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Before the
Federal Communications Commission
Washington, D.C. 20554
)
In the Matter of ) File Number EB-07-SE-351
Cox Communications, Inc. ) NAL/Acct. No. 20093210001
Fairfax County, Virginia Cable System ) FRN 0016034050
)
FORFEITURE ORDER
Adopted: January 19, 2009 Released: January 19, 2009
By the Chief, Enforcement Bureau:
I. INTRODUCTION
1. In this Forfeiture Order, we find that Cox Communications, Inc.
("Cox") willfully and repeatedly violated Section 76.1201 of the
Commission's Rules ("Rules"). Specifically, Cox violated Section
76.1201 by moving certain channels to a Switched Digital Video ("SDV")
platform on October 16, 2007, in its Fairfax County, Virginia cable
system, thereby preventing subscribers with CableCARD-equipped
unidirectional digital cable products ("UDCPs") from using their
navigation devices to access these channels. Further, in its
deployment of SDV on October 16, 2007, Cox violated Section
76.640(b)(1) by failing to provide a virtual channel table which
conforms to the standards required under Sections 76.640(b)(1)(i) and
76.640.(b)(1)(v). We conclude, pursuant to Section 503(b) of the
Communications Act of 1934, as amended ("Act"), that Cox is liable for
a forfeiture in the amount of twenty thousand dollars ($20,000). As
discussed below, we further direct Cox to comply with the Bureau's
Order to make appropriate refund of fees charged to customers affected
by Cox's movement of linear channels to the SDV platform on November
6, 2007.
II. BACKGROUND
2. Congress and the Commission have long recognized the importance of
allowing consumers the freedom to purchase their own navigation
devices from sources other than their cable operator, satellite
provider, or other multichannel video programming distributor
("MVPD"). Thus, Congress adopted Section 629 of the Act, which
requires the Commission to ensure the commercial availability of
navigation devices. By separating the security and navigation
functions of equipment used to receive MVPD programming, Congress
hoped to spur competition and expand consumer choice. As the House
Report accompanying Section 629 noted, "competition in the
manufacturing and distribution of consumer devices has always led to
innovation, lower prices and higher quality. Clearly, consumers will
benefit from having more choices among telecommunications subscription
services available through various distribution sources." At the same
time, Congress recognized that MVPDs have "a valid interest, which the
Commission should continue to protect, in system or signal security
and in preventing theft of service."
3. In its order proposing rules implementing Section 629, the Commission
stated that its overarching goal was to assure competition in the
availability of set-top boxes and other customer premises equipment.
"As navigation devices are the means to deliver analog and digital
communications, competition in the navigation equipment market is
central toward encouraging innovation in equipment and services, and
toward bringing more choice to a broader range of consumers at better
prices."
4. Thus, in adopting Section 76.1201 of the Commission's Rules, which
allows subscribers to acquire, attach, and use any compatible
navigation device with an MVPD's system, subject to the proviso that
such equipment not cause harmful interference or facilitate theft of
service, the Commission likened its actions to the Carterfone
principle it previously adopted in the telephone environment. In
Carterfone, the Commission allowed consumers to attach legal devices
to the telephone network unless that equipment would damage the
network. "As a result of Carterfone and other Commission actions,
ownership of telephones moved from the network operator to the
consumer. As a result, the choice of features and functions
incorporated into a telephone has increased substantially, while the
cost of equipment has decreased." The Commission emphasized that
"[f]ollowing the Carterfone principle adopted in the telephone context
would allow subscribers the option of owning their own navigation
devices and would facilitate the commercial availability of
equipment." The Commission stated that "[t]he steps taken in this
Report and Order, if implemented promptly and in good faith, should
result in an evolution of the market for navigation devices so that
they become generally and competitively available."
5. The Commission recognized that its work on these issues was not
complete and reiterated its commitment to monitoring developments
regarding the compatibility of set-top boxes and digital televisions.
Five years later, in the Plug and Play Order, the Commission took
further steps to facilitate the direct connection of digital
navigation devices (including commercially available UDCPs) to MVPD
systems. Specifically, the Commission considered standards agreed upon
by the cable and consumer electronics ("CE") industries and adopted a
cable compatibility standard for integrated, unidirectional digital
cable television receivers, as well as other UDCPs, to ensure the
compatibility and commercial availability of UDCPs with cable
television systems.
6. Generally, the Plug and Play Order required MVPDs to support operation
of UDCPs and ensure the utilization of such navigation devices in
connection with their cable systems. In addition, the Commission
required MVPDs to make available a security element separate from the
basic navigation device. Under this framework, the Commission sought
to enable unaffiliated manufacturers, retailers, and other vendors to
commercially market UDCPs while allowing MVPDs to retail control over
their system security.
7. Consumers with UDCPs access MVPD programming by using a CableCARD
leased from the cable operator. UDCPs, and certain related CE
equipment, employ a standard interface that permits them to negotiate
with the CableCARD. The CableCARD descrambles the MVPD's encoded
digital signal and allows the subscriber to view the programming.
Thus, commercially available UDCPs can be compatible with cable
systems nationwide, while cable operators maintain their ability to
secure programming content from unauthorized viewing. In theory, this
arrangement allows consumers access to all of a cable operator's
linear programming without the need of a separate set-top box leased
from their cable operator, while protecting the cable operator from
theft of its programming services.
8. But recent events have demonstrated the limits of this theory.
Traditionally, cable systems have used broadcast-type technologies
that deliver all programs to all subscribers whether the subscribers
view the programs or not. The programs not viewed nonetheless occupy
system bandwidth (which prevents the use of that bandwidth for any
other purpose). Many cable operators, however, have begun to test and
deploy SDV technology in their cable systems. In an SDV system, a
subset of programming is delivered in the traditional way to all
subscribers whether they are viewing the programs or not. For those
channels, the CableCARD-equipped UDCP will work as described above,
allowing the subscriber to view the channels delivered in the
traditional broadcast manner. The remaining channels are switched
through the use of SDV network equipment located at a "hub" (where
signals are converted and placed onto the "last mile" coaxial portion
of the network). These switched channels do not occupy bandwidth, and
are not available to subscribers until a subscriber tunes to that
channel by sending a request, using a remote or program guide,
upstream through the use of a set-top box to the hub. At the hub, the
SDV equipment directly receives and processes set-top channel change
requests for switched content and responds to that set-top with the
frequency and program number where that content can be found. Once the
hub receives the request, it immediately begins to transmit the
channel. A customer who uses a CableCARD-equipped UDCP to receive
programming must have additional equipment with the necessary upstream
signaling capability to obtain the switched (i.e., bi-directional)
channels. The UDCP cannot perform the bi-directional functions
necessary to request that a channel be delivered via SDV. Nor can the
CableCARD, which is designed only to provide the separate security
element, provide the necessary interface needed to send the signal to
the SDV server. Thus, in essence, in an SDV system, all subscribers
must have a cable-operator supplied set-top box to view channels
placed on the SDV platform.
