DRMBusiness Sense -Legal Ingenuity

Downs

Rachlin

Martin pllg

April 19, 2017 Nancy S. MalmquistTel: (603)448-2211nmalinquist@dni).com

Via Hand Delivery and U.S. MailMrs. Judith C. Whitney, Clerk of the BoardVermont Public Service Board

Peoples United Bank Building112 State Street

Montpelier, VT 05620-2701

Re: Docket No. 8301: In Re: Renewal of the Certificate of Public Good of Comcast of

Connecticut/Georgia/Massachusetts/New Hampshire/New York/NoithCarolinaWirginiaWermont, LLC, d/b/a Comcast, expiring on December 29, 2016, to providecable television service

Dear Mrs. Whitney:

On behalf of Comcast of Connecticiit/Georgia/Massachusetts/New Hampshire/New York/NorthCarolinaA/irginiaWemiont, LLC, d/b/a Comcast ("Comcast"), we are filing one original and six copies ofComcast's Reply in Support of Motion to Alter or Amend Judgment.

We certify that we have sei-ved via U.S. mail, copies of this filing on each of the parties identifiedon the Service List. We have provided copies of this llling to the Public Service Board and theDepartment of Public Service via hand delivery.

Please call me with any questions at (603) 448-221 1. Thank you very much for your attention tothis matter.

Very truly yours,

DOWNS RACHLIN MARTIN PLLC

Attorneys for Comcast of Connecticut/Georgia/Massachusetts/New Hampshire/New York/North Carolina/Virginia/Verniont, LLC, d/b/a Comcast

almquistT. Crisp

Cc: Service List

Mr. Daniel Glanville

Robert G. Scott, Jr., Esq.Steven J. Horvitz, Esq.

17402029

8 South Park Street I Lebanon. NH 03766-1326 1 T 603.448.2211 i F 603.448.9967 I drm.com

PSB Docket No. 8301 - Distribution List

Daniel C. Burke, Esq.Vermont Department of Public Service112 State Street

Montpelier, VT 05620-2601

Nancy S. Malmquist, Esq.Downs Rachlin Martin PLLC

67 Etna Road, Suite 300

P.O. Box 191

Lebanon, NH 03766

(For Comcast of Connecticut/Georgia/Massachusetts/New Hampshire/New York/North Carolina/Virginia/Vermont, LLC, d/b/aComcast)

Daniel P. Richardson, Esq.Tarrant, Gillies, Merriman & Richardson

44 East State Street

P.O. Box 1440

Montpelier, VT 05601-1440

(For Comcast of Connecticut/Georgia/Massachusetts/New Hampshire/New York/North Carolina/Virginia/Vermont, LLC, d^/aComcast)

Melissa Pierce, ManagerGovernment & Regulatory AffairsComcast

299 North Main Street

Rutland, VT 05701

Douglas R. Marden, Esq.Law Offices of Douglas R. Marden, PLLC145 Pine Haven Shores Road

Suite 2212

Shelbume,VT 05482

(For VAN)

16044222

STATE OF VERMONT

PUBLIC SERVICE BOARD

In Re: Renewal of the Certificate of Public

Good of Comcast of Connecticut/Georgia/Massachusetts/New Hampshire/New York/North Carolina/Virginia/Vermont, LLC,d/b/a Comcast, expiring on December 29,2016, to provide cable television service

Docket No. 8301

COMCAST'S REPLY IN SUPPORT OF

MOTION TO ALTER OR AMEND JUDGMENT

DOWNS RACHLIN MARTIN PLLC

Attorneys for Comcast of Connecticut/Georgia/Massachusetts/New Hampshire/New York/North Carolina/Virginia/Vermont, LLC, d/b/a Comcast

DAVIS WRIGHT TREMAINE LLP

Attorneys for Comcast of Connecticut/Georgia/Massachusetts/New Hampshire/New York/North Carolina/Virginia/Vermont, LLC, d/b/a Comcast

April 19,2017

TABLE OF CONTENTS

I. INTRODUCTION 1

II. NEITHER VAN NOR THE DEPARTMENT REBUTS COMCAST'S

DEMONSTRATION THAT THE IPG OBLIGATION SET FORTH IN CONDITION

22(3) VIOLATES THE CABLE ACT 3

A. VAN Ignores the Ascertainment Findings on the PEG IPG Condition 5

B. The Costs to Reconfigure Comcast's Network to Provide PEG Program Information onthe IPG Are Franchise Fees Under the Cable Act 7

C. The Board Cannot Impose Condition 22(3) as a Penalty 9

HI. THE DEPARTMENT FAILS TO ADDRESS THE CABLE ACT INFIRMITIES OF

THE LINE EXTENSION CONDITIONS 12

A. The Department Attempts to Circumvent the Controlling Section 626 Renewal Standard12

B. The Department Fails to Justify Imposing Line-Extension Requirements That Exceed TheRule 8.313 Formula 14

C. The Contested Line Extension Obligation is Discriminatory and Illogical 17

IV. THE AVAILABILITY OF "ALTERNATIVE TECHNOLOGIES" TO FULFILL

CONTESTED CONDITIONS 21(B) AND (C) DOES NOT SATISFY SECTION 626.19

V. VAN FAILS TO DEMONSTRATE WHY CONTESTED CONDITIONS 50 - 55 (I-NET) ARE SUPPORTED BY EVIDENCE OF NEED OR REASONABLE COST 21

VI. CONCLUSION 25

STATE OF VERMONT

PUBLIC SERVICE BOARD

In Re: Renewal of the Certificate of Public\

Good of Comcast of Connecticut/Georgia/Massachusetts/New Hampshire/New York/North Carolina/Virginia/Vermont, LLC,d/b/a Comcast, expiring on December 29,2016, to provide cable television service

Docket No. 8301

REPLY IN SUPPORT OF MOTION TO ALTER OR AMEND JUDGMENT

L INTRODUCTION

In their respective response briefs, the Department and VAN fail to substantively address

Comcast's fundamental arguments that the Board's Order:

• Does not provide the specific findings, based on a preponderance ofevidence in the record, required to demonstrate that Comcast's CPGRenewal Proposal was not reasonable to meet community needs andinterests, taking into account the costs of meeting those needs andinterests;

• Does not contain the Cable Act-required analysis balancing customers'needs and interests in the Contested Conditions against the costs ofsatisfying those specific conditions - and instead applies an "overallprofitability''' standard; and

• Does not justify the Contested Conditions in light of the most criticalaspect of the Department's renewal ascertainment - the impact of theContested Conditions on customer rates.'

