[Federal Register Volume 63, Number 166 (Thursday, August 27, 1998)]
[Rules and Regulations]
[Pages 45740-45746]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 98-22602]


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

FEDERAL COMMUNICATIONS COMMISSION

47 CFR Part 76

[CS Docket No. 97-248; RM No. 9097; FCC 98-189]


Development of Competition and Diversity in Video Programming 
Distribution and Carriage

AGENCY: Federal Communications Commission.

ACTION: Final rule.

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

SUMMARY: Section 628 of the Communications Act prohibits unfair or 
discriminatory practices in the sale of satellite cable and satellite 
broadcast programming. Section 628 is intended to increase competition 
and diversity in the multichannel video programming market, as well as 
to foster the development of competition to traditional cable systems, 
by prescribing regulations that govern the access by competing 
multichannel systems to cable programming services.

DATES: This rule contains information collection requirements that have 
not been approved by the Office of Management and Budget (``OMB''). The 
Commission will publish a document in the Federal Register announcing 
the effective date of this rule. Written comments by the public on the 
modified information collection requirements contained should be 
submitted on or before October 26, 1998. If you anticipate that you 
will be submitting comments on the modified information collection 
requirements, but find it difficult to do so within the period of time 
allowed by this notice, you should advise the contact listed below as 
soon as possible.

ADDRESSES: A copy of any comments on the modified information 
collection requirements contained herein should be submitted to Judy 
Boley, Federal Communications, Room 234, 1919 M St., NW, Washington, DC 
20554 or via internet to [email protected].

FOR FURTHER INFORMATION CONTACT: For additional information concerning 
the Report and Order contact Steve Broeckaert at (202) 418-7200 or via 
internet at [email protected]. For additional information concerning the 
proposed and/or modified information collection requirements contained 
in the Report and Order contact Judy Boley at (202) 418-0214 or via 
internet at [email protected].

Paperwork Reduction Act

    The requirements contained in this Report and Order have been 
analyzed

[[Page 45741]]

with respect to the Paperwork Reduction Act of 1995 (the ``1995 Act'') 
and would impose modified information collection requirements on the 
public. The Commission, as part of its continuing effort to reduce 
paperwork burdens, invites the general public to take this opportunity 
to comment on the proposed information collection requirements 
contained in this Notice, as required by the 1995 Act. Public comments 
are due October 26, 1998 and then implementation of any modified 
requirements will be subject to approval by the Office of Management 
and Budget (``OMB'') as prescribed by the 1995 Act. Comments should 
address: (a) 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; (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-XXXX.
    Title: Section 76.1003 Adjudicatory proceedings.
    Type of Review: Revision of a currently approved collection.
    Respondents: Businesses or other for-profit entities.
    Number of Respondents: 24.
    Estimated Time Per Response: 4-30 hours.
    Frequency of Response: On occasion.
    Total Annual Burden to Respondents: 408 hours.
    Total Annual Cost to Respondents: $54,360.
    Needs and Uses: The information disclosed and collected in these 
proceedings has been used by Commission staff to resolve disputes 
alleging unfair methods of competition and deceptive practices where 
the purpose or effect of which is to hinder significantly or to prevent 
any multichannel video programming distributor from providing satellite 
cable programming or satellite broadcast programming to subscribers or 
consumers.

