# Before the

# Federal Communications Commission

# Washington, D.C. 20554

In the Matter of: )

)

Implementation of the Satellite Home ) CS Docket No. 99-363

Viewer Improvement Act of 1999 )

)

Retransmission Consent Issues: )

Good Faith Negotiation and Exclusivity )

# FIRST REPORT AND ORDER 

**Adopted: March 14, 2000 Released: March 16, 2000**

**By the Commission:**

# Table of Contents

> Paragraph Nos.

I. INTRODUCTION 1

II\. BACKGROUND 3

III\. SUMMARY OF DECISION 6

IV. GOOD FAITH NEGOTIATION REQUIREMENT 11

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A.  Congressional Intent in Amending Section 325

> of the Communications Act 11

B. Mutual Good Faith Negotiation Requirement 25

C. Definition of Good Faith 27

D. Carriage While a Complaint is Pending 59

E. Existing and Subsequent Retransmission Consent Agreements 62

V. EXCLUSIVE RETRANSMISSION CONSENT AGREEMENTS 65

VI. RETRANSMISSION CONSENT AND EXCLUSIVITY COMPLAINT

PROCEDURES 73

A. Voluntary Mediation 73

B. Commission Procedures 75

C. Discovery 78

D. Remedies 80

E. Expedited Resolution 83

F. Burden of Proof 86

G. Sunset of Rules 90

VII\. ADMINISTRATIVE MATTERS 95

VIII\. ORDERING CLAUSES 98

APPENDIX A

APPENDIX B

APPENDIX C

###### INTRODUCTION

1\. In this First Report and Order ("Order"), we adopt rules
implementing certain aspects of the Satellite Home Viewer Improvement
Act of 1999 ("SHVIA").[^1] SHVIA authorizes satellite carriers to add
more local and national broadcast programming to their offerings, and to
make that programming available to subscribers who previously have been
prohibited from receiving broadcast fare via satellite under compulsory
licensing provisions of the copyright law. The legislation generally
seeks to place satellite carriers on an equal footing with local cable
operators when it comes to the availability of broadcast programming,
and thus give consumers more and better choices in selecting a
multichannel video program distributor ("MVPD").

2\. Among other things, Section 325(b)(3)(C) of the Communications Act
requires satellite carriers to obtain retransmission consent for the
local broadcast signals they carry, requires broadcasters, until 2006,
to negotiate in good faith with satellite carriers and other MVPDs with
respect to their retransmission of the broadcasters' signals, and
prohibits broadcasters from entering into exclusive retransmission
consent agreements.[^2] Section 325(b)(3)(C) required the Commission to
commence a rulemaking within 45 days of the enactment of SHVIA and to
complete all actions necessary to prescribe regulations within 1 year
after such date of enactment.[^3] The Commission issued a Notice of
Proposed Rulemaking ("Notice") on December 22, 1999.[^4] The Commission
received numerous comments and reply comments to the Notice.[^5] We
conclude the good faith negotiation and exclusivity portion of this
rulemaking well ahead of our statutory deadlines for doing so because of
the importance of implementing these provisions to MVPD competition and
the growth of satellite service.

## II. BACKGROUND

3\. In 1988, Congress passed the Satellite Home Viewer Act ("1988 SHVA")
in order to provide people in unserved areas of the country with access
to broadcast programming via satellite.[^6] The 1988 SHVA enabled
satellite carriers[^7] to provide broadcast programming to those
satellite subscribers who were unable to obtain broadcast network
programming over-the-air. As a general matter, however, the 1988 SHVA
did not permit satellite carriers to retransmit local broadcast
television signals directly to consumers.

4\. The Cable Television Consumer Protection and Competition Act of 1992
("1992 Cable Act")[^8] amended the Communications Act, *inter alia*, to
include Section 325, which provides television stations with certain
carriage rights on local market cable television systems. Within local
market areas,[^9] commercial television stations may elect cable
carriage under either the retransmission consent or mandatory carriage
requirements.[^10] Section 325 as initially enacted contained no
standards pursuant to which broadcasters were required to negotiate with
MVPDs. The Commission established rules related to the
retransmission/mandatory carriage election cycle, but did not adopt
rules governing the negotiation process of retransmission consent.

5\. SHVIA revises the 1988 SHVA and reflects changes not only involving
the satellite industry and subscribers, but television broadcast
stations and terrestrial MVPDs.[^11] SHVIA adopts changes in several
areas, including retransmission consent, must-carry, and retransmission
of local broadcast signals. In particular, SHVIA addresses several
limitations previously placed on satellite carriers, including the issue
of satellite carrier retransmission of local broadcast programming.

## III. SUMMARY OF DECISION

6\. The Order determines that the statute does not intend to subject
retransmission consent negotiation to detailed substantive oversight by
the Commission. Instead, the order concludes that Congress intended that
the Commission follow established precedent, particularly in the field
of labor law, in implementing the good faith retransmission consent
negotiation requirement. Consistent with this conclusion, the Order
adopts a two-part test for good faith. The first part of the test
consists of a brief, objective list of negotiation standards. First, a
broadcaster may not refuse to negotiate with an MVPD regarding
retransmission consent. Second, a broadcaster must appoint a negotiating
representative with authority to bargain on retransmission consent
issues. Third, a broadcaster must agree to meet at reasonable times and
locations and cannot act in a manner that would unduly delay the course
of negotiations. Fourth, a broadcaster may not put forth a single,
unilateral proposal. Fifth, a broadcaster, in responding to an offer
proposed by an MVPD, must provide considered reasons for rejecting any
aspects of the MVPD's offer. Sixth, a broadcaster is prohibited from
entering into an agreement with any party conditioned upon denying
retransmission consent to any MVPD. Finally, a broadcaster must agree to
execute a written retransmission consent agreement that sets forth the
full agreement between the broadcaster and the MVPD.

7\. The second part of the good faith test is based on a totality of the
circumstances standard. Under this standard, an MVPD may present facts
to the Commission which, even though they do not allege a violation of
the specific standards enumerated above, given the totality of the
circumstances constitute a failure to negotiate in good faith.

8\. The Order concludes that it is not practicably possible to discern
objective competitive marketplace factors that broadcasters must
discover and base any negotiations and offers on, and that it is the
retransmission consent negotiations that take place that are the market
through which the relative benefits and costs to the broadcaster and
MVPD are established. The Order provides examples of negotiation
proposals that presumptively are consistent and inconsistent with
"competitive marketplace considerations." At the same time, the Order
provides that it is implicit in Section 325(b)(3)(C) that any effort to
further anti-competitive ends through the negotiation process would not
meet the good faith negotiation requirement. Considerations that are
designed to frustrate the functioning of a competitive market are not
"competitive marketplace considerations." Conduct that is violative of
national policies favoring competition \-- that is, for example,
intended to gain or sustain a monopoly, is an agreement not to compete
or to fix prices, or involves the exercise of market power in one market
in order to foreclose competitors from participation in another market
\-- is not within the competitive marketplace considerations standard
included in the statute. The Commission's rules regarding the good faith
negotiation requirement sunset on January 1, 2006.

9\. As for the prohibition on exclusivity, the Order interprets the
phrase "engaging in" broadly. Thus, the Order would prohibit not only
entering into exclusive retransmission consent agreements, but also
negotiating exclusive agreements that would take effect after the sunset
of the prohibition. The Commission's rules regarding exclusive
retransmission consent agreements sunset on January 1, 2006.

10\. An MVPD believing itself to be aggrieved under Section 325(b)(3)(C)
may file a complaint with the Commission. The Order provides that the
procedural provisions of Section 76.7 will govern good faith and
exclusivity complaints. The Order directs Commission staff to expedite
resolution of good faith and exclusivity complaints. The Order provides
that the burden of proof with regard to such complaints is on the MVPD
complainant.

**IV. GOOD FAITH NEGOTIATION REQUIREMENT**

**A.** **Congressional Intent in Amending Section 325 of the
Communications Act**

11\. In SHVIA, Congress amended Section 325(b) of the Communications
Act, requiring the Commission to revise its regulations so that they
shall:

. . . until January 1, 2006, prohibit a television broadcast station
that provides retransmission consent from . . . failing to negotiate in
good faith, and it shall not be a failure to negotiate in good faith if
the television broadcast station enters into retransmission consent
agreements containing different terms and conditions, including price
terms, with different multichannel video programming distributors if
such different terms and conditions are based on competitive marketplace
considerations.[^12]

The Joint Explanatory Statement of the Committee of Conference
("Conference Report") does not explain or clarify the statutory
language, merely stating that:

> The regulations would, until January 1, 2006, prohibit a television
> broadcast station from . . . refusing to negotiate in good faith
> regarding retransmission consent agreements. A television station may
> generally offer different retransmission consent terms or conditions,
> including price terms, to different distributors. The \[Commission\]
> may determine that such different terms represent a failure to
> negotiate in good faith only if they are not based on competitive
> marketplace considerations.[^13]

The Notice sought comment on the correct interpretation of the good
faith negotiation requirement of Section 325(b)(3)(C).[^14]

12\. At the outset of our discussion, we note that Section 325(b)(2)(E)
of the Communications Act grants satellite carriers a six-month period
during which they may retransmit the signals of local broadcasters
without a broadcaster's express retransmission consent.[^15] As
discussed in further detail below, Section 325 also requires strict
enforcement of, and severe penalties for, satellite carrier
retransmission of local broadcast signals without consent after this
six-month period expires.[^16] We have adopted these rules before the
end of the six-month period provided by Section 325(b)(2)(E) so that
MVPDs, particularly satellite carriers, and broadcasters understand
their rights and obligations under Section 325(b)(3)(C) before that
period expires. These rules will provide a framework under which
broadcasters and satellite carriers can achieve retransmission consent
before the expiration of the six-month period set forth in Section
325(b)(2)(E) so as to avoid the highly undesirable interruption of local
broadcast signals that satellite carriers have begun to provide to their
subscribers in many cities across the nation. On an ongoing basis, we
intend these rules to govern the negotiation of retransmission consent
between broadcasters and all MVPDs.[^17]

13\. The statute does not appear to contemplate an intrusive role for
the Commission with regard to retransmission consent. Section
325(b)(3)(C) instructs the Commission to "revise the regulations
governing the exercise by television broadcast stations of the right to
grant retransmission consent under this subsection. . . ."[^18] The fact
that Congress instructed the Commission to "revise" its existing
retransmission consent regulations, coupled with the determinedly brief
discussion of Section 325(b)(3)(C) in the Conference Report, leads us to
conclude that, in addition to the guidance that can be gleaned from
SHVIA, we should also look for guidance in the legislative history of
the retransmission consent provisions of the 1992 Cable Act.[^19] When
Congress first applied retransmission consent to MVPDs in 1992, it
stated that "it is the Committee's intention to *establish a
marketplace* for the disposition of the rights to retransmit broadcast
signals; it is not the Committee's intention in this bill to *dictate
the outcome of the ensuing marketplace negotiations*."[^20]

14\. Based on this language, the Commission concluded in the *Broadcast
Signal Carriage Order* that Congress did not intend that the Commission
should intrude in the negotiation of retransmission consent.[^21] We do
not interpret the good faith requirement of SHVIA to alter this settled
course and require that the Commission assume a substantive role in the
negotiation of the terms and conditions of retransmission consent. We
note that Congress considered and explicitly rejected a comprehensive
regime that required the Commission to:

> prohibit television broadcast stations that provide retransmission
> consent from engaging in discriminatory practices, understandings,
> arrangements, and activities, including exclusive contracts for
> carriage, that prevent a multichannel video programming distributor
> from obtaining retransmission consent from such stations.[^22]

Where Congress expressly considers and rejects such an approach, the
rules of statutory construction do not favor interpreting a subsequent
statutory provision to require the rejected alternative.[^23] Given the
express congressional rejection of this anti-discrimination provision,
we will not adopt rules to recreate this provision by regulation.

15\. In support of the position that intrusive Commission action is
unnecessary to implement the good faith negotiation requirement,
commenters point to the fact that thousands of retransmission consent
agreements have been successfully concluded between local broadcasters
and MVPDs since adoption of the 1992 Cable Act.[^24] In addition,
commenters note that within days after enactment of SHVIA, DIRECTV and
EchoStar announced that they had entered into retransmission consent
agreements with the owned-and-operated affiliates of several of the
major television networks.[^25] As a result, these commenters argue that
it would be wholly inappropriate to impose "shotgun wedding" style
regulations on a marketplace that is already functioning.[^26] DIRECTV,
however, argues that the existence of these agreements does not ensure
that agreements that have yet to be completed will progress as
smoothly.[^27]

16\. One commenter maintains that the purpose of the good faith
requirement is merely to bring the parties to the bargaining table,
stating that "Congress signaled its desire only that broadcasters,
having once made the decision to provide retransmission consent, should
be required to negotiate with all interested MVPDs and not engage in an
outright refusal to deal."[^28] Several broadcast commenters assert that
Congress merely intended the Commission to revise its existing
regulations to account for retransmission consent agreements between
broadcasters and satellite carriers that now qualify for compulsory
copyright license to provide local television stations to satellite
subscribers.[^29]

17\. ALTV advises the Commission to focus on Congress' overarching
purpose in enacting Section 325 in the 1992 Cable Act -- assuring
broadcasters the opportunity to secure compensation for the value of the
retransmission of their signals by MVPDs.[^30] Conversely, other
commenters assert that Congress intended the Commission to begin with
the premise that television broadcast programming is an indispensable
component of any MVPD's service package and that alternative MVPDs
cannot compete effectively with incumbent cable operators if they are
denied full and fair access to that programming in local markets.[^31]

18\. We find instructive the legislative history of a previous version
of SHVIA that was considered, but not enacted, by Congress. During the
consideration of the House version of SHVIA, Representative Tauzin
explained to Representative Dingell that the House bill, which included
a detailed, anti-discrimination provision, would permit:

> \[A\] broadcast station . . . for example, \[to\] negotiate a cash
> payment from one video distributor for retransmission consent and
> reach an agreement with other distributors operating in the same
> market that contains different prices or other terms . . . \[Indeed\],
> as long as a station does not refuse to deal with any particular
> distributor, a station's insistence on different terms and conditions
> in retransmission agreements based on marketplace considerations is
> not intended to be prohibited by this bill . . . if a station
> negotiates in good faith with a distributor, the failure to reach an
> agreement with that distributor would not constitute a discriminatory
> act that is intended to be barred by this section.[^32]

In discussing this same previous version of SHVIA, Representative Berman
echoed a similar sentiment stating "\[W\]hile it is important that MVPDs
have the opportunity to negotiate for retransmission consent, we do not
in this bill subject the prices or other terms and conditions of
nonexclusive retransmission consent agreements to \[Commission\]
scrutiny."[^33] Again, these statements reflect consideration of the
more onerous House version of SHVIA and its anti-discrimination
requirement. We find it difficult to reconcile commenters arguments that
SHVIA as enacted contains a broad grant of Commission authority to
analyze and prohibit the substantive terms of retransmission consent
with these statements.

19\. Commenters argue that the statutory imposition of a good faith
negotiation requirement is in derogation of the long-standing common law
right to contract and therefore the duty, though statutorily imposed,
must be narrowly construed.[^34] Commenters assert that even a statutory
duty to negotiate in good faith does not require parties to do anything
contrary to their own self-interest or make any particular
concessions.[^35] Accordingly, argues Disney, the Commission is not
empowered to become involved in the substance of retransmission consent
negotiations.[^36]

20\. We agree with those commenters that assert that Section
325(b)(3)(C) should be narrowly construed. As commenters indicate,
congressional language in derogation of the common law should be
interpreted to implement the express directives of Congress and no
further. The United States Supreme Court has reiterated this rule of
statutory construction on several occasions, holding that \[s\]tatutes
which invade the common law . . . are to be read with a presumption
favoring the retention of long-established and familiar principles,
except when a statutory purpose to the contrary is evident."[^37] In
addition, the Court has stated that, when a statutory provision does
derogate from the common law, it "must be strictly construed for no
statute is to be construed as altering the common law, farther \[sic\]
than its words import."[^38]

21\. Commenters state that, in other contexts, the good faith standard
has a well understood meaning that Congress must be presumed to have
intended, particularly, where, as here, nothing in the statute or the
legislative history suggests that Congress intended the Commission to
develop its own definition of good faith.[^39] These commenters argue
that SHVIA cannot be read to grant the Commission new, wholesale
authority to define good faith or engage in a detailed case-by-case
review of the retransmission terms offered to one MVPD as compared to
another.[^40] These commenters assert that the most appropriate
statutory example to follow is that of the good faith requirement of
Section 8(d) of the Taft-Hartley Act.[^41]

22\. Given the dearth of guidance in the statute and legislative
history, we believe that Congress signaled that the good faith
negotiation requirement adopted in Section 325(b)(3)(C) was sufficiently
well understood that further explication was unnecessary. In such
situations, we believe that Congress intends the Commission look to
analogous statutory standards from which to draw guidance. While
commenters offer various sources on which to rely, we agree with those
commenters suggesting that the good faith bargaining requirement of
Section 8(d) of the Taft-Hartley Act is the most appropriate source of
guidance.[^42] Section 8(d) of the Taft-Hartley Act details the
collective bargaining duty of both employers and labor representatives,
providing that:

> To bargain collectively is the performance of the mutual obligation of
> the employer and the representative of the employees to meet at
> reasonable times and confer in good faith with respect to wages,
> hours, and other terms and conditions of employment . . . but such
> obligation does not compel either party to agree to a proposal or
> require the making of a concession.[^43]

There are significant parallels between the congressional policy goal of
good faith negotiation underlying both Section 325(b)(3)(C) and Section
8(d) of the Taft-Hartley Act. In this regard, there is substantial
National Labor Relations Board ("NLRB") precedent that the good faith
negotiation requirement applies solely to the process of the
negotiations and does not permit the NLRB to require agreement or impose
terms or conditions on collective bargaining agreements. The Supreme
Court has made this determination with force and clarity, stating that:

> It was recognized from the beginning that agreement might be
> impossible, and it was never intended that the Government would in
> such cases step in, become a party to the negotiations and impose its
> own views of a desirable settlement.[^44]

23\. Congress clearly did not intend the Commission to sit in judgement
of the terms of every retransmission consent agreement executed between
a broadcaster and an MVPD. Even if the Commission had the resources to
accomplish such a delegation, we can divine no intent in either the
statute or its legislative history to achieve such a result. As
commenters indicated, when Congress intends the Commission to directly
insert itself in the marketplace for video programming, it does so with
specificity.[^45] Despite the arguments of the satellite industry and
other MVPDs, we find nothing supporting a construction of Section
325(b)(3)(C) that would grant the Commission authority to impose a
complex and intrusive regulatory regime similar to the program access
provisions or the interconnection requirements of Section 251 of the
Communications Act. While the Commission generally will not intrude into
the substance of particular retransmission consent negotiations and
agreements, we note that Section 325(b)(3)(C) sanctions only those
retransmission consent agreements containing different terms and
conditions, including price terms, with different MVPDs if such
different terms and conditions are based upon competitive marketplace
considerations.

