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                 )

REPLY COMMENTS OF VIACOM INC.
     

     Viacom Inc. ("Viacom") hereby submits its reply to comments filed in connection
with the Commission's Notice of Proposed Rulemaking ("Notice") in the above-captioned
proceeding.  As noted below, the record compiled in this docket confirms the fundamental
premise of Viacom's original comments:  the Commission must take a light hand in crafting
the regulatory framework for "Open Video Systems" ("OVS") if the video marketplace is
ever to experience the substantial competitive benefits of OVS envisioned by Congress in the
Telecommunications Act of 1996 (the "1996 Act").  Open Video Systems' singular potential
for offering both inter-system and intra-system competition will come to nothing unless the
Commission's implementing regulations -- while providing the minimum safeguards needed
to afford unaffiliated packagers fair access to and treatment on an Open Video System -- still
permit a viable OVS-affiliated program packager to emerge.  This brief submission urges
the Commission to proceed accordingly and readdresses only those issues that warrant further
comment.

I.   The Record Highlights The Risk Of Denying Operators
     Of Open Video Systems Reasonable Flexibility            

     Local exchange carrier ("LEC") commenters have stated quite credibly that Open
Video Systems will not emerge in the video marketplace if an OVS operator is prevented
from mounting vigorous competition to inter-system rivals.  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.  Yet to insist on securing the most strictly conceived
notion of "open" access imaginable for OVS would be ultimately self-defeating.
     Viacom thus continues to advocate adoption of OVS rules that consist of general
prescriptive requirements for non-discriminatory treatment of unaffiliated packagers,
supplemented with "safe harbor" examples of practices deemed presumptively fair and
reasonable.  This approach is best suited to fostering the establishment and growth of a new
regulatory creature such as OVS, because the approach allows for reasonable flexibility in
system design while also providing the regulatory certainty needed to encourage system
investment.

II.  The Record Underscores The Need For OVS Allocation
     Requirements That Allow For A Viable Operator-
     Affiliated Package While Affording Non-Affiliated
     Packagers Fair Access To The System                        

     Nothing in the record refutes the premise underlying Viacom's call for minimally
intrusive rules for affording unaffiliated packagers fair access to Open Video Systems.  To
the contrary, potential OVS operators have acknowledged that they will have no incentive to
undertake the investment needed for (or cope with the uncertainty inherent in) the launch of
Open Video Systems if they themselves are precluded by government regulation from
becoming strong rivals to other multichannel video distributors.
     The Commission therefore should give OVS-affiliated packagers reasonably broad
latitude to put together program packages that will appeal to subscribers.  The OVS operator
must be permitted, as the 1996 Act specifies, to take at least one-third of the capacity on its
system for its affiliated packager's use -- and, if demand from unaffiliated packagers does not
outstrip supply, to take additional capacity as well.  And as Viacom and other commenters
have pointed out, neither OVS packagers nor subscribers would be well served by a rule
requiring packagers carried on a particular system to relinquish capacity if  subsequent
demand for channels should arise.  Furthermore, there is no statutory mandate for, nor
practical benefit in, requiring the OVS operator to provide more channel capacity to any one
unaffiliated packager than it may allocate to its affiliated packager.  Nor is it necessary or
desirable to count any "shared" channels, including those to which the OVS-affiliated
packager has licensing rights, against the statutory cap on the affiliated packager's use of
system capacity.
     The flexible allocation measures advocated in the preceding paragraph would not
unfairly hobble an unaffiliated packager's ability to reach subscribers.  The same cannot be
said, however, of the suggestion that an OVS operator should have unfettered freedom to
allocate all of a system's analog capacity to its affiliated packager (or any other favored
packager) while offering only digital capacity to disfavored packagers who request analog
channels.  The record in this proceeding, as well as the voluminous record in the "video
dialtone" ("VDT") proceeding before it, demonstrates that programming carried on digital
channels in today's video marketplace is not nearly as accessible to subscribers as
programming carried on analog channels.  Consequently, at least until consumers come to
enjoy ready access to programming carried on digital channels, the statutory cap should
indeed be deemed to limit the OVS operator's affiliated packager to one-third of an
over-subscribed system's analog capacity, measured separately from digital capacity.

