WPC$ 2BJZ Courier3|a ix6X@`7X@HP LaserJet 5Si Room 907HPLAS5SI.PRSx  @\{$Q_X@2'6KF Z<3|a "i~'^09CSS999S]+9+/SSSSSSSSSS//]]]Ixnnxg]xx9?xgxx]xn]gxxxxg9/9MS9ISISI9SS//S/SSSS9?/SSxSSIP!PZ9+ZM999+999999S9S/xIxIxIxIxIlnIgIgIgIgI9/9/9/9/xSxSxSxSxSxSxSxSxSxSxIxSxRxSxSxS]SxIxIxInInInZnIxigIgIgIgIxSxSxSxZxSxZxS9/9S999Su]ZZxSg/gCg9g9g/xSbxSxSxSxSxn9n9n9]?]?]?]ZgFg/gMxSxSxSxSxSxSxxZgIgIgIxSg9xS]?g9xSi+SS88WuuuuuuuuuuuuuuuuuuuuuuuuuuuuuuuuuuuuuuuuuuuuuuuuxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxNI\\>>>\g0>03\\\\\\\\\\33gggQyyrg>Frgygrr>3>T\>Q\Q\Q>\\33\3\\\\>F3\\\\QX%Xc>0cT>>>0>>>>>>\>\3QQQQQwyQrQrQrQrQ>3>3>3>3\\\\\\\\\\Q\Z\\\g\QQQyQyQycyQtrQrQrQrQ\\\c\c\>3>\>>>\gcc\r3rIr>r>r3\l\\\\y>y>y>gFgFgFgcrMr3rT\\\\\\crQrQrQ\r>\gFr>\t0\\=!=WxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxNBnnBT\>Q\\\\\3;\7;\7>>QQ\??n\\nBnnBmgg>Q\7"yyyy\njc\gnn\"i~'^5>g\\>>>\g0>03\\\\\\\\\\>>ggg\yyrF\yrgyy>3>j\>\gQgQ>\g3>g3g\ggQF>g\\\QI(I_>0_j>>>0>>>>>>\>g3\\\\\QyQyQyQyQD3D3D3D3g\\\\gggg\\g\\\\pg\\\QQ_QyQyQyQyQ\\\_\gjF3FgF>Fgg__gy3ySy>yIy3ggg\\QQQgFgFgFg_y^y>yjgggggg_yQyQyQgy>ggFy>\0\\=2=WxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxNBnnBa\>\\\\\\7>\7>\7>>\\\??n\\nBnnBsgg>\\7"yyyy\nlc\gnn\2Kh KKKI"i~'^ %,77\V%%%7>%7777777777>>>0eOIIOD>OO%*ODaOO>OI>DOOgOOD%%37%07070%777V7777%*77O77055;%;3%%%%%%%%%7%7O0O0O0O0O0aHI0D0D0D0D0%%%%O7O7O7O7O7O7O7O7O7O7O0O7O6O7O7O7>7O0O0O0I0I0I;I0OED0D0D0D0O7O7O7O;O7O;O7%%7%%%7M>;;O7DD,D%D%DO7AO7O7O7O7aOI%I%I%>*>*>*>;D.DD3O7O7O7O7O7O7gOO;D0D0D0O7D%O7>*D%O7E77%%WMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMMxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxN(BB(37%07777j7#TT7!#TT7T!%%007n&&Bn77lBTn(nBB(AZZ>>n%07\n!"IIIITTenn7TnB@;7>lBBn7"i~'^"(22TN"""28"2222222222888,\HBBH>8HH"&H>XHH8HB8>HH^HH>"".2",2,2,"222N2222"&22H22,006"6."""""""""2"2H,H,H,H,H,XAB,>,>,>,>,""""H2H2H2H2H2H2H2H2H2H2H,H2H1H2H2H282H,H,H,B,B,B6B,H?>,>,>,>,H2H2H2H6H2H6H2""2"""2F866H2>>(>">">H2;H2H2H2H2XHB"B"B"8&8&8&86>*>>.H2H2H2H2H2H2^HH6>,>,>,H2>"H28&>"H2?22!!WFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxN$<<$.2",2222`2 LL2 LL2L"",,2d""M\\>>>\}0>03\\\\\\\\\\>>}}}\rryrr>Qygyrr\grrggF3FM\>\\Q\Q3\\33Q3\\\\FF3\QyQQFI3Ic>0cM>>>0>>>>>>\>\3r\r\r\r\r\yyQrQrQrQrQ>3>3>3>3y\\\\\\\\\gQr\\\\gQ\r\r\r\r\yQyQycyQnrQrQrQrQ\\\c\c\>3>\>>>\\ccyQg3gBg>g;g3y\jy\y\\\yrFrFrF\F\F\FccgBg3gM\\\\\\ygcgFgFgF\g>y\\Fg>g\n0\\=(=WddddddddddddddddddddddddddddddddddddddddNBnnB_\F\\\\\\3;\7;\7>>gg\??n\\nBnnBb\\>g\7"yyyy\njc\}nn\"i~'^09FSS999Sq+9+/SSSSSSSSSS99qqqSggnxggxx9In]nxgxgS]xgg]]?/?FS9SSISI/SS//I/xSSSS??/SInII?C/CZ9+ZF999+999999S9S/gSgSgSgSgSnnIgIgIgIgI9/9/9/9/nSxSxSxSxSxSxSxSxS]IgSxSxSxS]IxSgSgSgSgSnInInZnIxdgIgIgIgIxSxSxSxZxSxZxS9/9S999SSZZnI]/]<]9]5]/nSanSnSxSxSng?g?g?S?S?S?ZZ]<]/]FxSxSxSxSxSxSn]Z]?]?]?xS]9nSS?]9]Sd+SS8%8WuuuuuuuuuuuuuuuuuuuuuuuuuuuuuuuuuuuuuuuuuuuuuuuuddddddddddddddddddddddddddddddddddddddddN-ԍCommunications Act 628(c)(2)(D), 47 U.S.C.  548(c)(2)(D). j   S - ` Qx12.` ` EchoStar argues that FX, a vertically integrated programming vendor, cannot enter into  xor enforce an exclusive contract with a cable operator in areas not served by a cable operator ("unserved  S - x\areas").' D3 {O.- xԍEchoStar Complaint at 12; see also Communications Act 628(c)(2)(C), 47 U.S.C.  548(c)(2)(C); 47 C.F.R.  {O- 76.1002(c)(1).   In areas served by a cable operator ("served areas"), EchoStar notes that Commission rules  xjprohibit entering into such exclusive contracts unless the parties submit a petition for exclusivity and the  S0- xCommission makes a determination that the contract is in the public interest.