$// O&A Video dialtone appl. WPC 6926-30, Ameritech, FCC 94-340 //$ $/ 300.214 Extension of lines /$ $/ 300.613 Ownership restrictions /$ $/ 400.63.01 Contents of applications /$ $/ 400.63.54 Facilities for provision of video programming /$ For Record Only FCC 94-340 Before the FEDERAL COMMUNICATIONS COMMISSION Washington, D.C. 20554 In the Matter of the Applications of ) ) AMERITECH OPERATING COMPANIES ) ) For Authority pursuant to Section 214 ) File Nos. W-P-C-6926 of the Communications Act of 1934, as ) W-P-C-6927 amended, to construct, operate, own, ) W-P-C-6928 and maintain advanced fiber optic ) W-P-C-6929 facilities and equipment to provide ) W-P-C-6930 video dialtone service within ) geographically defined areas in ) Illinois, Indiana, Michigan, Ohio, ) and Wisconsin ) ORDER AND AUTHORIZATION Adopted: December 23, 1994 Released: January 4, 1995 By the Commission: Table of Contents Paragraph No. I. Introduction 1 II. The Applications 3 III. Discussion 8 A. Video Dialtone Issues 9 1. Overview 9 2. Sufficient Capacity 10 3. Nondiscriminatory Access by Video Programmers 16 B. Section 214 Issues 31 1. Comments 32 2. Discussion 38 a. Section 214 Legal Standard 38 b. Application of Section 214 Standard to Ameritech Applications 44 (1). Economic Justification 45 (2). Public Interest Benefits of The Proposed Video Dialtone Systems 54 (3). Accounting Conditions and the Tariffing Process 59 IV. NCTA Motion to Dismiss 63 A. Comments 63 B. Discussion 67 V. Conclusion 71 VI. Ordering Clauses 72 Appendix: Pleadings Filed I. INTRODUCTION 1. On January 31, 1994, the Ameritech Operating Companies (Ameritech) filed five applications for authority to provide video dialtone. For the reasons set forth below, we grant all five of the applications, subject to the conditions set forth in this Order. We find that the proposed systems will promote the "public convenience and necessity" in the areas they will serve, in part by providing competition in the local distribution of video services, by promoting efficient investment in the national telecommunications infrastructure, and by fostering the availability of new and diverse sources of video programming. 2. In the 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. We defined "video dialtone" as the provision by a local telephone company of a basic common carrier platform to multiple video programmers on a nondiscriminatory basis. A "basic platform" is a common carriage transmission service coupled with the means by which end-user subscribers can obtain access to all video programming carried on the platform. If a local telephone company offers such a basic platform, it may also provide enhanced and non- common carrier services related to the provision of video programming in addition to basic common carrier services associated with the platform. The Commission also determined that a Section 214 application is the proper procedural vehicle for proposing video dialtone services. II. THE APPLICATIONS 3. On January 31, 1994, Ameritech filed Section 214 applications to provide video dialtone service in selected areas of Illinois, Indiana, Michigan, Ohio, and Wisconsin. Five parties filed petitions to deny or comments in response to one or more of the applications. On March 24, 1994, Ameritech filed its Consolidated Opposition to the Petitions to Deny. On April 5, 1994, four parties filed replies to Ameritech's Opposition. On April 28, 1994, the Acting Chief of the Common Carrier Bureau asked Ameritech to respond to staff questions regarding the applications. On May 9, 1994, Ameritech filed its response, and on May 16, 1994, three parties filed comments on Ameritech's response to the staff questions. On June 29, 1994, Ameritech filed a second response to further staff questions regarding the applications. On November 21, 1994, NCTA filed a Motion to Dismiss, claiming, among other things, that Ameritech had failed to revise its applications to reflect changes to the Commission's video dialtone policies adopted in the VDT Recon Order. On December 1, 1994, Ameritech filed its opposition to the motion, and reply comments were filed on December 6, 1994. 4. In the applications, Ameritech proposes to construct stand-alone facilities in order to provide video dialtone service. Ameritech's proposed systems would be capable of providing video services on a common carrier basis over a hybrid fiber-coaxial cable infrastructure. Ameritech states that its existing facilities are not capable of providing video dialtone service and no joint plant would be constructed. Ameritech asserts that, because its proposed network does not contemplate construction of joint facilities or provision of telephony over the video dialtone facilities, separations and cost allocation concerns are minimal and can be addressed by current Commission regulations. 5. Ameritech maintains that approval of the applications would permit its video dialtone network to reach 1.3 million homes, businesses and institutions in geographically and economically diverse sections of its service area. The proposed hybrid network would provide 310 multicast (240 digital and 70 analog) channels and 80 switched digital channels. The analog channels will be available individually or in ten channel blocks. There will be 30 digital multicast channel blocks available, with each block capable of providing 2 to 16 separate digital multicast channels, depending on the level of compression chosen by the programmer- customer. These blocks will be made available individually on a first-come, first-served basis. Ameritech proposes to permit a programmer-customer to lease no more than one half of the channels for exclusive use for the first year. After the first year any available channels will be available to any party, regardless of how many channels they may have previously leased. 6. Ameritech maintains that this architecture would allow it to offer the maximum flexibility to programmers on the platform. As a result, end-users could choose to receive services resembling current cable television service, including basic broadcast services, or subscribe to video-on-demand or interactive services, or any combination of those services. Ameritech also observes that only those end-users subscribing to digital services would require a digital set-top box. In addition, the system could be re-engineered to serve 125 homes per node rather than the initial 500 homes. This would increase the number of end-users that could use switched digital service without causing blocking. 7. In order to maximize the number of channels available to programmer-customers, Ameritech proposes to designate as many as 13 analog channels as "common channels" that a Common Channel Manager would make available on a non-discriminatory basis to all programmer-customers. The Common Channel Manager would not be affiliated with Ameritech, and Ameritech would not participate in the selection of programming channels. Programmer-customers would not be required to subscribe to the common channels to obtain access to the video dialtone platform and could subscribe either to individual channels or the block of channels. Ameritech maintains that this mechanism would allow the network to offer popular channels efficiently to all programmer-customers without unnecessary channel duplication. In its illustrative tariff, Ameritech outlines the basic requirements for programmer-customers and end-user subscribers. The minimum service period for programmer-customer services would be one year. III. DISCUSSION 8. In order to determine whether Ameritech's applications to offer commercial video dialtone service should be granted, the applications must satisfy the requirements of both the Commission's video dialtone policy and Section 214 of the Communications Act, as amended. Petitioners contend that the applications satisfy neither. We consider first the contentions that these applications do not satisfy our video dialtone requirements, and then turn to the issues raised under Section 214. A. Video Dialtone Issues 1. Overview 9. To qualify as video dialtone under our rules, a service must meet the requirements set forth in our Video Dialtone Order and modified and clarified in the VDT Recon Order. Among other things, the service must include a basic common carrier platform available to multiple video programmers on a nondiscriminatory basis, and a means by which end-user subscribers can access any and all of the video programming offered. The platform must provide "sufficient capacity to serve multiple video programmers." After extensive evaluation, we conclude that the system proposed by Ameritech does satisfy the "basic platform" requirement of our video dialtone rules. For the reasons set forth below, we conclude that Ameritech's applications meet the requirements of nondiscrimination and adequate capacity. 2. Sufficient Capacity a. Comments 10. Several parties voice concern about Ameritech's limited discussion in its application of its plans to expand analog capacity if such expansion proves necessary and reasonable to satisfy demand by programmer-customers. Joint Petitioners assert that not only is the currently proposed capacity insufficient, but Ameritech also fails adequately to discuss in its applications any plans or strategies for expanding its capacity if demand for the service requires it. The Great Lakes Cable Coalition (GLCC) disputes Ameritech's assertion that the proposed system would initially provide "a total of 390 analog and digital channels and will be able to accommodate hundreds of video programming sources." Instead, GLCC asserts that Ameritech initially, at best, will be able to provide 70 channels to no more than 70 video programming sources. 