Implementation of the Cable Television Consumer Protection and Competition Act of 1992 and Development of Competition and Diversity in Video Programming Distribution: Section 628(c)(5) of the Communications Act-Sunset of Exclusive Contract Prohibition, 56645-56664 [07-4935]

Agencies

• FEDERAL COMMUNICATIONS COMMISSION

[Federal Register Volume 72, Number 192 (Thursday, October 4, 2007)]
[Rules and Regulations]
[Pages 56645-56664]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 07-4935]



[[Page 56645]]

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FEDERAL COMMUNICATIONS COMMISSION

47 CFR Part 76

[MB Docket No. 07-29; FCC 07-169]


Implementation of the Cable Television Consumer Protection and 
Competition Act of 1992 and Development of Competition and Diversity in 
Video Programming Distribution: Section 628(c)(5) of the Communications 
Act--Sunset of Exclusive Contract Prohibition

AGENCY: Federal Communications Commission.

ACTION: Final rule.

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SUMMARY: In this document, the Commission retains for five years the 
prohibition on exclusive contracts for satellite cable programming and 
satellite broadcast programming between vertically integrated 
programming vendors and cable operators and modifies the procedures for 
resolving program access disputes.

DATES: Effective October 4, 2007, except for the amendments to Sec.  
76.1003(e)(1) and (j) which contain information collection requirements 
that are not effective until approved by the Office of Management and 
Budget. The Commission will publish a document in the Federal Register 
announcing the effective date for those sections.

FOR FURTHER INFORMATION CONTACT: For additional information on this 
proceeding, contact Steven Broeckaert, Steven.Broeckaert@fcc.gov; David 
Konczal, David.Konczal@fcc.gov; or Katie Costello, 
Katie.Costello@fcc.gov; of the Media Bureau, Policy Division, (202) 
418-2120.

SUPPLEMENTARY INFORMATION: This is a summary of the Commission's Report 
and Order (``Order''), FCC 07-169, adopted on September 11, 2007, and 
released on October 1, 2007. The full text of this document is 
available for public inspection and copying during regular business 
hours in the FCC Reference Center, Federal Communications Commission, 
445 12th Street, SW., CY-A257, Washington, DC 20554. This document will 
also be available via ECFS (https://www.fcc.gov/cgb/ecfs/). (Documents 
will be available electronically in ASCII, Word 97, and/or Adobe 
Acrobat.) The complete text may be purchased from the Commission's copy 
contractor, 445 12th Street, SW., Room CY-B402, Washington, DC 20554. 
To request this document in accessible formats (computer diskettes, 
large print, audio recording, and Braille), send an e-mail to 
fcc504@fcc.gov or call the Commission's Consumer and Governmental 
Affairs Bureau at (202) 418-0530 (voice), (202) 418-0432 (TTY).
    In addition to filing comments with the Office of the Secretary, a 
copy of any comments on the proposed information collection 
requirements contained herein should be submitted to Cathy Williams, 
Federal Communications Commission, 445 12th St., SW., Room 1-C823, 
Washington, DC 20554, or via the Internet at PRA@fcc.gov.

Paperwork Reduction Act of 1995 Analysis

    This document contains modified information collection 
requirements. The Commission will send the requirements for OMB review 
at a later date. The Commission, as part of its continuing effort to 
reduce paperwork burdens, will invite the general public to comment on 
the information collection requirements as required by the Paperwork 
Reduction Act of 1995, Public Law 104-13. In addition, pursuant to the 
Small Business Paperwork Relief Act of 2002, Public Law 107-198, see 44 
U.S.C. 3506(c)(4), we sought specific comment on how we might ``further 
reduce the information collection burden for small business concerns 
with fewer than 25 employees.'' We have assessed the effects of the 
information collection requirements resulting from the modifications to 
the Commission's procedures for resolving program access disputes 
adopted herein, and find that those requirements will benefit companies 
with fewer than 25 employees by facilitating the resolution of program 
access complaints and that these requirements will not burden those 
companies.

Summary of the Report and Order

I. Introduction and Executive Summary

    1. In areas served by a cable operator, Section 628(c)(2)(D) of the 
Communications Act of 1934, as amended (``Communications Act'') 
generally prohibits exclusive contracts for satellite cable programming 
or satellite broadcast programming between vertically integrated 
programming vendors and cable operators (the ``exclusive contract 
prohibition''). See 47 U.S.C. 548(c)(2)(D). In this Order, we find that 
the exclusive contract prohibition continues to be necessary to 
preserve and protect competition and diversity in the distribution of 
video programming, and accordingly, retain it again for five years, 
until October 5, 2012. In the Order, we decline to narrow the scope of 
the exclusive contract prohibition based on the popularity of the 
programming network, based on the competitive circumstances in 
individual geographic areas served by a cable operator, or by 
precluding certain competitive multichannel video programming 
distributors (``MVPDs'') from benefiting from the prohibition. We also 
decline to expand the exclusive contract prohibition to apply to non-
cable-affiliated programming, and we again conclude that terrestrially 
delivered programming is beyond the scope of the exclusive contract 
prohibition in Section 628(c)(2)(D).
    2. Further, we modify our procedures for resolving program access 
disputes by (i) codifying the requirements that a respondent in a 
program access complaint proceeding that expressly relies upon a 
document in asserting a defense include the document as part of its 
answer; (ii) finding that in the context of a complaint proceeding, it 
would be unreasonable for a respondent not to produce all the documents 
either requested by the complainant or ordered by the Commission, 
provided that such documents are in its control and relevant to the 
dispute; (iii) codifying the Commission's authority to issue default 
orders granting a complaint if the respondent fails to comply with 
discovery requests; and (iv) allowing parties to a program access 
complaint proceeding to voluntarily engage in alternative dispute 
resolution, including commercial arbitration, during which time 
Commission action on the complaint will be suspended. We also retain 
our goals of resolving program access complaints within five months 
from the submission of a complaint for denial of programming cases, and 
within nine months for all other program access complaints, such as 
price discrimination cases. We decline to (i) mandate electronic 
filings of pleadings at this time (but we note that parties currently 
may voluntarily submit electronic copies of their pleadings to staff 
via e-mail); (ii) adopt a more expedited pleading cycle for program 
access complaints; (iii) mandate weekly status conferences; (iv) shift 
resolution of program access complaints to the Enforcement Bureau; or 
(v) adopt mandatory arbitration.

