Review of the Commission's Program Access Rules and Examination of Programming Tying Arrangements

Federal RegisterMar 3, 2010

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FEDERAL COMMUNICATIONS COMMISSION

47 CFR Part 76

[MB Docket No. 07-198; FCC 10-17]

Review of the Commission's Program Access Rules and Examination of Programming Tying Arrangements

AGENCY:

Federal Communications Commission.

ACTION:

Final rule.

SUMMARY:

The FCC establishes rules, policies, and procedures for the consideration of complaints alleging unfair acts involving terrestrially delivered, cable-affiliated programming in violation of Section 628(b) of the Communications Act of 1934, as amended. This action will provide competitors to incumbent cable operators with an opportunity to obtain access to certain cable-affiliated programming that they are currently unable to offer their subscribers, thereby promoting competition in the delivery of video to consumers.

DATES:

Effective April 2, 2010, except for §§ 76.1001(b)(2) and 76.1003(l), and the amendment to § 76.1003(c)(3), which contain information collection requirements that are not effective until approved by the Office of Management and Budget. The FCC will publish a document in the

Federal Register

announcing the effective date for those sections.

FOR FURTHER INFORMATION CONTACT:

For additional information on this proceeding, contact David Konczal,

David.Konczal@fcc.gov;

or Diana Sokolow,

Diana.Sokolow@fcc.gov;

of the Media Bureau, Policy Division, (202) 418-2120. For additional information concerning the Paperwork Reduction Act information collection requirements contained in this document, contact Cathy Williams at 202-418-2918, or via the Internet at

PRA@fcc.gov.

SUPPLEMENTARY INFORMATION:

This is a summary of the Commission's

First Report and Order

(“

Order”

), FCC 10-17, adopted and released on January 20, 2010, and the Erratum thereto, FCC 10-30, adopted on February 5, 2010 and released on February 16, 2010. The full text of this document is available for public inspection and copying during regular business hours in the FCC Reference Center, Federal Communications Commission, 445 12th Street, SW., CY-A257, Washington, DC 20554. This document will also be available via ECFS (

http://www.fcc.gov/cgb/ecfs/

). (Documents will be available electronically in ASCII, Word 97, and/or Adobe Acrobat.) The complete text may be purchased from the Commission's copy contractor, 445 12th Street, SW., Room CY-B402, Washington, DC 20554. To request this document in accessible formats (computer diskettes, large print, audio recording, and Braille), send an e-mail to

fcc504@fcc.gov

or call the Commission's Consumer and Governmental Affairs Bureau at (202) 418-0530 (voice), (202) 418-0432 (TTY).

Paperwork Reduction Act of 1995 Analysis

This document adopts new or revised information collection requirements subject to the Paperwork Reduction Act of 1995 (PRA), Public Law 104-13 (44 U.S.C. 3501-3520). The requirements will be submitted to the Office of Management and Budget (OMB) for review under Section 3507 of the PRA. The Commission will publish a separate notice in the

Federal Register

inviting comment on the new or revised information collection requirements adopted in this document. The requirements will not go into effect until OMB has approved it and the Commission has published a notice announcing the effective date of the information collection requirements. In addition, we note that pursuant to the Small Business Paperwork Relief Act of 2002, Public Law 107-198, see 44 U.S.C. 3506(c)(4), we previously sought specific comment on how the Commission might “further reduce the information collection burden for small business concerns with fewer than 25 employees.” In this present document, we have assessed the potential effects of the various policy changes with regard to information collection burdens on small business concerns, and find that these requirements will benefit many companies with fewer than 25 employees by promoting the fair and expeditious resolution of program access complaints. In addition, we have described impacts that might affect small businesses, which includes most businesses with fewer than 25 employees, in the Final Regulatory Flexibility Analysis (“FRFA”) below.

Summary of the Report and Order

I. Introduction

1. In this

Order,

we take an important step to further promote competition in the video distribution market. We establish rules to address unfair acts, including exclusive contracts, involving terrestrially delivered, cable-affiliated programming. Throughout this

Order,

we use the terms “cable-affiliated programming” and “cable-affiliated programmer” to refer to a cable programming vendor in which a cable operator has an attributable interest, as defined by the Commission's cable attribution rules.

See

47 CFR 76.1000(b);

see also

47 CFR 76.501, Notes 1-5.

2. The rules established herein will provide competitors to incumbent cable operators with an opportunity to obtain access to certain cable-affiliated programming that they are currently unable to offer to their subscribers, thereby promoting competition in the delivery of video to consumers. Our existing program access rules have been a boon to such competition, and we anticipate that the rules we adopt today will have similar procompetitive effects. Our efforts to spur competition in the marketplace for video programming are also aimed at increasing consumer benefits, including better services, innovations in technology, and lower prices. Moreover, we believe broadband adoption to be a further benefit from increased competition and diversity in video programming distribution. Specifically, today we adopt rules permitting complainants to pursue program access claims involving terrestrially delivered, cable-affiliated programming similar to the claims that they may pursue with respect to satellite-delivered, cable-affiliated programming, where the purpose or effect of the challenged act is to significantly hinder or prevent the complainant from providing satellite cable programming or satellite broadcast programming. The types of claims potentially involved include challenges to: (i) Exclusive contracts between a cable operator and a cable-affiliated programmer that provides terrestrially delivered programming; (ii) discrimination in the prices, terms, and conditions for the sale of programming among multichannel video programming distributors (“MVPDs”) by a provider of terrestrially delivered programming that is wholly owned by, controlled by, or under common control with one or more of the following: a cable operator or operators, a satellite cable programming vendor or vendors in which a cable operator has an attributable interest, or a satellite broadcast programming vendor or vendors; and (iii) efforts by a cable operator to unduly influence the decision of its affiliated provider of terrestrially delivered programming to sell its programming to a competitor.

