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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: ) ) METROPOLITAN FIBER SYSTEMS/NEW ) YORK, INC. d/b/a MFS TELECOM OF ) NEW YORK, and METROPOLITAN ) FIBER SYSTEMS/McCOURT, INC. ) ) Election of Open Video System Option and ) Motion for Extension of Time to Complete) Open Video System Transition ) ) Petition for Reconsideration of ) Cable Services Bureau Decision ) ORDER ON RECONSIDERATION Adopted: May 15, 1997 Released: May 16, 1997 By the Commission: I. INTRODUCTION 1. On March 31, 1997, Metropolitan Fiber Systems of New York, Inc. d/b/a MFS Telecom of New York and Metropolitan Fiber Systems/McCourt, Inc. (jointly referred to as "MFS") filed a Petition for Reconsideration of the decision by the Cable Services Bureau (the "Bureau") denying MFS' November 5, 1996 Election of Open Video System Option ("Election") and Motion for Extension of Time to Complete Open Video System Transition ("Bureau Order"). Oppositions were filed by Time Warner Cable of New York and Paragon Communications (jointly referred to as "Time Warner"), Cablevision of Boston, Inc. ("Cablevision"), and the Massachusetts Cable Television Commission ("MCTC"). 2. Section 1.106 of the Commission's rules provides, in part, that "[p]etitions requesting reconsideration of other final actions taken pursuant to delegated authority will be acted on by the designated authority or referred by such authority to the Commission." The Chief, Cable Services Bureau has referred MFS' petition for reconsideration to the Commission. For the reasons stated below, we deny MFS' Petition for Reconsideration. II. THE BUREAU ORDER 3. On November 5, 1996, MFS filed its Election pursuant to Implementation of Section 302 of the Telecommunications Act of 1996, First Order on Reconsideration ("Transition Order"). In the Transition Order, the Commission provided authorized video dialtone operators 90 days, from August 8, 1996, in which to elect and to effect a transition to one of the four options for providing video programming services: radio based, common carrier, traditional cable, or open video. The Commission acknowledged in the Transition Order that it might not be possible in all circumstances for video dialtone operators to complete the transition in 90 days, and that, in such instances, we would consider reasonable extensions of time based upon a showing of good cause. 4. The Bureau Order denied MFS' request for an extension of time to transition to an open video system pursuant to the Commission's Transition Order. The Bureau examined MFS' legal authority to provide video dialtone service and whether MFS was required to file for Section 214 authorization to provide such service. Because these issues were not presented to the Commission, the Bureau determined that these issues could not be definitively answered and decided not to base its decision on either of these issues. Rather, the Bureau determined that MFS did not operate a video dialtone system under the rules established by the Commission and therefore was not eligible for an extension of time. Under these rules, the Bureau concluded that MFS was required to: (1) give notice to the Commission and interested programmers; (2) establish a basic common carrier platform to reach end-user subscribers; (3) provide sufficient capacity to serve multiple customer programmers; and (4) offer service on a non-discriminatory basis to all programmers. After reviewing the record in the proceeding and other video dialtone decisions, the Bureau concluded that MFS' video dialtone system did not satisfy any of these criteria. III. THE PLEADINGS A. MFS' Petition for Reconsideration 5. MFS states that, by identifying the four indicia of video dialtone service, the Bureau Order correctly adopted a functional approach to determining whether MFS offered video dialtone service. MFS argues that the proper application of these four criteria to MFS' alleged video dialtone service compels grant of MFS' Petition and reversal of the Bureau Order. 6. With regard to the first requirement that a video dialtone operator provide the Commission and interested programmers with notice of the availability of its video dialtone service, MFS asserts that the Bureau Order "completely ignores the fact that the most basic and fundamental form of notice of the availability of a common carrier service is a tariff filed at the Commission." MFS states that it acted in good faith and according to its understanding of the Commission's Common Carrier rules and video dialtone requirements when it tariffed its Video Transport Service, "an action which signaled the availability of a service to transmit video programming." MFS argues that its Video Transport Service tariff filing was sufficient notice to the Commission and interested programmers and that the "expanded notice" requirement relied upon by the Bureau is not found in any Commission rule or discussed by the United States Court of Appeals for the District of Columbia Circuit in National Cable Television Association v. FCC ("NCTA") reviewing the Commission's video dialtone regulations. MFS asserts that the Bureau Order cites only the Commission's BellSouth Telecommunications video dialtone decision ("BellSouth Order") which required expanded notice to potential programmers and that the BellSouth Order does not indicate that this requirement was intended by the Commission to be generally applicable to all video dialtone providers. 