Before the
                  FEDERAL COMMUNICATIONS COMMISSION
                       Washington, D.C.  20554
In the Matter of                   )
                              )
Implementation of Section 302 of        )
the Telecommunications Act of 1996 )    CS Docket No. 96-46
                              )
Open Video Systems                 )
COMMENTS OF VIACOM INC.
                                   Lawrence W. Secrest, III
                                   Peter D. Ross
                                   Rosemary C. Harold
                                               of
                                   WILEY, REIN & FIELDING
                                   1776 K Street, N.W.
                                   Washington, D.C.  20006
                                   (202) 429-7000
                                   Its Counsel
April 1, 1996
                           TABLE OF CONTENTS
                                                                   Page
     SUMMARY . . . . . . . . . . . . . . . . . . . . . . . . . . . .iii
I.   VIACOM SUPPORTS DEVELOPMENT OF FCC RULES THAT
     MAKE OPEN VIDEO SYSTEMS A GENUINELY
     ATTRACTIVE ALTERNATIVE FOR LOCAL EXCHANGE
     CARRIERS. . . . . . . . . . . . . . . . . . . . . . . . . . . .  3
II.  OTHER TELECOMMUNICATIONS FACILITY PROVIDERS,
     INCLUDING CABLE SYSTEM OPERATORS, SHOULD ALSO
     BE ALLOWED TO OFFER OVS . . . . . . . . . . . . . . . . . . . .  6
III. OVS OPERATORS SHOULD BE AFFORDED REASONABLE
     FLEXIBILITY TO DEVISE APPROPRIATE METHODS FOR
     PROVIDING UNAFFILIATED PROGRAMMERS AND PROGRAM
     PACKAGERS NONDISCRIMINATORY ACCESS TO AN OPEN
     VIDEO SYSTEM. . . . . . . . . . . . . . . . . . . . . . . . . .  7
     A.   The OVS Operator Should Be Permitted Reasonable
          Flexibility In Devising Procedures For Fairly
          Allocating Capacity To And Among Unaffiliated
          Program Packagers. . . . . . . . . . . . . . . . . . . . .  8
     B.   The Regulatory Constraints On OVS Channel Allocation
          Should Not Preclude The Competitive Viability Of
          An Affiliated Packager . . . . . . . . . . . . . . . . .   10
     C.   OVS Operators Should Be Allowed Limited Discretion In
          Structuring Carriage Rates, Terms, And Conditions That
          Do Not Discriminate In Favor Of The OVS-Affiliated
          Packager . . . . . . . . . . . . . . . . . . . . . . . . . 13
IV.  CERTAIN MINIMAL SAFEGUARDS ARE NEEDED TO ENSURE
     THAT, ONCE FAIR ACCESS TO OPEN VIDEO SYSTEMS
     IS SECURED, OVS OPERATORS DO NOT UNFAIRLY
     DISADVANTAGE UNAFFILIATED PROGRAMMERS AND
     PACKAGERS . . . . . . . . . . . . . . . . . . . . . . . . . . . 14

     A.   Appropriate Channel Sharing Practices Must Recognize
          The Primacy Of Each Programmer's Rights To Control
          The Licensing Of Its Programming . . . . . . . . . . . . . 15
     B.   Non-Discriminatory Navigational Devices and Channel
          Menus Are Integral To Ensuring Subscribers Fair
          Access To OVS Program Offerings Not Offered Within
          The OVS-Affiliated Package . . . . . . . . . . . . . . . . 17
     C.   The Commission Should Maximize The Viability of Open
          Video Systems Consistent With Its Limited Discretion In
          Implementing Carriage Rights For Local Broadcast Stations. 20
CONCLUSION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22                               SUMMARY
     The Telecommunications Act of 1996 (the "1996 Act") has dramatically altered
the options available to local exchange carriers ("LECs") for entering the video
programming marketplace.  Whether the Act's one newly created option -- "Open
Video Systems" ("OVS") -- emerges as a viable vehicle for LEC entry into video
distribution remains very much in the hands of the Commission.  Indeed, if OVS is
ever to be a significant factor in the marketplace, the Commission must give LECs the
flexibility necessary to make the creation and operation of Open Video Systems an
attractive option.