3. The Commission has previously established goals of resolving program access complaints within five months from the submission of a complaint for denial of programming cases, and

within nine months for all other program access complaints, such as price discrimination cases.

See 2007 Program Access Order,

72 FR 56645, October 4, 2007,

appeal pending sub nom. Cablevision Systems Corp. et al

FCC,

No. 07-1425 et al (D.C. Cir). These goals will also apply to complaints filed pursuant to the rules established in this

Order.

4. MVPDs seeking to compete with incumbent cable operators have provided the Commission with examples of actions by cable operators involving terrestrially delivered, cable-affiliated programming that they allege have harmed competition in the video distribution market. In light of these claims, the Commission adopted a Notice of Proposed Rulemaking (the “

NPRM”

) in September 2007 seeking comment on, among other things, whether to extend the program access rules to terrestrially delivered, cable-affiliated programming.

See

72 FR 61590, October 31, 2007. In the

NPRM,

the Commission stated its belief that unfair acts involving terrestrially delivered, cable-affiliated programming are a significant concern because they can adversely impact competition. Since adoption of the

NPRM

in September 2007, MVPDs have filed three program access complaints involving terrestrially delivered, cable-affiliated programming. This

Order

addresses only the issues of terrestrially delivered, cable-affiliated programming and a temporary standstill of an existing contract pending resolution of a program access complaint. This

Order

does not address the other issues raised in the

NPRM.

5. We find below that Section 628 of the Communications Act of 1934, as amended (the “Act”), grants the Commission authority to address unfair acts involving terrestrially delivered, cable-affiliated programming. Section 628 was passed as part of the Cable Television Consumer Protection and Competition Act of 1992 (“1992 Cable Act”).

See

Cable Television Consumer Protection and Competition Act of 1992, Public Law 102-385, 106 Stat. 1460 (1992);

see also

H.R. Rep. No. 102-628 (1992); S. Rep. No. 102-92 (1991),

reprinted in

1992 U.S.C.C.A.N. 1133; H.R. Rep. No. 102-862 (1992) (Conf. Rep.),

reprinted in

1992 U.S.C.C.A.N. 1231. Congress expressly declared that a purpose of Section 628 was “to promote the public interest, convenience, and necessity by increasing competition and diversity in the multichannel video programming market. * * *”

See

47 U.S.C. 548(a). Congress found that the “cable industry has become vertically integrated” and that “[v]ertically integrated program suppliers * * * have the incentive and ability to favor their affiliated cable operators over nonaffiliated cable operators and programming distributors using other technologies.”

See

H.R. Rep. No. 102-862 (1992) (Conf. Rep.), at 2,

reprinted in

1992 U.S.C.C.A.N. 1231. Congress “expect[s] the Commission to address and resolve the problems of unreasonable cable industry practices, including restricting the availability of programming and charging discriminatory prices to non-cable technologies.”

See id.

at 93,

reprinted in

1992 U.S.C.C.A.N. at 1275. To arm the Commission for that effort, Congress granted the Commission broad authority in Sections 628(b) and 628(c)(1) of the Act to prohibit unfair acts of cable operators that significantly hinder or prevent their competitors from providing video programming to consumers.

6. Section 628(b) provides that it shall be unlawful for a cable operator to “engage in unfair methods of competition or unfair or deceptive acts or practices, the purpose or effect of which is to hinder significantly or to prevent any multichannel video programming distributor from providing satellite cable programming or satellite broadcast programming to subscribers or consumers.”

See

47 U.S.C. 548(b). Section 628(c)(1) authorizes the Commission to prescribe regulations to specify the particular conduct prohibited by Section 628(b).

See

47 U.S.C. 548(c)(1). Throughout this

Order,

we use the term “unfair act” as shorthand for the phrase “unfair methods of competition or unfair or deceptive acts or practices.”

7. In addition to the broad grant of authority, Congress in Section 628(c)(2) required the Commission to adopt specific regulations partly implementing Section 628(b) by prohibiting cable operators or affiliates from engaging in unfair acts involving cable-affiliated programming that is delivered to cable operators via satellite (“satellite-delivered programming”).

See

47 U.S.C. 548(c)(2). Section 628(c)(2) pertains only to “satellite cable programming” and “satellite broadcast programming.”

See

47 U.S.C. 548(c)(2)(A)-(D). Both terms are defined to include only programming transmitted or retransmitted by satellite for reception by cable operators.

See

47 U.S.C. 548(i)(1) (incorporating the definition of “satellite cable programming” as used in 47 U.S.C. 605);

id.

548(i)(3).

8. The three unfair acts Congress required the Commission to address were: (i) Exclusive contracts between a cable operator and a cable-affiliated programmer; (ii) discrimination by a cable-affiliated programmer in the prices, terms, and conditions for sale of programming among MVPDs; and (iii) efforts by a cable operator to unduly influence the decision of its affiliated programmer to sell programming to competitors.

See

47 U.S.C. 548(c)(2)(A)-(D). The Commission has adopted rules to carry out that congressional command (the “program access rules”).

See

47 CFR 76.1000-1004. Those rules are a success. While competitors to incumbent cable operators served less than five percent of video subscribers nationwide when the program access provision of the 1992 Cable Act was passed (

see Implementation of Section 11 of the Cable Television Consumer Protection and Competition Act of 1992,

Further Notice of Proposed Rulemaking, 16 FCC Rcd 17312, 17326 (2001)), that percentage has increased to over 30 percent today. Competitors to incumbent cable operators widely credit the program access rules for this increase in competition.

9. An outgrowth of this increase in competition is an increase in employment in the video programming sector of the economy. The relationship between competition and employment in an industry is an obvious one. Firms maximize profits in a concentrated industry by reducing output in order to increase prices. This exertion of market power has, as a natural outcome, a negative effect on industry employment. Increasing the level of competition in an industry increases output, reduces prices, and increases employment. This intuitive result has been shown to hold in practice. Christoph Weiss found a negative relationship between the long-run equilibrium level of employment and the level of concentration in U.S. industries.

