The FCC last night, after a daylong struggle to reach consensus, took several actions of significance to cable operators and programmers.  First, the FCC adopted rules that it characterized as necessary to ensure that cable subscribers with analog televisions will be able to view local broadcast signals after the February 17, 2009 digital transition and a related further notice of rulemaking to address the economic impact of these rules on small cable operators.  Second, the agency also approved an order that extended for five years the ban on exclusive affiliation agreements involving satellite-delivered, vertically integrated programming and modified certain procedural rules for resolving program access complaints.  Third, the FCC announced a new rulemaking proceeding to consider further substantive and procedural changes to the program access rules, such as closing the so-called “terrestrial loophole” and barring broadcasters and cable programmers from “tying” two networks (i.e., forcing an MVPD to agree to carry one network in order to obtain the right to carry another network or broadcast station).   Although the Commission had been expected also to adopt an order extending to incumbent cable operators certain of the franchise reforms that were adopted for new entrants late last year, action on that item was postponed.

I. DUAL CARRIAGE

According to the FCC, analog-only cable subscribers constitute approximately 35 percent of the nation’s television homes (i.e., do not have a television or cable converter capable of receiving a digital signal).  Citing statutory provisions that were adopted prior to the development of digital television that require cable operators to provide subscribers with “viewable” local broadcast signals, the FCC adopted rules under which local broadcast signals are entitled to both analog and digital carriage unless the cable operator goes “all digital” prior to the transition deadline.  This “dual carriage” obligation will sunset in three years (February 18, 2012) unless the FCC acts affirmatively to extend it. 

In addition, the FCC provided potential relief to systems with limited channel capacity (552 MHz or less) by allowing them to request a waiver of the viewability requirement.  This action prompted a dissent from Commissioner Adelstein, who argued that limited capacity systems should have been automatically exempted from the rules.  The FCC also confirmed that cable systems must carry high definition (“HD”) broadcast signals in HD format and reaffirmed the current “material degradation” standard under which the picture quality of retransmitted broadcast signals must be equal to or better than the quality of non-broadcast video programming carried by the system.

The FCC’s action on dual carriage is generally regarded as a victory for the cable industry in that the proposal pushed by Chairman Martin would have established a permanent “dual carriage” obligation and would not have provided any relief for limited capacity systems.  Chairman Martin’s proposal also called for the adoption of a material degradation standard under which cable operators would have had to retransmit all of the “bits” in a broadcast digital signal – a requirement that would have prevented operators from using bandwidth-conserving compression technologies and could have easily been stretched into a multicast carriage obligation.

Finally, the FCC indicated that it would issue a further notice of rulemaking seeking comment on additional ways of minimizing the economic impact of the dual carriage requirement on small cable operators.  This further notice may also raise other questions.  It is not clear how long it will be before the staff releases the full text of the dual carriage order and further rulemaking, since changes were being made up until the last minute.

II. PROGRAM ACCESS

Section 628 of the Communications Act bars cable operators from entering into exclusive distribution agreements with vertically-integrated, satellite-delivered programming networks.  This prohibition originally was scheduled to “sunset” in 2002, but was extended for five years.  As was expected, the FCC yesterday decided to extend the exclusivity ban for another five years, finding that despite the growth of competition, cable operators continue to have the ability and incentive to withhold “essential” programming from other multi-channel video distributors. 

The FCC also adopted certain modifications to its program access complaint procedures, particularly with respect to the production of information relevant to the resolution of a complaint.  Although the FCC indicated that it would take steps to ensure that the confidentiality of sensitive business information is protected, Commissioners Adelstein and Copps expressed concern that this expanded “discovery” provision could go too far in requiring cable operators and programmers to provide complaining multichannel video providers with extensive information about other program affiliation agreements.