24\. Having reached this conclusion, we do not interpret Section
325(b)(3)(C) as "largely hortatory"[^46] as suggested by some
commenters. As we stated in the Notice, "Congress has signaled its
intention to impose some heightened duty of negotiation on broadcasters
in the retransmission consent process."[^47] In other words, Congress
intended that the parties to retransmission consent have negotiation
obligations greater than those under common law. Absent fraudulent
intent, common law imposes no obligation on parties to negotiate in good
faith prior to the formation of a contract. We believe that, by imposing
the good faith obligation, Congress intended that the Commission develop
and enforce a process that ensures that broadcasters and MVPDs meet to
negotiate retransmission consent and that such negotiations are
conducted in an atmosphere of honesty, purpose and clarity of process.

**B. Mutual Good Faith Negotiation Requirement**

###  25. As a preliminary matter, we must determine to whom the "good faith" negotiation obligation applies. The Notice requested comment on whether the duty of good faith negotiation applies equally to the broadcaster and MVPD negotiating a retransmission consent agreement.[^48] Several commenters assert that the good faith negotiation requirement is a mutual obligation and that the Commission must consider and weigh the conduct of the MVPD in assessing whether the broadcaster has failed to satisfy the good faith negotiation requirement.[^49] Only DIRECTV asserts that the good faith negotiation requirement applies solely to broadcasters. DIRECTV argues that the language of Section 325(b)(3)(C) applies solely to "broadcast television stations" and in no way, express or implied, is imposed on MVPDs.[^50]

26\. We agree with DIRECTV that the language of Section 325(b)(3)(C) on
its face applies only to "television broadcast station\[s\]."[^51] To
read the provision as a mutual obligation would contradict the express
language of the statute and controvert Congress' intent. Moreover,
Congress has demonstrated its ability to expressly impose a good faith
negotiation obligation on both parties in other provisions of the
Communications Act.[^52] Accordingly, we conclude that the good faith
negotiation requirement in Section 325(b)(3)(C) was intended to apply
only to broadcasters. However, we caution MVPDs that seek retransmission
consent that their conduct is relevant in determining whether a
broadcaster has complied with its obligation to negotiate retransmission
consent in good faith. Insistence by an MVPD on unreasonable terms and
conditions or negotiating procedures will be taken into account by the
Commission in assessing a broadcaster's observance of its good faith
negotiation obligations.

**C. Definition of Good Faith**

27\. The Notice sought comment on the criteria that should be employed
to define "good faith" and sought comment on whether the Commission
should explicitly define what constitutes good faith under Section
325(b)(3)(C).[^53] The Notice requested comment on whether to adopt a
two-part test for good faith similar to that embraced by the NLRB and by
the Commission pursuant to Section 251 of the Communications Act.[^54]
The Commission also sought comment on any other specific legal precedent
upon which we should rely and any other regulatory approach that might
appropriately implement the good faith negotiation requirement of
Section 325(b)(3)(C) of the Communications Act.[^55]

28\. Several commenters argue that both the NLRB and the Section 251
good faith negotiation regimes are based upon the premise that one party
to the negotiation may not have an interest in reaching an
agreement.[^56] These commenters argue that, because broadcasters want
their programming transmitted to the widest possible audience to
increase advertising revenue and MVPDs desire valuable broadcast
programming, both broadcasters and MVPDs have strong incentives for
reaching retransmission consent.[^57] Several commenters support a
two-part test to determine good faith similar to that suggested in the
Notice.[^58] Fox asserts that, if the Commission adopts a two-part test
for determining good faith, the specific actions that would constitute
lack of good faith should be "narrowly drawn to encompass only the most
obvious and egregious breaches of good faith negotiating practices, and
the Commission should always examine the factual context in which each
alleged prohibition occurred."[^59]

#### 29. Time Warner proposes that the Commission adopt a "zone of reasonableness" standard for good faith in which, even if the broadcaster satisfies all of the procedural indicia of good faith, the Commission could determine that it violated its duty to negotiate in good faith "if it insists \[on\] a level of consideration that is so plainly uneconomic that an MVPD would suffer greater financial harm from accepting the broadcaster's terms than from refusing to carry the station."[^60] NBC maintains that the Commission should contrive no standards before the fact.[^61] Instead, to the extent standards are appropriate, they should be developed out of actual experience in adjudicated controversies.[^62] Several commenters argue that the Commission should judge the conduct of the parties only by examining the totality of the circumstances.[^63] {#time-warner-proposes-that-the-commission-adopt-a-zone-of-reasonableness-standard-for-good-faith-in-which-even-if-the-broadcaster-satisfies-all-of-the-procedural-indicia-of-good-faith-the-commission-could-determine-that-it-violated-its-duty-to-negotiate-in-good-faith-if-it-insists-on-a-level-of-consideration-that-is-so-plainly-uneconomic-that-an-mvpd-would-suffer-greater-financial-harm-from-accepting-the-broadcasters-terms-than-from-refusing-to-carry-the-station.-nbc-maintains-that-the-commission-should-contrive-no-standards-before-the-fact.-instead-to-the-extent-standards-are-appropriate-they-should-be-developed-out-of-actual-experience-in-adjudicated-controversies.-several-commenters-argue-that-the-commission-should-judge-the-conduct-of-the-parties-only-by-examining-the-totality-of-the-circumstances. .unnumbered}

30\. We will adopt a two part test for good faith negotiation as
proposed in the Notice. We believe that this test best implements
Congress' intent in adopting the good faith negotiation requirement. A
two-part test follows well established precedent in the field of labor
law. In addition, the Commission has used a similar test in implementing
its statutory obligations under Section 251 of the Communications Act.
Through the objective standards, this approach gives immediate guidance
to the parties to retransmission consent negotiations that certain
conduct will not be tolerated. Through the broader, totality of the
circumstances test, the Commission will have the ability to prohibit
conduct that, while not constituting a failure of good faith in all
circumstances, does violate the good faith negotiation requirement in
the context of a given negotiation. The totality of the circumstances
test will also enable the Commission to continue refining and clarifying
the responsibilities of parties to retransmission consent negotiations.

31\. The first part of the test will consist of a brief, objective list
of negotiation standards. Because the list consists of *per se*
standards, of necessity, the standards must be concise, clear and
constitute a violation of the good faith standard in all possible
instances. Should an MVPD demonstrate to the Commission that a
broadcaster, in the conduct of a retransmission consent negotiation, has
engaged in actions violative of an objective negotiation standard, the
Commission would find that the broadcaster has breached its duty to
negotiate in good faith. We disagree with those commenters who assert
that the Commission should only define violations on a prospective
adjudicatory basis. Given the short, six-month, period in which
satellite carriers have to negotiate retransmission consent before
expiration of the compulsory license of Section 325(b)(2)(E), we believe
it incumbent upon us to provide as much initial guidance as possible
through which the parties may pursue negotiations.

32\. The second part of the test is a totality of the circumstances
standard.[^64] Under this standard, an MVPD may present facts to the
Commission which, even though they do not allege a violation of the
objective standards, given the totality of the circumstances reflect an
absence of a sincere desire to reach an agreement that is acceptable to
both parties and thus constitute a failure to negotiate in good faith.
We do not intend the totality of the circumstances test to serve as a
"back door" inquiry into the substantive terms negotiated between the
parties. While the Commission will not ordinarily address the substance
of proposed terms and conditions or the terms of actual retransmission
consent agreements, we will entertain complaints under the totality of
the circumstances test alleging that specific retransmission consent
proposals are sufficiently outrageous, or evidence that differences
among MVPD agreements are not based on competitive marketplace
considerations, as to breach a broadcaster's good faith negotiation
obligation. However, complaints which merely reflect commonplace
disagreements encountered by negotiating parties in the everyday
business world will be promptly dismissed by the Commission.

33\. The Commission sought comment on specific actions or practices that
would constitute *per se* violations of the duty to negotiate in good
faith in accordance with Section 325(b)(3)(C).[^65] In addition to any
other actions or practices, the Commission asked commenters to address
whether it would be appropriate to include in any such list provisions
similar to the violations of the obligation to negotiate interconnection
agreements in good faith set forth in Section 51.301 of the Commission's
rules.[^66] The Commission acknowledged, however, that the good faith
standard of SHVIA is different in significant respects to that contained
in Section 51.301 of the Commission's rules.[^67]

34\. Commenters proposed numerous standards that the Commission should
consider in adopting rules to enforce the good faith negotiation
requirement. Broadcasters generally argue that, to the extent it does
anything, the Commission should adopt streamlined rules that apply only
to the process of the negotiations between broadcasters and MVPDs. The
other group, consisting of satellite carriers, small cable operators and
alternative MVPDs, argues that the only way the Commission can
effectively enforce the good faith negotiation requirement is to involve
itself in the substantive terms of retransmission consent agreements as
well as the process of negotiations. These commenters propose that the
Commission adopt an extensive list of substantive terms and conditions
that should be prohibited as violations of the obligation to negotiate
retransmission consent agreements in good faith.

35\. Broadcast commenters propose several standards based on experience
gathered in the NLRB field, the absence of which indicates a lack of
good faith, including: (1) a party must have a sincere desire to reach
agreement,[^68] (2) a party's negotiator must have authority to conclude
a deal,[^69] (3) a party must offer to meet at reasonable times and
convenient places,[^70] and (4) a party must agree to execute a written
agreement once all terms have been agreed on.[^71] NBC proposes that
extrinsic evidence that a party never intended to reach agreement, or
extrinsic evidence of an understanding with a third party that the
negotiating party will not enter into a retransmission consent
agreement, should also evidence violations of the good faith negotiation
requirement.[^72] Other commenters would prohibit a broadcaster from
insisting on terms so unreasonable that they are tantamount to a refusal
to deal.[^73] EchoStar argues that such procedural violations are
meaningless because "no bad faith actor would be so inept or so artless
as to display its bad faith by not agreeing to a convenient time and
place to meet, not appointing a representative to negotiate, and not
committing to writing a retransmission agreement once a deal has been
reached."[^74]

36\. DIRECTV proposes the following list of good faith negotiation
standards based upon examples from labor law precedent, the Commission's
program access rules, the interconnection provisions of the 1996 Act,
and recognized marketplace dynamics. DIRECTV, supported by other
commenters, proposes that, during the negotiation of a retransmission
consent agreement, a broadcaster may not:

(a) intentionally seek to mislead or coerce the MVPD into reaching an
    agreement it would not otherwise have made;[^75]

(b) unreasonably obstruct or delay negotiations or resolutions of
    disputes;[^76]

(c) refuse to designate a representative with authority to make binding
    representations if such refusal significantly delays resolution of
    issues;[^77]

(d) refuse to negotiate in fact;

(e) refuse to provide the satellite carrier with a high quality, direct
    feed of the broadcast signal;[^78]

(f) engage in discrimination in the price, terms or conditions of
    retransmission consent afforded an MVPD relative to any other MVPD,
    unless such discrimination is related to "competitive marketplace
    conditions" as defined by the Commission . . .;

