Before the FEDERAL COMMUNICATIONS COMMISSION Washington, D.C. 20554 In the Matter of ) ) Implementation of Section 302 of ) CS Docket No. 96-46 the Telecommunications Act of 1996 ) ) Open Video Systems ) COMMENTS OF BELL ATLANTIC BELLSOUTH GTE LINCOLN TELEPHONE PACIFIC BELL SBC COMMUNICATIONS April 1, 1996 TABLE OF CONTENTS SUMMARY. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . iii INTRODUCTION . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 1. The Telecommunications Act of 1996. . . . . . . . . . . . . . . . . . 1 2. The Congressional Goal. . . . . . . . . . . . . . . . . . . . . . . . 3 3. Achieving The Congressional Goal. . . . . . . . . . . . . . . . . . . 3 4. The Litmus Test . . . . . . . . . . . . . . . . . . . . . . . . . . . 5 I. GENERAL APPROACH6 II. APPROACH TO DISCRIMINATION ISSUES. . . . . . . . . . . . . . . . . . . . . . . . 8 III. OPEN VIDEO SYSTEM REQUIREMENTS . . . . . . . . . . . . . . . . . . . . . . . . .11 A. Carriage of Video Programming Providers . . . . . . . . . . . . . . . . . .11 1. Administration of Channel Allocation. . . . . . . . . . . . . . . . .14 2. Operator Discretion Regarding Programming . . . . . . . . . . . . . .15 3. Capacity Measurement. . . . . . . . . . . . . . . . . . . . . . . . .16 4. Minimum/Maximum Capacity Limits . . . . . . . . . . . . . . . . . . .18 5. Analog/Digital Channel Allocation . . . . . . . . . . . . . . . . . .18 6. Channel Positioning . . . . . . . . . . . . . . . . . . . . . . . . .19 7. Changes in Demand/Capacity. . . . . . . . . . . . . . . . . . . . . .20 8. Marketing Programming Selected by Others. . . . . . . . . . . . . . .20 B. Rates, Terms, and Conditions of Carriage. . . . . . . . . . . . . . . . . .21 C. Channel Sharing23 D. Sports Exclusivity, Network Non-Duplication and Syndicated Exclusivity. . . . . . . . . . . . . . . . . . . . . . . . . . .24 E. Information Provided to Subscribers . . . . . . . . . . . . . . . . . . . .25 F. Applicability of Certain Title VI Provisions. . . . . . . . . . . . . . . .25 1. Public, Educational, and Governmental Access. . . . . . . . . . . . .25 2. Must Carry and Retransmission Consent . . . . . . . . . . . . . . .27 3. Program Access. . . . . . . . . . . . . . . . . . . . . . . . . . . .28 G. Non-Local Exchange Carriers as Open System Operators. . . . . . . . . . . .28 1. Bundled Packages. . . . . . . . . . . . . . . . . . . . . . . . . . .29 2. Joint Marketing . . . . . . . . . . . . . . . . . . . . . . . . . . .29 H. Certification Process . . . . . . . . . . . . . . . . . . . . . . . . . . .30 I. Dispute Resolution. . . . . . . . . . . . . . . . . . . . . . . . . . . . .31 IV. CONCLUSION 32 SUMMARY Reduced regulation, including freedom from local franchise and any Title II or Title II-like regulation, is the only incentive for deploying open video systems. The market and available technology, which are better suited to cable systems, substantially limit the potential for open video systems to succeed under even the most flexible regulatory regime. Open video systems can succeed only under regulation that acknowledges and adapts to the economic realities of the existing multichannel video programming distribution market and the operational realities of available technologies for the delivery of multichannel video programming services. If the Commission s regulation of open video systems does not result in a lesser burden (in terms of both regulatory process and operational requirements) than local franchise regulation, potential open video system operators will have no incentive to forego the editorial control they can exercise as cable operators or to expend the extra resources necessary to deploy and operate systems that accommodate multiple video programming providers. Likewise, if the Commission permits local authorities to exercise jurisdiction over the use of public rights-of-way by open video systems in a manner that makes elimination of the franchise requirement illusory, any incentive to deploy open video systems will be eliminated. There is a single test by which the Commission must evaluate proposed open video system rules: Will these rules make open video systems an attractive alternative for cable operators? If this question can be answered affirmatively, such rules also will make open video systems an attractive alternative for telephone companies entering the cable business. For open video systems to become a viable business alternative to cable systems, the Commission must minimize rules and maximize business flexibility for open video system operators. It must adopt only those regulations that are absolutely necessary to comply with Section 653. The Commission must not attempt to codify a rule for every conceivable situation, but should leave the details to negotiations between operators and video programming providers and, if necessary, the dispute resolution process, where it can decide disputed issues on the basis of fact. The single most important factor in determining whether regulation will encourage or discourage open video systems is how the Commission approaches discrimination issues. The Commission should recognize that there are many valid business reasons for treating video programming providers differently with respect to the rates, terms, and conditions for carriage. Differences based on legitimate business considerations should not be regarded as unjustly or unreasonably discriminatory. The Commission should not attempt to second-guess the good faith business judgment of operators. Instead, the Commission should allow varied business arrangements with programming providers unless a complaining provider makes, and the operator cannot rebut, the following prima facie discrimination showing: (1) that the operator intentionally treated it substantially differently than similarly situated video programming providers; (2) that such discriminatory treatment was commercially unreasonable in the video programming business; and (3) that the complainant suffered actual and substantial commercial harm from such discrimination. Open video systems will be entering markets in which there are well- established customer expectations. Open video systems will not succeed if operators are restrained by regulation from meeting those expectations. Therefore, operators must be permitted to structure their business arrangements with video programming providers to ensure that their systems offer customers the services they expect. In particular, open video system operators must be given enough flexibility to ensure that their systems offer programming packages that can compete effectively with what incumbent cable operators and other multichannel video programming distributors ( MVPDs ) offer. The Commission s primary focus should be on enabling open video systems to be viable competitors against existing cable systems and other MVPDs. The Commission should not, therefore, adopt detailed rules prescribing open video system requirements unless specifically mandated by Section 653. Under this approach, the Commission would adopt a rule that simply prohibits an open video system operator from discriminating against unaffiliated video programming providers and would leave the details of the operation of open video systems to the good faith business judgment of the operators, who would at all times be subject to the filing of complaints by parties who believe they have been denied carriage in violation of Section 653 and the Commission s rules or that they have been subjected to unjust, unreasonable, or unreasonably discriminatory prices, terms, or conditions. Similarly, the Commission would adopt a simple rule concerning PEG access and would rely on the dispute resolution process as the mechanism for ensuring that operators provide PEG access that complies with Section 653. The certification process should be streamlined to assure that it cannot be used by incumbent cable operators to delay or burden the entry of open video system operators. Any precertification compliance requirements would be inconsistent with the congressional mandate that the Commission act to approve or disapprove certifications within 10 days. The surest way for the Commission to encourage the deployment on a reasonable and timely basis of open video systems and other advanced telecommunications capabilities is to adopt the flexible, pro-competitive rules and the dispute resolution process proposed herein. By making operation of open video systems a genuinely attractive alternative to operation of cable systems, the Commission can encourage the competitive entry and investment that Congress intended and that will bring the benefits of competition to American consumers. Before the FEDERAL COMMUNICATIONS COMMISSION Washington, D.C. 20554 In the Matter of ) ) Implementation of Section 302 of ) CS Docket No. 96-46 the Telecommunications Act of 1996 ) ) Open Video Systems ) COMMENTS The undersigned Joint Parties submit these comments in response to the Notice Of Proposed Rulemaking (FCC 96-99), released on March 11, 1996 ( Notice ). Introduction 1. The Telecommunications Act of 1996 The Telecommunications Act of 1996 ( 1996 Act ) repeals the restriction on telephone company provision of video programming services that previously had been codified in the Communications Act of 1934, as amended ( Communications Act ). Section 302(a) of the 1996 Act also sets forth a new regulatory approach for the provision of video programming by telephone companies by providing for the codification of new Sections 651-653 as a part of Title VI of the Communications Act. New Section 651 provides several alternative ways a telephone company may enter the video programming marketplace, including (1) through radio-based systems under Title III of the Communications Act, (2) on a common carrier basis under Title II of the Communications Act, (3) as a cable system under Title VI of the Communications Act, or (4) by means of an open video system under new Section 653 of the Communications Act. To the extent permitted by the Commission, a cable operator or any other person may also provide video programming through an open video system. The Commission initiated this rulemaking proceeding in accordance with new Subsections 653(b) and (c), which provide for Commission actions necessary to implement a regulatory framework for open video systems. In the Notice, the Commission stated its intention to implement the requirements of the open video system framework in a way that will promote Congress goals of flexible market entry, enhanced competition, streamlined regulation, diversity of programming choices, investment in infrastructure and technology, and increased consumer choice. 2. The Congressional Goal The goal of Congress in adopting Section 653 of the 1996 Act was to encourage common carriers to deploy open video systems and introduce vigorous competition in entertainment and information markets. Congress recognized that common carriers that deploy open systems will be new entrants in established markets and deserve lighter regulatory burdens to level the playing field and that the development of competition and the operation of market forces mean that government oversight and regulation can and should be reduced. 