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File how2ftp (.txt & .wp) is in directory /pub/Bureaus/Miscellaneous/Public_Notices/ ***************************************************************** ******** Before the Federal Communications Commission FCC 96-249 Washington, D.C. 20554 In the Matter of ) ) Implementation of Section 302 of ) CS Docket No. 96-46 the Telecommunications Act of 1996 ) ) Open Video Systems ) SECOND REPORT AND ORDER Adopted: May 31, 1996 Released: June 3, 1996 By the Commission: Chairman Hundt, Commissioners Quello, Ness, and Chong issuing separate statements. Table of Contents Paragraph I. Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . .1 II. Background . . . . . . . . . . . . . . . . . . . . . . . . . . . . .4 III. Open Video Systems . . . . . . . . . . . . . . . . . . . . . . . . 11 A. Qualifications to be an Open Video System Operator . . . . . . . . 11 1. Notice . . . . . . . . . . . . . . . . . . . . . . . . . . . 11 2. Discussion . . . . . . . . . . . . . . . . . . . . . . . . . 12 a. Statutory Construction . . . . . . . . . . . . . . . . . . . 13 b. Public Interest Conditions on Non-LEC and Out-of-Region LEC Entry. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23 B. Certification Process. . . . . . . . . . . . . . . . . . . . . . . 27 C. Carriage of Video Programming Providers. . . . . . . . . . . . . . 37 1. Allocation of Open Video System Channel Capacity . . . . . . 37 a. Summary. . . . . . . . . . . . . . . . . . . . . . . . . . . 37 b. Open Video System Operator Participation in the Allocation Process. . . . . . . . . . . . . . . . . . . . . . . . 40 c. Notification and Enrollment of Video Programming Providers. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43 d. Open Video System Operator Discretion Regarding Video Programming Providers. . . . . . . . . . . . . . . . . . . . 50 e. Measurement of Capacity. . . . . . . . . . . . . . . . . . . 57 (1) Analog, Digital and Switched Digital Video . . . . . . . . . 57 (2) Counting the System Operator's One-Third Limit . . . . . . . 63 f. Allocation of Capacity Among Video Programming Providers. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 69 (1) General Framework. . . . . . . . . . . . . . . . . . . . . . 69 (2) Allocation Methodology . . . . . . . . . . . . . . . . . . . 71 (3) Type of Capacity -- Analog/Digital . . . . . . . . . . . . . 76 (4) Amounts of Capacity. . . . . . . . . . . . . . . . . . . . . 82 (5) Subsequent Changes in Capacity or Carriage Demand . . . . . . . . . . . . . . . . . . . . . . . . . 91 (6) Channel Positioning. . . . . . . . . . . . . . . . . . . . . 98 g. Channel Sharing. . . . . . . . . . . . . . . . . . . . . . .100 h. Technical Issues . . . . . . . . . . . . . . . . . . . . . .105 2. Open Video System Operator Co-Packaging of Video Programming Selected by Unaffiliated Video Programming Providers . . . .107 D. Rates, Terms and Conditions of Carriage. . . . . . . . . . . . . .112 1. Just and Reasonable Carriage Rates . . . . . . . . . . . . .112 2. Open Video System Carriage Rates Must Not Be Unjustly or Unreasonably Discriminatory. . . . . . . . . . . . . . . . . . . .129 3. Disclosure of Programming Contracts. . . . . . . . . . . . .131 E. Applicability of Title VI Provisions . . . . . . . . . . . . . . .133 1. Public, Educational and Governmental Access Channels . . . .133 a. Notice . . . . . . . . . . . . . . . . . . . . . . . . . . .133 b. Discussion . . . . . . . . . . . . . . . . . . . . . . . . .137 (1) Establishing Open Video System PEG Obligations through Negotiation. . . . . . . . . . . . . . . . . . . . . . . .137 (2) Open Video System Operator PEG Obligations Satisfied through Connection and Cost Sharing. . . . . . . . . . .141 (3) Establishing Open video System PEG Obligations Where No Local Cable Operator Exists . . . . . . . . . . . . . . .151 (4) Provision of PEG Access Channels to All Subscribers. . . . . . . . . . . . . . . . . . . . . . . . . . . .153 (5) Open Video System PEG Obligations Where System Overlaps with More than One Franchise Area . . . . . . . . . . . .154 (6) Technical Issues . . . . . . . . . . . . . . . . . . . . . .156 2. Must-Carry and Retransmission Consent. . . . . . . . . . . .157 3. Program Access . . . . . . . . . . . . . . . . . . . . . . .171 a. Notice . . . . . . . . . . . . . . . . . . . . . . . . . . .171 b. Discussion . . . . . . . . . . . . . . . . . . . . . . . . .174 (1) Applicability of Program Access Rules to Open Video System Operators and Their Affiliates. . . . . . . . . . . .175 (2) Program Access Restrictions on Open Video System Programming Providers . . . . . . . . . . . . . . . .181 (3) Benefits of Program Access Rules for Open Video System Programming Providers. . . . . . . . . . . . . .195 (4) Expansion of the Program Access Rules. . . . . . . . . . . .197 4. Sports Exclusivity, Network Non-Duplication and Syndicated Exclusivity. . . . . . . . . . . . . . . . . . . . . . . . .199 5. Other Title VI Provisions. . . . . . . . . . . . . . . . . .205 6. Preemption of Local Franchising Requirements . . . . . . . .207 F. Information Provided to Subscribers. . . . . . . . . . . . . . . .223 G. Dispute Resolution . . . . . . . . . . . . . . . . . . . . . . . .235 H. Joint Marketing, Bundling and Structural Separation . . . . . . .243 I. Advanced Telecommunications Incentives . . . . . . . . . . . . . .250 IV. Final Regulatory Flexibility Act Analysis. . . . . . . . . . . . .253 V. Paperwork Reduction Act of 1995 Analysis . . . . . . . . . . . . .257 VI. Ordering Clauses . . . . . . . . . . . . . . . . . . . . . . . . .259 Appendix A: Parties Filing Comments and Reply Comments Appendix B: Rule Changes Appendix C: FCC Form 1275 - Open Video System Certification of Compliance I. INTRODUCTION 1. The Telecommunications Act of 1996 (the "1996 Act") added Section 653 to the Communications Act. Section 653 of the Communications Act establishes a new framework for entry into the video programming delivery marketplace -- the "open video system." As designed by Congress, the open video framework provides an option, particularly to a local exchange carrier, for the distribution of video programming other than as a "cable system" governed by all of the provisions of Title VI. If a telephone company agrees to permit carriage of unaffiliated video programming providers on just, reasonable and non-discriminatory rates and terms, it can be certified as an operator of an "open video system" and subjected to streamlined regulation under Title VI. 2. In establishing this structure, we believe that Congress intended to advance competition in two areas of the video market. First, Congress sought to encourage telephone companies to enter the video programming distribution market and to deploy open video systems in order to "introduce vigorous competition in entertainment and information markets" by providing a competitive alternative to the incumbent cable operator. Congress' incentive for such entry was not only exemption from particular requirements of Title VI, but that streamlined Title VI obligations apply in lieu of, and not in addition to, any requirements under Title II. Second, by requiring open video system operators to provide carriage opportunities for video programming providers on terms that are just and reasonable, and not unjustly or unreasonably discriminatory, Congress sought to foster competition by encouraging multiple programming sources on open video systems. 3. The open video system model can provide the competitive benefits that Congress sought to achieve: market entry by new service providers, enhanced competition, streamlined regulation, investment in infrastructure and technology, diversity of programming choices and increased consumer choice. We believe that the best way to achieve Congress' goals is to give open video system operators the flexibility to enter and compete based on the demands of the marketplace. Our approach reflects the reduced regulatory burdens envisioned by Congress for open video systems. Specifically, the open video system operator, by not being subject to traditional Title II regulation, as well as particular provisions of Title VI, is afforded substantial discretion in administering the open video system, subject to particular parameters of the law. A general level of guidance, however, is required to ensure compliance with Congress' particular directives under Section 653 and to give certainty to the participants. As described below, we have implemented Section 653 with the clear recognition that the open video system operator is a new entrant in the video marketplace with particular statutory obligations that can be implemented through streamlined regulation. II. BACKGROUND 4. On February 8, 1996, the 1996 Act was signed into law. Among other things, the 1996 Act repeals the telephone-cable cross-ownership restriction imposed by the Cable Communications Policy Act of 1984 (the "1984 Cable Act"), which prohibited telephone companies from providing video programming directly to subscribers in their telephone service areas. In addition, the 1996 Act repealed the Commission's "video dialtone" rules and policies, which were established to permit telephone companies to participate in the video marketplace in a manner consistent with the statutory telephone-cable cross-ownership ban. Under the video dialtone rules and policies, telephone companies could provide a common carrier video transmission service for programming provided by others, but, consistent with the statutory ban, were generally prohibited from providing any programming themselves in their telephone service areas. The United States Courts of Appeal for the Fourth and Ninth Circuits, however, found the cross-ownership ban violated the First Amendment and the Commission was enjoined from enforcing it against virtually all local exchange carriers. 5. Contrary to the limited options available to local exchange carriers ("LECs") under the previous law for providing video programming, the 1996 Act offers telephone companies several options for entering and competing in the video marketplace. This is in keeping with the 1996 Act's general goal of "accelerat[ing] rapidly private sector deployment of advanced telecommunications and information technologies and services to all Americans by opening all telecommunications markets to competition." As the Conference Report for the 1996 Act (the "Conference Report") states: Recognizing that there can be different strategies, services and technologies for entering video markets, the conferees agree to multiple entry options to promote competition, to encourage investment in new technologies and to maximize consumer choice of services that best meet their information and entertainment needs. Later, the Conference Report reiterates "the conferees recognize that telephone companies need to be able to choose from among multiple video entry options to encourage entry," and systems should be "allowed to tailor services to meet the unique competitive and consumer needs of individual markets." In giving telephone companies broad flexibility to enter the video marketplace, the 1996 Act encourages competition and new investment. 6. The alternatives for the delivery of video programming services by telephone companies are set forth in Section 302 of the 1996 Act, which establishes a new Part V (Sections 651 through 653) of Title VI of the Communications Act. The specific entry options for telephone companies entering the video programming marketplace are set forth in Section 651, which provides that common carriers may: (1) provide video programming to subscribers through radio communication under Title III of the Communications Act; (2) provide transmission of video programming on a common carrier basis under Title II of the Communications Act; (3) provide video programming as a cable system under Title VI of the Communications Act; or (4) provide video programming by means of an "open video system" under new Section 653 of the Communications Act. The 1996 Act also provides that, to the extent permitted by Commission regulation, "an operator of a cable system or any other person may provide video programming through an open video system." 7. Generally, Section 653 provides that if an entity certifies that it complies with certain non-discrimination and other requirements established by the Commission, its open video system will not be subject to regulation under Title II and will be entitled to reduced regulation under Title VI. The Commission must approve or disapprove any open video system certification request within ten days of receipt. An open video system operator's certification request must certify that it complies with the Commission's regulations implementing the requirements in Section 653(b), which: (1) prohibit the operator from discriminating among video programmers regarding carriage on its system; (2) require the operator to establish rates, terms and conditions of carriage that are just, reasonable and not unjustly or unreasonably discriminatory; (3) prohibit the operator or its affiliate, if carriage demand exceeds capacity, from selecting the video programming on more than one-third of its activated channels; (4) permit the operator to use channel sharing arrangements that provide subscribers with ready and immediate access to programming; (5) extend the Commission's sports exclusivity, network non-duplication and syndicated exclusivity regulations to open video systems; and (6) prohibit the operator from unreasonably discriminating in favor of its affiliates with regard to information provided to subscribers for the purpose of selecting programming. The legislative history indicates that the Commission is not to impose "Title II-like regulation" under the authority of Section 653. Section 653(b)(1) directs the Commission to take all actions necessary (including any reconsideration) to prescribe regulations implementing these requirements within six months of the 1996 Act's enactment. Similarly, subsection 653(c)(2)(A) directs the Commission to take all actions necessary (including any reconsideration) to prescribe regulations applying, to the extent possible, Title VI "must-carry" and public, educational and governmental ("PEG") access obligations, and Title III retransmission consent obligations, to open video systems operators. 8. If the Commission approves an open video system operator's certification, the operator will qualify for the streamlined regulation of Section 653(c). Title VI provisions that do not apply to open video systems under Section 653(c) include: (1) Section 612 -- "leased access" obligations; (2) Sections 621 and 622 -- franchise requirements and fees (although an open video system operator will be subject to a gross revenue fee at a rate not to exceed the franchise fee paid by the local cable operator); (3) Section 623 -- rate regulation; and (4) Section 632 -- consumer protection and customer service. In providing for such streamlined regulation, Congress again stressed its goals of flexible market entry, encouraging competition and investment, and reliance on market forces: There are several reasons for streamlining the regulatory obligations of such systems. First, the conferees hope that this approach will encourage common carriers to deploy open video systems and introduce vigorous competition in entertainment and information markets. Second, the conferees recognize that common carriers that deploy open systems will be 'new' entrants in established video programming markets and deserve lighter regulatory burdens to level the playing field. Third, the development of competition and the operation of market forces mean that government oversight and regulation can and should be reduced. 9. Section 653 establishes a process for the resolution of any disputes that may arise. Generally, Section 653 provides that the Commission has the authority to resolve disputes regarding open video systems, and that it must do so within 180 days of submission. Where the Commission's rules have been violated, the Commission may require carriage, award damages to a person improperly denied carriage, or both. Aggrieved parties may also seek any other remedy available under the Communications Act. 10. On March 11, 1996, the Commission released a Report and Order and Notice of Proposed Rulemaking (the "Notice"), seeking comment on how to implement the above requirements. We received 61 comments and 79 replies in response to the Notice. After consideration of the comments and reply comments, we hereby adopt the Second Report and Order herein. III. OPEN VIDEO SYSTEMS A. Qualifications to be an Open Video System Operator 1. Notice 11. New Section 653(a)(1) of the Communications Act provides: A local exchange carrier may provide cable service to its cable service subscribers in its telephone service area through an open video system that complies with this section. To the extent permitted by such regulations as the Commission may prescribe consistent with the public interest, convenience, and necessity, an operator of a cable system or any other person may provide video programming through an open video system that complies with this section. Pursuant to this section, a LEC, as defined in Section 3(26), is qualified to be an open video system operator in its telephone service area. The Notice asked whether the second sentence of Section 653(a)(1) permits the Commission to allow cable operators and others, including LECs outside their telephone service areas, to become open video system operators, or whether it merely authorizes the Commission to allow them to provide video programming on the open video system operated by a LEC. Specifically, given that the first sentence of Section 653(a)(1) allows LECs to provide "cable service," we sought comment on whether use of the term "video programming" in the second sentence was intended to restrict cable operators and others to the role of programming providers on an open video system and thus precludes them from also becoming open video system operators. We also requested comment on what factors should govern the Commission's public interest determination under this section. 2. Discussion 12. We conclude that the second sentence of Section 653(a)(1) authorizes the Commission to allow non-LECs to operate open video systems and to allow LECs to operate open video systems outside of their telephone service areas when the public interest, convenience, and necessity are served. We find that it would serve the public interest, convenience and necessity to permit other entities, besides LECs, to become open video system operators. With respect to cable operators within their cable franchise areas, we conclude that it would serve the public interest, convenience, and necessity to allow a cable operator to operate an open video system in its cable franchise area if it is subject to "effective competition" under Section 623(l)(1) in its cable franchise area. This condition shall apply even if a cable operator also provides local exchange services within its cable franchise area. Our decision to allow cable operators to become open video system operators under these circumstances shall not be construed to affect the terms of any existing franchising agreements or other contractual agreements. a. Statutory Construction 13. The starting point for our analysis is the statute. Where Congress "has directly spoken to the precise question at issue . . . that is the end of the matter," and the Commission must give effect to Congress' expressed intent. If, however, the statute is silent or ambiguous with respect to a specific issue, the Commission's interpretation will be upheld so long as it is a "permissible" construction of the statute. 14. We do not believe that Congress has addressed the issue of whether non-LECs may operate open video systems in a clear and unambiguous manner. In light of various factors discussed below, we interpret the statute as allowing non-LECs to operate open video systems to the extent permitted by Commission regulations. As a preliminary matter, we note that neither the statute nor the legislative history states that non-LECs are prohibited from operating open video systems. Second, we agree with several commenters that Congress has used the phrases "provide cable service" and "provide video programming" to refer to the same activity. For instance, Section 651(a)(3) states that to the extent a common carrier is "providing video programming" to its subscribers in any manner other than a wireless operator or common carrier, it will be subject to the full requirements of Title VI unless "such programming is provided by means of an open video system" for which the Commission has approved a certification under Section 653. Furthermore, as TCI argued: in the now-repealed cable-telephone company cross-ownership provision, former Section 613(b)(1), 47 U.S.C.  533(b)(1), repealed by the 1996 Act,  302(b), Congress made it unlawful for any local exchange carrier to "provide video programming" directly to subscribers. Interpreting the term "provide video programming," the Fourth Circuit determined that Section 613(b)(1) "essentially prohibits local telephone companies from offering, with editorial control, cable television services to their common carrier subscribers." Similarly, the Commission found that Section 613(b)(1) was intended to ensure that common carriers did not provide video programming to subscribers "in the same manner as traditional cable operators;" thus, the Commission found that an entity has to obtain a cable franchise (and thus is providing "cable service") only when the entity "selects or provides the video programming to be offered." This interpretation was upheld by the United States Court of Appeals for the District of Columbia Circuit ("D.C. Circuit"). We can assume that Congress meant to adopt our interpretation, as affirmed by the courts, when it passed the 1996 Act because Congress is presumed to intend the meaning of terms and phrases as they have been interpreted by agencies or courts. 15. We disagree with the argument posed by the National League of Cities, et al. that it would not have been necessary for Congress to construct two separate sentences in Section 653(a)(1) if it had intended "cable service" and "video programming" to have the same meaning. This argument does not take into account that Congress permitted non-LECs to operate open video systems subject to the Commission's findings regarding the public interest, convenience, and necessity. We believe the two sentences were used not to distinguish which entities may operate open video systems, but to distinguish the conditions under which entities may operate such systems. We do agree with the National League of Cities, et al. that Congress did not intend the terms to be precise synonyms. Rather, "providing video programming" may or may not be synonymous with "providing cable service," depending upon who owns the transmission facilities and the manner in which video programming is provided. With respect to cable systems, the cable operator is entitled both to own the facilities and to select programming for channels other than those being used for PEG access, must-carry broadcast stations, and leased access. We believe that Congress used the term "video programming" to ensure Commission oversight over whether persons that operate cable systems may also participate in open video systems, both by providing video programming over their own open video systems and by providing video programming over another entity's system. 16. We also disagree with the argument by the National League of Cities, et al. and Alliance for Community Media, et al. that the second sentence of Section 653(a)(1) is nothing more than a clarification that cable operators may provide video programming on a LEC's open video system that Congress inserted in response to the debate over whether a cable operator could be a programmer on a video dialtone system under the Commission's former rules. There is no evidence to support this assertion on the face of the statute or its legislative history. Moreover, if Congress added the second sentence merely to resolve the dispute over cable operators' carriage rights on a video dialtone system, the more likely place would have been in Section 653(b), which describes video programming providers' carriage rights, not Section 653(a), which addresses the certification process for open video system operators. Indeed, we believe the statute's delineation of "an operator of a cable system or any other person" in Section 653(a)(1), the certification provision, supports our view that Congress intended that these entities, like LECs in their service areas, could obtain certification to operate open video systems. 17. We also disagree with commenters that find it significant that only common carriers or telephone companies are referred to in new Section 651(a)(4) and in the titles to new Part V of Title VI of the Communications Act and Section 302 of the 1996 Act. Similarly, we disagree with commenters that claim that references to common carriers or telephone companies in the legislative history indicate that Congress did not intend to allow non-LECs to become open video system operators. Part V was created against the backdrop of the statutory repeal of the telephone-cable cross-ownership restriction, which prohibited telephone companies from providing video programming to subscribers in their telephone service areas. In this context, it is logical that the legislative history would have focused on the telephone companies' new options for entering the video marketplace. But, given the 1996 Act's overall intent to open all telecommunications markets to competition, we do not read the legislative history's focus on telephone companies to mean that Congress intended to deny all others the opportunity to use this new model for delivering video programming. Indeed, we believe that with the express reference to cable operators and others in the second sentence of Section 653(a)(1), Congress intended to provide just such an opportunity. 18. We conclude, therefore, that Section 653(a)(1) does not preclude entities other than LECs in their service areas from becoming open video system operators. We believe that permitting non-LECs and LECs outside their service areas to become open video system operators is not only a "permissible" reading of the statute, but a reading that adheres most closely to Congressional intent to "accelerate rapidly private sector deployment of advanced telecommunications and information technologies and services to all Americans by opening all telecommunications markets to competition," and that is consistent with the public interest, convenience and necessity. We agree with UTC that Congress did not intend the 1996 Act, which is designed to eliminate outdated regulatory distinctions, to be used as the basis for creating new ones. Similarly, we agree with CATA's general argument that all entities should "have the option to make the same choices, unconstrained by artificial regulations based on their historic regulatory classification." As Comcast argues, any benefits gained through open video systems would also generally result from open video systems owned by non-LECs. By making the open video system option available to utility companies and others, this interpretation will foster facilities-based competition and maximize consumer choice by providing a wider range of outlets for unaffiliated video programming providers. 19. We disagree with those commenters that argue that Congress intended to offer a less regulatory option solely to LECs in their service areas, as the new entrants in the video marketplace, in order to enable them to compete with cable systems. In these commenters' views, there is no need to offer cable operators similar regulatory incentives because they are already entrenched in the video marketplace. Several commenters assert that if cable operators could become open video system operators, it would only increase their competitive advantage, thus defeating Congress' attempt to level the playing field. Since one of the purposes of the 1996 Act is to open all telecommunications markets to competition, we do not believe that Congress intended to create a competitive video marketplace by giving one competitor a regulatory option that would be unavailable to all others. The argument that only LECs should be permitted to operate open video systems because they are new entrants in the video marketplace is contrary to the competitor-neutral thrust of the 1996 Act. Indeed, it is because of the 1996 Act's expressed goal of promoting competition in all telecommunications markets, including the video market, that we believe Congress intended qualifying LECs and others to have the ability to offer open video services. Moreover, if one of the objectives of the open video option is to encourage new entrants, it should be available to all new entrants -- including utility companies, out-of-region cable operators, out-of-region LECs and others -- and not restricted solely to LECs seeking to provide video programming in-region. 20. In any event, the Commission also could exercise its authority under Section 4(i) of the Communications Act to permit non-LECs to become open video system operators even assuming arguendo that it was clear and unambiguous that the second sentence of Section 653(a)(1) addressed only the issue of whether cable operators and others could provide programming on a LEC's open video system and did not address the issue of whether non-LECs could also become open video system operators. Section 4(i) permits the Commission to "perform any and all acts, make such rules and regulations, and issue such orders, not inconsistent with this Act, as may be necessary in the execution of its functions." The Commission may properly take action under Section 4(i) even if such action is not expressly authorized by the Communications Act, as long as the action is not expressly prohibited by the Act and is necessary to the effective performance of the Commission's functions. We invoke Section 4(i) here because the statute does not expressly prohibit non-LECs and out-of-region LECs from becoming open video system operators and because affording the widest range of entities the open video alternative is necessary to effectuate the competitive purposes of the 1996 Act. 21. Section 4(i) has been held to justify various Commission regulations that were not within explicit grants of authority. In these cases, the courts found that the Commission's regulations were not inconsistent with the Act because they did not contravene an express prohibition or requirement of the Act, and were reasonably "necessary and proper" for the execution of the agency's enumerated powers. Most recently, in Mobile Communications Corp. of America v. FCC, the D.C. Circuit acknowledged the Commission's authority under Section 4(i) to regulate even where the Communications Act does not explicitly authorize such action. In that case, the D.C. Circuit held that the Commission had authority under 4(i) to require Mtel, which held a pioneer's preference, to pay for a narrowband personal communications service ("PCS") license, despite the fact that the Act did not specifically authorize the Commission to charge a price for a license granted to a pioneer's preference holder. The court denied Mtel's argument that the Commission's action was inconsistent with the Communications Act and therefore not within the Commission's Section 4(i) power. The court found Mtel's reliance on the expressio unius maxim -- that the expression of one is the exclusion of other -- misplaced. According to the court, "[t]he maxim `has little force in the administrative setting,' where we defer to an agency's interpretation of a statute unless Congress has "'directly spoken to the precise question at issue.'" The court also denied Mtel's argument that in the absence of an affirmative statutory mandate to support the payment requirement, the Commission's action was not "necessary in the execution of [the Commission's] functions," as required by Section 4(i). 22. Applying these principles here, the Commission is authorized under Section 4(i) to allow non-LECs and out-of-region LECs to become open video system operators. First, allowing non-LECs and out-of-region LECs to become open video system operators is not inconsistent with any provision of the statute. While the 1996 Act allows LECs to become open video system operators in their service areas, neither it nor the legislative history expressly prohibits non-LECs and out-of-region LECs from being open video system operators. Second, allowing non-LECs and out-of-region LECs to become open video system operators is necessary to the execution of the Commission's functions. Congress enacted Section 653 of the 1996 Act to promote competition in the video marketplace and to "meet the unique competitive and consumer needs of individual markets." Permitting non-LECs and out-of-region LECs to become open video system operators will serve these statutory objectives. It will achieve increased competition, particularly between facilities-based service providers, which Congress specifically sought to achieve. In addition to promoting competition between competing open video system providers, allowing non-LECs and out-of-region LECs to operate open video systems will benefit third party programmers by increasing the number of available outlets and by providing a non-discriminatory platform for distributing programming and services. We believe that under Section 4(i) we have the necessary authority to allow non-LECs and out-of- region LECs to become open video system operators. b. Public Interest Conditions on Non-LEC and Out-of-Region LEC Entry 23. We find that Section 653(a)(1) allows non-LECs and out-of-region LECs to operate open video systems, but only to the extent prescribed by the Commission consistent with the public interest, convenience, and necessity. In that regard, we find: (1) that it would serve the public interest, convenience and necessity to permit non-LECs and out-of-region LECs that are also not cable operators to own or operate open video systems; (2) that it would serve the public interest, convenience and necessity to permit cable operators to own or operate open video systems outside of their cable franchise areas; and (3) that it would not serve the public interest, convenience and necessity to allow a cable operator to own or operate an open video system within its franchise area where there is not "effective competition" as defined below. 24. The underlying premise of Section 653 is that open video system operators would be new entrants in established markets, competing directly with an incumbent cable operator. We believe that Congress exempted open video system operators from most Title VI regulations because, in the vast majority of cases, they will be competing with incumbent cable operators for subscribers. Thus, we believe that it is not in the public interest to permit incumbent cable operators, in the absence of competition, to convert their cable systems to open video systems. In certain circumstances, particularly where the entry of a facilities-based competitor into a market served by an incumbent cable operator would likely be infeasible, we believe that it would be consistent with the public interest to allow the incumbent cable operator to convert its cable system to an open video system. We will consider petitions from cable operators seeking such a public interest finding. 25. Because the concerns set forth above exist regardless of whether a cable operator also provides telephone service, we will not permit a cable operator to become an open video system operator in its cable franchise area if effective competition is not present for video programming delivery, even if it also becomes certified as a local exchange carrier within the franchise area. The second sentence of Section 653(a)(1) authorizes the Commission to determine when cable operators may become open video system operators, and the Commission retains this authority with respect to all cable operators, regardless of whether they are also providing local exchange service. Therefore, although the first sentence of Section 653(a)(1) allows LECs, without qualification, to operate open video systems within their telephone service areas, this sentence does not apply to cable operators that are also LECs. 26. Accordingly, we find that the public interest, convenience and necessity would best be served by allowing a cable operator to operate an open video system in its cable franchise area only if it is subject to "effective competition" pursuant to Section 623(l)(1). Our decision to permit cable operators to become open video system operators in their franchise areas if they are subject to effective competition pursuant to Section 623(l)(1) does not affect the terms of any existing franchising agreements or other contractual agreements. Conversion to an open video system would not relieve a cable operator of its existing contractual obligations to the local franchising authority, programming providers, or others. B. Certification Process 1. Notice 27. Section 653(a)(1) provides, among other things, that an open video system operator must certify to the Commission that it complies with the Commission's regulations under Section 653(b). The Commission must publish notice of the receipt of a certification and approve or disapprove the certification within ten days of receipt. The Notice sought comment on the timing of a certification filing, the appropriate level of review, the type of information that should be required, and the handling of any pleadings filed with respect to the certification within the ten-day review period. The Notice also asked what actions or representations should be required in the certification process to ensure that LECs comply with Part 64 of the Commission's rules, which require a LEC to segregate its cost of providing regulated telecommunications services from its cost of providing video programming over an open video system. 2. Discussion 28. In light of the brief period (ten days) allowed for Commission review of certification filings, we agree with those commenters that argue that Congress intended the certification process to be streamlined. This conclusion is consistent with Congress' elimination of the requirement that a common carrier obtain Commission approval under Section 214 to construct a new facility prior to the establishment of a video delivery system, including an open video system. 29. We also agree with those commenters that argue the Commission should avoid turning the certification process into a "back-door" Section 214 requirement. We do not believe that the ten-day certification period was intended to be the culmination of a lengthy proceeding. Thus, we will not require pre-certification submissions or approvals that erect the same barriers to entry and potential for delay that Congress sought to eliminate. We conclude that it is permissible, but not necessary, prior to certification for an open video system operator to: (1) modify and obtain approval of its cost allocation manual pursuant to Part 64 of the Commission's rules; (2) obtain the consent of local authorities for use of the public rights-of- way; or (3) obtain the approval of local authorities regarding the manner in which Section 611 obligations will be fulfilled. 30. In addition to the potential for delay, some of the pre-certification requirements suggested by commenters are beyond the scope of the certification process. Section 653(a)(1) requires an open video system operator to certify that it "complies with the Commission's regulations under subsection (b)." Some of the suggested pre-certification requirements arise under other subsections of Section 653 and thus are not properly part of the certification process (e.g., PEG obligations arise under subsection (c)). Others, such as the establishment of a separate subsidiary, are not provided for at all under Section 653. 31. A streamlined certification process does not mean, however, that the Commission may not request and review necessary information. We intend the certification process to provide purposeful representations regarding the responsibilities of the open video system operator. We also will require other information, if necessary, to determine compliance with the Commission's rules. In this regard, we will first require that certifications be verified by an officer or director of the applicant, stating that, to the best of his or her information and belief, the representations made therein are accurate. Second, the certification must contain particular facts and representations about the system, including: (1) the applicant's name, address and telephone number; (2) a statement of ownership, including all affiliated entities; (3) if the applicant is a cable operator applying for certification within its cable franchise area, a statement that the applicant is qualified to operate an open video system under Section 76.1501 of the Commission's rules; (4) a statement that the applicant agrees to comply and to remain in compliance with each of the Commission's regulations under Section 653(b); (5) a general description of the anticipated communities or areas to be served upon completion of the system; (6) the anticipated amount and type (i.e., analog or digital) of capacity (for switched digital systems, the anticipated number of available channel input ports); and (7) a statement that the applicant will comply with the Commission's notice and enrollment requirements for unaffiliated video programming providers. 32. The Commission's rules require incumbent local exchange carriers to allocate their costs between their regulated and nonregulated activities in accordance with specific cost principles. The largest incumbent local exchange carriers are further required by the Commission's rules to file cost allocation manuals with the Commission. These manuals include the specific accounting procedures the carriers use to allocate their costs between regulated and nonregulated activities. Such procedures must be consistent with the specific cost principles established by the Commission. The rules also provide that, for certain changes to the cost allocation manuals, such changes must be filed with the Commission "at least 60 days before the carrier plans to implement the changes." Companies seeking certification as open video system operators that are required to file cost allocation manuals need not modify their manuals prior to certification. These companies, however, must certify that they will modify their cost allocation manuals in a timely manner as set forth in the Commission rules. We now address what constitutes "a timely manner." 33. As indicated above, the rules require carriers to file proposed changes to their cost allocation manuals 60 days before the changes will be implemented. The changes are implemented when the carrier uses the new procedures to allocate its booked costs between regulated and nonregulated activities. Generally, there are two types of events that result in costs that are placed on the company's books of account and allocated between regulated and nonregulated activities: constructing facilities and providing service. Pursuant to our rules, the great majority of construction costs associated with plant will be used jointly to provide telephony and video services (regulated and nonregulated activities) do not affect the carrier's revenue requirement until the service is offered. We are most concerned with cost allocation compliance once the carrier begins charging customers for the service. Therefore, for purposes of the initial changes to the cost allocation manuals of carriers that are seeking certification as an open video system, we will require a certification that the changes to the manuals will be filed 60 days before service is offered. We will also require that the manuals address procedures to allocate the construction costs pursuant to our rules. 34. Open video system operators may apply for certification at any point prior to the commencement of service, subject to two conditions. If construction of new physical plant is required, the applicant must obtain Commission approval of its certification prior to the commencement of construction. This requirement will ensure that the public rights-of-way are disrupted only by those who are authorized to operate open video systems. If no new construction is required, certification must be obtained prior to the commencement of service, allowing sufficient time to comply with the Commission's notification requirements to programming providers. In order to facilitate the review process and to assure the completeness of submissions, applicants will be required to file for certification on FCC Form 1275, attached at Appendix C. In addition to requiring that hard copies of the certification forms be filed with the Office of the Secretary, Federal Communications Commission, we will also require applicants to file certification forms on computer disk so that the Commission can post them immediately on its Internet site. 35. We will consider comments or oppositions to a certification that are filed within five days of the Commission's receipt of the certification. Comments or oppositions must be served on the party that filed the certification. Disapproval of a certification will not preclude the applicant from filing a revised certification or from refiling its original submission with a statement addressing the issues in dispute. Such refilings must be served on any objecting party or parties. Any certification filing that the Commission does not disapprove within ten days will be deemed approved. 