Volume 6, Spring Issue, 1993 VIDEO DIALTONE: REFLECTIONS ON CHANGING PERSPECTIVES IN TELECOMMUNICATIONS REGULATION Robert L. Pettit* Christopher J. McGuire** INTRODUCTION The Federal Communications Commission's ("FCC" or "the Commis- sion") recent decision on the provision of video dialtone services ~ highlights ongoing changes in the Cemmission's approach toward telecommunications regulation. Two aspects of the decision, in particu- lar, are noteworthy. First, the decision represents the first attempt by the federal government to provide a comprehensive set of incentives for the deployment to the home of technologically advanced, high-capacity communications facilities, such as fiber optic cables, promoting the development of an array of informational and entertainment video services, z The deployment may lead to the "convergence" of all audio and video communications services onto "one wire" into the home. Second, the decision demonstrates the ability of a federal agency to navigate its way through a remarkably technology-restri~ive statute in order to promote the principle of allowing market forces, l~her than government plan, to be the engine of technological c~.;~t,ge an~ ~: innova- tion. This Article will examine the impact of these perspectives on the * Partner, Crowell & Moring, Washington, D.C.; B.A., 1974, University of Missouri; J.D., 1977, Duke University Law School; General Counsel of the Federal Communications Commission, 1989-1992. ** Associate, Crowell & Moring, Washington, D.C.; B.A., 1986, Williams College; M.P.A., 1988, The Woodrow Wilson School of Public and International Affairs, Princeton University; J.D., 1991, University of Michigan Law School. 1. Telephone Company-CableTelevision Cross-Ownership Rules, §§ 63.54-63.58, Second Report and Order, Recommendation to Congress, and Second Further Notice of Proposed Rulemaking, 7 F.C.C.R. 5781 (1992) [hereinafter Second Report]. Petitions for reconsideration of the Second Report are pending. See, e.g., Petition for Reconsideration of the National Cable Television Association, Inc., FCC Common Carrier Docket No. 87-266 (filed Oct. 9, 1992). An appeal to the U.S. Court of Appeals for the District of Columbia Circuit is anticipated. 2. This effort is continuing under the current Democratic administration. See WILLIAM J. CLINTON & ALBERT GORE, JR., TECHNOLOGY FOR AMERICA'S ECONOMIC GROWTH 28-30 (1993) (discussing efforts to promote the "information infrastructure ~ that "has as its lifeline a high-speed fiber optic network"); see also Phillip Elmer DeWitt, Take a Trip into the Future on the Electronic Super Highway, TIME, Apr. 12, 1993, at 50.
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`344 Harvard Journal of Law & Technology [Vol. 6 video dialtone decision as well as survey several of the issues that will have a major beating on the development of video dialtone but that remain to be addressed by the FCC. The focus ef Section I is an overview of the video dialtone decision itself, including the interests of the various parties and an examination of the FCC's analysis of the issues. Section II further examines the technological incentives created by the FCC and also concludes that the FCC's statutory interpretation flowed from a creative, yet well-grounded, analysis of the relevant statutory provisions. This interpretation reflects the importance of adopting a perspective that gives a greater role to technological forces and market-driven solutions in setting telecommunica- tions policy. Finally, Section III analyzes the major issues in implement- ing video dialtone that the FCC left unresolved in its ruling and the approaches being taken by local telephone companies as video dialtone moves from the drawing board and into the living room. ;What is video dial,'one? Conceptually, video dialtone, as its name implies, is best compared to the fanfiliar audio dialtone of a telephone. A telephone consumer typically picks up a telephone' handset, dials a telephone number, is switched and routed over the facilities of one or more common carriers, and reaches the numLer dialed--all in a matter of seconds. Similarly, as the FCC envisions video di.altone, a consumer could turn on a television, receive a menu of available services, dial the correct code, and access computer data bases, sporting events, movies, shopping guides, interactive services, and a multiplici .ty of other video services provided by various progranmaers (who are customers of the telephone company) ("customer-programmer") orby telephone companies themselves. Ultimately, the FCC envisions that video dialtone "could be offered over a broadband network" so as to enable any subscriber to transmit and receive a video signal to or from any other subscriber. 3 < 3. Telephone Company-Cable Television Cross-Ownership Rules, §§ 63.54-63.58. Further Notice of Proposed Rulemaking, First Report and Order, and Second Further Notice of Inquiry, 7 F.C.C.R. 300, 306-07 (1991) [hereinafter First Report].
