Program Access Rules, 66052-66065 [2012-26455]

Download as PDF 66052 Federal Register / Vol. 77, No. 211 / Wednesday, October 31, 2012 / Proposed Rules FEDERAL COMMUNICATIONS COMMISSION 47 CFR Part 76 [MB Docket No. 12–68; FCC 12–123] Program Access Rules Federal Communications Commission. ACTION: Proposed rule. AGENCY: In this document, the Commission seeks comment on the following revisions to its program access rules: the establishment of certain rebuttable presumptions in connection with program access complaints challenging exclusive contracts involving cable-affiliated programming; and amendments to its rules to ensure that buying groups utilized by small and medium-sized multichannel video programming distributors (‘‘MVPDs’’) can avail themselves of the program access rules. DATES: Comments are due on or before November 30, 2012; reply comments are due on or before December 17, 2012. ADDRESSES: You may submit comments, identified by MB Docket No. 12–68, 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. FOR FURTHER INFORMATION CONTACT: For additional information on this proceeding, contact David Konczal, David.Konczal@fcc.gov, or Kathy Berthot, Kathy.Berthot@fcc.gov, of the Media Bureau, Policy Division, (202) 418–2120. SUPPLEMENTARY INFORMATION: This is a summary of the Commission’s Further Notice of Proposed Rulemaking, FCC 12–123, adopted and released on October 5, 2012. The full text is available for public inspection and copying during regular business hours in the FCC Reference Center, Federal srobinson on DSK4SPTVN1PROD with SUMMARY: VerDate Mar<15>2010 18:28 Oct 30, 2012 Jkt 229001 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). Summary of the Further Notice of Proposed Rulemaking I. Introduction In the Further Notice of Proposed Rulemaking (‘‘FNPRM’’) in MB Docket No. 12–68, we seek comment on whether to establish (i) a rebuttable presumption that an exclusive contract for a cable-affiliated RSN (regardless of whether it is terrestrially delivered or satellite-delivered) is an ‘‘unfair act’’ under section 628(b); (ii) a rebuttable presumption that a complainant challenging an exclusive contract involving a cable-affiliated RSN (regardless of whether it is terrestrially delivered or satellite-delivered) is entitled to a standstill of an existing programming contract during the pendency of a complaint; (iii) rebuttable presumptions with respect to the ‘‘unfair act’’ element and/or the ‘‘significant hindrance’’ element of a section 628(b) claim challenging an exclusive contract involving a cableaffiliated ‘‘national sports network’’ (regardless of whether it is terrestrially delivered or satellite-delivered); and (iv) a rebuttable presumption that, once a complainant succeeds in demonstrating that an exclusive contract involving a cable-affiliated network (regardless of whether it is terrestrially delivered or satellite-delivered) 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 also seek comment in the FNPRM on revisions to the program access rules to ensure that buying groups utilized by small and mediumsized MVPDs can avail themselves of these rules. A. Rebuttable Presumptions for CableAffiliated RSNs 1. We seek comment on whether to establish (i) a rebuttable presumption PO 00000 Frm 00001 Fmt 4701 Sfmt 4702 that an exclusive contract for a cableaffiliated RSN (regardless of whether it is terrestrially delivered or satellitedelivered) is an ‘‘unfair act’’ under section 628(b); and (ii) a rebuttable presumption that a complainant challenging an exclusive contract involving a cable-affiliated RSN (regardless of whether it is terrestrially delivered or satellite-delivered) is entitled to a standstill of an existing programming contract for that RSN during the pendency of a complaint. 1. Rebuttable Presumption That an Exclusive Contract for a Cable-Affiliated RSN Is an ‘‘Unfair Act’’ 2. As discussed above, under the caseby-case process for complaints alleging that an exclusive contract violates section 628(b), the complainant will have the burden of proving that the exclusive contract at issue (i) is an ‘‘unfair act’’ and (ii) has the ‘‘purpose or effect’’ of ‘‘significantly hindering or preventing’’ the complainant from providing satellite cable programming or satellite broadcast programming. With respect to the second element, the Commission has established a rebuttable presumption that an exclusive contract involving a satellite-delivered, cableaffiliated RSN has the ‘‘purpose or effect’’ of ‘‘significantly hindering or preventing’’ the complainant from providing satellite cable programming or satellite broadcast programming, as set forth in section 628(b). The Commission established an identical presumption for terrestrially delivered, cable-affiliated RSNs in the 2010 Program Access Order. 3. With respect to the first element (the ‘‘unfair act’’ element), however, the Commission has not established a rebuttable presumption that an exclusive contract involving a cableaffiliated RSN is an ‘‘unfair act.’’ In the 2010 Program Access Order, the Commission established a categorical rule that all exclusive contracts involving terrestrially delivered, cableaffiliated programming (regardless of whether the programming qualifies as an RSN) are ‘‘unfair’’ under section 628(b). The DC Circuit vacated this aspect of the 2010 Program Access Order, holding that (i) just because Congress treated certain acts involving satellite programming as ‘‘unfair’’ does not mean the same acts are necessarily ‘‘unfair’’ in the context of terrestrial programming; (ii) even with respect to satellite-delivered programming, Congress established a sunset provision for the exclusivity ban and allowed cable operators or cable-affiliated programmers to seek prior approval to enter into an exclusive contract (neither E:\FR\FM\31OCP2.SGM 31OCP2 srobinson on DSK4SPTVN1PROD with Federal Register / Vol. 77, No. 211 / Wednesday, October 31, 2012 / Proposed Rules of which would apply to terrestrially delivered programming under the 2010 Program Access Order); and (iii) by labeling conduct ‘‘unfair’’ simply because it might in some circumstances negatively affect competition in the video distribution market, the Commission failed to consider whether it should treat conduct as ‘‘unfair’’ despite it being procompetitive in a given instance. The court concluded that ‘‘if the Commission believes that conduct involving the withholding of terrestrial programming should be treated as categorically unfair, as opposed to assessing fairness on a caseby-case basis or perhaps adopting a public interest exception mirroring the one for satellite programming, then it must grapple with whether its definition of unfairness would apply to conduct that appears procompetitive and, if so, whether that result would comport with section 628.’’ Consistent with the court’s decision, as demonstrated by the Verizon v. MSG/Cablevision and AT&T v. MSG/Cablevision cases, the Commission to date has elected to address whether challenged conduct, including an exclusive contract, is ‘‘unfair’’ on a case-by-case basis. 4. We seek comment on whether to establish a rebuttable presumption that an exclusive contract for a cableaffiliated RSN (regardless of whether it is terrestrially delivered or satellitedelivered) is an ‘‘unfair act’’ under section 628(b). The D.C. Circuit has explained that an evidentiary presumption is only permissible (i) ‘‘if there is a sound and rational connection between the proved and inferred facts’’ and (ii) ‘‘when proof of one fact renders the existence of another fact so probable that it is sensible and timesaving to assume the truth of [the inferred] fact * * * until the adversary disproves it.’’ Would a rebuttable presumption that an exclusive contract for a cable-affiliated RSN is an ‘‘unfair act’’ under section 628(b) satisfy this requirement? The Commission has held that determining whether challenged conduct is ‘‘unfair’’ requires ‘‘balancing the anticompetitive harms of the challenged conduct against the procompetitive benefits.’’ What are the potentially procompetitive benefits of an exclusive contract for a cableaffiliated RSN? How do these potential benefits compare to the potentially anticompetitive harms of an exclusive contract for a cable-affiliated RSN? We ask commenters to provide evidence supporting their positions. VerDate Mar<15>2010 18:28 Oct 30, 2012 Jkt 229001 2. Rebuttable Presumption That a Complainant Challenging an Exclusive Contract Involving a Cable-Affiliated RSN Is Entitled to a Standstill 5. As discussed above, the Commission in the 2010 Program Access Order established a process whereby a complainant may seek a standstill of an existing programming contract during the pendency of a complaint. The complainant has the burden of proof to demonstrate how grant of the standstill will meet the following four criteria: (i) The complainant is likely to prevail on the merits of its complaint; (ii) the complainant will suffer irreparable harm absent a stay; (iii) grant of a stay will not substantially harm other interested parties; and (iv) the public interest favors grant of a stay. 6. We seek comment on whether to establish a rebuttable presumption that a complainant challenging an exclusive contract involving a cable-affiliated RSN (regardless of whether it is terrestrially delivered or satellite-delivered) is entitled to a standstill of an existing programming contract for that RSN during the pendency of a complaint. Would such a rebuttable presumption meet the requirements for establishing such a presumption as set forth by the D.C. Circuit described above? Would this rebuttable presumption meet the requirements set forth by the D.C. Circuit only if we also establish a rebuttable presumption that an exclusive contract for a cable-affiliated RSN is an ‘‘unfair act’’ under section 628(b)? Are the rebuttable presumptions applicable to the ‘‘unfair act’’ (if adopted) and ‘‘significant hindrance’’ elements of a section 628(b) claim rationally related only to the ‘‘likelihood to prevail on the merits’’ prong of the four-part test for a standstill? What basis would there be for rationally presuming the other three elements of the test for a standstill (irreparable harm, no significant harm to other parties, and public interest) for purposes of establishing a standstill presumption for claims involving cable-affiliated RSNs? We ask commenters to provide evidence supporting their positions. B. Other Rebuttable Presumptions 1. Rebuttable Presumptions for Exclusive Contracts Involving CableAffiliated National Sports Networks 7. We seek comment on whether to establish rebuttable presumptions with respect to the ‘‘unfair act’’ element and/ or the ‘‘significant hindrance’’ element of a section 628(b) claim challenging an exclusive contract involving a cableaffiliated ‘‘national sports network’’ PO 00000 Frm 00002 Fmt 4701 Sfmt 4702 66053 (regardless of whether it is terrestrially delivered or satellite-delivered). How should the Commission define a ‘‘national sports network’’? What cableaffiliated national sports networks exist today? Would these rebuttable presumptions meet the requirements for establishing such presumptions as set forth by the D.C. Circuit described above? On what basis can the Commission conclude that these networks have no good substitutes, are important for competition, and are nonreplicable, as the Commission has found with respect to RSNs? We ask that commenters provide reliable, empirical data supporting their positions and address Commission precedent.1 We also request comment on whether and how these rebuttable presumptions would be consistent with the First Amendment. To the extent we adopt these rebuttable presumptions, should we also adopt a rebuttable presumption that a complainant challenging an exclusive contract involving a cableaffiliated national sports network (regardless of whether it is terrestrially delivered or satellite-delivered) is entitled to a standstill of an existing programming contract for that network during the pendency of a complaint? 2. Rebuttable Presumption for Previously Challenged Exclusive Contracts 8. We seek comment on whether the Commission should establish a rebuttable presumption that, once a complainant succeeds in demonstrating that an exclusive contract involving a cable-affiliated network (regardless of whether it is terrestrially delivered or satellite-delivered) 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)). While we sought comment on this issue in the NPRM in MB Docket No. 12–68, we concluded that the record on this issue was not sufficiently developed. Would this rebuttable presumption meet the requirements for establishing such a presumption as set forth by the D.C. Circuit described above? Is there a reasonable basis for 1 See 2010 Program Access Order, 25 FCC Rcd at 777 n.182 (discussing exclusive arrangements for ‘‘out-of-market, non-regional sports programming’’ and concluding that commenters ‘‘failed to provide evidence in the record of this proceeding of any harm to competition resulting from these arrangements’’); 2007 Extension Order, 22 FCC Rcd at 17843 n.380 (discussing national sports programming and concluding that ‘‘[u]nlike in the case of cable-affiliated regional sports programming, we have no evidence that the inability to access this sports programming has impacted MVPD subscribership’’). E:\FR\FM\31OCP2.SGM 31OCP2 66054 Federal Register / Vol. 77, No. 211 / Wednesday, October 31, 2012 / Proposed Rules presuming liability based on a prior determination of a section 628(b) violation involving the same network? How would differences among complainants (e.g., differences in the complainants’ market power) or changing circumstances over time (e.g., whether the network continues to carry the same highly coveted content) impact such a presumption? If we establish such a rebuttable presumption, should it be time limited? If we establish such a rebuttable presumption, should it apply if the complaints concern the same network but different geographic markets? srobinson on DSK4SPTVN1PROD with C. Buying Groups 9. We also solicit comment on possible modifications to the program access rules relating to buying groups. ACA filed comments in this proceeding asserting that revisions to the program access rules are needed to ensure that buying groups utilized by small and medium-sized MVPDs can avail themselves of the program access rules. ACA seeks three modifications to the program access rules: (i) revision of the definition of ‘‘buying group’’ to accurately reflect the level of liability assumed by buying groups under current industry practices; (ii) establishment of standards for the right of buying group members to participate in their group’s master licensing agreements; and (iii) establishment of a standard of comparability for a buying group regarding volume discounts. In addition to seeking comment on ACA’s proposed modifications, we propose to revise our definition of ‘‘buying group’’ to provide that a buying group may not unreasonably deny membership to any MVPD requesting membership. 1. Definition of ‘‘Buying Group’’ 10. As ACA explains, buying groups play an important role in the market for video programming distribution, both for small and medium-sized MVPDs and for programmers. A buying group negotiates master agreements with video programmers that its MVPD members can opt into and then acts as an interface between its members and the programmers so that the programmers are able to deal with a single entity. Thus, a buying group is generally able to obtain lower license fees for its members than they could obtain through direct deals with the programmers and lower transaction costs for programmers by enabling them to deal with a single entity, rather than many individual MVPDs, for their negotiations and fee collections. Because small and medium-sized MVPDs rely on buying groups as the VerDate Mar<15>2010 18:28 Oct 30, 2012 Jkt 229001 primary means by which they purchase their programming, ACA asserts that small and medium-sized MVPDs are protected under the program access rules only to the extent that buying groups are given the same protection in their dealings with cable-affiliated programmers as individual MVPDs are given. ACA notes that Congress, recognizing small MVPDs’ reliance on buying groups, explicitly extended the non-discrimination protections of section 628(c)(2)(B) of the Act to buying groups.2 The Commission likewise extended the protections of the nondiscrimination provision of the program access rules to buying groups by including ‘‘buying groups’’ within the definition of ‘‘multichannel video programming distributor’’ set forth in § 76.1000(e) of the Commission’s program access rules. 