II. Background

A. Exclusive Contract Prohibition

    3. In enacting the program access provisions, adopted as part of 
the Cable Television Consumer Protection and Competition Act of 1992 
(``1992 Cable Act''), Congress intended to encourage

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entry into the MVPD market by existing or potential competitors to 
traditional cable systems by making available to those entities the 
programming necessary to enable them to become viable competitors. The 
1992 Cable Act and its legislative history reflect Congressional 
findings that increased horizontal concentration of cable operators, 
combined with extensive vertical integration (which means the combined 
ownership of cable systems and suppliers of cable programming), created 
an imbalance of power, both between cable operators and program vendors 
and between incumbent cable operators and their multichannel 
competitors. Congress concluded at that time that vertically integrated 
program suppliers had the incentive and ability to favor their 
affiliated cable operators over other MVPDs, such as other cable 
systems, home satellite dish (``HSD'') distributors, direct broadcast 
satellite (``DBS'') providers, satellite master antenna television 
(``SMATV'') systems, and wireless cable operators.
    4. When the Commission promulgated regulations implementing the 
program access provisions of Section 628, it recognized that Congress 
placed a higher value on new competitive entry into the MVPD 
marketplace than on the continuation of exclusive distribution 
practices when such practices impede this entry. Congress absolutely 
prohibited exclusive contracts for satellite cable programming or 
satellite broadcast programming between vertically integrated 
programming vendors and cable operators in areas unserved by cable, and 
generally prohibited exclusive contracts within areas served by cable:

    With respect to distribution to persons in areas served by a 
cable operator, [the Commission shall] prohibit exclusive contracts 
for satellite cable programming or satellite broadcast programming 
between a cable operator and a satellite cable programming vendor in 
which a cable operator has an attributable interest or a satellite 
broadcast programming vendor in which a cable operator has an 
attributable interest, unless the Commission determines * * * that 
such contract is in the public interest. 47 U.S.C. 548(c)(2)(D); see 
also 47 CFR 76.1002(c)(2).

    Congress recognized that, in areas served by cable, some exclusive 
contracts may serve the public interest by providing offsetting 
benefits to the video programming market or assisting in the 
development of competition among MVPDs. See 47 U.S.C. 548(c)(2)(4). Any 
cable operator, satellite cable programming vendor in which a cable 
operator has an attributable interest, or satellite broadcast 
programming vendor in which a cable operator has an attributable 
interest seeking to enforce or enter into an exclusive contract in an 
area served by a cable operator must submit a ``petition for 
exclusivity'' to the Commission for approval. See 47 CFR 76.1002(c)(5).
    5. Congress directed that the exclusive contract prohibition would 
cease to be effective on October 5, 2002, unless the Commission found 
in a proceeding conducted between October 2001 and October 2002 that 
the prohibition ``continues to be necessary to preserve and protect 
competition and diversity in the distribution of video programming.'' 
See 47 U.S.C. 548(c)(5). In October 2001, the Commission sought comment 
on this issue (2001 Sunset NPRM, 66 FR 54972, October 31, 2001) and 
ultimately concluded that the exclusive contract prohibition did 
continue to be ``necessary.'' See 2002 Extension Order, 67 FR 49247, 
July 30, 2002. The Commission therefore extended the prohibition for 
five years (i.e., through October 5, 2007).
    6. The Commission further provided that, during the year before the 
expiration of the five-year extension of the exclusive contract 
prohibition, it would conduct another review to determine whether the 
exclusive contract prohibition continues to be necessary to preserve 
and protect competition and diversity in the distribution of video 
programming. We issued a Notice of Proposed Rulemaking (``NPRM'') in 
February 2007 to initiate this review (72 FR 9289, March 1, 2007).

B. Program Access Complaint Procedures

    7. Section 628 of the Communications Act prohibits unfair methods 
of competition or unfair or deceptive practices that hinder or prevent 
any MVPD from providing satellite-delivered programming to consumers. 
Section 628(b) provides:

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

    As part of the Telecommunications Act of 1996, Congress expanded 
program access protection to include common carriers and their 
affiliates that provide video programming by any means directly to 
subscribers, and to satellite cable programming vendors in which a 
common carrier has an attributable interest. See 47 U.S.C. 548(j). 
Section 628, among other things, protects access to vertically 
integrated cable programming services by competing MVPDs in order to 
increase competition and diversity in the MVPD market and foster the 
development of competition to traditional cable systems.
    8. Parties aggrieved by conduct alleged to violate the program 
access provisions have the right to commence an adjudicatory proceeding 
before the Commission. As instructed by Section 628(c), the Commission 
promulgated regulations implementing a program access complaint 
process. The Commission determined that a streamlined program access 
complaint process, with limited discovery procedures and adjudication 
based on a complaint, answer, and reply, would provide the most 
flexible and expeditious means of enforcing the anti-discrimination 
program access provisions. The Commission further addressed program 
access complaint process issues in response to a petition for 
rulemaking filed by Ameritech New Media, Inc. The Commission resolved 
these and other issues in the 1998 Program Access Order (13 FCC Rcd 
15822).
    9. In the 1998 Program Access Order, the Commission affirmed its 
authority to impose damages on a case-by-case basis for program access 
violations and adopted guidelines for resolving program access disputes 
so that denial of programming cases, such as unreasonable refusal to 
sell, petitions for exclusivity, and exclusivity complaints, are 
resolved within five months of the submission of the complaint to the 
Commission and all other program access complaints, including price 
discrimination cases, are resolved within nine months of the submission 
of the complaint to the Commission. The Commission subsequently amended 
the program access rules as part of an overhaul of the Commission's 
pleading and complaint rules.
    10. In the NPRM, in addition to seeking comment on extension of the 
exclusive contract prohibition, we sought comment on whether and how 
our procedures for resolving program access disputes under Section 628 
should be modified. We sought comment on the costs associated with the 
complaint process and whether the pre-filing notice, pleading 
requirements, evidentiary standards, timing, and potential remedies are 
appropriate and effective. We also sought comment on whether specific 
time limits on the

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Commission, the parties, or others would promote a speedy and just 
resolution of program access complaints. We asked whether the program 
access complaint rules and procedures, including those governing 
discovery and protection of confidential information, are adequate. We 
also asked whether we should adopt alternative procedures or remedies 
such as mandatory standstill agreements or arbitration, as the 
Commission has done in recent mergers.

