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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 )CSR-4694-L ) vs. ) ) SOUTHEAST FLORIDA CABLE, INC. d/b/a) ADELPHIA CABLE COMMUNICATIONS, ) Riviera Beach, Florida ) Respondent ) MEMORANDUM OPINION AND ORDER Adopted: July 30, 1997 Released: August 4, 1997 By the Chief, Cable Services Bureau: INTRODUCTION 1.Lorilei Communications, Inc. d/b/a The Firm ("The Firm") filed a petition for relief pursuant to 76.975 of the rules of the Federal Communications Commission alleging that Southeast Florida Cable, Inc. d/b/a Adelphia Cable Communications and West Boca Acquisition Limited Partnership of Riviera Beach, Florida ("Adelphia") is in violation of Sections 76.970 and 76.971 of the Commission's commercial leased access rules and requesting relief in several forms. Adelphia filed a response requesting that the petition for relief be denied. The Firm then filed a "Motion for Emergency Order," to which Adelphia responded. BACKGROUND 2.In 1984, Congress amended the Communications Act by adding, among other things, a commercial leased access requirement contained in 612, pursuant to which cable operators with 36 or more activated channels must set aside part of their channel capacity for use by 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, among other things, rules for determining maximum reasonable rates for commercial leased access. Pursuant to that Congressional directive, the Commission established regulations, including rate regulations, applicable to leased access channels, in the Report and Order and Further Notice of Proposed Rule Making in MM Docket No. 92-266 ("Rate Order"). The Commission revisited these regulations in the Order on Reconsideration of the First Report and Order and Further Notice of Proposed Rulemaking in MM Docket No. 92-266 and CS Docket No. 96-60 ("Recon. Order"), and again in the Second Report and Order and Second Order on Reconsideration of the First Report and Order in CS Docket No. 96-90 ("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 Recon. Order, the Commission set a seven business day response time from the time of a request. In the recently adopted Second Order, the Commission set a 15 calendar 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. SUMMARY OF THE PLEADINGS 4.The Firm is an advertising agency/video production company doing business throughout the southeastern United States. The Firm produces thirty-minute programs to air on commercial leased access channels. The Firm states that it initially requested commercial leased access rates from Adelphia in December 1994 and that Adelphia responded by offering monthly rates for three types of leased access service. The Firm states that it contacted Adelphia a second time, in May 1995, and requested full-time and part-time rates. The Firm says that Adelphia responded by providing part-time rates, the sum of which exceeded its full-time rates. The Firm states that it requested rates from Adelphia for a third time, in February 1996, and Adelphia responded with rates similar to those provided in May 1995. The Firm states that on this third occasion in February 1996, it protested the rates and requested revised rates, a channel lease agreement, information about the tape format that was required, and the channel number where leased access programming appears on Adelphia's cable systems. The Firm states that Adelphia provided the information requested but referred the request for revised rates to its corporate office. The Firm asserts that it contacted Adelphia's corporate office in Pennsylvania and asked if the rates were negotiable and was told to contact the local system manager in Florida. The Firm contends that it tried to contact Adelphia's local system manager in southeast Florida, but he did not return the calls. 5.The Firm alleges that Adelphia has violated the Commission's leased access rules because the monthly sum of its part-time rates significantly exceeds its full-time monthly leased access rates. The Firm further alleges that Adelphia's contract terms violate the leased access rules because Adelphia requires insurance coverage for willful or intentional conduct. The Firm alleges that it is impossible to obtain "willful conduct" coverage because no insurance company would issue a policy covering willful or intentional acts by an insured. The Firm also alleges that Adelphia's contract unreasonably prohibits The Firm from using Adelphia's name in its advertising and requires The Firm to clear its promotional materials with Adelphia 20 days prior to release. 