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HomeMy WebLinkAbout02.06.84 Council Packet AGENDA COUNCIL MEETING REGULAR FEBRUARY 6, 1984 1. CALL TO ORDER 2. APPROVE AGENDA 3. APPROVE MINUTES a. January 16, 1984 4. CITIZENS COMMENTS 5. PUBLIC HEARINGS a. 7:00 P.M. - Consider Amending Zoning & Subdivision Ordinance as they relate to P.U.D. 's b. 7:15 P.M. - Consider Amending Comprehensive Plan relating to 1990 Service Area. c. 7:30 P.M. - Consider Amending 10-10-10 of City Code relating to Public Hearings for Mineral Extraction Permits. d. 7:30 P.M. - Consider increase for Cable T.V. Rates 6. PETITIONS, REQUESTS AND COMMUNICATIONS 7. ORDINANCES AND RESOLUTIONS 8. UNFINISHED BUSINESS a. Review Revised Police Towing Policy b. Budget Adjustment 9. NEW BUSINESS a. Appoint City Delegate to LMC Legislative Conference b. Senior Citizen Center c. Park and Recreation 1. Accept Resignation of Dirk Rotty 2. Appoint new member to complete Dirk Rotty's term 10. MISCELLANEOUS a. Open and consider bids for Garbage Truck 11. CONSENT AGENDA a. Approve Street Closure - Oak Street from 2nd St. to 3rd St. -3/4/34 12:00 noon - 6:00 P.M. b. Approve Capital Outlay Request - Police Department 1. Paper Shredder 2. Electric Typewriter 3. Multi-purpose Storage Cabinet c. Capital Outlay Request - Liquor Store 1. Microwave Oven 2. Storage Cabinet d. Request to attend Municipal Liquor Store Conference - Feb. 13 & 14, Paul Asher e. Budget Adjustment/Capital Outlay - Administration and Liquor Store f. Set Public Hearing to Consider Preliminary P.U.D. - February 21, 1984 - 7:15 P.M. g. Bills 12. ADJOURN THE AGENDA IS CLOSED OUT AT NOON ON THE TUESDAY PRECEDING THE MEETING. COUNCIL MEETING AGENDA - ADD ONS 13. Request to Attend School - Planning Commission 14. Set Public Hearing to Consider Preliminary Plat - Westview Fourth February 21, 1984 15. Gambling License - Eagles Club 16. Set Public Hearing to Consider Rezoning the NE4 of the NE4 of Section 13, City of Farmington, from R-1 to R-2 - February 21, 1984 at 7:45 P.M. MEMO TO: MAYOR AND COUNCILMEMBERS SUBJECT: AGENDA ITEMS DATE: FEBRUARY 3, 1984 5a. Correspondence enclosed. 5b. Memo enclosed. 5c. Information sent previously 5d. Memo from Jerry Gorgos enclosed. 8a. Copy enclosed. 8b. I have completed my review of the City budget relating to the $2,700 reduction. I have just recently received some additional information which I would like to review. Therefore, I would like to delete this item and place it on the next meetings agenda. 9a. Copy enclosed. 9b. Memo enclosed. 9c. 1. Resignation enclosed. 2. Dennis Walter finished fourth in the balloting for the three positions available. The only other application was Terry Schilson. Mr. Walter has indicated that he would serve. Mr. Schilson has not been contacted yet. The applications are on file if anyone wishes to review them. lla. Memo enclosed. lib. Request enclosed. As per Wayne's recommendation, the approval of the type- writer is contingent upon receiving sufficient trade in. llc. Request enclosed. lid. Request enclosed. lle. Request enclosed. llf. The Planning Commission granted preliminary approval of the P.U.D. See minutes of January 26, 1984. 11g. Copy enclosed. 13. Correspondence enclosed. 14. Pursuant to the City Code a public hearing must also be held to consider the preliminary plat along with the P.U.D. 15. Request enclosed. 16. The rezoning has been recommended by the Planning Commission after Staff has calculated trunk sewer assessments against the 20 acres of land not previously included within Sewer District 1. Staff should have the calculations completed by February 21, 1984. r TELEPHONE: 463-7808 G. M. GORGOS ATTORNEY AT LAW 427 THIRD STREET FARMINGTON,MINNESOTA 55024 February 3, 1984 Larry Thompson City Hall Farmington, Mn. 55024 In Re: Cable T.V. Ordinance Dear Larry: I have reviewed our cable T.V. ordinance as it relates to the estabishment of rates and compared our regulations as they relate to those of the Federal Communication Commission. I have also compared our regulations regarding rates with a decision recently heard by United States Supreme Court in the case of Brookhaven Cable TV, Inc. vs Kelly, 573 F. 2d 765 (2d Cir. ), cert. den'd. , 441 U.S. 904. , in which it was held that State or Legal regulations of rates for pay cable T.V. services, for which a pre-channel charge is made would be invalid. In consideration of the regulations of the FCC and the decision of the United States Supreme Court, , I am of the opinion that the City would have no authority to regulate the rates for which Metro Cable is seeking an increase. Therefore, the schedule public hearing is not necessary. Sincerely, G.M. Gorgos City Attorney GMG/ea LAW OFFICES OF PIPER & MARBURY 888 SIXTEENTH STREET, N.W. WASHINGTON, D.C. 20006 TELEPHONE 202-785-8150 CABLE PIPERMAR WSH 1100 CHARLES CENTER SOUTH TELEX 904246 36 SOUTH CHARLES STREET BALTIMORE, MARYLAND 21201 MARK J.TAUBER TELEPHONE 301-539-2530 January 19, 1984 Mr. Frank Woytek Metro Cable, Inc. 16900 Cedar Avenue South Rosemount, Minnesota 55068 Dear Frank: You have asked me, as communications counsel to Metro Cable, Inc. , whether any state or local municipal franchising body has the authority to set or regulate rates for pay cable television program services such as Home Box Office, Showtime, The Movie Channel or other specialized program services for which a per- program or per-channel charge is made. The simple answer is no. The Federal Communications Commission has clearly preempted all state and local municipal regulation of pay cable rates and that action has been upheld by the U.S. Supreme Court. See, e.g. , LBrookhaven Cable TV, Inc. v. Kelly, 573 F.2d 765 (2d Cir. ) , cert. den'd. , 441 U.S. 9041 (1978) , and Community Cable TV, Inc. , FCC 83-525, released on November 15 , 1983 (copies attached) . Thus, any state or local municipal attempt to impose price regulation on pay cable programming would be invalid ab initio, as a matter of law. Of course, should you have any questions, feel free to call. Since -ly, 'ark J. Tauber Attachments BROOKHAVEN CABLE TV, INC. v. KELLY 765 Cite as 573 F.2d 785 (1978) 1. States X4.10 f BROOKHAVEN CABLE TV,INC.,Capital Telecommunications a=449 Cablevision, Inc., Samson Cablevision Federal Communications Commission Corp., Teleprompter Electronics Corpo- has authority to preempt state and local ration, Warner Cable of Olean, Inc., Na- price regulation of special pay cable televi- tional Cable Television Association, Inc., sion programming. New York State Cable Television Asso- ciation and Home Box Office, Inc., 2. Telecommunications 0=449 y Plaintiffs-Appellees, FCC may regulate cable television pro- gramming if its regulation will further goal t United States of America and Federal which it is entitled to pursue in broadcast g Communications Commission, area. ,.Plaintiffs-Intervenors-Appellees, 3. Telecommunications a=449 v. In view of FCC pronouncements to ef- feet that there should be no regulation of Robert F. KELLY, Chairman, Jerry A. rates for special pay cable television pro- Danzig, Vice Chairman, Michael H. Pen- gramming by any governmental level, FCC dergast, Eli Wagner and Edward J. Wegman, Commissioners of the New sought to preempt state and local price York State Commission on Cable Televi- regulation of such programming. sion, Defendants-Appellants, 4. Telecommunications a=449 FCC's choosing to preempt state and National Association of Regulatory local price regulation of special pay cable Utility Commissioners, television programming by means of policy Defendant-Intervenor-Appellant. statements and interpretations rather than Nos. 458, 482, Dockets 77-6156, 77-6157, formal regulation did not vitiate its attempt to preempt. United States Court of Appeals, ,. Second Circuit. 