Federal Communications Commission DA 99-733

Before the Federal Communications Commission Washington, D.C. 20554

In re Petition of: ) ) WXTV License Partnership, G.P. ) CSR-5327-M ) Petition for Special Relief Concerning ) Carriage of WXTV, Paterson, New Jersey, ) on Certain Cablevision Cable Systems ) in the New York ADI )

MEMORANDUM OPINION AND ORDER

Adopted: April 16, 1999 Released: April 16, 1999

By the Deputy Chief, Cable Services Bureau:

INTRODUCTION

1. WXTV License Partnership, G.P., licensee of commercial broadcast television station WXTV-TV, (Ch. 41--Paterson, New Jersey) ("WXTV") has requested that the Commission compel carriage of WXTV on its over the air channel in communities served by several Cablevision headends. 1 Cablevision filed an opposition to the petition to which WXTV filed a reply.

BACKGROUND

2. -·Pursuant lo Section 614 of the Communications Act ("Act") and implementing rules adopted by the Commission in its Report and Order in MM Docket 92-259,2 commercial television broadcast stations are entitled to assert mandatory carriage rights on cable systems located within the station's market. A station's market for this purpose is its "area of dominant influence," or ADI, as

1According to WXTV, the affected cable communities are served by various systems with headends in: Bayonne, Bergenfield, Elizabeth, Freehold, Jackson, Lakewood, Mahwah, Mamaroneck, Mine Hill, Oakland, Paterson, Piscataway, Seaside Heights and Wall/Asbury, New Jersey; Allamuchy, Amagansett, East Hampton, Farmingville, Hauppauge, Hicks-ville, Hicksville-Final, Huntington, Islip, Lynbrook, North Haven, North Salem, Riverhead, Shelter Island, Warwick, West Nyack, and Yonkers, New York; and Bridgeport and Norwalk, Connecticut (collectively referred to herein as the "Cable Communities"). Cablevision provides a similar list in Exhibit A of its Opposition. For purposes of this Order, we will rely on Cablevision's list.

2Broadcast Signal Carriage Issues, 8 FCC Red 2965, 2976-2977 (1993) ("Must Carry Order").

6482 Federal Communications Commission DA 99-733 defined by the Arbitron audience research organization. An ADI is a geographic market designation that defines each television market exclusive of others, based on measured viewing.

3. With respect to the channel number on which stations asserting must-carry rights are to be carried, Section 614(b)(6) of the Act and Section 76.57 of the Commission's rules provide commercial television stations with three possible options.3 The station may elect to be carried on: (I) the channel number on which the station is broadcast over the air; (2) the channel number on which the station was carried on July 19, 1985; or (3) the channel number on which the station was carried on January 1, 1992.4 The Act and the rules also provide that a broadcast station may be carried on any other channel number mutually agreed upon by the station and the cable operator.5

ARGUMENTS OF THE PARTIES

4. WXTV explains that it is a full-power television station licensed to Paterson, New Jersey, operating on Channel 41, and located in the New York ADI.6 The station states that it is the sole broadcast source of Univision Network Spanish-language programming to the New York ADI. It also states that all of the cable communities are located in the New York ADI. It is WXTV's intention to have its signal uniformly carried by New York ADI cable systems on its over-the-air channel so that the station is easier to locate and easier to market. 7

5. WXTV argues that Cablevision "dominates" cable television service in the New York ADI: through one or more subsidiaries, Cablevision provides cable television service to 52% of the total cable television subscribers, and 53% of the Hispanic cable television subscribers watching WXTV in the New York ADI.8 WXTV believes that securing a uniform channel position on Cablevision's systems would effectively secure a uniform channel position for WXTV throughout the market. WXTV states that Cablevision currently carries its signal on Channel 41 on approximately ten of Cablevision's 42 headends serving the New York market.9 WXTV asserts that, despite repeated requests by WXTV for on-channel carriage since 1993, carriage of WXTV is distributed among no fewer than 15 different cable channels on Cablevision systems market-wide; because of this, only 67% of Hispanic cable subscribers viewing

347 U.S.C. § 534(b)(6); 47 C.F.R. § 76.57.

447 U.S.C. § 534(b)(6);-47 C.F.R. § 76.57(a).

547 U.S.C. § 534(b)(6); 47 C.F.R. § 76.57(c).

6 WXTV petition at 2.

'Id.

8Jd. citing Nielsen Code, Cable On-Line Data Exchange as of October 17, 1998.

6483 Federal Communications Commission DA 99-733

WXTV in the New York ADI receive the station on Channel 41. 10 WXTV posits that if Cablevision carried its signal on Channel 41 throughout the market, as it is legally obligated to do, that percentage would increase to 94%. 11

6. WXTV explains that, except in Islip and Mt. Wurtsboro, where the station elected retransmission consent in 1993, the issue of a uniform channel position for its signal throughout the New York ADI was first raised in its initial must-carry election letters sent in 1993. 12 WXTV explains that, by these letters, it elected carriage on Channel 41. WXTV asserts that it was not carried on Channel 41 by a majority of the Cablevision systems serving the New York ADI at any time during the 1994-96 election period. WXTV states that it reiterated its request for on-channel carriage when, on September 24, 1996, it sent its second set of must-carry election letters to Cablevision. 13 In each of these letters, WXTV asserts that it notified Cablevision of its election of must-carry status on each of the Cablevision headends serving the cable communities; in addition, the letters informed Cablevision that WXTV would like to reach an agreement with Cablevision for carriage on a channel between 1and13, and that if this was not possible, then the station elected carriage on its over-the-air channel, Channel 41. WXTV asserts that Cablevision has been adamant that it cannot accommodate WXTV on a channel between 1 and 13. 14

7. WXTV asserts that while it sought to secure carriage of its signal on Channel 41 throughout the market, Cablevision announced that it is initiating a local cable news channel. 15 WXTV states that the new programming service is being carried on Channel 12, one of the channels that Cablevision told WXTV could not be made available to accommodate the station's carriage request. WXTV also states that in the Bronx, Cablevision's news channel has been advertising that it will carry news in Spanish on the weekends in direct competition with WXTV's own weekend news service. WXTV also asserts that Cablevision unilaterally repositioned its signal to Channel 57 on various systems in keeping with the operator's announced plans to classify WXTV as a foreign language programmer, and position it with foreign language cable programming services, without regard for its status as a local broadcast television station. WXTV states that its signal was being carried on Channel 41 on the portion of certain systems that had not been rebuilt and on Channel 57 on those portions that had been rebuilt,

10/d at 2-3.