See

Christoph Weiss, “Is Imperfect Competition in the Product Market Relevant for Labour Markets?”

Labour,

Vol. 12 No. 3, at 451-71 (1998).

10. Congress did not require the Commission to adopt program access rules for cable-affiliated programming that is delivered to cable operators via terrestrial means, such as programming transmitted to cable operators by fiber (“terrestrially delivered programming”). While an earlier version of the legislation that became Section 628(c)(2) would have encompassed terrestrially delivered programming, Congress did not explain why the final version of its bill removed this provision. This gap in the coverage of Section 628(c)(2) is commonly referred to as the “terrestrial loophole.”

See, e.g., 2002 Program Access Order,

67 FR 49247, July 30, 2002. Under Sections 628(b) and 628(c)(1), however, Congress granted the Commission broad authority to address

this “loophole” by adopting additional regulations beyond those listed in Section 628(c)(2) to address unfair acts of cable operators.

11. As discussed below, we take action pursuant to Sections 628(b) and 628(c)(1) of the Act to facilitate competition in the video distribution market by establishing rules for the consideration of complaints alleging that a cable operator, a satellite cable programming vendor in which a cable operator has an attributable interest, or a satellite broadcast programming vendor, has engaged in unfair acts involving terrestrially delivered, cable-affiliated programming. Our action today attempts to chart a middle course between two extremes proposed by commenters. On one hand, vertically integrated cable operators argue that there is no need and no statutory authority for the Commission to address unfair acts involving terrestrially delivered, cable-affiliated programming. In their view, exclusive arrangements for terrestrially delivered, cable-affiliated programming should be permitted because they enhance innovation, programming diversity, and competition. On the other hand, competing MVPDs urge the Commission to adopt a per se prohibition on exclusive arrangements involving most, if not all, terrestrially delivered, cable-affiliated programming. In their view, all such exclusive arrangements should be prohibited because they hamper competition. The case-by-case approach we adopt today establishes a fair process to address those situations in which MVPDs may be significantly hindered from competing, while at the same time allowing cable operators to use exclusive arrangements in cases where competition is not significantly harmed.

12. We begin by analyzing the statutory language and legislative history of Section 628 as well as the Commission's program access rules. We discuss our statutory authority under that section to consider complaints alleging unfair acts involving terrestrially delivered, cable-affiliated programming. We then discuss the bases for our conclusion that there is a need for Commission action to address such complaints: Cable operators have an incentive and ability to engage in unfair acts involving their affiliated programming; record evidence indicates that cable operators have engaged in unfair acts involving certain terrestrially delivered, cable-affiliated programming; and these unfair acts have impacted competition in the video distribution market in certain cases. We conclude, however, that there is insufficient record evidence to conclude that unfair acts involving terrestrially delivered, cable-affiliated programming will have the purpose or effect set forth in Section 628(b) in every case. Accordingly, we adopt a case-by-case approach rather than a per se rule for addressing these unfair acts. We then explain how addressing unfair acts involving terrestrially delivered, cable-affiliated programming on a case-by-case basis comports with the First Amendment.

13. We next set forth the requirements for complaints alleging unfair acts involving terrestrially delivered, cable-affiliated programming. A complainant alleging such an unfair act will have the burden of proof that the defendant's activities have the purpose or effect set forth in Section 628(b). We conclude that a complainant is unlikely to satisfy this burden when seeking access to readily replicable programming, such as local news and local community or educational programming. We also explain, however, that some programming may be non-replicable and sufficiently valuable to consumers that an unfair act regarding this programming presumptively—but not conclusively—has the purpose or effect set forth in Section 628(b). Based on Commission precedent in which the Commission has considered certain Regional Sports Networks (“RSNs”) and the record in this proceeding, we find that such networks fall within this category. In program access cases alleging an unfair act involving such programming, the defendant will be required to overcome the presumption that arises from our precedent and the record evidence here. In all program access cases involving terrestrially delivered, cable-affiliated programming, we provide the defendant with 45 days—rather than the usual 20 days—from the date of service of the complaint to file an Answer to ensure that the defendant has adequate time to develop a full, case-specific response.

14. This distinction between replicable and non-replicable programming will promote innovation and continued investment in programming. If particular programming is replicable, our policies should encourage MVPDs or others to create competing programming, rather than relying on the efforts of others, thereby encouraging investment and innovation in programming and adding to the diversity of programming in the marketplace. Conversely, when programming is non-replicable and valuable to consumers, such as regional sports programming, no amount of investment can duplicate the unique attributes of such programming, and denial of access to such programming can significantly hinder an MVPD from competing in the marketplace. In addition, in light of the growing importance of high definition (“HD”) programming in the marketplace today and its distinctive characteristics, we will analyze the HD version of a network separately from the standard definition (“SD”) version with similar content for purposes of the statutory analysis. Thus, the fact that a complainant offers the SD version of a network to subscribers will not alone be sufficient to refute the complainant's showing that lack of access to the HD version has the purpose or effect set forth in Section 628(b). Similarly, in cases involving the category of RSN programming addressed by our precedent and the evidence here, withholding the HD feed will be rebuttably presumed to cause significant hindrance even if an SD version of the network is made available to competitors.

15. We next describe how the rules applicable to terrestrially delivered, cable-affiliated programming will differ from the rules applicable to satellite-delivered, cable-affiliated programming. We also discuss how these rules will be applied to common carriers and terrestrially delivered programming that is subject to the program access rules as a result of merger conditions. In addition, we explain that the new rules will apply to existing contracts, but not to the unfair acts of cable operators involving terrestrially delivered, cable-affiliated programming that preceded the effective date of these rules. With respect to pending complaints alleging unfair acts involving terrestrially delivered, cable-affiliated programming, complainants may continue to prosecute these complaints pursuant to Section 628(d) of the Communications Act. In addition, a complainant that wants a currently pending complaint considered under the new rules can submit a supplemental filing alleging that the defendant has engaged in an unfair act after the effective date of the rules. Finally, we establish procedures for the Commission's consideration of requests for a temporary standstill of the price, terms, and other conditions of an existing programming contract by a program access complainant seeking renewal of such a contract.

