**Before the**

**Federal Communications Commission**

**Washington, D.C. 20554**

In the Matter of )

)

Implementation of Section 11(c) )

of the Cable Television Consumer Protection )

and Competition Act of 1992 ) MM Docket No. 92-264

)

)

Horizontal Ownership Limits )

**THIRD REPORT AND ORDER**

**Adopted: October 8, 1999 Released: October 20, 1999**

By the Commission: Commissioner Furchtgott-Roth concurring in part,
dissenting in part and issuing a statement; Commissioner Tristani
approving in part, dissenting in part and issuing a statement.

### Table of Contents

Paragraph

I. Introduction 1

II\. Background 7

III\. Basis for the Rules 12

IV\. Using Actual Subscriber Numbers to Calculate the Horizontal Limit
20

V. Using Total MVPD Subscribership to Calculate the Horizontal Limit 26

VI\. The Level of the Horizontal Ownership Limit 36

VII\. The Minority Control Allowance 66

VIII\. Motion to Lift Stay of Enforcement of Horizontal Ownership Rules
71

IX\. Final Regulatory Flexibility Analysis 74

X. Paper Work Reduction Act 87

XI\. Ordering Clauses 89

Appendix A: List of Commenters

Appendix B: Rule Amendments

## 

##  INTRODUCTION

1.  This *Third Report and Order* resolves the issues regarding Section
    76.503 of our rules (the "horizontal ownership rules")[^1] on which
    the Commission sought further comment in its *Second Memorandum
    Opinion and Order on Reconsideration and Further Notice of Proposed
    Rulemaking* ("*Second Order on Reconsideration*" and "*Further
    Notice*") issued in this proceeding.[^2] In the *Second Order on
    Reconsideration*, the Commission denied petitions to reconsider the
    horizontal ownership rules, which were adopted pursuant to Section
    613 of the Communications Act[^3] in the *Second Report and Order*
    issued in this proceeding.[^4] Section 613 of the Communications Act
    required the Commission to "prescribe rules and regulations
    establishing reasonable limits on the number of cable subscribers a
    person is authorized to reach through cable systems owned by such a
    person, or in which such a person has an attributable interest."[^5]
    In the *Second Report and Order*, the Commission promulgated
    horizontal ownership rules which provide that "no person or entity
    shall be permitted to reach more than 30% of all homes passed
    nationwide through cable systems owned by such person or entity or
    in which such person or entity holds an attributable interest."[^6]
    In addition, the Commission decided to permit cable systems to reach
    up to 35% of all homes passed nationwide "provided \[that\] the
    additional cable systems, beyond 30% of homes passed nationwide, are
    minority-controlled" (the "minority-control allowance").[^7]

2.  In the *Second Order on Reconsideration*, the Commission also
    continued its stay of the effective date of the horizontal ownership
    rules pending a decision by the United States Court of Appeals for
    the District of Columbia Circuit on challenges to the horizontal
    ownership rules and Section 613.[^8] The Commission decided that any
    parties over the horizontal limit must come into compliance with the
    rules within 60 days of a judicial decision upholding the statute
    and the rules.[^9] However, in order to facilitate monitoring of a
    cable multiple system operator's ("MSO") ownership interests, the
    Commission lifted the stay insofar as it applied to the information
    submission provisions of 47 C.F.R. § 76.503(c).[^10]

3.  The rules and the statute were challenged in two different forums.
    In *Daniels Cablevision, Inc. v. United States*, the United States
    District Court for the District of Columbia held that Section
    613(f)(1)(a) violates the First Amendment.[^11] The *Daniels* court
    also decided that, because \"there is substantial ground for
    difference of opinion\" as to the constitutionality of the
    underlying statute, it would stay its proceedings and the issuance
    of any relief to the plaintiffs pending appeal. Time Warner then
    challenged the horizontal ownership rules in the District of
    Columbia Circuit in *Time Warner Entertainment Co., L. P. v.
    FCC*.[^12] In August 1996, the District of Columbia Circuit
    consolidated the appeal of *Daniels* with *Time Warner*.[^13] The
    District of Columbia Circuit held the consolidated appeals in
    abeyance pending the Commission's decision on the petitions for
    reconsideration.[^14] Once the Commission issued the *Second Order
    on Reconsideration*, the District of Columbia Circuit lifted its
    stay on its consideration of the consolidated *Daniels* and *Time
    Warner* proceedings. The appeal is currently pending.

4.  In the *Further Notice*, we requested comment on whether 30% remains
    the appropriate horizontal limit in light of any changes in market
    conditions since 1993, when the *Second Report and Order* was
    issued.[^15] We sought comment on three specific issues. First, the
    current horizontal rules are based on the number of homes that a
    cable system passes (i.e., homes that could possibly subscribe to
    the cable system) rather than the cable system's actual number of
    subscribers. We asked whether we should amend the rules to base
    calculations on actual subscribers. Second, the horizontal ownership
    limits currently are calculated based on an MSO's share of cable
    subscribers. Given the growth of non-cable multiple video
    programming distributors ("MVPDs"), we asked for comment on whether
    the calculations should take into account the presence of all MVPD
    subscribers rather than cable subscribers alone. Third, we sought
    comment on the constitutionality of the minority-control allowance
    under *Adarand Constructors, Inc. v. Pena*, 515 U.S. 200 (1995) and
    whether there were alternative minority policies that might satisfy
    *Adarand's* standards.[^16]

5.  After analyzing the statute and the comments filed in response to
    the *Further Notice*, [^17] we conclude that the following changes
    should be made in the rules:

-   The calculation of the horizontal limit should be based on cable
    subscribers served rather than on cable homes passed;

-   The limit should include consideration of all MVPD subscribers
    rather than just cable subscribers;

-   The number of subscribers a single entity is permitted to reach
    through cable systems it owns or in which it has an attributable
    interest should be limited to 30 percent of MVPD subscribers in the
    United States.

-   An operator's horizontal share should not include cable subscribers
    that it serves through means other than through "incumbent cable
    franchises" so that a system operator may grow over the limit by
    overbuilding other incumbent cable operators; and

-   The "minority-control" allowance in the existing rules should be
    eliminated.

6.  These changes will make the rules easier to understand and
    implement, recognize the dynamic factors relating to the growth of
    the MVPD market, and allow cable ownership interests to increase as
    competition in the market increases. The new 30% rule, because it is
    now a share of MVPD subscribers rather than on cable subscribers
    alone, is effectively the same as a 36.7% cable subscribers limit
    using the measurement system in the previous rules. The
    minority-control allowance is being deleted in light of the fact
    that no party filed comments on this issue to argue that the
    allowance is effective, should be retained or might be beneficial,
    and in light of the possible constitutional issues that the
    allowance raised. Finally, we deny the request of one of the
    petitioners that we permit any transaction under contract prior to
    the release of the *Further Notice* to be continued regardless of
    the new rules. We deny requests to lift the stay of our horizontal
    ownership rules, and reiterate that all parties must comply with the
    rules within sixty days after the court issues its mandate upholding
    Section 613 and the rules.

## 

## Background

7.  Section 613(f) of the Communications Act requires the Commission

> to prescribe rules and regulations establishing reasonable limits on
> the number of cable subscribers a person is authorized to reach
> through cable systems owned by such person, or in which such person
> has an attributable interest. [^18]

8.  Congress did not direct the Commission to use a mathematical formula
    in determining the horizontal limits. Rather, Congress directed in
    Section 613(f)(2) that, the Commission must consider and balance,
    among other public interest objectives, seven specific public
    interest guidelines in determining the appropriate horizontal
    limits. These public interest guidelines are:

\(A\) ensure that no cable operator or group of cable operators can
unfairly impede, either because of the size of any individual operator
or because of joint actions by a group of operators of sufficient size,
the flow of video programming from the programmer to the consumer;

\(B\) ensure that cable operators affiliated with video programmers do
not favor such programmers in determining carriage on their cable
systems or do not unreasonably restrict the flow of video programming of
affiliated video programmers to other video distributors;

> \(C\) take particular account of the market structure, ownership
> patterns, and other relationships of the cable industry, including the
> nature and market power of the local franchise, the joint ownership of
> cable systems and video programmers, and the various types of
> non-equity controlling interests;
>
> \(D\) account for any efficiencies and other benefits that might be
> gained through increased ownership or control;
>
> \(E\) make such rules and regulations reflect the dynamic nature of
> the communications marketplace;
>
> \(F\) not impose limitations which would bar cable operators from
> serving previously unserved rural areas; and
>
> \(G\) not impose limitations which would impair the development of
> diverse and high quality programming.[^19]

9.  The 1992 Cable Act and its legislative history indicate heightened
    Congressional concern over horizontal concentration among cable
    operators. Witnesses at the congressional hearings, including
    representatives of the MSOs themselves, testified to the need for
    cable horizontal ownership limits to preserve competition and
    protect the public interest.[^20] Congress was concerned that the
    concentration of cable systems in the hands of a few "media
    gatekeepers" could potentially bar entry to new programmers and
    reduce the number of media voices available to consumers.[^21]

10. However, Congress also recognized that multiple system ownership
    could provide benefits to consumers. The House Report stated that
    cable industry consolidation had benefited consumers by allowing
    efficiencies in the administration, distribution and procurement of
    programming, and also noted that concentration of cable operators
    could promote the introduction of new programming services by
    providing capital and a ready subscriber base for new services.[^22]
    The House Report also observed that large cable MSOs can take
    competitive and programming risks that smaller operators
    cannot.[^23] Similarly, the Senate Report acknowledged that
    horizontal concentration could create efficiencies from lower
    transaction costs in carriage negotiations between programmers and
    cable operators.[^24]

11. In the *Second Report and Order*, the Commission adopted a
    horizontal ownership limit prohibiting any person from having an
    attributable interest in cable systems that in the aggregate reach
    more than 30% of cable homes passed nationwide. We found that this
    30% ownership limit struck the proper balance between: (1) ensuring
    that the structure of the cable industry nationwide limited the
    possibility that large cable MSOs might exercise excessive market
    power in the purchase of video programming; and (2) ensuring that
    the majority of MSOs could continue to expand and benefit from the
    economies of scale necessary to encourage investment in new video
    programming services, diverse program offerings, and the deployment
    of advanced cable technologies.[^25] In order to promote diversity
    of ownership, we also adopted the minority-control allowance, which
    allows an MSO to reach an additional 5% of homes passed by cable
    nationwide if these homes are reached by cable systems that are more
    than 50% owned by one or more members of a minority group.[^26]

## 

## Basis for the Rules

12. Congress directed the Commission to establish horizontal rules; yet
    > in response to the *Notice* in this proceeding and in the course
    > of the judicial proceedings relating to Section 613, a number of
    > commenters make arguments that, while sometimes couched as pleas
    > for a higher limit, appear to challenge the legitimacy and
    > rational basis of any regulations of the type Section 613(f)
    > requires the Commission to adopt. They argue:

-   that increases in channel capacity, through system upgrades and the
    introduction of digital channels, reduce the practical need as well
    as the ability of operators to select among alternative content
    sources; [^27]

-   that other rules, including mandatory broadcast signal carriage,
    channel occupancy, leased access, and public access rules, eliminate
    the need for ownership limits that are also designed to promote
    programming competition and content diversity; [^28]

-   that cable system operators as purchasers of programming content for
    their subscribers are bound by marketplace forces so that they
    acquire only that product which their subscribers demand and there
    is no evidence that cable operators have ever used their editorial
    discretion to deny an outlet for unorthodox or unpopular
    speech;[^29]

-   that, if any problems exist in this area, they can be addressed
    through ordinary antitrust enforcement processes. [^30]

We are not persuaded that these arguments are responsive to Congress'
concerns in adopting Section 613(f).

13. With respect to the channel capacity argument, system operators are
    implicitly suggesting that increased capacity translates into an
    increased demand for programming. This change in the supply and
    demand relationship between purchasers and sellers of programming
    would, it appears they are arguing, tend to mitigate concerns that
    are based on the buying (monopsony) power of system operators.

14. In most markets, a single incumbent cable operator is likely to have
    more than 80% of the multichannel video distribution market.
    Although calculations of market power are almost always complex, a
    frequently cited compendium of monopoly cases concludes that "market
    share in excess of 70% is almost always deemed sufficient to support
    an inference of monopoly power, although that inference may be
    overcome by other evidence."[^31] The cable television industry has
    become, in the words of the 1992 Cable Television Consumer
    Protection and Competition Act "A dominant nationwide video
    medium."[^32] On the other hand, the programming supply market is
    extremely competitive with increases in cable channel capacity, with
    the growth rate of new programmers rapidly outpacing the growth of
    new channels.[^33] The Commission's *1998 Competition Report* found
    that there were 245 national cable networks and that 65 new cable
    networks were planned to launch in the near future.[^34] The
    decreasing marginal value of additional channels, the more limited
    exposure these channels receive by virtue of their placement on
    digital or other tiers to which subscribership is restricted and the
    associated difficulties of attracting an audience base to support
    advertising sales all tend to suggest that capacity increases have
    not had the consequence suggested and that channel expansion has not
    negated the Congressional concerns. Cable operators still have the
    power to decide which cable networks will "make it" even as channel
    capacity grows.[^35]

15. The suggestion that other statutory provisions and Commission rules
    effectively address the same concerns we find equally unpersuasive.
    We believe Congress passed Section 613 to address specific concerns
    regarding the development of the video-programming market. Since
    Congress was aware of the interplay between the horizontal rule and
    the other rules addressing programming, it is clear that Congress
    intended for all the rules to work together in a complementary
    fashion. In any event, we do not believe that the goals of Section
    613 are addressed by other statutory provisions. The channel
    occupancy rules[^36] adopted pursuant to Section 613 of the
    Communications Act are intended to address only that programming
    that is controlled through direct ownership rather than through
    purchase and apply only to channel capacity up to 75 channels. The
    leased access rules,[^37] while intended to address some of the same
    kinds of concerns, require the programmer to pay for carriage, a
    model which thus far has not resulted in any significant amount of
    nationally distributed programming content being made available to
    the public. The must-carry requirement[^38] applies only to
    broadcasters, not to other unaffiliated programmers. Moreover the
    content of the broadcast stations that are carried, even when
    carried pursuant to mandatory obligations, is not totally divorced
    in terms of ownership and editorial voice from the cable systems
    involved. There are significant common ownership ties between a
    number of the broadcast networks involved and cable television
    system operators, including for example, significant AT&T (Liberty)
    ownership interests in News Corp. (the Fox networks), Time Warner
    and MediaOne ownership in The WB network, AT&T (Liberty) ownership
    in Telemundo, and Comcast and AT&T interests in QVC and HSN. These
    statutory based requirements thus share common objectives with the
    horizontal rules and function in a mutually supportive fashion with
    them but the contention that they are less restrictive methods of
    accomplishing the same substantive result is not correct. None of
    these rules fully address the core concern of national programming
    content diversity to which the horizontal limits are directed.

16. The Commission specifically considered how the behavioral rules
    interact with the horizontal ownership rules when it adopted the
    rules in this proceeding.[^39] The limit is a structural complement
    to the other access provisions.[^40] Thus, for example, it was
    explained that the horizontal ownership rules limit the potential
    for anticompetitive abuses of purchasing power in areas outside of
    the core areas covered by the program access rules, such as
    programming contracts between cable operators and non-vertically
    integrated programmers or contracts involving programming that is
    not delivered to cable operators via satellite. In addition,
    structural regulations generally are more easily enforced and their
    violation more easily detected than conduct regulations. We
    recognize that a large market share does not in and of itself
    indicate that a firm or a collection of firms has the ability to
    exercise market power or engage in anticompetitive behavior.[^41]
    The cable operators have presented no new arguments in response to
    the *Further Notice* that would alter these findings.