The new rulemaking that the FCC started in connection with the program access rules seeks comment on a pair of procedural issues: (1) whether the filing of a program access complaint in connection with proposed changes to an existing contract should trigger an automatic stay of the new provisions and (2) whether an arbitration-type step should be added to the complaint resolution process. 

Even more significantly, the notice of proposed rulemaking also addresses substantive issues, including whether the FCC can and should apply the program access rules to DBS, whether program access restrictions should apply to vertically-integrated services that are distributed terrestrially as well as to satellite-delivered services, whether the FCC should require programmers to deal with entities that provide service through a shared headend, and whether broadcasters and cable programmers should be required to offer their services on a “stand-alone” basis rather than forcing multichannel video distributors to purchase “undesired” programming in return for the right to carry desired programming.  As described, this latter proposal is directed at the wholesale distribution of programming and does not directly propose to require programmers to make their services available for retail distribution on an a la carte basis.

III. INCUMBENT CABLE OPERATOR FRANCHISE REFORM AND OTHER ISSUES.

Late last year, as part of the order adopting franchise reforms for new video entrants, the FCC commenced a proceeding to extend similar reforms to incumbent operators.  At the time, statements were made promising that action on this proceeding would be completed by September 2007.  And in fact, consideration of an order in the franchise reform proceeding originally was originally included on the agenda for yesterday’s meeting.  However, the franchise reform item was pulled from the agenda and, while it still could be adopted before the end of the month, its exact status is uncertain.  In addition, two other items of interest to cable are circulating among the Commissioners and could be decided in the near future.  One is an order that reportedly would deny a request by Comcast for a declaratory ruling that The America Channel is not a regional sports network for purposes of applying certain conditions imposed on Comcast and Time Warner as part of the FCC order approving the Adelphia transactions.  The other pending item is an order that would ban existing and future exclusive contracts between cable operators and the owners of multiple dwelling unit buildings.  This item raises several difficult legal issues (including whether the FCC has jurisdiction to void such contracts and whether it can only bar such contracts prospectively). 

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The Fire District charges Microsoft with engaging in "anticompetitive and monopolistic practices" and is seeking a jury trial. Attorneys for the Fire District are asking the court to open the case to all governing bodies in Arizona, giving it class action status.

The Fire District quietly filed the claim earlier this summer in Arizona state court in Maricopa County. Last week, Microsoft asked the federal U.S. District Court for Arizona to take over the case.

The Fire District is repeating many of the claims made against Microsoft by the Department of Justice and attorneys general on behalf of consumers in 19 states and the District of Columbia. The allegations center on charges that Microsoft used its monopoly position to overcharge for software applications such as word processors and spreadsheets. Under the settlements, Microsoft has agreed to issue millions of dollars worth of product vouchers to affected buyers.

Microsoft officials were not immediately available for comment.

Word of the action comes as Microsoft faces ongoing antitrust scrutiny in Europe. On Monday, Europe's second highest court rejected Microsoft's appeal of almost $1 billion in fines imposed on the company by trustbusters at the European Commission.

The six defendants are charged with assaulting Megan Williams, 20, for more than a week at a ramshackle trailer in Big Creek. Police say she was tortured, sexually assaulted, forced to eat animal droppings and taunted with a racial slur.

Bobby Brewster, George Messer, Alisha Burton and Karen Burton are scheduled to appear Monday in Logan County Magistrate Court. Frankie Brewster and Danny Combs are scheduled for to appear on Tuesday.

Public defenders representing Bobby Brewster and Messer have recused themselves because they had represented some of the defendants in the past.

A public defender can't represent a defendant in this case if they have represented any of the other defendants in past cases, Logan County Magistrate Court Clerk Deeanna Briggs said.

Since 1991, police have filed 108 criminal charges against the six.

Jack Rogers, executive director of the state's public defender services, said other lawyers could be hired on short-term contracts, or attorneys could be brought in from neighboring counties.

Frankie Brewster, 49, and her son, Bobby Brewster, 24, are both charged with kidnapping and sexual assault, among other counts.