9. On November 8, 2007, the Spectrum Enforcement Division of the
Enforcement Bureau ("Bureau") issued a Letter of Inquiry ("LOI") to
Cox based on complaints that the company had moved certain cable
channels that previously were accessible to subscribers using
CableCARD-equipped UDCPs, such as digital cable ready television sets
and digital video recorders, to an SDV platform. Specifically, the
Enforcement Bureau received a notice that Cox had sent to its Fairfax
County, Virginia CableCARD subscribers informing them that effective
October 16, 2007, Cox would implement new technology that was not
compatible with one-way digital cable ready devices requiring a
CableCARD. According to the notice, customers that used
CableCARD-equipped UDCPs to receive programming now would need a Cox
digital set-top box to continue to receive all cable channels
available to them prior to the change to the SDV platform. The LOI
sought information on a number of issues, and asked the company to
explain how its implementation of SDV was consistent with Section 629
of the Act, Commission Rules implementing that statute, the 2002 MOU,
and in particular, the policies and Rules established by the
Commission in the Plug and Play Order. The Bureau issued a
Supplemental LOI to Cox on September 5, 2008 and a Second Supplemental
LOI on October 3, 2008 to obtain additional information concerning the
company's deployment of SDV.
10. Cox responded to the LOI on December 17, 2007, and responded to the
Supplemental LOI on September 19, 2008 and the Second Supplemental LOI
on October 10, 2008. In its LOI Response, Cox admits that its Fairfax
County, Virginia cable system deployed SDV on October 16, 2007, which
resulted in the movement of the Latino tier and 14 linear channels to
an SDV platform. Cox states that the deployment of SDV to its Fairfax
County customers affected a small number of its customers using
CableCARDs in one-way devices and that to mitigate the potential
impact on these customers, Cox offered to transition them at little or
no incremental cost to bi-directional equipment to ensure that they
could continue accessing the switched channels, even though they had
purchased a one-way CableCARD device. Specifically, at the time of its
SDV deployment, Cox offered CableCARD-equipped UDCP subscribers a
standard digital receiver for the same price as a CableCARD for the
first year or a free Digital Video Recorder ("DVR") for three months.
Both those offers have since expired.
11. With respect to the technical requirements described above, Cox admits
that it does not provide its subscribers using CableCARD-equipped
UDCPs with a virtual channel table that includes programming on its
SDV platform. Rather, "Cox's Fairfax, Virginia subscribers who utilize
a Cox provided CableCARD with their UDCPs receive a `virtual channel
table' covering all of the scrambled programming services viewable on
their one-way devices." Cox explains that it "does not populate that
channel table for two-way services that are not viewable with UDCP
devices." Cox asserts that its actions are consistent with Section
76.640 of the Commission's Rules because -- according to Cox -- those
provisions only apply to unidirectional digital cable services. Cox
further argues that populating the virtual channel table for two-way
services would confuse consumers with UDCPs, as those devices are
incapable of viewing two-way services.
12. On October 15, 2008, after reviewing the evidence and Cox's arguments,
the Bureau issued a Notice of Apparent Liability for Forfeiture and
Order, finding that Cox apparently had willfully violated Sections
76.1201 and 76.640(b)(1) of the Rules by moving certain channels to a
SDV platform on October 16, 2007, thereby preventing subscribers with
CableCARD-equipped UDCPs from using their navigation devices to access
these channels and by failing to provide a virtual channel table which
conforms to the standards required under Sections 76.640(b)(1)(i) and
76.640.(b)(1)(v).
13. Cox responded to the NAL on November 14, 2008, requesting cancellation
of the Cox NAL. With respect to the NAL's finding of apparent
liability, Cox makes four principal arguments. First, Cox asserts that
the deployment of SDV did not violate the Commission's Rules or
Section 629. Second, Cox asserts that importart public policy goals
identified by Congress and the Commission weigh against the Bureau's
"strained" interpretation of the Commission's Rules or Section 629.
Third, Cox argues that a finding that the deployment of SDV violates
the Commission's rules is inconsistent with Cox's First Amendment
rights. Lastly, Cox argues that even if the Bureau finds that Cox
violated the Commission's Rules, a forfeiture is inappropriate because
Cox could not have ascertained with any certainty that its SDV
deployment would violate the Rules.
III. DISCUSSION
A. Cox Willfully and Repeatedly Violated Section 76.1201 By Requiring
Subscribers To Obtain A Set-Top Box To View Previously Accessible Linear
Programming
14. Section 76.1201 of the Rules prohibits an MVPD from "prevent[ing] the
connection or use of navigation devices to or with its system" unless
such devices would cause electronic or physical harm or allow the
unauthorized receipt of service. Based on the record before us, we
find that Cox willfully and repeatedly violated Section 76.1201 by
moving certain linear channels to an SDV platform in its Fairfax
County, Virginia Cable System on October 16, 2007. In so doing, Cox
prevented subscribers with UDCPs, such as "digital cable ready"
televisions and TiVo recorders, from viewing the switched linear
channels that were already part of their subscription package without
the use of a Cox-supplied set-top box, thus effectively impairing the
use of those UDCPs within each affected cable system. Additionally,
because a Cox-leased set-top box now is required to view many Cox
channels, even on UDCP devices, Cox's migration of channels to an SDV
platform has prevented the use of some functions available on those
UDCPs, such as the capacity to view picture-in-picture and record
content.