17. The suggestion that cable system operators are somehow involved in
    content decisions only as somewhat mechanical purchasing agents for
    their subscribers, without independent discretion over the nature of
    that product, is equally unavailing as a response to the concerns
    reflected in Section 613. Because there are more programming
    services available for distribution than there are cable channels to
    be used for distribution, systems operator inevitably must make
    judgments as to which services will be carried. Marketing and other
    economic considerations that involve both the desire to satisfy
    consumer demands and independent profit calculations certainly play
    a major role in programming distribution decisions. But there would
    also seem to be little doubt, especially when the value of
    programming content may be difficult to determine in advance of its
    distribution, that issues of judgment, showmanship, social
    conscience, and personal taste are also involved.[^42] The cable
    television industry has programming expenditures of almost eight
    billion dollars annually.[^43] If these expenditures were allocated
    evenly across the industry, a firm with 30% of the market would pay
    \$2.5 billion annually for programming, making it one of the largest
    purchasers of entertainment programming in the world.

18. With respect to the argument that ordinary antitrust policies and
    enforcement are sufficient to address any legitimate issues raised,
    we fail to understand why the statutory provisions and policies
    incorporated into antitrust law should be favored over the more
    targeted legislative mandate incorporated in Section 613. We agree
    with Ameritech that, if Congress had intended for us to rely on an
    antitrust analysis by itself, it would have directed us to do so or
    would not have adopted Section 613.[^44] Instead, Congress directed
    that the Commission, in setting the horizontal limit, consider
    "among other public interest objectives" seven specific factors,
    none of which involves an antitrust analysis.[^45] Indeed, in
    enacting Section 613, Congress was aware that the cable industry at
    that time was far from being concentrated under a traditional
    antitrust analysis assuming a national market for cable competition,
    but nevertheless empowered the Commission to enact horizontal limits
    using a public interest analysis.[^46] The House Report stated that
    a traditional antitrust analysis should not be the "sole measure of
    concentration in media industries:"

> Both Congress and the Commission have historically recognized that
> diversity of information sources can only be assured by imposing
> limits on the ownership of media outlets that are substantially below
> those that a traditional antitrust analysis would allow . . . . The
> Committee believes that concentration of media presents unique
> problems that must be considered by the Commission.[^47]

19. In sum, we do not find persuasive arguments that the concerns
    leading to the adoption of Section 613 are adequately addressed by
    market forces or technical changes, are not significant enough to
    warrant remedial action, or are properly addressed through other
    regulatory mechanisms.

## 

## IV. Using Homes Passed or Actual Subscriber Numbers to Calculate the Horizontal Limit

## 

## A. Background

## 

## The rules adopted in the *Second Report and Order* were based on a formula that related homes passed by an individual cable operator to the total homes passed by all cable operators nationwide.[^48] We stated that a homes-passed standard would calculate a more stable number than a subscribers-based system because subscriber numbers fluctuate more often than homes passed.[^49] In addition, we noted the arguments by some commenters that a subscriber-based standard might deter a cable operator from adding additional subscribers within its current systems as the operator approached the limit.[^50] In the *Further Notice*, we again asked whether the horizontal limits should be based on the number of actual subscribers or the number of homes passed.[^51] We noted that a subscriber-based standard might present a more reliable number and could be more accurately calculated. In addition, we stated that if we amended the rules to include all MVPDs in the calculation, a homes-passed standard would be difficult to implement because several MVPDs might pass the same homes and Direct Broadcast Satellite ("DBS") programming providers pass every home in the country.[^52] In addition to requesting comment on the benefits of a subscriber-based system, we sought comment on whether an operator approaching the limit might stop taking new subscribers or whether it would be able to anticipate the need to sell one of its systems in order to stay within the limit. We also asked whether we should devise special rules to address situations where subscriber growth within an operator's current systems might push the operator over the 30% limit.

> **B. Discussion**

20. We will amend our rules to base them on how many subscribers an
    operator serves. Although homes passed might be a more stable number
    in that it does not fluctuate as often as numbers of
    subscribers,[^53] it is not as reliable as the number for
    subscribers because homes passed calculations are based on estimates
    whereas subscriber numbers are based on billing records.[^54]

21. More importantly, the horizontal ownership rules are designed to
    gauge the market power that an operator could potentially assert in
    the national programming marketplace.[^55] In situations where there
    is only a single multichannel video provider, whether subscribership
    or homes passed data is used is largely a mechanical issue in terms
    of the market power issue. The return received by the content
    provider could equally be based on a share of revenues received,
    subscribers served, or size of the community involved depending on
    the contractual and economic (risk sharing) relationships involved.
    As the market develops in terms of competition we believe, in
    contrast to the argument made by RCN and in agreement with the cable
    operators, that an operator\`s actual number of subscribers more
    uniformly and accurately reflects power in the programming
    marketplace than does the number of homes passed.[^56] While an
    operator may pass a large number of homes in its franchise area, the
    operator could have a low penetration rate in that area due to
    competition from other MVPDs or other factors, thereby rendering the
    number of homes passed an inaccurate indicator of the operator's
    market power.[^57] Moreover, an operator does not purchase
    programming for the number of homes that it passes, but rather for
    its actual number of subscribers; thus, an operator's share of
    subscribers more accurately reflects its market power.

22. In addition, our decision below to include non-cable MVPDs in the
    horizontal limits calculation further supports our decision to rely
    on subscriber numbers. More than one MVPD may pass the same homes,
    making it difficult to determine an MVPD's share of the MVPD market
    on a homes passed basis. Moreover, although DBS providers pass every
    home in the country, homes passed does not accurately reflect their
    market power because DBS providers only serve approximately 10% of
    MVPD subscribers.[^58]

23. Any theoretical deterrence that a subscribers-based limit might pose
    to keep an operator from adding new subscribers when the operator
    reaches the limit[^59] does not outweigh the benefits of a
    subscribers-based system and does not merit an exception to the
    limit. Based on this record, we find it more reasonable that an
    operator will be aware of its potential growth areas when making
    acquisitions such that it will not cease accepting new subscribers
    in existing systems for fear of passing the limit. In their
    comments, the operators set forth in great detail their plans for
    consolidating or clustering their systems in order to enjoy the
    economies of scale that a large subscriber base will give them. The
    operators argue that a larger subscriber base in a clustered system
    will enable them to lower costs, improve current services, offer
    telephony and internet, and develop regional programming networks,
    as well as provide other benefits. [^60] Given their long-term
    business planning and stated interest in clustering, operators will
    know in advance which systems they intend to grow for a larger
    subscriber base and which systems they intend to sell. Accordingly,
    an operator with an interest in the economic efficiency of its
    clusters would likely plan in advance to divest itself of a system
    rather than forego adding subscribers to systems or clusters within
    the operator's growth plan.

24. Thus, we disagree with MediaOne and Time Warner that an exception is
    needed based on the need to reflect in the rules "the dynamic nature
    of the communications marketplace."[^61] Once the rules are in
    effect, nothing in the record suggests that, under the dynamics of
    the marketplace, an operator might find itself suddenly surprised
    that it cannot take any more subscribers without violating the
    horizontal ownership rules. We also disagree with MediaOne that an
    exception is necessary to ensure that cable operators are not
    prevented from servicing previously unserved rural areas.[^62]
    MediaOne has not shown how a subscribers-based method impacts a
    rural area any differently than it impacts an urban area. MediaOne
    argues that, without an exception, the horizontal limit might
    prevent cable systems from expanding to certain rural areas in
    violation of some franchise agreements. First, cable already passes
    nearly 97% of homes nationwide.[^63] Second, an operator is on
    notice with regard to the horizontal ownership rules and its
    franchise obligations, and the horizontal rules will not prevent a
    cable system from fulfilling its franchise obligations. If a
    franchise agreement requires an operator to expand its
    subscribership such that the operator will violate the horizontal
    limits, then the operator must divest a system elsewhere in order to
    stay within the limits and to meet its franchise obligations.

## 

## 

## Using Total MVPD Subscribership to Calculate the Horizontal Limit

> **A. Background**

25. In the *Further Notice*, we proposed that the horizontal ownership
    rules reflect the presence of all MVPDs rather than cable MVPDs
    alone in order to reflect changes in the MVPD market and their
    impact on programming power.[^64] We noted that the emergence of
    non-cable MVPDs diminishes an operator's market power over
    programming while conversely an operator's interest in non-cable
    MVPDs increases its market power.[^65] We requested comment on
    whether such a revision would be consistent with the Commission's
    statutory authority under Section 613.[^66] In calculating a cable
    operator's market share, we proposed that the numerator would
    contain the operator's cable subscribers plus that operator's
    non-cable MVPD subscribers, and the denominator would contain the
    total number of cable subscribers plus non-cable MVPD subscribers
    nationwide.[^67]

**B. Discussion**

26. We conclude that it is appropriate under Section 613 to include all
    MVPD subscribers in the horizontal limits calculation in order to
    reflect changes in the marketplace since 1993. In order to encourage
    competition through overbuilding, however, we will not include cable
    subscribers that an MSO serves through non-incumbent cable systems,
    as that phrase is defined below. In the Commission's determination
    of the appropriate measurements under the horizontal ownership
    rules, Section 613(f)(2)(A) requires the Commission to ensure that a
    cable operator cannot, by virtue of its size or by acting in concert
    with other cable operators, unfairly impede the distribution of
    video programming.[^68] Moreover, Section 613(f)(2)(E) requires the
    Commission to consider "the dynamic nature of the communications
    marketplace."[^69]

27. The MVPD marketplace has changed since 1993. In our *Competition
    Reports*, we have stated that the effect of horizontal concentration
    on programming should take into account the presence of all MVPDs:

> in assessing the impact that national concentration may have in the
> MVPD programming market, we believe that it is appropriate to consider
> the presence of all MVPDs and MVPD subscribers in national
> concentration figures, and not just cable MSOs and cable subscribers.
> As non-cable MVPD subscribership increases, the significance of DBS,
> MMDS and SMATV operators in the MVPD program purchasing market also
> increases.[^70]

28. Although cable continues to be the primary source of multichannel
    programming, its share of the MVPD market fell to approximately
    81.77% in June 1998[^71] and to 85.34% in June 1998 from 93.37% in
    December 1994.[^72] Currently, DBS has a 12.47% market share, home
    satellite delivery ("HDS") has a 2.21% market share, MMDS has a
    1.73% market share, SMATV has a 1.73% market share, and OVS has a
    0.09% market share.[^73] Between June 1997 and June 1998, DBS grew
    from approximately 5 million subscribers to 7.2 million subscribers,
    an increase of almost 43%.[^74] By June 1999, DBS had grown to
    10.078 million subscribers.[^75]

29. Given the past and expected future growth of non-cable MVPDs, we
    believe that it is consistent with Section 613's mandate to include
    all MVPD subscribers in both the denominator and the numerator when
    calculating an MSO's market share under the cable horizontal limits.
    We reject the argument that non-cable MVPDs should not be placed in
    the denominator because cable has certain types of competitive
    advantages over non-cable MVPDs.[^76] Although we agree that cable
    is still dominant in the MVPD marketplace, non-cable MVPDs have a
    growing impact on that marketplace. Inclusion of both cable and
    non-cable MVPD subscribers in the denominator will reflect the
    dynamic nature of the marketplace and the diminishing market power
    of cable operators as non-cable MVPDs increase their subscribership.

30. Likewise, when calculating an MSO's horizontal ownership, inclusion
    of both its cable and non-cable MVPDs subscribers in the numerator
    will reflect the market power held by that MSO through its total
    number of MVPD subscribers, whether reached through cable or other
    MVPD systems. This rule recognizes the increased market power gained
    by an MSO through its non-cable MVPD subscribers. This rule thus
    serves the objectives of Section 613 by reflecting both the dynamic
    nature of the marketplace and the ability of an MSO to impede the
    flow of programming by virtue of its total number of subscribers.

31. This rule is also consistent with Section 613's directive that the
    Commission establish limits on the number of cable subscribers a
    person may serve.[^77] The rule will not limit the number of
    subscribers a cable operator may reach through alternative MVPD
    systems. It also will not apply to persons who have no attributable
    ownership interests in cable systems. This rule will create a
    sliding or adjustable cable horizontal ownership limit, under which
    the number of subscribers a cable operator is authorized to reach
    through cable systems would decrease in proportion with any increase
    in the number of subscribers that that entity reaches through other
    MVPD systems. Conversely, the cable horizontal ownership limit would
    be higher for a cable operator that reaches fewer subscribers
    through other MVPD systems. This sliding scale calculation will more
    accurately reflect a cable operator's potential monopsony power and
    the extent of its control in the MVPD marketplace as a whole.

32. In order to promote competition in the marketplace, we find it
    appropriate at this time to include in an MSO's horizontal limit
    only those cable subscribers that it serves through incumbent cable
    franchises. For purposes of the horizontal ownership rule,
    "incumbent cable franchise" shall mean all cable franchises in
    existence on the date this order is released, October 20, 1999, and
    all successors in interest to those franchises. An MSO's cable
    subscribers shall include all subscribers served by those incumbent
    cable franchises, regardless of when the subscribers were added to
    the incumbent cable franchise system.

33. This rule will continue to limit an MSO's growth through acquiring
    incumbent cable franchises where cable-programming power is
    dominant. On the other hand, the rule sets no limits on an MSO
    overbuilding "incumbent cable franchises," thereby encouraging
    competition, more outlets for programming networks and more choices
    for consumers. Thus, we find that the benefits of not counting
    customers served via overbuilding outweigh any potential
    anticompetitive impact on the programming marketplace.

34. For purposes of reviewing compliance with the horizontal ownership
    limit, parties may use any generally accepted industry data as to
    the total MVPD subscriber count. We recognize that not all of the
    data used by the industry is identical and that some degree of
    estimation and double counting may be involved. We see no need,
    however, for parties subject to the limit, or for our own
    enforcement purposes, to spend unnecessary time refining the data
    given that the rule itself is based on estimates. Accordingly, in
    reviewing compliance with the rule, we will accept any published,
    current and widely cited industry estimate of MVPD subscribership.
    We would expect any party nearing the limit to bring to the
    Commission\'s attention any acquisition that would place them in
    conflict with the rules in accordance with the reporting requirement
    of Section 76.503(g).[^78]

## The Level of the Horizontal Ownership Limit

A.  **Background**

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35. In the *Second Report and Order* and the *Second Order on
    Reconsideration*, we found that a limit of 30 percent of households
    passed by all cable operators represented a careful balance
    between: (1) limiting the possible exertion by a cable operator of
    excessive market power in the purchase of video programming; and (2)
    ensuring that cable operators are able to expand and benefit from
    the economies of size necessary to encourage investment in new video
    programming technology and the deployment of other advanced
    technologies.[^79] In the *Further Notice*, we requested comment on
    whether 30% remains the appropriate horizontal limit in light of any
    changes in market conditions since 1993, when the initial rules in
    this proceeding were issued.[^80]

36. Because we agree with the cable operators that emerging non-cable
    MVPDs have an impact on the programming marketplace, we will, as
    discussed above, amend the horizontal limits rule to include all
    cable and non-cable MVPD subscribers in the calculation of the
    appropriate horizontal market. In addition, as discussed below, to
    the extent that cable operators have concerns regarding efficiencies
    of scale and competition with incumbent telephone service providers,
    we will permit cable operators to grow in size through overbuilding
    without counting subscribers reached in that manner towards an
    operator's horizontal limit. With these exceptions, which we will
    take into account in the calculation of the horizontal limit, the
    commenters have not presented any new or credible facts that would
    alter our conclusion regarding the need for and the considerations
    applicable to the adoption of an appropriate horizontal limit.[^81]
    Although the theoretical underpinnings for the rule remain unchanged
    and we continue to believe a 30% rule is appropriate, the effect of
    changing to a calculation based on the total size of the MVPD market
    results in a significant relaxation of the rule. The rule we adopt,
    a cable subscriber limit of no more than 30% of MVPD subscribers, is
    equivalent to a 36.7% limit based on cable subscribership
    alone.[^82] We find this change justified by the record and a
    consideration of the criteria specified in Section 613. Otherwise,
    however, we find nothing in the record that would justify upsetting
    the balance established in the initial rules. We discuss below the
    commenters' arguments regarding the cable operator's role as a media
    gatekeeper, competition, and the efficiencies of consolidation.