36. If the representations contained in a certification filing prove to be materially false or materially inaccurate, the Commission retains the authority to revoke an open video system operator's certification or to impose such other penalties it deems appropriate, including forfeitures. C. Carriage of Video Programming Providers 1. Allocation of Open Video System Channel Capacity a. Summary 37. This section summarizes the rules and policies we adopt below regarding the allocation of channel capacity on open video systems. These rules and policies are designed to implement Sections 653(b)(1)(A) and 653(b)(1)(B) of the Communications Act. Among other things, those provisions generally prohibit an open video system operator from discriminating among video programming providers with regard to carriage on its system and provide that if demand for carriage exceeds the system's channel capacity, the open video system operator may select the programming services on no more than one-third of the activated channel capacity. 38. Under the rules and policies set forth below, the allocation process generally will proceed as follows: An open video system operator will file a "Notice of Intent" ("Notice") with the Commission. The Commission will release the Notice to the public. The Notice will contain certain information that a video programming provider reasonably would need in order to assess whether to seek carriage on the system. The Notice must describe, among other things, the system's projected service area, the system's projected channel capacity and a description of the steps a video programming provider must follow to obtain carriage on the system. In addition to the information contained in the Notice, the open video system operator will be required to make available certain information upon written request from a video programming provider, including specific technical information regarding the system. The open video system operator may establish terms and conditions of carriage for video programming providers that are just and reasonable, and are not unreasonably or unjustly discriminatory. For instance, an open video system operator may: (1) take reasonable steps to ensure that a prospective video programming provider's request for capacity is bona fide; (2) generally exclude a competing, in-region cable operator from obtaining capacity on its system; (3) require video programming providers to obtain capacity in full-channel increments (i.e., prohibit part-time programming); (4) preclude unaffiliated video programming providers from selecting the programming on more capacity than the operator itself and its affiliates are selecting programming; (5) negotiate co- packaging agreements with unaffiliated video programming providers; and (6) require assurances that a video programming provider will actually deliver video programming over its allotted open video system capacity within some reasonable period of time after system activation. At the conclusion of the open enrollment or notice period, the open video system operator will determine whether demand for carriage, including its own demand, exceeds the system's channel capacity. For this purpose, analog and digital capacity must be treated separately. Specifically, if the system contains both analog and digital capacity, the open video system operator must separately assess whether analog demand exceeds analog capacity and whether digital demand exceeds digital capacity. - If demand for carriage does not exceed system capacity, the open video system operator should fill all video programming providers' demands for capacity, including its own. - If demand for carriage exceeds capacity, the open video system operator may select the programming services to be carried on no more than one- third of the system's activated channel capacity. PEG and must-carry channels carried pursuant to Sections 611, 614 and 615 of the Communications Act will not count against the operator's one-third limit. Channels carrying "shared" programming will count against the operator's one-third limit on a pro-rata basis, e.g., if the operator shares the channel with one other video programming provider, it will count as half of a channel against the operator's limit. - The remaining two-thirds of capacity, other than PEG and must-carry channels, must be allocated to unaffiliated video programming providers on an open, non-discriminatory basis. The Commission does not, however, require that a specific allocation methodology be used. After service commencement, an open video system operator will be required to allocate open capacity, if any is available, at least once every three years on an open, non-discriminatory basis, to the extent that there is demand. Such open capacity will include capacity that becomes available during the three year period, e.g., due to a system upgrade or the expiration of carriage contracts, and any capacity on which the open video system operator selects the video programming in excess of the one-third limit of activated channel capacity provided for under Section 653(b)(1)(B). 39. The following discussion addresses the issues summarized above. b. Open Video System Operator Participation in the Allocation Process (1) Notice 40. Since the open video system provides the opportunity for the operator as well as independent entities to distribute video programming, the administration of the system must reflect fair opportunities for all interested parties to pursue their strategies. To this end, Section 653 prohibits discrimination against independent entities with regard to carriage. The plain language of Section 653(b)(1)(A) refers to carriage of video programming providers by an "open video system operator." In the Notice, we thus tentatively concluded that Section 653's prohibition of discrimination did not require the Commission to prohibit an open video system operator from participating in the allocation of channel capacity. (2) Discussion 41. We affirm our tentative conclusion that the 1996 Act does not require that the open video system operator be prohibited from participating in the allocation of channel capacity. To the contrary, we believe that Section 653 clearly contemplates that open video system operators will play an active role in structuring and managing the platform, subject to clear non- discrimination requirements. Indeed, since it is the open video system operator that certifies it will comply with Section 653's non-discrimination requirements, and will be held responsible for any violation, it is unlikely that Congress intended to require the operator to delegate its authority to an independent entity. 42. We disagree with cable operators' and local governments' contentions that any participation by the open video system operator in the channel allocation process would be tantamount to the editorial control exercised by cable operators and result in impermissible discrimination against unaffiliated programming providers. We believe that the statute and implementing rules will prevent an open video system operator from discriminating against unaffiliated video programming providers, notwithstanding the operator's involvement in the allocation process. We also believe that allowing an open video system operator to allocate channel capacity will provide certain efficiencies that will enhance the overall system. With adequate protections in place, we believe it unnecessary and unduly restrictive to require the open video system operator to retain an independent entity to allocate system capacity. In the event that an operator acts discriminatorily in allocating channels, the Commission's dispute resolution process provides a mechanism for rectifying any individual harm without resorting to an absolute ban on the open video system operators' participation in the allocation process. c. Notification and Enrollment of Video Programming Providers (1) Notice 43. In the Notice, we sought comment on what procedures the Commission should adopt for an open video system operator to notify potential video programming providers that the operator intends to establish an open video system. We also sought comment on the proper form and scope of such notice, including what sort of information about the system a potential video programming provider may need to assess its interest in seeking carriage. Additionally, we solicited comment on the appropriate length of an enrollment period during which video programming providers could apply for capacity. (2) Discussion 44. We note that the notification and enrollment process is part of the capacity allocation process, and is therefore subject to Section 653's prohibition on discrimination. Given the importance of the notification and enrollment process in allocating capacity, we believe that ensuring an open, fair and non-discriminatory process is essential to comply with our mandate under Section 653(b)(1)(A). The process that the open video system operator follows is fundamental to demonstrating fairness, openness, and non-discrimination. For instance, if a video programming provider fails to receive adequate notice and files a complaint after system capacity has been allocated, it would be difficult, if not impossible, to provide an adequate remedy to the provider without significant disruption of the system, e.g., transferring capacity from one video programming provider to another. We believe that the approach suggested by most telephone commenters, which would allow an open video system operator to notify and enroll prospective video providers as it desired, subject only to the dispute resolution process may be inadequate to fulfill the statutory mandate of non-discrimination. Under our guidelines, video programming providers, including small, independent programming providers with limited resources, will be afforded a reasonable opportunity to obtain timely information, and the open video system operator will be given the stability and certainty of knowing that its notice and enrollment procedures satisfy the statute's non-discrimination requirements. 45. Accordingly, we conclude that an open video system operator must take reasonable steps to inform prospective video programming providers of its intention to establish an open video system. First, we will require an open video system operator to file a "Notice of Intent" to establish an open video system with the Office of the Secretary, Federal Communications Commission. The Notice of Intent may be filed at any time, so long as the operator can provide the information detailed below to unaffiliated video programming providers. The Commission will issue a Public Notice announcing receipt of the operator's Notice of Intent and will attach to the Public Notice a copy of the Notice of Intent. As with all Public Notices, these Public Notices will be listed in the Commission's Daily Digest. For convenience, and to ensure maximum access by unaffiliated video programming providers, the Commission will place the Notice of Intent on our Internet site and make it available for inspection in the Cable Service Bureau's Reference Room. We also reject some commenters' suggestions that notice be disseminated to cable programming providers, community information providers, local newspapers, publications and magazines, trade publications, the local media, and state public utilities commissions. We will not require such dissemination of the Notice of Intent because any benefits of this additional distribution are outweighed by the costs involved, and the Commission's Public Notice process affords an expeditious means for this information to be sufficiently disseminated. An open video system operator may distribute the Notice of Intent or solicit demand for carriage as it sees fit in addition to the requirements described herein. 46. Second, we will require that the Notice of Intent include a certification that the open video system operator has complied with all relevant notification requirements under our open video system must-carry and retransmission consent regulations (47 C.F.R.  76.1506), including a list of all local commercial and non-commercial televisions stations entitled to must- carry treatment. The Notice also must include a certificate of service showing that it has been provided to all local cable franchising authorities located in the anticipated service area of the open video system. This is necessary to ensure that open video system operators meet any obligations under Sections 611, 614 and 615. We believe that this approach is consistent with new Section 653(c), which provides that the Commission shall, to the extent possible, impose obligations on open video system operators that are "no greater or lesser" than the obligations imposed on cable operators concerning PEG and must-carry program services. Providing a copy of the Notice to broadcast stations will also inform them of an open video system operator's belief that they may qualify for must-carry treatment on the open video system. With regard to PEG channels, the above requirement is consistent with a local cable franchising authority's ability under the Communications Act to designate channel capacity for PEG use. 47. We believe that including the following information in the Notice of Intent will be sufficient to notify potential video programming providers of an operator's intent to establish an open video system: A heading clearly indicating that the document is a Notice of Intent to establish an open video system. The open video system operator's name, address and telephone number. A description of the open video system's anticipated service area. A description of the system's projected channel capacity, in terms of analog, digital and other type(s) of capacity, upon activation of the system. A description of the steps a prospective video programming provider must follow to seek carriage on the system, including the name, address, and telephone number of a person to contact for further information. The starting and ending dates of the initial enrollment period for video programming providers. A certification that the open video system operator has complied with all relevant notification requirements under our open video system must-carry and retransmission consent regulations (47 C.F.R.  76.1506), including a list of all local commercial and non-commercial televisions stations served. The Notice of Intent also must include a certificate of service showing that the Notice has been served on all local franchising authorities entitled to establish requirements under Section 611 regarding the designation or use of channel capacity for public, educational and governmental programming. The process for allocating the channel capacity, in the event that demand for carriage exceeds the system's capacity. We believe that this basic information is necessary and not unduly burdensome and will allow a prospective video programming provider to make an initial assessment as to whether it wishes to seek carriage on a particular system. 48. In addition, we believe that a prospective video programming provider can reasonably be expected to need additional information concerning the system to assess whether to seek carriage on the system. We also recognize that the competitive position of an open video system operator should not be compromised by the required release of information unnecessary to make an informed enrollment decision. In this regard, we will require that an open video system operator provide the following information to all prospective video programming providers within five business days of the open video system operator's receipt of a written request from such a provider: The projected activation date of the system. If a system is to be activated in stages, an operator should describe the respective stages and the projected dates on which each stage will be activated. A preliminary carriage rate estimate. The information a video programming provider will be required to provide to qualify as a commercially bona fide potential video programming provider, e.g., creditworthiness. Technical information that is reasonably necessary for prospective video programming providers to assess whether to seek capacity on the system, including what type of customer premises equipment subscribers will need to receive service. Any transmission or reception equipment needed by a video programming provider to interface successfully with the open video system (e.g., scrambling, signal and audio quality, processing or security). The equipment available to facilitate the carriage of unaffiliated video programming and the electronic forms (e.g., baseband signal) that will be accepted for processing and subsequent transmission through the system. 49. Video programming providers must receive adequate notice and opportunity to participate in the allocation of system channel capacity. An enrollment period therefore may not expire fewer than 90 days after the Commission's release of the Public Notice of the Notice of Intent. In order to provide video programming providers with sufficient time to prepare for offering their programming to subscribers, an enrollment period must expire prior to activation of the system. Aside from these minimal time limitations, an open video system operator will be accorded substantial discretion to design and implement its enrollment process. An operator will be able to confirm that a prospective video programming provider's request for capacity is bona fide. For example, a system operator could require a video programming provider to provide (1) a reasonable deposit on the lease of capacity (e.g., one or two months of carriage), (2) reasonable evidence of the video programming provider's capability to offer video programming at the time the system is activated, or (3) assurances that the provider will actually deliver video programming over its allotted capacity within some reasonable period of time after system activation. We believe this approach enhances the stability of an open video system by helping to prevent the need to reallocate system capacity of a video programming provider that is ultimately unable to utilize the capacity which it has obtained. At the same time, however, an open video system operator shall be prohibited from deterring video programming providers from seeking carriage through the imposition of unreasonable qualification requirements (e.g., unreasonable technical carriage requirements). d. Open Video System Operator Discretion Regarding Video Programming Providers (1) Notice 50. Pursuant to Section 653(a)(1), we determined that it was consistent with the public interest, convenience and necessity to allow entities other than local exchange carriers to operate an open video system. In this section, we address whether, under the public interest standard, an open video system operator may preclude access to its open video system by other MVPDs. In the Notice, we sought comment on the extent to which open video system operators should have discretion regarding video programming providers entitled to carriage on the system, in light of the 1996 Act's general prohibition of discrimination by system operators among video programming providers. In particular, we asked whether an open video system operator should be permitted to limit or preclude, in the absence of Commission regulations, a competing, in- region cable operator from obtaining capacity on the system. (2) Discussion 51. We recognize that Section 653(b)(1)(A) generally prohibits discrimination by an open video system operator among video programming providers. Thus, we find that an open video system operator generally may not discriminate among video programming providers based on their identities. We disagree, however, with the cable operators' assertion that Section 653(b)(1)(A) ensures them unrestricted access to open video systems. As noted above, Section 653(a)(1) specifically addresses the conditions under which a cable operator may provide video programming over an open video system, whether the system is owned by the cable operator itself or another entity: To the extent permitted by such regulations as the Commission may prescribe consistent with the public interest, convenience, and necessity, an operator of a cable system or any other person may provide video programming through an open video system that complies with this section. We believe that this provision, because it specifically addresses the provision of video programming by a cable operator, allows the Commission discretion to determine when to permit a cable operator to provide video programming over an open video system, consistent with the "public interest, convenience and necessity," notwithstanding the 1996 Act's general non- discrimination requirements. 52. In general, we believe that it would serve the public interest, convenience and necessity to permit an open video system operator to limit the ability of a competing, in-region cable operator to select programming on the open video system where facilities-based competition would be impeded. We thus will permit an open video system operator to limit the ability of the competing, in-region cable operator, or a video programming provider affiliated with such a cable operator, to select programming on the open video system. This approach serves the public interest because, as some commenters note, a competing, in-region cable operator should generally be encouraged to develop and upgrade its own system, rather than to occupy capacity on a competitor's system that could be used by another video programming provider. We note that the Commission made a similar determination in the context of cellular telephone systems, where we adopted an exception to the general prohibition on resale restrictions. This exception permits a carrier to deny access to its facilities where the competitor's system is fully operational. As MFS Communications notes, the Commission stated that this exception promotes competition "by encouraging each licensee to build out its network." 53. Moreover, this approach is consistent with Congress' intent to "encourage common carriers to deploy open video systems and introduce vigorous competition in entertainment and information markets." By promoting facilities-based competition in this manner, we recognize in most cases that an open video system will be a new entrant into video markets where a dominant, incumbent cable operator will be present. Additionally, we note that the 1996 Act generally prohibits acquisitions and joint ventures between local exchange carriers and cable operators that operate in the same market. We believe that Congress expressed a clear preference, where possible, for facilities-based competition in the video marketplace from both cable operators and telephone companies. 54. Thus, an open video system operator will be permitted to limit access to the open video system by the competing, in-region cable operator, and any video programming provider that is affiliated with that cable operator, whether the competing, in-region cable operator or video programming provider is a packager of multiple programming services or an individual programming service. We clarify, however, that a programming service affiliated with a competing, in-region cable operator may not be precluded from being carried on the system as part of the package of any video programming provider that is not affiliated with the competing, in-region cable operator. We also clarify that an open video system operator may not limit the ability of any video programming provider that is unaffiliated with the competing, in-region cable operator to obtain capacity on the open video system, except as consistent with the 1996 Act and the rules adopted herein. 55. We are giving the open video system operator discretion in this regard because we believe that, at least in some instances, the open video system operator will find it in its interest to allow the competing, in-region cable operator to obtain capacity on the open video system (e.g., where the operator believes that the programming offered by the competing, in-region cable system or programming affiliate is necessary to the success of the open video system operation). Thus, allowing the open video system operator to exercise this discretion will advance Congress' goal of facilities-based competition because, in some instances, it may impact on the open video system operator's decision to build, or further deploy, its open video system. 56. Contrary to the arguments of some cable operators, we do not believe that promoting the goal of facilities-based competition in the manner adopted herein constitutes a "complete ban on access to channel capacity" implicating First Amendment concerns. First, alternative avenues for speech by competing, in-region cable operators will exist, i.e., their own cable system, or open video systems, as set forth herein. Second, open video system operators may not limit access to their systems by out-of-region cable operators or video programming providers affiliated with such cable operators. Third, we will consider petitions from competing, in-region cable operators showing that facilities-based competition will not be significantly impeded in their particular circumstances. We will provide a specific exception in a situation in which: (1) the competing, in-region cable operator and affiliated systems offer service to less than 20% of the households passed by the open video system; and (2) the competing, in-region cable operator and affiliated systems provide cable service to a total of less than 17,000 subscribers within the open video system's service area. We believe that considering such petitions sufficiently addresses the concerns of some cable commenters that restrictions on access to an open video system based on the identity of a video programming provider would "fundamentally undermine" Congress' intent in repealing the cable-telephone company cross- ownership restriction or impair competition. e. Measurement of Capacity (1) Analog, Digital and Switched Digital Video (a) Notice 57. As described above, new Section 653(b)(1)(B) provides that, if demand for carriage exceeds the channel capacity of the open video system, the Commission's rules must prohibit an open video system operator and its affiliates from "selecting the video programming service for carriage on more than one-third of the activated channel capacity on such system . . . ." This requires the Commission to address how channel capacity should be measured, recognizing that technology continues to evolve. In the Notice, we sought comment on these issues. We sought comment on whether it would be appropriate to measure the activated channel capacity based on a system's total bandwidth, or on the number of channels on the system's analog portion and on the bandwidth of the system's digital portion. Second, we sought comment on how capacity should be measured on open video systems that employ "switched digital" video technology, and tentatively concluded that capacity on such systems may be presumed to be unlimited. (b) Discussion 58. The appropriate measure of analog capacity is relatively straightforward because the National Television System Committee ("NTSC") standard, which occupies a 6 MHz bandwidth, has been the broadcast television standard in the United States for close to four decades. Further, with very few exceptions, television sets currently in use in the United States are designed to receive 6 MHz NTSC channels. No alternative as well known and accepted exists. Therefore, we will require that analog capacity on an open video system be measured in 6 MHz channel increments. 59. The measurement of digital channel capacity on an open video system is more complex. As HBO states, "[t]he measurement of analog and digital capacity is different in that only one service at a time can be transmitted over a 6 MHz analog channel regardless of the service's underlying content, whereas the number of simultaneous services that can be transmitted over the same 6 MHz in digital format will vary depending on the type of information delivered and the picture quality the programmer desires." For example, transmitting a live sports event (e.g., 5-6 MHz) generally will require more bandwidth than transmitting a live interview show (e.g., 2-3 MHz). The determination is further complicated by the rapidly evolving nature of digital technologies, combined with the current lack of uniform standards in digital video delivery methods. We reject the telephone companies' argument that the continuing development of digital technologies makes it impossible to prescribe a specific way to measure capacity that will be appropriate for all systems, such as bandwidth. The approach we adopt is not inconsistent with these commenters' contention that open video system operators be given the discretion to determine how to measure system capacity consistent with the statutory non-discrimination requirements and the technical characteristics of their system. 60. We conclude that capacity on an open video system that is available for the distribution of digital communications should also be measured in bandwidth. An open video system will determine whether carriage demand exceeds the system's capacity in terms of bandwidth on the digital portion of the system. While the number of communication pathways in this bandwidth may vary greatly depending on the equipment and transmission systems involved, measuring "capacity" in terms of bandwidth will carry out the objectives of the one- third occupancy allocation in Section 653(b)(1)(B). We are unpersuaded by the Telephone Joint Commenters' assertion that measuring the capacity of an open video system based on bandwidth is impermissible because Section 653(b)(1)(B) refers to "channel capacity," "activated channel capacity," and "number of channels." Because there is no meaningful definition of a "channel" in a digital world, bandwidth remains the only reasonable measure of capacity on the digital portion of an open video system. 61. A switched video system design generally allows the operator to deliver only the programming and services requested by its subscribers from a local switching or control center. In comparison, broadband cable systems deliver practically all of their video programming and services to subscribers continuously. With regard to switched video, Broadband Technologies states that its switching technology will eliminate the importance of a system's bandwidth, referring to it as "essentially unlimited." The National League of Cities, however, cautions the Commission that infinite expansion of capacity may not be "economically reasonable or technologically feasible" due to the cost and physical limits of connecting additional switches and input ports, and therefore that no basis exists for relieving a switched digital open video system operator from the two-thirds capacity set-aside requirement. Moreover, General Instruments contends, and we agree, that a variety of technologies may be employed to provide switched digital video, some of which may have greater restraints than others. General Instruments points out that even the most serviceable of such technologies can be subject to severe interference or blocking during peak periods and other limitations. We thus determine that it is premature to make any broad findings with respect to switched digital video. We will therefore reexamine the impact of switched digital technology on the measurement of open video system capacity on a case-by-case basis. 62. We anticipate that concerns regarding appropriate methods for soliciting carriage demand, calculating system capacity, and allocating channel capacity to video programming providers will be alleviated on open video systems with capacity significantly higher than carriage demand. Therefore, when an open video system operator can demonstrate that, due to the technology employed in its system, the system's capacity is plentiful as compared to demand, we will consider waiving our rules concerning enrollment periods and allocation methods. (2) Counting the System Operator's One-Third Limit (a) Notice 63. In the Notice, we sought comment regarding the calculation of the one-third of capacity on which the open video system operator may select programming if carriage demand exceeds capacity. First, we tentatively concluded that channels devoted to PEG and must-carry should not count against a system operator's one-third cap. We reasoned that neither the system operator nor its affiliates would "select" this programming, as that term is used in section 653(b)(1)(B) of the 1996 Act, because these obligations are established as a matter of law or through negotiations with local franchising authorities. In addition, we sought comment on whether a system operator should be deemed to "select" the video programming that is placed on shared channels when: (1) the system operator or its affiliated video programming provider is one of the video programming providers carrying such programming; or (2) the system operator has delegated responsibility for implementing channel sharing to an independent entity. (b) Discussion 64. We adopt our proposal to exclude PEG and must-carry channels from the one-third of system capacity on which an open video system operator or its affiliates may select programming (when demand for capacity exceeds system capacity). In adopting this approach, we endorse our reasoning in the Notice that an open video system operator does not select PEG and must-carry channels because their carriage is mandated by law or established through negotiations with local franchising authorities. Broadcast television stations electing retransmission consent, however, as well as any program services granted carriage in connection with such consent, will count against an open video system operator's one-third limit, in accordance with the rules adopted herein. This approach recognizes that a television station, electing retransmission consent rather than must-carry status, is essentially electing to be treated as any other non-broadcast video programming service, and negotiates with the open video system operator over carriage on the open video system. 65. Section 653(b)(1)(B) limits the open video system operator to one-third of the "activated channel capacity" when demand exceeds capacity. We agree with telephone companies that the PEG and must-carry channels should be included in total system capacity when calculating the open video system operator's one-third limit. Our rules define "activated channels" on a cable system as: "[t]hose channels engineered at the headend of a cable system for the provision of services generally available to residential subscribers of the cable system, regardless of whether such services actually are provided, including any channel designated for public, educational or governmental use." For example, on a system with 90 total channels, of which 15 are PEG and must-carry channels, the open video system operator may select the programming on 30 channels when demand exceeds system capacity. These parties contend, and we agree, that channels on which PEG and must-carry stations are carried qualify as "activated." 66. We disagree with NCTA that PEG and must-carry channels should be deducted from the total amount of system capacity in calculating the one-third cap. NCTA argues that excluding those channels would be more equitable to video programming providers because it would cause all providers, including those affiliated with the system operator, to share equally in the responsibility for these channels. As we have already observed, where demand exceeds system capacity, the open video system operator is entitled to select the programming on one- third of the activated channel capacity; if the operator has not selected a particular programming service there is no statutory basis for counting the service against the operator's one-third limit. This approach is consistent with our cable "channel occupancy" (or "vertical ownership") rules, that permit PEG and must-carry channels to be included in total activated channel capacity for purposes of calculating the percentage of activated channels that a cable operator may devote to affiliated programming. 67. Viacom and U S West argue that channels on which shared programming is carried should not be counted against the one-third cap because such programming should not be deemed to be selected by the operator or its affiliate. They contend that, by definition, programming on shared channels would be carried on the system regardless of whether the operator or its affiliate elects to share the programming, because the program services would be delivered on behalf of another video programming provider. While we agree with U S West that channel sharing promotes efficiency on the system, we disagree that the open video system operator has not "selected" the programming placed on shared channels. As long as the open video system operator or its affiliate has exercised the editorial discretion of deciding to include a program service in its package of offerings that are carried on its allocated channel capacity, the operator or its affiliate must be deemed to have selected the programming. 68. We do not believe that it is equitable to count a shared channel solely against the open video system operator's one-third limit, if one or more unaffiliated video programming providers has selected the programming service as well. Where a channel is shared by one or more unaffiliated video programming providers, we will assess a pro-rata share of the shared channel against the open video system operator. For instance, if the open video system operator shares a channel with one unaffiliated video programming provider, one-half of a channel will count against the capacity of the open video system operator's one-third limit; if the system operator shares a channel with three other video programming providers, it will be assessed only one-quarter of one channel. The approach we adopt for counting PEG, must-carry and shared channels will provide an open video system operator with maximum flexibility to create and offer a package of programming services that can viably compete with the incumbent cable operator. f. Allocation of Capacity Among Video Programming Providers (1) General Framework (a) Notice 69. We sought comment in the Notice generally on how capacity on an open video system should be allocated among unaffiliated video programming providers. We asked whether the allocation of channel capacity on an open video system should be left to the discretion of the operator, and if so, how unaffiliated video programming providers could be protected from discrimination under such an approach. (b) Discussion 70. We believe that an open video system operator should be given the flexibility to implement its own method for allocating capacity to unaffiliated video programming providers, subject to minimal guidelines ensuring that unaffiliated providers are treated in a non- discriminatory fashion. The telephone companies legitimately note that open video system operators will need to adapt their allocation method to myriad factors that may arise, such as the particular technology employed and the particular market to be served. Pursuant to the statute, however, the Commission must ensure that video programming providers are provided non-discriminatory access to open video systems. In this regard, Rainbow calls for detailed regulations, while the telephone companies urge the Commission to merely adopt a general rule prohibiting discrimination. We think that extensive rules regarding the allocation of channels and the administration of the system by the open video system operator will impose inefficiencies on the operator without necessarily precluding discrimination. We believe that the approach we describe below strikes the appropriate balance between the two views. (2) Allocation Methodology (a) Notice 71. In the Notice, we sought comment on how an open video system operator should allocate the two-thirds of channel capacity that must contain programming selected by unaffiliated video programming providers (where carriage demand exceeds the system's capacity). We also sought comment on establishing a range of acceptable options for allocating capacity, including first-come first-served, lottery, and proportional allotment. (b) Discussion 72. The allocation of channel capacity determines carriage on an open video system and is therefore subject to the statute's non-discrimination requirements. We require that the two-thirds of total capacity that must be allocated to unaffiliated video programming providers, when demand exceeds system capacity, must be allocated in an open, fair, non-discriminatory manner. The allocation process must be verifiable as well as insulated from any bias of the open video system operator. In the event that an aggrieved video programming provider files a complaint with the Commission alleging discrimination in the allocation process, the burden of proving that the particular allocation method employed was not discriminatory will rest with the open video system operator. We believe that this burden of proof is reasonable, given that the open video system operator is responsible for ensuring a non-discriminatory allocation process and possesses the relevant information regarding the allocation method. 73. Other than any general limitations addressed in Section III.D. concerning rates, terms and conditions of carriage, we do not adopt any specific requirements governing the length of a video programming provider's lease of allocated capacity. We believe these matters are best left to the involved parties. 74. We disagree with NCTA that a federal standard detailing a specific manner in which open video system capacity must be allocated is necessary so video programming providers will not have to expend the resources necessary to learn the allocation procedures in each jurisdiction where they seek capacity. We believe that it is reasonable to expect video programming providers to find out about the enrollment and allocation procedures for a particular open video system operator. Moreover, we believe that adopting required enrollment procedures would unreasonably restrict flexibility and prevent open video system operators from responding to the particular conditions of their markets. 75. We reject Alliance for Community Media's suggestion that an open video system operator be required to hold back 20% of the channel capacity from its initial allocation and then award these channels on an a la carte basis to all unaffiliated video programming providers. The Alliance for Community Media argues that this approach would ensure that small video programming providers have an opportunity to obtain their desired capacity, thereby enhancing program diversity on the system. We believe that this approach unnecessarily restricts the ability of an open video system operator to allocate capacity in accordance with existing demand for carriage. In addition, while we seek to encourage small video programming providers to obtain access on open video systems, we believe that their interests are adequately protected under our rules set forth herein. (3) Type of Capacity -- Analog/Digital (a) Notice 76. In the Notice, we sought comment on whether the allocation of specific types of open video system capacity could constitute impermissible discrimination under Section 653(b)(1)(A). In particular, we asked whether it would be permissible for an operator to assign all of a system's analog capacity to itself or its affiliate. In this regard, we sought comment generally on the current availability of digital technology, and any differences that may exist between analog and digital capacity. If analog and digital capacity currently are not interchangeable "products," we sought comment on whether it would be appropriate to treat analog and digital channels independently for allocation purposes. (b) Discussion 77. Based upon the record evidence, we find that analog and digital portions of an open video system must be treated independently for purposes of allocating system capacity to video programming providers. We believe that this finding is justified by various technical and economic factors demonstrating that, for the foreseeable future, analog capacity and digital capacity are not interchangeable. 78. First, the embedded equipment base is analog -- both the equipment used by programmers and distributors to create, process, and transmit the signals, and the customer premises equipment ("CPE"), such as television sets and video cassette recorders ("VCRs") used by subscribers to receive and display the signals. Such analog equipment is widely and competitively available in the marketplace. 