11. Although Congress did not define the term ‘‘buying group,’’ the Commission has adopted a definition for this term. Section 76.1000(c) of the Commission’s rules sets forth the requirements that an entity must satisfy in order to be considered a ‘‘buying group’’ eligible to avail itself of the nondiscrimination protections afforded to MVPDs under the program access rules. One of these requirements pertains to the liability of the buying group or its members to the programmer for payments. The Commission has established three alternative ways for the buying group to satisfy this requirement. First, the entity seeking to qualify as a ‘‘buying group’’ may agree ‘‘to be financially liable for any fees due pursuant to a * * * programming contract which it signs as a contracting party as a representative of its members’’ (the ‘‘full liability’’ option). Second, the members of the buying group, as contracting parties, may agree to joint and several liability (the ‘‘joint and several liability’’ option). Third, the entity seeking to qualify as a ‘‘buying group’’ may maintain liquid cash or credit reserves equal to the cost of one 2 The legislative history of section 628(c)(2)(B) also reflects Congress’s intent to afford small MVPDs that purchase programming through buying groups the same protection against discrimination as other MVPDs. See S. Rep. No. 102–92, at 25 (1991), reprinted in 1992 U.S.C.C.A.N. 1133, 1160 (‘‘To address the complaints of small cable operators that cable programmers will not deal with them or will unreasonably discriminate against them in the sale of programming, the legislation requires vertically integrated, national cable programmers to make programming available to all cable operators and their buying agents on similar price, terms, and conditions.’’); H.R. Conf. Rep. No. 102–862, at 91 (1992), reprinted in 1992 U.S.C.C.A.N. 1231, 1273 (‘‘National and regional programmers affiliated with cable operators are required by the Senate bill to offer their programming to buying groups on terms similar to those offered to cable operators.’’). PO 00000 Frm 00003 Fmt 4701 Sfmt 4702 month of programming fees for all buying group members and each member of the buying group must remain liable for its pro rata share (the ‘‘cash reserve’’ option).3 12. ACA asserts that none of these alternative liability options reflects current industry practice. First, with respect to the ‘‘full liability’’ option, ACA asserts that buying groups, such as the National Cable Television Cooperative (‘‘NCTC’’),4 never assume full liability for the contractual commitment that each member company makes when it opts into a master agreement. Rather, NCTC’s obligation is limited to forwarding any payments that are received from members to the programmer and notifying the programmer of any default by one of its members. Additionally, NCTC’s general practice is to deal with delinquent members by terminating their membership and thus all of the master agreements of the delinquent member. Second, with respect to the ‘‘joint and several liability’’ option, ACA notes that NCTC found this option impracticable because it would interfere with some members’ loan covenants as to debt and result in fewer MVPDs being able to participate in NCTC master agreements. Third, with respect to the ‘‘cash reserve’’ option, ACA notes that NCTC’s standard practice in its early years was to require its members to deposit 30 days of payments into an escrow account when they opted into a master agreement, but programmers and NCTC eventually decided this protection was unnecessary. 13. According to ACA, programmers have widely accepted NCTC’s current business model, including the reduced level of liability that NCTC assumes 3 ACA notes that the changes to § 76.1000(c)(1) to reflect the ‘‘cash reserve’’ option were not included in the 1998 Program Access Order and that a subsequent Erratum making the relevant changes to § 76.1000(c)(1) was not published in the Federal Register. While ACA notes that, as a result, the changes to § 76.1000(c)(1) to reflect the ‘‘cash reserve’’ option are not reflected in the Code of Federal Regulations, a summary of the 1998 Program Access Order, including a discussion of the ‘‘cash reserve’’ option, was published in the Federal Register and is thus a binding rule. See Development of Competition and Diversity in Video Programming Distribution and Carriage, 63 FR 45740–02, 45742 (1998). 4 NCTC is a buying group with approximately 910 member companies representing approximately 25 million MVPD subscribers. NCTC’s members vary widely in size, from a few dozen subscribers to several million subscribers. More than half of NCTC’s 910 members have fewer than 1,000 subscribers, while a little over 100 of its members have more than 10,000 subscribers. In addition to negotiating the rates, terms, and conditions of master agreements with programmers, NCTC acts as an interface for all billing and collection activities between its member companies and the programmer. E:\FR\FM\31OCP2.SGM 31OCP2 Federal Register / Vol. 77, No. 211 / Wednesday, October 31, 2012 / Proposed Rules srobinson on DSK4SPTVN1PROD with under a master agreement. Because the existing definition of ‘‘buying group’’ does not conform to these widely accepted practices, ACA asserts that NCTC is effectively barred from bringing a program access complaint concerning a master agreement on behalf of its member companies. ACA accordingly recommends that the Commission modernize the definition of ‘‘buying group’’ in § 76.1000(c)(1) by adding, as an alternative to the existing liability options, a requirement that the entity seeking to qualify as a ‘‘buying group’’ assumes liability to forward all payments due and received from its members for payment under a master agreement to the appropriate programmer. 14. Based on ACA’s comments, it appears that our existing definition of ‘‘buying group’’ set forth in § 76.1000(c)(1) does not reflect accepted industry practices and thus may have the unintended effect of barring some buying groups from availing themselves of the protections of the nondiscrimination provision of the program access rules, in contravention of Congress’s express intent in enacting section 628(c)(2)(B) of the Act. We tentatively conclude that we should revise § 76.1000(c)(1) to require, as an alternative to the current liability options, that the buying group agree to assume liability to forward all payments due and received from its members for payment under a master agreement to the appropriate programmer.5 We seek comment on this tentative conclusion. We also seek comment on whether NCTC’s practices in terms of the level of liability it assumes under a master agreement are consistent with that of other buying groups. To the extent that the practices of other buying groups differ, how do they differ? 15. We note that the Commission adopted the liability options in § 76.1000(c)(1) to address concerns about the creditworthiness and financial stability of buying groups and protect programmers from excessive financial risk. We do not believe that revising the definition of buying group as discussed above would subject programmers to greater financial risk when contracting with a buying group than they would be when contracting with an individual MVPD. According to ACA, if an individual MVPD defaults on its payments for programming, a 5 As discussed above, the changes to § 76.1000(c)(1) to reflect the ‘‘cash reserve’’ option adopted in the 1998 Program Access Order are not reflected in the Code of Federal Regulations. We intend to conform § 76.1000(c)(1) as amended in this proceeding to the amendment previously adopted in the 1998 Program Access Order. VerDate Mar<15>2010 18:28 Oct 30, 2012 Jkt 229001 programmer may attempt to require the MVPD to continue making payments over the life of the agreement, or it may cease delivery of the programming to the MVPD. ACA states that the programmer’s legal rights are the same regardless of whether the defaulting MVPD has purchased service on an individual basis or through a buying group. Moreover, we note that NCTC’s general practice of terminating membership, and thus all of the master agreements, of a delinquent member, may reduce the risk of delinquency, which could provide the programmer greater protection than when dealing with an individual MVPD. We invite commenters to address whether the proposed revision to the buying group definition sufficiently protects programmers from financial risks in dealing with buying groups. If not, what additional measures are needed to protect programmers from financial risk? Should we codify NCTC’s practice of terminating membership and all of the master agreements of a delinquent member? Do other buying groups utilize this same practice? 16. We further propose to revise the definition of ‘‘buying group’’ to provide that a buying group may not unreasonably deny membership to any MVPD requesting membership. As ACA submits, ‘‘[b]uying groups play an extremely important role in today’s marketplace, for both small and medium-sized MVPDs,’’ because they provide ‘‘significantly lower license fees for [their] members than these MVPDs could obtain through direct deals with programmers.’’ Although a buying group would presumably benefit from increasing its membership in order to obtain better deals from programmers, we are aware of allegations in recent years that NCTC has denied membership to certain MVPDs. In light of the significance of buying groups in the marketplace today and Congress’s recognition of the importance of buying groups for small MVPDs, we propose to require that a ‘‘buying group’’ eligible to receive the benefits of the nondiscrimination provision of the program access rules may not unreasonably deny membership to any MVPD requesting membership. Under this proposal, a buying group would not be required to accept all members. Rather, it would only be prohibited from ‘‘unreasonably’’ denying membership. For example, if an MVPD seeking membership has a history of defaulting on its payments for programming, or if there are legitimate antitrust reasons for denying membership to a particular MVPD, then the buying group’s denial of PO 00000 Frm 00004 Fmt 4701 Sfmt 4702 66055 membership would not be ‘‘unreasonable.’’ Upon being denied membership, an MVPD could file a Petition for Declaratory Ruling that the buying group no longer qualifies as a ‘‘buying group’’ as defined in § 76.1000(c) because it has ‘‘unreasonably’’ denied the MVPD membership. The central issue in the Declaratory Ruling proceeding would be whether the buying group’s conduct in denying membership was ‘‘unreasonable.’’ If the Commission finds that the buying group’s conduct was ‘‘unreasonable,’’ the buying group would no longer be eligible to receive the benefits of the non-discrimination provision of the program access rules. We seek comment on this proposal. 17. We invite commenters to discuss the potential costs and benefits of each of the proposed revisions of the buying group definition. To the extent possible, we encourage commenters to quantify any costs and benefits and submit supporting data. Commenters that propose an alternative approach should similarly provide data regarding the costs and benefits of the alternative approach. 2. Participation of Buying Group Members in Master Agreements 18. ACA also urges the Commission to revise the program access rules to prohibit cable-affiliated programmers from unreasonably preventing particular members of a buying group from opting into a master agreement. ACA contends that, while the program access rules prohibit unfair methods of competition and discriminatory practices, including selective refusals to license, these rules do not explicitly restrain the ability of a cable-affiliated programmer to unreasonably prevent particular members of a buying group from participating in a master agreement, even if the member normally purchases a substantial share of its programming from the buying group. ACA asserts that if a cable-affiliated programmer had the right to arbitrarily exclude any buying group member that it wished from a master agreement, the requirement that cable-affiliated programmers negotiate non-discriminatory agreements with buying groups could be rendered meaningless. 19. To remedy its concern, ACA recommends that the Commission adopt clear and easily verifiable standards for determining when a buying group member is presumptively allowed to participate in a master agreement with a cable-affiliated programmer. Specifically, ACA suggests that the Commission establish a ‘‘safe harbor’’ subscriber level for buying group E:\FR\FM\31OCP2.SGM 31OCP2 srobinson on DSK4SPTVN1PROD with 66056 Federal Register / Vol. 77, No. 211 / Wednesday, October 31, 2012 / Proposed Rules member MVPDs to participate in a master agreement. Under ACA’s proposed approach, a buying group member MVPD with no more than the ‘‘safe harbor’’ number of subscribers would be presumptively entitled to participate in master agreements between the programmer and the buying group. A buying group member MVPD which has more than the safe harbor number of subscribers would also be entitled to participate if it demonstrates that it incurs some specified minimum share of its total expenditures on programming through the buying group. Further, when an expiring master agreement is up for renewal, buying group members participating in the expiring agreement would have the right to participate in the renewed agreement. ACA states that, as a consequence of this safe harbor, it would be a violation of the section 628(c)(2)(B) prohibition on discriminatory practices for a cableaffiliated programmer to refuse to deal with a buying group member that regularly participates in a master agreement. Although not mentioned by ACA, consistent with section 628(c)(2)(B), a cable-affiliated programmer could refuse to deal with a buying group member for a legitimate business reason, such as the distributor’s history of defaulting on other programming contracts. 20. We seek comment generally on the need for a safe harbor for buying group participation in master agreements and, more specifically, on ACA’s proposed safe harbor. Although several commenters make generalized allegations that cable-affiliated programmers have excluded particular buying group members from participating in master agreements negotiated with the buying group, we have not received information regarding specific instances in which such exclusions have occurred. We seek detailed information on the extent to which the exclusion of particular buying group members from participation in master agreements has occurred in the past or is occurring now. To the extent that some buying group members are being excluded from participating in master agreements, why are they being excluded? 21. If we determine that it is necessary to establish a safe harbor for buying group participation in master agreements, what subscriber level should we establish as the safe harbor? ACA suggests that we set the safe harbor subscriber number at 3 million subscribers. Is this an appropriate safe harbor subscriber number? Commenters that recommend a specific safe harbor subscriber number should explain the VerDate Mar<15>2010 18:28 Oct 30, 2012 Jkt 229001 basis for their recommendation. Further, under ACA’s suggested approach, a buying group member with more than the safe harbor number of subscribers would be entitled to participate in a master agreement if it demonstrates that it incurs some specified minimum share of its total expenditures on programming through the buying group. What minimum share of programming expenditures should such a buying group member have to incur through the buying group in order to be entitled to participate in a master agreement and over what period of time? ACA suggests that we require a buying group member with more than the safe harbor number of subscribers to demonstrate that the share of programming that it licenses through the buying group is not significantly smaller than the average share of programming that other buying group members license through the buying group. We seek comment on this proposal. What share of programming should be considered ‘‘significantly smaller’’ than the average share for purposes of this proposal? Over what period of time should we measure the ‘‘average share’’ of programming that other buying group members license through the buying group? In addition, we seek comment on ACA’s proposal that, when an expiring master agreement is up for renewal, buying group members participating in the expiring agreement would have the right to participate in the renewed agreement. We also invite commenters to suggest any alternatives to ACA’s proposed safe harbors and explain why the alternative is preferable or less burdensome. For example, would it be preferable to simply require that, if a cable-affiliated programmer enters into a master agreement with a buying group, all buying group members have a right to participate in the master agreement? What are the potential costs and benefits of ACA’s safe harbor approach and any alternative proposals? Commenters should quantify any potential costs and benefits to the extent possible and provide supporting data. 3. Standard of Comparability for Buying Groups Regarding Volume Discounts 22. The Commission has explained that a complainant MVPD alleging program access discrimination must make a prima facie showing that there is a difference between the rates, terms, or conditions charged or offered by a cable-affiliated programmer to the complainant MVPD and to a ‘‘competing distributor.’’ The Commission has explained that buying groups that are ‘‘fundamentally national in operation’’ may make a comparison to the rates, PO 00000 Frm 00005 Fmt 4701 Sfmt 4702 terms, or conditions charged or offered by a cable-affiliated programmer to a ‘‘national competitor.’’ Once the complainant MVPD establishes a prima facie case of discrimination, the defendant programmer must demonstrate that the difference in prices, terms, and conditions is justified by the four factors set forth in section 628(c)(2)(B)(i)–(iv) of the Act. One of those factors allows programmers to use volume-related justifications to establish price differentials. If the programmer believes that the complainant MVPD and the ‘‘competing distributor’’ are not sufficiently similar, and thus cannot be realistically compared, it can state its reasons for this conclusion and submit an alternative contract for comparison with another more ‘‘similarly situated’’ alternative MVPD. The Commission’s rules provide that the analysis of whether an alternative MVPD is properly comparable to the complainant includes consideration of, but is not limited to, the following factors: (i) Whether the alternative MVPD operates within a geographic region proximate to the complainant; (ii) whether the alternative MVPD has roughly the same number of subscribers as the complainant; and (iii) whether the alternative MVPD purchases a similar service as the complainant. Moreover, the Commission’s rules provide that the alternative MVPD ‘‘must use the same distribution technology as the ‘competing’ distributor with whom the complainant seeks to compare itself.’’ 23. ACA proposes that we amend our rules to clarify that the standard to be applied in determining whether buying groups are being discriminated against is the same as that applied to an individual MVPD providing the same number of subscribers to the programmer. In other words, ACA states, for purposes of determining whether prices offered to a buying group are discriminatory, the buying group should be considered ‘‘similarly situated’’ to an individual MVPD offering the programmer the same number of subscribers. According to ACA, ‘‘the utility of the program access rules has been dramatically undercut for buying groups because the Commission has never established a clear standard upon which a buying group is to be compared for purposes of determining whether it is being discriminated against by a cable-affiliated programmer.’’ 