FEDERAL COMMUNICATIONS COMMISSION Washington, D.C. 20554 In the Matter of ) ) Telephone Company-Cable Television ) CC Docket No. 87-266 Cross-Ownership Rules, Sections ) 63.54 - 63.58 ) REPLY COMMENTS OF THE NATIONAL TELECOMMUNICATIONS AND INFORMATION ADMINISTRATION ON THE FOURTH FURTHER NOTICE OF PROPOSED RULEMAKING Larry Irving Barbara S. Wellbery Assistant Secretary for Chief Counsel Communications and Information Michele Farquhar Lisa Sockett Chief of Staff and Director, Attorney-Advisor Office of Policy Coordination Office of Chief Counsel and Management Joseph L. Gattuso Acting Associate Administrator Radhika Karmarkar Cynthia Nila Tim Sloan Office of Policy Analysis and Development National Telecommunications and Information Administration U.S. Department of Commerce Room 4713 14th and Constitution Ave., N.W. Washington, D.C. 20230 (202) 482-1816 July 11, 1995 TABLE OF CONTENTS Page SUMMARY. . . . . . . . . . . . . . . . . . . . . . . . . . . . i I. INTRODUCTION. . . . . . . . . . . . . . . . . . . . . . . 1 II. LEC PROVISION OF IN-REGION VIDEO PROGRAMMING MUST BE ACCOMPANIED BY COMPETITIVE SAFEGUARDS.. . . . . . . . . . 4 A. The Commission Should Require LECs To Provide Distribution Facilities to All Video Programmers on a Common Carrier Basis. . . . . . . . . . . . . 8 B. The Commission Should Not Place a Maximum Limit on the Proportion of a LEC-Operated Video Distribution Facility That May Be Occupied by the LEC's Own Video Programming. . . . . 9 C. The FCC Should Require LECs to Provide In- Region Video Programming Through a Separate Affiliate.. . . . . . . . . . . . . . . . . . . 13 III. TELEPHONE COMPANY PROVISION OF IN-REGION VIDEO PROGRAMMING SHOULD NOT BE REGULATED SOLELY UNDER TITLE VI OF THE COMMUNICATIONS ACT. . . . . . . . . . . . . . . 14 A. A LEC-Operated Video Platform Is Not A "Cable System" Subject to Title VI Regulation. . . . . 16 B. If the LEC Common Carrier Is Deemed a Cable System, the Commission Must Apply Title II and Title VI In a Way That Minimizes Duplication and Promotes Competition. . . . . . 21 1. Imposing Title VI Only on the LEC Affiliate Would Be Problematic. . . . 21 2. The Commission Can Impose the Requirements of Title VI on the LEC Platform and the LEC Affiliate in a Way that Minimizes Regulation and Promotes Competition.. . . . . . . . . . . . . 25 IV. CONCLUSION. . . . . . . . . . . . . . . . . . . . . . . . 32 ENDNOTES . . . . . . . . . . . . . . . . . . . . . . . . . . 34 SUMMARY While LEC provision of video programming promises important consumer benefits, it also increases the potential for significant anticompetitive conduct by the LECs. In particular, there are concerns about cross-subsidization and discrimination against competing video providers. Accordingly, the Commission should condition LEC entry into the video services market on the LECs' compliance with several fundamental safeguards. First, LECs should be required to offer video programming via a common carrier video platform, which must be made available to unaffiliated programmers on reasonable, nondiscriminatory terms. Such a requirement will provide the best foundation to achieve the goals of promoting competition, fostering programming diversity, and stimulating efficient, advanced infrastructure development. Second, the Commission should prevent a LEC from occupying too much of the video platform's capacity; however, the Commission need not put a maximum limit on the number of channels or the percentage of platform capacity that the LEC may occupy. Instead, NTIA recommends a scheme that would allow the LEC to occupy unlimited capacity on its video platform, so long as it accommodates all bona fide requests for service from unaffiliated programmers. Third, the Commission should require LECs to provide video programming only through a separate affiliate. In addition to the above safeguards, the Commission must determine what regulations should apply to the LECs' provision of video programming. In NTIA's view, the Commission should rule that a LEC's video platform is not a "cable system" for purposes of Title VI of the Communications Act. Consequently, the LEC video affiliate and all other programmer-customers that use the LEC's platform would not be subject to Title VI regulation. If, however, the Commission determines that Title VI does apply, it should carefully apply the requirements of Titles II and VI to avoid duplicative, inefficient regulation and to promote full and fair competition among rival video programmers. Specifically, the Commission should impose particular provisions of Title VI on either the platform or the affiliate, depending on which result better satisfies the language and the underlying purpose of each provision. NTIA explains in these comments how this approach would work with respect to the three principal requirements of Title VI -- programming carriage obligations, franchising, and rate regulation. Before the FEDERAL COMMUNICATIONS COMMISSION Washington, DC 20554 In the Matter of ) ) TELEPHONE COMPANY- ) CABLE TELEVISION ) CC Docket No. 87-266 ) Cross-Ownership Rules, ) Sections 63.54-63.58 ) REPLY COMMENTS OF THE NATIONAL TELECOMMUNICATIONS AND INFORMATION ADMINISTRATION The National Telecommunications and Information Administration (NTIA), which is part of the Department of Commerce, is the Executive Branch agency responsible for the development of domestic and international telecommunications and information policy on behalf of the President. NTIA respectfully submits these reply comments in response to the Commission's Fourth Further Notice of Proposed Rulemaking (Fourth Notice) in the above-captioned proceeding.[1] I. INTRODUCTION For nearly twenty-five years, local exchange carriers (LECs) were barred by Commission regulation or Federal law from offering video programming in their telephone service areas.[2] Beginning in August of 1993, a series of Federal court decisions have overturned that "telco-cable crossownership restriction" as violative of the First Amendment.[3] As a result, many LECs may now provide video programming directly to subscribers in the telephone service areas in which they may be monopoly providers. In the Fourth Notice, the Commission seeks comments on whether and to what extent its video dialtone ("VDT") rules should be changed to accommodate this new legal environment.[4] For a number of years, NTIA has advocated allowing LECs to offer in-region video programming.[5] Permitting LECs to participate fully in the video marketplace would substantially expand competition in that market. Increased competition, in turn, should produce lower prices for consumers as well as a broader range of programming choices. At the same time, authorizing LECs to offer in-region video programming would also increase their incentives to deploy advanced transmission facilities, with concomitant benefits to American society. Nevertheless, although LEC provision of video programming promises important consumer benefits, it also increases the potential for significant anticompetitive conduct by the LECs. In particular, there are concerns about cross-subsidization and discrimination against competing video providers. Accordingly, the Commission should condition LEC entry into the video services market on their compliance with several fundamental safeguards. First, LECs should be required to offer video programming via a common carrier video platform, which must be made available to unaffiliated programmers on reasonable, nondiscriminatory terms. The Commission has correctly concluded that such a requirement "will provide the best foundation to achieve [the] goals of promoting the development of an efficient, nationwide, publicly accessible, advanced telecommunications infrastructure, facilitating robust competition, and fostering the First Amendment goal of ensuring a diversity of information sources."