1994-01-25 White Paper on Communications Act Reforms

[David Farber <farber@central.cis.upenn.edu>]

    lieu of cash payments.  H.R. 3636 has no comparable
     provisions.




VI.  Cable-Telephone Crossownership


     Although the existing cable-telephone company
crossownership restriction of the 1984 Cable Act may have
been appropriate when enacted, today it is an unnecessary and
artificial barrier to competition in the delivery of video
programming to American consumers and to investment in
advanced local infrastructure.  The Administration's proposal
to remove the current restriction, coupled with its proposals
to promote competition in local telephone service, will allow
telephone companies and cable operators to compete in
providing a full range of video, voice, and data services to
the public.  Such competition can promote investment that
expands consumer choices and services.


     To ensure that cable firms and telephone companies do
not harm  consumers or competition in providing these
services, the Administration proposes several safeguards
specified below, most notably requirements that most
telephone companies and cable operators make transmission
capacity available to unaffiliated video providers on a
nondiscriminatory basis.  In doing so, the Administration
also seeks to protect diversity and competition in the flow
of ideas, and to ensure that similarly situated firms are
regulated similarly.


     The Administration supports the general approach of H.R.
3636 to allow LECs to provide video programming in their
telephone service areas, subject to certain conditions and
safeguards.  The Administration would propose somewhat
different conditions and safeguards, which, however, are also
designed to protect consumers and competition and prevent
undue control of information content and conduit by any one
firm.


Structural Separation:


*    The Administration supports the approach in H.R. 3636 of
     requiring LECs to provide video programming through a
     separate affiliate, in order to prevent improper cross-
     subsidization and discrimination by the LEC.


*    H.R. 3636 specifies many of the details of the
     separation requirements.  The Administration proposes
     modifying this approach to charge the FCC with
     specifying the required degree of separation, subject to
     two basic requirements from H.R. 3636:


          A LEC's video programming affiliate must have
     separate books, records, and accounts; and

          Any contract or agreement between a LEC and its
     affiliate (1) must be pursuant to regulations adopted by
     the FCC, (2) must be on a fully compensatory and
     auditable basis, (3) must be without cost to the LEC's
     telephone service ratepayers, (4) must be filed with the
     FCC, and (5) must adhere with rules that will enable the
     FCC to assess the compliance of any transaction with its
     rules.


*    The Administration supports the approach of H.R. 3636 in
     permitting the FCC to modify separation requirements for
     small and rural LECs at any time.  H.R. 3636 would allow
     the FCC to modify separation requirements for other LECs
     beginning 5 years after enactment.  The Administration
     proposes reducing that waiting period to 2 years, to
     provide greater regulatory flexibility in the face of
     changing conditions.


Nondiscriminatory Access Obligations:


*    In order to promote competition and diversity in the
     flow of ideas, H.R. 3636 would require a LEC that
     provides video programming to subscribers in its service
     area to establish a "video platform," based on the FCC's
     current "video dialtone" rules, and make it available to
     unaffiliated programmers on nondiscriminatory terms.
     The Administration supports this general approach, with
     some modifications.


*    H.R. 3636, by its terms, would require that the rates
     for the platform be nondiscriminatory.  The
     Administration proposes specifying that LEC provision of
     the video platform will be subject to all requirements
     of Title II of the Communications Act.


*    H.R. 3636 appears to require a LEC to afford
     nondiscriminatory access to its video platforms only
     when it carries "affiliated" video programming (i.e.,
     programming in which the LEC has an ownership interest).
     The Administration proposes requiring a LEC to afford
     unaffiliated programmers nondiscriminatory access to its
     video platform whenever the LEC carries video
     programming.


*    H.R. 3636 would require the FCC to limit the number of
     channels on a LEC's video platform that can be occupied
     by its video programming affiliate (that limit can be no
     lower than 25% of the platform's capacity).  The
     Administration proposes to authorize the FCC to impose
     such a limit and give the FCC discretion in selecting
     what the limit should be.


*    The Administration proposes to permit the FCC to modify
     any of the foregoing requirements for small and rural
     LECs.  H.R. 3636 contains no similar provision for
     small, non-"rural" LECs.

*    The Administration supports allowing the FCC to modify
     the definition of "video platform" beginning 1 year
     after enactment.  H.R. 3636 contains no such provision.


*    The Administration proposes to direct the FCC to adopt
     regulations, within 1 year of enactment, that would
     require cable operators to offer nondiscriminatory
     access to channel capacity on their systems for
     unaffiliated programmers, except when technology, costs,
     and market conditions would make such offering
     inappropriate.  H.R. 3636 requires that the FCC study
     whether to impose such obligations and report to
     Congress within 2 years after enactment.


Anti-Buyout Provisions:


*    To protect competition in the provision of
     communications and information services and to further
     the flow of ideas, the Administration supports limiting
     a LEC's ability to enter the video services market via
     acquisition of cable systems operating in its telephone
     service area.  The Administration proposes to limit
     cable companies' ability to acquire LECs providing local
     telephone service in the cable companies' franchise
     areas.


*    The Administration supports the provisions of H.R.3636
     permitting in-region acquisitions occurring in rural
     areas and for joint LEC/cable operator use of the cable
     "drop wire."  The Administration proposes eliminating
     the provision of H.R. 3636 that would permit a LEC/cable
     acquisition if the number of households served by the
     cable systems acquired constituted less than 10% of all
     households in the telephone service areas of the
     acquiring LEC and its affiliates.