5. Telecommunications a=449 FCC preemption rendered invalid New Argued March 8, 1978. York's attempt to impose price regulation Decided March 29, 1978. on special pay cable television program- ming. Executive Law N.Y. §§ 811-831, 815, 819, 825. Appeal was taken from declaration by r the United States District Court for the Stuart Robinowitz, New York City(Paul, Northern District of New York, Edmund Weiss, Rifkind, Wharton & Garrison, Rob- Port, J., 428 F.Supp. 1216, that attempt of P ert S. Smith, Susan P. Carr and Jack A. New York State Commission on Cable Tele- Horn, New York City, on the brief), for If vision to regulate rates charged for special- ' 4 �' 1 plaintiffs-appellees. ized pay cable programming was improper in light of FCC preemption, and from in- Eloise E. Davies,Atty.,Appellate Section, junction against such regulation. The Civ. Div., Dept. of Justice, Washington, D. __ Court of Appeals, Lumbard, Circuit Judge, C. (Barbara Allen Babcock, Asst. Atty. .i held that: (1) FCC has authority to pre- Gen., Washington, D. C., Paul V. French, U. k- _ empt state and local price regulation of S. Atty., Albany, N. Y. and Leonard Schait- special pay cable programming, and(2) FCC man, Atty., Dept. of Justice, Washington, 4: preemption rendered invalid New York's D. C., Daniel M. Armstrong, Associate Gen. Counsel, Gregory Christopher and Lauren ' attempt to impose price regulation on such programming. Belvin, Counsels, F. C. C., Washington, D. ' C., on the brief), for intervenors-plaintiffs- ,. � Affirmed. appellees. a A -- ti, 7 . 766 573 FEDERAL REPORTER, 2d SERIES , Charles A. Bradley, New York City possessed and had asserted the requisite (Louis J. Lefkowitz,Atty. Gen. of the State authority, �. +� granted summary judgment to of N. Y., Ruth Kessler Toch, Sol. Gen. and the plaintiffs herein, declaring that the ac- Kenneth J. Connolly, Principal Atty., Alba- tion of the New York State Commission on ii. ny, N. Y., on the brief), for defendants-ap- Cable Television ["Commission") seeking to pellants. impose price regulation on specialized pay . 4, ; William R. Nusbaum, Deputy Asst. Gen. cable was invalid, and enjoining defendants y Counsel, Washington, D. C. (Paul Rodgers, from attempting such regulation in the fu- 4.-, :, . Gen. Counsel, and Charles A. Schneider, ture. We affirm. - Asst. Gen. Counsel, Washington, D. C., on the brief), for intervenor-defendant-appel- lant. I sl Plaintiffs are five cable television opera_ t Before LUMBARD and OAKES, Circuit tors, two trade associations and Home Box Judges, and WYZANSKI, District Judge.' Office, a supplier of special pay cable pro- gramming. In addition,Judge Port permit- LUMBARD, Circuit Judge: ted the FCC and the United States to inter- This appeal raises two questions: wheth- vene as parties plaintiff. The Commission - ` er the Federal Communications Commission and its members were joined as defendants has the authority to preempt state and local by intervenor National Association of Regu_ price regulation of one aspect of cable tele- latory Utility Commissioners ["NARUC']. vision—specialized programming for which This action was commenced in response a per-program or per-channel charge is to New York's scheme for regulating cable made—and if so, whether the FCC has ade- TV, N.Y.Exec.Law §§ 811-831 (McKinney's quately and effectively exercised that au- 1972-1977 Supp.)(article 28). The relevant thority. The Northern District of New portions of article 28 are set forth in the York, Port, J., finding that the FCC both margin.' The provisions in dispute here e *Sitting by designation. sion system does not occupy, use or in any .71 I. §815. Duties of the commission way traverse a public street. The provision The commission shall: of any municipal charter or other law autho- (1) Develop and maintain a statewide plan rizing a municipality to require and grant for development of cable television services, franchises is hereby enlarged and expanded, setting forth the objectives which the corn- to the extent necessary, to authorize such mission deems to be of regional and state franchises. concern; 3. Nothing in this article shall be con- (2) to the extent permitted by, and not strued to prevent franchise requirements in contrary to applicable federal law, rules and excess of those prescribed by the commis- lc contations: sion, unless such requirement is inconsistent (a) prescribe standards for procedures and with this article or any regulation, policy or ' practices which municipalities shall follow in procedure of the commission. granting franchises . . (b) prescribe minimum standards for inclu- §825. Rates sion in franchises . . . . 1. Except as otherwise provided in this section, the rates charged by a cable televi- §819. Franchise requirement sion company shall be those specified in the ' 1. Notwithstanding any other law, no ca- franchise which may establish,or provide for ble television system, whether or not it is the establishment of reasonable classifica- tions of service and categories of subscribers, deemed to occupy or use a public thorough- or charge different rates for differing services fare, may commence operations or expand the area it serves after April first, nineteen or for subscribers in different categories. ' hundred seventy-three unless it has been 2. Such rates may not be changed except franchised by each municipality in which it by amendment of the franchise. proposes to provide or extend service. . 2. A municipality shall have the power to 5. In addition to other powers, the corn- require a franchise of any cable television mission may,after public notice and opportu- system providing service within the munici- nity for hearing, prescribe rates for cable „, 4 pality,notwithstanding that said cable televi- television service r iv ' `' BROOKHAVEN CABLE TV t , INC. v. KELLY i concern the setting0. Cite as 573 Fad 765 (1878) 767 of rates by the state [2] The x- -, and local franchising authorities. Court elaborated on paneled this standard in United Stateand s v. is The sections concerning rates generated Midwest Video Corp.,r y considerable confusion when ► 32 .E U.S. 649,(1972),97 -68, is 1972, y Promulgated 92 S.Ct. 1860, 1870,32 L.Ed.2d 390 in particular) with regard to special which it approved programming on cable systems. According- cable originaon rules as "reae sonably anvil ., � ly,on March 1, 1976, the Commission issued lary"' a "Clarification of Commission Policy,"2 fished regulatoryI to "the achievement fieldof of estab_ [ which indicated 1 O that no exemption or sion broadcastinggoalsiin the tn number exclusion franchising and rate a by increasing the number e fusion fromtf was intended for prov- of outlets for community self-expression al requirements quire or "subscription"we "pay," and augmenting the public's choice of pro- ' ices—the specialized rcable serv- grams and type of service." �. dace, programming at issue the FCC mayre It follows that (2) that companies alreadyngon regulate cable TV if its rage_ pay cable services would not be required!to totpur uewillinu heeb broadcast ar a goal rch it is entitled amend their franchises immediately, $ would have to v but area. f k give notice within two A al payn to delay all price test; a ion y months to the appropriate authorities of special cable meets that a policy re- ' ocurrent rates, or face authorities of permittingc Y sheirions"; and (3) "appropriate development o price il. straints at every level is reasonably menti" that "active enforce- lary to. the objective of increasing o of these policies would be under- anvil- taken. diversit program y, and far less intrusive than the <, Plaintiffs sought a declaration that the Midwest Video, supra. mandatory origination rules approved in policies expressed in the Clarification vio- ation of Theater Owners v. lated the supremacy clause of the United A Cf.National Assoc.i States Constitution—because PP•D•C. 352, 362, 420 F. FCC, 136 U.S. 2d 9094 FCC preemption—as well as the firstllf fifth L.Ed.2d 102 (1970)U.S. 922, in S.Ct.3 914, 25and fourteenth amendments. The district regulation (upholding FCC's non- __ granted summary judgment on the field Policy in subscription television �' ` supremacy clause claim, and this