**Before the**

**Federal Communications Commission**

**Washington, D.C. 20554**

In the Matter of: )

)

1998 Biennial Regulatory Review \-- ) CS Docket No. 98-61

)

\"Annual Report of Cable Television )

Systems,\" Form 325, filed pursuant to )

Section 76.403 of the Commission\'s Rules )

**ORDER ON RECONSIDERATION**

**Adopted: May 11, 2000 Released: June 9, 2000**

By the Commission:

**I. INTRODUCTION**

1\. In *1998 Biennial Regulatory Review \-- \"Annual Report of Cable
Television Systems,\" Form 325, filed pursuant to Section 76.403 of the
Commission\'s Rules*, Report and Order (*\"Form 325 Order\"*), the
Commission revised and streamlined the Form 325, \"Annual Report of
Cable Television Systems,\"[^1] which is provided for in Section 76.403
of the Commission\'s rules.[^2] A petition for reconsideration of the
*Form 325 Order* was filed by Ameritech New Media (\"Ameritech\"). For
the reasons discussed below, Ameritech\'s petition is granted, in part,
and denied, in part, to the extent indicated herein.

**II. BACKGROUND**

2\. Form 325 serves as the Commission\'s basic annual reporting
requirement for the cable television industry. In the *Form 325 Order,*
the Commission assessed the continued relevance of the form for the
purposes of its policymaking and enforcement activities. The Commission
concluded that it would not eliminate the information collection process
altogether, but instead determined to significantly streamline and
revise the existing form in ways that would reduce the administrative
burden placed upon both the cable industry and the Commission, and yet
still continue to permit the Commission to meet its responsibilities in
regulating the cable television industry. In that regard, the Commission
drastically reduced the universe of cable systems required to file the
Form 325. As opposed to having all cable systems in the country file the
Form 325, the *Form 325 Order* requires that only systems with 20,000 or
more subscribers file the form and devised a sampling methodology to
gather information from cable systems with fewer than 20,000
subscribers.[^3] The filing requirement was thus completely eliminated
for almost 90 percent of cable operators. The *Form 325 Order* also
replaced the old four-part Form 325 with a streamlined two-part form.
The *Form 325 Order* further reduced the burden on those cable systems
required to file the form by modifying it so that information now will
be collected on a system-wide basis rather than on a
community-by-community basis which was the method utilized on the old
form. This change alone substantially reduces the burden on those cable
operators that serve ten or more communities on one system.

**III. DISCUSSION**

3\. Ameritech seeks reconsideration of the *Form 325 Order* on the
grounds that: (1) the revised form expands the reporting obligations of
cable operators in violation of the Administrative Procedure Act
(\"APA\") because the Commission failed to give notice in the *Notice of
Proposed Rule Making (\"NPRM\")*[^4] of the possibility of different
reporting requirements; (2) the rationales offered to support expansion
of the form do not justify the Commission\'s action; and (3) the form
requires the disclosure of confidential business information. Based on
its arguments, Ameritech contends that the Commission must rescind the
new reporting requirements in Form 325 pending a notice and comment
rulemaking proceeding to consider the need and statutory basis for such
requirements, as well as to consider whether, to the extent such need
has been established, cable operators should be permitted to submit such
information only on a confidential basis.[^5]

4\. After examining the purpose and history of the Form 325, the
Commission concluded in its *NPRM* that it was prepared \"to either: (1)
abolish this data collection process entirely, or (2) reform the process
so that the data that is deemed important may be collected in a more
efficient, less resource intensive manner.\"[^6] In its *NPRM*, the
Commission stated that \"it is vital that the Commission have accurate
and timely information regarding the cable television industry, both to
assist in the enforcement of existing requirements and for broader
rulemaking and policy purposes.\"[^7] More specifically, the *NPRM*
sought comment \"on any changes that should be made to clarify and
improve the usefulness of the data collected\" and noted, as examples,
some areas of interest such as channel capacity and use data, must
carry, leased access, and channel occupancy.[^8] After analyzing the
comments received in response to the *NPRM*, the Commission decided to
retain and modify Form 325.[^9] In revising the form, the Commission
sought to strike a balance by reducing the burdens placed upon the
industry and on Commission resources in the Form 325 information
collection process while still retaining access to core information that
the Commission deemed necessary in order to perform its regulatory
functions.[^10]

