FCC Requests Comments on Changes to Its Commercial Leased Access and Program Carriage Rules

On June 15, 2007, the Federal Communications Commission (FCC) released a Notice of Proposed Rule Making (NPRM) inquiring whether changes need to be made to its rules implementing Section 612 of the Communications Act, 47 U.S.C. § 532, governing rates, terms and conditions for commercial leased access, as well as its rules implementing Section 616 of the Communications Act, 47 U.S.C. § 536, governing program carriage agreements. According to the FCC, the NPRM was prompted by its 2006 review of the transactions involving the sale of Adelphia’s cable systems to Time Warner and Comcast. Certain commenters complained to the FCC of leased access and program carriage problems and potential violations.¹ Comments are due 45 days after the NPRM is published in the Federal Register, and Reply Comments will be due 65 days after the publication date in the Federal Register.

Commercial Leased Access

The commercial leased access provisions in Section 612 date back to the 1984 Cable Act. In adopting the provisions, Congress sought to “divorc[e] cable operator editorial control over a limited number of channels” so as 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. . . .” However, balanced against this diversity objective was an explicit direction that the leased access provisions be implemented “in a manner consistent with growth and development of cable systems” and that rates, terms and conditions of leased access use be “at least sufficient to assure that such use will not adversely affect the operation, financial condition, or market development of the cable system.” Congress amended the commercial leased access provisions in 1992 and 1996. In 1997, the FCC issued a Report and Order significantly revising the commercial leased access rate formula and other leased access rules.

Under the FCC’s current commercial leased access rules, cable operators are required to set aside a certain number of channels for use by unaffiliated commercial programmers. Cable operators may charge a fee for the use of a leased access channel under the FCC formula, which is based upon the implicit fee that the operator would earn from that channel if it were not used for leased access. Cable operators are permitted to negotiate terms and conditions of carriage with leased access programmers and may charge for technical support and equipment—to the extent they charge other unaffiliated programmers for similar services.

The FCC’s current NPRM requests comments on the extent to which leased access channels are being used, the types of programmers that are using the channels, the number of channels cable operators are providing, whether cable operators are denying access requests, and whether the terms of leased access agreements are different from those that cable operators have with other programming networks. In addition, the FCC seeks specific comments on:

• The current rate formula, and what specific new methodologies may be implemented that may better serve Congress’ statutory objectives;
• The effect of the digital transition on channel capacity and channel count for purposes of the calculation of carriage obligations and average rates;
• Whether leased access programmers should have the ability to request carriage on a specific tier, whether cable operators have acted reasonably in selecting the placement of leased access channels at specific channel locations, and whether leased access should apply to video-on-demand;
• How advances in technology or marketplace developments may affect the FCC’s leased access rules, such as interactive electronic programming guides, video-on-demand, or addressable digital set-top boxes; and
• The effectiveness of the current leased access enforcement process, including comment on the costs and other burdens associated with the complaint process, and whether changes to the process are necessary.

Commissioners Copps and Adelstein filed separate statements both expressing their beliefs that it is the FCC’s responsibility to ensure that independent programmers have available and viable options for carriage under the leased access rules. Neither statement expresses any concern as to the resulting impact upon cable operators or cable customers.

Program Carriage Agreements

Section 616, which was added to the Communications Act in 1992, instructed the FCC to adopt regulations prohibiting all multi-channel programming distributors from requiring “a financial interest in any program service as a condition for carriage” of such service, from coercing a programmer to grant “exclusive” carriage rights, or from engaging in conduct that unreasonably restrains “the ability of an unaffiliated programming vendor to compete fairly” by discriminating against such vendor “on the basis of affiliation or nonaffiliation.” 47 U.S.C. § 636. In implementing its program carriage regulations, 47 C.F.R. § 76.1301 et seq., the FCC followed the narrow focus of the statute finding it should allow the marketplace to play a decisive part in the private negotiation of programming agreements.

The FCC’s NPRM seeks comment on whether changes to its program carriage rules are necessary. In particular, the FCC asks whether the processes for resolving carriage disputes should be modified and, in particular, whether the elements of a prima facie case initiated by a complainant should be clarified. Additionally, the FCC asks whether its existing time lines for resolving complaints are sufficient, or whether changes or additional time lines are required to promote a speedy and just resolution. With regard to the complaint procedure itself, the FCC asks whether additional rules are needed to protect programmers against retaliation for filing a complaint, and if the existing penalties for frivolous complaints are adequate or require modification. Finally, the FCC specifically addresses whether independent programmers should be permitted to seek nationwide access directly from multiple system cable operators, as opposed to current claims that such programmers must negotiate for carriage on a system-by-system basis, even while cable operators negotiate national carriage agreements with other programmers.

Finally, the FCC is considering whether it should establish arbitration procedures specifically for leased access and program carriage disputes, including whether arbitration should be elective or mandatory, and who should bear the costs.

Footnotes

1 See, e.g., Applications for Consent to the Assignment and/or Transfer of Control of Licenses, Adelphia Communications Corporation, Assignors to Time Warner Cable, Inc., Assignees, et. al., Memorandum Opinion and Order, MB Docket No. 05-192, FCC 06-105, 21 FCC Rcd. 8203, 8277 at ¶ 165 (rel. July 21, 2006).