[Federal Register Volume 62, Number 48 (Wednesday, March 12, 1997)]
[Rules and Regulations]
[Pages 11364-11382]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 97-5897]
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FEDERAL COMMUNICATIONS COMMISSION
47 CFR Part 76
[CS Docket No. 96-60; FCC 97-27]
Cable Television Leased Commercial Access
AGENCY: Federal Communications Commission.
ACTION: Final rule.
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SUMMARY: The Commission has adopted a Second Report and Order and
Second Order on Reconsideration of the First Report and Order
(``Order'') regarding implementation of the leased commercial access
provisions of the 1992 Cable Act. The Order addressed comments and
petitions for reconsideration filed in response to the Order on
Reconsideration of the First Report and Order and Further Notice of
Proposed Rulemaking in CS Docket 96-60, FCC 96-122 (released March 29,
1996) (subparts referred to separately as ``Reconsideration Order'' and
``Further NPRM''). The Order: revised the maximum rate formulas for use
of full-
[[Page 11365]]
time leased access channels; declined to impose a transition period for
the implementation of the revised rate formulas; maintained the current
rules for maximum part-time rates and adopted a rule that cable
operators are not required to open additional leased access channels
for part-time use until all existing part-time leased access channels
are substantially filled or until a programmer requests a year-long
eight-hour daily time slot that cannot otherwise be accommodated;
allowed the resale of leased access time; granted leased access
programmers the right to demand access to a tier with a subscriber
penetration of more than 50%; stipulated that minority and educational
programming does not qualify as a substitute for leased access
programming unless it is carried on a tier with a subscriber
penetration of more than 50%; declined to mandate preferential
treatment for certain types of leased access programmers; required
operators to accept leased access programmers on a non-discriminatory
basis so long as available leased access capacity exceeds demand;
required that an independent accountant review an operator's rate
calculations prior to the filing of a rate complaint with the
Commission; established a standard of reasonableness for certain
contractual requirements; specified when leased access programmers must
pay for technical support; and defined the term ``affiliate'' for
purposes of leased access. The Order also addressed several issues on
reconsideration, including the exclusion of programming revenues from
the maximum rate calculation, the maximum rate calculation for a la
carte channels, cable operators' obligations to provide certain
information to potential leased access programmers and the need for
operators to comply with those obligations, time increments, the
calculation of the leased access set-aside requirement, and billing and
collection services. The Order is intended to address issues and
concerns raised in the comments and petitions for reconsideration that
were filed with the Commission in response to the Reconsideration Order
and Further NPRM.
DATES: This rule is effective April 11, 1997, except the amendments to
47 CFR 76.970 (c), (d), (e), (f), (g), (h), 76.971(f)(1), and 76.975
(b) and (c), which impose new or modified information collection
requirements, shall become effective upon approval by the Office of
Management and Budget (OMB), but no sooner than April 11, 1997. The
Commission will publish a document at a later date establishing the
effective date for the sections containing information collection
requirements. Written comments by the public on the modified
information collection requirements are due on or before April 11,
1997, and written comments by OMB on the modified information
collection requirements are due on or before May 12, 1997.
ADDRESSES: Office of the Secretary, Federal Communications Commission,
1919 M Street, NW., Washington, DC 20554. A copy of any comments on the
information collections contained in the Order 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 in the Order, contact Dorothy Conway at (202)
418-0217, or via the Internet at dconway@fcc.gov.
SUPPLEMENTARY INFORMATION:
Paperwork Reductions Act
The Order contains modified information collections. 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 Order, as required by the
Paperwork Reduction Act of 1995, Public Law 104-13. Public and agency
comments are due 30 days from the date of publication of the Order in
the Federal Register; OMB notification of action is due 60 days from
date of publication of the Order in the Federal Register. Comments
should address: (a) Whether the modified collection of information is
necessary for 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: 3060-0568.
Title: Commercial leased access rates, terms and conditions.
Type of Review: Revision of existing collection.
Respondents: Business and other for profit entities; not-for-profit
institutions.
Number of Respondents: 6,330 (6,270 cable systems + 30 selected
accountant reviewers + an estimated 30 leased access programmers
involved in the leased access rate dispute process).
Estimated Time Per Response: 1-10 hours.
Total Annual Burden: 94,171 hours, estimated as follows:
Sec. 76.970 describes the manner in which cable operators are to
calculate maximum leased access rates. Currently, there are
approximately 11,400 cable systems, of which approximately 45% have
channel capacities of less than 36 channels, and are therefore exempt
from the Commission's leased access provisions. The number of cable
system respondents is therefore 6,270 (55% of 11,400). The average
annual burden of calculating maximum rates is estimated to be 4 hours
per cable system.
6,270 x 4 hours=25,080 hours.
Section 76.970(h) requires cable operators to provide the following
information within 15 calendar days of a request regarding leased
access (for systems subject to small system relief, cable operators are
required to provide the following information within 30 days of a
request regarding leased access): (a) A complete schedule of the
operator's full-time and part-time leased access rates; (b) how much of
the cable operator's leased access set-aside capacity is available; (c)
rates associated with technical and studio costs; and (d) if
specifically requested, a sample leased access contract. We estimate
that each cable system operator will undergo an average burden of 10
hours per year to gather and maintain this information and disclose it
to requesting potential leased access programmers. Of the 10 hours, we
estimate an average burden of 4 hours for each operator to gather and
maintain the information and an average burden of 6 hours for each
operator to furnish materials to an estimated 20 requesters per year.
6,270 x 10 hours=62,700 hours.
Section 76.971 requires cable operators to provide billing and
collection services to leased access programmers unless they can
demonstrate the existence of third party billing and collection
services which, in terms of cost and accessibility, offer leased access
programmers an alternative substantially equivalent to that offered to
comparable non-leased access programmers. The Commission estimates that
identification of a third party billing and collection service rarely
needs to occur because the vast majority of leased access programming
[[Page 11366]]
is placed on a programming services tier and is billed as part of that
tier. Nonetheless, the Commission estimates an average burden of no
more than 1 hour per cable system operator to identify a third party
billing and collection service and then to make the necessary
information available.
6,270 x 1 hour=6,270 hours.
Section 76.975(b) requires that persons alleging that a cable
operator's leased access rate is unreasonable must receive a
determination of the cable operator's maximum permitted rate from an
independent accountant prior to filing a rate complaint with the
Commission. We estimate that operators will undergo an average burden
of 4 hours to arrange for an independent accountant review and
coordinate rate information with the selected accountant. This average
burden accounts for those instances where parties that cannot agree on
a mutually acceptable accountant must each select an independent
accountant who in turn select a third independent accountant.
Nationwide, we estimate a need for 30 accountant rate reviews per year.
30 x 4 hours = 120 hours.
76.975(c) requires that petitioners attach a copy of the final
accountant's report to their petition where the petition is based on
allegations that a cable operator's leased access rates are
unreasonable. We estimate that petitioners will undergo an average
burden of 2 minutes to attach such reports. Nationwide, we estimate
that petitioners will need to attach a total of no more than 30
accountant's reports when filing petitions for relief.
30 x 2 minutes = 1 hour. 25,080 + 62,700 + 6,270 + 120 + 1 = 94,171
hours.
Estimated costs to respondents: $74,000, estimated as follows: We
estimate the annual telephone, postage and stationery costs incurred by
cable operators for leased access recordkeeping, sending out leased
access information to prospective programmers, identifying third party
billing collection services, and selecting accountants to be $50,000,
equating to approximately $7.97 per operator. ($7.97 x 6,270
respondents = $50,000). We estimate that accountants will undergo an
average burden of 8 hours to review an operator's maximum rate
calculations and to prepare the required report. Accountants are
estimated to be paid $100 per hour for their services. (30 accountant
reviews) x (8 hours per review) x ($100 per hour) = $24,000.
Total costs to respondents = $50,000 + $24,000 = $74,000.
Needs and Uses: The information collected is used by prospective
leased access programmers and the Commission to verify rate
calculations for leased access channels and to eliminate uncertainty in
negotiations for leased commercial access. The Commission's leased
access requirements are designed to promote diversity of programming
and competition in programming delivery as required by section 612 of
the Communications Act.
Synopsis
The following is a synopsis of the Commission's Second Report and
Order and Second Order on Reconsideration of the First Report and Order
in CS Docket 96-60, FCC 97-27, adopted January 31, 1997 and released
February 4, 1997. 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 Services, Inc. (202) 857-3800, 1919 M
Street, NW., Washington, DC 20554.
I. Introduction
1. The statutory framework for commercial leased access, provided
in Section 612 of the Communications Act of 1934, as amended, 47 U.S.C.
521 et seq. (``Communications Act''), was first established by the
Cable Communications Policy Act of 1984, Public Law 98-549, 98 Stat.
2779 (1984), 47 U.S.C. 521 et seq. (``1984 Cable Act'') and was amended
by the Cable Television Consumer Protection and Competition Act of
1992, Public Law 102-385, 106 Stat. 1460 (1992), 47 U.S.C. 521 et seq.
(``1992 Cable Act''). Commercial leased access was created to provide
access to the channel capacity of cable systems by parties unaffiliated
with the cable operator that wish to distribute video programming free
of the editorial control of the cable operator. Channel set-aside
requirements were established in proportion to a system's total
activated channel capacity. The statutory objectives of leased access
are to ``promote competition in the delivery of diverse sources of
video programming and to assure that the widest possible diversity of
information sources are made available to the public from cable systems
in a manner consistent with growth and development of cable systems.''
Each system operator subject to the leased access requirement must
establish, consistent with the rules prescribed by the Commission,
``the price, terms, and conditions of such use which are at least
sufficient to assure that such use will not adversely affect the
operation, financial condition, or market development of the cable
system.''
2. In the Report and Order and Further Notice of Proposed
Rulemaking in MM Docket No. 92-266, FCC 93-177, 58 FR 29736 (May 21,
1993) (``Rate Order''), the Commission established initial regulations
to implement the leased access provisions of the 1992 Cable Act. The
Commission adopted the ``highest implicit fee'' formula as the method
for setting maximum reasonable rates, and adopted various standards
governing access terms and conditions, tier placement, technical
standards for use, technical support, security deposits, conditions
based on program content, requirements for billing and collection
services, and procedures for the expedited resolution of disputes. In
the Reconsideration Order, the Commission addressed certain issues
pertaining to the highest implicit fee formula, the provision of
certain leased access rate and channel availability information to
prospective leased access programmers, acceptable time increments and
pricing for part-time leased access use, operator provision of billing
and collection services for leased access programmers, security
deposits, calculation of the leased access set-aside requirement and
reporting requirements. In the Further NPRM, the Commission re-examined
the highest implicit fee formula from an economic perspective and
tentatively concluded that the highest implicit fee formula is likely
to overcompensate cable operators and does not sufficiently promote the
goals underlying the leased access provisions. The Commission proposed
a cost/market rate approach to setting maximum reasonable rates and
requested comment on the approach and its implementation. In addition,
the Commission sought comment on: (a) Part-time rates and an operator's
obligation to open additional leased access channels for part-time use,
(b) the resale of leased access time, (c) tier and channel placement
for leased access programming, (d) the placement of minority or
educational programming when it is used as a substitute for leased
access programming, (e) preferential treatment for certain types of
leased access programmers, including not-for-profit programmers, (f)
the selection of leased access programmers, and (g) streamlined leased
access dispute resolution procedures.
3. In the Order, the Commission amended its rules pertaining to
cable television commercial leased access, after considering the
comments and
[[Page 11367]]
reply comments filed in response to the Further NPRM, and addressed
petitions for reconsideration of the leased access rules adopted in the
Reconsideration Order.
II. Report and Order
A. Maximum Rate Formula for Leasing a Full Channel
4. Background: Section 612 directs the Commission to determine the
maximum reasonable rates that cable operators may charge for commercial
leased access. In the Rate Order, the Commission adopted rules that
established maximum rates based on the highest implicit fee paid by
non-leased access programming services distributed on a system. In the
non-leased access context, cable operators generally pay programmers
(e.g., a contractual license fee or a copyright fee) for their
programming services. Nevertheless, there is an implicit fee for
carriage to the extent that the amount of subscriber revenue that the
operator receives for the programming is greater than the fee that the
operator pays to the programmer. In other words, the amount of
subscriber revenue that the programmer forgoes to the operator
represents an implicit payment for carriage. The Commission determined
that the implicit fee paid by a programmer is the average price per
channel that a subscriber pays the operator minus the amount per
subscriber that the operator pays the programmer. The highest of the
implicit fees charged any unaffiliated non-leased access programmer was
the maximum rate per subscriber that a cable operator could charge a
leased access programmer.
