[Federal Register Volume 61, Number 163 (Wednesday, August 21, 1996)]
[Rules and Regulations]
[Pages 43160-43178]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 96-21262]
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FEDERAL COMMUNICATIONS COMMISSION
47 CFR Part 76
[CS Docket No. 96-46; FCC 96-334]
Open Video Systems
AGENCY: Federal Communications Commission.
ACTION: Final rule.
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SUMMARY: The Third Report and Order and Second Order on Reconsideration
adopts and modifies rules and policies concerning open video systems.
The Third Report and Order amends our regulations to reflect the
provisions regarding open video systems of the Telecommunications Act
of 1996 (the ``1996 Act'') with respect to the definition of
``affiliate.'' The Second Order on Reconsideration amends or adopts
regulations with respect to open video systems in response to petitions
for reconsideration regarding the Second Report and Order in this
proceeding. This item further fulfills Congress' mandate in adopting
the 1996 Act and will provide guidance to open video system operators,
video programming providers, and consumers concerning open video
systems.
DATES: Effective Date: The requirements and regulations established in
this decision shall become effective upon approval by OMB of the new
information requirements adopted herein, but no sooner than September
20, 1996. The Commission will publish a document at a later date
notifying the public as to the effective date.
Comments: Written comments by the public on the proposed and/or
modified information collections are due on or before September 20,
1996. Written comments must be submitted by the Office of Management
and Budget (OMB) on the proposed and/or modified information
collections on or before October 21, 1996.
ADDRESSES: 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, NW., Washington, DC
20554, or via the Internet to dconway@fcc.gov, and to Timothy Fain, OMB
Desk Officer, 10236 NEOB, 725-17th Street, NW., Washington, DC 20503 or
via the Internet to fain__t@al.eop.gov.
FOR FURTHER INFORMATION CONTACT: Rick Chessen, Cable Services Bureau,
(202) 418-7200. For additional information concerning the information
collections contained herein, contact Dorothy Conway at 202-418-0217,
or via the Internet at dconway@fcc.gov.
SUPPLEMENTARY INFORMATION: This is a synopsis of the Commission's Third
Report and Order and Second Order on Reconsideration in CS Docket No.
96-46, FCC No. 96-334, adopted August 7, 1996 and released August 8,
1996. The full text of this decision is available for inspection and
copying during normal business hours in the FCC Reference Center (room
239), 1919 M Street, NW., Washington, DC 20554, and may be purchased
from the Commission's copy contractor, International Transcription
Service, (202) 857-3800, 1919 M Street, NW., Washington, DC 20554.
The Second Order on Reconsideration contains proposed and/or
modified information collections. It has been submitted to the OMB for
review, as required by the Paperwork Reduction Act of 1995. 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 the Second Order on
Reconsideration. Comments should address: (a) Whether the proposed
collections of information are necessary to the proper performance of
the functions of the Commission, including whether the information
shall have practical utility; (b) the accuracy of the Commission's
burden estimates; (c) ways to enhance the quality, utility, and clarity
of the information collected; and (d) 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.
OMB Approval Number: 3060-0700.
Title: Implementation of Section 302 of the Telecommunications Act
of 1996; Open Video Systems.
Form Number: FCC Form 1275.
Type of Review: Revision of a currently approved collection.
Respondents: 740. (10 OVS operators, 250 video programming
providers that may request additional Notice of Intent information,
file rate complaints, or initiate dispute cases, 60 broadcast stations
that may elect type of carriage or make network non-duplication
notifications, 100 programming providers that may make notification of
invalid rights claimed, 300 must-carry list requesters, 20 oppositions
to OVS operator certifications.)
Number of Responses: 3754. (10 Notices of Intent, 14 certifications
of compliance filings and refilings, 250 requests for additional Notice
of Intent information, 250 responses to requests for additional Notice
of Intent information, 50 rate complaints, 50 rate justifications, 60
carriage elections, 10 must-carry recordkeepers, 300 must-carry list
requests, 300 provisions of must-carry lists, 1200 notifications of
network non-duplication rights to OVS operators, 100 programming
provider notifications of invalid rights claimed, 1100 OVS operator
notifications of network non-duplication rights to programming
providers, 20 oppositions to certifications of compliance, 20 dispute
case complainants, and 20 dispute case defendants.)
Estimated Burden to Respondents: Notice of Intent requirements: 10
prospective OVS operators are estimated to be in existence within the
next year. Average number of entities that prospective OVS operators
must notify with each Notice of Intent: 45. Average burden to each OVS
operator to complete a Notice of Intent and to provide copies to all
applicable entities: 8 hours apiece; therefore 10 x 8=80 hours.
Estimated number of written requests for additional information that
will be received subsequent to Notices of Intent: 25 per Notice of
Intent x 10 Notices=250. Average burden to prospective video
programming providers to make each written request: 2 hours apiece;
therefore 10 x 25 x 2=500 hours. Average burden to each OVS operator to
provide the additional information to all prospective video programming
providers: 8 hours apiece; therefore 10 x 8=80 hours. Total burden for
all respondents=80+500+80=660 hours. Form 1275 Certification Process
[[Page 43161]]
requirements: We estimate that 14 certification filings and refilings
will result in 10 certified OVS operators. Annual burden to OVS
operators to complete certifications and serve on applicable local
communities and opposition filers: 2 hours apiece; therefore 14 x 2=28
hours. Number of oppositions estimated to be filed with the Commission:
2 per certification; therefore 2 x 14=28. Average burden for completing
oppositions: 4 hours per opposition; therefore 28 x 4=112 hours. Total
burden for all respondents: 28+112=140 hours.
Rate Justification requirements: Estimated number of rate
complaints that video programming providers will file: 5 per OVS
operator; therefore 10 x 5=50. Estimated number of rate justifications
filed by OVS operators in response to rate complaints: 50. Burden to
video programming providers for filing complaints: 1 hour per
complaint; therefore 50 x 1=50 hours. Burden to OVS operators for
filing rate justifications: 20 hours per justification; therefore
10 x 5 x 20=1000 hours. Total burden for all respondents: 50+1,000=1050
hours.
Must-Carry and Retransmission Consent requirements: Number of OVS
operators: 10. Average number of broadcast stations in each OVS
operator's area of carriage: 6. Average burden to broadcast stations
for each election for must-carry or retransmission consent: 2 hours per
election; therefore 10 x 6 x 2 hours=120 hours. Annual recordkeeping
burden for OVS operators to maintain list of its broadcast stations
carried in fulfillment of must-carry requirements: 4 hours per OVS
operator; therefore 10 x 4=40 hours. Estimated annual number of written
requests received by OVS operators: 30 per OVS operator; therefore
10 x 30=300. Burden for completing written requests: .25 hours per
request; therefore 10 x 30 x .25=75 hours. Burden to OVS operators to
respond to requests: .25 hours per request; therefore 10 x 30 x .25=75
hours. Total burden for all respondents: 120+40+75+75=310 hours.
Sports Exclusivity, Network Non-Duplication and Syndicated
Exclusivity requirements: Estimated number of notifications filed by
television broadcast stations to notify OVS operators of exclusive or
non-duplication rights being exercised: 6 stations in each OVS
operator's area of carriage x 20 annual notifications x 10 OVS
operators=1200. Burden to television stations to make notifications: .5
hours per notification; therefore 1200 x .5=600 hours. Estimated number
of notifications filed by programming providers to notify OVS operators
of invalid exclusivity rights claimed: 100. Burden to programming
providers to make notifications: .5 hours per notification; therefore
100 x .5 hours=50 hours. Burden for OVS operator to make notifications
to delete signals available to all programming providers on their
systems: 1 hour per notification x 1100 occurrences=1100 hours. Total
burden for all respondents: 600+150+100=1750 hours.
Dispute Resolution requirements: Estimated number of notices filed
by complainant: 20. Estimated number of defendants' responses to
notices filed: 20. Average burden for each notice and response to
notice: 4 hours apiece; therefore 40 x 4=160 hours. We estimate that
the 20 notices will result in the initiation of 10 dispute cases. The
average burden for complainants and defendants for undergoing all
aspects of the dispute case: 25 hours per case; therefore 20 (10
complainants+10 defendants) x 25=500 hours. Total burden to all
respondents: 160+500=660 hours.
Total Annual Burden to Respondents: 4570 hours. (660+140+1050+
310+1750+660).
Estimated Cost to Respondents: Notices of Intent costs of
stationery and postage at $2 apiece for (10 Notices of Intent x 45
entities)+250 requests for additional information+250 responses to
requests for additional information=$1900.
Form 1275 Certification Process costs of stationery, diskettes, and
postage at $10 for 14 filings and refilings sent to the Commission and
all applicable local communities=$140. Costs of stationery and postage
at $2 apiece for 28 opposition filings=$48. $140+$48=$188.
Rate Justifications costs of stationery and postage at $2 apiece
for 50 rate complaints+50 rate justifications=$200.
Must-Carry and Retransmission Consent costs of stationery and
postage at $2 apiece for 60 carriage elections+300 requests for
lists+300 provisions of lists=$1320.
Sports Exclusivity, Network Non-Duplication and Syndicated
Exclusivity costs of stationery and postage at $2 apiece for 1200
notifications to OVS operators+100 notifications of invalid rights
claimed+1100 OVS operator notifications to programming providers=$4800.
Dispute Resolutions costs of stationery and postage at $2 apiece
for 20 notices+20 responses to notices=$80. Costs of stationery and
postage at $10 apiece for 10 complainants in dispute cases+10
defendants in dispute cases=$200. $80+$200=$280.
Total Estimated Costs to Respondents: $8688. ($1900+
$188+$200+$1320+ $4800+ $280).
Needs and Uses: The information collections contained herein are
necessary to implement the statutory provisions for Open Video Systems
contained in the Telecommunications Act of 1996.
I. Introduction
1. The Telecommunications Act of 1996 added Section 653 to the
Communications Act, establishing open video systems as a new framework
for entry into the video programming marketplace. Section 653 required
that the Commission, within six months after the date of enactment of
the 1996 Act, ``complete all actions necessary (including any
reconsideration) to prescribe regulations'' to govern the operation of
open video systems. Accordingly, on March 11, 1996, the Commission
issued a Notice of Proposed Rulemaking regarding open video systems.
Report and Order and Notice of Proposed Rulemaking in CS Docket No. 96-
46 and CC Docket No. 87-266 (terminated), 61 FR 10496 (March 14, 1996),
FCC 96-99, released March 11, 1996 (``NPRM''). Based on the record
submitted in response to the NPRM, on May 31, 1996, the Commission
adopted a Second Report and Order in which we prescribed rules and
policies for governing the establishment and operation of open video
systems. Second Report and Order in CS Docket No. 96-46, 61 FR 28698
(June 5, 1996), FCC 96-249, released June 3, 1996 (``Second Report and
Order'').
2. In this Second Order on Reconsideration, we address issues
raised in these filings, and modify or clarify our regulations
accordingly. In addition, in the Order and Notice of Proposed
Rulemaking in CS Docket No. 96-85 (``Cable Reform Proceeding''), we
sought comment on the definition of ``affiliate'' in the context of
open video systems. Order and Notice of Proposed Rulemaking in CS
Docket No. 96-85 (Implementation of the Cable Act Reform Provisions of
the Telecommunications Act of 1996) (``Cable Reform Proceeding''), 61
FR 19013 (April 30, 1996) 11 FCC Rcd 5937 (1996). In light of the six-
month deadline set by Congress for the Commission to establish final
open video system regulations, we address the affiliate issue in this
Third Report and Order.