(0j D3 {O:- xԍEchoStar Complaint at 1213; see also Communications Act 628(c)(2)(D), 47 U.S.C.  548(c)(2)(D); 47 C.F.R. 76.1002(c)(2). Echostar submits that FX  xyhas filed no such petition. Echostar argues that this requirement applies not only before entering into an  S- xexclusive contract in a served area, but also when "seeking to enforce" such a contract.u) D3 {OD-ԍEchoStar Complaint at 10 and 13; see also 47 C.F.R.  76.1002(c)(5).u EchoStar asserts  xthat, in served areas, the Commission's rules prohibit not only "enter[ing] into exclusive contracts," but  x"engag[ing] in any practice, activity or arrangement tantamount to an exclusive contract" unless the  Sh-Commission first determines that the practice, activity or arrangement is in the public interest.w*hV D3 {O^"-ԍEchoStar Complaint at 910; see also 47 C.F.R.  76.1002(c)(2). w  S- ` x13.` ` EchoStar argues that even if a contract does not fall within the exclusivity rules at the  xtime it was executed, it may later become subject to those rules in a situation where, for example, one of  S- xthe parties to the contract becomes affiliated with a cable operator.A+D3 yOP'-ԍEchoStar Complaint at 10.A EchoStar argues that because FX"x+,`(`(883"  x[is now affiliated with TCI, the nation's largest cable operator, FX should be prevented from enforcing its  xexclusive contracts with cable operators and must offer its programming to all competing MVPDs,  S- xincluding EchoStar.1,D3 {O-ԍId.1 EchoStar argues that with one exception, the grandfathering of exclusive contracts  xentered into prior to June 1, 1990, the 1992 Cable Act does not draw distinctions based on when an  S`- x[exclusive contract was executed.-`ZD3 {OZ-ԍEchoStar Reply at 5; see also Communications Act 628(h), 47 U.S.C.  548(h) and 47 C.F.R  76.1002(e).Ī EchoStar contends that FX does not explain why its contracts should  S8-be treated differently than any other exclusive contract entered into after June 1, 1990.1.8D3 {O -ԍId.1  S- ` nx14.` ` FX admits that it is a vertically integrated programming vendor and has exclusive contracts  S- xjwith cable operators throughout the country.8/~D3 yO -ԍFX Answer at 17.8 In FX's view, however, it should be permitted to enforce  xthese exclusive contracts, despite its subsequent vertical integration with TCI, because FX was not  x]vertically integrated at the time these contracts were entered into and there is no evidence that the  SH - xcontracts were entered into for anticompetitive reasons.80H D3 {O-ԍId. at 10.8 FX emphasizes the prospective language of the  x[Commission's orders implementing the program access rules relating to exclusive contracts and practices,  xciting such language as "any cable operator seeking to execute an exclusive contract" must obtain the  S - x{Commission's approval "before doing so."t1 D3 {O-ԍId., quoting Program Access Report and Order, 8 FCC Rcd at 3386.t According to FX's interpretation, the public interest  S - x=determination required to be made in these situations applies only to proposed exclusive contractsp2 2 D3 {Oz-ԍId. at 11; see also 47 C.F.R.  76.1002(c)(4)(5). p and  xkis not applicable to an exclusive contract that was lawfully entered into by a nonvertically integrated  SX- x programmer.93X D3 yO-ԍFX Answer at 11. 9 FX contends that Congress expressly exempted the verticallyintegrated contracts of  xyprogrammers if they were entered into on or before June 1, 1990 and thus declined to absolutely prohibit  S- x=exclusive contracts.4T D3 {O-ԍFX Answer at 6; see also 47 U.S.C.  548(h)(1), 47 C.F.R.  76.1002(e). FX argues that it would be illogical to interpret Section 628 to invalidate exclusive  xcontracts entered into by nonvertically integrated programmers when the statute explicitly allows  S-grandfathered exclusive contracts to remain in effect.95D3 yO>"-ԍFX Answer at 67.9  Sh- ` x15.