Program Access Proceeding

FEDERAL COMMUNICATIONS COMMISSION

47 CFR Part 76

[CS Docket No. 97-248; FCC 97-415]

Program Access Proceeding

AGENCY: Federal Communications Commission.

ACTION: Proposed rule.

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SUMMARY: In the Memorandum Opinion and Order and Notice of Proposed

Rulemaking (``NPRM''), the Commission grants the petition for

rulemaking filed by Ameritech New Media, Inc. requesting that the

Commission issue a notice of proposed rulemaking to amend its program

access rules. Also in the NPRM the Commission seeks comment on

proposals to amend several aspects of the program access rules. The

Commission believes that these proposals will provide expeditious and

effective resolution of program access complaints. These proposed rules

are necessary to further the Commission's goals of increased

competition and diversity in the multichannel video programming market,

as well as foster the development of competition to traditional cable

systems. The intended effect of this action is to seek comment on

proposed rules and procedures applicable to the Commission's program

access rules.

DATES: Comments are due on or before February 2, 1998. Reply comments

are due on or before February 23, 1998.

ADDRESSES: Federal Communications Commission, 1919 M Street, N.W., Room

222, Washington, D.C. 20554.

FOR FURTHER INFORMATION CONTACT: Deborah Klein or Steve Broeckaert,

Consumer Protection and Competition Division, Cable Services Bureau, at

(202) 418-7200.

SUPPLEMENTARY INFORMATION: This is a synopsis of the Memorandum Opinion

and Order and Notice of Proposed Rulemaking in CS Docket No. 97-248,

FCC 97-415 which was adopted and released on December 18, 1997. A copy

of the complete item is available for inspection and copying during

normal business hours in the FCC Reference Center, Room 239, 1919 M

Street, N.W., Washington, D.C. 20554. The complete text may be

purchased from the Commission's copy contractor, International

Transcription Service, Inc., 1231 20th Street, N.W., Washington, D.C.

20036, (202) 857-3800. The complete Memorandum Opinion and Order and

Notice of Proposed Rulemaking also is available on the Commission's

Internet home page (http://www.fcc.gov).

Summary of Action

I. Background

1. On December 18, 1997, the Federal Communications Commission

(``Commission'') adopted a Memorandum Opinion and Order and Notice of

Proposed Rulemaking which granted a petition for rulemaking filed by

Ameritech New Media, Inc. (``Ameritech'') and sought comment on a

variety of proposals relating to its program access rules. The Order

and NPRM are summarized below.

[[Page 1944]]

A. Introduction

2. Section 628 of the Communications Act of 1934, as amended

(``Communications Act''), prohibits unfair or discriminatory practices

in the sale of satellite cable and satellite broadcast programming.

Section 628 is intended to increase competition and diversity in the

multichannel video programming market, as well as to foster the

development of competition to traditional cable systems, by prescribing

regulations that govern the access by competing multichannel systems to

cable programming services. Section 628(c) instructs the Commission to

adopt regulations to identify particular conduct that is prohibited by

section 628(b). The Communications Act provides parties aggrieved by

conduct alleged to violate the program access provisions the right to

commence an adjudicatory proceeding before the Commission. Ameritech

filed a petition for rulemaking requesting that the Commission issue a

notice of proposed rulemaking to amend its program access rules.

Pursuant to Sec. 1.401 of the Commission's rules, on June 2, 1997, the

Commission issued a public notice seeking comment on Ameritech's

petition. Timely comments and oppositions were filed on July 2, 1997;

reply comments were filed on July 17, 1997. As discussed herein, the

Commission is initiating a proceeding to consider the amendment of

several aspects of the program access rules.

B. Time Limits

3. The Commission seeks comment on Ameritech's proposed time limits

for the processing of program access complaints: 90 days in the case of

a complaint that can be resolved without recourse to discovery, and

within 150 days if the complainant elects to conduct discovery. The

Commission seeks comment on appropriate time limits for the resolution

of program access complaints: should the Commission adopt the 90-day

and 150-day time periods proposed by Ameritech; should some other time

period apply; or should the Commission not adopt time limits. In

addition, the Commission seeks comment on whether the time limit, if

any, should run from the time the complaint was filed, or whether the

time limit should run from some other point, such as the close of

pleadings, or the close of discovery.

