[Federal Register Volume 72, Number 74 (Wednesday, April 18, 2007)]
[Proposed Rules]
[Pages 19448-19453]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: E7-7254]


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FEDERAL COMMUNICATIONS COMMISSION

47 CFR Part 76

[MB Docket No. 07-51; FCC 07-32]


Exclusive Service Contracts for Provision of Video Services in 
Multiple Dwelling Units and Other Real Estate Developments

AGENCY: Federal Communications Commission.

ACTION: Proposed rule.

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SUMMARY: In this document, the Commission takes steps to encourage 
greater competition in the market for the delivery of multichannel 
video programming by soliciting comment on the use of exclusive 
contracts for the provision of video services to multiple dwelling 
units (``MDUs'') or other real estate developments. The Commission also 
seeks comment on whether the use of exclusive contracts in the MDU 
video provider market unreasonably impedes the achievement of the 
interrelated federal goals of enhanced multichannel video competition 
and accelerated broadband deployment and, if so, how the Commission 
should act to address that problem.

DATES: Comments for this proceeding are due on or before June 18, 2007; 
reply comments are due on or before July 18, 2007.

ADDRESSES: You may submit comments, identified by MB Docket No. 07-51, 
by any of the following methods:
    <bullet> Federal eRulemaking Portal: http://www.regulations.gov. 
Follow the instructions for submitting comments.
    <bullet> Federal Communications Commission's Web site: http://www.fcc.gov/cgb/ecfs/. Follow the instructions for submitting comments.
    <bullet> People with Disabilities: Contact the FCC to request 
reasonable accommodations (accessible format documents, sign language 
interpreters, CART, etc.) by e-mail: <a href="/cdn-cgi/l/email-protection#e9afaaaadcd9dda98f8a8ac78e869f"><span class="__cf_email__" data-cfemail="f4b2b7b7c1c4c0b4929797da939b82">[email protected]</span></a> or phone: 202-418-
0530 or TTY: 202-418-0432.

For detailed instructions for submitting comments and additional 
information on the rulemaking process, see the SUPPLEMENTARY 
INFORMATION section of this document.

FOR FURTHER INFORMATION CONTACT: For additional information on this 
proceeding, contact Holly Saurer, <a href="/cdn-cgi/l/email-protection#5c1433303025720f3d292e392e1c3a3f3f723b332a"><span class="__cf_email__" data-cfemail="581037343421760b392d2a3d2a183e3b3b763f372e">[email protected]</span></a> of the Media 
Bureau, Policy Division, (202) 418-2120.

SUPPLEMENTARY INFORMATION: This is a summary of the Commission's Notice 
of Proposed Rulemaking (NPRM), FCC 07-32, adopted on March 22, 2007, 
and released on March 27, 2007. The full text of this document is 
available for public inspection and copying during regular business 
hours in the FCC Reference Center, Federal Communications Commission, 
445 12th Street, SW., CY-A257, Washington, DC 20554. These documents 
will also be available via ECFS (http://www.fcc.gov/cgb/ecfs/). 
(Documents will be available electronically in ASCII, Word 97, and/or 
Adobe Acrobat.) The complete text may be purchased from the 
Commission's copy contractor, 445 12th Street, SW., Room CY-B402, 
Washington, DC 20554. To request this document in accessible formats 
(computer diskettes, large print, audio recording, and Braille), send 
an e-mail to <a href="/cdn-cgi/l/email-protection" class="__cf_email__" data-cfemail="c4a2a7a7f1f4f084a2a7a7eaa3abb2">[email protected]</a> or call the Commission's Consumer and 
Governmental Affairs Bureau at (202) 418-0530 (voice), (202) 418-0432 
(TTY).

Initial Paperwork Reduction Act of 1995 Analysis

    This document does not contain proposed information collection 
requirements subject to the Paperwork Reduction Act of 1995, Public Law 
104-13. In addition, therefore, it does not contain any proposed 
information collection burden ``for small business concerns with fewer 
than 25 employees,'' pursuant to the Small Business Paperwork Relief 
Act of 2002, Public Law 107-198, see 44 U.S.C. 3506(c)(4).

