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- discriminatory; (3) prohibit the operator or its affiliate, if carriage demand exceeds capacity, from
- selecting the video programming on more than one-third of its activated channels; (4) permit the
-- operator to use channel sharing arrangements that provide subscribers with ready and immediate
- access to programming; (5) extend the Commission's sports exclusivity, network non-duplication
- and syndicated exclusivity regulations to open video systems; and (6) prohibit the operator from
- unreasonably discriminating in favor of its affiliates with regard to information provided to
- subscribers for the purpose of selecting programming. The legislative history indicates that the
X -
- Commission is not to impose "Title II-like regulation" under the authority of Section 653. A
y O f - ԍConference Report at 178.A
-^ Section 653(b)(1) directs the Commission to take all actions necessary (including any
- reconsideration) to prescribe regulations implementing these requirements within six months of
-L the 1996 Act's enactment. Similarly, subsection 653(c)(2)(A) directs the Commission to take all
-K actions necessary (including any reconsideration) to prescribe regulations applying, to the extent
- possible, Title VI "must-carry" and public, educational and governmental ("PEG") access
obligations, and Title III retransmission consent obligations, to open video systems operators.
X e -
&B 8. ` ` If the Commission approves an open video system operator's certification, the
- operator will qualify for the streamlined regulation of Section 653(c). Title VI provisions that
- do not apply to open video systems under Section 653(c) include: (1) Section 612 -- "leased " 7 (
,-(-(ZZ "
- access" obligations; (2) Sections 621 and 622 -- franchise requirements and fees (although an
- open video system operator will be subject to a gross revenue fee at a rate not to exceed the
X -
- franchise fee paid by the local cable operator); j
y O K - ԍCommunications Act 653(c)(2)(B), 47 U.S.C. 573(c)(2)(B).j (3) Section 623 -- rate regulation; and (4)
- Section 632 -- consumer protection and customer service. In providing for such streamlined
-[ regulation, Congress again stressed its goals of flexible market entry, encouraging competition
and investment, and reliance on market forces:
0* X There are several reasons for streamlining the regulatory obligations of such systems.
0* First, the conferees hope that this approach will encourage common carriers to deploy
0* open video systems and introduce vigorous competition in entertainment and information
0* markets. Second, the conferees recognize that common carriers that deploy open systems
0* will be 'new' entrants in established video programming markets and deserve lighter
0*{ regulatory burdens to level the playing field. Third, the development of competition and
0* the operation of market forces mean that government oversight and regulation can and
X - should be reduced. A X
y O - ԍConference Report at 178.A (#
X -
&O 9. ` ` Section 653 establishes a process for the resolution of any disputes that may arise. d
y O ) - ԍCommunications Act 653(a)(2), 47 U.S.C. 573(a)(2).d
- Generally, Section 653 provides that the Commission has the authority to resolve disputes
X b -
-j regarding open video systems, and that it must do so within 180 days of submission. 1 bx
{ O - ԍId.1 Where
-- the Commission's rules have been violated, the Commission may require carriage, award damages
X 4 -
- to a person improperly denied carriage, or both. 1 4
{ O - ԍId.1 Aggrieved parties may also seek any other
X - remedy available under the Communications Act. 1
{ O j - ԍId.1
X -
&` 10. ` ` On March 11, 1996, the Commission released a Report and Order and Notice of
X -
-! Proposed Rulemaking (the "Notice"), seeking comment on how to implement the above
X -
- requirements. .
{ O " -
- ԍSee Report and Order and Notice of Proposed Rulemaking in CS Docket No. 9646 and CC Docket No. 87266
{ O l# - (terminated), released March 11, 1996 (the "Notice"). We received 61 comments and 79 replies in response to the Notice. !
y O $ -
- ԍA list of parties that filed comments and reply comments in this proceeding, and the abbreviations used herein
to refer to such parties, is attached as Appendix A. After
consideration of the comments and reply comments, we hereby adopt the Second Report and " ! ,-(-(ZZ " ԌOrder herein.
X - III. OPEN VIDEO SYSTEMS
X - A.` ` Qualifications to be an Open Video System Operator
X -
X v - ` ` 1. , Notice
X H -
11. ` ` New Section 653(a)(1) of the Communications Act provides:
&} X A local exchange carrier may provide cable service to its cable service subscribers
& in its telephone service area through an open video system that complies with this
& section. To the extent permitted by such regulations as the Commission may
& prescribe consistent with the public interest, convenience, and necessity, an
& operator of a cable system or any other person may provide video programming
X
- through an open video system that complies with this section. d "
y O - ԍCommunications Act 653(a)(1), 47 U.S.C. 573(a)(1).d
X y -
- Pursuant to this section, a LEC, as defined in Section 3(26), ^ # yX
y O - ԍCommunications Act 3(26), 47 U.S.C. 153(26).^ is qualified to be an open video
X b -
- system operator in its telephone service area. The Notice asked whether the second sentence of
- Section 653(a)(1) permits the Commission to allow cable operators and others, including LECs
- outside their telephone service areas, to become open video system operators, or whether it
-z merely authorizes the Commission to allow them to provide video programming on the open
X -
- video system operated by a LEC. A $
{ O - ԍNotice at para. 64.A Specifically, given that the first sentence of Section 653(a)(1)
- allows LECs to provide "cable service," we sought comment on whether use of the term "video
- programming" in the second sentence was intended to restrict cable operators and others to the
-\ role of programming providers on an open video system and thus precludes them from also
X -
- becoming open video system operators. 1 % z
{ O - ԍId.1 We also requested comment on what factors should
X - govern the Commission's public interest determination under this section. > &
{ O R! - ԍId. at para. 65.>
X g - ` ` 2. ,Discussion
X 9 -
& 12. ` ` We conclude that the second sentence of Section 653(a)(1) authorizes the
- Commission to allow nonLECs to operate open video systems and to allow LECs to operate
- open video systems outside of their telephone service areas when the public interest, convenience, "
& ,-(-(ZZ "
-> and necessity are served. We find that it would serve the public interest, convenience and
- necessity to permit other entities, besides LECs, to become open video system operators. With
- respect to cable operators within their cable franchise areas, we conclude that it would serve the
-= public interest, convenience, and necessity to allow a cable operator to operate an open video
- system in its cable franchise area if it is subject to "effective competition" under Section 623(l)(1)
- in its cable franchise area. This condition shall apply even if a cable operator also provides local
- exchange services within its cable franchise area. Our decision to allow cable operators to
- become open video system operators under these circumstances shall not be construed to affect
the terms of any existing franchising agreements or other contractual agreements.
X - ` ` ,a.hStatutory Construction
X
-
& 13. ` ` The starting point for our analysis is the statute. Where Congress "has directly
- spoken to the precise question at issue . . . that is the end of the matter," and the Commission
X -
- must give effect to Congress' expressed intent. '
{ O 7 - ԍChevron, U.S.A., Inc. v. Natural Resources Defense Council, Inc., 467 U.S. 837, 84243 (1984). If, however, the statute is silent or ambiguous
- with respect to a specific issue, the Commission's interpretation will be upheld so long as it is
X - a "permissible" construction of the statute. 9 ( Z
{ O - ԍId. at 843.9
X b -
&@
14. ` ` We do not believe that Congress has addressed the issue of whether nonLECs may
-k operate open video systems in a clear and unambiguous manner. In light of various factors
- discussed below, we interpret the statute as allowing nonLECs to operate open video systems
- to the extent permitted by Commission regulations. As a preliminary matter, we note that neither
-= the statute nor the legislative history states that nonLECs are prohibited from operating open
- video systems. Second, we agree with several commenters that Congress has used the phrases
X -
- "provide cable service" and "provide video programming" to refer to the same activity. )
{ O u -
-j ԍSee, e.g., American Cable, et al. Comments at 2324; Cablevision Systems/CCTA Comments at 34; TCI
Comments at 2324; Comcast, et al. Comments at 4; Cox Comments at 34. For
-] instance, Section 651(a)(3) states that to the extent a common carrier is "providing video
- programming" to its subscribers in any manner other than a wireless operator or common carrier,
- it will be subject to the full requirements of Title VI unless "such programming is provided by
-L means of an open video system" for which the Commission has approved a certification under
X e - Section 653. X * eF
{ O \" - ԍSee American Cable, et al. Comments at 24.X Furthermore, as TCI argued:
&A X in the nowrepealed cabletelephone company crossownership provision, former
& Section 613(b)(1), 47 U.S.C. 533(b)(1), repealed by the 1996 Act, 302(b),
&4 Congress made it unlawful for any local exchange carrier to "provide video
&a programming" directly to subscribers. Interpreting the term "provide video " * ,-(-(ZZZ "
& programming," the Fourth Circuit determined that Section 613(b)(1) "essentially
&B prohibits local telephone companies from offering, with editorial control, cable
X - television services to their common carrier subscribers." + ^
{ O K -
-, ԍTCI Comments at 23 (citing Chesapeake & Potomac Telephone Co. of Virginia v. United States, 42 F.3d 181,
{ O -
-= 185 (4th Cir. 1994), cert. granted, 115 S.Ct. 608 (1995), vacated and remanded sub. nom. United States v.
{ O - Chesapeake & Potomac Tel. Co., 134 L.Ed.2d 46 (1996)). See also Cablevision Systems/CCTA Comments at 3334.
- Similarly, the Commission found that Section 613(b)(1) was intended to ensure that common
- carriers did not provide video programming to subscribers "in the same manner as traditional
X v -
- cable operators;" , v
{ O -
- ԍFurther Notice of Proposed Rulemaking, First Report and Order and Second Further Notice of Inquiry in CC
Docket No. 87266, 7 FCC Rcd 300, 312 (1991). thus, the Commission found that an entity has to obtain a cable franchise (and
- thus is providing "cable service") only when the entity "selects or provides the video
X H -
- programming to be offered." - HH
{ O A -
- ԍMemorandum Opinion and Order on Reconsideration in CC Docket No. 87266, 7 FCC Rcd 5069, 5072
(1992). This interpretation was upheld by the United States Court of
X 1 -
- Appeals for the District of Columbia Circuit ("D.C. Circuit"). . 1
{ O - ԍSee National Cable Television Ass'n, Inc. v. FCC, 33 F.3d 66, 72 (D.C. Cir. 1994). We can assume that Congress
-K meant to adopt our interpretation, as affirmed by the courts, when it passed the 1996 Act because
- Congress is presumed to intend the meaning of terms and phrases as they have been interpreted
X
- by agencies or courts. /
4
{ O -
-Z ԍSee, e.g., Society of Plastics Indus., Inc. v. ICC, 955 F.2d 722, 72829 (D.C. Cir. 1992) (in interpreting the
- meaning of the term "joint rate" within the Interstate Commerce Act, the court set forth the doctrine of ratification
- which holds that "when Congress reenacts, without change, statutory terms that have been given a consistent judicial
{ O + -
- or administrative interpretation, Congress has expressed an intention to adopt that interpretation"); Long v. Director,
{ O -
- Office of Workers' Compensation Programs, 767 F.2d 1578, 1581 (9th Cir. 1985) ("'when a legislature borrows an
- already judicially interpreted phrase from an old statute to use it in a new statute, it is presumed that the legislature
{ O -
- intends to adopt not merely the old phrase but the judicial construction of that phrase'") (quoting Fusco v. Perini
{ O Q -
- North River Assocs., 601 F.2d 659, 664 (2d Cir. 1979), vacated on other grounds, 444 U.S. 1028 (1980)). We
- therefore disagree with those commenters that assert that the technical distinction between "cable service" and "video
{ O -
- programming" in Section 602 of the Communications Act requires a different result. See Tandy Comments at 23;
EIA, et al. Reply Comments at 4.
X -
&A 15. ` ` We disagree with the argument posed by the National League of Cities, et al. that
-y it would not have been necessary for Congress to construct two separate sentences in Section
X -
-Z 653(a)(1) if it had intended "cable service" and "video programming" to have the same meaning. _ 0
y O # - ԍNational League of Cities, et al. Reply Comments at 33._
- This argument does not take into account that Congress permitted nonLECs to operate open
- video systems subject to the Commission's findings regarding the public interest, convenience,
-L and necessity. We believe the two sentences were used not to distinguish which entities may " K 0 0 ,-(-(ZZg "
- operate open video systems, but to distinguish the conditions under which entities may operate
-M such systems. We do agree with the National League of Cities, et al. that Congress did not
-L intend the terms to be precise synonyms. Rather, "providing video programming" may or may
-- not be synonymous with "providing cable service," depending upon who owns the transmission
-{ facilities and the manner in which video programming is provided. With respect to cable
-. systems, the cable operator is entitled both to own the facilities and to select programming for
- channels other than those being used for PEG access, mustcarry broadcast stations, and leased
- access. We believe that Congress used the term "video programming" to ensure Commission
-L oversight over whether persons that operate cable systems may also participate in open video
-M systems, both by providing video programming over their own open video systems and by
providing video programming over another entity's system.
X
-
& 16. ` ` We also disagree with the argument by the National League of Cities, et al. and
- Alliance for Community Media, et al. that the second sentence of Section 653(a)(1) is nothing
-L more than a clarification that cable operators may provide video programming on a LEC's open
- video system that Congress inserted in response to the debate over whether a cable operator could
X -
- be a programmer on a video dialtone system under the Commission's former rules. 1
{ O - ԍSee National League of Cities, et al. Comments at 48; Alliance for Community Media, et al. Comments at 37. There is
-N no evidence to support this assertion on the face of the statute or its legislative history.
-\ Moreover, if Congress added the second sentence merely to resolve the dispute over cable
-= operators' carriage rights on a video dialtone system, the more likely place would have been in
- Section 653(b), which describes video programming providers' carriage rights, not Section 653(a),
X -
- which addresses the certification process for open video system operators. 2 Z
{ O ( - ԍSee Cox Comments at 34; Comcast, et al. Comments at 4; Time Warner Reply Comments at 13. Indeed, we believe
- the statute's delineation of "an operator of a cable system or any other person" in Section
- 653(a)(1), the certification provision, supports our view that Congress intended that these entities,
like LECs in their service areas, could obtain certification to operate open video systems.
X -
& 17. ` ` We also disagree with commenters that find it significant that only common
-L carriers or telephone companies are referred to in new Section 651(a)(4) and in the titles to new
X | -
- Part V of Title VI of the Communications Act and Section 302 of the 1996 Act. : 3 |
y O -
- ԍSeveral commenters note that Section 651(a)(4) permits a "common carrier" to elect to operate open video
- systems. State of New Jersey Bd. of Pub. Util. Comments at 3; EIA et al. Comments at 7 n.18; Info. Tech. Indus.
-J Council Reply Comments at 2; Michigan Cities, et al. Reply Comments at 15. New York City remarks that Section
- 302 of the 1996 Act is entitled "Cable Service Provided by Telephone Companies." New York City Comments at
- 4. In addition, some commenters note that Part V to Title VI of the Communications Act, which was created by
-; Section 302, is entitled "Video Programming Services Provided by Telephone Companies." State of New Jersey Bd.
- of Pub. Util. Comments at 3; New York City Comments at 4; Alliance for Community Media, et al. Comments at
- 36; State of New York Comments at 6; Michigan Cities, et al. Reply Comments at 15; Regional Cable Group Reply
Comments at 4.: Similarly, we
- disagree with commenters that claim that references to common carriers or telephone companies
-Z in the legislative history indicate that Congress did not intend to allow nonLECs to become open " N
3 ,-(-(ZZ "
X -
- video system operators. $ 4
y O y -
- ԍCommenters cite the Conference Report's statements that Section 651 "specifically addresses the regulatory
- treatment of video programming services provided by telephone companies" and that Section 653(a) "focuses on the
- establishment of open video systems by local exchange carriers." Conference Report at 17172, 177. The
- Conference Report also provides that "[t]he Conferees recognize that telephone companies need to be able to choose
{ O -
- from among multiple video entry options to encourage entry." Id. at 177. See, e.g., State of New Jersey Bd. of Pub.
Util. Comments at 3; EIA et al. Comments at 7; New York City Comments at 4; Tandy Comments at 3.$ Part V was created against the backdrop of the statutory repeal of the
- telephonecable crossownership restriction, which prohibited telephone companies from providing
X -
- video programming to subscribers in their telephone service areas. J 5 B
{ O - ԍSee 1996 Act 302(b)(1).J In this context, it is logical
- that the legislative history would have focused on the telephone companies' new options for
- entering the video marketplace. But, given the 1996 Act's overall intent to open all
X -
-L telecommunications markets to competition, A 6
y O - ԍConference Report at 113.A we do not read the legislative history's focus on
- telephone companies to mean that Congress intended to deny all others the opportunity to use this
- new model for delivering video programming. Indeed, we believe that with the express reference
- to cable operators and others in the second sentence of Section 653(a)(1), Congress intended to
provide just such an opportunity.
X
-
& 18. ` ` We conclude, therefore, that Section 653(a)(1) does not preclude entities other than
- LECs in their service areas from becoming open video system operators. We believe that
- permitting nonLECs and LECs outside their service areas to become open video system operators
- is not only a "permissible" reading of the statute, but a reading that adheres most closely to
- Congressional intent to "accelerate rapidly private sector deployment of advanced
-y telecommunications and information technologies and services to all Americans by opening all
X y -
- telecommunications markets to competition," 1 7 yd
{ O - ԍId.1 and that is consistent with the public interest,
- convenience and necessity. We agree with UTC that Congress did not intend the 1996 Act,
-/ which is designed to eliminate outdated regulatory distinctions, to be used as the basis for
X 4 -
-j creating new ones. m 8 4
{ O - ԍUTC Comments at 23. See also Cox/Comcast Reply Comments at 6.m Similarly, we agree with CATA's general argument that all entities should
-- "have the option to make the same choices, unconstrained by artificial regulations based on their
X -
-Z historic regulatory classification." 9 "
{ O ?" -
-- ԍCATA Comments at 2. See also US West Comments at 2 ("No cable service provider should be 'locked in'
- to one option while everyone else has choices."); Optel Reply Comments at 2 (other entities are entitled to the same
-h delivery flexibility as LECs, which may now provide video programming by essentially any technologically available
means). As Comcast argues, any benefits gained through open video " r 9 ,-(-(ZZ "
X -
- systems would also generally result from open video systems owned by nonLECs. : "
{ O y -
-. ԍComcast, et al. Comments at 3. See also Time Warner Comments at 27; NCTA Comments at 28 (the
- Commission should not limit which companies can operate open video systems since Congress determined open video
- systems to be a legitimate type of service that it believed would serve the needs of operators, programmers, and
users). By making
-= the open video system option available to utility companies and others, this interpretation will
- foster facilitiesbased competition and maximize consumer choice by providing a wider range of
X - outlets for unaffiliated video programming providers. ; "
{ O -
- ԍSee UTC Comments at 3; Cablevision Systems/CCTA Comments at 3132; Cox Comments at 3; Viacom
y O -
- Comments at 7; TCI Comments at 2122; Time Warner Reply Comments at 14; MPAA Comments at 11; American
- Cable, et al. Comments at 24; Adelphia/Suburban Cable Reply Comments at 12; Independent Cable Assn. Reply
Comments at 2.
X -
&# 19. ` ` We disagree with those commenters that argue that Congress intended to offer a
-k less regulatory option solely to LECs in their service areas, as the new entrants in the video
X _ -
- marketplace, in order to enable them to compete with cable systems. < \_
{ O -
- ԍSee, e.g., State of New Jersey Bd. of Pub. Util. Comments at 5; Alliance for Community Media, et al.
{ O v -
-J Comments at 3637; Tandy Comments at 34. See also EIA, et al. Comments at 8; Minnesota Cities Comments at
14; City of Denver Reply Comments at 1011; EIA, et al. Reply Comments at 46. In these commenters'
- views, there is no need to offer cable operators similar regulatory incentives because they are
X 1 -
- already entrenched in the video marketplace. = 1
{ O -
- ԍSee National League of Cities, et al. Comments at 48; Info. Tech. Indus. Council Reply Comments at 2; EIA,
et al. Reply Comments at 56. Several commenters assert that if cable operators
- could become open video system operators, it would only increase their competitive advantage,
X
-
-= thus defeating Congress' attempt to level the playing field. l > X
{ O -
-w ԍSee State of New Jersey Bd. of Pub. Util. Comments at 5; Michigan Cities, et al. Reply Comments at 16; Tandy
{ O - Comments at 4. See also EIA, et al. Comments at 8; Regional Cable Group Reply Comments at 4.
0* Many commenters contend that to ensure that open video systems remain a tool to create competitive entry
- into the video services market, the Commission must prohibit cable operators from becoming open video system
{ O -
-h operators. See, e.g., Access Tucson Reply Comments at 1; PG County Community TV Reply Comments at 1; State
- of Hawaii Reply Comments at 2; Multnomah Community TV Reply Comments at 1; D.C. Public Access Corp. Reply
- Comments at 1; Cincinnati Community Video Reply Comments at 1; City of Pocatello Reply Comments at 1;
- Chicago Access Reply Comments at 1; Quote . . . Unquote Reply Comments at 1; Access Sacramento Reply
- Comments at 1; Miami Valley Reply Comments at 1; Access Houston Reply Comments at 1; Plymouth Channel 3
- Reply Comments at 1; Cambridge Community TV Reply Comments at 1; North Dakota Community TV Reply
Comments at 1; BNN TV3 Reply Comments at 1.
0* Other commenters simply state without explanation that the 1996 Act does not permit cable operators to
{ O $ -
- become open video system operators. See, e.g., Orange County Reply Comments at 2; City of Boston Reply
-J Comments at 1; City of Ann Arbor Reply Comments at 1; City of Charlotte Reply Comments at 1; City of Dayton
- Reply Comments at 1; City of Indianapolis Reply Comments at 1; Dade County Reply Comments at 2; Minnesota
- Cities Reply Comments at 3; City of Portland Reply Comments at 12; City of Richardson Reply Comments at 2; " ' = ,-(-(' "
-h City of St. Paul Reply Comments at 2; City of Santa Ana Reply Comments at 2; City of Encinitas Reply Comments
- at 2; City of Lake Forest Reply Comments at 2; City of Laurel Reply Comments at 1; Pitt County Reply Comments
at 2; City of Kalamazoo Reply Comments at 1; North Dakota Cable Commission Reply Comments at 1.l Since one of the purposes of the "
> ,-(-(ZZ#
"
X -
-k 1996 Act is to open all telecommunications markets to competition, A ?
y O - ԍConference Report at 113.A we do not believe that
-{ Congress intended to create a competitive video marketplace by giving one competitor a
- regulatory option that would be unavailable to all others. The argument that only LECs should
-0 be permitted to operate open video systems because they are new entrants in the video
X -
- marketplace is contrary to the competitorneutral thrust of the 1996 Act. J @ x
y O
-
- ԍAlthough the Info. Tech. Indus. Council argued that Congress intended to limit the open video system option
-i to LECs, it acknowledged that doing so would be an "anomalous approach" contrary to "the overall thrust of the
- Telecommunications Act of 1996 toward harmonized, deregulated environments in which modes of delivering
-Y comparable services were encouraged to compete on the same level playing field." Info. Tech. Indus. Council Reply
Comments at 12 (citations omitted).J Indeed, it is because
- of the 1996 Act's expressed goal of promoting competition in all telecommunications markets,
- including the video market, that we believe Congress intended qualifying LECs and others to
X _ -
- have the ability to offer open video services. G A _(
y O 8 - ԍConference Report at 113.G Moreover, if one of the objectives of the open
- video option is to encourage new entrants, it should be available to all new entrants including
X 1 -
- utility companies, F B 1
{ O - ԍSee UTC Comments at 24.F outofregion cable operators, P C 1J
{ O , - ԍSee City of Seattle Comments at 2.P outofregion LECs and others and not
restricted solely to LECs seeking to provide video programming inregion.
X
-
&# 20. ` ` In any event, the Commission also could exercise its authority under Section 4(i)
- of the Communications Act to permit nonLECs to become open video system operators even
X -
-z assuming arguendo that it was clear and unambiguous that the second sentence of Section
-0 653(a)(1) addressed only the issue of whether cable operators and others could provide
- programming on a LEC's open video system and did not address the issue of whether nonLECs
- could also become open video system operators. Section 4(i) permits the Commission to
- "perform any and all acts, make such rules and regulations, and issue such orders, not inconsistent
X M -
- with this Act, as may be necessary in the execution of its functions." \ D M
y O ! - ԍCommunications Act 4(i), 47 U.S.C. 154(i).\ The Commission may
- properly take action under Section 4(i) even if such action is not expressly authorized by the
- Communications Act, as long as the action is not expressly prohibited by the Act and is necessary
-< to the effective performance of the Commission's functions. We invoke Section 4(i) here because
-[ the statute does not expressly prohibit nonLECs and outofregion LECs from becoming open
- video system operators and because affording the widest range of entities the open video
alternative is necessary to effectuate the competitive purposes of the 1996 Act. " l D ,-(-(ZZ " Ԍ
X -
&} 21. ` ` Section 4(i) has been held to justify various Commission regulations that were not
X -
-z within explicit grants of authority. E r
{ O K -
- ԍSee, e.g., New England Telephone & Telegraph Co. v. FCC, 826 F.2d 1101, 110709 (D.C. Cir. 1987)
-= (affirming an FCC order requiring telephone companies to refund charges they had collected in excess of the
-h authorized rate of return, even though the Act's only provision explicitly authorizing refunds "does not apply to the
-- circumstances of this case," because refunds were necessary to remedy the violation of the Commission's rate of
{ O m -
- return order); North American Telecomm. Ass'n v. FCC, 772 F.2d 1282, 129293 (7th Cir. 1985) (affirming a
- Commission order pursuant to Section 4(i) requiring the Bell holding companies to file capitalization plans for
-< subsidiary companies organized to sell telephone equipment, even though the Act conferred no authority on the
- Commission over holding companies (and the legislative history of the Act suggested that Congress had considered
-[ granting such authority but ultimately denied it) because such a requirement "was necessary and proper to the
- effectuation of" the Commission's functions; "Section 4(i) empowers the Commission to deal with the unforeseen
- ԩ even if that means straying a little way beyond the apparent boundaries of the Act to the extent necessary to
{ O -
- regulate effectively those matters already within the boundaries."); Lincoln Telephone Co. v. FCC, 659 F.2d 1092,
- 110809 (D.C. Cir. 1981) (holding that Section 4(i) granted the Commission the authority to require a tariff filing
- by a telephone company that arguably qualified as a "connecting carrier," where the only provision in the Act
{ O A -
- expressly requiring carriers to file tariffs specifically exempted connecting carriers); Nader v. FCC, 520 F.2d 182,
-w 204 (D.C. Cir. 1975) (holding that an FCC order prescribing a rate of return for AT&T allowed the public to receive
- the benefit of the protection inherent in the Commission's authorization to prescribe just and reasonable charges, and
- therefore "was in the public interest, necessary for the Commission to carry out its functions in an expeditious
-; manner, and within its section 4(i) authority" even though the Act makes no mention of any authority to prescribe
{ O + -
- a rate of return); see also Southwestern Cable Co., 392 U.S. 157, 180 n.46 (1968) (recognizing Section 4(i) as basis
for Commission's authority to act in furtherance of its statutory purpose). In these cases, the courts found that the Commission's
-\ regulations were not inconsistent with the Act because they did not contravene an express
- prohibition or requirement of the Act, and were reasonably "necessary and proper" for the
X -
- execution of the agency's enumerated powers. Most recently, in Mobile Communications Corp.
X x -
-L of America v. FCC, k F x
{ O + - ԍ77 F.3d 1399 (D.C. Cir. 1996) (rehearing petition pending). k the D.C. Circuit acknowledged the Commission's authority under Section
- 4(i) to regulate even where the Communications Act does not explicitly authorize such action.
-[ In that case, the D.C. Circuit held that the Commission had authority under 4(i) to require Mtel,
- which held a pioneer's preference, to pay for a narrowband personal communications service
- ("PCS") license, despite the fact that the Act did not specifically authorize the Commission to
X
-
-. charge a price for a license granted to a pioneer's preference holder. 1 G D
y O L -
- ԍThe Commission granted Mtel a pioneer's preference in 1992. In 1993 Congress amended the
-i Communications Act to allow the Commission to use auctions for allocation of some kinds of licenses (including
{ O -
- PCS licenses) when "mutually exclusive applications are accepted for filing." See Omnibus Budget Reconciliation
- Act of 1993, Pub. L. No. 10366, Section 6002 (codified at 47 U.S.C. 309(j)). The Commission subsequently
- reversed its decision that Mtel would not have to pay for its license, in part, because of the Commission's "clearer
- understanding of the interdependence of the nationwide narrowband PCS licenses and the potential anticompetitive
-< effects that the free award of one of these licenses may have on the PCS market as well as the auction process."
{ O $ - In Re Application of Nationwide Wireless Network Corp., 9 FCC Rcd 3635, 3640 (1994). 1 The court denied Mtel's
-M argument that the Commission's action was inconsistent with the Communications Act and "
G ,-(-(ZZ
"
X -
-j therefore not within the Commission's Section 4(i) power. > H X
y O y -
-; ԍMtel argued that the payment requirement was inconsistent with the Commission's authority to collect various
-Z fees and to conduct auctions specifically because those grants of power necessarily deny any authority to impose
charges in other ways. > The court found Mtel's reliance on
X -
- the expressio unius maxim that the expression of one is the exclusion of other misplaced.
-k According to the court, "[t]he maxim `has little force in the administrative setting,' where we
-z defer to an agency's interpretation of a statute unless Congress has "'directly spoken to the
X -
- precise question at issue.'" 0 I
{ O ? -
- ԍMobile Communications Corp. of America v. FCC, 77 F.3d at 140405 (citing Texas Rural Legal Aid, Inc. v.
{ O
- Legal Serv. Corp., 940 F.2d 685, 694 (D.C. Cir. 1991) (quoting Chevron v. NRDC, 467 U.S. 837 (1984)). 0 The court also denied Mtel's argument that in the absence of an
- affirmative statutory mandate to support the payment requirement, the Commission's action was
X x - not "necessary in the execution of [the Commission's] functions," as required by Section 4(i). i J xD
y O m
-
- ԍThe Commission had argued that in imposing the payment requirement it relied on its duty to determine
- "whether the public interest, convenience, and necessity will be served" by the granting of a license application as
-- required by Section 309(a). The court found that "in light of that requirement, the payment condition would be
- 'necessary in the execution of [the Commission's] functions' under Section 4(i) so long as the Commission properly
- found it necessary to "ensure the achievement of the Commission's statutory responsibility' to grant a license only
{ O U -
- where the grant would serve the public interest, convenience, and necessity." Mobile Communications Corp. of
{ O -
- America v. FCC, 77 F.3d at 1406 (citations omitted). The court found that the concerns alluded to by the
- Commission in its Licensing Decision, specifically "the unjust enrichment of Mtel from a free license while, under
- the new auction regime, others would be required to pay," or "the prospect of predation by Mtel," "would support
{ O y - a finding that the payment requirement is 'necessary in the execution of [the Commission's] functions.'" Id. i
X J -
& 22. ` ` Applying these principles here, the Commission is authorized under Section 4(i)
- to allow nonLECs and outofregion LECs to become open video system operators. First,
- allowing nonLECs and outofregion LECs to become open video system operators is not
- inconsistent with any provision of the statute. While the 1996 Act allows LECs to become open
-> video system operators in their service areas, neither it nor the legislative history expressly
-j prohibits nonLECs and outofregion LECs from being open video system operators. Second,
- allowing nonLECs and outofregion LECs to become open video system operators is necessary
-j to the execution of the Commission's functions. Congress enacted Section 653 of the 1996 Act
- to promote competition in the video marketplace and to "meet the unique competitive and
X { -
- consumer needs of individual markets." B K {
y O - ԍConference Report at 177. B Permitting nonLECs and outofregion LECs to
- become open video system operators will serve these statutory objectives. It will achieve
-[ increased competition, particularly between facilitiesbased service providers, which Congress
X 6 -
- specifically sought to achieve. f L X6r
y O Y$ -
-x ԍConference Report at 174 ("the conferees agreed, in general, to take the most restrictive provisions [of the
- buyout prohibitions] of both the Senate bill and the House amendment in order to maximize competition between
local exchange carriers and cable operators within local markets").f In addition to promoting competition between competing open
- video system providers, allowing nonLECs and outofregion LECs to operate open video " L ,-(-(ZZ "
-[ systems will benefit third party programmers by increasing the number of available outlets and
X -
- by providing a nondiscriminatory platform for distributing programming and services. M
y O b -
- ԍOpening up open video systems to nonLECs is also necessary to fulfill other provisions of the Communications
-i Act similarly enacted to advance competition in the video market and the proliferation of programming outlets.
- These sections include: Section 601(4) (purposes of Title VI are to "assure that cable communications provide and
- are encouraged to provide the widest possible diversity of information sources and services to the public); Section
- 601(6) (purposes of Title VI are to "promote competition in cable communications and minimize unnecessary
-j regulations that would impose an undue economic burden on cable systems); and Section 628 (program access
-j provisions, the purpose of which is "to promote the public interest, convenience, and necessity by increasing
{ O -
- competition and diversity in the multichannel video programming market"). See Communications Act 601(4),
601(6), and 628, 47 U.S.C. 521(4), 521(6), and 548. We
-= believe that under Section 4(i) we have the necessary authority to allow nonLECs and outof
X - region LECs to become open video system operators.
X -
X -
` ` ,b. ` hPublic Interest Conditions on NonLEC and OutofRegion LEC
X v - Entry(#
X H -
& 23. ` ` We find that Section 653(a)(1) allows nonLECs and outofregion LECs to operate
- open video systems, but only to the extent prescribed by the Commission consistent with the
-[ public interest, convenience, and necessity. In that regard, we find: (1) that it would serve the
- public interest, convenience and necessity to permit nonLECs and outofregion LECs that are
- also not cable operators to own or operate open video systems; (2) that it would serve the public
-z interest, convenience and necessity to permit cable operators to own or operate open video
X -
-x systems outside of their cable franchise areas; P N
{ O - ԍSee City of Seattle Comments at 2.P and (3) that it would not serve the public interest,
- convenience and necessity to allow a cable operator to own or operate an open video system
X - within its franchise area where there is not "effective competition" as defined below. O ,
{ O m -
-K ԍSee State of New Jersey Bd. of Pub. Util. Comments at 8 (arguing that cable operators should not be able to
become open video system operators in their cable franchise areas unless they are subject to "effective competition").