11. Ameritech responds by asserting that its network architecture is designed to meet currently forecasted demand. Ameritech identifies four mechanisms for expanding capacity if necessary, however. First, Ameritech asserts that, if demand is sufficient, digital multicast channels may prove a cost-effective alternative to analog channels by allowing eight channels to be offered in the same bandwidth required for a single analog channel. Ameritech maintains that the ability to present eight digital channels for the same transport cost as one analog channel well might offset the initial high cost of digital converters. Second, analog capacity could be increased by narrowing the delivery area served by a video serving office, allowing a programmer customer to lease analog capacity delivered to less than the total service area and opening analog capacity elsewhere for other providers. Third, if necessary, some bandwidth Ameritech plans to use for digital service could be used to provide analog channel capacity on an interim basis. Finally, Ameritech asserts that switched analog technology, which would work in the same fashion as switched digital technology, may allow it to provide increased analog capacity to programmer customers by not requiring the distribution of a signal unless an end user requests it. 12. Several parties assert that Ameritech's proposed digital capacity presupposes technology not yet commercially available. NCTA, for instance, maintains that digital compression is not yet commercially feasible and, accordingly, cannot be relied upon to solve the limitation on available channels. In response, Ameritech lists specific examples of vendors able to supply the equipment in question; Ameritech also asserts that in several cases cable systems are already beginning to deploy similar technology. b. Discussion 13. A local telephone company that wishes to provide a video dialtone service must make available a basic common carrier platform to multiple video programmers, and must be able to expand its capacity to accommodate increasing demand so as not to become a bottleneck. The capacity must be expanded to the extent it is technically feasible and economically reasonable. In the NJ Bell Order, we stated that, in applying the capacity requirement, we would review each application on a case-by-case basis taking into consideration: (1) the initial capacity available; (2) the applicant's ability to expand this capacity; and (3) the demand for capacity. 14. For the following reasons, we conclude that Ameritech's proposed system will offer sufficient capacity to satisfy the requirements of the Video Dialtone Order. The initial capacity of the system will be 70 analog multicast channels, 240 digital multicast channels, and 80 switched digital channels. Ameritech has stated that it chose that allocation scheme in light of the expected demand for analog channels. Based on the existing record, we find it unlikely that the number and allocation of channels proposed will not be adequate to accommodate foreseeable demand. Certainly no party in this proceeding has suggested that a total of 390 channels would not be adequate. Several parties, however, do challenge the ability of Ameritech initially to provide that many channels by questioning the availability of digital service at this time. Therefore, we require, as a condition of this authorization, that any video dialtone service offered by Ameritech in the five areas specified in the applications provide at least the proposed 390 channels. This requirement is consistent with the representations made by Ameritech in the applications and subsequent filings about its ability to provide digital service. 15. Another issue is whether Ameritech's plan initially provides for sufficient analog capacity. If demand for analog channels does exceed the number of such channels available, Ameritech has identified four mechanisms for expanding capacity to meet demand, three of which would expand analog capacity so that end users would not need to use digital set-top boxes, unless they subscribe to digital services. Finally, consistent with our ruling in the VDT Recon Order, we will require Ameritech to report to the Chief of the Common Carrier Bureau, within thirty days after it becomes aware of an anticipated capacity shortfall or within five days of denying a programmer-customer access to analog channels due to limited capacity, whichever occurs first. In that report, Ameritech shall describe the steps taken to accommodate the programmer-customer denied access to the platform. To the extent that Ameritech believes that expansion is not technically feasible or economically reasonable at that time, it must explain in detail the basis for that determination and indicate when it anticipates expansion would be technically feasible and economically reasonable. 3. Nondiscriminatory Access a. Comments 16. Several commenters voice reservations regarding the potential for discrimination in programmer-customers' and end users' access to Ameritech's proposed video dialtone platform. First, they object to Ameritech's proposal to allocate up to 13 channels to the Common Channel Manager, contending that such an arrangement inherently entangles Ameritech in programming decisions in direct conflict with the Video Dialtone Order. Ameritech responds that the shared channel mechanism is not intended to embroil the company in programming decisions, nor will that be the effect. Ameritech asserts that the mechanism is simply a means of effectively using network resources and avoiding the inefficiencies that might result if different programmer-customers duplicated the same core programming over different channels. Any programmer- customer wishing to offer its customers any or all of the channels offered by the Common Channel manager will be able to do so without duplicating the offering of another programmer-customer. Finally, Ameritech argues that it would avoid any impermissible entanglement in programming decisions by establishing objective guidelines for selecting the Common Channel Manager beforehand. 17. The petitioners next argue that Ameritech's proposed set- aside of shared channels is in conflict with the basic common carrier format envisioned in the Video Dialtone Order. Several parties assert that the proposed service deviates so fundamentally from the guidelines set forth in the Video Dialtone Order that the service is not even video dialtone but simply cable television service. For example, Joint Petitioners contend that the Common Channel Manager proposal "is wholly at odds with the common carrier concept contemplated by the Video Dialtone Order." NCTA argues that the set-aside favors broadcast programmers and whatever entity is selected as the "Common Channel Manager." The Illinois Commission states that it is generally troubled by the lack of information regarding the terms and conditions of access to the proposed video dialtone platform. 18. Ameritech responds that the Common Channel Manager can be implemented in a fashion that causes no discrimination. In particular, Ameritech argues that, by facilitating efficient use of the network capacity, the Common Channel Manager will increase the "unfettered access for all program providers." In its response to staff questions, Ameritech also asserts that the shared channel mechanism includes no requirement that broadcast channels be included among the common channel line up. Ameritech maintains that certain channels will be necessary in any particular market if programmer-customers on its video dialtone network are to compete successfully with an incumbent cable system. The Common Channel Manager mechanism is designed to enable these programmer-customers to offer a core of popular channels without diminishing network capacity. 19. GLCC alleges that Ameritech's systems will be built in wealthier neighborhoods and will ultimately result in a class of "information have nots." The same issue has also been raised in a Petition for Relief which was filed by a coalition of consumer and civil rights groups on May 23, 1994. They allege that the Section 214 applications of several telephone companies, including Ameritech, demonstrate a pattern of avoiding low income areas and areas with a high concentration of minorities. Ameritech states that it did not discriminate in this manner in choosing the initial areas to receive video dialtone service. It argues, contrary to the allegations, that those initial service areas are very similar to its total service area in terms of racial and ethnic diversity, and that 35 percent of the population in those initial service areas have incomes below the median household income level for Ameritech's total service area. Additionally, Ameritech states that these five applications only cover 1.3 million customer locations of the approximately 6 million locations it plans to pass by the end of the decade. The Petition for Relief is currently pending before the Commission. 