5\. Commenters responding to the *NPRM* discussed a number of issues
such as cable system capacity and channel usage, digital television
broadcast signal carriage, horizontal integration, must carry, and
leased access.[^11] With this information, the Commission sought to
craft a new streamlined form, consistent with its *NPRM* proposal, that
collected data deemed to be important in a more efficient, less resource
intensive manner. The Commission eliminated information that it found to
be no longer useful and substituted questions seeking more relevant and
useful information that would prove helpful to better understand the
cable industry in these transitional times. In that regard, the new Form
325 poses some general questions seeking information regarding digital
services that will enable the Commission to better assess the technical
capabilities of cable systems and the future of the cable industry.
Similar to the old form, the new form also contains a section seeking
frequency and signal distribution information pertaining to areas such
as transmitted spectrum and channel capacity. We note that while some of
the questions in this section now may ask about the digital capabilities
of cable systems, the form has always sought information regarding such
areas as upstream and downstream channel spectrum.

6\. While not contesting the dramatic reduction in filing requirements
for the cable industry as a whole, Ameritech argues that the
Commission\'s *Form 325 Order* impermissibly expands the reporting
obligations of cable operators still required to file the form.[^12]
Ameritech argues that the addition of these reporting requirements is
inconsistent with the APA because they were not addressed in the *NPRM*
that led to the *Form 325 Order*.[^13] Ameritech argues that the
reporting requirements on Form 325 violate Section 553(b) of the APA,
which requires the Commission to give notice of \"either the terms or
substance of the proposed rule or a description of the subjects and
issues involved.\"[^14] Ameritech contends that the Commission did not
give interested parties any indication that it was considering expanding
the Form 325 reporting requirements and, as a result, none of the
parties to the proceeding commented on whether there is any need for the
additional data, whether the data are available from another source,
whether the data are confidential, or whether the Commission\'s
potential need for the information justified the burden imposed on cable
operators in having to collect and submit the information.[^15]
Ameritech further argues that the additional reporting requirements
adopted in the *Form 325 Order* do not satisfy the notice requirement in
Section 553(b) of the APA as a logical outgrowth of the proposals in the
*NPRM*.[^16] In that regard, Ameritech asserts that no one reasonably
could have foreseen that the Commission might expand Form 325, or do so
in the manner that it did.[^17]

7\. We do not agree with Ameritech that the reporting requirements
adopted in the *Form 325 Order* violate the notice requirement of
Section 553(b) of the APA.[^18] We believe that adequate notice was
provided in this matter so that interested parties were afforded a
reasonable opportunity to participate in the Form 325 rulemaking
process. The Commission notified interested parties that it would either
do away completely with the Form 325, or reform the process so that it
could collect important information in a more efficient manner. We
believe, therefore, that the *NPRM* gave notice of the terms or
substance of the proposed rulemaking as required by Section 553(b).[^19]
As noted above, the Commission considered the comments of interested
parties regarding what they deemed to be relevant areas of regulatory
concern, as well as arguments against any reporting requirements
whatsoever, and then determined to reformat and revise the Form 325. We
believe that the reporting requirements that Ameritech asserts to be new
requirements adopted in the *Form 325 Order* constitute a logical
outgrowth of the proposals in the *NPRM*. For a rule to constitute a
logical outgrowth of an agency proposal, the rule must be sufficiently
related to the notice given that interested parties \"should have
anticipated that such a requirement might be imposed.\"[^20] In order to
meet this standard, it has been held that the agency\'s notice and the
public\'s comments must pass the \"reasonable specificity\" test.[^21]
This standard can be stated as whether a reasonable person would be put
on notice of the final rule.[^22]

8\. In this situation, the final rule involved is not a new rule, but
one that has been revised so that the form involved has been modified,
as well as streamlined, from a four-part form to a two-part form,
applicable to a drastically reduced universe of cable systems required
to make the filing. Interested parties were advised by the *NPRM* that
the Commission was considering, as one option, changing its information
collection process in this matter. The Commission specifically stated in
the *NPRM* that it intended to either abolish the Form 325, or \"reform
the process so that the data that is deemed important may be collected
in a more efficient, less resource intensive manner.\"[^23] The *NPRM*
did not state that if a new streamlined form was ultimately adopted, the
information collected would be the same as that collected on the old
form. Those parties who submitted comments in this proceeding discussed
a variety of cable issues in relation to arguments both for and against
retention or elimination of the form. As the *NPRM* stated, it is vital
for the Commission to have accurate and timely information on the cable
industry, both to enforce current rules and for broader rulemaking and
policy purposes, and, in light of those purposes, we generally sought
comment on any changes that should be made to Form 325 to improve the
usefulness of the data collected.[^24] Consequently, we believe that
questions on Form 325 inquiring about cable digital age technology,
including information such as cable modem and telephony services, are
sufficiently related to this proceeding so that a reasonable person
would be put on notice of the changes adopted in the final rule.