Synopsis

    1. The Report and Order addresses the issues raised in the 
Memorandum Opinion and Order and Notice of Proposed Rulemaking in CS 
Docket No. 97-248, 63 FR 1943 (December 18, 1997) (``NPRM ''), 
regarding proposed amendments to the rules promulgated pursuant to 
section 628 of the Communications Act (47 USC Sec. 548).
    2. Sanctions. The Commission's existing statutory forfeiture 
authority can be used in appropriate circumstances as an enforcement 
mechanism for program access violations. Restitution in the form of 
damages is also an appropriate remedy to return improper gains obtained 
by vertically-integrated programmers to unjustly injured MVPDs. 
However, the law of program access continues to be refined, and it is 
not appropriate in all instances to impose damages for program access 
violations. Section 628 permits the Commission to exercise discretion 
in this area. Where a program access defendant relies upon a good faith 
interpretation of an ambiguous aspect of the program access provisions 
for which there is no guidance, we do not believe it would promote 
competition, or otherwise benefit the video marketplace, to require 
damages from a programming provider in such circumstances. Where a 
program access defendant knew, or should have known, that it was 
engaging in conduct violative of section 628, damages are appropriate 
and will be imposed. The Commission has the authority to assess 
forfeitures and damages separately and in combination depending upon 
the circumstances of a given case. The Commission also retains the 
authority to issue entirely prospective relief as it has in previous 
decisions.
    3. Damages can best be calculated on a case-by-case basis using 
procedures similar to those employed by the Commission in adjudicating 
common carrier formal complaints. The most efficient method by which to 
administer damages is to provide the Commission with discretion to 
bifurcate the violation determination from any damages adjudication. 
The Report and Order requires that a complainant seeking damages for a 
program access violation must file as part of its complaint either:
    (a) A detailed computation of damages, including supporting 
documentation and materials; or
    (b) An explanation of:
    (i) What information not in the possession of the complaining party 
is necessary to develop a detailed computation of damages;
    (ii) Why such information is unavailable to the complaining party;
    (iii) The factual basis the complainant has for believing that such 
evidence of damages exists; and
    (iv) A detailed outline of the methodology that would be used to 
create a computation of damages with such evidence.

Where a violation is found, the Cable Services Bureau (``Bureau'') will 
indicate in its order whether the violation is the type for which the 
Commission will impose damages or forfeitures. The burden of proof 
regarding damages rests with the complainant, who must demonstrate with 
specificity the damages arising from the program access violation.
    4. The Commission may adjudicate damages by determining the 
sufficiency of the damages calculation or computation methodology 
submitted by the complainant. Where the Commission issues a written 
order approving or modifying a damages calculation, the defendant shall 
recompense the complainant as directed in the Commission's order. Where 
the Commission issues a written order approving or modifying a damages 
computation methodology, the parties shall negotiate in good faith to 
reach an agreement on the exact amount of damages pursuant to the 
Commission-mandated methodology. To ensure that the parties are 
diligent in their negotiations to apply the approved methodology, the 
Commission will require that, within thirty days of the date the 
damages computation method is approved and released, the parties must 
file with the Commission a joint statement which will do one of the 
following: (1) detail the parties' agreement as to the amount of 
damages; (2) state that the parties are continuing to negotiate in good 
faith and request that the parties be given an extension of time to 
continue such negotiations, or (3) detail the bases for the continuing 
dispute and the reasons why no agreement can be reached. In cases in 
which the parties cannot resolve the amount of damages within a 
reasonable time period, the Commission retains the right to determine 
the actual amount of damages on its own, or through referral to an ALJ.
    5. Time Limits. Denial of programming cases (unreasonable refusal 
to sell, petitions for exclusivity, and exclusivity complaints) should 
be resolved within five months of the submission of the complaint to 
the Commission. All other program access complaints, including price 
discrimination cases, should be resolved within nine months of the 
submission of the complaint to the Commission. Where the Commission 
bifurcates the program access violation determination from a damages 
determination, the time limits adopted by the Commission apply solely 
to the resolution of the program access violation. The time limits 
contemplate resolution times applicable to most typical program access 
disputes

[[Page 45742]]

