[Federal Register Volume 61, Number 109 (Wednesday, June 5, 1996)]
[Rules and Regulations]
[Pages 28698-28718]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 96-14238]




[[Page 28697]]


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Part V





Federal Communications Commission





_______________________________________________________________________



47 CFR Part 76



Open Video Systems; Final Rule

  Federal Register / Vol. 61, No. 109 / Wednesday, June 5, 1996 / Rules 
and Regulations  

[[Page 28698]]



FEDERAL COMMUNICATIONS COMMISSION

47 CFR Part 76

[CS Docket No. 96-46; FCC 96-249]


Open Video Systems

AGENCY: Federal Communications Commission.

ACTION: Final rule.

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SUMMARY: The Second Report and Order describes rules and policies 
concerning open video systems. The Second Report and Order amends our 
regulations to reflect the provisions regarding open video systems in 
the Telecommunications Act of 1996 (the ``1996 Act''). The Second 
Report and Order fulfills Congress' mandate in adopting the 1996 Act 
and will provide guidance to open video system operators, video 
programming providers, and consumers concerning open video systems.

DATES: Effective date: July 5, 1996, except for Sec. 76.1502 which is 
not effective until approval by OMB of the new information 
requirements. The Commission will publish a document at a later date 
notifying the public as to the effective date of Sec. 76.1502.
    Written comments by the public on the proposed and/or modified 
information collections are due on or before July 5, 1996. Written 
comments must be submitted by the Office of Management and Budget (OMB) 
on the proposed and/or modified information collections on or before 60 
days after publication of the Second Report and Order in theFederal 
Register.

ADDRESSES: A copy of any comments on the information collections 
contained herein should be submitted to Dorothy Conway, Federal 
Communications Commission, Room 234, 1919 M Street, N.W., Washington, 
D.C. 20554, or via the Internet to [email protected], and to Timothy 
Fain, OMB Desk Officer, 10236 NEOB, 725-17th Street, N.W., Washington, 
D.C., 20503 or via the Internet to [email protected].

FOR FURTHER INFORMATION, CONTACT: Rick Chessen, Cable Services Bureau, 
(202) 418-7200. For additional information concerning the information 
collections contained herein, contact Dorothy Conway at 202-418-0217, 
or via the Internet at [email protected].

SUPPLEMENTARY INFORMATION: This is a synopsis of the Commission's 
Report and Order in CS Docket No. 96-46, FCC No. 96-249, adopted May 
31, 1996 and released June 3, 1996. The full text of this decision is 
available for inspection and copying during normal business hours in 
the FCC Reference Center (room 239), 1919 M Street, NW, Washington, 
D.C. 20554, and may be purchased from the Commission's copy contractor, 
International Transcription Service, (202) 857-3800, 1919 M Street, NW, 
Washington, D.C. 20554.
    The Second Report and Order contains proposed and/or modified 
information collections. It has been submitted to the OMB for review, 
as required by the Paperwork Reduction Act of 1995. The Commission, as 
part of its continuing effort to reduce paperwork burdens, invites the 
general public and OMB to comment on the information collections 
contained in the Second Report and Order. Comments should address: (a) 
whether the proposed collections of information are necessary to the 
proper performance of the functions of the Commission, including 
whether the information shall have practical utility; (b) the accuracy 
of the Commission's burden estimates; (c) ways to enhance the quality, 
utility, and clarity of the information collected; and (d) ways to 
minimize the burden of the collection of information on the 
respondents, including the use of automated collection techniques or 
other forms of information technology.
    OMB Approval Number:3060-0700.
    Title:Implementation of Section 302 of the Telecommunications Act 
of 1996; Open Video Systems.
    Type of Review:Revision of a currently approved collection.
    Respondents:640. (10 OVS operators, 250 video programming providers 
that may request additional Notice of Intent information, file rate 
complaints, or initiate dispute cases, 60 broadcast stations that may 
elect type of carriage or make network non-duplication notifications, 
300 must-carry list requesters, 20 oppositions to OVS operator 
certifications.)
    Number of Responses:3750. (10 Notices of Intent, 250 requests for 
additional Notice of Intent information, 250 responses to requests for 
additional Notice of Intent information, 50 rate complaints, 50 rate 
justifications, 60 carriage elections, 10 must-carry recordkeepers, 300 
must-carry list requests, 300 provisions of must-carry lists, 1200 
notifications of network non-duplication rights to OVS operators, 1200 
OVS operator notifications of network non-duplication rights to 
programming providers, 10 certifications of compliance, 20 oppositions 
to certifications of compliance, 20 dispute case complainants, and 20 
dispute case defendants.)
    Estimated Burden to Respondents: Notice of Intent requirements: 10 
prospective OVS operators are estimated to be in existence within the 
next year. Average number of entities that prospective OVS operators 
must notify with each Notice of Intent: 45. Average burden to each OVS 
operator to complete a Notice of Intent and to provide copies to all 
applicable entities: 8 hours apiece; therefore 10  x  8 = 80 hours. 
Estimated number of written requests for additional information that 
will be received subsequent to Notices of Intent: 25 per Notice of 
Intent  x  10 Notices = 250. Average burden to prospective video 
programming providers to make each written request: 2 hours apiece; 
therefore 10  x  25  x  2 = 500 hours. Average burden to each OVS 
operator to provide the additional information to all prospective video 
programming providers: 8 hours apiece; therefore 10  x  8 = 80 hours. 
Total burden for all respondents = 80 + 500 + 80 = 660 hours. Rate 
Justification requirements: Estimated number of rate complaints that 
video programming providers will file: 5 per OVS operator; therefore 10 
 x  5 = 50. Estimated number of rate justifications filed by OVS 
operators in response to rate complaints: 50. Burden to video 
programming providers for filing complaints: 1 hour per complaint; 
therefore 50  x  1 = 50 hours. Burden to OVS operators for filing rate 
justifications: 20 hours per justification; therefore 10  x  5  x  20 = 
1,000 hours. Total burden for all respondents: 50 + 1,000 = 1050 hours.
    Must-Carry and Retransmission Consent requirements: Number of OVS 
operators: 10. Average number of broadcast stations in each OVS 
operator's area of carriage: 6. Average burden to broadcast stations 
for each election for must-carry or retransmission consent: 2 hours per 
election; therefore 10  x  6  x  2 hours = 120 hours. Annual 
recordkeeping burden for OVS operators to maintain list of its 
broadcast stations carried in fulfillment of must-carry requirements: 4 
hours per OVS operator; therefore 10  x  4 = 40 hours. Estimated annual 
number of written requests received by OVS operators: 30 per OVS 
operator; therefore 10  x  30 = 300. Burden for completing written 
requests: .25 hours per request; therefore 10  x  30  x  .25 = 75 
hours. Burden to OVS operators to respond to requests: .25 hours per 
request; therefore 10  x  30  x  .25 = 75 hours. Total burden for all 
respondents: 120 + 40 + 75 + 75 = 310 hours.
    Sports Exclusivity, Network Non-Duplication and Syndicated 
Exclusivity requirements: Estimated number of occurrences where 
television broadcast stations must notify OVS operators of exclusive or 
non-duplication rights

[[Page 28699]]

being exercised: 6 stations in each OVS operator's area of carriage  x  
20 annual notifications  x  10 OVS operators = 1200. Burden to 
television stations to make notifications: .5 hours per notification; 
therefore 12400  x  .5 = 600 hours. Burden for each OVS operator to 
make notifications available to all programming providers on their 
systems: 1 hour per notification  x  1200 occurrences = 1200 hours. 
Total burden for all respondents: 600 + 1200 = 1800 hours.
    Certification Process requirements: Annual burden to OVS operators 
to complete certifications: 1 hour apiece; therefore 10  x  1= 10 
hours. Number of oppositions estimated to be filed with the Commission: 
2 per certification; therefore 2  x  10 = 20. Average burden for 
completing oppositions: 4 hours per opposition; therefore 20  x  4 = 80 
hours. Total burden for all respondents: 10 + 80 = 90 hours.
    Dispute Resolution requirements: Estimated number of notices filed 
by complainant: 20. Estimated number of defendants' responses to 
notices filed: 20. Average burden for each notice and response to 
notice: 4 hours apiece; therefore 40  x  4 = 160 hours. We estimate 
that the 20 notices will result in the initiation of 10 dispute cases. 
The average burden for complainants and defendants for undergoing all 
aspects of the dispute case: 25 hours per case; therefore 20 (10 
complainants + 10 defendants)  x  25 = 500 hours. Total burden to all 
respondents: 160 + 500 = 660 hours.
    Total Annual Burden to Respondents: 4570 hours. (660 + 1050 + 310 + 
18600 + 90 + 660)
    Estimated Cost to Respondents: Notices of Intent costs of 
stationery and postage at $2 apiece for (10 Notices of Intent  x  45 
entities) + 250 requests for additional information + 250 responses to 
requests for additional information = $1900.
    Rate Justifications costs of stationery and postage at $2 apiece 
for 50 rate complaints + 50 rate justifications = $200.
    Must-Carry and Retransmission Consent costs of stationery and 
postage at $2 apiece for 60 carriage elections + 300 requests for lists 
+ 300 provisions of lists = $1320.
    Sports Exclusivity, Network Non-Duplication and Syndicated 
Exclusivity costs of stationery and postage at $2 apiece for 1200 
notifications to OVS operators + 1200 OVS operator notifications to 
programming providers = $4800.
    Certification Process costs of stationery, diskettes, and postage 
at $5 for 10 certifications = $50. Costs of stationery and postage at 
$2 apiece for 20 opposition filings = $40. $50 + $40 = $90.
    Dispute Resolutions costs of stationery and postage at $2 apiece 
for 20 notices + 20 responses to notices = $80. Costs of stationery and 
postage at $10 apiece for 10 complainants in dispute cases + 10 
defendants in dispute cases = $200. $80 + $200 = $280.
    Total Estimated Costs to Respondents: $8590. ($1900 + $200 + $1320 
+ $4800 + $90 + $280).
    Needs and Uses: The information collections contained herein are 
necessary to implement the statutory provisions for Open Video Systems 
contained in the Telecommunications Act of 1996.

Second Report and Order--Open Video Systems

    1. New Section 653 of the Communications Act establishes a new 
framework for entry into the video programming delivery marketplace--
the ``open video system.'' See Sections 651 and 653 of the 
Communications Act of 1934, 47 U.S.C. Sec. 151 (``Communications 
Act''). As designed by Congress, the open video framework provides an 
option, particularly to a local exchange carrier, for the distribution 
of video programming other than as a ``cable system'' governed by all 
of the provisions of Title VI of the Communications Act. If a telephone 
company agrees to comply with certain non-discrimination and other 
requirements it can be certified as an operator of an ``open video 
system'' and subjected to streamlined regulation under Title VI.
    2. In establishing this structure, we believe that Congress 
intended to advance competition in two areas of the video marketplace. 
First, Congress sought to encourage telephone companies to enter the 
video programming distribution market and to deploy open video systems 
in order to ``introduce vigorous competition in entertainment and 
information markets'' by providing a competitive alternative to the 
incumbent cable operator. Telecommunications Act of 1996 Conference 
Report, S. Rep. 104-230 at 178 (February 1, 1996) (``Conference 
Report''). The incentive provided by Congress to encourage such entry 
was not only exemption from particular requirements of Title VI, but 
that streamlined Title VI obligations would apply in lieu of, and not 
in addition to, any requirements under Title II. Second, by requiring 
open video system operators to provide carriage opportunities for video 
programming providers on terms that are just and reasonable, and not 
unjustly or unreasonably discriminatory, Congress sought to foster 
competition by encouraging multiple programming sources on open video 
systems.
    3. The open video system model can provide the competitive benefits 
that Congress hoped to achieve: market entry by new providers, enhanced 
competition, streamlined regulation, investment in infrastructure and 
technology, diversity of programming choices and increased consumer 
choice. We believe that the best way to achieve Congress' goals is to 
give open video system operators the flexibility to enter and compete 
based on the demands of the marketplace. Our approach reflects the 
reduced regulatory burdens clearly envisioned by Congress for open 
video systems. Where necessary, the Commission has provided a level of 
guidance to parties in order to comply with Congress' particular 
directives under Section 653 and to give certainty to the parties.
    4. On March 11, 1996, the Commission released a Report and Order 
and Notice of Proposed Rulemaking, seeking comment on how to implement 
the requirements of Section 653. See Report and Order and Notice of 
Proposed Rulemaking in CS Docket No. 96-46 and CC Docket No. 87-266 
(terminated), released March 11, 1996, 61 FR 10496 (March 14, 1996) 
(the ``NPRM''). We received 61comments and 79 replies in response to 
the NPRM. After consideration of the comments and reply comments, we 
hereby adopt the Second Report and Order herein.

A. Qualifications To Be an Open Video System Operator

    5. We conclude that Section 653(a)(1) authorizes the Commission to 
allow non-local exchange (``non-LECs'') to operate open video systems, 
and to allow LECs to operate open video systems outside of their 
telephone service areas, when the public interest, convenience, and 
necessity are served. We further conclude that it would serve the 
public interest, convenience and necessity to permit: (1) non-LECs that 
are not cable operators; (2) LECs outside of their telephone service 
areas; and (3) cable operators outside of their cable franchise areas, 
to own or operate open video systems. With respect to cable operators 
within their cable franchise areas, we conclude that it would serve the 
public interest, convenience, and necessity to allow a cable operator 
to operate an open video system in its cable franchise area if it is 
subject to ``effective competition'' in its cable franchise area under 
Section 623(l)(1) of the Communications Act, 47 U.S.C.

[[Page 28700]]

Sec. 543(l)(1). This condition shall apply even if a cable operator 
also provides local exchange services within its cable franchise area. 
In certain circumstances, particularly where the entry of a facilities-
based competitor into a market served by an incumbent cable operator 
would likely be infeasible, we believe that it would be consistent with 
the public interest to allow the incumbent cable operator to convert 
its cable system to an open video system even if it is not subject to 
``effective competition'' in its cable franchise area under Section 
623(l)(1) of the Communications Act, 47 U.S.C. Sec. 543(l)(1). We will 
consider petitions from cable operators seeking such a public interest 
finding. Our decision to allow cable operators to become open video 
system operators under these circumstances shall not be construed to 
affect the terms of any existing franchising agreements or other 
contractual agreements.