pending accumulation of�expertise). Com- :- lowed. appeal fol- Cases relied on by NARUC and the mission are readilyCoA- distinguished. In NA- II RUC v. FCC, 174 U.S.A [1] We hold that the FCC has the au- F.2d 601 (1976), the court rued that 4there th[1] to hold tha sthee and local price was no nexus shown between FCC r - ceority on of preempt tion of regulation of two-wayp ramp Pay cable program- leased access cable channels (used nfor such ming; that it has exercised this authority; and that the meanss t has chosen a to pre- purposes as burglar alarms)and the enlpt state re P increasing program diversity. goal of 1' festive. gelation are adequate and ef- rection has been shown. y Here a con- It United States v. g Home Box Office, Inc. v. FCC, 567 F.2d 9 Co., 434 392Southwestern Cable (D.C.Cir. March 252 U.S. 157, 178,88 S.Ct. 1994,2004,20 L.Ed.2d 1001 U.S. 829, 98 S.Ct. 111954�L.Ed.2d 89denied, (1977 (1968), the Supreme Court up- (Dkt. Nos. 76-1841 and – overturned held the FCC's jurisdiction to regulate cable e to extent that such regulation is FCC anti-siphoning rules because 2of failure "TV to thehl to demonstrate a - y ancillary to the effective genuine formance of the Commission's varip re- Phoning broadcast problem of se fsorm bilitio for the regulation of television FCC's regulatoryprogramming. The goal in HBO was not pro- broadcasting," 1_ gram diversity, as here, but decreased - 2, petition. com- � Con re Rates Charged by Cable Television Companies for "Auxiliary" Programming, Docket 76 90010 g. vision r 976). (Commission on Cable Tele- 3 C P f i0,,,.•w .. •t-.'.:er tpa. 1 i, ''.It . " n 768 573 FEDERAL REPORTER, 2d SERIES �? Finally, Midwest Video Corp. v. FCC,571 would not only be premature but would 7; F.2d 1025, No. 76-1496 (8th Cir. Feb. 27, in all likelihood have a chilling effect on 1978), held that the FCC's imposition of the anticipated development. t minimum public access and channel capaci- Clarification of the Cable Television Rules }<, ty standards on cable systems was improp- and Notice of Proposed Rulemaking and 3 e j• er. The court ruled that this was an at- Inquiry in Docket Nos. 20018 et al., 46 t ' tempt to do in the cable field something the F.C.C.2d 175, 199-200(1974). See First Re- ' .' FCC was specifically prohibited from doing port and Order in Docket No. 19554, 52 E in the broadcast area—imposing the bur- F.C.C.2d 1, 68 (1975) ("Although, we have dens of common carriers. The far less in- not ourselves undertaken the regulation of �, , trusive 'regulation' proposed in the instant rates for the sale of subscription program- case is one which plainly eludes any at- ming, � tempt to analogize the regulation itself— we regard our prior statements con_ 4;,I' cerning the regulation of subscription oper- rather than the underlying policy—to the ations as preempting regulation preem tin local re of broadcast area. rates as well as program content."); Notice [3] That the FCC has, in fact, sought to of Inquiry in Docket No. 20767, 58 F.C.C.2d 1 ''.'' , preempt state and local price regulation of 915 (1976). ''. special paycable p programming is evident [4] Finally, we do not believe that the " from a survey of FCC pronouncements in �� s„.."'�� FCC's choice to proceed by means of policy ..._It ; the area since 1974: statements and interpretations rather than } In Section 76.31(a)(4) [of 47 C.F.R.] we formal regulations vitiates its attempt to require that cable systems, in order to preempt. The policy to preempt has been r. receive a certificate of compliance, must shouted from the rooftops, see Schwartz v. • have a franchise providing for franchisor Texas,344 U.S. 199,202-03,73 S.Ct.232,97 approval of initial charges for installation L.Ed.231 (1952),and the FCC has explicitly and regular subscriber service. We have indicated its intent that there be no price intentionally and specifically limited rate regulation whatever of the relevant area, regulation responsibilities to the area of see Bethlehem Steel Co. v. New York State regular subscriber service, and we will Labor Relations Board, 330 U.S. 767, 773- continue to do so. We have defined "reg- 74, 67 S.Ct. 1026,91 L.Ed. 1234(1947). The ular subscriber service" as that service Commission and NARUC both participated regularly provided to all subscribers. in the 1974 proceedings cited above, and This would include all broadcast signal had ample opportunities to attempt to per- carriage and all our required access chan- suade the FCC to their point of view— nels including origination programming. which they did—and to take an appeal It does not include specialized program- when they failed—which they did not. li ming for which a per-program or per- channel charge is made. The purpose of [5] Accordingly, we are satisfied that this rule was to clearly focus (sic) the FCC preemption has rendered invalid New regulatory responsibility for regular sub- York's attempt to impose price regulation scriber rates. It was not meant to pro- on special pay cable programming,and that ^k * = mote rate regulation of any kind. the injunction was properly issued. After considerable study of the emerg- Affirmed. ing cable industry and its prospects for introducing new and innovative commu- e ' nications services, we have concluded that, at this time, there should be no O E KEYNUMBER SYSTEM it regulation of rates for such services at all T by any governmental level. Attempting y to impose rate regulation on specialized ; services that have not yet developed j • Before the Federal Communications Commission FCC 83-525 Washington, D.C.20554 33950 In re: ) 60549 COMMUNITY CABLE TV, INC. ) CSR-2169 Petition tor Special Reliet ) • MEMORANDUM OPINION AND ORDER Adopted: November 8, 1983; Released: November 15, 1983 By the Commission: Commissioner Rivera absent. introduction I. On February 3, 1983, Community Cable TV, Inc. (here- inafter "CCTV") , operator of a cable television system serving Las Vegas, Nevada, and neighboring communities, tiled a "Petition tor Special Relief Requesting Declaratory Ruling" concerning the extent of federal preemption of cable television system rate regulation. Specifically, CCTV seeks a ruling that such preemption extends not only to pay or subscription cable services (i.e. , programming for which a per- channel or per-program charge is made) but also to specialized or auxiliary cable services -- primarily satellite-delivered programming -- of the kind commonly provided in tiers of services offered to subscribers at a single . package rate distinct from the rate charged tor regular subscriber services. Comments on CCTV' s petition have been tiled by -the following parties: Mr . Henry Geller and Ms. Donna Lampert, jointly; the Nevada Public Services Commission (hereinafter "PSC") ; A-R Telecommunications (hereinafter "ART") , operator of several cable television systems in the eastern United States; Group W Cable, Inc. (hereinafter "Group W") , operator of several cable television systems across the country, including Reno and Washoe County, Nevada; the City of Dallas, Texas (hereinafter "Dallas") ; Nevada Pay Television, Inc. (hereinafter "NPTV") , a distributor of pay television programming in the Las Vegas, Nevada metropolitan area through multipoint distribution service (MDS) and master antenna (MATV) systems; the Cable Television Information Center (hereinafter "CTIC") , "a non-profit organization whose membership includes over 200 city governments . . . "; Capital Cities Cable, Inc. (hereinafter "CCC") , operator of over 40 cable systems in S • •• • -2- 60550 It states; the City ot Richmond, Indiana, the TOTOVOt Front Royal , Virginia, and the Harrisonburg Electric COmmiss2.0 Ot Harrisonburg, Virginia, Jointly (hereinafter "the.:Clt-_ies")4-.-0, ,-;-4,111tie Inc. (here- matter "Time") , a corporation whiciii4Oterf :: 1 developing teletext, and whose subsidiaries initkkailitttf:JA - 44,i'ie,;:-*'system operator American Television and communicationtarpaii ',':;Ahereinatter "ATC") , Home Box Ottice, Inc. (hereinafter HBO")', Cinemax, and the USA Network (hereinatter "USA") . // .CCTV has r-e.kied to these comments, as has the National Cable164.'