4. Further, the Commission seeks comment regarding whether one

universally applicable time limit should apply to all program access

complaints, or whether one time limit should be established for cases

involving denial of programming, with another longer time limit

established for price discrimination cases, which generally involve

issues of greater complexity. The Commission also seeks comment on any

other reasonable distinction between program access cases which would

impact the appropriate time limit, if any, for resolution of that type

of program access proceeding. In addition, the Commission seeks comment

on Ameritech's proposal to shorten the answer (30 days to 20 days) and

reply (20 days to 15 days) pleading periods applicable to program

access complaints.

C. Discovery

5. The Commission seeks comment on several means of expediting the

discovery process. In this regard, the Commission seeks comment on

whether it would speed the discovery process to have complainants

submit proposed discovery requests with their program access complaints

and require Defendants to submit their proposed discovery requests and

objections to complainants' discovery requests with their answer.

Complainants would submit their objections to defendants' discovery

requests with their reply.

6. The Commission seeks comment on any other change in the

procedures applicable to program access complaints that would result in

the necessary information disclosure in the most efficient, expeditious

fashion possible. In this regard, the Commission seeks comment on

whether different standards for discovery should be applied to

different types of program access complaints, such as price

discrimination, exclusivity, and denial of programming. The Commission

also seeks comment on whether the issuance of a standardized protective

order applicable to program access complaints would expedite the

necessary information disclosure. Further, the Commission seeks comment

on Ameritech's proposal that complainants be entitled to discovery as

of right, particularly in light of our conclusion not to permit

discovery as of right in common carrier formal complaint proceedings.

D. Damages

7. The Commission has authority to impose forfeitures for violation

of the program access rules. The Commission seeks comment on whether

forfeitures alone are an adequate deterrent to prevent violations of

these rules. The Commission also seeks comment on whether an additional

check on anticompetitive conduct such as the imposition of damages for

violations of section 628 of the Communications Act may now be

appropriate and in the public interest. In this regard, the Commission

also seeks comment on the appropriate interaction, if any, between

damages and the Commission's existing forfeiture authority under Title

V to impose forfeitures for violations of the program access rules. The

Commission also seeks comment regarding the correct procedures through

which to implement damages or forfeitures in the context of specific

program access proceedings. For example, the Commission seeks comment

on the date from which damages should be levied for violations of

section 628. The Commission seeks comment on whether the operative date

should be the date of the notice of intent to file a program access

complaint, as Ameritech suggests, or the date of filing of the program

access complaint, or the date on which the violation first occurred.

Because the complainant has the ability to file a complaint at any time

after the 10 day notice requirement set forth in 47 CFR 76.1003(a), the

Commission seeks comment on whether damages should be calculated from

the date upon which the complainant filed its program access complaint

with the Commission. The Commission also seeks comment on the adequacy

and clarity of the forfeiture procedures and guidelines set forth in

section 503 of the Communications Act, the Commission's rules, and case

law. In addition the Commission seeks comment on whether, in some

cases, the most efficient manner of processing program access cases

would be to bifurcate the program access violation determination from

the damages or forfeiture determination. The Commission seeks comment

on whether Commission Staff should be given the discretion to bifurcate

the violation and sanction portions of program access proceedings and

whether doing so would more efficiently process such cases.

8. The Commission also seeks comment on the calculation of damages,

if assessed. Commenters should consider whether the Commission should

determine damages on a case-by-case basis, or whether there should be a

standard calculation for damages in program access matters. Those

arguing that damages should be based on a standard calculation should

comment on how the Commission should determine such standard

calculation. The Commission also seeks comment on the basis on which

damages, if assessed, should be calculated. For example, should damages

be based on lost profit, the difference between the rate that the

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complainant was charged and the rate the complainant should have been

charged, or some other legitimate basis.

