FEDERAL COMMUNICATIONS COMMISSION
                     Washington, D.C. 20554
In the Matter of                   )
                                   )
Telephone Company-Cable Television )    CC Docket No. 87-266
Cross-Ownership Rules, Sections    )
63.54 - 63.58                      )
                      REPLY COMMENTS OF THE
   NATIONAL TELECOMMUNICATIONS AND INFORMATION ADMINISTRATION
        ON THE FOURTH FURTHER NOTICE OF PROPOSED RULEMAKING
Larry Irving                            Barbara S. Wellbery
Assistant Secretary for                 Chief Counsel
  Communications and Information
Michele Farquhar                        Lisa Sockett
Chief of Staff and Director,            Attorney-Advisor
Office of Policy Coordination           Office of Chief Counsel
  and Management
Joseph L. Gattuso
Acting Associate Administrator
Radhika Karmarkar
Cynthia Nila
Tim Sloan
Office of Policy Analysis
  and Development
National Telecommunications
and Information Administration
U.S. Department of Commerce
Room 4713
14th and Constitution Ave., N.W.
Washington, D.C.  20230
(202) 482-1816
                                        July 11, 1995                         TABLE OF CONTENTS
                                                            Page
SUMMARY. . . . . . . . . . . . . . . . . . . . . . . . . . . .  i
I.   INTRODUCTION. . . . . . . . . . . . . . . . . . . . . . .  1
II.  LEC PROVISION OF IN-REGION VIDEO PROGRAMMING MUST BE
     ACCOMPANIED BY COMPETITIVE SAFEGUARDS.. . . . . . . . . .  4
          A.   The Commission Should Require LECs To Provide
               Distribution Facilities to All Video
               Programmers on a Common Carrier Basis.
                                       . . . . . . . . . . . .  8
          B.   The Commission Should Not Place a Maximum
               Limit on the Proportion of a LEC-Operated
               Video Distribution Facility That May Be
               Occupied by the LEC's Own Video Programming.
                                                       . . . .  9
          C.   The FCC Should Require LECs to Provide In-
               Region Video Programming Through a Separate
               Affiliate.. . . . . . . . . . . . . . . . . . . 13
III. TELEPHONE COMPANY PROVISION OF IN-REGION VIDEO
     PROGRAMMING SHOULD NOT BE REGULATED SOLELY UNDER TITLE
     VI OF THE COMMUNICATIONS ACT. . . . . . . . . . . . . . . 14
          A.   A LEC-Operated Video Platform Is Not A "Cable
               System" Subject to Title VI Regulation. . . . . 16
          B.   If the LEC Common Carrier Is Deemed a Cable
               System, the Commission Must Apply Title II
               and Title VI In a Way That Minimizes
               Duplication and Promotes Competition. . . . . . 21
                    1.   Imposing Title VI Only on the LEC
                         Affiliate Would Be Problematic. . . . 21
                    2.   The Commission Can Impose the
                         Requirements of Title VI on the LEC
                         Platform and the LEC Affiliate in a Way
                         that Minimizes Regulation and Promotes
                         Competition.. . . . . . . . . . . . . 25
IV.  CONCLUSION. . . . . . . . . . . . . . . . . . . . . . . . 32
ENDNOTES . . . . . . . . . . . . . . . . . . . . . . . . . .   34
                              SUMMARY
     While LEC provision of video programming promises important
consumer benefits, it also increases the potential for
significant anticompetitive conduct by the LECs.  In particular,
there are concerns about cross-subsidization and discrimination
against competing video providers.  Accordingly, the Commission
should condition LEC entry into the video services market on the
LECs' compliance with several fundamental safeguards.  First,
LECs should be required to offer video programming via a common
carrier video platform, which must be made available to
unaffiliated programmers on reasonable, nondiscriminatory terms.
Such a requirement will provide the best foundation to achieve
the goals of promoting competition, fostering programming
diversity, and stimulating efficient, advanced infrastructure
development.
     Second, the Commission should prevent a LEC from occupying
too much of the video platform's capacity; however, the
Commission need not put a maximum limit on the number of channels
or the percentage of platform capacity that the LEC may occupy.
Instead, NTIA recommends a scheme that would allow the LEC to
occupy unlimited capacity on its video platform, so long as it
accommodates all bona fide requests for service from unaffiliated
programmers.  Third, the Commission should require LECs to
provide video programming only through a separate affiliate.
     In addition to the above safeguards, the Commission must
determine what regulations should apply to the LECs' provision of
video programming.  In NTIA's view, the Commission should rule
that a LEC's video platform is not a "cable system" for purposes
of Title VI of the Communications Act.  Consequently, the LEC
video affiliate and all other programmer-customers that use the
LEC's platform would not be subject to Title VI regulation.
     If, however, the Commission determines that Title VI does
apply, it should carefully apply the requirements of Titles II
and VI to avoid duplicative, inefficient regulation and to
promote full and fair competition among rival video programmers.
Specifically, the Commission should impose particular provisions
of Title VI on either the platform or the affiliate, depending on
which result better satisfies the language and the underlying
purpose of each provision.  NTIA explains in these comments how
this approach would work with respect to the three principal
requirements of Title VI -- programming carriage obligations,
franchising, and rate regulation. Before the
FEDERAL COMMUNICATIONS COMMISSION
Washington, DC  20554
In the Matter of              )
                              )
TELEPHONE COMPANY-            )
CABLE TELEVISION              )    CC Docket No. 87-266
                              )
Cross-Ownership Rules,        )
Sections 63.54-63.58          )
                      REPLY COMMENTS OF THE
   NATIONAL TELECOMMUNICATIONS AND INFORMATION ADMINISTRATION
     The National Telecommunications and Information
Administration (NTIA), which is part of the Department of
Commerce, is the Executive Branch agency responsible for the
development of domestic and international telecommunications and
information policy on behalf of the President.  NTIA respectfully
submits these reply comments in response to the Commission's
Fourth Further Notice of Proposed Rulemaking (Fourth Notice) in
the above-captioned proceeding.[1]
I.   INTRODUCTION
     For nearly twenty-five years, local exchange carriers (LECs)
were barred by Commission regulation or Federal law from offering
video programming in their telephone service areas.[2]  Beginning
in August of 1993, a series of Federal court decisions have
overturned that "telco-cable crossownership restriction" as
violative of the First Amendment.[3]  As a result, many LECs may
now provide video programming directly to subscribers in the
telephone service areas in which they may be monopoly providers.
In the Fourth Notice, the Commission seeks comments on whether
and to what extent its video dialtone ("VDT") rules should be
changed to accommodate this new legal environment.[4]
     For a number of years, NTIA has advocated allowing LECs to
offer in-region video programming.[5]  Permitting LECs to
participate fully in the video marketplace would substantially
expand competition in that market.  Increased competition, in
turn, should produce lower prices for consumers as well as a
broader range of programming choices.  At the same time,
authorizing LECs to offer in-region video programming would also
increase their incentives to deploy advanced transmission
facilities, with concomitant benefits to American society.
     Nevertheless, although LEC provision of video programming
promises important consumer benefits, it also increases the
potential for significant anticompetitive conduct by the LECs.
