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NewRomanXA\  P|P\  `$Times NewRomanXN\  P}XP\  `$Times NewRomanXXN\  P~XP\  `$Times NewRomanXA\  PP\  `$Times NewRomanA\  PP\  `$Times NewRomanA\  PP\  `$Times NewRomanXN\  PXP\  `$Times NewRomanXA\  PP\  `$Times NewRomanXN\  PXP\  `$Times NewRomanXXN\  PXP\  `$Times NewRomanXA\  PP\  `$Times NewRomanA\  PP\  `$Times NewRomanA\  PP\  `$Times NewRomanXN\  PXP\  `$Times NewRomanXA\  PP\  `$Times NewRomanXN\  PXP\  `$Times NewRomanXXN\  PXP\  `$Times NewRomanXA\  PP\  `$Times NewRomanA\  PP\  `$Times NewRomanA\  PP\  `$Times NewRomanXN\  PXP\  `$Times NewRomanXXN\  PXP\  `$Times NewRomanXXN\  PXP\  `$Times NewRomanXXN\  PXP\  `$Times NewRomanXXN\  PXP\  `$Times NewRomanXXN\  PXP\  `$Times NewRomanXXN\  PXP\  `$Times NewRomanXXN\  PXP\  `$Times NewRomanXXN\  PXP\  `$Times NewRomanXA\  PP\  `$Times NewRomanXN\  PXP\  `$Times NewRomanXA\  PP\  `$Times NewRomanXN\  PXP\  `$Times NewRomanXA\  PP\  `$Times NewRomanXN\  PXP\  `$Times NewRomanX:\  PP\  `$Times NewRomanXN\  PXP\  `$Times NewRomanX:\  PP\  `$Times NewRomanXN\  PXP\  `$Times NewRomanXXN\  PXP\  `$Times NewRomanXXN\  PXP\  `$Times NewRomanXXN\  PXP\  `$Times NewRomanXXN\  PXP\  `$Times NewRomanXXN\  PXP\  `$Times NewRomanXXN\  PXP\  `$Times NewRomanX#|x2K8XKێ&"i~'^:DpddȨDDDdp4D48ddddddddddDDpppd|Ld|pȐD8DtdDdpXpXDdp8Dp8pdppXLDpdddXP,PhD4htDDD4DDDDDDdDp8dddddȐXXXXXJ8J8J8J8pddddppppddpddddzpdddXXhXXXXXdddhdptL8LpLDLpphhp8ZDP8pppddƐXXXpLpLpLphfDtppppppȐhXXXpDppLDd4ddC6CWxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxNHxxHjdDddddddXP#  B.44Congress Intended A Specific Regulatory Framework For OVS Footnote Tex u #A\  P?P##XN\  P@XP#Congress intended OVS operators to be subject to reduced regulatory burdens. LECs and MFS interpret this to mean the Commission should not adopt a specific regulatory framework.Footnote Ref#A\  PAP##Footnote Ref##XN\  PBXP#<#XN\  PCXP#  4` <hDpL!Footnote Tex u #A\  PDP#Footnote Ref#A\  PEP# #Footnote Ref##A\  PFP# See MFS Comments at 15; Bell Atlantic et. al. Comments at 7; NYNEX Comments at 5; USTA Comments at 8; US West Comments at 3.#Footnote Tex#  #XN\  PGXP#< This argument is not supported by the 1996 Act. The 1996 Act exempted OVS from various Title IIlike regulations. It eliminated a requirement that OVS operators make capacity available on a nondiscriminatory basis to any other person for the provision of cable service directly to subscribers.Footnote Ref#A\  PHP##Footnote Ref##XN\  PIXP##XN\  PJXP#  4` <hDpL!Footnote Tex u #A\  PKP#Footnote Ref#A\  PLP# #Footnote Ref##A\  PMP# Id. at Sec. 651(b).#Footnote Tex#  #XN\  PNXP# The 1996 Act also eliminated another Title IIlike requirement, the need to obtain a section 214 certificate for the establishment of an OVS.Footnote Ref#A\  POP##Footnote Ref##XN\  PPXP##XN\  PQXP#  4` <hDpL!Footnote Tex u #A\  PRP#Footnote Ref#A\  PSP# #Footnote Ref##A\  PTP# Id, at#hkIPUQP# #A\  PVP#Sec. 651(c)#Footnote Tex#  #XN\  PWXP##Footnote Tex#  #XN\  PXXP#The 1996 Act also exempted OVS operators from various Title VI regulations. Section 653(c)(1)(C) relieved OVS operators from commercial leased access, and most of the franchiserelated requirements to which cable companies are subject. Section 653(a)(1) required the Commission to either approve or disapprove an OVS certification within 10 days of the request for certification. While Congress did eliminate some Title II as well as Title VI regulations, it did not reduce the regulatory burden of remaining regulations: 44  ...the Commission shall, to the extent possible, impose obligations that are no greater or lesser than the obligations contained in the provisions described in paragraph (1)(B) of this subsection.Footnote Ref#A\  PYP##Footnote Ref##XN\  PZXP# #XN\  P[XP# 44 4` <hDpL!Footnote Tex u #A\  P\P#Footnote Ref#A\  P]P# #Footnote Ref##A\  P^P# Id. at Sec. 653(c)(2)(A).