B. Certification Process

    6. In light of the brief period (ten days) allowed for Commission 
review of certification filings, we conclude that Congress intended the 
certification process to be streamlined. We will require that 
certifications be verified by an officer or director of the applicant, 
stating that, to the best of his or her information and belief, the 
representations made therein are accurate. The certification must 
contain particular facts and representations about the system, 
including: (1) the applicant's name, address and telephone number; (2) 
a statement of ownership, including all affiliated entities; (3) if the 
applicant is a cable operator applying for certification within its 
cable franchise area, a statement that the applicant is qualified to 
operate an open video system under Section 76.1501 of the Commission's 
rules; (4) a statement that the applicant agrees to comply and to 
remain in compliance with each of the Commission's regulations under 
Section 653(b); (5) if the applicant is required under 47 CFR 
Sec. 64.903(a) to file a cost allocation manual, a statement that the 
applicant will file changes to its manual at least 60 days prior to 
commencement of service; (6) a general description of the anticipated 
communities or areas to be served upon completion of the system; (7) 
the anticipated amount and type (i.e., analog or digital) of capacity 
(for switched digital systems, the anticipated number of available 
channel input ports); and (8) a statement that the applicant will 
comply with the Commission's notice and enrollment requirements for 
unaffiliated video programming providers. Applicants will be required 
to file for certification using FCC Form 1275 (OMB approval pending).
    7. Open video system operators may apply for certification at any 
point prior to the commencement of service, subject to conditions. If 
construction of new physical plant is required, the applicant must 
obtain Commission approval of its certification prior to the 
commencement of construction. If no new construction is required, 
Commission approval of certification may be obtained at any point prior 
to the commencement of service that would allow the applicant 
sufficient time to comply with the Commission's notification 
requirements herein.
    8. We will consider comments or oppositions to a certification that 
are filed within five days of the Commission's receipt of the 
certification. Disapproval of a certification will not preclude the 
applicant from filing a revised certification or from refiling its 
original submission with a statement addressing the issues in dispute. 
Such refilings must be served on any objecting party or parties. Any 
certification filing that the Commission does not disapprove within ten 
days will be deemed approved. If the representations contained in a 
certification filing prove to be materially false or materially 
inaccurate, the Commission retains the authority to revoke an open 
video system operator's certification or to impose such other penalties 
it deems appropriate, including forfeitures.

C. Carriage of Video Programming Providers

    9. We affirm our tentative conclusion that the 1996 Act does not 
require that the open video system operator be prohibited from 
participating in the allocation of channel capacity. We believe that 
the statute and implementing rules will prevent an open video system 
operator from discriminating against unaffiliated video programming 
providers, notwithstanding the operator's involvement in the allocation 
process.
    10. These rules and policies are designed to implement Sections 
653(b)(1)(A) and 653(b)(1)(B) of the Communications Act. An open video 
system operator will file a ``Notice of Intent'' (``Notice'') with the 
Commission. The Commission will release the Notice to the public. The 
Notice will contain certain information that a video programming 
provider reasonably would need in order to assess whether to seek 
carriage on the system. The Notice must include: a heading clearly 
indicating that the document is a Notice of Intent; the open video 
system operator's name, address and telephone number; a description of 
the system's projected service area; a description of the system's 
projected channel capacity, in terms of analog, digital, and other 
type(s) of capacity, upon activation of the system; a description of 
the steps a prospective video programming provider must follow to seek 
carriage on the system, including the name, address and telephone 
number of a person to contact for further information; the starting and 
ending dates of the initial enrollment period; and a certification that 
the system operator has complied with all relevant notification 
requirements under our open video system regulations concerning must-
carry and retransmission consent, including a list of all local 
commercial and non-commercial television stations served, and a 
certificate of service showing that the Notice of Intent has been 
served on all local franchising authorities entitled to establish 
requirements under Section 611 of the Communications Act.
    11. In addition to the information in the Notice, the open video 
system operator will be required to provide within five business days 
of receiving a written request from a potential video programming 
provider certain information, including: the projected activation date 
of the system (if a system is to be activated in stages, an operator 
should describe each stage and the projected dates on which each stage 
will be activated; a preliminary rate estimate; the information a video 
programming provider will be required to provide to qualify as a 
commercially bona fide video programming provider; technical 
information that is reasonably necessary to prospective video providers 
to assess whether to seek capacity on the system; any transmission or 
reception equipment needed by a video programming provider to interface 
successfully with the open video system; and the equipment available to 
facilitate the carriage of unaffiliated video programming and the 
electronic forms that will be accepted for processing and subsequent 
transmission through the system.
    12. The open video system operator may establish terms and 
conditions of carriage for video programming providers that are just 
and reasonable, and are not unreasonably or unjustly discriminatory. 
For instance, an open video system operator may: (1) take reasonable 
steps to ensure that a prospective video programming provider's request 
for capacity is bona fide; (2) generally exclude an

[[Page 28701]]

incumbent, competing in-region cable operator from obtaining capacity 
on its system when such carriage would siginificantly impede 
facilities-based competition; (3) require video programming providers 
to obtain capacity in increments of no less than one full-time channel, 
however, the operator may not require video programming provider to 
obtain capacity only in amounts greater than one full-time channel; (4) 
preclude unaffiliated video programming providers from selecting the 
programming on more capacity than the operator itself and its 
affiliates; (5) negotiate co-packaging agreements with unaffiliated 
video programming providers; and (6) require assurances that a video 
programming provider will deliver video programming over the open video 
system within some reasonable time after the system is activated.
    13. At the conclusion of the open enrollment or notice period, the 
open video system operator will determine whether demand for carriage, 
including its own demand, exceeds the system's channel capacity. For 
this purpose, analog and digital capacity must be treated separately. 
Specifically, if the system contains both analog and digital capacity, 
the open video system operator must separately assess whether analog 
demand exceeds analog capacity and whether digital demand exceeds 
digital capacity. Analog capacity shall be measured in 6 MHz channel 
increments, and digital capacity shall be measured in bandwidth.
    14. Further, we anticipate that concerns regarding the methods for 
soliciting carriage demand and allocating system capacity will be 
alleviated with capacity significantly higher than carriage demand. 
Therefore, when an open video system operator can demonstrate that, due 
to technology, the system's capacity is plentiful as compared to 
demand, we will consider waiving the rules adopted in this Order.
    15. If demand for carriage does not exceed system capacity, the 
open video system operator may fill all video programming providers' 
demands for capacity, including its own. If demand for carriage exceeds 
capacity, the open video system operator may select the programming 
services on no more than one-third of the system's activated channel 
capacity. Public, educational, and governmental (``PEG'') and must-
carry channels carried pursuant to Sections 611, 614 and 615 of the 
Communications Act will count in the system's total activated channel 
capacity for purposes of calculating the operator's one-third limit, 
but will not count against the operator's one-third limit. Channels 
carrying ``shared'' programming will count against the operator's one-
third limit on a pro-rata basis, e.g., if the operator shares the 
channel with one other video programming provider, it will count as 
half of a channel against the operator's limit. The remaining two-
thirds of capacity, other than PEG and must-carry channels, must be 
allocated to unaffiliated video programming providers on an open, fair, 
non-discriminatory basis. The Commission does not require a specific 
allocation methodology.
    16. After service commencement, an open video system operator will 
be required to allocate open capacity, if any is available, at least 
every three years beginning three years after the system is activated, 
through an open, fair, non-discriminatory process. Such open capacity 
will include capacity that becomes available during the year, e.g., due 
to a system upgrade or the expiration of carriage contracts, and any 
capacity on which the open video system operator is selecting the video 
programming beyond one-third of activated channel capacity. Changes in 
an operator's PEG and must-carry obligations which cause changes in the 
level of available open video system capacity must be accommodated in 
accordance with the rules adopted in this Order. An operator must keep 
a list of qualified video programming providers that have sought 
carriage or additional carriage during the previous three year period.
    17. In addition, we find that channel positioning is an important 
part of allocating channel capacity to video programming providers, and 
therefore will require an open video system operator to assign channel 
positions in a non-discriminatory manner. We also find that, given 
Section 653(b)(1)(A)'s specific exemption of must-carry and PEG from 
its general non-discrimination requirements, an open video system 
operator must comply with the channel positioning requirements 
contained in those rules. Finally, we find that the statute leaves to 
an open video system operator's discretion whether to create shared 
channels for some or all of the duplicative programming on its system. 
However, we disagree with telephone companies who argue that the 
statutory reference to ``any video programming service'' means that an 
open video system operator may select--in advance of any actual 
duplication--which program services to place on shared channels. We 
also note that certain cable operators and programmers argue that the 
placement of a program service on a shared channel must be conditioned 
on the approval of the program service. We take this to mean simply 
that each video programming provider using the shared channel has 
reached its own agreement with the programming service. We also find 
that the statutory provision requiring subscribers have ``ready and 
immediate'' access to programming carried on shared channels means that 
channel sharing must be transparent to subscribers.
    18. An open video system operator may not discriminate among video 
programming providers with respect to technology or technical 
information necessary to access the system.

D. Rates, Terms, and Conditions of Service

    19. We will accord a strong presumption that carriage rates are 
just and reasonable for open video system operators where at least one 
unaffiliated video programming provider, or unaffiliated programming 
providers as a group, occupy capacity equal to the lesser of one-third 
of capacity or that occupied by the open video system operator and its 
affiliates, and where any rate complained of is no higher than the 
average of the rates paid by unaffiliated programmers receiving 
carriage from the open video system operator.
    20. We adopt our tentative conclusion that some level of rate 
differentiation is permissible, provided that the bases for the 
differences are not unjust or unreasonable. We therefore agree with 
those commenters that argue that open video system operators should be 
given flexibility to offer different carriage rates.
    21. We conclude that it is unnecessary and undesirable to require 
open video system operators to disclose publicly its carriage 
contracts. In general, we agree with those telephone companies that 
argue that making carriage contracts public would stifle competition by 
forcing them to divulge sensitive information. In order to protect 
video programming providers from discriminatory conduct, we will 
require all open video system operators to make preliminary rate 
estimates available to potential video programming providers. If, 
however, a complaint is filed, regardless of which party bears the 
burden of proof, the open video system operator's contracts with video 
programming providers will be subject to discovery.

[[Page 28702]]

E. Applicability of Title VI Provisions

1. Public, Educational and Governmental Access Channels
    22. The first issue we must address with respect to PEG use is how 
PEG access obligations should be established for open video systems, 
including the extent and amount of channel capacity and other resources 
that open video system operators should be required to devote to PEG 
use. We conclude that open video system operators should in the first 
instance be permitted to negotiate their PEG access obligations with 
the relevant local franchising authority. These negotiations may 
include the local cable operator if the local franchising authority, 
the open video system operator and the cable operator so desire.
    23. We are unaware of any cable operator that charges PEG 
programmers for access to the PEG channels on its cable system. 
Therefore, because the PEG access obligations of open video system 
operators are to the extent possible to be no greater or lesser than 
those imposed on cable operators, we do not foresee open video system 
operators charging PEG programmers for PEG use. We recognize that 
certain costs will be associated with providing PEG channels. These 
costs may be recovered as an element of the carriage rate.
    24. Although we believe that negotiation is the best way to 
establish the appropriate PEG access obligations for each open video 
system operator, we recognize that the parties may be unable to reach 
agreement. We therefore believe it is necessary to have a default 
mechanism for establishing PEG access obligations. If the open video 
system operator and the local franchising authority are unable to come 
to an agreement, we will require the open video system operator to 
satisfy the same PEG access obligations as the local cable operator. We 
believe this can be accomplished by connection to the cable operator's 
PEG access channel feeds and by sharing the costs directly related to 
supporting PEG access, including costs of PEG equipment and facilities, 
and equipment necessary to achieve the connection. We also determine 
that, under these circumstances, in order to comply with the statutory 
directive that to the extent possible the obligations be no greater or 
lesser than those imposed on cable operators, the open video system 
operator must provide the same amount of channel capacity for PEG 
access as the local cable operator is required to provide.
    25. If an open video system operator builds an institutional 
network, the local franchising authority may require that educational 
and govermental access channels be designated on that network to the 
extent such channels are designated on the institutional network of the 
local cable operator.
    26. In addition, absent an agreement to the contrary, the open 
video system operator will be subject to the same rules and procedures 
as those imposed on the local cable operator regarding the use of PEG 
channels for other programming when such channels are not being used 
for PEG.
    27. We will require cable operators to permit open video system 
operators to connect with their PEG feeds. We will leave how this 
connection is accomplished to the discretion of the parties, allowing 
them to take into consideration the exact physical and technical 
circumstances of the cable and open video systsms involved. If the 
cable and open video system operators cannot agree on how this 
connection can best be accomplished, the local franchising authority 
may decide. In this context, the local franchising authority may 
require that the connection take place on government property or on 
public rights of way.
    28. With regard to cost sharing, the costs of connection and 
maintaining PEG facilities and equipment shall be divided equitably 
between the cable operator and the open video system operator. This 
shall include captial contributions and any other costs or investments 
directly relating to or supporting PEG access and required by the cable 
operator's franchise agreement. Capital expenses incurred prior to the 
open video system operator's connection shall be subject to cost 
sharing on a pro rata basis to the extent such investments have not 
been fully amortized by the cable operator.
    29. Where the open video system operator and the local franchising 
authority cannot negotiate an agreement regarding PEG access, and the 
open video system operator is instead satisfying its PEG access 
obligations by connection and cost sharing with the cable operator's 
PEG facilities, the open video system operator's PEG access obligations 
should change to the extent that the cable operator's PEG access 
obligations change with the franchise renewal. Accordingly, open video 
system operators should be prepared to adjust their systems to comply 
with new PEG access obligations as necessary. An open video system 
operator will not, however, be required to displace other programmers 
to accommodate PEG channels until channel capacity becomes available, 
whether it be due to increased channel capacity or decreased demand for 
channel capacity. Because PEG access channels are expressly exempt from 
Section 653(b)(1)(A)'s non-discrimination requirement, an open video 
system operator need not and should not wait until the next three-year 
reallocation to comply with new PEG access obligations, but should 
comply with such obligations whenever additional capacity is or becomes 
available.
    30. Where there is no local cable operator and the open video 
system operator and the local franchising authority cannot agree on 
appropriate PEG access obligations, we believe that the open video 
system operator should make a reasonable amount of channel capacity 
available for PEG access, as well as provide reasonable support of PEG, 
services, facilities and equipment. First, the open video system 
operator's PEG access obligations shall depend on whether there used to 
be a cable franchise agreement in that franchise area. If there was, 
the open video system operator shall follow the PEG terms of the 
previously existing franchise agreement. Absent a previous cable 
franchise agreement, the open video system operator's PEG access 
obligations shall be determined by comparison to the franchise 
agreement(s) for the nearest operating cable system with a commitment 
to provide PEG access.
    31. We believe that PEG access channels should be provided to all 
subscribers to the open video system. The provision of PEG channels to 
all open video system subscribers is important to ensure that the PEG 
access obligations imposed on open video system operators are ``no 
greater or lesser'' than those imposed on cable operators.
    32. We also conclude that open video system operators should be 
subject to PEG access requirements for every franchise area with which 
its system overlaps. We believe that, despite open video system 
operators not being subject to franchise requirements, pursuant to 
Section 653(c)(1)(C), it is appropriate to require open video system 
operators to comply with these franchise by franchise requirements so 
that the obligations imposed on the open video system operator with 
respect to PEG access are ``no greater or lesser'' than those imposed 
on cable operators, as required by Section 653(c)(2)(A) of the 
Communications Act.
2. Must-Carry and Retransmission Consent
    33. We find that at this time the public interest will best be 
served by application of the cable must-carry and

