Revision of the Commission's Program Access Rules, 24302-24336 [2012-8991]
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Federal Register / Vol. 77, No. 78 / Monday, April 23, 2012 / Proposed Rules
FEDERAL COMMUNICATIONS
COMMISSION
47 CFR Part 76
[MB Docket Nos. 12–68, 07–18, and 05–192;
FCC 12–30]
Revision of the Commission’s Program
Access Rules
Federal Communications
Commission.
ACTION: Proposed rule.
AGENCY:
In this document, the
Commission seeks comment on whether
to retain, sunset, or relax one of the
several protections afforded to
multichannel video programming
distributors by the program access
rules—the prohibition on exclusive
contracts involving satellite-delivered,
cable-affiliated programming. The
current exclusive contract prohibition is
scheduled to expire on October 5, 2012.
The Commission also seeks comment on
potential revisions to its program access
rules to better address alleged
violations, including potentially
discriminatory volume discounts and
uniform price increases.
DATES: Comments are due on or before
June 22, 2012; reply comments are due
on or before July 23, 2012. Written PRA
comments on the proposed information
collection requirements contained
herein must be submitted by the public,
Office of Management and Budget
(OMB), and other interested parties on
or before June 22, 2012.
ADDRESSES: You may submit comments,
identified by MB Docket Nos. 12–68,
07–18, and 05–192 by any of the
following methods:
• Federal Communications
Commission’s Web site: https://
www.fcc.gov/cgb/ecfs/. Follow the
instructions for submitting comments.
• Mail: Filings can be sent by hand or
messenger delivery, by commercial
overnight courier, or by first-class or
overnight U.S. Postal Service mail
(although the Commission continues to
experience delays in receiving U.S.
Postal Service mail). All filings must be
addressed to the Commission’s
Secretary, Office of the Secretary,
Federal Communications Commission.
• People with Disabilities: Contact the
FCC to request reasonable
accommodations (accessible format
documents, sign language interpreters,
CART, etc.) by email: FCC504@fcc.gov
or phone: (202) 418–0530 or TTY: (202)
418–0432.
In addition to filing comments with
the Secretary, a copy of any PRA
comments on the proposed information
collection requirements contained
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SUMMARY:
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herein should be submitted to the
Federal Communications Commission
via email to PRA@fcc.gov and to
Nicholas A. Fraser, Office of
Management and Budget, via email to
Nicholas_A._Fraser@omb.eop.gov or via
fax at (202) 395–5167. For detailed
instructions for submitting comments
and additional information on the
rulemaking process, see the
SUPPLEMENTARY INFORMATION section of
this document.
FOR FURTHER INFORMATION CONTACT: For
additional information, contact David
Konczal, David.Konczal@fcc.gov, or
Diana Sokolow, Diana.Sokolow@fcc.gov,
of the Media Bureau, Policy Division,
(202) 418–2120. For additional
information concerning the information
collection requirements contained in
this document, send an email to
PRA@fcc.gov or contact Cathy Williams
at (202) 418–2918. To view or obtain a
copy of this information collection
request (ICR) submitted to OMB: (1) Go
to this OMB/GSA Web page: https://
www.reginfo.gov/public/do/PRAMain,
(2) look for the section of the Web page
called ‘‘Currently Under Review,’’ (3)
click on the downward-pointing arrow
in the ‘‘Select Agency’’ box below the
‘‘Currently Under Review’’ heading, (4)
select ‘‘Federal Communications
Commission’’ from the list of agencies
presented in the ‘‘Select Agency’’ box,
(5) click the ‘‘Submit’’ button to the
right of the ‘‘Select Agency’’ box, and (6)
when the list of FCC ICRs currently
under review appears, look for the OMB
control number of this ICR as shown in
the Supplementary Information section
below (or its title if there is no OMB
control number) and then click on the
ICR Reference Number. A copy of the
FCC submission to OMB will be
displayed.
SUPPLEMENTARY INFORMATION: This is a
summary of document FCC 12–30,
adopted and released on March 20,
2012. The full text 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 email to
fcc504@fcc.gov or call the Commission’s
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Consumer and Governmental Affairs
Bureau at (202) 418–0530 (voice), (202)
418–0432 (TTY).
This document contains proposed
information collection requirements. As
part of its continuing effort to reduce
paperwork burden and as required by
the Paperwork Reduction Act (PRA) of
1995 (44 U.S.C. 3501–3520), the Federal
Communications Commission invites
the general public and other Federal
agencies to comment on the following
information collection(s). Public and
agency comments are due June 22, 2012.
Comments should address: (a)
Whether the proposed collection of
information is necessary for the proper
performance of the functions of the
Commission, including whether the
information shall have practical utility;
(b) the accuracy of the Commission’s
burden estimates; (c) ways to enhance
the quality, utility, and clarity of the
information collected; and (d) ways to
minimize the burden of the collection of
information on the respondents,
including the use of automated
collection techniques or other forms of
information technology; 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 seek specific comment on how we
might ‘‘further reduce the information
collection burden for small business
concerns with fewer than 25
employees.’’
OMB Control Number: 3060–0888.
Title: Section 1.221, Notice of hearing;
appearances; Section 1.229, Motions to
enlarge, change, or delete issues;
Section 1.248, Prehearing conferences;
hearing conferences; Section 76.7,
Petition Procedures; Section 76.9,
Confidentiality of Proprietary
Information; Section 76.61, Dispute
Concerning Carriage; Section 76.914,
Revocation of Certification; Section
76.1001, Unfair Practices; Section
76.1002, Specific Unfair Practices
Prohibited; Section 76.1003, Program
Access Proceedings; Section 76.1302,
Carriage Agreement Proceedings;
Section 76.1513, Open Video Dispute
Resolution.
Form Number: Not applicable.
Type of Review: Revision of a
currently approved collection.
Respondents: Businesses or other forprofit; not-for-profit institutions.
Number of Respondents and
Responses: 828 respondents; 828
responses.
Estimated Time per Response: 6.8 to
98 hours.
Frequency of Response: On occasion
reporting requirement; third party
disclosure requirement.
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Federal Register / Vol. 77, No. 78 / Monday, April 23, 2012 / Proposed Rules
Obligation to Respond: Required to
obtain or retain benefits. The statutory
authority for this collection of
information is contained in sections 4(i),
303(r), 616, and 628 of the
Communications Act of 1934, as
amended.
Total Annual Burden: 43,387 hours.
Total Annual Costs: $4,719,600.
Privacy Act Impact Assessment: No
impact.
Nature and Extent of Confidentiality:
A party that wishes to have
confidentiality for proprietary
information with respect to a
submission it is making to the
Commission must file a petition
pursuant to the pleading requirements
in § 76.7 and use the method described
in §§ 0.459 and 76.9 to demonstrate that
confidentiality is warranted.
Needs and Uses: On March 20, 2012,
the Commission adopted a Notice of
Proposed Rulemaking (‘‘NPRM’’),
Revision of the Commission’s Program
Access Rules, MB Docket No. 12–68,
FCC 12–30. In the NPRM, the
Commission seeks comment on (i)
whether to retain, sunset, or relax the
prohibition on exclusive contracts
between cable operators and satellitedelivered, cable-affiliated programming
vendors; and (ii) potential revisions to
the program access rules to better
address alleged violations, including
potentially discriminatory volume
discounts and uniform price increases.
The NPRM proposes to add or revise
the following rule sections, which
contain proposed information collection
requirements: 47 CFR 76.1002(c)(5), 47
CFR 76.1002(c)(7), 76.1003(e)(1).
If adopted, 47 CFR 76.1002(c)(5)
would provide that, to the extent the
exclusive contract prohibition sunsets
or is relaxed, a 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
must submit a ‘‘Petition for Exclusivity’’
to the Commission and receive approval
from the Commission to preclude the
filing of complaints alleging that an
exclusive contract, or practice, activity
or arrangement tantamount to an
exclusive contract, with respect to areas
served by a cable operator violates
Section 628(b) of the Communications
Act of 1934, as amended, and Section
76.1001(a) of the Commission’s Rules,
or Section 628(c)(2)(B) of the
Communications Act of 1934, as
amended, and Section 76.1002(b) of the
Commission’s Rules. The proposed rule
specifies the requirements for the
petition for exclusivity, provides that a
competing multichannel video
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programming distributor affected by the
proposed exclusivity may file an
opposition to the petition for exclusivity
within thirty (30) days of the date on
which the petition is placed on public
notice, and provides that the petitioner
may file a response within ten (10) days
of receipt of any formal opposition.
If adopted, 47 CFR 76.1002(c)(7)
would provide that, to the extent the
exclusive contract prohibition is
relaxed, a 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 remove
the prohibition on exclusive contracts
and practices, activities or arrangements
tantamount to an exclusive contract set
forth in Section 76.1002(c)(2) of the
Commission’s Rules may submit a
‘‘Petition for Sunset’’ to the
Commission. If the Commission finds
that the prohibition is not necessary to
preserve and protect competition and
diversity in the distribution of video
programming, then the prohibition set
forth in Section 76.1002(c)(2) of the
Commission’s Rules shall no longer
apply in the geographic area specified in
the decision of the Commission. The
proposed rule specifies the
requirements for the petition for sunset,
provides that a competing multichannel
video programming distributor or other
interested party affected by the petition
for sunset may file an opposition to the
petition within forty-five (45) days of
the date on which the petition is placed
on public notice, and provides that the
petitioner may file a response within
fifteen (15) days of receipt of any formal
opposition.
If adopted, 47 CFR 76.1003(e)(1)
would provide that a cable operator,
satellite cable programming vendor, or
satellite broadcast programming vendor
upon which a program access complaint
is served shall answer within forty-five
(45) days of service of the complaint if
the complaint alleges a violation of
Section 628(b) of the Communications
Act of 1934, as amended, or Section
76.1001(a) of the Commission’s rules. In
addition, to the extent the exclusive
contract prohibition sunsets or is
relaxed, an increase in the number of
complaints alleging a violation of
Section 628(b) of the Communications
Act of 1934, as amended, or Section
76.1001(a) of the Commission’s rules is
expected.
The Commission is seeking OMB
approval for the proposed information
collection requirements. All other
remaining existing information
collection requirements would stay as
they are, and the various burden
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estimates would be revised to reflect the
new and revised rules noted above.
Summary of the Notice of Proposed
Rulemaking
I. Introduction
We issue this Notice of Proposed
Rulemaking (‘‘NPRM’’) to seek comment
on (i) whether to retain, sunset, or relax
one of the several protections afforded
to multichannel video programming
distributors (‘‘MVPDs’’) by the program
access rules—the prohibition on
exclusive contracts involving satellitedelivered, cable-affiliated programming;
and (ii) potential revisions to our
program access rules to better address
alleged violations, including potentially
discriminatory volume discounts and
uniform price increases. This NPRM
promotes the goals of Executive Order
13579 and the Commission’s plan
adopted thereto, whereby the
Commission analyzes rules that may be
outmoded, ineffective, insufficient, or
excessively burdensome and determines
whether any such regulations should be
modified, streamlined, expanded, or
repealed.
2. In areas served by a cable operator,
Section 628(c)(2)(D) of the
Communications Act of 1934, as
amended (the ‘‘Act’’), generally
prohibits exclusive contracts for satellite
cable programming or satellite broadcast
programming between any cable
operator and any cable-affiliated
programming vendor (the ‘‘exclusive
contract prohibition’’).1 The exclusive
contract prohibition applies to all
satellite-delivered, cable-affiliated
programming and presumes that an
exclusive contract will cause
competitive harm in every case,
regardless of the type of programming at
issue. The exclusive contract
prohibition applies only to
programming which is delivered via
satellite; it does not apply to
programming which is delivered via
1 See 47 U.S.C. 548(c)(2)(D). An exclusive
contract for satellite cable programming or satellite
broadcast programming between a cable operator
and a cable-affiliated programming vendor that
provides satellite-delivered programming would
violate Section 628(c)(2)(D) even if the cable
operator that is a party to the contract is not
affiliated with the cable-affiliated programming
vendor that is a party to the contract. See
Implementation of the Cable Television Consumer
Protection and Competition Act of 1992—
Development of Competition and Diversity in Video
Programming Distribution: Section 628(c)(5) of the
Communications Act: Sunset of Exclusive Contract
Prohibition, Report and Order, 22 FCC Rcd 17791,
17840–41, paras. 70–72 (2007) (‘‘2007 Extension
Order’’), aff’d sub nom. Cablevision Sys. Corp. et al.
v. FCC, 597 F.3d 1306, 1314–15 (D.C. Cir. 2010)
(‘‘Cablevision I’’); see also Cable Horizontal and
Vertical Ownership Limits, Further Notice of
Proposed Rulemaking, 23 FCC Rcd 2134, 2195–96,
para. 145 (2008).
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Federal Register / Vol. 77, No. 78 / Monday, April 23, 2012 / Proposed Rules
terrestrial facilities.2 In January 2010,
the Commission adopted rules
providing for the processing of
complaints alleging that an ‘‘unfair act’’
involving terrestrially delivered, cableaffiliated programming violates Section
628(b) of the Act. Thus, while an
exclusive contract involving satellitedelivered, cable-affiliated programming
is generally prohibited, an exclusive
contract involving terrestrially
delivered, cable-affiliated programming
is permitted unless the Commission
finds in response to a complaint that it
violates Section 628(b) of the Act.
3. In Section 628(c)(5) of the Act,
Congress provided that the exclusive
contract prohibition would cease to be
effective on October 5, 2002, unless the
Commission found that it ‘‘continues to
be necessary to preserve and protect
competition and diversity in the
distribution of video programming.’’ In
June 2002, the Commission found that
the exclusive contract prohibition
continued to be necessary to preserve
and protect competition and diversity
and retained the exclusive contract
prohibition for five years, until October
5, 2007. The Commission provided that,
during the year before the expiration of
the five-year extension, it would
conduct a second review to determine
whether the exclusive contract
prohibition continued to be necessary to
preserve and protect competition and
diversity in the distribution of video
programming. After conducting such a
review, the Commission in September
2007 concluded that the exclusive
contract prohibition was still necessary,
and it retained the prohibition for five
more years, until October 5, 2012. The
Commission again provided that, during
the year before the expiration of the
five-year extension, it would conduct a
third 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.
4. Accordingly, in this NPRM, we
initiate the third review of the necessity
of the exclusive contract prohibition.
Below, we present certain data on the
current state of competition in the video
distribution market and the video
programming market, and we invite
commenters to submit more recent data
or empirical analyses. We seek comment
on whether current conditions in the
video marketplace support retaining,
sunsetting, or relaxing the exclusive
contract prohibition. To the extent that
2 In this NPRM, we refer to ‘‘satellite cable
programming’’ and ‘‘satellite broadcast
programming’’ collectively as ‘‘satellite-delivered
programming.’’
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II. Background
order to compete effectively, new
market entrants would need access to
satellite-delivered, cable-affiliated
programming. At that time, Congress
found that increased horizontal
concentration of cable operators and
extensive vertical integration 3 created
an imbalance of power, both between
cable operators and program vendors
and between incumbent cable operators
and their multichannel competitors. As
a result of this imbalance of power,
Congress determined that the
development of competition among
MVPDs was limited and consumer
choice was restricted. Congress
concluded that cable-affiliated
programmers had the incentive and
ability to favor their affiliated cable
operators over other, unaffiliated,
MVPDs with the effect that competition
and diversity in the distribution of
video programming would not be
preserved and protected.
7. The program access provisions
afford several protections to MVPDs in
their efforts to compete in the video
distribution market. Sections 628(b),
628(c)(1), and 628(d) of the Act grant the
Commission broad authority to prohibit
‘‘unfair acts’’ of cable operators, satellite
cable programming vendors in which a
cable operator has an attributable
interest, and satellite broadcast
programming vendors that have the
‘‘purpose or effect’’ of ‘‘hinder[ing]
significantly or prevent[ing]’’ any MVPD
from providing ‘‘satellite cable
programming or satellite broadcast
programming to subscribers or
consumers.’’ 4 In addition to this broad
grant of authority, Congress in Section
628(c)(2) of the Act required the
Commission to adopt specific
regulations to specify particular conduct
that is prohibited by Section 628(b), i.e.,
certain unfair acts involving satellitedelivered, cable-affiliated programming.
In contrast to Section 628(b), the unfair
acts listed in Section 628(c)(2)
pertaining to satellite-delivered
programming are presumed to harm
competition in every case, and MVPDs
alleging such unfair acts are not
required to demonstrate harm. First,
Section 628(c)(2)(A) requires the
Commission to prohibit efforts by cable
operators to unduly influence the
decision of cable-affiliated programming
vendors that provide satellite-delivered
programming to sell their programming
to competitors (‘‘undue influence’’).
A. Program Access Protections
6. Congress adopted the program
access provisions as part of the Cable
Television Consumer Protection and
Competition Act of 1992 (‘‘1992 Cable
Act’’). Congress was concerned that, in
3 Vertical integration means the combined
ownership of cable systems and suppliers of cable
programming.
4 Throughout this NPRM, we use the term ‘‘unfair
act’’ as shorthand for the phrase ‘‘unfair methods
of competition or unfair or deceptive acts or
practices.’’ 47 U.S.C. 548(b); see 47 CFR 76.1001.
the data do not support retaining the
exclusive contract prohibition as it
exists today, we seek comment on
whether we can preserve and protect
competition in the video distribution
market by either:
• Sunsetting the exclusive contract
prohibition in its entirety and instead
relying solely on existing protections
provided by the program access rules
that will not sunset: (i) The case-by-case
consideration of exclusive contracts
pursuant to Section 628(b) of the Act;
(ii) the prohibition on discrimination in
Section 628(c)(2)(B) of the Act; and (iii)
the prohibition on undue or improper
influence in Section 628(c)(2)(A) of the
Act; or
• Relaxing the exclusive contract
prohibition by (i) establishing a process
whereby a cable operator or satellitedelivered, cable-affiliated programmer
can seek to remove the prohibition on
a market-by-market basis based on the
extent of competition in the market; (ii)
retaining the prohibition only for
satellite-delivered, cable-affiliated
Regional Sports Networks (‘‘RSNs’’) and
any other satellite-delivered, cableaffiliated programming that the record
here establishes as being important for
competition and non-replicable and
having no good substitutes; and/or (iii)
other ways commenters propose.
We seek comment also on (i) how to
implement a sunset (complete or partial)
to minimize any potential disruption to
consumers; (ii) the First Amendment
implications of the alternatives
discussed herein; (iii) the costs and
benefits of the alternatives discussed
herein; and (iv) the impact of a sunset
on existing merger conditions.
5. In addition, we seek comment
below on potential improvements to the
program access rules to better address
potential violations. With the exception
of certain procedural revisions and the
previous extensions of the exclusive
contract prohibition, the program access
rules have remained largely unchanged
in the almost two decades since the
Commission originally adopted them in
1993. We seek comment on, among
other things, whether our rules
adequately address potentially
discriminatory volume discounts and
uniform price increases and, if not, how
these rules should be revised to address
these concerns.
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Federal Register / Vol. 77, No. 78 / Monday, April 23, 2012 / Proposed Rules
Second, Section 628(c)(2)(B) requires
the Commission to prohibit
discrimination among MVPDs by cableaffiliated programming vendors that
provide satellite-delivered programming
in the prices, terms, and conditions for
sale of programming (‘‘discrimination’’).
Third, Sections 628(c)(2)(C)–(D) require
the Commission to prohibit exclusive
contracts between cable operators and
cable-affiliated programming vendors
that provide satellite-delivered
programming, subject to certain
exceptions. In this proceeding, our focus
is on the protection provided under
Section 628(c)(2)(D), although we
discuss the other statutory protections
to the extent they bear on our
consideration of whether to allow the
exclusive contract provision to sunset.
B. Enactment of the Exclusive Contract
Prohibition With a Sunset Provision
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8. In the 1992 Cable Act, Congress
drew a distinction between exclusive
contracts for satellite-delivered, cableaffiliated programming in areas not
served by a cable operator as of October
5, 1992 (‘‘unserved areas’’) and areas
served by a cable operator as of that date
(‘‘served areas’’). In unserved areas,
Congress adopted a per se prohibition
on exclusive contracts between cable
operators and satellite-delivered, cableaffiliated programmers. In served areas,
however, the prohibition on exclusive
contracts is not absolute; rather, an
exclusive contract is permissible if the
Commission determines that it ‘‘is in the
public interest.’’ Congress thus
recognized that, in served areas, 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. To enforce
or enter into an exclusive contract in a
served area, a cable operator or a
satellite-delivered, cable-affiliated
programmer must submit a ‘‘Petition for
Exclusivity’’ to the Commission for
approval.5
5 See 47 CFR 76.1002(c)(5). Ten Petitions for
Exclusivity have been filed since enactment of the
1992 Cable Act. Of these petitions, two were
granted, three were denied, and five were dismissed
at the request of the parties. See New England Cable
News Channel, Memorandum Opinion and Order,
9 FCC Rcd 3231 (1994) (granting exclusivity
petition); Time Warner Cable, Memorandum
Opinion and Order, 9 FCC Rcd 3221 (1994)
(denying exclusivity petition for Courtroom
Television (‘‘Court TV’’)); Outdoor Life Network and
Speedvision Network, Memorandum Opinion and
Order, 13 FCC Rcd 12226 (CSB 1998) (denying
exclusivity petition for the Outdoor Life Network
(‘‘OLN’’) and Speedvision Network
(‘‘Speedvision’’)); Cablevision Industries Corp. and
Sci-Fi Channel, Memorandum Opinion and Order,
10 FCC Rcd 9786 (CSB 1995) (denying exclusivity
petition for the Sci-Fi Channel); NewsChannel,
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9. In addition to this prior approval
process, Congress also recognized that
exclusivity can be a legitimate business
practice where there is sufficient
competition. Accordingly, in Section
628(c)(5), Congress provided that the
exclusive contract prohibition in served
areas:
Shall cease to be effective 10 years after the
date of enactment of this section, unless the
Commission finds, in a proceeding
conducted during the last year of such 10year period, that such prohibition continues
to be necessary to preserve and protect
competition and diversity in the distribution
of video programming.
The 1992 Cable Act was enacted on
October 5, 1992. Accordingly, the
‘‘sunset provision’’ of Section 628(c)(5)
would have triggered the expiration of
the exclusive contract prohibition on
October 5, 2002, absent a Commission
finding that the prohibition remained
necessary to preserve and protect
competition and diversity in the
distribution of video programming.
C. 2002 Extension of the Exclusive
Contract Prohibition
10. In October 2001, approximately a
year before the initial expiration of the
exclusive contract prohibition, the
Commission sought comment on
whether the exclusive contract
prohibition remained necessary to
preserve and protect competition and
diversity in the distribution of video
programming. Ultimately, the
Commission concluded that the
prohibition remained ‘‘necessary.’’ The
Commission explained that, based on
marketplace conditions at the time,
cable-affiliated programmers retained
the incentive and ability to withhold
programming from unaffiliated MVPDs
with the effect that competition and
diversity in the distribution of video
programming would be impaired
without the prohibition. The
Commission found as follows:
The competitive landscape of the market
for the distribution of multichannel video
programming has changed for the better since
1992. The number of MVPDs that compete
with cable and the number of subscribers
served by those MVPDs have increased
significantly. We find, however, that the
concern on which Congress based the
program access provisions—that in the
absence of regulation, vertically integrated
programmers have the ability and incentive
to favor affiliated cable operators over
nonaffiliated cable operators and
programming distributors using other
technologies such that competition and
diversity in the distribution of video
programming would not be preserved and
Memorandum Opinion and Order, 10 FCC Rcd 691
(CSB 1994) (granting exclusivity petition).
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protected—persists in the current
marketplace.
11. Accordingly, the Commission
extended the exclusive contract
prohibition for five years (i.e., through
October 5, 2007). The Commission
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 continued to be
necessary to preserve and protect
competition and diversity in
distribution of video programming.
D. 2007 Extension of the Exclusive
Contract Prohibition and D.C. Circuit
Decision
12. In February 2007, the Commission
again sought comment on whether the
prohibition remained necessary to
preserve and protect competition and
diversity in the distribution of video
programming. For a second time, the
Commission concluded that the
prohibition remained ‘‘necessary.’’
13. The Commission conducted its
analysis of the exclusive contract
prohibition in five parts. First, in
considering the applicable standard of
review, the Commission determined
that it may use its predictive judgment,
economic theory, and specific factual
evidence in determining whether, ‘‘in
the absence of the prohibition,
competition and diversity in the
distribution of video programming
would not be preserved and protected.’’
If such an inquiry is answered in the
affirmative, then the Commission
concluded that it must extend the
exclusive contract prohibition. Second,
the Commission examined the changes
that had occurred in the video
programming and distribution markets
since 2002, and it found that, while
there had been some procompetitive
trends, the concerns on which Congress
based the program access provisions
persisted in the marketplace. Third, the
Commission examined the incentive
and ability of cable-affiliated
programmers to favor their affiliated
cable operators over competitive MVPDs
with the effect that competition and
diversity in the distribution of video
programming would not be preserved
and protected.6 The Commission
determined that this incentive and
ability existed with the effect that the
exclusive contract prohibition remained
necessary to preserve and protect
6 For purposes of this NPRM, the term
‘‘competitive MVPD’’ refers to MVPDs that compete
with incumbent cable operators in the video
distribution market, such as DBS operators and
wireline video providers.
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competition and diversity in the
distribution of video programming. The
Commission recognized, however, ‘‘that
Congress intended for the exclusive
contract prohibition to sunset at a point
when market conditions warrant’’ and
specifically ‘‘caution[ed] competitive
MVPDs to take any steps they deem
appropriate to prepare for the eventual
sunset of the prohibition, including
further investments in their own
programming.’’ Fourth, the Commission
considered commenters’ arguments that
the exclusive contract prohibition is
both overinclusive and underinclusive
with respect to the types of
programming and MVPDs it covers, and
the Commission declined either to
narrow or broaden the prohibition.
Fifth, the Commission considered the
appropriate length of time for an
extension of the exclusive contract
prohibition, and it again concluded that
the prohibition should be extended for
five years.
14. Accordingly, the Commission
extended the exclusive contract
prohibition for five years (i.e., until
October 5, 2012). As in 2002, the
Commission provided that, during the
year before the expiration of the fiveyear extension of the exclusive contract
prohibition (i.e., between October 2011
and October 2012), it would conduct a
third 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.
15. Cablevision Systems Corporation
(‘‘Cablevision’’) and Comcast
Corporation (‘‘Comcast’’) (Cablevision
and Comcast, collectively, the
‘‘Petitioners’’) filed petitions for review
of the 2007 Extension Order with the
D.C. Circuit. The D.C. Circuit addressed
Petitioners’ objections to three
conclusions that the Commission
reached in the 2007 Extension Order.
First, Petitioners objected to the
Commission’s interpretation of the term
‘‘necessary’’ as used in the sunset
provision as requiring the exclusive
contract prohibition to continue ‘‘if, in
the absence of the prohibition,
competition and diversity in the
distribution of video programming
would not be preserved and protected.’’
The D.C. Circuit found that the term
‘‘necessary’’ is ‘‘not language of plain
meaning’’ and that the Commission’s
interpretation was ‘‘well within the
Commission’s discretion’’ under
Chevron. Second, Petitioners contended
that ‘‘the Commission did not rely on
substantial evidence when it concluded
that vertically integrated cable
companies would enter into
competition-harming exclusive
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contracts if the exclusivity prohibition
were allowed to lapse.’’ The D.C. Circuit
disagreed, finding that the Commission
relied on substantial evidence and
stating that ‘‘conclusions based on [the
Commission’s] predictive judgment and
technical analysis are just the type of
conclusions that warrant deference from
this Court.’’ While there had been
substantial changes in the MVPD market
since 1992, the court described the
transformation as a ‘‘mixed picture’’ and
deferred to the Commission’s analysis,
which concluded that vertically
integrated cable companies retained a
substantial ability and incentive to
withhold ‘‘must have’’ programming.
Finally, Petitioners objected to the
Commission’s failure to narrow the
exclusive contract prohibition to apply
only to certain types of cable companies
or certain types of programming. The
D.C. Circuit found that the
Commission’s decision to refrain from
narrowing the exclusive contract
prohibition was not arbitrary and
capricious, but rather was a reasonable
decision ‘‘to adhere to Congress’s
statutory design.’’
16. While the D.C. Circuit affirmed
the 2007 Extension Order, it also
provided some comment on the
Commission’s subsequent review of the
exclusive contract prohibition.
Specifically, the D.C. Circuit stated as
follows:
E. TWC/Time Warner and Comcast/
NBCU Transactions
17. Since the 2007 Extension Order,
two transactions have had a particular
impact on the video distribution market
and the video programming market: (i)
The separation of Time Warner Cable
Inc. (‘‘TWC’’; a cable operator) from
Time Warner Inc. (‘‘Time Warner’’; an
owner of satellite-delivered, national
programming networks); 7 and (ii) the
joint venture between Comcast (a
vertically integrated cable operator) and
NBC Universal, Inc. (‘‘NBCU’’; an owner
of broadcast stations and satellitedelivered, national programming
networks).8
18. In the Time Warner Order, the
Media, Wireline Competition, Wireless
Telecommunications, and International
Bureaus (the ‘‘Bureaus’’) granted the
applications for the assignment and
transfer of control of certain
Commission licenses and authorizations
from Time Warner to TWC. Before the
transaction, Time Warner controlled
TWC, but after their separation, Time
Warner no longer has an ownership
interest in TWC or its subsidiary
licensees. As a result of the transaction,
Time Warner’s programming networks
are no longer affiliated with TWC, thus
reducing the number of satellitedelivered, national programming
networks that are cable-affiliated. The
Bureaus found that the transaction
would benefit the public interest by
lessening the extent to which TWC is
vertically integrated and by eliminating
Time Warner’s vertical integration. In
declining to adopt a condition applying
the program access rules to Time
Warner post-transaction, the
Commission explained that the
underlying premise of the program
access rules would no longer apply
because Time Warner and TWC would
no longer have the incentive and ability
to discriminate in favor of each other. If
an MVPD believed that Time Warner or
TWC violated the program access rules
while they were vertically integrated,
however, the Commission stated that
the program access complaint process
would provide an avenue for relief.
19. In contrast, another recent
transaction has led to an increased
number of satellite-delivered, national
programming networks that are cableaffiliated. In the Comcast/NBCU Order,
the Commission granted the application
of Comcast, General Electric Company
(‘‘GE’’), and NBCU to assign and transfer
control of broadcast, satellite, and other
radio licenses from GE to Comcast. The
transaction created a joint venture
(‘‘Comcast-NBCU’’) combining NBCU’s
broadcast, cable programming, online
content, movie studio, and other
businesses with some of Comcast’s cable
programming and online content
businesses. Before the transaction, both
Comcast and NBCU either wholly or
partly owned a number of satellite-
7 See Applications for Consent to the Assignment
and/or Transfer of Control of Licenses, Time
Warner Inc., Assignor/Transferor, and Time Warner
Cable Inc., Assignee/Transferree, Memorandum
Opinion and Order, 24 FCC Rcd 879 (MB, WCB,
WTB, IB, 2009) (‘‘Time Warner Order’’).
8 See Applications of Comcast Corporation,
General Electric Company and NBC Universal, Inc.
For Consent to Assign Licenses and Transfer
Control of Licensees, Memorandum Opinion and
Order, 26 FCC Rcd 4238 (2011) (‘‘Comcast/NBCU
Order’’).
We anticipate that cable’s dominance in
the MVPD market will have diminished still
more by the time the Commission next
reviews the prohibition, and expect that at
that time the Commission will weigh heavily
Congress’s intention that the exclusive
contract prohibition will eventually sunset.
Petitioners are correct in pointing out that the
MVPD market has changed drastically since
1992. We expect that if the market continues
to evolve at such a rapid pace, the
Commission will soon be able to conclude
that the [exclusive contract] prohibition is no
longer necessary to preserve and protect
competition and diversity in the distribution
of video programming.
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delivered, national programming
networks. As a result of the transaction,
programming networks that were
previously affiliated with NBCU became
affiliated with the joint venture, thus
increasing the number of satellitedelivered, national programming
networks that are cable-affiliated.
20. In evaluating post-transaction
MVPD access to Comcast-NBCU
programming, the Commission
concluded that the transaction ‘‘creates
the possibility that Comcast-NBCU,
either temporarily or permanently, will
block Comcast’s video distribution
rivals from access to the video
programming content the [joint venture]
would come to control or raise
programming costs to its video
distribution rivals.’’ The Commission
found the joint venture would ‘‘have the
power to implement an exclusionary
strategy,’’ and that ‘‘successful
exclusion * * * of video distribution
rivals would likely harm competition by
allowing Comcast to obtain or (to the
extent it may already possess it)
maintain market power.’’ Additionally,
the Commission concluded that an
‘‘anticompetitive exclusionary program
access strategy would often be profitable
for Comcast.’’ Accordingly, the
Commission imposed conditions
designed to ameliorate the potential
harms, including a baseball-style
arbitration condition that allows an
aggrieved MVPD to submit a dispute
with Comcast-NBCU over the terms and
conditions of carriage of programming
to commercial arbitration.
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III. Discussion
A. Exclusive Contract Prohibition
21. We seek comment on whether to
retain, sunset, or relax the exclusive
contract prohibition.9 Our discussion of
this issue below proceeds in ten main
parts. First, we present relevant data for
assessing whether to retain, sunset, or
relax the exclusive contract prohibition,
and we invite commenters to submit
more recent data or empirical analyses.
Second, we ask commenters to assess
whether these data, as updated and
supplemented by commenters, support
either retaining, sunsetting, or relaxing
the exclusive contract prohibition.
Third, we seek comment on how each
of these three options (i.e., retaining,
sunsetting, or relaxing the exclusive
contract prohibition) will impact the
9 Because the Commission seeks comment on
alternative approaches to the exclusive contract
prohibition—retaining, sunsetting, or relaxing
(either through market-based petitions or retaining
a prohibition for regional sports networks)—the
Proposed Rules attached hereto include potential
rule amendments based on each of these
alternatives.
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creation of new national, regional, and
local programming. Fourth, to the extent
that the data do not support retaining
the exclusive contract prohibition as it
exists today, we seek comment on
whether we can nonetheless preserve
and protect competition in the video
distribution market by either (i)
sunsetting the prohibition in its entirety
and relying solely on existing
protections provided by the program
access rules that will not sunset; or (ii)
relaxing the exclusive contract
prohibition, such as through removal of
the prohibition on a market-by-market
basis based on the extent of competition
in the market or by retaining the
prohibition only for satellite-delivered,
cable-affiliated RSNs and other satellitedelivered, cable-affiliated ‘‘must have’’
programming. Fifth, we seek input on
how a sunset (complete or partial) of the
exclusive contract prohibition will
impact consumers, and how to
implement a sunset to minimize any
potential disruption to consumers.
Sixth, we ask commenters to assess
whether and how each of the three
options comports with the First
Amendment. Seventh, we ask
commenters to consider the costs and
benefits associated with each of the
three options. Eighth, to the extent the
exclusive contract prohibition sunsets
(wholly or partially), we propose to
eliminate existing restrictions on
exclusive subdistribution agreements
between cable operators and satellitedelivered, cable-affiliated programmers.
Ninth, we propose that any amendments
we adopt herein to our rules pertaining
to exclusive contracts between cable
operators and satellite-delivered, cableaffiliated programmers in served areas
will apply equally to existing rules
pertaining to exclusive contracts
involving common carriers and Open
Video Systems (‘‘OVS’’) in served areas.
Finally, we seek comment on how
conditions adopted in previous merger
orders may be impacted if the exclusive
contract prohibition were to sunset
(wholly or partially).
1. Relevant Data in Considering a Sunset
of the Exclusive Contract Prohibition
22. In evaluating whether the
exclusive contract prohibition
‘‘continues to be necessary to preserve
and protect competition and diversity in
the distribution of video programming,’’
the Commission has previously
examined data on the status of
competition in the video programming
market and the video distribution
market. Specifically, in the 2007
Extension Order, the Commission
examined ‘‘the changes that [had]
occurred in the programming and
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24307
distribution markets since 2002 when
the Commission last reviewed whether
the exclusive contract prohibition
continued to be necessary to preserve
and protect competition.’’ The
Commission examined data relating to
(i) the number of MVPD subscribers
nationwide and in regional markets
attributable to each category of MVPD,
including cable operators, as well as the
extent of regional clustering by cable
operators; 10 (ii) the number of satellitedelivered, national programming
networks and the percentage of such
networks that are cable-affiliated; and
(iii) the number of regional
programming networks and the
percentage of such networks that are
cable-affiliated. We believe it is
appropriate to consider similar data in
determining whether the exclusive
contract prohibition remains necessary
today. We also seek comment on
whether our assessment of the
exclusivity prohibition should consider
data concerning other types of ‘‘satellite
cable programming.’’
23. In an effort to aid such an
evaluation, we have prepared the tables
in Appendices A through C of the
NPRM, which contain data from
previously released Commission
documents as well as other sources.
Appendices A through C are available at
https://transition.fcc.gov/Daily_Releases/
Daily_Business/2012/db0320/FCC-1230A1.pdf. The first column of data,
entitled ‘‘1st Annual Report,’’ focuses
on data from the 1st Annual Report on
video competition.11 The second
column of data, entitled ‘‘2002
Extension,’’ focuses on data from the
2002 Extension Order.12 The third
column of data, entitled ‘‘2007
Extension,’’ focuses on data from the
2007 Extension Order.13 The fourth and
10 ‘‘Clustering’’ refers to ‘‘an increase over time in
the number of cable subscribers and homes passed
by a single MSO in particular markets
(accomplished via internal growth as well as by
acquisitions).’’ 2007 Extension Order, 22 FCC Rcd
at 17831, para. 56.
11 Implementation of Section 19 of the Cable
Television Consumer Protection and Competition
Act of 1992: Annual Assessment of the Status of
Competition in the Market for the Delivery of Video
Programming, First Report, 9 FCC Rcd 7442 (1994)
(‘‘1st Annual Report’’) (containing data as of 1994).
12 Implementation of the Cable Television
Consumer Protection and Competition Act of
1992—Development of Competition and Diversity in
Video Programming Distribution: Section 628(c)(5)
of the Communications Act: Sunset of Exclusive
Contract Prohibition, Report and Order, 17 FCC Rcd
12124 (2002) (‘‘2002 Extension Order’’) (citing data
from the Annual Assessment of the Status of
Competition in the Market for the Delivery of Video
Programming, Eighth Annual Report, 17 FCC Rcd
1244 (2002) (containing data as of June 2001) (‘‘8th
Annual Report’’)).
13 See 2007 Extension Order, 22 FCC Rcd 17791
(citing data from the Annual Assessment of the
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final column of data, entitled ‘‘Most
Recent,’’ focuses on the most recent data
available. We believe that considering
data from these four time periods will
enable us to view the evolution of the
video distribution and video
programming markets over time. We
invite commenters to submit more
recent data in each of the categories
identified, as well as data regarding the
extent of regional clustering of cable
operators, and any additional data the
Commission should consider in its
review.
a. Nationwide and Regional MVPD
Subscribership
24. In past reviews of the exclusive
contract prohibition, the Commission
has assessed the percentage of MVPD
subscribers nationwide that are
attributable to each category of MVPD,
including cable operators. The data in
Appendix A indicate that the percentage
of MVPD subscribers nationwide
attributable to cable operators has
declined over time, with the current
percentage at approximately 58.5
percent, a decrease of 8.5 percentage
points since the 2007 Extension Order.
On a regional basis, the market share
held by cable operators in Designated
Market Areas (‘‘DMAs’’) varies
considerably, from a high in the 80
percent range to a low in the 20 percent
range.
25. We seek comment on the extent to
which we should consider online
distributors of video programming in
our analysis. The Commission recently
stated that online distributors of video
programming ‘‘offer a tangible
opportunity to bring customers
substantial benefits’’ and that they ‘‘can
provide and promote more
programming choices, viewing
flexibility, technological innovation and
lower prices.’’ While the Commission
concluded that consumers today do not
perceive online distributors as a
substitute for traditional MVPD service,
it stated that online distributors are a
‘‘potential competitive threat’’ and that
they ‘‘must have a similar array of
programming’’ if they are to ‘‘fully
compete against a traditional MVPD.’’ In
addition, in connection with the
Commission’s forthcoming 14th Annual
Report on video competition, the
Commission sought comment on the
emergence of online video
distributors.14 In light of possible cordStatus of Competition in the Market for the Delivery
of Video Programming, Twelfth Annual Report, 21
FCC Rcd 2503 (2006) (containing data as of June
2005) (‘‘12th Annual Report’’)).
14 See Annual Assessment of the Status of
Competition in the Market for the Delivery of Video
Programming, Further Notice of Inquiry, 26 FCC
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cutting and cord-shaving trends, we ask
commenters to provide information
regarding the effect that online
distributors have had, or may have, on
nationwide and regional MVPD
subscription rates. Our task under
Section 628(c)(5) is to determine
whether the exclusive contract
prohibition is necessary to preserve and
protect ‘‘competition,’’ not competitors.
Thus, to the extent that we conclude
that competition in the video
distribution market and the video
programming market is currently
sufficient to warrant sunsetting or
relaxing the exclusive contract
prohibition, how, if at all, should the
emergence of a new category of
potential competitor that could benefit
from the exclusive contract prohibition
impact our analysis?
b. Satellite-Delivered, Cable-Affiliated,
National Programming Networks
26. In past reviews of the exclusive
contract prohibition, the Commission
has assessed the percentage of satellitedelivered, national programming
networks that are cable-affiliated and
the number of cable-affiliated networks
that are among the Top 20 satellitedelivered, national programming
networks as ranked by either
subscribership or prime time ratings.
The data in Appendix B indicate that,
since the 2007 Extension Order, (i) the
percentage of satellite-delivered,
national programming networks that are
cable-affiliated has declined from 22
percent to approximately 14.4 percent;
(ii) the number of cable-affiliated
networks among the Top 20 satellitedelivered, national programming
networks as ranked by subscribership
has increased from six to seven; and (iii)
the number of cable-affiliated networks
among the Top 20 satellite-delivered,
national programming networks as
ranked by average prime time ratings
has remained at seven. We note that the
calculation of the percentage of satellitedelivered, national programming
networks that are cable-affiliated is
based on our estimate of a total of 800
satellite-delivered, national
programming networks available to
MVPDs today.15 We seek comment on
Rcd 14091, 14112–13, paras. 52–55 (2011) (‘‘Further
Notice for the 14th Report’’).
15 In the 2007 Extension Order, the Commission
found that 22 percent of satellite-delivered, national
programming networks were affiliated with cable
operators. See 2007 Extension Order, 22 FCC Rcd
at 17802–03, para. 18. This percentage was based
on a total of 531 satellite-delivered, national
programming networks, as stated in the 12th
Annual Report. See 12th Annual Report, 21 FCC
Rcd at 2509–10, para. 21 and 2575, para. 157
(containing data as of June 2005). For purposes of
the analysis in this NPRM, we increase this figure
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the reasonableness of this estimate and
how, if at all, it should be revised. We
also note that these data include
satellite-delivered, national
programming networks affiliated with
Comcast, many of which (i.e., the
‘‘Comcast-controlled networks’’) are
subject to program access conditions
adopted in the Comcast/NBCU Order
and will continue to be subject to these
conditions for six more years (until
January 2018, assuming they are not
modified earlier in response to a
petition) even if the exclusive contract
prohibition were to sunset.16 If the
to 800 based on two factors. First, since 2005, we
estimate that approximately 150 high-definition
versions of networks previously provided only in
standard definition have been launched. See SNL
Kagan, High-Definition Cable Networks Getting
More Carriage, Feb. 17, 2009; NCTA, Cable
Networks, available at https://www.ncta.com/
Organizations.aspx? type=orgtyp2&contentId=2907.
Second, we estimate a net addition of
approximately 100 networks, reflecting the increase
over time in the number of national programming
networks. See 2007 Extension Order, 22 FCC Rcd
at 17836–37, para. 64 (noting the increase in
national programming networks over time); Annual
Assessment of the Status of Competition in the
Market for the Delivery of Video Programming,
Thirteenth Annual Report, 24 FCC Rcd 542, 550,
para. 20 (2009) (‘‘13th Annual Report’’) (noting an
increase of 34 programming networks between June
2005 and June 2006); id. at 731–36, Table C–4
(listing planned networks); SNL Kagan, Economics
of Basic Cable Networks (2011 Edition), at 27
(listing cable networks launched after 2005).
16 See Comcast/NBCU Order, 26 FCC Rcd at 4358,
Appendix A, Condition II. The program access
conditions reflected in Condition II apply to ‘‘C–
NBCU Programmers,’’ which are defined as
‘‘Comcast, C–NBCU, their Affiliates and any entity
for which Comcast or C–NBCU manages or controls
the licensing of Video Programming and/or any
local broadcast television station on whose behalf
Comcast or NBCU negotiates retransmission
consent.’’ Id. at 4356, Appendix A, Definitions. An
‘‘Affiliate’’ of any person means ‘‘any person
directly or indirectly controlling, controlled by, or
under common control with, such person at the
time at which the determination of affiliation is
being made.’’ Id. at 4355, Appendix A, Definitions.
The issue of whether a particular cable network
qualifies as a ‘‘C–NBCU Programmer’’ subject to
these conditions is a fact-specific determination.
For purposes of the estimates in this NPRM, and
with the exception of the iN DEMAND networks
discussed below, we assume that any network in
which Comcast or NBCU holds a 50 percent or
greater interest is a ‘‘C–NBCU Programmer’’ subject
to these conditions. See Appendix B, Table 2 and
Appendix C, Table 2 (available at https://
transition.fcc.gov/Daily_Releases/Daily_Business/
2012/db0320/FCC-12-30A1.pdf). We refer to these
networks as ‘‘Comcast-controlled networks.’’ We
refer to other networks in which Comcast or NBCU
holds a less than 50 percent interest as ‘‘Comcastaffiliated networks,’’ which we assume for purposes
of the estimates in this NPRM are not ‘‘C–NBCU
Programmers’’ subject to the program access
conditions adopted in the Comcast/NBCU Order,
but are subject to the program access rules,
including the exclusive contract prohibition. See id.
Although Comcast has stated that it has a 53.7
percent interest in iN DEMAND, it has also stated
that it ‘‘cannot control decisionmaking at iN
DEMAND.’’ See Application of General Electric and
Comcast, MB Docket No. 10–56 (Jan. 28, 2010), at
20 (stating that Comcast has a 53.7 percent interest
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Comcast-controlled networks are
excluded, the data in Appendix B
indicate that, since the 2007 Extension
Order, (i) the percentage of satellitedelivered, national programming
networks that are cable-affiliated has
declined from 22 percent to
approximately 11 percent; (ii) the
number of cable-affiliated networks
among the Top 20 satellite-delivered,
national programming networks as
ranked by subscribership has remained
at six; and (iii) the number of cableaffiliated networks among the Top 20
satellite-delivered, national
programming networks as ranked by
average prime time ratings has fallen
from seven to five. We seek comment on
whether and how to account for
different versions of the same network
in our analysis. For example, to the
extent a particular network is available
in standard definition (‘‘SD’’), high
definition (‘‘HD’’), 3D, and video-ondemand (‘‘VOD’’), should this be
counted as four different networks for
purposes of our analysis? If so, and if
both cable-affiliated and unaffiliated
networks are treated similarly, how will
this impact the percentage of networks
that are cable-affiliated?
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c. Satellite-Delivered, Cable-Affiliated,
Regional Programming Networks
27. In addition to national
programming networks, the Commission
in past reviews of the exclusive contract
prohibition has assessed the extent to
which regional programming networks
are cable-affiliated. As an initial matter,
we note that some regional networks
may be terrestrially delivered and
therefore not subject to the exclusive
contract prohibition applicable to
satellite-delivered, cable-affiliated
programming. The data in Appendix C
pertaining to regional networks do not
distinguish between terrestrially
delivered and satellite-delivered
networks. We ask commenters to
provide data regarding which cableaffiliated, regional programming
networks, including RSNs, are satellitedelivered and which are terrestrially
delivered.
28. For purposes of our analysis, we
distinguish between RSNs and other
in iN DEMAND) (‘‘GE/Comcast/NBCU
Application’’); Letter from Michael H. Hammer,
Counsel for Comcast, to Marlene H. Dortch, FCC,
MB Docket No. 10–56 (Oct. 22, 2010), at 2 n.5.
Accordingly, for purposes of the estimates in this
NPRM, we consider the iN DEMAND networks to
be ‘‘Comcast-affiliated’’ networks, and not
‘‘Comcast-controlled’’ networks subject to the
program access conditions adopted in the Comcast/
NBCU Order. Nothing in this NPRM should be read
to state or imply any position as to whether any
particular network qualifies or does not qualify as
a ‘‘C–NBCU Programmer.’’
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regional networks. The Commission has
previously held that RSNs have no good
substitutes, are important for
competition, and are non-replicable. As
set forth in Appendix C, recent data
indicate that the number of RSNs that
are cable-affiliated has increased from
18 to 31 (not including HD versions)
since the 2007 Extension Order, and the
percentage of all RSNs that are cableaffiliated has increased from 46 percent
to approximately 52.3 percent. Are there
networks that satisfy the Commission’s
definition of an RSN that are not
included in the list of RSNs in
Appendix C, such as certain local and
regional networks that show NCAA
Division I college football and basketball
games? Should we include these and
other similar networks, including
unaffiliated networks, in our list of
RSNs in Appendix C? In addition, are
there networks included in the list of
RSNs in Appendix C that do not satisfy
the Commission’s definition of an RSN?
For example, do networks such as the
Big Ten Network, PAC–12 Network, and
The Mtn.—Mountain West Sports
Network, which show NCAA Division I
college football and basketball games of
a particular college conference but not
necessarily those of a particular team,
satisfy the Commission’s definition of
an RSN? As required by this definition,
do these and similar networks (i)
distribute programming in ‘‘a limited
geographic region’’ and (ii) carry the
minimum amount of covered
programming for an individual sports
team.
29. We note that the figures in
Appendix C include RSNs that are
affiliated with Comcast, many of which
are subject to program access conditions
adopted in the Comcast/NBCU Order
and which will continue to be subject to
these conditions for six more years
(until January 2018, assuming they are
not modified earlier in response to a
petition) even if the exclusive contract
prohibition were to sunset. If the
Comcast-controlled RSNs are excluded,
the data in Appendix C indicate that the
number of RSNs that are cable-affiliated
has increased from 18 to 22 (not
including HD versions) since the 2007
Extension Order, and the percentage of
RSNs that are cable-affiliated has
decreased slightly from 46 percent to
approximately 44.1 percent. With
respect to non-RSN regional
programming, we ask commenters to
provide recent data on the number of
these networks and the percentage of
them that are cable-affiliated.
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d. Other Types of Cable-Affiliated
‘‘Satellite Cable Programming’’
30. While the Commission in past
reviews of the exclusive contract
prohibition has considered linear and
VOD programming networks, we also
seek comment on whether there are
other types of ‘‘satellite cable
programming’’ or ‘‘satellite broadcast
programming’’ that we should consider
in assessing the exclusive contract
prohibition. The Act defines ‘‘satellite
cable programming’’ as (i) ‘‘video
programming’’ (ii) which is ‘‘transmitted
via satellite’’ and (iii) which is
‘‘primarily intended for the direct
receipt by cable operators for their
retransmission to cable subscribers.’’
The Act defines ‘‘video programming’’
as ‘‘programming provided by, or
generally considered comparable to
programming provided by, a television
broadcast station.’’ Are cable operators
affiliated with forms of ‘‘video
programming’’ that meet the other two
requirements of the definition of
‘‘satellite cable programming,’’ but that
are not necessarily considered
programming ‘‘networks’’? For example,
to the extent that cable operators own or
are affiliated with film libraries and
other content, to what extent does this
content qualify as ‘‘satellite cable
programming’’? If so, how should this
factor into our consideration of the
exclusive contract prohibition?
