[Federal Register: June 6, 2007 (Volume 72, Number 108)]
[Proposed Rules]
[Page 31244-31250]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr06jn07-25]
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FEDERAL COMMUNICATIONS COMMISSION
47 CFR Part 76
[CS Docket No. 98-120; FCC 07-71]
Carriage of Digital Television Broadcast Signals: Amendment to
Part 76 of the Commission's Rules
AGENCY: Federal Communications Commission.
ACTION: Proposed rule.
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SUMMARY: In this document, the Commission seeks comment on the
obligations of cable operators under Sections 614 (establishing
mandatory carriage rights for local commercial television stations) and
615 (establishing mandatory carriage rights for noncommercial
educational television stations) of the Communications Act of 1934
concerning the carriage of digital broadcast television signals after
the conclusion of the digital television (``DTV'') transition. The
Commission reiterates that broadcast signal delivered in high-
definition to a cable system must be carried by that system in HDTV and
requests comment on exactly what constitutes material degradation. The
Commission proposes to provide more detail on the material degradation
requirements adopted by the Commission in 2001 and requests comment on
two alternatives. The Commission also offers for comment two proposals
for ensuring that cable subscribers with analog television sets can
continue to view all must-carry stations after the end of the DTV
transition.
DATES: Comments for this proceeding are due on or before July 16, 2007;
reply comments are due on or before August 16, 2007.
ADDRESSES: You may submit comments, identified by CS Docket No. 98-120,
by any of the following methods:
Federal eRulemaking Portal: http://www.regulations.gov.
Follow the instructions for submitting comments.
Federal Communications Commission's Web Site: http://www.fcc.gov/cgb/ecfs/.
Follow the instructions for submitting comments.
People with Disabilities: Contact the FCC to request
reasonable accommodations (accessible format documents, sign language
interpreters, CART, etc.) by e-mail: FCC504@fcc.gov or phone: 202-418-
0530 or TTY: 202-418-0432.
For detailed instructions for submitting comments and additional
information on the rulemaking process, see the SUPPLEMENTARY
INFORMATION section of this document.
FOR FURTHER INFORMATION CONTACT: For additional information on this
proceeding, contact Eloise Gore, Eloise.Gore@fcc.gov of the Media
Bureau, Policy Division, (202) 418-2120.
SUPPLEMENTARY INFORMATION: This is a summary of the Commission's Second
Further Notice of Proposed Rulemaking (Second FNPRM), FCC 07-71,
adopted on April 25, 2007, and released on May 4, 2007. The full text
of this document is available for public inspection and copying during
regular business hours in the FCC Reference Center, Federal
Communications Commission, 445 12th Street, SW., CY-A257, Washington,
DC 20554. These documents will also be available via ECFS (http://www.fcc.gov/cgb/ecfs/
). (Documents will be available electronically in
ASCII, Word 97, and/or Adobe Acrobat.) The complete text may be
purchased from the Commission's copy contractor, 445 12th Street, SW.,
Room CY-B402, Washington, DC 20554. To request this document in
accessible formats (computer diskettes, large print, audio recording,
and Braille), send an e-mail to fcc504@fcc.gov or call the Commission's
Consumer and Governmental Affairs Bureau at (202) 418-0530 (voice),
(202) 418-0432 (TTY).
Initial Paperwork Reduction Act of 1995 Analysis
The NPRM seeks comment on potential information collection
requirements. The Commission will invite the general public to comment
at a later date on any rules developed as a result of this proceeding
that require the collection of information, as required by the
Paperwork Reduction Act of 1995, Public Law 104-13. The Commission will
publish a separate notice seeking these comments from the public. In
addition, pursuant to the Small Business Paperwork Relief Act of 2002,
Public Law 107-198, see 44 U.S.C. 3506(c)(4), we will seek specific
comment on how we might ``further reduce the information collection
burden for small business concerns with fewer than 25 employees.''
Summary of the NPRM of Proposed Rulemaking
I. Introduction
1. In this Second Further Notice of Proposed Rulemaking (``Second
FNPRM''), we address issues concerning the carriage of digital
broadcast television signals after the conclusion of the digital
television (``DTV'') transition.