which do not involve complex or repeated discovery, pleading extensions 
or extra pleadings based upon new information, or requests that the 
Commission stay proceedings pending settlement negotiations. Where the 
parties to a program access dispute submit a motion to stay proceedings 
pending settlement discussions, the Commission will afford the parties 
the time necessary to determine whether a negotiated settlement is 
possible. If parties choose to pursue negotiations time limits will be 
suspended. Program access defendants must file an answer within 20 days 
of service of the complaint, unless otherwise directed by the 
Commission. Program access complainants must file a reply within 15 
days of service of the answer, unless otherwise directed by the 
Commission.
    6. Discovery. The Commission retains the current system of 
Commission-controlled discovery. Discovery as-of-right, or expanded 
discovery, will not improve the quality or efficiency of the 
Commission's resolution of program access complaints. The Commission 
clarifies its rules to provide that, to the extent that a defendant 
expressly references and relies upon a document or documents within its 
control in responding to a program access complaint, the defendant must 
attach that document or documents to its answer. The Commission adopts 
the standardized protective order that was attached to the NPRM for 
program access matters with several minor revisions.
    7. Terrestrial Delivery of Programming. The Commission concludes 
that the record developed in this proceeding fails to establish that 
the conduct complained of, i.e., moving the transmission of programming 
from satellite to terrestrial delivery to avoid the program access 
rules, is significant and causing demonstrative competitive harm at 
this time. In circumstances where anti-competitive harm has not been 
demonstrated, the Commission perceives no reason to impose detailed 
rules on the movement of programming from satellite delivery to 
terrestrial delivery that would unnecessarily inject the Commission 
into the day-to-day business decisions of vertically-integrated 
programmers. While the record does not indicate a significant anti-
competitive impact necessitating Commission action at this time, the 
Commission believes that the issue of terrestrial distribution of 
programming could eventually have substantial impact on the ability of 
alternative MVPDs to compete in the video marketplace. The Commission 
will continue to monitor this issue and its impact on competition in 
the video marketplace.
    8. Buying Groups: Joint and Several Liability. The record justifies 
adopting an alternative method to joint and several liability that 
buying groups can satisfy which ensures that programming distributors 
are adequately protected from excessive financial risk. To qualify for 
the alternative to joint and several liability, buying groups must 
maintain liquid cash or credit reserves (i.e., cash, cash equivalents, 
or letters or lines of credit) equal to cover the cost of one month's 
programming for all of the buying groups members. In addition, each 
member of the buying group will remain liable to the programmer for its 
pro-rata share of the buying group's programming. Under this approach, 
the alternative financial assurances method is available to buying 
groups of all sizes. At the same time, programming providers are 
adequately protected from the catastrophic default by multiple members 
of a buying group. If multiple members of a particular buying group 
default on their obligations to the buying group, and the buying group 
is unable to meet its obligations with existing resources, the 
programming provider is ensured payment for all programming thus far 
provided. At such point, the programming provider would have the option 
of terminating its contract with the buying group, retaining the one 
month's programming fees, and contracting with buying group members on 
terms negotiated between the programmers and the individual MVPDs. 
Alternatively, the programming provider could retain only the portion 
of the one month's programming fees that were actually defaulted upon, 
continue providing programming to the buying group, and look to the 
individual member for the balance of its pro-rata share of the buying 
groups' contractual obligations.

Final Regulatory Flexibility Analysis

    9. Background. As required by the Regulatory Flexibility Act (RFA), 
an Initial Regulatory Flexibility Analysis (``IRFA'') was incorporated 
into the Notice of Proposed Rule Making (``NPRM'') in this proceeding. 
The Commission sought written public comment on the possible impact of 
the proposed policies and rules on small entities in the NPRM, 
including comments on the IRFA. This Final Regulatory Flexibility 
Analysis (``FRFA'') in this Report and Order (``Order'') conforms to 
the RFA.
    1. Need for Action and Objectives of the Rules. Section 628 of the 
Communications Act prohibits unfair or discriminatory practices in the 
sale of satellite cable and satellite broadcast programming and is 
intended to increase competition and diversity in the multichannel 
video programming market, as well as to foster the development of 
competition to traditional cable systems, by prescribing regulations 
that govern the access by competing multichannel systems to cable 
programming services. Pursuant to Congress' mandate in the 1992 Cable 
Act, the Commission promulgated regulations implementing the 
Communication Act's program access provisions. In 1997, Ameritech New 
Media, Inc. filed a petition for rulemaking requesting that the 
Commission amend our program access rules. The Commission issued a NPRM 
seeking comment on amendments to our program access rules. After 
reviewing the comments filed in this proceeding, we conclude that the 
public interest in increased competition and diversity in the 
multichannel video programming and the development of competition to 
traditional cable systems is further enhanced by amending our program 
access rules as described in the Order.
    2. Summary of Significant Issues Raised by the Public Comments in 
Response to the IRFA. No comments were filed specifically in response 
to the IRFA. We have, however, considered the economic impact on small 
entities through consideration of comments that pertain to issues of 
concern to MVPDs and programming producers and distributors. In 
particular, the Small Cable Business Association (``SCBA'') filed 
comments addressing a number of issues. One of the rule changes adopted 
in the Order is intended to assist program buying cooperatives, many 
members of which are small entities, in gaining access to vertically-
integrated cable programming at competitive rates.
    3. Description and Estimate of the Number of Small Entities to 
Which the Rules Will Apply. The RFA directs the Commission to provide a 
description of and, where feasible, an estimate of the number of small 
entities that might be affected by the rules here adopted. The RFA 
defines the term ``small entity'' as having the same meaning as the 
terms ``small business,'' ``small organization,'' and ``small 
governmental jurisdiction.'' In addition, the term ``small business'' 
has the same meaning as the term ``small business concern'' under the 
Small Business Act. Under the Small Business Act, a small business 
concern is one which: (a) is independently owned and operated; (b) is 
not dominant in its field of operation; and (c) satisfies any 
additional criteria established by the SBA. The rules we adopt in this 
Report and Order will

