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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 re: ) ) Matthews Media Productions ) ) CSR-4603-L vs. ) ) Coaxial Communications ) ) ) For Leased Access Channels ) MEMORANDUM OPINION AND ORDER Adopted: May 27, 1997 Released: May 30, 1997 By the Chief, Cable Services Bureau: INTRODUCTION 1. Matthews Media Productions and its founder Michael A. Matthews ("Matthews" or "petitioner"), have filed the above-captioned petition pursuant to the Commission's rules against Coaxial Communications ("Coaxial") regarding its cable system in Columbus, Ohio, alleging violations of the Commission's leased access rules. Coaxial filed a response to Matthews' petition. BACKGROUND 2. The commercial leased access requirements for cable operators were established by the 1984 Cable Act and amended by the 1992 Cable Act. The 1984 Cable Act established a federal scheme through channel leasing to assure access to cable systems by third parties unaffiliated with the cable operator who have a desire to distribute video programming free of the editorial control of the cable operator. Channel set-aside requirements were established proportionate to a system's total activated channel capacity. The 1992 Cable Act revised the leased access requirements and directed the Commission to implement rules to govern this system of channel leasing. In its 1993 Report and Order and Further Notice of Proposed Rule Making ("Rate Order"), the Commission adopted new rules for leased access addressing maximum reasonable rates, reasonable terms and conditions of use, minority and educational programming, and procedures for resolution of disputes. The Commission recently modified some of its leased access rules in the Second Report and Order and Second Order on Reconsideration of the First Report and Order ("Second Report and Order"). ARGUMENTS OF THE PARTIES 3. Matthews alleges that Coaxial has not made leased access channel capacity available to it on Coaxial's cable system. In essence, Matthews argues that despite repeated requests, it has not been able to secure a leased access channel on Coaxial's system. According to Matthews, Coaxial does not provide any leased access channels at all in spite of the fact that the size of its system dictates that it must set aside 15% of its channel capacity for such purposes. Matthews also argues that, despite repeated inquiries, Coaxial has not provided Matthews with a schedule of the rates that it charges for leased access programming. Nevertheless, Matthews states that when it submitted its original programming proposal to Coaxial, it provided its own proposed rates for the half hour of programming it proposed based on its own understanding of the Commission's rules. 4. Matthews also contends that Coaxial improperly tried to exercise editorial control over its programming. Matthews states that its home shopping program entitled "The Columbus Motor-Vehicle Exchange" is designed to allow private sellers of used vehicles to advertise their vehicles for sale in the Columbus, Ohio area. According to Matthews, Coaxial tried to influence the editorial content of its programming by stating that the show's format should be changed to one supporting dealers rather than private sellers so that Coaxial would not have to deal with Matthews' proposed method of advertising. Matthews also contends that Coaxial had competitive motives for desiring a change in format because Coaxial had an interest in doing a program similar to Matthews' proposed program. 5. Matthews also argues that Coaxial engaged in channel placement and tier access violations with regard to its programming proposal. Regarding channel placement, Matthews argues that it negotiated for and was promised channel 7 for the airing of its show. Matthews charges that the offer was subsequently withdrawn and reoffered several times. In addition, Matthews states that Coaxial tried to get Matthews to change tiers by indicating that a higher rate would be charged if Matthews insisted on staying on the basic tier. Finally, Matthews asserts that Coaxial would not provide Matthews with "a written or verbal statement giving channels, times, dates or any other point of negotiation." Matthews also argues that Coaxial is improperly requiring Matthews to sign a contract for a minimum of 13 weeks in order secure a part-time lease with Coaxial. In addition, Matthews argues that Coaxial is not providing the technical support it needs in order to air its program. Matthews asserts that Coaxial stated that it needed to order S-VHS and video insertion equipment so that it could insert Matthews' video into channel 7. Matthews further states that after the equipment arrived 25 days after it was due, Coaxial still delayed the implementation of Matthews' programming because Coaxial would not indicate when the equipment would be operational. 6. In response, Coaxial states that it is in compliance with the Commission's rules regarding leased access channel capacity because it "has been and remains more than willing" to provide Matthews with a leased access channel. Coaxial, however, states that it "does not believe it must provide leased access programmers free advertising space in its cable guide or on local avails as technical support for use of its channel." 