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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 ) ) FAL-COMM COMMUNICATIONS, ) Petitioner, ) ) vs. ) CSR-4874-L ) CSR-4938-L CONTINENTAL CABLEVISION OF ) MICHIGAN, INC., ) Respondent ) MEMORANDUM OPINION AND ORDER Adopted: August 27, 1997 Released: August 29, 1997 By the Chief, Cable Services Bureau: INTRODUCTION 1. Fal-Comm Communications ("Fal-Comm") has filed a petition for relief pursuant to 76.975 of the rules of the Federal Communications Commission against a cable television system owned by Continental Cablevision of Michigan, Inc. ("Continental") serving Canton, Northville, and Plymouth, Michigan, alleging violations of 612 of the Communications Act of 1934, as amended. Continental has opposed Fal-Comm's petition, and Fal-Comm has replied. 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. ARGUMENTS OF THE PARTIES 4. Fal-Comm complains that Continental's system has failed to afford Fal-Comm leased access pursuant to rates in accordance with the Commission's formula. Fal-Comm submits copies of correspondence it has sent to Continental concerning these issues. This correspondence outlines several attempts by Fal-Comm to secure leased access upon Continental's system throughout most of 1996. In this correspondence, Fal-Comm alleges that Continental quoted rates in excess of 300% of the Commission's formula. In addition, Fal-Comm alleges that the system has only a single leased access channel, despite having 78 activated channels. Finally, on December 5, 1996. Fal-Comm filed its petition. 5. In opposition to Fal-Comm, Continental argues that Fal-Comm's petition should be dismissed for failure properly to serve a full copy of the petition on Continental, and for failure to meet the necessary burden of proof. Continental states that Fal-Comm only served Continental with a one-page letter alleging Continental's failures, but failed to include the six exhibits constituting Fal-Comm's 1996 letters to Continental. Accordingly, Continental states that it cannot properly respond to Fal-Comm, and the petition should be dismissed for violating 76.975(c) of the Commission's rules. In addition, Continental argues that Fal-Comm has failed to "show by clear and convincing evidence that [Continental] has violated the Commission's leased access provisions . . . ." Continental submits copies of correspondence with Fal- Comm, together with Federal Express records. Continental argues that these copies and records show that Continental did send a leased access application form to Fal-Comm on August 30, 1996, which Fal-Comm returned on September 13, 1996, and that Fal-Comm did not respond to Continental's further correspondence which specified deficiencies in Fal-Comm's applications. Continental states that these deficiencies included fundamental information about Fal-Comm's business and lack of an acceptable insurance policy. Continental submits a copy of a letter it sent to Fal-Comm dated October 21, 1996, in which Continental specified various deficiencies in Fal-Comm's application, including: (1) identifying Fal-Comm as an "individual"; (2) not supplying information on the company's annual gross income for the most current tax year; (3) not providing a broadcasters liability insurance policy with a minimum $1 million coverage amount; and (4) not stating how Fal-Comm's programming will be marketed to Continental's subscribers. In addition, Continental's letter seeks additional information and clarification with respect to certain portions of Fal- Comm's application. These items include: (1) whether the music from local bands to be used in Fal-Comm's programming is original; (2) additional explanation of the type of advertising and acknowledgments to be displayed on Fal-Comm's programming; and (3) whether Continental's name or logos will be used in Fal- Comm's marketing. Continental contends that its requests are reasonable, citing Anthony Giannotti vs. Cablevision Systems Corporation, et al., and notes that Fal-Comm has yet to remedy these deficiencies. 6. In reply, Fal-Comm states that it served the missing six exhibits on Continental on January 20, 1997. Fal-Comm further states that Continental continues to deny Fal-Comm's request for leased access. Fal-Comm does not respond to Continental's claim that Fal-Comm's leased access application form was deficient. DISCUSSION 7. Initially we note that Fal-Comm does not deny that it failed to serve a complete copy of its petition including all accompanying exhibits upon Continental. Fal-Comm certifies that it has remedied this deficiency. Continental does not dispute this. We do not believe that either party to this proceeding will be prejudiced by our consideration of Fal-Comm's petition. 8. At the time Fal-Comm initially made its request to Continental for leased access in February of 1996, the Commission's rules did not specify a specific time period for providing leased access information. At that time, 76.970(e) required that "[u]pon request, a schedule of commercial leased access rates shall be provided to prospective leased access programmers." However, Continental's submitted correspondence shows that Continental did not respond to Fal-Comm until more than six months after Fal- Comm's initial request. Continental admits in this correspondence that it did not respond to Fal-Comm's requests in a timely fashion, and we cannot find a six month response time to have been reasonable. Because of the unsettled nature of our leased access rules at the time of Fal-Comm's initial request, we will take no administrative action at this time. We nevertheless caution Continental that we expect it to adhere to all mandated response times under our new rules. 