******************************************************** NOTICE ******************************************************** This document was converted from WordPerfect to ASCII Text format. Content from the original version of the document such as headers, footers, footnotes, endnotes, graphics, and page numbers will not show up in this text version. All text attributes such as bold, italic, underlining, etc. from the original document will not show up in this text version. Features of the original document layout such as columns, tables, line and letter spacing, pagination, and margins will not be preserved in the text version. 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 In the Matter o f:) ) ENTERTAINMENT CONNECTIONS, INC. ) ) Motion for Declaratory Ruling ) MEMORANDUM OPINION AND ORDER Adopted: June 4, 1998 Released: June 30, 1998 By the Commission: Chairman Kennard and Commissioners Ness, Furchtgott-Roth and Powell issuing a joint statement; Commissioner Tristani dissenting and issuing a statement. TABLE OF CONTENTS Paragraph Nos. I. INTRODUCTION 1 II. BACKGROUND . 5 III. THE PLEADINGS . . .. . . . . .. . . 7 A. ECI's Motion for Declaratory Ruling. 7 B. Comments In Support of ECI's Motion 12 C. Comments Opposing ECI's Motion . . . 19 D. Reply Comments . .. . . . . .. . . 26 IV. DISCUSSION . 45 A. Common Carriage of Video Traffic . . 46 B. ECI's Status as a Cable Operator . . 49 C. Miscellaneous Matters. . . . .. . . 65 D. Motion to Dismiss .. . . . . .. . . 67 V. CONCLUSION . 73 VI. ORDERING CLAUSES .. . . . . .. . . 74 I. INTRODUCTION 1. Entertainment Connections, Inc. ("ECI") filed a motion for declaratory ruling pursuant to Section 1.2 of the Commission's rules. ECI seeks a ruling that it is not a cable operator required to obtain a franchise under Section 621 of the Communications Act of 1934, as amended, ("Communications Act"). The Commission issued a public notice seeking comment on ECI's motion. Numerous parties filed comments and reply comments related to ECI's motion. 2. Section 602 of the Communications Act provides that "any person or group of persons (A) who provides cable service over a cable system and directly or through one or more affiliates owns a significant interest in such cable system, or (B) who otherwise controls or is responsible for, through any arrangement, the management and operation of such a cable system" is a cable operator. Section 621(b) provides that a cable operator providing cable service must obtain a franchise from an appropriate government entity. Section 651(a)(2) of the Communications Act as amended by the Telecommunications Act of 1996 ("1996 Act"), provides that a common carrier may transmit video programming without obtaining a cable franchise if it provides common carriage of video traffic. In its Motion, ECI asserts that it does not fall within the definition of either a cable operator or cable system that must obtain a franchise as established by the Communications Act and the Commission's decisions. ECI contends that to the degree its signal is transmitted over a public right of way, it does so through the facilities of a local exchange carrier ("LEC"), and that the law does not require it to obtain a franchise under these circumstances. 3. ECI limits the issue in its motion for a declaratory ruling to whether it is required to obtain a cable franchise. We note that the issue of ECI's status as a cable operator has significant additional consequences under the Communications Act and Commission's rules, inter alia, mandatory carriage of television broadcast signals, nonduplication protection and syndicated exclusivity, cable television access and technical standards, and equal employment opportunity requirements. In addressing ECI's Motion, we are cognizant that a finding that ECI is a cable operator would require ECI to comply with all of a cable operator's statutory obligations. 4. We grant ECI's Motion for a Declaratory Ruling. Because it neither owns an interest in the facility that transmits its programming over the public rights of way, nor controls, or is responsible for the management and operation of those facilities, we conclude that ECI is a not cable operator as defined by the Communications Act and is not obligated to comply with the requirements of Title VI of the Communications Act. II. BACKGROUND 5. ECI contends that it is a satellite master antenna television ("SMATV") operator that provides video programming to approximately 1,600 subscribers of 12 multiple dwelling units ("MDUs") that are variously owned, managed and controlled by other entities. Until 1996, ECI provided its service through separate headends located at each MDU. Since 1996, to transmit its video signal from one headend to other MDUs, ECI has used a service provided by Ameritech, the area's incumbent local exchange carrier, on a common carriage basis pursuant to Tariff No. 2, referred to as Ameritech Supertrunking Video Service. The signal carrying the video programming that ECI provides to its subscribers transverses numerous public rights-of-way by way of Ameritech's facilities before connecting to ECI's various facilities inside the private property lines of the buildings ECI serves. Ameritech's facilities connect to junction boxes located inside the individual MDUs, which connect to ECI's interior building drop lines, which connect to residents' television sets. 6. ECI contends that the same fiber that Ameritech uses to provide service to ECI can be used to provide service for up to eleven other video service providers. ECI states that its facilities are located solely on private property and do not cross any public rights-of-way. III. THE PLEADINGS A. ECI's Motion for Declaratory Ruling 7. In its Motion, ECI contends that it is not a cable operator because (i) the facilities that are owned and controlled by ECI do not constitute a cable system, and (ii) the common carrier's facilities that deliver signals to ECI's facilities are not owned, managed or controlled by ECI. ECI argues that its owned or controlled facilities consist of wiring and equipment located solely on the MDU owners' properties and that, pursuant to the 1996 Act, a facility that serves subscribers without using any public rights-of-way is not a cable system. 8. ECI cites as support for its position the Commission's finding in Telephone Company- Cable Television Cross-Ownership Rules, Sections 63.54-58 that customer-programmers on a video dialtone platform were not required to obtain a cable franchise to provide their programming over the telephone companies' facilities. In particular, ECI notes the Commission's reasoning that customer- programmers are not cable operators because they neither own a significant interest in the telephone companies' facilities, nor control, manage, or operate those facilities. ECI also cites the United States Court of Appeals for the District of Columbia Circuit's decision in National Cable Television Association v. FCC which holds that customer-programmers of video dialtone service are not cable operators. ECI quotes the NCTA court stating that: Where the "closed transmission paths" and "associated" head-end equipment are owned and controlled by different entities (as in video dialtone), and where different configurations of equipment would be used to move video programming from the different providers to the different customers, the concepts of a single, integrated system and unified control are not present. ECI notes the District of Columbia Circuit's finding that the customer-programmer's control of the head- end equipment and responsibility for the program selection were not enough to warrant a finding that the customer-programmer had control of, or responsibility for, the operation and maintenance of the overall facilities themselves. ECI contends that it is in the same position as customer-programmers on a video dialtone platform with respect to a lack of control or responsibility for the operation and maintenance of the common carrier's facilities, and that therefore, ECI need not obtain a cable franchise. 9. ECI argues that pursuant to Section 651(a)(2) of the Communications Act, one of the four options for providing video programming permitted to common carriers includes the provision of video programming on a common carriage basis. ECI submits that, consistent with Section 651(a)(2), Ameritech complies with Title II requirements and is not required to comply with Title VI requirements. ECI also states that allowing it to operate without obtaining cable franchises is consistent with the pro-competitive nature of the 1996 Act and that it is exempt from the franchise requirement under Section 602(7)(B). ECI asserts that requiring it to obtain a cable franchise will further inhibit competition to franchised cable operators. 10. In the alternative, ECI suggests that even if the Commission were to conclude that ECI controls the operation of Ameritech's facilities, the common carrier's facilities would not be a cable system because they are used to transmit video programming to ECI's facilities rather than "directly to subscribers" as required by the Communications Act. In addition, ECI notes that while Section 651(a)(1) applies to common carriers' use of radio-based systems to provide programming "to subscribers," Section 651(a)(2) expressly omits the key phrase "to subscribers." Therefore, argues ECI, Section 651(a)(2) applies whenever a common carrier is providing transmission of video programming on a common carrier basis. Moreover, according to ECI, the NCTA court recognized that a facility transmitting signals from one cable operator to another that stops short of the subscriber's homes is not a cable system. 11. Although ECI acknowledges the generally accepted proposition that a cable operator using channel service must obtain a cable franchise, ECI asserts that its services are distinguishable from channel service. Channel service entails a telephone company building a video distribution system from the interconnection with the recipient's headend to the subscriber's premises and leasing it, in whole or part, to a cable operator. ECI contends that since channel service facilities are deployed for the exclusive use of the franchised cable operator and it is only one of several entities able to use Ameritech's fiber, the channel service analogy is not appropriate. ECI also notes that franchised cable operators using channel service ordinarily maintain and control the common carrier's facilities. ECI contends that its situation differs from that of New York Telephone, noting that the Commission's New York Telephone decision involved a request for a video dialtone trial rather than the request sought by ECI. ECI further argues that the Commission's decision in New York Telephone is inapposite because it was rendered prior to the enactment of the 1996 Act. B. Comments in Support of ECI's Motion 12. Several SMATV and wireless cable operators support ECI's motion for a declaratory ruling that the lease of transmission capacity from common carriers for the transport of video programming across public rights-of-way does not require a cable television franchise pursuant to Section 621 of the Communications Act. The comments in support of ECI argue that the distribution of video programming through a programmer's facilities located solely on private property does not constitute a cable system under Section 602(7)(B) of the Communications Act and does not trigger the cable franchise requirements of Section 621. 13. Commenters note that Section 602(7)(B) exempts from the definition of cable system facilities that serve subscribers "without using any public right-of-way." Commenters allege that a SMATV system that does not use a public right-of-way is not a cable system. OpTel argues that the common carrier providing video transport to ECI, rather than ECI itself, has the requisite nexus with the local jurisdiction which would justify local regulation. In this regard, OpTel argues that the common carrier owns the fiber optic cable which crosses the public right-of-way, operates the "extensive physical facilities" involved and has engaged in "substantial construction" on public property. In addition, ICS Communications, Inc. ("ICS") argues that the common carrier, rather than the SMATV operator, is responsible for any facility repair and maintenance that will affect the use of the public right-of-way. By contrast, commenters argue that ECI, as a customer of the common carrier, has no nexus with the local jurisdiction, has no ownership or control over the facilities and will not engage in any construction or installation on public property. 