Media Access Project: Reply Comments -- DBS Public
Interest ObligationsMedia Access Project: Reply Comments -- DBS Public
Interest Obligations
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____________________________________________ In the Matter of Implementation of Section 25 Direct Broadcast Satellite |
) ) ) ) ) MM Docket No. 93-25 ) ) ) ) ) ) |
By Media Access Project, their attorneys the Denver Area Educational Telecommunications Consortium, Inc., A*DEC, American Psychological Association, Association of Independent Video and Filmmakers, the Benton Foundation, Center for Media Education, Peggy Charren, Community Technology Centers' Network, Consumer Federation of America, Minority Media and Telecommunications Council, National Association of Elementary School Principals, National Association of School Psychologists, National Federation of Community Broadcasters, National Writers Union, Office of Communication of the United Church of Christ, Public Access Corporation of the District of Columbia and Self Help for Hard of Hearing People (DAETC, et al.) respectfully submit these reply comments to selected comments filed in the above docket. These reply comments primarily respond to arguments made by the DBS1 and cable industries regarding the scope of DBS providers' public interest obligations under Section 25 of the 1992 Cable Act.
No commenter in this proceeding disputes that there has been a dramatic and dynamic change in the DBS industry since the time the FCC first initiated a proceeding to implement Section 25 of the 1992 Cable Act. In just four years, the number of operating DBS providers has risen from 1 to 5 and the number of subscribers from a few thousand to over 4.5 million. Analysts and the industry itself predict that the number of subscribers will, at the very least, triple by the year 2000. E.g., Sky TRENDS Annual Report at 6 (DIRECTV projects 10 million subscribers; Primestar nearly 6 million); Direct Broadcast Satellite, Probe Research, Inc., April 1997 (from Internet homepage) (DBS subscribership projected to grow to 14.26 million by the year 2000). All but one of these systems currently provide over one hundred channels each, and new compression technologies are expected to increase those numbers, at a minimum, two and three-fold. Most importantly, the DBS industry has shown that it will be able to compete in the multichannel video market.
Yet even in the face of this record, the DBS industry acts as if it were lost in a time warp. Its approach to Section 25 is, for the most part, no different than it was 4 years ago. Notwit standing DBS's proven marketability, and its increased technological capabilities, the industry's comments reflect no real change in position. As it did in 1993, the DBS industry, inter alia,
The only new thinking the industry has done is to suggest that a nonprofit "clearinghouse" be formed for the purpose of determining what programming qualifies as "educational and informational" under Section 25(b). However, the industry still insists on maintaining the power to select from among the programming screened by the clearinghouse, and also wants the option not to use a clearinghouse at all. This would fall far short of complying with the plain language prohibition on a DBS provider maintaining editorial control over 25(b) capacity.
As was the case four years ago, the industry's comments are most remarkable for their steadfast refusal to acknowledge the plain language of Section 25. DAETC, et al. discuss these dictates at pp. 5-6 of their comments. Some DBS providers, most notably the industry's trade association (SBCA) and USSB, continue to refuse to acknowledge that Section 25 has two distinct and separate requirements. Section 25(a) permits the FCC to impose, in addition to the political broadcasting requirements, public interest programming requirements over which a DBS provider has editorial control, and which may include commercial programming. Section 25(b) requires DBS programmers to reserve capacity for noncommercial educational or informational programming over which DBS provider editorial control is expressly prohibited. As hard as SBCA and USSB try, these two provisions cannot be lumped into one "public service" requirement.
Most of the industry commenters ask the Commission to grant them the same discretion that over- the-air broadcasters have over programming. But the fact is, for the political broadcasting requirements of Section 25(a) and the capacity set-aside requirements of Section 25(b), Congress has expressly declined to afford such discretion to DBS providers. No matter how inconvenient these requirements might seem to these licensees, they remain the law of the land.
The DBS Industry universally urges the Commission to impose no public interest obligations beyond those that are specifically set out in Section 25(a), i.e., reasonable access and equal opportunities requirements. E.g., Sky Broadcasting Comments at 9; USSB Comments at 3; Primestar Comments at 11-12. Their rationale for this argument is merely that the DBS industry is still "nascent." E.g., DIRECTV Comments at 19; Sky Broadcasting Comments at 9; USSB Comments at 10.
The relevant question here is not whether the industry is "nascent," but whether the industry has, or will soon have, the capability to provide a full panoply of public service. As DAETC, et al. discussed in their comments at pp. 5-6, the tremendous growth the DBS industry has experienced over the past four years has demonstrated that it will survive, and thrive, in a multichannel video environment. And new compression technologies will expand DBS capacity to such an extent that provision of extra public service programming will hardly make a dent in DBS providers' bottom line, and indeed, may increase subscribership. This growth, viability and capability should be the benchmark by which the Commission decides whether the DBS industry can provide more public service, not, as some have argued, whether DBS has achieved parity with cable. SBCA Comments at 2; DIRECTV Comments at 3.
Indeed, the industry's own words support the view that DBS's subscribership and capacity has, and will continue to grow. The industry's trade association, SBCA, proudly states that "DBS has grown rapidly since its inception in 1994 and is providing increasing competition to the cable industry." SBCA Comments at 2. DIRECTV points to "rapid development and deployment of DBS by multiple providers over the past three years," claiming that "DBS subscribership has increased substantially to the point that DBS systems have a higher combined subscribership than any other MVPD alternative to incumbent cable systems." DIRECTV Comments at 2-3. And Sky Broadcasting boasts that
[i]n the four years since Section 25 was enacted, the DBS industry has undergone dramatic and dynamic change. At the time the Commission initiated this proceeding, not a single Part 100 DBS license had commenced operations, and the lone service provider operating from a satellite licensed under Part 25...offered only eleven channels of programming. Now there are five Part 100 licensees and two operators providing DBS service from Part 25 Ku-band satellites, offering hundreds of channels of digital-quality video programming to customers nationwide. In the last year, the United States has negotiated a DBS/DTH Protocol with Mexico laying the groundrules for cross-border service and has initiated a proceeding to adopt rules for service from other foreign-licensed satellites....The Commission has also authorized U.S. licensed satellites to provide international DBS service to other countries. The continuing rapid development of DBS service will challenge the Commission in implementing the statutory mandates of Section 25 that were adopted in a different era.