Summary of the NPRM of Proposed Rulemaking

I. Introduction

    In this Notice of Proposed Rulemaking (``NPRM''), we solicit 
comment on the use of exclusive contracts for the provision of video 
services to multiple dwelling units (``MDUs'') or other real estate 
developments. Greater competition in the market for the delivery of 
multichannel video programming is one of the primary goals of Federal 
communications policy. Moreover, for many participants in the 
marketplace, the ability to offer video to consumers and the ability to 
deploy broadband networks rapidly are linked intrinsically. However, 
potential competitors seeking to enter the multichannel video 
programming distributor (``MVPD'') marketplace have alleged that the 
use of exclusive contracts for the provision of video services to MDUs 
or other real estate developments serves as a barrier to entry. 
Accordingly, this NPRM is designed to solicit comment on whether the 
use of exclusive contracts in the MDU video provider market 
unreasonably impedes the achievement of the interrelated federal goals 
of enhanced multichannel video competition and accelerated broadband 
deployment and, if so, how the Commission should act to address that 
problem.

II. Background

    1. In 1997, the Commission issued an NPRM regarding the use of 
exclusive access arrangements in MDUs. The Commission stated that 
exclusive service contracts between MDU owners and MVPDs could be 
considered pro-competitive or anti-competitive, depending upon the 
circumstances involved. Commenters who were effectively prohibited from 
providing service due to the existence of exclusive contracts argued 
that those contracts were anti-competitive. Other commenters argued 
that exclusive contracts were necessary to enhance their ability to 
recover investment costs. In the corresponding Report and Order, the 
Commission declined to take any action regarding exclusive agreements, 
concluding that there was insufficient evidence in the record to 
determine the extent of use of such exclusive contracts, and whether or 
not such contracts had significantly impeded access by competitive 
providers into the MDU market.
    2. We note that the Commission is considering MDU access with 
respect to other services. In the context of

[[Page 19449]]

commercial telecommunications services, the Commission has prohibited 
the enforcement of exclusive access arrangements in multiple tenant 
environments (``MTEs''). In the Competitive Networks Order, the 
Commission concluded that a ban on exclusive contracts for 
telecommunications service in commercial MTEs would foster competition 
in that market. Unlike parties in the inside wiring proceeding, no 
party in the competitive networks proceeding argued in support of 
exclusive contracts in the commercial setting. Further, in Competitive 
Networks FNPRM, the Commission sought comment on other issues related 
to the imposition of a nondiscriminatory access requirement, including 
possibly extending the Competitive Networks Order findings to 
residential MTEs. We intend to issue a public notice seeking to refresh 
the record in that proceeding. Also, in the Cox Inside Wiring 
proceeding, the Commission is considering issues relating to the scope 
of competitors' right to access incumbent LECs' inside wire in 
multiunit premises for purposes of offering competing telephone 
service.
    3. The Commission recently adopted a Report and Order 
(``Franchising Reform Order'') relating to Section 621 of the Act. The 
Franchising Reform Order adopted several provisions to remedy 
unreasonable local government procedures and behavior with respect to 
the franchising process that result in unreasonable refusals to grant 
additional competitive franchises. The NPRM in that proceeding asked 
for comment on the specific rules or guidance that we should adopt to 
ensure that the local cable franchising process does not unreasonably 
impede competitive entry. Among other issues, commenters discussed the 
impediment presented by the use of exclusive contracts for the 
provision of video services to MDUs and other real estate developments.
    4. Specifically, SureWest Communications, which provides bundled 
offerings of voice, data, and video services, filed an ex parte 
statement asking the Commission to prohibit MVPDs from excuting new, or 
enforcing existing, exclusive access agreements with MDUs and other 
real estate developments. SureWest argues that exclusive agreements are 
used by incumbent providers to undercut the competitive market for 
video services and states that over 25% of the MDUs that its network 
passes are locked into exclusive agreements, which effectively bar 
SureWest from offering its services to residents in those MDUs. Manatee 
County, Florida submitted comments arguing that exclusive access 
agreements, if permitted at all, should be of limited duration. Manatee 
County stated that exclusive long-term contracts harm competition and 
permit incumbent providers to become complacent, imposing antiquated 
systems on their subscribers. The County noted that it recently adopted 
an ordinance which prohibits any of its franchisees from entering into 
exclusive agreements of more than five years. Verizon filed ex parte 
statements arguing that the Commission should prohibit MVPDs from 
entering into new, or enforcing existing, exclusive access agreements 
with owners of MDUs. Verizon stated that it had ``repeatedly 
encountered exclusive access arrangements which have prevented it from 
providing cable services to significant numbers of residents.'' Verizon 
provided examples of requests to cease and desist the marketing of its 
FiOS video service offerings (discussing various examples, including a 
cease and desist letter from Bright House Networks regarding marketing 
of FiOS in the River Chase apartment complex in Tampa, Florida; a 
letter from BDR Broadband, LLC regarding the provision of FiOS in 
apartment complexes in Plano and Carrollton, Texas; negotiations with 
Ariger Management in Maryland that have an exclusive contract with 
Comcast; and negotiations with Post Properties in Fairfax County, 
Virginia that have a perpetual contract with Cox). Verizon stated that 
some landlords would like to give tenants a greater variety of cable 
choices, but are unable to do so because of exclusive contracts. 
Further, Verizon notes that exclusive contracts do not provide video 
providers any incentives to upgrade equipment or improve services, 
which adversely impacts consumers. In contrast, the National Multi-
Housing Council filed an ex parte statement urging the Commission to 
reject calls for regulation of exclusive access agreements, stating 
that exclusive contracts give competitive providers assurance that they 
will be able to recover the capital costs of installing their 
facilities, thereby increasing the prospects of competition.