20. GLCC suggests that Ameritech's real intent in building a stand-alone video dialtone system is to position itself to provide cable service when the cable-telco cross-ownership ban is removed. Joint Petitioners argue that, if the provision of cable service is Ameritech's ultimate intention, then the Commission should not act on the applications until Ameritech's constitutional challenge to the cable/telephone cross-ownership restrictions is resolved. Ameritech acknowledges its constitutional challenge, but asserts that a pending court case does not bar it from simultaneously seeking authority to become a video dialtone provider. Ameritech states that, when it is allowed to provide video programming, it will fully comply with any rules governing that service. 21. NCTA also argues that Ameritech's proposal that there be a one-year minimum service period for which programmer-customers will be charged is discriminatory and prejudices the interests of smaller "part-time" or "one-time" programmers in direct contravention of the Video Dialtone Order. Ameritech presents two responses. First, as a procedural matter Ameritech asserts that, since this provision is part of its illustrative tariff, any discussion of this issue should be deferred to the tariff process. Beyond that, Ameritech argues that the one-year commitment is designed to achieve stability in programming and preserve end user demand for the product. Ameritech also contends that, if there is sufficient demand by part-time programmers, a resale market will develop. NCTA replies that the cable industry has provided commercial and public access to part-time users for years though public, educational and government (PEG) channels and leased access channels without the type of customer complaints that Ameritech cites to support the need for a one-year commitment. b. Discussion 22. In the Video Dialtone Order, we required local exchange companies to provide video dialtone service on a common carrier basis and unequivocally affirmed that requirement on reconsideration. An essential element of the common carrier nature of video dialtone is nondiscrimination with regard to both programmer-customers and end-users. We conclude that, with appropriate conditions, Ameritech's applications satisfy the requirements for nondiscriminatory access set out in the Video Dialtone Order and affirmed in the VDT Recon Order. We are not approving the Common Channel Manager proposal, however, and will require Ameritech to amend its authorization before using a channel sharing mechanism. In addition, we find Ameritech's proposal to allow programmer-customers to lease any unused channels after one year, regardless of how many channels that programmer-customer already leases, and its proposed one year lease term to be inconsistent with our video dialtone policies. 23. Based on the current record and given our understanding of the current state of technology, we find no inherent conflict between the reliance on shared channels to make more efficient use of the available bandwidth in Ameritech's proposed network architecture and the nondiscrimination requirements of the Video Dialtone Order. Indeed, in the VDT Recon Order we tentatively concluded that "channel sharing mechanisms, if properly structured, can offer significant benefits to consumers, programmer-customers, and video dialtone providers, while remaining consistent with the provisions of the 1984 Cable Act." We recognized, however, that the implementation of a shared channel plan raises significant legal and policy issues, such as the possibility of unreasonable discrimination. Consequently, we have sought comment in the VDT Recon Order on a number of issues related to whether channel sharing should be permitted and, if so, what rules and policies are required to ensure that any such arrangement will further the public interest and remain consistent with the 1984 Cable Act. We specifically noted that, pending development of such rules, we will continue to consider channel sharing plans in pending 214 applications, such as Ameritech's, on a case-by-case basis. Channel sharing arrangements approved prior to the completion of the rulemaking will be conditioned upon compliance with any subsequently adopted rules of general applicability governing channel sharing. 24. Upon review of the record in this proceeding, we find that Ameritech has not provided an adequate explanation of how its Common Channel Manager mechanism would work. For example, it is not clear how the Common Channel Manager (CCM) will be selected. Ameritech has stated that each party that desires to be the CCM would have to submit a written proposal to Ameritech. Ameritech listed a number of criteria it would use in reviewing those proposals. It has not explained, however, how it will weigh the criteria or otherwise evaluate the proposals. Consequently, we will not authorize Ameritech to use such a mechanism at this time. If Ameritech continues to desire to use a channel sharing mechanism, it must file an amended Section 214 application seeking Commission approval of its specific mechanism before using such a mechanism with any of these video dialtone systems. As noted above, use of any shared channel mechanism will also be conditioned on compliance with any requirements subsequently promulgated in the video dialtone proceeding, or any related proceeding. 25. We are not persuaded that we should deny this application because of assertions that Ameritech is simply seeking this authorization to begin construction of a conventional cable system in anticipation of a favorable ruling in its constitutional challenge to the cross-ownership prohibition. The applications before us propose construction of a system capable of providing video dialtone service and seek authority to provide such service. The petitioners make no credible argument as to why Ameritech's constitutional challenge to the prohibition against cross-ownership should bar its receiving authorization to offer video dialtone service. 26. While Ameritech has subsequently been granted relief from the cross-ownership prohibition, the applications do not propose that Ameritech or an affiliate will directly provide video programming to subscribers in the service areas. Rather, Ameritech requests authority to provide only video dialtone services, as well as unregulated non-common carrier services. We consider these applications under our video dialtone rules, and do not address any of the regulatory issues raised by the possible provision by Ameritech of video programming to end-users over this video dialtone platform. If Ameritech requests appropriate authority to directly provide video programming to end-users, we will consider that request under the rules then applicable to telephone company provision of video services. 27. Regarding the scope of Ameritech's deployment of video dialtone service, the Video Dialtone Order found that market forces should determine how and when the technology is deployed and services are offered to the public. We recognize that deployment of video dialtone will occur gradually, so that for a time it may reflect economic differences between communities. As with other common carrier services, we have not required that entire communities be wired before anyone can receive service. GLCC's allegations concerning Ameritech's deployment offer no substantive evidence of any discriminatory intent or effects in Ameritech's choice of areas for its initial deployment. Ameritech has stated that the initial deployment areas include an economically diverse population and has announced its commitment to deploy broadband services more widely in the future. We will, however, condition this authorization on Ameritech's compliance with any requirements adopted subsequently in the video dialtone proceeding or any related proceeding. 28. We reject Ameritech's proposal to allow any customer programmer to lease any unused channels after one year regardless of the number of channels previously leased. This could allow a single programmer-customer to control so many channels that other programmers' access to the platform could be limited. In establishing our video dialtone policies, one of our primary goals has been to allow multiple programmer-customers to have access to the basic platform. In the VDT Recon Order we specifically rejected the use of an "anchor programmer" that would have all or substantially all of the analog capacity of a system. We found such a concept would be inconsistent with the common carrier model and the requirement that video dialtone systems accommodate multiple programmers. In light of Ameritech's commitments to expand analog capacity and to implement a shared channel mechanism, and the number of channels it plans to offer initially, we do not find that its proposal to allow one programmer to lease up to half of the available non-shared analog channels constitutes impermissible discrimination. We see no reason, however, to eliminate that limit after a specified time period, which could permit one programmer to control substantially all of the analog channels. Our concern with providing access to the basic platform to multiple programmers does not expire after the first year of operation of a video dialtone system. We understand Ameritech's concern that it may be economically wasteful to leave channels unused if there is not sufficient demand from additional programmer-customers. If the situation were to arise that large numbers of channels were unused over an extended period of time, we would entertain a waiver motion from Ameritech to address that problem. We therefore condition authorization of the applications 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 non-shared channels. 