The response briefs only highlight that the Contested Conditions lack the evidentiary support and

the cost/benefit balancing that are required by Section 626 of the Cable Act and are essential to

surviving judicial scrutiny. Neither the Department nor VAN have identified the findings that

' Unless otherwise noted, as used in this Reply, all capitalized terms have the same definitions provided in the Orderand Comcast's Motion and Memorandum.

would be required to show that Comcast's CPG Renewal Proposal was not reasonable. The

simple reason for their failure is that no such findings exist. This deficiency alone requires

modification of the Contested Conditions and renders the Order unsustainable on appeal.

With respect to the PEG IPG condition, the Department confirms what the ascertainment

clearly demonstrated -Vermont cable customers already pay among the highest PEG costs in the

nation, and do not want to pay any additional amount for PEG, much less the $3.8 million the

condition would impose. The Department agrees with Comcast that the record does not support

condition 22(3), and continues its recommendation that Comcast be required to make the IPG

available only in headend areas where there is no channel conflict among PEG channels.

Comcast would accept the Department's proposal. In contrast, VAN's tone deaf response

ignores altogether the emphatically stated rate concerns of Vermont cable customers and the

applicable Cable Act standards. Instead of focusing on the relevant renewal standards, VAN

offers the ex post facto theory that the IPG condition can be justified as a "penalty" for past non-

performance. VAN'S theory is contrary to the record before the Board, which establishes that:

(i) Comcast did not breach the Existing CPG; and (ii) the Board never found Comcast in

violation of a material provision of the Existing CPG.

With respect to the line-extension conditions, the Board never explained how Comcast's

incorporation of the Board's own Rule 8.313 line extension policy into Comcast's CPG Renewal

Proposal could possibly be rejected as being unreasonable, and the Department fares no better in

its brief. The Department does not dispute that the Board adopted Contested Conditions 33 and

34 without conducting a cost-benefit analysis and without finding that Comcast's CPG Renewal

Proposal was unreasonable - both of which are required by Cable Act Section 626. Instead, the

Department disserves the Board by attempting to avoid the Section 626 requirements based on a

misreading of a 2007 FCC Order that the FCC explicitly stated does not apply to incumbent

cable providers.^ The Department's Response only highlights that the 550-mile line extension

mandate is arbitrary, discriminatory, irreconcilable with the Board's own line extension policy,

and in direct conflict with the Cable Act's franchise renewal mandates.

The Department and VAN also failed to refute the fundamental flaw that requires

reconsideration of the Board's imposition of conditions 21(b) and (c) (remote origination return

lines) and 50-55 (I-Nets): the Board never evaluated or made any finding regarding the

reasonableness of Comcast's proposal on these subjects. The Department and VAN also confirm

that the Board impermissibly relied on provisions contained in Comcast's Existing CPG, instead

of evaluating future community needs and interests and balancing the associated costs as

required under Section 626.

11. NEITHER VAN NOR THE DEPARTMENT REBUTS COMCAST'S

DEMONSTRATION THAT THE IPG OBLIGATION SET FORTH IN

CONDITION 22(3) VIOLATES THE CABLE ACT

Comcast's Memorandum established that the Board's costly renewal condition 22(3) -

requiring Comcast to modify its systems so that every AMO can place detailed program

information on Comcast's IPG - violates the Cable Act by: (1) failing to account for the already

extraordinary monthly subscriber cost imposed by existing PEG requirements; (2) failing to

consider the multi-million dollar cost of complying with condition 22(3); and (3) failing to

properly weigh undisputed ascertainment evidence that Vermont customers are not willing to pay

more to place PEG listings on the IPG.

^ DPS Resp. at 6-8.

Comcast's Memorandum further explained that condition 22(3)'s unacceptable rate

impact can be avoided only by properly treating the mandated IPG modification costs as

"franchise fees," subject to the five percent cap under the Cable Act - thereby reducing the

amount of monthly funding Comcast would otherwise pay to the AMOs. Finally, Comcast

explained that the Board is prohibited from imposing condition 22(3) on the alternative ground

of "Comcast's apparent failure to comply" with its Existing CFG."*

Significantly, the Department shares the concern of Comcast and consumers over the

extraordinary costs to comply with condition 22(3), particularly as to how such costs "will be

allocated amongst the AMOs and consumers."^ The Department sensibly recognizes that the

imposition of condition 22(3) will cause one of two unintended alternative outcomes: either a

significant increase in customer rates or a reduction in AMD funding.^ The Department thus

renews its proposal that the Board abandon the costly IPG requirement in situations where

AMOs and system boundaries do not coincide and instead asks the Board to "require Comcast to

make the IPG available to AMOs in headend territories [only] where there is no channel conflict

amongst PEG channels."^ The Department emphasizes that its requested modification of

condition 22(3) is necessary "to protect ratepayers and the AMOs from sudden and potentially

o

substantial financial impacts" of the condition as adopted by the Board.

Comcast Mem. at 19-21

" Id. at 21-24.

5DPS Resp. at 2-3.

^ Id. at 5 ("[T]he Department's recommended condition would shield ratepayers from additional increases ... andprotect the AMOs from potentially significant financial risk ...").

'Id.

^ Id. at 2.

While Comcast continues to believe that the Cable Act standard warrants elimination of

any PEG IPG obligation, it concurs with the Department's continued recognition of condition

22(3)'s financial folly, and Comcast is prepared to accept the modified condition as proposed by

the Department.

For its part, VAN continues to show a complete lack of interest in the customer rate

impact, and it fails to seriously address any of Comcast's legal and financial concerns with

condition 22(3). Instead, VAN offers a scattershot of arguments in an obvious attempt to

obfuscate the Board's failure to adhere to the franchise renewal analysis required by Section 626

of the Cable Act.