In particular, there are concerns about cross-subsidization and
discrimination against competing video providers.  Accordingly,
the Commission should condition LEC entry into the video services
market on their compliance with several fundamental safeguards.
First, LECs should be required to offer video programming via a
common carrier video platform, which must be made available to
unaffiliated programmers on reasonable, nondiscriminatory terms.
The Commission has correctly concluded that such a requirement
"will provide the best foundation to achieve [the] goals of
promoting the development of an efficient, nationwide, publicly
accessible, advanced telecommunications infrastructure,
facilitating robust competition, and fostering the First
Amendment goal of ensuring a diversity of information
sources."[6]
     Second, the Commission should prevent a LEC from occupying
too much of the video platform's capacity.  As discussed below,
the Commission need not put a maximum limit on the number of
channels or the percentage of platform capacity that the LEC may
occupy.  Instead, NTIA recommends a scheme that would allow the
LEC to occupy unlimited capacity on its video platform, so long
as it accommodates all bona fide requests for service from
unaffiliated programmers.  Third, the Commission should require
LECs to provide video programming only through a separate
affiliate.
     In addition to the above safeguards, the Commission has to
determine what regulations should apply to the LECs' provision of
video programming.  As demonstrated below, the Commission could
reasonably conclude that a LEC's video platform is not a "cable
system" for purposes of Title VI of the Communications Act.
Consequently, regulation of a LEC's participation in the video
market can be limited to regulation of the video platform
pursuant to Title II.
     If, however, the Commission determines that Title VI does
apply, it should carefully apply the requirements of Titles II
and VI to avoid duplicative, inefficient regulation and to
promote full and fair competition among rival video programmers.
NTIA believes that the requirements of Title VI can be applied in
a way that is consistent with the letter and intent of those
provisions, yet is also consistent with Title II regulation of
the video platform.  We explain below how this approach would
work with respect to the three principal requirements of Title VI
-- programming carriage obligations, franchising, and rate
regulation.
II.  LEC PROVISION OF IN-REGION VIDEO PROGRAMMING MUST BE
     ACCOMPANIED BY COMPETITIVE SAFEGUARDS.
     The anticompetitive concerns raised by LEC provision of
video programming in their telephone service areas are neither
novel nor theoretical.  The Commission adopted the crossownership
rule in 1970, in part in response to evidence that some LECs were
using their control over local exchange facilities to impede the
growth of independent cable systems.[7]
     The potential anticompetitive conduct is of two types.
First, a LEC could impede competition from competing video
distribution systems by denying them access to essential poles
and conduits or by providing such access at unreasonable rates.
Second, the LEC could cross-subsidize its video programming
offerings by shifting costs from its video activities to its
regulated telephone service operations.  Such cost shifting would
harm both competing video providers and captive telephone
ratepayers.[8]
     Regulatory changes in recent years have not eliminated the
potential for anticompetitive conduct.  Although the 1978 Pole
Attachment Act mandated government regulation of the pole
attachment rates charged by LECs and other utilities,[9] the
level of regulation that currently exists offers incomplete
protection against excessive rates or unreasonable conduct.[10]
Not surprisingly, there have been persistent complaints over the
years about LEC practices and policies with respect to pole
attachments.[11]  Indeed, to reduce a backlog of pending pole
attachment complaints, the Commission recently designated those
complaints for hearing before the agency's administrative law
judges.[12]  These problems will likely increase now that LECs
have authority to offer video programming.[13]
     Similarly, although the Commission's decision to apply price
cap rather than rate of return regulation to many LECs mitigates
their ability to engage in cross-subsidization, it too has
limitations.  Most importantly, because the Commission's price
cap scheme still contains significant rate of return elements, it
preserves -- albeit to a lesser degree -- LECs' incentives to
cross-subsidize their video service offerings from their monopoly
telephone operations.  Moreover, many LECs are not subject to
price cap regulation.[14]
     Thus, even today, unconditional LEC entry into the video
services market presents an unacceptable risk of anticompetitive
conduct.  It also raises broader policy concerns.  Problems arise
when the owner of a distribution facility can determine both the
programming that will be delivered via that facility and the
price that consumers will pay for that programming.[15]  As the
nation's experience with the cable television industry suggests,
combining distribution and "gatekeeper" functions can be a recipe
for excessive rates, as well as programming choices that reflect
the financial interests of providers, rather than the preferences
of subscribers.[16]
     It could be argued that LEC provision of in-region video
programming will not raise these policy concerns because each LEC
will be competing against an incumbent cable operator and other
video distribution media, such as direct broadcast satellite
(DBS).[17]  It is far too early to tell, however, whether the
anticipated rivalry between LECs and cable systems will produce
effective competition or be sustainable in the long run.[18]
Similarly, given uncertainties about the competitiveness of DBS
vis-a-vis conventional cable service,[19] it is equally premature
to conclude anything about the effect of DBS on a LEC's video
programming activities.  In short, merely assuming the existence
of a competitive video services marketplace is not a sound basis
for regulatory policymaking.
     The Commission must carefully consider these competitive and
policy concerns in deciding how to regulate LEC entry into video
programming.  The court decisions vitiating the crossownership
restriction make clear that Congress and the Commission may not
address these concerns by absolutely barring LECs from the video
marketplace.  Those decisions make equally clear, however, that
the First Amendment does not preclude the Commission from
imposing reasonable conditions on LEC entry to promote
competition and information diversity.[20]  In fact, the ruling
courts have identified specific regulatory safeguards that are
less restrictive than the crossownership ban.[21]  It is
therefore likely that these safeguards would pass constitutional
muster.
     Thus, the Commission has a sound policy rationale and legal
basis for conditioning the LECs' entry into the video services
market on their compliance with certain safeguards.  NTIA
therefore recommends that the Commission, at a minimum, adopt the
basic safeguards discussed below, which should deter potential
anticompetitive conduct by the LECs, yet permit them to compete
vigorously in the video services marketplace.[22]
     A.   The Commission Should Require LECs To Provide
          Distribution Facilities to All Video Programmers on a
          Common Carrier Basis.
     In NTIA's view, the essential safeguard in this area is
video common carriage -- the requirement that a LEC provide
distribution facilities to video programmers on a common carrier
basis.  In its VDT orders, the Commission correctly concluded
that such a common carrier obligation would promote competition,
foster programming diversity, and stimulate efficient, advanced
infrastructure development.[23]  Further, the Commission found
specifically that, by ensuring access to all service providers on
nondiscriminatory terms, video common carriage will "protect
against potential anticompetitive conduct by the conduit
provider."[24]
     More broadly, by separating the less competitive part of the
video programming business -- construction and operation of the
underlying transmission facilities -- from the more competitive
part -- selection and marketing of programming to the home --
video common carriage "would offer an alternate route to the
American household for program producers and program packagers
who now must largely depend upon television broadcast stations
and cable television systems to reach their markets."[25]  Video
common carriage would allow programmers to market their services
directly to consumers, thereby ensuring that the programming
available to the home would reflect a wider range of viewer
tastes, rather than the choices of an intermediate gatekeeper.
     The end result should be expanded competition in the
provision of video to the home and an increase in the range of
programming and information available to television viewers.