(g) offer unreasonable positions, including, but not limited to:

```{=html}
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1.  a unilateral requirement that retransmission consent for a given
    broadcast station be conditioned on carriage under retransmission
    consent of another broadcast station, either in the same or a
    different geographic market;[^79]

2.  a unilateral requirement that retransmission consent be conditioned
    on the exclusion of carriage under retransmission consent of other
    broadcast channels in a given market;

3.  a unilateral requirement that retransmission consent be conditioned
    on a broadcaster obtaining channel positioning rights on the
    satellite carrier's system;[^80]

4.  a unilateral requirement that the satellite carrier (i) commit to
    purchase advertising on the broadcast station or broadcaster
    affiliated media, or (ii) that a specified share of advertising
    dollars spent in a broadcaster's market be spent on that
    broadcaster;

5.  a unilateral requirement that retransmission consent be conditioned
    on a satellite carrier not retransmitting distant network signals to
    qualified subscribers in the market, or a satellite carrier
    "capping" the number of qualified subscribers in the market who may
    receive distant network signals, thus depriving eligible subscribers
    of their statutory right to subscribe to distant network
    signals;[^81]

6.  A unilateral requirement that retransmission consent be conditioned
    on the satellite carrier's carriage of digital signals.[^82]

To this list EchoStar, would add: (i) insisting on an unreasonably short
contract duration; (ii) threatening to run anti-satellite advertising;
and (iii) refusal to deal, whether explicit or disguised under requests
for extortionate terms.[^83] Several commenters would include the
imposition of non-optional tying arrangements requiring an MVPD to carry
the affiliated programming of the broadcaster in exchange for
retransmission consent.[^84] Other commenters suggest a standard
requiring parties to provide information necessary to reach
agreement.[^85]

37\. Several commenters propose a standard prohibiting instances in
which a broadcaster seeks higher consideration from an MVPD for any
affiliated cable network programming in exchange for retransmission
consent than it obtains from the incumbent cable operator, unless the
broadcaster justifies that such higher consideration is cost-based or
does not produce anti-competitive market conditions.[^86] In addition,
BellSouth urges the Commission to find a violation when a broadcaster
ties retransmission consent to minimum subscriber penetration
levels.[^87] Another commenter would also brand as a good faith
violation a demand of a nondisclosure agreement, a demand that the MVPD
attest that the agreement complies with all applicable laws, or the
refusal to include a provision permitting the agreement to be amended to
reflect subsequent changes in the law.[^88]

38\. Several broadcast commenters assert that the list of violations
proposed by DIRECTV, EchoStar and others is so extensive and one-sided
as to render any notion of equality at the bargaining table
meaningless.[^89] Other commenters assert that, since the adoption of
the 1992 Cable Act, carriage of additional programming as compensation
for retransmission consent is most often the compensation agreed upon by
broadcasters and MVPDs in their retransmission consent agreements.
Disney argues that the legislative history of the 1992 Cable Act
expressly endorsed such compensation and that, had Congress wished to
prohibit the practice, it would have done so expressly.[^90] Disney
further argues that no commenter offers a sustainable legal basis for
presuming on a blanket basis that a request for additional programming
carriage as consideration for retransmission consent would be illegal
under current law or anti-competitive.[^91]

39\. Consistent with our determination that Congress intended that the
Commission should enforce the process of good faith negotiation and that
the substance of the agreements generally should be left to the market,
we will not adopt the suggestions of certain commenters that we prohibit
proposals of certain substantive terms, such as offering retransmission
consent in exchange for the carriage of other programming such as a
cable channel, another broadcast signal, or a broadcaster's digital
signal.[^92] Instead, we believe that the good faith negotiation
requirement of SHVIA is best implemented through the following standards
derived from NLRB precedent, commenter's proposals and the Section 251
interconnection requirements. These standards are intended to identify
those situations in which a broadcaster did not enter into negotiations
with the sincere intent of trying to reach an agreement acceptable to
both parties.

40\. First, a broadcaster may not refuse to negotiate with an MVPD
regarding retransmission consent. Section 325(b)(3)(C) affirmatively
requires that broadcasters negotiate retransmission consent in good
faith.[^93] This requirement goes to the very heart of Congress' purpose
in enacting the good faith negotiation requirement. Outright refusal to
negotiate clearly violates the requirement of Section 325(b)(3)(C).
Broadcasters must participate in retransmission consent negotiations
with the intent of reaching agreement. Provided that the parties
negotiate in good faith in accordance with the Commission's standards,
failure to reach agreement does not violate Section 325(b)(3)(C).[^94]
Given the economic incentive for each side to reach agreement, we are
hopeful that such impasses will be rare and short-lived.

41\. Second, a broadcaster must appoint a negotiating representative
with authority to bargain on retransmission consent issues.[^95] Failure
to appoint a negotiating representative vested with authority to bargain
on retransmission consent issues indicates that a broadcaster is not
interested in reaching an agreement. This standard is the norm in NLRB
precedent as well as our interconnection rules implementing Section
251.[^96] This requirement does not empower MVPDs to demand that
specific officers or directors of a broadcaster attend negotiation
sessions. Provided that a negotiating representative is vested with the
authority to make offers on behalf of the broadcaster and respond to
counteroffers made by MVPDs to the broadcaster, this standard is
satisfied.

42\. Third, a broadcaster must agree to meet at reasonable times and
locations and cannot act in a manner that would unduly delay the course
of negotiations.[^97] Refusal to meet at reasonable times and locations
belies a good faith intent to negotiate. This requirement does not
preclude negotiations conducted via telephone, facsimile, or by letter.
Reasonable response times and unreasonable delays will be gauged by the
breadth and complexity of the issues contained in an offer. The
Commission is aware that, in many cases, time will be of the essence in
retransmission consent negotiations, particularly as we approach the end
of the six-month period provided for in Section 325(b)(2)(E) -- May 29,
2000. We advise broadcasters that, in examining violations of this
standard, we will consider the proximity of the termination of
retransmission consent and the consequent service disruptions to
consumers. At the same time, we caution MVPDs that waiting until the
eleventh hour to initiate negotiations will also be taken into account
in enforcing this standard.

43\. Fourth, a broadcaster may not put forth a single, unilateral
proposal and refuse to discuss alternate terms or
counter-proposals.[^98] "Take it, or leave it" bargaining is not
consistent with an affirmative obligation to negotiate in good faith.
For example, a broadcaster might initially propose that, in exchange for
carriage of its signal, an MVPD carry a cable channel owned by, or
affiliated with, the broadcaster. The MVPD might reject such offer on
the reasonable grounds that it has no vacant channel capacity and
request to compensate the broadcaster in some other way. Good faith
negotiation requires that the broadcaster at least consider some form of
consideration other than carriage of affiliated programming. This
standard does not, in any way, require a broadcaster to reduce the
amount of consideration it desires for carriage of its signal. This
standard only requires that broadcasters be open to discussing more than
one form of consideration in seeking compensation for retransmission of
its signal by MVPDs.

44\. Fifth, a broadcaster, in responding to an offer proposed by an
MVPD, must provide reasons for rejecting any aspects of the MVPD's
offer.[^99] Blanket rejection of an offer without explaining the reasons
for such rejection does not constitute good faith negotiation. This
provision merely ensures that MVPDs are not negotiating in a vacuum and
understand why certain terms are unacceptable to the broadcaster so that
the MVPD can respond to the broadcaster's concerns. We reiterate that
good faith negotiation requires a broadcaster's affirmative
participation. However, this standard is not intended as an information
sharing or discovery mechanism. Broadcasters are not required to justify
their explanations by document or evidence.[^100]

45\. Sixth, a broadcaster is prohibited from entering into an agreement
with any party a condition of which is to deny retransmission consent to
any MVPD.[^101] For example, Broadcaster A is prohibited from agreeing
with MVPD B that it will not reach retransmission consent with MVPD C.
It is impossible for a broadcaster to engage in good faith negotiation
with an MVPD regarding retransmission consent when it has a contractual
obligation not to reach agreement with that MVPD.

46. Finally, once the parties reach agreement on the terms of
    retransmission consent, the broadcaster must agree to execute a
    written retransmission consent agreement that sets forth the full
    agreement.[^102] Because the Commission may be called upon in
    certain instances to determine whether the totality of the
    circumstances involved in the negotiation of a particular
    retransmission consent agreement complies with Section 325(b)(3)(C),
    it is vital that the parties reduce their entire agreement to
    writing. In addition, this requirement also minimizes subsequent
    misunderstandings between the parties related to their respective
    obligations.

47\. We do not believe that we should at this time adopt further
objective standards as proposed by the commenters.[^103] In appropriate
instances, we will consider the conduct at the heart of such proposed
standards when we examine a particular retransmission consent
negotiation under the totality of the circumstances test.

48\. The Notice further observed that Section 325(b)(3)(C) provides
that:

it shall not be a failure to negotiate in good faith if the television
broadcast station enters into retransmission consent agreements
containing different terms and conditions, including price terms, with
different multichannel video programming distributors if such different
terms and conditions are based on competitive marketplace
considerations.[^104]

The Notice sought comment on what constitutes a competitive marketplace
consideration.[^105] The Notice also observed that the Commission has
adopted non-discrimination standards in both the program access and open
video system contexts and sought comment on the relevance, if any, of
these standards to what constitutes a "competitive market
consideration." [^106] In addition, the Notice sought comment on any
other factors or approaches to determining what constitutes competitive
marketplace considerations under Section 325(b)(3)(C).[^107]

49\. A number of commenting parties urge that the competitive
marketplace considerations language be interpreted as a requirement that
the Commission judge the good faith of all retransmission consent offers
based on whether they are based on "competitive marketplace
considerations." DIRECTV and EchoStar, for example, claim that
competitive marketplace considerations would permit a broadcaster to
discriminate between providers only in scenarios where Congress and the
Commission have recognized that certain variance in price, terms or
conditions correspond to legitimate behavior that may occur in the
marketplace for video programming.[^108]

50\. EchoStar asserts that, generally where a broadcaster has received
any consideration for retransmission consent, it has been non-monetary,
carriage of cable networks affiliated with the broadcaster, and argues
that:

> The general rule, therefore, should be that broadcaster demands
> deviating from that formula, such as demands for money, demands for
> carriage of additional cable networks beyond those involved in the
> retransmission-for-carriage agreements with cable operators, or
> demands for retransmission of additional broadcast stations (beyond
> those owned and operated by the same network), should be presumptively
> viewed as *not* based on competitive marketplace considerations.[^109]

51\. NAB argues that satellite carriers are not nascent businesses that
need government protection, but instead are well-financed,
powerfully-backed competitors in the multichannel marketplace.[^110]
Commenters argue that satellite companies not only use local stations to
increase the attractiveness of their overall product, but also sell the
stations to viewers at substantial prices.[^111] One commenter notes
that the fact that satellite carriers are able to charge a fee for
retransmitted local signals demonstrates that these signals have value
for which broadcasters must be compensated.[^112] EchoStar counters that
"the only reason . . . consumers purchase a satellite carrier's local
signal offering is for value that the satellite carrier provides,
including increased quality, convenience, and aesthetics (*i.e.*, lack
of off-air antenna)."[^113]

52\. Commenters assert that, in the early 1990s, when the retransmission
consent provisions of the 1992 Cable Act first became effective, cable
systems were effectively the only distributors from whom broadcasters
could seek consideration through retransmission consent. Broadcasters
assert that they were at a tremendous disadvantage because only a single
buyer was prepared to bid for their product.[^114] Broadcast commenters
state that, today, the existence of multiple MVPDs in at least some
markets creates a more competitive marketplace for the sale of
retransmission rights, and one that provides more opportunity for
stations seeking to obtain compensation for granting these valuable
rights.[^115] NAB states that the existence of multiple buyers is
obviously a very important competitive marketplace consideration in this
market, as in any market.[^116] EchoStar counters that multiple
competitors in a market only serve to increase a broadcaster's ability
to play one MVPD distributor against another in retransmission
negotiations, an ability Congress sought to restrain by imposing the
good faith and competitive marketplace considerations requirements on
retransmission consent.[^117]

53. As discussed above, we do not believe, as a general matter, that
    Section 325(b)(3)(C) was intended to subject retransmission consent
    negotiation to detailed substantive oversight by the Commission or
    indeed that there exist objective competitive marketplace factors
    that broadcasters must ascertain and base any negotiations and
    offers on. Indeed, in the aggregate, retransmission consent
    negotiations are the market through which the relative benefits and
    costs to the broadcaster and MVPD are established. Although some
    parties earnestly suggest, for example, that broadcasters should be
    entitled to zero compensation in return for retransmission consent
    or that the forms of compensation for carriage should be otherwise
    limited, this seems to us precisely the judgment that Congress
    generally intended the parties to resolve through their own
    interactions and through the efforts of each to advance its own
    economic self interest.[^118]

54\. EchoStar suggests an economic paradigm against which retransmission
terms might be compared to determine if they are based on "competitive
marketplace considerations." It suggests that in the ideal competitive
market setting, revenues will be just sufficient to compensate providers
for the costs of program creation, duplication, and distribution so that
all participants are earning a fair rate of return.[^119] Further,
having already noted that the marketplace may be distorted through the
exercise of market power by cable operators, EchoStar urges that
retransmission consent term outcomes for the cable industry provide a
benchmark or threshold that should not be exceeded in the case of
satellite carriage of broadcast signals.[^120] Further, it asserts that
considerations extracted from certain cable operators (for example
carriage of digital signals) would be inappropriate and not based on
competitive marketplace consideration if they were significantly
costlier to accede to for satellite carriers.[^121]

55\. In our view this type of regulatory analysis and comparison is not
what was intended through the enactment of Section 325(b)(3)(C). It is
both internally inconsistent and not capable of administration in any
reasonably timely fashion. The proposal is internally inconsistent in
that it acknowledges that among the market participants, cable operators
might be the most likely to have market power. If this were the case,
using their negotiations as a proxy for a competitive market setting
would not be logical. Under this analysis, broadcasters, already the
hypothesized victims of an exercise of market power, would be obligated
to continue in that role with other participants in the market. Further,
EchoStar finds one of the most common features of these agreements --
payment for carriage through the devotion of channel capacity to other
affiliated services -- presumptively a measure of bad faith. Acceptance
of the cash rate but not the other currency of the negotiation could
hardly be a replication of a competitive market. Even if these problems
could be overcome, however, it seems unlikely that the data needed to
measure a transaction against the economic model proposed would be
available either to the parties in the course of their negotiations or
to the Commission in the course of trying to judge their compliance with
the standard of review proposed.[^122]

56. We also believe that to arbitrarily limit the range or type of
    proposals that the parties may raise in the context of
    retransmission consent will make it more difficult for broadcasters
    and MVPDs to reach agreement. By allowing the greatest number of
    avenues to agreement, we give the parties latitude to craft
    solutions to the problem of reaching retransmission consent. The
    comments filed in this proceeding have called into question the
    legitimacy of a number of bargaining proposals as reflecting a
    failure of good faith or as presumptively not based on competitive
    marketplace considerations. As discussed, it is important that we
    provide the parties with as much initial guidance as possible. We
    believe that the following examples of bargaining proposals
    presumptively are consistent with competitive marketplace
    considerations and the good faith negotiation requirement:

> 1\. Proposals for compensation above that agreed to with other MVPDs
> in the same market;
>
> 2\. Proposals for compensation that are different from the
> compensation offered by other broadcasters in the same market;
>
> 3\. Proposals for carriage conditioned on carriage of any other
> programming, such as a broadcaster\'s digital signals, an affiliated
> cable programming service, or another broadcast station either in the
> same or a different market;
>
> 4\. Proposals for carriage conditioned on a broadcaster obtaining
> channel positioning or tier placement rights;
>
> 5\. Proposals for compensation in the form of commitments to purchase
> advertising on the broadcast station or broadcast-affiliated media;
> and
>
> 6\. Proposals that allow termination of retransmission consent
> agreement based on the occurrence of a specific event, such as
> implementation of SHVIA\'s satellite must carry requirements.[^123]

Each of the above proposals reflect presumptively legitimate terms and
conditions or forms of consideration that broadcasters may find impart
value in exchange for the grant of retransmission consent to an MVPD. We
do not find anything to suggest that, for example, requesting an MVPD to
carry an affiliated channel, another broadcast signal in the same or
another market, or digital broadcast signals is impermissible or other
than a competitive marketplace consideration. Prior to passage of the
1992 Cable Act, the compensation paid by MVPDs for broadcast signal
programming carriage was established under the copyright laws through a
governmental adjudicatory process.[^124] After passage of the 1992 Cable
Act, Congress left the negotiation of retransmission consent to the give
and take of the competitive marketplace. In SHVIA, absent conduct that
is violative of national policies favoring competition, we believe
Congress intended this same give and take to govern retransmission
consent. In addition, we point out that these are bargaining proposals
which an MVPD is free to accept, reject or counter with a proposal of
its own.

57. We find it more difficult to develop a similar list of proposals
    that indicate an automatic absence of competitive marketplace
    considerations. Because the size and relative bargaining power of
    broadcasters and MVPDs range from satellite master antenna
    television ("SMATV") operators and low power television broadcast
    stations to national cable entities and major-market, network