` ` With the sole exception of grandfathered contracts permitted by Section 628(h),6hvD3 yO~%- xԍCommunications Act 628(h), 47 U.S.C.  548(h). FX makes no assertion that the contracts at issue are subject to the grandfathering exception. the  xprogram access provisions of the Communications Act prohibit exclusive contracts with cableaffiliated"@6,`(`(88"  x.programming vendors unless the Commission makes a determination that the exclusive arrangement is in  xthe public interest. We disagree with FX's argument that only programmers that were vertically integrated  xat the time Section 628 was enacted are required to file a petition for exclusivity with the Commission.  xThe Communications Act and the Commission's rules acknowledge that exclusive contracts that were once  S`- xpermissible under the Communications Act may subsequently become prohibited.7Z`D3 {O- xԍSee Communications Act  628(h)(2), 47 U.S.C.  548(h)(2) ("A contract that was entered into on or before  xwJune 1, 1990, but that is renewed or extended after the date of enactment of this section [October 5, 1992] shall not be exempt under paragraph (1) [general grandfathering provision]"); 47 C.F.R  76.1002(e)(2). The Commission's  xLrules expressly provide procedures for the Commission to make a public interest determination not only  xwhen a vertically integrated programmer "enter[s]" into an exclusive contract, but also when a vertically  S- xintegrated programmer "seek[s] to enforce" an exclusive contract.N8D3 {Or -ԍSee 47 C.F.R. 76.1002(c)(5).N In this proceeding, FX seeks to  xenforce its exclusive contracts with unidentified cable operators to preclude selling its programming to  x]Echostar in such cable operators' franchise areas. Prior to enforcing these contracts as a vertically  Sp- xyintegrated programmer, FX was required by our rules to obtain a public interest determination permitting  xMsuch exclusivity. FX did not seek such a determination and therefore is precluded from enforcing the  S -exclusive aspect of such contracts.9 |D3 {O<- xJԍIn support of its argument, EchoStar cites a previous Commission decision, Cablevision Industries Corporation  {O- xand SciFi Channel (Cablevision Industries), where the Commission applied the exclusivity prohibition to a non xvertically integrated program vendor which subsequently became vertically integrated after entering into an exclusive  {O- xcontract with a cable operator. EchoStar Complaint at 1012, citing Cablevision Industries Corporation and SciFi  {Ob- x,Channel, 10 FCC Rcd 9786 (1995). FX argues that, at most, the Commission's Cablevision Industries decision, the  x;Commission decided that the continued enforcement of the exclusive contract at issue was not in the public interest  xbecause petitioners failed to make the necessary showing under the five public interest factors set forth in Section  {O- x76.1002(c)(4) of the Commission's rules. FX Answer at 14; see also 47 C.F.R.  76.1002(c)(4).  Although the matter  xhwas not discussed separately, the Cablevision Industries decision was clearly based on the understanding of the parties and the Commission that the prohibition against exclusive contracts was applicable.   S - ` x16.