III. Discussion

    5. Potential competitive video providers have alleged that the use 
of exclusive contracts for MDUs or other real estate developments 
serves as a barrier to entry, and that these exclusive contracts 
unreasonably delay competitive entry. As noted in the 621 Order, the 
video provider marketplace is currently undergoing a change, with the 
entrance of traditional phone companies that are primed to offer a 
``triple play'' of voice, high-speed Internet access, and video 
services over their respective networks. Given the interrelated Federal 
goals of enhanced cable competition and rapid broadband deployment, we 
seek comment on a number of issues relating to the prevalence and use 
and effect of exclusive contracts in today's marketplace.

 A. Potential Competitors' Current Ability to Obtain Access to MDUs

    6. As an initial matter, we request comment on the current 
environment for MVPDs attempting to obtain access to MDUs or other real 
estate developments. To what extent do exclusive contracts impede the 
realization of our policy goals? How often have competitive entrants 
confronted exclusive access agreements, what are the terms of those 
agreements, and are those agreements becoming more prevalent? How has 
the multichannel video marketplace changed since adoption of our Inside 
Wiring Report and Order, and what effect have those changes had for 
consumers who live in MDUs or other real estate developments? What is 
the current status of state mandatory access laws and what impact do 
they have on the issues raised herein?
    7. We also ask for additional information on the MVPDs operating 
pursuant to such exclusive contracts. In the Inside Wiring Second 
Report and Order we stated that exclusive contracts may benefit new 
entrants by reducing investment risk. Verizon indicates, however, that 
incumbent providers are soliciting such exclusive contracts when a 
potential competitor is actively seeking a local franchise to provide 
service in the MDU's franchise area. We seek comment on whether MVPDs 
seek exclusive contracts in an effort to frustrate competitive entry. 
Do incumbent providers use the time during which new entrants are 
negotiating local franchises in order to obtain exclusive contracts? We 
also seek comment on whether, in today's market, exclusive contracts 
benefit new entrants, incumbent providers, or both. We also ask whether 
the video providers entering into such exclusive contracts would be 
unable to provide service to these MDUs or other real estate 
developments absent the protections afforded by exclusive contracts.

B. The Commission's Authority to Prohibit the Use of Exclusive 
Contracts

    8. We tentatively conclude that the Commission has authority to 
regulate exclusive contracts for the provision of

[[Page 19450]]

video services to MDUs or other real estate developments where we find 
that such contracts may impede competition and impair deployment of 
those services. We seek comment on this tentative conclusion, 
particularly with regard to our authority under, and the scope and 
applicability of, Section 628(b) of the Communications Act of 1934 and 
Section 706 of the 1996 Telecommunications Act. We also seek comment on 
the scope and applicability of Section 623, Section 1, Section 4(i), 
and Section 303(r) of the Communications Act of 1934 to this issue as 
well as other provisions that may provide us with authority to regulate 
exclusive contracts. We note that Section 628(b) states

    [i]t shall be unlawful for a cable operator, a satellite, cable 
programming vendor in which a cable operator has an attributable 
interest, or a satellite broadcast programming vendor to engage in 
unfair methods of competition or unfair or deceptive acts or 
practices, the purpose or effect of which is to hinder significantly 
or to prevent any multichannel video programming distributor from 
providing satellite cable programming or satellite broadcast 
programming to subscribers or consumers.

