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If you need the complete document, download the WordPerfect version or Adobe Acrobat version, if available. ***************************************************************** Before the Federal Communications Commission Washington, D.C. 20554 ) In the Matter of ) Petition for Relief of ) ) LORILEI COMMUNICATIONS INC., ) d/b/a THE FIRM, ) Petitioner, ) ) vs. ) CSR 4627-L ) TELECABLE OF COLUMBUS, INC., ) Respondent ) MEMORANDUM OPINION AND ORDER Adopted: May 13, 1997 Released: May 15, 1997 By the Chief, Cable Services Bureau: I. INTRODUCTION 1. Lorilei Communications, Inc., d/b/a The Firm (herein "The Firm"), filed a petition for relief pursuant to Section 76.975 of the Commission's rules against TeleCable of Columbus, Inc. (herein "TeleCable") alleging violations of the Commission's commercial leased access rules. TeleCable has filed an Opposition. II. BACKGROUND 2. In 1984, Congress amended the Communications Act of 1934 by adding among other things a commercial leased access requirement, pursuant to which cable operators with 36 or more activated channels must set aside part of their channel capacity for use by video programmers that are not affiliated with them. The Cable Television Consumer Protection and Competition Act of 1992 (the "1992 Cable Act") revisited the leased access requirement and directed the Commission to establish rules for determining maximum reasonable rates for, and reasonable terms and conditions for the use of, commercial leased access channels. Pursuant to that Congressional directive, the Commission established regulations applicable to leased access channels in its proceedings in Implementation of Sections of the Cable Television Consumer Protection and Competition Act of 1992; Rate Regulation, MM Docket 92-266, (the Rate Order), 8 FCC Rcd 5631, 5956-5961 (1993). The Commission revisited these regulations in Implementation of Sections of the Cable Television Consumer Protection and Competition Act of 1992, Leased Commercial Access, Second Report and Order and Second Order on Reconsideration of the First Report and Order, CS Docket 96-90, 62 Fed. Reg. 11364, March 12, 1997 ("Second Order"). 3. The leased access regulations initially required, among other things, that cable operators provide a schedule of rates "[u]pon request" to prospective leased access programmers. In the recently adopted Second Order, the Commission set a 15 day response time from the date of a written request. A 30 day response time was established for systems who qualify for "small system" rate relief. Additionally, the regulations provide for the determination of maximum monthly leased access rates by means of an average implicit fee formula, which is described in the regulations. The Commission also adopted procedures for resolution of disputes, providing for the filing of a petition for relief within sixty days of an alleged violation of a leased access statutory or regulatory provision and for the filing of a response. III. THE PLEADINGS 4. The petition describes The Firm as an advertising agency and video production company that produces thirty minute programs for automotive dealers, recreational vehicle dealers, and real estate companies to air on commercial leased access channels. The petition describes efforts by The Firm to obtain a leased access channel on TeleCable's cable system at Columbus, Georgia. The Firm states that it received correspondence from TeleCable containing full-time and part-time leased access rate information and including conditions of service. The Firm objects to a requirement that part-time rates be purchased for a minimum of one hour per day for 30 consecutive days. The Firm contends this minimum purchase requirement is unduly restrictive in violation of Section 76.970(d) of the Commission's rules. The Firm asserts that this requirement is unusual and puts a burden on its programming plans. 5. The Firm also asserts that TeleCable's classification of its proposed programming in the "home shopping" rate category is a violation of Section 76.970(f) of the Commission's rules It argues that its programming properly belongs in the "all other" rate category. 6. The Firm states that TeleCable was informed of its position on these matter by means of several letters, and that the last of these letters dated October 13, 1995 asked for a response so that these matters could be negotiated, but no response has been received from TeleCable. The Firm asks the Commission to consider issuing a notice of apparent liability for forfeiture in the amount of $100,000 as penalty for TeleCable's violation of the rules, to require TeleCable to offer part-time rates in increments as little as one-half hour, which it asserts has become the industry standard for leased access services, and order TeleCable to reclassify its programming in the "all other" rate category. 