-evlat6-0,-.,.V1 --ti-ation, Inc. (hereinatter "NCTA") 2/ : • - 2. CCTV seeks its requestedlOffiAAesult ot the decision in In re Proposed General Order No.. -40-ktt.160dket No. 82-343 (Nev. Pub. Serv. Comm'n, Nov. 2, 1982) . On JOlykb, 1982, PSC pro- posed to adopt General Order No. 40 in orde,r to,:d.,kority and define the terms and provisions ot Nevada's cable televiai&OVIStem laws, Nev. Rev. Stat. §§111 et seq. General Order No. 40 contemplates rate regu- lation by PSC tor all subscriber service, a term .detined in Section 2.8 ot General Order No. 40 as "all -Cable televSiOn service provided other than pay channel services. " Section _2'.1-11#jines pay channel service as "a channel which is individually -chailici to customers. " A public hearing on the PSC proposal was held in Catton City, Nevada, on September 28, 1982, in which CCTV and other parties participated. As a result ot this hearing , PSC tound, contrary to the position urged by CCTV and other cable television companies (see rite Proposed General Order No. 40, slip op. at 4-5) , that " Itthe scot* or federal pre- emption over CATV service is necessarily limited to specialized programming tor which a per-program or per-channel charge is made . . • • •• Id. at 8. Subsequently, CCTV tiled the instant petition. Summary Or ccTV41-e'titi.bri'-'' 16,i.'. 3. In support of its petition, CCTV agues that General Order No. 40 would countenance ,sta, - • Aft.V..4., ,,,.zxates in a manner which has been preempted by the es particularly that its "expanded tier " whiCh:•4:-.55.4igt Its "basic r • tier" 3/ -- includes satellite-delivered serV1 ' Lsuch as Stations WGN-TV (Ind. , Channel 9) , Chicago, Illinois, WOR-TV (Ind. , Channel 9) , Secaucus, New Jersey, and WTBS (Incl.A:Channel'"OrAtlanta, Georgia; the Entertainment and Sports ProgrelNetwdriC (hk4inatter "ESPN") ; 1/ By Order, Mimeo No. 2735 (releMATA4V-- a "Motion tor Extension ot Time" tiled February ,as granted by the ' Chiet or the Video Services DivisiOn-,)Dt:-the:: - ,•;: -.714. ia Bureau, extending the time tor tiling ts until March 18, 1983, and tor tiling CCTV's s L/ NCTAs reply is contemplated nal her [1.45 (b) or by Section lb 1 (e) ot .the .Commis TAis not a petitioner. However , we ,uld be best served by the Commission's tuUthe tacts and arguments set torth herein. ,7 ,./y will be con- sidered. .3/ CCTV states that its "basic . i 11 y ot signals intiti,ed to mandatorycarriNsm..4-17.:'%74.41k-V:?i" ' .'-j..1.11asion' s signal .. . • -* 60551 • -3- Cable News Network (hereinafter "CNN") ; the Satellite Program Network (hereinafter "SPN") ; USA; Music Television (hereinafter "MTV") ; Satellite News Channel (hereinafter "SNC") ; and the Christian Broadcasting Network (hereinafter "CBN") . In addition, CCTV' s -expanded tier" otters a non-satellite-delivered program guide, Community Bulletin Board, and a New York Stock Exchange ticker. Were CCTV to attempt to otter services such as these on a separate, per- channel charge basis, to avoid PSC rate regulation, CCTV notes that services such as MTV and Nickelodeon would no longer be made available to it. CCTV states that a witness employed by the Warner Amex Satellite Entertainment Company (hereinafter "WASEC") testitied in the PSC proceedings that WASEC would not distribute MTV and Nickelodeon to cable operators intending to otter these services tor a separate, per- channel charge. 4. CCTV reviews the history ot the Commission' s cable regulatory program, particularly as it attects local rate regulation, and argues that the Commission has preempted "cable television rate regulation tor all but regular subscriber services. " Citing the Cable Television Report and Order, FCC 72-108, 36 FCC 2d 143 (1972) (hereinattez "C'T'RU") , recon. granted in part, FCC 72-530, 36 FCC 2d 326 (19 /2) , CCTV contends that the Commission intended that local rate regulation not extend beyond services furnished to all subscribers. These regular subscriber services, asserts CCTV, were defined by the Commission in the Claritication ot the Cable Television Rules and Notice of Proposed Rulemaking and Inquiry, FCC 74-384, 46 FCC 2d 175, 199 (19 /4) (hereinafter "Claritication-J , to "include all broadcast signal carriage and all our required access channels including origination programming. It does not include specialized programming tor which a per-program or per-channel charge is made. " 4/ CCTV states that this distinction was maintained by the Commission so as not to chill the anticipated development ot nascent and proposed communications services within the cable industry, such as -- citing • id. at. 200 -- "advertising, pay services, digital services, alarm systems, two way experiments, etc. " Similarly, notes CCTV, the Commission preempted rate regulation ot leased access channels, citing id. at 185-186. Accordingly, CCTV argues, the Commission' s preemption ot local rate regulation extends to satellite-delivered (and other) auxiliary cable services such as those provided by CCTV on its "expanded tier. " CCTV disagrees with PSC' s opinion that the Com- mission' s recognition that ," (s) atellite transmission to cable systems has become a technical reality, " id. at lib, indicates that the Commission did not consider such services to be new and innovative. Rather , CCTV maintains that such services "had not yet become a practical reality, " and that the Commission intended to maintain regulatory tlexibility vis-a-vis such services► through preemption. In tact, contends CCTV, the tirst domestic satellite receive-only earth 4/ Following the decision ot the Supreme Court in FCC v. Midwest video Corp. , 440 U.S. 689 (1979) , the Commission deleted, 'inter alia, its access channel requirements. Order in Docket No. 20508, FCC 80- 608, 83 FCC 2d 147 (1980) , recon. denied, 1CC 81-229, 87 FCC 2d 40 (1981) . -4- 60552 station authorization to a cable system was granted in 19 /b, in Micro- • Cable Communications Corporation d/b/a Florida Cablevision (Fort Pierce, Florida) , FCC 75-931, b4 FCC 2d 881 (1975) , which furthered the commission's objective ot allowing applicants to demonstrate new economies and etticiencles in the provision ot existing and new specialized services, citing id. at 882. CCTV argues that subsequent Commission decisions reveal the Commission' s intention to limit local rate regulation to those signals whose carriage is mandated by the Commission's Rules, citing the Notice of Proposed Rulemaking in Docket No. 20681, FCC 75-1422, 57 FCC 2d 368, 3 /U (1975) ; the Report and order in Docket No. 21002, FCC 77-530, 66 FCC 2d 380, 402 n. 21 (19/ /) , and the Memorandum Opinion and Order and Further Notice ot Proposed Rulemaking in Docket No. 21002, FCC 79-228, 71 FCC 2d 569, 5/1, 584 (19/9) . In addition, CCTV maintains that the Commission' s rate regulation preemption authority has been upheld on judicial review, citing Brookhaven Cable TV, Inc. v. Kelly, 573 F.2d 765 (2d Cir. 1978) , cert. denied, 441 U.S. 904 (1979) , and New York State Com- mission on Cable Television v. FCC, 669 F. 2d 58 (2d Cir. 1982) . 