II. Background

A. Section 628

16. Congress enacted Section 628 as part of the 1992 Cable Act to “promote the public interest, convenience, and necessity by increasing competition and diversity in the multichannel video

programming market, to increase the availability of satellite cable programming and satellite broadcast programming to persons in rural and other areas not currently able to receive such programming, and to spur the development of communications technologies.” 47 U.S.C. 548(a). The term “satellite cable programming” means “video programming which is transmitted via satellite and which is primarily intended for direct receipt by cable operators for their retransmission to cable subscribers,” except that such term does not include satellite broadcast programming. 47 U.S.C. 548(i)(1) (incorporating the definition of “satellite cable programming” as used in 47 U.S.C. 605). The term “satellite broadcast programming” means “broadcast video programming when such programming is retransmitted by satellite and the entity retransmitting such programming is not the broadcaster or an entity performing such retransmission on behalf of and with the specific consent of the broadcaster.” 47 U.S.C. 548(i)(3).

17. To advance Congress' goals, Sections 628(b) and 628(c)(1) grant the Commission broad authority to adopt rules to prohibit unfair acts of cable operators that have the purpose or effect of preventing or hindering significantly an MVPD from providing satellite cable programming or satellite broadcast programming to subscribers or consumers.

See

47 U.S.C. 548(b), (c)(1). Section 628(b) provides that:

[I]t shall be unlawful for a cable operator, a satellite cable programming vendor in which a cable operator has an attributable interest, or a satellite broadcast programming vendor to engage in unfair methods of competition or unfair or deceptive acts or practices, the purpose or effect of which is to hinder significantly or to prevent any multichannel video programming distributor from providing satellite cable programming or satellite broadcast programming to subscribers or consumers.

47 U.S.C. 548(b). Section 628(c)(1) provides that “the Commission shall, in order to promote the public interest, convenience, and necessity by increasing competition and diversity in the multichannel video programming market and the continuing development of communications technologies, prescribe regulations to specify particular conduct that is prohibited by” Section 628(b). 47 U.S.C. 548(c)(1). A federal court of appeals recently held that Section 628(b) is written in “broad and sweeping terms” and therefore “should be given broad, sweeping application.”

Nat'l Cable & Telecomm. Ass'n

FCC,

567 F.3d 659, 664 (D.C. Cir. 2009) (quoting

Consumer Elecs. Ass'n

FCC,

347 F.3d 291, 298 (D.C. Cir. 2003)).

18. We find no merit in Cablevision's argument that the Commission cannot rely on Section 628(c)(1) because that provision “limits” rulemaking authority to the 180 days after the date of enactment of Section 628(c)(1). The Commission has an obligation to consider, on an on-going basis, whether its rules should be modified in response to changed circumstances. As the Supreme Court has observed: “ ‘An initial agency interpretation is not instantly carved in stone. On the contrary, the agency * * * must consider varying interpretations and the wisdom of its policy on a continuing basis,'

Chevron, supra,

at 863-864, 104 S.Ct. 2778, for example, in response to changed factual circumstances, or a change in administrations. * * *”

National Cable & Telecomm. Ass'n

Brand X Internet Servs.,

545 U.S. 967, 981 (2005) (

quoting Chevron U.S.A. Inc.

Natural Resources Defense Council, Inc.,

467 U.S. 837, 863-64 (1984)). That is precisely what the Commission is doing in this

Order.

Cablevision's interpretation would prevent the Commission from fulfilling its obligation to consider whether its rules should be revised based on new evidence that has come to light. There is no evidence that Congress intended to tie the Commission's hands in this manner by carving its initial regulations, which were adopted back in 1993, “in stone.”

See 1993 Program Access Order,

8 FCC Rcd 3359 (1993),

recon.,

10 FCC Rcd 1902 (1994),

further recon.,

10 FCC Rcd 3105 (1994). Nor is there any indication Congress intended to strip the Commission of its rulemaking power under Sections 4(i) and 303(r) after 180 days.

See

47 U.S.C. 154(i), 303(r).

19. Moreover, Cablevision's interpretation is at odds with judicial precedent regarding statutory deadlines. Statutory deadlines are generally considered directory, rather than mandatory, and even where an agency has failed to meet such a deadline—which is not the case here—it has not been found to remove an agency's authority to act or impose any other penalty, unless the statute delineates a specific remedy for agency inaction.

See Thomas

Barry,

729 F.2d 1469, 1470 n.5 (D.C. Cir. 1984) (

quoting Fort Worth Nat'l Corp.

Fed. Savings & Loan Ins. Corp.,

469 F.2d 47, 58 (5th Cir. 1972));

see also

47 CFR 76.1002(e)(1)); (ii) exclusive contracts that the Commission deems to be in the public interest based on the factors set forth in the statute are not subject to the exclusive contract prohibition (

see

47 U.S.C. 548(c)(4);

see also

47 CFR 76.1002(c)(4)); and (iii) the exclusive contract prohibition will cease to be effective after October 5, 2002 unless the Commission finds that it “continues to be necessary to preserve and protect

competition and diversity in the distribution of video programming” (

see

47 U.S.C. 548(c)(5);

see also

47 CFR 76.1002(c)(6)). The public interest factors are: (i) The effect of such exclusive contract on the development of competition in local and national multichannel video programming distribution markets; (ii) the effect of such exclusive contract on competition from multichannel video programming distribution technologies other than cable; (iii) the effect of such exclusive contract on the attraction of capital investment in the production and distribution of new satellite cable programming; (iv) the effect of such exclusive contract on diversity of programming in the multichannel video programming distribution market; and (v) the duration of the exclusive contract.