Under a common carrier model, the effects of the LECs' "private
economic power on the means of distribution would cease to be a
danger to the free flow of information."[26]  One consequence
would be a lesser need for government economic and content
regulation to prevent potential abuses of that power --
regulation that itself may disturb the marketplace of ideas.  In
short, requiring LECs to provide distribution facilities on a
common carrier basis can foster development of "a communications
medium open to all, free of both excessive concentrations of
private power and undue government control."[27]
     Although the Commission initially adopted video common
carriage as a way to increase LEC participation in the video
marketplace consistent with the crossownership restriction, the
protections and benefits that common carriage provides are even
more necessary now that LECs have won the right to offer in-
region video programming.[28]  A common carrier obligation can
effectively prevent a LEC from acting on its increased incentives
to impede competition from rival video programmers and
distributors.[29]
     B.   The Commission Should Not Place a Maximum Limit on the
          Proportion of a LEC-Operated Video Distribution
          Facility That May Be Occupied by the LEC's Own Video
          Programming.
     A LEC could effectively frustrate a common carrier
requirement by leasing a substantial proportion of the capacity
on its video platform or video distribution facility either to
itself or to a favored "anchor programmer."[30]  To prevent such
conduct, the Commission has required that a LEC's video dialtone
platform (1) "contain sufficient capacity to serve multiple video
programmers"[31] and (2) have the ability to "expand as demand
increases so as not to become a bottleneck."[32]  While these
requirements may reduce the LECs' ability to undermine their
common carrier obligations,[33] they will offer incomplete
protection unless LECs have strong incentives to comply fully
with them.[34]
     The Commission could try to create such incentives by
limiting the number of channels or percentage of capacity on a
LEC-operated distribution facility that the LEC could occupy.
Although a capacity limitation could help ensure programmer
access, it also raises significant questions.  Most basically,
the Commission would have great difficulty in setting a non-
arbitrary limit.  More important, a rigid limit would put a LEC
in a very difficult situation.  It would have to determine -- in
an uncertain market environment -- what size distribution
facility is cost-justified and sufficiently capacious to allow
the LEC to offer a viable package of video programming without
using "too much" capacity.  If the LEC overestimated demand for
distribution facilities by unaffiliated programmers, it could
have substantial unused capacity that it would be precluded from
filling.  Under those circumstances, a maximum capacity limit
could obviously "increase the risk of deploying video dial tone
service and create a strong disincentive to do so."[35]
     To avoid this problem, NTIA recommends that the Commission
adopt a less rigid capacity limitation, which we call
"accommodate or vacate."  Under this approach, a LEC would be
free to occupy as much of the capacity of its video distribution
facility as it wishes.  Upon receiving a bona fide request for
capacity from an unaffiliated video programmer, however, the LEC
would have to accommodate that request either by making more
efficient use of its existing facilities (e.g., by employing
multiplexing or compression techniques that enable the LEC to
derive additional capacity from its existing transmission plant),
by promptly building additional capacity, or by removing its own
programming from the video platform.[36]
     To illustrate, suppose that a LEC's market research
indicates that it should construct a 100 channel video
distribution facility to serve a particular community.  After
receiving authority to construct that facility and filing the
requisite tariff, the LEC would then entertain requests for
service from interested programmers.  If unaffiliated programmer-
customers request only 20 channels, the LEC would be free to use
the remaining 80 channels for its own programming services.  If,
however, existing or new programmers subsequently requested two
additional channels, the LEC would either have to make additional
capacity available or remove its own programming services from
two channels.
     "Accommodate or vacate" would safeguard the interests of
unaffiliated programmers, yet avoid many of the risks presented
by a maximum capacity limitation.  It would both alleviate some
of the uncertainties inherent in sizing a LEC's video
distribution facility and substantially reduce the risk of unused
capacity.  At the same time, by requiring LECs to remove their
own programming to accommodate capacity requests from
unaffiliated programmers, NTIA's suggested approach would give
the LECs strong incentives to comply with the Commission's
capacity and expandability requirements.
     We recognize that problems could arise if capacity requests
from unaffiliated programmers exceed the capacity of a LEC's
video platform.  In that case, the accommodate or vacate rule
would either preclude the LEC affiliate from leasing space on the
LEC's platform or compel the affiliate to remove all of its
programming from that facility.  To avoid such a result, the
Commission could set a minimum capacity limit -- a minimum number
of channels or percentage of capacity that the LEC could occupy,
regardless of demand from other programmers.[37]  To strengthen a
LEC's incentive to construct distribution facilities with
sufficient capacity to accommodate future demand, however, any
minimum capacity limitation should be relatively small (e.g., 10-
15 percent).
     C.   The FCC Should Require LECs to Provide In-Region Video
          Programming Through a Separate Affiliate.
     As dominant providers of basic telephone service, local
exchange carriers have the ability to engage in anticompetitive
behavior.  LECs will have the incentive to discriminate against
other video programming providers and engage in improper cross-
subsidization between regulated and non-regulated services, to
the detriment of telephone ratepayers and other video programming
competitors.  Evidence of such anticompetitive behavior is often
difficult to detect,[38] and such difficulties will be compounded
by the Commission's relative lack of experience and information
regarding LEC provision of video programming and video
transmission services.
     Requiring a LEC to provide video programming through a
separate affiliate would provide an effective means of detecting
the existence of cross-subsidization between the LEC's basic
transmission services and its video programming operations.  In
addition, placing the affiliate in an "arms length" relationship
with its parent -- the LEC platform provider -- will help ensure
that such affiliate is not granted preferential access to the
platform.  Given the concerns about adequate capacity on the
video platform, it is particularly important that unaffiliated
programmer-customers be able to monitor the terms and conditions
under which the LEC's video programming operation gains access to
its video distribution facility.  The establishment of a separate
programming affiliate will allow such oversight.[39]
     Some commenters argue that a separation requirement
prohibits firms from benefitting from certain synergies, such as
economies of scope.  While such efficiencies may arise in the
joint provision of traditional enhanced and basic services, the
concerns noted above lead us to recommend separation for LEC
provision of video programming and video transmission services at
this time.[40]
III. TELEPHONE COMPANY PROVISION OF IN-REGION VIDEO PROGRAMMING
     SHOULD NOT BE REGULATED SOLELY UNDER TITLE VI OF THE
     COMMUNICATIONS ACT.
     Regardless of what conditions and safeguards the Commission
imposes on LEC entry into the video programming market, there is
an issue about whether Title II, Title VI, or both apply to LEC
provision of in-region video programming.[41]  Some telephone
companies have argued, citing Section 621(c) of the
Communications Act, that they cannot be regulated under Title II
if they are regulated under Title VI.[42]  That argument is
without merit.  Section 621(c) merely states that "[a]ny cable
system shall not be subject to regulation as a common carrier or
utility by reason of providing any cable service."[43]  While
that provision plainly precludes common carrier regulation of
cable service -- i.e., one-way transmission of video
programming[44]
-- it also suggests, by negative implication, that any non-cable
services offered by a cable system can be subjected to utility
regulation.
