WPC: 2a BK Z CourierCourierCG TimesCG Times BoldX@`7X@HP4Si (Additional); Rm. 900_1; LPT2HPLA4SAD.PRSx  @\;+OX@CY~~vCN~sk~CCCddCYdYdYCdd88d8ddddJN8ddddYYdYd4dddddCddddddddd8YYYYYY~Y~Y~Y~YC8C8C8C8ddddddddddYdddddsdXdXXXddx|X~d~d|XdddddddC8ddddCdoddd|8|H~d<|8dtddddHHdlLlLlLkd|H|8~ddddddddXXXd~ddkd~ddxCddCCCWxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxNdddCYQQddddddFddddFCChhd44ddzzdddvooChdF"dhd9dCCzCddoddCdYds]zUvdYYCCCCz~ozoY~NYdYC8YooYdYzsdzdd~YYzozzz~CdzYzzzzCCdddddddzCsdYC\   pxtll\tll@\@\`Lm. 900_1; LPT2HPLA4SAD.PRSXw PE37\;+OXP2B   Z 3|xCourierCG TimesTimes (Scalable)CG Times Bold (Scalable)HP LaserJet IIISiHPLAS3SI.PRSx  @,\,<mX@2t g vpfLetterheadMintz Levin Letterheadv i  X # P7gLP#X` hp x (#%'0*,.8135@8:+\1,-,-,,\,& !0 AHAM/GRCAHAM Letterhead w/GRC Roster/ ?և@M T  \, yP%\$dddy #&m P7#{&P# Association of Home Appliance Manufacturers  701 Pennsylvania Avenue, N.W., Suite 900, Washington, DC 20004 Phone (202)434-7484 Fax (202)4347400  \, #x6X@8;wX@# \,  , yP%\pdddyyP%\dddy Figure 1  Figure 1 y!P%\,0*x""iiAHAMDC.WPG%y$\\&&\\&&` !\&$zA \ XMlddل  bD #O P7{P# GOVERNMENT RELATIONS COUNCIL  Terry Thiele, GE Appliances XXChairman Linda Greiner, Frigidaire Co. XXViceChairman Hall Northcott, Matsushita Doug Horstman, Maytag Corp. Robert Cushman, Amana Ref. A. J. Takacs, Whirlpool Corp.  bD  ALTERNATE MEMBERS:  Dan Elliott, White Consolidated Inds. Michael Thompson, Whirlpool Corp  bD  PORT. APP. DIV. LIAISON: Joe Berney, National Presto Neil Halvorson, West Bend William Yager, Rival Mfrg. Gary Turner, Teledyne Water Pik  bDc  SUPPLIER DIV. LIAISON:  Robert Brown, Robertshaw Controls Steven Bowsher, Ryerson Coil  bD  INFORMATION COPIES:  David Wolbrink, Broan Mfrg. James Ruberti, Brown Stove Works Ted Baily, Carrier Corp. Roni Liberman, Cold Point Corp. Thomas Benua, Ebco Mfrg. John Verwiel, Emerson Electric Joel Zillioux, Friedrich Lisa Bloom, GoldStar Elect. William Brashares, AHAM Counsel Gordon Stauffer, Northland Corp. Russell Zipkin, Russell Range Bunzo Shiono, Sanyo Fisher (USA) Anne Howard, Sharp Electronics Allen Wilkins, SubZero Freezer James Robinson, Toshiba America Philip Uihlein, ULine Corp. Liston Durden, Viking Rangez 2_j0wm[1_2c3OgAHAM DCRCHAD -GRCAHAM DC LetterheadRC Roster0C@N T  \, yP%\$dddy #&m P7#{&P# Association of Home Appliance Manufacturers  701 Pennsylvania Avenue, N.W., Suite 900, Washington, DC 20004 Phone (202)434-7484 Fax (202)4347400  \, #x6X@8;wX@# \,  ,  Figure 1  Figure 1 y!P%\,0*x""iiAHAMDC.WPG%y$\\&&\\&&` !\&$yP%\pdddyyP%\dddyOldletOld DC address letterhead1Q2- i  X # P7gLP#X` hp x (#%'0*,.8135@8:\1\1\1,, \1\1,,>ԯ   , ddd yx( dddy    yxw dddy cdfModified DC Letterhead50 i  X # P7gLP#X` hp x (#%'0*,.8135@8:Fx6X@`7X@8wC;,=9Xw PE37XPD7zC;,BXz_ pi7Xier<?xxx,>Fx6X@`7X@d~8dJkN~8dddddCddCCCWxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxNdddCYQQddddddFddddFCChhd44ddzzdddwooxChdF"Ȑdhd岲dCCȐzȲxCddodȐȅdCdYdsȐ]ȐȐȧzȐUwŐdȐYYCCCCѐz~ozoY~NYdYC8YooYdYzsdzdd~YYzozzzzNd88YYYzYzzzzCCdddddddzzzzzzzzzzzzzzzzzzzNNNNNNNdddddddddddddddddddd888888888888YYYYYYYYYYYYYYYYYYYzzzzzzzzzzzzzzzzzzzzCs~CzCddYCx?xxx,9x6X@8;X@8wC;,[&Xw P7XP7zC;,"=Xz_ p^7X)V"G($,hG P7hP"m+O6^;C]ddCCCdCCCCddddddddddCCȲdzN`zoȐCCCddCdoYoYFdo8Co8odooYNCodddYdddCdddddCddddddddo8dddddϐYYYYYN8N8N8N8oddddooooddxddddzodddYYYYoYYYYddddddooN8N8N8N8r`o888N8ooodd┐YYYoNoNoNoNCCCooooooȐdYYYo8oYoNCddodoCddCCCWxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxNdddCdUUddddddFddddFCCssd44ddzzddd~ooxCsdF"Ȑdsd岲dCCȐzȲxCddodȐȅdCdYdsȐ`ȐȐȮzȐUwŐdȐddCCCCѐzozoYNYYYN8YooYdYzzdzddYYzozzzzNY88YYYzYzzzzCCdddddddzzzzzzzzzzzzzzzzzzzNNNNNNNYYYYYYYYYYYYYYYYYYYY888888888888YYYYYYYYYYYYYYYYYYYzzzzzzzzzzzzzzzzzzzzCzNzNddYCx22J E "m+O6^$(8<><q*"xxxxWWxxxWWkkxxx"(#X 1 X I.OPERATORS OF OPEN VIDEO SYSTEMS MUST TREAT VIDEO PROGRAMMING PROVIDERS IN AN EQUITABLE AND NONDISCRIMINATORY MANNER p>"(#X 7 XX` ` A.` ` The Commission should adopt a definition of affiliate that is sufficiently broad to prevent discrimination ` p>"(#X 7 XX` ` B.` ` Access to the video platform must be open and nondiscriminatory ` p"(#X 10 XX` ` X ` ` 1. The enrollment and selection of video programmers must not advantage affiliated or favored programmers p"(#X 10 XX` ` X ` ` 2. Channel capacity must be allocated in a manner that ensure fair competition p"(#X 14 ` ` X ` ` 3. Unaffiliated programmers should have nondiscriminatory access to necessary software and equipmentx p"(#X 17 ` `  ` ` 4. All VPPs must participate in developing channel sharing plans(# p"(#X 20 XX` ` ` ` 5.X OVS operators should not be permitted to use their telephone monopolies to gain marketing advantages p"(#X 23 X ` ` 6. The Commission should require separate subsidiaries to guard against crosssubsidization and anticompetitive conduct p"(#X 25 X II.FORCING VIDEO PROVIDERS TO MAKE THEIR PROGRAMMING AVAILABLE TO RIVALS ON AN OPEN VIDEO SYSTEM WILL STIFLE COMPETITION p"(#X 28 X III.THE COMMISSION SHOULD IMPLEMENT AN EFFECTIVE DISPUTE RESOLUTION PROCESS p"(#X 30 X CONCLUSION p"(#X 32 (0*0*0*  Y   / Before the V $FEDERAL COMMUNICATIONS COMMISSION  X )Washington, D.C. 20554 ă In the Matter of $hh*0) ` `  $hh*0) Implementation of Section 302hh*0) of theTelecommunications Acthh*0)7CS Docket No. 9646 Act of 1996` `  $hh*0) ` `  $hh*0) Open Video Systems $hh*0)  Y / COMMENTS OF RAINBOW PROGRAMMING HOLDINGS, INC. ă X01Í ÍX01Í/ Í/Rainbow Programming Holdings, Inc. ("Rainbow"), by its attorneys, hereby submits these Comments in response to the Commission's Notice of Proposed Rulemaking in the  Y above captioned proceeding.= Yj ԍIn the Matter of Implementation of Section 302 of the Telecommunications Act of 1996, CS Docket No. 9646, Report and Order and Notice of Proposed Rulemaking, rel. March 11, 1996 ("NPRM").  Y  ( INTRODUCTION AND SUMMARY ׃ Rainbow, a whollyowned subsidiary of Cablevision Systems Corporation  Yi ("Cablevision"),iK= Ye ԍCablevision, a producer and packager of video programming, is in the business of developing and marketing a diverse array of video programming services over various distribution systems. is the managing partner of several partnerships that provide a unique mix of national and regional video programming to millions of subscribers of cable and other  Y  multichannel video delivery systems across the country.9 = Y' ԍToday, these programming services include American Movie Classics, Bravo, News 12 Long Island, News 12 Westchester and News 12 Connecticut (regional news channels),u(0*0*0* MuchMusic, regional SportsChannel Services, NewSport, the national backdrop sports service of Prime SportsChannel Networks, The Independent Film Channel, and PRISM, a premium sports and movie service serving the Philadelphia market. In addition, in the near future, Rainbow expects to launch other new programming services. 9 Nearly two years ago, with a 40*0*0* letter to Bell Atlantic, Cablevision and Rainbow initiated requests for capacity on numerous  Y video dialtone systems. 4O Y ԍSee Letter from Marc Lustgarten, Vice Chairman, Cablevision Systems Corporation, to James G. Cullen, President, Bell Atlantic Corporation (July 29, 1994), attached at Ref. B to Comments of Cablevision Systems Corporation, Application of The Bell Atlantic Telephone Companies, File No. WPC 6966 (filed July 29, 1994). See also "Cable Chief Casts His Eye on Competitors' Turf," Wall Street Journal, B1 (June 30, 1994) (describing Cablevision's interest in offering programming to consumers in areas where it does not operate cable systems, using other distribution media). On January 23, 1995, Rainbow sent inquiries to other video dialtone applicants, including Southern New England Telephone Co. ("SNET") and US West. They believed then as they do now that truly "open" video platforms would offer them the rare opportunity for direct access to the consumer unimpeded by an intermediary. They took seriously the Commission's commitment to ensuring nondiscriminatory access to the video platform as the means of achieving "increased  Y competition in the delivery of video services and greater diversity of video programming."  