21464 Federal Register / Vol. 60, No. 84 / Tuesday, May 2, 1995 / Rules and Regulations

[FR Doc. 95–10693 Filed 5–1–95; 8:45 am]

BILLING CODE 6560–50–P

FEDERAL COMMUNICATIONS

COMMISSION

47 CFR Part 76

[MM Docket 92–264; FCC 95–147]

Cable Television Act of 1992—Vertical

Ownership Rules

AGENCY: Federal Communications

Commission.

ACTION: Order on reconsideration.

SUMMARY: On reconsideration of the

cable television vertical ownership (or

channel occupancy) rules adopted in its

Second Report and Order, the Federal

Communications Commission (the

‘‘Commission’’) has adopted a

Memorandum Opinion and Order on

Reconsideration of the Second Report

and Order (‘‘Reconsideration Order’’).

The Reconsideration Order denies

petitions for reconsideration filed by the

Center for Media Education/Consumer

Federation of America (collectively

‘‘CME’’) and Bell Atlantic Corporation

(‘‘Bell Atlantic’’). Specifically, the

Reconsideration Order: Denies CME’s

petition requesting that the

Commission; reduce the percentage of

activated channels that a cable operator

may devote to video programming in

which it has an attributable interest

from 40% to 20%; reverse the

Commission’s decision to include overthe-air broadcast, public, educational,

governmental (‘‘PEG’’), and leased

access channels when calculating total

channel capacity; reverse the

Commission’s decision to exempt local

and regional networks from the channel

occupancy limits; reverse the

Commission’s decision not to apply

channel occupancy limits beyond a

system’s first 75 channels; and reverse

the Commission’s decision to

grandfather all vertically integrated

programming services being carried as

of the effective date of the 1992 Cable

Act. The Reconsideration Order also

denies Bell Atlantic’s petition asking

that the Commission reconsider its

decision to apply the vertical ownership

limits to cable systems facing actual

head-to-head competition.

EFFECTIVE DATE: April 6, 1995.

FOR FURTHER INFORMATION CONTACT: Rick

Chessen, Cable Services Bureau, (202)

416–0800.

SUPPLEMENTARY INFORMATION: This is a

synopsis of the Memorandum Opinion

and Order on Reconsideration of the

Second Report and Order

(‘‘Reconsideration Order’’) in MM

Docket 92–264, adopted April 5, 1995

and released April 6, 1995. This

Reconsideration Order responds to

petitions for reconsideration filed in

response to the Commission’s Second

Report and Order, 58 FR 60135

(November 15, 1993). The Second

Report and Order was established

pursuant to section 11(c)(2)(B) of the

Cable Television Consumer Protection

and Competition Act of 1992 (‘‘1992

Cable Act’’), Public Law 102–385, 106

Stat. 1460 (1992).

The complete text of this

Reconsideration Order is available for

inspection and copying during normal

business hours in the FCC Reference

Center (room 239), 1919 M Street, NW.,

Washington, DC, and also may be

purchased from the Commission’s copy

contractor, International Transcription

Services, Inc. (‘‘ITS, Inc.’’) at (202) 857–

3800, 2100 M Street, NW., Suite 140,

Washington, DC 20037.

Synopsis of the Memorandum Opinion

and Order on Reconsideration of the

Second Report and Order

A. Background

Pursuant to section 11(c)(2)(B) of the

Cable Television Consumer Protection

and Competition Act of 1992 (‘‘1992

Cable Act’’), Pub. L. 102–385, 106 Stat.

1460 (1992), the Commission’s Second

Report and Order, 58 FR 60135

(November 15, 1993), established cable

channel occupancy rules, including the

following rules relevant here: (1) Cable

operators generally may devote no more

than 40% of their activated channels to

the carriage of programing services in

which they have an attributable interest;

(2) all activated channels will be

included in calculating channel

capacity, including broadcast, PEG and

leased access channels; (3) channal

occupancy limits will apply only to

‘‘national’’ programming services (i.e.,

local and regional programming services

are exempt); (4) channel occupancy

limits will apply to a maximum of 75

channels per system; (5) all vertically

integrated programming services carried

as of the effective date of the 1992 Cable

Act (December 4, 1992) could continue

to be carried; and (6) channel occupancy

limits will not be eliminated in

communities where actual head-to-head

competition exists.

