# as to the use of program vendor trademarks and the names or likenesses of persons appearing in
d(# programs. ESPN therefore argues that programming services must be able to approve co
X " - packaging arrangements in order to comply with their license agreements. = " MM
y O % - ԍESPN Petition at 34.=
" ! ,-(-(ZZ " Ԍ
X -
2 H 73. ` ` The Joint Telephone Petitioners respond that the Commission's rules do not, and
d(#< could not, alter the copyright laws. They argue merely that any programmer wishing to enter into
d(# a copackaging arrangement will have an obligation to ensure that any copyright or trademark
d(#= restrictions to which it is subject are not violated, regardless of whether the Commission takes
X - action as ESPN requests. X MM
y O - ԍTelephone Joint Petitioners Opposition at 1314.X
V v - ` ` b.Discussion
X H -
# I 74. ` ` We decline to adopt ESPN's proposal to require the consent of any programming
d(#Z services involved before a video programming provider may enter into a copackaging agreement.
d(# We recognize ESPN's legitimate concerns that its program license agreements frequently contain
d(#l negotiated terms related to the marketing of a programming service, including packaging
d(#- parameters and trademark use guidelines. However, these are contractual matters that we believe
d(# are best left to the individual negotiations between the parties involved. If a video programming
d(# provider enters into a copackaging arrangement that breaches its contractual obligations, we
d(#j believe that ESPN and other such programming services already possess adequate remedies at
d(# law. Nothing in our rules should be construed to infringe upon the rights of programming
services with respect to their program license obligations.
X K - D.` ` Rates, Terms, and Conditions of Carriage
X 4 -
X < ` ` 1. Just and Reasonable Carriage Rates
X -
V - ` ` a.Background
X -
J 75. ` ` Section 653 (b)(1)(A) requires that rates for carriage on open video systems be just
X -
d(# and reasonable and not unjustly or unreasonably discriminatory. In the Second Report and Order
X -
d(# we noted that this provision reflects the goal of affording unaffiliated video programming
d(#- providers access to, and fair treatment on, open video systems, while at the same time preserving
d(# for open video system operators the ability to realize a return on the economic value of their
X Q -
d(# investment. ] QX MM
{ O Z - ԍSecond Report and Order at paras. 112, 119120.] Our rules in this area are intended to preserve the incentive of open video system
d(#L operators to enter and compete with existing video programming distributors. Consistent with
d(# this goal, we eschewed traditional common carrierstyle rate regulation approaches in favor of
d(# a twostep approach intended to balance the public interest in promoting competition for the
d(# provision of video programming services against the statutory requirement that we ensure just and
d(# reasonable open video system carriage rates. In general, the approach provides that rates are
d(# presumed reasonable where specified conditions are met; and, upon the filing of a complaint
d(#> where the presumption conditions are not present, the burden is on the open video system
d(#- operator to demonstrate that the contested carriage rate is no greater than a carriage rate imputed " "" ,-(-(ZZ! " to the operator's affiliated video programming provider under a specified formula.
X -
K 76. ` ` The just and reasonable presumption attaches to open video system carriage rates
d(#N where at least one unaffiliated video programming provider, or unaffiliated programming
d(# providers as a group, occupy capacity equal to the lesser of onethird of the system capacity or
d(#K that occupied by the open video system operator and its affiliates, and where the rate complained
d(# of is no higher than the average of the rates paid by unaffiliated programmers receiving carriage
d(# from the open video system operator. We further concluded that the mathematical average rate
d(# may be adjusted to account for legitimate variances in rates, such as discounts given for volume,
d(# contract length, creditworthiness, or the number of subscribers reached. These elements were not
intended to be exclusive.
X
-
O L 77. ` ` Once the open video system operator demonstrates that the presumption conditions
d(# are present, the burden shifts to the complainant to demonstrate that the rate is not just and
X -
d(# reasonable. This presumption of reasonableness permits the open video system operator to
X
-
d(#= implement its carriage rates and provide service without prior regulatory rate filings or review.
d(# We further concluded that this structure would provide the open video system operator with
d(#K flexibility and an incentive to attract unaffiliated programming providers to the system, and would
d(# reduce litigation and administrative expenses associated with prior rate review processes. In
X K -
d(#< addition, the Second Report and Order found that these conclusions also apply when a group of
d(#- unaffiliated programming providers negotiate and obtain capacity equal to that of the open video
d(#0 system operator and its affiliates, if the operator or affiliate occupies less than onethird
X - capacity. ? MM
{ O - ԍId. at para. 123.?
X -
M 78. ` ` Where the presumption conditions are not met, and a potential video programming
X -
d(# provider files a complaint with the Commission, the Second Report and Order placed the burden
d(# on the open video system operator to demonstrate that the contested carriage rate is no greater
d(# than a carriage rate that could be imputed to the operator's affiliated video programming. The
X -
d(# Second Report and Order required the operator to show that it charges the unaffiliated
d(#M programmer no more for carriage than it earns from carrying its own affiliates' programming,
X T -
d(# and treated analog and digital channel capacity separately for this purpose. O TZ MM
{ O _ - ԍId. at paras. 114, 125128.O It stated that the
d(# imputed rate approach provides a legitimate basis to fulfill the law's requirement that the rate be
d(#= just and reasonable, and explains that, in principle, the method chosen to arrive at the imputed
d(#y carriage rate was an application of the efficient component pricing rule ("ECPR") to open video
X - systems. h \ MM
{ O $ -
d(# ԍWilliam J. Baumol & J. Gregory Sidak, The Pricing of Inputs Sold to Competitors, 11 Yale J. Reg. 171
{ O _% -
d(# (1994); Alfred E. Kahn & William E. Taylor, The Pricing of Inputs Sold to Competitors: A Comment, 11 Yale J.
Reg. 225 (1994).h
" # ,-(-(ZZ " Ԍ
X -
N 79. ` ` A number of parties filed petitions for reconsideration or clarification of these
X -
d(# open video system carriage rate requirements. : Z MM
{ O b -
d(# ԍSee Alliance for Community Media, et al. Petition at 19; Telephone Joint Petitioners Petition at 510; City of
d(# Indianapolis Petition at 3; National League of Cities, et al. Petition at 2024; MCI Petition at 25; NCTA Petition
at 1819.: In general, incumbent LECs supported the
d(# overall approach, but challenged the use of the imputed rate formula, where the presumption
X -
d(# conditions are not met, as too regulatory. _ MM
{ O V - ԍSee Telephone Joint Petitioners Petition at 510._ In contrast, cable companies, local authorities, and
d(# other competitors argue that the procedures established are too cumbersome from a procedural
d(# perspective, and fail to protect adequately both unaffiliated programmers and LEC telephone rate
X v - payers. v| MM
{ O -
d(# ԍSee NCTA Petition at 2024; City of Indianapolis Petition at 3; National League of Cities, et al. Petition at
2024; MCI Petition at 26.
X _ -
X H -
~ O 80. ` ` National League of Cities, et al. critique the pricing rules as inadequate to fulfill
d(# the statutory requirements of ensuring open access, nondiscrimination, and reasonable rates. It
d(#L argues that the presumption approach places an undue financial and regulatory burden on the
d(# unaffiliated programmer to determine whether the LEC's terms are fair; that the Commission's
d(#= rules will encourage the routine filing of carriage complaints by all video programmers that will
d(# "flood" the Commission; and that the presumption's conditions fail to protect unaffiliated
d(#> programming providers. National League of Cities, et al. maintain that the criteria related to
d(#[ average rates is largely meaningless since only the LEC has the necessary information to make
d(# such a determination and the average may be adjusted in a variety of ways left totally
X y - indeterminate under the Commission's rules. \ y MM
y O - ԍNational League of Cities, et al. Petition at 2023.\
X K -
P 81. ` ` MCI contends that the rules fail to establish a mechanism that prevents incumbent
d(#j LECs from pricing open video system carriage rates below incremental cost due to the transfer,
X -
d(#i by means of improper cost allocation, of videorelated costs to their telephone customers. B f MM
y O 4 - ԍMCI Petition at 23.B MCI
d(# argues further that the Commission has recognized that incumbent LECs have an incentive and
d(# opportunity to shift costs from unregulated to regulated services. MCI submits that the likelihood
d(# that open video system carriage rates will be set below incremental costs nearly guarantees that
d(# onethird of open video system capacity will be occupied by parties not affiliated with the
d(#j incumbent LECs that are unlikely to complain about the carriage rates, for they will share in the
X -
d(# crosssubsidy provided by the incumbent LEC's telephone customers. 9
MM
{ O :% - ԍId. at 34.9 National League of
d(#y Cities, et al. also argue that the presumption approach permits a LEC to control effectively two
d(#! thirds of the capacity directly, and onethird indirectly, by finding and favoring a single " e$ ,-(-(ZZ1 "
X - "unaffiliated" programmer so as to meet the presumption conditions. \ MM
y O y - ԍNational League of Cities, et al. Petition at 2223.\
X -
} Q 82. ` ` MCI also contends that the open video system pricing rules will permit incumbent
d(# LECs to charge discriminatory rates once onethird of their open video system capacity is
d(#. occupied by nonaffiliates. MCI argues that the large amount of common telephone and open
d(#L video system costs will result in a gap between the belowincremental cost rate (resulting from
d(#. crosssubsidies) offered to existing nonaffiliated programmers and a rate equal to incremental
d(# cost plus common costs. MCI contends that the Commission has compounded this problem by
d(#/ unilaterally excluding the parties harmed by the possibility of this crosssubsidization from
d(# challenging open video system carriage rates by bringing complaints against the presumptive
X -
d(#= reasonableness of the rates. B X MM
y O #
- ԍMCI Petition at 34.B MCI argues, therefore, that the Commission should: (a) permit
d(# any party potentially affected by an open video system carriage rate to file a complaint with the
d(# Commission; and (b) require telephone companies seeking open video system status to publicly
d(# file incremental and stand alone telephone and video cost studies, along with appropriate
X - subscriber and usage data as part of their open video system applications. 9 MM
{ O W - ԍId. at 46.9
X -
P R 83. ` ` In response, LECs generally urge the Commission to reject requests to reconsider
d(#\ the open video system pricing rules based on allegations of the potential for discriminatory
X b -
d(# pricing. N bz MM
{ O - ԍSee, e.g., USTA Opposition at 5.N They state that MCI's request that the Commission reverse many of the key
d(#= determinations made in crafting a rate regulation scheme suited to open video systems as new
d(# entrants without any market share or power, is simply a rehash of MCI's earlier unsuccessful
d(# advocacy of Title IIlike regulation for open video systems, which should be rejected by the
X -
d(# Commission on reconsideration. MM
y O - ԍTelephone Joint Petitioners Opposition at 13; NYNEX Opposition at 11; USTA Opposition at 34. USTA contends that competition would be disserved by
d(# requiring LECs to file incremental and standalone telephone and video cost studies with the
d(# Commission along with subscriber and usage data as MCI requests. USTA claims that the only
d(# result of such requirements would be to hamper LEC market entry, delay competition and
X -
d(#L increase costs for the LECs. = MM
y O ! - ԍUSTA Opposition at 6.= Similarly, RCN supports the Commission's goal of avoiding the
d(#K imposition of barriers to entry similar to those that have hindered the development of competition
d(# in the multichannel video distribution market thus far. RCN notes that the Commission has long
d(# recognized, with respect to the nondominant new entrants in the long distance and local
d(#j telephone market, and in other telecommunications markets where competition exists, that Title
d(# IItype rate and entry regulation is (a) not necessary to protect consumers or to assure just and " 7 % ,
,-(-(ZZ "
d(#[ reasonable rates, and (b) likely to impair the ability of open video system operators to compete
X - effectively in the market by "stifl[ing] price competition and service and marketing innovation." ^ MM
{ O b -
d(#. ԍRCN Opposition at 11 (citing Policy and Rules of Competitive Common Carrier Service and Facilities
{ O , -
d(# Authorizations in CC Docket No. 79252 (Competitive Carrier Proceedings), Second Report and Order, 91 FCC 2d
{ O - 59 (1982) (Second Report) (subsequent history omitted).
X -
S 84. ` ` The Telephone Joint Petitioners also respond that there is no possibility that an
d(# open video system operator who charges one group of programmers below cost rates, and then
d(# seeks to charge another programmer a discriminatorily high rate, will escape detection by the
d(# Commission when it compares the latter programmer's rate to the weighted average rate of the
d(#= first group. They strongly disagree with MCI's request that thirdparties be permitted to bring
d(# complaints regarding open video system carriage rates, as well as MCI's request that open video
X 1 -
d(# system operators be required to produce stand alone cost studies for telephony and video. X 1 MM
y O
- ԍTelephone Joint Petitioners Opposition at 1213.X The
d(# Telephone Joint Petitioners also urge the Commission to reject MCI's requests on grounds that
d(# such requirements would recreate the type of tariff proceedings that the Commission conducted
X
-
d(# under the video dialtone regime. 8
~ MM
{ O - ԍId. at 13.8 NYNEX argues that permitting thirdparty complaints would
d(# lead to the same results that the Commission obtained in the video dialtone process, where most,
d(# if not all, challenges against video dialtone were raised by incumbent cable interests and their
d(#0 affiliated programmers, rather than by unaffiliated programmers. NYNEX states that the
d(# Commission's open video system rate scheme properly focuses on that latter, rather than the
d(# former, group, and that the Commission should not countenance the regulatory tactics of
X b - competitors seeking to impede open video system. B b MM
y O # - ԍNYNEX Opposition at 1213.B
X K -
X 4 -
T 85. ` ` In their petition, the Telephone Joint Petitioners request that the Commission
d(# modify the requirements for applying the presumption. They argue that the Commission's
d(# threshold capacity requirement is unrelated to whether carriage rates are just and reasonable and
d(# will penalize open video system operators using advanced technologies. For example, the
d(# Telephone Joint Petitioners assert, operators of switcheddigital open video systems will be unable
d(#[ to show that unaffiliated video programming providers occupy a threshold amount of capacity
X -
d(# and will be unable to meet the presumption conditions. MM
X ! - # o \ P C +XP# эTelephone Joint Petitioners Petition at 6; see also USTA Opposition at 56.ĸ The Telephone Joint Petitioners
d(# suggest that the Commission remove the minimum capacity requirement and instead find that the
d(# presumption applies when two unaffiliated programmers purchase any level of capacity on an
X e -
d(# open video system. Z eS
MM
y O i& - ԍTelephone Joint Petitioners Petition at 78.Z USTA supports the Commission's commitment to flexibility, and urges
d(#z that it be extended further to permit and encourage the introduction of new technologies by " N& ,-(-(ZZ "
d(#l focusing on the presence of unaffiliated programmers, rather than the use of an arbitrary
d(#[ percentage of capacity utilitization before allowing LECs the safeharbor of the presumption of
X - just and reasonable rates. B MM
y O K - ԍUSTA Opposition at 6 n.15.B
X -
X -
U 86. ` ` The Telephone Joint Petitioners further argue that the phrase "unaffiliated
d(# programmers as a group" in our presumption conditions could be interpreted as a requirement that
d(#z the unaffiliated programmers market their programming as a package in competition with the
X _ -
d(# open video system operator and its affiliates to meet the presumption conditions. j _X MM
{ O h
- ԍTelephone Joint Petitioners Petition at 7.j The
d(# Telephone Joint Petitioners suggest that the Commission clarify that the presumption applies
d(# whether the unaffiliated programmers market their programming in competition or in cooperation
X - with the open video system operator's programming. O MM
{ O - ԍId. at 8.O
X
-
X
-
5 V 87. ` ` While the Telephone Joint Petitioners agree as a general matter that the
d(# Commission's imputed rate approach is preferable to more overtly regulatory prescriptions for
d(# setting prices, they argue that the Commission has not properly applied the ECPR methodology,
d(# and that computing an imputed rate is not necessary for the purpose of establishing just and
X -
d(# reasonable open video system carriage rates. @ | MM
{ O - ԍId. at 810.@ The Telephone Joint Petitioners include with their
d(# petition a "Declaration of William E. Taylor," one of the authors of an economics article on
X b -
d(# ECPR cited in the Second Report and Order. Y b MM
{ O ! - ԍSecond Report and Order at para. 126 n.295.Y Taylor's declaration discusses several ways in
X M -
d(# which the Second Report and Order allegedly misstates and misapplies the ECPR, including the
d(# premise that open video system carriage is an essential input. It generally concludes that the
d(# circumstances of the evolving video programming marketplace will not warrant the search for
d(# ECPRbased pricing standards, and urges that the marketplace itself should be able to determine
X -
d(# the proper rates for open video system carriage. v MM
y O D - ԍTelephone Joint Petitioners Petition, Declaration of William E. Taylor at 48.v The Telephone Joint Petitioners suggest that
d(# if the pricing methodology is retained, the Commission should clarify its use of the imputed rate
d(#j approach and how ECPR is to apply to open video system carriage rates. The Telephone Joint
d(# Petitioners argue that the imputed rate will set an artificially low ceiling on carriage rates because
d(#[ it omits the incremental cost of carriage, and thata ceiling on carriage rates based on the ECPR
d(#. is inappropriate because open video system operators are new entrants that will compete with
X i -
d(# incumbent cable operators and other video programming distributors. i0
MM
{ O J& -
d(# ԍTelephone Joint Petitioners Petition at 810, Declaration of William E. Taylor at 68; accord NYNEX
y O ' - Opposition at 12. They also suggest " i' ,-(-(ZZ1 "
X - thatthe use of the terms "earn" and "profit allowance" require clarification. P MM
y O y - ԍDeclaration of William E. Taylor at 68.P
X -
_ W 88. ` ` Other petitioners challenge the methodology as inadequate to protect unaffiliated
d(# programmers. The City of Indianapolis and the Alliance for Community Media, et al. object to
d(#= the imputed rate formula on the ground that it improperly compensates the open video system
d(# operator for lost subscribers. They argue that unaffiliated programmers will pay higher carriage
d(#. rates than affiliated programmers, and this will cause unaffiliated programming provision to be
X _ -
d(# unprofitable. _X MM
{ O h
- ԍCity of Indianapolis Petition at 3; Alliance for Community Media, et al. Petition at 19. The National League of Cities, et al. interpret the imputed rate formula as
d(#- improperly permitting open video system operators to charge unaffiliated programming providers
X 1 - a price for carriage equal to the price they charge subscribers for affiliated programming. e 1 MM
y O
- ԍNational League of Cities, et al. Petition at 23.e
X
-
Q X 89. ` ` MCI contends that the Commission may not use ECPR as a means of ensuring
d(# nondiscriminatory open video system carriage rates, because there is no practical method of
d(# determining whether an open video system carriage rate is greater than the rate that would be
d(# established by the ECPR. According to MCI, this is due in part to the Commission's inability
X
-
d(# to determine a carrier's actual opportunity cost. :
z MM
y O - ԍMCI Petition at 5.: MCI instead proposes that the incumbent
d(# LECs be required to charge video carriage rates in excess of the incremental cost of providing
X y -
d(# video services. 7 y
MM
{ O 4 - ԍId. at 6.7 In response, USTA urges the Commission to dismiss MCI's efforts to increase
d(# LEC regulatory burdens by urging that video carriage rates must be delivered in excess of
X K - incremental cost. = K MM
y O - ԍUSTA Opposition at 6.=
X 4 -
V - ` ` b.Discussion
X -
Y 90. ` ` In the Second Report and Order we specifically noted MCI's concerns as to the
d(#x need for effective cost accounting and auditing procedures to ensure that incumbent LECs do not
d(# engage in the allocation of excessive costs to their regulated telephone services. We stated that
X -
d(# the substantive cost allocation requirements are being addressed in a separate rulemaking. W ,
MM
{ O # - ԍSecond Report and Order at para. 29 n.92.W In
d(# its petition, MCI has provided no new facts or arguments to justify reconsideration of these
X ~ -
d(# concerns in the instant proceeding. ] ~ MM
{ O & - ԍSee generally, 47 C.F.R. 1.429(b) and (c).] We also decline to impose the other precertification and " ~( P
,-(-(ZZn "
d(# reporting requirements MCI seeks. We believe that these requirements are inconsistent with our
d(# flexible regulatory approach to the provision of open video system, and are not necessary to
d(# protect either unaffiliated programmers or the public in general. In addition, we decline to
d(#x require open video system operators to base their carriage rates on detailed studies of incremental
X -
d(# and stand alone cost and estimates of actual opportunity cost, as suggested by MCI, @ MM
y O - ԍMCI Petition at 5.@ because
X -
d(#- of the 1996 Act's direction that Title II requirements not be applied to open video systems, X MM
{ O -
d(# ԍSee Communications Act 653(c)(3), 47 U.S.C. 573(c)(3); Telecommunications Act of 1996 Conference
Report, S. Rep. 104230 at 178 (February 1, 1996) ("Conference Report"). and
X v -
d(# the limited time allowed for the review of certifications and complaints. S v MM
{ O - ԍSecond Report and Order at para. 120.S Instead, as we discuss
d(# below, we reaffirm our imputed rate approach for determining whether carriage rates are just and
reasonable where the presumption conditions are not present.
X -
Z 91. ` ` We also decline to adopt MCI's proposal to allow parties other than potential video
d(# programming providers seeking carriage on the open video system to file complaints with the
d(#L Commission regarding the carriage rates offered by the system operator. We think that such a
d(# rule would inevitably result in the filing of numerous complaints by parties with no direct interest
d(# in providing programming over open video systems, and thus delay the initiation of open video
d(#. system service. We therefore reaffirm our decision to allow only potential video programming
d(# providers to file complaints regarding open video system carriage rates. This decision does not
d(# leave other parties who claim to be adversely affected by an open video system operator's
d(# carriage rate without remedies. For example, a party seeking to challenge a rate it pays for
d(# common carrier services provided by that operator on the ground of improper costshifting from
d(# an open video system, retains its rights under section 208 of the Communications Act to file a
X -
d(# complaint. E D MM
{ O - ԍSee 47 U.S.C. 208.E These statutory rights afford adequate protection in the event that third parties
d(#i believe open video system operators are improperly shifting costs relating to video carriage at the
expense of telephone customers.
X -
[ 92. ` ` We disagree with the general assertion by the National League of Cities, et al. that
d(# our presumption conditions will not provide adequate protection to unaffiliated video
X -
d(# programming providers. As we noted in the Second Report and Order, where the presumption
d(#i conditions are met, there is sufficient reason to conclude that the open video system is accessible
X g -
d(# and the negotiated carriage rates are just and reasonable. S g MM
{ O # - ԍSecond Report and Order at para. 122.S The National League of Cities et al.
d(# have presented no new arguments or data to refute this conclusion. Moreover, we disagree with
d(#/ National League of Cities et al.'s contention that the presumption approach places a undue
d(#l financial and regulatory burden on the unaffiliated programmer to determine whether the " " ) h ,-(-(ZZ "
X -
d(#Z operators' rates are fair. Y MM
y O y - ԍNational League of Cities, et al. Petition at 21.Y Our presumption approach strikes an appropriate balance between the
d(# interests of the open video system operator in establishing service to end users quickly, without
d(#L undue regulatory intervention by competitors, and the interests of unaffiliated programmers in
d(# obtaining just and reasonable carriage rates. To the extent National League of Cities, et al.'s
d(# argument is directed at the precomplaint rate disclosure process, we further clarify the rights of
d(#< unaffiliated programmers to obtain preliminary rate estimates, and the information these estimates
X v - must contain, infra in Section III.H., Dispute Resolution.
X J -
\ 93. ` ` The National League of Cities, et al. also expressed the specific concern that the
d(#N presumption conditions will allow the average rate paid by the unaffiliated programming
d(# providers receiving carriage to be "weighted" or adjusted, but that only the open video system
d(#> operator will possess the information necessary to calculate the average or to "weight" the
X
-
d(# average. 8
X MM
{ O - ԍId. at 22.8 We clarify that, as part of its burden of showing that the presumption conditions are
d(# met, an open video system operator will be required to make available to a complainant all
d(# information needed to calculate the average rate paid by the unaffiliated programming providers
d(#/ receiving carriage on its system, including the information needed for any weighting of the
d(# individual carriage rates that the operator has included in the average rate. The complainant may
d(#Z challenge the weighting methodology used by the open video system operator as part of its case.
d(# Requests for confidential treatment of particular information shall be addressed consistent with
X M - our rules concerning proprietary information. L M MM
{ O - ԍSee 47 C.F.R. 76.1513(j).L
X -
n ] 94. ` ` The Telephone Joint Petitioners have reiterated their original request that carriage
d(# rates be presumed just and reasonable even if a small number of unaffiliated video programming
X -
d(# providers occupied only one channel each. | MM
{ O - ԍTelephone Joint Petitioners Petition at 78; see NCTA Opposition at 79 (disagreeing). We again reject their suggestion on the grounds,
X -
d(# stated in the Second Report and Order, that the presence of one or more unaffiliated programmers
d(#- on a diminutive portion of an open video system's channel capacity is not sufficient to show that
X -
d(# its carriage rates are just and reasonable. S MM
{ O m - ԍSecond Report and Order at para. 124.S We agree with the Telephone Joint Petitioners that
d(#Z the onethird threshold capacity requirement may not be appropriate in the future when advanced
d(#k technologies that are under development, such as switched digital video, may be deployed.
d(#j Because these technologies have not yet been deployed, however, we will not now modify the
requirement. We will consider requests
d(#| to waive or otherwise modify the threshold capacity requirement to reflect the special
circumstances of such advanced systems.
"
* ,-(-(ZZ " Ԍ
X -
^ 95. ` ` Moreover, the presumption requirement is met not only when unaffiliated
d(# programmers occupy onethird of capacity, but also when unaffiliated programmers occupy the
d(# same amount of capacity as the open video system operator or its affiliate. Take, for example,
d(# the case of a system that has a theoretical capacity of 1,000 channels, and assume that the open
d(# video system operator and its affiliate choose to occupy 100 of these channels. Under these
d(#. conditions, it will not be necessary for unaffiliated programmers to occupy 333 channels (one
d(# third of system capacity) to meet the presumption requirements. Rather, the open video system
d(#? operator will meet the presumption requirements if unaffiliated programmers occupy 100
channels. This factor may eliminate the problems that the Telephone Joint Petitioners foresee.
X -
_ 96. ` ` In response to the Telephone Joint Petitioners' request, we clarify that in the
X
-
d(# Second Report and Order, the phrase "unaffiliated programmers as a group" does not impose a
X
-
d(# requirement that the programmers market their programming in competition with the operator. ?
MM
{ O g
- ԍId. at para. 122.?
d(# Rather, the phrase is used to give open video system operators greater flexibility in meeting the
d(# presumption conditions. It allows operators to meet the requirement by providing carriage to
several unaffiliated programmers that in total occupy the threshold capacity requirement.
X { -
` 97. ` ` We reaffirm our basic imputed rate approach for ensuring just and reasonable open
d(# video system carriage rates where the presumption conditions are not met, but clarify our use of
X M -
d(#y certain terminology. We structured the imputed rate in the Second Report and Order to reflect
d(# what the open video system operator, or its affiliate, effectively "pays" for its own carriage of
d(# programming over the system by starting with the revenues received from the end user subscriber,
d(# and subtracting the costs avoided by the open video system operator by permitting another
X -
d(# programming provider to serve that subscriber. E Z MM
{ O - ԍId. at para. 127.E No petitioner has convinced us that an imputed
d(#= rate approach is not suitable to the circumstances of open video system carriage, where a new
d(#. market entrant (the open video system operator) will, in the majority of areas, face competition
d(# from an established incumbent (the cable operator). We continue to believe that, under these
d(#- circumstances, the imputed rate approach will produce carriage rates that encourage market entry
X -
d(#? and therefore result in greater competitive choices for video programming customers. S MM
{ O - ԍSecond Report and Order at para. 127.S
X i -
d(#< Therefore, we reaffirm that the imputed carriage rate established in the Second Report and Order,
d(# which equals the revenues received from subscribers for the open video system operator's
d(# programming package, minus the cost to the operator of creating the package, provides a sound
basis for comparison to the challenged carriage rate offered the unaffiliated programmer.