O Y #Xw P7[&XP#эTelephone CompanyCable Television CrossOwnership Rules, Sections 63.54 63.58, 7 FCC Rcd 300, 306 (1991) ("First Report and Order"), recon. 7 FCC Rcd 5069 (1992) ("Memorandum Opinion and Order"), aff'd Nat'l Cable Television Ass'n v. FCC, 33 F.3d 66 (D.C. Cir. 1994) ("NCTA"); Telephone CompanyCable Television CrossOwnership Rules, Sections 63.54 63.58, 7 FCC Rcd 5781, 581011 (1992) ("Second Report and Order"), aff'd in part and modified in part, 10 FCC Rcd 244, 25859 (1994) ("Video Dialtone Reconsideration Order"), appeal pending sub nom. Mankato Citizens Telephone Company v. FCC, No. 921204 (D.C. Cir. Sept. 9, 1992). The Commission defined "video dialtone" as the provision of a basic common carrier platform with sufficient capacity to accommodate multiple video programmers on a nondiscriminatory basis. In practice, however, video dialtone proved to be a discriminatory platform that obstructed competition rather than enhancing it. 0*((ԌRainbow's experiences since 1994 with Bell Atlantic, SNET, and US West have fallen far short of the video dialtone promise of nondiscriminatory competitive opportunities. In 1995, for instance, Rainbow obtained 192 channels on Bell Atlantic's Dover Township, N.J. video dialtone system, but Rainbow has been unable to put these channels to use because of Bell Atlantic's repeated anticompetitive and discriminatory conduct. Specifically, Bell Atlantic and its favored programmer, FutureVision, have used their unilateral control over essential equipment and software to effectively deny Rainbow access to Bell Atlantic's purported "open system." Even if Rainbow could somehow gain nondiscriminatory access to these essentials, however, it would still need to contend with pricing strategies that have been secured by undisclosed and unfair business affiliations between Bell Atlantic and  Y4 FutureVision:4O Y ԍRainbow has asked the Commission to require Bell Atlantic to fully disclose its relationship with FutureVision. In the Matter of Bell Atlantic Telephone Companies, Transmittal Nos. 741, 786, CC Docket No. 95145, Rainbow Opposition at 626 (filed Nov. 30, 1995).: and overcome unreasonable tariff terms and conditions that have been structured to enable Bell Atlantic to discriminate against Rainbow. Meanwhile, Bell Atlantic's FutureVision has begun commercial service. Likewise, over Rainbow's repeated objections to the Commission, US WEST and SNET improperly denied Rainbow access to any capacity on their video dialtone systems, while according their favored video programmers the benefits of preallocated channels, preferential channel positions, unreasonably excessive channel capacity, and impermissible channel sharing plans.40*((ԌNot coincidentally, having thwarted Rainbow's efforts to obtain its own capacity on their video platforms, all three telephone companies through their proxy video programming providers have sought coerced access to Rainbow's programming. Rainbow stands ready and willing to compete in the video dialtone marketplace and use its resources and expertise to offer consumers high quality video programming, but it has found the rules of engagement to be far different from the video dialtone rules set forth by the Commission. Willful efforts by telephone companies to defeat competition and the Commission's unwillingness to make vigorous enforcement of its own rules a priority have thus far combined to defeat Rainbow's efforts to use video dialtone to increase competition in the video marketplace. At every turn, the telephone companies successfully frustrated Rainbow's considerable efforts to make video dialtone a viable and competitive business. The lesson here is straightforward: unless the Commission wishes to repeat the mistakes of video dialtone, it must craft rules for open video systems that unambiguously preclude the kind of discrimination and anticompetitive conduct that characterized the telephone companies' dealings with Rainbow. It is not enough to proscribe discrimination with a general directive; the rules must be clear and readilyenforceable. Rainbow again stands ready to take advantage of the opportunities presented by the availability of open video delivery systems, and to use those opportunities to provide a wide variety of news, sports, and entertainment programming directly to customers. Without clear, welldefined safeguards to ensure the nondiscriminatory treatment of unaffiliated programmers on open video systems, however, local exchange carriers and their proxyh$0*(( programmers will once again frustrate competition by using open video systems to foreclose entry and establish a marketplace advantage for their own services. To prevent the recurrence of the serious problems that characterized video dialtone, these rules must ensure that: ` ` all video programming providers ("VPPs") are treated in a nondiscriminatory fashion with respect to access to the open video system;(#` XX` ` all VPPs have nondiscriminatory access to the information and essential features (such as channel positioning, enduser data, and system hardware and software) necessary to utilize the platform;(#` ` ` all VPPs have nondiscriminatory access to system rollout plans, activation schedules, billing services, and other information or services to enable all programming providers can market on an equal footing with the programming provider affiliated with the OVS operator;(#` XX` ` there is full public disclosure of all business relationships between OVS operators and video programming providers;(#` ` ` there is an open, prospective, and verifiable enrollment period of reasonable duration;(#` XX` ` the enrollment process is fair to all interested parties, and the result is demonstrably fair; and(#` ` ` any channel sharing mechanism has been agreed to by all VPPs that will actually participate on the platform, and that channel sharing will be administered in a manner that can accommodate new VPPs as existing ones  Y  drop off or channel capacity expands. O Y ԍThe rules adopted in this proceeding should also be applied to the video dialtone systems grandfathered by the 1996 Act. 1996 Act,  302(b)(3). (#` Adherence to a nondiscriminatory regime also means that a VPP should not be  Y allowed to use the program access rulesQ bO Y% ԍ 47 C.F.R. 76.1000 et seq.Q to demand programming from a wouldbe 0*(( competitor, as the favored programming providers on video dialtone platforms have done. The OVS framework contemplates that all video programmers will compete on equal terms if they choose to obtain capacity on the platform. If Rainbow is forced to provide programming to one of its potential competitors on an open video system, it will effectively be foreclosed from competing directly for subscribers. Congress specifically limited the applicability of the program access rules to OVS operators; extending it to program providers utilizing the platform would diminish the diversity of voices on open video systems.  Y Finally, the Commission must develop effective grievance procedures.M O Y7 ԍSee NPRM at 72.M Potential programmers should not be forced into "take it or leave it" deals with OVS operators. Congress provided that all disputes under the OVS rules must be resolved within 180  Y4 days.F 4yO Y^ ԍ47 U.S.C. 573(a)(2).F In order to implement this mandate, the Commission must identify specifically the remedies for aggrieved parties, including an immediate right of access to capacity on an expedited basis at rates, terms, and conditions that are not discriminatory in comparison to those imposed on affiliated programmers. An immediate right of access is absolutely necessary to bring some fairness to the relationship between them and the OVS operator. Without such a provision, it will be too easy for OVS operators to evade their responsibilities under the Act. * 0*((Ԍ X  I.XOPERATORS OF OPEN VIDEO SYSTEMS MUST TREAT VIDEO PROGRAMMING PROVIDERS IN AN EQUITABLE AND  X NONDISCRIMINATORY MANNER (# Congress established open video systems as an alternative to cable, offering OVS  Yv operators streamlined regulation in exchange for the nondiscriminatory@ vO Y ԍ47 U.S.C. 573.