[Federal Register Volume 59, Number 237 (Monday, December 12, 1994)]
[Unknown Section]
[Page 0]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 94-30242]


[[Page Unknown]]

[Federal Register: December 12, 1994]


=======================================================================
-----------------------------------------------------------------------

FEDERAL COMMUNICATIONS COMMISSION

47 CFR Part 63

[CC Docket No. 87-266; FCC 94-269]

 

Telephone Company-Cable Television Cross-Ownership Rules, and 
Regulatory Procedures for Video Dialtone Service

AGENCY: Federal Communications Commission.

ACTION: Notice of proposed rulemaking.

-----------------------------------------------------------------------

SUMMARY: In a Third Further Notice of Proposed Rulemaking in Common 
Carrier Docket 87-266, the Commission requested information and comment 
on: Mechanisms for addressing the apparent short-term constraints on 
the expandability of analog channel capacity; modifications to the 
Commission's prohibition on acquisition of cable facilities and a 
corresponding modification to the Commission's non-ownership 
affiliation rules; proposals that the Commission require or permit 
local exchange carriers (LECs) to provide preferential video dialtone 
access or rates to certain classes of video programmers; and possible 
changes to the Commission's rules governing pole attachments and 
conduit rights. Each of the comment and information requests described 
herein are necessary to enable the Commission to consider further 
refinements to its existing rules and policies governing video 
dialtone.

DATES: Comments must be submitted on or before December 16, 1994. Reply 
comments are due on January 17, 1995.

ADDRESSES: Comments and Reply Comments may be mailed to the Office of 
the Secretary, Federal Communications Commission, Washington, DC 20554.

FOR FURTHER INFORMATION CONTACT: Jane Jackson (202) 418-1593 or Gary 
Phillips (202) 418-1573, Common Carrier Bureau, Policy and Program 
Planning Division.

SUPPLEMENTARY INFORMATION: This is a synopsis of the Third Further 
Notice of Proposed Rulemaking in Common Carrier Docket 87-266: 
Telephone Company-Cable Television Cross-Ownership Rules, Sections 
63.54-63.58, adopted October 20, 1994, and released November 7, 1994. 
The complete text of this Third Further Notice of Proposed Rulemaking 
is available for inspection and copying, Monday through Friday, 9 a.m.-
4:30 p.m., in the FCC Reference Room (Room 239), 1919 M Street, NW., 
Washington, DC 20554. The complete text of the Third Further Notice of 
Proposed Rulemaking may also be purchased from the Commission's copy 
contractor, International Transcription Services, 2100 M Street NW., 
Suite 140, Washington, DC 20037, (202) 857-3800.

