§ 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]

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