3. Achieving The Congressional Goal Reduced regulation is the only incentive for deploying open video systems. The market and technology substantially limit the potential for open video systems to succeed under even the most flexible regulatory regime. The market and the available technology are better suited to cable systems, over which operators exercise substantially greater editorial control than open video system operators will be permitted. Open video systems can succeed only under regulation that acknowledges and adapts to the economic realities of the existing multichannel video programming distribution market and the operational realities of available technologies for the delivery of multichannel video programming services. The discredited video dialtone rules ignored these realities. Aware of the video dialtone experience, Congress repeatedly expressed its intent that neither Title II regulation nor Title II-like regulation be imposed on open video systems. Section 653(c)(3) states, With respect to the establishment and operation of an open video system, the requirements of this section shall apply in lieu of, and not in addition to, the requirements of title II. As if to underscore this intent, Section 302(b)(3) took the extraordinary step of terminating the Commission s video dialtone regulations. Finally, the legislative history states: The conferees do not intend that the Commission impose title II-like regulation under the authority of this section. Rules and regulations adopted by the Commission pursuant to its jurisdiction under title II should not be merged with or added to the rules and regulations governing open video systems, which will be subject to new section 653, not title II. Section 302(b)(3) of the conference agreement specifically repeals the Commission s video dialtone rules. Those rules implemented a rigid common carrier regime, including the Commission s customer premises equipment and Computer III rules, and thereby created substantial obstacles to the actual operation of open video systems. Open video system operators must cede editorial control over up to two- thirds of the activated channels on their systems to other video programming providers if demand exceeds capacity. In return, they will be subject to less Title VI and local regulation than cable system operators. The only reduction in Title VI regulation that is of any substantial value, however, is elimination of the local cable franchise requirement and attendant local regulation. Substantial Title VI burdens, including the equivalent of franchise fees, will apply to open video system operators. Thus, if the Commission s regulation of open video systems does not result in a lesser burden (in terms of both regulatory process and operational requirements) than local franchise regulation, potential open video system operators will have no reason to forego the editorial control they can exercise as cable operators or to expend the extra resources necessary to deploy and operate systems that accommodate multiple video programming providers. Likewise, if the Commission permits local authorities to exercise jurisdiction over the use of public rights-of-way by open video systems in a manner that makes elimination of the franchise requirement illusory, any incentive to deploy open video systems will be eliminated. In either case, the congressional goal will not be achieved. 4. The Litmus Test There is a single test by which the Commission must evaluate every aspect of proposed open video system rules: Will these rules make open video systems an attractive alternative for cable operators? If this question can be answered affirmatively, such rules also will make open video systems an attractive alternative for telephone companies entering the cable business. Further, to provide a continuing test of whether the open video system rules do in fact make operating an open video system an attractive alternative to operating a cable system (as well as to ensure that all firms have the same business options), the Commission must adopt rules that enable incumbent cable operators to elect the open video system option. Discussion I. General Approach The Commission requests comment concerning what regulations the Commission should adopt to ensure that the open video system operator allocates capacity on a non-discriminatory basis. The Commission then sets out two alternative approaches to that regulation: (1) to adopt a regulation that simply prohibits an open video system operator from discriminating against unaffiliated video programming providers in its allocation of capacity, with complaints alleging discrimination being heard on a case-by-case basis; or (2) to adopt regulations addressing specific issues that may arise in connection with the allocation of channels. The Joint Parties unequivocally support the first approach. For open video systems to have any chance as a business alternative to cable systems, the Commission must minimize rules and maximize business flexibility for open video system operators. It must adopt only those regulations that are absolutely necessary to comply with Section 653, namely, rules that prohibit operators from unreasonable or unjust discrimination against other video programming providers. The rules must afford to open video system operators the greatest flexibility permitted by Section 653. The Commission must not attempt to codify a rule for every conceivable situation, but should leave the details to negotiations between operators and video programming providers and, if necessary, the dispute resolution process, where it can decide disputed issues on the basis of fact, not hypothesis. This flexible approach will increase the prospects for open video system deployment and will fully protect the interests of video programming providers. The time involved in the 180-day dispute resolution process is far less harmful to prospective video programming providers interests than inflexible rules that are certain to discourage and substantially delay deployment of open video systems. At this stage, the Commission should clearly articulate the overall approach it will take to resolving disputes. In particular, the Commission should establish specific presumptions and burdens of proof that will apply in complaint proceedings. These presumptions and burdens of proof should afford significant weight to the good faith business judgment of open video system operators and to voluntarily negotiated arrangements. The Commission also should exemplify factors it will consider relevant to whether an operator has provided carriage in a nondiscriminatory manner, whether its prices, terms, and conditions for carriage are just and reasonable and not unreasonably discriminatory, and whether it otherwise has complied with Section 653. These examples should reflect the full range of legitimate business factors and should avoid interference with voluntarily negotiated terms and conditions between operators and unaffiliated video programming providers. Accordingly, the Appendix sets forth the open video system rules that the Joint Parties propose. The Appendix also proposes notes the Commission should publish with its rules to provide guidance regarding how the Commission will interpret and enforce its rules. Although open video systems rules could logically fit within the Commission s rules for Cable Television Service, the Joint Parties propose a separate part to make clear which rules apply to cable systems and which to open video systems. II. Approach To Discrimination Issues The single most important factor in determining whether regulation will encourage or discourage open video systems is how the Commission approaches discrimination issues. The Commission should recognize that there are many valid business reasons for treating video programming providers differently with respect to the rates, terms, and conditions for carriage. Section 653 prohibits differences in such arrangements only if they are unjustly or unreasonably discriminatory. The Commission s enforcement should focus on the statutory language and should not attempt to second- guess the good faith business judgment of operators. Instead, the Commission should allow varied business arrangements with programming providers unless a complaining provider makes the prima facie discrimination showing set forth below and the operator cannot rebut the showing. The Commission should clearly enunciate factors it will deem relevant to whether differentiated treatment of video programming providers is reasonable and just. Those factors should not be limited to differences in function or cost. The justness and reasonableness of differences in the treatment of different video programming providers should be assessed based on factors relevant to the multichannel video programming distribution business. For example, the Commission should regard such matters as the need to compete with incumbent cable operators, the nature and market value of the programming, customary practices in the industry, customers expectations, demand, and technical limitations of available and affordable technologies as relevant to whether a practice is reasonable. Open video systems will be entering markets in which there already are well-established ways of doing business. For example, some video programming providers are paid by cable operators, some pay cable operators for carriage, and some split revenues with cable operators. Such compensation arrangements reflect the value of carriage to the video programming provider as well as the value of the programming to customers. Open video systems will not succeed if operators must force video programming providers to accept unfamiliar or undesired business arrangements. The Commission should afford open video system operators sufficient latitude to establish relationships with video programming providers that are consistent with common business practices in the industry, as well as to offer new arrangements that may be created in response to the competitive market for video programming delivery. The Commission should not regard differing arrangements and their varied application to programming providers as unreasonably discriminatory. Nor should the Commission regard differences in the effects of reasonable business practices on video programming providers as unreasonable discrimination. Finally, the Commission should presume that an open video system operator s treatment of video programming providers is just and reasonable unless a complaining provider can make the following prima facie discrimination showing: (1) that the operator intentionally treated it substantially differently than similarly situated video programming providers; (2) that such discriminatory treatment was commercially unreasonable in the video programming business; and (3) that the complainant suffered actual and substantial commercial harm from such discrimination. Operators should not be required to defend their practices in the absence of substantial evidence in support of each of these elements. III. Open Video System Requirements A. Carriage of Video Programming Providers Open video systems will be entering markets in which there are well- established customer expectations. Open video systems will not succeed if operators are restrained by regulation from meeting those expectations. Therefore, operators must be permitted to structure their business arrangements with video programming providers to ensure that their systems offer customers the services they expect. In particular, open video system operators must be given enough flexibility to ensure that their systems offer programming packages that can compete effectively with what incumbent cable operators and other multichannel video programming distributors ( MVPDs ) offer. Accordingly, the Commission s primary focus should be on enabling open video systems to be viable competitors against existing cable systems and other MVPDs. The Commission finds in Section 653, however, a goal of intra-system competition to be balanced with inter-system competition. The availability of a substantial portion of an open video system to programming selection by video programming providers not affiliated with the operator doubtlessly will produce significant intra-system competition. The adoption of a rule that requires operators to provide carriage on terms that are just and reasonable and not unreasonably discriminatory is all that is required to assure that such competition will be fair. In adopting this rule, however, the Commission will undermine the competitive viability of open video systems themselves and the competitive prospects of the video programming providers if it fails to give the greater weight to assuring the competitive viability of open video systems against incumbent cable operators. Further, the Joint Parties see in the Commission s reference to balancing intra-system and inter-system competition a frightening spectre of video dialtone, namely, an inference that open video systems operators must not only accommodate the selection of programming by multiple video programming providers but also must design and equip their systems expressly to accommodate multiple MVPDs. Neither Section 653 nor the legislative history expresses any congressional intent to ensure that open video systems bear the added costs of accommodating multiple MVPDs. Section 653 merely requires that multiple video programming providers be permitted to select video programming for carriage on the system. Moreover, Congress stated that it did not intend to limit the number of channels that the carrier and its affiliates may offer to provide directly to subscribers. These words give open video system operators wide latitude to design programming packages and assign use of channels on the system and clearly indicate that Congress did not intend for the open video system operator to design its system expressly for the purpose of accommodating the needs of multiple MVPDs. Finally, Section 653 s permission for operators to carry on only one channel any video programming service that is offered by more than one video programming provider supports the conclusion that Congress primary focus was on making open video systems effective and efficient competitors with incumbent cable operators. Congress goal in establishing the open video system option was to bring competition to incumbent cable operators. Unless the open video system itself can be a viable competitor, there will be neither inter-system competition nor intra-system competition. Accordingly, any Commission rules designed to ensure nondiscriminatory carriage should not interfere with Congress primary goal. As a practical matter, as discussed below, this means open video system operators must have flexibility, within the requirement to avoid unjustly and unreasonably discriminatory terms and conditions, to design viable open video systems. 