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                           Before the
                FEDERAL COMMUNICATIONS COMMISSION
                     Washington, D.C. 20554


In the Matter of                   )
                              )
Rainbow Programming Holdings, Inc.,     )    
                              )     
                    Complainant,   )
                              )
v.                            )    File No. E-97-15
                              )
Bell Atlantic-New Jersey, Inc., and          )
Bell Atlantic Network Services, Inc.,        )
                              )
                    Defendants.    )
 
                  MEMORANDUM OPINION AND ORDER

          Adopted:  July 5, 2000Released:  July 6, 2000

By the Chief, Enforcement Bureau:

                         I.INTRODUCTION

1.     In this Memorandum Opinion and Order, we grant the formal complaint filed by
Rainbow Programming Holdings, Inc. ("Rainbow") against Bell Atlantic-New Jersey, Inc. and
Bell Atlantic Network Services, Inc. (collectively referred to as "Bell Atlantic") pursuant to
section 208 of the Communications Act of 1934, as amended ("the Act").  Rainbow seeks the
return of deposit money it paid to reserve channels on Bell Atlantic's video dialtone system in
Dover Township, New Jersey.

2.     For the reasons set forth below, we conclude that Bell Atlantic violated section 201(b)
of the Act by engaging in unjust and unreasonable practices that wrongfully denied Rainbow the
ability to provide video programming to end-users on Bell Atlantic's video dialtone system in
Dover Township.  We further conclude that these unjust and unreasonable practices by Bell
Atlantic damaged Rainbow within the meaning of section 206 of the Act in the amount of the
deposit Rainbow paid to Bell Atlantic.  We therefore require Bell Atlantic to return the $345,600
channel reservation deposit to Rainbow with appropriate interest.

                          II.BACKGROUND

3.     Bell Atlantic-New Jersey, Inc. is a New Jersey corporation and wholly-owned
subsidiary of Bell Atlantic Corporation, whose principal business is the provision of
telecommunications services.  Bell Atlantic Network Services, Inc. is a Delaware corporation that
provides marketing, planning, procurement, financial, legal, accounting, technical support and
other management services for various Bell Atlantic Corporation subsidiaries, including Bell
Atlantic-New Jersey.  At the time of the filing of the formal complaint in this matter, Rainbow
was a New York corporation and managing partner of several partnerships that provided national
and regional video programming to cable and other types of multichannel video delivery systems.

4.     On August 14, 1992, the Commission authorized incumbent local exchange carriers to
participate in the video marketplace by provisioning video dialtone service to video
programmers.  Video dialtone, as conceived by the Commission, was designed to foster
competition in the video programming delivery market by making available to video
programmers a basic platform, provided by the local telephone company, for the distribution of
programming to end-users.  In order to guarantee space on each system for multiple programmers,
the Commission required video dialtone providers to operate as common carriers.

5.     Soon after the release of the Second Report and Order, Bell Atlantic filed an
application with the Commission to operate a video dialtone system in Dover Township, New
Jersey.  The Commission granted Bell Atlantic's application on July 18, 1994.

6.     Following the Second Report and Order, Bell Atlantic entered into an agreement with
Futurevision of America Corporation ("Futurevision"), a video programmer competing with
Rainbow, that would allow Futurevision to provide video programming over the Dover Township
system, once activated.  In connection with this agreement, Bell Atlantic agreed to pay half of
the development costs for interface software for the Dover Township system.  This software was
to be developed by, and the payment made to, Broadband Applications Development Corporation
("Broadband"), an affiliate of Futurevision.  In exchange, Bell Atlantic received the right to use
the software to perform tests on its system and the right to license the software to other video
programmers.

7.     In January 1995, Bell Atlantic filed Tariff Transmittal No. 741, which proposed to
extend its FCC Tariff No. 10 ("Tariff") to govern the terms of the video dialtone service in Dover
Township.  Section 2.10(A) of the Tariff required prospective programmers to submit a pre-paid
deposit based on the number of channels they sought to reserve on the system.  Section 2.10(A)
further provided that, once the programmer ordered service and began providing programming to
its end-users, Bell Atlantic would credit all charges against the balance of the deposit until the
deposit amount reached zero.