@ provision of channel capacity. OVS is not like traditional cable service because it is based upon a video "platform" that is open to competing programmers not just the OVS operator's programming. Specific nondiscrimination rules are absolutely essential if OVS is to provide a real competitive alternative that enhances diversity and consumer choice in the video  Y marketplace. yO Y ԍContrary to the Commission's suggestion, NPRM at 34, adopting merely a general standard of nondiscrimination would be inadequate to meet the Act's objectives. Indeed, it would be counterproductive. It is noteworthy that, in the absence of such rules, virtually the only program providers using video dialtone are the telephone companies' proxy programmers.  X4   A.` ` The Commission should adopt a definition of affiliate that is sufficiently  X broad to prevent discrimination (#`  Y As a threshold matter, t he test of reasonable nondiscrimination rules is the definition  Y of an "affiliate." O Yn ԍThis definition cannot be postponed to a later date. See NPRM at 9 n.28 (postponing until "Cable Reform" rulemaking the definition of "affiliate" in the Title VI context). Define this term too narrowly, and a local exchange carrier will be able to favor captive or proxy programmers or video programming providers ("VPPs") without violating the  statutory proscription on discrimination. To avoid this result, "affiliation" should be defined to include any financial or business relationships, by contract or otherwise, directly or indirectly, between the OVS   0*((  Y operator and the VPP, except the carrieruser relationship.OO Yy ԍCf. 47 C.F.R.63.08(e).O This definition would encompass the existence of any ownership or financial interest, affiliation, contingent interest, or other agreement between a OVS operator and a video provider on its platform, including, but not limited to, the right to acquire such video provider or to utilize their capacity, which could give the OVS operator the incentive to favor that video provider over  Y others. yO YD ԍOf course, the term should also include situations in which the OVS operators and video operator have a common officer, director, or other employee at the management level. Of course, there must be full public disclosure of all business relationships between OVS operators and video programming providers in order to enforce this rule. The proposed definition would capture not only formal relationships, such as the existence of a management agreement and equity investments, but also "informal" relationships, such as favored contracts and agreements between the OVS operator and the programmer that were commonplace in video dialtone. As Rainbow has demonstrated, local exchange carriers ("LECs") have repeatedly established relationships with certain video programmers that were the antithesis of the kind of arm'slength transaction between an independent video programmer and a platform provider envisioned under video dialtone. SNET's carriage agreement with Connecticut Choice Television ("SNET/CCT Agreement") illustrates the lengths to which the LECs will go to use proxies to chill competition on their video dialtone platforms. The SNET/CCT Agreement provided SNET with a direct financial incentive to discriminate in favor of CCT at the expense of Rainbow and other independent programmers that sought capacity on SNET's platform by giving 0*(( SNET both a conditional purchase option in the bulk of CCT's capacity and a right to veto any potential thirdparty purchase of CCT, as well as a right to acquire CCT's business  Y interest.O Y ԍIn the Matter of SNET, File Nos. WPC 6858, 7074, CCT Agreement at  12.112.4 (public version) (filed Nov. 22, 1995). In Dover Township, New Jersey, Rainbow discovered evidence of a continuing preferential arrangement between Bell Atlantic and one particular video programming provider FutureVision of America Corp. ("FutureVision"). Those arrangements enabled  Y FutureVision to provide service at rates that no other competitor could possibly match, bO Y ԍFor instance, FutureVision offered to sell converters to Rainbow for $1000 per unit while it is reportedly offering those converters to subscribers for free. See Rainbow Opposition at 2425. and gave it first claim to interface software that its competitors would need to provision of  Y video programming on Bell Atlantic's platform.bO Y& ԍSee Rainbow Opposition at 626. FutureVision, established in 1992 after the Commission adopted its video dialtone rules and policy, was a small startup company that was organized for the purpose of marketing, managing and delivering television programming and video services. See "Bell Atlantic and FutureVision Join Forces to Bring the Information Age to New Jersey," PR Newswire (Dec. 15, 1993). Neither deterred by FutureVision's small size nor its potential lack of finances, Bell Atlantic announced that it signed with FutureVision a tenyear, sixtychannel video dialtone agreement on December 15, 1992, the same day Bell Atlantic filed its request for Commission authorization to operate the commercial video dialtone service in Dover Township. Compare In the Matter of the Application of New Jersey Bell Telephone Co., File No. 6840, Application (filed Dec. 15, 1995) with "Bell Atlantic and FutureVision Join Forces to Bring the Information Age to New Jersey," PR Newswire (Dec. 15, 1992). Even before the platform was opened to enrollment by unaffiliated parties, FutureVision was given advance knowledge of the platform's technical specifications to develop the interface software necessary to provide service to end users. As a result, FutureVision had that software in place long before any potential competitor. See Rainbow Opposition at 1516. If OVS operators are permitted to 0*(( bestow such advantages on allegedly "unaffiliated" program providers, they will use these tactics to set up proxy programmers to displace true arm'slength competitors and deprive unaffiliated entities of the nondiscriminatory access mandated by the 1996 Act.  Xv  B.` ` Access to the video platform must be open and nondiscriminatory (#` Under the Commission's video dialtone rules, which ostensibly required "access on  Y nondiscriminatory terms to LEC video delivery capabilities,"k O Y ԍVideo Dialtone Reconsideration Order, 10 FCC Rcd at 259.k Rainbow nonetheless experienced countless problems with providers regarding channel allocation, channel assignment and positioning, presubscription and notice provisions, marketing, and access to system hardware and software. There is every reason to believe that these problems will recur unless the Commission adopts clear and readilyenforceable nondiscrimination standards.  X XX` `  1.X The enrollment and selection of video programmers must not  X advantage affiliated or favored programmers (# The OVS rules must ensure that operators do not discriminate in favor of affiliated programmers in selecting programmers for carriage. All VPPs must be treated fairly and with equal consideration. Again, Rainbow's experience is instructive. In Connecticut, for example, SNET consistently discriminated against Rainbow in its attempts to secure capacity  Y  on SNET's nowdefunct video dialtone trial system.? yO Y3" ԍRainbow has previously brought to the Commission's attention the problems it faced in Connecticut. See, e.g., Letter from Donna Lampert to Kathleen M.H. Wallman, Chief, Common Carrier Bureau (July 6, 1995), File No. WPC 6858, at 25 ("Ex Parte Letter").?  0*((ԌFrom the outset, SNET made every effort to game the allocation process in order to ensure that its captive programmer, Connecticut Choice Television ("CCT") obtained the most favorable channel capacity. First, SNET and CCT initiated discussions that would permit CCT "to offer packaging of cable channels on VDT service if SNET was to offer such a service" almost three weeks before SNET filed its request for Commission authorization to conduct its 1,600home video dialtone trial in West Hartford,  Y Connecticut.  