     As the legislative history of Section 621(c) indicates, that
is precisely what Congress intended.  The provision was added to
the Communications Act by passage of the 1984 Cable Act.  At that
time, a number of cable companies were beginning to offer
telecommunications services in competition with LECs and there
was considerable debate concerning whether, how, and by whom such
services should be regulated.[45]  A cable television bill
adopted by the Senate in June of 1983 would have barred Federal,
State or local governments from "impos[ing] on a cable system
regulation as a common carrier or utility to the extent that such
cable system provides broadband telecommunications service other
than basic telephone service."[46]
     In response, the House of Representatives adopted a
substitute bill that contained the language eventually enacted as
Section 621(c).  That provision deliberately left open the
regulatory status of non-cable services, as the accompanying
Committee Report indicates:
     The Committee intends to leave the decision concerning the
     exercise of regulatory authority over non-cable
     communications services to the appropriate regulatory bodies
     [i.e., the Commission and the State public utility
     commissions].  This approach protects cable companies from
     unnecessary regulation, while reserving for state and
     Federal officials the authority they need to address the
     issue of competition between telephone and cable companies
     and the need to preserve universal telephone service.[47]
     Thus, Section 621(c) was never intended to preclude utility
regulation of non-cable services offered by cable systems.  To
the contrary, its very purpose was to preserve Federal and State
authority to regulate cable systems as common carriers to the
extent that they provide non-cable services similar to those
offered by telephone companies.[48]  Section 621(c) thus provides
no support for the claim that the Commission may not regulate a
LEC's video transmission service -- a non-cable service --
pursuant to Title II merely because that offering may be used to
provide cable services.
     Thus, the Communications Act erects no barrier to Commission
regulation of a LEC's video-related activities under Title II.
The question then is whether Title VI applies.
     A.   A LEC-Operated Video Platform Is Not A "Cable System"
          Subject to Title VI Regulation.
     The provisions of Title VI apply to "cable systems" and
"cable operators."  The definition of cable operator requires,
among other things, the presence of a cable system.[49]  Hence,
the search for a cable system is an essential first step in
deciding whether Title VI applies to any particular provider of
video programming.
     Section 602(7) of the Communications Act defines a "cable
system" as "a facility, consisting of a set of closed
transmission paths and associated signal generation, reception,
and control equipment that is designed to provide cable service
which includes video programming and is provided to multiple
subscribers within a community."[50]   At first glance, a LEC
facility used to provide video programming would come within the
statutory definition.
     There is, however, an exemption to that definition for a
common carrier facility that is subject in whole or in part to
Title II.[51]  The Commission has already determined that a LEC-
operated common carrier video platform -- as contemplated by
NTIA's recommended safeguards and the Commission's current VDT
rules -- would be a Title II regulated facility.[52]  At second
glance, then, the foregoing exemption would seem to remove the
LEC facility from the definition of a cable system.
     The exemption, however, has an exception, which provides
that a Title II regulated facility is a cable system "to the
extent such facility is used in the transmission of video
programming directly to subscribers."[53]  In NTIA's view, a LEC
offering video services in accordance with the regulatory scheme
outlined in Section II of these comments would not be
transmitting video programming directly to subscribers.
According to the D.C. Circuit, "transmission" requires "active
participation in the selection and distribution of video
programming."[54]  This involves "at least choosing the signal,
or originating it, not necessarily conducting it personally to
its destination."[55]
      Under video common carriage, a LEC would not be involved in
the selection and distribution of the programming delivered to
subscribers via its video platform.  In fact, the fundamental
purpose of that approach -- and its principal benefit -- is to
insulate the LEC from those very activities.  Instead, selection,
organization, and distribution of programming would be performed
by a separate affiliate and other unaffiliated programmer-
customers, rather than by the LEC that controls the underlying
distribution facility.[56]   Because the LEC would thus not be
involved in the "transmission" of video programming to
subscribers, the exception would not apply.[57]  Instead, the
exemption for a Title II regulated facility would control so as
to exclude the LEC's video distribution facility from the
statutory definition of a cable system.
     This construction of the exception in Section 602(7)(C) is
consistent with congressional intent.  As the D.C. Circuit has
concluded, the exception is "directed at telephone companies
providing a conventional cable service, which they are permitted
by the Cable Act in rural areas and other communities where no
other entity is likely to offer cable service."[58]  The court
also pointed out that a review of Title VI's regulatory scheme
"makes it quite clear" that conventional cable service and video
common carriage "are very different creatures."[59]  In the
absence of any guidance from Congress to the contrary, the
Commission should conclude that Congress intended the exception
in Section 602(7)(C) to apply in cases where a LEC offers video
programming over a traditional closed cable system, as opposed to
an open common carrier video platform.[60]
     That conclusion would be sound as a matter of policy.  Title
VI -- which would be triggered by a finding that a LEC-operated
video platform is a cable system -- has two fundamental purposes:
first, to permit non-Federal authorities to control the use of
public rights-of-way by wire-based video distribution systems and
to impose reasonable limits on the exercise of that
authority;[61] and second, to promote competition in the video
marketplace and to foster the widest possible diversity of
information sources and services to the public.[62]
     Title II regulation of a LEC's entry into the video
marketplace would achieve both purposes, without the need for the
additional overlay of Title VI regulation.  As the Commission is
well aware, common carrier regulation incorporates "the same
concerns about public safety and convenience and use of public
rights-of-way that provide a key justification for the cable
franchise requirement."[63]  Moreover, LECs already operate under
franchises or certificates that authorize them to use public
rights-of-way and impose regulatory obligations in return.  Given
that, the need and justification for additional franchise
obligations under Title VI is questionable.
     Title II regulation alone will also promote competition and
information diversity.  Most importantly, the requirement that
LECs furnish distribution facilities to all programmers --
including their video affiliates -- on a nondiscriminatory basis
at rates subject to Commission oversight will eliminate barriers
to entry by new video programmers.  In this way, common carrier
regulation of a LEC's video platform will give programmers an
unfettered opportunity -- which they do not now have under Title
VI -- "to promote their ideas, state their views, or sell their
goods and services."[64]  Subscribers, in turn, will have freedom
"to pick and choose from among a diverse range of entertainment,
information, and services."[65]  The net result, as the
Commission has recognized, will be "increased services, lower
prices and new services."[66]  In the highly competitive
environment fostered by Title II regulation, the provisions of
Title VI would be redundant and -- quite possibly --
counterproductive.
     For all the foregoing reasons, the Commission should rule
that a LEC-operated video platform is not a cable system, even if
a LEC affiliate uses that facility to deliver video programming
to the home.[67]  That conclusion is consistent with the letter
and spirit of the Communications Act and sound as a matter of
policy.[68]  Further, as noted above, if there is no cable
system, there can be no cable operator.[69]  Consequently, Title
VI does not apply to the LEC's video platform or to the
programmer-customers that use the platform -- including the LEC
affiliate.[70]
     B.   If the LEC Common Carrier Is Deemed a Cable System, the
          Commission Must Apply Title II and Title VI In a Way
          That Minimizes Duplication and Promotes Competition.