5. In the Reconsideration Order and Further NPRM, we identified
certain problems with the highest implicit fee formula and sought
comment on a ``cost/market rate formula,'' an alternative approach that
we believed might better promote the goals of leased access. Under this
proposed approach, the maximum rate for leased access would depend on
whether the cable operator is leasing its full statutory set-aside
requirement. When the full set-aside capacity is not leased to
unaffiliated programmers, the maximum rate would be based on the
operator's reasonable and quantifiable costs (i.e., the costs of
operating the cable system plus the additional costs related to leased
access), including a reasonable profit. The operator would be allowed
to use the subscriber revenue received from a leased access channel to
offset the operating costs associated with the channel. In addition,
the operator would be allowed to charge the leased access programmer
the reasonable costs of bumping a programming service in order to
accommodate the leased access programmer. We tentatively concluded that
once the operator met its set-aside requirement, the cost-based maximum
rate could be replaced by a market rate.
6. Discussion: Our role with regard to leased access rates is to
establish maximum reasonable rates, not a mandatory rate that must be
charged to all leased access programmers. Operators have the discretion
to negotiate rates below the maximum rates established by the
Commission. For clarification purposes, we adopted a rule that
specifically states that cable operators are permitted under our rules
to negotiate rates below the maximum permissible rates.
i. Cost/Market Rate Formula
7. After reviewing the record in this proceeding and after
considering and analyzing all of the options presented, we concluded
that the proposed cost/market rate formula does not adequately account
for certain factors which, if excluded, would make the maximum leased
access rates resulting from the formula unworkable in today's
programming marketplace. Although the proposed cost/market rate formula
accounts for lost advertising revenue and lost commissions that would
result from bumping existing programming, it does not account for
negative effects that leased access programming might have on
subscriber revenue (i.e., lost subscriber revenue caused by subscribers
dropping the tier or by requiring a lower price due to a devaluation of
the tier). In the Further NPRM, we recognized this cost but tentatively
concluded that the inability to quantify the specific effect on
subscriber revenue caused by the replacement of current programming
with leased access programming in the tiered programming services
context made it too speculative to include as an opportunity cost
category in the cost/market rate formula. We nevertheless sought
comment on how our cost/market rate formula might measure changes in
subscriber penetration due to the addition of leased access
programming.
8. Neither the Commission nor the commenters in this proceeding
have been able to accurately quantify the effect that leased access
programming carried on a programming services tier may have on
subscribership or subscriber revenues to a degree specific enough to
assign it a definite value in a formula. Nevertheless, we no longer
believe that this effect is a factor that reasonably can be ignored.
Under the cost/market rate formula, the value of a channel is measured
by subtracting the programming or license fee the operator pays for the
channel from the advertising revenues and commissions the operator
receives for the channel. The formula does not include the subscriber
revenue received for the channel because, as explained above, we
assumed that leased access programming would have no measurable impact
on subscriber revenue. By ignoring the effect of leased access
programming on subscriber revenue, the cost/market rate formula assigns
a negative value to a channel where the license fee is higher than the
revenue collected from advertising and commissions. For example, a
programming service such as The Disney Channel, which carries no
commercial advertising, could have a negative value under the cost/
market rate formula and thus would yield a negative leased access rate.
The proposed cost/market rate formula therefore must not accurately
represent at least some important factor in assessing the value of a
channel because a well-established channel like The Disney Channel is
unlikely to have a negative value to the operator. The missing factor,
we believe, is the subscriber revenue that an operator receives because
it carries a particular channel. In the case of a channel newly added
to a tier, this subscriber revenue includes both the additional amount
an operator can charge its existing subscribers when it adds a channel
and also the full tier price paid by subscribers the channel attracts
to the tier.
9. Because the cost/market rate formula does not adequately account
for a significant benefit that cable operators receive from
programming, we believe it may result in an unduly low rate that does
not adequately capture the value of a channel. Such a rate would not
adequately compensate the cable operator and would force cable
operators to subsidize leased access programmers, thereby impermissibly
affecting the cable system's operation, financial condition or market
development. We therefore concluded that the proposed cost/market rate
formula would not accurately establish reasonable maximum rates
because, in its attempt to measure the opportunity costs of using a
channel for leased access, it ignores a significant opportunity cost--
the effect on subscriber revenue. Because neither the Commission nor
the commenters in this proceeding have been able to
[[Page 11368]]
specifically quantify this effect, we were unable to revise our
proposed formula in a way that would allow us to adopt it as an
appropriate method for determining maximum leased access rates.
ii. Maximum Rate for Full-Time Leased Access Programming Carried on a
Programming Services Tier
10. Based on our review of the comments, we no longer believe that
the proposed cost/market rate formula is a reasonable formula for
determining maximum leased access rates. Instead, we decided to retain
an implicit fee formula. We did, however, modify our current formula to
address the concerns set forth in the Further NPRM and in the comments.
Specifically, as described below, we concluded that the maximum
reasonable rate for leased access programming that is carried on a
programming services tier should be the ``average implicit fee.'' We
will, however, continue to monitor the availability of leased access
channels and may revisit this issue if it appears that the average
implicit fee formula no longer reflects a reasonable rate.
11. To determine the average implicit fee for a full-time channel
on a particular tier with a subscriber penetration over 50%, an
operator must first calculate the total amount it receives in
subscriber revenue per month for the programming on all such tier(s),
and then subtract the total amount it pays in programming costs per
month for such tier(s) (the ``total implicit fee calculation''). A
weighting scheme that accounts for differences in the number of
subscribers and channels on all such tier(s) must be used to determine
how much of the total implicit fee calculation will be recovered from
any particular tier. The weighting scheme is determined in two steps.
First, the number of subscribers is multiplied by the number of
channels (the result is the number of ``subscriber-channels'') on each
tier with subscriber penetration over 50%. For instance, a tier with 10
channels and 1,000 subscribers would have 10,000 subscriber-channels.
Second, the number of subscriber-channels on each of these tiers is
divided by the total number of subscriber-channels on all such tiers.
Given the percent of subscriber-channels for the particular tier, the
implicit fee for the tier is computed by multiplying the subscriber-
channel percentage for the tier by the total implicit fee calculation.
Finally, to calculate the average implicit fee per channel, the
implicit fee for the tier must be divided by the corresponding number
of channels on the tier. The final result is the maximum rate per month
that the operator may charge the leased access programmer for a full-
time channel on that particular tier. In the event of an agreement to
lease capacity on a tier with less than 50% penetration, the average
implicit fee should be determined on the basis of subscriber revenues
and programming costs for that tier alone.
12. In essence, the average implicit fee measures the average
amount that full-time programmers implicitly ``pay'' the cable operator
for carriage. In other words, the average implicit fee represents the
average amount of subscriber revenue that full-time programmers cede to
the operator to permit the operator to cover its costs and earn a
profit. For instance, if subscribers pay an average of $0.50 per
channel for a particular tier, and the average programming or license
fee on the tier is $0.10, then, on average, programmers on the tier are
implicitly ``paying'' the operator $0.40 for carriage. Since full-time
lessees resemble, and will be competing with, full-time cable networks,
it is appropriate that the maximum full-time leased access rate reflect
the average marketplace terms and conditions under which cable networks
are able to gain access to the cable system. From the operator's
standpoint, the average implicit fee represents the average value of a
channel after programming acquisition costs are paid. A formula based
on the average value of a channel may reflect the value of channel
capacity more accurately than a formula based on the value of the
programming bumped for leased access, such as the proposed cost/market
rate formula, because programming that is bumped for leased access may
not have had sufficient opportunity to reach its full revenue-
generating potential.
13. In addition, we adopted an average implicit fee formula because
it is possible to determine the average value of a channel accurately,
even when channels are sold as part of a package (i.e., a tier). A
precise calculation of the average channel value is possible because
the necessary components are known: in particular, what a subscriber
pays for the tier and what the operator pays in total programming costs
for all channels on the tier. By contrast, the proposed cost/market
rate formula and the highest implicit fee formula cannot provide such
accuracy because they attempt to measure the value of an individual
channel on a tier. However, the value of an individual channel on a
tier cannot be ascertained accurately because it is not possible to
determine the subscriber revenue attributable to a particular channel
that is sold collectively with other channels as a single package. The
same problem would be presented by an attempt to determine the lowest
implicit fee.
14. We also believe that developments in the multichannel video
programming marketplace are relevant to our decision to adopt the
average implicit fee formula. The number of non-vertically integrated
national programming services has grown in each of the past three
years. We believe that a shift from a highest implicit fee formula to
an average implicit fee formula may provide additional opportunities
for diverse, unaffiliated programmers to enter the marketplace, without
creating a maximum rate that is artificially low and putting the cable
operator's operation, financial development or market development at
risk.
15. Moreover, we believe that the average implicit fee formula
addresses the concerns with the highest implicit fee formula that we
expressed in the Reconsideration Order. Most importantly, we do not
believe that the average implicit fee formula permits the operator a
``double recovery.'' In the Reconsideration Order, we noted that the
highest implicit fee formula overcompensates the operator because it
appears to allow the value of the channel to be recovered twice--once
from the leased access programmer (the highest implicit fee), and once
from subscribers (the average per channel subscriber charge). For
example, if the subscriber revenue for a tier is an average of $0.50
per channel and the lowest license fee for unaffiliated programming on
that tier is $0.05, the highest implicit fee for that tier would be
$0.45. Because we assumed that the leased access programmer would pay
up to $0.45 (the highest implicit fee) and the subscriber would still
pay $0.50 (the average per channel subscriber charge), we believed that
the operator was permitted to recover the value of the channel twice.
16. Our ``double recovery'' hypothesis was based on the assumption
that operators would be able to charge subscribers the same amount for
leased access programming that they charge on average for other
programming on the same tier. Although a number of commenters in this
proceeding supported this assumption, other commenters asserted that
subscribers will not be willing to pay the same amount for leased
access programming because subscribers value it less than programming
selected by the operator. These commenters claimed that the amount of
subscriber revenue that
[[Page 11369]]
operators will be able to collect for most leased access channels will
be close to or equal to zero, and leased access programming may in fact
diminish the value of a tier because subscribers will find it so
unappealing that viewership of the other programming on the tier will
be adversely impacted.
17. Based on the record before us, we could not conclude that
operators, in general, will be able to charge the same amount for a
tier once leased access programming is added, especially since most
leased access programming will be new and will not have an established
audience. We could not, however, predict with any certainty what the
relative value of the leased access programming will be. It is possible
that some leased access programming will be as profitable, if not more
so, than some of the operator's selected programming and that the
effect on the tier charge will be neutral or positive. On the other
hand, it is also possible that some leased access programming will be
less valuable than the operator's current programming, leading either
to a loss of subscribers or to a loss of subscriber revenue if the
operator lowers the tier price.
18. We therefore found that the assumption underlying our ``double
recovery'' hypothesis--that leased access programming will always be
equally valuable to the operator as its non-leased access programming--
was not supported by the record. Neither the Commission nor the
commenters, however, have been able to develop a reliable method for
predicting what value, if any, subscribers will place on leased access
programming. Since the current record did not permit us to accurately
assess the impact of leased access programming on the value of the
tier, we could not find that leased access programming will necessarily
result in an excess recovery (let alone a ``double'' recovery) for the
operator.
19. Moreover, we believe that any potential excess recovery
generally will be minimal. Based on what cable operators in a
competitive environment are able to charge subscribers for the addition
of a new channel, our ``going forward'' order allows operators to
charge a subscriber $0.20 a month for an additional channel. We expect,
however, that operators will recover less than $0.20 for a new leased
access channel because we believe that, on average, subscribers will
not be willing to pay as much for new leased access programming as they
do for new programming selected by the cable operator. In selecting its
own programming, a cable operator is able to take into account the
particular mix of programming already on its system and the particular
interests and demands of its subscribership. Thus, unlike with leased
access, the operator can select programming that will maximize net
subscriber revenue.