O Ye ԍCompare SNET First SixMonth Video Dialtone Trial Report, File No. WPC 6858, Attachment 2, at 1 with In the Matter of the Application of SNET, SNET Application, File No. WPC 6858 (filed April 27, 1993).  Within weeks of receiving authority to conduct its West Hartford Trial,j KO Y ԍSee In the Matter of SNET, 9 FCC Rcd 1019 (1993).j SNET filed for an extension and amendment to conduct a oneyear trial of 150,000 additional  Y households in the Hartford and Stamford areaslO Y= ԍSee In the Matter of SNET, 9 FCC Rcd 7715 (1994). l and almost immediately thereafter  Yb awarded CCT 49 of the 53 channels on the extended platform.ebO Y ԍSee SNET/CCT Agreement at  5 (public version).e In essence, the vast bulk of SNET's broadcast service capacity was assigned to CCT before Rainbow or any other unaffiliated programmer even had notice of this capacity. Rainbow was given no opportunity to seek capacity on the platform comparable to what was given away to CCT. With respect to the limited amount of capacity remaining, SNET made sure that its affiliated programming entity, SNET Diversified Group ("SNET Diversified"), rather than Rainbow, secured those channels. On January 23, 1995, Rainbow wrote to SNET seeking toN ^ 0*((  Y obtain capacity on the basic platform.O Yy #Xw P7[&XP#эSee Ex Parte Letter (Letter from Rainbow to SNET, dated January 23, 1995, attached thereto at Ref. B). SNET did not respond until more than three  Y months later.bO Y #Xw P7[&XP#эSee Ex Parte Letter (Hearing Transcript, Connecticut DPUC Docket No. 950310, at 181186, 658665, attached thereto at Ref. C). By letter dated April 27, 1995, SNET forwarded to Rainbow some general information and informed Rainbow that a "formal" request was necessary to secure platform capacity, even though no other video programmer had ever before been required to make  YH such a formal request.HO Y #Xw P7[&XP#эEx Parte Letter (Letter from SNET to Rainbow, dated April 27, 1995, attached thereto at Ref. D). The very next day and prior to the time Rainbow received the informational letter from SNET SNET Diversified, an unregulated affiliate of SNET,  Y requested all remaining platform capacity O Y3 #Xw P7[&XP#эEx Parte Letter (Letter from SNET Diversified Group, Inc. to SNET, dated April 28, 1995, attached thereto at Ref. E). and Rainbow was subsequently told there was  Y no more channels available. 0 O Y #Xw P7[&XP#эSee Ex Parte Letter (Letter from Mr. Michael P. Phelan, SNET Vice President, Network Marketing and Sales, to Ms. Andrea Greenberg, Rainbow Senior Vice President, Business Affairs, dated May 26, 1995, attached thereto at Ref. I). As further proof of SNET's intent to deny Rainbow capacity, SNET Diversified requested "channel capacity of 78 analog channels and 500 digital channels" for SNET's commercial video dialtone service on the very same day SNET filed its Commercial Section 214 Application with the FCC. See Ex Parte Letter (Letter from SNET Diversified to SNET, dated April 28, 1995, attached thereto at Ref. J). Indeed, SNET stated that its request for commercial capacity assumed that the SNET Diversified would be able to displace all of the existing programmers on its video dialtone trial system in West Hartford. Id. (Hearing Transcript, Connecticut DPUC Docket No. 950310, at 729730, attached thereto at Ref. K). Not until nine months after allocating the bulk of its analog broadcast capacity to CCT did SNET purport to propose an "open enrollment" process a0*(( process that would have provided Rainbow the "opportunity" to request a maximum of two  Y channels of programming of its own choosing on SNET's video dialtone platform.O YK #Xw P7[&XP#эSee In the Matter of SNET, File No. WPC 6858, Amended Application at 910 (filed Sept. 1, 1995). To avoid this result under OVS, it is essential that the Commission establish certain core safeguards to govern the programmer enrollment period: XX` ` the enrollment must be held open for a reasonable and publicly documented time period;(#` XX` ` the OVS operator should not require unreasonable deposits from interested programmers; and(#` XX` ` the OVS operator should give all programmers access to information regarding the rates, costs, and nature of additional services available or necessary to provide programming through the OVS offering.(#` Adoption of these safeguards would ensure adherence to the 1996 Act's fundamental command of nondiscrimination in the enrollment process. As demonstrated by certain  Y aspects of Bell Atlantic's channel reservation process in Dover Township,HbO Y ԍWhile Bell Atlantic's video dialtone tariff in Dover Township, New Jersey proved deficient in many respects, its channel reservation mechanism ultimately provided interested video providers with an open enrollment, channel allocation and channel positioning plan that would promote the nondiscriminatory goals of OVS. Here too, however, Bell Atlantic initially attempted to confer special treatment upon its favored video programmer in the form of channel reservation deposit exemptions, preallocated channels and preferential channel positioning. See Rainbow Opposition at 89. These discriminatory practices were avoided only after the Commission intervened. Id. such a plan is relatively easy to establish and administer and should provide all interested parties with an adequate framework from which to make informed business decisions regarding the video marketplace.|r 0*((Ԍ X ` `  2.X Channel capacity must be allocated in a manner that ensure fair  X competition (# In order to ensure that open video system operators allocate capacity on a non Y discriminatory basis,F O Y ԍSee NPRM at 12.F the Commission must adopt regulations establishing the appropriate means for selecting video programmers and allocating of capacity. These regulations must provide open video system operators and video programming providers with easily understood guidance regarding compliance with the Act. Greater clarity at the outset would also reduce the number of disputes between OVS operators and programmers that will inevitably arise if the Commission adopts only a general prohibition against discrimination. Ensuring nondiscrimination requires that OVS operators: ` ` allocate channels to programmers in a fair manner based upon the video programmers' initial requests in the case of requests exceeding available capacity;(#` ` ` set forth procedures that give programmers a role in deciding how channel positions will be determined;(#` ` ` allow programmers to determine whether to use analog or digital capacity; and(#` ` ` give programmers a role in channel positioning decisions.(#` The Commission's suggestion that it could "adopt a regulation that simply prohibits an open video system operator from discriminating against unaffiliated programs in its allocation  Y of capacity"<!yO Y# ԍNPRM at 12.