29. The Illinois Commerce Commission's concern regarding Ameritech's failure to provide specific information regarding rates, terms and conditions of access to the platform does not require denial of these applications. We expect Ameritech's video dialtone tariffs will include the specific information the Illinois Commision seeks. We will evaluate the adequacy of that information in the tariff review process. 30. Finally, for guidance to the parties in advance of the tariff review process, we note our view that the proposed one-year programming commitment contained in Ameritech's illustrative tariff appears to be unreasonable. One of the goals of our video dialtone policy is to increase the diversity of video programming available to the public. The ability of programmer-customers to provide programming on a less than full-time basis or for less than a year is an essential means of achieving that goal. Ameritech argues that allowing part-time programmers will create churn, which will be viewed negatively by end-users. We do not find that argument persuasive. As NCTA points out, the cable industry has accommodated part-time users for years. Further, from the end-user's perspective, there is no difference whether Ameritech accommodates part-time programmers or those programmers obtain access through resale of channel capacity as Ameritech suggests. We will consider the reasonableness of any specific rate proposals or regulations for part-time programmers, such as requiring purchase of minimum time blocks, in the tariff review process. B. Section 214 Issues 31. In the Video Dialtone Order, we determined that Section 214 of the Communications Act applies to telephone companies that seek authority to construct video dialtone facilities. In order to grant an application for authorization under Section 214 the Commission must determine that a grant would serve the "public convenience and necessity." Traditionally, the focus of the Section 214 review has been "to ensure that carriers prudently invest in equipment so as to avoid waste and unreasonably high rates" for telephone rate payers." As part of the Commission's rules specifying the contents of Section 214 applications, Subsection 63.01(m) requires the applicant to provide an "[e]conomic justification for the proposed project including . . . estimated added revenues and costs and the basis thereof." The courts have granted the Commission significant latitude in making its determinations under Section 214. In the Video Dialtone Order, we concluded that our existing safeguards against discrimination and cross-subsidization in the provision of basic services by local telephone companies, in conjunction with the additional protection of a first level non-discriminatory video dialtone platform, should effectively protect against potential anticompetitive conduct by telephone companies in their provision of video dialtone. We further stated, however, that we intended to "reassess" the adequacy of the safeguards as applied to Section 214 applications for specific video dialtone systems. 1. Comments 32. In the applications, Ameritech asserts that its showings are completely consistent with the requirements for economic justification set forth in Section 214. Ameritech asserts that it will account for the investment and expenses associated with the proposed facilities in accordance with Parts 32 and 64 of our rules, as well as any rules we may prospectively deem necessary in subsequent proceedings. In the economic analysis originally submitted with its applications, Ameritech projected a discounted payback period of seven years for all of the proposed projects. In its response to staff questions, Ameritech refined its economic and financial estimates, and now projects a discounted payback period ranging from seven to nine years for the projects. Ameritech claims that such a payback period is reasonable for this type of capital-intensive project. In its response to staff questions, Ameritech also re-estimated the net present value of revenues minus costs in the tenth year of operation for each of the projects, which range from $6.6 million in Indiana to $22.2 million in Illinois. Ameritech also provided a breakdown of revenue by service class for each application. 33. The petitions to deny argue that Ameritech has failed to file sufficient information about the projected revenues and costs of its proposed video dialtone systems. Joint Petitioners, for instance, assert that the proposal is so vague as to be facially deficient. Similarly, GLCC maintains that the applications fail to provide specific information regarding costs, demand, and projected revenue. It also asserts that Ameritech's revenue and payback projections are insufficient and unrealistic. Several parties also criticize Ameritech's revised payback period and current value estimates in its response to staff questions. 34. Joint Petitioners also argue that the Commission should not approve Ameritech's application until completion of a final evaluation of the data gathered in the various video dialtone trials and establishment of an appropriate permanent regulatory structure for common carrier video dialtone. Joint Petitioners also advocate that the Commission initiate a comprehensive rulemaking proceeding to promulgate specific rules and procedures before approving any Section 214 applications. As envisioned by Joint Petitioners, such a rulemaking would necessarily include cost allocation rules and creation of a Joint Board to establish rules for jurisdictional separations. Joint Petitioners assert that, at a minimum, critical issues of cost allocation, jurisdictional separations, and necessary safeguards to prevent unfair and improper cross subsidization were left unresolved in the Video Dialtone Order and must be addressed in each Section 214 application. Joint Petitioners maintain that Ameritech has failed to address these issues sufficiently in its application and, accordingly, the application must be dismissed. 35. In its Opposition, Ameritech asserts that these arguments are spurious or misinformed, or both. Ameritech responds that its use of a separate facility for video dialtone services limits the possibility for cross-subsidization and separations problems. Ameritech further contends that the safeguards currently in place and the combined oversight of both state and federal regulators are adequate to prevent anticompetitive activity on its part and will protect both intrastate and interstate ratepayers. 36. Several parties object that the estimates of revenue per subscriber in the applications are unrealistically high. Ameritech responds that these objections are based on numbers derived from incorrect assumptions. Ameritech also argues that it is inappropriate to compare its revenue figures with those for traditional cable systems since its video dialtone system will provide consumers with services not yet available on traditional cable systems. Furthermore, the system will provide services to commercial customers not currently served by traditional cable systems. In its Second Response Letter Ameritech provides a detailed analysis of why it believes its revenue projections are reasonable. 37. Ameritech also maintains that the various commenters are arguing for a higher standard of economic justification than is warranted. Ameritech argues that the pro-competitive nature of video dialtone justifies less specificity than petitioners would require. Ameritech also observes that the current regime of price caps would prevent an increase in rates for other interstate services if video dialtone should fail to generate sufficient revenue. 2. Discussion a. Section 214 Legal Standard 38. In order to grant an application for authorization under Section 214 of the Communications Act, the Commission must determine whether a grant would serve the "public convenience and necessity." Courts have found that this statutory standard "is to be construed so as to secure for the public the broad aims of the Communications Act," including the purposes expressed in Section 1 of the Communications Act. Administration of this standard is generally left to the Commission's discretion: "[I]t is entirely within the Commission's discretion to accept even a minimal showing of financial justification" for approval of a Section 214 application. 39. In its analysis of the public convenience and necessity under Section 214, the Commission has usually focused on the "added" or "incremental" costs and revenues of the facilities for which authorization is sought. We have generally interpreted Section 214 to require some showing that the revenues expected from the proposed facility will at least cover these costs within some reasonable period of time. The Commission orders interpreting our Section 214 rules also stress an examination of added costs. The Commission has determined, for example, that "estimates of additional . . . costs . . . are the relevant costs to be considered," and that we will not take into consideration "sunk costs" or "embedded costs" already invested in existing facilities. 