X b -
&n 24. ` ` The underlying premise of Section 653 is that open video system operators would
X K -
- be new entrants in established markets, competing directly with an incumbent cable operator. K P K
{ O - ԍSee Conference Report at 178.K
- We believe that Congress exempted open video system operators from most Title VI regulations
- because, in the vast majority of cases, they will be competing with incumbent cable operators for
- subscribers. Thus, we believe that it is not in the public interest to permit incumbent cable
X -
-- operators, in the absence of competition, to convert their cable systems to open video systems. R Q
{ O $ - ԍSee Minnesota Cities Comments at 15.R
- In certain circumstances, particularly where the entry of a facilitiesbased competitor into a
- market served by an incumbent cable operator would likely be infeasible, we believe that it would " Q ,-(-(ZZ "
- be consistent with the public interest to allow the incumbent cable operator to convert its cable
- system to an open video system. We will consider petitions from cable operators seeking such
a public interest finding.
X -
&n 25. ` ` Because the concerns set forth above exist regardless of whether a cable operator
- also provides telephone service, we will not permit a cable operator to become an open video
- system operator in its cable franchise area if effective competition is not present for video
-z programming delivery, even if it also becomes certified as a local exchange carrier within the
X H -
- franchise area. R "H
{ O -
- ԍBut see NCTA Comments at 2728 (cable operators that are also new entrant LECs are unequivocally entitled
- under the Act to become open video system operators); NCTA Reply Comments at 25 (same); National League of
-K Cities, et al. Reply Comments at 36 (at the most, a cable operator should be permitted to operate an open video
system only in the telephone service areas where it is also a LEC). The second sentence of Section 653(a)(1) authorizes the Commission to
- determine when cable operators may become open video system operators, and the Commission
-k retains this authority with respect to all cable operators, regardless of whether they are also
- providing local exchange service. Therefore, although the first sentence of Section 653(a)(1)
- allows LECs, without qualification, to operate open video systems within their telephone service
areas, this sentence does not apply to cable operators that are also LECs.
X
-
&@ 26. ` ` Accordingly, we find that the public interest, convenience and necessity would best
-i be served by allowing a cable operator to operate an open video system in its cable franchise area
-\ only if it is subject to "effective competition" pursuant to Section 623(l)(1). Our decision to
- permit cable operators to become open video system operators in their franchise areas if they are
- subject to effective competition pursuant to Section 623(l)(1) does not affect the terms of any
X 4 -
- existing franchising agreements or other contractual agreements. } S 4
y O -
- ԍSeveral commenters expressed concern about the effect that conversion to an open video system would have
{ O _ -
- on local franchising agreements. See National League of Cities, et al. Comments at 4950; City of Dallas Comments
- at 7; City of Seattle Comments at 2; State of New Jersey Bd. of Pub. Util. Comments at 8; City of Mountain View
y O -
- Comments at 1; City of Denver Comments at 8; Minnesota Cities Comments at 15; City of Quincy Reply Comments
at 1; Regional Cable Group Reply Comments at 4. } Conversion to an open video
-M system would not relieve a cable operator of its existing contractual obligations to the local
franchising authority, programming providers, or others.
X -
X - B . ` ` Certification Process
X - ` ` 1 . ,Notice
X | -
& 27. ` ` Section 653(a)(1) provides, among other things, that an open video system operator
- must certify to the Commission that it complies with the Commission's regulations under Section
X N -
- 653(b). d T Nd
y O c& - ԍCommunications Act 653(a)(1), 47 U.S.C. 573(a)(1).d The Commission must publish notice of the receipt of a certification and approve or " N
T ,-(-(ZZ "
X -
- disapprove the certification within ten days of receipt. 1 U
{ O y - ԍId.1 The Notice sought comment on the
- timing of a certification filing, the appropriate level of review, the type of information that should
-. be required, and the handling of any pleadings filed with respect to the certification within the
X -
- tenday review period. E V Z
{ O - ԍNotice at paras. 6869.E The Notice also asked what actions or representations should be required
-. in the certification process to ensure that LECs comply with Part 64 of the Commission's rules,
- which require a LEC to segregate its cost of providing regulated telecommunications services
X z - from its cost of providing video programming over an open video system. W ^z
{ O -
- ԍId. at para. 70. As the Notice stated, the specific cost allocation requirements of Part 64 between telephone
{ O -
- company operations and open video system operations is being addressed in a separate rulemaking. Id. at para. 70
{ O - n.82. See Notice of Proposed Rulemaking in CC Docket No. 96112, FCC No. 96214 (released May 10, 1996).
X L - ` ` 2. ,Discussion
X -
& 28. ` ` In light of the brief period (ten days) allowed for Commission review of
-M certification filings, we agree with those commenters that argue that Congress intended the
X
-
- certification process to be streamlined. , X
{ O -
-= ԍSee Telephone Joint Commenters Comments at 31; MFS Communications Comments at 1517; USTA
- Comments at 20; NTCA Comments at 34; NYNEX Comments at 26; NYNEX Reply Comments at 18; MFS
{ O E -
- Communications Reply Comments at 67; Bartholdi Cable Reply Comments at 7. But see National League of Cities,
- et al. Reply Comments at 1315 (tenday review period does not mean Commission should adopt a pro forma
certification process)., This conclusion is consistent with Congress' elimination
-/ of the requirement that a common carrier obtain Commission approval under Section 214 to
- construct a new facility prior to the establishment of a video delivery system, including an open
X
- video system. Y
{ O " - ԍSee Communications Act 651(c), 47 U.S.C. 571(c); Conference Report at 17273.
X } -
& 29. ` ` We also agree with those commenters that argue the Commission should avoid
X f -
-i turning the certification process into a "backdoor" Section 214 requirement. Z fX
{ O o -
-Z ԍSee MFS Communications Comments at 17; MFS Communications Reply Comments at 6; Telephone Joint
Commenters Reply Comments at 19; Bartholdi Cable Reply Comments at 6. We do not believe
- that the tenday certification period was intended to be the culmination of a lengthy proceeding.
- Thus, we will not require precertification submissions or approvals that erect the same barriers
X ! -
-> to entry and potential for delay that Congress sought to eliminate. [ !
{ O $ -
- ԍSee Telephone Joint Commenters Comments at 3132; USTA Comments at 21; NYNEX Reply Comments at
y O N% - 18; USTA Reply Comments at 6, 910; Broadband Reply Comments at 1011. We conclude that it is
permissible, but not necessary, prior to certification for an open video system operator to:
- (1) modify and obtain approval of its cost allocation manual pursuant to Part 64 of the " [ ,-(-(ZZ "
X -
-[ Commission's rules;
\ F
y O y -
- ԍFor the reasons stated above, we disagree with commenters that argue that compliance with the Part 64 cost
{ O A -
- allocation procedures must be completed before the submission of a certification filing. See, e.g., Pennsylvania PUC
- Comments at 8; NCTA Comments at 38; Continental Comments at 11; Cablevision Systems/CCTA Comments at
- 28; Time Warner Comments at 1516; CATA Comments at 3; State of California Comments at 1213; GSA Reply
Comments at 5; Time Warner Reply Comments at 89.
0* As discussed below in this section, although an applicant that is required to file a cost allocation manual
- need not modify its manual prior to certification, the applicant must certify that it will modify its cost allocation
- manual in accordance with the Commission's rules, which require that changes to the cost apportionment table and
-h to the description of time reporting procedures be filed with the Commission at least 60 days before the changes will
{ O K
-
-; be implemented. See, e.g., Cox Comments at 59; TCI Comments at 37; NCTA Comments at 2123; Continental
- Comments at 11; Cablevision Systems/CCTA Comments at 2531; MCI Comments at 78; Time Warner Comments
- at 1316; Comcast, et. al Comments at 79; CATA Comments at 3; GSA Comments at 45; State of California
- Comments at 1213; Alliance for Public Technology Comments at 910; Alliance for Community Media, et. al
-< Comments at 34; NARUC Comments at 6; CCTA Reply Comments at 68; GSA Reply Comments at 36; MCI
- Reply Comments at 78; NCTA Reply Comments at 2022; Cox/Comcast Reply Comments at 1011;
Adelphia/Suburban Cable Reply Comments at 810; Time Warner Reply Comments at 69.
{ O -
0* The substantive cost allocation requirements are being addressed in a separate rulemaking. See Notice of
{ O W -
- Proposed Rulemaking in CC Docket No. 96112, FCC No. 96214 (released May 10, 1996) ("Cost Allocation
{ O ! -
- NPRM"). That proceeding will address cost allocation issues raised by several commenters urging the Commission
to prevent LECs from subsidizing open video systems at the expense of their regulated telephone ratepayers.
0* Even though cost allocation procedures related to open video systems are not specifically addressed in the
- 1996 Act, incumbent local exchange carriers cannot offer services over such systems without complying with the
- Commission's cost allocation rules. Because the current rules may not be adequate to address these cost allocations
{ O -
- for integrated systems providing both telephony and video services, the Commission linked the cost allocation NPRM
-Y to this proceeding to comply with the 1996 Act's directive "to provide for a procompetitive, deregulatory national
-Z policy framework designed to accelerate rapidly private sector deployment of advanced telecommunications and
{ O - -
- information technologies and services to all Americans . . ." Conference Report at 113; Cost Allocation NPRM at
paras. 78.
(2) obtain the consent of local authorities for use of the public rightsof
X -
- way; ] z
{ O p -
-, ԍSee National League of Cities, et al. Comments at 6972 (certification filings must demonstrate that applicant
- has received all necessary authorizations from local authorities regarding public rightsofway); Texas Cities
- Comments at 1011 (certification should include authorizations to use public rightsofway); Michigan Cities, et al.
- Reply Comments at 1718 (local consents to use public rightsofway must be obtained before certification); City
-J of Denver Reply Comments at 11 (local governments must be a part of the certification process to ensure approval
-; for use of public rightsofway); Regional Cable Group Reply Comments at 5 (prior to certification, applicants must
obtain all local permits and approvals to use public rightsofway). or (3) obtain the approval of local authorities regarding the manner in which Section 611
X - obligations will be fulfilled. ^
{ O # -
-, ԍSee National League of Cities, et al. Comments at 7172 (certification filings must demonstrate that applicant
- has received all necessary authorizations from local authorities regarding PEG requirements); NCTA Comments at
- 3839 (prefiled information should include a demonstration that operator will comply with PEG requirements); City
- of Denver Comments at 89 (the filing of documentation detailing compliance with PEG requirements should be a
-h prerequisite to a certification filing); Texas Cities Comments at 1011 (certification should include agreements from " & ] ,-(-(& "
- all local franchising authorities that PEG requirements will be met); City of Denver Reply Comments at 1112 (local
governments must be a part of the certification process to ensure that PEG requirements are satisfied). " ^ ,-(-(ZZ " Ԍ
X -
& ԙ 30. ` ` In addition to the potential for delay, some of the precertification requirements
-[ suggested by commenters are beyond the scope of the certification process. Section 653(a)(1)
- requires an open video system operator to certify that it "complies with the Commission's
X -
- regulations under subsection (b)." d _
y O - ԍCommunications Act 653(a)(1), 47 U.S.C. 573(a)(1).d Some of the suggested precertification requirements arise
-- under other subsections of Section 653 and thus are not properly part of the certification process
X -
-/ (e.g., PEG obligations arise under subsection (c)). ' ` $
{ O
-
-
ԍSee Telephone Joint Commenters Reply Comments at 2425 (Open video system operators need not certify that
-i they will comply with Title VI requirements since those requirements are imposed in Section 653(c), not Section
- 653(b). Moreover, Section 653(c)(1) specifies that the requirements apply "to any operator of an open video system
{ O H
- for which the Commission has approved a certification under this section.") (emphasis added).' Others, such as the establishment of a
separate subsidiary, are not provided for at all under Section 653.
X H -
&_ 31. ` ` A streamlined certification process does not mean, however, that the Commission
X 1 -
- may not request and review necessary information. a 1
{ O ~ - ԍSee NCTA Reply Comments at 32 (short review period does not justify an inadequate review). We intend the certification process to
-\ provide purposeful representations regarding the responsibilities of the open video system
- operator. We also will require other information, if necessary, to determine compliance with the
- Commission's rules. In this regard, we will first require that certifications be verified by an
- officer or director of the applicant, stating that, to the best of his or her information and belief,
- the representations made therein are accurate. Second, the certification must contain particular
facts and representations about the system, including:
(1) the applicant's name, address and telephone number;
(2) a statement of ownership, including all affiliated entities;
0*? X (3) if the applicant is a cable operator applying for certification within its cable franchise
0* area, a statement that the applicant is qualified to operate an open video system under
Section 76.1501 of the Commission's rules;(#
0* X (4) a statement that the applicant agrees to comply and to remain in compliance with each
X - of the Commission's regulations under Section 653(b); + b .
y O # -
- ԍIn certifying compliance with each of the requirements under Section 653(b), open video system operators agree
- to comply with the Commission's implementing regulations regarding nondiscriminatory carriage; just and
- reasonable rates, terms and conditions; a onethird capacity limit on the amount of activated channel capacity on
- which an open video system operator may select programming when demand for carriage exceeds system capacity;
-< channel sharing; application of the rules concerning sports exclusivity, network nonduplication, and syndicated " & a ,-(-(& " exclusivity; and nondiscriminatory treatment in presenting information to subscribers.+ (# " Xb ,-(-(ZZ4 " Ԍ
0* ԙ X (5) a general description of the anticipated communities or areas to be served upon
completion of the system;(#
0* X (6) the anticipated amount and type (i.e., analog or digital) of capacity (for switched
digital systems, the anticipated number of available channel input ports); and(#
0*~ X (7) a statement that the applicant will comply with the Commission's notice and
enrollment requirements for unaffiliated video programming providers.(#
X 1 -
&_ 32. ` ` The Commission's rules require incumbent local exchange carriers to allocate their
- costs between their regulated and nonregulated activities in accordance with specific cost
X
-
- principles. H c
X
{ O - ԍSee 47 C.F.R. 64.901.H The largest incumbent local exchange carriers are further required by the
X
-
- Commission's rules to file cost allocation manuals with the Commission. H d
{ O - ԍSee 47 C.F.R. 64.903.H These manuals
- include the specific accounting procedures the carriers use to allocate their costs between
-K regulated and nonregulated activities. Such procedures must be consistent with the specific cost
-- principles established by the Commission. The rules also provide that, for certain changes to the
-Z cost allocation manuals, such changes must be filed with the Commission "at least 60 days before
X y -
- the carrier plans to implement the changes." K e y|
{ O - ԍSee 47 C.F.R. 64.903(b).K Companies seeking certification as open video
- system operators that are required to file cost allocation manuals need not modify their manuals
- prior to certification. These companies, however, must certify that they will modify their cost
- allocation manuals in a timely manner as set forth in the Commission rules. We now address
what constitutes "a timely manner."
X -
& 33. ` ` As indicated above, the rules require carriers to file proposed changes to their cost
-| allocation manuals 60 days before the changes will be implemented. The changes are
- implemented when the carrier uses the new procedures to allocate its booked costs between
-x regulated and nonregulated activities. Generally, there are two types of events that result in costs
-{ that are placed on the company's books of account and allocated between regulated and
- nonregulated activities: constructing facilities and providing service. Pursuant to our rules, the
- great majority of construction costs associated with plant will be used jointly to provide telephony
- and video services (regulated and nonregulated activities) do not affect the carrier's revenue
- requirement until the service is offered. We are most concerned with cost allocation compliance
- once the carrier begins charging customers for the service. Therefore, for purposes of the initial
- changes to the cost allocation manuals of carriers that are seeking certification as an open video
- system, we will require a certification that the changes to the manuals will be filed 60 days before
-> service is offered. We will also require that the manuals address procedures to allocate the " e ,-(-(ZZ " construction costs pursuant to our rules.
X -
& ! 34. ` ` Open video system operators may apply for certification at any point prior to the
- commencement of service, subject to two conditions. If construction of new physical plant is
- required, the applicant must obtain Commission approval of its certification prior to the
-L commencement of construction. This requirement will ensure that the public rightsofway are
- disrupted only by those who are authorized to operate open video systems. If no new
- construction is required, certification must be obtained prior to the commencement of service,
-m allowing sufficient time to comply with the Commission's notification requirements to
X 1 -
-@ programming providers. J f 1
{ O
- ԍSee infra Section III.C.1.c.J In order to facilitate the review process and to assure the
- completeness of submissions, applicants will be required to file for certification on FCC Form
X
-
- 1275, attached at Appendix C. g
Z
y O -
- ԍThis FCC Form 1275 is subject to approval by the Office of Management and Budget. A standardized form
- should address TCI's concerns that certifications be uniform, concise, and accurate since the Commission will have
-; limited time to review them in detail. TCI Comments at 1921 (recommending the enforcement of a strict "letterperfect" standard). In addition to requiring that hard copies of the certification
- forms be filed with the Office of the Secretary, Federal Communications Commission, we will
- also require applicants to file certification forms on computer disk so that the Commission can
X - post them immediately on its Internet site. h X B
y O -
-< ԍFilings should be on 3.5 inch diskettes formatted in an IBM compatible form using Windows 3.1 and Excel
- 4.0 software or such other diskette and format as announced by the Cable Services Bureau in a Public Notice. Any
attachments or other material not easily stored on computer disk may be filed in hard copy only.
X -
& " 35. ` ` We will consider comments or oppositions to a certification that are filed within
- five days of the Commission's receipt of the certification. Comments or oppositions must be
- served on the party that filed the certification. Disapproval of a certification will not preclude
-> the applicant from filing a revised certification or from refiling its original submission with a
-K statement addressing the issues in dispute. Such refilings must be served on any objecting party
- or parties. Any certification filing that the Commission does not disapprove within ten days will
X - be deemed approved. G i b
{ O - ԍSee NYNEX Comments at 27.G
X -
&n # 36. ` ` If the representations contained in a certification filing prove to be materially false
-. or materially inaccurate, the Commission retains the authority to revoke an open video system
-N operator's certification or to impose such other penalties it deems appropriate, including
forfeitures.
" |
i ,-(-(ZZ "
X - C.` ` Carriage of Video Programming Providers
X - ` ` 1. ,Allocation of Open Video System Channel Capacity (#
X -
X - ` ` ,a.hSummary
X v -
& $ 37. ` ` This section summarizes the rules and policies we adopt below regarding the
- allocation of channel capacity on open video systems. These rules and policies are designed to
X H -
-M implement Sections 653(b)(1)(A) + j H
y O - ԍSection 653 (b)(1)(A) provides that the Commission shall prescribe regulations that:
&" X [E]xcept as required pursuant to section 611, 614, or 615, prohibit an operator of an open video
&n system from discriminating among video programming providers with regard to carriage on its
& open video system, and ensure that the rates, terms, and conditions for such carriage are just and
reasonable, and are not unjustly or unreasonably discriminatory. + and 653(b)(1)(B) k xH@
y O 9 - ԍSection 653(b)(1)(B) provides that the Commission shall prescribe regulations that:
&0 X [I]f demand exceeds the channel capacity of the open video system, prohibit an operator of an open
& video system and its affiliates from selecting the video programming services for carriage on more
&m than onethird of the activated channel capacity on such system, but nothing in this subparagraph
& shall be construed to limit the number of channels that the carrier and its affiliates may offer to
provide directly to subscribers. Ɗ of the Communications Act. Among
- other things, those provisions generally prohibit an open video system operator from
- discriminating among video programming providers with regard to carriage on its system and
-K provide that if demand for carriage exceeds the system's channel capacity, the open video system
-K operator may select the programming services on no more than onethird of the activated channel
capacity.
X
-
& % 38. ` ` Under the rules and policies set forth below, the allocation process generally will
proceed as follows:
X b -
& ` ` An open video system operator will file a "Notice of Intent" ("Notice") with the
& Commission. The Commission will release the Notice to the public. The Notice
&3 will contain certain information that a video programming provider reasonably
& would need in order to assess whether to seek carriage on the system. The Notice
&R must describe, among other things, the system's projected service area, the
&% system's projected channel capacity and a description of the steps a video
& programming provider must follow to obtain carriage on the system. In addition
&n to the information contained in the Notice, the open video system operator will be
& required to make available certain information upon written request from a video
& programming provider, including specific technical information regarding the
system.(#`
" e k ,-(-(ZZ " Ԍ
X -
& ` ` The open video system operator may establish terms and conditions of carriage for
& video programming providers that are just and reasonable, and are not
& unreasonably or unjustly discriminatory. For instance, an open video system
&4 operator may: (1) take reasonable steps to ensure that a prospective video
X -
&o programming provider's request for capacity is bona fide; (2) generally exclude
a competing, inregion cable operator from obtaining capacity on its system; (#`
& X X` ` (3) require video programming providers to obtain capacity in fullchannel
& increments (i.e., prohibit parttime programming); (4) preclude unaffiliated video
& programming providers from selecting the programming on more capacity than the
&R operator itself and its affiliates are selecting programming; (5) negotiate co
X - packaging agreements with unaffiliated video programming providers ; and (#`
& X X` ` (6) require assurances that a video programming provider will actually deliver
& video programming over its allotted open video system capacity within some
reasonable period of time after system activation.(#`
X
-
&_ X X` ` At the conclusion of the open enrollment or notice period, the open video system
& operator will determine whether demand for carriage, including its own demand,
& exceeds the system's channel capacity. For this purpose, analog and digital
& capacity must be treated separately. Specifically, if the system contains both
& analog and digital capacity, the open video system operator must separately assess
& whether analog demand exceeds analog capacity and whether digital demand
exceeds digital capacity.(#`
X -
(#D X X` ` © X ,If demand for carriage does not exceed system capacity, the open video
(# system operator should fill all video programming providers' demands for
capacity, including its own.(#
X -
(# ` ` ,If demand for carriage exceeds capacity, the open video system operator
(#b may select the programming services to be carried on no more than one
(# third of the system's activated channel capacity. PEG and mustcarry
(# channels carried pursuant to Sections 611, 614 and 615 of the
(# Communications Act will not count against the operator's onethird limit.
(# Channels carrying "shared" programming will count against the operator's
(# onethird limit on a prorata basis, e.g., if the operator shares the channel
(# with one other video programming provider, it will count as half of a
channel against the operator's limit.(#
X ! -
(#c X X` ` © X ,The remaining twothirds of capacity, other than PEG and mustcarry
(# channels, must be allocated to unaffiliated video programming providers
X # -
(# on an open, nondiscriminatory basis. The Commission does not, however,
require that a specific allocation methodology be used.(#
X <& -
& ` ` After service commencement, an open video system operator will be required to
&~ allocate open capacity, if any is available, at least once every three years on an " %' k ,-(-(ZZ% "
&B open, nondiscriminatory basis, to the extent that there is demand. Such open
&n capacity will include capacity that becomes available during the three year period,
& e.g., due to a system upgrade or the expiration of carriage contracts, and any
&} capacity on which the open video system operator selects the video programming
& in excess of the onethird limit of activated channel capacity provided for under
Section 653(b)(1)(B).(#`
X _ - & 39. ` ` The following discussion addresses the issues summarized above.
X 1 -
` ` ,b. ` hOpen Video System Operator Participation in the Allocation
X - Process(#
X
- ` ` ,h(1)hhNotice
X -
&2 ' 40. ` ` Since the open video system provides the opportunity for the operator as well as
- independent entities to distribute video programming, the administration of the system must
- reflect fair opportunities for all interested parties to pursue their strategies. To this end, Section
X y -
-> 653 prohibits discrimination against independent entities with regard to carriage. The plain
- language of Section 653(b)(1)(A) refers to carriage of video programming providers by an "open
X K -
-] video system operator." In the Notice, we thus tentatively concluded that Section 653's
-= prohibition of discrimination did not require the Commission to prohibit an open video system
X - operator from participating in the allocation of channel capacity. A l
{ O - ԍNotice at para. 11.A
X - ` ` ,h(2)hhDiscussion
X -
& ( 41. ` ` We affirm our tentative conclusion that the 1996 Act does not require that the open
- video system operator be prohibited from participating in the allocation of channel capacity. To
- the contrary, we believe that Section 653 clearly contemplates that open video system operators
- will play an active role in structuring and managing the platform, subject to clear non
X g -
-y discrimination requirements. i m |gZ
{ O r -
- ԍSee, e.g., Communications Act 653(b)(1)(A), 47 U.S.C. 573(b)(1)(A) (prohibiting an open video system
-i operator from discriminating among video programming providers regarding carriage on the system, except with
-h respect to its PEG and mustcarry obligations); 653(b)(1)(C) (permitting an open video system operator to require
{ O -
- channel sharing). See also NYNEX Comments at 7 (arguing that the statutory scheme bars the Commission from
- regulating open video systems like "passive common carrier systems, with the operator having no control over its
- service offerings"); Telephone Joint Commenters Comments at 14; Access 2000 Comments at 56; ABC Comments
at 12; Viacom Comments at 810.i Indeed, since it is the open video system operator that certifies
- it will comply with Section 653's nondiscrimination requirements, and will be held responsible
-z for any violation, it is unlikely that Congress intended to require the operator to delegate its " 9 m ,-(-(ZZ{ "
X - authority to an independent entity. v n
{ O y - ԍSee Communications Act 653(a)(1)(2), 47 U.S.C. 573(a)(1)(2).v
X -
& ) 42. ` ` We disagree with cable operators' and local governments' contentions that any
-z participation by the open video system operator in the channel allocation process would be
- tantamount to the editorial control exercised by cable operators and result in impermissible
X -
-y discrimination against unaffiliated ^ o Z
y O -
- ԍWe sought comment on the appropriate standard for determining when a video programming provider is
{ O ` -
-Y "affiliated" with an open video system operator in the Order and Notice of Proposed Rulemaking in CS Docket No.
y O *
-
- 9685, (Implementation of Cable Act Reform Provisions of the Telecommunications Act of 1996), FCC 96154
{ O
-
- (released April 9, 1996) ("Cable Reform Proceeding"). We invite parties to comment with respect to the definition
{ O -
-h of affiliation in the Cable Reform Proceeding, and we will consider those comments and all relevant comments filed
in the instant proceeding in addressing this issue at a later stage of the instant proceeding.^ programming providers. > p X
y O -
-, ԍAmerican Cable, et al. Comments at 910; National League of Cities, et al. Comments at 2223; NCTA Reply
-= Comments at 8 (arguing that only the employment of an independent administrator will sufficiently protect
programmers from unfair treatment).> We believe that the statute and
- implementing rules will prevent an open video system operator from discriminating against
- unaffiliated video programming providers, notwithstanding the operator's involvement in the
- allocation process. We also believe that allowing an open video system operator to allocate
-z channel capacity will provide certain efficiencies that will enhance the overall system. With
- adequate protections in place, we believe it unnecessary and unduly restrictive to require the open
- video system operator to retain an independent entity to allocate system capacity. In the event
- that an operator acts discriminatorily in allocating channels, the Commission's dispute resolution
-K process provides a mechanism for rectifying any individual harm without resorting to an absolute
X - ban on the open video system operators' participation in the allocation process. v q
{ O g - ԍSee discussion of dispute resolution process, infra Section III.G.v
X - ` ` ,c. ` hNotification and Enrollment of Video Programming Providers(#
X b - ` ` ,h(1)hhNotice
X 4 -
& * 43. ` ` In the Notice, we sought comment on what procedures the Commission should
-x adopt for an open video system operator to notify potential video programming providers that the
-x operator intends to establish an open video system. We also sought comment on the proper form
- and scope of such notice, including what sort of information about the system a potential video
-M programming provider may need to assess its interest in seeking carriage. Additionally, we
-N solicited comment on the appropriate length of an enrollment period during which video
X - programming providers could apply for capacity. A r
{ O % - ԍNotice at para. 14.A
" r ,-(-(ZZ3 " Ԍ
X - ` ` ,h(2)hhDiscussion
X -
&a + 44. ` ` We note that the notification and enrollment process is part of the capacity
X -
-\ allocation process, and is therefore subject to Section 653's prohibition on discrimination. s
y O 4 -
- ԍCommunications Act 653(b)(1)(A), 47 U.S.C. 573(b)(1)(A). We disagree with USTA's argument that
- Commission rules governing notice, publication procedures, the length of enrollment periods and applications for
- carriage by programmers simply are not contemplated in the statute and thus may not be addressed by the
Commission. USTA Comments at 22.
-< Given the importance of the notification and enrollment process in allocating capacity, we believe
- that ensuring an open, fair and nondiscriminatory process is essential to comply with our
-y mandate under Section 653(b)(1)(A). The process that the open video system operator follows
- is fundamental to demonstrating fairness, openness, and nondiscrimination. For instance, if a
-= video programming provider fails to receive adequate notice and files a complaint after system
- capacity has been allocated, it would be difficult, if not impossible, to provide an adequate
-. remedy to the provider without significant disruption of the system, e.g., transferring capacity
-[ from one video programming provider to another. We believe that the approach suggested by
- most telephone commenters, which would allow an open video system operator to notify and
- enroll prospective video providers as it desired, subject only to the dispute resolution process may
X -
- be inadequate to fulfill the statutory mandate of nondiscrimination. t
{ O - ԍSee, e.g., U S West Comments at 21; Telephone Joint Commenters Comments at 1415. Under our guidelines,
- video programming providers, including small, independent programming providers with limited
X -
- resources, i u B
{ O - ԍSee generally Community Broadcasters Assn. Comments at 23.i will be afforded a reasonable opportunity to obtain timely information, | v
y O -
- ԍCommunity Broadcasters Assn. Comments at 23; NBC Comments at 910; NAB Comments at 8; Michigan
-+ Cities Reply Comments at 7 (urging the Commission to prevent obstacles to competition like those that arose in other
-, telephone areas, including interconnection, colocation, access charges, and number portability); Indep. Cable Assn.
-Y Reply Comments at 3; NCTA Reply Comments at 1112 (asserting that the telephone companies seek flexibility in
order to preserve their ability to hinder access to their open video systems).| and the
-x open video system operator will be given the stability and certainty of knowing that its notice and
X b - enrollment procedures satisfy the statute's nondiscrimination requirements. w b
{ O - ԍSee, e.g., Rainbow Comments at 1013; Cablevision/CCTA Comments at 9; HBO Comments at 4.
X 4 -
&1 , 45. ` ` Accordingly, we conclude that an open video system operator must take reasonable
-. steps to inform prospective video programming providers of its intention to establish an open
- video system. First, we will require an open video system operator to file a "Notice of Intent"
- to establish an open video system with the Office of the Secretary, Federal Communications
- Commission. The Notice of Intent may be filed at any time, so long as the operator can provide
- the information detailed below to unaffiliated video programming providers. The Commission
- will issue a Public Notice announcing receipt of the operator's Notice of Intent and will attach
-> to the Public Notice a copy of the Notice of Intent. As with all Public Notices, these Public " w ,-(-(ZZ3 "
X -
- Notices will be listed in the Commission's Daily Digest. m x
{ O y - ԍSee U S West Comments at 22 (notice should be in Daily Digest).m For convenience, and to ensure
- maximum access by unaffiliated video programming providers, the Commission will place the
- Notice of Intent on our Internet site and make it available for inspection in the Cable Service
-N Bureau's Reference Room. We also reject some commenters' suggestions that notice be
- disseminated to cable programming providers, community information providers, local
X -
- newspapers, publications and magazines, trade publications, the local media, _ y Z
y O - ԍState of California Comments at 9; NCTA Comments at 13._ and state public
X v -
- utilities commissions. 4 z Xv
y O -
- ԍState of New Jersey Ratepayer Advocate Comments at 6 (urging that notice should be served on local
- regulatory bodies in case tariff or other review is necessary to ensure that capacity has been allocated in a nondiscriminatory manner).4 We will not require such dissemination of the Notice of Intent because
- any benefits of this additional distribution are outweighed by the costs involved, and the
-k Commission's Public Notice process affords an expeditious means for this information to be
- sufficiently disseminated. An open video system operator may distribute the Notice of Intent or
solicit demand for carriage as it sees fit in addition to the requirements described herein.
X
-
&B - 46. ` ` Second, we will require that the Notice of Intent include a certification that the
-L open video system operator has complied with all relevant notification requirements under our
- open video system mustcarry and retransmission consent regulations (47 C.F.R. 76.1506),
- including a list of all local commercial and noncommercial televisions stations entitled to must
X -
- carry treatment. {
{ O K -
- ԍSee infra Section III.E.2. See also Assn. of Local Television Stations Comments at 16; NAB Comments at
89; Assn. of Public Television Stations Comments at 20. The Notice also must include a certificate of service showing that it has been
X y -
- provided to all local cable franchising authorities | yd
y O -
- ԍAlliance for Community Media, et al. Comments at 24; State of New Jersey Ratepayer Advocate Comments
at 6. located in the anticipated service area of the
- open video system. This is necessary to ensure that open video system operators meet any
X K -
- obligations under Sections 611, 614 and 615. t } K
y O - ԍCommunications Act 611, 614, 615, 47 U.S.C. 531, 534, 535.t We believe that this approach is consistent with
- new Section 653(c), which provides that the Commission shall, to the extent possible, impose
- obligations on open video system operators that are "no greater or lesser" than the obligations
X -
- imposed on cable operators concerning PEG and mustcarry program services. ~ L
y O # - ԍCommunications Act 653(c)(2)(A), (c)(1)(B), 47 U.S.C. 573(c)(2)(A), (c)(1)(B). Providing a
-K copy of the Notice to broadcast stations will also inform them of an open video system operator's
- belief that they may qualify for mustcarry treatment on the open video system. With regard to
-z PEG channels, the above requirement is consistent with a local cable franchising authority's " ~ ,-(-(ZZ "
X - ability under the Communications Act to designate channel capacity for PEG use. ^
y O y - ԍCommunications Act 611(a), 47 U.S.C. 531(a).^
X -
&Q . 47. ` ` We believe that including the following information in the Notice of Intent will
- be sufficient to notify potential video programming providers of an operator's intent to establish
an open video system:
X v -
& ` ` A heading clearly indicating that the document is a Notice of Intent to establish
an open video system.(#`
X 1 - ` ` The open video system operator's name, address and telephone number. 1X
y O : -
-K ԍU S West argues that this information alone should be sufficient, and that it becomes a video programming
- provider's responsibility to then request additional information from the system operator. U S West Comments at
- 21. We disagree. We believe that ensuring access to open video systems on a nondiscriminatory basis includes
distributing the other information described above. (#`
X
- ` ` A description of the open video system's anticipated service area.(#`
X -
& ` ` A description of the system's projected channel capacity, in terms of analog,
digital and other type(s) of capacity, upon activation of the system.(#`
X -
&_ ` ` A description of the steps a prospective video programming provider must follow
& to seek carriage on the system, including the name, address, and telephone number
of a person to contact for further information.(#`
X 4 -
& ` ` The starting and ending dates of the initial enrollment period for video
programming providers. (#`
X -
&P ` ` A certification that the open video system operator has complied with all relevant
& notification requirements under our open video system mustcarry and
& retransmission consent regulations (47 C.F.R. 76.1506), including a list of all
& local commercial and noncommercial televisions stations served. The Notice of
&# Intent also must include a certificate of service showing that the Notice has been
&_ served on all local franchising authorities entitled to establish requirements under
& Section 611 regarding the designation or use of channel capacity for public,
educational and governmental programming.(#`
X -
& ` ` The process for allocating the channel capacity, in the event that demand for
X - carriage exceeds the system's capacity. N @
{ O % - ԍSee infra Section III.C.1.f.(2).N (#`
" ,-(-(ZZ< " Ԍ
-L We believe that this basic information is necessary and not unduly burdensome and will allow
- a prospective video programming provider to make an initial assessment as to whether it wishes
to seek carriage on a particular system.