7. MFS maintains that application of an expanded notice requirement would limit the availability of video dialtone service from carriers such as MFS that do not restrict service to any particular location: Requiring MFS to observe the same notice procedures as [video dialtone] providers that build ubiquitous network capacity in discrete geographic locations would foreclose MFS's nationally-focused, demand-driven mode of providing [video dialtone] service and thereby limit its availability. . . . Application of the Order's notice "rule," as it expands the Commission's common carrier tariff notice requirements, would have required MFS to analyze the fiber capacity in all of its networks in advance of knowing what the demand for [video dialtone] service might be. Had such a notice rule been applied, customers (both programmers and end users) who might otherwise have seen competition develop in a [video dialtone] configuration would have been denied such an opportunity. 8. With regard to the second requirement that a video dialtone operator provide a basic common carrier platform available to multiple video programmers and a means by which end user subscribers could access any and all of the video programming offered, MFS argues that the Bureau Order incorrectly finds that MFS' system does not provide a video dialtone platform because MFS facilities terminate at the point of presence in a building, rather than at the end user's premises. MFS asserts that the Bureau Order incorrectly ignored MFS' claim that it had made arrangements with Residential Communications Network ("RCN") to connect programmers from the termination of MFS' system at the point of presence in a building and the end user subscriber, stating that: . . . as a condition of service, MFS specified that, in instances where it used the facilities of another entity to reach end users, it will do so only if that entity does not object to affording other programmers nondiscriminatory access to its in-building facilities. If RCN had refused to provide nondiscriminatory access to its intra-building facilities (which it did not do), MFS would not have carried RCN's programming and instead would have served only those end user locations to which its networks in Boston and New York terminate. MFS cites a Commission order approving the New York Telephone ("NYT") video dialtone trial in which the Commission permitted the video dialtone trial to use the coaxial drops of a satellite master antenna television ("SMATV") operator to reach end users. MFS argues that the only difference between MFS' system and the trial approved by the Commission in Application of New York Telephone Company ("NYT Order") is that the SMATV operator's promise to provide nondiscriminatory access to other programmers appeared on the record in that proceeding. 9. In addressing the third video dialtone requirement, that MFS has sufficient capacity to serve multiple video programmers, MFS argues that the Bureau incorrectly determined that RCN occupied the majority of MFS' 110 channel initial capacity. MFS states that "[t]his conclusion, which ignores the evidence presented by MFS, is simply wrong." MFS states that the record in this proceeding clearly establishes that at no time did RCN use more than 50% of the fiber capacity available from MFS' Video Transport Service. Moreover, MFS states that the Bureau Order failed to consider the expandability of MFS' network, arguing that initial capacity is irrelevant if additional capacity is readily available. MFS asserts that the Bureau cannot find that MFS is unable to expand the capacity of its networks either by constructing new fiber or by modifying its electronic equipment because there is no evidence to that effect on the record before the Bureau. 10. Finally, in addressing the fourth video dialtone requirement, that MFS offer its video dialtone service on a nondiscriminatory basis, MFS argues that the Bureau Order incorrectly found that RCN occupied more than 50% of the capacity of MFS's system, and that MFS discriminated against a programmer requesting information regarding carriage on MFS' system. MFS argues that it responded to the programmer by mailing information to the programmer's "established business address," and the letter was returned by the United States Postal Service as "undeliverable." MFS asserts that it "immediately" sent a second letter to the same address the Postal Service previously deemed undeliverable. The second letter was also returned to MFS as undeliverable. MFS argues that these circumstances clearly demonstrates that MFS acted in "good faith" and