14. MSTI cites the Commission's decision in Definition of a Cable Television System as defining a subscriber as "a member of the general public who receives broadcast programming distributed by a cable television system and does not further distribute it." In support of its argument, MSTI cites a Commission program access ruling involving a Walt Disney Company subsidiary, Madeira, which owns a program distribution facility serving hotels at the Walt Disney World Complex. In that decision, the hotels received the Madeira programming and distributed it to guest rooms using their own internal wiring. MSTI cites the Commission's statement that "[s]ince Madeira services the hotels, and since the hotels do further distribute the programming, there are arguably no true subscribers to Madeira's operation, so the operation cannot be considered a cable system." 15. Several commenters state that an entity, having no subscribers of its own, providing video transport services on a common carrier basis to an entity with facilities located solely on private property is not a cable operator subject to Title VI regulation. MSTI argues that neither the entity providing video transport services on a common carrier basis between two or more MDUs, nor a video service provider serving the MDUs by hiring the unrelated carrier's interconnection service, is a cable operator. RCN argues that a SMATV system that leases capacity from a common carrier pursuant to a tariff does not satisfy the definition of a cable operator under Section 602(5) because it does not own or control a cable system or have responsibility for its management and operation, and does not have exclusive rights to the common carrier facilities. 16. Several commenters contend that the Commission's video dialtone decisions support ECI's proposition. Supporters cite the Commission's determination in Telephone Company-Cable Television Cross Ownership Rules that a local exchange carrier ("LEC") providing video dialtone service does not fall within the cable operator definition because the LEC itself is not providing the video programming service directly to subscribers. Rather, supporters argue, the LEC is acting as a conduit in providing broadband common-carrier based service that enables customer-programmers to provide video programming service to subscribers. MSTI points to the Commission's holding in Telephone Company- Cable Television Cross Ownership Rules that customer programmers did not qualify as cable operators and were not subject to the franchise requirement since they neither owned a significant interest in the LEC's facilities nor were responsible for the management and operation of those facilities. MSTI argues that Ameritech provides ECI the same service provided by a LEC video dialtone operator to its customer programmer. Commenters also cite the NCTA decision as supporting ECI's position. Commenters argue that the Commission's video dialtone proceedings determined that local telephone companies already receive authorization to use public rights-of-way pursuant to common carrier regulation and therefore it would be redundant to require LECs to obtain a cable television franchise to use rights-of-way they were already authorized to use. 17. Several commenters argue that requiring a video programming provider utilizing common carrier video transport service to obtain a franchise would counter Congressional intent to streamline regulation of new entrants in the video programming market. Commenters argue that from a policy perspective, the imposition of a cable franchise requirement on companies such as ECI would impede innovation and competition in the market for delivery of video programming. 18. ICS supports ECI's Motion and urges the Commission to expand the scope of this proceeding and rule that private cable operators should have an opportunity to use the fiber facilities of any independent provider, whether offered on a common carrier or private carrier basis, without incurring cable franchise obligations under Section 621 of the Communications Act. MTS argues that the Commission should give franchised cable operators the option of maintaining their current networks while being subject to franchise requirements, or divesting themselves of their cable plant by transfer or assignment to an unaffiliated third party, and leasing transport from a common carrier subject to local regulation and accountable for its use of the public right-of-ways. C. Comments Opposing ECI's Motion 19. Numerous cable industry groups, cable operators, and local franchising authorities oppose ECI's Motion. The opponents argue that ECI is providing cable service under its arrangement with Ameritech. The opponents state that the question for the Commission to determine is whether the combination of facilities used by ECI is a cable system. The opponents claim it is. The opponents assert that the combined facilities meet every element of the statutory definition of a cable system: ECI owns the "facility" consisting of "closed transmission paths" (its wires); "associated signal generation . . . equipment" (its headend, located in one or more MDUs it serves); "reception . . . equipment" (the dish and antenna also located in one or more MDUs); "control equipment" (such as scramblers authorizing its premium services); "designed to provide cable service" (services including video programming); provided to "multiple subscribers" (the residents of the multiple dwelling units); "within a community" (each community unit within which ECI is operating). Ameritech New Media argues that, combined, the fiber and wires create a closed transmission path leading directly to the subscriber which constitutes an integrated video programming delivery system, and that such a system meets the statutory criteria for a cable system. Ameritech New Media analogizes ECI's proposal with General Motors purchasing tires from Michelin for new cars: the tires are essential for the car to move from one place to another, but the fact that they are purchased from another supplier does not destroy either the integrity of the final product, the car, nor alter the identity of General Motors as a car manufacturer. 20. The opponents assert that the bifurcated analysis utilized by ECI (Ameritech's facilities exempted by Section 602(7)(C), and ECI's facilities exempted under 602(7)(B)) ignores the plain statutory language, and well-established Commission precedent, that all technically integrated facilities used to deliver cable service from a single headend constitute a single cable system. Time Warner argues that Section 602(7)(C) is inapplicable to ECI because only a portion of the combined facilities will be offered on a common carrier basis, while the headend and the private property component are not common carrier facilities. The opponents state that the common carriage exception applies only to common carrier facilities which extend from end-to-end and that the Communications Act expressly states that "such facility shall be considered a cable system to the extent such facility is used in the transmission of video programming directly to subscribers." The opponents argue that the 602(7)(B) public right-of-way exception applies only to facilities that proceed from end-to-end without using a public right-of-way, and that ECI uses public rights-of-way. In the alternative, the opponents argue that the fact that ECI's wholly-owned facility does not use any public right-of-way is irrelevant, because the combined facilities, as a whole, make extensive use of public rights-of-way. Time Warner notes that Congress expressly stated that different entities may separately own significant interests in different portions of a cable system which does not detract from the conclusion that a technically integrated facility which uses closed transmission paths crossing public rights-of-way to deliver cable service is a cable system. In this regard, the City of New York claims that the Commission has interpreted the term "use" in Section 602(7)(C) of the Communications Act to exclude only infrared and other wireless transport technologies. Several of the opponents cite a 1990 Illinois Circuit Court decision involving similar circumstances in which the court determined that the entity leasing the facilities that crossed public rights-of-way was a cable system as defined by the Communications Act. 21. The opponents argue that ECI is a cable operator as defined by Section 602(5)(B) because it controls and is responsible, through an arrangement, for the management and operation of all key aspects of the combined facility. Ameritech New Media claims that ECI is a cable operator because it: (1) controls the necessary signal generation, reception and control equipment which is associated with the selection and provision of video programming; (2) directly bills the subscribers for the provision of video services; and (3) controls the means of distributing the video programming by virtue of its decision to purchase a tariffed telecommunications service enabling it to use a common carrier's fiber crossing public rights-of-way to take the signal to its subscribers. According to the opponents, the Commission has expressly rejected the technical maintenance and repair test for the definition of a cable operator, and instead looks to the entity with editorial control, the entity responsible for the selection, packaging and pricing of video programming offered to subscribers. US West argues that, in the 1984 Cable Act Rulemaking, the Commission specifically held that the definition of cable operator was "intentionally broad" -- broad enough to apply cable rules to many entities which in combination delivered cable services to the public. Moreover, US West states that the broad sweep of the cable operator definition is designed to encompass entities involved in hybrid arrangements such as ECI's arrangement with Ameritech. 22. While ECI claims that its arrangement with Ameritech is consistent with the Commission's video dialtone decisions and the District of Columbia Circuit's decision in NCTA, the opponents argue that, because ECI controls the headend and subscriber service facilities while directing Ameritech's delivery of its signal, ECI's arrangement with Ameritech is clearly that of channel service. Contrary to ECI's claims, the opponents assert that channel service is not a private carrier service and has always been a common carrier service. Indeed, NCTA asserts that the order cited by ECI as support for its characterization of channel service as a private carrier service fails to support this contention. Instead, the order describes channel service as "the provision on a common carrier basis by a local telephone company of video transport service to a cable operator holding a local cable franchise from the cable operator's headend to the residential customer's premises." NCTA cites Northwestern Indiana Telephone Company v. FCC in which the District of Columbia Circuit upheld the Commission's rejection of a Section 214 certificate to a local telephone company that refused to provide channel service to all locally franchised entities. 23. The opponents claim that ECI's reliance on the NCTA decision upholding the Commission's video dialtone regulations is misplaced. According to the opponents, the Commission has carefully circumscribed the application of the video dialtone rules and Congress has expressly repealed "the Commission's regulations and policies with respect to video dialtone." The Alliance states that ECI cannot avail itself of the benefits of the defunct video dialtone regulatory regime without, at a minimum, taking on the regulatory responsibility to act itself as a common carrier of unaffiliated third party signals. The opponents also state that the NCTA decision relied heavily on the fact that multiple packagers of programming could reach the end-user subscriber -- an essential component missing from ECI's proposal. In addition, Time Warner claims that the NCTA court declined to address the fact pattern presented by ECI -- an arrangement where a single entity controls (1) the headend equipment, (2) program selection, and (3) an ownership and operational interest in a significant portion of the distribution network. 