Sky Comments at 3-4 [Emphasis added].
In the face of this success, and the industry's own optimism, it is impossible to maintain the claim that adding public service obligations will harm the industry's viability. Contrary to what DIRECTV claims, DAETC, et al.'s suggestions for programming are not, "excessive or unrealistic" for DBS provide to furnish. DIRECTV Comments at 2. See DAETC, et al. Comments at 7.2 Indeed, they already provide some of this programming, like CSPAN and Encore Media's WAM! See, e.g., Primestar Comments at 21-23; Encore Media Comments at 2-3.
At the same time that the DBS industry insists that the Commission should not add any new public interest obligations under Section 25(a), it also demands that the Commission diminish its minimum obligations under that same section, i.e., reasonable access for candidates under Section 312(a)(7) of the Communications Act and equal opportunities pursuant to Section 315 of the Communications Act. As discussed below, and in DAETC, et al.'s Comments at 8-10, Sections 312(a)(7) and 315 do not permit cherry-picking either eligible candidates or program channels.
The DBS industry commenters ask the Commission to interpret Section 25(a) to limit their Section 312(a)(7) obligations to access for "national" candidates. E.g., TEMPO Comments at 17; Primestar Comments at 8; Sky Comments at 6. Much like DIRECTV, they claim that permitting all federal candidates access to their capacity would "impose an unreasonable and onerous burden on DBS providers...." DIRECTV Comments at 19. See Primestar Comments at 8.
But the law does not confer discretion upon the Commission to limit DBS providers' obligations merely to national candidates. The plain language of Section 25(a) requires the Commission to apply the access requirements of Section 312(a)(7), not just a small portion of those requirements, to DBS providers. Section 312(a)(7) requires broadcasters
to allow reasonable access to or to permit purchase of reasonable amounts of time for the use of a broadcasting stations by a legally qualified candidate for Federal elective office on behalf of his candidacy.
47 USC §312(a)(7) [Emphasis added].
Thus, under the plain language of Section 25(a), the Commission must require DBS providers to allow for reasonable access by any legally qualified candidate for federal office. Barring all but national candidates from gaining access certainly would not stand the "test of reasonableness" required under the statute. See Licensee Responsibility Under Amendments to the Communications Act Made By the Federal Election Campaign Act of 1971, 47 FCC 2d 516 (1974) (1974 Public Notice).
Nor does the existence of any alleged burden absolve DBS providers of their duties under Sections 312(a)(7). As discussed at pp. 8-10, infra, Section 312(a)(7) requests must be considered on a case-by-case basis, placing the candidate's needs first. While broadcasters may take into account whether there is a "multiplicity of candidates" which precludes granting all requests for time, Carter-Mondale Presidential Committee, 74 FCC 2d 631 recon denied, 74 FCC2d 657 (1979) aff'd sub nom., CBS, Inc. v FCC, 453 U.S. 367 (1981) and "the disruptive impact on regular programming," a specific request for access may cause, CBS v. FCC, 453 U.S. at 387, it may not "adopt uniform policies regarding requests for access" in making the determination whether access is reasonable. Id.
In Carter-Mondale, NBC argued that it should be able to impose a blanket policy of refusing all requests for one-half hour blocks of time because there were a total of 122 candidates seeking the presidential nomination, and they each might desire access. The Commission found that NBC's refusal to sell the requested time was unreasonable because "it is highly improbable that all of the 122 candidates who have filed with the Federal Election Commission will have the financial resources necessary to purchase a half hour of network prime time." Carter- Mondale, 74 FCC2d at 647.
The same logic applies here. Primestar aptly points out that "it is highly unlikely that federal candidates other than Presidential and Vice Presidential would have a serious interest in obtaining nationwide access to voters on such a dispersed basis." Primestar Comments at 8. Sky Broadcasting shares this view. Sky Comments at 6. Because DBS systems are national, federal candidates seeking the support of their districts or states would have relatively little use for such access. Primestar Comments at 8 n.5. The fact that DBS penetration is likely always to be low relative to over-the-air TV and local cable will also limit these candidates' desire to use the DBS medium to speak to voters. If federal candidates other than Presidential candidates sought access, they would most likely be limited to Senatorial candidates in extremely large states such as California or Texas. In those cases, it might be unreasonable to deny access, especially if a DBS provider is supplying regional spot beams. But any fear that hundreds of federal candidates will be seeking access is wholly illusory.
The DBS providers seek a Commission ruling that would permit them to place political advertisements on segregated channels. They also ask the Commission to hold that they may deny candidates access under Section 315 to the same channel (or one with similar audience demographics) they have provided to opposing candidates. E.g., TEMPO Comments at 18-19; Sky Comments at 6-7; Primestar Comments at 9-10. Such discretion, USSB claims, would give DBS operators "the same latitude to exercise good faith judgment in political programming as is afforded broadcasters." USSB Comments at 9. See SBCA Comments at 17.
But discretion accorded broadcasters under Sections 312(a)(7) and 315 is not so broad as to permit the result the DBS providers seek. As discussed below, Section 312(a)(7) prohibits broadcasters from adopting rigid access policies - including limiting candidates to discrete channels. And denying a candidate access to the same audience demographics as their opponents would also violate the plain language requirement of Section 315 that candidates receive equal opportunities to present their viewpoints.