< should be rejected. Any such regulation would expand OVS operator opportunities to discriminate against unaffiliated video programs and unnecessarily postpones the carriage and allocation considerations which Congress has already determined to be"*!0*(( essential to promote fair competition. Indeed, as the Commission learned in the video dialtone context, the allure of promulgating an abbreviated rule now is far outweighed by the costs of adjudicating disputes in an arena of uncertainty down the road. Experience has shown that in the absence of specific rules, OVS operators will likely deny unaffiliated or nonfavored programmers full and fair access to their open video system platforms. Under video dialtone, the LEC simply handpicked a favored video programmer  Y to utilize all, or virtually all," O Ye ԍSee e.g., Application of SNET for Approval to Conduct a Dial Tone Transport and Switching Marketing Trial, at 1415, Connecticut Department of Public Utility Control ("Connecticut DPUC"), June 30, 1995 (finding that SNET's allocation of 49 of the 53 available broadcasting channels to a single video programmer caused capacity problems. of the platform's available capacity through individual discussions and closed negotiations. Rather than establish a formal process to solicit capacity requests from potential video  Yb programmers, SNET, US WEST, and, initially, Bell Atlantic,a# b4O YG ԍAs originally proposed, the agreement between Bell Atlantic and its favored programmer, FutureVision of America Corp. ("FutureVision") committed 94% (60 of 64 channels) of the capacity on the Dover System to FutureVision. In the Matter of New Jersey Bell Telephone Company, File No. WPC 6840, 9 FCC Rcd 3677, 3680, n.44 (1994) ("Dover 214 Order"). After questions were raised regarding whether Future Vision's presence on the Dover Township system and its apparent right to control 60 of the 64 available channels were consistent with the video dialtone nondiscrimination and platform capacity requirements, Bell Atlantic amended its arrangement with FutureVision to restrict the use of any one programmer to 50% of the initial capacity as well as committed to expanding the platform capacity. Id.a acted to ensure that their affiliated or favored programming entities, rather than truly independent video programmers, would secure the lion's share of capacity on their video dialtone platforms under preferential terms and conditions that were not available to unaffiliated providers.#0*((ԌWhile SNET's and Bell Atlantic's attempts to secure capacity for their favored programmers were fairly blunt, Rainbow experienced a more creative, but no less anticompetitive, form of discrimination with regard to its attempt to secure channel capacity on US WEST's video dialtone trial system in Omaha, Nebraska. In Omaha, US WEST notified  YH only selected VPPs about its trial through a "requester/provider letter."$HO Y #Xw P7[&XP#эSee US WEST Communications, Inc., 9 FCC Rcd 184 (1993)("Omaha Authorization"); US WEST Communications, Inc., 10 FCC Rcd 4087, 4092 (1995)("Modification Order"). The notification letter apparently described the trial, stated the eligibility requirements, and established the deadlines by when participants must respond. Rainbow was  Y not one of those who received such a notification.Q% 4O Y #Xw P7[&XP#эSee Interface Communications Group, Inc. v. American Movie Classics Company and Rainbow Programming Holdings, Inc., File No. CSR ___, Rainbow Answer, Greenberg Declaration, Ref. No. 1 at  5 (filed Feb. 15, 1996) ("Rainbow Answer").Q Not only was Rainbow thereby  Y foreclosed from the initial channel allocation,c& O YT #Xw P7[&XP#э Rainbow sent US WEST a letter inquiring about obtaining capacity on the Omaha video dialtone system over seven months before the trial commenced. Rainbow Answer,  Y& Ref. No. 4 (Letter from Andrea Greenberg to A. Gary Ames, dated Jan. 23, 1995). c but even when nonshared channels on the platform became available, Rainbow was informed that it could not have access to that  Y capacity.': O Y{ #Xw P7[&XP#эRainbow Answer, Greenberg Declaration at  5. Rather than allocating these surrendered channels to new video providers, US West gave most of them to Interface Communications Group, Inc. ("Interface") US  Y4 WEST's favored programmer.o(_4 O Y! #Xw P7[&XP#эInterface's oral and written representations raise a serious question as to US WEST's relationship with Interface. Mr. Jerry Maglio, who had been hired by Interface to put together its successful bid to assemble programming, pricing, and packaging for the US WEST's video dialtone trial in Omaha, Nebraska, informed Rainbow personnel that Interface was in the preferred position on the US WEST video dialtone platform because only it could market using US WEST's name and use US WEST's billing system. See Rainbow Answer,  YF' Dewey Declaration at  4. Interface also marketed its services using US WEST's name,F''0*(( claiming it had "an exclusive agreement with US WEST's enhanced services group for the provision of basic and pay programming services. . . . [and that it] will select, price, and package the basic and pay services marketed under the US WEST TeleChoice brand." See Rainbow Answer, Ref. No. 7 (Letter of Julia Melnychuk to Rod Mickler, dated Apr. 14, 1995).o The upshot of this process was to enable Interface, which4(0*(( initially was to receive only nine channels on the Omaha system, to ultimately control all 77  Y analog channels including the 37 designated for thirdparty programmers.)O Y #Xw P7[&XP#эAlan Breznick, "Movie Madness," Cable World at 16 (Jan. 22, 1996). The article indicates that Interface was marketing a 58-channel basic package as well as 19 channels through TeleChoice. Rainbow has been denied any capacity in Omaha. If it is going to prevent these abuses in the future, the Commission must not only adopt specific rules to govern channel allocation, it must ensure a meaningful opportunity to enforce those rules. In this regard, Rainbow agrees that agreements should between OVS  Y operators and the programmers utilizing OVS should be available for public review.C* O Y= ԍNPRM at 34.C Full and open disclosure will help to ensure parity between OVS operators and competing MVPDs in accordance with the intent of Congress and the provisions of the Act. The  Yb Commission's rules provide adequate protection for proprietary information.B+bQ O Yd ԍ47 C.F.R. 0.457.B  X4 XX` `  3.X Unaffiliated programmers should have nondiscriminatory access to  X necessary software and equipment (# The 1996 Act directs the Commission to adopt regulation to assure the competitive availability of converter boxes, interactive communications devices, and other customer +0*((  Y premises equipment.,O Yy ԍ47 U.S.C. 549. See Conference Report at 180. Section 629 does not prohibit telecommunications system operators from also offering navigation devices and other customer premise equipment to customers provided that the system operators' charges for navigation devices and equipment are separately stated, and are not subsidized by the charges for network services. See Conference Report at 180181.C These regulations, and the 1996 Act's requirement to "ensure that the rates, terms, and conditions" for video programming on an OVS platform are "just and  Y reasonable,"I-O Yr ԍ47 U.S.C.  573(a)(1)(A).I clearly give the Commission the authority to require an OVS operator to make available all equipment necessary to access the OVS platform and provide service to customers on the same rates, terms and conditions provided to its affiliated programmers. Indeed, the prospects for fair competition will never be realized unless the Commission insists upon the core obligations for nondiscriminatory access to all essential equipment required to deliver video programming to subscribers over an OVS platform. Likewise, the Act's nondiscrimination requirement must be read to apply to the availability of the software  Yb necessary for unaffiliated VPPs to gain access to the platform to provide service.T.bO Y ԍSee Conference Report at 172173.T Rainbow's experience with Bell Atlantic's video dialtone system in Dover Township demonstrates that, absent sufficient regulation, a local exchange carrier will use its control over equipment and software to effectively deny unaffiliated video programmers access to an ostensible "open" system. As Rainbow explained in its Opposition to Bell Atlantic's Video Dialtone Service Tariff, despite requesting capacity for 192 channels on the Bell Atlantic platform, Rainbow did not have an equal opportunity to secure access to components criticalN .0*(( to the provision of video dialtone service such as digital settop boxes. This equipment was  Y not available from other sources at commercially reasonable prices./O YK ԍSee In the Matter of Bell Atlantic Telephone Companies, Transmittal Nos. 741, 786, CC Docket No. 95145, Rainbow Opposition at 1426. Likewise, Rainbow found that without timely access to interface