    We also seek comment on how we should define what constitutes 
``unfair methods of competition or unfair or deceptive acts or 
practices'' under Section 628(b). We note that this language is similar 
to that used in the Federal Trade Commission Act. Commenters should 
address the relevance to our interpretation of Section 628(b) of any 
interpretation of similar language by the FTC or Federal courts.
    9. In addition, Section 706 of the 1996 Telecommunications Act, 
charges the Commission to ``encourage the deployment of * * * advanced 
telecommunications capability to all Americans.'' Given the 
relationship between a company's ability to offer video programming to 
customers and its ability to invest in broadband facilities, does 
Section 706 provide the Commission authority to address competitive 
concerns relating to exclusive contracts? Moreover, the Commission is 
empowered by Section 1 of the Act ``to execute and enforce the 
provisions of this Act,'' and by Section 4(i) ``to perform any and all 
acts, make such rules and regulations, and issue such orders, not 
inconsistent with this Act, as may be necessary in the execution of its 
functions.'' We also note that, with respect to MDU ``home run'' 
wiring, the Commission concluded that it had authority under Title VI 
(particularly Section 623) in conjunction with Sections 4(i) and 303(r) 
to regulate the disposition of such wiring upon termination of service. 
``Home run'' wiring in an MDU is the wiring that runs from the 
demarcation point to the point at which the MVPD's wiring becomes 
devoted to an individual subscriber or individual loop. We invite 
commenters to address whether these provisions, or others, can or 
should serve as a basis for regulating exclusive contracts for the 
provision of video services to MDUs or other real estate developments. 
In addition, we ask parties to address the scope of the Commission's 
authority. Does the Commission have authority to regulate only 
exclusive contracts entered into after the effective date of the 
regulations or could it declare existing exclusive contracts void or 
voidable? Does the Commission have authority to regulate exclusive 
contracts entered into by MVPDs other than cable operators? Finally, we 
seek comment on the effect, if any, of state mandatory access laws or 
other statutory or constitutional considerations on the Commission's 
authority in this area.

C. Whether Commission Action Is Needed to Ensure Competitive Video 
Access to MDUs

    10. We seek comment on the impact of exclusive contracts on 
consumer choice and video competition. We note that, in the context of 
telecommunications services, the Commission has prohibited the 
enforcement of exclusive access arrangements in commercial MDUs. Does 
the existence of exclusive contracts within a community reduce the 
likelihood of competitive entry in the community? What are the typical 
durations of existing exclusive contracts? Are the costs associated 
with providing service to MDUs or other real estate developments 
significantly more than the costs of providing service in other areas? 
Is there more risk associated with serving these types of developments? 
Are the marketing costs higher in these areas? Is customer churn 
higher? How do the prices and services offered under the exclusive 
contracts compare to those offered to other customers? Are additional 
payments made to or by the MVPD in return for exclusive contracts? Do 
existing exclusive contracts provide the MVPD with a right of first 
refusal when renegotiating the contract? To the extent that some 
exclusive contracts can be pro-competitive and benefit consumers, we 
seek comment on those circumstances. If the Commission determines that 
it would serve the public interest to regulate exclusive contracts, we 
seek comment on how we should regulate such contracts.
    11. We seek comment on whether the Commission should limit 
exclusive contracts only where the video provider at issue possesses 
market power. In this regard, we call for comment on how the video 
programming market has changed since the issue was last posed in the 
Inside Wiring FNPRM, and whether the Commission should reconsider 
restriction or prohibition of the use of exclusive contracts by video 
providers with market power. In particular, we seek comment on how to 
define ``market power'' for these purposes. We also seek input on any 
other issues relevant to the analysis of market power and exclusive 
contracts. Does the competitive impact of exclusive contracts differ 
depending on whether a competing terrestrial MVPD was able to provide 
service to the MDU or other real estate development at the time the 
exclusive contract was negotiated?
    12. We also call for comment regarding the existence of 
``perpetual'' contracts. Perpetual contracts are contracts that grant 
the incumbent provider the right to maintain its wiring and provide 
service to the MDU for indefinite or very long periods of time, or for 
the duration of the cable franchise term, and any extensions thereof. 
Perpetual contracts present some of the same competitive issues as 
exclusive contracts, and were also discussed in the Inside Wiring 
Report and Order. Are perpetual contracts currently being executed? If 
so, are perpetual contracts anti-competitive, as they effectively bar 
any competitive entry, or are there instances in which the use of 
perpetual contracts does not impede our policy goals of enhanced cable 
competition and accelerated broadband deployment? Commenters should 
address the Commission's authority to nullify or otherwise regulate 
perpetual contracts.
    13. We also solicit comment on the specific rules or guidance that 
we should adopt to ensure that exclusive contracts do not unreasonably 
impede competitive video entry. Should the Commission establish 
explicit rules to which contracting parties must adhere or specific 
guidelines for MVPDs? Are there certain practices that we should find 
unreasonable through rules or guidelines? If so, what are these 
practices?