79. By contrast, digital signal delivery technologies are rapidly and continuously evolving. The cost and availability of digital equipment is much less certain than that of analog equipment. In addition, as noted by Viacom and numerous cable operators, specialized digital processing equipment is not currently available. For instance, it appears from the record that the cost of digital set-top boxes is currently between $300 to $400, or approximately three times more than the cost of similar analog set-top boxes. The record also demonstrates numerous uncertainties with respect to digital capacity: (1) when the cost of digital set-top boxes will decrease to affordable levels; and (2) when such boxes will become available on a large-scale basis. As U S West states: [V]ideo programmers do not view analog and digital capacity as substitutable given the present state of technology [citing its Omaha video dialtone trial, in which analog capacity was over-subscribed and had to be allocated while digital capacity was freely available and "barely used"]. At some point in the future, when digital standards are established and incorporated into set-tops and other peripheral devices, digital programming will most likely replace analog programming and there will be no need to distinguish between the two for capacity purposes. 80. Given these significant differences, we find that it would constitute impermissible discrimination under Section 653 for an open video system operator to treat its analog and digital capacities as fungible for allocation purposes. For instance, assuming a system with 100 analog channels and capacity for 200 digital channels, an open video system operator would be prohibited from taking the 100 analog channels as the one-third of capacity on which it may select programming (when carriage demand exceeds system capacity), and relegating all other video programming providers seeking analog capacity to the digital channels. Rather, the system operator must treat the analog and digital capacity separately. If analog demand exceeds analog capacity, the operator would be limited to selecting the programming on one-third of the analog channels; similarly, if the digital capacity were over-subscribed, the operator would be limited to selecting the programming on one-third of the digital capacity. We agree with U S West that the Commission should revisit this distinction if and when analog and digital capacities become relatively interchangeable. 81. The Telephone Joint Commenters do not argue that analog and digital capacity are fungible. Instead, the Telephone Joint Commenters contend that the 1996 Act makes no distinction between analog and digital capacity, and that "[open video system] operators must be given flexibility to select their channels from the total base of channels to the extent necessary to provide programming packages that can compete with those offered by incumbent cable operators." In making this argument, the Telephone Joint Commenters essentially acknowledge that analog and digital capacities are not fungible, or there would be no need for them to argue that they must occupy the analog channels in order to compete with the incumbent cable operator. We view our obligations under the statute to ensure non-discriminatory access to encompass affording actual access to subscribers by video programming providers, and not access that is not technologically possible. To do otherwise is to place the challenge of digital delivery unfairly, we believe, on those not affiliated with the open video system operator. While we recognize the telephone companies' concern, we believe that there are other ways to ensure that an open video system can assemble a competitive product that would not entail discriminatory conduct (e.g., not counting PEG and must-carry channels against the one-third limit; making use of channel sharing and joint marketing opportunities). (4) Amounts of Capacity (a) Notice 82. As noted, Section 653(b)(1)(B) of the Communications Act provides that, "if demand exceeds the channel capacity of the open video system," the Commission's regulations must prohibit an open video system operator and its affiliates from "selecting the video programming services for carriage on more than one-third of the activated channel capacity on such system . . . ." In the Notice, we interpreted this provision to mean that, so long as carriage demand does not exceed system capacity (after video programming providers have been allowed a reasonable opportunity to seek carriage), there will be no limit on the amount of capacity on which an open video system operator and its affiliates may select programming. 83. Further, we sought comment in the Notice on whether the Commission should allow an open video system operator to prescribe minimum or maximum amounts of capacity that an unaffiliated programming provider may obtain. For example, we sought comment on the situation where carriage demand exceeds the system's capacity, but only the open video system operator and one other video programming provider have acquired capacity on the system. We asked whether it would be appropriate to limit the open video system operator and its affiliates to selecting programming on one-third of the system while allowing the unaffiliated video programming provider to select the programming on the remaining two-thirds of the system. (b) Discussion 84. As an initial matter, we affirm, and no commenter disputed, our conclusion that a system operator and its affiliates may select the programming on more than one-third of the system's capacity if carriage demand does not exceed system capacity. In these situations, the carriage requests of all unaffiliated video programming providers will be fulfilled, and the system operator will be permitted to select the programming on the remaining capacity, under the regulations adopted in this Order. This approach is consistent with the plain language of the statute and comports with Congress' intent to encourage investment in new technologies by not requiring usable capacity to lie fallow. (i) Minimum Channel Allocations 85. We believe it is reasonable for open video system operators to require video programming providers to request carriage in no less than one-channel increments. A system operator, therefore, could prohibit the purchase of "part-time" programming capacity. We believe that such a restriction is just, reasonable, and not unjustly or unreasonably discriminatory under the statute because of the expense and administrative and technical burdens of accommodating part-time programming. 86. We disagree with those commenters which contend that, since the Commission's cable leased access rules require that channels be made available in increments as short as 30 minutes, parity and program diversity concerns demand that open video system operators face similar requirements. First, under our leased access rules, cable operators must accommodate part-time programmers on only a small portion of their capacity. By contrast, an open video system operator may be required to lease two-thirds of its capacity to part-time unaffiliated video programming providers. Second, in enacting cable leased access, Congress was addressing the cable operator's editorial control over virtually its entire system. We believe that while the goals of the cable leased access requirements may be similar to those here, the methods to achieve those goals are different. Open video systems, through the one-third limitation on the open video system operator, are intended to attract multiple video programming providers, that can also accommodate the needs of part-time programmers. 87. In addition, however, open video system operators will not be permitted to require video programming providers to obtain capacity in increments of more than one channel. We also find that this restriction is just, reasonable, and not unjustly or unreasonably discriminatory under the statute because allowing an open video system operator to require video programming providers to obtain multiple channels, such as five-channel increments, would unfairly disadvantage smaller video programming providers which do not have sufficient programming to fill multiple channels. We think that such a condition of carriage would be unreasonable and would contravene the statute's non-discrimination prohibition. As discussed more fully below, however, an open video system operator may establish reasonable levels of differentiation in carriage rates, such as volume discounts, provided that the bases for differentiation are not unjust or unreasonable. (ii) Maximum Channel Allocations 88. We conclude that open video system operators should be permitted to limit unaffiliated programming providers to selecting the programming for carriage on no more capacity than the amount obtained by the open video system operator or its affiliate. We therefore disagree with the argument of certain cable operators that, under Section 653(b)(1)(B), if the demand for carriage exceeds capacity with only a single unaffiliated video programming provider and the open video system operator requesting capacity, the unaffiliated programming provider would be entitled to two-thirds of the capacity while the open video system operator would be restricted to one-third. First, we believe that Section 653(b)(1)(B) contemplates the presence of robust demand for channel capacity by multiple video programming providers, such that the system capacity would not be dominated by a single programming provider. Moreover, we believe that such a result would discourage the deployment of open video systems by permitting an unaffiliated video programming provider to dominate the selection of programming on the system. Given that the financial risk of constructing the open video system rests primarily on the open video system operator, we do not believe that Section 653(b)(1)(B) requires that the open video system operator entrust the success or failure of its system to an entity with limited risk in building the infrastructure. 89. For the above reasons, we find that a term or condition of carriage limiting unaffiliated programming providers to selecting the programming on no more of the capacity than the open video system operator or its affiliate would not violate the Commission's rules, and would be just, reasonable, and not unjustly or unreasonably discriminatory under Section 653(b)(1)(A). 90. We also disagree with Adelphia/Suburban Cable that Section 653(b)(1)(B)'s one- third limit is actually a maximum rather than a minimum, and that the statute does not require the Commission to allow an open video system operator and its affiliates to occupy one-third of the channel capacity in all cases. For instance, assume a 100-channel system on which the open video system operator itself seeks as much capacity as possible, and four unaffiliated video programming providers each seek 25 channels. Under this scenario, Adelphia/Suburban Cable argues that all five programmers should receive 20 channels, rather than allowing the system operator to obtain one-third of the system's capacity (33 channels) while requiring that the four unaffiliated video programming providers divide the remaining two-thirds of capacity (67 channels), as will occur under our interpretation of Section 653(b)(1)(B). Adelphia/Suburban Cable contends that absent this interpretation, the system operator will have no incentive to construct additional capacity to meet demand. We find that nothing in the plain language of Section 653(b)(1)(B) or its legislative history supports Adelphia/Suburban Cable's interpretation. We believe that Adelphia/Suburban's approach would contravene the statute's intent that an open video system operator and its affiliates be afforded one-third of the system's capacity when carriage demand exceeds the system's capacity. We believe that Adelphia/Suburban Cable's method would unduly restrict an open video system operator's ability to compete, and undermine Congressional intent by discouraging the deployment of open video systems. (5) Subsequent Changes in Capacity or Carriage Demand (a) Notice 91. In the Notice, we sought comment on how additional capacity that becomes available on an open video system after the initial allocation should be distributed. We also sought comment on what rules should apply when initial demand for carriage does not exceed system capacity, but subsequent demand triggers Section 653(b)(1)(B)'s one-third limit. In this context, we sought comment on whether it would be permissible for an open video system operator to hold periodic enrollment periods during which capacity would be reallocated, rather than requiring such reallocation immediately. (b) Discussion 92. To ensure that open video systems remain open after the initial allocation of channel capacity, we will require an open video system operator to allocate open capacity, if any is available, at least every three years, beginning three years from the date service commenced. By "open capacity" we mean channel capacity that has become available during the course of the year, whether due to a system upgrade, the expiration of video programming providers' carriage contracts, or for any other reason. Capacity held by the open video system operator or its affiliate above the one-third of the system's activated channel capacity will be considered "open capacity." For example, if the demand for carriage did not exceed system capacity when capacity was initially allocated, and the open video system operator was able to select the programming on 50% of the system's activated channel capacity, the 17% of capacity on which the open video system operator is providing programming above the one-third limit (50% - 33%) will be considered "open capacity" for purposes of the allocation process. 93. We note that capacity on an open video system may become available due to the efficiencies of channel sharing, under which a video programming service to be offered by multiple video programming providers is placed on a single channel and shared by the multiple providers. We believe that all existing video programming providers should share in the efficiencies of channel sharing. Thus, additional capacity resulting from channel sharing will not count as "open" capacity and should be allocated through an open, fair, non-discriminatory process among existing video programming providers as soon as practicable after channel sharing is implemented. 94. In order to assess the demand for additional capacity, we will require open video system operators to maintain a list of bona fide video programming providers that have requested carriage or additional capacity during the previous three year period. Information regarding how a video programming provider should apply for carriage and the closing date for that three year period's allocation must be made available to potential video programming providers upon request. An operator should establish a closing date by which video programming providers may seek to lease additional capacity that reasonably relates to the time when programming services to be carried on the additional capacity will first be provided to subscribers. The open video system operator need not file a new Notice of Intent with the Commission, nor otherwise solicit additional demand, after the initial allocation of capacity has been completed. An open video system operator will not be required to follow these rules if there is no open capacity to be allocated. 95. Once the open video system operator has determined that additional capacity is available and has assessed carriage demand, it must allocate the open capacity at least once every three years through an open, fair, non-discriminatory process. Consideration should be given to all video programming providers that properly apply for carriage prior to the closing date in that three year period's allocation of open capacity. Additional must-carry obligations must be accommodated in accordance with our open video system must-carry rules. Additional PEG access obligations must be accommodated in accordance with the regulations adopted in this Order. In the absence of additional PEG access obligations, the open video system operator may use any capacity that becomes available during the remainder of the current three year allocation cycle. 96. After careful consideration of the record, we decline to require periodic enrollment periods at which time the total channel capacity of an open video system would be subject to re- allocation. That is, so long as an unaffiliated video programming provider continues to meet the conditions of carriage, it may continue to use its initially allocated capacity until its carriage contract expires, instead of facing the potential of periodic displacement. We believe that this approach will provide stability, certainty and flexibility to the platform. For subscribers, this approach will mean less confusion and less disruption of their channel line-ups; for video programming providers, this approach will provide additional incentive and ability to invest in and market their services; and for open video system operators, this approach will provide the flexibility to negotiate the length of carriage arrangements based on their business judgment and offer a more stable product to consumers. While we acknowledge the National League of Cities, et al.'s concern that an open video system operator could limit subsequent access to the system by negotiating for long-term carriage contracts, we believe that, as of now, the above benefits outweigh the speculative harm. If it becomes apparent that long-term contracts are being used in a discriminatory or anti-competitive manner, we may re-examine our conclusion. 97. We reject suggestions that an open video system operator should have to re- allocate open capacity in response to subsequent carriage requests in less than three years. An open video system operator must be able to accommodate subsequent demand without causing unreasonable disruption to the system and confusion for subscribers. Specifically, we reject the approach suggested by National League of Cities, et al., that would require a system operator or its affiliates to relinquish capacity within 30-60 days of a request for demand until the two- thirds of system capacity allocable to unaffiliated programming providers is completely occupied. According to National League of Cities, et al., this approach would preserve access to open video systems and would help prevent channels from going unused or being "locked up" by affiliated video programming providers. We disagree. Requiring the affiliated video programming provider to relinquish capacity within 30-60 days of receiving additional requests for carriage unduly compromises the stability of the affiliated provider's programming package, and would undermine its ability to market its offerings. (6) Channel Positioning (a) Notice 98. In the Notice, we sought comment on whether the channel positions to which video programming providers' program services are assigned should be subject to Section 653(b)(1)(A)'s non-discrimination requirements. In this regard, we asked whether it would violate Section 653 for an open video system operator to reserve the lower numbered channels for itself or its affiliates, since these channels may be considered more valuable to the extent they are more accessible to consumers. We further asked for information on any technology, such as "channel mapping," that could resolve any perceived problems in this area. (b) Discussion 99. Channel positioning is an important part of allocating channel capacity to video programming providers, and therefore we will require an open video system operator to assign channel positions in a manner that is not unjustly or unreasonably discriminatory. Certain channels, such as the lower-numbered channels, may be considered more valuable because they may be more accessible to consumers who scroll through the channels in sequence. In determining whether an open video system operator has assigned channel positions in a non- discriminatory manner, we will weigh whether the operator has implemented any technology that substantially alleviates concerns in this area, such as channel mapping, as well as the process employed by the operator to allocate channel numbers. We also find that, given Section 653(b)(1)(A)'s specific exemption of must-carry and PEG from its general non-discrimination requirements, an open video system operator must comply with the channel positioning requirements contained in those rules. g. Channel Sharing (1) Notice 100. New Section 653(b)(1)(C) of the Communications Act requires that the Commission's regulations permit an open video system operator "to carry on only one channel any video programming service that is offered by more than one video programming provider, including the local exchange carrier's video programming affiliate, provided that subscribers have ready and immediate access to any such video programming service." The Conference Report states that this provision was intended "to permit an open video system operator to require channel sharing." 101. We tentatively concluded in the Notice that open video system operators should be permitted to choose how and which programming will be carried on shared channels, and sought comment on this conclusion. Further, we sought comment on whether the Commission should prescribe any terms under which channels may be shared, and in particular, whether channel sharing is subject to the 1996 Act's non-discrimination requirements. In this regard, we sought information on any differences that may exist between shared and non-shared channels that might make non-shared channels more attractive to video programming providers. We also sought comment on the meaning of the phrase "ready and immediate access" as used in the statutory provision, such as whether channel sharing must be "transparent" to consumers. Finally, we tentatively concluded that the rights of programming vendors and licensors should be preserved by requiring each video programming provider seeking to offer programming carried on a shared channel to first obtain separate permission from the program service. (2) Discussion 102. As an initial matter, we believe that the statute permits an open video system operator to decide whether to create shared channels for some or all of the duplicative programming on its system. We therefore affirm our tentative conclusion that an open video system operator may implement and administer the channel sharing process. We disagree with NCTA's argument that a system operator should be required to employ an independent entity, or to create a committee comprised of the video programming providers on the system, in order to administer channel sharing. We believe that an operator of an open video system should have the flexibility to address technical and other factors that may affect channel sharing. 103. The National League of Cities, et al. expresses concern that, if an open video system operator selects the programming placed on shared channels, in advance of video programming providers' decisions to carry such programming, the operator will be exercising editorial control over unaffiliated programming providers' offerings, and therefore will be engaging in impermissible discrimination. Nothing in Section 653(b)(1)(C) allows an open video system operator to select which programming will be carried on shared channels prior to the existence of duplicative programming on the system. For the open video system operator to pre-determine the shared channels not only distorts the normal meaning of shared, but undermines the statutory intent that the system afford access to independent entities. Section 653(b)(1)(C) permits a system operator to place on a single channel a programming service "that is offered by more than one video programming provider." We clarify that channel sharing may be implemented by an open video system operator only after a determination is made regarding which programming services will be offered by more than one video programming provider. We disagree with telephone companies that argue that the statutory reference to "any video programming service" means that an open video system operator may select -- in advance of any actual duplication -- which program services to place on shared channels. We also note that certain cable operators and programmers argue that the placement of a programming service on a shared channel must be conditioned on the approval of the programming service. We take this to mean simply that each video programming provider using the shared channel has reached its own agreement with the programming service. We reaffirm our statement in the Notice that nothing in our regulations concerning channel sharing should be construed to impair the rights of program services. Consistent with our rules governing competitive access to video programming, a program vendor will still possess the right to negotiate over specific terms and conditions with each video programming provider. Once the programming service has reached agreements with all of the relevant video programming providers, however, we do not believe that additional consent is necessary for the open video system operator to place the programming service on a shared channel. 104. We find that the statutory provision requiring that subscribers have "ready and immediate" access to programming carried on shared channels means that channel sharing must be transparent to subscribers. This requires that subscribers be able to access programming carried on shared channels with no more difficulty than programming carried on non-shared channels. We do not believe this is unduly burdensome for open video system operators. Many cable operators currently provide different programming on the same channel in a manner transparent to subscribers receiving the respective signals. Moreover, we believe that, given this advance guidance that channel sharing must be transparent to consumers, open video system operators will be able to design and construct their systems to accommodate this requirement and avoid subsequent costs or disruption of the system. We thus reject telephone companies' assertions that we should merely codify the "ready and immediate" provision because the adoption of any specific regulations might inhibit deployment of open video systems. h. Technical Issues (1) Notice 105. In the Notice, we sought comment on whether certain technical requirements could restrict video programming providers' access to open video systems, and whether it would be necessary for the Commission to adopt any regulations or standards regarding technology to promote such access. (2) Discussion 106. We clarify that the availability of technology necessary to access an open video system operator is part of the overall process for allocating open video system channel capacity, and therefore subject to the statute's non-discrimination requirements. An operator may not discriminate among video programming providers with respect to technology or technical information necessary to access the system. This would include all technology and equipment related to compression techniques, arranging the digital data for transport, and the "last-mile" physical transport of the signal to the customer's premises. We believe that this approach will allow open video system operators to design technical standards in accordance with market forces rather than regulation, while preserving fair access for unaffiliated video programming providers. 2. Open Video System Operator Co-Packaging of Video Programming Selected by Unaffiliated Video Programming Providers a. Notice 107. In the Notice, we stated that new Section 653(b)(1)(B) of the Communications Act restricts the amount of capacity for which an open video system operator and its affiliates may select programming, where carriage demand exceeds system capacity; however, that section also provides that nothing therein should be construed to limit "the number of channels that the carrier and its affiliates may offer to provide directly to subscribers." We tentatively concluded that this provision allows a system operator and its affiliates to enter into agreements to co-package to subscribers the programming services selected for carriage by unaffiliated video programming providers, and sought comment on this conclusion. Co-packaging would permit one video programming provider to package its services with those of another video programming provider, and market the combined offerings to consumers as one package of video programming. b. Discussion 108. We affirm our tentative conclusion that Section 653(b)(1)(B) permits an open video system operator to enter into agreements to co-package the video programming selected by other video programming providers with the operator's selected programming, and market the combined offerings as one package to subscribers. We also note that video programming providers that are not affiliated with the open video system operator are free to enter into co- packaging arrangements with each other. We believe that this approach can provide efficiencies to independent programmers that may find it difficult to market their service to consumers on an individual basis. We also believe that consumers may benefit from having multiple options for subscribing to program services. 109. We further believe that co-packaging may not be imposed by an open video system operator as a condition of carriage on an open video system, such that an open video system operator could refuse access to a video programming provider that is unwilling to subject its video programming to co-packaging. Such a condition would allow an open video system operator to exercise editorial control over the two-thirds of capacity allocable to unaffiliated video programming providers (when carriage demand exceeds system capacity). This would violate the statute's non-discrimination requirements by allowing the operator to limit the access of video programming providers not amenable to co-packaging arrangements. We further note that Congress applied Section 616 of the Communications Act governing the regulation of carriage agreements to open video system operators. Under this section, multichannel video programming providers, including open video system operators, may not: (1) require a financial interest in a program service as a condition of carriage; (2) coerce a video programming service to provide, or retaliate against such a service for failing to provide, exclusive rights against other MVPDs as a condition of carriage; or (3) engage in conduct the effect of which is to unreasonably restrain the ability of an unaffiliated video programming service to compete fairly by discriminating based on affiliation or non-affiliation in the selection of terms and conditions of carriage. We believe that prohibiting an open video system operator from requiring co- packaging as a condition of carriage is consistent with Congress' intent in applying Section 616 on open video system operators. 110. Co-packaging arrangements therefore must be purely voluntary among the parties involved. Differences in co-packaging arrangements would be permissible, however, so long as the open video system operator complies with the rules described below regarding the rates, terms and conditions of carriage. 111. Only the National League of Cities, et al. object to the Commission's tentative conclusion that an affiliated programming provider may co-package programming selected by unaffiliated video programming providers. They argue that Section 653(b)(1)(B) merely clarifies that the one-third limit on the amount of capacity for which the system operator and its affiliates may select the programming is not absolute -- that is, if the operator builds additional capacity, then it may also select the programming for one-third of that additional capacity. We do not believe, however, that Congress would have found it necessary to delineate specifically the fact that an open video system operator is allowed to select the programming on one-third of a system's capacity, regardless of the size of the system. D. Rates, Terms, and Conditions of Service 1. Just and Reasonable Carriage Rates a. Notice 112. Section 653 (b)(1)(A) requires that rates for carriage on open video systems be just and reasonable and not unjustly or unreasonably discriminatory. This provision reflects the goal of affording unaffiliated video programming providers access to, and fair treatment on, open video systems, while at the same time preserving for operators the viability of open video systems through the ability to realize a return on the economic value of their investment. 113. In the Notice, we sought comment on how to ensure that open video system carriage rates are just and reasonable and not unjustly or unreasonably discriminatory, as required by Section 653(b)(1)(A). We asked whether market incentives and the presence of existing competitors will ensure such carriage rates or whether a specific regulatory framework or pricing formula is necessary. We also asked for comment on a "safe harbor" approach, e.g., rates will be presumed reasonable if a certain number of unaffiliated programmers are willing to pay existing rates on a certain percentage of available capacity, and whether an open video system operator should be required to charge rates to unaffiliated programmers that are no greater than the rates it charges itself or its affiliates for carriage. b. Discussion 114. Our intent is to provide maximum flexibility to open video system operators to respond to market forces consistent with the statutory obligation that carriage rates are just and reasonable and not unjustly or unreasonably discriminatory. We believe that primary reliance on a "presumption" approach best achieves these goals. We will accord a strong presumption that carriage rates are just and reasonable for open video system operators where at least one unaffiliated video programming provider, or unaffiliated programming providers as a group, occupy capacity equal to the lesser of one-third of the system capacity or that occupied by the open video system operator and its affiliates, and where the rate complained of is no higher than the average of the rates paid by unaffiliated programmers receiving carriage from the open video system operator. Where these conditions are met, the complainant will have the burden of demonstrating that the rate is not just and reasonable. Where these conditions are not met, and a potential video programming provider files a complaint with the Commission, the open video system operator will bear the burden of demonstrating that the contested carriage rate is no greater than a carriage rate that could be imputed to the operator's affiliated video programming. We will require the operator to show that it charges the unaffiliated programmer no more for carriage than it earns from carrying its own affiliates' programming. As noted in Section III.C.1.f.(3), analog and digital channel capacity will be treated separately for this purpose. 115. Commenters suggest several rate regulation approaches. LEC interests generally oppose the establishment of a specific regulatory scheme for open video system carriage rates. They assert that since open video system operators will be new entrants with no market power, market forces will ensure that their carriage rates are just and reasonable. These LECs propose that open video system carriage rates be unregulated except for the adjudication of complaints. The Telephone Joint Commenters argue that: (1) telephone companies entering a particular market will almost always face competition from an incumbent cable operator, (2) such competition constitutes "effective competition" under Title VI of the Communications Act, and therefore (3) the Commission should presume that open video system rates for wholesale video transport are "just and reasonable," just as cable rates are deemed just and reasonable under the "effective competition" test. Some telephone companies suggest that where the market will not constrain rates, aggrieved parties will always be able to complain, and that the Commission will then be able to regulate on a case-by-case basis. The Telephone Joint Commenters also maintain that no rate formula is possible, and that ensuring a just and reasonable rate should be accomplished through a complaint process. They assert that there can be no formula to evaluate the reasonableness of a rate. 116. MCI and others respond that the LEC commenters are focusing on the wrong market. Simply because effective competition exists in the video distribution market, which is why open video system rates to subscribers are not regulated, does not mean competition exists in the video carriage market. These parties argue that an open video system operator's incentives in these two markets are completely reversed: whereas the operator will compete on price in order to attract as many subscribers as possible in the distribution market, it will attempt to exclude as many unaffiliated programming providers as possible in order to exert greater control over the open video service platform in the carriage market. MCI further argues that, since LECs will have market power in the market for video carriage, Title II-like regulation of carriage rates is necessary. 117. State and local governments and regulators generally oppose limiting the regulation of open video system carriage rates to the complaint process. They suggest methods such as "most favored nations", that would require open video system operators to charge unaffiliated providers the same rates as affiliated providers under similar conditions, or cost-based rates. Cable interests urge the Commission not to rely on market forces and the complaint process to ensure that the open video system carriage rates are just and reasonable. NCTA suggests that since open video system operators will control a "bottleneck facility", they will engage in a "price squeeze", setting carriage rates high enough to exclude unaffiliated programmers while charging consumers competitive prices for delivered programming. The state and local government and the cable interests state that telephone companies will use their considerable resources and the complaint process to block unaffiliated programmers' access to the open video system. 118. Some of the cable and programming interests propose cost-based regulation approaches similar to those recommended by state and local governments. Alternatively, Continental and CATA suggest using the leased access model for setting open video system carriage rates. NCTA suggests that the Commission use a benchmark approach similar to that adopted for cable rates following the 1992 Cable Act. Viacom suggests that the reasonableness of a carriage rate for an unaffiliated programming providers be evaluated on the basis of the carriage rates "imputed" from what an open video system operator charges its affiliated programming providers. 119. As the comments reflect, there are a range of methods, varying in complexity, to ensure that a carriage rate is just and reasonable and not unjustly or unreasonably discriminatory. We agree with the Joint Telephone Commenters that regulation of carriage rates is unnecessary to ensure that rates are just and reasonable and that there be no review process prior to the open video system operator implementing its rate structure. A new entrant confronting an incumbent monopolist should not face a regulatory structure that precludes the entrant from responding to circumstances expeditiously. We think it appropriate to review an open video system carriage rate only after a complaint has been filed and that the rate should be presumed just and reasonable when specified conditions are present. We think that this structure will provide flexibility to the open video system operator, an incentive to attract unaffiliated programming providers to the system, and reduce litigation and administrative expenses associated with any rate review process. 120. Cost-based rules are traditional and useful means to determine rates, yet this approach would be significantly burdensome on the Commission and the open video system operator. Cost-based regulation involves tariff, or tariff-like, filings, closely paralleling Title II methods. We do not believe that the cost-based approach is consistent with the structure envisioned by Congress for open video systems. Notably, Section 653(c)(3) prohibits Title II type regulation of open video system rates. Moreover, the process involved in performing such a review is inconsistent with the confined time limits established by Congress for review of certifications and complaints. We disagree with MCI's conclusions and recommendations. MCI's approach would contravene Congress' intent that open video systems not be subject to extensive Title II-like regulation. As to benchmark and leased access approaches, we think that these are suited to the specific statutory schemes to which they apply and that the particular models cannot be transposed to open video systems. The benchmark approach was established by the comparison of competitive and noncompetitive cable systems. No parallel comparison can be made for open video systems, since no markets yet exist. Leased access was designed to offer access to a limited portion of a closed platform, not to provide access to the open platform of an open video system. 121. Two parties suggested specific safe harbor or presumption proposals. The National League of Cities, et al. proposes a safe harbor where carriage rates would be presumed unreasonable unless: (1) at least four unaffiliated video programming providers bought carriage on an open video system; and (2) unaffiliated video programming providers occupied at least one-third of the system's activated channel capacity. By contrast, the Telephone Joint Commenters state that if a presumption is adopted, rates should be presumed reasonable if (1) at least one unaffiliated programming provider contracted for carriage at a price no less than the challenged price; and (2) the open video system operator charges unaffiliated programming providers prices that are equivalent to affiliated programming providers for carriage of similar programming under similar circumstances. The Joint Telephone Commenters stated that this proposal would "minimize litigation regarding the reasonableness of prices for open video service carriage". 122. We think that the presumption approach will best ensure the reasonableness of carriage rates while minimizing the number of complaints. We conclude that the conditions that must be present to presume a just and reasonable rate are reflected in the law's prohibition against the open video system operator dominating the system where demand for carriage exceeds channel capacity. Congress limited the open video system operator and its affiliates in this circumstance to one-third of the activated channel capacity to enhance competition and diversity of programming. Implicit in this limit is the assumption that one-third of the channels will enable the operator and its affiliates to offer a viable programming package to subscribers. Accordingly, we believe that where one-third of the system's capacity is leased to one or more unaffiliated programming providers as a group, there is sufficient reason to believe that the rates charged to those providers is reasonable. However, we also need to ensure that the rate offered to the complaining party is reasonable. Accordingly, we believe it is also necessary to compare the average rate paid by unaffiliated programmers on the system to the complained of rate. The average rate may be "weighted" to account for legitimate variances in rates, such as discounts given for volume, contract length, creditworthiness, or the number of subscribers reached. Where one-third of the system's capacity is leased to one or more unaffiliated programming providers as a group, and the complained of rate is no higher than that of the average rate of all unaffiliated programmers, there is sufficient reason to conclude that the open video service system is accessible and the negotiated carriage rates are just and reasonable. Once the open video system operator demonstrates that the presumption conditions are present, the burden shifts to the complainant to demonstrate that the rate is not just and reasonable. 123. We think that these conclusions also apply when one or more unaffiliated programming providers negotiate and as a group obtain capacity equal to that of the open video system operator and its affiliates if the operator or affiliate occupies less than one-third capacity. In this circumstance, there is greater unaffiliated programmer participation than the law requires. The remaining capacity, which exceeds one-third, is occupied by or available to other program providers. 124. We think that unaffiliated programmers providing service on one-third of the open video system, or in an amount equal to the open video system operator if the operator has less than one-third, is sufficient. With at least one unaffiliated provider on the system, having capacity equal to that of the open video system operator or one-third of the capacity, individual programmers have an alternative to the operator as a source of distribution for their programming. We disagree with the National League of Cities et al.'s proposed requirement of at least four unaffiliated programming providers. This requirement would not adequately demonstrate that carriage rates are just and reasonable. We also disagree with the portion of the Telephone Joint Commenters' proposal that would, in effect, conclusively presume carriage rates to be just and reasonable if only one channel were occupied by an unaffiliated programming provider. The presence of one, or even several programmers, on a diminutive portion of the available capacity is not sufficient to show a just and reasonable rate. 125. When the presumption conditions are not present, and an eligible potential programming provider files a complaint with the Commission that a carriage rate is unjust and unreasonable, we agree with Viacom's recommendation that the most effective way to evaluate whether a rate is just and reasonable is to compare it to an imputed carriage rate associated with the open video system operator or its affiliate. We disagree with the Joint Telephone Commenters that no rate formula is possible. The imputed rate approach provides a legitimate basis to fullfill the law's requirement that the rate be just and reasonable. 