1. Administration Of Channel Allocation The Joint Parties support the Commission s tentative conclusion that open video system operators should be permitted to administer the allocation of channel capacity. Indeed, any other conclusion would be fundamentally inconsistent with Section 653 and patently absurd. Operators should be allowed to employ any reasonable process to make channels available on a reasonably nondiscriminatory basis to other video programming providers. The Commission s use of the term channel allocation, and its inquiry into whether it should adopt regulations to govern channel allocation and the enrollment process is too reminiscent of video dialtone. Section 653 does not use these terms or reflect these concepts. It merely requires that the Commission prohibit an operator of an open video system from discriminating among video programming providers with regard to carriage on its open video system. The Commission should adopt a rule to that effect and no more. Operators should be given the flexibility to sign up video programming providers in any manner consistent with the nondiscrimination obligation, including determining the appropriate means for informing potential video programming providers of their establishment of open video systems. Any attempt by the Commission to prescribe detailed allocation, enrollment, or notification rules would be counter-productive and would defeat the intent of Congress to provide operators the flexibility to tailor their systems to meet the unique competitive and consumer needs of individual markets. The Commission should confine its inquiries into the reasonableness of specific practices affecting video programming providers to the dispute resolution process. 2. Operator Discretion Regarding Programming The Commission can and should permit operators to refuse carriage to operators of cable systems in the open video system s service area. In view of Congress intent that open video systems introduce vigorous competition in entertainment and information markets , the Commission should presume conclusively that such refusals are reasonable. Otherwise, incumbent cable operators will be able to interfere with the successful operation of competing open video systems. One of the Joint Parties, BellSouth, has direct experience with such interference. The incumbent cable operator in BellSouth s video dialtone trial area requested half of the system s analog channels and a substantial number of digital channels. Even though that operator was allocated a smaller number of analog channels, its presence as an enrolled programmer during preparation for the trial has greatly increased the difficulty of creating and maintaining a coalition of enrolled programmers for development of a competitive retail offering. Moreover, its participation has greatly complicated the provision of competitively sensitive, but essential, information to other enrolled programmers. 3. Capacity Measurement The Notice correctly observes that measuring the capacity of an open video system may not be entirely clear in all cases. The advent and continuing development of digital technologies make it impossible to prescribe a specific way to measure digital capacity that will be appropriate for all systems. The suggestion that capacity be measured based solely on the system s total bandwidth is contrary to Section 653(b)(1)(B), which refers to channel capacity, activated channel capacity, and number of channels . The Commission should simply adopt the rule required by Section 653(b)(1)(B) without elaboration. Operators will be required to determine how to comply based on the characteristics of their systems. If those determinations are challenged, the Commission should approve any approach that reasonably reflects the technical characteristics of the system. The Commission s tentative conclusion that the capacity of switched digital systems can be presumed to be unlimited is a good working hypothesis, but it must be tempered by a recognition that infinite expansion of such systems may not be economically reasonable or technologically feasible. In any event, there is too much potential for variation among switched digital systems for the Commission to adopt specific rules for the measurement of such capacity. While the Notice correctly reaches the tentative conclusion that PEG channels and must-carry channels should not be counted as part of the operator s one-third, it incorrectly proposes to deduct those channels from the total prior to calculating the operator s one-third. This approach violates Section 653, which unambiguously bases the operator s one-third on the activated channel capacity. Title VI defines activated channels as those channels engineered at the head end 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 public, educational, or governmental use. Although this definition is expressed in terms of cable systems, there is no reason to believe that Congress intended any different meaning for open video systems. Section 653 does not authorize the Commission to deduct any activated channels for purposes of calculating the operator s one-third. 4. Minimum/Maximum Capacity Limits Congress intended that open video system operators be restricted to selecting the programming on no less than one-third of the activated channels if demand exceeds capacity. Nothing in the 1996 Act, however, can be interpreted to restrict the open video system operator to one-third of the capacity if demand is insufficient to fill existing or anticipated capacity. In addition, no individual unaffiliated video programming provider should be allowed to select the programming on more channels than the open video system operator and its affiliates. For example, where the open video system operator and only one unaffiliated video programming provider seek carriage, the open video system operator should be restricted to control of the programming on no fewer channels than the unaffiliated video programming provider. 5. Analog/Digital Channel Allocation The absolute necessity of competing effectively against incumbent cable operators demands that open video system operators be permitted to assign programming to analog or digital channels as they deem necessary to provide marketable, competitive programming packages. An operator s decisions regarding channel assignment should be considered unjust or unreasonable only if a complainant makes the prima facie discrimination showing set forth above and the operator cannot rebut that showing. 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 operators. To afford the essential business flexibility described in the foregoing paragraphs, the Commission s rules or its interpretation of its rules should, when demand exceeds capacity, permit operators to select programming for any one-third of the activated channels to the extent necessary to compete effectively with incumbent cable operators. Congress did not distinguish between analog and digital channels for this purpose. Neither should the Commission. 6. Channel Positioning Operators must be permitted to assign channel positions as necessary to meet consumers expectations and facilitate the marketing of competitive packages, as well as to meet channel positioning requirements for must-carry stations, satisfy the varied requirements of video programming providers, and deal with technological limitations. An operator s decisions regarding channel position should be considered unjust or unreasonable only if a complainant makes the prima facie discrimination showing set forth above and the operator cannot rebut that showing. 7. Changes In Demand/Capacity Operators must be permitted to handle changes in demand after the initial assignment of a system s capacity in a manner that does not disrupt service. The Commission should not prescribe any specific approach, but should permit operators to accommodate such changes in any reasonable manner. If excess demand materializes, an operator should be given a reasonable period of time to accommodate the demand. For example, if carriage is offered on fixed duration contracts (e.g., 5 years), then a reasonable period of time would be until the next anniversary of those contracts. Otherwise, prospective operators will not be assured of being able to meet customers expectations of reasonably stable programming packages. The Commission should not prescribe specific procedures for the assignment of added or newly available capacity. Such procedures should be left in the first instance to the business judgment of the operator exercised in light of Section 653 s prohibition of unreasonable discrimination. 8. Marketing Programming Selected By Others The Commission correctly concludes that Section 653(b)(1)(B) permits operators to market directly to customers any or all of the programming selected by unaffiliated video programming providers. As noted previously, Congress focused on enabling open video systems to compete effectively with incumbent cable operators and accordingly stated its intent not to limit the number of channels of programming an operator may offer to provide to customers. This freedom to market packages of programming - including programming selected by others - will help to make open video systems competitively viable. B. Rates, Terms and Conditions of Carriage That open video systems are not to be regulated as common carrier services means, among other things, that the Commission is precluded from using Title II-like regulations to enforce the requirement that prices, terms, and conditions for carriage be just and reasonable. Thus, the Commission can neither require the filing of tariffs or the comparable publication of contracts with video programming providers nor promulgate detailed rules governing pricing. The Joint Parties strongly oppose any requirement that they be required to make their contracts public. Such a requirement would amount to a backdoor imposition of Title II-like public tariff requirements on open video system operators. This tentative conclusion is inconsistent with the 1996 Act s requirement that open video system operators as new entrants be subject to lesser regulatory burdens than incumbent cable operators, and it directly contradicts repeated Commission findings that public rate filings in competitive markets lead to price coordination and are not in the public interest. In the Notice of Proposed Rulemaking in CC Docket No. 96-61, the Commission has tentatively concluded that tariff filings for non-dominant interexchange