Synopsis of Third Further Notice of Proposed Rulemaking

A. Capacity Issues

    1. In its Section 214 application, GTE Service Corporation (GTE) 
has proposed a video dialtone system that would make extensive use of 
digital capacity. GTE proposes a platform with approximately 168 
compressed digital channels, 80 analog channels, and 4 reverse analog 
channels. Programmer-customers on GTE's platform would have the option 
of delivering to GTE an analog signal or a digital signal. If a 
programmer-customer delivered an analog video signal, GTE would either 
modulate this signal onto an analog channel, or encode and multiplex 
this signal input onto a digital bit stream. The analog signal or 
digital bit stream would then be delivered over the video dialtone 
network. To access all channels and services offered on the platform, 
GTE's proposal requires end user subscribers to purchase or rent a set-
top converter, both because the converter is needed to view compressed 
digital video signals on today's televisions and because some channels 
may be encrypted.
    2. The Commission sought comment on the merits of the GTE approach 
or some variation of it as a way of meeting its capacity and 
expandability goals. Parties commenting on this approach should 
address, in particular, the technical, economic, and operational 
feasibility of digital equipment and facilities. For example, the 
Commission sought comment on whether digital compression and 
transmission equipment will be commercially available on a broad scale 
in the near future, and on the quality of compressed digital video. The 
Commission also sought comment on the costs of digital equipment. 
Likewise, the Commission sought comment on the cost of set-top 
converters and on whether and when, given these costs, it should 
require LECs to employ all-digital video dialtone systems. In addition, 
the Commission sought comment on the impact of such an approach on low-
income subscribers.
    3. The Commission also sought comment on methods or arrangements 
for promoting more efficient use of analog channel capacity. In order 
to make more efficient use of this analog capacity, and to comply with 
the Commission's rules, four LECs have proposed ``channel sharing 
arrangements.'' The stated purpose of these analog channel sharing 
mechanisms is to maximize use of analog capacity by avoiding carriage 
of the same video programming on more than one analog channel, thereby 
making video dialtone more attractive and available to multiple video 
programmers, and more marketable to consumers. Generally, channel 
sharing arrangements would make available to all programmer-customers 
subscribing to the basic platform the programming on shared individual 
channels or blocks of channels. In turn, the shared channels could be 
made part of the programmers' general service offering.
    4. The Commission tentatively concluded that channel sharing 
mechanisms, if properly structured, can offer significant benefits to 
consumers, programmer-customers, and video dialtone providers, while 
remaining consistent with the requirements of the cross-ownership 
provisions of the 1984 Cable Act. For example, these arrangements could 
increase the number of video programmers on the platform, thus creating 
diverse programming options. In addition, they would enable multiple 
video programmers to offer full service packages to consumers. Channel 
sharing arrangements would also maximize use of the platform by 
programmer-customers, thereby benefitting video dialtone providers.
    5. At the same time, the Commission recognized that, depending upon 
how they are structured, these arrangements can raise significant legal 
and policy issues. The Commission believes that the public interest 
would be well-served by the establishment of specific rules and 
policies to govern channel sharing arrangements. To this end, the 
Commission sought comment on the following issues: First, if channel 
sharing is permitted, who should structure or administer shared 
channels--the LEC, a programmer-customer, a consortium of programmer-
customers, or an independent third party? In this regard, the 
Commission sought comment on the role that LECs may play in structuring 
or administering channel sharing arrangements without violating the 
cross-ownership provisions. If the Commission were to conclude that 
video programmers should play a role in administering shared channel 
mechanisms, it also proposed to modify its rule prohibiting video 
programmers from jointly operating, with a LEC, a basic video dialtone 
platform. Second, what criteria should be used to select the shared 
channel administrator? Third, how should programming be selected for 
the shared channels? Fourth, the Commission sought comment on the terms 
and conditions on which shared channels should be made available to 
programmer-customers. Finally, the Commission sought comment on any 
other relevant issue regarding channel sharing arrangements. The 
Commission does not intend at this time to prescribe one kind of 
sharing arrangement, but to establish rules and policies that will 
ensure that any such arrangement will further the public interest and 
remain consistent with the 1984 Cable Act. Nor does it intend to defer 
consideration of Section 214 applications proposing channel sharing 
arrangements pending the development of rules and policies governing 
such arrangements. Rather, the Commission will address those proposals 
on a case-by-case basis. Section 214 authorizations will, however, be 
conditioned on compliance with any subsequent rules that the Commission 
may adopt with respect to channel sharing mechanisms.

