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If you need the complete document, download the WordPerfect version or Adobe Acrobat version, if available. ***************************************************************** Before the Federal Communications Commission Washington, D.C. 20554 In the Matter of ) Petition for Relief of ) ) LORILEI COMMUNICATIONS INC., ) d/b/a THE FIRM, ) Petitioner, ) ) vs. ) CSR 4573-L ) Continental Cablevision of Eastern ) Michigan, Inc., ) Respondent, ) ) For Leased Access Channels ) MEMORANDUM OPINION AND ORDER Adopted: May 13, 1997 Released: May 15, 1997 By the Chief, Cable Services Bureau: I. INTRODUCTION 1. Lorilei Communications, Inc., d/b/a The Firm (herein "The Firm"), filed a petition for relief pursuant to Section 76.975 of the Commission's rules against Continental Cablevision of Eastern Michigan, Inc., (hereinafter called "Continental") alleging violations of the commercial leased access rules and requesting an order for relief. Continental filed a response asserting that The Firm lacks standing to file a leased access petition, denying any violation of the leased access rules, and requesting that relief be denied. Continental also requests that sanctions be imposed against The Firm for alleged willful abuse of the Commission's leased access provisions. II. BACKGROUND 2. In 1984, Congress amended the Communications Act of 1934 by adding among other things a commercial leased access requirement, pursuant to which cable operators with 36 or more activated channels must set aside part of their channel capacity for use by video programmers that are not affiliated with them. The Cable Television Consumer Protection and Competition Act of 1992 (the "1992 Cable Act") revisited the leased access requirement and directed the Commission to establish rules for determining maximum reasonable rates for, and reasonable terms and conditions for the use of, commercial leased access channels. Pursuant to that Congressional directive, the Commission established regulations applicable to leased access channels in its proceedings in Implementation of Sections of the Cable Television Consumer Protection and Competition Act of 1992; Rate Regulation, MM Docket 92-266, (the Rate Order), 8 FCC Rcd 5631, 5956-5961 (1993). The Commission revisited these regulations in Implementation of Sections of the Cable Television Consumer Protection and Competition Act of 1992, Leased Commercial Access, Second Report and Order and Second Order on Reconsideration of the First Report and Order, CS Docket 96-90, 62 Fed. Reg. 11364, March 12, 1997 ("Second Order"). 3. The leased access regulations initially required, among other things, that cable operators provide a schedule of rates "[u]pon request" to prospective leased access programmers. In the recently adopted Second Order, the Commission set a 15 day response time from the date of a written request. A 30 day response time was established for systems who qualify for "small system" rate relief. Additionally, the regulations provide for the determination of maximum monthly leased access rates by means of an average implicit fee formula, which is described in the regulations. The Commission also adopted procedures for resolution of disputes, providing for the filing of a petition for relief within sixty days of an alleged violation of a leased access statutory or regulatory provision and for the filing of a response. III. THE PLEADINGS A. The Petitioner's Allegations 4. The petition describes The Firm as an advertising agency and video production company, which produces thirty minute programs for automotive dealers, recreational vehicle dealers, and real estate companies to air on commercial leased access channels. The Firm states that it initially tried to obtain a leased access channel on Continental's cable system through a series of letters, facsimile messages and phone conversations exchanged with Continental. The Firm states that it requested from Continental information including the number of system channels, full time and part time leased access rates, the number of system subscribers reached by leased access and system format for playback of leased access tapes. The Firm states that an initial response from Continental indicated that a minimum purchase of thirty days was required for part time leased access, that Continental did not provide facilities for the playing of tapes, requiring that a video and audio signal be delivered to the cable system headend. The Firm states that Continental's representative subsequently declined to negotiate these matters over the phone and indicated that the thirty day minimum purchase requirement was non-negotiable. The Firm further states the Continental representative later indicated that tape playback might be provided for a fee but refused to specify the amount of the fee. 5. The Firm asserts that Continental's refusal to provide the minimum level of technical support to present its material is inconsistent with the requirements of Section 76.971 of the Commission's rules. The Firm asserts also that Continental's refusal to specify the playback fee results in blocking access to the cable system in violation of the Commission's rules. B. Continental's Response 6. Continental asserts in response that The Firm is an advertising agency and, as such, is not entitled to leased access channels and thus lacks standing to file a leased access petition. It asserts that the Congress did not intend for the leased access obligations to extend to commercial advertising. Continental cites as support for this argument Sofer v. United States, No. 2:94cv1182, slip op. (E.D.VA., June 7, 1995), 1995 WL 576833 (E.D.Va.). 