[[Page 43162]]
II. Third Report and Order--Definition of ``Affiliate''
3. Background. In the Cable Reform Proceeding, we specifically
sought comment regarding the definition of ``affiliate'' in the context
of the new statutory provisions governing open video systems. We
subsequently received comments in the Cable Reform Proceeding
addressing this issue. For purposes of our decision in this Third
Report and Order, we incorporate those comments to the extent they
specifically address the definition of affiliation in the context of
the statutory provisions for open video systems. We noted that Congress
added a new definition of ``affiliate'' in Section 3 of Title I of the
Communications Act. This new provision defined ``affiliate'' for
purposes of the Act, unless the context otherwise requires, as: a
person that (directly or indirectly) owns or controls, is owned or
controlled by, or is under common ownership or control with, another
person. For purposes of this paragraph, the term ``own'' means to ``own
an equity interest (or the equivalent thereof) of more than 10 percent.
We noted also, however, that Congress did not alter the separate
definition of ``affiliate'' set forth under Title VI. Under Title VI,
the term ``affiliate'' is defined, when used in relation to any person,
to mean ``another person who owns or controls, is owned or controlled
by, or is under common ownership or control with, such person.'' We
sought comment regarding the definition of the term ``affiliate'' in
the context of the new statutory provisions for open video systems. We
will address the affiliation definition for these provisions in the
Cable Reform Proceeding.
4. Discussion. We agree with those commenters that argue that the
new definition of ``affiliate'' in Title I does not apply to matters
under Title VI since Title VI contains a separate definition of that
term that does not set a percentage threshold as to what constitutes
ownership. For our purposes, therefore, we must determine the point at
which an open video system operator's ownership or control of another
entity, or another entity's ownership or control of the open video
system operator, makes that entity an affiliate for purposes of Section
653. In defining ``affiliate'' for purposes of Section 653, we will
adopt the attribution standard that we use in the program access
context. Thus, as we do in the program access context, we will apply
the definitions contained in the notes to 47 CFR Sec. 76.501 (which
reflect the broadcast attribution rules contained in the notes to 47
CFR Sec. 73.3555), with certain modifications. For instance, in
contrast to the broadcast attribution rules: (a) We will consider an
entity to be an open video system operator's ``affiliate'' if the open
video system operator holds 5% or more of the entity's stock, whether
voting or non-voting; (b) we will not adopt a single majority
shareholder exception; and (c) all limited partnership interests of 5%
or greater will qualify, regardless of insulation. Under the single
majority shareholder exception, where there is a single holder of more
than 50% of a corporation's outstanding voting stock, minority voting
stock interests in the corporation are not attributable to shareholders
irrespective of whether they exceed the 5% benchmark. See 47 CFR
Sec. 73.3555 note 2. In addition, as with both the program access
standard and the broadcast attribution rules, actual working control,
in whatever manner exercised, will also be deemed a cognizable
interest.
III. Second Order on Reconsideration
A. Qualifications to be an Open Video System Operator
5. We decline to modify our decision in the Second Report and Order
to allow non-LECs to operate open video systems, and to allow cable
operators that are subject to effective competition in their cable
franchise areas to convert their cable systems to open video systems.
We disagree with Michigan Cities, et al. that our decision allowing
non-LECs to operate open video systems is inconsistent with the plain
language of the 1996 Act or the Act's legislative history. Permitting
non-LECs to become open video system operators is not only a
permissible reading of the statute, but is most consistent with
Congress' goal of opening all telecommunications markets to
competition. In addition, we disagree with the argument of the National
League of Cities, et al. that our decision to permit cable operators to
convert to open video may defeat the purposes of other Title VI
requirements that apply to cable operators. Congress established cable
and open video systems as two distinct video delivery models, each
offering a particular combination of regulatory benefits and burdens.
That an entity, by assuming the regulatory responsibilities of an open
video system, may be relieved of regulatory responsibilities relating
to cable is neither novel nor improper.
6. While we believe that cable operators should be allowed to
operate open video systems, we also decline to alter our decision that
cable operators may do so in their existing cable franchise areas only
if they are subject to ``effective competition.'' 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 much of Title VI regulation because, in the vast
majority of cases, they will be competing with incumbent cable
operators for subscribers. Our effective competition restriction
implements Congress' intent by ensuring that, where it is the incumbent
cable operator itself that seeks to enter the marketplace as an open
video system operator, there is at least one other multichannel video
programming provider competing in the market.
7. We are not convinced, as NCTA argues, that the potential
presence of multiple video programming providers on open video systems
obviates the need for an effective competition requirement. There is no
assurance that any particular system will generate sufficient
competition between providers of ``comparable'' video programming
services to qualify as a meaningful stand-in for effective facilities-
based competition. While we agree with U S West that the expiration of
a franchise agreement may remove a contractual impediment to a cable
operator's conversion to an open video system, the public interest
rationale that gave rise to the effective competition restriction
remains. So long as a cable operator has the ability to exercise market
power--i.e., is not subject to effective competition--it has not met
the necessary pre-condition for operating an open video system.
8. We also continue to disagree with Cox's argument that the
Commission has no authority to determine whether cable operators that
are also LECs may operate open video systems. The second sentence of
Section 653(a)(1) authorizes the Commission to determine whether any
cable operator may convert to open video, regardless of other services
it may also provide, including local exchange service. The Commission
retains its authority over cable operators that also become LECs
because, as Sprint notes, a cable operator does not lose its identity
as a cable operator simply by offering additional types of services.
B. Certification Process
9. The Second Report and Order fully explains our reasons for not
imposing pre-certification requirements regarding public rights-of-way,
PEG obligations, revisions to cost allocation manuals, or separate
subsidiaries. Petitioners have presented no new evidence or
[[Page 43163]]
arguments that would cause us to change our earlier conclusion.
10. In addition, we will maintain our rule that certification
filings will be deemed approved unless disapproved by the Commission
within ten days. Petitioners have not demonstrated that affirmative
approval is necessary to provide notice to outside parties or to assure
adequate Commission review. Also, because certification precedes the
operator's actual implementation of the Commission's rules, we disagree
with NCTA that the Commission is required, at this stage of the
process, to do more than obtain adequate representations that the
applicant will comply with the Commission's requirements. Further, we
believe that any conflicts that arise regarding the operator's conduct
can be addressed more fully in the 180-day dispute resolution process
than in the ten-day certification process. Finally, we will not modify
our rule that, if new physical plant is required, open video system
operators must obtain Commission approval of their certification prior
to the commencement of construction.
11. We do believe, however, that it is appropriate for a local
government to have a reasonable opportunity to respond to a
certification filing that implicates its community. We therefore will
revise FCC Form 1275, our proposed certification form, to require
applicants to list the names of the local communities in which they
intend to operate, rather than describe them generally. Because some
local communities may not have ready access to the Internet or to the
Commission's public notices, we will also require applicants for
certification to serve a copy of their FCC Form 1275 filing on the
clerk or other designated official of all affected local communities on
or before the date on which it is filed with the Commission. Service by
mail is complete upon mailing, but if mailed, the served documents must
be postmarked at least three days prior to the filing of the FCC Form
1275 with the Commission. Applicants also must inform the local
communities that any oppositions and comments must be filed with the
Commission within five days of an applicant's filing and must be served
on the applicant.
C. Carriage of Video Programming Providers
12. Notification and Enrollment of Video Programming Providers. We
fully considered the costs and benefits of requiring an open video
system operator to provide local notice of its intent to establish an
open video system. The Alliance for Community Media, et al. do not
provide additional evidence concerning these costs or benefits. We
reiterate our finding that dissemination of the Notice of Intent as
required under the Second Report and Order will be a sufficient means
for an entity to notify the public of its intention to establish an
open video system.
13. Open Video System Operator Discretion Regarding Video
Programming Providers. We find that the Second Report and Order fully
considered most of the arguments and evidence raised on reconsideration
by NCTA and Cox, as described above. We explained in the Second Report
and Order that Section 653(a)(1) specifically permits the Commission,
``consistent with the public interest, convenience and necessity'' to
determine when a cable operator may provide programming through an open
video system. We also fully explained our construction of Section
653(b)(1)(A), which gives the Commission the discretion to determine
when it is in the public interest, convenience and necessity for a
cable operator either to become an open video system operator or to
provide video programming over another entity's open video system. We
therefore deny the petitions of NCTA and Cox to the extent they raise
these particular contentions.
14. We also reject the cable operators' argument concerning access
to open video systems by DBS and wireless service providers. The 1996
Act expressed a clear preference for facilities-based competition
between cable operators and telephone companies, and allowing an open
video system operator generally to limit the ability of a competing,
in-region cable operator to obtain capacity on its system would
encourage cable operators to develop and upgrade their own wireline
systems. Cable operators possess substantial market power, and because
these markets have been protected by high entry barriers, cable
operators have been able to maintain prices above the level that would
prevail if the market were competitive. Because of this market power,
cable operators may have different incentives for seeking open video
system capacity than would MVPDs that do not have such market power,
such as DBS and wireless cable providers. Enabling a cable operator to
obtain open video system capacity means that less capacity will be
available for use by the system operator and for other entities. The
open video system therefore could become a less attractive alternative
for consumers, which would help preserve the cable operator's market
power. We believe that these rationales currently do not apply to DBS
or wireless cable providers because these MVPDs do not enjoy
substantial market power. We therefore reaffirm our conclusion in the
Second Report and Order. However, at such time that DBS or wireless
cable providers possess sufficient market power to raise concerns
similar to those associated with existing in-region, competing cable
operators, we will reexamine this conclusion.
15. We also disagree with NCTA's argument that the Commission
impermissibly delegated to open video system operators the discretion
to preclude cable operators from obtaining capacity on the system. In
determining that Section 653(a)(1) allows the Commission to determine
when a cable operator may access an open video system, we merely
interpreted the statute to allow the Commission to prescribe
regulations to govern this situation. We adopted regulations that set
forth the parameters for where a competing, in-region cable operator's
access to an open video system may be limited, and for where access may
not be limited. In any case, we will modify our regulations to
emphasize our decision that, pursuant to the second sentence of Section
653(a)(1), the public interest, convenience and necessity is served by
generally prohibiting a competing, in-region cable operator from
obtaining capacity on an open video system.
16. There are two exceptions to this general rule. First, a
competing, in-region cable operator may access an open video system
when the open video system operator determines that it is in its
interests to grant access. Second, a competing, in-region cable
operator will be granted access to an open video system when such
access will not significantly impede facilities-based competition. As
previously determined, one situation in which facilities-based
competition will be deemed not to be significantly impeded is where:
(a) 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 (b) 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.
17. Allocation of Open Video System Channel Capacity. In the Second
Report and Order, we permitted an open video system operator to
implement its own method for allocating channel capacity to
unaffiliated video programming providers, so long as capacity is
allocated in an open, fair, non-discriminatory manner. We stated that
[[Page 43164]]
the process must be verifiable and insulated from any bias by the
system operator. NCTA's arguments were fully considered and addressed
in the Second Report and Order. NCTA offers no additional facts or
arguments to support their position. Accordingly, we decline to
reconsider our previous conclusion.
18. Reallocation of Channel Capacity. In the Second Report and
Order, we required open video system operators to allocate open
capacity, if any is available, at least once every three years, stating
that requiring reallocation every three years will permit an open video
system operator to sufficiently accommodate subsequent requests for
carriage by video programming providers, while not causing unreasonable
disruption to the system. The Telephone Joint Petitioners do not
provide evidence that would compel the Commission to reconsider that
conclusion. We note in this regard that no new programming service,
which the Telephone Joint Petitioners assert would favor a longer
reallocation period, have filed for reconsideration in this proceeding.
19. Channel Positioning. In the Second Report and Order, we
permitted an open video system operator to assign channel positions,
subject to Section 653's non-discrimination requirements. In the Second
Report and Order we determined that the statute and our implementing
regulations will prevent discrimination against unaffiliated video
programming providers, notwithstanding an open video system operator's
participation in the channel allocation process. The Alliance for
Community Media, et al. do not present new facts or arguments to
support the mandatory involvement of an independent entity.
Accordingly, we decline the Alliance for Community Media's request for
reconsideration.
