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Re: Implementation of Cable Act Reform Provisions of the Telecommunications Act, CS Docket No. 96-95

In implementing the "effective competition" provision of the 1996 Telecommunications Act, Part II of this Report and Order requires that a local exchange carrier's service area "substantially overlap" that of the incumbent cable operatorin a franchise area. Because the plain language of the statute reveals no substantiality test, and because other statutory definitions of effective competition expressly include such tests, I respectfully dissent from Part II.

I start with the text of the statute. Section 623(l)(1)(D) states that "effective competition" exists when:

a local exchange carrier or its affiliate (or any multichannel video programming distributor ["MVPD"] using the facilities of such carrier or its affiliate) offers video programming services directly to subscribers by any means (other than direct-to-home satellite services) in the franchise area of an unaffiliated cable operator which is providing cable service in that franchise area, but only if the video programming services so offered in that area are comparable to the video programming services provided by the unaffiliated cable operator in that area.

47 U.S.C. section 543(l)(1)(D)(emphases added).

I now turn to the context of the provision. Section 623(l)(1)(D) was not the first time that Congress defined the meaning of "effective competition" for deregulatory purposes. The subsections immediately preceding the LEC effective competition provision, which were enacted in 1992, also define that term. Significantly, each of these definitions includes some kind of a pass or penetration rate that a new entrant must meet before a finding of effective competition is made and deregulation follows. In particular, these definitions provide that effective competition exists when:

fewer than 30 percent of the households in the franchise area subscribe to the service of a cable system;

the franchise areais served by at least two unaffiliated MVPDs each of which offers comparable video programming to at least 50 percent of the households in the franchise area . . . [and] the number of households subscribing to programming services offered by MVPDs other than the largest MVPD exceeds 15 percent of the households in the franchise area; [or]

a MVPD operated by the franchising authority for that franchise area offers video programming to at least 50 percent of the households in that franchise area; Id. sections 623(l)(1)(A)-(C) (emphases added).

Two things about the above-quoted statutory language are salient. First, nothing in subsection (D) states that the LEC must provide video programming to substantially the same number of households, or in substantially the same geographic area, as does the incumbent cable operator. There is simply no textual basis for a "substantial overlap" test. In terms of geography, all the statute requires is that the LEC offer service "in the franchise area," not "in a substantial part of the franchise area" or "in most of the franchise area." Notably, the definition is conditional -- for instance, the delivery cannot be via direct satellite, and the services must be comparable -- but a geographic coverage requirement within the franchise area is not one of the conditions set out by the statute. It is an extra condition that is entirely of the Commission's making and wholly extra-statutory.(1)

Second, the absence of language in subsection (D) regarding a coverage test is particularly conspicuous when considered in the context of the surrounding provisions. The other subsections defining effective competition include -- often immediately after the word "offer" -- some kind of threshold test for the substantiality of the offering in question. But after the word "offer" in subsection (D), there is no such test. "[W]here Congress includes particular language in one section of a statute but omits it in another section of the same Act, it is generally presumed that Congress acts intentionally and purposely in the disparate inclusion or exclusion." Russello v. United States, 464 U.S. 16, 23 (1983) (internal quotation marks omitted). Congress clearly knew how to tack a numerical threshold onto the offering requirement, and it did not do so here. We cannot conveniently ignore the fact of this exclusion.(2)

The Notice in this matter suggested that LEC competition cannot be "effective" when it is not offered to a significant number of households within the franchise area. Congress has not asked the Commission to define the term "effective competition" based on our understanding of what is and is not effective in terms of a market disciplining presence. Rather, Congress has already defined the term. And, under that definition, if a LEC offers programming comparable to that of the local cable company "directly to subscribers . . . in the franchise area," by any means except direct-to-home satellite, each and every element of the definition is met. Cable rate deregulation then must follow as a matter of law.

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1. If there were any doubt about the clarity of the statute, the legislative history supports the view that subsection (D) contains no coverage, pass, or penetration test. "Offer" in subsection (D) was intended to mean the same thing as in 47 CFR section 76.905(e). See H.R. Conf. Rep. No. 458, 104th Cong., 2d Sess. 170 (1996). That regulation includes no coverage, pass, or penetration rate. To be sure, the regulation establishes some requirements for an "offering" -- e.g., a reasonable awareness on the part of potential subscribers of the availability of the services -- but it sets no threshold limit for the breadth or scope of the offering.

2. If there is any basis for a numerical test under section 623(l)(1)(D), it must be derived from the statute -- specifically, the object of the phrase "offer to," "subscribers." The plural indicates that Congress meant two or more; the statute states nothing more, and nothing less, than this. And that result is not an absurd one, given the broad deregulatory nature of the Telecommunications Act of 1996. Unfortunately, the majority's reading of section 623(l)(1)(D) does not so much comport with Congressional intent as with their own policy judgments, as Commissioner Powell ably notes.