X -
&% / 48. ` ` In addition, we believe that a prospective video programming provider can
- reasonably be expected to need additional information concerning the system to assess whether
-K to seek carriage on the system. We also recognize that the competitive position of an open video
- system operator should not be compromised by the required release of information unnecessary
- to make an informed enrollment decision. In this regard, we will require that an open video
-l system operator provide the following information to all prospective video programming
-z providers within five business days of the open video system operator's receipt of a written
request from such a provider:
X -
& ` ` The projected activation date of the system. If a system is to be activated in
&n stages, an operator should describe the respective stages and the projected dates
X
- on which each stage will be activated. X
y O -
- ԍRainbow suggests that system operators also be required to disclose their construction plans. We believe this
-i could unnecessarily risk the disclosure of confidential business plans and that the projected activation date should
y O - be sufficient for the purposes of video programming providers. Rainbow Comments at 23.ĝ (#`
X y - ` ` A preliminary carriage rate estimate. S y
{ O -
- ԍSee generally infra Section III.D.3. (Disclosure of Programming Contracts). Other parties would require a
- showing of compliance with all procedures established to protect customers of regulated telephone service from
- excessive charges. Alliance for Community Media, et al. Comments at 24. We do not believe that such a showing
y O l -
- is appropriate as part of the notification process, and we discuss these issues in Section III.B., above (Certification
Process).S (#`
X K -
& ` ` The information a video programming provider will be required to provide to
X 4 -
& qualify as a commercially bona fide potential video programming provider, e.g.,
creditworthiness.(#`
X -
& ` ` Technical information that is reasonably necessary for prospective video
&" programming providers to assess whether to seek capacity on the system, including
what type of customer premises equipment subscribers will need to receive service.(#`
X -
& ` ` Any transmission or reception equipment needed by a video programming provider
X ~ -
&A to interface successfully with the open video system (e.g., scrambling, signal and
audio quality, processing or security).(#`
X 9 -
& ` ` The equipment available to facilitate the carriage of unaffiliated video
& programming and the electronic forms (e.g., baseband signal) that will be accepted
for processing and subsequent transmission through the system.(#` " ! ,-(-(ZZ= " Ԍ
X -
& ԙ 0 49. ` ` Video programming providers must receive adequate notice and opportunity to
- participate in the allocation of system channel capacity. An enrollment period therefore may not
- expire fewer than 90 days after the Commission's release of the Public Notice of the Notice of
X -
- Intent.
y O 4 -
-x ԍWe agree with NAB that prospective video programming providers will need a reasonable period of time to
-- become aware of the opportunity for carriage and to assess their interest. NAB Comments at 89. While other
- commenters suggest periods of only one month, NCTA Comments at 13, we agree with the Alliance for Community
-Y Media that a 90day period is reasonable. Alliance for Community Media, et al. Comments at 2425. This will give
video programming providers adequate time, for instance, to seek financing and negotiate programming contracts. In order to provide video programming providers with sufficient time to prepare for
- offering their programming to subscribers, an enrollment period must expire prior to activation
- of the system. Aside from these minimal time limitations, an open video system operator will
X v -
- be accorded substantial discretion to design and implement its enrollment process. vx
y O -
-x ԍSee Section III.C.1.f.(2) for a discussion of the methods an open video system operator may use to actually
- allocate system capacity to qualified video programming providers. The enrollment process employed by an open
-Z video system operator should be reasonable in light of the method selected by the operator for allocating system
capacity to video programming providers. An operator
-. will be able to confirm that a prospective video programming provider's request for capacity is
X H -
- bona fide. For example, a system operator could require a video programming provider to
X 3 -
- provide (1) a reasonable deposit on the lease of capacity (e.g., one or two months of carriage), \ 3`
y O D -
-\ ԍNational League of Cities, et al. Comments at 27 (Commission should specify a maximum financial
y O -
- commitment that would not form a barrier to independent programmers' access to an open video system); Alliance
- for Community Media, et al. Comments at 2526 (urging the Commission to require that a video programming
- provider file a good faith bond of $100,000 to go to the Commission if the provider is unable to use its allotted
capacity); MFS Communications Comments at 2021.\
-| (2) reasonable evidence of the video programming provider's capability to offer video
X
-
- programming at the time the system is activated, 1
{ O - ԍId.1 or (3) assurances that the provider will
-L actually deliver video programming over its allotted capacity within some reasonable period of
- time after system activation. We believe this approach enhances the stability of an open video
- system by helping to prevent the need to reallocate system capacity of a video programming
X
-
- provider that is ultimately unable to utilize the capacity which it has obtained. N
{ O - ԍSee infra Section III.C.1.f.(5).N At the same
- time, however, an open video system operator shall be prohibited from deterring video
- programming providers from seeking carriage through the imposition of unreasonable
qualification requirements (e.g., unreasonable technical carriage requirements).
" M" 4 ,-(-(ZZI "
X -
X X` ` X ,d. XhOpen Video System Operator Discretion Regarding Video
X - Programming Providers(#
X - ` ` ,h(1)hhNotice
X -
& 1 50. ` ` Pursuant to Section 653(a)(1), we determined that it was consistent with the public
-< interest, convenience and necessity to allow entities other than local exchange carriers to operate
-y an open video system. In this section, we address whether, under the public interest standard,
- an open video system operator may preclude access to its open video system by other MVPDs.
X 1 -
-j In the Notice, we sought comment on the extent to which open video system operators should
-i have discretion regarding video programming providers entitled to carriage on the system, in light
-{ of the 1996 Act's general prohibition of discrimination by system operators among video
X
-
-Z programming providers.
{ O g
- ԍNotice at para. 15 (citing Communications Act 653(b)(1)(A), 47 U.S.C. 573(b)(1)(A)). In particular, we asked whether an open video system operator should
- be permitted to limit or preclude, in the absence of Commission regulations, a competing, in
X - region cable operator from obtaining capacity on the system. Z Z
{ O - ԍId. (citingĠConference Report at 177).Z
X - ` ` ,h(2)hhDiscussion
X { -
X d -
& 2 51. ` ` We recognize that Section 653(b)(1)(A) generally prohibits discrimination by an
X M -
- open video system operator among video programming providers. j M
y O - ԍCommunications Act 653(b)(1)(A), 47 U.S.C. 573(b)(1)(A).j Thus, we find that an open
-Z video system operator generally may not discriminate among video programming providers based
- on their identities. We disagree, however, with the cable operators' assertion that Section
X -
- 653(b)(1)(A) ensures them unrestricted access to open video systems. g |
y O 5 -
- ԍAmerican Cable, et al. Comments at 1314; Cablevision Systems/CCTA Comments at 3537; Cox Comments
- at 45; Continental Comments at 10; Comcast, et al. Comments at 56; NCTA Comments at 3031; TCI Comments
-, at 2425; Adelphia\Suburban Cable Reply Comments at 6; Cox Reply Comments at 78. See also Tandy Comments
- at 45; Viacom Comments at 10 (stating that, at a minimum, such a rule is needed where analog capacity is
oversubscribed and digital capacity cannot provide comparable access to subscribers).g As noted above, Section
- 653(a)(1) specifically addresses the conditions under which a cable operator may provide video
- programming over an open video system, whether the system is owned by the cable operator
itself or another entity:
&$ X To the extent permitted by such regulations as the Commission may prescribe
& consistent with the public interest, convenience, and necessity, an operator of a
&B cable system or any other person may provide video programming through an
X P - open video system that complies with this section. d P,
y O -' - ԍCommunications Act 653(a)(1), 47 U.S.C. 573(a)(1).d " P# ,-(-(ZZ " Ԍ
- ԙWe believe that this provision, because it specifically addresses the provision of video
- programming by a cable operator, allows the Commission discretion to determine when to permit
- a cable operator to provide video programming over an open video system, consistent with the
-/ "public interest, convenience and necessity," notwithstanding the 1996 Act's general non
X - discrimination requirements. E F
{ O -
- ԍMuniz v. Hoffman, 422 U.S. 454, 459 (1975) (a provision that specifically addresses a certain situation or issue
{ O -
-Y typically overrides a more general, though relevant, provision contained in the same enactment); Bulova Watch Co.
{ O -
- v. U.S., 365 U.S. 753, 758 (1961) (same). See Telephone Joint Commenters Comments at 1516; MFS
-x Communications Comments at 2426; NYNEX Comments at 1112; U S West Comments at 13; TeleTV Reply
y O C -
- Comments at 15; City of Seattle Comments at 2; National League of Cities, et al. Comments at 51 (urging, however,
-J that under no circumstances should determination of this question be left to the discretion of the open video system
-x operator, because that would allow open video system operators and cable operators to collude to avoid the 1996
Act's prohibition on mergers between cable operators and local exchange carriers in some areas).E
X v -
&3 3 52. ` ` In general, we believe that it would serve the public interest, convenience and
-L necessity to permit an open video system operator to limit the ability of a competing, inregion
- cable operator to select programming on the open video system where facilitiesbased competition
X 1 -
-= would be impeded. $1
y O -
- ԍBy "facilitiesbased" competition, in this context of video programming provision, we mean competition
{ O -
-i between at least two wireline service providers. See MFS Communications Comments at 245; Telephone Joint
{ O J -
-Y Commenters Comments at 15 (citing Conference Report at 178); NYNEX Comments at 11 (same); TeleTV Reply
Comments at 1617; City of Seattle Comments at 3; U S West Comments at 13. We thus will permit an open video system operator to limit the ability of
- the competing, inregion cable operator, or a video programming provider affiliated with such
- a cable operator, to select programming on the open video system. This approach serves the
- public interest because, as some commenters note, a competing, inregion cable operator should
- generally be encouraged to develop and upgrade its own system, rather than to occupy capacity
X -
-K on a competitor's system that could be used by another video programming provider. i
y O 1 - ԍMFS Communications Comments at 2426; Viacom Reply Comments at 6.i We note
-. that the Commission made a similar determination in the context of cellular telephone systems,
- where we adopted an exception to the general prohibition on resale restrictions. This exception
-1 permits a carrier to deny access to its facilities where the competitor's system is fully
X b -
- operational. bR
{ O e -
- ԍSee NYNEX Comments at 12 (citingĠReport and Order in CC Docket No. 9133, (Petitions for Rulemaking
y O / -
-- Concerning Proposed Changes to the Commission's Cellular Resale Policies), 7 FCC Rcd 4006, 4008 (1992); 47
{ O -
-w C.F.R. 22.914(a)); MFS Communications Comments at 256 (same; Second Notice of Proposed Rulemaking in CC
{ O ! -
- Docket No. 9454, (Interconnection and Resale Obligations Pertaining to Commercial Mobile Radio Services), 10
{ O " - FCC Rcd 10666, 10696 (1995)("CMRS Order")); TeleTV Reply Comments at 16 (same). As MFS Communications notes, the Commission stated that this exception
X K - promotes competition "by encouraging each licensee to build out its network." K
{ O % - ԍMFS Communications Comments at 256 (citing CMRS Order, 10 FCC Rcd at 10696).
X -
&" 4 53. ` ` Moreover, this approach is consistent with Congress' intent to "encourage common " $ ,-(-(ZZ "
X -
- carriers to deploy open video systems and introduce vigorous competition in entertainment and
X -
- information markets." A
y O b - ԍConference Report at 178.A By promoting facilitiesbased competition in this manner, we recognize
- in most cases that an open video system will be a new entrant into video markets where a
- dominant, incumbent cable operator will be present. Additionally, we note that the 1996 Act
- generally prohibits acquisitions and joint ventures between local exchange carriers and cable
X -
- operators that operate in the same market. + "X
y O -
- ԍCommunications Act 652, 47 U.S.C. 572. Congress provided for waivers of these general prohibitions
{ O ^ -
- where, inter alia, the anticompetitive effects of the proposed transaction are clearly outweighed in the public interest
- by the probable effect of the transaction in meeting the convenience and needs of the community to be served.
y O
- Communications Act 652(d)(6)(A)(iii), 47 U.S.C. 572(d)(6)(A)(iii).+ We believe that Congress expressed a clear
-= preference, where possible, for facilitiesbased competition in the video marketplace from both
X _ - cable operators and telephone companies.
_B
y O R -
- ԍConference Report at 178. Because we allow an open video system operator generally to limit a competing
- cable operator's access to the open video system, we do not reach the following contentions of certain local exchange
- carriers. First, they assert that allowing the competing cable operator to obtain access on the system would disrupt
- the organization and operation of the open video system, MFS Communications Comments at 245; Telephone Joint
- Commenters Comments at 1516. Second, they argue that Congress, if it had intended open video systems as a
-h vehicle for competing cable operators rather than independent video programmers, would have used the welldefined
- term "multichannel video programming providers" rather than "video programming providers" in Section 653,
{ O -
- Telephone Joint Commenters Comments at 12 and n.19; but see American Cable, et al. Comments at 10, stating that
y O - "MVPDs are video programming providers [that] simply provide multiple channels of video programming."
X 1 -
&A 5 54. ` ` Thus, an open video system operator will be permitted to limit access to the open
-y video system by the competing, inregion cable operator, and any video programming provider
-z that is affiliated with that cable operator, whether the competing, inregion cable operator or
- video programming provider is a packager of multiple programming services or an individual
- programming service. We clarify, however, that a programming service affiliated with a
-= competing, inregion cable operator may not be precluded from being carried on the system as
- part of the package of any video programming provider that is not affiliated with the competing,
-= inregion cable operator. We also clarify that an open video system operator may not limit the
- ability of any video programming provider that is unaffiliated with the competing, inregion cable
-Z operator to obtain capacity on the open video system, except as consistent with the 1996 Act and
the rules adopted herein.
X -
& 6 55. ` ` We are giving the open video system operator discretion in this regard because we
- believe that, at least in some instances, the open video system operator will find it in its interest
- to allow the competing, inregion cable operator to obtain capacity on the open video system
-- (e.g., where the operator believes that the programming offered by the competing, inregion cable
- system or programming affiliate is necessary to the success of the open video system " % ,-(-(ZZS "
X -
-z operation).
y O y -
- ԍOf course, any arrangement between a cable operator and a LEC is subject to the restrictions contained in
Section 652. Thus, allowing the open video system operator to exercise this discretion will
- advance Congress' goal of facilitiesbased competition because, in some instances, it may impact
on the open video system operator's decision to build, or further deploy, its open video system.
X -
& 7 56. ` ` Contrary to the arguments of some cable operators, we do not believe that
- promoting the goal of facilitiesbased competition in the manner adopted herein constitutes a
X v -
-L "complete ban on access to channel capacity" implicating First Amendment concerns. ^v
{ O G
-
-i ԍTCI Comments at 2425 (citing Chesapeake & Potomac Tel. Co. of Virginia v. United States, 42 F.3d 181,
{ O -
- 201202 (4th Cir. 1994), cert. granted, 115 S. Ct. 608 (1995), vacated, remanded, sub nom. United States v.
{ O - Chesapeake & Potomac Tel. Co., 134 L.Ed. 2d 46, 64 U.S.L.W. 4115 (1996) ("C&P Telephone")).Ĵ First,
-y alternative avenues for speech by competing, inregion cable operators will exist, i.e., their own
X H -
-x cable system, or open video systems, as set forth herein. L HF
{ O ? - ԍC&P Telephone, 42 F.2d at 202.L Second, open video system operators
- may not limit access to their systems by outofregion cable operators or video programming
- providers affiliated with such cable operators. Third, we will consider petitions from competing,
-> inregion cable operators showing that facilitiesbased competition will not be significantly
-j impeded in their particular circumstances. We will provide a specific exception in a situation in
-K which: (1) the competing, inregion cable operator and affiliated systems offer service to less than
- 20% of the households passed by the open video system; and (2) the competing, inregion cable
- operator and affiliated systems provide cable service to a total of less than 17,000 subscribers
X -
-/ within the open video system's service area. "
y O -
-- ԍThis figure is consistent with the statutory exceptions to Section 652's general prohibition on a telephone
-Z company's buy out of a competing cable operator, under which a local exchange carrier may acquire more than a
{ O -
- 10% interest in a competing cable system if the cable system, inter alia, serves no more than 17,000 cable
subscribers. Communications Act 652(d)(4), 47 U.S.C. 572(d)(4). We believe that considering such petitions
- sufficiently addresses the concerns of some cable commenters that restrictions on access to an
-- open video system based on the identity of a video programming provider would "fundamentally
- undermine" Congress' intent in repealing the cabletelephone company crossownership restriction
X 4 - or impair competition. 4
{ O -
-J ԍSee, e.g., Cablevision Systems/CCTA Comments at 3536; NCTA Comments at 31; Cox Comments at 4. See
{ O q - also State of New York Comments at 7.
" & ,-(-(ZZ "
X - ` ` ,e.hMeasurement of Capacity
X - ` ` ,h(1)hhAnalog, Digital and Switched Digital Video
X - ` ` ,h hh(a)Notice
X x -
& 8 57. ` ` As described above, new Section 653(b)(1)(B) provides that, if demand for carriage
- exceeds the channel capacity of the open video system, the Commission's rules must prohibit an
- open video system operator and its affiliates from "selecting the video programming service for
X 3 -
- carriage on more than onethird of the activated channel capacity on such system . . . ." j 3
y O
- ԍCommunications Act 653(b)(1)(B), 47 U.S.C. 573(b)(1)(B).j This
- requires the Commission to address how channel capacity should be measured, recognizing that
X
-
- technology continues to evolve. In the Notice, we sought comment on these issues. %
X
{ O -
- ԍ Notice at para. 16. For a discussion of allocating specific types of capacity to video programming providers,
{ O - and in particular the allocation of analog and digital capacity, see infra Section III.C.1.f.(3).% We sought
-- comment on whether it would be appropriate to measure the activated channel capacity based on
- a system's total bandwidth, or on the number of channels on the system's analog portion and on
X -
-j the bandwidth of the system's digital portion. B
{ O ' - ԍId. at paras. 1617.B Second, we sought comment on how capacity
- should be measured on open video systems that employ "switched digital" video technology, and
X - tentatively concluded that capacity on such systems may be presumed to be unlimited. > F
{ O - ԍId. at para. 18.>
X f - ` ` ,hhh(b)Discussion ppX
X` hp x (#%'0*,.8135@8: in this bandwidth may vary greatly depending on the equipment and transmission systems
-. involved, measuring "capacity" in terms of bandwidth will carry out the objectives of the one
- third occupancy allocation in Section 653(b)(1)(B). We are unpersuaded by the Telephone Joint
-< Commenters' assertion that measuring the capacity of an open video system based on bandwidth
-. is impermissible because Section 653(b)(1)(B) refers to "channel capacity," "activated channel
X 4 -
-i capacity," and "number of channels." R 4 .
y O - ԍTelephone Joint Commenters Comments at 16.R Because there is no meaningful definition of a "channel"
X -
-. in a digital world, $ .
y O j -
- ԍTCI suggests that digital capacity be measured in increments of 6 MHz of bandwidth because it would ease
- comparison with the analog portion, as well as coincide with the definitions of "cable channel" and "television
{ O -
- channel" in the Commission's rules. TCI Comments at 12 (citing 47 U.S.C. 522(4) and 47 C.F.R. 73.681,
{ O - respectively). See also NCTA Reply Comments at 13. bandwidth remains the only reasonable measure of capacity on the digital
portion of an open video system.
X -
&A < 61. ` ` A switched video system design generally allows the operator to deliver only the
- programming and services requested by its subscribers from a local switching or control center.
-L In comparison, broadband cable systems deliver practically all of their video programming and
- services to subscribers continuously. With regard to switched video, Broadband Technologies
- states that its switching technology will eliminate the importance of a system's bandwidth, " |( ,-(-(ZZ2 "
X -
- referring to it as "essentially unlimited." W .
y O y - ԍBroadband Technologies Reply Comments at 1213.W The National League of Cities, however, cautions the
-0 Commission that infinite expansion of capacity may not be "economically reasonable or
- technologically feasible" due to the cost and physical limits of connecting additional switches and
- input ports, and therefore that no basis exists for relieving a switched digital open video system
X -
-j operator from the twothirds capacity setaside requirement. _ X .
y O - ԍNational League of Cities, et al. Comments at 24._ Moreover, General Instruments
- contends, and we agree, that a variety of technologies may be employed to provide switched
- digital video, some of which may have greater restraints than others. General Instruments points
- out that even the most serviceable of such technologies can be subject to severe interference or
- blocking during peak periods and other limitations. We thus determine that it is premature to
X 1 -
-[ make any broad findings with respect to switched digital video. P 1 .
y O
- ԍGeneral Instruments Reply Comments at 4.P We will therefore reexamine
- the impact of switched digital technology on the measurement of open video system capacity on
a casebycase basis.
X -
&P = 62. ` ` We anticipate that concerns regarding appropriate methods for soliciting carriage
- demand, calculating system capacity, and allocating channel capacity to video programming
- providers will be alleviated on open video systems with capacity significantly higher than carriage
-/ demand. Therefore, when an open video system operator can demonstrate that, due to the
-- technology employed in its system, the system's capacity is plentiful as compared to demand, we
X b - will consider waiving our rules concerning enrollment periods and allocation methods. 5 Xbx .
y O -
-J ԍU S West apparently would agree because it urges the Commission to adopt channel allocation regulations that
-Z contain a sunset provision that will become effective once such regulations are "no longer necessary." U S West
Comments at 10.5
X 4 - ` ` ,h(2)hhCounting the System Operator's OneThird Limit
X - ` ` ,hhh(a)Notice
X -
&~ > 63. ` ` In the Notice, we sought comment regarding the calculation of the onethird of
-[ capacity on which the open video system operator may select programming if carriage demand
- exceeds capacity. First, we tentatively concluded that channels devoted to PEG and mustcarry
X -
- should not count against a system operator's onethird cap. A .
{ O " - ԍNotice at para. 19.A We reasoned that neither the
- system operator nor its affiliates would "select" this programming, as that term is used in section
-\ 653(b)(1)(B) of the 1996 Act, because these obligations are established as a matter of law or
X R -
-L through negotiations with local franchising authorities. R*
.
{ O -' - ԍId. See Communications Act 611, 614, 615, 47 U.S.C. 531, 534, 535. In addition, we sought comment on " R) ,-(-(ZZ "
-Z whether a system operator should be deemed to "select" the video programming that is placed on
- shared channels when: (1) the system operator or its affiliated video programming provider is
- one of the video programming providers carrying such programming; or (2) the system operator
X - has delegated responsibility for implementing channel sharing to an independent entity. A .
{ O 4 - ԍNotice at para. 38.A
` ` ,hhh
X - ` ` ,hhh(b)Discussion
X a -
& ? 64. ` ` We adopt our proposal to exclude PEG and mustcarry channels from the onethird
- of system capacity on which an open video system operator or its affiliates may select
X 3 -
-- programming (when demand for capacity exceeds system capacity). 3Z .
y O > -
- ԍTelephone Joint Commenters Comments at 1718; Capital Cities/ABC Comments at 78; Golden Orange
- Broadcasting Comments at 2; NAB Comments at 34; NBC Comments at 9; NCTA Comments at 6; NYNEX
y O
-
- Comments at 19; City of Seattle Comments at 1; U S West Comments at 17; USTA Comments at 1819; Viacom
Comments at 12. In adopting this approach,
X -
- we endorse our reasoning in the Notice that an open video system operator does not select PEG
- and mustcarry channels because their carriage is mandated by law or established through
X
-
-? negotiations with local franchising authorities. 0
B .
{ O -
- ԍ Notice at para. 19. We do need not reach some commenters' contentions that this approach will enhance the
{ O - commercial feasibility of open video systems. See, e.g., ABC Comments at 7; City of Seattle Comments at 1.0 Broadcast television stations electing
-- retransmission consent, however, as well as any program services granted carriage in connection
-] with such consent, will count against an open video system operator's onethird limit, in
X
-
- accordance with the rules adopted herein. This approach recognizes that a television station,
-< electing retransmission consent rather than mustcarry status, is essentially electing to be treated
- as any other nonbroadcast video programming service, and negotiates with the open video system
operator over carriage on the open video system.
X 8 -
& @ 65. ` ` Section 653(b)(1)(B) limits the open video system operator to onethird of the
X ! -
- "activated channel capacity" when demand exceeds capacity. k ! .
y O p - ԍCommunications Act 653(b)(1)(B) , 47 U.S.C. 573(b)(1)(B).k We agree with telephone
- companies that the PEG and mustcarry channels should be included in total system capacity
X -
- when calculating the open video system operator's onethird limit. 0 .
.
y O -
- ԍTelephone Joint Commenters Comments at 1718; NYNEX Comments at 19. We also agree with broadcasters
-Y that counting mustcarry channels against an open video system operator's onethird cap could create incentives for
- an operator to hinder a television station's election of mustcarry over retransmission consent because this would
- preserve the operator's control over more channels. ABC Comments at 78; NAB Comments at 34; NBC Comments
at 9. 0 Our rules define "activated
- channels" on a cable system as: "[t]hose channels engineered at the headend of a cable system
-. for the provision of services generally available to residential subscribers of the cable system,
- regardless of whether such services actually are provided, including any channel designated for " * ,-(-(ZZp "
X -
- public, educational or governmental use." M .
y O y - ԍ47 C.F.R. 76.5(nn), 76.1506.M For example, on a system with 90 total channels,
- of which 15 are PEG and mustcarry channels, the open video system operator may select the
-Z programming on 30 channels when demand exceeds system capacity. These parties contend, and
- we agree, that channels on which PEG and mustcarry stations are carried qualify as
X - "activated." m X .
y O - ԍTelephone Joint Commenters Comments at 1718; NYNEX Comments at 19. m
X v -
& A 66. ` ` We disagree with NCTA that PEG and mustcarry channels should be deducted
- from the total amount of system capacity in calculating the onethird cap. NCTA argues that
-= excluding those channels would be more equitable to video programming providers because it
-L would cause all providers, including those affiliated with the system operator, to share equally
X -
- in the responsibility for these channels. A .
y O - ԍNCTA Reply Comments at 5.A As we have already observed, where demand exceeds
-[ system capacity, the open video system operator is entitled to select the programming on one
- third of the activated channel capacity; if the operator has not selected a particular programming
- service there is no statutory basis for counting the service against the operator's onethird limit.
- This approach is consistent with our cable "channel occupancy" (or "vertical ownership") rules,
-. that permit PEG and mustcarry channels to be included in total activated channel capacity for
-- purposes of calculating the percentage of activated channels that a cable operator may devote to
X y - affiliated programming. > yx .
y O - ԍ47 C.F.R. 76.504.>
X K -
& B 67. ` ` Viacom and U S West argue that channels on which shared programming is carried
- should not be counted against the onethird cap because such programming should not be deemed
- to be selected by the operator or its affiliate. They contend that, by definition, programming on
- shared channels would be carried on the system regardless of whether the operator or its affiliate
- elects to share the programming, because the program services would be delivered on behalf of
X -
- another video programming provider. z .
{ O - ԍViacom Comments at 16; U S West Comments at 16. See also NBC Comments at 9.z While we agree with U S West that channel sharing
- promotes efficiency on the system, we disagree that the open video system operator has not
-k "selected" the programming placed on shared channels. As long as the open video system
- operator or its affiliate has exercised the editorial discretion of deciding to include a program
- service in its package of offerings that are carried on its allocated channel capacity, the operator
X e - or its affiliate must be deemed to have selected the programming. < e .
y O $ - ԍNCTA Comments at 10.<
X 7 -
&n C 68. ` ` We do not believe that it is equitable to count a shared channel solely against the " 7 + *
,-(-(ZZ "
-> open video system operator's onethird limit, if one or more unaffiliated video programming
- providers has selected the programming service as well. Where a channel is shared by one or
- more unaffiliated video programming providers, we will assess a prorata share of the shared
-< channel against the open video system operator. For instance, if the open video system operator
- shares a channel with one unaffiliated video programming provider, onehalf of a channel will
- count against the capacity of the open video system operator's onethird limit; if the system
- operator shares a channel with three other video programming providers, it will be assessed only
-. onequarter of one channel. The approach we adopt for counting PEG, mustcarry and shared
- channels will provide an open video system operator with maximum flexibility to create and offer
a package of programming services that can viably compete with the incumbent cable operator.
X
- ` ` ,f. ` hAllocation of Capacity Among Video Programming Providers(#
X - ` ` ,h(1)hhGeneral Framework
X
- ` ` ,hhh(a)Notice
X { -
& D 69. ` ` We sought comment in the Notice generally on how capacity on an open video
-- system should be allocated among unaffiliated video programming providers. We asked whether
-< the allocation of channel capacity on an open video system should be left to the discretion of the
- operator, and if so, how unaffiliated video programming providers could be protected from
X ! - discrimination under such an approach. A ! .
{ O - ԍNotice at para. 24.A
X - ` ` ,hhh(b)Discussion
X -
& E 70. ` ` We believe that an open video system operator should be given the flexibility to
-L implement its own method for allocating capacity to unaffiliated video programming providers,
- subject to minimal guidelines ensuring that unaffiliated providers are treated in a non
-\ discriminatory fashion. The telephone companies legitimately note that open video system
X k -
-y operators will need to adapt their allocation method to myriad factors that may arise, } kZ .
y O v - ԍMFS Communications Comments at 23; NYNEX Comments at 8; USTA Comments at 1617.} such as
X T -
- the particular technology employed "T .
y O -
- ԍU S West Comments at 16. We note that when an open video system operator can demonstrate that, due to
- the technology employed in its open video system, the system's capacity is plentiful as compared to carriage demand,
- we will consider waiving our rules concerning enrollment of video programming providers and allocation of system
{ O G# - capacity. See infra Section III.C.1.e.(1). and the particular market to be served. < T .
y O $ - ԍNYNEX Comments at 8.< Pursuant to the
-j statute, however, the Commission must ensure that video programming providers are provided " = , d ,-(-(ZZ "
X -
-= nondiscriminatory access to open video systems. .
y O y -
- ԍAmerican Cable, et al. Comments at 10; Cablevision Systems/CCTA Comments at 1214; TCI Comments at
{ O A - 1314; NCTA Comments at 13. See also Rainbow Comments at 1417; In this regard, Rainbow calls for detailed
X -
-Z regulations, " .
y O -
-< ԍFor example, Rainbow suggests that it will be necessary to allow all video programming providers to play a
-y role in the process. Rainbow Comments at 14. Rainbow also urges the Commission to adopt regulations that
-- recognize that an open video system operator may forge relationships with certain programming providers that
- technically fall outside the definition of "affiliation," but nevertheless create economic incentives for the operator
-j to favor that programmer in the allocation of capacity. Rainbow describes alleged incidents where telephone
- companies intending to establish video dialtone systems hindered the ability of Rainbow to obtain capacity on their
{ O l
-
-= systems. Id. at 1517. See also Cablevision Systems/CCTA Comments at 1214. As note above, we sought
- comment on the appropriate standard for determining when a video programming provider is "affiliated" with an
{ O - open video system operator in the Cable Reform Proceeding, and invite comments on that issue in that proceeding. while the telephone companies urge the Commission to merely adopt a general rule
X -
- prohibiting discrimination.
.
y O y -
- ԍUSTA Comments at 16; NYNEX Comments at 8; Broadband Technologies Reply Comments at 10; MFS
- Communications Reply Comments at ii. In particular, we disagree with arguments that the dispute resolution process
- alone can fully protect unaffiliated video programming providers from discrimination because: (1) some video
-[ programming providers may be unable to afford the costs associated with pursuing a complaint; and (2) delay
- resulting from the process could hamper an aggrieved video programming provider's ability to compete since its
-j access to the system could be delayed for up to six months and possibly even longer if the open video system
{ O ) -
- operator decides to appeal. See MFS Communications Comments at 23; NYNEX Comments at 78; U S West
y O -
- Comments at 1517; USTA Comments at 1617; NBC Comments at 9 (urging that system operators be permitted
to determine this alone, subject to contractual obligations with program producers); UTC Comments at 4. We think that extensive rules regarding the allocation of channels
-Z and the administration of the system by the open video system operator will impose inefficiencies
- on the operator without necessarily precluding discrimination. We believe that the approach we
describe below strikes the appropriate balance between the two views.
X _ - ` ` ,h(2)hhAllocation Methodology
X 1 - ` ` ,hhh(a)Notice
X
-
& F 71. ` ` In the Notice, we sought comment on how an open video system operator should
- allocate the twothirds of channel capacity that must contain programming selected by unaffiliated
- video programming providers (where carriage demand exceeds the system's capacity). We also
- sought comment on establishing a range of acceptable options for allocating capacity, including
X
- firstcome firstserved, lottery, and proportional allotment. A
.
{ O $" - ԍNotice at para. 24.A
X } - ` ` ,hhh(b)Discussion
X Q -
& G 72. ` ` The allocation of channel capacity determines carriage on an open video system " Q- Z ,-(-(ZZ+ "
X -
- and is therefore subject to the statute's nondiscrimination requirements. j .
y O y - ԍCommunications Act 653(b)(1)(A), 47 U.S.C. 573(b)(1)(A).j We require that the
- twothirds of total capacity that must be allocated to unaffiliated video programming providers,
- when demand exceeds system capacity, must be allocated in an open, fair, nondiscriminatory
- manner. The allocation process must be verifiable as well as insulated from any bias of the open
- video system operator. In the event that an aggrieved video programming provider files a
-L complaint with the Commission alleging discrimination in the allocation process, the burden of
- proving that the particular allocation method employed was not discriminatory will rest with the
- open video system operator. We believe that this burden of proof is reasonable, given that the
- open video system operator is responsible for ensuring a nondiscriminatory allocation process
X 1 - and possesses the relevant information regarding the allocation method. _ 1X .
{ O : - ԍSee supra Section III.B. (Certification Process)._
X
-
& H 73. ` ` Other than any general limitations addressed in Section III.D. concerning rates,
-Z terms and conditions of carriage, we do not adopt any specific requirements governing the length
- of a video programming provider's lease of allocated capacity. We believe these matters are best
left to the involved parties.
