Leased Commercial Access, 10675-10696 [08-872]

Agencies

• FEDERAL COMMUNICATIONS COMMISSION

[Federal Register Volume 73, Number 40 (Thursday, February 28, 2008)]
[Rules and Regulations]
[Pages 10675-10696]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 08-872]


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FEDERAL COMMUNICATIONS COMMISSION

47 CFR Part 76

[MB Docket No. 07-42; FCC 07-208]


Leased Commercial Access

AGENCY: Federal Communications Commission.

ACTION: Final rule.

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SUMMARY: In this document, the Commission modifies the leased access 
rate formula; adopts customer service obligations that require minimal 
standards and equal treatment of leased access programmers with other 
programmers; eliminates the requirement for an independent accountant 
to review leased access rates; requires annual reporting of leased 
access statistics; adopts expedited time frames for resolution of 
complaints and modifies the discovery process.

DATES: The amendments contained in this final rule are effective as 
follows:
    Revised Sec.  76.970 is effective May 28, 2008 except for paragraph 
(j)(3) which contains information collection requirements that have not 
been approved by the Office of Management and Budget (OMB). The Federal 
Communications Commission will publish a document announcing the 
effective date upon OMB approval of those collection requirements.
    Section 76.972 is effective March 31, 2008 except for paragraphs 
(a), (b), (c), (d), (e) and (g) which contain information collection 
requirements that have not been approved by OMB and paragraph (f) which 
contains requirements related to those information collection 
requirements. The Federal Communications Commission will publish a 
document announcing the effective date upon OMB approval of those 
collection requirements.
    Amendments to Sec.  76.975 are effective March 31, 2008 except for 
paragraphs (d), (e), (g), and (h)(4) which contain information 
collection requirements that have not been approved by OMB and 
paragraphs (b), (c), and (f) which contain requirements related to 
those information collection requirements. The Federal Communications 
Commission will publish a document announcing the effective date upon 
OMB approval of those collection requirements.
    Section 76.978, as added in this rule, contains information 
collection requirements that have not been approved by OMB. The Federal 
Communications Commission will publish a document announcing the 
effective date upon OMB approval of those collection requirements.

ADDRESSES: Federal Communications Commission, 445 12th Street, SW., 
Room TW-A325, Washington, DC 20554. In addition to filing comments with 
the Office of the Secretary, a copy of any comments on the Paperwork 
Reduction Act information collection requirements contained herein 
should be submitted to Cathy Williams, Federal Communications 
Commission, Room 1-C823, 445 12th Street, SW., Washington, DC 20554, or 
via the Internet to PRA@fcc.gov. For additional information, see the 
SUPPLEMENTARY INFORMATION section of this document.

FOR FURTHER INFORMATION CONTACT: For additional information on this 
proceeding, contact Steven Broeckaert, Steven.Broeckaert@fcc.gov; Katie 
Costello, Katie.Costello@fcc.gov; or

[[Page 10676]]

David Konczal, David.Konczal@fcc.gov; of the Media Bureau, Policy 
Division, (202) 418-2120. For additional information concerning the 
Paperwork Reduction Act information collection requirements contained 
in this document, contact Cathy Williams at 202-418-2918, or via the 
Internet at PRA@fcc.gov.

SUPPLEMENTARY INFORMATION: This is a summary of the Commission's Report 
and Order (``Order''), FCC 07-208, adopted on November 27, 2007, and 
released on February 1, 2008. 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 new and modified information collection 
requirements. The Commission will send the requirements to OMB for 
review. 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.'' In this present document, we have 
assessed the potential effects of the various policy changes with 
regard to information collection burdens on small business concerns, 
and we find that these requirements will benefit many companies with 
fewer than 25 employees by facilitating the use of leased access 
channels and by promoting the fair and expeditious resolution of leased 
access complaints.

Summary of the Report and Order

I. Introduction

    1. In this Report and Order, we modify the Commission's leased 
access rules. With respect to leased access, we modify the leased 
access rate formula; adopt customer service obligations that require 
minimal standards and equal treatment of leased access programmers with 
other programmers; eliminate the requirement for an independent 
accountant to review leased access rates; and require annual reporting 
of leased access statistics. We also adopt expedited time frames for 
resolution of complaints and improve the discovery process. Finally, we 
seek comment in a Further Notice of Proposed Rulemaking on whether we 
should apply our new rate methodology to programmers that predominantly 
transmit sales presentations or program length commercials.

II. Commercial Leased Access Rules

A. Background
    2. The commercial leased access requirements are set forth in 
Section 612 of the Communications Act of 1934, as amended 
(``Communications Act''). The statute and corresponding leased access 
rules require a cable operator to set aside channel capacity for 
commercial use by unaffiliated video programmers. In implementing the 
statutory directive to determine maximum reasonable rates for leased 
access, the Commission adopted a maximum rate formula for full-time 
carriage on programming tiers based on the ``average implicit fee'' 
that other programmers are implicitly charged for carriage to permit 
the operator to recover its costs and earn a profit. The Commission 
also adopted a maximum rate for a la carte services based on the 
``highest implicit fee'' that other a la carte services implicitly pay, 
and a prorated rate for part-time programming.
B. Customer Service Standards and Equitable Contract Terms
    3. In this Order, we adopt uniform customer service standards to 
address the treatment of leased access programmers and potential leased 
access programmers by cable system operators. In order to make the 
leased access carriage process more efficient, we adopt new customer 
service standards, in addition to the existing standards. These 
standards are designed to ensure that leased access programmers are not 
discouraged from pursuing their statutory right to the designated 
commercial leased access channels, to facilitate communication of these 
rights and obligations to potential programmers, and to ensure a smooth 
process for gaining information about a cable system's available 
channels. We require cable system operators to maintain a contact name, 
telephone number and e-mail address on its website, and make available 
by telephone, a designated person to respond to requests for 
information about leased access channels. We also require cable system 
operators to maintain a brief explanation of the leased access statute 
and regulations on its website. Within three business days of a request 
for information, a cable system operator shall provide the prospective 
leased access programmers with the following information: (1) The 
process for requesting leased access channels; (2) The geographic 
levels of service that are technically possible; (3) The number and 
location and time periods available for each leased access channel; (4) 
Whether the leased access channel is currently being occupied; (5) A 
complete schedule of the operator's statutory maximum full-time and 
part-time leased access rates; (6) A comprehensive schedule showing how 
those rates were calculated; (7) Rates associated with technical and 
studio costs; (8) Electronic programming guide information; (9) The 
available methods of programming delivery and the instructions, 
technical requirements and costs for each method; (10) A comprehensive 
sample leased access contract that includes uniform terms and 
conditions such as tier and channel placement, contract terms and 
conditions, insurance requirements, length of contract, termination 
provisions and electronic guide availability; and (11) Information 
regarding prospective launch dates for the leased access programming. 
In addition to the customer service standards, we adopt penalties for 
ensuring compliance with these standards. We emphasize that the leased 
access customer service standards adopted herein are ``minimum'' 
standards. We cannot anticipate each and every instance of interaction 
between cable operators and leased access programmers.