X -
a 98. ` ` Telephone Joint Petitioners have instead urged us to let the market set the rates for
d(#j carriage. We do not, however, find that market conditions alone are sufficiently competitive to
d(# produce just and reasonable carriage rates for unaffiliated programmers. One of the premises of
d(# the open video system is that it will be providing independent programmers an alternative video " !+ ~ ,-(-(ZZ "
d(# carriage outlet that will encourage multiple programming sources. Today, independent
d(# programmers have limited ability to obtain carriage on cable systems on an open basis. Other
d(#Z alternatives to the open video system, e.g., DBS and wireless cable, currently serve approximately
X -
d(#" 9% of the market. l MM
{ O 4 - ԍSee Second Competition Report, 11 FCC Rcd at 2063.l Accordingly, these alternatives similarly appear to offer limited
d(# opportunities for carriage on an open basis for unaffiliated programmers. We therefore reject the
d(# position of the Joint Telephone Petitioners that the market alone will ensure just and reasonable
d(# carriage rates. We believe that the imputed rate approach will encourage entry by open video
d(#N systems, while ensuring that video carriage rates are just and reasonable for unaffiliated
X H - programmers.
X -
} b 99. ` ` As we noted in the Second Report and Order, open video systems are essentially
d(#K a combination of: (a)the creative development and production of programming, (b)the packaging
d(#> of various programs for the open video system operator's offering, and (c)the creation and
d(#j maintenance of infrastructure for the carriage of both the operator's affiliated programming and
X -
d(# unaffiliated programming. ? Z MM
{ O - ԍId. at para. 127.? Our rules are intended to ensure that unaffiliated programming
d(# providers pay a rate for carriage that is no more than the carriage price that can be fairly imputed
d(# for the carriage of the operator's affiliated programming packages. In so doing we seek to attain
d(#N an important result of the ECPR, which is that the price the operator charges unaffiliated
d(# programming providers for carriage must be no higher than the sum of its incremental cost of
X M - carriage and the contribution to fixed infrastructure costs in its retail price of programming. Z M MM
y O - ԍDeclaration of William E. Taylor at 5.Z
X -
% c 100. ` ` We disagree with the assertion by the Telephone Joint Petitioners that the
d(# Commission errs by using an ECPR methodology to establish carriage pricing on open video
d(#n systems, where it is not appropriate, while declining to use ECPR to establish LEC
X -
d(# interconnection pricing in situations where they assert it is appropriate. ^| MM
{ O -
d(# ԍTelephone Joint Petitioners Petition, Declaration of William E. Taylor at 5 n.15, citing Implementation of the
{ O -
d(#, Local Competition Provisions in the Telecommunications Act of 1996, CC Docket No. 9698, Notice of Proposed
{ O - Rulemaking (1996) (Interconnection Notice) at para. 148. Like ECPR, our
d(#M imputed rate approach will provide the open video system operator the same return when it
d(# carries unaffiliated programming as when it carries its own programming. We believe that in the
d(# case of open video systems, application of an ECPR methodology provides full economic
incentives for LEC entry into video in competition with incumbent cable providers.
X P -
d 101. ` ` By contrast, in the case of interconnection to the local telephone network,
d(# application of ECPR would reduce the incentives for entry into local exchange services by
d(# enabling incumbent LECs to charge higher rates for interconnection than would result from a
d(# forwardlooking economic cost model. In this latter case, application of the ECPR for network " , ,-(-(ZZy "
d(# interconnection under sections 251 and 252 of the 1996 Act would be inappropriate, and we have
X -
d(# therefore declined to use it. MM
y O b -
d(# ԍ Implementation of the Local Competition Provisions in the Telecommunications Act of 1996, CC Docket No.
{ O * - 9698, Report and Order, (adopted August 1, 1996). More specifically, the Commission has concluded that the ECPR
d(# is not appropriate in the pricing of unbundled local telephone network elements for the purposes
X -
d(# of interconnection. " MM
V - ԍ# XU 4 p QX# # o \ P C +XP# Id.# t 4 p (AC X# Ѭ There are significant differences in the market circumstances open video
d(# systems will face, as compared to the pricing of unbundled local telephone network elements.
d(# As we have noted, open video systems, as the new market entrant, will face competition from
d(# the established incumbent cable operator. By contrast, existing end user rates in local
d(# telecommunications services are not competitively set. In the Commission's interconnection
d(#= proceeding under section 251, we noted the ECPR's potential to permit higher rates than those
d(#K established by a forwardlooking economic cost model, to limit competitive entry, and to preserve
pricing inefficiencies.
X
-
e 102. ` ` We disagree also with the assertion by the Telephone Joint Petitioners that the
X -
d(# imputed price omits the incremental cost of carriage. T MM
y O Y - ԍDeclaration of William E. Taylor at 6.T Under normal market conditions, the
d(# imputed price of carriage will exceed the open video system operator's incremental cost of
d(# carriage (which is greater than zero) and make a contribution to the fixed infrastructure cost of
d(# the open video system. For this reason, we reject the Telephone Joint Petitioners' assertion that
X y -
d(#z the imputed rate approach will produce a carriage rate of zero or less. l yc MM
{ O - ԍTelephone Joint Petitioners Petition for Reconsideration at 9.l The imputed rate is
d(# based in part on the price charged by the open video system operator or its affiliate to enduser
d(# subscribers. The price charged the subscriber will generally be greater than the incremental cost
d(# of carriage. In addition, the imputed rate subtracts out the costs of developing the programming
d(# and creating the package, which removes the costs avoided when unaffiliated programming is
d(# carried. After subtracting these costs, the imputed rate will correspond to the carriage rate that
d(# the open video system operator "pays" to carry its own programming. The imputed rate approach
d(#/ is designed to give the open video system operator the same economic return when it sells
d(# carriage to unaffiliated programming providers as when it "sells" carriage to its own
d(# programming. Consequently, we would expect the use of the ECPR approach to minimize any
disincentives the open video system operator may have to carry unaffiliated programming.
X e -
P f 103. ` ` We believe that this result of the imputed rate approach should be achieved even
X N -
d(# under the competitive conditions assumed by the Telephone Joint Petitioners in their petition. 7 N MM
{ O $ - ԍId. at 9.7
d(#i Even assuming that, at the outset of open video system operations, competition lowered the retail
d(#z price of video programming to subscribers to the point that the open video system operator " - ,-(-(ZZ "
d(# incurred losses, this would not justify the operator's shifting the burden of such losses to
d(#L unaffiliated video programming providers by charging them a higher carriage rate than the rate
d(# that it effectively "charges" itself. The unaffiliated programming providers would also face lower
d(# retail prices for their programming under the competitive conditions assumed by the Telephone
d(#. Joint Petitioners. We disagree with the Telephone Joint Petitioners' assertion that unaffiliated
X -
d(#" programmers would be largely unaffected by retail price competition. N MM
y O - ԍDeclaration of William E. Taylor at 6.N Unaffiliated
d(#L programming providers would be offering services to subscribers in the same area as the open
d(#[ video system operator and would, as a result, face essentially the same competitive conditions
faced by the operator.
X -
g 104. ` ` The imputed rate approach was chosen as a flexible regulatory approach for
d(# determining what are just and reasonable carriage rates in an imperfectly competitive carriage
d(#- market. However, it may not be the sole means of establishing just and reasonable carriage rates.
d(#i There may be alternative, marketbased approaches to demonstrating that a challenged rate is just
d(#x and reasonable, that may also be useful in particular cases. We would consider such an argument
d(# in response to a complaint regarding a carriage rate. The open video system operator would be
d(# required to demonstrate that its carriage service is subject to sufficiently strong competitive forces
d(#L to ensure that its carriage rates are just and reasonable, or that it has computed its rate using a
methodology that aims to produce or replicate the working of a competitive carriage market.
X 4 -
h 105. ` ` In addition, on reconsideration, we find that certain aspects of our explanation and
X -
d(# use of terminology should be clarified. As we stated above, under our approach, the imputed
d(# price of carriage for an affiliated programming package equals the price of the package delivered
d(# to a subscriber minus the cost of creating the package. To clarify the terms identified by the
X -
d(# Telephone Joint Petitioners, in the Second Report and Order we use the term "earning" to refer
d(#> to the difference between the price of the package delivered to a subscriber and the cost of
X -
d(# creating the package. D X MM
{ O - ԍSee supra at para. 87.D We use the term "profit allowance" to refer to one type of cost of
d(# creating the programming package, namely the cost of capital used to create the package.
d(#= We also clarify Section 76.1504 of the rules to indicate more clearly the types of avoided costs
that must be subtracted by an open video system operator in calculating the imputed rate.
X 9 -
i 106. ` ` We also clarify in response to the National League of Cities, et al. that the imputed
d(#M rate formula will not allow open video system operators to charge unaffiliated programming
d(# providers a price for carriage equal to the price they charge subscribers for affiliated
d(# programming. The imputed rate formula, as we have discussed, requires open video system
d(#^ operators to subtract the cost of creating affiliated programming from the price of the
d(# programming. The carriage rate that unaffiliated programming providers pay will be less than
the price subscribers pay for affiliated programming.
" ". ,-(-(ZZ! " Ԍ
X -
j 107. ` ` The concerns of the City of Indianapolis and the Alliance for Community Media,
d(#- et al. regarding how subscriber losses will affect the imputed carriage rate are overstated because
d(#y they do not reflect the effects of subscriber gains. We wish to clarify that the imputed carriage
d(# rate will recognize both losses and gains in the number of subscribers to the open video system
d(# operator's programming package resulting from carrying unaffiliated programming. Increases in
d(# subscribers may occur because unaffiliated programming attracts subscribers to the open video
d(#l system from cable or broadcast television. Decreases in subscribers may occur because
d(# unaffiliated programming attracts subscribers away from affiliated programming on the open
d(# video system. The average of these individual channel effects, which may be an increase or a
X 1 - decrease, is the one that will be recognized by the imputed carriage rate.
X
-
k 108. ` ` We also wish to clarify that, contrary to MCI's suggestion, our imputed rate
d(#- approach does not require that we determine an open video system operator's actual opportunity
d(#O cost. Because it is computed by averaging costs over all channels carrying affiliated
d(# programming, the imputed carriage rate will include an estimate of the average opportunity cost
d(# resulting from the carriage of unaffiliated programming. This average is adequate to achieve the
d(#L goal of ensuring that the operator's carriage rates are just and reasonable, without determining
the operator's actual opportunity cost.
W K <
z
q ` ` 2. Open Video System Carriage Rates Must Not be Unjustly or
W 4 < Unreasonably Discriminatory (#
V - ` ` a.Background
X -
3 l 109. ` ` In the Second Report and Order, we concluded that some level of open video
d(# system carriage rate differentiation is permissible, provided that the bases for the differences are
d(# not unjust or unreasonable. We suggested that some legitimate, objective factors on which rate
d(#[ differences could be based are volume discounts, differences in creditworthiness and financial
d(#K stability, differences in the number of subscribers reached, and preferential rates for notforprofit
X g - programming providers. S g MM
{ O - ԍSecond Report and Order at para. 130.S
X 9 -
m 110. ` ` NCTA challenges the sufficiency of the presumption approach to protect
d(# unaffiliated programmers from discrimination, and requests that it be changed. NCTA states that
d(# the scheme leaves opportunities for open video system operators to "game the system" to
d(# discriminate against selected programmers. NCTA submits that the simplest and most effective
d(#y means of preventing such discrimination is to require, unless open video system operators can
d(# justify the difference, that each programmer be charged the same rate. NCTA contends that the
d(#k Commission should not place the burden of proof on the programmer alleging a violation of
d(# section 653(b)(1)(A) standard; rather, open video system operators should always bear the burden " "/ Z ,-(-(ZZ! "
X - of demonstrating that rate differences are justified by the circumstances. ? MM
y O y - ԍNCTA Petition at 1819.?
X -
# n 111. ` ` MCI argues that would be complainants will be unable to ensure that open video
d(# system carriage rates are nondiscriminatory because there is no practical method of determining
X -
d(# whether a rate is greater than the rate that would be established by ECPR. F X MM
{ O - ԍMCI Petition at 5.F The Alliance for
d(#Z Community Media, et al. argues that the Commission should require open video system operators
X v - to charge nonprofit video programming providers a reduced carriage rate. j v MM
{ O - ԍAlliance for Community Media, et al. Petition at 911.j
V H - ` ` b.Discussion
X -
o 112. ` ` The petitioners' concerns about whether open video system rates are
d(# nondiscriminatory ignores the wording of the 1996 Act, which prohibits rate differences only
X
-
d(#j when unjust or unreasonable. A
| MM
{ O - ԍNotice at para. 32.A As we noted in the Second Report and Order, we decided to
d(#y permit carriage rate differentiation because requiring open video system operators to charge all
d(# programming providers the same carriage rate would exclude providers whose programming has
X
-
d(# a low market value. S
MM
{ O h - ԍSecond Report and Order at para. 130.S Neither NCTA nor MCI has offered new factual or legal arguments to
d(#Z refute this reasoning. We will continue to permit open video system operators to charge different
rates based on objective factors.
X M -
p 113. ` ` MCI's rate discrimination concern arising from our use of an ECPR pricing model
X 6 -
d(# to compute an imputed rate is misplaced. | 6 MM
{ O - ԍSee our discussion of the imputed carriage rate, supra at paras. 97108.| In the Second Report and Order, we decided to rely
d(# on the complaint process to ensure that open video system carriage rates are not unjustly or
d(# unreasonably discriminatory. If a rate discrimination complaint is filed, the challenged rate
X -
d(# difference will have to be justified by legitimate, objective factors. S 2
MM
{ O - ԍSecond Report and Order at para. 130.S We have heard no new
d(#- argument that demonstrates that the complaint process will fail to ensure that differences in open
video system carriage rates have just and reasonable bases.
X -
p q 114. ` ` We disagree with the Alliance for Community Media, et al., that open video
d(# system operators should be required to charge reduced carriage rates to nonprofit programming
X i -
d(# providers. In the Second Report and Order, we identified notforprofit status as one of the
d(#x legitimate, objective factors on which open video system operators could base reduced rates. We " T0 ,-(-(ZZ0 "
d(# also cited comments that identified PEG channels as a source of carriage for nonprofit
X -
d(# programmers. K MM
{ O b - ԍId. at para. 130 n.300.K We note that the Alliance for Community Media, et al. recognize the significant
X -
d(# contribution that PEG requirements will make. m Z MM
{ O - ԍAlliance for Community Media, et al. Petition at 13 n.39.m Moreover, we are concerned about the impact
d(# of mandatory reduced carriage rates on a new entrant in the markets for video carriage and
d(#> distribution. Our decision to allow preferred carriage rates for nonprofit programmers on a
d(#L voluntary basis reflects our goals of promoting open video system entry and competition with
d(# incumbent cable systems, while providing access to carriage by unaffiliated programming
d(# providers. We will stand by our decision not to make reduced rates for nonprofit programmers
X H - mandatory.
X - E.` ` Gross Revenues Fee
X
-
W
< ` ` 1. Background
X -
_ r 115. ` ` Section 653(c)(2)(B) provides that an open video system operator shall be subject
d(#M to a fee on the gross revenues of its cable service, "in lieu of" the cable franchise fee under
X -
d(# Section 622. x MM
y O - - ԍSpecifically, Section 653(c)(2)(B) provides:
X X` ` An operator of an open video system under this part may be subject to the payment of fees on the
gross revenues of the operator for the provision of cable service imposed by a local franchising
authority or other governmental agency, in lieu of the franchise fees permitted under Section 622.
The rate at which such fees are imposed shall not exceed the rate at which franchise fees are
imposed on any cable operator transmitting video programming in the franchise area.(#` ƙ In the Second Report and Order, we concluded that the gross revenues fee should
d(# be based on all revenues received by an open video system operator or its affiliate relating to its
d(# provision of video services (including all subscriber revenues and all carriage revenues received
d(# from unaffiliated programming providers), but should exclude the gross revenues of unaffiliated
X 6 - video programming providers. X 6,
MM
{ O - ԍSecond Report and Order at paras. 218220.X
X -
~ s 116. ` ` On reconsideration, some local governments argue that the gross revenues fee
X -
d(#< should be applied to a broader revenue base than that specified in the Second Report and Order.
d(# The Village of Schaumburg and Metropolitan Dade County argue that the fee should be applied
d(# to all revenues derived from the operation of open video systems, regardless of whether they are
d(#\ received by the open video system operator, the operator's affiliate, or an unaffiliated video
X -
d(#Z programming provider. MM
{ O & -
d(# ԍVillage of Schaumburg Petition at 2; Metropolitan Dade County Petition at 3. See also NCTA Opposition at
y O & - 57; Michigan Cities, et al. Opposition at 34. These petitioners assert that the Commission's formulation of the gross " 1 ,-(-(ZZB "
d(# revenues fee will reduce the amount of fees collected by local authorities. Metropolitan Dade
d(# County speculates that this "could lead to claims of discrimination from existing cable operators
d(# to be released from cable franchises to the extent that OVS operators have lesser fiscal
X -
d(# burdens." | MM
y O 4 - ԍVillage of Schaumburg Petition at 2; Metropolitan Dade County Petition at 3. | The National League of Cities, et al. and NATOA argue that the Commission's
d(#Z gross revenues fee fails to adequately compensate local governments for the use of public rights
X -
d(#y ofway. X MM
{ O - ԍNational League of Cities, et al. Petition at 5; NATOA Opposition at 25. In addition, the National League of Cities, et al. and Municipal Services, et al. assert
d(# that the Commission has not made it clear that local governments have a positive authority to
X _ -
d(#< charge and receive the fee. _ MM
{ O - ԍNational League of Cities, et al. Petition at 8; Municipal Services, et al. Petition at 3. Finally, NATOA requests that we clarify that advertising revenues
d(# received by an open video system operator or its affiliate should be included in the fee
X 1 - calculation. 1| MM
y O ^ -
d(# ԍNATOA Opposition at n.4 (responding to statement in NYNEX's Petition at n.5 indicating that NYNEX
appeared to believe that advertising revenues were excluded).
X -
X
-
B t 117. ` ` By contrast, telephone companies generally argue that the gross revenues fee
X
-
d(# should be applied to a narrower revenue base than the base specified in the Second Report and
X -
d(# Order. In their petitions, the Telephone Joint Petitioners and NYNEX argue that, on its face,
d(#[ Section 653(c)(2)(B) applies only to the gross revenues of the open video system operator and
X
-
d(# not the operator's affiliate.
MM
{ O 0 - ԍTelephone Joint Petitioners Petition at 45; NYNEX Petition at 39 and Opposition at 1718. These petitioners differ, however, regarding which operator
d(#y revenues should be included in the fee calculation. The Telephone Joint Petitioners argue that
d(# the fee should be based only on the open video system operator's revenues from subscribers, and
X f -
d(# should exclude carriage revenues from unaffiliated video programming providers. f ff MM
{ O } - ԍ Telephone Joint Petitioners Petition at 45.f NYNEX,
d(# on the other hand, argues that the fee should be based only on the operator's carriage revenues
d(#{ from affiliated and unaffiliated programming providers, and should exclude all subscriber
X ! -
d(#L revenues. F !
MM
y O - ԍNYNEX Petition at 39. F Finally, NYNEX and U S West are concerned that collecting a fee solely from the
d(# open video system operator and its affiliates will discriminate in favor of unaffiliated
X -
d(# programming providers, which will not be burdened by a similar fee. X MM
y O ,# -
d(# ԍNYNEX Petition at 78; U S West Petition at 78. NYNEX adds that unless some mechanism is established
d(# to relieve the affiliated provider of this unique burden, that the resulting scheme could violate the affiliated provider's
y O $ - constitutional right to equal protection. NYNEX Petition at n.11. U S West proposes that
d(# open video system operators be permitted to include a portion of the gross revenues fee on the
d(# bills of all subscribers to an open video system not just those receiving programming directly " 2 ,-(-(ZZ "
X - from the operator or its affiliates. ? MM
y O y - ԍU S West Petition at 8.?
X -
u 118. ` ` In response, NATOA argues that excluding the open video system operator
d(#K affiliate's revenues from the gross revenues fee calculation would defeat the entire purpose of the
d(# fee, and would permit an open video system operator to pay far less than a cable operator by the
X -
d(# simple expedient of creating a corporate subsidiary. M XX MM
y O -
d(# ԍNATOA Opposition at 35 (arguing that an open video system operator's carriage and other nonsubscriber
d(#i revenues that would not exist "but for" the operator's provision of video services must also be included in the fee
y O &
- calculation). M Similarly, Michigan Cities, et al. argue
d(#[ that excluding the affiliate's revenues would thwart Congress' goal of ensuring equal treatment
d(#[ among video providers, and would permit an operator to engage in a corporate "shell game" in
d(# which the operator provided essentially no services and had all revenuegenerating activities
X 1 -
d(#z provided by its affiliates. ` 1x MM
y O Z - ԍMichigan Cities, et al. Opposition at 56. ` In addition, NCTA argues that the Telephone Joint Petitioners'
d(#[ proposal to exclude carriage revenues from the fee calculation "is simply beyond the pale, as it
X
-
d(#L would allow LECs to avoid paying any gross revenue fee by the simple expedient of providing
X
-
d(#M "cable" service through an affiliate. ^
MM
{ O - ԍSee NCTA Opposition at 6 (emphasis in original).^ Conversely, NCTA and the Alliance for Community
d(# Media, et al. argue that NYNEX's proposal to include only those revenues derived from carriage
X -
d(# in the fee calculation would understate the revenues derived from open video service, 1 MM
{ O - ԍId.1 ignores
d(# the significance of the statute's use of the term "cable service" instead of carriage, and would
X - create a fee that is not nearly equivalent to the franchise fee imposed on cable operators. ] ,
MM
y O m - ԍAlliance for Community Media, et al. Opposition at 6.]
X y -
W b < ` ` 2. Discussion
X 4 -
v 119. ` ` We generally reaffirm our conclusions in the Second Report and Order. We
d(# continue to believe that our interpretation represents the best reading of Section 653(c)(2)(B).
d(# We will, however, clarify our rule to make clear our intent that local governments have the
d(# authority to charge and receive the gross revenue fee. In addition, consistent with Congress'
X -
d(# intent of ensuring "parity among video providers," A
MM
y O G# - ԍConference Report at 178.A we will clarify that any advertising revenues
d(#. received by an open video system operator or its affiliates in connection with the provision of
d(# video programming should be included in the fee calculation, where such revenues are included
in the incumbent cable operator's franchise fee calculation.
" ~3 L
,-(-(ZZ} " Ԍ
X -
w 120. ` ` Those petitioners seeking to include the gross revenues of unaffiliated
d(#/ programming providers in the fee calculation have largely repeated arguments made by the
X -
d(# National League of Cities, et al. earlier. \ Z MM
{ O K -
d(#< ԍSee, e.g., National League of Cities, et al. Comments (filed April 1, 1996) at 4546, and Reply Comments
d(#w (filed April 11, 1996) at 3839. We address the Fifth Amendment argument raised by the National League of Cities,
et al. and NATOA in Section III.F.5., below.\ In our view, those arguments fail to account for the
d(# clear statutory language that the gross revenues fee applies to the open video system operator's
X -
d(#x revenues relating to its provision of cable service. j MM
y O ? - ԍCommunications Act 653(c)(2)(B), 47 U.S.C. 573(c)(2)(B).j We also disagree with these petitioners that
d(# our formulation necessarily will result in lost revenues to local governments. Petitioners assume
d(#i that an entity would build the same system, whether it was going to provide cable service or open
d(# video service. This may not be accurate. For example, an open video system operator may have
d(#x additional incentives to build a large capacity system in order to be assured of a sufficient number
d(# of channels to compete headtohead with the incumbent cable operator. Similarly, whether the
d(# fee that a local government receives is greater or lesser than the incumbent cable operator pays
d(# will vary depending upon the relative channel capacity of the systems, the amount of channel
d(# capacity occupied by the open video system operator, and the carriage rates the operator is able
X - to negotiate with unaffiliated providers.
z MM
y O -
d(# ԍIn addition, we find no ground for Dade County's belief that any difference in the total fees assessed on an
d(# incumbent cable operator and a competing open video system would entitle the cable operator to be released from
d(# its franchise agreement. The gross revenues fee provision is part of Congress' overall open video framework. The
d(# fact that, in relation to cable, Congress' open video framework imposes certain obligations and provides certain
benefits, does not constitute actionable "discrimination." Dade County Petition at 3.
X
-
x 121. ` ` On the other hand, we do not agree with the Telephone Joint Petitioners and
d(# NYNEX that the revenues of an open video system operator's affiliates should be excluded from
d(#0 the calculation of the gross revenue fee. Section 653(c)(2)(B) applies to gross revenues
d(#? attributable to an open video system operator's "provision of cable service." Under the
d(# Communications Act, "cable service" is defined as "the oneway transmission to subscribers of
X 4 -
d(#M (i) video programming, or (ii) other programming service . . . " ^ 4*
MM
y O - ԍCommunications Act 602(6), 47 U.S.C. 522(6).^ Thus, to the extent that an
d(#[ open video system operator employs an affiliate to provide video programming to subscribers,
X -
d(# the revenues that its affiliate receives from subscribers are subject to the gross revenues fee. I Z MM
y O q! -
d(#- ԍOn similar grounds, we reject NYNEX's proposal to apply the gross revenues fee only to carriage revenues
{ O 9" -
d(#i received by the open video system operator, whether from affiliated or unaffiliated programming providers. See
NYNEX Petition at 39.I
d(# To hold otherwise would place form over substance and would create a disparity between open
d(# video system operators that use affiliates to provide video programming and those that provide
d(#Z programming themselves. The Telephone Joint Petitioner's proposal to exclude carriage revenues
d(# from the fee calculation would widen this potential difference. There is no indication in Section " 4 ,-(-(ZZp "
d(# 653(c)(2)(B) that Congress intended to limit "gross revenues of the operator" to those revenues
d(# derived solely from the sale of its own programming. Indeed, the Telephone Joint Petitioner's
d(# proposal could result in an open video system operator that provided its programming through
d(# an affiliate paying little or no fee, contrary to Congress' intent "to ensure parity among video
X - providers." A MM
y O - ԍConference Report at 178.A
X v -
y 122. ` ` Finally, we agree with NYNEX and U S West that the application of the gross
d(#i revenues fee provision should not disadvantage any particular video programming provider. Like
d(# the costs of PEG and mustcarry, we believe that the gross revenues fee is a cost of the platform
d(#= ԩ in this case, the cost of using the rightsofway that should be shared equitably among all
d(# users of the system. We therefore will permit open video system operators to recover the gross
d(# revenues fee from all video programming providers on a proportional basis as an element of the
carriage rate.