Contrary to the DBS providers' suggestion that broadcasters are permitted broad discretion with respect to the sale of political advertisements, the primary consideration under Section 312(a)(7) is a candidate's perception of her needs. CBS, Inc. v. FCC, 453 U.S. at 389. While a broadcaster may consider certain other factors in giving access under Section 312(a)(7), such as availability of certain classes of time and the number of candidates, the law is clear that it may not adopt a rigid policy restricting access. Commission Policies in Enforcing Section 312(a)(7) of the Communications Act, 68 FCC2d 1079, 1090 (1978). Instead, broadcasters are required to examine each request for access on an individualized basis, starting from a candidate's specific needs, and considering "Congress' intent to ensure candidates for Federal office adequate opportunity to fully present and discuss their candidacies and hence provide the voters with information necessary for the responsible exercise of their franchise." Summa Corporation, 43 FCC2d 602, 604 (1973); 1974 Policy Statement at 517 ("In applying this test of reasonableness in particular cases, the Commission looks to the underlying policy of the legislation, as revealed by its legislative history."). The Supreme Court emphasized this case-by-case approach in CBS Inc, v. FCC:
[E]ach request must be examined on its own merits. While the adoption of uniform policies might well prove more convenient for broadcasters, such an approach would allow personal campaign strategies and the exigencies of the political process to be ignored****§312 assures a right of reasonable access to individual candidates for federal elective office, and the Commission's requirement that their requests be considered on an individualized basis is consistent with that guarantee.
Id. at 389 (1981) [Emphasis added].
A blanket policy that relegates candidates to a separate channel or channels undoubtedly runs afoul of Section 312(a)(7)'s candidate-centered view and its prohibition on rigid access policies.
The DBS providers' proposal to refuse candidate access to the same or similar (i.e., comparable audience size and demographics) channel on which his opponent appeared would be a denial of equal opportunities under Section 315. The operative principle of equal opportunities is non-discrimination. Thus, in adopting rules to implement Section 315(a), the Commission has provided:
Discrimination between candidates. In making time available to candidates for public office, no licensee shall make any discrimination between candidates in practices, regulations, facilities, or services for or in connection with the service rendered pursuant to this part, or make or give any preference to any candidate for public office, or subject any such candidate to any prejudice or disadvantage.
47 CFR §73.1941(e).
The importance of this directive was recently underscored in Becker v. FCC, 95 F.3d 75 (D.C. Cir. 1996). In that case, the Court rejected an FCC ruling that would have permitted a broadcaster to channel certain political advertisements to later hours if those advertisements contained material the broadcaster deemed "harmful to children." The Court held that Section 315 was violated because channeling an advertisement to a time period that was different from that used by the opposing candidate would be discriminatory:
Finally, section 315(a)...requires that candidates be given "equal opportunities" to use a broadcaster's facilities. To satisfy this requirement, a broadcaster must "make available periods of approximately equal audience potential to competing candidates to the extent that this is possible." Political Primer 1984, 100 FCC2d at 1505. Because the equal opportunity requirements "forbid any kind of discrimination between competing candidates,"...channeling clearly implicates the equal opportunity provision of Section 315(a). This is so because if a station channels one candidate's message but allows his opponent to broadcast his messages in prime time, the first candidate will have been denied the equal opportunity guaranteed by this section.
Becker v. FCC, 95 F.3d at 84.
The situation the DBS providers propose is no different - it could choose to favor one candidate with prime time access on CNN or ESPN, and "channel" the opponent to a lightly viewed "candidate channel," or a channel with few voting-age viewers, like the Disney Channel. Even if each channel had an equal audience size, the demographics certainly would not be the same - resulting in the kind of discrimination prohibited by Section 315.
The only excuse DBS operators offer to justify their proposal to place political advertisements on separate channels and to deny candidates the audience of their choosing, is their assertion that program carriage contracts prohibit them from controlling sales of advertising time. E.g., Sky Broadcasting Comments at 5; DIRECTV Comments at 20; Primestar Comments at 10. No one forced DBS providers to enter into these contracts. The fact is that they have chosen to accept these contractual limitations with the full knowledge that countervailing legal obligations might arise. The solution for this "problem" is simple. Where current contractual agreements prevent a DBS provider from giving a candidate reasonable access or equal opportunities, the Commission should preempt the contract to permit access. DAETC, et al. Comments at 9-10.3
Moreover, the "problem" is of limited scope. Even if DBS providers have entered into these contracts in the past, there is certainly no reason for the Commission to ratify these practices by allowing new contract inconsistent with the overriding obligations of Sections 312(a)(7) and 315. The Commission should also forbid future contracts between programmers and DBS providers that prohibit the latter from inserting advertisements in time slots normally reserved for cable operators to insert local advertising. Id.; See James H. Doyle, 38 RR2d 330, 331 (BB 1976) ("[W]here a licensee is mandated by statute or Commission regulation to offer a candidate an opportunity to purchase a specific period of time, a licensee may not avoid this obligation by alleging that this period is not available to the candidate because it has been `sold out' to commercial advertisers.")
The DBS providers' response to Section 25(b)'s prohibition on exercise of editorial control is to suggest the creation of a nonprofit "clearinghouse" that would determine whether certain programs would qualify for carriage under Section 25(b) as "noncommercial educational or informational." E.g., SBCA Comments at 5-6; USSB Comments at 6; DIRECT TV Comments at 13-16. While formation of this clearinghouse is a step in the right direction, the DBS providers continue to insist on maintaining the ability to select, reject and even produce Section 25(b) programming. As discussed below, a DBS provider may have no control over the selection of programming under 25(b), nor may it have control over the operations of the clearinghouse.
In an effort to get around the plain meaning of Section 25(b), the DBS providers follow USSB's lead in asserting that the prohibition against a DBS provider exercising editorial control "does not prevent DBS providers from selecting programmers or the timing or placement of progra ming." USSB Comments at 5. Accord SBCA Comments at 7 ("each provider should make its own judgment on the programming mix which will best serve its subscriber base"); Sky Broadcasting Comments at 19 ("DBS providers should be entrusted with the discretion to determine the appropriate mix of programming that will enable them to present an integrated one- up that maximizes program quality and diversity...."); DIRECTTV Comments at 9 (choosing programs "generally does not rise to the level of editorial control"). Their interpretation would prohibit DBS providers only from editing the content of the programming itself.
