[Federal Register: October 4, 2007 (Volume 72, Number 192)]
[Rules and Regulations]               
[Page 56645-56664]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr04oc07-8]                         


[[Page 56645]]

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FEDERAL COMMUNICATIONS COMMISSION

47 CFR Part 76

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

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

AGENCY: Federal Communications Commission.

ACTION: Final rule.

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

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

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


418-2120.

SUPPLEMENTARY INFORMATION: This is a summary of the Commission's Report 
and Order (``Order''), FCC 07-169, adopted on September 11, 2007, and 
released on October 1, 2007. The full text of this document is 
available for public inspection and copying during regular business 
hours in the FCC Reference Center, Federal Communications Commission, 
445 12th Street, SW., CY-A257, Washington, DC 20554. This document will 
also be available via ECFS (http://www.fcc.gov/cgb/ecfs/). (Documents 

will be available electronically in ASCII, Word 97, and/or Adobe 
Acrobat.) The complete text may be purchased from the Commission's copy 
contractor, 445 12th Street, SW., Room CY-B402, Washington, DC 20554. 
To request this document in accessible formats (computer diskettes, 
large print, audio recording, and Braille), send an e-mail to 
fcc504@fcc.gov or call the Commission's Consumer and Governmental 

Affairs Bureau at (202) 418-0530 (voice), (202) 418-0432 (TTY).
    In addition to filing comments with the Office of the Secretary, a 
copy of any comments on the proposed information collection 
requirements contained herein should be submitted to Cathy Williams, 
Federal Communications Commission, 445 12th St., SW., Room 1-C823, 
Washington, DC 20554, or via the Internet at PRA@fcc.gov.

Paperwork Reduction Act of 1995 Analysis

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

Summary of the Report and Order

I. Introduction and Executive Summary

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

II. Background

A. Exclusive Contract Prohibition

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

[[Page 56646]]

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

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

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

B. Program Access Complaint Procedures

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

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

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

[[Page 56647]]

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

III. Discussion

A. Exclusive Contract Prohibition

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

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

[[Page 56649]]

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

[[Page 56650]]

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

[[Page 56651]]

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

[[Page 56652]]

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

[[Page 56653]]

a. Narrowing the Prohibition
(i) Narrowing Based on Status of Programming Network
    45. For the reasons discussed below, we decline to narrow the scope 
of the exclusive contract prohibition based on the status of the 
programming network. The exclusive contract prohibition in Section 
628(c)(2)(D) and the implementing rules pertain to all satellite-
delivered programming networks that are vertically integrated with a 
cable operator, regardless of their popularity.
    46. As an initial matter, we note that in adopting the exclusive 
contract prohibition in Section 628(c)(2)(D), Congress applied the 
prohibition to all cable-affiliated programming. Congress did not 
distinguish between different types of cable-affiliated programming. 
Accordingly, as the Commission concluded in the 2002 Extension Order, 
we believe that treating all satellite cable programming and satellite 
broadcast programming uniformly for purposes of the exclusive contract 
prohibition is consistent with Section 628(c)(2)(D) and the definitions 
set forth in Sections 628(i)(1) and (3). Moreover, no commenter has 
provided a rational and workable definition of ``must have'' 
programming that would allow us to apply the exclusive contract 
prohibition to only this type of programming.
(ii) Narrowing Based on Status of Cable Operator
    47. For the reasons discussed below, we decline to narrow the scope 
of the exclusive contract prohibition based on the status of the cable 
operator. Cable MSOs argue that we should narrow the exclusive contract 
prohibition by allowing certain types of exclusive arrangements based 
on the status of the cable operator, such as (i) those involving an 
affiliated cable operator whose network passes only a small number of 
households throughout the nation; (ii) those between a cable operator 
and an affiliated programming network outside the footprint of the 
affiliated cable operator; and (iii) those involving affiliated cable 
operators that face competition from both DBS and telephone companies.
    48. In adopting the exclusive contract prohibition in Section 
628(c)(2)(D), Congress applied the prohibition to all cable operators. 
Congress did not distinguish between different types of cable operators 
for purposes of Section 628(c)(2)(D). Moreover, in adopting the 
exclusive contract prohibition, Congress has already delineated a 
geographic demarcation applicable to the prohibition--``areas served by 
a cable operator.'' Congress did not provide that the exclusive 
contract prohibition should vary based on the competitive circumstances 
in individual geographic areas served by a cable operator.
    49. We also find that these attempts to narrow the exclusive 
contract prohibition would harm competition in the video distribution 
marketplace. One of the key anticompetitive practices that the 
exclusive contract prohibition addresses is the practice of leveraging 
cable's market power collectively by withholding affiliated programming 
from rival MVPDs while selling the affiliated programming to other 
cable operators which do not compete with one another. A cable operator 
may gain by weakening a current or potential rival (such as a DBS 
operator) even in markets that the cable operator itself does not 
serve. Thus, proposals to narrow the exclusive contract prohibition by 
allowing exclusive arrangements outside of the footprint of the 
affiliated cable operator or with cable operators whose networks pass 
only a small number of households throughout the nation will impede 
competition in the video distribution marketplace. We similarly find 
that allowing exclusive arrangements for affiliated cable operators 
that face competition from both DBS and telephone companies would harm 
competition in the video distribution marketplace. We conclude herein 
that a cable operator will not lose the incentive and ability to enter 
into an exclusive arrangement in a given geographic area simply because 
it faces competition from both DBS operators and telephone companies in 
that area.
(iii) Narrowing Based on Status of Competitive MVPD
    50. For the reasons discussed below, we decline to narrow the 
exclusive contract prohibition by precluding certain competitive MVPDs 
from benefiting from the prohibition. Comcast and Cablevision ask us to 
narrow the exclusive contract prohibition by precluding certain 
competitive MVPDs from benefiting from the prohibition, such as 
competitive MVPDs that (i) have been in the MVPD market for more than 
five years; (ii) have extensive resources; or (iii) enter into 
exclusive contracts for programming.
    51. Section 628 makes no distinction among MVPDs of the kind 
suggested by these commenters. Moreover, we find that adopting such 
restrictions on the entities that can benefit from the prohibition will 
limit competition in the video distribution market and will result in 
no discernible public interest benefits. The resources of competitors 
or the number of years they have spent in the market has no bearing on 
the goal of Section 628(c)(2)(D) to preclude exclusive contracts in 
order to facilitate competition in the video distribution market. 
Rather, if cable operators have exclusive access to non-substitutable 
content that is essential for viable competition and they have the 
incentive to withhold such content, the amount of resources of 
competitive MVPDs or their longevity in the market will not be able to 
overcome that competitive advantage. Comcast asks us to prevent 
competitive MVPDs that themselves enter into exclusive programming 
contracts from being the beneficiaries of the exclusive contract 
prohibition applied to cable-affiliated programmers. Section 628, 
however, does not exempt cable operators from its restrictions based on 
the contracting practices of non-cable MVPDs.
b. Expanding the Prohibition
(i) Expanding the Prohibition to Non-Cable-Affiliated Programming
    52. For the reasons discussed below, we decline to apply an 
exclusive contract prohibition to non-cable-affiliated programming. The 
exclusive contract prohibition in Section 628(c)(2)(D) and the 
implementing rules pertain only to programming networks that are 
vertically integrated with a ``cable operator,'' as that term is 
defined in the Communications Act. Competitive MVPDs, as well as some 
cable MSOs, argue that the prohibition is thus underinclusive because 
it does not pertain to certain non-cable-affiliated programming that is 
necessary for MVPDs to compete.
    53. As an initial matter, to the extent that an MVPD meets the 
definition of a ``cable operator'' under the Communications Act, the 
exclusive contract prohibition in Section 628(c)(2)(D) already applies 
to its affiliated programming and, thus, no further action is required 
on our part. Moreover, as AT&T notes, Section 628(j) of the 
Communications Act provides that any provision of Section 628 that 
applies to a cable operator also applies to any common carrier or its 
affiliate that provides video programming. See 47 U.S.C. 548(j). We 
have previously explained that the exclusive contract prohibition in 
Section 628(c)(2)(D) does not extend to unaffiliated programming 
networks and programming networks affiliated with non-cable MVPDs, such 
as DBS operators. Moreover, the record before us in this proceeding 
does not provide sufficient evidence upon which to conclude that non-
cable-affiliated