37. Guidelines A, B, C and G of Section 613(f) require the Commission to
    ensure that cable operators, unilaterally or in coordination, do not
    unreasonably restrict the flow of video programming to consumers and
    do not hinder the development of new programming from diverse
    voices.[^83] When Congress enacted Section 613(f)(1)(A), it
    concluded that cable industry concentration may enable MSOs to
    exercise excessive market power, or monopsony power, to bar the
    entry of new programmers and to reduce the number of media voices
    available to consumers:

The cable industry has become highly concentrated. The potential effects
of such concentration are barriers to entry for new programmers and a
reduction in the number of media voices available to consumers. [^84]

In particular, Congress was concerned with the possibility that "media
gatekeepers will (1) slant information according to their own biases, or
(2) provide no outlet for unorthodox or unpopular speech because it does
not sell well, or both."[^85] At the time of the 1992 Cable Act, cable
served over 56 million households representing over 60% of all
television households.[^86] As of June 1999 cable served more than 66
million homes, representing approximately 82% of all MVPD
households.[^87] Thus, cable television remains the primary source of
information and programming for many households in the United States.
The horizontal rule limits the extent to which one or a few operators
could reduce the number of diverse programming voices in the United
States.

38. In the search for appropriate decisional criteria on which to base
    the Congressionally mandated ownership limit, one important element
    of the equation is the issue of what limit will sufficiently assure
    that no single cable operator "or group of cable operators" can
    "unfairly impede the flow of video programming from the programmer
    to the consumer."[^88] If the rule can help to assure that no single
    operator or group of operators can unilaterally determine the
    success or failure of a new programming service, then the rule can
    achieve one important congressional purpose.

39. In our *1996 Competition Report,* based on information supplied by
    program providers in proceedings before the Commission, we suggested
    that, to have a long term prospect for success, the initial
    subscriber requirement for a new channel would be at least 10 to 20
    million households.[^89] In our *1998 Competition Report*, we noted
    the conventional understanding that in the typical mass market, an
    advertiser supported programming network needs between 15 and 20
    million subscribers in order to ensure its long-term viability.[^90]
    Some have argued that a cable network needs as many as 30 to 40
    million subscribers in order to attract advertising dollars to
    ensure long-term viability. [^91] In the context of other Commission
    proceedings, parties within the industry have urged that it is
    generally not possible for a new, niche cable network to break even
    until its distribution reaches 20 million subscribers.[^92]

40. Staff analysis further supports 15 million as a minimum subscriber
    number for viability. In analyzing data consisting of 1988-98
    subscription figures for 68 cable networks along with the launch
    date for each,[^93] staff found that networks that survive for a
    long period of time almost always obtain more than 15 million
    subscribers. Of the 39 networks started in or before 1988, 38 had
    more than 15 million subscribers in 1998.[^94] Thus, we find no
    basic disagreement as to the general requirement for a cable
    programmer to succeed and have a reasonable prospect for survival.

41. Although we believe the 15-20 million subscriber estimates are now
    generally accepted in the cable industry as evidenced by the cable
    industry's reliance on this target in their comments in this
    proceeding, [^95] we acknowledge that they may not cover every type
    of programmer. Some programmers may need far more subscribers to be
    successful, while others may need far fewer,[^96] depending on the
    particular programmer's programming costs, target audience, and
    financial strength. Nevertheless, in balancing the Section 613(f)(2)
    factors, we must adopt a standard of general applicability in
    determining the horizontal limit. To that end, for purposes of this
    analysis, we will assume that a new programmer needs 15 million
    subscribers in order to have a reasonable chance to achieve economic
    viability. We use the lower number 15 over 20 million as a baseline
    in order to counterbalance the competing objectives of Section 613
    to recognize the dynamics of the marketplace and the efficiencies of
    size. Fifteen million subscribers are not an absolute minimum for
    viability. It is instead a number of subscribers that provides a
    reasonable probability of long-term success for a cable network.
    Fifteen million subscribers represent approximately 18.56% of the
    MVPD market.

42. Using the 15 million-subscriber number, a programmer could still
    theoretically obtain the minimum necessary circulation even if one
    system operator held 35, 40, or even 80% of the market. We do not
    agree, however, with the position of the cable operators that this
    is the end of the analysis. [^97] We disagree with the cable
    operators' assumption that the horizontal limit should be designed
    with only a single large operator in mind.[^98] Congress was
    concerned not only by the behavior of a single operator, but also
    with the possibility that a group of operators might decline to
    carry the programmer. Section 613(f)(2)(A) specifically directs the
    Commission to

> ensure that no cable operator or [group of cable
> operators]{.underline} can unfairly impede, either because of the size
> of any individual operator or because of joint actions by a [group of
> operators]{.underline} of sufficient size, the flow of video
> programming from the video programmer to the consumer . . . .[^99]

Thus, the horizontal limit must account for the possibility that a group
of operators will collectively deny carriage to a new programmer, either
by unilateral, independent decisions or by tacit collusion. The limit
should be set at a level such that, if each member of the group reaches
the horizontal limit, the operators' "collective market share" will
still leave enough of the market available to the programmer so that the
programmer has a reasonable chance of obtaining the subscribers it needs
in order to become financially viable. The legislative assumption is not
unreasonable given an environment in which all the larger operators in
the industry are vertically integrated so that all are both buyers and
sellers of programming and have mutual incentives to reach carriage
decisions beneficial to each other. Operators have incentives to agree
to buy their programming from one another. Moreover, they have
incentives to encourage one another to carry the same non-vertically
integrated programming in order to share the costs of such programming.

43. The limit should also take into account that both cable operators
    and cable networks benefit from having a certain number of large
    MSOs. The MSOs benefit from the efficiencies of economies of scale.
    The cable networks benefit in that, if a new cable network obtains
    carriage on one large MSO, it will incur significantly lower
    transaction costs.

44. Examining the horizontal limit from the cable network's perspective,
    given that 20% of the market is the share that a cable network must
    reach to ensure viability, and assuming that there is a public value
    in minimizing transaction costs, one could argue that 20% is a lower
    bound on the appropriate MSO limit. A 20% limit would preserve the
    possibility that a cable network could acquire its minimum
    subscriber level in a single negotiation. In addition, if 5 MSOs
    were to divide the market, the cable network would have five chances
    of obtaining carriage. This would also serve the public interest by
    maximizing the potential that there would be at least 5 voices.

45. However, it is unlikely that a network could, in fact, achieve 20%
    penetration via a single MSO that reaches 20% of total subscribers.
    First, some of the MSO's cable systems may lack channel capacity and
    will be unable to carry the cable network at all. Second, those
    systems of the MSO that have channel capacity may place the cable
    network on an upper or digital tier or on a premium channel that not
    all subscribers receive. A 20% limit might therefore be unreasonably
    small in terms of efficiency from the cable network's point of view.

46. In addition, we find no reason to believe that the remaining four
    MSOs, comprising 80% of the market, would collectively decline to
    carry the new cable network, thereby leaving the programmer with
    only one MSO. Balancing the efficiencies of size against the
    possibility of group action,[^100] we believe that assuming
    coordinated action by two operators rather than by three or more
    operators is appropriate at this time. Under this scenario, if two
    MSOs, comprising 40% of the market, declined to carry a new cable
    network, this would leave 60% of the market available to the
    network. However, giving the cable operators the benefit of the
    doubt, we do not believe that a cable network requires an open field
    of 60% of the market in order to secure the 15 million subscribers
    the new cable network needs on average to succeed.

47. In this regard, we will examine and weigh various market factors to
    approximate a typical cable network's probable rate of success of
    reaching subscribers through cable operators that do not flatly deny
    the cable network carriage. We reviewed cable industry literature to
    examine the subscriber numbers of cable networks and to determine
    whether there was any evidence of the market factors underlying such
    a rate. In analyzing Kagan's June 30, 1999 census of cable network
    subscribers, we found that the 72 networks contained in the census
    had an average carriage rate of 53% (with a range from 95% to 5%) of
    80.8 million subscribers.[^101] We also reviewed another census of
    cable networks published by *Cablevision* magazine. For the 105
    surveyed networks for which subscriber numbers were available, the
    average carriage rate was 36% of the total of 80.8 million MVPD
    subscribers.[^102] Thus, the appropriate success rate would appear
    to be between 36% and 53%. However, the Cablevision and Kagan
    censuses do not reveal how many subscribers a cable network actively
    attempted -- but failed \-- to reach. In addition, the censuses do
    not explain what market factors worked for or against a cable
    programmer's carriage rate.

48. Nevertheless, our review of the market factors affecting a new
    programmer's entrance demonstrated support for an average rate of
    success between these percentages. A programming network's ability
    to obtain carriage on cable systems may be limited by market
    conditions such as the lack of channel capacity on certain cable
    systems,[^103] the high cost of competitive entry,[^104] the
    competitive advantages of networks carried by the largest
    MSOs,[^105] the demographics of audiences in certain viewing areas,
    and other non-quantifiable factors, such as the programming tastes
    of particular cable operators.[^106] In addition, given the process
    of selling cable service by tiers, even where a programming network
    is added to a particular system it is unlikely that all subscribers
    to the system will purchase the network. Comments in this proceeding
    demonstrate that even vertically integrated programming networks
    generally do not reach 100% of an affiliated operator's subscribers
    and that carried networks in general may reach as few as 10% or as
    many as 95% of an operator's subscribers.[^107] Given these inherent
    roadblocks to carriage, we find that it is reasonable to assume that
    a programming network will have at the most a 50% success rate of
    overcoming these roadblocks with respect to each subscriber
    available to it.

49. Like the 15 million-subscriber figure, the 50% success rate figure
    is a rough attempt to quantify a multitude of business conditions
    that may vary widely from programmer to programmer. Some new cable
    networks may have a higher success rate if they are affiliated with
    existing networks or cable operators, while other new cable networks
    produced by parties new to the cable market may have a lower success
    rate. We believe that the 50% figure takes into account the varying
    factors for market entrance. Because we believe that a cable network
    has a 50% chance of successfully obtaining carriage, only 40% of the
    market need be available to a new cable network for it to reach the
    15 million subscribers (or 20% of the market) it needs. Accordingly,
    it is not necessary to maximize the number of MSOs controlling 20%
    of the market or to protect 60% of the market for a new cable
    network. Moreover, given the limited benefit to the cable networks,
    a 20% cable horizontal ownership limit threatens to limit unduly an
    MSO's ability to achieve economies of scale.

50. Examining the limit from the cable operator's side, one could posit
    an 80% limit, which would leave 20% of the market available to an
    MSO that might carry the new network. This scenario has several
    problems. Cable networks selling programming to two such unequally
    sized MSOs may charge excessively low rates to the large MSO and
    compensate by charging excessively high rates to the small MSO, or
    enter other contractual arrangements that harm the customers to the
    small MSO and pose significant monopsony concerns. Although, a 50%
    limit could lead to a more even duopoly, the weaknesses of such
    competition are well established. The probability of tacit collusion
    is higher with 2 competitors than 3 competitors. Moreover, Congress
    was concerned with a "reduction in the number of media voices
    available to consumers," and devising a rule that would allow only
    two MSO gatekeepers to select those voices does not meet the
    congressional mandate.[^108] Finally, Congress was concerned with
    the possibility that a group of MSOs might together harm a
    programmer, and a 50% limit permitting two MSOs to unilaterally or
    collectively harm a programmer would not address this concern.[^109]

51. A 40% limit would pose similar problems. Although a cable network
    would have a reasonable chance of success if it gained access to an
    MSO at the 40% limit, two MSOs at the 40% limit, representing a
    total of 80% of the market, might decline to carry the new network.
    Even assuming that the remaining 20% of the market was in the hands
    of one MSO and that MSO agreed to carry the programmer, it is highly
    unlikely that the programmer would reach 100% of that MSO's
    subscribers for the reasons stated above. In addition, if the
    remaining 20% of the market is fragmented among several cable
    operators, the cable network again would be highly unlikely to
    succeed given a 50% success rate at carriage.

52. Approaching a horizontal limit from these two ends, a 20% limit
    favoring cable networks and a 40% limit favoring cable operators, we
    select a 30% limit as a reasonable balance between the interests of
    the cable networks and the cable operators. We believe that adopting
    a limit between 20% and 40% is reasonable given that the tradeoffs
    for the cable networks and the operators are roughly even. Based on
    this analysis, a new programmer would have a reasonable chance of
    success if 40% of the 80,000,000 subscriber MVPD market is available
    to it after two operators have denied it access to the other 60% of
    the market. In other words, a 30% limit on a single operator's size
    will thereby prevent two large operators from obtaining control over
    60% of the market. Thus, even if two operators, covering 60% of the
    market, individually or collusively deny carriage to a programming
    network, the network will still have access to 40% of the market,
    thereby giving it a reasonable chance of financial viability. This
    leaves open the possibility that two MSOs at the 20% limit might
    exist that could carry the cable network. In addition, assuming that
    the remaining 40% of the market is fragmented, leaving 40% of the
    market available to the cable network will give it a reasonable
    chance of success, given that we conclude that a cable network has a
    50% chance of obtaining subscribers that are not actively denied to
    it.

53. While permitting cable operators to obtain economies of scale, the
    30% limit serves the salutary purpose of ensuring that there will be
    at least 4 MSOs in the marketplace. The rule thus maximizes the
    potential number of MSOs that will purchase programming. With more
    MSOs making purchasing decisions, this increases the likelihood that
    the MSOs will make different programming choices and a greater
    variety of media voices will therefore be available to the
    public.[^110]

54. We conclude that a 30% limit would fulfill Section 613(f)(2)'s
    mandate to strike a proper balance between the dangers to new
    programmers and the benefits to cable operators of economies of
    scale. Under current market conditions, we find that a 30%
    horizontal limit provides a new programmer with a reasonable chance
    of success, even if the largest operators decline to carry it. We
    acknowledge that the new cable programmer who is denied carriage by
    the largest operators may be at a severe competitive and financial
    disadvantage in the marketplace given the declining marginal cost
    basis of the programming distribution business.[^111]

55. The market power of large cable operators has the potential to
    prevent nascent cable networks from even launching and to cause
    current networks to fail. While the exercise of market power could
    result in lower negotiated programming costs for cable operators in
    the short run, it could also adversely affect the development of
    diverse and innovative programming in the long run. Studies have
    shown that increased horizontal concentration has both efficiency
    and negative market consequences.[^112] New networks might not be
    able to operate successfully subject to the lower prices that large
    operators are able to demand by virtue of their size. [^113] Launch
    costs for a new cable network are estimated to be between \$100 to
    \$125 million. [^114] New networks often must initially pay for
    carriage. [^115] In addition, although advertising revenue is
    critical for a cable network's long-term success, some industry
    analysts believe that new networks cannot attract significant
    advertising until they surpass at least 30 million subscribers.
    [^116] In particular, niche networks targeting small audiences with
    specific interests have difficulty attracting advertising. [^117]
    Given the significant amount of debt a new network must therefore
    carry before it begins earning affiliation and advertising
    revenues,[^118] nascent networks may not launch and new networks may
    fail because of an inability to carry this debt. [^119] The 30%
    limit recognizes this dynamic of the communications
    marketplace[^120] and the dynamic's ability to foreclose new
    programming.[^121] TCI's argument that consumers benefit from lower
    rates (as a result of lower programming costs enjoyed by large MSOs
    due to their bargaining power) takes into account only the
    efficiency effect of horizontal concentration.[^122]

56. As discussed above, the most significant change in the MVPD market
    has been the increased market share of non-cable MVPDs. We agree
    with the cable operators that the horizontal limits should take into
    account the non-cable MVPDs' impact on the programming marketplace.
    We take this into account by adopting our proposal that the
    calculation of the horizontal market include the presence of all
    MVPD subscribers. Using the presence of all MVPD subscribers in
    calculating the horizontal limit results in a self-adjusting
    horizontal limit whereby an operator's market share decreases when
    the total number of MVPD subscribers increases. Because the
    calculation of the horizontal limit will now automatically
    self-adjust based on the market share of noncable MVPDs, we need not
    alter the 30% limit to take into account their market share.