carriers (including AT&T) are not necessary to ensure that charges and practices of those carriers are just, reasonable, and not unreasonably discriminatory. That notice also restates the Commission s earlier finding that firms lacking market power simply cannot rationally price their services in ways which, or impose terms and conditions which, contravene Sections 201(b) and 202(a) of the Act. Similarly, competitive market forces will operate to ensure reasonable rates, terms, and conditions for carriage on open video systems. Moreover, with the minor exception of leased access, incumbent cable operators have no obligation to disclose their contracts. Also, upon a local exchange carrier s deployment of an open video system in an area, the incumbent cable operator will no longer be required to file upper tier programming contracts with the Commission. Even now, those contracts are not publicly disclosed. Under these circumstances, the mere suggestion of a contract disclosure requirement for new market entrants is nothing short of astounding. Such disclosure would serve only to position open video system operators rates as an umbrella for their competitors. No rule is needed in this area beyond the requirement stated in Section 653. The Commission should, however, provide guidance in notes regarding the approach it will take in complaint proceedings. Such notes should indicate that open video system operators will be permitted to place reasonable conditions on video programming providers seeking channels on the system (including, but not limited to, requirements that providers have legal access to programming, meet the system s technical standards, and meet the system s service schedule; requirements regarding scrambling or blocking of obscene or indecent programming; indemnification of the operator for copyright and intellectual property claims as to carried content; deposits; and minimum contract periods). The Commission should make it clear that operators are required to deal only with parties that have contractual access to programming and that operators have no obligation to accommodate a mere request for capacity. Otherwise, capacity on systems could be warehoused and held for speculation by parties that have no prospect of using it to deliver programming. Finally, the notes should establish a preference for voluntarily negotiated arrangements with video programming providers. All such arrangements with unaffiliated parties should be presumed just and reasonable regardless of how they may differ from one another. C. Channel Sharing The Commission s conclusion that channel sharing decisions should be left to the discretion of open video system operators is the only correct reading of Section 653. Operators will require sharing only when doing so makes good business sense from both technical and market perspectives. Thus, the Commission should adopt only a rule that permits channel sharing in the broad terms of the statute. More detailed rules cannot possibly reflect the variety of circumstances in which operators may elect to require channel sharing or the variety of ways in which they may provide subscribers with ready and immediate access to shared channels. The questions raised by the Notice cannot be addressed adequately without reference to the particular facts of particular systems. D. Sports Exclusivity, Network Non-Duplication and Syndicated Exclusivity In general, there is no reason for these rules to be applied to open video systems that cross multiple communities any differently than they are applied to cable systems that cross multiple communities. The primary difference between cable systems and open video systems that these rules should reflect is that multiple parties will be responsible for selection of programming on open video systems. The video programming provider responsible for selecting programming, not the open video system operator, should be held legally responsible for compliance with these rules as to that programming, including the responsibility to indemnify the operator if the video programming provider s failure to comply causes loss to the operator. Open video system operators and video programming providers should be permitted to handle the details of such compliance in their contracts. E. Information Provided to Subscribers The Commission should minimize its regulations by adopting a rule that merely restates this requirement as expressed in Section 653, with one exception: The Commission should clarify that this requirement applies only to information provided to all subscribers over the system itself and does not apply to information provided over or in connection with the channels over which the operator, its affiliates, or other video programming providers have exclusive editorial control. Operators should be free to determine how best to comply with this requirement on each system. The potential variety in legitimate approaches to system navigation, menus, the provision of programming information, and other matters related to program selection, to the extent the operator chooses to make them available, makes any other approach unworkable. F. Applicability of Certain Title VI Provisions 1. Public, Educational, And Governmental Access Section 653(c)(2)(A) gives the Commission great latitude to fashion an approach to PEG access on open video systems that keeps operators free from local franchise regulation as Congress intended. To ensure such freedom, the Commission must affirm that operators are not required to negotiate PEG access or related matters with state or local authorities and must not tie operators duties directly to regulation of individual cable operators. Instead, the Commission must prescribe regulations that to the extent possible impose obligations that are no greater or lesser than the obligations of cable operators. In that regard, Section 611 requires only that channel capacity be made available for PEG access. Therefore, the Commission s objective should be to ensure that open video system operators provide PEG access that is comparable to that generally in use in the open video system service area, not to mirror requirements imposed by individual franchising authorities on specific cable operators. Moreover, because open video systems will likely cross multiple franchise boundaries and serve portions of numerous franchise areas, each open video system operator must have the flexibility to determine based on technical considerations and market conditions the manner of meeting PEG access requirements. The Commissions general approach to regulating PEG access should be like that which the Joint Parties have urged for other open video system requirements: Adopt a general rule that requires operators to provide PEG access that overall is comparable to that generally in use in the open video system service area and resolve specific issues in the dispute resolution process. Such an approach would permit operators to satisfy Section 653 s PEG access requirement by any reasonable means, including, but not limited to, retransmission of incumbent cable operators PEG feeds or time-sharing of channels by PEG entities. It also would permit operators to satisfy PEG access requirements by making capacity available to carry the average amount of PEG programming carried by cable operators in the service area. This approach would give operators a reasonable time to reflect changes in the PEG access provided generally in open video system service areas. Open video system operators should not be required to dedicate entire channels to individual PEG entities. They should be permitted to make PEG access available to qualified users on a first-come-first-served basis, by lottery, or any other reasonable mechanism. PEG programmers must be responsible for making their programming feed available for delivery to the open video system headend. 2. Must Carry And Retransmission Consent In general, must-carry and retransmission consent rules should apply to open video systems in the same way they apply to cable systems. In order for open video systems to be competitively viable, the Commission should require broadcasters to offer consent for retransmission of their signals by open video system operators or their affiliates on the same terms and conditions as such signals are made available for retransmission by cable operators. 3. Program Access At a minimum, the program access rules for open video system providers should be equivalent to those for the cable industry, so that open video systems have the opportunity to compete with incumbents on a level playing field. G. Non-LECs as Open Video System Operators As stated previously, it is extremely important, as a test of the reasonableness of the Commission s open video system rules and for the sake of competitive neutrality, to extend to other providers of cable service the option of providing open video systems. The Commission should provide cable operators a genuine opportunity to convert to open video systems and operate them under the same rules as common carriers open video systems. The ambiguity created by Section 653(a)(1) s use of the term cable service with respect to carriers and the term video programming with respect to others can be reasonably resolved in favor of extending the open video system option to all providers of cable service. An interpretation that limits cable operators and others to being video programming providers on open video systems operated by carriers would be inconsistent with the pro-competitive intent of Section 653. 1. Bundled packages The Notice correctly acknowledges the value that bundled packages of telephone services, cable services, and data transmission can bring to consumers. There is growing evidence that such packages will result from competition in communications markets. The Commission should expressly recognize that such packaging is in the public interest, but should not adopt rules. Rather, the Commission should eschew rules and let the market determine the manner and degree of service bundling options offered to customers. Competitive markets require regulatory forbearance. 2. Joint Marketing The 1996 Act leaves the door wide open for the integrated provision of video programming and telephone services, including the joint marketing of such services. The 1996 Act s treatment of joint marketing of long distance and telephone services demonstrates that Congress was aware of joint marketing issues. The 1996 Act s total silence on joint marketing of telephone and video programming services sends a strong message to the Commission: Do not interfere with the operation of the market. H. Certification Process The Commission s certification process must be streamlined if the Commission is to approve or disapprove certifications within 10 days, as the 1996 Act mandates. As proposed in the Appendix, the Commission should require only that a certificate provide information comparable to that required in registration certificates for new cable systems and state that the operator will comply with the Commission s rules. The certification process must not become an opportunity for competitors to delay entry. Any requirement for pre-certification filings or compliance activity would clearly violate the congressional intent to provide for an expedited process that avoids the pitfalls of the Commission s video dialtone procedures. Further, pre-certification requirements could create the untenable situation in which an operator and its investors require the business certainty provided by certification before engaging in implementation activity but are required by the Commission to complete significant implementation before qualifying for certification. There is no need for the Commission to take any action regarding cost allocation prior to certification or to impose cost allocation requirements as a condition for certification. The Commission already has rules in place in Part 64 that fully accommodate the joint provision of common carrier and non- common carrier services. Common carriers must comply with Part 64 before providing video programming services on either an open video system or a cable system. The addition of a cost allocation requirement