III. Discussion

A. Exclusive Contract Prohibition

    11. Our analysis of whether the exclusive contract prohibition 
``continues to be necessary to preserve and protect competition and 
diversity in the distribution of video programming'' proceeds in five 
parts. Based on this five-part analysis, we conclude as explained below 
that the exclusive contract prohibition continues to be necessary to 
preserve and protect competition and diversity in the distribution of 
video programming and, accordingly, retain it again for five years.
1. Standard of Review
    12. Various cable MSOs repeat arguments made in response to the 
2001 Sunset NPRM that the Commission should construe the term 
``necessary'' as used in Section 628(c)(5) as requiring the exclusive 
contract prohibition to be ``indispensable'' or ``essential'' to 
prevent harm to competition. In the 2002 Extension Order, the 
Commission explained that the term ``necessary'' has been interpreted 
differently depending on the statutory context. In some cases, courts 
have interpreted the term to mean ``useful,'' ``convenient,'' or 
``appropriate'' while in other contexts courts have interpreted the 
term in a more restrictive sense to mean ``indispensable'' or 
``essential.'' Consistent with judicial precedent, the Commission 
construed the term ``necessary'' in its statutory context and 
determined that the exclusive contract prohibition continues to be 
``necessary'' if, in the absence of the prohibition, competition and 
diversity in the distribution of video programming would not be 
preserved and protected. We find no basis to revisit the conclusions 
reached in the 2002 Extension Order, which, we note, were never 
challenged. We continue to believe that Section 628(c)(5), when 
construed in its statutory context, requires the exclusive contract 
prohibition to be extended if we find that, in the absence of the 
prohibition, competition and diversity in the distribution of video 
programming would not be preserved and protected.
2. Status of the MVPD Market: 2002-2007
    13. We examine below the changes that have occurred in the 
programming and distribution markets since 2002 when the Commission 
last reviewed whether the exclusive contract prohibition continued to 
be necessary to preserve and protect competition.
    14. Satellite-Delivered National Programming Networks. The number 
of satellite-delivered national programming networks available to MVPDs 
has increased by 237 since 2002, from 294 networks to 531 networks. 
This amounts to an eighty percent increase in satellite-delivered 
national programming networks available to MVPDs.
    15. Vertically Integrated Satellite-Delivered National Programming 
Networks. The number of satellite-delivered national programming 
networks that are vertically integrated with cable operators has 
increased by twelve since 2002, from 104 networks to 116 networks. The 
percentage of all satellite-delivered national programming networks 
that are vertically integrated with cable operators has declined since 
2002, from 35 percent to 22 percent.
    16. The amount of the most popular programming that is vertically 
integrated with cable operators has declined slightly since 2002. While 
nine of the Top 20 (45 percent) satellite-delivered national 
programming networks (as ranked by subscribership) were vertically 
integrated in 2002 when the Commission last reviewed the exclusive 
contract prohibition, commenters state that this number has decreased 
to seven (35 percent). As discussed below, we find that this number has 
decreased to six. These networks are The Discovery Channel, CNN, TNT, 
TBS, TLC, and Headline News.
    17. Only the largest cable MSOs tend to own vertically integrated 
programming. In the 2002 Extension Order, the Commission noted that all 
vertically integrated programming was attributable to five cable 
operators, four of which were among the seven largest cable MSOs. 
Today, all vertically integrated programming is attributable to five 
cable operators, all of which are among the six largest cable MSOs: 
Comcast, Time Warner, Cox, Cablevision, and Advance/Newhouse.
    18. Regional Programming Networks. The number of regional 
programming networks available to MVPDs has increased by sixteen since 
2002, from 80 networks to 96 networks. This amounts to a 20 percent 
increase since 2002 in regional programming networks available to 
MVPDs. The number of regional sports networks (``RSNs'') has increased 
by approximately 36 percent since 2002, from 28 networks to 39 
networks, by some estimates. We note that, according to the 
Commission's most recent annual competition report, there were 37 RSNs 
as of June 2005. See 12th Annual Report, 21 FCC Rcd at 2510 and 2586. 
More recent data indicates that there are now 39 RSNs.
    19. Vertically Integrated Regional Programming Networks. The number 
of regional programming networks that are vertically integrated with 
cable operators has increased by five since 2002, from 39 networks to 
44 networks. The percentage of all regional programming networks that 
are vertically integrated with cable operators, however, has declined 
slightly since 2002, from 49 percent to 46 percent. The number of RSNs 
that are vertically integrated with cable operators has decreased by 
six since 2002, from 24 networks to 18 networks, by some estimates. We 
note that, according to the Commission's most recent annual competition 
report, there were 17 vertically integrated RSNs as of June 2005. See 
12th Annual Report, 21 FCC Rcd at 2510 and 2586. More recent data 
indicates that there are now 18 vertically integrated RSNs. The 
percentage of all RSNs that are vertically integrated has declined 
since 2002, from 86 percent to approximately 46 percent. We note that, 
according to the Commission's most recent annual competition report, 
45.9 percent of RSNs were vertically integrated as of June 2005. If the 
unaffiliated MASN and the cable-affiliated SportsNet New York are 
included, then 18 out of 39 RSNs, or 46.1 percent, are vertically 
integrated.
    20. MVPD Market. Since the Commission last examined the exclusive 
contract prohibition in 2002, the percentage of MVPD subscribers 
receiving their video programming from a cable operator has declined 
from 78 percent to 67 percent, by some estimates. We note that, 
according to the Commission's annual competition reports, the 
percentage of MVPD subscribers receiving their video programming from a 
cable operator was 78.11 percent as of June 2001 and 69.41 percent as 
of June 2005. More recent data indicates that the portion of MVPD 
subscribers served by cable operators is now approximately 67 percent. 
The number of cable subscribers has declined by 3.4 million since 2002, 
from 69 million to 65.4 million. During this