40. Section 214 authorizations do not require the level of detail demanded by petitioners. For instance, in AT&T Authorization we stated that "[g]enerally the Section 214 proceeding examines cost only insofar as it is necessary to determine, on a prima facie basis, whether costs are so substantial relative to benefits that the public interest would not be served by construction of the project." Nor have we required the level of certainty demanded by petitioners. We have only required a finding that the estimates "do not appear unreasonable." In examining an application for cable channel service, rather than denying the application, the Common Carrier Bureau conditioned its grant on a separate accounting of costs so that shareholders and not ratepayers would bear the burden of failure. In the early stages of the domestic satellite market, we stated that "[i]f a carrier waited until it was sure of a large demand for traffic, few stations would ever be built, while initial service demands go unsatisfied." 41. Finally, the Commission's review of a Section 214 application is not restricted merely to the financial aspects of the application. As stated above, the range of the Commission's inquiry into the "public convenience and necessity" is at least as broad as the purposes of the Communications Act. In situations such as this, where the applicant proposes a new service and thus must necessarily rely on predictions of demand and revenues, which by their very nature are cannot be certain, the Commission has found that public interest benefits to be gained from the new technology may nonetheless support a grant of a Section 214 application. Thus, in AT&T, where the applicant proposed supplementing existing facilities with a fiber lightguide cable, the Commission stated that "[t]his experience is necessary to foster the technological developments that will lead to 'learning curve' decreases in cost. Without experience in the early stages of development we may never see some of the advances that fiber technology promises to bring to telecommunications users." In Washington Utilities, the Commission considered the "public need and demand for the proposed facilities and services and for new and diverse sources of supply." On appeal the Ninth Circuit stated: "The crucial question is whether the Commission acted within its statutory authority in adopting a general policy favoring entry of new carriers rather than considering the costs and benefits of the specific proposal in each application. We hold that the Commission did act within its authority." b. Application of Section 214 Standard to Ameritech Applications 42. We conclude that a conditioned grant of the Ameritech applications will serve the public convenience and necessity and thus satisfy the requirements of Section 214. We find that Ameritech's showings of economic justification satisfy the requirements of the statute and our regulations. Our statutory finding is premised as well on the public interest benefits we find in the construction of the video dialtone systems and on our imposition of conditions in this authorization for a separate accounting of the costs of the video dialtone systems. As part of our examination, we have reassessed the adequacy of our safeguards as applied to these specific Section 214 applications, and conclude that our existing safeguards, in conjunction with the conditions we impose on this authorization, will be sufficient to protect against possible anticompetitive conduct by Ameritech. (1) Economic Justification 43. We find that Ameritech's economic justification meets the requirements of Section 214 and our rules. Under Section 214, applicants are required to show that costs are not so substantial relative to the benefits that the public interest would not be served by the construction of the proposed video dialtone system. With respect to applications to provide video dialtone service, the applicant must describe the proposed facilities and the economic justification for their deployment, including information regarding projected costs and revenues and the assumptions underlying those projections. We find that Ameritech has provided a reasoned basis for its determination that the revenues produced by its stand-alone video dialtone system will cover the cost of deployment within a reasonable time period. 44. Ameritech has submitted sufficient cost and revenue support for the Commission to grant the applications. For each application Ameritech has provided separate summaries of estimated construction costs, discounted pay-back periods, estimated revenues and costs by service class, a breakdown of the revenues by service class, net present values of revenues minus costs by year, annual costs for the projects, and annual operations and marketing expenses. In its responses to specific staff inquiries, the company has also provided detailed analysis regarding the underlying assumptions reflected in these projections and an explanation of why they should be considered reasonable. 45. Based on its market research, Ameritech projects an end-user subscription rate beginning at 9 percent and increasing to 39 percent within ten years. It anticipates that by the tenth year overall penetration rates for video delivery services (e.g., cable television, direct broadcast satellites (DBS), video dialtone) will increase to 78 percent of homes passed. This is premised on a trend line for basic cable service forecasted by Paul Kagan which, extrapolated to the year 2003, shows a 73 percent penetration rate. Ameritech then factored in the effect of the introduction of competition, which it believes will stimulate penetration by an additional 5 percent, for a total of 78 percent. It cites communities in which there is competition between cable companies to illustrate how such competition stimulates penetration and to show that over time both competitors will have roughly the same market share. 46. Ameritech also argues that, given the unique services its video dialtone system will offer, penetration need not be an "either/or" proposition, but rather that some consumers will subscribe to both its system and a traditional cable system. Based on those factors, Ameritech states that it expects to obtain approximately one-half of the video programming subscription market within ten years. Finally, Ameritech explains that its projected penetration rates take into account other video providers, such as DBS, but that these competitors are likely to gain only a very small market share in the areas Ameritech proposes to serve in the applications because these other providers generally do not offer the array of services that will be available over the video dialtone network. We find that Ameritech has provided a reasoned basis for its projections of penetration levels for its video dialtone systems. 47. Based on these market penetration projections, Ameritech states that it will have a positive cash flow in Illinois by its fourth year of operation and by the third year of operation in the other four states. Ameritech estimates that for the first few years of operation most of the revenue from its video dialtone platform will be generated by transport charges for analog multicast services. This service is analogous to existing cable service. As time passes, Ameritech expects that more end-users will use switched digital services, which include video on demand and interactive services. By the tenth year of operation, Ameritech anticipates that analog multicast, residential switched digital, and commercial switched digital will provide approximately the same revenues. 48. Ameritech estimates monthly revenue of $12 per residential subscriber for analog multicast services. Ameritech notes that this is less than the $15.77 cited by GLCC as the portion of an average monthly subscriber charge for cable service that is devoted to transport. The estimated revenue per residential subscriber for all services -- analog and digital multicast plus switched digital -- is $25 per month in the tenth year of operation. This revenue estimate does not seem unreasonable given the current revenues for cable service and the projected consumer demand for video on demand and interactive video. Ameritech notes that cable subscribers currently rent almost 5 movies a month in addition to their cable service. In the Video Dialtone Order, we also recognized the potential market for such services. 