B. Petitions for Reconsideration

The Center for Media Education and

the Consumer Federation of America

(collectively ‘‘CME’’) filed a joint

Petition for Reconsideration asking the

Commission to reconsider several issues

decided in the Second Report and

Order. Specifically, CME asked the

Commission to: (1) Reduce the channel

occupancy limit from 40% to 20%; (2)

require that broadcast, PEG, and leased

access channels be subtracted from the

number of activated channels before

calculating total channel capacity; (3)

eliminate the exemption for local and

regional networks; (4) apply channel

occupancy limits beyond a system’s first

75 channels; and (5) reverse the

decision to grandfather all vertically

integrated programming services carried

as of December 4, 1992.

After consideration of the various

submissions, the Commission declines

to modify the 40% channel occupancy

limit. In requiring the Commission to

establish ‘‘reasonable’’ channel

occupancy limits, Congress directed the

Commission to balance the risks of

vertical integration against benefits such

as the development of diverse and high

quality video programming. The

Commission continues to believe that

the 40% limit strikes the appropriate

balance between these competing

objectives.

Moreover, CME may have overstated

the practical effect of must-carry, PEG

and leased access requirements on

unaffiliated programmers’ ability to

obtain carriage. In the absence of record

evidence on this point, the Commission

examined an unscientific sampling of 25

Tele-Communications, Inc. (‘‘TCI’’) and

Time Warner Entertainment Company,

L.P. (‘‘Time Warner’’) cable systems

(those being the most vertically

integrated cable operators) in order to

determine whether, in fact, broadcast,

PEG and leased access channels

occupied all, or nearly all, of the

systems’ unaffiliated programming

channels. Generally, the Commission

found that, even after excluding

broadcast, PEG and leased access

channels (and even assuming the

presence of two local or regional

networks), all of the systems had

capacity remaining for additional

unaffiliated programming.

Next, CME claims that the

Commission overstated the benefits of

vertical integration. As proof, CME

states that the Cable News Network, Inc.

(‘‘CNN’’), Black Entertainment

Television, Inc. (‘‘BET’’), and

Nickelodeon were successful prior to

their relationship with cable operators,

and that ‘‘there has been no successful

launch of an unaffiliated video

programmer since the cable industry

began the trend toward vertical

integration.’’ Whether or not CNN, BET

and Nickelodeon achieved some initial

independent success, there is evidence

in the record that these and other

programmers would have had difficulty
Federal Register / Vol. 60, No. 84 / Tuesday, May 2, 1995 / Rules and Regulations 21465

sustaining their success had it not been

for cable operator investment (see, e.g.,

Comments of Turner Broadcasting

System, Inc., filed February 9, 1993, at

12 (at a time when TBS’s

‘‘independence was very much at

stake,’’ cable operators were willing to

provide long-term equity under terms

others were not); Opposition of Black

Entertainment Television, Inc. to

Comments of Viacom International, Inc.,

filed February 22, 1994, at 2 (‘‘[C]able

investment has been crucial to

establishing BET as a viable and

valuable programming service.’’).

Likewise, CME’s assertion that there has

been no successful launch of an

unaffiliated programmer since vertical

integration has taken hold was disputed

by TBS, citing the recent successes of

ESPN2, FLIX and the SciFi Channel.

Similarly, there is no evidence in the

record to substantiate CME’s claim that

the 40% limit will deter independent

investors from investing in video

programming, or that independent

investors are currently deterred from

investing in cable programming by the

Commission’s channel occupancy

limits.

Finally, the Commission disagrees

with CME’s assertion that the Senate

Report ‘‘suggested’’ a 20% channel

occupancy limit. The Senate Report

stated: ‘‘For example, the FCC may

conclude that each MSO should control

no more than 20 percent of the channels

on any cable system * * *.’’ Thus, the

Report used the 20% figure for

illustrative purposes only, while clearly

acknowledging that the Commission

was free to choose a different limit. This

interpretation is supported by the actual

wording of the statute, which simply

requires the Commission to establish

‘‘reasonable’’ channel occupancy limits.