11 /d at3.

15/d at 4.

6484 Federal Communications Commission DA 99-733 and that it was Cablevision's intent to move its signal to Channel 57 on the entire system at the conclusion of the rebuilding project. 16

8. WXTV states that it made a written demand for carriage on channel 41 on October 6, 1998, and advised Cablevision of its obligation to commence carriage of WXTV as requested within 30 days or state in writing its reasons for failing to do so. 17 WXTV asserts that Cablevision responded to the request by refusing to carry the station on channel 41 and hinted of a non-binding proposal that in the future, as systems are rebuilt, its signal may be moved to an advantageous channel position. 18

9. WXTV argues that carriage of its signal on any channel other than its requested over-the- air channel in this case cannot be excused. 19 WXTV argues that there is no bona fide allegation that its signal quality is inadequate at system headends serving the cable communities, nor that the satellite programming services currently carried on Channel 41 have a legal right to that channel.20 WXTV also states that it has expended considerable sums to market itself throughout the New York ADI and Cablevision's actions in this matter have frustrated such efforts. According to WXTV, Cablevision's actions have caused it to incur substantial additional costs to promote the station's existence to its viewers.21

10. In it opposition, Cablevision first argues that WXTV's complaint should be dismissed because it fails to state fully and precisely all pertinent facts concerning its request for on-channel carriage, and fails to include all steps taken by the parties to resolve the dispute.22 Cablevision asserts that while WXTV has sought carriage on Channel 41 throughout the New York ADI since its initial must-carry elections in 1993, WXTV has willingly engaged in discussions for carriage on other channels for the vast majority of the period at issue.23 In its continued negotiations with WXTV, Cablevision asserts that it has offered various channel positions in an attempt to accommodate WXTV's desire for uniform channel

16 /d. Among the systems on which WXTV has been repositioned to Channel 57 or has been informed it will be repositioned to Channel 57 are: Jackson, Freehold, Huntington, Hicksville, Islip, Lakewood, Lynbrook and Norwalk.

17 Id and Exhibit A.

18/d at 5 and Exhibit B.

19/d at 6.

21/d

22Cablevision Opposition at 3.

6485 Federal Communications Commission DA 99-733

position across the New York ADI, and WXTV has willingly engaged in such discussions.24 Cablevision explains that it is developing a uniform channel line-up plan for its cable systems in order to eliminate having 40 different channel line-ups in 20 systems across the New York ADl.25 In so doing, Cablevision has identified channels 21-30 and channels 55-70 for broadcasters, in addition to channels 2, 4, 5, 7, 9, 11 and 13 where broadcasters have historically been carried, in its new channel line-up.26 According to Cablevision, such a conversion is tentatively scheduled for completion in the year 2000, with the majority of systems being rebuilt in mid-1999. As systems are rebuilt, each will convert to the new uniform channel line-up. Cablevision has offered, for example, to carry WXTV uniformly across the New York ADI on WXTV's choice of channels 22, 23 or 24, as soon as it converts its systems to a single channel line-up. 27 Cablevision states that it has already reached several similar agreements with other broadcasters. Cablevision states that it has engaged in several positive negotiating sessions with WXTV to discuss this alternative, but notes that the station sought to impose certain conditions on its acceptance of these channel positions that Cablevision could not accept. 28 Cablevision asserts that it was only recently that WXTV rejected Cablevision's offer, and threatened that unless it received a channel position between channels 1-13, it would file a must-carry complaint at the Commission to enforce channel 41 placement everywhere.29

11. Cablevision argues that WXTV's alleged alternative -- placement on channels 1- 13 -- is no alternative at all.3° Cablevision asserts that, contrary to claims in a recent letter to the Commission from Henry Cisneros, the President of Univision Communications, which indirectly owns and operates WXTV, Univision's offer does not allow Cablevision fourteen channels from which to choose how to meet WXTV's demand.31 Cablevision explains that other broadcasters exercising channel positioning rights in the New York area already occupy half of those channels( 2, 4, 5, 7, 9, 11 and 13) and in many other Cablevision New York area systems, it has agreed to carry other broadcasters entitled to must-carry on several of the remaining VHF channels.32 Cablevision further explains that the remaining few channels are occupied either by pay cable services, which are difficult and expensive to move, or by highly rated

25/d. at 4.

29/d. at4-5.

30/d. at 5.

6486 Federal Communications Commission DA 99-733

cable networks who have occupied the same channel position for over a decade. Cablevision asserts that moving these services would result in substantial customer disruption and dissatisfaction.33

12. In its negotiations with WXTV, Cablevision asserts that it has tried to accommodate WXTV's request. Cablevision has explained that if it were to use addressable (i.e., interdiction) technology across the ADI when it converts its systems to the uniform channel line-up, it could accommodate WXTV's request for carriage on Channel 41 across the ADI.34 The operator explains that interdiction technology, which is currently used in many Cablevision cable systems, allows the operator to addressably jam channels it does not wish the subscriber to receive. In other systems, Cablevision states that it uses traps to filter out, or allow in, separate signals; the removal or placement of traps requires visits to each affected home for channel reconfigurations. Cablevision states that it· cannot commit to using interdiction technology, because since very few other cable operators use this more expensive means of providing a separately delineated broadcast basic tier, its continued manufacture is currently in question.35 Cablevision states that it will know in a few months which technology it will employ in its systems.