See

47 U.S.C. 548(c)(4);

see also

47 CFR 76.1002(c)(4). In areas that were not served by a cable operator as of October 5, 1992, the exclusive contract prohibition is absolute and is not subject to exceptions.

See

47 U.S.C. 548(c)(2)(C).

23. Section 628 was intended to address Congress' concern that cable operators or their affiliates would engage in unfair acts, including acts involving programming they own, that impede competition in the video distribution market.

See

H.R. Rep. No. 102-862 (1992) (Conf. Rep.), at 93,

reprinted in

1992 U.S.C.C.A.N. 1231, 1275; S. Rep. No. 102-92 (1991), at 26,

reprinted in

1992 U.S.C.C.A.N. 1133, 1159.

24. The 1992 Cable Act and its legislative history reflect Congressional findings that increased horizontal concentration of cable operators, combined with extensive vertical integration of cable operators and program suppliers, created an imbalance of power between incumbent cable operators and their multichannel competitors.

See

1992 Cable Act § 2(a)(4);

id.

section 2(a)(5); S. Rep. No. 102-92 (1991), at 24-29,

reprinted in

1992 U.S.C.C.A.N. 1133, 1157-62; H.R. Rep. No. 102-628 (1992), at 41-43. Congress concluded that vertically integrated program suppliers had the incentive and ability to favor their affiliated cable operators over other MVPDs, including direct broadcast satellite (“DBS”) providers.

See

1992 Cable Act section 2(a)(5); S. Rep. No. 102-92 (1991), at 26,

reprinted in

1992 U.S.C.C.A.N. 1133, 1159;

1993 Program Access Order,

8 FCC Rcd at 3365-67, ¶ 21.

25. Through Section 628, Congress intended to encourage entry and facilitate competition in the video distribution market by existing or potential competitors to traditional cable systems by, among other things, making available to those entities the programming they need to compete in the video distribution market.

See

H.R. Rep. No. 102-862 (1992) (Conf. Rep.), at 93,

reprinted in

1992 U.S.C.C.A.N. 1231, 1275; S. Rep. No. 102-92 (1991), at 28,

reprinted in

1992 U.S.C.C.A.N. 1133, 1161. As discussed above, competitors to incumbent cable operators credit the program access rules promulgated under Sections 628(b) and (c) for the increased competition to incumbent cable operators that has emerged since passage of the 1992 Cable Act.

B. Program Access Rules Applicable to Satellite-Delivered, Cable-Affiliated Programming

26. As required by Section 628(c)(2), the Commission has adopted program access rules which specifically prohibit undue or improper influence (

see

47 CFR 76.1002(a)), discrimination (

see

47 CFR 76.1002(b)), and exclusive contracts (

see

47 CFR 76.1002(c)-(e)) involving cable operators and cable-affiliated programmers that provide satellite-delivered programming. The Commission has also established a complaint process to address claims that a cable operator or a cable-affiliated programmer that provides satellite-delivered programming has violated the program access rules.

See

47 CFR 76.7, 76.1003. Consistent with the definitions in the 1992 Cable Act, the Commission's rules define the “satellite cable programming” and “satellite broadcast programming” to which the rules apply to include only programming transmitted or retransmitted by satellite for reception by cable operators.

See

47 CFR 76.1000(f), (h). The Commission has previously concluded that terrestrially delivered programming is outside of the direct coverage of Section 628(c)(2) and the Commission's program access rules under Section 628(c)(2).

See DIRECTV, Inc. and EchoStar Commc'ns Corp.

Comcast Corp. et al.,

15 FCC Rcd 22802, 22807 (2000),

aff'd sub nom. EchoStar Commc'ns Corp.

FCC,

292 F.3d 749 (D.C. Cir. 2002);

see also 2007 Program Access Order; 2002 Program Access Order.

C. NPRM

27. In September 2007, the Commission adopted an

NPRM

seeking comment on, among other things, whether to extend the program access rules to terrestrially delivered, cable-affiliated programming. The Commission noted examples of withholding of terrestrially delivered, cable-affiliated RSNs in San Diego and Philadelphia. The Commission stated its belief that “withholding of terrestrially delivered cable-affiliated programming is a significant concern that can adversely impact competition in the video distribution market.” To address this concern, the

NPRM

sought comment on whether it would be appropriate to address the terrestrial loophole in the current program access rules pursuant to provisions other than Section 628(c)(2) of the Act, such as Section 628(b) of the Act. The

NPRM

also sought comment on whether extension of program access requirements to terrestrially delivered, cable-affiliated programming by way of a general statutory provision such as Section 628(b) would be barred by the more specific provision in Section 628(c)(2) that requires the promulgating of rules relating only to conduct involving satellite-delivered programming.

28. In their comments filed in response to the

NPRM,

non-incumbent MVPDs contend that the Commission has statutory authority to address the terrestrial loophole in the current rules. They also argue that applying the program access rules to terrestrially delivered, cable-affiliated programming would promote competition in the video distribution market and broadband deployment. Conversely, vertically integrated cable operators contend that the Commission does not have the statutory authority to address the terrestrial loophole. Moreover, they argue that the market for video distribution is competitive and that additional regulations are not justified.

D. Pending Program Access Complaints

29. Since adoption of the

NPRM

in September 2007, MVPDs have filed three program access complaints involving terrestrially delivered, cable-affiliated programming. First, in September 2008, AT&T filed a program access complaint alleging that Cox is withholding a terrestrially delivered RSN (Cox-4) from AT&T in San Diego. In March 2009, the Media Bureau issued a decision denying this complaint without prejudice because (i) there was no precedent finding that withholding of terrestrially delivered programming is a violation of Section 628(b); and (ii) the pending

NPRM,

rather than an adjudicatory proceeding, is the correct forum for addressing this issue.