15. Notwithstanding its effect on CableCARD users, Cox contends that the
language of Section 76.1201 makes clear the "sole purpose and scope of
the section" is to prohibit "an MVPD from `preven[ting] the connection
or use of navigation devices to or with its system' unless such
devices would cause electronic or physical harm or allow the
unauthorized receipt of service. Cox argues that the deployment of SDV
does not violate the rule because "[t]his rule does not prohibit or
even mention SDV technology." Moreover, Cox argues, the rule does not
entitle MVPD subscribers who use UDCPs to a static line-up - any of
the channels delivered in a linear format may be dropped or moved at
any time - and, in any event the channels that have been moved from a
linear delivery format to be placed in the switched pool are still a
part of a subscriber's subscription package. Cox asserts that even if
the inability to watch a particular channel "impairs" the CableCard
subscriber's use of a UDCP, Cox is not "prevent[ing] the connection or
use" as required by the Rule.
16. We do not agree that a violation of Section 76.1201 is not present
here because the Rule does not expressly prohibit or even mention SDV
technology. The plain language and policy goals of the Rule are clear
- to protect cable subscribers' ability to view signals through the
use of commercially available navigation devices offered in a
competitive market. Cox's movement of linear channels that were
previously accessible with a CableCARD-equipped UDCP to a switched
digital platform that can only be accessed with a Cox-provided set-top
box is clearly at odds with the Commission's Rules and policies
designed to promote competition and consumer choice of navigation
devices.
17. While we recognize that the Plug and Play Order does not prohibit
cable operators from developing and deploying new technology and
services, we conclude that it does not permit Cox's actions here. By
moving linear programming to an SDV platform, Cox prevents
CableCARD-equipped UDCPs from receiving previously available channels
and negates the usefulness of competitive commercially available
navigation devices, in violation of the intent of Section 629 and the
Commission's Rules. The Commission recognized that devices made
pursuant to the standard adopted in the Plug and Play Order lacked
upstream or bi-directional capabilities and therefore could not
receive certain programming or services, but that recognition did not
extend to services that consumers traditionally experienced as one-way
services. At no point did the Commission authorize MVPDs to modify
their transmission of linear programming such that UDCP devices could
no longer receive such programming without a cable operator-provided
set-top box. The notion that such channels are still a "part of a
[subscriber's] subscription package" is disingenuous - since the
subscriber cannot access the channels without a Cox-supplied set-top
box. Such an outcome is fundamentally at odds with the policy and
regulatory objectives of the Plug and Play Order.
18. Section 76.1201 was adopted to achieve the statutory requirement of
alternative sources of navigation devices and to ensure the commercial
availability of navigation devices. The Plug and Play Order sought to
provide further assurance of the commercial availability of navigation
devices by requiring that cable operators support the operation of
UDCP in connection with their cable systems. Cox's implementation of
SDV in this case clearly negates the use of CableCARD-equipped UDCPs
and fundamentally limits the commercial and competitive viability of
those devices in cable systems where SDV has been deployed. In the
instant case, customers who used CableCARD-equipped UDCPs are unable
to receive more than a dozen linear channels after the deployment of
SDV. As such, Cox is effectively preventing CableCARD-equipped UDCPs
from receiving channels previously available and undermining the
underlying policy goals of the Act and the Commission's Rules to
ensure the commercial availability and use of navigation devices.
Thus, we find Cox's October 16, 2007 migration of linear channels to
an SDV platform in its Fairfax County, Virginia Cable System
constitutes a willful and repeated violation of Section 76.1201 of the
Rules.
B. Cox Willfully Violated Section 76.640(b) by Failing to Comply with the
Commission's Technical Rules Regarding the Provision of a Virtual Channel
Table for SDV Programming
19. Cox contends that the Cox NAL and Order's finding that the standard
incorporated by reference in Section 76.640(b)(1)(i) applies to all
services, including two-way services like SDV is wrong. According to
Cox , Section 76.640(b)(1)(i) cannot be read to conclude that a cable
operator should "support" a UDCP by populating the virtual channel
table with information regarding programming that cannot be accessed
on the UDCP, "thereby creating a source of customer confusion . . ."
Cox further asserts that because the text of the rule is limited to
one-way products, it necessarily only applies to one-way services.
20. We disagree. On its face, Section 76.640 applies only to
unidirectional products. Section 76.640(b)(1) makes no distinction
between unidirectional and bi-directional services. Indeed, by its own
terms, the standard incorporated by reference in Section
76.640(b)(1)(i) applies to all services - there is no exception for
bi-directional services. Therefore, Cox is required to describe
programming on an SDV platform in the out-of-band forward data channel
and populate the virtual channel table with all of its programming
services.
21. We also reject Cox's position that "there is no `false impression'
created by the lack of SDV programming in the channel table" because a
"UDCP subscriber (just like any other subscriber) purchases a tier of
programming and may choose from various equipment to access that tier
with varying degrees of functionality." Again, Cox misses the point -
by moving linear programming to a SDV platform that can only be
accessed with a Cox-provided set-top box, Cox has prevented the use of
the CableCARD subscriber's use of a UDCP with respect to that
programming, substantially diminishing the value of the subscriber's
equipment without any reduction in subscriber fees. Moreover,
requiring compliance with Section 76.640(b) does not conflict with
Section 15.123 and provides a significant practical benefit. As we
stated in the Cox NAL and Order, including the SDV programming in the
virtual channel table would make it clear to Cox subscribers using
CableCARD-equipped UDCPs that their cable operator is charging them
for programming that they cannot see. We reiterate that if Cox
believed it had a legitimate reason to exclude two-way programming
from the virtual channel table provided to customers with
CableCARD-equipped UDCPs, the company should have sought a waiver of
the relevant rules. Accordingly, based on the record before us, we
find that Cox willfully violated Section 76.640(b) by failing to
provide a virtual channel table as required by Section 76.640(1)(b)(i)
and 76.640(b)(1)(v) in its Fairfax County Cable System.
C. Section 629 Supports the Bureau's Enforcement Action
22. Cox argues that Section 629 of the Act provides an insufficient basis
for an enforcement action. According to Cox, Section 629 focuses on
the competitive availability of equipment and does not prohibit the
deployment of SDV technology or otherwise restrict MVPDs' roll-out of
new technologies or changes in channel line-ups. Indeed, Cox appears
to argue that Section 629 is not applicable here at all.