software, it could not access potential customers over the Dover Township platform. That software is under the control of FutureVision, Bell Atlantic's favored programmer, which threatened to withhold it until Rainbow licensed FutureVision to carry Rainbow's programming. FutureVision's blatant attempt to leverage its control over this essential software underscores the need for Commission regulation to ensure that access to critical OVS equipment and capabilities are provided on the same rates, terms and conditions provided to OVS operators and their affiliates. Because OVS systems are likely to involve complicated and expensive equipment for which there is no competitive alternative, Commission intervention is overwhelmingly just and necessary. By mandating that essential components be offered on a nondiscriminatory basis until such time as it is competitively available, the Commission will help ensure fair  Y| competition under OVS.]0|bO Y ԍSee Conference Report at 172173, 180181.] OVS operators should not be permitted to discriminate in the provision of essential equipment and functionalities.N00*((Ԍ X X` `  4. All VPPs must participate in developing channel sharing plans (# The Commission must ensure that channel sharing is not used to advantage favored  Y programmers or provide traditional cable service under the guise of OVS.[1O Y ԍThe Act permits OVS operators to implement channel sharing. 47U.S.C.573(b)(1)(C). The stated purpose of this provision is "to permit an [OVS] operator to require channel sharing . . . provided that subscribers have ready and immediate access" to any shared channels. Conference Report at 177.[ Channel sharing allows the platform provider to require different programmers that seek to offer the same video service to share the channel on which that service is offered. Proponents of channel sharing believe it provides efficiencies and increases programming diversity. Contrary to the Commission's tentative conclusion, however, the Act does not permit an OVS operator to choose "how and which programming will be selected for shared  Y channels."24O Yu ԍNPRM at 37. Nor is the Commission correct in tentatively concluding that an OVS operator should be allowed to choose the entity that administers the channel sharing arrangement. Id. Such a conclusion would open up myriad possibilities for an OVS operator to extend its reach over channel capacity beyond the onethird limitation established by the 1996 Act. Rather, the statute merely permits the OVS operator to determine whether to implement a channel sharing arrangement. Channel sharing remains subject to the general statutory prohibition on  Y discrimination.S3O Y" ԍSee 47 U.S.C. 573(b)(1)(A).S The Commission itself has recognized that channelsharing arrangements raise significant legal and policy issues, including the possibility of unreasonable|h 30*((  Y discrimination.4O Yy ԍIn the Matter of the Applications of Pacific Bell, FCC 95302 WPC Nos. 69136916, at  32 (rel. August 15, 1995) ("Pacific Bell Order"); see also Video Dialtone Reconsideration Order, 10 FCC Rcd at 371. Any channel sharing mechanism must conform to, and not supplant, the  Y principles of nondiscrimination.u5KO Y ԍSee Video Dialtone Reconsideration Order, 10 FCC Rcd at 371.u To that end, channel sharing arrangements be structured and administered in a nondiscriminatory fashion by an independent third party agreed to by  Yv all video programmers on the platform.6 vO Y# ԍIn this regard, Commission regulation that simply requires OVS operators to appoint an administrator to facilitate the channel sharing process will not be sufficient to minimize the possibility of unreasonable discrimination. US WEST, for example, hired a thirdparty facilitator to conduct a meeting in Englewood, Colorado among the seven prospective VPPs to its technical and marketing video dialtone trial. Interface, however, clearly dictated the agenda concerning shared and common channels. See In the Matter of US WEST, File No. WPC No. 6868, U.S. West Communications, Inc. Analog Channel Programming Facilitation Session, Executive Summary at 56 (Jan. 27, 1995). Two VPPs effectively relinquished their decision-making authority to Interface, with one actually giving Interface its vote. Id. at 6. In fact, only Interface and one other VPP participated in the discussion concerning shared channels. Id. For example, under the SNET channelsharing proposal, only one programmer on the platform, CCT, had an ostensible role in selecting the shared channel programming  Y services.7 O Yd #Xw P7[&XP#эSee In the Matter of SNET, File No. WPC 6858, Amended Application at 12 (filed Sept. 1, 1995). The proposal denied Rainbow and other programmers the opportunity to participate in the selection of shared channel programming services; anointed CCT as the  Y entity designated to administer the programming for the shared channels;]8aO Y# #Xw P7[&XP#эId.] excluded programming services that failed to satisfy content criteria established by SNET andb80*((  Y CCT;{9O Yy #Xw P7[&XP#эSee SNET/CCT Agreement at  5.{ and contained a costsharing formula designed principally to force unaffiliated  Y programmers to bear a wholly disproportionate share of CCT's costs. :yO Y #Xw P7[&XP#эSee In the Matter of SNET, File No. WPC 6858, Amended Application at 1216, Cablevision/NECTA Petition to Deny SNET Amended Application, at 4952 (filed Sept. 26, 1995).  SNET's channelsharing plan amounted to nothing more than an effort to preserve and strengthen unlawful discriminatory advantages SNET had secured with its favored programmer, CCT, almost two years earlier. To prevent these abuses under OVS, channelsharing must comply with the following principles: XX` ` all video programmers on the platform should be involved in the process of selecting the programming for the shared channels;(#` XX` ` no programming services should be excluded from consideration for the shared channel package on the basis of content;(#` XX` ` unaffiliated programmers should not be required to bear a disproportionate share of the costs of the shared channels;(#` XX` ` programmers must retain the right to decline to participate in channel Y sharing;C; Y ԍNPRM at 41.C and(#` XX` ` OVS operators cannot be allowed to enter into arrangements that could disproportionately favor the OVS operator or its affiliated programmer with respect to the distribution of advertisement availabilities ("ad avails") and  Ye related revenue..<e Y# ԍInstead, the OVS operator could be required to allocate the revenues from the sale of avails to each of the programmers on the shared channels or, alternatively, to permit each programmer to sell its own avails independently and keep the resulting revenues..(#` N0 <0*((Ԍ X XX` `  5.X OVS operators should not be permitted to use their telephone  X monopolies to gain marketing advantages (# Congress directed that OVS operators should be prevented from using their marketing  Y activities to discriminate against competitors.[=O Y ԍ47 U.S.C.  573(b)(1)(E) (forbidding discrimination with regard to "material or information (including advertising) provided by the operators to subscribers for the purposes of selecting programming on the open video system, or in the way such material or information is presented to subscribers.").[ To avoid giving its affiliated programming provider marketing advantages, the OVS operator should be required to provide unaffiliated programming providers with timely access to construction plans and activation schedules. That information is critical to knowing where and when to engage in marketing. Without access to that information, unaffiliated providers will always lag behind the marketing efforts of the OVS operator's affiliate. To counter another possible advantage that an OVS operator could confer on its affiliate, unaffiliated program providers should also be able to utilize the billing services of an OVS operator on the same terms and conditions as those services are provided to the affiliate. The Commission must also establish clear rules with respect to the joint marketing of OVS and voice telephony services by LECs. Because of the dangers of discrimination inherent in telephone company marketing of regulated and unregulated services together, the Commission should prohibit such activities by an incumbent LEC unless certain safeguards  Y7 are in place.