But this crimped definition of editorial control flatly contravenes the plain meaning of the term. The essence of an editor's function is to select the material to be published or broadcast. Oxford English Dictionary (1969) ("One who prepares the literary work of another person, or number of persons for publication, by selecting, revising and arranging the material.") [Emphasis added.] See Pennoyer v. Neff, 95 US 714, 721 (1877) ("[t]he term `editor'...usually included not only the person who wrote or selected the articles for publication, but the person who published the paper and put it into circulation") [Emphasis added]. An argument that a newspaper publisher does not engage in "editing" when it declines to print an opinion piece or news story, or chooses to include the same cannot pass the "red face" test.4 The case is no different here; a DBS provider with any power over whether a particular program or programmer gains access to 25(b) capacity is inevitably exercising editorial control.5
Nor can it be argued that Congress intended DBS providers to have any say whatsoever in selecting programming. Section 25(b) is modeled after, and employs the same words as, Section 612 of the Communications Act, which governs commercial leased access channels of cable systems. The phrase "shall not exercise any editorial control" was adopted as part of the 1984 Cable Act. See 47 USC §532(c)(2). In so doing, the House Commerce Committee made clear that "editorial control" included selection of programming:
A critical concern of the Committee's must be stressed at this juncture. The overall purpose of this section is to prohibit any editorial control by the cable operator over the selection of programming provided over channels designated for commercial leased access. This prohibition...restricts the cable operator from considering the content of a proposed service, thus assuring that even indirect editorial influences do not permeate what the Committee intends to be content- blind, arm's length negotiations over access to the set aside channels.
H. Rep. 98-934, 98th Cong., 1st Sess. at 51-52 (1984) [Emphases added].
The House Report language is the relevant legislative history for the meaning of the term "editorial control" because the Senate Bill did not contain a leased access provision. The final bill contained the House language virtually unchanged, including the exact prohibition on editorial control.6
Thus, the Commission must reject any notion that DBS providers can select or package program- ming either before, or after, it has been considered by the clearinghouse. As discussed below, those functions must be carried out by an entity outside of the DBS providers' control.
The DBS providers unanimously endorse the concept of funding a non-profit "501(c)(3)" organization intended to screen eligible programming for the Section 25(b) capacity. E.g., SBCA Comments at 5-6; USSB Comments at 6; DIRECT TV Comments at 13-16; Sky Broadcasting Comments at 20. DAETC, et al. recommended the creation of a similar nonprofit "Programming Consortium" that would screen, select, package and fund eligible programming. DAETC, et al. Comments at 18-20.
Unfortunately, the clearinghouse concept as conceived by the DBS industry has several critical legal flaws, and each would enable a DBS provider to evade the prohibition on editorial control contained in Section 25(b). First, the DBS provider is not required to use a clearinghouse, and could choose to make editorial decisions itself in violation of Section 25(b). E.g., Sky Broadcasting Comments at 20; SBCA Comments at 5; USSB Comments at 6-7. Second, the DBS providers' clearinghouse would function only as a screening mechanism for choosing what programming is noncommercial educational or informational programming, leaving to the DBS provider the ultimate discretion as to what programming would receive access. E.g. DIRECTV Comments at 14; SBCA Comments at 5; Primestar Comments at 19. As discussed above, this too, would violate Section 25(b). Finally, to the extent that some in the industry have suggested that 50% of the Board of Directors of the clearinghouse should consist of representatives of the DBS providers, DIRECT TV at 13, it again runs afoul of the express prohibition against DBS providers making content decisions about Section 25(b) programming.
As DAETC, et al. have suggested, any "clearinghouse" or "Programming Consortium" must not only be funded by the DBS industry, but its use must also be mandatory, and not voluntary.7 To prevent DBS provider editorial control, the nonprofit organization would screen, select and package eligible programming based on the needs of each DBS provider. Importantly, the organization must be structured so that no more than 10% of its Board Members consist of representatives of DBS providers. Otherwise, the mandate against exercise of editorial control would be rendered a nullity.
Section 25(b)(4) of the Act requires DBS providers to make the noncommercial capacity available at no more than 50% of "direct costs." The DBS providers urge the Commission to include in that calculation, inter alia, research and development costs, SBCA Comments at 15, proportionate costs of construction, launch and operation of the satellite, insurance, e.g., DIRECTV Comments at 17; Sky Broadcasting Comments at 22; Primestar Comments at 25, and the proportionate share of any auction payment, Sky Broadcasting Comments at 22.8
As discussed in DAETC, et al.'s Comments at 23, including these joint and common costs is contrary to the express Congressional directive that "direct costs" be limited to only the costs of transmitting the signal to the uplink facility and the direct costs of uplinking the signal to the satellite, " H.R.Rep. 102-628, 102nd Cong., 2nd Sess. at 125 [Emphasis added]. Including these costs is also contrary to the plain meaning of term. Direct costs are commonly defined to include those where "the cost element can be specifically traced to the finished product." Michael Schiff and Lawrence J. Beninger "Cost Accounting," (2d Ed. 1963) at 6-7. In other words, any costs that would have been incurred whether or not the DBS provider was required to set aside noncommercial capacity are not direct costs. Costs for research and development, construction, launch and operation of the satellite, insurance and the auction payment would be incurred with or without the requirements of Section 25(b). Thus, they are not "direct costs."9 DAETC, et al. believe that, at most, the direct costs of delivering noncommercial programming over Section 25(b) capacity will consist of
These costs will likely be de minimis, and, as a result, will be consistent with Congress' intent to make this capacity affordable and widely available. See 47 USC §§335(b)(3) & (b)(4) (DBS providers must make capacity available "upon reasonable prices, terms and conditions"; prices cannot exceed "50 percent of total direct costs of making channel available"; Commission must "take into account the nonprofit character of the programming provider.")10
The DBS providers ask the Commission to decide that all DBS systems be required to set aside only 4% of their channel capacity for use under Section 25(b). E.g., Primestar Comments at 13;11 SBCA Comments at 4; TEMPO Comments at 5. Moreover, they ask that the only capacity that should be subject to this 4% rule is that used to provide video. E.g., SBCA Comments at 11; DIRECTV Comments at 5-6, Sky Broadcasting Comments at 11; USSB Comments at 8. Their reason for seeking the minimum requirement under Section 25(b) mirrors its argument for keeping the industry's Section 25(a) obligations to a minimum - the DBS industry is still "nascent," and should not be burdened with anything above the bare minimum public service requirements. E.g., Sky Broadcasting Comments at 13, DIRECTV Comments at 5; Primestar Comments at 13.