[6] Second, the Commission should prevent a LEC from occupying too much of the video platform's capacity. As discussed below, the Commission need not put a maximum limit on the number of channels or the percentage of platform capacity that the LEC may occupy. Instead, NTIA recommends a scheme that would allow the LEC to occupy unlimited capacity on its video platform, so long as it accommodates all bona fide requests for service from unaffiliated programmers. Third, the Commission should require LECs to provide video programming only through a separate affiliate. In addition to the above safeguards, the Commission has to determine what regulations should apply to the LECs' provision of video programming. As demonstrated below, the Commission could reasonably conclude that a LEC's video platform is not a "cable system" for purposes of Title VI of the Communications Act. Consequently, regulation of a LEC's participation in the video market can be limited to regulation of the video platform pursuant to Title II. If, however, the Commission determines that Title VI does apply, it should carefully apply the requirements of Titles II and VI to avoid duplicative, inefficient regulation and to promote full and fair competition among rival video programmers. NTIA believes that the requirements of Title VI can be applied in a way that is consistent with the letter and intent of those provisions, yet is also consistent with Title II regulation of the video platform. We explain below how this approach would work with respect to the three principal requirements of Title VI -- programming carriage obligations, franchising, and rate regulation. II. LEC PROVISION OF IN-REGION VIDEO PROGRAMMING MUST BE ACCOMPANIED BY COMPETITIVE SAFEGUARDS. The anticompetitive concerns raised by LEC provision of video programming in their telephone service areas are neither novel nor theoretical. The Commission adopted the crossownership rule in 1970, in part in response to evidence that some LECs were using their control over local exchange facilities to impede the growth of independent cable systems.[7] The potential anticompetitive conduct is of two types. First, a LEC could impede competition from competing video distribution systems by denying them access to essential poles and conduits or by providing such access at unreasonable rates. Second, the LEC could cross-subsidize its video programming offerings by shifting costs from its video activities to its regulated telephone service operations. Such cost shifting would harm both competing video providers and captive telephone ratepayers.[8] Regulatory changes in recent years have not eliminated the potential for anticompetitive conduct. Although the 1978 Pole Attachment Act mandated government regulation of the pole attachment rates charged by LECs and other utilities,[9] the level of regulation that currently exists offers incomplete protection against excessive rates or unreasonable conduct.[10] Not surprisingly, there have been persistent complaints over the years about LEC practices and policies with respect to pole attachments.[11] Indeed, to reduce a backlog of pending pole attachment complaints, the Commission recently designated those complaints for hearing before the agency's administrative law judges.[12] These problems will likely increase now that LECs have authority to offer video programming.[13] Similarly, although the Commission's decision to apply price cap rather than rate of return regulation to many LECs mitigates their ability to engage in cross-subsidization, it too has limitations. Most importantly, because the Commission's price cap scheme still contains significant rate of return elements, it preserves -- albeit to a lesser degree -- LECs' incentives to cross-subsidize their video service offerings from their monopoly telephone operations. Moreover, many LECs are not subject to price cap regulation.[14] Thus, even today, unconditional LEC entry into the video services market presents an unacceptable risk of anticompetitive conduct. It also raises broader policy concerns. Problems arise when the owner of a distribution facility can determine both the programming that will be delivered via that facility and the price that consumers will pay for that programming.[15] As the nation's experience with the cable television industry suggests, combining distribution and "gatekeeper" functions can be a recipe for excessive rates, as well as programming choices that reflect the financial interests of providers, rather than the preferences of subscribers.[16] It could be argued that LEC provision of in-region video programming will not raise these policy concerns because each LEC will be competing against an incumbent cable operator and other video distribution media, such as direct broadcast satellite (DBS).[17] It is far too early to tell, however, whether the anticipated rivalry between LECs and cable systems will produce effective competition or be sustainable in the long run.[18] Similarly, given uncertainties about the competitiveness of DBS vis-a-vis conventional cable service,[19] it is equally premature to conclude anything about the effect of DBS on a LEC's video programming activities. In short, merely assuming the existence of a competitive video services marketplace is not a sound basis for regulatory policymaking. The Commission must carefully consider these competitive and policy concerns in deciding how to regulate LEC entry into video programming. The court decisions vitiating the crossownership restriction make clear that Congress and the Commission may not address these concerns by absolutely barring LECs from the video marketplace. Those decisions make equally clear, however, that the First Amendment does not preclude the Commission from imposing reasonable conditions on LEC entry to promote competition and information diversity.[20] In fact, the ruling courts have identified specific regulatory safeguards that are less restrictive than the crossownership ban.[21] It is therefore likely that these safeguards would pass constitutional muster. Thus, the Commission has a sound policy rationale and legal basis for conditioning the LECs' entry into the video services market on their compliance with certain safeguards. NTIA therefore recommends that the Commission, at a minimum, adopt the basic safeguards discussed below, which should deter potential anticompetitive conduct by the LECs, yet permit them to compete vigorously in the video services marketplace.[22] A. The Commission Should Require LECs To Provide Distribution Facilities to All Video Programmers on a Common Carrier Basis. In NTIA's view, the essential safeguard in this area is video common carriage -- the requirement that a LEC provide distribution facilities to video programmers on a common carrier basis. In its VDT orders, the Commission correctly concluded that such a common carrier obligation would promote competition, foster programming diversity, and stimulate efficient, advanced infrastructure development.[23] Further, the Commission found specifically that, by ensuring access to all service providers on nondiscriminatory terms, video common carriage will "protect against potential anticompetitive conduct by the conduit provider."[24] More broadly, by separating the less competitive part of the video programming business -- construction and operation of the underlying transmission facilities -- from the more competitive part -- selection and marketing of programming to the home -- video common carriage "would offer an alternate route to the American household for program producers and program packagers who now must largely depend upon television broadcast stations and cable television systems to reach their markets."[25] Video common carriage would allow programmers to market their services directly to consumers, thereby ensuring that the programming available to the home would reflect a wider range of viewer tastes, rather than the choices of an intermediate gatekeeper. The end result should be expanded competition in the provision of video to the home and an increase in the range of programming and information available to television viewers. Under a common carrier model, the effects of the LECs' "private economic power on the means of distribution would cease to be a danger to the free flow of information."