A. VAN Ignores the Ascertainment Findings on the PEG IPG Condition

Neither VAN nor the Department disputes that Comcast's Vermont customers already

pay among the highest fees anywhere in the United States to support PEG programming - an

extraordinary $5.37 per month in 2015.^ Nor do they dispute that 72% of respondents to the

Department's CNA were either opposed to, or preferred not to pay, any greater amount for PEG

IPG program listings.^® And, the Department's CNA found that 0% of respondents affirmatively

supported paying such a fee. ̂ ̂

There is no record evidence that the purported community interest in the PEG IPG

condition is justified in light of the cost. Maintaining a contrary position in this proceeding

disregards the ascertainment findings, skips the cost-benefit balancing required under Section

626, and reflects a disregard for consumers' overriding rate concerns. It is, therefore, not

Comcast Mem. at 14 & n.39.

at 17.

See id. at 17 & nn.50-51.

surprising that the Department joins Comcast in urging the Board to reconsider the PEG IPG

condition. Whatever community interest exists for PEG listings to appear on Comcast's IPG,

that interest cannot prevail against the uncontroverted record of customer opposition to paying

for such listings.

Rather than address bona fide rate concerns, VAN devotes most of its response to

• • 1

advancing various misplaced arguments that the Board is entitled to deference, that the Board

1 "5 ^

adequately considered costs in light of Comcast's overall profitability, and even suggesting that

Comcast might or might not be allowed to pass through the costs to reconfigure its systems for

PEG IPG listings.'"* VAN quibbles with the record evidence regarding the costs imposed to meet

the PEG IPG condition, but as the Board recognized, the record is clear that "such cost is

expected to exceed $3.0 million over the term of such CPG."'^ In its various attempts to defend

the PEG IPG condition, VAN never explains why or how the imposition of that uncontroverted

$3 million cost on Comcast customers would be reasonable.

VAN 0pp. at 8, 14, 16-19.

Id. at 9, 19-20,22. Under the Cable Act's Section 626 renewal standard, whether a cable operator can remain"profitable" despite the imposition of a condition is irrelevant to the franchising authority's statutory obligation toweigh evidence of community need and interest against the costs of meeting that interest.

''' VAN is strikingly inconsistent in its treatment of the pass-through issue - alternately asserting that Comcast hasthe right to pass-through the PEG IPG costs and contending that the Board can preclude such a pass-through. VAN0pp. at 19 (profitability under rate of return), 22-23 (costs could be imposed as a penalty or passed through in retailprice), 25 ("Comcast must absorb the cost" of the condition). In fact, Comcast is not a rate regulated utility, andalthough the Board ordered Comcast to modify its facilities to enable PEG listings on the IPG "at its expense,"Order at 54; CPG at 7 Tj 22(3), it did not purport to preclude Comcast from passing through those costs as a"franchise-related cost." See, e.g., 47 U.S.C. § 542(c)(2) (itemization of bills to show amounts to satisfy franchisePEG requirements); 47 U.S.C. § 543(b)(4) (FCC standards to identify franchise PEG costs); 47 C.F.R.§ 76.985(a)(2) (same).

Order at 54. The evidence in fact demonstrated that the minimum cost to satisfy the condition would be nearly$3.8 million. Comcast Mem. at 15 & n.42.

VAN also renews its spurious argument that the Board has authority to impose the IPG condition under the FCC'sorder approving Comcast's merger with NBCU. VAN 0pp. at 13-14. Comcast explained the lack of any rationalbasis for this claim in its Reply Brief filed October 17, 2016 at 8-10, and will not repeat them here. The Board didnot accept VAN'S argument.

VAN also misstates the standard by which the Board's final decision will be reviewed in

court, arguing that "the Board has authority and is the ultimate arbiter to determine whether an

operator's proposal is reasonable."'^ Respectfully, the Board is not the "ultimate arbiter"; under

Section 626, a court will ultimately decide whether the Board's decisions are supported using the

"preponderance of evidence" standard.'^ Further, even the specific case precedent that VAN

attempts to rely upon recognizes that "[a] court should defer to the franchising authority's

identification of the community's needs and interests except to the extent necessary to weigh the

needs and interests against the cost of implementing them''^^ VAN ignores the critical second

half of the sentence, which fatally undermines its argument while directly supporting Comcast's

position.

B. The Costs to Reconfigure Comcast's Network to Provide PEG ProgramInformation on the IPG Are Franchise Fees Under the Cable Act

Comcast's Memorandum clarified that the particular costs imposed by condition 22(3)

would constitute "franchise fees" subject to the Cable Act's 5% cap.^'' The governing "fi-anchise

fee" provision admittedly includes a narrow exception for "capital costs which are required by

" VAN 0pp. at 8.

47 U.S.C. § 546(e)(1) (right of appeal); 47 U.S.C. § 546(e)(2)(B) (court to apply the preponderance standard tothe Board's findings). Congress emphasized that this standard of review under Section 626 "is not that used intraditional court review of municipal decisions .... The court, after weighing the evidence, mcy grant whateverrelief it deems appropriate, including... ordering a grant of renewal." H.R. Rep. No. 98-934 at 75 (emphasisadded).

Union CATV, Inc. v. City ofStnrgis, 107 F.3d 434, 441 (6th Cir. 1997) (emphasis added).

Comcast Mem. at 19-21. The FCC interprets the definition of a franchise fee under 47 U.S.C. § 542(g)(1)"broadly." Implementation of Section 621(a)(1) of the Cable Commc 'ns Policy Act of 1984, Report and Order andNotice of Proposed Rulemaking, 22 FCC Red. 5101, 5145 f 96 (2007) (^''Section 621 - First Report and Order").

9 1

the franchise to be incurred by the cable operator for [PEG] access facilities f but that

exception is not applicable here.

VAN (and to a lesser extent, the Department) urges an expansive interpretation of the

"capital" exception that would violate basic canons of statutory construction by writing out of the

statute the explicit requirement that the excluded "capital costs" must be incurred for 'fPEGJ

access facilities. Although the costs to reconfigure Comcast's network for PEG use of the

IPG might be considered "capital," neither VAN nor the Department even attempts to argue that

the costs are "for [PEG] access facilities," as required to fit within the statutory exception.^^

There is, in fact, no dispute that the Board imposed the IPG condition as a "PEG channel

outreach requirement" intended to "increase customer awareness of PEG programs."^'* This

condition requires Comcast to reconfigure its own network to accommodate PEG program

listings. But the condition does not require Comcast to pay for PEG access facilities of any kind.

The condition falls outside the narrow exception to the otherwise sweeping definition of

"franchise fees."