Actually, in most instances, SBCA, DIRECTV and Primestar propose to provide less than the minimum 4% required by the statute. SBCA Comments at 11; DIRECTV Comments at 6; Primestar Comments at 16. According to the scale contained in their comments, for example, a DBS system with 150-174 channels would be required to reserve just 6 channels. But for systems with 151 - 174 channels, 6 channels is less than 4% of the capacity. The same flaw appears in the proposed set aside for 100-124 channels (4 channels<4% on systems with 101-124 channels), 125-149 channels (5 channels<4% on systems with 126-149 channels) and 175+ channels (7 channels<4% on systems with 176+ channels). Id. If the Commission does choose to limit the capacity set-aside, it must, at the very least, ensure that no less than 4% of capacity is reserved.12
As discussed at pp. 4-5, supra, DBS' relative youth is not relevant for determining the amount of capacity providers should set aside. What is relevant is the fact that DBS is viable and will continue to grow tremendously with the advent of new compression technologies. Thus, there is no good policy reason why the largest and most powerful DBS systems, including some with more than 150 channels, cannot reserve a mere 7% of their capacity to meet their statutory obligations under Section 25(b). Smaller DBS systems, under DAETC, et al.'s scale, would have less of an obligation. DAETC, et al. Comments at 13-14. The incremental cost of reserving 7 channels, as opposed to 4, for a 100 channel system is virtually zero, but the benefit to the public is tremendous.
Nor has the industry provided a good policy or legal reason why the set-aside should be limited to video channels. Nothing in the plain language of Section 25(b) so limits the set-aside.13 And the technology is no different - audio and data bits are the same as video bits in a digital world - the only difference is bandwidth. The 25(b) set aside requirement should apply separately to audio and data channels, which could be utilized by national educational programmers to provide noncommercial audio, data and internet services.14 Barker channels, channels containing static video and channel guides need not be included in the set aside. See, e.g., USSB Comments at 8; DIRECTV Comments at 6 n.11.15
The industry asks the Commission to permit DBS providers to fulfill their Section 25(b) obligations in one of two ways: 1) by allocating discrete channels or 2) by using a "time/hour equivalency basis" that would permit spreading the programming over a number of channels and time slots. SBCA Comments at 12; DIRECTV Comments at 7; Primestar Comments at 16.
DAETC, et al. strongly oppose the "time/hour equivalency" method of allocating Section 25(b) capacity, because it is simply another way for DBS providers to minimize their Section 25(b) obligations. In essence, this method would permit DBS providers to count an hour here and there of noncommercial educational and informational programming they may already offer on their systems, even if that channel also carries non-qualifying programming. E.g., TEMPO Comments at 9; Primestar Comments at 16-17; DIRECTV Comments at 7. This cannot be reconciled with the plain language of Section 25(b). Congress expressly required each DBS provider to reserve "a portion of its channel capacity," not program time, for noncommercial educational and informational programming. 47 USC §335(b)(1). Accord, Encore Media Comments at 16. Moreover, permitting DBS providers to count programming on channels over which they have editorial control would contravene Section 25(b)'s express prohibition over exercising such control.16
Permitting DBS providers to spread programming over a number of channels and time slots would also be bad policy. As Encore Media points out, discrete channels dedicated to Section 25(b) programming would make this programming easy and dependable to locate, while permitting a patchwork of programming that could change from month to month would frustrate any effort to make this programming accessible. Encore Media Comments at 16. As the debate over TV ratings has borne out, parents especially want to be made aware of the availability of "kid friendly" programming. Jane Hall, "TV Ratings Don't Play Here, Peoria Says," Los Angeles Times, May 20, 1997. Moreover, as Encore asserts, such scattershot programming would make impossible any public or FCC oversight over DBS providers' Section 25(b) obligations. Encore Media Comments at 17.
To the extent that some programmers, like those that provide distance learning, have a need to access certain dayparts, DAETC, et al. have suggested the creation of one or two discrete channels for those programmers that cannot fill a full-time channel. DAETC, et al. Comments at 17. These programmers would have access to no more than 5% of the total program time on the Section 25(b) capacity, and would permit programming to be grouped by content or purpose. Id.
The Industry Commenters and Encore Media assert that Section 25(b) creates two classes of programmers that are eligible to use Section 25(b) capacity - "National Educational Programming Suppliers," which are entitled to access at special rates determined under Section 25(b)(4), and other programming suppliers, which are not entitled to such rates. E.g., Sky Broadcasting Comments at 22; DIRECTV Comments at 16-17; Encore Media at 12. They contend that this "other" category may include for-profit and commercial programmers. E.g., USSB Comments at 9; Encore Media at 12; Primestar Comments at 23. This is an untenable reading of Section 25(b). Section 25(b)(3) plainly requires a DBS provider to make this capacity available to national educational programming suppliers, and, contrary to what TEMPO asserts, Section 25(b)(5) specifically defines what is included in that term. See TEMPO Comments at 11. If Congress had intended to broaden the eligible class of users, it would have use words like "including," or "not limited to." Accord, America's Public Television Stations Comments at 14. Nor is there any reference elsewhere in the statute or the legislative history to other programmers that would be permitted to use this capacity.
The theory that there are two classes of programmers entitled to different rate scales also fails under the plain language of Section 25(b)(4). That section states that "the Commission shall not permit such prices to exceed, for any channel made available under [subsection b], 50 percent of the total direct cots of making such channel available." 47 USC §335(b)(4)(B) [Emphasis added]. Thus, it is clear that there is no provision under Section 25(b) for "other" programmers to pay more than 50 percent of direct costs.