126. The imputed rate approach is an application of the Efficient Component Pricing Rule to open video systems. This approach is particularly applicable to circumstances where a new market entrant, the open video system operator, will face competition from an established incumbent, the cable operator. A competitive environment facilitates this approach as market forces limit the ability of the open video system operator to increase its imputed carriage rate. The open video system operator must obtain programming and seek subscribers in a competitive environment, thereby providing a sound basis of comparison to determine whether the unaffiliated rate is just and reasonable. The prices that determine the revenues and costs that make up the imputed carriage rate are effectively set in a competitive market. For example, subscriber revenues are determined in part by the prices that subscribers pay for delivered programming. These prices are determined by the competition for subscribers between open video systems, incumbent cable systems, Direct Broadcast Satellite ("DBS") services, and other video programming distributors. Similarly, programming costs are determined in part by the license fees that open video system operators pay to programming networks. These license fees are determined by the competition for programming between open video systems, incumbent cable systems, DBS services, and other video programming distributors. 127. The imputed rate will reflect what the open video system operator, or its affiliate, "pays" for carriage of its own programming. Use of this approach is appropriate in circumstances where the pricing is applicable to a new market entrant (the open video system operator) that will face competition from an existing incumbent provider (the incumbent cable operator), as opposed to circumstances where the pricing is used to establish a rate for an essential input service that is charged to a competing new entrant by an incumbent provider. With respect to new market entrants, an efficient component pricing model will produce rates that encourage market entry. If the carriage rate to an unaffiliated program provider surpasses what an operator earns from carrying its own programming, the rate can be presumed to exceed a just and reasonable level. An open video system operator's price to its subscribers will be determined by several separate costs components. One general category are those costs related to the creative development and production of programming. A second category are costs associated with packaging various programs for the open video system operator's offering. A third category related to the infrastructure or engineering costs identified with building and maintaining the open video system. Contained in each is a profit allowance attributed to the economic value of each component. When an open video system operator provides only carriage through its infrastructure, however, the programming and packaging flows from the independent program provider, who bears the cost. The open video system operator avoids programming and packaging costs, including profits. These avoided costs should not be reflected in the price charged an independent program provider for carriage. The imputed rate also seeks to recognize the loss of subscribers to the open video system operator's programming package resulting from carrying competing programming. 128. Irrespective of whether the presumption conditions are present or whether the imputed rate is reviewed, a complaint may be filed only by a programming provider that has sought carriage on the open video system. If the open video system operator meets the conditions of the presumption, the burden will fall on the complainant to show that rates are not just and reasonable. Upon the filing of a complaint, the open video system operator will have the burden of proof to demonstrate that its carriage rates are just and reasonable, consistent with the precepts set forth above. 2. Open Video System Carriage Rates Must Not be Unjustly or Unreasonably Discriminatory a. Notice 129. In the Notice, we tentatively concluded that some level of differentiation in rates charged to various categories of video programming providers would not be unjust or unreasonable. We sought comment on the criteria on which such differences could be based. b. Discussion 130. We adopt our tentative conclusion that some level of rate differentiation is permissible, provided that the bases for the differences are not unjust or unreasonable. We therefore agree with those commenters that argue that open video system operators should be given flexibility to offer different carriage rates. For instance, the Telephone Joint Commenters argue that if open video system operators were required to offer carriage at the same per channel rate for all customers, the rate would be too high for programming with a low market value. To prevent this outcome, they argue that open video system operators should be allowed to base rates on legitimate, objective market factors. Such legitimate, objective factors might include: (1) differences in economies of scale or cost savings, such as volume discounts; (2) differences in creditworthiness and financial stability; (3) differences in the number of subscribers reached; and (4) preferential carriage rates for not-for-profit programming providers. Absent such valid reasons, we will prohibit open video system operators from engaging in unreasonable or unjust discrimination against unaffiliated video programming providers. 3. Disclosure of Programming Contracts a. Notice 131. In the Notice, we tentatively concluded that an open video system operator should be required to make its contracts with all video programming providers publicly available. These contracts would disclose the rates charged to programming providers and other terms and conditions of carriage. We proposed this approach in order to give video programming providers a mechanism for determining whether they were being subject to discriminatory rates, terms or conditions of carriage. b. Discussion 132. After further analysis and careful consideration of the comments, we conclude that it is unnecessary and undesirable to require open video system operators to disclose their carriage contracts. In general, we agree with those telephone companies that argue that making carriage contracts public would stifle competition by forcing them to divulge sensitive information. We believe, however, that it is necessary to give video programming providers some basis for beginning negotiations. We disagree with the conclusion of the National League of Cities, et al. that publicly-posted carriage contracts are the only way to ensure reasonable and non- discriminatory rates. We believe that, in most cases, providing preliminary rate estimates will provide a starting point. In order to protect video programming providers from discriminatory conduct, we will require all open video system operators to make preliminary rate estimates available to potential video programming providers. If, however, a complaint is filed, regardless of which party bears the burden of proof, the open video system operator's contracts with video programming providers will be subject to discovery. Any contracts produced during proceedings may be protected pursuant to the Commission's confidentiality rules. E. Applicability of Title VI Provisions 1. Public, Educational and Governmental Access Channels a. Notice 133. Section 653(c)(1)(B) provides that any provision that applies to cable operators under Section 611 shall apply to open video system operators certified by the Commission. Section 653(c)(2) provides that in applying these provisions to open video system operators, the Commission "shall, to the extent possible, impose obligations that are no greater or lesser" than the obligations imposed on cable operators. Paragraph (1)(C), however, establishes, among other things, that open video system operators are not generally subject to the franchising requirements of the Communications Act. 134. Generally, Section 611 permits a local cable franchising authority to require that a cable operator designate channel capacity for public, educational, and governmental ("PEG") use. Under this statutory provision, a franchising authority may require, as part of a local cable franchise, or as part of a cable operator's proposal for a franchise renewal, that channel capacity be designated for PEG use, and that capacity on institutional networks can be designated for educational or governmental use. The franchising authority is allowed to mandate and enforce franchise requirements for services, facilities, or equipment related to PEG use of channel capacity. The franchising authority must permit the cable operator to use excess channel capacity designated for PEG use when such capacity is not being used for such purposes. Except as provided in Section 611(e), the cable operator is not permitted to exercise any editorial control over PEG channels being operated under the franchising authority's control. 135. In the Notice, we sought comment on implementing the 1996 Act's provision applying PEG access obligations to open video system operators, and, in particular, how PEG access obligations should be established in the absence of a franchise requirement. We sought comment on whether an open video system operator should be required to duplicate the PEG access obligations of the incumbent cable operator, either directly, by connecting with the cable operator's PEG channel feeds, or otherwise sharing with the cable operator the capital and operating expenses related to PEG channels, in light of the statute's direction that we should attempt to impose PEG access obligations on open video system operators that are no greater or lesser than those imposed on cable operators. We asked for comment on how PEG access requirements should be established where there is no incumbent cable operator. In addition, we requested comment on whether, if an open video system operator's PEG access obligations must track those of the incumbent cable operator, the open video system operator's obligations would be subject to change if the cable operator and franchising authority negotiate new PEG access obligations pursuant to a cable franchise renewal. We also sought comment on whether and, if so, how the open video system operator should be required to provide the PEG channels to all subscribers of the entire open video system, including those subscribers that do not subscribe to the operator's, or its affiliate's, programming service. 136. With respect to technical considerations, we asked how we should treat an open video system which overlaps several cable franchise jurisdictions, or perhaps covers most of some franchise areas, but only a very small part of others. In addition, we solicited comment on any equipment that is specific to open video systems that local franchising authorities may need to have their programming delivered over open video systems. We also requested comment on how cable operators today comply with different PEG access requirements when a cable system spans more than one franchise area. b. Discussion (1) Establishing Open Video System PEG Obligations through Negotiation 137. The first issue we must address with respect to PEG use is how PEG access obligations should be established for open video systems, including the extent and amount of channel capacity and other resources that open video system operators should be required to devote to PEG use. We conclude that open video system operators should in the first instance be permitted to negotiate their PEG access obligations with the relevant local franchising authority. These negotiations may include the local cable operator if the local franchising authority, the open video system operator and the cable operator so desire. We agree that PEG access obligations as a general matter should focus on the needs and interests of the local community. We believe that, as NCTA and others have noted, the local franchising authority is often in the best position to determine the needs and interests of the local community. For instance, in some areas, the local franchising authority may believe that simple connection to the cable operator's PEG feeds adequately satisfies the local community's needs. In other areas, the local authority may prefer that the open video system operator provide separate or different PEG access channels. We believe that the local communities and the public interest will best be served when the parties discuss and reach an agreement regarding all of the PEG issues that pertain to the particular community. 138. We also note that Assn. of Public Television Stations urges that preferential rates for carriage of PEG channels would be in the public interest and would fall under the just and reasonable category of rate discrimination. We are unaware of any cable operator that charges PEG programmers for access to the PEG channels on its cable system. Therefore, because the PEG access obligations of open video system operators are to the extent possible to be no greater or lesser than those imposed on cable operators, we do not foresee open video system operators charging PEG programmers for PEG use. We recognize that certain costs will be associated with providing PEG channels. These costs may be recovered as an element of the carriage rate. 139. Telephone Joint Commenters contend that open video system operators should only be required to provide PEG access that is comparable to that generally in use in the open video system service area without negotiating with local franchising authorities or mirroring requirements imposed on cable operators. Telephone Joint Commenters urge the Commission to adopt a simple rule for PEG access and to rely on the dispute resolution process to ensure compliance with Section 653. Telephone Joint Commenters further assert that open video system operators should not be required to dedicate entire channels to individual PEG entities, and should be allowed to make PEG access available to qualified users on a first-come, first- served basis, by lottery, or any other reasonable mechanism. 140. We disagree. Although some flexibility with respect to PEG access compliance is appropriate, Section 653(c)(2) requires the Commission to impose PEG access obligations that are, to the extent possible, no greater or lesser than the obligations imposed on cable operators. We believe that it is most appropriate to apply Section 653(c)(2) so that an open video system operator's PEG access obligations generally follow those of the particular franchise area where the open video system is providing service. Negotiation with the local franchising authority will, we believe, accomplish this goal. (2) Open Video System Operator PEG Obligations Satisfied through Connection and Cost Sharing 141. Although we believe that negotiation is the best way to establish the appropriate PEG access obligations for each open video system operator, we recognize that the parties may be unable to reach agreement. We therefore believe it is necessary to have a default mechanism for establishing PEG access obligations. If the open video system operator and the local franchising authority are unable to come to an agreement, we will require the open video system operator to satisfy the same PEG access obligations as the local cable operator. We believe this can be accomplished by connection to the cable operator's PEG access channel feeds and by sharing the costs directly related to supporting PEG access, including costs of PEG equipment and facilities, and equipment necessary to achieve the connection. We also determine that, under these circumstances, in order to comply with the statutory directive that to the extent possible the obligations be no greater or lesser than those imposed on cable operators, the open video system operator must provide the same amount of channel capacity for PEG access as the local cable operator is required to provide. 142. As stated above, we believe that the cable operator and the open video system operator should share all costs that relate to PEG access, including those for PEG services, facilities and equipment. Section 611(c) permits a cable operator to enforce any requirement in any franchise regarding the provision or use of PEG channel capacity, including provisions for services, facilities or equipment which relate to PEG use of channel capacity. Although NYNEX asserts that Section 611 only authorizes local franchising authorities to require dedication of cable channels to PEG use, we believe that Section 611(c), as applied through Section 653(c), imposes a responsibility on open video system operators to contribute toward PEG services, facilities and equipment to the same extent as the local cable operator. Furthermore, in describing open video system operators' PEG access obligations, the legislative history of the 1996 Act refers to "capacity, services, facilities and equipment." 143. National League of Cities, et al. assert that, if local community needs and interests dictate that the incumbent cable operator must provide an institutional network, then any open video system operator in that community must likewise provide an institutional network. As stated above, Section 611 provides that a local franchising authority may require that channel capacity on institutional networks be designated for educational or governmental use. Section 611 does not specifically authorize local franchising authorities to require cable operators to build institutional networks. In applying Section 611 to open video systems under Section 653, the statute requires that we attempt to ensure that the obligations imposed are no greater or lesser than those imposed on cable operators under Section 611. We will therefore not require open video system operators to build institutional networks, although they may, of course, agree to do so. However, if an open video system operator does build an institutional network, the local franchising authority may require that educational and governmental access channels be designated on that network to the extent such channels are designated on the institutional network of the local cable operator. 144. NYNEX asks that open video system operators be allowed to use channel capacity designated for PEG access for other programming when it is not being used for PEG. Section 611(d) directs local franchising authorities to prescribe rules and procedures under which the cable operator is so permitted to use PEG channels. In the interest of keeping open video system operators' PEG access obligations no greater or lesser than those imposed on cable operators, we believe this provision should also apply to open video system operators. Therefore, if, in the absence of an agreement between the open video system operator and the local franchising authority, the open video system operator is meeting its PEG access obligations through matching the obligations of the local cable operator, the open video system operator will be subject to the same rules and procedures regarding alternative use of PEG access channels as those imposed on the cable operator. 145. Several cable and local government commenters believe that requiring connection to the cable operator's facilities would be inequitable or might not satisfy the local community's needs and interests. Many of these parties urge the Commission to require open video system operators to duplicate the PEG channels and facilities provided by the local cable operator. We believe that, absent an agreement to the contrary between the open video system operator, the local franchising authority and/or the cable operator, requiring duplication of the cable operator's facilities may be unnecessary and inefficient. We believe that connection and cost sharing will ease the financial burden on both the cable and open video system operators, without diluting the number and quality of PEG access channels received by the community. We will therefore require cable operators to permit open video system operators to connect with their PEG feeds. We will leave how this connection is accomplished to the discretion of the parties, allowing them to take into consideration the exact physical and technical circumstances of the cable and open video systems involved. If the cable and open video system operators cannot agree on how this connection can best be accomplished, the local franchising authority, which we believe will be in the best position to evaluate the most appropriate method of connection for the local community, may decide. In this context, the local franchising authority may require that the connection take place on government property or on public rights of way. 146. With regard to cost sharing, the costs of connection and maintaining PEG services, facilities and equipment shall be divided equitably between the cable operator and the open video system operator. This shall include capital contributions and any other costs or investments directly relating to or supporting PEG access and required by the cable operator's franchise agreement. Capital expenses incurred prior to the open video system operator's connection shall be subject to cost sharing on a pro-rata basis to the extent such investments have not been fully amortized by the cable operator. As an example of how such cost sharing might be appropriately managed, we note that, in order to manage equitably the PEG access obligations of two cable operators which serve different sections of Brooklyn, New York, but support a single public access organization, New York City has established a capital fund to which each operator contributes based upon the number of subscribers it serves in Brooklyn. 147. Telephone Joint Commenters assert that it is clear that the statutory qualifier "to the extent possible" provides the Commission with latitude to fashion a flexible regulatory approach that recognizes the differences between open video and cable systems. They contend that the Commission must apply Title VI obligations "without effectively reimposing local franchise regulation." Telephone Joint Commenters contend that open video system operators must not be required to negotiate with local franchising authorities or local cable operators as a condition of certification. They also assert that open video system operators should be encouraged to employ flexible and workable solutions to achieve the 1996 Act's PEG requirements, e.g, where technically feasible, narrowcasting. According to Telephone Joint Commenters, if the Commission adopts overly restrictive PEG access rules for open video systems, it may hinder the use of new and innovative approaches to providing PEG access. 148. We believe that our approach of allowing the parties to negotiate PEG access obligations in the first instance satisfies these objectives of the Telephone Joint Commenters, and allows the open video system operator and the local franchising authority to employ flexible, workable solutions to satisfy the operator's PEG access obligations. With regard to Telephone Joint Commenters' assertion that open video system operators must not be required to negotiate, we believe that allowing the open video system operator to connect and to share the cable operator's costs if it cannot reach an agreement does not require open video system operators to negotiate. We do, however, strongly encourage the parties to negotiate an appropriate agreement if at all possible. 149. Minnesota Cities contend that the Commission should authorize local authorities to impose requirements on open video system operators, including PEG access, monetary contributions toward operating costs and capital equipment support, and that open video system operators should be permitted to complain to the Commission if they disagree with the local franchising authority. We do not believe that, absent a mutual agreement, local franchising authorities should be permitted to impose specific PEG access obligations on open video system operators that would exceed those imposed on the local cable operator. In addition, if the parties are unable to negotiate an agreement in the first instance, our default PEG access obligations will apply. We anticipate that these default requirements will minimize the number of disputes over an open video system operator's PEG access obligations if it is unable to reach an agreement with the local franchising authority in the first instance. We recognize, however, that disputes over an open video system operator's PEG access obligations may arise both with and without a negotiated agreement. We believe that, if the open video system operator, the local franchising authority and/or the local cable operator negotiate an agreement regarding PEG access obligations and a dispute arises over the terms of that negotiated agreement, the dispute would be a matter of contractual law and any complaint should be brought in the court of relevant jurisdiction. If the dispute involves an interpretation of our rules regarding the open video system operator's obligations under our default mechanism (i.e., connection and cost sharing), however, we believe that the complaining party should be permitted to file a complaint with the Commission and that our open video system dispute resolution procedures, described below in Section III.G., should apply. 150. Where the open video system operator and the local franchising authority cannot negotiate an agreement regarding PEG access, and the open video system operator is instead satisfying its PEG access obligations by connection and cost sharing with the cable operator's PEG facilities, the open video system operator's PEG access obligations should change to the extent that the cable operator's PEG access obligations change with the franchise renewal. Accordingly, open video system operators should be prepared to adjust their systems to comply with new PEG access obligations as necessary. An open video system operator will not, however, be required to displace other programmers to accommodate PEG channels. Because PEG access channels are expressly exempt from Section 653(b)(1)(A)'s non-discrimination requirement, an open video system operator need not and should not wait until the next three-year reallocation to comply with new PEG access obligations, but should comply with such obligations whenever additional capacity is or becomes available, whether it is due to increased channel capacity or decreased demand for channel capacity. (3) Establishing Open Video System PEG Obligations Where No Local Cable Operator Exists 151. Where there is no local cable operator and the open video system operator and the local franchising authority cannot agree on appropriate PEG access obligations, we agree with NYNEX that the open video system operator should make a reasonable amount of channel capacity available for PEG access. We also believe that the open video system operator's PEG obligations should include reasonable terms and conditions beyond the provision of mere channel capacity, including support of PEG services, facilities and equipment. We believe that what constitutes a reasonable amount of channel capacity as well as other terms and conditions should depend on whether there used to be a cable franchise agreement in that franchise area. If a franchise agreement previously existed in that franchise area, the open video system operator should be required to maintain the previously existing PEG access terms of that franchise agreement. For instance, if a cable system converts to an open video system, the operator will be required to maintain the previously existing terms of its PEG access obligations. 152. Absent a previous cable franchise agreement or an agreement negotiated between the open video system operator and the local franchising authority, however, we believe that what constitutes a reasonable amount of channel capacity and other terms and conditions should be determined by comparison to the franchise agreements for the nearest operating cable system with a commitment to provide PEG access. We anticipate that this comparison will yield PEG access obligations that are appropriate for the community and, to the extent possible, that are no greater or lesser than those that would have been imposed on a cable operator had there been one in that area. (4) Provision of PEG Access Channels to All Subscribers 153. We believe that PEG access channels should be provided to all subscribers to the open video system. Congress determined that PEG access channels should be provided to all subscribers in the cable context by including PEG access channels on the basic tier. The provision of PEG channels to all open video system subscribers is therefore important to ensure that the PEG access obligations imposed on open video system operators are "no greater or lesser" than those imposed on cable operators. Commenters have various suggestions for how to assure that all open video system subscribers receive the PEG access channels, including requiring that operators establish the equivalent of a basic programming tier. We, however, agree with NYNEX that, while PEG, as well as must-carry, compliance is "an inescapable part of an open video system operator's basic responsibility for allocating channel capacity," open video system operators should have the flexibility to determine how all subscribers will receive PEG access channels, i.e., whether to provide a basic programming tier similar to that provided by cable systems, or to require unaffiliated video programming providers to offer at their expense mandatory services such as PEG access channels to their subscribers. We conclude that the open video system operator is responsible for ensuring that all subscribers receive PEG channels, but that the operator has the discretion to decide how best to accomplish this, given its particular technical configuration and any other considerations. This flexibility will permit the operator to provide PEG access channels in an efficient manner while not diminishing the provision of the PEG access channels to the community. (5) Open Video System PEG Obligations Where System Overlaps with More than One Franchise Area 154. We also conclude that open video system operators should be subject to PEG access requirements for every franchise area with which its system overlaps. We believe that, despite open video system operators not being subject to franchise requirements, pursuant to Section 653(c)(1)(C), it is appropriate to require open video system operators to comply with these franchise by franchise requirements so that the obligations imposed on the open video system operator with respect to PEG access are "no greater or lesser" than those imposed on cable operators, as required by Section 653(c)(2)(A) of the Communications Act. 155. In addition, from the technical standpoint, as many commenters point out, cable operators whose systems overlap with more than one franchise area are required to configure their systems to comply with the various PEG access obligations of the multiple franchise areas, and open video system operators should be subject to no less. We will require open video system operators to satisfy the PEG access obligations for all franchise areas with which their systems overlap. (6) Technical Issues 156. We believe that it is unnecessary for the Commission to decide many of the technical issues raised by commenters, as we are permitting open video system operators to negotiate their PEG access obligations in the first instance, including technical requirements. If, however, an agreement cannot be reached, some technical issues regarding connection with the cable operator's PEG facilities may remain to be resolved on a case-by-case basis. 2. Must-Carry and Retransmission Consent a. Notice 157. Section 653(c)(1) provides that any provision that applies to cable operators under Sections 614 and 615 of Title VI, and Section 325 of Title III, shall apply to open video system operators certified by the Commission. Section 653(c)(2)(A) provides that, in applying these provisions to open video system operators, the Commission "shall, to the extent possible, impose obligations that are no greater or lesser" than the obligations imposed on cable operators. 158. Sections 614 and 615 set forth a cable operator's "must-carry" obligations regarding local commercial and local noncommercial educational television signals, respectively. Cable operators are required to set aside a portion of their capacity for carriage of these local broadcast stations. Section 325 sets forth a cable operator's retransmission consent obligations, generally prohibiting cable operators and other multichannel video programming distributors from carrying commercial broadcast stations without obtaining the station's consent. Local commercial stations seeking carriage must choose to proceed under the must-carry or retransmission consent requirements. Under must-carry, a station is entitled to insist on carriage in its local market area. Under retransmission consent, the station and the multichannel video programming distributor negotiate the terms of a carriage arrangement and the station is permitted to receive compensation in return for carriage. Because Section 325 applies to television broadcast stations in general, non-local commercial stations may also be carried by a cable system pursuant to a retransmission consent agreement. 159. In the Notice, we sought comment on how the must-carry and retransmission consent regulations for cable operators should be applied to open video system operators. Specifically, we sought comment on any technological or administrative differences between cable systems and open video systems that might require the adoption of different obligations. In addition, we asked whether and how open video system operators should be responsible for ensuring that every subscriber receives must-carry channels. We also asked for comment regarding how cable operators whose systems span several relevant regions currently comply with must-carry and retransmission consent requirements, and whether similarly situated open video system operators should be required to act in similar fashion. b. Discussion 160. Based upon the comments in the record, we do not believe it is necessary to change our must-carry and retransmission consent rules significantly in order to apply them to open video systems. Indeed, several commenters suggested that the Commission simply apply the present must-carry and retransmission consent rules directly to open video system operators. In light of this evidence, we largely agree that "there are no public policy reasons to justify treating an open video system operator differently from a cable [operator] in the same local market for purposes of broadcast signal carriage." 161. MFS Communications suggests that the manner in which the cable must-carry and retransmission consent rules apply to open video system operators will depend to some extent on the configuration of future networks and the type of programming services offered over these networks. We find, however, that at this time the public interest will best be served by application of the cable must-carry and retransmission consent rules to open video systems, even though future system configurations may require modification of our regulations. If our regulations later become inadequate for open video system operators, we intend to promptly address the problem. For now, we are guided by Congress' directive that we impose obligations that are "no greater or lesser" than the obligations currently imposed on cable operators. We will, therefore, apply the existing cable must-carry and retransmission consent rules to open video system operators. (1) Must-Carry 162. Pursuant to Section 614(b)(7) and 615(h), the operator of a cable system is required to ensure that signals carried in fulfillment of the must-carry requirements are provided to every subscriber of the system. Sections 614 and 615 also generally state the number of must-carry stations a cable operator is required to provide. The Assn. of Local Television Stations and NAB suggest that the Commission refrain from prescribing any requirements as to the number of must-carry stations to be carried on an open video system. We believe, however, that in order to apply obligations that are no greater or lesser than those imposed on cable operators, we must also apply these requirements to open video system operators. Consequently, we find that the operator of an open video system must ensure that every subscriber on the open video system receives all appropriate must-carry channels carried in accordance with our rules. An open video system operator will be required to fulfill this obligation regardless of whether or not individual subscribers on its system subscribe to the open video system operator's programming package. We do not find it necessary to prescribe the specific methods to be used by an open video system operator to comply with these requirements. We also recognize that certain costs will be associated with providing must-carry channels. These costs may be recovered as an element of the carriage rate. 163. We will not require open video system operators to use a basic tier. Section 653 states that Section 623 generally will not apply to open video system operators. As a result, open video system operators are not subject to Title VI rate regulation and are not subject to Section 623's requirement that a basic tier be provided for each subscriber on the system. Nevertheless, several commenters have urged the use of a basic tier for signals carried in fulfillment of the must-carry requirements. We recognize that cable operators have complied with our must-carry and rate regulation rules through the use of a basic tier, but Section 623's basic tier requirement does not apply to open video systems. We will, therefore, allow open video system operators to comply with our must-carry rules without necessarily using a basic tier. We believe that through the development of different system configurations, open video system operators may discover alternate methods to ensure that subscribers receive all appropriate must- carry channels. We also believe that by simply requiring compliance with our must-carry rules, which provide that subscribers must receive all appropriate must-carry channels, we are imposing obligations that are no greater or lesser than those imposed on cable operators. 164. As a related matter, we agree with the State of New Jersey Ratepayer Advocate that subscribers must have access to any customer premises equipment necessary to receive must- carry and PEG access channels. Consistent with our conclusion that open video system operators be permitted to decide how best to meet the requirement that all subscribers receive must-carry and PEG access channels, we leave the decision of how to offer any necessary customer premises equipment to the open video system operator, including whether the open video system operator will offer it directly or require video programming providers to provide the equipment. 165. As ABC states, channel identity will also be just as important on open video systems as it is on cable systems, and as video options proliferate in the future, channel numbers will come to be thought of as "landmarks" on the various delivery systems, and thus will become ever more important. Most commenters agree that our must-carry cable service regulations may be applied in a similar manner to open video systems. We note that the statute requires the Commission to impose the cable service must-carry regulations to open video system operators "to the extent possible." Congress recognized that certain allowances may have to be made to adapt our must-carry rules to the technology and architecture of open video systems, much of which is evolving. An open video system operator therefore will be required to implement the channel positioning requirements contained in the must-carry rules in a manner as similar as possible to that of a cable operator, including for example, identifying broadcast stations on the same channels as their over-the-air channel numbers, or on a channel mutually agreed upon by the station and the operator. We agree with the Assn. of Public Television Stations that, if a type of menu or gateway method is employed instead of traditional channels, the Commission may need to establish specific rules at a later date that protect the interests reflected in the channel positioning provisions. 166. Consistent with the statutory requirement of comparable treatment, open video systems that span multiple television markets will be subject to the same must-carry and retransmission consent rules as cable systems that span multiple markets. Generally, where a cable system spans multiple television markets, our rules give a cable operator a choice: the operator may provide all eligible broadcast stations to all subscribers, or it may configure its facility so that subscribers only receive the eligible broadcast stations in their market. While one commenter suggested that we change our rules in light of the potentially larger size of open video systems, we do not believe that there are sufficient technical or size differences between open video systems and large cable systems to warrant application of significantly different must- carry rules. We believe that application of similar must-carry rules in every relevant region served by a cable system or an open video system, will impose obligations on open video system operators that are "no greater or lesser" than those imposed on cable operators. (2) Retransmission Consent 167. We find that our existing retransmission consent rules should also be applied to the distribution of programming over open video systems. These rules generally prohibit MVPDs from retransmitting the signal of a commercial broadcasting station without the station's express authority. In the context of retransmission over a cable system, our rules clearly apply to the cable operator who is the only entity that distributes multiple channels of video programming over the cable system. Open video systems are designed to allow the operator and any video programming providers on the system to distribute the video programming they select. We believe that all such providers on a platform of this type that provide more than one channel of video programming qualify as MVPDs. Section 602(13) defines an MVPD as "a person such as, but not limited to, a cable operator, a multichannel multipoint distribution service, a direct broadcast satellite service, or a television receive-only satellite program distributor, who makes available for purchase, by subscribers or customers, multiple channels of video programming." Section 76.1000(e) of the Commission's rules defines an MVPD as "an entity engaged in the business of making available for purchase, by subscribers or customers, multiple channels of video programming." Therefore, our retransmission consent rules will apply to any video programming provider on an open video system that provides more than one channel of video programming. Given the inherent differences between cable systems and open video systems, we believe that the application of our retransmission consent rules in this fashion will impose obligations that are no greater or lesser than those imposed on cable operators. 168. As we stated, the open video system operator is charged with the responsibility for assuring that its system meets the requirements of our must-carry rules. We believe that it is appropriate as a matter of administrative efficiency that open video system operators receive all must-carry/retransmission consent election statements that broadcast stations are required to send under our retransmission consent rules. However, open video system operators will not be responsible for making retransmission consent arrangements for all programming carried on the system. We agree with U S West's recommendation that once retransmission consent has been elected, broadcast stations should have to negotiate agreements with individual video programming providers on the open video system. We require, therefore, that open video system operators promptly make all must-carry/ retransmission consent election statements received available to the programming providers on their systems. 