*    H.R. 3636 would also authorize the FCC to waive the
     anti-buyout policy at any time under certain conditions.
     The Administration proposes authorizing the FCC to
     change the policy by rule, or to grant waivers on a
     case-by-case basis, beginning 5 years after enactment,
     if it determines that such action would be in the public
     interest.  Such acquisitions would, however, remain
     subject to the antitrust laws.


Franchise Obligations:


*    The Administration supports the general approach in H.R.
     3636 of removing some requirements of the Cable Act for
     the LEC's video programming affiliate and any other user
     of the LEC's video platform, while maintaining others,
     such as must carry, retransmission consent, the
     provision of public, educational, and governmental
     channels, and others designed to protect consumers.

*    To promote symmetric regulation of similarly-situated
     firms, the Administration proposes to authorize the FCC
     to remove some Cable Act requirements (most notably, the
     requirement to have a cable franchise) for cable systems
     that offer nondiscriminatory access substantially
     similar to that required of LECs by the bill, while
     maintaining the overall Cable Act regulatory structure.
     H.R. 3636 has no comparable provision.


Rural Exemption:


*    H.R. 3636 states that provisions concerning the video
     programming affiliate, the video platform, provision of
     affiliated programming, and the ban on acquisitions do
     not apply to LECs offering video programming in rural
     areas.  The Administration proposes to authorize the FCC
     to modify those provisions for such LECs.




VII. Regulation of Two-Way, Broadband Transmission Services
     (Title VII)


     The Administration proposes adding a new Title VII to
the Communications Act to apply, on an elective basis, to
providers of two-way, broadband, digital transmission
services, offered on a switched basis to end users.  The
Administration would emphasize these services because, well
into the 21st century, they will connect and empower the
American public by providing them with a variety of voice,
data, video services, and other information that will enhance
our nation's economic competitiveness and the quality of life
of our citizens.


     A new Title VII would provide a unified, symmetric
treatment of providers of two-way broadband services, in
contrast to the present disparate treatment of common
carriers and cable operators under Titles II and VI of the
Act.  It also would provide important incentives to promote
private sector development of this part of the NII and spur
availability of advanced services on a widespread basis.  The
Administration recognizes that communications services are
developing in a rapidly changing technical and marketplace
environment.  A new Title VII would create a regulatory
regime that should stand the test of time by providing the
FCC with the flexibility to adapt its regulatory approach in
light of changes in market and technological conditions.


Eligibility and Certification


*    Under the Administration's proposal, firms could elect
     Title VII regulation of the two-way broadband,
     interactive, switched, digital transmission services
     they provide to end users ("Title VII broadband
     services"), if they offer such services to at least
     twenty percent of their subscribers in a state.  The FCC
     would be authorized to define Title VII broadband
     services in greater detail and to modify the subscriber
     threshold.

*    If a firm were to certify to the FCC that it meets the
     threshold in one or more states and the FCC does not
     disallow the election, the FCC would apply streamlined
     Title VII regulation to the firm's Title VII broadband
     services and the other services that share broadband
     facilities in those states.


Regulatory Framework for Title VII


*    Title VII would impose the following broad requirements
     (to be implemented by the FCC) to apply to Title VII
     broadband services and the services that share broadband
     facilities with them:


          Open access obligations (including access for the
     disabled) to enable all persons to send information over
     the firms' broadband facilities;


          Universal service requirements consistent with
     those under other parts of the Communications Act; and


          Interconnection and interoperability requirements


*    Title VII would promote regulatory flexibility by
     providing that the FCC shall:


          Regulate rates only for Title VII services that are
     offered by firms the FCC finds have market power in the
     provision of such services; and


          Establish procedures to resolve any complaints
     expeditiously.


*    Title VII would also authorize the FCC adopt rules, as
     needed, to:


          Address public interest concerns, such as those
     currently addressed in Sections 223 through 228 of the
     Communications Act (dealing with: obscene and harassing
     communications; regulation of pole attachments; services
     for hearing and speech-impaired individuals; telephone
     operator services; use of telephone equipment; and
     carrier provision of pay-per-call services,
     respectively).


          Ensure that delivery of video programming directly
     to subscribers over broadband facilities is consistent
     with certain principles now applicable to cable services
     (e.g., Sections 325(b), 611, 614, 615, and 632 of the
     Act, dealing with: retransmission consent; public,
     educational, and governmental access; must carry; and
     protection of subscriber privacy).



*    If a Title VII firm also provides communications
     services that do not share broadband facilities with
     Title VII broadband services, those other services would
     remain subject to regulation under Title II or Title VI,
     as appropriate.


Relations with State and Local Regulators


*    Consistent with the Administration's general approach to
     relations with state and local regulatory authorities,
     federal authority over the rates, terms, and conditions
     under which communications services are provided would
     predominate only when needed to ensure that national
     goals of promoting competition and liberal
     interconnection and access require it.


*    Title VII would preempt state and local authorities from
     regulating rates of Title VII services if the FCC
     determines that the providing firm lacks market power.


*    States would continue to regulate rates for the
     intrastate components of Title VII services provided by
     firms with market power:


          for Title VII broadband services, in accordance
     with models and guidelines adopted by the FCC in
     consultation with the states;


          for other services delivered over the facilities
     used to furnish Title VII broadband services, in the
     discretion of the states, subject only to a reserved
     right of Federal preemption that could be exercised to
     the extent necessary to avoid conflicts between state
     regulatory actions and the policies of Title VII.