    affiliate broadcast television stations, the dynamics of specific
    retransmission consent negotiations will span a considerable
    spectrum. In these instances, we will generally rely on the totality
    of the circumstances test to determine compliance with Section
    325(b)(3)(C).

58. At the same time, it is implicit in Section 325(b)(3)(C) that any
    effort to stifle competition through the negotiation process would
    not meet the good faith negotiation requirement. Considerations that
    are designed to frustrate the functioning of a competitive market
    are not "competitive marketplace considerations." Conduct that is
    violative of national policies favoring competition \-- that is, for
    example, intended to gain or sustain a monopoly, is an agreement not
    to compete or to fix prices, or involves the exercise of market
    power in one market in order to foreclose competitors from
    participation in another market \-- is not within the competitive
    marketplace considerations standard included in the statute.
    Following this reasoning, we believe that the following examples of
    bargaining proposals presumptively are not consistent with
    competitive marketplace considerations and the good faith
    negotiation requirement:

> 1\. Proposals that specifically foreclose carriage of other
> programming services by the MVPD that do not substantially duplicate
> the proposing broadcaster's programming;
>
> 2\. Proposals involving compensation or carriage terms that result
> from an exercise of market power by a broadcast station or that result
> from an exercise of market power by other participants in the market
> (*e.g.*, other MVPDs) the effect of which is to hinder significantly
> or foreclose MVPD competition;

3\. Proposals that result from agreements not to compete or to fix
prices; and

> 4\. Proposals for contract terms that would foreclose the filing of
> complaints with the Commission.[^125]

**D. Carriage While a Complaint is Pending**

### 59. Several MVPD commenters argue that where a MVPD shows a willingness to negotiate for continued carriage of a local broadcast station, the station should have an affirmative duty to negotiate terms for such carriage and should not be permitted to withhold retransmission consent while such negotiations are pending.[^126] Other commenters assert that the Commission should prohibit a broadcaster from withdrawing existing retransmission consent given to an MVPD until an exclusivity or good faith complaint is denied by the Cable Services Bureau and, if reconsideration is requested, the full Commission.[^127] These commenters note that local television stations enjoy similar protection when a cable operator seeks to drop the broadcaster via the Commission's market modification process.[^128] NAB and Network Affiliates assert that Congress expressly rejected this approach in SHVIA by requiring that upon the expiration of the six-month grace period outlined in Section 325(b)(2)(E), satellite carriers must obtain consent prior to retransmitting any programming or face stiff penalties, including mandatory civil liability of \$25,000 per station, per day.[^129] 

### 

60\. Two equally unambiguous provisions of SHVIA foreclose the approach
advanced by MVPD commenters. First, Section 325(b)(1) of the
Communications Act provides that "No cable system or other multichannel
video programming distributor shall retransmit the signal of the
broadcasting station, or any part thereof, *except . . . with the
express authority of the originating station*. . . ."[^130] This
language clearly prohibits an MVPD, except during the six-month period
allowed under Section 325(b)(2)(E), from retransmitting a broadcasters
signal if it has not obtained express retransmission consent. Second,
Section 325(e) of the Communications Act establishes a streamlined
complaint procedure through which broadcasters may seek redress for
allegedly illegal retransmission of local broadcast signals by satellite
carriers. The procedures established by Section 325(e) provide only four
defenses that a satellite carrier may raise: (1) the satellite carrier
did not retransmit the broadcaster's signal to any person in the local
market of the broadcaster during the time period specified in the
complaint; (2) the broadcaster had in writing expressly allowed the
satellite carrier to retransmit the broadcaster's signal to the
broadcaster's local market for the entire period specified in the
complaint; (3) the retransmission was made after January 1, 2002 and the
broadcaster elected to assert the right to must carry against the
satellite carrier under Section 338 for the entire period specified in
the complaint; and (4) the station being retransmitted is a
noncommercial television broadcast station.[^131] Against the backdrop
of the express language of these provisions, we see no latitude for the
Commission to adopt regulations permitting retransmission during good
faith negotiation or while a good faith or exclusivity complaint is
pending before the Commission where the broadcaster has not consented to
such retransmission.

61\. Having reached this conclusion, we must also express our concern
regarding the service disruptions and consumer outrage that will
inevitably result should MVPDs that are entitled to retransmit local
signals subsequently lose such authorization. Because the market has
functioned adequately since the advent of retransmission consent in the
early 1990's, we expect such instances to be the exception, rather than
the norm. We are encouraged by the retransmission consent agreements
that have been reached between broadcasters and satellite carriers prior
to the enactment of our rules. In addition, we strongly encourage that
broadcasters and MVPDs that are engaged in protracted retransmission
consent negotiations agree to short-term retransmission consent
extensions so that consumers' access to broadcast stations will not be
interrupted while the parties continue their negotiations.

### E. Existing and Subsequent Retransmission Consent Agreements

62\. In the Notice, the Commission acknowledged the existence of
retransmission consent agreements between satellite carriers and
television broadcast stations that predate enactment of Section
325(b)(3)(C).[^132] In addition, the Notice acknowledged that agreements
have been executed since the enactment of SHVIA. The Notice sought
comment on the impact of these agreements on the duty to negotiate in
good faith.[^133]

63\. Network Affiliates state that the fact that broadcasters and
satellite carriers have already reached arms length retransmission
consent agreements is an indication that they were negotiated in good
faith. Otherwise, in the face of impending legislation and Commission
action, they assert the parties would not have finalized such
agreements.[^134] Another commenter argues that the rules adopted by the
Commission should have prospective effect applying only to
retransmission consent negotiations that occur after the effective date
of the Commission's rules.[^135] One commenter urges the Commission to
give its rules retroactive application to preexisting retransmission
consent agreements.[^136]

64\. We will not apply the rules adopted herein to retransmission
consent agreements that predate the effective date of this Order.
Section 325(b)(3)(C) provides that:

> Within 45 days after the date of the enactment of \[SHVIA\], the
> Commission shall commence a rulemaking proceeding to revise the
> regulations governing the exercise by television broadcast stations of
> the right to grant retransmission consent under this subsection, and
> such other regulations as are necessary to administer the limitations
> contained in paragraph (2) . . . Such regulations shall . . . until
> January 1, 2006, prohibit a television broadcast station that provides
> retransmission consent from engaging in exclusive contracts for
> carriage or failing to negotiate in good faith . . .[^137]

As the quoted language indicates, Section 325 is not a self-effectuating
provision. It has substance and structure only after the Commission has
concluded its rulemaking to implement the good faith and exclusivity
limitations of Section 325(b)(3)(C). Moreover, we need not apply SHVIA
retroactively to ensure that such preexisting agreements do not contain
impermissible exclusivity provisions. Section 76.64(m) of the
Commission's rules has been in effect since 1993 and expressly prohibits
exclusive retransmission consent agreements.[^138] If any MVPD believes
that a broadcaster and an MVPD entered into a prohibited exclusive
retransmission consent agreement prior to adoption of SHVIA, that party
may file a petition for special relief alleging that a broadcaster and
MVPD have violated Section 76.64(m).[^139] Accordingly, the rules
applicable to good faith and exclusivity adopted herein will apply only
to retransmission consent agreements adopted after the effective date of
this Order.

#### EXCLUSIVE RETRANSMISSION CONSENT AGREEMENTS

65\. SHVIA amends Section 325(b) of the Communications Act by directing
the Commission to promulgate rules that would

> until January 1, 2006, prohibit a television broadcast station that
> provides retransmission consent from engaging in exclusive contracts.
> . . .[^140]

The accompanying Joint Explanatory Statement of the Committee of
Conference contains no language to clarify or explain the prohibition,
stating only that:

> The regulations would, until January 1, 2006, prohibit a television
> broadcast station from entering into an exclusive retransmission
> consent agreement with a multichannel video programming distributor .
> . .[^141]

The Commission, by rule, established a similar prohibition following
passage of the 1992 Cable Act. There, the Commission was directed by
Congress to establish regulations governing the right of television
broadcast stations to grant retransmission consent.[^142] The Commission
found that exclusive retransmission consent arrangements between a
television broadcast station and any multichannel video programming
distributor were contrary to the intent of the 1992 Cable Act.[^143]

66\. In the Notice, we sought to determine what activities would
constitute "engaging in exclusive contracts."[^144] We also sought to
determine whether there was significance to the difference between the
language in the statute (prohibiting "engaging in") and the language in
the Conference Report (prohibiting "entering into").[^145] We sought to
determine whether parties were prohibited from negotiating exclusive
contracts that would take effect after the date of January 1,
2006.[^146] We also sought comment on whether any such contracts already
existed, and if so, what effect the statute would have on such
contracts.[^147] Finally, we sought comment on how to effectively
enforce such a prohibition, and how to determine whether such agreements
existed.[^148]

67\. SHVIA prohibits a television broadcast station that provides
retransmission consent from "engaging in" exclusive contracts until
January 1, 2006. The Conference Report refers to a prohibition on
"entering into" exclusive retransmission consent agreements. Several
commentators argue that the phrases "entering into" and "engaging in"
are synonymous.[^149] Representatives of the satellite industry argue
that the Commission should rely on the broader language of the statute
("engaging in") rather than the arguably narrower Conference Report
language.[^150] Commenters supporting this interpretation posit that the
use of the language "engaging in" demonstrates an intent to prohibit a
broad range of practices. SBCA believes that the use of the phrase
"engaging in" prohibits "both express and implied, *de jure* and *de
facto*, exclusionary conduct, including literal or effective refusals to
deal with a particular MVPD distributor."[^151] Two other commenters
argue that broadcasters can impose unaffordable demands on smaller
MVPDs, and that these demands can result in prohibited *de facto*
exclusivity.[^152] Thus, according to this argument, the Commission
should expand its prohibition to explicitly forbid these types of
arrangements. LTVS supports an expansive definition of exclusive
practices and argues that a broad range of actions should be
prohibited.[^153]

68\. While the satellite industry supports a broad reading of the
statute, broadcast commenters argue that Congress intended to prohibit
exclusive contracts, not "undefined 'exclusive practices' nor . . . the
exercise of any *de facto* exclusivity."[^154] Network Affiliates assert
that the use of the phrase "engaging in" does not demonstrate
Congressional intent to "increase the number of prohibited
activities."[^155] Indeed, these commenters argue that by using the
phrase "engaging in" as opposed to the phrase "entering in," Congress
"intended to allow parties to negotiate and enter into exclusive
retransmission consent agreements as long as those agreements are not
effective until after the sunset of this prohibition on January 1,
2006."[^156] Under this theory, the statute only prohibits "engaging in
exclusive contracts." Thus, according to broadcasting representatives,
SHVIA does not prohibit undefined exclusive practices or the exercise of
*de facto* exclusivity.

69\. In determining the intended scope of the prohibition on exclusive
retransmission consent agreements, we believe that Congress intended
that all activity associated with exclusive retransmission consent
agreements be prohibited until January 1, 2006.[^157] Absent such a
comprehensive prohibition, marketplace distortions could occur that
would adversely influence the continuing development of a competitive
marketplace for multichannel video programming services. For example, if
an MVPD negotiates an exclusive retransmission consent agreement with a
television broadcaster that will take effect after January 1, 2006, such
MVPD undoubtedly would use that agreement in advertising or marketing
strategies during the prohibition on exclusive retransmission consent
agreements. The MVPD could market its services by stating that it will
be the only MVPD providing a particular television broadcast station or
stations after January 1, 2006. Given the overall pro-competitive
mandate of SHVIA, we believe that Congress did not intend that we permit
this type of market distortion while the Section 325(b)(3)(C)
prohibitions are in effect. As such, we interpret the phrase "engaging
in" to proscribe not only entering into exclusive agreements, but also
negotiation and execution of agreements granting exclusive
retransmission consent after the prohibition expires.

70\. As for the exercise of *de facto* exclusivity, we believe that the
statute's good faith requirement sufficiently addresses concerns voiced
by commenters. The good faith requirements of the statute and the
Commission's rules adopted in this Order should adequately address
behavior that would lead to *de facto* exclusivity.

71\. On its face, the prohibition on exclusive retransmission consent
agreements appears to have immediate effect. The Commission sought
comment on the existence of exclusive satellite carrier retransmission
consent agreements that either predate the enactment of SHVIA or under
the Commission's rules implementing Section 325(b)(3)(C)(ii).[^158] One
commenter argues that the Commission should nullify any exclusive
retransmission consent agreements that existed prior to SHVIA.[^159] The
commenter suggests that the Commission's authority to nullify any such
agreements stems from the requirements of the Commission's rules.[^160]
Another commenter argues that the Commission should apply rules
implementing the SHVIA prohibition on exclusive retransmission consent
agreements retroactively.[^161] Some commenters from the broadcasting
industry argue that any such agreements that were in existence prior to
the enactment of SHVIA should be grandfathered.[^162]

72\. Prior to the enactment of SHVIA, Section 76.64(m) of the
Commission's rules prohibited all exclusive retransmission consent
agreements.[^163] After its enactment, SHVIA prohibits all exclusive
retransmission consent agreements prior to January 1, 2006. Thus, to the
extent that any prohibited exclusive retransmission consent agreements
exist between television broadcast stations and MVPDs, such agreements
are prohibited either by Commission rule prior to SHVIA, or by SHVIA's
express terms thereafter.

#### RETRANSMISSION CONSENT AND EXCLUSIVITY COMPLAINT PROCEDURES

**A. Voluntary Mediation**

73\. The Notice sought comment on whether there are circumstances in
which the use of alternative dispute resolution ("ADR") services would
assist in determining whether a television broadcast station negotiated
in good faith as defined by Section 325(b)(3)(C) and the Commission\'s
rules adopted thereunder.[^164] Several commenters argue that a dispute
resolution mechanism is not necessary and contrary to the goal of swift
resolution of such complaints. By contrast, Time Warner supports a
mediation requirement that must be satisfied prior to the filing of a
complaint with the Commission.[^165] Under Time Warner's proposal, the
parties would have 60 days to negotiate in good faith. If an agreement
has not been reached 30 days or less prior to the termination of
retransmission consent, either party can require that the matter be
submitted to mediation.[^166]

74\. We will not, at this time, adopt Time Warner's mandatory mediation
proposal. There has not been a sufficient demonstration that such a
measure is necessary to implement the good faith provision of Section
325(b)(3)(C). We believe, however, that voluntary mediation can play an
important part in the facilitation of retransmission consent and
encourage parties involved in protracted retransmission consent
negotiations to pursue mediation on a voluntary basis. The Commission
would favorably consider a broadcaster's willingness to participate in a
mediation procedure in determining whether such broadcaster complied
with its good faith negotiation obligations. We emphasize, however, that
refusal to engage in voluntary mediation will not be considered
probative of a failure to negotiate in good faith. We will revisit the
issue of mandatory retransmission consent mediation if our experience in
enforcing the good faith provision indicates that such a measure is
necessary.

> **B. Commission Procedures**

75\. The Notice sought comment on what procedures the Commission should
employ to enforce the provisions adopted pursuant to Section
325(b)(3)(C).[^167] We asked commenters to state whether the same set of
enforcement procedures should apply to both the exclusivity prohibition
and the good faith negotiation requirement, or whether the Commission
should adopt different procedures tailored to each prohibition.[^168]
Specifically, we sought comment regarding whether special relief
procedures of the type found in Section 76.7 of the Commission's rules
provide an appropriate framework for addressing issues arising under
Section 325(b)(3)(C).[^169]

76\. There is general consensus among the commenters that the general
pleading provisions of Section 76.7 provide appropriate procedural rules
for good faith and exclusivity complaints.[^170] No commenters justified
a departure from the Commission's general pleading rules for matters
filed with the Cable Services Bureau. We agree with these commenters
urging the use of the Section 76.7 provisions and direct complainants to
follow these provisions in filing retransmission consent
complaints.[^171] Consistent with the requirements of Section 76.7 of
the Commission's rules, complaints alleging violations of the
prohibition on exclusive retransmission consent agreements should: (1)
identify the broadcaster and MVPD alleged to be parties to the
prohibited exclusive agreement; (2) provide evidence that the
complainant can or does serve the area of availability, or portions
thereof, of the signal of the broadcaster named in the complaint; and
(3) provide evidence that the complainant has requested retransmission
consent to which the broadcaster has refused or failed to respond.[^172]
Following the filing of a complaint, the defendant broadcaster must file
an answer that specifically admits or denies the complainants allegation
of the existence of an exclusive retransmission consent agreement.[^173]

77\. We agree with those commenters who argue that some aspects of the
program access procedural rules would assist the Commission in
effectively processing and resolving retransmission consent complaints.
[^174] We believe that it is necessary to impose a limitations period on
the filing of retransmission consent complaints. In the program access,
program carriage and open video system contexts, the Commission has
established a one-year limitations period within which an aggrieved
party must file a complaint with the Commission.[^175] Given that
retransmission consent complaints are likely to be highly fact-specific
and dependent on individual recollection, a similar limitations period
is fair and appropriate with regard to retransmission consent
complaints. Moreover, a limitations period lends finality and certainty
to retransmission consent agreements after affording MVPDs an
appropriate interval to challenge alleged violations of Section
325(b)(3)(C). Accordingly, a complaint filed pursuant to Section
325(b)(3)(C) must be filed within one year of the date any of the
following occur: (a) a complainant MVPD enters into a retransmission
consent agreement with a broadcaster that the complainant MVPD alleges
violate one or more of the rules adopted herein; or (b) a broadcaster
engages in retransmission consent negotiations with a complainant MVPD
that the complainant MVPD alleges violate one or more of the rules
adopted herein, and such negotiation is unrelated to any existing
contract between the complainant MVPD and the broadcaster; or (c) the
complainant MVPD has notified the broadcaster that it intends to file a