2. Assessing Whether the Data Support
Retaining, Sunsetting, or Relaxing the
Exclusive Contract Prohibition
31. We seek comment on whether the
data set forth herein, as updated and
supplemented by commenters, support
retaining, sunsetting, or relaxing the
exclusive contract prohibition. In
addition to the specific questions stated
herein, we seek comment on any new
trends in the industry or any other
issues that are relevant to our
determination of whether the status of
the MVPD marketplace today supports
the sunset of the exclusive contract
prohibition. We specifically seek
comment on the effect of the
development of online video on the
marketplace. We also request
information on the impact of the
Comcast/NBCU and TWC/Time Warner
transactions on the MVPD marketplace.
To what extent, if any, should these
transactions inform our analysis of
whether to retain, sunset, or relax the
exclusive contract prohibition? What
other recent developments in the MVPD
market since our 2007 review should we
consider in deciding whether to retain,
sunset, or relax the exclusive contract
prohibition?
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32. In analyzing whether the
exclusive contract prohibition remains
necessary, the Commission has stated
that it will ‘‘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.’’ Accordingly, in light of
the data noted above and as updated
and supplemented by commenters, we
seek comment on whether cableaffiliated programmers would have the
ability and incentive to favor their
affiliated cable operators absent the
exclusive contract prohibition in today’s
marketplace with the effect that
competition and diversity in the
distribution of video programming
would not be preserved and protected.
How has the exclusive contract
prohibition impacted the general state of
competition among MVPDs in the video
distribution market? How would a
sunset or relaxation of the exclusive
contract prohibition affect consumers
and competition in the video
distribution market, and how would a
sunset or relaxation affect the potential
entry of new competitors in the market?
Is there any basis for treating satellitedelivered, cable-affiliated programming
and terrestrially delivered, cableaffiliated programming differently with
respect to the exclusive contract
prohibition? Are there differences
between satellite-delivered
programming and terrestrially delivered
programming that would result in cable
operators having a greater ability and
incentive to favor affiliates providing
satellite-delivered programming that
warrants extension of the exclusive
contract prohibition? To the extent the
data support retaining the exclusive
contract prohibition as it exists today,
we seek comment on the appropriate
length of an extension. Should the
sunset date be five years from the
current sunset date (i.e., until October 5,
2017), consistent with the two prior
five-year extensions?
a. Ability
33. In assessing whether cableaffiliated programmers have the
‘‘ability’’ to favor their affiliated cable
operators with the effect that
competition and diversity in the
distribution of video programming
would not be preserved and protected,
the Commission has explained that it
considers whether satellite-delivered,
cable-affiliated programming remains
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programming that is necessary for
competition and for which there are no
good substitutes. In the 2007 Extension
Order, the Commission found that there
were no good substitutes for certain
satellite-delivered, cable-affiliated
programming, and that such
programming remained necessary for
viable competition in the video
distribution market. Accordingly, the
Commission concluded that cableaffiliated programmers retained ‘‘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
absent the rule.’’ In reaching this
conclusion, the Commission explained
that ‘‘[w]hat 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.’’ Moreover, the
Commission acknowledged that ‘‘there
exists a continuum of vertically
integrated programming, ‘ranging from
services for which there may be
substitutes (the absence of which from
a rival MVPD’s program lineup would
have little impact), to those for which
there are imperfect substitutes, to those
for which there are no close substitutes
at all (the absence of which from a rival
MVPD’s program lineup would have a
substantial negative impact).’ ’’
34. We seek comment on whether
competitive MVPDs’ access to satellitedelivered, cable-affiliated programming
remains necessary today to preserve and
protect competition in the video
distribution marketplace. Is there any
basis to depart from the Commission’s
conclusion in the 2007 Extension Order
that satellite-delivered, cable-affiliated
programming remains necessary for
viable competition in the video
distribution market? We seek comment
on whether and how the continued
decline in the number and percentage of
national programming networks that are
cable-affiliated should impact our
analysis, if at all. Despite a similar
decline between the 2002 Extension
Order and the 2007 Extension Order, the
Commission in the 2007 Extension
Order nonetheless found that ‘‘cableaffiliated programming continues to
represent some of the most popular and
significant programming available
today’’ and that ‘‘vertically integrated
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programming, if denied to cable’s
competitors, would adversely affect
competition in the video distribution
market.’’ Is this also true today,
considering that the data in Appendices
B and C indicate that, since the 2007
Extension Order, (i) the percentage of
satellite-delivered, national
programming networks that are cableaffiliated has declined from 22 percent
to approximately 14.4 percent; (ii) the
number of cable-affiliated networks
among the Top 20 satellite-delivered,
national programming networks as
ranked by subscribership has increased
from six to seven; (iii) the number of
cable-affiliated networks among the Top
20 satellite-delivered, national
programming networks as ranked by
average prime time ratings has remained
at seven; and (iv) the number of cableaffiliated RSNs has increased from 18 to
31 (not including HD versions)?
35. To what extent should we
consider Comcast-controlled networks
in our review of the exclusive contract
prohibition? Because these networks
will continue to be subject to program
access conditions adopted in the
Comcast/NBCU Order for six more years
(until January 2018, assuming they are
not modified earlier in response to a
petition) even if the exclusive contract
prohibition were to sunset, is there any
basis to consider them in assessing
whether to retain, sunset, or relax the
exclusive contract prohibition? With the
Comcast-controlled networks excluded,
the data in Appendices B and C indicate
that, since the 2007 Extension Order, (i)
the number of cable-affiliated networks
among the Top 20 satellite-delivered,
national programming networks as
ranked by subscribership has remained
at six; (ii) the number of cable-affiliated
networks among the Top 20 satellitedelivered, national programming
networks as ranked by average prime
time ratings has fallen from seven to
five; and (iii) the number of cableaffiliated RSNs has increased from 18 to
21 (not including HD versions). With
the Comcast-controlled networks
excluded from the analysis, is it still
accurate to characterize cable-affiliated
programming as ‘‘some of the most
popular and significant programming
available today,’’ the absence of which
from an MVPD’s offering would
‘‘adversely affect competition in the
video distribution market.’’ Rather than
focusing on the number and percentage
of networks that are cable-affiliated, is it
more critical to assess the extent to
which cable-affiliated programming
remains popular and without
substitutes? We note that, in the
Comcast-NBCU Order, the Commission
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found that the ‘‘the loss of ComcastNBCU programming * * * would harm
rival video distributors, reducing their
ability or incentive to compete with
Comcast for subscribers’’ and that
‘‘[t]his is particularly true for marquee
programming, which includes a broad
portfolio of national cable programming
in addition to RSN and local broadcast
programming; such programming is
important to Comcast’s competitors and
without good substitutes from other
sources.’’ Is there any basis to reach a
different conclusion with respect to
satellite-delivered programming
affiliated with other cable operators?
36. We ask commenters contending
that access to certain satellite-delivered,
cable-affiliated programming remains
necessary to preserve and protect
competition in the video distribution
market to present reliable, empirical
data supporting their positions, rather
than merely labeling such programming
as ‘‘must have.’’ While the Commission
has recognized that some satellitedelivered, cable-affiliated programming
has substitutes and that exclusive
contracts involving such programming
are unlikely to impact competition, are
there certain categories of programming,
such as RSNs, that we can presume have
no close substitutes and that are
necessary for competition? Does the
wide variation in the importance and
substitutability of satellite-delivered,
cable-affiliated programming call for a
case-by-case or categorical assessment of
programming, rather than a broad rule
that applies to all programming equally?
37. We also seek comment on whether
a sunset of the exclusive contract
prohibition would result in increased
vertical integration in the video
marketplace. If cable operators are
permitted to enter into exclusive
contracts with satellite-delivered, cableaffiliated programmers, will this result
in the acquisition of existing
programming networks by cable
operators, thereby increasing vertical
integration? How can we accurately
predict any such expected increase as
we assess whether to retain, sunset, or
relax the exclusive contract prohibition?
Are cable operators more likely to
acquire established networks that
provide popular and non-substitutable
programming, rather than creating new
networks or investing in fledgling
networks? Are there certain categories of
programming networks that are more
likely to be acquired or launched by
cable operators? For example, we note
that TWC recently announced that it
will launch two RSNs in 2012 featuring
the games of the Los Angeles Lakers,
including the first Spanish-language
RSN. Are cable operators expected to
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make further investments in RSNs in the
future, especially if the exclusive
contract prohibition were to sunset?
b. Incentive
38. In evaluating whether vertically
integrated programmers retain the
incentive to favor their affiliated cable
operators over competitive MVPDs, the
Commission analyzes ‘‘whether there
continues to be an economic rationale
for vertically integrated programmers to
engage in exclusive agreements with
cable operators that will cause []
anticompetitive harms.’’ The
Commission has explained that, if a
vertically integrated cable operator
withholds programming from
competitors, it can recoup profits lost at
the upstream level (i.e., lost licensing
fees and advertising revenues) by
increasing the number of subscribers of
its downstream MVPD division. The
Commission explained that, 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.’’ Moreover, in the
2007 Extension Order, the Commission
provided an empirical analysis
demonstrating that the profitability of
withholding increases as the number of
television households passed by a
vertically integrated cable operator
increases in a given market area, such as
through clustering.
39. The Commission concluded in the
2007 Extension Order that market
developments since 2002 did not yet
support the lifting of the exclusive
contract prohibition, but ‘‘there
nevertheless may come a point when
these developments will be sufficient to
allow the prohibition to sunset.’’
Similarly, in upholding the 2007
Extension Order, the D.C. Circuit stated
its expectation that, if the market
continued evolving rapidly, the
Commission could soon allow the
exclusive contract prohibition to sunset,
which Congress intended to occur at
some point. We seek comment on
whether now, almost five years since
the most recent extension of the
exclusive contract prohibition, we have
reached such a point.
40. As set forth in Appendix A, the
percentage of MVPD subscribers
nationwide attributable to cable
operators has fallen since 2007, from an
estimated 67 percent to approximately
58.5 percent today. Is there a certain
market share threshold that, if reached,
will render it unlikely for satellitedelivered, cable-affiliated programmers
to withhold national networks from
competitive MVPDs? We ask
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commenters to provide empirical
analyses to support their positions. Has
the decline in cable market share
benefited consumers, such as through
lower prices, or in some other way? If
not, does that suggest that the level of
competition in the video distribution
market has not reached a point where
the exclusive contract prohibition
should sunset, or is the price of cable
offerings determined by other factors?
41. We also seek comment on how the
current state of cable system clusters
and cable market share in regional
markets should affect our decision on
whether to retain, sunset, or relax the
exclusive contract prohibition. On a
regional basis, the market share held by
cable operators in DMAs varies
considerably, from a high in the 80
percent range to a low in the 20 percent
range. In some major markets, such as
New York, Philadelphia, and Boston,
the share of MVPD subscribers
attributable to cable operators far
exceeds the national cable market share
of 67 percent deemed significant in the
2007 Extension Order. In other DMAs,
such as Dallas, Denver, and Phoenix,
data indicate that the share of MVPD
subscribers attributable to cable
operators is below 50 percent. How
should this variation in regional market
shares impact our analysis? Does this
wide variation in cable market share on
a regional and local basis call for a more
granular assessment of the continued
need for an exclusive contract
prohibition in individual markets,
rather than a broad rule that applies to
all markets equally?
42. The Commission stated in the
2002 Extension Order that ‘‘clustering,
accompanied by an increase in
vertically integrated regional
programming networks affiliated with
cable MSOs that control system clusters,
will increase the incentive of cable
operators to practice anticompetitive
foreclosure of access to vertically
integrated programming.’’ We seek
comment on whether this conclusion
remains valid today. In the 2007
Extension Order, the Commission found
that the cable industry had continued to
form regional clusters since the 2002
Extension Order. We note that a
decrease in the amount of regional
clustering could decrease the market
share of individual cable operators
within the footprints of regional
programming, which would create fewer
opportunities to implement exclusive
arrangements. Has the amount of
regional clustering increased or
decreased since the 2007 Extension
Order? We seek comment on whether
events since the 2007 Extension Order
mitigate or exacerbate the impact of
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clustering. In the 2007 Extension Order,
the Commission provided an empirical
analysis demonstrating that the
profitability of withholding increases as
the number of television households
passed by a vertically integrated cable
operator increases in a given market
area, such as through clustering. The
analysis examined two vertically
integrated cable operators on a DMA-byDMA basis. Taking account of various
factors, including the characteristics of
the affiliated RSN and the profitability
figures of the vertically integrated cable
operator examined, the analysis
identified multiple DMAs in which
withholding would be profitable. In
those DMAs, the homes passed by the
vertically integrated cable operator as a
percentage of television households
ranged from 60–80 percent. We seek
comment on this analysis and whether,
based on current data, it continues to
support retaining an exclusive contract
prohibition, particularly in those
markets where a vertically integrated
cable operator passes a significant
number of television households. We
also note that the Commission in the
2007 Extension Order performed an
analysis that concluded that
withholding of some nationally
distributed programming networks
could be profitable if as little as 1.9
percent of non-cable subscribers were to
switch to cable as a result of the
withholding. We seek comment on this
analysis and whether, based on current
data, it continues to support retaining
an exclusive contract prohibition for
national programming networks.
43. Has the current state of horizontal
consolidation in the cable industry
increased or decreased incentives for
anticompetitive foreclosure of access to
vertically integrated programming? We
note that the data in Appendix A
indicate that the percentage of MVPD
subscribers receiving their video
programming from one of the four
largest vertically integrated cable MSOs
has decreased from between 54 and
56.75 percent as stated in the 2007
Extension Order to approximately 42.8
percent today. What impact, if any, does
this have on our review of the exclusive
contract prohibition?
3. Impact on the Video Programming
Market
44. We seek comment on how
retaining, sunsetting, or relaxing the
exclusive contract prohibition would
impact the creation of new national,
regional, and local programming and
which of these options is most likely to
increase programming diversity. What
effect has the exclusive contract
prohibition had on the incentives of
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incumbent cable operators to develop
and produce video programming? Are
incumbent cable operators less willing
to invest in programming because they
cannot enter into exclusive contracts
and therefore must share their
programming investment with their
competitors? In the 2007 Extension
Order, the Commission concluded that
the extension of the exclusive contract
prohibition would not create a
disincentive for the creation of new
programming. In support of this finding,
the Commission noted that, despite the
exclusive contract prohibition, the
number of programming networks,
including cable-affiliated networks, had
increased since 1994. Is there any basis
to conclude that the number of video
programming networks, including cableaffiliated networks, would be even
greater today if the exclusive contract
prohibition had sunset earlier? Since the
2007 extension of the exclusive contract
prohibition, has there been an increase
or decrease in the development,
promotion, and launch of new video
programming services by incumbent
cable operators? Would a sunset of the
exclusive contract prohibition entice
incumbent cable operators to invest in
and launch new programming networks
to compete with established networks,
leading to greater diversity in the video
programming market, or are incumbent
cable operators more likely to acquire
these established networks?
45. What effect has the exclusive
contract prohibition had on the
incentives of competitive MVPDs and
non-MVPD-affiliated programmers to
develop and produce video
programming? In the 2007 Extension
Order, the Commission noted evidence
that some competitive MVPDs had
begun to invest in their own video
programming, despite their ability to
access satellite-delivered, cableaffiliated programming as a result of the
exclusive contract prohibition. To what
extent have competitive MVPDs
invested in their own video
programming? In the 2007 Extension
Order, the Commission ‘‘caution[ed]
competitive MVPDs to take any steps
they deem appropriate to prepare for the
eventual sunset of the prohibition,
including further investments in their
own programming.’’ Have competitive
MVPDs made further investments in
their own programming since that time?
If the exclusive contract prohibition
were to sunset (wholly or partially),
would competitive MVPDs be likely to
increase their investment in video
programming in order to ensure that
they have a robust offering of
programming to counteract any
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exclusive deals that incumbent cable
operators might enter into with their
affiliated programmers? We note that
certain competitive MVPDs are
currently subject to the exclusive
contract prohibition, such as those that
are cable operators or common carriers
that provide video programming
directly to subscribers. Has the
exclusive contract prohibition caused
these competitive MVPDs to be less
willing to invest in programming
because they must share their
programming investment with their
competitors? Would a sunset of the
exclusive contract prohibition entice
these competitive MVPDs to invest in
and launch new programming
networks? Do competitive MVPDs have
the resources to invest in creating their
own video programming? If not, to the
extent that certain satellite-delivered,
cable-affiliated programming is
withheld from competitive MVPDs, is it
likely that non-MVPD-affiliated
programming vendors will fill the void
by creating competing programming to
license to competitive MVPDs, thereby
leading to even greater diversity in the
video programming market? Are there
certain categories of programming that
cannot be replicated by either
competitive MVPDs or non-MVPDaffiliated programming vendors? In the
2010 Program Access Order, the
Commission stated:
If particular programming is replicable, our
policies should encourage MVPDs or others
to create competing programming, rather
than relying on the efforts of others, thereby
encouraging investment and innovation in
programming and adding to the diversity of
programming in the marketplace. Conversely,
when programming is non-replicable and
valuable to consumers, such as regional
sports programming, no amount of
investment can duplicate the unique
attributes of such programming, and denial of
access to such programming can significantly
hinder an MVPD from competing in the
marketplace.17
While the Commission found that RSNs
are non-replicable, it concluded that
local news and local community or
educational programming is ‘‘readily
replicable programming.’’ We seek
comment on how the distinction
between replicable and non-replicable
content should impact our review of the
exclusive contract prohibition.
17 See Review of the Commission’s Program
Access Rules and Examination of Programming
Tying Arrangements, First Report and Order, 25
FCC Rcd 746, 750–51, para. 9 (2010) (‘‘2010
Program Access Order’’), affirmed in part and
vacated in part sub nom. Cablevision Sys. Corp. et
al. v. FCC, 649 F.3d 695 (D.C. Cir. 2011)
(‘‘Cablevision II’’).
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4. Alternatives to Retaining the
Exclusive Contract Prohibition as It
Exists Today
46. As discussed in further detail
below, to the extent the data do not
support retaining the exclusive contract
prohibition as it exists today, we seek
comment on whether we can
nonetheless preserve and protect
competition in the video distribution
market either by (i) sunsetting the
prohibition in its entirety and relying
solely on existing protections provided
by the program access rules that will not
sunset; or (ii) relaxing the exclusive
contract prohibition, such as through
removal of the prohibition on a marketby-market basis based on the extent of
competition in the market or by
retaining the prohibition only for
satellite-delivered, cable-affiliated RSNs
and other satellite-delivered, cableaffiliated ‘‘must have’’ programming.
a. Sunsetting the Exclusive Contract
Prohibition in Its Entirety and Relying
Solely on Existing Protections
47. As discussed above, the exclusive
contract prohibition is just one of
several protections that the program
access rules afford to competitive
MVPDs in their efforts to compete in the
video distribution market. Even if the
exclusive contract prohibition were to
sunset (wholly or partially), these other
existing protections will remain in
effect. We seek comment on whether
these existing protections are sufficient
to preserve and protect competition in
the video distribution market if the
exclusive contract prohibition were to
sunset and whether any additional
safeguards should be adopted.
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(i) Section 628(b) Complaints
48. The Act and the Commission’s
existing rules allow for the filing of
complaints alleging a violation of
Section 628(b) of the Act and Section
76.1001(a) of the Commission’s rules.
These provisions require a complainant
to establish three elements in order to
demonstrate a violation: (i) The
defendant is one of the three entities
covered by these provisions (i.e., a cable
operator, a satellite cable programming
vendor in which a cable operator has an
attributable interest, or a satellite
broadcast programming vendor); (ii) the
defendant has engaged in an ‘‘unfair
act’’; and (iii) the ‘‘purpose or effect’’ of
the unfair act is to ‘‘significantly hinder
or prevent’’ an MVPD from providing
satellite cable programming or satellite
broadcast programming to subscribers or
consumers. Even if the exclusive
contract prohibition were to sunset
(wholly or partially), an MVPD would
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still have the option to file a complaint
with the Commission alleging that an
exclusive contract between a cable
operator and a satellite-delivered, cableaffiliated programmer involving
satellite-delivered, cable-affiliated
programming violates these provisions.
We note that the Commission currently
considers allegedly ‘‘unfair acts’’
involving terrestrially delivered, cableaffiliated programming on a case-bycase basis pursuant to Section 628(b) of
the Act and Section 76.1001(a) of the
Commission’s rules. Applying these
provisions, the Commission recently
found that the withholding of
terrestrially delivered, cable-affiliated
RSNs from certain MVPDs in the New
York, Buffalo, and Hartford/New Haven
DMAs violated these provisions. We
seek comment regarding whether there
are any justifications for applying
different rules and procedures to
satellite-delivered, cable-affiliated
programming than those that apply to
terrestrially delivered, cable-affiliated
programming.
49. The Commission previously
concluded that Section 628(b) was not
an adequate substitute for the
prohibition on exclusive contracts
under Section 628(c)(2)(D). Among
other things, the Commission noted that
Section 628(b) ‘‘carries with it an added
burden’’ to demonstrate that the
‘‘purpose or effect’’ of the ‘‘unfair act’’
is to ‘‘significantly hinder or prevent’’
an MVPD from providing programming.
We seek comment on the costs and
benefits of moving from a broad,
prophylactic prohibition on exclusive
contracts involving satellite-delivered,
cable-affiliated programming to reliance
instead on a case-by-case process,
including Section 628(b) complaints. To
what extent would a case-by-case
process be more costly for competitive
MVPDs than the current prohibition on
exclusive contracts? What would be the
benefits of eliminating the prohibition
on exclusive contracts involving
satellite-delivered, cable-affiliated
programming? Would these benefits
outweigh the costs of a case-by-case
process?
categorically ‘‘unfair.’’ If the exclusive
contract prohibition were to sunset
(wholly or partially), however, exclusive
contracts would no longer always be
presumed ‘‘unfair.’’ Rather, a
complainant would have the burden to
establish that the exclusive contract at
issue is ‘‘unfair’’ based on the facts and
circumstances presented. Second, under
the current exclusive contract
prohibition, all exclusive contracts
between a cable operator and a satellitedelivered, cable-affiliated programmer
pertaining to satellite-delivered, cableaffiliated programming are presumed to
harm competition, and competitive
MVPDs alleging a prohibited exclusive
contract are not required to demonstrate
harm. In alleging that an exclusive
contract violates Section 628(b),
however, a complainant would have the
burden of proving that the exclusive
contract has the ‘‘purpose or effect’’ of
‘‘significantly hindering or preventing’’
the MVPD from providing satellite cable
programming or satellite broadcast
programming. Third, the current
exclusive contract prohibition forbids
all exclusive contracts between a cable
operator and a satellite-delivered, cableaffiliated programmer pertaining to
satellite-delivered, cable-affiliated
programming, unless a cable operator or
programmer can satisfy its burden of
demonstrating that an exclusive contract
serves the public interest based on the
factors set forth in Section 628(c)(4) of
the Act and Section 76.1002(c)(4) of the
Commission’s rules. If the exclusive
contract prohibition were to sunset
(wholly or partially), however, the
situation would be reversed. That is,
such exclusive contracts would be
permitted, unless an MVPD could carry
its burden of demonstrating that the
exclusive contract violates Section
628(b) (or, potentially, Section
628(c)(2)(B)). We seek comment on the
above interpretations of Section 628(b)
as it pertains to exclusive contracts
involving satellite-delivered, cableaffiliated programming, particularly the
practical implications for competitive
MVPDs, cable operators, and satellitedelivered, cable-affiliated programmers.
(a) Case-by-Case Complaint Process
50. We note that a case-by-case
complaint process alleging a violation of
Section 628(b) would differ from the
current prohibition on exclusive
contracts in Section 628(c)(2)(D) in
several important respects. First, under
the current exclusive contract
prohibition, all exclusive contracts
between a cable operator and a satellitedelivered, cable-affiliated programmer
pertaining to satellite-delivered, cableaffiliated programming are considered
(b) Extending Rules and Policies
Adopted for Section 628(b) Complaints
Involving Terrestrially Delivered, CableAffiliated Programming to Section
628(b) Complaints Challenging
Exclusive Contracts Involving SatelliteDelivered, Cable-Affiliated
Programming
51. The Commission in the 2010
Program Access Order adopted a caseby-case complaint process to address
unfair acts involving terrestrially
delivered, cable-affiliated programming
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that allegedly violate Section 628(b). In
doing so, the Commission adopted rules
and policies that would appear to be
equally appropriate for complaints
alleging that an exclusive contract
involving satellite-delivered, cableaffiliated programming violates Section
628(b). Accordingly, if the exclusive
contract prohibition were to sunset
(wholly or partially), we propose to
apply these same rules and policies to
such complaints.
52. First, the Commission declined to
adopt specific evidentiary requirements
with respect to proof that the
defendant’s alleged activities violated
Section 628(b). Among other things, the
Commission explained that the
evidence required to satisfy this burden
will vary based on the facts and
circumstances of each case and may
depend on, among other things, whether
the complainant is a new entrant or an
established competitor and whether the
programming the complainant seeks to
access is new or existing programming.
In addition, the Commission provided
the following illustrative examples of
evidence that litigants might consider
providing: (i) An appropriately crafted
regression analysis that estimates what
the complainant’s market share in the
MVPD market would be if it had access
to the programming and how that
compares to its actual market share; or
(ii) statistically reliable survey data
indicating the likelihood that customers
would choose not to subscribe to or not
to switch to an MVPD that did not carry
the withheld programming. The
Commission also explained that the
discovery process will enable parties to
obtain additional evidence. If the
exclusive contract prohibition were to
sunset (wholly or partially), we propose
to apply the same requirements to
complaints alleging that an exclusive
contract involving satellite-delivered,
cable-affiliated programming violates
Section 628(b).
53. Second, the Commission found
that one category of programming,
RSNs, was shown by both Commission
precedent and record evidence to be
very likely to be both non-replicable and
highly valued by consumers. Rather
than requiring litigants and the
Commission staff to undertake repetitive
examinations of this RSN precedent and
the relevant historical evidence, the
Commission instead allowed
complainants to invoke a rebuttable
presumption that an ‘‘unfair act’’
involving a terrestrially delivered, cableaffiliated RSN has the purpose or effect
set forth in Section 628(b). The D.C.
Circuit upheld the Commission’s
decision to establish a rebuttable
presumption of ‘‘significant hindrance’’
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for ‘‘unfair acts’’ involving terrestrially
delivered, cable-affiliated RSNs under
both First Amendment and
Administrative Procedure Act (‘‘APA’’)
review. Accordingly, to the extent the
exclusive contract prohibition were to
sunset (wholly or partially) and we do
not retain an exclusive contract
prohibition for satellite-delivered, cableaffiliated RSNs, should we similarly
adopt a rebuttable presumption of
‘‘significant hindrance’’ under Section
628(b) for exclusive contracts involving
satellite-delivered, cable-affiliated
RSNs? If so, we propose to define the
term ‘‘RSN’’ in the same way the
Commission defined that term in the
2010 Program Access Order. Is there any
basis to have a rebuttable presumption
of ‘‘significant hindrance’’ for
terrestrially delivered, cable-affiliated
RSNs, but not when these networks are
satellite-delivered? Are there any other
categories of satellite-delivered, cableaffiliated programming that can be
deemed ‘‘must have’’ and for which we
should establish a rebuttable
presumption of ‘‘significant hindrance’’?
We note that the Commission in the
Comcast-NBCU Order concluded that
‘‘certain national cable programming
networks produce programming that is
more widely viewed and commands
higher advertising revenue than certain
broadcast or RSN programming.’’ Are
there other types of satellite-delivered,
cable-affiliated programming besides
RSNs that have no good substitutes, are
important for competition, and are nonreplicable, as the Commission has found
with respect to RSNs? To the extent that
commenters contend that there are, we
ask that they provide reliable, empirical
data supporting their positions, rather
than merely labeling such programming
as ‘‘must have.’’ In addition, we request
commenters to provide a rational and
workable definition of such
programming that can be applied
objectively.
54. Third, the Commission concluded
that HD programming is growing in
significance to consumers and that
consumers do not consider the SD
version of a particular channel to be an
adequate substitute for the HD version
due to the different technical
characteristics and sometimes different
content. Accordingly, the Commission
determined that it would analyze the
HD version of a network separately from
the SD version of similar content for
purposes of determining whether an
‘‘unfair act’’ has the purpose or effect set
forth in Section 628(b). Thus, the fact
that a respondent provides the SD
version of a network to the complainant
will not alone be sufficient to refute the
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complainant’s showing that lack of
access to the HD version has the
purpose or effect set forth in Section
628(b). Similarly, in cases involving an
RSN, withholding the HD feed is
rebuttably presumed to cause
‘‘significant hindrance’’ even if an SD
version of the network is made available
to competitors. The D.C. Circuit upheld
the Commission’s decision on this issue
under both First Amendment and APA
review. To the extent the exclusive
contract prohibition were to sunset
(wholly or partially), we believe the
same requirements should apply to
complaints alleging that an exclusive
contract involving satellite-delivered,
cable-affiliated programming violates
Section 628(b). We seek comment on
this proposal.
(c) Additional Rules for Complaints
Challenging Exclusive Contracts
Involving Satellite-Delivered, CableAffiliated Programming
55. To the extent the exclusive
contract prohibition were to sunset
(wholly or partially), we seek comment
on ways to reduce burdens on both
complainants and defendants in
connection with complaints alleging
that an exclusive contract involving
satellite-delivered, cable-affiliated
programming violates Section 628(b)
(or, potentially, Section 628(c)(2)(B)).
We acknowledge that a case-by-case
complaint process for addressing
exclusive contracts involving satellitedelivered, cable-affiliated, national
programming networks may impose
some burdens for litigants and the
Commission, especially in comparison
to the current broad, prophylactic
prohibition. For example, although
several MVPDs could join as
complainants, the showing in the
complaint and any subsequent ruling on
the complaint (either grant or denial)
will be limited to the complainants.
Other competitive MVPDs that are not
parties to the complaint would have to
file their own complaint and
demonstrate how the exclusive contract
at issue is ‘‘unfair’’ and has
‘‘significantly hindered’’ them from
providing programming. Given the
number of competitive MVPDs
nationwide that might seek access to a
satellite-delivered, cable-affiliated,
national programming network that is
subject to an exclusive contract with
cable operators, the number of such
complaints involving just one national
network could be significant.
56. We seek comment on how to
reduce these potential burdens for both
complainants and defendants. For
example, rather than requiring litigants
and the Commission staff to undertake
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repetitive examinations of the same
network, we seek comment on whether
the Commission could establish a
rebuttable presumption that, once a
complainant succeeds in demonstrating
that an exclusive contract involving a
satellite-delivered, cable-affiliated
programming network violates Section
628(b) (or, potentially, Section
628(c)(2)(B)), any other exclusive
contract involving the same network
violates Section 628(b) (or Section
628(c)(2)(B)). We seek comment on
whether adoption of such a rebuttable
presumption is rational. For example, in
the event the Commission finds that an
exclusive contract violates Section
628(b) (or Section 628(c)(2)(B)) in
response to a complaint brought by a
small, fledgling MVPD, is it rational to
assume that the Commission is likely to
reach the same conclusion when the
complaint is brought by a large,
established MVPD?
57. We also seek comment on whether
there would be any benefit to retaining
post-sunset our existing process
whereby a cable operator or a satellitedelivered, cable-affiliated programmer
may file a Petition for Exclusivity
seeking Commission approval for an
exclusive contract involving satellitedelivered, cable-affiliated programming
by demonstrating that the arrangement
serves the public interest based on the
factors set forth in Section 628(c)(4) of
the Act and Section 76.1002(c)(4) of the
Commission’s rules. While a cable
operator post-sunset would be permitted
generally to enter into an exclusive
contract with a satellite-delivered,
cable-affiliated programming network
without receiving prior Commission
approval, we propose that the grant of
a Petition for Exclusivity would
immunize such an exclusive contract
from potential complaints alleging a
violation of Section 628(b), as well as
Section 628(c)(2)(B). We further propose
that, to the extent we were to deny a
Petition for Exclusivity post-sunset, the
petitioner would not be precluded from
entering into or enforcing the exclusive
contract subject to the petition. Rather,
denial of a Petition for Exclusivity postsunset would mean that the exclusive
contract at issue may not be permissible
in all cases if challenged pursuant to
Section 628(b) or, potentially, Section
628(c)(2)(B). We seek comment on the
costs and benefits of retaining this
petition process after a sunset,
especially whether the burdens for the
Commission staff and impacted parties
would outweigh any benefits. We also
seek comment on any other ways to
reduce the potential burdens for both
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complainants and defendants resulting
from a case-by-case complaint process.
(ii) Section 628(c)(2)(B) Discrimination
Complaints
58. We believe that discrimination
complaints under Section 628(c)(2)(B)
also will provide some protection for
competitive MVPDs should the
exclusive contract prohibition sunset
(wholly or partially). Discrimination can
take two forms: price discrimination
and non-price discrimination. Non-price
discrimination includes an
unreasonable refusal to license
programming to an MVPD. A refusal to
license is permissible only if there is a
‘‘legitimate business justification’’ for
the conduct. As discussed below, a
refusal to license can take two forms.
First, a satellite-delivered, cableaffiliated programmer may refuse to
license its programming to all MVPDs in
a market except for one (such as its
affiliated cable operator), thereby
providing the affiliated cable operator
with exclusive access to the
programming. Second, a satellitedelivered, cable-affiliated programmer
may selectively refuse to license its
programming to certain MVPDs in a
market (such as a recent entrant) while
licensing the programming to other
MVPDs (such as its affiliated cable
operator and DBS operators). We seek
comment on each of these scenarios
below.
(a) Challenging an Exclusive
Arrangement as an Unreasonable
Refusal to License
59. We seek comment on the interplay
between the potential sunset of the
exclusive contact prohibition in Section
628(c)(2)(D) and the continued
prohibition on unreasonable refusals to
license pursuant to Section 628(c)(2)(B).
As an initial matter, we note that
Section 628(c)(2)(D) prohibits
‘‘exclusive contracts * * * between a
cable operator and a satellite cable
programming vendor in which a cable
operator has an attributable interest.’’
This language presumes that an
agreement will exist between the cable
operator and the satellite-delivered,
cable-affiliated programmer that would
provide the cable operator with
exclusivity. In the event that a satellitedelivered, cable-affiliated programmer
unilaterally refuses to license its
programming to all MVPDs in a market
except for one cable operator and
without any exclusive contract with the
cable operator, we believe an MVPD can
challenge this conduct as an
unreasonable refusal to license in
violation of Section 628(c)(2)(B). While
a cable operator would be permitted
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24315
generally to enter into an exclusive
contract with the satellite-delivered,
cable-affiliated programmer in the event
of a sunset, the scenario presented here
does not involve an exclusive contract;
rather, it involves unilateral action by
the satellite-delivered, cable-affiliated
programmer. We seek comment on this
interpretation. In defending against a
complaint, the satellite-delivered, cableaffiliated programmer would be
required to provide a ‘‘legitimate
business justification’’ for its conduct.
60. In the event that a satellitedelivered, cable-affiliated programmer
and a cable operator enter into an
exclusive contract post-sunset (complete
or partial), we seek comment on
whether an MVPD can challenge this
exclusive contract as an unreasonable
refusal to license in violation of Section
628(c)(2)(B).18 We believe that there are
legitimate arguments for and against this
interpretation. We seek comment on
which of the interpretations set forth
below is more reasonable and consistent
with the goals of Section 628.
61. In favor of interpreting Section
628(c)(2)(B) to allow a challenge postsunset to an exclusive contract as an
unreasonable refusal to license, we note
that Section 628(c)(2)(B)(iv) provides
that it is not a violation of Section
628(c)(2)(B) for a satellite-delivered,
cable-affiliated programmer to ‘‘enter[]
into an exclusive contract that is
permitted under [Section 628(c)(2)(D)].’’
The Commission has previously
interpreted this language to pertain to
only those exclusive contracts that have
been deemed by the Commission to be
in the public interest pursuant to the
factors set forth in Section 628(c)(4).
This provision is silent regarding
exclusive contracts that are generally
permissible after a sunset pursuant to
Section 628(c)(5). Does the omission of
post-sunset exclusive contracts from
both Section 628(c)(2)(D) and Section
628(c)(2)(B)(iv) mean that Congress
intended that such contracts might still
be challenged as impermissibly
discriminatory in violation of Section
628(c)(2)(B)? In addition, we note that
the exclusive contract prohibition in
Section 628(c)(2)(D) applies to exclusive
contracts between a satellite-delivered,
cable-affiliated programmer and a cable
operator; it does not apply to exclusive
contracts between a satellite-delivered,
cable-affiliated programmer and a DBS
18 To the extent that we determine that an MVPD
can challenge an exclusive contract as an
unreasonable refusal to license in violation of
Section 628(c)(2)(B) post-sunset, we seek comment
above on ways to reduce the potential burdens for
both complainants and defendants resulting from a
case-by-case complaint process. See supra paras.
56–57.
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operator. Both before and after a sunset,
however, the decision of a satellitedelivered, cable-affiliated programmer
to license its programming to a DBS
operator but not to other MVPDs might
be challenged as an unreasonable
refusal to license pursuant to Section
628(c)(2)(B). If, post-sunset, an MVPD
cannot challenge an exclusive
arrangement between a satellitedelivered, cable-affiliated programmer
and a cable operator as an unreasonable
refusal to license in violation of Section
628(c)(2)(B), would this produce an
anomalous result? Specifically, in
challenging an exclusive contract
between a satellite-delivered, cableaffiliated programmer and a cable
operator, an MVPD would have to rely
on Section 628(b), which places the
burden on the MVPD to demonstrate
that the defendant has engaged in an
‘‘unfair act’’ that has the ‘‘purpose or
effect’’ of ‘‘significantly hindering or
preventing’’ the MVPD from providing
satellite cable programming or satellite
broadcast programming to subscribers or
consumers. By contrast, in challenging
an exclusive contract between a
satellite-delivered, cable-affiliated
programmer and a DBS operator, an
MVPD could rely on Section
628(c)(2)(B), which presumes harm in
every case and places the burden on the
satellite-delivered, cable-affiliated
programmer to provide a ‘‘legitimate
business justification’’ for its conduct. Is
there any basis for placing a greater
burden on an MVPD in challenging an
exclusive contract between a satellitedelivered, cable-affiliated programmer
and a cable operator than between a
satellite-delivered, cable-affiliated
programmer and a DBS operator?
62. On the other hand, we note that
there are legitimate arguments against
interpreting Section 628(c)(2)(B) to
allow an MVPD to challenge an
exclusive contract between a satellitedelivered, cable-affiliated programmer
and a cable operator post-sunset as an
unreasonable refusal to license.
Currently, with the exclusive contract
prohibition in effect, an exclusive
contract between a satellite-delivered,
cable-affiliated programmer and a cable
operator is prohibited, unless the
programmer or cable operator can
demonstrate that the exclusive contract
serves the public interest based on the
factors set forth in Section 628(c)(4). If,
post-sunset, an MVPD can challenge an
exclusive contract between a satellitedelivered, cable-affiliated programmer
and a cable operator as an unreasonable
refusal to license in violation of Section
628(c)(2)(B), the satellite-delivered,
cable-affiliated programmer would be
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required to demonstrate a ‘‘legitimate
business reason’’ for its conduct. Is it
reasonable to interpret Section 628 to
provide that, post-sunset, the public
interest factors in Section 628(c)(4)
would be replaced with a showing of a
‘‘legitimate business reason’’ in
response to a complaint alleging a
violation of Section 628(c)(2)(B)? We
note that two of the public interest
factors in Section 628(c)(4) focus on
competition in the video distribution
market, allowing a proponent of
exclusivity to demonstrate how the
exclusive contract will not adversely
impact competition. In a complaint
alleging discrimination under Section
628(c)(2)(B), however, the alleged
discriminatory act is presumed to harm
competition in every case. Is it
reasonable to interpret Section 628 to
provide that, pre-sunset, a satellitedelivered, cable-affiliated programmer
or a cable operator could make a
showing that an exclusive contract
would not adversely impact competition
pursuant to the public interest factors in
Section 628(c)(4), but, post-sunset,
exclusivity is presumed to harm
competition in every case when
challenged pursuant to Section
628(c)(2)(B)?
63. In addition to the foregoing, we
seek comment on whether the
legislative history of the 1992 Cable Act
supports either of the above
interpretations. The Senate Report
accompanying the 1992 Cable Act states
that the ‘‘bill does not equate exclusivity
with an unreasonable refusal to deal.’’
This statement might be read to imply
that Congress considered exclusive
contracts and unreasonable refusals to
deal to be mutually exclusive, with the
effect that once a satellite-delivered,
cable-affiliated programmer enters into
an exclusive contract with a cable
operator post-sunset, the contract
cannot be challenged as an
unreasonable refusal to license pursuant
to Section 628(c)(2)(B). Another part of
the Senate Report, however, states that
‘‘the dominance in the market of the
distributor obtaining exclusivity should
be considered in determining whether
an exclusive arrangement amounts to an
unreasonable refusal to deal.’’ This
statement might be read to imply that
Congress did not consider exclusive
contracts and unreasonable refusals to
license to be mutually exclusive, with
the effect that an exclusive contract
could be challenged as an unreasonable
refusal to license pursuant to Section
628(c)(2)(B).
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(b) Selective Refusals To License
Programming
64. Notwithstanding the question
raised in the previous section of
whether an MVPD can challenge postsunset an exclusive arrangement
between a satellite-delivered, cableaffiliated programmer and a cable
operator as an unreasonable refusal to
license in violation of Section
628(c)(2)(B), our rules and precedent
establish that the discrimination
provision in Section 628(c)(2)(B) would
prevent a satellite-delivered, cableaffiliated programmer from licensing its
content to MVPD A (such as a DBS
operator) in a given market area, but to
selectively refuse to license the content
to MVPD B (such as a telco video
provider) in the same area, absent a
legitimate business reason. When a
satellite-delivered, cable-affiliated
programmer discriminates among
MVPDs in this manner, it faces the
prospect of a complaint alleging nonprice discrimination in violation of
Section 628(c)(2)(B). As noted above,
complaints alleging a violation of
Section 628(c)(2)(B) do not require a
showing of harm to the complainant.
65. We seek comment on whether the
right of an MVPD to challenge a
selective refusal to license as a form of
prohibited non-price discrimination
under Section 628(c)(2)(B) will help to
preserve and protect competition in the
video distribution market if the
exclusive contract prohibition were to
sunset (wholly or partially). As reflected
in Appendix A, the two DBS operators
together have approximately 34 percent
of MVPD subscribers nationwide today.
Because a national programming
network that refuses to license its
content to these MVPDs will forgo
significant licensing fees and
advertising revenues, is it reasonable to
assume that most satellite-delivered,
cable-affiliated, national programming
networks will license their content to
DBS operators? If they do, we interpret
Section 628(c)(2)(B) as permitting other
competitive MVPDs, such as a telco
video provider, to bring non-price
discrimination complaints should these
programmers refuse to deal with them.
How does this analysis change with
respect to local and regional markets,
where cable operators may have an
overwhelming share of the market or a
vertically integrated cable operator may
pass a large percentage of television
households?
66. The Commission previously
concluded that the discrimination
provision in Section 628(c)(2)(B) is not
an adequate substitute for the
prohibition on exclusive contracts
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under Section 628(c)(2)(D). Among
other things, the Commission noted that
a non-price discrimination complaint
requires an MVPD to demonstrate that
the conduct was ‘‘unreasonable,’’ which
the Commission noted may be difficult
to establish. We seek comment on the
costs and benefits of moving from a
broad, prophylactic prohibition on
exclusive contracts involving satellitedelivered, cable-affiliated programming
to reliance instead on a case-by-case
process, including non-price
discrimination complaints.
delivered, cable-affiliated programmer
to enter into an exclusive contract,
would that conduct violate Section
628(c)(2)(A) even though the underlying
contract would be permissible (absent a
finding of a violation of Section 628(b)
(or, potentially, Section 628(c)(2)(B)))?
Stated differently, in the event of a
sunset, can a cable operator ‘‘unduly
influence’’ a satellite-delivered, cableaffiliated programmer to enter into an
exclusive contract only if the underlying
contract violates Section 628(b) (or,
potentially, Section 628(c)(2)(B))?
(iii) Section 628(c)(2)(A) Undue
Influence Complaints
67. We seek comment on the extent to
which undue influence complaints
under Section 628(c)(2)(A) may also
provide some protection for competitive
MVPDs should the exclusive contract
prohibition sunset (wholly or partially).
Section 628(c)(2)(A) precludes a cable
operator that has an attributable interest
in a satellite cable programming vendor
or a satellite broadcast programming
vendor from ‘‘unduly or improperly
influencing the decision of such vendor
to sell, or the prices, terms, and
conditions of sale of, satellite cable
programming or satellite broadcast
programming to any unaffiliated
[MVPD].’’ The Commission has
explained that the ‘‘concept of undue
influence between affiliated firms is
closely linked with discriminatory
practices and exclusive contracting’’
and that the prohibition on undue
influence ‘‘can play a supporting role
where information is available (such as
might come from an internal
‘whistleblower’) that evidences ‘undue
influence’ between affiliated firms to
initiate or maintain anticompetitive
discriminatory pricing, contracting, or
product withholding.’’ The Commission
acknowledged that ‘‘such conduct may
be difficult for the Commission or
complainants to establish’’ but ‘‘its
regulation provides a useful support for
direct discrimination and contracting
regulation.’’ To what extent, if any, will
the prohibition on undue influence
provide some protection for competitive
MVPDs should the exclusive contract
prohibition sunset? If the exclusive
contract prohibition were to sunset,
then a cable operator would be
permitted generally to enter into an
exclusive contract with a satellitedelivered, cable-affiliated programming
network, although the contract may be
deemed to violate Section 628(b) (or,
potentially, Section 628(c)(2)(B)) after
the conclusion of a complaint
proceeding. In the event the exclusive
contract prohibition sunsets, if a cable
operator ‘‘unduly influences’’ a satellite-
b. Relaxing the Exclusive Contract
Prohibition
68. Rather than sunsetting the
exclusive contract prohibition in its
entirety and relying solely on existing
protections provided by the program
access rules that will not sunset, we
seek comment on whether we should
instead relax, rather than sunset, the
exclusivity prohibition in the ways
discussed below, or in some other way.
We ask parties to comment on whether
retaining the exclusivity ban in certain
circumstances would be more effective
in preserving and protecting
competition in the video distribution
market than permitting the exclusive
contract prohibition to sunset entirely.
In addition to the proposals below, we
invite comment on other ways to relax
the exclusive contract prohibition.
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(i) Sunsetting the Exclusive Contract
Prohibition on a Market-by-Market Basis
69. We seek comment on whether to
establish a process whereby a cable
operator or satellite-delivered, cableaffiliated programmer can file a Petition
for Sunset seeking to remove the
exclusive contract prohibition on a
market-by-market basis based on the
extent of competition in the market.19 In
the 2002 Extension Order, the
Commission explained that ‘‘clustering,
accompanied by an increase in
vertically integrated regional
programming networks affiliated with
cable MSOs that control system clusters,
will increase the incentive of cable
operators to practice anticompetitive
19 We note that the Commission sought comment
on a similar proposal in the 2007 Program Access
NPRM. See Review of the Commission’s Program
Access Rules and Examination of Programming
Tying Arrangements, MB Docket No. 07–198,
Notice of Proposed Rulemaking, 22 FCC Rcd 17791,
17859, para. 114 (2007) (seeking comment on
whether the Commission can establish a procedure
that would shorten the term of the exclusive
contract prohibition if, after two years (i.e., October
5, 2009), a cable operator can show competition
from new entrant MVPDs has reached a certain
penetration level in the DMA) (‘‘2007 Program
Access NPRM’’). We hereby incorporate by
reference the comments filed in response to this
proposal.
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24317
foreclosure of access to vertically
integrated programming.’’ Moreover, as
noted above, the market share held by
cable operators in DMAs varies
considerably, from a high in the 80
percent range to a low in the 20 percent
range. As the Commission has explained
previously, 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.’’ Moreover, in the
2007 Extension Order, the Commission
provided an empirical analysis
demonstrating that the profitability of
withholding increases as the number of
television households passed by a
vertically integrated cable operator
increases in a given market area, such as
through clustering. Accordingly, a
cable-affiliated programmer will have an
increased incentive to enter into
exclusive contracts with cable operators
in those areas where the market share of
competitive MVPDs is comparatively
low or where its affiliated cable operator
passes a large percentage of television
households or where both
circumstances are present. If there was
not a blanket prohibition on exclusive
contracts involving satellite-delivered,
cable-affiliated programming, would
incumbent cable operators and cableaffiliated programmers enter into
exclusive contracts in these markets? If
so, does the wide variation in cable
market share and television households
passed by a vertically integrated cable
operator on a regional and local basis
call for a more granular assessment of
the continued need for an exclusive
contract prohibition in individual
markets, rather than a broad rule that
applies to all markets equally? Would
such a market-by-market assessment
necessarily be based on a Commission
finding that satellite-delivered, cableaffiliated programming remains
necessary for competition in the video
distribution market? That is, absent
such a finding, would a market-bymarket assessment approach mean that
the exclusive contract prohibition
would sunset only in areas where
satellite-delivered, cable-affiliated
programmers lack an incentive to enter
into exclusive contracts, regardless of
the importance of the programming at
issue for competition? Is there any basis
for interpreting the sunset provision in
Section 628(c)(5) in this manner, which
might permit exclusive contracts only
when there is little possibility such
contracts will exist?
70. To the extent we establish a
process whereby a cable operator or
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satellite-delivered, cable-affiliated
programmer can petition to remove the
exclusive contract prohibition on a
market-by-market basis, we seek
comment on the details of this process.
First, in assessing whether to sunset the
exclusive contract prohibition in an
individual market, we propose to apply
the same test set forth in Section
628(c)(5)—i.e., whether the prohibition
‘‘continues to be necessary to preserve
and protect competition and diversity in
the distribution of video programming.’’
Who should bear the burdens of
production and persuasion in
demonstrating that the exclusive
contract prohibition either does or does
not meet this test in an individual
market? While a petitioner (in this case,
the cable operator or satellite-delivered,
cable-affiliated programmer) might
normally bear these burdens, Congress
established that the exclusive contract
prohibition would sunset unless it
continues to be necessary pursuant to
this test. The Commission has explained
that Section 628(c)(5) thus ‘‘creates a
presumption that the rule will sunset’’
unless it continues to be necessary. Does
this call for a regime where, in response
to a petition seeking to remove the
prohibition in an individual market, the
burden of production shifts to
competitive MVPDs and other interested
parties to put forth evidence
demonstrating that the prohibition
continues to be necessary? To provide
guidance to impacted parties, should we
establish a specific benchmark which, if
met, would establish a rebuttable
presumption that the market is not
sufficiently competitive to allow the
exclusive contract prohibition to sunset?
For example, should the market be
rebuttably presumed to not be
sufficiently competitive to allow the
exclusive contract prohibition to sunset
if the market share held by competitive
MVPDs is below a certain threshold or
television households passed by a
vertically integrated cable operator is
above a certain threshold? We ask
commenters to provide support for any
proposed threshold. Should we instead
apply the test set forth in Section
628(c)(5) on an entirely case-by-case
basis, considering all of the facts and
circumstances presented, without
establishing a specific benchmark?
Second, how should we define the
‘‘market’’ for purposes of these
petitions? Should we establish a specific
market size for purpose of the petitions
(such as DMA, county, or franchise area)
or should we allow petitioners to seek
a sunset of the exclusive contract
prohibition for any size market they
choose? Third, we seek comment on
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procedural deadlines. Given the likely
fact-intensive nature of these petitions,
we propose to establish a pleading cycle
that is identical to the one established
for complaints involving terrestrially
delivered, cable-affiliated programming.
Specifically, we propose to establish a
45-day opposition period and a 15-day
reply period. Fourth, to the extent that
the exclusive contract prohibition has
not been removed in an individual
market, we propose to retain our
existing rules and procedures whereby a
cable operator or a satellite-delivered,
cable-affiliated programmer can seek
prior Commission approval to enter into
an exclusive contract by demonstrating
that the arrangement satisfies the factors
set forth in Section 628(c)(4) of the Act
and Section 76.1002(c)(4) of the
Commission’s rules. Fifth, we seek
comment on whether to adopt a sunset
date for the exclusive contract
prohibition, thereby eliminating the
need for further market-based petitions,
subject to a review by the Commission
in the year prior to the sunset date.