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same period, the percentage of MVPD subscribers receiving their video 
programming from a DBS operator has increased from 18 percent to over 
30 percent, by some estimates. We note that, according to the 
Commission's annual competition reports, the percentage of MVPD 
subscribers receiving their video programming from a DBS operator was 
18.2 percent as of June 2001 and 27.72 percent as of June 2005. Compare 
8th Annual Report, 17 FCC Rcd at 1388, Table C-1 (18.2 percent) with 
12th Annual Report, 21 FCC Rcd at 2617, Table B-1 (27.72 percent). More 
recent data indicates that the portion of MVPD subscribers served by 
DBS operators is now over 30 percent. The number of DBS subscribers has 
increased by 11.6 million since 2002, from 18 million to 29.6 million, 
by some estimates. We note that, according to the Commission's annual 
competition reports, the number of MVPD subscribers receiving their 
video programming from a DBS operator was 16.07 million as of June 2001 
and 26.12 million as of June 2005. More recent data indicate that the 
number of DBS subscribers is now 29.6 million.
    21. A significant development since 2002 is the emergence of video 
services offered by telephone companies, including AT&T, Qwest, and 
Verizon. As of the end of the second quarter of 2007, AT&T's U-Verse 
fiber-based video and Internet service passed over 4 million 
households. AT&T also recently announced that its U-Verse video service 
has more than 100,000 customers. Qwest has twenty-one cable franchises 
and provides nearly 60,000 subscribers with multichannel video service 
in Arizona, Colorado, Nebraska, and Utah. Verizon, which introduced its 
fiber-based FiOS TV service in September 2005, had 515,000 video 
subscribers at the end of the second quarter of 2007. Verizon's FiOS TV 
was available for sale to nearly 3.9 million premises in nearly 500 
communities in 12 states as of the end of the second quarter of 2007. 
Other wireline Broadband Service Providers (``BSPs'') also offer video 
services in competition with cable operators, including RCN, 
WideOpenWest, Knology, and Grande. Some wireline entrants cite a 2004 
Government Accountability Office (``GAO'') Report which concludes that 
wireline video entry provides more price discipline to cable than DBS 
and is more likely to cause cable operators to enhance their own 
services and to improve customer service. In response, cable MSOs argue 
that wireline entry does not have a greater impact on cable prices than 
DBS entry. Despite the significant investments made in competitive 
wireline networks, AT&T notes NCTA's estimate that wireline entrants 
have no more than 1.9 percent of all MVPD subscribers.
    22. The cable industry also cites other potential sources of video 
competition, such as SMATV systems, providers of video on the Internet 
(such as YouTube, Google, and Akimbo), over-the-air broadcast 
television, DVDs and videotape purchases and rentals, municipal and 
non-municipal utilities, and providers of mobile video services. 
Comcast also argues that in every community, consumers can choose from 
a minimum of three MVPDs, and states that in many communities a fourth 
or fifth MVPD is available or will be soon. Cablevision states that 
DIRECTV and EchoStar have at least double the number of subscribers of 
every cable MSO, with the exception of Time Warner and Comcast.
    23. Commenters in favor of extending the prohibition state that the 
figures cited by the cable industry are misleading. EchoStar claims 
that national DBS penetration figures obscure the extent of competition 
on a local or regional basis where DBS penetration is much lower than 
the national average. While the number of DBS subscribers has increased 
by 11.6 million since the 2002 Extension Order, CA2C notes that cable 
subscribership during the same period decreased by less than one 
million, demonstrating that cable operators have maintained their 
position in the market. Some competitive MVPDs argue that the continued 
ability of cable operators to raise prices in excess of inflation 
demonstrates the lack of competition in the video marketplace. 
Competitive MVPDs also assert that barriers in the MVPD market still 
persist, as demonstrated by the Commission's efforts to promote greater 
competition. CA2C notes that the Commission in its decision on cable 
franchising reform found that in the vast majority of communities 
around the country, ``cable competition simply does not exist.'' Some 
competitive MVPDs disagree with the assertion by the cable industry 
that mobile video, Internet video, and DVDs are substitutes for cable 
television. Moreover, competitive MVPDs state that only 2.9 percent of 
MVPD subscribers receive service from an alternative provider to cable 
or DBS.
    24. Consolidation of the Cable Industry. The cable industry has 
continued to consolidate since 2002. During this period, the percentage 
of MVPD subscribers receiving their video programming from one of the 
four largest cable MSOs (Comcast, Time Warner, Cox, and Charter) has 
increased from 48 percent to between 53 and 60 percent, by some 
estimates, after taking into account the recent acquisition by Comcast 
and Time Warner of cable systems formerly owned by Adelphia. We note 
that, according to the Commission's annual competition reports, the 
percentage of MVPD subscribers receiving their video programming from 
one of the four largest cable MSOs was 47.67 percent as of June 2001 
and 47.78 percent as of June 2005. More recent data indicates that the 
percentage of MVPD subscribers receiving their video programming from 
one of the four largest cable MSOs (Comcast, Time Warner, Cox, and 
Charter) has increased to between 53 and 60 percent. Moreover, the 
percentage of MVPD subscribers receiving their video programming from 
one of the four largest vertically integrated cable MSOs (Comcast, Time 
Warner, Cox, and Cablevision) has increased significantly since 2002, 
from 34 percent to between 54 and 56.75 percent, by some estimates. We 
note that, according to the Commission's annual competition reports, 
the percentage of MVPD subscribers receiving their video programming 
from one of the four largest vertically integrated cable MSOs was 34.26 
percent as of June 2001 and 44.63 percent as of June 2005. Compare 8th 
Annual Report, 17 FCC Rcd at 1341, Table C-3 (34.26 percent) with 12th 
Annual Report, 21 FCC Rcd at 2620, Table B-3 (44.63 percent). More 
recent data indicates that the percentage of MVPD subscribers receiving 
their video programming from one of the four largest vertically 
integrated cable MSOs (Comcast, Time Warner, Cox, and Cablevision) has 
increased to between 54 and 56.75 percent.
    25. Clustering of Cable Systems. The amount of regional clustering 
of cable systems has remained significant. Clustering refers to a 
strategy whereby cable MSOs concentrate their operations in regional 
geographic areas by acquiring cable systems in regions where the MSO 
already has a significant presence, while giving up other holdings 
scattered across the country. This strategy is accomplished through 
purchases and sales of cable systems, or by system ``swapping'' among 
MSOs. The percentage of cable subscribers that are served by systems 
that are part of regional clusters has increased since 2002, from 80 
percent to as much as 85 to 90 percent, by some estimates, taking into 
account the acquisition by Comcast and Time Warner of cable systems 
formerly owned by Adelphia. We note