20. Additional factors are likely to further reduce any potential
excess recovery. For one, the ``going forward'' rate is based on what
operators can charge subscribers when new channels are added without
displacing existing programming. Therefore, if leased access
programming displaces existing programming, any amount of subscriber
revenue that an operator gains from a leased access channel may be
offset by subscriber revenue lost from the displaced channel. In
addition, we believe that subscriber revenue from a leased access
channel will be further offset by lost advertising revenues since
leased access programmers, unlike other programmers, generally will not
provide advertising slots to the cable operator. Subscriber revenue
will also be offset by additional administrative costs imposed by
leasing, which are not recovered through the average implicit fee
formula. For all of the above reasons, we believe that any excess
recovery for a leased access channel will be significantly less than
the $0.20 that an operator is allowed to charge subscribers for a new
channel.
21. Although we no longer believe that our ``double recovery''
concern was a valid reason for rejecting the highest implicit fee
formula, we nonetheless believe that the average implicit fee formula
is a more appropriate method for determining the maximum leased access
rate. First, as discussed above, the average implicit fee is based on a
more logical calculation than the highest implicit fee, because it is
derived from values that can be measured--subscriber revenue for the
tier(s) and programming costs for the tier(s)--to arrive at an average
amount of subscriber revenue that programmers cede to the operator in
exchange for carriage. The highest implicit fee formula, by contrast,
attempts to measure the implicit fee of a particular channel by using
one verifiable figure (the actual programming cost) and one proxy (the
average per channel subscriber revenue), since the actual amount that
subscribers pay for any particular channel on a tier cannot be
determined. Second, the average implicit fee mitigates our previous
concern that the highest implicit fee may overcompensate operators by
permitting them to charge the highest mark-up over programming costs
(i.e., the highest of the implicit fees). While the average implicit
fee formula does not allow the operator to recover its highest mark-up
over programming costs, it also does not restrict the operator to
charging the lowest mark-up over programming costs. Although we stated
in the Rate Order that using the highest market value of channel
capacity is fair, we believe that basing the maximum rate on the
average mark-up over programming costs more appropriately balances the
interests of cable operators and leased access programmers.
22. Third, we also expressed concern in the Reconsideration Order
that an implicit fee formula is not based on the operator's reasonable
costs. We now believe, however, that an implicit fee formula may better
reflect the value of the channel capacity, since a formula based
strictly on quantifiable costs cannot account for lost subscriber
revenue and therefore may not adequately compensate the operator. Given
that the maximum rate should not adversely affect the operation,
financial condition or market development of the cable system, it is
entirely appropriate to consider these non-quantifiable costs, such as
any negative effects leased access programming may have on the value of
the tier, in establishing the market value of a channel.
23. We also made a few other changes to the manner in which the
maximum leased access rate is calculated for tiered channels. First, we
departed from the current rule requiring rate calculations to be made
on a tier-by-tier basis. As described below, we have determined that
leased access programmers have the right to demand access to a tier
with more than 50% subscriber penetration. We believe that subscribers
generally perceive these highly penetrated tiers as a single
programming package, not as separate products. Consistent with this
view, we believe that operators should calculate the average implicit
fee using all channels carried on any tier with more than 50%
subscriber penetration. In addition, our rate regulation rules
generally are based on the principle of tier neutrality, which requires
cable operators to charge the same per channel rate regardless of the
programming costs incurred on a particular tier. Prior to rate
regulation, we believe that tier prices did not necessarily follow this
tier neutrality principle. Similarly, because the Communications Act
requires cable operators to transmit must-carry and public,
educational, and governmental (``PEG'') access channels on the basic
service tier, the average programming cost on that tier will tend to be
lower than it would be absent such a carriage requirement. Since, as a
result of
[[Page 11370]]
regulation, individual tier prices may not be directly correlated with
their underlying programming costs, we believe that it is appropriate
to permit cable operators to assess these costs more accurately by
averaging across highly penetrated tiers.
24. Second, we believe that the maximum rate calculation should no
longer exclude channels devoted to must-carry broadcast signals or PEG
access programming. In the Reconsideration Order, we stated that must-
carry and PEG access channels should be excluded from consideration
because the lack of program license fees for those channels does not
represent a marketplace decision, but is the result of statutory
mandates. Under the highest implicit fee approach, the inclusion of
channels with zero license fees, such as must-carry and PEG access
channels, would virtually ensure that every cable system had a
commensurately high leased access rate. Now, with the average implicit
fee formula, because all of the programming costs are averaged
together, it is appropriate to include must-carry and PEG access
channels in calculating the maximum leased access rate. Although the
lack of programming costs for these channels makes it inappropriate to
use them as the sole determinant of maximum rates, these channels are
relevant to a calculation that is based on the value of the relevant
tier(s). Since the average implicit fee is derived from the total value
of the tier(s) being considered, it is appropriate to account for the
effect of all of the channels on the tier(s). Moreover, as with all
individual channels on a tier, it would not be possible to ascertain
how much the total subscriber revenue for the tier should be reduced if
must-carry and PEG access channels were excluded.
25. For the same reason we also concluded that the maximum rate
calculation should no longer exclude channels devoted to affiliated
programming. In the Rate Order, we determined that affiliated
programming should not be considered in determining the highest
implicit fee because to do so could affect the operator's right to
charge affiliated and unaffiliated programmers different rates.
However, in addition to the necessity of including all channels on the
relevant tier(s) in an average implicit fee calculation, we believe
that requiring cable operators to base an implicit fee calculation only
on unaffiliated programming may inappropriately result in different
maximum leased access rates for systems that are identical but for
their affiliation with certain programmers. We believe that adopting a
standard similar to that adopted with regard to our affiliate
transaction rules will resolve this disparity without interfering with
the operator's right to establish different rates for affiliated and
unaffiliated programmers. We therefore modified our rules to require
that, in calculating the average implicit fee, operators must use
programming costs for affiliated programming that reflect the
prevailing company prices offered in the marketplace to third parties.
If a prevailing company price does not exist, the programming should be
priced at the lower of the programmer's cost or the fair market value.
Because these objective measurements are based on factors outside
affiliated transactions, the requirement to use them as proxies for the
actual programming costs does not conflict with our conclusion in the
Rate Order that the Commission is precluded from establishing rates
based on transactions with affiliates.
26. Finally, we eliminated our current programmer categories for
determining maximum rates for leased access programming that is carried
on a tier. In the Rate Order, the Commission stated that the programmer
categories were intended to reflect the different economies faced by
the different types of programmers. We now believe, however, that
basing maximum rates on the average value of the channel capacity is a
more appropriate approach to implementing section 612 than making
distinctions based on the different economies among leased access
programmers. For this reason, and also because an average implicit fee
calculation must include all channels on the relevant tier(s), we
abolished the mandatory distinction between the rate charged to direct
sales programmers and ``all others.'' Therefore, all leased access
programmers carried on a cable system's tier will be subject to the
same maximum rate, which will be derived using all channels on the
relevant tier(s), including channels devoted to direct sales
programming (e.g., home shopping networks and infomercials). As
described below, cable operators will still be required to calculate
different rates for programming services sold on a per-channel, or a la
carte, basis. We will maintain the distinction between leased access
programming carried on a tier and leased access programming offered as
an a la carte service, not because of their ``different economies,''
but because of the practical differences involved in implementing a
maximum leased access rate for a la carte services.
iii. Maximum Rate for Full-Time Leased Access Programming Carried as an
A La Carte Service
27. Despite our conclusion that the average implicit fee formula is
the appropriate method for setting maximum reasonable rates for leased
access programming carried on a tier, we concluded that the highest
implicit fee formula remains the best approach for setting maximum
reasonable rates for leased access programming offered to subscribers
as an a la carte service. Because the subscriber revenue for an a la
carte service is known, an a la carte programmer can readily determine
how much it is implicitly paying the operator for carriage. If an
unaffiliated a la carte programmer is implicitly paying more than the
maximum leased access rate for carriage, the a la carte programmer
could obtain a larger share of the subscriber revenue simply by
demanding a lease. This potential disruption to operators' negotiated
relationships with unaffiliated a la carte programmers could adversely
impact the operation, financial condition, and market development of
cable systems. The highest implicit fee for a la carte services
protects operators from this potential adverse effect because, unlike
the average implicit fee, it represents the maximum amount that any a
la carte programmer is implicitly paying for carriage. The average
implicit fee does not pose such a risk for tiered services because the
actual subscriber revenue for individual channels is not known. Even if
the actual subscriber revenue for a particular tiered service could be
determined, a non-leased access programmer implicitly paying more than
the average implicit fee would have little reason to switch to leased
access because subscriber revenue is not passed through to leased
access programmers that are carried on a tier. Non-leased access
programmers that are carried on a tier are unlikely to switch from an
arrangement where they receive a license fee to an arrangement where
they pay the cable operator but receive no subscriber revenue.
28. In addition, because in the a la carte context we are able to
determine the actual subscriber revenue derived from particular
programming services, we do not need to use the average implicit fee
formula. Moreover, there can be no ``double recovery'' in the a la
carte context because any subscriber revenues for a leased access
channel carried as an a la carte service are readily ascertainable and
can be passed through to the leased access programmer. In order to
protect against any over recovery, we modified our
[[Page 11371]]
rules to clarify that any subscriber revenue from an a la carte leased
access service must be passed through to the leased access programmer.
As with the average implicit fee, we require operators to include
affiliated a la carte services in their highest implicit fee
calculation using the rules described above for determining programming
costs for affiliated programming. As discussed below, we also made one
modification regarding the calculation of the highest implicit fee for
a la carte programming services.
iv. Transition Period
29. We did not establish a transition period for implementing our
revised rate formulas. In the Rate Order, the Commission clearly stated
that ``the rules we adopt should be understood as a starting point that
will need refinement both through the rulemaking process and as we
address issues on a case-by-case basis.'' Thus, cable operators and
non-leased access programmers have had ample notice that the rate
formula was subject to change. Both operators and programmers alike
understand that a reduction in the maximum rate could increase the
demand for leased access, thereby increasing the possibility that
bumping might occur. We believe that operators and programmers that
negotiate to place non-leased access programming on a channel
designated for leased access assume the risk that the programming might
have to be bumped for a leased access programmer. Section 612
explicitly provides that operators may no longer use unused leased
access capacity once a written agreement is obtained by a leased access
programmer.
B. Part-Time Leased Access Programming and Maximum Part-Time Rates
30. Under the Commission's rules, cable operators are required to
accommodate part-time leased access requests, but need not accommodate
requests of less than one half hour. With respect to rates for part-
time leased access programming, the Commission's rules permit cable
operators to charge different time-of-day rates, provided that: (a) The
total of the rates for a day's schedule (i.e., a 24-hour block) does
not exceed the maximum rate for one day of a full-time leased access
channel prorated evenly from the monthly rate; (b) the overall pattern
of time-of-day rates is otherwise reasonable; and (c) the time-of-day
rates are not intended to unreasonably limit leased access use. The
Further NPRM sought comment on a cable operator's obligation to
accommodate a part-time leased access programmer by opening a new
channel for leased access use, and on the calculation of maximum rates
for part-time use.
i. Accommodation of Requests for Part-Time Leased Access
31. As an initial matter, we affirmed our current rule requiring
cable operators to lease time in half-hour increments. We recognize
that part-time leasing is not expressly required by the statute, that
it may impose additional administrative and other costs on cable
operators, and that it may pose the risk of capacity being under-used.
As noted above, if cable operators are not adequately compensated for
their capacity, it may constitute a violation of Section 612. We also
recognize, however, that the statute does not restrict leased access to
full-time programming and that part-time programming currently
represents a significant share of the leased access marketplace,
thereby providing much of the competition and diversity of programming
sources that Section 612 was intended to promote. Therefore, rather
than permit cable operators to exclude part-time leased access
programming, we permit cable operators to set reasonable limits on when
and how part-time programming must be accommodated, as set forth below.
32. First, we affirmed the holding in TV-24 Sarasota, Inc. v.
Comcast, 10 FCC Rcd 3512, 3518 (Cable Serv. Bur., Dec. 27, 1994) that a
cable operator is not required to open an additional leased access
channel if a programmer's request can be accommodated in a comparable
time slot on an existing leased access channel. We believe that the
comparability of time slots can be determined by a number of objective
factors, such as day of the week, time of day, and audience share. We
also adopted our tentative conclusion in the Further NPRM that a cable
operator should not be required to make even a dark channel available
for leased access, so long as the programmer's request can be
accommodated in a comparable time slot on a programmed channel. In
addition, we extended TV-24 Sarasota to permit a cable operator to
accommodate a part-time leased access request by offering the
programmer a comparable time slot on a channel otherwise carrying non-
leased access programming.
