E7-25214. Exclusive Service Contracts for Provision of Video Services in Multiple Dwelling Units and Other Real Estate Developments

AGENCY:

Federal Communications Commission.

ACTION:

Proposed rule.

SUMMARY:

The Further Notice of Proposed Rulemaking (“Notice”) solicits comment on whether providers of Direct Broadcast Satellite (“DBS”) service and Private Cable Operators (“PCOs”) should be allowed to have exclusive access to so-called Multiple Dwelling Units (“MDUs,” such as apartment and condominium buildings). Also, the Notice considers prohibiting all providers of video programming service from using exclusive marketing arrangements (which allow one MVPD to be the preferred video provider in an MDU) and bulk billing arrangements (which require MDU dwellers to pay for a video provider in their rental or condominium fees). The intended effect of the Notice is to determine whether each of these practices benefits or harms video consumers in MDUs on the whole.

DATES:

Comments for this proceeding are due on or before February 6, 2008; reply comments are due on or before March 7, 2008.

ADDRESSES:

You may submit comments, identified by MB Docket No. 07-51, by any of the following methods:

• Federal eRulemaking Portal: http://www.regulations.gov. Follow the instructions for submitting comments.
• Federal Communications Commission's Web Site: http://www.fcc.gov/​cgb/​ecfs/​. Follow the instructions for submitting comments.
• People With Disabilities: Contact the FCC to request reasonable accommodations (accessible format documents, sign language interpreters, CART, etc.) by e-mail: [e-mail] or phone: [phone] or TTY: 202-418-0432.

For detailed instructions for submitting comments and additional information on the rulemaking process, see the SUPPLEMENTARY INFORMATION section of this document

FOR FURTHER INFORMATION CONTACT:

For additional information on this proceeding, please contact John W. Berresford, [phone], or Holly Saurer, [phone], both of the Policy Division, Media Bureau.

SUPPLEMENTARY INFORMATION:

This is a summary of the Federal Communications Commission's Further Notice of Proposed Rulemaking in MB Docket No. 07-51, FCC 07-189, adopted October 31, 2007, and released November 13, 2007. The full text of this document is available for public inspection and copying during regular business hours in the FCC Reference Center, Federal Communications Commission, 445 12th Street, SW., CY-A257, Washington, DC 20554. These documents will also be available via ECFS (http://www.fcc.gov/​cgb/​ecfs/​). (Documents will be available electronically in ASCII, Word 97, and/or Adobe Acrobat.) The complete text may be purchased from the Commission's copy contractor, 445 12th Street, SW., Room CY-B402, Washington, DC 20554. To request this document in accessible formats (computer diskettes, large print, audio recording, and Braille), send an e-mail to [e-mail] or call the Commission's Consumer and Governmental Affairs Bureau at [phone] (voice), [phone] (TTY).

Summary of the Further Notice of Proposed Rulemaking

I. Further Notice of Proposed Rulemaking

1. The Report and Order released simultaneously with this Notice addresses primarily those providers of multichannel video programming distribution (“MVPDs”) covered by section 628 of the Communications Act of 1934, as amended, in part because the record before us predominantly addressed building exclusivity clauses involving cable operators. Therefore, in order to assess whether we should take action to address such clauses entered into by DBS providers, PCOs, and other MVPDs who are not subject to section 628, the Notice asks for comment on several matters. Do DBS service providers, PCOs, and other MVPD providers not subject to section 628 use any or all forms of exclusivity clauses (e.g., building, marketing)? If they do, what kinds of exclusivity do those clauses provide? Is it likely that an MVPD provider subject to section 628, in reaction to the foregoing Report and Order and seeking to avoid its effects, would partner with a DBS provider or PCO? What are the effects of the use of exclusivity clauses by MVPD providers not subject to section 628 on consumer choice, competition for multi-channel video and other services, and on the deployment of broadband and other advanced communications facilities? Are those effects and the balance of benefits and harms the same as we have found in the Report and Order with respect to the use of exclusivity clauses by providers that are subject to Section 628?