The Commission also denies CME’s

petition to reconsider the treatment of

broadcast, PEG and leased access

channels. CME correctly notes that the

channel occupancy limits are intended

to keep cable operators from filling

every available channel with their own

programming. But from this premise,

CME draws the conclusion that channel

occupancy limits must therefore be

intended to give ‘‘independent

commercial programmers a chance to

get on the wire.’’ The statute, however,

does not distinguish between

‘‘independent’’ unaffiliated

programmers and other types of

unaffiliated programmers. Section 11

simply ensures that subscribers will

have access to some kind of unaffiliated

programming on a prescribed number of

channels. CME does not dispute that

broadcast, PEG and leased access

channels are ‘‘unaffiliated’’ with cable

operators, or that the 1992 Cable Act

requires cable operators to reserve

channel space for such unaffiliated

programming. Thus, the Commission

reaffirms its holding in the Second

Report and Order that it would be

unreasonable to subtract such channels

before calculating the system’s channel

capacity, since they provide the type of

diverse, unaffiliated programming

contemplated by the 1992 Cable Act.

Further, as the Commission noted in the

Second Report and Order, it would be

unfair to penalize those cable operators

who carried the widest array of

broadcast, PEG and leased access

channels by decreasing the number of

channels available for affiliated

programming.

Moreover, there is no evidence in the

record that ‘‘independent’’ commercial

programmers (i.e., those with no cable

ownership interests at all) are unable to

obtain carriage because of the

Commission’s treatment of broadcast,

PEG and leased access channels. To the

contrary, in the Commission’s sampling

of 25 TCI and Time Warner cable

systems described above, the

Commission found that all of the

systems carried some ‘‘independent’’

unaffiliated programmers, with most

systems carrying between 7 and 11 such

channels.

In addition, although the Senate

Report’s sample calculation excluded

broadcast and access channels in

calculating channel capacity, CME’s

reliance on it as an expression of

Congressional intent is misplaced. As

the Commission stated in the Second

Report and Order:

The Senate Report language (* * *)

appears to be included merely as an example

to illustrate how the Commission may decide

to calculate channel occupancy limits and

therefore does not prohibit the Commission

from adopting an alternative approach if it

finds such an approach to be reasonable to

promote the legislative objectives. In any

event, this language is not included in the

statute itself.

Finally, the Commission does not

believe that it is weakening Congress’

statutory scheme by considering the

impact of other provisions of the 1992

Cable Act in establishing channel

occupancy limits. Section 11 expressly

gives the Commission broad discretion

to fashion ‘‘reasonable’’ channel

occupancy limits. In the Commission’s

view, establishing ‘‘reasonable’’ limits

requires it to consider all factors bearing

on the dangers or benefits of vertical

integration. Thus, for instance, the

Commission believes that not only

should it take into account the impact

of broadcast, PEG and leased access

channels, but also the impact of sections

12 and 19 in deterring the type of

discriminatory conduct that may be

caused by vertical integration. Only by

considering the whole of Congress’

scheme can the Commission determine

the level of vertical structural limits that

are ‘‘reasonable.’’

The Commission also denies CME’s

petition to reconsider the exception for

local and regional programming. CME’s

approach overlooks Congress’ direction

that the Commission consider the

benefits as well as the dangers of

vertical integration in establishing

‘‘reasonable’’ channel occupancy limits.

As the Commission stated in the Second

Report and Order, the exception for

local and regional networks was ‘‘an

important means of encouraging

continued MSO investment in the

development of local cable

programming, which is responsive to

the needs and tastes of local audiences

and serves Congress’ objectives of

promoting localism.’’ (Second Report

and Order at ¶ 78.) CME does not

challenge the value of local and regional

programming, or the Commission’s

conclusion that given the cost and

limited appeal of such programming, an

exception may be necessary to

encourage continued MSO investment.

The Commission continues to believe

that consideration of these benefits of

vertical integration more accurately

reflects Congressional intent, and fully

justifies the exception.