57. Cable operators argue that the emergence of new cable networks in
    the face of the continued growth of TCI, which purportedly passed
    41% of homes passed by cable nationwide as of September 1998,
    demonstrates that cable operators have not used and will not use
    their monopsony power to adversely affect the programming
    marketplace.[^123] TCI also argues that, compared to cable systems
    that do not have affiliated networks, TCI favors carriage of
    unaffiliated networks. That argument is likewise not
    convincing.[^124] TCI's data appears to demonstrate the opposite.
    TCI's economic data appears to show that, as of 1995, TCI had
    favored carriage of 68% (13 of 19) of its affiliated networks versus
    54% (25 of 46) of unaffiliated networks.[^125] We also note that
    TCI's economists concede that their analysis does not take into
    account differences other than vertical integration among the
    systems in their study.[^126] In addition, contrary to the findings
    of TCI's economists, several economic studies have shown that
    vertically integrated operators show preferences for their
    affiliated networks and exclude competing networks owned by
    independent programmers.[^127]

58. TCI's argument regarding its 41% homes passed market share lacks
    credibility in light of its arguments that actual numbers of total
    MVPD subscribers should be used to calculate the horizontal limit
    rather than homes passed. As noted above, we now recognize that the
    effective cable subscriber limit will be approximately 36.7% in
    light of today's market structure. Using these new methods of
    calculating the limit, TCI's market share would more likely
    approximate this limit. Moreover, TCI's argument does not take into
    account Section 613's mandate that we consider the possibility that
    two MSO's might foreclose a new programmer. In addition, WCA and
    Ameritech proffer credible evidence that indicates that MSOs have
    used their market power to cause unaffiliated programmers to refuse
    to sell their programming to other MVPDs. This evidence demonstrates
    another way in which MSOs can use their size and market power to
    impede the flow of programming to consumers in contravention of
    Section 613(f)(2)(A).[^128] It is reasonable to assume that an
    unaffiliated programmer carried on a large MSO, with all the
    advantages that such carriage confers, would be disinclined to
    alienate the MSO by seeking carriage on a competitor.

59. While we agree with CU that a lower horizontal limit could promote
    competition through overbuilding,[^129] we believe that 30% remains
    the appropriate limit to achieve these goals in light of the
    economies of scale it permits.[^130] Competition will provide more
    avenues for programmers to reach subscribers.[^131] The 30% limit
    may serve to facilitate the development of competition in those
    markets where cable operator market power already exists. By
    limiting the ability of large cable MSOs to merge or acquire
    incumbent cable systems, resulting in one or two MSOs controlling
    local cable markets nationwide, the horizontal limit encourages
    cable operators to overbuild one another. Limiting this merger and
    acquisition potential may preserve opportunities for entry by
    overbuilders or other MVPD providers and reduce the likelihood that
    large MSOs can coordinate their behavior by mutually forbearing from
    overbuilding each other\'s service territories.[^132] Coordinated
    activity between cable operators, whether tacit or overt, is more
    likely with few firms than many (due to greater ease in reaching a
    consensus, monitoring compliance, and punishing cheaters), and such
    behavior will have a greater impact the larger combined share of the
    market these firms control. Operators may use their market power to
    cause unaffiliated programmers to refuse to sell their programming
    to other MVPDs, thereby impeding the flow of programming to the
    consumer in contravention of Section 613(f)(2)(A).[^133] The 30%
    limit also reduces the likelihood of coordinated activity between
    large cable MSOs in areas such as program purchasing, Internet
    services, and equipment purchasing (e.g., set top boxes and
    converters).[^134]

60. If the sole guideline in adopting rules were to encourage the
    largest number of sources of editorial control possible, the
    horizontal limit would be quite low. Guidelines E and F of Section
    613(f)(2), however, require the Commission to include in the
    rulemaking balance the efficiencies and benefits of consolidation
    and the dynamic nature of the communications marketplace.[^135] In
    the *Second Report and Order* and in the *Second Order on
    Reconsideration*, we recognized and weighed the benefits of
    clustering and economies of scale and determined that 30% was the
    appropriate number to encourage growth without unduly raising
    competitive concerns.[^136] We find no basis in this record to alter
    this balance. Cable operators argue that the limit should be raised
    so that they may compete with common carriers for the provision of
    Internet and telephony services.[^137] However, under the current
    rules, a cable operator may obtain as much as 30% of the cable
    nationwide market. A 30% limit allows a cable operator to gain
    access to a substantial portion of the market to provide Internet
    access and telephony. The cable operators have presented no credible
    evidence that a larger size is necessary for the deployment of
    advanced technologies or telephony. Moreover, we note the
    possibility of cooperative arrangements among operators to offer
    coordinated telephony services through their cable systems, so that
    a cable operator does not necessarily need to grow in absolute size
    beyond the limit in order to participate in the offering of a
    national telephony service.[^138]

61. In addition, we disagree with the cable operators' arguments that
    the horizontal ownership rules prevent an MSO from clustering its
    systems in order to enjoy an economy of scale and to compete with
    the ILEC.[^139] As we stated earlier in this proceeding*,* "\[t\]he
    30% limit permits cable MSOs to cluster systems in order to gain
    efficiencies related to economies of scale and scope in
    administration, deployment of new technologies and services,
    extension into previously unserved territories, etc. Accordingly,
    the 30% limit simultaneously guards against the potential
    anticompetitive effects of horizontal concentration and allows cable
    MSOs to realize the benefits of clustering."[^140] The horizontal
    limit permits an MSO to consolidate its systems in one area in order
    to compete with an ILEC, if it wishes to do so. If an MSO must
    divest a system in order to comply with the horizontal ownership
    rules, the MSO has the discretion to decide what cluster of systems
    to retain in order to serve its business plans and customers.

62. Ameritech and CU raise the negative aspects of clustering, observing
    that clustering may enable cable operators to deny their competitors
    access to affiliated video programming and may deter
    overbuilders.[^141] RCN requests that we limit the size of cable
    clusters in order to promote competition.[^142] In the *Second
    Report and Order*, we considered whether to adopt regional
    subscriber limits, but declined to do so. [^143] We stated that
    other provisions of the Cable Television Consumer Protection and
    Competition Act of 1992 that were specifically designed to introduce
    local competition would better address issues regarding regional
    concentration.[^144] In addition, there was no evidence in the
    record that indicated that any anticompetitive effects outweighed
    the potential benefits of cable clustering, such as regional
    programming, upgraded cable infrastructure and improved customer
    services.[^145] Likewise, the record in this proceeding shows that
    the benefits of clustering -- including market efficiencies and the
    deployment of telephony and Internet access services -- outweigh any
    alleged anti-competitive effects on local programming.[^146]

63. An additional cable operator argument in favor of a revised limit is
    that we that we should raise the cable horizontal limits to 35%
    because Congress raised the television broadcast station horizontal
    limits to 35%.[^147] As indicated above, the practical consequence
    of including all MVPD subscribers in the base from which the limit
    is calculated is roughly equivalent to changing the rules to a 36.7%
    cable subscribers limit. We do not believe, however, that the
    commenters have shown how the broadcast station limits have any
    relevance to the cable horizontal limits. In contrast to the cable
    rules, the broadcast rules apply to single channel facilities where
    there are generally numerous directly competitive broadcast outlets
    in the market. Because a broadcast station competes with other
    broadcast stations in a local market and viewers therefore have
    several options for television viewing, a broadcast station owner
    does not actually have 100% of the local market's viewers all of the
    time. Thus, a broadcast station owner at the 35% national ownership
    limit cannot be deemed to have 35% of the nation's broadcast
    television viewers all of the time. A cable system has a set number
    of viewers making it possible to calculate more specifically than
    broadcast the number of viewers a cable system owner serves at the
    national level. In Section 613, Congress set forth seven specific
    criteria for the establishment of cable horizontal limits, which the
    Commission has followed. In addition, we fail to see the relevance
    to this proceeding of the Commission rule allocating half of a
    television market to a UHF station.[^148] That rule recognizes that
    a UHF station transmits a weaker signal than a VHF signal and likely
    is unable to reach an entire television market.[^149]

64. Finally, we reject Adelphia *et al.*'s request that we not apply the
    rules to any transactions under contract prior to the release of the
    *Further Notice*, and that existing joint ventures not subject to
    TCI's managerial control be permitted to grow through limited
    acquisitions to gain efficiencies of clustering.[^150] Parties have
    been on notice since the *Second Report and Order* was released in
    1993 of the horizontal limit. We reaffirm our decision in the
    *Second Order on Reconsideration* that parties must come into
    compliance with the horizontal rules within 60 days after the
    District of Columbia Circuit upholds the rules and Section
    613(f)(1)(A).[^151]

**VII. The Minority-Control Allowance**

**A. Background**

65. In the *Second Report and Order*, we adopted a minority-control
    allowance which permits a cable system to reach 35% of all homes
    nationwide "provided \[that\] the additional cable systems, beyond
    30% of homes passed nationwide, are minority-controlled.")[^152] A
    cable system is minority-controlled if it is more than 50% owned by
    one or more members of a minority group.[^153] For purposes of the
    horizontal ownership rules, a minority means Black, Hispanic,
    American Indian, Alaska Native, Asian and Pacific Islander.[^154]

66. We adopted the minority-allowance in order to foster the
    participation of minorities in the cable industry.[^155] In the
    *Second Report and Order*, we stated that promoting minority
    ownership was a significant means of promoting the inclusion of
    diverse views in cable programming.[^156] We stated that "the
    minority ownership incentive \[would\] be an important means of
    furthering this goal by encouraging MSO investment in
    minority-controlled systems."[^157] In conclusion, we stated that we
    believed that the benefits of increased diversity would outweigh any
    impact the increased limits would have on competition.[^158]

67. We observed in the *Further Notice,* however, that the
    minority-control allowance had never been used by and asked for
    comment on the effectiveness of the rule and whether alternative
    rules could serve the same purpose.[^159] We also asked for comment
    on the constitutionality of the allowance under *Adarand
    Constructors, Inc. v. Pena*, 515 U.S. 200 (1995) and whether we
    could devise rules that would be consistent with *Adarand*.[^160] No
    comments were filed discussing any aspect of the minority-control
    allowance.

**B. Discussion**

68. Events since 1993 have not borne out our predictions that MSOs would
    take advantage of the allowance. Not a single party filed comments
    stating that it had invested in minority-controlled systems or that
    it intended to take advantage of the allowance. No minority party
    filed comments stating that it had benefited from the allowance or
    potentially might benefit from the allowance in the future. Thus,
    the rule has not achieved its intended purpose of fostering minority
    participation in cable by way of MSO investment in
    minority-controlled systems.

69. Based on this record and our own analysis of the potential
    functioning of this provision, we believe that it is no longer
    appropriate to retain a minority-control allowance. No party filed
    comments proffering alternative rules that might achieve the same
    goal that the allowance was designed to achieve. Under this
    provision the entity that would be exceeding the limit must be
    minority controlled. Because of the functioning of the attribution
    rules such an entity would generally not be attributed to the larger
    entity that the rules were attempting to assist in financing the
    minority controlled firm. Without attribution, the exemption
    incentive is absent and the rule creates little practical advantage
    for either party. Moreover, no party filed comments on policies the
    Commission might adapt in light of *Adarand*. Given our decision to
    no longer retain the allowance in light of the cable industry's
    apparent disinterest in the allowance and its potential use to
    increase consolidation beyond acceptable levels, we need not reach
    the constitutional issues raised by *Adarand*.

**VIII. Motion to Lift Stay of Enforcement of Horizontal Ownership
Rules**

70. On August 17, 1999, CU filed a motion for expedited relief
    requesting that the Commission lift its voluntary stay of the
    enforcement of its horizontal ownership rules.[^161] The motion
    essentially argues that the conditions that led the Commission to
    impose its stay have changed.[^162] CU cites, for example, the
    pending applications of AT&T to acquire the licenses of cable
    operator MediaOne Group, Inc.[^163] as a reason to enforce the
    stayed horizontal ownership rules. Lifting the stay, according to
    CU, is necessary to prevent AT&T from acquiring almost 50 percent of
    the cable TV market.[^164]

71. Last year, the Commission denied a similar request by CU to lift the
    stay.[^165] We see no reason to lift our voluntary stay at this
    point. It would make little sense to enforce the new rules before
    giving the D.C. Circuit Court of Appeals an opportunity to review
    the constitutionality of the underlying statute.[^166] We also note
    that the close of the pleading cycle in the AT&T/Media One merger
    proceeding, CS Docket No. 99-251, does not provide a persuasive
    justification for lifting the stay. We reaffirm our decision in the
    *Second Order on Reconsideration* that parties must come into
    compliance with the horizontal rules.

72. We reconsider, however, on our own motion the requirement that
    interested parties come into compliance with the horizontal
    ownership rules within 60 days of a judicial decision upholding
    Section 613(f)(1)(a) and the rules.[^167] We now require that
    interested parties must come into compliance with these rules within
    180 days of a judicial decision upholding Section 613(f)(1)(a) and
    the rules. We find that 60 days is an unduly burdensome time frame
    for interested parties to dispose of property necessary to come into
    compliance with the rules. We find that 180 days is a more
    reasonable timeframe for the disposition of such property.

**IX. Final Regulatory Flexibility Analysis**

73. As required by the Regulatory Flexibility Act (\"FRA\"),[^168] an
    Initial Regulatory Flexibility Analysis (IRFA) was incorporated in
    the *Further Notice* *of Proposed Rulemaking* in MM Docket No.
    92-264, FCC 98-138. The Commission sought written public comment on
    the proposals in the *Further Notice*, including comment on the
    IRFA.[^169] This Final Regulatory Flexibility Analysis (\"FRFA\")
    conforms to the RFA.[^170]

**A. Need for, and Objectives of, this Third Report and Order**

74. Section 11(c) of the 1992 Cable Act, directed the Commission to set
    limits on the number of subscribers a cable operator is authorized
    to reach through cable systems.[^171] Congress directed the
    Commission to evaluate and balance seven statutory guidelines when
    establishing subscriber limits.[^172] This *Third Report and Order*
    revises Section 76.503 of our rules[^173] to make them more
    effective in serving these statutory guidelines.

**B. Summary of Significant Issues Raised by Public Comments in Response
to the IRFA**

75. None of the parties in this proceeding filed comments on how issues
    raised in the *Further Notice* would impact small entities.
    Nevertheless, we discuss below how we considered the impact of the
    amendment of Section 76.503 on small entities.