IV. Procedural Matters

A. Initial Regulatory Flexibility Analysis

    14. As required by the Regulatory Flexibility Act, the Commission 
has prepared an Initial Regulatory Flexibility Analysis (IRFA) of the

[[Page 19451]]

possible significant economic impact on a substantial number of small 
entities of the proposals addressed in this Notice of Proposed 
Rulemaking. The IRFA is set forth in the Appendix. Written public 
comments are requested on the IRFA. These comments must be filed in 
accordance with the same filing deadlines for comments on the NPRM, and 
they should have a separate and distinct heading designating them as 
responses to the IRFA.

B. Ex Parte Rules

    15. Permit-But-Disclose. This proceeding will be treated as a 
``permit-but-disclose'' proceeding subject to the ``permit-but-
disclose'' requirements under section 1.1206(b) of the Commission's 
rules. Ex parte presentations are permissible if disclosed in 
accordance with Commission rules, except during the Sunshine Agenda 
period when presentations, ex parte or otherwise, are generally 
prohibited. Persons making oral ex parte presentations are reminded 
that a memorandum summarizing a presentation must contain a summary of 
the substance of the presentation and not merely a listing of the 
subjects discussed. More than a one- or two-sentence description of the 
views and arguments presented is generally required. Additional rules 
pertaining to oral and written presentations are set forth in section 
1.1206(b).