24. Time Warner asserts that Section 651(a)(2) of the Communications Act, outlining the common carrier video transport option, does not offer refuge to ECI from the requirement to obtain a cable franchise. Time Warner argues that, while it exempts Ameritech as a common carrier from obtaining a franchise, Section 651(a)(2) does not safeguard the user of such common carrier facilities that are used in the transmission of video programming directly to subscribers. The opponents argue that Ameritech's Title II regulation in this arrangement only governs its action as a common carrier, and does not include the provision of video programming to subscribers by ECI. US West also states that Section 651(a)(2), while carrying forward the leaseback arrangement, specifically defers to the definitions in Section 602(7)(C), under which "such facility shall be considered a cable system . . . to the extent such facility is used in the transmission of video programming directly to subscribers." Time Warner argues that if Congress had intended to exempt all use of common carrier systems from Title VI regulation, it could have done so. Instead, Congress specifically added the second sentence to Section 651(a)(2) to expressly provide that common carrier facilities could be considered part of a cable system. The opponents also state that the 1996 Act does not address the regulatory status of customer-programmers utilizing common carrier video transport. 25. In response to ECI's arguments that the regulatory burden of being classified as a cable operator is often too great for smaller telecommunications providers to bear, Time Warner asserts there is no statutory basis for establishing a different standard for smaller companies. In this regard, Time Warner observes that thousands of smaller cable systems already operate under franchise requirements. Moreover, the opponents note that it is difficult to understand why any common carrier would accept the Title VI franchise-like requirements (franchise fees, ceding two-thirds channel capacity, and Public, Educational, and Governmental Access) imposed on open video system providers by Congress in the 1996 Act, if the Commission sanctions the enormous loophole claimed by ECI. Under ECI's proposal, NCTA argues no franchise is required, even though ECI's system, by leasing the facilities of an unaffiliated common carrier, may conceivably serve every MDU in a community. Nor is it necessary to stop at MDUs; the logic of ECI's proposal applies equally to single dwelling units. Such entities would be exempt from all regulatory oversight, which was clearly not intended by Congress. Specifically, the Alliance claims that Congress generally intended that wireline video programming services should be regulated at the local level. The City of New York observes that, while Congress intended to promote competition in the telecommunications industry through enactment of the 1996 Act, Congress also made clear that such competition was not intended to eviscerate the cable franchise requirement. The opponents argue that granting ECI's motion will substantially reduce local communities' ability to control their own destinies with regard to multichannel video programming. D. Reply Comments 26. ECI objects to ICS's and Ameritech New Media's proposals to expand the scope of this proceeding arguing that the Commission should decide only the issues raised by ECI in its motion. ECI notes that Ameritech's affiliate Ameritech New Media filed an opposition to ECI's motion even though Ameritech is providing video transport service to ECI, Wedgewood and others. ECI alleges that Ameritech New Media opposed its motion because Ameritech wants to inhibit competition in areas where it is a franchised cable operator. ECI asserts that Ameritech's own advertisements for its supertrunking service repeatedly represented that users would not need a franchise and that Ameritech New Media's position before the Commission contradicts its corporate affiliate's advertisements. ECI submits Ameritech's advertisement for its supertrunking service, which states that "network repair and maintenance" is included in Ameritech's service. As further evidence of Ameritech's control over its own fiber, ECI states that Ameritech refused to provide it with enhancements, such as two-way service and multiplexing. 27. In response to arguments by the Alliance, Ameritech New Media and NCTA that the Commission's reasoning in its video dialtone proceeding should be ignored because video dialtone has been repealed, ECI submits that the Commission's reasoning from the video dialtone context is nevertheless applicable by analogy in situations other than video dialtone and that the District of Columbia Circuit's ruling in NCTA has not been vacated. ECI argues that the Commission's video dialtone decisions and the District of Columbia Circuit's 1994 NCTA decision explicitly recognize that "where the telephone company did not own or control the headend equipment but owned and controlled only its own facilities, its facilities and the headend equipment were not part of one facility under the definition of a cable system. " Accordingly, ECI asserts that Time Warner's argument that the definition of a cable system changed from 1977 to 1984 so that all technically integrated facilities used to deliver cable service from a single headend are a single cable system is simply incorrect. 28. ECI asserts that the City of Chicago's determination that Wedgewood did not need a franchise is controlling legal authority. In addition, ECI distinguishes the Day decision by noting that, in that case, the common carrier built the facilities in order to lease them to the SMATV operator and that issues of control and use of the facilities in that situation are unclear. ECI contends that opponents incorrectly focus on the issue of whether public rights-of-way are used in the provision of video programming, rather than focusing on whether ECI's facilities are using public rights-of-way. ECI states that the 1996 Act focuses on whether an entity providing cable service owns or controls a cable system. ECI asserts that the exception contained in the cable system definition focuses on the transmission facility itself and if the facility does not use a public right-of-way, then it is not a cable system and the provider does not need a franchise. Moreover, ECI argues that even if the issue of whether public rights-of-way are used in the provision of ECI's service is relevant, the Commission should find that there is no such use as intended by the Communications Act because, while ECI's signals traverse public rights-of-way, there is no physical use of the right-of-way like that of Ameritech, which constructs, maintains, owns and operates facilities in the public right-of-way. 29. In response to the City of New York's statements that ECI differs from customer- programmers in that ECI own the drops and feeder lines, whereas the customer-programmers owned only the headend equipment, ECI submits that this difference is not relevant to the critical issue of ownership or control of the common carrier facilities. ECI rebuts Time Warner's argument that because ECI makes all editorial and pricing decisions, ECI will necessarily have control of the common carrier's facilities by noting that video dialtone customer-programmers also made all editorial and pricing decisions, yet were found not to have control over the common carrier's facilities. 30. ECI contends that the opponents' assertion that video dialtone facilities must accommodate multiple programmers while ECI has no such obligation confuses the real issue, which, according to ECI, is whether ECI owns or controls the common carrier's facilities. In any event, ECI states that it will permit any provider to use its drops when technologically feasible. 31. ECI argues that Section 651(a)(2) expressly authorized common carriage transport of video programming without the common carrier bearing the burden of the requirements of Title VI, as long as the common carrier complies with Title II requirements. ECI states that Ameritech New Media's argument that it is not providing "transmission" of video programming under Section 651(a)(2) because it is not actively involved in the selection of video programming fails for two reasons. First, ECI argues that Ameritech New Media ignores the legislative history of Section 651(a)(2), which authorizes "common carrier transport of video programming." In addition, ECI contends that Ameritech New Media's interpretation ignores the fact that an entity providing common carriage of video programming under Title II, by definition, would not also be actively involved in the selection of programming. In response to the City of New York's position that Section 651(a)(2) does not address the regulatory status of customer-programmers of video transport facilities, ECI states; . . . Section 651(a)(2) provides a clear indication that the customer-programmers do not need a franchise. Section 651(a)(2) contains a second sentence, which places a limitation on the first sentence. If Congress wanted additional limitations it would have so prescribed, especially given that it prescribed the limitation set forth in the second sentence. The fact that Congress did not do so shows that the only limitation to the first sentence of Section 651(a)(2) is the second sentence to that paragraph. That second sentence provides that "[t]his paragraph shall not affect the treatment under section 602(7)(C) of a facility of a common carrier as a cable system." In response to arguments by Time Warner and the Alliance that Section 651(a)(2) is not applicable because the common carriage facilities do not go all the way to the end user, ECI notes that Section 651(a)(2) does not require the facilities to reach the end user. 32. In response to the opponents' claim that ECI is providing channel service and needs a franchise, ECI notes that under traditional channel service the cable operator has the exclusive right to use the facilities. ECI argues that it does not have the right to exclude anyone from the Ameritech's facilities, and thus ECI is not receiving channel service. ECI argues that Time Warner mistakenly claims that the Commission's video dialtone proceedings established that maintenance and repair of the facilities is irrelevant in determining who is a cable operator. 33. ECI responds to arguments by Time Warner and the Alliance that a ruling for ECI would open the floodgates for unfranchised service by every cable operator throughout the United States, by asserting that this will not happen because in order for cable operators to avoid a franchise requirement such cable operators would have to restructure their system to relinquish control over the portions of their systems that use public rights-of-way. ECI claims that cable operators will not be willing to give up control of their systems. 34. In its reply comments, OpTel contends that there is a difference between facilities ownership and the lease of facilities, and that users leasing fiber from a local exchange common carrier do not themselves become local exchange carriers. OpTel argues that the owner of the facilities, the common carrier, is responsible for complying with applicable local regulations. Citing the Commission's definition of channel service, OpTel also argues that the leasing by a private cable operator of common carrier transmission capacity from a local telephone company, pursuant to a tariff, is not channel service. OpTel asserts that even if the Commission were to conclude that leased transport on common carrier facilities constitutes the "use" of a right-of-way, the hub-to-hub use of rights-of-way would not constitute "cable service" because the "closed transmission paths" would not be used to serve subscribers. 