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that, according to the Commission's annual competition reports, the 
percentage of cable subscribers served by systems that are part of 
regional clusters was 80.4 percent as of 2000 and 77.9 percent as of 
2004. Compare 8th Annual Report, 17 FCC Rcd at 1340, Table C-2 (stating 
that, as of 2000, 108 cable system clusters were serving 54.4 million 
subscribers, or 80.4 percent of cable subscribers) with 12th Annual 
Report, 21 FCC Rcd at 2619, Table B-2 (stating that, as of 2004, 118 
cable system clusters were serving 51.5 million subscribers, or 78.7 
percent of cable subscribers). More recent data indicates that the 
percentage of cable subscribers that are served by systems that are 
part of regional clusters has increased to between 85 and 90 percent.
3. Ability and Incentive
    26. Our analysis of whether the exclusive contract prohibition 
continues to be necessary requires us to assess whether, in the absence 
of the exclusive contract prohibition, vertically integrated 
programmers would have the ability and incentive to favor their 
affiliated cable operators over nonaffiliated competitive MVPDs and, if 
so, whether such behavior would result in a failure to protect and 
preserve competition and diversity in the distribution of video 
programming.
a. Ability
    27. As discussed in this section, we conclude that satellite-
delivered vertically integrated programming remains programming for 
which there are often no good substitutes and that such programming is 
necessary for viable competition in the video distribution market. In 
assessing the ability of satellite-delivered vertically integrated 
programmers to favor their affiliated cable operators to the detriment 
of competing MVPDs, we consider whether developments in the last five 
years have diminished the importance of satellite-delivered vertically 
integrated programming or have affected the ability of satellite-
delivered vertically integrated programmers to favor their affiliated 
cable operators over other MVPDs.
    28. Discussion. Despite some pro-competitive developments over the 
past five years, we find that access to vertically integrated 
programming continues to be necessary in order for competitive MVPDs to 
remain viable substitutes to the incumbent cable operator in the eyes 
of consumers. What is most significant to our analysis is not the 
percentage of total available programming that is vertically integrated 
with cable operators, but rather the popularity of the programming that 
is vertically integrated and how the inability of competitive MVPDs to 
access this programming will affect the preservation and protection of 
competition in the video distribution marketplace. While there has been 
a decrease since 2002 in the percentage of the most popular programming 
networks that are vertically integrated, we find that the four largest 
cable MSOs (Comcast, Time Warner, Cox, and Cablevision) still have (i) 
an interest in six of the Top 20 satellite-delivered networks as ranked 
by subscribership (The Discovery Channel, CNN, TNT, TBS, TLC, and 
Headline News); (ii) seven of the Top 20 satellite-delivered networks 
as ranked by prime time ratings (TNT, Adult Swim, HBO, TBS, American 
Movie Classics, Cartoon Network, and The Discovery Channel); (iii) 
almost half of all RSNs; (iv) popular subscription premium networks, 
such as HBO and Cinemax (competitive MVPDs argue that first-run 
programming produced by HBO and other premium networks are essential 
for a competitive MVPD to offer to potential subscribers in order to 
compete with the incumbent cable operator); and (v) video-on-demand 
(``VOD'') networks, such as iN DEMAND (competitive MVPDs argue that 
movie libraries owned by VOD networks are essential for a competitive 
MVPD to offer to potential subscribers in order to compete with the 
incumbent cable operator). The record thus reflects that popular 
national programming networks, such as CNN, TNT, TBS, and The Discovery 
Channel, among many others, in addition to premium programming 
networks, RSNs, and VOD networks, are affiliated with the four largest 
vertically integrated cable MSOs and that such programming networks are 
demanded by MVPD subscribers. We thus find that cable-affiliated 
programming continues to represent some of the most popular and 
significant programming available today.
    29. We find that access to vertically integrated programming is 
essential for new entrants in the video marketplace to compete 
effectively. If the programming offered by a competitive MVPD lacks 
``must have'' programming that is offered by the incumbent cable 
operator, subscribers will be less likely to switch to the competitive 
MVPD. We give little weight to the claims by cable operators that 
recent entrants, such as telephone companies, have not experienced 
``any trouble'' to date in acquiring access to satellite-delivered 
vertically integrated programming. As an initial matter, we note that 
competitive MVPDs state that they pay significant amounts for access to 
satellite-delivered vertically integrated programming. Moreover, 
because the exclusive contract prohibition is currently in effect and 
has been since 1992, vertically integrated programmers delivering 
programming to MVPDs via satellite were not able to deny competitors 
access to their programming. We also reject the cable MSOs' suggestion 
that the resources of some competitors in the video distribution market 
(i.e., telephone companies) should change our analysis of whether to 
extend the prohibition at this time. The competitors to which the cable 
operators refer are new entrants to the video distribution market, and 
have no established customer base. If cable operators have exclusive 
access to content that is essential for viable competition and for 
which there are no close substitutes, and they have the incentive to 
withhold such content, they can significantly impede the ability of new 
entrants to compete effectively in the marketplace, regardless of their 
level of resources. As competitive MVPDs note, DBS providers have been 
able to attract and retain millions of subscribers because of their 
ability to offer ``must have'' programming that is affiliated with 
cable operators.
    30. For the reasons discussed above, we conclude that there are no 
close substitutes for some satellite-delivered vertically integrated 
programming and that such programming is necessary for viable 
competition in the video distribution market. Having made this 
determination, we further conclude that vertically integrated 
programmers continue to have the ability to favor their affiliated 
cable operators over competitive MVPDs such that competition and 
diversity in the distribution of video programming would not be 
preserved and protected. Accordingly, assuming vertically integrated 
programmers continue to have the incentive to favor their affiliated 
cable operators, allowing vertically integrated programmers to enter 
into exclusive arrangements with their affiliated cable operators will 
fail to protect and preserve competition and diversity in the 
distribution of video programming.
b. Incentive
    31. We next assess whether vertically integrated programmers 
continue to have the incentive to favor their affiliated cable 
operators over competitive MVPDs. This requires us to analyze (i) 
whether cable operators, through the number of subscribers they

[[Page 56650]]