49. The Commercial Switched-Digital service will provide new and innovative services to Ameritech customers. Consequently, it is difficult to find comparable services from which to derive revenue estimates, and there is greater uncertainty inherent in these projections. We find, however, that Ameritech has provided a detailed explanation of these services as well as a reasoned basis for its estimates. Commercial Switched-Digital services would include such offerings as interactive training and education, interactive shopping, news and information on demand and electronic publishing. One example given by Ameritech is a service that would enable a real estate agent to give video tours on demand of homes for sale in areas outside the agent's and customer's community. Ameritech estimates that its average revenue from commercial subscribers would be $390 per month or $20 per business day in the tenth year of operation. Ameritech argues that this amount is reasonable, among other reasons, because it reflects that, for each commercial subscriber paying that amount, there may be many individuals at that location that use the service. In the real estate example, all the agents would be able to use the service, so the cost per agent could be substantially less than the $20 per day. Ameritech also argues that the use of these services would be economical for businesses. It illustrates that point by comparing the cost of a month of such service for a business to the cost of a single business or training trip that may be saved by using the service. Given this explanation by Ameritech, we find that Ameritech has provided a reasoned basis for its estimate of $390 per month as an average revenue per commercial subscriber in the tenth year of operation. 50. Ameritech's discounted payback period for these video dialtone systems is based on the use of a 10.6 percent discount rate. The petitioners argue that this rate is too low for a new and risky service such as video dialtone. Ameritech argues, on the other hand, that the rate represents the actual cost of capital to Ameritech in the financial markets and represents a weighting of the debt interest and equity return requirements based on the total operations of the company. It further argues that this rate is appropriate since debt and equity obligations are undertaken by the company as a whole, and investors evaluate risk and associated return based on the total risk structure of the company, not just a particular service. Ameritech also states that its video dialtone operations would have a positive net present value in their tenth year of operation in each state even using much higher discount rates. In the NJ Bell Order, we found a discount rate equal to the current rate of return used by the Commission, 11.25 percent, was not unreasonable for video dialtone. Using the 11.25 percent discount rate applied in the NJ Bell Order the discounted payback periods for the Ameritech applications would be seven to nine years. For the reasons stated in the NJ Bell Order, we decline to require Ameritech to use a discount rate higher than 11.25 percent. The discounted payback periods -- whether using a 10.6 or 11.25 percent discount rate -- are not unreasonable for such a capital-intensive project. 51. Without endorsing either Ameritech's specific cost and revenue figures or its projected break-even estimates, we conclude that Ameritech has made an adequate showing of the reasonableness of its estimated costs and revenues, sufficient to satisfy the economic justification requirements of Section 214. Ameritech's figures reasonably compare to a known current market, the home video market, and that market has demonstrated a consistent demand for video services, as evidenced by the success of the cable industry. Ameritech has also presented evidence of the potential for revenue relying on other non-cable related video information services. In all, Ameritech has clearly presented estimates and other evidence that "do not appear unreasonable," and therefore meet the requirements of Section 214. Finally, as described below, we will require Ameritech to account separately for its video dialtone costs. (2) Public Interest Benefits of The Proposed Video Dialtone Systems 52. In finding that video dialtone is in the public interest, the Commission concluded that video dialtone service would eliminate unnecessary regulatory barriers to competitive entry and to investment by telephone companies. The elimination of those barriers will help achieve three important goals: (1) facilitating competition in the provisions of video services; (2) promoting efficient investment in the national telecommunications infrastructure; and (3) fostering the availability to the American public of new and diverse sources of video programming. We believe the projects proposed by Ameritech will provide these benefits. 53. Ameritech's proposals clearly will produce new investment in an advanced telecommunications infrastructure. The proposed broadband analog and digital networks capable of providing at least 390 video channels would bring advanced technology to over a million locations in Ameritech's service area. Video servers, video administration modules, remote access modules, host digital terminals, multi-subscriber optical network units and associated software are among the advanced infrastructure components under development. Investment in these components benefits the nation in several important ways. Such investment stimulates manufacturing of high technology products, increases employment opportunities, creates potential export markets, and provides many indirect benefits in other fields, including marketing and training. 54. The proposals also promise to bring additional competition in the distribution of video services. Creating new outlets and opportunities for programmers and other users of system capacity will result in many of the same kinds of economic benefits that arise from investments in advanced infrastructure. These include employment opportunities in information services, potential export opportunities, and secondary stimulative effects on supporting services and industries. 55. Ameritech also states that all five of the states in its operating region currently allow competition for local exchange service. In the VDT Recon Order, we stated that the extent to which the states in which the service is proposed authorize competition for local exchange services is one of the factors which we may consider in the Section 214 review process. In that regard, we note that new entrants, including cable companies, have begun or announced their intentions to provide local exchange service in Illinois, Michigan, and Ohio. For example, MCI Metro recently filed applications with the Public Utilities Commission of Ohio to provide local service for businesses in Cleveland and Columbus. 56. Finally, the proposals will give consumers in the affected areas additional choices. Ameritech states the systems will offer a minimum of 390 channels. While we, and Ameritech, can anticipate the likely and potential uses of system capacity, there is no way of knowing which of these choices end-users will find most attractive, nor of knowing what new choices will become available in five or ten years. The systems will offer multiple service providers open access to video dialtone platforms, and consumers access to those providers. This access is consistent with the nation's fundamental commitment to diversity and competition in the flow of ideas, not only with respect to entertainment but also with respect to education, health, and commerce. (3) Accounting Conditions and the Tariffing Process 57. We require Ameritech to account for all costs associated with its video dialtone service in accordance with Part 32. In order to ensure that these costs are not borne by ratepayers of regulated services, and consistent with the requirements established in the VDT Recon Order, we condition this authorization on a requirement that Ameritech segregate all costs incurred in providing video dialtone service into two sets of subsidiary accounting records. We require Ameritech to create a set of subsidiary accounting records that identify all revenues, investment, and expenses wholly dedicated to video dialtone, and another set of records that capture any revenues, investment, and expenses that are shared between video dialtone and the provision of other services. These subsidiary accounting records shall include the direct costs and overheads associated with video dialtone service. To ensure that these costs are not borne by ratepayers of other regulated services, we require Ameritech to segregate all costs incurred in providing video dialtone service into subsidiary accounting records and to assign these costs to the video dialtone service. Consistent with the requirements of the VDT Recon Order, if these costs are not recovered from future video dialtone services, they must be borne by shareholders rather than the ratepayers of other regulated services. In addition, summaries of the subsidiary accounting records shall be submitted to the Commission on a quarterly basis. In the event that Ameritech wishes to offer local exchange and exchange access telephone services over this network, it must first submit and obtain approval of an accounting and cost allocation plan that is consistent with our then-existing rules. 