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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 Aamen TV Ministry, Petitioner ) ) v. ) CSR 5122-L ) MediaOne, Respondent ) ) For Commercial Leased Access ) MEMORANDUM OPINION AND ORDER Adopted: November 6, 1998 Released: November 10, 1998 By the Acting Chief, Consumer Protection and Competition Division, Cable Services Bureau: INTRODUCTION 1. On October 10, 1997, Aamen TV Ministry ("Aamen") filed a petition for special relief under the provisions of 47 C.F.R.  76.975 alleging that MediaOne has imposed certain unreasonable terms and conditions in connection with the provision of commercial leased access service, and requesting reimbursement of certain allegedly unreasonable charges and fees and an assessment of punitive damages. MediaOne filed a response on November 10, 1997. BACKGROUND 2. The 1984 Cable Act imposed on cable operators a commercial leased access requirement designed to assure access to cable systems by unaffiliated third parties who have a desire to distribute video programming free of editorial control of cable operators. 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, 12 FCC Rcd 5267 (1997) ("Second Report"). ALLEGATIONS AND ARGUMENT 3. Aamen, a producer of commercial leased access programming in the south central area of Los Angeles, California, states that it has produced programming consisting of the services of various local churches for a period of nine years and airs that programming on a weekly basis on leased access channels on local cable systems. Aamen states further that it has complied with a recent MediaOne demand that broadcasters liability and errors and omissions insurance coverage in the amount of $1,000,000 be obtained. However, Aamen asserts that the insurance requirement is an unreasonable demand that creates a financial hardship for itself as well as for all producers of leased access programming in south central Los Angeles. Aamen argues that Section 638 of the Communications Act provides adequate protection for cable operators and makes the demand for insurance unnecessary. 4. Aamen also states that MediaOne is imposing a $14.00 hourly technical assistance charge and a five percent franchise fee that it claims are illegal under 47 C.F.R.  76.970. In addition, Aamen seeks reimbursement in the amount of $15,600 for technical assistance charges imposed by MediaOne at the rate of $50 per hour for two hours of programming per week for 156 weeks during 1993 - 1996. Aamen requests an assessment of $4,400 in punitive damages on the grounds that MediaOne had taken advantage of someone who was not aware until recently of Commission rulings concerning charges for technical assistance. Finally, Aamen requests an assessment of an additional $1,000,000 in punitive damages to be distributed to other minority leased access producers that MediaOne has allegedly overcharged over the years. 5. MediaOne defends the requirement for insurance coverage on the grounds that it is necessary to protect against risks incurred in transmitting leased access programming, that it always required financial assurances from all programmers and now requires broadcasters liability and errors and omissions insurance coverage from all programming networks in all future contracts. MediaOne cites two examples of instances in which it was necessary and costly to defend lawsuits involving programming transmitted on its Los Angeles cable system. MediaOne also states that all other leased access programmers on its system have obtained broadcasters liability and errors and omissions insurance coverage. 6. MediaOne states that the current $14 per hour technical assistance charge covers the cost of insertion and play of leased access program tapes, a service not provided for non-leased access programming. MediaOne states further that this charge was substantially reduced from $50 per hour following release of the Commission's Second Report, in which the requirements for technical assistance charges were clarified. Since more than sixty days have passed following the reduction of this charge and before Aamen filed the petition, MediaOne argues that Aamen's $15,600 claim for reimbursement of such charges is barred by 47 C.F.R. 76.975(d), which requires the filing of a petition for relief within sixty days from the occurrence of any alleged violation. 7. MediaOne defends the imposition of a five percent franchise fee on the grounds that the Commission permits rates for basic and cable program service tiers to include a pass through to subscribers of all franchise fees paid, and argues that it would be unfair to force subscribers to pay franchise fees for programming that is forced upon them by regulation. MediaOne also argues that nothing in the Communications Act or the Commission's regulations prohibits cable operators from seeking reimbursement for franchise fees owing on leased access revenues. Finally, MediaOne contends that punitive damages are not available under the Communications Act or the Commission's regulations, and that Aamen has not shown that any forfeitures are justified in this case. ANALYSIS AND DISCUSSION 8. A cable operator's right to require reasonable liability insurance coverage for leased access programming was initially discussed in Anthony Giannotti v. Cablevision Systems Corporation. In that case, we noted that the programmer had not shown that the cost of the required insurance coverage was either prohibitive or imposed an unreasonable cost of doing business as an independent program producer. The Commission's Second Order confirmed that the regulations concerning reasonable terms and conditions of use for commercial leased access do not deny cable operators the right to require reasonable liability insurance coverage for leased access programming. Noting that the costs and expenses attributable to defending a prosecution for carriage of an allegedly obscene program may be covered by such insurance, the Commission previously stated, "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." Specific conditions or limits regarding the amount of coverage or the type of insurance policy that operators may require were not adopted in the Second Order, on the grounds that "a specific restriction might not be appropriate for all situations." Instead, the Commission stated that insurance requirements must be reasonable in relation to the objective of the requirement. The Commission further stated that determinations of 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 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. The burden of proof in establishing reasonableness was placed on cable operators. 