35. RCN notes that the customer-programmer in channel service retains exclusive control over the telephone company facilities used in that service, while ECI proposes to receive common carrier service that would be provided over facilities available to multiple programmers competing with ECI. RCN argues that Congress intended in Section 602(7) to distinguish between the distribution of video programming directly to subscribers and the transmission of programming on a common carrier basis to facilities that distribute programming to subscribers. RCN submits that the opponents' efforts to gloss over this distinction is a misreading of Section 602(7)(C). RCN also notes that the Day case was decided before the passage of the 1996 Act and therefore, does not reflect the current state of telecommunications law. 36. Wedgewood states that the Ameritech tariff is res judicata, given that the opponents had an opportunity to protest Ameritech Tariff No. 2, and did not, and thus cannot, two years later, now contest the tariff. Wedgewood also cites the City of Chicago's decision that entities receiving Ameritech's supertrunking service are not required to obtain a franchise. Wedgewood argues that ECI's opponents mistakenly rely on the Day case, which involved a closed system, unlike Ameritech's fiber and switch facilities. Wedgewood contends that the opponents reliance upon channel service cases is misplaced, because those cases involved Section 214 matters before the Common Carrier Bureau and involved voice service rather than video service. Furthermore, Wedgewood argues that the City of Chicago adopted a technology neutral entertainment tax, in lieu of traditional franchise fees, which preserves a level playing field from a tax standpoint and that Illinois could adopt such a bill state-wide. Finally, Wedgewood argues that the Commission's definition of a cable system is not applicable in this proceeding, because Wedgewood's facilities are franchise-exempt SMATV facilities located entirely on private property. 37. In its reply comments, NCTA states that the commenters that support ECI's motion offer few new arguments and no compelling reason to grant ECI's motion. NCTA notes that the only support that OpTel supplies for distinguishing between "crossing" rights-of-way and "using" rights-of-way involves the crossing of public rights-of-way by SMATV or multichannel multipoint distribution service ("MMDS") radio waves. NCTA states that extending this concept to the use of rights-of-way by wire-based physical facilities is against long-standing Commission precedent. NCTA also counters MST's assertion that no franchise is required because the common carrier facilities do not serve subscribers. NCTA states that under channel service, the telephone company providing video transport facilities does not provide video programming directly to subscribers, nevertheless, the channel service recipient has without exception been required to obtain a franchise. In addition NCTA states that MST's reliance on the Disney case is misplaced because it involved a waiver of the Commission's program access rules involving an unrelated, unique circumstance. NCTA also states that the fact that Wedgewood has obtained a letter from the City of Chicago advising that Wedgewood need not obtain a franchise to operate in the City of Chicago is irrelevant because whether Wedgewood or ECI are cable operators operating cable systems is a matter of federal law. NCTA also argues that MST's reliance on the Commission's video dialtone rules and the District of Columbia Circuit's decision in NCTA is unwarranted because those authorities did not examine a situation remotely comparable to the one presented by ECI. NCTA counters RCN's policy arguments in favor of ECI's motion by stating that such policy arguments ignore the express statutory provisions applicable to the instant proceeding. With regard to ICS's request that the Commission expand the scope of the proceeding to include carriage by private carriers in addition to common carriers, NCTA asserts that ICS's proposal is beyond the scope of the Commission's public notice regarding ECI's motion and therefore not properly an issue in this proceeding. 38. Time Warner argues that ECI's interpretation of the Communications Act is incorrect because it ignores the integrated nature of the facility through which it provides service. With regard to the commenters that assert that the Commission must grant ECI's motion to carry out the broad policy of the Communications Act to promote competition, Time Warner asserts that the Commission cannot promote competition where to do so directly contravenes the express language of the Communications Act. Moreover, Time Warner notes that the legislative history cited by RCN is actually the legislative history of a prior version of the 1996 Act which was not enacted by Congress and which discussed a video platform similar to video dialtone that evolved to become the open video system under the 1996 Act. Time Warner argues that the Commission must reject Ameritech New Media's argument that Ameritech can, without obtaining a franchise, provide programming that it selects over its own facilities without a franchise pursuant to Section 651(a)(2) of the Communications Act. 39. Ameritech New Media states that the Commission recently reached essentially the same conclusion as the Day court, albeit in a different context. Ameritech New Media argues that, in TBA, Inc. v. Ohio Bell Telephone Company, the Commission held that Ohio Bell did not exceed its Section 214 authorization when it built a broadband transmission facility consisting of fiber and coaxial cable over which a cable operator provided video programming services to subscribers. Ameritech New Media asserts that the Commission made clear that a telephone company leasing its broadband facilities to a cable operator is not engaged in the "transmission" of video programming when it "does not control the transmitted signals or the destination of the transmitted signals" and only "simply process[es] incoming transmissions and pass[es] those signals on to their unique destinations." Ameritech New Media argues that reliance by ECI and its supporters on video dialtone decisions is incorrect because ECI is not similarly situated with video dialtone programmers since ECI controls the necessary signal generation, reception and control equipment, the selection of the programming, and "the means of distributing such video programming by virtue of their decision to purchase a tariffed telecommunications service which enables them to use a common carrier's fiber crossing rights-of-way to take the signal directly to their subscribers." 40. The Chicago Access Corporation ("CAC") submitted reply comments to respond to certain statements contained in Wedgewood's comments in support of ECI's motion. CAC objects to Wedgewood's statement that the Chicago Corporation Counsel determined that Wedgewood's arrangement "promotes competition" or otherwise benefits the public. CAC argues that the Chicago Corporation Counsel's opinion that Wedgewood does not need a cable franchise and what constitutes a cable system are entitled to no deference by the Commission. CAC supports the comments of those entities which argue that ECI is operating a cable system and that the use of rights-of-way (even if owned by another entity) is the critical determinant in defining a cable system. 41. The Alliance reiterates its statement that ECI's proposal is indistinguishable from channel service and should be treated as such. With regard to ECI's claims that there is room for eleven other programmers to utilize Ameritech's fiber capacity, the Alliance states that "[e]leven empty fiber-optic lines now stand ready and waiting to carry potential competitors' video signals from their headends to a dead- end." The Alliance states that, while having complete editorial control over what subscribers see through their television sets, ECI avoids the result which entitle open video systems and video common carriers to exemption from cable regulation -- competitive, common carrier access to wireline subscribers. 42. The Michigan Coalition to Protect Public Rights of Way from Telecommunications Encroachments ("PROTEC") and the City of Troy, Michigan filed joint reply comments asserting that the question of whether ECI needs a franchise is a matter of state law that the Commission is not competent to address. Should the Commission proceed to address the federal question explicitly raised by ECI's motion, PROTEC/Troy argues that the Commission should exercise care to avoid ruling on related questions of state law. 43. US West asserts that its fundamental point remains unrebutted, that a multichannel video programmer using common carrier facilities to provide programming to multiple subscribers always has been subject to franchise, or franchise-like, requirements and the exception that ECI purports to find is nonexistent. Moreover, US West argues that ECI's purported exception is equally inconsistent with Congress' most recent expression on this topic through the imposition of franchise-like obligations on open video system operators. 44. On April 15, 1997, Ameritech New Media submitted a written ex parte submission pursuant to Section 1.1206 of the Commission rules responding to certain "egregious and inappropriate allegation[s]" contained in ECI's reply comments. Thereafter, on April 30, 1997, CAC also submitted a written ex parte submission attaching a copy of a letter from the Chicago Corporation Counsel to the president of Wedgewood Communications, Inc. stating that "the position set forth in the 1995 letter no longer represents the view of this office. . . . It is our determination that the operations of Wedgewood require a City of Chicago cable franchise." In addition, numerous ex parte presentations to the Commission were made by interested parties, including cable operators, non-cable video distributors and representatives of local franchising authorities. IV. DISCUSSION 45. The essential facts underlying ECI's service are not disputed by the parties. ECI serves approximately 1,600 subscribers at 12 MDUs with headend facilities located entirely on private property and ECI interconnects with Ameritech's fiber optic facilities inside the private property line. Prior to obtaining service from Ameritech, ECI served its subscribers utilizing a separate headend at each MDU location. ECI purchases and Ameritech provides Supertrunking video transport service. Pursuant to this service, Ameritech transports ECI's signal over public rights-of-way to the subscribers ECI serves. Ameritech possesses authority to provide its Supertrunking video transport service as a common carrier in the public rights of way. Ameritech controls all routing of ECI's communications when they travel over Ameritech's facilities. Inside the MDU private property line, ECI connects with Ameritech's facilities and owns, controls and maintains the final portion of facilities which terminate at the subscriber's television set. Ameritech's Supertrunking facilities are capable of providing service to several other customers. ECI has committed to make its drops available to competing video programming providers, where technologically feasible. Given these circumstances, ECI seeks a ruling that it is not a cable operator subject to the requirements of Title VI of the Communications Act. ECI argues that Section 651(a)(2) (common carriage of video transport) and Section 602(7)(B) (private cable exemption to the definition of cable system) independently support its argument that it is not a cable operator. We address each argument below. A. Common Carriage of Video Traffic 46. Section 651 of the Communications Act sets out four options for the provision of video programming services provided by common carriers. Such carriers may: (1) provide video programming to subscribers through radio communication under Title III of the Communications Act; (2) provide transmission of video programming on a common carrier basis under Title II of the Communications Act; (3) provide video programming as a cable system under Title VI of the Communications Act; or (4) provide video programming by means of an open video system under Section 653 of the Communications Act. Section 651(a)(2) states: To the extent that a common carrier is providing transmission of video programming on a common carrier basis, such carrier shall be subject to the requirements of title II and section 652, but shall not otherwise be subject to the requirements of this title. This paragraph shall not affect the treatment under section 602(7)(C) of a facility of a common carrier as a cable system. 