[[Page 56654]]

programming is being withheld from MVPDs to a significant extent or 
that such withholding is adversely impacting competition in the video 
distribution market.
(ii) Expanding the Prohibition to Terrestrially Delivered Programming
    54. We decline to apply an exclusive contract prohibition to 
terrestrially delivered programming at this time. Some competitive 
MVPDs argue that the Commission should apply the exclusive contract 
prohibition to terrestrially delivered programming networks, citing 
various provisions of the Communications Act in addition to Section 
628(c) for statutory support. The Commission previously declined to 
address arguments regarding the Commission's statutory authority to 
address terrestrially delivered programming under Sections 4(i) and 
303(r) of the Communications Act. Commenters have failed to provide any 
new evidence or arguments that would lead us to reconsider our previous 
conclusion that terrestrially delivered programming is ``outside of the 
direct coverage'' of Section 628(c)(2)(D). We continue to believe that 
the plain language of the definitions of ``satellite cable 
programming'' and ``satellite broadcast programming'' as well as the 
legislative history of the 1992 Cable Act place terrestrially delivered 
programming beyond the scope of Section 628(c)(2)(D).
5. Length of New Term
    55. We conclude that the exclusive contract prohibition will be 
extended for five years subject to review during the last year of this 
extension period (i.e., between October 2011 and October 2012). We 
believe that five years could be a sufficient amount of time for 
competition to develop in the video distribution and programming 
markets. Accordingly, we believe that five years is an appropriate 
period of time to revisit the exclusivity prohibition. We also 
emphasize that, if adequate competition emerges before five years, the 
Commission could initiate its review earlier either on its own motion 
or in response to a petition. Moreover, we will continue to evaluate 
petitions for exclusivity under the public interest factors established 
by Congress.
6. Other Programming Issues
    56. Small and rural telephone MVPDs raise additional concerns in 
their comments regarding the difficulties they face in trying to obtain 
access to programming, such as tying of desired with undesired 
programming and unwarranted security requirements. We find that these 
concerns are beyond the scope of the programming issues raised in the 
NPRM, which pertained only to the prohibition on exclusive contracts 
for satellite-delivered vertically integrated programming under Section 
628(c)(2)(D) and the extension of that prohibition pursuant to Section 
628(c)(5). We did not seek comment on these issues in the NPRM and, 
accordingly, do not have a sufficient record upon which to address 
these concerns in this Order. We seek further comment on these issues 
in the Notice of Proposed Rulemaking in MB Docket No. 07-198.

B. Modification of Program Access Complaint Procedures

    57. As discussed below, we revise our program access complaint 
procedures. Specifically, we codify the existing requirement that 
respondents to program access complaints must attach to their answers 
copies of any documents that they rely on in their defense; find that 
in the context of a complaint proceeding, it would be unreasonable for 
a respondent not to produce all the documents requested by the 
complainant or ordered by the Commission, provided that such documents 
are in its control and relevant to the dispute; codify the Commission's 
authority to issue default orders granting a complaint if a respondent 
fails to comply with discovery requests; and allow parties to choose, 
within 20 days of the close of the pleading cycle, to engage in 
voluntary commercial arbitration of their program access complaints.
    58. In the NPRM, the Commission sought comment on whether and how 
the procedures for resolving program access disputes under Section 628 
should be modified.
1. Pleading Cycle
    59. In this Order, we retain our existing pleading cycle. The 
Commission's existing rules provide that an MVPD aggrieved by conduct 
that it believes constitutes a violation of Section 628 and the 
Commission's program access rules may file a complaint with the 
Commission. See 47 CFR 76.7 and 76.1003. A complainant must first 
notify the programming vendor that it intends to file the complaint and 
allow the vendor 10 days to respond. Once a complaint is filed, the 
cable operator or satellite programming vendor must answer within 20 
days of service of the complaint. Replies to the answer are due within 
15 days of service of the answer.
    60. Discussion. A shorter pleading cycle would not necessarily 
improve the overall time for complaint resolution because incomplete or 
rushed responses could lead to the need for further pleadings and 
discovery. We therefore decline to adopt a more expedited pleading 
cycle. However, we believe that electronic filing may help improve the 
speed of resolution and, therefore, we will continue to study this 
issue internally to determine if it is technologically feasible to 
require electronic filing for program access complaints, which 
necessarily involve a number of confidential documents. Currently, 
parties may voluntarily submit electronic copies of their pleadings to 
staff via e-mail in order to expedite review.
2. Discovery
    61. In this Order, after reviewing our discovery rules pertaining 
to program access disputes, we codify the existing requirement that 
respondents to program access complaints must attach to their answers 
copies of any documents that they rely on in their defense; find that 
in the context of a complaint proceeding, it would be unreasonable for 
a respondent not to produce all the documents either requested by the 
complainant or ordered by the Commission, provided that such documents 
are in its control and relevant to the dispute; and emphasize that the 
Commission will use its authority to issue default orders granting a 
complaint if a respondent fails to comply with its discovery requests. 
The respondent shall have the opportunity to object to any request for 
documents. Such request shall be heard, and determination made, by the 
Commission. The respondent need not produce the disputed discovery 
material until the Commission has ruled on the discovery request.
    62. Discussion. We take measures to ensure that the Commission has 
the information necessary to expeditiously resolve program access 
complaints.
    63. Respondent's Answer. In the 1998 Program Access Order, the 
Commission clarified that, to the extent that a respondent expressly 
references and relies upon a document or documents in defending a 
program access claim, the respondent must attach that document or 
documents to its answer. In this Order, we expressly codify that 
requirement in the Commission's rules. To the extent that there has 
been any confusion about this requirement in the past, we clarify that 
a respondent must attach the necessary documentation to its answer to a 
program access complaint, subject to our rules on

[[Page 56655]]

confidential filings. Subsequent to the 1998 Program Access Order, the 
Commission, in the 1998 Biennial Review (64 FR 6565, February 10, 
1999), further clarified the response requirements for specific types 
of program access complaints. To the extent that a respondent fails to 
include the permissive attachments identified in our rules that are 
necessary to a resolution of the complaint, the Commission may require 
the production of further documents. See 47 CFR 76.1003(e); 47 CFR 
76.7(e)(2). Moreover, a program access complainant is entitled, either 
as part of its complaint or through a motion filed after the 
respondent's answer is submitted, to request that Commission staff 
order discovery of any evidence necessary to prove its case. See 47 CFR 
76.7(e), (f). Respondents are also free to request discovery.
    64. Submission of Necessary Information. We believe that expanded 
discovery will improve the quality and efficiency of the Commission's 
resolution of program access complaints. Accordingly, we find that it 
would be unreasonable for a respondent not to produce all the documents 
either requested by the complainant or ordered by the Commission 
(indeed, in such circumstances, failure to produce the subject 
documents would also be a violation of a Commission order), provided 
that such documents are in its control and relevant to the dispute. 
While we retain the existing process for the Commission to order the 
production of documents and other discovery, we will also allow parties 
to a program access complaint to serve requests for discovery directly 
on opposing parties.
    65. Parties to a program access complaint may serve requests for 
discovery directly on opposing parties, and file a copy of the request 
with the Commission. The respondent shall have the opportunity to 
object to any request for documents that are not in its control or 
relevant to the dispute. If the respondent refuses to produce the 
requested documents, the requesting party may file a petition with the 
Commission seeking to compel production of the documents. Such 
discovery dispute shall be heard, and determination made, by the 
Commission. Until the objection is ruled upon, the respondent need not 
produce the disputed material. Any party who fails to timely provide 
discovery requested by the opposing party to which it has not raised an 
objection as described above may be deemed in default and an order may 
be entered in accordance with the allegations contained in the 
complaint, or the complaint may be dismissed with prejudice.
    66. We reiterate that respondents to program access complaints must 
produce in a timely manner, the contracts and other documentation that 
are necessary to resolve the complaint, subject to confidential 
treatment. See 47 CFR 76.9. In order to prevent abuse, the Commission 
will strictly enforce its default rules against respondents who do not 
answer complaints thoroughly or do not respond in a timely manner to 
permissible discovery requests with the necessary documentation 
attached. Respondents that do not respond in a timely manner to all 
discovery ordered by the Commission will risk penalties, including 
having the complaint against them granted by default. Likewise, a 
complainant that fails to respond promptly to a Commission order 
regarding discovery will risk having its complaint dismissed with 
prejudice. Finally, a party that fails to respond promptly to a request 
for discovery to which it has not raised a proper objection will be 
subject to these sanctions as well.
    67. Confidential Material. We understand that this approach 
requires the submission of confidential and extremely competitively-
sensitive information. See, e.g., 47 CFR 0.457(d)(iv). Accordingly, in 
order to appropriately safeguard this confidential information we 
believe it is necessary to revise the standard protective order and 
declaration (``Protective Order'') for use in program access 
proceedings.
    68. To ensure that confidential information is not improperly used 
for competitive business purposes, we intend to make an important 
revision to the Protective Order. Specifically, we revise it to reflect 
that any personnel, including in-house counsel, involved in competitive 
decision-making are prohibited from accessing the confidential 
information.
    69. In order to appropriately safeguard confidential information, 
we revise the Protective Order for use in program access proceedings to 
find that any personnel, including in-house counsel, (i) that are 
involved in competitive decision-making, (ii) are in a position to use 
the confidential information for competitive commercial or business 
purposes, or (iii) whose activities, association, or relationship with 
the complainant, client, or any authorized representative involve 
rendering advice or participation in any or all of said person's 
business decisions that are or will be made in light of similar or 
corresponding information about a competitor, are prohibited from 
accessing the confidential information. See Appendix.
    70. A protective order constitutes both an order of the Commission 
and an agreement between the party executing the declaration and the 
submitting party. The Commission has full authority to fashion 
appropriate sanctions for violations of its protective orders, 
including but not limited to suspension or disbarment of attorneys from 
practice before the Commission, forfeitures, cease and desist orders, 
and denial of further access to confidential information in Commission 
proceedings. We intend to vigorously enforce any transgressions of the 
provisions of our protective orders.
3. Time Frame for Resolving Program Access Complaints
    71. In this Order, we retain our current goals for resolving 
program access complaints with the intent to expedite complaints filed 
by small companies without existing carriage contracts. Under the 
current process, the Commission has set forth goals for the resolution 
of program access complaints as five months from the submission of a 
complaint for denial of programming cases, and nine months for all 
other program access complaints, such as price discrimination cases.
    72. Discussion. We agree that program access complaints should be 
resolved in a timely manner, but the time frames for resolving 
complaints must be realistic. We will retain our goals of resolving 
program access complaints within five months from the submission of a 
complaint for denial of programming cases, and nine months for all 
other program access complaints, such as price discrimination cases.
    73. However, we are concerned with delays in the resolution of 
complaints filed by new entrants, especially small businesses, and 
therefore, the Commission will expedite the resolution of such 
complaints and, as discussed above in Section III.B.2, will strictly 
enforce its default rules against respondents who do not answer 
complaints thoroughly with the necessary documentation attached. See 47 
CFR 76.7(b)(2)(iii).
4. Arbitration
    74. In this Order, we expand the use of voluntary arbitration for 
resolution of program access disputes, by increasing opportunities for 
parties to choose arbitration in lieu of Commission resolution of a 
pending complaint, and refrain from imposing a mandatory arbitration 
requirement at this time.
    75. Discussion. We decline to impose mandatory arbitration as a 
rule in all