See AT&T Services Inc. et al

Coxcom, Inc.,

Memorandum Opinion and Order, 24 FCC Rcd 2859, 2864 (MB, 2009),

application for review pending.

AT&T has filed an Application for Review of this decision, which is pending. In July 2009, Verizon filed a program access complaint alleging that Cablevision is

withholding the terrestrially delivered HD feeds of its RSNs (MSG and MSG+) from Verizon in New York. In August 2009, AT&T filed a program access complaint against Cablevision making a similar claim regarding the withholding of the terrestrially delivered HD feeds of MSG and MSG+ from AT&T in Connecticut. The latter two complaints are pending.

30. We note that redacted versions of both of AT&T's complaints, the defendants' answers, AT&T's replies, and Cox's response to a declaration and survey included in AT&T's reply were filed in the record of this proceeding. We do not reach a decision in this

Order

on the merits of these complaints, including whether AT&T has demonstrated that the defendants' conduct violated Section 628(b).

III. Discussion

31. In Section A below, we begin with a discussion of our statutory authority under Section 628(b) to consider complaints alleging unfair acts involving terrestrially delivered, cable-affiliated programming. In Section B, we explain the bases for our conclusion that there is a need for Commission action to address such complaints. In Section C, we explain how addressing unfair acts involving terrestrially delivered, cable-affiliated programming on a case-by-case basis comports with the First Amendment. In Section D, we set forth the requirements for complaints alleging such unfair acts. In Section E, we discuss how these rules will be applied to common carriers, existing contracts, and terrestrially delivered programming that is subject to the program access rules applicable to satellite-delivered programming as a result of merger conditions. In Section F, we establish procedures for the Commission's consideration of requests for a temporary standstill of the price, terms, and other conditions of an existing programming contract by a program access complainant seeking renewal of such a contract.

A. The Commission's Statutory Authority To Address Unfair Acts Involving Terrestrially Delivered, Cable-Affiliated Programming

32. In this Section, we discuss our statutory authority under Section 628(b) to consider complaints alleging unfair acts involving terrestrially delivered, cable-affiliated programming in the circumstances described in that provision. Section 628(b) gives the Commission authority to promulgate rules applicable to unfair acts of cable operators (and certain other entities), including acts involving terrestrially delivered programming that have the purpose or effect of hindering significantly or preventing an MVPD from providing satellite cable programming or satellite broadcast programming to subscribers or consumers.

See

47 U.S.C. 548(b). Section 628(c)(1) authorizes the Commission to prescribe regulations to specify particular conduct prohibited by Section 628(b).

See

47 U.S.C. 548(c)(1). Our analysis reflects the Commission's interpretation of Section 628(b) in the

MDU Order,

where the Commission held that it has authority pursuant to Section 628(b) to adopt rules prohibiting exclusive contracts between cable operators and owners of multiple dwelling units (“MDUs”) because those contracts prevent or significantly hinder the ability of competing MVPDs to provide all programming, including “satellite cable programming” and “satellite broadcast programming,” in those markets.

See MDU Order,

73 FR 1080, January 7, 2008,

aff'd sub nom. Nat'l Cable & Telecomm. Ass'n

FCC,

567 F.3d 659 (D.C. Cir. 2009). This interpretation was recently upheld by a federal court of appeals.

See NCTA,

567 F.3d 659. Several commenters argue that applying the program access rules to terrestrially delivered, cable-affiliated programming pursuant to Section 628(b) is consistent with the Commission's analysis in the

MDU Order.

33. Vertically integrated cable operators note that Section 628(c)(2) requires the Commission to prohibit unfair acts involving only satellite-delivered programming and assert that this specific mandate precludes the Commission from addressing terrestrially delivered programming pursuant to the general authority provided in Section 628(b). While Section 628(c)(2) lists specific unfair acts that the Commission is required to address as “minimum contents” in its regulations, the United States Court of Appeals for the District of Columbia Circuit has explained that this list does not preclude the Commission from adopting rules to address additional conduct that also is prohibited under Section 628(b).

See NCTA,

567 F.3d at 664-65. As the court stated, “Congress had a particular manifestation of a problem in mind, but in no way expressed an unambiguous intent to limit the Commission's power solely to that version of the problem.”

Id.

at 665;

see also

47 U.S.C. 548(c)(4); 47 CFR 76.1002(c)(4). The Commission has declined to interpret this phrase more broadly to mean any exclusive contract that is not expressly prohibited by Section 628(c)(2)(D).

See 1996 OVS Order,

11 FCC Rcd at 18319.

37. We are aware that the former Cable Services Bureau stated that Section 628(b) may not be used categorically to preclude programming practices that are related to practices prohibited under Section 628(c)(2), but not themselves reached by Section 628(c)(2).

See Everest Midwest Licensee

Kansas City Cable Partners,

18 FCC Rcd 26679, 26683-84 (CSB, 2003);

RCN Telecom Servs.

Cablevision Sys. Corp.,

14 FCC Rcd 17093, 17105-06 (CSB, 1999);

EchoStar Commc'ns Corp.

Comcast Corp.,

14 FCC Rcd 2089, 2102 (CSB, 1999);

Dakota Telecom, Inc.

CBS Broad., Inc.,

14 FCC Rcd 10500, 10507-08 (CSB, 1999);

DIRECTV, Inc.

Comcast Corp.,

13 FCC Rcd 21822, 21837 (CSB, 1998). The Cable Services Bureau qualified these statements, however, by explaining that Section 628(b) may not be used “without more,” “standing alone,” or “on a per se basis” against conduct that is permitted under Section 628(c).