On reconsideration, the Commission

also declines CME’s invitation to

eliminate the 75-channel cap. There is

no evidence in the record to support

CME’s claim that ‘‘there is a strong

likelihood that all of the newly available

channels will be filled by services

affiliated with the MSO.’’ Indeed, the

Commission notes that in its informal

survey of 25 TCI and Time Warner cable

systems, none of the systems were

approaching the current 40% channel

occupancy limit for affiliated

programming. However, even if there

were some basis for CME’s prediction,

the Commission still believes that the

vast expansion of channel capacity may

obviate the need for a rigid occupancy

limit. As the Commission noted in the

Second Report and Order, although

information on how multichannel video

distributors will use the additional

capacity ‘‘is necessarily somewhat

speculative,’’ the record indicates that

the capacity will likely be used to

deliver targeted ‘‘niche’’ video

programming services aimed at

correspondingly smaller audience sizes,

such as pay-per-view and

‘‘multiplexed’’ channels. (Second

Report and Order at ¶¶ 83–84.)

Occupancy limits in these
21466 Federal Register / Vol. 60, No. 84 / Tuesday, May 2, 1995 / Rules and Regulations

circumstances do not parallel

occupancy limits for more restricted

capacity systems where most services

are distributed on discrete channels to

a significant portion of a system’s

subscribership. Accordingly, the

occupancy limits can be relaxed.

In sum, the Commission continues to

believe that the introduction of

advanced technologies such as signal

compression and fiber optics will

reduce the need for structural

occupancy limits in order to ensure

programming diversity and access for

unaffiliated programmers. Nevertheless,

as the Commission noted in the Second

Report and Order, the 75-channel cap

will be subject to periodic review and

will be eliminated if developments

warrant.

The Commission also denies CME’s

request to reconsider its decision to

grandfather all vertically integrated

programming services carried as of

December 4, 1992 (the effective date of

the 1992 Cable Act). The Commission

still believes, as it held in the Second

Report and Order, that the public

interest would be disserved by requiring

cable operators to delete vertically

integrated programming services to

comply with the channel occupancy

caps. The Commission continues to

believe that grandfathering existing

arrangements will limit consumer

confusion and the disruption of existing

programming relationships, and is

consistent with Congress’ direction that

our channel occupancy limits ‘‘take

particular account of the market

structure, ownership patterns, and other

relationships of the cable television

industry.’’ (Communications Act,

section 613(f)(2)(C).)

The Commission also rejects CME’s

contention that the decision to

grandfather existing vertical

arrangements ‘‘has rendered impotent’’

the intent of Congress to limit excessive

vertical integration. First, the

Commission reiterates that Congress

directed it to establish ‘‘reasonable’’

channel occupancy limits based on

competing interests; if Congress wished

to require the divestiture of existing

channels it could have done so. More

importantly, the Commission did not

grandfather non-compliance in

perpetuity. Rather, the Second Report

and Order provided that when a

grandfathered cable system adds

channel capacity, it cannot add an

affiliated programming service until its

system is in full compliance with the

Commission’s channel occupancy rules.

Thus, the difference is more one of

timing than of ultimate objectives.

While CME suggests immediate

divestiture of existing services to bring

systems into compliance, the

Commission’s approach is to

grandfather existing services and

remedy non-compliance prospectively.

The Commission continues to believe

that its approach better reflects the

various interests at stake, and thus

better reflects Congress’ intent.

Bell Atlantic filed a Petition for

Limited Reconsideration requesting that

the Commission reconsider its decision

to apply the channel occupancy limits

to cable systems that face actual headto-head competition. On

reconsideration, the Commission

declines to modify its decision to

enforce channel occupancy limits in

systems which face actual head-to-head

competition. With respect to Bell

Atlantic’s argument that channel

occupancy limits are even less

necessary in markets where competition

exists and one of the competitors is a

video dialtone service, the Commission

cannot find, at this time, that video

dialtone will completely eliminate the

problems caused by vertical integration.

Under video dialtone, a telephone

company must provide sufficient

capacity to serve multiple video

programmers, and must expand capacity

as demand increases to the extent

technically feasible and economically

reasonable. At this point, there are only

eight commercially licensed video

dialtone services in the country. None of

these systems is yet operational; until

that time, it is unclear whether a video

dialtone system will fully address the

concerns raised by channel occupancy

limits. In addition, the practical effect of

several recent court cases is that certain

telephone companies may now provide

their own programming to subscribers

in their service areas. Thus, the

Commission does not believe that video

dialtone in its current state can provide

sufficient justification to reconsider the

decision to enforce channel occupancy

limits in systems which face actual

head-to-head competition.