B. Modifications to the Commission's Prohibition on Acquisition of 
Cable Facilities

    6. The Commission also sought comment on possible modifications to 
its prohibition on the acquisition by telephone companies of cable 
facilities in their telephone service area for provision of video 
dialtone. The Commission noted that while this prohibition generally 
promoted facilities-based competition for video services, the 
prohibition serves little purpose in markets that are incapable of 
supporting two video delivery systems. Indeed, the Commission expressed 
concern that in these markets, the prohibition would preclude the 
establishment of video dialtone service, denying consumers its 
benefits.
    7. The Commission therefore sought comment on appropriate 
modifications to its prohibition that would permit acquisitions of 
cable facilities in markets in which two wire-based multi-channel video 
delivery systems are not viable, while preserving the ban in other 
markets. Specifically, the Commission sought comment on criteria that 
would permit it to identify those markets in which two wire-based 
multi-channel video delivery systems would likely not be viable.
    8. The Commission proposed to amend its prohibition so that LECs 
would be permitted to purchase cable facilities in markets that meet 
these criteria. Alternatively, these criteria could serve as the basis 
for a presumption that a request for waiver of the prohibition would be 
granted. The Commission tentatively concluded that LECs proposing to 
purchase cable facilities in their service area must identify the 
facilities to be purchased in their Section 214 application and 
demonstrate that the area served by those facilities meets the 
Commission's established criteria. The Commission sought comment on 
these proposals and on any other proposals parties might offer that 
would accomplish the same ends.
    9. The Commission also proposed to amend its rules to permit LECs 
and cable operators jointly to construct a video dialtone system in 
those areas in which the Commission permits LECs to acquire cable 
facilities for use in providing video dialtone. Permitting joint 
construction of video dialtone systems in such areas and shared costs 
of video dialtone might, in fact, encourage the deployment of advanced 
facilities in areas that otherwise might lack them. The Commission 
sought comment on its proposal to permit joint construction of video 
dialtone systems in areas in which the acquisition ban is lifted.

C. Preferential Access Proposals

    10. The Commission sought comment, first, on whether it legally 
can, and should, mandate preferential video dialtone treatment for 
commercial broadcasters or for certain classes of PEG or not-for-profit 
video programmers. The Commission has authorized preferential treatment 
of certain classes of consumers when such treatment is justified by a 
compelling showing of need and public policy concerns. The Commission 
invited parties to comment on whether there are public policy reasons 
to mandate preferential treatment for commercial broadcasters, or for 
certain types of PEG or not-for-profit programmers, such as, for 
example, noncommercial educational programmers. Parties addressing this 
issue were instructed to describe any such reasons with specificity, as 
well as the adequacy or inadequacy of alternative means of providing 
public support for such programmers, such as grants and direct 
subsidies. Parties were also instructed to address whether mandated 
preferences for certain types of programmers would be consistent with 
the First Amendment and the Supreme Court's decision in Turner v. FCC, 
as well as with Title II of the Act, including Sections 201(b) and 
202(a).
    11. The Commission also invited parties to suggest a definition of 
the programmers they believe any such mandate should cover. 
Specifically, to the extent that any policy of preferential treatment 
would be based upon a finding of need, the Commission sought comment on 
how such a policy could be fashioned to target not-for-profit video 
programmers most in need of preferential treatment. The Commission also 
sought comment on appropriate affiliation rules that might be part of 
any such need-based test to ensure that video programmers that have 
certain affiliations with nonqualifying entities do not receive 
preferential treatment. In addition, the Commission sought comment on 
whether preferential treatment should be available to any not-for-
profit programmer meeting a means test or to only those programmers 
offering certain types of programming, such as educational programming. 
Parties should also address the First Amendment implications of any 
such classifications, as well as how such classifications would be 
administered. For example, parties should discuss whether a LEC role in 
determining eligibility of specific video programmers for preferential 
treatment would be consistent with the common carrier framework 
governing video dialtone, the cross-ownership provisions of the 1984 
Cable Act, and relevant case law.
    12. Finally, the Commission sought comment on the type and amount 
of preference that should be mandated, in the event that it decided to 
prescribe preferential treatment for certain programmers. Parties 
should address, in particular, whether preferential access is 
necessary, or whether discounted rates alone would meet public policy 
goals. Parties should also address how much of a preference should be 
granted. For example, parties advocating preferential rates should 
address how those rates should be calculated. The Commission noted that 
one possibility would be to base preferential rates on an incremental 
cost standard, whereby video programmers eligible for preferences would 
pay only for the incremental costs to the LEC of providing channel 
capacity to such programmers. The Commission sought comment on this 
proposal and on any other proposal for implementing a preferential 
treatment policy.
    13. The Commission sought comment, second, on whether to permit 
LECs voluntarily to provide certain programmers with preferential 
treatment on LEC video dialtone platforms. The Commission sought 
comment on these ``will carry'' proposals. In addition, the Commission 
sought comment on whether it should permit LECs voluntarily to provide 
other forms of preferential treatment. For instance, should the 
Commission permit LECs to offer preferential access or rates only to 
not-for-profit video programmers? Should the Commission permit LECs to 
reserve capacity for local broadcast stations and PEG programmers at 
reduced rates? With respect to all proposals for voluntary LEC 
provision of preferential treatment, the Commission sought comment on 
whether a permissive policy toward preferential access to video 
dialtone would be consistent with the First Amendment and the Supreme 
Court's decision in Turner v. FCC. The Commission also sought comment 
on whether these proposals would or could be consistent with Sections 
201(b) and 202(a) of the Act, and, if so, under what circumstances. The 
Commission invited comment as well on whether such proposals are 
consistent with the common carrier framework governing video dialtone, 
the 1984 Cable Act, and relevant case law, including NCTA v. FCC. In 
addition, the Commission sought comment, as it did for mandatory 
preferential treatment, on all the issues entailed in identifying the 
categories of customers eligible for preferential treatment.
    Finally, the Commission sought comment on whether these proposals, 
assuming they are lawful, would further the public interest.

