Eli Noam: Good evening ladies and gentlemen. I'd like to welcome you. I'm Eli Noam, the Director of the Columbia Institute for Tele-Information, and we have a wonderful event here, dealing with an important topic. That is, I think it is important. The reason why is I would like to have the panel tell me whether this is real or hypothetical. It is the question whether the option of an open video platform, the one that Congress introduced in its legislation, without, it should be noted, virtually any public debate or hearing that I can recall, just kind of came suddenly. And so the question is really is this a realistic option? Of course, it is one of those three options, and I'm sure we'll hear more about it. But is this an option that anyone is interested in, before we get hung up on the details on exactly how we're going to structure something that nobody's going to use anyway. And so one of the things that our panelists would like to address is how will this happen, and secondly will it happen? As I understand this, there's a common carriage model and there's a cable television model as auctions. The cable television model - let's call it the contract carrier versus the common carrier and then there is this hybrid in between: the open video platform. I have actually done some thinking on the question of common carriers competing with non- common carriers and I have come to a conclusion in a paper called the Impending Doom of Common Carriage that the two really can't coexist in head to head competition. Contract carriage is more powerful. I'm not saying this as an advocate in any way. I'm just observing the economics. And that there's really no hybrid possible between them so that contract carriage is in the last and private carriage is going to be dominant. And so the question is will the FCC, will Congress, be able to establish a third auction in between, especially since the auction is a voluntary one, and it will be voluntary in return for what? In return for some deregulation, for example, absence of rate regulation. But then the question is can it truly be unregulated in terms of rate, if at the same time the law requires that prices will be nondiscriminatory. Well, how can one figure that one out, unless one does some analysis continuously whether the rates are appropriate and nondiscriminatory. So those are some of the issues I think that we will have to analyze here tonight. And so we have a wonderful panel dealing with this. But before I introduce Tom Landry and the panel to you, I also would like to share the excitement with you of something new that we have just unveiled at Columbia last Friday, which we call the Virtual Institute for Information, V.I.I., you know, N.I.I., G.I.I., why not? And that is, for all of you interested in media communications information research, a wonderful tool to find other work on areas of interest to you, and also to post your own work, because it is a platform with a translation into HTML in a Website, and search engines in which you can log on and then look for other work on subjects that you're interested in, both academic, government reports, other institutions, linkages, whatever, and post your own stuff on it too, plus a lot of other features. We will have time at the end when Steve Messer, who has been masterminding this, will give you some more details. We are very excited about it. It is quite unique, and this is very useful particularly if you are not continuously in touch with other people working in this area. Now, this event tonight is largely not my doing but Tom Landry's. I would like to introduce Tom. Also we'll introduce the topic. Tom has identified the speakers and organized this event and we are extremely grateful that he came to do this. He is getting his doctorate at the law school and we should be expecting great things from him, so he'll introduce the topic: the open video platform.

Tom Landry: Well, VDT is dead, long live OVS. I want to set the stage and get right to the panel. They are the ones you want to hear tonight. Things were simple in the old days, when you had video programming delivered by broadcasters and telephone companies delivering point-to-point personal communications and that was about it. Of course, since the 1960's, a lot of the walls have come down and now you have video programming delivered by landline cable and by over-the-air subscription services in addition to the old broadcast services. And you have personal communications delivered by over-the-air as well as traditional landline telephone services. But one thing hasn't changed, and that's that telephone companies still don't provide video programming. That may be partly because of their facilities which aren't built for that. But perhaps it's primarily because the FCC in 1970 adopted a policy that prohibited them from delivering video programming to customers in their service areas. That policy was incorporated into the Cable Act of 1984 which federalized cable law in the United States. But telcos remained interested in video delivery and the FCC adopted a model called video dialtone that permitted telcos to provide - well, it was basically a common carriage model. It permitted them to provide the conduit but not the content for video programming. We're gathered here today to pay our respects to VDT and to greet the new edition to the media family which is the open video system. The Telecom Act of 1996 decrees that the FCC shall abandon its VDT approach and that telcos may provide video, as Eli said, in any of three ways, as cable systems operators, as radio operators of DBS, MMDS and so forth, or as open video system operators. Well we know what cable is and we know what over-the-air services are, but what's an OVS, and how will it work, what will it mean for competition for consumers, and as Eli suggested, not only if they build it will anyone come but will they even build it? The FCC's considering in the pending rule making, but for now let's get into it with our own panel of distinguished experts, the first of whom will be Professor Monroe Price of the Benjamin M. Cardozo School of Law. Professor Price please.