23. We disagree. As noted above, Section 629 of the Act requires the
Commission to ensure the commercial availability of navigation
devices. By separating the security and navigation functions of
equipment used to receive MVPD programming, Congress sought to spur
competition and expand consumer choice. As the House Report
accompanying Section 629 noted, "competition in the manufacturing and
distribution of consumer devices has always led to innovation, lower
prices and higher quality. Clearly, consumers will benefit from having
more choices among telecommunications subscription services available
through various distribution sources." At the same time, Congress
recognized that MVPDs have "a valid interest, which the Commission
should continue to protect, in system or signal security and in
preventing theft of service." The interests at stake here go beyond
the protection in system or signal security, or in preventing theft of
service. The Bureau's action are fully consistent with letter and
spirit of Section 629.
D. The NAL Does Not Weigh against Important Public Policy Goals
24. Cox argues that the SDV technology offers important benefits to Cox
customers by, for example, only Cox to add HD channels, achieve
bandwidth efficency and offer higher broadband speeds. In this way,
Cox argues that even its deployment is prohibited by the Commission's
Rules, important public policy goals identified by Congress and the
Commission weigh against the Bureau's findings.
25. We reject Cox's contention. As we stated in the Cox NAL and Order, we
recognize that the Plug and Play Order does not prohibit cable
operators from developing and deploying new technology and services.
Nonetheless, it does not permit Cox's actions here. In recognizing
that cable operators are free to innovate and introduce new products
and services, the Commission cautioned that such development and
deployment of new products and services should not interfere with the
functioning of consumer electronics equipment or the introduction of
such equipment into the commercial market for navigation devices.
Indeed, the Commission has continually emphasized that its navigation
device rules are an important tool for promoting competition and
bringing more choices to consumers. Yet the manner in which Cox has
opted to administer its SDV programming effectively negates the
concerted efforts and advances made thus far to achieve a competitive
pro-consumer environment for such equipment.
26. The deployment of SDV technology may provide public benefits. As we
have explained previously, it is not Cox's deployment of SDV
technology that violates Section 76.1201, but Cox's migration of
existing linear programming to an SDV tier that we find inconsistent
with the Commission's Rules.
E. The NAL's Reading of Section 76.1201 Does Not Conflict with the First
Amendment
27. Cox's arguments that the NAL runs afoul of the First Amendment are
insubstantial. There is no merit to Cox's contention that the NAL
violates the First Amendment by "directly interfere[ing] with a cable
operator's `exercise of editorial control and judgment'" which would
cause it to favor certain programming over other programming. Simply
put, Cox has no First Amendment right to undermine the development of
a competitive market for navigation devices by preventing consumers
from accessing linear programming in their existing programming
packages with a CableCARD-equipped UDCP and instead requiring the
consumer to obtain a Cox-provided set-top box. To the extent that the
rules at issue here implicate the First Amendment at all, the
requirements are content neutral and narrowly tailored to further the
substantial federal interest in developing and maintaining a
competitive market for navigation devices, an interest whose
importance has been recognized by both Congress and the courts.
F. A Forfeiture Is Appropriate in the Instant Case
28. Finally, we reject Cox's contention that even if it is found to have
violated the Commission's Rules, a forfeiture is inappropriate because
Cox could not have ascertained with any certainty that its SDV
deployment would violate the rules. The Enforcement Bureau serves as
the primary Commission entity responsible for enforcement of the Act,
the Commission's rules, and Commission orders. The Bureau has
delegated authority to issue orders taking appropriate action in
response to complaints or investigations, including issues notices of
apparent liability and related orders, and to decide matters unless
they "present novel questions of law, fact or policy that cannot be
resolved under existing precedents and guidelines." The questions
presented here are consistent with the Commission's Plug and Play
Order, the Rules found in Section 76.1201 implementing that order, and
the technical rules of Section 76.640(b). Moreover, the Bureau's
action is fully consistent with Section 503 of the Act and the
Commission's Rules of practice and procedure. As such, a forfeiture is
appropriate.
G. Forfeiture Calculation
29. Under Section 503(b)(1)(B) of the Act, any person who is determined by
the Commission to have willfully or repeatedly failed to comply with
any provision of the Act or any rule, regulation, or order issued by
the Commission shall be liable to the United States for a forfeiture
penalty. To impose such a forfeiture penalty, the Commission must
issue a notice of apparent liability and the person against whom such
notice has been issued must have an opportunity to show, in writing,
why no such forfeiture penalty should be imposed. The Commission will
then issue a forfeiture if it finds by a preponderance of the evidence
that the person has violated the Act or a Commission rule. We conclude
that Cox is liable for a forfeiture in the amount of twenty thousand
dollars ($20,000) for its willful violation of Sections 76.1201,
76.640(b)(1)(i), and 76.640(b)(1)(v) of the Rules.
30. Under Section 503(b)(2)(A) and Section 1.80(b)(1) of the Commission's
Rules, we may assess a cable television operator a forfeiture of up to
$32,000 for each violation or each day of a continuing violation, up
to a statutory maximum forfeiture of $325,000 for any single
continuing violation. In exercising such authority, we are required to
take into account "the nature, circumstances, extent, and gravity of
the violation and, with respect to the violator, the degree of
culpability, any history of prior offenses, ability to pay, and such
other matters as justice may require."
31. The Commission's Forfeiture Policy Statement and Section 1.80 of the
Rules do not establish a specific base forfeiture for violation of
Section 76.1201. In a similar case, the Commission proposed
forfeitures for each cable system involved in the violation. Thus, we
establish a base forfeiture amount for each cable system in which
linear programming has been moved to an SDV platform, thereby
impairing customers' use of navigation devices such as UDCPs to view
such programming. As noted above, this case involves one of Cox's
cable systems - Fairfax County, Virginia Cable System.
32. As we stated in the Cox NAL and Order, one analogous violation for
which the Commission has already established a base forfeiture is
violation of the cable broadcast signal carriage rule, which has a
base forfeiture of $7,500. Given the number of channels involved and
the effect of actions like those here on the Commission's policy
objectives, however, we conclude that a more significant penalty is
appropriate. We conclude that $10,000 per cable system in which linear
programming is moved to an SDV platform is an appropriate base
forfeiture for violation of Section 76.1201. In this case, Cox moved
linear programming to an SDV platform in one cable system, Fairfax
County, Virginia Cable System. Accordingly, we conclude that Cox is
liable for a $10,000 forfeiture for its willful violation of Section
76.1201 of the Rules.
