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A. a.(1)(a) i) a)Documentg2("e& ''PleadingHeader for Numbered Pleading PaperE!n    X X` hp x (#%'0*,.8135@8:%7777777777>>>0eOIIOD>OO%*ODaOO>OI>DOOgOOD%%37%07070%777V7777%*77O77055;%;3%%%%%%%%%%%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&&Bn77lCTn(nBB(A\\>>n%07\n!"IIIITTenn7TnB@;7>lBBn7"i~'^@KXnnKKKn{9K9>nnnnnnnnnn>>{{{aʞ{KTž{{ϞK>KenKananaKnn>>n>nnnnKT>nnnnaj,jwK9weKKK9KKKKKKKKn>aaaaaaaaaaK>K>K>K>nnnnnnnnnnanlnnn{naaaaawaaaaannnwnwnK>KnKKKn{wwn>XKK>nnnnnžKKK{T{T{T{w\>ennnnnnϞwaaanKn{TKn9nnI(IWxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxNOOenKannnnn>FnBFnBKKaanKKnn؆O܄O{{KanB"n܄wn{؄n"i~'^"(22TN"""28"2222222222888,\HBBH>8HH"&H>XHH8HB8>HH^HH>"".2",2,2,"222N2222"&22H22,006"6."""""""""""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\\pBnnBb\\>g\7"yyyy\njc\}nn\y.X80,X\  P6G;P7jC:,9Xj\  P6G;XP2a=5,&a\  P6G;&P2e=5,&e4  pG;&P:% ,J:\  P6G;JPH5!,i,5\  P6G;,P\{,W80,%0W*f9 xr G;X\0_=5,%&_*f9 xr G;&X<uI@,;u\  P6G;Pxn9n9n9]?]?]?]ZgFg/gMxSxSxSxSxSxSxxZgIgIgIxSg9xS]?g9xSi+SS82= S- X    S-  Federal Communications Commission`}(#DA 981241 ă  yxdddy ՊPK #&a\  P6G;&P#Before the Federal Communications Commission  S-""Washington, D.C. 20554 ă  S`-In the Matter of:j)  S8-j)pp  S-OUTDOOR LIFE NETWORK andj)pp  S-SPEEDVISION NETWORK j)ppCSR 5044P  S- j)pp Petition for Exclusivityj) pursuant to 47 C.F.R. j)  76.1002(c)(4) and (5)g )  S -  MEMORANDUM OPINION AND ORDER lU  S -X` hp x (#%'0*,.8135@8:-p] yO -ԍPetition at 3, 25, 47.> The Networks assert   \that for the most part these are DMAs in which the Networks' three MSO investors have little or no   presence, in which few nonaffiliated cable or noncable MVPDs have subscribed to the Networks, and  S -  in which the Networks' subscribership is minimal.6.X |] yO-  wԍPetition at 47; Reply at 37. The Networks claim that because of their MSO investors' limited presence in most   of these markets, the MSO investors will not benefit significantly from grant of the petition for exclusivity. Petition at 48.6 However, the Networks do acknowledge that the   .markets covered by their proposal contain over 24 million cable homes, or 37.6 percent of the total 64.4  S -  million cable households in all DMAs in the United States, and span 14 states plus Washington, D.C.\/ ] {O-ԍSee Petition at 47; Reply at 37 and 38, n.102.\  S0-  13.` ` Far from being a narrow request, we find that the Networks are seeking exclusivity in  S-  =markets containing more than onethird of all homes passed by cable systems nationwide.N0. ] {O-ԍSee, e.g., Ameritech at 6 and 9.N Opponents   to the Networks' Petition, BellSouth and Ameritech, assert that the proposed exclusivity denies   programming to potential competitors in local and national markets and inhibits the development of  S-  competition in the MVPD market.K1 ] yO-ԍBellSouth at 10; Ameritech at 5. K Ameritech contends that the markets for which exclusivity is sought   are in every region of the country and are within the top 27 markets in the nation, including 7 of the top  S@-  10 markets.72@P ] yO0#-ԍAmeritech at 6.7 We agree that granting the Networks' exclusivity request would adversely effect competition   in local and national MVPD markets by depriving aspiring competitors in 17 of the largest DMA markets  S-  land the entire State of Connecticut of access to the Networks' programming.p3] {Op&-ԍSee BellSouth at 10; Ameritech at 6. See also WCA at 1920.p We also agree with   /BellSouth and Ameritech that the geographic extent of the exclusivity proposed here far exceeds that"r3,`(`(88B"   permitted under either of the other two orders in which we granted exclusivity pursuant to the program  S-  access rules.k4] {O@-ԍBellSouth at 12; Ameritech at 7. See also WCA at 1920. k In NECN, we granted exclusivity in six New England states and in NewsChannel  S-exclusivity was granted in four midAtlantic states.f5Z] {O-ԍNECN, 9 FCC Rcd 3231; NewsChannel, 10 FCC Rcd 691.f  Sb-  314.` ` The presence of noncable MVPDs in the relevant markets also distinguishes this case  S:-  from the situation presented in NECN, where competition to cable did not yet exist,6":] {O -  ԍNECN, 9 FCC Rcd at 3235 ("...while we anticipate in the long term competition to cable from MMDS   operations, it does not appear that such competition presently exists or will exist in the near future. Indeed, at   ,present the record demonstrates that there are no MMDS operations in New England that would be foreclosed from distributing NECN by the proposed exclusivity."). and in NewsChannel,   where we found that no noncable competitor had expressed an interest in obtaining the programming in  S-  <question.M7] {Ob-ԍNewsChannel, 10 FCC Rcd at 694.M Opponents to the Networks' Petition provide evidence that the areas covered by the Networks'   request include markets where telephone companies and other alternative MVPDs are actually offering or   are poised to offer competition to incumbent cable operators. For example, SNET states that it has a   franchise to provide cable service to the entire State of Connecticut, and that it already offers cable service  SL -  to over 70,000 households in Connecticut.8L h ] yOT-  ԍSNET at 2. SNET explains that construction throughout the State is slated for completion in the year 2007.  {M-Id.ľ Ameritech states that it is operating in the metropolitan areas  S$ -  =of Chicago, Illinois and Cleveland, Ohio.79$ ] yO-ԍAmeritech at 8.7 BellSouth states that it is scheduled to launch digital wireless  S -  cable service in Orlando and Miami, Florida during the first and second half of 1998, respectively.<: P ] yO-ԍBellSouth at 3, n.1.< In  S -addition, SNET, Ameritech and BellSouth have all expressed an interest in carrying the Networks.;  ] yOT-  ZԍAmeritech, BellSouth and WSN all state that they have been engaged in negotiations with Outdoor Life and   Speedvision regarding carriage of their programming. Ameritech at 1011; BellSouth at 1; WSN at 23. SNET   ;insists that it is interested in carrying both Networks upon completion of a system upgrade which will produce more channel capacity. SNET at 56.  S -  15.` ` The Networks contend that noncable MVPDs have generally expressed little or no interest  S\-  in carrying their programming and that only a few have actually signed carriage agreements.h<\] yO"-ԍPetition at 4345; Reply at 29, 30, and 47.  h Recently,   however, BellSouth informed the Commission that it signed an agreement to carry the Networks on a non S -  =exclusive basis.= X] {O&-  ԍSee Letter from Karen B. Possner, Vice PresidentStrategic Policy, BellSouth, to William F. Caton, Acting Secretary, F.C.C., dated September 23, 1997. In any case, we do not want to foreclose the possibility of alternative MVPDs gaining" =,`(`(88:"   access to the Networks' programming in the future. Given the existence of competing alternative MVPDs   in a number of the markets covered by the Petition, and the interest expressed by such MVPDs in carrying   the Networks, we find that grant of the proposed exclusivity would have a limiting effect on the   mdevelopment of competition in local and national markets by denying those MVPDs access to programming.  S-  16.` ` We believe that because Outdoor Life and Speedvision are programming services with   national appeal, denial of access to competitors in a substantial number of markets across the country may   Llimit the development of competition in local and national distribution markets. While Outdoor Life and   jSpeedvision are niche networks focused on specialized subject matters, they may appeal to a nationwide   audience and are, therefore, national, as opposed to local or regional, programming services. Indeed,   Lunderscoring Speedvision's national market potential, Paul Kagan Associates, Inc. identified Speedvision  S -  as one of the top ten fastest growing basic cable/satellite networks for the year ended June 30, 1997.> ] {O -  ZԍPaul Kagan Associates, Inc., Marketing New Media, at 2 (August 18, 1997). See also WCA opposition at 4 (citing Kagan report).  S -  In Time Warner, we found that the programming service at issue, Court TV, had "national appeal" and   lthat denial of access to such programming could limit the development of competition in local and  S -  national distribution markets.M? "] {Ol-ԍTime Warner, 9 FCC Rcd at 3227.M That Outdoor Life and Speedvision did not have as many subscribers  S -  Lwhen they filed their petition as Court TV did at the time of the Time Warner decision is not relevant to   the fact that the Networks have national distribution potential that will be affected by exclusive   [arrangements. In fact, evidence of the Networks' subscriber growth is clear. Recent reports indicate that   .Speedvision now has 14.5 million total subscribers, 7.5 million more than at the time the Networks filed  S-their Petition, and Outdoor Life has 13.5 million total subscribers, up 5.6 million from last summer.y@] {O8-ԍPaul Kagan Associates, Inc., Cable Program Investor, at 11 (Jan. 16, 1998).y  S-  17.` ` The Networks analogize their programming to the local/regional news networks at issue  Sl-  zin NECN and NewsChannel, arguing that Outdoor Life and Speedvision are tailored to a narrow group  SF-  Lof subscribers just as the news networks were addressed to a particular geographic area.7AFF] yO,-ԍPetition at 30.7 We reject this  S-  analogy. The cable networks in both NECN and NewsChannel were regional or local news services whose   ?regionally or locally oriented programming naturally limited the size of their audience and made it   unlikely that the proposed exclusivity would affect the development of competition in the national MVPD  S-  market.pB] {O!