13. The operator asserts that it would be required to reconfigure nearly 40 channel line-ups in order to carry WXTV on channel 41 through the New York ADI. 36 Cablevision explains that, because channel 41 is located within the expanded basic tier, it has trapped the tier in various ways in 18 channel line-ups.37 In those particular channel line-ups, the total engineering costs of removing and replacing traps to park WXTV on channel 41 amount to nearly $4,000,000.

14. In each of the 18 channel line-ups using traps, Cablevision states that its employees must visit those subscriber addresses where channel 41 is trapped, and carry out one of several actions, depending on the current channel configuration of the system. Cablevision details which action must be taken in each system, based on the current channel configuration of the system and the present occupant of channel 41. These actions include:

(1) removing I trap; (2) removing·l trap and replacing it with 2 traps; (3) removing 1 trap, replacing it with 2 traps and swapping 2 channels;

,."3 3 /d. Cablevision asserts that WXTV's complaint reveals a possible motive for its sudden interest in causing it financial hardship: the operator's emergence as a potential competitor for Hispanic viewers through the carriage of a cable-originated Spanish language news channel. Id. at 6. Cablevision denies that has anticompetitive motives for its resistance to WXTV's on-channel carriage request.

34/d at 7.

35Id

36/d. at 8.

37 According to the operator, traps prevent theft of service and allow it to provide its customers with unscrambled expanded basic service. Id

6487 Federal Communications Commission DA 99-733

(4) removing 1 trap and replacing it with 3 traps; and (5) replacing the broadcast basic with a new trap38

According to Cablevision, each of the above options has a cost associated with the trap and an additional labor cost. Thus, in a 1 trap scenario, the cost would be $9.00 for the trap, and $15.50 for labor per affected address. In a 2 trap scenario, the cost would be $24.00 for the traps, and $15.50 for labor per affected address. In a 3 trap scenario, the trap cost would be $33.00 and labor $15.50 per affected address. Cablevision asserts that in three of those 18 channel line-ups, a special trap configuration would cost $75.00 for the trap, plus $15.50 for labor per affected address. 39

15. Cablevision explains that the action required in each channel line-up to accommodate WXTV's request depends on the current occupant of channel 41.4° Cablevision states, for example, if channel 41 is currently within a band of pay services on channels 40-50, and a particular customer has not subscribed to those services, the system is configured so that the pay service channels are trapped at each side.41 In order to make channel 41 an accessible broadcast channel, Cablevision asserts that it would have to remove those 2 traps, and replace them with a new trap configuration that traps channel 40, and channels 42-50, as well as place new traps around whatever new channel the pay service that has been moved will occupy, if none already exist for that channel.42 Cablevision further explains that, even in systems using the interdiction technology described above, some channels go beyond the range of the addressable jamming capacity of the technology. In those cases, if the channel moved from channel 41 needed to be protected, Cablevision would have to install new traps. Finally, in some systems, such as the Woodbury system, Cablevision states that it ha5 ordered special traps cut to the precise channel configuration of the system.43 In the Woodbury system, a new trap would have to be recut each time any channel repositioning is required, at significant expense. According to Cablevision, the fact that broadcasters are given the right to make new channel elections every three years means that these uncompensated costs are likely to be quite significant.44

38/d. at 9.

39/d. Cablevision explains that because the traps operate by reducing the signal to the point where the subscriber cannot receive it, the more closely cut, or precise, the trap needs to be (to protect a narrow range of capacity, such · as one channel), the more expensive the trap will be, because a less precise trap would affect channels abutting the protected channel. Therefore, as the number of traps needed in a particular situation increases, the precision, and thus the cost, of the required traps increases.

40/d. at 10.

43/d.

6488 /' Federal Communications Commission DA 99-733

16. Cablevision states that there are several thousand affected subscriber addresses in many of the systems affected by WXTV's request. In the Hauppauge system alone, Cablevision would have to visit nearly 27,000 subscriber addresses, resulting in costs well over $1,000,000, while in other systems, the compliance costs would total several hundred thousand dollars.4s Cablevision cites, for example, that reconfiguring the Monmouth - Wall/Asbury system would cost over $170,000; reconfiguring the Morris system would cost $215,000; and reconfiguring the Ramapo system would cost $446,000. According to Cablevision, in only three of the 18 channel line-ups affected would the cost for moving WXTV to channel 41 be under $50,000.46

17. According to Cablevision, when these costs are examined on a per-subscriber basis, the costs it would incur to comply with WXTV's request would be out of proportion to any alleged public interest benefit.47 Cablevision cites the following examples: (1) in the Monmouth/Seaside, New Jersey system, the costs per subscriber would be $14.14; the costs per affected subscriber would be $39.50; (2) in the Hauppauge, Long Island system, the costs per subscriber would be nearly $10, while the costs per affected subscriber would be nearly $40; and (3) in the Ramapo, New Jersey system, the per-subscriber costs would be over $31; the costs per-affected subscriber would be $48.50.48

18. Cablevision asserts that the costs are not limited to engineering expenses associated with channel repositioning. There are both tangible and intangible customer service costs that Cablevision believes it will incur as a result of accommodating WXTV's request.49 Cablevision asserts that its customers are dissatisfied with, and inconvenienced by, any channel repositioning and such moves result in a large number of calls to Cablevision's customer service representatives.so Further, Cablevision states that its subscribers generally do not understand that channel repositioning to accommodate must-carry broadcast stations is not within Cablevision's control; thus, it must absorb the negative goodwill that results each time a channel line-up is rearranged. Cablevision also asserts that it will suffer a loss if its budgets and business plans are disrupted by having to accommodate WXTV's request.s 1

45/d. at 11.

47/d. at 12.