5. CCTV argues that the Commission's rate regulation pre- emption and exemptions have furthered "exactly the type ot substantial and continuing development ot new and innovative cable television services which the Commission sought to encourage . . . ," noting the existence of origination programming, pay cable channels, and tele- vision "superstations. " As a result of the current proliteration,ot these and other specialized services, CCTV states that it and other cable systems otter tiers of these specialized and auxiliary services, largely satellite-delivered and voluntarily carried by the cable systems. " ISJuch tiers ot specialized programming are typically grouped together and marketed at a package rate by cable television operators based on tree market decisions . . . . (footnote omitted) . In addition to the broadcast "superstations, " CCTV notes that the services on its expanded tier provide twenty-tour hour sports pro- gramming (ESPN) ; twenty-tour hour news programming (CNN, SNC) ; and a variety of sports, entertainment and religious programming (SPN, USA, MTV, CBN) . Satellite delivery of programming to cable systems, states CCTV, led to the creation of the specialized services (as well as the increased diversity of nationally-oriented programming on the "super- stations") , whose programming was created explicitly for specific audiences. CCTV notes that the Commonwealth ot Massachusetts Community Antenna Television Commission (hereinafter "CATC") , in its Competitive Standard Rulemaking Report and Order , 5/ found that the scope of federal preemption ot rate regulation, liberally construed, extends to all specialty services, available either by satellite or by other means, including broadcast signals which could be ottered on a separate per-program or per-channel basis. Accordingly, CCTV urges that the Commission issue a declaratory ruling contirming that its rate regulation preemption extends to any specialized or auxiliary cable services distinct from regular subscriber services, and that the services provided by CCTV on its "expanded tier" tall into the former category. 5/ Docket No. R-4 .(Mass. Community Antenna Television Comm'n, July L5, 1980) . • 60553-5- Comments in Support of CCTV Requested Ruling 6. CCTV's petition is supported by the following parties: Mr. Geller and Ms. Lampert, ART, Group W, CCC, and Time. Each or these parties contends, as the basis for their analyses, that the Commission has broadly preempted the field of rate regulation of non- basic subscriber services, rendering PSC's action ultra vires. • Proponents generally argue that both the CTRO, supra, and the Clarification, supra, reveal the Commission' s intent to preempt rate regulation of non-basic subscriber services broadly, in order to avoid chilling the development or new, innovative programming and services: "i.e. , advertising, pay services, digital services, alarm services, two way experiments, etc. " Id. at 200. Accordingly, it is clear that the Commission intended its preemption to extend beyond pay services to the specialized cable programming provided by CCTV. If indeed this programming is not specifically encompassed by the CTRO and Clarification, the proponents urge that the Commission should clarity that its preemption does extend to this programming. Mr. Geller and Ms. Lampert further argue that pay cable services have benefited from the Commission' s "determination to allow the new cable services to develop fully in the marketplace, unhindered by premature and in all likelihood unnecessary economic regulation. " Other proponents assert that the preemption or pay cable rate regulation was meant to roster program diversity, which they contend would be hampered by local rate regulation. 6/ These proponents note that many programming services delivered by satellites and offered in tiers would not be viable were they to be made available only tor a per-channel charge, and that these services include independent television broadcast stations such as WTBS, WGN-TV and WOR-TV. 7/ 6/ Group W and Time in particular cite their experience in marketing such services to support the general theme of the proponents that • local regulation would inhibit development of these services. Group W also states that both CATC and an Ohio court have found, contrary to PSC' s interpretation, that tiered services are beyond local regulatory jurisdiction. 1/ ART also notes that cable systems must pay copyright fees for the carriage of distant television broadcast signals, as does Group W, who also points to the demise of services such as CBS Cable and the Entertainment Channel , as examples of the continued risks to which program suppliers and cable operators are subjected. CCC argues that optional programming services are still evolving, and that "more than halt of this country' s cable systems provide 12' channels or less of service, " (footnote omitted) , necessitating the freedom to develop and experiment with optional services which local regulation would inhibit. CCC also asserts that a rulemaking proceeding is rot necessary to resolve the issues herein, citing, inter alia, SEC v. Chenery Corp. , .3.i2 U.S. 194 (1947) . -b- 60554 Comments Opposing CCTV' s Requested Ruling I. CCTV' s petition is opposed by the following parties: PSC, Dallas, MPTV, CTIC, and the Cities. Each opponent contends, essentially, that the Commission' s preemption of local rate regulation does not extend specifically to tiers of programming services. PSC itself notes that it "is charged by the Nevada legislature to supervise and regulate the operation ot public utilites within the State ot Nevada, " which includes, pursuant to Nev. Rev. Stat. SS /04. 020 (1) (f) and 711.080, cable television systems. This regulatory authority over cable television services, argues PSC, has been upheld by the United States Supreme Court, citing TV Pix, Inc. v. Taylor, 304 F. Supp. 459 (D. Nev. 1968) , atf'd per curiam, 396 U.S. 556 (19/0) . PSC notes that it does not regulate MATV systems, citing Nev. Rev. Stat. S /11.040 (2) (b) , nor does it regulate "cable television_ programming for which a per- program or per-channel charge is made," citing Brookhaven Cable TV, inc. v. Kelly, supra. However, PSC maintains, as it did in In re Proposed General' Order No. 40, . supra, that it may regulate tier package otterings.- PSC argues that its tier package rate regulation is intended "to protect subscribers trom the noncompetitive advantages that a certificated cable television company enjoys," 8/ and that such regulation will not inhibit "the Commission' s goal of promoting new and innovative television services. " .9/ 8. Other opponents, in addition to supporting PSC' s argu- ments, raise turther concerns. Dallas argues that grant ot CCTV's requested 'ruling would deprive the city of its "contractual right" to regulate the rates of local cable system operator Warner Amex's second and third tiers. Dallas also asserts that to limit local rate regu- lation to those services which cable systems are required to carry "remove(si trom the local franchisor the authority to regulate rates tor the majority of cable programming services provided to all sub- scribers, " contrary to the Commission's dual tederal-local regulatory policy. NPTV and CTIC urge that the issues raised herein are more properly the subject tor rulemaking because, as CTIC claims, the declaratory ruling sought by CCTV "would . . . drastically change the way cable television rates are regulated in thousands ot jurisdictions around the country, taking signiticant and established authority away trom state and local governments. " NPTV argues that preemption of local rate regulation is no longer necessary, stating that the pay cable industry has matured, and noting that such ;aervices "yielded revenues of $575 million in 1980 and accounted for .more than 25% ot the total cable industry revenues. " (tootnote omitted) . As a distributor of programming through MDS, NPTV states that it "can otter only a single channel of services, " compared _with cable's multiplicity 8/ PSC notes, for example, that CCTV offers one tier of primarily local broadcast signals for $7.95 per month, and a second tier of primarily satellite-delivered programming tor an -additional $6.95 per month. However, asserts PSC, "virtually all of the first tier stations can be received ott air in Las Vegas. " Accordingly, PSC claims, an individual must pay CCTV at least $14.90 per month to receive new services via cable television trom CCTV, which enjoys a monopoly on cable services in Las Vegas and whichabsent local rate regulation, could charge any price it chooses for its service. 