-ԍSee BellSouth at 12; Ameritech at 7. See also WCA at 1819.p In contrast, as argued by BellSouth and Ameritech, Outdoor Life and Speedvision are   programming services with nationwide appeal and distribution potential and are, therefore, akin to the  SX-  !programming that was at issue in Time Warner.cCXh ] {O`$-ԍBellSouth at 12; Ameritech at 7. See also WCA at 19.c Granting the Networks' petition would impair   .competition in both local and national MVPD markets by depriving cable's competitors of the ability to"2 C,`(`(88"  S-  ydistribute programming of national interest.\D] {Oh-ԍSee also BellSouth at 12; Ameritech at 78. \ We conclude that the effect of the proposed exclusivity on   the development of competition in distribution markets weighs against finding that grant of the Networks' request is in the public interest.  S`- $J~  mEffects of Exclusivity on Competition from MVPD Technologies Other Than Cable ă  S-  18.` ` Regarding the second public interest factor, the effect of the exclusive contract on   competition from MVPD technologies other than cable, the Networks maintain that their proposed   jexclusivity arrangement would not interfere with the ability of noncable MVPDs effectively to compete   with cable operators. The Networks assert that their proposed exclusivity arrangement would be offered  Sp-  =on a technologically neutral basis to all qualified MVPDs, not just to cable operators.;EpZ] yOj -ԍPetition at 48. ; Specifically, the   .Networks state that exclusivity would be available to any MVPD in the community, cable or noncable,   with "sufficiently high subscriber penetration" that is willing to launch, or substantially increase  S -  Mdistribution of, one of the Networks immediately.7F ] yO-ԍPetition at 48.7 The Networks, however, do not specify in their   Petition the subscriber penetration requirements. Without specific subscriber penetration figures, we find   yit difficult to evaluate the effects of the proposed exclusivity on noncable MVPDs. In all likelihood, the   [MVPDs most likely to achieve penetration levels significant enough to meet the Networks' requirements   Nwould be incumbent cable operators rather than alternative MVPDs because cable operators have  S0-  comparatively higher penetration rates.fG\0z] {OJ-  ԍ1997 Annual Assessment of the Status of Competition in Markets for the Delivery of Video Programming,  {O-  Fourth Annual Report, CS Docket No. 97141, FCC 97423 (rel. Jan. 13, 1998) at 6 and E1 (finding that 87% of all MVPD subscribers are cable subscribers).f We find, therefore, that a "sufficiently high subscriber  S-  \penetration" requirementAH] {OF-ԍSee Petition at 48.A is a criterion that discriminates against alternative MVPDs and in favor of  S-  incumbent cable operators.HI0 ] {O-ԍSee Ameritech at 11.H Exclusive contracts between the Networks and cable operators in those local   markets in which alternative MVPDs already exist or are emerging would limit the development of   lcompetition by denying such MVPDs access to programming. As noted above, Congress and the   [Commission have found that access to programming is an essential prerequisite to the ability to compete   against incumbent cable operators. Thus, while in theory the Networks' proposal may not discriminate   against noncable MVPD technologies, in practice we believe that the proposed exclusivity would negatively affect noncable MVPDs by precluding them from obtaining programming.  S-  #19.` ` We reject the Networks' argument that the effect of their proposed exclusivity on MVPD   competition is limited by the fact that the requested exclusivity would not apply against DBS distributors,  SP-  such as DirecTV.7JP ] yO&-ԍPetition at 49.7 The Networks claim that DBS was excluded because distributors such as DirecTV   and Primestar had already agreed to carry the Networks, unlike wireless cable operators or cable"( R J,`(`(88"  S-  overbuilders.4K] yOh-ԍReply at 35.4 The Networks assert that given that pattern of distribution and the fact that it is not   technically feasible to enforce exclusivity against DBS carriage on a marketbymarket basis, applying   exclusivity to DBS would require the Networks to forego DBS carriage nationally, a policy that is contrary  S-  to their need to increase distribution.?LX] yO-ԍReply at 1819, and 35.? As BellSouth points out, granting the Networks' Petition would   still harm wireless cable operators and cable overbuilders who are poised to provide competition to the  S8-  Lcable industry.7M 8] yO -  ԍBellSouth at 3. BellSouth states that it is pursuing a strategy of deploying wired and wireless multichannel   video technologies throughout its telephone service area in direct competition with incumbent cable operators.   