7. Continental states that it provided The Firm with a schedule of rates and a proposed leased access contract for execution. Continental, however, continues to argue that its thirty day minimum purchase requirement is reasonable and consistent with the Commission's rules. Furthermore, Continental maintains that, although not required to purchase equipment not already owned to facilitate carriage of leased access programming, certain video play-back equipment requested by The Firm has been purchased for use in providing leased access services. III. DISCUSSION A. Eligibility for Commercial Leased Access Channels 8. We first address Continental's claim that it has no obligation under Section 612 of the 1992 Cable Act, or the Commission's implementing regulations, to make a leased access channel available for the presentation of programming that includes commercial advertising. We conclude that it does. 9. Section 612(a) states that the purpose of the commercial leased access requirement is to promote competition "in the delivery of diverse sources of video programming and to assure that the widest possible diversity of information sources are made available to the public from cable systems in a manner consistent with the growth and development of cable systems." Section 612(b) implements this goal by mandating that cable operators "designate channel capacity for commercial use by persons unaffiliated with the operator," and requiring that specifically stated percentages of activated channels be so designated. The Commission's dispute resolution rules provide that any person aggrieved by the failure or refusal of a cable operator to make commercial channel capacity available in accordance with the provisions of Section 612 or the Commission's implementing regulations may file a petition for relief with the Commission. 10. The Firm states that it is "an advertising agency/video production company" which produces thirty minute programs for automotive dealers, recreational vehicle dealers, real estate companies, camp grounds, and others "to air on commercial leased access channels." We read this statement as a representation by The Firm that it is a video production company (as well as an advertising agency) and that it seeks to present its video program productions on a commercial leased access channel to be obtained from Continental. Continental has presented nothing which disputes that representation. Absent a showing of any affiliation between The Firm and Continental, we find that The Firm qualifies as an unaffiliated "diverse source of video programming" for whom Continental is required by Section 612 to "designate channel capacity for commercial use." Accordingly, we reject Continental's argument that The Firm is not entitled to leased access channels because The Firm is an advertising agency. Nothing in Section 612 may be construed as disqualifying The Firm from use of a leased access channel, simply because it is engaged in business as an advertising agency, in addition to being engaged in business as a video production company providing a "diverse source of video programming" within the meaning of Section 612. B. Standing to File Section 76.975 Petition for Relief 11. Moreover, we disagree with Continental that Sofer vs. United States, supra, supports the proposition that The Firm does not have standing to file a petition for relief under 47 C.F.R.  76.975. Sofer involved a claim that a cable operator refused to sell commercial advertising time on a cable system and allegations, not specified in the court's Opinion and Order, of violations of Section 612 and related regulations. The court in Sofer found that Section 612 and related Commission regulations have no application to commercial advertising. However, the case before us deals with advertising time on a leased access channel. Nothing in Section 612 or the Commission's leased access rules prohibits a leased access user from distributing advertisements let alone programming containing advertisements. The inclusion of advertising content in video program productions does not disqualify independently produced video programming, such as that produced by The Firm, from carriage on Section 612 designated leased access channels. Moreover, cable operators may consider the content of leased access programming only to the extent necessary to establish which pricing category applies to such programming. Accordingly, we will direct Continental to provide such leased access channel capacity as may be requested by The Firm