[[Page 56656]]

program access cases at this time. We would like to see how arbitration 
of program access disputes, either through a merger condition or 
through voluntary arbitration, is working over time, to determine if 
modifications to the arbitration process are necessary prior to 
imposing a mandatory requirement on all parties to all program access 
complaints. Once there is a track record for arbitration of program 
access disputes, we will be able to determine which types of disputes 
lend themselves more readily to resolution by arbitration and which may 
be more judiciously resolved by the Commission in the first instance.
    76. The current rules allow parties to voluntarily engage in ADR, 
including arbitration, in lieu of an administrative hearing. See 47 CFR 
76.7(g)(2). However, we believe that parties to program access 
complaints should be able to voluntarily choose arbitration prior to 
the Commission making a determination to forward the complaint to an 
administrative law judge and that the Adelphia Order provides adequate 
guidance for the arbitration process. Therefore, the Commission will 
suspend action on a complaint where both parties agree to use ADR, 
including commercial arbitration, within 20 days following the close of 
the pleading cycle. Parties may agree that voluntary arbitration is a 
quick and productive way to resolve their commercial disputes. 
Moreover, we will continue to monitor developments in the marketplace 
and will, if necessary, revisit in the future whether to adopt a 
mandatory arbitration requirement.

IV. Procedural Matters

A. Paperwork Reduction Act Analysis

    77. This document contains information collection requirements 
subject to the Paperwork Reduction Act of 1995 (PRA), Public Law 104-
13. It will be submitted to the OMB for review under section 3507(d) of 
the PRA. OMB, the general public, and other Federal agencies are 
invited to comment on the information collection requirements contained 
in this proceeding. In addition, we note that pursuant to the Small 
Business Paperwork Relief Act of 2002, Public Law 107-198, see 44 
U.S.C. 3506(c)(4), we will seek specific comment on how the Commission 
might ``further reduce the information collection burden for small 
business concerns with fewer than 25 employees.''
    78. We have assessed the effects of the information collection 
requirements, and find that those requirements will benefit companies 
with fewer than 25 employees by facilitating the resolution of program 
access complaints and that these requirements will not burden those 
companies.

B. Congressional Review Act

    79. The Commission will send a copy of this Order in a report to be 
sent to Congress and the Government Accountability Office pursuant to 
the Congressional Review Act, see 5 U.S.C. 801(a)(1)(A).

C. Final Regulatory Flexibility Analysis

    80. As required by the Regulatory Flexibility Act (``RFA''), 5 
U.S.C. 604, the Commission has prepared the following Final Regulatory 
Flexibility Analysis (``FRFA'') relating to the Order. An Initial 
Regulatory Flexibility Analysis (``IRFA'') was incorporated in the NPRM 
in MB Docket No. 07-29 (72 FR 9289, March 1, 2007). The Commission 
sought written public comment on the proposals in the NPRM, including 
comment on the IRFA. The comments received are discussed below. This 
present FRFA conforms to the RFA. We note that, because our action with 
respect to the exclusive contract prohibition in Section 628(c)(2)(D) 
retains the status quo in this context, we could have certified our 
action under the RFA. See generally 5 U.S.C. 605.
Need for, and Objectives of, the Rules Adopted
    81. Background. Congress enacted the program access provisions 
contained in Section 628 of the Communications Act of 1934, as amended 
(the ``Communications Act''), as part of the Cable Television Consumer 
Protection and Competition Act of 1992 (``1992 Act''). Section 628 is 
intended to encourage entry into the multichannel video programming 
distribution (``MVPD'') market by existing or potential competitors to 
traditional cable operators by requiring cable operators to make 
available to MVPDs the programming necessary for them to become viable 
competitors. Specifically, this proceeding involves (i) Section 
628(c)(2)(D), which prohibits, in areas served by a cable operator, 
exclusive contracts for satellite cable programming or satellite 
broadcast programming between vertically integrated programming vendors 
and cable operators unless the Commission determines that such 
exclusivity is in the public interest; and (ii) the Commission's 
procedures for resolving program access disputes under Section 628.
    82. Extension of Exclusive Contract Prohibition. Section 628(c)(5) 
of the Communications Act directed that the exclusive contract 
prohibition in Section 628(c)(2)(D) would cease to be effective on 
October 5, 2002, unless the Commission found in a proceeding conducted 
between October 2001 and October 2002 that the prohibition ``continues 
to be necessary to preserve and protect competition and diversity in 
the distribution of video programming.'' 47 U.S.C. 548(c)(5). In 
October 2001, the Commission issued a Notice of Proposed Rulemaking in 
CS Docket No. 01-290 seeking comment on whether the exclusive contract 
prohibition continued to be ``necessary'' pursuant to the criteria set 
forth in Section 628(c)(5). See 66 FR 54972, October 31, 2001. In June 
2002, the Commission issued a decision concluding that the exclusive 
contract prohibition continued to be ``necessary'' pursuant to these 
criteria and therefore extended the prohibition for five years (i.e., 
through October 5, 2007). See 67 FR 49247, July 30, 2002. The 
Commission also provided that, during the year before the expiration of 
the five-year extension of the exclusive contract prohibition, it would 
conduct another review to determine whether the exclusive contract 
prohibition continues to be necessary to preserve and protect 
competition and diversity in the distribution of video programming. We 
issued the NPRM in February 2007 to initiate this review. See 72 FR 
9289, March 1, 2007.
    83. The Order herein adopted retains for five years (until October 
5, 2012) the prohibition on exclusive contracts for satellite cable 
programming and satellite broadcast programming between vertically 
integrated programming vendors and cable operators as set forth in 
Section 628(c)(2)(D) of the Communications Act and Section 
76.1002(c)(2) of the Commission's rules.
    84. In the Order, we analyze the changes that have occurred in the 
video programming and distribution markets since 2002 when we last 
decided that the exclusive contract prohibition continued to be 
necessary to preserve and protect competition. While the markets for 
both programming and distribution reflect some pro-competitive trends 
since 2002, we conclude that these developments are not sufficient to 
allow us to decide that the exclusive contract prohibition is no longer 
necessary to preserve and protect competition and diversity in the 
distribution of video programming. We then assess whether vertically 
integrated programmers today retain both the ability and incentive to 
favor their affiliated cable operators over nonaffiliated MVPDs such 
that competition and diversity in the distribution of video programming