     As a programmer, Viacom is keenly interested in making full use of all possible
forms of distribution methods to deliver its program content to subscribers.
Furthermore, Viacom agrees with the Commission that lawmakers sought to preserve in
OVS the best features of a non-discriminatory video transmission medium designed to
promote the dual goals of "inter-system" and "intra-system" competition while also
eliminating many of the regulatory burdens that hampered "video dialtone" deployment.
Thus, Viacom believes that the potential benefits of OVS -- for content providers and
consumers alike -- should not be discounted.  An Open Video System obviously could
provide significant competition to rival video transmission systems.  But by also
providing unaffiliated program packagers some real measure of open access to the
system (whether a program packager offers only its own services or a combination of
various programmers' services), OVS would add a competitive check on the system
operator's ability to take unfair advantage of its control over the transmission facility.
     Thus, while the OVS regulatory scheme must afford unaffiliated programmers
and program packagers non-discriminatory access to -- and fair treatment on -- Open
Video Systems, Viacom urges the Commission to implement rules that will encourage
the establishment and viability of OVS.  As detailed below, Viacom advocates adoption
of a broad prescriptive approach, coupled with the certainty of elective "safe harbor"
approaches to compliance, in regulating access to Open Video Systems.  Once rival
packagers secure carriage, however, they must be protected by minimal safeguards to
ensure (1) that all packagers enjoy a fair opportunity to compete for and serve
subscribers, and (2) all programmers are able to maintain control over licensing of their
program services to packagers.
     Specifically, Viacom suggests that the following steps be taken:
    The Commission should authorize telecommunications entities other than
     telephone companies -- expressly including cable operators -- to offer service as
     (or transform themselves into) OVS operators, but in all events consistent with
     their existing program licensing obligation.
    The agency should establish general non-discrimination obligations that ensure
     unaffiliated packagers fair access to an Open Video System, while affording
     OVS operators reasonable discretion to determine the most viable -- yet still
     effective -- means to satisfy the broad prescriptions.  More specifically, the
     Commission should:
     --   Allow OVS operators reasonable discretion in meeting the general
          obligation to ensure non-discriminatory allocation of analog channels.
     --   In accord with the pro-competitive intent of the statutory prohibition on
          telco/cable "buy-outs" or joint ventures, preclude the incumbent local
          cable operator from taking analog capacity on an Open Video System
          unless such capacity is unclaimed by either OVS-affiliated or unaffiliated
          program packagers.
     --   Permit an OVS-affiliated packager to control and retain more than the
          statutory one-third channel cap where no excess demand for initial
          capacity arises.
     --   Exclude local broadcast channels and all "shared" channels from being
          counted against the statutory cap on the OVS-affiliated packager's use of
          system capacity.
     --   Allow an OVS operator, to the extent consistent with all relevant
          program licensing agreements, to "co-package" the programming
          selected by its affiliate with program services provided by an unaffiliated
          program packager.
     --   Permit an OVS operator limited discretion in establishing a non-
          discriminatory rate structure to be applied to affiliated and unaffiliated
          program packagers alike.
    Once unaffiliated packagers secure access to an OVS network, the Commission
     should provide minimal safeguards to ensure that unaffiliated entities are treated
     in a non-discriminatory fashion.  Thus, the agency should:
     --   Fashion rules governing channel sharing that respect the rights of a
          programmer to control the licensing of its programming services and
          afford a fair competitive opportunity for rival program packagers.
     --   Require non-discriminatory access to the interfaces -- including set-top
          boxes, other navigational devices, and any programming menus --
          between the subscriber and all programming services offered on an Open
          Video System.
    The Commission should, within its limited discretion in implementing must-
     carry/retransmission consent rights for local broadcasters, require OVS
     operators to employ channel sharing of broadcast signals in a manner that
     maximizes the viability of Open Video Systems.