169. Section 325(b)(3)(B) provides in relevant part: "If there is more than one cable system which services the same geographic area, a station's election shall apply to all such cable systems." Tele-TV argues that Section 325(b)(3)(B) should be applied to open video systems. However, we agree with NAB that the potential size difference between open video systems and cable systems here warrants the adoption of different regulations. As we have previously stated, Congress recognized that differences in the technology and architecture of open video systems might require that the Commission not adopt identical regulations but rather, adopt regulations that "to the extent possible" impose obligations that are no greater or lesser than those imposed on cable operators. Large open video systems may serve numerous geographic areas that overlap multiple cable franchise areas. We believe that this size difference poses the potential that one open video system may overlap several cable systems that do not have overlapping franchise areas. Our current retransmission consent rules do not require that a broadcaster make the same election for cable systems serving franchise areas that do not overlap. As a result, it may not be possible for broadcasters to make the same election on overlapping cable and open video systems. Therefore, we will not require that broadcasters apply the same election to all cable and open video systems serving the same geographic area. 170. Finally, we note that the Commission does not intend to modify application of the cable compulsory copyright license or to affect existing or future programming licenses between video programmers and broadcasters when applying the cable must-carry and retransmission consent rules to open video systems. The Commissioner of Baseball, the MPAA and the NBA, et al. expressed concern regarding the effect of our retransmission consent rules on cable compulsory licenses in the open video system context. However, we have previously recognized in the cable context that the signal retransmission rights created for broadcasters under Section 325(b)(1) are distinct from the interest a copyright holder may have in the programming contained in a particular signal. Section 325(b)(1) creates a separate right in the broadcaster's signal that may be applied against cable systems or other MVPDs. The cable compulsory license and existing and future programming licenses between video programmers and broadcasters all serve to protect the copyright holder's copyright interest in programming, while also allowing for distribution of such programming. Section 325(b)(6) recognizes the distinction between these rights and makes clear that the retransmission consent rights created under this section will not modify application of the cable compulsory license or affect existing or future programming licenses between video programmers and broadcasters in the cable context. We believe that Section 325(b)(6) should have the same effect in the context of open video systems. This will clearly impose obligations that are no greater or lesser than those imposed through cable service regulation. 3. Program Access a. Notice 171. Section 653(c)(1)(A) provides that, among other things, Section 628 of the Communications Act and the Commission's rules thereunder, which govern the development of competition and diversity in video programming distribution ("program access") in the cable television context shall apply to any operator of an open video system. Moreover, the 1996 Act amended Section 628 to apply the provisions under that section to a common carrier or its affiliate that provides video programming by any means directly to subscribers. 172. In enacting Section 628 as part of the 1992 Cable Act, Congress sought to promote competitive entry of programming distributors competing with cable operators by restricting certain conduct of cable operators and satellite programmers in which a cable operator has an attributable interest. This Congressional policy is embodied in Section 628 and the Commission's program access rules. In general, the program access rules, as amended pursuant to the 1996 Act, prohibit cable operators, common carriers and their affiliates that provide video programming by any means directly to subscribers, satellite cable programming vendors in which a cable operator or such a common carrier or its affiliate has an attributable interest ("vertically integrated satellite programmers"), and satellite broadcast programming vendors from engaging in unfair methods of competition. The rules also limit certain specified discriminatory conduct, including the use of exclusive contracts. In addition, under the program carriage provision of the Communications Act, competing distributors have standing to challenge exclusive arrangements that are the result of coercive activity. 173. In the Notice, we sought comment on applying the program access rules to open video system operators, as required under the 1996 Act. b. Discussion 174. Based on the comments received and our reading of the statute, we believe that four general issues arise in the context of applying the program access rules to open video systems. The first concerns the extent to which the program access regime restricts the activities of open video system operators. The second pertains to how the program access regime restricts the conduct of open video system video programming providers. The third issue concerns the extent to which the benefits of the program access statute and rules apply to open video system video programming providers. The fourth issue raised by commenters involves certain expansions of our program access rules. (1) Applicability of Program Access Rules to Open Video System Operators and Their Affiliates 175. Section 653(c)(1)(A) applies the program access provisions to open video system operators. Given this language, we conclude that the program access restrictions shall apply to the conduct of open video system operators in the same manner as they are currently applied to cable operators and common carriers or their affiliates that provide video programming directly to subscribers. 176. Generally, we see two different ways to read Section 628 to apply to open video system operators. First, we could substitute "open video system" for "cable" throughout Section 628 and create parallel provisions for cable operators and open video system operators. Such an application of Section 628 to open video systems would restrict, for example, open video system operators from entering into exclusive agreements with satellite programming vendors in which an open video system operator has an attributable interest, but would permit open video system operators to enter into exclusive agreements with satellite programming vendors in which a cable operator has an attributable interest. Alternatively, we could add "open video system operator" to the statutory language each time cable operator is referenced, yielding one provision for both types of operators. Under this scenario, open video system operators and cable operators would be restricted from entering into exclusive arrangements with each others' vertically integrated programming vendors. We do not believe that the latter type of exclusive contract is the type with which Congress was concerned. 177. As discussed below, one of Congress' primary concerns underlying the program access provisions was that cable operators (and now open video system operators) may use their ownership of or vertical integration with satellite programmers to exclude competitors from access to their programming. This concern does not exist with an open video system operator vis-a-vis a programmer vertically integrated with a cable operator. Nor does it exist with a cable operator vis-a-vis a satellite programmer in which an open video system operator has an attributable interest. Therefore, we believe it is most appropriate to apply Section 628 to open video system operators by creating parallel provisions for cable operators and open video system operators. Accordingly, open video system operators may, subject to Section 628(b)'s general prohibitions, enter into exclusive contracts with satellite programmers in which a cable operator has an attributable interest, and, likewise, cable operators may, subject to Section 628(b), enter into exclusive contracts with satellite programmers in which an open video system operator has an attributable interest. We believe that the application of the program access rules to open video systems as described will, in addition to following the plain language of the statute, create a level playing field between open video system operators and cable system operators by permitting comparable access to vertically integrated satellite programming. 178. Specifically, the conduct of an open video system operator shall be subject to Section 628(b), which prohibits unfair methods of competition and unfair or deceptive acts or practices. In addition, the program access provisions which preclude certain specific conduct, including undue or improper influence, and discrimination in prices, terms or conditions, shall apply to open video system operators as well. 179. Sections 628(c)(2)(C) and (D) as enacted by the 1992 Cable Act restrict cable operators from entering into exclusive agreements with programmers in which a cable operator has an attributable interest. We shall apply these limitations on exclusive contracts to open video system operators so that open video system operators will be generally restricted from entering into exclusive contracts with programmers in which an open video system operator has an attributable interest, not in which a cable operator has an attributable interest. Thus, any practice, understanding, arrangement or activity, including exclusive contracts, between an open video system operator and a satellite programmer vertically integrated with an open video system operator that prevents an MVPD from obtaining such satellite programming in an area unserved by a cable operator as of the date of enactment of the 1992 Cable Act is per se unlawful. Exclusive contracts between an open video system operator and a satellite programmer vertically integrated with an open video system operator which relate to an area served by cable as of the date of enactment of the 1992 Cable Act are prohibited unless the Commission first determines that such a contract is in the public interest in accordance with the factors set forth in Section 628(c)(2)(D). Moreover, to implement fully the intent of Section 653, Section 628 and our rules shall apply to any affiliate established by an open video system operator to distribute programming on its system. 180. In applying the program access restrictions to open video systems, we also believe it is reasonable to include, within the definition of satellite cable programming, video programming which is satellite delivered and which is primarily intended for the direct receipt by open video system operators for their retransmission to open video system subscribers. Section 628 refers to satellite cable programming, and the definition of satellite cable programming is video programming, other than satellite broadcast programming, which is satellite delivered and which is primarily intended for the direct receipt by cable operators for their retransmission to cable subscribers. We believe, however, that, in applying the provisions of Section 628 to open video system operators, Congress intended to include programming primarily intended for carriage on open video systems. We will therefore insert a note in Section 76.1000(h) of our rules indicating that satellite open video system programming is included within the definition of satellite cable programming. (2) Program Access Restrictions on Open Video System Programming Providers 181. The programming relationships that are likely to occur with respect to open video systems raise additional program access issues that are not raised by the programming relationships on cable systems. In the cable context, an agreement to carry programming is generally between a programmer and a cable operator. Restricting the activities of cable operators and satellite programmers vertically integrated with cable operators therefore addresses Congress' concern over cable operator control over video programming. In the open video system context, however, there may be many programmers providing packages of programming directly to subscribers. An agreement to carry programming may be between a programmer and an open video system operator or between a programmer that produces programming and one that will distribute it directly to subscribers through an open video system. Moreover, a video programmer may provide its own programming directly to subscribers by purchasing channel capacity on an open video system platform. 182. Rainbow claims that Congress limited the applicability of the program access rules to operators of open video systems, and that nothing in the 1996 Act suggests that programmers must provide their services to competing users of an open video system. We believe, however, that, in order to effectuate the purposes of the program access statute in the open video context, as we believe Congress intended us to do by applying Section 628 to open video systems, open video system programming providers should be subject to the program access restrictions to the extent described below. 183. In Implementation of Cable Television Consumer Protection and Competition Act of 1992: Development of Competition and Diversity in Video Programming Distribution and Carriage, Memorandum Opinion and Order on Reconsideration of the First Report and Order in MM Docket No. 92-265 ("DBS Order"), the Commission determined that, in the DBS context, in order for an exclusive contract to be prohibited under Section 628(c) of the Communications Act and Section 76.1002(c) of our rules, the contract must be between a cable operator and a vertically integrated satellite programmer. In the DBS Order, the Commission denied a petition to include exclusive contracts between a DBS operator and two vertically integrated satellite cable programmers (that were both unaffiliated with the DBS operator) within the per se prohibition of Section 628(c)(2)(C). The Commission's denial of the petition was based on the legislative history of the 1992 Cable Act, which was focused on concerns over exclusive arrangements of cable operators, the language of Section 628(c), and the fact that the exclusivity arrangements were limited to a single orbital slot. The Commission noted, however, that in declining to broaden its rules, it did not preclude the petitioner or any other aggrieved party from seeking relief from such contracts through other appropriate provisions of Section 628. 184. Thus, under the DBS Order, a vertically integrated satellite programmer is not generally restricted from entering into an exclusive contract with an MVPD that is not affiliated with a cable operator, although such a contract remains subject to case-by-case review under Section 628(b) of the Communications Act and Section 76.1001 of the Commission's rules. Consistent with the DBS Order, in the context of open video systems, a vertically integrated satellite programmer will not be per se precluded from selling its programming exclusively to one MVPD on an open video system, as long as that MVPD is not affiliated with the same type of operator (i.e., a cable operator, a common carrier providing video programming directly to subscribers or an open video system operator) as the vertically integrated satellite programmer. Similarly, cable operators, common carriers providing video programming directly to subscribers and open video system operators are not generally restricted from entering into exclusive contracts with non-vertically integrated programmers. Nonetheless, as we found in the DBS Order, our finding herein does not preclude an aggrieved party from seeking relief in an appropriate case under other provisions of Section 628 and the Commission's rules thereunder. 185. Moreover, while not explicitly discussed in the DBS Order, we also do not intend to foreclose challenges to exclusive contracts between vertically integrated satellite programmers and MVPDs, including unaffiliated MVPDs, on open video systems under Section 628(c)(2)(B), which prohibits, with limited exceptions, discrimination among competing MVPDs by a vertically integrated satellite programmer. In particular, as we found in the First Report and Order in MM Docket No. 92-265, Section 628(c)(2)(B) covers non-price discrimination such as an unreasonable refusal to deal, including one which might result from an exclusive contract. We also determined that the reasonableness of such refusals to deal will ordinarily be judged using applicable antitrust principles. 186. The above discussion does not, however, resolve the applicability of the program access rules to exclusive arrangements between satellite programmers in which a cable operator has an attributable interest and open video system programming providers in which a cable operator has an attributable interest. We believe that, in order to further the purposes of the program access rules and statute, we must extend the current program access rules to apply to these arrangements in the open video system context. As the Commission stated in the First Report and Order in MM Docket No. 92-265 and in the DBS Order, we believe that Section 628(b) authorizes the Commission to adopt additional rules to accomplish the program access statutory objectives "should additional types of conduct emerge as barriers to competition and obstacles to the broader distribution of satellite cable and broadcast programming." In addition, we note that Section 628(c), the statutory provision under which the current regulations were adopted, is entitled "Minimum Contents of Regulations," which we infer to mean that Congress did not intend to limit the Commission to adopting rules only as set forth in that statutory provision. 187. As stated above and in the DBS Order, in order for an exclusive contract to be prohibited under Sections 628(c)(2)(C) and 628(c)(2)(D) of the Communications Act and Section 76.1002(c) of the Commission's rules, the exclusive agreement must involve a cable operator (or, following the 1996 Act, a common carrier or its affiliate that provides video programming directly to subscribers, or an open video system operator). We will apply the program access rules under Section 628 to exclusive contracts between a satellite programmer in which a cable operator has an attributable interest ("cable-affiliated satellite programmer") and an open video system video programming provider in which a cable operator has an attributable interest ("cable- affiliated open video system programming provider"). Specifically, such exclusive contracts will be prohibited unless the contract pertains to an area served by a cable operator as of the date of the enactment of the 1992 Cable Act and the Commission first determines that the exclusive arrangement is in the public interest under the factors listed in Section 628(c)(4). Two types of cable-affiliated satellite programmer/cable-affiliated open video system programming provider relationships will be affected by this restriction on exclusive contracts. First, this rule will preclude a cable-affiliated satellite programmer from entering into an exclusive contract to provide its own programming to a cable-affiliated open video system programming provider with which the programmer is affiliated. For example, assume one of the open video system programming providers offering services on the open video system is Red Provider, which provides national and regional video programming to subscribers of cable and other multichannel video delivery systems. Red Provider is a wholly-owned subsidiary of Cablecolor, a large national cable company. Included among Red Provider's various programming services is the Yellow Channel. Under the rules adopted herein, absent prior Commission approval, the Yellow Channel may not enter into an exclusive contract with Red Provider, whereby the Yellow Channel agrees that Red Provider is the only open video system programming provider to which the Yellow Channel will be made available. Second, the new rule will preclude, absent prior Commission approval, a cable-affiliated satellite programmer from entering into an exclusive contract to provide its programming to an open video system programming provider that is affiliated with another cable operator. Using our example above, the Yellow Channel is not only precluded from entering into an exclusive agreement with Red Provider, but also may not enter into an exclusive agreement with the View Channel, a programming service that is an affiliate of another cable operator, Cableview. 188. We believe that subjecting these types of exclusive contracts to prior Commission review is necessary to fulfill the objectives of the program access rules in the open video system context. The program access requirements have at their heart the objective of releasing programming to existing or potential competitors of traditional cable systems so that the public may benefit from the development of competitive distributors. This concern remains when the cable operator (or its affiliate) is providing programming as a video programming provider on an open video system. 189. In enacting the program access provisions of the 1992 Cable Act, Congress expressed its concern that potential competitors to incumbent cable operators often face unfair hurdles when attempting to gain access to the programming they need in order to provide a viable and competitive multichannel alternative to the American public. The legislative history of Section 628 demonstrates Congress' deep concern with the cable industry's "stranglehold" over programming through exclusivity and the market power abuses exercised by cable operators and their affiliated programming suppliers that deny programming to non-cable technologies. Cable operators continue to have significant interests in programming, controlling 51% of all national satellite delivered programming services. Of the top 15 services by prime time rating, 11 are vertically integrated with cable operators. Moreover, while there has been competitive entry over the last few years, cable operators still serve about 91% of MVPD subscribers nationwide. At the same time, there has been significant consolidation in the cable industry, with the industry going from a relatively unconcentrated industry to one that can be characterized as well into the moderately concentrated range. For example, from 1990 to 1995, assuming consummation of transactions announced at the time the 1995 Competition Report was released, the percentage of subscribers nationwide served by the top ten multiple system operators ("MSOs") increased from 61.6% to almost 80%, and the percentage of subscribers nationwide served by the top five MSOs increased from less than 49% to more 66.6%. This increase in concentration is significant in this context both because it demonstrates an increase in the buying power of the major MSOs and because it facilitates the ability of MSOs to coordinate their conduct. 190. Our primary concern is that exclusive arrangements among cable-affiliated open video system programmers and cable-affiliated satellite programmers may serve to impede development of open video systems as a viable competitor to cable to the extent that popular programming services are denied to open video system operators or unaffiliated open video system programmers that seek to package such programming for distribution to subscribers. This is particularly so where the cable affiliated open video system programming provider has interests in a significant number of programming services, or the cable affiliated open video system programming provider is able to obtain exclusive contracts from a number of different cable affiliated satellite programmers, such that access to a substantial number of services is foreclosed. 191. As Congress recognized in enacting the program access provisions of the 1992 Cable Act, cable operators have the incentive to impede the development of other technologies into a robust competitor to incumbent cable systems. We believe that, in applying the program access provisions to open video systems in the 1996 Act, Congress recognized that cable operators may use their control over programming to further this objective with respect to open video systems as well. One way of doing so would be to employ exclusive arrangements between cable-affiliated satellite programmers and cable-affiliated open video system programming providers in order to foreclose access to such programming by open video system operators and unaffiliated open video system programming providers. 192. The record demonstrates that, under such circumstances, other open video system programming providers, including the open video system operator, might be unable to obtain access to sufficient programming to provide a viable service. This could lead to a situation where unaffiliated programmers decline to seek access on the platform or where the open video system operator might decide against entering the video programming distribution market through the open video system model or might decide to choose to provide traditional cable service rather than open video system, thus scuttling Congress' goal in establishing open video system as a facilities-based competitor. Such concerns are reflected in the record. For example, the telephone industry's perception is that the success of the telephone company-affiliated open video system package may well depend on the telephone companies' ability to obtain popular cable- affiliated programming. Thus the industry may choose not to develop open video system platforms if it cannot be assured of access to a reasonable amount of cable-affiliated programming. 193. In adopting this rule, we recognize, as did Congress in enacting the program access provisions, that exclusive contracts can often have pro-competitive effects under certain market conditions. However, strategic vertical restraints can also deter entry into markets for the distribution of multichannel video programming. Accordingly, the Commission's program access policies seek to balance the likely competitive harm to consumers created by a particular vertical arrangement against its likely efficiency benefits. In the context of open video systems, we believe that, unless the Commission first determines that exclusive arrangements for satellite programming which favor cable-affiliated video programming providers are in the public interest under Section 628(c)(4), the potential for competitive harm from such contracts requires their prohibition. In reaching this conclusion, we have considered the record evidence of competitive harms that might flow from such arrangements, as well as Rainbow's arguments that such contracts can have pro-competitive benefits. However, in light of the risk of competitive harm from such agreements, we believe it is appropriate to be guided by the balance struck by the 1992 Cable Act generally with respect to exclusive contracts which favor cable operators. Accordingly, we conclude that such arrangements should be prohibited unless the contract pertains to an area served by a cable operator as of the date of the enactment of the 1992 Cable Act and the Commission first determines that it is in the public interest in accordance with the factors set forth in Section 628(c)(4). 194. Similarly, as stated above, a satellite programmer may provide its own programming directly to subscribers by purchasing channel capacity on an open video system platform. It is therefore possible for a programmer vertically integrated with a cable operator, a common carrier or its affiliate that provides video programming directly to subscribers, or a different open video system operator, to purchase channel capacity, to provide its own programming directly to subscribers and to refuse to sell the programming it owns to another MVPD on the open video system. Such a refusal to sell would appear to be unreasonable because it discriminates against a class of distributors, i.e., open video system programming providers. Furthermore, this type of refusal to sell would result in the same situation which we have deemed contrary to the purposes of Section 628 when achieved through an exclusive contract, i.e., restricting competitive access to vertically integrated satellite cable programming to a vertically integrated entity. We believe this would consequently be actionable under Section 628(c). (3) Benefits of Program Access Rules for Open Video System Programming Providers 195. As noted above, commenters in this proceeding have raised the issue of the extent to which video programming providers on open video systems are MVPDs, and therefore entitled to the benefits of the program access rules. Rainbow's claim, referenced above, that Congress limited the applicability of the program access rules to operators of open video systems, and that nothing in the 1996 Act suggests that programmers must provide their services to competing users of an open video system, would seem to indicate that Rainbow does not believe that video programming providers on open video systems are entitled to the benefits of the program access statute. Although Rainbow argues that it will not be able to compete with other programmers on an open video system platform if Rainbow is forced to sell its programming to other MVPDs, we believe that the statute and the program access rules should not be interpreted as Rainbow urges. 196. As discussed above in Section III.E.2., open video system operators and video programming providers that provide more than one channel of programming on an open video system are MVPDs. We will not create an exception to our rules that would exclude open video system operators or open video system programming providers from the benefits of our program access rules. Accordingly, we will add a note to the definition of MVPD contained in Section 76.1000(e) of our rules to indicate that video programming providers on open video systems that provide more than one channel of programming to subscribers are MVPDs. (4) Expansion of the Program Access Rules 197. In addition, we decline to expand the program access rules as certain other commenters have requested. First, we decline to adopt NYNEX's assertion that open video system operators must have the right to insist that those using its system have the ability to obtain all programming on comparable, nondiscriminatory terms. As discussed above, for example, we do not view the exclusivity provisions of the program access rules as prohibiting an open video system programming provider that is unaffiliated with a cable operator, a common carrier that provides video programming directly to subscribers, or an open video system operator from entering into an exclusive programming contract with a vertically integrated satellite programmer, although such a contract may be challenged under other appropriate provisions of the program access rules as unfair competition and discriminatory conduct. We also decline to extend the program access requirements for open video systems, as NYNEX and Tele-TV have requested, beyond vertically integrated programming and satellite delivered programming. 198. Tele-TV also asks the Commission to clarify that national and regional programming that is delivered by satellite anywhere in the country is satellite programming for purposes of the program access rules. In this proceeding we are addressing program access issues only as they relate to open video systems and not the rules' general applicability. We therefore do not believe that this proceeding is the appropriate forum to decide this issue and decline to address it as TELE-TV requests. We may consider this request separately in a future proceeding. 4. Sports Exclusivity, Network Non-Duplication and Syndicated Exclusivity a. Notice 199. Section 653(b)(1)(D) directs the Commission to prescribe regulations that "extend to the distribution of video programming over open video systems the Commission's regulations concerning sports exclusivity (47 C.F.R. 76.67), network non-duplication (47 C.F.R. 76.92 et seq.), and syndicated exclusivity (47 C.F.R. 76.151 et seq.)." These regulations allow the holders of certain exclusive rights to prohibit cable systems from carrying various sports, network and syndicated programming within specified geographic zones. 200. In the Notice, we sought comment on how these regulations should be implemented in the context of open video systems. Specifically, we sought comment on how they should be applied to open video systems that cross multiple geographic zones or communities. We also sought comment on whether the open video system operator, individual video programming providers, or some other entity should be responsible for blocking programming and enforcing these provisions. b. Discussion 201. We believe that we can directly apply our existing cable regulations regarding sports exclusivity, syndicated exclusivity and network non-duplication to open video systems. First, we do not believe that open video systems that span multiple geographic zones or communities should be treated any differently than similar cable systems. The record evidence indicates that large cable systems are able to comply with these provisions, and no commenter has provided any reason why open video systems should be required to comply with different regulations. 202. Second, we find that open video system operators should be responsible for compliance with these rules. We received various opinions as to which entity in the open video system context should be responsible for compliance. Among those opposed to holding open video system operators responsible were the Telephone Joint Commenters who argued that video programming providers should be held legally responsible for compliance as to the individual video programming that they select. We do not believe, however, that the fact that a video programmer has selected certain programming alone justifies holding that programmer responsible for compliance with our exclusivity rules. 203. We note that exclusive and non-duplication rights are protected under our rules by a prohibition against carriage (i.e. retransmission to subscribers) of affected signals to community units located within relevant geographic zones. In the cable context, the cable system operator selects and controls the retransmission of all signals over its system. It is, as a practical matter, the only entity capable of deleting the affected signals when necessary. In the open video system context, open video system operators will not select all of the programming that is retransmitted to subscribers. However, we believe that, like cable operators, open video system operators will have ultimate control over the retransmission to subscribers of signals over the system. Therefore, we will hold open video system operators responsible for compliance with our sports exclusivity, network non-duplication, and syndicated exclusivity rules. 204. In all cases, we find that television stations must notify the open video system operator of the exclusive or non-duplication rights being exercised. As we stated above, the operator is ultimately responsible for compliance with these rules. We also believe that this is the most administratively efficient method for providing notice of these rights to an open video system. In addition, we believe that when retransmission of affected signals is prohibited under these rules, video programming providers should be given an opportunity to either substitute signals or delete signals where possible. Therefore, we require that open video system operators make all notices of exclusive or non-duplication rights received immediately available to the appropriate video programming providers on their systems. We would not expect to impose sanctions on an open video system operator for violations of the exclusivity rules by an unaffiliated program supplier if the operator provided proper notices to the program supplier and took prompt steps to stop the distribution of the infringing program once it was notified of the violation. 5. Other Title VI Provisions a. Notice 205. Section 653(c)(1)(A) provides that any provision that applies to cable operators under the following Title VI provisions shall apply to open video system operators: (1) Section 613 (except for subsection (a)) (ownership restrictions); (2) Section 616 (regulation of carriage agreements); (3) Section 623(f) (negative option billing); (4) Section 631 (subscriber privacy); and (5) Section 634 (equal employment opportunity). In the Notice, we proposed to amend our rules to apply Sections 613 (except for subsection (a)), 616, 623(f), 631 and 634 to open video system operators, as required by new Section 653(c)(1)(A). We sought comment in the Notice on any issues raised by the application of these sections to open video system operators. b. Discussion 206. Given the lack of substantial comment on this subject and the plain language of the statute, the Commission will, as proposed in the Notice, apply the following provisions of the Communications Act and the Commission's rules thereunder to open video systems: Section 613 (c) - (h) regarding ownership restrictions; Section 616 regarding regulation of carriage agreements; Section 623(f) regarding negative option billing; Section 631 regarding subscriber privacy; and Section 634 regarding equal employment opportunity. 6. Preemption of Local Franchising Requirements a. Notice 207. While Congress applied the above Title VI provisions to open video system operators, Congress also provided that open video system operators would be exempt from several Title VI obligations. As described above, these exemptions were intended to afford open video system operators a reduced regulatory burden in exchange for providing access to unaffiliated programming providers on a non-discriminatory basis. One of the Title VI exemptions is Section 621, which sets forth the local cable franchise requirements. In the comments, several parties raised the issue of the role of local authorities, in the absence of Section 621, to oversee use of the public rights-of-way. In addition, Section 653(c)(2)(B) provides that an open video system operator may be subject to the payment of fees on its gross revenues for the provision of cable service imposed by a local franchising authority or other governmental entity, in lieu of the franchise fees permitted under Section 622. The rate at which such "gross revenues fees" are imposed shall not exceed the rate at which franchise fees are imposed on any cable operator transmitting video programming in the franchise area. b. Discussion 208. We start with two basic premises. First, Section 653 exempts an open video system operator from the requirement of obtaining a local franchise under Section 621, although the operator still must pay a gross revenue fee "in lieu of" a franchise fee and must satisfy obligations under Section 611. Second, we believe that Congress did not intend to infringe upon local communities' prerogative to manage their rights-of-way in order to protect the public health and safety. As the Conference Report stated: The conferees intend that an operator of an open video system under this part shall be subject, to the extent permissible under State and local law, to the authority of a local government to manage its public rights-of-way in a nondiscriminatory and competitively neutral manner. 209. We believe that Congress' intent is clear. State and local authorities may impose conditions on an open video system operator for use of the rights-of-way, so long as such conditions are applied equally to all users of the rights-of-way (i.e., are non-discriminatory and competitively neutral). For instance, a state or local government could impose normal fees associated with zoning and construction of an open video system, so long as such fees was applied in a non-discriminatory and competitively neutral manner. Conversely, state and local authorities may not impose specific conditions on use of the rights-of-way that are unrelated to their management function or that apply to an open video system operator differently than they apply to other users of the rights-of-way. 210. We believe that most of the concerns raised by the Michigan Cities, et al. regarding their need to control use of the rights-of-way fall squarely within their legitimate management function. To use the examples of the Michigan Cities, et al., local authorities will retain their ability to address the following valid local concerns: (1) coordination of construction schedules, (2) establishment of standards and procedures for constructing lines across private property, (3) determination of insurance and indemnity requirements, and (4) establishment of rules for local building codes. Similarly, the National League of Cities, et al. cites the following responsibilities of state and local governments, that we believe are consistent with nondiscriminatory and competitively neutral management of the rights-of-way: (1) scheduling common trenching and street cuts, (2) repairing and resurfacing construction-damaged streets, (3) ensuring public safety in the use of rights-of-way by gas, telephone, electric, cable, and similar companies, and (4) keeping track of the various systems using the rights-of-way to prevent interference among facilities. 211. Any State or local requirements, however, that seek to impose Title VI "franchise- like" requirements on an open video system operator would directly conflict with Congress' express direction that open video system operators need not obtain local franchises as envisioned by Title VI. Examples of such Title VI requirements include constructing institutional networks, donating money to local educational or charitable institutions, or specifying the amount or type of capacity that the system must possess. Such requirements are preempted because they "stand[ ] as an obstacle to the accomplishment of the full purposes and objectives of Congress." 212. We believe the most natural reading of Section 653, in light of Congress's stated intent, is that state and local governments cannot require any open video system operator to obtain a Title VI franchise from a state or local authority for use of public rights-of-way necessary to operate its open video system. The state or local government may, however, impose non-discriminatory and competitively neutral conditions or requirements that are necessary to manage the public rights-of-way. Thus, we conclude that a state or local government requirement that directs an open video system operator to obtain a Title VI franchise to operate an open video system directly conflicts with Section 653 of the Communications Act and is therefore, preempted. 213. In coming to this conclusion, we cannot agree with the argument of the National League of Cities, et al. that a local franchising requirement would not be in conflict with federal requirements because it will not always be impossible for an open video system operator to comply with both. As we explained above, Section 653 explicitly states that the requirement that a cable operator obtain a franchise to provide cable service shall not apply to an open video system operator. Thus, any requirement that an open video system operator obtain a local franchise to operate an open video system would conflict with the statutory provision that such a requirement shall not apply. As the Court explained in Louisiana PSC, [p]reemption occurs when Congress, in enacting a federal statute, expresses a clear intent to pre-empt state law, Jones v. Rath Packing Co., 430 U.S. 519 (1977), [or] when there is outright or actual conflict between federal and state law, e.g., Free v. Bland, 369 U.S. 663 (1962). 214. Moreover, we believe that allowing state or local governments to require an open video system operator to obtain a Title VI franchise to operate an open video system stands as an obstacle to the accomplishment and execution of Congress' intent in enacting the open video system statutory provisions, including Section 653. Congress, through the open video system provisions, sought to encourage the deployment of alternative video delivery systems as a way to bring competition to the video delivery market. In so doing, Congress struck a balance between the open video system operator's editorial control and regulatory restrictions. Thus, although an open video system operator must cede editorial control over up to two-thirds of its system, Congress sought to induce entry by reducing an open video system operator's obligations under Title VI. Indeed, the Conference Report specifically states that one reason for the reduced regulatory obligations is to encourage the deployment of open video systems and to "introduce vigorous competition in entertainment and information markets." 215. We disagree with the National League of Cities, et al. that Congress merely intended to exempt open video system operators from the federal requirement for a local cable franchise, and that this exemption "has no effect whatsoever on any state or local requirement for right-of-way authorization." The reading of the National League of Cities, et al. would render meaningless Congress' exemption of open video system operators from local franchising requirements under Section 621. Indeed, it could have the effect of actually increasing the local franchising burden on open video systems in relation to cable. For instance, while Section 621 requires a cable operator to obtain a local franchise, it also requires a local franchising authority to give the cable operator a reasonable period of time in which to become capable of serving all households in the franchise area. Under the reasoning of the National League of Cities, et al. not only could a local authority impose such a build-out requirement on an open video system operator (a requirement unrelated to management of the rights-of-way), it could require an open video system operator to do so immediately, since the protections of Section 621 would no longer apply. 