D. Pole Attachments and Conduit Rights

    14. The Commission also requested comment on whether it should 
adopt additional rules with respect to pole attachments and conduit 
rights. Section 63.57 of the Commission rules requires LECs seeking to 
provide channel service to show in their Section 214 applications that 
the cable system for which the LECs would be providing channel service 
had available, within the limitations of technical feasibility, pole 
attachment rights or conduit space ``at reasonable charges and without 
undue restrictions on the uses that may be made of the channel by the 
operator.'' The rule seeks to prevent LECs from denying cable systems 
reasonable access to their pole or conduit space for the purpose of 
preventing competition from these cable systems. The Commission sought 
comment on whether a similar rule should apply to LECs providing video 
dialtone service. Commenting parties were instructed to address whether 
LECs have the incentive and ability to leverage their control over pole 
attachments or conduit rights to prevent facilities-based competition 
by video programmers to the LECs' video dialtone platforms. Advocates 
of a rule in this area were instructed to propose specific language, 
and to explain how the rule would prevent anticompetitive behavior.

Initial Regulatory Flexibility Analysis Statement

    15. Pursuant to the Regulatory Flexibility Act of 1980, 5 U.S.C. 
601-612, The Third Further Notice of Proposed Rulemaking, seeking 
comment and information with respect to the Commissions's rules to 
require or permit LECs providing video dialtone to grant preferential 
access or rates to certain classes of video programmers, may directly 
impact entities that are small business entities, as defined in Section 
602(3) of the Regulatory Flexibility Act. Granting certain small video 
programmers preferential access to or rates on the video dialtone 
platform can have a positive impact on those entities by facilitating 
their provision of video programming to subscribers. On the other hand, 
preferential access or rates for certain small entities may negatively 
impact those small entities that do not receive preferential treatment.
    16. The Secretary shall send a copy of the Third Further Notice of 
Proposed Rulemaking, including the Initial 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, Pub. L. No. 96-354, 94 Stat. 1164, 5 U.S.C. 601 et 
seq. (1981).

Ordering Clauses

    17. It is ordered that, pursuant to Sections 1, 4, 201-205, 215, 
and 218 of the Communications Act of 1934, as amended, 47 U.S.C. 151, 
154, 201-205, 215, 218 a Third Further Notice of Proposed Rulemaking is 
hereby adopted.
    18. It is further ordered that, the Secretary shall send a copy of 
the Third Further Notice of Proposed Rulemaking, including the 
regulatory flexibility certification, to the Chief Counsel for Advocacy 
of the Small Business Administration, in accordance with paragraph 
603(a) of the Regulatory Flexibility Act, 5 U.S.C. 601 et seq. (1981).

List of Subjects in 47 CFR Part 63

    Cable television, Communications common carriers, Reporting and 
recordkeeping requirements, Telephone, Video Dialtone.

Federal Communications Commission.
William F. Caton,
Acting Secretary.
[FR Doc. 94-30242 Filed 12-9-94; 8:45 am]
BILLING CODE 6712-01-M