**C. Description and Estimate of the Number of Small Entities to Which
the Rule Will Apply**

76. The RFA generally defines \"small entity\" as having the same
    meaning as the terms \"small business,\" \"small organization,\" and
    \"small governmental jurisdiction\" and \"the same meaning as the
    term \'small business concern\' under the Small Business Act unless
    the Commission has developed one or more definitions that are
    appropriate for its activities.[^174] 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\").[^175] Pursuant to 5 U.S.C. § 601(3), the statutory
    definition of a small business applies \"unless an agency after
    consultation with the Office of Advocacy of the SBA and after
    opportunity for public comment, establishes one or more definitions
    of such term which are appropriate to the activities of the agency
    and publishes such definition(s) in the Federal Register.\"

77. The SBA has developed a definition of small entities for cable and
    other pay television services under Standard Industrial
    Classification 4841 (SIC 4841), which covers subscription television
    services, which includes all such companies with annual gross
    revenues of \$11 million or less.[^176] This definition includes
    cable systems operators, closed circuit television services, direct
    broadcast satellite services, multipoint distribution systems,
    satellite master antenna systems and subscription television
    services. According to the Census Bureau, there were 1,323 such
    cable and other pay television services generating less than \$11
    million in revenue that were in operation for at least one year at
    the end of 1992.[^177]

78. The Commission has developed its own definition of a \"small cable
    company\" and \"small system\" for the purposes of rate regulation.
    Under the Commission\'s rules, a \"small cable company,\" is one
    serving fewer than 400,000 subscribers nationwide.[^178] Based on
    our most recent information, we estimate that there were 1,439 cable
    companies that qualified as small cable companies at the end of
    1995.[^179] Since then, some of those companies may have grown to
    serve over 400,000 subscribers, and others may have been involved in
    transactions that caused them to be combined with other cable
    companies. Consequently, we estimate that there are fewer than 1,439
    small entity cable companies that may be affected by the proposal
    adopted in this *Notice*. The Commission\'s rules also define a
    \"small system,\" for the purposes of cable rate regulation, as a
    cable system with 15,000 or fewer subscribers.[^180] We do not
    request nor do we collect information concerning cable systems
    serving 15,000 or fewer subscribers and thus are unable to estimate
    at this time the number of small cable systems nationwide.

79. The Communications Act also contains a definition of a \"small cable
    operator,\" 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.\"[^181] The Commission has determined that
    there are 61,700,000 subscribers in the United States. Therefore, we
    found that an operator serving fewer than 617,000 subscribers is
    deemed a small operator, if its annual revenues, when combined with
    the total annual revenues of all of its affiliates, do not exceed
    \$250 million in the aggregate.[^182] Based on available data, we
    find that the number of cable operators serving 617,000 subscribers
    or less totals 1,450.[^183] 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.

**D. Description of Projected Reporting, Recordkeeping, and Other
Compliance Requirements**

80. The new rule sets limits on the number of cable subscribers that one
    person may serve and alters the method for calculating the
    horizontal limit. The new rule changes the standard from cable homes
    passed to actual subscribers. This will impose a smaller burden on
    businesses because it is easier to calculate how many subscribers
    that a cable operator serves. The rule also grants further latitude
    to businesses by permitting one person or entity to serve up to 30%
    of MVPD subscribers nationwide.

**E. Steps Taken to Minimize Significant Economic Impact on Small
Entities, and Significant Alternatives Considered**

81. We find that there are no significant alternatives to the rules and
    policies set forth in this *Third Report and Order*, and we note
    that no commenter proffered alternatives to these rules and
    policies.

82. First, we maintain the 30% horizontal ownership limit. This rule
    limits the large size of large MSOs and does not prevent small cable
    operators from growing larger. To the extent that small cable
    operators argue that the 30% rule limits the ability of large MSOs
    to invest in small cable operators, we find that there is no
    significant alternative way to address this concern while enforcing
    Section 613(f)(1)(A). Moreover, given the current consolidation in
    the cable industry, we are not convinced that small cable operators
    will have difficulty in finding willing investors in their
    operations. In any event, the manner in which we have altered the
    calculation of the horizontal limit will permit MSOs to grow larger
    than the current rule permits.[^184]

83. Second, we amended the rule to base the limit on actual subscribers
    rather than homes passed. No one argued and we do not find that this
    amendment poses concerns for small cable operators.[^185]

84. Third, we amended the manner in which the horizontal limit is
    calculated to include all MVPD subscribers in the calculation. No
    one argued and we do not find that this amendment poses concerns for
    small cable operators.[^186]

85. Fourth, we amended the rule to remove the minority control
    allowance. No one argued and we do not find that this amendment
    poses concerns for small cable operators.[^187]

86. Fifth, we denied a motion to lift the stay on the enforcement of the
    horizontal ownership rules and decided that the rules will go into
    effect 180 after the United States Court of Appeals for the District
    of Columbia Circuit issues a decision upholding Section 613(f)(1)(A)
    and the rules. No one argued and we do not find that decision poses
    concerns for small cable operators.[^188]

**Report to Congress:** The Commission will send a copy of this *Third
Report and Order*, including this FRFA, in a report to Congress pursuant
to the Small Business Regulatory Enforcement Fairness Act of 1996, 5
U.S.C. § 801(a)(1)(A). A copy of this *Order on Reconsideration* and
FRFA (or summary thereof) will also be published in the Federal
Register, pursuant to 5 U.S.C.A. § 604(b), and will be sent to the Chief
Counsel for Advocacy of the Small Business Administration.

**X. Paper Work Reduction Act**

87. The requirements adopted in this *Third Report and Order* have been
    analyzed with respect to the Paperwork Reduction Act of 1995 (the
    \"1995 Act\") and found to impose new or modified information
    collection requirements on the public. Implementation of any new or
    modified information collection requirements will be subject to
    approval by the Office of Management and Budget (\"OMB\"). The
    Commission, as part of its continuing effort to reduce paperwork
    burdens, invites the general public to take this opportunity to
    comment on the information collection requirements contained in this
    *Third Report and Order*, as required by the 1995 Act. Comments
    should address: (a) whether the proposed collection of information
    is necessary for the proper performance of the functions of the
    Commission, including whether the information shall have practical
    utility; (b) the accuracy of the Commission\'s burden estimates; (c)
    ways to enhance the quality, utility, and clarity of the information
    collected; and (d) ways to minimize the burden of the collection of
    information on the respondents, including the use of automated
    collection techniques or other forms of information technology.

88. Written comments by the public on the information collection
    requirements are due 60 days from date of publication of this *Third
    Report and Order* in the Federal Register. Comments should be
    submitted to Judy Boley, Federal Communications Commission, Room
    1-C804, 445 12th Street, S.W., Washington, DC 20554, or via the
    Internet to jboley@fcc.gov. For additional information on the
    information collection requirements, contact Judy Boley at (202)
    418-0214 or via the Internet at the above address.

**XI. Ordering Clauses**

89. Accordingly, IT IS ORDERED, pursuant to Sections 4(i), 303 and 613
    of the Communications Act of 1934, as amended, 47 U.S.C. §§ 154(i),
    303 and 533, that the amendments to 47 C.F.R. § 76.503 discussed in
    this *Third Report and Order* and set forth in Attachment B ARE
    ADOPTED. These amendments shall become effective 70 days after
    publication in the Federal Register, following OMB approval, unless
    a notice is published in the Federal Register stating otherwise.

90. IT IS FURTHER ORDERED that the August 17, 1999 Consumers Union,
    Consumer Federation of America, and Media Access Project's Motion to
    Vacate Stay of Enforcement of Horizontal Ownership Limits and other
    requested relief IS DENIED in its entirety.

91. IT IS FURTHER ORDERED that 47 C.F.R. § 503(a)-(g) as set forth in
    Attachment B is STAYED until one hundred and eighty (180) days after
    the United States Court of Appeals for the District of Columbia
    Circuit issues a decision upholding Section 613(f)(1)(A) of the
    Communications Act, as amended, 47 U.S.C. § 533(f)(1)(A), and 47
    C.F.R. § 76.503.

92. IT IS FURTHER ORDERED that parties shall continue to comply with the
    reporting requirements of Section 503 of our rules, as modified by
    47 C.F.R. § 76.503(h) set forth in attachment B and as discussed in
    note 10 of this *Third Report and Order*.

93. IT IS FURTHER ORDERED that the Commission\'s Office of Public
    Affairs, Reference Operations Division, SHALL SEND a copy of this
    *Third Report and Order*, including the Final Regulatory Flexibility
    Analysis, to the Chief Counsel for Advocacy of the Small Business
    Administration in accordance with paragraph 603(a) of the Regulatory
    Flexibility Act, Pub. L. No. 96-354, 94 Stat. 1164, 5 U.S.C.A. § 601
    *et. seq*.

FEDERAL COMMUNICATIONS COMMISSION

Magalie Roman Salas

Secretary

**Appendix A**

**Comments Filed in this Proceeding**

**[Comments]{.underline}**

Adelphia Communications Corp. ("Adelphia"), Falcon Holding Group LP
("Falcon"), Insight Communications Co., LP ("Insight") and Lenfest
Communications, Inc. ("Lenfest") (collectively "Adelphia *et al.*")

Ameritech New Media, Inc. ("Ameritech")

AT&T Corp. ("AT&T")

Bresnan Communications Co., LP ("Bresnan") and TCA Cable TV, Inc.
("TCA")

Cablevision Systems Corp. ("Cablevision")

Consumers Union, Consumer Federation of America, the Center for Media
Education, the Office of Communication, Inc. of the United Church of
Christ, and the Association of Independent Video and Filmmakers ("CU")

MediaOne Group, Inc. ("MediaOne")

National Cable Television Association ("NCTA")

RCN Telecom Services, Inc. ("RCN")

Tele-Communications, Inc. ("TCI")

Time Warner, Inc. ("Time Warner")

**[Reply Comments]{.underline}**

Adelphia Communications Corp. ("Adelphia"), Falcon Holding Group LP
("Falcon"), Insight Communications Co., LP ("Insight") and Lenfest
Communications, Inc. ("Lenfest") (collectively "Adelphia *et al.*")

Cablevision Systems Corp. ("Cablevision")

MediaOne Group, Inc. ("MediaOne")

National Cable Television Association ("NCTA")

RCN Telecom Services, Inc. ("RCN")

Tele-Communications, Inc. ("TCI")

Time Warner, Inc. ("Time Warner")

Wireless Communications Association International, Inc. ("WCA")

**Appendix B**

##  Rule Changes

Part 76 of Title 47 of the Code of Federal Regulations is amended to
read as follows:

PART 76 \-- MULTICHANNEL VIDEO AND CABLE TELEVISION SERVICE

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

AUTHORITY: 47 U.S.C. 151, 152, 153, 154, 301, 302, 303, 303a, 307, 308,
309, 312, 315, 317, 325, 503, 521, 522, 531, 532, 533, 534, 535, 536,
537, 543, 544, 544a, 545, 548, 549, 552, 554, 556, 558, 560, 561, 571,
572, 573.

## Section 76.503 National Subscriber Limits

1\. Section 76.503 is amended by deleting paragraphs (a) through (f) and
adding paragraphs (a) through (g) as follows:

\(a\) Subject to paragraph (b) of this section, no cable operator shall
serve more than 30% of all multichannel-video programming subscribers
nationwide through multichannel video programming distributors owned by
such operator or in which such cable operator holds an attributable
interest.

\(b\) Cable subscribers that a cable operator does not serve through
incumbent cable franchises shall be excluded from the cable operator's
limit.

\(c\) For purposes of this section, "incumbent cable franchise" means a
cable franchise in existence as of October 20, 1999 and all successors
in interest to these franchises.

\(d\) Subscribers that a cable operator serves through incumbent cable
franchises shall include all subscribers served by those incumbent cable
franchises, regardless of when the subscribers were added to the
incumbent cable franchise system.

\(e\) "Multichannel video-programming subscribers" means subscribers who
receive multichannel video-programming from cable systems, direct
broadcast satellite services, direct-to-home satellite services,
multichannel multipoint distribution services, local multipoint
distribution services, satellite master antenna television services (as
defined in § 76.5(a)(2)), and open video systems.

\(f\) "Cable operator" means any person or entity that owns or has an
attributable interest in an incumbent cable franchise.

\(g\) Prior to acquiring additional multichannel video-programming
providers, any cable operator that serves 20% or more of multichannel
video-programming subscribers nationwide shall certify to the
Commission, concurrent with its applications to the Commission for
transfer of licenses at issue in the acquisition, that no violation of
the national subscriber limits prescribed in this section will occur as
a result of such acquisition.

Note 1: Certifications made under this section shall be sent to the
attention of the Cable Services Bureau, Federal Communications
Commission, 445 Twelfth Street, S.W., Washington, D.C. 20554.

**Statement of Commissioner Harold W. Furchtgott-Roth,**

**Concurring in Part and Dissenting in Part**

**In the Matter of Implementation of Section 11(c) of the Cable
Television Consumer Protection and Competition Act of 1992, Horizontal
Ownership Limits, MM No. 92-264.**

There is much to commend in this Order. I join in the decisions to
change the basis of the limit from homes passed to actual subscribers;
to include non-cable MVPDs in the limit calculation; to repeal the
minority-control allowance; and to retain the stay of these rules
pending resolution of related litigation. *See* Parts IV-V, VII-VIII. I
must dissent, however, the Commission\'s refusal to raise the limit
itself from the current rate of 30%. *See* Part VI.

*The Level of The Horizontal Ownership Limit*

I would have raised significantly the relevant rate for cable ownership
past the 30% that the Commission today maintains. This rate has been in
effect since 1993 and, as the Commission itself has documented in any
number of proceedings, the increase in competition in the multichannel
video programming market \-- assuming that is even the right market, as
opposed to all video programmers, the actual terminology of the statute
\-- has been at least substantial, if not explosive. The statute directs
us to take account of these changes. *See* 613(f)(2)(E) (Commission
should \"reflect the dynamic nature of the communications
marketplace\").

This Order even acknowledges these intervening competitive developments
in the context of the decisions to change the limit calculation. *See
supra* at paras. 28-30. I do not think we can take notice of increased
competition for purposes of those ancillary decisions but close our eyes
to that same fact in the context of the limit itself. Increased
competition either exists or it does not, and the fact of that
competition is logically relevant to the calculation of the limit and
the limit itself.

Even if one were not willing to admit increased competition since 1993,
changes within the cable industry itself \-- most significantly, the
expansion of channels due to upgrades \-- mitigate a cable operator\'s
potential for market power.

Furthermore, the Commission just a few months ago concluded that growth
in the communications industry warranted loosening of the broadcast
ownership rules. *See generally Review of the Commission\'s Regulations
Governing Television Broadcasting, Television Satellite Stations Review
of Policy and Rules,* MM Docket Nos. 91-221, 87-8 (rel. Aug. 6, 1999). I
would think that some deregulation \-- in particular, revising upward
the section 11(c) cap \-- would have been equally appropriate for the
cable industry.

In the attribution Report and Order adopted today, the Commission
concludes that \"the cable industry\'s ownership and management
structures do not in any relevant way differ from those of the broadcast
industry.\" *Review of the Commission\'s Cable Attribution Rules,* CS
Docket No. 98-82, at para. 11 (adopted Oct. 8, 1999). While I disagree
with that statement (the many differences between these particular
industries, and thus their ownership and management, are patent, at
least to me), I note it in order to highlight the incongruity of the
Commission\'s reasoning in these related decisions. Apparently, the
industries are similar enough that we should use the same attribution
rules, but when it comes to deregulation, they should not be treated
equally. This makes little sense to me.