9. On reviewing this record, we are satisfied that MediaOne established the reasonableness of the insurance requirement in this particular case. MediaOne demonstrated that financial assurances are required from all programmers and that broadcasters liability and errors and omissions insurance coverage are now required from all programming networks in all future contracts. MediaOne also established a recent history of defending costly lawsuits involving programming transmitted on its Los Angeles cable system. Finally, in this connection, all other leased access programmers on MediaOne's cable system have been required to obtain broadcasters liability and errors and omissions insurance coverage. 10. The Commission considered the level of technical support that cable operators are required to provide in the Rate Order. There the Commission noted that technical cooperation between the cable operator and the leased access programmer is likely to be necessary for the programming to be delivered over a cable system The Commission stated that operators will be required to provide programmers with "the minimal amount of technical support, whether it be equipment, technology or other miscellaneous support, which would be necessary for the programmer to present its material on the air." The Commission further explained this requirement by adding that a cable operator must offer to leased access programmers "the same services as would be offered to comparable programming services that use the operator's non-leased access channel capacity." In the Second Report the Commission further clarified these requirements and made it clear that the leased access rate determined under Section 76.970 includes the cost of technical support ordinarily provided in common to other programmers. Under this clarification of the requirements of Section 76.971, a cable operator may not impose an additional charge for technical support ordinarily provided in common to other programmers. Consequently, MediaOne may impose charges in addition to the charges determined under Section 76.970 for the reasonable cost of other equipment and technical support actually provided to Aamen only if that equipment and technical support is not also provided with other non-leased access programming. 11. The record in this case shows that MediaOne does not provide other programmers with the program tape insertion and replay service that is provided to Aamen. The $14 hourly charge for the tape insertion and replay service does not appear unreasonable on its face, provided the service is actually provided on an hourly basis. 12. Aamen's request for reimbursement in the amount of $15,600 related to technical assistance charges imposed by MediaOne during 1993 - 1996 will be dismissed as untimely filed. The Commission's leased access rules require that petitions making such claims be filed within sixty days from the occurrence of the events on which the claim is based. See 47 C.F.R. 76.975(d). Aamen filed the petition making this request on October 10, 1997, which is more than sixty days after the 1993 - 1996 period during which these charges were imposed. 13. On the other hand, we find that MediaOne has failed to justify the inclusion of a five percent franchise fee in the charges for leased access service provided to Aamen. First, we reject MediaOne's suggestion that overhead costs represented by franchise fees or any other factor may be imposed on leased access programmers on the basis of an assertion that cable subscribers prefer not to receive leased access programming. In the Rate Order, the Commission rejected the cost-of-service ratemaking option because of difficulties in justifying costs. Second, franchise fees are included in "the total amount the operator receives in subscriber revenue per month for programming," which is utilized in establishing the average implicit fee under the Commission's maximum reasonable leased access rate formula. Consequently, franchise fees are already accounted for in the calculation of the implicit fee. 14. Finally, we reject Aamen's request for the imposition of punitive damages or other sanctions on MediaOne. Nothing in the Communications Act authorizes the Commission to impose punitive damages in connection with the provision of commercial leased access services. ORDERING CLAUSES 15. Accordingly, IT IS ORDERED that the petition for relief of Aamen TV Ministry in file No. CSR 5122-L IS GRANTED IN PART and within thirty days from the release date of this order MediaOne SHALL CEASE imposing on Aamen TV Ministry a five percent franchise fee and refund to Aamen TV Ministry all franchise fees collected after August 11, 1997, and in all other respects the petition IS DENIED. 16. This action is taken pursuant to authority delegated by Section 0.321 of the Commission's rules, 47 C.F.R.  0.321. FEDERAL COMMUNICATIONS COMMISSION Deborah Klein, Acting Chief Consumer Protection and Competition Division Cable Services Bureau