X -
X - F.` ` Applicability of Title VI Provisions
W < ` ` 1. Public, Educational and Governmental Access Channels
` `
V b - ` ` a.Establishing Open Video System PEG Access Obligations
X 4 - ` ` (1)hhCBackground
X -
z 123. ` ` In the Second Report and Order, the Commission found that open video system
d(# operators should in the first instance be permitted to negotiate their PEG access obligations with
X -
d(#= the relevant local franchising authority and, if the parties so desire, the local cable operator. S X MM
{ O - ԍSecond Report and Order at para. 137.S
d(# We also provided a default mechanism in case an agreement cannot be reached, whereby the open
d(# video system operator will be required to satisfy the same PEG access obligations as the local
X -
d(# cable operator. ? MM
{ O 0 - ԍId. at para. 141.? We stated that this could be accomplished through connection to the local cable
d(# operator's PEG access channel feeds and by sharing the costs directly related to supporting PEG
d(# access, including the costs of PEG equipment and facilities, and equipment necessary to achieve
X P - the connection. 1 P| MM
{ O }" - ԍId.1
X " -
{ 124. ` ` Alliance for Community Media, et al. state that the Commission must require the
d(# open video system operator to add PEG resources to those provided by the existing cable operator
d(# as opposed to cutting those resources in half and forcing entities providing PEG access to perform " 5 ,-(-(ZZi "
X -
d(# more services on existing budgets. ! " MM
{ O y -
d(# ԍAlliance for Community Media, et al. Petition at 6; see also National League of Cities, et al. Petition at 14;
d(# City of Indianapolis Petition at 2 (unclear whether cable operators' obligations are to be doubled or halved);
d(# Cablevision Opposition at 8 (the Commission has cited no evidence supporting its conclusion that duplication of PEG
facilities would be inefficient and not in the public interest); Michigan Cities, et al. Opposition at 1213.! National League of Cities, et al. claim that because a cable
d(# operator's PEG access obligations are established by franchise agreement, the Commission may
X -
d(# not reduce them. B MM
{ O 5 -
d(# ԍNational League of Cities, et al. Petition at 14; see also Alliance for Community Media, et al. Petition at 6
d(#, (a cable operator and an open video system operator cannot share an existing contractual commitment to the local
d(#; franchising authority); Michigan Cities, et al. Opposition at 12 (the Commission cannot abrogate existing franchise
d(# agreements with respect to PEG access requirements by allowing the cable operator to reduce its contractual
obligations).B Furthermore, according to National League of Cities, et al., the Commission
d(#[ mistakenly assumes that a community has obtained all the PEG support it needs from the cable
X -
d(# operator. , d MM
{ O -
d(# ԍNational League of Cities, et al. Petition at 1415; see Michigan Cities, et al. Opposition at 12 (open video
{ O - systems should increase the local PEG access availability to subscribers). But see NYNEX Opposition at 8., National League of Cities, et al. claim that the local franchising authority has the
d(# right to obtain additional compensation in the form of PEG from the open video system
X v - operator. v MM
{ O - ԍNational League of Cities, et al. Petition at 15. But see NYNEX Opposition at 8.
X H -
2 | 125. ` ` Telephone Joint Petitioners assert that the Commission's approach may remove a
d(# local franchising authority's incentive to negotiate PEG access obligations that do not match or
d(# exceed those of the incumbent cable operator. In addition, Telephone Joint Petitioners claim that
d(# the Commission's approach may give local franchising authorities the power to demand other
X
-
d(#i obligations from open video system operators. "
R
MM
{ O -
d(# ԍTelephone Joint Petitioners Petition at 1314. But see NATOA Opposition at 7 (the LECs provide no support
d(# for their claim that local franchising authorities could or would attempt to extract other concessions); Michigan Cities,
d(# et al. Opposition at 12 (the Commission's approach provides no incentive for the open video system operator to
negotiate with the local franchising authority). According to Telephone Joint Petitioners, if no
d(#. agreement with the local franchising authority can be reached, an open video system operator
d(# should be permitted a third option of demonstrating (either in a complaint proceeding before the
d(# Commission or in arbitration) that it is not possible to satisfy the local franchising authority's
d(#i demands or to duplicate exactly the PEG access obligations of the cable operator, or that the open
d(#/ video system operator's proposal is different but "no greater or lesser" than the local cable
X b -
d(# operator's obligations. b< MM
{ O O# -
d(# ԍTelephone Joint Petitioners Petition at 1415. But see Alliance for Community Media, et al. Opposition at 45
(opposing binding arbitration in the event of a stalemate). NATOA argues that this third option urged by Telephone Joint
d(# Petitioners would allow an open video system operator to be able to impose its own conception
d(# of equivalent support unilaterally and would not allow local communities to take a proactive role " 46 ,-(-(ZZH "
X - in establishing open video system PEG access obligations. > MM
y O y - ԍNATOA Opposition at 6.>
X -
} 126. ` ` According to Comcast, because cable operators do not have a "default mechanism"
d(#Z of interconnection if their franchise negotiations with the local franchising authority fail, the open
d(# video system rules fail to ensure that the open video system's PEG access obligations are "no
X -
d(# greater or lesser" than those of the cable operator. "X MM
{ O -
d(# ԍComcast Petition at 8. But see Telephone Joint Petitioners Opposition at 9; NYNEX Opposition at 7 (the
d(# Commission's decision recognizes that open video system operators are not required to negotiate franchises but are
d(#- required to provide PEG access, and that it is not efficient to require that a burden be suffered twice where it can
be satisfied once). Comcast also contends that neither the cable
d(# operator nor the open video system operator should be required to agree to a connection and cost
d(# sharing arrangement, and that, if an open video system operator and the cable operator do agree
d(# to connect their PEG access channel feeds and cost share, the open video system operator and
d(#[ the cable operator should be required to negotiate the terms and conditions of the sharing and
X -
d(# connection. B MM
{ O
-
d(# ԍComcast Petition at 1112; see also NCTA Petition at 16 (absent a voluntary agreement with a cable operator
to share PEG facilities, an open video system operator must meet its PEG access obligations independently). NCTA claims that forced connection with the cable operator's channel feeds
d(# violates the 1996 Act's mandate to ensure that the open video system's PEG access obligations
X
-
d(# are "no greater or lesser" than those of the cable operator.
MM
{ O 9 -
d(#Y ԍNCTA Petition at 16; see also Cablevision Opposition at 58 (connection and cost sharing impose more costs
d(# and burdens on the cable operator than on the open video system operator and therefore contravene the 1996 Act
d(# and unfairly benefit open video system operators); Michigan Cities, et al. Opposition at 12, 13 (simply connecting
{ O -
d(# and sharing costs are not satisfying the same PEG access requirements). But see MFS Communications Opposition
d(# at 6 (cost sharing will result in apportioning the burdens on both open video system and cable operators and will be
more efficient than requiring duplicate facilities). NCTA also asserts that requiring
d(# such connection is inconsistent with the statutory proscription against regulating cable systems
X - as common carriers. MM
{ O -
d(# ԍNCTA Petition at 16; see also Cablevision Comments at 4. But see Telephone Joint Petitioners Opposition
d(#w at 78; NYNEX Opposition at n.18 (the Commission's approach does not burden cable companies as "PEG utilities,"
d(#w but instead reduces their contractual franchise burden through cost sharing); USTA Opposition at 1112 (stating that
d(# the Commission's rule is entirely within Congress' directive to speed the introduction of competition for the cable
incumbents, and that to require separate PEG facilities would be inefficient and burdensome).
X -
a ~ 127. ` ` In their opposition, Telephone Joint Petitioners also ask the Commission to
d(# eliminate the requirement for open video systems to share in the costs of facilities or equipment
d(# for PEG access, claiming that open video systems are required to provide only channel capacity
X K -
d(#? for PEG access. V K MM
y O % - ԍTelephone Joint Petitioners Opposition at 89.V They claim that a local franchising authority's power to require cable
d(#j operators to provide PEGrelated services, facilities and equipment is derived from Section 621, " 47 Z ,-(-(ZZH "
X - not Section 611, and therefore cannot be extended to open video systems. 1 MM
{ O y - ԍId.1
X -
$ 128. ` ` In addition, Municipal Services, et al. request that the Commission clarify that
d(#1 existing LECs seeking to provide open video system service may be required in their
X -
d(# telecommunications franchise to provide PEG access. C ! ZZ MM
{ O -
d(# ԍMunicipal Services, et al. Petition at 57; see also Telephone Joint Petitioners Opposition at 7 (whether existing
d(# rightsofway agreements cover open video systems is a matter between the LEC and the local government or private
property owner).C City of Indianapolis asserts that by not
d(# allowing local franchising authorities to require specific channel alignment for PEG access
d(#z channels, the Commission has given open video system operators the ability to realign PEG
d(# access channels on a whim and presents identity and logistical problems for many access
X H - channels, especially those that are known simply by channel number. M " H| MM
y O u - ԍCity of Indianapolis Petition at 34.M
X - ` ` (2)hhCDiscussion
X
-
m 129. ` ` We continue to believe that open video system operators should in the first instance
d(# be permitted to negotiate their PEG access obligations with the relevant local franchising
d(#\ authority and, if the parties so desire, the local cable operator. Furthermore, we continue to
d(# believe that it is necessary to have a default mechanism in case the open video system operator
d(# and the local franchising authority are unable to agree. We disagree with Comcast that open
X y -
d(# video system operators should be required to negotiate with local franchising authorities. # y MM
{ O 6 -
d(# ԍSee Telephone Joint Petitioners Opposition at 910 (it is the 1996 Act not the Commission's default mechanism
that relieves open video system operators of the requirement to negotiate with local franchising authorities).
d(# Providing a "backstop" is an appropriate balance between imposing Section 611's requirements
d(#k and not imposing franchise requirements on open video systems. If the open video system
d(# operator matches the PEG access obligations of the cable operator, the actual PEG access
d(# obligations imposed on the open video system operator will be, as the statute requires, to the
d(# extent possible no greater or lesser than those imposed on the cable operator. This is true even
d(#j if the open video system operator's obligations are established through our default mechanism
and the cable operator's obligations are established through negotiation and the franchise process.
X -
130. ` ` After considering the arguments made by the various petitioners, we believe,
d(# however, that some modification of our rule regarding how to establish open video system PEG
d(# access obligations is appropriate. We believe that imposing Section 611 obligations on open
d(# video system operators so that to the extent possible the obligations are "no greater or lesser" than
d(#z those imposed on cable operators means that, in the absence of an agreement with the local
d(# franchising authority, an open video system operator must match, rather than share, the annual
d(#k PEG access financial contributions of the local cable operator. Under our current rule, open " 8 f # ,-(-(ZZ "
d(# video system operators are required to match the PEG access channel capacity provided by the
d(# local cable operator, but are required to share the contributions towards PEG access services,
d(#\ facilities and equipment. Our modified rule will apply the matching principle which we have
d(# applied to channel capacity also to PEG contributions that cable operators make, and that are
d(# actually used for PEG access services, facilities and equipment. For instance, if a cable operator
d(# makes an annual contribution of $15,000 that is used to purchase PEG access equipment, the
open video system operator will now be required to do likewise.
X H -
131. ` ` For inkind contributions (e.g., cameras, production studios), we believe that
d(#Z precise duplication would often be unnecessary, wasteful and inappropriate. Instead, open video
d(# system operators may work out mutually agreeable terms with cable operators over inkind
d(#[ equipment, studios and the like so that PEG service to the community is improved or increased
d(# and the open video system operator fulfills its statutory obligation. As a backstop, however, we
d(#= will permit the open video system operator to pay the local franchising authority the monetary
d(#0 equivalent of the depreciated inkind contribution, or in the case of facilities, the annual
d(# amortization value. Any matching PEG access contributions provided by an open video system
d(# operator are to be used by the local franchising authority to fund activities arising under Section
d(# 611. We believe that information on the cable operator's PEG access contributions should be
d(# available to the local franchising authority, since a cable operator's monetary costs of complying
d(# with franchising requirements, including PEG access requirements, are identified as "external
X 4 - costs" under our cable rate rules. T $ 4 MM
{ O - ԍSee 47 C.F.R 76.922(c)(3)(iv)(C).T
X -
132. ` ` We decline to modify our rule that requires the local cable operator to permit the
X -
d(#x open video system operator to connect with the cable operator's PEG access channel feed. % Z MM
y O -
d(# ԍThe connection requirement we affirm herein is not intended to affect any copyright protections applicable to
PEG access channel feeds. We
d(# clarify, however, that any costs associated with the open video system operator's connection to
d(# the cable operator's PEG access channel feed shall be borne by the open video system operator.
d(# These costs shall be counted towards the open video system operator's matching obligation
d(#N described above. Contrary to NCTA's assertion, we do not believe that this connection
d(# requirement impermissibly treats cable operators as common carriers. The connection
X e -
d(#[ requirement here is far different from a common carrier interconnection requirement. u & e MM
{ O - ԍSee, e.g., Communications Act 251(c)(2), 47 U.S.C. 251(c)(2).u We are
d(# not requiring the local cable operator to permit others to interconnect with and use their cable
X 7 -
d(#K system to reach consumers. ' $7 D MM
{ O ,$ -
d(# ԍSee Southwestern Bell Telephone Co. v. FCC, 19 F.3d 1475, 1480 (D.C. Cir. 1994), citing National Ass'n of
{ O $ -
d(# Reg. Utility Commissioners, 533 F.2d 601, 60809 (D.C. Cir. 1976) (two characteristics of a "common carrier" are
d(# that the entity: (1) deals indifferently with the public; and (2) provides a system on which customers transmit
intelligence of their own design and choosing). Rather, we are simply requiring the local cable operator to provide " 7 9 0
' ,-(-(ZZ "
d(# its PEG access channel feed to a particular competitor that shares a similar PEG access obligation
d(#? in order to avoid an unnecessary duplication of facilities and promote Congress' goal of
competitive entry.
X -
$ 133. ` ` We do not agree with Telephone Joint Petitioners that the open video system
d(#\ operator should be allowed to decide unilaterally how to satisfy its PEG access obligations,
d(# subject to a complaint before the Commission or arbitration. This approach would be inefficient
X _ -
d(# and would increase the burdens on the local franchising authority, as well as the Commission. i ( _ MM
{ O - ԍSee Alliance for Community Media, et al. Opposition at 45.i
d(#K Telephone Joint Petitioners' approach does not allow the local communities, which we recognized
X 1 -
d(# in the Second Report and Order are often in the best position to determine the needs and interests
X -
d(#i of the local community, S ) Z MM
{ O '
- ԍSecond Report and Order at para. 137.S to participate effectively in establishing open video system PEG access
X
-
d(#M obligations. H *
MM
{ O - ԍSee NATOA Opposition at 6.H We believe that the Telephone Joint Petitioners' argument that the adopted
d(#z approach will reduce a local franchising authority's incentive to negotiate is misplaced. Our
d(# approach should not be used to coerce local franchising authorities into agreeing to less than what
d(# Section 653(c)(2)(A) provides, specifically ". . . obligations that are no greater or lesser" than the
d(# obligations imposed on cable operators. In addition, as NATOA states, the record in this
d(# proceeding does not contain any evidence that local franchising authorities will use their ability
X { - to negotiate open video system PEG access obligations to obtain other concessions. 7 + {~ MM
{ O - ԍId. at 7.7
X M -
134. ` ` We also disagree with Telephone Joint Petitioners with respect to whether open
d(# video system operators are required under the statute to provide more than channel capacity for
d(#L PEG access. Telephone Joint Petitioners argue that, because open video system operators are
d(# required only to provide channel capacity, and not programming or other services, cable operators
d(#i and local franchising authorities must cooperate in providing access to existing PEG programming
d(# feeds. Telephone Joint Petitioners also claim that the Commission has erroneously included the
d(#! provision of "services, facilities or equipment which relate to PEG use" as a PEG access
X -
d(# requirement to be imposed on open video systems. As stated in the Second Report and Order,
d(# Section 611(c) permits a local franchising authority to enforce any requirement in a franchise
d(# regarding the provision or use of PEG channel capacity, including provisions for services,
X i -
d(# facilities or equipment which relate to PEG use of channel capacity. , i MM
{ O *# - ԍSecond Report and Order at para. 142; Communications Act 611(c), 47 U.S.C. 531(c). This provision
d(# incorporates the requirement of providing PEG access services, facilities and equipment into
d(#[ Section 611 and therefore, as applied through Section 653(c), imposes a responsibility on open
d(# video system operators to contribute toward PEG access services, facilities and equipment to the " $ : , ,-(-(ZZ "
X -
d(#[ same extent as the local cable operator. - MM
y O y -
d(#Y ԍTelephone Joint Petitioners claim that the Commission misinterpreted the legislative history of the 1996 Act
d(#, by relying on language in the Conference Report which explained language in H.R. 1555 which was not carried over
d(# to the 1996 Act as adopted. Telephone Joint Petitioners Opposition at 9. We note that our primary reliance was
d(# and is on the statute itself, and that, as described above, Section 611(c) together with Section 653(c) impose an
d(# obligation on open video system operators to contribute toward PEG services, facilities and equipment to the same
extent as the local cable operator. We therefore refuse to modify our rule as requested
by Telephone Joint Petitioners.
X -
135. ` ` In response to the request of Municipal Services, et al., we clarify that the
d(#- negotiated PEG access obligations of an open video system operator may be enforced regardless
X -
d(# of where and when the agreement is made. c . @ MM
{ O ~ - ԍSee also Telephone Joint Petitioners Opposition at 7.c Regarding City of Indianapolis's assertion that
d(# channel alignment should not be at the discretion of the open video system, we affirm our
X _ -
d(#Z decision in the Second Report and Order that there is insufficient evidence to support mandating
d(#z that PEG access channels be carried at the same channel location on the open video system
X 3 -
d(#M operator as on the cable system. \ / 3 MM
{ O - ԍSee Second Report and Order at para 141 n.329.\ City of Indianapolis has presented no new evidence or
argument not presented to the Commission before.
V
- ` ` b. ` Establishing Open Video System PEG Access(#
V - ` ` Obligations Where No Local Cable Operator Exists
X
- ` ` (1)hhCBackground
X { -
136. ` ` We stated in the Second Report and Order by way of example that if a cable
d(#i system converts to an open video system, the operator will be required to maintain the previously
X O -
d(# existing terms of its PEG access obligations. ? 0 Od MM
{ O d - ԍId. at para. 151.? Alliance for Community Media, et al. assert that
d(#= if a common carrier buys the facilities of a cable operator, and at the expiration of the franchise
d(#L term converts the system into an open video system, the PEG access obligations at the time of
d(#- the purchase should not necessarily be retained by the open video system operator. Alliance for
d(#L Community Media, et al. contend that this would leave many communities without PEG access
X -
d(#j as only 16% of cable systems have PEG access obligations. 0 1 X
MM
y O " -
d(# ԍWe believe that many of these cable systems with PEG access obligations are located in large urban areas, and
d(# therefore that the percentage of cable subscribers nationwide that receive PEG access channels may be far higher than
16%.0 Alliance for Community Media,
d(# et al. suggest that the local franchising authority should be able to request PEG access obligations
d(#. at the time the cable system converts to an open video system, and then once every ten years " ; 1 ,-(-(ZZp "
X - thereafter. 2 MM
{ O y - ԍAlliance for Community Media, et al. Petition at 89; see also Michigan Cities, et al. Opposition at 1213.
X - ` ` (2)hhCDiscussion
X -
137. ` ` Our discussion in the Second Report and Order regarding the establishment of
d(#- open video system PEG access obligations where no local cable operator exists was not intended
d(# to foreclose a local franchising authority from negotiating with the open video system operator.
d(#K The discussion, which was premised on the idea that the local franchising authority and the open
d(# video system operator may in the first instance negotiate the operator's PEG access obligations,
d(#= was intended to explain how to establish open video system PEG access obligations where no
d(#Z local cable operator exists and the local franchising authority and the open video system operator
X
-
d(#[ cannot agree. 3
Z MM
{ O -
d(# ԍSee Second Report and Order at para. 151 ("Where there is no local cable operator and the open video system
operator and the local franchising authority cannot agree on appropriate PEG access obligations, . . ."). The parties are therefore free to negotiate PEG access obligations as Alliance
X
-
d(#i for Community, et al. request. ! 4
MM
y O S -
d(# ԍAs stated above, Alliance for Community Media, et al. propose that the local franchising authority be permitted
d(# to request PEG access obligations once every ten years. The local franchising authority and the open video system
d(# operator are free to negotiate as often as the wish. We conclude that, if the parties cannot agree, however, the open
video system operator's PEG access obligations should be reestablished every 15 years, as discussed below.! As stated in the Second Report and Order, however, if the open
d(# video system operator and the local franchising authority cannot agree, the operator must make
X -
d(#K a reasonable amount of channel capacity available for PEG use. In the Second Report and Order,
d(#[ we found that where a cable franchise previously existed, such as where a cable system is able
d(#< to convert to an open video system, what constitutes a reasonable amount of channel capacity is
d(# to be governed by the previously existing franchise agreement with respect to PEG access
X h -
d(#y obligations. S 5 h MM
{ O - ԍSecond Report and Order at para. 151.S This approach was formulated to comply with the statutory requirement that to
d(#k the extent possible the PEG access obligations of open video system operators are to be no
X : - greater or lesser than those imposed on cable operators. h 6 :.
MM
{ O - ԍSee Communications Act 653(c), 47 U.S.C. 573(c).h
X -
138. ` ` While we do not believe that Congress intended open video system PEG access
d(# obligations to correct deficiencies in what the local franchising authority negotiated for cable
d(#. operator PEG access obligations, we also recognize the concern that PEG access requirements
d(# should not be frozen in time in perpetuity. We will therefore modify our approach for a situation
d(# in which there was a previously existing cable franchise, such as where a cable system converts
d(#y to an open video system, and provide that, when the open video system operator and the local
d(#i franchising authority cannot agree on PEG access obligations, the local franchising authority may
d(#j either keep the previously existing PEG access obligations or may elect to have the open video
d(# system operator's PEG access obligations determined by comparison to the franchise agreement " T< 6 ,-(-(ZZ "
d(# for the nearest operating cable system that has a commitment to provide PEG access and that
d(# serves a franchise area with a similar population size. The local franchising authority shall be
d(# permitted to make a similar election every 15 years thereafter. We believe the PEG access
d(# obligations should be revisited every 15 years (unless the parties otherwise agree) because this
X -
d(# is a common term length of a franchise agreement. 7 MM
{ O -
d(# ԍSee, e.g., National League of Cities, et al. Petition at Appendices 15 (four of the five franchise agreements
attached to the Petition are for a term of 15 years; one is for a term of ten years). This approach will allow PEG access
d(# obligations to change over time with the needs and interests of the communities, rather than being
d(#- frozen in perpetuity simply because a cable system has been converted to an open video system.
d(# With this modification, we otherwise affirm our decision regarding open video system PEG
X H -
d(#j access obligations where no local cable operator exists as contained in the Second Report and
X 3 - Order.
V
- ` ` c.Provision of PEG Access Channels to All Subscribers
X - ` ` (1)hhCBackground
X
-
139. ` ` In the Second Report and Order, the Commission found that PEG access channels
d(# should be provided to all subscribers, but that open video system operators should have the
d(#y flexibility to determine how all subscribers will receive access channels, i.e., whether to provide
d(#k a basic programming tier similar to that provided by cable systems, or to require unaffiliated
X Q -
d(# video programming providers to offer PEG access channels to their subscribers. S 8 Q" MM
{ O $ - ԍSecond Report and Order at para. 153.S NCTA
d(# believes that to make implementation more certain and enforcement more likely the Commission
d(# should institute a national approach to the required delivery of mustcarry and PEG channels to
d(#Z subscribers, rather than leaving the method of implementation to the open video system operator.
d(# According to NCTA, programmers and packagers should not be responsible for PEG and must
X -
d(#< carry provision if subscribers purchase these channels from another source. < 9 MM
y O C - ԍNCTA Petition at 15.< USTA states that
d(#Z the Commission correctly determined that the open video system operator should have discretion
X - over the manner in which it would fulfill its PEG access obligations. > : D MM
y O - ԍUSTA Opposition at 11.>
X - ` ` (2)hhCDiscussion
X T -
4 140. ` ` We affirm our decision that PEG access channels should be provided to all
d(# subscribers, but that open video system operators should have the discretion to determine how
X & -
d(# best to accomplish this. As stated in the Second Report and Order, this flexibility will permit
d(# the operator to provide PEG access channels in an efficient manner while not diminishing the " = : ,-(-(ZZy "
X -
d(#y provision of the PEG access channels to the community. S ; MM
{ O y - ԍSecond Report and Order at para. 153.S NCTA provides no new arguments
d(# or evidence as to why we should change our decision. NCTA simply restates its position
previously presented in its comments which the Commission rejected.
V - ` ` d. ` Open Video System PEG Obligations Where(#
V - ` ` System Overlaps with More than One Franchise Area
X _ - ` ` (1)hhCBackground
X 1 -
141. ` ` The Second Report and Order stated that open video system operators should be
d(# required to satisfy the PEG access obligations for all franchise areas with which their systems
X
-
d(#\ overlap. C <
Z MM
{ O - ԍId. at para. 154155.C Telephone Joint Petitioners assert that, from a technical standpoint, open video
d(#Z systems may be configured in a potentially significantly different manner than cable systems, and
d(# that the Commission therefore erred in relying on cable operators' claims that it is possible to
X - configure overlapping systems in order to meet multiple PEG access requirements. = MM
{ O ] -
d(#w ԍTelephone Joint Petitioners Petition at 1415. But see Alliance for Community Media, et al. Opposition at 5;
NATOA Opposition at 7; Michigan Cities, et al. Opposition at 1516.
X - ` ` (2)hhCDiscussion
X d -
142. ` ` While we do not disagree with Telephone Joint Petitioners that open video systems
d(# may be configured differently from cable systems, as Alliance for Community Media, et al. point
d(#Z out, Telephone Joint Petitioners provide insufficient support for why open video systems will not
d(# be able to be configured to comply with the PEG access obligations for each franchise area with
X -
d(#L which each system overlaps. ] > F MM
y O - ԍAlliance for Community Media, et al. Opposition at 5.] In fact, Michigan Cities, et al. demonstrate that, in at least one
X -
d(#j situation, it is indeed possible. T ? MM
y O x - ԍMichigan Cities, et al. Opposition at 1516.T We therefore deny Telephone Joint Petitioners' petition with
respect to this matter.
V - ` ` e.Institutional Networks
X ~ - ` ` (1)hhCBackground
X P -
# 143. ` ` With regard to institutional networks, we stated in the Second Report and Order
d(#z that Section 611 does not specifically authorize local franchising authorities to require cable
d(# operators to build institutional networks, and that we would therefore not require open video " $ > f ? ,-(-(ZZ "
d(# system operators to build institutional networks. We also provided that if an open video system
d(# operator does build an institutional network, the local franchising authority may require that
d(# educational and governmental access channels be designated on that network to the extent such
X -
d(# channels are designated on the institutional network of the local cable operator. @ MM
{ O 4 - ԍSecond Report and Order at para. 143; see also Communications Act 611, 47 U.S.C. 531. Alliance for
d(#. Community Media, et al. state that, under Section 653(c)(2)(B), an open video system operator
d(# must provide institutional networks if a cable operator is required to provide institutional
d(#= networks. If such a requirement is not imposed on open video system operators, according to
d(#K Alliance for Community Media, et al., the open video system operator is not contributing towards
X H -
d(#k PEG access obligations to the same extent as the cable operator. D A ZHZ MM
{ O S -
d(#K ԍAlliance for Community Media, et al. Petition at 7; see also Michigan Cities, et al. Petition at 19 (the "no
d(#x greater or lesser" requirement is not met unless institutional network requirements are met on a franchise area by
franchise area basis).D Alliance for Community
d(# Media, et al. believe it is "an incongruous reading of Section 611 that a franchising authority
d(# could require that an OVS operator require educational and governmental access on an
X
-
d(#j institutional network without being able to require construction of the underlying network." B
| MM
{ O 0 -
d(# ԍAlliance for Community Media, et al. Petition at 7; see also Michigan Cities, et al. Petition at 14; National
League of Cities, et al. Petition at 16.
d(#< City of Indianapolis asks that we clarify what an institutional network is, apparently because "the
d(# Act forbids municipalities from asking for telecommunication services from cable operators as
X - part of a franchise agreement, which is what the cable industry is claiming an INET is." C MM
{ O E - ԍCity of Indianapolis Petition at 2; see also Communications Act 621(b)(3)(D), 47 U.S.C. 541(b)(3)(D).