Part of what contributes to the Commission\'s view that the limit cannot
go any higher than 30% is a fundamental misunderstanding of the premise
of section 613(f). The Commission approaches the statute as if it were
the \"Reasonable Guarantee of Success for Cable Networks Act.\" Hence,
its analysis of the appropriate percentage limit starts with the number
of subscribers it takes to launch a new network.

But the Act is not meant affirmatively to ensure that new cable networks
have some minimum chance of success in the marketplace. Rather, its
plain language reflects an intent to prevent cable operators from
\"unfair\[ly\] imped\[ing\] . . . the flow of video programming from the
programmer to the consumer.\" 47 U.S.C. section 613(f)(2)(A). A cable
network can fail to get off the ground for infinite reasons *other than*
the exercise of monopsony power by cable operators. The statute is not
meant to create a minimum chance of success for one group, but to
prevent specific anticompetitive behavior by a different group. We thus
should be focusing on what it means for a cable operator or operators to
\"*unfairly* impede\" the flow of programming, but this Order never does
that.

Moreover, the \"flow\" with which the statute concerns itself is of
\"video programming,\" not just cable network or even MVPD programming.
\"Video programming\" is a statutorily defined term, *see id.* section
611(20) (\"\'video programming\' means programming provided by, or
generally considered comparable to programming provided by, a television
broadcast station\"), which includes vastly more than just cable network
programming. When many paths exist for distributing video programming to
consumers \-- which there are \-- cable operators\' ability to impede
anything is drastically undermined.

Finally, the constitutional concerns raised by the statute \-- grave
enough that a federal judge has deemed it violative of the First
Amendment*, see Daniels Cablevision v. United States,* 835 F. Supp. 1
(D.D.C. 1993) \-- also mitigate in favor of a more generous approach to
the limit in order to mitigate the direct burdens on speech imposed by
these regulations. A higher subscriber rate, while it might not solve
the First Amendment problem, would at least alleviate some of the burden
created by the limit.[^189] But these rules impose as heavy a burden on
speech as the previous ones.

*The Calculation Of The Horizontal Ownership Limit*

The foregoing said, I do concur in the separate decisions to base the
limit on actual subscribers rather than homes passed, *see supra* Part
IV, and to include non-cable MVPDs in the calculus, *see id.* Part V.
Those decisions make common sense, in that they acknowledge the expanded
range and intensity of competition to cable. They also provide some
effective relief to cable operators and allow them some room to grow as
the MVPD market further develops.

Ultimately, however, the cleaner and more straightforward approach would
have been to simply raise the limit itself. Moreover, I would have
increased the limit to a greater extent than do these changes to the
formula. I support them, however, to the extent they provide some
benefit to regulated entities.

*The Minority Control Allowance*

I also concur in the decision to repeal the minority control allowance.
*See id.* Part VII. As I noted in the Notice of Proposed Rulemaking,
this facially race-based provision is presumptively violative of the
Equal Protection Clause. *See* Separate Statement of Commissioner Harold
W. Furchtgott-Roth, Second Memorandum Opinion and Order on
Reconsideration and Further Notice of Proposed Rulemaking*, In re
Implementation of Section 11(c) of the Cable Television Consumer
Protection and Competition Act of 1992: Horizontal Limits* (rel. June
26, 1998) (discussing application of strict scrutiny to the allowance).
Although the Commission chooses to repeal these regulations for reasons
of practicality, it makes *no* attempt to defend the constitutionality
of this rigid numerical preference and its supposed connection to
programming content in light of either the record in this proceeding or
relevant judicial precedent. That is probably wise, because the task is
near impossible, legally speaking.[^190]

*Administrative Stay Of The Rules*

Finally, I concur in the decision to continue the stay of these rules
pending resolution of the related litigation in the Court of Appeals for
the D.C. Circuit. *See supra* Part VIII.

**STATEMENT OF COMMISSIONER GLORIA TRISTANI,**

# [DISSENTING IN PART]{.underline}

***In the Matter of Implementation of Section 11(c)***

***Of the Cable Television Consumer Protection and Competition Act of
1992***

##### **Horizontal Ownership Limits**

## MM Docket No. 92-264

#  I would have lifted the Commission's voluntary stay of its horizontal ownership rules. While the stay may have done little harm in 1993, when it was imposed, it now constitutes a serious threat to the orderly enforcement of our rules and an abdication of our responsibility to implement Congress' express statutory directives.

# 

#  In the 1992 Cable Act, Congress provided that the Commission "shall . . . conduct a proceeding" to establish horizontal ownership limits. In 1993, shortly before the Commission issued its rules, the district court found the horizontal ownership provision of Section 613 unconstitutional on its face.[^191] Importantly, the district court judge stayed the effect of his ruling, thereby permitting the Commission to adopt and enforce horizontal ownership rules. Nevertheless, when the Commission adopted its rules shortly thereafter, it voluntarily suspended enforcement pending outcome of the *Daniels* appeal. The Commission has not always been so quick to abandon Congress' mandates. For instance, although a district court judge found Sections 271-275 of the Communications Act to be an unconstitutional bill of attainder,[^192] the Commission continued to enforce those provisions under circumstances similar to those here, until the appellate court eventually reversed the lower court decision.[^193] 

It has now been seven years since Congress expressly directed the
Commission to establish horizontal ownership rules, and six years since
the Commission opted to ignore that directive on its own motion. In
1993, the Commission's decision made little practical difference: no
cable operator was close to the 30% limit and appellate review of the
*Daniels* decision could be expected well before the limit was breached.

Times have changed. Now we are faced with the real possibility \--
indeed, the virtual certainty, if all pending transactions are approved
\-- that a single cable operator, AT&T, will be significantly over the
30% cap, even under the liberalized rules being adopted today. Moreover,
concentration issues will be squarely before us when we consider AT&T's
proposed acquisition of MediaOne \-- a decision that will likely come
before the D.C. Circuit rules on the *Daniels* appeal. Without
enforceable rules, the Commission will not be able to address the
Section 613 ownership issue at the time of the merger review, but,
assuming the merger is approved, will have to wait until the D.C.
Circuit acts. Not to worry, the majority says: if the D.C. Circuit
upholds the horizontal ownership limits, AT&T and others will be
required to come into compliance within 180 days of the decision.

# 

#  The majority's assurances give me little comfort because I do not believe its admonition about divestitures will ever be enforced.[^194] This is not a criticism of the Commission, but a recognition of administrative reality. It is much easier to enforce rules on a going-forward basis than to reverse established "facts on the ground." Ultimately, to the extent that the Commission is forced to grant waivers or grandfather ownership interests that violate our rules, Congress' purposes in enacting Section 613 will be eviscerated. 

# 

#  It might be different if the Commission believed there were a substantial likelihood that it would lose on appeal, or if there were some reason to believe that the 30% cap had grown stale. But on August 13, 1999, the Commission filed a brief in the D.C. Circuit describing at length how, under the applicable standard established in the Supreme Court's *Turner* decisions (which the *Daniels* court did not have the benefit of), the horizontal ownership provisions and the Commission's implementing rules are clearly constitutional. Nor is the 30% cap out-of-date: today's Order reaffirms the 30% cap based on a fresh record.

In the end, the issue of lifting the stay boils down to whether the
Commission is serious about implementing Congress' express directive to
establish reasonable horizontal ownership limits. Today's decision
indicates that it is not.

# 

#  

#  

[^1]: 47 C.F.R. § 76.503.

[^2]: *In re Implementation of Section 11(c) of the Cable Television
    Consumer Protection and Competition Act of 1992: Horizontal Limits*,
    MM Docket No. 92-264 (rel. June 26, 1998).

[^3]: Section 613 was adopted as Section 11(c) of Cable Television
    Consumer Protection and Competition Act of 1992, Pub. L. No.
    102-385, 106 Stat. 1460, 47 U.S.C. § 533(f)(1)(A).

[^4]: *In re Implementation of Section 11(c) of the Cable Television
    Consumer Protection and Competition Act of 1992: Horizontal Limits*,
    *Second Report and Order*, MM. Docket No. 92-264, 8 FCC Rcd 8565
    (1993).

[^5]: 47 U.S.C. § 533(f)(1)(A).

[^6]: 47 C.F.R. § 76.503(a). Under 47 C.F.R. § 76.503(f), an
    \"attributable interest\" is defined by reference to the criteria
    set forth in the Notes to the Commission\'s cable cross-ownership
    rules, 47 C.F.R. § 76.501.

[^7]: 47 C.F.R. § 76.503(b). For purposes of this regulation,
    \"minority-controlled\" is defined as \"more than 50% owned by one
    or more members of a minority group.\" 47 C.F.R. § 76.503(d).

[^8]: *Second Order on Reconsideration* at para. 75

[^9]: *Id.* at para. 77.

[^10]: The existing certification requirements of Section 76.503(c) are
    triggered when any person or entity that holds an attributable
    interest in cable systems reaching 20% or more of homes passed
    nationwide acquires additional cable systems. In light of the stay
    of enforcement of the horizontal ownership rules, the Commission
    relieved MSOs of the Section 76.503(c) requirement that the MSO
    certify that no violation of the 30% limit will occur as a result of
    an acquisition. Until the stay is lifted, the certification should
    only specify the incremental change the acquisition makes in terms
    of the 30% of household passed standard, i.e. specifying the
    ownership in terms of homes passed before and after the acquisition
    is complete. *Second Order on Reconsideration* at para. 76.

[^11]: *Daniels Cablevision, Inc. v. United States*, 835 F. Supp. 1, 10
    (D.D.C. 1993), *aff\'d in part, rev\'d in part, Time Warner
    Entertainment Co., LP v. FCC*, 93 F.3d 957 (D.C. Cir. 1996).

[^12]: *Time Warner Entertainment Co., L P v. FCC*, No. 94-1035 (D.C.
    Cir. 1994).

[^13]: *Time Warner Entertainment Co., LP v. FCC*, 93 F.3d 957, 979-80
    (D.C. Cir. 1996).

[^14]: *Time Warner*, 93 F.3d at 979-80.

[^15]: *Further Notice* at para. 32. In *Second Report and Order*, we
    stated that we intended to review the horizontal limits every five
    years in order to determine whether they were still reasonable under
    new market conditions and continued to meet their policy objectives.
    *Second Report and Order* at para. 40.

[^16]: *Further Notice* at paras. 78-88.

[^17]: A list of commenters and the abbreviations used to refer to them
    herein is attached as Appendix A.

[^18]: 47 U.S.C. § 533(f)(1)(A).

[^19]: 47 U.S.C. § 533(f)(2)(A)-(G).

[^20]: *See, e.g., Report of the Senate Committee on Commerce, Science
    and Transportation*, S. Rep. No. 92, 102d Cong., 1st Sess. 34 (1991)
    (\"Senate Report\") (testimony of John Malone, TCI Chairman,
    regarding need for cable horizontal ownership limits).

[^21]: 1992 Cable Act, Section 2(a)(4); Senate Report at 32-33; *see*
    Section 613(f)(2)(G) (directing the Commission to impose no rule
    that would impair the development of diverse and high quality
    programming); *see also* *Report of the House Committee on Energy
    and Commerce*, H.R. Rep. No. 102-628, 102d Cong., 2d Sess. 43 (1992)
    (diversity of information sources) ("House Report").

[^22]: House Report at 43.

[^23]: *Id.*

[^24]: Senate Report at 33. Beginning in 1994, the Commission has issued
    annual reports on the status of competition in the delivery of video
    programming. In these annual *Competition Reports*, the Commission
    has noted the potential benefits as well as the potential
    competitive concerns of increased national horizontal concentration
    among cable MSOs. *See First Annual Report, In the Matter of Annual
    Assessment of the Status of Competition in the Market for the
    Delivery of Video Programming*, FCC 94-235, CS Docket No. 94-48, 9
    FCC Rcd 7442 at paras. 148-155 (1994) (\"*1994 Competition
    Report*\"); *Second Annual Report, In the Matter of Annual
    Assessment of the Status of Competition in the Market for the
    Delivery of Video Programming*, FCC 95-491, CS Docket No. 95-61, 11
    FCC Rcd 2060 at paras. 131, 146 (1995) (\"*1995 Competition
    Report*\"); *Third Annual Report, In the Matter of Annual Assessment
    of the Status of Competition in the Market for the Delivery of Video
    Programming*, FCC 96-496, CS Docket No. 96-133, 12 FCC Rcd 4358 at
    paras. 138-139 (1997) (\"*1996 Competition Report*\"); *Fourth
    Annual Report, In the Matter of Annual Assessment of the Status of
    Competition in the Market for the Delivery of Video Programming*,
    FCC 97-423, CS Docket No. 97-141 at paras. 140-14, 149 (rel. Jan.
    13, 1998) (\"*1997 Competition Report*\"); *Fifth Annual Report, In
    the Matter of Annual Assessment of the Status of Competition in the
    Market for the Delivery of Video Programming*, FCC 98-335, CS Docket
    No. 97-141 at paras. 152-157 (rel. Dec. 23, 1998) (\"*1998
    Competition Report*\").

[^25]: *Second Report and Order* at para. 25; *Second Order on
    Reconsideration* at paras. 37-42.

[^26]: *Second Report and Order* at para. 28.

[^27]: *See, e.g.*, NCTA Comments at 9; TCI Comments at 26-27; Time
    Warner Comments at 17-18.

[^28]: *See, e.g*., TCI Reply Comments at 8, 12.

[^29]: TCI Comments in Docket 98-92 at 40 ("Investors will not tolerate
    actions designed to foreclose specific viewpoints or opinions merely
    for ideological purposes.").

[^30]: Adelphia *et al.* Comments at 29; Bresnan Comments at 26; TCI
    Comments at 67; Time Warner Comments at 23; Time Warner Reply
    Comments at 15.

[^31]: I *Antitrust Law Developments* (Third) 213-214 (1992) (citations
    omitted).

[^32]: Public Law 102-385, § 2(a)(3). *See also 1998 Video Competition
    Report* at para. 6 ("We find that cable television continues to be
    the primary delivery technology for the distribution of multichannel
    video programming and continues to occupy a dominant position in the
    MVPD marketplace.").

[^33]: *See* comments filed in *In re Carriage of the Transmissions of
    Digital Television Broadcast Stations, Amendments to Part 76 of the
    Commission's Rules*, CS Docket No. 98-120 ("*Digital Carriage"*);
    *e.g.*, Adelphia Digital Carriage Comments at 21 ("Even if
    technological advances result in a greatly increased number of
    channels on cable systems, the number of programmers competing for
    carriage on those channels increases at a faster rate."); NCTA
    Digital Carriage Comments at 47 ("\[I\]ncreased channel capacity
    continues to be outpaced by an increased number of national cable
    program networks."); Encore Digital Carriage Comments at 5;
    America's Voice Digital Carriage Comments at 14 (number of
    competitors will outstrip available channel space); Weather Channel
    Digital Carriage Comments at 13-15.

[^34]: *1998 Competition Report* at para. 152.

[^35]: *See* Senate Report at 33 ("\[L\]arge MSOs have the market power
    to determine what programming services can 'make it' on cable.").

[^36]: 47 C.F.R. § 76.504.

[^37]: 47 C.F.R. § 76.970 *et seq.*

[^38]: 47 C.F.R. § 76.55 *et seq.*

[^39]: *Second Report and Order* at para. 26; *Second Order on
    Reconsideration* at para. 42.

[^40]: 47 U.S.C. § 628; 47 C.F.R. § 76.1000 et seq.