with any "apparent discriminatory motive." B. Oppositions 11. Time Warner argues that the Bureau's analysis in this proceeding was "far too indulgent of MFS' claims" and that upon concluding that MFS failed to seek or obtain video dialtone authorization pursuant to Section 214 of the Communications Act, the Bureau should have ended its inquiry. Time Warner asserts that, without notice of the availability of a video dialtone operator's service, interested programmers have insufficient opportunity to gain access to the platform, and such access is a "crucial tenet" of video dialtone. Time Warner also asserts that, in addition to the BellSouth Order, the Commission imposed notice requirements on numerous other video dialtone programs. Time Warner argues that: MFS' claim that its "Video Transport Service" tariff provided sufficient notice that it was offering [video dialtone] is disingenuous. The Commission's rules require that tariff language be "clear and unambiguous." MFS' assertions illustrate why such requirement is in place -- to curb confusion and abuse. Where, as here, "Video Transport Service" has a common meaning that does not include [video dialtone], prospective programmers and the Commission could not reasonably have known that MFS contemplated [video dialtone]. 12. In responding to MFS' argument that it provides a basic common carrier platform for its video dialtone service, Time Warner asserts that MFS' facilities are effectively closed to all programmers except for its affiliated programmer, RCN. Time Warner states that other programmers cannot access subscribers over the facility since MFS' facilities do not deliver programming to end users, but rather, terminate at the point of presence of certain select MDU buildings. Time Warner observes that, MFS' statement that in those instances where MFS does not provide facilities directly to the customer's premises, any video programmer will be able to extend its own cable from the point of presence to its own end users is "completely at odds" with the Commission's video dialtone rules, as well as the mandate of the Telecommunications Act of 1996 (the "1996 Act") that open video system operators may not "discriminate among video programmers with regard to carriage." Time Warner also states that MFS' "self-serving statement" that it has the right to require a given video programmer to make its cable link to end users available as necessary to other video programmers is unsupported by any contract language or evidence, and should not be given any weight by the Commission. Time Warner also questions MFS' comparison to the video dialtone trial approved by the Commission in the NYT Order. Time Warner observes that NYT specifically pledged that all programmers would be able to use the in-building coaxial drops at no charge. In addition, Time Warner observes that the arrangement approved by the Commission in the NYT Order was only a video dialtone trial as opposed to MFS' full-scale commercial service, noting the Commission's statement: we find that a trial, by definition, is not generally susceptible to the same level of precision as an actual offering. We emphasize, however, that the Commission expects a greater level of specificity in applications for actual service offerings, as opposed to trials. 13. With regard to the issue of whether MFS offered sufficient capacity to serve multiple customer programmers, Time Warner states that MFS has acknowledged that essentially all capacity on its facilities was dedicated solely to RCN's 100 channels. In response to MFS' claim that the Commission applied only the first factor in determining whether MFS offered sufficient capacity to serve multiple programmers, Time Warner states that the Bureau Order did consider other factors, but could not judge the demand for capacity due to MFS' own failures. Time Warner argues that the Bureau identified three elements necessary for "adequate" video dialtone capacity and concluded that MFS failed to meet at least one of the elements and did not take enough steps to allow the Bureau to even judge whether it met another of the elements. Therefore, Time Warner asserts that it is irrelevant whether MFS has met the third element. Time Warner also states that, MFS's claim that RCN did not use more that 50% of the fiber capacity available from MFS' Video Transport Service, is based on MFS' assertion that "in the near future, MFS will have 330 channels available." Time Warner states that whether MFS could in the future have enough capacity to qualify as video dialtone, well after the video dialtone rules have been repealed, is irrelevant. 14. With regard to the issue of non-discrimination, Time Warner states that RCN occupied all or substantially all of MFS' channel capacity and that this fact alone disqualifies MFS' facilities as a video dialtone system. Moreover, Time Warner argues that "[o]ne element of a non- discriminatory platform is the ability of end users to have access to all video programming offered over the platform." Time Warner states that, because MFS prohibited programmers other than RCN from reaching subscribers without building their own internal distribution infrastructure within each building, MFS failed to provide non-discriminatory access to its alleged video dialtone system. 