9/ Opponents contend that the Commission years ago recognized the technical reality ot satellite transmission to cable television systems, citing the Clarification at 176. -'- 60555 ot channels. Unregulated cable systems could undercut Mus and other competitors, NY'1'V contends, whereas local pay cable rate regulation "would ensure a competitive marketplace. . . . ' LT1C asserts tnat preemption will lead to nigher rates Lor satellite-delivered basic services, Lor which there are rarely alternative suppliers, and tneretore with newer viewers, dibQuurage the growth of advertiser- supported programming. CT1e notes tne continues introduction Or advertiser-supported services, sucn as 5panisn International Network, Black entertainment Television, Cable satellite euDliC Attairs Network, The Health channel , and The weather Channel , despite the prevailing view ot local authority concerning tneir legitimate capacity tor rate regulation. The Cities contend tnat wniie regu- lation ot pay services may be justitiea as attempting to avoid regulation of tne programmer nimselr, tiered services -nave no relation to tne operators rates. The programmer is unattested by what the operator cnarges tne cable viewer. " 'The cities cnarac- terize the testimony or the WASt;C employee cited by CCTV (see paragraph i, supra) as unreliaole and groundless, ana argue tnat cable operators will not allow tneir program services to be lost. Citing NARUC II , supra, tne cities maintain tnat "tnere is no nexus between the goal or tne commission and the preemption or state and local rate regulation. . . . •• Reply Comments 9. CCTV tiled its reply comments on April b, 19ss. CCTV argues tnat, as a Whole, tne comments tiled in tnis proceeding sub- stantially support CC'1'v' s position. in addition, CCTV contends tnat CT1C' s opposing comments are at odds with the position or tne National League or cities (nereinatter "NLC") , "an organization representing l,uUu cities. " CCTV also asserts tnat NkTV "competes directly with' CCTV in the Las vegas area tnrougn inter alia, MATV systems, wnicn . . . FSC 'does not regulate'" (tootnotes omitted) , and, accordingly, cnaracterizes NP'rv's position as an attempt to namper .ccTV in its competitive cnallenge to NYTV. CCTV reiterates its contention that issuance or tne declaratory ruling wnicn it requests will not expand tne Commission' s preemption or local rate regulation, ana argues tnat PSC nas misunderstood the scope or this preemption. Moreover , noting ccc' s citation or Docket No. LUbbl, DI FCC 1d at ;i /U, CCTV argues tnat regular subscriber service encompasses only tnose signals wnose carriage is required by the Commission' s Rules (and any associated required access services, as well as installation, reconnection and similar charges) . CCTV denies that tiers ot services are " ' rurnisnea' or 'provided' to"all • subscribers because they are not ' required to be carried ' by Commission regu- lations. . . . instead, such tiers are 'orrered ', as an option to all subscribers. . . , " ana are plainly included in the Commission's preemption. While recognizing at tne time or the Claritication, supra, the technical reality of satellite delivery, the Commission some two years later still viewed the practical reality or• such satellite use as a ruture development not yet capable or precise anticipation. '1'ne mode ot packaging or this satellite-delivered programming -- whether in a tiered or a per-channel manner -- is not relevant, CCTV asserts, else one torm ot optional service will be subject to local regulation, while others will not be subject to such regulation. CC'ry turtner argues that it has been the lack ot 60556 -a- regulation which has led to "exactly the type ot dramatic increase in optional specialized and auxiliary programming which the Com- mission intended. " CCTV contends that opponents have produced "no evidence that rate regulation is required to protect viewers' interests. " (tootnote omitted) . In view of the lack ot evidence ot harm to cable viewers and given the benefits already gained, pursuant to the Commission's preemption policy, CCTV urges issuance ot requested declaratory ruling. 1U. NCTA filed reply comments on April 7, 1983. 10/ NCTA argues that allowing rate regulation to depend upon the manner in which services are marketed will only "hamper the development ot innovative cable services. " NCTA challenges the assertions ot CTIC and Dallas that satellite-delivered programming services are not new and innovative, and states that " (fjinding the right way, to market these new services is central to ensuring their survival in an increasingly competitive marketplace. " NCTA notes that cable tele- vision taces competition trom conventional broadcast stations, • subscription television (STV) , MDS, SMATV, videocassette recorders and videotape players, and, potentially, direct broadcast satellites (DBS) and low power television (LPTV) , and characterizes opponents' tears ot cable monopoly practices as unrealistic. NCTA particularly challenges NPTV' s contention that, absent local rate regulation, cable operators will price their services at predatorily low rates as an attempt to preserve NPTV trom competition, and antithetical lto Supreme Court antitrust doctrine. NCTA contends that " It)he public would be best served it cable, MDS and other competitors were sub- ject to regulatory parity, " and argues that just because cable is able to provide its customers many channels ot programming at a lower price (due to its inherent etticiency) than competing MDS can is no reason to penalize it with unnecessary regulation to increase its cost artiticially. Theretore, NCTA urges grant ot CCTV's requested declaratory ruling. • • 10/ See note 2, supra. • -9- - 60557 • Discussion 11. The issues presented in this case are best analyzed by reducing them to two gvections: -Does the Commission's preemption extend to all channels not offered as part of the basic service package , regardless of their type (e.g. , nonbroadcast premium, nonbroad- cast advertiser-supported, or distant broadcast signals)? -Does the Commission's preemption of rate regulation extend only to channels or programs priced individually rather than in tiers or groups? To answer these questions it is necessary to reexamine past Commission statements on the part played by cable television in contributing to the availability of a diverse array of programming to consumers in the overall context of a constantly - changing marketplace for video services. 12. Preemption of nonbroadcast channels . The Commission recognized fifteen years ago that cable television's multi-channel capacity made it uniquely capable of augmenting the public's choice of programs and types of services, without the use of valuable spectrum. 11/ Referring generically to these new types of nonbroadcast programming as "program originations," the Commission noted that the cable television industry was placing "increased emphasis on program origination, both of a local and public service nature and of the entertainment type, and on the provisions of other services to the public." 12/ Consistent with its recognition of the potential value of these "originations" on serving the unmet, specialized programming needs of the public, the Commission adopted rules requiring cable systems to provide at least one channel of local program originations. The Commission specified that the federal interest in program originations was not confined to locally-produced programming only: [The Notice] did not propose to restrict [cable television] to local originations or to bar originations of the entertainment type or to preclude [cable television] network operations. on an interponnected basis. . . . While we regard augmented opportunities for community self-expression • 11/ Midwest Television, Inc., 13 FCC 478, 505-6 (1968). 