216. We also disagree with the argument of the National League of Cities, et al. that because it will not always be impossible for an open video system operator to comply with both a local franchising requirement and the requirements of Section 653, there is no "actual conflict" between the two and thus preemption is inappropriate. We do not believe that Section 653 preempts local regulation on the ground of physical impossibility. To the contrary, so long as local authorities exercise their managerial function in a non-discriminatory, competitively neutral fashion, we agree that local oversight is complementary, not contradictory, to the federal scheme. Instead, the preemption of a local franchise requirement is necessary to accomplish a federal statutory objective -- namely, the deployment of open video systems. 217. We disagree with the National League of Cities, et al. that this narrow preemption necessarily constitutes a "taking" under the Fifth Amendment. First, with respect to LECs providing open video service over the same network they use to provide telephone service, there is inadequate evidence in the record for us to conclude that a "taking" has occurred. The National League of Cities,et al. has posited, without more, that the provision of video is beyond the scope of the LECs' state-granted authority to use the public rights-of-way to provide telecommunications services. 218. Further, we find that Congress has provided "just compensation" to local authorities for use of the public rights-of-way. Section 653(c)(2)(B) provides: An operator of an open video system under this part may be subject to the payment of fees on the gross revenues of the operator for the provision of cable service imposed by a local franchising authority or other governmental agency, in lieu of the franchise fees permitted under Section 622. The rate at which such fees are imposed shall not exceed the rate at which franchise fees are imposed on any cable operator transmitting video programming in the franchise area . . . 219. It is undisputed that Congress enacted the cable franchise fee as the consideration given in exchange for the right to use the public ways. It is apparent that the gross revenue fee "in lieu of" a franchise fee was intended as compensation by open video system operators for use of the public rights-of-way. We therefore disagree with the National League of Cities, et al. that the statute contains "no mechanism" for providing just compensation. 220. In calculating the gross revenues fee, the National League of Cities, et al. argue that, in order to treat cable operators and open video systems operators equally, the gross revenues fee should be applied to all open video systems revenues, including subscriber revenues and such non-subscriber revenues as carriage revenues and advertising revenues. The Texas Cities assert that, in order to treat all programmers equally, the gross revenues fee should be applied to all programming on the open video system, including the programming of the open video system operator, its affiliates, and unaffiliated programmers. NCTA states that the gross revenues fee should apply to the open video system operator's gross revenues from all channels on the open video system plus the gross revenues of the operator's video programming service. Time Warner argues that the gross revenues fee should apply to all open video system revenues including revenues received from end users and revenues received from programmers. We agree with those commenters that argue that the gross revenues fee should be based on the open video system operator's revenues from the system's operation. We therefore will apply the fee to all gross revenues received by an open video system operator or its affiliates, including all revenues received from subscribers and all carriage revenues received from unaffiliated video programming providers. Gross revenues will not include revenues collected by unaffiliated video programming providers from their subscribers or advertisers, etc. - gross revenues will only include fees paid to the OVS operator. Consistent with our recent decision, we will also require any gross revenues fee that the open video system operator or its affiliate collects from subscribers to be excluded from gross revenues. 221. We also disagree with the National League of Cities, et al. that this compensation is not "just" because they are able to recover additional compensation from cable operators beyond the maximum five percent franchise fee, and therefore the gross revenue fee does not represent fair market value for use of the rights-of-way. As an initial matter, one of the principal forms of additional compensation obtained by local authorities consists of "channel capacity . . . designated for public, educational, or governmental use, and channel capacity on institutional networks," as recognized in Section 611, and Congress has provided in the OVS provision that "section 611 . . . shall apply" in accordance with regulations prescribed by the Commission. In any event, the gross revenue fee, by itself, constitutes "just compensation" due the local authorities in exchange for the use of public rights-of-way. The Supreme Court has repeatedly held that "'[i]t is the owner's loss, not the taker's gain, which is the measure of the value of the property taken.'" That principle is embodied in the "before and after" test applied in partial takings cases, under which the measure of compensation is the difference between the value of the property before a partial taking and the value of the remainder of the property after the partial taking. For example, in United States v. 8.41 Acres of Land, 680 F.2d 388, 391 (5th Cir. 1982), which involved the taking of an easement for a pipeline, the court held that "[w]hen the property interest taken from a parent tract is merely an easement, the proper measure of damages is still the before-and-after method of valuation, expressed as the difference between the market value of the land free of the easement and the market value as burdened with the easement." Thus, in valuing the compensation due for the taking of an easement for an open video system operator to string its wires over public rights-of-way, the proper measure is the decrease in the value of the public rights-of-way if they are crossed by an additional wire. The local authorities have not attempted to argue that, after an open video system's wires are strung, their property will be worth less than before those wires are strung, and it would appear that any loss in value would be de minimis. Thus, the fee in lieu of a franchise fee will more than adequately compensate local authorities. 222. We also disagree with the National League of Cities, et al. that Bell Atlantic v. FCC requires a different result. In Bell Atlantic, the D.C. Circuit declined to construe Section 201(a) of the Communications Act as authorizing the Commission to order physical co-location of a competitor's equipment on a local exchange carrier's property, where "virtual" co-location would achieve the same result without a physical invasion of the local exchange carrier's property. Here, by contrast, Congress expressly directed the Commission to permit open video systems to operate without a local franchising requirement in exchange for a fee. The Commission cannot achieve the same result that Congress intended by permitting local authorities to exercise franchise or franchise-like authority over open video system operators. F. Information Provided to Subscribers 1. Notice 223. In the Notice, we sought general comment on how to interpret and implement the various provisions of Section 653(b)(1)(E). Section 653(b)(1)(E)(i) directs the Commission to prescribe regulations that prohibit an open video system operator: from unreasonably discriminating in favor of the operator or its affiliates with regard to material or information (including advertising) provided by the operator 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. In addition, according to Sections 653(b)(1)(E)(ii) and (iii), the Commission must establish regulations that require an open video system operator to ensure that video programming providers or copyright holders (or both) are able "suitably and uniquely to identify their programming services to subscribers," and, further, that an open video system operator will not change or alter any such identification that is transmitted as part of the programming signal. Finally, Section 653(b)(1)(E)(iv) directs that the Commission prescribe regulations that prohibit an open video system operator from "omitting television broadcast stations or other unaffiliated video programming services carried on such system from any navigational device, guide or menu." 2. Discussion a. Program Selection 224. Because the 1996 Act prohibits an open video system operator from omitting television broadcast stations or unaffiliated video programming carried on the system from any navigational device, guide or menu, we agree with Viacom that this demonstrates that Congress recognized the importance of inclusion on such devices in order to facilitate competition, and that Congress envisioned that a single navigational device would be employed by subscribers using the open video system. Therefore, in the discussion below, we assume that a single navigational device will be used by subscribers to select programming carried on the open video system. However, if in practice, subscribers to an open video system are able to employ multiple navigational devices to select programming provided by various programmers on the open video system, we may need to reexamine our rules in this area and tailor them accordingly. 225. We believe, as stated in the Notice, that Section 653(b)(1)(E)(i) is intended to be a specific application of the non-discrimination requirement contained in Section 653(b)(1)(A). Specifically, we believe that this provision is meant to ensure that an open video system operator does not favor itself or its affiliates in its interaction with the customer at the point of actual program selection (i.e., when the subscriber is choosing a particular channel to watch). The type of "material or information" that therefore would fall within the scope of Section 653(b)(1)(E)(i) includes navigational devices, guides (electronic or paper) and menus used by the subscriber to actively select programming. 226. We agree with commenters that this means that the open video system operator may not discriminate in favor of affiliated programming by, for example, "burying" unaffiliated programmers in difficult to access portions of electronic guides, navigational devices or menus, or by otherwise placing affiliated programming in more prominent positions on the electronic guides, navigational devices or menus. We believe that limiting the scope of Section 653(b)(1)(E)(i) to material or information that a subscriber would employ in the actual channel selection process comports with Congress' intent. 227. As we stated in the Notice, Section 653(b)(1)(E)(i), if read broadly, could impede an open video system operator's advertising of its affiliated programming service, since any such advertising presumably would be intended to encourage subscribers to "select" its affiliated video programming service. We agree with the State of California and NYNEX that Congress did not intend Section 653(b)(1)(E)(i) to hinder general advertising by an open video system operator of its affiliated programming service. Such a result could deter the deployment of open video systems and would contravene Congress' overall objective of creating competition and maximizing consumer choice in the video marketplace. Thus, for instance, to the extent that an open video system operator uses billing inserts to advertise its service generally, rather than providing inserts as a guide to program selection, we believe that such inserts fall outside the scope of Section 653(b)(1)(E)(i). We do not agree with NYNEX, however, that this Section was intended to refer solely to information provided by an open video system operator through its open video system. For example, we believe that a paper programming guide that is intended to be used at the point of actual channel selection would also be governed by Section 653(b)(1)(E)(i). 228. While ABC agrees that Congress did not intend Section 653(b)(1)(E)(i) to hinder advertising by the open video system operator of its affiliated services, ABC states that the open video system operator should not be able to use the navigational device or menu to advertise affiliated programming, and should only be able to use billing inserts and other forms of off- system advertising if unaffiliated video programming providers have access to the open video system operator's subscriber lists. We agree that Section 653(b)(1)(E)(i) prohibits the open video system operator from unreasonably discriminating in favor of its affiliated programming by means of discriminatory use of on-system advertising, if that advertising is contained in any channel selection guide, aid or menu. Accordingly, an open video system operator may not use its position as controller of a navigational device or menu to advertise its programming on the navigational device or menu, while at the same time disallowing unaffiliated programming providers comparable opportunities to advertise on the navigational device or menu. 229. However, we disagree that Section 653(b)(1)(E)(i) requires that unaffiliated providers be given the open video system operator's subscriber list if it engages in off-system advertising. As discussed above, we believe that general off-system advertising will usually be beyond the scope of Section 653(b)(1)(E)(i) because it will not be used by subscribers at the point of program selection. In addition, Section 653(b)(1)(E)(i) requires that the material or information be provided to "subscribers." Thus, newspaper advertisements, for instance, which would reach both subscribers and non-subscribers alike would therefore fall outside the parameters of Section 653(b)(1)(E)(i). 230. We concur with HBO that Section 653(b)(1)(E)(iv) "prohibits the actual omission of programming from any navigational device, guide or menu while Section 653(b)(1)(E)(i) prohibits the effective omission of programming through such things as menu placement and searchability." In addition, we agree with ABC that requiring an open video system operator to list on its electronic menus every program available (whether actually subscribed to or not) could "clutter" the menu. Rather, as suggested by ABC, we find that menus offered by the OVS operator may inform the viewer that other services (that the consumer has not ordered) are available on the open video system, and direct the subscriber how to access a second screen with more complete information on those other services. In addition, for programming to which the consumer has actually subscribed, we agree with HBO that no programming service on the open video system operator's navigational device should be more difficult to select than any other programming service. We find that this requirement strikes a balance between the prohibition in Section 653(b)(1)(E)(iv) against omitting television broadcast stations or other unaffiliated programmers "carried on such system," and the practical considerations involved in listing all services available. 231. We agree with Viacom that an open video system operator is not relieved of the non-discrimination provisions of Section 653(b)(1)(E)(i) if the operator offers a navigational device that works only with affiliated video programming packages. As Viacom notes, Section 653(b)(1)(E)(iv) prohibits the omission of broadcast stations or other unaffiliated programming services from any open video system navigational device. In addition, we disagree with Tele- TV that open video system affiliated programming providers are not subject to the non- discrimination requirements regarding the provision of navigational devices. The open video system operator should not be able to evade its obligation to ensure that other non-affiliated programming providers are represented on a navigational device, guide or menu simply by having the service nominally provided by its affiliate. 232. Finally, Viacom and Starsight raise the issue of navigational devices that are not provided by the open video system operator, generally arguing that the open video system operator must allow other navigational device providers competitive access to the open video system. EIA states that the competitive availability requirements of Section 629 of the 1996 Act and the equipment compatibility requirements of Section 624 of the 1996 Act should apply to open video systems. The issues of the commercial availability of navigational devices and equipment compatibility are beyond the scope of this proceeding and will be addressed in a separate proceeding. b. Program Identification 233. Section 653(b)(1)(E)(ii) provides that the Commission must establish regulations that require an open video system operator to ensure that video programming providers or copyright holders (or both) are able "suitably and uniquely to identify their programming services to subscribers;" Section 653(b)(1)(E)(iii) provides that an open video system operator will not change or alter any such identification that is transmitted as part of the programming signal. We are codifying the statutory language of Sections 653(b)(1)(E)(ii) and (iii) in our rules adopted herewith. 234. However, we decline to adopt the suggestion of HBO and ABC that the "suitable and unique" identification requirement should apply not only to the programming signal, but also to the navigational device and menu of the open video system operator. ABC argues that the open video system operator's menu should be required to carry not only the name of the video programming provider, but also the provider's logo or branding device. HBO states that unique brand information must be part of the program display and must appear within the navigational device. An open video system operator is required to transmit a video programming provider's identification only if it is transmitted "as part of the programming signal." Since an open video system operator's menu typically would not be transmitted as part of the unaffiliated video programming provider's signal, the statute only requires that the open video system operator ensure that the provider can "suitably and uniquely" identify its programming to subscribers. We find that the "suitable and unique" identification requirement would be satisfied if an open video system operator's navigational device included a provider's name (broadcast station call letters and network affiliation, for example), but not its logo or branding device. A requirement that the open video system operator's navigational device, guide, or menu also include logo or branding information would be beyond the scope of the statute and would unnecessarily limit the open video system operator's reasonable discretion to design its system in its own non- discriminatory way. However, if the open video system operator chooses to prohibit unaffiliated providers' logos or branding information on its navigational device, guide or menu, it would similarly have to prohibit its own logo or branding information under Section 653(b)(1)(E)(i). G. Dispute Resolution 1. Notice 235. In the Notice, we sought comment on how the Commission should implement Section 653's dispute resolution provision. In particular, we sought comment on whether we should model our open video systems dispute resolution procedures after the ones the Commission employs to resolve program access disputes. We also sought comment on whether we should promote the use of informal procedures, such as alternative dispute resolution ("ADR") mechanisms, which would require or encourage parties to attempt first to resolve a dispute without the Commission's direct involvement. 2. Discussion 236. Given the short 10-day period in which the Commission must approve or disapprove a certification request, we believe that the dispute resolution process will play a key role in ensuring the success of the open video framework. We agree with USTA that the assurance of Commission action within 180 days, combined with the risk of carriage awards and/or damages, will act as a substantial deterrent to potential rule violations. 237. In order for the Commission's review to be as efficient and thorough as possible, we adopt our suggestion in the Notice to model our open video system dispute resolution process -- except for must-carry complaints and petitions for special relief -- after our rules governing program access disputes. Thus, in order to file a complaint under Section 653(a)(2), we will require that a video programming provider or other complainant first notify an open video system operator of its belief that a violation of our rules has occurred, providing sufficient specificity so that the operator can determine the precise nature of the dispute. At a minimum, the complainant must provide a potential defendant with ten days to respond to the notice. If the parties cannot resolve the dispute, the complainant may file a complaint with the Commission along with evidence (an affidavit or copy of a certified letter) that the required notice has been given. Failure to include such evidence shall result in immediate dismissal of the complaint. 238. We will seek to dispose of as many cases as possible on the basis of a complaint, answer and reply. Parties should include all relevant evidence, including documentary evidence such as rate cards and programming contracts, in the complaint and answer to support their claims. Any documents submitted may be protected as proprietary pursuant to Commission rules. Discovery will not be permitted as a matter of right, but on a case-by-case basis as deemed necessary by the Commission staff reviewing the complaint. Any complaint filed pursuant to Section 653(a)(2) must be filed within one year of the date on which the open video system operator's actions allegedly violated Commission rules. 239. We believe that our adoption of this dispute resolution process will allow for the expedient resolution of complaints while adequately protecting video programming providers and others from discriminatory, anticompetitive, or otherwise improper conduct. We have not created a general standard that a complainant in an open video system dispute must meet in order to meet its burden of proof. Since open video system disputes may involve wide-ranging and novel issues, we do not believe that a single standard of proof is possible. Moreover, separate standards already exist for resolving certain types of disputes -- e.g., program access and must- carry -- that may come before the Commission under our open video system rules. Other disputes will be resolved pursuant to the principles and rules set forth in this Order. 240. We disagree with the proposal submitted by the Telephone Joint Commenters and NYNEX which states that a video programming provider or other complainant must show: (1) that an open video system operator intentionally treated it substantially differently from similarly- situated programming providers; (2) that the open video system operator's conduct was commercially unreasonable in the video programming business; and (3) that the complainant suffered actual and substantial commercial harm. We agree with those commenters that argued that such a standard would place too heavy a burden on the complainant and would unduly favor open video system operators. We believe that requiring a showing of intentional discrimination is unnecessary and often not amenable to direct proof. Moreover, a required showing that the conduct was "commercially unreasonable in the video programming business" would mean that it would be a complete defense for an open video system operator to assert, for instance, that a similarly situated cable operator might reasonably engage in the same conduct. Thus, the Telephone Joint Commenters' standard would effectively eviscerate Section 653's non- discrimination requirement. 241. We have also decided not to adopt recommendations made by the State of New York and the City of Indianapolis urging that local disputes, such as disputes between local franchising authorities and open video system operators, be resolved on a local or state level. Under Section 653(a)(2), the Commission has exclusive jurisdiction to resolve disputes arising under the open video system rules. 242. Finally, while we encourage parties to use ADR techniques to attempt to resolve their dispute without the Commission's direct involvement, we believe that a clause in a carriage agreement requiring ADR before a dispute could be brought to the Commission would not be a "just and reasonable" term or condition of carriage. Such a requirement could delay an aggrieved party's right to redress significantly beyond the 180-day period mandated by Congress. In addition, permitting operators to require as a condition of carriage that all disputes be resolved through ADR, may lead operators to mandate ADR practices that give them an unfair advantage over complainants. Since the use of ADR will be purely voluntary, we do not believe that negotiating parties will be able to use ADR as a strategy to delay the resolution of complaints. H. Joint Marketing, Bundling and Structural Separation 1. Notice 243. In the Notice, we asked whether open video system operators should be permitted to engage in the joint marketing and bundling of their video service, along with other services, such as local and interexchange telephone and data transmission services. Certain commenters expressed concern over open video system operators engaging in joint marketing and bundling. For instance, NCTA argued that joint marketing would give a telephone company an unfair marketing advantage deriving solely from its position as the monopoly supplier of an essential service. Until local telephone service is "effectively competitive," NCTA proposed, an incumbent LEC should be required to provide the name, address and telephone number of the local cable operator if it wishes to market video services to customers calling to request telephone service. Regarding bundling, AT&T, for instance, argued that where one of the products to be bundled is not competitive, such bundling can inhibit competition by allowing the monopoly provider to create bundled offerings that cannot be matched by providers of the competitive services. 244. By contrast, some commenters argued that the Commission should not prohibit joint marketing and bundling because they provide the open video system operator with mechanisms to tailor services to meet the unique competitive and consumer needs of individual markets by providing consumers with a comprehensive package of communications services. Moreover, USTA asserted that joint marketing and bundling are conveniences for consumers because they permit "one stop shopping." 245. Similarly, some commenters argued that a separate subsidiary requirement is required by Section 272 of the 1996 Act and is necessary to protect against the dangers of discrimination and cross-subsidy by LECs. According to one commenter, "the LEC will still have the incentive to cross-subsidize, [but] its ability to do so will be restrained" if the establishment of a separate subsidiary is required. Other commenters, however, argued that a separate subsidiary requirement is not only unnecessary, but is contrary to both the plain language of the 1996 Act and the intent of Congress. 2. Discussion a. Joint Marketing 246. Section 653 is silent on the issue of joint marketing. The Act does, however, expressly impose joint marketing restrictions on telephone companies in other contexts. Given that these Sections were all enacted as part of the 1996 Act, we find it a significant indication of Congress' intent that Sections 271(e), 272(g) and 274(c) contain express joint marketing restrictions while Section 653 does not. Moreover, while NCTA argues that joint marketing restrictions should be imposed until the local telephone market is "effectively competitive," Section 272(g)(2) specifically sets a similar competitive condition on the lifting of the joint marketing restrictions between telephone exchange and interLATA services: a BOC's authorization under Section 271(d) to provide interLATA services in an in-region State. Again, no such condition was established in Section 653. 247. Since Congress chose not to adopt joint marketing restrictions in Section 653 even though (1) it specifically applied joint marketing restrictions to other provisions of the 1996 Act, and (2) it restricted joint marketing in some provisions of the 1996 Act until the introduction of competition in the local telephone market, we decline to adopt joint marketing restrictions here. We note, however, that any entity that offers any telecommunications service will be subject to both the customer proprietary network information ("CPNI") restrictions set forth in Section 222 of the Communications Act and any regulations the Commission establishes pursuant to Section 222. Similarly, any provider of cable or open video service will be subject to the cable privacy restrictions set forth in Section 631. b. Bundling 248. Section 653 also does not address the issue of "bundling," which we define in this context to mean the offering of video service and local exchange service in a single package at a single price. We would also treat as bundling the situation in which an entity offers one service at a discount if the customer purchases another service. We disagree with AT&T and Time Warner's concern that the bundling of telephone and video services will be anti-competitive, and increase the risk of cross-subsidization of the competitive service by the monopoly service. We believe that the Commission's Part 64 cost allocation rules and any amendments thereto will protect adequately regulated telephone ratepayers from a misallocation of costs that could lead to excessive telephony rates. However, we will impose certain safeguards to protect consumers in these circumstances. First, the open video system operator, where it is the incumbent LEC, may not require that a subscriber purchase its video service in order to receive local exchange service. Second, while the open video system operator may offer subscribers a discount for purchasing the bundled package, the LEC must impute the unbundled tariff rate for the regulated service. c. Structural Separation 249. We disagree with those commenters that argue that a separate affiliate requirement nevertheless should be imposed pursuant to Section 272. We believe that Congress' did not intend to impose a separate affiliate requirement on LECs providing open video service. First, Section 653 is silent on whether LECs and others must provide open video service through a separate affiliate. In fact, Congress expressly directed that Title II requirements not be applied to "the establishment and operation of an open video system" under Section 653. In addition, Section 272 exempts "incidental interLATA services" from the separate affiliate requirement, and includes certain video programming services within the definition of "incidental interLATA services" described in Section 271(g). Since we conclude that Congress did not intend to apply a separate affiliate requirement in this context, we need not address whether the provision of video programming would qualify as an "information service" under Section 272(a)(2)(C), or exercise our authority under Section 272(f)(3). Rather, we will adhere to Congress' intent and decline to impose a separate affiliate requirement here. I. Advanced Telecommunications Incentives 1. Notice 250. Section 706(a) of the 1996 Act requires the Commission to "encourage the deployment on a reasonable and timely basis of advanced telecommunications capability to all Americans (including, in particular, elementary and secondary schools and classrooms) by utilizing, in a manner consistent with the public interest, convenience and necessity, price cap regulation, regulatory forbearance, measures that promote competition in the local telecommunications market, or other regulating methods that remove barriers to infrastructure investment." In the Notice, we sought comment on how we could achieve Congress' goals in the context of open video systems. 2. Discussion 251. The Telecom. Industry Assn. argues that, because an open video system operator will need to build excess capacity for unaffiliated programming providers (which could also be used to provide advanced telecommunications), the Commission can fulfill its obligation to ensure advanced technology deployment by adopting a deregulatory approach to open video systems. In particular, the Telecom. Industry Assn. proposes that the Commission adopt an "upgrade incentive plan" similar to that adopted for cable operators in MM Docket 93-215. According to the Telecom. Industry Assn., an open video system upgrade incentive plan could encourage the deployment of open video and provide a critical vehicle for fulfilling Congress' mandate that we encourage the deployment of advanced telecommunications services to all Americans (including elementary schools and classrooms). 252. We agree with the Telecom. Industry Assn. that the open video system framework offers an opportunity to further the goals of both fostering competition, upgrading infrastructure, and providing a vehicle for the deployment of advanced telecommunications services to all consumers. In order to promote the development of broadband capabilities for consumers, the Commission will consider proposals that encourage open video system deployment of advanced telecommunications services as defined in Section 706. While we believe that the open video system framework should provide operators with the incentives and flexibility to deploy advanced telecommunications, we believe that this additional approach should also be available on a case- by-case basis for open video system operators that can demonstrate a need for additional deregulatory measures to successfully deploy advanced telecommunications services to all consumers. IV. FINAL REGULATORY FLEXIBILITY ACT ANALYSIS 253. Pursuant to the Regulatory Flexibility Act of 1980, 5 U.S.C.  601-12, the Commission's final analysis with respect to the Second Report and Order is as follows: 254. Need and purpose of this action: The Commission, in compliance with Section 302(a) of the Telecommunications Act of 1996 pertaining to open video systems, is required to adopt rules and procedures necessary to implement this section of the Telecommunications Act of 1996. 255. Summary of issues raised by the public in response to the Initial Regulatory Flexibility Analysis: Collectively, the National League of Cities; the United States Conference of Mayors; the National Association of Counties; the National Association of Telecommunications Officers and Advisors; Montgomery County, Maryland; the City of Los Angeles, CA; the City of Chillicothe, OH; the City of Dearborn, Michigan; the City of Dubuque, Iowa; the City of St. Louis, MO; the City of Santa Clara, CA; and the City of Tallahassee, FL filed reply comments in response to the Initial Regulatory Flexibility Analysis. These reply comments assert that a significant number of small governmental entities will be burdened by the proposals of the Commission and commenters. The Commission has considered these reply comments and has attempted to structure the open video system rules set forth in this Second Report and Order so as to minimize the administrative burden upon small governmental entities. 256. Significant alternatives considered: Petitioners representing cable interests, telephone interests, programming interests, consumer interests and local government interests submitted several alternatives aimed at minimizing administrative burdens. In this proceeding, the Commission has considered these alternatives and has attempted both to accommodate the concerns raised by the parties and to minimize the administrative burdens upon the parties in accordance with Congress' desire for the Commission to develop a streamlined regulatory model for open video service operators. V. PAPERWORK REDUCTION ACT OF 1995 ANALYSIS 257. The requirements adopted in the Second Report and Order have been analyzed with respect to the Paperwork Reduction Act of 1995 (the "1995 Act") and found to impose new or modified information collection requirements on the public. Implementation of any new or modified requirement will be subject to approval by the Office of Management and Budget ("OMB") as prescribed by the 1995 Act. The Commission, as part of its continuing effort to reduce paperwork burdens, invites the general public and OMB to comment on the information collections contained in this Second Report and Order as required by the 1995 Act. OMB comments are due 60 days from date of publication of this Second Report and Order in the Federal Register. Comments should address: (1) whether the proposed collection of information is necessary for the proper performance of the functions of the Commission, including whether the information shall have practical utility; (2) the accuracy of the Commission's burden estimates; (3) ways to enhance the quality, utility, and clarity of the information collected; and (4) ways to minimize the burden of the collection of information on the respondents, including the use of automated collection techniques or other forms of information technology. 258. Written comments by the public on the proposed and/or modified information collections are due on or before 30 days after publication of the Second Report and Order in the Federal Register. Written comments must be submitted by the Office of Management and Budget (OMB) on the proposed and/or modified information collections on or before 60 days after publication of the Second Report and Order in the Federal Register. A copy of any comments on the information collections contained herein should be submitted to Dorothy Conway, Federal Communications Commission, Room 234, 1919 M Street, N.W., Washington, DC 20554, or via the Internet to dconway@fcc.gov and to Timothy Fain, OMB Desk Officer, 10236, NEOB, 725 - 17th Street, N.W., Washington, DC 20503 or via the Internet to fain_t@al.eop.gov. For additional information concerning the information collections contained herein contact Dorothy Conway at 202-418-0217, or via the Internet at dconway@fcc.gov. VI. ORDERING CLAUSES 259. Accordingly, IT IS ORDERED that, pursuant to Sections 4(i), 4(j), 303(r), and 653 of the Communications Act of 1934, as amended, 47 U.S.C.  154(i), 154(j), 303(r), and 573 the rules, requirements and policies discussed in this Second Report and Order ARE ADOPTED and Sections 76.1000 and 76.1500 through 76.1515 of the Commission's rules, 47 C.F.R.  76.1000 and 76.1500 through 1515, ARE AMENDED as set forth in Appendix B. 260. IT IS FURTHER ORDERED that the requirements and regulations established in this decision shall become effective upon approval by OMB of the new information collection requirements adopted herein, but no sooner than thirty days after publication in the Federal Register. 