24. We invite comment on ACA’s proposal. In particular, we seek comment on whether and how any perceived lack of clarity regarding the standard of comparability for buying groups has affected negotiations E:\FR\FM\31OCP2.SGM 31OCP2 srobinson on DSK4SPTVN1PROD with Federal Register / Vol. 77, No. 211 / Wednesday, October 31, 2012 / Proposed Rules between buying groups and cableaffiliated programmers on volume discounts or has discouraged buying groups from filing program access complaints. We note, in this regard, that neither section 628 nor the Commission’s rules distinguish between individual MVPDs and buying groups in describing the justifications for volume discounts. Therefore, it is arguably already clear that a buying group would be compared to an individual MVPD providing the same number of subscribers to the programmer. Moreover, in the 1993 Program Access Order, the Commission established the conditions that a buying group must meet ‘‘in order to benefit from treatment as a single entity for purposes of subscriber volume.’’ The Commission therein stated that ‘‘[v]endors can extend [to buying groups] the same volume discounts based on number of subscribers that they would ordinarily extend to single entities of comparable size provided that such discounts are offered in a nondiscriminatory fashion.’’ Thus, to the extent that we adopt the revised definition of ‘‘buying group’’ proposed by ACA, we seek comment on whether it is also necessary to revise the rules to establish an explicit standard of comparability. Are there differences between individual MVPDs and buying groups that would argue against the standard of comparability advocated by ACA? As discussed above, the Commission’s analysis of whether MVPDs are ‘‘similarly situated’’ for purposes of a program access discrimination complaint extends beyond consideration of whether MVPDs offer roughly the same number of subscribers to include other factors, such as the geographic region where the MVPDs operate, the services purchased, and the date of their contracts with the defendant programmer. What impact, if any, do these and other factors have on the standard of comparability advocated by ACA? 25. Moreover, as discussed above, a complainant MVPD alleging program access discrimination must make a prima facie showing of a differential in the price, terms, or conditions offered or charged to the complainant MVPD and to a ‘‘competing distributor.’’ In the case of a national buying group, the comparison is made to a ‘‘national competitor.’’ We seek comment on how this requirement impacts discrimination complaints brought by national buying groups and how, if at all, this requirement should be modified for discrimination complaints filed by national buying groups. For example, are there any ‘‘national competitors,’’ VerDate Mar<15>2010 18:28 Oct 30, 2012 Jkt 229001 other than DBS operators, to which a national buying group can make a comparison? If only a DBS operator qualifies as a ‘‘national competitor,’’ but a defendant programmer believes that a DBS operator is not comparable to the national buying group, the defendant programmer may submit an alternative contract for comparison with another more ‘‘similarly situated’’ alternative MVPD. As discussed above, however, the Commission’s rules provide that the alternative MVPD ‘‘must use the same distribution technology as the ‘competing’ distributor with whom the complainant seeks to compare itself.’’ If only a DBS operator can qualify as a ‘‘competing distributor’’ for a national buying group, does this limit the alternative MVPDs that can qualify as ‘‘similarly situated’’ to only other DBS operators? 26. ACA further proposes that we make clear that a cable-affiliated programmer cannot refuse to offer a master agreement to a buying group that specifies a schedule of nondiscriminatory license fees over any range of subscribership levels that the buying group requests, so long as it is possible that the buying group could provide this number of subscribers from its current members eligible to participate in the master agreement. Under this proposal, a cable-affiliated programmer would violate section 628(c)(2)(B)’s prohibition on discriminatory practices if it fails or refuses to offer a non-discriminatory schedule of prices based on the number of subscribers that members of the buying group could provide if they chose to opt into the master agreement. ACA explains that under the current NCTC model, NCTC negotiates the deal with the programmer and then its members decide whether to opt into the deal. Thus, at the time of negotiation, neither NCTC nor the programmer knows exactly which NCTC members will take their programming through NCTC—and therefore neither party knows the precise number of subscribers that NCTC will provide. ACA maintains that its proposal ‘‘will solve the ‘chicken and egg’ problem that might occur if certain members of a buying group are unwilling to opt into a master agreement because license fees are too high, even though the license fees would go down if the members decided to opt in.’’ We seek comment on the benefits and burdens of ACA’s proposal. To what extent has the ‘‘chicken and egg’’ problem described above hampered negotiations between buying groups and programmers? If, at the time of negotiation, neither the PO 00000 Frm 00006 Fmt 4701 Sfmt 4702 66057 buying group nor the programmer knows precisely which buying group members will participate in the agreement, how are volume discounts calculated for buying groups? Has past participation been a reliable indicator of which buying group members are likely to opt into a master agreement? Additionally, we seek comment on whether the Commission has the authority under section 628 or some other provision of the Act to require programmers to provide buying groups generally applicable rate schedules for differing subscribership levels. 27. Finally, we seek comment on ACA’s request that we clarify that the standard of comparability applies for purposes of evaluating all terms and conditions of the agreement, not just the price. As discussed above, to the extent that we adopt the revised definition of ‘‘buying group’’ proposed by ACA, is this proposed clarification necessary? We also invite commenters to analyze the potential costs and benefits of each of ACA’s proposals relating to the standard of comparability for buying groups, as well as any alternative proposals, quantify any costs and benefits of the proposals to the extent possible, and submit appropriate supporting data. II. Procedural Matters A. Initial Regulatory Flexibility Act Analysis 28. 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 Further Notice of Proposed Rulemaking (‘‘FNPRM’’). 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 FNPRM specified supra. The Commission will send a copy of the FNPRM, including this IRFA, to the Chief Counsel for Advocacy of the Small Business Administration (‘‘SBA’’). In addition, the FNPRM and IRFA (or summaries thereof) will be published in the Federal Register. Need for, and Objectives of, the Proposed Rule Changes 29. We seek comment in the FNPRM on whether to establish a rebuttable presumption that an exclusive contract for a cable-affiliated Regional Sports Network (‘‘RSN’’) (regardless of whether it is terrestrially delivered or satellitedelivered) is an ‘‘unfair act’’ under E:\FR\FM\31OCP2.SGM 31OCP2 srobinson on DSK4SPTVN1PROD with 66058 Federal Register / Vol. 77, No. 211 / Wednesday, October 31, 2012 / Proposed Rules section 628(b) of the Communications Act of 1934, as amended (the ‘‘Act’’). Under the case-by-case process for complaints alleging that an exclusive contract violates section 628(b), the complainant has the burden of proving that the exclusive contract at issue (i) is an ‘‘unfair act’’ and (ii) has the ‘‘purpose or effect’’ of ‘‘significantly hindering or preventing’’ the complainant from providing satellite cable programming or satellite broadcast programming. With respect to the second element, the Commission has established a rebuttable presumption that an exclusive contract involving a cable-affiliated RSN has the ‘‘purpose or effect’’ of ‘‘significantly hindering or preventing’’ the complainant from providing satellite cable programming or satellite broadcast programming, as set forth in section 628(b). With respect to the first element (the ‘‘unfair act’’ element), however, the Commission has not established a rebuttable presumption that an exclusive contract involving a cableaffiliated RSN is an ‘‘unfair act.’’ The FNPRM seeks comment on whether to establish this rebuttable presumption. 30. We also seek comment in the FNPRM on whether to establish a rebuttable presumption that a complainant challenging an exclusive contract involving a cable-affiliated RSN (regardless of whether it is terrestrially delivered or satellite-delivered) is entitled to a standstill of an existing programming contract during the pendency of a complaint. The Commission previously established a process whereby a complainant may seek a standstill of an existing programming contract during the pendency of a complaint. The complainant has the burden of proof to demonstrate how grant of the standstill will meet the following four criteria: (i) The complainant is likely to prevail on the merits of its complaint; (ii) the complainant will suffer irreparable harm absent a stay; (iii) grant of a stay will not substantially harm other interested parties; and (iv) the public interest favors grant of a stay. The FNPRM seeks comment on whether to establish a rebuttable presumption that a complainant is entitled to a standstill when challenging an exclusive contract involving a cable-affiliated RSN. 31. The FNPRM also seeks comment on whether to establish rebuttable presumptions with respect to the ‘‘unfair act’’ element and/or the ‘‘significant hindrance’’ element of a section 628(b) claim challenging an exclusive contract involving a cableaffiliated ‘‘national sports network’’ (regardless of whether it is terrestrially delivered or satellite-delivered). We also VerDate Mar<15>2010 18:28 Oct 30, 2012 Jkt 229001 seek comment in the FNPRM on whether the Commission should establish a rebuttable presumption that, once a complainant succeeds in demonstrating that an exclusive contract involving a cable-affiliated network (regardless of whether it is terrestrially delivered or satellite-delivered) 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)). 32. We also solicit comment on modifications to the program access rules relating to buying groups proposed by the American Cable Association (‘‘ACA’’) in its comments on the Notice of Proposed Rulemaking in MB Docket Nos. 12–68, 07–18, and 05–182. ACA asserts that revisions to the program access rules are needed to ensure that buying groups utilized by small and medium-sized multi-channel video programming distributors (‘‘MVPDs’’) can avail themselves of the nondiscrimination protections of the program access rules. ACA seeks three modifications to the program access rules: (i) The revision of the definition of ‘‘buying group’’ to accurately reflect the level of liability assumed by buying groups under current industry practices; (ii) the establishment of standards for the right of buying group members to participate in their group’s master licensing agreements; and (iii) the establishment of a standard of comparability for a buying group regarding volume discounts. In addition to ACA’s proposed modifications, we propose to revise our definition of ‘‘buying group’’ to provide that a buying group may not unreasonably deny membership to any MVPD requesting membership. 33. Buying groups play an important role in the market for video programming distribution, both for small and medium-sized MVPDs and for programmers. A buying group negotiates master agreements with video programmers that its MVPD members can opt into and then acts as an interface between its members and the programmers so that the programmers are able to deal with a single entity. Thus, a buying group is generally able to obtain lower license fees for its members than they could obtain through direct deals with the programmers, and lower transaction costs for programmers by enabling them to deal with a single entity, rather than many individual MVPDs, for their negotiations and fee collections. Because small and medium-sized MVPDs rely on buying groups as the primary means by which they purchase PO 00000 Frm 00007 Fmt 4701 Sfmt 4702 their programming, small and mediumsized MVPDs are only protected under the program access rules to the extent that buying groups are given the same protection in their dealings with cableaffiliated programmers as individual MVPDs are given. The nondiscrimination protections of section 628(c)(2)(B) of the Communications Act of 1934, as amended (the ‘‘Act’’) explicitly apply to buying groups. Further, the Commission’s rules extend the non-discrimination protections of the program access rules to buying groups by including ‘‘buying groups’’ within the definition of ‘‘multichannel video programming distributor’’ set forth in § 76.1000(e) of the Commission’s rules. 34. Section 76.1000(c) of the Commission’s rules sets forth the requirements that an entity must satisfy in order to be considered a ‘‘buying group’’ for purposes of the definition of ‘‘multichannel video programming distributor’’ in § 76.1000(e)—that is, to avail itself of the non-discrimination protections afforded to MVPDs under the program access rules. One of these requirements pertains to the liability of the buying group or its members to the programmer for payments. The Commission has established three alternatives ways for the buying group to satisfy this requirement. First, the entity seeking to qualify as a ‘‘buying group’’ may agree ‘‘to be financially liable for any fees due pursuant to a * * * programming contract which it signs as a contracting party as a representative of its members’’ (the ‘‘full liability’’ option). Second, the members of the buying group, as contracting parties, may agree to joint and several liability (the ‘‘joint and several liability’’ option). Third, the entity seeking to qualify as a ‘‘buying group’’ may maintain liquid cash or credit reserves equal to the cost of one month of programming fees for all buying group members and each member of the buying group must remain liable for its pro rata share (the ‘‘cash reserve’’ option). 35. ACA asserts that none of these alternative liability options reflect current industry practice. First, with respect to the ‘‘full liability’’ option, ACA asserts that buying groups, such as the National Cable Television Cooperative (‘‘NCTC’’), never assume full liability for the contractual commitment that each member company makes when it opts into a master agreement. Rather, NCTC’s obligation is limited to forwarding any payments that are received from members to the programmer and notifying the programmer of any default E:\FR\FM\31OCP2.SGM 31OCP2 srobinson on DSK4SPTVN1PROD with Federal Register / Vol. 77, No. 211 / Wednesday, October 31, 2012 / Proposed Rules by one of its members. Second, with respect to the ‘‘joint and several liability’’ option, ACA notes that NCTC found this option impracticable because it would interfere with some members’ loan covenants as to debt and result in fewer MVPDs being able to participate in NCTC master agreements. Third, with respect to the ‘‘cash reserve’’ option, ACA states that NCTC’s standard practice in its early years was to require its members to deposit 30 days of payments into an escrow account when they opted into a master agreement, but programmers and NCTC eventually decided this protection was unnecessary. 36. According to ACA, programmers have widely accepted NCTC’s current business model, including the reduced level of liability that NCTC assumes under a master agreement. Because the existing definition of ‘‘buying group’’ does not conform to these widely accepted practices, ACA asserts that NCTC is effectively barred from bringing a program access complaint concerning a master agreement on behalf of its member companies. ACA accordingly recommends that the Commission modernize the definition of ‘‘buying group’’ in § 76.1000(c)(1) by adding, as an alternative to the existing liability options, a requirement that the entity seeking to qualify as a ‘‘buying group’’ assumes liability to forward all payments due and received from its members for payment under a master agreement to the appropriate programmer. 37. In the FNPRM, we tentatively conclude that we should revise § 76.1000(c)(1) to require, as an alternative to the current liability options, that the buying group agree to assume liability to forward all payments due and received from its members for payment under a master agreement to the appropriate programmer. In light of the significance of buying groups in the marketplace today and Congress’s recognition of the importance of buying groups for small MVPDs, we further propose to revise the definition of ‘‘buying group’’ to provide that a buying group may not unreasonably deny membership to any MVPD requesting membership. 38. In addition, we seek comment on ACA’s proposal that we establish a ‘‘safe harbor’’ subscriber level for buying group members to participate in a master agreement negotiated with a cable-affiliated programmer. Under ACA’s proposed approach, a buying group member MVPD with no more than three million subscribers would be presumptively entitled to participate in master agreements between the VerDate Mar<15>2010 18:28 Oct 30, 2012 Jkt 229001 programmer and the buying group. A buying group member MVPD which has more than the safe harbor number of subscribers would also be entitled to participate if it demonstrates that it incurs some specified minimum share of its total expenditures on programming through the buying group. Further, when an expiring master agreement is up for renewal, buying group members participating in the expiring agreement would have the right to participate in the renewed agreement. As a consequence of this safe harbor, it would be a violation of the section 628(c)(2)(B) prohibition on discriminatory practices for a cableaffiliated programmer to refuse to deal with a buying group member that regularly participates in a master agreement. 