[[Page 31245]]
Section 614(b)(4)(B) of the Communications Act of 1934, as amended (the
``Act''), directs the Commission to revise the mandatory signal
carriage rules to reflect changes necessitated by the transition from
analog to digital broadcasting. We believe that this Second FNPRM is
warranted at this time in light of the recently established deadline
for the end of analog broadcasts by full-power television licensees.
Further, addressing these issues now will provide digital broadcasters
and cable operators with adequate time to prepare to comply with any
rules that we adopt.
2. In this Second FNPRM, we seek comment on the post-transition
obligations of cable operators under Sections 614 (establishing
mandatory carriage rights for local commercial television stations) and
615 (establishing mandatory carriage rights for noncommercial
educational television stations) of the Communications Act of 1934, as
amended (the ``Act'').
3. First, we remind industry of our 2001 decision regarding
material degradation (67 FR 17015-01): A broadcast signal delivered in
HDTV [high-definition television] to a cable system must be carried by
that system in HDTV. In addition, we seek comment on exactly what
constitutes material degradation.
4. Furthermore, we address the statutory requirement that cable
operators must make the signal transmitted by a broadcaster electing
mandatory carriage viewable by all of their subscribers, and seek
comment on how cable operators can implement this requirement after the
end of analog broadcasting on February 17, 2009. Specifically, we
propose that cable operators must comply with this ``viewability''
provision and ensure that cable subscribers with analog television sets
are able to continue to view all must-carry stations after the end of
the DTV transition by either: (1) Carrying the digital signal in analog
format, or (2) carrying the signal only in digital format, provided
that all subscribers have the necessary equipment to view the broadcast
content. In the absence of such a requirement, analog cable subscribers
(currently about 50% of all cable subscribers, or approximately 32
million households; Kagan reports that as of June 2006, there were 65.3
million cable subscribers) would no longer be able to view commercial
must-carry stations or non-commercial stations after February 17, 2009.
We believe such an outcome would adversely impact the DTV transition
and would unduly burden millions of consumers.
5. In interpreting both of these statutory provisions, we are
mindful of the need to minimize the burden imposed upon consumers by
the end of analog broadcasting in order to facilitate the successful
and timely conclusion of the DTV transition. The prohibition against
material degradation ensures that cable subscribers who invest in a
HDTV are not denied the ability to view broadcast signals transmitted
in this improved format. The requirement that cable operators make
must-carry stations viewable by all cable subscribers ensures that
analog cable subscribers, who today are able to view all of their
broadcast stations, do not lose access to those stations as a result of
the switch to digital-only broadcasting.
II. Background
6. Pursuant to Section 614(b)(4)(B) of the Act, the Commission
initiated this proceeding in 1998 to address the responsibilities of
cable television operators with respect to carriage of digital
broadcasters in light of the significant changes to the broadcasting
and cable television industries resulting from the conversion to
digital operations; 63 FR 42330-01.
7. In the 2001 First Report and Order, the Commission concluded
that broadcasters operating digital-only television stations are
entitled to mandatory carriage under the Act. In an effort to support
the ultimate conversion of digital broadcast signals and facilitate the
return of the analog spectrum, the Commission also decided to permit a
digital-only station, on an interim basis, to ``demand that one of its
HDTV [high-definition television] or SDTV [standard-definition
television] signals be carried on the cable system for delivery to
subscribers in an analog format.''
8. Now that Congress has established February 17, 2009 as the date
certain for the end of analog broadcasts by full-power television
licensees, we believe that the time has come for us to address the
post-transition carriage responsibilities of cable operators under
Sections 614 and 615--particularly in light of the fact that there will
continue to be a large number of cable subscribers with legacy, analog-
only television sets after the end of the DTV transition. This will be
the case despite the steady rise in DTV display sales over the last
several years.
III. Discussion
9. As discussed below, the Communications Act requires that cable
systems provide mandatory-carriage signals without material degradation
and ensure that all subscribers can receive and view those signals.