2. If the net effect of the use of exclusivity clauses by MVPD providers not subject to section 628 is harmful to consumers, what remedy should we impose—the same kind of prohibition we adopt in the Report and Order, or something different? We also ask for comment about two legal matters. First, do our Over-the-Air Reception Devices rules (47 CFR 1.4000) affect the remedy we should impose on DBS providers? Second, we ask for comment about our legal authority. Does the Commission have the authority to regulate the use of exclusivity clauses by MVPD providers not subject to section 628? Does the Commission have authority over DBS providers under section 335 of the Act? Does the Commission have authority over DBS and other providers under Title III generally, Title VI, its ancillary authority, or some other source? We ask for comment on all the foregoing factual, analytical, and legal issues.

3. We also seek comment on whether the Commission should prohibit exclusive marketing and bulk billing arrangements. For example, we are aware that certain clauses in contracts allow one MVPD into a MDU or real estate development but constrain the ability of competitive MVPDs to market their services directly to MDU residents. These arrangements provide for what is called “marketing exclusivity,” and may be anticompetitive. Some argue that in order for MDU residents to exercise freely their choice, they must know about their MVPD options.

4. In particular, we seek comment on a number of questions. How pervasive are these exclusive marketing arrangements? What is the typical scope of such arrangements? In other words, we seek comment on how the Commission should define them for regulatory purposes. Have they been used to impede competition in the video marketplace? Can other MVPDs effectively communicate with MDU residents in those MDUs that have signed exclusive marketing agreements? Do the costs of marketing, promotions and sales substantially increase when a competitive video provider confronts exclusive marketing arrangements? Do these arrangements constitute an unfair method of competition or an unfair act or practice in violation of section 628(b) of the Act? If so, how should the Commission act to address this problem? Should we prohibit the enforcement of all existing exclusive marketing arrangements as well as the execution of new ones? That is, should we treat them in the same manner as we treat exclusive building access arrangements in the Report and Order? Is our legal authority to address such agreements the same as our legal authority for addressing exclusive building access arrangements?

5. We also seek comment on these same questions with respect to “bulk billing” arrangements. Some have argued that bulk contracts are anti-competitive. As we understand them, bulk billing arrangements may be exclusive contracts because MDU owners agree to these arrangements with only one MVPD, barring others from a similar arrangement. Such arrangements may not prohibit MDU residents from selecting a competitive video provider. However, because of the “bulk billing” nature of the contract, residents would have to continue paying a fee to the provider with the bulk billing contract as well as pay a subscription fee to the new service provider. We seek comment on whether these “bulk billing” arrangements are typically formalized as agreements between cable operators and MDUs or between MDUs and residents (or both)? Do these arrangements have the same practical effect as exclusive access arrangements in that most customers would be dissuaded from switching video providers?

6. The Commission will conclude this rulemaking and release an order within six months of publication of this Order.

II. Procedural Matters

A. Filing Requirements

7. Ex Parte Rules. The Further Notice of Proposed Rulemaking in this proceeding will be treated as a “permit-but-disclose” subject to the “permit-but-disclose” requirements under § 1.1206(b) of the Commission's rules. Ex parte presentations are permissible if disclosed in accordance with Commission rules, except during the Sunshine Agenda period when presentations, ex parte or otherwise, are generally prohibited. Persons making oral ex parte presentations are reminded that a memorandum summarizing a presentation must contain a summary of the substance of the presentation and not merely a listing of the subjects discussed. More than a one- or two-sentence description of the views and arguments presented is generally required. Additional rules pertaining to oral and written presentations are set forth in § 1.1206(b).

8. Comments and Reply Comments. Pursuant to §§ 1.415 and 1.419 of the Commission's rules, 47 CFR 1.415, 1.419, interested parties may file comments and reply comments on or before the dates indicated on the first page of this document. Comments may be filed using: (1) The Commission's Electronic Comment Filing System (ECFS), (2) the Federal Government's eRulemaking Portal, or (3) by filing paper copies.

• Electronic Filers: Comments may be filed electronically using the Internet by accessing the ECFS: http://www.fcc.gov/​cgb/​ecfs/​ or the Federal eRulemaking Portal: http://www.regulations.gov. Filers should follow the instructions provided on the Web site for submitting comments.
• For ECFS filers, if multiple docket or rulemaking numbers appear in the caption of this proceeding, filers must transmit one electronic copy of the comments for each docket or rulemaking number referenced in the caption. In completing the transmittal screen, filers should include their full name, U.S. Postal Service mailing address, and the applicable docket or rulemaking number. Parties may also submit an electronic comment by Internet e-mail. To get filing instructions, filers should send an e-mail to [e-mail], and include the following words in the body of the message, “get form.” A sample form and directions will be sent in response.
• Paper Filers: Parties who choose to file by paper must file an original and four copies of each filing. If more than one docket or rulemaking number appears in the caption of this proceeding, filers must submit two additional copies for each additional docket or rulemaking number.