33. Additionally, we conclude that Cox is liable for a forfeiture in the
amount of $5,000 for its willful violation of Section 76.640(b)(1)(i)
of the Rules and $5,000 for its willful violation of Section
76.640(b)(1)(v) of the Rules. The Commission's Forfeiture Policy
Statement and Section 1.80 of the Rules do not establish a specific
base forfeiture for violation of Section 76.640(b). However, we note
that Section 1.80(b) establishes a base forfeiture of $5,000 for
unauthorized discontinuance of service. We find that the actions of
Cox effectively discontinue a portion of the services for each of its
CableCARD subscribers who choose to view content via a UDCP. We also
conclude that the amount of the forfeiture for each violation is
commensurate with the harm imposed upon cable subscribers. Because the
violation of Section 76.640(b)(1) coincides with the migration of
linear channels to an SDV platform, we will also apply this base
forfeiture amount of $5,000 for each technical violation of Section
76.640(b)(1) on a per cable system basis. Accordingly, we conclude
that Cox is liable for a forfeiture in the amount of $10,000 for its
willful violation of Sections 76.640(b)(1)(i) and 76.640(b)(1)(v) in
its Fairfax County, Virginia Cable System.
34. Cox's implementation of SDV in its Fairfax County, Virginia Cable
System, in which previously available linear programming was moved to
an SDV platform, resulted in the removal of channel information and
the loss of access to those switched channels for its subscribers
using CableCARD-equipped UDCPs. Moreover, such implementation of SDV,
without having in place standards to ensure bi-directional
compatibility of cable television systems and CE equipment,
effectively harms the Commission's policies to move navigation devices
toward a fully competitive market. We note that Cox could have sought
a waiver of these rules under Section 76.1207, but failed to do so.
Accordingly, we conclude that Cox is liable for a total forfeiture
amount of twenty thousand ($20,000) for its willful violation of
Sections 76.1201 ($10,000), 76.640(b)(1)(i) ($5,000), and
76.640(b)(1)(v) ($5,000) of the Commission's Rules.
H. Cox Must Issue Refunds to Customers Harmed by its SDV Implementation
35. As we noted in the Cox NAL andOrder, Cox's implementation of SDV has
harmed its customers who opted to purchase and use television
receiving equipment that does not require a cable operator-supplied
set-top device to receive cable service. Many consumers purchased
expensive UDCPs, such as "cable ready" televisions and digital video
recorders like TiVos, based on the reasonable assumption that no
set-top box would be necessary to receive linear programming. In
effect, Cox's movement of linear programming to an SDV platform has
substantially diminished the value of its customers' UDCP devices.
Moreover, CableCARD customers affected by Cox's SDV deployment now
must pay higher prices to lease set-top boxes than they would have
paid for CableCARDs. Those CableCARD customers who chose not to obtain
the Cox-supplied set-top boxes after the implementation of SDV
nevertheless have paid the same monthly rate for their cable service
even though they can view significantly fewer channels. Most
importantly, however, Cox's movement of linear programming to an SDV
platform set back the shared goal of Congress and the Commission of a
competitive market for commercially available navigation devices, as
required by Section 629 and the Commission's Rules.
36. In calculating the harm to Cox's customers who use UDCP equipment, we
recognize that Cox has made offers to its CableCARD customers to
offset the costs of obtaining a set-top box. While Cox's offer to
provide a free set-top box to its CableCARD customers may provide
temporary relief to its customers, it is not a permanent solution -
the benefits promised by Cox are, at best, limited in duration. Cox's
offer does not address the critical problem concerning the company's
interference with its customers' use of independently obtained UDCPs,
i.e., the loss of service to the extent customers can view fewer
channels than they did before the movement of linear programming to an
SDV platform, nor does it address the loss of functionality of the
device in question.
37. In the Cox NAL and Order, we ordered Cox, within ninety (90) days of
the Cox NAL and Order, to issue refunds to CableCARD customers
affected by the October 16, 2007 implementation of SDV in its Fairfax
County, Virginia Cable System. In addition, within thirty (30) days of
the release of the Cox NAL and Order, we required Cox to submit to the
Enforcement Bureau an explanation of the method the company planned to
use to determine the appropriate amount of refunds, the number of
customers receiving refunds, the total value of such refunds, and the
planned timing of such refunds. Cox failed to comply with the Bureau's
Order and the Bureau is separately addressing that violation of the
Commission's Rules.
38. Thus, we order Cox, within ninety (90) days of this Forfeiture Order,
to issue refunds to CableCARD customers affected by the October 16,
2007 implementation of SDV in its Fairfax County, Virginia Cable
System. Specifically, Cox must provide refunds as follows:
a. For former CableCARD customers that began to lease any set-top boxes
from Cox following notice of a possible SDV deployment, Cox must
refund the difference in cost (if any) between the charges for the Cox
set-top boxes and the CableCARD previously leased by such customers;
and
b. For CableCARD customers that kept their CableCARDs even after notice
of the SDV deployment, Cox must refund the customers' subscriber fees
based on the diminished value of their service following the movement
of linear programming to an SDV platform by $0.10 per month, per
channel moved and reduce their rates on a going-forward basis
accordingly.
IV. ordering clauses
39. Accordingly, IT IS ORDERED that, pursuant to Section 503(b) of the
Act, Section 1.80 of the Rules, and the authority delegated by
Sections 0.111 and 0.311 of the Commission's Rules, Cox
Communications, Inc., Fairfax County, Virginia Cable System IS LIABLE
FOR A FORFEITURE in the amount of twenty thousand dollars ($20,000)
for willful violation of Sections 76.1201, 76.640(b)(1)(i) and
76.640(b)(1)(v) of the Rules.
40. IT IS FURTHER ORDERED that, pursuant to sections 1, 4(i), 4(j), 601,
and 629 of the Communications Act of 1934, as amended 47 U.S.C. S:151,
154(i), 154(j), 521, 549, Cox communications, Inc. must take the steps
set forth in paragraph 39 of this Forfeiture Order.
41. Payment of the forfeiture must be made by check or similar instrument,
payable to the order of the Federal Communications Commission within
thirty (30) days of the release of this Order. The payment must
include the NAL/Account Number and FRN Number referenced above.
Payment by check or money order may be mailed to Federal
Communications Commission, P.O. Box 979088, St. Louis, MO 63197-9000.
Payment by overnight mail may be sent to U.S. Bank - Government
Lockbox #979088, SL-MO-C2-GL, 1005 Convention Plaza, St. Louis, MO
63101. Payment by wire transfer may be made to ABA Number 021030004,
receiving bank TREAS/NYC, and account number 27000001. For payment by
credit card, an FCC Form 159 (Remittance Advice) must be submitted.