This Second FNPRM proposes to provide more detail on the material
degradation requirements adopted by the Commission in 2001 and offers
for comment two proposals for ensuring that cable subscribers with
analog television sets can continue to view all must-carry stations
after the end of the DTV transition. It also seeks comment on other
issues that would be directly implicated by the proposals.
A. Material Degradation--Sections 614(b)(4)(A) and 615(g)(2)
10. The Communications Act requires (1) cable operators to carry
local broadcast signals ``without material degradation,'' and (2) the
Commission to ``adopt carriage standards to ensure that, to the extent
technically feasible, the quality of signal processing and carriage
provided by a cable system for the carriage of local commercial
television stations will be no less than that provided by the system
for carriage of any other type of signal.'' As noted above, Section
614(b)(4)(B) of the Act directs the Commission ``to establish any
changes in the signal carriage requirements of cable television systems
necessary to ensure cable carriage of such broadcast signals of local
commercial television stations which have been changed'' as a result of
the transition from analog to digital broadcasting.
11. In the 1998 NPRM, we solicited comments to determine the extent
to which this provision precludes cable operators from altering a
digital broadcast station signal when the transmission is processed at
the system headend or in customer premises equipment. Some broadcasters
argued that a digital signal would be materially degraded if it were
not transmitted to the viewer in the format that the broadcaster
intended. Other broadcasters sought to preclude cable operators from
blocking or deleting any of the bits constituting the broadcast
material. The First Report and Order concluded that cable operators are
required to ensure that consumers with DTV equipment (e.g., Digital-
Cable-Ready sets or DTV-ready sets connected to an HDTV digital cable
set-top box) are able to view the digital signal in its original
format--e.g., in high definition (``HD'') if delivered by the
broadcaster in HD.
12. As noted above, we previously determined in the First Report
and Order that a broadcast signal delivered to the cable headend in HD
must be carried in HD in order to comply with the prohibition on
material degradation.
[[Page 31246]]
We continue to require such carriage and reiterate that requirement. We
now propose revisions to the material degradation requirements set
forth in the First Report and Order with respect to carriage of bits in
the broadcast signal. Specifically, we propose to move from a
subjective to objective measure. For instance, we seek comment on
whether we should require that all primary video and program-related
content bits transmitted by the broadcaster (the ``content bits'') be
carried to avoid material degradation. Alternatively, we seek comment
on whether the Commission's existing non-discrimination requirement is
a better objective test for material degradation. In the First Report
and Order, the Commission prohibited cable operators from treating
cable programming services more favorably than broadcast signals for
purposes of material degradation. We seek comment on the application of
the existing or a new non-discrimination rule in this context. We also
seek comment on how to verify that cable operators are abiding by this
requirement. Should we identify specific measurement tools? If so, what
should those measurement tools be? We also request comment and specific
estimates regarding the costs of compliance with this proposal,
particularly with respect to small cable operators, and whether there
are alternative means that would minimize the economic impact for small
cable operators while still complying with the statutory requirements.
As noted in the First Report and Order, it may be especially burdensome
for small systems with limited channel capacity (such as systems with
fewer than 330 MHz) to carry an HDTV signal if they are not otherwise
providing HDTV programming. Therefore, if a small system that is not
otherwise carrying any HDTV signals is required to carry a broadcast
signal in HDTV, such that the signal straddles two 6 MHz channels
(i.e., if they are passing through the broadcaster's 8-VSB modulated
signal), the system may include all of the lost spectrum when
calculating its one-third capacity for purposes of the statutory cap.
13. Our option of carrying all content bits is responsive to the
Petitions for Reconsideration filed in this docket in which
broadcasters requested that we require cable operators to carry ``the
entire qualified digital bit stream of each station in the format in
which the broadcaster originally transmitted it.'' It also is
consistent with the requests for clarification made by the Broadcast
Group and the Noncommercial Broadcasters that the material degradation
requirements ``ensure that cable subscribers do not receive DTV
service, including HDTV, that is inferior in quality to the service
available over the air.'' In addition, by seeking comment on
measurement tools, this option is responsive to broadcast commenters'
concern that the material degradation standard adopted in the First
Report and Order did not provide an objective way to evaluate material
degradation.