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`Spring, 1993] Video Dialtone '~ I. VIDEO DIALTONE PROCEEDINGS AND DECISION 345 A. Historical Background Before examining the video dialtone decision, it is necessary to set it in the proper historical perspective. The relationship of telephone companies and cable system operators has been a concern of the Commission for the last twenty-five years. In the General Telephone decision, 4 the Commission determined that telephone companies were compelled by § 214 of the Communications Act s to seek the FCC's approval oefore the telephone company could provide channel service 6 to a cable system. In examining the § 214 applications that followed, the Commission became concerned about the potential anti-competitive effects from telephone company ownership of cable systems in the same service area. 7 As a result, the Commission concluded that a ban on such cross-ownership was necessary, s Therefore, regulations prohibiting cross-ownership were established? Several years later, recognizing that 4. See General Tel. Co. of Cal., 13 F.C.C.2d 488 (1968), affd, 413 F.2d 390 (D.C. Cir. 1969). 5. See 47 U.S.C. § 214 (1988). Generally, common carriers must show that it will serve "public convenience and necessity" before the Commission will grant permission under § 214 for the carrier to construct and operate new lines. Id. This is known as "214 authority." ~ :i 6. "Cha~;,~.i~.. Ace," referred to .in 47 C.F.R. § 63.55 (1992), occurs when te!ephone companies Ct.,~struct and maintain cable television distribution networks that are leased to cable operators with, in the same area in which the telephone companies provide telephone service. See Telephone Company-Cable Television Cross-Ownership Rules, §§ 63.54-63- .58, Notice of Inquiry, 2 F.C.C.R. 5092, 5097 n. 15 (1987) [hereinafter Notice of Inquiry]. 7. See Applications of Telephone Common Carriers for Section 214 Certificates for Channel FaeZ~!ties Furnished to Affiliated Community Antenna Television Systems, 21 F.C.C.2d ~,'.:','~. ~70)[hereinafter Appl cations for Certificat~:~l, aff'dsubnom. General Tel. Co. of S.V~: . ,::,~ited States, 449 F.2d 846 (5th Cir. 1971). 8. Applicatio,-~ for Certificates, supra note 7, at 325. 9. 47 C.F.R. § 63.54 (a)-(b) (1992). In an effort to maintain competition within each of these submarkets, the same policy makers have erected a complex network of ownership restrictions that have frequently caused competitors to choose among video delivery systems. For example, ownership barriers were erected between cable systems and local television stations and the national television networks, such as ABC, CBS, and NBC, 47 C.F.R. § 76.501(a) (1992). The Cable Act itself prohibited some of cable's most potent potential competitors, local telephone companies, from owning cable systems within their service areas. Cable Communications Policy Act of 1984, 47 U.S.C. § 533(b) (1988); see also 47 C.F.R. § 63.54(b) (1992) (implementing the Cable Act restriction). Outside the region where they provide telephone service, the telephone companies are permitted to own cable systems. For example, Southwestern Bell recently purchased two cable systems in metropolitan Washington D.C. See Paul Farhi & Cindy Skrzjcki, Southwestern Bell To Bto,
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`346 Harvard Journal of Law & Technology [Vol. 6 the cross-ownership ban was preventing any cable service in some situations, the Commission established an exception for "rural" areas. ~° This general ban was codified in the Cable Act of 1984. ~1 Specifical- ly, the statute prohibited "any common carder provid[ing] video programming directly to subscribers in its telephone service area"t2 and maintained the rural exemption.13 B. Prior Proceedings on Video Dialtone As federal regulatory time goes, video dialtone is a very new concept and grew out of proceedings that were not aimed at working within the ownership restrictions of the Cable Act, but aimed at doing away with them. In fact, it was not until 1991 that the structure of video dialtone began to take specific form.14 That year the Commission proposed for Arlington, Montgomery Cable, WASH. POST, Feb. 10, 1993 at C1. Adding an additional layer of complexity, as part of the consent decree that resulted in the AT&T break-up, the local telephone companies that were once part of AT&T are prohibited from providing "interexchange" services, which involve transmitting information across certain geographical boundaries known as LATAs. See United States v. AT&T, 552 F. Supp. 131 (D.D.C. 1982), aff'd sub nom. Maryland v. United States, 460 U.S. 1001 (1983). I0. See Elimination of the Telephoae Company-Cable Television Cross-Ownership Rules, §§ 63.54-63.56, 88 F.C.C.2d 564, 576 (1981) ("In rural areas, we have determined that the costs of imposing the cross-ownership rules outweigh their benefits. Those costs include foreclosure or delay of cable television service to rural residents and wasted administrative resources at the Commission [processing waivers]."); 47 C.F.R. § 63.58 (1992) (defining the rural exemption). 