BellSouth at 3, n.1. SNET states that grant of the Petition would deprive it of programming by permitting exclusive  yO -arrangements between the Networks and incumbent cable operators in the State of Connecticut. SNET at 6.  7 WCA contends that the Networks are asking for authority to discriminate against non S-  cable, nonDBS MVPDs in violation of Section 628(c)(2)(B) of the Communications Act.2N] yO-ԍWCA at 6. 2 Ameritech   similarly argues that the proposed exclusivity discriminates against terrestrial competitors to incumbent  S-  cable operators.?O` ] yO-ԍAmeritech at 1113. ? In Time Warner we noted that "the statutory public interest test requires us to consider  S-  !the effect of exclusivity on all alternate technology competitors, not just DBS."}P ] {O*-ԍTime Warner, 9 FCC Rcd at 3228; see also Cablevision, 10 FCC Rcd at 9790.} We agree with   MOpponents that allowing DBS distribution, while enforcing exclusivity against SMATV and MMDS   operators, would adversely affect noncable, nonDBS competitors by potentially denying them access to  S$ -  {programming.SQ$ ] {OF-ԍSee BellSouth at 6, n.7; WCA at 89. S Access to programming by all noncable MVPDs is crucial to the development of vigorous and widespread competition in the distribution market.  S -  ~20.` ` We do not accept the Networks' argument that the grandfathering of all existing carriage   \agreements involving Outdoor Life and Speedvision, including any carriage agreements reached during   the pendency of this Petition, significantly minimizes the effect of the proposed exclusivity on   competition. While grandfathering existing carriage agreements may reduce the anticompetitive effects   of the Networks' proposed exclusivity, it does not entirely eliminate such effects. Even if existing carriage   agreements are grandfathered, new and emerging alternative MVPDs or existing MVPDs that have not yet signed with the Networks would unfairly be denied access to the Networks' programming.  Sl-  _21.` ` We also reject the Networks' argument that grant of their petition would not interfere with   the ability of noncable MVPDs to effectively compete with cable operators because carriage of the  S-  Networks' programming may not be considered essential to an MVPD's ability to compete.CR] yO$-ԍPetition at 3; Reply at 29.C The   ^Networks contend that noncable MVPDs have expressed little or no interest in carrying their   programming and that the Networks should not be prohibited from entering into exclusive distribution   agreements with cable operators in order to preserve access for noncable MVPDs not interested in" R,`(`(88"  S-  carrying their programming.S] yOh-  ԍPetition at 43 and at 5253. The Networks claim that noncable MVPDs generally are more interested in   carrying a combination of popular, established networks and payperview programming rather than startup niche   networks such as Outdoor Life and Speedvision. Petition at 45. The Networks assert that some of the alternative   -MVPDs that do carry Outdoor Life and Speedvision have placed the Networks on tiers other than the basic tier,  yO-thereby limiting the Networks' exposure to the public. Petition at 43.Ĉ The Networks further argue that there are other programming networks   available whose subject areas overlap, to some extent, with those of the Networks and could thus be  S-  zcarried as substitutes for them.PTZx] yO-  ԍPetition at 46. The Networks list The Outdoor Channel (which is not affiliated with Outdoor Life), Automotive   Television Network, Ecology Channel, Discovery Networks, Animal Planet, Wingspan and ESPN as possible program  {OX -substitutes. Id.P We again note that contrary to the Networks' assertions, alternative   MVPDs in this proceeding have expressed an interest in carrying the Networks. We do not want to   foreclose the possibility of alternative MVPDs gaining access to the Networks' programming in the future.   .We believe that grant of the Petition would adversely affect competition by denying cable's competitors   zthe same access to programming as would be enjoyed by cable systems. We conclude that the overall   effect of the proposed exclusivity on competition from noncable MVPDs weighs against grant of the Networks' request.  Sp- $J   $J  Effects of Exclusivity on Attraction of Capital Investments  SH -b in Production and Distribution of Programming ă  S -  22.