[[Page 56657]]

would not be preserved and protected. We conclude that vertically 
integrated programmers retain this ability and incentive. Thus, we find 
that the exclusive contract prohibition is necessary to preserve and 
protect competition and diversity in the distribution of video 
programming. We therefore extend the exclusive contract prohibition for 
five years subject to review during the last year of this extension 
period.
    85. In the Order, we also reject proposals presented by some 
commenters to narrow the exclusive contract prohibition based on the 
status of the programming, the cable operator, or the competitive MVPD. 
We find that narrowing the prohibition in this manner is not supported 
by the Communications Act and would not promote competition. We also 
reject proposals presented by some commenters to expand the exclusive 
contract prohibition to non-cable-affiliated programming and 
unaffiliated programming. We find that expanding the prohibition is not 
supported by the Communications Act and that there is no record 
evidence to support such an expansion of the prohibition. We also 
considered the possibility of allowing the exclusive contract 
prohibition to sunset. Because we conclude that the exclusive contract 
prohibition is necessary to preserve and protect competition and 
diversity in the video distribution market, we decide not to allow the 
exclusive contract prohibition to sunset. The decision to retain the 
exclusive contract prohibition will facilitate competition in the video 
distribution market, thereby benefiting various competitive MVPDs 
including those that are smaller entities. Therefore, we conclude that 
our decision to retain the exclusive contract prohibition set forth in 
Section 628(c)(2)(D) benefits smaller entities as well as larger 
entities.
    86. Modification of Program Access Complaint Procedures. The 
Commission's rules provide that any MVPD aggrieved by conduct that it 
believes constitutes a violation of Section 628 and the Commission's 
program access rules may file a complaint at the Commission. 47 CFR 
76.7 and 76.1003. In the NPRM, we considered whether and how our 
procedures for resolving program access disputes under Section 628 
should be modified. Among other things, we considered (i) whether 
specific time limits on the Commission, the parties, or others would 
promote a speedy and just resolution of these disputes; (ii) whether 
our rules governing discovery and protection of confidential 
information are adequate; and (iii) whether the Commission should adopt 
alternative procedures or remedies such as mandatory standstill 
agreements and arbitration.
    87. In the Order, to facilitate the resolution of program access 
complaints, we modify our procedures for resolving such complaints by 
(i) codifying the requirements that a respondent in a program access 
complaint proceeding who expressly relies upon a document in asserting 
a defense must include the document as part of its answer; (ii) finding 
that in the context of a complaint proceeding, it would be unreasonable 
for a respondent not to produce all the documents either requested by 
the complainant or ordered by the Commission, provided that such 
documents are in its control and relevant to the dispute; (iii) 
codifying the Commission's authority to issue default orders granting a 
complaint if the respondent fails to comply with discovery requests; 
and (iv) allowing parties to a program access complaint proceeding to 
voluntarily engage in alternative dispute resolution, including 
commercial arbitration, during which time Commission action on the 
complaint will be suspended. We also retain our goals of resolving 
program access complaints within five months from the submission of a 
complaint for denial of programming cases, and within nine months for 
all other program access complaints, such as price discrimination 
cases.
Summary of Significant Issues Raised by Public Comments in Response to 
the IRFA
    88. In its Comments on the IRFA, the Office of Advocacy of the 
United States Small Business Administration (``SBA Office of 
Advocacy'') claims that the Commission's IRFA in this proceeding was 
inadequate because it allegedly (i) did not contain a complete economic 
analysis of the impact of a decision to allow the exclusive contract 
prohibition to sunset on the small entities listed in the IRFA; (ii) 
failed to consider alternatives to allowing the prohibition to sunset 
that will achieve the Commission's goals while minimizing burdens on 
small entities; and (iii) failed to collect data on the impact of a 
sunset of the prohibition on small businesses that offer video 
programming to customers, such as sports bars, smalls entities in the 
hospitality industry, and certain housing developments. The SBA Office 
of Advocacy Office argues that without access to video content demanded 
by subscribers, small providers of video services will not be able to 
compete in the MVPD market. Accordingly, the SBA Office of Advocacy 
urges a three-year extension of the exclusive contract prohibition. 
Although not filed specifically in response to the IRFA, comments were 
filed in response to the NPRM by small competitive MVPDs and small 
cable operators that urged the Commission to retain the exclusive 
contract prohibition and to revise the procedures for resolving program 
access complaints. These commenters argued that they will be unable to 
viably compete in the video distribution market if denied access to 
vertically integrated programming. Moreover, they argued that the 
current program access complaint process is costly and time-consuming 
such that it makes it impracticable for small carriers to pursue filing 
a program access complaint. Our response to all such comments is 
contained below.
Description and Estimate of the Number of Small Entities to Which the 
Proposed Rules Will Apply
    89. The RFA directs agencies to provide a description of, and where 
feasible, an estimate of the number of small entities that may be 
affected by the proposed rules, if adopted. The RFA generally defines 
the term ``small entity'' as having the same meaning as the terms 
``small business,'' ``small organization,'' and ``small governmental 
jurisdiction.'' In addition, the term ``small business'' has the same 
meaning as the term ``small business concern'' under the Small Business 
Act. A ``small business concern'' is one which: (1) Is independently 
owned and operated; (2) is not dominant in its field of operation; and 
(3) satisfies any additional criteria established by the Small Business 
Administration (``SBA'').
    90. Wired Telecommunications Carriers. The 2007 North American 
Industry Classification System (``NAICS'') defines ``Wired 
Telecommunications Carriers'' (2007 NAISC Code 517110) to include the 
following three classifications which were listed separately in the 
2002 NAICS: Wired Telecommunications Carriers (2002 NAICS Code 517110), 
Cable and Other Program Distribution (2002 NAISC Code 517510), and 
Internet Service Providers (2002 NAISC Code 518111). The 2007 NAISC 
defines this category 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

[[Page 56658]]

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 Wired 
Telecommunications Carriers, which is all firms having 1,500 employees 
or less. According to Census Bureau data for 2002, there were a total 
of 27,148 firms in the Wired Telecommunications Carriers category (2002 
NAISC Code 517110) that operated for the entire year; 6,021 firms in 
the Cable and Other Program Distribution category (2002 NAISC Code 
517510) that operated for the entire year; and 3,408 firms in the 
Internet Service Providers category (2002 NAISC Code 518111) that 
operated for the entire year. Of these totals, 25,374 of 27,148 firms 
in the Wired Telecommunications Carriers category (2002 NAISC Code 
517110) had less than 100 employees; 5,496 of 6,021 firms in the Cable 
and Other Program Distribution category (2002 NAISC Code 517510) had 
less than 100 employees; and 3,303 of the 3,408 firms in the Internet 
Service Providers category (2002 NAISC Code 518111) had less than 100 
employees. Thus, under this size standard, the majority of firms can be 
considered small.
    91. Cable and Other Program Distribution. The 2002 NAICS defines 
this category as follows: ``This industry comprises establishments 
primarily engaged as third-party distribution systems for broadcast 
programming. The establishments of this industry deliver visual, aural, 
or textual programming received from cable networks, local television 
stations, or radio networks to consumers via cable or direct-to-home 
satellite systems on a subscription or fee basis. These establishments 
do not generally originate programming material.'' This category 
includes, among others, cable operators, direct broadcast satellite 
(``DBS'') services, home satellite dish (``HSD'') services, satellite 
master antenna television (``SMATV'') systems, and open video systems 
(``OVS''). The SBA has developed a small business size standard for 
Cable and Other Program Distribution, which is all such firms having 
$13.5 million or less in annual receipts. According to Census Bureau 
data for 2002, there were a total of 1,191 firms in this category that 
operated for the entire year. Of this total, 1,087 firms had annual 
receipts of under $10 million, and 43 firms had receipts of $10 million 
or more but less than $25 million. Thus, under this size standard, the 
majority of firms can be considered small.
    92. Cable System Operators (Rate Regulation Standard). 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. As of 2006, 7,916 cable operators qualify as small cable 
companies under this 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 6,139 systems have under 
10,000 subscribers, and an additional 379 systems have 10,000-19,999 
subscribers. Thus, under this standard, most cable systems are small.
    93. Cable System Operators (Telecom Act Standard). 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.'' There are approximately 65.4 million 
cable subscribers in the United States today. Accordingly, an operator 
serving fewer than 654,000 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. Based on available data, we find that the number of cable 
operators serving 654,000 subscribers or less totals approximately 
7,916. 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. Although it 
seems certain that some of these cable system operators are affiliated 
with entities whose gross annual revenues exceed $250,000,000, we are 
unable at this time to estimate with greater precision the number of 
cable system operators that would qualify as small cable operators 
under the definition in the Communications Act.
    94. 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. Because DBS provides subscription 
services, DBS falls within the SBA-recognized definition of Cable and 
Other Program Distribution. This definition provides that a small 
entity is one with $13.5 million or less in annual receipts. Currently, 
three operators provide DBS service, which requires a great investment 
of capital for operation: DIRECTV, EchoStar (marketed as the DISH 
Network), and Dominion Video Satellite, Inc. (``Dominion'') (marketed 
as Sky Angel). All three currently offer subscription services. Two of 
these three DBS operators, DIRECTV and EchoStar Communications 
Corporation (``EchoStar''), report annual revenues that are in excess 
of the threshold for a small business. The third DBS operator, 
Dominion's Sky Angel service, serves fewer than one million subscribers 
and provides 20 family and religion-oriented channels. Dominion does 
not report its annual revenues. The Commission does not know of any 
source which provides this information and, thus, we have no way of 
confirming whether Dominion qualifies as 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 licensee. Nevertheless, given the absence of specific 
data on this point, we recognize the possibility that there are 
entrants in this field that may not yet have generated $13.5 million in 
annual receipts, and therefore may be categorized as a small business, 
if independently owned and operated.
    95. Private Cable Operators (PCOs) also known as Satellite Master 
Antenna Television (SMATV) Systems. PCOs, also known as SMATV systems 
or private communication operators, are video distribution facilities 
that use closed transmission paths without using any public right-of-
way. PCOs 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. The SBA definition of small entities for Cable 
and Other Program Distribution Services includes PCOs and, thus, small 
entities are defined as all such companies generating $13.5 million or 
less in annual receipts. Currently, there are approximately 150 members 
in the Independent Multi-Family Communications Council (IMCC), the 
trade association that represents PCOs. Individual PCOs often serve