[26] One consequence would be a lesser need for government economic and content regulation to prevent potential abuses of that power -- regulation that itself may disturb the marketplace of ideas. In short, requiring LECs to provide distribution facilities on a common carrier basis can foster development of "a communications medium open to all, free of both excessive concentrations of private power and undue government control."[27] Although the Commission initially adopted video common carriage as a way to increase LEC participation in the video marketplace consistent with the crossownership restriction, the protections and benefits that common carriage provides are even more necessary now that LECs have won the right to offer in- region video programming.[28] A common carrier obligation can effectively prevent a LEC from acting on its increased incentives to impede competition from rival video programmers and distributors.[29] B. The Commission Should Not Place a Maximum Limit on the Proportion of a LEC-Operated Video Distribution Facility That May Be Occupied by the LEC's Own Video Programming. A LEC could effectively frustrate a common carrier requirement by leasing a substantial proportion of the capacity on its video platform or video distribution facility either to itself or to a favored "anchor programmer."[30] To prevent such conduct, the Commission has required that a LEC's video dialtone platform (1) "contain sufficient capacity to serve multiple video programmers"[31] and (2) have the ability to "expand as demand increases so as not to become a bottleneck."[32] While these requirements may reduce the LECs' ability to undermine their common carrier obligations,[33] they will offer incomplete protection unless LECs have strong incentives to comply fully with them.[34] The Commission could try to create such incentives by limiting the number of channels or percentage of capacity on a LEC-operated distribution facility that the LEC could occupy. Although a capacity limitation could help ensure programmer access, it also raises significant questions. Most basically, the Commission would have great difficulty in setting a non- arbitrary limit. More important, a rigid limit would put a LEC in a very difficult situation. It would have to determine -- in an uncertain market environment -- what size distribution facility is cost-justified and sufficiently capacious to allow the LEC to offer a viable package of video programming without using "too much" capacity. If the LEC overestimated demand for distribution facilities by unaffiliated programmers, it could have substantial unused capacity that it would be precluded from filling. Under those circumstances, a maximum capacity limit could obviously "increase the risk of deploying video dial tone service and create a strong disincentive to do so."[35] To avoid this problem, NTIA recommends that the Commission adopt a less rigid capacity limitation, which we call "accommodate or vacate." Under this approach, a LEC would be free to occupy as much of the capacity of its video distribution facility as it wishes. Upon receiving a bona fide request for capacity from an unaffiliated video programmer, however, the LEC would have to accommodate that request either by making more efficient use of its existing facilities (e.g., by employing multiplexing or compression techniques that enable the LEC to derive additional capacity from its existing transmission plant), by promptly building additional capacity, or by removing its own programming from the video platform.[36] To illustrate, suppose that a LEC's market research indicates that it should construct a 100 channel video distribution facility to serve a particular community. After receiving authority to construct that facility and filing the requisite tariff, the LEC would then entertain requests for service from interested programmers. If unaffiliated programmer- customers request only 20 channels, the LEC would be free to use the remaining 80 channels for its own programming services. If, however, existing or new programmers subsequently requested two additional channels, the LEC would either have to make additional capacity available or remove its own programming services from two channels. "Accommodate or vacate" would safeguard the interests of unaffiliated programmers, yet avoid many of the risks presented by a maximum capacity limitation. It would both alleviate some of the uncertainties inherent in sizing a LEC's video distribution facility and substantially reduce the risk of unused capacity. At the same time, by requiring LECs to remove their own programming to accommodate capacity requests from unaffiliated programmers, NTIA's suggested approach would give the LECs strong incentives to comply with the Commission's capacity and expandability requirements. We recognize that problems could arise if capacity requests from unaffiliated programmers exceed the capacity of a LEC's video platform. In that case, the accommodate or vacate rule would either preclude the LEC affiliate from leasing space on the LEC's platform or compel the affiliate to remove all of its programming from that facility. To avoid such a result, the Commission could set a minimum capacity limit -- a minimum number of channels or percentage of capacity that the LEC could occupy, regardless of demand from other programmers.[37] To strengthen a LEC's incentive to construct distribution facilities with sufficient capacity to accommodate future demand, however, any minimum capacity limitation should be relatively small (e.g., 10- 15 percent). C. The FCC Should Require LECs to Provide In-Region Video Programming Through a Separate Affiliate. As dominant providers of basic telephone service, local exchange carriers have the ability to engage in anticompetitive behavior. LECs will have the incentive to discriminate against other video programming providers and engage in improper cross- subsidization between regulated and non-regulated services, to the detriment of telephone ratepayers and other video programming competitors. Evidence of such anticompetitive behavior is often difficult to detect,[38] and such difficulties will be compounded by the Commission's relative lack of experience and information regarding LEC provision of video programming and video transmission services. Requiring a LEC to provide video programming through a separate affiliate would provide an effective means of detecting the existence of cross-subsidization between the LEC's basic transmission services and its video programming operations. In addition, placing the affiliate in an "arms length" relationship with its parent -- the LEC platform provider -- will help ensure that such affiliate is not granted preferential access to the platform. Given the concerns about adequate capacity on the video platform, it is particularly important that unaffiliated programmer-customers be able to monitor the terms and conditions under which the LEC's video programming operation gains access to its video distribution facility. The establishment of a separate programming affiliate will allow such oversight.[39] Some commenters argue that a separation requirement prohibits firms from benefitting from certain synergies, such as economies of scope. While such efficiencies may arise in the joint provision of traditional enhanced and basic services, the concerns noted above lead us to recommend separation for LEC provision of video programming and video transmission services at this time.[40] III. TELEPHONE COMPANY PROVISION OF IN-REGION VIDEO PROGRAMMING SHOULD NOT BE REGULATED SOLELY UNDER TITLE VI OF THE COMMUNICATIONS ACT. Regardless of what conditions and safeguards the Commission imposes on LEC entry into the video programming market, there is an issue about whether Title II, Title VI, or both apply to LEC provision of in-region video programming.