261. IT IS FURTHER ORDERED that the Secretary shall send a copy of this Second Report and Order including the Final Regulatory Flexibility Analysis, to the Chief Counsel for Advocacy of the Small Business Administration in accordance with paragraph 603(a) of the Regulatory Flexibility Act, Pub. L. No. 96-354, 94 Stat. 1164, 5 U.S.C.  601 et seq. (1981). FEDERAL COMMUNICATIONS COMMISSION William F. Caton Acting Secretary Appendix A Parties Filing Comments and Reply Comments Comments Access 2000 Alliance for Community Media, Alliance for Communications Democracy, Consumer Federation of America, Consumer Project on Technology, Center for Media Education, and People for the American Way (Alliance for Community Media, et al.) Alliance for Public Technology American Cable Entertainment; Bresman Communications Co., Ltd.; Greater Media, Inc.; Cable Telecommunications Association of Georgia; Cable Telephone Association of Maryland, Deleware and the District of Columbia; New Jersey Cable Telecommunications Association; Ohio Cable Telecommunications Association; South Carolina Cable Television Association; Tennessee Cable Television Association; Texas Cable & Telecommunications Association; Wisconsin Cable Communications Association (American Cable, et al.) Association of America's Public Television Stations (Assn. of Public Television Stations) Association of Local Television Stations, Inc (Assn. of Local Television Stations). AT&T Corporation (AT&T) Bell Atlantic Telephone Companies and Bell Atlantic Video Services Company, Bell South Corporation and BellSouth Telecommunications, Inc., GTE Service Corporation and its affiliated domestic telephone operating companies and GTE Media Ventures, Inc., Lincoln Telephone and Telegraph Company, Pacific Bell, SBC Communications, Inc. and Southwestern Bell Telephone Company (Telephone Joint Commenters) Cablevision Systems Corporation and The California Cable Television Association (Cablevision Systems/CCTA) Cable Telecommunications Association (CATA) Capital Cities/ABC, Inc. (ABC) CBS, Inc. (CBS) Cities of Dallas, Denton, Houston, Plano, Fort Worth, Arlington, Irving, Longview, and Brownfield, TX (Texas Cities) City of Arvada, CO (City of Arvada) City and County of Denver, CO (City of Denver) City of Indianapolis, IN (City of Indianapolis) City of Milton, WA (City of Milton) City of Mountain View, CA (City of Mountain View) City of Olathe, KS (City of Olathe) City of Seattle Department of Administrative Services (City of Seattle) Comcast Cable Communications, Inc., Adelphia Communications Corporation and InterMedia Partners, L.P. (Comcast, et al.) Community Broadcasters Association (Community Broadcasters Assn.) Continental Cablevision, Inc. (Continental) Cox Communications, Inc. (Cox) Electric Industries Association, Consumer Electronics Manufacturers Association, and Consumer Electronics Retailers Coalition (EIA, et al.) General Instrument Corporation (General Instrument) General Services Administration (GSA) Golden Orange Broadcasting Co., Inc. (Golden Orange Broadcasting) Greater Metro Cable Consortium (Greater Metro Cable) Group W Satellite Communications (Group W) Home Box Office (HBO) MCI Telecommunications Corporation (MCI) MFS Communications Company, Inc. (MFS Communications) Motion Pictures Association of America, Inc. (MPAA) National Association of Broadcasters (NAB) National Association of Regulatory Utility Commissioners (NARUC) National Basketball Association, National Hockey League, & National Football League (NBA, et al.) National Broadcasting Company, Inc. (NBC) National Cable Television Association, Inc. (NCTA) National League of Cities; The United States Conference of Mayors; The National Association of Counties; The National Association of Telecommunications Officers and Advisors; Montgomery County, Maryland; The City of Los Angeles, CA; The City of Chillicothe, OH; The City of Dearborn, Michigan; The City of Dubuque, Iowa; The City of St. Louis, MI; The City of Santa Clara, CA; and The City of Tallahassee, FL. (National League of Cities, et al.) National Telephone Cooperative Association (NTCA) New York City Department of Information Technology and Telecommunications (New York City) New York State Department of Public Service (State of New York) NYNEX Corporation (NYNEX) Office of the Commissioner of Baseball (Commissioner of Baseball) Pennsylvania Public Utility Commission (Pennsylvania PUC) People of the State of California and the Public Utilities Commission of the State of California (State of California) Political Subdivisions of the State of Minnesota (Minnesota Cities) Rainbow Programming Holdings, Inc. (Rainbow) Residential Communications Networks, Inc. (Residential Communications) State of New Jersey, Department of the Treasury Division of the Ratepayer Advocate (State of New Jersey Ratepayer Advocate) State of New Jersey Board of Public Utilities' Office of CableTelevsion (State of New Jersey Bd. of Pub. Util.) Tandy Corporation (Tandy) Tele-Communications, Inc. (TCI) Telecommunications Industry Association (Telecom. Industry Assn.) Time Warner Cable (Time Warner) U S West, Inc. (U S West) United States Telephone Association (USTA) UTC, The Telecommunications Association (UTC) Viacom, Inc. (Viacom) Reply Comments Access Houston Cable Corporation (Access Houston) Access Sacramento Access 2000 Access Tucson Adelphia Communications Corporation, and Suburban Cable TV Co., Inc. (Adelphia/Suburban Cable) Alliance for Community Media, Alliance for Communications Democracy, Consumer Federation of America, Consumer Project on Technology, Center for Media Education, People for the American Way, and the Office of Communication of the United Church of Christ (Alliance for Community Media, et al.) American Cable Entertainment; Bresman Communications Co., Ltd.; Greater Media, Inc.; Cable Telecommunications Association of Georgia; Cable Telephone Association of Maryland, Delaware and the District of Columbia; New Jersey Cable Telecommunications Association; Ohio Cable Telecommunications Association; South Carolina Cable Television Association; Tennessee Cable Television Association; Texas Cable & Telecommunications Association; Wisconsin Cable Communications Association (American Cable, et al.) Association of Local Television Stations, Inc (Assn. of Local Television Stations). AT&T Corporation (AT&T) Bartholdi Cable Company, Inc. (Bartholdi Cable) Bell Atlantic Telephone Companies and Bell Atlantic Video Services Company, Bell South Corporation and BellSouth Telecommunications, Inc., GTE Service Corporation and its affiliated domestic telephone operating companies and GTE Media Ventures, Inc., Lincoln Telephone and Telegraph Company, Pacific Bell, SBC Communications, Inc. and Southwestern Bell Telephone Company (Telephone Joint Commenters) Boston Neighborhood Network (BNN TV3) BroadBand Technologies, Inc. (BroadBand) California Cable Television Association (CCTA) Cambridge Community Television (Cambridge Community TV) Capital Cities/ABC, Inc. (ABC) Chicago Access Corporation (Chicago Access) Cincinnati Community Video City of Ann Arbor, Michigan (City of Ann Arbor) City of Boston, Massachusetts (City of Boston) City of Charlotte and County of Mechlenburg, North Carolina (City of Charlotte) City and County of Denver, Colorado (City of Denver) City of Dayton, Ohio (City of Dayton) City of Encinitas, California (City of Encinitas) City of Indianapolis, Indiana (City of Indianapolis) City of Kalamazoo, Michigan (City of Kalamazoo) City of Lake Forest, Illinois (City of Lake Forest) City of Laurel, Maryland (City of Laurel) City of Pocatello, Idaho (City of Pocatello) City of Portland, Oregon (City of Portland) City of Quincy, Washington (City of Quincy) City of Richardson, Texas (City of Richardson) City of St. Paul, Minnesota (City of St. Paul) City of Santa Ana, California (City of Santa Ana) City of Somerville, Massachusetts (City of Somerville) City of Tucson (City of Tucson) Community Broadcasters Association (Community Broadcasters Assn.) Community Television of Prince George's (PG County Community TV) Cox Communications, Inc. and Comcast Cable Communications, Inc. (Cox/Comcast) Electronic Industries Association, Consumer Electronics Manufacturers Association, and Consumer Electronics Retailers Coalition (EIA, et al.) ESPN, Inc. (ESPN) General Instrument Corporation (General Instrument) General Services Administration (GSA) Independent Cable & Telecommunications Association (Independent Cable Assoc.) Information Technology Industry Council (Info. Tech. Indus. Council) MCI Telecommunications Corporation (MCI) Metropolitan Area Communications Commission (Oregon Cities) Metropolitan Dade County (Dade County) MFS Communications Company, Inc. (MFS Communications) Miami Valley Cable Council (Miami Valley) Michigan, Illinois and Texas Communities (Michigan Cities, et al.) Minneapolis Telecommunications Network (Minneapolis Telecom. Network) Motion Pictures Association of America, Inc. (MPAA) Municipalities of Buffalo Grove, Elk Grove, Hoffman Estates, Rolling Meadows, and Palatine, Illinois (Regional Cable Group) Multnomah Community Television (Multnomah Community TV) National Association of Broadcasters (NAB) National Cable Television Association, Inc. (NCTA) National League of Cities; The United States Conference of Mayors; The National Association of Counties; The National Association of Telecommunications Officers and Advisors; Montgomery County, Maryland; The City of Los Angeles, CA; The City of Chillicothe, OH; The City of Dearborn, Michigan; The City of Dubuque, Iowa; The City of St. Louis, MI; The City of Santa Clara, CA; and The City of Tallahassee, FL. (National League of Cities, et al.) New York City Department of Information Technology and Telecommunications (New York City) Northern Dakota County Cable Communications Commission (North Dakota Cable Commission) Northern Dakota County Community Television Corp. (North Dakota Community TV) NYNEX Corporation (NYNEX) Optel, Inc. (Optel) Orange County, Florida (Orange County) Pitt County (Pitt County) Plymouth Community Channel 3 (Plymouth Channel 3) Political Subdivisions of the State of Minnesota (Minnesota Cities) Public Access Corporation of the District of Columbia (D.C. Public Access Corp.) Quote . . . Unquote, Inc. (Quote . . . Unquote) Residential Communications Networks, Inc. (Residential Communications) Schopeg Access, Inc. (Schopeg Access) Starsight Telecast, Inc. (Starsight) State of Hawaii Telecommunications Industry Association (Telecom. Industry Assn.) Tele-TV Time Warner Cable (Time Warner) U S West, Inc. (U S West) United States Telephone Association (USTA) Viacom, Inc. (Viacom) Reply Comments to the Initial Regulatory Flexibility Analysis National League of Cities; The United States Conference of Mayors; The National Association of Counties; The National Association of Telecommunications Officers and Advisors; Montgomery County, Maryland; The City of Los Angeles, CA; The City of Chillicothe, OH; The City of Dearborn, Michigan; The City of Dubuque, Iowa; The City of St. Louis, MI; The City of Santa Clara, CA; and The City of Tallahassee, FL. (National League of Cities, et al. Reply Comments on IRFA) Ex Parte Filings Letter from The Honorable Tom Barrett, U.S. House of Representatives, to The Honorable Reed Hundt, Chairman, Federal Communications Commission, April 1, 1996. Letter from The Honorable Daniel K. Akaka, U. S. Senate, to Ms. Judith L. Harris, Director of Office of Legislative Affairs, Federal Communications Commission, April 4, 1996. Letter from The Honorable Anna G. Eshoo, U.S. House of Representatives, to The Honorable Reed Hundt, Chairman, Federal Communications Commission, April 11, 1996. Letter from The Honorable Neil Abercrombie, U.S. House of Representatives, to The Honorable Reed Hundt, Chairman, Federal Communications Commission, April 12, 1996. Letter from The Honorable Sam M. Gibbons, U.S. House of Representatives, to the Director, Office of Legislative Affairs, Federal Communications, April 24, 1996. Letter from The Honorable Tom Campbell, U.S. House of Representatives, to The Honorable Reed Hundt, Chairman, Federal Communications Commission, April 25, 1996. Letter from Tom Reeser, Executive Director, Oceanside Community Television, to Federal Communications Commission, May 13, 1996 (Oceanside Community Television Ex Parte Comments) Fujitsu Network Switching of America, Inc. (Fujitsu Ex Parte Comments) Appendix B Rule Changes Part 76 of Title 47 of the Code of Federal Regulations is amended as follows: PART 76 -- CABLE TELEVISION SERVICE 1. The authority citation for Part 76 is revised to read as follows: AUTHORITY: 47 U.S.C. 151, 152, 153, 154, 301, 302, 303, 303a, 307, 308, 309, 312, 315, 317, 325, 503, 521, 522, 531, 532, 533, 534, 535, 536, 537, 543, 544, 544a, 545, 548, 552, 554, 556, 558, 560, 561, 571, 572, 573. 2. Section 76.1000 is amended by adding notes to paragraphs (e) and (h) to read as follows:  76.1000 Definitions. * * * * * (e) * * * Note to paragraph (e): A video programming provider that provides more than one channel of video programming on an open video system is a multichannel video programming distributor for purposes of this subpart O and Section 76.1507. * * * * * (h) * * * Note to paragraph (h): Satellite programming which is primarily intended for the direct receipt by open video system operators for their retransmission to open video system subscribers shall be included within the definition of satellite cable programming. * * * * * 3. Section 76.1004 is amended by designating the existing text as paragraph (a), and adding paragraph (b) to read as follows: * * * * * (b) Sections 76.1002(c)(1) through (3) shall be applied to a common carrier or its affiliate that provides video programming by any means directly to subscribers in such a way that such common carrier or its affiliate shall be generally restricted from entering into an exclusive arrangement for satellite cable programming or satellite broadcast programming with a satellite cable programming vendor in which a common carrier or its affiliate has an attributable interest or a satellite broadcast programming vendor in which a common carrier or its affiliate has an attributable interest, unless the arrangement pertains to an area served by a cable system as of October 5, 1992, and the Commission determines in accrdance with Section 76.1002(c)(4) that such arrangment is in the public interest. 4. A new Subpart S is added to Part 76 to read as follows: Subpart S - Open Video Systems  76.1500 Definitions.  76.1501 Qualifications to be an open video system operator.  76.1502 Certification.  76.1503 Carriage of video programming providers on open video systems.  76.1504 Rates, terms and conditions for carriage on open video systems.  76.1505 Public, educational and governmental access.  76.1506 Carriage of television broadcast signals.  76.1507 Competitive access to satellite cable programming.  76.1508 Network non-duplication.  76.1509 Syndicated program exclusivity.  76.1510 Application of certain Title VI provisions.  76.1511 Fees.  76.1512 Programming information.  76.1513 Dispute resolution.  76.1514 Bundling of video and telephone services. Subpart S - Open Video Systems  76.1500 Definitions. (a) Open video system. A facility consisting of a set of transmission paths and associated signal generation, reception, and control equipment that is designed to provide cable service which includes video programming and which is provided to multiple subscribers within a community, provided that the Commission has certified that such system complies with this part. (b) Open video system operator ( operator ). Any person or group of persons who provides cable service over an open video system and directly or through one or more affiliates owns a significant interest in such open video system, or otherwise controls or is responsible for the management and operation of such an open video system. (c) Video programming provider. Any person or group of persons who has the right under the copyright laws to select and contract for carriage of specific video programming on an open video system. (d) Activated channels. This term shall have the same meaning as provided in the cable television rules, 47 CFR  76.5(nn). (e) Shared channel. Any channel that carries video programming that is selected by more than one video programming provider and offered to subscribers. (f) Cable service. This term shall have the same meaning as provided in the cable television rules, 47 CFR  76.5(ff). (g) Other terms. Unless otherwise expressly stated, words not defined in this part shall be given their meaning as used in Title 47 of the United States Code, as amended, and, if not defined therein, their meaning as used in Part 47 of the Code of Federal Regulations.  76.1501 Qualifications to be an open video system operator. Any person may obtain a certification to operate an open video system pursuant to Section 653(a)(1) of the Communications Act, 47 U.S.C.  573(a)(1), except that an operator of a cable system, regardless of any other service that the cable operator may provide, may not obtain such a certification within its cable service area unless it is subject to "effective competition," as defined in Section 623(l)(1) of the Communications Act, 47 U.S.C.  543(l)(1). A cable operator that is not subject to effective competition within its cable service area may file a petition with the Commission, seeking a finding that particular circumstances exist that make it consistent with the public interest, convenience, and necessity to allow the operator to convert its cable system to an open video system. Nothing herein shall be construed to affect the terms of any franchising agreement or other contractual agreement. Note 1: An example of a circumstance in which the public interest, convenience and necessity would be served by permitting a cable operator not subject to effective competition to become an open video system operator within its cable service area is where the entry of a facilities-based competitor into its cable service area would likely be infeasible.  76.1502 Certification. (a) An operator of an open video system must certify to the Commission that it will comply with the Commission's regulations in 47 CFR  76.1503, 76.1504, 76.1506(m), 76.1508, 76.1509, and 76.1513. If construction of new physical plant is required, the Commission must approve such certification prior to the commencement of construction. If no new construction is required, the Commission must approve such certification prior to the commencement of service at such a point in time that would allow the applicant sufficient time to comply with the Commission's notification requirements. (b) Certifications must be verified by an officer or director of the applicant, stating that, to the best of his or her information and belief, the representations made therein are accurate. (c) Certifications must be filed on FCC Form 1275 and must include: (1) The applicant's name, address and telephone number; (2) A statement of ownership, including all affiliated entities; (3) If the applicant is a cable operator applying for certification in its cable franchise area, a statement that the applicant is qualified to operate an open video system under Section 76.1501. (4) A statement that the applicant agrees to comply and to remain in compliance with each of the Commission's regulations in  76.1503, 76.1504, 76.1506(m), 76.1508, 76.1509, and 76.1513; (5) If the applicant is required under 47 CFR  64.903(a) of this chapter to file a cost allocation manual, a statement that the applicant will file changes to its manual at least 60 days before the commencement of service; (6) A general description of the anticipated communities or areas to be served upon completion of the system; (7) The anticipated amount and type (i.e., analog or digital) of capacity (for switched digital systems, the anticipated number of available channel input ports); and (8) A statement that the applicant will comply with the Commission's notice and enrollment requirements for unaffiliated video programming providers. (d) Comments or oppositions to a certification must be filed within five days of the Commission's receipt of the certification and must be served on the party that filed the certification. If the Commission does not disapprove certification within ten days after receipt of an applicant's request, the certification will be deemed approved. If disapproved, the applicant may file a revised certification or refile its original submission with a statement addressing the issues in dispute. Such refilings must be served on any objecting party or parties.  76.1503 Carriage of video programming providers on open video systems. (a) Non-discrimination principle. Except as otherwise permitted in applicable law or in this part, an operator of an open video system shall not discriminate among video programming providers with regard to carriage on its open video system, and its rates, terms and conditions for such carriage shall be just and reasonable and not unjustly or unreasonably discriminatory. (b) Demand for carriage. An operator of an open video system shall solicit and determine the level of demand for carriage on the system among potential video programming providers in a non-discriminatory manner. (1) Notification. An open video system operator shall file with the Secretary of the Federal Communications Commission a "Notice of Intent" to establish an open video system, which the Commission will release in a Public Notice. The Notice of Intent shall include the following information: (i) A heading clearly indicating that the document is a Notice of Intent to establish an open video system; (ii) The name, address and telephone number of the open video system operator; (iii) A description of the system's projected service area; (iv) A description of the system's projected channel capacity, in terms of analog, digital and other type(s) of capacity upon activation of the system; (v) A description of the steps a potential video programming provider must follow to seek carriage on the open video system, including the name, address and telephone number of a person to contact for further information; (vi) The starting and ending dates of the initial enrollment period for video programming providers; (vii) The process for allocating the system's channel capacity, in the event that demand for carriage on the system exceeds the system's capacity; and (viii) A certification that the operator has complied with all relevant notification requirements under the Commission's open video system regulations concerning must-carry and retransmission consent (Section 76.1506), including a list of all local commercial and non-commercial television stations served, and a certificate of service showing that the Notice of Intent has been served on all local cable franchising authorities entitled to establish requirements concerning the designation of channels for public, educational and governmental use. (2) Information. An open video system operator shall provide the following information to a video programming provider within five business days of receiving a written request from the provider, unless otherwise included in the Notice of Intent: (i) The projected activation date of the open video system. If a system is to be activated in stages, the operator should describe the respective stages and the projected dates on which each stage will be activated; (ii) A preliminary carriage rate estimate; (iii) The information a video programming provider will be required to provide to qualify as a video programming provider, e.g., creditworthiness; (iv) Technical information that is reasonably necessary for potential video programming providers to assess whether to seek capacity on the open video system, including what type of customer premises equipment subscribers will need to receive service; (v) Any transmission or reception equipment needed by a video programming provider to interface successfully with the open video system; and (vi) The equipment available to facilitate the carriage of unaffiliated video programming and the electronic form(s) that will be accepted for processing and subsequent transmission through the system. (3) Qualifications of video programming providers. An open video system operator may impose reasonable, non-discriminatory requirements to assure that a potential video programming provider is qualified to obtain capacity on the open video system. (c) One-third limit. If carriage demand by video programming providers exceeds the activated channel capacity of the open video system, the operator of the open video system and its affiliated video programming providers may not select the video programming services for carriage on more than one-third of the activated channel capacity on such system. (1) Measuring capacity. For purposes of this section: (i) If an open video system carries both analog and digital signals, an open video system operator shall measure analog and digital activated channel capacity independently; (ii) Channels that an open video system is required to carry pursuant to the Commission's regulations concerning public, educational and governmental channels and must-carry channels shall be included in activated channel capacity for purposes of calculating the one-third of such capacity on which the open video system operator and its affiliates are allowed to select the video programming for carriage. Such channels shall not be included in the one-third of capacity on which the open video system operator is permitted to select programming where demand for carriage exceeds system capacity; (iii) Channels that an open video system operator carries pursuant to the Commission's regulations concerning retransmission consent shall be included in activated channel capacity for purposes of calculating the one-third of such capacity on which the open video system operator and its affiliates are allowed to select the video programming for carriage. Such channels shall be included in the one-third of capacity on which the open video system operator is permitted to select programming, where demand for carriage exceeds system capacity, to the extent that the channels are carried as part of the programming service of the operator or its affiliate, subject to paragraph (c)(1)(iv); and (iv) Any channel on which shared programming is carried shall be included in "activated channel capacity" for purposes of calculating the one-third of such capacity on which the open video system operator and its affiliates are allowed to select the video programming for carriage. Such channels shall be included in the one-third of capacity on which the open video system operator is permitted to select programming, where demand for carriage exceeds system capacity, to the extent the open video system operator or its affiliate is one of the video programming providers sharing such channel. Note to paragraph (c)(1)(iv): For example, if the open video system operator and two unaffiliated video programming providers each carry a programming service that is placed on a shared channel, the shared channel shall count as 0.33 channels against the one-third amount of capacity allocable to the open video system operator, where demand for carriage exceeds system capacity. (2) Allocating capacity. An operator of an open video system shall allocate activated channel capacity through a fair, open and non-discriminatory process; the process must be insulated from any bias of the open video system operator and verifiable. (i) If an open video system carries both analog and digital signals, an open video system operator shall treat analog and digital capacity separately in allocating system capacity. (ii) Subsequent changes in capacity or demand. An open video system operator must allocate open capacity, if any, at least once every three years, beginning three years from the date of service commencement. Open capacity shall be allocated in accordance with this section. Open capacity shall include all capacity that becomes available during the course of the three-year period, as well as capacity in excess of one-third of the system's activated channel capacity on which the operator of the open video system or its affiliate selects programming. An operator shall maintain a file of qualified video programming providers who have requested carriage or additional carriage since the previous allocation of capacity. Information regarding how a video programming provider should apply for carriage must be made available upon request. Note 1 to paragraph (c)(2): An open video system operator will not be required to comply with the regulations contained in this section if there is no open capacity to be allocated at the end of the three year period. Note 2 to paragraph (c)(2): An open video system operator shall be required to accommodate changes in obligations concerning public, educational or governmental channels or must-carry channels in accordance with Sections 611, 614 and 615 of the Communications Act and the regulations contained in this part. (iii) Channel sharing. An open video system operator may carry on only one channel any video programming service that is offered by more than one video programming provider (including the operator s video programming affiliate), provided that subscribers have ready and immediate access to any such programming service. Nothing in this section shall be construed to impair the rights of programming services. Note 1 to paragraph (c)(2)(iii): An open video system operator may implement channel sharing only after it becomes apparent that one or more video programming services will be offered by multiple video programming providers. An open video system operator may not select, in advance of any duplication among video programming providers, which programming services shall be placed on shared channels. Note 2 to paragraph (c)(2)(iii): Each video programming provider offering a programming service that is carried on a shared channel must have the contractual permission of the video programming service to offer the service to subscribers. The placement of a programming service on a shared channel, however, is not subject to the approval of the video programming service or vendor. Note 3 to paragraph (c)(2)(iii): Ready and immediate access in this context means that the channel sharing is "transparent" to subscribers. (iv) Open video system operator discretion. Notwithstanding the foregoing, an operator of an open video system may: (A) Require video programming providers to request and obtain system capacity in increments of no less than one full-time channel; however, an operator of an open video system may not require video programming providers to obtain capacity in increments of more than one full-time channel; (B) Limit video programming providers from selecting the programming on more capacity than the amount of capacity on which the system operator and its affiliates are selecting the programming for carriage; and (C) Refuse carriage on its open video system to a competing, in-region cable operator or its affiliates that offers cable service to subscribers located in the service area of the open video system, except where the allocation of open video system capacity to a competing cable operator is consistent with the public interest, convenience, and necessity. Note to paragraph (c)(2)(iv)(C): The Commission will except situations where it is determined that facilities-based competition will not be significantly impeded. We will provide a specific exception in a situation in which: (1) the competing, in-region cable operator and affiliated systems offer service to less than 20% of the households passed by the open video system; and (2) the competing, in-region cable operator and affiliated systems provide cable service to a total of less than 17,000 subscribers within the open video system's service area. (3) Nothing in this paragraph shall be construed to limit the number of channels that the open video system operator and its affiliates, or another video programming provider, may offer to provide directly to subscribers. Co-packaging is permissible among video programming providers, but may not be a condition of carriage. Video programming providers may freely elect whether to enter into co-packaging arrangements. Note to paragraph (c)(3): Any video programming provider on an open video system may co-package video programming that is selected by itself, an affiliated video programming provider and/or unaffiliated video programming providers on the system.  76.1504 Rates, terms and conditions for carriage on open video systems. (a) Reasonable rate principle. An open video system operator shall set rates, terms, and conditions for carriage that are just and reasonable, and are not unjustly or unreasonably discriminatory. (b) Differences in rates. (1) An open video system operator may charge different rates to different classes of video programming providers, provided that the bases for such differences are not unjust or unreasonably discriminatory. (2) An open video system operator shall not impose different rates, terms, or conditions based on the content of the programming to be offered by any unaffiliated video programming provider. (c) Just and reasonable rate presumption. A strong presumption will apply that carriage rates are just and reasonable for open video system operators where at least one unaffiliated video programming provider, or unaffiliated programming providers as a group, occupy capacity equal to the lesser of one-third of the system capacity or that occupied by the open video system operator and its affiliates, and where any rate complained of is no higher than the average of the rates paid by unaffiliated programmers receiving carriage from the open video system operator. (d) Examination of rates. Complaints regarding rates shall be limited to video programming providers that have sought carriage on the open video system. If a video programming provider files a complaint against an open video system operator meeting the above just and reasonable rate presumption, the burden of proof will rest with the complainant. If a complaint is filed against an open video system operator that does not meet the just and reasonable rate presumption, the open video system operator will bear the burden of proof to demonstrate, using the principles set forth below, that the carriage rates subject to the complaint are just and reasonable. (e) Determining just and reasonable rates subject to complaints. Carriage rates subject to complaint shall be presumed just and reasonable if they are no greater than an imputed carriage rate based on the following: The imputed rate will reflect what the open video system operator, or its affiliate, "pays" for carriage of its own programming. Use of this approach is appropriate in circumstances where the pricing is applicable to a new market entrant (the open video system operator) that will face competition from an existing incumbent provider (the incumbent cable operator), as opposed to circumstances where the pricing is used to establish a rate for an essential input service that is charged to a competing new entrant by an incumbent provider. With respect to new market entrants, an efficient component pricing model will produce rates that encourage market entry. If the carriage rate to an unaffiliated program provider surpasses what an operator earns from carrying its own programming, the rate can be presumed to exceed a just and reasonable level. An open video system operator's price to its subscribers will be determined by several separate costs components. One general category are those costs related to the creative development and production of programming. A second category are costs associated with packaging various programs for the open video system operator's offering. A third category related to the infrastructure or engineering costs identified with building and maintaining the open video system. Contained in each is a profit allowance attributed to the economic value of each component. When an open video system operator provides only carriage through its infrastructure, however, the programming and packaging flows from the independent program provider, who bears the cost. The open video system operator avoids programming and packaging costs, including profits. These avoided costs should not be reflected in the price charged an independent program provider for carriage. The imputed rate also seeks to recognize the loss of subscribers to the open video system operator's programming package resulting from carrying competing programming.  76.1505 Public, educational and governmental access. (a) An open video system operator shall be subject to public, educational and governmental access requirements for every cable franchise area with which its system overlaps. (b) An open video system operator must ensure that all subscribers receive any public, educational and governmental access channels within the subscribers' franchise area. (c) An open video system operator may negotiate with the local cable franchising authority of the jurisdiction(s) which the open video system serves to establish the open video system operator's obligations with respect to public, educational and governmental access channel capacity, services, facilities and equipment. These negotiations may include the local cable operator if the local franchising authority, the open video system operator and the cable operator so desire. (d) If an open video system operator and a local franchising authority are unable to reach an agreement regarding the open video system operator's obligations with respect to public, educational and governmental access channel capacity, services, facilities and equipment within the local franchising authority's jurisdiction: (1) The open video system operator must satisfy the same public, educational and governmental access obligations as the local cable operator by connecting with the cable operator's public, educational and governmental access channel feeds and by sharing the costs directly related to supporting public, educational and governmental access, including costs of public, educational and governmental access services, facilities and equipment, and equipment necessary to achieve the connection. The open video system operator must provide the same amount of public, educational and governmental access as the local cable operator is required to carry. (2) The local franchising authority shall impose the same rules and procedures on an open video system operator as it imposes on the local cable operator with regard to the open video system operator's use of channel capacity designated for public, educational and governmental access use when such capacity is not being used for such purposes. (3) The local cable operator is required to permit the open video system operator to connect with its public, educational and governmental access channel feeds. The open video system operator and the cable operator may decide how to accomplish this connection, taking into consideration the exact physical and technical circumstances of the cable and open video systems involved. If the cable and open video system operator cannot agree on how to accomplish the connection, the local franchising authority may decide. The local franchising authority may require that the connection occur on government property or on public rights of way. (4) The costs of connection and maintaining public, educational and governmental access channel capacity, services, facilities and equipment shall be divided equitably between the cable operator and the open video system operator. Shared costs shall include capital contributions and any other costs or investments directly relating to or supporting public, educational and governmental access and required by the cable operator's franchise agreement. Capital expenses incurred prior to the open video system operator's connection shall be subject to cost sharing on a pro-rata basis to the extent such investments have not been fully amortized by the cable operator. (5) The local franchising authority may not impose public, educational and governmental access obligations on the open video system operator that would exceed those imposed on the local cable operator. (6) Where there is no existing local cable operator, the open video system operator must make a reasonable amount of channel capacity available for public, educational and governmental use, as well as provide reasonable support for services, facilities and equipment relating to such public, educational and governmental use. If a franchise agreement previously existed in that franchise area, the open video system operator shall be required to maintain the previously existing public, educational and governmental access terms of that franchise agreement. Absent a previous cable franchise agreement, the open video system operator shall be required to provide channel capacity, services, facilities and equipment relating to public, educational and governmental access equivalent to that prescribed in the franchise agreement(s) for the nearest operating cable system with a commitment to provide public, educational and governmental access. Note to paragraph (d)(6): If a cable system converts to an open video system, the operator will be required to maintain the previously existing terms of its public, educational and governmental access obligations. (7) The open video system operator must adjust its system(s) to comply with new public, educational and governmental access obligations imposed by a cable franchise renewal; provided, however, that an open video system operator will not be required to displace other programmers using its open video system to accommodate public, educational and governmental access channels. The open video system operator shall comply with such public, educational and governmental access obligations whenever additional capacity is or becomes available, whether it is due to increased channel capacity or decreased demand for channel capacity. (8) The open video system operator and/or the local franchising authority may file a complaint with the Commission, pursuant to our dispute resolution procedures set forth in Section 76.1514, if the open video system operator and the local franchising authority cannot agree as to the application of the Commission's rules regarding the open video system operator's connection and/or cost sharing obligations under this section. (e) If an open video system operator maintains an institutional network, as defined in Section 611(f) of the Communications Act, the local franchising authority may require that educational and governmental access channels be designated on that institutional network to the extent such channels are designated on the institutional network of the local cable operator. (f) An open video system operator shall not exercise any editorial control over any public, educational, or governmental use of channel capacity provided pursuant to this subsection, provided, however, that any open video system operator may prohibit the use on its system of any channel capacity of any public, educational, or governmental facility for any programming which contains nudity, obscene material, indecent material as defined in  76.701(g), or material soliciting or promoting unlawful conduct. For purposes of this section, material soliciting or promoting unlawful conduct shall mean material that is otherwise proscribed by law. An open video system operator may require any access user, or access manager or administrator agreeing to assume the responsibility of certifying, to certify that its programming does not contain any of the materials described above and that reasonable efforts will be used to ensure that live programming does not contain such material.  76.1506 Carriage of television broadcast signals. (a) The provisions of Subpart D shall apply to open video systems in accordance with the provisions contained in this subpart. (b) For the purposes of this Subpart S, television stations are significantly viewed when they are viewed in households that do not receive television signals from multichannel video programming distributors as follows: (1) For a full or partial network station -- a share of viewing hours of at least 3 percent (total week hours), and a net weekly circulation of at least 25 percent; and (2) For an independent station -- a share of viewing hours of at least 2 percent (total week hours), and a net weekly circulation of at least 5 percent. See  76.1506(c). Note to paragraph (b): As used in this paragraph, "share of viewing hours" means the total hours that households that do not receive television signals from multichannel video programming distributors viewed the subject station during the week, expressed as a percentage of the total hours these households viewed all stations during the period, and "net weekly circulation" means the number of households that do not receive television signals from multichannel video programming distributors that viewed the station for 5 minutes or more during the entire week, expressed as a percentage of the total households that do not receive television signals from multichannel video programming distributors in the survey area. (c) Significantly viewed signals; method to be followed for special showings. Any provision of Section 76.54 that refers to a "cable television community" or "cable community or communities" shall apply to an open video system community or communities. Any provision of Section 76.54 that refers to "non-cable television homes" shall apply to households that do not receive television signals from multichannel video programming distributors. Any provision of Section 76.54 that refers to a "cable television system" shall apply to an open video system. (d) Definitions applicable to the must-carry rules. Section 76.55 shall apply to all open video systems in accordance with the provisions contained in this section. Any provision of Section 76.55 that refers to a "cable system" shall apply to an open video system. Any provision of section 76.55 that refers to a "cable operator" shall apply to an open video system operator. Any provision of section 76.55 that refers to the "principal headend" of a cable system as defined in section 76.5(pp) shall apply to the equivalent of the principal headend of an open video system. Any provision of section 76.55 that refers to a "franchise area" shall apply to the service area of an open video system. (e) Signal carriage obligations. Any provision of section 76.56 that refers to a "cable television system" or "cable system" shall apply to an open video system. Any provision of section 76.56 that refers to a "cable operator" shall apply to an open video system operator. Section 76.56(d)(2) shall apply to open video systems as follows: An open video system operator shall make available to every subscriber of the open video system all qualified local commercial television stations and all qualified non-commercial educational television stations carried in fulfillment of its carriage obligations under this section. (f) Channel positioning. Open video system operators shall comply with the provisions of section 76.57 to the closest extent possible. Any provision of section 76.57 that refers to a "cable operator" shall apply to an open video system operator. Any provision of section 76.57 that refers to a "cable system" shall apply to an open video system, except the references to "cable system" in section 76.57(d) which shall apply to an open video system operator. (g) Notification. Any provision of section 76.58 that refers to a "cable operator" shall apply to an open video system operator. Any provision of section 76.58 that refers to a "cable system" shall apply to an open video system. Any provision of section 76.58 that refers to a "principal headend" shall apply to the equivalent of the principal headend for an open video system. (h) Modification of television markets. Any provision of section 76.59 that refers to a "cable system" shall apply to an open video system. Any provision of section 76.59 that refers to a "cable operator" shall apply to an open video system operator. (i) Compensation for carriage. Any provision of section 76.60 that refers to a "cable operator" shall apply to an open video system operator. Any provision of section 76.60 that refers to a "cable system" shall apply to an open video system. Any provision of section 76.60 that refers to a "principal headend" shall apply to the equivalent of the principal headend for an open video system. (j) Disputes concerning carriage. Any provision of section 76.61 that refers to a "cable operator" shall apply to an open video system operator. Any provision of section 76.61 that refers to a "cable system" shall apply to an open video system. Any provision of section 76.61 that refers to a "principal headend" shall apply to the equivalent of the principal headend for an open video system. (k) Manner of carriage. Any provision of section 76.62 that refers to a "cable operator" shall apply to an open video system operator. (l) Retransmission consent. Section 76.64 shall apply to open video systems in accordance with the provisions contained in this paragraph. (1) Any provision of section 76.64 that refers to a "cable system" shall apply to an open video system. Any provision of section 76.64 that refers to a "cable operator" shall apply to an open video system operator. (2) Must-carry/retransmission consent election notifications shall be sent to the open video system operator. An open video system operator shall make all must- carry/retransmission consent election notifications received available to the appropriate programming providers on its system. (3) Television broadcast stations are not required to make the same election for open video systems and cable systems in the same geographic area. (4) An open video system commencing new operations shall notify all local commercial and noncommercial broadcast stations as required under paragraph (l) of this section on or before the date on which it files with the Commission its Notice of Intent to establish an open video system. (m) Sports broadcast. Section 76.67 shall apply to open video systems in accordance with the provisions contained in this paragraph. (1) Any provisions of section 76.67 that refers to a "community unit" shall apply to an open video system or that portion of an open video system that operates or will operate within a separate and distinct community or municipal entity (including unincorporated communities within unincorporated areas and including single, discrete unincorporated areas). (2) Notification of programming to be deleted pursuant to this section shall be served on the open video system operator. The open video system operator shall make all notifications immediately available to the appropriate video programming providers on its open video system. An open video system operator shall not be subject to sanctions for any violation of these rules by an unaffiliated program supplier if the operator provided proper notices to the program supplier and subsequently took prompt steps to stop the distribution of the infringing program once it was notified of a violation. (n) Exemption from input selector switch rules. Any provision of Section 76.70 that refers to a "cable system" or "cable systems" shall apply to an open video system or open video systems. (o) Special relief and must-carry complaint procedures. The procedures set forth in Section 76.7 shall apply to special relief and must-carry complaints relating to open video systems, and not the procedures set forth in Section 76.1514 (Dispute resolution). Any provision of Section 76.7 that refers to a "cable television system operator" or "cable operator" shall apply to an open video system operator. Any provision of Section 76.7 that refers to a "cable television system" shall apply to an open video system. Any provision of Section 76.7 that refers to a "system community unit" shall apply to an open video system or that portion of an open video system that operates or will operate within a separate and distinct community or municipal entity (including unincorporated communities within unincorporated areas and including single, discrete unincorporated areas).  