to the certification process would be redundant. The Commission must state clearly what the effect of certification is. As previously stated, the only substantial incentive for establishing open video systems instead of cable systems is the ability to avoid local franchise negotiations and attendant local regulation. Therefore, the rules must clearly provide that local franchising authorities are not permitted to exercise any authority over establishment or operation of open video systems that would enable them to delay or impede market entry in any manner or otherwise burden the operation of open video systems. By not permitting state or local authorities to require franchises or otherwise regulate open video systems, Congress retained for itself and the Commission exclusive authority to regulate open video systems. The Commission, therefore, should preempt any state or local requirements that would burden or delay the deployment of or discriminate against open video systems. I. Dispute Resolution The Appendix proposes rules for dispute resolution. These rules are modeled after the Commission s rules for adjudicating disputes relating to program access. This is the process by which the Commission should resolve specific issues regarding compliance with the rules. The rules should extend presumptions of lawfulness to operators and impose sufficient burdens of proof on complainants to discourage the filing of insubstantial complaints. This can be accomplished by adopting the notes proposed in the Appendix. Conclusion The Commission has asked also how it can in this rulemaking advance Congress goal to encourage the deployment on a reasonable and timely basis of advanced telecommunications capability . The surest way for the Commission to further that goal is to adopt the flexible, pro-competitive rules and the dispute resolution process that these comments have proposed. By making operation of open video systems a genuinely attractive alternative to operation of cable systems, the Commission can encourage the competitive entry and investment that local franchising processes often discourage. Respectfully submitted, BELL ATLANTIC TELEPHONE COMPANIES and BELL ATLANTIC VIDEO SERVICES COMPANY By their Attorney: ________________________________ Leslie A. Vial 1320 North Court House Road Eighth Floor Arlington, VA 22201 (703) 974-2819 BELLSOUTH CORPORATION and BELLSOUTH TELECOMMUNICATIONS, INC. By their Attorneys: ________________________________ Herschel L. Abbott, Jr. Michael A. Tanner Suite 4300 675 West Peachtree St., N.E. Atlanta, GA 30375 (404) 335-0764 GTE SERVICE CORPORATION and its affiliated domestic telephone operating companies and GTE MEDIA VENTURES, INC. By their Attorneys: ________________________________ John F. Raposa, HQE03J27 P. O. Box 152092 Irving, TX 75015-2092 Gail L. Polivy 1850 M Street, N.W. Suite 1200 Washington, D.C. 20035 (202) 463-5214 LINCOLN TELEPHONE AND TELEGRAPH COMPANY By its Attorneys: ________________________________ Robert A. Mazer Albert Shuldiner Vinson & Elkins 1455 Pennsylvania Avenue, N.W. Washington, D.C. 20004-1008 (202) 639-6500 PACIFIC BELL By its Attorneys: ________________________________ Lucille M. Mates Christopher L. Rasmussen Sarah Rubenstein 140 New Montgomery Street Room 1522A San Francisco, CA 94105 (415) 542-7649 Margaret E. Garber 1275 Pennsylvania Avenue, N.W. Washington, D.C. 20004 (202) 383-6472 SBC COMMUNICATIONS, INC. and SOUTHWESTERN BELL TELEPHONE COMPANY By their Attorneys: ________________________________ James D. Ellis Robert M. Lynch David F. Brown 175 E. Houston Room 1254 San Antonio, TX 78205 (210) 351-3478 Mary W. Marks One Bell Center Room 3558 St. Louis, MO 63101 Date: April 1, 1996 APPENDIX Proposed Open Video System Rules Part __ of Title 47 of the Code of Federal Regulations is created as follows: Part __ -- Open Video Systems.  __.__ Purpose. The rules and regulations set forth in this part provide for the certification of open video systems and for their operation in conformity with standards for carriage of television broadcast signals, syndicated program exclusivity, access channels, and related matters.  __.__ Definitions. (a) Open video system. A facility consisting of a set of transmission paths and associated signal generation, reception, and control equipment that is designed to provide cable service which includes video programming and which is provided to multiple subscribers within a community, provided that the Commission has certified that such system complies with this part. (b) Open video system operator ( operator ). Any person or group of persons who provides cable service over an open video system and directly or through one or more affiliates owns a significant interest in such open video system. (c) Subscriber. A member of the general public who receives video programming distributed over an open video system and does not further distribute it. (d) Video programming provider. Any person or group of persons who has the right under the copyright laws to select and contract for carriage of specific video programming on an open video system. (e) Affiliate. When used in relation to any person, another person who owns or controls, or is owned or controlled by, or is under common ownership or control with, such person. (f) Person. An individual, partnership, association, joint stock company, trust, corporation or the like, or governmental entity. (g) Activated channels. This term shall have the same meaning as provided in the cable television rules, 47 C.F.R.  76.5(nn). (h) Cable service. This term shall have the same meaning as provided in the cable television rules, 47 C.F.R.  76.5(ff).  __.__ Application. This part shall apply to any person that provides video programming service to subscribers through an open video system certified by the Commission. Except as otherwise provided in this part, neither the provisions of part 76 nor any other rule or regulation of the Commission shall apply to the operation of open video systems.  __.__ Certificates of compliance. (a) In order to qualify for the reduced regulatory burdens applicable to open video systems, a person proposing to operate an open video system shall certify to the Commission that it will operate such open video system in compliance with this part. (b) The Commission shall publish notice of the receipt of any such certificate of compliance and shall act to approve or disapprove any such certification within 10 days after receipt of such certification. In the absence of any action by the Commission approving or disapproving a certificate of compliance, such certificate shall be deemed to be approved on the 10th calendar day after receipt by the Commission. (c) Contents. A certificate of compliance for an open video system shall include the following information: (1) The legal name of the proposed open video system operator, entity identification or social security number, and whether the operator is an individual, private association, partnership, or corporation. If the operator is a partnership, the legal name of the partner responsible for communications with the Commission shall be supplied; (2) The assumed name (if any) used by the open video system operator for doing business in the community(ies); (3) The mailing address, including ZIP code, of the open video system operator and the telephone number to which all communications are to be directed; (4) The date the open video system is scheduled to commence providing service to subscribers; (5) The name of the community(ies) or area(s) to be served by the open video system and the county(ies) in which it is located; (6) Certification that the proposed open video system will be operated in compliance with this part. (d) Effect of Commission approval. Commission approval of a certificate of compliance shall preclude any state or local authority from taking the following actions: (i) requiring an open video system operator that has existing authority to place any kind of communications facilities on public rights-of-way to obtain additional authorization for the use of such rights-of-way for the construction of an open video system; and (ii) imposing on an open video system operator any requirement or condition with respect to construction or operation of the open video system over public rights-of-way that is any more burdensome than requirements or conditions imposed on other entities using such public rights-of-way for interstate communications facilities.  __.__ Incorporation of selected provisions of part 76 The following provisions of part 76 that apply to cable operators shall also apply to open video system operators: Subpart E [Equal Employment Opportunity Requirements]; Subpart O [Competitive Access to Cable Programming]; Subpart Q [Regulation of Carriage Agreements];  76.503 [National subscriber limits];  76.504 [Limits on carriage of vertically integrated programming];  76.610, 76.611, 76.613, 76.614, 76.615, 76.616, and 76.617 [relating to signal leakage and harmful RF interference]; and  76.981 [Negative option billing].  __.__ Carriage on open video systems. (a) Except as required pursuant to the incorporation of subpart D of part 76 into this part, an operator of an open video system shall not unreasonably discriminate among video programming providers with regard to carriage on its system and shall provide such carriage pursuant to rates, terms, and conditions that are just and reasonable and are not unjustly or unreasonably discriminatory. Note 1: When demand for carriage exceeds capacity in an established open video system, the operator is not required, and it will not be considered discrimination for the operator to refuse, to reduce its capacity in order to accommodate carriage requests from unaffiliated programmers until the end of the current contract period, and in any case, the operator and/or its affiliate will not be required to reduce its capacity to less than one-third of the total system capacity. Note 2: If the operator has selected programming for no more than one-third of the total system capacity, it will not be considered discrimination for the operator to refuse requests for carriage which exceed the capacity of the system. Nothing in this subsection, however, shall preclude: (1) The imposition on video programming providers of reasonable requirements for creditworthiness and financial stability. Note 1: Open video system operators are permitted to create a distinct class or classes of service in pricing based on credit considerations or financial stability. Operators are not permitted to manifest factors such as creditworthiness or financial stability in price differentials if such factors are already taken into account through different terms or conditions such as special credit requirements or payment guarantees. Note 2: Open video system operators are permitted to require security deposits from video programming providers. Note 3: Open video system operators are permitted to require video programming providers to agree to minimum contract periods for carriage of their video programming. (2) Requirements that video programming providers provide evidence concerning their legal access to the programming such providers propose for carriage on the open video system prior to execution of the carriage agreement with the open video system operator. (3) Requirements that video programming providers provide evidence concerning their ability to meet certain technical standards in order to be provided carriage on the open video system. (4) Requirements that video programming providers provide reasonable assurances to the open video system operator that such providers will be able to provide programming on its assigned channels in a timely manner. Note: For example, open video system operators may require that providers of video programming be prepared to offer programming on the open video system within a specified period after the operational date of the system, or within a specified period after channel capacity is made available to the programmer, unless otherwise agreed in the carriage contract. The listing of certain permissible requirements in this subsection is not intended to preclude other requirements that may be commercially reasonable. (b) If