12/ Notice of Proposed rulemaking and ?btice of Inquiry in D cket No. 18397, 15 FCC 2d 417, 418, 421-2 (1968), footnote anitted. -10- 60558 as extremely important, the Commission has also sought to prothote new nationaland regional television ne-tWorks geftitilly and intends actively to explore this possibility for [cable television] The Commission explained the need for exclusive federal jurisdiction to bring about these developments: Our experience in the broadcast field (both commercial as well as noncommercial) , as well as comments filed in this proceeding, leads us to believe that the successful inauguration of any new network is not an easy matter, to a significant extent because of the high cost and other difficulties in producing or otherwise procuring programming in sufficient quantity and quality for network operations. . • . . [T]he public interest would best be served for the present by encouraging [cable television] to experiment and develop its originations free from restriction as to interconnection or limitations as to types of programming, in the expectation that the end result will be significant added diversity for the public . . . • . . The Commission would feel compelled to oppose on behalf of the public, any proposal which would preclude,:Loeb a teldV _ on] from . systems . . . fro : f . _. • regional or national ba s fbr till ose, including the distribtttith f '; ment- type programming. 14 13. The Commission took further stepi to assure that these new services could respond to marketplace detandWr undistorted by nonfederal rate regulation. The Commission spec ied that extra charges could be levied by the system operator fdrinonmandatory originations: "While we believe that the subscrAing public should 13 First Report and Order in Docket !b.' 18397, 20 FCC'2401, 203 (1969). The Ccsmission further declared that ". 'Sprir�; :.4 - t that origination to a significant extent could rpt.tib f 4•• =• by others, and [cable television] network programming." d. att • -� • ficantly, even at this initial stage of federal regulation the c)aratissionni the likelihood that "[cable television) channel capacity might b9 titiiited-864 )'leans for local distribution of satellite oa unications." Id. at 208. _ :• 14 Id. at 203, 205, 207. -11- GOS S not be required to pay extra fees in order to obtain access to local public service programming or presentations by political candidates on the [cable system's] origination channel, we do not presently contemplate any prohibition against higher monthly fees or per-program charges for other minority-interezt t:ro• ramming, or special charges for other extra services. 15 Having laid out this flexible overall plan for pricing nonbroadcast services, the Commission specifically declared that non-federal regulatory policies inconsistent with the federal objective of unregulated availability and pricing of nonbroadcast services were preempted. .16 . 14. In adopting comprehensive rules for cable television in 1972, the Commission established an overall regulatory scheme of "deliberately-structured dualism," dividing regulatory responsibilities between itself and nonfederal authorities. Certain matters were reserved for exclusive federal control, others were given over to exclusive nonfederal control, and still others were deemed to be areas of shared jurisdiction wherein nonfederal authorities regulated pursuant to Commission-set standards. Notwithstanding this dualism we maintained our preemptive jurisdiction over nonmandatory origination channels. Dual jurisdiction would be confusing and impracticable, and desired experimentation might be jeopardized if nonfederal authorities were to specify more restrictive regulations than those prescribed by the Commission. 17/ In 1974 the Commission, in the context of clarifying aspects of its overall regulatory program, took notice of the fact that many nonfederal authorities were proposing to regulate rates charged for nonbroadcast programming. Once again the Commission declared: It is premature to regulate along these lines. Such regulation might destroy any chance for this emerging communications service by stifling competition, setting incorrect rates, and establishing an atmosphere that deters experimentation, innovation, or speculation. We have pre-empted this area to avoid those pitfalls. 18/ 15/ Id. at 216, emphasis added. 16 Id. at 223. Federal Preemption of CATV Regulation , 20 FCC 2d 741 (1969) and In re Request by Time-Life Broadcast, Inc., 31 FCC 2d 747 (1,971), the latter stating categorically that, "This Commission ruled that local authorities are pre-empted from interfering with federally authorized cable television origination and advertising. Accordingly, the Commission has preempted the field of pay television cable cablecasting so that local franchise terms are inoperative." 17 Cable Television Report and Order, 36 FCC 2d 143, 193, 197 (1972). 18/ Clarification of the Cable television Rules and Notice of Proposed Rulemaking and Inquiry, 46 FCC 2d 175, 185-6, 200 (1974). 60560 -12- This -preemption, enunciated repeatedly by the Commission, 19 was upheld by the Court in Brookhaven v. Kelly, supra. 15. Preemption of distant signal carriage. In addition to broadly pre-empting rates charged for nonbroadcast program service, we have pre-empted rates charged for distant broadcast signals not offered as part of the basic subscriber package. The Commission recognized in 1975 distant signals could be part of the mix of program services available by satellite to cable systems. This recognition came in the context of repealing the so-called "leapfrogging" rules, which generally required cable operators to select non-network affiliated broadcast stations for carriage on their systems pursuant to a prescribed formula. The rules were inconsistent with the public interest by frustrating subscribers' programming preferences. The Commission specifically noted that transmission of broadcast signals to cable systems nationwide via domestic satellite could soon be a "realistic possibility," but, nevertheless, found that the proliferation of "superstations" of this type was not likely to harm local broadcasting. 20 16. At about the same time, the Commission issued a Notice of Proposed Rulemaking dealing with the regulation of rates for basic subscriber services. The Commission once again delimited those services in which it had preempted jurisdiction over rate regulation. Having just amended its rules to permit cable system operators at their discretion to carry any distant independent broadcast signals to fill their signal complements, 22/ the Commission defined "regular subscriber service rates" to be charges imposed for receipt of broadcast signals required to be carried by our rules . . . It does not apply to auxiliary services such as pay cable advertising,• leased channels., etc. We continue to believe that it is premature for any rate regulation to be imposed on these other services. 19 See, e.g., Notice of Pro?osed Rulemaking_ in Docket No. 20681, 57 FCC 2d 368, 0 (7775); report and Order in Docket No. 21002, 66 FCC 2d 380, 402 n. 21 (1977); Memorandum Opinion and Order and Further Notice of Proposed Rulemaking in Docket No. 21002, 57 FCC 2d 569, 584 n. 27 (1979); Rport and Order in Docket No. 20272, 54 FCC M5, 863 (1975); First Report and Order in Docket Nos. 19554 and 18893, 52 FCC 2d 1, 67-8 (1975), vacated and remarried on other grounds sub nam. Home Box Office v. FCC, 567 F.2d 9 (1976), cert. denied, 98 S.Ct. 111. 20 Report and Order in Docket No. 20487, 57. FCC 2d 625 (1975). _fl Notice of Proposal Rulemaking in Docket No. 20681, 57 FCC 2d 368 (1975). ?�?/ At that time the ()anmission had in force rules limiting the numbers of distant signals cable system were eligible to carry. These rules were eliminated by the 0xnnission in 1979, thus permitting cable operators to carry as many distant signals as they wished. Report and Order in Docket No. 21284, 65 FCC 2d 9 (1979), aff'd sub nan: Malrite v. FCC, 652 F.24. 1140 (2d Cir. 1981).