X -
144. ` ` Michigan Cities, et al. assert that local franchising authorities have the power under
d(# Section 611 to require cable operators to provide institutional networks, and that they should
d(# therefore be permitted to require them of open video system operators. According to Michigan
d(# Cities, et al., the Commission must defer to the local franchising authorities on the interpretation
X 4 -
d(# of Section 611. R D 4h MM
y O M - ԍMichigan Cities, et al. Petition at 1314.R Similarly, National League of Cities, et al. contend that institutional networks
d(#\ are entirely a creature of PEG, and that the open video system operator must therefore have
X - exactly the same institutional network requirements as the cable operator. E
MM
{ O - ԍNational League of Cities, et al. Petition at 16. But see Telephone Joint Petitioners Opposition at 45.
X -
n 145. ` ` USTA supports our interpretation of Section 611. USTA asserts that the fact that
d(# cable operators are resisting efforts by local franchising authorities to require the building of
d(# institutional networks is not a viable basis to misconstrue Section 611, and that the requiring open
d(#L video system operators to build institutional networks would serve as a disincentive for LECs " ? E ,-(-(ZZo "
X - to enter the video marketplace through open video systems. A F MM
y O y - ԍUSTA Opposition at 1011.A
X - ` ` (2)hhCDiscussion
X -
3 146. ` ` We affirm our decision to preclude local franchising authorities from requiring
X -
d(# open video system operators to build institutional networks G ,
X MM
y O -
d(#Z ԍAs stated above, City of Indianapolis requests that we clarify what an institutional network is. As stated in
{ O ^ -
d(# the Second Report and Order, institutional networks are defined in Section 611. Second Report and Order at n.334.
d(# Section 611(f) defines an institutional network as a communications network which is constructed or operated by
d(#/ the cable operator and which is generally available only to subscribers who are not residential subscribers.
d(#x Communications Act 611(f), 47 U.S.C. 531(f). We decline to define institutional networks other than as the
d(# statute states. See, however, Michigan Cities, et al. Petition at 1013 describing examples of the functions of
d(# institutional networks. As stated above, City of Indianapolis expresses concern over the definition of institutional
d(# networks apparently because the 1996 Act forbids municipalities from asking for telecommunication services from
d(# cable operators as part of a franchise agreement, "which is what the cable industry is claiming an INET is." City
d(# of Indianapolis Petition at 2. We note that Section 621(b)(3)(D), which contains the prohibition to which City of
{ O h -
d(#L Indianapolis appears to be referring, specifically excludes institutional networks. See Communications Act
d(# 621(b)(3)(D), 47 U.S.C. 541(b)(3)(D). Although institutional networks may be telecommunications services, local
franchising authorities are not restricted from requiring them. because the cable operator is
d(#Z required to do so under the terms of its franchise agreement. Because there is confusion over our
d(# interpretation of Section 611 as it applies to institutional networks, however, we make the
X H -
d(# following clarifications. Contrary to the understanding of certain petitioners, x H HL
MM
{ O E - ԍSee, e.g., Michigan Cities, et al. Petition at 14 and Opposition at 1314.x we agree that
d(#? institutional networks may be required of a cable operator, but we do not agree that this
X -
d(# requirement is found in Section 611. I MM
{ O -
d(# ԍSee Telephone Joint Petitioners Opposition at 34 (the issue is not whether local franchising authorities may
require institutional networks, but whether that right is derived from Section 611). As stated in the Second Report and Order, Section 611
d(#< only provides that a local franchising authority may require that channel capacity on institutional
d(# networks be designated for educational or governmental use and does not authorize local
X -
d(# franchising authorities to require cable operators to build institutional networks. $ J $ 8 MM
{ O -
d(#. ԍSecond Report and Order at para. 143. We note that Michigan Cities, et al. misquotes Section 611 as
{ O -
d(#w providing that local franchising authorities may require "channel capacity for institutional networks." See Michigan
d(#Y Cities, et al. Petition at 15. Furthermore, contrary to the claim of Michigan Cities, et al., the Commission does not
have to defer to local franchising authorities in interpreting Section 611, a federal statute.$ The building
X -
d(# of an institutional network is a requirement negotiated in the franchise agreement. c K $ MM
{ O # - ԍSee, e.g., Michigan Cities, et al. Petition at 1516.c Section
d(# 621(b)(3)(D), as added by the 1996 Act, makes clear that a local franchising authority may
d(# require a cable operator to provide institutional networks as a condition of the initial grant, " @ K ,-(-(ZZ "
X -
d(# renewal or transfer of a franchise. L MM
{ O y -
d(#= ԍCommunications Act 621(b)(3)(D), 47 U.S.C. 541(b)(3)(D). See also Telephone Joint Petitioners
d(# Opposition at 5 (the separate references to Section 611 and institutional networks contained in Section 621(b)(3)(D)
d(# indicate that Congress understood that Section 611 is not the source of any right that franchising authorities may have
d(#J to require cable operators to provide institutional networks). We also note that National League of Cities, et al. are
d(#J therefore wrong when they state that the only mention in the Cable Act of institutional networks is in Section 611.
{ O c - See National League of Cities, et al. Petition at 16. Pursuant to Section 653(c)(1)(C), open video system
d(# operators are not subject to franchise requirements, so we cannot apply an institutional network
X - requirement to open video systems. ` M D MM
{ O - ԍSee Telephone Joint Petitioners Opposition at 45.`
X -
P 147. ` ` While institutional networks may or may not function like PEG access as National
d(# League of Cities, et al. assert, the statutory definition is broader than merely PEG use. We do
d(# not agree that precluding the local franchising authority from requiring an open video system
d(#< operator to build an institutional network, but permitting the local franchising authority to require
d(# channel capacity on a network if an open video system operator does build one, is inconsistent,
X 1 -
d(# as Michigan Cities, et al. suggest. Y N 1 MM
{ O - ԍSee Michigan Cities, et al. Petition at 14.Y Rather, once an open video system operator decides to build
d(# an institutional network, the 1996 Act's mandate that an open video system operator's PEG
d(#Z access obligations be no greater or lesser than those of the cable operator become operative. We
thus deny the petitions for reconsideration with respect to this matter.
W < ` ` 2. MustCarry and Retransmission Consent
V - ` ` a.Background
X b -
148. ` ` In the Second Report and Order, the Commission promulgated rules pursuant to
d(#= Section 653(c)(1) that apply the provisions of Sections 325, 614, and 615 to open video system
X 6 -
d(# operators certified by the Commission. O 6h MM
{ O O - ԍSee Second Report and Order at paras. 15770; Communications Act 653(c)(1), 47 U.S.C. 573(c)(1). In applying these provisions to open video system
d(#. operators, we attempted to impose obligations that were, to the extent possible, "no greater or
X - lesser" than the obligations imposed on cable operators. z P
MM
{ O - ԍSee Communications Act 653(c)(2)(A), 47 U.S.C. 573(c)(2)(A).z
X -
149. ` ` Sections 614 and 615 set forth a cable operator's "must-carry" obligations
d(# regarding local commercial and local noncommercial educational television signals,
X -
d(#Z respectively. p Q MM
y O % - ԍCommunications Act 614, 615, 47 U.S.C. 534, 535.p They require that cable operators set aside a portion of their capacity for carriage
d(# of qualified local broadcast stations. Section 325 sets forth a cable operator's retransmission " A Q ,-(-(ZZ~ "
d(#\ consent obligations, which generally prohibit cable operators and other multichannel video
d(# programming distributors from carrying a commercial broadcast station without obtaining the
X -
d(# station's consent. ^ R MM
y O K - ԍCommunications Act 325, 47 U.S.C. 325.^ Local commercial stations seeking carriage must choose to proceed according
X -
d(#Z to either the mustcarry or retransmission consent requirements. p S X MM
y O - ԍCommunications Act 325(b)(3)(B), 47 U.S.C. 325(b)(3)(B).p Stations choosing to proceed
X -
d(# under mustcarry are entitled to insist on carriage in their local market area. T MM
y O = - ԍCommunications Act 614(a), 615(a), 47 U.S.C. 534(a), 535(a). Stations choosing
d(# to pursue carriage through retransmission consent must negotiate the terms of a carriage
d(# arrangement with a multichannel video programming distributor, and may receive compensation
X _ -
d(# in return for carriage. d U _x MM
y O
- ԍCommunications Act 325, 47 U.S.C. 325.d Nonlocal commercial stations may also be carried by a cable system
d(# pursuant to a retransmission consent agreement because Section 325 applies to broadcast stations
X 1 - in general. 1 V 1 MM
{ O - ԍId.1
X
-
150. ` ` In the Second Report and Order, the Commission found that our mustcarry and
d(# retransmission consent rules should apply to open video systems in largely the same manner as
X -
d(# they currently apply to cable systems. [ W MM
{ O " - ԍSee Second Report and Order at paras. 16061.[ We stated that the operator of an open video system
d(# must "ensure that every subscriber on the open video system receives all appropriate mustcarry
d(#i channels carried in accordance with our rules," and we provided open video system operators the
X -
d(#M flexibility to choose the most appropriate method of complying with this requirement. ? X ,
MM
{ O o - ԍId. at para. 162.? In
d(#K addition, as with cable systems that span multiple television markets, we gave open video system
d(# operators the option of providing mustcarry broadcast stations to all of the subscribers on their
d(#z systems or configuring their systems so that subscribers only receive the signals of eligible
X 6 -
d(#> television broadcast stations in their local market. ? Y 6 MM
{ O - ԍId. at para. 166.? The Commission also found that with
d(#j respect to mustcarry and retransmission consent elections, certain anomalies might result as a
d(# consequence of the potentially vast size of open video systems. We found that it was not
d(# necessary for broadcast stations to apply the same election to all cable and open video systems
X - serving the same geographic area. ? Z P
MM
{ O $ - ԍId. at para. 169.?
X -
151. ` ` In its petition for reconsideration, NCTA recommends that the Commission specify " B Z ,-(-(ZZ "
d(# exactly how an open video system operator must satisfy its obligation to provide mustcarry
X -
d(#K signals to all subscribers. < [ MM
y O b - ԍNCTA Petition at 15.< NCTA argues that if the Commission imposed some mechanism akin
d(# to the cable "basic tier" requirement, implementation would be more certain and enforcement
X -
d(# would be easier. 1 \ X MM
{ O - ԍId.1 NCTA also urges the Commission to find that programmers are not
d(#< responsible for providing mustcarry signals to subscribers if subscribers purchase those signals
X - from some other source. 1 ] MM
{ O (
- ԍId.1
X _ -
152. ` ` ALTV urges the Commission to prohibit an open video system's widespread
X H -
d(# carriage of local signals beyond a station's local market area. ; ^ H| MM
y O u - ԍALTV Petition at 1.; First, ALTV argues that the rule
d(#k allowing cable operators to "narrowcast" the mustcarry signals to the particular areas or to
X -
d(# deliver signals throughout a system should not be applied to open video systems. _ MM
y O - ԍThe term "narrowcast," as used in this section, means the transmission of a signal to a limited geographic area. ALTV argues
d(#/ that unlike the cable systems that were already established when the mustcarry rules were
d(#= adopted, open video systems are still being designed and can be built to distribute mustcarry
X -
d(# signals to specific local markets. A ` MM
y O " - ԍALTV Petition at 1.A ALTV also argues that stations will not be able to use
d(# retransmission consent outside of their local markets if open video systems carry these stations
X
-
d(# beyond their local markets pursuant to the mustcarry rules. 1 a
,
MM
{ O - ԍId.1 Finally, ALTV argues that stations
d(# may encounter prohibitive copyright fees if open video systems are eventually subject to the cable
X y -
d(# compulsory license. 7 b y MM
{ O - ԍId. at 3.7 It argues that on very large open video systems that are not configured
d(# to limit distribution of mustcarry signals to the station's local market, the copyright fees will be
d(#z prohibitively high, since the open video system operator will be allowed to recover from the
X 4 - station all such fees incurred as a result of carriage beyond the station's local market area. 9 c 4P
MM
{ O 5! - ԍId. at 13.9
X -
153. ` ` In response, NYNEX argues that the Commission should avoid creating "stringent
X -
d(#L regulatory solutions" for problems characterized by NYNEX as "speculative." > d MM
y O % - ԍNYNEX Opposition at 9.> NYNEX also
d(#i suggests that the issues raised by ALTV may be irrelevant because open video systems have not
d(# yet been developed and may be able to "carry programming to households on a selective, " C r d ,-(-(ZZ% "
X - addressable' basis." e MM
{ O y -
d(# ԍId. See also Joint Telephone Petitioners Opposition at 1415 (arguing that network efficiencies will drive open
video system configurations rather than attempts to game the mustcarry/retransmission consent rules).
X -
154. ` ` TeleTV recommends that the Commission reconsider its decision not to require
d(# broadcasters to make the same election among open video systems and cable systems serving the
X -
d(# same geographic area. A f " MM
y O w - ԍTeleTV Petition at 813.A TeleTV argues that the Commission's decision is inconsistent with its
d(#> finding that the technical and size differences between open video systems and large cable
d(# systems are insufficient to warrant application of significantly different mustcarry and
X _ -
d(# retransmission consent rules. 9 g _ MM
{ O - ԍId. at 89.9 TeleTV submits that if broadcasters are allowed to make
d(# different elections, they may discriminate between open video systems and cable systems in areas
X 1 -
d(# serving the same subscribers. : h 1D MM
{ O & - ԍId. at 910.: It states that such a rule could result in unfair situations, such
d(# as open video systems being forced to pay for competitively valuable signals that are provided
X
-
d(# to cable systems for free. 1 i
MM
{ O - ԍId.1 TeleTV asserts that the Commission need not assume that large
d(# open video systems will be unable to provide signals to specific parts of their systems pursuant
X -
d(#L to either mustcarry or retransmission consent. 8 j h MM
{ O - ԍId. at 12.8 It argues that the Commission's current rule
d(# should apply until an open video system operator is able to certify to broadcasters that made
d(#i different elections in different franchise areas that its system is capable of operating in conformity
X - with those elections. 8 k
MM
{ O ; - ԍId. at 13.8 USWest supports TeleTV's proposal. C l MM
y O - ԍUSWest Opposition at 67.C
X b -
B 155. ` ` ALTV opposes TeleTV's recommendation that the Commission reconsider its
d(#x decision to permit broadcasters to make different mustcarry and retransmission consent elections
d(# for open video systems and cable systems serving the same geographic area. ALTV argues that
X -
d(# TeleTV has failed to show that the Commission's findings in the Second Report and Order were
X -
d(# inconsistent or unreasonable. ? m MM
y O # - ԍALTV Opposition at 23.? It further argues that it is speculative for TeleTV to suggest that
d(# open video systems may be able to implement different mustcarry/retransmission consent
X - elections in different areas served by their systems. 7 n MM
{ O 7' - ԍId. at 3.7 " D > n ,-(-(ZZ " Ԍ
V - ԙ ` ` b.Discussion
X -
156. ` ` In the Second Report and Order, the Commission considered and rejected
d(#| suggestions similar to NCTA's that we specifically require the use of a basic tiertype
d(# arrangement in order to provide all subscribers on a system with the signals carried in fulfillment
X -
d(#y of the mustcarry requirements. S o MM
{ O - ԍSecond Report and Order at para. 163.S As we noted in the Second Report and Order, the basic tier
d(# requirement is contained in Section 623 of the Communications Act, which does not apply to
X c -
d(#{ open video systems. 1 p cZ MM
{ O n
- ԍId.1 NCTA has presented no new evidence in support of a basic tier
d(#= requirement. We therefore decline to adopt NCTA's request. We agree with NCTA, however,
d(# that video programming providers should not be required to duplicate mustcarry programming
already provided to subscribers from another source.
X
-
157. ` ` The Commission recognizes ALTV's valid concern that stations electing mustcarry
d(# status will have to reimburse open video system operators for extensive copyright fees that may
X -
d(#[ result from carriage beyond their local market areas. ; q MM
y O _ - ԍALTV Petition at 3.; As ALTV notes, these dangers may be
d(# avoided if open video system operators tailor the distribution of mustcarry signals to the parts
X -
d(# of their system that are located within a station's local market. 7 r | MM
{ O - ԍId. at 4.7 We believe that our rules
d(# provide open video system operators with an incentive to design and construct their systems with
d(#L this capability. Where an open video system has such a capability, we will require open video
d(# system operators to limit the distribution of mustcarry signals to the appropriate local markets,
d(# unless a local broadcast station consents otherwise. If an open video system operator cannot limit
d(#M its distribution of mustcarry signals in this manner, the open video system operator will be
d(#j responsible for any increase in copyright fees and may not pass through such increases to the
X - local station electing mustcarry treatment. s MM
y O -
d(#w ԍThe Commission does not here intend to prejudge the issue of the applicability of the cable compulsory license
to open video systems.
X -
158. ` ` Finally, we agree with TeleTV and USWest that we should amend our current
d(#= rule that allows broadcasters to make different elections among open video systems and cable
X -
d(# systems serving the same geographic area. ^ t f MM
y O # - ԍTeleTV Petition at 1213; USWest Opposition at 67.^ The "common election" requirement is contained
d(#] in Section 325(b)(3)(B): "If there is more than one cable system which services the same
X i -
d(# geographic area, a station's election shall apply to all such cable systems." t u i
MM
{ O ' - ԍSee Communications Act 325(b)(3)(B), 47 U.S.C. 325(b)(3)(B) t In Section 653(c), " iE u ,-(-(ZZ1 "
d(# Congress provided that Section 325 should apply to open video system operators, to the extent
X -
d(#y possible, no greater or lesser than it applies to cable operators. ^ v MM
y O b - ԍCommunications Act 653(c), 47 U.S.C. 573(c).^ By directing equal treatment
d(# under Section 325, we believe that Congress intended to remove Section 325 as a distinguishing
d(#- factor between those entering the video marketplace as a cable operator and those entering as an
d(# open video operator. Thus, since LECs and other entities entering the video marketplace as
d(#/ overbuilding cable operators would be entitled to rely upon Section 325's common election
d(# requirement, we believe that overbuilding open video system operators should be entitled to do
d(# the same. To hold otherwise would tip the balance in favor of the traditional cable option in a
manner that Congress did not intend.
X -
_ 159. ` ` In the Second Report and Order, however, we found that as a practical matter the
d(#j potential size differences between open video systems and cable systems could make common
X
-
d(# election on overlapping cable and open video systems infeasible. w
X MM
y O - ԍALTV supports the rule we adopted in light of this potential difficulty. ALTV Opposition at 23. We agree with TeleTV that
X -
d(# our concern in the Second Report and Order may no longer apply to the extent that an open
d(#^ video system can tailor the distribution of local broadcast stations to the appropriate
X
-
d(# communities. ? x
MM
y O D - ԍTeleTV Petition at 12.? As noted above, we believe that our rules provide open video system operators
X -
d(# with an incentive to construct their systems with this "narrowcast" capability. M y x MM
{ O - ԍSee supra at Section III.F.2.b.M We will
d(# therefore amend our rules to require that broadcasters make the same election for open video
d(# systems and cable systems serving the same geographic area unless the overlapping open video
d(#> system is unable to deliver appropriate signals in conformance with the broadcast station's
elections for all cable systems serving the same geographic area.
W
< ` ` 3. Program Access
V - ` ` a.Background
X -
160. ` ` In the Second Report and Order, we concluded that, pursuant to Section
d(# 653(c)(1)(A), the program access restrictions should apply to the conduct of open video system
d(# operators in the same manner as they are currently applied to cable operators and common
X k -
d(#N carriers or their affiliates that provide video programming directly to subscribers. S z k
MM
{ O &# - ԍSecond Report and Order at para. 175.S We
d(# concluded that it was most appropriate to apply Section 628 to open video system operators by
d(# creating parallel provisions for cable operators and open video system operators, such that, for
d(#x example, open video system operators are prohibited from entering into exclusive agreements with
d(# satellite programming vendors in which an open video system operator has an attributable interest, " F z ,-(-(ZZ "
d(# but are permitted to enter into an exclusive agreement with a satellite programming vendor in
X -
d(# which a cable operator has an attributable interest. I { MM
{ O b - ԍId. at paras. 176177, 179.I We also stated that, in order to effectuate
d(#< the purposes of the program access statute in the open video system context, open video system
d(# programming providers should be subject to the program access provisions. Specifically, we
d(# concluded that we would extend our program access rules to prohibit cableaffiliated satellite
d(#j programmers and cableaffiliated open video system programming providers from entering into
d(# exclusive programming agreements, unless the Commission first determines that the exclusive
X _ -
d(#j arrangement is in the public interest under the factors listed in Section 628(c)(4). D | _Z MM
{ O j
- ԍId. at paras. 186194.D Finally, we
d(# found that open video system programming providers that provide more than one channel of
d(#j programming clearly fit within the definition of an MVPD and that they are therefore entitled to
X - the benefits of the program access provisions. D } MM
{ O - ԍId. at paras. 195196.D
X
-
161. ` ` NCTA and Rainbow ask the Commission to reconsider its decision to apply the
X -
d(# program access rules to video programming providers on an open video system. ~ ~ MM
{ O - ԍNCTA Petition at 10; Rainbow Petition at 6. See Second Report and Order at para. 182. They argue
d(#. that the Commission impermissibly extended the exclusivity provisions of Section 628 to open
d(# video system video programming providers, contrary to the plain language of Section
X -
d(# 653(c)(1)(C), which extends the program access rules solely to open video system operators. \ MM
y O Q - ԍNCTA Petition at 10; Rainbow Petition at 69. \
X y -
X b -
162. ` ` Rainbow also argues that the Commission's interpretation of the 1996 Act
X K -
d(# contravenes the policy underlying open video systems. E K MM
y O - ԍRainbow Petition at 10.E Rainbow states that by giving
d(# competing video programming providers the right to access each other's programming, the
d(# Commission has undermined the competition and diversity open video systems were intended to
X -
d(# promote. y Z0
MM
{ O -
d(#w ԍId. at 11; see also NCTA Petition at 11 (arguing that the effect of the Order's prohibition on certain exclusive
d(# arrangements between programmers and open video system video programming providers will reduce competition
y O y! - among such providers). y Rainbow cautions that if the Commission expands the program access rules to open
d(#- video system programming providers, Rainbow will be forced to provide its programming directly
X -
d(# to its potential competitors and will have no incentive to use open video systems on its own. g ZR
MM
{ O $ -
d(#- ԍId. at 12. Conversely, in its opposition to petitions for reconsideration, RCN argues that under Rainbow's
d(# model "only OVS programming providers that are affiliated with satellite programmers (most of whom are also
affiliated with cable operators) could survive." RCN at 8.g
" G t ,-(-(ZZ " Ԍ
X -
ԙ 163. ` ` USTA and NYNEX support the Commission's decision to apply the program
X -
d(# access rules to open video system video programming providers. X MM
y O b - ԍUSTA Opposition at 6; NYNEX Opposition at 1516.X USTA argues that despite
d(#j claims by cable incumbents, "parity of access is an essential precondition for LECs to provide
d(#j meaningful competition to incumbent cable operators, due to the concentration of control over
X -
d(#L vast portions of . . . programming among a handful of vertically integrated cable operators." J X MM
y O - ԍRainbow Petition at 7.J
d(# RCN characterizes Rainbow and NCTA's arguments as "merely an attempt by cable affiliated
d(# entities to maintain their dominant market position despite the procompetitive policy of the 1996
X _ -
d(#. Act." > _ MM
y O - ԍRCN Opposition at 34.> RCN submits that the Commission's application of Section628 to open video system
d(#. programming providers is based on the 1992 Cable Act, and that the Commission had no need
X 1 - to rely on the extension of that provision in the 1996 Act. 7 1x MM
{ O Z - ԍId. at 4.7
X
-
A 164. ` ` Rainbow further objects to the Commission's conclusion that open video system
X
-
d(#L programmers qualify as multichannel video programming distributors ("MVPDs"). E
MM
y O - ԍRainbow Petition at 17.E Rainbow
d(#< argues that Congress declined to add open video system video programming providers to the list
X -
d(# of representative entities under the definition of MVPDs in Title VI. 8 MM
{ O - ԍId. at 18.8 Rainbow asserts that this
d(# omission is significant, in that the listed MVPDs all operate the vehicle for distribution (e.g.,
d(#y cable, MMDS, DBS), whereas open video system video programming providers distribute their
X y - product on a common platform in direct competition with other programming providers. 7 y,
MM
{ O V - ԍId.7
X K -
165. ` ` In opposition to Rainbow's argument that programming providers are not MVPDs,
d(# MPAA, RCN, and TeleTV argue that open video system programming providers are MVPDs,
X -
d(# based on the illustrative, not exhaustive, list of MVPDs set forth in Section 602(13). MM
y O - ԍMPAA Comments at 3; RCN Opposition at 910; TeleTV Opposition at 12. MPAA,
d(# RCN and TeleTV argue that open video system video programming providers clearly fit the
d(# definition of MVPD because they "make available for purchase, by subscribers or customers,
X - multiple channels of programming." N
MM
{ O $ -
d(# ԍCommunications Act602(13), 47 U.S.C.522(13). See MPAA Comments at 3; RCN Opposition at 910;
TeleTV Opposition at 12.
" H ,-(-(ZZ " Ԍ
X -
_ 166. ` ` NCTA contends that the Commission erred in applying the exclusivity provisions
d(# of Section 628 to contracts between cableaffiliated satellite programmers and cableaffiliated
X -
d(#M open video systems video programming providers. < MM
y O K - ԍNCTA Petition at 11.< NCTA contends that the exclusivity
d(# prohibitions in Sections 628(c)(2)(C) and (D) apply only to exclusive contracts between cable
X -
d(# operators and cableaffiliated satellite programmers. ? X MM
y O - ԍRainbow Petition at 11.? NCTA points out that Sections
X -
d(#j 628(c)(2)(C) and (D) do not say "cable operator or its affiliate." Y MM
y O &
- ԍNCTA Petition at 12 (emphasis in original).Y Nor, according to NCTA, is
d(# the Commission authorized to reach such exclusive arrangements under Section 628(b), since
d(# 628(b) is limited by its plain language to unfair or deceptive acts or practices of a cable operator,
X J - not a cableaffiliated open video system programming provider. 1 Jx MM
{ O s - ԍId.1
X -
_ 167. ` ` Finally, NCTA argues that the Second Report and Order impermissibly precludes
d(# individual vertically integrated satellite programmers from marketing directly to open video
d(# system subscribers unless they accept a "duty to deal" with open video system video programming
X -
d(#l providers on the system. 8
MM
{ O - ԍId. at 13.8 NCTA submits that there is nothing per se unreasonable or
X -
d(#- anticompetitive about a supplier choosing to retail directly to customers. 1 MM
{ O - ԍId.1 In any event, NCTA
d(# submits that the Commission cannot artificially create and discriminate against a subclass of the
X - open video system technology (i.e., open video system programming providers). 8 .