7. Telecable asserts generally that it is not required to provide leased access channels for The Firm's programming, on the grounds that the statutory leased access provisions do not apply to advertising. Telecable asserts that The Firm is an advertising agency that produces commercials for various products, and that the material which The Firm seeks to have carried seeks to sell a product or service. TeleCable argues that The Firm's programming "is either advertising or shopping and should not be classified in the all other category." Telecable further asserts that, if The Firm's programming qualifies for leased access channels, then its minimum purchase requirement of one hour per day for thirty consecutive days is reasonable and permissible under the leased access statutory and regulatory provisions. TeleCable also requests that the various forms of relief requested by The Firm be denied. Finally, Telecable claims that forfeitures should be imposed on The Firm for abusing the Commission's leased access rules. III. DISCUSSION A. Eligibility for Commercial Leased Access Channels 8. The principal issue presented here is whether TeleCable has an obligation under Section 612 of the 1992 Cable Act and the Commission's implementing regulations to make a leased access channel available for the presentation of programming that includes commercial advertising. We conclude that it does. 9. Section 612(a) states that the purpose of the commercial leased access requirement is to promote competition "in the delivery of diverse sources of video programming and to assure that the widest possible diversity of information sources are made available to the public from cable systems in a manner consistent with the growth and development of cable systems." Section 612(b) implements this goal by mandating that cable operators "designate channel capacity for commercial use by persons unaffiliated with the operator." Cable operators are required to designate stated percentages of activated channels for commercial leased access use. The Commission's dispute resolution rules provide that any person aggrieved by the failure or refusal of a cable operator to make commercial channel capacity available in accordance with the provisions of Section 612 or the Commission's implementing regulations may file a petition for relief with the Commission. 10. The Firm states that it is "an independent video production company" which produces thirty minute programs "to air on commercial leased access channels." We read this statement as a representation that The Firm is a video production company seeking to present video program productions on a commercial leased access channel to be obtained from TeleCable. TeleCable has presented nothing which disputes that representation, beyond its assertion that The Firm's programming contains commercial advertising materials and that The Firm also operates an advertising agency. We find that The Firm qualifies as an unaffiliated "diverse source of video programming" for which TeleCable is required by Section 612 to "designate channel capacity for commercial use." We reject TeleCable's argument that The Firm is not entitled to leased access channels because The Firm's programming includes advertising material. Nothing in Section 612 may be construed as disqualifying The Firm from use of a leased access channel, simply because it is engaged in business as an advertising agency, in addition to being engaged in video production providing a "diverse source of video programming" within the meaning of Section 612. Indeed nothing in Section 612 or the Commission's leased access rules would prohibit a leased access user seeking carriage soley of advertising time. 11. We disagree with TeleCable that Sofer vs. United States supports the proposition that The Firm's programming does not qualify for leased access channels. Sofer involved a claim that a cable operator refused to sell commercial advertising time on a cable system and other unspecified allegations of violations of Section 612 and related regulations. The court in Sofer found that Section 612 and related Commission regulations have no application to commercial advertising. However, the case before us here does not involve the purchase of commercial advertising as was the case in Sofer. Instead, this case involves a request by a video production company for a leased access channel, designated for that use pursuant to Section 612, for the presentation of program productions. Nothing in Sofer or in Section 612 suggests that the inclusion of commercial advertising content in video program productions disqualifies an independent video program producer, such as The Firm, from use of leased access channels for the presentation of such program productions. Indeed, cable operators are precluded from considering the content of leased access programming, except to the extent necessary to establish a reasonable price for such programming. Accordingly, we will direct TeleCable to provide such leased access channel capacity as may be requested by The Firm consistent with the requirements of Section 612. B. Proper Leased Access Rate Category 12. With respect to the rate category dispute, we note that the Commission initially separated leased access programming into three distinct rate categories. Nothing