` ` The third public interest factor is the effect of the exclusive contract on the attraction of  S -  Lcapital investment in the production and distribution of new satellite cable programming.eU ] yO -ԍCommunications Act  628(c)(4)(C), 47 U.S.C. 548(c)(4)(C).e By including   this third criterion in the statutory public interest test, Congress recognized that in some circumstances   exclusivity can serve as an investment incentive for cable operators to finance, promote and carry a new   programming service. The Networks maintain that without the authority to enter into exclusive   distribution arrangements, they will be unable to achieve the level of distribution they need to become and  S-  remain financially viable._V* ] {O-ԍSee e.g., Petition at 40; Reply at 1516 and 24._ The Networks contend that they cannot afford to continue producing quality,   !original programming without a rapid and substantial increase in revenues generated by expanded  S-  distribution.7W ] yO-ԍPetition at 55.7 In contrast, Ameritech argues that because the Networks' programming has "nationwide   appeal" Outdoor Life and Speedvision are more capable of attracting viewers and capital investment than  Sh-  the regional network involved in the NECN case.;XhL ] yOT"-ԍAmeritech at 1314.; The Networks respond that although they focus on   the national television market, the niche audiences to which they appeal are a narrower subset of the total  S-  [viewing public.4Y] yO%-ԍReply at 25.4 In addition, the Networks assert that while the regional news networks involved in the" lY,`(`(88S"  S-  NECN and NewsChannel cases served audiences with limited distribution potential, they also had far lower  S-programming, operating and distribution expenses than those incurred by Outdoor Life and Speedvision.4Z] yOB-ԍReply at 25.4  S-  23.` ` The Networks further contend that unlike other programming services, they cannot offer   cable operators incentives in exchange for carriage such as substantial upfront cash payments, periods of  S:-  [free service, tieins of new programming to established networks, or retransmission consent.[ :X] {O2-  [ԍSee e.g., Petition at 20, 3739 and 55; Reply at 2122. The Networks note that programmers owned by   broadcast entities are able to obtain carriage through retransmission consent agreements negotiated between their   broadcast owners and cable systems. Petition at 37. Moreover, the Networks contend that programmers affiliated   with popular programming networks have negotiated agreements with cable operators that tie carriage of the new  yOT -  program service to discounts for an established program service. Petition at 37;  Williams Aff. at  35. In contrast,    the Networks claim that they are not in a position to link their programming services to either retransmission consent   Yor to more popular, established programming services, nor are they able to rely on revenues from existing subscriber   penetration to offer substantial upfront payments or free service in exchange for carriage. Petition at 39; Williams Aff. at  34, 35.  BellSouth   and WCA dispute the Networks' contention that they do not have the financial resources to pay for cable  S-  carriage. \* ] yO-  ԍBellSouth at 78; WCA at 1516. BellSouth and WCA cite a recent study that specifically identifies Outdoor  {O|-Life as a cable network with corporate parents capable of paying for carriage.  Id.  BellSouth asserts that "there is no statutory or policy justification" for granting a vertically  S-  [integrated programmer's exclusivity petition "simply to reduce its costs of doing business."7] ] yO-ԍBellSouth at 8.7 Ameritech   similarly argues that the Networks are, in essence, "requesting a bailout for their business," which is not  Sr-  the purpose of the program access rules.?^r] yO&-ԍAmeritech at 13. ? The Networks insist that exclusivity is necessary to attract  SJ -operating revenues.9_J ] yO-ԍReply at 2426. 9  S -  424.` ` We believe the Networks have failed to demonstrate that they face hurdles that are   different from those encountered by other new programming services trying to expand their subscribership.   We agree with BellSouth and WCA who maintain that the Networks' circumstances are not unique and  S -  0therefore do not justify an exemption to the prohibition on exclusive distribution arrangements.R` 4] {OV -ԍSee BellSouth at 7 and 8; WCA at 16.R   Presumably, the Networks embarked on a business plan with foresight regarding the market conditions   and the costs involved in becoming commercially viable. BellSouth and WCA argue that although the   NNetworks contend that exclusivity is their only option for continued viability, the Networks also   acknowledge that cable operators are willing to carry cable networks in exchange for cash payments rather  S-  than exclusivity.Ba] yO &-ԍBellSouth at 7; WCA at 15.B We believe that the fact that the Networks have chosen to invest their money in ways   /other than to pay for cable carriage or otherwise provide for their commercial viability is a