NEWSReport No. CC- 95-13 COMMON CARRIER ACTION February 7, 1995 NYNEX AUTHORIZED TO OFFER VIDEO DIALTONE IN MASSACHUSETTS AND RHODE ISLAND The Commission granted the applications of New England Telephone and Telegraph Co. (NYNEX) to construct and operate video dialtone facilities in certain areas of Massachusetts and Rhode Island, upon finding that the grant of NYNEX's applications, subject to certain conditions, will serve the public interest. The systems would offer service to approximately 334,000 homes and businesses in Massachusetts and about 63,000 homes and businesses in Rhode Island. NYNEX proposes to build two broadband, hybrid fiber and coax networks offering advanced voice, data, and video services, including interactive video entertainment, multimedia education, and health care services. These networks will open the door for more competition in video delivery and programming and encourage investment in the nation's telecommunications infrastructure. In the 1992 Video Dialtone Order, the Commission determined that, through video dialtone, local telephone companies could participate in the video marketplace, consistent with the statutory telephone company-cable television cross-ownership restrictions. The Commission defined "video dialtone" as the provision by a local telephone company of a basic common carrier platform with sufficient capacity to serve multiple video programmers on a nondiscriminatory basis. Today, the Commission found that NYNEX's basic platform, consisting of 21 analog channels and between 400 and 800 digital channels, would offer sufficient capacity to serve multiple video programmers. After carefully examining the cost and revenue data submitted by NYNEX, the Commission also concluded that the proffered economic justification for the construction was reasonable, and that the new facilities would serve the public convenience and necessity. The economic data submitted by NYNEX showed that it would recover dedicated video dialtone costs and make a significant contribution to the common costs of the dual-use telephony-video dialtone systems. (over) - 2 - To protect telephone ratepayers, video programmers, and subscribers, the Commission imposed a number of conditions on NYNEX's authorization. Among other things, the Commission required that NYNEX: create two sets of accounting records to capture dedicated video dialtone costs and common costs; file summaries of these records with the Commission; file all revisions to Cost Allocation Manuals within 30 days after the release of the authorization and 60 days before providing non-regulated products or services related to video dialtone; and if NYNEX wishes to offer local exchange and exchange access service over these facilities, obtain approval of an accounting and cost allocation plan consistent with Commission rules. In addition, NYNEX must comply with the Commission's existing video dialtone requirements for nondiscriminatory access and comply prospectively with any changes in the Commission's video dialtone rules that result from pending rulemaking proceedings. The Commission declined to approve NYNEX's proposal to allocate the platform's analog channels to over-the-air broadcast and public access programmers, or NYNEX's plan for a channel administrator at this time because those issues are the subject of the Third Further Notice of Proposed Rulemaking in the Video Dialtone proceeding. The Commission stated that, given the expedited nature of its rulemaking on that issue, it does not anticipate that NYNEX will finish construction before the rulemaking is concluded. The Commission does not grant authority for NYNEX to implement its analog channel allocation proposal until these issues are resolved. NYNEX has not proposed to provide video programming over its video dialtone platforms. The Commission is currently considering certain issues raised by telephone company provision of video programming directly to subscribers over their video dialtone platforms pursuant to the Fourth Further Notice of Proposed Rulemaking. If NYNEX wishes to provide video programming directly to subscribers prior to the completion of this rulemaking, it must request additional authorization so that the Commission can determine whether and under what conditions NYNEX would be permitted to do so. Action by the Commission February 7, 1995, by Order and Authorization (FCC 95- 50). Chairman Hundt, Commissioners Quello, Barrett, Ness and Chong. -FCC- News Media contact: Susan Lewis Sallet at (202) 418-1500. Common Carrier Bureau contacts: Todd F. Silbergeld, Donald Stockdale, or Daniel Gonzalez at (202) 418-1580.