     If, notwithstanding the foregoing argument, the Commission
determines that a LEC-operated video platform is a cable system,
it will have to fashion a regulatory structure that incorporates
the provisions of Titles II and VI.  In so doing, the Commission
should strive, above all, to avoid duplicative regulation and to
promote competition among the various users of the LEC video
platform, including the LEC affiliate.  Two possible approaches
are discussed below.
          1.   Imposing Title VI Only on the LEC Affiliate Would
               Be Problematic.
     If the Commission were to construe the exception in Section
602(7)(C) to render a LEC-operated video platform a cable system
-- in cases where a LEC affiliate uses that facility to provide
video programming to subscribers -- only a portion of the
platform should be so classified.  The exception specifies that a
Title II-regulated facility is a cable system only "to the extent
such facility is used in the transmission of video programming
directly to subscribers."[71]  Under the regulatory structure
proposed in these comments, the only portion of the LEC's
platform that even arguably satisfies that requirement is the
capacity leased by the LEC's video affiliate.
     If the portion of the LEC's video platform occupied by the
affiliate were deemed to be a cable system, the affiliate would
therefore be a cable operator because it would be providing cable
service over a cable system in which it has an indirect ownership
interest.[72]  As such, the affiliate would be subject to
regulation under Title VI.  In contrast, the remainder of the
LEC's platform -- for which the selection, origination, and
distribution of programming would be performed by unaffiliated
entities -- would not be a cable system and the unaffiliated
programmer-customers would not be cable operators.  Accordingly,
the platform could be regulated pursuant to Title II and the
unaffiliated programmer-customers would not be subject to Title
VI.
     Imposing Title VI regulation on the affiliate alone would
raise several significant problems.  Most importantly, it would
place the LEC affiliate at a severe competitive disadvantage vis-
a-vis the other programmer-customers using the LEC's video
platform -- none of whom would be subject to Title VI.  The
affiliate would have to carry local broadcast stations, provide
public, educational, and governmental access (PEG) channels,
obtain a franchise (with all of the attendant obligations and
requirements), and pay a franchise fee.  The costs of complying
with those regulations would likely make it difficult for the
affiliate to compete effectively with its unregulated rivals.
     Title VI regulation of a LEC's video affiliate and Title II
regulation of the underlying video platform might also dissuade
the LEC from entering the market at all, because compliance with
two regulatory schemes might be prohibitively expensive.
Television viewers and society generally would thus be denied the
obvious benefits of LEC participation in the video marketplace.
Moreover, given that Title II regulation of the LEC's video
platform significantly reduces the affiliate's ability to compete
unfairly in the video programming market, Title VI regulation of
the affiliate would raise legitimate questions whether the
Commission's rules had been narrowly tailored to minimize
interference with the LEC's First Amendment rights.
     Imposing Title VI only on the LEC affiliate raises more
mundane implementation questions as well.  Can the Commission
harmonize the affiliate's "must carry" and PEG obligations with
the need for a limit (preferably a minimum limit as recommended
in Section II.B above) on the proportion of a LEC video platform
that an affiliate may occupy?  It would be manifestly unfair for
the Commission to impose such a limit and then compel the
affiliate, in accordance with Title VI, to fill that scarce
capacity with programming that the LEC may not have chosen to
carry.
     The Commission could avoid such a result by defining the
LEC's capacity limit as a designated proportion of a LEC's video
platform, plus any additional channels that the affiliate is
required to carry pursuant to Title VI.  This solution presents
its own problems, however.  In some instances, the affiliate
might be able to "monopolize" carriage of local broadcast
signals, thereby compelling consumers to purchase the LEC's
programming services to view local broadcast signals.  More
typically, other programmer-customers also wishing to provide
local broadcast signals would have to use some of the limited
capacity of the LEC's video platform to carry duplicate
programming.  Such duplication could result in an inefficient use
of platform capacity.
     The Commission could mitigate such inefficient use of the
platform by requiring the LEC affiliate to offer its "must carry"
signals in a shared channel arrangement.  This would allow other
programmer-customers to incorporate local broadcast signals into
their service packages, without consuming additional channels.
Yet, on what basis could the Commission compel the affiliate to
carry local broadcast signals (as required by Title VI), and then
force the affiliate to make those signals available to its
competitors?
     The foregoing discussion illustrates some of the
implementation problems presented by imposing Title VI only on
the LEC affiliate.  Although application of the "must carry"
requirements is particularly problematic, other examples can
readily be found.  These difficulties counsel in favor of
adopting a different approach to applying Titles II and VI to a
LEC's video programming activities, as we recommend below.
          2.   The Commission Can Impose the Requirements of
               Title VI on the LEC Platform and the LEC Affiliate
               in a Way that Minimizes Regulation and Promotes
               Competition.
     As an alternative to regulating only the LEC affiliate under
Title VI, if the Commission were to construe the exception in
Section 602(7)(C) to render a LEC-operated video platform a cable
system, the Commission should consider applying Title VI to both
the affiliate and the LEC platform in a way that minimizes the
regulatory burden on both entities.  Specifically, the Commission
would impose particular provisions of Title VI on either the
platform or the affiliate, depending on which result better
satisfies the language and underlying purpose of each provision.
The following sections illustrate how this approach would work
with respect to three specific areas of Title VI regulation:
carriage obligations, franchise requirements, and rate
regulation.
                a.   Carriage obligations
     The imposition of the Title VI leased access requirements on
either the video platform or the video programming affiliate
would be unnecessary given that the platform would be provided on
a common carrier basis, which would by definition give all
programmers access to that facility on reasonable,
nondiscriminatory terms.[73]  Title VI's must-carry and PEG
provisions, however, require cable systems to provide
distribution facilities to particular classes of video
programmers.  Those provisions would thus impose carriage
obligations on the LEC well in excess of those required by Title
II.
     Given the mandatory language of the "must carry" and PEG
access provisions, the Commission would seem to be compelled to
apply such requirements to LEC video programming operations.
These obligations, however, should only be imposed on the video
platform.  The "must carry" provisions, for example, specify what
local broadcast signals must be carried by a "cable system."[74]
Because the LEC's video platform is the cable system in this
scenario, it should bear specific carriage obligations that
parallel the platform's duty under Title II to provide service
upon reasonable request.  Among other things, this approach
ensures that all viewers have access to local broadcast signals
regardless of which program packages they select.
               b.   Franchise requirements
     There is a sound policy argument against imposing the
franchising requirements of Title VI on either the LEC or its
video affiliate.  As noted above, the primary rationale for cable
franchising is to enable local governments to control private use
of public rights-of-way.  In most cases, LECs providing in-region
programming have already received government authorization to use
those rights-of-ways.  Requiring them to obtain a separate cable
franchise would be -- if not unnecessary -- duplicative.
     Nevertheless, if the Commission determines that Title VI is
applicable, the language of Title VI indicates that a cable
franchise is required, regardless of what other government
authorizations have been obtained.[75]  Logically, the franchise
obligation should be borne by the LEC platform.  The platform,
after all, is the facility that occupies public rights-of-way.
Moreover, by exempting the affiliate from the need to obtain a
franchise, the Commission could avoid subjecting the affiliate to
regulatory burdens not imposed on the programmer-customers
against which the affiliate competes.