58. We also require Ameritech to account for the cost of non- common carrier and enhanced services or video customer premises equipment (CPE) in accordance with our rules, to the extent Ameritech offers such services. We conclude that Ameritech's proposed provision of these services and video CPE is consistent with the requirements contained in Section 63.54(d)(2) of our rules. We require that, to the extent the non-regulated components of the expanded video dialtone service are not already covered by Ameritech's cost allocation manual (CAM), Ameritech must revise its manual to show how it intends to allocate costs of such components between regulated and non-regulated activities. Any necessary revisions must be filed within thirty days after release of this Order, and sixty days before providing non-regulated services related to video dialtone. At a minimum, in its submission, we require Ameritech to list all accounts affected by its provision of non-regulated services associated with its video dialtone service, and also describe those services. All CAM revisions related to the service will be subject to public comment and Commission scrutiny. We emphasize that our decision here, and the conditions we attach to it, are without prejudice to and in no way constrain any action that we may take in later phases of the video dialtone proceeding or any other applicable rulemaking proceeding. 59. Moreover, our action in this proceeding in no way limits our ability to ensure, in the subsequent tariff review process, that Ameritech's tariffed rates, terms and conditions for video dialtone service are just and reasonable. It is clear that consideration of costs in a Section 214 proceeding is distinct from the examination of rates in the tariff review process. As the Commission staff stated in a 1986 decision, "[a] detailed inquiry into tariff related matters ... would vitiate the distinction between tariff and facilities authorization procedures and would require the Commission to engage in duplicative processes." Prior to providing service, Ameritech must file tariffs, and cost support information, which will be available for review. 60. We have determined that video dialtone service is a "new service" under our price cap rules, which apply to Ameritech. In the Part 69/ONA Proceeding, the Commission established pricing standards for new services ("the new services test") offered by companies subject to the price cap method of regulation. In setting an upper bound for such services, the Commission adopted a "flexible cost-based approach to pricing new services." Under this test, the Commission requires LECs introducing new services to submit engineering studies, time and wage studies or other cost accounting studies to identify the direct costs of providing the new service, absent overheads. Recognizing that LECs may have an incentive to understate direct costs and overheads in order to set unreasonably low prices for video dialtone service, in the VDT Recon Order we required a more detailed and complete identification of direct costs, and a stronger justification for allocation of extremely low overheads, then we have generally required in other new services filings. It is against these standards that we will judge the reasonableness of the tariffed rates Ameritech proposes for its video dialtone services. IV. MOTION TO DISMISS A. Comments 61. On November 21, 1994, NCTA filed a Motion to Dismiss the Ameritech applications. NCTA argues that Ameritech should have revised its applications in light of our decision in the VDT Recon Order, but failed to do so and thus should be dismissed. NCTA makes three arguments to support its position. First, it claims that Ameritech should have revised its cost and revenue estimates because the VDT Recon Order recognized the possibility of state jurisdiction over some video dialtone services. Second, NCTA argues that Ameritech failed to provide enough financial information. Third, it states that Ameritech has not demonstrated that the proposed systems will provide access to all would-be programmers on an equal basis. Ameritech responds that there is nothing in the reconsideration order that requires it to amend the applications or the Commission to dismiss them, and that NCTA is merely trying to further delay the deployment of video dialtone. It claims that NCTA has raised the same arguments previously, and the Commission has rejected them. 62. NCTA asserts that the cost information that Ameritech is required to provide under the Commission's rules was altered by the reconsideration order when the Commission modified its finding that it has exclusive jurisdiction over video dialtone. NCTA claims that Ameritech has attributed all of the costs of its proposed service to the interstate jurisdiction even though its Switched Digital services appear to be intrastate services. NCTA argues therefore that Ameritech's applications are incorrect and should be dismissed. Ameritech responds that there is neither a factual nor legal basis to conclude that, with the introduction of state regulation for certain video dialtone service, the financial analysis needed for its proposals must change. It argues that the costs and revenues of its proposed service remain the same regardless of whether it is regulated at the federal or state level. NCTA replies that, in light of the Commission's decision in the VDT Recon Order to monitor and report on the impact of video dialtone on separations and intrastate rates, it makes sense for Ameritech to separate costs and revenues by jurisdiction. 63. NCTA also argues that the reconsideration order adopted a standard for cost and revenue information higher than that of the original video dialtone policies and that Ameritech has failed to meet that new standard. NCTA argues that, because video dialtone presents an integrated facility and interservice cross-subsidies are possible, the cost allocation issues are more difficult and thus the Commission needs more detailed information in determining if the applications are in the public interest. Ameritech responds that the reconsideration order does not alter the revenue and cost information required. It argues that the standard the Commission will use in evaluating video dialtone applications was enunciated in the NJ Bell Order, and that it has met that standard. It notes that its proposed system is not integrated but is solely for video. Ameritech also states that it is subject to price cap regulation in all five of the states in its operating region and at the federal level, and that such price regulation prevents it from cross-subsidizing. NCTA, however, claims that in the VDT Recon Order, the Commission did not adopt the standard used in the NJ Bell Order, and that the Commission actually conditioned the NJ Bell Order on New Jersey Bell's compliance with whatever standard might be adopted in the VDT Recon Order. It reiterates that the new standard is a more rigorous standard than that used previously. It also argues that price cap regulation does not eliminate incentives for Ameritech to misallocate costs in order to underprice video services at the expense of local ratepayers. 64. Finally, NCTA argues that Ameritech's proposed Common Channel Manager and the use of common channels is contrary to the requirement that a telephone company provide access to the platform on a nondiscriminatory basis, an obligation the reconsideration did not alter. Ameritech notes that in the reconsideration order the Commission found channel sharing to be consistent with video dialtone and stated that it would not defer consideration of pending applications while it considers rules for channel sharing arrangements. In its reply NCTA states that it is not opposed to channel sharing per se, but to arrangements where the telephone company is involved in determining which channels are shared. B. Discussion 65. Section 214 directs the Commission to look at the public convenience and necessity in considering whether to grant an application for authorization. We do not agree with NCTA's assertion that we can only base our finding on the interstate aspects of the proposed video dialtone systems in evaluating Section 214 applications. Section 214 does not set out specific requirements that the Commission must consider, but rather leaves the Commission "wide discretion" in deciding how to make its public interest determination. Likewise, our rules implementing Section 214 refer to the public interest, convenience and necessity of the application and do not set out specific requirements for the economic information to be provided. Rather the Commission has looked at the specific type of facilities to be provided in determining the exact nature of the information required. 66. We believe that it is important to look at the unseparated costs and revenues of the proposed video dialtone systems to determine if the systems are in the public interest. Just focusing on the interstate portion may not provide the Commission with a complete picture of how the proposed systems will operate, the types of services they will provide, or how the public will be benefitted by the system. Many of the new and innovative services which can be made available to the public because of video dialtone, such as interactive capabilities, may well be intrastate services. Yet they may provide important public benefits and we would be remiss to ignore those aspects of the proposal when considering these applications. We therefore find that we have the authority under the Communications Act and under our rules and regulations to examine unseparated rather than interstate only costs and revenues in making our Section 214 determination. 