demand exceeds the channel capacity of an open video system, neither the operator of the system and its affiliates nor any other video programming provider shall select the video programming services for carriage on more than one-third of the activated channel capacity of such system, provided, however, that there shall be no limit on the number of channels on such system that the operator, its affiliates, or another video programming provider may offer to provide directly to subscribers. Note 1: Open video system operators may limit the capacity made available to any single unaffiliated video programming provider to an amount no greater than the amount of channel capacity allocable to the operator and/or its affiliates. Note 2: The open video system operator and its affiliate may select programming for one-third of the total activated channels on the open video system. Channels reserved for public, educational, and governmental carriage, for must-carry or retransmission consent carriage, or for shared channel carriage (to the extent that an open video system operator permits or requires shared channel carriage) are included in total activated channels for the purposes of calculating the one-third of such channels for which the open video system operator is allowed to select programming but are not included in the one-third of capacity for which the open video system operator is permitted to select programming. (c) An open video system operator or its affiliate is not limited with respect to the number of channels that it offers or markets directly to subscribers. Note: The open video system operator may offer or market directly to subscribers all programming selected by it and/or its affiliate as well as programming on the open video system selected by unaffiliated video programming providers. (d) An open video system operator is permitted but is not required to adopt a plan to carry on only one channel any video programming service that is offered by more than one video programming provider (including the operator s video programming affiliate). If an open video system operator adopts a channel sharing plan, it may administer the channel sharing arrangements or choose another entity to administer such arrangements. Shared channels must be readily and immediately available to all subscribers. Note: Shared channels will be included in the total channel capacity of the open video system for purposes of calculating the one-third of activated channels for which the open video system operator and/or its affiliate is permitted to select video programming when demand for carriage exceeds the capacity of the system, but shared channels will not be included in the one-third of total channel capacity to which the operator and/or its affiliate are limited in the selection of programming. (e) Open video system operators may not unreasonably discriminate in favor of the operator and/or its affiliate with respect to material or information (including advertising) provided to subscribers for the subscribers use in selecting programming on the open video system. Open video system operators must ensure that video programming providers and/or copyright holders are able to identify suitably and uniquely their programming services to subscribers. Open video system operators may not change or alter any such identification that is transmitted as part of the programming signal. Open video system operators are not permitted to omit television broadcast stations or other video programming provided by unaffiliated entities on the open video system from any basic navigational device, guide, or menu. Nothing in this section prohibits an operator or its affiliate from negotiating mutually agreeable terms and conditions with over-the-air broadcast stations and other unaffiliated video programming providers to allow consumer access to their signals on any level or screen of any gateway, menu, or other program guide, whether provided by the operator or its affiliate. Note: Nothing in this rule requires an operator or its affiliate to provide any navigational device, guide, or menu. The requirements in this rule apply only to information provided by the open video system operator to all subscribers over the open video system itself and does not apply to information provided over the channels over which the operator, its affiliate, or other video programming provider has exclusive editorial control. (f) Public, educational and governmental access. An open video system operator shall designate capacity for public, educational, or governmental use. An operator s provision of such capacity shall be subject to the following regulations, but shall not be subject to regulation by any franchising authority: (1) An operator shall make capacity available for public, educational, or governmental access in a manner that is comparable to that generally in use in the open video system service area. (2) An operator shall not be required to dedicate entire channels to any particular entity in conjunction with public, educational, or governmental access. (3) An operator shall make public, educational, and governmental access available to qualified users on a first-come, first-served basis, by lottery, or by any other reasonable mechanism. (4) An operator will be given a reasonable amount of time to make system adjustments required to accommodate changes in public, educational, and governmental access obligations. (5) An operator may use channel capacity designated for public, educational, or governmental use for other purposes if such channel capacity is not being used for the purposes designated. (6) An operator shall not exercise any editorial control over any public, educational, or governmental use of channel capacity provided pursuant to this subsection, provided, however, that any operator may prohibit the use on its system of any channel capacity designated for public, educational, or governmental use which contains obscene material, indecent material as defined in  76.701(g), or material soliciting or promoting unlawful conduct. For purposes of this section, material soliciting or promoting unlawful conduct shall mean material that is otherwise proscribed by law. An operator may require any access user, or access manager or administrator, to certify that its programming does not contain any of the materials described above and that reasonable efforts will be used to ensure that live programming does not contain such material.  __.__ Carriage of Television Broadcast Signals. The provisions of Subpart D (Carriage of Television Broadcast Signals), with the exception of 76.67, that apply to cable operators shall apply to open video system operators.  __.__ Network nonduplication protection and syndicated exclusivity. (a) Any person that selects video programming services for distribution over an open video system shall, with respect to the programming services that it has selected, be subject to the requirements of 76.67,  76.92 et seq., and  76.151 et seq., applicable to cable operators. (b) An open video system operator shall be responsible for compliance with such requirements only for the programming services it has selected. (c) An operator may undertake pursuant to its carriage contracts with video programming providers to provide services that enable such parties to comply with the requirements of this section. Such contracts may require video programming providers to indemnify the operator against any claims or losses resulting from the video programming provider s failure to comply with this section.  __.__ Fees. (a) An operator of an open video system under this part may be subject to the payment of fees on the gross revenues of the operator for the provision of cable service lawfully imposed by a local franchising authority or other governmental entity, in lieu of the franchise fees permitted under 47 U.S.C.  542. The rate at which such fees are imposed shall not exceed the rate at which franchise fees are imposed on any cable operator transmitting video programming in the franchise area. For purposes of this subsection, gross revenues shall include revenues of the operator only for the provision of cable service and shall exclude any federal, state, city or other tax, fee, or surcharge imposed upon subscribers, subscriber deposits on equipment owned by the open video system operator, charges billed to subscribers but not collected, refunds to subscribers, revenues collected from video programming providers for carriage and for any services provided by the operator in connection with such carriage, and any fees paid pursuant to this subsection in lieu of franchise fees. (b) An operator of an open video system may designate that portion of a subscriber's bill attributable to the fee under this subparagraph as a separate item on the bill.  __.__ Dispute resolution. (a) Complaints. Any provider of video programming aggrieved by conduct that it alleges to constitute a violation of the regulations set forth in this part or in Section 653 of the Communications Act (47 U.S.C.  653) may commence an adjudicatory proceeding at the Commission. The Commission shall resolve any such dispute within 180 days after the filing of a complaint. If the Commission fails to issue an order resolving a dispute within such time period, the open video system operator shall not be liable for any damages accruing after the running of said 180 days. (b) Alternate dispute resolution. An open video system operator may provide in its contracts with video programming providers that any dispute must be submitted to arbitration, mediation, or any other commercially reasonable alternative method for dispute resolution prior to submission of a complaint to the Commission. The Commission will not act on any complaint until the parties to such a contract have fully complied with such contractual provisions unless the party submitting the dispute to the Commission demonstrates by a preponderance of the evidence that the other party has acted in bad faith to defeat the contractual procedures for alternate dispute resolution. The period of time that the parties are involved in alternate dispute resolution shall not be counted in the 180-day period established in subsection (a) of this subpart. (c) Burden of proof in discrimination disputes. In disputes regarding whether the open video system operator has violated any provision of this part or Section 653 of the Telecommunications Act of 1996 prohibiting discrimination against any video programming providers, a complaining party shall allege with particularity and shall support by substantial evidence accompanying said complaint the following: (1) that the operator intentionally treated it substantially differently from other, similarly- situated video programming providers, including the operator or its affiliates, (2) that such discriminatory treatment was commercially unreasonable, and (3) that such discriminatory treatment caused the complaining party actual and substantial harm in its commercial interests. The Commission will dismiss complaints not complying with this subsection on its own motion or on the motion of the defendant. (d) Notice required prior to filing of complaint. Any aggrieved party intending to file a complaint under this section must first notify the potential defendant open video system operator that it intends to file a complaint with the Commission based on actions alleged to violate one or more of the provisions contained in this part or in Section 653 of the Communications Act. The notice must be in writing and must be sufficiently detailed so that its recipient(s) can determine the specific nature of the potential complaint. The potential complainant must allow a minimum of ten (10) days for the potential defendant(s) to respond before filing a complaint with the Commission. (e) General pleading requirements. Complaint proceedings under this part are generally resolved on a written record consisting of a complaint, answer, and reply, but may also include other written submissions such as briefs and written interrogatories. All written submissions, both substantive and procedural, must conform to the following standards : (1) Pleadings must be clear, concise, and