cr> Letter on Open Video Systems


Craig A. Johnson

Anyone have any comments on this complex aspect of the telecom law?  
Is the Alliance grinding an appropriate ax; what other fallout can we expect?


Date:          Thu, 15 Feb 1996 10:56:43 -0500
Reply-to:      •••@••.•••
From:          •••@••.•••
To:            Multiple recipients of list <•••@••.•••>
Subject:       Letter on Open Video Systems

The Alliance for Community Media is concerned about the possible
effects of "open video systems" (Telecommunications Act of 1996 at
Sec. 651 et seq.) on non-profit access and democratic discourse.  The
systems contain significant cost and procedural barriers.  Attached is
a letter sent to Pres. Clinton (and Conference Committee members)
before the conference report was voted on.

Please contact us if you would like more information on this important

Barry Forbes

- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
- - - February 1, 1996

The Hon. William Clinton
President of the United States
1600 Pennsylvania Ave., N.W.
Washington, D.C. 20500

Dear President Clinton:

     I want to thank you again for your efforts on the 
telecommunications bill (H.R. 1555/S.652).  Your 
commitment to work through the complex issues involved 
is much appreciated.  

     I am writing on behalf of the organizational and 
individual members of the Alliance for Community Media 
with our concerns about the establishment of "open video 
systems" ("OVS") in Section 302 (proposed Section 653) 
of the telecommunications bill conference report.  The 
Alliance for Community Media supports legislation which 
would provide meaningful access to  telecommuni-cations 
networks for those currently excluded.  However, I do 
not believe that OVS will have this effect.  

     The Alliance represents the interests of the 1.5 
million Americans who use the public, educational and 
governmental ("PEG") access centers throughout the 
country (and are thus actually involved in implementing 
telecommunications policy at the local level).  We are 
concerned that this provision will raise cable rates and 
impair consumers' access to quality video services.

     The report explicitly impairs the rights of local 
authorities to manage and control their rights-of-way, 
rights which Congress declared in 1984 to belong to 
localities.  OVS platforms use local rights-of-way and 
are local services.  Local authorities continue to be 
concerned about providing both high quality video 
services and efficient customer service at low rates, as 
they have since the early days of cable television.

     Since OVS was in neither the House nor the Senate 
bill, this new approach represents a significant 
departure from the proposed "video dialtone" provisions 
of both S. 652 and H.R. 1555.  This entirely new 
construct has been created without hearings, agency and 
public comment, or the initial ratification of either 
house of Congress.  

     Under this unexamined plan, local exchange carriers ("LECs")
entering the OVS market would be able to provide a service
undifferentiated from current cable service, without conforming to the
cable television policy embodied in the Cable Act of 1984 (47 U.S.C.
Secs. 521 et seq.).  Moreover, an apparent drafting error in the
provision could potentially authorize the Federal Communications
Commission ("FCC") to permit cable companies to convert to OVS
platforms without substantially changing the nature of their service. 
We do not believe that the language was meant to have this effect.

     The OVS provisions would require any entity desiring to operate
an OVS platform to receive a certificate of compliance from the FCC
under the most minimal conditions.  One condition prohibits OVS
operators from charging rates for carriage of competing video
programmers' offerings that are "not unjustly or unreasonably
discriminatory."  Another condition is that an OVS operator limit its
(or its affiliate's) use of its system to one third of the platform,
provided that demand for channel space exceeds the capacity of the
system.  Consequently, an OVS operator may be able to keep off all
third parties by charging rates that are excessive, even though
completely or nearly nondiscriminatory.  Experience shows that cable
operators' ability to charge nondiscriminatory-but-excessive prices
for "leased access" under Section 612 of the Cable Act (47 U.S.C. Sec.
532) has effectively prevented third parties from exercising their
right to cable system access.

     The report also contains a provision, proposed Sec. 
653(b)(1)(C), which would allow the OVS operator to limit to only one
channel the transmission of programming services that multiple
programmers may wish to provide.  The conference report indicates that
Congress intended that multiple programmers "share" the transmission
of duplicative programming services.  The proposed "channel-sharing"
requirement, combined with the platform providers' likely access
pricing, would make it highly unlikely that a non-OVS
operator-affiliated programmer could compete with the OVS affiliate's
prices.  Even if programmers sharing a channel divided its cost on an
equitable basis, the OVS affiliate's price would always be lower.  The
affiliated programming provider would be in a position to absorb the
platform's "paper transaction" costs itself while imposing real costs
on others.  Similarly, individual programming services attempting to
offer their channel "a la carte" could find that permissible
discrimination or excessive access charges would price their service
out of the range of any but the most selective television viewer.