[[Page 10677]]

    4. Maintenance of Contact Information. We require every cable 
system operator to maintain, on its website, a contact name, telephone 
number, and e-mail of an individual designated by the cable system 
operator to respond to requests for information about leased access 
channels. One of the more basic elements necessary to permit potential 
programmers reasonable access to cable systems is ready availability of 
a contact name, telephone number, and e-mail address of a cable system 
operator that the programmer can use to reach the appropriate person in 
the cable system to begin the process for requesting access to the 
system. While the physical location of a person designated as the 
leased access contact should not be critical in the relationship 
between the potential programmer and the cable system operator, the 
identity of that person and the ease of access to him are critical. 
Other aspects of the rules we adopt here deal with expeditious and full 
responses to leased access requests. The fact that the designated 
person is located some distance away should not affect the timeliness 
and substance of responses.
    5. Timing for Response. We amend our rules to require a cable 
system operator to respond to a request for information from a leased 
access programmer within three business days. We retain the 30-day 
response period currently provided in Section 76.970(i)(2) of the 
Commission's rules for cable systems that have been granted small 
system special relief. The identity of a designated person by the cable 
system operator who the potential programmer can contact is important 
only if that person replies quickly and fully to the requests of the 
programmer. Our current rules provide for a 15 day response by cable 
system operators to a request by a potential programmer. That response 
must include information on channel capacity available, the applicable 
rates, and a sample contract if requested. That response time is 
unnecessarily long and, as discussed below, the information is 
inadequate. Cable operators must have leased access channel information 
available in order to be able to comply with the statute and our rules. 
It does not take 15 days to provide a copy of that information to a 
potential leased access programmer. Three business days to reply to a 
request for such information is more than adequate. Accordingly, we are 
amending the response time permitted a cable system operator to three 
business days. We are also providing a more detailed list of 
information the operator must provide upon request within that time 
period. All of the information required to be provided is necessary for 
a potential leased access programmer to be able to file a bona fide 
request for carriage. There is no reason to delay providing the leased 
access programmer with the information it needs to take the necessary 
steps to obtain access.
    6. Process for Requesting Leased Access Channels. We require a 
cable system operator within three business days of a request to 
provide a prospective leased access programmer with the process for 
requesting leased access channels. One element of the information the 
cable system operator must make available to the potential programmer 
within three business days of a request is an explanation of the cable 
system operator's process for requesting leased access channels. 
Accordingly, we are requiring that the cable system operator include an 
explanation of the operator's process and procedures for requesting 
leased access channels.
    7. Geographic Levels of Service that Are Technically Possible. We 
require a cable system operator within three business days of a request 
to provide a prospective leased access programmer with the geographic 
levels of service that are technically possible. Commenters complain 
that cable system operators make available only limited levels of 
service. Typically, the service offered is defined by the size of the 
headend. We will not require, at this time, the operator to allow the 
leased access programmer to serve discrete communities smaller than the 
area served by a headend if they are not doing the same with other 
programmers. We acknowledge that with the consolidation of headends, 
programmers may be forced to purchase larger areas at higher costs than 
they would prefer. We will monitor developments in this area, and may 
revisit this issue if circumstances warrant. However, we will require 
cable system operators to clearly set out in their responses to 
programmers what geographic and subscriber levels of service they 
offer.
    8. Number, Location, and Time Periods Available for Each Leased 
Access Channel. We require a cable system operator within three 
business days of a request to provide a prospective leased access 
programmer with the number, location, and time periods available for 
each leased access channel. Our current leased access channel placement 
standards provide that programmers be given access to tiers that have 
subscriber penetration of more than 50 percent. 47 CFR 76.971(a)(1) We 
will not change that requirement, but we will expand on the current 
requirement relating to capacity in Section 76.970(i) to require cable 
system operators to provide, in their replies to requests from 
programmers, the specific number and location and time periods 
available for each leased access channel. This greater degree of 
certainty should assist programmers in their evaluations.
    9. Explanation of Currently Available and Occupied Leased Access 
Channels. We require a cable system operator within three business days 
of a request to provide a prospective leased access programmer with an 
explanation of currently available and occupied leased access channels. 
Section 612 of the Communications Act imposes specific requirements on 
cable operators with regard to leased access. 47 U.S.C. 532. It is 
inherent in these obligations to be able to provide timely and accurate 
information to prospective leased access programmers. Within three 
business days of a request by a current or potential leased access 
programmer, a cable operator shall provide information documenting: (1) 
The number of channels that the cable operator is required to designate 
for commercial leased access use pursuant to Section 612(b)(1); (2) the 
current availability of those channels for leased access programming on 
a full- or part-time basis; (3) the tier on which each leased access 
channel is located; (4) the number of customers subscribing to each 
tier containing leased access channels; (5) whether those channels are 
currently programmed with non-leased access programming; and (6) how 
quickly leased access channel capacity can be made available to the 
prospective leased access programmer. We believe this information is 
vital to enable leased access programmers to make an informed decision 
regarding whether to pursue leased access negotiations with a cable 
operator. Provision of this information will also benefit cable 
operators by timely informing leased access programmers of current 
leased access timing and availability, and thereby eliminating leased 
access requests that cannot be accommodated by existing leased access 
availability.
    10. Schedule and Calculation of Leased Access Rates. We require a 
cable system operator within three business days of a request to 
provide a prospective leased access programmer with a schedule and 
calculation of its leased access rates. As with information regarding 
available and occupied leased access channels, we believe Section 612 
imposes on cable operators the obligation to provide a timely and 
accurate explanation of its leased access

