Federal Communications Commission Record FCC 89-365

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Federal Communications Commission Record FCC 89-365 5 FCC Red No.2 Federal Communications Commission Record FCC 89-365 mission also asked for comments on the standard to apply Before the in determining whether unlawful discrimination exists. In Federal Communications Commission addition, because the legislation makes unlawful discrimi­ Washington, D.C. 20554 nation by satellite carriers a violation of the Copyright Act, the Commission specifically asked for comments from the United States Copyright Office on any reported complaints of discrimination as prohibited by the new Gen. Docket No. 89-88 legislation. 5. In response to the Notice, nine entities filed com­ In the Matter of ments.13 In general, these comments provided information on the distribution of satellite delivered superstation and Inquiry into the Existence network station transmissions. In addition, commenters of Discrimination in the raised issues regarding the nature of the analysis that the Commission should make in its report to Congress. Most Provision of Superstation and satellite carriers argued that the Commission should only Network Station Programming compare contractual arrangements between satellite car­ riers and the various distributors to satellite earth stations. Other parties asserted that we should broaden our inquiry REPORT to include comparison of practices by satellite carriers with distributors to practices by satellite carriers with Adopted: December 28, 1989; Released: December 29, 1989 cable system operators who distribute programming to cable subscribers. The commenters also discussed their By the Commission: views on discrimination based on their interpretation of the scope of this proceeding. Congress instructed us to issue a report on unlawful discrimination by satellite car­ I. INTRODUCTION riers "against" distributors of programming to subscribers 1. In the Fall of 1988 Congress amended the Copyright for home viewing. 47 U.S.C. § 713; 17 U.S.C. § 119 Act,1 and directed the Federal Communications Commis­ (a)(6), (d). While the statutory language does not define sion to conduct three related studies with respect to sat­ the category of entities that might be receiving more ellite delivered superstation2 and network station 3 favorable treatment than these home satellite distributors, programming. These studies include: (I) a combined In­ i.e., the other side of the comparison to be made, the quiry and Rule Making to determine the feasibility of legislative history indicates that cable operators were at imposing syndicated exclusivity on the delivery of this least one such category. The House Judiciary Committee programming,4 (2) an investigation of the need for a stated: universal scrambling standard for satellite programmin~ and (3) this report on whether and the extent to which It should be stressed that subsection 6, by its express 6 there exists unlawful discrimination by satellite carriers terms, only applies to discrimination by satellite against distributors7 in the provision of superstation and carriers against distributors of programming to earth network station programming for private home viewing8 station owners for private home viewing. It does not 9 by earth station ("dish") owners. extend to the distribution of signals to cable televi­ 2. As the initial step in preparing this report on dis­ sion headends. To the extent that it is of probative crimination, the Commission released a Notice of Inquiry value, a reviewing court could. however. weigh (Notice) 10 soliciting comments and requesting informa­ prices charged for the delivery of signals to cable tion on the issues involved. The focus of the Notice was headends and compare them to prices charged for on arrangements between satellite carriers and distribu­ direct distribution to dish owners in determining tors. Although the Commission required contracts among whether there is discrimination under the Commu­ those entities to be filed, it did not require contracts nications Act of 1934 and the rules of the FCC. 14 between satellite carriers and others, such as cable televi­ sion systems. Based on the record compiled in response to This type of comparison also comports with our general the Notice, we have prepared this report and will forward public interest concern over the nature of competition in it to Congress. the satellite cable programming distribution market and 3. As directed by Congress, the Commission is consider­ the possible negative impact on consumers of any ing here whether satellite carriers are discriminating un­ anticompetitive behavior. Our inquiry has produced dis­ lawfully against distributors in providing superstation and turbing evidence indicating the existence of discrimina­ network station programming for private home viewing tion by satellite carriers against distributors to earth by earth station owners. These terms are defined by the stations in favor of cable operators who distribute to cable SHVA. The report does not extend to the distribution of subscribers. Because we have determined that this in­ other, non-broadcast station, programming. 11 Moreover, formation presents the possibility of a significant problem, this report does not examine any possible discrimination we are initiating a subsequent proceeding to determine against end user earth station owners because they are not whether this discrimination is justified, and if not, what distributors.12 remedial action is necessary. 4. In order to ascertain to what extent unlawful dis­ 6. We reach the following conclusions in this report: crimination against distributors may exist, in the Notice the Commission requested comments on the structure and operation of the distribution market for superstation and network station satellite-to-home programming. The Com- 523 FCC 89-365 Federal Communications Commission Record 5 FCC Red No.2 (a) Satellite delivered superstation and network sta­ was developing competitively and that there was no rea- tion programming is accessible to home earth sta­ son, at that t1me,. for government mterventlon.. 22 Th e tion users both directly from satellite carriers and record compiled indicated that programming, including through a variety of entities servicing them as distri­ superstation programming, was accessible by home dish butors; owners and that prices for this programming were com­ (b) Based on the evidence in this record, there parable to, or lower than, prices charged to cable sub­ appears to be no general pattern of unlawful dis­ scribers.23 With respect to distributors, the scrambling crimination by satellite carriers among the various report indicated that there was evidence in the record to entities operating as distributors of superstation and suggest that the industry has an adequate number of dis­ network station programming to home earth sta­ tributors.24 After examining the supply and demand fac­ tions; tors influencing retail programming prices, the report concluded that some factors indicated that prices should (c) Evidence has been submitted indicating that sat­ be higher for home satellite earth station users wh~le ellite carriers are charging higher rates for others indicated they should be higher for cable subscnb­ programming provided to home dish distributors ers.25 than rates charged for cable distribution. The record 10. With respect to the market for superstation signals, contains little or no information as to the reasons the Second Scrambling Report noted that entry into this for these differences. making it impossible for us to segment of satellite-to-home programming distribution determine whether the higher rates are just and was relatively easy, that superstation programming was reasonable. Because this evidence raises serious con­ popular among subscribers, and that circulation figures cerns about the competitive nature of this market, indicated that services offering individual superstations and the impact on consumers, we intend to initiate could survive with relatively low subscriber counts and a further notice of inquiry in order to develop a without massive cable carriage.26 The Report found that more complete record on this issue. cable companies would therefore be limited in exercising any market power they mi~ht possess with respect to distribution of superstations. 7 Based on this and other II. BACKGROUND information the Commission concluded that the record did not contain evidence that the cable industry used its A. Development of the Satellite Delivered Television Pro· market power against the satellite-to-home earth station gramming Industry market and we therefore recommended against price reg­ 7. The Notice traced the development of the satellite ulation. 28 delivered television programming industry. which is sum­ marized only briefly here. In the early 1970's, all earth B. The SHVA stations were required to be licensed by the Commission 11. After the study on scrambling was completed, Con­ and were not extensively used for reception of television 15 gress adopted the Satellite Home Viewer Act (SHV A). The programming. As demand for video programming in­ SHVA, which prompted our current study. amended the creased. we authorized cable systems to construct earth Copyright Act to extend a compulsory copyright ~icense stations to receive television programming via satellite and to satellite carriers retransmitting the broadcastmg of authorized the retransmission of su perstation signals for 16 superstations and network stations to the public for pri­ receipt by cable systems. We also set new standards for vate home viewing and who charge a fee to either the
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