Should the sunset date be five years
from the current sunset date (i.e., until
October 5, 2017), consistent with the
two prior five-year extensions?
71. We also seek comment on the
practical effect of sunsetting the
exclusive contract prohibition on a
market-by-market basis. For example, to
the extent that certain competitive
MVPDs, such as DBS providers, market
their service on a nationwide basis, how
will the sunset of the exclusive contract
prohibition in individual markets
impact their marketing efforts? For
example, if a certain satellite-delivered,
cable-affiliated programming network is
available to DBS customers in some
markets, but not in others due to
exclusive contracts with cable operators,
how burdensome will it be for DBS
providers to inform subscribers and
potential customers of the limited
availability of this programming and to
implement the selective availability of
the programming? In addition to this
potential concern, we seek comment on
the other costs and benefits of moving
from a broad, prophylactic prohibition
on exclusive contracts involving
satellite-delivered, cable-affiliated
programming throughout the nation to
reliance instead on a market-by-market
assessment.
(ii) Retaining an Exclusive Contract
Prohibition for Satellite-Delivered,
Cable-Affiliated RSNs and Other
Satellite-Delivered, Cable-Affiliated
‘‘Must Have’’ Programming
72. We seek comment on whether we
should retain an exclusive contract
prohibition for satellite-delivered, cable-
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affiliated RSNs and other satellitedelivered, cable-affiliated ‘‘must have’’
programming. The Commission has
previously explained that RSNs have no
good substitutes, are important for
competition, and are non-replicable.
Moreover, in his dissenting opinion to
the D.C. Circuit decision affirming the
2007 Extension Order, Judge Kavanaugh
articulated the following explanation for
why a ban on exclusive contracts for
RSNs may be appropriate:
I would leave open the possibility that the
Government might still impose a prospective
ban on some exclusive agreements between
video programming distributors and affiliated
regional video programming networks,
particularly regional sports networks. That is
because the upstream market in which video
programming distributors contract with
regional networks is less competitive than
the national market * * *. [M]arket share
and other relevant factors in certain areas
may dictate tolerance of a narrow exclusivity
ban. Situations where a highly desirable
‘‘must have’’ regional sports network is
controlled by one video programming
distributor might justify a targeted restraint
on such regional exclusivity arrangements. I
need not definitively address such a
possibility in this case.
73. We note, however, that the
Commission in the 2010 Program
Access Order declined to adopt a flat
ban on exclusive contracts involving
terrestrially delivered, cable-affiliated
RSNs pursuant to Section 628(b) of the
Act. Noting empirical evidence that
withholding of an RSN in one case did
not have an impact on competition, the
Commission declined to adopt a general
conclusion regarding RSNs, adopting
instead a case-by-case approach, albeit
with a rebuttable presumption that an
‘‘unfair act’’ involving a terrestrially
delivered, cable-affiliated RSN has the
purpose or effect set forth in Section
628(b). The Commission explained that
‘‘case-by-case consideration of the
impact on competition in the video
distribution market is necessary to
address whether unfair practices
significantly hinder competition in
particular cases.’’
74. Are there legal and/or policy
reasons why the Commission may want
to establish a case-by-case approach for
assessing exclusive contracts involving
terrestrially delivered, cable-affiliated
RSNs, but to retain an across-the-board
prohibition on exclusive contracts
involving satellite-delivered, cableaffiliated RSNs? We note that, in
adopting a case-by-case approach for
terrestrially delivered, cable-affiliated
RSNs, the Commission was applying
and interpreting Section 628(b) of the
Act, which prohibits ‘‘unfair acts’’ that
have the ‘‘purpose or effect’’ to
‘‘significantly hinder or prevent’’ an
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MVPD from providing satellite cable
programming or satellite broadcast
programming to subscribers or
consumers. In considering a sunset of
the exclusive contract prohibition,
however, we are applying and
interpreting Section 628(c)(5) of the Act,
which requires the Commission to
determine whether the exclusive
contract prohibition ‘‘continues to be
necessary to preserve and protect
competition and diversity in the
distribution of video programming.’’
Unlike Section 628(b), the language in
Section 628(c)(5) does not require the
Commission to assess whether
particular exclusive contracts are
‘‘unfair’’ or whether they have the
‘‘purpose or effect’’ to ‘‘significantly
hinder or prevent’’ an MVPD from
providing satellite cable programming
or satellite broadcast programming to
subscribers or consumers. We note that
two vertically integrated cable
operators, Comcast and Cablevision,
previously stated before the D.C. Circuit
that a partial sunset of the exclusive
contract prohibition is a legally
permissible approach, explaining that
‘‘Section 628(c)(5) grants the FCC
additional sunsetting authority, and
nothing in the statute suggests that the
FCC must do so on an all-or-nothing
basis.’’ Does this difference in statutory
language provide a basis for treating
satellite-delivered, cable-affiliated RSNs
differently from terrestrially delivered,
cable-affiliated RSNs? In addition, are
there policy reasons why the
Commission may want to retain the
exclusivity ban as it applies to satellitedelivered, cable-affiliated RSNs? If so,
we propose to define the term ‘‘RSN’’ in
the same way the Commission defined
that term in the 2010 Program Access
Order.
75. To the extent we retain an
exclusive contract prohibition for
satellite-delivered, cable-affiliated
RSNs, we propose to retain our existing
rules and procedures whereby a cable
operator or a satellite-delivered, cableaffiliated programmer can file a Petition
for Exclusivity seeking prior
Commission approval to enter into an
exclusive contract by demonstrating that
the arrangement satisfies the factors set
forth in Section 628(c)(4) of the Act and
Section 76.1002(c)(4) of the
Commission’s rules. We seek comment
on whether this process is sufficient for
addressing those instances where an
exclusive contract pertaining to a
satellite-delivered, cable-affiliated RSN
might serve the public interest. We note
that, if we were to retain an exclusive
contract prohibition for only satellitedelivered, cable-affiliated RSNs, our
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rules would apply burdens to different
parties depending on whether or not the
programming subject to an exclusive
contract is an RSN: (i) In the case of
satellite-delivered, cable-affiliated
RSNs, exclusive contracts with cable
operators would be generally
prohibited, unless a cable operator or
RSN can satisfy its burden of
demonstrating that an exclusive contract
serves the public interest based on the
factors set forth in Section 628(c)(4) of
the Act and Section 76.1002(c)(4) of the
Commission’s rules; and (ii) in the case
of all other satellite-delivered, cableaffiliated programming, exclusive
contracts with cable operators would be
generally permitted, unless an MVPD
can satisfy its burden of demonstrating
that the exclusive contract violates
Section 628(b) of the Act and Section
76.1001(a) of the Commission’s rules
(or, potentially, Section 628(c)(2)(B) of
the Act and Section 76.1002(b) of the
Commission’s rules). Given the
Commission precedent and relevant
historical evidence pertaining to the
importance of RSNs for competition, as
well as their non-substitutability and
non-replicability, we believe there is a
sufficient basis for drawing this
distinction between RSN and non-RSN
programming. We seek comment on this
view.
76. Are there any other categories of
satellite-delivered, cable-affiliated
programming besides RSNs that can be
deemed ‘‘must have’’ and for which we
should retain the exclusivity
prohibition? We note that the
Commission in the Comcast-NBCU
Order concluded that ‘‘certain national
cable programming networks produce
programming that is more widely
viewed and commands higher
advertising revenue than certain
broadcast or RSN programming.’’ Are
there other types of satellite-delivered,
cable-affiliated programming besides
RSNs that have no good substitutes, are
important for competition, and are nonreplicable, as the Commission has found
with respect to RSNs? To the extent that
commenters contend that there are, we
ask that they provide reliable, empirical
data supporting their positions, rather
than merely labeling such programming
as ‘‘must have.’’ In addition, we request
commenters to provide a rational and
workable definition of such
programming that can be applied
objectively. We note that in the 2007
Extension Order the Commission
declined to differentiate between
categories of programming for purposes
of the exclusive contract prohibition for
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24319
a number of legal and policy reasons.20
We seek comment on whether any of the
concerns the Commission expressed in
the 2007 Extension Order should
prevent us from retaining an exclusive
contract prohibition for satellitedelivered, cable-affiliated RSNs, or
potentially other satellite-delivered,
cable-affiliated ‘‘must have’’
programming, given the state of the
market today.
77. With respect to First Amendment
concerns, we note that the Commission
in the 2010 Program Access Order
applied a rebuttable presumption of
significant hindrance to one category of
programming—terrestrially delivered,
cable-affiliated RSNs. The D.C. Circuit
rejected claims that this was a contentbased restriction on speech subject to
strict scrutiny, explaining that:
[T]here is absolutely no evidence, nor even
any serious suggestion, that the Commission
issued its regulations to disfavor certain
messages or ideas. The clear and undisputed
evidence shows that the Commission
established presumptions for RSN
programming due to that programming’s
economic characteristics, not to its
communicative impact. Thus contentneutral, the presumptions are subject only to
intermediate scrutiny.
In applying intermediate scrutiny, the
D.C. Circuit ruled that, ‘‘[g]iven record
evidence demonstrating the significant
impact of RSN programming
withholding, the Commission’s
presumptions represent a narrowly
tailored effort to further the important
governmental interest of increasing
competition in video programming.’’
Based on the D.C. Circuit’s decision, we
do not believe that retaining an
exclusive contract prohibition for
satellite-delivered, cable-affiliated RSNs
20 These reasons were as follows: (i) Congress did
not distinguish between different types of satellitedelivered, cable-affiliated programming in adopting
the exclusive contract prohibition in Section
628(c)(2)(D) (see 2007 Extension Order, 22 FCC Rcd
at 17839–40, para. 69; see also 2002 Extension
Order, 17 FCC Rcd at 12156, para. 69); (ii) requests
to relieve satellite-delivered, cable-affiliated
programming networks from the exclusive contract
prohibition can be addressed through individual
exclusivity petitions satisfying the factors set forth
in Section 628(c)(4) (see 2007 Extension Order, 22
FCC Rcd at 17839–40, para. 69); (iii) no commenter
provided a rational and workable definition of
‘‘must have’’ programming that would allow the
Commission to apply the exclusive contract
prohibition to only this type of programming (see
id.); (iv) the difficulty of developing an objective
process of general applicability to determine what
programming may or may not be essential to
preserve and protect competition (see id.; see also
2002 Extension Order, 17 FCC Rcd at 12156, para.
69); and (v) distinguishing between different types
of satellite-delivered, cable-affiliated programming
might raise First Amendment concerns (see 2007
Extension Order, 22 FCC Rcd at 17839–40, para. 69;
see also 2002 Extension Order, 17 FCC Rcd at
12156, para. 69).
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and other satellite-delivered, cableaffiliated ‘‘must have’’ programming
would run afoul of the First
Amendment. We seek comment on this
view.
78. To the extent we retain an
exclusive contract prohibition for
satellite-delivered, cable-affiliated RSNs
and other satellite-delivered, cableaffiliated ‘‘must have’’ programming, we
propose to apply the prohibition
independently to the SD and HD
versions of the same network. As
discussed above, the Commission has
concluded that HD programming is
growing in significance to consumers
and that consumers do not consider the
SD version of a particular channel to be
an adequate substitute for the HD
version due to the different technical
characteristics and sometimes different
content. Accordingly, the Commission
has determined that it will analyze the
HD version of a network separately from
the SD version with similar content for
purposes of determining whether an
‘‘unfair act’’ has the purpose or effect set
forth in Section 628(b). Because this
same finding would appear to apply to
an exclusive contract prohibition, we
propose that, if a satellite-delivered,
cable-affiliated programmer makes the
SD version of an RSN or other ‘‘must
have’’ programming available to
MVPDs, this would not exempt the
satellite-delivered, HD version of the
RSN or other ‘‘must have’’ programming
from the exclusive contract prohibition.
We seek comment on this view.
79. To the extent we retain an
exclusive contract prohibition pursuant
to Section 628(c)(5) only for satellitedelivered, cable-affiliated RSNs and
other satellite-delivered, cable-affiliated
‘‘must have’’ programming, should we
adopt a date when this prohibition will
sunset, subject to a review by the
Commission in the year prior to the
sunset date? Should the sunset date be
five years from the current sunset date
(i.e., until October 5, 2017), consistent
with the two prior five-year extensions?
80. Should we combine the two
approaches to partial sunsetting of the
exclusive contract prohibition, by
adopting a market-by-market approach
and also retaining the prohibition for
satellite-delivered, cable-affiliated RSNs
and other satellite-delivered, cableaffiliated ‘‘must have’’ programming? If
so, how should the two approaches
interrelate? If the exclusive contract
prohibition sunsets in a specific market,
should this sunset also apply to
satellite-delivered, cable-affiliated RSNs
and other satellite-delivered, cableaffiliated ‘‘must have’’ programming?
Or, given the critical nature of RSNs and
other ‘‘must have’’ programming for
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competition, should the exclusive
contract prohibition for satellitedelivered, cable-affiliated RSNs and
other satellite-delivered, cable-affiliated
‘‘must have’’ programming continue to
apply even if the exclusive contract
prohibition sunsets for other satellitedelivered, cable-affiliated programming
in the market? Should the Commission
instead assess whether the exclusive
contract prohibition should continue to
apply to satellite-delivered, cableaffiliated RSNs and other satellitedelivered, cable-affiliated ‘‘must have’’
programming on a market-by-market
basis, considering all of the facts and
circumstances presented in the petition?
5. Implementation of a Sunset in a
Manner That Minimizes Any Potential
Disruption for Consumers
81. Whether we retain, sunset, or
relax the exclusive contract prohibition,
our goal is protect consumers and
minimize any potential disruption. As
an initial matter, as noted above, many
Comcast-affiliated networks are subject
to program access conditions adopted in
the Comcast/NBCU Order and will
continue to be subject to these
conditions for six more years (until
January 2018, assuming they are not
modified earlier in response to a
petition). These networks will not be
impacted by a sunset (complete or
partial). With respect to other satellitedelivered, cable-affiliated networks, we
seek comment below on how sunsetting
the exclusive contract prohibition
(wholly or partially) will impact
consumers, and whether a phased
implementation of a sunset is necessary
to minimize any potential disruption to
consumers. As discussed above, to the
extent the data do not support retaining
the exclusive contract prohibition as it
exists today, we seek comment above on
sunsetting or relaxing the prohibition.
To the extent the prohibition sunsets
(wholly or partially), we envision that
there are at least two possible scenarios
with respect to existing affiliation
agreements. We seek comment on which
scenario is more likely and if there are
any other likely scenarios. First, if the
exclusive contract prohibition were to
sunset, an existing affiliation agreement
between a cable-affiliated programmer
and an MVPD pertaining to a satellitedelivered, cable-affiliated programming
network might allow the programmer to
terminate or modify the existing
agreement immediately on the effective
date of the sunset and to instead enter
into an exclusive contract with a cable
operator. Second, even if the exclusive
contract prohibition were to sunset, an
existing affiliation agreement might
require the satellite-delivered, cable-
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affiliated programmer to continue to
provide the programming to the MVPD
for the duration of the term of the
affiliation agreement despite the sunset.
We seek comment on these alternative
scenarios below.
a. Termination or Modification of
Affiliation Agreements on the Effective
Date of the Sunset
82. To the extent that existing
affiliation agreements permit satellitedelivered, cable-affiliated programmers
to terminate or modify the agreements
immediately on the effective date of the
sunset and to instead enter into an
exclusive contract with a cable operator,
is there any basis to expect that many
satellite-delivered, cable-affiliated
programmers would terminate or
modify existing agreements
simultaneously and thereby cause
significant disruption to consumers by
depriving them of programming they
have come to expect? Are our existing
rules sufficient to prevent any customer
disruption? For example, to the extent
that a cable-affiliated programmer
terminates or modifies an existing
affiliation agreement with an MVPD
pertaining to a satellite-delivered, cableaffiliated programming network and
instead enters into an exclusive
arrangement with a cable operator, the
MVPD could file a complaint alleging a
violation of Section 628(b) of the Act
(and, potentially, Section 628(c)(2)(B) of
the Act). While our program access rules
contain specific procedures for the filing
of a petition for a standstill along with
a program access complaint when
seeking to renew an existing affiliation
agreement, should our standstill
procedures also apply when an MVPD
files a program access complaint based
on a satellite-delivered, cable-affiliated
programmer’s mid-term termination or
modification of an affiliation agreement
resulting from the sunset? If the
standstill petition is granted, the price,
terms, and other conditions of the
existing affiliation agreement will
remain in place pending resolution of
the program access complaint, thereby
reducing consumer disruption.
83. Rather than relying on the
complaint and standstill process, should
we instead abrogate provisions of
affiliation agreements that would allow
satellite-delivered, cable-affiliated
programmers to terminate or modify
their existing agreements with MVPDs
immediately on the effective date of the
sunset? We seek comment regarding the
benefits and burdens of abrogating
contractual provisions that otherwise
would permit a programmer to
terminate or modify its existing
agreement with an unaffiliated MVPD
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immediately upon sunset of the
exclusive contract prohibition. We seek
comment regarding how the abrogation
of such contractual provisions would be
congruous with a possible finding to
sunset the exclusive contract
prohibition. In NCTA v. FCC, the D.C.
Circuit upheld the Commission’s
abrogation of existing contracts in the
program access context. Alternatively,
to minimize any potential disruption to
consumers, should we adopt a phased
implementation of the sunset? For
example, should we provide that, for a
period of three years from the sunset
date, a cable-affiliated programmer
cannot enter into an exclusive contract
with a cable operator for a satellitedelivered, cable-affiliated programming
network that is an RSN (assuming the
prohibition is not retained for RSNs) or
is ranked within the Top 20 cable
networks as measured by either prime
time ratings, average all-day ratings, or
total number of subscribers? Should we
adopt a similar restriction, for a period
of two years from the sunset date, for a
satellite-delivered, cable-affiliated
programming network that is ranked
within the Top 21–50 cable networks?
We seek comment on these proposals
and any other appropriate ways to
minimize any disruption to consumers
resulting from the sunset in the event
that existing affiliation agreements
permit satellite-delivered, cableaffiliated programmers to terminate or
modify them on the effective date of the
sunset.
b. Continued Enforcement of Existing
Affiliation Agreements Despite the
Sunset
84. To the extent that existing
affiliation agreements require cableaffiliated programmers to continue to
provide satellite-delivered, cableaffiliated programming networks to
MVPDs for the duration of the term of
the existing agreement despite the
sunset of the exclusive contract
prohibition, we seek comment on the
interplay between the sunset and the
discrimination provision of the program
access rules. For example, assume that
a cable-affiliated programmer has
existing affiliation agreements for a
satellite-delivered, cable-affiliated
programming network with three
MVPDs (including one cable operator)
subject to the following termination
dates: December 31, 2012 (cable
operator); December 31, 2013 (MVPD
A); December 31, 2014 (MVPD B). If the
satellite-delivered, cable-affiliated
programmer enters into an exclusive
contract with the cable operator after its
current agreement expires on December
31, 2012, would the satellite-delivered,
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cable-affiliated programmer be required
to make the programming available to
all MVPDs until after the expiration of
the latest-expiring affiliation agreement
with an MVPD other than the cable
operator that is a party to the exclusive
contract? We seek comment on whether
it would be impermissibly
discriminatory in violation of Section
628(c)(2)(B) if the satellite-delivered,
cable-affiliated programmer were to
refuse to license the network to MVPD
A after December 31, 2013, while
continuing to provide the programming
to MVPD B until its agreement expires
on December 31, 2014, based on the
future enforcement of an exclusive
contract with the cable operator as of
January 1, 2015, after the expiration of
the agreement with MVPD B. While the
satellite-delivered, cable-affiliated
programmer’s discriminatory treatment
of MVPD A relative to MVPD B and the
cable operator during the period of
December 31, 2013 to December 31,
2014 might be justified based on a
legitimate business reason, is the future
enforcement of an exclusive contract a
legitimate business reason for such
discriminatory conduct? If not, then the
satellite-delivered, cable-affiliated
programmer would not be permitted to
have the exclusivity period with the
cable operator begin, or to refuse to
license the programming to other
MVPDs, until all affiliation agreements
with other MVPDs expire. Thus, in this
scenario, absent a legitimate business
reason, the satellite-delivered, cableaffiliated programmer would be
required to enter into an affiliation
agreement with MVPD A that terminates
no earlier than December 31, 2014 (i.e.,
the expiration of the latest-expiring
affiliation agreement with an MVPD
other than the cable operator that is a
party to the exclusive contract). We seek
comment on this view.
85. To the extent that affiliation
agreements require cable-affiliated
programmers to continue to provide
satellite-delivered, cable-affiliated
programming networks to MVPDs for
the duration of the term of the existing
agreement despite the sunset, does the
anti-discrimination provision of Section
628(c)(2)(B) as described here prevent
the enforcement of any exclusive
contract until the expiration of the
latest-expiring affiliation agreement
with an MVPD other than the cable
operator that is a party to the exclusive
contract? Will this limit the immediate
impact of the sunset (complete or
partial) and help to minimize any
potential disruption to consumers?
What impact, if any, does Section
628(c)(2)(B)(iv) have on this discussion?
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Even if this section could be read to
immunize post-sunset exclusive
contracts from being challenged as
impermissibly discriminatory in
violation of Section 628(c)(2)(B), would
this provision allow a satellitedelivered, cable-affiliated programmer
to selectively refuse to license
programming to certain MVPDs based
on future enforcement of an exclusive
contract, as described here?
6. First Amendment
86. We ask commenters to consider
carefully how the First Amendment
impacts our review of the exclusive
contract prohibition, including the
proposals to relax the prohibition. As
the D.C. Circuit explained in rejecting a
facial challenge to the constitutionality
of the program access provisions, these
provisions will survive intermediate
scrutiny if they ‘‘further[] 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.’’ Given the current state of
competition in the video programming
market and the video distribution
market, does the First Amendment
require the exclusive contract
prohibition as it exists today to sunset
or to be relaxed? Is a prohibition on all
exclusive contracts in all markets
between cable operators and cableaffiliated programmers pertaining to
satellite-delivered, cable-affiliated
programming ‘‘no greater than is
essential’’ to the furtherance of the
substantial government interest in
promoting competition in the MVPD
market? Would retaining the prohibition
only for satellite-delivered, cableaffiliated RSNs and other satellitedelivered, cable-affiliated ‘‘must have’’
programming, and/or allowing the
prohibition to sunset on a market-bymarket basis, be a sufficiently tailored
approach?
87. We note that, in rejecting a facial
First Amendment challenge to the 2010
Program Access Order in which the
Commission adopted a case-by-case
approach for considering unfair acts
involving terrestrially delivered, cableaffiliated programming, the D.C. Circuit
explained that, ‘‘[b]y imposing liability
only when complainants demonstrate
that a company’s unfair act has ‘the
purpose or effect’ of ‘hinder[ing]
significantly or * * * prevent[ing]’ the
provision of satellite programming,
* * * the Commission’s terrestrial
programming rules specifically target
activities where the governmental
interest is greatest.’’ Moreover, the D.C.
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Circuit stated that the Commission, in
adopting this case-by-case approach,
‘‘has no obligation to establish that
vertically integrated cable companies
retain a stranglehold on competition
nationally or that all withholding of
terrestrially delivered programming
negatively affects competition.’’ Is a
case-by-case approach pursuant to
Section 628(b) (and, potentially, Section
628(c)(2)(B)) or a narrowed application
of the exclusive contract prohibition as
discussed above, rather than the current
broad, prophylactic prohibition,
preferable under the First Amendment
given the competitive environment
today? We also seek comment on the
First Amendment implications of a
phased implementation of a sunset as
discussed above to minimize any
potential disruption to consumers.
7. Costs and Benefits
88. In addition to the specific
questions noted above, we ask
commenters to consider generally the
costs and benefits associated with either
retaining, sunsetting, or relaxing the
exclusive contract prohibition as
described herein. We believe that
retaining the exclusive contract
prohibition in its entirety as it exists
today will result in certain costs, such
as unnecessarily restricting
procompetitive arrangements that in
certain instances may foster competition
in the video distribution market and
promote competition and diversity in
the video programming market. While a
case-by-case approach, either pursuant
to a Section 628(b) complaint (and,
potentially, a Section 628(c)(2)(B)
complaint) or a market-based petition,
will better enable the Commission to
consider the unique facts and
circumstances presented in each case,
this approach will also result in certain
costs by requiring the affected parties
and the Commission to expend
resources litigating and resolving the
complaints and petitions. Retaining an
exclusive contract prohibition for
programming that is demonstrated to be
important for competition, nonreplicable, and without good substitutes
(i.e., satellite-delivered, cable-affiliated
RSNs and other satellite-delivered,
cable-affiliated ‘‘must have’’
programming), may help to reduce these
costs by eliminating the need to file
complaints with respect to this class of
programming. To the extent possible,
we encourage commenters to quantify
the costs and benefits of the different
approaches to the exclusive contract
prohibition as described herein. Which
of the approaches would be most
beneficial to the public? When would
the public realize these benefits? Which
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of these approaches would be least
burdensome?
8. Subdistribution Agreements
89. We seek comment on the impact
of a sunset (complete or partial) of the
exclusive contract prohibition on the
Commission’s rules pertaining to
exclusive subdistribution agreements.
The Commission’s rules define a
subdistribution agreement as ‘‘an
arrangement by which a local cable
operator is given the right by a satellite
cable programming vendor or satellite
broadcast programming vendor to
distribute the vendor’s programming to
competing multichannel video
programming distributors.’’ Based on
the exclusive contract prohibition, the
Commission in the 1993 Program
Access Order adopted certain
restrictions on exclusive subdistribution
agreements to ‘‘address any incentives
for a subdistributor to refuse to sell to
a competing MVPD that may be inherent
in such rights’’ and to ensure
‘‘appropriate safeguards to limit the
potential for anticompetitive behavior.’’
Specifically, a cable operator engaged in
subdistribution (i) may not require a
competing MVPD to purchase
additional or unrelated programming as
a condition of such subdistribution; (ii)
may not require a competing MVPD to
provide access to private property in
exchange for access to programming;
(iii) may not charge a competing MVPD
more for programming than the satellite
cable programming vendor or satellite
broadcast programming vendor itself
would be permitted to charge; and (iv)
must respond to a request for access to
such programming by a competing
MVPD within fifteen (15) days of the
request and, if the request is denied, the
competing MVPD must be permitted to
negotiate directly with the satellite cable
programming vendor or satellite
broadcast programming vendor. We
propose to eliminate these restrictions
to the extent the exclusive contract
prohibition sunsets and seek comment
on this proposal.
9. Common Carriers and Open Video
Systems
90. The Commission’s rules contain
provisions pertaining to exclusive
contracts involving common carriers
and OVS in served areas that mirror the
rules applicable to exclusive contracts
between cable operators and satellitedelivered, cable-affiliated programmers
in served areas. With respect to common
carriers, these rules pertain to exclusive
contracts between a satellite-delivered,
common-carrier-affiliated programmer
and a common carrier or its affiliate that
provides video programming by any
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means directly to subscribers. With
respect to OVS, these rules pertain to
exclusive contracts (i) between a
satellite-delivered, OVS-affiliated
programmer and an OVS or its affiliate
that provides video programming on its
OVS; and (ii) between a satellitedelivered, cable-affiliated programmer
and an OVS video programming
provider in which a cable operator has
an attributable interest. We propose that
any amendments we adopt herein to our
rules pertaining to exclusive contracts
between cable operators and satellitedelivered, cable-affiliated programmers
in served areas will apply equally to
these rules pertaining to common
carriers and OVS. We also propose to
conform the rules pertaining to
exclusive subdistribution agreements
involving OVS to the rules applicable to
cable operators and seek comment on
this proposal.
10. Impact of a Sunset on Existing
Merger Conditions
91. We believe that conditions
adopted in two previous merger orders
may be impacted if the exclusive
contract prohibition were to sunset
(wholly or partially). We seek comment
on this impact below.
a. Adelphia Order Merger Conditions
92. Pursuant to merger conditions
adopted in the Adelphia Order, certain
terrestrially delivered RSNs (‘‘Covered
RSNs’’) affiliated with TWC are
currently required to comply with the
program access rules applicable to
satellite-delivered, cable-affiliated
programming, including the exclusive
contract prohibition.21 Among other
21 See Applications for Consent to the Assignment
and/or Transfer of Control of Licenses, Adelphia
Communications Corporation, Assignors to Time
Warner Cable, Inc., Assignees, et al., Memorandum
Opinion and Order, 21 FCC Rcd 8203, 8274, paras.
156–157 (2006) (‘‘Adelphia Order’’) (requiring
terrestrially delivered RSNs in which Time Warner
has or acquires an attributable interest to comply
with the program access rules applicable to
satellite-delivered, cable-affiliated programming,
citing 47 CFR 76.1002), 8276, para. 162, and 8336,
Appendix B, sec. B.1 (citing 47 CFR 76.1002); see
also Time Warner Order, 24 FCC Rcd at 893, para.
26 (approving transaction separating Time Warner
from TWC and explaining that the Adelphia Order
program access conditions will continue to apply to
TWC post-restructuring but will no longer apply to
Time Warner). An RSN as defined in the Adelphia
Order is ‘‘any non-broadcast video programming
service that (1) provides live or same-day
distribution within a limited geographic region of
sporting events of a sports team that is a member
of Major League Baseball, the National Basketball
Association, the National Football League, the
National Hockey League, NASCAR, NCAA Division
I Football, NCAA Division I Basketball and (2) in
any year, carries a minimum of either 100 hours of
programming that meets the criteria of subheading
1, or 10% of the regular season games of at least
one sports team that meets the criteria of
subheading 1.’’ Adelphia Order, 21 FCC Rcd at
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things, the conditions state as follows
with respect to exclusivity (the
‘‘exclusivity conditions’’):
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(i) ‘‘Time Warner [Cable], and [its] existing
or future Covered RSNs, regardless of the
means of delivery, shall not offer any such
RSN on an exclusive basis to any MVPD, and
* * * Time Warner [Cable], and [its] Covered
RSNs, regardless of the means of delivery, are
required to make such RSNs available to all
MVPDs on a non-exclusive basis * * *’’;
(ii) ‘‘Time Warner [Cable] will not enter
into an exclusive distribution arrangement
with any such Covered RSN, regardless of the
means of delivery’’; and
(iii) ‘‘Th[is] exclusive contracts and
practices * * * requirement of the program
access rules will apply to Time Warner
[Cable] and [its] Covered RSNs for six years,
provided that if the program access rules are
modified this condition shall be modified to
conform to any revised rules adopted by the
Commission.’’
93. These conditions are scheduled to
expire in July 2012. Depending on
whether and how we revise the
exclusive contract prohibition, and if we
do so before these conditions expire, we
may need to modify these exclusivity
conditions to conform to our revised
rules. We envision four alternative
scenarios. First, to the extent that we
retain the exclusive contract prohibition
in its entirety as it exists today,
including for RSNs, there will be no
need to modify the exclusivity
conditions because the program access
rules will remain the same. Second, to
the extent that we retain an exclusive
contract prohibition for satellitedelivered, cable-affiliated RSNs and
other satellite-delivered, cable-affiliated
‘‘must have’’ programming only, there
will be no need to modify the
exclusivity conditions because the
exclusive contract prohibition will
remain the same with respect to RSNs.
Third, to the extent we establish a
process whereby a cable operator or
satellite-delivered, cable-affiliated
programmer can seek to remove the
exclusive contract prohibition on a
market-by-market basis, and grant of
such a petition includes RSNs, then we
would expect to modify the exclusivity
conditions to provide that Covered
RSNs in markets covered by such a
petition (if granted) will no longer be
subject to these exclusivity conditions.
If the grant of such a petition does not
include RSNs, however, there will be no
need to modify the exclusivity
conditions because the exclusive
contract prohibition will remain the
same with respect to RSNs. Fourth, to
8336, Appendix B, sec. A. While these conditions
originally applied to Comcast as well, they were
superseded by the Comcast/NBCU Order. See
Comcast/NBCU Order, 26 FCC Rcd at 4364,
Appendix A, Condition VI.
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the extent we sunset the exclusive
contract prohibition in its entirety,
including for RSNs, then we would
expect to modify the exclusivity
conditions to provide that Covered
RSNs will no longer be subject to these
exclusivity conditions; rather, exclusive
contracts for Covered RSNs may be
assessed on a case-by-case basis in
response to a program access complaint
alleging a violation of Section 628(b)
(and, potentially, Section 628(c)(2)(B)).
We seek comment on this interpretation.
b. Liberty Media Order Merger
Conditions
94. Pursuant to merger conditions
adopted in the Liberty Media Order,22
certain programmers affiliated with
Liberty Media and DIRECTV are subject
to the following conditions (the
‘‘exclusivity conditions’’), among others:
(i) ‘‘Liberty Media shall not offer any of its
existing or future national and regional
programming services on an exclusive basis
to any MVPD. Liberty Media shall continue
to make such services available to all MVPDs
on a non-exclusive basis * * *’’;
(ii) ‘‘DIRECTV will not enter into an
exclusive distribution arrangement with any
Affiliated Program Rights Holder.’’;
(iii) ‘‘As long as Liberty Media holds an
attributable interest in DIRECTV, DIRECTV
will deal with any Affiliated Program Rights
Holder with respect to programming services
the Affiliated Program Rights Holder controls
as a vertically integrated programmer subject
to the program access rules.’’;
(iv) ‘‘These conditions will apply to Liberty
Media, DIRECTV, and any Affiliated Program
Rights Holder until the later of a
determination by the Commission that
Liberty Media no longer holds an attributable
interest in DIRECTV or the Commission’s
program access rules no longer remain in
effect (provided that if the program access
rules are modified these commitments shall
be modified, as the Commission deems
appropriate, to conform to any revised rules
adopted by the Commission).’’
95. These particular Liberty Media
Order conditions differ from similar
conditions in the Adelphia Order in that
(i) they apply not only to RSNs, but to
both national and regional programming
22 Applications for Consent to the Assignment
and/or Transfer of Control of Licenses, News
Corporation. and The DIRECTV Group, Inc.,
Transferors, to Liberty Media Corporation.,
Transferee, Memorandum Opinion and Order, 23
FCC Rcd 3265 (2008) (‘‘Liberty Media Order’’). The
conditions state that the term ‘‘Liberty Media’’
includes ‘‘any entity or program rights holder in
which Liberty Media or John Malone holds an
attributable interest. Thus, the term ‘Liberty Media’
includes Discovery Communications.’’ Id. at 3340–
41 n.3. Moreover, the conditions provide that
‘‘Liberty Media and DIRECTV are prohibited from
acquiring an attributable interest in any nonbroadcast national or regional programming service
while these conditions are in effect if the
programming service is not obligated to abide by
such conditions.’’ Id.
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services; and (ii) they do not expire after
the passage of a certain period of time.
Depending on whether and how we
revise the exclusive contract prohibition
of the program access rules, we may
need to modify these exclusivity
conditions to conform to our revised
rules. First, to the extent that we retain
the exclusive contract prohibition in its
entirety as it exists today, there will be
no need to modify the exclusivity
conditions because the program access
rules will remain the same. Second, to
the extent that we retain an exclusive
contract prohibition for satellitedelivered, cable-affiliated RSNs and
other satellite-delivered, cable-affiliated
‘‘must have’’ programming only, there
will be no need to modify the
exclusivity conditions with respect to
RSNs and other ‘‘must have’’
programming because the exclusive
contract prohibition will remain the
same with respect to such programming.
With respect to non-RSN programming
and other programming that is not
deemed ‘‘must have,’’ however, we
would expect to modify the exclusivity
conditions to provide that exclusive
contracts involving such programming
will no longer be prohibited. To the
extent any covered non-RSN/non-‘‘must
have’’ programming is cable-affiliated,
however, exclusive contracts may be
assessed on a case-by-case basis in
response to a program access complaint
alleging a violation of Section 628(b)
(and, potentially, Section 628(c)(2)(B)).
Third, to the extent we establish a
process whereby a cable operator or
satellite-delivered, cable-affiliated
programmer can seek to remove the
exclusive contract prohibition on a
market-by-market basis, and grant of
such a petition includes satellitedelivered, cable-affiliated RSNs and
other satellite-delivered, cable-affiliated
‘‘must have’’ programming, then we
would expect to modify the exclusivity
conditions to provide that exclusive
contracts in markets covered by such a
petition (if granted) will not be
prohibited under these conditions. If the
grant of such a petition does not include
satellite-delivered, cable-affiliated RSNs
and other satellite-delivered, cableaffiliated ‘‘must have’’ programming,
however, there will be no need to
modify the exclusivity conditions with
respect to RSNs and other ‘‘must have’’
programming because the exclusive
contract prohibition will remain the
same with respect to such programming.
Fourth, to the extent we sunset the
exclusive contract prohibition in its
entirety, including for satellitedelivered, cable-affiliated RSNs and
other satellite-delivered, cable-affiliated
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‘‘must have’’ programming, then we
would expect to modify the exclusivity
conditions to provide that exclusive
contracts will not be prohibited. Again,
however, to the extent any of the
covered programming is cable-affiliated,
exclusive contracts will be assessed on
a case-by-case basis in response to a
program access complaint alleging a
violation of Section 628(b) (and,
potentially, Section 628(c)(2)(B)). We
seek comment on this interpretation.23
B. Potential Revisions to the Program
Access Rules To Better Address Alleged
Violations
96. The Commission initially adopted
its program access rules in 1993. Other
than the previous extensions of the
exclusive contract prohibition and
certain procedural changes, including
the adoption of a process for the award
of damages, establishing aspirational
deadlines for the processing of
complaints, and implementing party-toparty discovery, these rules have
remained largely unchanged since this
time. We seek comment on how our
rules can be improved, especially in
light of marketplace developments and
commenters’ experience with these
rules over the past two decades.
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1. Procedural Rules
97. As an initial matter, while our
program access procedural rules provide
a defendant with 20 days after service
of a complaint to file an answer, the
Commission has provided defendants
with 45 days from the date of service to
file an answer to a Section 628(b)
complaint alleging an ‘‘unfair act’’
involving terrestrially delivered, cableaffiliated programming to ensure that
the defendant has adequate time to
develop a response. The Commission
explained that additional time was
appropriate because, unlike complaints
alleging a violation of the prohibitions
in Section 628(c), a complaint alleging
a violation of Section 628(b) entails
additional factual inquiries, including
whether the allegedly ‘‘unfair act’’ at
23 In contrast to the Adelphia Order and the
Liberty Media Order, there is no provision in the
Comcast/NBCU Order requiring the conditions
adopted therein to be modified to conform to
changes the Commission makes to the program
access rules. See Comcast/NBCU Order, 26 FCC Rcd
at 4381, Appendix A, Condition XX (stating that the
conditions will remain in effect for seven years,
provided that the Commission will consider a
petition from Comcast/NBCU for modification of a
condition if they can demonstrate that there has
been a material change in circumstances, or that the
condition has proven unduly burdensome, such
that the Condition is no longer necessary in the
public interest). Accordingly, the conditions
adopted in the Comcast/NBCU Order will not be
affected by the rule changes adopted in this
proceeding.
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issue has the purpose or effect set forth
in Section 628(b). To the extent the
exclusive contract prohibition were to
sunset (wholly or partially), we propose
to adopt the same 45-day answer period
in complaint proceedings alleging that
an exclusive contract involving satellitedelivered, cable-affiliated programming
violates Section 628(b). We seek
comment on this proposal. Because all
complaints alleging a violation of
Section 628(b) will involve the claim
that the conduct at issue has the
purpose or effect set forth in Section
628(b), we propose to amend our rules
to provide for a 45-day answer period
for all complaints alleging a violation of
Section 628(b). We seek comment on
this proposal. Are there any other
changes we should make to our program
access procedural rules to accommodate
the case-by-case consideration of
exclusive contracts involving satellitedelivered, cable-affiliated programming
under Section 628(b)?
2. Volume Discounts
98. We also seek comment on whether
our program access rules adequately
address potentially discriminatory
volume discounts and, if not, how these
rules should be revised to address these
concerns. Some MVPDs have expressed
concern that cable-affiliated
programmers charge larger MVPDs less
for programming on a per-subscriber
basis than smaller MVPDs due to
volume discounts, which are based on
the number of subscribers the MVPD
serves. As a result, smaller MVPDs
claim that they are placed at a
significant cost disadvantage relative to
larger MVPDs. Some commenters have
claimed that this price differential is not
cost-based because program production
and acquisition costs are sunk; delivery
costs do not vary; and administrative
costs are not different. According to
some commenters, without a basis in
cost, this wholesale practice amounts to
price discrimination.
99. The anti-discrimination provision
in Section 628(c)(2)(B) of the Act
provides that it is not impermissibly
discriminatory for a satellite-delivered,
cable-affiliated programmer to
‘‘establish[] different prices, terms, and
conditions which take into account
economies of scale, cost savings, or
other direct and legitimate economic
benefits reasonably attributable to the
number of subscribers served by the
distributor.’’ The Commission’s rules
provide that:
Vendors may use volume-related
justifications to establish price differentials
to the extent that such justifications are made
available to similarly situated distributors on
a technology-neutral basis. When relying
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upon standardized volume-related factors
that are made available to all multichannel
video programming distributors using all
technologies, the vendor may be required to
demonstrate that such volume discounts are
reasonably related to direct and legitimate
economic benefits reasonably attributable to
the number of subscribers served by the
distributor if questions arise about the
application of that discount. In such
demonstrations, vendors will not be required
to provide a strict cost justification for the
structure of such standard volume-related
factors, but may also identify non-cost
economic benefits related to increased
viewership.
Thus, the Commission’s rules
contemplate that an MVPD may file a
program access complaint challenging
volume-based pricing in certain
circumstances. In the Comcast/NBCU
Order, the Commission declined to
adopt a condition that would prohibit
Comcast-NBCU from offering volumebased discounts for its video
programming, finding such a
prohibition to be unnecessary because
‘‘the specific matter of volume-based
discounts is adequately addressed by
the Commission’s program access
rules.’’
100. Despite the concerns expressed
by some MVPDs regarding allegedly
discriminatory volume discounts and
the availability of the existing complaint
process, the Commission has not
received program access complaints
alleging that particular volume
discounts violate Section 628(c)(2)(B) of
the Act. We seek information about
specific instances of perceived volume
discount discrimination, along with
explanations of why the alleged conduct
amounts to a violation of the
Commission’s rules. We seek comment
on the reasons for the lack of program
access complaints alleging
discriminatory volume discounts,
despite the apparent concern among
some MVPDs regarding this issue. Do
our current program access rules and
procedures prevent or discourage the
filing of legitimate complaints
pertaining to this issue? Is the complaint
process too costly and time-consuming
with respect to complaints alleging
price discrimination? If so, we seek
comment on how we might improve our
rules and procedures to avoid impeding
the filing of legitimate complaints. Are
there procedural tools we might use,
such as establishing rebuttable
presumptions, that will expedite the
complaint process while ensuring
fairness to all parties? While the
Commission has stated that satellitedelivered, cable-affiliated programmers
may justify volume discounts based on
‘‘non-cost economic benefits’’ related to
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increased viewership, it has not defined
these benefits in the rules. Should we
continue to consider ‘‘non-cost
economic benefits’’ on a case-by-case
basis due to the various factors, such as
advertising and online and VOD
offerings, that can be considered in
setting prices? Should our rules
specifically list those ‘‘non-cost
economic benefits’’ related to increased
viewership that might justify volume
discounts? If so, what non-cost
economic benefits should be identified?
Should these benefits be limited to
increased advertising revenues resulting
from increased viewership? Should
satellite-delivered, cable-affiliated
programmers be required to demonstrate
in response to a complaint the increase
in advertising revenues resulting from
licensing programming to a larger
MVPD and how this increase justifies
the volume discount provided to the
larger MVPD relative to the
complainant?
3. Uniform Price Increases
101. We also seek comment on
whether and how we should revise our
rules to address uniform price increases
imposed by satellite-delivered, cableaffiliated programmers. In previous
merger decisions, the Commission has
discussed the possibility that a
vertically integrated cable operator
could disadvantage its competitors in
the video distribution market by raising
the price of a network to all distributors
(including itself) to a level greater than
that which would be charged by a nonvertically integrated supplier. The
Commission explained that a vertically
integrated cable operator might employ
such a strategy to raise its rivals’ costs.
Because rival MVPDs would have to pay
more for the programming, they would
likely respond either by raising their
prices to subscribers, not purchasing the
programming, or reducing marketing
activities. The vertically integrated cable
operator could then enjoy a competitive
advantage, because the higher price for
the programming that it would pay
would be an internal transfer that it
could disregard when it sets its own
prices. By forcing its competitors either
to pay more for the programming and
increase their retail rates, or forgo
purchasing the programming, the
vertically integrated cable operator
could raise its prices to some extent
without losing subscribers. The
Commission has also stated that this
strategy of uniform price increases does
not necessarily violate the antidiscrimination provision of the program
access rules because the price increases
would be applied to all distributors
equally and thus does not involve
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discriminatory conduct. In previous
merger orders, the Commission has
sought to address this issue by adopting
a baseball-style arbitration remedy to
maintain the pre-integration balance of
bargaining power between vertically
integrated programming networks and
rival MVPDs.
102. We seek comment on whether
and how we should revise our rules to
address uniform price increases
imposed by satellite-delivered, cableaffiliated programmers. We also seek
comment on actual experiences of
discriminatory uniform price increases.
Is there any basis to interpret the antidiscrimination provision in Section
628(c)(2)(B) as applying to uniform
price increases? We note that, in
employment law, a practice that appears
facially neutral may nonetheless be
discriminatory if it has a disparate
impact on a certain class. While a
uniform price increase appears facially
neutral in that it applies to all MVPDs
equally, it has a disparate impact on
MVPDs that are not affiliated with the
cable-affiliated programmer because the
price increase is not merely an internal
transfer for unaffiliated MVPDs. To the
extent that a uniform price increase is
not covered by the anti-discrimination
provision in Section 628(c)(2)(B), can it
be addressed on a case-by-case basis in
a Section 628(b) complaint alleging that
a uniform price increase is an ‘‘unfair
act’’ that has the ‘‘purpose or effect’’ of
‘‘significantly hindering or preventing’’
an MVPD from providing satellite cable
programming or satellite broadcast
programming to subscribers or
consumers? To the extent that a uniform
price increase is actionable under
Section 628(c)(2)(B) or Section 628(b),
how can we distinguish an
anticompetitive uniform price increase
intended to raise rivals’ costs from a
price increase dictated by the market?
IV. Procedural Matters
A. Initial Regulatory Flexibility Act
Analysis
103. As required by the Regulatory
Flexibility Act of 1980, as amended
(‘‘RFA’’), the Commission has prepared
this present Initial Regulatory
Flexibility Analysis (‘‘IRFA’’)
concerning the possible significant
economic impact on small entities by
the policies and rules proposed in the
Notice of Proposed Rulemaking
(‘‘NPRM’’). Written public comments are
requested on this IRFA. Comments must
be identified as responses to the IRFA
and must be filed by the deadlines for
comments on the NPRM specified
supra. The Commission will send a
copy of the NPRM, including this IRFA,
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to the Chief Counsel for Advocacy of the
Small Business Administration
(‘‘SBA’’). In addition, the NPRM and
IRFA (or summaries thereof) will be
published in the Federal Register.
Need for, and Objectives of, the
Proposed Rule Changes
104. We issue the NPRM to seek
comment on (i) whether to retain,
sunset, or relax one of the several
protections afforded to multichannel
video programming distributors
(‘‘MVPDs’’) by the program access
rules—the prohibition on exclusive
contracts involving satellite-delivered,
cable-affiliated programming; and (ii)
potential revisions to our program
access rules to better address alleged
violations, including potentially
discriminatory volume discounts and
uniform price increases.
105. In areas served by a cable
operator, Section 628(c)(2)(D) of the
Communications Act of 1934, as
amended (the ‘‘Act’’), generally
prohibits exclusive contracts for satellite
cable programming or satellite broadcast
programming between any cable
operator and any cable-affiliated
programming vendor (the ‘‘exclusive
contract prohibition’’). The exclusive
contract prohibition applies to all
satellite-delivered, cable-affiliated
programming and presumes that an
exclusive contract will cause
competitive harm in every case,
regardless of the type of programming at
issue. The exclusive contract
prohibition applies only to
programming which is delivered via
satellite; it does not apply to
programming which is delivered via
terrestrial facilities. In January 2010, the
Commission adopted rules providing for
the processing of complaints alleging
that an ‘‘unfair act’’ involving
terrestrially delivered, cable-affiliated
programming violates Section 628(b) of
the Act. Thus, while an exclusive
contract involving satellite-delivered,
cable-affiliated programming is
generally prohibited, an exclusive
contract involving terrestrially
delivered, cable-affiliated programming
is permitted unless the Commission
finds in response to a complaint that it
violates Section 628(b) of the Act.
106. In Section 628(c)(5) of the Act,
Congress provided that the exclusive
contract prohibition would cease to be
effective on October 5, 2002, unless the
Commission found that it ‘‘continues to
be necessary to preserve and protect
competition and diversity in the
distribution of video programming.’’ In
June 2002, the Commission found that
the exclusive contract prohibition
continued to be necessary to preserve
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and protect competition and diversity
and retained the exclusive contract
prohibition for five years, until October
5, 2007. The Commission provided that,
during the year before the expiration of
the five-year extension, it would
conduct a second review to determine
whether the exclusive contract
prohibition continued to be necessary to
preserve and protect competition and
diversity in the distribution of video
programming. After conducting such a
review, the Commission in September
2007 concluded that the exclusive
contract prohibition was still necessary,
and it retained the prohibition for five
more years, until October 5, 2012. The
Commission again provided that, during
the year before the expiration of the
five-year extension, it would conduct a
third 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.
107. Accordingly, in this NPRM, we
initiate the third review of the necessity
of the exclusive contract prohibition. In
the NPRM, we present certain data on
the current state of competition in the
video distribution market and the video
programming market, and we invite
commenters to submit more recent data
or empirical analyses. We seek comment
on whether current conditions in the
video marketplace support retaining,
sunsetting, or relaxing the exclusive
contract prohibition. To the extent that
the data do not support retaining the
exclusive contract prohibition as it
exists today, we seek comment on
whether we can preserve and protect
competition in the video distribution
market by either:
• Sunsetting the exclusive contract
prohibition in its entirety and instead
relying solely on existing protections
provided by the program access rules
that will not sunset: (i) The case-by-case
consideration of exclusive contracts
pursuant to Section 628(b) of the Act;
(ii) the prohibition on discrimination in
Section 628(c)(2)(B) of the Act; and (iii)
the prohibition on undue or improper
influence in Section 628(c)(2)(A) of the
Act; or
• Relaxing the exclusive contract
prohibition by (i) establishing a process
whereby a cable operator or satellitedelivered, cable-affiliated programmer
can seek to remove the prohibition on
a market-by-market basis based on the
extent of competition in the market; (ii)
retaining the prohibition only for
satellite-delivered, cable-affiliated
Regional Sports Networks (‘‘RSNs’’) and
any other satellite delivered, cableaffiliated programming that the record
here establishes as being important for
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competition and non-replicable and
having no good substitutes; and/or (iii)
other ways commenters propose.
We seek comment also on (i) how to
implement a sunset (complete or partial)
to minimize any potential disruption to
consumers; (ii) the First Amendment
implications of the alternatives
discussed herein; (iii) the costs and
benefits of the alternatives discussed
herein; and (iv) the impact of a sunset
on existing merger conditions.
108. In addition, we seek comment in
the NPRM on potential improvements to
the program access rules to better
address potential violations. With the
exception of certain procedural
revisions and the previous extensions of
the exclusive contract prohibition, the
program access rules have remained
largely unchanged in the almost two
decades since the Commission
originally adopted them in 1993. We
seek comment on, among other things,
whether our rules adequately address
potentially discriminatory volume
discounts and uniform price increases
and, if not, how these rules should be
revised to address these concerns.