20. Channel Sharing. In response to the Alliance for Community
Media, et al.'s petition, we clarify that there is no requirement that
a system operator charge a video programming provider a pro-rata fee
because a programming service carried by that provider is placed on a
shared channel. Thus, even if a video programming provider's
programming service is placed on a shared channel, the video
programming provider may be required to pay the same rate as if the
programming service was placed on a non-shared channel. We think this
clarification addresses the Alliance for Community Media, et al.'s
concern that an open video system operator will engage in rate
discrimination by placing favored video programming providers'
programming services on shared channels. Second, ESPN argued that
channel sharing should be conditioned on the approval of programming
services in its reply comments to the NPRM. We fully considered those
views in the Second Report and Order, where we stated that so long as
each video programming provider has the contractual right to offer a
particular program service to subscribers, it is unnecessary for the
open video system operator to obtain the consent of the programming
service in order to place that service on a shared channel. Third, we
agree with NCTA that ad avails associated with a programming service
carried by both the open video system operator or its affiliated video
programming provider and an unaffiliated provider must be shared in an
equitable manner. Examples of acceptable methods of sharing ad avails
include apportioning the revenues from such ad avails on a per
subscriber basis or apportioning the rights to sell the avails
themselves. We will clarify that arrangements with regard to ad avails
will be considered a term or condition of carriage, and an open video
system operator must comply with Section 653(b)(1)(A) in negotiating
their apportionment.
21. Open Video System Operator Co-Packaging of Video Programming
Selected by Unaffiliated Video Programming Providers. We decline to
adopt ESPN's proposal to require the consent of any programming
services involved before a video programming provider may enter into a
co-packaging agreement. We recognize ESPN's legitimate concerns that
its program license agreements frequently contain negotiated terms
related to the marketing of a programming service, including packaging
parameters and trademark use guidelines. However, these are contractual
matters that we believe are best left to the individual negotiations
between the parties involved. If a video programming provider enters
into a co-packaging arrangement that breaches its contractual
obligations, we believe that ESPN and other such programming services
already possess adequate remedies at law. Nothing in our rules should
be construed to infringe upon the rights of programming services with
respect to their program license obligations.
D. Rates, Terms, and Conditions of Service
22. Just and Reasonable Carriage Rates. In its petition, MCI has
provided no new facts or arguments to justify reconsideration of these
concerns in the instant proceeding. We also decline to impose the other
pre-certification and reporting requirements MCI seeks. We believe that
these requirements are inconsistent with our flexible regulatory
approach to the provision of open video system, and are not necessary
to protect either unaffiliated programmers or the public in general. In
addition, we decline to require open video system operators to base
their carriage rates on detailed studies of incremental and stand alone
cost and estimates of actual opportunity cost, as suggested by MCI,
because of the 1996 Act's direction that Title II requirements not be
applied to open video systems, and the limited time allowed for the
review of certifications and complaints. Instead, we reaffirm our
imputed rate approach for determining whether carriage rates are just
and reasonable where the presumption conditions are not present. We
also decline to adopt MCI's proposal to allow parties other than
potential video programming providers seeking carriage on the open
video system to file complaints with the Commission regarding the
carriage rates offered by the system operator. This decision does not
leave other parties who claim to be adversely affected by an open video
system operator's carriage rate without remedies. For example, a party
seeking to challenge a rate it pays for common carrier services
provided by that operator on the ground of improper cost-shifting from
an open video system, retains its rights under section 208 of the
Communications Act to file a complaint.
23. We disagree with the general assertion by the National League
of Cities, et al. that our presumption conditions will not provide
adequate protection to unaffiliated video programming providers. The
National League of Cities et al. have presented no new arguments or
data to refute this conclusion. Moreover, we disagree with National
League of Cities et al.'s contention that the presumption approach
places an undue financial and regulatory burden on the unaffiliated
programmer to determine whether the operators' rates are fair. Our
presumption approach strikes an appropriate balance between the
interests of the open video system operator in establishing service to
end users quickly, without undue regulatory intervention by
competitors, and the interests of unaffiliated programmers in obtaining
just and reasonable carriage rates. The National League of Cities, et
al. also expressed the specific concern that the presumption conditions
will allow the average rate paid by the unaffiliated programming
providers receiving carriage to be ``weighted'' or
[[Page 43165]]
adjusted, but that only the open video system operator will possess the
information necessary to calculate the average or to ``weight'' the
average. We clarify that, as part of its burden of showing that the
presumption conditions are met, an open video system operator will be
required to make available to a complainant all information needed to
calculate the average rate paid by the unaffiliated programming
providers receiving carriage on its system, including the information
needed for any weighting of the individual carriage rates that the
operator has included in the average rate. The complainant may
challenge the weighting methodology used by the open video system
operator as part of its case.
24. In response to the Telephone Joint Petitioners' request, we
clarify that in the Second Report and Order, the phrase ``unaffiliated
programmers as a group'' does not impose a requirement that the
programmers market their programming in competition with the operator.
Rather, the phrase is used to give open video system operators greater
flexibility in meeting the presumption conditions. It allows operators
to meet the requirement by providing carriage to several unaffiliated
programmers that in total occupy the threshold capacity requirement.
25. We reaffirm our basic imputed rate approach for ensuring just
and reasonable open video system carriage rates where the presumption
conditions are not met, but clarify our use of certain terminology. We
structured the imputed rate in the Second Report and Order to reflect
what the open video system operator, or its affiliate, effectively
``pays'' for its own carriage of programming over the system by
starting with the revenues received from the end user subscriber, and
subtracting the costs avoided by the open video system operator by
permitting another programming provider to serve that subscriber. No
petitioner has convinced us that an imputed rate approach is not
suitable to the circumstances of open video system carriage, where a
new market entrant (the open video system operator) will, in the
majority of areas, face competition from an established incumbent (the
cable operator).
26. As we noted in the Second Report and Order, open video systems
are essentially a combination of: (a) the creative development and
production of programming, (b) the packaging of various programs for
the open video system operator's offering, and (c) the creation and
maintenance of infrastructure for the carriage of both the operator's
affiliated programming and unaffiliated programming. Our rules are
intended to ensure that unaffiliated programming providers pay a rate
for carriage that is no more than the carriage price that can be fairly
imputed for the carriage of the operator's affiliated programming
packages. In so doing we seek to attain an important result of the
ECPR, which is that the price the operator charges unaffiliated
programming providers for carriage must be no higher than the sum of
its incremental cost of carriage and the contribution to fixed
infrastructure costs in its retail price of programming.
27. We disagree with the assertion by the Telephone Joint
Petitioners that the Commission errs by using an ECPR methodology to
establish carriage pricing on open video systems, where it is not
appropriate, while declining to use ECPR to establish LEC
interconnection pricing in situations where they assert it is
appropriate. Like ECPR, our imputed rate approach will provide the open
video system operator the same return when it carries unaffiliated
programming as when it carries its own programming. We believe that in
the case of open video systems, application of an ECPR methodology
provides full economic incentives for LEC entry into video in
competition with incumbent cable providers.
28. We disagree also with the assertion by the Telephone Joint
Petitioners that the imputed price omits the incremental cost of
carriage. Under normal market conditions, the imputed price of carriage
will exceed the open video system operator's incremental cost of
carriage (which is greater than zero) and make a contribution to the
fixed infrastructure cost of the open video system. For this reason, we
reject the Telephone Joint Petitioners' assertion that the imputed rate
approach will produce a carriage rate of zero or less. The imputed rate
is based in part on the price charged by the open video system operator
or its affiliate to end-user subscribers. The price charged the
subscriber will generally be greater than the incremental cost of
carriage. In addition, the imputed rate subtracts out the costs of
developing the programming and creating the package, which removes the
costs avoided when unaffiliated programming is carried. After
subtracting these costs, the imputed rate will correspond to the
carriage rate that the open video system operator ``pays'' to carry its
own programming. The imputed rate approach is designed to give the open
video system operator the same economic return when it sells carriage
to unaffiliated programming providers as when it ``sells'' carriage to
its own programming. Consequently, we would expect the use of the ECPR
approach to minimize any disincentives the open video system operator
may have to carry unaffiliated programming.
29. We believe that this result of the imputed rate approach should
be achieved even under the competitive conditions assumed by the
Telephone Joint Petitioners in their petition. Even assuming that, at
the outset of open video system operations, competition lowered the
retail price of video programming to subscribers to the point that the
open video system operator incurred losses, this would not justify the
operator's shifting the burden of such losses to unaffiliated video
programming providers by charging them a higher carriage rate than the
rate that it effectively ``charges'' itself. The unaffiliated
programming providers would also face lower retail prices for their
programming under the competitive conditions assumed by the Telephone
Joint Petitioners. We disagree with the Telephone Joint Petitioners'
assertion that unaffiliated programmers would be largely unaffected by
retail price competition.
30. The imputed rate approach was chosen as a flexible regulatory
approach for determining what are just and reasonable carriage rates in
an imperfectly competitive carriage market. However, it may not be the
sole means of establishing just and reasonable carriage rates. There
may be alternative, market-based approaches to demonstrating that a
challenged rate is just and reasonable, that may also be useful in
particular cases. We would consider such an argument in response to a
complaint regarding a carriage rate. The open video system operator
would be required to demonstrate that its carriage service is subject
to sufficiently strong competitive forces to ensure that its carriage
rates are just and reasonable, or that it has computed its rate using a
methodology that aims to produce or replicate the working of a
competitive carriage market.
31. In addition, on reconsideration, we find that certain aspects
of our explanation and use of terminology should be clarified. As we
stated above, under our approach, the imputed price of carriage for an
affiliated programming package equals the price of the package
delivered to a subscriber minus the cost of creating the package. To
clarify the terms identified by the Telephone Joint Petitioners, in the
Second Report and Order we use the term ``earning'' to refer to the
difference between the price of the package delivered to a subscriber
and the cost of creating the package. We
[[Page 43166]]
use the term ``profit allowance'' to refer to one type of cost of
creating the programming package, namely the cost of capital used to
create the package. We also clarify Section 76.1504 of the rules to
indicate more clearly the types of avoided costs that must be
subtracted by an open video system operator in calculating the imputed
rate.
32. We also clarify in response to the National League of Cities,
et al. that the imputed rate formula will not allow open video system
operators to charge unaffiliated programming providers a price for
carriage equal to the price they charge subscribers for affiliated
programming. The imputed rate formula, as we have discussed, requires
open video system operators to subtract the cost of creating affiliated
programming from the price of the programming. The carriage rate that
unaffiliated programming providers pay will be less than the price
subscribers pay for affiliated programming.
33. Open Video System Carriage Rates Must Not be Unjustly or
Unreasonably Discriminatory. The petitioners' concerns about whether
open video system rates are nondiscriminatory ignores the wording of
the 1996 Act, which prohibits rate differences only when unjust or
unreasonable. As we noted in the Second Report and Order, we decided to
permit carriage rate differentiation because requiring open video
system operators to charge all programming providers the same carriage
rate would exclude providers whose programming has a low market value.
Neither NCTA nor MCI has offered new factual or legal arguments to
refute this reasoning.
34. We disagree with the Alliance for Community Media, et al., that
open video system operators should be required to charge reduced
carriage rates to non-profit programming providers. In the Second
Report and Order, we identified not-for-profit status as one of the
legitimate, objective factors on which open video system operators
could base reduced rates. Moreover, we are concerned about the impact
of mandatory reduced carriage rates on a new entrant in the markets for
video carriage and distribution. Our decision to allow preferred
carriage rates for non-profit programmers on a voluntary basis reflects
our goals of promoting open video system entry and competition with
incumbent cable systems, while providing access to carriage by
unaffiliated programming providers.
E. Gross Revenues Fee
35. We generally reaffirm our conclusions in the Second Report and
Order. We continue to believe that our interpretation represents the
best reading of Section 653(c)(2)(B). We will, however, clarify our
rule to make clear our intent that local governments have the authority
to charge and receive the gross revenue fee. In addition, consistent
with Congress' intent of ensuring ``parity among video providers,'' we
will clarify that any advertising revenues received by an open video
system operator or its affiliates in connection with the provision of
video programming should be included in the fee calculation, where such
revenues are included in the incumbent cable operator's franchise fee
calculation.
