The FCC today adopted a Second Report and Order in its Commercial Leased Access (CLA) proceeding that modifies the existing rate formula for cable operators providing CLA channels. The core rate formula remains unchained—it will continue to calculate the maximum permissible CLA rate based on the average margin between a system's per channel revenue and per channel cost—but the formula will now be a tier-specific calculation based on the particular tier on which the CLA channel is carried. (The standard calculation previously was a blended rate calculation based on all tiers with greater than 50 percent subscriber penetration.)

The Order explains that "a simplified tier-specific rate calculation best reflects regulatory changes that have occurred in the last 20 years and will more accurately approximate the value of a particular channel, while alleviating burdens on cable operators." The Order also clarifies that the calculation of the maximum permitted CLA fee should be performed annually based on contracts in effect in the previous calendar year.

The FCC was asked to consider eliminating all CLA obligations in light of constitutional concerns. The FCC acknowledged these issues but declined to eliminate CLA entirely. The Order explains, "We . . . find that, although changes in the marketplace cast substantial doubt on the constitutionality of mandatory leased access, leased access requirements are contained in a specific statutory mandate from Congress, so we do not eliminate our leased access rules."

This is the second significant change the FCC made to the CLA rules in the past year. In its initial Report and Order last year, the FCC concluded that cable operators would no longer be required to lease channels to part-time CLA applicants.

This article was originally featured as a communications advisory on on July 16, 2020. Our editors have chosen to feature this article here for its coinciding subject matter.