Federal Register / Vol. 73, No. 40 / Thursday, February 28, 2008 / Rules and Regulations 10675 

* * * * * 

[FR Doc. E8–3392 Filed 2–27–08; 8:45 am] 

BILLING CODE 6560–50–P 

FEDERAL COMMUNICATIONS 

COMMISSION 

47 CFR Part 73 

[DA 08–275; MB Docket No. 02–376; RM–

10617, RM–10690] 

Radio Broadcasting Services; DavisMonthan Air Force Base, Sells, and 

Willcox, AZ 

AGENCY: Federal Communications 

Commission. 

ACTION: Final rule; denial of petition for 

reconsideration. 

SUMMARY: The staff denied a petition for 

reconsideration filed by Lakeshore 

Media, LLC of a Report and Order in 

this proceeding, which had denied 

Lakeshore’s counterproposal and 

granted a mutually exclusive allotment 

of Channel 285A at Sells, Arizona. The 

staff determined the counterproposal 

was properly denied because the 

proposed ‘‘backfill’’ of two new FM 

allotments at Willcox were not adequate 

substitutes for the creation of sizeable 

‘‘white’’ and ‘‘gray’’ service loss areas 

that would be caused by the downgrade 

and reallotment of Lakeshore’s Station 

KWCX–FM from Willcox to DavisMonthan Air Force Base. 

FOR FURTHER INFORMATION CONTACT: 

Andrew J. Rhodes, Media Bureau, (202) 

418–2180. 

SUPPLEMENTARY INFORMATION: This is a 

synopsis of the Commission’s 

Memorandum Opinion and Order, MB 

Docket No. 02–376, adopted January 30, 

2008 and released February 1, 2008. The 

full text of this Commission decision is 

available for inspection and copying 

during normal business hours in the 

FCC Reference Information Center 

(Room CY–A257), 445 12th Street, SW., 

Washington, DC 20554. The complete 

text of this decision may also be 

purchased from the Commission’s copy 

contractor, Best Copy and Printing, Inc., 

Portals II, 445 12th Street, SW., Room 

CY–B402, Washington, DC 20554, 

telephone 1–800–378–3160 or http:// 

www.BCPIWEB.com. 

The Memorandum Opinion and Order 

agreed that the Report and Order had 

properly applied the Commission’s 

policy of not permitting ‘‘backfill’’

vacant allotments to the facts of this 

case. See 69 FR 71386 (December 9, 

2004). Specifically, the proposed 

relocation of Lakeshore’s station 

KWCX–FM would result in the loss of 

all radio service for 2,846 persons (i.e., 

a ‘‘white’’ area) and the reduction from 

two to one full-time reception service 

for 1,022 persons (i.e., a ‘‘gray’’ area). 

Although Lakeshore argued that its 

counterproposal does not create ‘‘white’’

area, as a matter of law, because the 

Commission considers a vacant 

allotment to prevent the creation of 

‘‘white’’ area, the Memorandum 

Opinion and Order disagreed, finding 

that the policy of no longer permitting 

‘‘backfill’’ allotments has necessarily 

modified, to some extent, the 

calculation of ‘‘white’’ or ‘‘gray’’ areas in 

cases of operating, as opposed to 

unbuilt, stations. As a result, the 

potential service from new ‘‘backfill’’

allotments, existing vacant allotments, 

or unbuilt construction permits will no 

longer be considered in calculating the 

loss of service by the reallotment of 

operating stations. By way of contrast, 

the traditional test of considering the 

potential service from ‘‘backfill’’ or 

existing vacant allotments would 

continue to apply in cases involving 

reallotments and changes of community 

of license for unbuilt stations because 

existing on-air service is not being lost. 

This document is not subject to the 

Congressional Review Act. (The 

Commission, is, therefore, not required 

to submit a copy of this Memorandum 

Opinion and Order to GAO, pursuant to 

the Congressional Review Act, see 5 

U.S.C. 801(a)(1)(A) because the petition 

for reconsideration was denied.) 

Federal Communications Commission. 

John A. Karousos, 

Assistant Chief, Audio Division, Media 

Bureau. 

[FR Doc. E8–3703 Filed 2–27–08; 8:45 am] 

BILLING CODE 6712–01–P 

FEDERAL COMMUNICATIONS 

COMMISSION 

47 CFR Part 76 

[MB Docket No. 07–42; FCC 07–208] 

Leased Commercial Access 

AGENCY: Federal Communications 

Commission. 

ACTION: Final rule. 

SUMMARY: In this document, the 

Commission modifies the leased access 

rate formula; adopts customer service 

obligations that require minimal 

standards and equal treatment of leased 

access programmers with other 

programmers; eliminates the 

requirement for an independent 

accountant to review leased access rates; 

requires annual reporting of leased 

access statistics; adopts expedited time 

frames for resolution of complaints and 

modifies the discovery process. 

DATES: The amendments contained in 

this final rule are effective as follows: 

Revised § 76.970 is effective May 28, 

2008 except for paragraph (j)(3) which 

contains information collection 

requirements that have not been 

approved by the Office of Management 

and Budget (OMB). The Federal 

Communications Commission will 

publish a document announcing the 

effective date upon OMB approval of 

those collection requirements. 

Section 76.972 is effective March 31, 

2008 except for paragraphs (a), (b), (c), 

(d), (e) and (g) which contain 

information collection requirements that 

have not been approved by OMB and 

paragraph (f) which contains 

requirements related to those 

information collection requirements. 

The Federal Communications 

Commission will publish a document 

announcing the effective date upon 

OMB approval of those collection 

requirements. 

Amendments to § 76.975 are effective 

March 31, 2008 except for paragraphs 

(d), (e), (g), and (h)(4) which contain 

information collection requirements that 

have not been approved by OMB and 

paragraphs (b), (c), and (f) which 

contain requirements related to those 

information collection requirements. 

The Federal Communications 

Commission will publish a document 

announcing the effective date upon 

OMB approval of those collection 

requirements. 

Section 76.978, as added in this rule, 

contains information collection 

requirements that have not been 

approved by OMB. The Federal 

Communications Commission will 

publish a document announcing the 

effective date upon OMB approval of 

those collection requirements. 

ADDRESSES: Federal Communications 

Commission, 445 12th Street, SW., 

Room TW–A325, Washington, DC 

20554. In addition to filing comments 

with the Office of the Secretary, a copy 

of any comments on the Paperwork 

Reduction Act information collection 

requirements contained herein should 

be submitted to Cathy Williams, Federal 

Communications Commission, Room 1–

C823, 445 12th Street, SW., Washington, 

DC 20554, or via the Internet to 

PRA@fcc.gov. For additional 

information, see the SUPPLEMENTARY

INFORMATION section of this document. 

FOR FURTHER INFORMATION CONTACT: For 

additional information on this 

proceeding, contact Steven Broeckaert, 

Steven.Broeckaert@fcc.gov; Katie 

Costello, Katie.Costello@fcc.gov; or 


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10676 Federal Register / Vol. 73, No. 40 / Thursday, February 28, 2008 / Rules and Regulations 

David Konczal, David.Konczal@fcc.gov; 

of the Media Bureau, Policy Division, 

(202) 418–2120. For additional 

information concerning the Paperwork 

Reduction Act information collection 

requirements contained in this 

document, contact Cathy Williams at 

202–418–2918, or via the Internet at 

PRA@fcc.gov. 

SUPPLEMENTARY INFORMATION: This is a 

summary of the Commission’s Report 

and Order (‘‘Order’’), FCC 07–208, 

adopted on November 27, 2007, and 

released on February 1, 2008. 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. This document 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 fcc504@fcc.gov or call the 

Commission’s Consumer and 

Governmental Affairs Bureau at (202) 

418–0530 (voice), (202) 418–0432 

(TTY). 

In addition to filing comments with 

the Office of the Secretary, a copy of any 

comments on the proposed information 

collection requirements contained 

herein should be submitted to Cathy 

Williams, Federal Communications 

Commission, 445 12th St., SW., Room 1- 

C823, Washington, DC 20554, or via the 

Internet at PRA@fcc.gov. 

Paperwork Reduction Act of 1995 

Analysis 

This document contains new and 

modified information collection 

requirements. The Commission will 

send the requirements to OMB for 

review. The Commission, as part of its 

continuing effort to reduce paperwork 

burdens, will invite the general public 

to comment on the information 

collection requirements as required by 

the Paperwork Reduction Act of 1995, 

Public Law 104–13. In addition, 

pursuant to the Small Business 

Paperwork Relief Act of 2002, Public 

Law 107–198, see 44 U.S.C. 3506(c)(4), 

we sought specific comment on how we 

might ‘‘further reduce the information 

collection burden for small business 

concerns with fewer than 25 

employees.’’ In this present document, 

we have assessed the potential effects of 

the various policy changes with regard 

to information collection burdens on 

small business concerns, and we find 

that these requirements will benefit 

many companies with fewer than 25 

employees by facilitating the use of 

leased access channels and by 

promoting the fair and expeditious 

resolution of leased access complaints. 

Summary of the Report and Order 

I. Introduction 

1. In this Report and Order, we 

modify the Commission’s leased access 

rules. With respect to leased access, we 

modify the leased access rate formula; 

adopt customer service obligations that 

require minimal standards and equal 

treatment of leased access programmers 

with other programmers; eliminate the 

requirement for an independent 

accountant to review leased access rates; 

and require annual reporting of leased 

access statistics. We also adopt 

expedited time frames for resolution of 

complaints and improve the discovery 

process. Finally, we seek comment in a 

Further Notice of Proposed Rulemaking 

on whether we should apply our new 

rate methodology to programmers that 

predominantly transmit sales 

presentations or program length 

commercials. 

II. Commercial Leased Access Rules 

A. Background 

2. The commercial leased access 

requirements are set forth in Section 612 

of the Communications Act of 1934, as 

amended (‘‘Communications Act’’). The 

statute and corresponding leased access 

rules require a cable operator to set 

aside channel capacity for commercial 

use by unaffiliated video programmers. 

In implementing the statutory directive 

to determine maximum reasonable rates 

for leased access, the Commission 

adopted a maximum rate formula for 

full-time carriage on programming tiers 

based on the ‘‘average implicit fee’’ that 

other programmers are implicitly 

charged for carriage to permit the 

operator to recover its costs and earn a 

profit. The Commission also adopted a 

maximum rate for a la carte services 

based on the ‘‘highest implicit fee’’ that 

other a la carte services implicitly pay, 

and a prorated rate for part-time 

programming. 

B. Customer Service Standards and 

Equitable Contract Terms 

3. In this Order, we adopt uniform 

customer service standards to address 

the treatment of leased access 

programmers and potential leased 

access programmers by cable system 

operators. In order to make the leased 

access carriage process more efficient, 

we adopt new customer service 

standards, in addition to the existing 

standards. These standards are designed 

to ensure that leased access 

programmers are not discouraged from 

pursuing their statutory right to the 

designated commercial leased access 

channels, to facilitate communication of 

these rights and obligations to potential 

programmers, and to ensure a smooth 

process for gaining information about a 

cable system’s available channels. We 

require cable system operators to 

maintain a contact name, telephone 

number and e-mail address on its 

website, and make available by 

telephone, a designated person to 

respond to requests for information 

about leased access channels. We also 

require cable system operators to 

maintain a brief explanation of the 

leased access statute and regulations on 

its website. Within three business days 

of a request for information, a cable 

system operator shall provide the 

prospective leased access programmers 

with the following information: (1) The 

process for requesting leased access 

channels; (2) The geographic levels of 

service that are technically possible; (3) 

The number and location and time 

periods available for each leased access 

channel; (4) Whether the leased access 

channel is currently being occupied; (5) 

A complete schedule of the operator’s 

statutory maximum full-time and parttime leased access rates; (6) A 

comprehensive schedule showing how 

those rates were calculated; (7) Rates 

associated with technical and studio 

costs; (8) Electronic programming guide 

information; (9) The available methods 

of programming delivery and the 

instructions, technical requirements and 

costs for each method; (10) A 

comprehensive sample leased access 

contract that includes uniform terms 

and conditions such as tier and channel 

placement, contract terms and 

conditions, insurance requirements, 

length of contract, termination 

provisions and electronic guide 

availability; and (11) Information 

regarding prospective launch dates for 

the leased access programming. In 

addition to the customer service 

standards, we adopt penalties for 

ensuring compliance with these 

standards. We emphasize that the leased 

access customer service standards 

adopted herein are ‘‘minimum’’

standards. We cannot anticipate each 

and every instance of interaction 

between cable operators and leased 

access programmers. 


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4. Maintenance of Contact 

Information. We require every cable 

system operator to maintain, on its 

website, a contact name, telephone 

number, and e-mail of an individual 

designated by the cable system operator 

to respond to requests for information 

about leased access channels. One of the 

more basic elements necessary to permit 

potential programmers reasonable 

access to cable systems is ready 

availability of a contact name, telephone 

number, and e-mail address of a cable 

system operator that the programmer 

can use to reach the appropriate person 

in the cable system to begin the process 

for requesting access to the system. 

While the physical location of a person 

designated as the leased access contact 

should not be critical in the relationship 

between the potential programmer and 

the cable system operator, the identity 

of that person and the ease of access to 

him are critical. Other aspects of the 

rules we adopt here deal with 

expeditious and full responses to leased 

access requests. The fact that the 

designated person is located some 

distance away should not affect the 

timeliness and substance of responses. 

5. Timing for Response. We amend 

our rules to require a cable system 

operator to respond to a request for 

information from a leased access 

programmer within three business days. 

We retain the 30-day response period 

currently provided in Section 

76.970(i)(2) of the Commission’s rules 

for cable systems that have been granted 

small system special relief. The identity 

of a designated person by the cable 

system operator who the potential 

programmer can contact is important 

only if that person replies quickly and 

fully to the requests of the programmer. 

Our current rules provide for a 15 day 

response by cable system operators to a 

request by a potential programmer. That 

response must include information on 

channel capacity available, the 

applicable rates, and a sample contract 

if requested. That response time is 

unnecessarily long and, as discussed 

below, the information is inadequate. 

Cable operators must have leased access 

channel information available in order 

to be able to comply with the statute 

and our rules. It does not take 15 days 

to provide a copy of that information to 

a potential leased access programmer. 

Three business days to reply to a request 

for such information is more than 

adequate. Accordingly, we are 

amending the response time permitted a 

cable system operator to three business 

days. We are also providing a more 

detailed list of information the operator 

must provide upon request within that 

time period. All of the information 

required to be provided is necessary for 

a potential leased access programmer to 

be able to file a bona fide request for 

carriage. There is no reason to delay 

providing the leased access programmer 

with the information it needs to take the 

necessary steps to obtain access. 

6. Process for Requesting Leased 

Access Channels. We require a cable 

system operator within three business 

days of a request to provide a 

prospective leased access programmer 

with the process for requesting leased 

access channels. One element of the 

information the cable system operator 

must make available to the potential 

programmer within three business days 

of a request is an explanation of the 

cable system operator’s process for 

requesting leased access channels. 

Accordingly, we are requiring that the 

cable system operator include an 

explanation of the operator’s process 

and procedures for requesting leased 

access channels. 

7. Geographic Levels of Service that 

Are Technically Possible. We require a 

cable system operator within three 

business days of a request to provide a 

prospective leased access programmer 

with the geographic levels of service 

that are technically possible. 

Commenters complain that cable system 

operators make available only limited 

levels of service. Typically, the service 

offered is defined by the size of the 

headend. We will not require, at this 

time, the operator to allow the leased 

access programmer to serve discrete 

communities smaller than the area 

served by a headend if they are not 

doing the same with other programmers. 

We acknowledge that with the 

consolidation of headends, 

programmers may be forced to purchase 

larger areas at higher costs than they 

would prefer. We will monitor 

developments in this area, and may 

revisit this issue if circumstances 

warrant. However, we will require cable 

system operators to clearly set out in 

their responses to programmers what 

geographic and subscriber levels of 

service they offer. 

8. Number, Location, and Time 

Periods Available for Each Leased 

Access Channel. We require a cable 

system operator within three business 

days of a request to provide a 

prospective leased access programmer 

with the number, location, and time 

periods available for each leased access 

channel. Our current leased access 

channel placement standards provide 

that programmers be given access to 

tiers that have subscriber penetration of 

more than 50 percent. 47 CFR 

76.971(a)(1) We will not change that 

requirement, but we will expand on the 

current requirement relating to capacity 

in Section 76.970(i) to require cable 

system operators to provide, in their 

replies to requests from programmers, 

the specific number and location and 

time periods available for each leased 

access channel. This greater degree of 

certainty should assist programmers in 

their evaluations. 

9. Explanation of Currently Available 

and Occupied Leased Access Channels. 

We require a cable system operator 

within three business days of a request 

to provide a prospective leased access 

programmer with an explanation of 

currently available and occupied leased 

access channels. Section 612 of the 

Communications Act imposes specific 

requirements on cable operators with 

regard to leased access. 47 U.S.C. 532. 

It is inherent in these obligations to be 

able to provide timely and accurate 

information to prospective leased access 

programmers. Within three business 

days of a request by a current or 

potential leased access programmer, a 

cable operator shall provide information 

documenting: (1) The number of 

channels that the cable operator is 

required to designate for commercial 

leased access use pursuant to Section 

612(b)(1); (2) the current availability of 

those channels for leased access 

programming on a full- or part-time 

basis; (3) the tier on which each leased 

access channel is located; (4) the 

number of customers subscribing to 

each tier containing leased access 

channels; (5) whether those channels 

are currently programmed with nonleased access programming; and (6) how 

quickly leased access channel capacity 

can be made available to the prospective 

leased access programmer. We believe 

this information is vital to enable leased 

access programmers to make an 

informed decision regarding whether to 

pursue leased access negotiations with a 

cable operator. Provision of this 

information will also benefit cable 

operators by timely informing leased 

access programmers of current leased 

access timing and availability, and 

thereby eliminating leased access 

requests that cannot be accommodated 

by existing leased access availability. 