8.     When the enrollment period began on March 13, 1995, Futurevision immediately
submitted a deposit to reserve 36 channels on the Dover Township system.  Shortly thereafter,
Rainbow gave Bell Atlantic $345,600 to reserve 192 channels.  On April 10, 1995, Bell Atlantic
allocated 192 channels to Rainbow and 96 channels to Futurevision.  Bell Atlantic and Rainbow
then entered into an agreement, as required by the Tariff, in which Rainbow agreed to take the
192 channels for a minimum period of three months after the system began operations.

9.     Before the video dialtone system became operational, Bell Atlantic told all potential
programmers they would need to have interface software to access the system.  The Futurevision
affiliate Broadband, pursuant to the agreement between Futurevision and Bell Atlantic, developed
the Enhanced Provisioning Interactive Communication (EPIC) interface software that permitted
programmers to access the video dialtone system.  Bell Atlantic informed all potential
programmers that, in order to access the system, the potential programmers could: (i) develop
their own interface software using the generic specifications Bell Atlantic supplied; (ii) license the
EPIC software from Futurevision; or (iii) license the EPIC software from Bell Atlantic itself.

10.    As discussed in more detail below, Bell Atlantic specifically represented to Rainbow
that it would make available to Rainbow the EPIC software.  However, Bell Atlantic neither
provided Rainbow with any licensing proposal for the EPIC software in response to Rainbow's
request nor allowed Rainbow to use the EPIC software without a license.  As a result, Rainbow
asserts that it was unable to provide video programming to end-users in Dover Township on the
date the system began operations.

11.    The Dover Township system began operations on January 29, 1996 with the EPIC
software as the only software capable of interfacing with the system.  Moreover, Futurevision was
the only programmer providing video programming to end-users.

12.    By letters dated September 25 and October 22, 1996, Rainbow informed Bell Atlantic
that it was terminating its agreement to order service.  In the letters, Rainbow demanded that
Bell Atlantic return its entire channel reservation deposit with interest because, among other
things, Bell Atlantic had refused to negotiate with Rainbow for or provide access to the
"necessary componentry and functionality" needed to interface with the Dover Township
system.  In response, by letters dated October 4 and December 16, 1996, Bell Atlantic refused
Rainbow's demand, claiming that it had made the necessary specifications available to Rainbow,
and that Rainbow could have developed its own interface software.  Rainbow then filed the
instant formal complaint.  

                         III.DISCUSSION

13.    Rainbow alleges that Bell Atlantic failed to furnish the requested video dialtone
service in a nondiscriminatory manner, in violation of sections 201(a) and 202(a) of the Act. 
Rainbow also asserts that Bell Atlantic's refusal to return Rainbow's deposit was an unjust and
unreasonable practice, in violation of section 201(b) of the Act.  In addition, Rainbow contends:
(i) that Bell Atlantic failed to substantially perform or reasonably discharge its duty under the
tariff, in violation of section 203(a) of the Act; (ii) that the tariff was ambiguous and should be
construed to require the return of the deposit to Rainbow under section 61.2 of the Commission's
rules; and (iii) that the tariff was void and should have been rescinded.  Finally, Rainbow alleges
that Bell Atlantic's failure to provide access to the video dialtone platform by denying it the
necessary EPIC interface software was an unjust and unreasonable practice in violation of section
201(b) of the Act.  Rainbow seeks the return of its $345,600 channel reservation deposit plus
accumulated interest.