III. The Record Supports Permitting Local Cable Operators
     To Become OVS Operators, But the 1996 Act's "Two-Wire"
     Model Would Not Be Served By Allowing A Local Cable
     Operator To Take Up Scarce Capacity On A Competitor's
     Open Video System                                                       

     Viacom's initial comments explained that the public interest benefits of Open Video
Systems are particularly well matched to the Congressional policy favoring a vigorously 
competitive "two-wire" world.  Because OVS clearly could contribute to both inter- and
intra-system competition, many commenters joined Viacom in supporting the Commission's
proposal to allow any interested entity -- including an incumbent cable operator -- to offer
video services under the OVS rules.  Conversion from traditional cable service to OVS
service would offer significant benefits to consumers and programmers alike, and cable
operators should not be impeded by federal or local authorities from doing so.
     The policy goal of two-wire competition would not be advanced, however, if a local
cable operator were permitted to use up scarce channel capacity on an Open Video System. 
Rather, the Commission itself should bar an incumbent cable operator from taking capacity
on a competing LEC's Open Video System, at least in cases where demand for analog
capacity exceeds supply.  This issue could be revisited once digital capacity offers
subscriber access generally comparable to that of analog and thereby renders the local cable
operator's presence on an Open Video System less of an impediment to competition.

IV.  The Record Supports Granting OVS Operators Limited
     Discretion In Structuring Carriage Rates, Terms, And
     Conditions That Do Not Discriminate In Favor Of The
     OVS-Affiliated Packager                                         

     The record supports Viacom's call for allowing OVS operators limited discretion in
establishing rates, terms, and conditions for carriage on Open Video Systems.  Specifically,
Viacom reiterates its support for an approach, suggested in the Notice, that would require an
OVS operator to apply to unaffiliated program packagers the same rate structure that it offers
(or could be fairly imputed) to its OVS-affiliated packager.  For example, a distinction
between the rates charged for analog and digital capacity would not be justified to the extent
such a distinction was unfairly employed to effectively reserve analog capacity to an affiliated
(or other favored) packager and to relegate disfavored packagers to less desirable digital
channels.

V.   The Record Strongly Confirms The Primacy Of Programmers'
     Control Over Licensing In The Structuring Of Channel
     Sharing And Other OVS Licensing Arrangements                 

     The record compellingly supports the Commission's proposed predicate for OVS
channel sharing:  any program packager who wants to offer a program service carried on a
shared channel "must first obtain permission from the program service to do so." 
Accordingly, the Commission should expressly reject any suggestion that an OVS operator
may have broader authority to deny programmers any rights they may otherwise have "to
license or not license" their program services to one or more packagers.
     Neither channel sharing nor any other elements of the OVS operator's "network
administrator" role should be leveraged to advance the OVS-affiliated packager's efforts to
extract an unreasonable license for an unaffiliated program service -- either directly from the
programmer or through a competing packager that the programmer has licensed.  Thus, the
Commission must reject the suggestion that an OVS operator may deny unaffiliated packagers
carriage where such packagers are licensed to carry program services for which the
OVS-affiliated packager (or any other packager) has not obtained a license on terms to its
liking.  Not only does this suggestion lack any statutory basis, but it would also flout the
Act's prohibition against discrimination in favor of affiliated packagers and would undermine
packager differentiation that would well serve the consumer's interest and the quest for
intra-system competition.
     The record also contains other explicit or implicit suggestions regarding application of
program access rules to Open Video Systems that likewise lack any statutory basis and,
indeed, contravene the specific limits of the express statutory authority for program access
rules.  In particular, there is no statutory authority whatsoever for extending program
access rules to apply either, first, to terrestrially-delivered program services or, second, to
any program service in which an OVS packager that is neither a LEC nor a cable operator
has an interest.

VI.  The Record Demonstrates That Non-Discriminatory Navigational
     Devices Are Critical To Supporting Intra-System Competition
     On Open Video Systems                                                     

     Commenters have shown that OVS menus and navigational devices must function in a
non-discriminatory manner if the service is ever to deliver on its promise for genuine intra-
system competition.  The Commission's OVS safeguards should thus ensure a
non-discriminatory interface between the subscriber and all packagers offering program
services on the Open Video System, permitting subscribers to access both affiliated and
unaffiliated program packagers with comparable ease.
     The 1996 Act's clear mandate in this regard cannot be reconciled with the suggestion
of some commenters that an OVS operator may circumvent its non-discrimination obligation
by simply offering subscribers a navigational device that works only within the operator's
affiliated package.  The Commission need not preclude an OVS operator's reasonable
discretion in arranging the presentation of the programming choices carried within its
affiliated package.  Congress was explicit, however, in prohibiting the OVS operator fromexcluding unaffiliated packagers from any navigational device the operator employs with its
system.

                                CONCLUSION

     Viacom respectfully urges the Commission to adopt the foregoing proposals 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 11, 1996