X -
& I 74. ` ` We disagree with NCTA that a federal standard detailing a specific manner in
- which open video system capacity must be allocated is necessary so video programming providers
- will not have to expend the resources necessary to learn the allocation procedures in each
X K -
-l jurisdiction where they seek capacity. < K .
y O - ԍNCTA Comments at 13.< We believe that it is reasonable to expect video
-K programming providers to find out about the enrollment and allocation procedures for a particular
-K open video system operator. Moreover, we believe that adopting required enrollment procedures
-< would unreasonably restrict flexibility and prevent open video system operators from responding
to the particular conditions of their markets.
X -
&P J 75. ` ` We reject Alliance for Community Media's suggestion that an open video system
- operator be required to hold back 20% of the channel capacity from its initial allocation and then
- award these channels on an a la carte basis to all unaffiliated video programming providers. The
-0 Alliance for Community Media argues that this approach would ensure that small video
- programming providers have an opportunity to obtain their desired capacity, thereby enhancing
X N -
- program diversity on the system. _ Nz .
y O y" - ԍAlliance for Community Media, et al. Comments at 2829._ We believe that this approach unnecessarily restricts the
- ability of an open video system operator to allocate capacity in accordance with existing demand
-M for carriage. In addition, while we seek to encourage small video programming providers to
- obtain access on open video systems, we believe that their interests are adequately protected under
our rules set forth herein. " .
,-(-(ZZZ "
X - ` ` ,h(3)hhType of Capacity Analog/Digital
X - ` ` ,hhh(a)Notice
X -
& K 76. ` ` In the Notice, we sought comment on whether the allocation of specific types of
-{ open video system capacity could constitute impermissible discrimination under Section
-. 653(b)(1)(A). In particular, we asked whether it would be permissible for an operator to assign
- all of a system's analog capacity to itself or its affiliate. In this regard, we sought comment
- generally on the current availability of digital technology, and any differences that may exist
- between analog and digital capacity. If analog and digital capacity currently are not
- interchangeable "products," we sought comment on whether it would be appropriate to treat
X
- analog and digital channels independently for allocation purposes. A
.
{ O - ԍNotice at para. 21.A
X - ` ` ,hhh(b)Discussion
X
-
&o L 77. ` ` Based upon the record evidence, we find that analog and digital portions of an
- open video system must be treated independently for purposes of allocating system capacity to
X -
-i video programming providers. n XZ .
y O -
- ԍAlliance for Community Media, et al. Comments at 2930; Continental Comments at 14; HBO Comments at
- 67; NCTA Comments at 1112; National League of Cities, et al. Comments at 14; TCI Comments at 12; Viacom
Comments at 10 (all supporting treating analog and digital capacities separately).n We believe that this finding is justified by various technical and
-\ economic factors demonstrating that, for the foreseeable future, analog capacity and digital
X Q - capacity are not interchangeable. "Qz .
{ O | -
-; ԍSee, e.g., CATA Comments at 4; Alliance for Community Media, et al. Reply Comments at 4 ("[P]erhaps for
-- the next two decades, the primary mode of video programming delivery and receipt will be in analog format . . .
-Z [because] . . . both providers of programming and consumers do not, and for the foreseeable future will not, have
the necessary equipment to provide and receive programming digitally.").
X # -
& M 78. ` ` First, the embedded equipment base is analog both the equipment used by
-k programmers and distributors to create, process, and transmit the signals, and the customer
-< premises equipment ("CPE"), such as television sets and video cassette recorders ("VCRs") used
-] by subscribers to receive and display the signals. Such analog equipment is widely and
competitively available in the marketplace.
X -
& N 79. ` ` By contrast, digital signal delivery technologies are rapidly and continuously
- evolving. The cost and availability of digital equipment is much less certain than that of analog
-. equipment. In addition, as noted by Viacom and numerous cable operators, specialized digital
X T -
- processing equipment is not currently available. Td .
y O i& -
- ԍViacom Comments at 10; American Cable, et al. Comments at 1819; CATA Comments at 4; NCTA
Comments at 1112; TCI Comments at 12. For instance, it appears from the record that " T/ ,-(-(ZZ "
-j the cost of digital settop boxes is currently between $300 to $400, or approximately three times
X -
-= more than the cost of similar analog settop boxes. .
y O b -
-Z ԍViacom Comments at 10; Michigan Cities Reply Comments at 11 (asserting a price range of between $500
and $1000 for digital converter boxes). The record also demonstrates numerous
- uncertainties with respect to digital capacity: (1) when the cost of digital settop boxes will
- decrease to affordable levels; and (2) when such boxes will become available on a largescale
X - basis. " .
y O u -
-J ԍCablevision Systems/CCTA Comments at 1112; TCI Comments at 12; HBO Comments at 46; and Comcast,
{ O = -
-= et al. Comments at 6. See alsoĠAlliance for Community Media, et al. Comments at 30 (urging that capacity
-, measurement be based on the "least expansive method," in order to encourage system operators to expand capacity
through infrastructure or technical developments); Michigan Cities Reply Comments at 910. As U S West states:
0*0 X [V]ideo programmers do not view analog and digital capacity as substitutable given the
0* present state of technology [citing its Omaha video dialtone trial, in which analog capacity
0* was oversubscribed and had to be allocated while digital capacity was freely available
0*0 and "barely used"]. At some point in the future, when digital standards are established
0* and incorporated into settops and other peripheral devices, digital programming will most
0* likely replace analog programming and there will be no need to distinguish between the
X
- two for capacity purposes. @
.
y O - ԍU S West Comments at 10.@ (#
X -
&A O 80. ` ` Given these significant differences, we find that it would constitute impermissible
- discrimination under Section 653 for an open video system operator to treat its analog and digital
- capacities as fungible for allocation purposes. For instance, assuming a system with 100 analog
-l channels and capacity for 200 digital channels, an open video system operator would be
-k prohibited from taking the 100 analog channels as the onethird of capacity on which it may
- select programming (when carriage demand exceeds system capacity), and relegating all other
-K video programming providers seeking analog capacity to the digital channels. Rather, the system
- operator must treat the analog and digital capacity separately. If analog demand exceeds analog
- capacity, the operator would be limited to selecting the programming on onethird of the analog
- channels; similarly, if the digital capacity were oversubscribed, the operator would be limited
- to selecting the programming on onethird of the digital capacity. We agree with U S West that
- the Commission should revisit this distinction if and when analog and digital capacities become
X - relatively interchangeable. A .
{ O ! - ԍId. at 1516.A
X | -
& P 81. ` ` The Telephone Joint Commenters do not argue that analog and digital capacity are
X e -
-/ fungible. e,
.
y O B& -
- ԍIndeed, if they were fungible, the Telephone Joint Commenters would not be harmed by our approach, since
they would be entitled to select the programming on onethird of what would be interchangeable capacity. Instead, the Telephone Joint Commenters contend that the 1996 Act makes no " e0 ,-(-(ZZ "
X -
-K distinction between analog and digital capacity, U .
y O y - ԍTelephone Joint Commenters Comments at 1819.U and that "[open video system] operators must
-< be given flexibility to select their channels from the total base of channels to the extent necessary
-> to provide programming packages that can compete with those offered by incumbent cable
X -
- operators." 8 X .
{ O - ԍId. at 19.8 In making this argument, the Telephone Joint Commenters essentially acknowledge
-[ that analog and digital capacities are not fungible, or there would be no need for them to argue
- that they must occupy the analog channels in order to compete with the incumbent cable operator.
-. We view our obligations under the statute to ensure nondiscriminatory access to encompass
- affording actual access to subscribers by video programming providers, and not access that is not
-L technologically possible. To do otherwise is to place the challenge of digital delivery unfairly,
- we believe, on those not affiliated with the open video system operator. While we recognize the
- telephone companies' concern, we believe that there are other ways to ensure that an open video
system can assemble a competitive product that would not entail discriminatory conduct
- (e.g., not counting PEG and mustcarry channels against the onethird limit; making use of
channel sharing and joint marketing opportunities).
X
- ` ` ,h(4)hhAmounts of Capacity
X y - ` ` ,hhh(a)Notice
X M -
& Q 82. ` ` As noted, Section 653(b)(1)(B) of the Communications Act provides that, "if
- demand exceeds the channel capacity of the open video system," the Commission's regulations
-! must prohibit an open video system operator and its affiliates from "selecting the video
-[ programming services for carriage on more than onethird of the activated channel capacity on
X -
- such system . . . ." j .
y O - ԍCommunications Act 653(b)(1)(B), 47 U.S.C. 573(b)(1)(B).j In the Notice, we interpreted this provision to mean that, so long as
- carriage demand does not exceed system capacity (after video programming providers have been
- allowed a reasonable opportunity to seek carriage), there will be no limit on the amount of
X - capacity on which an open video system operator and its affiliates may select programming. A z .
{ O - ԍNotice at para. 16.A
X -
&Q R 83. ` ` Further, we sought comment in the Notice on whether the Commission should
- allow an open video system operator to prescribe minimum or maximum amounts of capacity that
-/ an unaffiliated programming provider may obtain. For example, we sought comment on the
- situation where carriage demand exceeds the system's capacity, but only the open video system
- operator and one other video programming provider have acquired capacity on the system. We
-[ asked whether it would be appropriate to limit the open video system operator and its affiliates
- to selecting programming on onethird of the system while allowing the unaffiliated video " 1 ,-(-(ZZZ "
X - programming provider to select the programming on the remaining twothirds of the system. > .
{ O y - ԍId. at para. 20.>
X - ` ` ,hhh(b)Discussion
X -
&~ S 84. ` ` As an initial matter, we affirm, and no commenter disputed, our conclusion that
- a system operator and its affiliates may select the programming on more than onethird of the
X x -
-K system's capacity if carriage demand does not exceed system capacity. ` ZxZ .
{ O -
- ԍSee, e.g., National League of Cities, et al. Comments at 2324; Alliance for Community Media, et al.
- Comments at 2829; City of Seattle Comments at 3; NCTA Comments at 16; MFS Communications Comments at
2021; HBO Comments at 78; NYNEX Comments at 89; USTA Comments at 18.` In these situations, the
- carriage requests of all unaffiliated video programming providers will be fulfilled, and the system
- operator will be permitted to select the programming on the remaining capacity, under the
X 3 -
- regulations adopted in this Order. 3| .
{ O ` - ԍSee infra Section III.C.1.f.(5) (Subsequent Changes in Capacity or Carriage Demand). This approach is consistent with the plain language of the
- statute and comports with Congress' intent to encourage investment in new technologies by not
X
- requiring usable capacity to lie fallow. G
.
y O - ԍConference Report at 172.G
X - ` ` ,hhh(i)Minimum Channel Allocations
X
-
& T 85. ` ` We believe it is reasonable for open video system operators to require video
- programming providers to request carriage in no less than onechannel increments. A system
X } -
- operator, therefore, could prohibit the purchase of "parttime" programming capacity. X } .
y O - ԍTelephone Joint Commenters Reply Comments at 15.X We
-i believe that such a restriction is just, reasonable, and not unjustly or unreasonably discriminatory
- under the statute because of the expense and administrative and technical burdens of
X 8 - accommodating parttime programming. D 8.
.
y O -
-. ԍCommunications Act 653(b)(1)(A), 47 U.S.C. 573(b)(1)(A). We also note American Cable, et al.'s
- argument that, given the unavoidable costs and time involved in pursuing a complaint of discrimination at the
-, Commission, a lack of Commission standards in this area could create a substantial if not "fatal" economic hardship
- for small programmers. However, we cannot make such a finding based upon the current record. American Cable,
et al. Comments at 1718.D
X
-
&# U 86. ` ` We disagree with those commenters which contend that, since the Commission's
- cable leased access rules require that channels be made available in increments as short as 30
X -
-< minutes, A .
y O k& - ԍ47 C.F.R. 76.971(g).A parity and program diversity concerns demand that open video system operators face " 2 n ,-(-(ZZ "
X -
- similar requirements. .
y O y -
- ԍNCTA Comments at 16; American Cable, et al. Comments at 1718; Michigan Cities Reply Comments at 12
(urging increments as short as 15 minutes). First, under our leased access rules, cable operators must accommodate
X -
-= parttime programmers on only a small portion of their capacity. .
y O -
- ԍCommunications Act 612(b)(1)(D), 47 U.S.C. 532(b)(1)(D) (a cable system of fewer than 36 channels
-J is not required to designate channels for leased access); 612(b)(1)(A), 47 U.S.C. 532(b)(1)(A) (a cable system of 36
- 54 channels must designate 10% of the channels for leased access); 612(b)(1)(B)(C), 47 U.S.C. 532(b)(1)(B)(C)
(a cable system of 55 or more channels must designate 15% of the channel for leased access). By contrast, an open video
- system operator may be required to lease twothirds of its capacity to parttime unaffiliated video
- programming providers. Second, in enacting cable leased access, Congress was addressing the
X -
- cable operator's editorial control over virtually its entire system. | .
y O ] - ԍCommunications Act 612(a), 612(b)(1), 47 U.S.C. 532(a), 532(b)(1).| We believe that while the
- goals of the cable leased access requirements may be similar to those here, the methods to
-[ achieve those goals are different. Open video systems, through the onethird limitation on the
- open video system operator, are intended to attract multiple video programming providers, that
can also accommodate the needs of parttime programmers.
X -
& V 87. ` ` In addition, however, open video system operators will not be permitted to require
- video programming providers to obtain capacity in increments of more than one channel. We
- also find that this restriction is just, reasonable, and not unjustly or unreasonably discriminatory
- under the statute because allowing an open video system operator to require video programming
- providers to obtain multiple channels, such as fivechannel increments, would unfairly
-L disadvantage smaller video programming providers which do not have sufficient programming
- to fill multiple channels. We think that such a condition of carriage would be unreasonable and
X y -
-Z would contravene the statute's nondiscrimination prohibition. j y .
y O - ԍCommunications Act 653(b)(1)(A), 47 U.S.C. 573(b)(1)(A).j As discussed more fully below,
- however, an open video system operator may establish reasonable levels of differentiation in
- carriage rates, such as volume discounts, provided that the bases for differentiation are not unjust
X 4 - or unreasonable. H 4(
.
{ O
- ԍSee infra Section III.D.2.H
X - ` ` ,hhh(ii)Maximum Channel Allocations
X -
X -
& W 88. ` ` We conclude that open video system operators should be permitted to limit
- unaffiliated programming providers to selecting the programming for carriage on no more
- capacity than the amount obtained by the open video system operator or its affiliate. We
- therefore disagree with the argument of certain cable operators that, under Section 653(b)(1)(B),
- if the demand for carriage exceeds capacity with only a single unaffiliated video programming
- provider and the open video system operator requesting capacity, the unaffiliated programming
- provider would be entitled to twothirds of the capacity while the open video system operator " P3 ,-(-(ZZ "
X -
-y would be restricted to onethird. .
y O y -
- ԍAmerican Cable, et al. Comments at 1718; Cablevision Systems/CCTA Comments at 1011; TCI Comments
y O A - at 12; NCTA Comments at 1415; Adelphia/Suburban Cable Reply Comments at 4. First, we believe that Section 653(b)(1)(B) contemplates the
- presence of robust demand for channel capacity by multiple video programming providers, such
- that the system capacity would not be dominated by a single programming provider. Moreover,
- we believe that such a result would discourage the deployment of open video systems by
- permitting an unaffiliated video programming provider to dominate the selection of programming
-< on the system. Given that the financial risk of constructing the open video system rests primarily
- on the open video system operator, we do not believe that Section 653(b)(1)(B) requires that the
- open video system operator entrust the success or failure of its system to an entity with limited
X H - risk in building the infrastructure. "H .
{ O -
- ԍSee U S West Comments at 14 (stating that a local exchange carrier will have little incentive to invest in the
- construction of an open video system for the dominant use of an unaffiliated video programming provider);
y O
-
- Telephone Joint Commenters Reply Comments at 56; National League of Cities, et al. Comments at 1415; NYNEX
Comments at 8.
X -
& X 89. ` ` For the above reasons, we find that a term or condition of carriage limiting
-K unaffiliated programming providers to selecting the programming on no more of the capacity than
- the open video system operator or its affiliate would not violate the Commission's rules, and
- would be just, reasonable, and not unjustly or unreasonably discriminatory under Section
X - 653(b)(1)(A).
.
{ O y - ԍCommunications Act 653(b)(1)(A), 47 U.S.C. 573(b)(1)(A). See infra Section III.D.
X -
& Y 90. ` ` We also disagree with Adelphia/Suburban Cable that Section 653(b)(1)(B)'s one
- third limit is actually a maximum rather than a minimum, and that the statute does not require
- the Commission to allow an open video system operator and its affiliates to occupy onethird of
- the channel capacity in all cases. For instance, assume a 100channel system on which the open
-z video system operator itself seeks as much capacity as possible, and four unaffiliated video
-j programming providers each seek 25 channels. Under this scenario, Adelphia/Suburban Cable
- argues that all five programmers should receive 20 channels, rather than allowing the system
- operator to obtain onethird of the system's capacity (33 channels) while requiring that the four
- unaffiliated video programming providers divide the remaining twothirds of capacity (67
- channels), as will occur under our interpretation of Section 653(b)(1)(B). Adelphia/Suburban
- Cable contends that absent this interpretation, the system operator will have no incentive to
X -
- construct additional capacity to meet demand. V .
y O " - ԍAdelphia/Suburban Cable Reply Comments at 34.V We find that nothing in the plain language of
- Section 653(b)(1)(B) or its legislative history supports Adelphia/Suburban Cable's interpretation.
- We believe that Adelphia/Suburban's approach would contravene the statute's intent that an open
-k video system operator and its affiliates be afforded onethird of the system's capacity when
- carriage demand exceeds the system's capacity. We believe that Adelphia/Suburban Cable's " 7 4 ,
,-(-(ZZ "
-< method would unduly restrict an open video system operator's ability to compete, and undermine
Congressional intent by discouraging the deployment of open video systems.
X - ` ` ,h(5) hhSubsequent Changes in Capacity or Carriage Demand(#h
X - ` ` ,hhh(a)Notice
X a -
& Z 91. ` ` In the Notice, we sought comment on how additional capacity that becomes
- available on an open video system after the initial allocation should be distributed. We also
-. sought comment on what rules should apply when initial demand for carriage does not exceed
-j system capacity, but subsequent demand triggers Section 653(b)(1)(B)'s onethird limit. In this
- context, we sought comment on whether it would be permissible for an open video system
- operator to hold periodic enrollment periods during which capacity would be reallocated, rather
X - than requiring such reallocation immediately. E .
{ O R - ԍNotice at paras. 2527.E
X
- ` ` ,hhh(b)Discussion
X -
& [ 92. ` ` To ensure that open video systems remain open after the initial allocation of
- channel capacity, we will require an open video system operator to allocate open capacity, if any
X Q -
-Z is available, at least every three years, beginning three years from the date service commenced. QZ .
{ O \ -
-i ԍSee MFS Communications Comments at 2021 (three years); U S West Comments at 12 (three years as an
absolute minimum, five years as more reasonable).
-Z By "open capacity" we mean channel capacity that has become available during the course of the
- year, whether due to a system upgrade, the expiration of video programming providers' carriage
- contracts, or for any other reason. Capacity held by the open video system operator or its
- affiliate above the onethird of the system's activated channel capacity will be considered "open
X -
- capacity." .
y O C -
- ԍViacom suggests that, when capacity becomes available on an open video system, the open video system
- operator should be required to make this new capacity available to unaffiliated providers "on a reasonable basis," such
-Y as by limiting the affiliated provider "to no more than onethird of any new capacity if oversubscription recurs" and
- allocating the remaining twothirds of new capacity to unaffiliated video programming providers. Viacom Comments
- at 1112. We reject this approach, however, because, if carriage demand exceeded system capacity when capacity
-y was initially allocated (or when open capacity was previously allocated) and the affiliated video programming
-
provider obtained its maximum permitted onethird of system capacity, it would allow the open video system operator
-, to select the programming on more than onethird of the system's capacity even though carriage demand to exceed
capacity. Such an approach thus may contravene Section 653(b)(1)(B) of the statute. For example, if the demand for carriage did not exceed system capacity when
- capacity was initially allocated, and the open video system operator was able to select the
- programming on 50% of the system's activated channel capacity, the 17% of capacity on which
- the open video system operator is providing programming above the onethird limit (50% 33%) " 5 ,-(-(ZZ "
X - will be considered "open capacity" for purposes of the allocation process. j .
y O y - ԍCommunications Act 653(b)(1)(B), 47 U.S.C. 573(b)(1)(B).j
X -
&A \ 93. ` ` We note that capacity on an open video system may become available due to the
- efficiencies of channel sharing, under which a video programming service to be offered by
-j multiple video programming providers is placed on a single channel and shared by the multiple
-l providers. We believe that all existing video programming providers should share in the
- efficiencies of channel sharing. Thus, additional capacity resulting from channel sharing will not
- count as "open" capacity and should be allocated through an open, fair, nondiscriminatory
- process among existing video programming providers as soon as practicable after channel sharing
X 1 - is implemented. $1X .
y O : -
-J ԍAs discussed above, shared channels will count against the onethird limit on capacity for which an open video
y O
-
- system operator may select the programming, when demand exceeds system capacity, on a prorata basis to the extent
{ O
-
- that the affiliated video programming provider is one of the providers carrying the shared programming service. See
{ O - infra Section III.C.1.e(2).
X
-
& ] 94. ` ` In order to assess the demand for additional capacity, we will require open video
X
-
-i system operators to maintain a list of bona fide video programming providers that have requested
- carriage or additional capacity during the previous three year period. Information regarding how
- a video programming provider should apply for carriage and the closing date for that three year
- period's allocation must be made available to potential video programming providers upon
-i request. An operator should establish a closing date by which video programming providers may
- seek to lease additional capacity that reasonably relates to the time when programming services
- to be carried on the additional capacity will first be provided to subscribers. The open video
- system operator need not file a new Notice of Intent with the Commission, nor otherwise solicit
- additional demand, after the initial allocation of capacity has been completed. An open video
- system operator will not be required to follow these rules if there is no open capacity to be
allocated.
X -
& ^ 95. ` ` Once the open video system operator has determined that additional capacity is
- available and has assessed carriage demand, it must allocate the open capacity at least once every
- three years through an open, fair, nondiscriminatory process. Consideration should be given to
- all video programming providers that properly apply for carriage prior to the closing date in that
- three year period's allocation of open capacity. Additional mustcarry obligations must be
X g -
-j accommodated in accordance with our open video system mustcarry rules. I gD .
{ O \" - ԍSee 47 C.F.R. 76.1506.I Additional PEG
- access obligations must be accommodated in accordance with the regulations adopted in this
X 9 -
- Order. H 9 .
{ O % - ԍSee infra Section III.E.1.H In the absence of additional PEG access obligations, the open video system operator
-M may use any capacity that becomes available during the remainder of the current three year " " 6 h ,-(-(ZZ " allocation cycle.
X -
&} _ 96. ` ` After careful consideration of the record, we decline to require periodic enrollment
- periods at which time the total channel capacity of an open video system would be subject to re
X -
- allocation. " .
y O -
- ԍIn light of our finding concerning a rolling, three year allocation cycle, we do not reach commenters'
- suggestions that the interval between periodic enrollment periods, if such enrollment periods were required, should
{ O -
- be longer than three years. See HBO Comments at 78 (five years); NYNEX Comments at 89 (five years, subject
to programming contracts). That is, so long as an unaffiliated video programming provider continues to meet
- the conditions of carriage, it may continue to use its initially allocated capacity until its carriage
X v -
- contract expires, instead of facing the potential of periodic displacement. v .
y O -
-h ԍThis approach is consistent with certain commenters' argument that a video programming provider should not
-= have to relinquish capacity after activation of the system because this could require abrogating programming
- contracts. Viacom Comments at 1112; USTA Comments at 18; Telephone Joint Commenters Comments at 21.
y O 1 - ķ We believe that this
- approach will provide stability, certainty and flexibility to the platform. For subscribers, this
- approach will mean less confusion and less disruption of their channel lineups; for video
-. programming providers, this approach will provide additional incentive and ability to invest in
-= and market their services; and for open video system operators, this approach will provide the
- flexibility to negotiate the length of carriage arrangements based on their business judgment and
X
-
- offer a more stable product to consumers. While we acknowledge the National League of Cities,
- et al.'s concern that an open video system operator could limit subsequent access to the system
- by negotiating for longterm carriage contracts, we believe that, as of now, the above benefits
X
-
-- outweigh the speculative harm. l
.
{ O - ԍSee National League of Cities, et al. Reply Comments at 2526.l If it becomes apparent that longterm contracts are being used
in a discriminatory or anticompetitive manner, we may reexamine our conclusion.
X b -
& ` 97. ` ` We reject suggestions that an open video system operator should have to reallocate
X K -
- open capacity in response to subsequent carriage requests in less than three years. K,
.
y O ( -
-< ԍNational League of Cities, et al. Comments at 23 (3060 days); Adelphia/Suburban Cable Reply Comments
-Y at 7 (urging a period of 90 days, given a cable operator's duty to discontinue carriage of programming to make room
-x for a new mustcarry television broadcast station within this time frame); NCTA Comments at 16 (stating that a
- system operator should be required to allocated capacity above the onethird limit, or add capacity to meet additional
demand, within one year); Alliance for Community Media, et al. Comments at 2829 (same). An open
- video system operator must be able to accommodate subsequent demand without causing
X -
- unreasonable disruption to the system and confusion for subscribers. .
{ O # -
- ԍSee generally, Telephone Joint Commenters Comments at 21; MFS Communications Comments at 23; Viacom
Comments at 12. Specifically, we reject
-- the approach suggested by National League of Cities, et al., that would require a system operator
- or its affiliates to relinquish capacity within 3060 days of a request for demand until the two
-< thirds of system capacity allocable to unaffiliated programming providers is completely occupied. " 7 6 ,-(-(ZZ "
-i According to National League of Cities, et al., this approach would preserve access to open video
- systems and would help prevent channels from going unused or being "locked up" by affiliated
X -
-\ video programming providers. \ .
y O K - ԍNational League of Cities, et al. Comments at 2324.\ We disagree. Requiring the affiliated video programming
- provider to relinquish capacity within 3060 days of receiving additional requests for carriage
-. unduly compromises the stability of the affiliated provider's programming package, and would
undermine its ability to market its offerings.
X _ - ` ` ,h(6) hhChannel Positioning
X 1 - ` ` ,hhh(a)Notice
X
-
&" a 98. ` ` In the Notice, we sought comment on whether the channel positions to which video
- programming providers' program services are assigned should be subject to Section
- 653(b)(1)(A)'s nondiscrimination requirements. In this regard, we asked whether it would
-[ violate Section 653 for an open video system operator to reserve the lower numbered channels
-- for itself or its affiliates, since these channels may be considered more valuable to the extent they
- are more accessible to consumers. We further asked for information on any technology, such as
X } - "channel mapping," that could resolve any perceived problems in this area. A }X .
{ O - ԍNotice at para. 22.A
X O - ` ` ,hhh(b)Discussion
X # -
& b 99. ` ` Channel positioning is an important part of allocating channel capacity to video
-L programming providers, and therefore we will require an open video system operator to assign
X -
- channel positions in a manner that is not unjustly or unreasonably discriminatory. Z Z .
{ O -
-; ԍSee, e.g., American Cable, et al. Comments at 1920; ABC Comments at 20; Community Broadcasters Assoc.
-- Comments at 34; State of California Comments at 8; NCTA Comments at 11; National League of Cities, et al.
Comments at 15; Telephone Joint Commenters Comments at 20.Z Certain
- channels, such as the lowernumbered channels, may be considered more valuable because they
- may be more accessible to consumers who scroll through the channels in sequence. In
-. determining whether an open video system operator has assigned channel positions in a non
- discriminatory manner, we will weigh whether the operator has implemented any technology that
-. substantially alleviates concerns in this area, such as channel mapping, as well as the process
X k -
-M employed by the operator to allocate channel numbers. 6 k .
y O (# -
- ԍChannel numbers are normally associated with specific frequencies used to transmit video programming.
- Channel mapping alters this relationship by displaying on specialized equipment, usually a settop box, a different
-Z channel number than the number normally associated with the frequencies used to deliver the programming. For
- example, channel mapping settops can display to the subscriber channel number 2, which is usually associated with
-; the video frequency 51.25 MHz, while the video programming being shown is actually transmitted on the frequency
y O ' - 83.25 MHz, which is the frequency usually associated with channel number 6.#
] \ P 6G ;
P# 6 We also find that, given Section " k8 ,-(-(ZZ "
-\ 653(b)(1)(A)'s specific exemption of mustcarry and PEG from its general nondiscrimination
X -
-/ requirements, j .
y O b - ԍCommunications Act 653(c)(1)(B), 47 U.S.C. 573(c)(1)(B).j an open video system operator must comply with the channel positioning
X - requirements contained in those rules. + X .
y O -
-J ԍNBC Comments at 5, 1011; Fujitsu Ex Parte Comments at 3; ABC Comments at 5 (noting the Commission's
y O - past recognition of the importance of channel positioning to broadcasters, 47 C.F.R. 76.56(d), 76.57(a)).+
X - ` ` ,g. hChannel Sharing
X v - ` ` ,h(1) hh Notice
X H -
& c 100. ` ` New Section 653(b)(1)(C) of the Communications Act requires that the
-j Commission's regulations permit an open video system operator "to carry on only one channel
- any video programming service that is offered by more than one video programming provider,
-- including the local exchange carrier's video programming affiliate, provided that subscribers have
X
-
-- ready and immediate access to any such video programming service." p
.
y O M - ԍCommunications Act 653(b)(1)(C), 47 U.S.C. 573(b)(1)(C).p The Conference Report
-k states that this provision was intended "to permit an open video system operator to require
X - channel sharing." A @ .
y O - ԍConference Report at 177.A
X -
&P d 101. ` ` We tentatively concluded in the Notice that open video system operators should
- be permitted to choose how and which programming will be carried on shared channels, and
X d -
-Z sought comment on this conclusion. E d .
{ O - ԍNotice at paras. 3637.E Further, we sought comment on whether the Commission
-k should prescribe any terms under which channels may be shared, and in particular, whether
- channel sharing is subject to the 1996 Act's nondiscrimination requirements. In this regard, we
- sought information on any differences that may exist between shared and nonshared channels
X -
- that might make nonshared channels more attractive to video programming providers. > b .
{ O - ԍId. at para. 39.> We also
- sought comment on the meaning of the phrase "ready and immediate access" as used in the
X -
-. statutory provision, such as whether channel sharing must be "transparent" to consumers. >
.
{ O " - ԍId. at para. 40.>
-j Finally, we tentatively concluded that the rights of programming vendors and licensors should
-K be preserved by requiring each video programming provider seeking to offer programming carried
X - on a shared channel to first obtain separate permission from the program service. > .
{ O & - ԍId. at para. 41.> " 9 ,-(-(ZZ "
X - ` ` ,h(2)hh Discussion
X -
& e 102. ` ` As an initial matter, we believe that the statute permits an open video system
- operator to decide whether to create shared channels for some or all of the duplicative
X -
- programming on its system. .
{ O -
- ԍSee, e.g., American Cable, et al. Comments at 1011 (stating that a system operator must be prevented from
favoring any one video programming provider). We therefore affirm our tentative conclusion that an open video
X -
-Z system operator may implement and administer the channel sharing process. e " .
{ O ` - ԍSee Telephone Joint Commenters Reply Comments at 1314.e We disagree with
X v -
-- NCTA's argument that a system operator should be required to employ an independent entity, < v .
y O - ԍNCTA Comments at 10.<
X _ -
-Z or to create a committee comprised of the video programming providers on the system, R _D .
y O T -
-. ԍRainbow Comments at 2022; American Cable, et al. Comments at 1011; Cablevision Systems/CCTA
-w Comments at 14; MPAA Comments at 7. We therefore do not reach the arguments of certain parties that even the
- appointment of an independent entity by the system operator would provide no safe harbor for unaffiliated
-x programmers because the influence of the system operator would still pervade. Group W Comments at 5; NCTA
Comments at 10; National League of Cities, et al. Comments at 26.R in order
-K to administer channel sharing. We believe that an operator of an open video system should have
X 1 - the flexibility to address technical and other factors that may affect channel sharing. 1
.
y O -
- ԍTelephone Joint Commenters Comments at 2425; NYNEX Comments at 15; U S West Comments at 14. We
- also believe that this approach addresses the concerns of Golden Orange Broadcasting, which contends that
- programming carried on shared channels will be more accessible to consumers, and that broadcasters therefore must
- have the right to insist on placement on a shared channel. As stated above, channel sharing may be subject to
-. negotiations between video programming providers and programming vendors. Golden Orange Broadcasting
Comments at 34.
X
-
& f 103. ` ` The National League of Cities, et al. expresses concern that, if an open video
- system operator selects the programming placed on shared channels, in advance of video
- programming providers' decisions to carry such programming, the operator will be exercising
-l editorial control over unaffiliated programming providers' offerings, and therefore will be
X
-
-z engaging in impermissible discrimination. Y
l .
y O - ԍNational League of Cities, et al. Comments at 26.Y Nothing in Section 653(b)(1)(C) allows an open
-L video system operator to select which programming will be carried on shared channels prior to
- the existence of duplicative programming on the system. For the open video system operator to
- predetermine the shared channels not only distorts the normal meaning of shared, but undermines
X K -
-K the statutory intent that the system afford access to independent entities. { K .
{ O $ - ԍSee, e.g., Communications Act 653(b)(1)(B), 47 U.S.C. 573(b)(1)(B).{ Section 653(b)(1)(C)
- permits a system operator to place on a single channel a programming service "that is offered by " 4: ,-(-(ZZf "
X -
-] more than one video programming provider." " " .
y O y -
- ԍNCTA Comments at 10. NCTA argues that this efficiency can just as easily be achieved without the system
{ O A -
-, operator's direct involvement. Id. But see NAB Comments at 10 (asserting that, because channel sharing is largely
-, a technical issue, the system operator is probably in the best position to administer it). In addition, as noted above,
the statute leaves channel sharing to the open video system operator's discretion." We clarify that channel sharing may be
X -
- implemented by an open video system operator only after a determination is made regarding
X -
- which programming services will be offered by more than one video programming provider. Y .
y O 7 - ԍNational League of Cities, et al. Comments at 26.Y
X -
- We disagree with telephone companies that argue that the statutory reference to "any video
- programming service" means that an open video system operator may select in advance of any
X -
- actual duplication which program services to place on shared channels. X B .
y O - ԍTelephone Joint Commenters Reply Comments at 12.X We also note that
- certain cable operators and programmers argue that the placement of a programming service on
X c -
- a shared channel must be conditioned on the approval of the programming service. ( Xc .
y O -
- ԍMPAA Comments at 7; NCTA Comments at 10; Assn. of Local Television Stations Comments at 12; ABC
- Comments at 9; Group W Comments at 3; NAB Comments at 9; Viacom Comments at 1516; HBO Comments at
23; ESPN Reply Comments at 4.( We take
- this to mean simply that each video programming provider using the shared channel has reached
X 5 -
-L its own agreement with the programming service. We reaffirm our statement in the Notice that
- nothing in our regulations concerning channel sharing should be construed to impair the rights
- of program services. Consistent with our rules governing competitive access to video
X
-
- programming, H
.
y O - ԍ47 C.F.R. 76.10001004.H a program vendor will still possess the right to negotiate over specific terms and
-y conditions with each video programming provider. Once the programming service has reached
- agreements with all of the relevant video programming providers, however, we do not believe
-x that additional consent is necessary for the open video system operator to place the programming
service on a shared channel.