36. We agree with NYNEX and U S West that the application of the
gross revenues fee provision should not disadvantage any particular
video programming provider. Like the costs of PEG and must-carry, we
believe that the gross revenues fee is a cost of the platform--in this
case, the cost of using the rights-of-way--that should be shared
equitably among all users of the system. We therefore will permit open
video system operators to recover the gross revenues fee from all video
programming providers on a proportional basis as an element of the
carriage rate.
F. Applicability of Title VI Provisions
37. Public, Educational and Governmental Access Channels. We
continue to believe that open video system operators should in the
first instance be permitted to negotiate their PEG access obligations
with the relevant local franchising authority and, if the parties so
desire, the local cable operator. Furthermore, we continue to believe
that it is necessary to have a default mechanism in case the open video
system operator and the local franchising authority are unable to
agree. We disagree with Comcast that open video system operators should
be required to negotiate with local franchising authorities. Providing
a ``backstop'' is an appropriate balance between imposing Section 611's
requirements and not imposing franchise requirements on open video
systems. If the open video system operator matches the PEG access
obligations of the cable operator, the actual PEG access obligations
imposed on the open video system operator will be, as the statute
requires, to the extent possible no greater or lesser than those
imposed on the cable operator. This is true even if the open video
system operator's obligations are established through our default
mechanism and the cable operator's obligations are established through
negotiation and the franchise process.
38. After considering the arguments made by the various
petitioners, we believe, however, that some modification of our rule
regarding how to establish open video system PEG access obligations is
appropriate. We believe that imposing Section 611 obligations on open
video system operators so that to the extent possible the obligations
are ``no greater or lesser'' than those imposed on cable operators
means that, in the absence of an agreement with the local franchising
authority, an open video system operator must match, rather than share,
the annual PEG access financial contributions of the local cable
operator. Under our current rule, open video system operators are
required to match the PEG access channel capacity provided by the local
cable operator, but are required to share the contributions towards PEG
access services, facilities and equipment. Our modified rule will apply
the matching principle which we have applied to channel capacity also
to PEG contributions that cable operators make, and that are actually
used for PEG access services, facilities and equipment.
39. For in-kind contributions (e.g., cameras, production studios),
we believe that precise duplication would often be unnecessary,
wasteful and inappropriate. Instead, open video system operators may
work out mutually agreeable terms with cable operators over in-kind
equipment, studios and the like so that PEG service to the community is
improved or increased and the open video system operator fulfills its
statutory obligation. As a backstop, however, we will permit the open
video system operator to pay the local franchising authority the
monetary equivalent of the depreciated in-kind contribution, or in the
case of facilities, the annual amortization value. Any matching PEG
access contributions provided by an open video system operator are to
be used by the local franchising authority to fund activities arising
under Section 611.
40. We decline to modify our rule that requires the local cable
operator to permit the open video system operator to connect with the
cable operator's PEG access channel feed. We clarify, however, that any
costs associated with the open video system operator's connection to
the cable operator's PEG access channel feed shall be borne by the open
video system operator. These costs shall be counted towards the open
video system operator's matching obligation described above. We are not
requiring the local cable operator to
[[Page 43167]]
permit others to interconnect with and use their cable system to reach
consumers. Rather, we are simply requiring the local cable operator to
provide its PEG access channel feed to a particular competitor that
shares a similar PEG access obligation in order to avoid an unnecessary
duplication of facilities and promote Congress' goal of competitive
entry.
41. In response to the request of Municipal Services, et al., we
clarify that the negotiated PEG access obligations of an open video
system operator may be enforced regardless of where and when the
agreement is made. Regarding City of Indianapolis's assertion that
channel alignment should not be at the discretion of the open video
system, we affirm our decision in the Second Report and Order that
there is insufficient evidence to support mandating that PEG access
channels be carried at the same channel location on the open video
system operator as on the cable system. City of Indianapolis has
presented no new evidence or argument not presented to the Commission
before.
42. Establishing Open Video System PEG Access Obligations Where No
Local Cable Operator Exists. Our discussion in the Second Report and
Order regarding the establishment of open video system PEG access
obligations where no local cable operator exists was not intended to
foreclose a local franchising authority from negotiating with the open
video system operator. The discussion was intended to explain how to
establish open video system PEG access obligations where no local cable
operator exists and the local franchising authority and the open video
system operator cannot agree. The parties are therefore free to
negotiate PEG access obligations as Alliance for Community, et al.
request. However, if the open video system operator and the local
franchising authority cannot agree, the operator must make a reasonable
amount of channel capacity available for PEG use. In the Second Report
and Order, we found that where a cable franchise previously existed,
such as where a cable system is able to convert to an open video
system, what constitutes a reasonable amount of channel capacity is to
be governed by the previously existing franchise agreement with respect
to PEG access obligations.
43. While we do not believe that Congress intended open video
system PEG access obligations to correct deficiencies in what the local
franchising authority negotiated for cable operator PEG access
obligations, we also recognize the concern that PEG access requirements
should not be frozen in time in perpetuity. We will therefore modify
our approach for a situation in which there was a previously existing
cable franchise, such as where a cable system converts to an open video
system, and provide that, when the open video system operator and the
local franchising authority cannot agree on PEG access obligations, the
local franchising authority may either keep the previously existing PEG
access obligations or may elect to have the open video system
operator's PEG access obligations determined by comparison to the
franchise agreement for the nearest operating cable system that has a
commitment to provide PEG access and that serves a franchise area with
a similar population size. The local franchising authority shall be
permitted to make a similar election every 15 years thereafter.
44. Open Video System PEG Obligations Where System Overlaps with
More than One Franchise Area. While we do not disagree with Telephone
Joint Petitioners that open video systems may be configured differently
from cable systems, as Alliance for Community Media, et al. point out,
Telephone Joint Petitioners provide insufficient support for why open
video systems will not be able to be configured to comply with the PEG
access obligations for each franchise area with which each system
overlaps. In fact, Michigan Cities, et al. demonstrate that, in at
least one situation, it is indeed possible. We therefore deny Telephone
Joint Petitioners' petition with respect to this matter.
45. Institutional Networks. We affirm our decision to preclude
local franchising authorities from requiring open video system
operators to build institutional networks because the cable operator is
required to do so under the terms of its franchise agreement. Because
there is confusion over our interpretation of Section 611 as it applies
to institutional networks, however, we make the following
clarifications. Contrary to the understanding of certain petitioners,
we agree that institutional networks may be required of a cable
operator, but we do not agree that this requirement is found in Section
611. Section 611 only provides that a local franchising authority may
require that channel capacity on institutional networks be designated
for educational or governmental use and does not authorize local
franchising authorities to require cable operators to build
institutional networks. The building of an institutional network is a
requirement negotiated in the franchise agreement. Section
621(b)(3)(D), as added by the 1996 Act, makes clear that a local
franchising authority may require a cable operator to provide
institutional networks as a condition of the initial grant, renewal or
transfer of a franchise. Pursuant to Section 653(c)(1)(C), open video
system operators are not subject to franchise requirements, so we
cannot apply an institutional network requirement to open video
systems.
46. While institutional networks may or may not function like PEG
access as National League of Cities, et al. assert, the statutory
definition is broader than merely PEG use. We do not agree that
precluding the local franchising authority from requiring an open video
system operator to build an institutional network, but permitting the
local franchising authority to require channel capacity on a network if
an open video system operator does build one, is inconsistent, as
Michigan Cities, et al. suggest. Rather, once an open video system
operator decides to build an institutional network, the 1996 Act's
mandate that an open video system operator's PEG access obligations be
no greater or lesser than those of the cable operator become operative.
47. Must-Carry and Retransmission Consent. In the Second Report and
Order, the Commission considered and rejected suggestions similar to
NCTA's that we specifically require the use of a basic tier-type
arrangement in order to provide all subscribers on a system with the
signals carried in fulfillment of the must-carry requirements. As we
noted in the Second Report and Order, the basic tier requirement is
contained in Section 623 of the Communications Act, which does not
apply to open video systems. NCTA has presented no new evidence in
support of a basic tier requirement. We therefore decline to adopt
NCTA's request. We agree with NCTA, however, that video programming
providers should not be required to duplicate must-carry programming
already provided to subscribers from another source.
48. The Commission recognizes ALTV's valid concern that stations
electing must-carry status will have to reimburse open video system
operators for extensive copyright fees that may result from carriage
beyond their local market areas. As ALTV notes, these dangers may be
avoided if open video system operators tailor the distribution of must-
carry signals to the parts of their system that are located within a
station's local market. We believe that our rules provide open video
system operators with an incentive to design
[[Page 43168]]
and construct their systems with this capability. Where an open video
system has such a capability, we will require open video system
operators to limit the distribution of must-carry signals to the
appropriate local markets, unless a local broadcast station consents
otherwise. If an open video system operator cannot limit its
distribution of must-carry signals in this manner, the open video
system operator will be responsible for any increase in copyright fees
and may not pass through such increases to the local station electing
must-carry treatment.
49. Finally, we agree with Tele-TV and U S West that we should
amend our current rule that allows broadcasters to make different
elections among open video systems and cable systems serving the same
geographic area. The ``common election'' requirement is contained in
Section 325(b)(3)(B): ``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.'' In Section 653(c), Congress provided that
Section 325 should apply to open video system operators, to the extent
possible, no greater or lesser than it applies to cable operators. By
directing equal treatment under Section 325, we believe that Congress
intended to remove Section 325 as a distinguishing factor between those
entering the video marketplace as a cable operator and those entering
as an open video operator. In the Second Report and Order, however, we
found that as a practical matter the potential size differences between
open video systems and cable systems could make common election on
overlapping cable and open video systems infeasible. We agree with
Tele-TV that our concern in the Second Report and Order may no longer
apply to the extent that an open video system can tailor the
distribution of local broadcast stations to the appropriate
communities. We will therefore amend our rules to require that
broadcasters make the same election for open video systems and cable
systems serving the same geographic area unless the overlapping open
video system is unable to deliver appropriate signals in conformance
with the broadcast station's elections for all cable systems serving
the same geographic area.
50. Program Access. We believe that our initial interpretation
applying the provisions of Section 628 to open video system programming
providers is reasonable and should stand. Rainbow and NCTA's argument
that Congress limited the applicability of the program access rules to
open video system operators was expressly considered and rejected in
the Second Report and Order.
51. As we stated in the Second Report and Order, an exclusive
contract between a cable-affiliated video programming provider on an
open video system and a cable-affiliated programmer presents many of
the same concerns as an exclusive contract between a cable operator and
a vertically integrated satellite programming vendor. A primary
objective of the program access requirements is the release of
programming to existing or potential competitors of traditional cable
systems so that the public may benefit from the development of
competitive distributors. Exclusive arrangements among cable-affiliated
open video system programming providers and cable-affiliated satellite
programmers may impede the development of open video systems as a
viable competitor to cable. NCTA and Rainbow fail to challenge or
address these concerns.
52. Second, we believe that the benefits of the program access
provisions apply to open video system providers. Contrary to Rainbow's
arguments, open video system programming providers fall within the
definition of MVPDs, which Section 628 identified as the intended
beneficiaries of the program access regime. We believe that Section
602(13)'s list of entities enumerated in that section is expressly a
non-exclusive list. Section 602(13) states that the term MVPD ``means a
person such as, but not limited to, a cable operator, a multichannel
multipoint distribution service, a direct broadcast satellite service.
* * * `` We also agree with those commenters that asserted that open
video system video programming providers fit the definition of MVPD
because they make ``available for purchase, by subscribers or
customers, multiple channels of video programming.