10. Schedule and Calculation of 

Leased Access Rates. We require a cable 

system operator within three business 

days of a request to provide a 

prospective leased access programmer 

with a schedule and calculation of its 

leased access rates. As with information 

regarding available and occupied leased 

access channels, we believe Section 612 

imposes on cable operators the 

obligation to provide a timely and 

accurate explanation of its leased access 


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10678 Federal Register / Vol. 73, No. 40 / Thursday, February 28, 2008 / Rules and Regulations 

rates to prospective leased access 

programmers. Accordingly, within three 

business days of a request by a current 

or potential leased access programmer, 

a cable operator shall provide 

information documenting the schedule 

of all leased access rates (full- and parttime) available on the cable system. 

Cable operators must attach to this 

schedule a separate calculation detailing 

how each rate was derived pursuant to 

the revised rate formula adopted herein. 

This information will assist leased 

access programmers in determining 

whether leased access capacity on a 

given cable system is economically 

feasible. In addition, the rate 

calculations will further assist leased 

access programmers in determining 

whether particular cable operators are 

complying with their leased access 

obligations. 

11. Explanation of Any Rates 

Associated with Technical or Studio 

Costs. Included in the customer 

standards we are adopting today is a 

requirement that a cable operator 

provide a prospective leased access 

programmer, within three business days 

of a request, with a list of fees for 

providing technical support or studio 

assistance to the leased access 

programmer along with an explanation 

of such fees and how they were 

calculated. We note that our rules 

require leased access providers to 

reimburse cable operators ‘‘for the 

reasonable cost of any technical support 

the operators actually provide.’’ 47 CFR 

76.971(c) Further, our rate calculation 

includes technical costs common to all 

programmers so that cable operators 

may not impose a separate charge for 

technical support they already provide 

to non-leased access programmers. 

Second Report and Order, 12 FCC Rcd 

at 5324, para. 114. At this time, we will 

not prescribe an hourly rate for 

technical support, but instead will 

monitor the effectiveness of the new 

customer standards that require that 

cable operators list up front any 

technical fees along with an explanation 

of the fee calculation. If leased access 

programmers have continued problems 

with high technical or studio cost, we 

will consider implementing a more 

specific solution. 

12. Programming Guide Information. 

We require a cable system operator 

within three business days of a request 

to provide a prospective leased access 

programmer with all relevant 

information for obtaining carriage on the 

program guide(s) provided on the 

operator’s system. Moreover, we 

expressly require that, if a cable 

operator does not charge non-leased 

access programmers for carriage of their 

program information on a programming 

guide, the cable operator cannot charge 

leased access programmers for such 

service. Because of the dynamic nature 

of leased access programming, we 

believe that it would be impracticable to 

impose a requirement on cable operators 

to include all leased access listings in 

their programming guides. However, we 

believe that, in situations where time 

permits and the leased access 

programming information is submitted 

as reasonably required by the cable 

operators, cable operators must ensure 

that leased access programming 

information is incorporated in its 

program guide to the same extent that it 

does so for non-leased access 

programmers. In order to accomplish 

this, cable operators are required to 

provide potential leased access 

programmers with all relevant 

information for obtaining carriage on the 

program guide(s) provided on the 

operator’s system. This information 

shall include the requirements 

necessary for a leased access 

programmer to have its programming 

included in the programming guide(s) 

that serve the tier of service on which 

the leased access provider contracts for 

carriage. At a minimum, the cable 

operator must provide: (1) The format in 

which leased access programming 

information must be provided to the 

cable operator for inclusion in the 

appropriate programming guide; (2) the 

content requirements for such 

information; (3) the time by which such 

programming information must be 

received for inclusion in the 

programming guide; and (4) the 

additional cost, if any, related to 

carriage of the leased access 

programmer’s information on the 

programming guide. We expressly 

require that, if a cable operator does not 

charge non-leased access programmers 

for carriage of their program information 

on a programming guide, the cable 

operator cannot charge leased access 

programmers for such service. 

13. Methods of Programming Delivery. 

We require a cable system operator 

within three business days of a request 

to provide a prospective leased access 

programmer with available information 

regarding all acceptable, standard 

methods for delivering leased access 

programming to the cable operator. 

Because of the variable circumstances 

experienced by each cable system, we 

cannot establish a list of acceptable, 

standard delivery methods for leased 

access programming applicable to all 

cable systems. However, we believe that 

it incumbent upon a cable operator to 

provide prospective leased access 

programmers with sufficient 

information to be able to gauge the 

relative difficulty and expense of 

delivering its programming for carriage 

by the cable operator. A cable operator 

must make available information to 

leased access programmers regarding all 

acceptable, standard methods for 

delivering leased access programming to 

the cable operator. For each method of 

acceptable, standard delivery, the cable 

operator shall provide detailed 

instructions for the timing of delivery, 

the place of delivery, the cable operator 

employee(s) responsible for receiving 

delivery of leased access programming, 

all technical requirements and 

obligations imposed on the leased 

access programmer, and the total cost 

involved with each acceptable, standard 

delivery method that will be assessed by 

the cable operator. We clarify, however, 

that cable operators must give 

reasonable consideration to any delivery 

method suggested by a leased access 

programmer. A leased access 

programmer that is denied the 

opportunity to deliver its programming 

via a reasonable method may file a 

complaint with the Commission. In 

such complaint proceeding, the burden 

of proof shall be on the cable operator 

to demonstrate that its denial was 

reasonable given the unique 

circumstances of its cable system. 

14. Comprehensive Sample Leased 

Access Carriage Contract. We require a 

cable system operator within three 

business days of a request to provide a 

prospective leased access programmer 

with a comprehensive sample leased 

access carriage contract. We also require 

a cable system operator in its leased 

access carriage contract to apply the 

same uniform standards, terms, and 

conditions to leased access 

programmers as it applies to its other 

programmers. 

15. We do not intend by this 

requirement to infringe the freedom of 

contract of either party and expressly 

clarify that neither the cable operator 

nor the prospective leased access 

programmer need abide by any of the 

terms and conditions set forth in the 

sample contract. Instead, we believe that 

the provision of such agreements by 

cable operators serve to inform leased 

access programmers of terms and 

conditions that are generally acceptable 

to the cable operator and will be a 

useful first step in the initiation of 

leased access negotiations. Accordingly, 

within three business days of a request 

by a current or potential leased access 

programmer, a cable operator shall 

provide a copy of a sample leased access 

carriage contract setting forth what the 

cable operator considers to be the 


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Federal Register / Vol. 73, No. 40 / Thursday, February 28, 2008 / Rules and Regulations 10679 

standard terms and conditions for a 

leased access carriage agreement. 

16. As discussed below, we also 

require cable system operators to apply 

the same uniform standards, terms, and 

conditions to leased access 

programmers as it applies to its other 

programmers. Rather than dictate 

specific reasonable terms and 

conditions, we require that cable system 

operators apply the same uniform 

standards, terms, and conditions to 

leased access programmers as it applies 

to its other programmers. 

17. The Commission has stated in the 

past that the reasonableness of specific 

terms and conditions will be 

determined on a case-by-case basis, but 

set broad guidelines for tier placement 

and a general standard of 

reasonableness for contract terms and 

conditions. 

18. We will continue to address 

complaints about specific contract terms 

and conditions on a case-by-case basis. 

We emphasize that in all cases, the 

Commission will evaluate any 

complaints pursuant to a reasonableness 

standard. We also clarify that a cable 

system operator may not continue to 

include terms and conditions in new 

contracts that previously have been held 

to be unreasonable by the Commission. 

Not only are our orders binding on the 

affected parties to a leased access 

complaint, but unless and until an order 

is stayed or reversed by the 

Commission, a cable system operator is 

under an obligation to follow the 

Commission’s rules and precedent in 

setting its practices, terms, and 

conditions. 

19. Because we do not think that 

every potential leased access 

programmer should be required to file a 

complaint to determine if every term in 

its contract is reasonable, we will 

require the cable operator to provide, 

along with its standard leased access 

contract, an explanation and 

justification, including a cost 

breakdown, for any terms and 

conditions that require the payment or 

deposit of funds. This includes 

insurance and deposit requirements, 

any fees for handling or delivery, and 

any other technical or equipment fees, 

such as tape insertion fees. This will 

allow the leased access programmer to 

determine whether the cost is 

reasonable and expedite any review by 

the Commission. We believe that 

requiring a cable operator to provide an 

explanation and justification for such a 

fee will encourage cable operators to 

impose only reasonable fees or, at least, 

facilitate the filing of a leased access 

complaint demonstrating that such a fee 

is unreasonable. 

20. With regard to non-monetary 

terms and conditions, such as channel 

and tier placement, targeted 

programming, access to electronic 

program guides, VOD, etc., we similarly 

require the cable operator to provide, 

along with its standard leased access 

contract, an explanation and 

justification of its policy. For example, 

with regard to the geographic scope of 

carriage, if a leased access programmer 

requests to have its programming 

targeted to a finite group of subscribers 

based on community location, unless 

the operator agrees to the request, it 

must not provide such limited carriage 

to other programmers or channels. To 

the extent the cable operator denies the 

request for limited carriage, the cable 

operator must provide an explanation as 

to why it is technically infeasible to 

provide such carriage. If limited carriage 

is technically feasible, the cable 

operator must provide a fee and cost 

breakdown for such carriage for 

comparison with similar coverage 

provided for non-leased access 

programmers. 

21. Similarly, with regard to tier 

placement and channel location, we 

require the cable operator to provide, 

along with its standard leased access 

contract, an explanation and 

justification of its policy regarding 

placement of a leased access 

programmer on a particular channel as 

well as an explanation and justification 

for the cable operator’s policy for 

relocating leased access channels. To 

the extent a request for a particular 

channel is denied, the cable operator 

must provide a detailed explanation and 

justification for its decision. 

22. Launch Date. We require a cable 

system operator within three business 

days of a request to provide a 

prospective leased access programmer 

with information regarding prospective 

launch dates for the leased access 

programmer. Moreover, we require cable 

operators to launch leased access 

programmers within a reasonable 

amount of time. We consider 35–60 

days after the negotiation is finalized to 

be a reasonable amount of time for 

launch of a programmer, unless the 

parties come to a different agreement. 

We note that this time frame affords 

cable operators sufficient time to satisfy 

the requirement, if applicable, to 

provide subscribers with 30-days 

written notice in advance of any 

changes in programming services or 

channel positions. 

C. Response to Bona Fide Proposals for 

Leased Access 

23. We adopt rules to ensure that 

cable system operators respond to 

proposals for leased access in a timely 

manner and do not unreasonably delay 

negotiations for leased access. To 

address this concern, after the cable 

system operator provides the 

information requested above, in order to 

be considered for carriage on a leased 

access channel, we require a leased 

access programmer to submit a proposal 

for carriage by submitting a written 

proposal that includes the following 

information: (1) The desired length of a 

contract term; (2) The tier, channel and 

time slot desired; (3) The anticipated 

commencement date for carriage; (4) 

The nature of the programming; (5) The 

geographic and subscriber level of 

service requested; and (6) Proposed 

changes to the sample contract. The 

cable system operator must respond to 

the proposal by accepting the proposed 

terms or offering alternative terms 

within 10 days. This same response 

deadline will apply until an agreement 

is reached or negotiations fail. 

24. Failure to provide the requested 

information will result in the issuance 

of a notice of apparent liability (‘‘NAL’’) 

including a forfeiture in the amount of 

$500.00 per day. A potential leased 

access programmer need not file a 

formal leased access complaint pursuant 

to Section 76.975 of the Commission’s 

rules in order to bring a violation of our 

customer service standards to our 

attention. Rather, the programmer may 

notify the Commission either orally or 

in writing, and where necessary the 

Commission will submit a Letter of 

Inquiry (‘‘LOI’’) to the cable operator to 

obtain additional information. A cable 

system which is found to have failed to 

respond on time with the required 

information will be issued an NAL. The 

same process and forfeiture amount will 

apply for the failure to timely respond 

to a proposal as for the failure to comply 

with an information request. We rely on 

our general enforcement authority under 

Section 503 of the Communications Act 

to impose forfeitures in appropriate 

cases. See 47 U.S.C. 503 

D. Leased Access Rates 

1. Maximum Rate for Leasing a Full 

Channel 

25. Background. The Commission’s 

current rules calculate leased access 

rates for all tiers that have subscriber 

penetration of more than 50 percent. 

Upon request, cable operators generally 

must place leased access programmers 

on such a tier. To determine the average 

implicit fee for a full-time channel on a 

tier with a subscriber penetration over 

50 percent, an operator first calculates 

the total amount it receives in 

subscriber revenue per month for the 


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programming on all such tiers, and then 

subtracts the total amount it pays in 

programming costs per month for such 

tiers (the ‘‘implicit fee calculation’’). A 

weighting scheme that accounts for 

differences in the number of subscribers 

and channels on all such tier(s) is used 

to determine how much of the total will 

be recovered from a particular tier. To 

calculate the average implicit fee per 

channel, the implicit fee for the tier is 

divided by the number of channels on 

the tier. The final result is the rate per 

month that the operator may charge the 

leased access programmer for a full-time 

channel on that tier. Where the leased 

access programmer agrees to carriage on 

a tier with less than 50 percent 

penetration, the average implicit fee is 

determined using subscriber revenues 

and programming costs for only that 

tier. The implicit fee for full-time 

channel placement as an a la carte 

service is based upon the revenue 

received by the cable operator for nonleased access a la carte channels on its 

system. 

26. In this Order we modify the 

method for determining the leased 

access rate for full-time carriage on a 

tier. We harmonize the rate 

methodology for carriage on tiers with 

more than 50% subscriber penetration 

and carriage on tiers with lower levels 

of penetration by calculating the leased 

access rate based upon the 

characteristics of the tier on which the 

leased access programming will be 

placed. Cable operators will calculate a 

leased access rate for each cable system 

on a tier-by-tier basis which will 

adequately compensate the operator for 

the net revenue that is lost when a 

leased access programmer displaces an 

existing program channel on the cable 

system. In addition, the Order sets a 

maximum allowable leased access rate 

of $0.10 per subscriber per month to 

ensure that leased access remains a 

viable outlet for programmers. At this 

time we leave the method for 

calculating rates for a la carte carriage 

unchanged. 

27. As an initial matter, we conclude 

that we will not apply this new rate 

methodology to programmers that 

predominantly transmit sales 

presentations or program length 

commercials. These programmers often 

‘‘pay’’ for carriage—either directly or 

through some form of revenue sharing 

with the cable operator. In our previous 

Order, we set the leased access rate for 

a la carte programmers at the ‘‘highest 

implicit fee’’ partly out of a concern that 

lower rates would simply lead these 

programmers to migrate to leased access 

if it were less expensive than what they 

are currently ‘‘paying’’ for carriage. 

Such a migration would not add to the 

diversity of voices and would 

potentially financially harm the cable 

system. Similarly, we do not wish to set 

the leased access rates at a point at 

which programmers that predominantly 

transmit sales presentations or program 

length commercials simply migrate to 

leased access because it is less 

expensive than their current commercial 

arrangements. We will seek comment in 

the Further Notice of Proposed 

Rulemaking on whether leased access is 

affordable at current rates to 

programmers that predominantly 

transmit sales presentations or program 

length commercials and whether 

reduced rates would simply cause 

migration of existing services to leased 

access. 

2. The Marginal Implicit Fee 

28. The purposes of Section 612 are 

‘‘to promote competition in the delivery 

of diverse sources of video programming 

and to assure that the widest possible 

diversity of information sources are 

made available to the public from cable 

systems in a manner consistent with 

growth and development of cable 

systems.’’ Because Section 612 also 

requires that the price, terms and 

conditions for leased access be ‘‘at least 

sufficient to assure that such use will 

not adversely affect the operation, 

financial condition or market 

development of the cable system,’’ the 

Commission is faced with balancing the 

interests of leased access programmers 

with those of cable operators. We 

believe that our method provides a cable 

operator with a leased access rate that 

will allow the operator to replace an 

existing channel from its cable system 

with a leased access channel without 

experiencing a loss in net revenue. 

While we do not believe that our 

method for determining leased access 

rates will result in cable operators 

experiencing any loss in net revenue, 

the relevant statutory provision does not 

require such a finding. As explained 

above, Section 612(c)(1) provides that 

the ‘‘prices, terms and conditions’’ of 

use must be ‘‘at least sufficient to assure 

that such use will not adversely affect 

the operation, financial condition, or 

market development of the cable 

system.’’ We interpret this provision to 

restrict ‘‘prices, terms, and conditions’’

of leased access use that materially 

affect the financial health of a cable 

system. We do not interpret the 

provision to require that cable operators 

experience no loss in revenue 

whatsoever as a result of leased access 

use. Thus, even if we were to conclude 

that our method for determining leased 

access rates would have some impact on 

cable operators’ revenue, we would still 

adopt this method because we are 

confident that any impact on operators’’

revenue would not be of sufficient 

magnitude to materially affect the 

financial health of cable systems. In 

addition, since we are required to 

balance the revenue requirement of 

cable operators and that of leased access 

programmers, we will assume that the 

cable operator will elect to replace a 

channel which does not generate a 

significant amount of the total net 

revenue of the system. We refer to this 

channel as the marginal channel and 

use the marginal implicit fee to 

determine leased access rates. Our 

method was intended to promote the 

goals of competition and diversity of 

programming sources while doing so in 

a manner consistent with growth and 

development of cable systems. 