>74O Y# ԍSee In the matter of American Telephone and Telegraph Co., 98 FCC 2d 943 (1984) ("Sales Agency Order").7>0*((ԌIn particular, an OVS operator should not be permitted to conduct any inbound  Y telemarketing?O YK ԍ"Inbound telemarketing" refers to telemarketing or referrals that occur during a call initiated by a customer or a potential customer of the service. or referrals of its video services unless it provides the same marketing on the same terms, conditions, and prices to all VPPs. The Commission should limit the inbound telemarketing or referral services provided by the OVS operator to a listing, on a rotating basis, of all video programming providers, including the OVS operator's programming affiliate, that request such a listing service. To prevent the OVS operator from using its inbound telemarketing in a manner that disadvantages a video programmer or cable operator, the OVS operator should not be permitted to include any information about the price, terms, or conditions of service offered by any video programmer or cable operator, and should be prohibited from comparing among video programmers and cable operators, or  Y4 among competing program offerings on its own OVS.g@4bO YG ԍThese rules are analogous to the Commission's rules governing the joint marketing of local telephone service and customer premises equipment by LECs. See Furnishing of Customer Premises Equipment by the Bell Operating Telephone Companies and the Independent Telephone Companies, 4 FCC Rcd 6537 (1989).g To avoid the possibility that a LEC would use its monopolyderived customer lists to gain an unfair advantage in the outbound telemarketing of unregulated services, moreover, the Commission should bar such telemarketing at least until the LEC can show that a competing multichannel video programming distributor is engaged in the outbound joint marketing of local telephony and video services. The Commission must also ensure that all video programmers on the OVS platform obtain access to the same customer information on a real time basis. Information regarding@0*(( deployment should also be provided on a nondiscriminatory basis. Equal access to information about potential and actual subscribers is critical in promoting fairness on open video systems. Not only is such information necessary for billing, it is invaluable for marketing purposes. Information about potential enduser subscribers, as well as deployment plans and schedules, will allow programmers to assess the market and to advertise to those customers. OVS operators will certainly have access to that information. Finally, under no condition should the OVS operator be allowed to market any programming package offered on its service. The Commission correctly recognized that programming providers should not be forced to relinquish control over their own  Yb products.CAbO Y ԍNPRM at  41.C Permitting OVS operators to market the services offered by unaffiliated programmers would present countless opportunities for price discrimination, among other things, and discourage independent offering of competing program packages on the OVS system.  X X` `  6. The Commission should require separate subsidiaries to guard  X against crosssubsidization and anticompetitive conduct (# In order to deter crosssubsidization and anticompetitive conduct by local exchange carriers, the Commission should require LECs to operate their open video systems, and provide programming to subscribers, through an affiliate that is structurally separated from the LEC's regulated telephone operations. The separate affiliate would act independently of the telephone operating company; maintain separate books, records, and accounts; have separate officers, directors; and employees; obtain credit separately from the telephone#yA0*(( operating company; and conducts all of its transactions with the operating company on an arm'slength basis, with any such transactions reduced to writing and available for public  Y inspection.BO Y ԍCf. 1996 Act, 272(b) (to be codified at 47 U.S.C.  272(b)) (requiring public disclosure of any transaction between a Bell operating company and its separate subsidiary). While structural separation does not by itself prevent unlawful activity, it has proven useful as a means of deterring such activity by highlighting the transactions between a  Y regulated entity and its unregulated affiliate.C_ bO Y- ԍSee, e.g., In re Policy and Rules Concerning the Furnishing of Customer Premises Equipment, Enhanced Services and Cellular Communication Services by the Bell Operating Companies, 95 FCC 2d 1117, 1131 (1983), aff'd sub nom. Illinois Bell Tel. Co. v. FCC, 740 F.2d 465 (7th Cir. 1984), recon. den, 49 Fed. Reg. 26,056 (June 26, 1984), aff'd sub nom. North American Telephone Association v. FCC, 772 F.2d 1282 (7th Cir. 1985) (separate subsidiaries eliminate problem of determining proper allocation of joint costs and reduces chance of discrimination). The Commission has long employed this tool to ensure that the entry of monopoly local exchange carriers into competitive markets  Y does not impede competition.D O Y ԍSee e.g.,First Computer Inquiry, 28 FCC 2d 291 (1970) (data processing services); Computer II Final Decision, 77 FCC 2d 384 (1980) (same); Cellular Communication Systems, 86 FCC 2d 469, 493 (1981) (cellular services). In the case of OVS, arm'slength separation between the LEC's telephone operating company and its OVS affiliate and between the "wholesale" and "retail" OVS offerings of the LEC is essential in order to provide a meaningful opportunity  Y4 to detect and police the many and varied anticompetitive activities that could arise.GE4 O Y! ԍSee Section I.B, supra.G With respect to Bell operating companies ("BOCs"), a structural separation requirement for OVS is also compelled by the 1996 Act. Section 272(a)(2)(C) of the 1996E0*((  Y Act requires a BOC to establish a separate affiliate for interLATA information services.F O Yy ԍ47 U.S.C.  272(b)(2)(C). The statute exempts from this requirement, inter alia, "incidental interLATA services" and "electronic publishing."  272(b)(2)(B)(i), 272(b)(2)(C). Neither exemption is relevant here. Only "an interLATA transmission incidental to the provision by a [BOC] or its affiliate of video . . . services" is considered an "incidental" interLATA video service; the actual provision of service to the public is not an incidental service for purposes of section 271 or 272. See  271(h). Likewise, the definition of electronic publishing specifically excludes "video programming or full motion video entertainment on demand.  274(h)(2)(O). Even assuming arguendo that the separate affiliate requirement does not apply to a BOC's offering of OVS, the Commission retains its authority to "prescribe safeguards" consistent with the public interest, convenience, and necessity.  