calculated" Va,`(`(88"   business decision. The Networks' alleged inability to pay for cable carriage, therefore, cannot be   construed as a unique circumstance justifying grant of their petition. Indeed, the public interest exception   to the prohibition on exclusive distribution arrangements is intended to benefit the public at large, rather  S-  than the needs of individual programmers.b] yO-  ԍWe note, too, that the Networks enjoy an economic benefit not shared by many other startup networks in that they have financial backing from three of the top ten cable MSOs. The difficulties the Networks describe in persuading cable   operators to add Outdoor Life and Speedvision as new services on their systems are shared, to a certain   extent, by all new programming services. As BellSouth, WCA and SNET argue, the Networks admit that   their failure to obtain more widespread cable carriage is attributable to a variety of marketplace factors  S-  unrelated to exclusivity that are common to other startup cable programming services.\c ] yO -ԍBellsouth at 68; WCA at 1112; SNET at 45. \ The early   iinvestment losses sustained by the Networks cannot, alone, justify enforcement of the proposed exclusivity  S-  zarrangement because few programming services are profitable in the first two years.Qd] {O -ԍSee Time Warner, 9 FCC Rcd at 3229.Q In granting the  Sp-  exclusivity petition in NECN, we found that the distribution potential for that particular programming  SJ -  service was limited by the regional focus of the programming, thereby constraining its revenue potential.;eJ B] {O,-ԍNECN at 3236.;  S" -  This limitation distinguished the service from other new launches and justified NECN's use of exclusivity  S -  as a tool to attract financial investments and carriage commitments.1f ] {On-ԍId.1 The Networks, in contrast, have   national distribution potential and, therefore, are not similarly constrained. In addition, the Networks'  S -  contention that a service that cannot offer exclusivity to a cable operator is "significantly less attractive"Ag f ] {O-ԍSee Petition at 22.A  S -  also does not identify a unique obstacle facing the Networks.YhX ] yO-  wԍSNET claims that the fact that TCI, the cable operator in direct competition with SNET in Connecticut, plans   yto carry the Networks in Connecticut without any guarantee of exclusivity is proof that the inability to offer exclusivity is not a barrier to carriage. SNET at 4.Y Indeed, as WCA notes in its opposition,   "the Networks' Executive Vice President/Chief Operating Officer, Roger Williams, admitted to  S2-  Broadcasting & Cable magazine that "the two [Networks] are unlikely to dry up and blow away" if the  S -Commission denies the Petition.mi ] {O-ԍWCA at 4 (citing Broadcasting & Cable at 62, (July 28, 1997)). m  S-  25.` ` The Networks' argument that exclusivity is necessary to prevent "freeriding" is equally   unpersuasive. While the Networks attach affidavits of cable operators stating that "freeriding" is a   concern, the Networks do not provide evidence that any cable operator has expended significant resources  SD-  in promoting the Networks on which other MVPDs could possibly "freeride."j^D] {O%-  ԍOur rationale here is consistent with our reasoning in Time Warner in which we also rejected the petitioner's  {OX&-  k"freeriding" argument. See Time Warner, 9 FCC Rcd at 3229.  See also BellSouth at 4 and WCA at 910  {O"'-(contending that the Commission previously rejected the Networks' "freerider" argument in the Time Warner case). Moreover, the program"Dj,`(`(88"   ?access rules were adopted specifically to allow competing MVPDs access to vertically integrated   yprogramming on nondiscriminatory terms and conditions in order to spur competition in the provision of   video programming. We also note that Commission rules provide that in setting the price for their   services, programming vendors may establish price differentials based on a number of factors including  S`-  j"date of purchase [of the programming service], especially purchase of service at launch."Wk`] {O-ԍSee 47 C.F.R.  76.1002(b)(1), Note 2.W Thus, those   MVPDs that purchase programming at its inception may benefit from their early investment by paying   lower prices than would other distributors who only carry the programming once it becomes popular. We   jconclude, therefore, that the effect of the proposed exclusivity on the attraction of capital investments in the production and distribution of programming does not support a grant of the Networks' Petition.  Sp- Effects of Exclusivity on Diversity in Programming ă  S -  26.