47 U.S.C. § 542(g)(2)(C) (emphasis added). The legislative history mentions "capital costs associated with theconstruction of public, educational and governmental access facilities," as well as production-related gear like "vans,studios, cameras, or other equipment relating to the use of public, educational, or governmental channel capacity."H.R. Rep. No. 98-934 at 26,45. The FCC emphasized that "payments of this type, if collected onlyfor the cost ofbuilding PEG facilities, are not subject to the 5 percent limit," and that "[cjapital costs refer to those costs incurredin or associated with the construction of PEG access facilities." Section 621 - First Report and Order, 22 FCCRed. at 5150-51 ̂ 109 (emphasis added).

DPS Resp. at 4; VAN 0pp. at 26-27. VAN's franchise fee argument violates the canon that "[w]here a generalprovision in a statute has certain limited exceptions, all doubts should be resolved in favor of the general provisionrather than the exceptions." 2A Sutherland Statutory Construction § 47:11 (7th ed.) (quoting In re Woods, 743 F.3d689, 699 (10th Cir. 2014), and citing other cases); see also id. § 47:8 ("[A]ny doubt about the extent of a proviso'sapplication is strictly resolved [0]nly those subjects expressly exempted should be freed from a statute'soperation.") (citations omitted).

See Comcast Mem. at 19-21. The Department and VAN both recognize that their arguments to the contrary are atbest "uncertain." VAN 0pp. at 27; DPS Resp. at 5 (recognizing that an argument that the IPG costs fall within the"capital exception" could lead to litigation).

Order at 53.

Because the IPG costs mandated by condition 22(3) would constitute franchise fees in

excess of the statutory cap, "the non-capital costs of such [PEG] requirements are offset from the

cable operator's franchise fee payments. This is consistent with the Act and the historic

management of PEG requirements by LFAs."^^ The costs of meeting the IPG condition would

thus reduce payments to AMOs on a dollar-for-dollar basis. Nothing in the record suggests that

the Board contemplated this possibility in adopting condition 22(3).

C. The Board Cannot Impose Condition 22(3) as a Penalty

VAN suggests that condition 22(3) is justified as a "penalty" for Comcast's alleged non-

compliance with its EPG obligations under the condition 23(3) of the Existing CPG.^^ In making

this claim, VAN implicitly recognizes that condition 22(3) would not otherwise survive under

Section 626's required cost-benefit analysis. Regardless, VAN's alternative non-compliance

rationale collapses for lack of any factual or legal foundation.

Comcast's Memorandum addressed the absence of factual support for the Order's

statement that "[gjiven Comcast's apparent failure to comply with [condition 23(3)] of the

Existing CPG ... the Board will... require Comcast, at its expense, to bring its system into

07 *

compliance with its pre-existing obligations." Comcast identified evidence in the record

proving that it still carries the "electronic program guide," although VAN no longer desires to

use it.^^ Comcast's IPG is simply not the same thing as the "electronic programming guide"

Section 621 - First Report and Order, 22 FCC Red. at 5108 ̂ 13. Comcast's disclosure of this effect on AMOrevenue merely explains the statutory remedy for excessive franchise fees caused by franchise requirements, asspecified by the FCC. It is not, as VAN mischaracterizes it, a threat of any kind. VAN 0pp. at 23.

VAN 0pp. at 22-23.

Order at 54 (emphasis added).

Comcast Mem. at 22.

referenced in condition 23(3) of the Existing CPG. Neither VAN nor the Department challenges

this fundamental fact.

Further, the record evidence establishes that Comcast did not create the cable system

infrastructure that would require the expensive system changes necessary for AMOs to use the

* 00 • •

IPG for PEG program listings in each AMD service area. The record is uncontradicted that

Comcast inherited Adelphia's system which had already been reconstructed in its current

configuration. Neither VAN nor the Department identifies anything in the record that

on

contradicts this basic fact.

The Board's comment on Comcast's apparent failure to comply" with condition 23(3)

of the Existing CPG recognizes that there is, at minimum, a bonafide dispute as to Comcast's

past compliance on this issue. It is absolutely clear that the Board did not initiate any

enforcement action against Comcast regarding the IPG PEG requirement. Further, VAN admits,

as it must, that "the Board did not provide actual notice to Comcast of any noncompliance with

Existing CPG conditions."^' That should end the matter: the Cable Act expressly prohibits the

denial of a proposal for renewal "unless the franchising authority has provided the operator with

Comcast Mem. at 22 (and citations). In addition, the Board has detailed information, through Docket 7077 andthe annual cable operator reports filed by Adelphia and Comcast, showing that Comcast did not alter the systemarchitecture it inherited from Adelphia.

VAN refers to the testimony of its own witnesses, cited in the Order at Finding 110, complaining that Comcastand some AMOs have been unable to agree on a mutually acceptable resolution of the AMOs' desire to use the IPG.VAN Opp. at 10 & n.5. VAN's witness testimony of their complaint is not evidence that Comcast failed to makethe electronic programming guide available. An alleged complaint or request by an interested party - VAN - doesnot establish a contract violation by the other party - Comcast.

VAN Opp. at 11. The Board likewise did not use its own procedures for placing cable operators on notice ofperceived noncompliance. See, e.g., 30 V.S.A. § 509; Investigation into the Certificates of Public Good ofFirstCarolina Cable TV, L.P. and Young's Cable TV Corp., Docket No. 5327, 1989 WL 571628, at *1 (Apr. 13, 1989)C'First Carolina Cable Investigation") ("Sanctions pursuant to 30 V.S.A. § 509 must be predicated upon very clearand well-supported findings.").

10

notice and the opportunity to cure ... Calling the condition a "penalty" does not eliminate

the Cable Act requirement for notice and an opportunity to cure.

VAN also advances a bizarre argument that the Board's Order itself "serves notice to

Comcast with conditions designed to cure noncompliance with [the] Existing CPG via the New

CpG "33 Cable Act renewal provision requires the franchising authority to provide the

operator with notice and a meaningful opportunity to cure the alleged deficiency before the

franchising authority issues a decision to deny a renewal proposal or impose conditions. The

franchising authority cannot evade the letter and intent of the law by skipping the required

notice-and-opportunity-to-cure process and then deeming a mandatory condition in the final

renewal order to be a notice of noncompliance. Here, the Board never gave Comcast notice of

any failure to comply with the Existing CPG and never formally adjudicated whether Comcast

violated the Existing CPG.^"* VAN's efforts to rewrite that history are both misleading and

unfounded.