Combs, 20, of Harts, is charged with sexual assault and malicious wounding; Karen Burton, 46, of Chapmanville, is charged with malicious wounding, battery and assault during the commission of a felony; and Burton's daughter, Alisha Burton, 23, and Messer, 27, both of Chapmanville, are charged with assault during the commission of a felony and battery.

All six remain in custody in lieu of $100,000 bail each.

Betty Gregory, lawyer for Karen Burton, said Friday she intends to ask for a bond reduction for her client because the $100,000 cash bond is "grossly inappropriate."

The other lawyers representing the defendants did not immediately return telephone calls Sunday.

Because Williams is black and the defendants are white, some _ including church groups close to the Williams family _ want hate crimes charges filed, either at the state or federal level.

U.S. Attorney Charles T. Miller has said he doesn't currently plan to file civil rights charges, while Abraham said he may file new or amended charges in the days to come.

The Court of First Instance of the European Communities ruled that the Commission had committed an infringement by forcing Akzo and subsidiary Akcros Chemicals to allow investigators a cursory look at documents and by not allowing them to contest the action.

However, it added: "The Court concludes that the infringements on the part of the Commission ... did not result in unlawfully depriving them of (lawyer-client) protection in respect of those documents, since, as has been held, the Commission did not err in deciding that none of those documents in fact fell within the scope of that protection."

The firms can appeal against legal points of the ruling.

A spokesman for Akzo said it would study the ruling and could not say whether it would appeal.

It was further alleged that while Mozilo and the insider-appointed benefits committee members had a fiduciary responsibility to warn employees of the company's precarious financial health, they hid information from plan participants.

Financial statements were also alleged to have been certified by Mozilo in an attempt to conceal the high-risk loans it was selling.

Steve Berman, the attorney representing the plaintiffs, said: "Most of these employees weren't risk takers, rather claims processors and line staff who go to work every morning, putting a little away every month for retirement, or to finance a child's education."

Countrywide Financial Corporation responded by saying that it had not yet seen the lawsuit, and did not generally comment on specific points of pending litigation.

A spokesperson said: " From what we can discern from the news release put out by the public relations firm for plaintiffs’ counsel, we do not believe the case has merit, and we will defend it vigorously.

“Countrywide values its work force, which we believe is among the most dedicated and talented in our industry, and we believe our 401(k) program is properly structured and provides competitive benefits to employee participants."

Even if those proposals draw the 60 votes needed to overcome a Senate filibuster — a level that has eluded Democrats this year — any real strictures on the president would face a veto, frustrating war critics and raising the prospect that roughly as many American troops might be in Iraq a year from now as were there a year ago.

Still, the Democrats tried to get ahead of President Bush's planned speech on Iraq on Thursday night, and to press what they see as a political advantage in opposing the war in the months before the 2008 elections.

Senator Harry Reid of Nevada, the majority leader, and two party leaders on military issues accused Mr. Bush of embracing "more of the same" and of trying to pass off a routine troop reduction as a significant shift in policy.

"That is unacceptable to me, it is unacceptable to the American people," said Mr. Reid, who was flanked by Senators Carl Levin of Michigan, chairman of the Armed Services Committee, and Jack Reed of Rhode Island, a West Point graduate.

Democratic presidential contenders also assailed the administration's plan.

Senator Barack Obama of Illinois called for the withdrawal of one or two combat brigades a month, starting immediately.

Senator Hillary Rodham Clinton of New York said taking credit for the force reductions that Gen. David H. Petraeus, the commander in Iraq, was recommending, and that Mr. Bush appeared ready to accept, was "like taking credit for the sun coming up in the morning."

With Democrats intensifying their attacks on the strategy outlined this week by General Petraeus, the administration is setting in motion its plans with a prime-time speech by the president on Thursday, a subsequent visit to a military base and continued appearances by General Petraeus and Ryan C. Crocker, the American ambassador in Baghdad.