48/d. at 13. A complete table of costs per-subscriber and costs per-affected subscriber is attached as Exhibit C to Cablevision's Opposition.

49/d. at 12.

sold.

51 /d. at 13.

6489 Federal Communications Commission DA 99-733

19. Cablevision also claims that Fifth amendment constitutional concerns require rejection of WXTV's complaint.52 Cablevision argues that the Commission's must-carry regulations constitute an uncompensated taking of private property in violation of the Fifth Amendment to the Constitution. It asserts that it is the Commission's obligation to construe its regulations that underlie this dispute so as to avoid "the grave constitutional concerns raised in instances, such as this, where a broadcaster asks the Commission to require Cablevision to expend nearly four million dollars in engineering costs alone to accommodate the channel positioning request of one broadcaster. "53

20. Cablevision argues that the must carry rules force cable operators to give up the use of valuable channel capacity to unaffiliated broadcasters without compensation in return.54 According to Cablevision, whether viewed as a per se physical taking of private property, or a per se regulatory taking that deprives property owners of all viable use of their property, the must-carry regulations violate the Fifth Amendment.55 Cablevision asserts that Supreme Court precedent compels a finding that the must carry regulations invade and appropriate the private property of cable operators for the exclusive use of broadcasters, denying them any use of certain of their property, and thus effect a per se physical and regulatory taking.56 To support its position, the operator cites the Supreme Court's 1982 Loretto decision57 ; in this case, the Court held that because the power to exclude unaffiliated persons from private property "has traditionally been considered one of the most treasured strands in an owners bundle of property rights", even a "minor but permanent physical occupation of an owner's property authorized by government constitutes a physical taking 'of property for which just compensation is due. "58 In Loretto, apartment owners contested a state law that allowed cable operators merely to attach cable wires to the outside of their buildings. Cablevision argues that the must carry rules specifically allow unaffiliated broadcasters to occupy a far greater portion of the cable operators' property than that at issue in Loretto, up to one-third of the cable operator's channel capacity -- for their own personal use.59

21. Cablevision asserts that channel capacity is the essence of a cable operator's property. It states that a cable operator's traditional video business involves selling one or more packages of its

52/d at 14.

55 /d at 14-15.

57Loretto v. Teleprompter Manhattan CATV Corp., 458 U.S. 419 (1982).

58Cablevision Opposition at 16 citing Loretto, 458 U.S. at 421, 435.

59Cablevision Opposition at 16.

6490 Federal Communications Commission DA 99-733

cable channels.60 It further states that, cable channels, like real estate property, are more or less valuable depending on the neighborhood in which they are located; the more valuable cable channels -- those located lower in the channel line-up, or in neighborhoods with the most popular and significantly viewed channels -- are, again like real estate, more scarce, and cable programmers compete for these spots in the marketplace.61 But, under the must-carry regulations, Cablevision asserts, broadcasters are able to claim this property at will for their own use. 62

22. Cablevision also argues that governmental regulatory actions resulting in direct interference with the use of property can constitute a regulatory taking.63 Cablevision states that to the extent regulations deny all economically beneficial or productive use of the property, they are a per se regulatory taking.64 The operator states that the must-carry rules accomplish precisely this result. Cablevision explains that a cable operator's channel capacity is made up of specific bands within its cable lines that are restricted to a single use; thus, when a broadcaster occupies a cable channel, the cable operator can make no further use of that channel, and the operator is deprived of that property altogether.65 Cablevision argues that the wholesale nature of the deprivation -- particularly in light of the fact that the must carry regulations operate not by restricting use of the property, but by taking the property's intended use and granting the control and benefits of that use to an outside party -- confirms that the must-carry regulations effect a per se regulatory taking.66

23. Cablevision argues that any alleged legitimate interest in preserving local broadcasting cannot justify a taking.67 Cablevision asserts that Congress has sought to justify the must-carry rules by citing to the public interest in preserving local broadcasting as a viable option but the Supreme Court has explicitly rejected this defense in both the regulatory and physical taking context. Cablevision asserts that the Court has held where government regulations compel property owners to suffer a physical invasion of their property, "no matter how minute the intrusion, and no matter how weighty the public purpose behind it, such a regulation is a per se taking in the absence of just compensation. "68 Cablevision asserts

63/d citing Keystone Bituminous Coal Ass'n v. Duncan, 771 F.2d 707, 712 (3rd Cir.) aff'd, 480 U.S. 470, 488 (1987).

64Cablevision Opposition at 17 citing Lucas v. South Carolina Council, 505 U.S. 1003, 1015 (1992).

65Cablevision Opposition at 17.

67/d at 17-18.

68Cablevision Opposition at 18 citing Lucas, 505 U.S. at 1015.

6491 Federal Communications Commission DA 99-733 that the D.C. Circuit, in its 1994 Bell Atlantic Tel. Co. v. FCC decision, also confirmed that a permanent physical occupation authorized by the government is a taking without regard to the public interests that it may serve.69 Cablevision explains that in Bell Atlantic, the D.C. Circuit held that the Commission's physical co-location rules, which granted competitive access providers the right to exclusive use of a portion of the local exchange carriers' central offices, resulted in such a government-authorized permanent physical occupation and thus a per se physical taking under the Fifth Amendment.70 According to Cablevision, the must-carry rules grant of a cable operator's channel capacity to unaffiliated broadcasters constitute a government-authorized invasion and occupation of private property and, unlike the physical co-location rules, the must-carry rules provide for no compensation whatsoever to cable operators. 71

24. Cablevision explains that there has been considerable discussion in recent years about the takings concerns raised by the must carry regulations. 72 Indeed, Cablevision states that it voiced its concerns regarding this potential constitutional violation since at least 1993, when it articulated Fifth Amendment arguments to the Commission in response to a must-carry complaint filed by television station WNYC. 73 Cablevision asserts that other legal authorities believe a takings challenge to the must-carry requirements may have significant merit. Cablevision cites, for example, Judge Williams, in his dissent to the first district court decision upholding the First Amendment challenge to the must-carry requirements:

Because of my conclusion on the First Amendment challenge to the must-carry provisions, I do not reach the contention that those provisions also represent an unconstitutional taking of cablecasters property in violation of the Fifth Amendment. I do not, however, regard the claim as frivolous. The creation of an entitlement in some parties to use the facilities of another, gratis, would seem on its face to implicate Loretto v. Teleprompter Manhattan CATV Corp., where the Court struck down a statute entitling cable companies to place equipment in an owner's building so that tenants could receive cable television. The NAB responds that Loretto is limited to physical occupation of real property .... But the insertion of local stations' programs into a cable operator's line-up presumably is not a metaphysical act, and presumably takes place on real property.