[[Page 10678]]

rates to prospective leased access programmers. Accordingly, within 
three business days of a request by a current or potential leased 
access programmer, a cable operator shall provide information 
documenting the schedule of all leased access rates (full- and part-
time) available on the cable system. Cable operators must attach to 
this schedule a separate calculation detailing how each rate was 
derived pursuant to the revised rate formula adopted herein. This 
information will assist leased access programmers in determining 
whether leased access capacity on a given cable system is economically 
feasible. In addition, the rate calculations will further assist leased 
access programmers in determining whether particular cable operators 
are complying with their leased access obligations.
    11. Explanation of Any Rates Associated with Technical or Studio 
Costs. Included in the customer standards we are adopting today is a 
requirement that a cable operator provide a prospective leased access 
programmer, within three business days of a request, with a list of 
fees for providing technical support or studio assistance to the leased 
access programmer along with an explanation of such fees and how they 
were calculated. We note that our rules require leased access providers 
to reimburse cable operators ``for the reasonable cost of any technical 
support the operators actually provide.'' 47 CFR 76.971(c) Further, our 
rate calculation includes technical costs common to all programmers so 
that cable operators may not impose a separate charge for technical 
support they already provide to non-leased access programmers. Second 
Report and Order, 12 FCC Rcd at 5324, para. 114. At this time, we will 
not prescribe an hourly rate for technical support, but instead will 
monitor the effectiveness of the new customer standards that require 
that cable operators list up front any technical fees along with an 
explanation of the fee calculation. If leased access programmers have 
continued problems with high technical or studio cost, we will consider 
implementing a more specific solution.
    12. Programming Guide Information. We require a cable system 
operator within three business days of a request to provide a 
prospective leased access programmer with all relevant information for 
obtaining carriage on the program guide(s) provided on the operator's 
system. Moreover, we expressly require that, if a cable operator does 
not charge non-leased access programmers for carriage of their program 
information on a programming guide, the cable operator cannot charge 
leased access programmers for such service. Because of the dynamic 
nature of leased access programming, we believe that it would be 
impracticable to impose a requirement on cable operators to include all 
leased access listings in their programming guides. However, we believe 
that, in situations where time permits and the leased access 
programming information is submitted as reasonably required by the 
cable operators, cable operators must ensure that leased access 
programming information is incorporated in its program guide to the 
same extent that it does so for non-leased access programmers. In order 
to accomplish this, cable operators are required to provide potential 
leased access programmers with all relevant information for obtaining 
carriage on the program guide(s) provided on the operator's system. 
This information shall include the requirements necessary for a leased 
access programmer to have its programming included in the programming 
guide(s) that serve the tier of service on which the leased access 
provider contracts for carriage. At a minimum, the cable operator must 
provide: (1) The format in which leased access programming information 
must be provided to the cable operator for inclusion in the appropriate 
programming guide; (2) the content requirements for such information; 
(3) the time by which such programming information must be received for 
inclusion in the programming guide; and (4) the additional cost, if 
any, related to carriage of the leased access programmer's information 
on the programming guide. We expressly require that, if a cable 
operator does not charge non-leased access programmers for carriage of 
their program information on a programming guide, the cable operator 
cannot charge leased access programmers for such service.
    13. Methods of Programming Delivery. We require a cable system 
operator within three business days of a request to provide a 
prospective leased access programmer with available information 
regarding all acceptable, standard methods for delivering leased access 
programming to the cable operator. Because of the variable 
circumstances experienced by each cable system, we cannot establish a 
list of acceptable, standard delivery methods for leased access 
programming applicable to all cable systems. However, we believe that 
it incumbent upon a cable operator to provide prospective leased access 
programmers with sufficient information to be able to gauge the 
relative difficulty and expense of delivering its programming for 
carriage by the cable operator. A cable operator must make available 
information to leased access programmers regarding all acceptable, 
standard methods for delivering leased access programming to the cable 
operator. For each method of acceptable, standard delivery, the cable 
operator shall provide detailed instructions for the timing of 
delivery, the place of delivery, the cable operator employee(s) 
responsible for receiving delivery of leased access programming, all 
technical requirements and obligations imposed on the leased access 
programmer, and the total cost involved with each acceptable, standard 
delivery method that will be assessed by the cable operator. We 
clarify, however, that cable operators must give reasonable 
consideration to any delivery method suggested by a leased access 
programmer. A leased access programmer that is denied the opportunity 
to deliver its programming via a reasonable method may file a complaint 
with the Commission. In such complaint proceeding, the burden of proof 
shall be on the cable operator to demonstrate that its denial was 
reasonable given the unique circumstances of its cable system.
    14. Comprehensive Sample Leased Access Carriage Contract. We 
require a cable system operator within three business days of a request 
to provide a prospective leased access programmer with a comprehensive 
sample leased access carriage contract. We also require a cable system 
operator in its leased access carriage contract to apply the same 
uniform standards, terms, and conditions to leased access programmers 
as it applies to its other programmers.
    15. We do not intend by this requirement to infringe the freedom of 
contract of either party and expressly clarify that neither the cable 
operator nor the prospective leased access programmer need abide by any 
of the terms and conditions set forth in the sample contract. Instead, 
we believe that the provision of such agreements by cable operators 
serve to inform leased access programmers of terms and conditions that 
are generally acceptable to the cable operator and will be a useful 
first step in the initiation of leased access negotiations. 
Accordingly, within three business days of a request by a current or 
potential leased access programmer, a cable operator shall provide a 
copy of a sample leased access carriage contract setting forth what the 
cable operator considers to be the