X h -
& g 104. ` ` We find that the statutory provision requiring that subscribers have "ready and
- immediate" access to programming carried on shared channels means that channel sharing must
- be transparent to subscribers. This requires that subscribers be able to access programming
-z carried on shared channels with no more difficulty than programming carried on nonshared
-K channels. We do not believe this is unduly burdensome for open video system operators. Many
- cable operators currently provide different programming on the same channel in a manner
-Z transparent to subscribers receiving the respective signals. Moreover, we believe that, given this
-L advance guidance that channel sharing must be transparent to consumers, open video system
-i operators will be able to design and construct their systems to accommodate this requirement and
- avoid subsequent costs or disruption of the system. We thus reject telephone companies'
- assertions that we should merely codify the "ready and immediate" provision because the adoption " ; ,-(-(ZZ2 "
X - of any specific regulations might inhibit deployment of open video systems. .
y O y -
- ԍTelephone Joint Commenters at 25; U S West Comments at 14 (stating that an open video system operator
will have a natural incentive to comply with this requirement); NYNEX Comments at 1516.
X - ` ` ,h.hTechnical Issues
X - ` ` ,h(1)hhNotice
X v -
& h 105. ` ` In the Notice, we sought comment on whether certain technical requirements could
- restrict video programming providers' access to open video systems, and whether it would be
- necessary for the Commission to adopt any regulations or standards regarding technology to
X 3 - promote such access. A 3 .
{ O
- ԍNotice at para. 23.A
X
- ` ` ,h(2)hhDiscussion
X -
& i 106. ` ` We clarify that the availability of technology necessary to access an open video
- system operator is part of the overall process for allocating open video system channel capacity,
- and therefore subject to the statute's nondiscrimination requirements. An operator may not
- discriminate among video programming providers with respect to technology or technical
X { -
-i information necessary to access the system. L { .
{ O - ԍSee Rainbow Comments at 1819.L This would include all technology and equipment
- related to compression techniques, arranging the digital data for transport, and the "lastmile"
X M -
- physical transport of the signal to the customer's premises. MD .
y O B -
-, ԍNAB Comments at 4; Assn. of Local Television Stations Comments at 16 (stating that system characteristics
should reflect maximum commonality with broadcast ATV digital technical characteristics). We believe that this approach will
- allow open video system operators to design technical standards in accordance with market forces
X -
- rather than regulation, .
{ O l - ԍHBO Comments at 89. See also MFS Communications Comments at 7:
0*> X There is no reason to suggest that Congress intended . . . only one type of [open video system] platform
0* for carriers to transmit video programming, and therefore effectively to limit video distribution infrastructure
development only to the incumbent dominant local telephone and cable television carriers.(# while preserving fair access for unaffiliated video programming
X - providers.
" < N
,-(-(ZZ "
X -
(# ` ` 2. , Open Video System Operator CoPackaging of Video Programming
X - Selected by Unaffiliated Video Programming Providers (#
X - ` ` ,a.hNotice
X -
&n j 107. ` ` In the Notice, we stated that new Section 653(b)(1)(B) of the Communications Act
-[ restricts the amount of capacity for which an open video system operator and its affiliates may
- select programming, where carriage demand exceeds system capacity; however, that section also
- provides that nothing therein should be construed to limit "the number of channels that the carrier
X 3 -
- and its affiliates may offer to provide directly to subscribers." 3 .
{ O
- ԍNotice at para. 27 (citing Communications Act 653(b)(1)(B), 47 U.S.C. 573(b)(1)(B)). We tentatively concluded that
- this provision allows a system operator and its affiliates to enter into agreements to copackage
- to subscribers the programming services selected for carriage by unaffiliated video programming
X
-
- providers, and sought comment on this conclusion. 2
Z .
{ O - ԍId. 2 Copackaging would permit one video
-< programming provider to package its services with those of another video programming provider,
and market the combined offerings to consumers as one package of video programming.
X - ` ` ,b.hDiscussion
X d -
& k 108. ` ` We affirm our tentative conclusion that Section 653(b)(1)(B) permits an open video
-K system operator to enter into agreements to copackage the video programming selected by other
-Z video programming providers with the operator's selected programming, and market the combined
X -
- offerings as one package to subscribers. .
{ O -
-J ԍSee Telephone Joint Commenters Comments at 21; HBO Comments at 6; NYNEX Comments at 14; State of
New York Comments at 10; USTA Comments at 18. We also note that video programming providers that
-{ are not affiliated with the open video system operator are free to enter into copackaging
X -
-\ arrangements with each other. W
F .
y O - ԍCATA Comments at 4; Continental Comments at 12.W We believe that this approach can provide efficiencies to
- independent programmers that may find it difficult to market their service to consumers on an
-j individual basis. We also believe that consumers may benefit from having multiple options for
X - subscribing to program services. A .
y O 3! - ԍViacom Comments at 1213.A
X ~ -
& l 109. ` ` We further believe that copackaging may not be imposed by an open video system
- operator as a condition of carriage on an open video system, such that an open video system
- operator could refuse access to a video programming provider that is unwilling to subject its
- video programming to copackaging. Such a condition would allow an open video system
-Z operator to exercise editorial control over the twothirds of capacity allocable to unaffiliated video " " = f ,-(-(ZZ "
-< programming providers (when carriage demand exceeds system capacity). This would violate the
-. statute's nondiscrimination requirements by allowing the operator to limit the access of video
X -
- programming providers not amenable to copackaging arrangements. j .
y O K - ԍCommunications Act 653(b)(1)(A), 47 U.S.C. 573(b)(1)(A).j We further note that
-L Congress applied Section 616 of the Communications Act governing the regulation of carriage
X -
- agreements to open video system operators. X
X .
y O - ԍCommunications Act 616, 47 U.S.C. 536.X Under this section, multichannel video
- programming providers, including open video system operators, may not: (1) require a financial
-j interest in a program service as a condition of carriage; (2) coerce a video programming service
- to provide, or retaliate against such a service for failing to provide, exclusive rights against other
- MVPDs as a condition of carriage; or (3) engage in conduct the effect of which is to
- unreasonably restrain the ability of an unaffiliated video programming service to compete fairly
-j by discriminating based on affiliation or nonaffiliation in the selection of terms and conditions
X
-
- of carriage. 1
.
{ O - ԍId.1 We believe that prohibiting an open video system operator from requiring co
- packaging as a condition of carriage is consistent with Congress' intent in applying Section 616
on open video system operators.
X
-
&} m 110. ` ` Copackaging arrangements therefore must be purely voluntary among the parties
X -
- involved. \ z .
y O - ԍAccess 2000 Comments at 4; Viacom Comments at 1213.\ Differences in copackaging arrangements would be permissible, however, so long
- as the open video system operator complies with the rules described below regarding the rates,
X b - terms and conditions of carriage. j b
.
y O - ԍCommunications Act 653(b)(1)(B), 47 U.S.C. 573(b)(1)(B).j
X 4 -
& n 111. ` ` Only the National League of Cities, et al. object to the Commission's tentative
- conclusion that an affiliated programming provider may copackage programming selected by
- unaffiliated video programming providers. They argue that Section 653(b)(1)(B) merely clarifies
- that the onethird limit on the amount of capacity for which the system operator and its affiliates
-j may select the programming is not absolute that is, if the operator builds additional capacity,
X -
-y then it may also select the programming for onethird of that additional capacity. Z .
y O ! - ԍNational League of Cities, et al. Comments at n.7.Z We do not
- believe, however, that Congress would have found it necessary to delineate specifically the fact
- that an open video system operator is allowed to select the programming on onethird of a
system's capacity, regardless of the size of the system.
" N> *
,-(-(ZZ "
X - D.` ` Rates, Terms, and Conditions of Service
X - ` ` , 1.hJust and Reasonable Carriage Rates
X -
X - ` ` ,h a.hh Notice
X v -
& o 112. ` ` Section 653 (b)(1)(A) requires that rates for carriage on open video systems be just
-< and reasonable and not unjustly or unreasonably discriminatory. This provision reflects the goal
- of affording unaffiliated video programming providers access to, and fair treatment on, open
- video systems, while at the same time preserving for operators the viability of open video systems
through the ability to realize a return on the economic value of their investment.
X
-
& p 113. ` ` In the Notice, we sought comment on how to ensure that open video system
- carriage rates are just and reasonable and not unjustly or unreasonably discriminatory, as required
-/ by Section 653(b)(1)(A). We asked whether market incentives and the presence of existing
- competitors will ensure such carriage rates or whether a specific regulatory framework or pricing
X -
- formula is necessary. We also asked for comment on a "safe harbor" approach, e.g., rates will
- be presumed reasonable if a certain number of unaffiliated programmers are willing to pay
-[ existing rates on a certain percentage of available capacity, and whether an open video system
- operator should be required to charge rates to unaffiliated programmers that are no greater than
X 6 - the rates it charges itself or its affiliates for carriage. E 6 .
{ O - ԍNotice at paras. 2931.E
X -
X - ` ` ,hb.hhDiscussion
X -
&$ q 114. ` ` Our intent is to provide maximum flexibility to open video system operators to
- respond to market forces consistent with the statutory obligation that carriage rates are just and
-- reasonable and not unjustly or unreasonably discriminatory. We believe that primary reliance on
- a "presumption" approach best achieves these goals. We will accord a strong presumption that
- carriage rates are just and reasonable for open video system operators where at least one
-M unaffiliated video programming provider, or unaffiliated programming providers as a group,
- occupy capacity equal to the lesser of onethird of the system capacity or that occupied by the
- open video system operator and its affiliates, and where the rate complained of is no higher than
- the average of the rates paid by unaffiliated programmers receiving carriage from the open video
- system operator. Where these conditions are met, the complainant will have the burden of
- demonstrating that the rate is not just and reasonable. Where these conditions are not met, and
-= a potential video programming provider files a complaint with the Commission, the open video
-k system operator will bear the burden of demonstrating that the contested carriage rate is no
- greater than a carriage rate that could be imputed to the operator's affiliated video programming.
-z We will require the operator to show that it charges the unaffiliated programmer no more for
-? carriage than it earns from carrying its own affiliates' programming. As noted in Section
III.C.1.f.(3), analog and digital channel capacity will be treated separately for this purpose. " j$? Z ,-(-(ZZF# " Ԍ
X -
& ԙ r 115. ` ` Commenters suggest several rate regulation approaches. LEC interests generally
X -
-K oppose the establishment of a specific regulatory scheme for open video system carriage rates. O .
X b -
-? # XP \ P 6Q9XP# эSee, e.g., U S West Comments at 46; USTA Comments at i, 810, and 1316; USTA
- Reply Comments at 7; NYNEX Comments at 5, 23; MFS Communications Comments at 1013;
Telephone Joint Commenters Comments at 34.O
- They assert that since open video system operators will be new entrants with no market power,
X -
-< market forces will ensure that their carriage rates are just and reasonable. M .
X -
- # XP \ P 6Q9XP# эSee, U S West Comments at 56. U S West argues that no rate regulation should be
- imposed but if it is, the presumption of reasonableness should be tied to retail prices, not to costs.
X
-
- See also NYNEX at 2324; USTA Comments at 1415; Telephone Joint Commenters Reply
Comments at 1617. These LECs propose
- that open video system carriage rates be unregulated except for the adjudication of complaints.
-\ The Telephone Joint Commenters argue that: (1) telephone companies entering a particular
- market will almost always face competition from an incumbent cable operator, (2) such
- competition constitutes "effective competition" under Title VI of the Communications Act, and
- therefore (3) the Commission should presume that open video system rates for wholesale video
- transport are "just and reasonable," just as cable rates are deemed just and reasonable under the
X -
-i "effective competition" test. w .
{ O - ԍSee Ex Parte Affidavit of Thomas W. Hazlett, filed April 17, 1996 at 34.w Some telephone companies suggest that where the market will not
-y constrain rates, aggrieved parties will always be able to complain, and that the Commission will
X
-
-> then be able to regulate on a casebycase basis.
O
.
y O -
-; ԍUSTA Comments at 11; NYNEX Comments at 23; NTCA Comments at 2; MFS Communications Comments
{ O - at ii and 13; Telephone Joint Commenters Comments at 67. See also Access 2000 Comments at 67. The Telephone Joint Commenters also
- maintain that no rate formula is possible, and that ensuring a just and reasonable rate should be
- accomplished through a complaint process. They assert that there can be no formula to evaluate
X
- the reasonableness of a rate.
.
{ O -
- ԍSee Ex Parte letter from Michael A. Tanner, on behalf of the Telephone Joint Commenters, to Meredith Jones,
Chief, Cable Services Bureau, dated May 2, 1996, at 1.
X y -
& s 116. ` ` MCI and others respond that the LEC commenters are focusing on the wrong
- market. Simply because effective competition exists in the video distribution market, which is
- why open video system rates to subscribers are not regulated, does not mean competition exists
X 4 -
- in the video carriage market. < 4 .
y O " - ԍMCI Comments at 46.< These parties argue that an open video system operator's
-L incentives in these two markets are completely reversed: whereas the operator will compete on
- price in order to attract as many subscribers as possible in the distribution market, it will attempt
- to exclude as many unaffiliated programming providers as possible in order to exert greater
- control over the open video service platform in the carriage market. MCI further argues that, " @ ,-(-(ZZ "
-\ since LECs will have market power in the market for video carriage, Title IIlike regulation of
X - carriage rates is necessary. B .
y O b - ԍMCI Comments at 12.B
X -
& t 117. ` ` State and local governments and regulators generally oppose limiting the regulation
-= of open video system carriage rates to the complaint process. They suggest methods such as
- "most favored nations", that would require open video system operators to charge unaffiliated
X v -
- providers the same rates as affiliated providers under similar conditions, or costbased rates. T vX .
{ O -
-J ԍSee, e.g., National League of Cities, et al. Comments at vvi, 8, 13, 18, and 27; State of California Comments
{ O I
-
- at 6; State of New York at 4; Texas Cities Comments at 35. See also National League of Cities, et al. Reply
- Comments at 2027. In particular, the National League of Cities, et al. argue that LECs should bear the burden of
-; proof in complaint proceedings in exchange for less stringent regulation of rates (at 2021); that LECs confuse rate
- regulation visavis programmers with rate regulation visavis subscribers (at 22); and that the LECs are dominant
in the market for video transport because unaffiliated video programming providers have no alternatives (at 2627).T
X _ -
-L Cable interests urge the Commission not to rely on market forces and the complaint process to
X H -
-i ensure that the open video system carriage rates are just and reasonable. H .
{ O -
- ԍSee, e.g., American Cable, et al. Comments at 1819 and 21; Time Warner Comments at 1923; Time Warner
Reply Comments at 1112; NCTA Reply Comments at 1719. NCTA suggests that
-K since open video system operators will control a "bottleneck facility", they will engage in a "price
- squeeze", setting carriage rates high enough to exclude unaffiliated programmers while charging
X
-
-< consumers competitive prices for delivered programming. B
.
.
y O - ԍNCTA Comments at 18.B The state and local government and
- the cable interests state that telephone companies will use their considerable resources and the
complaint process to block unaffiliated programmers' access to the open video system.
X
-
& u 118. ` ` Some of the cable and programming interests propose costbased regulation
X -
- approaches similar to those recommended by state and local governments. p .
y O - ԍMPAA Comments at 8; HBO Comments at 20; Access 2000 Reply Comments at 5.p Alternatively,
- Continental and CATA suggest using the leased access model for setting open video system
X b -
- carriage rates. bN
.
y O a -
- ԍContinental Comments at 8; CATA Comments at 23. The National League of Cities and MPAA oppose using
-x the leased access model. National League of Cities, et al. Comments at 1011 and MPAA Reply Comments at 9.
- The NCTA suggests that if open video system carriage rates are not regulated, then cable leased access rates should
be deregulated. NCTA Comments at 20. NCTA suggests that the Commission use a benchmark approach similar to that
X K -
- adopted for cable rates following the 1992 Cable Act. < K6 .
y O 2$ - ԍNCTA Comments at 18.< Viacom suggests that the reasonableness
-k of a carriage rate for an unaffiliated programming providers be evaluated on the basis of the
-N carriage rates "imputed" from what an open video system operator charges its affiliated " A ,-(-(ZZG "
X - programming providers. D .
y O y - ԍViacom Comments at 13.D
X -
& v 119. ` ` As the comments reflect, there are a range of methods, varying in complexity, to
-i ensure that a carriage rate is just and reasonable and not unjustly or unreasonably discriminatory.
- We agree with the Joint Telephone Commenters that regulation of carriage rates is unnecessary
- to ensure that rates are just and reasonable and that there be no review process prior to the open
- video system operator implementing its rate structure. A new entrant confronting an incumbent
- monopolist should not face a regulatory structure that precludes the entrant from responding to
-= circumstances expeditiously. We think it appropriate to review an open video system carriage
- rate only after a complaint has been filed and that the rate should be presumed just and
-\ reasonable when specified conditions are present. We think that this structure will provide
- flexibility to the open video system operator, an incentive to attract unaffiliated programming
- providers to the system, and reduce litigation and administrative expenses associated with any rate
review process.
X
-
& w 120. ` ` Costbased rules are traditional and useful means to determine rates, yet this
- approach would be significantly burdensome on the Commission and the open video system
- operator. Costbased regulation involves tariff, or tarifflike, filings, closely paralleling Title II
- methods. We do not believe that the costbased approach is consistent with the structure
- envisioned by Congress for open video systems. Notably, Section 653(c)(3) prohibits Title II
- type regulation of open video system rates. Moreover, the process involved in performing such
-> a review is inconsistent with the confined time limits established by Congress for review of
-i certifications and complaints. We disagree with MCI's conclusions and recommendations. MCI's
-i approach would contravene Congress' intent that open video systems not be subject to extensive
X -
-i Title IIlike regulation. D ! X .
y O - ԍConference Report at 17879.D As to benchmark and leased access approaches, we think that these are
- suited to the specific statutory schemes to which they apply and that the particular models cannot
-{ be transposed to open video systems. The benchmark approach was established by the
- comparison of competitive and noncompetitive cable systems. No parallel comparison can be
-j made for open video systems, since no markets yet exist. Leased access was designed to offer
- access to a limited portion of a closed platform, not to provide access to the open platform of an
open video system.
X -
&1 x 121. ` ` Two parties suggested specific safe harbor or presumption proposals. The National
X -
- League of Cities, et al. proposes a safe harbor where carriage rates would be presumed
- unreasonable unless: (1) at least four unaffiliated video programming providers bought carriage
- on an open video system; and (2) unaffiliated video programming providers occupied at least
X -
- onethird of the system's activated channel capacity. " .
y O ]& -
- ԍNational League of Cities, et al. Comments at 20; National League of Cities, et al. Reply Comments,
Attachment at 11. By contrast, the Telephone Joint " B @ " ,-(-(ZZ "
-. Commenters state that if a presumption is adopted, rates should be presumed reasonable if (1)
- at least one unaffiliated programming provider contracted for carriage at a price no less than the
-\ challenged price; and (2) the open video system operator charges unaffiliated programming
- providers prices that are equivalent to affiliated programming providers for carriage of similar
- programming under similar circumstances. The Joint Telephone Commenters stated that this
-Z proposal would "minimize litigation regarding the reasonableness of prices for open video service
X v - carriage". # v .
{ O -
- ԍSee Ex Parte letter from Michael A. Tanner, on behalf of the Telephone Joint Commenters, to Meredith Jones,
Chief, Cable Services Bureau, dated May 2, 1996, at 2.
X H -
& y 122. ` ` We think that the presumption approach will best ensure the reasonableness of
- carriage rates while minimizing the number of complaints. We conclude that the conditions that
-x must be present to presume a just and reasonable rate are reflected in the law's prohibition against
-/ the open video system operator dominating the system where demand for carriage exceeds
-M channel capacity. Congress limited the open video system operator and its affiliates in this
-< circumstance to onethird of the activated channel capacity to enhance competition and diversity
X -
- of programming. G $ " .
y O - ԍConference Report at 177.G Implicit in this limit is the assumption that onethird of the channels will
- enable the operator and its affiliates to offer a viable programming package to subscribers.
-L Accordingly, we believe that where onethird of the system's capacity is leased to one or more
- unaffiliated programming providers as a group, there is sufficient reason to believe that the rates
- charged to those providers is reasonable. However, we also need to ensure that the rate offered
- to the complaining party is reasonable. Accordingly, we believe it is also necessary to compare
- the average rate paid by unaffiliated programmers on the system to the complained of rate. The
-[ average rate may be "weighted" to account for legitimate variances in rates, such as discounts
- given for volume, contract length, creditworthiness, or the number of subscribers reached. Where
-= onethird of the system's capacity is leased to one or more unaffiliated programming providers
- as a group, and the complained of rate is no higher than that of the average rate of all unaffiliated
- programmers, there is sufficient reason to conclude that the open video service system is
-i accessible and the negotiated carriage rates are just and reasonable. Once the open video system
- operator demonstrates that the presumption conditions are present, the burden shifts to the
complainant to demonstrate that the rate is not just and reasonable.
X N -
& z 123. ` ` We think that these conclusions also apply when one or more unaffiliated
- programming providers negotiate and as a group obtain capacity equal to that of the open video
- system operator and its affiliates if the operator or affiliate occupies less than onethird capacity.
- In this circumstance, there is greater unaffiliated programmer participation than the law requires.
-= The remaining capacity, which exceeds onethird, is occupied by or available to other program
providers.
X ! -
& { 124. ` ` We think that unaffiliated programmers providing service on onethird of the open " !C $ ,-(-(ZZ "
-j video system, or in an amount equal to the open video system operator if the operator has less
- than onethird, is sufficient. With at least one unaffiliated provider on the system, having
- capacity equal to that of the open video system operator or onethird of the capacity, individual
-Z programmers have an alternative to the operator as a source of distribution for their programming.
X -
-z We disagree with the National League of Cities et al.'s proposed requirement of at least four
-. unaffiliated programming providers. This requirement would not adequately demonstrate that
- carriage rates are just and reasonable. We also disagree with the portion of the Telephone Joint
-= Commenters' proposal that would, in effect, conclusively presume carriage rates to be just and
- reasonable if only one channel were occupied by an unaffiliated programming provider. The
- presence of one, or even several programmers, on a diminutive portion of the available capacity
is not sufficient to show a just and reasonable rate.
` `
X
-
&a | 125. ` ` When the presumption conditions are not present, and an eligible potential
- programming provider files a complaint with the Commission that a carriage rate is unjust and
-[ unreasonable, we agree with Viacom's recommendation that the most effective way to evaluate
- whether a rate is just and reasonable is to compare it to an imputed carriage rate associated with
X -
-] the open video system operator or its affiliate. > % .
y O - ԍViacom Comments at 13.> We disagree with the Joint Telephone
X y -
- Commenters that no rate formula is possible. & yX .
{ O -
- ԍSee Ex Parte letter from Michael A. Tanner, on behalf of the Joint Telephone Commenters, to Meredith Jones,
Chief, Cable Services Bureau, dated May 2, 1996 at 1. The imputed rate approach provides a legitimate
basis to fullfill the law's requirement that the rate be just and reasonable.
X 4 -
& } 126. ` ` The imputed rate approach is an application of the Efficient Component Pricing
X -
- Rule to open video systems. h ' \ .
{ O -
- ԍWilliam J. Baumol & J. Gregory Sidak, The Pricing of Inputs Sold to Competitors, 11 Yale J. Reg. 171
{ O J -
- (1994); Alfred E. Kahn & William E. Taylor, The Pricing of Inputs Sold to Competitors: A Comment, 11 Yale J.
Reg. 225 (1994).h This approach is particularly applicable to circumstances where
- a new market entrant, the open video system operator, will face competition from an established
- incumbent, the cable operator. A competitive environment facilitates this approach as market
- forces limit the ability of the open video system operator to increase its imputed carriage rate.
- The open video system operator must obtain programming and seek subscribers in a competitive
- environment, thereby providing a sound basis of comparison to determine whether the unaffiliated
-. rate is just and reasonable. The prices that determine the revenues and costs that make up the
-] imputed carriage rate are effectively set in a competitive market. For example, subscriber
- revenues are determined in part by the prices that subscribers pay for delivered programming.
- These prices are determined by the competition for subscribers between open video systems,
- incumbent cable systems, Direct Broadcast Satellite ("DBS") services, and other video
- programming distributors. Similarly, programming costs are determined in part by the license
- fees that open video system operators pay to programming networks. These license fees are
- determined by the competition for programming between open video systems, incumbent cable " D ' ,-(-(ZZ< " systems, DBS services, and other video programming distributors.
X -
& ~ 127. ` ` The imputed rate will reflect what the open video system operator, or its affiliate,
-Z "pays" for carriage of its own programming. Use of this approach is appropriate in circumstances
- where the pricing is applicable to a new market entrant (the open video system operator) that will
-< face competition from an existing incumbent provider (the incumbent cable operator), as opposed
-y to circumstances where the pricing is used to establish a rate for an essential input service that
-. is charged to a competing new entrant by an incumbent provider. With respect to new market
-= entrants, an efficient component pricing model will produce rates that encourage market entry.
- If the carriage rate to an unaffiliated program provider surpasses what an operator earns from
-. carrying its own programming, the rate can be presumed to exceed a just and reasonable level.
- An open video system operator's price to its subscribers will be determined by several separate
-Z costs components. One general category are those costs related to the creative development and
- production of programming. A second category are costs associated with packaging various
-! programs for the open video system operator's offering. A third category related to the
-/ infrastructure or engineering costs identified with building and maintaining the open video
-{ system. Contained in each is a profit allowance attributed to the economic value of each
- component. When an open video system operator provides only carriage through its
- infrastructure, however, the programming and packaging flows from the independent program
-{ provider, who bears the cost. The open video system operator avoids programming and
- packaging costs, including profits. These avoided costs should not be reflected in the price
- charged an independent program provider for carriage. The imputed rate also seeks to recognize
- the loss of subscribers to the open video system operator's programming package resulting from
carrying competing programming.
X -
&Q 128. ` ` Irrespective of whether the presumption conditions are present or whether the
-M imputed rate is reviewed, a complaint may be filed only by a programming provider that has
- sought carriage on the open video system. If the open video system operator meets the conditions
- of the presumption, the burden will fall on the complainant to show that rates are not just and
X e -
-k reasonable. ( e .
y O -
-, ԍ An open video system operator not meeting the conditions for presumption will not have to justify its rates
unless a complaint is filed with the Commission by a programming provider who has sought carriage. Upon the filing of a complaint, the open video system operator will have the
-- burden of proof to demonstrate that its carriage rates are just and reasonable, consistent with the
precepts set forth above.
X -
S ` ` , 2.hOpen Video System Carriage Rates Must Not be Unjustly or
X - ` ` ,hUnreasonably Discriminatory
X ! - ` ` ,ha.hhNotice
X # -
& 129. ` ` In the Notice, we tentatively concluded that some level of differentiation in rates " #E ( ,-(-(ZZe" "
- charged to various categories of video programming providers would not be unjust or
X - unreasonable. We sought comment on the criteria on which such differences could be based. A ) .
{ O b - ԍNotice at para. 32.A
X - ` ` ,hb.hhDiscussion
X -
&4 130. ` ` We adopt our tentative conclusion that some level of rate differentiation is
-z permissible, provided that the bases for the differences are not unjust or unreasonable. We
-[ therefore agree with those commenters that argue that open video system operators should be
X H -
-< given flexibility to offer different carriage rates. * HZ .
{ O S -
- ԍSee, e.g., NYNEX Comments at 1011; U S West Comments at 56; Access 2000 Comments at 45; Telephone
y O - Joint Commenters at iv, 810, and 2324. For instance, the Telephone Joint Commenters
- argue that if open video system operators were required to offer carriage at the same per channel
-= rate for all customers, the rate would be too high for programming with a low market value. To
- prevent this outcome, they argue that open video system operators should be allowed to base rates
X
-
-= on legitimate, objective market factors. [ +
.
y O Q - ԍTelephone Joint Commenters Reply Comments at 1819.[ Such legitimate, objective factors might include: (1)
-j differences in economies of scale or cost savings, such as volume discounts; (2) differences in
-< creditworthiness and financial stability; (3) differences in the number of subscribers reached; and
X
-
- (4) preferential carriage rates for notforprofit programming providers. 9 , $
D .
{ O -
- ԍWe disagree, however, that such preferential rates should be mandatory. See Alliance for Community Media,
{ O f -
-Y et al. Comments at 20. See also USTA Reply Comments at 8 (arguing that preferential rates for nonprofits should
y O 0 -
- be voluntary, not mandatory); Continental Comments at 89 (arguing that nonprofits already have access to carriage
through PEG channels, so it is not necessary to mandate preferential rates for nonprofits).9 Absent such valid
- reasons, we will prohibit open video system operators from engaging in unreasonable or unjust
discrimination against unaffiliated video programming providers.
X K - ` ` , 3.hDisclosure of Programming Contracts
X - ` ` ,ha.hhNotice
X -
& 131. ` ` In the Notice, we tentatively concluded that an open video system operator should
X -
- be required to make its contracts with all video programming providers publicly available. These
- contracts would disclose the rates charged to programming providers and other terms and
-Z conditions of carriage. We proposed this approach in order to give video programming providers
-= a mechanism for determining whether they were being subject to discriminatory rates, terms or
X ~ - conditions of carriage. A - ~0
.
{ O _% - ԍNotice at para. 34.A
" PF - ,-(-(ZZ "
X - ` ` ,hb.hhDiscussion
X -
& 132. ` ` After further analysis and careful consideration of the comments, we conclude that
- it is unnecessary and undesirable to require open video system operators to disclose their carriage
- contracts. In general, we agree with those telephone companies that argue that making carriage
X -
-i contracts public would stifle competition by forcing them to divulge sensitive information. . .
{ O -
- ԍSee, e.g., U S West Comments at 7; USTA Comments at 16; NYNEX Comments at 13; NYNEX Reply
{ O -
- Comments at n.18; MFS Communications Comments at 1314; MFS Communications Reply Comments at 5. See
{ O -
-< also Telephone Joint Commenters Comments at 22 (arguing that such a requirement would be tantamount "to a
-
backdoor imposition of Title IIlike public tariff requirements on open video system operators") and Reply Comments
- at 1718 (arguing that, like cable leased access, contracts should not be made public, but rather subject to discovery
in the complaint process). We
- believe, however, that it is necessary to give video programming providers some basis for
- beginning negotiations. We disagree with the conclusion of the National League of Cities, et al.
- that publiclyposted carriage contracts are the only way to ensure reasonable and non
X 1 -
- discriminatory rates. c / z1F .
y O ( -
- ԍNational League of Cities, et al. Comments at vi; 1618. The National League of Cities, et al., in their reply
- comments, argue that in protesting disclosure of contracts, the LECs confuse two different types of contracts: (1)
- LEC contracts with unaffiliated video programming providers; and (2) LEC contracts with affiliated programmers.
- It is the latter which the National League of Cities, et al. want disclosed, and claim this disclosure will cause no
- competitive disadvantage. National League of Cities, et al. Reply Comments at 2728. We disagree with this
{ O -
- assessment. See also, Michigan Cities, et al. Reply Comments at 5; NCTA Comments at 1920; NCTA Reply
Comments at 17.c We believe that, in most cases, providing preliminary rate estimates will
- provide a starting point. In order to protect video programming providers from discriminatory
-/ conduct, we will require all open video system operators to make preliminary rate estimates
- available to potential video programming providers. If, however, a complaint is filed, regardless
- of which party bears the burden of proof, the open video system operator's contracts with video
-x programming providers will be subject to discovery. Any contracts produced during proceedings
X
- may be protected pursuant to the Commission's confidentiality rules. 0 $
.
{ O -
-y ԍSee infra Section III.G. See also 47 C.F.R. 76.1003(h). This confidential treatment of programming
-z contracts should deal with the concern expressed by several commenters regarding the public disclosure of
{ O r -
- programming license agreements. See, e.g., NCTA Comments at n.16; HBO Comments at 22; Viacom Comments
at 14.
X y - E.` ` Applicability of Title VI Provisions
X K - ` ` 1. ,Public, Educational and Governmental Access Channels
X - ` ` ,a.hNotice
X -
& 133. ` ` Section 653(c)(1)(B) provides that any provision that applies to cable operators " G t 0 ,-(-(ZZ "
X -
- under Section 611 shall apply to open video system operators certified by the Commission. j 1 .
y O y - ԍCommunications Act 653(c)(1)(B), 47 U.S.C. 573(c)(1)(B).j
- Section 653(c)(2) provides that in applying these provisions to open video system operators, the
- Commission "shall, to the extent possible, impose obligations that are no greater or lesser" than
X -
-[ the obligations imposed on cable operators. p 2 X .
y O - ԍCommunications Act 653(c)(2)(A), 47 U.S.C. 573(c)(2)(A).p Paragraph (1)(C), however, establishes, among
-/ other things, that open video system operators are not generally subject to the franchising
X - requirements of the Communications Act. j 3 .
y O &
- ԍCommunications Act 653(c)(1)(C), 47 U.S.C. 573(c)(1)(C).j
X _ -
& 134. ` ` Generally, Section 611 permits a local cable franchising authority to require that
-j a cable operator designate channel capacity for public, educational, and governmental ("PEG")
X 1 -
- use. X 4 1x .
y O Z - ԍCommunications Act 611, 47 U.S.C. 531.X Under this statutory provision, a franchising authority may require, as part of a local cable
- franchise, or as part of a cable operator's proposal for a franchise renewal, that channel capacity
- be designated for PEG use, and that capacity on institutional networks can be designated for
X
-
-Z educational or governmental use. ^ 5
.
y O - ԍCommunications Act 611(b), 47 U.S.C. 531(b).^ The franchising authority is allowed to mandate and enforce
- franchise requirements for services, facilities, or equipment related to PEG use of channel
X -
-z capacity. ^ 6 .
y O - ԍCommunications Act 611(c), 47 U.S.C. 531(c).^ The franchising authority must permit the cable operator to use excess channel
X
-
- capacity designated for PEG use when such capacity is not being used for such purposes. d 7
(
.
y O - ԍCommunications Act 611(d)(1), 47 U.S.C. 531(d)(1).d
- Except as provided in Section 611(e), the cable operator is not permitted to exercise any editorial
X y - control over PEG channels being operated under the franchising authority's control. ^ 8 y .
y O - ԍCommunications Act 611(e), 47 U.S.C. 531(e).^
X K -
& 135. ` ` In the Notice, we sought comment on implementing the 1996 Act's provision
- applying PEG access obligations to open video system operators, and, in particular, how PEG
X -
- access obligations should be established in the absence of a franchise requirement. ; 9 H
.
y O " - ԍNotice at para. 57.; We sought
- comment on whether an open video system operator should be required to duplicate the PEG
- access obligations of the incumbent cable operator, either directly, by connecting with the cable
- operator's PEG channel feeds, or otherwise sharing with the cable operator the capital and
- operating expenses related to PEG channels, in light of the statute's direction that we should
- attempt to impose PEG access obligations on open video system operators that are no greater or " H 9 ,-(-(ZZ "
- lesser than those imposed on cable operators. We asked for comment on how PEG access
- requirements should be established where there is no incumbent cable operator. In addition, we
- requested comment on whether, if an open video system operator's PEG access obligations must
- track those of the incumbent cable operator, the open video system operator's obligations would
-L be subject to change if the cable operator and franchising authority negotiate new PEG access
- obligations pursuant to a cable franchise renewal. We also sought comment on whether and, if
-L so, how the open video system operator should be required to provide the PEG channels to all
-Z subscribers of the entire open video system, including those subscribers that do not subscribe to
X H - the operator's, or its affiliate's, programming service. 1 : H .
