Sec.  76.1504   Rates, terms and conditions for carriage on open video systems.

   (a) Reasonable rate principle. An open video system operator shall set
   rates, terms, and conditions for carriage that are just and reasonable, and
   are not unjustly or unreasonably discriminatory.

   (b) Differences in rates. (1) An open video system operator may charge
   different rates to different classes of video programming providers,
   provided that the bases for such differences are not unjust or unreasonably
   discriminatory.

   (2) An open video system operator shall not impose different rates, terms,
   or conditions based on the content of the programming to be offered by any
   unaffiliated video programming provider.

   (c) Just and reasonable rate presumption. A strong presumption will apply
   that carriage rates are just and reasonable for open video system operators
   where at least one unaffiliated video programming provider, or unaffiliated
   programming providers as a group, occupy capacity equal to the lesser of
   one-third of the system capacity or that occupied by the open video system
   operator and its affiliates, and where any rate complained of is no higher
   than the average of the rates paid by unaffiliated programmers receiving
   carriage from the open video system operator.

   (d) Examination of rates. Complaints regarding rates shall be limited to
   video programming providers that have sought carriage on the open video
   system. If a video programming provider files a complaint against an open
   video system operator meeting the above just and reasonable rate
   presumption, the burden of proof will rest with the complainant. If a
   complaint is filed against an open video system operator that does not meet
   the just and reasonable rate presumption, the open video system operator
   will bear the burden of proof to demonstrate, using the principles set forth
   below, that the carriage rates subject to the complaint are just and
   reasonable.

   (e) Determining just and reasonable rates subject to complaints pursuant to
   the imputed rate approach or other market based approach. Carriage rates
   subject to complaint shall be found just and reasonable if one of the two
   following tests are met:

   (1) The imputed rate will reflect what the open video system operator, or
   its affiliate, “pays” for carriage of its own programming. Use of this
   approach is appropriate in circumstances where the pricing is applicable to
   a new market entrant (the open video system operator) that will face
   competition from an existing incumbent provider (the incumbent cable
   operator), as opposed to circumstances where the pricing is used to
   establish a rate for an essential input service that is charged to a
   competing new entrant by an incumbent provider. With respect to new market
   entrants, an efficient component pricing model will produce rates that
   encourage market entry. If the carriage rate to an unaffiliated program
   provider surpasses what an operator earns from carrying its own programming,
   the rate can be presumed to exceed a just and reasonable level. An open
   video system operator's price to its subscribers will be determined by
   several separate costs components. One general category are those costs
   related to the creative development and production of programming. A second
   category are costs associated with packaging various programs for the open
   video system operator's offering. A third category related to the
   infrastructure or engineering costs identified with building and maintaining
   the open video system. Contained in each is a profit allowance attributed to
   the economic value of each component. When an open video system operator
   provides only carriage through its infrastructure, however, the programming
   and packaging flows from the independent program provider, who bears the
   cost. The open video system operator avoids programming and packaging costs,
   including profits. These avoided costs should not be reflected in the price
   charged an independent program provider for carriage. The imputed rate also
   seeks to recognize the loss of subscribers to the open video system
   operator's programming package resulting from carrying competing
   programming.

   Note to paragraph (e)(1): Examples of specific “avoided costs” include:

   (1) All amounts paid to studios, syndicators, networks or others, including
   but not limited to payments for programming and all related rights;

   (2) Packaging, including marketing and other fees;

   (3) Talent fees; and

   (4) A reasonable overhead allowance for affiliated video service support.

   (2) An open video system operator can demonstrate that its carriage service
   rates are just and reasonable through other market based approaches.

   [ 61 FR 28708 , June 5, 1996, as amended at  61 FR 43176 , Aug. 21, 1996]

   Effective Date Note:   At  61 FR 43176 , Aug. 21, 1996, in  Sec. 76.1504, paragraph
   (e) was revised. This paragraph contains information collection and
   recordkeeping requirements and will not become effective until approval has
   been given by the Office of Management and Budget.