That Congress also chose to use the language "noncommercial programming of an educational or informational nature" in Section 25(b)(1) rather than the term "national educational progra ming supplier" does not demonstrate that it intended to broaden the field of eligible entities, as DIRECTV argues. DIRECTV Comments at 12. That language merely demonstrates Congress' intent that the programming provided by national educational programming suppliers be noncommercial educational or informational programming.17
As discussed in DAETC, et al.'s Comments at 12-13, the term "national educational programming supplier" does include a broad segment of programming entities, each sharing one common denominator - they must be nonprofit and/or public.18 Thus, SBCA, Sky Broadcasting and Primestar's assertion that these entities should include PBS, CSPAN and CSPAN2 is correct - they are all not-for-profit entities. SBCA Comments at 8, Sky Broadcasting Comments at 12; Primestar Comments at 24. On the other hand, the suggestion that for-profit programmers should be allowed to use Section 25(b) capacity is incompatible with the plain language of the statute.19 Moreover, Primestar's request that DBS providers be permitted to place at least 50% of this programming on other than the basic tier, Primestar Comments at 17, runs contrary to Congress' intent that this capacity be broadly available to the public, not just those who can afford to pay extra.
A number of DBS providers ask the Commission for a two year phase-in of their Section 25(b) obligations. E.g., USSB Comments at 8, SBCA Comments at 13, DIRECTV Comments at 8. They claim to need this long period of time, inter alia, for negotiating or renegotiating programming contracts, notifying subscribers, and setting up the clearinghouse. Id.
In light of the four year delay in this proceeding and the industry's last minute attempt to have Section 25 declared unconstitutional, a request for an added two year delay is particularly unconscionable. As Sky Broadcasting so aptly notes in rejecting a long phase-in, "the American public has already had to wait several years for the public service programming mandated by Section 25," and "DBS providers have been on notice of the set-aside requirement since adoption of the 1992 Cable Act..." Sky at Broadcasting Comments 23.
It is for these very same reasons that DAETC, et al. urged that DBS providers make their capacity available under Section 25(b) within 45 days after the Commission releases its rules implementing this provision. DAETC, et al. Comments at 25-26. A DBS provider's need to negotiate and renegotiate programming contracts are irrelevant to the capacity reservation because they cannot have any editorial control over the Section 25(b) capacity. In any event, such contract negotiations can be accomplished in a matter of weeks, and FCC regulations require that a cable operator provide a subscriber with only 30 days notice of changes. 47 CFR §76.309. (c)(3)(i)(B). Moreover, to the extent that it will take some time (although nothing nearly approaching two years) for a nonprofit "clearinghouse" to be formed and other changes made, nothing should stop the DBS industry from starting that process today.20
The cable industry commenters argue that there should be "regulatory parity" between DBS providers and cable operators. See generally, Time Warner Comments, NCTA Comments, US West Comments. This argument has two parts. The first is that any DBS provider that carries local broadcast signals should be subject to the same obligations as cable attendant to such carriage, including must carry, syndicated exclusivity, and the network non- duplication rules. E.g., Time Warner Comments at 23-38; NCTA Comments at 9-13; US West Comments at 9-11. The second is that all DBS providers should be subject various other structural regulations imposed on cable operators, including the program access requirements of 47 USC §548, the channel occupancy limits of 47 USC §533(f)(1)(B), the leased access provisions of 47 USC §532, the prohibitions against requiring a financial interest as a condition of carriage, 47 CFR §76.1300(c), and, if a DBS system provides regional programming, the requirement to carry channels and facilities for public, educational and governmental access. E.g., Time Warner Comments at 38-48; NCTA Comments at 13-14; 16-22.
DAETC, et al. agree with the cable industry commenters that, to the extent DBS providers carry local over-the-air broadcast signals, they can and should be subject to the same carriage requirements that attend to cable operators' carriage of such stations. These requirements include must carry, syndicated exclusivity, network non-duplication and the sports blackout rules.
The reason for requiring these obligations of DBS providers are no different than for cable operators. Permitting DBS providers to carry only the largest and most profitable stations would be to the detriment of smaller stations, which are more likely to be minority owned or to provide programming that serves underserved communities. See, e.g., H.R. Rep. 102-628, 102d Cong., 2d Sess. 52-53 (1992) (1992 House Report). To the extent that the syndicated exclusivity, network non-duplication and sports blackout rules also protect local stations from audience and advertiser erosion, they should also apply to DBS. See U.S. v. Southwestern Cable, 392 US 157, 177 (1968) (finding that Commission can regulate cable so that it may discharge its "broad responsibilities for the orderly development of an appropriate system of local television broadcasting").
However, DAETC, et al. do not agree with the cable industry commenters to the extent that they ask the Commission to prohibit common ownership of a DBS system and a local broadcast station. E.g., Time Warner Comments at 29-32; NCTA Comments at 14- 16. Cable operators are prohibited under FCC regulations from owning a local broadcast station. 47 CFR §76.501 (a). That ban is justified because local cable systems provide local programming and compete with local broadcast stations for local advertising. Thus, a local cable system could compete unfairly by combining local advertising rates. No such concern is raised by common ownership of a DBS system and a local broadcast station -local advertisers would have little or no interest in obtaining time on a national multichannel technology such as DBS.
The cable industry commenters also ask the Commission to subject DBS providers to all other regulations applicable to cable regardless of whether they carry local broadcast signals. These include, but are not limited to, program access, PEG and leased access channels, channel occupancy limits, carriage regulations, taxes and franchise fees. Time Warner Comments at 38- 48; NCTA Comments at 13-14; 16-22.