VAN makes the frivolous claim that the AMOs' arguments to Comcast about their desire to have Comcast pay fortheir use of the IPG constitute "de facto" notice sufficient to satisfy the Cable Act. VAN 0pp. at 11-12,24-25.VAN and the AMOs are interested parties, not the franchising authority, and cannot usurp the Board's governmentalrole and issue notices of noncompliance.

VAN 0pp. at 24.

The Board's Order is also insufficient to impose sanctions under 30 V.S.A. § 509, which requires the Board tofind that condition 23(3) is a material term of the Existing CPG that Comcast violated, and then allow Comcast areasonable time to cure the claimed violation. See 30 V.S.A. § 509. The Board's Order did not find that Comcastviolated condition 23(3). See Order at 56 (noting an "apparent failure to comply"). The Board did not make the"very clear and well-supported findings" that are required in order impose sanctions under 30 V.S.A. § 509, nor hasthis docket included "a vigorous, thorough fact-finding process" with respect to Existing CPG condition 23(3)needed to make such findings. See First Carolina Cable Investigation, 1989 WL 571628, at *1. Finally, the cost toreconfigure Comcast's network far exceeds the civil penalty limits of 30 V.S.A. § 509(b), and also far exceeds thepenalties imposed on Adelphia for its numerous violations of Vermont law, its CPGs, and Board orders and rules.See Docket Nos. 6101/6223, Order of Apr. 28,2000 at 5.

11

III. THE DEPARTMENT FAILS TO ADDRESS THE CABLE ACT INFIRMITIES

OF THE LINE EXTENSION CONDITIONS

A. The Department Attempts to Circumvent the Controlling Section 626Renewal Standard

The Department's Response conspicuously ignores the Cable Act Section 626 renewal

standard that lies at the very heart of Comcast's challenge to line extension conditions 33 and 34,

Rather than confronting Section 626, the Department instead contends that federal law authorizes

c

any franchise build-out requirement that is not categorically "unreasonable." The

Department's novel legal argument is expressly premised on a 2007 FCC ruling preempting

unreasonable franchise barriers against new cable entrants.^*^ The Department has

mischaracterized that FCC ruling, which in no way overrides the careful cost-benefit balancing

mandated under Section 626.

The Department quickly concedes that the so-called "reasonableness" standard it

espouses "was developed within an FCC proceeding that focused largely on removing barriers to

T7 •

entry... to overbuild incumbent cable providers, such as Comcast." This concession was

unavoidable, as the 2007 FCC proceeding was indisputably undertaken "to implement section

621(a)(1) of the Communications Act of 1934, as amended ..., which prohibits franchising

authorities from unreasonably refusing to award competitive franchises for the provision of cable

services."^^ In fact, each of the build-out references the Department relies on from the FCC's

• • TO

Section 621 - First Report and Order explicitly discusses "new entrants." Nevertheless, the

See DPS Resp. at 6-8.

See Section 621 - First Report and Order, 22 FCC Red. 5101.

DPS Resp. at n.l3.

38 Section 621 - First Report and Order, 22 FCC Red. at 5102 ̂ 1.

See DPS Resp. at 7.

12

Department contends, "There is no indication that the FCC's order and standard with respect to

build-out requirements is limited to market entry franchises.""*® This remarkable contention is

facially incorrect. The FCC issued a Second Report and Order in the same proceeding in late

2007, in which it directly addressed this precise jurisdictional issue and clearly concluded, "The

'build-out' section of the First Report and Order is ... not applicable to incumbents.""*' The

Commission unequivocally explained:

We agree that the findings in the First Report and Order concerning build-outshould not apply to incumbents. Our findings regarding build-out requirementswere squarely based on Section 621(a)(1) of the Act, a provision that plainly doesnot apply to incumbents providers.... We also find there is no basis for applyingthe build-out rationale in the First Report and Order to incumbents, because theunderlying rationale - that build-out requirements can serve as a barrier to newentrants - is inapplicable to incumbents.""*^

Simply put, the Department misdirects the Board in contending that the FCC's "build-

out" discussion in the Section 621 - First Report and Order applies to franchise renewals.

Contrary to the Department's characterization. Section 621(a)(1) and the FCC's implementing

regulations were not designed to broadly empower franchising authorities to impose build-out

requirements during franchise renewals, but rather to restrain the imposition of build-out

conditions that might otherwise inhibit competition from new entrants.

The Department's attempt to escape the restraints of Section 626 - and the careful cost-

benefit analysis required thereunder - reflects its recognition that CPG conditions 33 and 34

cannot possibly pass muster under that controlling federal franchise renewal standard. Equally

unsupported is the Department's argument that EMCO Rule 8.214(B)(7) somehow supersedes

atn.l3.

Implementation of Section 621(a)(1) of the Cable Communications Policy Act of1984, Second Report and Order,22 FCC Red. 19633, 19636 ̂ 9 (2007) (emphasis added) ((''Section 621 - Second Report and Order").

Id. at 19636-37 ̂ 9 (emphasis added).

13

the cost-benefit analysis mandated for franchise renewals under both the Cable Act and Vermont

Rule 8.230.''^ Unable to justify conditions 33 and 34 under Section 626 and Rule 8.230, the

Department disregards the controlling renewal standard in favor of a misinterpreted alternative,

but that approach is not a viable legal option for the Board. The Cable Act preempts inconsistent

state and local renewal standards and precludes a franchising authority from bypassing the cost-

benefit analysis mandated under Section 626.'^''

B. The Department Fails to Justify Imposing Line-Extension RequirementsThat Exceed The Rule 8.313 Formula

The Department's Response summarily dismisses the Board's line extension formula set

forth in Rule 8.313 (and specifically incorporated into Comcast's ovm renewal proposal) as a

"baseline" requirement that is irrelevant to this renewal proceeding."^^ The Response fails to

explain, however, why the Rule 8.313 formula - which mathematically balances the costs and

benefits associated with each potential line extension - does not appropriately ensure Vermont

residents that cable service will be fairly expanded into additional areas where it is economically

Rule 8.214 establishes a variety of "criteria" for approving or rejecting a request for a cable CPG, with subsectionB(7) identifying the "availability of service to maximum number of residences." Rule 8.230, however, specificallyestablishes "renewal" standards and essentially restates Cable Act Section 626, with subsection (D) requiring anevaluation of whether, "the operator's proposal is reasonable to meet the future cable-related community needs andinterests, taking into account the cost of meeting such needs and interests."