When completing the FCC Form 159, enter the NAL/Account number in
block number 23A (call sign/other ID), and enter the letters "FORF" in
block number 24A (payment type code). Requests for full payment under
an installment plan should be sent to: Chief Financial Officer --
Financial Operations, 445 12th Street, S.W., Room 1-A625, Washington,
D.C. 20554. Please contact the Financial Operations Group Help Desk at
1-877-480-3201 or Email: ARINQUIRIES@fcc.gov with any questions
regarding payment procedures. Cox will also send electronic
notification on the date said payment is made to JoAnn.Lucanik@fcc.gov
and Kevin.Pittman@fcc.gov.
42. IT IS FURTHER ORDERED that a copy of this Notice of Apparent Liability
for Forfeiture and Order shall be sent by first class mail and
certified mail return receipt requested to counsel for Cox
Communications, Inc.: Kathleen Q. Abernathy, Esq., David H. Solomon,
Esq., and Natalie G. Roisman, Esq., Wilkinson Barker Knauer, LLP, 2300
N Street, N.W., Suite 700, Washington, D.C. 20037.
FEDERAL COMMUNICATIONS COMMISSION
Kris Anne Monteith
Chief, Enforcement Bureau
47 C.F.R. S: 76.1201.
Navigation devices refer to "converter boxes, interactive communications
equipment, and other equipment used by consumers to access multichannel
video programming and other services offered over multichannel video
programming systems." 47 C.F.R. S: 76.1200(c). UDCPs refer to devices that
have the ability to receive encrypted digital cable programming, but do
not have any upstream, or bidirectional, capabilities. For example, such
devices cannot support two-way services such as Electronic Programming
Guides (EPGs), Voice on Demand (VOD), Pay Per View (PPV), and other
interactive capabilities. See Implementation of Section 304 of the
Telecommunications Act of 1996, Commercial Availability of Navigation
Devices, Compatibility Between Cable Systems and Consumer Electronics
Equipment, Third Further Notice of Proposed Rulemaking, 22 FCC Rcd 12024,
12025-26 (2007) ("Third Further Notice of Proposed Rulemaking"). See also
47 C.F.R. S: 15.123(a).
47 U.S.C. S: 503(b). This Forfeiture Order is issued through the
coordinated effort of the Commission's Enforcement Bureau and Media
Bureau. See 47 C.F.R. S:S: 0.61(f)(5), 0.111(15).
47 U.S.C. S: 549. Section 629 was adopted as part of the
Telecommunications Act of 1996. Pub. L. No. 104-104, 110 Stat. 56 (1996).
H.R. Rep. No. 104-204, at 112 (1995).
Id.
Implementation of Section 304 of the Telecommunications Act of 1996,
Commercial Availability of Devices, Notice of Proposed Rulemaking, 12 FCC
Rcd 5639, 5641 (1997).
See Implementation of Section 304 of the Telecommunications Act of 1996,
Commercial Availability of Navigation Devices, Report and Order, 13 FCC
Rcd 14775, 14776, para. 2 (1998) ("Navigation Devices Order").
47 C.F.R. S: 76.1201.
See Navigation Devices Order, 13 FCC Rcd at 14478 (citing Use of the
Carterfone Device in Message Toll Service, Decision, 13 FCC 2d 420, 424-25
(1968), recon. denied, 14 FCC 2d 571(1968)).
Navigation Devices Order Id. at 14780, para. 11.
Id. at 14786.
Id. The Commission recognized that "the parallel to the telephone has
limitations" and specifically stated that the rules it adopted in
implementing Section 629 of the Act sought to accommodate the differences
from the telephone model.
Id. at 14781.
Implementation of Section 304 of the Telecommunications Act of 1996,
Commercial Availability of Navigation Devices, Compatibility Between Cable
Systems and Consumer Electronics Equipment, Second Report and Order and
Second Further Notice of Proposed Rulemaking, 18 FCC Rcd 20885 (2003)
("Plug and Play Order"). "The term `plug and play' refers to a device's
ability to plug into a cable system and receive digital cable programming
without a cable-operator provided set-top box." Third Further Notice of
Proposed Rulemaking, 22 FCC Rcd at n.9.
See December 2002 Memorandum of Understanding Among Cable MSOs and
Consumer Electronics Manufacturers. Id. at note 3 (citing Letter from Carl
E. Vogel, President and CEO, Charter Communications, et al., to Michael K.
Powell, Chairman, FCC (Dec. 19, 2002) ("2002 MOU")). The MOU "reflects a
compromise agreement among the parties [cable and consumer electronics
industries] on a specification that will permit the manufacture of
unidirectional cable television receivers that include [the same] ...
navigation functionality [that currently exists for set-top boxes]."
In most cases, the MVPDs have employed CableCARDs as their
separate-security solution to enable non-integrated conditional access.
But see Cablevision Systems Corporation's Request for Waiver of Section
76.1204(a)(1) of the Commission's Rules, Memorandum Opinion and Order, 22
FCC Rcd 220, 221-222 (2007). The Commission granted Cablevision a waiver
of the ban on cable operator deployment of set-top boxes with integrated
security to allow Cablevision to use a Smart-Card-based separate-security
solution, which is CableCARD-compatible with the use of an adaptor.
The term "linear programming" is generally understood to refer to video
programming that is prescheduled by the programming provider. Cf. 47
U.S.C. S: 522(12) (defining "interactive on-demand services" to exclude
"services providing video programming prescheduled by the programming
provider").
Third Further Notice of Proposed Rulemaking, 22 FCC Rcd at 12025 P:P:3-4.
See Letter from Kathryn S. Berthot, Chief, Spectrum Enforcement Division,
Enforcement Bureau, Federal Communications Commission to James A. Hatcher,
Esq., Senior Vice President, Legal and Regulatory Affairs, Cox
Communications, Inc. (Nov. 8, 2007) ("LOI").
Id. at Exhibit A. The Commission has received several complaints from Cox
customers about SDV deployment in Cox's Fairfax County cable system. We
have provided relevant excerpts and identifying information for those
complaints in Attachment A. Because these complaints were not filed in a
public Commission docket, we will treat the complainants' names as
confidential for privacy reasons.