15. Cablevision opposes MFS' Petition stating that nothing therein refutes, or in any way alters, the findings contained in the Bureau Order. With regard to MFS' claim that the Commission has never required that a video dialtone operator provide the Commission and interested programmers sufficient notice of its alleged video dialtone system, Cablevision states that: . . . the entire premise of the video dialtone framework -- that unaffiliated programmers could offer service directly to consumers -- would be nonsensical if the system operator were not required to notify these programmers of the existence of the video dialtone platform by which they could reach customers. Cablevision states that, given the basic difference between video transport and video dialtone services, there is nothing in MFS' Video Transport Service tariff provision which would lead a video programmer to believe that MFS was an authorized video dialtone operator. 16. With regard to whether MFS' alleged video dialtone system provided sufficient capacity for multiple programmers, Cablevision argues that MFS' claim that it provided sufficient capacity should be rejected because MFS never provided the Bureau with record evidence to demonstrate that its system could accommodate more than 110 channels of capacity. In responding to MFS' claim that its system was readily expandable to serve additional programmers, Cablevision states that the Commission has required that all video dialtone operators demonstrate, upon authorization of their video dialtone platforms, that: (1) they would make available sufficient capacity to serve multiple video programmers upon the inception of operations. Cablevision also argues that the Commission correctly determined that MFS did not make its alleged video dialtone system available on a nondiscriminatory basis. Finally, Cablevision argues that the Commission should order the immediate cessation of MFS' unlawful cable operations and impose fines and penalties upon MFS. 17. MCTC supports the Bureau Order. MCTC addresses specifically the issue of whether MFS provided sufficient notice to the Commission and interested programmers. MCTC argues that the Commission is in the best position to determine whether MFS provided adequate notice and the Commission determined that MFS did not provide such notice. MCTC also asserts that, even assuming that the Commission could somehow divine that MFS was providing video dialtone service, it is difficult to imagine how unaffiliated programmers could reach a similar determination. C. MFS' Reply 18. MFS argues in its reply that nothing in Time Warner, Cablevision and MCTC's oppositions contradicts MFS' claim that it was an authorized video dialtone operator, and that the Bureau Order should be reversed. With regard to the issue of notice, MFS asserts that the only express notice requirements applicable to video dialtone were applied by the Commission to certain incumbent dominant LECs and that those incumbent carriers are, by definition, subject to more specific notice requirements generally than non-dominant carriers such as MFS. MFS also states that "[u]nder the construct implemented by MFS in its tariff, MFS notified prospective customers of the availability of Video Transport Service wherever MFS' network capacity and sufficient demand exist." Next, MFS argues that Time Warner's verb tense argument, that all of MFS' representations regarding its arrangement with RCN refer to future arrangements, is nothing more than "semantical gamesmanship." MFS also maintains that Cablevision's explanation of its affiliated programmer's failure to pursue carriage on MFS' system is unpersuasive. Finally, MFS reiterates its assertion that "at no time has RCN's programming occupied more than 50% of the fiber optic capacity allocated by MFS to this service." Even if this were not the case, MFS asserts that it is permissible for a video dialtone provider to allocate more than 50% of its capacity to a programmer if that party is willing to surrender capacity when subsequently requested by another programmer. IV. DISCUSSION 19. At the outset, we note that, except for the transition periods specifically authorized by the Commission under the Transition Order, video dialtone service is no longer a permissible regulatory option for any entity. Congress repealed the Commission's video dialtone regulations as part of the 1996 Act. We first address MFS' contention that the Bureau erred in concluding that MFS failed to provide sufficient notice to the Commission and interested programmers that it was operating a video dialtone system. The Bureau Order noted that the notice requirement was commonly satisfied when a LEC filed for Section 214 authorization for its video dialtone system, and that MFS could have, but did