Legal Basis
109. The proposed action is
authorized pursuant to Sections 4(i),
4(j), 303(r), and 628 of the
Communications Act of 1934, as
amended, 47 U.S.C. 154(i), 154(j),
303(r), and 548.
Description and Estimate of the Number
of Small Entities to Which the Proposed
Rules Will Apply
110. The RFA directs agencies to
provide a description of, and where
feasible, an estimate of the number of
small entities that may be affected by
the proposed rules, if adopted. The RFA
generally defines the term ‘‘small
entity’’ as having the same meaning as
the terms ‘‘small business,’’ ‘‘small
organization,’’ and ‘‘small governmental
jurisdiction.’’ In addition, the term
‘‘small business’’ has the same meaning
as the term ‘‘small business concern’’
under the Small Business Act. A small
business concern is one which: (1) Is
independently owned and operated; (2)
is not dominant in its field of operation;
and (3) satisfies any additional criteria
established by the SBA. Below, we
provide a description of such small
entities, as well as an estimate of the
number of such small entities, where
feasible.
111. Wired Telecommunications
Carriers. The 2007 North American
Industry Classification System
(‘‘NAICS’’) defines ‘‘Wired
Telecommunications Carriers’’ as
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follows: ‘‘This industry comprises
establishments primarily engaged in
operating and/or providing access to
transmission facilities and infrastructure
that they own and/or lease for the
transmission of voice, data, text, sound,
and video using wired
telecommunications networks.
Transmission facilities may be based on
a single technology or a combination of
technologies. Establishments in this
industry use the wired
telecommunications network facilities
that they operate to provide a variety of
services, such as wired telephony
services, including VoIP services; wired
(cable) audio and video programming
distribution; and wired broadband
Internet services. By exception,
establishments providing satellite
television distribution services using
facilities and infrastructure that they
operate are included in this industry.’’
The SBA has developed a small
business size standard for wireline firms
within the broad economic census
category, ‘‘Wired Telecommunications
Carriers.’’ Under this category, the SBA
deems a wireline business to be small if
it has 1,500 or fewer employees. Census
Bureau data for 2007, which now
supersede data from the 2002 Census,
show that there were 3,188 firms in this
category that operated for the entire
year. Of this total, 3,144 had
employment of 999 or fewer, and 44
firms had employment of 1,000
employees or more. Thus under this
category and the associated small
business size standard, the majority of
these firms can be considered small.
112. Cable Television Distribution
Services. Since 2007, these services
have been defined within the broad
economic census category of Wired
Telecommunications Carriers; that
category is defined above. The SBA has
developed a small business size
standard for this category, which is: All
such firms having 1,500 or fewer
employees. Census Bureau data for
2007, which now supersede data from
the 2002 Census, show that there were
3,188 firms in this category that
operated for the entire year. Of this
total, 3,144 had employment of 999 or
fewer, and 44 firms had employment of
1,000 employees or more. Thus under
this category and the associated small
business size standard, the majority of
these firms can be considered small.
113. Cable Companies and Systems.
The Commission has also developed its
own small business size standards, for
the purpose of cable rate regulation.
Under the Commission’s rules, a ‘‘small
cable company’’ is one serving 400,000
or fewer subscribers nationwide.
Industry data indicate that all but ten
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cable operators nationwide are small
under this size standard. In addition,
under the Commission’s rules, a ‘‘small
system’’ is a cable system serving 15,000
or fewer subscribers. Industry data
indicate that, of 6,101 systems
nationwide, 4,410 systems have under
10,000 subscribers, and an additional
258 systems have 10,000–19,999
subscribers. Thus, under this standard,
most cable systems are small.
114. Cable System Operators. The
Communications Act of 1934, as
amended, also contains a size standard
for small cable system operators, which
is ‘‘a cable operator that, directly or
through an affiliate, serves in the
aggregate fewer than 1 percent of all
subscribers in the United States and is
not affiliated with any entity or entities
whose gross annual revenues in the
aggregate exceed $250,000,000.’’ The
Commission has determined that an
operator serving fewer than 677,000
subscribers shall be deemed a small
operator if its annual revenues, when
combined with the total annual
revenues of all its affiliates, do not
exceed $250 million in the aggregate.
Industry data indicate that all but nine
cable operators nationwide are small
under this subscriber size standard. We
note that the Commission neither
requests nor collects information on
whether cable system operators are
affiliated with entities whose gross
annual revenues exceed $250 million,
and therefore we are unable to estimate
more accurately the number of cable
system operators that would qualify as
small under this size standard.
115. Direct Broadcast Satellite
(‘‘DBS’’) Service. DBS service is a
nationally distributed subscription
service that delivers video and audio
programming via satellite to a small
parabolic ‘‘dish’’ antenna at the
subscriber’s location. DBS, by
exception, is now included in the SBA’s
broad economic census category,
‘‘Wired Telecommunications Carriers,’’
which was developed for small wireline
firms. Under this category, the SBA
deems a wireline business to be small if
it has 1,500 or fewer employees. Census
Bureau data for 2007, which now
supersede data from the 2002 Census,
show that there were 3,188 firms in this
category that operated for the entire
year. Of this total, 3,144 had
employment of 999 or fewer, and 44
firms had employment of 1,000
employees or more. Thus under this
category and the associated small
business size standard, the majority of
these firms can be considered small.
Currently, only two entities provide
DBS service, which requires a great
investment of capital for operation:
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DIRECTV and EchoStar
Communications Corporation
(‘‘EchoStar’’) (marketed as the DISH
Network). Each currently offers
subscription services. DIRECTV and
EchoStar each report annual revenues
that are in excess of the threshold for a
small business. Because DBS service
requires significant capital, we believe it
is unlikely that a small entity as defined
by the SBA would have the financial
wherewithal to become a DBS service
provider.
116. Satellite Master Antenna
Television (SMATV) Systems, also
known as Private Cable Operators
(PCOs). SMATV systems or PCOs are
video distribution facilities that use
closed transmission paths without using
any public right-of-way. They acquire
video programming and distribute it via
terrestrial wiring in urban and suburban
multiple dwelling units such as
apartments and condominiums, and
commercial multiple tenant units such
as hotels and office buildings. SMATV
systems or PCOs are now included in
the SBA’s broad economic census
category, ‘‘Wired Telecommunications
Carriers,’’ which was developed for
small wireline firms. Under this
category, the SBA deems a wireline
business to be small if it has 1,500 or
fewer employees. Census Bureau data
for 2007, which now supersede data
from the 2002 Census, show that there
were 3,188 firms in this category that
operated for the entire year. Of this
total, 3,144 had employment of 999 or
fewer, and 44 firms had employment of
1,000 employees or more. Thus, under
this category and the associated small
business size standard, the majority of
these firms can be considered small.
117. Home Satellite Dish (‘‘HSD’’)
Service. HSD or the large dish segment
of the satellite industry is the original
satellite-to-home service offered to
consumers, and involves the home
reception of signals transmitted by
satellites operating generally in the Cband frequency. Unlike DBS, which
uses small dishes, HSD antennas are
between four and eight feet in diameter
and can receive a wide range of
unscrambled (free) programming and
scrambled programming purchased from
program packagers that are licensed to
facilitate subscribers’ receipt of video
programming. Because HSD provides
subscription services, HSD falls within
the SBA-recognized definition of Wired
Telecommunications Carriers. The SBA
has developed a small business size
standard for this category, which is: All
such firms having 1,500 or fewer
employees. Census Bureau data for
2007, which now supersede data from
the 2002 Census, show that there were
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3,188 firms in this category that
operated for the entire year. Of this
total, 3,144 had employment of 999 or
fewer, and 44 firms had employment of
1,000 employees or more. Thus, under
this category and the associated small
business size standard, the majority of
these firms can be considered small.
118. Broadband Radio Service and
Educational Broadband Service.
Broadband Radio Service systems,
previously referred to as Multipoint
Distribution Service (MDS) and
Multichannel Multipoint Distribution
Service (MMDS) systems, and ‘‘wireless
cable,’’ transmit video programming to
subscribers and provide two-way high
speed data operations using the
microwave frequencies of the
Broadband Radio Service (BRS) and
Educational Broadband Service (EBS)
(previously referred to as the
Instructional Television Fixed Service
(ITFS)). In connection with the 1996
BRS auction, the Commission
established a small business size
standard as an entity that had annual
average gross revenues of no more than
$40 million in the previous three
calendar years. The BRS auctions
resulted in 67 successful bidders
obtaining licensing opportunities for
493 Basic Trading Areas (BTAs). Of the
67 auction winners, 61 met the
definition of a small business. BRS also
includes licensees of stations authorized
prior to the auction. At this time, we
estimate that of the 61 small business
BRS auction winners, 48 remain small
business licensees. In addition to the 48
small businesses that hold BTA
authorizations, there are approximately
392 incumbent BRS licensees that are
considered small entities. After adding
the number of small business auction
licensees to the number of incumbent
licensees not already counted, we find
that there are currently approximately
440 BRS licensees that are defined as
small businesses under either the SBA
or the Commission’s rules. In 2009, the
Commission conducted Auction 86, the
sale of 78 licenses in the BRS areas. The
Commission offered three levels of
bidding credits: (i) A bidder with
attributed average annual gross revenues
that exceed $15 million and do not
exceed $40 million for the preceding
three years (small business) received a
15 percent discount on its winning bid;
(ii) a bidder with attributed average
annual gross revenues that exceed $3
million and do not exceed $15 million
for the preceding three years (very small
business) received a 25 percent discount
on its winning bid; and (iii) a bidder
with attributed average annual gross
revenues that do not exceed $3 million
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for the preceding three years
(entrepreneur) received a 35 percent
discount on its winning bid. Auction 86
concluded in 2009 with the sale of 61
licenses. Of the ten winning bidders,
two bidders that claimed small business
status won 4 licenses; one bidder that
claimed very small business status won
three licenses; and two bidders that
claimed entrepreneur status won six
licenses.
119. In addition, the SBA’s Cable
Television Distribution Services small
business size standard is applicable to
EBS. There are presently 2,032 EBS
licensees. All but 100 of these licenses
are held by educational institutions.
Educational institutions are included in
this analysis as small entities. Thus, we
estimate that at least 1,932 licensees are
small businesses. Since 2007, Cable
Television Distribution Services have
been defined within the broad economic
census category of Wired
Telecommunications Carriers; that
category is defined as follows: ‘‘This
industry comprises establishments
primarily engaged in operating and/or
providing access to transmission
facilities and infrastructure that they
own and/or lease for the transmission of
voice, data, text, sound, and video using
wired telecommunications networks.
Transmission facilities may be based on
a single technology or a combination of
technologies.’’ The SBA has developed
a small business size standard for this
category, which is: All such firms
having 1,500 or fewer employees.
Census Bureau data for 2007, which
now supersede data from the 2002
Census, show that there were 3,188
firms in this category that operated for
the entire year. Of this total, 3,144 had
employment of 999 or fewer, and 44
firms had employment of 1,000
employees or more. Thus, under this
category and the associated small
business size standard, the majority of
these firms can be considered small.
120. Fixed Microwave Services.
Microwave services include common
carrier, private-operational fixed, and
broadcast auxiliary radio services. They
also include the Local Multipoint
Distribution Service (LMDS), the Digital
Electronic Message Service (DEMS), and
the 24 GHz Service, where licensees can
choose between common carrier and
non-common carrier status. At present,
there are approximately 31,428 common
carrier fixed licensees and 79,732
private operational-fixed licensees and
broadcast auxiliary radio licensees in
the microwave services. There are
approximately 120 LMDS licensees,
three DEMS licensees, and three 24 GHz
licensees. The Commission has not yet
defined a small business with respect to
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microwave services. For purposes of the
IRFA, we will use the SBA’s definition
applicable to Wireless
Telecommunications Carriers (except
satellite)—i.e., an entity with no more
than 1,500 persons. Under the present
and prior categories, the SBA has
deemed a wireless business to be small
if it has 1,500 or fewer employees. For
the category of Wireless
Telecommunications Carriers (except
Satellite), Census data for 2007, which
supersede data contained in the 2002
Census, show that there were 1,383
firms that operated that year. Of those
1,383, 1,368 had fewer than 1000
employees, and 15 firms had 1000
employees or more. Thus under this
category and the associated small
business size standard, the majority of
firms can be considered small. We note
that the number of firms does not
necessarily track the number of
licensees. We estimate that virtually all
of the Fixed Microwave licensees
(excluding broadcast auxiliary
licensees) would qualify as small
entities under the SBA definition.
121. Open Video Systems. The open
video system (‘‘OVS’’) framework was
established in 1996, and is one of four
statutorily recognized options for the
provision of video programming
services by local exchange carriers. The
OVS framework provides opportunities
for the distribution of video
programming other than through cable
systems. Because OVS operators provide
subscription services, OVS falls within
the SBA small business size standard
covering cable services, which is
‘‘Wired Telecommunications Carriers.’’
The SBA has developed a small
business size standard for this category,
which is: All such firms having 1,500 or
fewer employees. Census Bureau data
for 2007, which now supersede data
from the 2002 Census, show that there
were 3,188 firms in this category that
operated for the entire year. Of this
total, 3,144 had employment of 999 or
fewer, and 44 firms had employment of
1,000 employees or more. Thus, under
this category and the associated small
business size standard, the majority of
these firms can be considered small. In
addition, we note that the Commission
has certified some OVS operators, with
some now providing service. Broadband
service providers (‘‘BSPs’’) are currently
the only significant holders of OVS
certifications or local OVS franchises.
The Commission does not have
financial or employment information
regarding the entities authorized to
provide OVS, some of which may not
yet be operational. Thus, at least some
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of the OVS operators may qualify as
small entities.
122. Cable and Other Subscription
Programming. The Census Bureau
defines this category as follows: ‘‘This
industry comprises establishments
primarily engaged in operating studios
and facilities for the broadcasting of
programs on a subscription or fee basis.
* * * These establishments produce
programming in their own facilities or
acquire programming from external
sources. The programming material is
usually delivered to a third party, such
as cable systems or direct-to-home
satellite systems, for transmission to
viewers.’’ The SBA has developed a
small business size standard for this
category, which is: All such firms
having $15 million dollars or less in
annual revenues. To gauge small
business prevalence in the Cable and
Other Subscription Programming
industries, the Commission relies on
data currently available from the U.S.
Census for the year 2007. Census Bureau
data for 2007, which now supersede
data from the 2002 Census, show that
there were 396 firms in this category
that operated for the entire year. Of that
number, 325 operated with annual
revenues of $9,999,999 million dollars
or less. Seventy-one (71) operated with
annual revenues of between $10 million
and $100 million or more. Thus, under
this category and associated small
business size standard, the majority of
firms can be considered small.
123. Small Incumbent Local Exchange
Carriers. We have included small
incumbent local exchange carriers in
this present RFA analysis. A ‘‘small
business’’ under the RFA is one that,
inter alia, meets the pertinent small
business size standard (e.g., a telephone
communications business having 1,500
or fewer employees), and ‘‘is not
dominant in its field of operation.’’ The
SBA’s Office of Advocacy contends that,
for RFA purposes, small incumbent
local exchange carriers are not dominant
in their field of operation because any
such dominance is not ‘‘national’’ in
scope. We have therefore included small
incumbent local exchange carriers in
this RFA analysis, although we
emphasize that this RFA action has no
effect on Commission analyses and
determinations in other, non-RFA
contexts.
124. Incumbent Local Exchange
Carriers (‘‘LECs’’). Neither the
Commission nor the SBA has developed
a small business size standard
specifically for incumbent local
exchange services. The appropriate size
standard under SBA rules is for the
category Wired Telecommunications
Carriers. Under that size standard, such
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a business is small if it has 1,500 or
fewer employees. Census Bureau data
for 2007, which now supersede data
from the 2002 Census, show that there
were 3,188 firms in this category that
operated for the entire year. Of this
total, 3,144 had employment of 999 or
fewer, and 44 firms had employment of
1,000 employees or more. Thus, under
this category and the associated small
business size standard, the majority of
these firms can be considered small.
125. Competitive Local Exchange
Carriers, Competitive Access Providers
(CAPs), ‘‘Shared-Tenant Service
Providers,’’ and ‘‘Other Local Service
Providers.’’ Neither the Commission nor
the SBA has developed a small business
size standard specifically for these
service providers. The appropriate size
standard under SBA rules is for the
category Wired Telecommunications
Carriers. Under that size standard, such
a business is small if it has 1,500 or
fewer employees. Census Bureau data
for 2007, which now supersede data
from the 2002 Census, show that there
were 3,188 firms in this category that
operated for the entire year. Of this
total, 3,144 had employment of 999 or
fewer, and 44 firms had employment of
1,000 employees or more. Thus, under
this category and the associated small
business size standard, the majority of
these firms can be considered small.
Consequently, the Commission
estimates that most providers of
competitive local exchange service,
competitive access providers, ‘‘SharedTenant Service Providers,’’ and ‘‘Other
Local Service Providers’’ are small
entities.
126. Motion Picture and Video
Production. The Census Bureau defines
this category as follows: ‘‘This industry
comprises establishments primarily
engaged in producing, or producing and
distributing motion pictures, videos,
television programs, or television
commercials.’’ We note that firms in this
category may be engaged in various
industries, including cable
programming. Specific figures are not
available regarding how many of these
firms produce and/or distribute
programming for cable television. The
SBA has developed a small business
size standard for this category, which is:
All such firms having $29.5 million
dollars or less in annual revenues. To
gauge small business prevalence in the
Motion Picture and Video Production
industries, the Commission relies on
data currently available from the U.S.
Census for the year 2007. Census Bureau
data for 2007, which now supersede
data from the 2002 Census, show that
there were 9,095 firms in this category
that operated for the entire year. Of
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these, 8995 had annual receipts of
$24,999,999 or less, and 100 had annual
receipts ranging from not less that
$25,000,000 to $100,000,000 or more.
Thus, under this category and
associated small business size standard,
the majority of firms can be considered
small.
127. Motion Picture and Video
Distribution. The Census Bureau defines
this category as follows: ‘‘This industry
comprises establishments primarily
engaged in acquiring distribution rights
and distributing film and video
productions to motion picture theaters,
television networks and stations, and
exhibitors.’’ We note that firms in this
category may be engaged in various
industries, including cable
programming. Specific figures are not
available regarding how many of these
firms produce and/or distribute
programming for cable television. The
SBA has developed a small business
size standard for this category, which is:
All such firms having $29.5 million
dollars or less in annual revenues. To
gauge small business prevalence in the
Motion Picture and Video Distribution
industries, the Commission relies on
data currently available from the U.S.
Census for the year 2007. Census Bureau
data for 2007, which now supersede
data from the 2002 Census, show that
there were 450 firms in this category
that operated for the entire year. Of
these, 434 had annual receipts of
$24,999,999 or less, and 16 had annual
receipts ranging from not less that
$25,000,000 to $100,000,000 or more.
Thus, under this category and
associated small business size standard,
the majority of firms can be considered
small.
Description of Projected Reporting,
Recordkeeping, and Other Compliance
Requirements
128. Certain proposed rule changes
discussed in the NPRM would affect
reporting, recordkeeping, or other
compliance requirements. First, even if
the exclusive contract prohibition were
to sunset (wholly or partially), the
Commission recognizes that other
existing protections will remain in
effect. Namely, an MVPD would still
have the option to file a complaint with
the Commission alleging that an
exclusive contract between a cable
operator and a satellite-delivered, cableaffiliated programmer involving
satellite-delivered, cable-affiliated
programming is an unfair act in
violation of Section 628(b) of the Act
and Section 76.1001(a) of the
Commission’s rules. An MVPD may also
have the option of filing a
discrimination complaint under Section
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24329
628(c)(2)(B) of the Act, which would
provide some protection for competitive
MVPDs should the exclusive contract
prohibition sunset (wholly or partially).
Further, the NPRM seeks comment on
the extent to which undue influence
complaints under Section 628(c)(2)(A)
may also provide some protection for
competitive MVPDs should the
exclusive contract prohibition sunset
(wholly or partially). Second, rather
than sunsetting the exclusive contract
prohibition in its entirety, the
Commission seeks comment on whether
it should instead relax the exclusivity
prohibition, such as by establishing a
process whereby a cable operator or
satellite-delivered, cable-affiliated
programmer can seek to remove the
exclusive contract prohibition on a
market-by-market basis based on the
extent of competition in the market. The
Commission seeks comment on the
details of any such process for removing
the exclusive contract prohibition on a
market-by-market basis. Third, the
Commission proposes to adopt a 45-day
answer period in complaint proceedings
alleging a violation of Section 628(b).
Fourth, the NPRM seeks comment on
how the Commission might improve its
rules and procedures to avoid impeding
the filing of legitimate complaints
alleging that particular volume
discounts violate Section 628(c)(2)(B) of
the Act. Specifically, the Commission
asks whether satellite-delivered, cableaffiliated programmers should be
required to demonstrate in response to
a complaint the increase in advertising
revenues resulting from licensing
programming to a larger MVPD and how
this increase justifies the volume
discount provided to the larger MVPD
relative to the complaint.
Steps Taken to Minimize Significant
Impact on Small Entities and Significant
Alternatives Considered
129. The RFA requires an agency to
describe any significant alternatives that
it has considered in reaching its
proposed approach, which may include
the following four alternatives (among
others): (1) The establishment of
differing compliance or reporting
requirements or timetables that take into
account the resources available to small
entities; (2) the clarification,
consolidation, or simplification of
compliance or reporting requirements
under the rule for small entities; (3) the
use of performance, rather than design,
standards; and (4) an exemption from
coverage of the rule, or any part thereof,
for small entities.
130. First, regarding the potential
sunset or relaxation of the exclusive
contract prohibition, the NPRM seeks
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comment on what impact the retention
of the exclusive contract prohibition has
had on the general state of competition
among MVPDs in the video distribution
market. More specifically, the NPRM
asks how a sunset or relaxation of the
exclusive contract prohibition would
affect competition in the video
distribution market, and how a sunset or
relaxation would affect the potential
entry of new competitors in the market.
The NPRM also seeks comment on how
the current state of cable system
clustering and cable market share in
regional markets should affect the
Commission’s decision on whether to
retain, sunset, or relax the exclusive
contract prohibition. Further, it asks
whether the current state of horizontal
consolidation in the cable industry has
increased or decreased incentives for
anticompetitive foreclosure of access to
vertically integrated programming. The
NPRM asks whether competitive MVPDs
have the resources to invest in creating
their own video programming. Overall,
the Commission’s analysis is focused on
whether the exclusive contract
prohibition ‘‘continues to be necessary
to preserve and protect competition and
diversity in the distribution of video
programming.’’
131. Second, to the extent the
exclusive contract prohibition were to
sunset (wholly or partially), the NPRM
seeks comment on ways to reduce
burdens on both complainants and
defendants in connection with
complaints alleging that an exclusive
contract involving satellite-delivered,
cable-affiliated programming violates
Section 628(b) (or Section 628(c)(2)(B))
of the Act.
132. Third, regarding the potential
changes to our procedural rules
governing program access complaints,
we find that the changes would benefit
regulated entities, including those that
are small entities. Specifically, small
entities may benefit from the proposed
lengthier 45-day period within which to
file an answer. They may also benefit
from rules addressing potentially
discriminatory volume discounts and
uniform price increases.
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Federal Rules That May Duplicate,
Overlap, or Conflict With the Proposed
Rule
133. None.
B. Paperwork Reduction Act
134. This document contains
proposed new information collection
requirements. The Commission, as part
of its continuing effort to reduce
paperwork burdens, invites the general
public and the Office of Management
and Budget (OMB) to comment on the
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information collection requirements
contained in this document, as required
by the Paperwork Reduction Act of
1995. In addition, pursuant to the Small
Business Paperwork Relief Act of 2002,
we seek specific comment on how we
might ‘‘further reduce the information
collection burden for small business
concerns with fewer than 25
employees.’’
C. Ex Parte Rules
135. Permit-But-Disclose. The
proceeding this Notice initiates shall be
treated as a ‘‘permit-but-disclose’’
proceeding in accordance with the
Commission’s ex parte rules. Persons
making ex parte presentations must file
a copy of any written presentation or a
memorandum summarizing any oral
presentation within two business days
after the presentation (unless a different
deadline applicable to the Sunshine
period applies). Persons making oral ex
parte presentations are reminded that
memoranda summarizing the
presentation must (1) list all persons
attending or otherwise participating in
the meeting at which the ex parte
presentation was made, and (2)
summarize all data presented and
arguments made during the
presentation. If the presentation
consisted in whole or in part of the
presentation of data or arguments
already reflected in the presenter’s
written comments, memoranda or other
filings in the proceeding, the presenter
may provide citations to such data or
arguments in his or her prior comments,
memoranda, or other filings (specifying
the relevant page and/or paragraph
numbers where such data or arguments
can be found) in lieu of summarizing
them in the memorandum. Documents
shown or given to Commission staff
during ex parte meetings are deemed to
be written ex parte presentations and
must be filed consistent with rule
1.1206(b). In proceedings governed by
rule 1.49(f) or for which the
Commission has made available a
method of electronic filing, written ex
parte presentations and memoranda
summarizing oral ex parte
presentations, and all attachments
thereto, must be filed through the
electronic comment filing system
available for that proceeding, and must
be filed in their native format (e.g., .doc,
.xml, .ppt, searchable .pdf). Participants
in this proceeding should familiarize
themselves with the Commission’s ex
parte rules.
D. Filing Requirements
136. Comments and Replies. Pursuant
to Sections 1.415 and 1.419 of the
Commission’s rules, interested parties
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may file comments and reply comments
on or before the dates indicated on the
first page of this document. Comments
may be filed using the Commission’s
Electronic Comment Filing System
(‘‘ECFS’’).
• Electronic Filers: Comments may be
filed electronically using the Internet by
accessing the ECFS: https://
fjallfoss.fcc.gov/ecfs2/.
• Paper Filers: Parties who choose to
file by paper must file an original and
one copy of each filing. If more than one
docket or rulemaking number appears in
the caption of this proceeding, filers
must submit two additional copies for
each additional docket or rulemaking
number.
Filings can be sent by hand or
messenger delivery, by commercial
overnight courier, or by first-class or
overnight U.S. Postal Service mail. All
filings must be addressed to the
Commission’s Secretary, Office of the
Secretary, Federal Communications
Commission.
Æ All hand-delivered or messengerdelivered paper filings for the
Commission’s Secretary must be
delivered to FCC Headquarters at 445
12th St. SW., Room TW–A325,
Washington, DC 20554. The filing hours
are 8 a.m. to 7 p.m. All hand deliveries
must be held together with rubber bands
or fasteners. Any envelopes and boxes
must be disposed of before entering the
building.
Æ Commercial overnight mail (other
than U.S. Postal Service Express Mail
and Priority Mail) must be sent to 9300
East Hampton Drive, Capitol Heights,
MD 20743.
Æ U.S. Postal Service first-class,
Express, and Priority mail must be
addressed to 445 12th Street SW.,
Washington, DC 20554.
137. Availability of Documents.
Comments, reply comments, and ex
parte submissions will be available for
public inspection during regular
business hours in the FCC Reference
Center, Federal Communications
Commission, 445 12th Street SW., CY–
A257, Washington, DC 20554. These
documents will also be available via
ECFS. Documents will be available
electronically in ASCII, Microsoft Word,
and/or Adobe Acrobat.
138. People with Disabilities. To
request materials in accessible formats
for people with disabilities (braille,
large print, electronic files, audio
format), send an email to fcc504@fcc.gov
or call the FCC’s Consumer and
Governmental Affairs Bureau at (202)
418–0530 (voice), (202) 418–0432
(TTY).
139. Additional Information. For
additional information on this
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proceeding, contact David Konczal,
David.Konczal@fcc.gov, or Diana
Sokolow, Diana.Sokolow@fcc.gov, of the
Media Bureau, Policy Division, (202)
418–2120.
V. Ordering Clauses
140. Accordingly, It is ordered that
pursuant to the authority found in
Sections 4(i), 4(j), 303(r), and 628 of the
Communications Act of 1934, as
amended, 47 U.S.C. 154(i), 154(j),
303(r), and 548, this Notice of Proposed
Rulemaking is adopted.
141. It is further ordered that the
Commission’s Consumer and
Governmental Affairs Bureau, Reference
Information Center, shall send a copy of
this Notice of Proposed Rulemaking,
including the Initial Regulatory
Flexibility Analysis, to the Chief
Counsel for Advocacy of the Small
Business Administration.
List of Subjects in 47 CFR Part 76
Cable television, Reporting and
recordkeeping requirements.
Federal Communications Commission.
Sheryl D. Todd,
Deputy Secretary.
Proposed Rules
For the reasons discussed in the
preamble, the Federal Communications
Commission proposes to amend 47 CFR
part 76 as follows:
PART 76—MULTICHANNEL VIDEO
AND CABLE TELEVISION SERVICE
1. The authority citation for Part 76
continues to read as follows:
Authority: 47 U.S.C. 151, 152, 153, 154,
301, 302, 302a, 303, 303a, 307, 308, 309, 312,
315, 317, 325, 339, 340, 341, 503, 521, 522,
531, 532, 534, 535, 536, 537, 543, 544, 544a,
545, 548, 549, 552, 554, 556, 558, 560, 561,
571, 572 and 573.
2. Section 76.1000 is amended by
adding paragraph (n) to read as follows:
§ 76.1000
Definitions.
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*
*
*
*
(n) Regional Sports Network. The term
‘‘Regional Sports Network’’ means video
programming that:
(1) Provides live or same-day
distribution within a limited geographic
region of sporting events of a sports
team that is a member of Major League
Baseball, the National Basketball
Association, the National Football
League, the National Hockey League,
NASCAR, NCAA Division I Football,
NCAA Division I Basketball, Liga de
´
Beisbol Profesional de Puerto Rico,
Baloncesto Superior Nacional de Puerto
´
Rico, Liga Mayor de Futbol Nacional de
Puerto Rico, and the Puerto Rico
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Islanders of the United Soccer League’s
First Division; and
(2) In any year, carries a minimum of
either 100 hours of programming that
meets the criteria of paragraph (n)(1) of
this section, or 10 percent of the regular
season games of at least one sports team
that meets the criteria of paragraph
(n)(1) of this section.
Alternative 1:
3. Section 76.1002 is amended by
revising paragraph (c)(3) and (6) to read
as follows:
§ 76.1002 Specific unfair practices
prohibited.
*
*
*
*
*
(c) * * *
(3) Specific arrangements:
Subdistribution agreements—(i)
Unserved and served areas. No cable
operator shall enter into any
subdistribution agreement or
arrangement for satellite cable
programming or satellite broadcast
programming with a satellite cable
programming vendor in which a cable
operator has an attributable interest or a
satellite broadcast programming vendor
in which a cable operator has an
attributable interest, with respect to
areas served or unserved by a cable
operator, unless such agreement or
arrangement complies with the
limitations set forth in paragraph
(c)(3)(ii) of this section.
(ii) Limitations on subdistribution
agreements. No cable operator engaged
in subdistribution of satellite cable
programming or satellite broadcast
programming may require a competing
multichannel video programming
distributor to
(A) Purchase additional or unrelated
programming as a condition of such
subdistribution; or
(B) Provide access to private property
in exchange for access to programming.
In addition, a subdistributor may not
charge a competing multichannel video
programming distributor more for said
programming than the satellite cable
programming vendor or satellite
broadcast programming vendor itself
would be permitted to charge. Any cable
operator acting as a subdistributor of
satellite cable programming or satellite
broadcast programming must respond to
a request for access to such
programming by a competing
multichannel video programming
distributor within fifteen (15) days of
the request. If the request is denied, the
competing multichannel video
programming distributor must be
permitted to negotiate directly with the
satellite cable programming vendor or
satellite broadcast programming vendor.
*
*
*
*
*
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(6) Sunset provision. The prohibition
of exclusive contracts set forth in
paragraph (c)(2) of this section shall
cease to be effective on October 5, 2017,
unless the Commission finds, during a
proceeding to be conducted during the
year preceding such date, that said
prohibition continues to be necessary to
preserve and protect competition and
diversity in the distribution of video
programming.
*
*
*
*
*
Alternative 2:
4. Section 76.1002 is amended by
removing and reserving paragraph (c)(2),
revising paragraph (c)(3) through (5),
and removing paragraph (c)(6) to read as
follows:
§ 76.1002 Specific unfair practices
prohibited.
*
*
*
*
*
(c) * * *
(3) Specific arrangements:
Subdistribution agreements—(i)
Unserved areas. No cable operator shall
enter into any subdistribution
agreement or arrangement for satellite
cable programming or satellite broadcast
programming with a satellite cable
programming vendor in which a cable
operator has an attributable interest or a
satellite broadcast programming vendor
in which a cable operator has an
attributable interest for distribution to
persons in areas not served by a cable
operator as of October 5, 1992 unless
such agreement or arrangement
complies with the limitations set forth
in paragraph (c)(3)(ii) of this section.
(ii) Limitations on subdistribution
agreements in unserved areas. No cable
operator engaged in subdistribution of
satellite cable programming or satellite
broadcast programming may require a
competing multichannel video
programming distributor to
(A) Purchase additional or unrelated
programming as a condition of such
subdistribution; or
(B) Provide access to private property
in exchange for access to programming.
In addition, a subdistributor may not
charge a competing multichannel video
programming distributor more for said
programming than the satellite cable
programming vendor or satellite
broadcast programming vendor itself
would be permitted to charge. Any cable
operator acting as a subdistributor of
satellite cable programming or satellite
broadcast programming must respond to
a request for access to such
programming by a competing
multichannel video programming
distributor within fifteen (15) days of
the request. If the request is denied, the
competing multichannel video
programming distributor must be
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permitted to negotiate directly with the
satellite cable programming vendor or
satellite broadcast programming vendor.
(4) Public interest determination. In
determining whether an exclusive
contract is in the public interest for
purposes of paragraph (c)(5) of this
section, the Commission will consider
each of the following factors with
respect to the effect of such contract on
the distribution of video programming
in areas that are served by a cable
operator:
(i) The effect of such exclusive
contract on the development of
competition in local and national
multichannel video programming
distribution markets;
(ii) The effect of such exclusive
contract on competition from
multichannel video programming
distribution technologies other than
cable;
(iii) The effect of such exclusive
contract on the attraction of capital
investment in the production and
distribution of new satellite cable
programming;
(iv) The effect of such exclusive
contract on diversity of programming in
the multichannel video programming
distribution market; and
(v) The duration of the exclusive
contract.
(5) Commission approval required.
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 must submit a
‘‘Petition for Exclusivity’’ to the
Commission and receive approval from
the Commission to preclude the filing of
complaints alleging that an exclusive
contract, or practice, activity or
arrangement tantamount to an exclusive
contract, with respect to areas served by
a cable operator violates section 628(b)
of the Communications Act of 1934, as
amended, and § 76.1001(a), or section
628(c)(2)(B) of the Communications Act
of 1934, as amended, and paragraph (b)
of this section.
(i) The petition for exclusivity shall
contain those portions of the contract
relevant to exclusivity, including:
(A) A description of the programming
service;
(B) The extent and duration of
exclusivity proposed; and
(C) Any other terms or provisions
directly related to exclusivity or to any
of the criteria set forth in paragraph
(c)(4) of this section. The petition for
exclusivity shall also include a
statement setting forth the petitioner’s
reasons to support a finding that the
contract is in the public interest,
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addressing each of the five factors set
forth in paragraph (c)(4) of this section.
(ii) Any competing multichannel
video programming distributor affected
by the proposed exclusivity may file an
opposition to the petition for exclusivity
within thirty (30) days of the date on
which the petition is placed on public
notice, setting forth its reasons to
support a finding that the contract is not
in the public interest under the criteria
set forth in paragraph (c)(4) of this
section. Any such formal opposition
must be served on petitioner on the
same day on which it is filed with the
Commission.
(iii) The petitioner may file a response
within ten (10) days of receipt of any
formal opposition. The Commission will
then approve or deny the petition for
exclusivity.
*
*
*
*
*
Alternative 3:
5. Section 76.1002 is amended by
revising paragraph (c)(2) through (3) and
(5), removing and reserving paragraph
(c)(6), and adding paragraph (c)(7) to
read as follows:
§ 76.1002 Specific unfair practices
prohibited.
*
*
*
*
*
(c) * * *
(2) Served areas. No cable operator
shall enter into any exclusive contracts,
or engage in any practice, activity or
arrangement tantamount to an exclusive
contract, for satellite cable programming
or satellite broadcast programming with
a satellite cable programming vendor in
which a cable operator has an
attributable interest or a satellite
broadcast programming vendor in
which a cable operator has an
attributable interest, with respect to
areas served by a cable operator, unless:
(i) The Commission determines in
accordance with paragraph (c)(4) of this
section that such contract, practice,
activity or arrangement is in the public
interest; or
(ii) Such contract, practice, activity or
arrangement pertains to a geographic
area for which a petition for sunset has
been granted pursuant to paragraph
(c)(7) of this section.
(3) Specific arrangements:
Subdistribution agreements—(i)
Unserved and served areas. No cable
operator shall enter into any
subdistribution agreement or
arrangement for satellite cable
programming or satellite broadcast
programming with a satellite cable
programming vendor in which a cable
operator has an attributable interest or a
satellite broadcast programming vendor
in which a cable operator has an
attributable interest, with respect to
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areas served or unserved by a cable
operator, unless such agreement or
arrangement complies with the
limitations set forth in paragraph
(c)(3)(ii) of this section.
(ii) Limitations on subdistribution
agreements. No cable operator engaged
in subdistribution of satellite cable
programming or satellite broadcast
programming may require a competing
multichannel video programming
distributor to
(A) Purchase additional or unrelated
programming as a condition of such
subdistribution; or
(B) Provide access to private property
in exchange for access to programming.
In addition, a subdistributor may not
charge a competing multichannel video
programming distributor more for said
programming than the satellite cable
programming vendor or satellite
broadcast programming vendor itself
would be permitted to charge. Any cable
operator acting as a subdistributor of
satellite cable programming or satellite
broadcast programming must respond to
a request for access to such
programming by a competing
multichannel video programming
distributor within fifteen (15) days of
the request. If the request is denied, the
competing multichannel video
programming distributor must be
permitted to negotiate directly with the
satellite cable programming vendor or
satellite broadcast programming vendor.
(iii) Exceptions. Paragraph (c)(3) of
this section shall not apply in a
geographic area where a petition for
sunset has been granted pursuant to
paragraph (c)(7) of this section.
*
*
*
*
*
(5) Commission approval required. (i)
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 must submit a
‘‘Petition for Exclusivity’’ to the
Commission and receive approval from
the Commission:
(A) Prior to enforcing or entering into
an exclusive contract, or practice,
activity or arrangement tantamount to
an exclusive contract, subject to
paragraph (c)(2) of this section that
pertains to a geographic area for which
a petition for sunset has not been
granted pursuant to paragraph (c)(7) of
this section; and
(B) To preclude the filing of
complaints alleging that an exclusive
contract, or practice, activity or
arrangement tantamount to an exclusive
contract, with respect to areas served by
a cable operator violates section 628(b)
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of the Communications Act of 1934, as
amended, and § 76.1001(a) of this part,
or section 628(c)(2)(B) of the
Communications Act of 1934, as
amended, and paragraph (b) of this
section.
(ii) The petition for exclusivity shall
contain those portions of the contract
relevant to exclusivity, including:
(A) A description of the programming
service;
(B) The extent and duration of
exclusivity proposed; and
(C) Any other terms or provisions
directly related to exclusivity or to any
of the criteria set forth in paragraph
(c)(4) of this section. The petition for
exclusivity shall also include a
statement setting forth the petitioner’s
reasons to support a finding that the
contract is in the public interest,
addressing each of the five factors set
forth in paragraph (c)(4) of this section.
(iii) Any competing multichannel
video programming distributor affected
by the proposed exclusivity may file an
opposition to the petition for exclusivity
within thirty (30) days of the date on
which the petition is placed on public
notice, setting forth its reasons to
support a finding that the contract is not
in the public interest under the criteria
set forth in paragraph (c)(4) of this
section. Any such formal opposition
must be served on petitioner on the
same day on which it is filed with the
Commission.
(iv) The petitioner may file a response
within ten (10) days of receipt of any
formal opposition. The Commission will
then approve or deny the petition for
exclusivity.
*
*
*
*
*
(7) Petition for Sunset. 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 remove
the prohibition on exclusive contracts
and practices, activities or arrangements
tantamount to an exclusive contract set
forth in paragraph (c)(2) of this section
may submit a ‘‘Petition for Sunset’’ to
the Commission.
(i) The petition for sunset shall
specify the geographic area for which a
sunset of the prohibition set forth in
paragraph (c)(2) of this section is sought
and shall include a statement setting
forth the petitioner’s reasons to support
a finding that such prohibition is not
necessary to preserve and protect
competition and diversity in the
distribution of video programming in
the geographic area specified.
(ii) Any competing multichannel
video programming distributor or other
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interested party affected by the petition
for sunset may file an opposition to the
petition within forty-five (45) days of
the date on which the petition is placed
on public notice, setting forth its
reasons to support a finding that such
prohibition continues to be necessary to
preserve and protect competition and
diversity in the distribution of video
programming. Any such formal
opposition must be served on the
petitioner on the same day on which it
is filed with the Commission.
(iii) The petitioner may file a response
within fifteen (15) days of receipt of any
formal opposition.
(iv) If the Commission finds that the
prohibition is not necessary to preserve
and protect competition and diversity in
the distribution of video programming,
then the prohibition set forth in
paragraph (c)(2) of this section shall no
longer apply in the geographic area
specified in the decision of the
Commission.
*
*
*
*
*
Alternative 4:
6. Section 76.1002 is amended by
revising paragraphs (c)(2) (3), (5) and (6)
to read as follows:
§ 76.1002 Specific unfair practices
prohibited.
*
*
*
*
*
(c) * * *
(2) Served areas. No cable operator
shall enter into any exclusive contracts,
or engage in any practice, activity or
arrangement tantamount to an exclusive
contract, for satellite cable programming
or satellite broadcast programming that
meets the definition of a Regional Sports
Network as defined in § 76.1000(n) of
this part with 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, with respect to
areas served by a cable operator, unless
the Commission determines in
accordance with paragraph (c)(4) of this
section that such contract, practice,
activity or arrangement is in the public
interest.
(3) Specific arrangements:
Subdistribution agreements—(i)
Unserved areas. No cable operator shall
enter into any subdistribution
agreement or arrangement for satellite
cable programming or satellite broadcast
programming with a satellite cable
programming vendor in which a cable
operator has an attributable interest or a
satellite broadcast programming vendor
in which a cable operator has an
attributable interest, for distribution to
persons in areas not served by a cable
operator as of October 5, 1992, unless
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24333
such agreement or arrangement
complies with the limitations set forth
in paragraph (c)(3)(iii) of this section.
(ii) Served areas. No cable operator
shall enter into any subdistribution
agreement or arrangement for satellite
cable programming or satellite broadcast
programming that meets the definition
of a Regional Sports Network as defined
in § 76.1000(n) of this part with 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, with respect to
areas served by a cable operator, unless
such agreement or arrangement
complies with the limitations set forth
in paragraph (c)(3)(iii) of this section.
(iii) Limitations on subdistribution
agreements. No cable operator engaged
in subdistribution of satellite cable
programming or satellite broadcast
programming may require a competing
multichannel video programming
distributor to
(A) Purchase additional or unrelated
programming as a condition of such
subdistribution; or
(B) Provide access to private property
in exchange for access to programming.
In addition, a subdistributor may not
charge a competing multichannel video
programming distributor more for said
programming than the satellite cable
programming vendor or satellite
broadcast programming vendor itself
would be permitted to charge. Any cable
operator acting as a subdistributor of
satellite cable programming or satellite
broadcast programming must respond to
a request for access to such
programming by a competing
multichannel video programming
distributor within fifteen (15) days of
the request. If the request is denied, the
competing multichannel video
programming distributor must be
permitted to negotiate directly with the
satellite cable programming vendor or
satellite broadcast programming vendor.
*
*
*
*
*
(5) Commission approval required. (i)
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 must submit a
‘‘Petition for Exclusivity’’ to the
Commission and receive approval from
the Commission:
(A) Prior to enforcing or entering into
an exclusive contract, or practice,
activity or arrangement tantamount to
an exclusive contract, subject to
paragraph (c)(2) of this section; and
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(B) To preclude the filing of
complaints alleging that an exclusive
contract, or practice, activity or
arrangement tantamount to an exclusive
contract, with respect to areas served by
a cable operator violates section 628(b)
of the Communications Act of 1934, as
amended, and § 76.1001(a) of this part,
or section 628(c)(2)(B) of the
Communications Act of 1934, as
amended, and paragraph (b) of this
section.
(ii) The petition for exclusivity shall
contain those portions of the contract
relevant to exclusivity, including:
(A) A description of the programming
service;
(B) The extent and duration of
exclusivity proposed; and
(C) Any other terms or provisions
directly related to exclusivity or to any
of the criteria set forth in paragraph
(c)(4) of this section. The petition for
exclusivity shall also include a
statement setting forth the petitioner’s
reasons to support a finding that the
contract is in the public interest,
addressing each of the five factors set
forth in paragraph (c)(4) of this section.
(iii) Any competing multichannel
video programming distributor affected
by the proposed exclusivity may file an
opposition to the petition for exclusivity
within thirty (30) days of the date on
which the petition is placed on public
notice, setting forth its reasons to
support a finding that the contract is not
in the public interest under the criteria
set forth in paragraph (c)(4) of this
section. Any such formal opposition
must be served on petitioner on the
same day on which it is filed with the
Commission.
(iv) The petitioner may file a response
within ten (10) days of receipt of any
formal opposition. The Commission will
then approve or deny the petition for
exclusivity.
(6) Sunset provision. The prohibition
of exclusive contracts set forth in
paragraph (c)(2) of this section shall
cease to be effective on October 5, 2017,
unless the Commission finds, during a
proceeding to be conducted during the
year preceding such date, that said
prohibition continues to be necessary to
preserve and protect competition and
diversity in the distribution of video
programming.
*
*
*
*
*
7. Section 76.1003 is amended by
revising paragraph (e)(1) to read as
follows:
§ 76.1003
Program access proceedings.
*
*
*
*
*
(e) Answer. (1) Except as otherwise
provided or directed by the
Commission, any cable operator,
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Jkt 226001
satellite cable programming vendor or
satellite broadcast programming vendor
upon which a program access complaint
is served under this section shall answer
within twenty (20) days of service of the
complaint, provided that the answer
shall be filed within forty-five (45) days
of service of the complaint if the
complaint alleges a violation of section
628(b) of the Communications Act of
1934, as amended, or § 76.1001(a). To
the extent that a cable operator, satellite
cable programming vendor or satellite
broadcast programming vendor
expressly references and relies upon a
document or documents in asserting a
defense or responding to a material
allegation, such document or documents
shall be included as part of the answer.
*
*
*
*
*
Alternative 1:
8. Section 76.1004 is amended by
revising paragraph (b) to read as follows:
§ 76.1004 Applicability of program access
rules to common carriers and affiliates.
*
*
*
*
*
(b) Sections 76.1002(c)(1) through (3)
shall be applied to a common carrier or
its affiliate that provides video
programming by any means directly to
subscribers as follows: No common
carrier or its affiliate that provides video
programming directly to subscribers
shall engage in any practice or activity
or enter into any understanding or
arrangement, including exclusive
contracts, with a satellite cable
programming vendor or satellite
broadcast programming vendor for
satellite cable programming or satellite
broadcast programming that prevents a
multichannel video programming
distributor from obtaining such
programming from any satellite cable
programming vendor in which a
common carrier or its affiliate has an
attributable interest, or any satellite
broadcasting vendor in which a
common carrier or its affiliate has an
attributable interest for distribution to
persons in areas not served by a cable
operator as of October 5, 1992.
Alternative 2:
9. Section 76.1004 is amended by
revising paragraph (b) to read as follows:
§ 76.1004 Applicability of program access
rules to common carriers and affiliates.
*
*
*
*
*
(b) Sections 76.1002(c)(1) through (3)
shall be applied to a common carrier or
its affiliate that provides video
programming by any means directly to
subscribers in such a way that such
common carrier or its affiliate shall be
generally restricted from entering into
an exclusive arrangement for satellite
cable programming or satellite broadcast
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Sfmt 4702
programming with a satellite cable
programming vendor in which a
common carrier or its affiliate has an
attributable interest or a satellite
broadcast programming vendor in
which a common carrier or its affiliate
has an attributable interest, unless the
arrangement pertains to an area served
by a cable system as of October 5, 1992,
and:
(1) The Commission determines in
accordance with § 76.1002(c)(4) that
such arrangement is in the public
interest; or
(2) Such arrangement pertains to a
geographic area for which a petition for
sunset has been granted pursuant to
§ 76.1002(c)(7) of this part.
Alternative 3:
10. Section 76.1004 is amended by
revising paragraph (b) to read as follows:
§ 76.1004 Applicability of program access
rules to common carriers and affiliates.
*
*
*
*
*
(b) Sections 76.1002(c)(1) through (3)
shall be applied to a common carrier or
its affiliate that provides video
programming by any means directly to
subscribers in such a way that such
common carrier or its affiliate shall be
generally restricted from entering into
an exclusive arrangement for satellite
cable programming or satellite broadcast
programming that meets the definition
of a Regional Sports Network as defined
in § 76.1000(n) with a satellite cable
programming vendor in which a
common carrier or its affiliate has an
attributable interest or a satellite
broadcast programming vendor in
which a common carrier or its affiliate
has an attributable interest, unless the
arrangement pertains to an area served
by a cable system as of October 5, 1992,
and the Commission determines in
accordance with § 76.1002(c)(4) that
such arrangement is in the public
interest.
Alternative 1:
11. Section 76.1507 is amended by
removing and reserving paragraph (a)(2)
and revising paragraphs (a)(3) and (b) to
read as follows:
§ 76.1507 Competitive access to satellite
cable programming.
(a) * * *
(3) Section 76.1002(c)(3)(i) through
(ii) shall only restrict the conduct of an
open video system operator, its affiliate
that provides video programming on its
open video system and a satellite cable
programming vendor in which an open
video system operator has an
attributable interest, as follows: No open
video system operator shall enter into
any subdistribution agreement or
arrangement for satellite cable
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Federal Register / Vol. 77, No. 78 / Monday, April 23, 2012 / Proposed Rules
programming or satellite broadcast
programming with a satellite cable
programming vendor in which an open
video system operator has an
attributable interest or a satellite
broadcast programming vendor in
which an open video system operator
has an attributable interest for
distribution to persons in areas not
served by a cable operator as of October
5, 1992 unless such agreement or
arrangement complies with the
limitations set forth in
§ 76.1002(c)(3)(ii).
(b) No open video system
programming provider in which a cable
operator has an attributable interest
shall engage in any practice or activity
or enter into any understanding or
arrangement, including exclusive
contracts, with a satellite cable
programming vendor or satellite
broadcast programming vendor for
satellite cable programming or satellite
broadcast programming that prevents a
multichannel video programming
distributor from obtaining such
programming from any satellite cable
programming vendor in which a cable
operator has an attributable interest, or
any satellite broadcasting vendor in
which a cable operator has an
attributable interest for distribution to
person in areas not served by a cable
operator as of October 5, 1992.
Alternative 2:
12. Section 76.1507 is amended by
revising paragraphs (a)(2) and (3) and
paragraph (b)(2) to read as follows:
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§ 76.1507 Competitive access to satellite
cable programming.
(a) * * *
(2) Section 76.1002(c)(2) shall only
restrict the conduct of an open video
system operator, its affiliate that
provides video programming on its open
video system and a satellite cable
programming vendor in which an open
video system operator has an
attributable interest, as follows: No open
video system operator or its affiliate that
provides video programming on its open
video system shall enter into any
exclusive contracts, or engage in any
practice, activity or arrangement
tantamount to an exclusive contract, for
satellite cable programming or satellite
broadcast programming with a satellite
cable programming vendor in which an
open video system operator has an
attributable interest or a satellite
broadcast programming vendor, unless:
(i) The Commission determines in
accordance with § 76.1002(c)(4) that
such a contract, practice, activity or
arrangement is in the public interest; or
(ii) Such a contract, practice, activity
or arrangement pertains to a geographic
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area for which a petition for sunset has
been granted pursuant to
§ 76.1002(c)(7).