[[Page 56659]]

approximately 3,000-4,000 subscribers, but the larger operations serve 
as many as 15,000-55,000 subscribers. In total, PCOs currently serve 
approximately one million subscribers. Because these operators are not 
rate regulated, they are not required to file financial data with the 
Commission. Furthermore, we are not aware of any privately published 
financial information regarding these operators. Based on the estimated 
number of operators and the estimated number of units served by the 
largest ten PCOs, we believe that a substantial number of PCO may 
qualify as small entities.
    96. Home Satellite Dish (``HSD'') Service. Because HSD provides 
subscription services, HSD falls within the SBA-recognized definition 
of Cable and Other Program Distribution, which includes all such 
companies generating $13.5 million or less in revenue annually. 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. There are approximately 30 
satellites operating in the C-band, which carry over 500 channels of 
programming combined; approximately 350 channels are available free of 
charge and 150 are scrambled and require a subscription. HSD is 
difficult to quantify in terms of annual revenue. HSD owners have 
access to program channels placed on C-band satellites by programmers 
for receipt and distribution by MVPDs. Commission data shows that, 
between June 2004 and June 2005, HSD subscribership fell from 335,766 
subscribers to 206,358 subscribers, a decline of more than 38 percent. 
The Commission has no information regarding the annual revenue of the 
four C-Band distributors.
    97. Broadband Radio Service and Educational Broadband Service. 
Broadband Radio Service comprises Multichannel Multipoint Distribution 
Service (MMDS) systems and Multipoint Distribution Service (MDS). MMDS 
systems, often referred to as ``wireless cable,'' transmit video 
programming to subscribers using the microwave frequencies of MDS and 
Educational Broadband Service (EBS) (formerly known as Instructional 
Television Fixed Service (ITFS)). We estimate that the number of 
wireless cable subscribers is approximately 100,000, as of March 2005. 
The SBA definition of small entities for Cable and Other Program 
Distribution, which includes such companies generating $13.5 million in 
annual receipts, appears applicable to MDS and ITFS.
    98. The Commission has also defined small MDS (now BRS) entities in 
the context of Commission license auctions. For purposes of the 1996 
MDS auction, the Commission defined a small business as an entity that 
had annual average gross revenues of less than $40 million in the 
previous three calendar years. This definition of a small entity in the 
context of MDS auctions has been approved by the SBA. In the MDS 
auction, 67 bidders won 493 licenses. Of the 67 auction winners, 61 
claimed status as a small business. At this time, the Commission 
estimates that of the 61 small business MDS auction winners, 48 remain 
small business licensees. In addition to the 48 small businesses that 
hold BTA authorizations, there are approximately 392 incumbent MDS 
licensees that have gross revenues that are not more than $40 million 
and are thus considered small entities. MDS licensees and wireless 
cable operators that did not receive their licenses as a result of the 
MDS auction fall under the SBA small business size standard for Cable 
and Other Program Distribution, which includes all such entities that 
do not generate revenue in excess of $13.5 million annually. 
Information available to us indicates that there are approximately 850 
of these licensees and operators that do not generate revenue in excess 
of $13.5 million annually. Therefore, we estimate that there are 
approximately 850 small entity MDS (or BRS) providers, as defined by 
the SBA and the Commission's auction rules.
    99. Educational institutions are included in this analysis as small 
entities; however, the Commission has not created a specific small 
business size standard for ITFS (now EBS). We estimate that there are 
currently 2,032 ITFS (or EBS) licensees, and all but 100 of the 
licenses are held by educational institutions. Thus, we estimate that 
at least 1,932 ITFS licensees are small entities.
    100. Local Multipoint Distribution Service. Local Multipoint 
Distribution Service (LMDS) is a fixed broadband point-to-multipoint 
microwave service that provides for two-way video telecommunications. 
The SBA definition of small entities for Cable and Other Program 
Distribution, which includes such companies generating $13.5 million in 
annual receipts, appears applicable to LMDS. The Commission has also 
defined small LMDS entities in the context of Commission license 
auctions. In the 1998 and 1999 LMDS auctions, the Commission defined a 
small business as an entity that had annual average gross revenues of 
less than $40 million in the previous three calendar years. Moreover, 
the Commission added an additional classification for a ``very small 
business,'' which was defined as an entity that had annual average 
gross revenues of less than $15 million in the previous three calendar 
years. These definitions of ``small business'' and ``very small 
business'' in the context of the LMDS auctions have been approved by 
the SBA. In the first LMDS auction, 104 bidders won 864 licenses. Of 
the 104 auction winners, 93 claimed status as small or very small 
businesses. In the LMDS re-auction, 40 bidders won 161 licenses. Based 
on this information, we believe that the number of small LMDS licenses 
will include the 93 winning bidders in the first auction and the 40 
winning bidders in the re-auction, for a total of 133 small entity LMDS 
providers as defined by the SBA and the Commission's auction rules.
    101. Open Video Systems (``OVS''). 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-recognized definition of Cable and 
Other Program Distribution Services, which provides that a small entity 
is one with $13.5 million or less in annual receipts. The Commission 
has approved approximately 120 OVS certifications with some OVS 
operators now providing service. Broadband service providers (BSPs) are 
currently the only significant holders of OVS certifications or local 
OVS franchises, even though OVS is one of four statutorily-recognized 
options for local exchange carriers (LECs) to offer video programming 
services. As of June 2005, BSPs served approximately 1.4 million 
subscribers, representing 1.49 percent of all MVPD households. Among 
BSPs, however, those operating under the OVS framework are in the 
minority. As of June 2005, RCN Corporation is the largest BSP and 14th 
largest MVPD, serving approximately 371,000 subscribers. RCN received 
approval to operate OVS systems in New York City, Boston, Washington, 
DC and other areas. The Commission does not have financial information 
regarding the entities authorized to provide OVS, some of which may not 
yet be operational. We thus believe that at least