complaint with the Commission based on a request to negotiate
retransmission consent that has been denied, unreasonably delayed, or
unacknowledged in violation of one or more of the rules adopted
herein.[^176]

#### Discovery

78\. Several commenters urge the Commission to provide discovery
as-of-right in retransmission consent complaint proceedings.[^177]
Disney observes that since there is no automatic right to discovery in
the more procedurally complex program access regime -- *a fortiori*
there should be no discovery in the context of retransmission consent
proceedings.[^178] One commenter asserts that retransmission consent
agreements and the negotiations surrounding them constitute confidential
business information that must be protected by strong nondisclosure
agreements if subject to Commission-directed discovery procedures.[^179]
This commenter offers three limitations on Commission-directed
discovery: (1) the complainant must have made a *prima facie* showing of
evidence supporting its claim that a violation has taken place; (2) the
Commission's discovery order must be narrowly-tailored to avoid fishing
expeditions; and (3) the Commission must permit mutual discovery.[^180]

79\. We decline the invitation of several commenters to apply discovery
as-of-right to the retransmission complaint procedures. Interested
parties should not interpret our decision as meaning that discovery will
play no part in the Section 325 complaint process. Because MVPDs will be
present at negotiations, we generally anticipate that evidence of a
violation of the good faith standard will be accessible by the MVPD
complainant. Where complainants can demonstrate that such information is
not available (*e.g.*, agreements entered into with other MVPDs) and
that discovery is necessary to the proper conduct and resolution of a
proceeding, the Commission will consider, where necessary, the
imposition of discovery to develop a more complete record and resolve
complaints. In this regard, parties are free to raise appropriate
discovery requests in their pleadings. We will protect proprietary
information, where necessary, pursuant to Section 76.9 of our
rules.[^181] Accordingly, we will employ Commission-controlled discovery
as contemplated in the Section 76.7 procedures.[^182]

**D. Remedies**

80\. With regard to the appropriate measures for the Commission to take
after a finding that a broadcaster has violated the good faith
negotiation requirement, several commenters argue that the sole remedy
is a Commission directive to engage in further negotiation consistent
with the Commission's decision.[^183] In this regard, other commenters
note that, in the labor law context, the Supreme Court has determined
that the NLRB has no power to order parties to enter into a particular
agreement, or even agree to individual terms.[^184] EchoStar argues that
this is not the limit of the Commission's remedial authority and that
the Commission should order a broadcaster that has been found to violate
the Commission's prohibitions to conclude a retransmission consent
agreement that "does not include any discriminatory terms not based on
competitive marketplace considerations."[^185] Other commenters argue
that the Commission should adopt a liberal policy of allowing damages,
both as a deterrent to unlawful conduct and as compensation to injured
parties.[^186] Commenters opposing the imposition of damages note that,
while Congress granted the Commission express authority to order
appropriate remedies in the program access context, Congress did not
grant such express authority in the context of the good faith
negotiation requirement.[^187]

81\. Congress did not empower the Commission to sit in judgement of the
substantive terms and conditions of retransmission consent agreements.
Therefore, in situations in which a broadcaster is determined to have
failed to negotiate in good faith, the Commission will instruct the
parties to renegotiate the agreement in accordance with the Commission's
rules and Section 325(b)(3)(C). We reiterate, however, that the
Commission will not require any party to a retransmission consent
agreement to offer or accept a specific term or condition or even to
reach agreement as part of such renegotiation.

82\. Although several commenters strongly favor the imposition of
damages for adjudicated violations of Section 325(b)(3)(C), we can
divine no statutory grant of authority to take such action. Congress
instructed the Commission to revise its regulations governing
retransmission consent to prohibit exclusive agreements and require good
faith negotiation. We can divine no intent in Section 325(b)(3)(C) to
impose damages for violations thereof. This is especially true where
later in the same statutory provision, Congress expressly granted the
District Courts of the United States the authority to impose statutory
damages of up to \$25,000 per violation, per day following a Commission
determination of a retransmission consent violation by a satellite
carrier.[^188] Commenters' reliance on the program access provisions as
support for a damages remedy in this context is misplaced. The
Commission's authority to impose damages for program access violations
is based upon a statutory grant of authority.[^189] We note, however,
that, as with all violations of the Communications Act or the
Commission's rules, the Commission has the authority to impose
forfeitures for violations of Section 325(b)(3)(C).[^190]

**E.** **Expedited Resolution**

83\. The Notice requested comment on whether expedited procedures are
necessary to the appropriate resolution of either exclusivity or good
faith proceedings.[^191] Several commenters argue that, in Section
325(e) of the Communications Act, Congress expressly required expedited
processing of broadcasters\' complaints that satellite carriers have
illegally retransmitted local broadcaster signals without consent.[^192]
Given this express directive by Congress, these commenters argue that
the lack of an express directive to expedite good faith negotiation
complaints indicates Congress' decision that such complaints should not
receive expedited treatment.[^193] U S West, however, notes that the
Commission has wide discretion to manage its procedures "as will best
conduce to the proper dispatch of business and to the ends of
justice."[^194] Disney asserts that the Commission must ensure that good
faith negotiation complaints are resolved expeditiously.[^195] In this
regard, several commenters suggest various time limits within which the
Commission should resolve complaints related to the good faith
negotiation requirement and the exclusivity prohibition.[^196]

84\. Commenters generally favor expedited action by the Commission
regarding complaints filed pursuant to Section 325(b)(3)(C). Because we
conclude that, upon expiration of an MVPD's carriage rights under the
Section 325(b)(2)(E) six-month compulsory license period or an existing
retransmission consent agreement, an MVPD may not continue carriage of a
broadcaster's signal while a retransmission consent complaint is pending
at the Commission,[^197] it is incumbent upon the Commission to expedite
the resolution of these claims. We are mindful that Congress has imposed
no express time limits for Commission resolution of retransmission
consent complaints, whereas it has done so in other provisions of SHVIA
and the Communications Act. We believe, however, that expeditious
resolution of Section 325(b)(3)(C) complaints is entirely consistent
with Congress' statutory scheme. We believe that, to ensure efficient
functioning of the retransmission consent process, and to avoid
protracted loss of service to subscribers, expedited action on these
claims is necessary.

85\. While commenters propose various time periods within which the
Commission should resolve retransmission consent complaints, we believe
the spectrum of issues that may be involved in these proceedings does
not lend itself to selecting one time period by which the Commission
should resolve all complaints brought under Section 325(b)(3)(C). For
example, it would be inefficient and arbitrary to apply the same time
period to a clear violation, such as outright refusal to negotiate, and
a violation of the test involving analysis of the totality of the
circumstances. Bearing in mind that the Commission must give maximum
priority to matters involving statutory time limits, we instruct
Commission staff to give priority to Section 325(b)(3)(C) complaints and
resolve them in an expeditious manner, considering the complexity of the
issues raised. We will monitor the resolution times of individual
retransmission consent complaints and, if necessary, we will revisit
this issue in the future.

**F. Burden of Proof**

86\. The Notice sought comment on how the burden of proof should be
allocated.[^198] In this regard, we asked for comment on whether the
burden should rest with the complaining party until it has made a *prima
facie* showing and then shift to the defending party and what would
constitute a *prima facie* showing sufficient to shift the burden to the
defending party. [^199]

87\. Arguing that, consistent with NLRB cases in which the party
claiming bad faith bears the burden of proof, several commenters counsel
the Commission to provide that the burden of proof should always be on
the MVPD complainant.[^200] Indeed, several commenters assert that the
Commission should adopt procedural rules that permit it to dismiss
retransmission consent complaints summarily if the MVPD fails to satisfy
a specified threshold standard.[^201]

88\. Other commenters support a shifting of the burden of proof after a
*prima facie* demonstration.[^202] Commenters assert that such a
shifting is appropriate because of the difficulty of conclusively
establishing the existence of an exclusive agreement or lack of good
faith. For exclusivity complaints, DIRECTV and EchoStar suggest that a
complaining party only provide affidavits or other documentary evidence
to support its belief that a prohibited exclusive contract exists, and
the burden of proof then shifts to the defendant to refute the existence
of such agreement.[^203] For good faith complaints, DIRECTV and EchoStar
suggest that the complaining party should provide a description of the
conduct complained of, including conduct alleged to violate any of the
good faith negotiation standards supported by any documentary evidence
or an affidavit signed by an officer of the complaining MVPD setting
forth the basis for the complainant's allegations.[^204] After the
burden has shifted to the broadcaster, commenters urge the Commission to
require the broadcaster to include with its answer a copy of any
retransmission consent agreement the complainant alleges to contain
unlawfully different terms and conditions, subject to Commission
confidentiality protections.[^205] Several commenters maintain that the
Commission should impose sanctions against filers of frivolous
complaints.[^206] Network Affiliates argue that the adoption of a
shifting burden mechanism will encourage the filing of frivolous
complaints during the negotiation period in order to intimidate
broadcasters.[^207]

89\. Commenters advance cogent arguments both for and against shifting
the burden to the broadcaster after a *prima facie* showing by a
complaining MVPD. However, as in labor law context,[^208] we believe the
burden should rest with the MVPD complainant to establish a violation of
Section 325(b)(3)(C).[^209] This conclusion is also consistent with our
belief that generally the evidence of a violation of the good faith
standard will be accessible by the complainant.[^210] This should not be
interpreted as permitting a broadcaster to remain mute in the face of
allegations of a Section 325(b)(3)(C) violation. After service of a
complaint, a broadcaster must file an answer as required by Section
76.7, which advises the parties and the Commission fully and completely
of any and all defenses, responds specifically to all material
allegations of the complaint, and admits or denies the averments on
which the party relies.[^211] In addition, where necessary, the
Commission has discretion to impose discovery requests on a defendant to
a Section 325(b)(3)(C) complaint.[^212] However, in the end, the
complainant must bear the burden of proving that a violation occurred.

**G.** **Sunset of Rules**

G.  

90\. Section 325(b)(3)(C) directs that the regulations adopted by the
Commission prohibit exclusive carriage agreements and require good faith
negotiation of retransmission consent agreements "until January 1,
2006."[^213] The Commission sought comment on whether the Commission's
rules regarding exclusive carriage agreements and good faith negotiation
should automatically sunset on this date.[^214] On its face, this
provision would seem to sunset the prohibition on exclusive
retransmission consent agreements and good faith negotiation for all
MVPDs. Under this reading of the statute, the Commission's rule
prohibiting exclusive retransmission consent agreements for cable
operators would be deemed abrogated as of January 1, 2006.

91\. The broadcast industry argues that this is the correct
interpretation of SHVIA. One commenter states that "\[b\]ecause the
statutory language is plain on its face, and because Congress acted with
knowledge of the existing regulatory prohibition, it is clear that
Congress intended to abrogate the Commission's existing rule prohibiting
exclusive retransmission consent agreements with cable operators."[^215]
This commenter additionally argues that the prohibition on exclusive
retransmission consent agreements was meant to correct imbalances in the
marketplace, and thus was established as a temporary solution.[^216]

92\. The satellite industry and other MVPD representatives disagree with
this interpretation of the statute. Two commenters argue that the date
set out in the statute establishes a minimum time frame on the
prohibition of exclusive retransmission consent agreements and the good
faith negotiation requirement.[^217] Others state that interpreting the
statute as sunsetting the Commission's prohibitions on exclusive
retransmission consent agreements runs contrary to the intent of
Congress. Specifically, they argue that nothing in the legislative
history demonstrates an intent to sunset Section 325(b)(3)(C), and
without an affirmative statement of intent, no such intent may be
inferred.[^218] Commenters argue that to sunset the prohibition would
result in anti-competitive behavior, and would thus undermine the goals
of SHVIA. Finally, many commenters from the satellite industry and the
MVPD industry argue that the Commission has authority to extend the
prohibition on exclusive retransmission consent agreements beyond
January 1, 2006, if the Commission determines that such an extension
would be in the public interest.[^219]

93\. A third approach to this issue is advanced by some representatives
of the satellite industry and the cable industry. Time Warner argues
that the Commission should make no determination at this point over
whether to sunset the prohibition, but rather should make a decision
closer to the expiration date set out in the statute.[^220]

94\. We believe that the statute is clear on its face, and that the
correct interpretation of the language "until January 1, 2006" is that
the prohibitions on exclusive retransmission consent agreements and the
good faith negotiation requirement terminate on that date. We agree with
commentators who argue that the provisions of Section 325(b)(3)(C) are
meant to foster competition. However, in the absence of guidance from
Congress as to the Commission's authority after this date, we can not
assume that Congress was establishing a minimum time frame and that the
Commission has authority to promulgate rules prohibiting exclusive
retransmission consent agreements and requiring good faith negotiation
beyond January 1, 2006. Congress has demonstrated its ability to craft
legislation that established a sunset date which the Commission has
express authority to extend.[^221] Such language is not contained in
SHVIA. The statute clearly states that the provisions would last "until
January 1, 2006." The legislative history does not express any intent to
extend such provisions. Thus, we must interpret Section 325(b)(3)(C) as
written and that January 1, 2006 is meant to be the sunset date for the
prohibition of exclusive retransmission consent agreements and the rules
on good faith retransmission consent negotiations.

#### ADMINISTRATIVE MATTERS

95\. *Final Regulatory Flexibility Analysis.* As required by the
Regulatory Flexibility Act ("RFA"), *see* 5 U.S.C. § 603, an Initial
Regulatory Flexibility Analysis ("IRFA") was incorporated in the Notice.
The Commission sought written public comments on the possible
significant economic impact of the proposed policies and rules on small
entities in the Notice, including comments on the IRFA. Pursuant to the
RFA, *see* 5 U.S.C. § 604, a Final Regulatory Flexibility Analysis is
contained in Appendix C.

96. *Paperwork Reduction Act of 1995 Analysis.* The actions herein have
    been analyzed with respect to the Paperwork Reduction Act of 1995
    and found to impose no new or modified reporting and recordkeeping
    requirements or burdens on the public.

97\. *Effective Date.* As discussed, Section 325(b)(2)(E) of the
Communications Act grants satellite carriers a six-month period during
which they may retransmit the signals of local broadcasters without a
broadcaster's express retransmission consent. We have adopted these
rules before the end of the six-month period provided by Section
325(b)(2)(E) so that MVPDs, particularly satellite carriers, and
broadcasters understand their rights and obligations under Section
325(b)(3)(C) before that period expires. To afford parties the maximum
amount of time to negotiate retransmission consent in good faith and to
file complaints pursuant to Section 325(b)(3)(C) before the expiration
of the six-month period, this First Report and Order will be effective
upon publication in the Federal Register. We find good cause exists
under the Administrative Procedure Act ("APA") to have the rules adopted
in this First Report and Order take effect upon publication in the
Federal Register pursuant to Section 553(d)(3) of the APA.[^222] Prompt
effectiveness of these rules will provide a framework under which
broadcasters and satellite carriers can achieve retransmission consent
before the expiration of the six-month period set forth in Section
325(b)(2)(E).

V.  **ORDERING CLAUSES**

98\. Accordingly, **IT IS ORDERED** that, pursuant authority found in
Sections 4(i) 4(j), 303(r) and 325 of the Communications Act of 1934, as
amended, 47 U.S.C. §§ 154(i), 154(j), 303(r) and 325, the Commission's
rules **ARE HEREBY AMENDED** as set forth in Appendix B.

99\. **IT IS FURTHER ORDERED** that the rule amendments set forth in
Appendix B **WILL BECOME EFFECTIVE** upon publication in the Federal
Register.

100\. **IT IS FURTHER ORDERED** that the Consumer Information Bureau,
Reference Information Center, **SHALL SEND** a copy of this First Report
and Order, including the Final Regulatory Flexibility Analysis, to the
Chief Counsel for Advocacy of the Small Business Administration.

Federal Communications Commission

Magalie Roman Salas

Secretary

###### Appendix A

##### [Parties Filing Comments]{.underline}

ABC, CBS, Fox, and NBC Television Network Affiliate Associations
("Network Affiliates").

American Cable Association ("ACA").

Association of Local Television Stations, Inc. ("ALTV").

BellSouth Corporation, BellSouth Interactive Media Services, Inc. and
BellSouth Wireless Cable, Inc. (\"BellSouth\").

CBS Corporation ("CBS").

DIRECTV, Inc. ("DIRECTV").

EchoStar Satellite Corporation ("EchoStar").

Fox Television Stations, Inc. ("Fox").

LEXCOM Cable ("LEXCOM").

Local TV on Satellite, LLC ("LTVS").

National Association of Broadcasters ("NAB").

National Broadcasting Company, Inc. ("NBC").

National Cable Television Association ("NCTA").

Satellite Broadcasting and Communications Association ("SBCA").

U S West, Inc. ("U S West").

Walt Disney Company ("Disney").

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

####### Parties Filing Reply Comments

American Cable Association ("ACA").

ABC, CBS, Fox, and NBC Television Network Affiliate Associations
("Network Affiliates").

Association of Local Television Stations, Inc. ("ALTV").

BellSouth Corporation, BellSouth Interactive Media Services, Inc. and
BellSouth Wireless Cable, Inc. ("BellSouth").

DIRECTV, Inc. ("DIRECTV").

EchoStar Satellite Corporation ("EchoStar").

Fisher Broadcasting Inc. ("Fisher").

Hearst-Argyle Television, Inc. ("Hearst").

Lin Television Corporation ("Lin").

Local TV on Satellite, LLC ("LTVS").

National Association of Broadcasters (NAB").

National Broadcasting Company, Inc. ("NBC").

National Cable Television Association ("NCTA").

RCN Telecom Services, Inc. ("RCN").

Satellite Broadcasting and Communications Association ("SBCA").

Seren Innovations, Inc. ("Seren").

The Post Company ("Post").

Time Warner Cable ("Time Warner").

U S West, Inc. ("U S West").

Walt Disney Company ("Disney").

Young Broadcasting, Inc. ("Young").

# Appendix B

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

Part 76 -- Multichannel Video and Cable Television Service

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

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

2.  Section 76.64(m) is amended as follows:

**§ 76.64 Retransmission Consent.**

\*\*\*\*\*

\(m\) Exclusive retransmission consent agreements are prohibited. No
television broadcast station shall make or negotiate and agreement with
one multichannel video programming distributor for carriage to the
exclusion of other multichannel video programming distributors. This
paragraph shall terminate at midnight on December 31, 2005.