53. Third, we reject NCTA's argument that intra-system competition
would be harmed by applying the program access rules to cable-
affiliated video programming providers on an open video system. Our
concern is the same as in the cable context--that a cable operator
would use its control over programming to keep that programming from
other competing MVPDs. We are concerned that exclusive arrangements
among cable-affiliated open video system programming providers 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 programming providers that
seek to package such programming for distribution to subscribers.
54. We reiterate that the prohibition, absent a Commission public
interest finding, on exclusive contracts applies only to contracts
between cable-affiliated satellite programmers and cable-affiliated
open video system programming providers and contracts between satellite
programmers affiliated with an open video system operator and open
video system programming providers affiliated with an open video system
operator. We note that 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 is subject to challenge under Section 628(b) of the
Communications Act and Section 76.1001 of the Commission's rules.
55. Sports Exclusivity, Network Non-Duplication and Syndicated
Exclusivity. Upon reconsideration, we grant the petition filed by the
Joint Sports Petitioners regarding our current rule governing sports
exclusivity. We find merit in their position that, unlike network non-
duplication and syndicated exclusivity, sports exclusivity requires
infrequent deletions that cannot be recouped once missed. We believe
that our rule that extends the Commission's regulations concerning
sports exclusivity to open video systems must be amended in order to
preserve the same level of protection received by sports teams and
leagues in the cable context. While we hold open video system operators
responsible for compliance with our rules, we also recognize that they
are forced by the structure of an open video system to rely, to a
degree, on individual programming providers who may dispute a claim of
exclusivity or may attempt to substitute a signal for the signal that
is to be deleted. We amend our rule to provide that open video system
operators will be subject to sanctions for any violation of our sports
exclusivity rules. Operators generally may effect the deletion of
signals for which they receive deletion notices unless they receive
notice within a reasonable time from the appropriate programming
provider that the rights claimed are invalid. If a programmer
challenges the validity of claimed exclusive or non-duplication rights,
the open video system operator shall not delete the signal. However, an
open video system operator should be allowed to require indemnification
as a
[[Page 43169]]
condition of carriage for any sanctions it may incur in reliance on a
programmer's claim that certain exclusive or non-duplication rights are
invalid.
56. Contrary to the further concerns mentioned by the Joint Sports
Petitioners, our current rules do not require a sports team or league
to provide notifications to individual video programming providers in
addition to the open video system operator. The holder of exclusive or
non-duplication rights is, of course, free to notify individual
programming providers when it notifies the open video system operator
as required by our rules. In addition, our rules require an open video
system operator to make the notices it receives ``immediately
available'' to the appropriate programming providers on its system.
Given the different types of systems and different circumstances in
which notice will be provided, we do not believe at this time that a
specific time requirement is necessary or appropriate.
57. We also deny U S West's petition for reconsideration which
suggests that the Commission hold individual programming providers
responsible for compliance with our exclusivity and non-duplication
rules, and asks the Commission to further define the ``prompt steps''
that must be taken by an operator in order to avoid liability after a
violation of our rules has occurred. In the Second Report and Order,
the Commission responded to the issues raised in U S West's petition. U
S West does not present any further evidence to support the adoption of
different rules.
58. Local Franchising Requirements. We thoroughly explained the
bases of our findings in the Second Report and Order on these issues.
No parties on reconsideration raise any arguments that lead us to
revisit our conclusions therein. We continue to believe that the
general distinction we adopted reflects Congress' stated intent: state
and local authorities may manage the public rights-of-way in a non-
discriminatory and competitively neutral manner, but may not impose
Title VI franchise or Title VI ``franchise-like'' requirements on open
video system operators.
59. We do, however, clarify our decision in several respects.
First, we clarify that the preemption is limited to Title VI or Title
VI ``franchise-like'' requirements, and does not extend to all types of
potential franchises. If, for example, a state or local government
characterizes permission to use the public rights-of-way as a
``franchise,'' such franchises are not preempted so long as they are
issued in a non-discriminatory and competitively neutral manner. We
agree with U S West that the key in this regard is not how such
requirements are labeled, but their effect. If the local requirements
are Title VI-like requirements that would frustrate Congress' intent in
adopting the 1996 Act's open video provisions, we continue to believe
they are preempted.
60. Second, we clarify that ``non-discriminatory and competitively
neutral'' treatment does not necessarily mean ``equal'' treatment. For
instance, it could be a non-discriminatory and competitively neutral
regulation for a state or local authority to impose higher insurance
requirements based on the number of street cuts an entity planned to
make, even though such a regulation would not treat all entities
``equally.'' Third, we clarify that when the Second Report and Order
stated that local authorities may ensure the public safety in the use
of rights-of-way by ``gas, telephone, electric, cable and similar
companies,'' an open video system would qualify as a ``similar
company.''
61. We continue to disagree with the National League of Cities, et
al. that the narrow preemption in the Second Report and Order violates
the Fifth Amendment. First, although the National League of Cities, et
al. assert that the Second Report and Order ``grossly underestimates''
the compensation due to local authorities, they fail to address the
Commission's finding that the ``before and after'' test--in which the
measure of compensation is the difference in the value of the property
before a partial taking and the value of the property after the partial
taking--is the proper test to apply. Second, we do not agree with the
National League of Cities, et al. that the local community has not
received just compensation unless an open video system operator matches
the franchise and other obligations imposed upon the incumbent cable
operator. Such a requirement would obviously render meaningless
Congress' exemption of open video from Section 621 franchising
requirements, since an open video system operator would be forced to
comply with each of the incumbent cable operator's franchise terms or
be subject to a Fifth Amendment ``takings'' claim. Third, the Second
Report and Order specifically permits the recovery of normal fees
associated with the construction of an open video system: ``[A] state
or local government could impose normal fees associated with zoning and
construction of an open video system, so long as such fees [are]
applied in a non-discriminatory and competitively neutral manner.'' We
clarify, however, that these ``normal fees associated with zoning and
construction'' should not duplicate the compensation provided by the
gross revenues fee. As we stated in the Second Report and Order, 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. The National League of Cities, et al. have not
explained why the fees associated with the construction of open video
systems would be any different than the fees associated with any other
users of the rights-of-way, and why regulations applied in a non-
discriminatory, competitively neutral manner on all users of the
rights-of-way would be insufficient to deal with such matters.
62. Finally, we find that a determination of whether LECs that use
the rights-of-way for open video service remain subject to the same
conditions contained in the pre-existing telephone franchise agreements
can only be made on a case-by-case basis in light of the particular
agreement between the parties. Thus, we make no general conclusions
here.
G. Information Provided to Subscriber
63. On reconsideration, we agree that video programming providers,
including those affiliated with the open video system operator, should
be permitted to develop and use their own navigational devices. We
agree with Tele-TV and NYNEX that individualized navigational devices
could be a factor in subscribers' choice of programming providers,
thereby fostering innovation and competition among providers. While for
technical considerations we will not require open video system
operators to permit programming providers to use their own navigational
devices, we do not believe that the same limitation should be placed on
a provider's right to develop and use their own individualized guides
and menus. We believe that it would be an impermissible term or
condition of carriage under Section 653(b)(1) for an open video system
operator to restrict a video programming provider's ability to use part
of its channel capacity to provide an individualized guide or menu to
its subscribers.
64. We believe that several safeguards are necessary to effectuate
congressional intent and protect unaffiliated programming providers.
First, we reaffirm our conclusion in the Second Report and Order that
an open video system operator cannot evade its non-discrimination
obligations under Section 653(b)(1)(E) simply by having its
navigational devices, guides, or
[[Page 43170]]
menus nominally provided by an affiliate. By this statement, we meant
that where an open video system operator provides no navigational
device, guide or menu of its own, its affiliate's navigational device,
guide or menu will be subject to the requirements of Section
653(b)(1)(E) even though such services are not formally provided by the
open video system operator. We therefore will continue to apply the
non-discrimination requirements of Section 653(b)(1)(E) to the open
video system operator's affiliate where the affiliate provides a
navigational device, guide or menu and the operator does not.
65. Second, if an open video system operator permits video
programming providers, including its affiliate, to develop and use
their own navigational devices, the operator must create an electronic
menu or guide that all video programming providers must carry
containing a non-discriminatory listing of programming providers or
programming services available on the system. These menus or guides
should also inform the viewer how to obtain additional information on
each of the services listed. If an operator provides a system-wide menu
or guide that meets these requirements, its programming affiliate may
create its own menu or guide without being subject to the requirements
of Section 653(b)(1)(E).
66. Third, an open video system operator may not require
programming providers to develop and/or use their own navigational
devices. Upon request, such programming providers must have access to
the navigational device used by the open video system operator or its
affiliate. Thus, for example, an open video system operator may not
require a subscriber of its affiliated programming package to purchase
a second set-top box in order to receive service from an unaffiliated
programming provider that does not wish to use its own set-top box. An
open video system operator need not physically integrate such
programming providers into its affiliated programming package, or list
such programming providers on its affiliate's guide or menu, so long as
it meets the requirement set forth in the Second Report and Order that
no programming service on its navigational device be more difficult to
select than any other programming service.
H. Dispute Resolution
67. We disagree with the Alliance for Community Media, et al. that
not mandating public disclosure and filing of carriage contracts will
result in economic inefficiency. Economic efficiency is promoted by
increased competition. Open video system operators generally will be
new entrants into markets that, although characterized by a degree of
competition, have relatively few sellers of channel capacity over which
video programming may be offered to subscribers. In such markets,
increased competition is promoted when sellers of capacity, such as
open video system operators, can negotiate contracts privately with
individual buyers (i.e., video programming providers), and rival
sellers cannot immediately match the contracts' terms and conditions.
Thus, our rules are designed to increase economic efficiency by
promoting competition in video programming carriage markets.
68. We believe that the National League of Cities, et al. raise
valid concerns that would-be complainants may lack sufficient
information to file a complaint under our pleading rules. We believe it
appropriate to give unaffiliated programming providers seeking carriage
on open video systems some access to other programmer's carriage rates
under certain circumstances. To ensure that the open video system
operator provides useful information to the would-be complainant, we
clarify that the preliminary rate estimates must include, upon request,
all information needed to calculate the average rate paid by the
unaffiliated programmers receiving carriage on the system, including
the information needed for any weighting of the individual carriage
rates that the operator has included in the average rate. This
information may be made available subject to a reasonable non-
disclosure agreement. In addition, we reiterate that the operator's
carriage contracts may be subject to discovery as part of the complaint
procedure.
I. Joint Marketing, Bundling and Structural Separation
69. Joint Marketing. We again decline to adopt NCTA's proposed
restriction on joint marketing. While we agree that Congress' silence
is not determinative, in light of Congress' silence on the issue, we
believe that the burden is on those proposing joint marketing
restrictions to demonstrate that such restrictions are necessary. NCTA
requests that open video system operators be required to inform
incoming callers that other video service providers exist in the area.
To justify such a requirement, NCTA, at a minimum, would have to make
some showing that consumers otherwise would likely be unaware of the
existence of other video service options, such as cable service. NCTA
made no such showing in its initial comments and has presented no new
evidence here. In the absence of record evidence, the Commission
declines to find that consumers would be unaware of the existence of
other video providers such as cable, especially since cable currently
accounts for 91% of multichannel video programming subscribers
nationally, and passes 96% of all television households. NCTA's
petition is denied.
70. Bundling. AT&T and NCTA's concerns were considered and
addressed in the Second Report and Order. They adduce no new evidence
here, nor have they explained why the safeguards adopted by the
Commission are inadequate to protect consumers' interests. The
petitions for reconsideration are denied. On our own motion, we will
correct a typographical error in our rule regarding the bundling of
video and local exchange services. The current text provides, in part,
that any local exchange carrier offering a bundled package must impute
the unbundled tariff rate for the ``unregulated service.'' The rule
will be corrected to be consistent with the text of the Second Report
and Order, which states that a bundled package must impute the
unbundled tariff rate for the ``regulated service.''