6.The Firm maintains that Adelphia has blocked access to its cable system and that it will suffer financially as a result. The Firm argues that it has suffered expenses for 15 months trying to gain access to Adelphia's system and will suffer lost revenue of $50,000 per month because it is unable to gain access. The Firm asks the Commission to issue a notice of apparent liability for $700,000, which The Firm suggests Adelphia should be ordered to pay directly to The Firm. The Firm also asks the Commission to order Adelphia to adjust its part-time rates for all its systems to conform to  76.970 of the Commission's rules; to revise its lease agreements to eliminate the requirement for an insurance policy and the restrictions on use of Adelphia's name; and to strike the provision requiring Adelphia's pre-approval of The Firm's promotional materials. 7.In response, Adelphia asserts that it has complied fully with the Commission's leased access regulations. Adelphia alleges that it has responded promptly to each of The Firm's requests for leased access information and argues that it was The Firm that prolonged the process by spreading its requests over 13 months. Adelphia asserts that the Commission has approved part-time rate schedules that charge different rates for different times of the day. Adelphia claims the Commission requires only that the cable operator have a reasonable basis for the different rates it charges and that it monitors its part-time revenues to ensure that the total monthly revenue does not exceed the maximum monthly rate. Adelphia asserts that its rates "vary based on the value of the channel for the time of day and the number of hours per month to which a lessee is willing to commit and takes into account the lost advertising revenue opportunity and the pro rate [sic] channel capacity charge." 8.Adelphia further alleges that it provided The Firm with a standard lease agreement and that the Firm made no attempt to negotiate the terms. With respect to The Firm's objections to the requirement for insurance, Adelphia asserts that insurance is needed to protect against liability for the content of The Firm's programming because Adelphia has no editorial control. Adelphia further asserts that insurance is needed lest a lessee damage Adelphia's equipment. 9.With regard to The Firm's opposition to the contract provisions concerning use of Adelphia's trade name and the alleged requirement for prior approval of promotional materials, Adelphia argues that it is entitled to protect its trade name and has the right to restrict others' use of its name. Adelphia also disputes The Firm's contention that its contract automatically requires prior approval of promotional materials and argues that such approval is only upon request and to prevent "subscriber confusion between Lessee's promotional materials and Adelphia's services and trade associations." Adelphia asserts that both of these provisions are standard in programming contracts and that The Firm neither sought clarification nor negotiated these terms.Adelphia also questions the basis for The Firm's request for damages in the amount of $700,000 and suggests that there is no substantiation for this amount. 10.The Firm responded to Adelphia's response with a "Motion for Emergency Order," ("Motion") in which The Firm disputes Adelphia's contention that The Firm did not attempt to negotiate the terms of Adelphia's leased access contract. The Firm asserts that it tried on several occasions to speak with Adelphia's local manager, but he did not return The Firm's calls. The Firm further asserts that Adelphia's response is tantamount to an admission that it violated the leased access rules because it admits adding "lost advertising revenues" into its part-time rates. The Firm argues that, in light of Adelphia's alleged "admission," the notice of apparent liability should be doubled to $1,400,000. The Firm asserts that there is no opportunity for equipment damage and, therefore, disputes Adelphia's basis for requiring insurance protection. The Firm also argues that Adelphia's assertion of a right to demand prior written consent for use of its name, and to withhold such consent, means that programmers would have no way of directing potential viewers to its programming. Similarly, with respect to prior approval of promotional materials, The Firm disputes Adelphia's rationale that this requirement is only "upon request" because it considers Adelphia's "anti-leased access nature" as an indication that it would always make this request and thus cause The Firm's programming to fail for lack of promotion. 