At a news conference on Wednesday, General Petraeus reiterated that he was unwilling to commit to troop cuts beyond a five-brigade reduction by mid-July, a level he described as prudent. There are 20 combat brigades in Iraq.

He also took issue with claims that such a reduction would not be significantly faster than what had already been scheduled. Combat forces in Iraq serve up to 15-month tours. Under that limit, part of the Pentagon's broad effort to lessen the strains on the military, General Petraeus would not have had to pull out any combat units until April, instead of removing the first brigades in mid-December, he said.

"We are coming out quicker than we had to," he said.

The White House spokesman, Tony Snow, in his last news briefing before leaving the job, rejected Democrats' complaints that the administration's plan was simply a return to the level that existed before more than 30,000 additional troops were sent into Iraq this year, a buildup that the administration pointedly referred to as a surge, suggesting its temporary nature.

"It's a different country," said Mr. Snow of Iraq. "You have the ability to reduce the numbers because there have been changes that reduced the necessity of American involvement."

Senator Reid would not provide details of the legislative proposals that Democrats will pursue. But Mr. Levin and Mr. Reed have been working with some Republicans on a measure that would focus the military mission on counterterrorism, training Iraqis and protecting forces already there — a switch intended to allow large numbers of combat troops to be withdrawn by next spring.

"We have to go ahead and recognize the strain on the military forces and give them the tasks that they can do so well," said Mr. Reed, a former Army captain, "but within the capability of their resources and the best interests of the United States."

They have been exploring the idea of making the withdrawal more of an objective than a requirement in order to attract Republican votes, but that approach could cause defections by Democrats.

Democrats have been picking up new Republican support for a measure that requires troops to spend at least the same amount of time at their home bases as they did in Iraq before returning — a requirement that could reduce troop numbers because the Pentagon would not have as many eligible for deployment.

"I think that might be a good way to accelerate a troop reduction," said Senator Gordon Smith, Republican of Oregon, who noted that it was also popular with strained military families.

That measure attracted 56 votes this summer, and some Republicans who opposed it then, including George V. Voinovich, Republican of Ohio, have expressed new interest. Senator Arlen Specter, Republican of Pennsylvania, said Wednesday that he was considering the proposal, and Democrats were also trying to persuade Senator Lisa Murkowski, Republican of Alaska.

Mr. Reid said Democrats also planned to vote on more aggressive legislative challenges to the war, which could help appease critics who are demanding that Democrats take tougher action.

Democrats say they may also be more willing to try to attach conditions to coming Pentagon spending requests. (Democrats have been reluctant to limit money for the war unilaterally.) "I think the American people are getting tired of sending the money with no end in sight," said Senator Charles E. Schumer, Democrat of New York.

The struggle to settle on a party alternative illustrates the problems Democrats are having finding a way to take on the president that unites their party and avoids criticism that they are weak on national security.

As Democrats huddled Wednesday to prepare for the floor debate, a group of leading House Republicans arrived in Iraq to demonstrate their backing for the president. The lawmakers, led by Representative John A. Boehner of Ohio, the Republican leader, had been in Iraq less than five hours, but in a conference call with reporters they said their initial briefings had already confirmed improvements.

"Clearly what's happened over the last three months has been real success," said Mr. Boehner, who previously visited Iraq in July 2006.

In an interview on "The Today Show" on Wednesday, Secretary of State Condoleezza Rice said stabilizing Iraq was part of "a long process of dealing with what the president called a long time ago a generational challenge to our security brought on by extremism, coming principally out of the Middle East."

Speaker of the House Nancy Pelosi, a California Democrat, said Ms. Rice's comment represented an acknowledgment that the United States would be engaged in Iraq for "years to come."

"We need a new direction that redeploys our troops from Iraq, rebuilds our military and refocuses on fighting terrorism across the world," Ms. Pelosi said.