` ` FX argues that its vertical integration subsequent to entering into the contract creates an  xjexception to Congress' mandate prohibiting exclusivity, but has been unable to demonstrate any basis for  xthat exception in either the statute or the legislative history. We do not think that the Communications  x]Act silently validates the exclusive contracts of programmers that subsequently became vertically  xintegrated. Through its inclusion of the grandfathering exception, Congress demonstrated that it did not  xintend the prohibition against exclusive contracts in served areas to apply to a certain category of exclusive  S- xcontracts (i.e., exclusive contracts entered into on or before June 1, 1990) and drafted express language  x[to implement that policy. FX asks us to find that Congress created a second, unwritten exception to the  xprohibition against exclusive contracts. The plain language of Section 628 contains no such exception.  xIf Congress intended to create such an exception, we are confident that it would have done so expressly  xas it did with exclusive contracts entered into before June 1, 1990. FX is a vertically integrated  xlprogrammer, subject to the program access rules and, based on the record, FX's enforcement of an  xexclusive contract violates the prohibition on exclusive contracts in Section 628(c)(2)(D) of the Communications Act.  S-  Sz- ` ox17.` ` FX argues that by granting Echostar's complaint, the Commission would impinge upon  xFX's First Amendment rights. We disagree. The United States Court of Appeals for the District of"R9,`(`(88"  x[Columbia Circuit examined the program access provisions of the 1992 Cable Act under the "intermediate  S- xscrutiny" standard of review.:D3 {O@-ԍSee Time Warner Entertainment Co., L.P. v. FCC, 93 F.3d 957, 978 (D.C. Cir. 1996). In holding the program access provisions to be constitutional, the District of Columbia Circuit stated that:  S`- Xxthe vertically integrated programmer provisions at issue here are likewise justified by . .  2. special characteristic[s] of the affected companies: both the bottleneck monopoly power  Dexercised by cable operators . . . and the unique power that vertically integrated  S-companies have in the cable market.c;ZD3 {O -ԍId. (internal quotation marks and citations omitted).c   xFX asserts that "the court would have reached a different result had it contemplated the argument that the  x=statute extends to contracts entered into by nonvertically integrated programmers. The court found the  xlstatute narrowly tailored specifically because it regulated only the conduct of vertically integrated  S - x[companies."L< D3 yO-ԍFX Answer at 15 (footnotes omitted).L FX submits no evidence or precedent to support its First Amendment claims. In view of  x0the District of Columbia Circuit's broad affirmance of the constitutionality of the program access  xprovisions, FX has failed to establish that its First Amendment rights have been impinged. FX  xlacknowledges that the District of Columbia Circuit concluded that the statute is narrowly tailored  xspecifically because it regulates only the conduct of vertically integrated programmers supports our  xkdecision. It is now a vertically integrated programmer. FX's activities came under the scrutiny of the  xprogram access provisions only after FX became vertically integrated and attempted to enforce its prohibited exclusive contracts.  S- ` ox18.