See Everest Midwest Licensee,

18 FCC Rcd at 26683-84;

RCN,

14 FCC Rcd at 17105-06;

EchoStar,

14 FCC Rcd at 2103;

Dakota Telecom,

14 FCC Rcd at 10507-08;

DIRECTV,

13 FCC Rcd at 21838;

see also

S. Rep. No. 102-92 (1991), at 64, 77-78, 121-22,

reprinted in

1992 U.S.C.C.A.N. 1133, 1197, 1210-11. The House amendment, by contrast, expressly limited the provisions to “satellite cable programming vendor[s] affiliated with a cable operator.”

See

H.R. Rep. No. 102-862 (1992) (Conf. Rep.), at 91-93,

reprinted in

1992 U.S.C.C.A.N. at 1273-75. The Conference agreement adopted the House version with amendments.

See id.

41. Contrary to the claims of cable operators, however, we do not find this unexplained change in Section 628(c)(2) relevant in determining Congress' intent with respect to Section 628(b)'s broadly worded prohibition.

See, e.g., Drummond Coal Co.

Watt,

735 F.2d 469, 474 (11th Cir. 1984) (“Unexplained changes made in committee are not reliable indicators of congressional intent.”),

quoted in Save Our Cumberland Mountains, Inc.

Lujan,

963 F.2d 1541, 1548 (D.C. Cir. 1992),

cert. denied,

507 U.S. 911 (1993);

Trailmobile Co.

Whirls,

331 U.S. 40, 61 (1947) (“The interpretation of statutes cannot safely be made to rest upon mute intermediate legislative maneuvers.” (citation omitted));

see also

Thomas G. Krattenmaker & Steven C. Salop,

Anticompetitive Exclusion: Raising Rivals' Costs to Achieve Power Over Price,

96 Yale L.J. 209, 234-38 (1986). As the Commission noted in the

Adelphia Order,

“the integrated firm may be able to harm its rivals' competitive positions, enabling it to raise prices and increase its market share in the downstream market, thereby increasing its profits while retaining lower prices for itself or for firms with which it does not compete.” 21 FCC Rcd at 8256.

46. Unfair acts involving cable-affiliated programming may harm the ability of MVPDs to compete with incumbent cable operators, thereby resulting in less competition in the marketplace to the detriment of consumers. For example, the Commission has noted previously that, although competitors have entered the video distribution market, there is evidence that cable prices have risen in excess of inflation.

See 2007 Program Access Order

(citing

Implementation of Section 3 of the Cable Television Consumer Protection and Competition Act of 1992: Statistical Report on Average Rates for Basic Service, Cable Programming Service, and Equipment,

Report on Cable Industry Prices, 21 FCC Rcd 15087, 15087-88 (2006));

see also

47 U.S.C. 522(6) (defining “cable service”); 522(7) (defining “cable system”); 548(i)(1) (defining “satellite broadcast programming”). They claim that to the extent they are engaged in other activities, such as the distribution of terrestrial programming, they are not covered under that section. This argument effectively reads into the statute an additional condition that is not there. Nothing in the statute excludes an otherwise covered entity from the reach of Section 628(b) simply because the conduct at issue is not covered by the statutorily defined activities of a “cable operator” or “satellite cable programming vendor.” To the contrary, under Section 628(b), so long as the provider itself meets the statutory definition of a covered entity, it is prohibited from engaging in any unfair or deceptive acts or practices that hinder significantly or prevent any MVPD from providing satellite cable or satellite broadcast programming to consumers. In contrast, when Congress intends to restrict the circumstances under which an entity is covered under a category of providers, it has done so expressly.

See

47 U.S.C. 153(44) (“A telecommunications carrier shall be treated as a common carrier under this Act only to the extent that it is engaged in providing telecommunications services”). There is no such restriction contained in Section 628(b). For this reason, we reject this argument.

91. While our program access procedural rules provide a defendant with 20 days after service to file an Answer to a complaint (

see

47 CFR 76.1003(e)), we will provide the defendant with 45 days from the date of service of the complaint to file an Answer to a complaint involving terrestrially delivered programming to ensure that the defendant has adequate time to develop a response. We believe that additional time is appropriate because program access complaints involving terrestrially delivered programming, unlike complaints involving satellite-delivered programming, entail an additional factual inquiry regarding whether the unfair act has the purpose or effect set forth in Section 628(b). With the exception of the additional burdens described below and the additional time for defendants to file an Answer, these proceedings will be subject to the same

procedures set forth in Sections 76.7 and 76.1003 of the Commission's rules that apply to program access complaints involving satellite-delivered, cable-affiliated programming. 47 CFR 76.7, 76.1003. Among other things, these rules provide for pre-filing notices, discovery, remedies, potential defenses, and the required contents of and deadlines for filing the complaint, answer, and reply.

See id.;

see generally 1993 Program Access Order,

8 FCC Rcd 3359. We remind potential complainants that filing a frivolous program access complaint is unlawful and an abuse of process subject to sanctions.

See

47 CFR 76.6(c);

see also

47 U.S.C. 548(f)(3);

1993 Program Access Order,

8 FCC Rcd at 3426-28;

1998 Biennial Regulatory Review,

Report and Order, 1999 WL 4984 (1999) (adopting 47 CFR 76.6(c)).

2. Additional Burdens in Program Access Complaint Proceedings Alleging Unfair Acts Involving Terrestrially Delivered, Cable-Affiliated Programming

92. We are adopting rules to address unfair acts involving terrestrially delivered, cable-affiliated programming pursuant to the authority Congress provided the Commission in Sections 628(b) and 628(c)(1) of the Act. Unlike the program access rules for satellite-delivered programming, which the Commission adopted pursuant to Section 628(c)(2), Section 628(b) requires that the “purpose or effect” of the unfair act is “to hinder significantly or to prevent any multichannel video programming distributor from providing satellite cable programming or satellite broadcast programming to subscribers or consumers.” 47 U.S.C. 548(b);

see 2002 Program Access Order

(“Section 628(b) addresses `unfair or deceptive acts or practices' generally and carries with it an added burden `to demonstrate that the purpose or effect of the conduct complained of was to `hinder significantly or to prevent' an MVPD from providing programming to subscribers or customers.' ” (

quoting 1993 Program Access Order,

8 FCC Rcd at 3377-78)). The unfair acts listed in Section 628(c)(2) pertaining to satellite-delivered programming are presumed to harm competition, and complainants alleging such unfair acts are not required to demonstrate harm.