NAB also argues that cable operators have no historically rooted expectation of compensation for the right to use their cable services evidently because of (1) local governments practices of imposing carriage requirements as a condition of granting franchises and right-of-way access, and (2) prior similar federal impositions, seemingly granted in exchange for privileged entitlements to retransmit broadcasters' signals. Both

69Cablevision Opposition at 18 citing Bell Atlantic Tel. Co. v. FCC, 24 F.3d 1441, 1445 (D.C. Cir. 1994).

7°Cablevision Opposition at 18 citing Bell Atlantic, 24 F.3d at 1445-47.

71 Cablevision Oppo;ition at 18.

12Id at 19.

73 /d citing Cablevision Systems Corp. Opposition to Must Carry Complaint, CSR 4148-M (filed Nov. 24, 1993).

6492 Federal Communications Commission DA 99-733

seem of limited relevance because the local governments are not involved here, and the federal government has removed the quid for which it now seeks a quo. 74

25. Cablevision argues that the channel positioning requirements exacerbate the Fifth Amendment violation occasioned by the must-carry requirements.75 Cablevision asserts that, by allowing broadcasters to select the precise bands of channel capacity they obtain through the must carry regulations, the rules not only cause cable operators to lose their property,"but also add significant extra uncompensated costs for cable operators. "76 Cablevision further argues that since the rules allow broadcasters to select from a number of channel positions, and to amend their channel preference elections every three years, the potential costs to the cable operator from all broadcaster channel elections are "enormous. "77

26. Cablevision asserts that broadcasters not only occupy the channel capacity they select, but their choice also impacts significant other bands of capacity, since operators are precluded from organizing those channels into logical tiers in accordance with their business plans.7s Cablevision states, for example, that a single channel positioning demand can prevent a cable operator from creating thematically clustered programming blocks. Cablevision argues that all cable operators are expected to relinquish any control over the arrangement of their programming to satisfy the demands of each broadcaster every time that broadcaster makes a channel positioning request. 79 According to Cablevision, such requirements serve only to stifle creativity and progress in the marketplace.

27. Cablevision argues that because the must-carry channel pos1t1oning requirements raise constitutional concerns, and in light of the Commission'sobligation to construe statutes and its regulations in a manner that minimizes constitutional conflict, the Commission cannot set the barrier too high to obtain a waiver of those rules.so Cablevision argues that the Commission should waive its channel positioning requirements when an operator makes a reasonable showing of substantial hardship and impact under the Commission's standards, and demonstrates compliance with the spirit of the rules.s 1 Cablevision asserts that it has met those standards in this case by showing that granting WXTV's request will result ',

74Cablevision Opposition at 20 citing Turner v. FCC, 819 F.Supp. 32, 67, n.10 (D.D.C. 1993) (Williams, J. dissenting).

75Cablevision Opposition at 21.

7s/d at 22.

80/d

81 /d. at 23.

6493 Federal Communications Commission DA 99-733

in substantial cost and hardship to the company, and that there is no evidence that Cablevision's intent is to evade the Commission's rules.82 The operator concludes by stating that the Commission should waive Cablevision's channel positioning obligations with regard to WXTV, at least with respect to those systems where the costs are particularly burdensome, and dismiss or deny WXTV's complaint in all other respects. 83

28. Cablevision asks that it be allowed a reasonable time to come into compliance if it is required to carry WXTV on Channel 41 on all of its New York ADI systems because compliance with the request would require substantial time and expense to reconfigure the 18 channel line-ups affected. Cablevision therefore requests that the Commission grant it nine months to come it compliance with any possible order. 84

29. In its reply, WXTV first notes that Cablevision has never challenged: (1) that WXTV is a television station in the New York ADI; (2) that the Cable Communities are also in the New York ADI; (3) that WXTV provides a good quality signal at the headends in the Cable Communities; nor (4) that WXTV' s over-the-air channel is Channel 41. 85 WXTV states that it therefore qualifies for carriage on Channel 41 of Cablevision's systems and Cablevision's Opposition in no way negates WXTV's right to carriage on that channel under the Act.

30. WXTV argues that Cablevision forfeited the right to request a waiver five years ago when it chose to ignore its must carry obligations rather than seek special relief from those obligations from the Commission based on its claimed undue burden. 86 WXTV asserts that the information provided by Cablevision to support its belated waiver request is inadequate to permit the Commission to determine whether the operator's alleged costs justify any waiver of the channel positioning requirements.87 WXTV also asserts that the information provided by Cablevision demonstrates that the bulk of Cablevision's estimated costs attributable to carrying WXTV on Channel 41 are attributable to only a few of the operator's systems. In any event, WXTV argues that there is no such exception to the channel positioning requirement in the Cable Act or the Commission's regulations. 88

31. WXTV asserts that Cablevision's own estimates show no cost of carrying WXTV on Channel 41 at all on several systems, yet no explanation is offered for its failure to comply with its

82/d. at 23-24.

85WXTV Reply at I.

86/d. at 2.

87/d.