     A.   Bell Atlantic's Conduct Was Unjust and Unreasonable in Violation of Section 201(b)
     of the Act.

2.     We find that Bell Atlantic violated section 201(b) of the Act by engaging in unjust and
unreasonable practices that denied Rainbow access to the video dialtone platform.  As explained
in more detail below, we so find because: (i) Bell Atlantic made various representations to
Rainbow that it would make available to Rainbow the EPIC software; (ii) Bell Atlantic
subsequently failed to make the EPIC software available; and (iii) Rainbow refrained from
developing its own interface software after reasonably and detrimentally relying on Bell Atlantic's
representations.

3.     First, we determine that Bell Atlantic's refusal to provide the EPIC software to
Rainbow constitutes a practice "in connection with . . . communication service" within the
meaning of section 201(b) of the Act.  In the First Report and Order permitting incumbent local
exchange carriers to offer video dialtone, the Commission concluded that the video dialtone
platform should include "limited computer processing applications directly related to the
facilitation of the connection between the subscriber and the service provider" and that such
applications would be adjunct to basic services provided.  Moreover, the Commission, in the
New Jersey Bell Order, found that interface software was "necessary to facilitate video
programmer interconnection to [Bell Atlantic's] basic platform."  Bell Atlantic admits that
Rainbow could not have provided delivery of its programming without some interface software. 
On the Dover Township system, video programmers could not provide programming without
accessing the Video Administration Module ("VAM") component of the system.  The VAM
provisioned and maintained information about the system for the programmer, allowed
programmers to schedule and modify end-user video service, and performed billing functions. 
Therefore, a video programmer that could not interface with the VAM could not access the video
dialtone system and could not provide programming.  We therefore conclude that Bell Atlantic's
actions in providing (or failing to provide) the interface software was a "practice" conducted "in
connection with" the video dialtone service within the meaning of section 201(b) of the Act.

4.     We next conclude that Bell Atlantic failed to make available to Rainbow the EPIC
interface software after it made representations that it would do so and after Rainbow reasonably
relied upon these representations in deciding not to develop its own interface software.  Prior to
the activation of the Dover Township system, Bell Atlantic made several representations
concerning the availability of the EPIC software.  In May 1994, the New Jersey Cable Television
Association ("NJCTA") petitioned the Commission to deny Bell Atlantic's video dialtone
application.  Among other points, the NJCTA alleged that the software development agreement
between Futurevision and Bell Atlantic possibly violated the Commission's telephone company-
cable television cross-ownership rules.  On May 20, 1994, Bell Atlantic responded to NJCTA's
concerns by informing the Commission, as well as all potential programmers, that programmers
would be able to license from Bell Atlantic the EPIC software.  Bell Atlantic does not deny that
it made this representation.

5.     The next year, on April 26, 1995, one month after Rainbow had given Bell Atlantic its
$345,600 channel reservation deposit, Rainbow representatives met with Bell Atlantic
representatives to discuss a number of issues related to the provision of the video dialtone service
in Dover Township.  The parties discussed the appropriate activation date for the Dover Township
system, marketing arrangements, channel assignments for the different video programmers, and
the necessary interface software.  Rainbow asserts that during these discussions, Bell Atlantic
assured Rainbow that Bell Atlantic "had available and would be willing to lease Rainbow" the
EPIC software.   Bell Atlantic does not deny making this statement to the Rainbow
representatives.

6.     Bell Atlantic continued throughout 1995 to represent to Rainbow that it could and
would license the EPIC software.  According to Rainbow, during the week of October 23, 1995,
Bell Atlantic told Rainbow that the EPIC interface software was the only software available that
would allow programmers to access the system. In addition, Bell Atlantic's own representative
stated in an affidavit that he told Rainbow that, if Rainbow wanted to use the EPIC software,
Rainbow could negotiate a license for the software with Bell Atlantic.  Shortly thereafter, on
November 13, 1995, Rainbow attempted to negotiate with both Bell Atlantic and Futurevision for
a license to use the EPIC software.  During these discussions, Futurevision told Rainbow that it
would not allow Rainbow to use the EPIC software until Rainbow licensed Futurevision to carry
Rainbow's video programming.  At the same time, Bell Atlantic told Rainbow it would lease to
Rainbow the EPIC software at rates, terms and conditions to be negotiated in the future. 
Rainbow then requested that Bell Atlantic submit a licensing proposal, which Bell Atlantic failed
to do.  Once again, Bell Atlantic does not deny that it made these representations.