39. Finally, we seek comment on ACA’s proposals that we revise the rules to clarify that: (i) The standard to be applied in determining whether buying groups are being discriminated against is the same as that applied to an individual MVPD providing the same number of subscribers to the programmer; (ii) a cable-affiliated programmer cannot refuse to offer a master agreement to a buying group that specifies a schedule of nondiscriminatory license fees over any range of subscribership levels that the buying group requests, so long as it is possible that the buying group could provide this number of subscribers from its current members eligible to participate in the master agreement; and (iii) the standard of comparability for a buying group is an MVPD providing the same number of customers for purposes of evaluating all terms and conditions of the agreement, not just the price. Legal Basis 40. 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 41. 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 herein. 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. PO 00000 Frm 00008 Fmt 4701 Sfmt 4702 66059 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 Small Business Administration (SBA). Below, we provide a description of such small entities, as well as an estimate of the number of such small entities, where feasible. 42. 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. 43. 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 E:\FR\FM\31OCP2.SGM 31OCP2 srobinson on DSK4SPTVN1PROD with 66060 Federal Register / Vol. 77, No. 211 / Wednesday, October 31, 2012 / Proposed Rules 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. 44. 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 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. 45. 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. 46. 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 VerDate Mar<15>2010 18:28 Oct 30, 2012 Jkt 229001 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 DISH Network). Each currently offers subscription services. DIRECTV and DISH Network 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. 47. 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. 48. 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 PO 00000 Frm 00009 Fmt 4701 Sfmt 4702 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. 49. 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 E:\FR\FM\31OCP2.SGM 31OCP2 srobinson on DSK4SPTVN1PROD with Federal Register / Vol. 77, No. 211 / Wednesday, October 31, 2012 / Proposed Rules 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 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. 50. 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. 51. 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 VerDate Mar<15>2010 18:28 Oct 30, 2012 Jkt 229001 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. 52. 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 PO 00000 Frm 00010 Fmt 4701 Sfmt 4702 66061 addition, we note that the Commission has certified approximately 42 OVS operators, with some now providing service. Broadband service providers (‘‘BSPs’’) are currently the only significant holders of OVS certifications or local OVS franchises. Affiliates of Residential Communications Network, Inc. (‘‘RCN’’) received approval to operate OVS systems in New York City, Boston, Washington, DC, and other areas. RCN has sufficient revenues to assure that they do not qualify as a small business entity. The Commission does not have financial or employment information regarding the other entities authorized to provide OVS, some of which may not yet be operational. Thus, up to 41 of the OVS operators may qualify as small entities. 53. 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 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. 54. 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 E:\FR\FM\31OCP2.SGM 31OCP2 srobinson on DSK4SPTVN1PROD with 66062 Federal Register / Vol. 77, No. 211 / Wednesday, October 31, 2012 / Proposed Rules 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. 55. 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 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. According to Commission data, 1,307 carriers reported that they were incumbent local exchange service providers. Of these 1,307 carriers, an estimated 1,006 have 1,500 or fewer employees and 301 have more than 1,500 employees. Thus, under this category and the associated small business size standard, the majority of these firms can be considered small. 56. 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. 57. Motion Picture and Video Production. The Census Bureau defines VerDate Mar<15>2010 18:28 Oct 30, 2012 Jkt 229001 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. 58. 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, PO 00000 Frm 00011 Fmt 4701 Sfmt 4702 the majority of firms can be considered small. Description of Projected Reporting, Recordkeeping, and Other Compliance Requirements 59. Certain proposed rule changes discussed in the FNPRM would affect reporting, recordkeeping, or other compliance requirements. The FNPRM seeks comment on whether to establish (i) a rebuttable presumption that an exclusive contract for a cable-affiliated RSN (regardless of whether it is terrestrially delivered or satellitedelivered) is an ‘‘unfair act’’ under section 628(b); (ii) a rebuttable presumption that a complainant challenging an exclusive contract involving a cable-affiliated RSN (regardless of whether it is terrestrially delivered or satellite-delivered) is entitled to a standstill of an existing programming contract during the pendency of a complaint; (iii) rebuttable presumptions with respect to the ‘‘unfair act’’ element and/or the ‘‘significant hindrance’’ element of a section 628(b) claim challenging an exclusive contract involving a cableaffiliated ‘‘national sports network’’ (regardless of whether it is terrestrially delivered or satellite-delivered); and (iv) a rebuttable presumption that, once a complainant succeeds in demonstrating that an exclusive contract involving a cable-affiliated network (regardless of whether it is terrestrially delivered or satellite-delivered) 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)). The FNPRM tentatively concludes that the Commission should revise definition of ‘‘buying group’’ to require, as an alternative to the current liability options, that the buying group agree to assume liability to forward all payments due and received from its members for payment under a master agreement to the appropriate programmer. The FNPRM also proposes to revise the definition of ‘‘buying group’’ to provide that a buying group may not unreasonably deny membership to any MVPD requesting membership. In addition, the FNPRM seeks comment on whether the Commission should establish a ‘‘safe harbor’’ subscriber level for buying group members to participate in master agreements with cable-affiliated programmers. As a consequence of this safe harbor, it would be a violation of the section 628(c)(2)(B) prohibition on discriminatory practices for a cableaffiliated programmer to refuse to deal with a buying group member that E:\FR\FM\31OCP2.SGM 31OCP2 Federal Register / Vol. 77, No. 211 / Wednesday, October 31, 2012 / Proposed Rules srobinson on DSK4SPTVN1PROD with regularly participates in a master agreement. Finally, the FNPRM seeks comment on whether the Commission should revise the rules to clarify that: (i) The standard to be applied in determining whether buying groups are being discriminated against is the same as that applied to an individual MVPD providing the same number of subscribers to the programmer; (ii) a cable-affiliated programmer cannot refuse to offer a master agreement to a buying group that specifies a schedule of non-discriminatory license fees over any range of subscribership levels that the buying group requests, so long as it is possible that the buying group could provide this number of subscribers from its current members eligible to participate in the master agreement; and (iii) the standard of comparability for a buying group is an MVPD providing the same number of customers for purposes of evaluating all terms and conditions of the agreement, not just the price. Steps Taken To Minimize Significant Impact on Small Entities and Significant Alternatives Considered 60. The RFA requires an agency to describe any significant alternatives that it has considered in developing 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 and reporting requirements under the rule for such 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 such small entities.’’ 61. The FNPRM seeks comment on whether to establish (i) a rebuttable presumption that an exclusive contract for a cable-affiliated RSN (regardless of whether it is terrestrially delivered or satellite-delivered) is an ‘‘unfair act’’ under section 628(b); (ii) a rebuttable presumption that a complainant challenging an exclusive contract involving a cable-affiliated RSN (regardless of whether it is terrestrially delivered or satellite-delivered) is entitled to a standstill of an existing programming contract during the pendency of a complaint; (iii) rebuttable presumptions with respect to the ‘‘unfair act’’ element and/or the ‘‘significant hindrance’’ element of a section 628(b) claim challenging an exclusive contract involving a cableaffiliated ‘‘national sports network’’ (regardless of whether it is terrestrially delivered or satellite-delivered); and (iv) VerDate Mar<15>2010 18:28 Oct 30, 2012 Jkt 229001 a rebuttable presumption that, once a complainant succeeds in demonstrating that an exclusive contract involving a cable-affiliated network (regardless of whether it is terrestrially delivered or satellite-delivered) 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)). These presumptions may benefit small entities by reducing costs by eliminating the need for litigants and the Commission to undertake repetitive examinations of Commission precedent and empirical evidence on RSNs. 62. The FNPRM also seeks comment on proposed modifications to the program access rules that are intended to ensure that buying groups utilized by small and medium-sized MVPDs can avail themselves of the nondiscrimination protections of the program access rules. Thus, the proposed modifications would benefit small entities. Specifically, the proposed revision of the definition of ‘‘buying group’’ to include an alternative liability option may benefit small entities by enabling buying groups that do not fall within the scope of the existing definition to file complaints with the Commission alleging violations of the non-discrimination provisions of the program access rules on behalf of their small and medium-sized MVPD members. Additionally, the proposed revision of the ‘‘buying group’’ definition to provide that a buying group may not unreasonably deny membership to any MVPD requesting membership may benefit small entities by making the benefits of buying group membership available to more small entities. Small entities may also benefit from the establishment of a ‘‘safe harbor’’ subscriber level for buying group members to participate in master agreements with cable-affiliated programmers and from clarifications to the rules addressing the standard of comparability for a buying group regarding volume discounts. Federal Rules That May Duplicate, Overlap, or Conflict With the Proposed Rule 63. None. B. Paperwork Reduction Act 64. The FNPRM in MB Docket No. 12– 68 does not contain proposed information collections subject to the PRA. In addition, therefore, it does not contain any new or modified information collection burden for small business concerns with fewer than 25 employees, pursuant to the Small Business Paperwork Relief Act of 2002. PO 00000 Frm 00012 Fmt 4701 Sfmt 4702 66063 C. Ex Parte Rules 65. Permit-But-Disclose. The proceeding the FNPRM in MB Docket No. 12–68 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 66. Comments and Replies. Pursuant to §§ 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 E:\FR\FM\31OCP2.SGM 31OCP2 srobinson on DSK4SPTVN1PROD with 66064 Federal Register / Vol. 77, No. 211 / Wednesday, October 31, 2012 / Proposed Rules 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 8:00 a.m. to 7:00 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. 67. 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. 68. 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). 69. Additional Information. For additional information on this proceeding, contact David Konczal, David.Konczal@fcc.gov, or Kathy Berthot, Kathy.Berthot@fcc.gov, of the Media Bureau, Policy Division, (202) 418–2120. VerDate Mar<15>2010 18:28 Oct 30, 2012 Jkt 229001 III. Ordering Clauses 70. 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, the Further Notice of Proposed Rulemaking in MB Docket No. 12–68 Is Adopted. 71. It is further ordered that the Commission’s Consumer and Governmental Affairs Bureau, Reference Information Center, Shall Send a copy of the Further Notice of Proposed Rulemaking in MB Docket No. 12–68, 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 Administrative practice and procedure, Cable television. Federal Communications Commission. Marlene H. Dortch, Secretary. Proposed Rules For the reasons discussed in the preamble, Part 76 of Title 47 of the Code of Federal Regulations is proposed to be amended as follows: PART 76—MULTICHANNEL VIDEO AND CABLE TELEVISION SERVICE 1. The authority citation for Part 76 continues to read as follows: Authority: 47 U.S.C. 151, 152, 153, 154, 301, 302, 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, 573. 2. Section 76.1000 is amended by revising paragraphs (c)(1) and (c)(3), adding paragraph (c)(4), and revising paragraph (j) to read as follows: § 76.1000 Definitions. * * * * * (c) * * * (1)(i) Agrees to be financially liable for any fees due pursuant to a satellite cable programming, satellite broadcast programming, or terrestrial cable programming contract which it signs as a contracting party as a representative of its members, or (ii) Whose members, as contracting parties, agree to joint and several liability, or (iii) Maintains liquid cash or credit reserves (i.e., cash, cash equivalents, or letters or lines of credit) equal to cover the cost of one month’s programming for all buying group members, or (iv) Agrees to assume liability to forward to the appropriate programmer all fees due and received from its PO 00000 Frm 00013 Fmt 4701 Sfmt 4702 members for payment under a programming contract; and * * * * * (3) Agrees either collectively or individually on reasonable technical quality standards for the individual members of the group; and (4) Does not unreasonably deny membership to any multichannel video programming distributor that requests membership. * * * * * (j) Similarly situated. The term ‘‘similarly situated’’ means, for the purposes of evaluating alternative programming contracts offered by a defendant programming vendor or by a terrestrial cable programming vendor alleged to have engaged in conduct described in § 76.1001(b)(1)(ii), that an alternative multichannel video programming distributor has been identified by the defendant as being more properly compared to the complainant in order to determine whether a violation of § 76.1001(a) or § 76.1002(b) has occurred. The analysis of whether an alternative multichannel video programming distributor is properly comparable to the complainant includes consideration of, but is not limited to, such factors as whether the alternative multichannel video programming distributor operates within a geographic region proximate to the complainant, has roughly the same number of subscribers as the complainant, and purchases a similar service as the complainant. Such alternative multichannel video programming distributor, however, must use the same distribution technology as the ‘‘competing’’ distributor with whom the complainant seeks to compare itself. For purposes of determining the size of a volume discount applicable to a buying group, a buying group will be considered similarly situated to an alternative multichannel video programming distributor with approximately the same number of subscribers for the programming as expected to be supplied by the buying group. * * * * * 3. Section 76.1002 is amended by revising the Note to paragraph (b)(3) and adding paragraph (g) to read as follows: § 76.1002 Specific unfair practices prohibited. * * * (b) * * * (3) * * * * * Note: Vendors may use volume-related justifications to establish price differentials to the extent that such justifications are made available to similarly situated distributors on E:\FR\FM\31OCP2.SGM 31OCP2 Federal Register / Vol. 77, No. 211 / Wednesday, October 31, 2012 / Proposed Rules 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. Vendors may not use volumerelated justifications to establish price differentials between a buying group and an alternative multichannel video programming distributor that has approximately the same number of subscribers for the programming as expected to be supplied by the buying group. srobinson on DSK4SPTVN1PROD with * * * VerDate Mar<15>2010 * * 18:28 Oct 30, 2012 Jkt 229001 (g) Buying Groups. (1) Right to Participate in Buying Group Programming Contracts. No satellite cable programming vendor in which a cable operator has an attributable interest or satellite broadcast programming vendor may unreasonably interfere with or prevent a member of a buying group from participating in a programming contract in which a buying group signs as a contracting party as a representative of its members if: (i) The member has no more than three million subscribers; or (ii) The share of programming that the member licenses through the buying group is not significantly smaller than the average share of programming that other members of the buying group license through the buying group. Upon the expiration of a satellite cable programming or satellite broadcast PO 00000 Frm 00014 Fmt 4701 Sfmt 9990 66065 programming contract which a buying group signs as a contracting party as a representative of its members, all buying group members participating in the expiring programming contract shall be presumptively entitled to participate in the renewed programming contract. (2) License Fee Schedule. A programming vendor must offer a programming contract to a buying group that specifies a schedule of nondiscriminatory license fees over any range of subscribership levels that the buying group requests, provided that it is possible that the buying group could provide this number of subscribers from its current members eligible to participate in the programming contract. [FR Doc. 2012–26455 Filed 10–30–12; 8:45 am] BILLING CODE 6712–01–P E:\FR\FM\31OCP2.SGM 31OCP2