(3) Section 76.1002(c)(3)(i) through
(ii) shall only restrict the conduct of an
open video system operator, its affiliate
that provides video programming on its
open video system and a satellite cable
programming vendor in which an open
video system operator has an
attributable interest, as follows: No open
video system operator shall enter into
any subdistribution agreement or
arrangement for satellite cable
programming or satellite broadcast
programming with a satellite cable
programming vendor in which an open
video system operator has an
attributable interest or a satellite
broadcast programming vendor in
which an open video system operator
has an attributable interest, with respect
to areas served or unserved by a cable
operator, unless such agreement or
arrangement complies with the
limitations set forth in
§ 76.1002(c)(3)(ii), except as provided in
§ 76.1002(c)(3)(iii).
(b) * * *
(2) Enter into any exclusive contracts,
or engage in any practice, activity or
arrangement tantamount to an exclusive
contract, for satellite cable programming
or satellite broadcast programming with
a satellite cable programming vendor in
which a cable operator has an
attributable interest or a satellite
broadcast programming vendor, unless:
(i) The Commission determines in
accordance with § 76.1002(c)(4) that
such a contract, practice, activity or
arrangement is in the public interest; or
(ii) Such a contract, practice, activity
or arrangement pertains to a geographic
area for which a petition for sunset has
been granted pursuant to
§ 76.1002(c)(7).
Alternative 3:
13. Section 76.1507 is amended by
revising paragraph (a)(2) through (3) and
paragraph (b)(2) to read as follows:
§ 76.1507 Competitive access to satellite
cable programming.
(a) * * *
(2) Section 76.1002(c)(2) shall only
restrict the conduct of an open video
system operator, its affiliate that
provides video programming on its open
video system and a satellite cable
programming vendor in which an open
video system operator has an
attributable interest, as follows: No open
video system operator or its affiliate that
provides video programming on its open
video system shall enter into any
exclusive contracts, or engage in any
practice, activity or arrangement
tantamount to an exclusive contract, for
PO 00000
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24335
satellite cable programming or satellite
broadcast programming that meets the
definition of a Regional Sports Network
as defined in § 76.1000(n) of this part
with a satellite cable programming
vendor in which an open video system
operator has an attributable interest or a
satellite broadcast programming vendor,
unless the Commission determines in
accordance with § 76.1002(c)(4) that
such a contract, practice, activity or
arrangement is in the public interest.
(3) Section 76.1002(c)(3)(i) through
(ii) shall only restrict the conduct of an
open video system operator, its affiliate
that provides video programming on its
open video system and a satellite cable
programming vendor in which an open
video system operator has an
attributable interest, as follows:
(i) Unserved areas. No open video
system operator shall enter into any
subdistribution agreement or
arrangement for satellite cable
programming or satellite broadcast
programming with a satellite cable
programming vendor in which an open
video system operator has an
attributable interest or a satellite
broadcast programming vendor in
which an open video system operator
has an attributable interest for
distribution to persons in areas not
served by a cable operator as of October
5, 1992 unless such agreement or
arrangement complies with the
limitations set forth in
§ 76.1002(c)(3)(iii).
(ii) Served areas. No open video
system operator shall enter into any
subdistribution agreement or
arrangement for satellite cable
programming or satellite broadcast
programming that meets the definition
of a Regional Sports Network as defined
in § 76.1000(n) of this part with a
satellite cable programming vendor in
which an open video system operator
has an attributable interest or a satellite
broadcast programming vendor in
which an open video system operator
has an attributable interest, with respect
to areas served by a cable operator,
unless such agreement or arrangement
complies with the limitations set forth
in § 76.1002(c)(3)(iii).
(b) * * *
(2) Enter into any exclusive contracts,
or engage in any practice, activity or
arrangement tantamount to an exclusive
contract, for satellite cable programming
or satellite broadcast programming that
meets the definition of a Regional Sports
Network as defined in § 76.1000(n) of
this part with a satellite cable
programming vendor in which a cable
operator has an attributable interest or a
satellite broadcast programming vendor,
unless the Commission determines in
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accordance with § 76.1002(c)(4) that
such a contract, practice, activity or
arrangement is in the public interest.
[FR Doc. 2012–8991 Filed 4–20–12; 8:45 am]
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]]>Agencies
[Federal Register Volume 77, Number 78 (Monday, April 23, 2012)]
[Proposed Rules]
[Pages 24302-24336]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2012-8991]
[[Page 24301]]
Vol. 77
Monday,
No. 78
April 23, 2012
Part III
Federal Communications Commission
-----------------------------------------------------------------------
47 CFR Part 76
Revision of the Commission's Program Access Rules; Proposed Rule
Federal Register / Vol. 77 , No. 78 / Monday, April 23, 2012 /
Proposed Rules
[[Page 24302]]
-----------------------------------------------------------------------
FEDERAL COMMUNICATIONS COMMISSION
47 CFR Part 76
[MB Docket Nos. 12-68, 07-18, and 05-192; FCC 12-30]
Revision of the Commission's Program Access Rules
AGENCY: Federal Communications Commission.
ACTION: Proposed rule.
-----------------------------------------------------------------------
SUMMARY: In this document, the Commission seeks comment on whether to
retain, sunset, or relax one of the several protections afforded to
multichannel video programming distributors by the program access
rules--the prohibition on exclusive contracts involving satellite-
delivered, cable-affiliated programming. The current exclusive contract
prohibition is scheduled to expire on October 5, 2012. The Commission
also seeks comment on potential revisions to its program access rules
to better address alleged violations, including potentially
discriminatory volume discounts and uniform price increases.
DATES: Comments are due on or before June 22, 2012; reply comments are
due on or before July 23, 2012. Written PRA comments on the proposed
information collection requirements contained herein must be submitted
by the public, Office of Management and Budget (OMB), and other
interested parties on or before June 22, 2012.
ADDRESSES: You may submit comments, identified by MB Docket Nos. 12-68,
07-18, and 05-192 by any of the following methods:
Federal Communications Commission's Web site: https://www.fcc.gov/cgb/ecfs/. Follow the instructions for submitting comments.
Mail: Filings can be sent by hand or messenger delivery,
by commercial overnight courier, or by first-class or overnight U.S.
Postal Service mail (although the Commission continues to experience
delays in receiving U.S. Postal Service mail). All filings must be
addressed to the Commission's Secretary, Office of the Secretary,
Federal Communications Commission.
People with Disabilities: Contact the FCC to request
reasonable accommodations (accessible format documents, sign language
interpreters, CART, etc.) by email: FCC504@fcc.gov or phone: (202) 418-
0530 or TTY: (202) 418-0432.
In addition to filing comments with the Secretary, a copy of any
PRA comments on the proposed information collection requirements
contained herein should be submitted to the Federal Communications
Commission via email to PRA@fcc.gov and to Nicholas A. Fraser, Office
of Management and Budget, via email to Nicholas_A._Fraser@omb.eop.gov
or via fax at (202) 395-5167. For detailed instructions for submitting
comments and additional information on the rulemaking process, see the
SUPPLEMENTARY INFORMATION section of this document.
FOR FURTHER INFORMATION CONTACT: For additional information, contact
David Konczal, David.Konczal@fcc.gov, or Diana Sokolow,
Diana.Sokolow@fcc.gov, of the Media Bureau, Policy Division, (202) 418-
2120. For additional information concerning the information collection
requirements contained in this document, send an email to PRA@fcc.gov
or contact Cathy Williams at (202) 418-2918. To view or obtain a copy
of this information collection request (ICR) submitted to OMB: (1) Go
to this OMB/GSA Web page: https://www.reginfo.gov/public/do/PRAMain, (2)
look for the section of the Web page called ``Currently Under Review,''
(3) click on the downward-pointing arrow in the ``Select Agency'' box
below the ``Currently Under Review'' heading, (4) select ``Federal
Communications Commission'' from the list of agencies presented in the
``Select Agency'' box, (5) click the ``Submit'' button to the right of
the ``Select Agency'' box, and (6) when the list of FCC ICRs currently
under review appears, look for the OMB control number of this ICR as
shown in the Supplementary Information section below (or its title if
there is no OMB control number) and then click on the ICR Reference
Number. A copy of the FCC submission to OMB will be displayed.
SUPPLEMENTARY INFORMATION: This is a summary of document FCC 12-30,
adopted and released on March 20, 2012. The full text 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 email to fcc504@fcc.gov or call
the Commission's Consumer and Governmental Affairs Bureau at (202) 418-
0530 (voice), (202) 418-0432 (TTY).
This document contains proposed information collection
requirements. As part of its continuing effort to reduce paperwork
burden and as required by the Paperwork Reduction Act (PRA) of 1995 (44
U.S.C. 3501-3520), the Federal Communications Commission invites the
general public and other Federal agencies to comment on the following
information collection(s). Public and agency comments are due June 22,
2012.
Comments should address: (a) Whether the proposed collection of
information is necessary for the proper performance of the functions of
the Commission, including whether the information shall have practical
utility; (b) the accuracy of the Commission's burden estimates; (c)
ways to enhance the quality, utility, and clarity of the information
collected; and (d) ways to minimize the burden of the collection of
information on the respondents, including the use of automated
collection techniques or other forms of information technology; 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 seek specific comment
on how we might ``further reduce the information collection burden for
small business concerns with fewer than 25 employees.''
OMB Control Number: 3060-0888.
Title: Section 1.221, Notice of hearing; appearances; Section
1.229, Motions to enlarge, change, or delete issues; Section 1.248,
Prehearing conferences; hearing conferences; Section 76.7, Petition
Procedures; Section 76.9, Confidentiality of Proprietary Information;
Section 76.61, Dispute Concerning Carriage; Section 76.914, Revocation
of Certification; Section 76.1001, Unfair Practices; Section 76.1002,
Specific Unfair Practices Prohibited; Section 76.1003, Program Access
Proceedings; Section 76.1302, Carriage Agreement Proceedings; Section
76.1513, Open Video Dispute Resolution.
Form Number: Not applicable.
Type of Review: Revision of a currently approved collection.
Respondents: Businesses or other for-profit; not-for-profit
institutions.
Number of Respondents and Responses: 828 respondents; 828
responses.
Estimated Time per Response: 6.8 to 98 hours.
Frequency of Response: On occasion reporting requirement; third
party disclosure requirement.
[[Page 24303]]
Obligation to Respond: Required to obtain or retain benefits. The
statutory authority for this collection of information is contained in
sections 4(i), 303(r), 616, and 628 of the Communications Act of 1934,
as amended.
Total Annual Burden: 43,387 hours.
Total Annual Costs: $4,719,600.
Privacy Act Impact Assessment: No impact.
Nature and Extent of Confidentiality: A party that wishes to have
confidentiality for proprietary information with respect to a
submission it is making to the Commission must file a petition pursuant
to the pleading requirements in Sec. 76.7 and use the method described
in Sec. Sec. 0.459 and 76.9 to demonstrate that confidentiality is
warranted.
Needs and Uses: On March 20, 2012, the Commission adopted a Notice
of Proposed Rulemaking (``NPRM''), Revision of the Commission's Program
Access Rules, MB Docket No. 12-68, FCC 12-30. In the NPRM, the
Commission seeks comment on (i) whether to retain, sunset, or relax the
prohibition on exclusive contracts between cable operators and
satellite-delivered, cable-affiliated programming vendors; and (ii)
potential revisions to the program access rules to better address
alleged violations, including potentially discriminatory volume
discounts and uniform price increases.
The NPRM proposes to add or revise the following rule sections,
which contain proposed information collection requirements: 47 CFR
76.1002(c)(5), 47 CFR 76.1002(c)(7), 76.1003(e)(1).
If adopted, 47 CFR 76.1002(c)(5) would provide that, to the extent
the exclusive contract prohibition sunsets or is relaxed, a 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 must submit a
``Petition for Exclusivity'' to the Commission and receive approval
from the Commission to preclude the filing of complaints alleging that
an exclusive contract, or practice, activity or arrangement tantamount
to an exclusive contract, with respect to areas served by a cable
operator violates Section 628(b) of the Communications Act of 1934, as
amended, and Section 76.1001(a) of the Commission's Rules, or Section
628(c)(2)(B) of the Communications Act of 1934, as amended, and Section
76.1002(b) of the Commission's Rules. The proposed rule specifies the
requirements for the petition for exclusivity, provides that a
competing multichannel video programming distributor affected by the
proposed exclusivity may file an opposition to the petition for
exclusivity within thirty (30) days of the date on which the petition
is placed on public notice, and provides that the petitioner may file a
response within ten (10) days of receipt of any formal opposition.
If adopted, 47 CFR 76.1002(c)(7) would provide that, to the extent
the exclusive contract prohibition is relaxed, a 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 remove
the prohibition on exclusive contracts and practices, activities or
arrangements tantamount to an exclusive contract set forth in Section
76.1002(c)(2) of the Commission's Rules may submit a ``Petition for
Sunset'' to the Commission. If the Commission finds that the
prohibition is not necessary to preserve and protect competition and
diversity in the distribution of video programming, then the
prohibition set forth in Section 76.1002(c)(2) of the Commission's
Rules shall no longer apply in the geographic area specified in the
decision of the Commission. The proposed rule specifies the
requirements for the petition for sunset, provides that a competing
multichannel video programming distributor or other interested party
affected by the petition for sunset may file an opposition to the
petition within forty-five (45) days of the date on which the petition
is placed on public notice, and provides that the petitioner may file a
response within fifteen (15) days of receipt of any formal opposition.
If adopted, 47 CFR 76.1003(e)(1) would provide that a cable
operator, satellite cable programming vendor, or satellite broadcast
programming vendor upon which a program access complaint is served
shall answer within forty-five (45) days of service of the complaint if
the complaint alleges a violation of Section 628(b) of the
Communications Act of 1934, as amended, or Section 76.1001(a) of the
Commission's rules. In addition, to the extent the exclusive contract
prohibition sunsets or is relaxed, an increase in the number of
complaints alleging a violation of Section 628(b) of the Communications
Act of 1934, as amended, or Section 76.1001(a) of the Commission's
rules is expected.
The Commission is seeking OMB approval for the proposed information
collection requirements. All other remaining existing information
collection requirements would stay as they are, and the various burden
estimates would be revised to reflect the new and revised rules noted
above.
Summary of the Notice of Proposed Rulemaking
I. Introduction
We issue this Notice of Proposed Rulemaking (``NPRM'') to seek
comment on (i) whether to retain, sunset, or relax one of the several
protections afforded to multichannel video programming distributors
(``MVPDs'') by the program access rules--the prohibition on exclusive
contracts involving satellite-delivered, cable-affiliated programming;
and (ii) potential revisions to our program access rules to better
address alleged violations, including potentially discriminatory volume
discounts and uniform price increases. This NPRM promotes the goals of
Executive Order 13579 and the Commission's plan adopted thereto,
whereby the Commission analyzes rules that may be outmoded,
ineffective, insufficient, or excessively burdensome and determines
whether any such regulations should be modified, streamlined, expanded,
or repealed.
2. In areas served by a cable operator, Section 628(c)(2)(D) of the
Communications Act of 1934, as amended (the ``Act''), generally
prohibits exclusive contracts for satellite cable programming or
satellite broadcast programming between any cable operator and any
cable-affiliated programming vendor (the ``exclusive contract
prohibition'').\1\ The exclusive contract prohibition applies to all
satellite-delivered, cable-affiliated programming and presumes that an
exclusive contract will cause competitive harm in every case,
regardless of the type of programming at issue. The exclusive contract
prohibition applies only to programming which is delivered via
satellite; it does not apply to programming which is delivered via
[[Page 24304]]
terrestrial facilities.\2\ In January 2010, the Commission adopted
rules providing for the processing of complaints alleging that an
``unfair act'' involving terrestrially delivered, cable-affiliated
programming violates Section 628(b) of the Act. Thus, while an
exclusive contract involving satellite-delivered, cable-affiliated
programming is generally prohibited, an exclusive contract involving
terrestrially delivered, cable-affiliated programming is permitted
unless the Commission finds in response to a complaint that it violates
Section 628(b) of the Act.
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\1\ See 47 U.S.C. 548(c)(2)(D). An exclusive contract for
satellite cable programming or satellite broadcast programming
between a cable operator and a cable-affiliated programming vendor
that provides satellite-delivered programming would violate Section
628(c)(2)(D) even if the cable operator that is a party to the
contract is not affiliated with the cable-affiliated programming
vendor that is a party to the contract. See Implementation of the
Cable Television Consumer Protection and Competition Act of 1992--
Development of Competition and Diversity in Video Programming
Distribution: Section 628(c)(5) of the Communications Act: Sunset of
Exclusive Contract Prohibition, Report and Order, 22 FCC Rcd 17791,
17840-41, paras. 70-72 (2007) (``2007 Extension Order''), aff'd sub
nom. Cablevision Sys. Corp. et al. v. FCC, 597 F.3d 1306, 1314-15
(D.C. Cir. 2010) (``Cablevision I''); see also Cable Horizontal and
Vertical Ownership Limits, Further Notice of Proposed Rulemaking, 23
FCC Rcd 2134, 2195-96, para. 145 (2008).
\2\ In this NPRM, we refer to ``satellite cable programming''
and ``satellite broadcast programming'' collectively as ``satellite-
delivered programming.''
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3. In Section 628(c)(5) of the Act, Congress provided that the
exclusive contract prohibition would cease to be effective on October
5, 2002, unless the Commission found that it ``continues to be
necessary to preserve and protect competition and diversity in the
distribution of video programming.'' In June 2002, the Commission found
that the exclusive contract prohibition continued to be necessary to
preserve and protect competition and diversity and retained the
exclusive contract prohibition for five years, until October 5, 2007.
The Commission provided that, during the year before the expiration of
the five-year extension, it would conduct a second review to determine
whether the exclusive contract prohibition continued to be necessary to
preserve and protect competition and diversity in the distribution of
video programming. After conducting such a review, the Commission in
September 2007 concluded that the exclusive contract prohibition was
still necessary, and it retained the prohibition for five more years,
until October 5, 2012. The Commission again provided that, during the
year before the expiration of the five-year extension, it would conduct
a third 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.
4. Accordingly, in this NPRM, we initiate the third review of the
necessity of the exclusive contract prohibition. Below, we present
certain data on the current state of competition in the video
distribution market and the video programming market, and we invite
commenters to submit more recent data or empirical analyses. We seek
comment on whether current conditions in the video marketplace support
retaining, sunsetting, or relaxing the exclusive contract prohibition.
To the extent that the data do not support retaining the exclusive
contract prohibition as it exists today, we seek comment on whether we
can preserve and protect competition in the video distribution market
by either:
Sunsetting the exclusive contract prohibition in its
entirety and instead relying solely on existing protections provided by
the program access rules that will not sunset: (i) The case-by-case
consideration of exclusive contracts pursuant to Section 628(b) of the
Act; (ii) the prohibition on discrimination in Section 628(c)(2)(B) of
the Act; and (iii) the prohibition on undue or improper influence in
Section 628(c)(2)(A) of the Act; or
Relaxing the exclusive contract prohibition by (i)
establishing a process whereby a cable operator or satellite-delivered,
cable-affiliated programmer can seek to remove the prohibition on a
market-by-market basis based on the extent of competition in the
market; (ii) retaining the prohibition only for satellite-delivered,
cable-affiliated Regional Sports Networks (``RSNs'') and any other
satellite-delivered, cable-affiliated programming that the record here
establishes as being important for competition and non-replicable and
having no good substitutes; and/or (iii) other ways commenters propose.
We seek comment also on (i) how to implement a sunset (complete or
partial) to minimize any potential disruption to consumers; (ii) the
First Amendment implications of the alternatives discussed herein;
(iii) the costs and benefits of the alternatives discussed herein; and
(iv) the impact of a sunset on existing merger conditions.
5. In addition, we seek comment below on potential improvements to
the program access rules to better address potential violations. With
the exception of certain procedural revisions and the previous
extensions of the exclusive contract prohibition, the program access
rules have remained largely unchanged in the almost two decades since
the Commission originally adopted them in 1993. We seek comment on,
among other things, whether our rules adequately address potentially
discriminatory volume discounts and uniform price increases and, if
not, how these rules should be revised to address these concerns.
II. Background
A. Program Access Protections
6. Congress adopted the program access provisions as part of the
Cable Television Consumer Protection and Competition Act of 1992
(``1992 Cable Act''). Congress was concerned that, in order to compete
effectively, new market entrants would need access to satellite-
delivered, cable-affiliated programming. At that time, Congress found
that increased horizontal concentration of cable operators and
extensive vertical integration \3\ created an imbalance of power, both
between cable operators and program vendors and between incumbent cable
operators and their multichannel competitors. As a result of this
imbalance of power, Congress determined that the development of
competition among MVPDs was limited and consumer choice was restricted.
Congress concluded that cable-affiliated programmers had the incentive
and ability to favor their affiliated cable operators over other,
unaffiliated, MVPDs with the effect that competition and diversity in
the distribution of video programming would not be preserved and
protected.
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\3\ Vertical integration means the combined ownership of cable
systems and suppliers of cable programming.
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7. The program access provisions afford several protections to
MVPDs in their efforts to compete in the video distribution market.
Sections 628(b), 628(c)(1), and 628(d) of the Act grant the Commission
broad authority to prohibit ``unfair acts'' of cable operators,
satellite cable programming vendors in which a cable operator has an
attributable interest, and satellite broadcast programming vendors that
have the ``purpose or effect'' of ``hinder[ing] significantly or
prevent[ing]'' any MVPD from providing ``satellite cable programming or
satellite broadcast programming to subscribers or consumers.'' \4\ In
addition to this broad grant of authority, Congress in Section
628(c)(2) of the Act required the Commission to adopt specific
regulations to specify particular conduct that is prohibited by Section
628(b), i.e., certain unfair acts involving satellite-delivered, cable-
affiliated programming. In contrast to Section 628(b), the unfair acts
listed in Section 628(c)(2) pertaining to satellite-delivered
programming are presumed to harm competition in every case, and MVPDs
alleging such unfair acts are not required to demonstrate harm. First,
Section 628(c)(2)(A) requires the Commission to prohibit efforts by
cable operators to unduly influence the decision of cable-affiliated
programming vendors that provide satellite-delivered programming to
sell their programming to competitors (``undue influence'').
[[Page 24305]]
Second, Section 628(c)(2)(B) requires the Commission to prohibit
discrimination among MVPDs by cable-affiliated programming vendors that
provide satellite-delivered programming in the prices, terms, and
conditions for sale of programming (``discrimination''). Third,
Sections 628(c)(2)(C)-(D) require the Commission to prohibit exclusive
contracts between cable operators and cable-affiliated programming
vendors that provide satellite-delivered programming, subject to
certain exceptions. In this proceeding, our focus is on the protection
provided under Section 628(c)(2)(D), although we discuss the other
statutory protections to the extent they bear on our consideration of
whether to allow the exclusive contract provision to sunset.
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\4\ Throughout this NPRM, we use the term ``unfair act'' as
shorthand for the phrase ``unfair methods of competition or unfair
or deceptive acts or practices.'' 47 U.S.C. 548(b); see 47 CFR
76.1001.
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B. Enactment of the Exclusive Contract Prohibition With a Sunset
Provision
8. In the 1992 Cable Act, Congress drew a distinction between
exclusive contracts for satellite-delivered, cable-affiliated
programming in areas not served by a cable operator as of October 5,
1992 (``unserved areas'') and areas served by a cable operator as of
that date (``served areas''). In unserved areas, Congress adopted a per
se prohibition on exclusive contracts between cable operators and
satellite-delivered, cable-affiliated programmers. In served areas,
however, the prohibition on exclusive contracts is not absolute;
rather, an exclusive contract is permissible if the Commission
determines that it ``is in the public interest.'' Congress thus
recognized that, in served areas, 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. To enforce or enter into an exclusive contract in a served area,
a cable operator or a satellite-delivered, cable-affiliated programmer
must submit a ``Petition for Exclusivity'' to the Commission for
approval.\5\
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\5\ See 47 CFR 76.1002(c)(5). Ten Petitions for Exclusivity have
been filed since enactment of the 1992 Cable Act. Of these
petitions, two were granted, three were denied, and five were
dismissed at the request of the parties. See New England Cable News
Channel, Memorandum Opinion and Order, 9 FCC Rcd 3231 (1994)
(granting exclusivity petition); Time Warner Cable, Memorandum
Opinion and Order, 9 FCC Rcd 3221 (1994) (denying exclusivity
petition for Courtroom Television (``Court TV'')); Outdoor Life
Network and Speedvision Network, Memorandum Opinion and Order, 13
FCC Rcd 12226 (CSB 1998) (denying exclusivity petition for the
Outdoor Life Network (``OLN'') and Speedvision Network
(``Speedvision'')); Cablevision Industries Corp. and Sci-Fi Channel,
Memorandum Opinion and Order, 10 FCC Rcd 9786 (CSB 1995) (denying
exclusivity petition for the Sci-Fi Channel); NewsChannel,
Memorandum Opinion and Order, 10 FCC Rcd 691 (CSB 1994) (granting
exclusivity petition).
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9. In addition to this prior approval process, Congress also
recognized that exclusivity can be a legitimate business practice where
there is sufficient competition. Accordingly, in Section 628(c)(5),
Congress provided that the exclusive contract prohibition in served
areas:
Shall cease to be effective 10 years after the date of enactment
of this section, unless the Commission finds, in a proceeding
conducted during the last year of such 10-year period, that such
prohibition continues to be necessary to preserve and protect
competition and diversity in the distribution of video programming.
The 1992 Cable Act was enacted on October 5, 1992. Accordingly, the
``sunset provision'' of Section 628(c)(5) would have triggered the
expiration of the exclusive contract prohibition on October 5, 2002,
absent a Commission finding that the prohibition remained necessary to
preserve and protect competition and diversity in the distribution of
video programming.
C. 2002 Extension of the Exclusive Contract Prohibition
10. In October 2001, approximately a year before the initial
expiration of the exclusive contract prohibition, the Commission sought
comment on whether the exclusive contract prohibition remained
necessary to preserve and protect competition and diversity in the
distribution of video programming. Ultimately, the Commission concluded
that the prohibition remained ``necessary.'' The Commission explained
that, based on marketplace conditions at the time, cable-affiliated
programmers retained the incentive and ability to withhold programming
from unaffiliated MVPDs with the effect that competition and diversity
in the distribution of video programming would be impaired without the
prohibition. The Commission found as follows:
The competitive landscape of the market for the distribution of
multichannel video programming has changed for the better since
1992. The number of MVPDs that compete with cable and the number of
subscribers served by those MVPDs have increased significantly. We
find, however, that the concern on which Congress based the program
access provisions--that in the absence of regulation, vertically
integrated programmers have the ability and incentive to favor
affiliated cable operators over nonaffiliated cable operators and
programming distributors using other technologies such that
competition and diversity in the distribution of video programming
would not be preserved and protected--persists in the current
marketplace.
11. Accordingly, the Commission extended the exclusive contract
prohibition for five years (i.e., through October 5, 2007). The
Commission 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 continued to be necessary to preserve and protect
competition and diversity in distribution of video programming.
D. 2007 Extension of the Exclusive Contract Prohibition and D.C.
Circuit Decision
12. In February 2007, the Commission again sought comment on
whether the prohibition remained necessary to preserve and protect
competition and diversity in the distribution of video programming. For
a second time, the Commission concluded that the prohibition remained
``necessary.''
13. The Commission conducted its analysis of the exclusive contract
prohibition in five parts. First, in considering the applicable
standard of review, the Commission determined that it may use its
predictive judgment, economic theory, and specific factual evidence in
determining whether, ``in the absence of the prohibition, competition
and diversity in the distribution of video programming would not be
preserved and protected.'' If such an inquiry is answered in the
affirmative, then the Commission concluded that it must extend the
exclusive contract prohibition. Second, the Commission examined the
changes that had occurred in the video programming and distribution
markets since 2002, and it found that, while there had been some
procompetitive trends, the concerns on which Congress based the program
access provisions persisted in the marketplace. Third, the Commission
examined the incentive and ability of cable-affiliated programmers to
favor their affiliated cable operators over competitive MVPDs with the
effect that competition and diversity in the distribution of video
programming would not be preserved and protected.\6\ The Commission
determined that this incentive and ability existed with the effect that
the exclusive contract prohibition remained necessary to preserve and
protect
[[Page 24306]]
competition and diversity in the distribution of video programming. The
Commission recognized, however, ``that Congress intended for the
exclusive contract prohibition to sunset at a point when market
conditions warrant'' and specifically ``caution[ed] competitive MVPDs
to take any steps they deem appropriate to prepare for the eventual
sunset of the prohibition, including further investments in their own
programming.'' Fourth, the Commission considered commenters' arguments
that the exclusive contract prohibition is both overinclusive and
underinclusive with respect to the types of programming and MVPDs it
covers, and the Commission declined either to narrow or broaden the
prohibition. Fifth, the Commission considered the appropriate length of
time for an extension of the exclusive contract prohibition, and it
again concluded that the prohibition should be extended for five years.
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\6\ For purposes of this NPRM, the term ``competitive MVPD''
refers to MVPDs that compete with incumbent cable operators in the
video distribution market, such as DBS operators and wireline video
providers.
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14. Accordingly, the Commission extended the exclusive contract
prohibition for five years (i.e., until October 5, 2012). As in 2002,
the Commission provided that, during the year before the expiration of
the five-year extension of the exclusive contract prohibition (i.e.,
between October 2011 and October 2012), it would conduct a third 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.
15. Cablevision Systems Corporation (``Cablevision'') and Comcast
Corporation (``Comcast'') (Cablevision and Comcast, collectively, the
``Petitioners'') filed petitions for review of the 2007 Extension Order
with the D.C. Circuit. The D.C. Circuit addressed Petitioners'
objections to three conclusions that the Commission reached in the 2007
Extension Order. First, Petitioners objected to the Commission's
interpretation of the term ``necessary'' as used in the sunset
provision as requiring the exclusive contract prohibition to continue
``if, in the absence of the prohibition, competition and diversity in
the distribution of video programming would not be preserved and
protected.'' The D.C. Circuit found that the term ``necessary'' is
``not language of plain meaning'' and that the Commission's
interpretation was ``well within the Commission's discretion'' under
Chevron. Second, Petitioners contended that ``the Commission did not
rely on substantial evidence when it concluded that vertically
integrated cable companies would enter into competition-harming
exclusive contracts if the exclusivity prohibition were allowed to
lapse.'' The D.C. Circuit disagreed, finding that the Commission relied
on substantial evidence and stating that ``conclusions based on [the
Commission's] predictive judgment and technical analysis are just the
type of conclusions that warrant deference from this Court.'' While
there had been substantial changes in the MVPD market since 1992, the
court described the transformation as a ``mixed picture'' and deferred
to the Commission's analysis, which concluded that vertically
integrated cable companies retained a substantial ability and incentive
to withhold ``must have'' programming. Finally, Petitioners objected to
the Commission's failure to narrow the exclusive contract prohibition
to apply only to certain types of cable companies or certain types of
programming. The D.C. Circuit found that the Commission's decision to
refrain from narrowing the exclusive contract prohibition was not
arbitrary and capricious, but rather was a reasonable decision ``to
adhere to Congress's statutory design.''
16. While the D.C. Circuit affirmed the 2007 Extension Order, it
also provided some comment on the Commission's subsequent review of the
exclusive contract prohibition. Specifically, the D.C. Circuit stated
as follows:
We anticipate that cable's dominance in the MVPD market will
have diminished still more by the time the Commission next reviews
the prohibition, and expect that at that time the Commission will
weigh heavily Congress's intention that the exclusive contract
prohibition will eventually sunset. Petitioners are correct in
pointing out that the MVPD market has changed drastically since
1992. We expect that if the market continues to evolve at such a
rapid pace, the Commission will soon be able to conclude that the
[exclusive contract] prohibition is no longer necessary to preserve
and protect competition and diversity in the distribution of video
programming.
E. TWC/Time Warner and Comcast/NBCU Transactions
17. Since the 2007 Extension Order, two transactions have had a
particular impact on the video distribution market and the video
programming market: (i) The separation of Time Warner Cable Inc.
(``TWC''; a cable operator) from Time Warner Inc. (``Time Warner''; an
owner of satellite-delivered, national programming networks); \7\ and
(ii) the joint venture between Comcast (a vertically integrated cable
operator) and NBC Universal, Inc. (``NBCU''; an owner of broadcast
stations and satellite-delivered, national programming networks).\8\
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\7\ See Applications for Consent to the Assignment and/or
Transfer of Control of Licenses, Time Warner Inc., Assignor/
Transferor, and Time Warner Cable Inc., Assignee/Transferree,
Memorandum Opinion and Order, 24 FCC Rcd 879 (MB, WCB, WTB, IB,
2009) (``Time Warner Order'').
\8\ See Applications of Comcast Corporation, General Electric
Company and NBC Universal, Inc. For Consent to Assign Licenses and
Transfer Control of Licensees, Memorandum Opinion and Order, 26 FCC
Rcd 4238 (2011) (``Comcast/NBCU Order'').
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18. In the Time Warner Order, the Media, Wireline Competition,
Wireless Telecommunications, and International Bureaus (the
``Bureaus'') granted the applications for the assignment and transfer
of control of certain Commission licenses and authorizations from Time
Warner to TWC. Before the transaction, Time Warner controlled TWC, but
after their separation, Time Warner no longer has an ownership interest
in TWC or its subsidiary licensees. As a result of the transaction,
Time Warner's programming networks are no longer affiliated with TWC,
thus reducing the number of satellite-delivered, national programming
networks that are cable-affiliated. The Bureaus found that the
transaction would benefit the public interest by lessening the extent
to which TWC is vertically integrated and by eliminating Time Warner's
vertical integration. In declining to adopt a condition applying the
program access rules to Time Warner post-transaction, the Commission
explained that the underlying premise of the program access rules would
no longer apply because Time Warner and TWC would no longer have the
incentive and ability to discriminate in favor of each other. If an
MVPD believed that Time Warner or TWC violated the program access rules
while they were vertically integrated, however, the Commission stated
that the program access complaint process would provide an avenue for
relief.
19. In contrast, another recent transaction has led to an increased
number of satellite-delivered, national programming networks that are
cable-affiliated. In the Comcast/NBCU Order, the Commission granted the
application of Comcast, General Electric Company (``GE''), and NBCU to
assign and transfer control of broadcast, satellite, and other radio
licenses from GE to Comcast. The transaction created a joint venture
(``Comcast-NBCU'') combining NBCU's broadcast, cable programming,
online content, movie studio, and other businesses with some of
Comcast's cable programming and online content businesses. Before the
transaction, both Comcast and NBCU either wholly or partly owned a
number of satellite-
[[Page 24307]]
delivered, national programming networks. As a result of the
transaction, programming networks that were previously affiliated with
NBCU became affiliated with the joint venture, thus increasing the
number of satellite-delivered, national programming networks that are
cable-affiliated.
20. In evaluating post-transaction MVPD access to Comcast-NBCU
programming, the Commission concluded that the transaction ``creates
the possibility that Comcast-NBCU, either temporarily or permanently,
will block Comcast's video distribution rivals from access to the video
programming content the [joint venture] would come to control or raise
programming costs to its video distribution rivals.'' The Commission
found the joint venture would ``have the power to implement an
exclusionary strategy,'' and that ``successful exclusion * * * of video
distribution rivals would likely harm competition by allowing Comcast
to obtain or (to the extent it may already possess it) maintain market
power.'' Additionally, the Commission concluded that an
``anticompetitive exclusionary program access strategy would often be
profitable for Comcast.'' Accordingly, the Commission imposed
conditions designed to ameliorate the potential harms, including a
baseball-style arbitration condition that allows an aggrieved MVPD to
submit a dispute with Comcast-NBCU over the terms and conditions of
carriage of programming to commercial arbitration.
III. Discussion
A. Exclusive Contract Prohibition
21. We seek comment on whether to retain, sunset, or relax the
exclusive contract prohibition.\9\ Our discussion of this issue below
proceeds in ten main parts. First, we present relevant data for
assessing whether to retain, sunset, or relax the exclusive contract
prohibition, and we invite commenters to submit more recent data or
empirical analyses. Second, we ask commenters to assess whether these
data, as updated and supplemented by commenters, support either
retaining, sunsetting, or relaxing the exclusive contract prohibition.
Third, we seek comment on how each of these three options (i.e.,
retaining, sunsetting, or relaxing the exclusive contract prohibition)
will impact the creation of new national, regional, and local
programming. Fourth, to the extent that the data do not support
retaining the exclusive contract prohibition as it exists today, we
seek comment on whether we can nonetheless preserve and protect
competition in the video distribution market by either (i) sunsetting
the prohibition in its entirety and relying solely on existing
protections provided by the program access rules that will not sunset;
or (ii) relaxing the exclusive contract prohibition, such as through
removal of the prohibition on a market-by-market basis based on the
extent of competition in the market or by retaining the prohibition
only for satellite-delivered, cable-affiliated RSNs and other
satellite-delivered, cable-affiliated ``must have'' programming. Fifth,
we seek input on how a sunset (complete or partial) of the exclusive
contract prohibition will impact consumers, and how to implement a
sunset to minimize any potential disruption to consumers. Sixth, we ask
commenters to assess whether and how each of the three options comports
with the First Amendment. Seventh, we ask commenters to consider the
costs and benefits associated with each of the three options. Eighth,
to the extent the exclusive contract prohibition sunsets (wholly or
partially), we propose to eliminate existing restrictions on exclusive
subdistribution agreements between cable operators and satellite-
delivered, cable-affiliated programmers. Ninth, we propose that any
amendments we adopt herein to our rules pertaining to exclusive
contracts between cable operators and satellite-delivered, cable-
affiliated programmers in served areas will apply equally to existing
rules pertaining to exclusive contracts involving common carriers and
Open Video Systems (``OVS'') in served areas. Finally, we seek comment
on how conditions adopted in previous merger orders may be impacted if
the exclusive contract prohibition were to sunset (wholly or
partially).
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\9\ Because the Commission seeks comment on alternative
approaches to the exclusive contract prohibition--retaining,
sunsetting, or relaxing (either through market-based petitions or
retaining a prohibition for regional sports networks)--the Proposed
Rules attached hereto include potential rule amendments based on
each of these alternatives.
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1. Relevant Data in Considering a Sunset of the Exclusive Contract
Prohibition
22. In evaluating whether the exclusive contract prohibition
``continues to be necessary to preserve and protect competition and
diversity in the distribution of video programming,'' the Commission
has previously examined data on the status of competition in the video
programming market and the video distribution market. Specifically, in
the 2007 Extension Order, the Commission examined ``the changes that
[had] 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.'' The Commission examined data relating to (i) the number
of MVPD subscribers nationwide and in regional markets attributable to
each category of MVPD, including cable operators, as well as the extent
of regional clustering by cable operators; \10\ (ii) the number of
satellite-delivered, national programming networks and the percentage
of such networks that are cable-affiliated; and (iii) the number of
regional programming networks and the percentage of such networks that
are cable-affiliated. We believe it is appropriate to consider similar
data in determining whether the exclusive contract prohibition remains
necessary today. We also seek comment on whether our assessment of the
exclusivity prohibition should consider data concerning other types of
``satellite cable programming.''
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\10\ ``Clustering'' refers to ``an increase over time in the
number of cable subscribers and homes passed by a single MSO in
particular markets (accomplished via internal growth as well as by
acquisitions).'' 2007 Extension Order, 22 FCC Rcd at 17831, para.
56.
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23. In an effort to aid such an evaluation, we have prepared the
tables in Appendices A through C of the NPRM, which contain data from
previously released Commission documents as well as other sources.
Appendices A through C are available at https://transition.fcc.gov/Daily_Releases/Daily_Business/2012/db0320/FCC-12-30A1.pdf. The first
column of data, entitled ``1st Annual Report,'' focuses on data from
the 1st Annual Report on video competition.\11\ The second column of
data, entitled ``2002 Extension,'' focuses on data from the 2002
Extension Order.\12\ The third column of data, entitled ``2007
Extension,'' focuses on data from the 2007 Extension Order.\13\ The
fourth and
[[Page 24308]]
final column of data, entitled ``Most Recent,'' focuses on the most
recent data available. We believe that considering data from these four
time periods will enable us to view the evolution of the video
distribution and video programming markets over time. We invite
commenters to submit more recent data in each of the categories
identified, as well as data regarding the extent of regional clustering
of cable operators, and any additional data the Commission should
consider in its review.
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\11\ Implementation of Section 19 of the Cable Television
Consumer Protection and Competition Act of 1992: Annual Assessment
of the Status of Competition in the Market for the Delivery of Video
Programming, First Report, 9 FCC Rcd 7442 (1994) (``1st Annual
Report'') (containing data as of 1994).
\12\ Implementation of the Cable Television Consumer Protection
and Competition Act of 1992--Development of Competition and
Diversity in Video Programming Distribution: Section 628(c)(5) of
the Communications Act: Sunset of Exclusive Contract Prohibition,
Report and Order, 17 FCC Rcd 12124 (2002) (``2002 Extension Order'')
(citing data from the Annual Assessment of the Status of Competition
in the Market for the Delivery of Video Programming, Eighth Annual
Report, 17 FCC Rcd 1244 (2002) (containing data as of June 2001)
(``8th Annual Report'')).
\13\ See 2007 Extension Order, 22 FCC Rcd 17791 (citing data
from the Annual Assessment of the Status of Competition in the
Market for the Delivery of Video Programming, Twelfth Annual Report,
21 FCC Rcd 2503 (2006) (containing data as of June 2005) (``12th
Annual Report'')).
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a. Nationwide and Regional MVPD Subscribership
24. In past reviews of the exclusive contract prohibition, the
Commission has assessed the percentage of MVPD subscribers nationwide
that are attributable to each category of MVPD, including cable
operators. The data in Appendix A indicate that the percentage of MVPD
subscribers nationwide attributable to cable operators has declined
over time, with the current percentage at approximately 58.5 percent, a
decrease of 8.5 percentage points since the 2007 Extension Order. On a
regional basis, the market share held by cable operators in Designated
Market Areas (``DMAs'') varies considerably, from a high in the 80
percent range to a low in the 20 percent range.
25. We seek comment on the extent to which we should consider
online distributors of video programming in our analysis. The
Commission recently stated that online distributors of video
programming ``offer a tangible opportunity to bring customers
substantial benefits'' and that they ``can provide and promote more
programming choices, viewing flexibility, technological innovation and
lower prices.'' While the Commission concluded that consumers today do
not perceive online distributors as a substitute for traditional MVPD
service, it stated that online distributors are a ``potential
competitive threat'' and that they ``must have a similar array of
programming'' if they are to ``fully compete against a traditional
MVPD.'' In addition, in connection with the Commission's forthcoming
14th Annual Report on video competition, the Commission sought comment
on the emergence of online video distributors.\14\ In light of possible
cord-cutting and cord-shaving trends, we ask commenters to provide
information regarding the effect that online distributors have had, or
may have, on nationwide and regional MVPD subscription rates. Our task
under Section 628(c)(5) is to determine whether the exclusive contract
prohibition is necessary to preserve and protect ``competition,'' not
competitors. Thus, to the extent that we conclude that competition in
the video distribution market and the video programming market is
currently sufficient to warrant sunsetting or relaxing the exclusive
contract prohibition, how, if at all, should the emergence of a new
category of potential competitor that could benefit from the exclusive
contract prohibition impact our analysis?
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\14\ See Annual Assessment of the Status of Competition in the
Market for the Delivery of Video Programming, Further Notice of
Inquiry, 26 FCC Rcd 14091, 14112-13, paras. 52-55 (2011) (``Further
Notice for the 14th Report'').
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b. Satellite-Delivered, Cable-Affiliated, National Programming Networks
26. In past reviews of the exclusive contract prohibition, the
Commission has assessed the percentage of satellite-delivered, national
programming networks that are cable-affiliated and the number of cable-
affiliated networks that are among the Top 20 satellite-delivered,
national programming networks as ranked by either subscribership or
prime time ratings. The data in Appendix B indicate that, since the
2007 Extension Order, (i) the percentage of satellite-delivered,
national programming networks that are cable-affiliated has declined
from 22 percent to approximately 14.4 percent; (ii) the number of
cable-affiliated networks among the Top 20 satellite-delivered,
national programming networks as ranked by subscribership has increased
from six to seven; and (iii) the number of cable-affiliated networks
among the Top 20 satellite-delivered, national programming networks as
ranked by average prime time ratings has remained at seven. We note
that the calculation of the percentage of satellite-delivered, national
programming networks that are cable-affiliated is based on our estimate
of a total of 800 satellite-delivered, national programming networks
available to MVPDs today.\15\ We seek comment on the reasonableness of
this estimate and how, if at all, it should be revised. We also note
that these data include satellite-delivered, national programming
networks affiliated with Comcast, many of which (i.e., the ``Comcast-
controlled networks'') are subject to program access conditions adopted
in the Comcast/NBCU Order and will continue to be subject to these
conditions for six more years (until January 2018, assuming they are
not modified earlier in response to a petition) even if the exclusive
contract prohibition were to sunset.\16\ If the
[[Page 24309]]
Comcast-controlled networks are excluded, the data in Appendix B
indicate that, since the 2007 Extension Order, (i) the percentage of
satellite-delivered, national programming networks that are cable-
affiliated has declined from 22 percent to approximately 11 percent;
(ii) the number of cable-affiliated networks among the Top 20
satellite-delivered, national programming networks as ranked by
subscribership has remained at six; and (iii) the number of cable-
affiliated networks among the Top 20 satellite-delivered, national
programming networks as ranked by average prime time ratings has fallen
from seven to five. We seek comment on whether and how to account for
different versions of the same network in our analysis. For example, to
the extent a particular network is available in standard definition
(``SD''), high definition (``HD''), 3D, and video-on-demand (``VOD''),
should this be counted as four different networks for purposes of our
analysis? If so, and if both cable-affiliated and unaffiliated networks
are treated similarly, how will this impact the percentage of networks
that are cable-affiliated?
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\15\ In the 2007 Extension Order, the Commission found that 22
percent of satellite-delivered, national programming networks were
affiliated with cable operators. See 2007 Extension Order, 22 FCC
Rcd at 17802-03, para. 18. This percentage was based on a total of
531 satellite-delivered, national programming networks, as stated in
the 12th Annual Report. See 12th Annual Report, 21 FCC Rcd at 2509-
10, para. 21 and 2575, para. 157 (containing data as of June 2005).
For purposes of the analysis in this NPRM, we increase this figure
to 800 based on two factors. First, since 2005, we estimate that
approximately 150 high-definition versions of networks previously
provided only in standard definition have been launched. See SNL
Kagan, High-Definition Cable Networks Getting More Carriage, Feb.
17, 2009; NCTA, Cable Networks, available at https://www.ncta.com/Organizations.aspx? type=orgtyp2&contentId=2907. Second, we estimate
a net addition of approximately 100 networks, reflecting the
increase over time in the number of national programming networks.
See 2007 Extension Order, 22 FCC Rcd at 17836-37, para. 64 (noting
the increase in national programming networks over time); Annual
Assessment of the Status of Competition in the Market for the
Delivery of Video Programming, Thirteenth Annual Report, 24 FCC Rcd
542, 550, para. 20 (2009) (``13th Annual Report'') (noting an
increase of 34 programming networks between June 2005 and June
2006); id. at 731-36, Table C-4 (listing planned networks); SNL
Kagan, Economics of Basic Cable Networks (2011 Edition), at 27
(listing cable networks launched after 2005).
\16\ See Comcast/NBCU Order, 26 FCC Rcd at 4358, Appendix A,
Condition II. The program access conditions reflected in Condition
II apply to ``C-NBCU Programmers,'' which are defined as ``Comcast,
C-NBCU, their Affiliates and any entity for which Comcast or C-NBCU
manages or controls the licensing of Video Programming and/or any
local broadcast television station on whose behalf Comcast or NBCU
negotiates retransmission consent.'' Id. at 4356, Appendix A,
Definitions. An ``Affiliate'' of any person means ``any person
directly or indirectly controlling, controlled by, or under common
control with, such person at the time at which the determination of
affiliation is being made.'' Id. at 4355, Appendix A, Definitions.
The issue of whether a particular cable network qualifies as a ``C-
NBCU Programmer'' subject to these conditions is a fact-specific
determination. For purposes of the estimates in this NPRM, and with
the exception of the iN DEMAND networks discussed below, we assume
that any network in which Comcast or NBCU holds a 50 percent or
greater interest is a ``C-NBCU Programmer'' subject to these
conditions. See Appendix B, Table 2 and Appendix C, Table 2
(available at https://transition.fcc.gov/Daily_Releases/Daily_Business/2012/db0320/FCC-12-30A1.pdf). We refer to these networks as
``Comcast-controlled networks.'' We refer to other networks in which
Comcast or NBCU holds a less than 50 percent interest as ``Comcast-
affiliated networks,'' which we assume for purposes of the estimates
in this NPRM are not ``C-NBCU Programmers'' subject to the program
access conditions adopted in the Comcast/NBCU Order, but are subject
to the program access rules, including the exclusive contract
prohibition. See id. Although Comcast has stated that it has a 53.7
percent interest in iN DEMAND, it has also stated that it ``cannot
control decisionmaking at iN DEMAND.'' See Application of General
Electric and Comcast, MB Docket No. 10-56 (Jan. 28, 2010), at 20
(stating that Comcast has a 53.7 percent interest in iN DEMAND)
(``GE/Comcast/NBCU Application''); Letter from Michael H. Hammer,
Counsel for Comcast, to Marlene H. Dortch, FCC, MB Docket No. 10-56
(Oct. 22, 2010), at 2 n.5. Accordingly, for purposes of the
estimates in this NPRM, we consider the iN DEMAND networks to be
``Comcast-affiliated'' networks, and not ``Comcast-controlled''
networks subject to the program access conditions adopted in the
Comcast/NBCU Order. Nothing in this NPRM should be read to state or
imply any position as to whether any particular network qualifies or
does not qualify as a ``C-NBCU Programmer.''
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c. Satellite-Delivered, Cable-Affiliated, Regional Programming Networks
27. In addition to national programming networks, the Commission in
past reviews of the exclusive contract prohibition has assessed the
extent to which regional programming networks are cable-affiliated. As
an initial matter, we note that some regional networks may be
terrestrially delivered and therefore not subject to the exclusive
contract prohibition applicable to satellite-delivered, cable-
affiliated programming. The data in Appendix C pertaining to regional
networks do not distinguish between terrestrially delivered and
satellite-delivered networks. We ask commenters to provide data
regarding which cable-affiliated, regional programming networks,
including RSNs, are satellite-delivered and which are terrestrially
delivered.
28. For purposes of our analysis, we distinguish between RSNs and
other regional networks. The Commission has previously held that RSNs
have no good substitutes, are important for competition, and are non-
replicable. As set forth in Appendix C, recent data indicate that the
number of RSNs that are cable-affiliated has increased from 18 to 31
(not including HD versions) since the 2007 Extension Order, and the
percentage of all RSNs that are cable-affiliated has increased from 46
percent to approximately 52.3 percent. Are there networks that satisfy
the Commission's definition of an RSN that are not included in the list
of RSNs in Appendix C, such as certain local and regional networks that
show NCAA Division I college football and basketball games? Should we
include these and other similar networks, including unaffiliated
networks, in our list of RSNs in Appendix C? In addition, are there
networks included in the list of RSNs in Appendix C that do not satisfy
the Commission's definition of an RSN? For example, do networks such as
the Big Ten Network, PAC-12 Network, and The Mtn.--Mountain West Sports
Network, which show NCAA Division I college football and basketball
games of a particular college conference but not necessarily those of a
particular team, satisfy the Commission's definition of an RSN? As
required by this definition, do these and similar networks (i)
distribute programming in ``a limited geographic region'' and (ii)
carry the minimum amount of covered programming for an individual
sports team.