9\. Ameritech further argues that the rationales offered to support what
it alleges to be the expansion of the Form 325 do not justify the
Commission\'s action. Ameritech contends that the Commission\'s claimed
need for the Form 325 information is undermined because it has not been
collected since 1994.[^25] In addition, Ameritech argues that the
information collected by the form is not relied upon for making policy
decisions because the Commission always asks interested parties in
rulemaking proceedings to submit specific, relevant information.[^26]

10\. Ameritech also contends that the particular justifications offered
for specific data collection requirements in the *Form 325 Order* are
not valid. For instance, Ameritech disputes the Commission\'s assertion
that the new Form 325 will provide a mechanism that will enable the
Commission to oversee and audit compliance with its regulatory fee
requirements. In that regard, Ameritech contends that the Commission has
successfully collected regulatory fees over the past five years without
Form 325 data.[^27] Ameritech also argues that it is not necessary for
the Commission to have Form 325 data in order to monitor and enforce
compliance with the must carry and leased access rules.[^28] Ameritech
asserts that the Commission has access to such information through its
well-defined complaint procedures or through the process of examining
its own records.[^29] Ameritech argues that there is no merit to the
Commission\'s finding that information concerning the provision of
digital services is necessary to enable the Commission to analyze cable
operators\' technical capabilities and the systems\' technical potential
to offer sophisticated services.[^30] Ameritech questions why the
Commission needs such information in light of its avowed intent not to
regulate advanced services provided via cable.[^31]

11\. We disagree with Ameritech that we have not justified the retention
of Form 325 because it has not been sent out to cable system operators
in several years. As we stated in the *Form 325 Order*, due to the
demands of rate regulation and the implementation of the
Telecommunications Act of 1996, Commission resources were deployed to
focus on those areas and it proved difficult to complete the data input
process utilized at that time for the Form 325.[^32] Although our own
resource constraints have deprived us of the benefit of the information
provided on the form, thus prompting us to temporarily suspend the
filing requirement, the Commission has not lost sight of the value of
that information, especially during this transitional time within the
industry. For these reasons, the Commission reinstated the Form 325
filing requirement in a streamlined form that lessens the regulatory
burden on a reduced number of cable operators and in a form that can be
readily processed by Commission staff. While specific, relevant
information can always be solicited from interested parties during
rulemaking proceedings, the Commission has found it useful in the past,
and anticipates that it will be useful in the future, to have an
in-house database to supplement its rulemaking proceedings and to assist
in various other aspects of carrying out its regulatory functions.[^33]

12\. We also believe that the Form 325 collection process will prove to
be a valuable resource to help monitor the implementation of the rules
promulgated as a result of our rulemaking proceedings. Ameritech argues
that the Commission\'s complaint procedures and specific requests for
information from cable operators\' public files are enough to enforce
and monitor such rules as must carry and leased access. As we stated in
the *Form 325 Order*, we believe that the Commission will benefit from
the information provided in the form not only to assess industry
compliance with our rules, but to monitor trends within the cable
industry.[^34] Similarly, while Ameritech disputes our desire to gather
information about cable digital services in light of the Commission\'s
stated intent not to regulate advanced services provided via cable, we
believe that having such a consolidated source of information regarding
the development of the future of the cable industry will assist us in
monitoring and keeping abreast of the progress made in areas such as the
deployment of broadband capabilities.[^35]

13\. Finally, Ameritech argues that even if the Commission were to
require cable operators to submit the new Form 325 data, it should
permit operators to submit that data on a confidential basis.[^36]
According to Ameritech, much of the new data required by Form 325 is
sensitive and highly confidential business information.[^37] In that
regard, Ameritech contends that by requiring an operator to disclose the
number of set-top boxes (analog, digital, or hybrid) it has deployed
would allow competitors to know how successfully an operator has
marketed set-top box technology and attendant services.[^38] Similarly,
Ameritech asserts that requiring operators to disclose information
concerning the number of their cable modem subscribers would give
competitors valuable information concerning the success or failure of
various cable modem deployment strategies.[^39] In addition, Ameritech
argues that forcing an operator to disclose information concerning the
deployment of two-way services and other advanced technologies would
give competitors significant information concerning the operators\'
upgrade of its cable plant and rollout of advanced services which then
would allow competitors to copy successful business strategies with
little risk of failure.[^40]