A line extension requirement that "eliminates case by case consideration of a cable operator's renewal proposal bymandating the service areas for a cable license, irrespective of the demand for cable in and the costs of providingcable to such areas ... is inconsistent with the Cable Act and, therefore, it is preempted and declaredunenforceable." Time Warner Entm't Co. v. Briggs, 1993 WL 23710, at *3 (D. Mass. Jan. 14, 1993).

DPS Resp. at 8.

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justified."^^ Again, the Department ignores the Section 626 renewal standard in favor of an

arbitrary mileage mandate that compels construction beyond that which the Board itself has

determined would be economically justified.

The Department contends that the 550-mile mandate it recommended to the Board (in

lieu of Comcast's proposed reliance on the Board's own line extension formula) was based on a

"combination of... two factors" - the Department's belief that: (1) "strict compliance with the

line extension rule resulted in a relatively little build out;" and (2) "Comcast's business in

Vermont has been highly lucrative.""^^ The first factor recognizes that there are few (if any)

remaining areas in Comcast's franchise area that can be economically built out according to the

Board's own formula. And the second factor serves to eliminate the Cable Act requirement that

renewal build-out conditions be cost-justified - asserting instead that Comcast should build 550

miles of line extensions based on its overall profitability.

Comcast's Memorandum included a lengthy discussion explaining why the Board's

reliance on Comcast's overall profitability to impose a multi-million dollar construction

obligation is legally flawed."^^ The Department's Response fails to address any of Comcast's

points. Instead, the Department effectively concedes that the only basis for recommending the

550 mile construction obligation was to maximize service availability - without any regard for

the "cost of meeting such needs and interests." Indeed, the Department's Response never

The Department argues that Rule 8.313 is a baseline and that a cable company may be required to construct lineextensions above this baseline if the Board finds that service is not available to a maximum number of residences if

properly considered by the Board under Rule 8.214(B)(7). DPS Resp. at 8-9. The Department, however, does notcite to any Board precedent for this novel interpretation. The Board has instead used Rule 8.313 as a reasonablemeasure for maximizing cable service availability. See, e.g.. Docket No. 6521, Order of 9/8/2003 at 12 ("Charter'sservice will be available to a maximum number of residences as determined by Charter's line extension policy.");Docket No. 7077, Order of 12/29/2005 at 20 ("Holdco's service will be available to a maximum number ofresidences as determined by Adelphia's line-extension policy, which will be adopted by Holdco.").

DPS Resp. at 9.

48See Comcast Mem. at 30-33.

15

disputes that the Board adopted the contested line extension conditions without: (1) identifying

any particular geographic area for the mandated build-out; (2) quantifying either the benefits to

potential customers or the costs associated with the additional construction; or (3) reconciling the

high-cost construction obligation with the significant rate concerns expressed by consumers in

the public ascertainment. Moreover, although the Department asserts that there is "a sufficient

factual basis to support the build-out requirements,""^^ the record actually lacks factual analysis of

either the need for additional cable construction or the rate impact of the resulting construction

costs.

The absence of any meaningful cost-benefit analysis is fatal to the Board's line-extension

conditions. The Department's Response has done nothing to justify these Contested Conditions

under Cable Act Section 626.^^ The failure to evaluate the number of potential new customers

and the rate implications of the mandated construction is particularly troubling in light of the

undisputed fact that cable service cost was the primary concern identified in the community

ascertainment.^^ The Department seems to purposely ignore the fact that the multi-million dollar

construction costs imposed by the Board's conditions will negatively impact the rates of all

existing Comcast Vermont customers - the very customers who will subsidize the uneconomic

construction.

DPS Resp. at 8.

The Department does not dispute the statement made in Comcast's Memorandum that, "the ascertainment recordin this proceeding falls far short of identifying a widespread unmet demand for cable service, and it certainly doesnot evaluate any such demand relative to the associated costs." Comcast Mem. at 27.

See Comcast Mem. at 11-12.

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C. The Contested Line Extension Obligation is Discriminatory and Illogical/

The Department's Response specifically confirms that the contested 550 mile

construction obligation would subject Comcast to unique regulatory treatment. But in arguing

that CPG conditions 33 and 34 do not place Comcast at a "competitive disadvantage vis a vis ...

other [cable] companies, the Department misstates Comcast's legal challenge. Comcast's

Memorandum did not suggest that the contested line extension obligation should be removed

because it places Comcast at a competitive disadvantage vis a vis other cable operators, but

because it is inherently discriminatory and subjects Comcast to a unique regulatory burden that is

contrary to the First Amendment.

In response to this fundamental legal challenge, the Department unapologetically asserts

that Comcast was properly singled out for special treatment because it is larger and more

profitable than the other Vermont cable operators.^"* Again, the Department misses the point.

The geographic scope of Comcast's operations does wo/justify imposing a categorically different

approach to line extensions. The mathematics underlying the Board's generally applicable line

extension formula automatically adjust for the geographic scope of any given operator's

franchise area. Other things being equal, an operator with a larger franchise territory would have

a greater construction obligation under the Board's formula - but each operator's respective

obligation logically would remain proportional and non-discriminatory.

There is nothing in the record suggesting that Comcast has been any less diligent than

other cable operators in building out its franchise area. The Department never suggests that other

operators' franchise areas are entirely built-out. Accordingly, there is no credible legal basis for

" DPSResp. at 10-11.

See Comcast Mem. at 33-35.

DPSResp. at 11.

17

the Board to subject Comcast to a unique construction obligation. As Comcast explained in its

Memorandum, it would be inappropriate under the Cable Act and the First Amendment to

subject Comcast to unique construction obligations solely because it is bigger or more profitable.

Yet the Department's Response makes it very clear that is exactly what happened in this case.