29. Based on the wide variance 

between the actual use of leased access 

and the goals stated in the law, it 

appears that the current ‘‘average 

implicit fee’’ formula for tiered leased 

access channels yields fees that are 

higher than the statute mandates, 

resulting in an underutilization of 

leased access channels. According to the 

Commission’s most recent annual cable 

price survey, cable systems on average 

carry only 0.7 leased access channels. 

Because our Rules are not achieving 

their intended purpose, we are 

revisiting decisions made in the Second 

Report and Order establishing the 

maximum leased access rates in order to 

make the leased access channels a more 

viable outlet for programming. 

Throughout its implementation of 

Section 612, the Commission has 

recognized that the Rules adopted 

would need refinement as specifics 

regarding how the leased access rules 

were functioning became available. 

30. Due to the variances in channel 

line-ups and tier prices of cable systems, 

in most instances, a flat rate would 

either over- or undercompensate cable 

operators. As discussed below, however, 

we will set a cap on the maximum rate 

that cable operators may charge in order 

to prevent the construction of tiers in a 

manner that makes leased access rates 

excessively high. 

31. We agree with Shop NBC’s 

assertion that the average implicit fee 

overcompensates cable operators 

because it reflects the average value of 

a channel to the cable operator instead 

of the value of the channel replaced. We 

will make adjustments to the rate 

calculations that should lower prices by 

using the marginal implicit fee rather 

than the average. The result is intended 

to promote the goals of leased access by 

providing more affordable opportunities 


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for programmers without creating an 

artificially low rate. 

32. The legislative history provides 

that the leased access provisions are 

‘‘aimed at assuring that cable channels 

are available to enable program 

suppliers to furnish programming when 

the cable operator may elect not to 

provide that service as part of the 

program offerings he makes available to 

subscribers’’ To promote this legislative 

purpose the Commission should set the 

leased access rates as low as possible 

consistent with the requirement to avoid 

any negative financial impact on the 

cable operator. One may assume that the 

cable operator, faced with a requirement 

to free up a channel for leased access, 

would have its own incentives to elect 

to replace one of the channels with the 

lowest implicit fee. But even if this is 

not the case, the discussion above 

suggests that the Commission should set 

its rules to encourage such a result. This 

dictates, at least in principle, the use of 

the lowest implicit fee, which we refer 

to as the ‘‘marginal implicit fee.’’ And 

it supports the conclusion that the 

current ‘‘average implicit fee’’ criterion 

for tiered channels is higher than 

warranted by the statute and may be 

impeding, rather than promoting, the 

goals of competition and diversity of 

programming sources. These rules 

provide cable operators a higher return 

for lost channel capacity than the value 

the cable operator would have received 

if the channel was not used for leased 

access programming. The ‘‘average 

implicit fee’’ is calculated based on the 

average value of all of the channels in 

a tier instead of the value of the 

channels most likely to be replaced. We 

will adopt a method which eliminates 

this excess recovery. This method 

remains faithful to the statutory 

requirements while more appropriately 

balancing the interests of cable 

operators and leased access 

programmers. 

3. The Cable Operator’s Net Revenue 

From a Cable Channel 

33. Cable channels are sold in bundles 

of channels known as tiers. It is 

therefore not possible to directly 

observe the revenue per subscriber a 

cable operator earns from carrying an 

individual channel included in a tier. 

We therefore approximate the revenue 

earned by those channels on the tier. To 

do so we assume that the revenue 

generated by each channel is directly 

proportional to the per subscriber 

affiliation fee paid by the cable operator 

to the programmer. The first step in the 

calculation is to determine this factor of 

proportionality which we refer to as the 

mark-up. To do so, the cable operator 

will take the total subscriber revenue for 

the programming tier at issue and divide 

by the total of the affiliation fees that the 

cable operator pays to the programmers 

for the channels on that tier. For the 

purposes of defining the price of a tier 

and the channels on the tier we adopt 

the incremental approach in cases 

where the cost and channels of one tier 

are implicitly incorporated into larger 

tiers. For example, when the expanded 

basic tier incorporates the basic tier, the 

expanded basic tier price is the retail 

price of the expanded basic tier less the 

retail price of the basic tier and the 

channels on the expanded basic tier are 

those that are not available on the basic 

tier. A similar adjustment is required of 

other tiers which are not sold on an 

incremental basis. This calculation will 

generate the mark-up of channels that 

are sold on the tier. The gross revenue 

per subscriber due to carriage of a 

specific channel on the tier is then 

simply the per subscriber affiliation fee 

paid to the programmer for the specific 

channel multiplied by the mark-up. It is 

our understanding that some 

programming contracts specify a single 

rate for a group, or bundle, of channels. 

In these cases, for the purposes of 

determining the per subscriber 

affiliation fee for one of the bundled 

channels, the fee in the contract shall be 

allocated in its entirety to the highest 

rated network in the bundle. The net 

revenue per subscriber earned by the 

cable operator from the channel is the 

difference between the gross revenue 

per subscriber and the per subscriber 

affiliation fee paid by the cable operator. 

This value represents the implicit fee for 

the channel. 

4. The Net Revenue of the Marginal 

Channel 

34. The net revenue per subscriber is 

the reduction in profit a cable operator 

would experience if it did not carry the 

channel in question. In our previous 

method for calculating leased access 

rates the calculation was based the 

average net revenue of all channels 

carried by the cable operator. In our new 

method, we base the leased access rate 

on the net revenue of the least profitable 

channels voluntarily carried by the 

cable operators on the tier where the 

leased access programming will be 

carried. We do so because this 

represents an approximation of the 

minimum net revenue a network must 

generate in order for the cable operator 

to consider carrying it on the tier. As 

mentioned, we examine the net revenue 

of channels that are voluntarily carried 

by the cable operator. From this 

calculation we exclude channels whose 

carriage is mandated by statute, 

regulation, or franchise agreement. 

These mandated channels consist of 

broadcast stations that are subject to the 

must-carry rules as well as public, 

educational, and governmental (‘‘PEG’’) 

channels that are carried pursuant to a 

franchise agreement. In addition, 

broadcaster’s multi-cast channels are 

also excluded from the marginal 

channels. Our goal is to base the leased 

access rate on the net revenue of 

channels which are subject to free 

market negotiations over the carriage 

decision and affiliation fee. It is the net 

revenue of these types of channels 

which provides an indication of the net 

revenue that would be forgone when a 

cable operator devotes channel capacity 

to a leased access programmer since the 

cable operator would be unable to 

displace a broadcast station or PEG 

channel. 

35. We identify the least profitable, or 

marginal, channels using the fraction of 

activated channels that a cable operator 

is statutorily required to make available 

for commercial leased access. The 

leased access rate is the mean value of 

net revenue earned by the lowest 

earning channels on the tier, up to the 

designated leased access fraction of 

qualifying channels on the tier. For 

example, in the case of a cable system 

with 100 activated channels and 40 

channels on the expanded basic tier, the 

mean value of the net revenue of the 6 

channels with the lowest net revenue 

will be the leased access rate for carriage 

on the expanded basic tier. We use the 

mean rather than the minimum value 

because use of the minimum would 

undercompensate the cable operator if 

more than one leased access channel 

was carried because, presumably, all 

channels other than the minimum earn 

higher net revenues. Use of the mean 

ensures that if the cable operator carries 

the statutory maximum number of 

leased access channels by displacing the 

lowest earning channels on its system, 

the cable operator will be fully 

compensated for lost revenue. 

36. Appendix B of this Order presents 

an example of the calculation of the 

leased access rates for a hypothetical 

cable system. 

5. Determining the Maximum Allowable 

Leased Access Rate 

37. We recognize that our tier-based 

calculation method may lead to 

inequitable results in situations when a 

tier carries only a few non-mandated 

programming networks in combination 

with a large amount of mandated 

programming. This may create 

incentives among cable operators to 

design programming tiers that are 

unaffordable for leased access 


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programmers. Such an outcome would 

contravene our statutory directive. 

Therefore we institute a maximum 

allowable rate based upon industrywide cable operator programming costs 

and revenues. This will ensure that 

leased access programmers can reach 

consumers in all areas of the country. 

We will permit cable operators to seek 

a waiver of the maximum allowable rate 

to ensure no unreasonable financial 

burden is put on any cable operator. The 

maximum allowable leased access rate 

will apply to carriage on any tier in 

which the operator-specific leased 

access rate for the tier exceeds the 

maximum allowable rate. 

38. We take several approaches to 

calculating this maximum rate. For 

example, we calculate the maximum 

rate utilizing a methodology based on 

per-subscriber affiliation fees that 

compensates systems that must vacate a 

channel in order to provide capacity to 

a commercial leased access programmer. 

We also calculate the maximum 

allowable leased access rate using a 

method that follows the one used to 

calculate the system-specific rates. In 

both cases, maximum rates for each of 

the analog and digital tiers are no 

greater than $0.10 per subscriber per 

month. The methods are detailed in 

Appendix B. Therefore, the maximum 

leased access rate will not exceed $0.10 

per subscriber per month for any cable 

system. 

39. Cable operators may petition the 

Commission to exceed the maximum 

allowable leased access rates. A petition 

for relief must present specific facts 

justifying the system’s specific leased 

access rate and provide an alternative 

rate which equitably balances the 

revenue requirements of the cable 

operator with the public interest goals of 

the leased access statute. Our 

presumption is that the mean value of 

the net revenue of the marginal 

networks, including those currently 

earning no license fee, provides the 

most reasonable approximation of the 

revenue which is forgone when a cable 

operator carries leased access 

programming. 

6. Effective Date of New Rate 

Regulations 

40. We recognize that the industry 

should receive an appropriate amount of 

time to review and to take steps to 

comply with the new rate regulations 

set forth above. Section 76.970(j)(3), 

which contains new or modified 

information collection requirements that 

have not been approved by the Office of 

Management and Budget (OMB), is 

effective upon OMB approval. Section 

76.970 is effective May 28, 2008 or upon 

OMB approval of § 76.970(j)(3), 

whichever is later. After OMB approval 

is received, the Commission will 

publish a document in the Federal 

Register announcing the effective date 

of the rules requiring OMB approval and 

those whose effective date was delayed 

pending OMB approval of other rules. 

E. Expedited Process 

41. As explained below, we do not 

change the current pleading cycle for 

leased access complaints set forth in 

Section 76.975 of the Commission’s 

rules, which requires the complaint to 

be filed with the Commission within 60 

days of any alleged violation and the 

cable operator to submit a response 

within 30 days from the date of the 

complaint. The Media Bureau will 

resolve all leased access complaints 

within 90 days of the close of the 

pleading cycle, obtaining additional 

discovery from the parties as necessary 

to quickly resolve complaints. Finally, 

we eliminate the requirement that a 

complainant alleging that a leased 

access rate is unreasonable must first 

receive a determination of the cable 

operator’s maximum permitted rate 

from an independent accountant. 

42. Discussion. We retain our existing 

pleading cycle for resolution of leased 

access complaints set forth in Section 

76.975 of the Commission’s rules, which 

requires the complaint to be filed with 

the Commission within 60 days of any 

alleged violation and the cable operator 

to submit a response within 30 days 

from the date of the complaint. We find 

that our current pleading cycle is not 

too lengthy, as it is imperative that we 

receive all the necessary information to 

resolve the dispute. Although we retain 

the existing time limits on filing of 

complaints, we add an exception that 

the time limit on filing complaints will 

be suspended if the complainant files a 

notice with the Commission prior to the 

expiration of the filing period, stating 

that it seeks an extension of the filing 

deadline in order to pursue active 

negotiations with the cable operator. 

The cable operator must agree to the 

extension. 

43. The Media Bureau will resolve all 

leased access complaints within 90 days 

of the close of the pleading cycle, 

obtaining additional discovery from the 

parties as necessary to quickly resolve 

complaints. As part of the remedy phase 

of the leased access complaint process, 

the Media Bureau will have discretion 

to request that the parties file their best 

and final offer proposals for the prices, 

terms, or conditions in dispute. The 

Commission will have the discretion to 

adopt one of the proposals or choose to 

fashion its own remedy. We believe that 

this expedited process will help to 

resolve leased access disputes quickly 

and efficiently and create a body of 

precedent to encourage private 

negotiations and the settlement of 

disputes. If the Media Bureau concludes 

that the complainant is entitled to 

access a leased access channel, the 

Media Bureau’s resolution of the 

complaint will include a launch date for 

the programming. 

44. Elimination of Independent 

Accountant Requirement. We eliminate 

the requirement for a complainant 

alleging that a leased access rate is 

unreasonable to first obtain a 

determination of the cable operator’s 

maximum permitted rate from an 

independent accountant prior to filing a 

petition for relief with the Commission. 

While the Commission adopted the 

independent accountant requirement as 

a means to ‘‘streamline’’ the leased 

access complaint process, the record 

reflects that this requirement has not 

worked as intended. We conclude that 

the expense, delay, and uncertainty for 

leased access programmers resulting 

from the requirement to obtain a 

determination from an independent 

accountant are not what the 

Commission envisioned in attempting to 

‘‘streamline’’ the leased access 

complaint process. Furthermore, we 

believe the new rate methodology we 

have adopted, along with the 

requirement to provide rate information 

and an explanation of how rates were 

calculated, will result in a simpler and 

transparent process for leased access 

rates. We also believe the expedited 

complaint process and expanded 

discovery we adopt herein provide 

leased access programmers with a more 

efficient process for challenging the 

commercial leased access rates charged 

by cable operators. While cable 

operators argue that the use of an 

independent accountant is important to 

protect commercially sensitive financial 

information, the Protective Order we 

adopt below will sufficiently safeguard 

such information. 

F. Discovery 

45. As discussed below, we adopt 

expanded discovery rules for leased 

access complaints to improve the 

quality and efficiency of the 

Commission’s resolution of these 

complaints. We amend our discovery 

rules pertaining to leased access 

complaints to require respondents to 

attach to their answers copies of any 

documents that they rely on in their 

defense; find that in the context of a 

complaint proceeding, it would be 

unreasonable for a respondent not to 

produce all the documents either 


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requested by the complainant or ordered 

by the Commission, provided that such 

documents are in its control and 

relevant to the dispute, subject to the 

protection of confidential material. We 

emphasize that the Commission will use 

its authority to issue default orders 

granting a complaint if a respondent 

fails to comply with reasonable 

discovery requests. The respondent 

shall have the opportunity to object to 

any request for documents. Such request 

shall be heard, and determination made, 

by the Commission. The respondent 

need not produce the disputed 

discovery material until the 

Commission has ruled on the discovery 

request. Any party who fails to timely 

provide discovery requested by the 

opposing party to which it has not 

raised an objection may be deemed in 

default and an order may be entered in 

accordance with the allegations 

contained in the complaint, or the 

complaint may be dismissed with 

prejudice. 

46. Under the current rules, a leased 

access complainant is entitled, either as 

part of its complaint or through a 

motion filed after the respondent’s 

answer is submitted, to request that 

Commission staff order discovery of any 

evidence necessary to prove its case. See 

47 CFR 76.7(e), (f). Respondents are also 

free to request discovery. We believe 

that expanded discovery will improve 

the quality and efficiency of the 

Commission’s resolution of leased 

access complaints. Accordingly, we find 

that it would be unreasonable for a 

respondent not to produce all the 

documents either requested by the 

complainant or ordered by the 

Commission, provided that such 

documents are in its control and 

relevant to the dispute. In reaching this 

finding, we agree that evidence detailing 

how the cable operator calculated its 

leased access rate, as well as the 

availability of certain contracts for 

carriage of leased access programming, 

subject to confidential treatment, are 

essential for determining whether the 

cable operator has violated the 

Commission’s leased access rules. The 

Commission’s Rules allow the 

Commission staff to order production of 

any documents necessary to the 

resolution of a leased access complaint. 

See 47 CFR 76.7(e), (f). The subject 

discovery may require the production of 

confidential material, including 

evidence detailing how the cable 

operator calculated its leased access rate 

as well as carriage contracts, subject to 

our confidentiality rules. While we 

retain this process for the Commission 

to order the production of documents 

and other discovery, we will also allow 

parties to a leased access complaint to 

serve requests for discovery directly on 

opposing parties. 

47. Parties to a leased access 

complaint may serve requests for 

discovery directly on opposing parties, 

and file a copy of the request with the 

Commission. As discussed above, the 

respondent shall have the opportunity 

to object to any request for documents 

that are not in its control or relevant to 

the dispute. Such request shall be heard, 

and determination made, by the 

Commission. Until the objection is ruled 

upon, the obligation to produce the 

disputed material is suspended. Any 

party who fails to timely provide 

discovery requested by the opposing 

party to which it has not raised an 

objection as described above may be 

deemed in default and an order may be 

entered in accordance with the 

allegations contained in the complaint, 

or the complaint may be dismissed with 

prejudice. 

48. We reiterate that respondents to 

leased access complaints must produce 

in a timely manner the contracts and 

other documentation that are necessary 

to resolve the complaint, subject to 

confidential treatment. In order to 

prevent abuse, the Commission will 

strictly enforce its default rules against 

respondents who do not answer 

complaints thoroughly or do not 

respond in a timely manner to 

permissible discovery requests with the 

necessary documentation attached. 