[[Page 45743]]

affect cable systems, multipoint multichannel distribution systems, 
direct broadcast satellites, home satellite dish manufacturers, 
satellite master antenna television, open video systems, local 
multipoint distribution systems, and program producers and 
distributors. Below, we set forth the general SBA and FCC cable small 
size standards, and then address each service individually to provide a 
more precise estimate of small entities. We also describe program 
producers and distributors.
    4. SBA Definitions for Cable and Other Pay Television Services: The 
SBA has developed a definition of small entities for cable and other 
pay television services, which includes all such companies generating 
$11 million or less in annual receipts. This definition includes cable 
system operators, closed circuit television services, direct broadcast 
satellite services, multipoint distribution systems, satellite master 
antenna systems and subscription television services. According to the 
Census Bureau data from 1992, there were approximately 1,758 total 
cable and other pay television services and 1,423 had less than $11 
million in revenue.
    5. Additional Cable System Definitions: In addition, the Commission 
has developed, with SBA's approval, our own definition of a small cable 
system operator for the purposes of rate regulation. Under the 
Commission's rules, a ``small cable company'' is one serving no more 
than 400,000 subscribers nationwide. Based on recent information, we 
estimate that there were 1439 cable operators that qualified as small 
cable companies at the end of 1995. Since then, some of those companies 
may have grown to serve over 400,000 subscribers, and others may have 
been involved in transactions that caused them to be combined with 
other cable operators. Consequently, we estimate that there are fewer 
than 1439 small entity cable system operators that may be affected by 
the decisions and rules we are adopting. We conclude that only a small 
percentage of these entities currently provide qualifying 
``telecommunications services'' as required by the Communications Act 
and, therefore, estimate that the number of such entities are 
significantly fewer than noted.
    6. The Communications Act also contains a definition of a small 
cable system operator, which is ``a cable operator that, directly or 
through an affiliate, serves in the aggregate fewer than 1% of all 
subscribers in the United States and is not affiliated with any entity 
or entities whose gross annual revenues in the aggregate exceed 
$250,000,000.'' The Commission has determined that there are 61,700,000 
cable subscribers in the United States. Therefore, we found that an 
operator serving fewer than 617,000 subscribers shall be deemed a small 
operator, if its annual revenues, when combined with the total annual 
revenues of all of its affiliates, do not exceed $250 million in the 
aggregate. Based on available data, we find that the number of cable 
operators serving 617,000 subscribers or less totals 1450. Although it 
seems certain that some of these cable system operators are affiliated 
with entities whose gross annual revenues exceed $250,000,000, we are 
unable at this time to estimate with greater precision the number of 
cable system operators that would qualify as small cable operators 
under the definition in the Communications Act.
    7. Multipoint Multichannel Distribution Systems (``MMDS''): The 
Commission refined its definition of ``small entity'' for the auction 
of MMDS as an entity that together with its affiliates has average 
gross annual revenues that are not more than $40 million for the 
preceding three calendar years. This definition of a small entity in 
the context of MMDS auctions has been approved by the SBA.
    8. The Commission completed its MMDS auction in March 1996 for 
authorizations in 493 basic trading areas (``BTAs''). Of 67 winning 
bidders, 61 qualified as small entities. Five bidders indicated that 
they were minority-owned and four winners indicated that they were 
women-owned businesses. MMDS is an especially competitive service, with 
approximately 1573 previously authorized and proposed MMDS facilities. 
Information available to us indicates that no MMDS facility generates 
revenue in excess of $11 million annually. We conclude that, for 
purposes of this FRFA, there are approximately 1634 small MMDS 
providers as defined by the SBA and the Commission's auction rules.
    9. ITFS: There are presently 2032 ITFS licensees. All but 100 of 
these licenses are held by educational institutions. Educational 
institutions are included in the definition of a small business. 
However, we do not collect annual revenue data for ITFS licensees and 
are not able to ascertain how many of the 100 non-educational licensees 
would be categorized as small under the SBA definition. No commenters 
address these non-educational licensees. Accordingly, we conclude that 
there may be as many as 2032 licensees that are small businesses.
    10. Direct Broadcast Satellite (``DBS''): Because DBS provides 
subscription services, DBS falls within the SBA definition of cable and 
other pay television services (SIC 4841). As of December 1996, there 
were eight DBS licensees. However, the Commission does not collect 
annual revenue data for DBS and, therefore, is unable to ascertain the 
number of small DBS licensees that could be affected by these proposed 
rules. Although DBS service requires a great investment of capital for 
operation, in the NPRM, we acknowledged that there are several new 
entrants in this field that may not yet have generated $11 million in 
annual receipts, and therefore may be categorized as a small business, 
if independently owned and operated. Since the publication of the NPRM, 
however, more information has become available. In light of the 1997 
gross revenue figures for the various DBS operators, we conclude that 
no DBS operator qualifies as a small entity.
    11. Home Satellite Dish (``HSD''): The market for HSD service is 
difficult to quantify. Indeed, the service itself bears little 
resemblance to other MVPDs. HSD owners have access to more than 500 
channels of programming placed on C-band satellites by programmers for 
receipt and distribution by MVPDs, of which 350 channels are scrambled 
and approximately 150 are unscrambled. HSD owners can watch unscrambled 
channels without paying a subscription fee. To receive scrambled 
channels, however, an HSD owner must purchase an integrated receiver-
decoder from an equipment dealer and pay a subscription fee to an HSD 
programming packager. Thus, HSD users include: (1) viewers who 
subscribe to a packaged programming service, which affords them access 
to most of the same programming provided to subscribers of other MVPDs; 
(2) viewers who receive only non-subscription programming; and (3) 
viewers who receive satellite programming services illegally without 
subscribing.
    12. According to the most recently available information, there are 
approximately 20 to 25 program packagers nationwide offering packages 
of scrambled programming to retail consumers. These program packagers 
provide subscriptions to approximately 2,184,470 subscribers 
nationwide. This is an average of about 77,163 subscribers per program 
packager. This is substantially smaller than the 400,000 subscribers 
used in the Commission's definition of a small multiple system operator 
(``MSO'').
    13. Satellite Master Antenna Television (``SMATVs''): Industry

[[Page 45744]]