[[Page 10679]]

standard terms and conditions for a leased access carriage agreement.
    16. As discussed below, we also require cable system operators to 
apply the same uniform standards, terms, and conditions to leased 
access programmers as it applies to its other programmers. Rather than 
dictate specific reasonable terms and conditions, we require that cable 
system operators apply the same uniform standards, terms, and 
conditions to leased access programmers as it applies to its other 
programmers.
    17. The Commission has stated in the past that the reasonableness 
of specific terms and conditions will be determined on a case-by-case 
basis, but set broad guidelines for tier placement and a general 
standard of reasonableness for contract terms and conditions.
    18. We will continue to address complaints about specific contract 
terms and conditions on a case-by-case basis. We emphasize that in all 
cases, the Commission will evaluate any complaints pursuant to a 
reasonableness standard. We also clarify that a cable system operator 
may not continue to include terms and conditions in new contracts that 
previously have been held to be unreasonable by the Commission. Not 
only are our orders binding on the affected parties to a leased access 
complaint, but unless and until an order is stayed or reversed by the 
Commission, a cable system operator is under an obligation to follow 
the Commission's rules and precedent in setting its practices, terms, 
and conditions.
    19. Because we do not think that every potential leased access 
programmer should be required to file a complaint to determine if every 
term in its contract is reasonable, we will require the cable operator 
to provide, along with its standard leased access contract, an 
explanation and justification, including a cost breakdown, for any 
terms and conditions that require the payment or deposit of funds. This 
includes insurance and deposit requirements, any fees for handling or 
delivery, and any other technical or equipment fees, such as tape 
insertion fees. This will allow the leased access programmer to 
determine whether the cost is reasonable and expedite any review by the 
Commission. We believe that requiring a cable operator to provide an 
explanation and justification for such a fee will encourage cable 
operators to impose only reasonable fees or, at least, facilitate the 
filing of a leased access complaint demonstrating that such a fee is 
unreasonable.
    20. With regard to non-monetary terms and conditions, such as 
channel and tier placement, targeted programming, access to electronic 
program guides, VOD, etc., we similarly require the cable operator to 
provide, along with its standard leased access contract, an explanation 
and justification of its policy. For example, with regard to the 
geographic scope of carriage, if a leased access programmer requests to 
have its programming targeted to a finite group of subscribers based on 
community location, unless the operator agrees to the request, it must 
not provide such limited carriage to other programmers or channels. To 
the extent the cable operator denies the request for limited carriage, 
the cable operator must provide an explanation as to why it is 
technically infeasible to provide such carriage. If limited carriage is 
technically feasible, the cable operator must provide a fee and cost 
breakdown for such carriage for comparison with similar coverage 
provided for non-leased access programmers.
    21. Similarly, with regard to tier placement and channel location, 
we require the cable operator to provide, along with its standard 
leased access contract, an explanation and justification of its policy 
regarding placement of a leased access programmer on a particular 
channel as well as an explanation and justification for the cable 
operator's policy for relocating leased access channels. To the extent 
a request for a particular channel is denied, the cable operator must 
provide a detailed explanation and justification for its decision.
    22. Launch Date. We require a cable system operator within three 
business days of a request to provide a prospective leased access 
programmer with information regarding prospective launch dates for the 
leased access programmer. Moreover, we require cable operators to 
launch leased access programmers within a reasonable amount of time. We 
consider 35-60 days after the negotiation is finalized to be a 
reasonable amount of time for launch of a programmer, unless the 
parties come to a different agreement. We note that this time frame 
affords cable operators sufficient time to satisfy the requirement, if 
applicable, to provide subscribers with 30-days written notice in 
advance of any changes in programming services or channel positions.
C. Response to Bona Fide Proposals for Leased Access
    23. We adopt rules to ensure that cable system operators respond to 
proposals for leased access in a timely manner and do not unreasonably 
delay negotiations for leased access. To address this concern, after 
the cable system operator provides the information requested above, in 
order to be considered for carriage on a leased access channel, we 
require a leased access programmer to submit a proposal for carriage by 
submitting a written proposal that includes the following information: 
(1) The desired length of a contract term; (2) The tier, channel and 
time slot desired; (3) The anticipated commencement date for carriage; 
(4) The nature of the programming; (5) The geographic and subscriber 
level of service requested; and (6) Proposed changes to the sample 
contract. The cable system operator must respond to the proposal by 
accepting the proposed terms or offering alternative terms within 10 
days. This same response deadline will apply until an agreement is 
reached or negotiations fail.
    24. Failure to provide the requested information will result in the 
issuance of a notice of apparent liability (``NAL'') including a 
forfeiture in the amount of $500.00 per day. A potential leased access 
programmer need not file a formal leased access complaint pursuant to 
Section 76.975 of the Commission's rules in order to bring a violation 
of our customer service standards to our attention. Rather, the 
programmer may notify the Commission either orally or in writing, and 
where necessary the Commission will submit a Letter of Inquiry 
(``LOI'') to the cable operator to obtain additional information. A 
cable system which is found to have failed to respond on time with the 
required information will be issued an NAL. The same process and 
forfeiture amount will apply for the failure to timely respond to a 
proposal as for the failure to comply with an information request. We 
rely on our general enforcement authority under Section 503 of the 
Communications Act to impose forfeitures in appropriate cases. See 47 
U.S.C. 503
D. Leased Access Rates
1. Maximum Rate for Leasing a Full Channel
    25. Background. The Commission's current rules calculate leased 
access rates for all tiers that have subscriber penetration of more 
than 50 percent. Upon request, cable operators generally must place 
leased access programmers on such a tier. To determine the average 
implicit fee for a full-time channel on a tier with a subscriber 
penetration over 50 percent, an operator first calculates the total 
amount it receives in subscriber revenue per month for the