serve, the number of homes they pass, and their affiliations with 
programmers, continue to have market dominance of sufficient magnitude 
that, in the absence of the prohibition, they would be able to act in 
an anticompetitive manner; and (ii) whether there continues to be an 
economic rationale for vertically integrated programmers to engage in 
exclusive agreements with cable operators that will cause such 
anticompetitive harms.
    32. While cable MSOs argue that they have no incentive to withhold 
programming, competitive MVPDs provide the following examples which 
they claim demonstrate that cable MSOs will withhold programming if 
advantageous and permitted. Competitive MVPDs argue that many of the 
examples listed below, involving terrestrially delivered programming 
(sports as well as non-sports)--for which the exclusive contract 
prohibition does not apply--demonstrate the incentive and ability of 
vertically integrated cable operators to deny access to programming 
where permitted by the statute.
Sports Programming
     Comcast SportsNet Philadelphia. Some competitive MVPDs 
state that Comcast refuses to make the terrestrially delivered Comcast 
SportsNet Philadelphia channel available to EchoStar and DIRECTV. 
Competitive MVPDs cite the Commission's conclusion in the Adelphia 
Order that the percentage of households that subscribe to DBS service 
in Philadelphia is 40 percent below what would otherwise be expected. 
In response, Comcast notes that Comcast SportsNet Philadelphia is 
available to RCN.
     Channel 4 San Diego. Some competitive MVPDs claim that Cox 
makes available its Channel 4 San Diego network, which has exclusive 
rights to San Diego Padres baseball games, only to cable operators that 
do not directly compete with Cox and not to DIRECTV, EchoStar, and 
AT&T. While competitive MVPDs state that DIRECTV's market penetration 
in San Diego is half of its national average, Cablevision notes that 
DIRECTV in the Adelphia proceeding reported that it did not find a 
statistically significant effect on its market penetration in San Diego 
resulting from its inability to access this RSN.
     Overflow sports programming in New York, NY. RCN notes 
that it was deprived of access to overflow sports programming from 
Cablevision after Cablevision revised its distribution system from 
satellite to terrestrial delivery.
     RSNs Affiliated with Cablevision in New York and New 
England. Verizon notes that it was forced to file a program access 
complaint against Cablevision and its vertically integrated programming 
subsidiary, Rainbow Media Holdings, LLC, in order to obtain access to 
RSNs in the New York City metropolitan area and New England.
     High Definition (``HD'') Feeds of RSNs Affiliated with 
Cablevision. While Rainbow has made available standard definition feeds 
of its RSNs, Verizon states that Rainbow is delivering HD feeds of this 
programming terrestrially to avoid the program access rules.
Non-Sports Programming
     New England Cable News (``NECN'') in Boston, MA. One 
commenter claims that RCN was provided with access to NECN, a 
terrestrially delivered network that is 50 percent owned by Comcast, 
only after the Senate Judiciary Committee indicated that they were 
considering legislative action to apply an exclusive contract 
prohibition to terrestrially delivered programming.
     PBS Kids Sprout. AT&T and RCN claim that after PBS Kids 
Sprout became vertically integrated with Comcast, RCN lost access to 
the network, resulting in an 83 percent drop in the usage of its 
children's VOD service.
     iN DEMAND. CA2C notes that iN DEMAND is jointly owned by 
Time Warner, Comcast, and Cox. CA2C argues that iN DEMAND has taken the 
position that its programming is beyond the scope of the exclusive 
contract prohibition in Section 628(c)(2)(D) because iN DEMAND 
programming is delivered to MVPDs terrestrially. CA2C claims that iN 
DEMAND initially refused to provide its service to BSPs that competed 
with incumbent cable operators and that it reversed this position only 
after meetings were held with the Antitrust Subcommittee of the Senate 
Judiciary Committee.
     CN8--The Comcast Network. Qwest claims that CN8--The 
Comcast Network is a local news and information channel that serves 12 
states and 20 television markets but is only available to Comcast and 
Cablevision subscribers because it is terrestrially delivered and 
therefore beyond the scope of Section 628(c)(2)(D).
     NRTC. NRTC, which acts as a ``buying group'' on behalf of 
its members, claims that it has been denied access to two vertically 
integrated programming networks, the identities of which it claims it 
cannot disclose due to non-disclosure agreements.
    33. Discussion. We conclude that vertically integrated cable 
programmers retain the incentive to withhold programming from their 
competitors. We recognize the pro-competitive developments in the MVPD 
market since the 2002 Extension Order, such as the reduction in the 
cable industry's share of MVPD subscribers from 78 percent to an 
estimated 67 percent and the increase in the DBS industry's market 
share from 18 percent to approximately 30 percent. Despite these 
positive trends, however, almost seven out of ten subscribers still 
choose cable over competitive MVPDs, the percentage of all MVPD 
subscribers nationwide served by one of the four largest vertically 
integrated cable operators has increased substantially since 2002, and 
cable operators have continued to raise prices in excess of inflation. 
While cable MSOs claim that the emergence of telephone companies as new 
video competitors demonstrates that competition is flourishing, the 
fact is that, based on estimates provided by the cable industry, 
competitive MVPDs, excluding DBS operators, serve approximately three 
percent of all MVPD subscribers nationwide, which accounts for less 
than three million total MVPD subscribers. Although we are encouraged 
by developments since 2002, we do not believe these developments have 
been significant enough for us to reverse the Commission's previous 
conclusion that cable operators have market dominance of sufficient 
magnitude that, in the absence of the prohibition, they would be able 
to act in an anticompetitive manner.
    34. We also conclude that cable-affiliated programmers continue to 
have an economic incentive to favor their affiliated cable operators 
over competitive MVPDs by entering into exclusive agreements. We agree 
that in many instances a cable-affiliated programmer may choose to 
provide its programming to as many platforms as possible in order to 
maximize advertising and subscription revenues. In other cases, 
however, cable-affiliated programmers will have an incentive to 
withhold programming from competitive MVPDs in order to favor their 
affiliated cable operator. Our conclusion that vertically integrated 
cable programmers retain the incentive to withhold programming from 
their competitors is reinforced by specific factual evidence that 
vertically integrated programmers have withheld and continue to 
withhold programming, including both sports and non-sports programming, 
from competitive MVPDs. If vertically integrated programmers had no 
economic incentive other than to distribute their programming to as 
many

[[Page 56651]]

platforms as possible, then we would not expect to see such examples of 
withholding.
    35. As the Commission did in the 2002 Extension Order, we find that 
the costs (i.e., foregone revenues) incurred by a cable-affiliated 
programmer by refusing to sell to competitive MVPDs would be offset by 
(i) revenues from increased subscriptions to the services of its 
affiliated cable operator resulting from subscribers that switch to 
cable to obtain access to the cable-exclusive programming; (ii) 
revenues from increased rates charged by the affiliated cable operator 
in response to increased demand for its services resulting from its 
ability to offer exclusive programming; and (iii) revenues resulting 
from the ability of the cable-affiliated programmer to raise the price 
it charges for programming to other cable operators in return for 
exclusivity. Thus, particularly where competitive MVPDs are limited in 
their market share, a cable-affiliated programmer will be able to 
recoup a substantial amount, if not all, of the revenues foregone by 
pursuing a withholding strategy. In the long term, a withholding 
strategy may result in a reduction in competition in the video 
distribution market, thereby allowing the affiliated cable operator to 
raise rates. We thus conclude that the one-third share of the MVPD 
market held by competitive MVPDs remains limited enough to allow cable-
affiliated programmers to successfully and profitably implement a 
withholding strategy.
    36. We also find that three additional developments since 2002 
provide cable-affiliated programmers with an even greater economic 
incentive to withhold programming from competitive MVPDs: (i) the 
increase in horizontal consolidation in the cable industry; (ii) the 
increase in clustering of cable systems; and (iii) the recent emergence 
of new entrants in the video market place, such as telephone companies.
    37. Horizontal Consolidation. The cable industry has continued to 
consolidate since 2002. Since this time, the percentage of MVPD 
subscribers receiving their video programming from one of the four 
largest vertically integrated cable MSOs (Comcast, Time Warner, Cox, 
and Cablevision) has increased from 34 percent to between 54 and 56.75 
percent. Moreover, the percentage of MVPD subscribers receiving their 
video programming from one of the four largest cable MSOs (Comcast, 
Time Warner, Cox, and Charter) has increased from 48 percent to between 
53 and 60 percent after taking into account the recent acquisition by 
Comcast and Time Warner of cable systems formerly owned by Adelphia. 
Thus, while the evidence demonstrates that the market share of small-
to-medium sized, non-vertically integrated cable operators has 
declined, the market share of large cable operators, and in particular 
those that own cable programming, has increased substantially since 
2002. In the 2002 Extension Order, the Commission observed that because 
four of the five largest vertically integrated cable operators served 
34 percent of all MVPD subscribers, they could reap a substantial 
portion of the gains from withholding programming from their rivals. 
Now that the market share of the four largest vertically integrated 
cable MSOs has increased to between 54 and 56.75 percent, the largest 
vertically integrated cable operators stand to gain even more from a 
withholding strategy. Thus, the increase in horizontal consolidation in 
the cable industry since 2002 increases the incentive to pursue 
anticompetitive withholding strategies.
    38. Clustering. The cable industry has continued to form regional 
clusters since the 2002 Extension Order, when approximately 80 percent 
of cable subscribers were served by systems that were part of regional 
clusters. Today, taking into account the sale of Adelphia's systems to 
Comcast and Time Warner, some estimate that the percentage of cable 
subscribers served by systems that are part of regional clusters has 
increased to between 85 and 90 percent. The Commission concluded in the 
2002 Extension Order that horizontal consolidation and clustering 
combined with affiliation with regional programming contributed to the 
cable industry's overall market dominance. Given the increase in 
horizontal consolidation and regional clustering since 2002, this 
statement is no less true today. With a regional programming denial 
strategy, a cable-affiliated programmer foregoes only those revenues 
associated with the subscribers of competitive MVPDs within the 
cluster, not the revenues associated with subscribers of competitive 
MVPDs nationwide. As the Commission concluded previously, in many 
cities where cable MSOs have clusters, the market penetration of 
competitive MVPDs is much lower and cable market penetration is much 
higher than their nationwide penetration rates. For example, according 
to data from Nielsen Media Research, the collective market penetration 
of competitive MVPDs in many DMAs where cable MSOs have clusters is far 
less than their collective nationwide market penetration rate 
(approximately 33 percent): San Diego (13.7 percent), New York (18.2 
percent), Philadelphia (19.8 percent), and San Francisco (26.9 
percent). As the Commission acknowledged in the 2002 Extension Order, 
this market penetration data may not correspond exactly to cable MSO 
cluster boundaries, and there are likely other factors, such as line-
of-sight, in addition to cable competition that affect city market 
penetration. Nevertheless, we believe that this market penetration data 
provide support for the position that market penetration of competitive 
MVPDs is lower in certain cable cluster areas than nationwide. 
Moreover, due to the national distribution of DBS services and the 
insufficient mass of DBS subscribers on a regional basis, DBS operators 
do not have an economic base for substantial regional programming 
investments on a market-by-market basis. As a result, the cost to a 
cable-affiliated programmer of withholding regional programming is 
lower in many cases than the cost of withholding national programming. 
Moreover, the affiliated cable operator will obtain a substantial share 
of the benefits of a withholding strategy because its share of 
subscribers within the cluster is likely to be inordinately high.
    39. As we concluded in the 2002 Extension Order, Sections 628(b), 
628(c)(2)(A), and 628(c)(2)(B) of the Communications Act are not 
adequate substitutes for the particularized protection afforded under 
Section 628(c)(2)(D). We stated that (i) Section 628(c)(2)(D) places 
the burden on the party seeking exclusivity to show that an exclusive 
contract meets the statutory public interest standard and that no other 
program access provision provides this protection; (ii) these other 
provisions were all enacted as part of the 1992 Cable Act, indicating 
that, despite the existence of these other program access provisions, 
Congress found the exclusive contract prohibition to be necessary to 
preserve and protect competition and diversity; (iii) as compared to 
Section 628(c)(2)(D), Section 628(b) carries with it an added burden 
``to demonstrate that the purpose or effect of the conduct complained 
of was to ``hinder significantly or to prevent'' an MVPD from providing 
programming to subscribers or customers''; (iv) conduct of undue 
influence necessary to establish a violation of Section 628(c)(2)(A) 
``may be difficult for the Commission or complainants to establish''; 
and (v) the prohibition of ``non-price discrimination'' in Section 
628(c)(2)(B) requires the complainant to