[41] Some telephone companies have argued, citing Section 621(c) of the Communications Act, that they cannot be regulated under Title II if they are regulated under Title VI.[42] That argument is without merit. Section 621(c) merely states that "[a]ny cable system shall not be subject to regulation as a common carrier or utility by reason of providing any cable service."[43] While that provision plainly precludes common carrier regulation of cable service -- i.e., one-way transmission of video programming[44] -- it also suggests, by negative implication, that any non-cable services offered by a cable system can be subjected to utility regulation. As the legislative history of Section 621(c) indicates, that is precisely what Congress intended. The provision was added to the Communications Act by passage of the 1984 Cable Act. At that time, a number of cable companies were beginning to offer telecommunications services in competition with LECs and there was considerable debate concerning whether, how, and by whom such services should be regulated.[45] A cable television bill adopted by the Senate in June of 1983 would have barred Federal, State or local governments from "impos[ing] on a cable system regulation as a common carrier or utility to the extent that such cable system provides broadband telecommunications service other than basic telephone service."[46] In response, the House of Representatives adopted a substitute bill that contained the language eventually enacted as Section 621(c). That provision deliberately left open the regulatory status of non-cable services, as the accompanying Committee Report indicates: The Committee intends to leave the decision concerning the exercise of regulatory authority over non-cable communications services to the appropriate regulatory bodies [i.e., the Commission and the State public utility commissions]. This approach protects cable companies from unnecessary regulation, while reserving for state and Federal officials the authority they need to address the issue of competition between telephone and cable companies and the need to preserve universal telephone service.[47] Thus, Section 621(c) was never intended to preclude utility regulation of non-cable services offered by cable systems. To the contrary, its very purpose was to preserve Federal and State authority to regulate cable systems as common carriers to the extent that they provide non-cable services similar to those offered by telephone companies.[48] Section 621(c) thus provides no support for the claim that the Commission may not regulate a LEC's video transmission service -- a non-cable service -- pursuant to Title II merely because that offering may be used to provide cable services. Thus, the Communications Act erects no barrier to Commission regulation of a LEC's video-related activities under Title II. The question then is whether Title VI applies. A. A LEC-Operated Video Platform Is Not A "Cable System" Subject to Title VI Regulation. The provisions of Title VI apply to "cable systems" and "cable operators." The definition of cable operator requires, among other things, the presence of a cable system.[49] Hence, the search for a cable system is an essential first step in deciding whether Title VI applies to any particular provider of video programming. Section 602(7) of the Communications Act defines a "cable system" as "a facility, consisting of a set of closed transmission paths and associated signal generation, reception, and control equipment that is designed to provide cable service which includes video programming and is provided to multiple subscribers within a community."[50] At first glance, a LEC facility used to provide video programming would come within the statutory definition. There is, however, an exemption to that definition for a common carrier facility that is subject in whole or in part to Title II.[51] The Commission has already determined that a LEC- operated common carrier video platform -- as contemplated by NTIA's recommended safeguards and the Commission's current VDT rules -- would be a Title II regulated facility.[52] At second glance, then, the foregoing exemption would seem to remove the LEC facility from the definition of a cable system. The exemption, however, has an exception, which provides that a Title II regulated facility is a cable system "to the extent such facility is used in the transmission of video programming directly to subscribers."[53] In NTIA's view, a LEC offering video services in accordance with the regulatory scheme outlined in Section II of these comments would not be transmitting video programming directly to subscribers. According to the D.C. Circuit, "transmission" requires "active participation in the selection and distribution of video programming."[54] This involves "at least choosing the signal, or originating it, not necessarily conducting it personally to its destination."[55] Under video common carriage, a LEC would not be involved in the selection and distribution of the programming delivered to subscribers via its video platform. In fact, the fundamental purpose of that approach -- and its principal benefit -- is to insulate the LEC from those very activities. Instead, selection, organization, and distribution of programming would be performed by a separate affiliate and other unaffiliated programmer- customers, rather than by the LEC that controls the underlying distribution facility.[56] Because the LEC would thus not be involved in the "transmission" of video programming to subscribers, the exception would not apply.[57] Instead, the exemption for a Title II regulated facility would control so as to exclude the LEC's video distribution facility from the statutory definition of a cable system. This construction of the exception in Section 602(7)(C) is consistent with congressional intent. As the D.C. Circuit has concluded, the exception is "directed at telephone companies providing a conventional cable service, which they are permitted by the Cable Act in rural areas and other communities where no other entity is likely to offer cable service."[58] The court also pointed out that a review of Title VI's regulatory scheme "makes it quite clear" that conventional cable service and video common carriage "are very different creatures."[59] In the absence of any guidance from Congress to the contrary, the Commission should conclude that Congress intended the exception in Section 602(7)(C) to apply in cases where a LEC offers video programming over a traditional closed cable system, as opposed to an open common carrier video platform.[60] That conclusion would be sound as a matter of policy. Title VI -- which would be triggered by a finding that a LEC-operated video platform is a cable system -- has two fundamental purposes: first, to permit non-Federal authorities to control the use of public rights-of-way by wire-based video distribution systems and to impose reasonable limits on the exercise of that authority;[61] and second, to promote competition in the video marketplace and to foster the widest possible diversity of information sources and services to the public.[62] Title II regulation of a LEC's entry into the video marketplace would achieve both purposes, without the need for the additional overlay of Title VI regulation. As the Commission is well aware, common carrier regulation incorporates "the same concerns about public safety and convenience and use of public rights-of-way that provide a key justification for the cable franchise requirement."[63] Moreover, LECs already operate under franchises or certificates that authorize them to use public rights-of-way and impose regulatory obligations in return. Given that, the need and justification for additional franchise obligations under Title VI is questionable. Title II regulation alone will also promote competition and information diversity. Most importantly, the requirement that LECs furnish distribution facilities to all programmers -- including their video affiliates -- on a nondiscriminatory basis at rates subject to Commission oversight will eliminate barriers to entry by new video programmers. In this way, common carrier regulation of a LEC's video platform will give programmers an unfettered opportunity -- which they do not now have under Title VI -- "to promote their ideas, state their views, or sell their goods and services."