{ O - ԍId.1
X -
& 136. ` ` With respect to technical considerations, we asked how we should treat an open
- video system which overlaps several cable franchise jurisdictions, or perhaps covers most of some
-= franchise areas, but only a very small part of others. In addition, we solicited comment on any
-y equipment that is specific to open video systems that local franchising authorities may need to
-Z have their programming delivered over open video systems. We also requested comment on how
-< cable operators today comply with different PEG access requirements when a cable system spans
X - more than one franchise area. > ; Z .
{ O - ԍId. at para. 58.>
X b - ` ` ,b.hDiscussion
X 4 -
* ` ` ,h(1) hhEstablishing Open Video System PEG Obligations through
Negotiation(#h
X -
&a 137. ` ` The first issue we must address with respect to PEG use is how PEG access
-= obligations should be established for open video systems, including the extent and amount of
-. channel capacity and other resources that open video system operators should be required to
- devote to PEG use. We conclude that open video system operators should in the first instance
- be permitted to negotiate their PEG access obligations with the relevant local franchising
X | -
- authority. < | .
{ O -
-- ԍSee Alliance for Community Media, et al. Comments at 9; City of Denver Comments at 5; City of Seattle
- Comments at 1; Texas Cities at 10; Minnesota Cities Comments at 89; State of New Jersey Ratepayer Advocate
{ O -
- Comments at 4; see also NYNEX Comments at 17 (open video system operators should have the flexibility to fulfill
{ O u! -
- their PEG access obligations in all the ways outlined in paragraph 57 of the Notice); U S West Comments at 18
-K (from a technical standpoint, open video system operators should have the same flexibility as cable operators in
{ O # -
- determining how best to meet PEG requirements). But see MFS Communications Comments at 27 (claiming that
PEG compliance should be worked out between the programmer and the local franchising authority). These negotiations may include the local cable operator if the local franchising
X e -
-Z authority, the open video system operator and the cable operator so desire. = e4
.
{ O J& -
-j ԍSee National League of Cities, et al. Comments at 3637; Cablevision Systems/CCTA Comments at 23;
Minnesota Cities Comments at 10; TCI Comments at 18; U S West Comments at 19. We agree that PEG " eI = ,-(-(ZZ "
- access obligations as a general matter should focus on the needs and interests of the local
X -
- community. > b .
y O b -
- ԍAlliance for Community Media, et al. Comments at 3334 (the public policy behind Section 611 is to guarantee
- a place on the system for local voices); National League of Cities, et al. Comments at 31. Many commenters support
- National League of Cities, et al. in their belief that the Commission's rules regarding PEG access and other Title
{ O -
- VI requirements must ensure that open video system operators will meet local community needs and interests. See
- National League of Cities, et al. Comments at 31; City of Ann Arbor Reply Comments at 1; City of Boston Reply
- Comments at 1; City of Charlotte Reply Comments at 1; City of Dayton Reply Comments at 1; City of Encinitas
-J Reply Comments at 12; City of Indianapolis Reply Comments at 12; City of Kalamazoo Reply Comments at 12;
- City of Lake Forest Reply Comments at 12; City of Laurel Reply Comments at 1; City of Portland Reply Comments
-- at 12; City of Richardson Reply Comments at 12; City of St. Paul Reply Comments at 12; City of Santa Ana
- Reply Comments at 12; City of Tucson Reply Comments at 12; Oregon Cities Reply Comments at 12; Dade
-K County Reply Comments at 12; North Dakota Cable Commission Reply Comments at 1; Orange County Reply
Comments at 12; Pitt County Reply Comments at 12; State of Hawaii Reply Comments at 23. We believe that, as NCTA and others have noted, the local franchising authority
X -
- is often in the best position to determine the needs and interests of the local community. ? d
.
{ O u -
- ԍSee NCTA Comments at 33; New York City Comments at 7; New York City Reply Comments at 11;
- Minnesota Cities Comments at 6; City of Ann Arbor Reply Comments at 2; City of Boston Reply Comments at 2;
-; City of Charlotte Reply Comments at 2; City of Dayton Reply Comments at 2; City of Encinitas Reply Comments
- at 3; City of Indianapolis Reply Comments at 3; City of Kalamazoo Reply Comments at 2; City of Lake Forest Reply
-Y Comments at 2; City of Laurel Reply Comments at 2; City of Portland Reply Comments at 23; City of Richardson
- Reply Comments at 23; City of St. Paul Reply Comments at 3; City of Santa Ana Reply Comments at 3; City of
- Tucson Reply Comments at 2; Oregon Cities Reply Comments at 2; Dade County Reply Comments at 23; North
- Dakota Cable Commission Reply Comments at 2; Orange County Reply Comments at 2; Pitt County Reply
{ O -
- Comments at 23; Minnesota Cities Reply Comments at 4; State of Hawaii Reply Comments at 3. See also National
- League of Cities, et al. Comments at 29 (citing the legislative history of the 1996 Act (H.R.Rep. No. 104204, 104th
- Cong., 1st Sess. at 105 (1996)) as stating that, in considering how to implement PEG requirements for open video
systems, the Commission should give substantial weight to the input of local governments). For
- instance, in some areas, the local franchising authority may believe that simple connection to the
- cable operator's PEG feeds adequately satisfies the local community's needs. In other areas, the
- local authority may prefer that the open video system operator provide separate or different PEG
- access channels. We believe that the local communities and the public interest will best be served
- when the parties discuss and reach an agreement regarding all of the PEG issues that pertain to
X H - the particular community. @ H .
{ O -
-J ԍSee Alliance for Community Media, et al., Reply Comments at 9 ("A trilateral agreement could produce lower
-, costs for both the cable operator and the open video system operator, and increase the amount of carriage services,
- facilities and equipment provided to the franchise authorities' cable and OVS subscribers."); National League of
{ O q -
-w Cities, et al. Comments at 3537. Cf. Time Warner Reply Comments at 22 (open video system operators should not
be allowed to negotiate lesser PEG burdens than those borne by the incumbent cable operator).
X -
&} 138. ` ` We also note that Assn. of Public Television Stations urges that preferential rates
- for carriage of PEG channels would be in the public interest and would fall under the just and
X
-
-< reasonable category of rate discrimination. ^ A
.
y O o& - ԍAssn. of Public Television Stations Comments at 1314.^ We are unaware of any cable operator that charges
- PEG programmers for access to the PEG channels on its cable system. Therefore, because the " J b A ,-(-(ZZ "
-i PEG access obligations of open video system operators are to the extent possible to be no greater
- or lesser than those imposed on cable operators, we do not foresee open video system operators
X -
-. charging PEG programmers for PEG use. B .
y O K -
- ԍSee Section III.D.2. above for a discussion of carriage rates that may be charged notforprofit programmers
in a nonPEG context. We recognize that certain costs will be associated
with providing PEG channels. These costs may be recovered as an element of the carriage rate.
X -
&m 139. ` ` Telephone Joint Commenters contend that open video system operators should only
-y be required to provide PEG access that is comparable to that generally in use in the open video
- system service area without negotiating with local franchising authorities or mirroring
X H -
- requirements imposed on cable operators. U C H .
y O - ԍTelephone Joint Commenters Comments at 2728.U Telephone Joint Commenters urge the Commission
- to adopt a simple rule for PEG access and to rely on the dispute resolution process to ensure
X -
- compliance with Section 653. 8 D .
{ O { - ԍId. at 27.8 Telephone Joint Commenters further assert that open video
-j system operators should not be required to dedicate entire channels to individual PEG entities,
-z and should be allowed to make PEG access available to qualified users on a firstcome, first
X - served basis, by lottery, or any other reasonable mechanism. 9 E B .
{ O - ԍId. at 28. 9
X
-
& 140. ` ` We disagree. Although some flexibility with respect to PEG access compliance
- is appropriate, Section 653(c)(2) requires the Commission to impose PEG access obligations that
X y -
- are, to the extent possible, no greater or lesser than the obligations imposed on cable operators. F J
y .
{ O -
- ԍCommunications Act 653(c)(2), 47 U.S.C. 573(c)(2); see also Letter from The Honorable Daniel Akaka,
- U.S. Senator, to Judith L. Harris, Director, Office of Legislative Affairs, Federal Communications Commission,
- (April 4, 1996) at 1 (Commission's rules regarding open video systems should not adversely impact PEG channels);
-0 Letter from The Honorable Anna G. Eshoo, Member of Congress, to Reed Hundt, Chairman, Federal
- Communications Commission, (April 11, 1996) (supporting regulations that provide a level of access for PEG centers
-x equal to that available on cable systems); Letter from The Honorable Neil Abercrombie, Member of Congress, to
- Reed Hundt, Chairman, Federal Communications Commission, (April 12, 1996) (urging that open video system
-- operators should be required to provide and/or support local PEG access facilities fully and in good faith); Letter
-j from The Honorable Tom Barrett, Member of Congress, to Reed Hundt, Chairman, Federal Communications
- Commission, (April 1, 1996) (open video system operators should give PEG broadcasters at least the same access,
-j services, facilities and equipment currently available from cable operators); Letter from The Honorable Tom
- Campbell, Member of Congress, to Reed Hundt, Chairman, Federal Communications Commission, (April 25, 1996)
- (stating that the open video system regulations regarding PEG access should produce a result that at least equals the
- level of access, services, facilities, equipment and support available to PEG access centers on cable systems); Letter
- from Tom Reeser, Executive Director of Oceanside Community Television to Federal Communications Commission,
- (May 13, 1996) (stating the same); Letter from The Honorable Sam M. Gibbons, Member of Congress, to Lauren
Belvin, Office of Legislative Affairs, Federal Communications Commission (April 24, 1996).
-. We believe that it is most appropriate to apply Section 653(c)(2) so that an open video system
-L operator's PEG access obligations generally follow those of the particular franchise area where " KK F ,-(-(ZZI "
- the open video system is providing service. Negotiation with the local franchising authority will,
we believe, accomplish this goal.
X -
: ` ` ,h(2) hhOpen Video System Operator PEG Obligations Satisfied
through Connection and Cost Sharing(#h
X v -
&A 141. ` ` Although we believe that negotiation is the best way to establish the appropriate
- PEG access obligations for each open video system operator, we recognize that the parties may
- be unable to reach agreement. We therefore believe it is necessary to have a default mechanism
- for establishing PEG access obligations. If the open video system operator and the local
- franchising authority are unable to come to an agreement, we will require the open video system
X
-
-L operator to satisfy the same PEG access obligations as the local cable operator. G
.
y O | -
- ԍCATA Comments at 34; City of Arvada Comments at 1; Continental Comments at 5; Greater Metro Cable
- Comments at 1; State of New York Comments at 9; Texas Cities Comments at 8. Access Houston, Access
-, Sacramento, Access Tucson, BNN TV3, Cambridge Community TV, Chicago Access, Cincinnati Community Video,
- City of Pocatello, PG County Community TV, Miami Valley, Minneapolis Telecom. Network, Multnomah
- Community TV, North Dakota Community TV, Plymouth Channel 3, D.C. Public Access Corp., Quote . . . Unquote,
- and Schopeg Access support the comments of Alliance for Community Media, et al., National League of Cities, et
-h al., and State of New Jersey Ratepayer Advocate and urge the Commission to, at a minimum, implement PEG access
-Y to open video system platforms in a way which matches implementation of PEG on cable systems. Access Houston
- Reply Comments at 1; Access Sacramento Reply Comments at 12; Access Tucson Reply Comments at 1; BNN TV3
- Reply Comments at 12; Cambridge Community TV at 1; Chicago Access Reply Comments at 1; Cincinnati
- Community Video Reply Comments at 12; City of Pocatello Reply Comments at 1; PG County Community TV
-; Reply Comments at 1; Miami Valley Reply Comments at 1; Minneapolis Telecom. Network Reply Comments at 1;
- Multnomah Community TV Reply Comments at 12; North Dakota Community TV Reply Comments at 12;
- Plymouth Channel 3 Reply Comments at 12; D.C. Public Access Corp. Reply Comments at 12; Quote . . . Unquote
Reply Comments at 1; Schopeg Access Reply Comments at 1. We believe
-< this can be accomplished by connection to the cable operator's PEG access channel feeds and by
-L sharing the costs directly related to supporting PEG access, including costs of PEG equipment
X -
-L and facilities, and equipment necessary to achieve the connection. > H H
.
{ O -
-K ԍRegarding connection with the cable operator's PEG facilities, see MFS Communications Comments at 27;
-w U S West Comments at 19; Telephone Joint Commenters Reply Comments at 27; Bartholdi Cable Reply Comments
- at 11; State of New Jersey Bd. of Pub. Util. Comments at 1112; State of New Jersey Ratepayer Advocate Comments
-[ at 4; Alliance for Community Media, et al. Comments at 9; City of Olathe Comments at 78; City of Seattle
{ O -
-< Comments at 1; MFS Communications Reply Comments at 14. Regarding cost sharing, see City of Indianapolis
-Y Comments at 2; U S West Comments at 19; State of New Jersey Bd. of Pub. Util. Comments at 1213; State of New
-h Jersey Ratepayer Advocate Comments at 4; Alliance for Community Media, et al. Comments at 9, 35; CCTA Reply
- Comments at 9; City of Denver Reply Comments at 8; Continental Comments at 6; MFS Communications Reply
Comments at 1415.> We also determine that,
-k under these circumstances, in order to comply with the statutory directive that to the extent
- possible the obligations be no greater or lesser than those imposed on cable operators, the open
- video system operator must provide the same amount of channel capacity for PEG access as the " yL H ,-(-(ZZ- "
X - local cable operator is required to provide. I *
.
{ O y -
- ԍSee City of Arvada Comments at 2; Greater Metro Cable Comments at 2; City of Olathe Comments at 9;
NYNEX Comments at 17.
0*/ In addition, City of Denver contends that (1) PEG services must be allowed to be stipulated in bandwidth
- and not necessarily in traditional channels to ease the transition from analog to digital, (2) open video systems should
-j set aside both analog and digital capacity so that all types of PEG programming will be able to be delivered to
-y subscribers, and (3) PEG programmers should be allowed to telecast their services so that they are received by
- subscribers on the same channel on the open video system and the cable system. City of Denver Comments at 6,
- 9. Although the parties may negotiate each of these items, we believe that, absent an agreement to the contrary,
- requirements imposed on the open video system operator regarding each of these subjects must track that imposed
-x on the cable operator, in order to ensure that the PEG obligations are no greater or lesser than those of the cable
- operator. We do not believe that there is sufficient evidence that mandating the location of PEG channels is critical
to an open video system operator meeting its PEG obligations.
X -
& 142. ` ` As stated above, we believe that the cable operator and the open video system
- operator should share all costs that relate to PEG access, including those for PEG services,
-= facilities and equipment. Section 611(c) permits a cable operator to enforce any requirement in
-j any franchise regarding the provision or use of PEG channel capacity, including provisions for
X v -
- services, facilities or equipment which relate to PEG use of channel capacity. ^ J v .
y O - ԍCommunications Act 611(c), 47 U.S.C. 531(c).^ Although
-x NYNEX asserts that Section 611 only authorizes local franchising authorities to require dedication
X H -
- of cable channels to PEG use, ? K HJ
.
y O C - ԍNYNEX Comments at n.42.? we believe that Section 611(c), as applied through Section
- 653(c), imposes a responsibility on open video system operators to contribute toward PEG
X -
- services, facilities and equipment to the same extent as the local cable operator. L Z .
{ O -
- ԍSee Minnesota Cities Comments at 78; National League of Cities, et al. Comments at 34; Michigan Cities,
- et al. Reply Comments at 3839; National League of Cities, et al. Reply Comments at 2930; Alliance for Community
Media, et al. Reply Comments at 6; City of Denver Reply Comments at 78; Time Warner Reply Comments at 22. Furthermore,
- in describing open video system operators' PEG access obligations, the legislative history of the
X
- 1996 Act refers to "capacity, services, facilities and equipment." A M
.
y O - ԍConference Report at 176.A
X -
&n 143. ` ` National League of Cities, et al. assert that, if local community needs and interests
-y dictate that the incumbent cable operator must provide an institutional network, then any open
X -
- video system operator in that community must likewise provide an institutional network. N " .
{ O # -
- ԍNational League of Cities, et al. Comments at 34; see also City of Denver Reply Comments at 13; Michigan
-, Cities, et al. Reply Comments at 3940. Section 611(f) defines institutional network as a communications network
- which is constructed or operated by the cable operator and which is generally available only to subscribers who are
not residential subscribers. Communications Act 611(f), 47 U.S.C. 531(f). As
- stated above, Section 611 provides that a local franchising authority may require that channel " yM v N ,-(-(ZZ "
X -
-K capacity on institutional networks be designated for educational or governmental use. ^ O .
y O y - ԍCommunications Act 611(b), 47 U.S.C. 531(b).^ Section
-K 611 does not specifically authorize local franchising authorities to require cable operators to build
- institutional networks. In applying Section 611 to open video systems under Section 653, the
-L statute requires that we attempt to ensure that the obligations imposed are no greater or lesser
- than those imposed on cable operators under Section 611. We will therefore not require open
-< video system operators to build institutional networks, although they may, of course, agree to do
- so. However, if an open video system operator does build an institutional network, the local
- franchising authority may require that educational and governmental access channels be
- designated on that network to the extent such channels are designated on the institutional network
of the local cable operator.
X
-
& 144. ` ` NYNEX asks that open video system operators be allowed to use channel capacity
X
-
- designated for PEG access for other programming when it is not being used for PEG. = P
X .
y O - ԍNYNEX Comments at 17.= Section
- 611(d) directs local franchising authorities to prescribe rules and procedures under which the
-- cable operator is so permitted to use PEG channels. In the interest of keeping open video system
-< operators' PEG access obligations no greater or lesser than those imposed on cable operators, we
- believe this provision should also apply to open video system operators. Therefore, if, in the
-z absence of an agreement between the open video system operator and the local franchising
- authority, the open video system operator is meeting its PEG access obligations through matching
- the obligations of the local cable operator, the open video system operator will be subject to the
-i same rules and procedures regarding alternative use of PEG access channels as those imposed on
the cable operator.
X -
&n 145. ` ` Several cable and local government commenters believe that requiring connection
- to the cable operator's facilities would be inequitable or might not satisfy the local community's
X -
-K needs and interests. G Q .
y O Z -
-/ ԍTCI Comments at 18; Time Warner Comments at 25; NCTA Reply Comments at 29; Cablevision
- Systems/CCTA Comments at 22; Texas Cities Comments at 9; City of Mountain View Comments at 2; City of
-
Denver Comments at 45; Continental Comments at 6; City of Olathe Comments at 67; Minnesota Cities Comments
{ O -
-z at 67; see also NCTA Comments at 34 (asserting that there is no legal basis to require cable operators to
interconnect its PEG channel feeds with anyone).G Many of these parties urge the Commission to require open video system
X -
-= operators to duplicate the PEG channels and facilities provided by the local cable operator. q R .
{ O ! - ԍSee, e.g., Alliance for Community Media, et al., Comments at 9, 10.q
- We believe that, absent an agreement to the contrary between the open video system operator,
- the local franchising authority and/or the cable operator, requiring duplication of the cable
- operator's facilities may be unnecessary and inefficient. We believe that connection and cost
- sharing will ease the financial burden on both the cable and open video system operators, without
- diluting the number and quality of PEG access channels received by the community. We will " 7 N ,
R ,-(-(ZZ "
-i therefore require cable operators to permit open video system operators to connect with their PEG
- feeds. We will leave how this connection is accomplished to the discretion of the parties,
-. allowing them to take into consideration the exact physical and technical circumstances of the
-L cable and open video systems involved. If the cable and open video system operators cannot
-j agree on how this connection can best be accomplished, the local franchising authority, which
- we believe will be in the best position to evaluate the most appropriate method of connection for
- the local community, may decide. In this context, the local franchising authority may require that
the connection take place on government property or on public rights of way.
X 1 -
& 146. ` ` With regard to cost sharing, the costs of connection and maintaining PEG services,
-i facilities and equipment shall be divided equitably between the cable operator and the open video
- system operator. This shall include capital contributions and any other costs or investments
-M directly relating to or supporting PEG access and required by the cable operator's franchise
- agreement. Capital expenses incurred prior to the open video system operator's connection shall
- be subject to cost sharing on a prorata basis to the extent such investments have not been fully
X
-
- amortized by the cable operator. j S
.
{ O - ԍSee State of New Jersey Bd. of Pub. Util. Comments at 1213.j As an example of how such cost sharing might be
-= appropriately managed, we note that, in order to manage equitably the PEG access obligations
-\ of two cable operators which serve different sections of Brooklyn, New York, but support a
- single public access organization, New York City has established a capital fund to which each
X K - operator contributes based upon the number of subscribers it serves in Brooklyn. N T KZ .
y O V - ԍNew York City Reply Comments at 1011.N
X -
& 147. ` ` Telephone Joint Commenters assert that it is clear that the statutory qualifier "to
- the extent possible" provides the Commission with latitude to fashion a flexible regulatory
- approach that recognizes the differences between open video and cable systems. They contend
- that the Commission must apply Title VI obligations "without effectively reimposing local
X -
-Z franchise regulation." Z U .
y O \ - ԍTelephone Joint Commenters Reply Comments at 24. Z Telephone Joint Commenters contend that open video system operators
- must not be required to negotiate with local franchising authorities or local cable operators as a
-N condition of certification. They also assert that open video system operators should be
-1 encouraged to employ flexible and workable solutions to achieve the 1996 Act's PEG
-k requirements, e.g, where technically feasible, narrowcasting. According to Telephone Joint
- Commenters, if the Commission adopts overly restrictive PEG access rules for open video
X 7 - systems, it may hinder the use of new and innovative approaches to providing PEG access. a V 7 z .
{ O b# - ԍId. at 27; see also USTA Reply Comments at 6.a
X -
& 148. ` ` We believe that our approach of allowing the parties to negotiate PEG access
-x obligations in the first instance satisfies these objectives of the Telephone Joint Commenters, and
- allows the open video system operator and the local franchising authority to employ flexible, " O V ,-(-(ZZ; "
X -
-i workable solutions to satisfy the operator's PEG access obligations. W .
{ O y - ԍSee Michigan Cities, et al. Reply Comments at 30 (negotiation provides needed flexibility). With regard to Telephone
- Joint Commenters' assertion that open video system operators must not be required to negotiate,
- we believe that allowing the open video system operator to connect and to share the cable
- operator's costs if it cannot reach an agreement does not require open video system operators to
- negotiate. We do, however, strongly encourage the parties to negotiate an appropriate agreement
if at all possible.
X _ -
&2 149. ` ` Minnesota Cities contend that the Commission should authorize local authorities
- to impose requirements on open video system operators, including PEG access, monetary
-K contributions toward operating costs and capital equipment support, and that open video system
-z operators should be permitted to complain to the Commission if they disagree with the local
X
-
-L franchising authority. G X
Z .
y O - ԍMinnesota Cities Comments at 8.G We do not believe that, absent a mutual agreement, local franchising
- authorities should be permitted to impose specific PEG access obligations on open video system
X -
- operators that would exceed those imposed on the local cable operator. Y .
y O p -
-Z ԍWe also will not expand the PEG obligations imposed on open video systems from those imposed on cable
- operators, as the City of Somerville suggests. City of Somerville Reply Comments at 12. We believe we are
- constrained by the 1996 Act's provision that the obligations imposed be no greater or lesser than those imposed on
cable operators. In addition, if the
-l parties are unable to negotiate an agreement in the first instance, our default PEG access
- obligations will apply. We anticipate that these default requirements will minimize the number
- of disputes over an open video system operator's PEG access obligations if it is unable to reach
-j an agreement with the local franchising authority in the first instance. We recognize, however,
- that disputes over an open video system operator's PEG access obligations may arise both with
-x and without a negotiated agreement. We believe that, if the open video system operator, the local
- franchising authority and/or the local cable operator negotiate an agreement regarding PEG access
- obligations and a dispute arises over the terms of that negotiated agreement, the dispute would
-M be a matter of contractual law and any complaint should be brought in the court of relevant
- jurisdiction. If the dispute involves an interpretation of our rules regarding the open video system
- operator's obligations under our default mechanism (i.e., connection and cost sharing), however,
-m we believe that the complaining party should be permitted to file a complaint with the
- Commission and that our open video system dispute resolution procedures, described below in
Section III.G., should apply.
X e -
&n 150. ` ` Where the open video system operator and the local franchising authority cannot
- negotiate an agreement regarding PEG access, and the open video system operator is instead
-[ satisfying its PEG access obligations by connection and cost sharing with the cable operator's
- PEG facilities, the open video system operator's PEG access obligations should change to the " P Y ,-(-(ZZz "
X -
- extent that the cable operator's PEG access obligations change with the franchise renewal. Z B .
{ O y -
- ԍSee State of New Jersey Bd. of Pub. Util. Comments at 1314 (if the cable operator negotiates new PEG
- obligations, the open video system operator's interconnection will be viable without much additional expenditures
- on the part of the open video system operator, and additional costs can be absorbed by both the cable and open video
-h system operator on a going forward basis); City of Olathe Comments at 56 (in light of the fact that cable operators
-Y must update their PEG requirements upon renewal of their franchise agreement, open video system operators should
- also be subject to the PEG requirements contained in the cable operator's renewed franchise agreement); National
- League of Cities, et al. Comments at 33; National League of Cities, et al. Reply Comments at 32; New York City
Comments at 7; New York City Reply Comments at 10.
- Accordingly, open video system operators should be prepared to adjust their systems to comply
X -
-\ with new PEG access obligations as necessary. , [ Z .
{ O U -
-x ԍSee City of Denver Comments at 6 (the Commission should require that expansion capacity is available on
-j the open video system for the addition of new PEG services as such services are added on the cable provider's
system)., An open video system operator will not,
- however, be required to displace other programmers to accommodate PEG channels. Because
- PEG access channels are expressly exempt from Section 653(b)(1)(A)'s nondiscrimination
- requirement, an open video system operator need not and should not wait until the next threeyear
-x reallocation to comply with new PEG access obligations, but should comply with such obligations
- whenever additional capacity is or becomes available, whether it is due to increased channel
X H - capacity or decreased demand for channel capacity. \ H
.
{ O -
- ԍSee NYNEX Comments at n.43; see also Section III.C.1.e.(5) above (regarding subsequent changes in demand
or capacity).
X -
` ` ,h(3) hhEstablishing Open Video System PEG Obligations Where
No Local Cable Operator Exists(#h
X -
& 151. ` ` Where there is no local cable operator and the open video system operator and the
X -
- local franchising authority cannot agree on appropriate PEG access obligations, ] N
.
y O -
- ԍNational League of Cities, et al. assert that there are very few areas without a franchised cable operator, and
-- that potential open video system operators are unlikely to be attracted to those areas, or LECs would have built
- systems there under the rural exception to the now repealed crossownership ban. National League of Cities, et al.
- Comments at 38. National League of Cities, et al. also assert, and we agree, that an open video system operator may
-K negotiate with local government to establish PEG access obligations even where there is no local cable operator.
{ M - Id. we agree with
- NYNEX that the open video system operator should make a reasonable amount of channel
X -
- capacity available for PEG access. = ^ .
y O # - ԍNYNEX Comments at 17.= We also believe that the open video system operator's PEG
- obligations should include reasonable terms and conditions beyond the provision of mere channel
-z capacity, including support of PEG services, facilities and equipment. We believe that what
-x constitutes a reasonable amount of channel capacity as well as other terms and conditions should
-> depend on whether there used to be a cable franchise agreement in that franchise area. If a " 4Q V ^ ,-(-(ZZ* "
- franchise agreement previously existed in that franchise area, the open video system operator
- should be required to maintain the previously existing PEG access terms of that franchise
-L agreement. For instance, if a cable system converts to an open video system, the operator will
X - be required to maintain the previously existing terms of its PEG access obligations. i _ .
{ O 4 - ԍSee Alliance for Community Media, et al. Comments at 1213.i
X -
& 152. ` ` Absent a previous cable franchise agreement or an agreement negotiated between
- the open video system operator and the local franchising authority, however, we believe that what
- constitutes a reasonable amount of channel capacity and other terms and conditions should be
- determined by comparison to the franchise agreements for the nearest operating cable system with
X 1 -
- a commitment to provide PEG access. < ` 1Z .
{ O < - ԍSee id. at 12.< We anticipate that this comparison will yield PEG
- access obligations that are appropriate for the community and, to the extent possible, that are no
- greater or lesser than those that would have been imposed on a cable operator had there been one
in that area.
X - ` ` ,h(4) hhProvision of PEG Access Channels to All Subscribers(#h
X -
&n 153. ` ` We believe that PEG access channels should be provided to all subscribers to the
-. open video system. Congress determined that PEG access channels should be provided to all
X b -
-k subscribers in the cable context by including PEG access channels on the basic tier. d a b .
y O - ԍCommunications Act 623(b)(7), 47 U.S.C. 543(b)(7).d The
- provision of PEG channels to all open video system subscribers is therefore important to ensure
- that the PEG access obligations imposed on open video system operators are "no greater or
X -
- lesser" than those imposed on cable operators. b | .
{ O J -
- ԍSee Communications Act 653(c)(2)(A), 47 U.S.C. 573(c)(2)(A); National League of Cities, et al.
Comments at 42; City of Denver Reply Comments at 8. Commenters have various suggestions for how
- to assure that all open video system subscribers receive the PEG access channels, including
X -
-= requiring that operators establish the equivalent of a basic programming tier. cb X .
y O v -
- ԍNational League of Cities, et al. Comments at 42; New York City Comments at 8; New York City Reply
- Comments at 12; City of Seattle Comments at 2; Alliance for Community Media, et al. Comments at 28. Minnesota
- Cities believes that PEG and must carry channels should be part of the open video system operator's programming
-Y package and available on an a la carte basis apart from other program packages. Minnesota Cities Comments at 11
{ O ! -
- 12. See also NCTA Comments at 34 (recommending that PEG be implemented through a channel administrator);
- Bartholdi Cable Reply Comments at 11 (suggesting that the Commission require open video system operators only
- to make PEG channels available on their networks); City of Olathe Comments at 1112 (stating that mustcarry and
- PEG channels should perhaps be available as shared channels that would have to be provided by unaffiliated
- programmers on the system, at the same price as charged by the open video system operator, and that open video
- system operators should only be allowed to mandate channel bundling when implementing mustcarry and PEG
- access requirements); Assn. of Public Television Stations Comments at 7 (charging for PEG services would
-, undermine the goal of providing public telecommunications services to all citizens); State of New Jersey Bd. of Pub. " ' b ,-(-(' "
- Util. Comments at 14 (contending that PEG channels should be provided to all subscribers whether or not the
-y individual subscriber asks for them, and that, if the Commission does not require a basic service package, PEG
channels should be part of the subscriber linecharge). We, however, " R c ,-(-(ZZ "
- agree with NYNEX that, while PEG, as well as mustcarry, compliance is "an inescapable part
X -
- of an open video system operator's basic responsibility for allocating channel capacity," d Z .
{ O -
-; ԍNYNEX Comments at 18; see also Bartholdi Cable Reply Comments at 1011 (contending that the 1996 Act
-: authorizes the Commission to apply cable PEG requirements only to open video system operators, not to multichannel
video programming distributors purchasing carriage, and that such intent cannot be found in the legislative history.) open
-j video system operators should have the flexibility to determine how all subscribers will receive
-= PEG access channels, i.e., whether to provide a basic programming tier similar to that provided
- by cable systems, or to require unaffiliated video programming providers to offer at their expense
X -
- mandatory services such as PEG access channels to their subscribers. G e
.
{ O H
- ԍSee NYNEX Comments at 18.G We conclude that the
-Z open video system operator is responsible for ensuring that all subscribers receive PEG channels,
-K but that the operator has the discretion to decide how best to accomplish this, given its particular
- technical configuration and any other considerations. This flexibility will permit the operator to
-. provide PEG access channels in an efficient manner while not diminishing the provision of the
PEG access channels to the community.
X
-
, ` ` ,h(5) hhOpen Video System PEG Obligations Where System
Overlaps with More than One Franchise Area(#h
X
-
&Q 154. ` ` We also conclude that open video system operators should be subject to PEG
-= access requirements for every franchise area with which its system overlaps. We believe that,
-= despite open video system operators not being subject to franchise requirements, pursuant to
- Section 653(c)(1)(C), it is appropriate to require open video system operators to comply with
- these franchise by franchise requirements so that the obligations imposed on the open video
- system operator with respect to PEG access are "no greater or lesser" than those imposed on cable
X - operators, as required by Section 653(c)(2)(A) of the Communications Act. f .
{ O j - ԍSee Cablevision Systems/CCTA Comments at 2425; New York City Reply Comments at 910.
X -
& 155. ` ` In addition, from the technical standpoint, as many commenters point out, cable
- operators whose systems overlap with more than one franchise area are required to configure their
- systems to comply with the various PEG access obligations of the multiple franchise areas, and
X -
-- open video system operators should be subject to no less. 2 gz.