[[Page 10680]]

programming on all such tiers, and then subtracts the total amount it 
pays in programming costs per month for such tiers (the ``implicit fee 
calculation''). A weighting scheme that accounts for differences in the 
number of subscribers and channels on all such tier(s) is used to 
determine how much of the total will be recovered from a particular 
tier. To calculate the average implicit fee per channel, the implicit 
fee for the tier is divided by the number of channels on the tier. The 
final result is the rate per month that the operator may charge the 
leased access programmer for a full-time channel on that tier. Where 
the leased access programmer agrees to carriage on a tier with less 
than 50 percent penetration, the average implicit fee is determined 
using subscriber revenues and programming costs for only that tier. The 
implicit fee for full-time channel placement as an a la carte service 
is based upon the revenue received by the cable operator for non-leased 
access a la carte channels on its system.
    26. In this Order we modify the method for determining the leased 
access rate for full-time carriage on a tier. We harmonize the rate 
methodology for carriage on tiers with more than 50% subscriber 
penetration and carriage on tiers with lower levels of penetration by 
calculating the leased access rate based upon the characteristics of 
the tier on which the leased access programming will be placed. Cable 
operators will calculate a leased access rate for each cable system on 
a tier-by-tier basis which will adequately compensate the operator for 
the net revenue that is lost when a leased access programmer displaces 
an existing program channel on the cable system. In addition, the Order 
sets a maximum allowable leased access rate of $0.10 per subscriber per 
month to ensure that leased access remains a viable outlet for 
programmers. At this time we leave the method for calculating rates for 
a la carte carriage unchanged.
    27. As an initial matter, we conclude that we will not apply this 
new rate methodology to programmers that predominantly transmit sales 
presentations or program length commercials. These programmers often 
``pay'' for carriage--either directly or through some form of revenue 
sharing with the cable operator. In our previous Order, we set the 
leased access rate for a la carte programmers at the ``highest implicit 
fee'' partly out of a concern that lower rates would simply lead these 
programmers to migrate to leased access if it were less expensive than 
what they are currently ``paying'' for carriage. Such a migration would 
not add to the diversity of voices and would potentially financially 
harm the cable system. Similarly, we do not wish to set the leased 
access rates at a point at which programmers that predominantly 
transmit sales presentations or program length commercials simply 
migrate to leased access because it is less expensive than their 
current commercial arrangements. We will seek comment in the Further 
Notice of Proposed Rulemaking on whether leased access is affordable at 
current rates to programmers that predominantly transmit sales 
presentations or program length commercials and whether reduced rates 
would simply cause migration of existing services to leased access.
2. The Marginal Implicit Fee
    28. The purposes of Section 612 are ``to promote competition in the 
delivery of diverse sources of video programming and to assure that the 
widest possible diversity of information sources are made available to 
the public from cable systems in a manner consistent with growth and 
development of cable systems.'' Because Section 612 also requires that 
the price, terms and conditions for leased access be ``at least 
sufficient to assure that such use will not adversely affect the 
operation, financial condition or market development of the cable 
system,'' the Commission is faced with balancing the interests of 
leased access programmers with those of cable operators. We believe 
that our method provides a cable operator with a leased access rate 
that will allow the operator to replace an existing channel from its 
cable system with a leased access channel without experiencing a loss 
in net revenue. While we do not believe that our method for determining 
leased access rates will result in cable operators experiencing any 
loss in net revenue, the relevant statutory provision does not require 
such a finding. As explained above, Section 612(c)(1) provides that the 
``prices, terms and conditions'' of use must be ``at least sufficient 
to assure that such use will not adversely affect the operation, 
financial condition, or market development of the cable system.'' We 
interpret this provision to restrict ``prices, terms, and conditions'' 
of leased access use that materially affect the financial health of a 
cable system. We do not interpret the provision to require that cable 
operators experience no loss in revenue whatsoever as a result of 
leased access use. Thus, even if we were to conclude that our method 
for determining leased access rates would have some impact on cable 
operators' revenue, we would still adopt this method because we are 
confident that any impact on operators'' revenue would not be of 
sufficient magnitude to materially affect the financial health of cable 
systems. In addition, since we are required to balance the revenue 
requirement of cable operators and that of leased access programmers, 
we will assume that the cable operator will elect to replace a channel 
which does not generate a significant amount of the total net revenue 
of the system. We refer to this channel as the marginal channel and use 
the marginal implicit fee to determine leased access rates. Our method 
was intended to promote the goals of competition and diversity of 
programming sources while doing so in a manner consistent with growth 
and development of cable systems.
    29. Based on the wide variance between the actual use of leased 
access and the goals stated in the law, it appears that the current 
``average implicit fee'' formula for tiered leased access channels 
yields fees that are higher than the statute mandates, resulting in an 
underutilization of leased access channels. According to the 
Commission's most recent annual cable price survey, cable systems on 
average carry only 0.7 leased access channels. Because our Rules are 
not achieving their intended purpose, we are revisiting decisions made 
in the Second Report and Order establishing the maximum leased access 
rates in order to make the leased access channels a more viable outlet 
for programming. Throughout its implementation of Section 612, the 
Commission has recognized that the Rules adopted would need refinement 
as specifics regarding how the leased access rules were functioning 
became available.
    30. Due to the variances in channel line-ups and tier prices of 
cable systems, in most instances, a flat rate would either over- or 
undercompensate cable operators. As discussed below, however, we will 
set a cap on the maximum rate that cable operators may charge in order 
to prevent the construction of tiers in a manner that makes leased 
access rates excessively high.
    31. We agree with Shop NBC's assertion that the average implicit 
fee overcompensates cable operators because it reflects the average 
value of a channel to the cable operator instead of the value of the 
channel replaced. We will make adjustments to the rate calculations 
that should lower prices by using the marginal implicit fee rather than 
the average. The result is intended to promote the goals of leased 
access by providing more affordable opportunities