Respondents that do not respond in a 

timely manner to all discovery ordered 

by the Commission will risk penalties, 

including having the complaint against 

them granted by default. Likewise, a 

complainant that fails to respond 

promptly to a Commission order 

regarding discovery will risk having its 

complaint dismissed with prejudice. 

Finally, a party that fails to respond 

promptly to a request for discovery to 

which it has not raised a proper 

objection will be subject to these 

sanctions as well. 

49. We understand that this approach 

requires the submission of confidential 

and extremely competitively-sensitive 

information. Accordingly, in order to 

appropriately safeguard this 

confidential information we believe it is 

necessary to utilize the protective order 

adopted for use in our program access 

proceedings (‘‘Protective Order’’), which 

we attach hereto as Appendix A. 

50. A Protective Order constitutes 

both an Order of the Commission and an 

agreement between the party executing 

the declaration and the submitting 

party. The Commission has full 

authority to fashion appropriate 

sanctions for violations of its protective 

orders, including but not limited to 

suspension or disbarment of attorneys 

from practice before the Commission, 

forfeitures, cease and desist orders, and 

denial of further access to confidential 

information in Commission 

proceedings. We intend to vigorously 

enforce any transgressions of the 

provisions of our protective orders. 

G. Annual Reporting of Leased Access 

Statistics 

51. We adopt an annual reporting 

requirement for cable operators to 

submit information pertaining to leased 

access rates, usage, channel placement, 

and complaints, among other leased 

access matters. In the NPRM, we sought 

comment on various questions regarding 

the status of commercial leased access, 

such as the extent to which 

programmers are making use of 

commercial leased access channels, 

whether cable operators have denied 

requests for commercial leased access, 

whether cable operators use commercial 

leased access channels for their own 

purposes, and the effectiveness of the 

complaint process. 

52. We did not receive a large number 

of comments containing industry-wide 

data regarding use of leased access. As 

described below, to ensure that we have 

sufficient up-to-date information on the 

status of leased access programming in 

the future, we adopt an annual reporting 

requirement for cable operators. 

53. Discussion. We adopt an annual 

reporting requirement for cable 

operators pertaining to leased access 

rates, usage, channel placement, and 

complaints, among other leased access 

matters. We find that gathering up-todate information and statistics on an 

annual basis pertaining to leased access 

is critical to our efforts to track trends 

in commercial leased access rates and 

usage as well as to monitor any efforts 

by cable operators to impede use of 

commercial leased access channels. 

This information will allow us to 

determine whether further 

modifications to the commercial leased 

access rules we adopt herein are needed 

based on a more concrete factual setting. 

The Annual Report will require each 

cable system to provide the following 

information: 

• List the number of commercial 

leased access channels provided by the 

cable system. 

• List the channel number and tier 

applicable to each commercial leased 

access channel. 

• Provide the rates the cable system 

charges for full-time and part-time 

leased access on each leased access 

channel. 


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• Provide the calculated maximum 

commercial leased access rate and 

actual rates. 

• List programmers using each 

commercial leased access channel and 

state whether each programmer is using 

the channel on a full-time or part-time 

basis. 

• List number of requests received for 

information pertaining to commercial 

leased access and the number of bona 

fide proposals received for commercial 

leased access. 

• Describe whether you have denied 

any requests for commercial leased 

access and, if so, explain the basis for 

the denial. 

• Describe whether a complaint has 

been filed against the cable system with 

the Commission or with a Federal 

district court regarding a commercial 

leased access dispute. 

• Describe whether any entity has 

sought arbitration with the cable system 

regarding a commercial leased access 

dispute. 

• Describe the extent to which and for 

what purposes the cable system uses 

commercial leased access channels for 

its own purposes. 

• Describe the extent to which the 

cable system impose different rates, 

terms, or conditions on commercial 

leased access programmers (such as 

with respect to security deposits, 

insurance, or termination provisions). 

Explain any differences. 

• List and describe any instances of 

the cable system requiring an existing 

programmer to move to another channel 

or tier. 

54. Each cable system must submit 

this report with the Commission by 

April 30th of each year. The report will 

request information for the preceding 

calendar year. We anticipate that any 

burdens associated with this annual 

reporting requirement will be limited, as 

the information requested should be 

readily available to cable operators. 

55. We provide leased access 

programmers and other interested 

parties with an opportunity to file 

comments on a voluntary basis with the 

Commission responding to the cable 

operators’ annual leased access reports. 

These comments should be filed by May 

15th of each year. We invite commercial 

leased access programmers to provide 

information such as the following in 

these comments: 

• List the number of commercial 

leased access channels leased on each 

cable system. Indicate the channel 

number and tier applicable to each 

commercial leased access channel. 

• Describe whether a cable operator 

has denied any request for commercial 

leased access and, if so, explain the 

basis for the denial. 

• Describe whether cable operators 

have responded to requests for 

information pertaining to leased access 

within three business days, as required 

by the Commission’s rules. 

• Describe whether the programmer 

has filed any complaints with the 

Commission or a Federal district court 

against a cable operator regarding a 

commercial leased access dispute. 

• Describe whether the programmer 

has sought arbitration with a cable 

operator regarding a commercial leased 

access dispute. 

• Describe any difficulties the 

programmer has faced in trying to 

obtain access to a commercial leased 

access channel. 

III. Constitutional Issues 

56. The revisions to the leased access 

rules we adopt herein withstand 

constitutional scrutiny. The leased 

access provision of the 1992 Cable Act 

has survived a facial First Amendment 

challenge in Time Warner 

Entertainment Co., L.P. v. FCC, 93 F.3d 

957 (DC Cir. 1996) (‘‘Time Warner’’). 

The DC Circuit has already decided that 

the leased access provision of the 1992 

Cable Act is not content-based. The 

leased access provision does not favor 

or disfavor speech on the basis of the 

ideas contained therein; rather, it 

regulates speech based on affiliation 

with a cable operator. The court held in 

Time Warner that the provisions of the 

Cable Act that regulate speech based on 

affiliation with a cable operator are 

subject to intermediate scrutiny and are 

constitutional if the government’s 

interest is important or substantial and 

the means chosen to promote that 

interest do not burden substantially 

more speech than necessary to achieve 

the aim. The Time Warner court found 

that there is a substantial government 

interest in promoting diversity and 

competition in the video programming 

marketplace. We find that this 

substantial government interest remains 

today. While MVPDs argue that there 

are more outlets today for independent 

programmers, such as the Internet, they 

fail to demonstrate that these alternative 

outlets can be considered sufficient to 

conclude that Congress’s goals of 

promoting competition and diversity in 

passing the leased access provisions of 

the 1992 Cable Act have been achieved. 

The rules we adopt today simply 

implement the statutory requirements 

enacted by Congress. 

57. We also reject the claim that the 

leased access rules deprive cable 

operators of the value of their property 

(i.e., channel capacity) without just 

compensation in violation of the Fifth 

Amendment. The Fifth Amendment 

‘‘takings’’ clause requires ‘‘just 

compensation’’ for a government 

‘‘taking’’ of private property. Moreover, 

the leased access provision of the 1992 

Cable Act, as well as our rules 

implementing that provision, provide 

just compensation to cable operators for 

use of their channel capacity. We 

conclude that leased access rules satisfy 

requirements that there must be an 

‘‘essential nexus’’ between the taking 

and a legitimate state interest as well as 

a ‘‘rough proportionality’’ between the 

taking and the magnitude of the 

government objective. As the DC Circuit 

previously held, there is a substantial 

government interest in promoting 

competition and diversity in the video 

programming marketplace, and the 

provisions of the 1992 Cable Act 

regulating cable-affiliated programming 

are narrowly tailored to achieve those 

goals. Thus, there is no ‘‘taking’’ within 

the meaning of the Fifth Amendment. 

58. We also reject the argument that 

the NPRM failed to provide the 

specificity required under the 

Administrative Procedure Act (‘‘APA’’) 

and that the Commission must issue 

another notice before adopting final 

rules. Section 553(b) and (c) of the APA 

requires agencies to give public notice 

of a proposed rule making that includes 

‘‘either the terms or substance of the 

proposed rule or a description of the 

subjects and issues involved’’ and to 

give interested parties an opportunity to 

submit comments on the proposal. See 

5 U.S.C. 553(b), (c). The notice ‘‘need 

not specify every precise proposal 

which [the agency] may ultimately 

adopt as a rule’’; it need only ‘‘be 

sufficient to fairly apprise interested 

parties of the issues involved.’’ See 

Nuvio Corp. v. FCC, 473 F.3d 302, 310 

(DC Cir. 2006) (internal quotations 

omitted). In particular, the APA’s notice 

requirements are satisfied where the 

final rule is a ‘‘logical outgrowth’’ of the 

actions proposed. See Public Service 

Commission of the District of Columbia 

v. FCC, 906 F.2d 713, 717 (DC Cir. 

1990). The questions raised in the 

NPRM, as well as the concerns 

mentioned in the Adelphia Order which 

resulted in the NPRM, regarding the 

adequacy of the current leased access 

regimes, including the complaint 

process, were sufficient to put interested 

parties on notice that the Commission 

was considering how to revise the 

leased access rules to effectuate the 

intent of Congress. See NPRM, 22 FCC 

Rcd 11222, para. 1 (citing Adelphia 

Order, 21 FCC Rcd 8203, 8277, para. 

165; 8367 (Statement of Commissioner 


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Copps); 8371 (Statement of 

Commissioner Adelstein)); See also 

Adelphia Order, 21 FCC Rcd at paras. 

99, 109, 114, 165, 190–91, 298. Because 

parties could have anticipated that the 

rules ultimately adopted herein were 

possible, it is a ‘‘logical outgrowth’’ of 

the original proposal, and adequate 

notice was provided under the APA. See 

Northeast Maryland Waste Disposal 

Authority v. EPA, 358 F.3d 936, 951 (DC 

Cir. 2004) (discussing APA notice 

requirements and the ‘‘logical 

outgrowth’’ test). 

IV. Procedural Matters 

59. Congressional Review Act. The 

Commission will send a copy of this 

Report and Order in a report to be sent 

to Congress and the Government 

Accountability Office pursuant to the 

Congressional Review Act, see 5 U.S.C. 

801(a)(1)(A). 

60. Effective Date. Sections 

76.975(h)(1),(2) and (3) and (i) are 

effective March 31, 2008. Sections 

76.970(j)(3), 76.972(a), (b), (c), (d), (e), 

and (g); 76.975(d), (e), (g) and (h)(4); and 

76.978, which contain new or modified 

information collection requirements that 

have not been approved by the Office of 

Management and Budget (OMB), are 

effective upon OMB approval. Section 

76.970 is effective May 28, 2008 or upon 

OMB approval of § 76.970(j)(3), 

whichever is later. The effective date of 

Sections 76.972 (f) and 76.975 (b), (c) 

and (f) is delayed until OMB approval 

of the aforementioned rule sections. 

After OMB approval is received, the 

Commission will publish a document in 

the Federal Register announcing the 

effective date of the rules requiring 

OMB approval and those whose 

effective date was delayed pending 

OMB approval of other rules. 

61. Final Regulatory Flexibility 

Analysis. As required by the Regulatory 

Flexibility Act of 1980, as amended 

(‘‘RFA’’), an Initial Regulatory 

Flexibility Analysis (‘‘IRFA’’) was 

incorporated in the Notice of Proposed 

Rulemaking (‘‘NPRM’’) in MB Docket 

No. 07–42. The Commission sought 

written public comment on the 

proposals in the Notice of Proposed 

Rulemaking, including comment on the 

IRFA. This present Final Regulatory 

Flexibility Analysis (‘‘FRFA’’) conforms 

to the RFA. 

A. Need for, and Objectives of, the Rules 

Adopted 

62. The commercial leased access 

requirements set forth in Section 612 of 

the Communications Act of 1934 require 

a cable operator to set aside channel 

capacity for commercial use by video 

programmers unaffiliated with the cable 

operator. The purposes of Section 612 

are ‘‘to promote competition in the 

delivery of diverse sources of video 

programming and to assure that the 

widest possible diversity of information 

sources are made available to the public 

from cable systems in a manner 

consistent with growth and 

development of cable systems.’’

63. In the Order, the Commission 

concludes that its rules governing 

commercial leased access have impeded 

the use of leased access channels by 

programmers, including smaller entities, 

thereby undermining the goals of 

Section 612. The Order adopts several 

rules to address this concern. Regarding 

commercial leased access rates, the 

Commission concludes that its current 

formula for calculating leased access 

rates yields fees charged by cable 

operators that are higher than the statute 

mandates, resulting in an 

underutilization of leased access 

channels. To address this concern, the 

Order modifies the Commission’s 

formula used to calculate commercial 

leased access rates, which will result in 

making these channels a more viable 

outlet for leased access programming. 

The Order also provides that the 

maximum leased access rate will not 

exceed $0.10 per subscriber per month 

for any cable system. Cable operators 

may petition the Commission to exceed 

the maximum allowable leased access 

rates. A petition for relief must present 

specific facts justifying the system’s 

specific leased access rate and provide 

an alternative rate which equitably 

balances the revenue requirements of 

the cable operator with the public 

interest goals of the leased access 

statute. The Order does not apply the 

new rate methodology or the maximum 

allowable leased access rate of $0.10 per 

subscriber to programmers that 

predominantly transmit sales 

presentations or program length 

commercials. 

64. To address poor customer service 

practices of cable system operators with 

regard to potential leased access 

programmers, the Order requires a cable 

system operator to meet uniform 

customer service standards; to maintain 

a contact name, telephone number, and 

e-mail address on its website; to make 

available by telephone a designated 

person to respond to requests for 

information about leased access 

channels; and to maintain a brief 

explanation of the leased access statute 

and regulations on its website. In 

response to concerns raised by 

commercial leased access programmers 

that contract terms and conditions 

imposed by cable operators are often 

unfair, unreasonable, onerous, and 

overly burdensome, the Order requires 

cable operators to apply the same 

uniform standards, terms, and 

conditions for all of its leased access 

programmers as it applies to its other 

programmers. The Order also specifies 

the information that a leased access 

programmer must provide to a cable 

system operator in order to be 

considered for carriage, and requires the 

cable system operator to respond to the 

proposal by accepting the proposed 

terms or offering alternative terms 

within 10 days. 

65. Regarding leased access complaint 

procedures, the Order adopts an 

expedited process which requires the 

Media Bureau to resolve leased access 

complaints within 90 days of the close 

of the pleading cycle and eliminates the 

requirement for a leased access 

complainant alleging that a rate is 

unreasonable to first obtain a 

determination of the cable operator’s 

maximum permitted rate from an 

independent accountant. The Order 

revises rules to provide that, as part of 

the remedy phase of a leased access 

complaint process, the Media Bureau 

will have the discretion to request that 

the parties file their best and final offer 

for the prices, terms, or conditions in 

dispute, and the Media Bureau will 

have the discretion to adopt one of the 

best and final offers or to choose to 

fashion its own remedy. The Order also 

amends the Commission’s discovery 

rules pertaining to leased access 

complaints by requiring respondents to 

attach to their answers copies of any 

documents that they rely on in their 

defense; finding that in the context of a 

complaint proceeding, it would be 

unreasonable for a respondent not to 

produce all the documents either 

requested by the complainant or ordered 

by the Commission, provided that such 

documents are in its control and 

relevant to the dispute, subject to the 

protection of confidential material; and 

emphasizing that the Commission will 

use its authority to issue default orders 

granting a complaint if a respondent 

fails to comply with its discovery 

requests. 

66. Moreover, in order to ensure that 

the Commission has sufficient up-todate information on the status of leased 

access programming in the future, the 

Order adopts a reporting requirement 

for cable operators that requires cable 

operators to file annual reports on 

leased access rates, channel usage, and 

complaints, among other matters 

pertaining to leased access. Leased 

access programmers will have an 

opportunity to file comments with the 

Commission in response to these 

reports. 


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B. Summary of Significant Issues Raised 

by Public Comments in Response to the 

IRFA 

67. There were no comments filed 

specifically in response to the IRFA. 

C. Description and Estimate of the 

Number of Small Entities to Which the 

Proposed Rules Will Apply 

68. 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 

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’’). 

69. Wired Telecommunications 

Carriers. The 2007 North American 

Industry Classification System 

(‘‘NAICS’’) defines ‘‘Wired 

Telecommunications Carriers’’ (2007 

NAISC code 517110) to include the 

following three classifications which 

were listed separately in the 2002 

NAICS: Wired Telecommunications 

Carriers (2002 NAICS code 517110), 

Cable and Other Program Distribution 

(2002 NAICS code 517510), and Internet 

Service Providers (2002 NAISC code 

518111). The 2007 NAISC defines this 

category as follows: ‘‘This industry 

comprises establishments primarily 

engaged in operating and/or providing 

access to transmission facilities and 

infrastructure that they own and/or 

lease for the transmission of voice, data, 

text, sound, and video using wired 

telecommunications networks. 

Transmission facilities may be based on 

a single technology or a combination of 

technologies. Establishments in this 

industry use the wired 

telecommunications network facilities 

that they operate to provide a variety of 

services, such as wired telephony 

services, including VoIP services; wired 

(cable) audio and video programming 

distribution; and wired broadband 

Internet services. By exception, 

establishments providing satellite 

television distribution services using 

facilities and infrastructure that they 

operate are included in this industry.’’

The SBA has developed a small 

business size standard for Wired 

Telecommunications Carriers, which is 

all firms having 1,500 employees or less. 