     In any event, a LEC's procurement of a cable franchise for
its video platform should generally be a formality.  Section
621(a)(1) of the Communications Act prohibits franchising
authorities from unreasonably refusing to grant a franchise.[76]
Although Section 621(a)(4) does permit those authorities to
impose certain legal, technical, and financial requirements on
prospective franchisees,[77]  LECs should have no difficulty
satisfying those requirements.  Accordingly, the Commission
should scrutinize carefully any untimely approval or denial of a
cable franchise to a LEC-operated video platform.
     The Commission should also carefully circumscribe the
franchise fees that non-Federal authorities require of their LEC
cable franchisees.  Section 622 of the Communications Act
specifies that franchise fees may be levied only on the "gross
revenues derived . . . from the operation of the cable
system."[78]  Because the video platform is the cable system in
these circumstances, the only revenues properly subject to
franchise fees are those monies received from household
subscribers and programmer-customers for access to the video
platform.  The Commission should absolutely bar franchising
authorities from exacting fees from the revenues earned by the
LEC's programming affiliate or any other programmer-customers.
               c.   Rate regulation
     Title VI rate regulation requirements should apply only to
the affiliate.  Since those provisions apply to "cable services,"
it would seem appropriate to impose any rate regulation
requirements on the LEC programming affiliate rather than the
platform.[79]  The Commission should bear in mind, however, that
the affiliate would in most cases face "effective competition"
from the incumbent cable operator serving the same market.  As a
result, imposing rate regulation on the video affiliate would in
most cases have no practical effect.[80]
               d.   Other Title VI requirements
     The Commission should follow the same analysis as that
applied above in determining how to apply other Title VI
provisions.  Essentially, NTIA recommends that the Commission
should impose only those Title VI requirements for which there  are no analogous Title II provisions.  Generally, any Title VI
obligation should be imposed on either the LEC platform or the
programming affiliate as circumstances warrant, but not both.[81]
 IV.  CONCLUSION
     For the foregoing reasons, NTIA respectfully requests that
the Commission adopt the recommendations contained herein.
     Respectfully submitted,
Larry Irving
Assistant Secretary for                 Barbara S. Wellbery
 Communications and Information         Chief Counsel
Michele C. Farquhar
Chief of Staff and Director,            Lisa Sockett
Office of Policy Coordination           Attorney-Advisor
 and Management                         Office of Chief Counsel
Joseph L. Gattuso
Acting Associate Administrator
Radhika Karmarkar
Cynthia Nila
Tim Sloan
Office of Policy Analysis
 and Development
National Telecommunications
 and Information Administration
U.S. Department of Commerce
Room 4713
14th and Constitution Ave., N.W.
Washington, D.C.  20230
(202) 482-1816
                                        July 11, 1995                      CERTIFICATE OF SERVICE
     I, Cheryl A. Kinsey, do hereby certify that I have this 11th
day of July, 1995, mailed by first class United States mail,
postage prepaid, copies of the foregoing Reply Comments to the
parties of record in this proceeding.
                              ______________________________
                              Cheryl A. Kinsey
                             ENDNOTES
[1]  Telephone Company-Cable Television Cross-Ownership Rules,
Sections 63.54-63.58, Fourth Further Notice of Proposed
Rulemaking, 10 FCC Rcd 4617 (1995) (Fourth Notice).
[2]  See 47 U.S.C.   533(b)(1) (1994); 47 C.F.R.
63.54-63.58
(1994).
[3]  See, e.g., U S West, Inc. v. United States, 48 F.3d 1092
(9th Cir. 1994) (affirming 855 F. Supp. 1184 (W.D. Wash.));
Chesapeake and Potomac Tel. Co. of Va. v. United States, 42 F.3d
181 (4th Cir. 1994), cert. granted, 63 U.S.L.W. 3906 (U.S. 1995)
(affirming 830 F. Supp. 909 (E.D. Va. 1993); BellSouth Corp. v.
United States, 868 F. Supp. 1335 (N.D. Ala. 1994); Ameritech
Corp. v. United States, 867 F. Supp. 721 (N.D. Ill. 1994); United
States Tel. Ass'n v. United States, Civ No. 1:94CV01961 (D.D.C.
Feb. 14, 1995).
[4]  The Commission has characterized VDT as "an enriched
version" of video common carriage.  Telephone Company-Cable
Television Cross-Ownership Rules, Sections 63.54-63.58, Further
Notice of Proposed Rulemaking, First Report and Order and Second
Further Notice of Inquiry, 7 FCC Rcd 300, 306   10 (1991) (First
Report and Order).  See also National Telecommunications and
Information Admin., U.S. Dep't. of Commerce, NTIA Report 88-233,
Video Program Distribution and Cable Television:  Current Policy
Issues and Recommendations at 32, 36-38 (June 1988) (explaining
"video common carriage" concept).  Under VDT, LECs would not only
provide distribution facilities to video programmers on a common
carrier basis, but would also offer navigational aids to help
consumers identify and choose among the programming options
available to them.
[5]  See, e.g., Hearings on Telecommunications Reform Legislation
Before the Subcomm. on Telecommunications and Finance of the
House Comm. on Energy and Commerce, 103rd Cong., 2nd Sess. (Jan.
27, 1994) (statement of Larry Irving, Assistant Secretary for
Communications and Information, U.S. Department of Commerce);
Comments of the National Telecommunications and Information
Administration in CC Docket No. 87-266 at 4-8 (filed Feb. 3,
1992).
[6]  First Report and Order, 7 FCC Rcd at 304,   6.
[7]  See Section 214 Certificates, 21 FCC 2d 307, recon., 22 FCC
2d 746 (1970), aff'd sub nom. General Tel. Co. of Southwest v.
United States, 449 F.2d 846 (5th Cir. 1971).
[8]  Although a LEC would have the incentive to engage in these
activities even if it offered only video transmission services,
the authority to market video programming magnifies that
incentive considerably.  When a LEC provides video transmission
services, it has the incentive to disadvantage other video
transmission providers.  When the LEC also provides video
programming, its incentives to act anticompetitively extend both
to its transmission services and to its programming activities.
[9]  See 47 U.S.C.  224(b) (1994).
[10] The Commission's current pole attachment regulations allow
utilities to set rates based on formulas "that define the upper
bound of the zone of reasonableness."  FCC and Common Carrier
Bureau Take Steps To Resolve Pending Pole Attachment Complaints,
Report No. DC 95-87 (released June 16, 1995) (Pole Attachment
Report).
[11] See, e.g., Reply Comments of Continental Cablevision, et al.
in CC Docket No. 87-266, at 19-21 (filed Apr. 11, 1995); Pole
Attachment Comments of Continental Cablevision, et al. in CC
Docket No. 87-266, at 17-27 (filed Dec. 16, 1994).  See also
Common Carrier Bureau Cautions Owners of Utility Poles, FCC
Public Notice, DA 95-35 (released Jan. 11, 1995).
[12] Pole Attachment Report, supra note ?.
[13] Cf. Contel of Virginia, et al., Files Nos. W-P-C-6955-6958,
DA 95-1012 (released May 5, 1995); BellSouth Telecommunications,
Inc., File No. W-P-C-6977, DA 95-181 (released Feb. 8, 1995)
(allegations raised that two LECs raised their pole attachment
rates after filing applications to offer video dialtone service).