6494 Federal Communications Commission DA 99-733

carriage obligation on these systems. WXTV specifically states that on 19 systems, no action is required and there is no cost associated with placing WXTV on Channel 41. 89 Accordingly, WXTV argues that Cablevision should be ordered to place WXTV on Channel 41 on these systems immediately - not another nine months from now as Cablevision requests.90 WXTV further states that, with respect to another 12 systems,91 Cablevision's claimed per-subscriber costs to comply with WXTV's channel position rights are less than or comparable to the per-subscriber costs that the Commission has approved in other cases such as Greater Dayton Public Television, where the Commission required TCI to spend $4.52- per subscriber to accommodate a broadcast station's channel positioning request.92 Cablevision asserts that of all the Cablevision systems involved in this proceeding, only six raise any cost issue. WXTV argues that the Commission should not permit Cablevision to delay implementation of carriage of its signal on Channel 41 on other systems where there is no cost barrier, particularly given that Cablevision itself has already delayed over five years in complying.93

32. WXTV argues that the Commission should not allow Cablevision to benefit from its failure to comply with the law. 94 The station asserts that had Cablevision complied with the law at the time WXTV made either of its elections, it could have avoided the costs it now claims it will incur by removing-cable programming services it added on Channel 41 after WXTV made its election.95 The same is true of the customer dissatisfaction that Cablevision claims will affect it. WXTV further asserts that had Cablevision placed WXTV on Channel 41, the only one of the current occupants of Channel 41 that has any legal right to it, at the time it (1) developed its initial October 6, 1993 line-ups, (2) added the cable programming service currently on Channel 41 or even (3) rebuilt each system, the Channel 41 repositioning would have been only one of several occurring at the same time and any customer

89ld at 3. These systems are: East End East Hampton, Rockville Center, Malvern, Islip, East End Riverhead Optimum, New York City, Norwalk Optimum, Bridgeport Optimum, Cross River, Yonkers-Optimum, Yonkers­ Essential, Bayo~ne, Bayonne:-Optimum, Bergen-Optimum, Hudson-Optimum, TCI-Hamilton, TCI-Hamilton-Rebuild, TCI-Oakland-Rebuild, and TCI-Rockland.

91 According to WXTV, these systems include the Woodbury Optimum Syosset, East End Riverhead Old Wire, Monmouth-Millstone, Monmouth-Optimum, TCI-Oakland and TCI-Tri-System systems, where Cablevision's costs of compliance would be well less than half the amount approved in Greater Dayton Public Television, and on the Monmouth-Wall/Asbury, TCI-Morris, TC I-Elizabeth, TC!-Paterson, TC I-Westchester and TC I-Brookhaven systems, where the costs would approximate those approved in that case.

92/d at 3-4.

93 Jd at 4.

6495 Federal Communications Commission DA 99-733 dissatisfaction with respect to a repositioning of WXTV would have been minimal and overridden by customer satisfaction with the other actions taken simultaneously.96

33. WXTV argues that Cablevision has failed to establish that the channel positioning implementation costs will substantially impact the systems involved.97 While Cablevision claims per­ subscriber costs of compliance as high as $31.00 on one system, WXTV claims that the operator has failed to show, as required, how that cost would affect its investment in and revenues from that system.98 WXTV states that even if Cablevision's claimed costs of compliance were accurate and not the fault of Cablevision itself, it is worth noting that when Cablevision acquired 830,000 of its subscribers from TCI, it paid a reported $1 billion, or more than $1,000.00 per subscriber.99 WXTV believes that Cablevision's cost of compliance is therefore minuscule compared to the value of the systems at issue.

34. WXTV argues that Cablevision's Fifth Amendment challenge to the Cable Act should be ignored. 100 WXTV claims that the constitutional argument is nothing more than an untimely Petition for Reconsideration of the Commission's adoption of must-carry regulations. 101 WXTV notes that the must carry provisions of the Cable Act have already withstood constitutional scrutiny by the U.S. Supreme Court. It adds that while the challenge in that case was brought on First Amendment grounds, the Court could hardly have permitted the Cable Act to stand had it really believed that it was unconstitutional on Fifth Amendment grounds. 102 WXTV nevertheless argues that there is no basis for finding that the must carry provisions are unconstitutional. WXTV asserts that the cable television industry is highly regulated, and as the Commission has recognized, cable operators are aware of the pervasive nature of the regulation of the industry and the likelihood that new or changed requirements will impact them. 103 WXTV argues that the mere fact that the must carry or channel positioning requirements might exact some financial toll from cable operators does not render the requirements a taking any more than the requirement that broadcasters offer their lowest unit rate to political candidates constitutes a taking. 104

98/d. at 6.

ioo/d. at 7.

101/d.

103 Jd.

104/d. citing Andrus v. Allard, 444 U.S. 51, 65 (1979) ("Suffice it to say that government regulation--by definition--involves the adjustment of rights for the public good. often this adjustment curtails some potential for the use or economic exploitation of private property. To require compensation in all such circumstances would

6496 Federal Communications Commission DA 99-733

35. WXTV argues that Cablevision overlooks the many forms of compensation it receives for complying with the carriage regulations. 105 WXTV states, for example, that Cablevision is allowed use of public rights-of-way which permit the operator to conduct its business and that it has been provided a public franchise that allows it to charge the public subscriber fees for video programming. 106 WXTV argues that Cablevision receives a benefit from being allowed to carry local broadcast signals which result in increased subscribership or increased subscriber loyalty from subscribers who wish to view both their local broadcast stations and cable programming without having to make complicated equipment switches to do so, or from those who may receive a better quality signal via cable than via a set-top antenna. 107 WXTV asserts that even if the must carry rules could be considered a taking, it is certainly not an uncompensated one. 108

36. With specific regard to WXTV, the station states there are no special facts that would make application of the channel positioning requirements to Cablevision a taking. 109 WXTV asserts that there is no cost involved in placing WXTV on Channel 41 in more than half of Cablevision's systems. WXTV adds that any of the other costs involved likely have resulted from, or are greater, because of Cablevision's past failure to comply with the regulations.