Finally, the Department's Response confirms that the specific mileage figure was not

based on the identification of any particular public need, or an evaluation of the associated

construction costs. To the contrary, it was based entirely on "Comcast's historical line extension

construction practices and budgets. That rationale is, of course, inherently illogical, because it

disregards critical operational facts and wrongly assumes that historic needs and costs match

future needs and costs. As explained in Comcast's Memorandum:

The more an operator constructs in a relatively rural state like Vermont, the morelikely it is that the remaining unserved franchise areas will have very lowpotential subscribership, and the more likely it is that such additionalconstruction will be uneconomic. The detailed line-extension formula in the

Board rule applicable to all cable television companies properly recognizes thefundamental business fact and adjusts construction obligations depending onconstruction economics - whereas the 550 mile construction obligationillogically remains unchanged, regardless of the number of potential newcustomers and regardless of the costs of reaching them.^^

The Department's Response never explains why Comcast's future line extension

obligations should be based on past practices, regardless of future economic considerations.

Indeed, when all is said and done, the Department does not dispute Comcast's factual objections

to the arbitrary 550-mile line extension obligation, nor does it seriously grapple with Comcast's

multi-faceted legal challenge. The Department essentially argues that the Board was entitled to

impose a unique multi-million dollar line extension obligation on Comcast because its "business

Id. at 12.

Comcast Mem. at 28-29.

18

in Vermont has been highly lucrative."^^ Comcast respectfully submits that the Department's

argument is unreasonable, unconstitutional, and inconsistent with the governing renewal standard

set forth in Cable Act Section 626.

IV. THE AVAILABILITY OF "ALTERNATIVE TECHNOLOGIES" TO FULFILL

CONTESTED CONDITIONS 21(B) AND (C) DOES NOT SATISFY SECTION 626

VAN'S Opposition recognizes that Comcast's challenge to conditions 21(b) and (c)

focuses primarily on the Board's failure to evaluate the reasonableness of Comcast's proposal in

light of the future cable-related community needs and interests, taking into account the cost of

CO

meeting those needs and interests. Yet, neither VAN nor the Department directly rebut

Comcast's threshold legal challenge. They certainly do not catalogue a strong interest in remote

origination programming that would be unmet under Comcast's proposal, nor do they analyze or

justify the costs associated with conditions 21(b) and (c). No such record evidence exists. In

fact, the Board rejected Comcast's proposal solely because "it would materially modify" the

provisions of the Existing CPG addressing remote origination return lines.^^ The Board's

obligation under Cable Act Section 626 is to evaluate the reasonableness of Comcast's proposal

in light of the needs identified in the ascertainment, not as compared to an Existing CPG

condition.^*'

Instead of responding to this threshold failing in the Board's decision, both VAN and the

Department focus on the provision of condition 21 that states "Comcast may employ various

" DPS Resp. at 9.

VAN 0pp. at 28.

Order at 47.

Comcast Mem. at 8-9, 39-40.

19

alternative technologies of its choice to provide PEG Access origination capability."^' They

argue that the Board effectively "considered" the cost of compliance with conditions 21(b) and

(c) by including the option to use alternative technologies. This argument misconstrues the

Section 626 standard, and relies on unsupported cost assumptions.

Under Section 626, the Board's first duty is to evaluate the reasonableness of Comcast's

proposal. Only after a finding that Comcast's proposal is unreasonable to meet the community

interest in remote origination of PEG programming, can the Board impose an alternate

requirement.^^ At a minimum, the record must demonstrate that the Board conducted a careful

cost-benefit analysis that supports the necessity of imposing an alternate requirement. Here, the

record evidence demonstrates that conditions 21(b) and (c) will result in significantly greater

costs than Comcast's proposal.^''

Contrary to VAN's and the Department's arguments, the option to employ "alternative

technologies" does not satisfy the Board's obligation to consider the costs imposed by conditions

21(b) and (c). Neither VAN nor the Department cite any record evidence establishing cost

VAN 0pp. at 29; DPS Resp. at 13-14.

VAN also argues that Comcast's Memorandum presents cost arguments that were not previously raised and notsupported by record evidence. VAN 0pp. at 28. VAN is mistaken. Comcast's Memorandum cites numerousexamples of the cost of construction of remote origination return lines in the record. Comcast Mem. at 41. Comcastdid not provide a precise estimate of the total cost of compliance with conditions 21(b) and (c) because the potentialcost exposure is dependent upon the number of sites AMOs request - a number Comcast cannot predict. Becausethe number of potential origination sites under conditions 21(b) and (c) are unlimited, the resulting costs associatedwith the construction of remote lines is also essentially unlimited. In any event, the record evidence providessufficient examples of construction costs to conclude that the costs of compliance with conditions 21(b) and (c) aresignificantly greater than the cost of compliance with Comcast's proposed condition 18. See Comcast Mem. at 40-43.

As Comcast's Memorandum explained, Comcast's proposal is sufficient to meet the community interest in PEGremote origination. Comcast Mem. at 38, 40-43. Comcast currently provides 148 remote origination sites and iscommitted to continuing those and providing additional new sites at reasonably predictable construction costs. Id. at41. The Department's ascertainment demonstrated that Vermont cable subscribers are unwilling to bear the costs ofadditional remote origination sites. Id. at 41-43.

^ Comcast Mem. at 38-43.

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savings available through the use of "alternative technologies," and nothing in the Board's Order

explains that the costs of conditions 21(b) and (c) could be meaningfully offset by the potential

to use "alternative technologies."^^ Indeed, the Board's Order offers no justification as to why

conditions 21(b) and (c) are necessary despite the increased costs they impose. Without record

evidence that the potentially unlimited cost of complying with conditions 21(b) and (c) can be

effectively offset by using "alternative technologies," VAN's and the Department's position

amounts to nothing more than telling Comcast it may comply with the requirement in the least

expensive manner it can devise.^^ That approach is mt a balancing of the community need

against the cost of meeting that need - it is mandating a requirement regardless of the cost. And

it is clearly a violation of Cable Act Section 626.

The Cable Act demands an evaluation of whether remote origination sites are an

important enough community need that the cost of providing additional sites is worthwhile. The

Board's decision does not undertake such an analysis. Accordingly, Comcast respectfully

requests that the Board reconsider the adoption of conditions 21(b) and (c) and replace them with

Comcast's proposed condition 18.

V. VAN FAILS TO DEMONSTRATE WHY CONTESTED CONDITIONS 50 - 55 (I-NET) ARE SUPPORTED BY EVIDENCE OF NEED OR REASONABLE COST

Comcast's proposal did not explicitly address I-Nets, instead leaving any request for an I-

Net subject to negotiation on commercially reasonable terms between the parties. The Board's

VAN makes reference to record evidence regarding an alternative technology used to provide remote originationin Rutland, but it does not address the associated costs and viability throughout Comcast's franchise area. There isno indication in the Order that the Board relied on this particular method of providing remote origination PEGprogramming to support its adoption of conditions 21 (b) and (c), and VAN does not claim otherwise.