The remaining arguments raised by

Bell Atlantic’s Petition have already

been considered and rejected in the

Second Report and Order. In the Second

Report and Order, the Commission

concluded that it should not eliminate

channel occupancy limits in

communities where effective

competition exists because the

Commission found that the effective

competition standard was not adopted

for this specific purpose and because it

is not clear that the presence of effective

competition for any cable system will

address all of the relevant concerns that

Congress expressed in enacting section

11 of the 1992 Cable Act. For example,

the Commission noted that if a

competing multichannel distributor is

also vertically integrated, without

channel occupancy limits, unaffiliated

programming services may continue to

be denied access from either outlet, thus

frustrating the diversity and competition

objectives of the 1992 Act.

Finally, the Commission also agrees

that the statutory exemption from

regulation for cable systems subject to

effective competition is very limited:

Congress explicitly stated in the statute

that, in systems which faced effective

competition, rate regulation would not

be necessary. Thus, it is reasonable to

assume that had Congress intended for

all cable regulations to be eliminated

where systems became subject to actual

head-to-head competition, this statutory

exemption would have been drafted

much more broadly. Nowhere in either

the language of section 11 or its

legislative history does it state that the

presence of actual head-to-head

competition will render the channel

occupancy limits unnecessary.

The Commission therefore concludes

that there is insufficient evidence in the

record before it to warrant elimination

or modification of the channel

occupancy limits in systems that face

actual head-to-head competition.

However, as the Commission indicated

in the Second Report and Order, it

remains aware that Congress has

indicated that a primary objective of the

1992 Act was to rely on the marketplace

to the maximum extent possible, and

that the legislation was intended to

protect consumer interests in the receipt

of cable service where cable television

systems are not subject to effective

competition. Thus, as competition

develops and the Commission gains

more experience with the rules, the

Commission will further analyze its

rules and the industry as a whole to see

whether vertical ownership limits

should be phased out.

Administrative Matters

Regulatory Flexibility Act Analysis

Pursuant to sections 601–602 of the

Regulatory Flexibility Act, Public Law

96–354, 94 Stat. 1164, 5 U.S.C. 601 et

seq. (1981), the Commission’s final

analysis is as follows:

Need and Purpose for Action: This

action is being taken to address

petitions for reconsideration of the

channel occupancy rules adopted by the

Commission to implement section 11(c)

of the 1992 Cable Act.

Summary of Issues Raised by the

Public Comments in Response to the

Initial Regulatory Flexibility Analysis:

There were no comments received in
Federal Register / Vol. 60, No. 84 / Tuesday, May 2, 1995 / Rules and Regulations 21467

response to the Initial Regulatory

Flexibility Analysis.

Significant Alternatives Considered:

We have analyzed the comments

submitted in light of our statutory

directives and have, to the extent

possible, minimized the regulatory

burden on entities covered by the

ownership provisions of the 1992 Cable

Act.

Ordering Clauses

Accordingly, it is hereby ordered That

pursuant to the authority in sections 1,

4 and 613 of the Communications Act

of 1934, as amended, 47 U.S.C. 151, 154,

and 533, the petitions for

reconsideration filed in this proceeding

by the Center for Media Education/

Consumer Federation of America and

Bell Atlantic Corporation are denied.

Federal Communications Commission.

William F. Caton,

Acting Secretary.

[FR Doc. 95–10719 Filed 5–1–95; 8:45 am]

BILLING CODE 6712–01–M

GENERAL SERVICES

ADMINISTRATION

48 CFR Parts 502, 506, 513, and 552

[APD 2800.12A, CHGE 62]

RIN 3090–AF60

General Services Administration

Acquisition Regulation; Miscellaneous

Changes

AGENCY: Office of Acquisition Policy,

GSA.

ACTION: Final rule.

SUMMARY: The General Services

Administration Acquisition Regulation

(GSAR) is amended to make

miscellaneous changes by providing

uniform procedures for contracting

under the regulatory system.

EFFECTIVE DATE: May 8, 1995.

FOR FURTHER INFORMATION CONTACT:

Paul Lynch, Office of GSA Acquisition

Policy, (202) 501–1224.