The LOI described an investigation into possible violations of Section 629
of the Act, 47 U.S.C. S: 549, and Sections 76.640, 76.980(f), 76.984,
76.1204, 76.1206, and 76.1603 of the Commission's rules, 47 C.F.R. S:S:
76.640, 76.980(f), 76.984, 76.1204, 76.1206, and 76.1603.
See Plug and Play Order, 18 FCC Rcd at 20885 n.3.
Id. at 20885.
See Letter from JoAnn Lucanik, Deputy Chief, Spectrum Enforcement
Division, Enforcement Bureau, Federal Communications Commission to Gary S.
Lutzker, Esq., Dow Lohnes PLLC, Counsel for Cox Communications, Inc.,
(Sept. 5, 2008) ("Supplemental LOI"). The Supplemental LOI noted that the
investigation now included possible violations by Cox of Sections 76.1201
and 76.1202 of the Rules. 47 C.F.R. S:S: 76.1201, 76.1202. Supplemental
LOI at n. 3.
See Letter from JoAnn Lucanik, Deputy Chief, Spectrum Enforcement
Division, Enforcement Bureau, Federal Communications Commission to Gary S.
Lutzker, Esq., Dow Lohnes PLLC, Counsel for Cox Communications, Inc.,
(Oct. 3, 2008) ("Second Supplemental LOI"). This LOI sought information
relating to possible violations of Section 76.640 of the Commission's
Rules.
See LOI Response. The response was timely filed based on the Bureau's
approval of Cox's request for an extension of time to respond.
See Letter from Gary S. Lutzker, Esq., Dow Lohnes PLLC, Counsel for Cox
Communications, Inc. to Marlene H. Dortch, Secretary, Federal
Communications Commission (Sept. 19, 2008) ("Supplemental LOI Response").
See Letter from J. Christopher Redding, Esq., Dow Lohnes PLLC, Counsel for
Cox Communications, Inc. to Marlene H. Dortch, Secretary, Federal
Communications Commission at 3 (Oct. 10, 2008) ("Second Supplemental LOI
Response").
See LOI Response at 9, 11, and Exhibit 3. Cox states that it provided
advanced notice of its switched digital implementation to its customers in
the August 2007 billing inserts, which commenced on July 27, 2007 and
continued through August 27, 2007, and also mailed a second notice to its
CableCARD customers on September 14, 2007. In addition, Cox states that it
provided advanced written notice to the Fairfax County local franchise
authority ("LFA") on September 14, 2007. According to these notices, in
addition to pay-per-view channels, the Paquete Latino Tier and 14 networks
would no longer be available to Cox's CableCARD-equipped UDCP customers
without a Cox digital set-top box. Also, the notice stated that new
channels added to the Cox Digital Cable and HD channel lineup will not be
available to customers with CableCARD-equipped UDCPs without the use of a
Cox set-top box.
Cox reports that its Fairfax County, Virginia cable system served 241,128
subscribers as of November 9, 2007; and that it had issued 2002 CableCARDs
in the Fairfax County system as of October 31, 2007. See Supplemental LOI
Response at 2.
LOI Response at 4.
Id. at Exhibit 3.
Id.
Second Supplemental LOI Response at 3.
Id.
Id.
Id.
Cox Communications, Inc., Fairfax County, Virginia Cable System, Notice of
Apparent Liability for Forfeiture and Order, 23 FCC Rcd 14944 (Enf. Bur.
2008) ("Cox NAL and Order").
Cox Communications, Inc., Fairfax County, Virginia Cable System, Statement
in Response to Notices of Apparent Liability and Order, File No.
EB-07-SE-352 (filed Nov. 14, 2008) (Cox NAL Response). Together with its
NAL Response, Cox also filed a Request for Stay and Petition for
Reconsideration. Cox's Request for Stay and Petition for Reconsideration
will be addressed in subsequent orders.
Cox Response at 4-11.
Id. at 12-16.
Id. at 16-18
Id. at 18-19.
47 C.F.R. S: 76.1201.
See 47 U.S.C. S: 312(f)(1) & (2) (defining a "willful" violation as the
"conscious and deliberate commission or omission of such act, irrespective
of any intent to violate any provision of this Act or any rule or
regulation of the Commission," and defining "repeated" as "the commission
or omission of such act more than once."). The definition of willful and
the definition of repeated apply to violations for which forfeitures are
assessed under Section 503(b) of the Act. See Southern California
Broadcasting Co., Memorandum Opinion and Order, 6 FCC Rcd 4387 (1991),
recon. denied 7 FCC Rcd 3454 (1992).
As enacted, Section 624A of the Act expressly mandates that the Commission
"minimize interference with or nullification of the special functions of
subscriber's television receivers or video cassette recorders," and thus
ensure the full compatibility of these devices with the cable system. 47
U.S.C. S: 544a(c)(1)(B).
Cox Response at 5.
Id.
Id. at 7.
See 47 U.S.C. S: 549; 47 C.F.R. S: 76.1201.
"Due to the unidirectional nature of this receiver specification, an
external navigation device would still be needed to receive advanced
features such as cable operator-enhanced electronic programming guides
(`EPGs'), impulse pay per view (`IPPV') or video on demand (`VOD')." Plug
and Play Order, 18 FCC Rcd at 20890, P:7. See also Third Further Notice of
Proposed Rulemaking, 22 FCC Rcd at 12025-26, P: 4 ("Devices made pursuant
to this standard have the ability to receive encrypted digital cable
programming, but do not have any upstream, or bidirectional, capabilities
(i.e., consumer electronics manufacturers can only make unidirectional
devices under the technical standard adopted in the Plug and Play Order).
For example, such devices cannot support two-way services such as EPGs,
VOD, PPV, and other ITV [Interactive Television] capabilities.").
The Bureau also notes Cox's claim that "for UDCP customers and all other
cable subscribers, packages of channels are purchased at prices that
accurately reflect the value proposition for a specific tier. While the
package content necessarily varies over time, the overall value
proposition remains constant." Cox Response at 7. Complaints filed with
the Commission indicate that, at least some of, Cox's subscribers believe
otherwise.
See Navigation Devices Order, 13 FCC Rcd at 14786.
According to the Cox notices announcing the deployment that ultimately
took place on October 16, 2007, in addition to pay-per-view channels, the
Paquete Latino Tier and 14 networks would no longer be available to Cox's
CableCARD-equipped UDCP customers without a Cox digital set-top box. Also,
the notice stated that new channels added to the Cox Digital Cable and HD
channel lineup will not be available to customers with CableCARD-equipped
UDCPs without the use of a Cox set-top box.