[[Page 56660]]

some of the OVS operators may qualify as small entities.
    102. 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 firms within this 
category, which is all firms with $13.5 million or less in annual 
receipts. According to Census Bureau data for 2002, there were 270 
firms in this category that operated for the entire year. Of this 
total, 217 firms had annual receipts of under $10 million and 13 firms 
had annual receipts of $10 million to $24,999,999. Thus, under this 
category and associated small business size standard, the majority of 
firms can be considered small.
    103. Small Incumbent Local Exchange Carriers. We have included 
small incumbent local exchange carriers in this present RFA analysis. A 
``small business'' under the RFA is one that, inter alia, meets the 
pertinent small business size standard (e.g., a telephone 
communications business having 1,500 or fewer employees), and ``is not 
dominant in its field of operation.'' The SBA's Office of Advocacy 
contends that, for RFA purposes, small incumbent local exchange 
carriers are not dominant in their field of operation because any such 
dominance is not ``national'' in scope. We have therefore included 
small incumbent local exchange carriers in this RFA, although we 
emphasize that this RFA action has no effect on Commission analyses and 
determinations in other, non-RFA contexts.
    104. 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. According to Commission 
data, 1,307 carriers have reported that they are engaged in the 
provision of incumbent local exchange services. Of these 1,307 
carriers, an estimated 1,019 have 1,500 or fewer employees and 288 have 
more than 1,500 employees. Consequently, the Commission estimates that 
most providers of incumbent local exchange service are small 
businesses.
    105. 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. According to Commission 
data, 859 carriers have reported that they are engaged in the provision 
of either competitive access provider services or competitive local 
exchange carrier services. Of these 859 carriers, an estimated 741 have 
1,500 or fewer employees and 118 have more than 1,500 employees. In 
addition, 16 carriers have reported that they are ``Shared-Tenant 
Service Providers,'' and all 16 are estimated to have 1,500 or fewer 
employees. In addition, 44 carriers have reported that they are ``Other 
Local Service Providers.'' Of the 44, an estimated 43 have 1,500 or 
fewer employees and one has more than 1,500 employees. 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.
    106. Electric Power Generation, Transmission and Distribution. The 
Census Bureau defines this category as follows: ``This industry group 
comprises establishments primarily engaged in generating, transmitting, 
and/or distributing electric power. Establishments in this industry 
group may perform one or more of the following activities: (1) Operate 
generation facilities that produce electric energy; (2) operate 
transmission systems that convey the electricity from the generation 
facility to the distribution system; and (3) operate distribution 
systems that convey electric power received from the generation 
facility or the transmission system to the final consumer.'' The SBA 
has developed a small business size standard for firms in this 
category: ``A firm is small if, including its affiliates, it is 
primarily engaged in the generation, transmission, and/or distribution 
of electric energy for sale and its total electric output for the 
preceding fiscal year did not exceed 4 million megawatt hours.'' 
According to Census Bureau data for 2002, there were 1,644 firms in 
this category that operated for the entire year. Census data do not 
track electric output and we have not determined how many of these 
firms fit the SBA size standard for small, with no more than 4 million 
megawatt hours of electric output. Consequently, we estimate that 1,644 
or fewer firms may be considered small under the SBA small business 
size standard.
Description of Reporting, Recordkeeping and Other Compliance 
Requirements
    107. The rules adopted in the Report and Order will impose 
additional reporting, recordkeeping, and compliance requirements on 
complainants and respondents in program access disputes by (i) 
codifying the requirements that a respondent in a program access 
complaint proceeding who expressly relies upon a document in asserting 
a defense must include the document as part of its answer; and (ii) 
finding that in the context of a complaint proceeding, it would be 
unreasonable for a respondent not to produce all the documents either 
requested by the complainant or ordered by the Commission, provided 
that such documents are in its control and relevant to the dispute.
Steps Taken To Minimize Significant Impact on Small Entities and 
Significant Alternatives Considered
    108. The RFA requires an agency to describe any significant 
alternatives that it has considered in proposing regulatory approaches, 
which may include the following four alternatives (among others): (1) 
The establishment of differing compliance or reporting requirements or 
timetables that take into account the resources available to small 
entities; (2) the clarification, consolidation, or simplification of 
compliance or reporting requirements under the rule for small entities; 
(3) the use of performance, rather than design, standards; and (4) an 
exemption from coverage of the rule, or any part thereof, for small 
entities.
    109. The NPRM invited comment on issues that had the potential to 
have significant economic impact on some small entities, including (i) 
whether the exclusive contract prohibition remains necessary to 
preserve and protect competition in the video distribution market; and 
(ii) whether and how our procedures for resolving program access 
disputes under Section 628 should be modified.
    110. Extension of Exclusive Contract Prohibition. As discussed 
above, the decision to extend the exclusive contract prohibition for 
five years will facilitate competition in the video distribution market 
by ensuring that

[[Page 56661]]

competitive MVPDs continue to have access to the programming they need 
to compete. The decision therefore confers benefits upon various 
competitive MVPDs, including those that are smaller entities. Moreover, 
the decision avoids the adverse impact to smaller entities that the SBA 
Office of Advocacy Office and others stated would occur if the 
prohibition were to sunset. Therefore, we conclude that our decision to 
retain the exclusive contract prohibition set forth in Section 
628(c)(2)(D) benefits smaller entities as well as larger entities. The 
alternative of allowing the exclusive contract prohibition to expire 
would hinder competition in the video distribution market, thereby 
harming smaller entities.
    111. Modification of Program Access Complaint Procedures. As 
discussed above, the decision to modify the procedures for resolving 
program access disputes will facilitate the processing and resolution 
of program access complaints, thereby conferring benefits upon smaller 
entities as well as larger entities that seek to compete in the video 
distribution marketplace. The alternative of retaining the current 
program access complaint procedures would not facilitate the resolution 
of program access complaints and would thereby harm smaller entities 
that file such complaints.
Report to Congress
    112. The Commission will send a copy of the Report and Order, 
including this FRFA, in a report to be sent to Congress pursuant to the 
Congressional Review Act. In addition, the Commission will send a copy 
of the Report and Order, including this FRFA, to the Chief Counsel for 
Advocacy of the SBA. A copy of the Report and Order and FRFA (or 
summaries thereof) will also be published in the Federal Register.

V. Ordering Clauses

    113. It is ordered that, pursuant to the authority found in 
Sections 4(i), 303(r), and 628 of the Communications Act of 1934, as 
amended, 47 U.S.C. 154(i), 303(r), and 548, this Report and Order is 
adopted.
    114. It is ordered that, pursuant to the authority found in 
Sections 4(i), 303(r), and 628 of the Communications Act of 1934, as 
amended, 47 U.S.C. 154(i), 303(r), and 548, the Commission's rules are 
hereby amended as set forth in the Rules Changes below.
    115. It is ordered that the rules adopted herein are effective 
October 4, 2007, except for Sec.  76.1003(e)(1) and (j) which contains 
information collection requirements that are not effective until 
approved by the Office of Management and Budget. The Commission will 
publish a document in the Federal Register announcing the effective 
date for those sections.
    116. It is ordered that, pursuant to 5 U.S.C. 553(d)(3) and 47 CFR 
1.427(b), the Commission finds good cause to make Sec.  76.1002(c)(6) 
and Sec.  76.1003(i) and (k) effective upon publication in the Federal 
Register. Section 76.1002(c)(6) provides that the exclusive contract 
prohibition set forth in Sec.  76.1002(c)(2) will expire on October 5, 
2007. See 47 CFR 76.1002(c)(6). Accordingly, it is necessary for the 
five-year extension of this prohibition reflected in the amendment to 
Sec.  76.1002(c)(6) adopted herein to take effect by October 5, 2007. 
We thus find good cause to make the amendment to Sec.  76.1002(c)(6) 
effective upon publication in the Federal Register. We note further 
that this amendment extends an existing requirement and does not impose 
any new requirements on any entity. Accordingly, no entity will be 
harmed as a result of our decision to make this amendment effective 
upon publication in the Federal Register. We also find good cause to 
make the amendments to our procedural rules adopted herein, other than 
those that require OMB approval, effective upon publication in the 
Federal Register. These rules are (i) new Sec.  76.1003(i), which 
allows parties to a program access dispute to voluntarily engage in 
ADR; and (ii) new Sec.  76.1003(k), which pertains to the Commission's 
authority to issue protective orders regarding confidential material 
submitted in program access complaint proceedings and to issue 
appropriate sanctions for violations of its protective orders. These 
new rules are essential to our goal of expeditiously resolving program 
access complaints. We find good cause to make these amendments 
effective upon publication in the Federal Register so that parties to 
all program access complaint proceedings, including those currently 
pending before the Commission, can benefit from these new rules. With 
respect to new Sec.  76.1003(i) regarding ADR, we note this procedure 
is voluntary and requires both parties to agree to engage in 
alternative dispute resolution; thus, no entity will be harmed as a 
result of our decision to make this amendment effective upon 
publication in the Federal Register. With respect to new Sec.  
76.1003(k) regarding protective orders, we note that this rule enhances 
existing safeguards provided under our form protective order, and will 
facilitate and expedite the review of privileged and/or confidential 
documents; thus, no entity will be harmed as a result of our decision 
to make this amendment effective upon publication in the Federal 
Register.
    117. It is further ordered that the Commission's Consumer and 
Governmental Affairs Bureau, Reference Information Center, shall send a 
copy of this Report and Order including the Final Regulatory 
Flexibility Analysis, to the Chief Counsel for Advocacy of the Small 
Business Administration.
    118. It is further ordered that the Commission shall send a copy of 
this Report and Order in a report to be sent to Congress and the 
Government Accountability Office pursuant to the Congressional Review 
Act, see 5 U.S.C. 801(a)(1)(A).