.
y O # -
- ԍAlliance for Community Media, et al. Comments at 3132, Appendix B and Appendix C (including at
- Appendix C a declaration of Mr. Dale Hatfield stating that, among other things, the distribution by LECs of PEG
-; access channels on less than a statewide basis is clearly feasible); Cablevision Systems/CCTA Comments at 22; City
- of Arvada Comments at 12; Continental Comments at 6; Greater Metro Cable Comments at 2; Minnesota Cities
- Comments at 1213; New York City Comments at 67 and New York City Reply Comments at 10 (claiming that " & f ,-(-(& "
- open video system operators must design their systems to be able to duplicate the cable operators PEG obligations
- in each franchise area and to comply with all Title VI obligations in each jurisdiction they serve); NYNEX
- Comments at 17; TCI Comments at 18; Time Warner Comments at 25; State of New Jersey Bd. of Pub. Util.
{ O -
- Comments at 11; see also City of Olathe Comments at 9; City of Indianapolis Comments at 3; State of New York
- Comments at 910 (claiming that there should be no significant problem with respect to channel capacity for an open
- video system which covers more than one franchise area); Michigan Cities, et al. Reply Comments at 3134 (there
is not evidence that it is not possible to deliver PEG channels to specific areas).2 We will require open video system " S
g ,-(-(ZZ4 "
-j operators to satisfy the PEG access obligations for all franchise areas with which their systems
overlap.
X - ` ` ,h(6) hhTechnical Issues(#h
X -
& 156. ` ` We believe that it is unnecessary for the Commission to decide many of the
X v -
-y technical issues raised by commenters, R h v
.
{ O 1 -
- ԍSee, e.g., NYNEX Comments at 17 (the local authority should be responsible for delivering program material
- on PEG access channels); Telephone Joint Commenters Comments at 28 (PEG programmers should be responsible
- for making their program feed available for delivery to the open video system headend); Michigan Cities Reply
- Comments at 3738 (open video system operators must be responsible for converting PEG signals to a compatible
format and transporting it to its headend).R as we are permitting open video system operators to
- negotiate their PEG access obligations in the first instance, including technical requirements. If,
- however, an agreement cannot be reached, some technical issues regarding connection with the
cable operator's PEG facilities may remain to be resolved on a casebycase basis.
X
- ` ` 2. , MustCarry and Retransmission Consent
X - ` ` ,a.hNotice
X
-
& 157. ` ` Section 653(c)(1) provides that any provision that applies to cable operators under
- Sections 614 and 615 of Title VI, and Section 325 of Title III, shall apply to open video system
X y -
-y operators certified by the Commission. d i y .
y O - ԍCommunications Act 653(c)(1), 47 U.S.C. 573(c)(1).d Section 653(c)(2)(A) provides that, in applying these
-Z provisions to open video system operators, the Commission "shall, to the extent possible, impose
X K - obligations that are no greater or lesser" than the obligations imposed on cable operators. p j KL
.
y O H - ԍCommunications Act 653(c)(2)(A), 47 U.S.C. 573(c)(2)(A).p
X -
& 158. ` ` Sections 614 and 615 set forth a cable operator's "must-carry" obligations
- regarding local commercial and local noncommercial educational television signals,
X -
- respectively. p k .
y O |% - ԍCommunications Act 614, 615, 47 U.S.C. 534, 535.p Cable operators are required to set aside a portion of their capacity for carriage
-x of these local broadcast stations. Section 325 sets forth a cable operator's retransmission consent
- obligations, generally prohibiting cable operators and other multichannel video programming " T l k ,-(-(ZZq "
X -
- distributors from carrying commercial broadcast stations without obtaining the station's consent. ^ l .
y O y - ԍCommunications Act 325, 47 U.S.C. 325.^
-k Local commercial stations seeking carriage must choose to proceed under the mustcarry or
X -
-> retransmission consent requirements. p m X .
y O - ԍCommunications Act 325(b)(3)(B), 47 U.S.C. 325(b)(3)(B).p Under mustcarry, a station is entitled to insist on
X -
-| carriage in its local market area. n .
y O T - ԍCommunications Act 614(a), 615(a), 47 U.S.C. 534(a), 535(a). Under retransmission consent, the station and the
-. multichannel video programming distributor negotiate the terms of a carriage arrangement and
X -
-. the station is permitted to receive compensation in return for carriage. d o x .
y O - ԍCommunications Act 325, 47 U.S.C. 325.d Because Section 325
- applies to television broadcast stations in general, nonlocal commercial stations may also be
X _ - carried by a cable system pursuant to a retransmission consent agreement. 1 p _ .
{ O - ԍId.1
X 1 -
& 159. ` ` In the Notice, we sought comment on how the mustcarry and retransmission
-> consent regulations for cable operators should be applied to open video system operators.
- Specifically, we sought comment on any technological or administrative differences between cable
- systems and open video systems that might require the adoption of different obligations. In
- addition, we asked whether and how open video system operators should be responsible for
- ensuring that every subscriber receives mustcarry channels. We also asked for comment
- regarding how cable operators whose systems span several relevant regions currently comply with
- mustcarry and retransmission consent requirements, and whether similarly situated open video
system operators should be required to act in similar fashion.
X M - ` ` , b.hDiscussion
X -
& 160. ` ` Based upon the comments in the record, we do not believe it is necessary to
-j change our mustcarry and retransmission consent rules significantly in order to apply them to
X -
- open video systems. q " .
{ O < -
-j ԍSee Assn. of Local Television Stations Comments at 6, 910; Assn. of Local Television Stations Reply
- Comments at 8; CATA Comments at 34; Continental Comments at 57; CCTA Reply Comments at 9; MPAA Reply
- Comments at 11; NBC Comments at 45; Time Warner Reply Comments at 2122; NYNEX Comments at 16; NAB
Comments at 12; Telephone Joint Commenters Comments at 28. Indeed, several commenters suggested that the Commission simply apply
X -
- the present mustcarry and retransmission consent rules directly to open video system operators. r .
{ O $ -
- ԍSee Assn. of Local Television Stations Comments at 2 (proposing that the mustcarry rules be applied "to open
- video systems in a direct and straightforward manner virtually identical to their application to cable systems");
- Cablevision Systems/CCTA Comments at 21 (proposing that the statutory mustcarry obligations be applied "to OVS
- operators just as they are applied to cable operators"); NBC Comments at 45 (proposing that the Commission amend
-J all rules regarding broadcast carriage to apply to open video system operators); Telephone Joint Commenters Reply " 1' q ,-(-(f' "
- Comments at 25 (proposing that the Commission simply codify a general rule requiring adherence with the provisions
of subpart D of our rules). " U r ,-(-(ZZ "
-> In light of this evidence, we largely agree that "there are no public policy reasons to justify
-/ treating an open video system operator differently from a cable [operator] in the same local
X - market for purposes of broadcast signal carriage." s $ .
{ O -
- ԍNBC Comments at 4; see also Time Warner Reply Comments at 2122; TeleTV Reply Comments at 11 n.10.
-- As is discussed below, we will not require open video system operators to fulfill these obligations through the use
{ O 5 -
- of a "basic" or "lowest priced" tier as is required of cable operators in Section 76.56(d)(2). See 47 C.F.R.
76.56(d)(2).
` ` ,
X -
& 161. ` ` MFS Communications suggests that the manner in which the cable mustcarry and
-i retransmission consent rules apply to open video system operators will depend to some extent on
- the configuration of future networks and the type of programming services offered over these
X _ -
- networks. M t _ .
y O - ԍMFS Communications Comments at 2627.M We find, however, that at this time the public interest will best be served by
-i application of the cable mustcarry and retransmission consent rules to open video systems, even
-N though future system configurations may require modification of our regulations. If our
- regulations later become inadequate for open video system operators, we intend to promptly
- address the problem. For now, we are guided by Congress' directive that we impose obligations
X
-
- that are "no greater or lesser" than the obligations currently imposed on cable operators. j u
.
y O 9 - ԍCommunications Act 653(c)(2)(A), 47 U.S.C. 573(c)(2)(A).j We
-i will, therefore, apply the existing cable mustcarry and retransmission consent rules to open video
system operators.
X - ` ` ,h(1)hhMustCarry
X b -
& 162. ` ` Pursuant to Section 614(b)(7) and 615(h), the operator of a cable system is
- required to ensure that signals carried in fulfillment of the mustcarry requirements are provided
X 4 -
- to every subscriber of the system. v 4,
.
y O - ԍCommunications Act 614(b)(7), 615(h), 47 U.S.C. 534(b)(7), 535(h). Sections 614 and 615 also generally state the number of
X -
- mustcarry stations a cable operator is required to provide. w .
y O - ԍCommunications Act 614(b)(1), (5), 615(b), (e), 47 U.S.C. 534(b)(1), (5), 535(b), (e). The Assn. of Local Television
- Stations and NAB suggest that the Commission refrain from prescribing any requirements as to
X -
- the number of mustcarry stations to be carried on an open video system. m x L
.
y O # - ԍAssn. of Local Television Stations Comments at 4; NAB Comments at 14.m We believe,
-L however, that in order to apply obligations that are no greater or lesser than those imposed on " V x ,-(-(ZZ "
X -
-> cable operators, we must also apply these requirements to open video system operators. g y Z .
{ O y -
-Y ԍSee MPAA Reply Comments at 12. We find that this approach is further supported by the fact that the open
-x video system operator is the only entity who may control how far its system extends and whether its system will
serve communities within the ADI of various broadcast stations.g
- Consequently, we find that the operator of an open video system must ensure that every
-z subscriber on the open video system receives all appropriate mustcarry channels carried in
X -
- accordance with our rules. z " .
{ O V -
- ԍSee ABC Comments at 45; Assn. of Local Television Stations Comments at 6; CBS Comments at 910;
-j Golden Orange Broadcasting Comments at 23; MPAA Comments at 1314; NAB Comments at 1213; NBC
- Comments at 45; NYNEX Comments at 1718; TCI Comments at 1718; U S West Comments at 1920; Viacom
Comments at 2021. An open video system operator will be required to fulfill this
- obligation regardless of whether or not individual subscribers on its system subscribe to the open
- video system operator's programming package. We do not find it necessary to prescribe the
- specific methods to be used by an open video system operator to comply with these requirements.
- We also recognize that certain costs will be associated with providing mustcarry channels. These
costs may be recovered as an element of the carriage rate.
X -
& 163. ` ` We will not require open video system operators to use a basic tier. Section 653
X
-
-y states that Section 623 generally will not apply to open video system operators. {
.
y O -
- ԍCommunications Act 653(c)(1)(C), 47 U.S.C. 573(c)(1)(C). Section 623 addresses the regulation of cable
y O P - rates and related matters. Communications Act 623, 47 U.S.C. 543. As a result,
- open video system operators are not subject to Title VI rate regulation and are not subject to
- Section 623's requirement that a basic tier be provided for each subscriber on the system.
- Nevertheless, several commenters have urged the use of a basic tier for signals carried in
X
-
- fulfillment of the mustcarry requirements. | Z
,
.
{ O -
- ԍSee NAB Reply Comments at 4; National League of Cities, et al. Comments at 42; Alliance for Community
-, Media, et al. Comments at 28; NBC Comments at 67; New York City Comments at 8; U S West Comments at 1920. We recognize that cable operators have complied
- with our mustcarry and rate regulation rules through the use of a basic tier, but Section 623's
- basic tier requirement does not apply to open video systems. We will, therefore, allow open
-x video system operators to comply with our mustcarry rules without necessarily using a basic tier.
- We believe that through the development of different system configurations, open video system
-Z operators may discover alternate methods to ensure that subscribers receive all appropriate must
X -
-K carry channels. a } N
.
{ O " - ԍNAB Comments at 13. See also NYNEX Comments at 18.a We also believe that by simply requiring compliance with our mustcarry rules,
-K which provide that subscribers must receive all appropriate mustcarry channels, we are imposing
obligations that are no greater or lesser than those imposed on cable operators.
X -
& 164. ` ` As a related matter, we agree with the State of New Jersey Ratepayer Advocate
- that subscribers must have access to any customer premises equipment necessary to receive must " W } ,-(-(ZZp " ԫ
X -
-\ carry and PEG access channels. ~ " .
{ O y -
-i ԍSee State of New Jersey Ratepayer Advocate Comments at 7 (the State of New Jersey Ratepayer Advocate
- suggests that subscribers receiving both analog and digital signals through an open video system should be provided
- with any necessary equipment where additional equipment is required in a customer's premises for receipt of mustcarry and PEG access channels). Consistent with our conclusion that open video system
- operators be permitted to decide how best to meet the requirement that all subscribers receive
- mustcarry and PEG access channels, we leave the decision of how to offer any necessary
- customer premises equipment to the open video system operator, including whether the open
- video system operator will offer it directly or require video programming providers to provide
the equipment.
X _ -
& 165. ` ` As ABC states, channel identity will also be just as important on open video
-< systems as it is on cable systems, and as video options proliferate in the future, channel numbers
- will come to be thought of as "landmarks" on the various delivery systems, and thus will become
X -
-. ever more important. < .
y O } - ԍABC Comments at 56.< Most commenters agree that our mustcarry cable service regulations
X
-
- may be applied in a similar manner to open video systems.
B .
{ O -
-, ԍSee Community Broadcasters Assn. Comments at 6; Assn. of Local Television Stations Comments at 6; NAB
Comments at 12; NBC Comments at 45. We note that the statute requires
- the Commission to impose the cable service mustcarry regulations to open video system
- operators "to the extent possible." Congress recognized that certain allowances may have to be
-= made to adapt our mustcarry rules to the technology and architecture of open video systems,
-] much of which is evolving. An open video system operator therefore will be required to
- implement the channel positioning requirements contained in the mustcarry rules in a manner
- as similar as possible to that of a cable operator, including for example, identifying broadcast
-= stations on the same channels as their overtheair channel numbers, or on a channel mutually
X K -
-= agreed upon by the station and the operator. K .
y O -
- ԍAs in the channel positioning context, discussed above, we will weigh heavily in any dispute whether the
operator has employed available channel re-mapping techniques. We agree with the Assn. of Public Television
-j Stations that, if a type of menu or gateway method is employed instead of traditional channels,
-k the Commission may need to establish specific rules at a later date that protect the interests
X - reflected in the channel positioning provisions.
.
{ O -
- ԍAssn. of Public Television Stations Comments at 21. See also Assn. of Local Television Stations Comments
at 7.
X -
& 166. ` ` Consistent with the statutory requirement of comparable treatment, open video
-] systems that span multiple television markets will be subject to the same mustcarry and " X N
,-(-(ZZ "
X -
- retransmission consent rules as cable systems that span multiple markets. " .
{ O y -
- ԍSee Assn. of Local Television Stations Comments at 9; CATA Comments at 34; Continental Comments at
- 56; ABC Comments at 67; CBS Comments at 10; Time Warner Comments at 25; New York City Comments at
-J 89; TCI Comments at 1718; MPAA Comments at 1415 (all supporting application of the cable rules in the open
video context). Generally, where a
- cable system spans multiple television markets, our rules give a cable operator a choice: the
- operator may provide all eligible broadcast stations to all subscribers, or it may configure its
X -
- facility so that subscribers only receive the eligible broadcast stations in their market. .
{ O -
- ԍSee NBC Comments at 4 n.8; NAB Comments at 13; New York City Comments at 89; NYNEX Comments
at 1617; Viacom Comments at 2122. While
- one commenter suggested that we change our rules in light of the potentially larger size of open
X -
-< video systems, .
y O J
-
- ԍThe Community Broadcasters Assn. stated that "because OVS will likely cover much greater areas (i.e., more
-J than one Area of Dominant Influence ("ADI")) than current cable systems do, the rules as applied to OVS may wish
- to limit any broadcast station's mustcarry rights to its Grade B contour." Community Broadcasters Assn. Comments
at 67. we do not believe that there are sufficient technical or size differences between
-x open video systems and large cable systems to warrant application of significantly different must
- carry rules. We believe that application of similar mustcarry rules in every relevant region
-K served by a cable system or an open video system, will impose obligations on open video system
operators that are "no greater or lesser" than those imposed on cable operators.
X
- ` ` ,h(2)hhRetransmission Consent
X -
& 167. ` ` We find that our existing retransmission consent rules should also be applied to
-i the distribution of programming over open video systems. These rules generally prohibit MVPDs
- from retransmitting the signal of a commercial broadcasting station without the station's express
X -
- authority.
.
{ O 5 - ԍ47 C.F.R. 76.64; see also Communications Act 325(b), 47 U.S.C. 325(b). In the context of retransmission over a cable system, our rules clearly apply to the
- cable operator who is the only entity that distributes multiple channels of video programming
- over the cable system. Open video systems are designed to allow the operator and any video
-k programming providers on the system to distribute the video programming they select. We
-y believe that all such providers on a platform of this type that provide more than one channel of
X -
-j video programming qualify as MVPDs. @ .
y O T! - ԍCBS Comments at 7.@ Section 602(13) defines an MVPD as "a person such
- as, but not limited to, a cable operator, a multichannel multipoint distribution service, a direct
-y broadcast satellite service, or a television receiveonly satellite program distributor, who makes
X -
-K available for purchase, by subscribers or customers, multiple channels of video programming." ` .
y O % - ԍCommunications Act 602(13), 47 U.S.C. 522(13).`
-k Section 76.1000(e) of the Commission's rules defines an MVPD as "an entity engaged in the " Y ,-(-(ZZ "
- business of making available for purchase, by subscribers or customers, multiple channels of
X -
- video programming." .
y O b -
-- ԍ47 C.F.R. 76.1000(e). Section 76.1000(e) also includes a specifically nonexclusive list of entities which
qualify as MVPDs. Therefore, our retransmission consent rules will apply to any video
-L programming provider on an open video system that provides more than one channel of video
X -
-< programming. S .
y O - ԍCBS Comments at 7; U S West Comments at 20.S Given the inherent differences between cable systems and open video systems,
- we believe that the application of our retransmission consent rules in this fashion will impose
obligations that are no greater or lesser than those imposed on cable operators.
X _ -
& 168. ` ` As we stated, the open video system operator is charged with the responsibility for
- assuring that its system meets the requirements of our mustcarry rules. We believe that it is
- appropriate as a matter of administrative efficiency that open video system operators receive all
- mustcarry/retransmission consent election statements that broadcast stations are required to send
X
-
-. under our retransmission consent rules. J
.
{ O d - ԍSee 47 C.F.R. 76.64(h).J However, open video system operators will not be
- responsible for making retransmission consent arrangements for all programming carried on the
- system. We agree with U S West's recommendation that once retransmission consent has been
- elected, broadcast stations should have to negotiate agreements with individual video
X
-
- programming providers on the open video system. @
B .
y O - ԍU S West Comments at 20.@ We require, therefore, that open video
-k system operators promptly make all mustcarry/ retransmission consent election statements
received available to the programming providers on their systems.
X K -
& 169. ` ` Section 325(b)(3)(B) provides in relevant part: "If there is more than one cable
- system which services the same geographic area, a station's election shall apply to all such cable
X -
-! systems." Z .
{ O -
-- ԍCommunications Act 325(b)(3)(B), 47 U.S.C. 325(b)(3)(B). See also 47 C.F.R. 76.64(g) ("If one or
-K more franchise areas served by a cable system overlaps with one or more franchise areas served by another cable
system, television broadcast stations are required to make the same election for both cable systems."). TeleTV argues that Section 325(b)(3)(B) should be applied to open video
X -
- systems. S X
.
y O -
- ԍTeleTV Reply Comments at 11 n.10. U S West also argues that broadcasters should be required to make the
- same mustcarry retransmission consent election "with all competing cable services providers (i.e. OVS operators
and cable operators)." U S West Comments at 20.S However, we agree with NAB that the potential size difference between open video
X -
-y systems and cable systems here warrants the adoption of different regulations. @ .
y O $ - ԍNAB Reply Comments at 3.@ As we have
- previously stated, Congress recognized that differences in the technology and architecture of open
-x video systems might require that the Commission not adopt identical regulations but rather, adopt " Z ,-(-(ZZ "
- regulations that "to the extent possible" impose obligations that are no greater or lesser than those
X -
-Z imposed on cable operators. N .
{ O b - ԍSee supra Section III.E.2.b.(1).N Large open video systems may serve numerous geographic areas
- that overlap multiple cable franchise areas. We believe that this size difference poses the
- potential that one open video system may overlap several cable systems that do not have
-\ overlapping franchise areas. Our current retransmission consent rules do not require that a
-Z broadcaster make the same election for cable systems serving franchise areas that do not overlap.
- As a result, it may not be possible for broadcasters to make the same election on overlapping
- cable and open video systems. Therefore, we will not require that broadcasters apply the same
election to all cable and open video systems serving the same geographic area.
X -
&_ 170. ` ` Finally, we note that the Commission does not intend to modify application of the
- cable compulsory copyright license or to affect existing or future programming licenses between
- video programmers and broadcasters when applying the cable mustcarry and retransmission
- consent rules to open video systems. The Commissioner of Baseball, the MPAA and the NBA,
- et al. expressed concern regarding the effect of our retransmission consent rules on cable
X
-
-l compulsory licenses in the open video system context.
Z .
y O - ԍCommissioner of Baseball Comments at 34; MPAA Comments at 15; NBA, et al. Comments at 3. However, we have previously
- recognized in the cable context that the signal retransmission rights created for broadcasters under
-y Section 325(b)(1) are distinct from the interest a copyright holder may have in the programming
X b -
- contained in a particular signal. $b .
{ O -
- ԍIn the Matter of Implementation of the Cable Television Consumer Protection and Competition Act of 1992,
-h Broadcast Signal Carriage Issues, Reexamination of the Effective Competition Standard for the Regulation of Cable
-h Television Basic Service Rates, Request by TV 14, Inc. to Amend Section 76.51 of the Commission's Rules to Include
{ O W - Rome, Georgia, in the Atlanta, Georgia, Television Market, 8 FCC Rcd 2965, 300405 (1993). Section 325(b)(1) creates a separate right in the broadcaster's
X K -
- signal that may be applied against cable systems or other MVPDs. o K .
{ O - ԍId.; Communications Act 325(b)(1), 47 U.S.C. 325(b)(1).o The cable compulsory
- license and existing and future programming licenses between video programmers and
- broadcasters all serve to protect the copyright holder's copyright interest in programming, while
X -
-! also allowing for distribution of such programming. ; h .
y O - ԍ17 U.S.C. 111.; Section 325(b)(6) recognizes the
- distinction between these rights and makes clear that the retransmission consent rights created
-j under this section will not modify application of the cable compulsory license or affect existing
- or future programming licenses between video programmers and broadcasters in the cable context.
-/ We believe that Section 325(b)(6) should have the same effect in the context of open video
- systems. This will clearly impose obligations that are no greater or lesser than those imposed
through cable service regulation.
" N[
,-(-(ZZ "
X - ` ` 3. ,Program Access
X - ` ` , a. hNotice
X -
& 171. ` ` Section 653(c)(1)(A) provides that, among other things, Section 628 of the
- Communications Act and the Commission's rules thereunder, which govern the development of
X v -
- competition and diversity in video programming distribution ("program access") v .
{ O - ԍSee Communications Act 628, 47 U.S.C. 548; 47 C.F.R. 76.100076.1003. in the cable
X _ -
-[ television context shall apply to any operator of an open video system. j _Z .
y O j
- ԍCommunications Act 653(c)(1)(A), 47 U.S.C. 573(c)(1)(A).j Moreover, the 1996
-= Act amended Section 628 to apply the provisions under that section to a common carrier or its
X 1 - affiliate that provides video programming by any means directly to subscribers. 1 .
y O
-
-, ԍ1996 Act 301(h). The Commission amended its rules to include the application of the program access rules
{ O - to common carriers as provided in Section 628(j). See 47 C.F.R. 76.1004.
X
-
& 172. ` ` In enacting Section 628 as part of the 1992 Cable Act, Congress sought to promote
- competitive entry of programming distributors competing with cable operators by restricting
- certain conduct of cable operators and satellite programmers in which a cable operator has an
-< attributable interest. This Congressional policy is embodied in Section 628 and the Commission's
X
-
- program access rules. |
D .
y O - ԍCommunications Act 628, 47 U.S.C. 548; 47 C.F.R. 76.100076.1004.| In general, the program access rules, as amended pursuant to the 1996
-Z Act, prohibit cable operators, common carriers and their affiliates that provide video programming
-> by any means directly to subscribers, satellite cable programming vendors in which a cable
-K operator or such a common carrier or its affiliate has an attributable interest ("vertically integrated
X K -
- satellite programmers"), W zK .
y O -
- ԍSection 628(j) applies a different definition of attributable interest to common carriers than it does to other
- entities under the program access rules. In addition to the definitional exceptions contained in Section 76.1000(b)
- of our rules, 47 C.F.R. 76.1000(b), two or fewer common officers or directors shall not by itself establish an
- attributable interest by a common carrier in a satellite programming vendor. Communications Act 628(j), 47
{ O -
- U.S.C. 548(j); see also Implementation of Cable Act Reform Provisions of the Telecommunications Act of 1996,
- Order and Notice of Proposed Rulemaking in CS Docket No. 9685 (FCC 96154, released April 9, 1996), at para.
48.W and satellite broadcast programming vendors from engaging in unfair
- methods of competition. The rules also limit certain specified discriminatory conduct, including
X -
- the use of exclusive contracts. & .
{ O " -
-L ԍId. The program access rules require that complaints of discrimination involve discrimination between
{ O # -
- "competing distributors." See generally 47 C.F.R. 76.100076.1003. The rules also provide procedures for
{ O x$ -
-< resolving program access disputes. See Section III.G. hereof regarding application of the program access dispute
resolution procedures to open video system disputes. In addition, under the program carriage provision of the " \ ,-(-(ZZ "
X -
- Communications Act, d .
y O y - ԍCommunications Act 616(a)(2), 47 U.S.C. 536(a)(2).d competing distributors have standing to challenge exclusive
X - arrangements that are the result of coercive activity. X .
y O -
-Z ԍ47 C.F.R. 76.130076.1302. See also Section III.E.5. below regarding the application of Section 616 to
open video system operators.
X -
&# 173. ` ` In the Notice, we sought comment on applying the program access rules to open
X - video system operators, as required under the 1996 Act. A .
{ O
- ԍNotice at para. 61.A
X x - ` ` ,b.hDiscussion
X J -
& 174. ` ` Based on the comments received and our reading of the statute, we believe that
- four general issues arise in the context of applying the program access rules to open video
-- systems. The first concerns the extent to which the program access regime restricts the activities
-K of open video system operators. The second pertains to how the program access regime restricts
-y the conduct of open video system video programming providers. The third issue concerns the
- extent to which the benefits of the program access statute and rules apply to open video system
- video programming providers. The fourth issue raised by commenters involves certain expansions
of our program access rules.
X { -
` ` ,h(1) hhApplicability of Program Access Rules to Open Video
System Operators and Their Affiliates(#h
X 6 -
&P 175. ` ` Section 653(c)(1)(A) applies the program access provisions to open video system
- operators. Given this language, we conclude that the program access restrictions shall apply to
- the conduct of open video system operators in the same manner as they are currently applied to
-[ cable operators and common carriers or their affiliates that provide video programming directly
X - to subscribers. f ZB .
{ O -
- ԍSee Telephone Joint Commenters Comments at 29; Cablevision Systems/CCTA Comments at 23; HBO
- Comments at 21; NCTA Comments at 35; National League of Cities, et al. Comments at 44; NYNEX Comments
at 20; TCI Comments at 19; Telecom. Industry Assn. Comments at 4; USTA Comments at 20.f
X -
& 176. ` ` Generally, we see two different ways to read Section 628 to apply to open video
-x system operators. First, we could substitute "open video system" for "cable" throughout Section
- 628 and create parallel provisions for cable operators and open video system operators. Such an
- application of Section 628 to open video systems would restrict, for example, open video system
-y operators from entering into exclusive agreements with satellite programming vendors in which
- an open video system operator has an attributable interest, but would permit open video system
- operators to enter into exclusive agreements with satellite programming vendors in which a cable " " ] d ,-(-(ZZ "
- operator has an attributable interest. Alternatively, we could add "open video system operator"
- to the statutory language each time cable operator is referenced, yielding one provision for both
-< types of operators. Under this scenario, open video system operators and cable operators would
- be restricted from entering into exclusive arrangements with each others' vertically integrated
- programming vendors. We do not believe that the latter type of exclusive contract is the type
with which Congress was concerned.
X _ -
& 177. ` ` As discussed below, one of Congress' primary concerns underlying the program
-Z access provisions was that cable operators (and now open video system operators) may use their
-Z ownership of or vertical integration with satellite programmers to exclude competitors from access
- to their programming. This concern does not exist with an open video system operator visavis
- a programmer vertically integrated with a cable operator. Nor does it exist with a cable operator
-M visavis a satellite programmer in which an open video system operator has an attributable
- interest. Therefore, we believe it is most appropriate to apply Section 628 to open video system
-j operators by creating parallel provisions for cable operators and open video system operators.
- Accordingly, open video system operators may, subject to Section 628(b)'s general prohibitions,
- enter into exclusive contracts with satellite programmers in which a cable operator has an
-z attributable interest, and, likewise, cable operators may, subject to Section 628(b), enter into
-. exclusive contracts with satellite programmers in which an open video system operator has an
X K -
-K attributable interest. V XK .
y O -
- ԍSimilarly, a common carrier or its affiliate that provides video programming directly to subscribers will be
-J generally restricted from entering into exclusive agreements with a satellite programmer in which a common carrier
or its affiliate has an attributable interest.V We believe that the application of the program access rules to open video
-- systems as described will, in addition to following the plain language of the statute, create a level
- playing field between open video system operators and cable system operators by permitting
comparable access to vertically integrated satellite programming.
X -
& 178. ` ` Specifically, the conduct of an open video system operator shall be subject to
- Section 628(b), which prohibits unfair methods of competition and unfair or deceptive acts or
-[ practices. In addition, the program access provisions which preclude certain specific conduct,
X -
- including undue or improper influence, and discrimination in prices, terms or conditions, t .
y O , - ԍCommunications Act 628(c)(2)(A), (B), 47 U.S.C. 548(c)(2)(A), (B).t shall
apply to open video system operators as well.
X N -
& 179. ` ` Sections 628(c)(2)(C) and (D) as enacted by the 1992 Cable Act restrict cable
-= operators from entering into exclusive agreements with programmers in which a cable operator
-x has an attributable interest. We shall apply these limitations on exclusive contracts to open video
- system operators so that open video system operators will be generally restricted from entering
- into exclusive contracts with programmers in which an open video system operator has an
-x attributable interest, not in which a cable operator has an attributable interest. Thus, any practice,
-. understanding, arrangement or activity, including exclusive contracts, between an open video
-M system operator and a satellite programmer vertically integrated with an open video system " !^ x ,-(-(ZZ "
- operator that prevents an MVPD from obtaining such satellite programming in an area unserved
X -
- by a cable operator as of the date of enactment of the 1992 Cable Act is per se unlawful. .
{ O b -
- ԍImplementation of Cable Television Consumer Protection and Competition Act of 1992: Development of
{ O , -
-h Competition and Diversity in Video Programming Distribution and Carriage, First Report and Order in MM Docket
{ O -
-, No. 92265, 8 FCC Rcd 3359, 3383 (1993) ("First Report and Order in MM Docket No. 92265"). In applying the
- distinction between unserved and served areas to open video systems, we will continue to consider an area unserved
- if it was unserved by a cable operator, as opposed to an open video system operator, as of the date of enactment of
- the 1992 Cable Act. Because open video systems are a creature of the 1996 Act, all areas would be considered
- unserved if we were to apply this provision to areas unserved by open video system operators as of date of enactment
-[ of 1992 Cable Act. To preserve Congress' distinction between unserved and served areas, we will continue to
consider an area "unserved" if it was unserved by a cable operator as of October 5, 1992.
- Exclusive contracts between an open video system operator and a satellite programmer vertically
- integrated with an open video system operator which relate to an area served by cable as of the
-L date of enactment of the 1992 Cable Act are prohibited unless the Commission first determines
- that such a contract is in the public interest in accordance with the factors set forth in Section
X x -
-> 628(c)(2)(D). j x .
y O - ԍCommunications Act 628(c)(2)(D), 47 U.S.C. 548(c)(2)(D).j Moreover, to implement fully the intent of Section 653, Section 628 and our
-M rules shall apply to any affiliate established by an open video system operator to distribute
programming on its system.
X -
& 180. ` ` In applying the program access restrictions to open video systems, we also believe
-1 it is reasonable to include, within the definition of satellite cable programming, video
- programming which is satellite delivered and which is primarily intended for the direct receipt
-\ by open video system operators for their retransmission to open video system subscribers.
- Section 628 refers to satellite cable programming, and the definition of satellite cable
-< programming is video programming, other than satellite broadcast programming, which is satellite
- delivered and which is primarily intended for the direct receipt by cable operators for their
- retransmission to cable subscribers. We believe, however, that, in applying the provisions of
-Z Section 628 to open video system operators, Congress intended to include programming primarily
X M -
- intended for carriage on open video systems. M.
.
{ O , -
-x ԍSee also National League of Cities, et al. Comments at 44 ("OVSoriginated programming should be equally
available to other competing video delivery systems."). We will therefore insert a note in Section
- 76.1000(h) of our rules indicating that satellite open video system programming is included
within the definition of satellite cable programming.
X -
Y ` ` ,h(2) hhProgram Access Restrictions on Open Video System
Programming Providers(#h
X -
&P 181. ` ` The programming relationships that are likely to occur with respect to open video
- systems raise additional program access issues that are not raised by the programming
-M relationships on cable systems. In the cable context, an agreement to carry programming is
-N generally between a programmer and a cable operator. Restricting the activities of cable " g_ ,-(-(ZZ "
-Z operators and satellite programmers vertically integrated with cable operators therefore addresses
-> Congress' concern over cable operator control over video programming. In the open video
- system context, however, there may be many programmers providing packages of programming
- directly to subscribers. An agreement to carry programming may be between a programmer and
- an open video system operator or between a programmer that produces programming and one that
- will distribute it directly to subscribers through an open video system. Moreover, a video
- programmer may provide its own programming directly to subscribers by purchasing channel
capacity on an open video system platform.
X 1 -
& 182. ` ` Rainbow claims that Congress limited the applicability of the program access rules
-- to operators of open video systems, and that nothing in the 1996 Act suggests that programmers
X
-
- must provide their services to competing users of an open video system.
.