MM
{ O u - ԍId. at 14.8
V -
V h - ` ` b.Discussion
X : -
168. ` ` We believe that our initial interpretation applying the provisions of Section 628
d(#x to open video system programming providers is reasonable and should stand. First, Rainbow and
d(# NCTA's argument that Congress limited the applicability of the program access rules to open
X -
d(# video system operators was expressly considered and rejected in the Second Report and Order. o MM
{ O f" - ԍSee Second Report and Order at paras. 182, 186.o
d(#k Nevertheless, we will take this opportunity to reiterate the basis for our decision. We reject
d(# NCTA's challenge to our authority to apply the exclusivity provisions of Section 628(c)(2)(C)
d(#[ and (D) to the exclusive arrangements between satellite programmers in which a cable operator
d(#\ has an attributable interest and open video system programming providers in which a cable
d(#- operator has an attributable interest. The structure of Section 628 confers broad authority on the " I R
,-(-(ZZ "
d(#> Commission to adopt regulations in order to promote "the public interest... by increasing
d(# competition and diversity in the multichannel video programming market and the continuing
X -
d(# development of communications technology." d MM
y O K - ԍCommunications Act 628(c)(1), 47 U.S.C. 548(c)(1).d Congress required that such regulations specify
particular conduct prohibited by Section 628(b), which makes it:
X unlawful for a cable operator, a satellite cable programming vendor in which a
cable operator has an attributable interest, or a satellite broadcast programming
vendor to engage in unfair methods of competition or unfair or deceptive acts or
~ practices, the purpose or effect of which is to hinder significantly or to prevent
any [MVPD] from providing satellite cable programming or satellite broadcast
X - programming to subscribers or consumers. ^ X MM
y O #
- ԍCommunications Act 628(b), 47 U.S.C. 548(b).^
d(# Therefore, we reject NCTA's argument that Section 628(b) and our implementing regulations
d(# only apply to the conduct of cable operators. Our regulations clearly can extend to the conduct
d(# of cableaffiliated satellite programmers, including, of particular relevance here, the manner in
which such programmers deal with open video system programming providers.
X y -
169. ` ` Moreover, as we stated in the Second Report and Order, Section 628(b) authorizes
d(# the Commission to adopt additional rules to accomplish the program access statutory objectives
d(# "should additional types of conduct emerge as barriers to competition and obstacles to the broader
X 6 -
d(# distribution of satellite cable and broadcast programming." 6 MM
{ O -
d(# ԍSee Second Report and Order at para. 186; First Report and Order in MM Docket No. 92265 ("First Report
{ O -
d(# and Order"), 8 FCC Rcd 3359, 3374; Implementation of Cable Television Consumer Protection and Competition Act
{ O c -
d(# of 1992: Development of Competition and Diversity in Video Programming Distribution and Carriage, Memorandum
{ O - -
d(# Opinion and Order on Reconsideration of the First Report and Order in MM Docket No. 92265 ("DBS Order"),
10 FCC Rcd 3105, 31263127 (1994). The Commission has called Section
X -
d(#< 628(b) a "clear repository of Commission jurisdiction" to address those obstacles. X MM
{ O p - ԍFirst Report and Order, 8 FCC Rcd at 3374.X By entitling
d(# Section 628(c) "Minimum Contents of Regulations," Congress gave the Commission authority to
d(# adopt additional rules that will advance the purposes of Section 628; it did not limit the
X - Commission to adopting rules only as set forth in that statutory provision. 2
MM
{ O ! -
d(# ԍSee RCN Opposition at 6 (discussing the Commission's broad mandate to adopt additional regulations that it
finds necessary to effectuate the purpose of Section 628(b)).
X -
170. ` ` As we stated in the Second Report and Order, an exclusive contract between a
d(#> cableaffiliated video programming provider on an open video system and a cableaffiliated
d(# programmer presents many of the same concerns as an exclusive contract between a cable
X i -
d(# operator and a vertically integrated satellite programming vendor. A primary objective of the " iJ ,-(-(ZZ "
d(#j program access requirements is the release of programming to existing or potential competitors
d(# of traditional cable systems so that the public may benefit from the development of competitive
X -
d(# distributors. W MM
{ O K - ԍSee Second Report and Order at para. 188.W Exclusive arrangements among cableaffiliated open video system programming
d(# providers and cableaffiliated satellite programmers may impede the development of open video
X -
d(#< systems as a viable competitor to cable. H Z MM
{ O - ԍSee id. at paras. 189191.H NCTA and Rainbow fail to challenge or address these
concerns.
X _ -
171. ` ` Second, we believe that the benefits of the program access provisions apply to
d(# open video system providers. Contrary to Rainbow's arguments, open video system programming
d(# providers fall within the definition of MVPDs, which Section 628 identified as the intended
X -
d(#= beneficiaries of the program access regime. t Z MM
{ O -
d(# ԍSee, e.g., Communications Act 628(b), 47 U.S.C. 548(b) (prohibiting certain conduct which "hinder[s]
d(#k significantly or [prevents] any multichannel video programming distributor from providing satellite cable
programming or satellite broadcast programming to subscribers or consumers.")t Specifically, in response to Rainbow's argument
d(#k that Congress did not amend Section 602(13) to add open video system video programming
d(# providers to the list of MVPDs, we agree with MPAA, Residential Communications and TeleTV
d(# that the list of entities enumerated in that section is expressly a nonexclusive list. Section
X -
d(# 602(13) states that the term MVPD "means a person such as, but not limited to, a cable operator,
X
-
d(# a multichannel multipoint distribution service, a direct broadcast satellite service. . . . " q
MM
y O h - ԍCommunications Act 602(13), 47 U.S.C. 522(13) (emphasis added).q We
d(#z also agree with those commenters that asserted that open video system video programming
d(# providers fit the definition of MVPD because they make "available for purchase, by subscribers
X d -
d(# or customers, multiple channels of video programming. 1 d MM
{ O - ԍId.1 Furthermore, we find Rainbow's
d(# argument that video programming providers cannot qualify as MVPDs because they may not
d(# operate the vehicle for distribution to be unsupported by the plain language of Section 602(13),
X -
d(# which imposes no such requirement. 0
MM
{ O -
d(# ԍSee also TeleTV Opposition at 2 (the fact that most open video system programming providers will use
another party's network has no relevance under Section 602(13)). The conclusion that open video system programming
d(# providers are MVPDs is further supported by the amendment to the effective competition "test'
X -
d(# of Section 623(d) added by the 1996 Act. o MM
y O ,# - ԍCommunications Act 623(d), 47 U.S.C. 543(d) (emphasis added).o That section explicitly refers to "a local exchange
d(# carrier or its affiliate (or any multichannel video programming distributor using the facilities of
X -
d(#" such carrier or its affiliate)." j MM
y O & - ԍCommunications Act 623(l)(1)(D), 47 U.S.C. 543(l)(1)(D).j In light of these factors, an open video system video " K ,-(-(ZZ " programming provider clearly constitutes such an MVPD.
` `
X -
n 172. ` ` Third, we reject NCTA's argument that intrasystem competition would be harmed
d(#K by applying the program access rules to cableaffiliated video programming providers on an open
X -
d(# video system. As we stated in the Second Report and Order, our concern is the same as in the
d(# cable context that a cable operator would use its control over programming to keep that
X x -
d(# programming from other competing MVPDs. Specifically, as we stated in the Second Report and
X c -
d(# Order, we are concerned that exclusive arrangements among cableaffiliated open video system
d(# programming providers and cableaffiliated satellite programmers may serve to impede
d(# development of open video systems as a viable competitor to cable to the extent that popular
d(# programming services are denied to open video system operators or unaffiliated open video
d(# system programming providers that seek to package such programming for distribution to
subscribers.
X -
_ 173. ` ` We reiterate that the prohibition, absent a Commission public interest finding, on
d(# exclusive contracts applies only to contracts between cableaffiliated satellite programmers and
d(# cableaffiliated open video system programming providers and contracts between satellite
d(# programmers affiliated with an open video system operator and open video system programming
X h -
d(#x providers affiliated with an open video system operator. h MM
y O -
d(#- ԍRainbow's comments misleadingly fail to make the distinction between cableaffiliated video programming
providers and nonaffiliated video programming providers. We note that, consistent with the DBS
X S -
d(#= Order, a vertically integrated satellite programmer is not generally restricted from entering into
d(# an exclusive contract with an MVPD that is not affiliated with a cable operator, although such
d(#y a contract is subject to challenge under Section 628(b) of the Communications Act and Section
X - 76.1001 of the Commission's rules. \ MM
{ O -
d(# ԍSee Second Report and Order at paras.18485. See also MPAA Opposition at 3 (under the principles of the
{ O -
d(# DBS Order, the program access rules do not preclude an exclusive arrangement by a cableaffiliated satellite
y O u - programming vendor and a noncable MVPD (including an open video system MVPD)).
X -
} 174. ` ` Finally, we disagree with NCTA's contention that by applying the program access
d(# rules to open video system video programming providers, the Commission has deemed retailing
d(# directly to customers to be patently unreasonable or anticompetitive. The open video system rules
d(#M do not prohibit any open video system video programming provider from selling directly to
d(# customers. Rather, the open video system rules address dealings between satellite programmers
d(#[ (in particular, those affiliated with cable operators and open video system operators) and open
video system programming providers.
" * L D ,-(-(ZZ\ "
W < ` ` 4. Sports Exclusivity, Network NonDuplication and Syndicated Exclusivity
V - ` ` a.Background
X -
175. ` ` In the Second Report and Order, the Commission prescribed regulations pursuant
d(#. to Section 653(b)(1)(D) that "extend to the distribution of video programming over open video
d(#L systems the Commission's regulations concerning sports exclusivity (47 C.F.R. 76.67), network
X a -
d(# nonduplication (47 C.F.R. 76.92 et seq.), and syndicated exclusivity (47 C.F.R. 76.151 et seq.). X a MM
{ O - ԍSecond Report and Order at paras. 199204.X
d(# These regulations allow the holders of certain exclusive rights to prohibit cable systems from
d(#/ carrying various sports, network and syndicated programming within specified geographic
X - zones. h Z MM
y O )
- ԍ47 C.F.R. 76.67, 76.92.97 and 76.151, .153.159, .163.h
X
-
176. ` ` In the Second Report and Order, we generally found that our exclusivity and non
d(# duplication rules should be applied to open video systems in the same manner as they apply to
X -
d(# cable systems. S MM
{ O _ - ԍSecond Report and Order at para. 201.S Specifically, the Commission found that open video system operators should
X
-
d(#z be responsible for compliance with our exclusivity and nonduplication rules. ?
| MM
{ O - ԍId. at para. 202.? In order to
d(#y account for the administrative differences between open video systems and cable systems, the
d(# Commission provided that all notices of exclusive or nonduplication rights must be received by
d(# the open video system operator. We further required that the open video system operator make
d(#i all such notices immediately available to all appropriate video programming providers so that they
X : -
d(#y have the opportunity to either delete or substitute signals where possible. ? : MM
{ O - ԍId. at para. 204.? The Commission
d(#K recognized that some systems would be configured to allow individual programmers to substitute
d(# or delete the necessary signals. Therefore, we decided that an operator would not be subject to
d(# our sanctions when that operator provided proper notices to the necessary programming providers
d(# and took prompt steps to stop distribution of the infringing program once it was notified of a
X - violation. 1 MM
{ O ! - ԍId.1
X -
177. ` ` The Joint Sports Petitioners request that the Commission reconsider its findings
d(# regarding sports exclusivity because the current rules give sports teams and leagues holding
X k -
d(# exclusive rights less protection than they receive in the cable context. O k2
MM
y O N& - ԍJoint Sports Petitioners Petition at 2.O The Joint Sports
d(# Petitioners argue that our rules improperly permit open video system operators to escape liability " TM ,-(-(ZZ? "
d(# if they notify the appropriate unaffiliated programming providers of the request for deletion and
X -
d(# take steps to stop the distribution of infringing programs once they are notified of a violation. 9 MM
{ O b - ԍId. at 23.9
d(# The Joint Sports Petitioners argue that, unlike network nonduplication and syndicated exclusivity,
X -
d(# sports exclusivity requires infrequent deletions that cannot be recouped once missed. 7 Z MM
{ O - ԍId. at 3.7 The Joint
d(# Sports Petitioners suggest that the Commission require that the open video system operator always
d(# be responsible for compliance even after notifying programming providers and taking steps after
X v -
d(# a violation occurs. 1 v MM
{ O - ԍId.1 The Joint Sports Petitioners suggest that open video system operators be
d(# allowed to require indemnification as a condition of carriage, for any monetary sanctions it may
X H - receive. ; H~ MM
{ O w - ԍId. at 3 n.4.;
X -
Q 178. ` ` Further, the Joint Sports Petitioners ask the Commission to clarify that it is not
d(# necessary for a sports team or league to notify both the individual programming providers and
X
-
d(#. the open video system operator. 7
MM
{ O - ԍId. at 4.7 They also ask that the Commission make clear when such
d(# notifications will be deemed to have been made "immediately available" to a programmer and
d(#Z suggest that the Commission require open video system operators to transmit such notices to the
X
- necessary program providers on the same day that they are received. 1
MM
{ O - ԍId.1
X y -
179. ` ` In its opposition, MFS urges the Commission not to alter the open video system
X b -
d(#] rules regarding sports exclusivity. K b4
MM
y O G - ԍMFS Communications Opposition at 8.K It argues that open video system operators will be
d(# unnecessarily burdened if they are required to do anything more than notify individual
X 4 -
d(#[ programming providers of any notifications they receive. 9 4 MM
{ O - ԍId. at 89.9 For instance, the Joint Telephone
d(#x Petitioners argue that operators should not be placed in the middle of such disputes because they
d(#> risk liability from either the party claiming exclusive rights or the programmer depending on
X - who's directions they follow. U V
MM
y O # - ԍJoint Telephone Petitioners Opposition at 12.U
X -
180. ` ` In its petition for reconsideration, USWest asks the Commission to provide
d(# guidance as to the necessary "prompt steps" that must be taken by an open video system operator " N ,-(-(ZZ "
d(#{ in order to avoid being subject to sanctions for any violation of our nonduplication and
X -
d(#< exclusivity rules. ? MM
y O b - ԍUSWest Petition at 5.? USWest suggests that the Commission avoid the complication of involving
d(#= the operator by placing the compliance burden on the alleged violator, the video programming
X -
d(# provider. l X MM
{ O - ԍId. See also Joint Telephone Petitioners Opposition at 1112.l Alternatively, USWest suggests that the Commission find that sanctions will not
d(# be imposed on open video system operators if proper notice has been given to the programming
X -
d(#j providers that have allegedly violated the rules. ? MM
y O (
- ԍUSWest Petition at 5.? In its opposition, NYNEX argues that open
X v -
d(# video system operators cannot ensure compliance. ? vz MM
y O - ԍNYNEX Opposition at 14.? It submits that the individual video
d(# programmers on an open video system should be responsible for blocking distribution of
d(# necessary signals or negotiating over the validity of any claims of exclusive or nonduplication
X 1 - rights. | 1
MM
{ O - ԍId. at 1415. See also Joint Telephone Petitioners Opposition at 1112.|
V
- ` ` b.Discussion
X -
181. ` ` Upon reconsideration, we grant the petition filed by the Joint Sports Petitioners
d(#z regarding our current rule governing sports exclusivity. We find merit in their position that,
d(#- unlike network nonduplication and syndicated exclusivity, sports exclusivity requires infrequent
d(# deletions that cannot be recouped once missed. We believe that our rule that extends the
d(#< Commission's regulations concerning sports exclusivity to open video systems must be amended
d(# in order to preserve the same level of protection received by sports teams and leagues in the cable
X K -
d(# context. $K MM
y O -
d(# ԍWe are also not persuaded by the arguments raised in the oppositions filed by MFS Communications and
{ O ` -
d(#w NYNEX. In the Second Report and Order, the Commission considered and rejected proposals similar to those made
d(# by NYNEX that we hold the individual programming providers on the system responsible for compliance with our
{ O - sports exclusivity rules. Second Report and Order at paras. 202203. While we hold open video system operators responsible for compliance with our rules,
d(#z we also recognize that they are forced by the structure of an open video system to rely, to a
d(#k degree, on individual programming providers who may dispute a claim of exclusivity or may
attempt to substitute a signal for the signal that is to be deleted.
X -
182. ` ` In the Second Report and Order, we stated that the open video system operator
d(# would be responsible for compliance with these rules and would be liable if it failed to delete
X -
d(#y signals once it was made aware that a violation had occurred. X MM
{ O % - ԍSecond Report and Order at paras. 202204.X We amend our rule to provide
d(# that open video system operators will be subject to sanctions for any violation of our sports " O ,-(-(ZZ "
d(#L exclusivity rules. Operators generally may effect the deletion of signals for which they receive
d(#{ deletion notices unless they receive notice within a reasonable time from the appropriate
d(#{ programming provider that the rights claimed are invalid. If a programmer challenges the
d(# validity of claimed exclusive or nonduplication rights, the open video system operator shall not
d(# delete the signal. However, we agree with the Joint Sports Petitioners that an open video system
d(#K operator should be allowed to require indemnification as a condition of carriage for any sanctions
d(#L it may incur in reliance on a programmer's claim that certain exclusive or nonduplication rights
X _ - are invalid. S _ MM
y O - ԍJoint Sports Petitioners Petition at 3 n.4.S
X 1 -
183. ` ` Contrary to the further concerns mentioned by the Joint Sports Petitioners, our
d(#j current rules do not require a sports team or league to provide notifications to individual video
d(#y programming providers in addition to the open video system operator. The holder of exclusive
d(#[ or nonduplication rights is, of course, free to notify individual programming providers when it
d(#[ notifies the open video system operator as required by our rules. In addition, our rules require
d(# an open video system operator to make the notices it receives "immediately available" to the
X
-
d(#j appropriate programming providers on its system. k
X MM
{ O - ԍSee 47 C.F.R. 76.1506(m)(2), 76.1508(c), 76.1509(c).k Given the different types of systems and
d(# different circumstances in which notice will be provided, we do not believe at this time that a
specific time requirement is necessary or appropriate.
X K -
Q 184. ` ` We also deny USWest's petition for reconsideration which suggests that the
d(#l Commission hold individual programming providers responsible for compliance with our
d(# exclusivity and nonduplication rules, and asks the Commission to further define the "prompt
d(#L steps" that must be taken by an operator in order to avoid liability after a violation of our rules
X -
d(# has occurred. ? MM
y O - ԍUSWest Petition at 5.? In the Second Report and Order, the Commission responded to the issues raised
X -
d(# in USWest's petition. X z MM
{ O - ԍSecond Report and Order at paras. 202204.X USWest does not present any further evidence to support the
d(# adoption of different rules. We also recognize that the procedures necessary to stop the
d(# distribution of infringing programs may vary from system to system. Therefore, we decline to
d(# state the specific steps that an open video system operator will be required to take in order to
promptly stop the further distribution of infringing programs.
W P < ` ` 5. Local Franchising Requirements
V " - ` ` a.Background
X -
3 185. ` ` In the Second Report and Order, we found that Congress' open video system
d(# framework permits state and local authorities to impose conditions on an open video system " P ,-(-(ZZJ "
d(# operator for use of the rightsofway, so long as such conditions are applied equally to all users
X -
d(#= of the rightsofway (i.e., are nondiscriminatory and competitively neutral). T MM
{ O b - ԍSee Id. at paras. 207222.T We also found
d(# that, in light of Congress' stated intent, state and local governments cannot require any open
d(#z video system operator to obtain a Title VI franchise from a state or local authority for use of
d(# public rightsofway necessary to operate its open video system. We therefore concluded that a
d(#i state or local government requirement that directs an open video system operator to obtain a Title
d(# VI franchise, or seeks to impose Title VI "franchiselike" requirements, directly conflicts with
X _ -
d(# Section 653 of the Communications Act and is preempted. D _Z MM
{ O j
- ԍId. at paras. 208212.D In addition, we disagreed in the
X H -
d(# Second Report and Order that this narrow preemption necessarily constitutes a "taking" under the
d(# Fifth Amendment, specifically finding that Congress has provided "just compensation" to local
X - authorities for use of the public rightsofway. D MM
{ O - ԍId. at paras. 217222.D
X
-
@ 186. ` ` Several parties representing state and local interests have requested reconsideration
X -
d(# of the Second Report and Order. The National League of Cities, et al. state that, at times, the
X -
d(#y Order's language regarding preemption is too broad and the Commission should clarify that its
X
-
d(#z intent was only to preempt local franchising authority under Title VI. X
~ MM
y O - ԍNational League of Cities, et al. Petition at 2.X In the absence of a
d(# specific directive from Congress, the National League of Cities, et al. argue that the Commission
X - has no authority to preempt any nonTitle VI local franchising requirement. 7 MM
{ O > - ԍId. at 3.7
X Q -
` 187. ` ` The National League of Cities, et al. also reiterate its claim that any preemption
X : -
d(#M of nonTitle VI franchises would violate the Fifth Amendment. : : MM
{ O - ԍId. at 412.: In particular, the National
X # -
d(#M League of Cities, et al. argue that the Second Report and Order grossly underestimates the
d(# compensation due to local franchising authorities, which in the cable context goes far beyond a
X -
d(# monetary franchise fee. b Z2
MM
{ O -
d(#
ԍId. at 58 (noting that local governments receive compensation from cable operators that include franchise fees,
d(# inkind compensation such as PEG facilities, and other community benefits such as buildout requirements, system
design parameters and customer service standards).b Since the Second Report and Order's rules fall short of requiring that
d(# the open video system operator's compensation will match the cable operator's obligations (i.e.,
d(# the market value of the public rightsofway), the Commission has deprived the community of
X -
d(#K just compensation. 9 T
MM
{ O & - ԍId. at 89.9 Finally, the National League of Cities, et al. assert that open video systems " Q ,-(-(ZZ "
d(# will impose massive costs on local governments for the repair and maintenance of the rightsof
X - way, including costs attributable to street cuts, paving and repaving. : MM
{ O b - ԍId. at 912.:
X -
_ 188. ` ` In addition, the National League of Cities, et al. and the City of Indianapolis argue
X -
d(#= that the Second Report and Order mistakenly equates the 1996 Act's "nondiscriminatory and
d(#= competitively neutral" standard for local management of the public rightsofway with "equal"
X x -
d(#? treatment, which is a far more inflexible standard. \ xZ MM
{ O - ԍId. at 13; City of Indianapolis Petition at 1.\ The Village of Schaumburg, while it
d(#[ concurs with the Commission's statement that local authorities may ensure the public safety in
d(# the use of rightsofway by "gas, telephone, electric, cable and similar companies, "requests that
X 3 -
d(# the Commission clarify that "similar companies" includes open video system operators. R 3 MM
y O
- ԍVillage of Schaumburg Petition at 1.R The
X -
d(# Village of Schaumburg also states that the Second Report and Order does not outline mechanisms
d(# for local governments to impose terms and conditions on the use of the rightsofway, and
d(# requests the Commission to require open video system operators to enter into contractual
X - agreements with local authorities regarding such use. 7 | MM
{ O - ԍId. at 2.7
X
-
189. ` ` Municipal Services, et al. contend that municipalities in a majority of states have
d(#= existing franchises with their LECs, pursuant to state laws that require the telephone company
d(# to obtain local authorization prior to using the public rightsofway. Municipal Services, et al.
d(# request the Commission to state that LECs using the public rightsofway for open video service
X O - remain subject to preexisting and otherwise valid telephone franchise requirements. S O MM
y O - ԍMunicipal Services, et al. Petition at 26.S
X ! -
190. ` ` In response, NYNEX argues that the arguments of the National League of Cities,
X
-
d(# et al. are based on a "fundamentally flawed misunderstanding." ?
MM
y O Y - ԍNYNEX Opposition at 18.? The source of local
d(# governments' cable franchising authority, according to NYNEX, is Part III of Title VI of the
d(#- Communications Act, and Congress clearly stated in the 1996 Act that local governments did not
X -
d(# have similar franchising authority over open video operators. ; .
MM
{ O " - ԍId. at 1819.; NYNEX asserts that the National
d(#j League of Cities, et al. compounds their error by reciting a litany of mechanisms by which local
d(# governments obtain inkind compensation and services from cable operators in excess of the
X -
d(# maximum permissible 5% franchise fee. 8 MM
{ O & - ԍId. at 19.8 According to NYNEX, such attempts to evade the " R R
,-(-(ZZn "
d(# 5% limit through the franchise process was precisely the concern that led Congress to establish
d(# the 5% cap in the first place a concern that Congress may have had in mind when it exempted
d(# open video system operators from local franchise requirements and provided instead for a
X - payment in lieu of franchise fee. MM
{ O 4 -
d(# ԍId. at 20 (quoting Memorandum Opinion and Order in the Matter of United Artists Cable of Baltimore, FCC
96188 (released April 26, 1996) at para. 17).
X -
191. ` ` U S West also disagrees with the National League of Cities, et al. that the
d(# Commission does not have the authority to preempt nonTitle VI state and local franchise
X _ -
d(# requirements. C _" MM
y O 2 - ԍU S West Opposition at 56.C U S West argues that, contrary to the claim of the National League of Cities,
d(# et al., the key is not how such requirements are labeled, but their effect. If the local requirements
d(# are Title VIlike requirements that would frustrate Congress' intent in adopting the 1996 Act's
d(# open video provisions, the Commission has sufficient authority to preempt any such requirements;
d(# whereas if the local requirements are nondiscriminatory and competitively neutral, the
X
- Commission would have no grounds for preemption. 1
MM
{ O O - ԍId.1
X -
1 192. ` ` In their response, the Telephone Joint Petitioners object to the suggestion that local
d(#Z authorities should have the same degree of regulatory control over open video that Congress has
X -
d(#- permitted them to exercise over cable service. T D MM
y O - ԍTelephone Joint Petitioners Opposition at 6.T The Telephone Joint Petitioners argue that both
X y -
d(#y open video and cable are activities in interstate commerce, over which Congress is supreme. 1 y MM
{ O - ԍId.1
d(#y According to the Telephone Joint Petitioners, the Commission therefore must follow Congress'
d(# direction limiting local regulation of open video to nondiscriminatory and competitively neutral
d(#y management of public rightsofway, and prescribing the "compensation" that local authorities
X - may receive for use of the rightsofway. 1 f MM
{ O 4 - ԍId.1
V - ` ` b.Discussion
X -
" 193. ` ` We thoroughly explained the bases of our findings in the Second Report and Order
X -
d(# on these issues. \
MM
{ O U$ - ԍSee Second Report and Order at paras. 207222.\ No parties on reconsideration raise any arguments that lead us to revisit our
d(# conclusions therein. We continue to believe that the general distinction we adopted reflects
d(#i Congress' stated intent: state and local authorities may manage the public rightsofway in a non
d(#j discriminatory and competitively neutral manner, but may not impose Title VI franchise or Title " gS ,-(-(ZZO " VI "franchiselike" requirements on open video system operators.
X -
P 194. ` ` We do, however, clarify our decision in several respects. First, we clarify that the
d(# preemption is limited to Title VI or Title VI "franchiselike" requirements, and does not extend
d(#z to all types of potential franchises. If, for example, a state or local government characterizes
d(#Z permission to use the public rightsofway as a "franchise," such franchises are not preempted so
d(#- long as they are issued in a nondiscriminatory and competitively neutral manner. We agree with
d(# U S West that the key in this regard is not how such requirements are labeled, but their effect.
d(# If the local requirements are Title VIlike requirements that would frustrate Congress' intent in
adopting the 1996 Act's open video provisions, we continue to believe they are preempted.
X
-
195. ` ` Second, we clarify that "nondiscriminatory and competitively neutral" treatment
d(# does not necessarily mean "equal" treatment. For instance, it could be a nondiscriminatory and
d(#N competitively neutral regulation for a state or local authority to impose higher insurance
d(# requirements based on the number of street cuts an entity planned to make, even though such a
X
-
d(#y regulation would not treat all entities "equally." Third, we clarify that when the Second Report
X -
d(# and Order stated that local authorities may ensure the public safety in the use of rightsofway
d(# by "gas, telephone, electric, cable and similar companies," an open video system would qualify
as a "similar company."