[[Page 10681]]

for programmers without creating an artificially low rate.
    32. The legislative history provides that the leased access 
provisions are ``aimed at assuring that cable channels are available to 
enable program suppliers to furnish programming when the cable operator 
may elect not to provide that service as part of the program offerings 
he makes available to subscribers'' To promote this legislative purpose 
the Commission should set the leased access rates as low as possible 
consistent with the requirement to avoid any negative financial impact 
on the cable operator. One may assume that the cable operator, faced 
with a requirement to free up a channel for leased access, would have 
its own incentives to elect to replace one of the channels with the 
lowest implicit fee. But even if this is not the case, the discussion 
above suggests that the Commission should set its rules to encourage 
such a result. This dictates, at least in principle, the use of the 
lowest implicit fee, which we refer to as the ``marginal implicit 
fee.'' And it supports the conclusion that the current ``average 
implicit fee'' criterion for tiered channels is higher than warranted 
by the statute and may be impeding, rather than promoting, the goals of 
competition and diversity of programming sources. These rules provide 
cable operators a higher return for lost channel capacity than the 
value the cable operator would have received if the channel was not 
used for leased access programming. The ``average implicit fee'' is 
calculated based on the average value of all of the channels in a tier 
instead of the value of the channels most likely to be replaced. We 
will adopt a method which eliminates this excess recovery. This method 
remains faithful to the statutory requirements while more appropriately 
balancing the interests of cable operators and leased access 
programmers.
3. The Cable Operator's Net Revenue From a Cable Channel
    33. Cable channels are sold in bundles of channels known as tiers. 
It is therefore not possible to directly observe the revenue per 
subscriber a cable operator earns from carrying an individual channel 
included in a tier. We therefore approximate the revenue earned by 
those channels on the tier. To do so we assume that the revenue 
generated by each channel is directly proportional to the per 
subscriber affiliation fee paid by the cable operator to the 
programmer. The first step in the calculation is to determine this 
factor of proportionality which we refer to as the mark-up. To do so, 
the cable operator will take the total subscriber revenue for the 
programming tier at issue and divide by the total of the affiliation 
fees that the cable operator pays to the programmers for the channels 
on that tier. For the purposes of defining the price of a tier and the 
channels on the tier we adopt the incremental approach in cases where 
the cost and channels of one tier are implicitly incorporated into 
larger tiers. For example, when the expanded basic tier incorporates 
the basic tier, the expanded basic tier price is the retail price of 
the expanded basic tier less the retail price of the basic tier and the 
channels on the expanded basic tier are those that are not available on 
the basic tier. A similar adjustment is required of other tiers which 
are not sold on an incremental basis. This calculation will generate 
the mark-up of channels that are sold on the tier. The gross revenue 
per subscriber due to carriage of a specific channel on the tier is 
then simply the per subscriber affiliation fee paid to the programmer 
for the specific channel multiplied by the mark-up. It is our 
understanding that some programming contracts specify a single rate for 
a group, or bundle, of channels. In these cases, for the purposes of 
determining the per subscriber affiliation fee for one of the bundled 
channels, the fee in the contract shall be allocated in its entirety to 
the highest rated network in the bundle. The net revenue per subscriber 
earned by the cable operator from the channel is the difference between 
the gross revenue per subscriber and the per subscriber affiliation fee 
paid by the cable operator. This value represents the implicit fee for 
the channel.
4. The Net Revenue of the Marginal Channel
    34. The net revenue per subscriber is the reduction in profit a 
cable operator would experience if it did not carry the channel in 
question. In our previous method for calculating leased access rates 
the calculation was based the average net revenue of all channels 
carried by the cable operator. In our new method, we base the leased 
access rate on the net revenue of the least profitable channels 
voluntarily carried by the cable operators on the tier where the leased 
access programming will be carried. We do so because this represents an 
approximation of the minimum net revenue a network must generate in 
order for the cable operator to consider carrying it on the tier. As 
mentioned, we examine the net revenue of channels that are voluntarily 
carried by the cable operator. From this calculation we exclude 
channels whose carriage is mandated by statute, regulation, or 
franchise agreement. These mandated channels consist of broadcast 
stations that are subject to the must-carry rules as well as public, 
educational, and governmental (``PEG'') channels that are carried 
pursuant to a franchise agreement. In addition, broadcaster's multi-
cast channels are also excluded from the marginal channels. Our goal is 
to base the leased access rate on the net revenue of channels which are 
subject to free market negotiations over the carriage decision and 
affiliation fee. It is the net revenue of these types of channels which 
provides an indication of the net revenue that would be forgone when a 
cable operator devotes channel capacity to a leased access programmer 
since the cable operator would be unable to displace a broadcast 
station or PEG channel.
    35. We identify the least profitable, or marginal, channels using 
the fraction of activated channels that a cable operator is statutorily 
required to make available for commercial leased access. The leased 
access rate is the mean value of net revenue earned by the lowest 
earning channels on the tier, up to the designated leased access 
fraction of qualifying channels on the tier. For example, in the case 
of a cable system with 100 activated channels and 40 channels on the 
expanded basic tier, the mean value of the net revenue of the 6 
channels with the lowest net revenue will be the leased access rate for 
carriage on the expanded basic tier. We use the mean rather than the 
minimum value because use of the minimum would undercompensate the 
cable operator if more than one leased access channel was carried 
because, presumably, all channels other than the minimum earn higher 
net revenues. Use of the mean ensures that if the cable operator 
carries the statutory maximum number of leased access channels by 
displacing the lowest earning channels on its system, the cable 
operator will be fully compensated for lost revenue.
    36. Appendix B of this Order presents an example of the calculation 
of the leased access rates for a hypothetical cable system.
5. Determining the Maximum Allowable Leased Access Rate
    37. We recognize that our tier-based calculation method may lead to 
inequitable results in situations when a tier carries only a few non-
mandated programming networks in combination with a large amount of 
mandated programming. This may create incentives among cable operators 
to design programming tiers that are unaffordable for leased access