7. Regarding rates for leased access, Coaxial argues that under Commission rules, cable operators are able to charge market rates for leased access on their channels. Coaxial states that Matthews erroneously calculated and significantly understated the permitted pro rata rate that Coaxial would be allowed to charge for Matthews' programming. Coaxial notes that under Commission rules, "a cable operator's part-time rate may take into account the particular time of day programming is shown so that the pro rata hourly rate may be exceeded for prime time so long as the revenue received for all part-time usage does not exceed the full-time rate." Coaxial asserts that Matthews would be charged $150 per half hour under Coaxial's part-time rate card calculated on a purely pro rata basis scaled for prime time use. Coaxial further notes that its monthly revenue from part-time leasing will not exceed the maximum monthly rate for full-time use. 8. Coaxial also states that it has not improperly demanded editorial control of Matthews' programming. Coaxial, however, admits that it made some suggestions to Matthews about its programming based on its own unsuccessful experience with used car advertising. Coaxial states that it only suggested to Matthews that it might consider soliciting used car dealers in addition to individuals because commercial dealers would provide a more consistent and higher volume of purchasers for advertising space. According to Coaxial, its suggestions were made in good faith with the aim of assisting Matthews. 9. Coaxial states that it will provide technical support for Matthews. According to Coaxial, receipt of the special equipment that it needed in order to assist Matthews was delayed due to supplier delays. Once the equipment was received, Coaxial states that the installation of both the equipment and the software proved to be time-consuming. Coaxial reports that it has been ready and willing to assist Matthews in operating the equipment. However, Coaxial notes that it has not yet determined a charge for this technical support because it involves capital cost and operation of new equipment. Coaxial adds that it will provide complete documentation in order to support its charges. 10. Finally, Coaxial argues that its request that Matthews commit to an initial programming run of 13 weeks is reasonable and comports with Commission rules. Coaxial states that Matthews' programming will displace popular prime time local origination programming on channel 7. According to Coaxial, the minimum 13 week run is necessary in order to achieve at least a minimal level of stability in its programming schedule. Coaxial also cites the economic risk involved and notes "[t]here is no real financial security if a part-time channel lessee is allowed to substitute interested [sic] programming for popular ad-supported local programs simply by paying the per-hour rate for a week or two and then walking away leaving the cable operator to pick up the pieces." Coaxial notes that the Commission has recognized that cable operators have a right to impose reasonable business conditions on leased access users. According to Coaxial, minimum commitment terms are a standard business practice in many commercial transactions. ANALYSIS AND DECISION 11. Based on the information in the record before us in this proceeding, Matthews' petition will be granted in part and denied in part. We disagree that Coaxial has not made leased access channel capacity available to Matthews on Coaxial's system. Coaxial states that it has been willing to provide channel capacity in the past and remains willing to do so in the future. It appears from the information before us that Coaxial has not denied leased access channel capacity to Matthews; instead the situation between the parties appears to be one of an ongoing negotiation process. While the negotiation process appears to be a lengthy one, we trust that the parties can come to an agreement now that certain difficulties have been overcome such as securing and installing the new equipment. 12. Regarding leased access rates, we agree with Coaxial that a cable operator may develop a part-time rate schedule which recognizes the varying values of different day parts in which part-time programmers may wish to air their programming. In its Second Report and Order, the Commission affirmed its decision "to require that cable operators prorate their maximum full-time rate when determining their maximum permitted part-time rate, and to allow operators to adjust part- time rates according to time-of-day pricing." Matthews asserts that Coaxial has not provided it with a schedule of leased access rates and Matthews, therefore, calculated its own rates based on its understanding of the rules. Coaxial disagrees with Matthews' calculations and asserts that Matthews understated the permitted pro rata rate that it would be allowed to charge for Matthews' programming. We note that Coaxial has now worked out its implicit fee calculations and submitted those calculations with its response in this proceeding. Coaxial calculated its rates in accordance with the highest implicit fee formula which was in effect at the time this petition was filed. The Commission has recently revised its rules for calculating the leased access rate for leased access programming to implement the "average implicit fee" formula. Coaxial has also devised its part- time rate card as calculated on a pro rata basis scaled for prime time use according to the rules in effect at the time of the petition's filing. 