[[Page 56652]]

demonstrate the conduct was ``unreasonable'' which may be difficult to 
establish. No commenter provides any basis for us to revisit these 
conclusions. Moreover, we note that some competitive MVPDs argue that 
allowing the exclusive contract prohibition to sunset would provide 
cable-affiliated programmers with an incentive to enter into exclusive 
contracts with their affiliated cable operators to avoid allegations of 
unfair acts or practices or discrimination with respect to their 
dealings with unaffiliated distributors.
    40. We recognize the benefits of exclusive contracts and vertical 
integration cited by some cable MSOs, such as encouraging innovation 
and investment in programming and allowing for ``product 
differentiation'' among distributors. We do not believe, however, that 
these purported benefits outweigh the harm to competition and diversity 
in the video distribution marketplace that would result if we were to 
lift the exclusive contract prohibition. In addition, the Commission's 
rules permit cable-affiliated programmers to seek approval to enter 
into an exclusive contract based on a demonstration that the exclusive 
arrangement serves the public interest consistent with factors 
established by Congress.
c. Impact on Programming
    41. We find above that the exclusive contract prohibition continues 
to be necessary to preserve and protect diversity in the distribution 
of programming. As we stated in the 2002 Extension Order, while we 
recognize that the exclusive contract prohibition's impact on 
programming diversity is one component of our analysis, Congress 
directed that ``our primary focus should be on preserving and 
protecting diversity in the distribution of video programming--i.e., 
ensuring that as many MVPDs as possible remain viable distributors of 
video programming.'' While cable MSOs contend that the exclusive 
contract prohibition reduces incentives for cable operators and 
competitive MVPDs to create and invest in new programming, we find no 
evidence to support this theory. To the contrary, the number of 
vertically integrated satellite-delivered national programming networks 
has more than doubled since 1994 when the rule implementing the 
exclusive contract prohibition took effect and has continued to 
increase since 2002 when the Commission last examined the exclusive 
contract prohibition. There is also evidence that some competitive 
MVPDs have begun to invest in their own programming despite their 
ability to access cable-affiliated programming based on the exclusive 
contract prohibition and the program access rules. Accordingly, we find 
no basis to conclude that extending the exclusive contract prohibition 
will create a disincentive for the creation of new programming.
    42. We are mindful that our decision to extend the exclusive 
contract prohibition must withstand an intermediate scrutiny test 
pursuant to First Amendment jurisprudence. As the D.C. Circuit 
explained in rejecting a facial challenge to the constitutionality of 
the exclusive contract prohibition in Section 628(c)(2)(D), the 
prohibition will survive intermediate scrutiny if it ``furthers an 
important or substantial governmental interest; if the governmental 
interest is unrelated to the suppression of free expression; and if the 
incidental restriction on alleged First Amendment freedoms is no 
greater than is essential to the furtherance of that interest.'' For 
the reasons discussed herein, our decision to extend the exclusive 
contract prohibition satisfies this intermediate scrutiny test. First, 
in Time Warner, the court found that the governmental interest Congress 
intended to achieve in enacting the exclusive contract prohibition was 
``the promotion of fair competition in the video marketplace,'' and 
that this interest was substantial. Moreover, one of Congress' express 
findings in enacting the 1992 Cable Act was that ``[t]here is a 
substantial governmental and First Amendment interest in promoting a 
diversity of views provided through multiple technology media.'' 
Moreover, the court noted Congress' conclusion that ``the benefits of 
these provisions--the increased speech that would result from fairer 
competition in the video programming marketplace--outweighed the 
disadvantages [resulting in] the possibility of reduced economic 
incentives to develop new programming.'' We disagree with cable MSOs to 
the extent they argue that the substantial government interest in 
achieving competition in the video distribution market has been met. As 
discussed above, cable operators still have a dominant share of MVPD 
subscribers (approximately 67 percent), have raised prices in excess of 
inflation despite the emergence of new competitors, and still own 
significant programming networks. Accordingly, we conclude that 
competition and diversity in the video distribution market has not 
reached the level at which Congress intended the exclusive contract 
prohibition would sunset. Second, in Time Warner, the court held that 
the governmental objective in adopting the exclusive contract 
prohibition in Section 628(c)(2)(D) was unrelated to the suppression of 
free speech. In this Order, we extend the exclusive contract 
prohibition for an additional five years but do not otherwise modify 
the prohibition. Thus, the prohibition remains unrelated to the 
suppression of free speech, as the D.C. Circuit Court of Appeals 
previously held. Third, in Time Warner, the court rejected claims that 
the exclusive contract prohibition was not narrowly tailored to achieve 
the stated government interest. In this Order, we extend the exclusive 
contract prohibition for a term of five years but do not otherwise 
modify the prohibition. Thus, the prohibition remains narrowly tailored 
to meet the statute's objective, and any incidental restriction on 
alleged First Amendment freedoms is no greater than is essential to the 
furtherance of that objective.
    43. We note that cable MSOs argue that the exclusive contract 
prohibition is not narrowly tailored because it is allegedly both 
overinclusive (in that it applies to ``new,'' ``unpopular,'' and other 
types of programming that are arguably not essential to the viability 
of competition in the video distribution market) and underinclusive (in 
that it does not apply to certain non-cable-affiliated programming that 
may be necessary for viable competition in the MVPD market). Moreover, 
we note that the exclusive contract prohibition in Section 628(c)(2)(D) 
is not absolute. Rather, cable-affiliated programmers may seek approval 
to enter into exclusive programming contracts that satisfy the criteria 
set forth by Congress in Section 628(c)(2) and (4). Despite claims that 
the exclusive contract prohibition deprives cable operators and others 
of the incentive to invest in new programming, thereby restricting the 
creation of new programming, the record reflects the opposite. Thus, 
contrary to these contentions, the prohibition has fostered, not 
restricted, speech.
4. Scope of Exclusive Contract Prohibition
    44. Various commenters argue that the exclusive contract 
prohibition is both overinclusive and underinclusive with respect to 
the type of programming and MVPDs it covers. As discussed below, we 
decline to either narrow or expand the exclusive contract prohibition.