7.     Finally, as late as December 1995, Bell Atlantic represented that it would license the
EPIC software to Rainbow.  As part of a Common Carrier Bureau tariff investigation, Rainbow
filed comments complaining that, because the EPIC software was the only software that allowed
access to the Dover Township system, and because only Bell Atlantic and Futurevision could
license the EPIC software, Rainbow might not be able to gain access to the system.  Rainbow
asked the Commission to require Bell Atlantic to offer access to the EPIC software.  In response,
on December 20, 1995, Bell Atlantic informed the Commission in a written filing that it had
offered to license the EPIC software to Rainbow.  Bell Atlantic conceded in the filing that
Rainbow had requested a proposal to license the EPIC software from Bell Atlantic in November
1995, but claimed that it had not yet completed the "internal work" needed to submit such a
proposal.  Despite these representations, Bell Atlantic never provided Rainbow with any EPIC
software licensing proposal.

8.     We also find that Rainbow reasonably relied upon these statements in deciding not to
pursue development of its own interface software until it was too late to pursue such an alternative
route.  As detailed above, over a period of more than a year and a half prior to the January 1996
launch of service on the Dover Township system, Bell Atlantic repeatedly represented to Rainbow
and the Commission that it would make the EPIC software available for licensing.  In reliance on
these representations, Rainbow refrained from developing its own interface software and instead
requested a license to use the EPIC software from Bell Atlantic.  Under these circumstances,
Rainbow's reliance on Bell Atlantic's representations and decision not to develop its own
interface software were entirely reasonable.

9.     Bell Atlantic concedes that Rainbow needed to have some software capable of
interfacing with the system, but claims that Rainbow could have developed its own interface
software from the available generic technical specifications.  Additionally, Bell Atlantic
contends that Rainbow knew it would have to develop its own interface software because Bell
Atlantic allegedly informed all programmers that they, and not Bell Atlantic, were responsible for
the interface software.

10.    As explained above, however, Bell Atlantic made specific representations both to
Rainbow and the Commission that it would license the EPIC software to Rainbow.  By the time
Rainbow realized that Bell Atlantic would not live up to its promises, it was too late (and too
expensive) for Rainbow to develop its own interface software before the Dover Township system
began operations.  According to Bell Atlantic, Futurevision took more than two years and spent
approximately $300,000 to develop the EPIC software.  In early 1996, Rainbow estimated that it
could develop its own software with "2 to 3 man-years effort" at a cost of $350,000 to
$400,000.  Bell Atlantic told Rainbow as recently as December 20, 1995 that it would provide
the EPIC software for Rainbow's use.  Even if Bell Atlantic had informed Rainbow the very next
day that the EPIC software was no longer available, Rainbow could not reasonably have
developed its own interface software by the time Bell Atlantic activated service at the end of
January 1996. We are thus not persuaded that Rainbow could have developed its own interface
software in a timely manner and at a reasonable cost.
 
11.    Bell Atlantic next insists that Rainbow could have licensed the EPIC software from
Futurevision.  Rainbow did attempt to negotiate an agreement with Futurevision, but Futurevision
refused to license the EPIC software unless Rainbow agreed to let Futurevision carry Rainbow's
video programming.  In essence, Futurevision leveraged its right to license the EPIC software to
try to force Rainbow to give up the exclusive rights to its own video programming.  Under these
circumstances, particularly considering Futurevision's close relationship with Bell Atlantic, we do
not consider this to be a reasonable alternative for Rainbow.  In any event, Bell Atlantic's
representations significantly affected Rainbow's ability to exercise this option since Rainbow had
no reason to pursue such negotiations with Rainbow until it became clear that Bell Atlantic was
refusing to provide the EPIC software.