#Footnote Tex#  #XN\  P_XP#    It is noteworthy that Congress chose not to reduce regulation on OVS by mandating an acrosstheboard reduction in either Title II or Title VI regulation.Footnote Ref#A\  P`P##Footnote Ref##XN\  PaXP# #XN\  PbXP#  4` <hDpL!Footnote Tex u #A\  PcP#Footnote Ref#A\  PdP# #Footnote Ref##A\  PeP# Of course, operators may be eligible for forbearance and other forms of reduced regulation if conditions justify such treatment. But this type of reduced regulation does not lie at the heart of what Congress specifically intended for OVS.#Footnote Tex#  #XN\  PfXP#ۣ Consequently, there is no support for arguments made by MFS and LECs that the Commission need not adopt a specific regulatory framework. Congress intended the remaining elements of both Title II and Title VI to be applied to OVS in order to reproduce the regulatory safeguards they provide. IV.44Anticompetitive Actions Public interest parties, state and local regulators, interexchange carriers, cable companies, CPE manufacturers, and programmers contend that LECs retain incentives to engage in anticompetitive behaviors, either by cross subsidizing their video systems by overcharging customers of monopoly telephone services, or by favoring their programming entity in the allocation of channel location, channel capacity, etc. A.44Cost Allocation Telephone services devoid of widespread competitive alternatives, such as access rates charged by LECs, are priced well above economic cost. This permits LECs to subsidize their entry into new lines of business, such as OVS. So long as there are some LEC services not subject to effective competition, LECs will have the motive, and absent proper cost allocation, the opportunity to cross subsidize. Except for US West, LECs are silent on the question of cost allocation to OVS. US West argues that there is no need for cost allocation where LECs are no longer regulated under rate of return regulation, because LECs would not be able to raise rates above competitive levels under other forms of regulation.Footnote Ref#A\  PgP##Footnote Ref##XN\  PhXP# #XN\  PiXP#  4` <hDpL!Footnote Tex u #A\  PjP#Footnote Ref#A\  PkP# #Footnote Ref##A\  PlP# US West Comments at 9.#Footnote Tex#  #XN\  PmXP# This argument is incorrect. LECs have an incentive to shift the recovery of costs incurred for the provision of more competitive services onto those services able to sustain a supracompetitive price, regardless of the regulatory regime. Whether LECs succeed, depends on whether regulators prevent regulated prices from rising above their competitive levels. This can occur under a price cap regime either if base rates are above competitive levels (perhaps because costs have been misallocated); or if actual productivity exceeds the productivity index, and misallocated costs reduce the amount of profits available for sharing. Consequently, US Wests argument that the Commission need not address cost allocation to OVS