sources estimate that approximately 5200 SMATV operators were providing 
service as of December 1995. Other estimates indicate that SMATV 
operators serve approximately 1.162 million residential subscribers as 
of June 30, 1997. The ten largest SMATV operators together pass 848,450 
units. If we assume that these SMATV operators serve 50% of the units 
passed, the ten largest SMATV operators serve approximately 40% of the 
total number of SMATV subscribers. Because these operators are not rate 
regulated, they are not required to file financial data with the 
Commission. Furthermore, we are not aware of any privately published 
financial information regarding these operators. Based on the estimated 
number of operators and the estimated number of units served by the 
largest ten SMATVs, we conclude that a substantial number of SMATV 
operators qualify as small entities.
    14. Local Multipoint Distribution System (``LMDS''): Unlike the 
above pay television services, LMDS technology and spectrum allocation 
will allow licensees to provide wireless telephony, data, and/or video 
services. A LMDS provider is not limited in the number of potential 
applications that will be available for this service. Therefore, the 
definition of a small LMDS entity may be applicable to both cable and 
other pay television (SIC 4841) and/or radiotelephone communications 
companies (SIC 4812). The SBA approved definition for cable and other 
pay services that qualify as a small business is defined in paragraphs 
5-6, supra. A small radiotelephone entity is one with 1500 employees or 
fewer. However, for the purposes of this Report and Order on navigation 
devices, we include only an estimate of LMDS video service providers.
    15. An auction for licenses to operate LMDS systems was recently 
completed by the Commission. The vast majority of the LMDS license 
auction winners were small businesses under the SBA's definition of 
cable and pay television (SIC 4841). In the Second R&O, we adopted a 
small business definition for entities bidding for LMDS licenses as an 
entity that, together with affiliates and controlling principles, has 
average gross revenues not exceeding $40 million for each of the three 
preceding years. We have not yet received approval by the SBA for this 
definition.
    16. There is only one company, CellularVision, that is currently 
providing LMDS video services. In the IRFA, we assumed that 
CellularVision was a small business under both the SBA definition and 
our auction rules. No commenters addressed the tentative conclusions we 
reached in the NPRM. Accordingly, we affirm our tentative conclusion 
that a majority of the potential LMDS licensees will be small entities, 
as that term is defined by the SBA.
    17. Open Video System (``OVS''): The Commission has certified 15 
OVS operators. Of these nine, only two are providing service. On 
October 17, 1996, Bell Atlantic received approval for its certification 
to convert its Dover, New Jersey Video Dialtone (``VDT'') system to 
OVS. Bell Atlantic subsequently purchased the division of Futurevision 
which had been the only operating program package provider on the Dover 
system, and has begun offering programming on this system using these 
resources. Metropolitan Fiber Systems was granted certifications on 
December 9, 1996, for the operation of OVS systems in Boston and New 
York, both of which are being used to provide programming. Bell 
Atlantic and Metropolitan Fiber Systems have sufficient revenues to 
assure us that they do not qualify as small business entities. Little 
financial information is available for the other entities authorized to 
provide OVS that are not yet operational. We believe that one OVS 
licensee may qualify as a small business concern. Given that other 