47. ECI asserts that Congress specifically intended Section 651(a)(2) to allow SMATV operators to distribute video programming without using public rights-of-way through a common carrier video transport to facilities located solely on private property without complying with a cable operator's obligations. ECI argues that, since it receives service from Ameritech pursuant to Section 651(a)(2), ECI is not subject to the requirements of Title VI. 48. We disagree with ECI's contention. We cannot perceive an intent, express or inferred, on the part of Congress to address in Section 651(a)(2) the regulatory status of video distributors that purchase common carriage of video traffic service. Instead, Section 651(a)(2) expressly exempts from the requirements of Title VI common carriers, such as Ameritech, that provide a common carrier service through which their facilities are used by video providers to transmit their signal. Section 651(a)(2) does not expressly address the obligations of video distributors which purchase such service and use the common carrier facilities to transmit video programming directly to subscribers. Section 651(a)(2) specifically states that it does "not affect the treatment under Section 602(7)(C) of a facility of a common carrier as a cable system." Section 602(7)(C) states that "a facility of a common carrier which is subject, in whole or in part, to the provisions of title II of this Act . . . shall be considered a cable system . . . to the extent such facility is used in the transmission of video programming directly to subscribers. . . ." Given this language, we cannot reasonably interpret Section 651(a)(2) as an exemption shielding ECI from complying with the obligations of Title VI, including the cable franchise obligation. Accordingly, we next address whether ECI is a cable operator to which the cable franchise requirement and other cable operator obligations apply. B. ECI's Status as a Cable Operator 49. To be subject to a cable operator's obligations, including the franchise requirement of Section 621(b), an entity must be a cable operator, which is defined as: any person or group of persons (A) who provides cable service over a cable system and directly or through one or more affiliates owns a significant interest in such cable system, or (B) who otherwise controls or is responsible for, through any arrangement, the management and operation of such a cable system. None of the parties to this proceeding contest that ECI provides cable service to its subscribers. We find that ECI provides cable service within the meaning of Section 602(6), because it provides "(A) one-way transmission to subscribers of (i) video programming, or (ii) other programming service, and (B) subscriber interaction, if any, which is required for the selection or use of such video programming or other programming service." 50. Although we find ECI provides cable service, it is a cable operator only if it provides such service over a "cable system," in which it owns a significant interest directly or through an affiliate, or which it controls or is responsible for the management or operation. As explained below, we conclude, based on the facts before us that ECI is not operating a cable system. 51. Section 602(7) enumerates the elements of a cable system. In pertinent part, the Communications Act defines the term cable system as: a facility, consisting of a set of closed transmission paths and associated signal generation, reception, and control equipment that is designed to provide cable service which includes video programming and which is provided to multiple subscribers within a community. The Communications Act provides several exemptions to the definition of what constitutes a cable system. The exemption at issue in this proceeding, the private cable exemption, set forth at Section 602(7)(B) provides that "a facility that serves subscribers without using any public right-of-way" is not a cable system. 52. Consistent with this statutory exemption, in analyzing the definition of the term "cable system," the Commission has stated that: [t]he dual federal-local jurisdictional approach to regulating cable television service is largely premised on the fact that cable systems necessarily involve extensive physical facilities and substantial construction upon and use of public- rights of way in the communities they serve." Thus, through the policies enumerated by the Communications Act, the definitions reflecting these policies, and the Commission's decisions, the cable franchise requirement of Section 621(b) is inextricably linked to the use of public rights-of-way. In addition, there is evidence in the legislative history that Congress did not intend users of non-cable-franchised common carrier services to be subject to Title VI requirements. In its comments, RCN cites the legislative history of earlier versions of Section 302 of the 1996 Act and Section 651 of the Communications Act, which states: to the extent that the carrier provides programming through a common carrier platform, neither it, nor any video programming provider making use of such platform shall be deemed to be a cable operator providing cable service. Under current law, a programmer who uses a video dialtone network to deliver programming to subscribers is not a cable operator. While we recognize, as Time Warner points out in its comments, that the legislative history cited by RCN refers to a proposal relating to what evolved into the open video system option, we are not persuaded that RCN's reference is inapplicable to the instant proceeding. The cited legislative history can be interpreted as a congressional indication that video distributors that transmit their signals over public rights-of-way through the use of a LEC's common carrier platform not be deemed cable systems. 53. We have previously determined that the term "cable operator" does not encompass an entity that maintains reception and transmission equipment wholly on private property and that transmits its video signals through the public rights-of-way solely by means of a local exchange carrier's facilities that are made available on a common carrier basis. Under the video dialtone framework, local telephone companies were permitted to make available, on a nondiscriminatory common carrier basis, a basic platform that delivered video programming and other services from the separately-owned headend facilities of multiple customer programmers to end-user subscribers. In Telephone Company-Cable Television Cross-Ownership Rules, Sections 63.54 - 63.58, Further Notice of Proposed Rulemaking, First Report and Order, and Second Further Notice of Inquiry ("First Report and Order"), the Commission determined that neither a LEC providing video dialtone services nor its customer/programmer was required under Section 621(b) to obtain a cable franchise in order to offer service. The Commission determined that the customer/programmers were not cable operators subject to the franchise requirement because "they neither own a significant interest in the telephone company broadband facilities, or control, or are responsible for the management and operation of those facilities. . . ." In Telephone Company-Cable Television Cross- Ownership Rules, Sections 63.54 - 63.58, Memorandum Opinion and Order on Reconsideration ("Order on Reconsideration"), the Commission addressed reconsideration requests on the issue of whether LEC video dialtone providers should be required to obtain local cable franchises. Although the Commission was not asked to reconsider the cable franchise requirement as it pertained to video dialtone customer/programmers, the Commission indirectly touched on this issue by holding that: [w]e conclude further that video dialtone facilities typically would not constitute a "cable system" for the additional reason that they will not ordinarily include the necessary signal generation, reception and control equipment. As a video dialtone provider, a telephone company generally will not control this "headend equipment," which is associated with selection and provision of video programming. It will be the video programmers, rather than the telephone company, who will generate and control the signal sent over transmission facilities made available by the telephone company. As long as the facilities are not used by the telephone company for the direct provision of video programming, the system does not qualify as a cable system. 54. In upholding the Commission's video dialtone policies as set forth in the First Report and Order and the Order on Reconsideration, the District of Columbia Circuit in NCTA stressed the importance of separate ownership of the headend and transmission facilities stating that: [w]here the "closed transmission paths" and "associated" head-end equipment are owned and controlled by different entities (as in video dialtone), and where different configurations of equipment would be used to move video programming from the different providers to the different customers, the concepts of a single, integrated system and unified control are not present. 55. We believe the District of Columbia Circuit's affirmance of our decisions in the video dialtone context supports the conclusion that ECI is not a cable operator. The court's decision is based on principles that are present here. First, there is an absolute separation of ownership between ECI's headend facilities, which are located entirely on private property, and the transmission facilities owned and controlled by Ameritech. ECI has no financial interest in Ameritech and Ameritech has no financial interest in ECI. The companies are in no way affiliated. Ameritech takes no part in programming selection. ECI retains total control over the selection of programming offered to its subscribers. After delivery of its signal to Ameritech at the junction box, ECI surrenders control to Ameritech, retaining only the right to designate the delivery points, which Ameritech must approve. ECI can provide service only to those locations where Ameritech has facilities or is willing to construct facilities in furtherance of its Supertrunking service. In short, there is absolutely no evidence that the relationship between Ameritech and ECI is other than a "carrier-user" relationship. In addition, Ameritech also has capacity to serve multiple customers in the same MDUs -- ECI asserts that it uses one strand of fiber in a twelve fiber bundle. We acknowledge that the relationship between Ameritech and ECI does not absolutely mirror that of a video dialtone operator and a customer programmer. For example, in the instant circumstances, at least initially, there will be only a single stream of programming from a single programming provider. However, such distinctions are not legally relevant to the issue of whether a single, integrated cable system is present. 56. We acknowledge Time Warner's argument that the definition of the term cable system, as codified by the 1984 Act, intentionally omitted the Commission's previous requirement that all portions of a cable system be under common ownership or control. Accordingly, Time Warner contends that the separate ownership of ECI's headend facilities and Ameritech's transmission facilities does not preclude a finding that ECI is a cable operator of a cable system. While Time Warner's argument is correct as far as it goes, we find that it does not compel a different conclusion in this case. As explained herein, Ameritech exercises complete stewardship over the transmission facilities that actually traverse the public right-of-way. It has no affiliation whatever with ECI and no obligation to use the facilities exclusively for ECI. Under all these circumstances, we find that ECI is not a cable operator. 57. Several parties argue that Ameritech's Supertrunking service more closely resembles common carrier channel service than video dialtone, and that the Commission has always required that channel service recipients comply with all Title VI requirements. We disagree. Ameritech's Supertrunking service does not have the traditional characteristics of channel service. Channel service generally entailed a telephone company building a video distribution system or systems, if the telephone company received multiple channel service requests, from the interconnection with the recipient's headend to the subscriber's premises and leasing it to a cable operator. Channel service facilities are built-to- order facilities constructed solely for the use of a particular channel service recipient. The channel service facilities are constructed to take the recipient's signal to the destinations designated by the recipient. 