67. We emphasize that our approval of Ameritech's Section 214 applications is not intended to preempt state commissions from disallowing from local telephone service rates any video dialtone- related costs that do not meet their own standards for inclusion in rates. Moreover, our approval is consistent with precedent. In Iowa Network Access Division (INAD), the Common Carrier Bureau approved a Section 214 application for INAD to construct facilities to provide centralized equal access service, even though the applicant justified the construction in part with revenues it anticipated from intrastate service. In authorizing the service, the Bureau recognized that the viability of the service depended on intrastate revenues, that the state of Iowa was examining the proposed service, and that state rejection of the service would fundamentally affect the Bureau's decision to approve the facilities. Accordingly, the Bureau conditioned its grant on state approval of the network without modifications that materially affect the relative amounts of interstate and intrastate usage. Similarly, we require as a condition of this authorization that Ameritech inform us within 30 days of any state action or requirement that fundamentally changes Ameritech's assumptions regarding its ability to recover the costs of its video dialtone system. 68. Regarding NCTA's other arguments regarding the financial information required for approval of these applications and the use of common channels, the petition does not present any arguments that were not raised in the previous pleadings on these applications. We have already discussed Ameritech's proposed use of shared channels, and the level of review required for these applications under Section 214 and our rules. We do not agree with NCTA that the VDT Recon Order changed the standard for reviewing the Section 214 applications. The passage which NCTA cites is a background section which describes the existing standard, and did not establish a new standard. NCTA also cites our discussion of the type of information we will require for video dialtone tariffs. The consideration of costs in a Section 214 proceeding is different from the examination of costs in the tariff review process. Consequently, we do not find our discussion in the VDT Recon Order of the level of information we will require in the tariff review process in any way changes the standard we will use in Section 214 proceedings. Therefore we do not find that NCTA's motion provides any reason to alter our findings. The motion is therefore denied. V. CONCLUSION 69. We find that the video dialtone systems Ameritech has proposed in the applications will serve the public convenience and necessity. Ameritech has supplied the information necessary to demonstrate that its proposals are consistent with the goals set forth in the Video Dialtone Order and our rules. A prima facie case has been made for the reasonable long-term viability of the projects and sufficient safeguards have been imposed to protect against unreasonable discrimination. The public interest will be served by expeditious implementation of the projects. Our action here is without prejudice to any subsequent action that might be taken in response to tariffs filed for these projects, or in rulemaking or other proceedings. VI. ORDERING CLAUSES 70. Accordingly, IT IS ORDERED that pursuant to Section 214 of the Communications Act of 1934, as amended, 47 U.S.C.  214, the applications of Ameritech (File Nos. WPC-6926, WPC-6927, WPC-6928, WPC-6929, and WPC-6930) ARE GRANTED to the extent indicated in this order. Ameritech is authorized to provide video dialtone service, within the geographic areas described in its applications. 71. IT IS FURTHER ORDERED that the petitions to deny filed by NCTA, Joint Petitioners, GLCC, and Ad Hoc ARE DENIED. 72. IT IS FURTHER ORDERED, that grant of these applications IS SUBJECT TO the following CONDITIONS: a) That Ameritech file an amended Section 214 application to obtain Commission approval of the structure of any shared channel mechanism, such as its proposed Common Channel Manager, before implementing any such mechanism for any of the video dialtone systems authorized in this order. b) That Ameritech file any necessary revisions to its Cost Allocation Manual (CAM) within thirty days after release of this Order, and sixty days before providing non-regulated products or services related to video dialtone. Ameritech must also list all accounts affected by its provision of non- regulated services associated with its video dialtone service, and must describe those services. c) That Ameritech create two sets of subsidiary accounting records: one to capture the revenues, investments and expenses wholly dedicated to video dialtone, and the other to capture any revenues, investments and expenses that are shared between video dialtone and the provision of other services. Ameritech must file summaries of those records for public inspection with the Secretary of the Federal Communications Commission on a quarterly basis. Copies of those records must be also served on the Chief, Accounting and Audits Division, Common Carrier Bureau. We delegate to the Chief, Common Carrier Bureau, the authority to determine the content and format of these subsidiary accounting records as well as the quarterly reports. Ameritech is further required to keep subsidiary accounting records to identify by each Part 32 account the amount of all plant that is replaced (that is, no longer used and useful) as a result of the deployment of video dialtone plant. In the event that investments made pursuant to this authorization are not deemed used and useful or deemed not to have been prudently incurred in the provision of interstate services, the Commission reserves the right to disallow the recovery of any or all such expenditures from interstate ratepayers. d) In the event that Ameritech wishes to offer local exchange and exchange access telephone service over the video dialtone network, Ameritech must first submit and obtain approval of an accounting and cost allocation plan that is consistent with Commission rules. We delegate to the Chief, Common Carrier Bureau the authority to review and approve the accounting and cost allocation plan submitted by Ameritech. e) That Ameritech provide all video programmers access to the basic platform under the same terms and conditions and that Ameritech make all reasonable efforts to expand capacity in order to meet all reasonably foreseeable increases in demand. Furthermore, Ameritech shall report to the Chief of the Common Carrier Bureau, within thirty days of an anticipated capacity shortfall or within five days of denying any video programmer access to the platform due to capacity limitations, in whole or in part, and on the steps taken to expand the capacity of the platform so as to accommodate the increased demand. f) That Ameritech may not allow any programmer to lease exclusive use more than one half of the available non-shared analog channels. g) That Ameritech comply prospectively with any changes in our rules that result from rulemakings or from reconsideration of our Second Report and Order in CC Docket 87-266 or any other applicable rulemaking proceeding. 73. IT IS FURTHER ORDERED that the Motion to Dismiss filed by NCTA on November 21, 1994 IS DENIED for the reasons stated herein. 74. IT IS FURTHER ORDERED, pursuant to Section 214(c) of the Communications Act of 1934, as amended, 47 U.S.C.  214 (c), the grant of Ameritech's applications to provide video dialtone service is subject to the conditions provided herein, and is also subject to any Commission rules or orders that result from any existing or future proceeding or proceedings that address video dialtone cost allocations, jurisdictional separations, pricing and other issues. Failure of Ameritech to decline the authorization as conditioned herein within thirty-one (31) days from the release date will be considered formal acceptance. FEDERAL COMMUNICATIONS COMMISSION William F. Caton Acting Secretary APPENDIX: Pleadings Filed Applications: Ameritech (Applications) [Citation for all five applications. If citing to particular application, the State name is cited.] Petitions to Deny: Ad Hoc Telecommunications Users Committee (Ad Hoc Committee Petition) [filed separately on each of the five applications] Cablevision, Inc., Comcast Cable Communications, Inc., Jones Intercable, Inc. (Joint Petition) [filed separately on each of the five applications] Great Lakes Cable Coalition (GLCC Petition) [filed consolidated petition] National Cable Television Association (NCTA) [filed separately on each of the five applications] Comments: Illinois Commerce Commission (Illinois Commission) [filed only in WPC-6929] Opposition to Petitions to Deny: Ameritech (Opposition) Replies to Opposition: Ad Hoc (Ad Hoc Reply) GLCC (GLCC Reply) Joint Petitioners (Joint Petitioners Reply) NCTA (NCTA Reply) Response to CCB Letter: Ameritech (Response Letter) Comments on Response Letter: Ad Hoc (Ad Hoc Response) GLCC (GLCC Response) NCTA (NCTA Response) Response to Staff Inquiries: Ameritech (Second Response Letter) Motion to Dismiss NCTA (NCTA Motion) Opposition to Motion to Dismiss Ameritech (Motion Opposition) Reply to Opposition to Motion to Dismiss Adelphia Communications Corp., Comcast Cable Communications, Inc, and Jones Intercable (Adelphia Reply) Liberty Cable Company (Liberty Reply) NCTA (Motion Reply) United States Telephone Association (USTA Reply)