3.  Section 76.65 is added to Subpart D to read as follows:

**§ 76.65 Good Faith and Exclusive Retransmission Consent Complaints.**

(a) *Duty to Negotiate in Good Faith.* Television broadcast stations
    that provide retransmission consent shall negotiate in good faith
    the terms and conditions of such agreements to fulfill the duties
    established by section 325(b)(3)(C) of the Act; provided, however,
    that it shall not be a failure to negotiate in good faith if the
    television broadcast station proposes or enters into retransmission
    consent agreements containing different terms and conditions,
    including price terms, with different multichannel video programming
    distributors if such different terms and conditions are based on
    competitive marketplace considerations. If a television broadcast
    station negotiates with multichannel video programming distributors
    in accordance with the rules and procedures set forth in this
    section, failure to reach an agreement is not an indication of a
    failure to negotiate in good faith.

(b) *Good Faith Negotiation.*

\(1\) *Standards.* The following actions or practices violate a
broadcast television station's duty to negotiate retransmission consent
agreements in good faith:

(A) Refusal by a television broadcast station to negotiate
    retransmission consent with any multichannel video programming
    distributor;

(B) Refusal by a television broadcast station to designate a
    representative with authority make binding representations on
    retransmission consent;

(C) Refusal by a television broadcast station to meet and negotiate
    retransmission consent at reasonable times and locations, or acting
    in a manner that unreasonably delays retransmission consent
    negotiations;

(D) Refusal by a television broadcast station to put forth more than a
    single, unilateral proposal.

(E) Failure of a television broadcast station to respond to a
    retransmission consent proposal of a multichannel video programming
    distributor, including the reasons for the rejection of any such
    proposal;

(F) Execution by a television broadcast station of an agreement with any
    party, a term or condition of which, requires that such television
    broadcast station not enter into a retransmission consent agreement
    with any multichannel video programming distributor; and

(G) Refusal by a television broadcast station to execute a written
    retransmission consent agreement that sets forth the full
    understanding of the television broadcast station and the
    multichannel video programming distributor.

\(2\) *Totality of the circumstances.* In addition to the standards set
forth in subsection 76.65(b)(1), a multichannel video programming
distributor may demonstrate, based on the totality of the circumstances
of a particular retransmission consent negotiation, that a television
broadcast station breached its duty to negotiate in good faith as set
forth in subsection 76.65(a).

\(c\) *Good Faith Negotiation and Exclusivity Complaints.* Any
multichannel video programming distributor aggrieved by conduct that it
believes constitutes a violation of the regulations set forth in this
section or subsection 76.64(m) may commence an adjudicatory proceeding
at the Commission to obtain enforcement of the rules through the filing
of a complaint. The complaint shall be filed and responded to in
accordance with the procedures specified in Section 76.7 of this part.

\(d\) *Burden of proof.* In any complaint proceeding brought under this
section, the burden of proof as to the existence of a violation shall be
on the complainant.

\(e\) *Time limit on filing of complaints.* Any complaint filed pursuant
to this subsection must be filed within one year of the date on which
one of the following events occurs:

(1) a complainant multichannel video programming provider enters into a
    retransmission consent agreement with a television broadcast station
    that the complainant alleges to violate one or more of the rules
    contained in this subpart; or

(2) a television broadcast station engages in retransmission consent
    negotiations with a complainant that the complainant alleges to
    violate one or more of the rules contained in this subpart, and such
    negotiation is unrelated to any existing contract between the
    complainant and the television broadcast station; or

(3) the complainant has notified the television broadcast station that
    it intends to file a complaint with the Commission based on a
    request to negotiate retransmission consent that has been denied,
    unreasonably delayed, or unacknowledged in violation of one or more
    of the rules contained in this subpart.

\(f\) *Termination of rules.* This section shall terminate at midnight
on December 31, 2005.

**Appendix C**

**FINAL REGULATORY FLEXIBILITY ANALYSIS**

1\. As required by the Regulatory Flexibility Act (\"RFA\"),[^223] an
Initial Regulatory Flexibility Analysis (\"IRFA\") was incorporated in
the Notice of Proposed Rulemaking ("Notice") in CS Docket No. 99-363,
FCC 99-406. The Commission sought written public comments on the
proposals in the Notice, including comment on the IRFA.[^224] This Final
Regulatory Flexibility Analysis ("FRFA") conforms to the RFA.[^225]

2\. *Need for, and Objectives of, this Report and Order.* Section 1009
of the Satellite Home Viewer Improvement Act ("SHVIA"),[^226] codified
as Section 325 of the Communications Act of 1934, as amended ("Act"), 47
U.S.C. § 325, instructs the Commission to revise the regulations
governing the exercise by television broadcast stations of the right to
grant retransmission consent. Congress directed the Commission to devise
regulations, procedures, and standards implementing a good faith
requirement in the negotiation of agreements in connection with the
transmission of television broadcast station signals by multichannel
video programming distributors ("MVPDs"). This Report and Order adopts
rules governing negotiation of retransmission consent between
broadcasters and all MVPDs which will help to ensure that negotiations
are conducted in an atmosphere of honesty, clarity of process and good
faith. In particular, this proceeding provides a clear framework under
which broadcasters and satellite carriers can achieve retransmission
consent before expiration and interruption of local broadcast signals
that satellite carriers have begun to provide their subscribers in many
cities across the nation since the enactment of the SHVIA. Further,
pursuant to the SHVIA, this proceeding also addresses implementing rules
prohibiting exclusive retransmission consent agreements. Finally, the
Report and Order adopts a complaint process to assist the Commission in
enforcing the statutory obligations related to Section 325(b)(3)(C).

3\. *Summary of Significant Issues Raised by Public Comments in Response
to the IRFA*. We received one comment in direct response to the IRFA.
The American Cable Association ("ACA") argues that smaller cable systems
play an important role in the distribution of local signals in rural
America and smaller communities and that competitive imbalances from
broadcaster abuses relating to retransmission consent threatens this
role. In particular, ACA states that the "IFRA remains devoid of any
meaningful analysis of how any retransmission consent rules that may
result would impact smaller cable businesses and their systems, nor does
it propose alternative relief to accommodate the unique needs of those
businesses. Instead, the Commission generally believes that entity size
has no bearing on the issues raised in the Notice."[^227] We note,
however, that in the IFRA we discussed the retransmission consent
election process and the possibility that differences among MVPDs might
justify different election schemes. We stated that we had not proposed
to treat small entities differently in this regard, but sought comment
on the possibility. We also sought comment on four specific alternatives
that might lessen the compliance burden on small entities: (1) the
establishment of differing compliance or reporting requirements or
timetables that take into account the resources available to small
entities; (2) the clarification, consolidation, or simplification of
compliance or reporting requirements under the rule for small entities;
(3) the use of performance, rather than design standards: and (4) an
exemption from coverage of the rule, or any part thereof, for small
entities. None of the other parties in this proceeding filed comments on
how issues raised in the Notice would impact small entities. Below, in
the section of the FRFA titled, "Steps Taken to Minimize Significant
Impact on Small Entities, and Significant Alternatives Considered," we
discuss further ACA's comment concerning the possible impact on small
entities.

4.  *Description and Estimate of the Number of Small Entities To Which
    the Rules Will Apply.*

The RFA directs the Commission to provide a description of and, where
feasible, an estimate of the number of small entities that will be
affected by the proposed rules.[^228] The RFA defines the term \"small
entity\" as having the same meaning as the terms \"small business,\"
\"small organization,\" and \"small business concern\" under Section 3
of the Small Business Act.[^229] Under the Small Business Act, a small
business concern is one which: (1) is independently owned and operated;
(2) is not dominant in its field of operation; and (3) satisfies any
additional criteria established by the Small Business Administration
(\"SBA\").[^230] The rules we adopt as a result of the Report and Order
will affect television station licensees, cable operators, and other
MVPDs.

5\. *Television Stations*. The Small Business Administration defines a
television broadcasting station that has no more than \$10.5 million in
annual receipts as a small business.[^231] Television broadcasting
stations consist of establishments primarily engaged in broadcasting
visual programs by television to the public, except cable and other pay
television services.[^232] Included in this industry are commercial,
religious, educational, and other television stations.[^233] Also
included are establishments primarily engaged in television broadcasting
and which produce taped television program materials.[^234] Separate
establishments primarily engaged in producing taped television program
materials are classified under another SIC number.[^235] There were
1,509 television stations operating in the nation in 1992.[^236] That
number has remained fairly constant as indicated by the approximately
1,579 operating full power television broadcasting stations in the
nation as of May 31, 1998.[^237]

6\. Thus, the rules will affect many of the approximately 1,579
television stations; approximately 1,200 of those stations are
considered small businesses.[^238] These estimates may overstate the
number of small entities since the revenue figures on which they are
based do not include or aggregate revenues from non-television
affiliated companies.

### 7. I**n addition to owners of operating television stations, any entity that seeks or desires to obtain a television broadcast license may be affected by the** rules **contained in this item. The number of entities that may seek to obtain a television broadcast license is unknown.** 

8*. Small MVPDs*: SBA has developed a definition of small entities for
cable and other pay television services, which includes all such
companies generating \$11 million or less in annual receipts.[^239] This
definition includes cable system operators, direct broadcast satellite
services, multipoint distribution systems, satellite master antenna
systems and subscription television services. According to the Census
Bureau data from 1992, there were 1,758 total cable and other pay
television services and 1,423 had less than \$11 million in
revenue.[^240] We address below services individually to provide a more
precise estimate of small entities.

##### 

##### 9. ***Cable Systems*:** 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 of less.[^241] 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.[^242] 

##### 

##### **The Commission has developed, with SBA\'s approval,** its **own definition of a small cable** 

##### **system operator for the purposes of rate regulation. Under the Commission\'s rules, a \"small cable company\" is one serving fewer than 400,000 subscribers nationwide.**[^243] **Based on our most recent information, we estimate that there were 1439 cable operators that qualified as small cable companies at the end of 1995.**[^244] **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 operators.** 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.[^245] We do not request nor do we collect information concerning cable systems serving 15,000 or fewer subscribers and this are unable to estimate at this time the number of small cable systems nationwide.

##### 

##### 11. **The Communications Act also contains a definition of a small cable system operator, which is \"a cable operator that, directly or through an affiliate, serves in the aggregate fewer than 1% 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.\"**[^246] **The Commission has determined that there are 61,700,000 subscribers in the United States. Therefore, an operator serving fewer than 617,000 subscribers shall be 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.**[^247] **Based on available data, we find that the number of cable operators serving 617,000 subscribers or less totals approximately 1450.**[^248] **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.** It should be further noted that recent industry estimates project that there will be a total 64,000,000 subscribers and we have based our fee revenue estimates on that figure.

12\. *Open Video System (\"OVS*\"): The Commission has certified eleven
OVS operators. Of these eleven, only two are providing service.
Affiliates of Residential Communications Network, Inc. (\"RCN\")
received approval to operate OVS systems in New York City, Boston,
Washington, D.C. and other areas. RCN has sufficient revenues to assure
us that they do not qualify as small business entities. Little financial
information is available for the other entities authorized to provide
OVS that are not yet operational. Given that other entities have been
authorized to provide OVS service but have not yet begun to generate
revenues, we conclude that at least some of the OVS operators qualify as
small entities.

13\. *Multichannel Multipoint Distribution Service ("MMDS")*: The
Commission refined the definition of \"small entity\" for the auction of
MMDS as an entity that together with its affiliates has average gross
annual revenues that are not more than \$40 million for the proceeding
three calendar years.[^249] This definition of a small entity in the
context of the Commission\'s Report and Order concerning MMDS auctions
that has been approved by the SBA.[^250]

14\. The Commission completed its MMDS auction in March, 1996 for
authorizations in 493 basic trading areas (\"BTAs\"). Of 67 winning
bidders, 61 qualified as small entities. Five bidders indicated that
they were minority‑owned and four winners indicated that they were
women‑owned businesses. MMDS is an especially competitive service, with
approximately 1,573 previously authorized and proposed MMDS facilities.
Information available to us indicates that no MDS facility generates
revenue in excess of \$11 million annually. We conclude that there are
approximately 1,634 small MMDS providers as defined by the SBA and the
Commission\'s auction rules.

15\. *DBS*: There are four licenses of DBS services under Part 100 of
the Commission\'s Rules. Three of those licensees are currently
operational. Two of the licensees which are operational have annual
revenues which may be in excess of the threshold for a small business.
The Commission, however, does not collect annual revenue data for DBS
and, therefore, is unable to ascertain the number of small DBS licensees
that could be impacted by these proposed rules. DBS service requires a
great investment of capital for operation, and we acknowledge that there
are entrants in this field that may not yet have generated \$11 million
in annual receipts, and therefore may be categorized as a small
business, if independently owned and operated.

16\. *HSD*: The market for HSD service is difficult to quantify. Indeed,
the service itself bears little resemblance to other MVPDs. HSD owners
have access to more than 265 channels of programming placed on C‑band
satellites by programmers for receipt and distribution by MVPDs, of
which 115 channels are scrambled and approximately 150 are
unscrambled.[^251] HSD owners can watch unscrambled channels without
paying a subscription fee. To receive scrambled channels, however, an
HSD owner must purchase an integrated receiver‑decoder from an equipment
dealer and pay a subscription fee to an HSD programming package. Thus,
HSD users include: (1) viewers who subscribe to a packaged programming
service, which affords them access to most of the same programming
provided to subscribers of other MVPDs; (2) viewers who receive only
non‑subscription programming; and (3) viewers who receive satellite
programming services illegally without subscribing. Because scrambled
packages of programming are most specifically intended for retail
consumers, these are the services most relevant to this
discussion.[^252]

17\. According to the most recently available information, there are
approximately 30 program packages nationwide offering packages of
scrambled programming to retail consumers.[^253] These program packages
provide subscriptions to approximately 2,314,900 subscribers
nationwide.[^254] This is an average of about 77,163 subscribers per
program package. This is substantially smaller than the 400,000
subscribers used in the commission\'s definition of a small MSO.
Furthermore, because this is an average, it is likely that some program
packages may be substantially smaller.

18\. *SMATVs*: Industry sources estimate that approximately 5,200 SMATV
operators were providing service as of December, 1995.[^255] Other
estimates indicate that SMATV operators serve approximately 1.05 million
residential subscribers as of September, 1996.[^256] The ten largest
SMATV operators together pass 815,740 units.[^257] If we assume that
these SMATV operators serve 50% of the units passed, the ten largest
SMATV operators serve approximately 40% of the total number of SMATV
subscribers. Because these operators are not rate regulated, they are
not required to file financial data with the Commission. Furthermore, we
are not aware of any privately published financial information regarding
these operators. Based on the estimated number of operators and the
estimated number of units served by the largest ten SMATVs, we
tentatively conclude that a substantial number of SMATV operators
qualify as small entities.

19\. *Description of Projected Reporting, Recordkeeping and other
Compliance Requirements.*

This Report and Order establishes a series of rules implementing good
faith guidelines in connection with retransmission consent agreements
between television broadcast stations and all MVPDs. The good faith
negotiation requirement applies only to broadcasters, however the
conduct of MVPDs that seek retransmission consent is not irrelevant to
the Commission in determining whether a broadcaster has complied with
its obligation to negotiate retransmission consent in good faith.[^258]
During the process of developing and negotiating retransmission consent,
parties will be guided by the principles and provisions established in
this Report and Order. While the substance of the agreements should be
left to the market, the Commission is responsible for enforcing the
process of good faith negotiation. We have established standards,
practices, and conduct, derived principally from NLRB precedent, that
will be applicable to all retransmission consent negotiations.[^259]
First among the negotiation standards is that a broadcaster may not
refuse to negotiate with an MVPD regarding retransmission consent.[^260]
Additional standards outline broadcaster conduct required to meet the
good faith standard in retransmission consent negotiation.[^261]

20\. Pursuant to the directive by Congress, this proceeding also
describes and explains the limits relating to exclusivity agreements and
implements rules in that regard. Specifically, the SHVIA prohibits all
exclusive retransmission agreements for television broadcast stations
and MVPDs prior to January 1, 2006.[^262] We interpret the phrase
"engaging in" to proscribe not only entering into exclusive agreements,
but also negotiation and execution of agreements granting exclusive
retransmission consent.[^263] The Commission also establishes complaint
procedures and sets forth the requirements of complainants to address
situations where there is evidence of exclusive retransmission consent
agreements.[^264]

21\. In the event that the good faith negotiation obligation provisions
are not adhered to, enforcement procedures also have been established to
report concerns and complaints and address disputes between parties. An
MVPD believing itself aggrieved, may file a complaint with the
Commission. Based upon pleadings filed, a determination will be made by
the Commission on the issue of good faith.[^265]

22*. Steps Taken to Minimize Significant Impact on Small Entities, and
Significant Alternatives Considered.* In this Report and Order, of major
importance is the principle of sustaining an environment where there
will be fairness, fair dealings, and true competition between parties in
the process of developing agreements on retransmission consent. This
proceeding develops a definite framework for retransmission consent
agreements so that television broadcast stations and MVPDs are aware of
their rights and obligations under Section 325(b)(3)(C).