Characteristically, the cable industry goes too far, asking for rules which would hinder DBS. The Commission should not allow the cable industry to browbeat a potential competitor by applying regulations that were intended to curb cable's own monopolistic abuses. The majority of the regulations to which the cable industry refers were part of the 1992 Cable Act, and were direct responses to the vast record of specific anticompetitive abuses by the cable industry. See, e.g., 1992 House Report at 41 (program access), 51-53 ("must carry"); S. Rep. 102-92, 102d Cong., 1st Sess. 24-26 (1991) (program access), 30, 33 (leased access), 42-45 ("must carry") (1991 Senate Report). They were also designed to ensure the existence and growth of competitors like DBS. See, e.g. 1992 House Report at 44, 46; 1991 Senate Report at 17, 26-28. Most importantly, Congress chose, in the 1992 Act, to regulate DBS through Section 25, and not through the other provisions the cable industry now wishes to apply to DBS. Indeed, as discussed at pp. 14-15, supra, Section 25(b) is modeled on cable regulation, specifically the PEG/leased access scheme.
Although the DBS industry has grown rapidly and proven itself to be a viable multichannel video service, it has nowhere near the subscribership or the power that goes with level of vertical integration possessed by the cable industry. "Regulatory parity" would only serve to constrain DBS as a potential competitor to cable, while providing little or no public benefits.21
The cable regulation that the Commission should apply to DBS providers is the program access requirement of 47 USC §548, which prohibits discriminatory and unfair practices by vertically integrated cable operators in distributing programming. The program access law was intended to "promote the public interest, convenience and necessity by increasing competition and diversity in the multichannel video programming market" by diminishing the ability of cable operators to refuse to provide popular programming to other multichannel video providers such as DBS. 47 USC §548(a). To the extent that certain DBS system providers also own programming on their systems, they have the same incentives to keep programming from their competitors, including other DBS systems. Thus, they should be similarly prohibited from engaging in discriminatory practices in the distribution of programming in which they have a financial interest.
It is 1997, and not 1993, and the DBS industry is now capable of providing a full panoply of public interest benefits. But while the industry has certainly changed, the plain language of Section 25 has not. Regardless of whether the industry finds Section 25 outdated or burdensome is immaterial - it remains Congress' payment to the American people for the industry's use of the public airwaves. The Commission should delay no longer in making the disbursement.
| May 28, 1997 |
Respectfully submitted, Gigi B. Sohn Andrew Jay Schwartzman Joseph S. Paykel MEDIA ACCESS PROJECT Counsel for DAETC, et al. |
Back to new media main page2. DAETC, et al. also asked the Commission to apply the EEO obligations of 47 USC §554 to DBS. DAETC, et al. Comments at 7. It appears, however, that the Commission already did so when it extended its EEO rules to other MVPD's, including DBS, in 1993. 47 CFR §76.71(a). See Time Warner Comments at 48. The Commission should take the opportunity in this docket to ratify that decision.
3. There is no logical reason why a DBS provider, which has the capacity to provide 312(a)(7) access to a candidate on a particular channel, would not have the capacity to provide equal opportunities to opposing candidates on that same channel.
4. The portion of the U.S. District Court opinion which DIRECTV cites in support of its argument that "choosing which programs to carry, generally does not rise to the level of editorial control," DIRECTV at 9, actually supports DAETC, et al.'s position. In holding that CompuServe was not liable for a defamatory statement made in one of the news publications contained in CompuServe's "Journalism Forum," the court stated that, as a general matter, "[w]hile CompuServe may decline to carry a given publication altogether, in reality, once it does decide to carry a publication, it will have little or no editorial control over that publication's contents." Cubby, Inc. v. CompuServe Inc., 776 F. Supp. 135, 140 (S.D.N.Y.1991) [Emphasis added.] Thus, the court found that the only editorial control CompuServe did exercise over its electronic libraries was in choosing whether or not to carry a publication in the first instance.
5. Obviously, this prohibition would also extend to DBS providers producing programming for use on Section 25(b) capacity. See, e.g., Primestar Comments at 20 ("DBS providers should be afforded the flexibility to create and/or solicit on their own volition quality programming designed to satisfy [Section 25(b)]....").
6. TEMPO's comparison of Section 25(b) to the "must carry" scheme of 47 USC §534 is flawed. See TEMPO Comments at 13 n. 23. Whether or not the Supreme Court declared the "must carry" scheme to be content neutral is completely irrelevant. Unlike Section 25(b), the must carry law does not contain an express ban on editorial control over local broadcast stations. Instead, where the number of local stations exceeds the required capacity, it permits a cable operator "discretion in selecting which such stations shall be carried on its cable system." 47 USC §534 (b)(2).
7. DAETC, et al. do not ask the FCC to mandate that the industry use one clearinghouse or programming consortium. DBS providers could choose to each have their own clearinghouses, or could combine their efforts. But what is essential to any scheme is that they must effectively insulate themselves from exercising editorial control over Section 25(b) programming.
8. Echostar urges that the "reasonableness inquiry" for determining prices, required under Sections 25(b)(3) and (4), should be used only "as a last resort" Echostar Comments at 7. Suffice it to say that this novel argument turns every law of statutory construction on its head.
9. A second provision in the 1992 Cable Act provides additional support for this interpretation of direct costs as excluding joint and common costs. Section 623 of the 1992 Cable Act uses identical terminology in setting out guidelines for the Commission to ensure that rates for basic tier cable service are reasonable. In calculating reasonable rates, the Commission was required to take into account (ii) the direct costs (if any) of obtaining, transmitting, and otherwise providing signals carried on the basic service tier,.... (iii) only such portion of the joint and common costs (if any) of obtaining, transmitting, and otherwise providing such signals as is determined,...to be reasonably and properly allocable to the basic service tier. 47 USC §543(b)(2)(C)(ii-iii). The Conference Report stated that this language was intended "to ensure that the direct costs of providing non-basic cable services are not considered joint and common costs and are not recovered in the rates charged for basic cable service." H. Conf. Rep. No. 102-862, 102nd Cong., 2nd Sess. at 63 (1992).