37. WXTV also argues that Cablevision's claim that it will be "victimized in the future" by WXTV and other broadcasters changing their elections, are unavailing. 110 WXTV states that television stations can only change their elections during the election periods, which occur three years apart; thus, Cablevision has known for two and one-half years now what channel every station in the market wishes to be carried on and could move to enforce. 111 In any event, WXTV argues that it does not wish to be moved from channel to channel every election cycle.

38. With regard to Cablevision's complaint that enforcement of the station's channel positioning rights thwarts the operator's efforts to establish a tiered line-up throughout the market, WXTV argues the following. First, under the Cable Act, Cablevision has no right to implement such a line-up

effectively compel the government to regulate by purchase.")

105 /d at 8.

107/d

108/d

llOJd. at9.

6497 Federal Communications Commission DA 99-733

unless it secures channel positioning agreements with the broadcasters it carries. 112 WXTV also asserts that Cablevision has never offered a viable option to WXTV and only began negotiating with WXTV long after its planned line-up was in the implementation phase. 113 Finally, WXTV asserts that had Cablevision sought a uniform channel positioning agreement earlier, its line-up would not be in jeopardy. 114

39. WXTV argues that Cablevision's claim that it has attempted to negotiate a uniform channel position with the station is "pure fabrication." 115 The station explains that following its 1996 must-carry/retransmission consent elections, it attempted to initiate discussions with Cablevision regarding the disposition of those elections and its efforts to obtain a uniform channel position throughout the market. 116 According to the station, at no time during WXTV' s extensive efforts to contact Cablevision and discuss its channel position rights did Cablevision cooperate or present any viable solution to the current situation. 117 WXTV asserts that the channel positioning choices Cablevision has offered, and the implementation schedule it has discussed, would not cover all of Cablevision' s systems and would prevent WXTV from enforcing its channel position rights until the end of the current three-year election period. 118 As Cablevision' s proposals did not provide WXTV with a uniform channel position throughout the market, WXTV states that it continued to push for an agreement which would provide the necessary uniform channel position. 119 WXTV states that the parties finally reached an oral agreement under which Cablevision agreed to move WXTV to Channel 41 on each of its systems as they were rebuilt, but in no event later than July I, 1999. 120 WXTV states that Cablevision agreed to this timetable because it would permit the systems to conduct the necessary repositionings in conjunction with its roll-out of system-by­ system upgrades already in progress. WXTV asserts, however, that after a written agreement containing these terms was created, Cablevision refused to sign it. 121

i 13 /d. at 10.

t16/d. at 11.

119/d. at 11-12.

120 Id. at 12.

6498 Federal Communications Commission DA 99-733

40. WXTV argues that Cablevision should be ordered to comply immediately and fined a substantial amount for its past failure to comply with the law. 122 In response to Cablevision claims that it should be granted an additional nine months to come into compliance with the Jaw, WXTV states that Cablevision has already had five years to comply and should not be permitted to continue to violate the law for yet another year. 123 WXTV notes that even in KDTV License Partnership, G.P. Against TC! Cablevision of California, Inc., a previous channel position case with issues similar to the instant case, the Commission only allowed TCI six months to come into compliance. 124 WXTV argues.that in no case should Cablevision be granted any additional time to come into compliance on the I 9 systems it acknowledges can carry WXTV as of this date without taking any action or incurring any costs. 125 In addition, WXTV argues that the Commission should assess the maximum penalty for violation of the broadcast station carriage requirements, $7,500.00, per day since October 6, 1993 when Cablevision should first have complied with the channel positioning requirements or sought a waiver of them. 126 WXTV asserts that unless the Commission renders noncompliance more costly than compliance, cable operators will continue to subvert the rules and take unfair advantage of broadcast stations. 127

DISCUSSION

41. It is not contested that WXTV is a qualified local commercial television station entitled to carriage pursuant to the must-carry provisions of the Cable Act, nor is it disputed that WXTV is entitled to elect its over-the-air channel as the channel it wishes to occupy on Cablevision's systems. The dispute is over whether Cablevision was warranted in not complying with these requirements as a consequence of insurmountable technical difficulties and costs of compliance.

42. With respect to 21 cable systems, 128 where it is documented that WXTV is not oh Channel 41 already, Cablevision has essentially conceded that on-air channel positioning is feasible because it has provided no technical or financial justification for not carrying the station on the channel position it had elected. With respect to these systems Cablevision will be ordered to comply with the statutory channel

122/d at 13_--

123/d

124/d. citing KDTV License Partnership, G.P., 13 FCC Red 10331 (Cab. Serv. Bur. 1998).

125WXTV Reply at 13.

121/d at 14.

128These systems include (1) East End East Hampton; (2) Rockville Center; (3) Malvern; (4) Islip; (5) Lynbrook; (6) East End Riverhead Optimum; (7) New York City; (8) Norwalk Optimum; (9) Bridgeport Optimum; (10) Cross River; (11) Yonkers-Optimum; (12) Yonkers-Essential; (13) Bayonne; (14) Bayonne-Optimum; (15) Bergen­ Optimum; (16) Hudson-Optimum; (17) TCI-Hamilton; (18) TCI-Hamilton-Rebuild; (19) TCI-Oakland; (20) TCI­ Rockland; and (21) TCI-Allamuchy. See Cablevision's Opposition at Exhibit A.

6499 Federal Communications Commission DA 99-733 positioning requirements as soon as practically possible or within 45 days from the release of this order, whichever is sooner. In this regard, we recognize that immediate compliance would conflict with the need to provide appropriate notice to subscribers of the change taking place. We view Cablevision's clear lack of compliance in these situations, and its cavalier approach to the basic statutory requirement, as a serious matter warranting initiation of a forfeiture proceeding. However, to avoid any further delay in this proceeding the forfeiture matter will be addressed separately.