Agencies

FEDERAL COMMUNICATIONS COMMISSION

[Federal Register Volume 77, Number 211 (Wednesday, October 31, 2012)]
[Proposed Rules]
[Pages 66052-66065]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2012-26455]

Federal Register / Vol. 77, No. 211 / Wednesday, October 31, 2012 /
Proposed Rules

[[Page 66052]]

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FEDERAL COMMUNICATIONS COMMISSION

47 CFR Part 76

[MB Docket No. 12-68; FCC 12-123]

Program Access Rules

AGENCY: Federal Communications Commission.

ACTION: Proposed rule.

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SUMMARY: In this document, the Commission seeks comment on the
following revisions to its program access rules: the establishment of
certain rebuttable presumptions in connection with program access
complaints challenging exclusive contracts involving cable-affiliated
programming; and amendments to its rules to ensure that buying groups
utilized by small and medium-sized multichannel video programming
distributors (``MVPDs'') can avail themselves of the program access
rules.

DATES: Comments are due on or before November 30, 2012; reply comments
are due on or before December 17, 2012.

ADDRESSES: You may submit comments, identified by MB Docket No. 12-68,
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.

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

SUPPLEMENTARY INFORMATION: This is a summary of the Commission's
Further Notice of Proposed Rulemaking, FCC 12-123, adopted and released
on October 5, 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).

Summary of the Further Notice of Proposed Rulemaking

I. Introduction

In the Further Notice of Proposed Rulemaking (``FNPRM'') in MB
Docket No. 12-68, we seek comment on whether to establish (i) a
rebuttable presumption that an exclusive contract for a cable-
affiliated RSN (regardless of whether it is terrestrially delivered or
satellite-delivered) is an ``unfair act'' under section 628(b); (ii) a
rebuttable presumption that a complainant challenging an exclusive
contract involving a cable-affiliated RSN (regardless of whether it is
terrestrially delivered or satellite-delivered) is entitled to a
standstill of an existing programming contract during the pendency of a
complaint; (iii) rebuttable presumptions with respect to the ``unfair
act'' element and/or the ``significant hindrance'' element of a section
628(b) claim challenging an exclusive contract involving a cable-
affiliated ``national sports network'' (regardless of whether it is
terrestrially delivered or satellite-delivered); and (iv) a rebuttable
presumption that, once a complainant succeeds in demonstrating that an
exclusive contract involving a cable-affiliated network (regardless of
whether it is terrestrially delivered or satellite-delivered) 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 also seek comment in the FNPRM on
revisions to the program access rules to ensure that buying groups
utilized by small and medium-sized MVPDs can avail themselves of these
rules.

A. Rebuttable Presumptions for Cable-Affiliated RSNs

1. We seek comment on whether to establish (i) a rebuttable
presumption that an exclusive contract for a cable-affiliated RSN
(regardless of whether it is terrestrially delivered or satellite-
delivered) is an ``unfair act'' under section 628(b); and (ii) a
rebuttable presumption that a complainant challenging an exclusive
contract involving a cable-affiliated RSN (regardless of whether it is
terrestrially delivered or satellite-delivered) is entitled to a
standstill of an existing programming contract for that RSN during the
pendency of a complaint.
1. Rebuttable Presumption That an Exclusive Contract for a Cable-
Affiliated RSN Is an ``Unfair Act''
2. As discussed above, under the case-by-case process for
complaints alleging that an exclusive contract violates section 628(b),
the complainant will have the burden of proving that the exclusive
contract at issue (i) is an ``unfair act'' and (ii) has the ``purpose
or effect'' of ``significantly hindering or preventing'' the
complainant from providing satellite cable programming or satellite
broadcast programming. With respect to the second element, the
Commission has established a rebuttable presumption that an exclusive
contract involving a satellite-delivered, cable-affiliated RSN has the
``purpose or effect'' of ``significantly hindering or preventing'' the
complainant from providing satellite cable programming or satellite
broadcast programming, as set forth in section 628(b). The Commission
established an identical presumption for terrestrially delivered,
cable-affiliated RSNs in the 2010 Program Access Order.
3. With respect to the first element (the ``unfair act'' element),
however, the Commission has not established a rebuttable presumption
that an exclusive contract involving a cable-affiliated RSN is an
``unfair act.'' In the 2010 Program Access Order, the Commission
established a categorical rule that all exclusive contracts involving
terrestrially delivered, cable-affiliated programming (regardless of
whether the programming qualifies as an RSN) are ``unfair'' under
section 628(b). The DC Circuit vacated this aspect of the 2010 Program
Access Order, holding that (i) just because Congress treated certain
acts involving satellite programming as ``unfair'' does not mean the
same acts are necessarily ``unfair'' in the context of terrestrial
programming; (ii) even with respect to satellite-delivered programming,
Congress established a sunset provision for the exclusivity ban and
allowed cable operators or cable-affiliated programmers to seek prior
approval to enter into an exclusive contract (neither

[[Page 66053]]

of which would apply to terrestrially delivered programming under the
2010 Program Access Order); and (iii) by labeling conduct ``unfair''
simply because it might in some circumstances negatively affect
competition in the video distribution market, the Commission failed to
consider whether it should treat conduct as ``unfair'' despite it being
procompetitive in a given instance. The court concluded that ``if the
Commission believes that conduct involving the withholding of
terrestrial programming should be treated as categorically unfair, as
opposed to assessing fairness on a case-by-case basis or perhaps
adopting a public interest exception mirroring the one for satellite
programming, then it must grapple with whether its definition of
unfairness would apply to conduct that appears procompetitive and, if
so, whether that result would comport with section 628.'' Consistent
with the court's decision, as demonstrated by the Verizon v. MSG/
Cablevision and AT&T v. MSG/Cablevision cases, the Commission to date
has elected to address whether challenged conduct, including an
exclusive contract, is ``unfair'' on a case-by-case basis.
4. We seek comment on whether to establish a rebuttable presumption
that an exclusive contract for a cable-affiliated RSN (regardless of
whether it is terrestrially delivered or satellite-delivered) is an
``unfair act'' under section 628(b). The D.C. Circuit has explained
that an evidentiary presumption is only permissible (i) ``if there is a
sound and rational connection between the proved and inferred facts''
and (ii) ``when proof of one fact renders the existence of another fact
so probable that it is sensible and timesaving to assume the truth of
[the inferred] fact * * * until the adversary disproves it.'' Would a
rebuttable presumption that an exclusive contract for a cable-
affiliated RSN is an ``unfair act'' under section 628(b) satisfy this
requirement? The Commission has held that determining whether
challenged conduct is ``unfair'' requires ``balancing the
anticompetitive harms of the challenged conduct against the
procompetitive benefits.'' What are the potentially procompetitive
benefits of an exclusive contract for a cable-affiliated RSN? How do
these potential benefits compare to the potentially anticompetitive
harms of an exclusive contract for a cable-affiliated RSN? We ask
commenters to provide evidence supporting their positions.
2. Rebuttable Presumption That a Complainant Challenging an Exclusive
Contract Involving a Cable-Affiliated RSN Is Entitled to a Standstill
5. As discussed above, the Commission in the 2010 Program Access
Order established a process whereby a complainant may seek a standstill
of an existing programming contract during the pendency of a complaint.
The complainant has the burden of proof to demonstrate how grant of the
standstill will meet the following four criteria: (i) The complainant
is likely to prevail on the merits of its complaint; (ii) the
complainant will suffer irreparable harm absent a stay; (iii) grant of
a stay will not substantially harm other interested parties; and (iv)
the public interest favors grant of a stay.
6. We seek comment on whether to establish a rebuttable presumption
that a complainant challenging an exclusive contract involving a cable-
affiliated RSN (regardless of whether it is terrestrially delivered or
satellite-delivered) is entitled to a standstill of an existing
programming contract for that RSN during the pendency of a complaint.
Would such a rebuttable presumption meet the requirements for
establishing such a presumption as set forth by the D.C. Circuit
described above? Would this rebuttable presumption meet the
requirements set forth by the D.C. Circuit only if we also establish a
rebuttable presumption that an exclusive contract for a cable-
affiliated RSN is an ``unfair act'' under section 628(b)? Are the
rebuttable presumptions applicable to the ``unfair act'' (if adopted)
and ``significant hindrance'' elements of a section 628(b) claim
rationally related only to the ``likelihood to prevail on the merits''
prong of the four-part test for a standstill? What basis would there be
for rationally presuming the other three elements of the test for a
standstill (irreparable harm, no significant harm to other parties, and
public interest) for purposes of establishing a standstill presumption
for claims involving cable-affiliated RSNs? We ask commenters to
provide evidence supporting their positions.

B. Other Rebuttable Presumptions

1. Rebuttable Presumptions for Exclusive Contracts Involving Cable-
Affiliated National Sports Networks
7. We seek comment on whether to establish rebuttable presumptions
with respect to the ``unfair act'' element and/or the ``significant
hindrance'' element of a section 628(b) claim challenging an exclusive
contract involving a cable-affiliated ``national sports network''
(regardless of whether it is terrestrially delivered or satellite-
delivered). How should the Commission define a ``national sports
network''? What cable-affiliated national sports networks exist today?
Would these rebuttable presumptions meet the requirements for
establishing such presumptions as set forth by the D.C. Circuit
described above? On what basis can the Commission conclude that these
networks have no good substitutes, are important for competition, and
are non-replicable, as the Commission has found with respect to RSNs?
We ask that commenters provide reliable, empirical data supporting
their positions and address Commission precedent.\1\ We also request
comment on whether and how these rebuttable presumptions would be
consistent with the First Amendment. To the extent we adopt these
rebuttable presumptions, should we also adopt a rebuttable presumption
that a complainant challenging an exclusive contract involving a cable-
affiliated national sports network (regardless of whether it is
terrestrially delivered or satellite-delivered) is entitled to a
standstill of an existing programming contract for that network during
the pendency of a complaint?
---------------------------------------------------------------------------

\1\ See 2010 Program Access Order, 25 FCC Rcd at 777 n.182
(discussing exclusive arrangements for ``out-of-market, non-regional
sports programming'' and concluding that commenters ``failed to
provide evidence in the record of this proceeding of any harm to
competition resulting from these arrangements''); 2007 Extension
Order, 22 FCC Rcd at 17843 n.380 (discussing national sports
programming and concluding that ``[u]nlike in the case of cable-
affiliated regional sports programming, we have no evidence that the
inability to access this sports programming has impacted MVPD
subscribership'').
---------------------------------------------------------------------------

2. Rebuttable Presumption for Previously Challenged Exclusive Contracts
8. We seek comment on whether the Commission should establish a
rebuttable presumption that, once a complainant succeeds in
demonstrating that an exclusive contract involving a cable-affiliated
network (regardless of whether it is terrestrially delivered or
satellite-delivered) 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)). While we sought
comment on this issue in the NPRM in MB Docket No. 12-68, we concluded
that the record on this issue was not sufficiently developed. Would
this rebuttable presumption meet the requirements for establishing such
a presumption as set forth by the D.C. Circuit described above? Is
there a reasonable basis for

[[Page 66054]]

presuming liability based on a prior determination of a section 628(b)
violation involving the same network? How would differences among
complainants (e.g., differences in the complainants' market power) or
changing circumstances over time (e.g., whether the network continues
to carry the same highly coveted content) impact such a presumption? If
we establish such a rebuttable presumption, should it be time limited?
If we establish such a rebuttable presumption, should it apply if the
complaints concern the same network but different geographic markets?