14\. While Ameritech makes general assertions about the confidentiality
of such information, it provides no specific or detailed support for its
claims.[^41] Nonetheless, we are aware that there may be instances where
parties submitting information to the Commission believe that the
information contains commercial, financial or technical data that should
be guarded from competitors. Therefore, those cable operators required
to file the Form 325 may designate as proprietary such information on
the Form 325 that the operator believes, in good faith, to be
information that falls within an exception to disclosure contained in
the Freedom of Information Act (\"FOIA\").[^42] Those operators making
requests that information contained in their Form 325 submissions be
withheld from public inspection shall follow the procedures outlined in
Section 0.459 of the Commission\'s rules.[^43]

# IV. ORDERING CLAUSE

15\. **IT IS ORDERED** that the Petition for Reconsideration filed by
Ameritech New Media is **GRANTED, IN PART, AND DENIED, IN PART**, **TO
THE EXTENT INDICATED**.

FEDERAL COMMUNICATIONS COMMISSION

Magalie Roman Salas

Secretary

[^1]:     ^?^FCC Form 325, Annual Report of Cable Television Systems
    (approved by OMB 3060-0061).

[^2]:     ^?^47 C.F.R. § 76.403; *1998 Biennial Regulatory Review \--
    \"Annual Report of Cable Television Systems,\" Form 325, filed
    pursuant to Section 76.403 of the Commission\'s Rules*, Report and
    Order, 14 FCC Rcd 4720 (1999) (*"Form 325 Order"*).

[^3]:     ^?^In the past, all of the approximately 11,000 cable systems
    in the country were required to file Form 325. The *Form 325 Order*
    now requires the approximately 700 systems with 20,000 or more
    subscribers, covering 70 percent of cable subscribers, to file the
    form. In addition, of the approximately 10,000 cable systems serving
    fewer than 20,000 subscribers, the Commission will seek to solicit
    information from these smaller systems by mailing the Form 325 to a
    sampling of 5 percent of those systems.

[^4]:     ^?^*1998 Biennial Regulatory Review \-- \"Annual Report of
    Cable Television Systems,\" Form 325, filed pursuant to Section
    76.403 of the Commission\'s Rules*, Notice of Proposed Rule Making,
    13 FCC Rcd 12266 (1998) (*\"NPRM\"*).

[^5]:     ^?^Ameritech Petition at 2, 11.

[^6]:     ^?^*NPRM* at 12268.

[^7]:     ^?^*Id.*

[^8]:     ^?^*Id.*

[^9]:     ^?^In response to the *NPRM*, the Commission received 4
    comments and 3 reply comments. The Institute for Public
    Representation, et al. and the National Association of Broadcasters
    supported the retention of the Form 325. Ameritech New Media, Inc.,
    the National Cable Television Association and Adelphia
    Communications Corporation, et al. advocated the elimination of the
    Form 325.

[^10]:     ^?^*Form 325 Order* at 4725.

[^11]:     ^?^*Id.* at 4722-4725.

[^12]:     ^?^Ameritech Petition at 1, 3. Specifically, Ameritech states
    that the Form 325 imposes 12 new reporting requirements which
    include: the number of subscribers who have set-top boxes and the
    number of set-top boxes in inventory and deployed (analog, digital
    and hybrid); information concerning upstream channel usage (*i.e.*,
    two-way capability and services); the number of telephony
    subscribers; the number of cable modem subscribers; the number of
    leased cable modems deployed; the number of optical fiber nodes in
    the system; the type of digital modulation method utilized; whether
    programming is transmitted over the system in analog, digital or
    HDTV formats; and the tier in which specific programming is carried.
    *Id.* at 3, n.6 citing *Form 325 Order* at Appendix A.

[^13]:     ^?^*Id.* at 3, citing *NPRM*, 13 FCC Rcd 12266 (1998).

[^14]:     ^?^*Id.* at 5, citing 5 U.S.C. § 553(b). Ameritech notes that
    the D.C. Circuit Court of Appeals has explained that this provision
    \"requires the Commission to provide notice of the proposed
    rulemaking \`adequate to afford interested parties a reasonable
    opportunity to participate in the rulemaking.\' \" *Id.* at 5,
    citing *MCI Telecommunications Corp. v. FCC,* 57 F.3d 1136, 1140-41
    (D.C. Cir. 1995) (quoting *Florida Power & Light Co. v. United
    States*, 846 F.2d 765, 771 (D.C. Cir. 1988) ).