` ` FX argues that by granting Echostar's complaint, the Commission would subject FX to  xbreach of contract and damage claims. The program access provisions of the Communications Act,  xincluding the exclusivity prohibition and public interest factors, were enacted as part of the 1992 Cable  xNAct. These provisions clearly established that a vertically integrated programmer entering into or  xenforcing an exclusive contract after June 1, 1990 must seek a public interest determination to validate  xLsuch contract. It is undisputed that all of the exclusive contracts at issue in this proceeding were entered  xinto well after the enactment date of the 1992 Cable Act. FX knew, or should have known, that, if  x.subsequent to the execution of such exclusive contracts a cable operator obtained an attributable interest  xLin FX, the exclusive aspects of such contracts would be invalid absent a public interest determination by  x=the Commission. The circumstances that brought FX to this juncture were entirely within FX's control.  x FX entered into exclusive contracts. FX agreed to the business arrangement that caused it to become a  xvertically integrated programmer. FX failed to seek a public interest determination from the Commission.  x These were voluntary actions. That these actions have resulted in the instant complaint, and that the  xexclusivity prohibition of the law subjects FX to breach of contract liability, is not a justifiable defense.  S`- ` ox19.` ` We next turn to Echostar's allegation that FX's refusal to sell EchoStar its programming  S8- xconstitutes an unreasonable refusal to sell in violation of Section 628(c) of the Communications Act and  xSection 76.1002(b) of the Commission's rules, which prohibit discrimination by a satellite cable  xprogramming vendor in which a cable operator has an attributable interest in the prices, terms, and" |<,`(`(88t""  S- xconditions of sale of satellite cable programming between competing MVPDs.=D3 {Oh-ԍCommunications Act 628(c)(2)(B), 47 U.S.C.  548(c)(2)(B); see also 47 C.F.R.  76.1002(b). The Commission has  xlstated that the burden is on the complainant to show that: (i) the defendant is a satellite broadcast  xprogramming vendor or a vertically integrated satellite cable programming vendor that meets the  S- xattribution standards outlined in the Commission's rules; and (ii) the defendant, as between the  xjcomplainant and another MVPD competitor, has engaged in some form of nonprice discrimination, such  S8- xas an unreasonable refusal to sell its programming to the complainant.a>8ZD3 {O2-ԍProgram Access Report and Order, 8 FCC Rcd at 3422.a To avoid a decision in favor of  xthe complainant where the defendant has refused to sell its programming to the complainant, the defendant  xmust establish that its refusal to sell its programming to the complainant is not unlawfully discriminatory  S-because it is justified by legitimate business reasons.1?D3 {OL -ԍId.1  Sp- ` ox20.` ` The first element requires that the defendant must be a satellite broadcast programming  xvendor or a satellite cable programming vendor that meets the Commission's attribution standards, FX  S - xdoes not dispute and we find that FX is a satellite cable programming vendor in which a cable operator  xhas an attributable interest. The Commission's attribution standard set forth at Section 76.1000(b) and  xthe notes to Section 76.501 of the Commission's rules, state that a cable operator will be considered to  xhave an attributable interest in a programming vendor if the cable operator holds five percent or more of  xthe stock of the programmer, whether voting or nonvoting, or if the operator holds limited partnership  SX- xequity interest of five percent or more.@X~D3 {Ov-ԍ47 C.F.R. 76.501 Note, 76.100(b); Program Access Report and Order, 8 FCC Rcd at 3370. Defendants acknowledge that through its whollyowned  x-subsidiary, Liberty Media Corporation, TCI has a 50% ownership interest in FX and that FX is a "satellite  S-cable programming vendor" in which a cable operator has an "attributable interest."AD3 {O-ԍCommunications Act 628(c)(2)(B), 47 U.S.C.  548(c)(2)(B); see also 47 C.F.R.  76.1002(b).  