272(f)(3). The FCC's pre1996 Act authority clearly included the power to require separate affiliates, which the Commission has done on a number of occasions. See n.46, supra. "Information service" means "the offering of a capability for generating, acquiring, storing, transforming, processing, retrieving, utilizing, or making available information via  Yv telecommunications.":GvNO Yu ԍ47 U.S.C.  153(41). This definition is drawn from the Modification of Final Judgment,  IV(J) ("MFJ"). See U.S. v. American Tel. & Telegraph Co., 552, F.Supp. 131 (D.D.C. 1982), aff'd. sub nom. Maryland v. U.S., 460 U.S. 1001 (1983).: The provision of video services to subscribers, whether over a  YH cable system or otherwise, is an information service,HHO Y ԍSee, e.g., Pepper, Through the Looking Glass: Integrated Broadband Networks, Regulatory Policies, and Institutional Change, 4 FCC Rcd 1306, 131415  72 (1988). and the Commission has long held  Y that the lastmile distribution of video programming is an interstate service.vI kO Y6 ԍSee U.S. v. Southwestern Cable Co., 392 U.S. 157, 168 (1968).v  I0*((Ԍ X  II.XFORCING VIDEO PROVIDERS TO MAKE THEIR PROGRAMMING AVAILABLE TO RIVALS ON AN OPEN VIDEO SYSTEM WILL STIFLE  X COMPETITION (# The Commission rightly recognized that programmers have a right to exercise control  Yv over their own product.CJvO Y ԍNPRM at 41.C This point extends beyond channel sharing arrangements and  YH  applies with equal force to the applicability of the program access rules.nKHyO Yr ԍ47 U.S.C.  548. See 47 C.F.R.  76.1000 et seq.n Congress itself  Y limited the applicability of the program access rules to operators of open video systems;TL *O Y ԍ47 U.S.C.  573(c)(1)(A). The program access rules impose particular obligations on cable operators, separate and apart from the requirements imposed on the satellite cable programming vendors. Like cable operators, OVS operators would are precluded from . . . See  548(b).T nothing in the 1996 Act suggests that programmers must provide their services to competing users of an open video system. The Commission should make clear the limited reach of program access in the context of OVS. In this context, Rainbow's experiences are again instructive. It can be no coincidence that, having thwarted Rainbow's efforts to obtain its own capacity on their video platforms, SNET, US West, and Bell Atlantic through their respective proxies CCT, Interface, and FutureVision have all sought to use the program access rules to demand Rainbow's  Y programming for their own use.5MvO Y! ԍSee CAI v. Cablevision Systems, Inc. [sic], File No. CSR ___ (dismissed without prejudice after SNET withdrew its video dialtone applications, Order, DA 96283, rel. March 12, 1996); Interface Communications Group, Inc. v. American Movie Classics Company and Rainbow Programming Holdings, Inc., File No. CSR ___, filed Jan. 16, 1996; Digital Video Services [formerly FutureVision] v. Cablevision Systems Corp. and Rainbow Programming Holdings, Inc., File No. CSR ___, filed March 12, 1996.5 If they succeed and Rainbow is forced to provideM0*(( programming to one of its potential competitors on an open video system, Rainbow will effectively be foreclosed from competing directly for subscribers. The OVS framework contemplates that all video programmers will compete on equal terms if they choose to obtain capacity on the platform. Enabling Interface or FutureVision to forcibly obtain the Rainbow's programming would fundamentally undermine the very competition OVS is intended to promote. The OVS platform is designed to enable multiple program providers to bring their offerings directly to consumers in competition with each  Y other and the system operator. Market forces are given full play under such a scheme.N O Y7 ԍSee Second Report and Order, 7 FCC Rcd at 579596; 5787 ("Free market forces, rather than governmental regulation, determine the success or failure of new services.") Applying program access to the relationships between programmers on the platform is directly contrary to the OVS model. If one VPP can demand gain access to another's programming, there would be little or nothing left to the second VPP's "right" to gain capacity for itself; its programming would already be available on the platform, with its access to the platform effectively usurped. Interprogrammer competition would become a nullity under such a scenario. On an OVS, each programmer is the equal of every other with respect to access to the platform. Applying program access rules in a manner that makes some programmers more equal than other can only hamstring competition as VPPs attempt to use the program access rules to obtain for themselves the rights to program services that would otherwise compete against them. The Commission cannot countenance such a result. bN0*((ԌTo allow VPPs to use the program access rules to acquire the programming of their competitors would reduce the number and diversity of voices available through open video systems, dampen competition, and harm consumers. Potential new programmers would have dramatically reduced incentives to roll out new offerings on OVS, since they would be forced to relinquish their programs to their competitors. It would be easy, moreover, for a dominant VPP probably an affiliate of the OVS operator to thwart competition by demanding access to channels owned or controlled by nonaffiliated, competing VPPs that have fewer channels. With fewer channels, and a reduced ability to distinguish themselves from the dominant VPP, there would soon be nothing to keep any competing programmer on the platform.   X  III.XTHE COMMISSION SHOULD IMPLEMENT AN EFFECTIVE DISPUTE  X RESOLUTION PROCESS (# If OVS is to succeed as Congress intended, it is absolutely essential for the  Y Commission to establish an effective dispute resolution process.MOO Y# ԍSee NPRM at 72.M An effective process demands clear rules, speedy resolution of grievances, and delivery of effective relief to injured parties. Congress ensured speedy resolution of grievances by requiring all complaints  Y  to be addressed within 180 days.OP yO YJ! ԍ47 U.S.C.  573(a)(2).hh*O The Commission must provide clear rules and ensure that relief is available. An effective dispute resolution process must guarantee aggrieved programmers with an immediate right of access to the OVS platform at issue for programmers who have been" *P0*(( denied such access. Without this right, the process will be devoid of value, since time is absolutely of the essence in establishing a viable programming service on a shared platform. Once an OVS operator denies access to a VPP, the damage is done. No remedy will compensate the VPP for its delayed entry into the market. Customers cannot be required to changes their minds about the programming packages they have selected. Furthermore, the Commission must require an expedited process for resolving allocation, capacity, and service information disputes. These issues all affect the critical startup period, when each VPP is developing its marketing and rollout strategy. Discrimination poses a significant threat to business viability at this nascent stage. If a programmer is allocated fewer channels than necessary to offer a marketable package, or if customers are not provided with important marketing materials, that programmer will inevitably be handicapped in the market. Consumers will suffer because of the resulting decline in program choice and diversity. A meaningful dispute resolution process is also essential to stimulate and encourage the development of new programs for open video systems. If the Commission fails to provide a process that can address the needs of aggrieved programmers, there will be a significant chilling effect on programmers' incentive to participate in open video systems. No programmer can be expected to invest the time and money necessary to expand its offerings into open video systems if it cannot protect itself from potential anticompetitive behavior."!P0*((Ԍ Y IG/ CONCLUSION ׃ For the reasons set forth herein, the Commission should adopt rules that ensure equitable and nondiscriminatory treatment for unaffiliated programmers seeking access to an Iopen video system. Absent such rules, as Rainbow can attest, OVS will frustrate rather than promote the robust competition envisioned by Congress.  X ` `  $hh*0Respectfully Submitted, ` `  $hh*0RAINBOW PROGRAMMING HOLDINGS, INC.  c ` `  $hh*0yhddd"y ` `  $hh*0 kx Howard J. Symons ` `  $hh*0James J. Valentino ` `  $hh*0Fernando R. Laguarda ` `  $hh*0MINTZ, LEVIN, COHN, FERRIS, ` `  $hh*0 GLOVSKY AND POPEO, P.C. ` `  $hh*0701 Pennsylvania Avenue, N.W. ` `  $hh*0Suite 900 ` `  $hh*0Washington, D.C. 20004 ` `  $hh*0202/4347300 ` `  $hh*0Its Attorneys April 1, 1996   VC F1/50750.4