23\. As noted, American Cable Association ("ACA") asserts that because
retransmission consent agreements have been largely unrestricted,
broadcasters have tried to extract unreasonable concessions in return
for retransmission consent from smaller cable systems and will continue
to do so.[^266] It states that the Commission must establish sufficient
safeguards to protect individual smaller cable businesses.[^267] ACA
suggests that the Commission should articulate its expectations
regarding good faith negotiations and extend those obligations to all
retransmission consent negotiations, including cable.[^268] We do not
believe it necessary to develop specific rules for particular subsets of
the MVPD market. The good faith negotiation requirement applies to a
broadcaster's negotiations with all MVPDs, including small cable
operators. The Report and Order adopts rules to implement this
obligation with regard to all broadcaster negotiations with all MVPDs.
For example, we set forth good faith negotiations standards, which
proscribe the actions or practices that would violate a broadcast
television station's duty to negotiate retransmission consent agreements
in good faith.[^269] Further, procedures to address exclusivity
complaints are also established.[^270] Small businesses are subject to
these provisions and will benefit from the protection provided. We
believe this sufficiently ameliorates ACA's concerns.

24\. *Report to Congress:* The Commission will send a copy of this
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 Report and Order and FRFA (or
summary thereof) will also be published in the Federal Register,
pursuant to 5 U.S.C. § 604(b), and will be sent to the Chief Counsel for
Advocacy of the Small Business Administration.

[^1]: SHVIA was enacted as Title I of the Intellectual Property and
    Communications Omnibus Reform Act of 1999 ("IPACORA") (relating to
    copyright licensing and carriage of broadcast signals by satellite
    carriers, codified in scattered sections of 17 and 47 U.S.C.), PL
    106-113, 113 Stat. 1501, Appendix I (1999).

[^2]: 47 U.S.C. § 325(b)(3)(C). Retransmission consent is the process
    whereby television broadcasters negotiate and consent to carriage of
    their signals by MVPDs such as cable television operators and
    satellite carriers.

[^3]: *Id.*

[^4]: *See Implementation of the Satellite Home Viewer Improvement Act
    of 1999: Retransmission Consent Issues,* Notice of Proposed
    Rulemaking, CS Docket No. 99-363, FCC 99-406 (rel. December 22,
    1999) ("Notice"). The Notice also sought comment on the adoption of
    implementing regulations relating to the retransmission consent
    election cycle for satellite carriers. We will adopt such election
    rules in a separate order within the time limit established by
    Congress.

[^5]: A list of commenters and reply commenters and the abbreviations by
    which they are referred to herein is attached as Appendix A.

[^6]: Conference Report at 1.

[^7]: The term "satellite carrier" means "an entity that uses the
    facilities of a satellite or satellite service licensed by the
    Federal Communications Commission and operates in the
    Fixed-Satellite Service under part 25 of title 47 of the Code of
    Federal Regulations or the Direct Broadcast Satellite Service under
    part 100 of title 47 of the Code of Federal Regulations, to
    establish and operate a channel of communications for
    point-to-multipoint distribution of television station signals, and
    that owns or leases a capacity or service on a satellite in order to
    provide such point-to-multipoint distribution, except to the extent
    that such entity provides such distribution pursuant to tariff under
    the Communications Act of 1934, other than for private home
    viewing." 17 U.S.C. § 119(d)(6). Satellite carriers' customers are
    home satellite dish households.

[^8]: Cable Television Consumer Protection and Competition Act of 1992,
    Pub. L. No. 102-385, 106 Stat. 1460 (1992).

[^9]: *See* 47 C.F.R. §76.55(e) (currently defined as Nielsen\'s
    Designated Market Areas (\"DMAs\")).

[^10]: *Implementation of the Cable Television Consumer Protection and
    Competition Act of 1992, Broadcast Signal Carriage Issues,* Report
    and Order 8 FCC Rcd 2965 (1993) ("*Broadcast Signal Carriage
    Order*"). The Commission later clarified these rules. *See
    Implementation of the Cable Television Consumer Protection and
    Competition Act of 1992, Broadcast Signal Carriage Issues,* Order, 8
    FCC Rcd 4142 (1993) ("*Clarification Order*").

[^11]: The Communications Act defines an MVPD as "a person such as, but
    not limited to, a cable operator, a multichannel multipoint
    distribution service, a direct broadcast satellite service, or a
    television receive-only satellite program distributor, who makes
    available for purchase, by subscribers or customers, multiple
    channels of video programming." 47 U.S.C. § 602(13).

[^12]: Communications Act § 325(b)(3)(C), 47 U.S.C. §325(b)(3)(C)(ii).

[^13]: Conference Report at 13.

[^14]: Notice at ¶ 15.

[^15]: Section 325(b)(2)(E) provides that:

    > This subsection \[prohibiting MVPD retransmission of local
    > broadcast signals without express broadcaster consent\] shall not
    > apply . . . during the 6-month period beginning on the date of the
    > enactment of the Satellite Home Viewer Improvement Act of 1999, to
    > the retransmission of the signal of a television broadcast station
    > within the station's local market by a satellite carrier directly
    > to its subscribers under the statutory license of section 122 of
    > title 17, United States Code.

    47 U.S.C. § 325(b)(2)(E).

[^16]: 47 U.S.C. § 325(e); *see infra* n.131 and accompanying text
    (discussing Section 325(e)).

[^17]: See 47 U.S.C. § 325(b)(1) ("No cable system or other
    *multichannel video programming distributor* shall retransmit the
    signal of a broadcasting station"); *Id*. § 325(b)(3)(C) (" . . . if
    the television broadcast station enters into retransmission consent
    agreements . . . with different *multichannel video programming
    distributors* . . .")(emphasis added).

[^18]: 47 U.S.C. § 325(b)(3)(C).

[^19]: *See* NAB Comments at 17; ALTV Comments at 15.

[^20]: *Broadcast Signal Carriage Order*, 8 FCC Rcd at 3006 (emphasis
    added), quoting 1992 Cable Act Senate Report at 36.

[^21]: *Id.*

[^22]: H.R. 1554, 106^th^ Cong., 1^st^ Sess. (1999) (unenacted Section
    325(b)(2)(C)(ii)).

[^23]: *See INS v. Cardoza-Fonseca*, 480 U.S. 421, 442-43 (1987) ("Few
    principles of statutory construction are more compelling that the
    proposition that Congress does not intend *sub silentio* to enact
    statutory language that it has earlier discarded in favor of other
    language."); *Slaven v. BP America, Inc.*, 973 F.2d 1468, 1474
    (9^th^ Cir. 1992) ("Congress's earlier express rejection of certain
    statutory language counsels strongly against interpreting the
    statute in a manner consistent with the rejected language."); *see
    also* Network Affiliates Comments at 3; NBC Comments at 6; Hearst
    Reply at 2; Post Reply at 2; Time Warner Reply at 10; Fisher Reply
    at 3.

[^24]: Pub. L. No. 102-385, 106 Stat. 1460 (1992); *see* Network
    Affiliate Comments at 9; CBS Comments at 8; Post Reply at 4..

[^25]: NAB Comments at 15; Disney Comments at 12; Fox Comments at 2; NBC
    Comments at 4-6; Young Reply at 4.

[^26]: NAB Comments at 15; Fisher Reply at 3; Network Affiliates Reply
    at 16 (" There is no factual basis on which the Commission may
    rationally conclude that the marketplace is dysfunctional. Should it
    become so, the Commission can then recommend to Congress that it be
    given statutory authority to establish a substantive regulatory
    scheme.").

[^27]: DIRECTV Reply at 7.

[^28]: Network Affiliate Comments at 16; NCTA Comments at 4; Fisher
    Reply at 3; Lin Reply at 2; Disney Comments at 5 ("common law
    teaches that the duty of good faith is violated only when a party to
    a negotiation engages in a refusal to deal").

[^29]: Network Affiliates Comments at 5; Disney Comments at 1; Hearst
    Reply at 5; Lin Reply at 2.

[^30]: ALTV Comments at 4; *see also* Network Affiliates Reply at 17.

[^31]: BellSouth Reply at 3-4; Seren Reply at 3; RCN Reply at 3; U S
    West Reply at 4.

[^32]: 145 Cong. Rec. H 2320 (daily ed. April 27, 1999) (colloquy
    between Representatives Tauzin and Dingell).

[^33]: *Id.* at H2317 (statement of Representative Berman). Moreover, in
    discussing the version of Section 325(b)(3)C) actually enacted,
    Representative Tauzin urged his colleagues to reopen the debate
    regarding anti-discriminatory retransmission consent at some future
    time. 145 Cong. Rec. E2487 (daily ed. November 19, 1999)
    (Representative Tauzin).

[^34]: Network Affiliates Comments at 12 & Hearst Reply at 6, each
    quoting *Robert C. Herd & Co. v. Krawill Mach. Corp*., 359 U.S. 297,
    304 (1959) ("*Herd*").

[^35]: NAB Comments at 9; Disney Comments at 5; ALTV Comments at 14.

[^36]: Disney Comments at 2.

[^37]: *Isbrandtsen Co. v. Johnson*, 343 U.S. 779, 783 (1952).

[^38]: *Herd*, 359 U.S. 297, 304 (1959) ( internal quotes and citation
    omitted); *see* E. Allen Farnsworth, Contracts § 3.26 (2d ed. 1990)
    (requirement to negotiate in good faith is a departure from common
    law principles protecting the freedom of contract).

[^39]: Disney Reply at 3; Young Reply at 2.

[^40]: Network Affiliates Comments at 5; Fox Comments at 1; CBS Comments
    at 7.

[^41]: Disney Reply at 3; NAB Comments at 8-10; CBS Comments at 10-14.

[^42]: We also look to the Commission's rules implementing the good
    faith negotiation requirement of Section 251 of the Communications
    Act, which also relies substantially on labor law precedent. *See
    Implementation of the Local Competition Provisions in the
    Telecommunications Act of 1996: Interconnection Between Local
    Exchange Carriers and Commercial Mobile Radio Service Providers*,
    First Report and Order, 11 FCC Rcd 15499, 15577 (1996)
    ("*Interconnection Order*").

[^43]: National Labor Relations Act § 8(d), 29 U.S.C. § 158(d). One
    commenter asserts that the good faith negotiation requirement is
    analogous to the obligation created by a preliminary agreement
    between two parties, which requires them to make a good faith effort
    to reach a final agreement. In this type of agreement, "the parties
    are bound only to make a good faith effort to negotiate and agree
    upon terms and a final agreement; if they fail to reach such a final
    agreement after making good faith effort to do so, there is no
    further obligation." ALTV Comments at 15, quoting *Adjustrite
    Systems, Inc. et al. V. Gab Business Services et al.*, 145 F.3d 543
    (2d. Cir. 1998).

[^44]: *H.K. Porter v. NLRB*, 397 U.S. 99, 103-04 (1970); *see NLRB v.
    American National Insurance Co*., 343 U.S. 395 (1970).

[^45]: The example most often cited by commenters is the program access
    provisions of Section 628 of the Communications Act which requires
    the Commission to prohibit discriminatory prices, terms and
    conditions and unfair practices in the market for vertically
    integrated, satellite delivered cable programming. 47 U.S.C. § 548.

[^46]: NAB Comments at 16.

[^47]: Notice at ¶ 15.

[^48]: Notice at ¶ 15.

[^49]: Network Affiliate Comments at 17; Disney Comments at 8; ALTV
    Comments at 18; Fox Comments at 3; LTVS Reply at 8.

[^50]: DIRECTV Comments at 7, quoting 47 U.S.C. § 325(b)(3)(C)(ii).

[^51]: 47 U.S.C. § 325(b)(3)(C).

[^52]: 47 U.S.C. § 251(c)(1)("The requesting telecommunications carrier
    also has the duty to negotiate in good faith the terms and
    conditions of such agreements.").

[^53]: *Id.*

[^54]: Notice at ¶ 18.

[^55]: *Id.*

[^56]: NAB Comments at 10; Network Affiliate Comments at 8, 11; Disney
    Comments at 8; NAB Reply at 10, quoting *Interconnection Order*, 11
    FCC Rcd 15499, ¶ 141 (emphasis added) ("ILECs stand only to lose by
    cooperating with new entrants and providing access to their
    facilities because providing interconnection '*reduce\[s\] the
    \[ILECs\] subscribership and . . . weaken\[s\] the \[ILECs\]
    dominant position in the market*.'"); Fisher Reply at 3.

[^57]: NAB Comments at 10; Network Affiliate Comments at 8; Disney
    Comments at 3; ALTV Comments at 9; NBC Comments at 6; Lin Reply at
    2; Young Reply at 3. One commenter, BellSouth, asserts that
    broadcasters have strong incentives to enter into retransmission
    consent agreements with the dominant MVPD in the area, but the same
    incentives do not apply to alternative MVPDs. BellSouth Reply at 14;
    *see also* U S West Reply at 6. In addition, ACA asserts that
    broadcasters behavior is motivated solely by profit maximization and
    that in the current era of media conglomeration retransmission to
    the widest possible audience does not always generate the maximum
    profits. ACA Reply at 3.

[^58]: DIRECTV Comments at 6; EchoStar Comments at 10; LTVS Comments at
    5; SBCA Comments at 4; ACA Comments at 16; RCN Reply at 5; Time
    Warner Reply at 11.

[^59]: Fox Comments at 2.

[^60]: Time Warner Reply at 11. In such circumstances, asserts Time
    Warner, the broadcaster could establish that the terms are within
    the zone of reasonableness by providing evidence that a similarly
    situated MVPD has accepted terms that impose an equivalent economic
    burden. *Id.*

[^61]: NBC Comments at 7.

[^62]: NBC Comments at 7; Network Affiliate Comments at 10; *see* Fox
    Comments at 2 ("A list of specific *per se* behavioral prohibitions
    cannot adequately account for the factual context of a particular
    negotiation.").

[^63]: Disney Comments at 7; NCTA Comments at 4; LTVS Comments at 6;
    Young Reply at 3.

[^64]: *See* Appendix B, § 76.65(b)(2).

[^65]: Notice at ¶ 18.

[^66]: *Id.*; 47 C.F.R. § 51.301(c)(1), (2), (3), (5), (6), (7), & (8).

[^67]: Notice at ¶ 18, n.40.

[^68]: Disney Comments at 5.

[^69]: NAB Comments at 21; Disney Comments at 5; Hearst Reply at 4; NBC
    Reply at 8.

[^70]: NAB Comments at 21; Network Affiliate Comments at 15-16; Disney
    Comments at 7; NBC Comments at 8; Hearst Reply at 4; Fisher Reply at
    5; LTVS Reply at 3.

[^71]: NAB Comments at 21; Disney Comments at 7; Time Warner Reply at
    4-5; LTVS Reply at 3.

[^72]: NBC Reply at 8.

[^73]: NCTA Reply at 2; NBC Reply at 9.

[^74]: EchoStar Reply at 5; *see* RCN Reply at 4 (Good faith requires
    more than "a simple willingness to meet and the absence of a refusal
    to deal."); DIRECTV Reply at 6 ("Congress does not adopt such
    language without purpose.").

[^75]: *See also* LTVS Comments at 5; ACA Comments at 17.

[^76]: *See also* LTVS Comments at 5; ACA Comments at 17; NCTA Reply at
    2; RCN Reply at 6.

[^77]: *See also* LTVS Comments at 5; ACA Comments at 17.

[^78]: *See also* EchoStar Comments at 13.

[^79]: *See also* EchoStar Comments at 12.

[^80]: *See also* EchoStar Comments at 13.

[^81]: *See also* EchoStar Comments at 12.

[^82]: DIRECTV Comments at 9-10 (citations omitted); *see also* EchoStar
    Comments at 12. Several commenters fully support the list of
    violations submitted by DIRECTV and EchoStar. SBCA Comments at 5;
    BellSouth Reply at 8. ACA also supports a good faith violation
    related to unilateral demands that an MVPD carry a broadcaster's
    digital signals. ACA Comments at 9; *but see* NAB Reply at 18
    ("While the Commission has not yet ruled on a general must-carry
    mandate for digital signals, it would be absurd for the Commission
    to bar stations from using their own statutorily-granted right to
    retransmission consent as an incentive to encourage MVPDs to make
    their station's digital signals available to the maximum number of
    local viewers.").

[^83]: EchoStar Comments at 13. NAB asserts that there is no basis for
    the Commission to prevent broadcasters from voicing concerns in the
    media or through their own editorials or otherwise, about the status
    of retransmission consent negotiations. NAB Reply at 19.

[^84]: U S West Comments at 5-6; WCA Comments at 14-15; BellSouth
    Comments at 13; ACA Comments at 10; LTVS Reply at 3; EchoStar Reply
    at 15; Seren Reply at 5; RCN Reply at 4; Time Warner Reply at 5-8.

[^85]: LTVS Comments at 5; ACA Comments at 17. NAB asserts that the
    Commission should not require information exchanges as part of the
    bargaining process and argues that, although required in other
    contexts, such exchanges are not appropriate in the retransmission
    consent context because broadcasters have no obligation to enter
    into involuntary retransmission consent agreements. NAB Comments at
    21-22.

[^86]: BellSouth Comments at 16-17; Seren Reply at 4-5; U S West Reply
    at 4; LTVS Reply at 4. WCA supports the reply comments the reply
    comments filed on behalf of BellSouth. WCA Reply at 1.

[^87]: BellSouth Comments at 17.

[^88]: ACA Comments at 17. ACA also urges the Commission to adopt the
    following violations applicable solely to small cable and MVPDs:

    > \[1\] insisting that an MVPD carry either digital signals or other
    > satellite cable programming in exchange for retransmission consent
    > in contravention of the Commission's revised regulations.
    >
    > \[2\] Where a broadcaster's demands would result in a *de facto*
    > exclusive retransmission consent agreement, refusing to offer the
    > aggrieved smaller MVPD the same terms and conditions.
    >
    > \[3\] Refusing to deal with smaller MVPDs or their
    > representatives, *e.g.*, buying cooperatives \[and\].
    >
    > \[4\] Failing to offer smaller MVPDs terms and conditions,
    > including price terms, at least as favorable as those offered to
    > competitors.

    ACA Comments at 18.

[^89]: Post Reply at 3-5; Fisher Reply at 5.

[^90]: Disney Reply at 7-8, quoting S. Rep. No. 102-92, 102^nd^ Cong.,
    at 35-36 (1991) ("Other broadcasters may not seek monetary
    compensation, but instead negotiate other issues with cable systems,
    such as joint marketing efforts, the opportunity to provide news
    inserts on cable channels, *or the right to program an additional
    channel on the cable system. It is the Committee's intention to
    establish a marketplace for the disposition of the rights to
    retransmit broadcast signals; it is not the Committee's intention in
    this bill to dictate the outcome of the ensuing marketplace
    negotiations.*") (emphasis Disney).

[^91]: Disney Reply at 9; Lin Reply at 4.

[^92]: As described below, Section 325(b)(3)(C) sanctions only those
    retransmission consent agreements containing different terms and
    conditions, including price terms, with different MVPDs if such
    different terms and conditions are based upon competitive
    marketplace considerations. *See infra* ¶ 56, discussing bargaining
    proposals that are consistent with competitive marketplace
    considerations.

[^93]: *See* Appendix B, § 76.65(b)(1)(A).

[^94]: *See supra* n. 32 and accompanying text (colloquy between
    Representatives Tauzin and Dingell) ("as long as a station does not
    refuse to deal with any particular distributor, a station's
    insistence on different terms and conditions in retransmission
    agreements based on marketplace considerations is not intended to be
    prohibited by this bill . . . if a station negotiates in good faith
    with a distributor, the failure to reach an agreement with that
    distributor would not constitute a discriminatory act that is
    intended to be barred by this section."); *Candide Productions Inc.
    v. Int'l Skating Union*, 530 F. Supp. 1330, 1337 (S.D.N.Y. 1982) ("A
    commitment to good faith negotiation does not carry with it a
    surrender of one's right to decide not to enter into another
    contract with a party."); *supra* n. 43 and accompanying text,
    discussing Section 8(d) of the Taft-Hartley Act (". . . such
    obligation does not compel either party to agree to a proposal or
    require the making of a concession.").

[^95]: *See* Appendix B, § 76.65(b)(1)(B).

[^96]: 47 C.F.R. § 51.301(c)(7); *see Cablevision Industries*, 283 NLRB
    22 (1987).

[^97]: *See* Appendix B, § 76.65(b)(1)(C).

[^98]: *See* Appendix B, § 76.65(b)(1)(D).

[^99]: *See* Appendix B, § 76.65(b)(1)(E).

[^100]: We recognize that in other contexts there is an information
    exchange requirement applicable to both parties as to claims made in
    the bargaining process. *See e.g. Teleprompter Corporation v. NLRB*,
    570 F. 2d 4 (1st Cir. 1977); *NLRB v. Truitt Mfg. Co.,* 351 U.S. 149
    (1956). We do not believe it would be desirable to attempt to
    replicate such a requirement here because the parties are
    competitors and the information involved would, in most instances,
    be competitively sensitive. Because there is no mutuality of
    obligations under Section 325(b)(3)(C), the marketplace negotiation
    contemplated in SHVIA would be negated by a one-sided information
    disclosure requirement. *See Silverman v. Major League Baseball
    Player Relations Committee*, 516 F. Supp. 588, 594 (S.D. N.Y. 1981)
    ("Information concerning subjects at issue in bargaining is presumed
    to be necessary and relevant to negotiations, and *employers and
    unions alike* must provide such information when requested in the
    course of bargaining.") (emphasis added). Thus, although
    broadcasters must provide reasons for the positions taken, we impose
    no general requirement that confidential information be made
    available to support negotiating positions taken.

[^101]: *See* Appendix B, § 76.65(b)(1)(F).

[^102]: *See* Appendix B, § 76.65(b)(1)(G).

[^103]: *See e.g., supra* nn. 75-88 and accompanying text, discussing