[^41]: *See, e.g., In re Motion of AT&T Corp. to be Reclassified as a
    Non-Dominant Carrier*, 11 FCC Rcd 3271 (1995). We also recognize
    that the courts have generally found that a firm can not
    successfully obtain a monopoly with less than a 30% market share.
    *Antitrust Law Developments (Fourth)* 298-99 and cases cited
    therein.

[^42]: Cable operators frequently associate themselves with programming
    content that reflects well on their standing in the community but
    they have an equal ability to discourage carriage of popular content
    that does not suit their tastes. *See e.g., Broadcasting and Cable*,
    April 1, 1996, at page 14 regarding the decision of TCI to cease
    carrying one particular type of programming and the explanation of
    the desirability of doing so notwithstanding the adverse economic
    consequences. In this article, the company official who made the
    decision not to carry the program was quoted as stating, "I hope
    this costs us money because I think the company needs to know
    there's a price to be paid for taking a stance."

[^43]: NCTA Cable Television Developments, Fall 1998/Winter 1999.

[^44]: Ameritech Reply Comments at 7 ("The Department of Justice must
    enforce the antitrust laws but the Commission must effectuate the
    policies of the Communications Act.").

[^45]: *See* Section 613(f)(2) (A)-(G).

[^46]: There are two prevailing measures of market concentration \-- the
    four firm concentration ratio (\"Four Firm Ratio\") and the
    Hirfindahl-Hirschman Index (\"HHI\"). The Four Firm Ratio measures
    the percentage of the market captured by the four largest companies
    in the market. The HHI reflects the distribution of market share
    among all firms in a given market, giving proportionately greater
    weight to the market shares of the larger firms. A market is
    generally considered concentrated when one firm, or a small group of
    firms, has a sufficient share of the market to exercise power over
    it. The Justice Department considers an industry concentrated when
    the HHI exceeds 1800 (although an HHI that exceeds 1000 prompts
    further evaluation) or when the four firm ratio exceeds 50%.
    According to the 1992 House Report, the HHI for the top 20 MSOs was
    491 and the Four Firm ratio for the largest MSOs was 36%, well below
    the Justice Department\'s threshold. *See* House Report at 42.

[^47]: House Report at 42. To the extent commenters are simply urging
    that the rules we adopt should be informed by an antitrust type of
    analysis, we note that no party has provided a specific analytical
    framework whereby this might be accomplished unless it is to suggest
    that the aggregation of interests within the cable industry does not
    pose an antitrust concern. Because cable operators are frequently
    monopolists in their local area, traditional horizontal analysis may
    not find harm in mergers. To the extent that is the case it
    reinforces, rather than undermines, the need for a separate analysis
    based on the standards set forth in Section 613.

[^48]: 47 C.F.R. § 76.503(a).

[^49]: *Second Report and Order* at para. 24.

[^50]: *Id.* at para. 19.

[^51]: *Further Notice* at para. 79.

[^52]: *Further Notice* at paras. 84-86.

[^53]: *See* CU Comments at 12.

[^54]: *See* Adelphia *et al*. Comments at 23; TCI Comments at 58-61;
    Time Warner Comments at 28; *contra* RCN Comments at 18; RCN Reply
    Comments at 14.

[^55]: TCI Reply Comments at 35-36; Time Warner Reply Comments at 18.

[^56]: *See* TCI Comments at 61; Time Warner Comments at 29; TCI Reply
    Comments at 35.

[^57]: *See* Adelphia *et al.* Comments at 24; NCTA Comments at 19; Time
    Warner Comments at 29; Adelphia *et al.* Reply Comments at 12.

[^58]: *1998 Competition Report* at App. C, C-1.

[^59]: *See, e.g.*, CU Comments at 11-12.

[^60]: Cablevision Comments at 13; TCI Comments at 49-53; Bresnan
    Comments at 5, 22-23 (cable modems and digital cable television);
    NCTA Comments at 9 (clustering reduces duplicative costs); MediaOne
    Comments at 14; Time Warner Comments at 10; Adelphia *et al.* Reply
    Comments at 6; Comcast Reply Comments at 6; Cablevision Reply
    Comments at 7. MediaOne also argues that clustering enables MSOs to
    advertise their services in order to counter competition from other
    types of MVPDs. MediaOne Comments at 14.

[^61]: *See, e.g.*, MediaOne Comments at 31; Time Warner Comments at 27.

[^62]: *See* MediaOne Comments at 31.

[^63]: National Cable Television Association, Current Estimates,
    available at
    \<http://ncta.cyberserv.com/qs/user_pages/Dev(currentestimates).cfm\>
    (96.60% of homes passed/TV households).

[^64]: *Further Notice* at paras. 79-80.

[^65]: *Further Notice* at paras. 80-81.

[^66]: 47 U.S.C. § 533(f)(1)(A).

[^67]: *Further Notice* at para. 79.

[^68]: Section 613(f)(2)(A) provides, "\[The Commission shall\] ensure
    that no cable operator or group of cable operators can unfairly
    impede, either because of the size of any individual operator or
    because of joint actions by a group of operators of sufficient size,
    the flow of video programming from the video programmer to the
    consumer\[.\]" 47 U.S.C. § 533(f)(2)(A).

[^69]: 47 U.S.C. § 533(f)(2)(E).

[^70]: 1997 *Competition Report* at para. 150.

[^71]: Cable had 66,065,400 subscribers in June, 1999. Kagan, *The Cable
    Financial Databook, 1999.* The current total number of MVPD
    subscribers appears to be 80,792,811. We base this number on the
    estimated 1.4 million MMDS and 1.4 million SMATV subscribers;
    Kagan's *Marketing New Media* at p.1 (Oct. 19, 1998); 66,000 OVS
    subscribers; *1998 Competition Report* at App. C, C-1; and
    10,078,000 DBS subscribers and 1,783,411 HSD subscribers; SBCA
    Comments in response to *Notice of Inquiry*, *In re Annual
    Assessment of the Status of Competition in Markets for the Delivery
    of Video Programming*, CS Docket No. 99-230.

[^72]: 1998 *Competition Report* at App. C, C-1.

[^73]: *See* note 73 *supra.*

[^74]: *Id.* at paras. 5, 12.

[^75]: *See* note 73 *supra.*

[^76]: *See* CU Comments at 7; RCN Comments at 16-17.

[^77]: *See* Section 613(f)(1)(A) of the Communications Act, 47 U.S.C. §
    533(f)(1)(A); TCI Comments at 59; TCI Reply Comments at 31; Time
    Warner Comments at 31; NCTA Reply Comments at 3.

[^78]: *See* Appendix B.

[^79]: *Second Order on Reconsideration* at paras. 8, 37-42.

[^80]: *Further Notice* at para. 32. In the *Second Report and Order*,
    we stated that we intended to review the horizontal limits every
    five years in order to determine whether they were still reasonable
    under new market conditions and continued to meet their policy
    objectives. *Second Report and Order* at para. 40.

[^81]: Indeed, there was little agreement among the commenters as to
    what the horizontal ownership limit should be. Commenters supported
    horizontal ownership limits ranging from 20% to 50%. *See, e.g*.,
    RCN Comments at 13; Bresnan Comments at 28; MediaOne Comments at 30;
    TCI Comments at 65.

[^82]: *See* note 73 *supra*. Thirty percent of the current 80,792,811
    total MVPD subscribers permits an operator to serve 24,237,843
    subscribers. 24,237,843 divided by the current 66,065,400 total
    cable subscribers permits an operator to serve 36.69% of cable
    subscribers. We note that, according to NCTA, there are currently
    67,607,910 total cable subscribers and 81,827,910 total MVPD
    subscribers. NCTA Comments in response to *Notice of Inquiry*, *In
    re Annual Assessment of the Status of Competition in Markets for the
    Delivery of Video Programming*, CS Docket No. 99-230. Using NCTA's
    numbers, 30% of all MVPD subscribers equals 36.31% of all cable
    subscribers.

[^83]: 47 U.S.C. § 533(f)(2)(A),(B),(C) & (G).

[^84]: 1992 Cable Act, § 2(a)(4); 47 U.S.C. § 521 note; *see also*
    Senate Report at 33 ("\[L\]arge MSOs have the market power to
    determine what programming services can 'make it' on cable.").

[^85]: Senate Report at 32-33; *see also* Section 613(f)(2)(G)
    (directing the Commission to impose no rule that would impair the
    development of diverse and high quality programming); House Report
    at 43 (1992) (diversity of information services).

[^86]: 1992 Cable Act, § 2(a)(3); 47 U.S.C. § 521 note.

[^87]: *See* note 73 *supra**.***

[^88]: 47 U.S.C. § 533f)(2)(A).

[^89]: *1996 Competition Report*, 12 FCC Rcd 4358 at para. 135.

[^90]: *1998 Competition Report* at para. 152. *See also* *1997
    Competition Report*, 13 FCC Rcd 1034, para. 155 (1998)
    ("Conventional understanding in the cable industry appears to be
    that a successful launch of a new mass market, advertisers
    supported, national programming network \-- that is, the initial
    subscriber requirement for long- term success \-- requires that the
    new channel be available to at least fifteen to twenty million
    households.")

[^91]: *See CAB Report: The Big Picture Channel* Crossings, Mediaweek
    (Apr. 14, 1997) (real growth over time comes from advertising) (CBS
    *Stumbles in Cable Distribution Game*, Cable World at 8 (Aug. 3,
    1998) ("Typically, an ad supported network needs 40 million
    subscribers to attract ad revenues."); *Cable Networks Get Choked in
    Channel Congestion: Even with Upgrades, Niche Contenders Outnumber
    Open Spaces*, The Kansas City Star at E-1 (Apr. 4, 1997) (any cable
    network reaching fewer than 30 million subscribers is not getting
    advertising dollars that will make them profitable); *Cartoon
    Network Tops 30 Million: Large Subscribership Helps Sell
    Advertising*, The Atlanta Journal and Constitution at 5-C (Oct. 1,
    1996) ("Advertisers do not seriously consider most cable channels
    until they garner 30 million subscribers, say industry experts.").

[^92]: *Closed Captioning and Video Description of Video Programming*,
    13 FCC Rcd 19973, para. 45 (1998) ("GSN argues that it is generally
    impossible for a new, niche cable network to break even until its
    distribution reaches 20 million subscribers . . ."); *see* Joint
    Comments of Outdoor Life Network, Speedvision Network, The Golf
    Channel, BET on Jazz, and America\'s Health Network in *In* re
    Closed Captioning and Video Description of Video Programming, MM
    Docket No. 95-176, at 10 (filed Feb. 28, 1997); *In the Matter of
    Outdoor Life Network and Speedvision Network*, 13 FCC Rcd 12226,
    note 116 (1998) ("The Networks contend that at 20 million
    subscribers, they will achieve a level of distribution sufficient to
    attract volume purchases by national advertisers and to generate
    subscriber revenues that approach the level necessary to carry the
    Networks operating costs.").

[^93]: *See* Paul Kagan Associates, Inc., *Cable Television Household
    Growth 1988-98*, Cable Program Investor at 12-13 (Mar. 15, 1999). In
    performing this particular calculation, the staff discarded 4 of the
    72 networks that Kagan surveyed: WTBS, WGN, the Disney Channel, and
    Q2. WTBS and WGN are both superstations and have compulsory licenses
    for carriage. The Disney Channel was a premium channel for much of
    its life, and Q2 is now defunct.

[^94]: *Id.*

[^95]: *See, e.g.*, Time Warner Comments at 25 n. 68; TCI Comments at 76
    n.122; Bresnan Comments at 25.

[^96]: Indeed, sixteen (24%) of the networks surveyed by Kagan had fewer
    than 15 million subscribers in 1998, and 14 of those 16 have been in
    business for three or more years. *See* Paul Kagan Associates, Inc.,
    *Cable Television Household Growth 1988-98*, Cable Program Investor
    at 12-13 (Mar. 15, 1999).

[^97]: *See, e.g*., Bresnan Comments at 28; Time Warner Comments at 26.

[^98]: *See, e.g.*, Bresnan Comments at 28 (cable network could still
    obtain 15-20 million subscribers even if limit were 50%); Time
    Warner Comments at 26.

[^99]: Section 613(f)(2)(A) (emphasis added).

[^100]: *See* Sections 613(f)(2)(A)&(E).

[^101]: *See* Paul Kagan Associates, Inc., *Cable Network Census: June
    30, 1999*, Cable Program Investor at 8 (Aug. 13, 1999).

[^102]: *See Cablevision* at 73-74 (July 19, 1999).

[^103]: *See Digital Carriage Notice* at para. 45 n.113 (noting that,
    according to Nielson's Cable On-Line Data Exchange, approximately
    two-thirds of cable systems in early 1998 were channel locked); *see
    also* *See Popcorn: The Latest Indie to Die*, Multichannel News at 1
    (Nov. 25, 1996); *New Nets: Tough Act to Open: Cable Television
    Launches Postponed*, Cablevision (Nov. 27, 1995 (network launches
    delay due to lack of channel capacity and tight finances); *Comcast
    Shuts Q2 for Style*, Multichannel News at 1, 60 (Aug. 31, 1998)
    (reached only 8 million subscribers and lost \$50 million over two
    years); *CBS Stumble in Cable Distribution Game*, Cable World at 8
    (Aug. 3, 1998) (CBS sells its share of Eye On People network stating
    that it could not justify the ongoing financial strain of supporting
    a start-up cable network).

[^104]: *See Closed Captioning Order on Reconsideration*, FCC 98-236 at
    para 54 ("\[N\]ew networks, especially in the early stages,
    frequently must pay for carriage, and struggle to become an accepted
    venue for national advertising. These economic circumstances create
    significant accumulated debt and deferred earning which must be
    recovered from revenues if the network is to remain viable."); *In
    re New England Cable News*, 9 FCC Rcd. 3231 at para. 35 (1994) ("It
    is not uncommon for new programming services to sustain losses for
    long periods of time before their investors see any return on
    investment."); *see also* notes 107-112 *supra*.

[^105]: *See* Dennis H. Liebowitz, *Buyer's Guide for Programming --
    Thanks to TCI, News Corp.,* Cable TV and New Media Law & Finance,
    Feb. 1997, at 1 ("\[T\]he new math makes it more expensive to absorb
    the cost of launching a new network. In turn, this favors existing
    networks.").

[^106]: *E.g., Combat Sports May Face Ultimate Finish*, Broadcasting and
    Cable (May 12, 1997) (certain cable operators drove the sport
    ultimate fighting off their cable systems despite the sport's
    popularity with their customers).

[^107]: *See, e.g*., TCI Comments, Appendix A, Table A-1.

[^108]: *See* 1992 Cable Act, § 2(a)(4).

[^109]: *See* Section 613(f)(2)(D).

[^110]: *See* 1992 Cable Act § 2(a)(4).

[^111]: *See* Dennis H. Liebowitz, *Buyer's Guide for Programming --
    Thanks to TCI, News Corp.,* Cable TV and New Media Law & Finance,
    Feb. 1997, at 1 ("\[T\]he new math makes it more expensive to absorb
    the cost of launching a new network. In turn, this favors existing
    networks.").

[^112]: Ford, G.W., and J.H. Jackson, *Horizontal Concentration and
    Vertical Integration in the Cable Television Industry*, 12 Review of
    Industrial Organization at 514 (1997) ("Ford and Jackson"); Chipty,
    T., *Horizontal Integration for Bargaining Power: Evidence from the
    Cable Industry*, 4 Journal of Economics & Management Strategy at
    375-397 (Summer 1995).