entities have been authorized to provide OVS service but have not yet 
begun to generate revenues, we conclude that at least some of the OVS 
operators qualify as small entities.
    18. Program Producers and Distributors: The Commission has not 
developed a definition of small entities applicable to producers or 
distributors of television programs. Therefore, we will utilize the SBA 
classifications of Motion Picture and Video Tape Production (SIC 7812), 
Motion Picture and Video Tape Distribution (SIC 7822), and Theatrical 
Producers (Except Motion Pictures) and Miscellaneous Theatrical 
Services (SIC 7922). These SBA definitions provide that a small entity 
in the television programming industry is an entity with $21.5 million 
or less in annual receipts for SIC 7812 and 7822, and $5 million or 
less in annual receipts for SIC 7922. The 1992 Bureau of the Census 
data indicate the following: (1) there were 7265 U.S. firms classified 
as Motion Picture and Video Production (SIC 7812), and that 6987 of 
these firms had $16,999 million or less in annual receipts and 7002 of 
these firms had $24,999 million or less in annual receipts; (2) there 
were 1139 U.S. firms classified as Motion Picture and Tape Distribution 
(SIC 7822), and that 1007 of these firms had $16,999 million or less in 
annual receipts and 1013 of these firms had $24,999 million or less in 
annual receipts; and (3) there were 5671 U.S. firms classified as 
Theatrical Producers and Services (SIC 7922), and that 5627 of these 
firms had less than $5 million in annual receipts.
    19. Each of these SIC categories is very broad and includes firms 
that may be engaged in various industries including television. 
Specific figures are not available as to how many of these firms 
exclusively produce and/or distribute programming for television or how 
many are independently owned and operated. Consequently, we conclude 
that there are approximately 6987 small entities that produce and 
distribute taped television programs, 1013 small entities primarily 
engaged in the distribution of taped television programs, and 5627 
small producers of live television programs that may be affected by the 
rules adopted in this Report and Order.
    20. Description of Reporting, Recordkeeping and Other Compliance 
Requirements. This analysis examines the costs and administrative 
burdens associated with our rules and requirements. To the extent 
expressly relied upon in responding to a program access complaint, the 
rules we adopt require program access defendants to attach documents 
within their control to their answer or other responsive pleading 
permitted by the Commission. In addition, the rules we adopt, in 
certain situations, require program access complainants and defendants 
to negotiate in good faith regarding the amount of damages based upon a 
Commission-approved computation methodology. The Commission believes, 
however, that this requirement would not necessitate significant 
additional costs or skills beyond those already utilized in the 
ordinary course of business by MVPDs and program producers and 
distributors.
    21. Steps Taken to Minimize Significant Economic Impact On Small 
Entities and Significant Alternatives Considered. We believe that our 
amended rules relating to program access will have a positive impact on 
small entities. The purpose of the program access provisions is to 
prohibit unfair or discriminatory practices in the sale of satellite 
cable and satellite broadcast programming and increase competition and 
diversity in the multichannel video programming market. Small entities 
play an important role in effectuating this purpose. The rules we adopt 
will enable small entities to more fairly and expeditiously obtain 
programming and compensate such entities, in appropriate circumstances, 
when such programming is denied or