According to Census Bureau data for 

2002, there were a total of 27,148 firms 

in the Wired Telecommunications 

Carriers category (2002 NAISC code 

517110) that operated for the entire 

year; 6,021 firms in the Cable and Other 

Program Distribution category (2002 

NAISC code 517510) that operated for 

the entire year; and 3,408 firms in the 

Internet Service Providers category 

(2002 NAISC code 518111) that 

operated for the entire year. Of these 

totals, 25,374 of 27,148 firms in the 

Wired Telecommunications Carriers 

category (2002 NAISC code 517110) had 

less than 100 employees; 5,496 of 6,021 

firms in the Cable and Other Program 

Distribution category (2002 NAISC code 

517510) had less than 100 employees; 

and 3,303 of the 3,408 firms in the 

Internet Service Providers category 

(2002 NAISC code 518111) had less 

than 100 employees. Thus, under this 

size standard, the majority of firms can 

be considered small. 

70. Cable and Other Program 

Distribution. The 2002 NAICS 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.’’ This category includes, 

among others, cable operators, direct 

broadcast satellite (‘‘DBS’’) services, 

home satellite dish (‘‘HSD’’) services, 

satellite master antenna television 

(‘‘SMATV’’) systems, and open video 

systems (‘‘OVS’’). 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. Thus, under this size standard, 

the majority of firms can be considered 

small. 

71. Cable System Operators (Rate 

Regulation Standard). 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. As of 

2006, 7,916 cable operators qualify as 

small cable companies under this 

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 

6,139 systems have under 10,000 

subscribers, and an additional 379 

systems have 10,000–19,999 

subscribers. Thus, under this standard, 

most cable systems are small. 

72. Cable System Operators (Telecom 

Act Standard). 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.’’ There are approximately 

65.4 million cable subscribers in the 

United States today. Accordingly, an 

operator serving fewer than 654,000 

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. 

Based on available data, we find that the 

number of cable operators serving 

654,000 subscribers or less totals 

approximately 7,916. 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. Although it seems 

certain that some of these cable system 

operators are affiliated with entities 

whose gross annual revenues exceed 

$250,000,000, we are unable at this time 

to estimate with greater precision the 

number of cable system operators that 

would qualify as small cable operators 

under the definition in the 

Communications Act. 

73. Direct Broadcast Satellite (‘‘DBS’’) 

Service. DBS service is a nationally 

distributed subscription service that 

delivers video and audio programming 

via satellite to a small parabolic ‘‘dish’’

antenna at the subscriber’s location. 

Because DBS provides subscription 

services, DBS falls within the SBArecognized definition of Cable and 

Other Program Distribution. This 

definition provides that a small entity is 

one with $13.5 million or less in annual 

receipts. Currently, three operators 

provide DBS service, which requires a 

great investment of capital for operation: 

DIRECTV, EchoStar (marketed as the 

DISH Network), and Dominion Video 

Satellite, Inc. (‘‘Dominion’’) (marketed 

as Sky Angel). All three currently offer 

subscription services. Two of these 


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three DBS operators, DIRECTV and 

EchoStar Communications Corporation 

(‘‘EchoStar’’), report annual revenues 

that are in excess of the threshold for a 

small business. The third DBS operator, 

Dominion’s Sky Angel service, serves 

fewer than one million subscribers and 

provides 20 family and religion-oriented 

channels. Dominion does not report its 

annual revenues. The Commission does 

not know of any source which provides 

this information and, thus, we have no 

way of confirming whether Dominion 

qualifies as a small business. Because 

DBS service requires significant capital, 

we believe it is unlikely that a small 

entity as defined by the SBA would 

have the financial wherewithal to 

become a DBS licensee. Nevertheless, 

given the absence of specific data on 

this point, we recognize the possibility 

that there are entrants in this field that 

may not yet have generated $13.5 

million in annual receipts, and therefore 

may be categorized as a small business, 

if independently owned and operated. 

74. Private Cable Operators (PCOs) 

also known as Satellite Master Antenna 

Television (SMATV) Systems. PCOs, 

also known as SMATV systems or 

private communications operators, are 

video distribution facilities that use 

closed transmission paths without using 

any public right-of-way. PCOs acquire 

video programming and distribute it via 

terrestrial wiring in urban and suburban 

multiple dwelling units such as 

apartments and condominiums, and 

commercial multiple tenant units such 

as hotels and office buildings. The SBA 

definition of small entities for Cable and 

Other Program Distribution Services 

includes PCOs and, thus, small entities 

are defined as all such companies 

generating $13.5 million or less in 

annual receipts. Currently, there are 

approximately 150 members in the 

Independent Multi-Family 

Communications Council (IMCC), the 

trade association that represents PCOs. 

Individual PCOs often serve 

approximately 3,000–4,000 subscribers, 

but the larger operations serve as many 

as 15,000–55,000 subscribers. In total, 

PCOs currently serve approximately one 

million subscribers. Because these 

operators are not rate regulated, they are 

not required to file financial data with 

the Commission. Furthermore, we are 

not aware of any privately published 

financial information regarding these 

operators. Based on the estimated 

number of operators and the estimated 

number of units served by the largest 

ten PCOs, we believe that a substantial 

number of PCOs may qualify as small 

entities. 

75. Home Satellite Dish (‘‘HSD’’) 

Service. Because HSD provides 

subscription services, HSD falls within 

the SBA-recognized definition of Cable 

and Other Program Distribution, which 

includes all such companies generating 

$13.5 million or less in revenue 

annually. HSD or the large dish segment 

of the satellite industry is the original 

satellite-to-home service offered to 

consumers, and involves the home 

reception of signals transmitted by 

satellites operating generally in the Cband frequency. Unlike DBS, which 

uses small dishes, HSD antennas are 

between four and eight feet in diameter 

and can receive a wide range of 

unscrambled (free) programming and 

scrambled programming purchased from 

program packagers that are licensed to 

facilitate subscribers’ receipt of video 

programming. There are approximately 

30 satellites operating in the C-band, 

which carry over 500 channels of 

programming combined; approximately 

350 channels are available free of charge 

and 150 are scrambled and require a 

subscription. HSD is difficult to 

quantify in terms of annual revenue. 

HSD owners have access to program 

channels placed on C-band satellites by 

programmers for receipt and 

distribution by MVPDs. Commission 

data shows that, between June 2004 and 

June 2005, HSD subscribership fell from 

335,766 subscribers to 206,358 

subscribers, a decline of more than 38 

percent. The Commission has no 

information regarding the annual 

revenue of the four C-Band distributors. 

76. Broadband Radio Service and 

Educational Broadband Service. 

Broadband Radio Service comprises 

Multichannel Multipoint Distribution 

Service (MMDS) systems and 

Multipoint Distribution Service (MDS). 

MMDS systems, often referred to as 

‘‘wireless cable,’’ transmit video 

programming to subscribers using the 

microwave frequencies of MDS and 

Educational Broadband Service (EBS) 

(formerly known as Instructional 

Television Fixed Service (ITFS)). We 

estimate that the number of wireless 

cable subscribers is approximately 

100,000, as of March 2005. The SBA 

definition of small entities for Cable and 

Other Program Distribution, which 

includes such companies generating 

$13.5 million in annual receipts, 

appears applicable to MDS and ITFS. 

77. The Commission has also defined 

small MDS (now BRS) entities in the 

context of Commission license auctions. 

For purposes of the 1996 MDS auction, 

the Commission defined a small 

business as an entity that had annual 

average gross revenues of less than $40 

million in the previous three calendar 

years. This definition of a small entity 

in the context of MDS auctions has been 

approved by the SBA. In the MDS 

auction, 67 bidders won 493 licenses. Of 

the 67 auction winners, 61 claimed 

status as a small business. At this time, 

the Commission estimates that of the 61 

small business MDS auction winners, 48 

remain small business licensees. In 

addition to the 48 small businesses that 

hold BTA authorizations, there are 

approximately 392 incumbent MDS 

licensees that have gross revenues that 

are not more than $40 million and are 

thus considered small entities. MDS 

licensees and wireless cable operators 

that did not receive their licenses as a 

result of the MDS auction fall under the 

SBA small business size standard for 

Cable and Other Program Distribution, 

which includes all such entities that do 

not generate revenue in excess of $13.5 

million annually. Information available 

to us indicates that there are 

approximately 850 of these licensees 

and operators that do not generate 

revenue in excess of $13.5 million 

annually. Therefore, we estimate that 

there are approximately 850 small entity 

MDS (or BRS) providers, as defined by 

the SBA and the Commission’s auction 

rules. 

78. Educational institutions are 

included in this analysis as small 

entities; however, the Commission has 

not created a specific small business 

size standard for ITFS (now EBS). We 

estimate that there are currently 2,032 

ITFS (or EBS) licensees, and all but 100 

of the licenses are held by educational 

institutions. Thus, we estimate that at 

least 1,932 ITFS licensees are small 

entities. 

79. Local Multipoint Distribution 

Service. Local Multipoint Distribution 

Service (LMDS) is a fixed broadband 

point-to-multipoint microwave service 

that provides for two-way video 

telecommunications. The SBA 

definition of small entities for Cable and 

Other Program Distribution, which 

includes such companies generating 

$13.5 million in annual receipts, 

appears applicable to LMDS. The 

Commission has also defined small 

LMDS entities in the context of 

Commission license auctions. In the 

1998 and 1999 LMDS auctions, the 

Commission defined a small business as 

an entity that had annual average gross 

revenues of less than $40 million in the 

previous three calendar years. 

Moreover, the Commission added an 

additional classification for a ‘‘very 

small business,’’ which was defined as 

an entity that had annual average gross 

revenues of less than $15 million in the 

previous three calendar years. These 

definitions of ‘‘small business’’ and 

‘‘very small business’’ in the context of 

the LMDS auctions have been approved 


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by the SBA. In the first LMDS auction, 

104 bidders won 864 licenses. Of the 

104 auction winners, 93 claimed status 

as small or very small businesses. In the 

LMDS re-auction, 40 bidders won 161 

licenses. Based on this information, we 

believe that the number of small LMDS 

licenses will include the 93 winning 

bidders in the first auction and the 40 

winning bidders in the re-auction, for a 

total of 133 small entity LMDS 

providers as defined by the SBA and the 

Commission’s auction rules. 

80. Open Video Systems (‘‘OVS’’). The 

OVS framework provides opportunities 

for the distribution of video 

programming other than through cable 

systems. Because OVS operators provide 

subscription services, OVS falls within 

the SBA-recognized definition of Cable 

and Other Program Distribution 

Services, which provides that a small 

entity is one with $ 13.5 million or less 

in annual receipts. The Commission has 

approved approximately 120 OVS 

certifications with some OVS operators 

now providing service. Broadband 

service providers (BSPs) are currently 

the only significant holders of OVS 

certifications or local OVS franchises, 

even though OVS is one of four 

statutorily-recognized options for local 

exchange carriers (LECs) to offer video 

programming services. As of June 2005, 

BSPs served approximately 1.4 million 

subscribers, representing 1.49 percent of 

all MVPD households. Among BSPs, 

however, those operating under the OVS 

framework are in the minority. As of 

June 2005, RCN Corporation is the 

largest BSP and 14th largest MVPD, 

serving approximately 371,000 

subscribers. RCN received approval to 

operate OVS systems in New York City, 

Boston, Washington, DC and other 

areas. The Commission does not have 

financial information regarding the 

entities authorized to provide OVS, 

some of which may not yet be 

operational. We thus believe that at least 

some of the OVS operators may qualify 

as small entities. 

81. Cable and Other Subscription 

Programming. The Census Bureau 

defines this category as follows: ‘‘This 

industry comprises establishments 

primarily engaged in operating studios 

and facilities for the broadcasting of 

programs on a subscription or fee basis 

* * *. These establishments produce 

programming in their own facilities or 

acquire programming from external 

sources. The programming material is 

usually delivered to a third party, such 

as cable systems or direct-to-home 

satellite systems, for transmission to 

viewers.’’ The SBA has developed a 

small business size standard for firms 

within this category, which is all firms 

with $13.5 million or less in annual 

receipts. According to Census Bureau 

data for 2002, there were 270 firms in 

this category that operated for the entire 

year. Of this total, 217 firms had annual 

receipts of under $10 million and 13 

firms had annual receipts of $10 million 

to $24,999,999. Thus, under this 

category and associated small business 

size standard, the majority of firms can 

be considered small. 

82. Motion Picture and Video 

Production. The Census Bureau defines 

this category as follows: ‘‘This industry 

comprises establishments primarily 

engaged in producing, or producing and 

distributing motion pictures, videos, 

television programs, or television 

commercials.’’ The SBA has developed 

a small business size standard for firms 

within this category, which is all firms 

with $27 million or less in annual 

receipts. According to Census Bureau 

data for 2002, there were 7,772 firms in 

this category that operated for the entire 

year. Of this total, 7,685 firms had 

annual receipts of under $24,999,999 

and 45 firms had annual receipts of 

between $25,000,000 and $49,999,999. 

Thus, under this category and 

associated small business size standard, 

the majority of firms can be considered 

small. Each of these NAICS categories is 

very broad and includes firms that may 

be engaged in various industries, 

including cable programming. Specific 

figures are not available regarding how 

many of these firms exclusively produce 

and/or distribute programming for cable 

television or how many are 

independently owned and operated. 

83. Motion Picture and Video 

Distribution. The Census Bureau defines 

this category as follows: ‘‘This industry 

comprises establishments primarily 

engaged in acquiring distribution rights 

and distributing film and video 

productions to motion picture theaters, 

television networks and stations, and 

exhibitors.’’ The SBA has developed a 

small business size standard for firms 

within this category, which is all firms 

with $27 million or less in annual 

receipts. According to Census Bureau 

data for 2002, there were 377 firms in 

this category that operated for the entire 

year. Of this total, 365 firms had annual 

receipts of under $24,999,999 and 7 

firms had annual receipts of between 

$25,000,000 and $49,999,999. Thus, 

under this category and associated small 

business size standard, the majority of 

firms can be considered small. Each of 

these NAICS categories is very broad 

and includes firms that may be engaged 

in various industries, including cable 

programming. Specific figures are not 

available regarding how many of these 

firms exclusively produce and/or 

distribute programming for cable 

television or how many are 

independently owned and operated. 

84. Small Incumbent Local Exchange 

Carriers. We have included small 

incumbent local exchange carriers in 

this present RFA analysis. 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. We have therefore included small 

incumbent local exchange carriers in 

this RFA, although we emphasize that 

this RFA action has no effect on 

Commission analyses and 

determinations in other, non-RFA 

contexts. 

85. Incumbent Local Exchange 

Carriers (‘‘LECs’’). Neither the 

Commission nor the SBA has developed 

a small business size standard 

specifically for incumbent local 

exchange services. The appropriate size 

standard under SBA rules is for the 

category Wired Telecommunications 

Carriers. Under that size standard, such 

a business is small if it has 1,500 or 

fewer employees. According to 

Commission data, 1,307 carriers have 

reported that they are engaged in the 

provision of incumbent local exchange 

services. Of these 1,307 carriers, an 

estimated 1,019 have 1,500 or fewer 

employees and 288 have more than 

1,500 employees. Consequently, the 

Commission estimates that most 

providers of incumbent local exchange 

service are small businesses. 

86. Competitive Local Exchange 

Carriers, Competitive Access Providers 

(CAPs), ‘‘Shared-Tenant Service 

Providers,’’ and ‘‘Other Local Service 

Providers.’’ Neither the Commission nor 

the SBA has developed a small business 

size standard specifically for these 

service providers. The appropriate size 

standard under SBA rules is for the 

category Wired Telecommunications 

Carriers. Under that size standard, such 

a business is small if it has 1,500 or 

fewer employees. According to 

Commission data, 859 carriers have 

reported that they are engaged in the 

provision of either competitive access 

provider services or competitive local 

exchange carrier services. Of these 859 

carriers, an estimated 741 have 1,500 or 

fewer employees and 118 have more 

than 1,500 employees. In addition, 16 

carriers have reported that they are 

‘‘Shared-Tenant Service Providers,’’ and 


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all 16 are estimated to have 1,500 or 

fewer employees. In addition, 44 

carriers have reported that they are 

‘‘Other Local Service Providers.’’ Of the 

44, an estimated 43 have 1,500 or fewer 

employees and one has more than 1,500 

employees. Consequently, the 

Commission estimates that most 

providers of competitive local exchange 

service, competitive access providers, 

‘‘Shared-Tenant Service Providers,’’ and 

‘‘Other Local Service Providers’’ are 

small entities. 

87. Electric Power Generation, 

Transmission and Distribution. The 

Census Bureau defines this category as 

follows: ‘‘This industry group comprises 

establishments primarily engaged in 

generating, transmitting, and/or 

distributing electric power. 

Establishments in this industry group 

may perform one or more of the 

following activities: (1) Operate 

generation facilities that produce 

electric energy; (2) operate transmission 

systems that convey the electricity from 

the generation facility to the distribution 

system; and (3) operate distribution 

systems that convey electric power 

received from the generation facility or 

the transmission system to the final 

consumer.’’ The SBA has developed a 

small business size standard for firms in 

this category: ‘‘A firm is small if, 

including its affiliates, it is primarily 

engaged in the generation, transmission, 

and/or distribution of electric energy for 

sale and its total electric output for the 

preceding fiscal year did not exceed 4 

million megawatt hours.’’ According to 

Census Bureau data for 2002, there were 

1,644 firms in this category that 

operated for the entire year. Census data 

do not track electric output and we have 

not determined how many of these firms 

fit the SBA size standard for small, with 

no more than 4 million megawatt hours 

of electric output. Consequently, we 

estimate that 1,644 or fewer firms may 

be considered small under the SBA 

small business size standard. 