C. Filing Requirements

    16. Comment Information. Pursuant to sections 1.415 and 1.419 of 
the Commission's rules, 47 CFR 1.415, 1.419, interested parties may 
file comments and reply comments on or before the dates indicated on 
the first page of this document. Comments may be filed using: (1) The 
Commission's Electronic Comment Filing System (ECFS), (2) the Federal 
Government's eRulemaking Portal, or (3) by filing paper copies. See 
Electronic Filing of Documents in Rulemaking Proceedings, 63 FR 24121 
(1998).
    <bullet> Electronic Filers: Comments may be filed electronically 
using the Internet by accessing the ECFS: http://www.fcc.gov/cgb/ecfs/ 
or the Federal eRulemaking Portal: http://www.regulations.gov. Filers 
should follow the instructions provided on the Web site for submitting 
comments.
    <bullet> For ECFS filers, if multiple docket or rulemaking numbers 
appear in the caption of this proceeding, filers must transmit one 
electronic copy of the comments for each docket or rulemaking number 
referenced in the caption. In completing the transmittal screen, filers 
should include their full name, U.S. Postal Service mailing address, 
and the applicable docket or rulemaking number. Parties may also submit 
an electronic comment by Internet e-mail. To get filing instructions, 
filers should send an e-mail to <a href="/cdn-cgi/l/email-protection#bfdadcd9ccffd9dcdc91d8d0c9"><span class="__cf_email__" data-cfemail="66030500152600050548010910">[email protected]</span></a>, and include the following 
words in the body of the message, ``get form.'' A sample form and 
directions will be sent in response.
    <bullet> Paper Filers: Parties who choose to file by paper must 
file an original and four copies of each filing. If more than one 
docket or rulemaking number appears in the caption of this proceeding, 
filers must submit two additional copies for each additional docket or 
rulemaking number.
    Filings can be sent by hand or messenger delivery, by commercial 
overnight courier, or by first-class or overnight U.S. Postal Service 
mail (although we continue to experience delays in receiving U.S. 
Postal Service mail). All filings must be addressed to the Commission's 
Secretary, Office of the Secretary, Federal Communications Commission.
    <bullet> The Commission's contractor will receive hand-delivered or 
messenger-delivered paper filings for the Commission's Secretary at 236 
Massachusetts Avenue, NE., Suite 110, Washington, DC 20002. The filing 
hours at this location are 8 a.m. to 7 p.m. All hand deliveries must be 
held together with rubber bands or fasteners. Any envelopes must be 
disposed of before entering the building.
    <bullet> Commercial overnight mail (other than U.S. Postal Service 
Express Mail and Priority Mail) must be sent to 9300 East Hampton 
Drive, Capitol Heights, MD 20743.
    <bullet> U.S. Postal Service first-class, Express, and Priority 
mail should be addressed to 445 12th Street, SW., Washington, DC 20554.
    People with Disabilities: To request materials in accessible 
formats for people with disabilities (braille, large print, electronic 
files, audio format), send an e-mail to <a href="/cdn-cgi/l/email-protection" class="__cf_email__" data-cfemail="8bede8e8bebbbfcbede8e8a5ece4fd">[email protected]</a> or call the 
Consumer & Governmental Affairs Bureau at 202-418-0530 (voice), 202-
418-0432 (tty).
    17. Availability of Documents. Comments, reply comments, and ex 
parte submissions will be available for public inspection during 
regular business hours in the FCC Reference Center, Federal 
Communications Commission, 445 12th Street, SW., CY-A257, Washington, 
DC 20554. These documents will also be available via ECFS. Documents 
will be available electronically in ASCII, Word 97, and/or Adobe 
Acrobat.
Initial Regulatory Flexibility Analysis
    18. As required by the Regulatory Flexibility Act of 1980, as 
amended (the ``RFA''), the Commission has prepared this Initial 
Regulatory Flexibility Analysis (``IRFA'') of the possible significant 
economic impact of the policies and rules proposed in the Notice of 
Proposed Rulemaking (``NPRM'') on a substantial number of small 
entities. Written public comments are requested on this IRFA. Comments 
must be identified as responses to the IRFA and must be filed by the 
deadlines for comments on the NPRM provided in paragraphs 17-18 of the 
item. The Commission will send a copy of the NPRM, including this IRFA, 
to the Chief Counsel for Advocacy of the Small Business Administration 
(``SBA''). In addition, the NPRM and IRFA (or summaries thereof) will 
be published in the Federal Register.
Need for, and Objectives of, the Proposed Rules
    19. The NPRM initiates a proceeding to investigate the use of 
exclusive contracts for the provision of video services to multiple 
dwelling units (``MDUs'') and other real estate developments, in order 
to further the interrelated goals of enhanced cable competition and 
accelerated broadband deployment. Specifically, the NPRM solicits 
comment on the existence of exclusive contracts for the provision of 
video services to MDUs and other real estate developments, and whether 
such exclusive contracts are ever pro-competitive, and if not, whether 
the Commission has authority to prohibit the use of such agreements.
Legal Basis
    20. The NPRM asks whether the Commission has authority to regulate 
the use of exclusive contracts for the provision of video services to 
MDUs or other real estate developments. It specifically asks whether 
such authority can be found in Sections 1, 4(i), 303(r), 623 and 628(b) 
of the Communications Act of 1934, as amended, and Section 706 of the 
Telecommunications Act of 1996.
Description and Estimate of the Number of Small Entities to Which the 
Proposed Rules Will Apply
    21. The RFA directs agencies to provide a description of, and where 
feasible, an estimate of the number of small entities that may be 
affected by the proposed rules, if adopted. The RFA generally defines 
the term ``small entity'' as having the same meaning as the terms 
``small business,'' ``small organization,'' and ``small governmental

[[Page 19452]]