[[Page 28703]]

retransmission consent rules to open video systems, even though future 
system configurations may require modification of our regulations. If 
our regulations later become inadequate for open video system 
operators, we intend to address promptly the problem. For now, we are 
guided by Congress' directive that we impose obligations that are ``no 
greater or lesser'' than the obligations currently imposed on cable 
operators.
(1) Must-Carry
    34. Pursuant to Section 614(b)(7) and 615(h), the operator of a 
cable system is required to ensure that signals carried in fulfillment 
of the must-carry requirements are provided to every subscriber of the 
system. Sections 614 and 615 also generally state the number of must-
carry stations that a cable operator is required to provide. We believe 
that in order to apply obligations that are no greater or lesser than 
those imposed on cable operators, we must also apply these requirements 
to open video system operators. Consequently, we find that the operator 
of an open video system must ensure that every subscriber on the open 
video system receives all appropriate must-carry channels carried in 
accordance with our rules. An open video system operator will be 
required to fulfill this obligation regardless of whether or not 
individual subscribers on its system subscribe to the open video system 
operator's programming package. We do not find it necessary to 
prescribe a specific method to be used by an open video system operator 
to comply with these requirements, such as a requirement that an open 
video system operator must use a basic tier. We recognize that certain 
costs will be associated with providing must-carry channels. These 
costs may be recovered as an element of the carriage rate.
    35. As a related matter, we leave the decision of how to offer any 
necessary customer premises equipment to the open video system 
operator, including whether the open video system operator will offer 
it directly or require video programming providers to provide the 
equipment. In addition, an open video system operator will be required 
to implement the channel positioning requirements contained in the 
must-carry rules in a manner as similar as possible to that of a cable 
operator, including, for example, identifying broadcast stations on the 
same channels as their over-the-air channel numbers, or on a channel 
mutually agreed upon by the station and the operator. Consistent with 
the statutory requirement of comparable treatment, open video systems 
that span multiple television markets will be subject to the same must-
carry and retransmission consent rules as cable systems that span 
multiple markets.
(2) Retransmission Consent
    36. We find that our existing retransmission consent rules should 
also be applied to the distribution of programming over open video 
systems. These rules generally prohibit multichannel video programming 
providers from retransmitting the signal of a commercial broadcasting 
station without the station's express authority. Our retransmission 
consent rules will apply to any video programming provider on an open 
video system that provides more than one channel of video programming. 
Given the inherent differences between cable systems and open video 
systems, we believe that the application of our retransmission consent 
rules in this fashion will impose obligations that are no greater or 
lesser than those imposed on cable operators. The open video system 
operator is charged with the responsibility for assuring that its 
system meets the requirements of our must-carry rules. We believe that 
it is also appropriate as a matter of administrative efficiency that 
open video system operators receive all must-carry/retransmission 
consent election statements that broadcast stations are required to 
send under our retransmission consent rules. However, open video system 
operators will not be responsible for making retransmission consent 
arrangements for all programming carried on the system. Once 
retransmission consent has been elected, broadcast stations will have 
to negotiate agreements with individual video programming providers on 
the open video system. Television broadcast stations are not required 
to make the same elections for open video systems and cable systems in 
the same geographic area.
3. Program Access
    37. We believe that four general issues arise in the context of 
applying the program access rules to open video systems. The first 
concerns the extent to which the program access regime restricts the 
activities of open video system operators. The second pertains to how 
the program access regime restricts the conduct of open video system 
video programming providers. The third issue concerns the extent to 
which the benefits of the program access statute and rules apply to 
open video system video programming providers. The fourth issue raised 
by commenters involves certain expansions of our program access rules.
    38. Section 653(c)(1)(A) applies the program access provisions to 
open video system operators. Given this statutory language, we conclude 
that the program access restrictions shall apply to the conduct of open 
video system operators in the same manner as they are currently applied 
to cable operators and common carriers or their affiliates that provide 
video programming directly to subscribers. Specifically, the conduct of 
an open video system operator shall be subject to Section 628(b), which 
prohibits unfair methods of competition and unfair or deceptive acts or 
practices. In addition, the program access provisions which preclude 
certain specific conduct, including undue or improper influence, and 
discrimination in prices, terms, or conditions, shall apply to open 
video system operators as well. Similarly, the limitations on exclusive 
contracts contained in Sections 628(c)(2) (C) and (D) shall apply to 
open video system operators so that open video system operators will 
generally be restricted from entering into exclusive contracts with 
satellite programmers in which an open video system operator has an 
attributable interest, but not in which a cable operator has an 
attributable interest. Thus, any practice, understanding, arrangement 
or activity, including exclusive contracts, between an open video 
system operator and a satellite programmer vertically integrated with 
an open video system operator that prevents an MVPD from obtaining 
satellite programming in an area unserved by a cable operator as of the 
date of enactment of the 1992 Cable Act is per se unlawful. Exclusive 
contracts between an open video system operator and a satellite 
programmer vertically integrated with an open video system operator 
which relate to an area served by cable as of the date of enactment of 
the 1992 Cable Act are prohibited unless the Commission first 
determines that such a contract is in the public interest in accordance 
with the factors set forth in Section 628(c)(2)(D). Moreover, Section 
628 and or program access rules shall apply to any affiliate 
established by an open video system operator to distribute programming 
on its system. We also believe it is reasonable to, and will therefore 
insert a note in Section 76.1000(h) of our rules indicating that 
satellite open video system programming is included within the 
definition of satellite cable programming.
    39. The programming relationships that are likely to occur with 
respect to open video systems raise additional

[[Page 28704]]

program access issues that are not raised by the programming 
relationships on cable systems. In the cable context, an agreement to 
carry programming is generally between a programmer and a cable 
operator. Restricting the activities of cable operators and satellite 
programmers vertically integrated with cable operators therefore 
addresses Congress' concern over cable operator control over video 
programming. In the open video system context, however, there may be 
many programmers providing packages of programming directly to 
subscribers. An agreement to carry programming may be between a 
programmer and an open video system operator or between a programmer 
who produces programming and one who will distribute it directly to 
subscribers. Moreover, a video programmer may provide its own 
programming directly to subscribers by purchasing channel capacity on 
an open video system platform.
    40. We believe that, in order to effectuate the purposes of the 
program access statute in the open video context, open video system 
programming providers should be subject to the program access 
restrictions to the extent described below. In the open video system 
context, a vertically integrated satellite programmer will not be per 
se precluded from selling its programming exclusively to one MVPD on an 
open video system, as long as that MVPD is not affiliated with the same 
type of operator as the vertically integrated satellite programmer. 
Similarly, cable operators, common carrriers or their affiliates 
providing video programming directly to subscribers and open video 
system operators are not generally restricted from entering into 
exclusive contracts with non-vertically integrated programmers. We do 
not intend to foreclose challenges to exclusive contracts between 
vertically integrated satellite programmers and MVPDs, including 
unaffiliated MVPDs, on open video systems under Section 628(b) or 
Section 628(c)(2)(B), which prohibits, with limited exceptions, 
discrimination among competing MVPDs by a vertically integrated 
satellite programmer.
    41. We believe that the purposes of the program access rules and 
statute are served by extending the current program access rules to 
apply to exclusive arrangements between satellite programmers in which 
a cable operator has an attributable interest and open video system 
programming providers in which a cable operator has an attributable 
interest. We believe that Section 628(b) authorizes the Commission to 
adopt additional rules to accomplish the program access statutory 
objectives should additional types of conduct emerge as barriers to 
competition and obstacles to the broader distribution of satellite 
cable and broadcast programming. We will apply the program access rules 
under Section 628 to exclusive contracts between a satellite programmer 
in which a cable operator has an attributable interest (``cable-
affiliated satellite programmer'') and an open video system video 
programming provider in which a cable operator has an attributable 
interest (``cable-affiliated open video system programming provider''). 
Specifically, such exclusive contracts will be prohibited unless the 
contract pertains to an area served by a cable operator as of the date 
of the enactment of the 1992 Cable Act and the Commission first 
determines that the exclusive arrangement is in the public interest 
under the factors listed in Section 628(c)(4). Two types of cable-
affiliated satellite programmer/cable-affiliated open video system 
programming provider relationships will be affected by this restriction 
on exclusive contracts. First, this rule will preclude a cable-
affiliated satellite programmer from entering into an exclusive 
contract to provide its own programming to a cable-affiliated open 
video system programming provider with which the programmer is 
affiliated. Second, the new rule will preclude, absent prior Commission 
approval, a cable-affiliated satellite programmer from entering into an 
exclusive contract to provide its programming to an open video system 
programming provider that is affiliated with another cable operator.
    42. We believe that subjecting these types of exclusive contracts 
to prior Commission review is necessary to fulfill the objectives of 
the program access rules in the open video system context. The program 
access requirements have at their heart the objective of releasing 
programming to existing or potential competitors of traditional cable 
systems so that the public may benefit from the development of 
competitive distributors. Our primary concern is that exclusive 
arrangements among cable-affiliated open video system programmers and 
cable-affiliated satellite programmers may serve to impede development 
of open video systems as a viable competitor to cable to the extent 
that popular programming services are denied to open video system 
operators or unaffiliated open video system programmers that seek to 
package such programming for distribution to subscribers. In adopting 
this rule, we recognize, as did Congress in enacting the program access 
provisions, that exclusive contracts can often have pro-competitive 
effects under certain market conditions. However, strategic vertical 
restraints can also deter entry into markets for the distribution of 
multichannel video programming. Accordingly, the Commission's program 
access policies seek to balance the likely competitive harm to 
consumers created by a particular vertical arrangement against its 
likely efficiency benefits. In the context of open video systems, 
unless the Commission first determines that exclusive arrangements for 
satellite programming which favor cable-affiliated video programming 
providers are in the public interest under Section 628(c)(4), the 
potential for competitive harm from such contracts requires their 
prohibition.
    43. As stated above, a satellite programmer may also provide its 
own programming directly to subscribers by purchasing channel capacity 
on an open video system platform. It is therefore possible for a 
programmer vertically integrated with a cable operator to purchase 
channel capacity, to provide its own programming directly to 
subscribers and to refuse to sell the programming it owns to another 
MVPD on the open video system. Such a refusal to sell would appear to 
be unreasonable because it discriminates against a class of 
distributors, i.e., open video system programming providers. 
Furthermore, this type of refusal to sell would result in the same 
situation which we have deemed contrary to the purposes of Section 628 
when achieved through an exclusive contract, i.e., restricting 
competitive access to vertically integrated satellite cable programming 
to a vertically integrated entity. We believe this would consequently 
be actionable under Section 628(c).
    44. Open video system operators and video programming providers 
that provide more than one channel of programming on an open video 
system are MVPDs. We will not create an exception to our rules that 
would exclude open video system operators or open video system 
programming providers from the benefits of our program access rules. 
Accordingly, we will add a note to the definition of MVPD contained in 
Section 76.1000(e) of our rules to indicate that video programming 
providers on open video systems that provide more than one channel of 
programming to subscribers are MVPDs.

[[Page 28705]]

4. Sports Exclusivity, Network Non-Duplication and Syndicated 
Exclusivity
    45. We believe that we can directly apply our existing cable 
regulations regarding sports exclusivity, syndicated exclusivity and 
network non-duplication to open video systems. We do not believe that 
open video systems that span multiple geographic zones or communities 
should be treated any differently than similar cable systems. The 
record evidence indicates that large cable systems are able to comply 
with these provisions, and no commenter has provided any reason why 
open video systems should not be required to comply with the same 
regulations. In addition, we find that open video system operators 
should be responsible for compliance with these rules.
    46. In all cases, we find that television stations must notify the 
open video system operator of the exclusive or non-duplication rights 
being exercised. When the open video system operator receives such a 
notification, it will be required to give the appropriate video 
programming providers an opportunity to either substitute signals or 
delete signals where possible. Therefore, we require that open video 
system operators make all notices of exclusive or non-duplication 
rights received immediately available to the appropriate video 
programming providers on their systems. We would not expect to impose 
sanctions on an OVS operator for violations of the exclusivity rules by 
an unaffiliated program supplier if the operator provided proper 
notices to the program supplier and took prompt steps to stop the 
distribution of the infringing program once it was notified of the 
violation.
5. Other Title VI Provisions
    47. The Commission will, as proposed in the NPRM, apply the 
following provisions of the Communications Act and the Commission's 
rules thereunder to open video systems: Section 613 (c) through (h) 
regarding ownership restrictions; Section 616 regarding regulation of 
carriage agreements; Section 623(f) regarding negative option billing; 
Section 631 regarding subscriber privacy; and Section 634 regarding 
equal employment opportunity.
6. Preemption of Local Franchising Requirements
    48. Section 653 exempts an open video system operator from the 
requirement of obtaining a local franchise under Section 621, although 
the operator still must pay a gross revenue fee ``in lieu of'' a 
franchise fee and must satisfy obligations under Section 611. However, 
we believe that Congress did not intend to infringe upon local 
communities' prerogative to manage their rights-of-way in order to 
protect the public health and safety. State and local authorities may 
impose conditions on an open video system operator for use of the 
rights-of-way, so long as such conditions are applied equally to all 
users of the rights-of-way (i.e., are non-discriminatory and 
competitively neutral). Conversely, state and local authorities may not 
impose specific conditions on use of the rights-of-way that are 
unrelated to their management function or that apply to an open video 
system operator differently than they apply to other rights-of-way 
users.
    49. Any state or local requirement that seeks to impose Title VI 
``franchise-like'' requirements on an open video system operator would 
directly conflict with Congress' express direction that open video 
system operators need not obtain local franchises. Examples of such 
``franchise-like'' requirements include constructing institutional 
networks, donating money to local educational or charitable 
institutions, or specifying the amount or type of capacity that the 
system must possess. Such requirements are preempted because they 
``stand[ ] as an obstacle to the accomplishment of the full purposes 
and objectives of Congress.'' We believe the most natural reading of 
Section 653, in light of Congress's stated intent, is that state and 
local governments cannot require any open video system operator to 
obtain a Title VI franchise from a state or local authority for use of 
public rights-of-way necessary to operate its open video system.
    50. The state or local government may, however, impose non-
discriminatory and competitively conditions on an open video system 
operator for use of the rights-of-way, so long as such conditions are 
applied equally to all users of the rights-of-way (i.e., are non-
discriminatory and competitvely neutral). For instance, a state or 
local government could impose normal fees associated with zoning and 
construction of an open video system, so long as such fees were applied 
in a non-discriminatory and competitively neutral manner. Conversely, 
state and local authorities may not impose specific conditions on the 
use of the rights-of-way that are unrelated to their management 
function or that apply to an open video system operator differently 
than they apply to other users of the rights-of-way.
    51. Local authorities will retain their ability to address the 
following valid local concerns: (1) coordination of construction 
schedules, (2) establishment of standards and procedures for 
constructing lines across private property, (3) determination of 
insurance and indemnity requirements, (4) establishment of rules for 
local building codes, (5) repairing and resurfacing construction-
damaged streets, (6) ensuring public safety in the use of rights-of-way 
by gas, telephone, electric, cable, and similar companies, and (7) 
keeping track of the various systems using the rights-of-way to prevent 
interference among facilities.
    52. We will apply the fee to all gross revenues received by an open 
video system operator or its affiliates, including all revenues 
received from subscribers and all carriage revenues received from 
unaffiliated video programming providers. Gross revenues will not 
include revenues collected by unaffiliated video programming providers 
from their subscribers or advertisers, etc.--gross revenues will only 
include fees paid to the OVS operator. We will also require any gross 
revenues fee that the open video system operator or its affiliate 
collects from subscribers to be excluded from gross revenues.
    53. Thus, we conclude that a state or local government requirement 
that directs an open video system operator to obtain a Title VI 
franchise, or impose Title VI ``franchise like'' requirements, to 
operate an open video system directly conflicts with Section 653 of the 
Communications Act and is preempted.