33. Furthermore, we concluded that cable operators should not be
required to open an additional channel for use by part-time leased
access programmers until existing part-time leased access channels are
substantially filled with leased access programming. For these
purposes, we will consider a channel to be ``substantially filled''
with leased access programming if leased access programming occupies
75% or more of its programming day. In other words, cable operators do
not have to open a second channel for part-time use until the first
part-time channel has at least 18 hours of programming every day.
Likewise, a third channel for part-time use does not have to be made
available until the second channel has at least 18 hours of programming
every day, and so on.
34. Consistent with our tentative conclusion in the Further NPRM,
we provide an exception to this rule and require operators to open an
additional channel for part-time leased access use if a programmer (or
collective) agrees to provide programming for a minimum of eight
contiguous hours every day for at least one year. The programmer may
select any eight-hour time period during the day, but the same eight
hours must be used every day. Therefore, even if an operator has an
existing part-time leased access channel that is not substantially
filled with leased access programming, the operator must open an
additional part-time leased access channel if it cannot otherwise
accommodate a programmer's request for a year-long eight-hour daily
time slot. Once an operator has opened a vacant channel to accommodate
such a request, our other leased access rules apply. If, however, the
operator has accommodated such a request on a channel already carrying
an existing full-time non-leased access programmer, the operator does
not have to accommodate other part-time requests of less than eight
hours on that channel until all other existing part-time leased access
channels are substantially filled with leased access programming.
35. Part-time programmers are permitted to seek access on a
collective basis. If part-time programmers request an entire channel on
a collective basis, the operator must provide the channel regardless of
any unused capacity on part-time leased access channels because we
would not consider that a request for part-time programming. Similarly,
part-time programmers that individually cannot meet the year-long
eight-hour daily time commitment may demand access as a group in order
to satisfy the requirement. Allowing collective requests will not
impose any further burden on cable operators since the same request
could have been made by an individual programmer.
36. To summarize, we modified our rules regarding part-time leased
access programming as follows. Cable operators may accommodate part-
time
[[Page 11372]]
leased access requests by providing comparable time slots on non-leased
access channels or on channels already being used for leased access on
a part-time basis. Cable operators will not be required to make an
additional channel available for part-time leased access use until all
other part-time leased access channels have at least 18 hours of leased
access programming every day. So long as an operator has at least one
channel designated for part-time leased access use that is not
substantially filled by part-time programmers, the operator will not be
required to open another part-time channel even if comparable time
slots are no longer available on the part-time channel that is only
partially programmed. However, if a leased access programmer (or
collective) agrees, at a minimum, to provide programming during the
same eight-hour time slot every day for at least one year, an operator
will be required to accommodate the request even if an existing part-
time leased access channel is not substantially filled with leased
access programming. We believe that this approach achieves the
statutory objectives of competition and diversity of programming
sources, while doing so in a manner consistent with the growth and
development of cable systems.
ii. Maximum Part-Time Rates
37. Because we did not adopt the proposed cost/market rate formula,
and because the formulas for tiered and a la carte full-time services
that we adopted are similar in kind to the existing approach for
setting the maximum full-time leased access rate, we affirmed our
decision to require that cable operators prorate their maximum full-
time rate when determining their maximum permitted part-time rate, and
to allow operators to adjust part-time rates according to time-of-day
pricing. As we stated in the Reconsideration Order, we believe that
this approach accounts for marketplace realities by recognizing that
different time slots have different values, furthers the statutory goal
of promoting a diversity of programming sources, and promotes the full
use of leased access channels by making non-prime time slots less
expensive than prime-time slots, and therefore more attractive, to
programmers. Cable operators are permitted to recover any additional
technical costs that are attributable to part-time leased access
programming in accordance with the rules described below.
C. Resale of Leased Access Time
38. In the Further NPRM, we asked whether persons unaffiliated with
the operator should be allowed to lease programming time from the
operator and then sell it for a profit to other unaffiliated persons.
In the Order, we concluded that resale of leased access capacity to
persons unaffiliated with the operator should be permitted, subject to
certain contractual conditions described below that a cable operator
may reasonably impose, because we believe that resale can provide
substantial benefits to leased access programmers without an adverse
impact on cable operators. In particular, we believe that small and
part-time programmers could benefit from resale. For instance, a
reseller could bring together various part-time programmers to form a
programming package for an entire channel. This service would not only
relieve operators of much of the cost and burden of dealing with a
large number of small programmers, but would be more efficient, since a
reseller's business would be devoted to this goal while cable operators
typically devote little or no staff to promoting leased access. We
believe that resale may prove to be a crucial mechanism by which part-
time programmers are able to obtain carriage.
39. To avoid discouraging cable operators from providing carriage
to not-for-profit entities and others at reduced rates, we found that
it would be a reasonable term or condition of carriage for a cable
operator to provide that if the lessee resells its capacity, the lessee
must start paying the operator at a rate which may be up to and
including the maximum permissible rate. In addition, cable operators
may provide in their leased access contracts that any sublessees are
subject to the non-price terms and conditions that apply to the initial
lessee. Finally, we noted that the cable operator's right to refuse to
transmit programming containing obscenity or indecency applies to any
leased access program or portion of a leased access program, regardless
of whether the programmer purchased leased access capacity directly
from the cable operator or through a reseller.
D. Tier and Channel Placement
40. Background: According to the legislative history of the 1992
amendments to Section 612, the purpose of leased access would be
defeated if leased access programmers were placed on tiers that few
subscribers access. The 1992 Senate Report states that ``[t]he FCC
should ensure that [leased access] programmers are carried on channel
locations that most subscribers actually use.'' It further states that
``it is vital that the FCC use its authority to ensure that these
channels are a genuine outlet for programmers.'' In the Further NPRM,
the Commission tentatively concluded that leased access programmers are
entitled to placement either on the basic service tier (``BST'') or on
the cable programming services tier (``CPST'') with the highest
subscriber penetration, unless technical or other compelling reasons
weigh against such placement. We reasoned that the BST and the CPST
with the highest subscriber penetration qualify as ``genuine outlets''
because ``most subscribers actually use'' them. We sought comment on
whether the term ``most subscribers'' should be interpreted to mean
that any CPST that has a subscriber penetration of more than 50% should
also qualify as a ``genuine outlet.''
41. Discussion: As stated in the Further NPRM, we believe that we
must ensure a ``genuine outlet'' for leased access programming in order
to further the statutory goals of competition in the delivery of video
programming sources and diversity of programming sources. To that end,
we affirmed our tentative conclusion that, absent a technical or other
compelling reason, leased access programmers have the right to demand
access to a tier that most subscribers actually use. Leased access
programmers would not be assured access to most subscribers if cable
operators were permitted to require leased access channels to be sold
on an individual, or a la carte, basis.
42. Although we continue to believe that the BST and the CPST with
the highest subscriber penetration qualify as genuine outlets, we do
not think it is necessary to restrict the placement of leased access
programming to only those tiers. We believe that any tier with a
subscriber penetration over 50% should also qualify as a genuine outlet
because it consists of channel locations that ``most subscribers
actually use.'' Therefore, if a leased access programmer requests
placement on a tier, we will allow the cable operator the flexibility
to place the programming on any tier that has a subscriber penetration
of more than 50%. We believe that this approach takes into account the
``legitimate need of the cable operator to market its product'' because
it allows the operator to consider the marketing mix of different
tiers. The record reflected that some commenters would favor placing
leased access channels on a separate tier comprised primarily, if not
exclusively, of leased access programming. We concluded that so long as
such a tier has a subscriber penetration of more than 50%, the cable
operator is not precluded from developing a tier that predominantly
features leased access programming.
[[Page 11373]]
43. With regard to specific channel placement, we believe that the
cable operator should have the discretion to select the channel
location of a leased access channel, so long as the operator's choice
is reasonable. Because a determination of reasonable channel placement
will depend on the particular circumstances of a situation, we will
evaluate these types of disputes on a case-by-case basis. We will take
into consideration evidence that the operator deliberately interfered
with potential viewership of the leased access programming in an effort
to discourage continued carriage (e.g., by intentionally surrounding a
leased access channel with dark channels or by frequently shifting its
channel location without sufficient justification). Once a cable
operator has provided leased access programmers with a genuine outlet,
we do not believe it is necessary to interfere with that operator's
ability to structure channel line-ups. Therefore, although a leased
access programmer may demand access to a tier that has a subscribership
of more than 50%, the cable operator is entitled to place the leased
access programming on any reasonable channel location on any qualifying
tier.
E. Minority and Educational Programmers
44. Background: Pursuant to section 612(i), a cable operator may
substitute programming from a qualified minority or educational
programming source for up to 33% of its designated leased access
channels. In the Further NPRM, the Commission sought comment on whether
leased access requirements regarding tier and channel placement should
also apply to minority or educational programming that is used as a
substitute for leased access programming. The Commission tentatively
concluded that minority or educational programming should not qualify
as a substitute for leased access programming unless it is carried on
the BST or on a CPST that qualifies as a genuine outlet.
45. Discussion: Applying the same tier placement standard we
adopted for leased access, we concluded that minority or educational
programming will not qualify as a substitute for leased access
programming unless it is carried on a tier that has a subscriber
penetration of more than 50%. The cable operator may select which
qualifying tier to use for the substituted programming. As we noted in
the Further NPRM, neither the statute nor the legislative history
specifically requires that most subscribers receive the substituted
minority or educational programming. However, as we previously stated,
the language of Section 612(i)(1) strongly suggests that Congress
envisioned that any substituted minority or educational programming
would be placed on the same channels that would have been used for
leased access. Specifically, section 612(i)(1) states that ``a cable
operator required by this section to designate channel capacity for
commercial use may use any such channel capacity'' to provide minority
or educational programming. Furthermore, to allow a more lenient
standard for minority or educational programming could potentially
diminish its value as a substitute for leased access programming. We
therefore imposed the same tier and channel placement requirements on
substitute minority or educational programming as we did on leased
access programming.
F. Preferential Access
46. Background: In the Further NPRM, we asked whether preferential
treatment for not-for-profit leased access programmers should be
required to promote a diversity of programming sources. We sought
comment on how to calculate preferential rates, if found to be
necessary, and we asked whether cable operators should be required to
give preferential access to not-for-profit programmers by setting aside
a certain percentage of their leased access capacity for such use
(e.g., 25%). Commenters were also invited to demonstrate with specific
evidence why preferential treatment might be appropriate for certain
types of for-profit programmers, such as low power television
(``LPTV'') stations and minority and educational programmers.
47. Discussion: We do not believe that mandating preferential
access or preferential rates for not-for-profit programmers, or any
other class of programmers, is necessary or appropriate under Section
612. First, leased access is intended for ``commercial use,'' which the
Communications Act defines as ``the provision of video programming,
whether or not for profit.'' The fact that not-for-profit leased access
programmers are defined as commercial users for purposes of leased
access indicates that they should compete on equal terms with for-
profit leased access programmers.
48. Second, we do not believe that requiring cable operators to
offer preferential treatment to not-for-profit programmers is necessary
to serve the statutory purposes of Section 612. Mandatory preferential
treatment would not necessarily promote diversity since unaffiliated
not-for-profit programming sources are not inherently more diverse than
unaffiliated for-profit programming sources. In fact, mandatory
preferential treatment could potentially conflict with the statutory
directive that leased access rates not ``adversely affect the
operation, financial condition, or market development of the cable
system'' because a mandatory preferential rate below what the
Commission has determined to be the maximum reasonable rate may be
insufficient to compensate operators for leased access use. Third, not-
for-profit status does not necessarily indicate a lack of financial
resources. While we noted that Congress gave cable operators the
flexibility to negotiate lower rates, we do not believe that operators'
right to negotiate lower rates should be transformed into an obligation
to provide affordable rates to not-for-profit leased access
programmers.