explicit. All matters concerning a claim, defense or requested remedy, should be pleaded fully and with specificity. (2) Pleadings must contain facts which, if true, are sufficient to constitute a violation of the Communications Act or of this part, or a defense to such alleged violation. (3) Facts must be supported by relevant documentation or affidavit. (4) Legal arguments must be supported by appropriate judicial, Commission, or statutory authority. (5) Opposing authorities must be distinguished. (6) Copies must be provided of all non-Commission authorities relied upon which are not routinely available in national reporting systems, such as unpublished decisions or slip opinions of courts or administrative agencies. (7) Parties are responsible for the continuing accuracy and completeness of all information and supporting authority furnished in a pending complaint proceeding. Information submitted, as well as relevant legal authorities, must be current and updated as necessary and in a timely manner at any time before a decision is rendered on the merits of the complaint. (f) Complaint. (1) A complaint filed under this part shall contain: (A) The name of the complainant and each defendant; (B) The type of entity that describes complainant (i.e., individual, private association, partnership, or corporation), the address and telephone number of the complainant, and the address and telephone number of each defendant; (C) The name, address and telephone number of complainant's attorney, if complainant is represented by counsel; (D) Citation to the section of the Communications Act and/or this part alleged to have been violated; (E) A complete statement of facts, which, if proven true, would constitute such a violation; (F) Any evidence that supports the truth or accuracy of the alleged facts; (G) Evidence that the complainant provides video programming and (1) that the operator intentionally treated it substantially differently from other, similarly-situated video programming providers, including the operator or its affiliates, (2) that such discriminatory treatment was commercially unreasonable, and (3) that such discriminatory treatment caused the complaining party actual and substantial harm in its commercial interests. (H) If discrimination in rates, terms, and conditions of carriage is alleged, documentary evidence such as a rate card or a programming contract that demonstrates a differential in price, terms or conditions between complainant and a competing video programming provider or, if no programming contract or rate card is submitted with the complaint, an affidavit signed by an officer of complainant alleging that a differential in price, terms or conditions exists, a description of the nature and extent (if known or reasonably estimated by the complainant) of the differential, together with a statement that defendant refused to provide any further specific comparative information; (I) If a programming contract or a rate card is submitted with the complaint in support of the alleged violation, specific references to the relevant provisions therein; and (J) The specific relief sought. (3) The following format may be used in cases to which it is applicable, with such modifications as the circumstances may render necessary: Before The Federal Communications Commission, Washington, DC 20554 In the Matter of Complainant v. File No. (To be inserted by the Commission) Defendant. [Insert Subject/Nature of Issue: Unjust or Unreasonable Discrimination in Rates, Terms, and Conditions; Discriminatory Denial of Carriage] Open Video System Complaint To: The Commission. The complainant (here insert full name of complainant and type of entity of such complainant): 1. (Here state the complainant's post office address and telephone number). 2. (Here insert the name, address and telephone number of each defendant). 3. (Here insert fully and clearly the specific act or thing complained of, together with such facts as are necessary to give full understanding of the matter, including relevant legal and documentary support). Wherefore, complainant asks (here state specifically the relief desired). (Date) (Name of complainant) (Name, address, and telephone number of attorney, if any) (4) The complaint must be accompanied by appropriate evidence demonstrating that the required notification pursuant to paragraph (d) of this section has been made. (g) Answer. (1) Any open video system operator upon which a complaint is served under this section shall answer within thirty (30) days of service of the complaint, unless otherwise directed by the Commission. (2) The answer shall advise the parties and the Commission fully and completely of the nature of any and all defenses, and shall respond specifically to all material allegations of the complaint. Collateral or immaterial issues shall be avoided in answers and every effort should be made to narrow the issues. Any defendant failing to file and serve an answer within the time and in the manner prescribed by these rules may be deemed in default and an order may be entered against defendant in accordance with the allegations contained in the complaint. (3) The answer shall state concisely any and all defenses to each claim asserted and shall admit or deny the averments on which the adverse party relies. If the defendant is without knowledge or information sufficient to form a belief as to the truth of an averment, the defendant shall so state and this has the effect of a denial. When a defendant intends in good faith to deny only part of an averment, the answer shall specify so much of it as is true and shall deny only the remainder. The defendant may make its denials as specific denials of designated averments or paragraphs, or may generally deny all the averments except such designated averments or paragraphs as the defendant expressly admits. When the defendant intends to controvert all averments, the defendant may do so by general denial. (4) Averments in a complaint are deemed to be admitted when not denied in the answer. (5) An answer to a discrimination complaint shall state the reasons for any differential in prices, terms or conditions between the complainant and its competitor, and shall specify the particular justification relied upon in support of the differential. (A) When responding to allegations concerning price discrimination, except in cases in which the alleged price differential is de minimis (less than or equal to five cents per subscriber or five percent, whichever is greater), the defendant shall provide evidence to support any argument that the magnitude of the differential is not discriminatory. (B) In cases involving a price differential of less than or equal to five cents per subscriber or five percent, whichever is greater, the answer shall identify the differential as de minimis and state that the defendant is therefore not required to justify the magnitude of the differential. (C) If the defendant believes that the complainant and its competitor are not sufficiently similar, the answer shall set forth the reasons supporting this conclusion, and the defendant may submit an alternative contract for comparison. The answer shall state the defendant's reasons for any differential between the prices, terms and conditions between the complainant and such other programmer, and shall specify the particular justifications relied upon in support of the differential. The defendant shall also provide with its answer any written documentary evidence as may be available to support its justification of the magnitude of any price differential between the complainant and such other programmer that is not de minimus. (D) Any documents or contracts submitted pursuant to this subparagraph may be protected as proprietary pursuant to paragraph (k) of this section. (6) An answer to a complaint alleging an unjust or unreasonable refusal to provide carriage shall state the defendant's reasons for refusing to carry the programming of the complainant, or for refusing to carry the complainant s programming on the same terms and conditions as complainant's competitor, and shall specify why the defendant's actions are not discriminatory. (h) Reply. Within twenty (20) days after service of an answer, the complainant may file and serve a reply which shall be responsive to matters contained in the answer and shall not contain new matters. Failure to reply will not be deemed an admission of any allegations contained in the answer, except with respect to any affirmative defense set forth therein. Replies containing information claimed by defendant to be proprietary under paragraph (k) of this section shall be submitted to the Commission in confidence pursuant to the requirements of Section 0.459 of this chapter and clearly marked "Not for Public Inspection." An edited version removing all proprietary data shall be filed with the Commission for inclusion in the public file within five (5) days from the date the unedited reply is submitted, and shall be served on the defendant. (i) Motions. Except as provided in this section, or upon a showing of extraordinary circumstances, additional motions or pleadings by any party will not be accepted. (j) Discovery. (1) The Commission staff may in its discretion order discovery limited to the issues specified by the Commission. Such discovery may include answers to written interrogatories or document production. (2) The Commission staff may in its discretion direct the parties to submit discovery proposals, together with a memorandum in support of the discovery requested. Such discovery requests may include answers to written interrogatories, document production or depositions. The Commission staff will then hold a status conference with the parties, pursuant to paragraph (m) of this section, to determine the scope of discovery. If the Commission staff determines that extensive discovery is required or that depositions are warranted, the staff will advise the parties that the proceeding will be referred to an administrative law judge in accordance with paragraph (p) of this section. (k) Confidentiality of proprietary information. (1) Any materials generated or provided by a party in connection with the pre-complaint notification procedure required under subsections (b) and (d) hereof and in the course of adjudicating a complaint under this provision may be designated as proprietary by that party if the party believes in good faith that the materials fall within an exemption to disclosure contained in the Freedom of Information Act (FOIA), 5 U.S.C.  552(b). Any party asserting confidentiality for such materials shall so indicate by clearly marking each page, or portion thereof, for which a proprietary designation is claimed. If a proprietary designation is challenged, the party claiming confidentiality will have the burden of demonstrating, by a preponderance of the evidence, that the material designated as proprietary falls under the standards for nondisclosure enunciated in the FOIA. (2) Except as provided in paragraph (k)(3) of this section, materials marked as proprietary may be disclosed solely to the following persons, only for use in prosecuting or defending a party to the complaint action, and only to the extent necessary to assist in the prosecution or defense of the case: (A) Counsel of record representing the parties in the complaint action and any support personnel employed by such attorneys; (B) Officers or employees of the opposing party who are named by the opposing party as being directly involved in the prosecution or defense of the case; (C) Consultants or expert witnesses retained by the parties; (D) The Commission and its staff; and (E) Court reporters and stenographers in accordance with the terms and conditions of this section. (3) The Commission will entertain, subject to a proper showing, a party's request to further restrict access to proprietary information as specified by the party. The opposing party will have an opportunity to respond to such requests. (4) The persons designated in paragraphs (k) (2) and (3) of this section shall not disclose information designated as proprietary to any person who is not authorized under this section to receive such information, and shall not use the