11.Adelphia filed a response objecting to The Firm's Motion on the grounds that 76.975 of the Commission's rules does not authorize such pleadings. Adelphia also responds that it did not add lost advertising revenue into its rates but, rather, used advertising revenues at different times of days to reflect a reasonable basis for calculating the rates at different times. Adelphia also repeats its assertion that the terms of the lease agreement are negotiable, denies telling The Firm that they were non-negotiable, and reasserts that The Firm never conveyed its concerns about the terms in the agreement. Adelphia reiterates that The Firm has no basis for damages in the amount of $1,400,000. DISCUSSION 12.There are four issues presented for our determination. The first is a procedural issue concerning whether to accept unauthorized pleadings. The other three issues address the substance of the leased access rules concerning the rates Adelphia proposes to charge and its proposed contract terms requiring insurance and restricting the content of The Firm's promotional materials. A.Procedural Issue 13.At the time the pleadings in this case were filed, the Commission's leased access rules provided for an aggrieved party to file a petition for relief within 60 days of the alleged violation and for a cable operator or other respondent to respond to the petition within 30 days. The rules did not, and do not, provide for motions for emergency order, nor for replies from the petitioner, nor sur-replies from the respondent. Nevertheless, in an effort to afford the parties ample opportunity to clarify their positions, we will consider The Firm's Motion and Adelphia's reply to the extent that the information offered therein clarifies or attempts to clarify arguments made in the original pleadings and is not merely cumulative of earlier arguments. However, we note that submission of pleadings not authorized by the Commission's rules is generally disfavored. B.Part-time Rates 14. We find that the part-time rates offered by Adelphia do not comply with the leased access rules. The Firm alleges that the sum of Adelphia's part-time rates exceeds its full-time rates. Adelphia does not deny The Firm's allegation but argues that its rates have a reasonable basis, that the Commission has approved charging different rates for different parts of the day, and that, therefore, its rates comply with the leased access rules. We have previously ruled and recently reaffirmed that cable operators may charge different rates for different times of the day based upon different values for prime versus non-prime time. However, the sum of the part-time charges for any single leased access channel within a 24-hour period may not exceed the maximum rate for the leased access channel. Therefore, Adelphia must recalculate its part- time rates in compliance with  76.970(g). C.Insurance Requirement 15.With respect to Adelphia's requirement that The Firm obtain insurance coverage, we note that cable operators have been given protection from leased access program liability as provided by Section 638 of the Communications Act. Section 638 provides program liability protection "unless the program involves obscene material." We are not aware, however, of any statutory provision that completely protects cable operators from all possible program carriage liability, or from the filing of un-meritorious actions against cable operators despite the provisions of Section 638. 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 obscene programming." In Anthony Giannotti v. Cablevision Systems Corporation, an operator's right to require reasonable liability insurance coverage for leased access programming was confirmed. 16.The Commission recently addressed the issue of insurance requirements in the Second Order. The Commission declined to adopt specific conditions or limits regarding the amount of coverage or the type of insurance policy that operators 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 reasonable 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 determinations of what is a "reasonable" insurance requirement will be based on the operator's practices with respect to insurance requirements imposed on non-leased access programmers, the likelihood that the nature of the leased access programming will pose a liability risk for the operator, previous instances of litigation arising from the leased access programming, and any other relevant factors. 17.Adelphia's response to The Firm's petition and its reply to The Firm's Motion suggest that it is willing to negotiate the terms of its insurance requirement. While it may be reasonable for Adelphia to require certain types of insurance coverage from some leased access providers, the burden under the leased access rules is on the subject cable operator to show that an indemnification requirement is reasonable. Consequently, should Adelphia require that insurance coverage be provided by The Firm, Adelphia must show its reasonableness consistent with the provisions of the Second Order. D.Restrictions on Promotional Materials 18.With respect to the final issue raised by the petition -- Adelphia's requirement for prior approval of The Firm's promotional materials and restriction on the use of its trade name -- we conclude that Adelphia may contractually protect the use of its trade name but may not require prior review of The Firm's promotional materials unless The Firm has previously violated Adelphia's contractual restrictions. 