presented in this record shows that The Firm's programming involves any selling of products directly to customers, only that such programming contains some unspecified amount of advertising content. There also is no issue concerning per-event or per channel charges. Therefore, we conclude that The Firm's programming should have been placed in the "all other programming" category, as initially defined in Section 76.970(f)(3). We note in this connection that in the Second Order, the Commission abolished the previous distinction between rates charged to direct sales programmers and rates charged to "all others," on the grounds that it was more appropriate to base maximum rates on the value of channel capacity determined under the leased access regulations than on the different economies among leased access programmers. In addition to resting leased access rates on sounder economics principles, this simplification of rate categories eliminated confusion that may have arisen under the earlier provisions when attempting to determine proper leased access rates based on programming content. On the record before us, we believe it inappropriate to sanction Telecable in view of the lack of clarity that existed under the earlier provisions concerning proper application of leased access rate categories. C. Thirty-Day Minimum Purchase Requirement 13. TeleCable asserts that nothing in the Communications Act or the Commission's rules prohibits the establishment of a thirty-day minimum purchase requirement for part-time leased access channels. TeleCable argues that cable operators must be permitted to maintain minimum purchase requirements, in order to minimize the number of time slots that would otherwise become blank on a channel carrying part-time leased access programming. TeleCable asserts that carriage of part-time programming will inevitably displace full-time programming services and lead to waste of valuable channel capacity that will harm cable operators, full-time programmers and subscribers alike. It suggests that, absent minimum purchase requirements, cable operators will be forced to replace full-time programming with disjointed, randomly spaced blocks of part-time programming on channels with the remaining unused time slots probably remaining dark. TeleCable asserts that cable operators will otherwise be unable to use slots not taken by part-time programming. TeleCable asserts that a further reduction of available channel capacity for new and innovative full-time programmers will result from such inefficient devotion of valuable channel space to part-time programmers. TeleCable asserts that part-time minimum purchase requirements tend to add some measure of programming continuity and help reduce the resulting confusion and dissatisfaction among subscribers that will result from a disjointed mix of part-time programming on a leased access channel. TeleCable also argues that a minimum purchase requirement will guarantee cable operators a minimum amount of compensation for use of extremely valuable channel capacity. 14. TeleCable has provided no empirical evidence that supports the suggestion that part- time leased access will displace full-time service, or that enough time slots will remain unused on channels carrying part-time leased access programs to cause confusion and dissatisfaction among subscribers. Furthermore, Telecable has not described how the thirty-day minimum requirement would be applied. 15. In the Recon. Order the Commission found that the most common programming time increment is typically a one-half hour increment, and that imposing a longer minimum time increment could effectively preclude many leased access programmers from obtaining access. Accordingly, Section 76.971(g) was added to the rules stating that cable operators are not required to accept leases for less that a one-half hour interval. We will expect Telecable to make leased access time available to The Firm in increments of not less than one-half hour, consistent with Section 76.971(g) of our revised leased access regulations. D. Other Forms of Relief 16. The Firm requests relief in the form of compensation for time expended and costs incurred in bringing this action before the Commission. Neither the Communications Act of 1934, as amended, nor the 1992 Cable Act provides for recovery of costs associated with the filing of a petition for relief with the Commission for alleged violations of the statutory leased access provisions or of the Commission's regulations issued under those statutory provisions. Accordingly, petitioner's request for compensation for such costs will be denied. IV. ORDERING CLAUSES 17. For the foregoing reasons, IT IS ORDERED that the petition for relief of The Firm (a) IS GRANTED in part insofar as indicated in Paragraphs 8 through 10 and Paragraph 14 and (b) IS DENIED insofar as it requests imposition of penalties and other forms relief. 18. This action is taken pursuant to authority delegated by Section 0.321 of the Commission's rules, 47 C.F.R.  0.321. FEDERAL COMMUNICATIONS COMMISSION Meredith J. Jones Chief, Cable Services Bureau