C. Buying Groups

9. We also solicit comment on possible modifications to the program
access rules relating to buying groups. ACA filed comments in this
proceeding asserting that revisions to the program access rules are
needed to ensure that buying groups utilized by small and medium-sized
MVPDs can avail themselves of the program access rules. ACA seeks three
modifications to the program access rules: (i) revision of the
definition of ``buying group'' to accurately reflect the level of
liability assumed by buying groups under current industry practices;
(ii) establishment of standards for the right of buying group members
to participate in their group's master licensing agreements; and (iii)
establishment of a standard of comparability for a buying group
regarding volume discounts. In addition to seeking comment on ACA's
proposed modifications, we propose to revise our definition of ``buying
group'' to provide that a buying group may not unreasonably deny
membership to any MVPD requesting membership.
1. Definition of ``Buying Group''
10. As ACA explains, buying groups play an important role in the
market for video programming distribution, both for small and medium-
sized MVPDs and for programmers. A buying group negotiates master
agreements with video programmers that its MVPD members can opt into
and then acts as an interface between its members and the programmers
so that the programmers are able to deal with a single entity. Thus, a
buying group is generally able to obtain lower license fees for its
members than they could obtain through direct deals with the
programmers and lower transaction costs for programmers by enabling
them to deal with a single entity, rather than many individual MVPDs,
for their negotiations and fee collections. Because small and medium-
sized MVPDs rely on buying groups as the primary means by which they
purchase their programming, ACA asserts that small and medium-sized
MVPDs are protected under the program access rules only to the extent
that buying groups are given the same protection in their dealings with
cable-affiliated programmers as individual MVPDs are given. ACA notes
that Congress, recognizing small MVPDs' reliance on buying groups,
explicitly extended the non-discrimination protections of section
628(c)(2)(B) of the Act to buying groups.\2\ The Commission likewise
extended the protections of the non-discrimination provision of the
program access rules to buying groups by including ``buying groups''
within the definition of ``multichannel video programming distributor''
set forth in Sec. 76.1000(e) of the Commission's program access rules.
---------------------------------------------------------------------------

\2\ The legislative history of section 628(c)(2)(B) also
reflects Congress's intent to afford small MVPDs that purchase
programming through buying groups the same protection against
discrimination as other MVPDs. See S. Rep. No. 102-92, at 25 (1991),
reprinted in 1992 U.S.C.C.A.N. 1133, 1160 (``To address the
complaints of small cable operators that cable programmers will not
deal with them or will unreasonably discriminate against them in the
sale of programming, the legislation requires vertically integrated,
national cable programmers to make programming available to all
cable operators and their buying agents on similar price, terms, and
conditions.''); H.R. Conf. Rep. No. 102-862, at 91 (1992), reprinted
in 1992 U.S.C.C.A.N. 1231, 1273 (``National and regional programmers
affiliated with cable operators are required by the Senate bill to
offer their programming to buying groups on terms similar to those
offered to cable operators.'').
---------------------------------------------------------------------------

11. Although Congress did not define the term ``buying group,'' the
Commission has adopted a definition for this term. Section 76.1000(c)
of the Commission's rules sets forth the requirements that an entity
must satisfy in order to be considered a ``buying group'' eligible to
avail itself of the non-discrimination protections afforded to MVPDs
under the program access rules. One of these requirements pertains to
the liability of the buying group or its members to the programmer for
payments. The Commission has established three alternative ways for the
buying group to satisfy this requirement. First, the entity seeking to
qualify as a ``buying group'' may agree ``to be financially liable for
any fees due pursuant to a * * * programming contract which it signs as
a contracting party as a representative of its members'' (the ``full
liability'' option). Second, the members of the buying group, as
contracting parties, may agree to joint and several liability (the
``joint and several liability'' option). Third, the entity seeking to
qualify as a ``buying group'' may maintain liquid cash or credit
reserves equal to the cost of one month of programming fees for all
buying group members and each member of the buying group must remain
liable for its pro rata share (the ``cash reserve'' option).\3\
---------------------------------------------------------------------------

\3\ ACA notes that the changes to Sec. 76.1000(c)(1) to reflect
the ``cash reserve'' option were not included in the 1998 Program
Access Order and that a subsequent Erratum making the relevant
changes to Sec. 76.1000(c)(1) was not published in the Federal
Register. While ACA notes that, as a result, the changes to Sec.
76.1000(c)(1) to reflect the ``cash reserve'' option are not
reflected in the Code of Federal Regulations, a summary of the 1998
Program Access Order, including a discussion of the ``cash reserve''
option, was published in the Federal Register and is thus a binding
rule. See Development of Competition and Diversity in Video
Programming Distribution and Carriage, 63 FR 45740-02, 45742 (1998).
---------------------------------------------------------------------------

12. ACA asserts that none of these alternative liability options
reflects current industry practice. First, with respect to the ``full
liability'' option, ACA asserts that buying groups, such as the
National Cable Television Cooperative (``NCTC''),\4\ never assume full
liability for the contractual commitment that each member company makes
when it opts into a master agreement. Rather, NCTC's obligation is
limited to forwarding any payments that are received from members to
the programmer and notifying the programmer of any default by one of
its members. Additionally, NCTC's general practice is to deal with
delinquent members by terminating their membership and thus all of the
master agreements of the delinquent member. Second, with respect to the
``joint and several liability'' option, ACA notes that NCTC found this
option impracticable because it would interfere with some members' loan
covenants as to debt and result in fewer MVPDs being able to
participate in NCTC master agreements. Third, with respect to the
``cash reserve'' option, ACA notes that NCTC's standard practice in its
early years was to require its members to deposit 30 days of payments
into an escrow account when they opted into a master agreement, but
programmers and NCTC eventually decided this protection was
unnecessary.
---------------------------------------------------------------------------

\4\ NCTC is a buying group with approximately 910 member
companies representing approximately 25 million MVPD subscribers.
NCTC's members vary widely in size, from a few dozen subscribers to
several million subscribers. More than half of NCTC's 910 members
have fewer than 1,000 subscribers, while a little over 100 of its
members have more than 10,000 subscribers. In addition to
negotiating the rates, terms, and conditions of master agreements
with programmers, NCTC acts as an interface for all billing and
collection activities between its member companies and the
programmer.
---------------------------------------------------------------------------

13. According to ACA, programmers have widely accepted NCTC's
current business model, including the reduced level of liability that
NCTC assumes

[[Page 66055]]

under a master agreement. Because the existing definition of ``buying
group'' does not conform to these widely accepted practices, ACA
asserts that NCTC is effectively barred from bringing a program access
complaint concerning a master agreement on behalf of its member
companies. ACA accordingly recommends that the Commission modernize the
definition of ``buying group'' in Sec. 76.1000(c)(1) by adding, as an
alternative to the existing liability options, a requirement that the
entity seeking to qualify as a ``buying group'' assumes liability to
forward all payments due and received from its members for payment
under a master agreement to the appropriate programmer.
14. Based on ACA's comments, it appears that our existing
definition of ``buying group'' set forth in Sec. 76.1000(c)(1) does
not reflect accepted industry practices and thus may have the
unintended effect of barring some buying groups from availing
themselves of the protections of the non-discrimination provision of
the program access rules, in contravention of Congress's express intent
in enacting section 628(c)(2)(B) of the Act. We tentatively conclude
that we should revise Sec. 76.1000(c)(1) to require, as an alternative
to the current liability options, that the buying group agree to assume
liability to forward all payments due and received from its members for
payment under a master agreement to the appropriate programmer.\5\ We
seek comment on this tentative conclusion. We also seek comment on
whether NCTC's practices in terms of the level of liability it assumes
under a master agreement are consistent with that of other buying
groups. To the extent that the practices of other buying groups differ,
how do they differ?
---------------------------------------------------------------------------

\5\ As discussed above, the changes to Sec. 76.1000(c)(1) to
reflect the ``cash reserve'' option adopted in the 1998 Program
Access Order are not reflected in the Code of Federal Regulations.
We intend to conform Sec. 76.1000(c)(1) as amended in this
proceeding to the amendment previously adopted in the 1998 Program
Access Order.
---------------------------------------------------------------------------

15. We note that the Commission adopted the liability options in
Sec. 76.1000(c)(1) to address concerns about the creditworthiness and
financial stability of buying groups and protect programmers from
excessive financial risk. We do not believe that revising the
definition of buying group as discussed above would subject programmers
to greater financial risk when contracting with a buying group than
they would be when contracting with an individual MVPD. According to
ACA, if an individual MVPD defaults on its payments for programming, a
programmer may attempt to require the MVPD to continue making payments
over the life of the agreement, or it may cease delivery of the
programming to the MVPD. ACA states that the programmer's legal rights
are the same regardless of whether the defaulting MVPD has purchased
service on an individual basis or through a buying group. Moreover, we
note that NCTC's general practice of terminating membership, and thus
all of the master agreements, of a delinquent member, may reduce the
risk of delinquency, which could provide the programmer greater
protection than when dealing with an individual MVPD. We invite
commenters to address whether the proposed revision to the buying group
definition sufficiently protects programmers from financial risks in
dealing with buying groups. If not, what additional measures are needed
to protect programmers from financial risk? Should we codify NCTC's
practice of terminating membership and all of the master agreements of
a delinquent member? Do other buying groups utilize this same practice?
16. We further propose to revise the definition of ``buying group''
to provide that a buying group may not unreasonably deny membership to
any MVPD requesting membership. As ACA submits, ``[b]uying groups play
an extremely important role in today's marketplace, for both small and
medium-sized MVPDs,'' because they provide ``significantly lower
license fees for [their] members than these MVPDs could obtain through
direct deals with programmers.'' Although a buying group would
presumably benefit from increasing its membership in order to obtain
better deals from programmers, we are aware of allegations in recent
years that NCTC has denied membership to certain MVPDs. In light of the
significance of buying groups in the marketplace today and Congress's
recognition of the importance of buying groups for small MVPDs, we
propose to require that a ``buying group'' eligible to receive the
benefits of the non-discrimination provision of the program access
rules may not unreasonably deny membership to any MVPD requesting
membership. Under this proposal, a buying group would not be required
to accept all members. Rather, it would only be prohibited from
``unreasonably'' denying membership. For example, if an MVPD seeking
membership has a history of defaulting on its payments for programming,
or if there are legitimate antitrust reasons for denying membership to
a particular MVPD, then the buying group's denial of membership would
not be ``unreasonable.'' Upon being denied membership, an MVPD could
file a Petition for Declaratory Ruling that the buying group no longer
qualifies as a ``buying group'' as defined in Sec. 76.1000(c) because
it has ``unreasonably'' denied the MVPD membership. The central issue
in the Declaratory Ruling proceeding would be whether the buying
group's conduct in denying membership was ``unreasonable.'' If the
Commission finds that the buying group's conduct was ``unreasonable,''
the buying group would no longer be eligible to receive the benefits of
the non-discrimination provision of the program access rules. We seek
comment on this proposal.
17. We invite commenters to discuss the potential costs and
benefits of each of the proposed revisions of the buying group
definition. To the extent possible, we encourage commenters to quantify
any costs and benefits and submit supporting data. Commenters that
propose an alternative approach should similarly provide data regarding
the costs and benefits of the alternative approach.
2. Participation of Buying Group Members in Master Agreements
18. ACA also urges the Commission to revise the program access
rules to prohibit cable-affiliated programmers from unreasonably
preventing particular members of a buying group from opting into a
master agreement. ACA contends that, while the program access rules
prohibit unfair methods of competition and discriminatory practices,
including selective refusals to license, these rules do not explicitly
restrain the ability of a cable-affiliated programmer to unreasonably
prevent particular members of a buying group from participating in a
master agreement, even if the member normally purchases a substantial
share of its programming from the buying group. ACA asserts that if a
cable-affiliated programmer had the right to arbitrarily exclude any
buying group member that it wished from a master agreement, the
requirement that cable-affiliated programmers negotiate non-
discriminatory agreements with buying groups could be rendered
meaningless.
19. To remedy its concern, ACA recommends that the Commission adopt
clear and easily verifiable standards for determining when a buying
group member is presumptively allowed to participate in a master
agreement with a cable-affiliated programmer. Specifically, ACA
suggests that the Commission establish a ``safe harbor'' subscriber
level for buying group

[[Page 66056]]

member MVPDs to participate in a master agreement. Under ACA's proposed
approach, a buying group member MVPD with no more than the ``safe
harbor'' number of subscribers would be presumptively entitled to
participate in master agreements between the programmer and the buying
group. A buying group member MVPD which has more than the safe harbor
number of subscribers would also be entitled to participate if it
demonstrates that it incurs some specified minimum share of its total
expenditures on programming through the buying group. Further, when an
expiring master agreement is up for renewal, buying group members
participating in the expiring agreement would have the right to
participate in the renewed agreement. ACA states that, as a consequence
of this safe harbor, it would be a violation of the section
628(c)(2)(B) prohibition on discriminatory practices for a cable-
affiliated programmer to refuse to deal with a buying group member that
regularly participates in a master agreement. Although not mentioned by
ACA, consistent with section 628(c)(2)(B), a cable-affiliated
programmer could refuse to deal with a buying group member for a
legitimate business reason, such as the distributor's history of
defaulting on other programming contracts.
20. We seek comment generally on the need for a safe harbor for
buying group participation in master agreements and, more specifically,
on ACA's proposed safe harbor. Although several commenters make
generalized allegations that cable-affiliated programmers have excluded
particular buying group members from participating in master agreements
negotiated with the buying group, we have not received information
regarding specific instances in which such exclusions have occurred. We
seek detailed information on the extent to which the exclusion of
particular buying group members from participation in master agreements
has occurred in the past or is occurring now. To the extent that some
buying group members are being excluded from participating in master
agreements, why are they being excluded?
21. If we determine that it is necessary to establish a safe harbor
for buying group participation in master agreements, what subscriber
level should we establish as the safe harbor? ACA suggests that we set
the safe harbor subscriber number at 3 million subscribers. Is this an
appropriate safe harbor subscriber number? Commenters that recommend a
specific safe harbor subscriber number should explain the basis for
their recommendation. Further, under ACA's suggested approach, a buying
group member with more than the safe harbor number of subscribers would
be entitled to participate in a master agreement if it demonstrates
that it incurs some specified minimum share of its total expenditures
on programming through the buying group. What minimum share of
programming expenditures should such a buying group member have to
incur through the buying group in order to be entitled to participate
in a master agreement and over what period of time? ACA suggests that
we require a buying group member with more than the safe harbor number
of subscribers to demonstrate that the share of programming that it
licenses through the buying group is not significantly smaller than the
average share of programming that other buying group members license
through the buying group. We seek comment on this proposal. What share
of programming should be considered ``significantly smaller'' than the
average share for purposes of this proposal? Over what period of time
should we measure the ``average share'' of programming that other
buying group members license through the buying group? In addition, we
seek comment on ACA's proposal that, when an expiring master agreement
is up for renewal, buying group members participating in the expiring
agreement would have the right to participate in the renewed agreement.
We also invite commenters to suggest any alternatives to ACA's proposed
safe harbors and explain why the alternative is preferable or less
burdensome. For example, would it be preferable to simply require that,
if a cable-affiliated programmer enters into a master agreement with a
buying group, all buying group members have a right to participate in
the master agreement? What are the potential costs and benefits of
ACA's safe harbor approach and any alternative proposals? Commenters
should quantify any potential costs and benefits to the extent possible
and provide supporting data.
3. Standard of Comparability for Buying Groups Regarding Volume
Discounts
22. The Commission has explained that a complainant MVPD alleging
program access discrimination must make a prima facie showing that
there is a difference between the rates, terms, or conditions charged
or offered by a cable-affiliated programmer to the complainant MVPD and
to a ``competing distributor.'' The Commission has explained that
buying groups that are ``fundamentally national in operation'' may make
a comparison to the rates, terms, or conditions charged or offered by a
cable-affiliated programmer to a ``national competitor.'' Once the
complainant MVPD establishes a prima facie case of discrimination, the
defendant programmer must demonstrate that the difference in prices,
terms, and conditions is justified by the four factors set forth in
section 628(c)(2)(B)(i)-(iv) of the Act. One of those factors allows
programmers to use volume-related justifications to establish price
differentials. If the programmer believes that the complainant MVPD and
the ``competing distributor'' are not sufficiently similar, and thus
cannot be realistically compared, it can state its reasons for this
conclusion and submit an alternative contract for comparison with
another more ``similarly situated'' alternative MVPD. The Commission's
rules provide that the analysis of whether an alternative MVPD is
properly comparable to the complainant includes consideration of, but
is not limited to, the following factors: (i) Whether the alternative
MVPD operates within a geographic region proximate to the complainant;
(ii) whether the alternative MVPD has roughly the same number of
subscribers as the complainant; and (iii) whether the alternative MVPD
purchases a similar service as the complainant. Moreover, the
Commission's rules provide that the alternative MVPD ``must use the
same distribution technology as the `competing' distributor with whom
the complainant seeks to compare itself.''
23. ACA proposes that we amend our rules to clarify that the
standard to be applied in determining whether buying groups are being
discriminated against is the same as that applied to an individual MVPD
providing the same number of subscribers to the programmer. In other
words, ACA states, for purposes of determining whether prices offered
to a buying group are discriminatory, the buying group should be
considered ``similarly situated'' to an individual MVPD offering the
programmer the same number of subscribers. According to ACA, ``the
utility of the program access rules has been dramatically undercut for
buying groups because the Commission has never established a clear
standard upon which a buying group is to be compared for purposes of
determining whether it is being discriminated against by a cable-
affiliated programmer.''
24. We invite comment on ACA's proposal. In particular, we seek
comment on whether and how any perceived lack of clarity regarding the
standard of comparability for buying groups has affected negotiations