9. The Commission seeks comment on whether a complainant seeking

damages must file in its complaint or supplemental complaint either a

detailed computation of damages or a detailed explanation of why such a

computation is not possible at the time of filing. Commenters

advocating the adoption of such a requirement should address whether

the explanation standards adopted for complaints against common

carriers should be adopted, or whether some other explanation standard

should apply.

10. Finally, the Commission observes that no persuasive evidence

has been presented which suggests that punitive damages should be

imposed in program access cases. Accordingly, the Commission

tentatively concludes that punitive damages should not be imposed in

program access cases. The Commission seeks comment on this tentative

conclusion.

E. Terrestrial-Delivery of Programming

11. Section 628 of the Communications Act is applicable to cable

operators, satellite cable programming vendors in which a cable

operator has an attributable interest, and satellite broadcast

programming vendors and generally applies to the delivery of satellite

cable programming and satellite broadcast programming. On its face,

section 628 does not preclude a programmer from altering its

distribution method from satellite-distribution to terrestrial-

distribution. Such an action could arguably constitute an unfair method

of competition or unfair or deceptive act or practice, 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. The Commission seeks comment on appropriate ways to address

such situations. As a threshold matter, the Commission specifically

asks commenters to address the statutory basis for any suggested

remedial action, and whether legislation is needed. To the extent that

commenters contend that Commission action is appropriate, the

Commission seeks comment on what types of evidence a complainant may

marshal to prevail on a claim against a programmer that has moved

satellite-delivered programming to terrestrial delivery to evade the

program access requirements. The Commission also seeks comment on

whether programming that has been moved from satellite to terrestrial

delivery can or should be subject to program access requirements based

on the effect, rather than the purpose, of the programmer's action.

F. Buying Groups: Joint and Several Liability

12. The Commission seeks comment on a proposal that the Commission

clarify its program access rules to provide that any cooperative buying

group that maintains adequate financial reserves should not be required

to provide joint and several liability. Specifically, the Commission

seeks comment on what financial assurances cooperative buying groups

can provide to programming distributors such that joint and several

liability is not necessary, while adequately protecting programming

distributors from the financial risks associated with such

arrangements. For example, the Commission seeks comment on whether

buying groups that maintain a cash reserve equal to one month's

programming fees would satisfy such a requirement. In addition, the

Commission seeks comment on any other proposals that would result in

the elimination of joint and several liability while maintaining

adequate protection for programmers.

II. Procedural Matters

A. Regulatory Flexibility Analysis

13. As required by the Regulatory Flexibility Act (RFA), 5 U.S.C.

Sec. 603, the Commission has prepared an Initial Regulatory Flexibility

Analysis (IRFA) of the expected impact on small entities of the rules

proposed in the NPRM. Written public comments are requested on the

IRFA. Comments on the IRFA must have a separate and distinct heading

designating them as responses to the IRFA and must be filed by the

deadlines for comments on the NPRM. The Commission will send a copy of

the NPRM, including this IRFA, to the Chief Counsel for Advocacy of the

Small Business Administration.

Initial Regulatory Flexibility Analysis

A. Need for, and Objectives of, the Proposed Rules

14. In 1993, the Commission adopted its current rules intended to

protect, pursuant to section 628 of the Communications Act, the right

of multichannel video programming providers to obtain access to

specified types of video programming. Ameritech filed a petition for

rulemaking proposing that certain aspects of the Commission's program

access rules be amended to better ensure the Communication Act's

program access requirements. In this NPRM, the Commission seeks comment

as to whether certain aspects of the Commission's program access rules

should be amended to better enforce the Communication Act's program

access requirements.

B. Legal Basis

15. The authority for the action proposed for this rulemaking is

contained in sections 4(i), 303(r), and 628 of the Communications Act

of 1934, as amended, 47 U.S.C. sections 4(i), 303(r), and 548.

C. Description and Estimate of the Number of Small Entities

16. The Commission is required to provide a description of and,

where feasible, an estimate of the number of small entities that will

be affected by the proposed rules, if adopted. The RFA defines the term

``small entity'' as having the same meaning as the terms ``small

business'' and ``small organization.'' In addition, the term ``small

business'' has 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: (1) is independently

owned and operated; (2) is not dominant in its field of operation; and

(3) meets any additional criteria established by the Small Business

Administration (``SBA'').