Filings can be sent by hand or messenger delivery, by commercial overnight courier, or by first-class or overnight U.S. Postal Service mail (although we continue to experience delays in receiving U.S. Postal Service mail). All filings must be addressed to the Commission's Secretary, Office of the Secretary, Federal Communications Commission.

• The Commission's contractor will receive hand-delivered or messenger-delivered paper filings for the Commission's Secretary at 236 Massachusetts Avenue, NE., Suite 110, Washington, DC 20002. The filing hours at this location are 8 a.m. to 7 p.m. All hand deliveries must be held together with rubber bands or fasteners. Any envelopes must be disposed of before entering the building.
• Commercial overnight mail (other than U.S. Postal Service Express Mail and Priority Mail) must be sent to 9300 East Hampton Drive, Capitol Heights, MD 20743.
• U.S. Postal Service first-class, Express, and Priority mail must be addressed to 445 12th Street, SW., Washington, DC 20554.

People With Disabilities: To request materials in accessible formats for people with disabilities (braille, large print, electronic files, audio format), send an e-mail to [e-mail] or call the Consumer & Governmental Affairs Bureau at 202-418-0530 (voice), 202-418-0432 (tty).

9. Availability of Documents. Comments, reply comments, and ex parte submissions will be available for public inspection during regular business hours in the FCC Reference Center, Federal Communications Commission, 445 12th Street, SW., CY-A257, Washington, DC 20554. Persons with disabilities who need assistance in the FCC Reference Center may contact Bill Cline at [phone] (voice), [phone] (TTY), or [e-mail]. These documents also will be available from the Commission's Electronic Comment Filing System. Documents are available electronically in ASCII, Word 97, and Adobe Acrobat. Copies of filings in this proceeding may be obtained from Best Copy and Printing, Inc., Portals II, 445 12th Street, SW., Room CY-B402, Washington, DC 20554; they can also be reached by telephone, at [phone] or [phone]; by e-mail at [e-mail]; or via their Web site at http://www.bcpiweb.com. To request materials in accessible formats for people with disabilities (Braille, large print, electronic files, audio format), send an e-mail to [e-mail] or call the Consumer and Governmental Affairs Bureau at [phone] (voice), [phone] (TTY).

B. Initial Regulatory Flexibility Analysis

• As required by the Regulatory Flexibility Act of 1980, as amended (the “RFA”), the Commission has prepared this Initial Regulatory Flexibility Analysis (“IRFA”) of the possible significant economic impact of the policies and rules proposed in the Further Notice of Proposed Rulemaking (“FNPRM”) on a substantial number of small entities.

C. Paperwork Reduction Act Analysis

10. This document does not contain new or modified information collection requirements subject to the paperwork Reduction Act of 1995 (PRA), Public Law 104-13. In addition, therefore, it does not contain any new or modified “information collection burdens for small business concerns with fewer than 25 employees,” pursuant to the Small Business Paperwork Relief Act of 2002, Public Law 107-198, see 44 U.S.C. 3506(c)(4).

D. Additional Information

11. For additional information on this proceeding, please contact John W. Berresford, [phone], or Holly Saurer, [phone], both of the Policy Division, Media Bureau.

III. Ordering Clauses

12. It is ordered that, pursuant to sections 1, 4(i), 303(r), 335, 623 and 628(b, c) of the Communications Act of 1934, as amended, and section 706 of the Telecommunications Act of 1996, 47 U.S.C. 151, 154(i), 303(r), 335, 543, and 548(b, c), this Further Notice of Proposed Rulemaking is hereby adopted.

13. It is further ordered that the Consumer and Governmental Affairs Bureau, Reference Information Center, shall send a copy of this Further Notice of Proposed Rulemaking, including the Initial Regulatory Flexibility Analysis, to the Chief Counsel for Advocacy of the Small Business Administration.

Federal Communications Commission.

Marlene H. Dortch,

Secretary.