                               Before the
                    FEDERAL COMMUNICATIONS COMMISSION
                         Washington, D.C.  20554
In the Matter of                   )
                              )
Implementation of Section 302 of        )
the Telecommunications Act of 1996 )    CS Docket No. 96-46
                              )
Open Video Systems                 )
COMMENTS OF VIACOM INC.
                          Viacom Inc. ("Viacom") hereby submits its comments on the Commission's Notice of
Proposed Rulemaking ("Notice") in the above-captioned proceeding, which seeks to craft an
"Open Video Systems" ("OVS") regulatory framework as called for by Section 302 of the
Telecommunications Act of 1996 (the "1996 Act").  From its fundamental perspective as a
programmer, Viacom believes that the combination of inter-system and intra-system
competition contemplated by the OVS framework would afford consumers and program
providers alike significant benefits in the multichannel video marketplace.  Given the other
alternatives now available to local exchange carriers ("LECs") for entering the video
marketplace, however, OVS could be rendered a dead letter by unnecessarily rigid
implementing rules.  Viacom therefore urges the Commission to structure its regulations in a
manner that allows LECs -- and any other telecommunications entity interested in offering
OVS -- reasonable flexibility consistent with the non-discriminatory foundation established by
Congress.
I.   VIACOM SUPPORTS DEVELOPMENT OF FCC RULES THAT
     MAKE OPEN VIDEO SYSTEMS A GENUINELY
     ATTRACTIVE ALTERNATIVE FOR LOCAL EXCHANGE
     CARRIERS
     Where once telephone companies faced strict limits on their direct participation in the
distribution of video programming, the 1996 Act now affords LECs a host of opportunities.
All but one of these options present LEC business strategists with established regulatory
frameworks for providing multichannel video services.  Only the concept of Open Video
Systems represents uncharted territory, and whether this new OVS terrain will ultimately
entice telco explorations remains very much in the hands of the Commission.
     The tensions which the FCC must reconcile to implement a viable and effective OVS
framework are undeniable.  Section 653 of the Act clearly incorporates certain terminology
and concepts rooted in Title II common carrier regulation, while at the same time the framers
of these provisions have rejected the FCC's "video dialtone" ("VDT") rules and, indeed, any
strict common carrier foundation for OVS.  Yet Viacom agrees with the Commission that
lawmakers also clearly sought to preserve in OVS the best features of a non-discriminatory
video transmission medium intended to "promote the dual goals of both inter-system
competition . . . and intra-system competition" -- while eliminating many regulatory burdens
that hampered deployment of VDT systems.
     As a programmer, Viacom believes that the public interest benefits in such a "dual
competition" framework should not be lightly discounted.  As the record in many
Commission proceedings documents, Viacom has consistently urged the development and
growth of all possible technologies and methods for the delivery of video programming to
consumers.  Competition among transmission facilities would create the greatest number of
viable links between consumers and programmers -- thus expanding the program choices
available to consumers while also maximizing programmers' service to subscribers (and their
ability to achieve fair licensing terms from program packagers).
     The 1996 Act reflects a clear recognition of those benefits on the part of Congress.
Particularly in its restrictions on telco buy-outs of local cable systems, the statute embodies a
Congressional policy favoring a vigorously competitive "two-wire" world.  Whether or not
the economics of the dynamic and unpredictable communications marketplace will ultimately
support full, widespread two-wire competition, the Act's complementary creation of an OVS
model could foster and support wire-based video competition in any event.  Thus, if
established as a viable entry option, OVS clearly could offer the maximum opportunity for
some form of long-term wireline competition among rival video service providers.
Moreover, by providing unaffiliated program packagers some real measure of open access to
consumers, the OVS framework would limit the ability of an OVS operator to take unfair
advantage of its control over the transmission medium -- and thus deliver on the 1996 Act's
promise of providing consumers the broadest possible choice among communications service
offerings.