17. Small MVPDs. 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 annual receipts.

This definition includes cable system operators, closed circuit

television services, direct broadcast satellite services, multipoint

distribution systems, satellite master antenna systems and subscription

television services. According to the Bureau of the Census, there were

1,758 total cable and other pay television services and 1,423 had less

than $11 million in revenue. The Commission addresses below each

service individually to provide a more precise estimate of small

entities.

18. Cable Systems. The Commission has developed, with SBA's

approval, our own definition of a small cable system operator for the

purposes of rate regulation. Under 47 CFR 76.901(e), a ``small cable

company'' is one serving fewer than 400,000 subscribers nationwide.

Based on our most recent information, the Commission estimates that

there were 1439 cable operators that qualified as small cable companies

at

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the end of 1995. Since then, some of those companies may have grown to

serve over 400,000 subscribers, and others may have been involved in

transactions that caused them to be combined with other cable

operators. Consequently, the Commission estimates that there are fewer

than 1439 small entity cable system operators that may be affected by

the decisions and rules the Commission is adopting. The Commission

believes that only a small percentage of these entities currently

provide qualifying ``telecommunications services'' as required by the

Communications Act and, therefore, estimate that the number of such

entities are significantly fewer than noted.

19. The Communications Act also contains a definition of a small

cable system operator, which is ``a cable operator that, directly or

through an affiliate, serves in the aggregate fewer than 1% 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, the Commission 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, the Commission finds that the

number of cable operators serving 617,000 subscribers or less totals

1450. Although it seems certain that some of these cable system

operators are affiliated with entities whose gross annual revenues

exceed $250,000,000, the Commission is unable at this time 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.

20. Multipoint Multichannel Distribution Systems (``MMDS''). The

Commission refined the definition of ``small entity'' for the auction

of MMDS as an entity that together with its affiliates has average

gross annual revenues that are not more than $40 million for the

preceding three calendar years. This definition of a small entity in

the context of MMDS auctions has been approved by the SBA.

21. The Commission completed its MMDS auction in March 1996 for

authorizations in 493 basic trading areas (``BTAs''). Of 67 winning

bidders, 61 qualified as small entities. Five bidders indicated that

they were minority-owned and four winners indicated that they were

women-owned businesses. MMDS is an especially competitive service, with

approximately 1573 previously authorized and proposed MMDS facilities.

Information available to us indicates that no MMDS facility generates

revenue in excess of $11 million annually. The Commission concludes

that, for purposes of this FRFA, there are approximately 1634 small

MMDS providers as defined by the SBA and the Commission's auction

rules.

22. Direct Broadcast Satellite (``DBS''). Because DBS provides

subscription services, DBS falls within the SBA definition of cable and

other pay television services (SIC 4841). As of December 1996, there

were eight DBS licensees. Estimates of 1996 revenues for various DBS

operators are significantly greater than $11,000,000 and range from a

low of $31,132,000 for Alphastar to a high of $1,100,000,000 for

Primestar. Accordingly, the Commission concludes that no DBS operator

qualifies as a small entity.

23. Home Satellite Dish (``HSD''). The market for HSD service is

difficult to quantify. Indeed, the service itself bears little

resemblance to other MVPDs. HSD owners have access to more than 265

channels of programming placed on C-band satellites by programmers for

receipt and distribution by MVPDs, of which 115 channels are scrambled

and approximately 150 are unscrambled. HSD owners can watch unscrambled

channels without paying a subscription fee. To receive scrambled

channels, however, an HSD owner must purchase an integrated receiver-

decoder from an equipment dealer and pay a subscription fee to an HSD

programming packager. Thus, HSD users include: (1) viewers who

subscribe to a packaged programming service, which affords them access

to most of the same programming provided to subscribers of other MVPDs;

(2) viewers who receive only nonsubscription programming; and (3)

viewers who receive satellite programming services illegally without

subscribing.