49. We also declined to mandate preferential treatment for not-for-
profit programmers that qualify as minority or educational programmers
under Section 612(i)(2) or (3). Congress chose to encourage minority
and educational programming by allowing it to be used as a substitute
for leased access, regardless of its profit status. There is no
evidence that Congress intended the Commission to create an additional
mechanism to promote not-for-profit minority or educational programming
through preferential rates and set-asides. Furthermore, we did not
require cable operators to provide preferential treatment for LPTV
stations or for educational and community programming services that
public television stations may wish to offer in addition to their
primary over-the-air signals. Congress provided public television
stations and LPTV stations the preferences it deemed necessary.
G. Selection of Leased Access Programmers
50. In the Further NPRM, the Commission proposed rules to govern a
cable operator's selection of leased access programmers. In the Order,
we concluded that, so long as an operator's available leased access
capacity is sufficient to satisfy the current demand for leased access,
all leased access requests must be accommodated as expeditiously as
possible, unless the operator refuses to transmit the programming
because it contains obscenity or indecency. We believe that such an
approach is the most appropriate method of assuring that cable
operators comply with section 612(c)(2), which explicitly restricts
operators' exercise of editorial control
[[Page 11374]]
over leased access programming. Section 612(c)(2) provides that ``a
cable operator shall not exercise any editorial control over any video
programming provided pursuant to this section, or in any other way
consider the content of such programming,'' except in the case of
programming containing obscenity or indecency, or to the minimum extent
necessary to set a reasonable price. We believe that requiring
operators to accommodate all leased access requests when the
programming does not contain obscenity or indecency, so long as there
is available capacity, will most effectively restrict operators'
exercise of editorial control, without impinging upon their discretion
with regard to price and sexually-oriented programming. We also believe
that such an approach will further the statutory objective to promote
competition because it will reduce an operator's ability to select
leased access programming based on anti-competitive motives.
51. We believe, however, that an operator should be allowed to make
objective, content-neutral selections from among leased access
programmers when the operator's available leased access channel
capacity is insufficient to accommodate all pending leased access
requests. In the full-time channel context, this situation would arise
if two or more leased access programmers requested the remaining
available leased access space; in the part-time context, this situation
could arise, for example, if two or more programmers requested the 8:00
p.m. to 9:00 p.m. time slot on the system's part-time leased access
channel. In such situations, we believe that the cable operator should
be allowed to make an objective, content-neutral selection among the
competing programmers. For example, the operator could hold a lottery.
Or, the operator could base its decision on other objective, content-
neutral criteria such as a programmer's non-profit status, the amount
of time a programmer is willing to lease, or a programmer's willingness
to pay the highest reasonable price for the capacity at issue. Allowing
flexibility within this limited context will better enable operators to
assure the growth and development of their cable systems.
H. Procedures for Resolution of Disputes
52. We affirmed our proposal in the Further NPRM to streamline the
complaint process by requiring that an independent accountant make a
determination of the cable operator's maximum permitted rate prior to
the filing of any complaint alleging that the operator's rate is
unreasonable. We believe that such a requirement will preserve
Commission resources by reducing the likelihood that unsubstantiated
claims will be filed with the Commission. In the event that a complaint
is filed with the Commission because the dispute remains unresolved
despite the accountant's final report, there will be a rebuttable
presumption that the accountant's findings are correct.
53. We did not adopt our proposal in the Further NPRM to allow the
cable operator to select an independent accountant in the event that
the operator and leased access programmer fail to agree on a mutually
acceptable accountant. Such an approach may be unfair to the leased
access programmer because it does not encourage the operator to find a
mutually acceptable accountant. Instead, we required that if the
parties cannot agree on a mutually acceptable accountant within five
business days of the programmer's request for a review, they must each
select an independent accountant on the sixth business day. These two
accountants will then have five business days to select a third
independent accountant to perform the review. To account for their more
limited resources, operators of systems entitled to small system relief
will have 14 business days to select an independent accountant when no
agreement can be reached. A cable system is entitled to small system
relief if it either: (a) serves 15,000 or fewer subscribers and is
owned by a small cable company serving a total of 400,000 or fewer
subscribers over all of its systems, or (b) has been granted special
relief as provided for in the Sixth Report and Order and Eleventh Order
on Reconsideration in MM Docket Nos. 92-266 and 93-215, 60 FR 35854
(July 12, 1995) (``Small System Order''). The final accountant report
must be completed within 60 days of when the final accountant is
selected to perform the review. The Order amended the Commission's
current rule requiring complaints to be filed within 60 days of the
alleged violation to provide instead that complaints must be filed
within 60 days of the completion of the final accountant report.
54. The operator must pay the full cost of the review if the final
accountant report shows that the operator's rate exceeds the maximum
permitted rate by more than a de minimis amount. Otherwise, each party
will pay their own expenses incurred in making the review and will
split the cost of the final accountant's review. We believe that this
approach is appropriate because, unlike the leased access programmer,
the cable operator possesses all the information necessary to calculate
its rates accurately and knows, or should know, whether its rates are
excessive.
55. The final accountant report should be filed in the cable
system's local public file. In order for the information to serve as
adequate notice to other potential leased access programmers, the final
accountant report must, at a minimum, state the maximum permitted rate
and explain, as fully as possible without revealing proprietary
information, how it was determined. The report must be signed, dated,
and certified by the accountant.
56. We strongly encourage parties to use ADR to settle disputes
that are not resolved by the final accountant report. If parties
attempt, but fail, to settle their dispute through ADR, we will make an
exception to our requirement that complaints must be filed within 60
days of the completion of the final accountant report, provided that
the leased access programmer certifies that its complaint was filed
within 60 days of the termination of the ADR proceedings. The cable
operator may rebut such a certification.
I. Contractual Issues
i. Minimum Contract Length
57. In response to the request of a few commenters that we address
certain contractual issues that arise in the negotiation of leased
access contracts, we found that the record before us was insufficient
to determine what a reasonable minimum contract length would be. We
recognize that the lack of long-term security could create difficulties
for leased access programmers that need to obtain financing or to make
long-term investments in leases and equipment. However, our rule that
operators must accommodate all leased access requests so long as
capacity exceeds demand guarantees that a leased access programmer will
be assured of continued access at least until the operator's set-aside
requirement is met. Operators are not allowed to terminate leased
access contracts for simply any reason asserted by the cable operator.
Termination provisions of leased access contracts must be commercially
reasonable. Because we believe that this requirement affords leased
access programmers adequate security, we declined to establish a
minimum contract length.
58. Operators may not, however, unreasonably limit the length of a
contract with a leased access programmer. In assessing reasonableness
in this context, we will
[[Page 11375]]
weigh heavily the contract lengths that the operator enters into with
the non-leased access programming services on its system.
ii. Insurance Requirements
59. At the outset, we noted that operators have the right to
require reasonable liability insurance coverage for leased access
programming. We declined to adopt specific conditions or limits
regarding the amount of coverage or the type of insurance policy that
operators may require because we believe that a specific restriction
might not be appropriate for all situations. Instead, we adopted a
standard comparable to the standard that applies in the context of
security deposits for leased access programming. That is, insurance
requirements must be reasonable in relation to the objective of the
requirement. Cable operators will bear the burden of proof in
establishing reasonableness. Similar to the rule for security deposits,
insurance requirements may be sufficient to insure adequate coverage.
Determinations of what is a ``reasonable'' insurance requirement will
be based on the operator's practices with respect to insurance
requirements imposed on non-leased access programmers, the likelihood
that the nature of the leased access programming will pose a liability
risk for the operator, previous instances of litigation arising from
the leased access programming, and any other relevant factors.
J. Technical Equipment Costs
60. The Commission's rules provide that cable operators must
provide ``the minimal level of technical support necessary for [leased
access] users to present their material on the air * * * provided
however, that leased access providers must reimburse operators for the
reasonable cost of any technical support that operators actually
provide.'' We clarified that this provision entitles cable operators to
charge an additional fee only for the reasonable cost of providing
technical support to a leased access programmer that is not also
provided to non-leased access programmers on the system. Cable
operators may not impose a separate charge for the same kind of
technical support that they already provide to non-leased access
programmers because the maximum leased access rate represents what non-
leased access programmers implicitly pay for carriage, including their
technical costs. In other words, the maximum leased access rate already
includes technical costs common to all programmers. Similarly, the
operator cannot impose an additional charge on the leased access
programmer to purchase additional equipment (e.g., when the current
equipment is fully utilized) if the same type of equipment is used to
serve non-leased access programmers. For example, the operator cannot
add a charge for the costs of providing a satellite dish if it provides
that type of technical support to non-leased access programmers at no
additional charge. In contrast, the operator is entitled to add a
charge to recover the costs of providing, for instance, a tape recorder
or a camera if such technical equipment would be provided to non-leased
access programmers for the same additional charge. The operator may
also charge the leased access programmer for the use of technical
equipment that is provided at no charge for PEG access programming,
provided that the franchise agreement requires the operator to provide
the equipment, the equipment is not being used for any other non-leased
access programming, and the operator's franchise agreement does not
preclude such use.
61. If, in order to accommodate a leased access programmer, a cable
operator must purchase technical equipment that is not of a type used
by non-leased access programmers on the system, we believe that the
operator should have the option of requiring the leased access
programmer to pay the full purchase price of the equipment. Should the
cable operator exercise this option, the leased access programmer will
have all rights of ownership associated with the equipment under
applicable state and local law. If, on the other hand, the operator
prefers to own the technical equipment, it may purchase the equipment
for itself and lease it to leased access programmers at a reasonable
rate. We believe that this approach will protect leased access
programmers, while assuring that the cable system's operation,
financial condition or market development are not adversely affected.
K. Definition of Affiliate
62. For purposes of section 612, we adopted the definition of
affiliate that applies in the context of our program access rules under
section 628 and our open video system rules under section 653. As we do
in those contexts, we apply the definitions contained in the notes to
47 CFR 76.501 (which reflect the broadcast attribution rules contained
in the notes to 47 CFR 73.3555), with certain modifications.
Specifically, in contrast to the broadcast attribution rules reflected
in Sec. 76.501: (a) An entity is considered a cable operator's
affiliate if the cable operator holds 5% or more of the entity's stock,
whether voting or non-voting; (b) there is no single majority
shareholder exception; and (c) all limited partnership interests of 5%
or greater qualify, regardless of insulation. In addition, actual
working control, in whatever manner exercised, is also deemed a
cognizable interest.
63. Section 612 is designed to promote diversity of programming
sources and to reduce the ability of cable operators to discriminate
against unaffiliated programming services for anti-competitive reasons.
Because these dual objectives are analogous to the objectives of the
program access and open video system rules, adoption of a similar
affiliation standard is warranted. Moreover, by adopting a definition
of affiliate for leased access that is consistent with the program
access standard, we avoided the possibility that a programmer will be
considered a cable operator's affiliate for one purpose but not for
another.
64. We also clarified that leased access programmers are required
to be unaffiliated only with the operator of the cable system on which
they seek carriage. Section 612(b)(1) provides that leased access
channel capacity shall be designated for use by programmers
``unaffiliated with the cable operator.'' We believe that use of the
term ``the'' to modify ``cable operator'' clearly indicates that
Congress was referring only to the cable operator of the particular
system in question. We believe that if Congress feared that affiliated
programmers have an advantage in acquiring carriage from even rival
cable operators, it would have disqualified all affiliated programmers
by using ``a'' or ``any'' to modify ``cable operator.'' Furthermore,
allowing a broader category of programmers to use leased access will
advance the statutory purposes of promoting competition and diversity.