SUPPLEMENTARY INFORMATION:

A. Background

The rule amends section 502.101 to

revise the definitions of ‘‘Agency

competition advocate,’’ ‘‘Contracting

activity competition advocate,’’ and

‘‘Head of the contracting activity’’ to

reflect current GSA organizational

changes; to revise section 506.304 to

delete reference to ‘‘concurrence by

legal counsel’’ which is no longer

required; to revise section 513.106 to

make use of the GSA Form 2010, Small

Purchase Tabulation Source List/

Abstract optional rather than mandatory

and to indicate that the form does not

apply to purchases under $2,500; and to

revise section 552.225–72 to insert the

words ‘‘Basin country’’ after

‘‘Caribbean’’ in paragraph (a)(1) to

correct an inadvertent omission of the

words in GSAR Change 59.

B. Public Comments

This rule was not published in the

Federal Register for Public comment

because it is not a significant revision as

defined in FAR 1.501–1.

C. Executive Order 12866

The rule was not submitted to the

Office of Management and Budget

because it is not a significant rule as

defined in Executive Order 12866,

Regulatory Planning and Review.

D. Regulatory Flexibility Act

The Regulatory Flexibility Act does

not apply because this rule is not a

significant revision as defined in FAR

1.501–1.

E. Paperwork Reduction Act

This rule does not impose any

information collection or recordkeeping

requirements that require the approval

of OMB under 44 U.S.C. 3501, et seq.

Therefore, the requirements of the

Paperwork Reduction Act do not apply.

List of Subjects in 48 CFR Parts 502,

506, 513 and 552

Government procurement, Reporting

and recordkeeping requirements.

Accordingly, 48 CFR Parts 502, 506,

513 and 552 are amended as follows:

1. The authority citation for 48 CFR

Parts 502, 506, 513 and 552 continues

to read as follows:

Authority: 40 U.S.C. 486(c).

PART 502—DEFINITION OF WORDS

AND TERMS

2. Section 502.101 is amended by

revising the definitions for ‘‘Agency

competition advocate,’’ ‘‘Contracting

activity competition advocate’’ and

‘‘Head of the contracting activity’’ to

read as follows:

502.101 Definitions.

Agency competition advocate means

the GSA Competition Advocate located

in the Office of Acquisition Policy.

* * * * *

Contracting activity competition

advocate means the individual

designated in writing by the head of the

contracting activity. This authority may

not be redelegated. The HCA must

ensure that the designated competition

advocate is not assigned any duty or

responsibility that is inconsistent with

the advocacy function. The identity of

the designated official shall be

communicated to procuring staff and

the Senior procurement executive.

* * * * *

Head of the contracting activity

means the Associate Administrator for

Acquisition Policy, Commissioners of

the Federal Supply Service (FSS),

Information Technology Service (ITS),

Public Buildings Service (PBS), or

Regional Administrators. The Associate

Administrator for Acquisition Policy

serves as the HCA for Central Office

contracting activity outside of FSS, ITS

and PBS.

* * * * *

PART 506—COMPETITION

REQUIREMENTS

3. Section 506.304 is amended by

revising the introductory text to read as

follows:

506.304 Approval of the justification.

The justification (except for contracts

awarded under FAR 6.302–7) must be

approved by:

* * * * *

PART 513—SMALL PURCHASE AND

OTHER SIMPLIFIED PURCHASE

PROCEDURES

3. Section 513.106 is amended by

revising paragraph (c)(2) to read as

follows:

513.106 Competition and price

reasonableness.

* * * * *

(c) * * *

(2) The GSA Form 2010, Small

Purchases Tabulation Source List/

Abstract, or an automated equivalent

which provides substantially the same

documentation, must be used to

document written and oral quotations

(except small purchases $2,500 or less).

PART 552—SOLICITATION

PROVISIONS AND CONTRACT

CLAUSES

4. Section 552.225–72 is amended by

revising paragraph (a)(1) of the clause to

read as follows:

552.225–72 Eligible Products from

Nondesignated Countries—Waiver.

* * * * *

(a) * * *

(1) No responsive bid or technically

acceptable offer from a responsible offeror is

received offering U.S. or designated country

end products, Caribbean Basin country end

products, Canadian or Mexican end products