76.1507 Competitive access to satellite cable programming. (a) Any provision that applies to a cable operator under Sections 76.1000 through 76.1003 shall also apply to an operator of an open video system and its affiliate which provides video programming on its open video system, except as limited by paragraph (a)(1)-(3) of this section. Any such provision that applies to a satellite cable programming vendor in which a cable operator has an attributable interest shall also apply to any satellite cable programming vendor in which an open video system operator has an attributable interest, except as limited by paragraph (a)(1)-(3) of this section. (1) Section 76.1002(c)(1) shall only restrict the conduct of an open video system operator, its affiliate that provides video programming on its open video system and a satellite cable programming vendor in which an open video system operator has an attributable interest, as follows: No open video system operator or its affiliate that provides video programming on its open video system shall engage in any practice or activity or enter into any understanding or arrangement, including exclusive contracts, with a satellite cable programming vendor or satellite broadcast programming vendor for satellite cable programming or satellite broadcast programming that prevents a multichannel video programming distributor from obtaining such programming from any satellite cable programming vendor in which an open video system operator has an attributable interest, or any satellite broadcasting vendor in which an open video system operator has an attributable interest for distribution to person in areas not served by a cable operator as of October 5, 1992. (2) Section 76.1002(c)(2) shall only restrict the conduct of an open video system operator, its affiliate that provides video programming on its open video system and a satellite cable programming vendor in which an open video system operator has an attributable interest, as follows: No open video system operator or its affiliate that provides video programming on its open video system shall enter into any exclusive contracts, or engage in any practice, activity or arrangement tantamount to an exclusive contract, for satellite cable programming or satellite broadcast programming with a satellite cable programming vendor in which an open video system operator has an attributable interest or a satellite broadcast programming vendor, unless the Commission determines in accordance with Section 76.1002(c)(4) that such a contract, practice, activity or arrangement is in the public interest. (3) Section 76.1002(c)(3)(i) through (ii) shall only restrict the conduct of an open video system operator, its affiliate that provides video programming on its open video system and a satellite cable programming vendor in which an open video system operator has an attributable interest, as follows: (i) Unserved areas. No open video system operator shall enter into any subdistribution agreement or arrangement for satellite cable programming or satellite broadcast programming with a satellite cable programming vendor in which an open video system operator has an attributable interest or a satellite broadcast programming vendor in which an open video system operator has an attributable interest for distribution to persons in areas not served by a cable operator as of October 5, 1992. (ii) Served areas. No open video system operator shall enter into any subdistribution agreement or arrangement for satellite cable programming or satellite broadcast programming with a satellite cable programming vendor in which an open video system operator has an attributable interest or a satellite broadcast programming vendor in which an open video system operator has an attributable interest, with respect to areas served by a cable operator, unless such agreement or arrangement complies with the limitations set forth in Section 76.1002(c)(3)(iii). (b) No open video system programming provider in which a cable operator has an attributable interest shall: (1) engage in any practice or activity or enter into any understanding or arrangement, including exclusive contracts, with a satellite cable programming vendor or satellite broadcast programming vendor for satellite cable programming or satellite broadcast programming that prevents a multichannel video programming distributor from obtaining such programming from any satellite cable programming vendor in which a cable operator has an attributable interest, or any satellite broadcasting vendor in which a cable operator has an attributable interest for distribution to person in areas not served by a cable operator as of October 5, 1992. (2) enter into any exclusive contracts, or engage in any practice, activity or arrangement tantamount to an exclusive contract, for satellite cable programming or satellite broadcast programming with a satellite cable programming vendor in which a cable operator has an attributable interest or a satellite broadcast programming vendor, unless the Commission determines in accordance with Section 76.1002(c)(4) that such a contract, practice, activity or arrangement is in the public interest.  76.1508 Network non-duplication. (a) Sections 76.92 through 76.97 shall apply to open video systems in accordance with the provisions contained in this section. (b) Any provision of section 76.92 that refers to a "cable community unit" or "community unit" shall apply to an open video system or that portion of an open video system that operates or will operate within a separate and distinct community or municipal entity (including unincorporated communities within unincorporated areas and including single, discrete unincorporated areas). Any provision of section 76.92 that refers to a "cable television community" shall apply to an open video system community. Any provision of section 76.92 that refers to a "cable television system's mandatory signal carriage obligations" shall apply to an open video system's mandatory signal carriage obligations. (c) Any provision of section 76.94 that refers to a "cable system operator" or "cable television system operator" shall apply to an open video system operator. Any provision of section 76.94 that refers to a "cable system" or "cable television system" shall apply to an open video system except section 76.94(e) and (f) which shall apply to an open video system operator. Open video system operators shall make all notifications and information regarding the exercise of network non-duplication rights immediately available to all appropriate video programming provider on the system. An open video system operator shall not be subject to sanctions for any violation of these rules by an unaffiliated program supplier if the operator provided proper notices to the program supplier and subsequently took prompt steps to stop the distribution of the infringing program once it was notified of a violation. (d) Any provision of section 76.95 that refers to a "cable system" or a "cable community unit" shall apply to an open video system or that portion of an open video system that operates or will operate within a separate and distinct community or municipal entity (including unincorporated communities within unincorporated areas and including single, discrete unincorporated areas).  76.1509 Syndicated program exclusivity. (a) Sections 76.151 through 76.163 shall apply to open video systems in accordance with the provisions contained in this section. (b) Any provision of section 76.151 that refers to a "cable community unit" shall apply to an open video system. (c) Any provision of section 76.155 that refers to a "cable system operator" or "cable television system operator" shall apply to an open video system operator. Any provision of section 76.155 that refers to a "cable system" or "cable television system" shall apply to an open video system except section 76.155(c) which shall apply to an open video system operator. Open video system operators shall make all notifications and information regarding exercise of syndicated program exclusivity rights immediately available to all appropriate video programming provider on the system. An open video system operator shall not be subject to sanctions for any violation of these rules by an unaffiliated program supplier if the operator provided proper notices to the program supplier and subsequently took prompt steps to stop the distribution of the infringing program once it was notified of a violation. (d) Any provision of section 76.156 that refers to a "cable community" shall apply to an open video system community. Any provision of section 76.156 that refers to a "cable community unit" or "community unit" shall apply to an open video system or that portion of an open video system that operates or will operate within a separate and distinct community or municipal entity (including unincorporated communities within unincorporated areas and including single, discrete unincorporated areas). Any provision of sections 76.156 through 76.158, and 76.163 that refers to a "cable system" shall apply to an open video system. (e) Any provision of section 76.159 that refers to "cable television" or a "cable system" shall apply to an open video system. (f) Any provision of section 76.161 that refers to a "community unit" shall apply to an open video system or that portion of an open video system that is affected by this rule.  76.1510 Application of certain Title VI provisions. The following sections within Part 76 shall also apply to open video systems: Sections 76.71, 76.73, 76.75, 76.77 and 76.79 (Equal Employment Opportunity Requirements); Sections 76.503 and 76.504 (ownership restrictions); Section 76.981 (negative option billing); and Sections 76.1300, 76.1301 and 76.1302 (regulation of carriage agreements); provided, however, that these sections shall apply to open video systems only to the extent that they do not conflict with this subpart S. Section 631 of the Communications Act (subscriber privacy) shall also apply to open video systems.  76.1511 Fees. An open video system operator may be subject to the payment of fees on the gross revenues of the operator for the provision of cable service imposed by a local franchising authority or other governmental entity, in lieu of the franchise fees permitted under Section 622 of the Communications Act. Gross revenues under this paragraph means all gross revenues received by an open video system operator or its affiliates, including all revenues received from subscribers and all carriage revenues received from unaffiliated video programming providers. Gross revenues does not include revenues collected by unaffiliated video programming providers from their subscribers. Any gross revenues fee that the open video system operator or its affiliate collects from subscribers shall be excluded from gross revenues. An operator of an open video system may designate that portion of a subscriber's bill attributable to the fee as a separate item on the bill.  76.1512 Programming information. (a) An open video system operator shall not unreasonably discriminate in favor of itself or its affiliates with regard to material or information (including advertising) provided by the operator to subscribers for the purpose of selecting programming on the open video system, or in the way such material or information is provided to subscribers. Note to paragraph (a): "Material or information" as used in paragraph (a) of this section means material or information that a subscriber uses to actively select programming at the point of program selection. (b) In accordance with paragraph (a) of this section: (1) An open video system operator shall not discriminate in favor of itself or its affiliate on any navigational device, guide or menu; (2) An open video system operator shall not omit television broadcast stations or other unaffiliated video programming services carried on the open video system from any navigational device, guide (electronic or paper) or menu. For programming services that an open video system subscriber has not ordered, menus provided by an open video system operator shall, at a minimum, inform the subscriber how to access an additional screen that lists the unordered programming services. (c) An open video system operator shall ensure that video programming providers or copyright holders (or both) are able to suitably and uniquely identify their programming services to subscribers. (d) An open video system operator shall transmit programming identification without change or alteration if such identification is transmitted as part of the programming signal.  76.1513 Dispute resolution. (a) Complaints. Any party aggrieved by conduct that it alleges to constitute a violation of the regulations set forth in this part or in Section 653 of the Communications Act (47 U.S.C.  573) may commence an adjudicatory proceeding at the Commission. The Commission shall resolve any such dispute within 180 days after the filing of a complaint. (b) Alternate dispute resolution. An open video system operator may not provide in its carriage contracts with programming providers that any dispute must be submitted to arbitration, mediation, or any other alternative method for dispute resolution prior to submission of a complaint to the Commission. (c) Notice required prior to filing of complaint. Any aggrieved party intending to file a complaint under this section must first notify the potential defendant open video system operator that it intends to file a complaint with the Commission based on actions alleged to violate one or more of the provisions contained in this part or in Section 653 of the Communications Act. The notice must be in writing and must be sufficiently detailed so that its recipient(s) can determine the specific nature of the potential complaint. The potential complainant must allow a minimum of ten (10) days for the potential defendant(s) to respond before filing a complaint with the Commission. (d) General pleading requirements. Complaint proceedings under this part are generally resolved on a written record consisting of a complaint, answer, and reply, but may also include other written submissions such as briefs and written interrogatories. All written submissions, both substantive and procedural, must conform to the following standard: (1) Pleadings must be clear, concise, and explicit. All matters concerning a claim, defense or requested remedy, should be pleaded fully and with specificity; (2) Pleadings must contain facts which, if true, are sufficient to constitute a violation of the Communications Act or of a Commission regulation or order, or a defense to such alleged violation; (3) Facts must be supported by relevant documentation or affidavit; (4) Legal arguments must be supported by appropriate judicial, Commission, or statutory authority; (5) Opposing authorities must be distinguished; (6) Copies must be provided of all non-Commission authorities relied upon which are not routinely available in national reporting systems, such as unpublished decisions or slip opinions of courts or administrative agencies; and (7) Parties are responsible for the continuing accuracy and completeness of all information and supporting authority furnished in a pending complaint proceeding. Information submitted, as well as relevant legal authorities, must be current and updated as necessary and in a timely manner at any time before a decision is rendered on the merits of the complaint. (e) Complaint. (1) A complaint filed under this part shall contain: (i) The name of the complainant and each defendant; (ii) The type of entity that describes complainant (e.g., individual, private association, partnership, or corporation), the address and telephone number of the complainant, and the address and telephone number of each defendant; (iii) The name, address and telephone number of complainant's attorney, if complainant is represented by counsel; (iv) Citation to the section of the Communications Act and/or the Commission regulation or order alleged to have been violated; (v) A complete statement of facts, which, if proven true, would constitute such a violation; (vi) Any evidence that supports the truth or accuracy of the alleged facts; (vii) Evidence that the open video system operator's conduct at issue violated a section of the Communications Act and/or Commission regulation or order. (viii) If discrimination in rates, terms, and conditions of carriage is alleged, documentary evidence shall be submitted such as a preliminary carriage rate estimate or a programming contract that demonstrates a differential in price, terms or conditions between complainant and a competing video programming provider or, if no programming contract or preliminary carriage rate estimate is submitted with the complaint, an affidavit signed by an officer of complainant alleging that a differential in price, terms or conditions exists, a description of the nature and extent (if known or reasonably estimated by the complainant) of the differential, together with a statement that defendant refused to provide any further specific comparative information; (ix) If a programming contract or a preliminary carriage rate estimate is submitted with the complaint in support of the alleged violation, specific references to the relevant provisions therein; and (x) The specific relief sought. (2) Every complaint alleging a violation of the open video system requirements shall be accompanied by a sworn affidavit signed by an authorized officer or agent of the complainant. This affidavit shall contain a statement that the affiant has read the complaint and that to the best of the affiant's knowledge, information, and belief formed after reasonable inquiry, it is well grounded in fact and is warranted under Commission regulations and policies, or is a good faith argument for the extension, modification or reversal of such regulations or policies, and it is not interposed for any improper purpose. If the complaint is signed in violation of this rule, the Commission upon motion or its own initiative, shall impose upon the complainant an appropriate sanction. (3) The following format may be used in cases to which it is applicable, with such modifications as the circumstances may render necessary: Before The Federal Communications Commission, Washington, D.C. 20554 In the Matter of Complainant v. File No. (To be inserted by the Commission) Defendant. [Insert Subject or Nature of Issue: Unjust or Unreasonable Discrimination in Rates, Terms, and Conditions; Discriminatory Denial of Carriage] Open Video System Complaint To: The Commission. The complainant (here insert full name of complainant and type of entity of such complainant): 1. (Here state the complainant's post office address and telephone number). 2. (Here insert the name, address and telephone number of each defendant). 3. (Here insert fully and clearly the specific act or thing complained of, together with such facts as are necessary to give full understanding of the matter, including relevant legal and documentary support). Wherefore, complainant asks (here state specifically the relief desired). (Date) (Name of complainant) (Name, address, and telephone number of attorney, if any) (4) The complaint must be accompanied by appropriate evidence demonstrating that the required notification pursuant to paragraph (c) of this section has been made. (f) Answer. (1) Any open video system operator upon which a complaint is served under this section shall answer within thirty (30) days of service of the complaint, unless otherwise directed by the Commission. (2) The answer shall advise the parties and the Commission fully and completely of the nature of any and all defenses, and shall respond specifically to all material allegations of the complaint. Collateral or immaterial issues shall be avoided in answers and every effort should be made to narrow the issues. Any defendant failing to file and serve an answer within the time and in the manner prescribed by these rules may be deemed in default and an order may be entered against defendant in accordance with the allegations contained in the complaint. (3) The answer shall state concisely any and all defenses to each claim asserted and shall admit or deny the averments on which the adverse party relies. If the defendant is without knowledge or information sufficient to form a belief as to the truth of an averment, the defendant shall so state and this has the effect of a denial. When a defendant intends in good faith to deny only part of an averment, the answer shall specify so much of it as is true and shall deny only the remainder. The defendant may make its denials as specific denials of designated averments or paragraphs, or may generally deny all the averments except such designated averments or paragraphs as the defendant expressly admits. When the defendant intends to controvert all averments, the defendant may do so by general denial. (4) Averments in a complaint are deemed to be admitted when not denied in the answer. (5) An answer to a discrimination complaint shall state the reasons for any differential in prices, terms or conditions between the complainant and its competitor, and shall specify the particular justification relied upon in support of the differential. Any documents or contracts submitted pursuant to this subparagraph may be protected as proprietary pursuant to paragraph (j) of this section. (g) Reply. Within twenty (20) days after service of an answer, the complainant may file and serve a reply which shall be responsive to matters contained in the answer and shall not contain new matters. Failure to reply will not be deemed an admission of any allegations contained in the answer, except with respect to any affirmative defense set forth therein. Replies containing information claimed by defendant to be proprietary under paragraph (j) of this section shall be submitted to the Commission in confidence pursuant to the requirements of Section 0.459 of this chapter and clearly marked "Not for Public Inspection." An edited version removing all proprietary data shall be filed with the Commission for inclusion in the public file within five (5) days from the date the unedited reply is submitted, and shall be served on the defendant. (h) Motions. Except as provided in this section, or upon a showing of extraordinary circumstances, additional motions or pleadings by any party will not be accepted. (i) Discovery. (1) The Commission staff may in its discretion order discovery limited to the issues specified by the Commission. Such discovery may include answers to written interrogatories or document production. (2) The Commission staff may in its discretion direct the parties to submit discovery proposals, together with a memorandum in support of the discovery requested. Such discovery requests may include answers to written interrogatories, document production or depositions. The Commission staff will then hold a status conference with the parties, pursuant to paragraph (l) of this section, to determine the scope of discovery. If the Commission staff determines that extensive discovery is required or that depositions are warranted, the staff will advise the parties that the proceeding will be referred to an administrative law judge in accordance with paragraph (o) of this section. (j) Confidentiality of proprietary information. (1) Any materials generated or provided by a party in connection with the pre-complaint notification procedure required under paragraph (c) of this section and in the course of adjudicating a complaint under this provision may be designated as proprietary by that party if the party believes in good faith that the materials fall within an exemption to disclosure contained in the Freedom of Information Act (FOIA), 5 U.S.C.  552(b). Any party asserting confidentiality for such materials shall so indicate by clearly marking each page, or portion thereof, for which a proprietary designation is claimed. If a proprietary designation is challenged, the party claiming confidentiality will have the burden of demonstrating, by a preponderance of the evidence, that the material designated as proprietary falls under the standards for nondisclosure enunciated in the FOIA. (2) Materials marked as proprietary may be disclosed solely to the following persons, only for use in prosecuting or defending a party to the complaint action, and only to the extent necessary to assist in the prosecution or defense of the case: (i) Counsel of record representing the parties in the complaint action and any support personnel employed by such attorneys; (ii) Officers or employees of the opposing party who are named by the opposing party as being directly involved in the prosecution or defense of the case; (iii) Consultants or expert witnesses retained by the parties; (iv) The Commission and its staff; and (v) Court reporters and stenographers in accordance with the terms and conditions of this section. (3) The persons designated in paragraph (j)(2) of this section shall not disclose information designated as proprietary to any person who is not authorized under this section to receive such information, and shall not use the information in any activity or function other than the prosecution or defense in the case before the Commission. Each individual who is provided access to the information by the opposing party shall sign a notarized statement affirmatively stating, or shall certify under penalty of perjury, that the individual has personally reviewed the Commission's rules and understands the limitations they impose on the signing party. (4) No copies of materials marked proprietary may be made except copies to be used by persons designated in paragraph (j)(2) of this section. Each party shall maintain a log recording the number of copies made of all proprietary material and the persons to whom the copies have been provided. (5) Upon termination of the complaint proceeding, including all appeals and petitions, all originals and reproductions of any proprietary materials, along with the log recording persons who received copies of such materials, shall be provided to the producing party. In addition, upon final termination of the complaint proceeding, any notes or other work product derived in whole or in part from the proprietary materials of an opposing or third party shall be destroyed. (k) Other required written submissions. (1) The Commission may, in its discretion, require the parties to file briefs summarizing the facts and issues presented in the pleadings and other record evidence. These briefs shall contain the findings of fact and conclusions of law which that party is urging the Commission to adopt, with specific citations to the record, and supported by relevant authority and analysis. (2) The Commission may require the parties to submit any additional information it deems appropriate for a full, fair, and expeditious resolution of the proceeding, including copies of all contracts and documents reflecting arrangements and understandings alleged to violate the requirements set forth in the Communications Act and in this part, as well as affidavits and exhibits. (3) Any briefs submitted shall be filed concurrently by both the complainant and defendant at such time as is designated by the staff. Such briefs shall not exceed fifty (50) pages. (4) Reply briefs may be submitted by either party within twenty (20) days from the date initial briefs are due. Reply briefs shall not exceed thirty (30) pages. (5) Briefs containing information which is claimed by an opposing or third party to be proprietary under paragraph (j) of this section shall be submitted to the Commission in confidence pursuant to the requirements of Section 0.459 of this chapter, and shall be clearly marked "Not for Public Inspection." An edited version removing all proprietary data shall be filed with the Commission for inclusion in the public file within five (5) days from the date the unedited version is submitted and served on opposing parties. (l) Status conference. (1) In any complaint proceeding under this part, the Commission staff may in its discretion direct the attorneys and/or the parties to appear for a conference to consider: (i) Simplification or narrowing of the issues; (ii) The necessity for or desirability of amendments to the pleadings, additional pleadings, or other evidentiary submissions; (iii) Obtaining admissions of fact or stipulations between the parties as to any or all of the matters in controversy; (iv) Settlement of the matters in controversy by agreement of the parties; (v) The necessity for and extent of discovery, including objections to interrogatories or requests for written documents; (vi) The need and schedule for filing briefs, and the date for any further conferences; and (vii) Such other matters that may aid in the disposition of the complaint. (2) Any party may request that a conference be held at any time after the complaint has been filed. (3) Conferences will be scheduled by the Commission at such time and place as it may designate, to be conducted in person or by telephone conference call. (4) The failure of any attorney or party, following reasonable notice, to appear at a scheduled conference will be deemed a waiver and will not preclude the Commission from conferring with those parties or counsel present. (5) During a status conference, the Commission staff may issue oral rulings pertaining to a variety of interlocutory matters relevant to the conduct of the complaint proceeding including, inter alia, procedural matters, discovery, and the submission of briefs or other evidentiary materials. These rulings will be promptly memorialized in writing and served on the parties. When such rulings require a party to take affirmative action not subject to deadlines established by another provision of this part, such action will be required within ten (10) days from the date of the written memorialization unless otherwise directed by the staff. (m) Specifications as to pleadings, briefs, and other documents; subscriptions. (1) All papers filed in a complaint proceeding under this part must be drawn in conformity with the requirements of Sections 1.49 and 1.50 of this chapter. (2) All averments of claims or defenses in complaints and answers shall be made in numbered paragraphs. The contents of each paragraph shall be limited as far as practicable to a statement of a single set of circumstances. Each claim founded on a separate transaction or occurrence and each affirmative defense shall be separately stated to facilitate the clear presentation of the matters set forth. (3) The original of all pleadings and submissions by any party shall be signed by that party, or by the party's attorney. Complaints must be signed by the complainant. The signing party shall state his or her address and telephone number and the date on which the document was signed. Copies should be conformed to the original. Except when otherwise specifically provided by rule or statute, pleadings need not be verified. The signature of an attorney or party shall be a certificate that the attorney or party has read the pleading, motion, or other paper; that to the best of his or her knowledge, information and belief formed after reasonable inquiry, it is well grounded in fact and is warranted by existing law or a good faith argument for the extension, modification or reversal of existing law; and that it is not interposed for any improper purpose. If any pleading or other submission is signed in violation of this provision, the Commission shall upon motion or upon its own initiative impose upon the party an appropriate sanction. Where the pleading or submission is signed by counsel, the provisions of Sections 1.52 and 1.24 of this chapter shall also apply. (n) Copies; service. (1) The complainant shall file an original plus three copies of the complaint with the Commission. However, if the complaint is addressed against multiple defendants, complainant shall provide three additional copies of the complaint for each additional defendant. (2) An original plus two copies shall be filed of all pleadings and documents other than the complaint. (3) The complainant shall serve the complaint on each defendant at the same time that it is filed at the Commission. (4) All subsequent pleadings and briefs, as well as all letters, documents or other written submissions, shall be served by the filing party on all other parties to the proceeding, together with proof of such service in accordance with the requirements of Section 1.47 of this chapter. (5) The parties to any complaint proceeding brought pursuant to this section may be required to file additional copies of any or all papers filed in the proceeding. (o) Referral to administrative law judge. (1) After reviewing the complaint, answer and reply, and at any stage of the proceeding thereafter, the Commission staff may, in its discretion, designate any complaint proceeding for an adjudicatory hearing before an administrative law judge. (2) Before designation for hearing, the staff shall notify, either orally or in writing, the parties to the proceeding of its intent to so designate, and the parties shall be given a period of ten (10) days to elect to resolve the dispute through alternative dispute resolution procedures, or to proceed with an adjudicatory hearing. Such election shall be submitted in writing to the Commission. (3) Unless otherwise directed by the Commission, or upon motion by the Cable Services Bureau Chief, the Cable Services Bureau Chief shall not be deemed to be a party to a complaint proceeding designated for a hearing before an administrative law judge pursuant to this paragraph. (p) Petitions for reconsideration. Petitions for reconsideration of interlocutory actions by the Commission's staff or by an administrative law judge will not be entertained. Petitions for reconsideration of a decision on the merits made by the Commission's staff should be filed in accordance with Sections 1.104 through 1.106 of this chapter. (q) Interlocutory review. (1) Except as provided below, no party may seek review of interlocutory rulings until a decision on the merits has been issued by the staff or administrative law judge. (2) Rulings listed in this paragraph are reviewable as a matter of right. An application for review of such ruling may not be deferred and raised as an exception to a decision on the merits: (i) If the staff's ruling denies or terminates the right of any person to participate as a party to the proceeding, such person, as a matter of right, may file an application for review of that ruling: (ii) If the staff's ruling requires production of documents or other written evidence, over objection based on a claim of privilege, the ruling on the claim of privilege is reviewable as a matter of right; and/or (iii) If the staff's ruling denies a motion to disqualify a staff person from participating in the proceeding, the ruling is reviewable as a matter of right. (r) Expedited review. (1) Any party to a complaint proceeding under this part aggrieved by any decision on the merits issued by the staff pursuant to delegated authority may file an application for review by the Commission in accordance with Section 1.115 of this chapter. (2) Any party to a complaint proceeding aggrieved by any decision on the merits by an administrative law judge may file an appeal of the decision directly with the Commission, in accordance with Section 1.276(a) and Sections 1.277(a) through (c) of this chapter, except that unless a stay is granted by the Commission, the decision by the administrative law judge will become effective upon release and will remain in effect pending appeal. (s) Frivolous complaints. It shall be unlawful for any party to file a frivolous complaint with the Commission alleging any violation of this part. Any violation of this paragraph shall constitute an abuse of process subject to appropriate sanctions. (t) Statute of limitations. Any complaint filed pursuant to this subsection must be filed within one year of the date on which the following acts or conduct occur which form the basis of the complaint: (1) The open video system operator enters into a contract with the complainant that the complainant alleges to violate one or more of the rules contained in this part; or (2) The open video system operator offers to carry programming for the complainant pursuant to terms that the complainant alleges to violate one or more of the rules contained in this part; or (3) The complainant has notified an open video system operator that it intends to file a complaint with the Commission based on a request for such operator to carry the complainant s programming on its open video system that has been denied or unacknowledged, allegedly in violation of one or more of the rules contained in this part. (u) Remedies for violations. (1) Remedies authorized. Upon completion of such adjudicatory proceeding, the Commission shall order appropriate remedies, including, if necessary, the requiring carriage, awarding damages to any person denied carriage, or any combination of such sanctions. Such order shall set forth a timetable for compliance, and shall become effective upon release. (2) Additional sanctions. The remedies provided in paragraph (u)(1) of this section are in addition to and not in lieu of the sanctions available under Title VI or any other provision of the Communications Act.  76.1514 Bundling of video and local exchange services. An open video system operator may offer video and local exchange services for sale in a single package at a single price, provided that: (1) the open video system operator, where it is the incumbent local exchange carrier, may not require that a subscriber purchase its video service in order to receive local exchange service; and (2) Any local exchange carrier offering such a package must impute the unbundled tariff rate for the unregulated service. Appendix C INSTRUCTIONS FOR FCC FORM 1275 OPEN VIDEO SYSTEM CERTIFICATION OF COMPLIANCE (pending OMB approval) Purpose of this Form Section 653(a)(1) of the Communications Act, 47 U.S.C.  573(a)(1), provides that an open video system operator must certify to the Commission that it complies with the Commission's regulations under Section 653(b) of the Communications Act, 47 U.S.C.  573(b). This FCC Form 1275 is to be used by an open video system applicant to obtain certification from the Commission. The Commission will publish notice of the receipt of FCC Form 1275 and will post the Form on its Internet site. The certification will be deemed approved if the Commission does not disapprove the certification within ten days of the Commission's receipt of the filing. Please be sure to review all relevant FCC regulations and these instructions before completing this Form. Filing Information A hard copy of FCC Form 1275 and all attachments must be filed with the Office of the Secretary, Federal Communications Commission, 1919 M Street N.W., Room 222, Washington D.C., 20554, and with the Office of the Bureau Chief, Cable Services Bureau, 2033 M Street, N.W., Washington, D.C. 20554. The applicant must also file the Form 1275 on computer disk at these same two locations. Such a submission should be on a 3.5 inch diskette formatted in an IBM compatible form using Windows 3.1 and Excel 4.0 software. The diskettes should be submitted in "read only" mode. The diskettes should be clearly labelled as an open video system certification filing, should indicate the applicant's name and date of submission, and should be accompanied by a cover letter. Any attachments or other material not easily stored on computer disk may be filed in hard copy only. Instructions Module A: Company Information. Indicate the applicant's name, address, telephone and fax numbers and the name of a person to contact for further information. Module B: Ownership Information. Attach a statement of ownership interest in the open video system, including all affiliated entities. Module C: Eligibility and Compliance Representations. Line 1: If you are a cable operator applying for certification to operate within your cable franchise area, indicate whether you are qualified to become an open video system operator under Section 76.1501 of the Commission's rules. You must also attach a brief statement explaining how you qualify under Section 76.1501. Section 76.1501 provides that a cable operator is qualified to operate within its cable franchise area if it is subject to "effective competition" in the franchise area, as defined in Section 623(l)(1) of the Communications Act, 47 U.S.C.  543(l)(1). If a cable operator is not subject to effective competition in its cable franchise area, it may still qualify to operate an open video system under Section 76.1501, provided that the Commission has issued a finding that such operation would serve the public interest, convenience, and necessity. If you are not a cable operator applying for certification within your cable franchise area, check "N/A" to indicate that the question is not applicable. Line 2: Indicate whether you agree to comply with Sections 76.1503, 76.1504, 76.1506(m), 76.1508, 76.1509, and 76.1513 of the Commission's rules, implementing Section 653(b) of the Communications Act. In certifying compliance with these regulations, you agree to abide by the Commission's requirements regarding non-discriminatory carriage; just and reasonable rates, terms and conditions; a one-third capacity limit on the amount of activated channel capacity on which an open video system operator may select programming when demand for carriage exceeds system capacity; channel sharing; application of the rules concerning sports exclusivity, network non-duplication, and syndicated exclusivity; and non-discriminatory treatment in presenting information to subscribers. Line 3: Indicate whether you agree to comply with the Commission's requirements for enrollment of and for notice to unaffiliated video programming providers. Line 4: If you are required under Section 64.903(a) of the Commission's rules to file a cost allocation manual, indicate whether you agree to file changes to your cost allocation manual at least 60 days before the commencement of service. If you are not required under Section 64.903(a) to file a cost allocation manual, check "N/A" to indicate that the question is not applicable. Module D: System Information. Line 1: Describe generally the anticipated communities or areas to be served upon completion of your open video system. If the space provided on the form is insufficient, attach additional sheets as necessary. Line 2: Indicate the amount of digital capacity anticipated on the open video system. Line 3: Indicate the amount of analog capacity anticipated on the open video system. Line 4: For switched digital systems, indicate the anticipated number of available channel input ports. Module E: Verification Statement. An officer or director of the applicant must sign and date Form 1275 certifying that, to the best of his or her information and belief, all representations contained in the filing are accurate according to the most recent information available. FCC NOTICE TO INDIVIDUALS REQUIRED BY THE PRIVACY ACT AND THE PAPERWORK REDUCTION ACT The solicitation of personal information in this form is authorized by the Communications Act of 1934, as amended. The information provided in this form is used by the Commission to determine that open video system operators comply with the Commission's regulations under Section 653(b) of the Communications Act. In reaching that determination, or for law enforcement purposes, it may become necessary to provide personal information contained in this form to another government agency. If information requested on this form is not provided, processing may be delayed. All information provided in this form will be available for public inspection. Your response is required to obtain the requested certification. Individuals are not required to respond to a collection of information unless it displays a currently valid OMB control number. Public reporting burden for this information is estimated to average one hour per response, including the time for reviewing instructions, searching existing data sources, gathering and maintaining the data needed, and completing and reviewing the collection of information. Send comments regarding this burden estimate or any other aspect of this collection of information, including suggestions for reducing the burden, to the Federal Communications Commission, Records Management Division, Washington, D.C. 20554. Do not send completed forms to this address.