[^15]:     ^?^*Id.* at 5.

[^16]:     ^?^*Id.* at 6; 5 U.S.C. § 553(b).

[^17]:     ^?^*Id*. Ameritech argues that for a rule to constitute a
    logical outgrowth of an agency proposal, the rule must be
    sufficiently related to the proposal that a party, \"*ex ante*,
    should have anticipated that such a requirement might be imposed.\"
    *Id.*, citing *Aeronautical Radio, Inc. v. FCC*, 928 F.2d 428, 446
    (D.C. Cir. 1991 (quoting *Small Refiner Lead Phase-Down Task Force
    v. EPA*, 705 F.2d 506, 549 (D.C. Cir. 1983) ).

[^18]:     ^?^5 U.S.C. § 553(b).

[^19]:     ^?^*Id.*

[^20]:     ^?^*Small Refiner Lead* *Phase-Down Task Force v. EPA*, 705
    F.2d 506, 547 (D.C. Cir. 1983); *see also Shell Oil Co. v. EPA,* 950
    F.2d 741, 759 (D.C. Cir. 1991).

[^21]:     ^?^*Smaller Refiner Lead Phase-Down v. EPA*, 705 F.2d at 549;
    *see also Phillip M. Kannan*, Admin. L. Rev. 213 (1996).

[^22]:     ^?^*LaMadrid v. Hegstrom*, 830 F.2d 1524, 1530-31 (9th Cir.
    1987); *see also Phillip M. Kannan*, 48 Admin. L. Rev. 213 (1996).

[^23]:     ^?^*NPRM* at 12268.

[^24]: ^?^ *Id.*

[^25]:     ^?^Ameritech Petition at 7.

[^26]:     ^?^*Id.*

[^27]:     ^?^*Id.*

[^28]:     ^?^*Id.* at 8.

[^29]:     ^?^*Id.*

[^30]:     ^?^*Id.* at 9.

[^31]:     ^?^*Id.*, citing remarks of William E. Kennard, Chairman,
    Federal Communications Commission, Before the National Cable
    Television Association, Chicago, Illinois, June 15, 1999 (\"So with
    competition and deregulation as our touchstones, the FCC has taken a
    hands-off deregulatory approach to the broadband market.\")

[^32]:     ^?^*Form 325 Order* at 4722. In the past, in order to help
    reduce the filing burden on cable operators, preprinted forms
    reflecting the previous year\'s collected information were sent to
    cable operators so that they were only required to correct
    information that had changed since the last filing. This process
    proved to be labor intensive for the Commission because the returned
    forms, many of which were deficient in some manner, had to be
    reviewed on an individual basis for accuracy by the staff before
    being entered into the database.

[^33]:     ^?^Ameritech disputes the Commission\'s assertion that the
    Form 325 will provide a mechanism to aid in overseeing and auditing
    compliance with the Commission\'s regulatory fee requirements
    arguing that the Commission has been successful in collecting
    regulatory fees and noting that many cable operators will not even
    be required to file the form. While many cable operators will not be
    required to file the Form 325, we believe that those who do file the
    form will assist the Commission in verifying that the cable industry
    is paying appropriate regulatory fees because subscribership numbers
    will be reported on the form and these numbers are directly related
    to the fees paid by cable operators.

[^34]:     ^?^*Form 325 Order* at 4729.

[^35]:     ^?^*See* *In the Matter of: Inquiry Concerning the Deployment
    of Advanced Telecommunications Capability to All Americans in a
    Reasonable and Timely Fashion, and Possible Steps to Accelerate Such
    Deployment Pursuant to Section 706 of the Telecommunications Act of
    1996*, Report, 14 FCC Rcd 2398, 2449 (1999). (\"We will, however,
    continue to monitor broadband deployment closely to see whether
    there are developments that could affect our goal of encouraging
    deployment of broadband capabilities pursuant to the requirements of
    section 706.\").

[^36]:     ^?^Ameritech Petition at 10.

[^37]:     ^?^*Id.*

[^38]:     ^?^*Id.*

[^39]:     ^?^*Id.*

[^40]:     ^?^*Id.*

[^41]:     ^?^We note also that the record in this proceeding is lacking
    as no other filings have been made except for the instant petition
    filed by Ameritech.

[^42]:     ^?^5 U.S.C. § 552(b).

[^43]:     ^?^47 C.F.R. § 0.459.