     Because "an entirely new framework" must be developed for OVS, however, its
appeal to LECs -- and other potential OVS operators -- will be determined in large measure
by the manner in which the Commission implements this broad statutory model.  Bearing in
mind the established and reasonably attractive alternatives for entry into video distribution
now available to LECs, the Commission must undertake a delicate balancing act in devising
its OVS rules.  The regulatory scheme must afford independent program packagers
nondiscriminatory access to, and fair treatment on, Open Video Systems.  Yet if OVS is ever
to appear in the marketplace, the Commission also must give LECs the flexibility necessary
to make the creation and operation of an Open Video System a viable -- and, indeed, an
attractive -- option.
     In the discussion below, Viacom urges the Commission to adopt rules that will
encourage the establishment and viability of OVS.  Section II of these comments endorses
affording the OVS option to any entity technically capable of transmitting multichannel video
services.  Section III advocates adoption of a broad and flexible prescriptive approach to the
regulations governing access to an Open Video System.  Section IV outlines the minimal
safeguards necessary to ensure that, once able to offer program services on an Open Video
System, rival program packagers will enjoy a fair opportunity to serve and compete for
viewers.
II.  OTHER TELECOMMUNICATIONS FACILITY PROVIDERS,
     INCLUDING CABLE SYSTEM OPERATORS, SHOULD ALSO
     BE ALLOWED TO OFFER OVS
     Before turning to the specifics of OVS regulation, Viacom wishes to emphasize that
the potential competitive benefits of Open Video Systems do not hinge on the identity of the
transmission service provider.  The Notice asks whether the Commission can and should
permit non-LECs -- including traditional cable operators and any other entity that can provide
facilities-based transmission service -- to become OVS operators.  Viacom strongly believes
that the OVS option should indeed be available to all facilities-based competitors, including
cable operators.
     Viacom thus endorses the Commission's tentative conclusion that there would be
"significant benefits to permitting cable operators and others to become Open Video System
operators."  Irrespective of who the OVS operator might be, Open Video Systems could
offer the benefits of both enhanced programmer access to consumers and enhanced consumer
access to diverse programming.  The legislation explicitly authorizes the Commission to offer
the OVS option to other entities, and doing so would not only fulfill Section 653's goals of
"enhancing competition and maximizing consumer choice" but in fact would comport with
the pro-competition and regulatory parity tenets of the 1996 Act as a whole.
III. OVS OPERATORS SHOULD BE AFFORDED REASONABLE
     FLEXIBILITY TO DEVISE APPROPRIATE METHODS FOR
     PROVIDING UNAFFILIATED PROGRAMMERS AND PACKAGERS
     NONDISCRIMINATORY ACCESS TO AN OPEN VIDEO SYSTEM
     As noted above, the emergence and viability of OVS in the multichannel marketplace
will hinge directly on whether LECs and other potential OVS operators are afforded
sufficient flexibility to make Open Video Systems an attractive business option.  To insist too
strictly on securing the most broadly conceived notion of "open" access imaginable from
OVS would be ultimately self-defeating.  It should therefore be a Commission priority to
craft OVS rules that allow for the operation of a competitively viable package by the OVS-
affiliated program packager, while maintaining meaningful access to subscribers for
unaffiliated packagers.
     To that end, discussed below are certain key elements of OVS that Viacom believes
should be subject to a general non-discrimination obligation, with reasonable discretion left in
the hands of the OVS operator to determine the most viable -- yet still effective -- means to
satisfy the broad fairness prescriptions.  The generally flexible approach advocated here will,
as the Commission recognizes, require that certain enforcement mechanisms be put in place.
To provide OVS operators not only with reasonable flexibility but also the regulatory
certainty necessary to proceed with confidence, Viacom suggests that the Commission couple
its broad prescriptive rules with some "safe harbor" examples of practices that would be
deemed presumptively fair and reasonable.  Providing illustrations of alternative approaches
(sufficient but not necessary) to ensure compliance would be useful in resolving potential
disputes between OVS operators and unaffiliated program packagers seeking carriage -- and
thus would likely ease enforcement burdens placed on the Commission's staff.