58. This stands in distinct contrast to the service ECI receives from Ameritech. ECI purchases a tariffed service provided over facilities the large majority of which were constructed by Ameritech prior to marketing its Supertrunking video service and some of which were constructed in response to ECI's request for service. Thus, the fiber optic facilities used to provide service were not wholly constructed at ECI's request. In addition, because such construction, at a minimum, consists of twelve-strand fiber bundles, the facilities constructed to provide service to ECI do not benefit any particular programming provider, Moreover, Ameritech does not own and control the facilities that go directly to the subscriber's premises. ECI owns and controls the facilities from its interconnection with Ameritech inside the private property line to the subscriber's television. Ameritech's service is provided over facilities totally owned, controlled and maintained by Ameritech. Also in contrast to channel service, several other video programming distributors may purchase on demand the same service provided to ECI under the same prices, terms and conditions. We believe these factors distinguish ECI's service from traditional channel service and render the opponent's analogy unpersuasive. Again, we find the District of Columbia Circuit's opinion in NCTA instructive. In response to claims that the Commission's video dialtone decisions would permit channel service recipients to restructure their service to avoid the cable franchise requirements, the District of Columbia Circuit stated that: [a] cable operator could presumably do that, but it would at the same time fundamentally alter the nature of its business, offering the public programs rather than channels of programming. It would also have to give up control over, including the right to exclude others from, the channel capacity that it formerly leased, and depend upon the capacity of the public switched network in order to reach its customers. In these important ways, video dialtone and channel service are not . . . functionally indistinguishable. 59. We reject contentions that the Commission's video dialtone decisions have no precedential value in light of Congress' express repeal of video dialtone in the 1996 Act. The amendments to the Communications Act by the 1996 Act do not alter the analysis of Section 602(7) contained in the Commission's video dialtone orders and the District of Columbia Circuit's NCTA decision. These decisions and NCTA analyzed the video dialtone framework in the context of the definition of cable system set forth in Section 602(7) to determine whether the video dialtone system operator or customer/programmers were cable operators of cable systems, necessitating that either or both of these parties obtain a cable franchise. The reasoning and analysis that formed the underpinning of the Commission's video dialtone decisions continues to have applicability in interpreting the definition of "cable system." 60. Ameritech New Media argues that, in TBA v. Ohio Bell, the Commission considered facts similar to the instant proceeding and concluded that a common carrier does not engage in transmission when it does not control the transmitted signals or their destination. We disagree. In TBA, the Commission addressed whether Ohio Bell violated its Section 214 grant of authority in connection with the construction, operation and extension of lines of a broadband cable television transport system for North Coast Cable Ltd. ("NCC"). NCC purchased the coaxial cable portion of the system from Ohio Bell. Although record title remained with Ohio Bell, all other incidents of ownership were conveyed to NCC. Thereafter, NCC extended a line of the coaxial portion of the system into a neighboring community and began competing with another cable operator, TBA, Inc. ("TBA"). TBA filed a complaint alleging that Ohio Bell violated its Section 214 authority when NCC extended the line outside of Ohio Bell's telephony service area and into TBA's franchise area. The Common Carrier Bureau ("CCB") concluded that TBA failed to establish a Section 214 violation, and TBA filed an application for review of the CCB's order to the Commission. On review, the Commission upheld the CCB's decision. Our review of that decision indicates that Ohio Bell clearly provided channel service to NCC. Accordingly, because Ameritech provides common carriage video transport, not channel service, to ECI, we find the reasoning of TBA to be inapplicable to ECI's Motion. 61. We conclude that ECI's facilities and Ameritech's facilities do not constitute a single, integrated cable system. ECI is not a cable operator as defined by Section 602(5) of the Communications Act because it does not provide service to its subscribers through a cable system. Because only cable operators are required by Section 621(b) to obtain cable franchises and comply with the other Title VI requirements, ECI is not required to obtain a cable franchise or otherwise comply with a cable operator's obligations under Title VI of the Communications Act. 62. We find also that ECI qualifies for the private cable exemption of Section 602(7)(B), which provides that "a facility that serves subscribers without using any public rights of way" does not constitute a cable system under Section 602(7). That ECI's signal moves across public rights-of-way to reach its subscribers does not by itself render ECI the operator of a cable system. The issue is whether the transport by Ameritech of ECI's signal constitutes a use of such rights-of-way by ECI as contemplated by Section 602(7)(B). It is Ameritech, not ECI, that uses the rights-of-way, as the Commission and courts have interpreted the term, whether for installations, repair or maintenance of its facilities. Ameritech does not have unfettered use of public rights-of-way and must comply with a range of safety, convenience, and other requirements. The public safety and convenience and management of public rights-of-way, provide a key premise for the cable franchise requirement. Because Ameritech possesses the authority to operate in the right-of-way and to transmit ECI's, or other video distributors', signals, we conclude that the underlying premise tying the franchise requirement to the use of public rights-of-way is not present in ECI's circumstances, and that requiring ECI to obtain a franchise would be needlessly duplicative. As discussed above, a cable operator's construction in and use of public rights-of way is an important factor, and advantage, underlying the Communication Act's requirement that all cable operators be franchised. ECI engages in neither of these activities, relying on Ameritech's authorization, construction and maintenance of its right-of-way facilities. We cannot conclude that ECI's mere interaction with Ameritech's authorized facilities in the public right-of-way is the type of use to which Congress spoke in defining what constitutes a cable system. Any conclusion to the contrary would be inconsistent with the NCTA decision, where the District of Columbia Circuit held that a programmer's "use" of LEC common carrier facilities in the public rights-of-way does not trigger the cable franchise requirement. We find our conclusion in concert with the amendments to the private cable exemption effected by Congress in the 1996 Act. By removing the requirement that private cable operators serve only commonly owned, controlled, or managed MDUs, Congress clearly indicated its desire that the private cable exemption be more broadly available than prior to the 1996 Act. 63. The United States District Court for the Western District of Texas' recent decision in AT&T Communications of the Southwest v. City of Austin further supports our holding. In that case, Southwestern Bell Telephone Company ("SWBT") leased facilities to AT&T of the Southwest, Inc. ("AT&T") for the provision of local telephone service by AT&T. Based on AT&T's occupancy of SWBT's facilities located in public rights-of-way, the City of Austin claimed that AT&T must obtain a local franchise before offering local telephone service. Arguing that Section 253 of Communications Act precludes such barriers to entry by localities, AT&T sought and was granted a preliminary injunction enjoining the City's franchise requirement. In granting a permanent injunction, the District Court stated: AT&T transmits signals consisting of electrons and lightwaves, which travel through copper and fiber optic lines, cables, and link switches located in (as opposed to above) the City's rights-of-way. The City contends these electrons and lightwaves constitute both a use and an occupancy of the public rights-of-way. The distinction between "in" and "above" is due to the Court's reliance in its preliminary injunction order on In the Matter of Definition of a Cable Television System . . . a Federal Communications Commission ("FCC") decision which held that the "mere passing over of . . . a right-of-way by electromagnetic radiation" does not constitute the "use" of the right-of-way. The City argues the FCC decision, which involves wireless communication passing over a right-of- way, is materially different from the situation here in which communication travels through wires located in the City's rights-of-way. * * * [T]he manner in which electrons travel -- in, through, out, above, below, beyond, between, around, over, under, on, within, without -- is irrelevant. The essential point is that AT&T will not erect telephone polls [sic] or dig holes in the City's streets in order to install, maintain, operate or repair SWBT's network (i.e., wires, cables, and switches) because those rights and duties belong to SWBT, not to AT&T. When AT&T purchases wholesale services and network functionalities from SWBT, SWBT provides those services to AT&T through SWBT's network, and AT&T then resells those services to consumers. True, when AT&T's customers place a local telephone call, electromagnetic radiation travels through SWBT's network, but that is not to say that AT&T owns the electromagnetic radiation travelling through the network (a question which is better left to the ruminations of philosophers rather than a court of law). The Court once again rejects the City's bizarre definition of the term "use." 64. Our decision is consistent with the pro-competitive mandate imparted on the Commission by Congress in enacting the 1996 Act. Indeed, the Conference Report states: "[r]ecognizing that there can be different strategies, services and technologies for entering video markets, the conferees agree to multiple entry options to promote competition, encourage investment in new technologies and to maximize consumer choice of services that best meet their information and entertainment needs." The 1996 Act directs that advanced telecommunications service be obtained through robust competition rather than through regulatory oversight. ECI's service is a statutorily permissible option which will, where possible, promote competition in the MVPD marketplace and enhance consumer choice. C. Miscellaneous Matters 65. We reject ICS' request to expand the scope of this proceeding to consider whether private cable operators should be allowed to use the fiber optic facilities of any independent provider, both common carrier and private carrier. We also reject MTS' request that the Commission grant franchised cable operators the option to transfer their cable plant that use public rights-of-way to unaffiliated third parties. Both requests are beyond the scope of this proceeding. 66. We disagree with PROTEC/Troy's assertion that whether or not ECI needs to obtain a cable franchise is a question of state law that the Commission is not competent to address. The Commission is charged with administering and enforcing the Communications Act. Incumbent in such jurisdiction is interpreting the applicability of the provisions of the Communications Act such as the definition of cable operator and cable system contained in Section 602 as those terms relate to the franchising requirement of Section 621(b)(1) of the Communications Act. This decision does not reach the issue of state and local authority over video distributors such as ECI. D. Motion to Dismiss 67. The Cities of Chicago, East Lansing, and Meridian (the "Cities") filed a Joint Motion to Dismiss ECI's Motion arguing that ECI breached its duty of truthfulness and candor to the Commission. The Cities assert that ECI has breached that duty by misrepresenting and failing to candidly disclose that construction of new facilities is necessary in the majority of cases for Ameritech to provide service to ECI and other Supertrunking video transport service customers. The Cities cite two statements made by ECI in its Reply Comments which state: As also previously explained, unlike traditional channel service, Ameritech did not construct its system for ECI to provide cable service but instead is simply now allowing ECI, Wedgewood and presumably others to transport video over pre-existing Ameritech facilities that are also used for the transport of non-video services. * * * Therefore, a ruling against petitioners will lead to the underutilization of the common carriers facilities, as such facilities would be able to support a viable service that cannot take off because of regulation. The Cities also cite several similar statements made by parties supporting ECI's Motion. The Cities request that the Commission either dismiss ECI's Motion on the basis of "facts already known," or, in the alternative, conduct a hearing for the purpose of determining whether ECI made material misrepresentations or omitted to disclose relevant information in its filings with the Commission. 