    proposed limitations on good faith negotiation suggested by certain
    commenters.

[^104]: Communications Act § 325(b)(3)(C), 47 U.S.C. §325(b)(3)(C)(ii).

[^105]: Notice at ¶ 19. The Notice observed that on the subject of
    "competitive marketplace considerations," Senator Kohl commented
    that:

    > . . . there may be some disagreement as to what exactly this new
    > provision means. At the very least, "competitive marketplace
    > considerations" may simply be interpreted as the normal, everyday
    > jostling that takes place in the business world. At the very most,
    > a "competitive marketplace" would tolerate differences based upon
    > legitimate cost justifications, but not anti-competitive practices
    > such as illegal tying and bundling. The answer probably lies
    > somewhere between these two interpretations and we trust the
    > sometimes confused \[Commission\], as we often do, to properly
    > divine the real intent of a sometimes confused Congress.

    145 Cong. Rec. S15017 (daily ed. Nov. 19, 1999) (statement of Sen.
    Kohl).

[^106]: Notice at ¶ 19; *see* 47 C.F.R. § 76.1002(b) (program access
    standard); 47 C.F.R. § 76.1503(a) (open video system standard).

[^107]: Notice at ¶ 19.

[^108]: DIRECTV Comments at 13-14; EchoStar Comments at 18. Several
    commenters assert that the Commission's program access and open
    video system rules provide an ideal model and suggest that only the
    following acts or practices constitute competitive marketplace
    considerations that a broadcaster may take into account in
    negotiating retransmission consent agreements:

    > Reasonable requirements for creditworthiness, offering of service,
    > and financial stability and standards regarding character and
    > technical quality; and
    >
    > Different prices, terms, and conditions to take into account
    > actual, verifiable differences in the costs of delivering the
    > programming.

    DIRECTV Comments at 13-14; LTVS Comments at 6; WCA Comments at 14;
    BellSouth Reply at 10; EchoStar Comments at 18; SBCA Comments at 5.

[^109]: EchoStar Comments at 17 (emphasis original); *see* SBCA Comments
    at 3; *see also* EchoStar Ex Parte at 3-5; *but see* ALTV Reply at 3
    (Congress "expressly overlayed the compulsory \[copyright\] license
    with the retransmission consent requirement to assure that stations
    do get payment for their signals commensurate with the value to the
    MVPD using the signal.").

[^110]: NAB Reply at 5-7.

[^111]: In Washington, D.C., for example, DIRECTV charges \$5.99 for a
    total of five broadcast channels (\$1.20 per station, per month),
    four of which are the local outlets for the four major networks
    (ABC, CBS, Fox, and NBC). *See* NAB Comments at 13-14; NBC Comments
    at 3. DIRECT and EchoStar each currently offer local signals in more
    than 17 markets, including Boston, Chicago, Dallas, Denver, Los
    Angeles, Miami, New York, Philadelphia, San Francisco, and
    Washington, D.C. NBC Comments at 3. Similarly, EchoStar charges
    \$4.99 for the four major network affiliates in Washington (\$1.25
    per station, per month). *See* NAB Comments at 14; ALTV Comments at
    6; NBC Comments at 3. Commenters observe that these prices are
    substantially higher than the average price DIRECTV and EchoStar
    charge for most other channels -- DIRECTV charges approximately 47
    cents per channel and EchoStar charges approximately 45 cents per
    channel. *See* NAB Comments at 14; Network Affiliates Reply at 11
    (EchoStar charges its customers 180% more, and DIRECTV 160% more for
    local broadcast stations than for non-broadcast channels).

[^112]: Hearst Reply at 4.

[^113]: EchoStar Reply at 13.

[^114]: NAB Comments at 17; ALTV Comments at 13.

[^115]: NAB Comments at 17; ALTV Comments at 10; NBC Reply at 2; *but
    see* EchoStar Ex Parte at 3-5 (retransmission marketplace not as
    competitive as broadcasters claim).

[^116]: NAB Comments at 18.

[^117]: EchoStar Reply at 8.

[^118]: *See supra* nn. 75-88 and accompanying text, discussing proposed
    limitations on good faith negotiation suggested by certain
    commenters.

[^119]: Comments of James N. Dertouzas at 3.

[^120]: *Id.* at 4-5.

[^121]: *Id.*

[^122]: As part of its effort to describe a competitive marketplace
    against which satellite retransmission consent terms might be
    compared to determine compliance with the requirements of Section
    325(b)(3)(C), EchoStar presents what is described as a "simple
    model" to illustrate some of the competitive considerations facing
    broadcasters. According to this model:

    > In providing distant signals, BI represents the value to a
    > broadcaster (in terms of advertising) of a household that does not
    > subscribe to MVPD services. B2 represents the value to a
    > broadcaster of a household that subscribes to MVPD services when
    > the television signal is only available over-the-air. B3
    > represents the value to a broadcaster of a household that
    > subscribes to MVPD services when the signal is carried by the
    > operator. PI represents the proportion of the population that does
    > not subscribe to MVPD services in the absence of carriage. P2
    > represents the proportion of the population that does subscribe to
    > MVPD services in the absence of carriage, and s represents the
    > percentage of non subscribers who shift when the over-the-air
    > signals are made available on the MVPD menu of services. The gain
    > to the broadcaster is thus - (B1 - B3)SP1 + (B3 - B2)P2. The first
    > term represents the loss in value from those households who shift
    > to MVPD services. This loss is larger when many households shift
    > and when ratings and advertising revenues are diverted to services
    > only available via the MVPD offerings. The second term represents
    > a gain that is larger when the percentage of subscribers is large
    > and the broadcast ratings are significantly greater after the
    > signals are carried by the MVPD operator.

    *Id.* at 6, n.1.

[^123]: These proposals are illustrative in nature and are not intended
    to represent a finite list of bargaining proposals that are
    consistent with competitive marketplace considerations and the good
    faith negotiation requirement.

[^124]: 17 U.S.C. § 111.

[^125]: Again, these proposals are illustrative in nature and are not
    intended to represent a finite list of bargaining proposals that are
    not consistent with competitive marketplace considerations and the
    good faith negotiation requirement.

[^126]: NCTA Comments at 4; Time Warner Reply at 14-15.

[^127]: U S West Comments at 8-9; BellSouth Comments at 24; WCA Comments
    at 17.

[^128]: U S West Comments at 8-9; BellSouth Comments at 24; WCA Comments
    at 17, each citing 47 C.F.R. § 76.59(c).

[^129]: NAB Reply at 21, citing 47 U.S.C. § 325(b)(3); Network
    Affiliates Reply at 40.

[^130]: 47 U.S.C. § 325(b)(1) (emphasis added).

[^131]: 47 U.S.C. § 325(e)(4).

[^132]: Notice at 20.

[^133]: *Id.*

[^134]: Network Affiliate Comments at 24.

[^135]: Fox Comments at 3.

[^136]: LTVS Reply at 9.

[^137]: 47 U.S.C. § 325(b)(3)(C).

[^138]: 47 C.F.R. § 76.64(m) ("Exclusive retransmission consent
    agreements are prohibited. No television broadcast station shall
    make an agreement with one multichannel distributor for carriage, to
    the exclusion of other multichannel distributors).

[^139]: *See* 47 C.F.R. § 76.7 (special relief provisions).

[^140]: S. 1948, the Intellectual Property and Communications Omnibus
    Reform Act of 1999, Section 1009(a)(2)(C)(ii), p. 46.

[^141]: Joint Explanatory Statement of the Committee of Conference on
    the Intellectual Property and Communications Omnibus Reform Act of
    1999, p. 13

[^142]: *See Broadcast Signal Carriage Order*, 8 FCC Rcd at 2996.

[^143]: *Id.,* at 3006.

[^144]: Notice at ¶ 23.

[^145]: *Id.*

[^146]: *Id.*

[^147]: *Id.*

[^148]: *Id.*

[^149]: Disney Comments at 14; NAB Comments at 33.

[^150]: SBCA Comments at 6; EchoStar Comments at 20; LTVS Comments at
    10.

[^151]: SBCA Comments at 5. This position is supported by DIRECTV who
    urges the Commission to "attentively monitor the industry to ensure
    that broadcasters do not attempt in their retransmission
    negotiations to wield de facto exclusivity against DBS providers by
    virtue of the terms and conditions that are contained in deals with
    other MVPDs." DIRECTV Comments at 16).

[^152]: ACA Comments at 14-15; EchoStar Reply at 21.

[^153]: LTVS Comments at 10-12.

[^154]: Network Affiliates Reply at 42.

[^155]: *Id.*

[^156]: *Id.*

[^157]: *See* Appendix B, § 76.64(m).

[^158]: Notice at ¶ 24.

[^159]: BellSouth Comments at 22.

[^160]: *Id*., citing 47 C.F.R. § 76.64(m).

[^161]: LTVS Reply at 9.

[^162]: Network Affiliates Comments at 28.

[^163]: 47 C.F.R. § 76.64(m).

[^164]: Notice at ¶ 26; *see e.g., Implementation of the
    Telecommunications Act of 1996: Amendment of Rules Governing
    Procedures to be Followed When Formal Complaints are Filed Against
    Common Carriers*, Second Report and Order, 13 FCC Rcd 17018, ¶¶
    14-15 (rel. July 14, 1998); *Use of Alternative Dispute Resolution
    Procedures in Commission Proceedings and Proceedings in which the
    Commission is a Party*, Initial Policy Statement and Order, 6 FCC
    Rcd 5669 (1991); 47 C.F.R. § 1.18.

[^165]: Time Warner Reply at 14.

[^166]: *Id.*

[^167]: Notice at ¶ 26.

[^168]: *Id.*

[^169]: *Id.*; *see* 47 C.F.R. § 76.7.

[^170]: Disney Comments at 17; Network Affiliate Comments at 28; LTVS
    Comments at 12; U S West Comments at 8; WCA Comments at 16; NAB
    Reply at 22; BellSouth Comments at 22. BellSouth asserts that the
    Commission should require good faith complaint defendants to attach
    a copy of any retransmission consent agreements with any MVPDs with
    whom the complainant competes. BellSouth Reply at 18. ACA argues
    that the Commission should give all MVPDs standing to challenge
    alleged retransmission consent violations, rather than standing to
    challenge only those to which they are a party. ACA Comments at
    21-22.

[^171]: *See* Appendix B, § 76.65(c).

[^172]: See 47 C.F.R. § 76.7(a)(4) (Complaint shall state fully and
    precisely all pertinent facts and considerations relied on to
    demonstrate the need for the relief requested.).

[^173]: 47 C.F.R. § 76.7(b)(2).

[^174]: DIRECTV Comments at 16; EchoStar Comments at 21.

[^175]: *See* 47 C.F.R. § 76.1003(g) (program access); 47 C.F.R. §
    76.1302(f) (program carriage); 47 C.F.R. § 76.1513(t) (open video
    systems).

[^176]: *See* Appendix B, § 76.65(e).

[^177]: DIRECTV Comments at 17-18; EchoStar Comments at 23; RCN Reply at
    6. WCA supports limited mandatory discovery. WCA Comments at 16.

[^178]: Disney Reply at 13.

[^179]: Network Affiliates Reply at 35-36.

[^180]: Network Affiliate Reply at 36-38.

[^181]: 47 C.F.R. § 76.9.

[^182]: 47 C.F.R. § 76.7(f).

[^183]: NAB Comments at 21; Network Affiliate Comments at 19; ALTV
    Comments at 17.

[^184]: Disney Reply at 3-4, quoting *H.K. Porter v. NLRB*, 397 U.S. 99,
    103-104 (1970) ("\[I\]t was recognized from the beginning that
    agreement might be impossible, and it was never intended that the
    Government would in such cases step in, become a party to the
    negotiations and impose its own views of a desirable settlement.");
    NAB Comments at 21, Network Affiliates Reply at 32 & CBS Comments at
    12, citing *H.K. Porter Co.*, 397 U.S. 99, 108 (1970); Network
    Affiliate Comments at 18, quoting *NLRB v. American National
    Insurance Co.*, 343 U.S. 395, 404 (1952) (NLRB "may not, either
    directly or indirectly, compel concessions or otherwise sit in
    judgement upon the substantive terms of collective bargaining
    agreements."); Network Affiliates Reply, citing *NLRB v. Wooster
    Div. Of Borg-Warner Corp*., 365 U.S. 342, 349 (1958).

[^185]: EchoStar Reply at 25.

[^186]: EchoStar Comments at 23; BellSouth Reply at 18.

[^187]: Disney Reply at 14, citing 47 U.S.C. § 548(e); NAB Reply at 24;
    Network Affiliates Reply at 31.

[^188]: 47 U.S.C. § 325(e)(10).

[^189]: *See Program Access Report and Order*, 13 FCC Rcd at 15829-32.

[^190]: *See* 47 U.S.C. § 503(b).

[^191]: Notice at ¶ 26. The Notice observed that, in amended Section
    325(e) of the Communications Act, Congress established expedited
    enforcement procedures for complaints by broadcasters that a
    satellite carrier has retransmitted such broadcaster's signal in its
    local market in violation of Section 325(b)(1). *Id.*; *see* 47
    U.S.C. § 325(e); *see* 47 U.S.C. § 325(b)(1), requiring that no MVPD
    may retransmit the signal of a broadcasting station, except with the
    express authority 338 or 614 of the Communications Act. The Notice
    also observed that good faith is not a defense under Section 325(e).

[^192]: *See* 47 U.S.C. § 325(e).

[^193]: NAB Comments at 32-33; Network Affiliate Comments at 28-29.
    Network Affiliates concludes that this disparate treatment indicates
    that the Commission lacks authority to adopt expedited procedures.
    Network Affiliate Reply at 28-29, citing *Russello v. United
    States*, 464 U.S. 16, 23 (1983).

[^194]: U S West Reply at 6-7, quoting *GTE Service Corp. v. FCC*, 782
    F.2d 263, 273 (D.C. Cir. 1985), quoting 47 U.S.C. § 154(j).

[^195]: Disney Comments at 16.

[^196]: *See* DIRECTV Comments at 17 (five-month time limit); EchoStar
    Comments at 24 (four-month time limit for *per se* violations and
    seven-month time limit for differentials not based on competitive
    marketplace considerations); U S West Comments at 8 (120-day time
    limit); WCA Comments at 16 (120-day time limit); BellSouth Comments
    at 23 (45-day time limit); Seren Reply at 6 (45-day time limit); ACA
    Comments at 21 (50-day time limit).

[^197]: *See supra* nn. 130-131 and accompanying text, discussing
    foreclosure of carriage while a complaint is pending.

[^198]: Notice at ¶ 27.

[^199]: *Id.* The Commission adopted such a shifting burden approach in
    the program access context. *See Implementation of Sections 12 and
    19 of the Cable Television Consumer Protection and Competition Act
    of 1992: Development of Competition and Diversity in Video
    Programming Distribution and Carriage*, First Report and Order, 8
    FCC Rcd 3359, 3416-22 (1993).

[^200]: NAB Comments at 30; Network Affiliate Comments at 29; ALTV
    Comments at 17; Disney Reply at 12; NBC Reply at 8.

[^201]: NAB Comments at 30; Network Affiliate Comments at 30. NAB
    asserts that, without specific factual evidence, the Commission
    should dismiss an allegation of "lack of good faith." NAB Comments
    at 30.

[^202]: DIRECTV Comments at 18-20; EchoStar Comments at 22; LTVS
    Comments at 12; U S West Comments at 9; BellSouth Comments at 25.

[^203]: DIRECTV Comments at 19; EchoStar Reply at 24.

[^204]: DIRECTV Comments at 19; EchoStar Comments at 22.

[^205]: U S West Comments at 9; BellSouth Comments at 25.

[^206]: Disney Complaints at 17.

[^207]: Network Affiliate Reply at 30-31.

[^208]: *See e.g., North Cambria Fuel Co. v. NLRB*, 645 F.2d 177, 182
    (3d Cir. 1981) ("It is settled that the burden of proving a
    violation of the National Labor Relations Act is on the General
    Counsel \[complainant\]"); *NLRB v. St. Louis Cordage Mills*, 424
    F.2d 976, 979 (8^th^ Cir. 1970) ("The principle is firmly
    established that the burden is on the General Counsel
    \[complainant\] to prove the essential elements of the charges
    unfair labor practices.").

[^209]: *See* Appendix B, § 76.65(d).

[^210]: *See supra* nn. 177-182 and accompanying text, discussing
    rejection of discovery as-of-right.

[^211]: 47 C.F.R. § 76.7(b)(iii) & (iv).

[^212]: *Id.* at § 76.7(f).

[^213]: Communications Act § 325(b)(3)(C), 47 U.S.C. §325(b)(3)(C)(ii).

[^214]: Notice at ¶ 28.

[^215]: Network Affiliates Comments at 25.

[^216]: *Id.* at 26.

[^217]: EchoStar Reply at 22; LTVS Comments at 7.

[^218]: BellSouth Comments at 19-20; EchoStar Reply at 22; WCA Comments
    at 7; U S West Comments at 7; DIRECTV Reply at 9; Time Warner Reply
    at 15.

[^219]: BellSouth Comments at 19-20; EchoStar Comments at 20-21; DIRECTV
    Reply at 9; LTVS Comments at 7; U S West Comments at 7-8; WCA
    Comments at 6.

[^220]: Time Warner Reply at 15.

[^221]: *See* 47 U.S.C. § 548(5) (program access exclusivity sunset and
    Commission authority to extend).

[^222]: The APA generally requires publication in the Federal Register
    of substantive rules 30 days prior to their effective date but
    permits substantive rules to become effective with less than 30 days
    advance publication for good cause. 5 U.S.C. § 553(d)(1) & (3); 47
    C.F.R. § 427(b).

[^223]: *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).

[^224]: Notice at Appendix A.

[^225]: *See* 5 U.S.C. § 604.

[^226]: The SHVIA was enacted as Title I of the Intellectual Property
    and Communications Omnibus Reform Act of 1999 ("IPACORA")(relating
    to copyright licensing and carriage of broadcast signals by
    satellite carriers, codified in sections of 17 and 47 U.S.C.), Pub.
    L. No. 106-113, 113 Stat. 1501, Appendix I (1999).

[^227]: American Cable Association Comments at 1-2.

[^228]: 5 U.S.C. §604(b)(3).

[^229]: 5 U.S.C. §601(3)(incorporating by reference the definition of
    "small business concern" in 15 U.S.C. § 632.) Pursuant to the RFA,
    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 the term which are appropriate to the activities
    of the agency and publishes such definition(s) in the Federal
    Register. 5 U.S.C. § 601(3).

[^230]: 15 U.S.C. §632.

[^231]: 13 C.F.R. §121.201, Standard Industrial Code (SIC) 4833.

[^232]: Economics and Statistics Administration, Bureau of Census, U.S.
    Department of Commerce, 1992 CENSUS OF TRANSPORTATION,
    COMMUNICATIONS AND UTILITIES, ESTABLISHMENT AND FIRM SIZE, Series
    UC92-S-1, Appendix A-9 (1995).

[^233]: *Id*. *See* *also* OMB SIC Manual at 283, which describes
    \"Television Broadcasting Stations (SIC Code 4833) as:

    Establishments primarily engaged in broadcasting visual programs by
    television to the public, except cable and other pay television
    services. Included in this industry are commercial, religious,
    educational and other television stations. Also included here are
    establishments primarily engaged in television broadcasting and
    which produce taped television program materials.

[^234]: Economics and Statistics Administration, Bureau of Census, U.S.
    Department of Commerce, 1992 CENSUS OF TRANSPORTATION,
    COMMUNICATIONS AND UTILITIES, ESTABLISHMENT AND FIRM SIZE, Series
    UC92-S-1, Appendix A-9 (1995).

[^235]: *Id*. SIC 7812 (Motion Picture and Video Tape Production); SIC
    7922 (Theatrical Producers and Miscellaneous Theatrical Services
    (producers of live radio and television programs).

[^236]: FCC News Release No. 31327, Jan. 13, 1993.

[^237]: *See Broadcast Station Totals As Of May 31, 1998*, FCC News
    Release, June 19, 1998.

[^238]: We use the 77 percent figure of TV stations operating at less
    than \$10 million for 1992 and apply it to the 1998 total of 1579 TV
    stations to arrive at 1,200 stations categorized as small
    businesses.

[^239]: 13 C.F.R. §121.201 (SIC 4841).

[^240]: 1992 Economic Census Industry and Enterprise Receipts Size
    Report, Table 2D, SIC Code 4841 (Bureau of the Census data under
    contract to the Office of Advocacy of the SBA).

[^241]: 13 C.F.R. 121.201.

[^242]: 1992 Census, *supra,* at Firm Size 1-123. *See Memorandum
    Opinion and Order and Notice of Proposed Rule Making,*
    Implementation of Section 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).

[^243]: 47 C.F.R. §76.901(e). The Commission developed this definition
    based on its determinations that a small cable system operator is
    one with annual revenues of \$100 million or less. *Sixth Report and
    Order and Eleventh Order on Reconsideration*, MM Docket Nos. 92-266
    and 93-215, 10 FCC Rcd 7393 (1995).

[^244]: Paul Kagan Associates, Inc., *Cable TV Investor*, Feb. 29, 1996
    (based on figures for Dec. 30, 1995).

[^245]: 47 C.F.R. § 76.901(c).

[^246]: 47 U.S.C. §543(m)(2).

[^247]: 47 C.F.R. §76.1403(b).

[^248]: Paul Kagan Associates, Inc., *Cable TV Investor*, Feb. 29, 1996
    (based on figures for Dec. 30, 1995).

[^249]: 47 U.S.C. § 21.961(b)(1).

[^250]: In the Matter of Amendment of Parts 21 and 74 of the
    Commission's Rules With Regard to Filing Procedures in the
    Multipoint Distribution Service and in the Instructional Television
    Fixed Service and Implementation of Section 309(j) of the
    Communications Act -- Competitive Bidding MM Docket No. 94-31 and PP
    Docket No. 93-253, *Report and Order*, 10 FCC Rcd 9589 (1995).

[^251]: Annual Assessment of the Status of Competition in Markets for
    the Delivery of Video Programming, Third Annual Report, CS Docket
    No. 96-133, 12 FCC Rcd 4358, 4385 (1996)("*Third Annual Report").*.

[^252]: *Third Annual Report,* 12 FCC Rcd at 4385, ¶ 49..

[^253]: *Id.*

[^254]: *Id.*

[^255]: *Third Annual Report*, 12 FCC Rcd at 4403, ¶ 81.

[^256]: *Id.*

[^257]: *Id.*

[^258]: First Report and Order at ¶ 26.

[^259]: *Id.* at ¶¶ 30-58.

[^260]: *Id.* at ¶ 40.

[^261]: *Id.* at ¶¶ 41-46.

[^262]: *Id.* at 28 ¶¶ 65-72.

[^263]: *Id.*

[^264]: *Id.* at ¶¶ 75-77.

[^265]: *Id.*

[^266]: ACA Comments at 7-8. ACA states that it is especially concerned
    since smaller cable systems often do not have the technical and
    financial ability to provide digital signals in return for analog
    retransmission consent. Comments at 10.

[^267]: *Id.* at 7.

[^268]: *Id.* at 16.

[^269]: First Report and Order, Appendix B, § 76.65(b)(1).

[^270]: Id., Appendix B, § 76.65(c).