12.    Bell Atlantic asserts two additional arguments, each of which is undermined by its
representations to Rainbow.  Bell Atlantic first asserts that Futurevision prohibited it from
licensing the EPIC software to Rainbow because Bell Atlantic could not provide the required
technical support and was unwilling to pay Futurevision's proposed technical support fee. 
Second, Bell Atlantic argues that it had no obligation to provide the EPIC software because the
Tariff only obligated it to provide "delivery of . . .video signals between the Programmer-
Customer and its End-User Subscribers."  We find these arguments are without merit. 
Beginning in May 1994 and continuing through December 1995, Bell Atlantic held itself out to
Rainbow and the Commission as able and willing to license the EPIC software.  Rainbow
reasonably relied upon these representations.  As a result, Bell Atlantic could not lawfully refuse
to supply the license on the grounds that it would be too expensive or was not legally required.

13.    In light of these facts, we conclude that Bell Atlantic's refusal to make the EPIC
software available to Rainbow was an unjust and unreasonable practice under section 201(b) of
the Act.

     N.   Rainbow is Entitled to Damages.

15.    Rainbow requests damages in the amount of its $345,600 channel reservation deposit
plus interest.  We find this relief, including prejudgment interest, is appropriate and reasonable
under sections 206 and 209 of the Act.  From October 4, 1996 (the date on which Bell Atlantic
first refused to return Rainbow's channel reservation deposit), until the present day, Bell Atlantic
has wrongfully retained the channel reservation deposit and has deprived Rainbow of the
beneficial use of these funds.  We conclude that an award of interest in this proceeding will make
Rainbow whole and avoid any unjust enrichment to Bell Atlantic stemming from behavior we
find to be in violation of section 201(b) of the Act.  The parties shall compute the interest using
the IRS rate for tax refunds based on the total amount of $345,600 and covering the time period
beginning October 4, 1996 and concluding on the date Bell Atlantic provides full payment to
Rainbow.

                          IV.CONCLUSION

16.    For the foregoing reasons, we grant Rainbow's complaint and conclude that Bell
Atlantic violated section 201(b) of the Communications Act of 1934, as amended, 47 U.S.C. 
201(b).  As damages for this violation, Bell Atlantic must pay Rainbow $345,600, including
interest computed as set forth above.

                       V.ORDERING CLAUSES

17.    Accordingly, IT IS ORDERED, pursuant to sections 4(i), 4(j), 201(b), and 208 of the
Communications Act of 1934, as amended, 47 U.S.C.  154(i), 154(j), 201(b), and 208, and
authority delegated pursuant to sections 0.111 and 0.333 of the Commission's rules, 47 C.F.R. 
0.111, 0.333, that the formal complaint filed in this matter by Rainbow Programming Holdings is
hereby GRANTED in part as indicated herein.

18.    IT IS FURTHER ORDERED, pursuant to sections 4(i), 4(j), 206, 208 and 209 of the
Communications Act of 1934, as amended, 47 U.S.C.  154(i), 154(j), 206, 208 and 209, and
authority delegated pursuant to sections 0.111 and 0.333 of the Commission's rules, 47 C.F.R. 
0.111, 0.333, that Defendants Bell Atlantic-New Jersey, Inc., and Bell Atlantic Network Services,
Inc. shall pay Complainant Rainbow Programming Holdings, Inc. three hundred forty-five
thousand, six hundred dollars ($345,600) not later than thirty (30) days from the release date of
this Memorandum Opinion and Order, along with prejudgment and post-judgment interest.  The
parties shall compute the interest payment using the 1996 IRS rate for tax refunds.  The interest
payment shall be calculated beginning on October 4, 1996 and ending on the date that Bell
Atlantic makes full payment to Rainbow of the damages owed.

19.    IT IS FURTHER ORDER that Rainbow's Motion to Compel, filed August 26, 1997,
is DENIED as moot.


                         FEDERAL COMMUNICATIONS COMMISSION



                    David H. Solomon
                    Chief, Enforcement Bureau