not accomplish such notice through its alleged video dialtone tariff filing. In its Petition, MFS argues that the Video Transport Service tariff that it filed with the Commission constituted sufficient notice to the Commission and interested programmers. The Bureau properly concluded that MFS' Video Transport Service tariff did not provide the Commission and interested programmers with notice that MFS was operating a video dialtone system. Time Warner correctly states that the Commission's rules require that "[i]n order to remove all doubt as to their proper application, all tariff publications must contain clean and explicit explanatory statements regarding the rates and regulations." That MFS denominated, without further explanation, its purported video dialtone service as "Video Transport Service," a term which has a common meaning, although not that of video dialtone service, is determinative that MFS' tariff provision did not contain a "clean and explicit explanatory statement" providing notice to the Commission and interested programmers that MFS was offering video dialtone service. The finding that MFS did not provide any notice to the Commission and interested programmers renders unnecessary the task of addressing MFS' claim that, as a non-dominant common carrier, MFS was subject to less specific notice requirements than dominant common carriers. 20. MFS also argues that there is no support, either in the Commission's decisions or the District of Columbia Circuit Court's NCTA decision, to support the expanded notice requirement imposed upon MFS. MFS incorrectly interprets the Bureau Order as creating an expanded notice requirement. The Bureau cited the BellSouth Order as an example of the importance of notice in the video dialtone context, and the lack of notice provided by MFS. The Bureau Order stated: While we do not expressly hold, as we did with BellSouth's video dialtone trial, that MFS was required to advertise its alleged video dialtone system to comply with the Commission's video dialtone rules, we find the lack of any notice by MFS to the Commission and interested programmers to be inconsistent with both the spirit and letter of our video dialtone rules. . . 21. MFS also argues that requiring MFS to observe the same notice procedures as video dialtone providers that build site-specific video dialtone systems "would foreclose MFS' nationally- focused, demand-driven mode of providing [video dialtone] service and thereby limit its availability. . . ." This argument has no legal premise and is unpersuasive. The Bureau Order conveyed the responsibility of a video dialtone operator to provide the Commission and interested programmers with notice of its ability to provide video dialtone service. Such a requirement does not foreclose in any way MFS's ability to provide video dialtone service. 22. MFS' arguments do not persuade us that the Bureau erred in concluding that MFS failed to provide the Commission and interested programmers with adequate notice that it was operating a video dialtone system. While this conclusion is sufficient for the Commission to affirm the Bureau Order, we also address MFS' remaining contentions. 23. MFS contends that the Bureau erred in concluding that MFS failed to provide a basic common carrier platform. We observe that MFS does not disagree with the Bureau's conclusion that "[t]he Commission's rules required video dialtone service to include at a minimum, a basic common carrier platform available to multiple video programmers on a non-discriminatory basis, and a means by which end-user subscribers could access any and all of the video programming offered." We affirm this conclusion. Instead, MFS argues that the Bureau erred in ignoring MFS' claim that it had made arrangements with RCN to connect programmers (in those buildings already served by RCN) from the termination of MFS' system at the point of presence in a building to the end user subscriber. Other than its facial assertion, MFS provided no evidence to the Bureau in its Election, and provides no evidence here, that it has made any arrangements with RCN to enable potential programmers to utilize RCN's facilities to reach end user subscribers. MFS has not described the parameters and terms of such "arrangements." 24. MFS' comparison of its system to the NYT video dialtone trial is misplaced. As noted in the Bureau Order: The Commission found that NYT's use of Liberty's coaxial drops was "an acceptable means of complying with the Commission's video dialtone rules during a limited, one-year trial." In addition, Liberty guaranteed that all video programmers would have access to coaxial facilities installed to each apartment at the trial sites at no extra charge. This conflicts significantly with MFS' system, which, at least in some cases, ends at the point of presence within a building. Thereafter it is up to the individual programmer to negotiate with RCN for use of its facilities, or install and maintain its own facilities to serve end-user subscribers. MFS provides no