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Schaefer d/b/a Strategic Videol) ` `  hh,V)  Xu-` ` v. hh,V)ppCSR4800L ` `  hh,V)  XG -Time Warner Cable hh,Vl)  X0 -Raleigh, North Carolinahh,V)  X -l)  X -For Leased Access Channelsl)  X-  MEMORANDUM OPINION AND ORDER lU  X- Adopted: June  "vL! 9, "vL!  1997 hh,V ppReleased: June 11, 1997 X` hp x (#%'0*,.8135@8:- yOg-ԍ47 C.F.R.  76.975.> against Time Warner Cable   ("Warner"), operator of cable systems serving Raleigh, Durham, and Chapel Hill, North Carolina.   Strategic and Warner subsequently requested that the time for filing of an opposition to the   petition be extended, and indicated that the parties were engaged in discussions which could result   in the matter being settled amicably and the complaint withdrawn. However, Strategic   subsequently filed a "Request for Resumption and Emergency Consideration" asserting that   -Warner had ceased negotiating and had refused its attempts at communication. Warner has filed a response to the petition. " X0*''ZZY"Ԍ X-: rřBACKGROUND ĐlU  X-  ~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  X-  jprogrammers that are not affiliated with them..2  {O-ЍSee Section 612 of the Communications Act of 1934, as amended., 47 U.S.C.  532. The amount of channel  {O-capacity an operator must set aside is based on a system's activated channel capacity. See 47 U.S.C.  532(b).. The Cable Television Consumer Protection and   zCompetition 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  XH-  -reasonable terms and conditions for the use of, commercial leased access channels.H$2  {O -ЍSee Pub. L. No. 102385,  9, 10(a) and 10(b), 106 Stat. 1460, Oct. 5, 1992. See 47 U.S.C.  532(c)(4)(A) & (B) (1992). Pursuant to   -that Congressional directive, the Commission established regulations applicable to leased access  X -  channels in its proceedings in Implementation of Sections of the Cable Television Consumer  X -  iProtection and Competition Act of 1992; Rate Regulation, MM Docket 92266, (the Rate Order),  X -  _8 FCC Rcd 5631, 59565961 (1993)._ ~2  {O-ԍSee, 47 C.F.R.  76.970, 76.971 & 76.975._ The Commission revisited these regulations in  V -  Implementation of Sections of the Cable Television Consumer Protection and Competition Act of  V -  1992, Leased Commercial Access, Second Report and Order and Second Order on  X -  Reconsideration of the First Report and Order, CS Docket 9690, 62 Fed. Reg. 11364, March  X-12, 1997 ("Second Report").A(2  {OW-  JԍSee Second Report, Appendix D, Revised Rules. See also Order on Reconsideration of the First Report and Order  {O!-  and Further Notice of Proposed Rulemaking, MM Docket 92266 & CS Docket 9660, FCC 96122, released March  {O-  29, 1996, 61 Fed. Reg. 16396 (April 15, 1996) ("Recon. Order"). The leased access regulations as modified by the  {O-Recon. Order may be found at 47 C.F.R.  76.970, 76.971 & 76.975 (1996).A r  Xj-  SUMMARY OF PLEADINGS  XS-l U  X<-  3.` ` The petition raised objection to some of the rates, terms and conditions offered by   Warner to Strategic in connection with the provision of commercial leased access channel   capacity. Specifically, Strategic asserted that a technical support fee proposed by Warner is   exorbitant and motivated by an attempt to discourage use of leased access. Strategic requested   the Commission to direct Warner to justify the proposed fee or reduce it substantially. Strategic   lraised further objections to numerous provisions contained in Warner's Commercial Use   <Programming Agreement and asserted that the objectionable provisions are vague, intrusive, and   [unnecessary and represent an attempt to establish an unreasonable barrier to obtaining leased access capacity." 0*%%ZZ"Ԍ X-  cԙ4.` ` Warner submitted with its opposition copies of several exchanges of   correspondence with Strategic. Warner asserts that the correspondence shows efforts to negotiate   a satisfactory leased access arrangement with Strategic that began when Strategic first asked about   .leased access capacity on its Chapel Hill, North Carolina system in July, 1996. Warner asserts   >that its negotiating efforts and the related exchanges of correspondence continued with its   jassistant general counsel forwarding to Strategic a letter summarizing his understanding of the   Ktwo remaining unresolved issues, explaining that one of the time slots requested by Strategic was   Lnot available, and offering certain other times slots for the carriage of Strategic's programming.   Warner asserts that of the numerous issues initially raised by the petition only two remain   /concerning a requirement for liability indemnification insurance and the resonableness of a   mtechnical support fee. Warner contends that these remaining two issues relate to the   xreasonableness of terms and conditions offered to Strategic in connection with leased access use.   Warner argues that the correspondence accompanying the opposition shows full compliance with the Commission's leased access regulations and requests that the petition be dismissed.  X -w  DISCUSSION AND ANALYSIS ă  Xy-  5.` ` The first of the two issues concerns a requirement by Warner for Strategic to   obtain a certificate of insurance coverage for indemnification relating to claims stemming from   [carriage of Strategic's programming. The other concerns Warner's proposed technical support fee.  X- A. The Reasonableness of Insurance Requirements.  X-  6.` ` With regard to the requirement for a certificate of indemnification insurance, we  X-  note that cable operators have been given protection from leased access program liability as  X-  provided by Section 638 of the Communications Act.E2  {O#-ԍSee 47 U.S.C.  558.E Section 638 provides program liability  X-  protection "unless the program involves obscene material."EZ2  {O-ԍSee 47 U.S.C.  558.E We are not aware, however, of any   jstatutory provision that completely protects cable operators from all possible program carriage   iliability, or from the filing of unmeritorious actions against cable operators despite the provisions  XN-  yof Section 638.N2  {O -ԍSee Anthony Giannotti v. Cable Systems Corporation, 11 FCC Rcd 10441, (Cable Serv. Bur. 1996). Moreover, the Commission does not deny cable operators the right to request   indemnification from leased access programmers for the costs and expenses attributable to   ?defending a prosecution for carriage of an allegedly obscene program, stating, "this is a   reasonable term or condition relating to use of leased access channel capacity in light of the   removal by Congress in amended [S]ection 638 of cable operator immunity for carriage of"~0*%%ZZ<"  X-  obscene programming." 