[[Page 56653]]

a. Narrowing the Prohibition
(i) Narrowing Based on Status of Programming Network
    45. For the reasons discussed below, we decline to narrow the scope 
of the exclusive contract prohibition based on the status of the 
programming network. The exclusive contract prohibition in Section 
628(c)(2)(D) and the implementing rules pertain to all satellite-
delivered programming networks that are vertically integrated with a 
cable operator, regardless of their popularity.
    46. As an initial matter, we note that in adopting the exclusive 
contract prohibition in Section 628(c)(2)(D), Congress applied the 
prohibition to all cable-affiliated programming. Congress did not 
distinguish between different types of cable-affiliated programming. 
Accordingly, as the Commission concluded in the 2002 Extension Order, 
we believe that treating all satellite cable programming and satellite 
broadcast programming uniformly for purposes of the exclusive contract 
prohibition is consistent with Section 628(c)(2)(D) and the definitions 
set forth in Sections 628(i)(1) and (3). Moreover, no commenter has 
provided a rational and workable definition of ``must have'' 
programming that would allow us to apply the exclusive contract 
prohibition to only this type of programming.
(ii) Narrowing Based on Status of Cable Operator
    47. For the reasons discussed below, we decline to narrow the scope 
of the exclusive contract prohibition based on the status of the cable 
operator. Cable MSOs argue that we should narrow the exclusive contract 
prohibition by allowing certain types of exclusive arrangements based 
on the status of the cable operator, such as (i) those involving an 
affiliated cable operator whose network passes only a small number of 
households throughout the nation; (ii) those between a cable operator 
and an affiliated programming network outside the footprint of the 
affiliated cable operator; and (iii) those involving affiliated cable 
operators that face competition from both DBS and telephone companies.
    48. In adopting the exclusive contract prohibition in Section 
628(c)(2)(D), Congress applied the prohibition to all cable operators. 
Congress did not distinguish between different types of cable operators 
for purposes of Section 628(c)(2)(D). Moreover, in adopting the 
exclusive contract prohibition, Congress has already delineated a 
geographic demarcation applicable to the prohibition--``areas served by 
a cable operator.'' Congress did not provide that the exclusive 
contract prohibition should vary based on the competitive circumstances 
in individual geographic areas served by a cable operator.
    49. We also find that these attempts to narrow the exclusive 
contract prohibition would harm competition in the video distribution 
marketplace. One of the key anticompetitive practices that the 
exclusive contract prohibition addresses is the practice of leveraging 
cable's market power collectively by withholding affiliated programming 
from rival MVPDs while selling the affiliated programming to other 
cable operators which do not compete with one another. A cable operator 
may gain by weakening a current or potential rival (such as a DBS 
operator) even in markets that the cable operator itself does not 
serve. Thus, proposals to narrow the exclusive contract prohibition by 
allowing exclusive arrangements outside of the footprint of the 
affiliated cable operator or with cable operators whose networks pass 
only a small number of households throughout the nation will impede 
competition in the video distribution marketplace. We similarly find 
that allowing exclusive arrangements for affiliated cable operators 
that face competition from both DBS and telephone companies would harm 
competition in the video distribution marketplace. We conclude herein 
that a cable operator will not lose the incentive and ability to enter 
into an exclusive arrangement in a given geographic area simply because 
it faces competition from both DBS operators and telephone companies in 
that area.
(iii) Narrowing Based on Status of Competitive MVPD
    50. For the reasons discussed below, we decline to narrow the 
exclusive contract prohibition by precluding certain competitive MVPDs 
from benefiting from the prohibition. Comcast and Cablevision ask us to 
narrow the exclusive contract prohibition by precluding certain 
competitive MVPDs from benefiting from the prohibition, such as 
competitive MVPDs that (i) have been in the MVPD market for more than 
five years; (ii) have extensive resources; or (iii) enter into 
exclusive contracts for programming.
    51. Section 628 makes no distinction among MVPDs of the kind 
suggested by these commenters. Moreover, we find that adopting such 
restrictions on the entities that can benefit from the prohibition will 
limit competition in the video distribution market and will result in 
no discernible public interest benefits. The resources of competitors 
or the number of years they have spent in the market has no bearing on 
the goal of Section 628(c)(2)(D) to preclude exclusive contracts in 
order to facilitate competition in the video distribution market. 
Rather, if cable operators have exclusive access to non-substitutable 
content that is essential for viable competition and they have the 
incentive to withhold such content, the