III. Order on Reconsideration
A. Maximum Rate Formula
i. Exclusion of Programming Revenues
65. We declined to modify our current rule that programming
revenues received by the operator from non-leased access programmers,
such as sales commissions from home shopping networks, should be
excluded from the maximum rate calculation. We found that the effect of
excluding sales commissions on future maximum leased access rates will
be minimal given that the Order: (a) Adopted the average implicit fee
for tiered services which, unlike the highest implicit fee, is derived
using all channels on the
[[Page 11376]]
relevant tier(s), and (b) eliminated direct sales programming as a
separate category for setting rates. We therefore do not believe that
excluding sales commissions will result in the migration of home
shopping networks to leased access.
ii. Averaging Subscriber Penetration for A La Carte Channels
66. The Reconsideration Order clarified that in order to calculate
the maximum rate when leased access programming is offered as an a la
carte service, the highest per-subscriber implicit fee should be
multiplied by the average number of subscribers that subscribe to the
operator's a la carte services. As discussed above, we continue to
permit cable operators to use the highest implicit fee formula to set
maximum reasonable rates for leased access programming that is carried
as an a la carte service. We believe, however, that it is most
appropriate to require operators to determine on an aggregate basis for
a single channel which of their a la carte services has the highest
implicit fee. For example, if Channel A on a given cable system has a
per-subscriber implicit fee of $1.00 and has 2000 subscribers, its
aggregate implicit fee is $2000. If Channel B has a per-subscriber
implicit fee of $1.50 and 1000 subscribers, its aggregate implicit fee
is $1500. Of these channels, Channel A has the highest aggregate
implicit fee even though it has a lower per-subscriber implicit fee
than Channel B. Therefore, assuming these two channels are the only
channels offered on an a la carte basis, the amount that is implicitly
paid for Channel A would be the maximum rate that the operator may
charge a leased access programmer that wishes to be carried as an a la
carte service.
67. We believe that this formulation accurately represents the
highest amount that a non-leased access programmer has agreed to
implicitly pay the operator for carriage as an a la carte service.
Thus, it will discourage existing a la carte services from migrating to
leased access. Accordingly, on reconsideration, we concluded that
operators should not be required to multiply the highest per-subscriber
implicit fee by the average number of subscribers that subscribe to the
operator's a la carte services. Instead, operators must determine which
a la carte service has the highest implicit fee by comparing their
implicit fees on an aggregate basis.
B. Provision of Initial Leased Access Information
i. Response Period
68. In the Reconsideration Order, we stated that our leased access
complaint process had revealed that cable operators often did not
provide rate information in a timely manner, despite our rule requiring
a schedule of rates to be provided to prospective leased access
programmers upon request. In order to facilitate the provision of such
information to potential leased access programmers, we required an
operator to provide the following information within seven business
days of a request regarding leased access: (a) A complete schedule of
the operator's full-time and part-time leased access rates; (b) how
much of the cable operator's leased access set-aside capacity is
available; (c) rates associated with technical and studio costs; and
(d) if specifically requested, a sample leased access contract.
69. In the Order, we stressed our expectation that cable operators
will respond to all leased access requests in a complete and timely
manner. While we recognized the importance of prompt disclosure of the
required information by cable operators, we nevertheless modified our
rule to require operators to respond to a leased access request within
15 calendar days of the date the leased access programmer makes the
request. Such an extension should insure that operators have a
reasonable length of time to process leased access requests even when
those requests are received through the mail. In order to provide more
certainty regarding the date of a request, we also modified our rule to
require that all requests for leased access be made in writing and
specify the date they are sent to the operator. In addition, we allowed
operators of systems subject to small system relief 30 calendar days
from the date of a leased access request to provide the required
information, rather than the 15 calendar days in which other operators
must respond.
ii. Preconditions To Providing Initial Leased Access Information
70. Because we remain concerned that requests for programmer
information will be used by operators to discourage leased access use,
operators may not ask for any information before responding to a leased
access request unless the information is necessary to prepare the
required response. For instance, if a leased access request does not
specify for which cable system access is sought, the cable operator may
ask the programmer for this information because maximum rates are
calculated on a per-system basis. On the other hand, information from
the programmer regarding its tier preference is not necessary for the
operator to provide the required information, since the operator may
place a programmer demanding access to a tier on any tier with more
than 50% subscriber penetration. In addition, operators are not
entitled to inquire about the content of the programming before
responding to a request because such information is not relevant to the
required rate and capacity information.
71. We did, however, make an exception for systems subject to small
system relief because their initial costs of providing this information
may be higher than other systems. Therefore, we found that operators of
systems subject to small system relief do not have to provide the
required information until the leased access programmer supplies the
following information: (a) Desired length of contract term, (b) time
slot desired, (c) anticipated commencement date for carriage, and (d)
the nature of the programming.
iii. Obligation To Provide Information Regarding the Amount of
Available Leased Access Capacity
72. We declined to reconsider our requirement that cable operators
provide potential leased access users with information about how much
set-aside capacity is available on their systems. We believe that
information concerning overall available channel capacity may be of use
to a potential leased access programmer in deciding which cable system
best meets its needs, particularly if the programmer wishes to lease
more than one channel. Moreover, we do not believe that calculating a
system's available leased access capacity is difficult, particularly
with the clarifications of our rules regarding the methodology for
calculating set-aside requirements. Finally, the additional time we
granted cable operators to supply the information should make supplying
the information less burdensome.
C. Time Increments
73. We declined to alter our current rule that operators are not
required to accept leases that are for less than half-hour intervals.
As noted above, part-time leased access programming provides much of
the competition and diversity of programming sources that Section 612
was intended to promote. As we stated in the Reconsideration Order, the
most common programming time increment is typically one-half to
[[Page 11377]]
one hour. We therefore continue to believe that permitting operators to
exclude leased access programming seeking half-hour increments would
unfairly deny access to a substantial number of potential programmers.
Moreover, we believe that the rules we adopted regarding part-time use
address any concerns that a half-hour minimum will cause excessive
migration of current infomercial programming to leased access channels
and will lead to excessive displacement of existing non-leased access
programmers. We clarified that the leased access rate for a half-hour
program must be prorated to reflect the length of the program (i.e.,
hourly rates cannot be charged for half-hour programs).
D. Calculation of Statutory Set-Aside Requirement
74. Section 612 requires a cable system to set aside up to 15% of
its activated channels for leased access. For operators with 100 or
fewer activated channels, the statutory set-aside requirements for
leased access channels are expressed as a percentage of ``channels not
otherwise required for use by federal law or regulation.'' We continue
to believe that, when calculating its set-aside requirement, an
operator must include channels carrying retransmission consent stations
because such channels are not ``required by federal law or
regulation.'' We clarified that channels which cannot be used due to
technical and safety regulations of the federal government, such as
aeronautical channels, should be excluded when calculating the set-
aside requirement for cable systems that have 100 channels or less.
E. Billing and Collection Services
75. Section 612(c)(4)(A)(ii) grants the Commission the authority to
establish reasonable terms and conditions for the billing of rates to
subscribers and for the collection of revenue from subscribers for
leased access channels. In the Rate Order, we required cable operators
to provide billing and collection services to leased access programmers
unless operators could demonstrate the existence of third-party billing
and collection services which, in terms of cost and accessibility,
offer leased access programmers an alternative substantially equivalent
to that offered to comparable non-leased access programmers. In both
the Rate Order and the Reconsideration Order, we did not adopt specific
rules regarding rates for such services. In the Order, we declined to
modify our current rule or to establish specific rules relating to the
rates that cable operators can charge for billing and collection
services.
IV. Market Entry Analysis
76. We noted that section 257 of the Communications Act requires
the Commission to complete a proceeding to identify and eliminate
market entry barriers for entrepreneurs and other small businesses in
the telecommunications industry. The Commission is directed to promote
a diversity of media voices and vigorous economic competition, among
other things. We believe that the Order is consistent with the
objectives of section 257 in that it establishes rates, terms, and
conditions for leased access that are intended to promote diversity and
competition. We also believe that our provisions for part-time leased
access are especially suited to allow small or entrepreneurial leased
access programmers to enter the telecommunications programming
marketplace.
V. Final Regulatory Flexibility Analysis
77. As required by section 603 of the Regulatory Flexibility Act, 5
U.S.C. 603, (``RFA''), an Initial Regulatory Flexibility Analysis
(``IRFA'') was incorporated in the Further NPRM. The Commission sought
written public comments on the proposals in the Further NPRM, including
comments on the IRFA. This Final Regulatory Flexibility Analysis
(``FRFA'') conforms to the RFA, as amended.
A. Need for Action and Objectives of the Rule
78. Section 612 of the Communications Act requires the Commission
to establish reasonable terms and conditions, including maximum
reasonable rates, for leased access on cable systems. The purpose of
the Order is to amend the Commission's rules regarding leased access,
including the rules for calculating maximum reasonable rates. The
statutory objectives of the leased access provisions are to promote
competition in the delivery of diverse programming sources and to
assure the widest possible diversity of programming sources in a manner
that is consistent with the growth and development of cable systems.
B. Summary of Issues Raised by the Public Comments in Response to the
Initial Regulatory Flexibility Analysis
79. In response to the IRFA, the Small Cable Business Association
(``SCBA'') filed comments criticizing the Commission for failing to
estimate the number of small cable systems and small cable operators
that would be affected by the regulations proposed in the Further NPRM.
SCBA argued that, as reflected in the Small System Order, the
Commission has extensive data regarding the existence of small cable
entities. SCBA also claimed the Commission neither sought specific
comment regarding the impact of its proposals on small cable entities
nor asked for alternatives. SCBA urged the Commission to adopt the
alternatives for small cable systems that it has proposed in this
proceeding. In its filings, SCBA raised the following issues and
alternatives.
80. Information Collection Issues. SCBA argued that the
Commission's seven business-day response time for providing leased
access information imposes significant burdens on small cable systems.
SCBA recommended that the Commission allow small system operators 30
days to provide a written response stating whether unused leased access
capacity is available and 60 days to provide the remaining required
information. SCBA also requested that the Commission allow small system
operators to respond only to ``bona fide'' leased access requests.
81. Rate Issues. SCBA argued that the Commission's proposed cost/
market rate formula would not adequately compensate small system
operators for the following reasons:
(a) Full-Time Rates. SCBA contended that because small system
operators often receive no advertising revenues, the Commission's cost/
market rate formula could result in leased access rates of zero or
less. Among other things, SCBA suggested that the Commission revise the
proposed formula to allow small system operators to recover all
operating costs reflected on FCC Form 1230, instead of using subscriber
revenue as a surrogate for such costs. Alternatively, SCBA proposed
allowing operators of small systems to charge market rates for all
leased access programmers regardless of demand, particularly if the
party requesting access is affiliated with the provider of a competing
multi-channel video programming service.
(b) Part-Time Rates. SCBA argued that if the full-time rate under
the proposed cost/market rate formula is prorated, the per hour or
half-hour rates for small systems would be lower than advertising
rates, which would create a flood of requests for part-time leased
access.
(c) Transaction Costs. SCBA contended that leased access contracts
create higher transaction costs than other programming contracts
because leased access agreements are negotiated
[[Page 11378]]
more frequently and must be negotiated on a system-by-system basis.
SCBA proposed that the Commission remedy this problem for small system
operators by allowing them to include an additional amount of at least
$1,000 in their leased access rate calculations.
(d) Technical Costs. SCBA argued that additional headend equipment
used to add leased access channels will result in high per-subscriber
costs for small systems. SCBA proposed that the Commission allow small
system operators to charge leased access programmers for all technology
costs related to leased access.
(e) Transition Period. SCBA argued that the Commission should phase
in leased access obligations for small cable systems to avoid the
disruption to current programming line-ups that the proposed cost/
market rate formula would create.
(f) Advance Channel Designations. The Further NPRM proposed that a
cable operator must place in its public file a list of the specific
channels it intends to use for leased access programming. SCBA argued
that small system operators should only be required to provide the
required leased access information following receipt of a ``bona fide''
request.
82. In reviewing the record before us, we identified issues that
may impact small leased access programmers, such as maximum rate
calculations, part-time use of leased access, resale, tier and channel
placement, preferential access, dispute resolution procedures, certain
contractual issues, technical equipment costs, and the definition of
affiliate. The Order addressed comments from leased access programmers
regarding these issues.
C. Description and Estimate of the Number of Small Entities Impacted
83. The RFA directs the Commission to provide a description of and,
where feasible, an estimate of the number of small entities that will
be affected by the proposed rules. 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. Under the Small Business Act, a ``small
business concern'' is one which: (a) Is independently owned and
operated; (b) is not dominant in its field of operation; and (c)
satisfies any additional criteria established by the Small Business
Administration (``SBA''). The rules we adopted in the Order will affect
cable systems and cable programmers.
84. Cable Systems: The SBA has developed a definition of small
entities for cable and other pay television services, which includes
all such companies generating $11 million or less in revenue annually.