[64] Subscribers, in turn, will have freedom "to pick and choose from among a diverse range of entertainment, information, and services."[65] The net result, as the Commission has recognized, will be "increased services, lower prices and new services."[66] In the highly competitive environment fostered by Title II regulation, the provisions of Title VI would be redundant and -- quite possibly -- counterproductive. For all the foregoing reasons, the Commission should rule that a LEC-operated video platform is not a cable system, even if a LEC affiliate uses that facility to deliver video programming to the home.[67] That conclusion is consistent with the letter and spirit of the Communications Act and sound as a matter of policy.[68] Further, as noted above, if there is no cable system, there can be no cable operator.[69] Consequently, Title VI does not apply to the LEC's video platform or to the programmer-customers that use the platform -- including the LEC affiliate.[70] B. If the LEC Common Carrier Is Deemed a Cable System, the Commission Must Apply Title II and Title VI In a Way That Minimizes Duplication and Promotes Competition. If, notwithstanding the foregoing argument, the Commission determines that a LEC-operated video platform is a cable system, it will have to fashion a regulatory structure that incorporates the provisions of Titles II and VI. In so doing, the Commission should strive, above all, to avoid duplicative regulation and to promote competition among the various users of the LEC video platform, including the LEC affiliate. Two possible approaches are discussed below. 1. Imposing Title VI Only on the LEC Affiliate Would Be Problematic. If the Commission were to construe the exception in Section 602(7)(C) to render a LEC-operated video platform a cable system -- in cases where a LEC affiliate uses that facility to provide video programming to subscribers -- only a portion of the platform should be so classified. The exception specifies that a Title II-regulated facility is a cable system only "to the extent such facility is used in the transmission of video programming directly to subscribers."[71] Under the regulatory structure proposed in these comments, the only portion of the LEC's platform that even arguably satisfies that requirement is the capacity leased by the LEC's video affiliate. If the portion of the LEC's video platform occupied by the affiliate were deemed to be a cable system, the affiliate would therefore be a cable operator because it would be providing cable service over a cable system in which it has an indirect ownership interest.[72] As such, the affiliate would be subject to regulation under Title VI. In contrast, the remainder of the LEC's platform -- for which the selection, origination, and distribution of programming would be performed by unaffiliated entities -- would not be a cable system and the unaffiliated programmer-customers would not be cable operators. Accordingly, the platform could be regulated pursuant to Title II and the unaffiliated programmer-customers would not be subject to Title VI. Imposing Title VI regulation on the affiliate alone would raise several significant problems. Most importantly, it would place the LEC affiliate at a severe competitive disadvantage vis- a-vis the other programmer-customers using the LEC's video platform -- none of whom would be subject to Title VI. The affiliate would have to carry local broadcast stations, provide public, educational, and governmental access (PEG) channels, obtain a franchise (with all of the attendant obligations and requirements), and pay a franchise fee. The costs of complying with those regulations would likely make it difficult for the affiliate to compete effectively with its unregulated rivals. Title VI regulation of a LEC's video affiliate and Title II regulation of the underlying video platform might also dissuade the LEC from entering the market at all, because compliance with two regulatory schemes might be prohibitively expensive. Television viewers and society generally would thus be denied the obvious benefits of LEC participation in the video marketplace. Moreover, given that Title II regulation of the LEC's video platform significantly reduces the affiliate's ability to compete unfairly in the video programming market, Title VI regulation of the affiliate would raise legitimate questions whether the Commission's rules had been narrowly tailored to minimize interference with the LEC's First Amendment rights. Imposing Title VI only on the LEC affiliate raises more mundane implementation questions as well. Can the Commission harmonize the affiliate's "must carry" and PEG obligations with the need for a limit (preferably a minimum limit as recommended in Section II.B above) on the proportion of a LEC video platform that an affiliate may occupy? It would be manifestly unfair for the Commission to impose such a limit and then compel the affiliate, in accordance with Title VI, to fill that scarce capacity with programming that the LEC may not have chosen to carry. The Commission could avoid such a result by defining the LEC's capacity limit as a designated proportion of a LEC's video platform, plus any additional channels that the affiliate is required to carry pursuant to Title VI. This solution presents its own problems, however. In some instances, the affiliate might be able to "monopolize" carriage of local broadcast signals, thereby compelling consumers to purchase the LEC's programming services to view local broadcast signals. More typically, other programmer-customers also wishing to provide local broadcast signals would have to use some of the limited capacity of the LEC's video platform to carry duplicate programming. Such duplication could result in an inefficient use of platform capacity. The Commission could mitigate such inefficient use of the platform by requiring the LEC affiliate to offer its "must carry" signals in a shared channel arrangement. This would allow other programmer-customers to incorporate local broadcast signals into their service packages, without consuming additional channels. Yet, on what basis could the Commission compel the affiliate to carry local broadcast signals (as required by Title VI), and then force the affiliate to make those signals available to its competitors? The foregoing discussion illustrates some of the implementation problems presented by imposing Title VI only on the LEC affiliate. Although application of the "must carry" requirements is particularly problematic, other examples can readily be found. These difficulties counsel in favor of adopting a different approach to applying Titles II and VI to a LEC's video programming activities, as we recommend below. 2. The Commission Can Impose the Requirements of Title VI on the LEC Platform and the LEC Affiliate in a Way that Minimizes Regulation and Promotes Competition. As an alternative to regulating only the LEC affiliate under Title VI, if the Commission were to construe the exception in Section 602(7)(C) to render a LEC-operated video platform a cable system, the Commission should consider applying Title VI to both the affiliate and the LEC platform in a way that minimizes the regulatory burden on both entities. Specifically, the Commission would impose particular provisions of Title VI on either the platform or the affiliate, depending on which result better satisfies the language and underlying purpose of each provision. The following sections illustrate how this approach would work with respect to three specific areas of Title VI regulation: carriage obligations, franchise requirements, and rate regulation. a. Carriage obligations The imposition of the Title VI leased access requirements on either the video platform or the video programming affiliate would be unnecessary given that the platform would be provided on a common carrier basis, which would by definition give all programmers access to that facility on reasonable, nondiscriminatory terms.