11. 47 U.S.C. § 533(b) (1984). In addition, AT&T and its affiliates were barred from providing cable television service as part of a 1956 antitrust settlement. United States v. Western Elec. Co., 1956 Trade Cas. (CCH) ~1 68,246 (D.N.J. 1956). See Notice of Inquiry, supra note 6, at 5096 n.22 (recognizing this interpretation of the decree). The later decree governing the break-up of AT&T maintained ',his ban on the former Bell System operating companies. United States v. AT&T, 552 F. Supp. 131,180-86, 189-90 (D.D.C. 1982), aff'd sub nom. Maryland v. United States, 460 U.S. 1001 (1983) (establishing a prohibition on providing "electronic publishing" and "information services," which encompasses cable television service). However, more recent court action has freed these companies from the prohibition. United States v. Western Elec. Co., 767 F. Supp. 308 (D.D.C.), stay lifted, 1991-92 Trade Cas. (CCH) ¶ 69,610 (D.C. Cir.), aff'd sub nora. American Newspaper Publishers Ass'n v. United States, 112 S. Ct. 366 (1991). 12. 47 U.S.C. § 533(b)(1). Congress intended to adopt the then existing FCC rules on this pe~nt. See H.R. REP. NO. 934, 98th Cong., 2d Sess. 56 (1984) ("It is the intent of section 613(b) to codify current FCC rules concerning the provision of video programming over cable systems by common carriers, except to the extent of making the exemption for rural telephone companies automatic."). 13. 4-7 U.S.C. § 533(b)(3). In light of changed market place conditions from those which many years ago prompted the Commission to impose the ban, the Commission has now advocated that Congress repeal the cross-ownership ban. Second Report, supra note 1, at 5847-51. 14. In 19,',7, tl.~e Commission issued a Notice of Inquiry to explore the continued need for
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`Spring, 1993] Video Dialtone 347 the first time, to allow telephone common carriers to provide what the FCC denominated "video dialtone service. "s As initially envisioned by the agency, video dialtone would not be limited to the transport function that had been traditionally associated with common carriage and allowed by the cross-ownership restriction but that had limited appeal to telephone companies. Rather, the FCC proposed that telephone companies could provide "additional non-programming services and enhanced video gateways including detailed menus, information search capabilities, and subscriber-driven data processing. "16 Thus, the Commission said, video dialtone will "provide a 'platform' through which subscribers can access video and other information services.'17 C. Establishing the Regulatory Structure for Video Diaitone Based on this vision, last summer, the Commission decided on an initial regulatory structure and established broad definitions for video a cable-telephone company cross-ownership ban. Notice of Inquiry, supra note 6. The Notice sought comment on the continuing validity of the rationale for the cros~-ownership rules in light of changing marketplace conditions and technology. Id. at 5093. The possibility of video dialtone grew in part from the National Telecommunications and Information Administration's ("NTIA") belief at the time that telephone companies should themselves be allowed to provide programming in light of cross-subsidization concerns. NATIONAL TELECOMMUNICATIONS & INFORMATION ADMIN., NTIA REP. NO. 88-233, VIDEO PROGRAM DISTRIBUTION AND CABLE TEI.EVISION: CURRENT POLICY ISSUES AND RECOMMENDATIONS (1988). Following that report, the Commission suggested that there might be a policy somewhere between the mere provision of transport, which was generally conceded to be allowable under the Cable Act, aJld the ownership and provision of full-blown cable service, which seemed clearly prohibite,/by the Cable Act. In a Further Notice, Telephone Company-Cable Television Cross-Ownership Rules, §§ 63.54-63.58, 22 F.C.C.R. 5849 (1988), tile Commission referenced NTIA's discussion of "'video dial tone'" and solicited comments "generally on whether the existing definitions under the Cable Act of cable operator and associated franchise and other obligations can reasonably accommodate such switched video networks and whether legislative recommendations would b warranted." ld. at 5874 n.57. The Commission also sought comment on whether, ,,nder a video dialtone-type regime, telephone common carriers or their customer-program lets were required to secure a local cable franchise. Id. at 5863. Still, even at this s~o, the Commission's focus continued to be on the necessity of any cable-telephone company cross-ownership restriction. The FCC proposed that it would recommend to Congress the repeal or modification of the cross-ownership restrictions put in place by the Cable Act. See id. at 5865-66 (discussing the restriction in 47 U.S.C. § 533(b). 