Cox Response at 8-9.
Id.
See 47 C.F.R. S:76.640 ("Support for unidirectional digital cable products
on digital cable systems.").
Id. at S: 76.640(b)(1)(i) (incorporating by reference SCTE 40 2003,
Section 5.5, which states that "[w]hen one or more scrambled services are
offered on the cable system, System and Service Information for all
services (both scrambled and in-the-clear) shall be carried in an
out-of-band Forward Data Channel...").
Cox Response at 9.
Cox NAL and Order at paras. 18-25.
47 C.F.R. S: 76.1207.
Cox Response at 10.
Id.
Id. ("the scope of section 629 does not extend to material carried on
cable systems via equipment that is subject to this statutory provision").
47 U.S.C. S: 549. Section 629 was adopted as part of the
Telecommunications Act of 1996. Pub. L. No. 104-104, 110 Stat. 56 (1996).
H.R. Rep. No. 104-204, at 112 (1995).
Id.
Cox Response at 12-13.
Id.
2005 Deferral Order, 20 FCC Rcd at 6809-10.
Id.
Cox Response at 17.
See 47 U.S.C. S: 549; Comcast Corp. v. FCC, 536 F.3d 763 (D.C. Cir. 2008);
Charter Communications, Inc. v. FCC, 460 F.3d 31 (D.C. Cir. 2006).
Cox Response at 18-19.
47 C.F.R. S: 0.111.
47 C.F.R. S: 0.111(17).
47 C.F.R. S: 0.311(a)(3).
47 U.S.C. S: 503
47 C.F.R. S: 1.80.
47 U.S.C. S: 503(b)(1)(B); 47 C.F.R. S: 1.80(a)(1).
47 U.S.C. S: 503(b); 47 C.F.R. S: 1.80(f).
See, e.g., SBC Communications, Inc., Forfeiture Order, 17 FCC Rcd 7589,
7591 (2002).
47 U.S.C. S: 503(b)(2)(A); 47 C.F.R. S: 1.80(b)(1). The Commission has
repeatedly amended Section 1.80(b)(1) of the Rules to increase the maximum
forfeiture amounts, in accordance with the inflation adjustment
requirements contained in the Debt Collection Improvement Act of 1996, 28
U.S.C. S: 2461. Most recently, the Commission raised the maximum
forfeitures applicable to cable operators, broadcast licensees, and
applicants for such authority from $32,500 to $37,500 for a single
violation, and from $325,000 to $375,000 for continuing violation. See
Inflation Adjustment of Maximum Forfeiture Penalties, 73 Fed. Reg. 44663,
44664 (July 31, 2008). The new forfeiture limits took effect September 2,
2008, apply to violations occurring after that date, and accordingly do
not apply to this case.
47 U.S.C. S: 503(b)(2)(E). See also 47 C.F.R. S: 1.80(b)(4), Note to
paragraph (b)(4): Section II. Adjustment Criteria for Section 503
Forfeitures. We consider Cox's apparent violations of Section 76.1201 to
have begun on the date its cable system moved previously available linear
programming to an SDV platform. Cox's apparent violations continue each
day that such programming remains unavailable to customers using
CableCARD-equipped UDCPs.
See The Commission's Forfeiture Policy Statement and Amendment of Section
1.80 of the Rules to Incorporate the Forfeiture Guidelines, Report and
Order, 12 FCC Rcd 17087, 17115 (1997) ("Forfeiture Policy Statement"),
recon. denied, 15 FCC Rcd 303 (1999).
The Bureau has substantial discretion in proposing forfeitures. See, e.g.,
InPhonic, Inc., Order of Forfeiture and Further Notice of Apparent
Liability, 22 FCC Rcd 8689, 8699 (2007); Globcom, Inc. d/b/a Globcom
Global Commun., Order of Forfeiture, 21 FCC Rcd 4710, 4723-24 (2006). We
may apply the base forfeiture amounts described in the Forfeiture Policy
Statement and the Commission's rules, or we may depart from them
altogether as the circumstances demand. See 47 C.F.R. S: 1.80(b)(4) ("The
Commission and its staff may use these guidelines in particular cases[,
and] retain the discretion to issue a higher or lower forfeiture than
provided in the guidelines, to issue no forfeiture at all, or to apply
alternative or additional sanctions as permitted by the statute.")
(emphasis added).
See, e.g., Cablevision Systems Corporation, Forfeiture Order, 15 FCC Rcd
24298 (2000) ("Cablevision Forfeiture Order") (imposing forfeitures
against Cablevision on a cable system basis). SDV is installed at separate
hubs throughout the cable system, but generally the operator will
implement the technology on a system-wide basis.
47 C.F.R. S: 1.80(b)(4)(Note). See also Cablevision Forfeiture Order, 15
FCC Rcd at 24298.
47 C.F.R. S: 1.80(b)(4)(Note). Violation of the broadcast signal carriage
rule is also analogous to Cox's failure to provide the SDV programming
information in its virtual channel table. In contrast with violations of
Section 76.1201, however, violations of Section 76.640(b)(1) do not affect
the viewability of actual programming. Therefore, it is appropriate to
impose a somewhat lesser penalty for such technical violations.
Under Section 629(c) of the Act, 47 U.S.C. S: 549(c) and Section 76.1207
of the Commission's Rules, 47 C.F.R. S: 76.1207, the Commission may waive
rules adopted under Section 629(a) of the Act for a limited time "upon an
appropriate showing by a provider of multichannel video programming and
other services offered over multichannel video programming systems, or an
equipment provider, that such waiver is necessary to assist the
development or introduction of a new or improved multichannel video
programming or other service offered over multichannel video programming
systems, technology, or products. See 47 U.S.C. S: 549(c), 47 C.F.R. S:
76.1207.
Cox NAL and Order at 39.
$0.10 is our best estimate of the relevant license fee per channel. We
note that Cox did not provide an explanation of the method the company
planned to use to determine the appropriate amount of refunds as required
by the Cox NAL and Order. The Bureau will reconsider the appropriate
license fee per channel should Cox submit a petition for reconsideration
that includes evidence that the license fees of the affected channels are
lower than $0.10 per month.
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Federal Communications Commission DA 09-122
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Federal Communications Commission DA 09-122