X 8 -
# 196. ` ` In addition, we continue to disagree with the National League of Cities, et al. that
X ! -
d(# the narrow preemption in the Second Report and Order violates the Fifth Amendment. First,
X -
d(# although the National League of Cities, et al. assert that the Second Report and Order "grossly
d(# underestimates" the compensation due to local authorities, they fail to address the Commission's
d(# finding that the "before and after" test in which the measure of compensation is the difference
d(# in the value of the property before a partial taking and the value of the property after the partial
X -
d(# taking is the proper test to apply. MM
{ O + -
d(# ԍSee Second Report and Order at para. 221 (citing United States v. 8.41 Acres of Land, 680 F.2d 388, 391 (5th
Cir. 1982)). Second, we do not agree with the National League of
d(# Cities, et al. that the local community has not received just compensation unless an open video
d(# system operator matches the franchise and other obligations imposed upon the incumbent cable
d(# operator. Such a requirement would obviously render meaningless Congress' exemption of open
d(# video from Section 621 franchising requirements, since an open video system operator would be
d(#y forced to comply with each of the incumbent cable operator's franchise terms or be subject to a
X ( -
d(# Fifth Amendment "takings" claim. Third, the Second Report and Order specifically permits the
d(# recovery of normal fees associated with the construction of an open video system: "[A] state or
d(# local government could impose normal fees associated with zoning and construction of an open
d(#i video system, so long as such fees [are] applied in a nondiscriminatory and competitively neutral
X -
d(#| manner." E " MM
{ O % - ԍId. at para. 209.E We clarify, however, that these "normal fees associated with zoning and
d(#x construction" should not duplicate the compensation provided by the gross revenues fee. As we " !T ,-(-(ZZ "
X -
d(# stated in the Second Report and Order, it is apparent that the gross revenue fee "in lieu of" a
d(#x franchise fee was intended as compensation by open video system operators for use of the public
X -
d(#< rightsofway. \ MM
{ O M - ԍSee Second Report and Order at paras. 219222.\ The National League of Cities, et al. have not explained why the fees associated
d(#i with the construction of open video systems would be any different than the fees associated with
d(# any other users of the rightsofway, and why regulations applied in a nondiscriminatory,
d(# competitively neutral manner on all users of the rightsofway would be insufficient to deal with
X x - such matters. c xZ MM
{ O - ԍSee Joint Telephone Petitioners Opposition at 6 n.13.c
X J -
197. ` ` Finally, we find that a determination of whether LECs that use the rightsofway
d(# for open video service remain subject to the same conditions contained in the preexisting
d(# telephone franchise agreements can only be made on a casebycase basis in light of the particular
d(# agreement between the parties. Thus, we make no general conclusions here. Similarly, we do
d(#L not believe it necessary, as the Village of Schaumburg suggests, to require open video system
d(# operators to enter into contractual agreements with local authorities for use of the rightsofway.
d(# Management of the rightsofway is a traditional local government function. Local governments
d(#M should be able to manage the rightsofway in their usual fashion without the imposition of
unique requirements for open video service.
X d - G.` ` Information Provided to Subscribers
W 6 < ` ` 1. Background
X -
n 198. ` ` In the Second Report and Order, we stated that an open video system operator is
d(# not relieved of the nondiscrimination provisions of Section 653(b)(1)(E)(i) if it offers a
X -
d(#- navigational device that works only with affiliated programming packages. S MM
{ O y - ԍSecond Report and Order at para.231.S Similarly, we found
d(# that an open video system operator should not be able to evade its nondiscrimination obligations
X - by having its affiliate nominally provide the navigational device, guide or menu. 1 ~ MM
{ O - ԍId.1
X -
199. ` ` On reconsideration, the Joint Telephone Petitioners, TeleTV, and NYNEX contend
d(# that Section 653(b)(1)(E) requires only that open video system operators, and not their affiliates,
d(# be prohibited from discriminating with respect to information provided for the selection of
X ; -
d(# programming. ; MM
y O $ - ԍJoint Telephone Petitioners Petition at 2; TeleTV Petition at 4; NYNEX Petition at 1012. According to the Joint Telephone Petitioners, applying this nondiscrimination
d(# requirement to affiliated programmers effectively makes affiliates the servant of nonaffiliates and " $ U ,-(-(ZZ "
X -
d(# subjects affiliates to substantial cost and competitive disadvantages. Q MM
y O y - ԍJoint Telephone Petitioners Petition at 2Q NYNEX states that the
d(#j application of the requirement to affiliates should be limited to situations in which there is only
X - one navigational device available on the system. B X MM
y O - ԍNYNEX Petition at note 16.B
X -
200. ` ` The Joint Telephone Petitioners, TeleTV, U S West and NYNEX also object to
d(#[ any implication that there will only be a single navigational device provided by the open video
X v -
d(#< system operator or its affiliate. v MM
y O -
d(#: ԍJoint Telephone Petitioners Petition at 23; NYNEX Petition at 12; TeleTV Petition at 34; U S West Petition
at 67. According to the Joint Telephone Petitioners, while consumers
d(#y may only want a single navigational device, the device could be provided by any programming
X H -
d(# provider that has created its own navigational device. R H@ MM
y O 9 - ԍJoint Telephone Petitioners Petition at 3.R TeleTV states that affiliated
d(# programmers will face a distinct disadvantage if they are unable to highlight their own
d(#l programming while unaffiliated programmers are able to offer individualized navigational
X
-
d(#[ devices. >
MM
y O - ԍTeleTV Petition at 6.> The Joint Telephone Petitioners state that "the OVS operator may choose to allow
d(# programmers obtaining carriage on its system to provide such devices by making the necessary
d(# technical information available as part of the information provided in the open enrollment
X -
d(# period." R ` MM
y O - ԍJoint Telephone Petitioners Petition at 3.R Similarly, NYNEX states that it will provide all programming providers with the
d(#? necessary technical specifications for development of independent program guides and
X - navigational devices. =
MM
y O 1 - ԍNYNEX Petition at 12.=
X b -
201. ` ` The Joint Telephone Petitioners assert that if an OVS operator chooses to allow
d(# programming packagers to provide their own navigational devices, the operator should be
d(#. permitted to offer a systemwide menu or guide (electronic or paper) to all subscribers to fulfill
X -
d(#? its obligations under Section 653(b)(1)(E)(i) and (v). R MM
y O N! - ԍJoint Telephone Petitioners Petition at 3.R The guide would provide a non
d(#Z discriminatory listing of all programming providers on the system, along with instructions on how
X -
d(# to subscribe to that provider's programming. 1 MM
{ O $ - ԍId.1 If the menu or guide were electronic, it would
d(#y be part of the mandatory package of PEG and must carry channels that the operator requires as " V ,-(-(ZZ& "
X -
d(# a condition of carriage. 1 MM
{ O y - ԍId.1 Similarly, U S West states that the nondiscrimination requirement
d(# should be satisfied if all programming providers on the system are displayed in a non
d(# discriminatory manner in an introductory guide or menu and all programming is equally
X -
d(# accessible at the initial navigational level, such as a cableready TV set. ? Z MM
y O - ԍU S West Petition at 7.? Sprint states that,
d(# rather than applying the requirement to affiliates, the Commission should instead prohibit
X - operators from providing a navigational device that only works with its affiliate. ? MM
y O (
- ԍSprint Opposition at 6.?
X _ -
202. ` ` In response, the Alliance for Community Media, et al. and MPAA agree with the
d(# Commission's finding that the nondiscrimination provisions of Section 653(b)(1)(E) apply to an
d(#{ open video system's affiliate if the affiliate, and not the operator, provides a navigational
X -
d(#@ device. Y z MM
y O E - ԍAlliance Opposition at 12; MPAA Opposition at 2.Y According to the Alliance for Community Media, et al., applying the non
d(#j discrimination provisions of Section 653(b)(1)(E) only to an operator when its affiliate provides
X
-
d(# the navigational device renders the nondiscrimination provisions meaningless. I
MM
y O - ԍAlliance Opposition at 12.I The Alliance
d(# for Community Media, et al., however, recommend that, because the precise configuration of
d(#x navigational devices is currently unknown, the Commission should state that the rules in this area
X
- will be revisited by the Commission as systems develop. <
MM
{ O - ԍId at 2.<
W y < ` ` 2. Discussion
X K -
203. ` ` On reconsideration, we agree that video programming providers, including those
d(# affiliated with the open video system operator, should be permitted to develop and use their own
d(# navigational devices. We agree with TeleTV and NYNEX that individualized navigational
d(# devices could be a factor in subscribers' choice of programming providers, thereby fostering
d(# innovation and competition among providers. While for technical considerations we will not
d(# require open video system operators to permit programming providers to use their own
d(# navigational devices, we do not believe that the same limitation should be placed on a provider's
d(#= right to develop and use their own individualized guides and menus. We believe that it would
d(#/ be an impermissible term or condition of carriage under Section 653(b)(1) for an open video
d(#> system operator to restrict a video programming provider's ability to use part of its channel
capacity to provide an individualized guide or menu to its subscribers.
X 7 -
} 204. ` ` In light of the above decision, we believe that several safeguards are necessary to " 7 W ,
,-(-(ZZ "
d(#< effectuate congressional intent and protect unaffiliated programming providers. First, we reaffirm
X -
d(# our conclusion in the Second Report and Order that an open video system operator cannot evade
d(#[ its nondiscrimination obligations under Section 653(b)(1)(E) simply by having its navigational
X -
d(# devices, guides, or menus nominally provided by an affiliate. S MM
{ O 6 - ԍSecond Report and Order at para.231.S By this statement, we meant that
d(#- where an open video system operator provides no navigational device, guide or menu of its own,
d(# its affiliate's navigational device, guide or menu will be subject to the requirements of Section
d(# 653(b)(1)(E) even though such services are not formally provided by the open video system
d(# operator. We therefore will continue to apply the nondiscrimination requirements of Section
d(# 653(b)(1)(E) to the open video system operator's affiliate where the affiliate provides a
navigational device, guide or menu and the operator does not.
X
-
205. ` ` Second, if an open video system operator permits video programming providers,
d(#K including its affiliate, to develop and use their own navigational devices, the operator must create
d(#j an electronic menu or guide that all video programming providers must carry containing a non
d(#Z discriminatory listing of programming providers or programming services available on the system.
d(#. These menus or guides should also inform the viewer how to obtain additional information on
d(#K each of the services listed. If an operator provides a systemwide menu or guide that meets these
d(#y requirements, its programming affiliate may create its own menu or guide without being subject
to the requirements of Section 653(b)(1)(E).
X 6 -
206. ` ` Third, an open video system operator may not require programming providers to
d(# develop and/or use their own navigational devices. Not all programming providers will have the
d(# desire or the resources to supply their own navigational devices. This may be especially true of
d(# smaller video programming providers seeking carriage on the open video system. Upon request,
d(#x such programming providers must have access to the navigational device used by the open video
d(# system operator or its affiliate. Thus, for example, an open video system operator may not
d(# require a subscriber of its affiliated programming package to purchase a second settop box in
d(# order to receive service from an unaffiliated programming provider that does not wish to use its
d(# own settop box. An open video system operator need not physically integrate such programming
d(#k providers into its affiliated programming package, or list such programming providers on its
X P -
d(# affiliate's guide or menu, so long as it meets the requirement set forth in the Second Report and
X ; -
d(# Order that no programming service on its navigational device be more difficult to select than any
X & - other programming service. B & Z MM
{ O 1! - ԍId. at para. 23031.B
X - H.` ` Dispute Resolution
W < ` ` 1. Background
X " -
207. ` ` In the Second Report and Order, we adopted procedures for resolving disputes " "X ,-(-(ZZ! "
X -
d(# under Section 653 that are modeled after our rules governing program access disputes. Among
d(# other things, we decided that requiring open video system operators to disclose their carriage
d(# contracts with video programming providers was unnecessary and undesirable. In order to protect
d(#j video programming providers from discrimination, we required open video system operators to
d(# make preliminary rate estimates available to potential video programming providers. In addition,
X -
d(# we made carriage contracts subject to discovery if a complaint was filed. ? MM
{ O - ԍId. at para. 132.? We determined that
d(# discovery will not be permitted as a matter of right, but on a casebycase basis as deemed
X _ - necessary by Commission staff. D _Z MM
{ O j
- ԍId. at paras. 237238.D
X 1 -
o 208. ` ` On reconsideration, the National League of Cities, et al., argue that even where
d(# an unaffiliated programming provider has the financial resources to file a complaint challenging
d(# rates as discriminatory, it must, under the Commission's pleading rules, provide documentary
X
-
d(# evidence or an affidavit describing the differential of which it complains. U
MM
{ O - ԍSee 47 C.F.R. 76.1513(e)(1)(viii).U Yet, under the open
d(# video system carriage pricing rules, open video system operators are not required to disclose their
d(#! carriage arrangements. National League of Cities, et al., argue that these rules place the
d(# unaffiliated programming provider in a "Catch22" situation: it cannot file a discrimination
d(#- complaint without evidence of other parties' rates, but it can get no evidence of others' rates until
X y - it files a complaint, and then can get discovery only at the Commission's discretion. y~ MM
{ O - ԍNational League of Cities, et al. Petition at 2223 (citing 47 C.F.R. 76.1513(i)).ċ
X K -
~ 209. ` ` Similarly, the Alliance for Community Media, et al. argue that the Commission's
d(#> decision not to require the disclosure of carriage contracts between the open video system
d(#! operator and programming providers, whether affiliated or unaffiliated, will significantly
d(#j undermine the Commission's ability to enforce the nondiscriminatory access provisions of the
X -
d(#N 1996 Act. MM
y O - ԍCity of Indianapolis Petition at 3; Alliance for Community Media, et al. Petition at 1315. The Alliance for Community Media, et al. also argue that the Commission's
d(#- decision not to require disclosure of open video system carriage contracts will result in economic
X -
d(# inefficiency because some carriage rates will differ from the most efficient marginal price. k MM
{ O ! - ԍAlliance for Community Media, et al. Petition at 1314.k The
d(#N Alliance for Community Media, et al. urge that the Commission require the filing of such
d(# contracts with the Commission and require that any subsequent unaffiliated programming
d(#Z providers that wishes to obtain carriage be subject to the same price, terms and conditions as any
d(# contract already on file (with any pro rata adjustments and bulk discounts as may be necessary).
d(# At a minimum, the Alliance for Community Media, et al. argue, the Commission should require
d(# that open video system operators provide copies of contracts upon request to unaffiliated " 7 Y 2
,-(-(ZZ "
d(# programmers if negotiations for carriage are unsuccessful. The Alliance for Community Media,
d(#/ et al. suggest that such pre-complaint disclosure will enable aggrieved parties to determine
X - whether their allegations are justified before they approach the Commission with a complaint. ; MM
{ O K - ԍId. at 1415.;
W < ` ` 2. Discussion
X v -
B 210. ` ` We disagree with the Alliance for Community Media, et al. that not mandating
d(#y public disclosure and filing of carriage contracts will result in economic inefficiency. Economic
d(# efficiency is promoted by increased competition. In similar contexts, we have discussed the
X 1 -
d(# economic inefficiencies and disincentives that tariff filings have in competitive markets. : 1Z MM
{ O < -
d(# ԍSee, e.g., Policy and Rules Concerning the Interstate, Interexchange Marketplace, Implementation of Section
{ O
-
d(#, 254(g) of the Communications Act of 1934, as amended in CC Docket No. 9661, Notice of Proposed Rulemaking
d(# (1996), at paras. 2139 (proposing the elimination of nondominant carrier tariff filing requirements for domestic
d(# services, and discussing costs of requiring nondominant common carrier to file tariffs, including removing carriers'
d(# ability to make rapid, efficient responses to changes in demand and cost; impeding and removing incentives for
competitive pricing discounting; and imposing costs on carriers attempting to make new offerings). : Open
d(# video system operators generally will be new entrants into markets that, although characterized
d(# by a degree of competition, have relatively few sellers of channel capacity over which video
d(# programming may be offered to subscribers. In such markets, increased competition is promoted
d(# when sellers of capacity, such as open video system operators, can negotiate contracts privately
d(#y with individual buyers (i.e., video programming providers), and rival sellers cannot immediately
d(#. match the contracts' terms and conditions. Thus, our rules are designed to increase economic
efficiency by promoting competition in video programming carriage markets.
X b -
211. ` ` In addition, we believe that the National League of Cities, et al. raise valid
d(# concerns that wouldbe complainants may lack sufficient information to file a complaint under
d(# our pleading rules. We believe it appropriate to give unaffiliated programming providers seeking
d(# carriage on open video systems some access to other programmer's carriage rates under certain
d(# circumstances. We first reiterate that the complaint process appropriately may be initiated when
d(# the unaffiliated programmer uses the preliminary rate estimates that open video system operators
d(# will be required to make available to potential video programming providers. To ensure that the
d(# open video system operator provides useful information to the wouldbe complainant, we clarify
d(#- that the preliminary rate estimates must include, upon request, all information needed to calculate
d(# the average rate paid by the unaffiliated programmers receiving carriage on the system, including
d(#. the information needed for any weighting of the individual carriage rates that the operator has
X e -
d(# included in the average rate. e MM
y O # -
d(# ԍAs discussed in Section III.D.1. above, the complainant also may challenge the weighting methodology used
y O $ - by the open video system operator as part of its case. This information may be made available subject to a reasonable
d(# nondisclosure agreement. In addition, we reiterate that the operator's carriage contracts may be
X 7 -
d(#\ subject to discovery as part of the complaint procedure. We believe that this approach will " 7 Z .
,-(-(ZZ "
d(# prevent the filing of pleadings whose sole purpose is to seek rate information, while avoiding
X - unnecessary regulatory intervention in the contract negotiation process.
X -
X - I.` ` Joint Marketing, Bundling and Structural Separation
W < ` ` 1. Joint Marketing
V _ - ` ` a.Background
X 1 -
212. ` ` In the Second Report and Order, we declined to impose joint marketing restrictions
d(# on open video system operators, noting that Congress chose not to adopt joint marketing
d(# restrictions in Section 653 even though it specifically applied joint marketing restrictions to other
d(# provisions of the 1996 Act, and restricted joint marketing in some provisions of the 1996 Act
X -
d(# until the introduction of competition in the local telephone market. [ MM
{ O P - ԍSee Second Report and Order at paras. 24647.[ We also noted, however,
d(#j that any entity that offers any telecommunications service will be subject to both the customer
d(# proprietary network information ("CPNI") restrictions set forth in Section 222 of the
d(# Communications Act (and any regulations the Commission establishes pursuant to Section 222),
d(#? and that any provider of cable or open video service will be subject to the cable privacy
X d - restrictions set forth in Section 631. ? dZ MM
{ O o - ԍId. at para. 247.?
X 6 -
213. ` ` On reconsideration, NCTA asserts that, until there is "workable competition for
d(# local telephone service," incumbent LECs stand in a unique position with regard to any other
d(# supplier of telecommunications or information services, since they are frequently the first
X -
d(#i company contacted by new residents in an area in order to start up essential telephone service. ? MM
y O - ԍNCTA Petition at 2122.?
d(#j NCTA argues that the Commission should reconsider its rejection of NCTA's prior proposal to
d(# require incumbent LECs, in the case of inbound marketing, to advise consumers that other video
X -
d(# offerings are available in their area. 1 | MM
{ O - ԍId.1 NCTA further argues that we should not infer from
d(#[ Congress' silence on joint marketing that it intended to foreclose this option, but that it left the
X ~ -
d(# issue to the Commission's discretion. 8 ~ MM
{ O =" - ԍId. at 22.8 In response, Sprint argues that NCTA's motion should
d(# be denied, because it has introduced no new evidence nor presented any persuasive argument that
X P - the Commission erred in its previous decision. ? P MM
y O % - ԍSprint Opposition at 2.?
" 9 [ 0
,-(-(ZZ " Ԍ
V - ` ` b.Discussion
X -
214. ` ` We again decline to adopt NCTA's proposed restriction on joint marketing. While
d(#= we agree that Congress' silence is not determinative, in light of Congress' silence on the issue,
d(# we believe that the burden is on those proposing joint marketing restrictions to demonstrate that
d(#K such restrictions are necessary. NCTA requests that open video system operators be required to
d(# inform incoming callers that other video service providers exist in the area. To justify such a
d(# requirement, NCTA, at a minimum, would have to make some showing that consumers otherwise
d(#= would likely be unaware of the existence of other video service options, such as cable service.
d(#j NCTA made no such showing in its initial comments and has presented no new evidence here.
d(# In the absence of record evidence, the Commission declines to find that consumers would be
d(# unaware of the existence of other video providers such as cable, especially since cable currently
d(# accounts for 91% of multichannel video programming subscribers nationally, and passes 96% of
X - all television households. MM
{ O N -
d(#Y ԍSee Second Competition Report in CS Docket No. 9561, FCC 95491 (released December 11, 1995) at paras.
57. NCTA's petition is denied.
W
< ` ` 2. Bundling
V y - ` ` a.Background
X K -
215. ` ` The Second Report and Order declined to prohibit "bundling," \K" MM
{ O -
d(# ԍSecond Report and Order at para. 248. By "bundling," we stated that we meant the offering of video service
y O -
d(#Y and local exchange service in a single package at a single price, or the situation in which an entity offers one service
{ O - at a discount if the customer purchases another service. Id. but imposed
d(#j certain safeguards to protect consumers. First, the open video system operator, where it is the
d(#y incumbent LEC, may not require that a subscriber purchase its video service in order to receive
d(#[ local exchange service. Second, while the open video system operator may offer subscribers a
d(# discount for purchasing the bundled package, the LEC must impute the unbundled tariff rate for
X - the regulated service. 2 F MM
{ O - ԍId. 2
X -
" 216. ` ` AT&T and NCTA request that the Commission reconsider its decision on bundling.
d(# AT&T argues that until incumbent LECs have met their obligations under Sections 251 and 252
d(# of the 1996 Act, and effective competition for local exchange service has emerged, incumbent
d(# LECs will have the incentive and ability to leverage unfairly their monopoly status into the
X P -
d(#/ emerging video market. e P MM
{ O $ - ԍAT&T Petition at 23. See also NCTA Opposition at 23.e AT&T asserts that incumbent LECs can foreclose their potential
d(# competitors from the local market by "locking in" customers with bundled offers before those " 9 \ j ,-(-(ZZ "
X -
d(#K new entrants have the ability to match those offers with competitive plans of their own. A MM
y O y - ԍAT&T Petition at 3.A AT&T
X -
d(# asserts that this concern is not addressed by the safeguards adopted by the Commission. 7 X MM
{ O - ԍId. at 3.7
d(#j Similarly, NCTA asserts that its concern regarding crosssubsidization is not addressed by the
X - Commission's safeguards. < MM
y O V - ԍNCTA Petition at 22.<
X -
" 217. ` ` In response, Sprint and NYNEX assert that AT&T has presented no new arguments
X v -
d(# or rationale for its position and that its petition should be denied. Y vz MM
y O - ԍSprint Opposition at 4; NYNEX Opposition at 910.Y USTA argues that the one
d(# stop shopping attacked by AT&T in the open video context is of major convenience and benefit
d(#< to consumers, and that the Commission's Part 64 cost allocation rules and the specific safeguards
X 1 - adopted in the Second Report and Order will adequately protect consumers. ? 1
MM
y O - ԍUSTA Opposition at 89.?
V
- ` ` b.Discussion
X -
218. ` ` AT&T and NCTA's concerns were considered and addressed in the Second Report
X -
d(# and Order. They adduce no new evidence here, nor have they explained why the safeguards
d(# adopted by the Commission are inadequate to protect consumers' interests. The petitions for
reconsideration are denied.
X h -
2 219. ` ` On our own motion, we will correct a typographical error in our rule regarding the
d(# bundling of video and local exchange services. The current text provides, in part, that any local
d(# exchange carrier offering a bundled package must impute the unbundled tariff rate for the
X # -
d(# "unregulated service." ? # MM
y O n - ԍ47 C.F.R. 76.1514.? The rule will be corrected to be consistent with the text of the Second
X -
d(# Report and Order, which states that a bundled package must impute the unbundled tariff rate for
X - the "regulated service." S *
MM
{ O - ԍSecond Report and Order at para. 248.S
W < ` ` 3. Structural Separation
V - ` ` a.Background
X o -
4 220. ` ` In the Second Report and Order, we declined to impose a separate affiliate
d(# requirement on LECs providing open video service, concluding that Congress did not intend to " Z] ,-(-(ZZ? "
X -
d(# impose such a requirement. ? MM
{ O y - ԍId. at para. 249.? NCTA and the Alliance for Community Media, et al. request that
X -
d(#j the Commission reconsider that decision. | Z MM
{ O - ԍSee NCTA Petition at 23; Alliance for Community Media, et al. Petition at 24.| NCTA argues the Commission ignored the record
d(#K evidence supporting the need for structural separation to protect against crosssubsidization and
d(# discrimination, and improperly took Congress' silence on the issue as limiting its discretion to
X -
d(# impose such a requirement. > MM
y O A - ԍNCTA Petition at 23. > Similarly, the Alliance for Community Media, et al. asserts that
d(# the absence of a specific separate affiliate requirement in Section 653 does not relieve the
d(# Commission of its general duty to ensure competition and nondiscrimination in the open video
X _ -
d(# context. [
_| MM
y O
- ԍAlliance for Community Media, et al. Petition at 3.[ The Alliance for Community Media, et al. further state that requiring a separate
d(# affiliate "is probably the simplest and most effective way of preventing crosssubsidization and
X 1 -
d(# securing full and fair competition." 7 1 MM
{ O - ԍId. at 4.7 Although the Alliance for Community Media, et al. believe
d(# such a requirement should become a permanent safeguard, they urge the Commission to at least
d(#/ require separate affiliates until an order is adopted in the cost allocation docket, the rules it
X
- approves are tested in the marketplace, and effective cost allocation rules are in place. 1
MM
{ O ; - ԍId.1
X -
221. ` ` In response, Sprint asserts that NCTA's petition advances no new evidence or
X
-
d(# persuasive arguments on this issue that would warrant reconsideration. ?
0
MM
y O - ԍSprint Opposition at 2.? USTA states that the
d(#L Commission correctly concluded that a separate affiliate requirement for open video is without
d(# basis in the 1996 Act, and, if imposed, could "decisively affect" the Commission's balance
X b -
d(#< between a LEC's incentives to provide open video service and its regulatory burdens. @ b MM
y O - ԍUSTA Opposition at 910.@ NYNEX
d(# asserts that the Telephone Joint Petitioners' argument that the Commission has the power to
d(# impose a separate subsidiary requirement misses the mark, and that the Commission should not
X - impose such regulatory constraints and operating inefficiencies without a compelling reason. B P
MM
y O " - ԍNYNEX Opposition at 1011.B
V - ` ` b.Discussion
X -
222. ` ` We deny the motions of NCTA and the Alliance for Community Media, et al. to
X -
d(# reconsider our decision in the Second Report and Order, and accordingly decline to impose a " ^ ,-(-(ZZ "
d(#. separate affiliate requirement. First, while both NCTA and the Alliance for Community Media,
d(#x et al. point out that the Commission need not be restricted by congressional silence, they both fail
X -
d(# to address the point raised in the Second Report and Order that Congress expressly directed in
d(#. Section 653 that Title II requirements not be applied to "the establishment and operation of an
X -
d(# open video system." MM
{ O - ԍSecond Report and Order at para. 249. See Communications Act 653(c)(3), 47 U.S.C. 573(c)(3). In addition, as we stated in the Second Report and Order, we believe that
d(#K the Commission's Part 64 cost allocation rules and any amendment thereto will adequately protect
d(# regulated telephone ratepayers from a misallocation of costs that could lead to excessive telephone
X c -
d(# rates. ? cZ MM
{ O n
- ԍId. at para. 248.? Neither NCTA nor the Alliance for Community Media, et al. has advanced any new
d(# evidence or substantive arguments that a separate affiliate requirement is a necessary additional
d(# safeguard to protect against crosssubsidization. We therefore do not believe that it is necessary,
d(#. as the Alliance for Community Media, et al. suggest, to impose a separate affiliate requirement
X
- until new cost allocation rules are adopted and tested in the marketplace.