     A.   The OVS Operator Should Be Permitted Reasonable
          Flexibility In Devising Procedures For Fairly
          Allocating Capacity To And Among Unaffiliated
          Program Packagers
     The Notice seeks guidance on how the Commission can fashion minimally intrusive
rules that still provide open access to an Open Video System for unaffiliated program
packagers.  As suggested above, Viacom would generally support the Commission's proposal
to "adopt a regulation that simply prohibits an [O]pen [V]ideo [S]ystem operator from
discriminating against unaffiliated program packagers in its allocation of capacity."
     The OVS operator would thus enjoy reasonable, but not unbounded, discretion in
devising a fair enrollment and allocation plan for its system.  The Commission could
supplement this broad prescription with some minimal guidelines, such as requiring that OVS
operators fairly disclose open enrollment periods and the allocation procedures the operator
will use if demand for carriage exceeds the system's capacity.  Beyond such general
prohibitions, however, the Commission should afford the LEC some reasonable latitude to
design workable non-discriminatory allocation procedures and provide additional guidance
through adoption of a non-exhaustive set of "safe harbor" practices deemed presumptively
fair and reasonable.  For example, the OVS operator should not be required to allocate more
channel capacity to any one unaffiliated program packager than the operator would be
allowed to provide to its own affiliated program packager.
     The non-discrimination requirement would, of course, have to apply separately to the
allocation of analog capacity.  This approach will remain a practical necessity at least until
digital transmission and digital set-top boxes are deployed to such an extent that
programming carried on digital channels is just as accessible to subscribers as programming
carried on analog channels.  For example, in a situation where demand for capacity exceeds
supply, the statutory cap should be deemed to limit the OVS operator's affiliated packager to
one-third of the network's analog capacity, measured separately from digital capacity.
     This non-discrimination principle would not logically extend to an incumbent local
cable operator who might seek channel capacity on an Open Video System.  While a local
cable operator should (as urged above) be free to operate its own OVS facility, the 1996
Act's fundamental benefit of inter-system competition would be compromised if the
Commission allowed a local cable operator to take capacity on a rival Open Video System.
Indeed, the competitive policy underlying the 1996 Act's new statutory prohibition on
telco/cable buy-outs and joint ventures would clearly warrant Commission restrictions on an
incumbent cable operator in taking capacity on a competing LEC's Open Video System.
At a minimum, such treatment would be justified in cases where analog capacity is
oversubscribed and digital capacity cannot provide comparable access to subscribers.
Likewise, in the case where a cable operator opts to proceed under the OVS rules, the LEC
should be precluded from obtaining capacity on that OVS facility.
     B.   The Regulatory Constraints On OVS Channel Allocation
          Should Not Preclude The Competitive Viability Of An
          Affiliated Program Packager
     The flip side of a light regulatory hand in ensuring fair allocation of capacity for
unaffiliated program packagers is an equally light hand in implementing the statutory
constraints on an OVS operator's allocation of capacity to its affiliated packager.  OVS
networks simply will not emerge if LECs cannot compete with local cable operators nearly as
effectively through their OVS-affiliated packagers as they could under Title VI or other
available modes of entry.  And the public would be ill-served by excessive constraints on the
ability of OVS-affiliated packager to offer truly effective competition in the video
marketplace at large.  This understanding should lead the Commission to several key
conclusions.
     First, Section 653 limits an OVS operator's freedom to program channels only if
"demand exceeds the channel capacity of the [operator's] Open Video System."
Consequently, if the OVS operator confronts no excess demand during a reasonable period of
open enrollment, the OVS-affiliated packager should be allowed to use capacity beyond the
statutory limitation.  This principle would apply equally to the initial enrollment period and
any subsequent offering of capacity.
     Moreover, the certainty required for viable business planning would be undercut if
subsequent expansion of, or demand for, capacity would trigger an obligation that any
program packager (including the OVS affiliate) relinquish channels it has previously secured.
