Sec. 76.1002  Specific unfair practices prohibited.

    (a) Undue or improper influence. No cable operator that has an 
attributable interest in a satellite cable programming vendor or in a 
satellite broadcast programming vendor shall unduly or improperly 
influence the decision of such vendor to sell, or unduly or improperly 
influence such vendor's prices, terms and conditions for the sale of, 
satellite cable programming or satellite broadcast programming to any 
unaffiliated multichannel video programming distributor.
    (b) Discrimination in prices, terms or conditions. No satellite 
cable programming vendor in which a cable operator has an attributable 
interest, or satellite broadcast programming vendor, shall discriminate 
in the prices, terms, and conditions of sale or delivery of satellite 
cable programming or satellite broadcast programming among or between 
competing cable systems, competing cable operators, or any competing 
multichannel video programming distributors. Nothing in this subsection, 
however, shall preclude:
    (1) The imposition of reasonable requirements for creditworthiness, 
offering of service, and financial stability and standards regarding 
character and technical quality;

    Note 1: Vendors are permitted to create a distinct class or classes 
of service in pricing based on credit considerations or financial 
stability, although any such distinctions must be applied for reasons 
for other than a multichannel video programming distributor's 
technology. Vendors are not permitted to manifest factors such as 
creditworthiness or financial stability in price differentials if such 
factors are already taken into account through different terms or 
conditions such as special credit requirements or payment guarantees.

    Note 2: Vendors may establish price differentials based on factors 
related to offering of service, or difference related to the actual 
service exchanged between the vendor and the distributor, as manifested 
in standardly applied contract terms based on a distributor's particular 
characteristics or willingness to provide secondary services that are 
reflected as a discount or surcharge in the programming service's price. 
Such factors include, but are not limited to, penetration of programming 
to subscribers or to particular systems; retail price of programming to 
the consumer for pay services; amount and type of promotional or 
advertising services by a distributor; a distributor's purchase of 
programming in a package or a la carte; channel position; importance of 
location for non-volume reasons; prepayment discounts; contract 
duration; date of purchase, especially purchase of service at launch; 
meeting competition at the distributor level; and other legitimate 
factors as standardly applied in a technology neutral fashion.

    (2) The establishment of different prices, terms, and conditions to 
take into account actual and reasonable differences in the cost of 
creation, sale, delivery, or transmission of satellite cable programming 
or satellite broadcast programming;

    Note: Vendors may base price differentials, in whole or in part, on 
differences in the cost of delivering a programming service to 
particular distributors, such as differences in costs, or additional 
costs, incurred for advertising expenses, copyright fees, customer 
service, and signal security. Vendors may base price differentials on 
cost differences that occur within a given technology as well as between 
technologies. A price differential for a program service may not be 
based on a distributor's retail costs in delivering service to 
subscribers unless the program vendor can demonstrate that subscribers 
do not or

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will not benefit from the distributor's cost savings that result from a 
lower programming price.

    (3) The establishment of different prices, terms, and conditions 
which take into account economies of scale, cost savings, or other 
direct and legitimate economic benefits reasonably attributable to the 
number of subscribers served by the distributor; or

    Note: Vendors may use volume-related justifications to establish 
price differentials to the extent that such justifications are made 
available to similarly situated distributors on a technology-neutral 
basis. When relying upon standardized volume-related factors that are 
made available to all multichannel video programming distributors using 
all technologies, the vendor may be required to demonstrate that such 
volume discounts are reasonably related to direct and legitimate 
economic benefits reasonably attributable to the number of subscribers 
served by the distributor if questions arise about the application of 
that discount. In such demonstrations, vendors will not be required to 
provide a strict cost justification for the structure of such standard 
volume-related factors, but may also identify non-cost economic benefits 
related to increased viewership.

    (4) Entering into exclusive contracts in areas that are permitted 
under paragraphs (c)(2) and (c)(4) of this section.
    (c) Exclusive contracts and practices.--(1) Unserved areas. No cable 
operator shall engage in any practice or activity or enter into any 
understanding or arrangement, including exclusive contracts, with a 
satellite cable programming vendor or satellite broadcast programming 
vendor for satellite cable programming or satellite broadcast 
programming that prevents a multichannel video programming distributor 
from obtaining such programming from any satellite cable programming 
vendor in which a cable operator has an attributable interest, or any 
satellite broadcast programming vendor in which a cable operator has an 
attributable interest for distribution to persons in areas not served by 
a cable operator as of October 5, 1992.
    (2) Served areas. No cable operator shall enter into any exclusive 
contracts, or engage in any practice, activity or arrangement tantamount 
to an exclusive contract, for satellite cable programming or satellite 
broadcast programming with a satellite cable programming vendor in which 
a cable operator has an attributable interest or a satellite broadcast 
programming vendor in which a cable operator has an attributable 
interest, with respect to areas served by a cable operator, unless the 
Commission determines in accordance with paragraph (c)(4) of this 
section that such contract, practice, activity or arrangement is in the 
public interest.
    (3) Specific arrangements: Subdistribution agreements.--(i) Served 
areas. No cable operator shall enter into any subdistribution agreement 
or arrangement for satellite cable programming or satellite broadcast 
programming with a satellite cable programming vendor in which a cable 
operator has an attributable interest or a satellite broadcast 
programming vendor in which a cable operator has an attributable 
interest, with respect to areas served by a cable operator, unless such 
agreement or arrangement complies with the limitations set forth in 
paragraph (c)(3)(iii) of this section.
    (ii) Limitations on subdistribution agreements in served areas. No 
cable operator engaged in subdistribution of satellite cable programming 
or satellite broadcast programming may require a competing multichannel 
video programming distributor to
    (A) Purchase additional or unrelated programming as a condition of 
such subdistribution; or
    (B) Provide access to private property in exchange for access to 
programming. In addition, a subdistributor may not charge a competing 
multichannel video programming distributor more for said programming 
than the satellite cable programming vendor or satellite broadcast 
programming vendor itself would be permitted to charge. Any cable 
operator acting as a subdistributor of satellite cable programming or 
satellite broadcast programming must respond to a request for access to 
such programming by a competing multichannel video programming 
distributor within fifteen (15) days of the request. If the request is 
denied, the competing multichannel video programming distributor must be 
permitted to negotiate directly with the satellite cable programming 
vendor or