While this definition includes small cable entities, it also includes
closed circuit television services, direct broadcast satellite
services, multipoint distribution systems, satellite master antenna
systems and subscription television services. Thus, the definition
includes many small entities that will not be directly impacted by our
leased access rules. According to the Census Bureau, there were 1,423
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. We noted that not only does this estimate include small
entities other than small cable entities, but the majority of the small
cable systems included within this estimate have less than 36 channels
and therefore are not subject to the Commission's leased access
regulations. We therefore estimated that, based on the SBA definition,
the number of small cable entities likely to be impacted by our rules
will be significantly less than 1,423 entities.
85. The Commission has developed its own definition of a small
cable system for purposes of rate regulation. Under the Commission's
rules, cable systems serving fewer than 15,000 subscribers are
considered small systems, and small systems owned by small cable
companies serving fewer than 400,000 subscribers nationwide are
entitled to small system relief. This definition is both broader and
narrower than that of the SBA. The definition is broader in that it
includes larger cable systems than the SBA definition. It is narrower
in that, unlike the SBA definition, it does not include closed circuit
television services, direct broadcast satellite services, multipoint
distribution systems, satellite master antenna systems, or subscription
television services. Our most recent information indicates that, under
the Commission's definition, there were 1,439 systems entitled to small
system relief at the end of 1995. Of these systems, we estimated that
approximately 614 systems offer more than 36 channels, and thus are
subject to our leased access rules.
86. Section 623(m)(2) of the Communications Act defines a small
cable system operator as ``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 determined that there are 61,700,000
subscribers in the United States. Therefore, we found that an operator
serving fewer than 617,000 subscribers shall be deemed a small operator
if its annual revenues, when combined with the total annual revenues of
all of its affiliates, do not exceed $250 million in the aggregate.
Based on available data, we found 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 million, we were
unable to estimate with greater precision the number of cable system
operators that would qualify as small cable operators under the
definition in the Communications Act.
87. Cable Programmers: We anticipate that both small leased access
programmers and small non-leased access programmers may be impacted by
our leased access rules. The Commission has not developed a definition
of small entities applicable to producers or distributors of cable
television programs. Therefore, we utilized the SBA classifications of
Motion Picture and Video Tape Production (SIC 7812), and Theatrical
Producers (Except Motion Pictures) and Miscellaneous Theatrical
Services (SIC 7922). These SBA definitions provide that a small entity
in the cable television programming industry is an entity with $21.5
million or less in annual receipts for SIC 7812, and $5 million or less
in annual receipts for SIC 7922. Census Bureau data indicate the
following: (a) There were 7,265 firms in the United States classified
as Motion Picture and Video Production (SIC 7812), and that 6,987 of
these firms had $16.999 million or less in annual receipts and 7,002 of
these firms had $24.999 million or less in annual receipts; and (b)
there were 5,671 firms in the United States classified as Theatrical
Producers and Services (SIC 7922), and that 5,627 of these firms had
$4.999 million or less in annual receipts.
88. Each of these SIC categories is very broad and includes firms
that may be engaged in various industries, including cable programming.
Specific figures are not available regarding how many of these firms
exclusively produce and/or distribute programming for cable television
or how many are independently owned and operated. Thus, we estimated
that our rules may affect approximately 6,987 small entities that
produce and distribute taped cable
[[Page 11379]]
television programs and 5,627 small producers of live programs. In
addition, as of May 31, 1996, there were 1,880 LPTV stations that may
also be affected by our rules.
D. Reporting, Recordkeeping, and Other Compliance Requirements
This section specifies the reporting, recordkeeping and other
related requirements of the regulations adopted, amended, modified, or
clarified in the Order.
89. Maximum Rate Calculations: Operators of cable systems subject
to leased access requirements must calculate their maximum leased
access rates in accordance with the rate formulas we have established.
We do not believe that operators will need additional professional
skills to perform these calculations.
90. Accountant Reports: A final accountant report that is completed
as a result of a dispute concerning an operator's rate calculations
must be filed in the operator's local public file.
91. Provision of Initial Leased Access Information: Within 15
calendar days of a leased access request, cable operators are required
to provide the following types of information: (a) A complete schedule
of the operator's full-time and part-time leased access rates, (b) how
much of the cable operator's leased access set-aside capacity is
available, (c) rates associated with technical and studio costs, and
(d) if specifically requested, a sample leased access contract. An
exception is provided for operators of systems entitled to small system
relief, which are allowed 30 calendar days to provide the required
information. In addition, these operators are not required to respond
to a leased access request if the programmer does not provide the
following information: (a) Desired length of contract term, (b) time
slot desired, (c) anticipated commencement date for carriage, and (d)
the nature of the programming.
92. Requirements for Leased Access Requests: Leased access requests
must be made in writing and must specify the date the request was sent
to the operator.
E. Significant Alternatives and Steps Taken to Minimize the Significant
Economic Impact on a Substantial Number of Small Entities Consistent
With the Stated Objectives
This section analyzes the impact on small entities of the
regulations adopted, amended, modified, or clarified in the Order.
93. Information Collection Issues. We allow operators of systems
entitled to small system relief to respond to leased access requests
within 30 calendar days, instead of the 15 calendar days required of
other operators. In addition, we do not require these operators to
respond to leased access requests unless the programmer provides the
following information: (a) Desired length of contract term, (b) time
slot desired, (c) anticipated commencement date for carriage, and (d)
the nature of the programming. These modifications to the Commission's
rules should mitigate any disproportionate burdens that responding to a
leased access request may create for small system operators.
94. Rate Issues. We do not believe that either full-time or part-
time rates under our maximum rate formula will impose disproportionate
burdens on small system operators. When calculated for a particular
cable system, both the average implicit fee (for tiered services) and
the highest implicit fee (for a la carte services) represent what
current non-leased access programmers are implicitly paying for
carriage on that system. Because the maximum rates under an implicit
fee formula are tailored to each individual system, we disagreed with
SCBA that small system operators should be allowed to charge market
prices. For the following reasons, we also disagreed with SCBA's
various other proposals to modify the maximum rate formula for small
systems.
(a) Transaction Costs. We did not agree with SCBA that small system
operators should be allowed to include in their rates an additional sum
of at least $1,000 as compensation for transaction costs imposed by
leased access because, as discussed above, we believe that the recovery
that operators may gain from subscriber revenue for leased access
programming will sufficiently offset any additional transaction costs.
(b) Technical Costs. We declined to adopt modified rules for small
system operators regarding the recovery of technical costs associated
with leased access. We do not believe that there will be a
disproportionate impact on small system operators because our rules
enable them to recover technical costs that are specific to leasing.
(c) Transition Period. SCBA argued that the Commission should phase
in leased access obligations for small cable systems in order to
minimize the displacement of existing programming services. In light of
our adoption of the average implicit fee methodology and our
accommodations of the special needs of small systems, we concluded that
a transition period was unnecessary.
(d) Advance Channel Designations. SCBA argued that the Commission
should not require small system operators to publicly file a list of
their designated leased access channels. The Commission did not adopt
such a requirement for any cable systems.
95. Dispute Resolution Procedures. To account for their more
limited resources, we allow operators of systems entitled to small
system relief 14 business days to select an independent accountant when
an operator and a leased access programmer fail to agree on a mutually
acceptable accountant to review the operator's rate calculations in the
case of a dispute. The general rule is that the parties must each
select an independent accountant on the sixth business day if they
cannot agree on a mutually acceptable accountant within five business
days of the programmer's request for a review.
96. Impact on Cable Programmers. Leased access may impact existing
programmers to the extent that operators displace them in order to
accommodate leased access requests. However, we believe that
displacement of existing programmers is inherent in section 612(b)(4),
which provides that a cable operator may no longer use unused leased
access capacity once a written agreement is obtained by a leased access
programmer. In addition, since it is within an operator's discretion to
select which non-leased access programmers to carry (aside from must-
carry and PEG access channels), our rules do not create a
disproportionate impact on small non-leased access programmers. With
respect to small leased access programmers, we believe that the impact
of our revised rules generally will be positive, particularly since our
rules will result in lower maximum rates for tiered services, permit
resale, grant access to highly penetrated tiers, and require part-time
rates to be prorated without a surcharge. Although permissible costs
for insurance policies, technical equipment, and accountant reviews of
rate calculations may impose a burden on small leased access
programmers, we believe that such impacts are the normal costs of being
a leased access programmer, and that no modifications are warranted.
F. Report to Congress
97. The Commission will send a copy of this Final Regulatory
Flexibility Analysis, along with the Order, in a report to Congress
pursuant to the Small Business Regulatory Enforcement Fairness Act of
1996, 5 U.S.C. 801(a)(1)(A).
[[Page 11380]]
VI. Ordering Clauses
98. Accordingly, it is ordered that, pursuant to the authority
granted in sections 4(i), 4(j), and 612 of the Communications Act of
1934, as amended, 47 U.S.C. 154(i), 154(j) and 532, the Petitions for
Reconsideration in CS Docket No. 96-60 are Granted in part and denied
in part, as provided herein.
99. It is further ordered that, pursuant to the authority granted
in Sections 4(i), 4(j), and 612 of the Communications Act of 1934, as
amended, 47 U.S.C. 154(i), 154(j) and 532, Part 76 of the Commission's
rules is hereby amended as indicated below. The amendments to 47 CFR
76.970 (a), (b), (i), 76.971 (a), (c), (d), (g), (h), and 76.977(a)
shall become effective April 11, 1997. The amendments to 47 CFR 76.970
(c), (d), (e), (f), (g), (h), 76.971(f)(1), and 76.975 (b) and (c),
which impose information collection requirements, shall become
effective upon approval by the Office of Management and Budget (OMB),
but no sooner than April 11, 1997. The Commission will publish a
document at a later date establishing the effective date for the
sections containing information collection requirements.
100. It is further ordered that the Secretary shall send a copy of
this Order, including the Final Regulatory Flexibility Analysis, to the
Chief Counsel for Advocacy of the Small Business Administration in
accordance with paragraph 603(a) of the Regulatory Flexibility Act,
Public Law 96-354, 94 Stat. 1164, 5 U.S.C. 601 et seq. (1981).
List of Subjects in 47 CFR Part 76
Administrative practice and procedure, Cable television, Reporting
and recordkeeping requirements.
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 76.970 is amended by adding a last sentence to paragraph
(a), revising paragraphs (b), (c), (d), (e) and (f), and adding new
paragraphs (g), (h) and (i) to read as follows:
Sec. 76.970 Commercial leased access rates.
(a) * * * For cable systems with 100 or fewer channels, channels
that cannot be used due to technical and safety regulations of the
Federal Government (e.g., aeronautical channels) shall be excluded when
calculating the set-aside requirement.
(b) In determining whether a party is an ``affiliate'' for purposes
of commercial leased access, the definitions contained in the notes to
Sec. 76.501 shall be used, provided, however, that the single majority
shareholder provision 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 the provisions of Note 2(a) to Sec. 76.501 regarding five
(5) percent interest shall include all voting or nonvoting stock or
limited partnership equity interest of five (5) percent or more. Actual
working control, in whatever manner exercised, shall also be deemed a
cognizable interest.
(c) The maximum commercial leased access rate that a cable operator
may charge for full-time channel placement on a tier exceeding a
subscriber penetration of 50 percent is the average implicit fee for
full-time channel placement on all such tier(s).
(d) The average implicit fee identified in paragraph (c) of this
section for a full-time channel on a tier with a subscriber penetration
over 50 percent shall be calculated by first calculating the total
amount the operator receives in subscriber revenue per month for the
programming on all such tier(s), and then subtracting the total amount
it pays in programming costs per month for such tier(s) (the ``total
implicit fee calculation''). A weighting scheme that accounts for
differences in the number of subscribers and channels on all such
tier(s) must be used to determine how much of the total implicit fee
calculation will be recovered from any particular tier. The weighting
scheme is determined in two steps. First, the number of subscribers is
multiplied by the number of channels (the result is the number of
``subscriber-channels'') on each tier with subscriber penetration over
50 percent. For instance, a tier with 10 channels and 1,000 subscribers
would have a total of 10,000 subscriber-channels. Second, the
subscriber-channels on each of these tiers is divided by the total
subscriber-channels on all such tiers. Given the percent of subscriber-
channels for the particular tier, the implicit fee for the tier is
computed by multiplying the subscriber-channel percentage for the tier
by the total implicit fee calculation. Finally, to calculate the
average implicit fee per channel, the implicit fee for the tier must be
divided by the corresponding number of channels on the tier. The final
result is the maximum rate per month that the operator may charge the
leased access programmer for a full-time channel on that particular
tier. The average implicit fee shall be calculated by using all
channels carried on any tier exceeding 50 percent subscriber
penetration (including channels devoted to affiliated programming,
must-carry and public, educational and government access channels). In
the event of an agreement to lease capacity on a tier with less than 50
percent penetration, the average implicit fee should be determined on
the basis of subscriber revenues and programming costs for that tier
alone. The license fees for affiliated channels used in determining the
average implicit fee shall reflect the prevailing company prices
offered in the marketplace to third parties. If a prevailing company
price does not exist, the license fee for that programming shall be
priced at the programmer's cost or the fair market value, whichever is
lower. The average implicit fee shall be based on contracts in effect
in the previous calendar year. The implicit fee for a contracted
service may not include fees, stated or implied, for services other
than the provision of channel capacity (e.g., billing and collection,
marketing, or studio services).