Neither consumers nor programmers would be served by a Commission rule obligating or
(explicity or implicitly) permitting the OVS operator to abrogate any program affiliation
agreements on this basis.  Instead, if the OVS-affiliated packager's use of capacity after
initial enrollment exceeds the one-third cap, the operator should be required to make new
capacity available to unaffiliated program packagers on a fair and reasonable basis -- perhaps
by limiting the OVS-affiliated packager to no more than one-third of any new capacity if
oversubscription recurs.
     Viacom also agrees with the Commission that any PEG and broadcast must-carry
obligations imposed on an OVS operator should not be counted against the one-third cap on
operator "selection" of capacity.  It is Congress, not the OVS operator, which has
"selected" these program services for mandatory carriage.  For similar reasons, as discussed
below, Viacom urges the Commission not to include any shared channels within the cap on
channels "selected" by the OVS-affiliated packager.
     Furthermore, Viacom agrees with the Commission's tentative conclusion that Section
653 does not -- and the Commission should not -- bar an OVS operator or its affiliated
packager from marketing to subscribers additional channels that have been "selected" by
unaffiliated program packagers.  To the contrary, the 1996 Act specifically provides that
"nothing" in the statutory provision "shall be construed to limit the number of channels that
the carrier and its affiliates may offer to provide directly to subscribers."  It is therefore
appropriate to allow various program packagers, including the OVS operator's affiliate, to
make "co-packaging" agreements that would present consumers with the choice of
subscribing to various packages jointly or separately -- so long as the program packagers and
especially the programmers involved freely choose to enter into such agreements.  As the
Commission has recognized, such an approach could enhance the ability of both the OVS
operator and unaffiliated program packagers to compete effectively in the video
marketplace.
     C.   OVS Operators Should Be Allowed Limited Discretion In
          Structuring Carriage Rates, Terms, And Conditions That
          Do Not Discriminate In Favor Of The OVS-Affiliated Packager
     Viacom agrees with the Commission's tentative conclusion that the 1996 Act requires
some less stringent form of rate regulation than the rules that govern common carriage.
Nonetheless, as the Commission notes, the "just and reasonable" and non-discrimination
mandates of Section 653 clearly embody the recognition that a discriminatory rate structure
would undermine the prospects for any fair intra-system competition.  Viacom thus agrees
with the minimum approach, suggested in the Notice, that would require an OVS operator to
apply to unaffiliated program packagers the same rate structure that is offered (or could be
fairly imputed) to its OVS-affiliated packager.
     With respect to the Commission's suggestion that an OVS operator "be required to
make its contracts with all video programming providers publicly available," Viacom
respectfully suggests that any disclosure obligation be tailored to the goal of providing
program packagers with sufficient information to verify that they are not "being harmed by
rates, terms or conditions that do not comply with the 1996 Act."  It would, therefore, be
appropriate to keep a check on rates by requiring that OVS operators disclose to a program
packager the rate structure and/or specific rates that govern their provision of carriage
service to other packagers.  The Act makes clear that the non-discrimination obligation
applies to the rates the OVS operator charges the program packager for carriage.  The
Commission's disclosure rules need not, and should not, extend beyond the operator's
carriage rates to distinct and potentially confidential and proprietary matters such as licensing
agreements (including fee provisions) between any such packager and individual
programmers.
IV.  CERTAIN MINIMAL SAFEGUARDS ARE NEEDED TO ENSURE
     THAT, ONCE FAIR ACCESS TO OPEN VIDEO SYSTEMS
     IS SECURED, OVS OPERATORS DO NOT UNFAIRLY
     DISADVANTAGE UNAFFILIATED PROGRAMMERS AND PACKAGERS
     While the potential for OVS operators to create a viable inter-system competitor
requires freedom from unnecessary regulatory constraints, the unique intra-system
competitive benefits of OVS would be lost without the limited safeguards set forth below to
protect unaffiliated packagers and the program services they offer.