13. Based on the information before us, we cannot find a violation with regard to the leased access rate calculations submitted by Coaxial in its response to Matthews' petition. At the time the petition was filed, the parties had not come to an agreement on the rates to be charged. In the interim, new calculation rules came into effect and Coaxial is required to provide new rates or rate cards based upon this new method of calculation. Consequently, we do not believe that it would serve any purpose to rule on the now outdated highest implicit fee calculations. With regard to the amount of time that Coaxial took to respond to Matthews' request for a schedule of leased access rates, we note that under the rules in effect at the time, cable operators were to provide a schedule of rates "[u]pon request" to prospective leased access programmers. In this case, Matthews' requested a rate schedule from Coaxial in July and Coaxial did not respond until November of the same year when it submitted its response to the instant petition. Because the leased access rules in effect at that time were somewhat unfamiliar to most cable operators, as well as to programmers, we do not find that Coaxial's response time in this matter was so unreasonable as to require us to impose formal sanctions. We note that the new rules in effect for leased access provide that the cable operator must provide such information within 15 calendar days of the date on which a request for leased access information is made. Because we have no information before us to indicate that the parties at issue have resolved their dispute with regard to leased access rates, we hold that any future inquiries or negotiations regarding full and part-time leased access rates should be resolved under our new rules and we caution Coaxial to adhere to the mandated response time under these rules. 14. In addition, we disagree with Matthews that Coaxial exercised improper editorial control over its programming. Coaxial did not refuse to air Matthews' programming if Matthews' did not alter its programming format. It appears from the record that Coaxial was not planning to compete with Matthews' programming, but instead was advising Matthews on the choice of its format based on Coaxial's past unsuccessful experience with used car advertising. 15. With regard to technical support, Coaxial has stated that the special equipment it ordered to accommodate Matthews has arrived and is operational. We note that Coaxial intends to charge a fee for the support it provides to Matthews because of the capital cost and operation of the recently acquired new equipment. The Commission's rules state that cable operators are required to provide unaffiliated leased access users the minimal level of technical support necessary for users to present their programming, provided that the programmers reimburse operators for the reasonable cost of any technical support that operators actually provide. The Commission recently has clarified that this provision entitles cable operators to charge an additional fee only for the reasonable cost of providing technical support to a leased access programmer that is not also provided to non- leased access programmers on the system. We have no information before us to indicate whether or not the special equipment that Coaxial purchased for Matthews' would also be provided to non- leased access programmers. As such, we note that the Commission's clarification on the costs of technical support that can be charged must be taken into consideration by Coaxial if Matthews' decides to pursue leased access time on Coaxial's system. 16. Finally, we disagree with Coaxial that it is reasonable to request that Matthews commit to an initial programming run of 13 weeks in order to secure a part-time lease with the cable system. We do not accept Coaxial's rationale that it is seeking a limited guarantee in the form of this programming commitment because Matthews' programming would be displacing advertiser- supported popular prime time local origination programming on channel 7. With regard to specific channel placement, the Commission has stated in its Second Report and Order that the cable operator should have the discretion to select the channel location of a leased access channel, so long as the choice is reasonable. Specifically, the Commission has given considerable flexibility to cable operators regarding the placement of part-time leased access programming. For instance, cable operators that have at least one channel designated for part-time leased access use that is not substantially filled by part-time programmers will not be required to open another part-time channel, despite the fact that comparable time slots are not available on the partially programmed part-time channel. Thus, while Coaxial may place Matthews' programming on any reasonable channel choice, it does not have to displace popular programming on channel 7 unless it desires to do so. We also note that while the Commission has not specifically addressed the issue of a maximum contract length for leased access programming, the Commission has declined to establish a minimum contract length. ORDERING CLAUSES 17. Accordingly, IT IS ORDERED, pursuant to 612 of the Communications Act of 1934, as amended (47 U.S.C. 532), that the petition (CSR-4603-L) filed by Matthews Media Productions against Coaxial Communications regarding its cable system in Columbus, Ohio IS GRANTED IN PART AND DENIED IN PART to the extent indicated herein. 18. This action is taken pursuant to authority delegated by 0.321 of the Commission's rules, 47 C.F.R. 0.321. FEDERAL COMMUNICATIONS COMMISSION Meredith J. Jones Chief, Cable Services Bureau