[14] In addition, the Commission's regulations and resources may
not be sufficient to prevent cross-subsidization.  See, e.g.,
General Accounting Office, GAO/RCED-93-94, Telecommunications:
FCC's Oversight Efforts to Control Cross-Subsidization (1993)
(GAO Report).
[15] See, e.g., Ithiel de Sola Pool, Technologies of Freedom 172-
173 (1983); Besen and Johnson, An Economic Analysis of Mandatory
Leased Channel Access for Cable Television 22 (Rand Corp. 1982).
[16] As the Commission is aware, NBC was compelled to change its
CNBC cable channel to a specialized business news format at the
insistence of several large cable companies, who did not wish to
carry an all news competitor to CNN, which was partially owned by
many of those very same companies.  See Competition, Rate
Deregulation and the Commission's Policies Relating to the
Provision of Cable Television Service, 5 FCC Rcd 4962, 5028-5029,
   120-122 (1990).
[17] See, e.g., Comments of Bell Atlantic in CC Docket No. 87-
266, at 5-6 (filed Mar. 21, 1995).
[18]  Legislation now pending in Congress would permit mergers
and joint ventures between telephone companies and cable
operators in many communities.  See S. 652, 104th Cong., 1st
Sess.,   202(a) (1995); H.R. 1555, 104th Cong., 1st Sess.,
201
(1995).  Permitting these potential rivals to merge reduces the
likelihood that they will become head-to-head competitors.
[19] One industry observer has noted a significant tendency on
the part of households subscribing to DBS to retain their
existing cable service.  Another predicts that in the year 2000,
about 50 percent of DBS households will also subscribe to cable
service.  See Communications Daily, May 10, 1995, at 6.
[20] See, e.g., U S West, Inc. v. United States, 48 F.3d at 1102
(fostering competition in the cable industry is a substantial
government interest for First Amendment purposes); Chesapeake and
Potomac Tel. Co. of Va. v. United States, 42 F.3d at 198-199
("government's interest in eliminating restraints on fair
competition is always substantial," and assuring that the public
has access to a multiplicity of information sources "is a
governmental purpose of the highest order").
[21] See, e.g., U S West, Inc. v. United States, 48 F.3d at 1105
(common carrier obligation and structural separation "would help
ensure that the telephone companies do not develop monopolies in
the programming market, while allowing them to engage in
considerably more protected speech") (citing Chesapeake and
Potomac Tel. Co. of Va. v. United States, 42 F.3d at 201-202).
Accord BellSouth Corp. v. United States, 868 F. Supp. 1335, 1342-
1343 (N.D. Ala. 1994) (common carrier obligation); Ameritech
Corp. v. United States, 867 F. Supp. 721, 736 n.9 (N.D. Ill.
1994) (same).
[22] A LEC should be required to operate in accordance with all
the safeguards detailed below whenever it offers in-region video
programming via a wire-based distribution facility -- even in an
overbuild situation -- as it has all the same incentives to
discriminate and cross-subsidize in those situations.  In
contrast, were a LEC to offer in-region video programming via a
wireless distribution system, such as MMDS, the potential for
discrimination and cross-subsidization would be significantly
less and the same safeguards should not be required.
[23] First Report and Order, 7 FCC Rcd at 304,   6.
[24] Telephone Company-Cable Television Cross-Ownership Rules,
Sections 63.54-63.58, Second Report and Order, Recommendation to
Congress, and Second Further Notice of Proposed Rulemaking, 7 FCC
Rcd 5781, 5811,   57 (1992) (Second Report and Order).  Accord
Telephone Company-Cable Television Cross-Ownership Rules,
Sections 63.54-63.58, Memorandum Opinion and Order on
Reconsideration and Third Further Notice of Proposed Rulemaking,
10 FCC Rcd 244, 259,   31 (1994) (VDT Reconsideration Order)
(common carrier requirement "will provide an important check
against unreasonably discriminatory treatment of video
programmers by telephone companies").
[25] First Report and Order, 7 FCC Rcd at 309-310,   17.
[26] Cabinet Committee on Cable Communications, Cable Report to
the President, reprinted in 14 Weekly Television Digest 7 (Jan.
21, 1974) (Cabinet Committee Report).
[27] Id.
[28] Should a LEC become the dominant provider of video
transmission services in a community -- whether via superior
business acumen or undetected anticompetitive conduct -- a common
carrier obligation will ensure that the competing video
programmers still have a way of distributing their services to
the home.
[29] Requiring LECs to operate their distribution facilities on a
common carrier basis would subject them to obligations not borne
by incumbent cable systems.  The Clinton Administration has
advocated legislation that would authorize the Commission to
impose a similar common carrier obligation on cable systems,
except when technology, costs, and market conditions would make
such an offering inappropriate.  See The Communications Act of
1994: Hearings on S. 1822 Before the Senate Comm. on Commerce,
Science and Transportation, 103d Cong., 2d Sess. (1994)
(statement of Ronald H. Brown, Secretary of Commerce, at 11).
See also Administration Comments on H.R. 1555:  The
Communications Act of 1995, and Related Legislation Before the
House Commerce Committee 5 (May 15, 1995) (on file with NTIA)
(supporting the provisions in H.R. 1555 that seek to encourage
cable operators to open up their platforms as they begin to
upgrade their networks to provide interactive services).
[30] See, e.g., VDT Reconsideration Order, 10 FCC Rcd at 260,
35 (LEC offering VDT may not lease all or substantially all of
its capacity to a single anchor programmer).
[31] Id. at 257,   25.
[32] Second Report and Order, 7 FCC Rcd at 5797-5798,   30.
[33] The "expandability" requirement, in particular, is hardly
absolute.  LECs will have the opportunity to demonstrate that
expansion of capacity is not "technically feasible" or
"economically reasonable."  VDT Reconsideration Order, 10 FCC Rcd
at 261,   38.
[34] As the Commission is aware, a firm will be more likely to
engage in socially desirable behavior if it has positive
incentives to do so.  That is one of the principal reasons why
the Commission decided to replace rate of return regulation with
price cap regulation.
[35] Comments of Bell Atlantic in CC Docket No. 87-266, at 11
(filed Mar. 21, 1995).
[36] The Commission could readily develop guidelines governing,
for example, what would constitute a reasonable attempt by a LEC
to accommodate capacity requests from unaffiliated programmer-
customers and what would qualify as the prompt building of
additional facilities.
[37] If the unserved demand from unaffiliated programmers were
sufficiently large, the Commission's "expandability" requirement
would presumably obligate the LEC promptly to construct
additional channels to satisfy that demand.
[38] See, e.g., GAO Report, supra note ?, at 2.
[39] Moreover, if a LEC does not provide programming through a
separate affiliate, the LEC's video platform and the LEC's video
programming operation would meet the statutory definitions of
"cable system" and "cable operator" and, thus, would be subject
to Title VI regulation.  See infra note ? and accompanying text.