[73] Title VI's must-carry and PEG provisions, however, require cable systems to provide distribution facilities to particular classes of video programmers. Those provisions would thus impose carriage obligations on the LEC well in excess of those required by Title II. Given the mandatory language of the "must carry" and PEG access provisions, the Commission would seem to be compelled to apply such requirements to LEC video programming operations. These obligations, however, should only be imposed on the video platform. The "must carry" provisions, for example, specify what local broadcast signals must be carried by a "cable system."[74] Because the LEC's video platform is the cable system in this scenario, it should bear specific carriage obligations that parallel the platform's duty under Title II to provide service upon reasonable request. Among other things, this approach ensures that all viewers have access to local broadcast signals regardless of which program packages they select. b. Franchise requirements There is a sound policy argument against imposing the franchising requirements of Title VI on either the LEC or its video affiliate. As noted above, the primary rationale for cable franchising is to enable local governments to control private use of public rights-of-way. In most cases, LECs providing in-region programming have already received government authorization to use those rights-of-ways. Requiring them to obtain a separate cable franchise would be -- if not unnecessary -- duplicative. Nevertheless, if the Commission determines that Title VI is applicable, the language of Title VI indicates that a cable franchise is required, regardless of what other government authorizations have been obtained.[75] Logically, the franchise obligation should be borne by the LEC platform. The platform, after all, is the facility that occupies public rights-of-way. Moreover, by exempting the affiliate from the need to obtain a franchise, the Commission could avoid subjecting the affiliate to regulatory burdens not imposed on the programmer-customers against which the affiliate competes. In any event, a LEC's procurement of a cable franchise for its video platform should generally be a formality. Section 621(a)(1) of the Communications Act prohibits franchising authorities from unreasonably refusing to grant a franchise.[76] Although Section 621(a)(4) does permit those authorities to impose certain legal, technical, and financial requirements on prospective franchisees,[77] LECs should have no difficulty satisfying those requirements. Accordingly, the Commission should scrutinize carefully any untimely approval or denial of a cable franchise to a LEC-operated video platform. The Commission should also carefully circumscribe the franchise fees that non-Federal authorities require of their LEC cable franchisees. Section 622 of the Communications Act specifies that franchise fees may be levied only on the "gross revenues derived . . . from the operation of the cable system."[78] Because the video platform is the cable system in these circumstances, the only revenues properly subject to franchise fees are those monies received from household subscribers and programmer-customers for access to the video platform. The Commission should absolutely bar franchising authorities from exacting fees from the revenues earned by the LEC's programming affiliate or any other programmer-customers. c. Rate regulation Title VI rate regulation requirements should apply only to the affiliate. Since those provisions apply to "cable services," it would seem appropriate to impose any rate regulation requirements on the LEC programming affiliate rather than the platform.[79] The Commission should bear in mind, however, that the affiliate would in most cases face "effective competition" from the incumbent cable operator serving the same market. As a result, imposing rate regulation on the video affiliate would in most cases have no practical effect.[80] d. Other Title VI requirements The Commission should follow the same analysis as that applied above in determining how to apply other Title VI provisions. Essentially, NTIA recommends that the Commission should impose only those Title VI requirements for which there are no analogous Title II provisions. Generally, any Title VI obligation should be imposed on either the LEC platform or the programming affiliate as circumstances warrant, but not both.[81] IV. CONCLUSION For the foregoing reasons, NTIA respectfully requests that the Commission adopt the recommendations contained herein. Respectfully submitted, Larry Irving Assistant Secretary for Barbara S. Wellbery Communications and Information Chief Counsel Michele C. Farquhar Chief of Staff and Director, Lisa Sockett Office of Policy Coordination Attorney-Advisor and Management Office of Chief Counsel Joseph L. Gattuso Acting Associate Administrator Radhika Karmarkar Cynthia Nila Tim Sloan Office of Policy Analysis and Development National Telecommunications and Information Administration U.S. Department of Commerce Room 4713 14th and Constitution Ave., N.W. Washington, D.C. 20230 (202) 482-1816 July 11, 1995 CERTIFICATE OF SERVICE I, Cheryl A. Kinsey, do hereby certify that I have this 11th day of July, 1995, mailed by first class United States mail, postage prepaid, copies of the foregoing Reply Comments to the parties of record in this proceeding. ______________________________ Cheryl A. Kinsey ENDNOTES [1] Telephone Company-Cable Television Cross-Ownership Rules, Sections 63.54-63.58, Fourth Further Notice of Proposed Rulemaking, 10 FCC Rcd 4617 (1995) (Fourth Notice). [2] See 47 U.S.C. 533(b)(1) (1994); 47 C.F.R. 63.54-63.58 (1994). [3] See, e.g., U S West, Inc. v. United States, 48 F.3d 1092 (9th Cir. 1994) (affirming 855 F. Supp. 1184 (W.D. Wash.)); Chesapeake and Potomac Tel. Co. of Va. v. United States, 42 F.3d 181 (4th Cir. 1994), cert. granted, 63 U.S.L.W. 3906 (U.S. 1995) (affirming 830 F. Supp. 909 (E.D. Va. 1993); BellSouth Corp. v. United States, 868 F. Supp. 1335 (N.D. Ala. 1994); Ameritech Corp. v. United States, 867 F. Supp. 721 (N.D. Ill. 1994); United States Tel. Ass'n v. United States, Civ No. 1:94CV01961 (D.D.C. Feb. 14, 1995). [4] The Commission has characterized VDT as "an enriched version" of video common carriage. Telephone Company-Cable Television Cross-Ownership Rules, Sections 63.54-63.58, Further Notice of Proposed Rulemaking, First Report and Order and Second Further Notice of Inquiry, 7 FCC Rcd 300, 306 10 (1991) (First Report and Order). See also National Telecommunications and Information Admin., U.S. Dep't. of Commerce, NTIA Report 88-233, Video Program Distribution and Cable Television: Current Policy Issues and Recommendations at 32, 36-38 (June 1988) (explaining "video common carriage" concept). Under VDT, LECs would not only provide distribution facilities to video programmers on a common carrier basis, but would also offer navigational aids to help consumers identify and choose among the programming options available to them. [5] See, e.g., Hearings on Telecommunications Reform Legislation Before the Subcomm. on Telecommunications and Finance of the House Comm. on Energy and Commerce, 103rd Cong., 2nd Sess. (Jan. 27, 1994) (statement of Larry Irving, Assistant Secretary for Communications and Information, U.S. Department of Commerce); Comments of the National Telecommunications and Information Administration in CC Docket No. 87-266 at 4-8 (filed Feb. 3, 1992). [6] First Report and Order, 7 FCC Rcd at 304, 6. [7] See Section 214 Certificates, 21 FCC 2d 307, recon., 22 FCC 2d 746 (1970), aff'd sub nom. General Tel. Co. of Southwest v. United States, 449 F.2d 846 (5th Cir. 1971). [8] Although a LEC