consistent with the requirements of Section 612. C. Thirty-Day Minimum Purchase Requirement 12. Continental asserts that nothing in the Cable Act or the Commission's rules prohibits the establishment of a thirty-day minimum purchase requirement for part-time leased access. Exhibit "A" to the Channel Lease Agreement provided to The Firm states, at item 4.a., "30-Day minimum purchase applies." Neither The Firm nor Continental provided any description of how the thirty- day purchase requirement would be applied. However, Continental argues that cable operators must be permitted to maintain minimum purchase requirements, in order to minimize the number of time slots that will otherwise become blank on a channel carrying part-time leased access programming. Continental asserts that carriage of part-time programming will inevitably displace full-time programming services and will lead to waste of valuable channel capacity that will harm cable operators, full-time programmers and subscribers alike. It suggests that, absent minimum purchase requirements, cable operators will be forced to replace full-time programming with disjointed, randomly spaced blocks of part-time programming on channels with the remaining unused time slots probably remaining dark. Continental asserts that cable operators will otherwise be unable to use slots not taken by part-time programming. Continental asserts that a further reduction of available channel capacity for new and innovative full-time programmers will result from such inefficient devotion of valuable channel space to part-time programmers. Continental asserts that part-time minimum purchase requirements will tend to add some measure of programming continuity and help reduce the resulting confusion and dissatisfaction among subscribers that will otherwise result from an disjointed mix of part-time programming on a leased access channel. Continental also argues that a minimum purchase requirement will guarantee cable operators a minimum amount of compensation for use of extremely valuable channel capacity. 13. Continental has provided no empirical evidence that supports the suggestion that part- time leased access will displace full-time service, or that enough time slots will remain unused on channels carrying part-time leased access programs to cause confusion and dissatisfaction among subscribers. Furthermore, Continental has not described how the thirty-day minimum requirement would be applied. D. Technical Equipment Support 14. The record shows that certain video playback equipment requested by The Firm has been purchased, although the cable operator initially took the position that it had no obligation to do so. Section 76.971(c) of the rules provide that a cable operator must provide the minimum level of technical support necessary for the leased access programmer to present their material on the air. In the Second Report, the Commission clarified the obligation of cable operators with respect to technical support, such as the provision of equipment. If an operator must purchase equipment not typically used by non-leased access programmers to accommodate a leased access programmer, the operator may either (1) purchase the equipment for itself and lease it to the programmer at a reasonable rate or (2) purchase the equipment and require the programmer to re-purchase the equipment at full price and take ownership of it. The Commission also made it clear that the maximum leased access rate determined under Section 76.970 includes the cost of technical equipment ordinarily provided in common to all programmers. In the future, we expect Continental to comply with these requirements. E. Other Forms of Relief 15. The Firm requests relief in the form of compensation for time expended and costs incurred in bringing this action before the Commission. Neither the Communications Act of 1934, as amended, nor the 1992 Cable Act provides for recovery of costs associated with the filing of a petition for relief with the Commission for alleged violations of the statutory leased access provisions or of the Commission's regulations issued under those statutory provisions. Accordingly, petitioner's request for compensation for such costs will be denied. IV. ORDERING CLAUSES 16. For the foregoing reasons, IT IS ORDERED pursuant to 47 C.F.R.  76.975(f) that the respondent Continental, the current operator of the subject cable systems, shall, within twenty days from the release date of this order, provide to The Firm such leased access channel capacity as may be requested consistent with the requirements of 47 U.S.C  532. 17. IT IS FURTHER ORDERED, that the petition for relief of The Firm (a) IS GRANTED to the extent indicated in paragraphs 8 through 11 and paragraph 15 above and (b) in all other respects IS DENIED. 18. IT IS FURTHER ORDERED that the request of Continental for imposition of sanctions against The Firm IS DENIED. 19. This action is taken pursuant to authority delegated by Section 0.321 of the Commission's rules, 47 C.F.R.  0.321. FEDERAL COMMUNICATIONS COMMISSION Meredith J. Jones Chief, Cable Services Bureau