[^113]: *See* Dennis H. Liebowitz, *Buyer's Guide for Programming --
    Thanks to TCI, News Corp.,* Cable TV and New Media Law & Finance,
    Feb. 1997, at 1 ("\[T\]he new math makes it more expensive to absorb
    the cost of launching a new network. In turn, this favors existing
    networks.").

[^114]: *Viacom to FCC: Go Slow on Access*, Multichannel News at 50
    (Sept. 7, 1998); *Struggling to Hook Up Viewers*, LA Times at F1
    (Apr. 29, 1996) (quoting media analyst David Londoner, of Schroder
    Wertheim, and Lee Masters, MTV founder and CEO of E!); *Acquired or
    Original?: New Networks are Making Different Decisions than Their
    Predecessors*, Multichannel News at 8A (Jan. 16, 1995).

[^115]: *Throwing Money Around*, Cablevision at 14 (Jan. 27, 1997)
    ("Animal Planet is paying for carriage. . . . Networks like Sundance
    Channel, Independent Film Channel, Outdoor Life, Speedvision and
    others are all going to have to start paying just to get on systems
    -- that is, using money that traditionally went into programming.");
    *Swimming Upstream -- Programmers Caught in TCI's Recovery Net*,
    Multichannel News at 1 (Nov. 18, 1996) (TCI charging \$14 and \$8
    per sub to launch Fox News and Animal Planet, respectively); *Sci-Fi
    Tries Incentives to Fuel Growth*, Multichannel News at 10 (Oct. 5,
    1998) (at close to 50 million subscribers, Sci-Fi channel is
    offering \$2 to \$3 in launch support and free carriage in some
    instances).

[^116]: *See CBS Stumbles in Cable Distribution Game*, Cable World at 8
    (Aug. 3, 1998) ("Typically, an ad supported network needs 40 million
    subscribers to attract ad revenues."); *Cable Networks Get Choked in
    Channel Congestion: Even with Upgrades, Niche Contenders Outnumber
    Open Spaces*, The Kansas City Star at E-1 (Apr. 4, 1997) (any cable
    network reaching fewer than 30 million subscribers is not getting
    advertising dollars that will make them profitable); *Cartoon
    Network Tops 30 Million: Large Subscribership Helps Sell
    Advertising*, The Atlanta Journal and Constitution at 5-C (Oct. 1,
    1996) ("Advertisers do not seriously consider most cable channels
    until they garner 30 million subscribers, say industry experts.").

[^117]: *See Explosion of Channels Upping Ante For Agencies*, Electronic
    Media at 22 (May 19, 1997); *Cable's Little Engines That Might:
    Niche Channels Search For Shows, Bucks And Eyeballs; Small Start-Up
    Cable TV Channels*, Broadcasting & Cable at 62 (Mar. 31, 1997)
    (niche networks are almost guaranteed lower ratings from
    advertisers).

[^118]: *See Closed Captioning Order on Reconsideration*, FCC 98-236 at
    para 54 ("\[N\]ew networks, especially in the early stages,
    frequently must pay for carriage, and struggle to become an accepted
    venue for national advertising. These economic circumstances create
    significant accumulated debt and deferred earning which must be
    recovered from revenues if the network is to remain viable."); *In
    re New England Cable News*, 9 FCC Rcd. 3231 at para. 35 (1994) ("It
    is not uncommon for new programming services to sustain losses for
    long periods of time before their investors see any return on
    investment.").

[^119]: *See Popcorn: The Latest Indie to Die*, Multichannel News at 1
    (Nov. 25, 1996); *New Nets: Tough Act to Open: Cable Television
    Launches Postponed*, Cablevision (Nov. 27, 1995 (network launches
    delay due to lack of channel capacity and tight finances); *Comcast
    Shuts Q2 for Style*, Multichannel News at 1, 60 (Aug. 31, 1998)
    (reached only 8 million subscribers and lost \$50 million over two
    years); *CBS Stumble in Cable Distribution Game*, Cable World at 8
    (Aug. 3, 1998) (CBS sells its share of Eye On People network stating
    that it could not justify the ongoing financial strain of supporting
    a start-up cable network).

[^120]: *See* 613(f)(2)(E) ("dynamic nature of the communications
    marketplace").

[^121]: *See* 613(f)(2)(G) ("impose no limitations that will impair the
    development of diverse and high quality programming"); *see also*
    1992 Cable Act, § 2(a)(4).

[^122]: Using FCC rate data, Ford and Jackson found that only a portion
    of these discounts is passed along to consumers in the form of lower
    prices. Ford and Jackson at 514.

[^123]: MediaOne Comments at 11; NCTA Comments at 4-6, 9; TCI Comments
    at 16-17; TCI Reply Comments at 33. NCTA notes that broadband cable
    Internet may also be able to provide programming similar to what is
    now considered to be television, thereby creating additional avenues
    for programmers. NCTA Comments at 13.

[^124]: *See* TCI Comments at App. A; Stanley M. Besen & John Woodbury,
    *An Economic Analysis of the FCC's Cable Ownership Restrictions* at
    18-21 (Aug. 14, 1998) ("Besen & Woodbury I"); *see also* Time Warner
    Reply Comments at 3 (*citing* Besen & Woodbury I).

[^125]: Besen and Woodbury I at 20 n.16.

[^126]: *Id.*

[^127]: Waterman, David, W. and Wise, Andrew, [Vertical Integration in
    Cable Television]{.underline} at 88 (1997); Riordan, M. and D.
    Salant, *Exclusion and Integration in the Market for Video
    Entertainment Delivered to the Home* (July 7, 1994); Chipty, T,
    *Vertical Integration and Market Foreclosure: Evidence from the
    Cable Television Industry* at 19 (Feb. 1994); Olson, J. and L.
    Spiwak, *Can Short-Term Limits on Strategic Vertical Restraints
    Improve Long-Term Cable Industry Market Performance*, Cardoza Arts
    and Entertainment Law Journal at 285-315 (1995).

[^128]: Section 613(f)(2)(A) directs the Commission to devise rules that
    prevent MSOs from impeding the flow of programming to consumers.
    Ameritech and WCA state that, because of the MSOs' monopsony
    pressure, unaffiliated cable networks such as Fox News, MSNBC, Game
    Show Network, Eye on People, Home & Garden Television and TV Land
    act like vertically-integrated programmers and refuse to sell their
    products to alternative MVPDs. WCA Comments at 16; Ameritech
    Comments at 15; WCA Reply Comments at 5-10; *see also* CU Comments
    at 8 (stating that Viacom refused to provide its programs, such as
    Showtime, to People's Choice, a wireless cable company).

[^129]: CU Comments at 5.

[^130]: *See* *Second Order on Reconsideration* at para. 40

[^131]: *See* Section 613(f)(2)(A).

[^132]: *See* Section 613(f)(2)(c) (directing the Commission to take
    account of the market structure, ownership patterns and
    relationships within the cable industry).

[^133]: Section 613(f)(2)(A) directs the Commission to devise rules that
    prevent MSOs from impeding the flow of programming to consumers.
    Ameritech and WCA state that, because of the MSOs' monopsony
    pressure, unaffiliated cable networks such as Fox News, MSNBC, Game
    Show Network, Eye on People, Home & Garden Television and TV Land
    act like vertically-integrated programmers and refuse to sell their
    products to alternative MVPDs. WCA Comments at 16; Ameritech
    Comments at 15; WCA Reply Comments at 5-10; *see also* CU Comments
    at 8 (stating that Viacom refused to provide its programs, such as
    Showtime, to People's Choice, a wireless cable company).

[^134]: *See generally*, James L. Langenfeld and Louis Silvia, *Federal
    Trade Commission Horizontal Restraint Cases: An Economic
    Perspective,* ANTITRUST LAW JOURNAL (1993); Alexis Jacquemin and
    Margaret E. Slade, *Cartels, Collusion, and Horizontal Merger,*
    HANDBOOK OF INDUSTRIAL ORGANIZATION, Richard Schmalensee and Robert
    Willig, ed., (1990); *see also* *NCAA v. University of Oklahoma*,
    468 U.S. 85 (1984); *Northwest Wholesale Stationers, Inc. v. Pacific
    Stationary and Printing Co*., 105 S.Ct. 2613 (1985).

[^135]: 47 U.S.C. § 533(f)(2)(E) & (F).

[^136]: *Second Report and Order* at para. 25; *Second Order on
    Reconsideration* at para. 41; *see also 1998 Competition Report* at
    para. 144 (acknowledging the benefits of clustering).

[^137]: *See, e.g.,* AT&T Comments at 10; Cablevision Comments at 20;
    TCI Comments at 53-56; MediaOne Reply Comments at 4; TCI Reply
    Comments at 15.

[^138]: Paul Farhi, *Pact Ends MediaOne Bid War; Comcast Lets AT&T Buy
    Cable Rival*, The Washington Post (May 5, 1999) ("Comcast will allow
    AT&T to offer local telephone service to Comcast's cable customers."
    Agreement is dependent on AT&T reaching agreement with two other
    cable systems first.); Jarman, *AT&T Discusses Taking Over Cox
    Communication's Phoenix Telephone Service*, Knight-Ridder Tribune
    Business News (July 19, 1999).

[^139]: *See, e.g.*, MediaOne Comments at 30; NCTA Comments at 23.

[^140]: *Second Memorandum Opinion and Order on Reconsideration* at
    para. 41.

[^141]: *See* CU *et al*. Comments at 5; Ameritech Comments at 21; *see
    also 1998 Competition Report* at para. 144; *Second Order on
    Reconsideration* at para. 40.

[^142]: RCN Comments at 20.

[^143]: *Second Report and Order* at para. 16.

[^144]: *Id.*

[^145]: *Id.* at para. 17.

[^146]: Cablevision Comments at 13 n.18; Bresnan Comments at 5, 22-23;
    TCI Comments at 49-53

[^147]: *See, e.g.*, Adelphia *et al*. Comments at 29; Bresnan Comments
    at 25-26; MediaOne Comments at 40; Time Warner Comments at 24-25.

[^148]: 47 C.F.R. § 73.3555(e)(2)(I).

[^149]: *Id.*

[^150]: *See* Adelphia *et al*. Comments at 32.

[^151]: *See* *Second Order on Reconsideration* at para. 77.

[^152]: 47 C.F.R. § 76.504(b) (emphasis added).

[^153]: 47 C.F.R. § 76.504(d).

[^154]: 47 C.F.R. § 76.504(e).

[^155]: *Second Report and Order* at para. 28.

[^156]: *Id.*

[^157]: *Id.*

[^158]: *Id.*

[^159]: *Further Notice* at para. 32.

[^160]: *Id.*

[^161]: CU Motion to Vacate Stay of Enforcement of Horizontal Ownership
    Limits, MM Docket No. 92-264, CS Docket No. 98-82 (filed Aug. 17,
    1999) ("Motion").

[^162]: *Id.* at 6-17.

[^163]: Transfer of Control of FCC Licenses of MediaOne Group, Inc. to
    AT&T Corp., CS Docket No. 99-251 (filed July 7, 1999).

[^164]: CU Motion at 2 (citing attached Report of Mark Cooper, Ph.D.,
    "Breaking the Rules: AT&T's Attempt to Buy a National Monopoly in
    Cable TV and Broadband Internet Services.").

[^165]: *Second Order on Reconsideration* at paras. 75-77.

[^166]: *See* Brief for the Federal Communications Commission, *Time
    Warner Entertainment Co, LP. v. FCC*, No. 94-1035) (D.C. Cir. Filed
    Aug. 13, 1999) at 43-44 ("there is no reason for this Court to
    address \[petitioner's\] arguments unless and until the Commission
    denies reconsideration of those aspects of the subscriber limit rule
    and order that the rule go into effect.").

[^167]: *Second Order on Reconsideration* at para 77.

[^168]: *See* 5 U.S.C. § 603. The RFA, *see* 5 U.S.C. § 601 *et. seq.*,
    has been amended by the Contract With America Advancement Act of
    1996, Pub. L. No. 104-121, 110 Stat. 847 (1996) (\"CWAAA\"). Title
    II of the CWAAA is the Small Business Regulatory Enforcement
    Fairness Act of 1996 (\"SBREFA\").

[^169]: *Report and Order* at Attachment D.

[^170]: *See* 5 U.S.C. § 604.

[^171]: 47 U.S.C. § 533(f)(1)(A).

[^172]: 47 U.S.C. § 533(f)(2)(A)-(G).

[^173]: 47 C.F.R. § 76.503.

[^174]: 5 U.S.C. § 601(3) (incorporating by reference the definition of
    \"small business concern\" in 15 U.S.C. § 632).

[^175]: 15 U.S.C. § 632.

[^176]: 13 C.F.R. §121.201.

[^177]: 1992 Census, *supra*, at Firm Size 1‑123. *See Memorandum
    Opinion and Order and Notice of Proposed Rule Making, Implementation
    of Sections of the Cable Telecommunications Consumer Protection and
    Competition Act of 1992, Rate Regulation and Cable Pricing
    Flexibility,* MM Docket No. 92-266 and CS Docket No. 96-157, 11 FCC
    Rcd 9517, 9531 (1996).

[^178]: 47 C.F.R. § 76.901(e). The Commission developed this definition
    based on its determinations that a small cable company is one with
    annual revenues of \$100 million or less. *Sixth Report and Order
    and Eleventh Order on Reconsideration*, *Implementation of Sections
    of the 1992 Cable Act: Rate Regulation,* MM Docket Nos. 92-266 &
    93-215, 10 FCC Rcd 7393 (1995).

[^179]: Paul Kagan Associates, Inc., *Cable TV Investor*, Feb. 29, 1996
    (based on figures for Dec. 30, 1995).

[^180]: 47 C.F.R. § 76.901(c).

[^181]: 47 U.S.C. § 543(m)(2).

[^182]: 47 C.F.R. § 76.1403(b).

[^183]: Paul Kagan Associates, Inc., *Cable TV Investor*, Feb. 29, 1996
    (based on figures for Dec. 30, 1995).

[^184]: *See* Section VI above.

[^185]: *See* Section IV above.

[^186]: *See* Section V above.

[^187]: *See* Section VII above.

[^188]: *See* Section VIII above.

[^189]: I note also that, in this Order, the Commission continues to
    focus, just as it did in the first Order promulgating rules under
    this section, on the effect of the limit on the content of video
    programming, belying the claim that these rules are based purely on
    competition-related goals. *See, e,g, supra* at para. 17 & n. 44
    (discussing concern that \"unorthodox or unpopular speech is being
    denied an outlet\" and noting that cable operators can (as is their
    editorial right under the First Amendment) \"discourage carriage of
    popular content that does not suit their taste.\").

[^190]: Still on the Commission\'s books, however, is the analog to the
    minority-control allowance in the channel occupancy context. That
    regulation allows a cable operator to commit \"two additional
    channels or up to 45 percent of its channel capacity, whichever is
    greater,\" to affiliated programming services if those services are
    minority-controlled. 47 C.F.R. section 76.504(c). This regulation
    suffers from the very same infirmities under *Adarand* as the
    horizontal ownership minority-control allowance. It should also be
    repealed.

[^191]: *See Daniels Cablevision, Inc. v. United States*, 835 F. Supp. 1
    (D.D.C. 1993).

[^192]: *See SBC Communications, Inc. v. FCC*, 981 F. Supp. 996 (N.D.
    Tex. 1997).

[^193]: *See SBC Communications, Inc. v. FCC*, 154 F.3d 226 (5^th^ Cir.
    1998).

[^194]: I note that the Commission's commitment appears to be waning
    already. In last year's Order on Reconsideration, the Commission
    insisted that cable companies be prepared to come into compliance
    with its rules within 60 days of a judicial decision upholding our
    rules. On its own motion, the Commission has extended that to 180
    days.