` ` The fourth public interest factor is the effect of exclusivity on diversity in the  S -  programming market.kl Z] yO-ԍCommunications Act,  628(c)(4)(D), 47 U.S.C.  548(c)(4)(D).k Exclusivity may promote diversity by providing incentives for cable operators   to promote and carry new and untested programming services. We believe that the benefits of exclusivity   to the development and distribution of new and diverse programming must be balanced against the   Loverarching goal of the program access rules to foster the development of competition in the distribution   marketplace. The Networks argue that permitting the proposed exclusivity would promote diversity in  S0-  programming.:m0] yO-ԍPetition at 4142.: BellSouth and Ameritech note that the Networks identify other cable networks whose  S-  programming is similar to that of the Networks and could be carried as substitutes for the Networks.Lnz] yO"-ԍBellSouth at 10; Ameritech at 1415.L    The Networks argue that the existence of similar networks, however, does not mean that loss of either  S-  Outdoor Life or Speedvision, or both, would not diminish program diversity.4o ] yOb-ԍReply at 27.4 In light of Outdoor Life's   and Speedvision's current subscriber penetration figures of 13.5 million and 14.5 million, respectively,   as well as the interest expressed by various MVPDs in carrying the Networks, we conclude that the   Networks have failed to demonstrate that exclusivity is currently necessary to promote diversity in   zprogramming. We note that granting the Petition would have the effect of limiting the availability and  S-diversity of the Networks' programming for subscribers to cable's competitors.cp] {O* -ԍSee also Cablevision, 10 FCC Rcd at 9791, n.76.c  S-K$ Duration of Exclusivity ă  SP-   27.` ` The final public interest factor to be considered in determining whether the proposed  S(-  exclusivity is in the public interest is the duration of the proposed exclusivity arrangement.kq(, ] yO%-ԍCommunications Act,  628(c)(4)(E), 47 U.S.C.  548(c)(4)(E).k The   Networks explain that the duration of their proposed exclusivity agreement is limited to the earlier of a" q,`(`(88"  S-  /period of four years or until December 31, 2001.@r] yOh-ԍPetition at 25 and 49. @ The Networks contend that the duration of their   proposed arrangement is limited to the time needed to achieve the level of subscribership necessary to  S-  become commercially viable.sX] yO-  ԍPetition at 54. The Networks contend that it takes four years for a programming service to become popular  {Op-enough to attract distributors. Id. at 4950. The Networks also state that they are seeking only a limited period within   ywhich each Network would be permitted to offer exclusivity up to twelve months or until the Network  S`-  is distributed to 20 million households, whichever occurs first.tZ`] yO -  ԍPetition at 49. The Networks contend that at 20 million subscribers, they will achieve a level of distribution   sufficient to attract volume purchases by national advertisers and to generate subscriber revenues that approach the  {OB -level necessary to carry the Networks' operating costs.  Id.ă Opponents to the Petition contend that  S8-  zthe duration of the proposed exclusivity arrangement is too long and, therefore, anticompetitive.Wu8] yO -ԍBellSouth at 1011; Ameritech at 15; WCA at 21.W In   /general, we believe that in situations where the duration of the exclusivity is tailored to the minimum   zperiod of time reasonably necessary to develop and firmly establish the programming service without   yunduly denying the availability of the service to competing distributors, such limited duration may weigh   /in favor of allowing exclusive distribution by cable operators. However, in this instance, because we   found little or no public interest benefits to the programming market to offset the adverse effects on   =competition in the distribution market which would result from a grant of the Networks' Petition, we do not find it necessary to make a specific determination regarding the duration of the proposed term.  S - IV.  CONCLUSION  S -  28.` ` Upon consideration of the five statutory public interest factors, we find that the Networks   have failed to demonstrate that enforcement of their proposed exclusive distribution arrangement is in the   [public interest. The proposed exclusivity withholds programming services with nationwide appeal from   emerging competitors to cable, such as cable overbuilders, MMDS, and telephone companies, thereby   directly constraining competition in the local distribution markets at issue as well as the national   distribution market. We further find that no countervailing public interest benefits would be derived from allowing enforcement of the proposed exclusivity and therefore deny the Networks' Petition.  S@- V.  DISCLOSURE OF INFORMATION  S-  29.