List of Subjects in 47 CFR Part 76

    Administrative practice and procedure and Cable television.

Federal Communications Commission.
Marlene H. Dortch,
Secretary.

Rule Changes

0
For the reasons stated in the preamble, the Federal Communications 
Commission amends 47 CFR part 76 as follows:

PART 76--MULTICHANNEL VIDEO AND CABLE TELEVISION SERVICE

0
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, 338, 339, 340, 503, 521, 
522, 531, 532, 533, 534, 535, 536, 537, 543, 544, 544a, 545, 548, 
549, 552, 554, 556, 558, 560, 561, 571, 572 and 573.


0
2. Section 76.1002 is amended by revising paragraph (c)(6) to read as 
follows:


Sec.  76.1002  Specific unfair practices prohibited.

* * * * *
    (c) * * *
    (6) Sunset provision. The prohibition of exclusive contracts set 
forth in paragraph (c)(2) of this section shall cease to be effective 
on October 5, 2012, unless the Commission finds, during a proceeding to 
be conducted during the year preceding such date, that said prohibition 
continues to be necessary to preserve and protect competition and 
diversity in the distribution of video programming.
* * * * *

0
3. Section 76.1003 is amended by adding a sentence to the end of 
paragraph (e)(1) and by adding

[[Page 56662]]

paragraphs (i), (j) and (k) to read as follows:


Sec.  76.1003  Program access proceedings.

* * * * *
    (e) Answer. (1) * * * To the extent that a cable operator, 
satellite cable programming vendor or satellite broadcast programming 
vendor expressly references and relies upon a document or documents in 
asserting a defense or responding to a material allegation, such 
document or documents shall be included as part of the answer.
* * * * *
    (i) Alternative dispute resolution. Within 20 days of the close of 
the pleading cycle, the parties to the program access dispute may 
voluntarily engage in alternative dispute resolution, including 
commercial arbitration. The Commission will suspend action on the 
complaint if both parties agree to use alternative dispute resolution.
    (j) Discovery. In addition to the general pleading and discovery 
rules contained in Sec.  76.7 of this part, parties to a program access 
complaint may serve requests for discovery directly on opposing 
parties, and file a copy of the request with the Commission. The 
respondent shall have the opportunity to object to any request for 
documents that are not in its control or relevant to the dispute. Such 
request shall be heard, and determination made, by the Commission. 
Until the objection is ruled upon, the obligation to produce the 
disputed material is suspended. Any party who fails to timely provide 
discovery requested by the opposing party to which it has not raised an 
objection as described above, or who fails to respond to a Commission 
order for discovery material, may be deemed in default and an order may 
be entered in accordance with the allegations contained in the 
complaint, or the complaint may be dismissed with prejudice.
    (k) Protective Orders. In addition to the procedures contained in 
Sec.  76.9 of this part related to the protection of confidential 
material, the Commission may issue orders to protect the 
confidentiality of proprietary information required to be produced for 
resolution of program access complaints. A protective order constitutes 
both an order of the Commission and an agreement between the party 
executing the protective order declaration and the party submitting the 
protected material. The Commission has full authority to fashion 
appropriate sanctions for violations of its protective orders, 
including but not limited to suspension or disbarment of attorneys from 
practice before the Commission, forfeitures, cease and desist orders, 
and denial of further access to confidential information in Commission 
proceedings.

    Note: The attached Appendix will not be included in the Code of 
Federal Regulations (CFR).

Appendix--Standard Protective Order and Declaration for Use in Section 
628 Program Access Proceedings Before the Federal Communications 
Commission, Washington, DC 20554

In the Matter of-------------------------------------------------------
[Name of Proceeding]---------------------------------------------------
Docket No.-------------------------------------------------------------

PROTECTIVE ORDER

    1. This Protective Order is intended to facilitate and expedite 
the review of documents obtained from a person in the course of 
discovery that contain trade secrets and privileged or confidential 
commercial or financial information. It establishes the manner in 
which ``Confidential Information,'' as that term is defined herein, 
is to be treated. The Order is not intended to constitute a 
resolution of the merits concerning whether any Confidential 
Information would be released publicly by the Commission upon a 
proper request under the Freedom of Information Act or other 
applicable law or regulation, including 47 CFR Sec.  0.442.
    2. Definitions.
    a. Authorized Representative. ``Authorized Representative'' 
shall have the meaning set forth in Paragraph 7.
    b. Commission. ``Commission'' means the Federal Communications 
Commission or any arm of the Commission acting pursuant to delegated 
authority.
    c. Confidential Information. ``Confidential Information'' means 
(i) information submitted to the Commission by the Submitting Party 
that has been so designated by the Submitting Party and which the 
Submitting Party has determined in good faith constitutes trade 
secrets and commercial or financial information which is privileged 
or confidential within the meaning of Exemption 4 of the Freedom of 
Information Act, 5 U.S.C. 552(b)(4) and (ii) information submitted 
to the Commission by the Submitting Party that has been so 
designated by the Submitting Party and which the Submitting Party 
has determined in good faith falls within the terms of Commission 
orders designating the items for treatment as Confidential 
Information. Confidential Information includes additional copies of, 
notes, and information derived from Confidential Information.
    d. Declaration. ``Declaration'' means Attachment A to this 
Protective Order.
    e. Reviewing Party. ``Reviewing Party'' means a person or entity 
participating in this proceeding or considering in good faith filing 
a document in this proceeding.
    f. Submitting Party. ``Submitting Party'' means a person or 
entity that seeks confidential treatment of Confidential Information 
pursuant to this Protective Order.
    2A. Claim of Confidentiality. The Submitting Party may designate 
information as ``Confidential Information'' consistent with the 
definition of that term in Paragraph 2.c of this Protective Order. 
The Commission may, sua sponte or upon petition, pursuant to 47 CFR 
0.459 and 0.461, determine that all or part of the information 
claimed as ``Confidential Information'' is not entitled to such 
treatment.
    3. Procedures for Claiming Information is Confidential. 
Confidential Information submitted to the Commission shall be filed 
under seal and shall bear on the front page in bold print, 
``CONTAINS PRIVILEGED AND CONFIDENTIAL INFORMATION--DO NOT 
RELEASE.'' Confidential Information shall be segregated by the 
Submitting Party from all non-confidential information submitted to 
the Commission. To the extent a document contains both Confidential 
Information and non-confidential information, the Submitting Party 
shall designate the specific portions of the document claimed to 
contain Confidential Information and shall, where feasible, also 
submit a redacted version not containing Confidential Information.
    4. Storage of Confidential Information at the Commission. The 
Secretary of the Commission or other Commission staff to whom 
Confidential Information is submitted shall place the Confidential 
Information in a non-public file. Confidential Information shall be 
segregated in the files of the Commission, and shall be withheld 
from inspection by any person not bound by the terms of this 
Protective Order, unless such Confidential Information is released 
from the restrictions of this Order either through agreement of the 
parties, or pursuant to the order of the Commission or a court 
having jurisdiction.
    5. Access to Confidential Information. Confidential Information 
shall only be made available to Commission staff, Commission 
consultants and to counsel to the Reviewing Parties, or if a 
Reviewing Party has no counsel, to a person designated by the 
Reviewing Party. Before counsel to a Reviewing Party or such other 
designated person designated by the Reviewing Party may obtain 
access to Confidential Information, counsel or such other designated 
person must execute the attached Declaration. Consultants under 
contract to the Commission may obtain access to Confidential 
Information only if they have signed, as part of their employment 
contract, a non-disclosure agreement the scope of which includes the 
Confidential Information, or if they execute the attached 
Declaration.
    6. Disclosure. Counsel to a Reviewing Party or such other person 
designated pursuant to Paragraph 5 may disclose Confidential 
Information to other Authorized Representatives to whom disclosure 
is permitted under the terms of paragraph 7 of this Protective Order 
only after advising such Authorized Representatives of the terms and 
obligations of the Order. In addition, before Authorized 
Representatives may obtain access to Confidential Information, each 
Authorized Representative must execute the attached Declaration.
    7. Authorized Representatives shall be limited to:
    a. Subject to Paragraph 7.d, counsel for the Reviewing Parties 
to this proceeding,