15. First Report, supra note 3, at 306-21. The FCC decided that local telephone companies would not need to obtain a cable television franchise in order to provide video dialtone service. The agency also asked further questions regarding the need for a cable-telephone company restriction. Id. 16. ld. at 307. 17. ld.
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`348 Harvard Journal of Law & Technology [Vol. 6 dialtone in its Second Report and Order, Recommendation to Congress, and Second Further Notice of Proposed Rulemaking ("Second Report") ~8 and a Memorandum Opinion and Order on Reconsideration of the First Report ("Reconsideration Order"). ~9 The Second Report modified FCC regulations to enable local telephone companies to provide video dialtone services and set out a regulatory structure for the provision of those services. 5° The Reconsideration Order clarified why local telephone companies did not need to obtain local cable television franchises to offer video dialtone service. 2~ 1. Defining Video Dialtone The Commission stated that video dialtone "is an enriched version of video common carriage under which [local telephone companies] will offer various non-programming services in addition to the underlying video transport."52 If only the underlying video transport were provided, video dialtone would not differ from the already permissible "channel service" capability. What distinguishes video dialtone is that the FCC conceives of it as "facilitating the provision of additional non-program- ming services and of enhanced video gateway including detailed menus, information search capabilities, and subscriber-driven data processing."53 Essentially, channel service, video dialtone, and cable service form a hierarchy relating to the degree of control an entity has over the content being transported. When providing channel service, the telephone company acts purely as a conduit, not interacting in any way with the transported content. Video dialtone envisions the provider contributing to and enhancing the content by providing non-programming services and gateways. Finally, cable service itself is distinguished by an entity's ability to have complete editorial control over content, as well as control over the selection and pricing of programming. The Second Report established a two-tier framework to govern the provision of video dialtone services. 54 In the video dialtone context, the 18. See supra note 1. Petitions for reconsideration of the Second Report are pending. 19. Telephone Company-Cable Television Cross-Ownership Rules, §§ 63.54-63.58, Memorandum Opinion and Order on Reconsideration, 7 F.C.C.R. 5069 (1992) [hereinafter Recon. Order]. 20. Second Report, supra note 1, at 5783. 21. Recon. Order, supra note 19, at 5069. 22. First Report, supra note 3, at 306. 23. Id. at 307. 24. Second Report, supra note 1, at 5810-11. In 1980, the FCC adopted a similar
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`~Spdng, 1993] Video Dialtone 349 FCC stated that the first tier would contain a basic video dialtone platform as a basic regulated service. The second tier would contain services such as an optional gateway, owned and operated by the telephone company, that constituted an enhanced or nonregulated service. 25 The first-tier offerings would be subject to traditional common carrier obligations--the local telephone companies will need to make available to all service providers the same service offerings on the same terms and conditions. 26 2. Ownership Restrictiol~ and Local Franchises In authorizing telephone companies to engage in video dialtone services, the Commission had to overcome two major legal impediments. First, many commenting parties argued that the provision of video dialtone by telephone companies was prohibited by the Cable Act's cross-ownership ban. In deciding that the Act did not prohibit the provision of video dialtone, the FCC recognized that the Cable Act prohibits local telephone companies from providing video programming directly to subscribers within the local company's service area. z~ Yet the Commission also recognized that, even under the Cable Act proscriptions, telephone companies are able to construct and provide the physical transport facilities necessary to link programmers with individual consumers. 