19.Adelphia's Channel Lease Agreement ("Agreement") provides that the lessee may not use Adelphia's name in its advertising or for any purpose without Adelphia's prior written consent, "which consent may be withheld or delayed in [Adelphia's] sole and absolute discretion." The Agreement further requires the lessee to take all necessary measures to ensure there is no confusion between the lessee's programming and Adelphia's services and reserves Adelphia right to request prior approval of the lessee's promotional materials at least 20 days prior to use. According to the Agreement, if Adelphia does not object to the material within the 20 days, the lessee may use the material, unless and until Adelphia raises an objection. 20.The Firm specifically objects to Adelphia's unilateral restriction on the use of its trade name because such restriction seriously limits The Firm's ability to convey to potential viewers where its programming may be found. The Firm also objects to Adelphia's requirement for prior approval of The Firm's promotional materials as an infringement of its freedom to promote its programming. Adelphia responds that all of these terms are negotiable and that the Agreement does not automatically require prior approval, but merely reserves Adelphia's right to do so. We agree with The Firm that this reservation, at Adelphia's sole discretion, amounts to a mandatory requirement because the lessee has no say in whether or when the cable operator will assert its "right" to require prior approval of promotional materials. Adelphia further asserts that its right of approval is intended only to assure that there is no confusion between the lessee's programming and Adelphia's services. 21.We agree that Adelphia may protect the use of its name and take reasonable steps to prevent confusion and avoid the appearance of endorsing a lessee's programming. However, we find merit in The Firm's argument that the goal of providing commercial leased access would be seriously harmed if leased access programmers are unable to advertise their location on a cable system. Just as the Commission has followed Congressional instruction that leased access channels provide a "genuine outlet for programmers," similarly, we believe that restrictions that would effectively prevent advertising the location of leased access programming would deprive the leased access programmer of a genuine outlet for its programming. Therefore, we conclude that while Adelphia may make reasonable restrictions on the use of its trade name, it may not prevent a leased access programmer from using its name in the context of advertising its channel location. 22.Moreover, we believe that Adelphia's unilateral option to impose a twenty day period to review The Firm's advertising material is unreasonable in the absence of The Firm's failure to comply with the contractual restrictions on the use of its name. Adelphia may include reasonable contract terms as necessary to prevent confusion concerning affiliation with or sponsorship of The Firm's programming, but it may not require The Firm to submit advertising or promotional materials to Adelphia for review prior to release. The contract may provide, as a remedy for material breach of the trade name restrictions, that Adelphia subsequently may review promotional materials prior to publication. We further remind Adelphia that its contractual provisions and review process may not involve the content of the programming. E.Monetary Penalty 23.As to The Firm's request that we impose monetary penalties, we do not believe that formal administrative sanctions are warranted in this instance because of the unsettled nature of our rules at the time The Firm requested leased access on Adelphia's systems. Similarly, we deny The Firm's request for compensatory damages. The Firm complains of the costs it has incurred in filing the instant petitions. Nothing in the leased access rules provides for recovery of costs associated with the filing of a petition for relief with the Commission for alleged violations of the statutory provisions or of the Commission's regulations applicable to leased access channels. Accordingly, The Firm's request for compensation for out- of-pocket expenses of litigation will be denied. Similarly, we shall deny The Firm's request for compensatory damages, which are also not provided for in the rules. ORDERING CLAUSES 24.For the foregoing reasons, IT IS ORDERED that the petition for relief of Lorilei Communications, Inc. d/b/a The Firm in File Number CSR 4694-L IS GRANTED to the extent indicated in paragraphs 14, 21 and 22 above, and in all other respects IS DENIED. 25.Accordingly, IT IS ORDERED that Southeast Florida Cable, Inc. d/b/a Adelphia Cable Communications and West Boca Acquisition Limited Partnership of Riviera Beach, Florida shall, within fifteen (15) days from the release date of this Order, provide to Lorilei Communications, Inc. d/b/a The Firm, part-time rates for leased access on its cable systems in southeast Florida in compliance with 47 C.F.R.  76.970. 26. 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