[[Page 56663]]

including in-house counsel, actively engaged in the conduct of this 
proceeding and their associated attorneys, paralegals, clerical 
staff and other employees, to the extent reasonably necessary to 
render professional services in this proceeding;
    b. Subject to Paragraph 7.d, specified persons, including 
employees of the Reviewing Parties, requested by counsel to furnish 
technical or other expert advice or service, or otherwise engaged to 
prepare material for the express purpose of formulating filings in 
this proceeding; and
    c. Subject to Paragraph 7.d, any person designated by the 
Commission in the public interest, upon such terms as the Commission 
may deem proper; except that,
    d. Disclosure shall be prohibited to any persons in a position 
to use the Confidential Information for competitive commercial or 
business purposes, including persons involved in competitive 
decision-making, which includes, but is not limited to, persons 
whose activities, association or relationship with the Reviewing 
Parties or other Authorized Representatives involve rendering advice 
or participating in any or all of the Reviewing Parties', Associated 
Representatives' or any other person's business decisions that are 
or will be made in light of similar or corresponding information 
about a competitor.
    8. Inspection of Confidential Information. Confidential 
Information shall be maintained by a Submitting Party for inspection 
at two or more locations, at least one of which shall be in 
Washington, D.C. Inspection shall be carried out by Authorized 
Representatives upon reasonable notice not to exceed one business 
day during normal business hours.
    9. Copies of Confidential Information. The Submitting Party 
shall provide a copy of the Confidential Material to Authorized 
Representatives upon request and may charge a reasonable copying fee 
not to exceed twenty five cents per page. Authorized Representatives 
may make additional copies of Confidential Information but only to 
the extent required and solely for the preparation and use in this 
proceeding. Authorized Representatives must maintain a written 
record of any additional copies made and provide this record to the 
Submitting Party upon reasonable request. The original copy and all 
other copies of the Confidential Information shall remain in the 
care and control of Authorized Representatives at all times. 
Authorized Representatives having custody of any Confidential 
Information shall keep the documents properly and fully secured from 
access by unauthorized persons at all times.
    10. Filing of Declaration. Counsel for Reviewing Parties shall 
provide to the Submitting Party and the Commission a copy of the 
attached Declaration for each Authorized Representative within five 
(5) business days after the attached Declaration is executed, or by 
any other deadline that may be prescribed by the Commission.
    11. Use of Confidential Information. Confidential Information 
shall not be used by any person granted access under this Protective 
Order for any purpose other than for use in this proceeding 
(including any subsequent administrative or judicial review), shall 
not be used for competitive business purposes, and shall not be used 
or disclosed except in accordance with this Order. This shall not 
preclude the use of any material or information that is in the 
public domain or has been developed independently by any other 
person who has not had access to the Confidential Information nor 
otherwise learned of its contents.
    12. Pleadings Using Confidential Information. Submitting Parties 
and Reviewing Parties may, in any pleadings that they file in this 
proceeding, reference the Confidential Information, but only if they 
comply with the following procedures:
    a. Any portions of the pleadings that contain or disclose 
Confidential Information must be physically segregated from the 
remainder of the pleadings and filed under seal;
    b. The portions containing or disclosing Confidential 
Information must be covered by a separate letter referencing this 
Protective Order;
    c. Each page of any Party's filing that contains or discloses 
Confidential Information subject to this Order must be clearly 
marked: ``Confidential Information included pursuant to Protective 
Order, [cite proceeding];'' and
    d. The confidential portion(s) of the pleading, to the extent 
they are required to be served, shall be served upon the Secretary 
of the Commission, the Submitting Party, and those Reviewing Parties 
that have signed the attached Declaration. Such confidential 
portions shall be served under seal, and shall not be placed in the 
Commission's Public File unless the Commission directs otherwise 
(with notice to the Submitting Party and an opportunity to comment 
on such proposed disclosure). A Submitting Party or a Reviewing 
Party filing a pleading containing Confidential Information shall 
also file a redacted copy of the pleading containing no Confidential 
Information, which copy shall be placed in the Commission's public 
files. A Submitting Party or a Reviewing Party may provide courtesy 
copies of pleadings containing Confidential Information to 
Commission staff so long as the notations required by this Paragraph 
12 are not removed.
    13. Violations of Protective Order. Should a Reviewing Party 
that has properly obtained access to Confidential Information under 
this Protective Order violate any of its terms, it shall immediately 
convey that fact to the Commission and to the Submitting Party. 
Further, should such violation consist of improper disclosure or use 
of Confidential Information, the violating party shall take all 
necessary steps to remedy the improper disclosure or use. The 
Violating Party shall also immediately notify the Commission and the 
Submitting Party, in writing, of the identity of each party known or 
reasonably suspected to have obtained the Confidential Information 
through any such disclosure. The Commission retains its full 
authority to fashion appropriate sanctions for violations of this 
Protective Order, including but not limited to suspension or 
disbarment of attorneys from practice before the Commission, 
forfeitures, cease and desist orders, and denial of further access 
to Confidential Information in this or any other Commission 
proceeding. Nothing in this Protective Order shall limit any other 
rights and remedies available to the Submitting Party at law or 
equity against any party using Confidential Information in a manner 
not authorized by this Protective Order.
    14. Termination of Proceeding. Within two weeks after final 
resolution of this proceeding (which includes any administrative or 
judicial appeals), Authorized Representatives of Reviewing Parties 
shall, at the direction of the Submitting Party, destroy or return 
to the Submitting Party all Confidential Information as well as all 
copies and derivative materials made, and shall certify in a writing 
served on the Commission and the Submitting Party that no material 
whatsoever derived from such Confidential Information has been 
retained by any person having access thereto, except that counsel to 
a Reviewing Party may retain two copies of pleadings submitted on 
behalf of the Reviewing Party. Any confidential information 
contained in any copies of pleadings retained by counsel to a 
Reviewing Party or in materials that have been destroyed pursuant to 
this paragraph shall be protected from disclosure or use 
indefinitely in accordance with paragraphs 9 and 11 of this 
Protective Order unless such Confidential Information is released 
from the restrictions of this Order either through agreement of the 
parties, or pursuant to the order of the Commission or a court 
having jurisdiction.
    15. No Waiver of Confidentiality. Disclosure of Confidential 
Information as provided herein shall not be deemed a waiver by the 
Submitting Party of any privilege or entitlement to confidential 
treatment of such Confidential Information. Reviewing Parties, by 
viewing these materials: (a) agree not to assert any such waiver; 
(b) agree not to use information derived from any confidential 
materials to seek disclosure in any other proceeding; and (c) agree 
that accidental disclosure of Confidential Information shall not be 
deemed a waiver of the privilege.
    16. Additional Rights Preserved. The entry of this Protective 
Order is without prejudice to the rights of the Submitting Party to 
apply for additional or different protection where it is deemed 
necessary or to the rights of Reviewing Parties to request further 
or renewed disclosure of Confidential Information.
    17. Effect of Protective Order. This Protective Order 
constitutes an Order of the Commission and an agreement between the 
Reviewing Party, executing the attached Declaration, and the 
Submitting Party.
    18. Authority. This Protective Order is issued pursuant to 
Sections 4(i) and 4(j) of the Communications Act as amended, 47 
U.S.C. 154(i), (j) and 47 CFR 0.457(d).

Attachment A to Standard Protective Order

DECLARATION

In the Matter of-------------------------------------------------------
[Name of Proceeding]---------------------------------------------------
Docket No.-------------------------------------------------------------

    I, ------------, hereby declare under penalty of perjury that I 
have read the

[[Page 56664]]

Protective Order that has been entered by the Commission in this 
proceeding, and that I agree to be bound by its terms pertaining to 
the treatment of Confidential Information submitted by parties to 
this proceeding. I understand that the Confidential Information 
shall not be disclosed to anyone except in accordance with the terms 
of the Protective Order and shall be used only for purposes of the 
proceedings in this matter. I acknowledge that a violation of the 
Protective Order is a violation of an order of the Federal 
Communications Commission. I acknowledge that this Protective Order 
is also a binding agreement with the Submitting Party. I am not in a 
position to use the Confidential Information for competitive 
commercial or business purposes, including competitive decision-
making, and my activities, association or relationship with the 
Reviewing Parties, Authorized Representatives, or other persons does 
not involve rendering advice or participating in any or all of the 
Reviewing Parties,' Associated Representatives' or other persons' 
business decisions that are or will be made in light of similar or 
corresponding information about a competitor.
(signed)---------------------------------------------------------------
(printed name)---------------------------------------------------------
(representing)---------------------------------------------------------
(title)----------------------------------------------------------------
(employer)-------------------------------------------------------------
(address)--------------------------------------------------------------
(phone)----------------------------------------------------------------
(date)-----------------------------------------------------------------

[FR Doc. 07-4935 Filed 10-3-07; 8:45 am]

BILLING CODE 6712-01-P