NEWSReport No. CC-593 COMMON CARRIER ACTIONDecember 23, 1994 COMMISSION ACTS ON ELEVEN VIDEO DIALTONE APPLICATIONS Through its actions on eleven video dialtone applications, the Commission today took several significant steps that will promote fair competition in the video programming marketplace. The Commission approved a large scale commercial deployment of video dialtone facilities by granting five applications from the Ameritech Operating Companies to provide video dialtone service in selected areas of Illinois, Indiana, Michigan, Ohio and Wisconsin. The proposed video dialtone network will reach 1.3 million homes, businesses and institutions in six metropolitan areas in Ameritech's service area. Ameritech intends to construct video dialtone facilities that will offer customers a wide array of new video services, including interactive services and video-on-demand, as well as traditional broadcast services. The Commission also has granted the request of U S WEST Communications, Inc. to modify its trial of video dialtone service in Omaha, Nebraska to permit it to accommodate all the video programmers that have requested capacity on the video dialtone system. In addition, the Common Carrier Bureau, acting pursuant to its delegated authority, dismissed without prejudice four applications filed by U S WEST seeking authorization to construct video dialtone facilities in Cedar Rapids, Iowa; Des Moines, Iowa; Albuquerque, New Mexico; and Colorado Springs, Colorado. The Bureau stated that, as filed, these applications did not satisfy the minimum requirements set forth in the Commission's rules. The Common Carrier Bureau also has granted the application of Carolina Telephone and Telegraph Company, a wholly-owned subsidiary of Sprint Corporation, to conduct a video dialtone technical and market trial in portions of Wake Forest, North Carolina. * * * * * In the Ameritech authorizations, the Commission found that the proposed video dialtone systems would serve the public interest by providing competition in the local distribution of video services, promoting efficient investment in the national telecommunications infrastructure, and fostering the availability of new and diverse sources of video programming. In order to protect against unreasonable discrimination and ensure that telephone ratepayers will not be adversely affected by the proposed video dialtone deployment, the Commission imposed several conditions and requirements in granting the authorizations. These conditions include the requirements that Ameritech submit detailed accounting records on a quarterly basis and file any necessary revisions to its cost allocation manuals. (over) - 2 - The proposed systems would provide video services in accordance with the Commission's video dialtone rules and policies over a hybrid fiber-coaxial cable infrastructure constructed solely for the provision of video dialtone services. The proposed video dialtone network would offer 310 multicast (240 digital and 70 analog) channels and 80 switched digital channels. The Commission stated that this proposed capacity meets the requirements of the video dialtone rules. The Commission stated that to ensure there is sufficient capacity for video programmers in the future, Ameritech must report to the Chief, Common Carrier Bureau, within 30 days of any anticipated capacity shortfall or within 5 days of when it denies a programmer-customer access to analog channels due to limited capacity, whichever occurs first. The Commission conditioned the grant of Ameritech's application on obtaining FCC approval of any channel sharing mechanism prior to implementing it. Ameritech had proposed to designate up to 13 analog channels as "common channels" that a Common Channel Manager would make available on a non-discriminatory basis to all programmer- customers. The Commission found, however, that Ameritech had not provided an adequate explanation of how its Common Channel Manager mechanism would work. The Commission also rejected Ameritech's proposal to allow programmer-customers to lease unused channels after one year regardless of the number of channels previously leased. The Commission found that this arrangement could allow a single programmer- customer to limit other programmers' access to the platform. The Commission therefore conditioned the authorization on Ameritech's limiting the number of analog channels a programmer may lease for exclusive use to no more than one half of the available unshared channels. * * * * * The Commission today also has granted U S WEST'S request to modify its authorization to conduct a trial of video dialtone service in Omaha, Nebraska so as to permit U S WEST to adopt a proposed revised analog channel allocation plan. On December 22, 1993, the Commission granted U S WEST's application to conduct a limited technical and market trial for video dialtone facilities and services in portions of its Omaha telephone service area. The Commission authorized U S WEST to conduct a technical trial for six months, passing no more than 2,500 households, as well as a market trial for a period of one year. The Commission found that U S WEST's proposal met the video dialtone requirements of offering a basic common carrier platform with sufficient capacity to serve multiple video programmers, and would serve the public convenience and necessity. - 3 - Subsequently, U S WEST asked the Commission to modify its existing authorization and proposed an alternative channel allocation plan that would accommodate all video programmers that have requested analog capacity for the trial period. U S WEST stated that the goals of the revised plan are to accommodate as many programmers as possible and to avoid duplicative video programming on the platform. The Commission concluded that the proposed channel allocation plan would provide sufficient capacity to serve multiple video service providers, and thus, will satisfy the video dialtone requirements. It also found that U S WEST's plan would not improperly involve it in video programmer functions, such as bundling or tiering. In a separate letter, the Common Carrier Bureau dismissed without prejudice U S WEST's applications for authorization to construct video dialtone facilities in Cedar Rapids, Iowa; Des Moines, Iowa; Albuquerque, New Mexico; and Colorado Springs, Colorado. The Bureau found that, because U S WEST had not provided sufficient information regarding estimated costs and revenues, the applications failed to meet the minimum requirements for a video dialtone facilities authorization application. U S WEST filed the four applications on November 16, 1994. * * * * * In addition, the Common Carrier Bureau has granted the application of Carolina Telephone and Telegraph Company, a wholly-owned subsidiary of Sprint Corporation, to conduct a video dialtone technical and market trial in portions of Wake Forest, North Carolina. Carolina has stated that the proposed video dialtone network will be capable of providing video services, including movies on demand and various interactive applications like games, home shopping, and health care services. The Bureau found that Carolina's proposal met the video dialtone requirements of offering a basic common carrier platform with sufficient capacity to serve multiple video programmers and would serve the public interest, convenience, and necessity. In order to ensure that telephone ratepayers will not be adversely affected by the trial, the Bureau imposed several conditions and requirements on Carolina. For example, Carolina must establish subsidiary accounting records to capture the revenues, investments and expenses associated with the provision of video dialtone services and file copies of these records with the Commission. Action by the Commission December 23, 1994, by Orders and Authorizations (FCC 94-340, Ameritech; FCC 94-350, US West); and by the Chief, Common Carrier Bureau (Carolina). -FCC- News Media Contact: Susan Lewis Sallet or Maureen Peratino at (202) 418-0500. Common Carrier Bureau Contact: John S. Morabito, Donna N. Lampert, or James D. Schlichting at (202) 418-1580.