would have the incentive to engage in these activities even if it offered only video transmission services, the authority to market video programming magnifies that incentive considerably. When a LEC provides video transmission services, it has the incentive to disadvantage other video transmission providers. When the LEC also provides video programming, its incentives to act anticompetitively extend both to its transmission services and to its programming activities. [9] See 47 U.S.C. 224(b) (1994). [10] The Commission's current pole attachment regulations allow utilities to set rates based on formulas "that define the upper bound of the zone of reasonableness." FCC and Common Carrier Bureau Take Steps To Resolve Pending Pole Attachment Complaints, Report No. DC 95-87 (released June 16, 1995) (Pole Attachment Report). [11] See, e.g., Reply Comments of Continental Cablevision, et al. in CC Docket No. 87-266, at 19-21 (filed Apr. 11, 1995); Pole Attachment Comments of Continental Cablevision, et al. in CC Docket No. 87-266, at 17-27 (filed Dec. 16, 1994). See also Common Carrier Bureau Cautions Owners of Utility Poles, FCC Public Notice, DA 95-35 (released Jan. 11, 1995). [12] Pole Attachment Report, supra note ?. [13] Cf. Contel of Virginia, et al., Files Nos. W-P-C-6955-6958, DA 95-1012 (released May 5, 1995); BellSouth Telecommunications, Inc., File No. W-P-C-6977, DA 95-181 (released Feb. 8, 1995) (allegations raised that two LECs raised their pole attachment rates after filing applications to offer video dialtone service). [14] In addition, the Commission's regulations and resources may not be sufficient to prevent cross-subsidization. See, e.g., General Accounting Office, GAO/RCED-93-94, Telecommunications: FCC's Oversight Efforts to Control Cross-Subsidization (1993) (GAO Report). [15] See, e.g., Ithiel de Sola Pool, Technologies of Freedom 172- 173 (1983); Besen and Johnson, An Economic Analysis of Mandatory Leased Channel Access for Cable Television 22 (Rand Corp. 1982). [16] As the Commission is aware, NBC was compelled to change its CNBC cable channel to a specialized business news format at the insistence of several large cable companies, who did not wish to carry an all news competitor to CNN, which was partially owned by many of those very same companies. See Competition, Rate Deregulation and the Commission's Policies Relating to the Provision of Cable Television Service, 5 FCC Rcd 4962, 5028-5029, 120-122 (1990). [17] See, e.g., Comments of Bell Atlantic in CC Docket No. 87- 266, at 5-6 (filed Mar. 21, 1995). [18] Legislation now pending in Congress would permit mergers and joint ventures between telephone companies and cable operators in many communities. See S. 652, 104th Cong., 1st Sess., 202(a) (1995); H.R. 1555, 104th Cong., 1st Sess., 201 (1995). Permitting these potential rivals to merge reduces the likelihood that they will become head-to-head competitors. [19] One industry observer has noted a significant tendency on the part of households subscribing to DBS to retain their existing cable service. Another predicts that in the year 2000, about 50 percent of DBS households will also subscribe to cable service. See Communications Daily, May 10, 1995, at 6. [20] See, e.g., U S West, Inc. v. United States, 48 F.3d at 1102 (fostering competition in the cable industry is a substantial government interest for First Amendment purposes); Chesapeake and Potomac Tel. Co. of Va. v. United States, 42 F.3d at 198-199 ("government's interest in eliminating restraints on fair competition is always substantial," and assuring that the public has access to a multiplicity of information sources "is a governmental purpose of the highest order"). [21] See, e.g., U S West, Inc. v. United States, 48 F.3d at 1105 (common carrier obligation and structural separation "would help ensure that the telephone companies do not develop monopolies in the programming market, while allowing them to engage in considerably more protected speech") (citing Chesapeake and Potomac Tel. Co. of Va. v. United States, 42 F.3d at 201-202). Accord BellSouth Corp. v. United States, 868 F. Supp. 1335, 1342- 1343 (N.D. Ala. 1994) (common carrier obligation); Ameritech Corp. v. United States, 867 F. Supp. 721, 736 n.9 (N.D. Ill. 1994) (same). [22] A LEC should be required to operate in accordance with all the safeguards detailed below whenever it offers in-region video programming via a wire-based distribution facility -- even in an overbuild situation -- as it has all the same incentives to discriminate and cross-subsidize in those situations. In contrast, were a LEC to offer in-region video programming via a wireless distribution system, such as MMDS, the potential for discrimination and cross-subsidization would be significantly less and the same safeguards should not be required. [23] First Report and Order, 7 FCC Rcd at 304, 6. [24] Telephone Company-Cable Television Cross-Ownership Rules, Sections 63.54-63.58, Second Report and Order, Recommendation to Congress, and Second Further Notice of Proposed Rulemaking, 7 FCC Rcd 5781, 5811, 57 (1992) (Second Report and Order). Accord Telephone Company-Cable Television Cross-Ownership Rules, Sections 63.54-63.58, Memorandum Opinion and Order on Reconsideration and Third Further Notice of Proposed Rulemaking, 10 FCC Rcd 244, 259, 31 (1994) (VDT Reconsideration Order) (common carrier requirement "will provide an important check against unreasonably discriminatory treatment of video programmers by telephone companies"). [25] First Report and Order, 7 FCC Rcd at 309-310, 17. [26] Cabinet Committee on Cable Communications, Cable Report to the President, reprinted in 14 Weekly Television Digest 7 (Jan. 21, 1974) (Cabinet Committee Report). [27] Id. [28] Should a LEC become the dominant provider of video transmission services in a community -- whether via superior business acumen or undetected anticompetitive conduct -- a common carrier obligation will ensure that the competing video programmers still have a way of distributing their services to the home. [29] Requiring LECs to operate their distribution facilities on a common carrier basis would subject them to obligations not borne by incumbent cable systems. The Clinton Administration has advocated legislation that would authorize the Commission to impose a similar common carrier obligation on cable systems, except when technology, costs, and market conditions would make such an offering inappropriate. See The Communications Act of 1994: Hearings on S. 1822 Before the Senate Comm. on Commerce, Science and Transportation, 103d Cong., 2d Sess. (1994) (statement of Ronald H. Brown, Secretary of Commerce, at 11). See also Administration Comments on H.R. 1555: The Communications Act of 1995, and Related Legislation Before the House Commerce Committee 5 (May 15, 1995) (on file with NTIA) (supporting the provisions in H.R. 1555 that seek to encourage cable operators to open up their platforms as they begin to upgrade their networks to provide interactive services). [30] See, e.g., VDT Reconsideration Order, 10 FCC Rcd at 260, 35 (LEC offering VDT may not lease all or substantially all of its capacity to a single anchor programmer). [31] Id. at 257, 25. [32] Second Report and Order, 7 FCC Rcd at 5797-5798, 30. [33] The "expandability" requirement, in particular, is hardly absolute. LECs will have the opportunity to demonstrate that expansion of capacity is not "technically feasible" or "economically reasonable." VDT Reconsideration Order, 10 FCC Rcd at 261, 38. [34] As the Commission is aware, a firm will be more likely to engage in socially desirable behavior if it has positive incentives to do so. That is one of the principal reasons why the Commission decided to replace rate of return regulation with price cap regulation. [35] Comments of Bell Atlantic in CC Docket No. 87-266, at 11 (filed Mar. 21, 1995). [36] The Commission could readily develop guidelines governing, for example, what would constitute a reasonable attempt by a LEC to accommodate capacity