24. According to the most recently available information, there are

approximately 30 program packagers nationwide offering packages of

scrambled programming to retail consumers. These program packagers

provide subscriptions to approximately 2,314,900 subscribers

nationwide. This is an average of about 77,163 subscribers per program

packager. This is substantially smaller than the 400,000 subscribers

used in the Commission's definition of a small multiple system operator

(``MSO''). Furthermore, because this is an average, it is likely that

some program packagers may be substantially smaller.

25. Open Video System (``OVS''). The Commission has certified nine

OVS operators. Of these nine, only two are providing service. On

October 17, 1996, Bell Atlantic received approval for its certification

to convert its Dover, New Jersey Video Dialtone (``VDT'') system to

OVS. Bell Atlantic subsequently purchased the division of Futurevision

which had been the only operating program package provider on the Dover

system, and has begun offering programming on this system using these

resources. Metropolitan Fiber Systems was granted certifications on

December 9, 1996, for the operation of OVS systems in Boston and New

York, both of which are being used to provide programming. Bell

Atlantic and Metropolitan Fiber Systems have sufficient revenues to

assure us that they do not qualify as small business entities. Little

financial information is available for the other entities authorized to

provide OVS that are not yet operational. The Commission believes that

one OVS licensee may qualify as a small business concern. Given that

other entities have been authorized to provide OVS service but have not

yet begun to generate revenues, the Commission concludes that at least

some of the OVS operators qualify as small entities.

26. Satellite Master Antenna Television (``SMATVs''). Industry

sources estimate that approximately 5200 SMATV operators were providing

service as of December 1995. Other estimates indicate that SMATV

operators serve approximately 1.05 million residential subscribers as

of September 1996. The ten largest SMATV operators together pass

815,740 units. If the Commission assumes that these SMATV operators

serve 50% of the units passed, the ten largest SMATV operators serve

approximately 40% of the total number of SMATV subscribers. Because

these operators are not rate regulated, they are not required to file

financial data with the Commission. Furthermore, the Commission is not

aware of any privately published financial information regarding these

operators. Based on the estimated number of operators and the estimated

number of units served by the largest ten SMATVs, the Commission

concludes that a substantial number of SMATV operators qualify as small

entities.

27. Local Multipoint Distribution System (``LMDS''). Unlike the

above pay television services, LMDS technology and spectrum allocation

will allow licensees to provide wireless telephony,

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data, and/or video services. A LMDS provider is not limited in the

number of potential applications that will be available for this

service. Therefore, the definition of a small LMDS entity may be

applicable to both cable and other pay television (SIC 4841) and/or

radiotelephone communications companies (SIC 4812). The SBA definition

for cable and other pay services is defined above. A small

radiotelephone entity is one with 1500 employees or less. However, for

the purposes of this NPRM, the Commission includes only an estimate of

LMDS video service providers.

28. LMDS is a service that is expected to be auctioned by the FCC

in 1998. The vast majority of LMDS entities providing video

distribution could be small businesses under the SBA's definition of

cable and pay television (SIC 4841). However, the Commission proposed

to define a small LMDS provider as an entity that, together with

affiliates and attributable investors, has average gross revenues for

the three preceding calendar years of less than $40 million. The

Commission has not yet received approval by the SBA for this

definition.

29. There is only one company, CellularVision, that is currently

providing LMDS video services. Although the Commission does not collect

data on annual receipts, the Commission assumes that CellularVision is

a small business under both the SBA definition and our proposed auction

rules. Accordingly, the Commission affirms its tentative conclusion

that a majority of the potential LMDS licensees will be small entities,

as that term is defined by the SBA.