F. Information Provided to Subscribers

    54. We believe, as stated in the Notice, that Section 
653(b)(1)(E)(i) is intended to be a specific application of the non-
discrimination requirement contained in Section 653(b)(1)(A). 
Specifically, we believe that this provision is meant to ensure that an 
open video system operator does not favor itself or its affiliates in 
its interaction with the customer at the point of actual program 
selection (i.e., when the subscriber is choosing a particular channel 
to watch). The type of ``material or information'' that therefore would 
fall within the scope of Section 653(b)(1)(E)(i) includes navigational 
devices, guides (electronic or paper) and menus used by the subscriber 
to actively select programming.
    55. An open video system operator may not discriminate in favor of 
affiliated programming by, for example, ``burying'' unaffiliated 
programmers in difficult to access portions of electronic guides, 
navigational devices or menus, or by otherwise placing affiliated 
programming in more prominent

[[Page 28706]]

positions on the electronic guides, navigational devices or menus. To 
the extent that an open video system operator uses billing inserts to 
advertise its service generally, rather than providing inserts as a 
guide to program selection, we believe that such inserts fall outside 
the scope of Section 653(b)(1)(E)(i). We believe that a paper 
programming guide that is intended to be used at the point of actual 
channel selection would be governed by Section 653(b)(1)(E)(i).
    56. Section 653(b)(1)(E)(i) prohibits the open video system 
operator from unreasonably discriminating in favor of its affiliated 
programming by means of discriminatory use of on-system advertising, if 
that advertising is contained in any channel selection guide, aid or 
menu. Accordingly, an open video system operator may not use its 
position as controller of a navigational device or menu to advertise 
its programming on the navigational device or menu, while at the same 
time disallowing unaffiliated programming providers comparable 
opportunities to advertise on the navigational device or menu.
    57. Menus offered by the OVS operator may inform the viewer that 
other services (that the consumer has not ordered) are available on the 
open video system, and direct the subscriber how to access a second 
screen with more complete information on those other services. In 
addition, for programming to which the consumer has actually 
subscribed, no programming service on the open video system operator's 
navigational device should be more difficult to select than any other 
programming service.
    58. An open video system operator is not relieved of the non-
discrimination provisions of Section 653(b)(1)(E)(i) if the operator 
offers a navigational device that works only with affiliated video 
programming packages. In addition, the open video system operator may 
not evade its obligation to ensure that other non-affiliated 
programming providers are represented on a navigational device, guide 
or menu simply by having the service nominally provided by its 
affiliate.
    59. We find that the ``suitable and unique'' identification 
requirement of Section 653(b)(1)(E)(ii) would be satisfied if an open 
video system operator's navigational device included a provider's name 
(broadcast station call letters and network affiliation, for example), 
but not its logo or branding device. However, if the open video system 
operator chooses to prohibit unaffiliated providers' logos or branding 
information on its navigational device, guide or menu, it would 
similarly have to prohibit its own logo or branding information under 
Section 653(b)(1)(E)(i).

G. Dispute Resolution

    60. Given the short 10-day period in which the Commission must 
approve or disapprove a certification request, we believe that the 
dispute resolution process will play a key role in ensuring the success 
of the open video framework. In order for the Commission's review to be 
as efficient and thorough as possible, we adopt our suggestion in the 
Notice to model our open video system dispute resolution process after 
our rules governing program access disputes (except for must-carry 
complaints and petitions for special relief).
    61. We will seek to dispose of as many cases as possible on the 
basis of a complaint, answer and reply. Parties should include all 
relevant evidence, including documentary evidence, in the complaint and 
answer to support their claims. Discovery will not be permitted as a 
matter of right, but on a case-by-case basis as deemed necessary by the 
Commission staff reviewing the complaint. Any complaint filed pursuant 
to Section 653(a)(2) must be filed within one year of the date on which 
the open video system operator's actions allegedly violated Commission 
rules.
    62. Finally, while we encourage parties to use ADR techniques to 
attempt to resolve their dispute without the Commission's direct 
involvement, we believe that a clause in a carriage agreement requiring 
ADR before a dispute could be brought to the Commission would not be a 
``just and reasonable'' term or condition of carriage. Such a 
requirement could delay an aggrieved party's right to redress 
significantly beyond the 180-day period mandated by Congress. In 
addition, permitting operators to require as a condition of carriage 
that all disputes be resolved through ADR, may lead operators to 
mandate ADR practices that give them an unfair advantage over 
complainants.

H. Joint Marketing, Bundling and Structural Separation

    63. Section 653 is silent on the issue of joint marketing. The Act 
does, however, expressly impose joint marketing restrictions on 
telephone companies in other contexts. Given that these Sections were 
all enacted as part of the 1996 Act, we find it a significant 
indication of Congress' intent that Sections 271(e), 272(g) and 274(c) 
contain express joint marketing restrictions while Section 653 does 
not. Section 272(g)(2) specifically sets a similar competitive 
condition on the lifting of the joint marketing restrictions between 
telephone exchange and interLATA services: a BOC's authorization under 
Section 271(d) to provide interLATA services in an in-region State. 
Again, no such condition was established in Section 653.
    64. Since Congress chose not to adopt joint marketing restrictions 
in Section 653 even though (1) it specifically applied joint marketing 
restrictions to other provisions of the 1996 Act, and (2) it restricted 
joint marketing in some provisions of the 1996 Act until the 
introduction of competition in the local telephone market, we decline 
to adopt joint marketing restrictions here. We note, however, that any 
entity that offers any telecommunications service will be subject to 
both the customer proprietary network information (``CPNI'') 
restrictions set forth in Section 222 of the Communications Act and any 
regulations the Commission establishes pursuant to Section 222. 
Similarly, any provider of cable or open video service will be subject 
to the cable privacy restrictions set forth in Section 631.
b. Bundling
    65. Section 653 also does not address the issue of ``bundling,'' 
which we define in this context to mean the offering of video service 
and local exchange service in a single package at a single price. We 
would also treat as bundling the situation in which an entity offers 
one service at a discount if the customer purchases another service. We 
disagree that the bundling of telephone and video services will be 
anti-competitive, and increase the risk of cross-subsidization of the 
competitive service by the monopoly service. We believe that the 
Commission's Part 64 cost allocation rules and any amendments thereto 
will protect adequately regulated telephone ratepayers from a 
misallocation of costs that could lead to excessive telephony rates. 
However, we will impose certain safeguards to protect consumers in 
these circumstances. First, the open video system operator, where it is 
the incumbent LEC, may not require that a subscriber purchase its video 
service in order to receive local exchange service. Second, while the 
open video system operator may offer subscribers a discount for 
purchasing the bundled package, the LEC must impute the unbundled 
tariff rate for the regulated service.

[[Page 28707]]

c. Structural Separation
    66. We disagree with those commenters that argue that a separate 
affiliate requirement nevertheless should be imposed pursuant to 
Section 272. We believe that Congress did not intend to impose a 
separate affiliate requirement on LECs providing open video service. 
First, Section 653 is silent on whether LECs and others must provide 
open video service through a separate affiliate. In fact, Congress 
expressly directed that Title II requirements not be applied to ``the 
establishment and operation of an open video system'' under Section 
653. In addition, Section 272 exempts ``incidental interLATA services'' 
from the separate affiliate requirement, and includes certain video 
programming services within the definition of ``incidental interLATA 
services'' described in Section 271(g). Since we conclude that Congress 
did not intend to apply a separate affiliate requirement in this 
context, we need not address whether the provision of video programming 
would qualify as an ``information service'' under Section 272(a)(2)(C), 
or exercise our authority under Section 272(f)(3). Rather, we will 
adhere to Congress' intent and decline to impose a separate affiliate 
requirement here.

I. Advanced Telecommunications Incentives

    67. In order to promote the development of advanced 
telecommunications to consumers, the Commission will consider proposals 
for actions to encourage open video system deployment of advanced 
telecommunications services as defined in Section 706 of the 1996 Act. 
This approach will be available on a case-by-case basis for open video 
system operators that can demonstrate a need for additional 
deregulatory measures to successfully deploy advanced 
telecommunications to all consumers.

Final Regulatory Flexibility Analysis

    68. Pursuant to the Regulatory Flexibility Act of 1980, 5 U.S.C. 
Secs. 601-12, the Commission's final analysis with respect to the 
Second Report and Order is as follows:
    69. Need and purpose of this action: The Commission, in compliance 
with Section 302(a) of the Telecommunications Act of 1996 pertaining to 
open video systems, is required to adopt rules and procedures necessary 
to implement this section of the Telecommunications Act of 1996.
    70. Summary of issues raised by the public in response to the 
Initial Regulatory Flexibility Analysis: Collectively, the National 
League of Cities; the United States Conference of Mayors; the National 
Association of Counties; the National Association of Telecommunications 
Officers and Advisors; Montgomery County, Maryland; the City of Los 
Angeles, CA; the City of Chillicothe, OH; the City of Dearborn, 
Michigan; the City of Dubuque, Iowa; the City of St. Louis, MO; the 
City of Santa Clara, CA; and the City of Tallahassee, FL filed reply 
comments in response to the Initial Regulatory Flexibility Analysis. 
These reply comments assert that a significant number of small 
governmental entities will be burdened by the proposals of the 
Commission and commenters. The Commission has considered these reply 
comments and has attempted to structure the open video system rules set 
forth in this Second Report and Order so as to minimize the 
administrative burden upon small governmental entities.
    71. Significant alternatives considered: Petitioners representing 
cable interests, telephone interests, programming interests, consumer 
interests and local government interests submitted several alternatives 
aimed at minimizing administrative burdens. In this proceeding, the 
Commission has considered these alternatives and has attempted both to 
accommodate the concerns raised by the parties and to minimize the 
administrative burdens upon the parties in accordance with Congress' 
desire for the Commission to develop a streamlined regulatory model for 
open video service operators.

Paperwork Reduction Act of 1995 Analysis

    72. The requirements adopted in the Second Report and Order have 
been analyzed with respect to the Paperwork Reduction Act of 1995 (the 
``1995 Act'') and found to impose new or modified information 
collection requirements on the public. Implementation of any new or 
modified requirement will be subject to approval by the Office of 
Management and Budget (``OMB'') as prescribed by the 1995 Act. The 
Commission, as part of its continuing effort to reduce paperwork 
burdens, invites the general public and OMB to comment on the 
information collections contained in this Second Report and Order as 
required by the 1995 Act, Public Law No. 104-13. OMB comments are due 
on or before August 5, 1996. Comments should address: (1) Whether the 
proposed collection of information is necessary for the proper 
performance of the functions of the Commission, including whether the 
information shall have practical utility; (2) the accuracy of the 
Commission's burden estimates; (3) ways to enhance the quality, 
utility, and clarity of the information collected; and (4) ways to 
minimize the burden of the collection of information on the 
respondents, including the use of automated collection techniques or 
other forms of information technology.
    73. Written comments by the public on the modified information 
collections are due on or before June 20, 1996, and reply comments are 
due on or before July 1, 1996. Written comments must be submitted by 
OMB on modified information collections on or before August 5, 1996. A 
copy of any comments on the information collections contained herein 
should be submitted to Dorothy Conway, Federal Communications 
Commission, Room 234, 1919 M Street, N.W., Washington, DC 20554, or via 
the Internet to [email protected] and to Timothy Fain, OMB Desk Officer, 
10236, NEOB, 725--17th Street, N.W., Washington, DC 20503 or via the 
Internet to [email protected]. For additional information concerning 
the information collections contained herein contact Dorothy Conway at 
202-418-0217, or via the Internet at [email protected].

Ordering Clauses

    74. Accordingly, it is ordered that, pursuant to Sections 4(i), 
4(j), 303(r), and 653 of the Communications Act of 1934, as amended, 47 
U.S.C. 154(i), 154(j), 303(r), and 573, the rules, requirements and 
policies discussed in this Second Report and Order ARE adopted and 
Sections 76.1000 and 76.1500 through 76.1515 of the Commission's rules, 
47 CFR Secs. 1000, 76.1000 and 76.1500 through 76.1515 ARE AMENDED as 
set forth below.
    75. It is further ordered that the requirements and regulations 
established in this decision shall become effective upon approval by 
OMB of the new information collection requirements adopted herein, but 
no sooner than July 5, 1996.
    76. It is further ordered that the Secretary shall send a copy of 
this Second Report and Order including the Final Regulatory Flexibility 
Analysis, to the Chief Counsel for Advocacy of the Small Business 
Administration in accordance with paragraph 603(a) of the Regulatory 
Flexibility Act, Public Law No. 96-354, 94 Stat. 1164, 5 U.S.C. 
Secs. 601 through 699 (1981).


[[Page 28708]]


Federal Communications Commission.
LaVera F. Marshall,
Acting Secretary.

List of Subjects in 47 CFR Part 76

    Cable television.

Appendix B

Rule Changes

    Part 76 of Title 47 of the Code of Federal Regulations is amended 
as follows:

PART 76--CABLE TELEVISION SERVICE

    1. The authority citation for Part 76 is revised to read as 
follows:

    Authority: 47 U.S.C. 151, 152, 153, 154, 301, 302, 303, 303a, 
307, 308, 309, 312, 315, 317, 325, 503, 521, 522, 531, 532, 533, 
534, 535, 536, 537, 543, 544, 544a, 545, 548, 552, 554, 556, 558, 
560, 561, 571, 572, 573.

    2. Section 76.1000 is amended by adding notes to paragraphs (e) and 
(h) to read as follows:


Sec. 76.1000  Definitions.

* * * * *
    (e) * * *
    Note to paragraph (e): A video programming provider that 
provides more than one channel of video programming on an open video 
system is a multichannel video programming distributor for purposes 
of this subpart O and Section 76.1507.
* * * * *
    (h) * * *
    Note to paragraph (h): Satellite programming which is primarily 
intended for the direct receipt by open video system operators for 
their retransmission to open video system subscribers shall be 
included within the definition of satellite cable programming.
* * * * *
    3. Section 76.1004 is amended by designating the existing text as 
paragraph (a), and adding paragraph (b) to read as follows:


Sec. 76.1004  Applicability of program access rules to common carriers 
and affiliates.

* * * * *
    (b) Sections 76.1002(c)(1) through (3) shall be applied to a common 
carrier or its affiliate that provides video programming by any means 
directly to subscribers in such a way that such common carrier or its 
affiliate shall be generally restricted from entering into an exclusive 
arrangement for satellite cable programming or satellite broadcast 
programming with a satellite cable programming vendor in which a common 
carrier or its affiliate has an attributable interest or a satellite 
broadcast programming vendor in which a common carrier or its affiliate 
has an attributable interest, unless the arrangement pertains to an 
area served by a cable system as of October 5, 1992, and the Commission 
determines in accordance with Section Sec. 76.1002(c)(4) that such 
arrangment is in the public interest.
    4. A new Subpart S is added to Part 76 to read as follows:

Subpart S--Open Video Systems

Sec.
76.1500  Definitions.
76.1501  Qualifications to be an open video system operator.
76.1502  Certification.
76.1503  Carriage of video programming providers on open video 
systems.
76.1504  Rates, terms and conditions for carriage on open video 
systems.
76.1505  Public, educational and governmental access.
76.1506  Carriage of television broadcast signals.
76.1507  Competitive access to satellite cable programming.
76.1508  Network non-duplication.
76.1509  Syndicated program exclusivity.
76.1510  Application of certain Title VI provisions.
76.1511  Fees.
76.1512  Programming information.
76.1513  Dispute resolution.
76.1514  Bundling of video and local exchange services.