71. Structural Separation. We deny the motions of NCTA and the
Alliance for Community Media, et al. to reconsider our decision in the
Second Report and Order, and accordingly decline to impose a separate
affiliate requirement. First, while both NCTA and the Alliance for
Community Media, et al. point out that the Commission need not be
restricted by congressional silence, they both fail to address the
point raised in the Second Report and Order that Congress expressly
directed in Section 653 that Title II requirements not be applied to
``the establishment and operation of an open video system.'' In
addition, as we stated in the Second Report and Order, we believe that
the Commission's Part 64 cost allocation rules and any amendment
thereto will adequately protect regulated telephone ratepayers from a
misallocation of costs that could lead to excessive telephone rates.
Neither NCTA nor the Alliance for Community Media, et al. has advanced
any new evidence or substantive arguments that a separate affiliate
requirement is a necessary additional safeguard to protect against
cross-subsidization.
IV. Regulatory Flexibility Act Analysis
72. As required by Section 603 of the Regulatory Flexibility Act, 5
U.S.C. Sec. 603 (RFA), an Initial Regulatory
[[Page 43171]]
Flexibility Analysis (IRFA) was incorporated in the Report and Order
and Notice of Proposed Rulemaking (``NPRM'') in CS Docket No. 96-46 and
CC Docket No. 87-266 (terminated) (In the Matter of Implementation of
Section 302 of the Telecommunications Act of 1996--Open Video Systems),
FCC 96-99, 61 FR 10496 (March 14, 1996), released March 11, 1996. The
Commission sought written public comments on the proposals in the NPRM
including comments on the IRFA, and addressed these responses in the
Second Report and Order in CS Docket No. 96-46 (In the Matter of
Implementation of Section 302 of the Telecommunications Act of 1996--
Open Video Systems), FCC 96-249, 61 FR 28698 (June 5, 1996), released
June 3, 1996. No IRFA was attached to the Second Report and Order
because the Second Report and Order only adopted final regulations and
did not propose regulations. This Final Regulatory Flexibility Analysis
(FRFA) therefore addresses the impact of regulations on small entities
only as adopted or modified in this Third Report and Order and Second
Order on Reconsideration and not as adopted or modified in earlier
stages of this rulemaking proceeding. The FRFA conforms to the RFA, as
amended by the Contract with America Advancement Act of 1996 (CWAAA),
Public Law No. 104-121, 110 Stat. 847.
73. Need for Action and Objectives of the Rule. The rulemaking
implements Section 302 of the Telecommunications Act of 1996, Public
Law No. 104-104, 110 Stat. 56. Section 302 directs the Commission to
promulgate regulations governing the establishment and operation of
open video systems. The purposes of this action are to establish a
structure for open video systems that provides competitive benefits,
including market entry by new service providers, enhanced competition,
streamlined regulation, investment in infrastructure and technology,
diversity of video programming choices and increased consumer choice.
74. Summary and Assessment of Issues Raised by Petitioners in
Response to the IRFA. With respect to the Third Report and Order,
several parties filed comments in the Cable Reform Proceeding and also
filed petitions for reconsideration of the Second Report and Order
regarding the definition of the term ``affiliate'' in the context of
the new statutory provisions for open video systems. These comments and
the Commission's report are summarized in Section III, above. As
mentioned, no IRFA was attached to the Second Report and Order. In
petitions for reconsideration of the Second Report and Order, however,
some parties raised issues that generally could involve small entities.
For example, local cities urge the Commission to: (1) further ensure
that local governments receive notification of an operator's intent to
establish an open video system, by requiring an operator to serve a
copy of FCC Form 1275 on all affected local municipalities; and (3)
require an open video system operator to match, rather than share, the
local cable operator's PEG access obligations. We grant reconsideration
of these issues. Other parties, including potentially small business
video programming providers, urge the Commission to enhance programming
providers' ability to access information necessary to pursue a rate
complaint against an open video system operator. We also grant
reconsideration on this issue. Local television stations urge the
Commission to require that open video system operators tailor the
distribution of must-carry signals to the parts of their system that
are located within a station's local service area so that stations
electing must-carry status do not have to reimburse the operators for
extensive copyright fees that may result from carriage beyond their
local service areas. We grant reconsideration on this point.
75. Description and Estimate of the Number of Small Entities
Impacted. The RFA defines the term ``small entity'' as having the same
meaning as the terms ``small business,'' ``small organization,'' and
``small governmental jurisdiction,'' and the same meaning as the term
``small business concern'' under Section 3 of the Small Business Act. A
small concern is one which: (1) is independently owned and operated;
(2) is not dominant in its field of operation; and (3) satisfies any
additional criteria established by the Small Business Administration
(SBA). The rules we adopt today apply to municipalities, television
stations, and business video programming providers. The rules also
apply to entities that are likely to become open video system
operators, including local exchange carriers and cable systems.
76. Local Exchange Carriers. Neither the Commission nor SBA has
developed a definition of small providers of local exchange services
(LECs). The closest applicable definition under SBA rules is for
telephone communications companies other than radiotelephone (wireless)
companies. The most reliable source of information regarding the number
of LECs nationwide of which we are aware appears to be the data that we
collect annually in connection with the Telecommunications Relay
Service (TRS). According to our most recent data, 1,347 companies
reported that they were engaged in the provision of local exchange
services. Although it seems certain that some of these carriers are not
independently owned and operated, or have more than 1,500 employees, we
are unable at this time to estimate with greater precision the number
of LECs that would qualify as small business concerns under SBA's
definition. Consequently, we estimate that there are fewer than 1,347
small incumbent LECs that may be affected by this Order.
77. Cable Systems: SBA has developed a definition of small entities
for cable and other pay television services, which includes all such
companies generating less than $11 million in revenue annually. This
definition includes cable systems operators, closed circuit television
services, direct broadcast satellite services, multipoint distribution
systems, satellite master antenna systems and subscription television
services. According to the Census Bureau, there were 1,323 such cable
and other pay television services generating less than $11 million in
revenue that were in operation for at least one year at the end of
1992.
78. The Commission has developed its own definition of a small
cable system operator for the purposes of rate regulation. Under the
Commission's rules, a ``small cable company,'' is one serving fewer
than 400,000 subscribers nationwide. Based on our most recent
information, we estimate that there were 1,439 cable operators that
qualified as small cable system operators at the end of 1995. Since
then, some of those companies may have grown to serve over 400,000
subscribers; thus, we estimate that there are fewer than 1,439 small
entity cable system operators that may be affected by this Order.
79. The Communications Act also contains a definition of a small
cable system operator, which is ``a cable operator that, directly or
through an affiliate, serves in the aggregate fewer than 1 percent of
all subscribers in the United States and is not affiliated with any
entity or entities whose gross annual revenues in the aggregate exceed
$250,000,000.'' The Commission has found that an operator serving fewer
than 617,000 subscribers shall be deemed a small operator. Based on
available data, we find that the number of cable operators serving
617,000 subscribers or less totals 1,450. Although it seems certain
that some of these cable system operators are affiliated with entities
whose gross annual revenues exceed $250,000,000,
[[Page 43172]]
we cannot estimate with greater precision the number of cable system
operators that would qualify as small cable operators under the
definition in the Communications Act.
80. Municipalities: The term ``small governmental jurisdiction'' is
defined as ``governments of * * * districts, with a population of less
than fifty thousand.'' There are 85,006 governmental entities in the
United States. This number includes such entities as states, counties,
cities, utility districts and school districts. We note that any
official actions with respect to open video systems will typically be
undertaken by LFAs, which primarily consist of counties, cities and
towns. Of the 85,006 governmental entities, 38,978 are counties, cities
and towns. The remainder are primarily utility districts, school
districts, and states, which typically are not LFAs. Of the 38,978
counties, cities and towns, 37,566 or 96%, have populations of fewer
than 50,000. Thus, approximately 37,500 ``small governmental
jurisdictions'' may be affected by the rules adopted in this Third
Report and Order and Second Order on Reconsideration.
81. Television Stations: The SBA defines small television
broadcasting stations as television broadcasting stations with $10.5
million or less in annual receipts. 13 CFR Sec. 121.201. According to
the Census Bureau, in 1992, there were 1,155 out of 1,478 operating
television stations reported revenues of less than $10 million for
1992. This represents 78% of all television stations, including non-
commercial stations. The Census Bureau does not separate the revenue
data by commercial and non-commercial stations in this report. Neither
does it allow us to determine the number of stations with a maximum of
10.5 million dollars in annual receipts. Census data also indicates
that 81 percent of operating firms (that owned at least one television
station) had revenues of less than 10 million dollars.
82. Based on the foregoing worst case analysis using census data,
we estimate that our rules will apply to as many as 1,150 commercial
and non-commercial television stations (78 percent of all stations)
that could be classified as small entities. Using a worst case analysis
based on the data in the BIA data base, we estimate that as many as
approximately 771 commercial television stations (about 68 percent of
all commercial televisions stations) could be classified as small
entities. As we noted above, these estimates are based on a definition
that we tentatively believe greatly overstates the number of television
broadcasters that are small businesses. Further, it should be noted
that under the SBA's definitions, revenues of affiliates that are not
television stations should be aggregated with the television station
revenues in determining whether a concern is small. The estimates
overstate the number of small entities since the revenue figures on
which they are based do not include or aggregate such revenues from
non-television affiliated companies.
83. Video Programming Providers: Open video systems are an entirely
new framework for delivering video programming to consumers. No open
video systems have yet been certified to operate. Therefore, it is not
possible at this time to estimate the size or number of video
programming providers that may seek capacity on open video systems. We
anticipate that two types of video programming providers may arise: (1)
video programming providers seeking to utilize an open video system to
offer a package of individual programming services via open video
systems to subscribers; and (2) providers seeking to offer only one
programming service. It is not possible to estimate the impact on or
the number of video programming providers in the first category because
no such entities exist. With respect to the second category, however,
we believe that small cable programming services may provide a
reasonable substitute. The Census Bureau category most similar to cable
programming services is ``motion picture and video tape production.''
SIC Code 7812. Under this category, entities with less than $21.5
million in annual receipts are defined as small motion picture and
video tape production entities. There are a total of 7,265 motion
picture and video tape production entities; of those, 7,002 have annual
receipts of less than $24.5 million. The figures are not broken down
further. We estimate that approximately 7,000 small cable programming
services, or video programming providers, may be affected by the rules
adopted in this Order. The Census Bureau data does not reflect a likely
significant number of small, independent motion picture and video tape
production companies. It is not possible at this time to estimate this
number because no publicly available data is available that is specific
to such entities. We therefore estimate that a minimum of 7,000 small
cable programming services, or video programming providers, may be
affected by this rule.
84. Reporting, Recordkeeping and Other Compliance Requirements. The
following addresses the requirements of regulations adopted, amended,
modified or clarified on reconsideration in the Third Report and Order
and Second Order on Reconsideration. We adopt a definition of
``affiliate'' that will impact open video system operators and their
affiliates, including open video system operators that are small
entities. A primary effect of this rule concerns situations where
demand for carriage exceeds the open video system's channel capacity,
where the open video system operator and its affiliates are prohibited
from selecting the video programming services for carriage on more than
one-third of the activated channel capacity on its system. We revise
FCC Form 1275 to require that applicants to become open video system
operators, including applicants that are small businesses, list the
names of the local communities in which they intend to operate. Listing
the names of the communities will neither require any specialized
skills nor impose significant new burdens.
85. We modify our regulations to require that an open video system
applicant, including those that are small entities, serve a copy of its
FCC Form 1275 on all affected local communities on or before the date
it is filed with the Commission. Merely serving the form on all
affected local communities will not require any specialized skills. We
modify our regulations to require that advertising availabilities (``ad
avails'') associated with a programming service carried by both the
open video system operator or its affiliated video programming provider
and an unaffiliated provider must be shared in an equitable manner.