[[Page 45745]]

obtained through unfair rates, terms or conditions.
    22. Report to Congress. The Commission will send a copy of the 
Report and Order, including this FRFA, in a report to Congress pursuant 
to the Small Business Regulatory Enforcement Fairness Act of 1996, 5 
U.S.C. 801(a)(1)(A). The Report and Order and this FRFA (or summaries 
thereof) will be sent to the Chief Counsel for Advocacy of the Small 
Business Administration. As required by the Regulatory Flexibility Act 
(RFA), an Initial Regulatory Flexibility Analysis (``IRFA'') was 
incorporated into the NPRM in this proceeding. The Commission sought 
written public comment on the possible impact of the proposed policies 
and rules on small entities in the NPRM, including comments on the 
IRFA. This Final Regulatory Flexibility Analysis (``FRFA'') in this 
Report and Order conforms to the RFA.

Federal Communications Commission.
Magalie Roman Salas,
Secretary.

Rule Changes

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

PART 76--MULTICHANNEL VIDEO AND CABLE TELEVISION SERVICE

    1. The authority citation for part 76 continues to read as follows:

    Authority: 47 U.S.C. 151, 152, 153, 154, 301, 302, 303, 303a, 
307, 308, 309, 312, 315, 317, 325, 503, 521, 522, 531, 532, 533, 
534, 535, 536, 537, 543, 544, 544a, 545, 548, 549, 552, 554, 556, 
558, 560, 561, 571, 572, 573.

    2. Section 76.1003 is amended by adding paragraph (c)(5), revising 
paragraphs (d)(1), (d)(2), (e), and (s)(1), and adding paragraph (s)(3) 
to read as follows:


Sec. 76.1003  Adjudicatory proceedings.