29. We note that the figures in Appendix C include RSNs that are
affiliated with Comcast, many of which are subject to program access
conditions adopted in the Comcast/NBCU Order and which will continue to
be subject to these conditions for six more years (until January 2018,
assuming they are not modified earlier in response to a petition) even
if the exclusive contract prohibition were to sunset. If the Comcast-
controlled RSNs are excluded, the data in Appendix C indicate that the
number of RSNs that are cable-affiliated has increased from 18 to 22
(not including HD versions) since the 2007 Extension Order, and the
percentage of RSNs that are cable-affiliated has decreased slightly
from 46 percent to approximately 44.1 percent. With respect to non-RSN
regional programming, we ask commenters to provide recent data on the
number of these networks and the percentage of them that are cable-
affiliated.
d. Other Types of Cable-Affiliated ``Satellite Cable Programming''
30. While the Commission in past reviews of the exclusive contract
prohibition has considered linear and VOD programming networks, we also
seek comment on whether there are other types of ``satellite cable
programming'' or ``satellite broadcast programming'' that we should
consider in assessing the exclusive contract prohibition. The Act
defines ``satellite cable programming'' as (i) ``video programming''
(ii) which is ``transmitted via satellite'' and (iii) which is
``primarily intended for the direct receipt by cable operators for
their retransmission to cable subscribers.'' The Act defines ``video
programming'' as ``programming provided by, or generally considered
comparable to programming provided by, a television broadcast
station.'' Are cable operators affiliated with forms of ``video
programming'' that meet the other two requirements of the definition of
``satellite cable programming,'' but that are not necessarily
considered programming ``networks''? For example, to the extent that
cable operators own or are affiliated with film libraries and other
content, to what extent does this content qualify as ``satellite cable
programming''? If so, how should this factor into our consideration of
the exclusive contract prohibition?
2. Assessing Whether the Data Support Retaining, Sunsetting, or
Relaxing the Exclusive Contract Prohibition
31. We seek comment on whether the data set forth herein, as
updated and supplemented by commenters, support retaining, sunsetting,
or relaxing the exclusive contract prohibition. In addition to the
specific questions stated herein, we seek comment on any new trends in
the industry or any other issues that are relevant to our determination
of whether the status of the MVPD marketplace today supports the sunset
of the exclusive contract prohibition. We specifically seek comment on
the effect of the development of online video on the marketplace. We
also request information on the impact of the Comcast/NBCU and TWC/Time
Warner transactions on the MVPD marketplace. To what extent, if any,
should these transactions inform our analysis of whether to retain,
sunset, or relax the exclusive contract prohibition? What other recent
developments in the MVPD market since our 2007 review should we
consider in deciding whether to retain, sunset, or relax the exclusive
contract prohibition?
[[Page 24310]]
32. In analyzing whether the exclusive contract prohibition remains
necessary, the Commission has stated that it will ``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.'' Accordingly, in light of the data noted above and as
updated and supplemented by commenters, we seek comment on whether
cable-affiliated programmers would have the ability and incentive to
favor their affiliated cable operators absent the exclusive contract
prohibition in today's marketplace with the effect that competition and
diversity in the distribution of video programming would not be
preserved and protected. How has the exclusive contract prohibition
impacted the general state of competition among MVPDs in the video
distribution market? How would a sunset or relaxation of the exclusive
contract prohibition affect consumers and competition in the video
distribution market, and how would a sunset or relaxation affect the
potential entry of new competitors in the market? Is there any basis
for treating satellite-delivered, cable-affiliated programming and
terrestrially delivered, cable-affiliated programming differently with
respect to the exclusive contract prohibition? Are there differences
between satellite-delivered programming and terrestrially delivered
programming that would result in cable operators having a greater
ability and incentive to favor affiliates providing satellite-delivered
programming that warrants extension of the exclusive contract
prohibition? To the extent the data support retaining the exclusive
contract prohibition as it exists today, we seek comment on the
appropriate length of an extension. Should the sunset date be five
years from the current sunset date (i.e., until October 5, 2017),
consistent with the two prior five-year extensions?
a. Ability
33. In assessing whether cable-affiliated programmers have the
``ability'' to favor their affiliated cable operators with the effect
that competition and diversity in the distribution of video programming
would not be preserved and protected, the Commission has explained that
it considers whether satellite-delivered, cable-affiliated programming
remains programming that is necessary for competition and for which
there are no good substitutes. In the 2007 Extension Order, the
Commission found that there were no good substitutes for certain
satellite-delivered, cable-affiliated programming, and that such
programming remained necessary for viable competition in the video
distribution market. Accordingly, the Commission concluded that cable-
affiliated programmers retained ``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 absent the rule.'' In reaching this conclusion,
the Commission explained that ``[w]hat 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.'' Moreover, the Commission acknowledged that ``there
exists a continuum of vertically integrated programming, `ranging from
services for which there may be substitutes (the absence of which from
a rival MVPD's program lineup would have little impact), to those for
which there are imperfect substitutes, to those for which there are no
close substitutes at all (the absence of which from a rival MVPD's
program lineup would have a substantial negative impact).' ''
34. We seek comment on whether competitive MVPDs' access to
satellite-delivered, cable-affiliated programming remains necessary
today to preserve and protect competition in the video distribution
marketplace. Is there any basis to depart from the Commission's
conclusion in the 2007 Extension Order that satellite-delivered, cable-
affiliated programming remains necessary for viable competition in the
video distribution market? We seek comment on whether and how the
continued decline in the number and percentage of national programming
networks that are cable-affiliated should impact our analysis, if at
all. Despite a similar decline between the 2002 Extension Order and the
2007 Extension Order, the Commission in the 2007 Extension Order
nonetheless found that ``cable-affiliated programming continues to
represent some of the most popular and significant programming
available today'' and that ``vertically integrated programming, if
denied to cable's competitors, would adversely affect competition in
the video distribution market.'' Is this also true today, considering
that the data in Appendices B and C indicate that, since the 2007
Extension Order, (i) the percentage of satellite-delivered, national
programming networks that are cable-affiliated has declined from 22
percent to approximately 14.4 percent; (ii) the number of cable-
affiliated networks among the Top 20 satellite-delivered, national
programming networks as ranked by subscribership has increased from six
to seven; (iii) the number of cable-affiliated networks among the Top
20 satellite-delivered, national programming networks as ranked by
average prime time ratings has remained at seven; and (iv) the number
of cable-affiliated RSNs has increased from 18 to 31 (not including HD
versions)?
35. To what extent should we consider Comcast-controlled networks
in our review of the exclusive contract prohibition? Because these
networks will continue to be subject to program access conditions
adopted in the Comcast/NBCU Order for six more years (until January
2018, assuming they are not modified earlier in response to a petition)
even if the exclusive contract prohibition were to sunset, is there any
basis to consider them in assessing whether to retain, sunset, or relax
the exclusive contract prohibition? With the Comcast-controlled
networks excluded, the data in Appendices B and C indicate that, since
the 2007 Extension Order, (i) the number of cable-affiliated networks
among the Top 20 satellite-delivered, national programming networks as
ranked by subscribership has remained at six; (ii) the number of cable-
affiliated networks among the Top 20 satellite-delivered, national
programming networks as ranked by average prime time ratings has fallen
from seven to five; and (iii) the number of cable-affiliated RSNs has
increased from 18 to 21 (not including HD versions). With the Comcast-
controlled networks excluded from the analysis, is it still accurate to
characterize cable-affiliated programming as ``some of the most popular
and significant programming available today,'' the absence of which
from an MVPD's offering would ``adversely affect competition in the
video distribution market.'' Rather than focusing on the number and
percentage of networks that are cable-affiliated, is it more critical
to assess the extent to which cable-affiliated programming remains
popular and without substitutes? We note that, in the Comcast-NBCU
Order, the Commission
[[Page 24311]]
found that the ``the loss of Comcast-NBCU programming * * * would harm
rival video distributors, reducing their ability or incentive to
compete with Comcast for subscribers'' and that ``[t]his is
particularly true for marquee programming, which includes a broad
portfolio of national cable programming in addition to RSN and local
broadcast programming; such programming is important to Comcast's
competitors and without good substitutes from other sources.'' Is there
any basis to reach a different conclusion with respect to satellite-
delivered programming affiliated with other cable operators?
36. We ask commenters contending that access to certain satellite-
delivered, cable-affiliated programming remains necessary to preserve
and protect competition in the video distribution market to present
reliable, empirical data supporting their positions, rather than merely
labeling such programming as ``must have.'' While the Commission has
recognized that some satellite-delivered, cable-affiliated programming
has substitutes and that exclusive contracts involving such programming
are unlikely to impact competition, are there certain categories of
programming, such as RSNs, that we can presume have no close
substitutes and that are necessary for competition? Does the wide
variation in the importance and substitutability of satellite-
delivered, cable-affiliated programming call for a case-by-case or
categorical assessment of programming, rather than a broad rule that
applies to all programming equally?
37. We also seek comment on whether a sunset of the exclusive
contract prohibition would result in increased vertical integration in
the video marketplace. If cable operators are permitted to enter into
exclusive contracts with satellite-delivered, cable-affiliated
programmers, will this result in the acquisition of existing
programming networks by cable operators, thereby increasing vertical
integration? How can we accurately predict any such expected increase
as we assess whether to retain, sunset, or relax the exclusive contract
prohibition? Are cable operators more likely to acquire established
networks that provide popular and non-substitutable programming, rather
than creating new networks or investing in fledgling networks? Are
there certain categories of programming networks that are more likely
to be acquired or launched by cable operators? For example, we note
that TWC recently announced that it will launch two RSNs in 2012
featuring the games of the Los Angeles Lakers, including the first
Spanish-language RSN. Are cable operators expected to make further
investments in RSNs in the future, especially if the exclusive contract
prohibition were to sunset?
b. Incentive
38. In evaluating whether vertically integrated programmers retain
the incentive to favor their affiliated cable operators over
competitive MVPDs, the Commission analyzes ``whether there continues to
be an economic rationale for vertically integrated programmers to
engage in exclusive agreements with cable operators that will cause []
anticompetitive harms.'' The Commission has explained that, if a
vertically integrated cable operator withholds programming from
competitors, it can recoup profits lost at the upstream level (i.e.,
lost licensing fees and advertising revenues) by increasing the number
of subscribers of its downstream MVPD division. The Commission
explained that, 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.'' Moreover, in the 2007 Extension
Order, the Commission provided an empirical analysis demonstrating that
the profitability of withholding increases as the number of television
households passed by a vertically integrated cable operator increases
in a given market area, such as through clustering.
39. The Commission concluded in the 2007 Extension Order that
market developments since 2002 did not yet support the lifting of the
exclusive contract prohibition, but ``there nevertheless may come a
point when these developments will be sufficient to allow the
prohibition to sunset.'' Similarly, in upholding the 2007 Extension
Order, the D.C. Circuit stated its expectation that, if the market
continued evolving rapidly, the Commission could soon allow the
exclusive contract prohibition to sunset, which Congress intended to
occur at some point. We seek comment on whether now, almost five years
since the most recent extension of the exclusive contract prohibition,
we have reached such a point.
40. As set forth in Appendix A, the percentage of MVPD subscribers
nationwide attributable to cable operators has fallen since 2007, from
an estimated 67 percent to approximately 58.5 percent today. Is there a
certain market share threshold that, if reached, will render it
unlikely for satellite-delivered, cable-affiliated programmers to
withhold national networks from competitive MVPDs? We ask commenters to
provide empirical analyses to support their positions. Has the decline
in cable market share benefited consumers, such as through lower
prices, or in some other way? If not, does that suggest that the level
of competition in the video distribution market has not reached a point
where the exclusive contract prohibition should sunset, or is the price
of cable offerings determined by other factors?
41. We also seek comment on how the current state of cable system
clusters and cable market share in regional markets should affect our
decision on whether to retain, sunset, or relax the exclusive contract
prohibition. On a regional basis, the market share held by cable
operators in DMAs varies considerably, from a high in the 80 percent
range to a low in the 20 percent range. In some major markets, such as
New York, Philadelphia, and Boston, the share of MVPD subscribers
attributable to cable operators far exceeds the national cable market
share of 67 percent deemed significant in the 2007 Extension Order. In
other DMAs, such as Dallas, Denver, and Phoenix, data indicate that the
share of MVPD subscribers attributable to cable operators is below 50
percent. How should this variation in regional market shares impact our
analysis? Does this wide variation in cable market share on a regional
and local basis call for a more granular assessment of the continued
need for an exclusive contract prohibition in individual markets,
rather than a broad rule that applies to all markets equally?
42. The Commission stated in the 2002 Extension Order that
``clustering, accompanied by an increase in vertically integrated
regional programming networks affiliated with cable MSOs that control
system clusters, will increase the incentive of cable operators to
practice anticompetitive foreclosure of access to vertically integrated
programming.'' We seek comment on whether this conclusion remains valid
today. In the 2007 Extension Order, the Commission found that the cable
industry had continued to form regional clusters since the 2002
Extension Order. We note that a decrease in the amount of regional
clustering could decrease the market share of individual cable
operators within the footprints of regional programming, which would
create fewer opportunities to implement exclusive arrangements. Has the
amount of regional clustering increased or decreased since the 2007
Extension Order? We seek comment on whether events since the 2007
Extension Order mitigate or exacerbate the impact of
[[Page 24312]]
clustering. In the 2007 Extension Order, the Commission provided an
empirical analysis demonstrating that the profitability of withholding
increases as the number of television households passed by a vertically
integrated cable operator increases in a given market area, such as
through clustering. The analysis examined two vertically integrated
cable operators on a DMA-by-DMA basis. Taking account of various
factors, including the characteristics of the affiliated RSN and the
profitability figures of the vertically integrated cable operator
examined, the analysis identified multiple DMAs in which withholding
would be profitable. In those DMAs, the homes passed by the vertically
integrated cable operator as a percentage of television households
ranged from 60-80 percent. We seek comment on this analysis and
whether, based on current data, it continues to support retaining an
exclusive contract prohibition, particularly in those markets where a
vertically integrated cable operator passes a significant number of
television households. We also note that the Commission in the 2007
Extension Order performed an analysis that concluded that withholding
of some nationally distributed programming networks could be profitable
if as little as 1.9 percent of non-cable subscribers were to switch to
cable as a result of the withholding. We seek comment on this analysis
and whether, based on current data, it continues to support retaining
an exclusive contract prohibition for national programming networks.
43. Has the current state of horizontal consolidation in the cable
industry increased or decreased incentives for anticompetitive
foreclosure of access to vertically integrated programming? We note
that the data in Appendix A indicate that the percentage of MVPD
subscribers receiving their video programming from one of the four
largest vertically integrated cable MSOs has decreased from between 54
and 56.75 percent as stated in the 2007 Extension Order to
approximately 42.8 percent today. What impact, if any, does this have
on our review of the exclusive contract prohibition?
3. Impact on the Video Programming Market
44. We seek comment on how retaining, sunsetting, or relaxing the
exclusive contract prohibition would impact the creation of new
national, regional, and local programming and which of these options is
most likely to increase programming diversity. What effect has the
exclusive contract prohibition had on the incentives of incumbent cable
operators to develop and produce video programming? Are incumbent cable
operators less willing to invest in programming because they cannot
enter into exclusive contracts and therefore must share their
programming investment with their competitors? In the 2007 Extension
Order, the Commission concluded that the extension of the exclusive
contract prohibition would not create a disincentive for the creation
of new programming. In support of this finding, the Commission noted
that, despite the exclusive contract prohibition, the number of
programming networks, including cable-affiliated networks, had
increased since 1994. Is there any basis to conclude that the number of
video programming networks, including cable-affiliated networks, would
be even greater today if the exclusive contract prohibition had sunset
earlier? Since the 2007 extension of the exclusive contract
prohibition, has there been an increase or decrease in the development,
promotion, and launch of new video programming services by incumbent
cable operators? Would a sunset of the exclusive contract prohibition
entice incumbent cable operators to invest in and launch new
programming networks to compete with established networks, leading to
greater diversity in the video programming market, or are incumbent
cable operators more likely to acquire these established networks?
45. What effect has the exclusive contract prohibition had on the
incentives of competitive MVPDs and non-MVPD-affiliated programmers to
develop and produce video programming? In the 2007 Extension Order, the
Commission noted evidence that some competitive MVPDs had begun to
invest in their own video programming, despite their ability to access
satellite-delivered, cable-affiliated programming as a result of the
exclusive contract prohibition. To what extent have competitive MVPDs
invested in their own video programming? In the 2007 Extension Order,
the Commission ``caution[ed] competitive MVPDs to take any steps they
deem appropriate to prepare for the eventual sunset of the prohibition,
including further investments in their own programming.'' Have
competitive MVPDs made further investments in their own programming
since that time? If the exclusive contract prohibition were to sunset
(wholly or partially), would competitive MVPDs be likely to increase
their investment in video programming in order to ensure that they have
a robust offering of programming to counteract any exclusive deals that
incumbent cable operators might enter into with their affiliated
programmers? We note that certain competitive MVPDs are currently
subject to the exclusive contract prohibition, such as those that are
cable operators or common carriers that provide video programming
directly to subscribers. Has the exclusive contract prohibition caused
these competitive MVPDs to be less willing to invest in programming
because they must share their programming investment with their
competitors? Would a sunset of the exclusive contract prohibition
entice these competitive MVPDs to invest in and launch new programming
networks? Do competitive MVPDs have the resources to invest in creating
their own video programming? If not, to the extent that certain
satellite-delivered, cable-affiliated programming is withheld from
competitive MVPDs, is it likely that non-MVPD-affiliated programming
vendors will fill the void by creating competing programming to license
to competitive MVPDs, thereby leading to even greater diversity in the
video programming market? Are there certain categories of programming
that cannot be replicated by either competitive MVPDs or non-MVPD-
affiliated programming vendors? In the 2010 Program Access Order, the
Commission stated:
If particular programming is replicable, our policies should
encourage MVPDs or others to create competing programming, rather
than relying on the efforts of others, thereby encouraging
investment and innovation in programming and adding to the diversity
of programming in the marketplace. Conversely, when programming is
non-replicable and valuable to consumers, such as regional sports
programming, no amount of investment can duplicate the unique
attributes of such programming, and denial of access to such
programming can significantly hinder an MVPD from competing in the
marketplace.\17\
\17\ See Review of the Commission's Program Access Rules and
Examination of Programming Tying Arrangements, First Report and
Order, 25 FCC Rcd 746, 750-51, para. 9 (2010) (``2010 Program Access
Order''), affirmed in part and vacated in part sub nom. Cablevision
Sys. Corp. et al. v. FCC, 649 F.3d 695 (D.C. Cir. 2011)
(``Cablevision II'').
While the Commission found that RSNs are non-replicable, it concluded
that local news and local community or educational programming is
``readily replicable programming.'' We seek comment on how the
distinction between replicable and non-replicable content should impact
our review of the exclusive contract prohibition.
[[Page 24313]]
4. Alternatives to Retaining the Exclusive Contract Prohibition as It
Exists Today
46. As discussed in further detail below, to the extent the data do
not support retaining the exclusive contract prohibition as it exists
today, we seek comment on whether we can nonetheless preserve and
protect competition in the video distribution market either by (i)
sunsetting the prohibition in its entirety and relying solely on
existing protections provided by the program access rules that will not
sunset; or (ii) relaxing the exclusive contract prohibition, such as
through removal of the prohibition on a market-by-market basis based on
the extent of competition in the market or by retaining the prohibition
only for satellite-delivered, cable-affiliated RSNs and other
satellite-delivered, cable-affiliated ``must have'' programming.
a. Sunsetting the Exclusive Contract Prohibition in Its Entirety and
Relying Solely on Existing Protections
47. As discussed above, the exclusive contract prohibition is just
one of several protections that the program access rules afford to
competitive MVPDs in their efforts to compete in the video distribution
market. Even if the exclusive contract prohibition were to sunset
(wholly or partially), these other existing protections will remain in
effect. We seek comment on whether these existing protections are
sufficient to preserve and protect competition in the video
distribution market if the exclusive contract prohibition were to
sunset and whether any additional safeguards should be adopted.
(i) Section 628(b) Complaints
48. The Act and the Commission's existing rules allow for the
filing of complaints alleging a violation of Section 628(b) of the Act
and Section 76.1001(a) of the Commission's rules. These provisions
require a complainant to establish three elements in order to
demonstrate a violation: (i) The defendant is one of the three entities
covered by these provisions (i.e., a cable operator, a satellite cable
programming vendor in which a cable operator has an attributable
interest, or a satellite broadcast programming vendor); (ii) the
defendant has engaged in an ``unfair act''; and (iii) the ``purpose or
effect'' of the unfair act is to ``significantly hinder or prevent'' an
MVPD from providing satellite cable programming or satellite broadcast
programming to subscribers or consumers. Even if the exclusive contract
prohibition were to sunset (wholly or partially), an MVPD would still
have the option to file a complaint with the Commission alleging that
an exclusive contract between a cable operator and a satellite-
delivered, cable-affiliated programmer involving satellite-delivered,
cable-affiliated programming violates these provisions. We note that
the Commission currently considers allegedly ``unfair acts'' involving
terrestrially delivered, cable-affiliated programming on a case-by-case
basis pursuant to Section 628(b) of the Act and Section 76.1001(a) of
the Commission's rules. Applying these provisions, the Commission
recently found that the withholding of terrestrially delivered, cable-
affiliated RSNs from certain MVPDs in the New York, Buffalo, and
Hartford/New Haven DMAs violated these provisions. We seek comment
regarding whether there are any justifications for applying different
rules and procedures to satellite-delivered, cable-affiliated
programming than those that apply to terrestrially delivered, cable-
affiliated programming.
49. The Commission previously concluded that Section 628(b) was not
an adequate substitute for the prohibition on exclusive contracts under
Section 628(c)(2)(D). Among other things, the Commission noted that
Section 628(b) ``carries with it an added burden'' to demonstrate that
the ``purpose or effect'' of the ``unfair act'' is to ``significantly
hinder or prevent'' an MVPD from providing programming. We seek comment
on the costs and benefits of moving from a broad, prophylactic
prohibition on exclusive contracts involving satellite-delivered,
cable-affiliated programming to reliance instead on a case-by-case
process, including Section 628(b) complaints. To what extent would a
case-by-case process be more costly for competitive MVPDs than the
current prohibition on exclusive contracts? What would be the benefits
of eliminating the prohibition on exclusive contracts involving
satellite-delivered, cable-affiliated programming? Would these benefits
outweigh the costs of a case-by-case process?
(a) Case-by-Case Complaint Process
50. We note that a case-by-case complaint process alleging a
violation of Section 628(b) would differ from the current prohibition
on exclusive contracts in Section 628(c)(2)(D) in several important
respects. First, under the current exclusive contract prohibition, all
exclusive contracts between a cable operator and a satellite-delivered,
cable-affiliated programmer pertaining to satellite-delivered, cable-
affiliated programming are considered categorically ``unfair.'' If the
exclusive contract prohibition were to sunset (wholly or partially),
however, exclusive contracts would no longer always be presumed
``unfair.'' Rather, a complainant would have the burden to establish
that the exclusive contract at issue is ``unfair'' based on the facts
and circumstances presented. Second, under the current exclusive
contract prohibition, all exclusive contracts between a cable operator
and a satellite-delivered, cable-affiliated programmer pertaining to
satellite-delivered, cable-affiliated programming are presumed to harm
competition, and competitive MVPDs alleging a prohibited exclusive
contract are not required to demonstrate harm. In alleging that an
exclusive contract violates Section 628(b), however, a complainant
would have the burden of proving that the exclusive contract has the
``purpose or effect'' of ``significantly hindering or preventing'' the
MVPD from providing satellite cable programming or satellite broadcast
programming. Third, the current exclusive contract prohibition forbids
all exclusive contracts between a cable operator and a satellite-
delivered, cable-affiliated programmer pertaining to satellite-
delivered, cable-affiliated programming, unless a cable operator or
programmer can satisfy its burden of demonstrating that an exclusive
contract serves the public interest based on the factors set forth in
Section 628(c)(4) of the Act and Section 76.1002(c)(4) of the
Commission's rules. If the exclusive contract prohibition were to
sunset (wholly or partially), however, the situation would be reversed.
That is, such exclusive contracts would be permitted, unless an MVPD
could carry its burden of demonstrating that the exclusive contract
violates Section 628(b) (or, potentially, Section 628(c)(2)(B)). We
seek comment on the above interpretations of Section 628(b) as it
pertains to exclusive contracts involving satellite-delivered, cable-
affiliated programming, particularly the practical implications for
competitive MVPDs, cable operators, and satellite-delivered, cable-
affiliated programmers.
(b) Extending Rules and Policies Adopted for Section 628(b) Complaints
Involving Terrestrially Delivered, Cable-Affiliated Programming to
Section 628(b) Complaints Challenging Exclusive Contracts Involving
Satellite-Delivered, Cable-Affiliated Programming
51. The Commission in the 2010 Program Access Order adopted a case-
by-case complaint process to address unfair acts involving
terrestrially delivered, cable-affiliated programming
[[Page 24314]]
that allegedly violate Section 628(b). In doing so, the Commission
adopted rules and policies that would appear to be equally appropriate
for complaints alleging that an exclusive contract involving satellite-
delivered, cable-affiliated programming violates Section 628(b).
Accordingly, if the exclusive contract prohibition were to sunset
(wholly or partially), we propose to apply these same rules and
policies to such complaints.
52. First, the Commission declined to adopt specific evidentiary
requirements with respect to proof that the defendant's alleged
activities violated Section 628(b). Among other things, the Commission
explained that the evidence required to satisfy this burden will vary
based on the facts and circumstances of each case and may depend on,
among other things, whether the complainant is a new entrant or an
established competitor and whether the programming the complainant
seeks to access is new or existing programming. In addition, the
Commission provided the following illustrative examples of evidence
that litigants might consider providing: (i) An appropriately crafted
regression analysis that estimates what the complainant's market share
in the MVPD market would be if it had access to the programming and how
that compares to its actual market share; or (ii) statistically
reliable survey data indicating the likelihood that customers would
choose not to subscribe to or not to switch to an MVPD that did not
carry the withheld programming. The Commission also explained that the
discovery process will enable parties to obtain additional evidence. If
the exclusive contract prohibition were to sunset (wholly or
partially), we propose to apply the same requirements to complaints
alleging that an exclusive contract involving satellite-delivered,
cable-affiliated programming violates Section 628(b).
53. Second, the Commission found that one category of programming,
RSNs, was shown by both Commission precedent and record evidence to be
very likely to be both non-replicable and highly valued by consumers.
Rather than requiring litigants and the Commission staff to undertake
repetitive examinations of this RSN precedent and the relevant
historical evidence, the Commission instead allowed complainants to
invoke a rebuttable presumption that an ``unfair act'' involving a
terrestrially delivered, cable-affiliated RSN has the purpose or effect
set forth in Section 628(b). The D.C. Circuit upheld the Commission's
decision to establish a rebuttable presumption of ``significant
hindrance'' for ``unfair acts'' involving terrestrially delivered,
cable-affiliated RSNs under both First Amendment and Administrative
Procedure Act (``APA'') review. Accordingly, to the extent the
exclusive contract prohibition were to sunset (wholly or partially) and
we do not retain an exclusive contract prohibition for satellite-
delivered, cable-affiliated RSNs, should we similarly adopt a
rebuttable presumption of ``significant hindrance'' under Section
628(b) for exclusive contracts involving satellite-delivered, cable-
affiliated RSNs? If so, we propose to define the term ``RSN'' in the
same way the Commission defined that term in the 2010 Program Access
Order. Is there any basis to have a rebuttable presumption of
``significant hindrance'' for terrestrially delivered, cable-affiliated
RSNs, but not when these networks are satellite-delivered? Are there
any other categories of satellite-delivered, cable-affiliated
programming that can be deemed ``must have'' and for which we should
establish a rebuttable presumption of ``significant hindrance''? We
note that the Commission in the Comcast-NBCU Order concluded that
``certain national cable programming networks produce programming that
is more widely viewed and commands higher advertising revenue than
certain broadcast or RSN programming.'' Are there other types of
satellite-delivered, cable-affiliated programming besides RSNs that
have no good substitutes, are important for competition, and are non-
replicable, as the Commission has found with respect to RSNs? To the
extent that commenters contend that there are, we ask that they provide
reliable, empirical data supporting their positions, rather than merely
labeling such programming as ``must have.'' In addition, we request
commenters to provide a rational and workable definition of such
programming that can be applied objectively.
54. Third, the Commission concluded that HD programming is growing
in significance to consumers and that consumers do not consider the SD
version of a particular channel to be an adequate substitute for the HD
version due to the different technical characteristics and sometimes
different content. Accordingly, the Commission determined that it would
analyze the HD version of a network separately from the SD version of
similar content for purposes of determining whether an ``unfair act''
has the purpose or effect set forth in Section 628(b). Thus, the fact
that a respondent provides the SD version of a network to the
complainant will not alone be sufficient to refute the complainant's
showing that lack of access to the HD version has the purpose or effect
set forth in Section 628(b). Similarly, in cases involving an RSN,
withholding the HD feed is rebuttably presumed to cause ``significant
hindrance'' even if an SD version of the network is made available to
competitors. The D.C. Circuit upheld the Commission's decision on this
issue under both First Amendment and APA review. To the extent the
exclusive contract prohibition were to sunset (wholly or partially), we
believe the same requirements should apply to complaints alleging that
an exclusive contract involving satellite-delivered, cable-affiliated
programming violates Section 628(b). We seek comment on this proposal.
(c) Additional Rules for Complaints Challenging Exclusive Contracts
Involving Satellite-Delivered, Cable-Affiliated Programming
55. To the extent the exclusive contract prohibition were to sunset
(wholly or partially), we seek comment on ways to reduce burdens on
both complainants and defendants in connection with complaints alleging
that an exclusive contract involving satellite-delivered, cable-
affiliated programming violates Section 628(b) (or, potentially,
Section 628(c)(2)(B)). We acknowledge that a case-by-case complaint
process for addressing exclusive contracts involving satellite-
delivered, cable-affiliated, national programming networks may impose
some burdens for litigants and the Commission, especially in comparison
to the current broad, prophylactic prohibition. For example, although
several MVPDs could join as complainants, the showing in the complaint
and any subsequent ruling on the complaint (either grant or denial)
will be limited to the complainants. Other competitive MVPDs that are
not parties to the complaint would have to file their own complaint and
demonstrate how the exclusive contract at issue is ``unfair'' and has
``significantly hindered'' them from providing programming. Given the
number of competitive MVPDs nationwide that might seek access to a
satellite-delivered, cable-affiliated, national programming network
that is subject to an exclusive contract with cable operators, the
number of such complaints involving just one national network could be
significant.
56. We seek comment on how to reduce these potential burdens for
both complainants and defendants. For example, rather than requiring
litigants and the Commission staff to undertake
[[Page 24315]]
repetitive examinations of the same network, we seek comment on whether
the Commission could establish a rebuttable presumption that, once a
complainant succeeds in demonstrating that an exclusive contract
involving a satellite-delivered, cable-affiliated programming network
violates Section 628(b) (or, potentially, Section 628(c)(2)(B)), any
other exclusive contract involving the same network violates Section
628(b) (or Section 628(c)(2)(B)). We seek comment on whether adoption
of such a rebuttable presumption is rational. For example, in the event
the Commission finds that an exclusive contract violates Section 628(b)
(or Section 628(c)(2)(B)) in response to a complaint brought by a
small, fledgling MVPD, is it rational to assume that the Commission is
likely to reach the same conclusion when the complaint is brought by a
large, established MVPD?
57. We also seek comment on whether there would be any benefit to
retaining post-sunset our existing process whereby a cable operator or
a satellite-delivered, cable-affiliated programmer may file a Petition
for Exclusivity seeking Commission approval for an exclusive contract
involving satellite-delivered, cable-affiliated programming by
demonstrating that the arrangement serves the public interest based on
the factors set forth in Section 628(c)(4) of the Act and Section
76.1002(c)(4) of the Commission's rules. While a cable operator post-
sunset would be permitted generally to enter into an exclusive contract
with a satellite-delivered, cable-affiliated programming network
without receiving prior Commission approval, we propose that the grant
of a Petition for Exclusivity would immunize such an exclusive contract
from potential complaints alleging a violation of Section 628(b), as
well as Section 628(c)(2)(B). We further propose that, to the extent we
were to deny a Petition for Exclusivity post-sunset, the petitioner
would not be precluded from entering into or enforcing the exclusive
contract subject to the petition. Rather, denial of a Petition for
Exclusivity post-sunset would mean that the exclusive contract at issue
may not be permissible in all cases if challenged pursuant to Section
628(b) or, potentially, Section 628(c)(2)(B). We seek comment on the
costs and benefits of retaining this petition process after a sunset,
especially whether the burdens for the Commission staff and impacted
parties would outweigh any benefits. We also seek comment on any other
ways to reduce the potential burdens for both complainants and
defendants resulting from a case-by-case complaint process.
(ii) Section 628(c)(2)(B) Discrimination Complaints
58. We believe that discrimination complaints under Section
628(c)(2)(B) also will provide some protection for competitive MVPDs
should the exclusive contract prohibition sunset (wholly or partially).
Discrimination can take two forms: price discrimination and non-price
discrimination. Non-price discrimination includes an unreasonable
refusal to license programming to an MVPD. A refusal to license is
permissible only if there is a ``legitimate business justification''
for the conduct. As discussed below, a refusal to license can take two
forms. First, a satellite-delivered, cable-affiliated programmer may
refuse to license its programming to all MVPDs in a market except for
one (such as its affiliated cable operator), thereby providing the
affiliated cable operator with exclusive access to the programming.
Second, a satellite-delivered, cable-affiliated programmer may
selectively refuse to license its programming to certain MVPDs in a
market (such as a recent entrant) while licensing the programming to
other MVPDs (such as its affiliated cable operator and DBS operators).
We seek comment on each of these scenarios below.
(a) Challenging an Exclusive Arrangement as an Unreasonable Refusal to
License
59. We seek comment on the interplay between the potential sunset
of the exclusive contact prohibition in Section 628(c)(2)(D) and the
continued prohibition on unreasonable refusals to license pursuant to
Section 628(c)(2)(B). As an initial matter, we note that Section
628(c)(2)(D) prohibits ``exclusive contracts * * * between a cable
operator and a satellite cable programming vendor in which a cable
operator has an attributable interest.'' This language presumes that an
agreement will exist between the cable operator and the satellite-
delivered, cable-affiliated programmer that would provide the cable
operator with exclusivity. In the event that a satellite-delivered,
cable-affiliated programmer unilaterally refuses to license its
programming to all MVPDs in a market except for one cable operator and
without any exclusive contract with the cable operator, we believe an
MVPD can challenge this conduct as an unreasonable refusal to license
in violation of Section 628(c)(2)(B). While a cable operator would be
permitted generally to enter into an exclusive contract with the
satellite-delivered, cable-affiliated programmer in the event of a
sunset, the scenario presented here does not involve an exclusive
contract; rather, it involves unilateral action by the satellite-
delivered, cable-affiliated programmer. We seek comment on this
interpretation. In defending against a complaint, the satellite-
delivered, cable-affiliated programmer would be required to provide a
``legitimate business justification'' for its conduct.
60. In the event that a satellite-delivered, cable-affiliated
programmer and a cable operator enter into an exclusive contract post-
sunset (complete or partial), we seek comment on whether an MVPD can
challenge this exclusive contract as an unreasonable refusal to license
in violation of Section 628(c)(2)(B).\18\ We believe that there are
legitimate arguments for and against this interpretation. We seek
comment on which of the interpretations set forth below is more
reasonable and consistent with the goals of Section 628.
---------------------------------------------------------------------------
\18\ To the extent that we determine that an MVPD can challenge
an exclusive contract as an unreasonable refusal to license in
violation of Section 628(c)(2)(B) post-sunset, we seek comment above
on ways to reduce the potential burdens for both complainants and
defendants resulting from a case-by-case complaint process. See
supra paras. 56-57.
---------------------------------------------------------------------------
61. In favor of interpreting Section 628(c)(2)(B) to allow a
challenge post-sunset to an exclusive contract as an unreasonable
refusal to license, we note that Section 628(c)(2)(B)(iv) provides that
it is not a violation of Section 628(c)(2)(B) for a satellite-
delivered, cable-affiliated programmer to ``enter[] into an exclusive
contract that is permitted under [Section 628(c)(2)(D)].'' The
Commission has previously interpreted this language to pertain to only
those exclusive contracts that have been deemed by the Commission to be
in the public interest pursuant to the factors set forth in Section
628(c)(4). This provision is silent regarding exclusive contracts that
are generally permissible after a sunset pursuant to Section 628(c)(5).
Does the omission of post-sunset exclusive contracts from both Section
628(c)(2)(D) and Section 628(c)(2)(B)(iv) mean that Congress intended
that such contracts might still be challenged as impermissibly
discriminatory in violation of Section 628(c)(2)(B)? In addition, we
note that the exclusive contract prohibition in Section 628(c)(2)(D)
applies to exclusive contracts between a satellite-delivered, cable-
affiliated programmer and a cable operator; it does not apply to
exclusive contracts between a satellite-delivered, cable-affiliated
programmer and a DBS
[[Page 24316]]
operator. Both before and after a sunset, however, the decision of a
satellite-delivered, cable-affiliated programmer to license its
programming to a DBS operator but not to other MVPDs might be
challenged as an unreasonable refusal to license pursuant to Section
628(c)(2)(B). If, post-sunset, an MVPD cannot challenge an exclusive
arrangement between a satellite-delivered, cable-affiliated programmer
and a cable operator as an unreasonable refusal to license in violation
of Section 628(c)(2)(B), would this produce an anomalous result?
Specifically, in challenging an exclusive contract between a satellite-
delivered, cable-affiliated programmer and a cable operator, an MVPD
would have to rely on Section 628(b), which places the burden on the
MVPD to demonstrate that the defendant has engaged in an ``unfair act''
that has the ``purpose or effect'' of ``significantly hindering or
preventing'' the MVPD from providing satellite cable programming or
satellite broadcast programming to subscribers or consumers. By
contrast, in challenging an exclusive contract between a satellite-
delivered, cable-affiliated programmer and a DBS operator, an MVPD
could rely on Section 628(c)(2)(B), which presumes harm in every case
and places the burden on the satellite-delivered, cable-affiliated
programmer to provide a ``legitimate business justification'' for its
conduct. Is there any basis for placing a greater burden on an MVPD in
challenging an exclusive contract between a satellite-delivered, cable-
affiliated programmer and a cable operator than between a satellite-
delivered, cable-affiliated programmer and a DBS operator?
62. On the other hand, we note that there are legitimate arguments
against interpreting Section 628(c)(2)(B) to allow an MVPD to challenge
an exclusive contract between a satellite-delivered, cable-affiliated
programmer and a cable operator post-sunset as an unreasonable refusal
to license. Currently, with the exclusive contract prohibition in
effect, an exclusive contract between a satellite-delivered, cable-
affiliated programmer and a cable operator is prohibited, unless the
programmer or cable operator can demonstrate that the exclusive
contract serves the public interest based on the factors set forth in
Section 628(c)(4). If, post-sunset, an MVPD can challenge an exclusive
contract between a satellite-delivered, cable-affiliated programmer and
a cable operator as an unreasonable refusal to license in violation of
Section 628(c)(2)(B), the satellite-delivered, cable-affiliated
programmer would be required to demonstrate a ``legitimate business
reason'' for its conduct. Is it reasonable to interpret Section 628 to
provide that, post-sunset, the public interest factors in Section
628(c)(4) would be replaced with a showing of a ``legitimate business
reason'' in response to a complaint alleging a violation of Section
628(c)(2)(B)? We note that two of the public interest factors in
Section 628(c)(4) focus on competition in the video distribution
market, allowing a proponent of exclusivity to demonstrate how the
exclusive contract will not adversely impact competition. In a
complaint alleging discrimination under Section 628(c)(2)(B), however,
the alleged discriminatory act is presumed to harm competition in every
case. Is it reasonable to interpret Section 628 to provide that, pre-
sunset, a satellite-delivered, cable-affiliated programmer or a cable
operator could make a showing that an exclusive contract would not
adversely impact competition pursuant to the public interest factors in
Section 628(c)(4), but, post-sunset, exclusivity is presumed to harm
competition in every case when challenged pursuant to Section
628(c)(2)(B)?
63. In addition to the foregoing, we seek comment on whether the
legislative history of the 1992 Cable Act supports either of the above
interpretations. The Senate Report accompanying the 1992 Cable Act
states that the ``bill does not equate exclusivity with an unreasonable
refusal to deal.'' This statement might be read to imply that Congress
considered exclusive contracts and unreasonable refusals to deal to be
mutually exclusive, with the effect that once a satellite-delivered,
cable-affiliated programmer enters into an exclusive contract with a
cable operator post-sunset, the contract cannot be challenged as an
unreasonable refusal to license pursuant to Section 628(c)(2)(B).
Another part of the Senate Report, however, states that ``the dominance
in the market of the distributor obtaining exclusivity should be
considered in determining whether an exclusive arrangement amounts to
an unreasonable refusal to deal.'' This statement might be read to
imply that Congress did not consider exclusive contracts and
unreasonable refusals to license to be mutually exclusive, with the
effect that an exclusive contract could be challenged as an
unreasonable refusal to license pursuant to Section 628(c)(2)(B).
(b) Selective Refusals To License Programming
64. Notwithstanding the question raised in the previous section of
whether an MVPD can challenge post-sunset an exclusive arrangement
between a satellite-delivered, cable-affiliated programmer and a cable
operator as an unreasonable refusal to license in violation of Section
628(c)(2)(B), our rules and precedent establish that the discrimination
provision in Section 628(c)(2)(B) would prevent a satellite-delivered,
cable-affiliated programmer from licensing its content to MVPD A (such
as a DBS operator) in a given market area, but to selectively refuse to
license the content to MVPD B (such as a telco video provider) in the
same area, absent a legitimate business reason. When a satellite-
delivered, cable-affiliated programmer discriminates among MVPDs in
this manner, it faces the prospect of a complaint alleging non-price
discrimination in violation of Section 628(c)(2)(B). As noted above,
complaints alleging a violation of Section 628(c)(2)(B) do not require
a showing of harm to the complainant.
65. We seek comment on whether the right of an MVPD to challenge a
selective refusal to license as a form of prohibited non-price
discrimination under Section 628(c)(2)(B) will help to preserve and
protect competition in the video distribution market if the exclusive
contract prohibition were to sunset (wholly or partially). As reflected
in Appendix A, the two DBS operators together have approximately 34
percent of MVPD subscribers nationwide today. Because a national
programming network that refuses to license its content to these MVPDs
will forgo significant licensing fees and advertising revenues, is it
reasonable to assume that most satellite-delivered, cable-affiliated,
national programming networks will license their content to DBS
operators? If they do, we interpret Section 628(c)(2)(B) as permitting
other competitive MVPDs, such as a telco video provider, to bring non-
price discrimination complaints should these programmers refuse to deal
with them. How does this analysis change with respect to local and
regional markets, where cable operators may have an overwhelming share
of the market or a vertically integrated cable operator may pass a
large percentage of television households?
66. The Commission previously concluded that the discrimination
provision in Section 628(c)(2)(B) is not an adequate substitute for the
prohibition on exclusive contracts
[[Page 24317]]
under Section 628(c)(2)(D). Among other things, the Commission noted
that a non-price discrimination complaint requires an MVPD to
demonstrate that the conduct was ``unreasonable,'' which the Commission
noted may be difficult to establish. We seek comment on the costs and
benefits of moving from a broad, prophylactic prohibition on exclusive
contracts involving satellite-delivered, cable-affiliated programming
to reliance instead on a case-by-case process, including non-price
discrimination complaints.
(iii) Section 628(c)(2)(A) Undue Influence Complaints
67. We seek comment on the extent to which undue influence
complaints under Section 628(c)(2)(A) may also provide some protection
for competitive MVPDs should the exclusive contract prohibition sunset
(wholly or partially). Section 628(c)(2)(A) precludes a cable operator
that has an attributable interest in a satellite cable programming
vendor or a satellite broadcast programming vendor from ``unduly or
improperly influencing the decision of such vendor to sell, or the
prices, terms, and conditions of sale of, satellite cable programming
or satellite broadcast programming to any unaffiliated [MVPD].'' The
Commission has explained that the ``concept of undue influence between
affiliated firms is closely linked with discriminatory practices and
exclusive contracting'' and that the prohibition on undue influence
``can play a supporting role where information is available (such as
might come from an internal `whistleblower') that evidences `undue
influence' between affiliated firms to initiate or maintain
anticompetitive discriminatory pricing, contracting, or product
withholding.'' The Commission acknowledged that ``such conduct may be
difficult for the Commission or complainants to establish'' but ``its
regulation provides a useful support for direct discrimination and
contracting regulation.'' To what extent, if any, will the prohibition
on undue influence provide some protection for competitive MVPDs should
the exclusive contract prohibition sunset? If the exclusive contract
prohibition were to sunset, then a cable operator would be permitted
generally to enter into an exclusive contract with a satellite-
delivered, cable-affiliated programming network, although the contract
may be deemed to violate Section 628(b) (or, potentially, Section
628(c)(2)(B)) after the conclusion of a complaint proceeding. In the
event the exclusive contract prohibition sunsets, if a cable operator
``unduly influences'' a satellite-delivered, cable-affiliated
programmer to enter into an exclusive contract, would that conduct
violate Section 628(c)(2)(A) even though the underlying contract would
be permissible (absent a finding of a violation of Section 628(b) (or,
potentially, Section 628(c)(2)(B)))? Stated differently, in the event
of a sunset, can a cable operator ``unduly influence'' a satellite-
delivered, cable-affiliated programmer to enter into an exclusive
contract only if the underlying contract violates Section 628(b) (or,
potentially, Section 628(c)(2)(B))?
b. Relaxing the Exclusive Contract Prohibition
68. Rather than sunsetting the exclusive contract prohibition in
its entirety and relying solely on existing protections provided by the
program access rules that will not sunset, we seek comment on whether
we should instead relax, rather than sunset, the exclusivity
prohibition in the ways discussed below, or in some other way. We ask
parties to comment on whether retaining the exclusivity ban in certain
circumstances would be more effective in preserving and protecting
competition in the video distribution market than permitting the
exclusive contract prohibition to sunset entirely. In addition to the
proposals below, we invite comment on other ways to relax the exclusive
contract prohibition.
(i) Sunsetting the Exclusive Contract Prohibition on a Market-by-Market
Basis
69. We seek comment on whether to establish a process whereby a
cable operator or satellite-delivered, cable-affiliated programmer can
file a Petition for Sunset seeking to remove the exclusive contract
prohibition on a market-by-market basis based on the extent of
competition in the market.\19\ In the 2002 Extension Order, the
Commission explained that ``clustering, accompanied by an increase in
vertically integrated regional programming networks affiliated with
cable MSOs that control system clusters, will increase the incentive of
cable operators to practice anticompetitive foreclosure of access to
vertically integrated programming.'' Moreover, as noted above, the
market share held by cable operators in DMAs varies considerably, from
a high in the 80 percent range to a low in the 20 percent range. As the
Commission has explained previously, 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.'' Moreover, in
the 2007 Extension Order, the Commission provided an empirical analysis
demonstrating that the profitability of withholding increases as the
number of television households passed by a vertically integrated cable
operator increases in a given market area, such as through clustering.
Accordingly, a cable-affiliated programmer will have an increased
incentive to enter into exclusive contracts with cable operators in
those areas where the market share of competitive MVPDs is
comparatively low or where its affiliated cable operator passes a large
percentage of television households or where both circumstances are
present. If there was not a blanket prohibition on exclusive contracts
involving satellite-delivered, cable-affiliated programming, would
incumbent cable operators and cable-affiliated programmers enter into
exclusive contracts in these markets? If so, does the wide variation in
cable market share and television households passed by a vertically
integrated cable operator on a regional and local basis call for a more
granular assessment of the continued need for an exclusive contract
prohibition in individual markets, rather than a broad rule that
applies to all markets equally? Would such a market-by-market
assessment necessarily be based on a Commission finding that satellite-
delivered, cable-affiliated programming remains necessary for
competition in the video distribution market? That is, absent such a
finding, would a market-by-market assessment approach mean that the
exclusive contract prohibition would sunset only in areas where
satellite-delivered, cable-affiliated programmers lack an incentive to
enter into exclusive contracts, regardless of the importance of the
programming at issue for competition? Is there any basis for
interpreting the sunset provision in Section 628(c)(5) in this manner,
which might permit exclusive contracts only when there is little
possibility such contracts will exist?
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\19\ We note that the Commission sought comment on a similar
proposal in the 2007 Program Access NPRM. See Review of the
Commission's Program Access Rules and Examination of Programming
Tying Arrangements, MB Docket No. 07-198, Notice of Proposed
Rulemaking, 22 FCC Rcd 17791, 17859, para. 114 (2007) (seeking
comment on whether the Commission can establish a procedure that
would shorten the term of the exclusive contract prohibition if,
after two years (i.e., October 5, 2009), a cable operator can show
competition from new entrant MVPDs has reached a certain penetration
level in the DMA) (``2007 Program Access NPRM''). We hereby
incorporate by reference the comments filed in response to this
proposal.
---------------------------------------------------------------------------
70. To the extent we establish a process whereby a cable operator
or
[[Page 24318]]
satellite-delivered, cable-affiliated programmer can petition to remove
the exclusive contract prohibition on a market-by-market basis, we seek
comment on the details of this process. First, in assessing whether to
sunset the exclusive contract prohibition in an individual market, we
propose to apply the same test set forth in Section 628(c)(5)--i.e.,
whether the prohibition ``continues to be necessary to preserve and
protect competition and diversity in the distribution of video
programming.'' Who should bear the burdens of production and persuasion
in demonstrating that the exclusive contract prohibition either does or
does not meet this test in an individual market? While a petitioner (in
this case, the cable operator or satellite-delivered, cable-affiliated
programmer) might normally bear these burdens, Congress established
that the exclusive contract prohibition would sunset unless it
continues to be necessary pursuant to this test. The Commission has
explained that Section 628(c)(5) thus ``creates a presumption that the
rule will sunset'' unless it continues to be necessary. Does this call
for a regime where, in response to a petition seeking to remove the
prohibition in an individual market, the burden of production shifts to
competitive MVPDs and other interested parties to put forth evidence
demonstrating that the prohibition continues to be necessary? To
provide guidance to impacted parties, should we establish a specific
benchmark which, if met, would establish a rebuttable presumption that
the market is not sufficiently competitive to allow the exclusive
contract prohibition to sunset? For example, should the market be
rebuttably presumed to not be sufficiently competitive to allow the
exclusive contract prohibition to sunset if the market share held by
competitive MVPDs is below a certain threshold or television households
passed by a vertically integrated cable operator is above a certain
threshold? We ask commenters to provide support for any proposed
threshold. Should we instead apply the test set forth in Section
628(c)(5) on an entirely case-by-case basis, considering all of the
facts and circumstances presented, without establishing a specific
benchmark? Second, how should we define the ``market'' for purposes of
these petitions? Should we establish a specific market size for purpose
of the petitions (such as DMA, county, or franchise area) or should we
allow petitioners to seek a sunset of the exclusive contract
prohibition for any size market they choose? Third, we seek comment on
procedural deadlines. Given the likely fact-intensive nature of these
petitions, we propose to establish a pleading cycle that is identical
to the one established for complaints involving terrestrially
delivered, cable-affiliated programming. Specifically, we propose to
establish a 45-day opposition period and a 15-day reply period. Fourth,
to the extent that the exclusive contract prohibition has not been
removed in an individual market, we propose to retain our existing
rules and procedures whereby a cable operator or a satellite-delivered,
cable-affiliated programmer can seek prior Commission approval to enter
into an exclusive contract by demonstrating that the arrangement
satisfies the factors set forth in Section 628(c)(4) of the Act and
Section 76.1002(c)(4) of the Commission's rules. Fifth, we seek comment
on whether to adopt a sunset date for the exclusive contract
prohibition, thereby eliminating the need for further market-based
petitions, subject to a review by the Commission in the year prior to
the sunset date. Should the sunset date be five years from the current
sunset date (i.e., until October 5, 2017), consistent with the two
prior five-year extensions?