` ` In addition to the issue of program exclusivity, a separate matter arose in this proceeding   concerning the disclosure of information. The Networks filed two versions of their Petition for   Exclusivity: a confidential version for the Commission, along with a Request to Withhold Information   from Public Inspection, and a redacted version for the public. In response, WCA filed a Freedom of  SP-  Information Act ("FOIA"):vPd ] yOT$-ԍ5 U.S.C.  552.: request asking the Commission to make available for public inspection the"P v,`(`(88"  S-  information that had been redacted from the confidential version of the Petition.w$] {Oh-  ԍSee Freedom of Information Act Request filed by The Wireless Cable Association International, Inc. on August  {O2-  8, 1997. The Networks filed a Reply to the FOIA request, and WCA filed a Response to the Reply. See Reply   to Opposition to Request to Withhold Information from Public Inspection filed by the Networks on August 20, 1997; Response to Reply filed by WCA and dated August 29, 1997.  The Cable Services   Bureau denied WCA's FOIA request and urged all of the parties to craft a protective order under which  S-  the redacted information could be disclosed.x] {O-  ԍSee Letter to Andrew Kreig, WCA, from Meredith J. Jones, Chief, Cable Services Bureau, dated September 5, 1997. The parties subsequently informed the Bureau that they  S-  were unable to agree on the terms and conditions of a protective order.byZ] {O6 -  hԍSee Letter to Leora Hochstein, Cable Services Bureau, from Burt A. Braverman and Lisa A. Leventhal, counsel   to the Networks, dated September 17, 1997; Letter to Leora Hochstein from W. James Mac Naughton, counsel to the World Satellite Network, Inc., dated September 17, 1997.b Because we have determined   that there is sufficient information before us to render a decision, we need not impose our own protective   order on the parties here. As discussed above, based on the information before us and pursuant to the   criteria set forth in Section 628(c)(2)(D) and 628(c)(4) of the Communications Act and Sections   76.1002(c)(4) and (5) of our rules, we find that the arrangement proposed by the Networks for the   .exclusive distribution of programming is not in the public interest. Since we are denying the Petition for   Exclusivity filed by Speedvision and Outdoor Life, we do not believe that Opponents of the Networks will be prejudiced by their lack of access to the redacted information.  S - VI.ORDERING CLAUSE  S -  30.` ` Accordingly, IT IS ORDERED that the Petition for Exclusivity filed by Outdoor Life   [Network, L.L.C., and Speedvision Network, L.L.C., requesting a finding that their proposed contract for  S -the exclusive distribution of programming is in the public interest IS DENIED .  S0-  _31.` ` This action is taken pursuant to authority delegated by Section 0.321 of the Commission's rules. ` `  hh,FEDERAL COMMUNICATIONS COMMISSION ` `  hh,John E. Logan ` `  hh,Acting Chief, Cable Services Bureau "0 y,`(`(88"  S-H APPENDIX ă  S- The Networks' Proposal for Exclusivity ă  The Networks seek Commission authorization to offer program exclusivity to cable operators and other MVPDs under the following conditions:  S-  (1)` ` Exclusivity would be offered in the State of Connecticut and in the following 17 DMAs:   New York, NY; Los Angeles, CA; Chicago, IL; San FranciscoOaklandSan Jose, CA;   Boston, MA; Washington, D.C.; DallasFt. Worth, TX; Houston, TX; SeattleTacoma,   2WA; Cleveland, OH; MinneapolisSt. Paul, MN; MiamiFt. Lauderdale, FL; Denver, CO; Pittsburgh, PA; St. Louis, MO; OrlandoDaytona BeachMelbourne, FL; Portland, OR.(#`  S -  (2)` ` Exclusivity would be offered on a systembysystem basis to any cable operator or other   RMVPD that meets the Networks' subscriber penetration requirements and that will   commence, or substantially expand, carriage of the Network(s) within 120 days of entering into an exclusivity agreement;(#`  S0-  (3)` ` Exclusivity would be offered subject to all existing carriage of the Networks (i.e., existing   carriage of the Networks by cable systems and noncable MVPDs, including carriage commenced during the pendency of this petition, would be grandfathered);(#`  S-(4)` ` Exclusivity would not preclude the Networks from entering into additional ` ` agreements for new or expanded distribution via DBS;  S-  (5)` ` Exclusivity would last for a period of up to four years but not beyond December31, 2001; and(#`  S-  p(6)` ` Exclusivity would be offered by each of the Networks to MVPDs in the designated   markets during an enrollment period of 12 months from the release date of the   ~Commission's grant of the Networks' petition, or until the Network is distributed to 20  S*-million households, whichever occurs first.Lz*] yO-ԍPetition at 2526 and at Exhibit 10.Lpp(#`