Monroe Price: I think OVS is a little bit like, Eli said, the distinction between overly hot and overly cold and the question is can you find something in the middle? This is a bizarre statute, which I think has quite a lot to do with VDT. I might disagree with how any of it might be interesting to look at the extremes of VDT and to see how much it will influence the development and exact formulation of the OVS system. The business is a system in which the statute has a lot of really difficult problems in it, and I'll try to get into some of them. And the industries, the telephone industry, the cable industry, are battling, in some ways to make it operable, in some ways to make it inoperable. I think that one of the questions here is, what will be the result in terms of the clash of industries and how things will be resolved? I'd like to step right into some of the particularities of it. First thing is, a requirement that a telephone company receive a certificate from the FCC before it goes into the OVS business and this certificate has to be approved by the FCC within ten days of receipt. And these are incredibly elaborate systems and one of the issues that the FCC tried to do within the NPRM, is how can we test whether or not an OVS system is in compliance in ten days, and of course the answer is probably they can't. This is part of the Congress's effort to impose lots of regulatory aspects and then claim that they're deregulating by slapping the agency at the same time. Among the things that have to be in the certificate, for example, are an indication that the OVS system will not discriminate against the assignment of video carriage, and it won't be discriminatory, it won't provide unjust and unreasonable rates or rates that are not - let's see if I can get the exact term because it's such a wonderful term - it doesn't provide for unjust or unreasonable discrimination. Now here, the first difficulty exists within the statute. That is to say, what constitutes a just and reasonable rate, and a rate that's not unjustly or unreasonably discriminatory? Built into it is some suggestion that there is a possibility of discrimination and the FCC and the NPRM has suggested that there are grounds on which an OVS operator can discriminate in terms of the nature of the services provided, the cost of obtaining or providing the service. That there might be a potential that the FCC wasn't clear about this, of discriminating between non-profit providers and home-shopping or pay-per-view providers. But any rate, this question of what constitutes discrimination in carriage and what constitutes discrimination if at all in rate regulation is one of the big issues right off the bat in a certification process. And as I think the FCC said it's going to resolve, and it will say, if the OVS operator declares that it will abide by these regulations, generally that will be sufficient for certification, and then it will be up to a complaint process or a factual determination afterwards to see if the OVS operator is not in compliance. The thing that's quite interesting is another provision of Section 653 which says that if demand exceeds supply of cable channels, then an amazing thing is triggered. The OVS operator, which prior to this trigger was permitted to program the channels itself or through an affiliate, is now restricted to one-third of the channel capacity. This itself poses a really interesting issue because it may well be that, for one thing, in a digital world, it's hard to tell what one-third of the channels means. I think that there's some indication if this is a switched system, this problem falls out. How do you distinguish between the analog and digital systems? This was a problem in VDT itself where there might have been discrimination in terms of assignment of digital versus analog channels. At any rate, this clip of one-third is really an amazing thing. One of the issues I'm concerned about is, what does it mean to say that demand exceeds supply? Does that mean that the pricing of channels is not appropriate because you would think there would be a market clearing price at which that demand curve would intersect with a supply curve. So it's only because there must be something in the pricing structure that could lead to the situation that demand would exceed supply and the operator wouldn't have the capacity properly to price it. And that leads to another set of questions which I'm sure we'll get into and that is cost allocation and insurance that not only our rates are nondiscriminatory, but they are just, and the question is what "just" means? Do you mean just to the telephone regulated subscriber, or does it mean just in terms of the cable operator competitor, or what? What is just? Who is to be served by the just rate here? And is the rate that's just that rate that is not market clearing, but leads to a situation in which demand exceeds supply? I think I'm running out of time here, but I'll pick one other or two other really interesting issues... And that is the must carry provisions. This statute imports almost as to simply a number of provisions from Title VI, one of which is the must carry and PEG channels. And it's not clear in this statute what must carry applies to; if the OVS operator is programming, in a sense, 20 channels or 70 channels to look like your cable operator, you can think of must carry as part of that. But what about the affiliated channels that are also on this OVS platform? Does a must carry operation apply to them, and does the cable operator have the duty to assure that there is a kind of buy through of a must carry tier before any other signal on the OVS platform is acquired by the subscriber. So a model which you might think of, which is, this is the heaven-sent relief for the start-up program suppliers, say he wants to call up and say 'I want to get on your platform', the question is 'Will we have to go through the must carry in PEG to buy a single channel here?' So, I'll leave you with that and continue the questions.