This may impose burdens on open video system operators, including those
that are small entities, because an operator must now share the
revenues or other benefits of such ad avails with unaffiliated
entities, rather than keeping all such revenues. We find that
implementing this approach requires no specialized skills.
86. We modify our regulations to permit an open video system
operator to recover the gross revenues fee from all video programming
providers using the platform on a proportional basis as an element of
the carriage rate. This approach may impose additional burdens on video
programming providers, including those that are small entities, because
the carriage rate may be increased to reflect the open video system
operator's gross revenues fees. We find that implementing this approach
requires no specialized skills. We modify our regulations to require
open video system operators, in the absence of a negotiated agreement,
to match, rather than share, all public, educational and governmental
(``PEG'')
[[Page 43173]]
access financial contributions of the local cable operator. This
matching requirement could result in additional financial burdens on
open video system operators, including those that are small entities,
because matching the cable operator's PEG access financial
contributions will be more costly in many situations than merely
sharing the cable operator's contributions towards PEG access services,
facilities and equipment, as permitted under the previous approach. We
find that implementing this approach requires no specialized skills.
87. We modify our regulations so that, in areas where a cable
franchise previously existed, the local franchise authority will be
permitted, absent a negotiated agreement, to elect either: (1) to
maintain the previously existing PEG access requirements; or (2) to
have the open video system operator's PEG access obligations determined
by comparison to the nearest operating cable system that has a
commitment to provide PEG access and that serves a franchise area with
a similar population size. Every 15 years thereafter, the LFA is
permitted to make a similar election. This requirement could impose new
burdens on open video system operators, including those that are small
entities, because an operator's PEG access obligations may be increased
when compared to the nearest operating cable system that has a
commitment to provide PEG access and that serves a franchise area with
a similar population size. The order requires a broadcast station to
make the same election for open video systems and cable systems in the
same geographic area, unless the overlapping open video system is
unable to deliver appropriate signals in conformance with the broadcast
station's elections for all cable systems serving the same geographic
area. We estimate that this requirement will have an impact on some
broadcast stations. We anticipate that this requirement will not
require any more professional skills than are required to make such
elections and notify operators in the context of cable systems.
88. The order requires an open video system operator to pay for any
additional copyright fees incurred as a result of carrying a local
signal outside of its local service area. We estimate that this
requirement may affect a limited number of large open video system
operators. We anticipate that distribution of signals outside of a
local market will most likely occur on large systems that overlap
several markets. If additional copyright fees are incurred by an open
video system operator, we do not anticipate that the operator will have
to use any professional skills beyond those already used to comply with
the copyright rules. The order holds an open video system operator
responsible for any violation of our sports exclusivity rules. We
estimate that this requirement will have an impact on open video system
operators and programmers, but will not require the use of any
additional professional skills.
89. We allow open video system operators to permit programming
providers, including those affiliated with the open video system, to
use their own navigational devices, subject to certain conditions. If
the open video system operator permits programming providers to use
their own navigational devices, the open video system operator must
provide a nondiscriminatory guide or menu that all programming
providers must carry, showing all programming available on the systems.
We estimate that the requirement could result in additional burdens on
open video system operators including small open video system
operators. We find that implementing this approach requires no
specialized skills. We clarify our regulations to require that the
preliminary rate estimate provided by an open video system operator to
video programming providers must include, upon request, all information
needed to calculate the average rate paid by unaffiliated programming
providers receiving carriage on the system, including the information
needed for any weighting of the individual carriage rates that the
operator has included in the average rate. This clarification may
impose new burdens on open video system operators, including those that
are small entities, because an open video system operator may have to
prepare this information earlier than under the previous approach.
90. Steps Taken to Minimize the Significant Economic Impact on
Small Entities and Significant Alternatives Rejected. This section
analyzes the impact on small entities in the contexts of regulations
adopted, amended, modified or clarified in this Third Report and Order
and Second Order on Reconsideration. With respect to the definition of
affiliate, we adopt the attribution standard that applies in the cable
program access context. The factual, legal and policy reasons are set
forth in Section II, above. The definition of affiliate we adopt will
create opportunities for unaffiliated programmers, many of which may be
small entities, by promoting diversity of video programming sources. We
rejected several alternatives to this definition of affiliate, as
described in Section II, above. Requiring applicants to list the names
of all local communities in which they intend to operate will not
impose significant new burdens on applicants for the reasons stated
above and will reduce burdens on the affected local communities,
including those that are small entities. This approach will also reduce
the burdens on open video system operators by reducing the potential
for confusion over which local communities will be served by the open
video system.
91. Requiring service of FCC Form 1275 on local communities, as
described above, will impose only minimal new burdens on open video
system operators, including those that are small entities. These
burdens are outweighed by the benefits to local communities, such as
ensuring that a local community without ready access to the Internet or
the Commission's Public Notices will be made aware of the applicant's
filing. The factual, legal and policy reasons are described in Section
III.B. This approach will reduce the burdens on open video system
operators by reducing the potential for confusion over which local
communities will be served by the open video system. The primary
significant alternative is not requiring such service, but as stated,
we find that the benefits to local communities outweigh any minimal
burdens of complying with this rule. Requiring that ad avails
associated with a programming service carried by both the open video
system operator or its affiliated video programming provider and an
unaffiliated provider be shared in an equitable manner may impose
burdens on open video system operators, including those that are small
entities. Such burdens are described in the preceeding section of this
FRFA. However, we find these burdens are outweighed by the benefits of
this requirement, which include providing unaffiliated video
programming providers with an equitable share of income from ad avails
and preventing the open video system operator or its affiliate from
having a significant financial advantage over unaffiliated video
programming providers. The factual, legal and policy reasons are
described in Section III.C. We reduce the burdens on open video system
operators by specifying examples of acceptable methods of sharing ad
avails, including apportioning the relevant revenues or apportioning
the rights to sell the avails themselves. The primary significant
alternative is maintaining our current rules which do not require such
sharing; however, as stated, we find that the benefits to unaffiliated
[[Page 43174]]
video programming providers outweigh the burdens of complying with this
rule.
92. Modifying our rules to permit an open video system operator to
recover the gross revenues fee from all video programming providers
using the platform on a proportional basis as an element of the
carriage rate may impose additional burdens on video programming
providers, including those that are small entities. However, we find
that these burdens, as described above, are outweighed by the benefits
to open video system operators and are in the interests of competition.
Permitting this recoupment of the gross revenues fee should promote
competition on the platform among video programming providers by not
disadvantaging any particular video programming provider with respect
to the payment of the gross revenues fee. The factual, legal and policy
reasons for this approach are described above in Section III.E. This
approach will reduce burdens on open video system operators by
permitting them to recoup a proportion of these costs from video
programming providers. The primary significant alternative we rejected
is maintaining our current regulations which may have permitted
unaffiliated video programming providers to avoid paying any share of
the gross revenues fee; however, as stated, we find that the benefits
to open video system operators outweigh the burdens of this approach on
video programming providers. Requiring open video system operators to
match, rather than share, all PEG access financial contributions of the
local cable operator may impose burdens on open video system operators,
including those that are small entities. These burdens are described in
the preceeding section of this FRFA. We find that these burdens are
outweighed by the benefits of this revised approach. The factual,
policy and legal reasons for this approach are described in Section
III.F. We believe that this approach may reduce burdens on open video
system operators by providing further certainty as to their PEG access
financial obligations. Significant alternatives we rejected include:
(1) maintaining our current rules which permit an open video system
operator to share the PEG access contributions. Generally, we rejected
this alternative because we find that the matching principle more
accurately fulfills the 1996 Act's mandate to impose PEG access
obligations on open video system operators that are ``no greater or
lesser'' than those imposed on cable operators.
93. Modifying a local franchise authority's ability to make an
election concerning the PEG access obligations of an open video system
operator, as described in the preceeding section of this FRFA, may
impose additional burdens on open video system operators, including
those that are small entities. These burdens are described above.
However, we find that these burdens are outweighed by the benefits of
this approach, which include preventing PEG access obligations from
being frozen in perpetuity, thereby providing significant benefits to
local franchise areas and communities. The factual, policy and legal
reasons for this approach are described above in Section III.F. This
approach may reduce burdens on local communities by permitting them to
negotiate with open video system operators with respect to PEG access
obligations, and on open video system operators by providing them
certainty as to their PEG access obligations for a period of up to 15
years. The primary significant alternative we rejected is maintaining
our current regulations which do not permit local franchise areas to
make this election; however, as stated, we find that the benefits to
local communities outweigh the burdens of this approach on open video
system operators. The rule which requires a broadcast station to make
the same election for open video systems and cable systems in the same
geographic area, unless the overlapping open video system is unable to
deliver appropriate signals in conformance with the broadcast station's
elections for all cable systems serving the same geographic area, may
impose a burden on broadcast stations. The policy, factual and legal
reasons for adopting this final rule are set forth in Section
III.F.2.b. of this Order. The rule adopted in this order may reduce
burdens on both open video system operators and television stations by
providing further certainty with respect to the must-carry status of
television stations.
94. The rule which requires an open video system operator to pay
for any additional copyright fees incurred as a result of carrying a
local station beyond its local market area may impose a burden on open
video system operators. It has not been necessary to take significant
steps to minimize the burden on small open video system operators
because we do not believe that this rule is likely to affect many open
video systems and especially not smaller open video systems, because it
will only apply to open video systems capable of carrying broadcast
signals beyond their local service areas. The factual policies and
legal reasons for adopting this final rule are set forth in Section
III.F.2.b. Any burden on open video system operators is outweighed by
the benefit to broadcast stations, especially small stations that might
not be able to elect must-carry status if they were subject to
copyright fees in distant markets. The rule which holds an open video
system operator responsible for any violation of our sports exclusivity
rules may impose a burden on open video system operators. This burden
is justified by the interest in protecting exclusive rights to sports
programming. The factual policies and legal reasons for adopting this
final rule are set forth in Section III.F.4.b. The rule adopted in this
order applies our sports exclusivity rules to open video systems more
fairly than the Commission's previous rule for the reasons cited in
Section III.F.4.b.
95. Allowing open video system operators to permit programming
providers, including those affiliated with the open video system
operator, to use their own navigational devices subject to certain
conditions may impact open video system operators and their affiliates,
including those that are small entities. If an operator permits
programming providers, including its affiliate, to develop their own
navigational devices, the operator must create an electronic menu or
guide containing a non-discriminatory listing of programming providers
or programming services available on the system that every programming
provider must carry. The factual and policy reasons for adopting the
final rule are found in Section III.G., above. We believe that this
rule minimizes burdens on open video system operators and their
programming affiliates, by allowing the affiliated programmers the
flexibility to develop and use their own navigational devices, guides
and menus. However, under the rule adopted, programming providers
cannot be required to use their own navigational devices. Such
providers must, upon request, have access to the navigational device
used by the open video system operator or its affiliate. This
requirement can help minimize burdens on small programming providers by
allowing them access to the navigational device used by the open video
system operator or its affiliate. Requiring that the preliminary rate
estimate provided by an open video system operator to video programming
providers include, upon request, all information needed to calculate
the average rate paid by unaffiliated programming providers receiving
carriage on the system, including the information needed for any
weighting of the individual carriage rates that the operator has
included in
[[Page 43175]]
the average rate, may impose burdens on open video system operator,
including those that are small entities. These burdens are described in
the preceeding section of this FRFA. However, we find that these
burdens are outweighed by the benefits of this clarification, which
include providing an unaffiliated video programming provider with
relevant information regarding whether to pursue a rate complaint
against an open video system operator. The factual, policy and legal
reasons are described above in Section III.H. The primary significant
alternative rejected by the Commission is to maintain our current rules
which do not require a system operator's provision of such information
upon request but only in formal discovery; however, as stated, we find
that the benefits to unaffiliated video programming providers outweigh
the burdens of complying with this rule.
96. Report to Congress. The Commission shall send a copy of this
FRFA, along with this Third Report and Order and Second Order on
Reconsideration, in a report to Congress pursuant to the SBREFA, 5
U.S.C. Sec. 801(a)910(A). A copy of this FRFA will also be published in
the Federal Register.