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satellite broadcast programming vendor.
    (4) Public interest determination. In determining whether an 
exclusive contract is in the public interest for purposes of paragraph 
(c)(2) of this section, the Commission will consider each of the 
following factors with respect to the effect of such contract on the 
distribution of video programming in areas that are served by a cable 
operator:
    (i) The effect of such exclusive contract on the development of 
competition in local and national multichannel video programming 
distribution markets;
    (ii) The effect of such exclusive contract on competition from 
multichannel video programming distribution technologies other than 
cable;
    (iii) The effect of such exclusive contract on the attraction of 
capital investment in the production and distribution of new satellite 
cable programming;
    (iv) The effect of such exclusive contract on diversity of 
programming in the multichannel video programming distribution market; 
and
    (v) The duration of the exclusive contract.
    (5) Prior Commission approval required. Any cable operator, 
satellite cable programming vendor in which a cable operator has an 
attributable interest, or satellite broadcast programming vendor in 
which a cable operator has an attributable interest seeking to enforce 
or enter into an exclusive contract in an area served by a cable 
operator must submit a ``Petition for Exclusivity'' to the Commission 
for approval.
    (i) The petition for exclusivity shall contain those portions of the 
contract relevant to exclusivity, including:
    (A) A description of the programming service;
    (B) The extent and duration of exclusivity proposed; and
    (C) Any other terms or provisions directly related to exclusivity or 
to any of the criteria set forth in paragraph (c)(4) of this section. 
The petition for exclusivity shall also include a statement setting 
forth the petitioner's reasons to support a finding that the contract is 
in the public interest, addressing each of the five factors set forth in 
paragraph (c)(4) of this section.
    (ii) Any competing multichannel video programming distributor 
affected by the proposed exclusivity may file an opposition to the 
petition for exclusivity within thirty (30) days of the date on which 
the petition is placed on public notice, setting forth its reasons to 
support a finding that the contract is not in the public interest under 
the criteria set forth in paragraph (c)(4) of this section. Any such 
formal opposition must be served on petitioner on the same day on which 
it is filed with the Commission.
    (iii) The petitioner may file a response within ten (10) days of 
receipt of any formal opposition. The Commission will then approve or 
deny the petition for exclusivity.
    (6) Sunset provision. The prohibition of exclusive contracts set 
forth in paragraph (c)(2) of this section shall cease to be effective on 
October 5, 2002, unless the Commission finds, during a proceeding to be 
conducted during the year preceding such date, that said prohibition 
continues to be necessary to preserve and protect competition and 
diversity in the distribution of video programming.
    (d) Limitations--(1) Geographic limitations. Nothing in this section 
shall require any person who is engaged in the national or regional 
distribution of video programming to make such programming available in 
any geographic area beyond which such programming has been authorized or 
licensed for distribution.
    (2) Applicability to satellite retransmissions. Nothing in this 
section shall apply:
    (i) To the signal of any broadcast affiliate of a national 
television network or other television signal that is retransmitted by 
satellite but that is not satellite broadcast programming; or
    (ii) To any internal satellite communication of any broadcast 
network or cable network that is not satellite broadcast programming.
    (e) Exemptions for prior contracts.--(1) In general. Nothing in this 
section shall affect any contract that grants exclusive distribution 
rights to any person with respect to satellite cable programming and 
that was entered into or

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before June 1, 1990, except that the provisions of paragraph (c)(1) of 
this section shall apply for distribution to persons in areas not served 
by a cable operator.
    (2) Limitation on renewals. A contract that was entered into on or 
before June 1, 1990, but that was renewed or extended after October 5, 
1992, shall not be exempt under paragraph (e)(1) of this section.
    (f) Application to existing contracts. All contracts, except those 
specified in paragraph (e) of this section, related to the provision of 
satellite cable programming or satellite broadcast programming to any 
multichannel video programming distributor must be brought into 
compliance with the requirements specified in this subpart no later than 
November 15, .

[58 1993 FR 27671 , May 11, 1993, as amended at  59 FR 66259 , Dec. 23, 1994]