30. Program Producers and Distributors. The Commission has not

developed a definition of small entities applicable to producers or

distributors of television programs. Therefore, the Commission will

utilize the SBA classifications of Motion Picture and Video Tape

Production (SIC 7812), Motion Picture and Video Tape Distribution (SIC

7822), and Theatrical Producers (Except Motion Pictures) and

Miscellaneous Theatrical Services (SIC 7922). These SBA definitions

provide that a small entity in the television programming industry is

an entity with $21.5 million or less in annual receipts for SIC 7812

and 7822, and $5 million or less in annual receipts for SIC 7922. The

1992 Bureau of the Census data indicate the following: (1) there were

7265 U.S. firms classified as Motion Picture and Video Production (SIC

7812), and that 6987 of these firms had $16,999 million or less in

annual receipts and 7002 of these firms had $24,999 million or less in

annual receipts; (2) there were 1139 U.S. firms classified as Motion

Picture and Tape Distribution (SIC 7822), and that 1007 of these firms

had $16,999 million or less in annual receipts and 1013 of these firms

had $24,999 million or less in annual receipts; and (3) there were 5671

U.S. firms classified as Theatrical Producers and Services (SIC 7922),

and that 5627 of these firms had less than $5 million in annual

receipts.

31. Each of these SIC categories is very broad and includes firms

that may be engaged in various industries including television.

Specific figures are not available as to how many of these firms

exclusively produce and/or distribute programming for television or how

many are independently owned and operated. Consequently, the Commission

concludes that there are approximately 6987 small entities that produce

and distribute taped television programs, 1013 small entities primarily

engaged in the distribution of taped television programs, and 5627

small producers of live television programs that may be affected by the

rules adopted in this proceeding.

D. Description of Reporting, Recordkeeping, and Other Compliance

Requirements

32. The rules proposed in this NPRM will not require a change in

record keeping requirements.

E. Steps Taken To Minimize Significant Economic Impact on Small

Entities, and Significant Alternatives Considered

33. The NPRM proposes various alternatives which may expand access

to video programming by small entities.

F. Federal Rules Which Overlap, Duplicate, or Conflict With These Rules

34. None.

B. Ex Parte Presentations

35. The NPRM is a permit but disclose notice and comment rule

making proceeding. Ex parte presentations are permitted, except during

the Sunshine Agenda period, provided they are disclosed as provided in

Commission rules. See generally 47 CFR 1.1202, 1.1203, and 1.1206(a).

C. Comments

36. Pursuant to applicable procedures set forth in Secs. 1.415 and

1.419 of the Commission's rules, interested parties may file comments

on or before February 2, 1998 and reply comments on or before February

23, 1998. To file formally in this proceeding, you must file an

original and six copies of all comments, reply comments, and supporting

comments. Parties are also asked to submit, if possible, draft rules

that reflect their positions. If you want each Commissioner to receive

a personal copy of your comments, you must file an original and eleven

copies. Comments and reply comments should be sent to Office of the

Secretary, Federal Communications Commission, 1919 M Street, N.W., Room

222, Washington, D.C. 20554, with a copy to Deborah Klein of the Cable

Services Bureau, 2033 M Street, N.W., 7th Floor, Washington, D.C.

20554. Parties should also file one copy of any documents filed in this

docket with the Commission's copy contractor, International

Transcription Services, Inc., 1231 20th Street, N.W., Washington, D.C.

20037. Comments and reply comments will be available for public

inspection during regular business hours in the FCC Reference Center,

1919 M Street, N.W., Room 239, Washington, D.C. 20554.

37. Parties are also asked to submit comments and reply comments on

diskette, where possible. Such diskette submissions would be in

addition to and not a substitute for the formal filing requirements

addressed above. Parties submitting diskettes should submit them to

Deborah Klein of the Cable Services Bureau, 2033 M Street, N.W., 7th

Floor, Washington, D.C. 20554. Such a submission must be on a 3.5 inch

diskette formatted in an IBM compatible form using MS DOS 5.0 and

WordPerfect 5.1 software. The diskette should be submitted in ``read

only'' mode. The diskette should be clearly labelled with the party's

name, proceeding, type of pleading (comment or reply comments) and date

of submission. The diskette should be accompanied by a cover letter.

List of Subjects in 47 CFR Part 76

Administrative practice and procedure.

Federal Communications Commission.

Magalie Roman Salas,

Secretary.

[FR Doc. 98-707 Filed 1-12-98; 8:45 am]

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