jurisdiction.'' In addition, the term ``small business'' has the same 
meaning as the term ``small business concern'' under the Small Business 
Act. A ``small business concern'' is one which: (1) Is independently 
owned and operated; (2) is not dominant in its field of operation; and 
(3) satisfies any additional criteria established by the Small Business 
Administration (``SBA'').
    22. Small Businesses. Nationwide, there are a total of 
approximately 22.4 million small businesses, according to SBA data.
    23. Small Organizations. Nationwide, there are approximately 1.6 
million small organizations.
    24. Small Governmental Jurisdictions. The term ``small governmental 
jurisdiction'' is defined generally as ``governments of cities, towns, 
townships, villages, school districts, or special districts, with a 
population of less than fifty thousand.'' Census Bureau data for 2002 
indicate that there were 87,525 local governmental jurisdictions in the 
United States. We estimate that, of this total, 84,377 entities were 
``small governmental jurisdictions.'' We assume that the villages, 
school districts, and special districts are small, and total 48,558. 
For 2002, Census Bureau data indicate that the total number of county, 
municipal, and township governments nationwide was 38,967, of which 
35,819 were small. Thus, we estimate that most governmental 
jurisdictions are small.
    25. The Commission has determined that the group of small entities 
possibly directly affected by our action consists of small governmental 
entities. In addition the Commission voluntarily provides, below, 
descriptions of certain entities that may be merely indirectly affected 
by any rules that may ultimately result from the NPRM.
Cable Operators
    26. Cable and Other Program Distribution. The Census Bureau defines 
this category as follows: ``This industry comprises establishments 
primarily engaged as third-party distribution systems for broadcast 
programming. The establishments of this industry deliver visual, aural, 
or textual programming received from cable networks, local television 
stations, or radio networks to consumers via cable or direct-to-home 
satellite systems on a subscription or fee basis. These establishments 
do not generally originate programming material.'' The SBA has 
developed a small business size standard for Cable and Other Program 
Distribution, which is: all such firms having $13.5 million or less in 
annual receipts. According to Census Bureau data for 2002, there were a 
total of 1,191 firms in this category that operated for the entire 
year. Of this total, 1,087 firms had annual receipts of under $10 
million, and 43 firms had receipts of $10 million or more but less than 
$25 million. An additional 61 firms had annual receipts of $25 million 
or more. Thus, under this size standard, the majority of firms can be 
considered small.
    27. Cable Companies and Systems. The Commission has also developed 
its own small business size standards, for the purpose of cable rate 
regulation. Under the Commission's rules, a ``small cable company'' is 
one serving 400,000 or fewer subscribers, nationwide. The Commission 
determined that this size standard equates approximately to a size 
standard of $100 million or less in annual revenues. Industry data 
indicate that, of 1,076 cable operators nationwide, all but eleven are 
small under this size standard. In addition, under the Commission's 
rules, a ``small system'' is a cable system serving 15,000 or fewer 
subscribers. Industry data indicate that, of 7,208 systems nationwide, 
6,139 systems have under 10,000 subscribers, and an additional 379 
systems have 10,000-19,999 subscribers. Thus, under this second size 
standard, most cable systems are small.
    28. Cable System Operators. The Communications Act of 1934, as 
amended, also contains a size standard for small cable system 
operators, which is ``a cable operator that, directly or through an 
affiliate, serves in the aggregate fewer than 1 percent of all 
subscribers in the United States and is not affiliated with any entity 
or entities whose gross annual revenues in the aggregate exceed 
$250,000,000.'' The Commission has determined that an operator serving 
fewer than 677,000 subscribers shall be deemed a small operator, if its 
annual revenues, when combined with the total annual revenues of all 
its affiliates, do not exceed $250 million in the aggregate. Industry 
data indicate that, of 1,076 cable operators nationwide, all but ten 
are small under this size standard. We note that the Commission neither 
requests nor collects information on whether cable system operators are 
affiliated with entities whose gross annual revenues exceed $250 
million, and therefore we are unable to estimate more accurately the 
number of cable system operators that would qualify as small under this 
size standard. The Commission does receive such information on a case-
by-case basis if a cable operator appeals a local franchise authority's 
finding that the operator does not qualify as a small cable operator 
pursuant to section 76.901(f) of the Commission's rules.
    29. Open Video Services. Open Video Service (``OVS'') systems 
provide subscription services. As noted above, the SBA has created a 
small business size standard for Cable and Other Program Distribution. 
This standard provides that a small entity is one with $13.5 million or 
less in annual receipts. The Commission has certified approximately 25 
OVS operators to serve 75 areas, and some of these are currently 
providing service. Affiliates of Residential Communications Network, 
Inc. (RCN) received approval to operate OVS systems in New York City, 
Boston, Washington, D.C., and other areas. RCN has sufficient revenues 
to assure that they do not qualify as a small business entity. Little 
financial information is available for the other entities that are 
authorized to provide OVS and are not yet operational. Given that some 
entities authorized to provide OVS service have not yet begun to 
generate revenues, the Commission concludes that up to 24 OVS operators 
(those remaining) might qualify as small businesses that may be 
affected by our action.
Telecommunications Service Entities
    30. As noted above, a ``small business'' under the RFA is one that, 
inter alia, meets the pertinent small business size standard (e.g., a 
telephone communications business having 1,500 or fewer employees), and 
``is not dominant in its field of operation.'' The SBA's Office of 
Advocacy contends that, for RFA purposes, small incumbent local 
exchange carriers are not dominant in their field of operation because 
any such dominance is not ``national'' in scope.
    31. Wired Telecommunications Carriers. The SBA has developed a 
small business size standard for wireline firms within the broad 
economic census category, ``Wired Telecommunications Carriers.'' Under 
this category, the SBA deems a wireline business to be small if it has 
1,500 or fewer employees. Census Bureau data for 2002 show that there 
were 2,432 firms in this category that operated for the entire year. Of 
this total, 2,395 firms had employment of 999 or fewer employees, and 
37 firms had employment of 1,000 employees or more. The census data do 
not provide a more precise estimate of the number of firms that have 
employment of 1,500 or fewer employees; the largest category provided 
is for firms with ``1000 employees or more.'' Thus, under this category 
and associated small business size standard, the majority of firms can 
be considered small.