evidence that its circumstances even approach those found in the one-year NYT video dialtone trial approved by the Commission. As noted by the Bureau, NYT's video dialtone system was operated only as a one-year trial and all programmers would have access to coaxial facilities installed to each apartment at the trial site at no extra charge. Conversely, MFS' system was a permanent commercial operation which failed to guarantee programmers access to end-user subscribers. In addition, MFS' claimed arrangement with RCN fails to resolve how, if MFS' system terminates at the point of presence within a building, individual programmers reach end user subscribers. The Bureau correctly concluded that video dialtone operators must provide a basic platform through which multiple video programmers would receive uninterrupted service from the headend to end user subscribers. MFS fails to demonstrate how its system satisfied this requirement. 25. Next, MFS argues that it had sufficient capacity to serve multiple video programmers, that the Bureau Order incorrectly determined that RCN occupied the majority of MFS' 110 channel initial capacity, and that the Bureau failed to consider the expandability of MFS' network in making its determination. In reviewing proposed video dialtone facility applications, the Bureau Orderidentified three elements which are used to evaluate sufficient capacity: (1) the initial capacity available; (2) the ability to expand this capacity; and (3) the demand for capacity. The Bureau Order noted that RCN offers at least 100 analog channels of programming on MFS' 110 channel capacity and MFS does not demonstrate to the contrary. The Bureau Order found that MFS allocated the majority of its 110 analog channels to one programmer, RCN, at the inception of its service. In its Petition for Reconsideration, MFS claims for the first time that there is an unspecified amount of "dark fiber" available to expand its system to accommodate additional programmers. The expandability of MFS' system, although probative of whether MFS' system would have had sufficient capacity to serve multiple programmers in the future, does not address the ability of MFS to serve multiple video programmers at the inception of its alleged video dialtone service. Moreover, MFS provides no evidence that it could or would reallocate channel capacity between RCN and interested programmers. The record was insufficient for the Bureau to determine the demand for capacity on MFS' system because MFS neither provided nor initiated procedures where programmers other than RCN could have sought carriage on its system. 26. MFS also asserts that the Bureau Order was incorrect in its determination that MFS did not offer its video dialtone service on a nondiscriminatory basis. MFS disputes the Bureau's finding that RCN, the only programmer ever to lease channels on MFS' system, occupied more than 50% of the capacity of MFS' system and argues that the Bureau Order erred in finding that MFS discriminated against a programmer requesting information regarding carriage on MFS' system. Despite this contention, MFS never expressly states what percentage of the platform RCN occupied. This failure, combined with MFS' failure to provide evidence that it had procedures through which it would require RCN to cede capacity to interested programmers, indicates that MFS did not demonstrate that its system was available on a nondiscriminatory basis. Finally, MFS argues that it attempted twice to respond to a programmer requesting carriage information, but that its responses were returned as undeliverable. MFS' difficulty in sending correspondence to a recognized programmer at an established business location within the same city is not a justified excuse for not providing the requested information. The Bureau Order correctly determined that MFS failed to provide non-discriminatory access to its alleged video dialtone system. 27. In summary, MFS had the burden of demonstrating that its system complied with the policies of the Commission's video dialtone rules. The Bureau's decision that it failed to meet this burden is correct. MFS has raised no new arguments, nor has it introduced new evidence which brings into question the Bureau Order denying its Election. In light of the foregoing, we find that MFS' Petition for Reconsideration fails to raise issues which warrant reconsideration under Section 1.106 of the Commission rules. V. ORDERING CLAUSES 28. Accordingly, IT IS ORDERED that the Petition for Reconsideration of the Bureau Order denying the Election of Open Video System Option and Motion for Extension of Time to Complete Open Video System Transition filed by Metropolitan Fiber Systems/New York, Inc. d/b/a/ MFS Telecom of New York and Metropolitan Fiber Systems/McCourt, Inc. IS DENIED. 29. IT IS FURTHER ORDERED that, pursuant to Section 0.445 of the Commission's rules, the Cable Services Bureau mail a copy of this Order on Reconsideration to each of the parties. FEDERAL COMMUNICATIONS COMMISSION William F. Caton Acting Secretary