* * * * *
    (c) * * *
    (5) Damages requests. (i) In a case where recovery of damages is 
sought, the complaint shall contain a clear and unequivocal request for 
damages and appropriate allegations in support of such claim in 
accordance with the requirements of paragraph (c)(iii) of this section.
    (ii) Damages will not be awarded upon a complaint unless 
specifically requested. Damages may be awarded if the complaint 
complies fully with the requirement of paragraph (c)(iii) of this 
section where the defendant knew, or should have known that it was 
engaging in conduct violative of section 628 of the Communications Act.
    (iii) In all cases in which recovery of damages is sought, the 
complainant shall include within, or as an attachment to, the 
complaint, either:
    (A) A computation of each and every category of damages for which 
recovery is sought, along with an identification of all relevant 
documents and materials or such other evidence to be used by the 
complainant to determine the amount of such damages; or
    (B) An explanation of:
    (1) The information not in the possession of the complaining party 
that is necessary to develop a detailed computation of damages;
    (2) The reason such information is unavailable to the complaining 
party;
    (3) The factual basis the complainant has for believing that such 
evidence of damages exists; and
    (4) A detailed outline of the methodology that would be used to 
create a computation of damages when such evidence is available.
* * * * *
    (d) Answer. (1) Any cable operator, satellite cable programming 
vendor or satellite broadcast programming vendor upon which a program 
access complaint is served under this section shall answer within 
twenty (20) 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. To the 
extent that a cable operator, satellite cable programming vendor or 
satellite broadcast programming vendor expressly references and relies 
upon a document or documents within its control in asserting a defense 
or responding to a material allegation, such document or documents 
shall be included as part of the answer. 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.
* * * * *
    (e) Reply. Within fifteen (15) days after service of an answer, 
unless otherwise directed by the Commission, 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 (h) 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.
* * * * *
    (s) Remedies for violations.--(1) Remedies authorized. Upon 
completion of such adjudicatory proceeding, the Commission shall order 
appropriate remedies, including, if necessary, (i) the imposition of 
damages, and/or
    (ii) the establishment of prices, terms, and conditions for the 
sale of programming to the aggrieved multichannel video programming 
distributor. Such order shall set forth a timetable for compliance, and 
shall become effective upon release.
* * * * *
    (3) Imposition of damages. (i) Bifurcation. In all cases in which 
damages are requested, the Commission may bifurcate the program access 
violation determination from any damage adjudication.
    (ii) Burden of proof. The burden of proof regarding damages rests 
with the complainant, who must demonstrate with specificity the damages 
arising from the program access violation. Requests for damages that 
grossly overstate the amount of damages may result in a Commission 
determination that the complainant failed to satisfy its burden of 
proof to demonstrate with specificity the damages arising from the 
program access violation.
    (iii) Damages adjudication. (A) The Commission may, in its 
discretion, end adjudication of damages with a written order 
determining the sufficiency of the damages computation submitted in 
accordance with paragraph (c)(5)(iii)(A) of this section or the damages 
computation methodology submitted in accordance with paragraph 
(c)(5)(iii)(B)(4) of this section, modifying such computation or 
methodology, or requiring the complainant to resubmit such computation 
or methodology.
    (1) Where the Commission issues a written order approving or 
modifying a damages computation submitted in accordance with paragraph 
(c)(5)(iii)(A) of this section, the defendant shall

[[Page 45746]]

recompense the complainant as directed therein.
    (2) Where the Commission issues a written order approving or 
modifying a damages computation methodology submitted in accordance 
with paragraph (c)(5)(iii)(B)(4) of this section, the parties shall 
negotiate in good faith to reach an agreement on the exact amount of 
damages pursuant to the Commission-mandated methodology.
    (B) Within thirty days of the issuance of a paragraph 
(c)(5)(iii)(B)(4) of this section damages methodology order, the 
parties shall submit jointly to the Commission either:
    (1) A statement detailing the parties' agreement as to the amount 
of damages;
    (2) A statement that the parties are continuing to negotiate in 
good faith and a request that the parties be given an extension of time 
to continue negotiations; or
    (3) A statement detailing the bases for the continuing dispute and 
the reasons why no agreement can be reached.
    (C) (1) In cases in which the parties cannot resolve the amount of 
damages within a reasonable time period, the Commission retains the 
right to determine the actual amount of damages on its own, or through 
the procedures described in paragraph (s)(3)(iii)(C)(2) of this 
section.
    (2) Issues concerning the amount of damages may be designated by 
the Chief, Cable Services Bureau for hearing before, or, if the parties 
agree, submitted for mediation to, a Commission Administrative Law 
Judge.
    (D) Interest on the amount of damages awarded will accrue from 
either the date indicated in the Commission's written order issued 
pursuant to paragraph (s)(3)(iii)(A)(1) of this section or the date 
agreed upon by the parties as a result of their negotiations pursuant 
to paragraph (s)(3)(iii)(A)(2) of this section. Interest shall be 
computed at applicable rates published by the Internal Revenue Service 
for tax refunds.

[FR Doc. 98-22602 Filed 8-26-98; 8:45 am]
BILLING CODE 6712-10-P