D. Description of Reporting, 

Recordkeeping and Other Compliance 

Requirements 

88. The rules adopted in the Report 

and Order will impose additional 

reporting, recordkeeping, and other 

compliance requirements on cable 

system operators and leased access 

programmers. The Order requires a 

respondent in a leased access complaint 

proceeding that expressly relies upon a 

document in asserting a defense to 

include the document as part of its 

answer. The Order finds that in the 

context of a leased access complaint 

proceeding, it would be unreasonable 

for a respondent not to produce all the 

documents either requested by the 

complainant or ordered by the 

Commission, provided that such 

documents are in its control and 

relevant to the dispute. The Order 

requires the parties to a leased access 

complaint proceeding to enter into a 

Protective Order to protect pleading or 

discovery material that is deemed by the 

submitting party to contain confidential 

information. The Order requires cable 

system operators to submit annual 

reports on leased access rates, channel 

usage, and complaints. The Order 

requires cable system operators to 

provide prospective leased access 

programmers with certain information 

within three business days of the date 

on which a request for leased access 

information is made. A longer period for 

small systems to respond has been 

retained. The Order requires cable 

system operators to meet uniform 

customer service standards with respect 

to their dealings with leased access 

programmers and to apply uniform 

contract terms and conditions to all 

leased access programmers as applied to 

other programmers. The Order requires 

cable systems to maintain a contact 

name, telephone number, and e-mail 

address on their Web site and to make 

available by telephone a designated 

person to respond to requests for 

information about leased access 

channels. The Order requires a cable 

system operator to maintain a brief 

explanation of the leased access statute 

and regulations on its Web site. The 

Order specifies the information that a 

leased access programmer must provide 

to a cable system operator in order to be 

considered for carriage and requires the 

cable system operator to respond to the 

proposal by accepting the proposed 

terms or offering alternative terms 

within 10 days. 

E. Steps Taken To Minimize Significant 

Impact on Small Entities and Significant 

Alternatives Considered 

89. The RFA requires an agency to 

describe any significant alternatives that 

it has considered in proposing 

regulatory approaches, 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 or reporting requirements 

under the rule for 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 small entities. The Notice invited 

comment on issues that had the 

potential to have significant economic 

impact on some small entities. 

90. As discussed in Section A, the 

decision to modify the leased access 

rules will facilitate the goals of Section 

612 of the Communications Act ‘‘to 

promote competition in the delivery of 

diverse sources of video programming 

and to assure that the widest possible 

diversity of information sources are 

made available to the public from cable 

systems in a manner consistent with 

growth and development of cable 

systems.’’ The decision confers benefits 

upon the variety of leased access 

programmers, most of which are smaller 

entities. Thus, the decision to modify 

the leased access rules benefits smaller 

entities as well as larger entities. The 

alternative of retaining the current 

leased access rules would hinder 

achieving the goals of competition and 

diversity as envisioned by Congress. 

Moreover, the alternative of requiring 

only certain cable operators to comply 

with these new rules, such as only large 

cable operators, would similarly impede 

achieving the goals of competition and 

diversity as envisioned by Congress. 

However, a longer period for small 

systems to respond to certain requests 

for information has been retained. 

F. Report to Congress 

91. The Commission will send a copy 

of the Report and Order, including this 

FRFA, in a report to be sent to Congress 

and the Government Accountability 

Office pursuant to the Congressional 

Review Act. In addition, the 

Commission will send a copy of the 

Report and Order, including this FRFA, 

to the Chief Counsel for Advocacy of the 

SBA. A copy of the Report and Order 

and FRFA (or summaries thereof) will 

also be published in the Federal 

Register. 

V. Ordering Clauses 

92. Accordingly, it is ordered, 

pursuant to the authority found in 

Sections 4(i), 303, and 612 of the 

Communications Act of 1934, as 

amended, 47 U.S.C. 154(i), 303, and 

532, this Report and Order and Further 

Notice of Proposed Rulemaking is 

adopted. 

93. It is ordered that, pursuant to the 

authority found in Sections 4(i), 303, 

and 612 of the Communications Act of 

1934, as amended, 47 U.S.C. 154(i), 303, 

and 532, the Commission’s Rules are 

hereby amended as set forth in the Rule 

Changes. 

94. It is further ordered that, Sections 

76.975(h)(1), (2) and (3) and (i) are 

effective March 31, 2008. Sections 

76.970(j)(3), 76.972(a), (b), (c), (d), (e), 

and (g); 76.975(d), (e), (g) and (h)(4); and 


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76.978, which contain new or modified 

information collection requirements that 

have not been approved by the Office of 

Management and Budget (OMB), are 

effective upon OMB approval. Section 

76.970 is effective May 28, 2008 or upon 

OMB approval of § 76.970(j)(3), 

whichever is later. The effective date of 

Sections 76.972 (f) and 76.975 (b), (c) 

and (f) is delayed until OMB approval 

of the aforementioned rule sections. 

After OMB approval is received, the 

Commission will publish a document in 

the Federal Register announcing the 

effective date of the rules requiring 

OMB approval and those whose 

effective date was delayed pending 

OMB approval of other rules. 

95. It is further ordered that the 

Commission’s Consumer and 

Governmental Affairs Bureau, Reference 

Information Center, shall send a copy of 

this Report and Order and Further 

Notice of Proposed Rulemaking, 

including the Initial and Final 

Regulatory Flexibility Analyses, to the 

Chief Counsel for Advocacy of the Small 

Business Administration. 

96. It is further ordered that the 

Commission shall send a copy of this 

Report and Order and Further Notice of 

Proposed Rulemaking in a report to be 

sent to Congress and the Government 

Accountability Office pursuant to the 

Congressional Review Act, see 5 U.S.C. 

801(a)(1)(A). 

List of Subjects in 47 CFR Part 76 

Administrative practice and 

procedure and Cable television. 

Federal Communications Commission. 

Marlene H. Dortch, 

Secretary. 

Rule Changes 

■ For the reasons stated in the preamble, 

the Federal Communications 

Commission amends 47 CFR part 76 as 

follows: 

PART 76—MULTICHANNEL VIDEO 

AND CABLE TELEVISION SERVICE 

■ 1. The authority citation for part 76 

continues to read as follows: 

Authority: 47 U.S.C. 151, 152, 153, 154, 

301, 302, 302a, 303, 303a, 307, 308, 309, 312, 

315, 317, 325, 338, 339, 340, 503, 521, 522, 

531, 532, 533, 534, 535, 536, 537, 543, 544, 

544a, 545, 548, 549, 552, 554, 556, 558, 560, 

561, 571, 572 and 573. 

■ 2. Revise § 76.970 to read as follows: 

§ 76.970 Commercial leased access rates. 

(a) Cable operators shall designate 

channel capacity for commercial use by 

persons unaffiliated with the operator in 

accordance with the requirement of 47 

U.S.C. 532. For purposes of 47 U.S.C. 

532(b)(1)(A) and (B), only those 

channels that must be carried pursuant 

to 47 U.S.C. 534 and 535 qualify as 

channels that are required for use by 

Federal law or regulation. For cable 

systems with 100 or fewer channels, 

channels that cannot be used due to 

technical and safety regulations of the 

Federal Government (e.g., aeronautical 

channels) shall be excluded when 

calculating the set-aside requirement. 

(b) In determining whether an entity 

is an ‘‘affiliate’’ for purposes of 

commercial leased access, entities are 

affiliated if either entity has an 

attributable interest in the other or if a 

third party has an attributable interest in 

both entities. 

(c) Attributable interest shall be 

defined by reference to the criteria set 

forth in Notes 1–5 to § 76.501 provided, 

however, that: 

(1) The limited partner and LLC/LLP/ 

RLLP insulation provisions of Note 2(f) 

shall not apply; and 

(2) The provisions of Note 2(a) 

regarding five (5) percent interests shall 

include all voting or nonvoting stock or 

limited partnership equity interests of 

five (5) percent or more. 

(d) The maximum commercial leased 

access rate that a cable operator may 

charge to programmers that 

predominantly transmit sales 

presentations or program length 

commercials for full-time channel 

placement on a tier exceeding a 

subscriber penetration of 50 percent is 

the average implicit fee for full-time 

channel placement on all such tier(s). 

(e) The average implicit fee identified 

in paragraph (d) of this section for a fulltime channel on a tier with a subscriber 

penetration over 50 percent shall be 

calculated by first calculating the total 

amount the operator receives in 

subscriber revenue per month for the 

programming on all such tier(s), and 

then subtracting the total amount it pays 

in programming costs per month for 

such tier(s) (the ‘‘total implicit fee 

calculation’’). A weighting scheme that 

accounts for differences in the number 

of subscribers and channels on all such 

tier(s) must be used to determine how 

much of the total implicit fee 

calculation will be recovered from any 

particular tier. The weighting scheme is 

determined in two steps. First, the 

number of subscribers is multiplied by 

the number of channels (the result is the 

number of ‘‘subscriber-channels’’ ’) on 

each tier with subscriber penetration 

over 50 percent. For instance, a tier with 

10 channels and 1,000 subscribers 

would have a total of 10,000 subscriberchannels. Second, the subscriberchannels on each of these tiers is 

divided by the total subscriber-channels 

on all such tiers. Given the percent of 

subscriber-channels for the particular 

tier, the implicit fee for the tier is 

computed by multiplying the 

subscriber-channel percentage for the 

tier by the total implicit fee calculation. 

Finally, to calculate the average implicit 

fee per channel, the implicit fee for the 

tier must be divided by the 

corresponding number of channels on 

the tier. The final result is the maximum 

rate per month that the operator may 

charge the leased access programmer for 

a full-time channel on that particular 

tier. The average implicit fee shall be 

calculated by using all channels carried 

on any tier exceeding 50 percent 

subscriber penetration (including 

channels devoted to affiliated 

programming, must-carry and public, 

educational and government access 

channels). In the event of an agreement 

to lease capacity on a tier with less than 

50 percent penetration, the average 

implicit fee should be determined on 

the basis of subscriber revenues and 

programming costs for that tier alone. 

The license fees for affiliated channels 

used in determining the average implicit 

fee shall reflect the prevailing company 

prices offered in the marketplace to 

third parties. If a prevailing company 

price does not exist, the license fee for 

that programming shall be priced at the 

programmer’s cost or the fair market 

value, whichever is lower. The average 

implicit fee shall be based on contracts 

in effect in the previous calendar year. 

The implicit fee for a contracted service 

may not include fees, stated or implied, 

for services other than the provision of 

channel capacity (e.g., billing and 

collection, marketing, or studio 

services). 

(f) The maximum commercial leased 

access rate that a cable operator may 

charge for full-time channel placement 

as an a la carte service is the highest 

implicit fee on an aggregate basis for 

full-time channel placement as an a la 

carte service. 

(g) The highest implicit fee on an 

aggregate basis for full-time channel 

placement as an a la carte service shall 

be calculated by first determining the 

total amount received by the operator in 

subscriber revenue per month for each 

non-leased access a la carte channel on 

its system (including affiliated a la carte 

channels) and deducting the total 

amount paid by the operator in 

programming costs (including license 

and copyright fees) per month for 

programming on such individual 

channels. This calculation will result in 

implicit fees determined on an aggregate 

basis, and the highest of these implicit 

fees shall be the maximum rate per 

month that the operator may charge the 


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leased access programmer for placement 

as a full-time a la carte channel. The 

license fees for affiliated channels used 

in determining the highest implicit fee 

shall reflect the prevailing company 

prices offered in the marketplace to 

third parties. If a prevailing company 

price does not exist, the license fee for 

that programming shall be priced at the 

programmer’s cost or the fair market 

value, whichever is lower. The highest 

implicit fee shall be based on contracts 

in effect in the previous calendar year. 

The implicit fee for a contracted service 

may not include fees, stated or implied, 

for services other than the provision of 

channel capacity (e.g., billing and 

collection, marketing, or studio 

services). Any subscriber revenue 

received by a cable operator for an a la 

carte leased access service shall be 

passed through to the leased access 

programmer. 

(h) The maximum commercial leased 

access rate that a cable operator may 

charge for part-time channel placement 

shall be determined by either prorating 

the maximum full-time rate uniformly, 

or by developing a schedule of and 

applying different rates for different 

times of the day, provided that the total 

of the rates for a 24-hour period does 

not exceed the maximum daily leased 

access rate. 

(i) The maximum commercial leased 

access rate that a cable operator may 

charge for full-time channel placement, 

except to programmers that 

predominantly transmit sales 

presentations or program length 

commercials, is the lower of the 

marginal implicit fee for a full-time 

channel placement on the tier where the 

leased access programming will be 

placed or $0.10 per subscriber per 

month. 

(j)(1)(i) The marginal implicit fee 

identified in paragraph (i) of this section 

for a full-time channel shall be 

calculated by first determining the 

mark-up of the tier where the leased 

access programming will be placed. The 

mark-up is calculated by determining 

the total amount the operator receives in 

subscriber revenue per month for the 

tier, and dividing by the total amount it 

pays in affiliation fees for the channels 

located on the tier. The resulting figure 

is the mark-up. In cases where the cost 

and channels of one tier are implicitly 

incorporated into a larger tier, the larger 

tier price is equal to the larger tier price 

minus the smaller tier price and the 

channels on the larger tier are those that 

are not available on the smaller tier. 

(ii) The monthly gross subscriber 

revenue per channel is obtained by 

multiplying the monthly per subscriber 

affiliation fee for each channel by the 

mark-up for the tier. The net subscriber 

revenue per channel per month for each 

channel is the difference between the 

monthly gross subscriber revenue per 

channel and the monthly per subscriber 

affiliation fee paid for that channel by 

the cable operator. This value represents 

the implicit fee for the individual 

channel. 

(iii) To determine the marginal 

channels on the tier for systems with 55 

or more activated channels, multiply the 

number of non-mandated channels on 

the tier by 0.15 and round to the nearest 

number. To determine the marginal 

channels on the tier for systems with 54 

or less activated channels, multiply the 

number of non-mandated channels on 

the tier by 0.10 and round to the nearest 

number. That is the number of marginal 

channels. Next identify the channels 

with the lowest implicit fee until that 

number is reached. These are the 

marginal channels. 

(iv) Finally, calculate the marginal 

implicit fee by taking the mean of the 

implicit fees of the marginal channels 

by summing the implicit fees of the 

marginal channels and dividing by the 

number of marginal channels. The result 

is the marginal implicit fee. 

(2) The affiliation fees for channels 

used in determining the marginal 

implicit fee are the contractual license 

fee or retransmission consent fee 

representing the compensation per 

subscriber per month paid to the 

programmer for the right to carry the 

programming. It excludes fees for 

services other than the provision of 

channel capacity, such as marketing, 

and excludes revenues. The affiliation 

fees for channels used in determining 

the marginal implicit fee shall reflect 

the prevailing affiliation fees offered in 

the marketplace to third parties. If a 

prevailing affiliation fee does not exist, 

the affiliation fee for that programming 

shall be priced at the programmer’s cost 

or the fair market value, whichever is 

lower. The marginal implicit fee 

calculation shall be based on affiliation 

fees in contracts in effect in the previous 

calendar year. The implicit fee for a 

contracted service may not include fees, 

stated or implied, for services other than 

the provision of channel capacity (e.g., 

billing and collection, marketing, or 

studio services). 

(3) Operators shall maintain, for 

Commission inspection, sufficient 

supporting documentation to justify the 

scheduled rates, including supporting 

contracts, calculations of the implicit 

fees, and justifications for all 

adjustments. 

(4) Cable operators are permitted to 

negotiate rates below the maximum 

permitted rates. 

■ 3. Add § 76.972 to read as follows: 

§ 76.972 Customer service standards. 

(a)(1) A cable system operator shall 

maintain a contact name, telephone 

number and e-mail address on its Web 

site and available by telephone of a 

designated person to respond to 

requests for information about leased 

access channels. 

(2) A cable system operator shall 

maintain a brief explanation of the 

leased access statute and regulations on 

its Web site. 

(b) Cable system operators shall 

provide prospective leased access 

programmers with the following 

information within three business days 

of the date on which a request for leased 

access information is made: 

(1) The cable system operator’s 

process for requesting leased access 

channels; 

(2) The geographic and subscriber 

levels of service that are technically 

possible; 

(3) The number and location and time 

periods available for each leased access 

channel; 

(4) Whether the leased access channel 

is currently being occupied; 

(5) A complete schedule of the 

operator’s statutory maximum full-time 

and part-time leased access rates; 

(6) A comprehensive schedule 

showing how those rates were 

calculated; 

(7) Rates associated with technical 

and studio costs; 

(8) Whether inclusion in an electronic 

programming guide is available; 

(9) The available methods of 

programming delivery and the 

instructions, technical requirements and 

costs for each method; 

(10) A comprehensive sample leased 

access contract that includes uniform 

terms and conditions such as tier and 

channel placement, contract terms and 

conditions, insurance requirements, 

length of contract, termination 

provisions and electronic guide 

availability; and 

(11) Information regarding 

prospective launch dates for the leased 

access programmer. 

(c) A bona fide proposal, as used in 

this section, is defined as a proposal 

from a potential leased access 

programmer that includes the following 

information: 

(1) The desired length of a contract 

term; 

(2) The tier, channel and time slot 

desired; 

(3) The anticipated commencement 

date for carriage; 

(4) The nature of the programming; 

(5) The geographic and subscriber 

level of service requested; and 


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(6) Proposed changes to the sample 

contract. 