10. Some DBS providers ask the Commission to set rates at the maximum 50% of direct costs because to do otherwise would "jeopardize the continued growth and development of DBS." TEMPO Comments at 14; Sky Comments at 22 (50% maximum is needed because "DBS providers are struggling to pay off the costs of satellite construction, launch, insurance and operation." ). But this assumes that DBS providers receive payment from programmers that use their channel capacity, and are therefore losing income by making these channels available at a discount rate. In fact, however, DBS providers pay for virtually all of the programming they offer. Thus, Section 25(b), rather than being a drain on DBS providers' bottom line, is an opportunity to get quality noncommercial educational and informational programming for free, or for a small fee paid by the programmer.
11. Primestar boasts that "[a]s further justification for the 4% maximum,...as detailed in the Further Comments of SBCA, industry members are willing to commit to dedicate the full 4% of the reserved capacity from the onset of their obligations." Primestar Comments at 13. This would be no great gift from the DBS industry deserving of special dispensation. They are mandated, under Section 25(a), to reserve at least that much. Moreover, to the extent that SBCA asks the Commission for a two year phase-in before the "onset of [DBS providers'] obligations" the public is being done even less of a favor. See SBCA Comments at 13.
12. Sky Broadcasting asserts that it would be "unfair" for the Commission to rule that DBS providers offering duplicative programming to the eastern and western parts of the country through Half-CONUS service should be required to reserve 4-7% of the capacity of each Half-CONUS service. Sky Broadcasting Comments at 11. But it would be "unfair" to a DBS viewer on either coast if his system's Section 25(b) programming were to be cut in half simply because the other half of the country is receiving the same programming.
13. TEMPO claims that because Section 25 (b)(1) applies the channel capacity requirement to a "direct broadcast satellite service providing video programming," the set-aside applies only to video channels. TEMPO Comments at 8. That language, however, merely describes the type of DBS provider that is subject to the set aside. The statutory language immediately following that phrase states "that the provider of such service reserve a portion of its channel capacity, equal to not less than 4 percent nor more than 7 percent, exclusively for noncommercial programming of an educational or informational nature." This language does not include any mandate that the set-aside be applied only to video channel capacity.
14. Sky Broadcasting argues that because the Commission has chosen not to apply public interest obligations to Digital Audio Radio Satellite systems, which provide digital audio programming, it should not apply the set aside to audio channels on DBS. Sky Comments at 12. This argument is flawed as a matter of law, and of policy. First, the Commission did apply public interest obligations to DARS, including requiring them to comply with Sections 312(a)(7) and 315, as well as the Commission's EEO rules. Establishment of Rules and Policies for the Digital Audio Radio Satellite Service, FCC 97-70 (released March 3, 1997) at ¶¶91-92. Second, comparing DARS to DBS is like comparing apples and oranges: not one DARS system is now operative, nor is one expected to be operative before late 1999, at the earliest. Paul Farhi, "Music From the Spheres," Washington Post, May 19, 1997 at 5. DBS, on the other hand, is a proven technology with a substantial subscriber base and changes in technology that will permit it to expand its capacity dramatically. See discussion at pp. 2, 4-5, supra.
15. Children's Television Workshop (CTW) proposes that the Commission permit a DBS provider to reduce its Section 25(b) obligations by providing increased children's educational programming under Section 25(a). CTW Comments at 6-7. But as DAETC, et al. discussed at length in their comments at p. 6, Sections 25(a) and 25(b) are distinct provisions that serve different purposes, and are therefore not interchangeable. While under Section 25(a), a DBS provider can offer high quality children's educational and civic programming, Section 25(b) is specifically intended to be a forum for programmers that are neither affiliated with, nor selected by the DBS provider. To the extent that a DBS provider wishes to reduce its capacity to the 4% minimum, DAETC, et al. have provided a mechanism by which it could do so by providing extra funding for 25(b) programming. DAETC, et al. Comments at 24-25.
16. This prohibition over editorial control would also prohibit DBS providers from counting full channels of programming that they already carry on their systems toward their Section 25(b) obligations. See Encore Media Comments at 17 (If DBS provider already carries noncommercial educational channel, it should count toward 4-7% obligation). However, channels such as CSPAN, PBS or WAM! if they are already carried, could go towards satisfying a DBS provider's obligations under Section 25(a). See discussion at pp. 5, supra.
17. As a general rule, not all "national educational programming suppliers" are prohibited from providing commercial programming. Indeed, CTW, which indisputably falls within the definition of national educational programming supplier, proposes doing just that. CTW Comments at 5.
18. DAETC, et al. agree with CTW that non-profit organizations should be permitted to undertake partnerships with commercial entities for the purpose of producing Section 25(b) programming, but only to the extent that it has editorial control and greater than 60% ownership interest in the programming. See CTW Comments at 9. It should not, however, permit equal ownership and control of the programming, as CTW suggests. Id.
19. Sky Broadcasting suggests that the term "national educational programming suppliers" should include political parties, candidates for federal office and other non-profit groups to the extent that they sponsor debates or discussions among federal candidates or representatives of national political parties or about topical issues of national importance. To the extent that these entities are either noncommercial educational television stations, public telecommunications entities or educational institutions, as defined in 47 USC §§397(6)(A&B), 397(12), and 397(7), they would qualify to use Section 25(b) capacity. See DAETC, et al. Comments at 12-13. Under those definitions, it appears that neither political parties or candidates for federal office would qualify.
20. In practice, an item adopted at an FCC open meeting would not be effective for six to eight weeks because of delays in releasing text, publishing the rules in the Federal Register and the 30 day delay inherent in 5 USC §553(d). Adding 45 days to that time frame means that there would be three to four months for a transition.
21. The Commission has no authority to apply several of these obligations to DBS. Certainly, it has no authority to levy taxes or franchise fees. Moreover, it is dubious whether it has the power to mandate leased access in the absence of specific findings that it is necessary to ensure diversity or stop anticompetitive abuses. See HBO v. FCC, 567 F.2d 9, 34 (D.C. Cir.) cert. denied 434 U.S. 829 (1977).