     In order to protect competition among programming providers, this
provision also requires that "subscribers have ready and immediate
access to any such video programming service."  Sharing clearly was
contemplated by the conference committee, but the actual meaning of
the "ready access" clause is ambiguous.  "Channel-sharing" is not in
the provision; it is only in the legislative history.  One
interpretation of the provision without such clarifying language would
allow an OVS operator to prohibit non-affiliate programming services
from offering desirable programming that the affiliate was already
providing itself; a subscriber could receive "immediate access" only
by switching from a competitor to the OVS affiliate.  This could
stifle competitive offering of similar services. 

      Limitations on buy-outs of cable systems by LECs or LECs by
cable systems also carry an overly generous exception:  the FCC may
allow a merger between a cable company and LEC if, inter alia, "the
anticompetitive effects of the proposed transaction are clearly
outweighed in the public interest by the probable effect of the
transaction in meeting the convenience and needs of the community to
be served."  This waiver without any meaningful standards is a virtual
invitation for the FCC and the regulated industries to ignore buy-out
limitations entirely, as experience with other undefined waivers has
shown.  Although local authorities have veto power over permissive
waivers, in the face of an already-granted FCC waiver, I am highly
doubtful that a local franchise authority will be able to effectively
exercise that power.  In a bill devoted to fostering robust
competition at the local level, there is little policy justification
for permitting these generous exceptions to the LEC-cable buyout

     Finally, we are concerned that an unintentional error could
potentially lead to some parties misconstruing the conference
committee's intent in Section 302 of the draft conference bill
(proposed Section 653(a)(1)).  This section states:  "To the extent
permitted by such regulations as the [Federal Communications]
Commission may prescribe consistent with the public interest,
convenience and necessity, an operator of a cable system or any other
person may provide video programming through an open video system that
complies with this section."  

     The provision does not identify what entities are permitted to
operate OVS platforms.  However, the legislative history for Section
302 is quite clear:  "The conferees recognize that telephone companies
need to be able to choose from multiple video entry options. .
.Section 653(a) focuses on the establishment of open video systems by
local exchange carriers..."  

     Consequently, the provision authorizing cable company entry
should be clarified to indicate that cable companies may have access
to the platform, but cannot be OVS platform operators themselves. 
This would comport with the intent of the conference committee that
this option only be available to LECs.  Likewise, LECs should be able
to enter the video market only under conditions that are more or less
equivalent to the regulatory structure of Title VI.

     If no clarification is made, cable operators and LECs could
potentially evade most Title VI regulation, including rate regulation
and cooperation with local authorities, without any noticeable public
benefit.  I am convinced that many cable operators will seek to
abandon Title VI regulation entirely if section 302 passes without
substantial clarification to make the conference committee's intent
clear.  And I am not alone.  According to an article in Multichannel
News, a widely-read and highly-regarded trade magazine reporting on
the cable industry, "Operators might view OVS as a way to escape local
franchising and other cable regulation burdens [including rate
regulation] in Title VI of the 1934 Communications Act."

     In conclusion, the Alliance hopes that you will support 
changes to the OVS provisions which would:
     a) limit the availability of this construct to LECs only, and
then only under conditions which parallel Title VI;
     b) ensure that programmers' access rates are fair and 
reasonable by requiring that they be set by state public service
commissions and/or franchise authorities pursuant to public
     c) impose subscriber rate regulation on OVS that is 
equivalent to the rate regulation required by Title VI of the 
Communications Act;
     d) require explicitly that "channel sharing" be offered to 
all would-be programming providers; and require that access to 
shared programming services be charged to providers on a uniform,
non-discriminatory "per subscriber" basis only;
     e) require OVS providers to be subject to equivalent 
obligations and treatment as cable operators, with respect to 
relationships with local franchise authorities, including local 
franchise fees, and other provisions of part III (Sections 621 -
627) of the 1984 Cable Act;
     f) place a proportional limit on the number of channels a LEC or
its programming affiliate may program on its system; and
     g) narrow the "buy-out" prohibition exceptions in Section 
652(d), and delete the "permissive waiver" provisions of Section

     We urge you to consider the implications of these new 


                                              Barry Forbes
                                              Executive Director


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