(d) All requests for leased access must 

be made in writing and must specify the 

date on which the request was sent to 

the operator. 

(e) A cable system operator must 

respond to a bona fide proposal within 

10 days after receipt. 

(f) A cable system operator will be 

subject to a forfeiture for each day it 

fails to comply with §§ 76.972(a) or 

76.972(e). 

(g)(1) Operators of systems subject to 

small system relief shall provide the 

information required in paragraph (b) of 

this section within 30 calendar days of 

a bona fide request from a prospective 

leased access programmer. For these 

purposes, systems subject to small 

system relief are systems that either: 

(i) Qualify as small systems under 

§ 76.901(c) and are owned by a small 

cable company as defined under 

§ 76.901(e); or 

(ii) Have been granted special relief. 

(2) Bona fide requests, as used in this 

section, are defined as requests from 

potential leased access programmers 

that have provided the following 

information: 

(i) The desired length of a contract 

term; 

(ii) The time slot desired; 

(iii) The anticipated commencement 

date for carriage; and 

(iv) The nature of the programming. 

■ 4. Section 76.975 is amended to revise 

paragraphs (b) through (g) and 

redesignate paragraph (h) as paragraph 

(i) and to add new paragraph (h) to read 

as follows: 

§ 76.975 Commercial leased access 

dispute resolution. 

* * * * * 

(b) Any person aggrieved by the 

failure or refusal of a cable operator to 

make commercial channel capacity 

available or to charge rates for such 

capacity in accordance with the 

provisions of Title VI of the 

Communications Act, or our 

implementing regulations, §§ 76.970, 

76.971, and 76.972 may file a petition 

for relief with the Commission. 

(c) A petition must contain a concise 

statement of the facts constituting a 

violation of the statute or the 

Commission’s rules, the specific 

statute(s) or rule(s) violated, and certify 

that the petition was served on the cable 

operator. 

(d) The petition must be filed within 

60 days of the alleged violation. The 

time limit on filing complaints will be 

suspended if the complainant files a 

notice with the Commission prior to the 

expiration of the filing period, stating 

that it seeks an extension of the filing 

deadline in order to pursue active 

negotiations with the cable operator, 

and the cable operator agrees to the 

extension. 

(e) Discovery. In addition to the 

general pleading and discovery rules 

contained in § 76.7 of this part, parties 

to a leased access complaint may serve 

requests for discovery directly on 

opposing parties, and file a copy of the 

request with the Commission. The 

respondent shall have the opportunity 

to object to any request for documents 

that are not in its control or relevant to 

the dispute. Such request shall be heard, 

and determination made, by the 

Commission. Until the objection is ruled 

upon, the obligation to produce the 

disputed material is suspended. Any 

party who fails to timely provide 

discovery requested by the opposing 

party to which it has not raised an 

objection, or who fails to respond to a 

Commission order for discovery 

material, may be deemed in default and 

an order may be entered in accordance 

with the allegations contained in the 

complaint, or the complaint may be 

dismissed with prejudice. 

(f) Protective Orders. In addition to 

the procedures contained in § 76.9 of 

this part related to the protection of 

confidential material, the Commission 

may issue orders to protect the 

confidentiality of proprietary 

information required to be produced for 

resolution of leased access complaints. 

A protective order constitutes both an 

order of the Commission and an 

agreement between the party executing 

the protective order declaration and the 

party submitting the protected material. 

The Commission has full authority to 

fashion appropriate sanctions for 

violations of its protective orders, 

including but not limited to suspension 

or disbarment of attorneys from practice 

before the Commission, forfeitures, 

cease and desist orders, and denial of 

further access to confidential 

information in Commission 

proceedings. 

(g) The cable operator or other 

respondent will have 30 days from the 

filing of the petition to file a response. 

To the extent that a cable operator 

expressly references and relies upon a 

document or documents in asserting a 

defense or responding to a material 

allegation, such document or documents 

shall be included as part of the 

response. If a leased access rate is 

disputed, the response must show that 

the rate charged is not higher than the 

maximum permitted rate for such leased 

access, and must be supported by the 

affidavit of a responsible company 

official. If, after a response is submitted, 

the staff finds a prima facie violation of 

our rules, the staff may require a 

respondent to produce additional 

information, or specify other procedures 

necessary for resolution of the 

proceeding. 

(h)(1) The Media Bureau will resolve 

a leased access complaint within 90 

days of the close of the pleading cycle. 

(2) The Media Bureau, after 

consideration of the pleadings, may 

grant the relief requested, in whole or in 

part, including, but not limited to 

ordering refunds, injunctive measures, 

or forfeitures pursuant 47 U.S.C. 503, 

denying the petition, or issuing a ruling 

on the petition or dispute. 

(3) To be afforded relief, the petitioner 

must show by clear and convincing 

evidence that the cable operator has 

violated the Commission’s leased access 

provisions in 47 U.S.C. 532 or §§ 76.970, 

76.971, or 76.972, or otherwise acted 

unreasonably or in bad faith in failing 

or refusing to make capacity available or 

to charge lawful rates for such capacity 

to an unaffiliated leased access 

programmer. 

(4) As part of the remedy phase of the 

leased access complaint process, the 

Media Bureau will have discretion to 

request that the parties file their best 

and final offer for the prices, terms, or 

conditions in dispute. The Commission 

will have the discretion to adopt one of 

the proposals or choose to fashion its 

own remedy. 

* * * * * 

■ 5. Section 76.978 is added to read as 

follows: 

§ 76.978 Leased access annual reporting 

requirement. 

(a) Each cable system shall submit a 

Leased Access Annual Report with the 

Commission on a calendar year basis, no 

later than April 30th following the close 

of each calendar year, which provides 

the following information for the 

calendar year: 

(1) The number of commercial leased 

access channels provided by the cable 

system. 

(2) The channel number and tier 

applicable to each commercial leased 

access channel. 

(3) The rates the cable system charges 

for full-time and part-time leased access 

on each leased access channel. 

(4) The cable system’s calculated 

maximum commercial leased access rate 

and actual rates. 

(5) The programmers using each 

commercial leased access channel and 

whether each programmer is using the 

channel on a full-time or part-time 

basis. 

(6) The number of requests received 

for information pertaining to 


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commercial leased access and the 

number of bona fide proposals received 

for commercial leased access. 

(7) Whether the cable system has 

denied any requests for commercial 

leased access and, if so, with an 

explanation of the basis for the denial. 

(8) Whether a complaint has been 

filed against the cable system with the 

Commission or a Federal district court 

regarding a commercial leased access 

dispute. 

(9) Whether any entity has sought 

arbitration with the cable system 

regarding a commercial leased access 

dispute. 

(10) The extent to which and for what 

purposes the cable system uses 

commercial leased access channels for 

its own purposes. 

(11) The extent to which the cable 

system impose different rates, terms, or 

conditions on commercial leased access 

programmers (such as with respect to 

security deposits, insurance, or 

termination provisions) with an 

explanation of any differences. 

(12) A list and description of any 

instances of the cable system requiring 

an existing programmer to move to 

another channel or tier. 

(b) Leased access programmers and 

other interested parties may file 

comments with the Commission in 

response to the Leased Access Annual 

Reports by May 15th. 

The attached Appendices A and B 

will not be included in the Code of 

Federal Regulations (CFR). 

Appendix A—Standard Protective 

Order and Declaration for Use in 

Section 612 Commercial Leased Access 

Proceedings 

Before the Federal Communications 

Commission, Washington, DC 20554 

In the Matter of [Name of Proceeding], Docket 

No. lll 

PROTECTIVE ORDER 

1. This Protective Order is intended to 

facilitate and expedite the review of 

documents obtained from a person in the 

course of discovery that contain trade secrets 

and privileged or confidential commercial or 

financial information. It establishes the 

manner in which ‘‘Confidential Information,’’

as that term is defined herein, is to be treated. 

The Order is not intended to constitute a 

resolution of the merits concerning whether 

any Confidential Information would be 

released publicly by the Commission upon a 

proper request under the Freedom of 

Information Act or other applicable law or 

regulation, including 47 CFR 0.442. 

2. Definitions. 

a. Authorized Representative. ‘‘Authorized 

Representative’’ shall have the meaning set 

forth in Paragraph 7. 

b. Commission. ‘‘Commission’’ means the 

Federal Communications Commission or any 

arm of the Commission acting pursuant to 

delegated authority. 

c. Confidential Information. ‘‘Confidential 

Information’’ means (i) information 

submitted to the Commission by the 

Submitting Party that has been so designated 

by the Submitting Party and which the 

Submitting Party has determined in good 

faith constitutes trade secrets and 

commercial or financial information which is 

privileged or confidential within the meaning 

of Exemption 4 of the Freedom of 

Information Act, 5 U.S.C. 552(b)(4) and (ii) 

information submitted to the Commission by 

the Submitting Party that has been so 

designated by the Submitting Party and 

which the Submitting Party has determined 

in good faith falls within the terms of 

Commission orders designating the items for 

treatment as Confidential Information. 

Confidential Information includes additional 

copies of, notes, and information derived 

from Confidential Information. 

d. Declaration. ‘‘Declaration’’ means 

Attachment A to this Protective Order. 

e. Reviewing Party. ‘‘Reviewing Party’’

means a person or entity participating in this 

proceeding or considering in good faith filing 

a document in this proceeding. 

f. Submitting Party. ‘‘Submitting Party’’

means a person or entity that seeks 

confidential treatment of Confidential 

Information pursuant to this Protective 

Order. 

3. Claim of Confidentiality. The Submitting 

Party may designate information as 

‘‘Confidential Information’’ consistent with 

the definition of that term in Paragraph 2.c 

of this Protective Order. The Commission 

may, sua sponte or upon petition, pursuant 

to 47 CFR 0.459 and 0.461, determine that all 

or part of the information claimed as 

‘‘Confidential Information’’ is not entitled to 

such treatment. 

4. Procedures for Claiming Information is 

Confidential. Confidential Information 

submitted to the Commission shall be filed 

under seal and shall bear on the front page 

in bold print, ‘‘CONTAINS PRIVILEGED 

AND CONFIDENTIAL INFORMATION—DO 

NOT RELEASE.’’ Confidential Information 

shall be segregated by the Submitting Party 

from all non-confidential information 

submitted to the Commission. To the extent 

a document contains both Confidential 

Information and non-confidential 

information, the Submitting Party shall 

designate the specific portions of the 

document claimed to contain Confidential 

Information and shall, where feasible, also 

submit a redacted version not containing 

Confidential Information. 

5. Storage of Confidential Information at 

the Commission. The Secretary of the 

Commission or other Commission staff to 

whom Confidential Information is submitted 

shall place the Confidential Information in a 

non-public file. Confidential Information 

shall be segregated in the files of the 

Commission, and shall be withheld from 

inspection by any person not bound by the 

terms of this Protective Order, unless such 

Confidential Information is released from the 

restrictions of this Order either through 

agreement of the parties, or pursuant to the 

order of the Commission or a court having 

jurisdiction. 

6. Access to Confidential Information. 

Confidential Information shall only be made 

available to Commission staff, Commission 

consultants and to counsel to the Reviewing 

Parties, or if a Reviewing Party has no 

counsel, to a person designated by the 

Reviewing Party. Before counsel to a 

Reviewing Party or such other designated 

person designated by the Reviewing Party 

may obtain access to Confidential 

Information, counsel or such other 

designated person must execute the attached 

Declaration. Consultants under contract to 

the Commission may obtain access to 

Confidential Information only if they have 

signed, as part of their employment contract, 

a non-disclosure agreement the scope of 

which includes the Confidential Information, 

or if they execute the attached Declaration. 

7. Disclosure. Counsel to a Reviewing Party 

or such other person designated pursuant to 

Paragraph 5 may disclose Confidential 

Information to other Authorized 

Representatives to whom disclosure is 

permitted under the terms of paragraph 8 of 

this Protective Order only after advising such 

Authorized Representatives of the terms and 

obligations of the Order. In addition, before 

Authorized Representatives may obtain 

access to Confidential Information, each 

Authorized Representative must execute the 

attached Declaration. 

8. Authorized Representatives shall be 

limited to: 

a. Subject to Paragraph 8.d, counsel for the 

Reviewing Parties to this proceeding, 

including in-house counsel, actively engaged 

in the conduct of this proceeding and their 

associated attorneys, paralegals, clerical staff 

and other employees, to the extent 

reasonably necessary to render professional 

services in this proceeding; 

b. Subject to Paragraph 8.d, specified 

persons, including employees of the 

Reviewing Parties, requested by counsel to 

furnish technical or other expert advice or 

service, or otherwise engaged to prepare 

material for the express purpose of 

formulating filings in this proceeding; and 

c. Subject to Paragraph 8.d., any person 

designated by the Commission in the public 

interest, upon such terms as the Commission 

may deem proper; except that, 

d. Disclosure shall be prohibited to any 

persons in a position to use the Confidential 

Information for competitive commercial or 

business purposes, including persons 

involved in competitive decision-making, 

which includes, but is not limited to, persons 

whose activities, association or relationship 

with the Reviewing Parties or other 

Authorized Representatives involve 

rendering advice or participating in any or all 

of the Reviewing Parties’, Associated 

Representatives’ or any other person’s 

business decisions that are or will be made 

in light of similar or corresponding 

information about a competitor. 

9. Inspection of Confidential Information. 

Confidential Information shall be maintained 

by a Submitting Party for inspection at two 

or more locations, at least one of which shall 

be in Washington, DC. Inspection shall be 

carried out by Authorized Representatives 

upon reasonable notice not to exceed one 

business day during normal business hours. 


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10. Copies of Confidential Information. 

The Submitting Party shall provide a copy of 

the Confidential Material to Authorized 

Representatives upon request and may charge 

a reasonable copying fee not to exceed 

twenty five cents per page. Authorized 

Representatives may make additional copies 

of Confidential Information but only to the 

extent required and solely for the preparation 

and use in this proceeding. Authorized 

Representatives must maintain a written 

record of any additional copies made and 

provide this record to the Submitting Party 

upon reasonable request. The original copy 

and all other copies of the Confidential 

Information shall remain in the care and 

control of Authorized Representatives at all 

times. Authorized Representatives having 

custody of any Confidential Information shall 

keep the documents properly and fully 

secured from access by unauthorized persons 

at all times. 

11. Filing of Declaration. Counsel for 

Reviewing Parties shall provide to the 

Submitting Party and the Commission a copy 

of the attached Declaration for each 

Authorized Representative within five (5) 

business days after the attached Declaration 

is executed, or by any other deadline that 

may be prescribed by the Commission. 

12. Use of Confidential Information. 

Confidential Information shall not be used by 

any person granted access under this 

Protective Order for any purpose other than 

for use in this proceeding (including any 

subsequent administrative or judicial 

review), shall not be used for competitive 

business purposes, and shall not be used or 

disclosed except in accordance with this 

Order. This shall not preclude the use of any 

material or information that is in the public 

domain or has been developed 

independently by any other person who has 

not had access to the Confidential 

Information nor otherwise learned of its 

contents. 

13. Pleadings Using Confidential 

Information. Submitting Parties and 

Reviewing Parties may, in any pleadings that 

they file in this proceeding, reference the 

Confidential Information, but only if they 

comply with the following procedures: 

a. Any portions of the pleadings that 

contain or disclose Confidential Information 

must be physically segregated from the 

remainder of the pleadings and filed under 

seal; 

b. The portions containing or disclosing 

Confidential Information must be covered by 

a separate letter referencing this Protective 

Order; 

c. Each page of any Party’s filing that 

contains or discloses Confidential 

Information subject to this Order must be 

clearly marked: ‘‘Confidential Information 

included pursuant to Protective Order, [cite 

proceeding];’’ and 

d. The confidential portion(s) of the 

pleading, to the extent they are required to 

be served, shall be served upon the Secretary 

of the Commission, the Submitting Party, and 

those Reviewing Parties that have signed the 

attached Declaration. Such confidential 

portions shall be served under seal, and shall 

not be placed in the Commission’s Public 

File unless the Commission directs otherwise 

(with notice to the Submitting Party and an 

opportunity to comment on such proposed 

disclosure). A Submitting Party or a 

Reviewing Party filing a pleading containing 

Confidential Information shall also file a 

redacted copy of the pleading containing no 

Confidential Information, which copy shall 

be placed in the Commission’s public files. 

A Submitting Party or a Reviewing Party may 

provide courtesy copies of pleadings 

containing Confidential Information to 

Commission staff so long as the notations 

required by this Paragraph 13 are not 

removed. 

14. Violations of Protective Order. Should 

a Reviewing Party that has properly obtained 

access to Confidential Information under this 

Protective Order violate any of its terms, it 

shall immediately convey that fact to the 

Commission and to the Submitting Party. 

Further, should such violation consist of 

improper disclosure or use of Confidential 

Information, the violating party shall take all 

necessary steps to remedy the improper 

disclosure or use. The Violating Party shall 

also immediately notify the Commission and 

the Submitting Party, in writing, of the 

identity of each party known or reasonably 

suspected to have obtained the Confidential 

Information through any such disclosure. 

The Commission retains its full authority to 

fashion appropriate sanctions for violations 

of this Protective Order, including but not 

limited to suspension or disbarment of 

attorneys from practice before the 

Commission, forfeitures, cease and desist 

orders, and denial of further access to 

Confidential Information in this or any other 

Commission proceeding. Nothing in this 

Protective Order shall limit any other rights 

and remedies available to the Submitting 

Party at law or equity against any party using 

Confidential Information in a manner not 

authorized by this Protective Order. 