[[Page 66057]]

between buying groups and cable-affiliated programmers on volume
discounts or has discouraged buying groups from filing program access
complaints. We note, in this regard, that neither section 628 nor the
Commission's rules distinguish between individual MVPDs and buying
groups in describing the justifications for volume discounts.
Therefore, it is arguably already clear that a buying group would be
compared to an individual MVPD providing the same number of subscribers
to the programmer. Moreover, in the 1993 Program Access Order, the
Commission established the conditions that a buying group must meet
``in order to benefit from treatment as a single entity for purposes of
subscriber volume.'' The Commission therein stated that ``[v]endors can
extend [to buying groups] the same volume discounts based on number of
subscribers that they would ordinarily extend to single entities of
comparable size provided that such discounts are offered in a
nondiscriminatory fashion.'' Thus, to the extent that we adopt the
revised definition of ``buying group'' proposed by ACA, we seek comment
on whether it is also necessary to revise the rules to establish an
explicit standard of comparability. Are there differences between
individual MVPDs and buying groups that would argue against the
standard of comparability advocated by ACA? As discussed above, the
Commission's analysis of whether MVPDs are ``similarly situated'' for
purposes of a program access discrimination complaint extends beyond
consideration of whether MVPDs offer roughly the same number of
subscribers to include other factors, such as the geographic region
where the MVPDs operate, the services purchased, and the date of their
contracts with the defendant programmer. What impact, if any, do these
and other factors have on the standard of comparability advocated by
ACA?
25. Moreover, as discussed above, a complainant MVPD alleging
program access discrimination must make a prima facie showing of a
differential in the price, terms, or conditions offered or charged to
the complainant MVPD and to a ``competing distributor.'' In the case of
a national buying group, the comparison is made to a ``national
competitor.'' We seek comment on how this requirement impacts
discrimination complaints brought by national buying groups and how, if
at all, this requirement should be modified for discrimination
complaints filed by national buying groups. For example, are there any
``national competitors,'' other than DBS operators, to which a national
buying group can make a comparison? If only a DBS operator qualifies as
a ``national competitor,'' but a defendant programmer believes that a
DBS operator is not comparable to the national buying group, the
defendant programmer may submit an alternative contract for comparison
with another more ``similarly situated'' alternative MVPD. As discussed
above, however, the Commission's rules provide that the alternative
MVPD ``must use the same distribution technology as the `competing'
distributor with whom the complainant seeks to compare itself.'' If
only a DBS operator can qualify as a ``competing distributor'' for a
national buying group, does this limit the alternative MVPDs that can
qualify as ``similarly situated'' to only other DBS operators?
26. ACA further proposes that we make clear that a cable-affiliated
programmer cannot refuse to offer a master agreement to a buying group
that specifies a schedule of non-discriminatory license fees over any
range of subscribership levels that the buying group requests, so long
as it is possible that the buying group could provide this number of
subscribers from its current members eligible to participate in the
master agreement. Under this proposal, a cable-affiliated programmer
would violate section 628(c)(2)(B)'s prohibition on discriminatory
practices if it fails or refuses to offer a non-discriminatory schedule
of prices based on the number of subscribers that members of the buying
group could provide if they chose to opt into the master agreement. ACA
explains that under the current NCTC model, NCTC negotiates the deal
with the programmer and then its members decide whether to opt into the
deal. Thus, at the time of negotiation, neither NCTC nor the programmer
knows exactly which NCTC members will take their programming through
NCTC--and therefore neither party knows the precise number of
subscribers that NCTC will provide. ACA maintains that its proposal
``will solve the `chicken and egg' problem that might occur if certain
members of a buying group are unwilling to opt into a master agreement
because license fees are too high, even though the license fees would
go down if the members decided to opt in.'' We seek comment on the
benefits and burdens of ACA's proposal. To what extent has the
``chicken and egg'' problem described above hampered negotiations
between buying groups and programmers? If, at the time of negotiation,
neither the buying group nor the programmer knows precisely which
buying group members will participate in the agreement, how are volume
discounts calculated for buying groups? Has past participation been a
reliable indicator of which buying group members are likely to opt into
a master agreement? Additionally, we seek comment on whether the
Commission has the authority under section 628 or some other provision
of the Act to require programmers to provide buying groups generally
applicable rate schedules for differing subscribership levels.
27. Finally, we seek comment on ACA's request that we clarify that
the standard of comparability applies for purposes of evaluating all
terms and conditions of the agreement, not just the price. As discussed
above, to the extent that we adopt the revised definition of ``buying
group'' proposed by ACA, is this proposed clarification necessary? We
also invite commenters to analyze the potential costs and benefits of
each of ACA's proposals relating to the standard of comparability for
buying groups, as well as any alternative proposals, quantify any costs
and benefits of the proposals to the extent possible, and submit
appropriate supporting data.

II. Procedural Matters

A. Initial Regulatory Flexibility Act Analysis

28. 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 Further Notice of Proposed Rulemaking (``FNPRM'').
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 FNPRM specified supra. The Commission will send a
copy of the FNPRM, including this IRFA, to the Chief Counsel for
Advocacy of the Small Business Administration (``SBA''). In addition,
the FNPRM and IRFA (or summaries thereof) will be published in the
Federal Register.
Need for, and Objectives of, the Proposed Rule Changes
29. We seek comment in the FNPRM on whether to establish a
rebuttable presumption that an exclusive contract for a cable-
affiliated Regional Sports Network (``RSN'') (regardless of whether it
is terrestrially delivered or satellite-delivered) is an ``unfair act''
under

[[Page 66058]]

section 628(b) of the Communications Act of 1934, as amended (the
``Act''). Under the case-by-case process for complaints alleging that
an exclusive contract violates section 628(b), the complainant has the
burden of proving that the exclusive contract at issue (i) is an
``unfair act'' and (ii) has the ``purpose or effect'' of
``significantly hindering or preventing'' the complainant from
providing satellite cable programming or satellite broadcast
programming. With respect to the second element, the Commission has
established a rebuttable presumption that an exclusive contract
involving a cable-affiliated RSN has the ``purpose or effect'' of
``significantly hindering or preventing'' the complainant from
providing satellite cable programming or satellite broadcast
programming, as set forth in section 628(b). With respect to the first
element (the ``unfair act'' element), however, the Commission has not
established a rebuttable presumption that an exclusive contract
involving a cable-affiliated RSN is an ``unfair act.'' The FNPRM seeks
comment on whether to establish this rebuttable presumption.
30. We also seek comment in the FNPRM on whether to establish a
rebuttable presumption that a complainant challenging an exclusive
contract involving a cable-affiliated RSN (regardless of whether it is
terrestrially delivered or satellite-delivered) is entitled to a
standstill of an existing programming contract during the pendency of a
complaint. The Commission previously established a process whereby a
complainant may seek a standstill of an existing programming contract
during the pendency of a complaint. The complainant has the burden of
proof to demonstrate how grant of the standstill will meet the
following four criteria: (i) The complainant is likely to prevail on
the merits of its complaint; (ii) the complainant will suffer
irreparable harm absent a stay; (iii) grant of a stay will not
substantially harm other interested parties; and (iv) the public
interest favors grant of a stay. The FNPRM seeks comment on whether to
establish a rebuttable presumption that a complainant is entitled to a
standstill when challenging an exclusive contract involving a cable-
affiliated RSN.
31. The FNPRM also seeks comment on whether to establish rebuttable
presumptions with respect to the ``unfair act'' element and/or the
``significant hindrance'' element of a section 628(b) claim challenging
an exclusive contract involving a cable-affiliated ``national sports
network'' (regardless of whether it is terrestrially delivered or
satellite-delivered). We also seek comment in the FNPRM on whether the
Commission should establish a rebuttable presumption that, once a
complainant succeeds in demonstrating that an exclusive contract
involving a cable-affiliated network (regardless of whether it is
terrestrially delivered or satellite-delivered) 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)).
32. We also solicit comment on modifications to the program access
rules relating to buying groups proposed by the American Cable
Association (``ACA'') in its comments on the Notice of Proposed
Rulemaking in MB Docket Nos. 12-68, 07-18, and 05-182. ACA asserts that
revisions to the program access rules are needed to ensure that buying
groups utilized by small and medium-sized multi-channel video
programming distributors (``MVPDs'') can avail themselves of the non-
discrimination protections of the program access rules. ACA seeks three
modifications to the program access rules: (i) The revision of the
definition of ``buying group'' to accurately reflect the level of
liability assumed by buying groups under current industry practices;
(ii) the establishment of standards for the right of buying group
members to participate in their group's master licensing agreements;
and (iii) the establishment of a standard of comparability for a buying
group regarding volume discounts. In addition to ACA's proposed
modifications, we propose to revise our definition of ``buying group''
to provide that a buying group may not unreasonably deny membership to
any MVPD requesting membership.
33. Buying groups play an important role in the market for video
programming distribution, both for small and medium-sized MVPDs and for
programmers. A buying group negotiates master agreements with video
programmers that its MVPD members can opt into and then acts as an
interface between its members and the programmers so that the
programmers are able to deal with a single entity. Thus, a buying group
is generally able to obtain lower license fees for its members than
they could obtain through direct deals with the programmers, and lower
transaction costs for programmers by enabling them to deal with a
single entity, rather than many individual MVPDs, for their
negotiations and fee collections. Because small and medium-sized MVPDs
rely on buying groups as the primary means by which they purchase their
programming, small and medium-sized MVPDs are only protected under the
program access rules to the extent that buying groups are given the
same protection in their dealings with cable-affiliated programmers as
individual MVPDs are given. The non-discrimination protections of
section 628(c)(2)(B) of the Communications Act of 1934, as amended (the
``Act'') explicitly apply to buying groups. Further, the Commission's
rules extend the non-discrimination protections of the program access
rules to buying groups by including ``buying groups'' within the
definition of ``multichannel video programming distributor'' set forth
in Sec. 76.1000(e) of the Commission's rules.
34. Section 76.1000(c) of the Commission's rules sets forth the
requirements that an entity must satisfy in order to be considered a
``buying group'' for purposes of the definition of ``multichannel video
programming distributor'' in Sec. 76.1000(e)--that is, to avail itself
of the non-discrimination protections afforded to MVPDs under the
program access rules. One of these requirements pertains to the
liability of the buying group or its members to the programmer for
payments. The Commission has established three alternatives ways for
the buying group to satisfy this requirement. First, the entity seeking
to qualify as a ``buying group'' may agree ``to be financially liable
for any fees due pursuant to a * * * programming contract which it
signs as a contracting party as a representative of its members'' (the
``full liability'' option). Second, the members of the buying group, as
contracting parties, may agree to joint and several liability (the
``joint and several liability'' option). Third, the entity seeking to
qualify as a ``buying group'' may maintain liquid cash or credit
reserves equal to the cost of one month of programming fees for all
buying group members and each member of the buying group must remain
liable for its pro rata share (the ``cash reserve'' option).
35. ACA asserts that none of these alternative liability options
reflect current industry practice. First, with respect to the ``full
liability'' option, ACA asserts that buying groups, such as the
National Cable Television Cooperative (``NCTC''), never assume full
liability for the contractual commitment that each member company makes
when it opts into a master agreement. Rather, NCTC's obligation is
limited to forwarding any payments that are received from members to
the programmer and notifying the programmer of any default