2s The Commissioii's ability under the Cable Act to authorize something more than a trm~sport function hinged on relatively narrow readings of three defined terms in the Cable Act: "cable operator, "29 "cable ser- vice,"30 and "cable system."3J These definitions were critical because framework designating basic and enhanced services in the context of computer services and common carriers. See Amendment of Section 64.702 of the Commission's Rules and Regulations, 77 F.C.C.2d 384 (1980) ("Computer II"), modified, 84 F.C.C.2d 50 (1980), modified, 88 F C.C.2d 512 (1981), aff'd sub nom. Computer & Communications Indus. Ass'n v. FCC, 693 F.2d 198 (D.C. Cir. 1982), cert. denied, 461 U.S. 938 (1983). 25. Second Report, supra note 1, at 5811. 26. ld. at 5810-11. 27. ld. at 5786 (citing 47 U.S.C. § 533(b)(1)). 28. Id. at 5787. 29. The Act defines a cable operator as "any person or group of persons (A) who provides cable service over a cable system and directly or through one or more affiliates owns a significant interest in such cable system, or (B) who otherwise controls or is responsible for, through any arrangement, the management or ope~tion of such a cable system." 47 U.S.C. § 522(4)(1992). 30. The Act defines cable service as "(A) the one-way transmission to subscribers of (i)
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`350 Harvard Journal of Law & Technology [Vol. 6 the Cable Act generally prohibited common carders from acting as a cable operator or from providing cable service over a cable system. Although it did not undertake an extensive analysis in the Further Notice of Proposed Rulemaking, First Report and Order, and Second Further Notice of Inquiry ("First Report"), the FCC found that video dialtone was different from any of the concepts described by these terms. Rather, the FCC said: A [local telephone company] providing video dialtone service does not fall within th[e] definition [of a cable operator] because the [company] is not providing the video programming service directly to subscribers. Rather, the [company] is simply acting as a conduit in providing broadband common carrier-based service that enables its customer/progranuners to provide video programming to subscribers. ~2 In the Reconsideration Order, the FCC elaborated on its rationale. In considering video diahone, it recognized that it was dealing with a mode of delivery that "the drafters of the Cable Act had not contemplated."33 video programming, or (ii) other programming service, and (B) subscriber interaction, if any, which is required for the selection of such video programming or other programming service." 47 U.S.C. § 522(5)(A)-(B). 31. The act defines a cable system as: a facility consisting of a set of closed transmission paths and associated signal generation, reception, and control equipment that is designed to provide cable service which includes video programming and which is provided to multiple subscribers within a community, but such term does not include (A) a facility that serves only to retransmit the television signals of 1 or more television broadcast stations; (B) a facility that serves only subscribers in 1 or more multiple unit dwellings under common ownership, control, or management, unless such facility or facilities uses any public right-of-way; (C) a facility of a common carder which is subject, in whole or in part, to the provisions of title II of this act, except that such facility shall be considered a cable system (other than for purposes of section 621(c)) to the extent such facility is used in the transmission of video programming directly to subscribers; or (D) any facilities of any electric utility used solely for operating its electric utility systems. 47 U.S.C. § 522(7). 32. First Report, supra note 3, at 327. 33. Recon. Order, supra note ;9, at 5070. Of course, some commentators would consider that to be reason enough to dispense with interpretation of the Cable Act, on the premise that it was not addressed to the issue of video dialtone. See, e.g., Frank H. Easterbrook, Statutes'Domains, 50 U. CHI. L. REV. 533,544 (1983) ("IT]he domain of