Subpart S--Open Video Systems


Sec. 76.1500  Definitions.

    (a) Open video system. A facility consisting of a set of 
transmission paths and associated signal generation, reception, and 
control equipment that is designed to provide cable service which 
includes video programming and which is provided to multiple 
subscribers within a community, provided that the Commission has 
certified that such system complies with this part.
    (b) Open video system operator (``operator''). Any person or group 
of persons who provides cable service over an open video system and 
directly or through one or more affiliates owns a significant interest 
in such open video system, or otherwise controls or is responsible for 
the management and operation of such an open video system.
    (c) Video programming provider. Any person or group of persons who 
has the right under the copyright laws to select and contract for 
carriage of specific video programming on an open video system.
    (d) Activated channels. This term shall have the same meaning as 
provided in the cable television rules, 47 CFR 76.5(nn).
    (e) Shared channel. Any channel that carries video programming that 
is selected by more than one video programming provider and offered to 
subscribers.
    (f) Cable service. This term shall have the same meaning as 
provided in the cable television rules, 47 CFR 76.5(ff).
    (g) Other terms. Unless otherwise expressly stated, words not 
defined in this part shall be given their meaning as used in Title 47 
of the United States Code, as amended, and, if not defined therein, 
their meaning as used in Part 47 of the Code of Federal Regulations.


Sec. 76.1501  Qualifications to be an open video system operator.

    Any person may obtain a certification to operate an open video 
system pursuant to Section 653(a)(1) of the Communications Act, 47 
U.S.C. 573(a)(1), except that an operator of a cable system, regardless 
of any other service that the cable operator may provide, may not 
obtain such a certification within its cable service area unless it is 
subject to ``effective competition,'' as defined in Section 623(l)(1) 
of the Communications Act, 47 U.S.C. 543(l)(1). A cable operator that 
is not subject to effective competition within its cable service area 
may file a petition with the Commission, seeking a finding that 
particular circumstances exist that make it consistent with the public 
interest, convenience, and necessity to allow the operator to convert 
its cable system to an open video system. Nothing herein shall be 
construed to affect the terms of any franchising agreement or other 
contractual agreement.

    Note to Sec. 76.1501: An example of a circumstance in which the 
public interest, convenience and necessity would be served by 
permitting a cable operator not subject to effective competition to 
become an open video system operator within its cable service area 
is where the entry of a facilities-based competitor into its cable 
service area would likely be infeasible.


Sec. 76.1502  Certification.

    (a) An operator of an open video system must certify to the 
Commission that it will comply with the Commission's regulations in 47 
CFR 76.1503, 76.1504, 76.1506(m), 76.1508, 76.1509, and 76.1513. If 
construction of new physical plant is required, the Commission must 
approve such certification prior to the commencement of construction. 
If no new construction is required, the Commission must approve such 
certification prior to the commencement of service at such a point in 
time that would allow the applicant sufficient time to comply with the 
Commission's notification requirements.
    (b) Certifications must be verified by an officer or director of 
the applicant, stating that, to the best of his or her information and 
belief, the

[[Page 28709]]

representations made therein are accurate.
    (c) Certifications must be filed on FCC Form 1275 and must include:
    (1) The applicant's name, address and telephone number;
    (2) A statement of ownership, including all affiliated entities;
    (3) If the applicant is a cable operator applying for certification 
in its cable franchise area, a statement that the applicant is 
qualified to operate an open video system under Section 76.1501.
    (4) A statement that the applicant agrees to comply and to remain 
in compliance with each of the Commission's regulations in 
Secs. 76.1503, 76.1504, 76.1506(m), 76.1508, 76.1509, and 76.1513;
    (5) If the applicant is required under 47 CFR 64.903(a) of this 
chapter to file a cost allocation manual, a statement that the 
applicant will file changes to its manual at least 60 days before the 
commencement of service;
    (6) A general description of the anticipated communities or areas 
to be served upon completion of the system;
    (7) The anticipated amount and type (i.e., analog or digital) of 
capacity (for switched digital systems, the anticipated number of 
available channel input ports); and
    (8) A statement that the applicant will comply with the 
Commission's notice and enrollment requirements for unaffiliated video 
programming providers.
    (d) Comments or oppositions to a certification must be filed within 
five days of the Commission's receipt of the certification and must be 
served on the party that filed the certification. If the Commission 
does not disapprove certification within ten days after receipt of an 
applicant's request, the certification will be deemed approved. If 
disapproved, the applicant may file a revised certification or refile 
its original submission with a statement addressing the issues in 
dispute. Such refilings must be served on any objecting party or 
parties.


Sec. 76.1503  Carriage of video programming providers on open video 
systems.

    (a) Non-discrimination principle. Except as otherwise permitted in 
applicable law or in this part, an operator of an open video system 
shall not discriminate among video programming providers with regard to 
carriage on its open video system, and its rates, terms and conditions 
for such carriage shall be just and reasonable and not unjustly or 
unreasonably discriminatory.
    (b) Demand for carriage. An operator of an open video system shall 
solicit and determine the level of demand for carriage on the system 
among potential video programming providers in a non-discriminatory 
manner.
    (1) Notification. An open video system operator shall file with the 
Secretary of the Federal Communications Commission a ``Notice of 
Intent'' to establish an open video system, which the Commission will 
release in a Public Notice. The Notice of Intent shall include the 
following information:
    (i) A heading clearly indicating that the document is a Notice of 
Intent to establish an open video system;
    (ii) The name, address and telephone number of the open video 
system operator;
    (iii) A description of the system's projected service area;
    (iv) A description of the system's projected channel capacity, in 
terms of analog, digital and other type(s) of capacity upon activation 
of the system;
    (v) A description of the steps a potential video programming 
provider must follow to seek carriage on the open video system, 
including the name, address and telephone number of a person to contact 
for further information;
    (vi) The starting and ending dates of the initial enrollment period 
for video programming providers;
    (vii) The process for allocating the system's channel capacity, in 
the event that demand for carriage on the system exceeds the system's 
capacity; and
    (viii) A certification that the operator has complied with all 
relevant notification requirements under the Commission's open video 
system regulations concerning must-carry and retransmission consent 
(Sec. 76.1506), including a list of all local commercial and non-
commercial television stations served, and a certificate of service 
showing that the Notice of Intent has been served on all local cable 
franchising authorities entitled to establish requirements concerning 
the designation of channels for public, educational and governmental 
use.
    (2) Information. An open video system operator shall provide the 
following information to a video programming provider within five 
business days of receiving a written request from the provider, unless 
otherwise included in the Notice of Intent:
    (i) The projected activation date of the open video system. If a 
system is to be activated in stages, the operator should describe the 
respective stages and the projected dates on which each stage will be 
activated;
    (ii) A preliminary carriage rate estimate;
    (iii) The information a video programming provider will be required 
to provide to qualify as a video programming provider, e.g., 
creditworthiness;
    (iv) Technical information that is reasonably necessary for 
potential video programming providers to assess whether to seek 
capacity on the open video system, including what type of customer 
premises equipment subscribers will need to receive service;
    (v) Any transmission or reception equipment needed by a video 
programming provider to interface successfully with the open video 
system; and
    (vi) The equipment available to facilitate the carriage of 
unaffiliated video programming and the electronic form(s) that will be 
accepted for processing and subsequent transmission through the system.
    (3) Qualifications of video programming providers. An open video 
system operator may impose reasonable, non-discriminatory requirements 
to assure that a potential video programming provider is qualified to 
obtain capacity on the open video system.
    (c) One-third limit. If carriage demand by video programming 
providers exceeds the activated channel capacity of the open video 
system, the operator of the open video system and its affiliated video 
programming providers may not select the video programming services for 
carriage on more than one-third of the activated channel capacity on 
such system.
    (1) Measuring capacity. For purposes of this section:
    (i) If an open video system carries both analog and digital 
signals, an open video system operator shall measure analog and digital 
activated channel capacity independently;
    (ii) Channels that an open video system is required to carry 
pursuant to the Commission's regulations concerning public, educational 
and governmental channels and must-carry channels shall be included in 
``activated channel capacity'' for purposes of calculating the one-
third of such capacity on which the open video system operator and its 
affiliates are allowed to select the video programming for carriage. 
Such channels shall not be included in the one-third of capacity on 
which the open video system operator is permitted to select programming 
where demand for carriage exceeds system capacity;
    (iii) Channels that an open video system operator carries pursuant 
to the

[[Page 28710]]

Commission's regulations concerning retransmission consent shall be 
included in ``activated channel capacity'' for purposes of calculating 
the one-third of such capacity on which the open video system operator 
and its affiliates are allowed to select the video programming for 
carriage. Such channels shall be included in the one-third of capacity 
on which the open video system operator is permitted to select 
programming, where demand for carriage exceeds system capacity, to the 
extent that the channels are carried as part of the programming service 
of the operator or its affiliate, subject to paragraph (c)(1)(iv); and
    (iv) Any channel on which shared programming is carried shall be 
included in ``activated channel capacity'' for purposes of calculating 
the one-third of such capacity on which the open video system operator 
and its affiliates are allowed to select the video programming for 
carriage. Such channels shall be included in the one-third of capacity 
on which the open video system operator is permitted to select 
programming, where demand for carriage exceeds system capacity, to the 
extent the open video system operator or its affiliate is one of the 
video programming providers sharing such channel.

    Note to paragraph (c)(1)(iv): For example, if the open video 
system operator and two unaffiliated video programming providers 
each carry a programming service that is placed on a shared channel, 
the shared channel shall count as 0.33 channels against the one-
third amount of capacity allocable to the open video system 
operator, where demand for carriage exceeds system capacity.

    (2) Allocating capacity. An operator of an open video system shall 
allocate activated channel capacity through a fair, open and non-
discriminatory process; the process must be insulated from any bias of 
the open video system operator and verifiable.
    (i) If an open video system carries both analog and digital 
signals, an open video system operator shall treat analog and digital 
capacity separately in allocating system capacity.
    (ii) Subsequent changes in capacity or demand. An open video system 
operator must allocate open capacity, if any, at least once every three 
years, beginning three years from the date of service commencement. 
Open capacity shall be allocated in accordance with this section. Open 
capacity shall include all capacity that becomes available during the 
course of the three-year period, as well as capacity in excess of one-
third of the system's activated channel capacity on which the operator 
of the open video system or its affiliate selects programming. An 
operator shall maintain a file of qualified video programming providers 
who have requested carriage or additional carriage since the previous 
allocation of capacity. Information regarding how a video programming 
provider should apply for carriage must be made available upon request.

    Note 1 to paragraph (c)(2)(ii): An open video system operator 
will not be required to comply with the regulations contained in 
this section if there is no open capacity to be allocated at the end 
of the three year period.
    Note 2 to paragraph (c)(2)(ii): An open video system operator 
shall be required to accommodate changes in obligations concerning 
public, educational or governmental channels or must-carry channels 
in accordance with Sections 611, 614 and 615 of the Communications 
Act and the regulations contained in this part.

    (iii) Channel sharing. An open video system operator may carry on 
only one channel any video programming service that is offered by more 
than one video programming provider (including the operator's video 
programming affiliate), provided that subscribers have ready and 
immediate access to any such programming service. Nothing in this 
section shall be construed to impair the rights of programming 
services.

    Note 1 to paragraph (c)(2)(iii): An open video system operator 
may implement channel sharing only after it becomes apparent that 
one or more video programming services will be offered by multiple 
video programming providers. An open video system operator may not 
select, in advance of any duplication among video programming 
providers, which programming services shall be placed on shared 
channels.
    Note 2 to paragraph (c)(2)(iii): Each video programming provider 
offering a programming service that is carried on a shared channel 
must have the contractual permission of the video programming 
service to offer the service to subscribers. The placement of a 
programming service on a shared channel, however, is not subject to 
the approval of the video programming service or vendor.
    Note 3 to paragraph (c)(2)(iii): Ready and immediate access in 
this context means that the channel sharing is ``transparent'' to 
subscribers.

    (iv) Open video system operator discretion. Notwithstanding the 
foregoing, an operator of an open video system may:
    (A) Require video programming providers to request and obtain 
system capacity in increments of no less than one full-time channel; 
however, an operator of an open video system may not require video 
programming providers to obtain capacity in increments of more than one 
full-time channel;
    (B) Limit video programming providers from selecting the 
programming on more capacity than the amount of capacity on which the 
system operator and its affiliates are selecting the programming for 
carriage; and
    (C) Refuse carriage on its open video system to a competing, in-
region cable operator or its affiliates that offers cable service to 
subscribers located in the service area of the open video system, 
except where the allocation of open video system capacity to a 
competing cable operator is consistent with the public interest, 
convenience, and necessity.

    Note to paragraph (c)(2)(iv)(C): The Commission will except 
situations where it is determined that facilities-based competition 
will not be significantly impeded. We will provide a specific 
exception in a situation in which: the competing, in-region cable 
operator and affiliated systems offer service to less than 20% of 
the households passed by the open video system; and the competing, 
in-region cable operator and affiliated systems provide cable 
service to a total of less than 17,000 subscribers within the open 
video system's service area.

    (3) Nothing in this paragraph shall be construed to limit the 
number of channels that the open video system operator and its 
affiliates, or another video programming provider, may offer to provide 
directly to subscribers. Co-packaging is permissible among video 
programming providers, but may not be a condition of carriage. Video 
programming providers may freely elect whether to enter into co-
packaging arrangements.

    Note to paragraph (c)(3): Any video programming provider on an 
open video system may co-package video programming that is selected 
by itself, an affiliated video programming provider and/or 
unaffiliated video programming providers on the system.


Sec. 76.1504  Rates, terms and conditions for carriage on open video 
systems.

    (a) Reasonable rate principle. An open video system operator shall 
set rates, terms, and conditions for carriage that are just and 
reasonable, and are not unjustly or unreasonably discriminatory.
    (b) Differences in rates.
    (1) An open video system operator may charge different rates to 
different classes of video programming providers, provided that the 
bases for such differences are not unjust or unreasonably 
discriminatory.
    (2) An open video system operator shall not impose different rates, 
terms, or conditions based on the content of the programming to be 
offered by any unaffiliated video programming provider.