9. Turning to Fal-Comm's substantive complaints, as we have noted above, the Commission's leased access rules and regulations have been modified significantly, in particular since Fal-Comm filed its complaint. We do not believe that it would be useful to require that the affected parties submit the necessary documentation that would allow an examination of Continental's rates at the time Fal-Comm made its request, to determine whether these rates comported with rules that have now been superseded. We caution Continental, however, that we expect it to adhere fully to our current leased access rules. With regard to Fal- Comm's allegation that Continental's system has only a single leased access channel, we note that in the Second Order we confirmed a prior holding that "a cable operator is not required to open an additional leased access channel if a programmer's request can be accommodated in a comparable time slot on an existing leased access channel." We further concluded that a cable operator need not open an additional channel for part-time leased access use until existing part-time channels were "substantially filled" with leased access programming, and defined "substantially filled" as having leased access programming occupy 75% or more of the channels' programming day. 10. Turning to the merits of Fal-Comm's generalized complaint that Continental is denying Fal- Comm leased access, we note that with regard to the requirement for a certificate of indemnification insurance, cable operators have been given protection from leased access program liability as provided by 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 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 that "this is a reasonable term and condition relating to use of leased access channel capacity in light of the removal by Congress in amended section 638 of cable operator immunity for carriage of obscene programming." In Anthony Giannotti, supra, an operator's right to require reasonable liability insurance coverage for leased access programming was confirmed. In that case, we noted that the programmer had not shown that the cost of the required insurance coverage is either prohibitive or imposes an unreasonable cost of doing business as an independent program producer. 11. In its response to Continental, Fal-Comm merely asserts that Continental is attempting to deny Fal-Comm leased access. This issue has been settled in Anthony Giannotti, supra. 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 Fal-Comm's petition was filed, which is set out in Anthony Giannotti, supra, we cannot find that Continental violated the leased access rules then in effect by requesting an indemnification policy. 12. The Commission recently revisited this subject and modified the insurance requirements in the Second Order. 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 small independent producers. One party requested that the Commission set a limit on the required 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 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: 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. 13. In this instance, Continental has not explained to Fal-Comm why its programming will impose a liability risk for the operator or what Continental's practices are with regard to non-leased access programming. Thus, we find that if Continental chooses to continue to impose insurance requirements upon Fal-Comm, or other leased access programmers, it must show that its requirements are reasonable and consistent with the provisions of the Second Order. 14. In view of the above, we will require Continental to provide Fal-Comm with an application and rate card for leased access services within 15 days from the release date of this order. Previously, Continental apparently had refused to provide such prior to Fal-Comm first submitting information relating to its company's annual gross income, how its leased access programming will be marketed, whether music carried will be original, and information relating to proposed advertising methods. In its Second Order, the Commission prohibited cable operators from asking for additional information prior to responding to a request for leased access information made by a potential programmer. The Commission concluded it "remain[s] concerned that requests for programmer information will be used by operators to discourage leased access use, we will not allow operators to ask for any information before responding to a leased access request unless the information is necessary to prepare the required response." We do not believe that the above information requested of Fal-Comm is necessary for Continental to prepare the required response to Fal-Comm's request for leased access information ORDERING CLAUSES 15. Accordingly, IT IS ORDERED, that the Complaint of Fal-Comm Communications in File No. CSR-4874-L IS GRANTED to the extent indicated in paragraphs 8, 9, 13 and 14, supra, and in all other respects IS DENIED. 16. IT IS FURTHER ORDERED, that the Complaint of Fal-Comm Communications in File No. CSR-4938-L IS DISMISSED. 17. IT IS FURTHER ORDERED THAT, Continental will provide Fal-Comm with the information required by 76.970(h) of the Commission's rules within 15 days of the release date of this order. 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