See 1993 Program Access Order,

8 FCC Rcd at 3377-78;

see also Implementation of Sections 12 and 19 of the Cable Television Consumer Protection and Competition Act of 1992: Development of Competition and Diversity in Video Programming Distribution and Carriage,

Memorandum Opinion and Order on Reconsideration of the First Report and Order, 10 FCC Rcd 1902, 1930 (1994).

93. Accordingly, to run afoul of Section 628(b), an unfair act involving terrestrially delivered, cable-affiliated programming (which, as defined in this

Order,

includes an exclusive contract, discrimination, or undue or improper influence) must have the purpose or effect of hindering significantly or preventing the complainant from providing satellite cable programming or satellite broadcast programming to subscribers or consumers. The prohibition in Section 628(b) makes unlawful any unfair or deceptive act or practice that has the “purpose or effect” of hindering significantly or preventing competitors from providing service. 47 U.S.C. 548(b). Under the broad language of the statute, a case involving only a prohibited purpose, even without a likelihood of material effects, may nonetheless support a finding of a violation of Section 628(b). In the antitrust context, however, courts have found that a “desire to crush a competitor, standing alone, is insufficient to make out a violation of the antitrust laws.”

Ocean State Physicians Health Plan

Blue Cross & Blue Shield,

883 F.2d 1101, 1113 (1st Cir. 1989),

cert. denied,

494 U.S. 1027 (1990);

see also

47 U.S.C. 548(c)(2)(C)-(D)), the rules we adopt in this

Order

for terrestrially delivered, cable-affiliated programming do not. Section 628(b) does not draw such a distinction, and our case-by-case approach will enable us to take into account relevant factual circumstances of a particular case.

111. Third, while the exclusive contract prohibition generally applicable to satellite-delivered, cable-affiliated programming will sunset on a Commission determination that the categorical prohibition is no longer necessary to preserve and protect competition (

see

47 CFR 76.1002(c)(6);

see also

47 U.S.C. 548(c)(5)), the rules we adopt in this

Order

for terrestrially delivered, cable-affiliated programming do not contain a sunset provision because Section 628(b) does not contain such a provision. If the exclusive contract prohibition applicable to satellite-delivered, cable-affiliated programming sunsets, we will still consider complaints alleging unfair acts involving terrestrially delivered, cable-affiliated programming on a case-by-case basis unless and until we repeal the rule with respect to terrestrially delivered programming. Of course, the facts supporting a sunset of the exclusive contract prohibition under Section 628(c)(2) may bear on a particular complaint brought under Section 628(b).

112. By contrast, with the exception of the additional burdens and the additional response time for defendants to file an Answer described above, we will apply the same rules, policies, and procedures to address claims of discrimination and undue or improper influence involving terrestrially delivered, cable-affiliated programming that currently apply to such claims involving satellite-delivered, cable-affiliated programming.

See

47 CFR 76.1002(b)(1)-(3) (listing actions that a cable-affiliated programmer is not

precluded from taking under the discrimination provision of the program access rules);

id.

§ 76.1003(c)(4)-(5) (listing specific requirements for a program access complaint alleging discrimination);

id.

§ 76.1003(e)(3)-(4) (listing specific requirements for an answer to a program access complaint alleging discrimination);

see also

47 U.S.C. 628(j);

Implementation of Cable Act Reform Provisions of the Telecommunications Act of 1996,

Order and Notice of Proposed Rulemaking, 11 FCC Rcd 5937, 5956-57 (1996).

2. Existing Contracts

115. Given the potential harms to video competition and broadband deployment that arise from unfair acts involving terrestrially delivered, cable-affiliated programming, we conclude that the public interest requires us to apply the rules adopted in this

Order

to existing contracts or other arrangements for terrestrially delivered, cable-affiliated programming, to the extent a cable operator's reliance on or enforcement of those contracts or arrangements following the effective date of the rules is found to violate Section 628(b). Accordingly, although a cable operator may have entered into an exclusive contract prior to the effective date of the rules adopted in this

Order,

an MVPD may file a program access complaint after the effective date of the rules alleging that the cable operator's continued reliance on or enforcement of this contract violates these rules. We decline, however, to apply the rules adopted in this

Order

to the unfair acts of cable operators involving terrestrially delivered, cable-affiliated programming that preceded the effective date of these rules. Thus, to the extent a terrestrially delivered, cable-affiliated programmer refused to deal with an MVPD prior to (and not after) the effective date of these rules, we would not entertain a program access complaint alleging that such conduct is unlawful under the rules adopted in this

Order.

Rather, an MVPD filing a program access complaint pursuant to the rules adopted in this

Order

regarding the allegedly unlawful conduct would need to demonstrate that the unfair act occurred after the effective date of the rules.

116. Applying the rules to existing contracts in this manner is not impermissibly retroactive.

See, e.g., Celtronix Telemetry, Inc.

FCC,

272 F.3d 585, 588 (D.C. Cir. 2001) (changing the grace period on auction debt was not impermissibly retroactive where new rule applied to payment delays occurring after the rule's adoption; although it altered the future effect of the initial license issuance, it did not alter past legal consequences);

Bell Atl. Tel. Cos.

FCC,

79 F.3d 1195, 1207 (D.C. Cir. 1996) (a regulation that governs future rates “is not made retroactive merely because it draws upon antecedent facts for its operation”) (quotations and citations omitted);