V. Paperwork Reduction Act of 1995 Analysis
97. The requirements adopted in the Third Report and Order and
Second Order on Reconsideration 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 Third Report and Order
and Second Order on Reconsideration as required by the 1995 Act. OMB
comments are due October 21, 1996. 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.
98. Written comments by the public on the proposed and/or modified
information collections are due on or before September 20, 1996.
Written comments must be submitted by the Office of Management and
Budget (OMB) on the proposed and/or modified information collections on
or before October 21, 1996. 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
99. 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. Secs. 154(i), 154(j), 303(r), and 573 the rules, requirements
and policies discussed in this Third Report and Order and Second Order
on Reconsideration ARE ADOPTED and Sections 76.1000 and 76.1500 through
76.1515 of the Commission's rules, 47 CFR Secs. 76.1000 and 76.1500
through 1515, ARE AMENDED as set forth below.
100. It is further 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. Secs. 154(i), 154(j), 303(r), and 573 the rules, the Petitions
for Reconsideration set forth in Appendix A are granted in part and
denied in part, as provided herein.
101. 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 October 21, 1996. The Commission will issue a document
at such time to notify parties that the regulations established in this
decision are effective.
102. It is further ordered that the Motion to Accept Late-Filed
Opposition filed by the Telephone Joint Petitioners is hereby granted.
103. It is further ordered that the Secretary shall send a copy of
this Third Report and Order and Second Order on Reconsideration
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, Public Law No.
96-354, 94 Stat. 1164, 5 U.S.C. Secs. 601 et seq. (1981).
List of Subjects 47 CFR Part 76
Cable television.
Federal Communications Commission
William F. Caton,
Acting Secretary.
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 continues 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 76.1500 is amended by redesignating paragraph (g) as
paragraph (h) and adding new paragraph (g) to read as follows:
Sec. 76.1500 Definitions.
* * * * *
(g) Affiliate. For purposes of determining whether a party is an
``affiliate'' as used in this subpart, the definitions contained in the
notes to Sec. 76.501 shall be used, provided, however that:
(1) The single majority shareholder provisions of Note 2(b) to
Sec. 76.501 and the limited partner insulation provisions of Note 2(g)
to Sec. 76.501 shall not apply; and
(2) The provisions of Note 2(a) to Sec. 76.501 regarding five (5)
percent interests shall include all voting or nonvoting stock or
limited partnership equity interests of five (5) percent or more.
* * * * *
3. Section 76.1502 is amended by revising paragraphs (c)(6) and (d)
and by adding paragraph (e) to read as follows:
Sec. 76.1502 Certification.
* * * * *
(c) * * *
(6) A list of the names of the anticipated local communities to be
served upon completion of the system;
* * * * *
(d) On or before the date an FCC Form 1275 is filed with the
Commission, the applicant must serve a copy of its filing
[[Page 43176]]
on all local communities identified pursuant to paragraph (c)(6) of
this section and must include a statement informing the local
communities of the Commission's requirements in paragraph (e) of this
section for filing oppositions and comments. Service by mail is
complete upon mailing, but if mailed, the served documents must be
postmarked at least three days prior to the filing of the FCC Form 1275
with the Commission.
(e) 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 and on all local communities in which the applicant intends to
operate.
4. Section 76.1503 is amended by removing paragraph (c)(2)(iv)(C)
and adding new paragraph (c)(2)(v) to read as follows:
Sec. 76.1503 Carriage of video programming providers on open video
systems.
* * * * *
(c) * * *
(2) * * *
(v) Notwithstanding the general prohibition on an open video system
operator's discrimination among video programming providers contained
in paragraph (a) of this section, a competing, in-region cable operator
or its affiliate(s) that offers cable service to subscribers located in
the service area of an open video system shall not be entitled to
obtain capacity on such an open video system, except:
(A) Where the operator of an open video system determines that
granting access to the competing, in-region cable operator is in its
interests; or
(B) Where a showing is made that facilities-based competition will
not be significantly impeded.
Note to paragraph (c)(2)(v)(B): The Commission finds that
facilities-based competition will not be significantly impeded, for
example, where:
(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.
* * * * *
5. Section 76.1504 is amended by revising paragraph (e) to read as
follows:
Sec. 76.1504 Rates, terms and conditions for carriage on open video
systems.
* * * * *
(e) Determining just and reasonable rates subject to complaints
pursuant to the imputed rate approach or other market based approach.
Carriage rates subject to complaint shall be found just and reasonable
if one of the two following tests are met:
(1) 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.
Note to paragraph (e)(1): Examples of specific ``avoided costs''
include:
(1) All amounts paid to studios, syndicators, networks or
others, including but not limited to payments for programming and
all related rights;
(2) Packaging, including marketing and other fees;
(3) Talent fees; and
(4) A reasonable overhead allowance for affiliated video service
support.
(2) An open video system operator can demonstrate that its carriage
service rates are just and reasonable through other market based
approaches.
6. Section 76.1505 is amended by revising paragraphs (d)(1),
(d)(4), (d)(6), the note to paragraph (d)(6), and (d)(8) to read as
follows:
Sec. 76.1505 Public, educational and governmental access.
* * * * *
(d) * * *
(1) The open video system operator must satisfy the same public,
educational and governmental access obligations as the local cable
operator by providing the same amount of channel capacity for public,
educational and governmental access and by matching the local cable
operator's annual financial contributions towards public, educational
and governmental access services, facilities and equipment that are
actually used for public, educational and governmental access services,
facilities and equipment. For in-kind contributions (e.g., cameras,
production studios), the open video system operator may satisfy its
statutory obligation by negotiating mutually agreeable terms with the
local cable operator, so that public, educational and governmental
access services to the community is improved or increased. If such
terms cannot be agreed upon, the open video system operator must pay
the local franchising authority the monetary equivalent of the local
cable operator's depreciated in-kind contribution, or, in the case of
facilities, the annual amortization value. Any matching contributions
provided by the open video system operator must be used to fund
activities arising under Section 611 of the Communications Act.
* * * * *
(4) The costs of connection to the cable operator's public,
educational and governmental access channel feed shall be borne by the
open video system operator. Such costs shall be counted towards the
open video system operator's matching financial contributions set forth
in paragraph (d)(4) of this section.
* * * * *
(6) Where there is no existing local cable operator, the open video
system operator must make a reasonable
[[Page 43177]]
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 local franchising authority may elect either to
impose the previously existing public, educational and governmental
access obligations or determine the open video system operator's
public, educational and governmental access obligations by comparison
to the franchise agreement for the nearest operating cable system that
has a commitment to provide public, educational and governmental access
and that serves a franchise area with a similar population size. The
local franchising authority shall be permitted to make a similar
election every 15 years thereafter. Absent a previous 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 and that serves a franchise area with a similar
population size.
Note to paragraph (d)(6): This paragraph shall apply, for
example, if a cable operator converts its cable system to an open
video system under Sec. 76.1501.
* * * * *
(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 Sec. 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 public, educational and governmental access
obligations under paragraph (d) of this section.
* * * * *
7. Section 76.1506 is amended by revising paragraphs (d), (l)(3)
and (m)(2) to read as follows:
Sec. 76.1506 Carriage of television broadcast signals.
* * * * *
(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 Sec. 76.55 that refers to a
``cable system'' shall apply to an open video system. Any provision of
Sec. 76.55 that refers to a ``cable operator'' shall apply to an open
video system operator. Any provision of Sec. 76.55 that refers to the
``principal headend'' of a cable system as defined in Sec. 76.5(pp)
shall apply to the equivalent of the principal headend of an open video
system. Any provision of Sec. 76.55 that refers to a ``franchise area''
shall apply to the service area of an open video system. The provisions
of Sec. 76.55 that permit cable operators to refuse carriage of signals
considered distant signals for copyright purposes shall not apply to
open video system operators. If an open video system operator cannot
limit its distribution of must-carry signals to the local service area
of broadcast stations as used in 17 U.S.C. 111(d), it will be liable
for any increase in copyright fees assessed for distant signal carriage
under 17 U.S.C. 111.
* * * * *
(l) * * *
(3) Television broadcast stations are required to make the same
election for open video systems and cable systems serving the same
geographic area, unless the overlapping open video system is unable to
deliver appropriate signals in conformance with the broadcast station's
elections for all cable systems serving the same geographic area.
* * * * *
(m) * * *
(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. Operators may effect the deletion of signals for which
they have received deletion notices unless they receive notice within a
reasonable time from the appropriate programming provider that the
rights claimed are invalid. The open video system operator shall not
delete signals for which it has received notice from the programming
provider that the rights claimed are invalid. An open video system
operator shall be subject to sanctions for any violation of this
subpart. An open video system operator may require indemnification as a
condition of carriage for any sanctions it may incur in reliance on a
programmer's claim that certain exclusive or non-duplication rights are
invalid.
* * * * *
8. Section 76.1511 is revised to read as follows:
Sec. 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. Local governments shall have the authority to
assess and receive the gross revenue fee. 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. In addition gross revenues under this paragraph
includes any advertising revenues received by an open video system
operator or its affiliates in connection with the provision of video
programming, where such revenues are included in the calculation of the
incumbent cable operator's cable franchise fee. Gross revenues does not
include revenues collected by unaffiliated video programming providers,
such as subscriber or advertising revenues. Any gross revenues fee that
the open video system operator or its affiliate collects from
subscribers or video programming providers shall be excluded from gross
revenues. An operator of an open video system or any programming
provider may designate that portion of a subscriber's bill attributable
to the fee as a separate item on the bill. An operator of an open video
system may recover the gross revenue fee from programming providers on
a proportional basis as an element of the carriage rate.
9. Section 76.1512 is amended by revising paragraphs (b), (c) and
(d) to read as follows:
Sec. 76.1512 Programming information.
* * * * *
(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;
(3) An open video system operator shall not restrict a video
programming provider's ability to use part of the provider's channel
capacity to provide an individualized guide or menu to the provider's
subscribers;
(4) Where an open video system operator provides no navigational
device, guide or menu, its affiliate's
[[Page 43178]]
navigational device, guide or menu shall be subject to the requirements
of Section 653(b)(1)(E) of the Communications Act;
(5) An open video system operator may permit video programming
providers, including its affiliate, to develop and use their own
navigational devices. If an open video system operator permits video
programming providers, including its affiliate, to develop and use
their own navigational devices, the operator must create an electronic
menu or guide that all video programming providers must carry
containing a non-discriminatory listing of programming providers or
programming services available on the system and informing the viewer
how to obtain additional information on each of the services listed;
(6) An open video system operator must grant access, for
programming providers that do not wish to use their own navigational
device, to the navigational device used by the open video system
operator or its affiliate; and
(7) If an operator provides an electronic guide or menu that
complies with paragraph (b)(5) of this section, its programming
affiliate may create its own menu or guide without being subject to the
requirements of Section 653(b)(1)(E) of the Communications Act.
(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.
10. Section 76.1513 is amended by adding a note following paragraph
(e)(1)(viii) to read as follows:
Sec. 76.1513 Dispute resolution.
* * * * *
(e) * * *
(1) * * *
(viii) * * *
Note to paragraph (e)(1)(viii): Upon request by a complainant,
the preliminary carriage rate estimate shall include a calculation
of the average of the carriage rates paid by the unaffiliated video
programming providers receiving carriage from the open video system
operator, including the information needed for any weighting of the
individual carriage rates that the operator has included in the
average rate.
* * * * *
11. Section 76.1514 is amended by revising paragraph (b) to read as
follows:
Sec. 76.1514 Bundling of video and local exchange services.
* * * * *
(b) Any local exchange carrier offering such a package must impute
the unbundled tariff rate for the regulated service.
[FR Doc. 96-21262 Filed 8-20-96; 8:45 am]
BILLING CODE 6712-01-P