information in any activity or function other than the prosecution or defense in the case before the Commission. Each individual who is provided access to the information by the opposing party shall sign a notarized statement affirmatively stating, or shall certify under penalty of perjury, that the individual has personally reviewed the Commission's rules and understands the limitations they impose on the signing party. (5) No copies of materials marked proprietary may be made except copies to be used by persons designated in paragraphs (k) (2) or (3) of this section. Each party shall maintain a log recording the number of copies made of all proprietary material and the persons to whom the copies have been provided. (6) Upon termination of the complaint proceeding, including all appeals and petitions, all originals and reproductions of any proprietary materials, along with the log recording persons who received copies of such materials, shall be provided to the producing party. In addition, upon final termination of the complaint proceeding, any notes or other work product derived in whole or in part from the proprietary materials of an opposing or third party shall be destroyed. (l) Other required written submissions. (1) The Commission may, in its discretion, require the parties to file briefs summarizing the facts and issues presented in the pleadings and other record evidence. These briefs shall contain the findings of fact and conclusions of law which that party is urging the Commission to adopt, with specific citations to the record, and supported by relevant authority and analysis. (2) The Commission may require the parties to submit any additional information it deems appropriate for a full, fair, and expeditious resolution of the proceeding, including copies of all contracts and documents reflecting arrangements and understandings alleged to violate the requirements set forth in the Communications Act and in this part, as well as affidavits and exhibits. (3) Any briefs submitted shall be filed concurrently by both the complainant and defendant at such time as is designated by the staff. Such briefs shall not exceed fifty (50) pages. (4) Reply briefs may be submitted by either party within twenty (10) days from the date initial briefs are due. Reply briefs shall not exceed thirty (30) pages. (5) Briefs containing information which is claimed by an opposing or third party to be proprietary under paragraph (k) of this section shall be submitted to the Commission in confidence pursuant to the requirements of Section 0.459 of this chapter, and shall be clearly marked "Not for Public Inspection." An edited version removing all proprietary data shall be filed with the Commission for inclusion in the public file within five (5) days from the date the unedited version is submitted and served on opposing parties. (m) Status conference. (1) In any complaint proceeding under this part, the Commission staff may in its discretion direct the attorneys and/or the parties to appear for a conference to consider: (A) Simplification or narrowing of the issues; (B) The necessity for or desirability of amendments to the pleadings, additional pleadings, or other evidentiary submissions; (C) Obtaining admissions of fact or stipulations between the parties as to any or all of the matters in controversy; (D) Settlement of the matters in controversy by agreement of the parties; (E) The necessity for and extent of discovery, including objections to interrogatories or requests for written documents; (F) The need and schedule for filing briefs, and the date for any further conferences; and (G) Such other matters that may aid in the disposition of the complaint. (2) Any party may request that a conference be held at any time after the complaint has been filed. (3) Conferences will be scheduled by the Commission at such time and place as it may designate, to be conducted in person or by telephone conference call. (4) The failure of any attorney or party, following reasonable notice, to appear at a scheduled conference will be deemed a waiver and will not preclude the Commission from conferring with those parties or counsel present. (5) During a status conference, the Commission staff may issue oral rulings pertaining to a variety of interlocutory matters relevant to the conduct of the complaint proceeding including, inter alia, procedural matters, discovery, and the submission of briefs or other evidentiary materials. These rulings will be promptly memorialized in writing and served on the parties. When such rulings require a party to take affirmative action not subject to deadlines established by another provision of this part, such action will be required within ten (10) days from the date of the written memorialization unless otherwise directed by the staff. (n) Specifications as to pleadings, briefs, and other documents; subscriptions. (1) All papers filed in a complaint proceeding under this part must be drawn in conformity with the requirements of Sections 1.49 and 1.50 of this chapter. (2) All averments of claims or defenses in complaints and answers shall be made in numbered paragraphs. The contents of each paragraph shall be limited as far as practicable to a statement of a single set of circumstances. Each claim founded on a separate transaction or occurrence and each affirmative defense shall be separately stated to facilitate the clear presentation of the matters set forth. (3) The original of all pleadings and submissions by any party shall be signed by that party, or by the party's attorney. Complaints must be signed by the complainant. The signing party shall state his or her address and telephone number and the date on which the document was signed. Copies should be conformed to the original. Except when otherwise specifically provided by rule or statute, pleadings need not be verified. The signature of an attorney or party shall be a certificate that the attorney or party has read the pleading, motion, or other paper; that to the best of his or her knowledge, information and belief formed after reasonable inquiry, it is well grounded in fact and is warranted by existing law or a good faith argument for the extension, modification or reversal of existing law; and that it is not interposed for any improper purpose. If any pleading or other submission is signed in violation of this provision, the Commission shall upon motion or upon its own initiative impose upon the party an appropriate sanction. Where the pleading or submission is signed by counsel, the provisions of Sections 1.52 and 1.24 of this chapter shall also apply. (o) Copies; service. (1) The complainant shall file an original plus three copies of the complaint with the Commission. However, if the complaint is addressed against multiple defendants, complainant shall provide three additional copies of the complaint for each additional defendant. (2) An original plus two copies shall be filed of all pleadings and documents other than the complaint. (3) The complainant shall serve the complaint on each defendant at the same time that it is filed at the Commission. (4) All subsequent pleadings and briefs, as well as all letters, documents or other written submissions, shall be served by the filing party on all other parties to the proceeding, together with proof of such service in accordance with the requirements of Section 1.47 of this chapter. (5) The parties to any complaint proceeding brought pursuant to this section may be required to file additional copies of any or all papers filed in the proceeding. (p) Referral to administrative law judge. (1) After reviewing the complaint, answer and reply, and at any stage of the proceeding thereafter, the Commission staff may, in its discretion, designate any complaint proceeding for an adjudicatory hearing before an administrative law judge. (2) Before designation for hearing, the staff shall notify, either orally or in writing, the parties to the proceeding of its intent to so designate, and the parties shall be given a period of ten (10) days to elect to resolve the dispute through alternative dispute resolution procedures, or to proceed with an adjudicatory hearing. Such election shall be submitted in writing to the Commission. (3) Unless otherwise directed by the Commission, or upon motion by the Cable Services Bureau Chief, the Cable Services Bureau Chief shall not be deemed to be a party to a complaint proceeding designated for a hearing before an administrative law judge pursuant to this paragraph. (q) Petitions for reconsideration. Petitions for reconsideration of interlocutory actions by the Commission's staff or by an administrative law judge will not be entertained. Petitions for reconsideration of a decision on the merits made by the Commission's staff should be filed in accordance with Sections 1.104-1.106 of this chapter. (r) Interlocutory review. (1) Except as provided below, no party may seek review of interlocutory rulings until a decision on the merits has been issued by the staff or administrative law judge. (2) Rulings listed in this paragraph are reviewable as a matter of right. An application for review of such ruling may not be deferred and raised as an exception to a decision on the merits. (A) If the staff's ruling denies or terminates the right of any person to participate as a party to the proceeding, such person, as a matter of right, may file an application for review of that ruling. (B) If the staff's ruling requires production of documents or other written evidence, over objection based on a claim of privilege, the ruling on the claim of privilege is reviewable as a matter of right. (C) If the staff's ruling denies a motion to disqualify a staff person from participating in the proceeding, the ruling is reviewable as a matter of right. (s) Expedited review. (1) Any party to a complaint proceeding under this part aggrieved by any decision on the merits issued by the staff pursuant to delegated authority may file an application for review by the Commission in accordance with Section 1.115 of this chapter. (2) Any party to a complaint proceeding aggrieved by any decision on the merits by an administrative law judge may file an appeal of the decision directly with the Commission, in accordance with Section 1.276(a) and Sections 1.277(a)-(c) of this chapter, except that unless a stay is granted by the Commission, the decision by the administrative law judge will become effective upon release and will remain in effect pending appeal. (t) Frivolous complaints. It shall be unlawful for any party to file a frivolous complaint with the Commission alleging any violation of this part. Any violation of this paragraph shall constitute an abuse of process subject to appropriate sanctions. (u) Statute of limitations. Any complaint filed pursuant to this subsection must be filed within one year of the date on which the earliest of the following events occurs: (1) The open video system operator enters into a contract with the complainant that the complainant alleges to violate one or more of the rules contained in this part; or (2) The open video system operator offers to carry programming for the complainant pursuant to terms that the complainant alleges to violate one or more of the rules contained in this part; or (3) The complainant has notified an open video system operator that it intends to file a complaint with the Commission based on a request for such operator to carry the complainant s programming on its open video system that has been unjustly or unreasonably denied or unacknowledged, allegedly in violation of one or more of the rules contained in this part. (v) Remedies for violations. (1) Remedies authorized. Upon completion of such adjudicatory proceeding, the Commission shall order appropriate remedies, including, if necessary, the establishment of prices, terms, and conditions for the provision of carriage to the aggrieved video programming provider. Such order shall set forth a timetable for compliance, and shall become effective upon release. (2) Additional sanctions. The remedies provided in paragraph (s)(1) of this section are in addition to and not in lieu of the sanctions available under title V or any other provision of the Communications Act.