[[Page 28711]]

    (c) Just and reasonable rate presumption. A strong presumption will 
apply that carriage rates are just and reasonable for open video system 
operators where at least one unaffiliated video programming provider, 
or unaffiliated programming providers as a group, occupy capacity equal 
to the lesser of one-third of the system capacity or that occupied by 
the open video system operator and its affiliates, and where any rate 
complained of is no higher than the average of the rates paid by 
unaffiliated programmers receiving carriage from the open video system 
operator.
    (d) Examination of rates. Complaints regarding rates shall be 
limited to video programming providers that have sought carriage on the 
open video system. If a video programming provider files a complaint 
against an open video system operator meeting the above just and 
reasonable rate presumption, the burden of proof will rest with the 
complainant. If a complaint is filed against an open video system 
operator that does not meet the just and reasonable rate presumption, 
the open video system operator will bear the burden of proof to 
demonstrate, using the principles set forth below, that the carriage 
rates subject to the complaint are just and reasonable.
    (e) Determining just and reasonable rates subject to complaints. 
Carriage rates subject to complaint shall be presumed just and 
reasonable if they are no greater than an imputed carriage rate based 
on the following. The imputed rate will reflect what the open video 
system operator, or its affiliate, ``pays'' for carriage of its own 
programming. Use of this approach is appropriate in circumstances where 
the pricing is applicable to a new market entrant (the open video 
system operator) that will face competition from an existing incumbent 
provider (the incumbent cable operator), as opposed to circumstances 
where the pricing is used to establish a rate for an essential input 
service that is charged to a competing new entrant by an incumbent 
provider. With respect to new market entrants, an efficient component 
pricing model will produce rates that encourage market entry. If the 
carriage rate to an unaffiliated program provider surpasses what an 
operator earns from carrying its own programming, the rate can be 
presumed to exceed a just and reasonable level. An open video system 
operator's price to its subscribers will be determined by several 
separate costs components. One general category are those costs related 
to the creative development and production of programming. A second 
category are costs associated with packaging various programs for the 
open video system operator's offering. A third category related to the 
infrastructure or engineering costs identified with building and 
maintaining the open video system. Contained in each is a profit 
allowance attributed to the economic value of each component. When an 
open video system operator provides only carriage through its 
infrastructure, however, the programming and packaging flows from the 
independent program provider, who bears the cost. The open video system 
operator avoids programming and packaging costs, including profits. 
These avoided costs should not be reflected in the price charged an 
independent program provider for carriage. The imputed rate also seeks 
to recognize the loss of subscribers to the open video system 
operator's programming package resulting from carrying competing 
programming.


Sec. 76.1505  Public, educational and governmental access.

    (a) An open video system operator shall be subject to public, 
educational and governmental access requirements for every cable 
franchise area with which its system overlaps.
    (b) An open video system operator must ensure that all subscribers 
receive any public, educational and governmental access channels within 
the subscribers' franchise area.
    (c) An open video system operator may negotiate with the local 
cable franchising authority of the jurisdiction(s) which the open video 
system serves to establish the open video system operator's obligations 
with respect to public, educational and governmental access channel 
capacity, services, facilities and equipment. These negotiations may 
include the local cable operator if the local franchising authority, 
the open video system operator and the cable operator so desire.
    (d) If an open video system operator and a local franchising 
authority are unable to reach an agreement regarding the open video 
system operator's obligations with respect to public, educational and 
governmental access channel capacity, services, facilities and 
equipment within the local franchising authority's jurisdiction:
    (1) The open video system operator must satisfy the same public, 
educational and governmental access obligations as the local cable 
operator by connecting with the cable operator's public, educational 
and governmental access channel feeds and by sharing the costs directly 
related to supporting public, educational and governmental access, 
including costs of public, educational and governmental access 
services, facilities and equipment, and equipment necessary to achieve 
the connection. The open video system operator must provide the same 
amount of public, educational and governmental access as the local 
cable operator is required to carry.
    (2) The local franchising authority shall impose the same rules and 
procedures on an open video system operator as it imposes on the local 
cable operator with regard to the open video system operator's use of 
channel capacity designated for public, educational and governmental 
access use when such capacity is not being used for such purposes.
    (3) The local cable operator is required to permit the open video 
system operator to connect with its public, educational and 
governmental access channel feeds. The open video system operator and 
the cable operator may decide how to accomplish this connection, taking 
into consideration the exact physical and technical circumstances of 
the cable and open video systems involved. If the cable and open video 
system operator cannot agree on how to accomplish the connection, the 
local franchising authority may decide. The local franchising authority 
may require that the connection occur on government property or on 
public rights of way.
    (4) The costs of connection and maintaining public, educational and 
governmental access channel capacity, services, facilities and 
equipment shall be divided equitably between the cable operator and the 
open video system operator. Shared costs shall include capital 
contributions and any other costs or investments directly relating to 
or supporting public, educational and governmental access and required 
by the cable operator's franchise agreement. Capital expenses incurred 
prior to the open video system operator's connection shall be subject 
to cost sharing on a pro-rata basis to the extent such investments have 
not been fully amortized by the cable operator.
    (5) The local franchising authority may not impose public, 
educational and governmental access obligations on the open video 
system operator that would exceed those imposed on the local cable 
operator.
    (6) Where there is no existing local cable operator, the open video 
system operator must make a reasonable amount of channel capacity 
available for public, educational and governmental use, as well as 
provide reasonable support for services, facilities and

[[Page 28712]]

equipment relating to such public, educational and governmental use. If 
a franchise agreement previously existed in that franchise area, the 
open video system operator shall be required to maintain the previously 
existing public, educational and governmental access terms of that 
franchise agreement. Absent a previous cable franchise agreement, the 
open video system operator shall be required to provide channel 
capacity, services, facilities and equipment relating to public, 
educational and governmental access equivalent to that prescribed in 
the franchise agreement(s) for the nearest operating cable system with 
a commitment to provide public, educational and governmental access.

    Note to paragraph (d)(6): If a cable system converts to an open 
video system, the operator will be required to maintain the 
previously existing terms of its public, educational and 
governmental access obligations.

    (7) The open video system operator must adjust its system(s) to 
comply with new public, educational and governmental access obligations 
imposed by a cable franchise renewal; provided, however, that an open 
video system operator will not be required to displace other 
programmers using its open video system to accommodate public, 
educational and governmental access channels. The open video system 
operator shall comply with such public, educational and governmental 
access obligations whenever additional capacity is or becomes 
available, whether it is due to increased channel capacity or decreased 
demand for channel capacity.
    (8) The open video system operator and/or the local franchising 
authority may file a complaint with the Commission, pursuant to our 
dispute resolution procedures set forth in Sec. 76.1514, if the open 
video system operator and the local franchising authority cannot agree 
as to the application of the Commission's rules regarding the open 
video system operator's connection and/or cost sharing obligations 
under this section.
    (e) If an open video system operator maintains an institutional 
network, as defined in Section 611(f) of the Communications Act, the 
local franchising authority may require that educational and 
governmental access channels be designated on that institutional 
network to the extent such channels are designated on the institutional 
network of the local cable operator.
    (f) An open video system operator shall not exercise any editorial 
control over any public, educational, or governmental use of channel 
capacity provided pursuant to this subsection, provided, however, that 
any open video system operator may prohibit the use on its system of 
any channel capacity of any public, educational, or governmental 
facility for any programming which contains nudity, obscene material, 
indecent material as defined in Sec. 76.701(g), or material soliciting 
or promoting unlawful conduct. For purposes of this section, ``material 
soliciting or promoting unlawful conduct'' shall mean material that is 
otherwise proscribed by law. An open video system operator may require 
any access user, or access manager or administrator agreeing to assume 
the responsibility of certifying, to certify that its programming does 
not contain any of the materials described above and that reasonable 
efforts will be used to ensure that live programming does not contain 
such material.


Sec. 76.1506  Carriage of television broadcast signals.

    (a) The provisions of Subpart D shall apply to open video systems 
in accordance with the provisions contained in this subpart.
    (b) For the purposes of this Subpart S, television stations are 
significantly viewed when they are viewed in households that do not 
receive television signals from multichannel video programming 
distributors as follows:
    (1) For a full or partial network station--a share of viewing hours 
of at least 3 percent (total week hours), and a net weekly circulation 
of at least 25 percent; and
    (2) For an independent station--a share of viewing hours of at 
least 2 percent (total week hours), and a net weekly circulation of at 
least 5 percent. See Sec. 76.1506(c).

    Note to paragraph (b): As used in this paragraph, ``share of 
viewing hours'' means the total hours that households that do not 
receive television signals from multichannel video programming 
distributors viewed the subject station during the week, expressed 
as a percentage of the total hours these households viewed all 
stations during the period, and ``net weekly circulation'' means the 
number of households that do not receive television signals from 
multichannel video programming distributors that viewed the station 
for 5 minutes or more during the entire week, expressed as a 
percentage of the total households that do not receive television 
signals from multichannel video programming distributors in the 
survey area.

    (c) Significantly viewed signals; method to be followed for special 
showings. Any provision of Sec. 76.54 that refers to a ``cable 
television community'' or ``cable community or communities'' shall 
apply to an open video system community or communities. Any provision 
of Sec. 76.54 that refers to ``non-cable television homes'' shall apply 
to households that do not receive television signals from multichannel 
video programming distributors. Any provision of Sec. 76.54 that refers 
to a ``cable television system'' shall apply to an open video system.
    (d) Definitions applicable to the must-carry rules. Section 76.55 
shall apply to all open video systems in accordance with the provisions 
contained in this section. Any provision of Sec. 76.55 that refers to a 
``cable system'' shall apply to an open video system. Any provision of 
Sec. 76.55 that refers to a ``cable operator'' shall apply to an open 
video system operator. Any provision of Sec. 76.55 that refers to the 
``principal headend'' of a cable system as defined in Sec. 76.5(pp) 
shall apply to the equivalent of the principal headend of an open video 
system. Any provision of Sec. 76.55 that refers to a ``franchise area'' 
shall apply to the service area of an open video system.
    (e) Signal carriage obligations. Any provision of Sec. 76.56 that 
refers to a ``cable television system'' or ``cable system'' shall apply 
to an open video system. Any provision of Sec. 76.56 that refers to a 
``cable operator'' shall apply to an open video system operator. 
Section 76.56(d)(2) shall apply to open video systems as follows: An 
open video system operator shall make available to every subscriber of 
the open video system all qualified local commercial television 
stations and all qualified non-commercial educational television 
stations carried in fulfillment of its carriage obligations under this 
section.
    (f) Channel positioning. Open video system operators shall comply 
with the provisions of Sec. 76.57 to the closest extent possible. Any 
provision of Sec. 76.57 that refers to a ``cable operator'' shall apply 
to an open video system operator. Any provision of Sec. 76.57 that 
refers to a ``cable system'' shall apply to an open video system, 
except the references to ``cable system'' in Sec. 76.57(d) which shall 
apply to an open video system operator.
    (g) Notification. Any provision of Sec. 76.58 that refers to a 
``cable operator'' shall apply to an open video system operator. Any 
provision of Sec. 76.58 that refers to a ``cable system'' shall apply 
to an open video system. Any provision of Sec. 76.58 that refers to a 
``principal headend'' shall apply to the equivalent of the principal 
headend for an open video system.
    (h) Modification of television markets. Any provision of Sec. 76.59 
that refers to a

[[Page 28713]]

``cable system'' shall apply to an open video system. Any provision of 
Sec. 76.59 that refers to a ``cable operator'' shall apply to an open 
video system operator.
    (i) Compensation for carriage. Any provision of Sec. 76.60 that 
refers to a ``cable operator'' shall apply to an open video system 
operator. Any provision of Sec. 76.60 that refers to a ``cable system'' 
shall apply to an open video system. Any provision of Sec. 76.60 that 
refers to a ``principal headend'' shall apply to the equivalent of the 
principal headend for an open video system.
    (j) Disputes concerning carriage. Any provision of Sec. 76.61 that 
refers to a ``cable operator'' shall apply to an open video system 
operator. Any provision of Sec. 76.61 that refers to a ``cable system'' 
shall apply to an open video system. Any provision of Sec. 76.61 that 
refers to a ``principal headend'' shall apply to the equivalent of the 
principal headend for an open video system.
    (k) Manner of carriage. Any provision of Sec. 76.62 that refers to 
a ``cable operator'' shall apply to an open video system operator.
    (l) Retransmission consent. Section 76.64 shall apply to open video 
systems in accordance with the provisions contained in this paragraph.
    (1) Any provision of Sec. 76.64 that refers to a ``cable system'' 
shall apply to an open video system. Any provision of Sec. 76.64 that 
refers to a ``cable operator'' shall apply to an open video system 
operator.
    (2) Must-carry/retransmission consent election notifications shall 
be sent to the open video system operator. An open video system 
operator shall make all must-carry/retransmission consent election 
notifications received available to the appropriate programming 
providers on its system.
    (3) Television broadcast stations are not required to make the same 
election for open video systems and cable systems in the same 
geographic area.
    (4) An open video system commencing new operations shall notify all 
local commercial and noncommercial broadcast stations as required under 
paragraph (l) of this section on or before the date on which it files 
with the Commission its Notice of Intent to establish an open video 
system.
    (m) Sports broadcast. Section 76.67 shall apply to open video 
systems in accordance with the provisions contained in this paragraph.
    (1) Any provisions of Sec. 76.67 that refers to a ``community 
unit'' shall apply to an open video system or that portion of an open 
video system that operates or will operate within a separate and 
distinct community or municipal entity (including unincorporated 
communities within unincorporated areas and including single, discrete 
unincorporated areas).
    (2) Notification of programming to be deleted pursuant to this 
section shall be served on the open video system operator. The open 
video system operator shall make all notifications immediately 
available to the appropriate video programming providers on its open 
video system. An open video system operator shall not be subject to 
sanctions for any violation of these rules by an unaffiliated program 
supplier if the operator provided proper notices to the program 
supplier and subsequently took prompt steps to stop the distribution of 
the infringing program once it was notified of a violation.
    (n) Exemption from input selector switch rules. Any provision of 
Sec. 76.70 that refers to a ``cable system'' or ``cable systems'' shall 
apply to an open video system or open video systems.
    (o) Special relief and must-carry complaint procedures. The 
procedures set forth in Sec. 76.7 shall apply to special relief and 
must-carry complaints relating to open video systems, and not the 
procedures set forth in Sec. 76.1514 (Dispute resolution). Any 
provision of Sec. 76.7 that refers to a ``cable television system 
operator'' or ``cable operator'' shall apply to an open video system 
operator. Any provision of Sec. 76.7 that refers to a ``cable 
television system'' shall apply to an open video system. Any provision 
of Sec. 76.7 that refers to a ``system community unit'' shall apply to 
an open video system or that portion of an open video system that 
operates or will operate within a separate and distinct community or 
municipal entity (including unincorporated communities within 
unincorporated areas and including single, discrete unincorporated 
areas).


Sec. 76.1507  Competitive access to satellite cable programming.