[[Page 19453]]

Dwelling Units
    32. MDU Operators. The SBA has developed definitions of small 
entities for operators of nonresidential buildings, apartment 
buildings, and dwellings other than apartment buildings, which include 
all such companies generating $6 million or less in revenue annually. 
According to the Census Bureau, there were 31,584 operators of 
nonresidential buildings generating less than $6 million in revenue 
that were in operation for at least one year at the end of 1997. Also 
according to the Census Bureau, there were 51,275 operators of 
apartment dwellings generating less than $6 million in revenue that 
were in operation for at least one year at the end of 1997. The Census 
Bureau provides no separate data regarding operators of dwellings other 
than apartment buildings, and we are unable at this time to estimate 
the number of such operators that would qualify as small entities.
Description of Projected Reporting, Recordkeeping and Other Compliance 
Requirements
    33. We anticipate that any rules that result from this action would 
have at most a de minimis compliance burden on cable operators and 
telecommunications service entities. Any rules that might be adopted 
pursuant to this NPRM likely would not require any reporting or 
recordkeeping requirements.
Steps Taken To Minimize Significant Economic Impact on Small Entities 
and Significant Alternatives Considered
    34. The RFA requires an agency to describe any significant, 
specifically small business, alternatives that it has considered in 
reaching its proposed approach, which may include the following four 
alternatives (among others): ``(1) The establishment of differing 
compliance or reporting requirements or timetables that take into 
account the resources available to small entities; (2) the 
clarification, consolidation, or simplification of compliance and 
reporting requirements under the rule for such small entities; (3) the 
use of performance rather than design standards; and (4) an exemption 
from coverage of the rule, or any part thereof, for such small 
entities.''
    35. As discussed in the NPRM, the Commission has initiated this 
proceeding to ensure that use of exclusive contracts for the provision 
of video services to MDUs and other real estate developments are pro-
competitive. As noted above, applying any rules regarding the use of 
exclusive contracts in the provision of video services to MDUs or other 
real estate developments likely would have at most a de minimis impact 
on small governmental jurisdictions. We seek comment on the impact that 
any rules might have on such small governmental entities, as well as 
the other small entities described, and on what effect alternative 
rules would have on those entities. For instance, should a definition 
of ``market power,'' if such a definition is appropriate, make 
reference to small entities? We also invite comment on ways in which 
the Commission might impose restrictions on the use of exclusive 
contracts for the provision of video services while at the same time 
imposing lesser burdens on small entities.
Federal Rules That May Duplicate, Overlap, or Conflict With the 
Proposed Rules
    36. None.

 V. Ordering Clauses

    37. Accordingly, it is ordered that, pursuant to Sections 1, 4(i), 
303(r), 623 and 628(b) of the Communications Act of 1934, as amended, 
and Section 706 of the Telecommunications Act of 1996, 47 U.S.C. 151, 
154(i), 303(r), 543, 548(b) and 157, this Notice of Proposed Rulemaking 
is hereby adopted.
    38. It is further ordered that the Consumer and Governmental 
Affairs Bureau, Reference Information Center, SHALL SEND a copy of this 
Notice of Proposed Rulemaking, including the Initial Regulatory 
Flexibility Analysis, to the Chief Counsel for Advocacy of the Small 
Business Administration.

Federal Communications Commission.
Marlene H. Dortch,
Secretary.
[FR Doc. E7-7254 Filed 4-17-07; 8:45 am]
BILLING CODE 6712-01-P


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