[[Page 66059]]

by one of its members. Second, with respect to the ``joint and several
liability'' option, ACA notes that NCTC found this option impracticable
because it would interfere with some members' loan covenants as to debt
and result in fewer MVPDs being able to participate in NCTC master
agreements. Third, with respect to the ``cash reserve'' option, ACA
states that NCTC's standard practice in its early years was to require
its members to deposit 30 days of payments into an escrow account when
they opted into a master agreement, but programmers and NCTC eventually
decided this protection was unnecessary.
36. According to ACA, programmers have widely accepted NCTC's
current business model, including the reduced level of liability that
NCTC assumes under a master agreement. Because the existing definition
of ``buying group'' does not conform to these widely accepted
practices, ACA asserts that NCTC is effectively barred from bringing a
program access complaint concerning a master agreement on behalf of its
member companies. ACA accordingly recommends that the Commission
modernize the definition of ``buying group'' in Sec. 76.1000(c)(1) by
adding, as an alternative to the existing liability options, a
requirement that the entity seeking to qualify as a ``buying group''
assumes liability to forward all payments due and received from its
members for payment under a master agreement to the appropriate
programmer.
37. In the FNPRM, we tentatively conclude that we should revise
Sec. 76.1000(c)(1) to require, as an alternative to the current
liability options, that the buying group agree to assume liability to
forward all payments due and received from its members for payment
under a master agreement to the appropriate programmer. In light of the
significance of buying groups in the marketplace today and Congress's
recognition of the importance of buying groups for small MVPDs, we
further propose to revise the definition of ``buying group'' to provide
that a buying group may not unreasonably deny membership to any MVPD
requesting membership.
38. In addition, we seek comment on ACA's proposal that we
establish a ``safe harbor'' subscriber level for buying group members
to participate in a master agreement negotiated with a cable-affiliated
programmer. Under ACA's proposed approach, a buying group member MVPD
with no more than three million subscribers would be presumptively
entitled to participate in master agreements between the programmer and
the buying group. A buying group member MVPD which has more than the
safe harbor number of subscribers would also be entitled to participate
if it demonstrates that it incurs some specified minimum share of its
total expenditures on programming through the buying group. Further,
when an expiring master agreement is up for renewal, buying group
members participating in the expiring agreement would have the right to
participate in the renewed agreement. As a consequence of this safe
harbor, it would be a violation of the section 628(c)(2)(B) prohibition
on discriminatory practices for a cable-affiliated programmer to refuse
to deal with a buying group member that regularly participates in a
master agreement.
39. Finally, we seek comment on ACA's proposals that we revise the
rules to clarify that: (i) The standard to be applied in determining
whether buying groups are being discriminated against is the same as
that applied to an individual MVPD providing the same number of
subscribers to the programmer; (ii) a cable-affiliated programmer
cannot refuse to offer a master agreement to a buying group that
specifies a schedule of non-discriminatory license fees over any range
of subscribership levels that the buying group requests, so long as it
is possible that the buying group could provide this number of
subscribers from its current members eligible to participate in the
master agreement; and (iii) the standard of comparability for a buying
group is an MVPD providing the same number of customers for purposes of
evaluating all terms and conditions of the agreement, not just the
price.
Legal Basis
40. 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
41. 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 herein. 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
Small Business Administration (SBA). Below, we provide a description of
such small entities, as well as an estimate of the number of such small
entities, where feasible.
42. 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.
43. 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

[[Page 66060]]

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.
44. 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 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.
45. 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.
46. 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 DISH Network).
Each currently offers subscription services. DIRECTV and DISH Network
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.
47. 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.
48. 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.
49. 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

[[Page 66061]]

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 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.
50. 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.
51. 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.
52. 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 approximately 42 OVS operators, with some now providing
service. Broadband service providers (``BSPs'') are currently the only
significant holders of OVS certifications or local OVS franchises.
Affiliates of Residential Communications Network, Inc. (``RCN'')
received approval to operate OVS systems in New York City, Boston,
Washington, DC, and other areas. RCN has sufficient revenues to assure
that they do not qualify as a small business entity. The Commission
does not have financial or employment information regarding the other
entities authorized to provide OVS, some of which may not yet be
operational. Thus, up to 41 of the OVS operators may qualify as small
entities.
53. 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
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.
54. 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

[[Page 66062]]

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.
55. 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 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. According to Commission data,
1,307 carriers reported that they were incumbent local exchange service
providers. Of these 1,307 carriers, an estimated 1,006 have 1,500 or
fewer employees and 301 have more than 1,500 employees. Thus, under
this category and the associated small business size standard, the
majority of these firms can be considered small.
56. 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.
57. 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.
58. 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
59. Certain proposed rule changes discussed in the FNPRM would
affect reporting, recordkeeping, or other compliance requirements. The
FNPRM seeks comment on whether to establish (i) a rebuttable
presumption that an exclusive contract for a cable-affiliated RSN
(regardless of whether it is terrestrially delivered or satellite-
delivered) is an ``unfair act'' under section 628(b); (ii) a rebuttable
presumption that a complainant challenging an exclusive contract
involving a cable-affiliated RSN (regardless of whether it is
terrestrially delivered or satellite-delivered) is entitled to a
standstill of an existing programming contract during the pendency of a
complaint; (iii) rebuttable presumptions with respect to the ``unfair
act'' element and/or the ``significant hindrance'' element of a section
628(b) claim challenging an exclusive contract involving a cable-
affiliated ``national sports network'' (regardless of whether it is
terrestrially delivered or satellite-delivered); and (iv) a rebuttable
presumption that, once a complainant succeeds in demonstrating that an
exclusive contract involving a cable-affiliated network (regardless of
whether it is terrestrially delivered or satellite-delivered) 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)). The FNPRM tentatively concludes that the
Commission should revise definition of ``buying group'' to require, as
an alternative to the current liability options, that the buying group
agree to assume liability to forward all payments due and received from
its members for payment under a master agreement to the appropriate
programmer. The FNPRM also proposes to revise the definition of
``buying group'' to provide that a buying group may not unreasonably
deny membership to any MVPD requesting membership. In addition, the
FNPRM seeks comment on whether the Commission should establish a ``safe
harbor'' subscriber level for buying group members to participate in
master agreements with cable-affiliated programmers. As a consequence
of this safe harbor, it would be a violation of the section
628(c)(2)(B) prohibition on discriminatory practices for a cable-
affiliated programmer to refuse to deal with a buying group member that

[[Page 66063]]

regularly participates in a master agreement. Finally, the FNPRM seeks
comment on whether the Commission should revise the rules to clarify
that: (i) The standard to be applied in determining whether buying
groups are being discriminated against is the same as that applied to
an individual MVPD providing the same number of subscribers to the
programmer; (ii) a cable-affiliated programmer cannot refuse to offer a
master agreement to a buying group that specifies a schedule of non-
discriminatory license fees over any range of subscribership levels
that the buying group requests, so long as it is possible that the
buying group could provide this number of subscribers from its current
members eligible to participate in the master agreement; and (iii) the
standard of comparability for a buying group is an MVPD providing the
same number of customers for purposes of evaluating all terms and
conditions of the agreement, not just the price.
Steps Taken To Minimize Significant Impact on Small Entities and
Significant Alternatives Considered
60. The RFA requires an agency to describe any significant
alternatives that it has considered in developing 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 and reporting requirements under the rule
for such 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 such small entities.''
61. The FNPRM seeks comment on whether to establish (i) a
rebuttable presumption that an exclusive contract for a cable-
affiliated RSN (regardless of whether it is terrestrially delivered or
satellite-delivered) is an ``unfair act'' under section 628(b); (ii) a
rebuttable presumption that a complainant challenging an exclusive
contract involving a cable-affiliated RSN (regardless of whether it is
terrestrially delivered or satellite-delivered) is entitled to a
standstill of an existing programming contract during the pendency of a
complaint; (iii) rebuttable presumptions with respect to the ``unfair
act'' element and/or the ``significant hindrance'' element of a section
628(b) claim challenging an exclusive contract involving a cable-
affiliated ``national sports network'' (regardless of whether it is
terrestrially delivered or satellite-delivered); and (iv) a rebuttable
presumption that, once a complainant succeeds in demonstrating that an
exclusive contract involving a cable-affiliated network (regardless of
whether it is terrestrially delivered or satellite-delivered) 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)). These presumptions may benefit small
entities by reducing costs by eliminating the need for litigants and
the Commission to undertake repetitive examinations of Commission
precedent and empirical evidence on RSNs.
62. The FNPRM also seeks comment on proposed modifications to the
program access rules that are intended to ensure that buying groups
utilized by small and medium-sized MVPDs can avail themselves of the
non-discrimination protections of the program access rules. Thus, the
proposed modifications would benefit small entities. Specifically, the
proposed revision of the definition of ``buying group'' to include an
alternative liability option may benefit small entities by enabling
buying groups that do not fall within the scope of the existing
definition to file complaints with the Commission alleging violations
of the non-discrimination provisions of the program access rules on
behalf of their small and medium-sized MVPD members. Additionally, the
proposed revision of the ``buying group'' definition to provide that a
buying group may not unreasonably deny membership to any MVPD
requesting membership may benefit small entities by making the benefits
of buying group membership available to more small entities. Small
entities may also benefit from the establishment of a ``safe harbor''
subscriber level for buying group members to participate in master
agreements with cable-affiliated programmers and from clarifications to
the rules addressing the standard of comparability for a buying group
regarding volume discounts.
Federal Rules That May Duplicate, Overlap, or Conflict With the
Proposed Rule
63. None.

B. Paperwork Reduction Act

64. The FNPRM in MB Docket No. 12-68 does not contain proposed
information collections subject to the PRA. In addition, therefore, it
does not contain any new or modified information collection burden for
small business concerns with fewer than 25 employees, pursuant to the
Small Business Paperwork Relief Act of 2002.

C. Ex Parte Rules

65. Permit-But-Disclose. The proceeding the FNPRM in MB Docket No.
12-68 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 Sec. 1.1206(b). In proceedings governed
by rule Sec. 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

66. Comments and Replies. Pursuant to Sec. Sec. 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

[[Page 66064]]

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
8:00 a.m. to 7:00 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.
67. 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.
68. 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).
69. Additional Information. For additional information on this
proceeding, contact David Konczal, David.Konczal@fcc.gov, or Kathy
Berthot, Kathy.Berthot@fcc.gov, of the Media Bureau, Policy Division,
(202) 418-2120.

III. Ordering Clauses

70. 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, the Further Notice
of Proposed Rulemaking in MB Docket No. 12-68 Is Adopted.
71. It is further ordered that the Commission's Consumer and
Governmental Affairs Bureau, Reference Information Center, Shall Send a
copy of the Further Notice of Proposed Rulemaking in MB Docket No. 12-
68, 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

Administrative practice and procedure, Cable television.

Federal Communications Commission.
Marlene H. Dortch,
Secretary.

Proposed Rules

For the reasons discussed in the preamble, Part 76 of Title 47 of
the Code of Federal Regulations is proposed to be amended as follows:

PART 76--MULTICHANNEL VIDEO AND CABLE TELEVISION SERVICE

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

Authority: 47 U.S.C. 151, 152, 153, 154, 301, 302, 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, 573.

2. Section 76.1000 is amended by revising paragraphs (c)(1) and
(c)(3), adding paragraph (c)(4), and revising paragraph (j) to read as
follows:

Sec. 76.1000 Definitions.

* * * * *
(c) * * *
(1)(i) Agrees to be financially liable for any fees due pursuant to
a satellite cable programming, satellite broadcast programming, or
terrestrial cable programming contract which it signs as a contracting
party as a representative of its members, or
(ii) Whose members, as contracting parties, agree to joint and
several liability, or
(iii) Maintains liquid cash or credit reserves (i.e., cash, cash
equivalents, or letters or lines of credit) equal to cover the cost of
one month's programming for all buying group members, or
(iv) Agrees to assume liability to forward to the appropriate
programmer all fees due and received from its members for payment under
a programming contract; and
* * * * *
(3) Agrees either collectively or individually on reasonable
technical quality standards for the individual members of the group;
and
(4) Does not unreasonably deny membership to any multichannel video
programming distributor that requests membership.
* * * * *
(j) Similarly situated. The term ``similarly situated'' means, for
the purposes of evaluating alternative programming contracts offered by
a defendant programming vendor or by a terrestrial cable programming
vendor alleged to have engaged in conduct described in Sec.
76.1001(b)(1)(ii), that an alternative multichannel video programming
distributor has been identified by the defendant as being more properly
compared to the complainant in order to determine whether a violation
of Sec. 76.1001(a) or Sec. 76.1002(b) has occurred. The analysis of
whether an alternative multichannel video programming distributor is
properly comparable to the complainant includes consideration of, but
is not limited to, such factors as whether the alternative multichannel
video programming distributor operates within a geographic region
proximate to the complainant, has roughly the same number of
subscribers as the complainant, and purchases a similar service as the
complainant. Such alternative multichannel video programming
distributor, however, must use the same distribution technology as the
``competing'' distributor with whom the complainant seeks to compare
itself. For purposes of determining the size of a volume discount
applicable to a buying group, a buying group will be considered
similarly situated to an alternative multichannel video programming
distributor with approximately the same number of subscribers for the
programming as expected to be supplied by the buying group.
* * * * *
3. Section 76.1002 is amended by revising the Note to paragraph
(b)(3) and adding paragraph (g) to read as follows:

Sec. 76.1002 Specific unfair practices prohibited.

* * * * *
(b) * * *
(3) * * *

Note: Vendors may use volume-related justifications to establish
price differentials to the extent that such justifications are made
available to similarly situated distributors on

[[Page 66065]]

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. Vendors may not use volume-related
justifications to establish price differentials between a buying
group and an alternative multichannel video programming distributor
that has approximately the same number of subscribers for the
programming as expected to be supplied by the buying group.

* * * * *
(g) Buying Groups. (1) Right to Participate in Buying Group
Programming Contracts. No satellite cable programming vendor in which a
cable operator has an attributable interest or satellite broadcast
programming vendor may unreasonably interfere with or prevent a member
of a buying group from participating in a programming contract in which
a buying group signs as a contracting party as a representative of its
members if:
(i) The member has no more than three million subscribers; or
(ii) The share of programming that the member licenses through the
buying group is not significantly smaller than the average share of
programming that other members of the buying group license through the
buying group. Upon the expiration of a satellite cable programming or
satellite broadcast programming contract which a buying group signs as
a contracting party as a representative of its members, all buying
group members participating in the expiring programming contract shall
be presumptively entitled to participate in the renewed programming
contract.
(2) License Fee Schedule. A programming vendor must offer a
programming contract to a buying group that specifies a schedule of
non-discriminatory license fees over any range of subscribership levels
that the buying group requests, provided that it is possible that the
buying group could provide this number of subscribers from its current
members eligible to participate in the programming contract.

[FR Doc. 2012-26455 Filed 10-30-12; 8:45 am]
BILLING CODE 6712-01-P

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