• • -13- 60561 We have pre-empted such regulation with the express intent of allowing the market place to function freely. j 17. Thus, the Commission has deliberately preempted state regulation of non-basic program offerings, both non-broadcast programs and broadcast programs delivered to distant markets by satellite. While the nature of that non-basic offering was (and still is) developing, the preemptive intent, and the reasons for that preemption, are clear and discernible. Today, the degree of diversity in satellite delivered program services reflects the wisdom of freeing cable systems from burdensome state and local regulation in this area. So-called "premium" offerings such as HBO, Showtime, and The Movie Channel, along with narrowcast channels such as Christian Broadcasting Network, Nickelodeon, and Black Entertainment Television manifest the rich variety available to cable subscribers under a policy of nonbasic preemption. 18. Second, it is also clear that our preemptive jurisdiction logically extends to nonbasic services whether they are priced individually by channel or by program or as a group in one or more tiers of service. 19. "Tiering" of nonbasic subscriber services is a develop- ment of the late 1970's. 2..4.7Tiering became feasible through the expansion of domestic satellite service, the expanded channel capacity on new or upgraded cable television systems, and the emergence of cable in the major metropolitan areas. The development of tiered services does not, however, connote that the market for cablecast video services is now mature, and that the premise for federal preemption has disappeared. Plainly, the market for cablecast video services is still volatile and rapidly changing in response not only to the specialized programming needs of cable subscribers but also to new competitive challengers in the overall video services market. 2_5.7 And the video field has grown since preemption was enunciated. In restating our preemption of regulation of nonbasic subscriber services in 1975 we cited as their competitive alternatives free television, motion pictures, live sports, and other entertainment events. Today the ranks of competitive alternatives have swelled to include video cassette, video disc, video games, home computers, low power television, multi-channel MDS, SMATV, and DBS, most of which enjoy great pricing flexibility. 23 Notice of Proposed Rulemaking in Dxket No. 20681, ,supra at 370. (eanphasis added). • 24 Telepranpter Corporation, 87 FCC 2d 540, 561 n.69 (1981). 25/ The demise of CBS Cable, the Entertainment Channel, and 1 leFrance and the merger of Satellite News Channels into Cable News Network in the last year reflect the developmental character of cable program services. • • -14- 60562 20. - These vigorous and growing competitors in the video services market pose a new challenge to nonbroadcast programming entreprenuers and cable system operators. This challenge is not, as it formerly was, simply to find new services that subscribers would find attractive, but rather to package or combine services to maximize attractiveness to consumers in different markets and in anticipation of the penetration of those local markets by other, new services. In this sense it is fair to say that the development of different. individual channels of nonbasic subscriber services represents but one phase -- the first phase -- in the evolution of the market for cable video. The next phase -- the one which has just recently begun -- is packaging services, at appropriate prices, to meet consumer demand in a myriad of localities featuring different combinations of competitive video alternatives. The current situation requires that system operators and nonbroadcast programming entrepreneurs retain maximum flexibility: in the marketplace to experiment with types of program offerings and methods to pay for such programs, i .e. , advertisers, subscriber fees, network compensation, or a combination. 26/. Continued federal preemption is needed to preclude artifi is al and unnecessary skewing of the market that nonfederal regulation of entry and price could produce. 22/ 21. To suggest, as do PSC and the others, that nonfederal rate regulation should depend upon the manner in which a particular service is marketed or delivered, contradicts the very basis of the Commission's preemption policy. Indeed, allowing preemption to depend upon such a distinction would, as CATC has recognized (see paragraph 5, supra) , "create disjunctive practices in the marketplace," While this proceeding is directed primarily to issues involving state or local rate controls, we remain concerned with other types of regulations that may impede new cable services and burden interstate oarnunications. State controls over advertising on cable channels distributed by space satellite may both undercut the economic base for such services and render their operation on an interstate basis a practical impossibility. 1st have in the past stated that local franchise provisions or regulations that prohibit advertising in a manner consistent with our rules are preempted. Federal Preemption of CATV Regulations, supra note 16. The types of regulation promulgated by the state of Oklahoma in Oklahoma Telecasters Ass'n v. Crisp, 699 F.2d 490 (10th Cir. 1983), petition for cert. filed sub. nam Capital Cities Cable, Inc. v. Crisp, No. 82-1795, *ad thus undernine the goals of preemption articulated by the Commission in this and earlier cases. 27 An unregulated marketplace facilitates the development of tiered services in several ways. Fbr example, it may be efficient for prospective subscribers to be able to sample a bundle of services by making a single transaction. Likewise, tiering may simplify and reduce the costs of billing subscribers. If tier prices are regulated, new programming may be discouraged by the fear that regulation would prevent its marketing at a compensatory price. Programmers may be moved to avoid tiering of those channels that are offered, sacrificing the transactions and billing efficiencies, and cable operators would be restricted in the marketing tools they can use to bring new services to the attention of subscribers. .f . -15- Competitive Standard Rulemaking Report and Order at para. 46. Absent a specific showing of a need for regulatory intervention -- a showing which PSC and other opponents have not made -- it is in the public interest for entrepreneurs and firms engaged in dynamic industries, such as video programming for cable television, to enjoy maximum flexibility in their responses to innovations and developments within the industry. See , e.g. , Teleprompter Corporation , 87 FCC 2d at 579 (separate statement of Commissioner Fogarty) . Accord, First Report and Order in CC Docket No. 79-252, 85 FCC 2d 1,75-11-§80) ; Further Notice of Proposed Rulemaking in CC Docket No. 79-252, 84 FCC 2d 445, 453-454 (1980) . 28/ Moreover, it appears that the existing competitive marketplace is sufficiently capable of imposing controls on pricing policies for auxiliary video services. Accordingly, we see no reason today to limit the scope of our preemption of state and local rate regulation of services not regularly provided to all subscribers, and we find that In re Proposed General Order No. 40, supra, is contrary -to our.preemption policy and hence of no force or effect . See Report and Order in Docket No. 20272, supra n.20. Accord, Telecable Associates, Inc. , Mimeo No. 2885, 51RR .2d 147, 152 ( 1982) ; Commercial Communications, Inc. , FCC 80-519, 81 FCC 2d 106, 118 ( 1980) . 22. In view of the foregoing, we find that grant of the declaratory ruling requested by CCTV is in the public interest. 23. Accordingly, IT IS ORDERED, That the "Petition for Special Relief Requesting Declaratory Ruling" (CSR-2269) filed February 3, 1983, by Community Cable TV, Inc. IS GRANTED. FEDERAL COMMUNICATIONS COMMISSION • • William J. Tricarico Secretary • • The need for such flexibility is further buttressed by the fact that, as CCC has noted (see note 7, su ra), most of the nation's cable systems are still twelve- channel systems. Broadcasting/Cablecasting Yearbook 1983 at D-1, D-3.