43. Regarding 17 other cable systems, 129 where the documented costs of compliance with the station's channel positioning request are between $4000 and $500,000, the issue is whether the technical and cost obstacles to carriage of WXTV's signal on channel 41 are of such magnitude as to excuse compliance from the on-channel requirement. There is no dispute in the record of this proceeding that on-channel carriage as a technical matter can be accomplished on all of the systems in issue. The Act requires cable operators to comply with a station's channel positioning request, absent a compelling technical reason. The Commission has specifically indicated that the need to replace traps, or to reconfigure the basic tier, or to make technological changes are generally not grounds for a waiver. Nevertheless, in adopting the on-channel carriage rules, the Commission recognized that there might well be certain circumstances where the costs incurred by a cable operator to comply would be so compelling as to warrant a waiver. The question that we must answer in this instance is whether Cablevision has established such grounds.

44. The standard that has been established for compliance with the channel positioning rules is one of unreasonability rather than impossibility. The Commission has specifically stated that "a cable operator may present evidence as to the costs involved in remedying the technical problem." 130 The costs involved here are significant. However, Cablevision has not provided any information that would help to place these figures in the context of the financial capacity of the systems in question. Cablevision also did not document why the channel positioning request could not have been accommodated when its systems were being upgraded or demonstrate any attempt to mitigate the cost of WXTV's request as it engineers were in the field rebuilding the systems in question. It is important to stress here that an operator with a rebuild in progress, cannot unilaterally dictate which cable channel position a broadcast television station will be· on, as the Act is clear that the station is empowered to choose its channel position among the statµtory options. In the circumstances, given the statutory nature of the obligation at issue and the high waiver burden established by the Commission in its implementation documents, it cannot be concluded that Cablevision has met the waiver standard. Nevertheless, given the magnitude of the transitional difficulties involved and the nature of the system reconfiguration needed to comply, Cablevision will be given 180 days from the release of this order to come into compliance.

129These systems include: (I) Woodbury-Optimum-Syosset; (2) Woodbury-Optimum; (3) East End Riverhead-Old wire; (4) Monmouth Millstone; (5) Monmouth-Wall/Asbury; (6) Monmouth-Lakewood; (7) Monmouth-Seaside; (8) Monmouth-Optimum; (9) TCI-Elizabeth; (10) TCI-Morris; (I I) TCI-Oakland; (12) TCI-Paterson; (I3) TCI-Ramapo; (14) TCI-Warwick; (15) TCI Tri-System; (I6) TCI Westchester; and (17) TCI Brookhaven. See Cablevision's Opposition at Exhibit A.

130Memorandum Opinion and Order in MM Docket 92-259, 9 FCC Red 6723, para. 57 (I994).

6500 Federal Communications Commission DA 99-733

45. With respect to carriage on the Hauppauge system in New York, where the documented costs of compliance is $1,061,642, the facts are different from the other systems where there is a cost to comply with the channel positioning request. In this circumstance, it would cost Cablevision more than $1 million in equipment and labor to place WXTV on channel 41 on this system alone. 131 The trap replacement costs on a per-subscriber basis is documented to be $9.78. 132 More significantly, almost 27,000 cable subscribers will be affected and will have to be inconvenienced to accommodate Cablevision personnel who would need to remove one trap and replace two traps at their residences. Cablevision also reports that this particular system was upgraded many years ago before the dispute with WXTV began. Given the magnitude of the costs to the operator, the intensive labor involved to comply with the station's request, the harm to the public, and the fact that the costs to the system were not aggravated by Cablevision's action, we find that Cablevision has sufficiently met its burden, even absent data·on the costs to revenue ratio, and does not have to comply with WXTV's on-air channel positioning request. We note, however, that we expect Cablevision to comply with WXTV's channel positioning request if and when this particular system is rebuilt.

46. Cablevision raises concerns that an order by the Commission to carry WXTY on Channel 41 would severely exacerbate the taking of property issue a mandatory carriage obligation would impose. To the degree that Cablevision's arguments are intended as a frontal assault on the constitutionality of the on-channel carriage requirement of Section 614, it is a well-established principle of law that "regulatory agencies are not free to declare an act of Congress unconstitutional." 133 We note, moreover, that the Supreme Court has upheld the constitutionality of Section 614 in the only challenge to that provision. 134 Although the Commission may not have the authority to declare an act of Congress unconstitutional, and therefore refuse to enforce it, it has the obligation to construe statutes it enforces in a constitutional manner. 135 We have attempted to do that here. We are, however, obligated to execute and enforce the provisions of the Communications Act as enacted by Congress.

131 See Cablevision's Opposition at Exhibit A.

132See Cablevision's Opposition at Exhibit C.

133See Johnson v. Robinson, 415 U.S. 361, 368 (1974) ("Adjudication of the constitutionality of congressional enactments has generally been thought beyond the jurisdiction of administrative agencies").

134 Turner Broadcasting System v. FCC, 117 S.Ct. 1174 (1997).

135Cf. St. Martin Evangelical Lutheran v. South Dakota, 451 U.S. 777, 780 (1981) (courts must construe statute, if possible, to avoid raising doubts of its constitutionality).

6501 Federal Communications Commission DA 99-733

ORDERING CLAUSES

47. Accordingly, IT IS ORDERED, pursuant to Section 614 of the Communications Act of 1934, as amended (47 U.S.C. § 534), that the petition filed by WXTV License Partnership, G.P., licensee of television broadcast station WXTV(TV), Paterson, New Jersey, IS GRANTED IN PART AND DENIED IN PART.

48. IT IS FURTHER ORDERED THAT, Cablevision must comply with the schedule outlined in paragraphs 43-46 above.

49. This action is taken pursuant to authority delegated under Section 0.321 of the Commission's rules.

FEDERAL COMMUNICATIONS COMMISSION

William H. Johnson Deputy Chief Cable Services Bureau

6502