68. In its Opposition, ECI asserts that the Cities' Joint Motion to Dismiss is frivolous and maintains that the statements the Cities complained of are not false. With regard to the first alleged misrepresentation regarding extension of Ameritech facilities to provide it service, ECI asserts that the Cities: . . . focus solely on the fact that not every foot of Ameritech's facilities were pre-existing, which ECI never stated in the first place. It is axiomatic that when two facilities such as Ameritech's and ECI's are connected there ordinarily will be some small extension of the lines to connect to the other facility. ECI further argues that the small extensions of line necessary to connect Ameritech's pre-existing facilities is not relevant to, or inconsistent with, ECI's argument that it need not obtain a franchise because the lines added by Ameritech are part of Ameritech's common carrier facilities, all of which are owned, controlled, and managed by Ameritech. ECI states that, while the Cities allege that ECI withheld material information from the Commission, it was ECI that first brought the information to the Commission's attention through its ex parte submissions. In these submissions, states ECI, the Commission was clearly informed of the fact that Ameritech was required to install short extensions to connect its facilities with ECI. ECI states that these submissions included a map clearly detailing the portions of Ameritech's system which preexisted ECI's service and those facilities which were constructed to provide service to ECI. With regard to the second alleged misrepresentation concerning the underutilization of Ameritech's facilities, ECI states that the Cities' claim is "absurd as obviously those common carrier facilities that are currently utilized to provide service to entities such as ECI and Wedgewood will not be so utilized if the Commission rules against ECI." 69. As the Cities correctly acknowledge, all parties to Commission proceedings have an affirmative duty of truthfulness and candor. We fail to perceive, however, how ECI has breached this duty. At the outset of our discussion, we note that the disputed statements are immaterial to our decision today. As discussed above, Ameritech is providing ECI with a common carriage video transport service over facilities wholly owned, controlled and managed by Ameritech. 70. We first address the Cities' argument that ECI has been less than truthful regarding Ameritech's construction of facilities. A party's duty of truthfulness and candor does not extend to pleading facts that are so patently obvious that their inclusion does not serve to inform the Commission and needlessly inflates pleadings. The Commission did not approach ECI's Motion in a vacuum, and was not under the misapprehension that Ameritech had constructed all the facilities needed to serve ECI, or other similarly-situated programming providers, at all present and future locations such that the two facilities need merely to be connected to commence service. To argue that ECI had an affirmative duty to dissuade the Commission of this fact is unreasonable. The Commission correctly read ECI's statements that Ameritech did not construct its system with the intent of permitting ECI to provide cable service and that ECI's service was provided "over pre-existing Ameritech facilities" in their proper context -- that Ameritech did not construct the primary facilities necessary to provide service to ECI. The fact that Ameritech had to construct short extensions to connect with ECI's facilities does not render ECI's statements untrue or misleading. 71. We also acknowledge that, despite the voluminous record amassed in this proceeding, the issue of the existence and scope of Ameritech's extensions to serve ECI was not raised by any party until almost one year after ECI filed its Motion. The Commission finds it difficult to posit that all parties to this proceeding believed that ECI was receiving service via facilities that completely pre-existed its service request to Ameritech. We find it far more likely that these parties correctly read ECI's statement in its intended context. When the issue of the existence and scope of Ameritech extensions to serve ECI was raised before the Commission, ECI promptly filed information with the Commission detailing such extensions. 72. We next address the Cities' argument that ECI's statement concerning underutilization of facilities was false or misleading. We find ECI's statement in this regard to be a reasonable characterization of the facts. To the extent that Ameritech is prevented from providing its common carriage video transport service to ECI, facilities will not be used to serve ECI and thus not utilized to capacity. Finally, to the extent that the Cities base a portion of their Joint Motion to Dismiss on the allegedly false statements of parties supporting ECI's Motion, we find that, while false statements in a proceeding are always of concern to the Commission, such statements do not serve as grounds to dismiss the motion of a party that did not render such statements. Accordingly, the Cities Joint Motion to Dismiss ECI's motion for declaratory ruling based on a breach of ECI's duty of truthfulness and candor to the Commission is denied. For the foregoing reasons, we also deny the Cities alternate request for a hearing for the purpose of determining whether ECI made material misrepresentations or omitted to disclose relevant information in its filings with the Commission. V. CONCLUSION 73. In granting ECI's motion for a declaratory ruling, we are cognizant that other similarly- situated operators have embraced the same interpretation as ECI. In so stating, we caution other MVPDs that the instant decision is expressly limited to the facts before the Commission as presented by ECI. In this regard, we note that: (i) there is absolute separation of ownership between ECI and Ameritech and there is nothing more than the carrier-user relationship between them; (ii) ECI's facilities are located entirely on private property; (iii) Ameritech provides service to ECI pursuant to a tariffed common carrier service; (iv) Ameritech has no editorial control over the content of ECI's programming; (v) the facilities primarily used by Ameritech to provide service to ECI were not constructed at ECI's request; (vi) there is capacity to serve several other programming providers; and (vii) ECI has committed to make its drops available to other programming providers. VI. ORDERING CLAUSES 74. Accordingly, IT IS ORDERED that the Motion for a Declaratory Ruling of Entertainment Connections, Inc. IS GRANTED as described in this Memorandum Opinion and Order, and in all other respects denied. 75. IT IS FURTHER ORDERED that the Joint Motion to Dismiss Proceeding filed by the City of Chicago, Illinois, Meridian Charter Township, Michigan, and the City of East Lansing, Michigan IS DENIED. FEDERAL COMMUNICATIONS COMMISSION Magalie Roman Salas Secretary Joint Statement of Chairman Kennard, Commissioner Ness, Commissioner Furchtgott-Roth, and Commissi oner Powell In the Order we issue today, we decide that Entertainment Connections, Inc., is not a cable operator as defined by the Communications Act and therefore is not required to obtain a cable franchise. Although strong arguments have been presented on both sides of the question of whether a franchise is required by ECI, a video provider who leases video trunking service from Ameritech, we ultimately conclude that no franchise is required. This decision, while difficult, hinges on our factual judgment that the facilities of ECI and Ameritech are separate and cannot be considered as one, integrated facility that would trigger the franchise requirements of Section 621(b)(1) of the Communications Act. Thus, with due respect to the points made by Commissioner Tristani in her dissent, because we differ on this fundamental view of the facts, we reach an opposite conclusion on the application of the law. There are three key reasons that compel our legal judgment. First, ECI is exempt from the franchise requirement by Section 602(7)(B) of the Act, which provides that "a facility that serves subscribers without using any public rights of way" does not constitute a cable system. Second, the Ameritech facilities comprise a large majority of the distribution network used by ECI. ECI does not manage, control, or otherwise direct the use of Ameritech's facilities and the two unaffiliated companies are in a "carrier-user" relationship to one another. Third, the Ameritech facilities -- twelve-strand fiber trunks of which ECI uses no more than two strands -- are available to other video providers that might serve some or all of the same locations served by ECI, and ECI has offered to make its facilities available to competitive providers. With regard to policy, as Commissioner Tristani's dissent notes, the decision highlights important issues surrounding dual federal-local jurisdiction under the Communications Act. This is an area where proper deference to local officials is critical in light of the extensive physical facilities and substantial construction upon and use of public rights-of-way. We remain committed to upholding the legitimate rights of local governments to manage their rights of way and receive compensation for their use. Under the facts presented here, however, we believe the local government can and must exercise these rights in the context of its relationship with the local exchange carrier that owns, installs, and maintains the facilities in the public rights-of-way, rather than via franchising and regulation of the video programmer that makes no such use of the rights-of-way. We believe this reasoning, and today's decision, follow from the judicial precedent cited in the order and are consistent with the decision by Congress, in the Telecommunications Act of 1996, to expand the "private cable" exception to the cable franchising requirement. See 47 U.S.C.  522(7)(B). Our decision makes clear our commitment to ensure competitive opportunity while safeguarding the discretion and responsibilities of local officials. DISSENTING STATEMENT OF COMMISSIONER GLORIA TRISTANI In the Matter of Entertainment Connections, Inc., Motion for Declaratory Ruling I dissent. Today's decision is wrong as a matter of law and misguided as a matter of policy. Moreover, by concluding for the first time that a wireline video distribution service with a single editorial voice need not obtain a cable franchise, I fear that the majority has opened a Pandora's box that will prove difficult and time-consuming to close. Legal Issues The sole legal issue under review is whether ECI must obtain a Title VI cable franchise. ECI must obtain such a franchise if it is a "cable operator" providing "cable service" over a "cable system." ECI is providing "cable service" This is not in dispute. As the majority correctly concludes, ECI is clearly providing one-way transmission of video programming to subscribers. ECI is providing its cable service over a "cable system" A cable system is: a facility, consisting of a set of closed transmission paths and associated signal generation, reception, and control equipment that is designed to provide cable service which includes video programming and which is provided to multiple subscribers within a community. ECI's video distribution system meets this standard. First, ECI uses a "set" of transmission paths (some owned, some leased) to transmit its video programming to subscribers. Just like any cable operator, these transmission paths do not change and are dedicated to ECI's