Court Upholds Leased-Access Rules

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Washington -- A federal court upheld the Federal
Communications Commission's decision to slash leased-access rates and rejected
arguments that the FCC deferred too much to cable operators by failing to cut rates
deeper.

The ruling was handed down July 24 by a three-judge panel
of the U.S. Court of Appeals for the District of Columbia Circuit, following oral
arguments in March, during which the judges expressed doubt about the challenges to the
FCC's rules.

A unanimous court held that the FCC's second set of
leased-access rules -- adopted after would-be leased-access programmers complained about
the first set -- were a reasonable interpretation of the 1992 Cable Act.

Under cable law, operators are required to set aside
between 10 percent and 15 percent of their channels, depending on system size, for
unaffiliated programmers that are willing to pay for access. Unused channels may be
occupied by operator-selected programming.

The FCC was charged with setting leased-access rates, while
at the same time ensuring that the rates did not adversely affect the financial
performance of cable operators.

At first, the FCC adopted a
"highest-implicit-fee" formula, which based leased-access rates on the
difference between what cable operators pay for traditional cable networks and the retail
price.

After complaints rolled in about the rates being too high
and leased-access channels being underutilized, the FCC brought down rates by switching to
an "average-implicit-fee" formula.

The commission also required cable operators to carry
leased-access programming on tiers with greater than 50 percent penetration; to lease time
in half-hour blocks; to prorate full-time rates for part-time rates; and to allow
programmers to resell their time to other unaffiliated programmers.

The FCC's average implicit fee, combined with the new
operational burdens on cable operators, "was a reasonable means of accomplishing the
statue's purposes," the court said.

The court rejected arguments by ValueVision International
Inc., a home shopping network and heavy buyer of leased-access time, that rates should be
based on a "real-world" explicit-fee approach -- namely, the fees that
cable-affiliated home shopping networks pay for cable carriage.

The court said the FCC rejected ValueVision's
10-cent-per-subscriber proposal -- which competed with other proposals that ranged from
one penny to 90 cents -- because the agency had no methodology for deciding which amount
of money would be correct and would promote the law's objectives.

The court also turned aside arguments by the Community
Broadcasters Association, which represented low-power TV stations, that the FCC's
"primary objective" was to promote leased-access programming, and not to protect
the financial interests of cable systems.

The court said the FCC was charged with balancing competing
interests, and "Congress never intended to ensure the financial success of
leased-access programmers."

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