71. We also seek comment on the practical effect of sunsetting the
exclusive contract prohibition on a market-by-market basis. For
example, to the extent that certain competitive MVPDs, such as DBS
providers, market their service on a nationwide basis, how will the
sunset of the exclusive contract prohibition in individual markets
impact their marketing efforts? For example, if a certain satellite-
delivered, cable-affiliated programming network is available to DBS
customers in some markets, but not in others due to exclusive contracts
with cable operators, how burdensome will it be for DBS providers to
inform subscribers and potential customers of the limited availability
of this programming and to implement the selective availability of the
programming? In addition to this potential concern, we seek comment on
the other costs and benefits of moving from a broad, prophylactic
prohibition on exclusive contracts involving satellite-delivered,
cable-affiliated programming throughout the nation to reliance instead
on a market-by-market assessment.
(ii) Retaining an Exclusive Contract Prohibition for Satellite-
Delivered, Cable-Affiliated RSNs and Other Satellite-Delivered, Cable-
Affiliated ``Must Have'' Programming
72. We seek comment on whether we should retain an exclusive
contract prohibition for satellite-delivered, cable-affiliated RSNs and
other satellite-delivered, cable-affiliated ``must have'' programming.
The Commission has previously explained that RSNs have no good
substitutes, are important for competition, and are non-replicable.
Moreover, in his dissenting opinion to the D.C. Circuit decision
affirming the 2007 Extension Order, Judge Kavanaugh articulated the
following explanation for why a ban on exclusive contracts for RSNs may
be appropriate:
I would leave open the possibility that the Government might
still impose a prospective ban on some exclusive agreements between
video programming distributors and affiliated regional video
programming networks, particularly regional sports networks. That is
because the upstream market in which video programming distributors
contract with regional networks is less competitive than the
national market * * *. [M]arket share and other relevant factors in
certain areas may dictate tolerance of a narrow exclusivity ban.
Situations where a highly desirable ``must have'' regional sports
network is controlled by one video programming distributor might
justify a targeted restraint on such regional exclusivity
arrangements. I need not definitively address such a possibility in
this case.
73. We note, however, that the Commission in the 2010 Program
Access Order declined to adopt a flat ban on exclusive contracts
involving terrestrially delivered, cable-affiliated RSNs pursuant to
Section 628(b) of the Act. Noting empirical evidence that withholding
of an RSN in one case did not have an impact on competition, the
Commission declined to adopt a general conclusion regarding RSNs,
adopting instead a case-by-case approach, albeit with a rebuttable
presumption that an ``unfair act'' involving a terrestrially delivered,
cable-affiliated RSN has the purpose or effect set forth in Section
628(b). The Commission explained that ``case-by-case consideration of
the impact on competition in the video distribution market is necessary
to address whether unfair practices significantly hinder competition in
particular cases.''
74. Are there legal and/or policy reasons why the Commission may
want to establish a case-by-case approach for assessing exclusive
contracts involving terrestrially delivered, cable-affiliated RSNs, but
to retain an across-the-board prohibition on exclusive contracts
involving satellite-delivered, cable-affiliated RSNs? We note that, in
adopting a case-by-case approach for terrestrially delivered, cable-
affiliated RSNs, the Commission was applying and interpreting Section
628(b) of the Act, which prohibits ``unfair acts'' that have the
``purpose or effect'' to ``significantly hinder or prevent'' an
[[Page 24319]]
MVPD from providing satellite cable programming or satellite broadcast
programming to subscribers or consumers. In considering a sunset of the
exclusive contract prohibition, however, we are applying and
interpreting Section 628(c)(5) of the Act, which requires the
Commission to determine whether the exclusive contract prohibition
``continues to be necessary to preserve and protect competition and
diversity in the distribution of video programming.'' Unlike Section
628(b), the language in Section 628(c)(5) does not require the
Commission to assess whether particular exclusive contracts are
``unfair'' or whether they have the ``purpose or effect'' to
``significantly hinder or prevent'' an MVPD from providing satellite
cable programming or satellite broadcast programming to subscribers or
consumers. We note that two vertically integrated cable operators,
Comcast and Cablevision, previously stated before the D.C. Circuit that
a partial sunset of the exclusive contract prohibition is a legally
permissible approach, explaining that ``Section 628(c)(5) grants the
FCC additional sunsetting authority, and nothing in the statute
suggests that the FCC must do so on an all-or-nothing basis.'' Does
this difference in statutory language provide a basis for treating
satellite-delivered, cable-affiliated RSNs differently from
terrestrially delivered, cable-affiliated RSNs? In addition, are there
policy reasons why the Commission may want to retain the exclusivity
ban as it applies to satellite-delivered, cable-affiliated RSNs? If so,
we propose to define the term ``RSN'' in the same way the Commission
defined that term in the 2010 Program Access Order.
75. To the extent we retain an exclusive contract prohibition for
satellite-delivered, cable-affiliated RSNs, we propose to retain our
existing rules and procedures whereby a cable operator or a satellite-
delivered, cable-affiliated programmer can file a Petition for
Exclusivity seeking prior Commission approval to enter into an
exclusive contract by demonstrating that the arrangement satisfies the
factors set forth in Section 628(c)(4) of the Act and Section
76.1002(c)(4) of the Commission's rules. We seek comment on whether
this process is sufficient for addressing those instances where an
exclusive contract pertaining to a satellite-delivered, cable-
affiliated RSN might serve the public interest. We note that, if we
were to retain an exclusive contract prohibition for only satellite-
delivered, cable-affiliated RSNs, our rules would apply burdens to
different parties depending on whether or not the programming subject
to an exclusive contract is an RSN: (i) In the case of satellite-
delivered, cable-affiliated RSNs, exclusive contracts with cable
operators would be generally prohibited, unless a cable operator or RSN
can satisfy its burden of demonstrating that an exclusive contract
serves the public interest based on the factors set forth in Section
628(c)(4) of the Act and Section 76.1002(c)(4) of the Commission's
rules; and (ii) in the case of all other satellite-delivered, cable-
affiliated programming, exclusive contracts with cable operators would
be generally permitted, unless an MVPD can satisfy its burden of
demonstrating that the exclusive contract violates Section 628(b) of
the Act and Section 76.1001(a) of the Commission's rules (or,
potentially, Section 628(c)(2)(B) of the Act and Section 76.1002(b) of
the Commission's rules). Given the Commission precedent and relevant
historical evidence pertaining to the importance of RSNs for
competition, as well as their non-substitutability and non-
replicability, we believe there is a sufficient basis for drawing this
distinction between RSN and non-RSN programming. We seek comment on
this view.
76. Are there any other categories of satellite-delivered, cable-
affiliated programming besides RSNs that can be deemed ``must have''
and for which we should retain the exclusivity prohibition? We note
that the Commission in the Comcast-NBCU Order concluded that ``certain
national cable programming networks produce programming that is more
widely viewed and commands higher advertising revenue than certain
broadcast or RSN programming.'' Are there other types of satellite-
delivered, cable-affiliated programming besides RSNs that have no good
substitutes, are important for competition, and are non-replicable, as
the Commission has found with respect to RSNs? To the extent that
commenters contend that there are, we ask that they provide reliable,
empirical data supporting their positions, rather than merely labeling
such programming as ``must have.'' In addition, we request commenters
to provide a rational and workable definition of such programming that
can be applied objectively. We note that in the 2007 Extension Order
the Commission declined to differentiate between categories of
programming for purposes of the exclusive contract prohibition for a
number of legal and policy reasons.\20\ We seek comment on whether any
of the concerns the Commission expressed in the 2007 Extension Order
should prevent us from retaining an exclusive contract prohibition for
satellite-delivered, cable-affiliated RSNs, or potentially other
satellite-delivered, cable-affiliated ``must have'' programming, given
the state of the market today.
---------------------------------------------------------------------------
\20\ These reasons were as follows: (i) Congress did not
distinguish between different types of satellite-delivered, cable-
affiliated programming in adopting the exclusive contract
prohibition in Section 628(c)(2)(D) (see 2007 Extension Order, 22
FCC Rcd at 17839-40, para. 69; see also 2002 Extension Order, 17 FCC
Rcd at 12156, para. 69); (ii) requests to relieve satellite-
delivered, cable-affiliated programming networks from the exclusive
contract prohibition can be addressed through individual exclusivity
petitions satisfying the factors set forth in Section 628(c)(4) (see
2007 Extension Order, 22 FCC Rcd at 17839-40, para. 69); (iii) no
commenter provided a rational and workable definition of ``must
have'' programming that would allow the Commission to apply the
exclusive contract prohibition to only this type of programming (see
id.); (iv) the difficulty of developing an objective process of
general applicability to determine what programming may or may not
be essential to preserve and protect competition (see id.; see also
2002 Extension Order, 17 FCC Rcd at 12156, para. 69); and (v)
distinguishing between different types of satellite-delivered,
cable-affiliated programming might raise First Amendment concerns
(see 2007 Extension Order, 22 FCC Rcd at 17839-40, para. 69; see
also 2002 Extension Order, 17 FCC Rcd at 12156, para. 69).
---------------------------------------------------------------------------
77. With respect to First Amendment concerns, we note that the
Commission in the 2010 Program Access Order applied a rebuttable
presumption of significant hindrance to one category of programming--
terrestrially delivered, cable-affiliated RSNs. The D.C. Circuit
rejected claims that this was a content-based restriction on speech
subject to strict scrutiny, explaining that:
[T]here is absolutely no evidence, nor even any serious
suggestion, that the Commission issued its regulations to disfavor
certain messages or ideas. The clear and undisputed evidence shows
that the Commission established presumptions for RSN programming due
to that programming's economic characteristics, not to its
communicative impact. Thus content-neutral, the presumptions are
subject only to intermediate scrutiny.
In applying intermediate scrutiny, the D.C. Circuit ruled that,
``[g]iven record evidence demonstrating the significant impact of RSN
programming withholding, the Commission's presumptions represent a
narrowly tailored effort to further the important governmental interest
of increasing competition in video programming.'' Based on the D.C.
Circuit's decision, we do not believe that retaining an exclusive
contract prohibition for satellite-delivered, cable-affiliated RSNs
[[Page 24320]]
and other satellite-delivered, cable-affiliated ``must have''
programming would run afoul of the First Amendment. We seek comment on
this view.
78. To the extent we retain an exclusive contract prohibition for
satellite-delivered, cable-affiliated RSNs and other satellite-
delivered, cable-affiliated ``must have'' programming, we propose to
apply the prohibition independently to the SD and HD versions of the
same network. As discussed above, the Commission has concluded that HD
programming is growing in significance to consumers and that consumers
do not consider the SD version of a particular channel to be an
adequate substitute for the HD version due to the different technical
characteristics and sometimes different content. Accordingly, the
Commission has determined that it will analyze the HD version of a
network separately from the SD version with similar content for
purposes of determining whether an ``unfair act'' has the purpose or
effect set forth in Section 628(b). Because this same finding would
appear to apply to an exclusive contract prohibition, we propose that,
if a satellite-delivered, cable-affiliated programmer makes the SD
version of an RSN or other ``must have'' programming available to
MVPDs, this would not exempt the satellite-delivered, HD version of the
RSN or other ``must have'' programming from the exclusive contract
prohibition. We seek comment on this view.
79. To the extent we retain an exclusive contract prohibition
pursuant to Section 628(c)(5) only for satellite-delivered, cable-
affiliated RSNs and other satellite-delivered, cable-affiliated ``must
have'' programming, should we adopt a date when this prohibition will
sunset, subject to a review by the Commission in the year prior to the
sunset date? Should the sunset date be five years from the current
sunset date (i.e., until October 5, 2017), consistent with the two
prior five-year extensions?
80. Should we combine the two approaches to partial sunsetting of
the exclusive contract prohibition, by adopting a market-by-market
approach and also retaining the prohibition for satellite-delivered,
cable-affiliated RSNs and other satellite-delivered, cable-affiliated
``must have'' programming? If so, how should the two approaches
interrelate? If the exclusive contract prohibition sunsets in a
specific market, should this sunset also apply to satellite-delivered,
cable-affiliated RSNs and other satellite-delivered, cable-affiliated
``must have'' programming? Or, given the critical nature of RSNs and
other ``must have'' programming for competition, should the exclusive
contract prohibition for satellite-delivered, cable-affiliated RSNs and
other satellite-delivered, cable-affiliated ``must have'' programming
continue to apply even if the exclusive contract prohibition sunsets
for other satellite-delivered, cable-affiliated programming in the
market? Should the Commission instead assess whether the exclusive
contract prohibition should continue to apply to satellite-delivered,
cable-affiliated RSNs and other satellite-delivered, cable-affiliated
``must have'' programming on a market-by-market basis, considering all
of the facts and circumstances presented in the petition?
5. Implementation of a Sunset in a Manner That Minimizes Any Potential
Disruption for Consumers
81. Whether we retain, sunset, or relax the exclusive contract
prohibition, our goal is protect consumers and minimize any potential
disruption. As an initial matter, as noted above, many Comcast-
affiliated networks are subject to program access conditions adopted in
the Comcast/NBCU Order and will continue to be subject to these
conditions for six more years (until January 2018, assuming they are
not modified earlier in response to a petition). These networks will
not be impacted by a sunset (complete or partial). With respect to
other satellite-delivered, cable-affiliated networks, we seek comment
below on how sunsetting the exclusive contract prohibition (wholly or
partially) will impact consumers, and whether a phased implementation
of a sunset is necessary to minimize any potential disruption to
consumers. As discussed above, to the extent the data do not support
retaining the exclusive contract prohibition as it exists today, we
seek comment above on sunsetting or relaxing the prohibition. To the
extent the prohibition sunsets (wholly or partially), we envision that
there are at least two possible scenarios with respect to existing
affiliation agreements. We seek comment on which scenario is more
likely and if there are any other likely scenarios. First, if the
exclusive contract prohibition were to sunset, an existing affiliation
agreement between a cable-affiliated programmer and an MVPD pertaining
to a satellite-delivered, cable-affiliated programming network might
allow the programmer to terminate or modify the existing agreement
immediately on the effective date of the sunset and to instead enter
into an exclusive contract with a cable operator. Second, even if the
exclusive contract prohibition were to sunset, an existing affiliation
agreement might require the satellite-delivered, cable-affiliated
programmer to continue to provide the programming to the MVPD for the
duration of the term of the affiliation agreement despite the sunset.
We seek comment on these alternative scenarios below.
a. Termination or Modification of Affiliation Agreements on the
Effective Date of the Sunset
82. To the extent that existing affiliation agreements permit
satellite-delivered, cable-affiliated programmers to terminate or
modify the agreements immediately on the effective date of the sunset
and to instead enter into an exclusive contract with a cable operator,
is there any basis to expect that many satellite-delivered, cable-
affiliated programmers would terminate or modify existing agreements
simultaneously and thereby cause significant disruption to consumers by
depriving them of programming they have come to expect? Are our
existing rules sufficient to prevent any customer disruption? For
example, to the extent that a cable-affiliated programmer terminates or
modifies an existing affiliation agreement with an MVPD pertaining to a
satellite-delivered, cable-affiliated programming network and instead
enters into an exclusive arrangement with a cable operator, the MVPD
could file a complaint alleging a violation of Section 628(b) of the
Act (and, potentially, Section 628(c)(2)(B) of the Act). While our
program access rules contain specific procedures for the filing of a
petition for a standstill along with a program access complaint when
seeking to renew an existing affiliation agreement, should our
standstill procedures also apply when an MVPD files a program access
complaint based on a satellite-delivered, cable-affiliated programmer's
mid-term termination or modification of an affiliation agreement
resulting from the sunset? If the standstill petition is granted, the
price, terms, and other conditions of the existing affiliation
agreement will remain in place pending resolution of the program access
complaint, thereby reducing consumer disruption.
83. Rather than relying on the complaint and standstill process,
should we instead abrogate provisions of affiliation agreements that
would allow satellite-delivered, cable-affiliated programmers to
terminate or modify their existing agreements with MVPDs immediately on
the effective date of the sunset? We seek comment regarding the
benefits and burdens of abrogating contractual provisions that
otherwise would permit a programmer to terminate or modify its existing
agreement with an unaffiliated MVPD
[[Page 24321]]
immediately upon sunset of the exclusive contract prohibition. We seek
comment regarding how the abrogation of such contractual provisions
would be congruous with a possible finding to sunset the exclusive
contract prohibition. In NCTA v. FCC, the D.C. Circuit upheld the
Commission's abrogation of existing contracts in the program access
context. Alternatively, to minimize any potential disruption to
consumers, should we adopt a phased implementation of the sunset? For
example, should we provide that, for a period of three years from the
sunset date, a cable-affiliated programmer cannot enter into an
exclusive contract with a cable operator for a satellite-delivered,
cable-affiliated programming network that is an RSN (assuming the
prohibition is not retained for RSNs) or is ranked within the Top 20
cable networks as measured by either prime time ratings, average all-
day ratings, or total number of subscribers? Should we adopt a similar
restriction, for a period of two years from the sunset date, for a
satellite-delivered, cable-affiliated programming network that is
ranked within the Top 21-50 cable networks? We seek comment on these
proposals and any other appropriate ways to minimize any disruption to
consumers resulting from the sunset in the event that existing
affiliation agreements permit satellite-delivered, cable-affiliated
programmers to terminate or modify them on the effective date of the
sunset.
b. Continued Enforcement of Existing Affiliation Agreements Despite the
Sunset
84. To the extent that existing affiliation agreements require
cable-affiliated programmers to continue to provide satellite-
delivered, cable-affiliated programming networks to MVPDs for the
duration of the term of the existing agreement despite the sunset of
the exclusive contract prohibition, we seek comment on the interplay
between the sunset and the discrimination provision of the program
access rules. For example, assume that a cable-affiliated programmer
has existing affiliation agreements for a satellite-delivered, cable-
affiliated programming network with three MVPDs (including one cable
operator) subject to the following termination dates: December 31, 2012
(cable operator); December 31, 2013 (MVPD A); December 31, 2014 (MVPD
B). If the satellite-delivered, cable-affiliated programmer enters into
an exclusive contract with the cable operator after its current
agreement expires on December 31, 2012, would the satellite-delivered,
cable-affiliated programmer be required to make the programming
available to all MVPDs until after the expiration of the latest-
expiring affiliation agreement with an MVPD other than the cable
operator that is a party to the exclusive contract? We seek comment on
whether it would be impermissibly discriminatory in violation of
Section 628(c)(2)(B) if the satellite-delivered, cable-affiliated
programmer were to refuse to license the network to MVPD A after
December 31, 2013, while continuing to provide the programming to MVPD
B until its agreement expires on December 31, 2014, based on the future
enforcement of an exclusive contract with the cable operator as of
January 1, 2015, after the expiration of the agreement with MVPD B.
While the satellite-delivered, cable-affiliated programmer's
discriminatory treatment of MVPD A relative to MVPD B and the cable
operator during the period of December 31, 2013 to December 31, 2014
might be justified based on a legitimate business reason, is the future
enforcement of an exclusive contract a legitimate business reason for
such discriminatory conduct? If not, then the satellite-delivered,
cable-affiliated programmer would not be permitted to have the
exclusivity period with the cable operator begin, or to refuse to
license the programming to other MVPDs, until all affiliation
agreements with other MVPDs expire. Thus, in this scenario, absent a
legitimate business reason, the satellite-delivered, cable-affiliated
programmer would be required to enter into an affiliation agreement
with MVPD A that terminates no earlier than December 31, 2014 (i.e.,
the expiration of the latest-expiring affiliation agreement with an
MVPD other than the cable operator that is a party to the exclusive
contract). We seek comment on this view.
85. To the extent that affiliation agreements require cable-
affiliated programmers to continue to provide satellite-delivered,
cable-affiliated programming networks to MVPDs for the duration of the
term of the existing agreement despite the sunset, does the anti-
discrimination provision of Section 628(c)(2)(B) as described here
prevent the enforcement of any exclusive contract until the expiration
of the latest-expiring affiliation agreement with an MVPD other than
the cable operator that is a party to the exclusive contract? Will this
limit the immediate impact of the sunset (complete or partial) and help
to minimize any potential disruption to consumers? What impact, if any,
does Section 628(c)(2)(B)(iv) have on this discussion? Even if this
section could be read to immunize post-sunset exclusive contracts from
being challenged as impermissibly discriminatory in violation of
Section 628(c)(2)(B), would this provision allow a satellite-delivered,
cable-affiliated programmer to selectively refuse to license
programming to certain MVPDs based on future enforcement of an
exclusive contract, as described here?
6. First Amendment
86. We ask commenters to consider carefully how the First Amendment
impacts our review of the exclusive contract prohibition, including the
proposals to relax the prohibition. As the D.C. Circuit explained in
rejecting a facial challenge to the constitutionality of the program
access provisions, these provisions will survive intermediate scrutiny
if they ``further[] 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.'' Given the current state of competition in the video
programming market and the video distribution market, does the First
Amendment require the exclusive contract prohibition as it exists today
to sunset or to be relaxed? Is a prohibition on all exclusive contracts
in all markets between cable operators and cable-affiliated programmers
pertaining to satellite-delivered, cable-affiliated programming ``no
greater than is essential'' to the furtherance of the substantial
government interest in promoting competition in the MVPD market? Would
retaining the prohibition only for satellite-delivered, cable-
affiliated RSNs and other satellite-delivered, cable-affiliated ``must
have'' programming, and/or allowing the prohibition to sunset on a
market-by-market basis, be a sufficiently tailored approach?
87. We note that, in rejecting a facial First Amendment challenge
to the 2010 Program Access Order in which the Commission adopted a
case-by-case approach for considering unfair acts involving
terrestrially delivered, cable-affiliated programming, the D.C. Circuit
explained that, ``[b]y imposing liability only when complainants
demonstrate that a company's unfair act has `the purpose or effect' of
`hinder[ing] significantly or * * * prevent[ing]' the provision of
satellite programming, * * * the Commission's terrestrial programming
rules specifically target activities where the governmental interest is
greatest.'' Moreover, the D.C.
[[Page 24322]]
Circuit stated that the Commission, in adopting this case-by-case
approach, ``has no obligation to establish that vertically integrated
cable companies retain a stranglehold on competition nationally or that
all withholding of terrestrially delivered programming negatively
affects competition.'' Is a case-by-case approach pursuant to Section
628(b) (and, potentially, Section 628(c)(2)(B)) or a narrowed
application of the exclusive contract prohibition as discussed above,
rather than the current broad, prophylactic prohibition, preferable
under the First Amendment given the competitive environment today? We
also seek comment on the First Amendment implications of a phased
implementation of a sunset as discussed above to minimize any potential
disruption to consumers.
7. Costs and Benefits
88. In addition to the specific questions noted above, we ask
commenters to consider generally the costs and benefits associated with
either retaining, sunsetting, or relaxing the exclusive contract
prohibition as described herein. We believe that retaining the
exclusive contract prohibition in its entirety as it exists today will
result in certain costs, such as unnecessarily restricting
procompetitive arrangements that in certain instances may foster
competition in the video distribution market and promote competition
and diversity in the video programming market. While a case-by-case
approach, either pursuant to a Section 628(b) complaint (and,
potentially, a Section 628(c)(2)(B) complaint) or a market-based
petition, will better enable the Commission to consider the unique
facts and circumstances presented in each case, this approach will also
result in certain costs by requiring the affected parties and the
Commission to expend resources litigating and resolving the complaints
and petitions. Retaining an exclusive contract prohibition for
programming that is demonstrated to be important for competition, non-
replicable, and without good substitutes (i.e., satellite-delivered,
cable-affiliated RSNs and other satellite-delivered, cable-affiliated
``must have'' programming), may help to reduce these costs by
eliminating the need to file complaints with respect to this class of
programming. To the extent possible, we encourage commenters to
quantify the costs and benefits of the different approaches to the
exclusive contract prohibition as described herein. Which of the
approaches would be most beneficial to the public? When would the
public realize these benefits? Which of these approaches would be least
burdensome?
8. Subdistribution Agreements
89. We seek comment on the impact of a sunset (complete or partial)
of the exclusive contract prohibition on the Commission's rules
pertaining to exclusive subdistribution agreements. The Commission's
rules define a subdistribution agreement as ``an arrangement by which a
local cable operator is given the right by a satellite cable
programming vendor or satellite broadcast programming vendor to
distribute the vendor's programming to competing multichannel video
programming distributors.'' Based on the exclusive contract
prohibition, the Commission in the 1993 Program Access Order adopted
certain restrictions on exclusive subdistribution agreements to
``address any incentives for a subdistributor to refuse to sell to a
competing MVPD that may be inherent in such rights'' and to ensure
``appropriate safeguards to limit the potential for anticompetitive
behavior.'' Specifically, a cable operator engaged in subdistribution
(i) may not require a competing MVPD to purchase additional or
unrelated programming as a condition of such subdistribution; (ii) may
not require a competing MVPD to provide access to private property in
exchange for access to programming; (iii) may not charge a competing
MVPD more for programming than the satellite cable programming vendor
or satellite broadcast programming vendor itself would be permitted to
charge; and (iv) must respond to a request for access to such
programming by a competing MVPD within fifteen (15) days of the request
and, if the request is denied, the competing MVPD must be permitted to
negotiate directly with the satellite cable programming vendor or
satellite broadcast programming vendor. We propose to eliminate these
restrictions to the extent the exclusive contract prohibition sunsets
and seek comment on this proposal.
9. Common Carriers and Open Video Systems
90. The Commission's rules contain provisions pertaining to
exclusive contracts involving common carriers and OVS in served areas
that mirror the rules applicable to exclusive contracts between cable
operators and satellite-delivered, cable-affiliated programmers in
served areas. With respect to common carriers, these rules pertain to
exclusive contracts between a satellite-delivered, common-carrier-
affiliated programmer and a common carrier or its affiliate that
provides video programming by any means directly to subscribers. With
respect to OVS, these rules pertain to exclusive contracts (i) between
a satellite-delivered, OVS-affiliated programmer and an OVS or its
affiliate that provides video programming on its OVS; and (ii) between
a satellite-delivered, cable-affiliated programmer and an OVS video
programming provider in which a cable operator has an attributable
interest. We propose that any amendments we adopt herein to our rules
pertaining to exclusive contracts between cable operators and
satellite-delivered, cable-affiliated programmers in served areas will
apply equally to these rules pertaining to common carriers and OVS. We
also propose to conform the rules pertaining to exclusive
subdistribution agreements involving OVS to the rules applicable to
cable operators and seek comment on this proposal.
10. Impact of a Sunset on Existing Merger Conditions
91. We believe that conditions adopted in two previous merger
orders may be impacted if the exclusive contract prohibition were to
sunset (wholly or partially). We seek comment on this impact below.
a. Adelphia Order Merger Conditions
92. Pursuant to merger conditions adopted in the Adelphia Order,
certain terrestrially delivered RSNs (``Covered RSNs'') affiliated with
TWC are currently required to comply with the program access rules
applicable to satellite-delivered, cable-affiliated programming,
including the exclusive contract prohibition.\21\ Among other
[[Page 24323]]
things, the conditions state as follows with respect to exclusivity
(the ``exclusivity conditions''):
---------------------------------------------------------------------------
\21\ See Applications for Consent to the Assignment and/or
Transfer of Control of Licenses, Adelphia Communications
Corporation, Assignors to Time Warner Cable, Inc., Assignees, et
al., Memorandum Opinion and Order, 21 FCC Rcd 8203, 8274, paras.
156-157 (2006) (``Adelphia Order'') (requiring terrestrially
delivered RSNs in which Time Warner has or acquires an attributable
interest to comply with the program access rules applicable to
satellite-delivered, cable-affiliated programming, citing 47 CFR
76.1002), 8276, para. 162, and 8336, Appendix B, sec. B.1 (citing 47
CFR 76.1002); see also Time Warner Order, 24 FCC Rcd at 893, para.
26 (approving transaction separating Time Warner from TWC and
explaining that the Adelphia Order program access conditions will
continue to apply to TWC post-restructuring but will no longer apply
to Time Warner). An RSN as defined in the Adelphia Order is ``any
non-broadcast video programming service that (1) provides live or
same-day distribution within a limited geographic region of sporting
events of a sports team that is a member of Major League Baseball,
the National Basketball Association, the National Football League,
the National Hockey League, NASCAR, NCAA Division I Football, NCAA
Division I Basketball and (2) in any year, carries a minimum of
either 100 hours of programming that meets the criteria of
subheading 1, or 10% of the regular season games of at least one
sports team that meets the criteria of subheading 1.'' Adelphia
Order, 21 FCC Rcd at 8336, Appendix B, sec. A. While these
conditions originally applied to Comcast as well, they were
superseded by the Comcast/NBCU Order. See Comcast/NBCU Order, 26 FCC
Rcd at 4364, Appendix A, Condition VI.
(i) ``Time Warner [Cable], and [its] existing or future Covered
RSNs, regardless of the means of delivery, shall not offer any such
RSN on an exclusive basis to any MVPD, and * * * Time Warner
[Cable], and [its] Covered RSNs, regardless of the means of
delivery, are required to make such RSNs available to all MVPDs on a
non-exclusive basis * * *'';
(ii) ``Time Warner [Cable] will not enter into an exclusive
distribution arrangement with any such Covered RSN, regardless of
the means of delivery''; and
(iii) ``Th[is] exclusive contracts and practices * * *
requirement of the program access rules will apply to Time Warner
[Cable] and [its] Covered RSNs for six years, provided that if the
program access rules are modified this condition shall be modified
to conform to any revised rules adopted by the Commission.''
93. These conditions are scheduled to expire in July 2012.
Depending on whether and how we revise the exclusive contract
prohibition, and if we do so before these conditions expire, we may
need to modify these exclusivity conditions to conform to our revised
rules. We envision four alternative scenarios. First, to the extent
that we retain the exclusive contract prohibition in its entirety as it
exists today, including for RSNs, there will be no need to modify the
exclusivity conditions because the program access rules will remain the
same. Second, to the extent that we retain an exclusive contract
prohibition for satellite-delivered, cable-affiliated RSNs and other
satellite-delivered, cable-affiliated ``must have'' programming only,
there will be no need to modify the exclusivity conditions because the
exclusive contract prohibition will remain the same with respect to
RSNs. Third, to the extent we establish a process whereby a cable
operator or satellite-delivered, cable-affiliated programmer can seek
to remove the exclusive contract prohibition on a market-by-market
basis, and grant of such a petition includes RSNs, then we would expect
to modify the exclusivity conditions to provide that Covered RSNs in
markets covered by such a petition (if granted) will no longer be
subject to these exclusivity conditions. If the grant of such a
petition does not include RSNs, however, there will be no need to
modify the exclusivity conditions because the exclusive contract
prohibition will remain the same with respect to RSNs. Fourth, to the
extent we sunset the exclusive contract prohibition in its entirety,
including for RSNs, then we would expect to modify the exclusivity
conditions to provide that Covered RSNs will no longer be subject to
these exclusivity conditions; rather, exclusive contracts for Covered
RSNs may be assessed on a case-by-case basis in response to a program
access complaint alleging a violation of Section 628(b) (and,
potentially, Section 628(c)(2)(B)). We seek comment on this
interpretation.
b. Liberty Media Order Merger Conditions
94. Pursuant to merger conditions adopted in the Liberty Media
Order,\22\ certain programmers affiliated with Liberty Media and
DIRECTV are subject to the following conditions (the ``exclusivity
conditions''), among others:
\22\ Applications for Consent to the Assignment and/or Transfer
of Control of Licenses, News Corporation. and The DIRECTV Group,
Inc., Transferors, to Liberty Media Corporation., Transferee,
Memorandum Opinion and Order, 23 FCC Rcd 3265 (2008) (``Liberty
Media Order''). The conditions state that the term ``Liberty Media''
includes ``any entity or program rights holder in which Liberty
Media or John Malone holds an attributable interest. Thus, the term
`Liberty Media' includes Discovery Communications.'' Id. at 3340-41
n.3. Moreover, the conditions provide that ``Liberty Media and
DIRECTV are prohibited from acquiring an attributable interest in
any non-broadcast national or regional programming service while
these conditions are in effect if the programming service is not
obligated to abide by such conditions.'' Id.
(i) ``Liberty Media shall not offer any of its existing or
future national and regional programming services on an exclusive
basis to any MVPD. Liberty Media shall continue to make such
services available to all MVPDs on a non-exclusive basis * * *'';
(ii) ``DIRECTV will not enter into an exclusive distribution
arrangement with any Affiliated Program Rights Holder.'';
(iii) ``As long as Liberty Media holds an attributable interest
in DIRECTV, DIRECTV will deal with any Affiliated Program Rights
Holder with respect to programming services the Affiliated Program
Rights Holder controls as a vertically integrated programmer subject
to the program access rules.'';
(iv) ``These conditions will apply to Liberty Media, DIRECTV,
and any Affiliated Program Rights Holder until the later of a
determination by the Commission that Liberty Media no longer holds
an attributable interest in DIRECTV or the Commission's program
access rules no longer remain in effect (provided that if the
program access rules are modified these commitments shall be
modified, as the Commission deems appropriate, to conform to any
revised rules adopted by the Commission).''
95. These particular Liberty Media Order conditions differ from
similar conditions in the Adelphia Order in that (i) they apply not
only to RSNs, but to both national and regional programming services;
and (ii) they do not expire after the passage of a certain period of
time. Depending on whether and how we revise the exclusive contract
prohibition of the program access rules, we may need to modify these
exclusivity conditions to conform to our revised rules. First, to the
extent that we retain the exclusive contract prohibition in its
entirety as it exists today, there will be no need to modify the
exclusivity conditions because the program access rules will remain the
same. Second, to the extent that we retain an exclusive contract
prohibition for satellite-delivered, cable-affiliated RSNs and other
satellite-delivered, cable-affiliated ``must have'' programming only,
there will be no need to modify the exclusivity conditions with respect
to RSNs and other ``must have'' programming because the exclusive
contract prohibition will remain the same with respect to such
programming. With respect to non-RSN programming and other programming
that is not deemed ``must have,'' however, we would expect to modify
the exclusivity conditions to provide that exclusive contracts
involving such programming will no longer be prohibited. To the extent
any covered non-RSN/non-``must have'' programming is cable-affiliated,
however, exclusive contracts may be assessed on a case-by-case basis in
response to a program access complaint alleging a violation of Section
628(b) (and, potentially, Section 628(c)(2)(B)). Third, to the extent
we establish a process whereby a cable operator or satellite-delivered,
cable-affiliated programmer can seek to remove the exclusive contract
prohibition on a market-by-market basis, and grant of such a petition
includes satellite-delivered, cable-affiliated RSNs and other
satellite-delivered, cable-affiliated ``must have'' programming, then
we would expect to modify the exclusivity conditions to provide that
exclusive contracts in markets covered by such a petition (if granted)
will not be prohibited under these conditions. If the grant of such a
petition does not include satellite-delivered, cable-affiliated RSNs
and other satellite-delivered, cable-affiliated ``must have''
programming, however, there will be no need to modify the exclusivity
conditions with respect to RSNs and other ``must have'' programming
because the exclusive contract prohibition will remain the same with
respect to such programming. Fourth, to the extent we sunset the
exclusive contract prohibition in its entirety, including for
satellite-delivered, cable-affiliated RSNs and other satellite-
delivered, cable-affiliated
[[Page 24324]]
``must have'' programming, then we would expect to modify the
exclusivity conditions to provide that exclusive contracts will not be
prohibited. Again, however, to the extent any of the covered
programming is cable-affiliated, exclusive contracts will be assessed
on a case-by-case basis in response to a program access complaint
alleging a violation of Section 628(b) (and, potentially, Section
628(c)(2)(B)). We seek comment on this interpretation.\23\
---------------------------------------------------------------------------
\23\ In contrast to the Adelphia Order and the Liberty Media
Order, there is no provision in the Comcast/NBCU Order requiring the
conditions adopted therein to be modified to conform to changes the
Commission makes to the program access rules. See Comcast/NBCU
Order, 26 FCC Rcd at 4381, Appendix A, Condition XX (stating that
the conditions will remain in effect for seven years, provided that
the Commission will consider a petition from Comcast/NBCU for
modification of a condition if they can demonstrate that there has
been a material change in circumstances, or that the condition has
proven unduly burdensome, such that the Condition is no longer
necessary in the public interest). Accordingly, the conditions
adopted in the Comcast/NBCU Order will not be affected by the rule
changes adopted in this proceeding.
---------------------------------------------------------------------------
B. Potential Revisions to the Program Access Rules To Better Address
Alleged Violations
96. The Commission initially adopted its program access rules in
1993. Other than the previous extensions of the exclusive contract
prohibition and certain procedural changes, including the adoption of a
process for the award of damages, establishing aspirational deadlines
for the processing of complaints, and implementing party-to-party
discovery, these rules have remained largely unchanged since this time.
We seek comment on how our rules can be improved, especially in light
of marketplace developments and commenters' experience with these rules
over the past two decades.
1. Procedural Rules
97. As an initial matter, while our program access procedural rules
provide a defendant with 20 days after service of a complaint to file
an answer, the Commission has provided defendants with 45 days from the
date of service to file an answer to a Section 628(b) complaint
alleging an ``unfair act'' involving terrestrially delivered, cable-
affiliated programming to ensure that the defendant has adequate time
to develop a response. The Commission explained that additional time
was appropriate because, unlike complaints alleging a violation of the
prohibitions in Section 628(c), a complaint alleging a violation of
Section 628(b) entails additional factual inquiries, including whether
the allegedly ``unfair act'' at issue has the purpose or effect set
forth in Section 628(b). To the extent the exclusive contract
prohibition were to sunset (wholly or partially), we propose to adopt
the same 45-day answer period in complaint proceedings alleging that an
exclusive contract involving satellite-delivered, cable-affiliated
programming violates Section 628(b). We seek comment on this proposal.
Because all complaints alleging a violation of Section 628(b) will
involve the claim that the conduct at issue has the purpose or effect
set forth in Section 628(b), we propose to amend our rules to provide
for a 45-day answer period for all complaints alleging a violation of
Section 628(b). We seek comment on this proposal. Are there any other
changes we should make to our program access procedural rules to
accommodate the case-by-case consideration of exclusive contracts
involving satellite-delivered, cable-affiliated programming under
Section 628(b)?
2. Volume Discounts
98. We also seek comment on whether our program access rules
adequately address potentially discriminatory volume discounts and, if
not, how these rules should be revised to address these concerns. Some
MVPDs have expressed concern that cable-affiliated programmers charge
larger MVPDs less for programming on a per-subscriber basis than
smaller MVPDs due to volume discounts, which are based on the number of
subscribers the MVPD serves. As a result, smaller MVPDs claim that they
are placed at a significant cost disadvantage relative to larger MVPDs.
Some commenters have claimed that this price differential is not cost-
based because program production and acquisition costs are sunk;
delivery costs do not vary; and administrative costs are not different.
According to some commenters, without a basis in cost, this wholesale
practice amounts to price discrimination.
99. The anti-discrimination provision in Section 628(c)(2)(B) of
the Act provides that it is not impermissibly discriminatory for a
satellite-delivered, cable-affiliated programmer to ``establish[]
different prices, terms, and conditions which take into account
economies of scale, cost savings, or other direct and legitimate
economic benefits reasonably attributable to the number of subscribers
served by the distributor.'' The Commission's rules provide that:
Vendors may use volume-related justifications to establish price
differentials to the extent that such justifications are made
available to similarly situated distributors on a technology-neutral
basis. When relying upon standardized volume-related factors that
are made available to all multichannel video programming
distributors using all technologies, the vendor may be required to
demonstrate that such volume discounts are reasonably related to
direct and legitimate economic benefits reasonably attributable to
the number of subscribers served by the distributor if questions
arise about the application of that discount. In such
demonstrations, vendors will not be required to provide a strict
cost justification for the structure of such standard volume-related
factors, but may also identify non-cost economic benefits related to
increased viewership.
Thus, the Commission's rules contemplate that an MVPD may file a
program access complaint challenging volume-based pricing in certain
circumstances. In the Comcast/NBCU Order, the Commission declined to
adopt a condition that would prohibit Comcast-NBCU from offering
volume-based discounts for its video programming, finding such a
prohibition to be unnecessary because ``the specific matter of volume-
based discounts is adequately addressed by the Commission's program
access rules.''
100. Despite the concerns expressed by some MVPDs regarding
allegedly discriminatory volume discounts and the availability of the
existing complaint process, the Commission has not received program
access complaints alleging that particular volume discounts violate
Section 628(c)(2)(B) of the Act. We seek information about specific
instances of perceived volume discount discrimination, along with
explanations of why the alleged conduct amounts to a violation of the
Commission's rules. We seek comment on the reasons for the lack of
program access complaints alleging discriminatory volume discounts,
despite the apparent concern among some MVPDs regarding this issue. Do
our current program access rules and procedures prevent or discourage
the filing of legitimate complaints pertaining to this issue? Is the
complaint process too costly and time-consuming with respect to
complaints alleging price discrimination? If so, we seek comment on how
we might improve our rules and procedures to avoid impeding the filing
of legitimate complaints. Are there procedural tools we might use, such
as establishing rebuttable presumptions, that will expedite the
complaint process while ensuring fairness to all parties? While the
Commission has stated that satellite-delivered, cable-affiliated
programmers may justify volume discounts based on ``non-cost economic
benefits'' related to
[[Page 24325]]
increased viewership, it has not defined these benefits in the rules.
Should we continue to consider ``non-cost economic benefits'' on a
case-by-case basis due to the various factors, such as advertising and
online and VOD offerings, that can be considered in setting prices?
Should our rules specifically list those ``non-cost economic benefits''
related to increased viewership that might justify volume discounts? If
so, what non-cost economic benefits should be identified? Should these
benefits be limited to increased advertising revenues resulting from
increased viewership? Should satellite-delivered, cable-affiliated
programmers be required to demonstrate in response to a complaint the
increase in advertising revenues resulting from licensing programming
to a larger MVPD and how this increase justifies the volume discount
provided to the larger MVPD relative to the complainant?
3. Uniform Price Increases
101. We also seek comment on whether and how we should revise our
rules to address uniform price increases imposed by satellite-
delivered, cable-affiliated programmers. In previous merger decisions,
the Commission has discussed the possibility that a vertically
integrated cable operator could disadvantage its competitors in the
video distribution market by raising the price of a network to all
distributors (including itself) to a level greater than that which
would be charged by a non-vertically integrated supplier. The
Commission explained that a vertically integrated cable operator might
employ such a strategy to raise its rivals' costs. Because rival MVPDs
would have to pay more for the programming, they would likely respond
either by raising their prices to subscribers, not purchasing the
programming, or reducing marketing activities. The vertically
integrated cable operator could then enjoy a competitive advantage,
because the higher price for the programming that it would pay would be
an internal transfer that it could disregard when it sets its own
prices. By forcing its competitors either to pay more for the
programming and increase their retail rates, or forgo purchasing the
programming, the vertically integrated cable operator could raise its
prices to some extent without losing subscribers. The Commission has
also stated that this strategy of uniform price increases does not
necessarily violate the anti-discrimination provision of the program
access rules because the price increases would be applied to all
distributors equally and thus does not involve discriminatory conduct.
In previous merger orders, the Commission has sought to address this
issue by adopting a baseball-style arbitration remedy to maintain the
pre-integration balance of bargaining power between vertically
integrated programming networks and rival MVPDs.
102. We seek comment on whether and how we should revise our rules
to address uniform price increases imposed by satellite-delivered,
cable-affiliated programmers. We also seek comment on actual
experiences of discriminatory uniform price increases. Is there any
basis to interpret the anti-discrimination provision in Section
628(c)(2)(B) as applying to uniform price increases? We note that, in
employment law, a practice that appears facially neutral may
nonetheless be discriminatory if it has a disparate impact on a certain
class. While a uniform price increase appears facially neutral in that
it applies to all MVPDs equally, it has a disparate impact on MVPDs
that are not affiliated with the cable-affiliated programmer because
the price increase is not merely an internal transfer for unaffiliated
MVPDs. To the extent that a uniform price increase is not covered by
the anti-discrimination provision in Section 628(c)(2)(B), can it be
addressed on a case-by-case basis in a Section 628(b) complaint
alleging that a uniform price increase is an ``unfair act'' that has
the ``purpose or effect'' of ``significantly hindering or preventing''
an MVPD from providing satellite cable programming or satellite
broadcast programming to subscribers or consumers? To the extent that a
uniform price increase is actionable under Section 628(c)(2)(B) or
Section 628(b), how can we distinguish an anticompetitive uniform price
increase intended to raise rivals' costs from a price increase dictated
by the market?
IV. Procedural Matters
A. Initial Regulatory Flexibility Act Analysis
103. As required by the Regulatory Flexibility Act of 1980, as
amended (``RFA''), the Commission has prepared this present Initial
Regulatory Flexibility Analysis (``IRFA'') concerning the possible
significant economic impact on small entities by the policies and rules
proposed in the Notice of Proposed Rulemaking (``NPRM''). Written
public comments are requested on this IRFA. Comments must be identified
as responses to the IRFA and must be filed by the deadlines for
comments on the NPRM specified supra. The Commission will send a copy
of the NPRM, including this IRFA, to the Chief Counsel for Advocacy of
the Small Business Administration (``SBA''). In addition, the NPRM and
IRFA (or summaries thereof) will be published in the Federal Register.
Need for, and Objectives of, the Proposed Rule Changes
104. We issue the NPRM to seek comment on (i) whether to retain,
sunset, or relax one of the several protections afforded to
multichannel video programming distributors (``MVPDs'') by the program
access rules--the prohibition on exclusive contracts involving
satellite-delivered, cable-affiliated programming; and (ii) potential
revisions to our program access rules to better address alleged
violations, including potentially discriminatory volume discounts and
uniform price increases.
105. In areas served by a cable operator, Section 628(c)(2)(D) of
the Communications Act of 1934, as amended (the ``Act''), generally
prohibits exclusive contracts for satellite cable programming or
satellite broadcast programming between any cable operator and any
cable-affiliated programming vendor (the ``exclusive contract
prohibition''). The exclusive contract prohibition applies to all
satellite-delivered, cable-affiliated programming and presumes that an
exclusive contract will cause competitive harm in every case,
regardless of the type of programming at issue. The exclusive contract
prohibition applies only to programming which is delivered via
satellite; it does not apply to programming which is delivered via
terrestrial facilities. In January 2010, the Commission adopted rules
providing for the processing of complaints alleging that an ``unfair
act'' involving terrestrially delivered, cable-affiliated programming
violates Section 628(b) of the Act. Thus, while an exclusive contract
involving satellite-delivered, cable-affiliated programming is
generally prohibited, an exclusive contract involving terrestrially
delivered, cable-affiliated programming is permitted unless the
Commission finds in response to a complaint that it violates Section
628(b) of the Act.
106. In Section 628(c)(5) of the Act, Congress provided that the
exclusive contract prohibition would cease to be effective on October
5, 2002, unless the Commission found that it ``continues to be
necessary to preserve and protect competition and diversity in the
distribution of video programming.'' In June 2002, the Commission found
that the exclusive contract prohibition continued to be necessary to
preserve
[[Page 24326]]
and protect competition and diversity and retained the exclusive
contract prohibition for five years, until October 5, 2007. The
Commission provided that, during the year before the expiration of the
five-year extension, it would conduct a second review to determine
whether the exclusive contract prohibition continued to be necessary to
preserve and protect competition and diversity in the distribution of
video programming. After conducting such a review, the Commission in
September 2007 concluded that the exclusive contract prohibition was
still necessary, and it retained the prohibition for five more years,
until October 5, 2012. The Commission again provided that, during the
year before the expiration of the five-year extension, it would conduct
a third 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.
107. Accordingly, in this NPRM, we initiate the third review of the
necessity of the exclusive contract prohibition. In the NPRM, we
present certain data on the current state of competition in the video
distribution market and the video programming market, and we invite
commenters to submit more recent data or empirical analyses. We seek
comment on whether current conditions in the video marketplace support
retaining, sunsetting, or relaxing the exclusive contract prohibition.
To the extent that the data do not support retaining the exclusive
contract prohibition as it exists today, we seek comment on whether we
can preserve and protect competition in the video distribution market
by either:
Sunsetting the exclusive contract prohibition in its
entirety and instead relying solely on existing protections provided by
the program access rules that will not sunset: (i) The case-by-case
consideration of exclusive contracts pursuant to Section 628(b) of the
Act; (ii) the prohibition on discrimination in Section 628(c)(2)(B) of
the Act; and (iii) the prohibition on undue or improper influence in
Section 628(c)(2)(A) of the Act; or
Relaxing the exclusive contract prohibition by (i)
establishing a process whereby a cable operator or satellite-delivered,
cable-affiliated programmer can seek to remove the prohibition on a
market-by-market basis based on the extent of competition in the
market; (ii) retaining the prohibition only for satellite-delivered,
cable-affiliated Regional Sports Networks (``RSNs'') and any other
satellite delivered, cable-affiliated programming that the record here
establishes as being important for competition and non-replicable and
having no good substitutes; and/or (iii) other ways commenters propose.
We seek comment also on (i) how to implement a sunset (complete or
partial) to minimize any potential disruption to consumers; (ii) the
First Amendment implications of the alternatives discussed herein;
(iii) the costs and benefits of the alternatives discussed herein; and
(iv) the impact of a sunset on existing merger conditions.
108. In addition, we seek comment in the NPRM on potential
improvements to the program access rules to better address potential
violations. With the exception of certain procedural revisions and the
previous extensions of the exclusive contract prohibition, the program
access rules have remained largely unchanged in the almost two decades
since the Commission originally adopted them in 1993. We seek comment
on, among other things, whether our rules adequately address
potentially discriminatory volume discounts and uniform price increases
and, if not, how these rules should be revised to address these
concerns.
Legal Basis
109. The proposed action is authorized pursuant to Sections 4(i),
4(j), 303(r), and 628 of the Communications Act of 1934, as amended, 47
U.S.C. 154(i), 154(j), 303(r), and 548.
Description and Estimate of the Number of Small Entities to Which the
Proposed Rules Will Apply
110. The RFA directs agencies to provide a description of, and
where feasible, an estimate of the number of small entities that may be
affected by the proposed rules, if adopted. The RFA generally defines
the term ``small entity'' as having the same meaning as the terms
``small business,'' ``small organization,'' and ``small governmental
jurisdiction.'' In addition, the term ``small business'' has the same
meaning as the term ``small business concern'' under the Small Business
Act. A small business concern is one which: (1) Is independently owned
and operated; (2) is not dominant in its field of operation; and (3)
satisfies any additional criteria established by the SBA. Below, we
provide a description of such small entities, as well as an estimate of
the number of such small entities, where feasible.
111. Wired Telecommunications Carriers. The 2007 North American
Industry Classification System (``NAICS'') defines ``Wired
Telecommunications Carriers'' as follows: ``This industry comprises
establishments primarily engaged in operating and/or providing access
to transmission facilities and infrastructure that they own and/or
lease for the transmission of voice, data, text, sound, and video using
wired telecommunications networks. Transmission facilities may be based
on a single technology or a combination of technologies. Establishments
in this industry use the wired telecommunications network facilities
that they operate to provide a variety of services, such as wired
telephony services, including VoIP services; wired (cable) audio and
video programming distribution; and wired broadband Internet services.
By exception, establishments providing satellite television
distribution services using facilities and infrastructure that they
operate are included in this industry.'' The SBA has developed a small
business size standard for wireline firms within the broad economic
census category, ``Wired Telecommunications Carriers.'' Under this
category, the SBA deems a wireline business to be small if it has 1,500
or fewer employees. Census Bureau data for 2007, which now supersede
data from the 2002 Census, show that there were 3,188 firms in this
category that operated for the entire year. Of this total, 3,144 had
employment of 999 or fewer, and 44 firms had employment of 1,000
employees or more. Thus under this category and the associated small
business size standard, the majority of these firms can be considered
small.