14. We request comment on this option. We specifically request
comment on how cable operators are to distinguish between bits with
content and so-called ``null bits'' (so-called ``null bits'' need not
be passed through or included in the signal as carried, as they are, as
the name implies, empty of any content), and whether material
degradation could result from failure to carry these empty bits. We
also recognize that bandwidth-conserving techniques commonly are used
by cable operators to improve efficiency. Is there a way to permit the
use of improved compression, statistical multiplexing, rate shaping
(Rate shaping ``describes bit rate adaptation techniques applied to
MPEG-2 encoded streams, to further enhance bandwidth efficiency. This
technique can substitute for decoding-encoding operations that are
expensive, space consuming and ultimately harmful to content
quality''), or other techniques that would not result in prohibited
material degradation?
15. We further seek comment on whether, under the option of
carrying all content bits, a cable operator that wishes to reduce the
number of content bits in a digital broadcast signal first must
demonstrate to the broadcaster that such reduction will not result in
material degradation. In doing so, how might the cable operator
demonstrate that, although not all of the content bits are being
carried, the content will not be degraded in a material way? Would it
be necessary and/or sufficient for the cable operator to demonstrate
that the broadcast station's digital signal carriage does not differ
from other broadcast or non-broadcast programmers? (We note that this
latter comparison also would ensure that cable operators do not
discriminate against some or all broadcast content as compared with
non-broadcast content.) We seek comment on whether, under these
circumstances, the cable operator must continue to pass through all of
the content bits until an agreement has been reached with the broadcast
station to permit the reduction in the number of bits. Similarly, we
seek comment on a rule that when a broadcast station files a carriage
complaint concerning material degradation, the cable operator must pass
through all of the content bits during the pendency of the complaint.
The Commission is required to resolve carriage complaints within 120
days after the filing of a complaint. In situations where negotiations
between cable operators and broadcasters reach an impasse, cable
operators may notify the station in writing of that fact and the
station will then have 30 days from receipt of the letter to file a
complaint with the Commission in order to preserve its claim. We seek
comment on these options and on the procedures and mechanisms for cable
operators and stations to engage in such discussions short of filing a
carriage complaint with the Commission.
B. Availability of Signals--Sections 614(b)(7) and 615(h)
16. Pursuant to Sections 614 and 615 of the Act, cable operators
must ensure that all cable subscribers have the ability to view all
local broadcast stations carried pursuant to mandatory carriage.
Specifically, Section 614(b)(7) (for commercial stations) states that
broadcast signals that are subject to mandatory carriage must be
``viewable via cable on all television receivers of a subscriber which
are connected to a cable system by a cable operator or for which a
cable operator provides a connection.'' Similarly, Section 615(h) for
noncommercial stations states that ``Signals carried in fulfillment of
the carriage obligations of a cable operator under this section shall
be available to every subscriber as part of the cable system's lowest
priced tier that includes the retransmission of local commercial
television broadcast signals.'' These statutory requirements plainly
apply to cable carriage of digital broadcast signals, and, as a
consequence, cable operators must ensure that all cable subscribers--
including those with analog television sets--continue to be able to
view all commercial and non-commercial must-carry broadcast stations
after February 17, 2009. Analog-only television sets plainly qualify as
``television receivers'' under Section 614(b)(7) at the present time,
and we think that it is eminently reasonable to conclude that they will
continue to fall within the scope of that term as it is used in Section
614(b)(7) after the transition. Below we seek comment on how to
implement this statutory requirement. We note that all cable
subscribers today are able to view all of their must-carry stations,
and we believe that it is critical to the successful and timely
conclusion of the DTV transition that they are not disenfranchised by
the
[[Page 31247]]
switch to digital-only broadcasting. We therefore are mindful of the
need to minimize the burden imposed on consumers, including cable
subscribers with analog television sets, by the end of the DTV
transition.