[[Page 10682]]

programmers. Such an outcome would contravene our statutory directive. 
Therefore we institute a maximum allowable rate based upon industry-
wide cable operator programming costs and revenues. This will ensure 
that leased access programmers can reach consumers in all areas of the 
country. We will permit cable operators to seek a waiver of the maximum 
allowable rate to ensure no unreasonable financial burden is put on any 
cable operator. The maximum allowable leased access rate will apply to 
carriage on any tier in which the operator-specific leased access rate 
for the tier exceeds the maximum allowable rate.
    38. We take several approaches to calculating this maximum rate. 
For example, we calculate the maximum rate utilizing a methodology 
based on per-subscriber affiliation fees that compensates systems that 
must vacate a channel in order to provide capacity to a commercial 
leased access programmer. We also calculate the maximum allowable 
leased access rate using a method that follows the one used to 
calculate the system-specific rates. In both cases, maximum rates for 
each of the analog and digital tiers are no greater than $0.10 per 
subscriber per month. The methods are detailed in Appendix B. 
Therefore, the maximum leased access rate will not exceed $0.10 per 
subscriber per month for any cable system.
    39. Cable operators may petition the Commission to exceed the 
maximum allowable leased access rates. A petition for relief must 
present specific facts justifying the system's specific leased access 
rate and provide an alternative rate which equitably balances the 
revenue requirements of the cable operator with the public interest 
goals of the leased access statute. Our presumption is that the mean 
value of the net revenue of the marginal networks, including those 
currently earning no license fee, provides the most reasonable 
approximation of the revenue which is forgone when a cable operator 
carries leased access programming.
6. Effective Date of New Rate Regulations
    40. We recognize that the industry should receive an appropriate 
amount of time to review and to take steps to comply with the new rate 
regulations set forth above. Section 76.970(j)(3), which contains new 
or modified information collection requirements that have not been 
approved by the Office of Management and Budget (OMB), is effective 
upon OMB approval. Section 76.970 is effective May 28, 2008 or upon OMB 
approval of Sec.  76.970(j)(3), whichever is later. After OMB approval 
is received, the Commission will publish a document in the Federal 
Register announcing the effective date of the rules requiring OMB 
approval and those whose effective date was delayed pending OMB 
approval of other rules.
E. Expedited Process
    41. As explained below, we do not change the current pleading cycle 
for leased access complaints set forth in Section 76.975 of the 
Commission's rules, which requires the complaint to be filed with the 
Commission within 60 days of any alleged violation and the cable 
operator to submit a response within 30 days from the date of the 
complaint. The Media Bureau will resolve all leased access complaints 
within 90 days of the close of the pleading cycle, obtaining additional 
discovery from the parties as necessary to quickly resolve complaints. 
Finally, we eliminate the requirement that a complainant alleging that 
a leased access rate is unreasonable must first receive a determination 
of the cable operator's maximum permitted rate from an independent 
accountant.
    42. Discussion. We retain our existing pleading cycle for 
resolution of leased access complaints set forth in Section 76.975 of 
the Commission's rules, which requires the complaint to be filed with 
the Commission within 60 days of any alleged violation and the cable 
operator to submit a response within 30 days from the date of the 
complaint. We find that our current pleading cycle is not too lengthy, 
as it is imperative that we receive all the necessary information to 
resolve the dispute. Although we retain the existing time limits on 
filing of complaints, we add an exception that the time limit on filing 
complaints will be suspended if the complainant files a notice with the 
Commission prior to the expiration of the filing period, stating that 
it seeks an extension of the filing deadline in order to pursue active 
negotiations with the cable operator. The cable operator must agree to 
the extension.
    43. The Media Bureau will resolve all leased access complaints 
within 90 days of the close of the pleading cycle, obtaining additional 
discovery from the parties as necessary to quickly resolve complaints. 
As part of the remedy phase of the leased access complaint process, the 
Media Bureau will have discretion to request that the parties file 
their best and final offer proposals for the prices, terms, or 
conditions in dispute. The Commission will have the discretion to adopt 
one of the proposals or choose to fashion its own remedy. We believe 
that this expedited process will help to resolve leased access disputes 
quickly and efficiently and create a body of precedent to encourage 
private negotiations and the settlement of disputes. If the Media 
Bureau concludes that the complainant is entitled to access a leased 
access channel, the Media Bureau's resolution of the complaint will 
include a launch date for the programming.
    44. Elimination of Independent Accountant Requirement. We eliminate 
the requirement for a complainant alleging that a leased access rate is 
unreasonable to first obtain a determination of the cable operator's 
maximum permitted rate from an independent accountant prior to filing a 
petition for relief with the Commission. While the Commission adopted 
the independent accountant requirement as a means to ``streamline'' the 
leased access complaint process, the record reflects that this 
requirement has not worked as intended. We conclude that the expense, 
delay, and uncertainty for leased access programmers resulting from the 
requirement to obtain a determination from an independent accountant 
are not what the Commission envisioned in attempting to ``streamline'' 
the leased access complaint process. Furthermore, we believe the new 
rate methodology we have adopted, along with the requirement to provide 
rate information and an explanation of how rates were calculated, will 
result in a simpler and transparent process for leased access rates. We 
also believe the expedited complaint process and expanded discovery we 
adopt herein provide leased access programmers with a more efficient 
process for challenging the commercial leased access rates charged by 
cable operators. While cable operators argue that the use of an 
independent accountant is important to protect commercially sensitive 
financial information, the Protective Order we adopt below will 
sufficiently safeguard such information.
F. Discovery
    45. As discussed below, we adopt expanded discovery rules for 
leased access complaints to improve the quality and efficiency of the 
Commission's resolution of these complaints. We amend our discovery 
rules pertaining to leased access complaints to require respondents to 
attach to their answers copies of any documents that they rely on in 
their defense; find that in the context of a complaint proceeding, it 
would be unreasonable for a respondent not to produce all the documents 
either