     A.   Appropriate Channel Sharing Practices Must Recognize
          The Primacy Of Each Programmer's Rights To Control
          The Licensing Of Its Programming
     The Commission appropriately seeks to craft guidelines for "channel sharing" that
allow for efficient use of Open Video System capacity without infringing on the rights of
programmers and fair access of rival program packagers.  Viacom was unopposed to the
legitimate use of channel sharing for the purpose of making efficient use of limited analog
capacity in the VDT context, and its position applies equally in the new environment of
OVS.  In particular, Viacom welcomes the Commission's recognition that nothing in this
proceeding should be deemed to "alter or dilute" a programmer's rights to exercise control
over its program services, including the freedom "to license or not license their programming
for shared use by multiple video programming providers."  This recognition should lead to
channel sharing rules that expressly acknowledge that, as the Commission states it, the
predicate for any channel sharing is that each program packager who "wants to provide a
program service to subscribers that will be carried on a shared channel must first obtain
permission from the program service to do so."
      The Commission also should expressly bar OVS operators or their affiliated
packagers from attempting to deny a programmer any rights it might have to grant
exclusivity or sublicensing rights to any program packager, including the OVS affiliate.  As a
related matter, OVS operators should be precluded from extracting such rights or imposing
cost-sharing terms in a manner that unnecessarily undermines the potential for intra-system
competition from rivals to the OVS-affiliated packager.  Furthermore, as the Commission
suggests, any authorized channel sharing should in all respects be transparent to subscribers.
     Finally, Viacom concurs with the Commission that program services carried on
shared channels should not be counted against the one-third statutory cap on the OVS-
affiliated packager's use of capacity.  The affiliate should not be deemed to have "selected"
any program services transmitted on shared channels because that programming would have
been carried on the Open Video System regardless of whether the OVS-affiliated packager
had initially selected any of those program services for its own package as well.  Interpreting
the term "select" otherwise would deny the OVS-affiliated packager a reasonable competitive
opportunity to offer a differentiated program package over its allotted channels.
     B.   Non-Discriminatory Navigational Devices and Channel
          Menus Are Integral To Ensuring Subscribers Fair
          Access to OVS Program Offerings Not Offered Within
          the OVS-Affiliated Package
     The Congressional framers of the OVS model expressly mandated specific safeguards
to ensure that the access afforded to unaffiliated program packagers did not end with channel
capacity on the Open Video System.  They sought to ensure genuine and fair access to the
subscriber as well, recognizing that meaningful intra-system competition would not otherwise
emerge.  The Commission should thus impose a broad principle that an OVS operator should
not be permitted either to impede an unaffiliated program packager's access to subscribers or
otherwise take unfair advantage of its control as system administrator.
     Beyond that, however, the Act specifically prohibits an OVS operator from omitting
an unaffiliated program packager carried on the system from any navigational device, guide,
or menu.  Congress was thus explicit in recognizing that meaningful access requires
providing all program packagers on an Open Video System fair access to the critical
gateways to its subscribers.  This specific safeguard -- coupled with the general statutory
framework for OVS and the anticipated critical role of channel sharing in these systems --
demonstrates that Congress contemplated the use of a single set-top box (or functional
equivalent) as a predicate to operation of an Open Video System.  In particular, this
safeguard reflects a Congressional desire to limit the potential frustration of subscribers who
seek ready access to a variety of multichannel video programming sources.  By
incorporating the 1996 Act's direct mandate for the inclusion and ready accessibility of all
program packagers in any navigational device used on an Open Video System, the
Commission can and should act to ensure that its OVS safeguards provide a non-
discriminatory interface between the subscriber and all packagers offering program services
on the Open Video System.
     Further, the Act's general OVS non-discrimination provisions, together with its more
specific statutory requirement regarding navigational devices, guides, and menus, effectively
mandate that program offerings of a non-affiliated program packager must be at least as
accessible to subscribers as those program services carried by the OVS operator's affiliated
packager.  The Commission should thus mandate that non-discriminatory access requires
that, from a customer's perspective, a connection through an Open Video System to an
unaffiliated program packager is comparable to -- i.e., as transparent as -- connecting with an
affiliated packager in time, cost, and ease.  User-friendly "shortcuts" in accessing desired
programming should be freely deployed, but only on a non-discriminatory basis.