2  {Oy-ԍSee First Report and Order in MM Docket No. 92258, 8 FCC Rcd 998, 1007(1993), n.44.Ĉ In Anthony Giannotti v. Cablevision Systems Corporation,^ Z2  yO -ԍ11 FCC Rcd 10441 (Cable Serv, Bur., September 6, 1996)^ an   operator's right to require reasonable liability insurance coverage for leased access programming was confirmed.  X-  B7.` ` However, the Commission recently modified the insurance requirements in the  X-  Second Order.J 2  {O* -ԍSee Second Report,  112.J In connection with the Second Order, some commenting parties contended that   the cost of general liability and errors and omissions insurance represents a significant barrier to   Zsmall independent producers. One party requested that the Commission set a limit on the required  XL-  amount of general liability insurance. However, the Commission declined to adopt specific   conditions or limits regarding the amount of coverage or the type of insurance policy that   joperators may require on the ground that "a specific restriction might not be appropriate for all   situations." Instead, the Commission stated that it would require that insurance requirements be   Mreasonable in relation to the objective of the requirement and placed on cable operators the   @burden of proof in establishing reasonableness. The Commission further stated that   jdeterminations of what is a "reasonable" insurance requirement will be based on the operator's   Zpractices with respect to insurance requirements imposed on nonleased access programmers, the   likelihood that the nature of the leased access programming will pose a liability risk for the   Loperator, previous instances of litigation arising from the leased access programming, and any  Xf-other relevant factors.1 f|2  {O-ԍId.1  X8-  8.` ` In its petition, Strategic merely asserts that a cable operator may not require  X!-  indemnification from a leased access user. This issue has been settled in  Anthony Giannotti v.  X -  Cablevision Systems Corporation.^ 2  yO-ԍ11 FCC Rcd 10441 (Cable Serv, Bur., September 6, 1996)^ In this decision, the Commission concluded that cable   operators could require reasonable indemnification provisions from leased access users.   Consequently based on the Commission's holding at the time the application was filed, which is  X-  set out in the Giannotti decision, we cannot find that Warner violated the leased access rules by   jrequesting an indemnification policy. However, as noted above, the Commission revisited this  X-  Zarea in its Second Order and found that the burden under its leased access rules is on the subject   cable operator to show that an indemnification requirement is reasonable. Consequently, should   -Warner require an indemnification policy from a potential leased access user in the future, it must  XZ-show its reasonableness consistent with the provision's of the Second Order. "E 0*%%ZZ"Ԍ X-ԙ B. Reasonableness of Technical Support Fees  X-  }9.` ` At the time that Warner filed its complaint, the leased access rules permitted cable   zoperators to charge leased access users for providing the minimal level of technical support  X-  necessary to present their material on a cable system.C2  yO-ԍ Former Section 76.971(c).C Under this standard, Warner developed   a technical service fee based on the average hourly rate for technicians in its Raleigh area cable   systems and adjusted this hourly cost figure by a factor of 50% to take account overtime hours.   Warner increased the average hour rate in this instance by 50% because the hours requested for   leased access use were outside its normal business hours. We believe this approach to be   reasonable. Warner then, however, included a 100% mark up of the hourly labor cost to cover   overhead Apart from a conclusory statement that this is reasonable, Warner has failed to justify   the 100% mark up. Consequently, we find that the proposed 100% overhead cost factor to be unsupported and therefore unreasonable.  X -  10.` ` The Commission revisited the area of technical costs in its Second Report. Therein   the Commission clarified that the leased access rates determined under Section 76.970 include   jthe cost of technical support ordinarily provided to other programmers. For that reason a cable   operator may not impose an additional charge for technical support ordinarily provided to other  Xd-  yprogrammers.VZdX2  {Om-  ԍSee Second Report,  114. The Second Order noted that an operator may impose a charge to recover the cost   ,of providing equipment such as a tape recorder or camera, if such equipment would be provided to nonleased access programmers for the same charge.V In addition to failing to justify its 100% mark up of its labor costs for overhead,   [the information before us does not indicate whether the technical support services at issue are   ordinarily provided to other programmers. Therefore, we cannot determine whether the proposed  X-support fee would be acceptable under the Second Report standard. "z0*%%ZZs"  X-) ORDERING CLAUSE lU  X-  11.` ` Accordingly, IT IS ORDERED, that the Petitions for Special Relief filed by  X-  yThomas M. Schaefer d/b/a Strategic Video in File No. CSR 4800L IS GRANTED to the extent  X-indicated in paragraphs 10 and 11 above and in all other respects IS DENIED .  Xv-  o112.` ` This action is taken by the Chief, Cable Services Bureau, pursuant to authority delegated by Section 0.321 of the Commission's Rules, 47 C. F. R.  0.321 (1995). ` `  hh,VFEDERAL COMMUNICATIONS COMMISSION ` `  hh,VMeredith J. Jones ` `  hh,VChief, Cable Services Bureau1