(e) The maximum commercial leased access rate that a cable operator
may charge for full-time channel placement as an a la carte service is
the highest implicit fee on an aggregate basis for full-time channel
placement as an a la carte service.
(f) The highest implicit fee on an aggregate basis for full-time
channel placement as an a la carte service shall be calculated by first
determining the total amount received by the operator in subscriber
revenue per month for each non-leased access a la carte channel on its
system (including affiliated a la carte channels) and deducting the
total amount paid by the operator in programming costs (including
license and copyright fees) per month for programming on such
individual channels. This calculation will result in implicit fees
determined on an aggregate basis, and the highest of these implicit
fees shall be the maximum rate per month that the operator may charge
the leased access programmer for placement as a full-time a la carte
channel. The license fees for affiliated channels used in determining
the highest implicit fee shall reflect the prevailing company prices
offered in the marketplace to third parties. If a prevailing company
[[Page 11381]]
price does not exist, the license fee for that programming shall be
priced at the programmer's cost or the fair market value, whichever is
lower. The highest implicit fee shall be based on contracts in effect
in the previous calendar year. The implicit fee for a contracted
service may not include fees, stated or implied, for services other
than the provision of channel capacity (e.g., billing and collection,
marketing, or studio services). Any subscriber revenue received by a
cable operator for an a la carte leased access service shall be passed
through to the leased access programmer.
(g) The maximum commercial leased access rate that a cable operator
may charge for part-time channel placement shall be determined by
either prorating the maximum full-time rate uniformly, or by developing
a schedule of and applying different rates for different times of the
day, provided that the total of the rates for a 24-hour period does not
exceed the maximum daily leased access rate.
(h)(1) Cable system operators shall provide prospective leased
access programmers with the following information within 15 calendar
days of the date on which a request for leased access information is
made:
(i) How much of the operator's leased access set-aside capacity is
available;
(ii) A complete schedule of the operator's full-time and part-time
leased access rates;
(iii) Rates associated with technical and studio costs; and
(iv) If specifically requested, a sample leased access contract.
(2) Operators of systems subject to small system relief shall
provide the information required in paragraph (h)(1) of this section
within 30 calendar days of a bona fide request from a prospective
leased access programmer. For these purposes, systems subject to small
system relief are systems that either:
(i) Qualify as small systems under Sec. 76.901(c) and are owned by
a small cable company as defined under Sec. 76.901(e); or
(ii) Have been granted special relief.
(3) Bona fide requests, as used in this section, are defined as
requests from potential leased access programmers that have provided
the following information:
(i) The desired length of a contract term;
(ii) The time slot desired;
(iii) The anticipated commencement date for carriage; and
(iv) The nature of the programming.
(4) All requests for leased access must be made in writing and must
specify the date on which the request was sent to the operator.
(5) Operators shall maintain, for Commission inspection, sufficient
supporting documentation to justify the scheduled rates, including
supporting contracts, calculations of the implicit fees, and
justifications for all adjustments.
(i) Cable operators are permitted to negotiate rates below the
maximum rates permitted in paragraphs (c) through (g) of this section.
3. Section 76.971 is amended by revising paragraphs (a), (c),
(f)(1) and (g), adding two sentences to the end of paragraph (d), and
adding new paragraph (h) to read as follows:
Sec. 76.971 Commercial leased access terms and conditions.
(a) (1) Cable operators shall place leased access programmers that
request access to a tier actually used by most subscribers on any tier
that has a subscriber penetration of more than 50 percent, unless there
are technical or other compelling reasons for denying access to such
tiers.
(2) Cable operators shall be permitted to make reasonable
selections when placing leased access channels at specific channel
locations. The Commission will evaluate disputes involving channel
placement on a case-by-case basis and will consider any evidence that
an operator has acted unreasonably in this regard.
(3) On systems with available leased access capacity sufficient to
satisfy current leased access demand, cable operators shall be required
to accommodate as expeditiously as possible all leased access requests
for programming that is not obscene or indecent. On systems with
insufficient available leased access capacity to satisfy current leased
access demand, cable operators shall be permitted to select from among
leased access programmers using objective, content-neutral criteria.
(4) Cable operators that have not satisfied their statutory leased
access requirements shall accommodate part-time leased access requests
as set forth in this paragraph. Cable operators shall not be required
to accept leases for less than one half-hour of programming. Cable
operators may accommodate part-time leased access requests by opening
additional channels for part-time use or providing comparable time
slots on channels currently carrying leased or non-leased access
programming. The comparability of time slots shall be determined by
objective factors such as day of the week, time of day, and audience
share. A cable operator that is unable to provide a comparable time
slot to accommodate a part-time programming request shall be required
to open an additional channel for part-time use unless such operator
has at least one channel designated for part-time leased access use
that is programmed with less than 18 hours of part-time leased access
programming every day. However, regardless of the availability of
partially programmed part-time leased access channels, a cable operator
shall be required to open an additional channel to accommodate any
request for part-time leased access for at least eight contiguous
hours, for the same time period every day, for at least a year. Once an
operator has opened a vacant channel to accommodate such a request, our
other leased access rules apply. If, however, the operator has
accommodated such a request on a channel already carrying an existing
full-time non-leased access programmer, the operator does not have to
accommodate other part-time requests of less than eight hours on that
channel until all other existing part-time leased access channels are
substantially filled with leased access programming.
* * * * *
(c) Cable operators are required to provide unaffiliated leased
access users the minimal level of technical support necessary for users
to present their material on the air, and may not unreasonably refuse
to cooperate with a leased access user in order to prevent that user
from obtaining channel capacity. Leased access users must reimburse
operators for the reasonable cost of any technical support actually
provided by the operator that is beyond that provided for non-leased
access programmers on the system. A cable operator may charge leased
access programmers for the use of technical equipment that is provided
at no charge for public, educational and governmental access
programming, provided that the operator's franchise agreement requires
it to provide the equipment and does not preclude such use, and the
equipment is not being used for any other non-leased access
programming. Cable operators that are required to purchase technical
equipment in order to accommodate a leased access programmer shall have
the option of either requiring the leased access programmer to pay the
full purchase price of the equipment, or purchasing the equipment and
leasing it to the leased access programmer at a reasonable rate. Leased
access programmers that are required to pay the full purchase price of
additional equipment shall have all rights of
[[Page 11382]]
ownership associated with the equipment under applicable state and
local law.
(d) * * * Cable operators may impose reasonable insurance
requirements on leased access programmers. Cable operators shall bear
the burden of proof in establishing reasonableness.
* * * * *
(f) (1) A cable operator shall provide billing and collection
services for commercial leased access cable programmers, unless the
operator demonstrates the existence of third party billing and
collection services which in terms of cost and accessibility, offer
leased access programmers an alternative substantially equivalent to
that offered to comparable non-leased access programmers.
* * * * *
(g) Cable operators shall not unreasonably limit the length of
leased access contracts. The termination provisions of leased access
contracts shall be commercially reasonable and may not allow operators
to terminate leased access contracts without a reasonable basis.
(h) Cable operators may not prohibit the resale of leased access
capacity to persons unaffiliated with the operator, but may provide in
their leased access contracts that any sublessees will be subject to
the non-price terms and conditions that apply to the initial lessee,
and that, if the capacity is resold, the rate for the capacity shall be
the maximum permissible rate.
4. Section 76.975 is amended by revising paragraphs (b), (c), (d)
and (e) to read as follows:
Sec. 76.975 Commercial leased access dispute resolution.
* * * * *
(b) (1) Any person aggrieved by the failure or refusal of a cable
operator to make commercial channel capacity available or to charge
rates for such capacity in accordance with the provisions of Title VI
of the Communications Act, or our implementing regulations,
Secs. 76.970 and 76.971, may file a petition for relief with the
Commission. Persons alleging that a cable operator's leased access rate
is unreasonable must receive a determination of the cable operator's
maximum permitted rate from an independent accountant prior to filing a
petition for relief with the Commission.
(2) Parties to a dispute over leased access rates shall have five
business days to agree on a mutually acceptable accountant from the
date on which the programmer provides the cable operator with a written
request for a review of its leased access rates. Parties that fail to
agree on a mutually acceptable accountant within five business days of
the programmer's request for a review shall each be required to select
an independent accountant on the sixth business day. The two
accountants selected shall have five business days to select a third
independent accountant to perform the review. Operators of systems
subject to small system relief shall have 14 business days to select an
independent accountant when an agreement cannot be reached. For these
purposes, systems subject to small system relief are systems that
either:
(i) Qualify as small systems under Sec. 76.901(c) and are owned by
a small cable company as defined under Sec. 76.901(e); or
(ii) Have been granted special relief.
(3) The final accountant's report must be completed within 60 days
of the date on which the final accountant is selected to perform the
review. The final accountant's report must, at a minimum, state the
maximum permitted rate, and explain how it was determined without
revealing proprietary information. The report must be signed, dated and
certified by the accountant. The report shall be filed in the cable
system's local public file.
(4) If the accountant's report indicates that the cable operator's
leased access rate exceeds the maximum permitted rate by more than a de
minimis amount, the cable operator shall be required to pay the full
cost of the review. If the final accountant's report does not indicate
that the cable operator's leased access rate exceeds the maximum
permitted rate by more than a de minimis amount, each party shall be
required to split the cost of the final accountant's review, and to pay
its own expenses incurred in making the review.
(5) Parties may use alternative dispute resolution (ADR) processes
to settle disputes that are not resolved by the final accountant's
report.
(c) A petition must contain a concise statement of the facts
constituting a violation of the statute or the Commission's Rules, the
specific statute(s) or rule(s) violated, and certify that the petition
was served on the cable operator. Where a petition is based on
allegations that a cable operator's leased access rates are
unreasonable, the petitioner must attach a copy of the final
accountant's report. In proceedings before the Commission, there will
be a rebuttable presumption that the final accountant's report is
correct.
(d) Where a petition is not based on allegations that a cable
operator's leased access rates are unreasonable, the petition must be
filed within 60 days of the alleged violation. Where a petition is
based on allegations that the cable operator's leased access rates are
unreasonable, the petition must be filed within 60 days of the final
accountant's report, or within 60 days of the termination of ADR
proceedings. Aggrieved parties must certify that their petition was
filed within 60 days of the termination of ADR proceedings in order to
file a petition later than 60 days after completion of the final
accountant's report. Cable operators may rebut such certifications.
(e) The cable operator or other respondent will have 30 days from
the filing of the petition to file a response. If a leased access rate
is disputed, the response must show that the rate charged is not higher
than the maximum permitted rate for such leased access, and must be
supported by the affidavit of a responsible company official. If, after
a response is submitted, the staff finds a prima facie violation of our
rules, the staff may require a respondent to produce additional
information, or specify other procedures necessary for resolution of
the proceeding.
* * * * *
5. Section 76.977 is amended by revising the last sentence of
paragraph (a) to read as follows:
Sec. 76.977 Minority and educational programming used in lieu of
designated commercial leased access capacity.
(a) * * * The channel capacity used to provide programming from a
qualified minority programming source or from any qualified educational
programming source pursuant to this section may not exceed 33 percent
of the channel capacity designated pursuant to 47 U.S.C. 532 and must
be located on a tier with more than 50 percent subscriber penetration.
* * * * *
[FR Doc. 97-5897 Filed 3-11-97; 8:45 am]
BILLING CODE 6712-01-P