^ Any such "allowance" is unnecessary because the Board cannot dictate Comcast's technology choices. See 47U.S.C. § 544(e); Implementation of the Cable Act Reform Provisions of the Telecommunications Act of1996, Reportand Order, 14 FCC Red. 5296, 5356-57 ̂ 141 (1996), affdon recon., 17 FCC Red. 7609 (2002).

21

decision does not assess the reasonableness of Comcast's approach to I-Nets and does not

identify any support from the Department's ascertainment process that the I-Net conditions are

necessary to fulfill any cable-related community need or interest.^^

VAN asserts that "the Board has the authority to bring forward [Existing CPG] I-Net

conditions without amendment" and therefore the Board's conclusion that the absence of

compelling reasons to omit the existing institutional network conditions is sufficient to justify

inclusion of the I-Net conditions.^^ VAN provides no support for its assertion. Again, Cable Act

Section 626 renewal standard does not allow the Board to impose a condition not included in

Comcast's proposal simply because it was a part of a prior CPG.^^ The Board's role under

Section 626 is to evaluate the reasonableness of Comcast's current proposal. To the extent the

Board requires conditions not included in Comcast's proposal, any such conditions must be

necessary to meet a future cable-related community need identified in the ascertainment

70process.

VAN claims that the "Board agrees with VAN that the I-Net is one way to achieve the

objectives of statewide programming which is supported by community needs assessed by the

The Department does not contest Comcast's arguments supporting the deletion of the I-Net conditions fromComcast's renewed CPG.

VAN 0pp. at 30. VAN also claims that the Board has "explicit federal authority" to impose these conditions. Id.VAN misstates the law and misuses the legislative history of the Act. An LFA's "PEG authority" over institutionalnetworks is limited to requiring carriage of traditional PEG programming over a cable system's existing institutionalnetwork. Section 621(a) allows a franchising authority to "establish requirements ... with respect to the designationor use of channel capacity ... only to the extent provided in this section." And Section 621(b) limits a franchisingauthority to "require as part of a cable operator's proposal... channel capacity on institutional networks bedesignated for [PEG] use ..." 47 U.S.C. § 541(a)-(b). In any event, nothing in the Act with regard to I-Netsrelieves the Board from its duty to evaluate the reasonableness of Comcast's proposal based on the future cable-related community needs and interests as weighed against the costs of meeting such needs and interests. Here, thereis no evidence in the record supporting a need for the 1-Net provisions.

Comcast Mem. at 8-9,44-45.

™ See 47 U.S.C. § 546(c)(1)(D); H.R. Rep. No. 98-934 at 75.

22

AMO and the Department's CNA."^' Again, however, VAN provides no citation or record

79

evidence to support its claim. In fact, VAN did not prepare a community needs assessment - it

filed testimony and argument advocating that the Board require Comcast to construct a statewide

I-Net, a condition the Board rejected. The community needs assessment prepared by the

Department did not so much as reference institutional networks, a point VAN does not dispute.

Simply put, nothing in the Board's Order or in the Department's ascertainment supports a claim

that the I-Net conditions are necessary to meet future cable-related community needs or interests.

van's advocacy of a statewide I-Net does not create a prima facie community need.

Finally, VAN fails to respond to Comcast's argument that conditions 52 and 53 are

commercially unreasonable, and that the Board failed to undertake a cost-benefit analysis to

justify the I-Net conditions.^'' Instead, VAN simply asserts that "[t]he issue of cost/benefit is

addressed, as it typically is, by negotiated I-Net terms of service."^^ VAN ignores the reality that

the I-Net conditions impose artificial and unsupported limits on Comcast's ability to negotiate

commercially reasonable terms of service, and disregards the fact that conditions 52-53 could

" VAN Opp. at 30.

Id. Indeed, it is not even clear whether VAN is referring to the I-Net conditions the Board adopted, or VAN'Sproposal that would have required a statewide I-Net, which the Board rejected.

See Comcast Mem. at 44.

See Comcast Mem. at 45-46.

VAN Opp. at 30.

23

result in significant costs borne by Vermont cable subscribers - costs Vermont customers do not

want/^

It is clear that franchise-required I-Net costs may be passed through to subscribers. See 47 C.F.R. § 76.925(a)(4);Implementation of Sections ofthe Cable TV Consumer Protection and Competition Act of1992: Rate Regulation,Report and Order and Further Notice of Proposed Rulemaking, 8 FCC Red. 5631, 5967-68 ̂ 546 (1993). As theDepartment's community needs assessment recognized, "customers do not want to bear the costs for enhancedAMD services." Exh. CP-1 (CNA Report at 7-8). Similarly, the scientific survey Comcast commissioned foundthat less than 20% of respondents were willing to pay more than $1 per month total for all PEG fiinding - yet theycurrently are subject to over $5 per month in PEG fees. Exh. DMG-12 at 37 (slide 17 of 25).

24

VI. CONCLUSION

Comcast respectfully requests that the Board grant its Motion to Alter or Amend

Judgment and amend the Order to:

• Eliminate condition 22(3), or in the alternative, modify it as proposed by theDepartment;

• Eliminate conditions 33 and 34, and adopt Comcast's proposed condition 25;

• Modify conditions 21(b) and (c) to conform with Comcast's proposed condition 18;and

• Eliminate conditions 52 and 53.

Dated this 19th day of April, 2017.

DOWNS RACHLIN MARTIN PLLC

Attorneys for Comcast of Connecticut/Georgia/Massachusetts/N ew Hampshire/New York/North Carolina/Vii-ginia/Vemiont, LLC, d/b/a Comcast

lancyiS. MalmquistdWiMT. Crisp

DAVIS WRIGHT TREMAINE LLP

Attorneys for Comcast of Coimecticut/Georgia/Massachusetts/New Hampshire/New York/North Carolina/Virginia/Vermont, LLC, d/b/a Comcast

By:( Robert G. Scott, Jr. j (j

Steven J. Hoivitz

Adam S. Caldweil

Daniel P. Reing

17408595

25