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`Spring, 1993] Video Dialtone 351 In part, the Reconsideration Order focused on the interpretation of "transmission" in the definition of cable service. Although some parties argued that the telephone companies were involved in the "transmission • . . of video programming," the FCC rejected a reading of "transmis- sion" that involved the telephone companies falling under the Act for only passively transporting a signal generated by a programmer to a subscrib- er, as telephone companies do in providing channel service. Instead, it found that congressional intent was more consistent with a reading of "transmission" that required "active participation in the selection and distribution of video programming."3~ Because a telephone company was not participating in the selection of the programming, it was not providing "cable service." Furthermore, the ability of the local telephone company to provide services related to, but not consisting of, video programming, was firmly stated in the legislative history. 3s Thus, the provision of capabilities to search for movie titles or otherwise engage in interactive processes is not limited in any way by the Cable Act. The Reconsideration Order then addressed whether local telephone companies were "cable operators," a decision that depended on the interpretation of "cable system." It found that all the telephone facilities involved in providing video dialtone would be covered by the exemption for common carrier services governed by Title II of the Communications Act. ~6 Furthermore, the FCC reasoned that Congress did not intend to subject telephone companies to two sets of regulations for one facility. 37 The Commission also found two additional reasons why video dialtone facilities in its view were not a "cable system." First, the exemption exception did not apply because telephone companies were not actively involved in the selection of programming. 38 Second, video dialt~ne facilities owned by the telephone company would not ordinarily include the equipment for signal generation, reception, and control, which constitute necessary pans of a cable system. 39 the statute should be restricted to cases anticipated by its framers and expressly resolved in the legislative process."). Easterbrook's interpretive principle serves a great need in areas that are undergoing rapid technological change. 34. Recon. Order, supra note 19, at 5071. 35. See H.R. REP. NO. 934, 98th Cong.. 2d Sess. 57 ("Nothing in this section shall be construed to limit telephone company provision of information services or other non-video programming, transmissions or communications services.'). 36. Recon. Order. supra note 19, at 5072 (citing 47 U.S.C. § 522(6)(c)). 37. Id. 38. ld. 39. Id. at 5072-73.
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`352 Harvard Journal of Law & Technology [Vol. 6 In short, the Commission found that the customer-programmer's provision of video programming over a telephone company conduit and the telephone company's provision of video "platforms" and "gateways" were not "cable service" provided by a "cable operator" over a "cable system." Thus, under the FCC's view of the Cable Act, telephone companies were free to provide video dialtone and neither they nor their customer-programmers would need a local franchise to do so. The Commission anticipated wide variation in how different local telephone companies may choose to implement video dialtone. ~° Thus, the agency hoped to avoid molding of either the technology or the message to some government notion of what works best and what consumers want. Second, the Commission also decided that a local cable franchise was not necessary in order for telephone companies to provide video dialtone. ~ This conclusion followed from two observations. First, the concerns about a cable television system's burden on public rights-of-way and the need for state and local entities to regulate that burden are not present. The local telephone companies' use of lines to provide video dialtone present no additional physical burdens on public rights-of-way. 42 Second, requiring a cable franchise for the transport of video program- ming would run counter to the longstanding provision of channel service by local telephone companies. 43 At its core, after all, video dialtone is an enhanced form of channel service, one that envisions that the service is provided by multiple programmers instead of a single programmer. 44 The Cable Act gives no indication that Congress wished to alter this practice, as 40. Second Report, supra note 1, at 5805 n.104. 41. Recon. Order, supra note 19, at 5070. 42. Id. 43. Id. 44. Second Report, supra note 1, at 5783 n.3 ("Video dialtone service at the basic platform level differs from the 'channel service' that local telephone companies currently may provide cable television operators in that we will require local telephone companies to provide sufficient transmission capacity to serve multiple video programmers."). 