exclusive use. Second, these transmission paths are "closed" because they transmit via wires rather than radio waves. Third, these closed transmission paths have "associated signal generation, reception, and control equipment [i.e., ECI's headend equipment] that is designed to provide cable service." Fourth, ECI's service includes video programming and is provided to multiple subscribers within a community. The conclusion that ECI is operating a cable system is consistent with the Commission's long- standing definition of "cable system" based on technical integration: all technically integrated facilities that provide cable service from a single headend to multiple subscribers are deemed to be a cable system. Rather than apply a straightforward technical integration test, however, the majority gets sidetracked by the fact that ECI leases part of its distribution system from Ameritech. Relying primarily on an inapt analogy to video dialtone, the majority argues that the separation of ownership between headend (ECI) and transmission paths (Ameritech) precludes a finding that ECI is operating a cable system. The majority's mistaken analogy to video dialtone is based on a failure to distinguish between use of a common carrier's facilities and use of a common carrier platform. The distinction is critical. Use of a common carrier's facilities on a technically integrated basis -- i.e., where a single entity, like ECI, provides programming to subscribers from a single headend over a dedicated set of common carrier wires - - has always been considered a cable system. Indeed, that is "channel service," a common carrier offering that requires the programmer leasing capacity to obtain a Title VI cable franchise. By contrast, a common carrier video platform like video dialtone refers to a common carrier service on which multiple independent programmers may obtain carriage on a non-discriminatory basis and provide video programming directly to consumers. As the Commission recently stated, our rules required video dialtone service: to include at a minimum, a basic common carrier platform available to multiple video programmers on a non-discriminatory basis, and a means by which end-user subscribers could access any and all of the video programming offered. Put differently, if channel service is like cable, a common carrier video platform is more like a video version of a common carrier "900" service through which multiple independent entities can obtain non- discriminatory access to consumers through the common carrier's network. This distinction is significant and demonstrates why ECI is clearly operating a cable system. First, as a technical matter, ECI's system resembles a cable system and not a common carrier platform. In a key passage regarding video dialtone cited by the majority as supporting its conclusion, the D.C. Circuit stated: [w]here the "closed transmission paths" and "associated" headend equipment are owned and controlled by different entities (as in video dialtone), and where different configurations of equipment would be used to move video programming from the different providers to the different customers, the concepts of a single, integrated system and unified control are not present. In other words, in video dialtone there was no "single, integrated system and unified control" not simply because different entities owned the headends and closed transmission paths, but because the presence of multiple headends meant that no technically integrated "system" was used to deliver programming to subscribers (i.e., a different mix of facilities might be used to deliver video programming to each subscriber). This is nothing like ECI's technically integrated system, where there is only one headend "associated" with the closed transmission paths, and the same configuration of equipment is used to deliver video programming to subscribers from a single provider. Nor can ECI's technically integrated system be shoe-horned into the video dialtone model because Ameritech may have additional fibers in the ground that could accommodate other programmers. Unlike video dialtone, Ameritech's service does not provide a common vehicle for multiple programmers to reach subscribers to the platform. Rather, Ameritech provides dedicated transmission paths -- ready-made channel service, if you will -- for single programmers operating from single headends to reach only their own customers. Every ECI customer receives programming only from ECI's headend; every customer of a different service would receive programming from only that service's headend. The requirement that multiple programmers be able to reach consumers was a key aspect of video dialtone: [W]e believe that such a requirement will prevent a telephone company from seeking to present ordinary channel service to a single video programmer and claiming that such a construct is a sufficient video dialtone "platform" to enable it to provide to video programmers unregulated enhanced services related to video programming. In fact, there is no guarantee that residents in multiple dwelling unit buildings ("MDUs") served by ECI will even have a choice among separate service providers that may use Ameritech's service. At best, Ameritech's service only gets programmers as far as a junction box within an MDU. An MDU owner that selects ECI or a different provider (possibly for a share of the revenues), could prevent all other programmers using Ameritech's service from reaching MDU residents. Thus, an MDU resident may have no choice at all among service providers -- it could be ECI or nothing. Second, ECI exercises the editorial discretion of a cable operator, not of a programmer on a common carrier platform. A traditional cable system is a "closed" system -- a single cable operator (using channel service or otherwise) generally has broad editorial control over what programming is carried on its system. A common carrier platform, on the other hand, is an "open" system -- no one has control over the system's editorial content because the common carrier must provide access to all programmers on a non-discriminatory basis. ECI's broad editorial discretion to select and package programming, and to exclude others from its dedicated wire, is far more similar to cable service than video dialtone. Indeed, ECI will have even more editorial control than a traditional cable operator since, under the majority's decision, ECI has no leased access, must-carry or public, educational and governmental ("PEG") access obligations. Third, unlike a common carrier platform, it is feasible as a practical matter to regulate ECI's system as a cable system. As the NCTA court pointed out, it would be non-sensical to apply many of the strictures of Title VI to a common carrier platform like video dialtone. For instance, with multiple programmers providing service from separate headends over a single wire, it is difficult to imagine how the system would comply with the basic service tier, commercial leased access and must-carry requirements. No such practical problems present themselves with ECI. As with channel service, it is not difficult to determine which programmer must comply with the requirements of Title VI because there is only one entity providing programming to ECI's customers: ECI. Finally, the majority asserts that, even if ECI's system constitutes a "cable system," it qualifies for the private cable exemption reserved for "a facility that serves subscribers without using any public rights of way." The majority argues that it is Ameritech, not ECI, that is using the public rights-of-way. This argument can be dismissed quickly. Under Title VI, the issue is not whether a particular entity uses the public rights of way, but whether the facility uses the public rights of way. Were it otherwise, traditional channel service would not have required a Title VI franchise. As described above, ECI owns part of its video distribution facility and leases part of it, but there can be no question that this unified, end-to-end facility uses the public rights of way. The majority's argument cannot withstand scrutiny under the plain language of the Act. ECI is a "cable operator" Section 602(5) defines a "cable operator" as: any person or group of persons (A) who provides cable service over a cable system and directly or through one or more affiliates owns a significant interest in such cable system, or (B) who otherwise controls or is responsible for, through any arrangement, the management and operation of such a cable system. Although the majority does not reach this issue, I believe that ECI likely satisfies both tests by which an entity can be deemed a cable operator. First, ECI may own a "significant interest" in the facilities that constitute its cable system. Although Ameritech owns the closed transmission paths in the public rights of way, ECI owns all of the signal generation, reception, and control equipment, as well as the portion of the closed transmission paths at each MDU (including all inside wiring, amplifiers, splitters, lockboxes, etc.). At the very least, this raises a substantial question of fact that cannot be resolved on the current record. Moreover, ECI controls or is responsible for (through its ownership and lease arrangements) the management and operation of the cable system. ECI decides how many channels the cable system will have and what programming services will be carried. ECI selects the MDUs that will be served, sets the price for and markets the service, and bills subscribers for the service. If a subscriber wants to initiate service or has a service outage, he or she would call ECI, not Ameritech. Ameritech essentially serves as a transparent conduit, transporting video signals at ECI's direction from ECI's headend to its customers. As the NCTA court found, where an entity is using the facilities of a common carrier to transmit video programming to subscribers, it is the transmitting entity and not the common carrier that is engaged in activity covered by Title VI. Policy Considerations Although this case primarily turns on a legal interpretation of the Communications Act, several policy considerations also argue against granting ECI's petition. First, today's decision upsets the careful regulatory balance struck by Congress in the Communications Act. The Act establishes several distinct methods for entering the video marketplace, each with its own specific benefits and obligations. Even under the "reduced regulatory burdens" of the open video system ("OVS") model, Congress imposed various Title VI obligations including must-carry, PEG and the payment of a gross revenue fee to local authorities. ECI, by contrast, will have virtually all of the benefits of being a cable or OVS operator with none of the Title VI obligations. Regardless of how much we want to promote competition in the multichannel video marketplace, we cannot do so by creating loopholes in the regulatory scheme created by Congress. Second, today's decision undermines the vital franchising role that Title VI reserves for local governments. Under Title VI, local franchising authorities can ensure that the needs of their particular communities are met, such as requiring that all neighborhoods be served and that capacity for PEG access be provided. We should not lightly deprive local governments of the ability to protect their communities in this regard, and certainly not without a fuller analysis than is presented here. Third, today's decision poses a substantial risk of unintended consequences. For instance, I see no legal basis for limiting the decision solely to entities that want to serve MDUs. If ECI's system is not a "cable system," it would not be a cable system whether it serves MDUs or single family homes. The next case before us could be an overbuild of an entire cable franchise area that would look exactly like a cable system in every respect -- except that no Title VI obligations would apply. Moreover, the next case may not involve a small entity like ECI; telephone companies, incumbent cable operators and others have already expressed an interest in obtaining similar treatment if ECI's petition is granted. We should not underestimate the incentive that today's decision gives companies to artificially restructure their ownership arrangements to evade Title VI regulation. Unfortunately, by failing to articulate a clear legal or factual standard of review for future cases, the majority has done little to discourage such behavior.