     OVS operators likewise should not be allowed to impede ready access to unaffiliated
packagers through consumer equipment subscribers have acquired independently.  Newly
emerging devices, such as the Starsight technology (in which Viacom holds an interest), are
coming to offer consumers enhanced navigational control of available video services through
hardware embedded in such consumer equipment as television receivers, video cassette
records, or advanced set-top boxes.  Whether acquired independently by the consumer or as
part of an unaffiliated OVS packager's service offering, such navigational devices should not
be rendered useless by the actions of OVS operators.  The Commission should, in particular,
prevent OVS operators from taking action not otherwise technically necessary (such as
stripping out key information stored in the vertical blanking interval of a programmer's
signal) that would disable independently-provided navigational devices offering subscribers
access to an unaffiliated packager's program offerings.
     Finally, the Commission's non-discrimination safeguards should reasonably extend to
unaffiliated program packagers fair treatment in channel positioning and marketing.  While
the OVS framework should maximize the viability of Open Video Systems as an entry option
for LECs and other multichannel video providers, intra-system rivals should not be placed at
a severe competitive disadvantage against the OVS-affiliated packager.
     C.   The Commission Should Maximize The Viability of OVS
          Systems Consistent With Its Limited Discretion In
          Implementing Carriage Rights For Local Broadcast Stations
     The Notice calls for comment on the "overall applicability" to OVS of the statutory
must-carry and retransmission consent rules, which the 1996 Act requires the Commission
to replicate "to the extent possible" within the OVS regulatory framework.  The FCC thus
has little discretion to alter the basic scheme providing "local" commercial broadcasters the
choice between exercising mandatory carriage rights or seeking retransmission consent from
the OVS operator, yet the Commission should resolve certain particulars of implementation
consistent with its interest in promoting the viability of OVS systems.
     Given the "signal availability" provision within the mandatory carriage statutory
scheme, the OVS operator should be the entity ultimately responsible for ensuring that
local broadcast signals carried pursuant to must-carry rules are available to every subscriber
to an Open Video System.  While it may be possible to allow an OVS operator to manage
this responsibility in various ways, Viacom suggests that an OVS operator be required to
treat all must-carry broadcast signals as "shared channels" available for co-packaging with
every program package offered on the OVS facility.  Such shared broadcast channels would
not be counted against any limits on any program packager's channel capacity on an Open
Video System.
     The geographic coverage area of an Open Video System obviously will have a
significant impact on how many broadcast signals will be eligible for carriage.  No OVS
operator would be required to devote more than the statutory maximum one-third of its
channel capacity to local broadcast signals.  Yet in those cases where an OVS operator has
chosen to deploy a system that "span[s] multiple television markets," the Commission
should allow the operator to decide whether it will provide all eligible broadcast signals to
every OVS subscriber or instead configure its facility so that only subscribers located within
a particular TV market receive the broadcast signals eligible for carriage in that market.
                                CONCLUSION
     Viacom respectfully urges the Commission to adopt the foregoing proposals to govern
provision of OVS service.  The public interest benefits of a regulatory scheme that can
provide both inter-system and intra-system competition should not be lost because of the
challenges presented by implementation.  The Commission's rules must strike a balance so
that unaffiliated program packagers can enjoy fair access to, and non-discriminatorytreatment on, OVS facilities, while LECs enjoy sufficient flexibility to create and design
Open Video Systems that can vigorously compete in the marketplace.
                              Respectfully submitted,
                              VIACOM INC.
                              By:____________________________
                              Lawrence W. Secrest, III
                                 Peter D. Ross
                                 Rosemary C. Harold
                                 WILEY, REIN & FIELDING
                                 1776 K Street, N.W.
                                 Washington, D.C.  20006
                                 (202) 429-7000
                                 Its Attorneys
                                 April 1, 1996