{ O | -
- ԍRainbow Comments at 28; see also Cablevision Systems/CCTA Comments at 2324 (expressing concern that
- the application of the program access rules to open video systems should not dilute the rights of programming
-h producers, vendors, and other entities responsible for programming content to exercise control over their products);
- TCI Comments at n.61 (asserting that the program access rules should not be interpreted to supplant the right of a
- programmer to request channel capacity on an open video system or to determine the manner in which its
programming is to be provided). We believe, however,
- that, in order to effectuate the purposes of the program access statute in the open video context,
- as we believe Congress intended us to do by applying Section 628 to open video systems, open
- video system programming providers should be subject to the program access restrictions to the
extent described below.
X y -
& 183. ` ` In Implementation of Cable Television Consumer Protection and Competition Act
-y of 1992: Development of Competition and Diversity in Video Programming Distribution and
X M -
- Carriage, Memorandum Opinion and Order on Reconsideration of the First Report and Order in
X 8 -
- MM Docket No. 92265 ("DBS Order"), ? 8B .
y O + - ԍ10 FCC Rcd 3105 (1994).? the Commission determined that, in the DBS context,
-L in order for an exclusive contract to be prohibited under Section 628(c) of the Communications
- Act and Section 76.1002(c) of our rules, the contract must be between a cable operator and a
X -
-[ vertically integrated satellite programmer. In the DBS Order, the Commission denied a petition
-x to include exclusive contracts between a DBS operator and two vertically integrated satellite cable
X -
- programmers (that were both unaffiliated with the DBS operator) within the per se prohibition
X -
- of Section 628(c)(2)(C). 5 .
{ O 7! - ԍSee id.5 The Commission's denial of the petition was based on the legislative
-L history of the 1992 Cable Act, which was focused on concerns over exclusive arrangements of
- cable operators, the language of Section 628(c), and the fact that the exclusivity arrangements
X o -
-z were limited to a single orbital slot. ? od .
{ O % - ԍId. at 31233126.? The Commission noted, however, that in declining to
- broaden its rules, it did not preclude the petitioner or any other aggrieved party from seeking " X`
,-(-(ZZ "
X - relief from such contracts through other appropriate provisions of Section 628. : .
{ O y - ԍId. at 3121.:
X -
& 184. ` ` Thus, under the DBS Order, a vertically integrated satellite programmer is not
-j generally restricted from entering into an exclusive contract with an MVPD that is not affiliated
- with a cable operator, although such a contract remains subject to casebycase review under
X -
- Section 628(b) of the Communications Act and Section 76.1001 of the Commission's rules. C Z .
{ O - ԍSee id. at 31253127.C
X x -
- Consistent with the DBS Order, in the context of open video systems, a vertically integrated
X c -
- satellite programmer will not be per se precluded from selling its programming exclusively to one
- MVPD on an open video system, as long as that MVPD is not affiliated with the same type of
- operator (i.e., a cable operator, a common carrier providing video programming directly to
X -
-x subscribers or an open video system operator) as the vertically integrated satellite programmer. .
y O -
-x ԍWe believe this situation is analogous to USSB's agreements with Time Warner and Viacom which provided
-- USSB with exclusive rights to HBO and Showtime only with respect to DBS distributors at the 101 degrees West
{ O M -
- Longitude orbital location. Id. at3110. Like the contracts at issue in the DBS Order, exclusive contracts between
- a vertically integrated programmer and an unaffiliated MVPD on an open video system may promote competition
{ O - between MVPDs by permitting one MVPD to distinguish its service from that of another MVPD. See id. at 3126.
- Similarly, cable operators, common carriers providing video programming directly to subscribers
- and open video system operators are not generally restricted from entering into exclusive
X -
- contracts with nonvertically integrated programmers. Nonetheless, as we found in the DBS
X -
- Order, .
{ O - ԍId. at 3121, 31263127, citing First Report and Order in MM Docket No. 92265, 8 FCC Rcd at 3374. our finding herein does not preclude an aggrieved party from seeking relief in an
appropriate case under other provisions of Section 628 and the Commission's rules thereunder.
X -
&A 185. ` ` Moreover, while not explicitly discussed in the DBS Order, we also do not intend
-- to foreclose challenges to exclusive contracts between vertically integrated satellite programmers
- and MVPDs, including unaffiliated MVPDs, on open video systems under Section 628(c)(2)(B),
- which prohibits, with limited exceptions, discrimination among competing MVPDs by a vertically
X ) -
-. integrated satellite programmer. @)2
.
y O -
-x ԍOne of the exceptions where discrimination "shall not be prohibited" is where the satellite programmer has
-{ entered "into an exclusive contract that is permitted under subparagraph (D) [Section 628(c)(2)(D)]."
- Communications Act 628(c)(2)(B)(iv), 47 U.S.C. 548(c)(2)(B)(iv). We interpret this provision as providing a
- safe harbor from challenge under Section 628(c)(2)(B)'s discrimination prohibition to exclusive contracts that the
- Commission has determined to be in the public interest under Section 628(c)(2)(D). We do not see this provision
- as applying to exclusive contracts that do not involve a cable operator (and now an open video system operator or
- common carrier providing video programming directly to subscribers), and are therefore not within the purview of
Section 628(c)(2)(D). In particular, as we found in the First Report and Order in
X -
- MM Docket No. 92265, Section 628(c)(2)(B) covers nonprice discrimination such as an " a : ,-(-(ZZ "
X -
-- unreasonable refusal to deal, p .
{ O y - ԍFirst Report and Order in MM Docket No. 92265, 8 FCC Rcd at 3412.p including one which might result from an exclusive contract. We
- also determined that the reasonableness of such refusals to deal will ordinarily be judged using
X - applicable antitrust principles. Z .
{ O -
-; ԍId. at 3413. The antitrust laws typically analyze such exclusive dealing arrangements under a "rule of reason"
- analysis, which addresses the extent to which the restraint will have an anticompetitive effect in any relevant market.
{ O o -
- See, e.g., Tampa Electric Co. v. Nashville Coal Co., 365 U.S. 320 (1961); Advanced HealthCare Servs. v. Radfor
{ O 9 -
- Community Hosp., 910 F.2d 139, 151 (4th Cir. 1990); Collins v. Associated Pathologists, Ltd., 844 F.2d 473, 47879
{ O - (7th Cir.), cert. denied., 488 U.S. 852 (1988).
X -
&n 186. ` ` The above discussion does not, however, resolve the applicability of the program
- access rules to exclusive arrangements between satellite programmers in which a cable operator
-\ has an attributable interest and open video system programming providers in which a cable
- operator has an attributable interest. We believe that, in order to further the purposes of the
-L program access rules and statute, we must extend the current program access rules to apply to
X 1 -
- these arrangements in the open video system context. As the Commission stated in the First
X -
- Report and Order in MM Docket No. 92265 and in the DBS Order, we believe that Section
- 628(b) authorizes the Commission to adopt additional rules to accomplish the program access
- statutory objectives "should additional types of conduct emerge as barriers to competition and
X -
- obstacles to the broader distribution of satellite cable and broadcast programming." .
{ O - ԍFirst Report and Order in MM Docket No. 92265 at 3374; DBS Order at 31263127. In addition,
- we note that Section 628(c), the statutory provision under which the current regulations were
- adopted, is entitled "Minimum Contents of Regulations," which we infer to mean that Congress
- did not intend to limit the Commission to adopting rules only as set forth in that statutory
X } - provision. } .
{ O -
- ԍSee Communications Act 628(c), 47 U.S.C. 548(c); First Report and Order in MM Docket No. 92265
at 3370.
X O -
&` 187. ` ` As stated above and in the DBS Order, in order for an exclusive contract to be
- prohibited under Sections 628(c)(2)(C) and 628(c)(2)(D) of the Communications Act and Section
- 76.1002(c) of the Commission's rules, the exclusive agreement must involve a cable operator (or,
-l following the 1996 Act, a common carrier or its affiliate that provides video programming
- directly to subscribers, or an open video system operator). We will apply the program access
-. rules under Section 628 to exclusive contracts between a satellite programmer in which a cable
-y operator has an attributable interest ("cableaffiliated satellite programmer") and an open video
-Z system video programming provider in which a cable operator has an attributable interest ("cable
- affiliated open video system programming provider"). Specifically, such exclusive contracts will
- be prohibited unless the contract pertains to an area served by a cable operator as of the date of
-\ the enactment of the 1992 Cable Act and the Commission first determines that the exclusive
-[ arrangement is in the public interest under the factors listed in Section 628(c)(4). Two types of
- cableaffiliated satellite programmer/cableaffiliated open video system programming provider " = b
,-(-(ZZ "
- relationships will be affected by this restriction on exclusive contracts. First, this rule will
- preclude a cableaffiliated satellite programmer from entering into an exclusive contract to
- provide its own programming to a cableaffiliated open video system programming provider with
- which the programmer is affiliated. For example, assume one of the open video system
- programming providers offering services on the open video system is Red Provider, which
-K provides national and regional video programming to subscribers of cable and other multichannel
- video delivery systems. Red Provider is a whollyowned subsidiary of Cablecolor, a large
- national cable company. Included among Red Provider's various programming services is the
- Yellow Channel. Under the rules adopted herein, absent prior Commission approval, the Yellow
-- Channel may not enter into an exclusive contract with Red Provider, whereby the Yellow Channel
-\ agrees that Red Provider is the only open video system programming provider to which the
- Yellow Channel will be made available. Second, the new rule will preclude, absent prior
-\ Commission approval, a cableaffiliated satellite programmer from entering into an exclusive
-> contract to provide its programming to an open video system programming provider that is
- affiliated with another cable operator. Using our example above, the Yellow Channel is not only
-L precluded from entering into an exclusive agreement with Red Provider, but also may not enter
- into an exclusive agreement with the View Channel, a programming service that is an affiliate
of another cable operator, Cableview.
X K -
& 188. ` ` We believe that subjecting these types of exclusive contracts to prior Commission
- review is necessary to fulfill the objectives of the program access rules in the open video system
-! context. The program access requirements have at their heart the objective of releasing
-y programming to existing or potential competitors of traditional cable systems so that the public
X -
-- may benefit from the development of competitive distributors. t .
{ O h - ԍSee First Report and Order in MM Docket No. 92265, 8 FCC Rcd at 3365.t This concern remains when the
- cable operator (or its affiliate) is providing programming as a video programming provider on
an open video system.
X -
&p 189. ` ` In enacting the program access provisions of the 1992 Cable Act, Congress
-y expressed its concern that potential competitors to incumbent cable operators often face unfair
-x hurdles when attempting to gain access to the programming they need in order to provide a viable
X N -
- and competitive multichannel alternative to the American public. u NZ .
{ O Y - ԍSee First Report and Order in MM Docket No. 92265, 8 FCC Rcd at 3362. u The legislative history of
- Section 628 demonstrates Congress' deep concern with the cable industry's "stranglehold" over
- programming through exclusivity and the market power abuses exercised by cable operators and
X -
-x their affiliated programming suppliers that deny programming to noncable technologies. .
{ O # -
- ԍSee DBS Order at 31233124, citing, among other statements of various representatives, 138 Cong. Rec. H6540
-L (daily ed. July 23, 1992) (statement of Rep. Eckart) ("they [cable industry] know that if they maintain their
-j stranglehold on this programming, they can shut down competitioneven the deep pockets of the telephone
{ O & -
-h companies for a decade or more."). See also First Report and Order in MM Docket No. 92265, 8 FCC Rcd at 3370,
{ O & -
- citing 138 Cong. Rec. H653334 (daily ed. July 23, 1992) (Rep. Tauzin) (the legislative history of Section 628 " & ,-(-(& "
- demonstrates Congress' concern that vertically integrated programmers may control programming access in areas
where they are not commonly owned with the particular cable operator). Cable " c ,-(-(ZZ= "
-y operators continue to have significant interests in programming, controlling 51% of all national
X -
-. satellite delivered programming services. & .
{ O -
-Y ԍImplementation of Section 19 of the 1992 Cable Act (Annual Assessment of the Status of Competition in the
- Market For the Delivery of Video Programming), Second Annual Report, CS Docket No. 9561, FCC491, 11 FCC
{ O L -
- Rcd 2060, 2132 (1996) ("1995 Competition Report"). TCI alone holds interests in 30% of national programming
{ O - services, and Time Warner, 14%. Id. at 213334. Of the top 15 services by prime time rating, 11 are
X -
- vertically integrated with cable operators. 2 .
{ O
- ԍId. 2 Moreover, while there has been competitive entry
- over the last few years, cable operators still serve about 91% of MVPD subscribers nationwide.
-K At the same time, there has been significant consolidation in the cable industry, with the industry
- going from a relatively unconcentrated industry to one that can be characterized as well into the
X v -
-j moderately concentrated range. G v .
{ O - ԍId. at 2183 (TableG3). G For example, from 1990 to 1995, assuming consummation of
X _ -
-i transactions announced at the time the 1995 Competition Report was released, the percentage of
-i subscribers nationwide served by the top ten multiple system operators ("MSOs") increased from
-< 61.6% to almost 80%, and the percentage of subscribers nationwide served by the top five MSOs
X -
-j increased from less than 49% to more 66.6%. 1 2
.
{ O - ԍId.1 This increase in concentration is significant in
- this context both because it demonstrates an increase in the buying power of the major MSOs and
X
- because it facilitates the ability of MSOs to coordinate their conduct.
X -
& 190. ` ` Our primary concern is that exclusive arrangements among cableaffiliated open
- video system programmers and cableaffiliated satellite programmers may serve to impede
- development of open video systems as a viable competitor to cable to the extent that popular
- programming services are denied to open video system operators or unaffiliated open video
-i system programmers that seek to package such programming for distribution to subscribers. This
-i is particularly so where the cable affiliated open video system programming provider has interests
- in a significant number of programming services, or the cable affiliated open video system
-M programming provider is able to obtain exclusive contracts from a number of different cable
affiliated satellite programmers, such that access to a substantial number of services is foreclosed.
X -
& 191. ` ` As Congress recognized in enacting the program access provisions of the 1992
- Cable Act, cable operators have the incentive to impede the development of other technologies
X -
-x into a robust competitor to incumbent cable systems. a .
y O !% - ԍCommunications Act 628, 47 U.S.C. 548.a We believe that, in applying the program
- access provisions to open video systems in the 1996 Act, Congress recognized that cable
- operators may use their control over programming to further this objective with respect to open " ~d T
,-(-(ZZ2 "
X -
-\ video systems as well. j .
y O y - ԍCommunications Act 653(c)(1)(A), 47 U.S.C. 548(c)(1)(A).j One way of doing so would be to employ exclusive arrangements
-^ between cableaffiliated satellite programmers and cableaffiliated open video system
- programming providers in order to foreclose access to such programming by open video system
operators and unaffiliated open video system programming providers.
X -
& 192. ` ` The record demonstrates that, under such circumstances, other open video system
- programming providers, including the open video system operator, might be unable to obtain
X _ -
-. access to sufficient programming to provide a viable service. _X .
{ O h
- ԍSee, e.g., NYNEX Comments at 20; National League of Cities, et al. Comments at 44. This could lead to a situation
- where unaffiliated programmers decline to seek access on the platform or where the open video
X 1 -
- system operator might decide against entering the video programming distribution market through
-Z the open video system model or might decide to choose to provide traditional cable service rather
-= than open video system, thus scuttling Congress' goal in establishing open video system as a
- facilitiesbased competitor. Such concerns are reflected in the record. For example, the
- telephone industry's perception is that the success of the telephone companyaffiliated open video
-. system package may well depend on the telephone companies' ability to obtain popular cable
X
-
- affiliated programming. G
.
y O B - ԍTeleTV Reply Comments at 2, 5.G Thus the industry may choose not to develop open video system
-" platforms if it cannot be assured of access to a reasonable amount of cableaffiliated
X y - programming. yz .
{ O -
-h ԍId. at 3. If a telephone company chose to develop a cable system rather than an open video system platform,
- the existing rules would ensure that it could not be prevented by exclusive agreements from obtaining access to cable
- affiliated programming. Consumers are likely to suffer if telephone companies choose to forego open video systems
- because it is likely to take longer for LECs to obtain franchises to deploy cable systems and cable systems will not
carry as many "distinctive voices" as open video systems would.
X K -
& 193. ` ` In adopting this rule, we recognize, as did Congress in enacting the program access
- provisions, that exclusive contracts can often have procompetitive effects under certain market
- conditions. However, strategic vertical restraints can also deter entry into markets for the
- distribution of multichannel video programming. Accordingly, the Commission's program access
- policies seek to balance the likely competitive harm to consumers created by a particular vertical
-M arrangement against its likely efficiency benefits. In the context of open video systems, we
- believe that, unless the Commission first determines that exclusive arrangements for satellite
- programming which favor cableaffiliated video programming providers are in the public interest
- under Section 628(c)(4), the potential for competitive harm from such contracts requires their
- prohibition. In reaching this conclusion, we have considered the record evidence of competitive
- harms that might flow from such arrangements, as well as Rainbow's arguments that such
X N -
- contracts can have procompetitive benefits. B N,
.
y O +' - ԍRainbow Comments at 2830.B However, in light of the risk of competitive harm " Ne ,-(-(ZZ "
-< from such agreements, we believe it is appropriate to be guided by the balance struck by the 1992
- Cable Act generally with respect to exclusive contracts which favor cable operators. Accordingly,
-- we conclude that such arrangements should be prohibited unless the contract pertains to an area
-l served by a cable operator as of the date of the enactment of the 1992 Cable Act and the
- Commission first determines that it is in the public interest in accordance with the factors set
forth in Section 628(c)(4).
X _ -
& 194. ` ` Similarly, as stated above, a satellite programmer may provide its own
-j programming directly to subscribers by purchasing channel capacity on an open video system
- platform. It is therefore possible for a programmer vertically integrated with a cable operator,
- a common carrier or its affiliate that provides video programming directly to subscribers, or a
- different open video system operator, to purchase channel capacity, to provide its own
- programming directly to subscribers and to refuse to sell the programming it owns to another
- MVPD on the open video system. Such a refusal to sell would appear to be unreasonable
- because it discriminates against a class of distributors, i.e., open video system programming
-[ providers. Furthermore, this type of refusal to sell would result in the same situation which we
- have deemed contrary to the purposes of Section 628 when achieved through an exclusive
-L contract, i.e., restricting competitive access to vertically integrated satellite cable programming
-Z to a vertically integrated entity. We believe this would consequently be actionable under Section
628(c).
X -
` ` ,h(3) hhBenefits of Program Access Rules for Open Video System
Programming Providers(#h
X -
& 195. ` ` As noted above, commenters in this proceeding have raised the issue of the extent
-K to which video programming providers on open video systems are MVPDs, and therefore entitled
-= to the benefits of the program access rules. Rainbow's claim, referenced above, that Congress
- limited the applicability of the program access rules to operators of open video systems, and that
- nothing in the 1996 Act suggests that programmers must provide their services to competing users
-/ of an open video system, would seem to indicate that Rainbow does not believe that video
- programming providers on open video systems are entitled to the benefits of the program access
X 7 -
- statute. ? 7 .
y O - ԍRainbow Comments at 28.? Although Rainbow argues that it will not be able to compete with other programmers
- on an open video system platform if Rainbow is forced to sell its programming to other
X -
- MVPDs, ; X .
{ O " - ԍId. at 2930.; we believe that the statute and the program access rules should not be interpreted as
Rainbow urges.
X -
& 196. ` ` As discussed above in Section III.E.2., open video system operators and video
-= programming providers that provide more than one channel of programming on an open video
- system are MVPDs. We will not create an exception to our rules that would exclude open video " "f ,-(-(ZZ! "
- system operators or open video system programming providers from the benefits of our program
X -
- access rules. F .
{ O b - ԍSee USTA Comments at 20.F Accordingly, we will add a note to the definition of MVPD contained in Section
X -
-j 76.1000(e) of our rules L Z .
{ O - ԍSee 47 C.F.R. 76.1000(e).L to indicate that video programming providers on open video systems
that provide more than one channel of programming to subscribers are MVPDs.
X - ` ` ,h(4) hhExpansion of the Program Access Rules(#h
X _ -
&% 197. ` ` In addition, we decline to expand the program access rules as certain other
-\ commenters have requested. First, we decline to adopt NYNEX's assertion that open video
- system operators must have the right to insist that those using its system have the ability to obtain
X -
-j all programming on comparable, nondiscriminatory terms. | .
{ O -
0* ԍ See NYNEX Reply Comments at 15; see also Ex Parte Letter to William Caton, Acting Secretary, Federal
- Communications Commission, from Marie Breslin, Director, FCC Relations, Bell Atlantic Network Services, Inc.
-L (May 3, 1996) at Attachment at 7 (program access rules should be extended to apply to all programmers, all
{ O -
- programming, all delivery methods); TeleTV Reply Comments at 315. But see MPAA Reply Comments at 911
- (disagreeing with NYNEX's contention that open video system operators should be permitted to deny access to
- entities holding either exclusive rights to a programming service or favorable contract terms that effectively preclude
others from distributing the program service on that open video system facility). As discussed above, for example,
- we do not view the exclusivity provisions of the program access rules as prohibiting an open
-[ video system programming provider that is unaffiliated with a cable operator, a common carrier
- that provides video programming directly to subscribers, or an open video system operator from
- entering into an exclusive programming contract with a vertically integrated satellite programmer,
- although such a contract may be challenged under other appropriate provisions of the program
- access rules as unfair competition and discriminatory conduct. We also decline to extend the
X y -
-- program access requirements for open video systems, as NYNEX and TeleTV have requested, y0
.
{ O Z -
- ԍSee NYNEX Comments at 21; TeleTV Reply Comments at 315. But see MPAA Reply Comments at 911
- (opposing NYNEX's suggestion that exclusive arrangements involving nonsatellite distributed programming should
- be foreclosed). We note, however, that certain commenters have alleged that vertically integrated programmers have
{ O -
-; threatened to circumvent the program access rules by delivering satellite programming by terrestrial means. See Ex
- Parte Letter from Marie Breslin, Bell Atlantic, to William Caton, Secretary, Federal Communications Commission
-w (May 14, 1996) (referring to "regional nonsatellite delivery"). In declining to explicitly extend the program access
- rules to nonsatellite delivered programming, we do not foreclose a challenge under Section 628(b) to conduct that
- involves moving satellite delivered programming to terrestrial distribution in order to evade application of the
program access rules and having to deal with competing MVPDs.
beyond vertically integrated programming and satellite delivered programming.
X 4 -
& 198. ` ` TeleTV also asks the Commission to clarify that national and regional
-= programming that is delivered by satellite anywhere in the country is satellite programming for
- purposes of the program access rules. In this proceeding we are addressing program access issues
- only as they relate to open video systems and not the rules' general applicability. We therefore " g ,-(-(ZZ "
-L do not believe that this proceeding is the appropriate forum to decide this issue and decline to
address it as TELETV requests. We may consider this request separately in a future proceeding.
X -
(# ` ` 4. ,Sports Exclusivity, Network NonDuplication and Syndicated
X - Exclusivity (#
X v - ` ` ,a.hNotice
X H -
&A 199. ` ` Section 653(b)(1)(D) directs the Commission to prescribe regulations that "extend
- to the distribution of video programming over open video systems the Commission's regulations
- concerning sports exclusivity (47 C.F.R. 76.67), network nonduplication (47 C.F.R. 76.92 et
X
-
-> seq.), and syndicated exclusivity (47 C.F.R. 76.151 et seq.)." j
.
y O | - ԍCommunications Act 653(b)(1)(D), 47 U.S.C. 573(b)(1)(D).j These regulations allow the
-i holders of certain exclusive rights to prohibit cable systems from carrying various sports, network
X - and syndicated programming within specified geographic zones. h X .
y O - ԍ47 C.F.R. 76.67, 76.92.97 and 76.151, .153.159, .163.h
X
-
&1 200. ` ` In the Notice, we sought comment on how these regulations should be implemented
- in the context of open video systems. Specifically, we sought comment on how they should be
-. applied to open video systems that cross multiple geographic zones or communities. We also
- sought comment on whether the open video system operator, individual video programming
-j providers, or some other entity should be responsible for blocking programming and enforcing
X 6 - these provisions. A 6 .
{ O - ԍNotice at para. 46.A
X - ` ` , b.hDiscussion
X -
&3 201. ` ` We believe that we can directly apply our existing cable regulations regarding
-y sports exclusivity, syndicated exclusivity and network nonduplication to open video systems.
-] First, we do not believe that open video systems that span multiple geographic zones or
X -
-K communities should be treated any differently than similar cable systems. & Xz .
y O -
-, ԍAssn. of Local Television Stations Comments at 4, 1112; NAB Comments at 11 (suggesting that open video
- systems be designed to permit compliance across multiple geographic zones); Telephone Joint Commenters Comments
at 25.& The record evidence
-[ indicates that large cable systems are able to comply with these provisions, and no commenter
-[ has provided any reason why open video systems should be required to comply with different
X P - regulations. C XP .
y O % -
- ԍCablevision Systems/CCTA Comments at 23; CBS Comments at 45; Community Broadcasters Assoc.
- Comments at 6; Alliance for Community Media, et al. Reply Comments at 8; Minnesota Cities Comments at 12; TCI
-j Comments at 1819; Time Warner Comments at 25. TCI Comments at 19 (arguing that LECs will have the " +' ,-(-(N' "
- opportunity to "design their systems around these problems rather than having to implement the rules via existing
systems.").C " Ph ,-(-(ZZ " Ԍ
X -
& ԙ 202. ` ` Second, we find that open video system operators should be responsible for
- compliance with these rules. We received various opinions as to which entity in the open video
X -
-- system context should be responsible for compliance. .
{ O -
-Y ԍSee NYNEX Reply Comments at 1314; Telephone Joint Commenters Comments at 25; USTA Comments at
-; 1920 (all arguing that responsibility for compliance should lie with the individual programmers) and Assn. of Local
- Television Stations Comments at 4, 1011; U S West Comments at 1920 (arguing that responsibility for compliance
-K should lie with the open video system operator). NCTA also suggested the use of an administrator who would be
responsible for compliance with our rules. NCTA Comments at 3637; NCTA Reply Comments at 2930. Among those opposed to holding open
-i video system operators responsible were the Telephone Joint Commenters who argued that video
- programming providers should be held legally responsible for compliance as to the individual
X -
-L video programming that they select. R .
y O - ԍTelephone Joint Commenters Comments at 25.R We do not believe, however, that the fact that a video
-x programmer has selected certain programming alone justifies holding that programmer responsible
for compliance with our exclusivity rules.
X H -
X 1 -
& 203. ` ` We note that exclusive and nonduplication rights are protected under our rules by
-Z a prohibition against carriage (i.e. retransmission to subscribers) of affected signals to community
X
-
-Z units located within relevant geographic zones. h
b .
y O - ԍ47 C.F.R. 76.67, 76.92.97 and 76.151, .153.159, .163.h In the cable context, the cable system operator
- selects and controls the retransmission of all signals over its system. It is, as a practical matter,
X -
- the only entity capable of deleting the affected signals when necessary. ; X
.
y O x -
- ԍIn fact, the definition of a cable system operator refers to one who provides cable services or "otherwise
-h controls or is responsible for, through any arrangement, the management and operation of such a cable system." 47
C.F.R. 76.5(cc).; In the open video
- system context, open video system operators will not select all of the programming that is
- retransmitted to subscribers. However, we believe that, like cable operators, open video system
- operators will have ultimate control over the retransmission to subscribers of signals over the
X y -
- system. y .
y O < -
-; ԍ ABC suggests that because open video system operators control the wire just like cable operators, they should
- similarly be held at least partially responsible for compliance with our rules. ABC Comments at 11. We also agree
- with CBS that the open video system operator will most likely be in the best position to perform those acts necessary
for compliance with these regulations. CBS Comments at 6. Therefore, we will hold open video system operators responsible for compliance with
our sports exclusivity, network nonduplication, and syndicated exclusivity rules.
X 4 -
&o 204. ` ` In all cases, we find that television stations must notify the open video system
- operator of the exclusive or nonduplication rights being exercised. As we stated above, the
-. operator is ultimately responsible for compliance with these rules. We also believe that this is
- the most administratively efficient method for providing notice of these rights to an open video " i ,-(-(ZZ "
X -
- system. .
y O y -
-i ԍAssn. of Local Television Stations Comments at 1011; CBS Comments at 56; NAB Comments at 1112;
NBA, et al. Comments at 23; NBC Comments at 16. In addition, we believe that when retransmission of affected signals is prohibited under
- these rules, video programming providers should be given an opportunity to either substitute
-- signals or delete signals where possible. Therefore, we require that open video system operators
-\ make all notices of exclusive or nonduplication rights received immediately available to the
- appropriate video programming providers on their systems. We would not expect to impose
-] sanctions on an open video system operator for violations of the exclusivity rules by an
- unaffiliated program supplier if the operator provided proper notices to the program supplier and
-L took prompt steps to stop the distribution of the infringing program once it was notified of the
X H - violation. J H .
{ O - ԍSee NAB Comments at 12 n.12.J
X - ` ` 5. ,Other Title VI Provisions
X
- ` ` ,a.hNotice
X -
& 205. ` ` Section 653(c)(1)(A) provides that any provision that applies to cable operators
- under the following Title VI provisions shall apply to open video system operators: (1) Section
- 613 (except for subsection (a)) (ownership restrictions); (2) Section 616 (regulation of carriage
- agreements); (3) Section 623(f) (negative option billing); (4) Section 631 (subscriber privacy);
X b -
-y and (5) Section 634 (equal employment opportunity). In the Notice, we proposed to amend our
- rules to apply Sections 613 (except for subsection (a)), 616, 623(f), 631 and 634 to open video
X 6 -
-[ system operators, as required by new Section 653(c)(1)(A). We sought comment in the Notice
X ! - on any issues raised by the application of these sections to open video system operators. A ! .
{ O - ԍNotice at para. 62.A
X - ` ` ,b.hDiscussion
X -
& 206. ` ` Given the lack of substantial comment on this subject and the plain language of
X -
-< the statute, the Commission will, as proposed in the Notice, apply the following provisions of the
-- Communications Act and the Commission's rules thereunder to open video systems: Section 613
- (c) (h) regarding ownership restrictions; Section 616 regarding regulation of carriage
X k -
-{ agreements; kD .
{ O `" -
-Y ԍSee HBO Comments at 21 and NYNEX Comments at 20 (both supporting application of Section 616 to open
video systems). Section 623(f) regarding negative option billing; k .
y O $ -
- ԍNational League of Cities, et al. commented that the negative option billing rules should be applied to open
- video systems without the exceptions created under cable rate regulation. National League of Cities, et al. Comments
- at 4445. We believe that, in order to comply with the statutory mandate that the negative option billing
- requirements applied to cable operators be applied to open video system operators, as directed by Section 653, our " ' ,-(-(?' "
- entire negative option billing rule should be applied to open video system operators. National League of Cities, et
al. do not provide any rationale for us to conclude otherwise. Section 631 regarding " kj ,-(-(ZZ " subscriber privacy; and Section 634 regarding equal employment opportunity.
X - ` ` 6. ,Preemption of Local Franchising Requirements
X - ` ` ,a.hNotice
X v -
& 207. ` ` While Congress applied the above Title VI provisions to open video system
- operators, Congress also provided that open video system operators would be exempt from several
- Title VI obligations. As described above, these exemptions were intended to afford open video
-[ system operators a reduced regulatory burden in exchange for providing access to unaffiliated
X -
-/ programming providers on a nondiscriminatory basis. h .
{ O
- ԍSee Communications Act 653(c), 47 U.S.C. 573(c).h One of the Title VI exemptions is
- Section 621, which sets forth the local cable franchise requirements. In the comments, several
- parties raised the issue of the role of local authorities, in the absence of Section 621, to oversee
- use of the public rightsofway. In addition, Section 653(c)(2)(B) provides that an open video
-- system operator may be subject to the payment of fees on its gross revenues for the provision of
- cable service imposed by a local franchising authority or other governmental entity, in lieu of the
X -
- franchise fees permitted under Section 622. k .
y O - ԍCommunications Act, 653(c)(2)(B), 47 U.S.C. 573(c)(2)(B).k The rate at which such "gross revenues fees" are
- imposed shall not exceed the rate at which franchise fees are imposed on any cable operator
X b - transmitting video programming in the franchise area. 1 bB .
{ O U - ԍId.1
X 4 - ` ` ,b.hDiscussion
X -
& 208. ` ` We start with two basic premises. First, Section 653 exempts an open video
- system operator from the requirement of obtaining a local franchise under Section 621, although
- the operator still must pay a gross revenue fee "in lieu of" a franchise fee and must satisfy
- obligations under Section 611. Second, we believe that Congress did not intend to infringe upon
- local communities' prerogative to manage their rightsofway in order to protect the public health
X - and safety. V .
{ O " - ԍSee NYNEX Reply Comments at 1618.V As the Conference Report stated:
0* X The conferees intend that an operator of an open video system under this part shall be
0*^ subject, to the extent permissible under State and local law, to the authority of a local
0*{ government to manage its public rightsofway in a nondiscriminatory and competitively " 7 k f ,-(-(ZZ "
X - neutral manner. I .
y O y - ԍConference Report at 178. I (#
X -
& 209. ` ` We believe that Congress' intent is clear. State and local authorities may impose
-/ conditions on an open video system operator for use of the rightsofway, so long as such
-[ conditions are applied equally to all users of the rightsofway (i.e., are nondiscriminatory and
X -
- competitively neutral). J ZX .
{ O -
-h ԍSee Telephone Joint Commenters Reply Comments at 30; Time Warner Reply Comments at 2021. See also
-w City of Olathe Comments at 1415 (noting that local authorities retain their right to manage public rightsofway in
a nondiscriminatory manner).J For instance, a state or local government could impose normal fees
- associated with zoning and construction of an open video system, so long as such fees was
-. applied in a nondiscriminatory and competitively neutral manner. Conversely, state and local
- authorities may not impose specific conditions on use of the rightsofway that are unrelated to
- their management function or that apply to an open video system operator differently than they
apply to other users of the rightsofway.
X
-
& 210. ` ` We believe that most of the concerns raised by the Michigan Cities, et al.
- regarding their need to control use of the rightsofway fall squarely within their legitimate
- management function. To use the examples of the Michigan Cities, et al., local authorities will
- retain their ability to address the following valid local concerns: (1) coordination of construction
-j schedules, (2) establishment of standards and procedures for constructing lines across private
- property, (3) determination of insurance and indemnity requirements, and (4)establishment of
X b -
- rules for local building codes. Y bz .
y O - ԍMichigan Cities, et al. Reply Comments at 1929. Y Similarly, the National League of Cities, et al. cites the
- following responsibilities of state and local governments, that we believe are consistent with
-= nondiscriminatory and competitively neutral management of the rightsofway: (1) scheduling
-i common trenching and street cuts, (2) repairing and resurfacing constructiondama