[[Page 10683]]

requested by the complainant or ordered by the Commission, provided 
that such documents are in its control and relevant to the dispute, 
subject to the protection of confidential material. We emphasize that 
the Commission will use its authority to issue default orders granting 
a complaint if a respondent fails to comply with reasonable discovery 
requests. The respondent shall have the opportunity to object to any 
request for documents. Such request shall be heard, and determination 
made, by the Commission. The respondent need not produce the disputed 
discovery material until the Commission has ruled on the discovery 
request. Any party who fails to timely provide discovery requested by 
the opposing party to which it has not raised an objection may be 
deemed in default and an order may be entered in accordance with the 
allegations contained in the complaint, or the complaint may be 
dismissed with prejudice.
    46. Under the current rules, a leased access complainant is 
entitled, either as part of its complaint or through a motion filed 
after the respondent's answer is submitted, to request that Commission 
staff order discovery of any evidence necessary to prove its case. See 
47 CFR 76.7(e), (f). Respondents are also free to request discovery. We 
believe that expanded discovery will improve the quality and efficiency 
of the Commission's resolution of leased access complaints. 
Accordingly, we find that 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. In reaching this finding, we agree 
that evidence detailing how the cable operator calculated its leased 
access rate, as well as the availability of certain contracts for 
carriage of leased access programming, subject to confidential 
treatment, are essential for determining whether the cable operator has 
violated the Commission's leased access rules. The Commission's Rules 
allow the Commission staff to order production of any documents 
necessary to the resolution of a leased access complaint. See 47 CFR 
76.7(e), (f). The subject discovery may require the production of 
confidential material, including evidence detailing how the cable 
operator calculated its leased access rate as well as carriage 
contracts, subject to our confidentiality rules. While we retain this 
process for the Commission to order the production of documents and 
other discovery, we will also allow parties to a leased access 
complaint to serve requests for discovery directly on opposing parties.
    47. Parties to a leased access complaint may serve requests for 
discovery directly on opposing parties, and file a copy of the request 
with the Commission. As discussed above, the respondent shall have the 
opportunity to object to any request for documents that are not in its 
control or relevant to the dispute. Such request shall be heard, and 
determination made, by the Commission. Until the objection is ruled 
upon, the obligation to produce the disputed material is suspended. Any 
party who fails to timely provide discovery requested by the opposing 
party to which it has not raised an objection as described above may be 
deemed in default and an order may be entered in accordance with the 
allegations contained in the complaint, or the complaint may be 
dismissed with prejudice.
    48. We reiterate that respondents to leased access complaints must 
produce in a timely manner the contracts and other documentation that 
are necessary to resolve the complaint, subject to confidential 
treatment. In order to prevent abuse, the Commission will strictly 
enforce its default rules against respondents who do not answer 
complaints thoroughly or do not respond in a timely manner to 
permissible discovery requests with the necessary documentation 
attached. Respondents that do not respond in a timely manner to all 
discovery ordered by the Commission will risk penalties, including 
having the complaint against them granted by default. Likewise, a 
complainant that fails to respond promptly to a Commission order 
regarding discovery will risk having its complaint dismissed with 
prejudice. Finally, a party that fails to respond promptly to a request 
for discovery to which it has not raised a proper objection will be 
subject to these sanctions as well.
    49. We understand that this approach requires the submission of 
confidential and extremely competitively-sensitive information. 
Accordingly, in order to appropriately safeguard this confidential 
information we believe it is necessary to utilize the protective order 
adopted for use in our program access proceedings (``Protective 
Order''), which we attach hereto as Appendix A.
    50. A Protective Order constitutes both an Order of the Commission 
and an agreement between the party executing the declaration and the 
submitting party. The Commission has full authority to fashion 
appropriate sanctions for violations of its protective orders, 
including but not limited to suspension or disbarment of attorneys from 
practice before the Commission, forfeitures, cease and desist orders, 
and denial of further access to confidential information in Commission 
proceedings. We intend to vigorously enforce any transgressions of the 
provisions of our protective orders.
G. Annual Reporting of Leased Access Statistics
    51. We adopt an annual reporting requirement for cable operators to 
submit information pertaining to leased access rates, usage, channel 
placement, and complaints, among other leased access matters. In the 
NPRM, we sought comment on various questions regarding the status of 
commercial leased access, such as the extent to which programmers are 
making use of commercial leased access channels, whether cable 
operators have denied requests for commercial leased access, whether 
cable operators use commercial leased access channels for their own 
purposes, and the effectiveness of the complaint process.
    52. We did not receive a large number of comments containing 
industry-wide data regarding use of leased access. As described below, 
to ensure that we have sufficient up-to-date information on the status 
of leased access programming in the future, we adopt an annual 
reporting requirement for cable operators.
    53. Discussion. We adopt an annual reporting requirement for cable 
operators pertaining to leased access rates, usage, channel placement, 
and complaints, among other leased access matters. We find that 
gathering up-to-date information and statistics on an annual basis 
pertaining to leased access is critical to our efforts to track trends 
in commercial leased access rates and usage as well as to monitor any 
efforts by cable operators to impede use of commercial leased access 
channels. This information will allow us to determine whether further 
modifications to the commercial leased access rules we adopt herein are 
needed based on a more concrete factual setting. The Annual Report will 
require each cable system to provide the following information:
     List the number of commercial leased access channels 
provided by the cable system.
     List the channel number and tier applicable to each 
commercial leased access channel.
     Provide the rates the cable system charges for full-time 
and part-time leased access on each leased access channel.

[[Page 10684]]

     Provide the calculated maximum commercial leased access 
rate and actual rates.
     List programmers using each commercial leased access 
channel and state whether each programmer is using the channel on a 
full-time or part-time basis.
     List number of requests received for information 
pertaining to commercial leased access and the number of bona fide 
proposals received for commercial leased access.
     Describe whether you have denied any requests for 
commercial leased access and, if so, explain the basis for the denial.
     Describe whether a complaint has been filed against the 
cable system with the Commission or with a Federal district court 
regarding a commercial leased access dispute.
     Describe whether any entity has sought arbitration with 
the cable system regarding a commercial leased access dispute.
     Describe the extent to which and for what purposes the 
cable system uses commercial leased access channels for its own 
purposes.
     Describe the extent to which the cable system impose 
different rates, terms, or conditions on commercial leased access 
programmers (such as with respect to security deposits, insurance, or 
termination provisions). Explain any differences.
     List and describe any instances of the cable system 
requiring an existing programmer to move to another channel or ti