45. In addition, the Commission revised its rules governing financial relationships between local telephone companies and video programmers. Where the current regulations generally provided for no more than a one percent interest in video programmers held by telephone companies, 47 C.F.R. § 63.54, the new regulations permit up to a five percent interest when the programmer participates in the basic platform. Second Report, supra note I, at 5801-02. This change brings the ownership standard in line with the existing five percent standard between cable and broadcast entities. See Re-examination of the Commission's Rules and Policies Regarding the Attribution of Owne'rship interests in Broadcasting, Cable Television and Newspaper Entities, 97 F.C.C.2d 997 (1984), recons. in part, 58 Rad. Reg. (P & F) 604 (1985),fitrther recons., 1 F.C.C.R 802 (1986). In addition to benefits such as providing start-up capital to increase the diversity of independent programming sources, raising the permissible level of interest also reduces the current
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`Spring, 1993] 3. Safeguards Video Dialtone 353 In response to traditional concerns about telephone company provision of unregulated services, the FCC established three measures to help prevent a telephone company from discriminating among customers and using its monopoly revenues to subsidize its second-tier video dialtone services. First, existing safeguards against discrimination and cross-sub- sidization will apply to video dialtone services? 6 Second, if appropriate, additional safeguards tailored to specific video dialtone proposals will be imposed as part of the § 214 certification process. 47 Third, a review of the adequacy of all safeguards will occur in three years to ensure that they are accomplishing the desired result. 48 II. THE FCC'S INTERPRETATION OF THE CABLE ACT IN THE CONTEXT OF CHANGING MARKETS AND TECHNOLOGY The FCC explicitly recognized that its video dialtone decision heralded a new era of communications to the home--an era in which one connec- tion could provide a multitude of video and audio services. As the Com- mission said, a video dialtone "basic platform would enable a potential large number of existing and new programming sources, with differing service forms artd structures, to reach consumers . . . likely bringing those consumers more choice in content, more responsive customer service, and lower prices for video programming and video programming services. ''49 As such, the Commission's decision served a number of communications policies--some traditional, some new--and prompted the Commission to interpret creatively the technology-restrictive provisions of the Cable Act. For example, in its decision, the FCC furthered several traditional communications policies. Video dialtone clearly continues the Commis- sion's longstanding belief' in creating choice for American consumers. Even in its most basic form, video dialtone provides yet another way to regulatory burden that processing waivers from file current standard imposes. Second Report, supra note 1, at 5801. 46. Second Report, supra note 1, at 5823. 47. ld. 48. Id. 49. Id. at 5795-96.
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`354 Harvard Journal of Law & Technology [Vol. 6 deliver television programming to the home. Because of this policy, American consumers are already offered a bewildering array of video channels. Indeed, particularly over the last two decades, both Congress and the FCC have encouraged more choice for video consumers, often over the objection of existing video providers. In particular, this impulse is reflected in the increased licensing of television stations; ~ the authorization of direct broadcast satellite service; sl the authorization ofmultipoint multichannel distribution systems (MMDS, also known as "wireless cable"); sz and the "Open Skies" decision that paved the way for satellite-delivered programming, such as Home Box Office and the Cable News Network. s3 Video dialtone service promotes an important corollary policy as well: providing competition for existing delivery, systems. This has proved particularly important because of the growth and perceived power of the cable television industry in the past few years. Indeed, while competition historically has been seen by the FCC on a station-by-station or channel- by-channel basis, s4 video dialtone is seen by the Commission as a means of providing a multi-ch