is not be supported by economic logic. B.44Other Anticompetitive Behaviors LECs generally argue that the Commission does not need to adopt specific regulations preventing anticompetitive actions. Instead, they argue that the Commission need only adopt statutory language prohibiting discrimination.Footnote Ref#A\  PnP##Footnote Ref##XN\  PoXP#! #XN\  PpXP#  4` <hDpL!Footnote Tex u #A\  PqP#Footnote Ref#A\  PrP# #Footnote Ref##A\  PsP# See, e.g., Comments of Bell Atlantic, et. al. at 11; US West Comments at 16; NYNEX Comments at 7.#Footnote Tex#  #XN\  PtXP#! As explained in Section III.B above, the LECs are incorrect. Congress did require the Commission to develop a new, and specific, regulatory framework for OVS. The Commission must establish such a framework in order to protect against LEC attempts to undermine the openness of OVS. MCI identifies new evidence, provided by Bell Atlantic et. al., that LECs intend to undermine the openness of open video systems and thereby lessen the number of video distributors. Bell Atlantic proposes that the Commission treat OVS as the same as cable service, rather than as an open video system. For example:  `    Bell Atlantic et. al. contend the market relationship between programmers and OVS operators should be the same as between programmers and cable operators. Yet, cable systems are closed systems based on contract carriage;Footnote Ref#A\  PuP##Footnote Ref##XN\  PvXP# #XN\  PwXP# `  4` <hDpL!Footnote Tex u #A\  PxP# I. A. 1. a.(1)(a) i) a)Footnote Ref#A\  PyP# #Footnote Ref##A\  PzP# Open video systems will not succeed if operators must force video programming providers to accept unfamiliar or undesired business arrangements. Id. at 10.#Footnote Tex#  #XN\  P{XP#      Bell Atlantic et. al propose the Commission judge all OVS rules according to whether they would make open video systems an attractive alternative for cable operators;Footnote Ref#A\  P|P##Footnote Ref##XN\  P}XP#S#XN\  P~XP#  4` <hDpL!Footnote Tex u #A\  PP# I. A. 1. a.(1)(a) i) a)Footnote Ref#A\  PP# #Footnote Ref##A\  PP# Id. at 5.#Footnote Tex#  #XN\  PXP#S      Bell Atlantic et. al contend OVS operators are not obligated to provide capacity to multiple video program distributors;Footnote Ref#A\  PP##Footnote Ref##XN\  PXP#T#XN\  PXP#  4` <hDpL!Footnote Tex u #A\  PP# I. A. 1. a.(1)(a) i) a)Footnote Ref#A\  PP# #Footnote Ref##A\  PP# Id. at 12.#Footnote Tex#  #XN\  PXP#T     Bell Atlantic et. al contend that OVS operators should be able to deny carriage to parties that do not have contracts with programmers in place prior to approaching an OVS operator for carriage.Footnote Ref#A\  PP##Footnote Ref##XN\  PXP#T#XN\  PXP#  4` <hDpL!Footnote Tex u #A\  PP# I. A. 1. a.(1)(a) i) a)Footnote Ref#A\  PP# #Footnote Ref##A\  PP# Id. at 24.#Footnote Tex#  #XN\  PXP#T      V.Conclusion Based on the arguments presented above, MCI urges the Commission to establish a specific regulatory framework for OVS. This framework should require LECs to: 1) perform proper allocation of costs prior to submission of OVS certification; 2) submit unbundled and cost causative tariffs with cost support as a condition for OVS certification; 3) establish a fully separate programming affiliate; 4) require OVS operators to charge their programming affiliated the tariffed rates for video carriage; and 5) require OVS operators to make their contracts available for public inspection.