S- ` x21.` ` With respect to the element of discrimination between competing MVPDs, the Commission  xhas stated that in order to establish that another distributor is a competitor for purposes of showing  xdiscrimination under Section 76.1002(b), there must be "some overlap in actual or proposed service  S@- xarea."aB@D3 {O-ԍProgram Access Report and Order, 8 FCC Rcd at 3400.a FX has stated that, prior to the formation of a joint venture with News Corporation and TCI, FX  S- xentered into distribution agreements with nearly all of the major cable operators in the country.9C4 D3 yO -ԍFX Answer at 34.9 Echostar  S- xoffers its service on a nationwide basis. We therefore find that Echostar competes with cable operators  x[in every franchise area in the continental United States. In addition, the complainant must show that the  xdefendant discriminates between the complainant and its competitor in the sale of the programming in  Sx- xquestion.:Dx D3 {O%-ԍId. at 3422.: FX, by virtue of its exclusive agreements with cable operators, and its refusal to sell to  SP-Echostar, discriminates between the complainant and its competitors. "( V D,`(`(88"Ԍ S- ` x22.` ` As to the requirement that a complainant show the existence of nonprice discrimination  x.by defendant, the Commission has recognized that an "unreasonable refusal to sell" may constitute non S- xprice discrimination under Section 628(c).aED3 {O-ԍProgram Access Report and Order, 8 FCC Rcd at 3412.a The Commission, however, has cautioned that unreasonable  S- xrefusals to sell must be distinguished from refusal to sell based on legitimate reasons.1FZD3 {O-ԍId.1 Other than  xasserting an exclusive contract, FX offers no evidence that its refusal to sell is based on legitimate business reasons.  S- ` Bx23.` ` We find that FX unreasonably has refused to sell its programming to Echostar. We do  x=not agree with FX that its once valid exclusive contracts justify its refusal to sell to Echostar. FX offers  xNno additional support which might constitute a legitimate business reason for its refusal to sell its  x!programming to Echostar. We find that FX's refusal to sell is a violation of Section 628(c) of the Communications Act and Section 76.1002(b) of the Commission's rules.  S - ` x24.` ` In light of our finding in this matter regarding FX's violations of Sections 628(c), we find  xit unnecessary to address EchoStar's unfair method of competition argument pursuant to Section 628(b)  xof the Communications Act and Section 76.10001 of the Commission's rules. We also decline to award  xdamages against FX at this time. We will not foreclose, however, the imposition of appropriate  xadministrative remedies, including forfeitures, should FX fail to comply with the directives set forth herein.  S- VI.xORDERING CLAUSES  S- `  x25.` ` Accordingly, IT IS ORDERED that the program access complaint filed by EchoStar  Sh- xCommunications Corporation against Fox/Liberty Networks, LLC and FX Networks, LLC IS GRANTED  xand FX Networks, LLC is required within 45 days of the release of this order to make its programming  x=available to EchoStar Communications for distribution over its DBS system on nondiscriminatory terms and conditions.  S- ` Bx26.` ` This action is taken by the Acting Chief, Cable Services Bureau, pursuant to authority  Sx-delegated by Section 0.321 of the Commission's rules.<GxD3 yO-ԍ47 C.F.R. 0.321.< x` `  hhFEDERAL COMMUNICATIONS COMMISSION x` `  hhJohn E. Logan x` `  hhActing Chief, Cable Services Bureau