requests from unaffiliated programmer- customers and what would qualify as the prompt building of additional facilities. [37] If the unserved demand from unaffiliated programmers were sufficiently large, the Commission's "expandability" requirement would presumably obligate the LEC promptly to construct additional channels to satisfy that demand. [38] See, e.g., GAO Report, supra note ?, at 2. [39] Moreover, if a LEC does not provide programming through a separate affiliate, the LEC's video platform and the LEC's video programming operation would meet the statutory definitions of "cable system" and "cable operator" and, thus, would be subject to Title VI regulation. See infra note ? and accompanying text. [40] Some federal courts have noted that a separate affiliate requirement would be a less restrictive alternative for combatting potential LEC anticompetitive practices than the total ban on in-region programming represented by the crossownership restriction. See, e.g., U S West, Inc. v. United States, 48 F.3d at 1105. [41] Because video dialtone was not anticipated when Congress first established the Title II and Title VI regulatory regimes, it is not entirely clear which of these sections of the Communications Act should govern. NTIA's recommended approach will resolve in a sound manner much of the confusion that arises from not having a specific legislative mandate. Legislative guidance on this matter, however, would provide a more certain regulatory environment. [42] See, e.g., Comments of U S West in CC Docket No. 87-266, at 24 (filed Mar. 21, 1995). [43] 47 U.S.C. 541(c) (1994). [44] See 47 U.S.C. 522(6) (1994). [45] See, e.g., H.R. Rep. No. 934, 98th Cong., 2d Sess. 60 (1984), reprinted in 1984 U.S.C.C.A.N. 4655, 4697 (House Report). [46] S. 66, 98th Cong., 1st Sess., 614 (1983). [47] House Report at 60, 1984 U.S.C.C.A.N at 4697 (brackets added). [48] While the House was considering the regulatory issues implicated by Section 621(c), the Commission was deciding whether to preempt state regulation of non-cable services. Id. [49] For purposes of Title VI, the term "cable operator" means any person or group of persons (A) who provides cable service over a cable system and directly or through one or more affiliates owns a significant interest in such cable system, or (B) who otherwise controls or is responsible for, through any arrangement, the management and operation of such a cable system. 47 U.S.C 522(5) (1994). [50] 47 U.S.C. 522(7) (1994). [51] 47 U.S.C. 522(7)(C) (1994). [52] See Fourth Notice, 10 FCC Rcd at 4621, 5; Telephone Company-Cable Television Cross-Ownership Rules, Sections 63.54- 63.58, Memorandum Opinion and Order on Reconsideration, 7 FCC Rcd 5069, 5072, at 22 (1992) (Reconsideration Order). [53] 47 U.S.C. 522(7)(C) (1994). [54] National Cable Television Ass'n v. FCC, 33 F.3d 66, 73 (D.C. Cir. 1994) (NCTA v. FCC) (quoting Reconsideration Order, 7 FCC Rcd at 5072, 18). [55] NCTA v. FCC, 33 F.3d at 71-72. [56] If a LEC provides video programming on an unseparated basis, the exception would clearly apply and the underlying distribution facility would constitute a "cable system," even if it were operated on a Title II regulated basis. [57] It could be argued that the affiliate's "transmission" activities are attributable to the LEC parent and thus that the LEC's Title II regulated video platform is a cable system. Recall, however, that the exception covers only transmissions "directly" to subscribers. Congress has been quite specific in other cases when it wanted to attribute indirect activities of an affiliate to its parent. For example, the statutory cross- ownership restriction refers to telephone company provision of in-region video programming "either directly or indirectly through an affiliate." 47 U.S.C. 533(b)(1) (1994). Likewise, the definition of "cable operator" encompasses ownership of a cable system either "directly or through one or more affiliates." 47 U.S.C. 522(5)(A) (1994). Given Congress's specific intent to include "direct and indirect" activities in these two closely- related provisions of Title VI, its omission of similar language in Section 522(7)(C) reenforces the conclusion that the exception was meant to reach only direct involvement in the transmission of video programming. [58] NCTA v. FCC, 33 F.3d at 74 (citing Reconsideration Order, 7 FCC Rcd at 5072). [59] 33 F.3d at 75. [60] See Chevron U.S.A., Inc. v. Natural Resources Defense Council, Inc., 467 U.S. 837, 842-844 (1984) (holding that when Congress has not spoken to the precise question at issue the courts must give considerable weight to the agency's interpretation if it is based on a permissible construction of the statute). [61] See House Report at 19, 23-24, 1984 U.S.C.C.A.N. at 4656, 4660-61. [62] See, 47 U.S.C. 521(4), (6) (1994). [63] Reconsideration Order, 7 FCC Rcd at 5072, 22. [64] Cabinet Committee Report, supra note ?, at 9. [65] Id. [66] First Report and Order, 7 FCC Rcd at 306, 8. [67] The affiliate alone cannot be considered a "cable system" because it has no facilities. [68] Concluding that the LEC facility is not a cable system would avoid government regulation of the video services that a LEC chooses to offer, thereby minimizing government interference with the LEC's First Amendment rights. As a result, government regulation of LEC entry into the video marketplace would be limited to Title II-based competitive safeguards that have been identified by the courts as less restrictive alternatives to the crossownership ban. [69] See supra note ? and accompanying text. [70] Even if the Commission were to determine that the LEC facility is a "cable system," unaffiliated programmer-customers would still not be cable operators "because they neither own a significant interest in the telephone company [video distribution] broadband facilities, or control, or are responsible for the management and operation of those facilities." NCTA v. FCC, 33 F.3d at 74 (quoting First Report and Order, 7 FCC Rcd at 327, 52). [71] 47 U.S.C. 522(7)(C) (1994) (emphasis added). [72] See 47 U.S.C. 522(5)(A) (1994). The LEC could also be considered a cable operator because it would arguably "control[] or [be] responsible for . . . the management and operation of" the cable system in question. 47 U.S.C. 522(5)(B) (1994). It would make no sense, however, -- assuming that it were feasible - - to impose Title VI obligations on two different entities with respect to the very same facility. [73] See Fourth Notice, 10 FCC Rcd at 4628, 15. [74] 47 U.S.C. 534 (1994). [75] See 47 U.S.C. 541(b)(1) (1994). [76] See 47 U.S.C. 541(a)(1) (1994). [77] See 47 U.S.C. 541(a)(4) (1994). [78] See 47 U.S.C. 542(b) (1994). [79] See 47 U.S.C. 543 (1994). [80] See 47 U.S.C. 543(a)(2) (1994). [81] There may, however, be one exception to this general rule. The Commission may for public policy reasons impose the Title VI privacy provisions on both the platform and the affiliate. Although the Commission has stated that the customer proprietary network information (CPNI) rules should apply to a LEC common carrier video transport platform, these rules -- because they were primarily devised to address specific competitive concerns - - may not address the privacy concerns associated with the provision of video programming. For example, the current CPNI rules only require certain LECs to obtain the authorization of customers with more than twenty lines before releasing their data internally. This rule would leave all single-line residential customers unprotected. Furthermore, imposition of the CPNI rules on only the platform would leave virtually no legal restraints on the programming affiliate's use of subscriber information. It should be noted, however, that even if the Commission imposes the Title VI privacy provisions on the platform and the affiliate, use of subscriber information by unaffiliated customer- programmers will remain unregulated because these entities will not be considered "cable operators." Legislation may be required to address this disparity.