X - IV. REGULATORY FLEXIBILITY ACT ANALYSIS
X
-
4 223. ` ` As required by Section 603 of the Regulatory Flexibility Act, 5 U.S.C. 603
X -
d(#\ (RFA), an Initial Regulatory Flexibility Analysis (IRFA) was incorporated in the Report and
X -
d(#= Order and Notice of Proposed Rulemaking ("Notice") in CS Docket No. 9646 and CC Docket
d(# No. 87266 (terminated) (In the Matter of Implementation of Section 302 of the
d(#\ Telecommunications Act of 1996 Open Video Systems), FCC 9699, 61 FR 10496 (3/14/96),
d(# released March 11, 1996. The Commission sought written public comments on the proposals in
X % -
d(# the Notice including comments on the IRFA, and addressed these responses in the Second Report
X -
d(#{ and Order in CS Docket No. 9646 (In the Matter of Implementation of Section 302 of the
d(#\ Telecommunications Act of 1996 Open Video Systems), FCC 96249, 61 FR 28698 (6/5/96),
X -
d(# released June 3, 1996. In addition, in the Order and Notice of Proposed Rulemaking in CS
X -
d(# Docket No. 9685 ("Cable Reform Proceeding"), 11 FCC Rcd 5937 (1996), we sought comment
d(# regarding the definition of "affiliate" in the context of the new statutory provisions governing
X -
d(# open video systems. The Third Report and Order and Second Order on Reconsideration adopts
d(#[ or modifies regulations only to the extent necessary to respond to comments filed with respect
d(#M to the definition of affiliate in the context of the statutory provisions governing open video
X ` -
d(# systems in the Cable Reform Proceeding and to petitions for reconsideration of the Second Report
X K -
d(# and Order. No IRFA was attached to the Second Report and Order because the Second Report
X 6 -
d(#K and Order only adopted final regulations and did not propose regulations. This Final Regulatory
d(# Flexibility Analysis (FRFA) therefore addresses the impact of regulations on small entities only
X
-
d(# as adopted or modified in this Third Report and Order and Second Order on Reconsideration and
d(# not as adopted or modified in earlier stages of this rulemaking proceeding. The FRFA conforms
d(# to the RFA, as amended by the Contract with America Advancement Act of 1996 (CWAAA), " _ ,-(-(ZZ "
X - Pub. L. No. 104121, 110 Stat. 847. MM
y O y -
d(#x ԍSubtitle II of the CWAAA is The Small Business Regulatory Enforcement Fairness Act of 1996 (SBREFA),
{ O A - codified at 5 U.S.C. 610 et seq. (1996).
X -
224. ` ` Need for Action and Objectives of the Rule. The rulemaking implements Section
d(# 302 of the Telecommunications Act of 1996, Pub. L. No. 104104, 110 Stat. 56. Section 302
d(# directs the Commission to promulgate regulations governing the establishment and operation of
X -
d(#L open video systems. : " MM
y O b - ԍ1996 Act 302.: The purposes of this action are to establish a structure for open video
d(# systems that provides competitive benefits, including market entry by new service providers,
d(#k enhanced competition, streamlined regulation, investment in infrastructure and technology,
X J - diversity of video programming choices and increased consumer choice. I J MM
y O
- ԍConference Report at 172, 17778.I
X 3 -
X -
225. ` ` Summary and Assessment of Issues Raised by Petitioners in Response to the IRFA.
X
-
d(# With respect to the Third Report and Order, several parties filed comments in the Cable Reform
X
-
d(# Proceeding and also filed petitions for reconsideration of the Second Report and Order regarding
d(# the definition of the term "affiliate" in the context of the new statutory provisions for open video
d(# systems. These comments and the Commission's report are summarized in Section III, above.
X
-
d(#0 As mentioned, no IRFA was attached to the Second Report and Order. In petitions for
X -
d(# reconsideration of the Second Report and Order, however, some parties raised issues that
X -
d(# generally could involve small entities. For example, local cities urge the Commission to: (1)
d(#\ require that open video system operators obtain approval from local franchising authorities
d(#[ ("LFAs") regarding the manner in which public, educational and governmental ("PEG") access
d(#N obligations will be fulfilled as a precondition of certification; (2) further ensure that local
d(#L governments receive notification of an operator's intent to establish an open video system, by
d(# requiring an operator to serve a copy of FCC Form 1275 on all affected local municipalities; (3)
d(# expand the base of open video system revenues on which gross revenue fees due the cities would
d(#y be applied; and (4) require an open video system operator to match, rather than share, the local
X -
d(#K cable operator's PEG access obligations. As discussed in the Second Order on Reconsideration,
d(# we deny reconsideration of the first and third contentions, and grant reconsideration of the second
d(# and fourth. Other parties, including potentially small business video programming providers, urge
d(# the Commission to: (1) require an open video system operator to place the Notice of Intent in
d(# local newspapers and in telephone bill inserts to enhance the opportunities for nonprofit video
d(#> programming providers to become aware of the establishment of an open video system; (2)
d(# modify its regulations to further guard against an open video system operator's rate discrimination
d(#\ among unaffiliated video programming providers; and (3) modify its regulations to enhance
d(#i programming providers' ability to access information necessary to pursue a rate complaint against
X -
d(#i an open video system operator. As discussed in the Second Order on Reconsideration, we deny
d(# reconsideration on the first two grounds and grant reconsideration on the third. Local television
d(# stations urge the Commission to require that open video system operators tailor the distribution " ` B ,-(-(ZZ "
d(# of mustcarry signals to the parts of their system that are located within a station's local service
d(# area so that stations electing mustcarry status do not have to reimburse the operators for
d(# extensive copyright fees that may result from carriage beyond their local service areas. We grant
reconsideration on this point.
X -
C 226. ` ` The Commission also notes the positive economic impact that the new and
d(#. modified rules will have on many small businesses. For example, the new rules will allow small
d(# businesses that use video programming delivery services to select from a broader range of service
d(#- providers, which could result in significant economic benefits because providers will compete for
d(# customers, which, in turn, should result in improved service at lower prices. In addition, small
d(# business video programming providers will face fewer entry hurdles, and thus will be able to
develop their markets and compete more effectively.
X -
227. ` ` Description and Estimate of the Number of Small Entities Impacted. The RFA
d(# defines the term "small entity" as having the same meaning as the terms "small business," "small
d(#L organization," and "small governmental jurisdiction," and the same meaning as the term "small
X -
d(# business concern" under Section 3 of the Small Business Act." I MM
y O - ԍRFA, 5 U.S.C. 601(3) (1980).I A small concern is one which:
d(# (1) is independently owned and operated; (2) is not dominant in its field of operation; and (3)
X d -
d(# satisfies any additional criteria established by the Small Business Administration (SBA). V dX MM
y O m - ԍSmall Business Act, 15 U.S.C. 632 (1996).V The
X M -
d(# rules we adopt today apply to municipalities , television stations, and business video programming
d(#K providers. The rules also apply to entities that are likely to become open video system operators,
including local exchange carriers and cable systems.
X -
X -
2 228. ` ` Local Exchange Carriers. The rules we adopt or modify in the Second Order on
X -
d(#k Reconsideration may affect local exchange carriers (LECs), as LECs are permitted under the
d(# Telecommunications Act of 1996 to establish open video systems. Neither the Commission nor
d(# SBA has developed a definition of small providers of local exchange services (LECs). The
d(# closest applicable definition under SBA rules is for telephone communications companies other
d(# than radiotelephone (wireless) companies. The most reliable source of information regarding the
d(#l number of LECs nationwide of which we are aware appears to be the data that we collect
d(# annually in connection with the Telecommunications Relay Service (TRS). According to our
d(#z most recent data, 1,347 companies reported that they were engaged in the provision of local
X & -
d(#i exchange services. d ^& MM
{ O " -
d(#= ԍFederal Communications Commission, CCB, Industry Analysis Division, Telecommunications Industry
{ O # -
d(# Revenue: TRS Fund Worksheet Data, Tbl. 21 (Average Total Telecommunications Revenue Reported by Class of
{ O S$ - Carrier) (Feb.1996) (TRS Worksheet). d Although it seems certain that some of these carriers are not independently
d(#j owned and operated, or have more than 1,500 employees, we are unable at this time to estimate
d(# with greater precision the number of LECs that would qualify as small business concerns under
d(# SBA's definition. Consequently, we estimate that there are fewer than 1,347 small incumbent " a ,-(-(ZZ " LECs that may be affected by the decisions and rules adopted in this Order.
X -
p 229. ` ` Cable Systems: Under certain conditions explained in the Second Order on
X -
d(# Reconsideration, cable operators may become open video system operators, and therefore, may
d(# be affected by the rules adopted or modified in this Order. SBA has developed a definition of
d(# small entities for cable and other pay television services, which includes all such companies
d(# generating less than $11 million in revenue annually. This definition includes cable systems
d(# operators, closed circuit television services, direct broadcast satellite services, multipoint
d(#k distribution systems, satellite master antenna systems and subscription television services.
d(# According to the Census Bureau, there were 1,323 such cable and other pay television services
d(# generating less than $11 million in revenue that were in operation for at least one year at the end
X
- of 1992. [
MM
{ O - ԍ1992 Census, supra, at Firm Size1-123.[
X -
230. ` ` The Commission has developed its own definition of a small cable system operator
d(#[ for the purposes of rate regulation. Under the Commission's rules, a "small cable company," is
X
-
d(#< one serving fewer than 400,000 subscribers nationwide. $
Z MM
y O -
d(#Z ԍ47 C.F.R. 76.901(e). The Commission developed this definition based on its determinations that a small
{ O ~ -
d(# cable system operator is one with annual revenues of $100 million or less. Implementation of Sections of the 1992
{ O H -
d(#i Cable Act: Rate Regulation, Sixth Report and Order and Eleventh Order on Reconsideration, 10 FCC Rcd 7393.
Based on our most recent information,
d(#y we estimate that there were 1,439 cable operators that qualified as small cable system operators
X -
d(# at the end of 1995. F MM
{ O v - ԍPaul Kagan Associates, Inc., Cable TV Investor, Feb. 29, 1996 (based on figures for Dec. 30, 1995). Since then, some of those companies may have grown to serve over
d(# 400,000 subscribers, and others may have been involved in transactions that caused them to be
d(# combined with other cable operators. Consequently, we estimate that there are fewer than 1,439
d(# small entity cable system operators that may be affected by the decisions and rules adopted in this
Order.
X -
R 231. ` ` The Communications Act also contains a definition of a small cable system
d(# operator, which is "a cable operator that, directly or through an affiliate, serves in the aggregate
d(#. fewer than 1 percent of all subscribers in the United States and is not affiliated with any entity
X -
d(# or entities whose gross annual revenues in the aggregate exceed $250,000,000." A MM
y O 9! - ԍ47 U.S.C. 543(m)(2).A The
d(#< Commission has determined that there are 61,700,000 subscribers in the United States. Therefore,
d(# we found that an operator serving fewer than 617,000 subscribers shall be deemed a small
d(# operator, if its annual revenues, when combined with the total annual revenues of all of its
X T -
d(# affiliates, do not exceed $250 million in the aggregate. B Th MM
y O m& - ԍ47 C.F.R. 76.1403(b).B Based on available data, we find that " Tb
,-(-(ZZ "
X -
d(# the number of cable operators serving 617,000 subscribers or less totals 1,450. MM
{ O y - ԍPaul Kagan Associates, Inc., Cable TV Investor, Feb. 29, 1996 (based on figures for Dec. 30, 1995). Although it
seems certain that some of
d(# these cable system operators are affiliated with entities whose gross annual revenues exceed
d(# $250,000,000, we are unable at this time to estimate with greater precision the number of cable
d(#! system operators that would qualify as small cable operators under the definition in the
Communications Act.
X _ -
232. ` ` Municipalities: The term "small governmental jurisdiction" is defined as
X J -
d(# "governments of . . . districts, with a population of less than fifty thousand." = JZ MM
y O U - ԍ5 U.S.C. 601(5).= There are 85,006
X 3 -
d(#k governmental entities in the United States. 3 MM
{ O
- ԍUnited States Dept. of Commerce, Bureau of the Census, 1992 Census of Governments. This number includes such entities as states,
d(# counties, cities, utility districts and school districts. We note that any official actions with respect
d(#- to open video systems will typically be undertaken by LFAs, which primarily consist of counties,
d(# cities and towns. Of the 85,006 governmental entities, 38,978 are counties, cities and towns. The
d(# remainder are primarily utility districts, school districts, and states, which typically are not LFAs.
d(#[ Of the 38,978 counties, cities and towns, 37,566 or 96%, have populations of fewer than 50,000.
d(#\ Thus, approximately 37,500 "small governmental jurisdictions" may be affected by the rules
X - adopted in this Third Report and Order and Second Order on Reconsideration.
X f -
233. ` ` Television Stations: The SBA defines small television broadcasting stations as
d(#N television broadcasting stations with $10.5 million or less in annual receipts. 13 C.F.R.
121.201.
X -
234. ` ` Estimates Based on Census and BIA Data. According to the Census Bureau, in
d(#L 1992, there were 1,155 out of 1,478 operating television stations reported revenues of less than
d(# $10 million for 1992. This represents 78% of all television stations, including noncommercial
X -
d(# stations. See 1992 Census of Transportation, Communications, and Utilities, Establishment and
X -
d(# Firm Size, May 1995, at 125. The Census Bureau does not separate the revenue data by
d(# commercial and noncommercial stations in this report. Neither does it allow us to determine the
d(#. number of stations with a maximum of 10.5 million dollars in annual receipts. Census data also
d(# indicates that 81 percent of operating firms (that owned at least one television station) had
X Z - revenues of less than 10 million dollars. Z| MM
y O " -
d(# ԍAlternative data supplied by the U.S. Small Business Administration Office of Advocacy indicate that 65
d(#w percent of TV owners (627 of 967) have less than $10 million in annual revenue and that 39 percent of TV stations
d(# (627 of 1,591) have less than $10 million in annual revenue. These data were prepared by the U.S. Census bureau
d(# under contract to the Small Business Administration. These data show a lower percentage of small businesses than
d(#< the data supplied directly to us by the Census Bureau. Therefore, for purposes of our worst case analysis, we will
use the data supplied directly to us by the Census Bureau.
" C c
,-(-(ZZ " Ԍ
X -
_ 235. ` ` We have also performed a separate study based on the data contained in the BIA
d(# Publications, Inc. Master Access Television Analyzer Database, which lists a total of 1,141 full
X -
d(# power commercial television stations. V ! MM
y O K -
d(#J ԍWe have excluded Low Power Television (LPTV) stations or translator stations from the calculations because
d(#Z such stations could be affected by our open video system mustcarry and retransmission consent regulations only
d(#, under extremely limited circumstances. As of May 31, 1996, there were 1,880 LPTV stations and 4,885 television
{ O -
d(# translators in the United States. FCC News Release, Broadcast Station Totals as of May 31, 1996, Mimeo No.
63298, released June 6, 1996.V It should be noted that, using the SBA definition of
d(# small business concern, the percentage figures derived from the BIA data base may be
d(#{ underinclusive because the data base does not list revenue estimates for noncommercial
d(#= educational stations, and these are therefore excluded from our calculations based on the data
X v -
d(# base. a " Xvz MM
y O -
d(#h ԍIn the Joint Comments of the Association of America's Public Television Stations and the Public Broadcasting
d(#; Service (p. 6), it is reported that there are 38 public televisions stations (out of 197 public television licensees) with
annual operating budgets of less than $2 million.a The BIA data indicate that, based on 1995 revenue estimates, 440 fullpower commercial
d(#. television stations had an estimated revenue of 10.5 million dollars or less. That represents 54
d(# percent of commercial television stations with revenue estimates listed in the BIA program. The
d(#- data base does not list estimated revenues for 331 stations. Using a worst case scenario, if those
d(#j 331 stations for which no revenue is listed are counted as small stations, there would be a total
d(#" of 771 stations with an estimated revenue of 10.5 million dollars or less, representing
approximately 68 percent of the 1,141 commercial television stations listed in the BIA data base.
X -
236. ` ` Alternatively, if we look at owners of commercial television stations as listed in
d(# the BIA data base, there are a total of 488 owners. The data base lists estimated revenues for
d(# 60 percent of these owners, or 295. Of these 295 owners, 156 or 53 percent had annual revenues
d(# of less than 10.5 million. Using a worst case scenario, if the 193 owners for which revenue is
d(# not listed are assumed to be small, the total of small entities would constitute 72 percent of
owners.
X -
237. ` ` In summary, based on the foregoing worst case analysis using census data, we
d(# estimate that our rules will apply to as many as 1,150 commercial and noncommercial television
d(# stations (78 percent of all stations) that could be classified as small entities. Using a worst case
d(# analysis based on the data in the BIA data base, we estimate that as many as approximately 771
d(# commercial television stations (about 68 percent of all commercial televisions stations) could be
d(# classified as small entities. As we noted above, these estimates are based on a definition that we
d(# tentatively believe greatly overstates the number of television broadcasters that are small
d(# businesses. Further, it should be noted that under the SBA's definitions, revenues of affiliates
d(# that are not television stations should be aggregated with the television station revenues in
d(# determining whether a concern is small. The estimates overstate the number of small entities
d(# since the revenue figures on which they are based do not include or aggregate such revenues from
nontelevision affiliated companies.
" d " ,-(-(ZZ= " Ԍ
X -
238. ` ` Video Programming Providers: Open video systems are an entirely new
d(# framework for delivering video programming to consumers. No open video systems have yet
d(# been certified to operate. Therefore, it is not possible at this time to estimate the size or number
d(# of video programming providers that may seek capacity on open video systems. We anticipate
d(#\ that two types of video programming providers may arise: (1) video programming providers
d(# seeking to utilize an open video system to offer a package of individual programming services
d(# via open video systems to subscribers; and (2) providers seeking to offer only one programming
d(#{ service. It is not possible to estimate the impact on or the number of video programming
d(# providers in the first category because no such entities exist. With respect to the second category,
d(# however, we believe that small cable programming services may provide a reasonable substitute.
d(# The Census Bureau category most similar to cable programming services is "motion picture and
X
-
d(#= video tape production." See SIC Code 7812. Under this category, entities with less than $21.5
d(# million in annual receipts are defined as small motion picture and video tape production entities.
d(# 13 C.F.R. 121.201. There are a total of 7,265 motion picture and video tape production
d(# entities; of those, 7,002 have annual receipts of less than $24.5 million. The figures are not
d(# broken down further. Thus, we estimate that approximately 7,000 small cable programming
d(# services, or video programming providers, may be affected by the rules adopted in this Order.
d(#j In addition, we note that the Census Bureau data does not reflect a likely significant number of
d(# small, independent motion picture and video tape production companies. Such companies may
d(# seek to become video programming providers on open video systems, although it is not possible
d(# at this time to estimate this number because no publicly available data is available that is specific
d(#{ to such entities. We therefore estimate that a minimum of 7,000 small cable programming
services, or video programming providers, may be affected by this rule.
X -
A 239. ` ` Reporting, Recordkeeping and Other Compliance Requirements. The following
d(#| addresses the requirements of regulations adopted, amended, modified or clarified on
X - reconsideration in the Third Report and Order and Second Order on Reconsideration.
X -
` ` 1. Affiliate. In the Third Report and Order, the Commission adopts a definition
d(# of "affiliate" that will impact open video system operators and their affiliates, including open
d(#y video system operators that are small entities. A primary effect of this rule concerns situations
d(#Z where demand for carriage exceeds the open video system's channel capacity. In such situations,
d(#0 the open video system operator and its affiliates are prohibited from selecting the video
d(#[ programming services for carriage on more than onethird of the activated channel capacity on
X - its system. E # MM
{ O u! - ԍSee Section II., above.E
X -
` ` 2. Certification. We revise FCC Form 1275 to require that applicants to become
d(#Z open video system operators, including applicants that are small businesses, list the names of the
X " -
d(#[ local communities in which they intend to operate. H $ "Z MM
{ O & - ԍSee Section III.B., above.H An applicant will have already identified " "e $ ,-(-(ZZ! "
d(#> the local communities in which it intends to operate prior to preparing the form. Listing the
d(#= names of the communities will neither require any specialized skills nor impose significant new
burdens.
X -
` ` 3. Service of FCC Form 1275. We modify our regulations to require that an open
d(# video system applicant, including those that are small entities, serve a copy of its FCC Form 1275
X x -
d(# on all affected local communities on or before the date it is filed with the Commission. H % x MM
{ O - ԍSee Section III.B., above.H An
d(#z applicant will have already prepared the form for submission to the Commission. Therefore,
merely serving the form on all affected local communities will not require any specialized skills.
X -
# ` ` 4. Ad Avails. We modify our regulations to require that advertising availabilities
d(#\ ("ad avails") associated with a programming service carried by both the open video system
d(# operator or its affiliated video programming provider and an unaffiliated provider must be shared
X -
d(# in an equitable manner. H & Z MM
{ O - ԍSee Section III.C., above.H This may impose burdens on open video system operators, including
d(# those that are small entities, because an operator must now share the revenues or other benefits
d(#k of such ad avails with unaffiliated entities, rather than keeping all such revenues. In certain
d(#. instances, this approach may impose burdens on video programming providers that may have
d(# been able to keep all such revenues. We find that implementing this approach requires no
specialized skills.
X 8 -
` ` 5. Gross Revenues Fee. We modify our regulations to permit an open video
d(#j system operator to recover the gross revenues fee from all video programming providers using
X -
d(# the platform on a proportional basis as an element of the carriage rate. H ' MM
{ O - ԍSee Section III.E., above.H This approach may
d(# impose additional burdens on video programming providers, including those that are small
d(#j entities, because the carriage rate may be increased to reflect the open video system operator's
gross revenues fees. We find that implementing this approach requires no specialized skills.
X -
` ` 6. Matching of PEG Access Obligations. We modify our regulations to require
d(# open video system operators, in the absence of a negotiated agreement, to match, rather than
d(#i share, all public, educational and governmental ("PEG") access financial contributions of the local
X V -
d(#K cable operator. H ( V~ MM
{ O " - ԍSee Section III.F., above.H This matching requirement could result in additional financial burdens on open
d(#> video system operators, including those that are small entities, because matching the cable
d(# operator's PEG access financial contributions will be more costly in many situations than merely
d(# sharing the cable operator's contributions towards PEG access services, facilities and equipment,
d(# as permitted under the previous approach. We find that implementing this approach requires no
specialized skills. " f ( ,-(-(ZZ; " Ԍ
X -
ԙ ` ` 7. LFA Election. We modify our regulations so that, in areas where a cable
d(#j franchise previously existed, such as where a cable operator is able to convert its cable system
d(# to an open video system, the local franchise authority will be permitted, absent a negotiated
d(# agreement, to elect either: (1) to maintain the previously existing PEG access requirements; or
d(# (2) to have the open video system operator's PEG access obligations determined by comparison
d(# to the nearest operating cable system that has a commitment to provide PEG access and that
d(# serves a franchise area with a similar population size. Every 15 years thereafter, the LFA is
X a -
d(# permitted to make a similar election. @ ) a MM
{ O - ԍSee Section III.F.@ This requirement could impose new burdens on open
d(#- video system operators, including those that are small entities, because an operator's PEG access
d(#= obligations may be increased when compared to the nearest operating cable system that has a
d(# commitment to provide PEG access and that serves a franchise area with a similar population
d(#- size. In addition, these obligations may be subject to increases every 15 years, rather than frozen
in perpetuity.
X -
n ` ` 8. MustCarry/Retransmission Consent Election. The order requires a broadcast
d(#l station to make the same election for open video systems and cable systems in the same
d(# geographic area, unless the overlapping open video system is unable to deliver appropriate signals
d(# in conformance with the broadcast station's elections for all cable systems serving the same
d(#/ geographic area. We estimate that this requirement will have an impact on some broadcast
d(#= stations. We anticipate that this requirement will not require any more professional skills than
are required to make such elections and notify operators in the context of cable systems.
X
-
` ` 9. MustCarry Copyright. The order requires an open video system operator to
d(# pay for any additional copyright fees incurred as a result of carrying a local signal outside of its
X -
d(#M local service area. I * Z MM
{ O - ԍSee Section III.F.2, above.I We estimate that this requirement may affect a limited number of large
d(# open video system operators. We anticipate that distribution of signals outside of a local market
d(# will most likely occur on large systems that overlap several markets. We also anticipate that
d(# many open video systems will have the ability to limit distribution of signals to local markets.
d(# If additional copyright fees are incurred by an open video system operator, we do not anticipate
d(#[ that the operator will have to use any professional skills beyond those already used to comply
with the copyright rules.
X & -
" ` ` 10. Sports Exclusivity. The order holds an open video system operator responsible
X -
d(#= for any violation of our sports exclusivity rules. I + MM
{ O # - ԍSee Section III.F.4, above.I We estimate that this requirement will have
d(# an impact on open video system operators and programmers. We do not anticipate that this rule
d(#L will require the use of any additional professional skills beyond the skills normally required for
a programmer to assess the validity of exclusive rights to sports programming.
" !g ~ + ,-(-(ZZ " Ԍ
X -
` ` 11. Navigational Devices. In this Order, we allow open video system operators
d(#[ to permit programming providers, including those affiliated with the open video system, to use
X -
d(# their own navigational devices, subject to certain conditions. H , MM
{ O M - ԍSee Section III.G., above.H If the open video system operator
d(# permits programming providers to use their own navigational devices, the open video system
d(#[ operator must provide a nondiscriminatory guide or menu that all programming providers must
d(#z carry, showing all programming available on the systems. We estimate that the requirement
d(#L could result in additional burdens on open video system operators including small open video
system operators. We find that implementing this approach requires no specialized skills.
X 3 -
_ ` ` 12. Dispute Resolution. We clarify our regulations to require that the preliminary
d(# rate estimate provided by an open video system operator to video programming providers must
d(#. include, upon request, all information needed to calculate the average rate paid by unaffiliated
d(#= programming providers receiving carriage on the system, including the information needed for
X -
d(#i any weighting of the individual carriage rates that the operator has included in the average rate. H - Z MM
{ O - ԍSee Section III.H., above.H
d(#- This clarification may impose new burdens on open video system operators, including those that
d(# are small entities, because an open video system operator may have to prepare this information
d(# earlier than under the previous approach. This will occur because an operator must now provide
d(#= a video programming provider with the information upon request, rather than after a complaint
d(# is filed. On the other hand, an open video system operator is likely to have prepared such
d(# information in order to determine carriage rates to be charged. In such situations, the rule
d(# clarification may not impose significant new burdens because an open video system operator
d(#. merely will have to provide a video programming provider with existing material, which should
not require any specialized skills.
X -
_ 240. ` ` Steps Taken to Minimize the Significant Economic Impact on Small Entities and
X -
d(#> Significant Alternatives Rejected. This section analyzes the impact on small entities in the
X -
d(#j contexts of regulations adopted, amended, modified or clarified in this Third Report and Order
X - and Second Order on Reconsideration.
X q -
` ` 1. Affiliate. In the Third Report and Order and Second Order on Reconsideration
X \ -
d(# with respect to the definition of affiliate, we adopt the attribution standard that applies in the
d(# cable program access context. The factual, legal and policy reasons are set forth in Section II,
d(# above. The definition of affiliate we adopt will create opportunities for unaffiliated programmers,
d(# many of which may be small entities, by promoting diversity of video programming sources, and
d(# is intended to reduce the likelihood that open video system operators will discriminate against or
d(# otherwise disfavor unaffiliated programming providers, including small unaffiliated programmers.
d(# In addition, by adopting consistent standards, we reduce the burdens associated with determining
d(#[ whether a video programming provider will be considered an affiliate of the open video system
d(# operator for one purpose but not for the other. We rejected several alternatives to this definition " "h - ,-(-(ZZ! " of affiliate, as described in Section II, above.