[40] Some federal courts have noted that a separate affiliate
requirement would be a less restrictive alternative for
combatting potential LEC anticompetitive practices than the total
ban on in-region programming represented by the crossownership
restriction.  See, e.g., U S West, Inc. v. United States, 48 F.3d
at 1105.
[41] Because video dialtone was not anticipated when Congress
first established the Title II and Title VI regulatory regimes,
it is not entirely clear which of these sections of the
Communications Act should govern.  NTIA's recommended approach
will resolve in a sound manner much of the confusion that arises
from not having a specific legislative mandate.  Legislative
guidance on this matter, however, would provide a more certain
regulatory environment.
[42] See, e.g., Comments of U S West in CC Docket No. 87-266, at
24 (filed Mar. 21, 1995).
[43] 47 U.S.C.  541(c) (1994).
[44] See 47 U.S.C.  522(6) (1994).
[45] See, e.g., H.R. Rep. No. 934, 98th Cong., 2d Sess. 60
(1984), reprinted in 1984 U.S.C.C.A.N. 4655, 4697 (House Report).
[46] S. 66, 98th Cong., 1st Sess.,   614 (1983).
[47] House Report at 60, 1984 U.S.C.C.A.N at 4697 (brackets
added).
[48] While the House was considering the regulatory issues
implicated by Section 621(c), the Commission was deciding whether
to preempt state regulation of non-cable services.  Id.
[49] For purposes of Title VI, the term "cable operator" means
          any person or group of persons (A) who provides
          cable service over a cable system and directly or
          through one or more affiliates owns a significant
          interest in such cable system, or (B) who
          otherwise controls or is responsible for, through
          any arrangement, the management and operation of
          such a cable system.
47 U.S.C   522(5) (1994).
[50] 47 U.S.C.  522(7) (1994).
[51] 47 U.S.C.  522(7)(C) (1994).
[52] See Fourth Notice, 10 FCC Rcd at 4621,   5; Telephone
Company-Cable Television Cross-Ownership Rules, Sections 63.54-
63.58, Memorandum Opinion and Order on Reconsideration, 7 FCC Rcd
5069, 5072, at   22 (1992) (Reconsideration Order).
[53] 47 U.S.C.  522(7)(C) (1994).
[54] National Cable Television Ass'n v. FCC, 33 F.3d 66, 73 (D.C.
Cir. 1994) (NCTA v. FCC) (quoting Reconsideration Order, 7 FCC
Rcd at 5072,   18).
[55] NCTA v. FCC, 33 F.3d at 71-72.
[56] If a LEC provides video programming on an unseparated basis,
the exception would clearly apply and the underlying distribution
facility would constitute a "cable system," even if it were
operated on a Title II regulated basis.
[57] It could be argued that the affiliate's "transmission"
activities are attributable to the LEC parent and thus that the
LEC's Title II regulated video platform is a cable system.
Recall, however, that the exception covers only transmissions
"directly" to subscribers.  Congress has been quite specific in
other cases when it wanted to attribute indirect activities of an
affiliate to its parent.  For example, the statutory cross-
ownership restriction refers to telephone company provision of
in-region video programming "either directly or indirectly
through an affiliate."  47 U.S.C.  533(b)(1) (1994).  Likewise,
the definition of "cable operator" encompasses ownership of a
cable system either "directly or through one or more affiliates."
47 U.S.C.  522(5)(A) (1994).  Given Congress's specific intent
to
include "direct and indirect" activities in these two closely-
related provisions of Title VI, its omission of similar language
in Section 522(7)(C) reenforces the conclusion that the exception
was meant to reach only direct involvement in the transmission of
video programming.
[58] NCTA v. FCC, 33 F.3d at 74 (citing Reconsideration Order, 7
FCC Rcd at 5072).
[59] 33 F.3d at 75.
[60] See Chevron U.S.A., Inc. v. Natural Resources Defense
Council, Inc., 467 U.S. 837, 842-844 (1984) (holding that when
Congress has not spoken to the precise question at issue the
courts must give considerable weight to the agency's
interpretation if it is based on a permissible construction of
the statute).
[61] See House Report at 19, 23-24, 1984 U.S.C.C.A.N. at 4656,
4660-61.
[62] See, 47 U.S.C.  521(4), (6) (1994).
[63] Reconsideration Order, 7 FCC Rcd at 5072,   22.
[64] Cabinet Committee Report, supra note ?, at 9.
[65] Id.
[66] First Report and Order, 7 FCC Rcd at 306,   8.
[67] The affiliate alone cannot be considered a "cable system"
because it has no facilities.
[68] Concluding that the LEC facility is not a cable system would
avoid government regulation of the video services that a LEC
chooses to offer, thereby minimizing government interference with
the LEC's First Amendment rights.  As a result, government
regulation of LEC entry into the video marketplace would be
limited to Title II-based competitive safeguards that have been
identified by the courts as less restrictive alternatives to the
crossownership ban.
[69] See supra note ? and accompanying text.
[70] Even if the Commission were to determine that the LEC
facility is a "cable system," unaffiliated programmer-customers
would still not be cable operators "because they neither own a
significant interest in the telephone company [video
distribution] broadband facilities, or control, or are
responsible for the management and operation of those
facilities."  NCTA v. FCC, 33 F.3d at 74 (quoting First Report
and Order, 7 FCC Rcd at 327,   52).
[71] 47 U.S.C.  522(7)(C) (1994) (emphasis added).
[72] See 47 U.S.C.  522(5)(A) (1994).  The LEC could also be
considered a cable operator because it would arguably "control[]
or [be] responsible for . . . the management and operation of"
the cable system in question.  47 U.S.C.  522(5)(B) (1994).  It
would make no sense, however, -- assuming that it were feasible -
- to impose Title VI obligations on two different entities with
respect to the very same facility.
[73] See Fourth Notice, 10 FCC Rcd at 4628,   15.
[74] 47 U.S.C.  534 (1994).
[75] See 47 U.S.C.  541(b)(1) (1994).
[76] See 47 U.S.C.  541(a)(1) (1994).
[77] See 47 U.S.C.  541(a)(4) (1994).
[78] See 47 U.S.C.  542(b) (1994).
[79] See 47 U.S.C.  543 (1994).
[80] See 47 U.S.C.  543(a)(2) (1994).
[81] There may, however, be one exception to this general rule.
The Commission may for public policy reasons impose the Title VI
privacy provisions on both the platform and the affiliate.
Although the Commission has stated that the customer proprietary
network information (CPNI) rules should apply to a LEC common
carrier video transport platform, these rules -- because they
were primarily devised to address specific competitive concerns -
- may not address the privacy concerns associated with the
provision of video programming.  For example, the current CPNI
rules only require certain LECs to obtain the authorization of
customers with more than twenty lines before releasing their data
internally.  This rule would leave all single-line residential
customers unprotected.  Furthermore, imposition of the CPNI rules
on only the platform would leave virtually no legal restraints on
the programming affiliate's use of subscriber information.  It
should be noted, however, that even if the Commission imposes the
Title VI privacy provisions on the platform and the affiliate,
use of subscriber information by unaffiliated customer-
programmers will remain unregulated because these entities will
not be considered "cable operators."  Legislation may be required
to address this disparity.