    (a) Any provision that applies to a cable operator under 
Secs. 76.1000 through 76.1003 shall also apply to an operator of an 
open video system and its affiliate which provides video programming on 
its open video system, except as limited by paragraph (a) (1)-(3) of 
this section. Any such provision that applies to a satellite cable 
programming vendor in which a cable operator has an attributable 
interest shall also apply to any satellite cable programming vendor in 
which an open video system operator has an attributable interest, 
except as limited by paragraph (a) (1)-(3) of this section.
    (1) Section 76.1002(c)(1) shall only restrict the conduct of an 
open video system operator, its affiliate that provides video 
programming on its open video system and a satellite cable programming 
vendor in which an open video system operator has an attributable 
interest, as follows: No open video system operator or its affiliate 
that provides video programming on its open video system shall engage 
in any practice or activity or enter into any understanding or 
arrangement, including exclusive contracts, with a satellite cable 
programming vendor or satellite broadcast programming vendor for 
satellite cable programming or satellite broadcast programming that 
prevents a multichannel video programming distributor from obtaining 
such programming from any satellite cable programming vendor in which 
an open video system operator has an attributable interest, or any 
satellite broadcasting vendor in which an open video system operator 
has an attributable interest for distribution to person in areas not 
served by a cable operator as of October 5, 1992.
    (2) Section 76.1002(c)(2) shall only restrict the conduct of an 
open video system operator, its affiliate that provides video 
programming on its open video system and a satellite cable programming 
vendor in which an open video system operator has an attributable 
interest, as follows: No open video system operator or its affiliate 
that provides video programming on its open video system shall enter 
into any exclusive contracts, or engage in any practice, activity or 
arrangement tantamount to an exclusive contract, for satellite cable 
programming or satellite broadcast programming with a satellite cable 
programming vendor in which an open video system operator has an 
attributable interest or a satellite broadcast programming vendor, 
unless the Commission determines in accordance with Sec. 76.1002(c)(4) 
that such a contract, practice, activity or arrangement is in the 
public interest.
    (3) Section 76.1002(c)(3) (i) through (ii) shall only restrict the 
conduct of an open video system operator, its affiliate that provides 
video programming on its open video system and a satellite cable 
programming vendor in which an open video system operator has an 
attributable interest, as follows:
    (i) Unserved areas. No open video system operator shall enter into 
any subdistribution agreement or arrangement for satellite cable 
programming or satellite broadcast programming with a satellite cable 
programming vendor in which an open video system operator has an 
attributable interest or a satellite broadcast programming vendor in

[[Page 28714]]

which an open video system operator has an attributable interest for 
distribution to persons in areas not served by a cable operator as of 
October 5, 1992.
    (ii) Served areas. No open video system operator shall enter into 
any subdistribution agreement or arrangement for satellite cable 
programming or satellite broadcast programming with a satellite cable 
programming vendor in which an open video system operator has an 
attributable interest or a satellite broadcast programming vendor in 
which an open video system operator has an attributable interest, with 
respect to areas served by a cable operator, unless such agreement or 
arrangement complies with the limitations set forth in 
Sec. 76.1002(c)(3)(iii).
    (b) No open video system programming provider in which a cable 
operator has an attributable interest shall:
    (1) engage in any practice or activity or enter into any 
understanding or arrangement, including exclusive contracts, with a 
satellite cable programming vendor or satellite broadcast programming 
vendor for satellite cable programming or satellite broadcast 
programming that prevents a multichannel video programming distributor 
from obtaining such programming from any satellite cable programming 
vendor in which a cable operator has an attributable interest, or any 
satellite broadcasting vendor in which a cable operator has an 
attributable interest for distribution to person in areas not served by 
a cable operator as of October 5, 1992.
    (2) enter into any exclusive contracts, or engage in any practice, 
activity or arrangement tantamount to an exclusive contract, for 
satellite cable programming or satellite broadcast programming with a 
satellite cable programming vendor in which a cable operator has an 
attributable interest or a satellite broadcast programming vendor, 
unless the Commission determines in accordance with Section 
76.1002(c)(4) that such a contract, practice, activity or arrangement 
is in the public interest.


Sec. 76.1508  Network non-duplication.

    (a) Sections 76.92 through 76.97 shall apply to open video systems 
in accordance with the provisions contained in this section.
    (b) Any provision of Sec. 76.92 that refers to a ``cable community 
unit'' or ``community unit'' shall apply to an open video system or 
that portion of an open video system that operates or will operate 
within a separate and distinct community or municipal entity (including 
unincorporated communities within unincorporated areas and including 
single, discrete unincorporated areas). Any provision of Sec. 76.92 
that refers to a ``cable television community'' shall apply to an open 
video system community. Any provision of Sec. 76.92 that refers to a 
``cable television system's mandatory signal carriage obligations'' 
shall apply to an open video system's mandatory signal carriage 
obligations.
    (c) Any provision of Sec. 76.94 that refers to a ``cable system 
operator'' or ``cable television system operator'' shall apply to an 
open video system operator. Any provision of Sec. 76.94 that refers to 
a ``cable system'' or ``cable television system'' shall apply to an 
open video system except Sec. 76.94 (e) and (f) which shall apply to an 
open video system operator. Open video system operators shall make all 
notifications and information regarding the exercise of network non-
duplication rights immediately available to all appropriate video 
programming provider on the system. An open video system operator shall 
not be subject to sanctions for any violation of these rules by an 
unaffiliated program supplier if the operator provided proper notices 
to the program supplier and subsequently took prompt steps to stop the 
distribution of the infringing program once it was notified of a 
violation.
    (d) Any provision of Sec. 76.95 that refers to a ``cable system'' 
or a ``cable community unit'' shall apply to an open video system or 
that portion of an open video system that operates or will operate 
within a separate and distinct community or municipal entity (including 
unincorporated communities within unincorporated areas and including 
single, discrete unincorporated areas).


Sec. 76.1509  Syndicated program exclusivity.

    (a) Sections 76.151 through 76.163 shall apply to open video 
systems in accordance with the provisions contained in this section.
    (b) Any provision of Sec. 76.151 that refers to a ``cable community 
unit'' shall apply to an open video system.
    (c) Any provision of Sec. 76.155 that refers to a ``cable system 
operator'' or ``cable television system operator'' shall apply to an 
open video system operator. Any provision of Sec. 76.155 that refers to 
a ``cable system'' or ``cable television system'' shall apply to an 
open video system except Sec. 76.155(c) which shall apply to an open 
video system operator. Open video system operators shall make all 
notifications and information regarding exercise of syndicated program 
exclusivity rights immediately available to all appropriate video 
programming provider on the system. An open video system operator shall 
not be subject to sanctions for any violation of these rules by an 
unaffiliated program supplier if the operator provided proper notices 
to the program supplier and subsequently took prompt steps to stop the 
distribution of the infringing program once it was notified of a 
violation.
    (d) Any provision of Sec. 76.156 that refers to a ``cable 
community'' shall apply to an open video system community. Any 
provision of Sec. 76.156 that refers to a ``cable community unit'' or 
``community unit'' shall apply to an open video system or that portion 
of an open video system that operates or will operate within a separate 
and distinct community or municipal entity (including unincorporated 
communities within unincorporated areas and including single, discrete 
unincorporated areas). Any provision of Secs. 76.156 through 76.158, 
and 76.163 that refers to a ``cable system'' shall apply to an open 
video system.
    (e) Any provision of Sec. 76.159 that refers to ``cable 
television'' or a ``cable system'' shall apply to an open video system.
    (f) Any provision of Sec. 76.161 that refers to a ``community 
unit'' shall apply to an open video system or that portion of an open 
video system that is affected by this rule.


Sec. 76.1510  Application of certain Title VI provisions.

    The following sections within Part 76 shall also apply to open 
video systems: Secs. 76.71, 76.73, 76.75, 76.77 and 76.79 (Equal 
Employment Opportunity Requirements); Secs. 76.503 and 76.504 
(ownership restrictions); Sec. 76.981 (negative option billing); and 
Secs. 76,1300, 76.1301 and 76.1302 (regulation of carriage agreements); 
provided, however, that these sections shall apply to open video 
systems only to the extent that they do not conflict with this subpart 
S. Section 631 of the Communications Act (subscriber privacy) shall 
also apply to open video systems.


Sec. 76.1511  Fees.

    An open video system operator may be subject to the payment of fees 
on the gross revenues of the operator for the provision of cable 
service imposed by a local franchising authority or other governmental 
entity, in lieu of the franchise fees permitted under Section 622 of 
the Communications Act. Gross revenues under this paragraph means all 
gross revenues received by an open video system operator or its 
affiliates,

[[Page 28715]]

including all revenues received from subscribers and all carriage 
revenues received from unaffiliated video programming providers. Gross 
revenues does not include revenues collected by unaffiliated video 
programming providers from their subscribers. Any gross revenues fee 
that the open video system operator or its affiliate collects from 
subscribers shall be excluded from gross revenues. An operator of an 
open video system may designate that portion of a subscriber's bill 
attributable to the fee as a separate item on the bill.


Sec. 76.1512  Programming information.

    (a) An open video system operator shall not unreasonably 
discriminate in favor of itself or its affiliates with regard to 
material or information (including advertising) provided by the 
operator to subscribers for the purpose of selecting programming on the 
open video system, or in the way such material or information is 
provided to subscribers.

    Note to paragraph (a): ``Material or information'' as used in 
paragraph (a) of this section means material or information that a 
subscriber uses to actively select programming at the point of 
program selection.

    (b) In accordance with paragraph (a) of this section:
    (1) An open video system operator shall not discriminate in favor 
of itself or its affiliate on any navigational device, guide or menu;
    (2) An open video system operator shall not omit television 
broadcast stations or other unaffiliated video programming services 
carried on the open video system from any navigational device, guide 
(electronic or paper) or menu. For programming services that an open 
video system subscriber has not ordered, menus provided by an open 
video system operator shall, at a minimum, inform the subscriber how to 
access an additional screen that lists the unordered programming 
services.
    (c) An open video system operator shall ensure that video 
programming providers or copyright holders (or both) are able to 
suitably and uniquely identify their programming services to 
subscribers.
    (d) An open video system operator shall transmit programming 
identification without change or alteration if such identification is 
transmitted as part of the programming signal.


Sec. 76.1513  Dispute resolution.

    (a) Complaints. Any party aggrieved by conduct that it alleges to 
constitute a violation of the regulations set forth in this part or in 
Section 653 of the Communications Act (47 U.S.C. 573) may commence an 
adjudicatory proceeding at the Commission. The Commission shall resolve 
any such dispute within 180 days after the filing of a complaint.
    (b) Alternate dispute resolution. An open video system operator may 
not provide in its carriage contracts with programming providers that 
any dispute must be submitted to arbitration, mediation, or any other 
alternative method for dispute resolution prior to submission of a 
complaint to the Commission.
    (c) Notice required prior to filing of complaint. Any aggrieved 
party intending to file a complaint under this section must first 
notify the potential defendant open video system operator that it 
intends to file a complaint with the Commission based on actions 
alleged to violate one or more of the provisions contained in this part 
or in Section 653 of the Communications Act. The notice must be in 
writing and must be sufficiently detailed so that its recipient(s) can 
determine the specific nature of the potential complaint. The potential 
complainant must allow a minimum of ten (10) days for the potential 
defendant(s) to respond before filing a complaint with the Commission.
    (d) General pleading requirements. Complaint proceedings under this 
part are generally resolved on a written record consisting of a 
complaint, answer, and reply, but may also include other written 
submissions such as briefs and written interrogatories. All written 
submissions, both substantive and procedural, must conform to the 
following standard:
    (1) Pleadings must be clear, concise, and explicit. All matters 
concerning a claim, defense or requested remedy, should be pleaded 
fully and with specificity;
    (2) Pleadings must contain facts which, if true, are sufficient to 
constitute a violation of the Communications Act or of a Commission 
regulation or order, or a defense to such alleged violation;
    (3) Facts must be supported by relevant documentation or affidavit;
    (4) Legal arguments must be supported by appropriate judicial, 
Commission, or statutory authority;
    (5) Opposing authorities must be distinguished;
    (6) Copies must be provided of all non-Commission authorities 
relied upon which are not routinely available in national reporting 
systems, such as unpublished decisions or slip opinions of courts or 
administrative agencies; and
    (7) Parties are responsible for the continuing accuracy and 
completeness of all information and supporting authority furnished in a 
pending complaint proceeding. Information submitted, as well as 
relevant legal authorities, must be current and updated as necessary 
and in a timely manner at any time before a decision is rendered on the 
merits of the complaint.
    (e) Complaint.
    (1) A complaint filed under this part shall contain:
    (i) The name of the complainant and each defendant;
    (ii) The type of entity that describes complainant (e.g., 
individual, private association, partnership, or corporation), the 
address and telephone number of the complainant, and the address and 
telephone number of each defendant;
    (iii) The name, address and telephone number of complainant's 
attorney, if complainant is represented by counsel;
    (iv) Citation to the section of the Communications Act and/or the 
Commission regulation or order alleged to have been violated;
    (v) A complete statement of facts, which, if proven true, would 
constitute such a violation;
    (vi) Any evidence that supports the truth or accuracy of the 
alleged facts;
    (vii) Evidence that the open video system operator's conduct at 
issue violated a section of the Communications Act and/or Commission 
regulation or order.
    (viii) If discrimination in rates, terms, and conditions of 
carriage is alleged, documentary evidence shall be submitted such as a 
preliminary carriage rate estimate or a programming contract that 
demonstrates a differential in price, terms or conditions between 
complainant and a competing video programming provider or, if no 
programming contract or preliminary carriage rate estimate is submitted 
with the complaint, an affidavit signed by an officer of complainant 
alleging that a differential in price, terms or conditions exists, a 
description of the nature and extent (if known or reasonably estimated 
by the complainant) of the differential, together with a statement that 
defendant refused to provide any further specific comparative 
information;
    (ix) If a programming contract or a preliminary carriage rate 
estimate is submitted with the complaint in support of the alleged 
violation, specific references to the relevant provisions therein; and
    (x) The specific relief sought.
    (2) Every complaint alleging a violation of the open video system 
requirements shall be accompanied by a sworn affidavit signed by an 
authorized

[[Page 28716]]

officer or agent of the complainant. This affidavit shall contain a 
statement that the affiant has read the complaint and that to the best 
of the affiant's knowledge, information, and belief formed after 
reasonable inquiry, it is well grounded in fact and is warranted under 
Commission regulations and policies, or is a good faith argument for 
the extension, modification or reversal of such regulations or 
policies, and it is not interposed for any improper purpose. If the 
complaint is signed in violation of this rule, the Commission upon 
motion or its own initiative, shall impose upon the complainant an 
appropriate sanction.
    (3) The following format may be used in cases to which it is 
applicable, with such modifications as the circumstances may render 
necessary:

    Before The Federal Communications Commission, Washington, D.C. 
20554
    In the Matter of Complainant
    File No. (To be inserted by the Commission) v. Defendant.