Eli Noam: The format we'll have is where the speaker speaks for six or so minutes. There can be instant questioning and replies before we get to the next speaker. Just not too long so that it's not just the speaker speaking. So we'd like you to question or to comment and that goes to the panel too.

Question: What is the constitutionality of the must carry as applied to OVS given that it barely survives the must carry on cable? I guess the question is ultimately can the same argument be made - that is if it's important, which I'm not sure it is - to have a free over- the-air broadcasting system? And it's potentially OVS that's going to be a substitute for cable; we don't know whether it is or not. That is, is this a substitute that's going to overwhelm the city? That there's going to be a massive shift to an OVS system? In fact the two operators themselves will choose an OVS model. And the question is can you do it in a protective way?

Answers (panelists): We were one of the plaintiffs in the case that is going back to the Supreme Court this Fall. We're fairly hopeful that it's going to be struck down this time, given that as the Professor said, that it barely survived last time and what it was remanded to the District Court for was to see whether broadcasting really was in genuine jeopardy. And the discovery clearly showed that broadcasting is not in any serious jeopardy, and therefore the basis the Supreme Court had on doesn't even exist. So I think it's going to fall down altogether.

I think that the one factor that you have to consider is that there's also a desire for some regulatory parity between OVS and cable so if must carry is going to apply to the cable operators and if a certain amount of the platform is going to be taken with must carry for cable operator, there's an interest for having parity if an OVS operator is going to compete.

This is an argument which is going to be made constantly which is the distinction between deregulation in a level playing field.

You know there was a similar provision for carrying public programming. And just to show that we're not only looking out for ourselves, but really do take the First Amendment seriously, we challenge that provision too. Unfortunately, for us, that's one thing that the District judge did declare unconstitutional. So we didn't end up getting the parity, but when we looked at the issue, we thought that they should both fall.

Eli Noam: Let's move to our second speaker here. I would stay away from the introductions because we really want to hear them and we have provided you with biographical details that you can glance or read at. These are extremely distinguished people and it will take half an hour just to introduce them. Meredith Jones, of the FCC, who will have to decide all this before it goes to the Supreme Court.

Meredith Jones: Luckily it's the office of General Counsel that will go the Supreme Court, not me. I'm Chief of the Cable Services Bureau at the FCC and it's the Cable Services Bureau that's been charged with the staff work of putting out, getting together a notice for the Commission's consideration, which the Commission issued in March. The comment period for that closed April 11. We've been reading the comments and we've put together a proposal for the Commission to consider to adopt the final rules. One of the things about the OVS statute in the 1996 Act is that it requires the Commission to have final rules, including a reconsideration proceeding by August 8, so we have a very, very short amount of time to do with, to give you some sense of where we are in terms of timing. I just meant that the law requires that we have the final order adopted and then have a thirty day period following the final order during which people can petition for reconsideration of the Commission's ruling, and then we were required to have a fifteen day reply period to the petitions for reconsideration. So if you start with August 8, you're back 45 days from there to just meet the minimum statutory requirements, and then we have to get it published in the federal register which takes extra time. So that I guess what I'm trying to say is that very shortly after we disband tonight, you shall be able to click on the Cable Bureau's portion of the FCC's Website and see it coming out which I don't know if any of you are interested in but we do have it, let's see, http, www, and then it's fcc.com. But we in the Cable Services Bureau do put everything up there. I think what we see at the Commission is a lot of what went on with VDT, you do see in the OVS. I mean immediately prior to the adoption of the 1996 Act, the Commission was considering the VDT item and trying to consider what portions of Title VI might or may not apply and what portions of Title II apply. And I think what Congress decided to do in the 1996 Act was to give the Commission some clear guidance on how to go forward. I think that the bottom line of the OVS is that in exchange for the OVS operator agreeing to give up two-thirds of its platform to unaffiliated programmers, the OVS operator is relieved of many of the requirements of the franchise process that cable generally goes through. The OVS operator must pay a matching franchise fee on its revenues that is equivalent to the franchise fees the cable operators pay on their revenues and also it must match the must carry and the PEG obligations that are imposed on the cable operator. But there are other things in the franchise process that people have found time-consuming that the OVS operator would not have to go through. And from what we hear from people who are interested in exploring the OVS is just the franchise process is time-consuming for no other reason than that there are another 33,000 franchise areas in the US. And the way cable has been able to build out is that each cable company has entered into agreement with each franchise authority for each area in which it operates. So that was a big factor in the telephone companies' interest in getting into video service.