112. Cable Television Distribution Services. Since 2007, these
services have been defined within the broad economic census category of
Wired Telecommunications Carriers; that category is defined above. The
SBA has developed a small business size standard for this category,
which is: All such firms having 1,500 or fewer employees. Census Bureau
data for 2007, which now supersede data from the 2002 Census, show that
there were 3,188 firms in this category that operated for the entire
year. Of this total, 3,144 had employment of 999 or fewer, and 44 firms
had employment of 1,000 employees or more. Thus under this category and
the associated small business size standard, the majority of these
firms can be considered small.
113. Cable Companies and Systems. The Commission has also developed
its own small business size standards, for the purpose of cable rate
regulation. Under the Commission's rules, a ``small cable company'' is
one serving 400,000 or fewer subscribers nationwide. Industry data
indicate that all but ten
[[Page 24327]]
cable operators nationwide are small under this size standard. In
addition, under the Commission's rules, a ``small system'' is a cable
system serving 15,000 or fewer subscribers. Industry data indicate
that, of 6,101 systems nationwide, 4,410 systems have under 10,000
subscribers, and an additional 258 systems have 10,000-19,999
subscribers. Thus, under this standard, most cable systems are small.
114. Cable System Operators. The Communications Act of 1934, as
amended, also contains a size standard for small cable system
operators, which is ``a cable operator that, directly or through an
affiliate, serves in the aggregate fewer than 1 percent of all
subscribers in the United States and is not affiliated with any entity
or entities whose gross annual revenues in the aggregate exceed
$250,000,000.'' The Commission has determined that an operator serving
fewer than 677,000 subscribers shall be deemed a small operator if its
annual revenues, when combined with the total annual revenues of all
its affiliates, do not exceed $250 million in the aggregate. Industry
data indicate that all but nine cable operators nationwide are small
under this subscriber size standard. We note that the Commission
neither requests nor collects information on whether cable system
operators are affiliated with entities whose gross annual revenues
exceed $250 million, and therefore we are unable to estimate more
accurately the number of cable system operators that would qualify as
small under this size standard.
115. Direct Broadcast Satellite (``DBS'') Service. DBS service is a
nationally distributed subscription service that delivers video and
audio programming via satellite to a small parabolic ``dish'' antenna
at the subscriber's location. DBS, by exception, is now included in the
SBA's broad economic census category, ``Wired Telecommunications
Carriers,'' which was developed for small wireline firms. Under this
category, the SBA deems a wireline business to be small if it has 1,500
or fewer employees. Census Bureau data for 2007, which now supersede
data from the 2002 Census, show that there were 3,188 firms in this
category that operated for the entire year. Of this total, 3,144 had
employment of 999 or fewer, and 44 firms had employment of 1,000
employees or more. Thus under this category and the associated small
business size standard, the majority of these firms can be considered
small. Currently, only two entities provide DBS service, which requires
a great investment of capital for operation: DIRECTV and EchoStar
Communications Corporation (``EchoStar'') (marketed as the DISH
Network). Each currently offers subscription services. DIRECTV and
EchoStar each report annual revenues that are in excess of the
threshold for a small business. Because DBS service requires
significant capital, we believe it is unlikely that a small entity as
defined by the SBA would have the financial wherewithal to become a DBS
service provider.
116. Satellite Master Antenna Television (SMATV) Systems, also
known as Private Cable Operators (PCOs). SMATV systems or PCOs are
video distribution facilities that use closed transmission paths
without using any public right-of-way. They acquire video programming
and distribute it via terrestrial wiring in urban and suburban multiple
dwelling units such as apartments and condominiums, and commercial
multiple tenant units such as hotels and office buildings. SMATV
systems or PCOs are now included in the SBA's broad economic census
category, ``Wired Telecommunications Carriers,'' which was developed
for small wireline firms. Under this category, the SBA deems a wireline
business to be small if it has 1,500 or fewer employees. Census Bureau
data for 2007, which now supersede data from the 2002 Census, show that
there were 3,188 firms in this category that operated for the entire
year. Of this total, 3,144 had employment of 999 or fewer, and 44 firms
had employment of 1,000 employees or more. Thus, under this category
and the associated small business size standard, the majority of these
firms can be considered small.
117. Home Satellite Dish (``HSD'') Service. HSD or the large dish
segment of the satellite industry is the original satellite-to-home
service offered to consumers, and involves the home reception of
signals transmitted by satellites operating generally in the C-band
frequency. Unlike DBS, which uses small dishes, HSD antennas are
between four and eight feet in diameter and can receive a wide range of
unscrambled (free) programming and scrambled programming purchased from
program packagers that are licensed to facilitate subscribers' receipt
of video programming. Because HSD provides subscription services, HSD
falls within the SBA-recognized definition of Wired Telecommunications
Carriers. The SBA has developed a small business size standard for this
category, which is: All such firms having 1,500 or fewer employees.
Census Bureau data for 2007, which now supersede data from the 2002
Census, show that there were 3,188 firms in this category that operated
for the entire year. Of this total, 3,144 had employment of 999 or
fewer, and 44 firms had employment of 1,000 employees or more. Thus,
under this category and the associated small business size standard,
the majority of these firms can be considered small.
118. Broadband Radio Service and Educational Broadband Service.
Broadband Radio Service systems, previously referred to as Multipoint
Distribution Service (MDS) and Multichannel Multipoint Distribution
Service (MMDS) systems, and ``wireless cable,'' transmit video
programming to subscribers and provide two-way high speed data
operations using the microwave frequencies of the Broadband Radio
Service (BRS) and Educational Broadband Service (EBS) (previously
referred to as the Instructional Television Fixed Service (ITFS)). In
connection with the 1996 BRS auction, the Commission established a
small business size standard as an entity that had annual average gross
revenues of no more than $40 million in the previous three calendar
years. The BRS auctions resulted in 67 successful bidders obtaining
licensing opportunities for 493 Basic Trading Areas (BTAs). Of the 67
auction winners, 61 met the definition of a small business. BRS also
includes licensees of stations authorized prior to the auction. At this
time, we estimate that of the 61 small business BRS auction winners, 48
remain small business licensees. In addition to the 48 small businesses
that hold BTA authorizations, there are approximately 392 incumbent BRS
licensees that are considered small entities. After adding the number
of small business auction licensees to the number of incumbent
licensees not already counted, we find that there are currently
approximately 440 BRS licensees that are defined as small businesses
under either the SBA or the Commission's rules. In 2009, the Commission
conducted Auction 86, the sale of 78 licenses in the BRS areas. The
Commission offered three levels of bidding credits: (i) A bidder with
attributed average annual gross revenues that exceed $15 million and do
not exceed $40 million for the preceding three years (small business)
received a 15 percent discount on its winning bid; (ii) a bidder with
attributed average annual gross revenues that exceed $3 million and do
not exceed $15 million for the preceding three years (very small
business) received a 25 percent discount on its winning bid; and (iii)
a bidder with attributed average annual gross revenues that do not
exceed $3 million
[[Page 24328]]
for the preceding three years (entrepreneur) received a 35 percent
discount on its winning bid. Auction 86 concluded in 2009 with the sale
of 61 licenses. Of the ten winning bidders, two bidders that claimed
small business status won 4 licenses; one bidder that claimed very
small business status won three licenses; and two bidders that claimed
entrepreneur status won six licenses.
119. In addition, the SBA's Cable Television Distribution Services
small business size standard is applicable to EBS. There are presently
2,032 EBS licensees. All but 100 of these licenses are held by
educational institutions. Educational institutions are included in this
analysis as small entities. Thus, we estimate that at least 1,932
licensees are small businesses. Since 2007, Cable Television
Distribution Services have been defined within the broad economic
census category of Wired Telecommunications Carriers; that category is
defined as follows: ``This industry comprises establishments primarily
engaged in operating and/or providing access to transmission facilities
and infrastructure that they own and/or lease for the transmission of
voice, data, text, sound, and video using wired telecommunications
networks. Transmission facilities may be based on a single technology
or a combination of technologies.'' The SBA has developed a small
business size standard for this category, which is: All such firms
having 1,500 or fewer employees. Census Bureau data for 2007, which now
supersede data from the 2002 Census, show that there were 3,188 firms
in this category that operated for the entire year. Of this total,
3,144 had employment of 999 or fewer, and 44 firms had employment of
1,000 employees or more. Thus, under this category and the associated
small business size standard, the majority of these firms can be
considered small.
120. Fixed Microwave Services. Microwave services include common
carrier, private-operational fixed, and broadcast auxiliary radio
services. They also include the Local Multipoint Distribution Service
(LMDS), the Digital Electronic Message Service (DEMS), and the 24 GHz
Service, where licensees can choose between common carrier and non-
common carrier status. At present, there are approximately 31,428
common carrier fixed licensees and 79,732 private operational-fixed
licensees and broadcast auxiliary radio licensees in the microwave
services. There are approximately 120 LMDS licensees, three DEMS
licensees, and three 24 GHz licensees. The Commission has not yet
defined a small business with respect to microwave services. For
purposes of the IRFA, we will use the SBA's definition applicable to
Wireless Telecommunications Carriers (except satellite)--i.e., an
entity with no more than 1,500 persons. Under the present and prior
categories, the SBA has deemed a wireless business to be small if it
has 1,500 or fewer employees. For the category of Wireless
Telecommunications Carriers (except Satellite), Census data for 2007,
which supersede data contained in the 2002 Census, show that there were
1,383 firms that operated that year. Of those 1,383, 1,368 had fewer
than 1000 employees, and 15 firms had 1000 employees or more. Thus
under this category and the associated small business size standard,
the majority of firms can be considered small. We note that the number
of firms does not necessarily track the number of licensees. We
estimate that virtually all of the Fixed Microwave licensees (excluding
broadcast auxiliary licensees) would qualify as small entities under
the SBA definition.
121. Open Video Systems. The open video system (``OVS'') framework
was established in 1996, and is one of four statutorily recognized
options for the provision of video programming services by local
exchange carriers. The OVS framework provides opportunities for the
distribution of video programming other than through cable systems.
Because OVS operators provide subscription services, OVS falls within
the SBA small business size standard covering cable services, which is
``Wired Telecommunications Carriers.'' The SBA has developed a small
business size standard for this category, which is: All such firms
having 1,500 or fewer employees. Census Bureau data for 2007, which now
supersede data from the 2002 Census, show that there were 3,188 firms
in this category that operated for the entire year. Of this total,
3,144 had employment of 999 or fewer, and 44 firms had employment of
1,000 employees or more. Thus, under this category and the associated
small business size standard, the majority of these firms can be
considered small. In addition, we note that the Commission has
certified some OVS operators, with some now providing service.
Broadband service providers (``BSPs'') are currently the only
significant holders of OVS certifications or local OVS franchises. The
Commission does not have financial or employment information regarding
the entities authorized to provide OVS, some of which may not yet be
operational. Thus, at least some of the OVS operators may qualify as
small entities.
122. Cable and Other Subscription Programming. The Census Bureau
defines this category as follows: ``This industry comprises
establishments primarily engaged in operating studios and facilities
for the broadcasting of programs on a subscription or fee basis. * * *
These establishments produce programming in their own facilities or
acquire programming from external sources. The programming material is
usually delivered to a third party, such as cable systems or direct-to-
home satellite systems, for transmission to viewers.'' The SBA has
developed a small business size standard for this category, which is:
All such firms having $15 million dollars or less in annual revenues.
To gauge small business prevalence in the Cable and Other Subscription
Programming industries, the Commission relies on data currently
available from the U.S. Census for the year 2007. Census Bureau data
for 2007, which now supersede data from the 2002 Census, show that
there were 396 firms in this category that operated for the entire
year. Of that number, 325 operated with annual revenues of $9,999,999
million dollars or less. Seventy-one (71) operated with annual revenues
of between $10 million and $100 million or more. Thus, under this
category and associated small business size standard, the majority of
firms can be considered small.
123. Small Incumbent Local Exchange Carriers. We have included
small incumbent local exchange carriers in this present RFA analysis. A
``small business'' under the RFA is one that, inter alia, meets the
pertinent small business size standard (e.g., a telephone
communications business having 1,500 or fewer employees), and ``is not
dominant in its field of operation.'' The SBA's Office of Advocacy
contends that, for RFA purposes, small incumbent local exchange
carriers are not dominant in their field of operation because any such
dominance is not ``national'' in scope. We have therefore included
small incumbent local exchange carriers in this RFA analysis, although
we emphasize that this RFA action has no effect on Commission analyses
and determinations in other, non-RFA contexts.
124. Incumbent Local Exchange Carriers (``LECs''). Neither the
Commission nor the SBA has developed a small business size standard
specifically for incumbent local exchange services. The appropriate
size standard under SBA rules is for the category Wired
Telecommunications Carriers. Under that size standard, such
[[Page 24329]]
a business is small if it has 1,500 or fewer employees. Census Bureau
data for 2007, which now supersede data from the 2002 Census, show that
there were 3,188 firms in this category that operated for the entire
year. Of this total, 3,144 had employment of 999 or fewer, and 44 firms
had employment of 1,000 employees or more. Thus, under this category
and the associated small business size standard, the majority of these
firms can be considered small.
125. Competitive Local Exchange Carriers, Competitive Access
Providers (CAPs), ``Shared-Tenant Service Providers,'' and ``Other
Local Service Providers.'' Neither the Commission nor the SBA has
developed a small business size standard specifically for these service
providers. The appropriate size standard under SBA rules is for the
category Wired Telecommunications Carriers. Under that size standard,
such a business is small if it has 1,500 or fewer employees. Census
Bureau data for 2007, which now supersede data from the 2002 Census,
show that there were 3,188 firms in this category that operated for the
entire year. Of this total, 3,144 had employment of 999 or fewer, and
44 firms had employment of 1,000 employees or more. Thus, under this
category and the associated small business size standard, the majority
of these firms can be considered small. Consequently, the Commission
estimates that most providers of competitive local exchange service,
competitive access providers, ``Shared-Tenant Service Providers,'' and
``Other Local Service Providers'' are small entities.
126. Motion Picture and Video Production. The Census Bureau defines
this category as follows: ``This industry comprises establishments
primarily engaged in producing, or producing and distributing motion
pictures, videos, television programs, or television commercials.'' We
note that firms in this category may be engaged in various industries,
including cable programming. Specific figures are not available
regarding how many of these firms produce and/or distribute programming
for cable television. The SBA has developed a small business size
standard for this category, which is: All such firms having $29.5
million dollars or less in annual revenues. To gauge small business
prevalence in the Motion Picture and Video Production industries, the
Commission relies on data currently available from the U.S. Census for
the year 2007. Census Bureau data for 2007, which now supersede data
from the 2002 Census, show that there were 9,095 firms in this category
that operated for the entire year. Of these, 8995 had annual receipts
of $24,999,999 or less, and 100 had annual receipts ranging from not
less that $25,000,000 to $100,000,000 or more. Thus, under this
category and associated small business size standard, the majority of
firms can be considered small.
127. Motion Picture and Video Distribution. The Census Bureau
defines this category as follows: ``This industry comprises
establishments primarily engaged in acquiring distribution rights and
distributing film and video productions to motion picture theaters,
television networks and stations, and exhibitors.'' We note that firms
in this category may be engaged in various industries, including cable
programming. Specific figures are not available regarding how many of
these firms produce and/or distribute programming for cable television.
The SBA has developed a small business size standard for this category,
which is: All such firms having $29.5 million dollars or less in annual
revenues. To gauge small business prevalence in the Motion Picture and
Video Distribution industries, the Commission relies on data currently
available from the U.S. Census for the year 2007. Census Bureau data
for 2007, which now supersede data from the 2002 Census, show that
there were 450 firms in this category that operated for the entire
year. Of these, 434 had annual receipts of $24,999,999 or less, and 16
had annual receipts ranging from not less that $25,000,000 to
$100,000,000 or more. Thus, under this category and associated small
business size standard, the majority of firms can be considered small.
Description of Projected Reporting, Recordkeeping, and Other Compliance
Requirements
128. Certain proposed rule changes discussed in the NPRM would
affect reporting, recordkeeping, or other compliance requirements.
First, even if the exclusive contract prohibition were to sunset
(wholly or partially), the Commission recognizes that other existing
protections will remain in effect. Namely, an MVPD would still have the
option to file a complaint with the Commission alleging that an
exclusive contract between a cable operator and a satellite-delivered,
cable-affiliated programmer involving satellite-delivered, cable-
affiliated programming is an unfair act in violation of Section 628(b)
of the Act and Section 76.1001(a) of the Commission's rules. An MVPD
may also have the option of filing a discrimination complaint under
Section 628(c)(2)(B) of the Act, which would provide some protection
for competitive MVPDs should the exclusive contract prohibition sunset
(wholly or partially). Further, the NPRM seeks comment on the extent to
which undue influence complaints under Section 628(c)(2)(A) may also
provide some protection for competitive MVPDs should the exclusive
contract prohibition sunset (wholly or partially). Second, rather than
sunsetting the exclusive contract prohibition in its entirety, the
Commission seeks comment on whether it should instead relax the
exclusivity prohibition, such as by establishing a process whereby a
cable operator or satellite-delivered, cable-affiliated programmer can
seek to remove the exclusive contract prohibition on a market-by-market
basis based on the extent of competition in the market. The Commission
seeks comment on the details of any such process for removing the
exclusive contract prohibition on a market-by-market basis. Third, the
Commission proposes to adopt a 45-day answer period in complaint
proceedings alleging a violation of Section 628(b). Fourth, the NPRM
seeks comment on how the Commission might improve its rules and
procedures to avoid impeding the filing of legitimate complaints
alleging that particular volume discounts violate Section 628(c)(2)(B)
of the Act. Specifically, the Commission asks whether satellite-
delivered, cable-affiliated programmers should be required to
demonstrate in response to a complaint the increase in advertising
revenues resulting from licensing programming to a larger MVPD and how
this increase justifies the volume discount provided to the larger MVPD
relative to the complaint.
Steps Taken to Minimize Significant Impact on Small Entities and
Significant Alternatives Considered
129. The RFA requires an agency to describe any significant
alternatives that it has considered in reaching its proposed approach,
which may include the following four alternatives (among others): (1)
The establishment of differing compliance or reporting requirements or
timetables that take into account the resources available to small
entities; (2) the clarification, consolidation, or simplification of
compliance or reporting requirements under the rule for small entities;
(3) the use of performance, rather than design, standards; and (4) an
exemption from coverage of the rule, or any part thereof, for small
entities.
130. First, regarding the potential sunset or relaxation of the
exclusive contract prohibition, the NPRM seeks
[[Page 24330]]
comment on what impact the retention of the exclusive contract
prohibition has had on the general state of competition among MVPDs in
the video distribution market. More specifically, the NPRM asks how a
sunset or relaxation of the exclusive contract prohibition would affect
competition in the video distribution market, and how a sunset or
relaxation would affect the potential entry of new competitors in the
market. The NPRM also seeks comment on how the current state of cable
system clustering and cable market share in regional markets should
affect the Commission's decision on whether to retain, sunset, or relax
the exclusive contract prohibition. Further, it asks whether the
current state of horizontal consolidation in the cable industry has
increased or decreased incentives for anticompetitive foreclosure of
access to vertically integrated programming. The NPRM asks whether
competitive MVPDs have the resources to invest in creating their own
video programming. Overall, the Commission's analysis is focused on
whether the exclusive contract prohibition ``continues to be necessary
to preserve and protect competition and diversity in the distribution
of video programming.''
131. Second, to the extent the exclusive contract prohibition were
to sunset (wholly or partially), the NPRM seeks comment on ways to
reduce burdens on both complainants and defendants in connection with
complaints alleging that an exclusive contract involving satellite-
delivered, cable-affiliated programming violates Section 628(b) (or
Section 628(c)(2)(B)) of the Act.
132. Third, regarding the potential changes to our procedural rules
governing program access complaints, we find that the changes would
benefit regulated entities, including those that are small entities.
Specifically, small entities may benefit from the proposed lengthier
45-day period within which to file an answer. They may also benefit
from rules addressing potentially discriminatory volume discounts and
uniform price increases.
Federal Rules That May Duplicate, Overlap, or Conflict With the
Proposed Rule
133. None.
B. Paperwork Reduction Act
134. This document contains proposed new information collection
requirements. The Commission, as part of its continuing effort to
reduce paperwork burdens, invites the general public and the Office of
Management and Budget (OMB) to comment on the information collection
requirements contained in this document, as required by the Paperwork
Reduction Act of 1995. In addition, pursuant to the Small Business
Paperwork Relief Act of 2002, we seek specific comment on how we might
``further reduce the information collection burden for small business
concerns with fewer than 25 employees.''
C. Ex Parte Rules
135. Permit-But-Disclose. The proceeding this Notice initiates
shall be treated as a ``permit-but-disclose'' proceeding in accordance
with the Commission's ex parte rules. Persons making ex parte
presentations must file a copy of any written presentation or a
memorandum summarizing any oral presentation within two business days
after the presentation (unless a different deadline applicable to the
Sunshine period applies). Persons making oral ex parte presentations
are reminded that memoranda summarizing the presentation must (1) list
all persons attending or otherwise participating in the meeting at
which the ex parte presentation was made, and (2) summarize all data
presented and arguments made during the presentation. If the
presentation consisted in whole or in part of the presentation of data
or arguments already reflected in the presenter's written comments,
memoranda or other filings in the proceeding, the presenter may provide
citations to such data or arguments in his or her prior comments,
memoranda, or other filings (specifying the relevant page and/or
paragraph numbers where such data or arguments can be found) in lieu of
summarizing them in the memorandum. Documents shown or given to
Commission staff during ex parte meetings are deemed to be written ex
parte presentations and must be filed consistent with rule 1.1206(b).
In proceedings governed by rule 1.49(f) or for which the Commission has
made available a method of electronic filing, written ex parte
presentations and memoranda summarizing oral ex parte presentations,
and all attachments thereto, must be filed through the electronic
comment filing system available for that proceeding, and must be filed
in their native format (e.g., .doc, .xml, .ppt, searchable .pdf).
Participants in this proceeding should familiarize themselves with the
Commission's ex parte rules.
D. Filing Requirements
136. Comments and Replies. Pursuant to Sections 1.415 and 1.419 of
the Commission's rules, interested parties may file comments and reply
comments on or before the dates indicated on the first page of this
document. Comments may be filed using the Commission's Electronic
Comment Filing System (``ECFS'').
Electronic Filers: Comments may be filed electronically
using the Internet by accessing the ECFS: https://fjallfoss.fcc.gov/ecfs2/.
Paper Filers: Parties who choose to file by paper must
file an original and one copy of each filing. If more than one docket
or rulemaking number appears in the caption of this proceeding, filers
must submit two additional copies for each additional docket or
rulemaking number.
Filings can be sent by hand or messenger delivery, by commercial
overnight courier, or by first-class or overnight U.S. Postal Service
mail. All filings must be addressed to the Commission's Secretary,
Office of the Secretary, Federal Communications Commission.
[cir] All hand-delivered or messenger-delivered paper filings for
the Commission's Secretary must be delivered to FCC Headquarters at 445
12th St. SW., Room TW-A325, Washington, DC 20554. The filing hours are
8 a.m. to 7 p.m. All hand deliveries must be held together with rubber
bands or fasteners. Any envelopes and boxes must be disposed of before
entering the building.
[cir] Commercial overnight mail (other than U.S. Postal Service
Express Mail and Priority Mail) must be sent to 9300 East Hampton
Drive, Capitol Heights, MD 20743.
[cir] U.S. Postal Service first-class, Express, and Priority mail
must be addressed to 445 12th Street SW., Washington, DC 20554.
137. Availability of Documents. Comments, reply comments, and ex
parte submissions will be available for public inspection during
regular business hours in the FCC Reference Center, Federal
Communications Commission, 445 12th Street SW., CY-A257, Washington, DC
20554. These documents will also be available via ECFS. Documents will
be available electronically in ASCII, Microsoft Word, and/or Adobe
Acrobat.
138. People with Disabilities. To request materials in accessible
formats for people with disabilities (braille, large print, electronic
files, audio format), send an email to fcc504@fcc.gov or call the FCC's
Consumer and Governmental Affairs Bureau at (202) 418-0530 (voice),
(202) 418-0432 (TTY).
139. Additional Information. For additional information on this
[[Page 24331]]
proceeding, contact David Konczal, David.Konczal@fcc.gov, or Diana
Sokolow, Diana.Sokolow@fcc.gov, of the Media Bureau, Policy Division,
(202) 418-2120.
V. Ordering Clauses
140. Accordingly, It is ordered that pursuant to the authority
found in Sections 4(i), 4(j), 303(r), and 628 of the Communications Act
of 1934, as amended, 47 U.S.C. 154(i), 154(j), 303(r), and 548, this
Notice of Proposed Rulemaking is adopted.
141. It is further ordered that the Commission's Consumer and
Governmental Affairs Bureau, Reference Information Center, shall send a
copy of this Notice of Proposed Rulemaking, including the Initial
Regulatory Flexibility Analysis, to the Chief Counsel for Advocacy of
the Small Business Administration.
List of Subjects in 47 CFR Part 76
Cable television, Reporting and recordkeeping requirements.
Federal Communications Commission.
Sheryl D. Todd,
Deputy Secretary.
Proposed Rules
For the reasons discussed in the preamble, the Federal
Communications Commission proposes to amend 47 CFR part 76 as follows:
PART 76--MULTICHANNEL VIDEO AND CABLE TELEVISION SERVICE
1. The authority citation for Part 76 continues to read as follows:
Authority: 47 U.S.C. 151, 152, 153, 154, 301, 302, 302a, 303,
303a, 307, 308, 309, 312, 315, 317, 325, 339, 340, 341, 503, 521,
522, 531, 532, 534, 535, 536, 537, 543, 544, 544a, 545, 548, 549,
552, 554, 556, 558, 560, 561, 571, 572 and 573.
2. Section 76.1000 is amended by adding paragraph (n) to read as
follows:
Sec. 76.1000 Definitions.
* * * * *
(n) Regional Sports Network. The term ``Regional Sports Network''
means video programming that:
(1) Provides live or same-day distribution within a limited
geographic region of sporting events of a sports team that is a member
of Major League Baseball, the National Basketball Association, the
National Football League, the National Hockey League, NASCAR, NCAA
Division I Football, NCAA Division I Basketball, Liga de B[eacute]isbol
Profesional de Puerto Rico, Baloncesto Superior Nacional de Puerto
Rico, Liga Mayor de F[uacute]tbol Nacional de Puerto Rico, and the
Puerto Rico Islanders of the United Soccer League's First Division; and
(2) In any year, carries a minimum of either 100 hours of
programming that meets the criteria of paragraph (n)(1) of this
section, or 10 percent of the regular season games of at least one
sports team that meets the criteria of paragraph (n)(1) of this
section.
Alternative 1:
3. Section 76.1002 is amended by revising paragraph (c)(3) and (6)
to read as follows:
Sec. 76.1002 Specific unfair practices prohibited.
* * * * *
(c) * * *
(3) Specific arrangements: Subdistribution agreements--(i) Unserved
and served areas. No cable operator shall enter into any
subdistribution agreement or arrangement for satellite cable
programming or satellite broadcast programming with a satellite cable
programming vendor in which a cable operator has an attributable
interest or a satellite broadcast programming vendor in which a cable
operator has an attributable interest, with respect to areas served or
unserved by a cable operator, unless such agreement or arrangement
complies with the limitations set forth in paragraph (c)(3)(ii) of this
section.
(ii) Limitations on subdistribution agreements. No cable operator
engaged in subdistribution of satellite cable programming or satellite
broadcast programming may require a competing multichannel video
programming distributor to
(A) Purchase additional or unrelated programming as a condition of
such subdistribution; or
(B) Provide access to private property in exchange for access to
programming. In addition, a subdistributor may not charge a competing
multichannel video programming distributor more for said programming
than the satellite cable programming vendor or satellite broadcast
programming vendor itself would be permitted to charge. Any cable
operator acting as a subdistributor of satellite cable programming or
satellite broadcast programming must respond to a request for access to
such programming by a competing multichannel video programming
distributor within fifteen (15) days of the request. If the request is
denied, the competing multichannel video programming distributor must
be permitted to negotiate directly with the satellite cable programming
vendor or satellite broadcast programming vendor.
* * * * *
(6) Sunset provision. The prohibition of exclusive contracts set
forth in paragraph (c)(2) of this section shall cease to be effective
on October 5, 2017, unless the Commission finds, during a proceeding to
be conducted during the year preceding such date, that said prohibition
continues to be necessary to preserve and protect competition and
diversity in the distribution of video programming.
* * * * *
Alternative 2:
4. Section 76.1002 is amended by removing and reserving paragraph
(c)(2), revising paragraph (c)(3) through (5), and removing paragraph
(c)(6) to read as follows:
Sec. 76.1002 Specific unfair practices prohibited.
* * * * *
(c) * * *
(3) Specific arrangements: Subdistribution agreements--(i) Unserved
areas. No cable operator shall enter into any subdistribution agreement
or arrangement for satellite cable programming or satellite broadcast
programming with a satellite cable programming vendor in which a cable
operator has an attributable interest or a satellite broadcast
programming vendor in which a cable operator has an attributable
interest for distribution to persons in areas not served by a cable
operator as of October 5, 1992 unless such agreement or arrangement
complies with the limitations set forth in paragraph (c)(3)(ii) of this
section.
(ii) Limitations on subdistribution agreements in unserved areas.
No cable operator engaged in subdistribution of satellite cable
programming or satellite broadcast programming may require a competing
multichannel video programming distributor to
(A) Purchase additional or unrelated programming as a condition of
such subdistribution; or
(B) Provide access to private property in exchange for access to
programming. In addition, a subdistributor may not charge a competing
multichannel video programming distributor more for said programming
than the satellite cable programming vendor or satellite broadcast
programming vendor itself would be permitted to charge. Any cable
operator acting as a subdistributor of satellite cable programming or
satellite broadcast programming must respond to a request for access to
such programming by a competing multichannel video programming
distributor within fifteen (15) days of the request. If the request is
denied, the competing multichannel video programming distributor must
be
[[Page 24332]]
permitted to negotiate directly with the satellite cable programming
vendor or satellite broadcast programming vendor.
(4) Public interest determination. In determining whether an
exclusive contract is in the public interest for purposes of paragraph
(c)(5) of this section, the Commission will consider each of the
following factors with respect to the effect of such contract on the
distribution of video programming in areas that are served by a cable
operator:
(i) The effect of such exclusive contract on the development of
competition in local and national multichannel video programming
distribution markets;
(ii) The effect of such exclusive contract on competition from
multichannel video programming distribution technologies other than
cable;
(iii) The effect of such exclusive contract on the attraction of
capital investment in the production and distribution of new satellite
cable programming;
(iv) The effect of such exclusive contract on diversity of
programming in the multichannel video programming distribution market;
and
(v) The duration of the exclusive contract.
(5) Commission approval required. 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 must submit a ``Petition for
Exclusivity'' to the Commission and receive approval from the
Commission to preclude the filing of complaints alleging that an
exclusive contract, or practice, activity or arrangement tantamount to
an exclusive contract, with respect to areas served by a cable operator
violates section 628(b) of the Communications Act of 1934, as amended,
and Sec. 76.1001(a), or section 628(c)(2)(B) of the Communications Act
of 1934, as amended, and paragraph (b) of this section.
(i) The petition for exclusivity shall contain those portions of
the contract relevant to exclusivity, including:
(A) A description of the programming service;
(B) The extent and duration of exclusivity proposed; and
(C) Any other terms or provisions directly related to exclusivity
or to any of the criteria set forth in paragraph (c)(4) of this
section. The petition for exclusivity shall also include a statement
setting forth the petitioner's reasons to support a finding that the
contract is in the public interest, addressing each of the five factors
set forth in paragraph (c)(4) of this section.
(ii) Any competing multichannel video programming distributor
affected by the proposed exclusivity may file an opposition to the
petition for exclusivity within thirty (30) days of the date on which
the petition is placed on public notice, setting forth its reasons to
support a finding that the contract is not in the public interest under
the criteria set forth in paragraph (c)(4) of this section. Any such
formal opposition must be served on petitioner on the same day on which
it is filed with the Commission.
(iii) The petitioner may file a response within ten (10) days of
receipt of any formal opposition. The Commission will then approve or
deny the petition for exclusivity.
* * * * *
Alternative 3:
5. Section 76.1002 is amended by revising paragraph (c)(2) through
(3) and (5), removing and reserving paragraph (c)(6), and adding
paragraph (c)(7) to read as follows:
Sec. 76.1002 Specific unfair practices prohibited.
* * * * *
(c) * * *
(2) Served areas. No cable operator shall enter into any exclusive
contracts, or engage in any practice, activity or arrangement
tantamount to an exclusive contract, for satellite cable programming or
satellite broadcast programming with a satellite cable programming
vendor in which a cable operator has an attributable interest or a
satellite broadcast programming vendor in which a cable operator has an
attributable interest, with respect to areas served by a cable
operator, unless:
(i) The Commission determines in accordance with paragraph (c)(4)
of this section that such contract, practice, activity or arrangement
is in the public interest; or
(ii) Such contract, practice, activity or arrangement pertains to a
geographic area for which a petition for sunset has been granted
pursuant to paragraph (c)(7) of this section.
(3) Specific arrangements: Subdistribution agreements--(i) Unserved
and served areas. No cable operator shall enter into any
subdistribution agreement or arrangement for satellite cable
programming or satellite broadcast programming with a satellite cable
programming vendor in which a cable operator has an attributable
interest or a satellite broadcast programming vendor in which a cable
operator has an attributable interest, with respect to areas served or
unserved by a cable operator, unless such agreement or arrangement
complies with the limitations set forth in paragraph (c)(3)(ii) of this
section.
(ii) Limitations on subdistribution agreements. No cable operator
engaged in subdistribution of satellite cable programming or satellite
broadcast programming may require a competing multichannel video
programming distributor to
(A) Purchase additional or unrelated programming as a condition of
such subdistribution; or
(B) Provide access to private property in exchange for access to
programming. In addition, a subdistributor may not charge a competing
multichannel video programming distributor more for said programming
than the satellite cable programming vendor or satellite broadcast
programming vendor itself would be permitted to charge. Any cable
operator acting as a subdistributor of satellite cable programming or
satellite broadcast programming must respond to a request for access to
such programming by a competing multichannel video programming
distributor within fifteen (15) days of the request. If the request is
denied, the competing multichannel video programming distributor must
be permitted to negotiate directly with the satellite cable programming
vendor or satellite broadcast programming vendor.
(iii) Exceptions. Paragraph (c)(3) of this section shall not apply
in a geographic area where a petition for sunset has been granted
pursuant to paragraph (c)(7) of this section.
* * * * *
(5) Commission approval required. (i) 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 must submit a ``Petition for
Exclusivity'' to the Commission and receive approval from the
Commission:
(A) Prior to enforcing or entering into an exclusive contract, or
practice, activity or arrangement tantamount to an exclusive contract,
subject to paragraph (c)(2) of this section that pertains to a
geographic area for which a petition for sunset has not been granted
pursuant to paragraph (c)(7) of this section; and
(B) To preclude the filing of complaints alleging that an exclusive
contract, or practice, activity or arrangement tantamount to an
exclusive contract, with respect to areas served by a cable operator
violates section 628(b)
[[Page 24333]]
of the Communications Act of 1934, as amended, and Sec. 76.1001(a) of
this part, or section 628(c)(2)(B) of the Communications Act of 1934,
as amended, and paragraph (b) of this section.
(ii) The petition for exclusivity shall contain those portions of
the contract relevant to exclusivity, including:
(A) A description of the programming service;
(B) The extent and duration of exclusivity proposed; and
(C) Any other terms or provisions directly related to exclusivity
or to any of the criteria set forth in paragraph (c)(4) of this
section. The petition for exclusivity shall also include a statement
setting forth the petitioner's reasons to support a finding that the
contract is in the public interest, addressing each of the five factors
set forth in paragraph (c)(4) of this section.
(iii) Any competing multichannel video programming distributor
affected by the proposed exclusivity may file an opposition to the
petition for exclusivity within thirty (30) days of the date on which
the petition is placed on public notice, setting forth its reasons to
support a finding that the contract is not in the public interest under
the criteria set forth in paragraph (c)(4) of this section. Any such
formal opposition must be served on petitioner on the same day on which
it is filed with the Commission.
(iv) The petitioner may file a response within ten (10) days of
receipt of any formal opposition. The Commission will then approve or
deny the petition for exclusivity.
* * * * *
(7) Petition for Sunset. 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 remove the prohibition
on exclusive contracts and practices, activities or arrangements
tantamount to an exclusive contract set forth in paragraph (c)(2) of
this section may submit a ``Petition for Sunset'' to the Commission.
(i) The petition for sunset shall specify the geographic area for
which a sunset of the prohibition set forth in paragraph (c)(2) of this
section is sought and shall include a statement setting forth the
petitioner's reasons to support a finding that such prohibition is not
necessary to preserve and protect competition and diversity in the
distribution of video programming in the geographic area specified.
(ii) Any competing multichannel video programming distributor or
other interested party affected by the petition for sunset may file an
opposition to the petition within forty-five (45) days of the date on
which the petition is placed on public notice, setting forth its
reasons to support a finding that such prohibition continues to be
necessary to preserve and protect competition and diversity in the
distribution of video programming. Any such formal opposition must be
served on the petitioner on the same day on which it is filed with the
Commission.
(iii) The petitioner may file a response within fifteen (15) days
of receipt of any formal opposition.
(iv) If the Commission finds that the prohibition is not necessary
to preserve and protect competition and diversity in the distribution
of video programming, then the prohibition set forth in paragraph
(c)(2) of this section shall no longer apply in the geographic area
specified in the decision of the Commission.
* * * * *
Alternative 4:
6. Section 76.1002 is amended by revising paragraphs (c)(2) (3),
(5) and (6) to read as follows:
Sec. 76.1002 Specific unfair practices prohibited.
* * * * *
(c) * * *
(2) Served areas. No cable operator shall enter into any exclusive
contracts, or engage in any practice, activity or arrangement
tantamount to an exclusive contract, for satellite cable programming or
satellite broadcast programming that meets the definition of a Regional
Sports Network as defined in Sec. 76.1000(n) of this part with 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, with respect to
areas served by a cable operator, unless the Commission determines in
accordance with paragraph (c)(4) of this section that such contract,
practice, activity or arrangement is in the public interest.
(3) Specific arrangements: Subdistribution agreements--(i) Unserved
areas. No cable operator shall enter into any subdistribution agreement
or arrangement for satellite cable programming or satellite broadcast
programming with a satellite cable programming vendor in which a cable
operator has an attributable interest or a satellite broadcast
programming vendor in which a cable operator has an attributable
interest, for distribution to persons in areas not served by a cable
operator as of October 5, 1992, unless such agreement or arrangement
complies with the limitations set forth in paragraph (c)(3)(iii) of
this section.
(ii) Served areas. No cable operator shall enter into any
subdistribution agreement or arrangement for satellite cable
programming or satellite broadcast programming that meets the
definition of a Regional Sports Network as defined in Sec. 76.1000(n)
of this part with 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, with respect to areas served by a cable operator, unless such
agreement or arrangement complies with the limitations set forth in
paragraph (c)(3)(iii) of this section.
(iii) Limitations on subdistribution agreements. No cable operator
engaged in subdistribution of satellite cable programming or satellite
broadcast programming may require a competing multichannel video
programming distributor to
(A) Purchase additional or unrelated programming as a condition of
such subdistribution; or
(B) Provide access to private property in exchange for access to
programming. In addition, a subdistributor may not charge a competing
multichannel video programming distributor more for said programming
than the satellite cable programming vendor or satellite broadcast
programming vendor itself would be permitted to charge. Any cable
operator acting as a subdistributor of satellite cable programming or
satellite broadcast programming must respond to a request for access to
such programming by a competing multichannel video programming
distributor within fifteen (15) days of the request. If the request is
denied, the competing multichannel video programming distributor must
be permitted to negotiate directly with the satellite cable programming
vendor or satellite broadcast programming vendor.
* * * * *
(5) Commission approval required. (i) 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 must submit a ``Petition for
Exclusivity'' to the Commission and receive approval from the
Commission:
(A) Prior to enforcing or entering into an exclusive contract, or
practice, activity or arrangement tantamount to an exclusive contract,
subject to paragraph (c)(2) of this section; and
[[Page 24334]]
(B) To preclude the filing of complaints alleging that an exclusive
contract, or practice, activity or arrangement tantamount to an
exclusive contract, with respect to areas served by a cable operator
violates section 628(b) of the Communications Act of 1934, as amended,
and Sec. 76.1001(a) of this part, or section 628(c)(2)(B) of the
Communications Act of 1934, as amended, and paragraph (b) of this
section.
(ii) The petition for exclusivity shall contain those portions of
the contract relevant to exclusivity, including:
(A) A description of the programming service;
(B) The extent and duration of exclusivity proposed; and
(C) Any other terms or provisions directly related to exclusivity
or to any of the criteria set forth in paragraph (c)(4) of this
section. The petition for exclusivity shall also include a statement
setting forth the petitioner's reasons to support a finding that the
contract is in the public interest, addressing each of the five factors
set forth in paragraph (c)(4) of this section.
(iii) Any competing multichannel video programming distributor
affected by the proposed exclusivity may file an opposition to the
petition for exclusivity within thirty (30) days of the date on which
the petition is placed on public notice, setting forth its reasons to
support a finding that the contract is not in the public interest under
the criteria set forth in paragraph (c)(4) of this section. Any such
formal opposition must be served on petitioner on the same day on which
it is filed with the Commission.
(iv) The petitioner may file a response within ten (10) days of
receipt of any formal opposition. The Commission will then approve or
deny the petition for exclusivity.
(6) Sunset provision. The prohibition of exclusive contracts set
forth in paragraph (c)(2) of this section shall cease to be effective
on October 5, 2017, unless the Commission finds, during a proceeding to
be conducted during the year preceding such date, that said prohibition
continues to be necessary to preserve and protect competition and
diversity in the distribution of video programming.
* * * * *
7. Section 76.1003 is amended by revising paragraph (e)(1) to read
as follows:
Sec. 76.1003 Program access proceedings.
* * * * *
(e) Answer. (1) Except as otherwise provided or directed by the
Commission, any cable operator, satellite cable programming vendor or
satellite broadcast programming vendor upon which a program access
complaint is served under this section shall answer within twenty (20)
days of service of the complaint, provided that the answer shall be
filed within forty-five (45) days of service of the complaint if the
complaint alleges a violation of section 628(b) of the Communications
Act of 1934, as amended, or Sec. 76.1001(a). To the extent that a
cable operator, satellite cable programming vendor or satellite
broadcast programming vendor expressly references and relies upon a
document or documents in asserting a defense or responding to a
material allegation, such document or documents shall be included as
part of the answer.
* * * * *
Alternative 1:
8. Section 76.1004 is amended by revising paragraph (b) to read as
follows:
Sec. 76.1004 Applicability of program access rules to common carriers
and affiliates.
* * * * *
(b) Sections 76.1002(c)(1) through (3) shall be applied to a common
carrier or its affiliate that provides video programming by any means
directly to subscribers as follows: No common carrier or its affiliate
that provides video programming directly to subscribers shall engage in
any practice or activity or enter into any understanding or
arrangement, including exclusive contracts, with a satellite cable
programming vendor or satellite broadcast programming vendor for
satellite cable programming or satellite broadcast programming that
prevents a multichannel video programming distributor from obtaining
such programming from any satellite cable programming vendor in which a
common carrier or its affiliate has an attributable interest, or any
satellite broadcasting vendor in which a common carrier or its
affiliate has an attributable interest for distribution to persons in
areas not served by a cable operator as of October 5, 1992.
Alternative 2:
9. Section 76.1004 is amended by revising paragraph (b) to read as
follows:
Sec. 76.1004 Applicability of program access rules to common
carriers and affiliates.
* * * * *
(b) Sections 76.1002(c)(1) through (3) shall be applied to a common
carrier or its affiliate that provides video programming by any means
directly to subscribers in such a way that such common carrier or its
affiliate shall be generally restricted from entering into an exclusive
arrangement for satellite cable programming or satellite broadcast
programming with a satellite cable programming vendor in which a common
carrier or its affiliate has an attributable interest or a satellite
broadcast programming vendor in which a common carrier or its affiliate
has an attributable interest, unless the arrangement pertains to an
area served by a cable system as of October 5, 1992, and:
(1) The Commission determines in accordance with Sec.
76.1002(c)(4) that such arrangement is in the public interest; or
(2) Such arrangement pertains to a geographic area for which a
petition for sunset has been granted pursuant to Sec. 76.1002(c)(7) of
this part.
Alternative 3:
10. Section 76.1004 is amended by revising paragraph (b) to read as
follows:
Sec. 76.1004 Applicability of program access rules to common
carriers and affiliates.
* * * * *
(b) Sections 76.1002(c)(1) through (3) shall be applied to a common
carrier or its affiliate that provides video programming by any means
directly to subscribers in such a way that such common carrier or its
affiliate shall be generally restricted from entering into an exclusive
arrangement for satellite cable programming or satellite broadcast
programming that meets the definition of a Regional Sports Network as
defined in Sec. 76.1000(n) with a satellite cable programming vendor
in which a common carrier or its affiliate has an attributable interest
or a satellite broadcast programming vendor in which a common carrier
or its affiliate has an attributable interest, unless the arrangement
pertains to an area served by a cable system as of October 5, 1992, and
the Commission determines in accordance with Sec. 76.1002(c)(4) that
such arrangement is in the public interest.
Alternative 1:
11. Section 76.1507 is amended by removing and reserving paragraph
(a)(2) and revising paragraphs (a)(3) and (b) to read as follows:
Sec. 76.1507 Competitive access to satellite cable programming.
(a) * * *
(3) Section 76.1002(c)(3)(i) through (ii) shall only restrict the
conduct of an open video system operator, its affiliate that provides
video programming on its open video system and a satellite cable
programming vendor in which an open video system operator has an
attributable interest, as follows: No open video system operator shall
enter into any subdistribution agreement or arrangement for satellite
cable
[[Page 24335]]
programming or satellite broadcast programming with a satellite cable
programming vendor in which an open video system operator has an
attributable interest or a satellite broadcast programming vendor in
which an open video system operator has an attributable interest for
distribution to persons in areas not served by a cable operator as of
October 5, 1992 unless such agreement or arrangement complies with the
limitations set forth in Sec. 76.1002(c)(3)(ii).
(b) No open video system programming provider in which a cable
operator has an attributable interest shall engage in any practice or
activity or enter into any understanding or arrangement, including
exclusive contracts, with a satellite cable programming vendor or
satellite broadcast programming vendor for satellite cable programming
or satellite broadcast programming that prevents a multichannel video
programming distributor from obtaining such programming from any
satellite cable programming vendor in which a cable operator has an
attributable interest, or any satellite broadcasting vendor in which a
cable operator has an attributable interest for distribution to person
in areas not served by a cable operator as of October 5, 1992.
Alternative 2:
12. Section 76.1507 is amended by revising paragraphs (a)(2) and
(3) and paragraph (b)(2) to read as follows:
Sec. 76.1507 Competitive access to satellite cable programming.
(a) * * *
(2) Section 76.1002(c)(2) shall only restrict the conduct of an
open video system operator, its affiliate that provides video
programming on its open video system and a satellite cable programming
vendor in which an open video system operator has an attributable
interest, as follows: No open video system operator or its affiliate
that provides video programming on its open video system shall enter
into any exclusive contracts, or engage in any practice, activity or
arrangement tantamount to an exclusive contract, for satellite cable
programming or satellite broadcast programming with a satellite cable
programming vendor in which an open video system operator has an
attributable interest or a satellite broadcast programming vendor,
unless:
(i) The Commission determines in accordance with Sec.
76.1002(c)(4) that such a contract, practice, activity or arrangement
is in the public interest; or
(ii) Such a contract, practice, activity or arrangement pertains to
a geographic area for which a petition for sunset has been granted
pursuant to Sec. 76.1002(c)(7).
(3) Section 76.1002(c)(3)(i) through (ii) shall only restrict the
conduct of an open video system operator, its affiliate that provides
video programming on its open video system and a satellite cable
programming vendor in which an open video system operator has an
attributable interest, as follows: No open video system operator shall
enter into any subdistribution agreement or arrangement for satellite
cable programming or satellite broadcast programming with a satellite
cable programming vendor in which an open video system operator has an
attributable interest or a satellite broadcast programming vendor in
which an open video system operator has an attributable interest, with
respect to areas served or unserved by a cable operator, unless such
agreement or arrangement complies with the limitations set forth in
Sec. 76.1002(c)(3)(ii), except as provided in Sec.
76.1002(c)(3)(iii).
(b) * * *
(2) Enter into any exclusive contracts, or engage in any practice,
activity or arrangement tantamount to an exclusive contract, for
satellite cable programming or satellite broadcast programming with a
satellite cable programming vendor in which a cable operator has an
attributable interest or a satellite broadcast programming vendor,
unless:
(i) The Commission determines in accordance with Sec.
76.1002(c)(4) that such a contract, practice, activity or arrangement
is in the public interest; or
(ii) Such a contract, practice, activity or arrangement pertains to
a geographic area for which a petition for sunset has been granted
pursuant to Sec. 76.1002(c)(7).
Alternative 3:
13. Section 76.1507 is amended by revising paragraph (a)(2) through
(3) and paragraph (b)(2) to read as follows:
Sec. 76.1507 Competitive access to satellite cable programming.
(a) * * *
(2) Section 76.1002(c)(2) shall only restrict the conduct of an
open video system operator, its affiliate that provides video
programming on its open video system and a satellite cable programming
vendor in which an open video system operator has an attributable
interest, as follows: No open video system operator or its affiliate
that provides video programming on its open video system shall enter
into any exclusive contracts, or engage in any practice, activity or
arrangement tantamount to an exclusive contract, for satellite cable
programming or satellite broadcast programming that meets the
definition of a Regional Sports Network as defined in Sec. 76.1000(n)
of this part with a satellite cable programming vendor in which an open
video system operator has an attributable interest or a satellite
broadcast programming vendor, unless the Commission determines in
accordance with Sec. 76.1002(c)(4) that such a contract, practice,
activity or arrangement is in the public interest.
(3) Section 76.1002(c)(3)(i) through (ii) shall only restrict the
conduct of an open video system operator, its affiliate that provides
video programming on its open video system and a satellite cable
programming vendor in which an open video system operator has an
attributable interest, as follows:
(i) Unserved areas. No open video system operator shall enter into
any subdistribution agreement or arrangement for satellite cable
programming or satellite broadcast programming with a satellite cable
programming vendor in which an open video system operator has an
attributable interest or a satellite broadcast programming vendor in
which an open video system operator has an attributable interest for
distribution to persons in areas not served by a cable operator as of
October 5, 1992 unless such agreement or arrangement complies with the
limitations set forth in Sec. 76.1002(c)(3)(iii).
(ii) Served areas. No open video system operator shall enter into
any subdistribution agreement or arrangement for satellite cable
programming or satellite broadcast programming that meets the
definition of a Regional Sports Network as defined in Sec. 76.1000(n)
of this part with a satellite cable programming vendor in which an open
video system operator has an attributable interest or a satellite
broadcast programming vendor in which an open video system operator has
an attributable interest, with respect to areas served by a cable
operator, unless such agreement or arrangement complies with the
limitations set forth in Sec. 76.1002(c)(3)(iii).
(b) * * *
(2) Enter into any exclusive contracts, or engage in any practice,
activity or arrangement tantamount to an exclusive contract, for
satellite cable programming or satellite broadcast programming that
meets the definition of a Regional Sports Network as defined in Sec.
76.1000(n) of this part with a satellite cable programming vendor in
which a cable operator has an attributable interest or a satellite
broadcast programming vendor, unless the Commission determines in
[[Page 24336]]
accordance with Sec. 76.1002(c)(4) that such a contract, practice,
activity or arrangement is in the public interest.
[FR Doc. 2012-8991 Filed 4-20-12; 8:45 am]
BILLING CODE 6712-01-P