[Insert Subject or Nature of Issue: Unjust or Unreasonable 
Discrimination in Rates, Terms, and Conditions; Discriminatory 
Denial of Carriage]
    Open Video System Complaint
To: The Commission.
    The complainant (here insert full name of complainant and type 
of entity of such complainant):
    1. (Here state the complainant's post office address and 
telephone number).
    2. (Here insert the name, address and telephone number of each 
defendant).
    3. (Here insert fully and clearly the specific act or thing 
complained of, together with such facts as are necessary to give 
full understanding of the matter, including relevant legal and 
documentary support).
    Wherefore, complainant asks (here state specifically the relief 
desired).
(Date)-----------------------------------------------------------------
(Name of complainant)--------------------------------------------------
----------------------------------------------------------------------
(Name, address, and telephone number of attorney, if any)

    (4) The complaint must be accompanied by appropriate evidence 
demonstrating that the required notification pursuant to paragraph (c) 
of this section has been made.
    (f) Answer.
    (1) Any open video system operator upon which a complaint is served 
under this section shall answer within thirty (30) days of service of 
the complaint, unless otherwise directed by the Commission.
    (2) The answer shall advise the parties and the Commission fully 
and completely of the nature of any and all defenses, and shall respond 
specifically to all material allegations of the complaint. Collateral 
or immaterial issues shall be avoided in answers and every effort 
should be made to narrow the issues. Any defendant failing to file and 
serve an answer within the time and in the manner prescribed by these 
rules may be deemed in default and an order may be entered against 
defendant in accordance with the allegations contained in the 
complaint.
    (3) The answer shall state concisely any and all defenses to each 
claim asserted and shall admit or deny the averments on which the 
adverse party relies. If the defendant is without knowledge or 
information sufficient to form a belief as to the truth of an averment, 
the defendant shall so state and this has the effect of a denial. When 
a defendant intends in good faith to deny only part of an averment, the 
answer shall specify so much of it as is true and shall deny only the 
remainder. The defendant may make its denials as specific denials of 
designated averments or paragraphs, or may generally deny all the 
averments except such designated averments or paragraphs as the 
defendant expressly admits. When the defendant intends to controvert 
all averments, the defendant may do so by general denial.
    (4) Averments in a complaint are deemed to be admitted when not 
denied in the answer.
    (5) An answer to a discrimination complaint shall state the reasons 
for any differential in prices, terms or conditions between the 
complainant and its competitor, and shall specify the particular 
justification relied upon in support of the differential. Any documents 
or contracts submitted pursuant to this paragraph (f)(5) may be 
protected as proprietary pursuant to paragraph (j) of this section.
    (g) Reply. Within twenty (20) days after service of an answer, the 
complainant may file and serve a reply which shall be responsive to 
matters contained in the answer and shall not contain new matters. 
Failure to reply will not be deemed an admission of any allegations 
contained in the answer, except with respect to any affirmative defense 
set forth therein. Replies containing information claimed by defendant 
to be proprietary under paragraph (j) of this section shall be 
submitted to the Commission in confidence pursuant to the requirements 
of Sec. 0.459 of this chapter and clearly marked ``Not for Public 
Inspection.'' An edited version removing all proprietary data shall be 
filed with the Commission for inclusion in the public file within five 
(5) days from the date the unedited reply is submitted, and shall be 
served on the defendant.
    (h) Motions. Except as provided in this section, or upon a showing 
of extraordinary circumstances, additional motions or pleadings by any 
party will not be accepted.
    (i) Discovery.
    (1) The Commission staff may in its discretion order discovery 
limited to the issues specified by the Commission. Such discovery may 
include answers to written interrogatories or document production.
    (2) The Commission staff may in its discretion direct the parties 
to submit discovery proposals, together with a memorandum in support of 
the discovery requested. Such discovery requests may include answers to 
written interrogatories, document production or depositions. The 
Commission staff will then hold a status conference with the parties, 
pursuant to paragraph (l) of this section, to determine the scope of 
discovery. If the Commission staff determines that extensive discovery 
is required or that depositions are warranted, the staff will advise 
the parties that the proceeding will be referred to an administrative 
law judge in accordance with paragraph (o) of this section.
    (j) Confidentiality of proprietary information.
    (1) Any materials generated or provided by a party in connection 
with the pre-complaint notification procedure required under paragraph 
(c) of this section and in the course of adjudicating a complaint under 
this provision may be designated as proprietary by that party if the 
party believes in good faith that the materials fall within an 
exemption to disclosure contained in the Freedom of Information Act 
(FOIA), 5 U.S.C. 552(b). Any party asserting confidentiality for such 
materials shall so indicate by clearly marking each page, or portion 
thereof, for which a proprietary designation is claimed. If a 
proprietary designation is challenged, the party claiming 
confidentiality will have the burden of demonstrating, by a 
preponderance of the evidence, that the material designated as 
proprietary falls under the standards for nondisclosure enunciated in 
the FOIA.
    (2) Materials marked as proprietary may be disclosed solely to the 
following persons, only for use in prosecuting or defending a party to 
the complaint action, and only to the extent necessary to assist in the 
prosecution or defense of the case:
    (i) Counsel of record representing the parties in the complaint 
action and any support personnel employed by such attorneys;
    (ii) Officers or employees of the opposing party who are named by 
the opposing party as being directly

[[Page 28717]]

involved in the prosecution or defense of the case;
    (iii) Consultants or expert witnesses retained by the parties;
    (iv) The Commission and its staff; and
    (v) Court reporters and stenographers in accordance with the terms 
and conditions of this section.
    (3) The persons designated in paragraph (j)(2) of this section 
shall not disclose information designated as proprietary to any person 
who is not authorized under this section to receive such information, 
and shall not use the information in any activity or function other 
than the prosecution or defense in the case before the Commission. Each 
individual who is provided access to the information by the opposing 
party shall sign a notarized statement affirmatively stating, or shall 
certify under penalty of perjury, that the individual has personally 
reviewed the Commission's rules and understands the limitations they 
impose on the signing party.
    (4) No copies of materials marked proprietary may be made except 
copies to be used by persons designated in paragraph (j)(2) of this 
section. Each party shall maintain a log recording the number of copies 
made of all proprietary material and the persons to whom the copies 
have been provided.
    (5) Upon termination of the complaint proceeding, including all 
appeals and petitions, all originals and reproductions of any 
proprietary materials, along with the log recording persons who 
received copies of such materials, shall be provided to the producing 
party. In addition, upon final termination of the complaint proceeding, 
any notes or other work product derived in whole or in part from the 
proprietary materials of an opposing or third party shall be destroyed.
    (k) Other required written submissions.
    (1) The Commission may, in its discretion, require the parties to 
file briefs summarizing the facts and issues presented in the pleadings 
and other record evidence. These briefs shall contain the findings of 
fact and conclusions of law which that party is urging the Commission 
to adopt, with specific citations to the record, and supported by 
relevant authority and analysis.
    (2) The Commission may require the parties to submit any additional 
information it deems appropriate for a full, fair, and expeditious 
resolution of the proceeding, including copies of all contracts and 
documents reflecting arrangements and understandings alleged to violate 
the requirements set forth in the Communications Act and in this part, 
as well as affidavits and exhibits.
    (3) Any briefs submitted shall be filed concurrently by both the 
complainant and defendant at such time as is designated by the staff. 
Such briefs shall not exceed fifty (50) pages.
    (4) Reply briefs may be submitted by either party within twenty 
(20) days from the date initial briefs are due. Reply briefs shall not 
exceed thirty (30) pages.
    (5) Briefs containing information which is claimed by an opposing 
or third party to be proprietary under paragraph (j) of this section 
shall be submitted to the Commission in confidence pursuant to the 
requirements of Sec. 0.459 of this chapter, and shall be clearly marked 
``Not for Public Inspection.'' An edited version removing all 
proprietary data shall be filed with the Commission for inclusion in 
the public file within five (5) days from the date the unedited version 
is submitted and served on opposing parties.
    (l) Status conference.
    (1) In any complaint proceeding under this part, the Commission 
staff may in its discretion direct the attorneys and/or the parties to 
appear for a conference to consider:
    (i) Simplification or narrowing of the issues;
    (ii) The necessity for or desirability of amendments to the 
pleadings, additional pleadings, or other evidentiary submissions;
    (iii) Obtaining admissions of fact or stipulations between the 
parties as to any or all of the matters in controversy;
    (iv) Settlement of the matters in controversy by agreement of the 
parties;
    (v) The necessity for and extent of discovery, including objections 
to interrogatories or requests for written documents;
    (vi) The need and schedule for filing briefs, and the date for any 
further conferences; and
    (vii) Such other matters that may aid in the disposition of the 
complaint.
    (2) Any party may request that a conference be held at any time 
after the complaint has been filed.
    (3) Conferences will be scheduled by the Commission at such time 
and place as it may designate, to be conducted in person or by 
telephone conference call.
    (4) The failure of any attorney or party, following reasonable 
notice, to appear at a scheduled conference will be deemed a waiver and 
will not preclude the Commission from conferring with those parties or 
counsel present.
    (5) During a status conference, the Commission staff may issue oral 
rulings pertaining to a variety of interlocutory matters relevant to 
the conduct of the complaint proceeding including, inter alia, 
procedural matters, discovery, and the submission of briefs or other 
evidentiary materials. These rulings will be promptly memorialized in 
writing and served on the parties. When such rulings require a party to 
take affirmative action not subject to deadlines established by another 
provision of this part, such action will be required within ten (10) 
days from the date of the written memorialization unless otherwise 
directed by the staff.
    (m) Specifications as to pleadings, briefs, and other documents; 
subscriptions.
    (1) All papers filed in a complaint proceeding under this part must 
be drawn in conformity with the requirements of Sections 1.49 and 1.50 
of this chapter.
    (2) All averments of claims or defenses in complaints and answers 
shall be made in numbered paragraphs. The contents of each paragraph 
shall be limited as far as practicable to a statement of a single set 
of circumstances. Each claim founded on a separate transaction or 
occurrence and each affirmative defense shall be separately stated to 
facilitate the clear presentation of the matters set forth.
    (3) The original of all pleadings and submissions by any party 
shall be signed by that party, or by the party's attorney. Complaints 
must be signed by the complainant. The signing party shall state his or 
her address and telephone number and the date on which the document was 
signed. Copies should be conformed to the original. Except when 
otherwise specifically provided by rule or statute, pleadings need not 
be verified. The signature of an attorney or party shall be a 
certificate that the attorney or party has read the pleading, motion, 
or other paper; that to the best of his or her knowledge, information 
and belief formed after reasonable inquiry, it is well grounded in fact 
and is warranted by existing law or a good faith argument for the 
extension, modification or reversal of existing law; and that it is not 
interposed for any improper purpose. If any pleading or other 
submission is signed in violation of this provision, the Commission 
shall upon motion or upon its own initiative impose upon the party an 
appropriate sanction. Where the pleading or submission is signed by 
counsel, the provisions of Sections 1.52 and 1.24 of this chapter shall 
also apply.
    (n) Copies; service.
    (1) The complainant shall file an original plus three copies of the 
complaint with the Commission.

[[Page 28718]]

However, if the complaint is addressed against multiple defendants, 
complainant shall provide three additional copies of the complaint for 
each additional defendant.
    (2) An original plus two copies shall be filed of all pleadings and 
documents other than the complaint.
    (3) The complainant shall serve the complaint on each defendant at 
the same time that it is filed at the Commission.
    (4) All subsequent pleadings and briefs, as well as all letters, 
documents or other written submissions, shall be served by the filing 
party on all other parties to the proceeding, together with proof of 
such service in accordance with the requirements of Sec. 1.47 of this 
chapter.
    (5) The parties to any complaint proceeding brought pursuant to 
this section may be required to file additional copies of any or all 
papers filed in the proceeding.
    (o) Referral to administrative law judge.
    (1) After reviewing the complaint, answer and reply, and at any 
stage of the proceeding thereafter, the Commission staff may, in its 
discretion, designate any complaint proceeding for an adjudicatory 
hearing before an administrative law judge.
    (2) Before designation for hearing, the staff shall notify, either 
orally or in writing, the parties to the proceeding of its intent to so 
designate, and the parties shall be given a period of ten (10) days to 
elect to resolve the dispute through alternative dispute resolution 
procedures, or to proceed with an adjudicatory hearing. Such election 
shall be submitted in writing to the Commission.
    (3) Unless otherwise directed by the Commission, or upon motion by 
the Cable Services Bureau Chief, the Cable Services Bureau Chief shall 
not be deemed to be a party to a complaint proceeding designated for a 
hearing before an administrative law judge pursuant to this paragraph.
    (p) Petitions for reconsideration. Petitions for reconsideration of 
interlocutory actions by the Commission's staff or by an administrative 
law judge will not be entertained. Petitions for reconsideration of a 
decision on the merits made by the Commission's staff should be filed 
in accordance with Secs. 1.104 through 1.106 of this chapter.
    (q) Interlocutory review.
    (1) Except as provided below, no party may seek review of 
interlocutory rulings until a decision on the merits has been issued by 
the staff or administrative law judge.
    (2) Rulings listed in this paragraph are reviewable as a matter of 
right. An application for review of such ruling may not be deferred and 
raised as an exception to a decision on the merits:
    (i) If the staff's ruling denies or terminates the right of any 
person to participate as a party to the proceeding, such person, as a 
matter of right, may file an application for review of that ruling:
    (ii) If the staff's ruling requires production of documents or 
other written evidence, over objection based on a claim of privilege, 
the ruling on the claim of privilege is reviewable as a matter of 
right; and/or
    (iii) If the staff's ruling denies a motion to disqualify a staff 
person from participating in the proceeding, the ruling is reviewable 
as a matter of right.
    (r) Expedited review.
    (1) Any party to a complaint proceeding under this part aggrieved 
by any decision on the merits issued by the staff pursuant to delegated 
authority may file an application for review by the Commission in 
accordance with Section 1.115 of this chapter.
    (2) Any party to a complaint proceeding aggrieved by any decision 
on the merits by an administrative law judge may file an appeal of the 
decision directly with the Commission, in accordance with Sec. 1.276(a) 
and Secs. 1.277 (a) through (c) of this chapter, except that unless a 
stay is granted by the Commission, the decision by the administrative 
law judge will become effective upon release and will remain in effect 
pending appeal.
    (s) Frivolous complaints. It shall be unlawful for any party to 
file a frivolous complaint with the Commission alleging any violation 
of this part. Any violation of this paragraph shall constitute an abuse 
of process subject to appropriate sanctions.
    (t) Statute of limitations. Any complaint filed pursuant to this 
subsection must be filed within one year of the date on which the 
following acts or conduct occur which form the basis of the complaint:
    (1) The open video system operator enters into a contract with the 
complainant that the complainant alleges to violate one or more of the 
rules contained in this part; or
    (2) The open video system operator offers to carry programming for 
the complainant pursuant to terms that the complainant alleges to 
violate one or more of the rules contained in this part; or
    (3) The complainant has notified an open video system operator that 
it intends to file a complaint with the Commission based on a request 
for such operator to carry the complainant's programming on its open 
video system that has been denied or unacknowledged, allegedly in 
violation of one or more of the rules contained in this part.
    (u) Remedies for violations.
    (1) Remedies authorized. Upon completion of such adjudicatory 
proceeding, the Commission shall order appropriate remedies, including, 
if necessary, the requiring carriage, awarding damages to any person 
denied carriage, or any combination of such sanctions. Such order shall 
set forth a timetable for compliance, and shall become effective upon 
release.
    (2) Additional sanctions. The remedies provided in paragraph (u)(1) 
of this section are in addition to and not in lieu of the sanctions 
available under Title VI or any other provision of the Communications 
Act.


Sec. 76.1514  Bundling of video and local exchange services.

    An open video system operator may offer video and local exchange 
services for sale in a single package at a single price, provided that:
    (a) the open video system operator, where it is the incumbent local 
exchange carrier, may not require that a subscriber purchase its video 
service in order to receive local exchange service; and
    (b) Any local exchange carrier offering such a package must impute 
the unbundled tariff rate for the unregulated service.

[FR Doc. 96-14238 Filed 6-4-96; 8:45 am]
BILLING CODE 6712-01-P