I'd say we've now digested all of the comments and the reply comments that we've received in the OVS system, and I think that there are some key questions that come out of it that we need to look at in reaching a final decision with respect to OVS. I would say one major question is that statute clearly says that local exchange carriers (or LECs) can become OVS operators. A major questions is can a non-LEC become an OVS operator? Obvious non- LECs who might care to become OVS operators are cable companies, electric utilities, and other kinds of people. But those are the two large contenders. Second, which has been related to by prior commentators, is can the OVS operator take all of the analog capacity on this system for itself? In other words, when the statute talks about the OVS operator having one-third of the capacity being reduced to one-third of the capacity of the system where demand exceeds the capacity, could the OVS operator say "Well, I'll take one-third but P.S. it'll be all the analog capacity of the system and other programmers are relegated to a digital capacity." In the days of a video dialtone most of the people trying to get on the system today want analog capacity. And I think in the number of the trials what we saw was an oversubscription to the analog capacity and the dearth of application for the digital capacity. The question that we had asked is that statute reads that the OVS operator can be reduced to one-third of the capacity if other unaffiliated programmers have demand in the end that exceeds supply. The question we asked was whether the OVS operator could be reduced to one-third of the capacity if that would leave the OVS operator with less capacity than an unaffiliated programmer; which would be happening for example if an unaffiliated video programmer came in and said they wanted all of the capacity, the only other person they wanted to go out of system was the OVS operator, would the statute, would the Congress contemplate reducing the OVS operator to one-third of the capacity allowing the unaffiliated programmer to get two-thirds?

A major issue is also how the program access rules, laws, and regulations will apply in the OVS. Under the 1992 Cable Act, satellite delivered programming that's vertically integrated with cable operators has to be made available to competing multi-channel video programming distributors. So the question is how does that work out on the OVS platform. We've had programmers who come in and say, well technically we're subject to the program access rules, but if we go on the platform as an unaffiliated programmer, we don't want the OVS operator, somebody else on the platform, being allowed to offer our programming because then we've got nothing to sell if our competitors on the platform can also sell our program. That's the major issue. And I'm not trying to signal how the Commission is coming out; I'm just telling you what the big issues are. Can cable operators be treated differently then, if cable operators are allowed to go on a platform and put together a package and become an unaffiliated programmer? Can the OVS operator treat the cable operator differently from other programming providers on the platform? This would be a concern that a telco might raise, that telco builds the platform, the cable operator who's already operating in the area and wants to come in and take up the capacity on the platform. The major question that we've had is how should the certification system be structured? How can we make sure that in this ten day window that we actually have any ability to look at the applications or that others have any ability to call things to our attention. The question that city, state, and local governments are very interested in is the extent of their control over the use of the rights-of- way by the OVS operator. And then the final major question that was alluded to is the just and reasonable rates of carriage, how those are determined. Should we have presumptions? Should we, for example, say that if x% of the capacity of the system is used by unaffiliated programmers that we'll just presume the rates reasonable? If you have a safe harbor of that nature and it's not met, then what do you look at to see whether the rates being charged are reasonable. So my time is up.