15. Termination of Proceeding. Within two 

weeks after final resolution of this 

proceeding (which includes any 

administrative or judicial appeals), 

Authorized Representatives of Reviewing 

Parties shall, at the direction of the 

Submitting Party, destroy or return to the 

Submitting Party all Confidential Information 

as well as all copies and derivative materials 

made, and shall certify in a writing served on 

the Commission and the Submitting Party 

that no material whatsoever derived from 

such Confidential Information has been 

retained by any person having access thereto, 

except that counsel to a Reviewing Party may 

retain two copies of pleadings submitted on 

behalf of the Reviewing Party. Any 

confidential information contained in any 

copies of pleadings retained by counsel to a 

Reviewing Party or in materials that have 

been destroyed pursuant to this paragraph 

shall be protected from disclosure or use 

indefinitely in accordance with paragraphs 

10 and 12 of this Protective Order unless 

such Confidential Information is released 

from the restrictions of this Order either 

through agreement of the parties, or pursuant 

to the order of the Commission or a court 

having jurisdiction. 

16. No Waiver of Confidentiality. 

Disclosure of Confidential Information as 

provided herein shall not be deemed a 

waiver by the Submitting Party of any 

privilege or entitlement to confidential 

treatment of such Confidential Information. 

Reviewing Parties, by viewing these 

materials: (a) Agree not to assert any such 

waiver; (b) agree not to use information 

derived from any confidential materials to 

seek disclosure in any other proceeding; and 

(c) agree that accidental disclosure of 

Confidential Information shall not be deemed 

a waiver of the privilege. 

17. Additional Rights Preserved. The entry 

of this Protective Order is without prejudice 

to the rights of the Submitting Party to apply 

for additional or different protection where it 

is deemed necessary or to the rights of 

Reviewing Parties to request further or 

renewed disclosure of Confidential 

Information. 

18. Effect of Protective Order. This 

Protective Order constitutes an Order of the 

Commission and an agreement between the 

Reviewing Party, executing the attached 

Declaration, and the Submitting Party. 

19. Authority. This Protective Order is 

issued pursuant to Sections 4(i) and 4(j) of 

the Communications Act as amended, 47 

U.S.C. 154(i), (j) and 47 CFR 0.457(d). 

Attachment A to Section 612 Protective 

Order 

DECLARATION 

In the Matter of [Name of Proceeding] Docket 

No.___ 

I, __________, hereby declare under penalty 

of perjury that I have read the Protective 

Order that has been entered by the 

Commission in this proceeding, and that I 

agree to be bound by its terms pertaining to 

the treatment of Confidential Information 

submitted by parties to this proceeding. I 

understand that the Confidential Information 

shall not be disclosed to anyone except in 

accordance with the terms of the Protective 

Order and shall be used only for purposes of 

the proceedings in this matter. I acknowledge 

that a violation of the Protective Order is a 

violation of an order of the Federal 

Communications Commission. I acknowledge 

that this Protective Order is also a binding 

agreement with the Submitting Party. I am 

not in a position to use the Confidential 

Information for competitive commercial or 

business purposes, including competitive 

decision-making, and my activities, 

association or relationship with the 

Reviewing Parties, Authorized 

Representatives, or other persons does not 

involve rendering advice or participating in 

any or all of the Reviewing Parties’, 

Associated Representatives’ or other persons’

business decisions that are or will be made 

in light of similar or corresponding 

information about a competitor. 

(signed) lllllllllllllllll

(printed name) lllllllllllll

(representing) llllllllllllll

(title) llllllllllllllllll

(employer) lllllllllllllll

(address) llllllllllllllll

(phone) lllllllllllllllll

(date) llllllllllllllllll

(date) llllllllllllllllll


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Appendix B—Example Calculation of 

the Leased Access Rate 

I. Example of the Marginal Implicit Fee 

Calculation 

The following table illustrates the channel 

line-up of a tier with greater than 50% 

subscriber penetration. The tier consists of 26 

channels. We will assume that 100 

subscribers purchase this tier and that they 

all pay the retail price of $18.95. 

Programming 

Affiliation fee 

paid by cable 

operator to the 

programmer 

(monthly amount 

per subscriber) 

Implicit fee 

(net revenue) 

Broadcast Station 1 ..................................................................................................................................... $0.00 $0.000 

Broadcast Station 2 ..................................................................................................................................... 0.05 0.082 

Broadcast Station 3 ..................................................................................................................................... 0.00 0.000 

PEG 1 .......................................................................................................................................................... 0.00 0.000 

Leased Access 1 ......................................................................................................................................... 0.00 0.000 

Cable Network 1 .......................................................................................................................................... 0.12 0.196 

Cable Network 2 .......................................................................................................................................... 0.34 0.556 

Cable Network 3 .......................................................................................................................................... 0.05 0.082 

Cable Network 4 .......................................................................................................................................... 0.07 0.114 

Cable Network 5 .......................................................................................................................................... 0.01 0.016 

Cable Network 6 .......................................................................................................................................... 0.04 0.065 

Cable Network 7 .......................................................................................................................................... 0.05 0.082 

Cable Network 8 .......................................................................................................................................... 0.27 0.442 

Cable Network 9 .......................................................................................................................................... 0.00 0.000 

Cable Network 10 ........................................................................................................................................ 0.10 0.164 

Cable Network 11 ........................................................................................................................................ 0.48 0.785 

Cable Network 12 ........................................................................................................................................ 2.19 3.582 

Cable Network 13 ........................................................................................................................................ 1.10 1.799 

Cable Network 14 ........................................................................................................................................ 0.57 0.932 

Cable Network 15 ........................................................................................................................................ 0.15 0.245 

Cable Network 16 ........................................................................................................................................ 0.41 0.671 

Cable Network 17 ........................................................................................................................................ 0.19 0.311 

Cable Network 18 ........................................................................................................................................ 0.06 0.098 

Cable Network 19 ........................................................................................................................................ 0.21 0.343 

Cable Network 20 ........................................................................................................................................ 0.11 0.180 

Cable Network 21 ........................................................................................................................................ 0.62 1.014 

Step 1: Determine Monthly Per-Subscriber 

Affiliation Fees for Each Channel on the Tier 

The preceding table presents the monthly 

per-subscriber affiliation fee paid by the 

cable operator to the programmer. These 

values are those contractually agreed to and 

paid by the cable operator. As illustrated, this 

hypothetical cable operator carries three 

broadcast stations. Two of the broadcast 

stations do not receive a monthly persubscriber payment from the cable operator, 

while ‘‘Broadcast Station 2’’ receives $0.05 

per month per subscriber from the cable 

operator. In addition, ‘‘Cable Network 8’’ and 

‘‘Cable Network 9’’ are sold by the 

programmer on a bundled basis in a contract 

which does not specify individual affiliation 

fees for each network, but instead specifies 

a rate of $0.27 for carriage of both networks. 

‘‘Cable Network 8’’ is the higher rated of the 

two networks and therefore the affiliation fee 

is allocated to it and the affiliate fee for 

‘‘Cable Network 9’’ is set equal to zero. 

Step 2: Determine the Mark-Up of the Tier 

The mark-up is equal to the total subscriber 

revenue for the programming tier (100 × 

$18.95 = $1,895), divided by the total of the 

affiliation fees the cable operator pays to the 

programmers for the channels on the tier (100 

× $7.19 = $719). In the example the mark-up 

is equal to 2.636. 

Step 3: Determine the Implicit Fee of Each 

Channel on the Tier 

The implicit fee, or net revenue, is equal 

to the gross revenue from the channel less the 

affiliation fee of the channel. The gross 

revenue is obtained by multiplying the 

affiliation fee by the mark-up of the tier. 

Step 4: Determine the Number of Marginal 

Channels on the Tier 

The number of marginal channels is equal 

to 15% of the non-mandated channels on the 

tier. In this case, the tier contains 5 mandated 

channels: ‘‘Broadcast Station 1,’’ ‘‘Broadcast 

Station 2,’’ ‘‘Broadcast Station 3,’’ ‘‘PEG 1,’’

and ‘‘Leased Access 1.’’ Therefore there are 

21 non-mandated channels on the tier. The 

number of marginal channels is 0.15 × 21 = 

3.15. The result should be rounded to the 

nearest positive integer. This tier has three 

marginal channels. 

Step 5: Determine the Marginal Channels 

The marginal channels are the three nonmandated channels with the lowest implicit 

fee. In this example, those channels are: 

‘‘Cable Network 5,’’ ‘‘Cable Network 6,’’ and 

‘‘Cable Network 9.’’

Step 6: Calculate the Marginal Implicit Fee 

The marginal implicit fee is the mean of 

the implicit fees of the three marginal 

channels. The marginal implicit fee is (0.000 

+ 0.016 + 0.065)/3 = 0.027. The monthly rate 

for a leased access programmer on this tier 

is $0.027 per subscriber. 

II. Alternative Methods for Calculating the 

Maximum Allowable Leased Access Rate 

20. We use several methods to examine 

aggregate information on the cable industry 

and develop a maximum allowable leased 

access rate. All of our methods begin with the 

construction of hypothetical analog and 

digital tiers based upon the 194 most widely 

distributed networks. We obtain the number 

of subscribers to the most widely distributed 

programming networks from SNL Kagan, 

Economics of Basic Cable Networks, 13th Ed. 

(at 36–40) and SNL Kagan, Media Trends, 

2007 Edition (at 58). Affiliation fees for these 

networks are from SNL Kagan, Economics of 

Basic Cable Networks, 13th Edition (at 60–

62); SNL Kagan, Media Trends, 2007 Edition 

(at 59); and SNL Kagan, Cable Program 

Investor, October 18, 2007 (at 2–3). We base 

the sizes of the hypothetical analog and 

digital tiers on data collected via the FCC’s 

Cable Price Survey. The survey indicates that 

the average analog tier contains 54.9 nonmandated channels and the most highly 

subscribed digital tier contains 33.7 

additional channels. Report on Cable 

Industry Prices, Table 4, 21 FCC Rcd 15087 

(released December 27, 2006). The most 

widely distributed networks were ranked 


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according to their subscribers. They are then 

weighted according to the number of 

subscribers that they reach relative to the 

most widely distributed network, The 

Discovery Channel, which received a weight 

of 1. Lesser distributed networks receive 

weights that are equivalent to the fraction of 

subscribers they have relative to the most 

widely distributed network. 

21. The hypothetical analog tier consists of 

the channels with the highest subscribers, 

whose weights sum to 54.9. This 

hypothetical analog tier consists of 67 

program networks. These 67 networks reach 

the same number of subscribers as that which 

would be reached if 55 networks each 

reached 100% of cable subscribers. 

Construction of the hypothetical digital tier 

is complicated by the fact that 12 of the 194 

most widely distributed networks do not 

currently receive any license fees. We 

therefore proceed on two fronts. We 

construct a digital tier which includes these 

‘‘no-fee’’ networks which we refer to as the 

‘‘inclusive digital tier’’ as well as an 

‘‘exclusive digital tier’’ which excludes 

networks with no license fees from the 

hypothetical digital tier. An additional 

complication is that our information on 

affiliation fees and distribution of cable 

networks is not sufficiently broad to get a 

sufficient number of networks whose weights 

sum to 33.7, the number of channels on the 

average digital tier. Therefore both the 

inclusive and exclusive digital tiers will 

contain all of the networks not included in 

our hypothetical analog tier. The inclusive 

digital tier consists of 127 networks with a 

total weight of 17. The exclusive digital tier 

contains 115 networks with a weight of 15.1. 

22. We examine two approaches to 

calculating the marginal implicit fees of the 

hypothetical analog and digital tiers. The first 

approach, which we refer to as the net 

revenue approach, follows the method used 

to calculate the operator-specific rates. The 

average mark-up of cable operators is 

determined. This value is used to determine 

net revenue of each network on the tier by 

multiplying it against the affiliation fee to 

obtain gross revenue and subtracting off the 

programming cost to obtain net revenue. The 

marginal implicit fee is calculated as the 

mean or median net revenue of the least 

profitable 15% of channels on the tier. The 

other approach, which we call the persubscriber fee approach, calculates the 

marginal implicit fee as the mean or median 

affiliation fee of the least costly 15% of 

channels on the hypothetical tier. Because 

the mark-up of each channel on a tier is the 

same, ranking networks by net revenue or 

per-subscriber fees leads to the same ordering 

of the networks. Therefore, the identities of 

the channels used to calculate the marginal 

implicit fee under either approach are the 

same for a given hypothetical tier. 

A. The Marginal Implicit Fee Under the Net 

Revenue Approach 

23. As discussed, the net revenue approach 

mirrors the system-specific method adopted 

in this order. The mark-up of programming 

costs by cable operators is determined by 

dividing video revenues by programming 

costs. We base this calculation on the average 

of the programming cost as a percentage of 

revenue for three large cable operators in 

2005. The inverse of this number is equal to 

the mark-up. SNL Kagan, Cable TV Investor: 

Deals and Finance, January 31, 2007 at 6. The 

mark-up in the cable industry is 2.76. This 

mark-up is then applied to the per-subscriber 

affiliation fees of the networks in the 

hypothetical tiers in order to determine the 

gross revenue per subscriber that each of 

those networks generates for the cable 

industry. Subtracting the per subscriber 

affiliation fee from the gross revenue per 

subscriber yields the net revenue per 

subscriber. The next step in the calculation 

is to determine the marginal channels, which 

is based upon the number of channels that 

the average cable operator must set aside for 

leased access. The marginal networks for the 

maximum allowable rate on an analog tier 

will be the 15% of 54.9 or 8.2 networks. The 

marginal channels are those channels, with 

the lowest net revenues amongst the 67, 

whose weights sum to 8.2 (the number of 

marginal channels on our hypothetical 

analog tier). The weighted mean of the net 

revenue of those 13 networks is equal to 

$0.091 per subscriber per month and the 

weighted median is equal to $0.094 per 

subscriber per month. 

24. Calculation of the maximum rate for 

the hypothetical digital tiers is similar. The 

tier consists of those networks that were not 

included in the hypothetical analog tier with 

the greatest numbers of subscribers, whose 

weights sum to 33.7. Our information on per 

subscriber affiliation fees and distribution of 

cable networks is not sufficiently broad to get 

a sufficient number of networks whose 

weights sum to 33.7. This occurs because 

there is a substantial population of networks 

with very limited distribution. However, in 

our existing data, we noted that there are a 

number of networks with license fees that are 

effectively zero. It is likely that the lesser 

networks that we have been unable to 

include have a similar paucity of license 

revenues. Failure to include these additional 

networks makes the marginal implicit fee for 

digital tiers slightly higher than it otherwise 

would be. The marginal channels are those 

channels, with the lowest net revenues 

whose weights sum to 5.1 (15% of the 

number of channels on our hypothetical 

digital tier). The weighted mean net revenue 

of those networks is $0.056 per subscriber 

per month and the weighted median is 

$0.070 per subscriber per month for the 

exclusive digital tier. The weighted mean net 

revenue for the inclusive digital tier is $0.026 

per subscriber per month and the weighted 

median is $0.035 per subscriber per month. 

B. The Marginal Implicit Fee Under the PerSubscriber Fee Approach 

25. The per-subscriber fee method is based 

upon the costs incurred by a cable system 

when it must vacate a channel in order to 

provide capacity to a commercial leased 

access programmer. If a cable system that 

receives a request for LA carriage has no 

vacant channels available, then the system 

will need to incur certain costs in order to 

make the required capacity available to the 

LA programmer. Specifically, it is unlikely 

that the commercial contracts that the cable 

operator has with program channels permit 

unilateral costless cancellation by the cable 

operator. Even without detailed information 

on these contracts, it is reasonable to assume 

that the cable operator would need to provide 

some compensation to the ‘‘bumped’’

channel in order to induce it to vacate the 

system. One reasonable candidate for this is 

the fee that the cable operator was collecting 

from each consumer and paying to the 

bumped channel (the ‘‘per-subscriber fee’’). If 

we assume that the marginal channel is 

earning negligible advertising revenues, then 

that channel would be made whole if it 

continued to receive the per-subscriber fee 

that the cable operator had been paying. We 

use this as an alternative method of 

examining the costs that leased access 

programming may impose on cable operators. 

To calculate the marginal implicit fee 

under the per-subscriber fee approach, rather 

than calculating the weighted means and 

medians of the net revenue of the bottom 

15% of networks in a tier, the weighted 

means and medians of the affiliation fees are 

calculated. As discussed, because a constant 

mark-up is applied to affiliation fees when 

calculating net revenue, networks with the 

lowest net revenue are also the networks 

with the lowest affiliation fees. Therefore the 

marginal implicit cost using the persubscriber fee method is based on exactly the 

same networks as used to calculate the 

marginal implicit fee with the net revenue 

method. The weighted mean of the persubscriber fee of the marginal networks on 

the hypothetical analog tier is equal to $0.051 

per subscriber per month and the weighted 

median is equal to $0.053 per subscriber per 

month. The weighted mean of the persubscriber fee of the marginal networks on 

the hypothetical inclusive digital tier is equal 

to $0.015 per subscriber per month and the 

weighted median is equal to $0.020 per 

subscriber per month. The weighted mean of 

the programming cost of the marginal 

networks on the hypothetical exclusive 

digital tier is equal to $0.032 per subscribe. 

[FR Doc. 08–872 Filed 2–27–08; 8:45 am] 

BILLING CODE 6712–01–P 


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