X -
` ` 2. Certification. Requiring applicants to list the names of all local communities
d(# in which they intend to operate will not impose significant new burdens on applicants for the
d(# reasons stated above and will reduce burdens on the affected local communities, including those
d(# that are small entities. This approach will also reduce the burdens on open video system
d(#= operators by reducing the potential for confusion over which local communities will be served
by the open video system.
X 3 -
` ` 3. Service of FCC Form 1275. Requiring service of FCC Form 1275 on local
d(# communities, as described above, will impose only minimal new burdens on open video system
d(# operators, including those that are small entities. These burdens are outweighed by the benefits
d(# to local communities, such as ensuring that a local community without ready access to the
d(# Internet or the Commission's Public Notices will be made aware of the applicant's filing. The
d(# factual, legal and policy reasons are described in Section III.B. This approach will reduce
d(#M burdens on local communities by enhancing their ability to become aware of an open video
d(#> system's establishment. This approach will also reduce the burdens on open video system
d(#= operators by reducing the potential for confusion over which local communities will be served
d(# by the open video system. The primary significant alternative is not requiring such service, but
d(# as stated, we find that the benefits to local communities outweigh any minimal burdens of
complying with this rule.
X
-
` ` 4. Ad Avails. Requiring that advertising availabilities ("ad avails") associated with
d(# a programming service carried by both the open video system operator or its affiliated video
d(# programming provider and an unaffiliated provider be shared in an equitable manner may impose
d(# burdens on open video system operators, including those that are small entities. Such burdens
d(# are described in the preceeding section of this FRFA. However, we find these burdens are
d(# outweighed by the benefits of this requirement, which include providing unaffiliated video
d(#< programming providers with an equitable share of income from ad avails and preventing the open
d(# video system operator or its affiliate from having a significant financial advantage over
X T -
d(# unaffiliated video programming providers. H . T MM
{ O - ԍSee Section III.C., above.H The factual, legal and policy reasons are described
d(#- in Section III.C. We reduce the burdens on open video system operators by specifying examples
d(# of acceptable methods of sharing ad avails, including apportioning the relevant revenues or
d(# apportioning the rights to sell the avails themselves. The primary significant alternative is
d(# maintaining our current rules which do not require such sharing; however, as stated, we find that
d(#i the benefits to unaffiliated video programming providers outweigh the burdens of complying with
this rule.
X " -
` ` 5. Gross Revenues Fee. Modifying our rules to permit an open video system
d(#/ operator to recover the gross revenues fee from all video programming providers using the
d(#< platform on a proportional basis as an element of the carriage rate may impose additional burdens " p$i Z . ,-(-(ZZF# "
d(# on video programming providers, including those that are small entities. However, we find that
d(# these burdens, as described above, are outweighed by the benefits to open video system operators
d(# and are in the interests of competition. Permitting this recoupment of the gross revenues fee
d(# should promote competition on the platform among video programming providers by not
d(#. disadvantaging any particular video programming provider with respect to the payment of the
d(# gross revenues fee. The factual, legal and policy reasons for this approach are described above
d(#! in Section III.E. This approach will reduce burdens on open video system operators by
d(#[ permitting them to recoup a proportion of these costs from video programming providers. The
d(# primary significant alternative we rejected is maintaining our current regulations which may have
d(#> permitted unaffiliated video programming providers to avoid paying any share of the gross
d(#> revenues fee; however, as stated, we find that the benefits to open video system operators
outweigh the burdens of this approach on video programming providers.
X -
~ ` ` 6. PEG Access Obligations. Requiring open video system operators to match,
d(#Z rather than share, all public, educational and governmental ("PEG") access financial contributions
d(#- of the local cable operator may impose burdens on open video system operators, including those
d(# that are small entities. These burdens are described in the preceeding section of this FRFA. We
d(# find that these burdens are outweighed by the benefits of this revised approach. The factual,
d(# policy and legal reasons for this approach are described in Section III.F. We believe that this
d(# approach may reduce burdens on open video system operators by providing further certainty as
d(#{ to their PEG access financial obligations. Significant alternatives we rejected include: (1)
d(#M maintaining our current rules which permit an open video system operator to share the PEG
d(# access contributions; (2) requiring an open video system operator to match precisely any inkind
d(# contributions (e.g., cameras); and (3) not requiring open video system operators to share the costs
X -
d(# of services, facilities or equipment for PEG access. 1 / MM
{ O S - ԍId.1 Generally, we rejected the first alternative
d(# because we find that the matching principle more accurately fulfills the 1996 Act's mandate to
d(#L impose PEG access obligations on open video system operators that are "no greater or lesser"
d(# than those imposed on cable operators. We rejected the second because we find that precise
d(#M duplication would often be unnecessary, wasteful and inappropriate. We rejected the third
d(# alternative because we believe that providing support for PEG access services, facilities and
d(# equipment is a part of the open video system operator's PEG obligation under Section 611 of the
X 9 - Communications Act. 1 0 9 Z MM
{ O D - ԍId.1
X -
R ` ` 7. LFA Election. Modifying a local franchise authority's ability to make an
d(# election concerning the PEG access obligations of an open video system operator, as described
d(#= in the preceeding section of this FRFA, may impose additional burdens on open video system
d(# operators, including those that are small entities. These burdens are described above. However,
d(# we find that these burdens are outweighed by the benefits of this approach, which include
d(# preventing PEG access obligations from being frozen in perpetuity, thereby providing significant " "j 0 ,-(-(ZZ! "
d(# benefits to local franchise areas and communities. The factual, policy and legal reasons for this
d(#M approach are described above in Section III.F. This approach may reduce burdens on local
d(#y communities by permitting them to negotiate with open video system operators with respect to
d(# PEG access obligations, and on open video system operators by providing them certainty as to
d(#. their PEG access obligations for a period of up to 15 years. The primary significant alternative
d(# we rejected is maintaining our current regulations which do not permit local franchise areas to
X v -
d(# make this election; 1 1 v MM
{ O - ԍId.1 however, as stated, we find that the benefits to local communities outweigh
the burdens of this approach on open video system operators.
X 1 -
` ` 8. MustCarry/Retransmission Consent Election. The rule which requires a
d(# broadcast station to make the same election for open video systems and cable systems in the same
d(# geographic area, unless the overlapping open video system is unable to deliver appropriate signals
d(# in conformance with the broadcast station's elections for all cable systems serving the same
d(#> geographic area, may impose a burden on broadcast stations. The policy, factual and legal
d(# reasons for adopting this final rule are set forth in Section III.F.2.b. of this Order. The rule
X
-
d(#= adopted in the Second Report and Order did not require a broadcast station to make the same
d(# election for open video and cable systems serving the same geographic area. The rule adopted
d(#/ in this order promotes parity between open video system operators and cable operators, in
d(# accordance with Section 653 of the Communications Act, and may reduce burdens on both open
d(# video system operators and television stations by providing further certainty with respect to the
mustcarry status of television stations.
X
-
` ` 9. MustCarry Copyright. The rule which requires an open video system operator
d(# to pay for any additional copyright fees incurred as a result of carrying a local station beyond its
d(#l local market area may impose a burden on open video system operators. It has not been
d(# necessary to take significant steps to minimize the burden on small open video system operators
d(#N because we do not believe that this rule is likely to affect many open video systems and
d(# especially not smaller open video systems, because it will only apply to open video systems
d(# capable of carrying broadcast signals beyond their local service areas. The factual policies and
d(#= legal reasons for adopting this final rule are set forth in Section III.F.2.b. Any burden on open
d(# video system operators is outweighed by the benefit to broadcast stations, especially small stations
d(# that might not be able to elect mustcarry status if they were subject to copyright fees in distant
markets.
X -
` ` 10. Sports Exclusivity. The rule which holds an open video system operator
d(# responsible for any violation of our sports exclusivity rules may impose a burden on open video
d(# system operators. This burden is justified by the interest in protecting exclusive rights to sports
d(#L programming. The factual policies and legal reasons for adopting this final rule are set forth in
X " -
d(# Section III.F.4.b. The rule adopted in the Second Report and Order, did not hold an open video
d(# system operator responsible for a violation of the sports exclusivity rules if the operator took
d(# prompt steps to delete the programming once it was notified of a violation. The rule adopted in " r$k Z 1 ,-(-(ZZF# "
d(#{ this order applies our sports exclusivity rules to open video systems more fairly than the
Commission's previous rule for the reasons cited in Section III.F.4.b.
X -
` ` 11. Navigational Devices. Allowing open video system operators to permit
d(#= programming providers, including those affiliated with the open video system operator, to use
d(#k their own navigational devices subject to certain conditions may impact open video system
d(# operators and their affiliates, including those that are small entities. If an operator permits
d(# programming providers, including its affiliate, to develop their own navigational devices, the
d(#> operator must create an electronic menu or guide containing a nondiscriminatory listing of
d(#< programming providers or programming services available on the system that every programming
d(#Z provider must carry. If an operator creates a systemwide nondiscriminatory menu or guide, then
d(# its programming affiliate may create its own menu or guide without being subject to the non
d(# discrimination requirements of Section 653(b)(1)(E). The factual and policy reasons for adopting
d(#[ the final rule are found in Section III.G., above. We believe that this rule minimizes burdens on
d(#! open video system operators and their programming affiliates, by allowing the affiliated
d(#K programmers the flexibility to develop and use their own navigational devices, guides and menus.
` ` However, under the rule adopted, programming providers cannot be required to
d(#z use their own navigational devices. Such providers must, upon request, have access to the
d(# navigational device used by the open video system operator or its affiliate. As is explained in
d(#j Section III.G., above, not all programming providers will have the desire or resources to supply
d(# their own navigational devices. This may be especially true of smaller video programming
d(# providers seeking carriage on the open video system. This requirement can help minimize
d(# burdens on small programming providers by allowing them access to the navigational device used
by the open video system operator or its affiliate.
X -
2 ` ` 12. Dispute Resolution. Requiring that the preliminary rate estimate provided by
d(# an open video system operator to video programming providers include, upon request, all
d(# information needed to calculate the average rate paid by unaffiliated programming providers
d(#k receiving carriage on the system, including the information needed for any weighting of the
d(# individual carriage rates that the operator has included in the average rate, may impose burdens
d(# on open video system operator, including those that are small entities. These burdens are
d(#k described in the preceeding section of this FRFA. However, we find that these burdens are
d(# outweighed by the benefits of this clarification, which include providing an unaffiliated video
d(# programming provider with relevant information regarding whether to pursue a rate complaint
d(# against an open video system operator. The factual, policy and legal reasons are described above
d(# in Section III.H. The primary significant alternative rejected by the Commission is to maintain
d(#= our current rules which do not require a system operator's provision of such information upon
d(# request but only in formal discovery; however, as stated, we find that the benefits to unaffiliated
video programming providers outweigh the burdens of complying with this rule.
X >& -
_ 241. ` ` Report to Congress. The Commission shall send a copy of this FRFA, along with
X )' -
d(# this Third Report and Order and Second Order on Reconsideration, in a report to Congress " )'l 1 ,-(-(ZZ% "
d(#L pursuant to the SBREFA, 5 U.S.C. 801(a)910(A). A copy of this FRFA will also be published
in the Federal Register.
X - V. PAPERWORK REDUCTION ACT OF 1995 ANALYSIS
X -
242. ` ` The requirements adopted in the Third Report and Order and Second Order on
X x -
d(# Reconsideration have been analyzed with respect to the Paperwork Reduction Act of 1995 (the
d(# "1995 Act") and found to impose new or modified information collection requirements on the
d(# public. Implementation of any new or modified requirement will be subject to approval by the
d(#. Office of Management and Budget ("OMB") as prescribed by the 1995 Act. The Commission,
d(# as part of its continuing effort to reduce paperwork burdens, invites the general public and OMB
X
-
d(#- to comment on the information collections contained in this Third Report and Order and Second
X
-
d(# Order on Reconsideration as required by the 1995 Act. < 2
MM
y O k
- ԍPub. L. No. 10413. < OMB comments are due 60 days from
X -
d(# date of publication of this Third Report and Order and Second Order on Reconsideration in the
d(# Federal Register. Comments should address: (1) whether the proposed collection of information
d(#y is necessary for the proper performance of the functions of the Commission, including whether
d(#! the information shall have practical utility; (2) the accuracy of the Commission's burden
d(#= estimates; (3) ways to enhance the quality, utility, and clarity of the information collected; and
d(#. (4) ways to minimize the burden of the collection of information on the respondents, including
the use of automated collection techniques or other forms of information technology.
X ' -
3 243. ` ` Written comments by the public on the proposed and/or modified information
X -
d(# collections are due on or before 30 days after publication of the Third Report and Order and
X -
d(#- Second Order on Reconsideration in the Federal Register. Written comments must be submitted
d(#y by the Office of Management and Budget (OMB) on the proposed and/or modified information
X -
d(# collections on or before 60 days after publication of the Third Report and Order and Second
X -
d(# Order on Reconsideration in the Federal Register. A copy of any comments on the information
d(# collections contained herein should be submitted to Dorothy Conway, Federal Communications
d(# Commission, Room 234, 1919 M Street, N.W., Washington, DC 20554, or via the Internet to
d(#> dconway@fcc.gov and to Timothy Fain, OMB Desk Officer, 10236, NEOB, 725 17th Street,
d(# N.W., Washington, DC 20503 or via the Internet to fain_t@al.eop.gov. For additional
X I -
d(# information concerning the information collections contained herein contact Dorothy Conway at
2024180217, or via the Internet at dconway@fcc.gov.
X - VI. ORDERING CLAUSES
X -
244. ` ` Accordingly, IT IS ORDERED that, pursuant to Sections 4(i), 4(j), 303(r), and 653
d(# of the Communications Act of 1934, as amended, 47 U.S.C. 154(i), 154(j), 303(r), and 573
X " -
d(#- the rules, requirements and policies discussed in this Third Report and Order and Second Order
X # -
d(#. on Reconsideration ARE ADOPTED and Sections 76.1000 and 76.1500 through 76.1515 of the
X ~$ -
d(#M Commission's rules, 47 C.F.R. 76.1000 and 76.1500 through 1515, ARE AMENDED as set " ~$m X 2 ,-(-(ZZF# "
X - forth below.
X -
$ 245. ` ` IT IS FURTHER ORDERED that, pursuant to Sections 4(i), 4(j), 303(r), and 653
X -
d(# of the Communications Act of 1934, as amended, 47 U.S.C. 154(i), 154(j), 303(r), and 573
d(# the rules, the Petitions for Reconsideration set forth in Appendix A are GRANTED IN PART and
DENIED IN PART, as provided herein.
X _ -
246. ` ` IT IS FURTHER ORDERED that the requirements and regulations established in
d(# this decision shall become effective upon approval by OMB of the new information collection
requirements adopted herein, but no sooner than 60 days after publication in the Federal Register.
X
-
247. ` ` IT IS FURTHER ORDERED that the Motion to Accept LateFiled Opposition
filed by the Telephone Joint Petitioners is HEREBY GRANTED.
X -
248. ` ` IT IS FURTHER ORDERED that the Secretary shall send a copy of this Third
X
-
d(# Report and Order and Second Order on Reconsideration including the Final Regulatory
X -
d(# Flexibility Analysis, to the Chief Counsel for Advocacy of the Small Business Administration in
d(#= accordance with paragraph 603(a) of the Regulatory Flexibility Act, Pub. L. No. 96354, 94 Stat.
X f - 1164, 5 U.S.C. 601 et seq. (1981).
` ` hhCFEDERAL COMMUNICATIONS COMMISSION
` `
` ` hhCWilliam F. Caton
X - ` ` hhCActing Secretary " n 2 ,-(-(ZZ "
X -
o
` hp X4` hp x (#%'0*,.8135@8: system is unable to deliver appropriate signals in conformance with the broadcast station's
elections for all cable systems serving the same geographic area.
***
rr~ (m)***
rr~ (2) Notification of programming to be deleted pursuant to this section shall be
b*! rr~ served on the open video system operator. The open video system operator shall make all
b*! notifications immediately available to the appropriate video programming providers on its
b*!m open video system. Operators may effect the deletion of signals for which they have
b*! received deletion notices unless they receive notice within a reasonable time from the
b*! appropriate programming provider that the rights claimed are invalid. The open video
b*! system operator shall not delete signals for which it has received notice from the
b*! programming provider that the rights claimed are invalid. An open video system operator
b*!@ shall be subject to sanctions for any violation of these rules. An open video system
b*!! operator may require indemnification as a condition of carriage for any sanctions it may
b*!? incur in reliance on a programmer's claim that certain exclusive or nonduplication rights
are invalid.(#r
***
X N - rr~ 8. Section76.1511 is amended to read as follows:
b*! rr~ An open video system operator may be subject to the payment of fees on the gross revenues
d(#i of the operator for the provision of cable service imposed by a local franchising authority or other
d(# governmental entity, in lieu of the franchise fees permitted under Section 622 of the
d(# Communications Act. Local governments shall have the authority to assess and receive the gross
d(#< revenue fee. Gross revenues under this paragraph means all gross revenues received by an open
d(#. video system operator or its affiliates, including all revenues received from subscribers and all
d(# carriage revenues received from unaffiliated video programming providers. In addition gross
d(# revenues under this paragraph includes any advertising revenues received by an open video
d(#. system operator or its affiliates in connection with the provision of video programming, where
d(#y such revenues are included in the calculation of the incumbent cable operator's cable franchise
d(# fee. Gross revenues does not include revenues collected by unaffiliated video programming
d(# providers, such as subscriber or advertising revenues. Any gross revenues fee that the open video " #'w 2 ,-(-(ZZ% "
d(# system operator or its affiliate collects from subscribers or video programming providers shall
d(# be excluded from gross revenues. An operator of an open video system or any programming
d(# provider may designate that portion of a subscriber's bill attributable to the fee as a separate item
d(# on the bill. An operator of an open video system may recover the gross revenue fee from
programming providers on a proportional basis as an element of the carriage rate.
rr~
X v - rr~ 9. Section 76.1512 is revised to read as follows:
76.1512 Programming information.
* * * * *
rr~ (b) In accordance with paragraph (a) of this section:
rr~ (1) An open video system operator shall not discriminate in favor of itself or its
rr~ affiliate on any navigational device, guide or menu;
P rr~ (2) An open video system operator shall not omit television broadcast stations or
X b - rr~ other unaffiliated video programming services carried on the open video system from (#(#any
navigational device, guide (electronic or paper) or menu;
rr~
" rr~ (3) An open video system operator shall not restrict a video programming provider's
X - rr~ ability to use part of the provider's channel capacity to provide an individualized guide (#(#or
menu to the provider's subscribers;
rr~ (4) Where an open video system operator provides no navigational device, guide or
b*! rr~ menu, its affiliate's navigational device, guide or menu shall be subject to the
rr~ requirements of Section653(b)(1)(E) of the Communications Act;
! rr~ (5) An open video system operator may permit video programming providers, including
d(# its affiliate, to develop and use their own navigational devices. If an open video system operator
d(# permits video programming providers, including its affiliate, to develop and use their own
d(#] navigational devices, the operator must create an electronic menu or guide that all video
d(# programming providers must carry containing a nondiscriminatory listing of programming
d(# providers or programming services available on the system and informing the viewer how to
obtain additional information on each of the services listed;
rr~ (6) An open video system operator must grant access, for programming providers that
d(#= do not wish to use their own navigational device, to the navigational device used by the open
video system operator or its affiliate;
rr~ (7) If an operator provides an electronic guide or menu that complies withparagraph (5)
d(# of this subsection, its programming affiliate may create its own menu or guide without being
subject to the requirements of Section 653(b)(1)(E) of the Communications Act. " #'x 2 ,-(-(ZZ% " Ԍ
b*!m ԙrr~ (c) An open video system operator shall ensure that video programming providers or
d(# copyright holders (or both) are able to suitably and uniquely identify their programming services
to subscribers.
b*! rr~ (d) An open video system operator shall transmit programming identification without change
or alteration if such identification is transmitted as part of the programming signal.
* * *
X 1 -
#
i rr~ 10. Section 76.1513 is amended by adding a note to paragraph (e)(viii) to read as
follows:
* * * * *
rr~ (e) * * *
rr~ (viii) * * *
b*!] rr~ Note to paragraph (e)(viii): Upon request by a complainant, the preliminary carriage rate
d(# estimate shall include a calculation of the average of the carriage rates paid by the unaffiliated
d(# video programming providers receiving carriage from the open video system operator, including
d(#. the information needed for any weighting of the individual carriage rates that the operator has
included in the average rate.
* * *
X - rr~ 11. Section 76.1514 is revised to read as follows:
* * * * *
b*!l rr~ (2) Any local exchange carrier offering such a package must impute the unbundled tariff
rate for the regulated service.
* * * " y 2 ,-(-(ZZ "
X -
] APPENDIX C Đ
X - \
a <
# | \ P 6G ; iP# INSTRUCTIONS FOR FCC FORM 1275
OPEN VIDEO SYSTEM CERTIFICATION OF COMPLIANCE
X - # Xj \ P 6G ; +XP#
X - rr~
X - Purpose of this Form
d(# Section 653(a)(1) of the Communications Act, 47 U.S.C. 573(a)(1), provides that an open video
d(# system operator must certify to the Commission that it complies with the Commission's
d(#/ regulations under Section 653(b) of the Communications Act, 47 U.S.C. 573(b). This FCC
d(# Form 1275 is to be used by an open video system applicant to obtain certification from the
d(# Commission. The Commission will publish notice of the receipt of FCC Form 1275 and will
d(#y post the Form on its Internet site. The certification will be deemed approved if the Commission
does not disapprove the certification within ten days of the Commission's receipt of the filing.
d(#= Please be sure to review all relevant FCC regulations and these instructions before completing
this Form.
X - Filing Information
d(# A hard copy of FCC Form 1275 and all attachments must be filed with the Office of the
d(# Secretary, Federal Communications Commission, 1919 M Street N.W., Room 222, Washington
d(# D.C., 20554, and with the Office of the Bureau Chief, Cable Services Bureau, 2033 M Street,
d(# N.W., Washington, D.C. 20554. The applicant must also file the Form 1275 on computer disk
d(# at these same two locations. Such a submission should be on a 3.5 inch diskette formatted in an
d(# IBM compatible form using Windows 3.1 and Excel 4.0 software. The diskettes should be
d(#K submitted in "read only" mode. The diskettes should be clearly labelled as an open video system
d(#[ certification filing, should indicate the applicant's name and date of submission, and should be
d(# accompanied by a cover letter. Any attachments or other material not easily stored on computer
disk may be filed in hard copy only.
d(# On or before the date the Form 1275 is filed with the Commission, the applicant must serve a
d(#y copy of its filing on all local communities listed in Module D, Line 1 of the Form. The applicant
d(#Z must include a statement informing the local communities that any oppositions or comments must
d(# be filed with the Commission within five days of the applicant's filing and must be served on the
d(# applicant. Service by mail is complete upon mailing, but if mailed, the served documents must
be postmarked at least three days prior to the date the applicant files the Form 1275.
X # - Instructions
X % -
#
i Module A: Company Information. Indicate the applicant's name, address, telephone and fax
numbers and the name of a person to contact for further information.
X N( -
#
i Module B: Ownership Information. Attach a statement of ownership interest in the open video " N(z 2 ,))ZZ$' " system, including all affiliated entities.
X - Module C: Eligibility and Compliance Representations.
X -
b*!N rr~ Line 1: If you are a cable operator applying for certification to operate within your cable
d(#x franchise area, indicate whether you are qualified to become an open video system operator under
d(# Section 76.1501 of the Commission's rules. You must also attach a brief statement explaining
d(# how you qualify under Section 76.1501. Section 76.1501 provides that a cable operator is
d(# qualified to operate within its cable franchise area if it is subject to "effective competition" in the
d(#= franchise area, as defined in Section 623(l)(1) of the Communications Act, 47 U.S.C. 543(l)(1).
d(# If a cable operator is not subject to effective competition in its cable franchise area, it may still
d(#j qualify to operate an open video system under Section 76.1501, provided that the Commission
d(#/ has issued a finding that such operation would serve the public interest, convenience, and
d(#[ necessity. If you are not a cable operator applying for certification within your cable franchise
area, check "N/A" to indicate that the question is not applicable.
X -
b*!{ rr~ Line 2: Indicate whether you agree to comply with Sections 76.1503, 76.1504, 76.1506(m),
d(#/ 76.1508, 76.1509, and 76.1513 of the Commission's rules, implementing Section 653(b) of the
X b -
d(# Communications Act.# uo \ P 6G ; "uP# # Xj \ P 6G ; +XP# In certifying compliance with these regulations, you agree to abide by the
d(# Commission's requirements regarding nondiscriminatory carriage; just and reasonable rates, terms
d(# and conditions; a onethird capacity limit on the amount of activated channel capacity on which
d(#> an open video system operator may select programming when demand for carriage exceeds
X -
d(#< system capacity; c# Xj \ P 6G ; +XP# hannel sharing; application of the rules concerning sports exclusivity, network
d(# nonduplication, and syndicated exclusivity; and nondiscriminatory treatment in presenting
information to subscribers.
X -
b*! rr~ Line 3: Indicate whether you agree to comply with the Commission's requirements for
enrollment of and for notice to unaffiliated video programming providers.
X e -
b*! rr~ Line 4: If you are required under Section 64.903(a) of the Commission's rules to file a cost
d(#[ allocation manual, indicate whether you agree to file changes to your cost allocation manual at
d(# least 60 days before the commencement of service. If you are not required under Section
d(# 64.903(a) to file a cost allocation manual, check "N/A" to indicate that the question is not
applicable.
X - Module D: System Information.
X ! -
b*! rr~ Line 1: List the names of the anticipated local communities to be served upon completion
d(#= of your open video system. If the space provided on the form is insufficient, attach additional
sheets as necessary.
X Q% - rr~ Line 2: Indicate the amount of digital capacity anticipated on the open video system.
X #' - rr~ Line 3: Indicate the amount of analog capacity anticipated on the open video system. " #'{ 2 ,-(-(ZZ% " Ԍ
X -
b*! rr~ Line 4: For switched digital systems, indicate the anticipated number of available channel
input ports.
X - Module E: Verification Statement.
b*! rr~ An officer or director of the applicant must sign and date Form 1275 certifying that, to the
d(#= best of his or her information and belief, all representations contained in the filing are accurate
according to the most recent information available.
X 1 -
d(#= # Xj \ P 6G ; +XP# FCC NOTICE TO INDIVIDUALS REQUIRED BY THE PRIVACY ACT AND THE
X - PAPERWORK REDUCTION ACT
d(# The solicitation of personal information in this form is authorized by the Communications Act
d(# of 1934, as amended. The information provided in this form is used by the Commission to
d(# determine that open video system operators comply with the Commission's regulations under
d(#^ Section 653(b) of the Communications Act. In reaching that determination, or for law
d(# enforcement purposes, it may become necessary to provide personal information contained in this
d(#> form to another government agency. If information requested on this form is not provided,
d(# processing may be delayed. All information provided in this form will be available for public
X K -
d(# inspection. Your response is required to obtain the requested certification. Individuals are not
d(#i required to respond to a collection of information unless it displays a currently valid OMB control
number.
d(#> Public reporting burden for this information is estimated to average one hour per response,
d(# including the time for reviewing instructions, searching existing data sources, gathering and
d(# maintaining the data needed, and completing and reviewing the collection of information. Send
d(#. comments regarding this burden estimate or any other aspect of this collection of information,
d(# including suggestions for reducing the burden, to the Federal Communications Commission,
X | -
d(# Records Management Division, Washington, D.C. 20554. Do not send completed forms to this
X e - address. # c P E37 P#