17. To achieve compliance with the viewability requirement of
Sections 614(b)(7) and 615(h) after the end of the DTV transition, we
propose that, in order to ensure that subscribers with analog
television sets remain able to view all local broadcast television
stations electing mandatory carriage, cable operators must either: (1)
Carry the signals of commercial and non-commercial must-carry stations
in analog format to all analog cable subscribers, or (2) for all-
digital systems, carry those signals only in digital format, provided
that all subscribers with analog television sets have the necessary
equipment to view the broadcast content. In the 2001 First Report and
Order, the Commission afforded a digital-only station mandatory
carriage rights pursuant to Sections 614 and 615, coupled with the
option to request that its digital signal be carried on the cable
system for delivery to subscribers in an analog format, at the
station's expense (a mechanism also referred to as ``down-
conversion.''). This requirement would be in addition to the
requirement that the cable operator pass through the HD signal to cable
subscribers of an HD package, as discussed above. We believe that these
proposals are consistent with our articulation of carriage requirements
in the analog must-carry context, in which the Commission has made
clear that mere transmission of the must-carry signal is not sufficient
to meet the requirements of Section 614(b)(7). The Commission stated in
1993 that:
We believe that the 1992 Act is clear in its requirement that
all local commercial television stations carried in fulfillment of
the must-carry requirements must be provided to every cable
subscriber and must be viewable on all television sets that are
connected to the cable system by a cable operator for which the
cable operator provides a connection. The Act does not give the
Commission authority to exempt any class of subscribers from this
requirement.
In other words, the signal must be ``viewable'' on all television sets
connected to the cable provider's system. We seek comment on these
proposals.
18. As we consider these issues, we are cognizant that the ultimate
goal of Congress is that every customer should enjoy the benefits of
the digital transition. That is, our policies should advance the goal
of transitioning all consumers--including cable consumers--to digital.
We seek comment on ways to promote this goal within the context of this
proceeding. In particular, we seek comment on ways to move cable
subscribers from analog to digital in a manner consistent with the
statute and consumer expectations.
19. Under the Commission's interim down-conversion policy for
digital-only stations during the transition, broadcasters that request
carriage of an analog version of their digital signal must pay for the
cost of down-conversion. Under the first option set forth in our
proposal, however, cable operators themselves would elect to satisfy
their obligations under Sections 614 and 615 by carrying a digital
signal in analog format to ensure that the signal is viewable by all
subscribers. Given the circumstances, should cable operators be
responsible for any expense associated with down-conversion?
20. Finally, we note that, in the First Report and Order, the
Commission concluded ``not to require a cable operator to provide
subscribers with a set top box capable of processing digital signals
for display on analog sets.'' That decision, however, was premised on
factual considerations that will not apply in a post-transition
environment. Specifically, the Commission was reluctant to require
cable subscribers to obtain such equipment because the content
available on the digital signal likely would have been identical to
analog programming to which subscribers already had access. In that
same vein, the Commission pointed out that the obligation to
simulcast--which later was eliminated--weighed against requiring the
provision of equipment necessary to view a digital signal. However,
given that our proposal here would apply to the carriage of digital
signals after the end of analog broadcasting, we believe that the
Commission's 2001 decision is not directly relevant since subscribers
with analog sets after the transition will face the prospect of not
being able to view the signals of must-carry stations unless they
possess the necessary equipment (i.e., a Digital-Cable-Ready television
set or a digital cable set-top box). Nevertheless, we seek comment on
this issue.
IV. Procedural Matters
A. Filing Requirements
21. Ex Parte Rules. This proceeding will be treated as a ``permit-
but-disclose'' proceeding subject to the ``permit-but-disclose''
requirements under Section 1.1206(b) of the Commission's rules. Ex
parte presentations are permissible if disclosed in accordance with
Commission rules, except during the Sunshine Agenda period when
presentations, ex parte or otherwise, are generally prohibited. Persons
making oral ex parte presentations are reminded that a memorandum
summarizing a presentation must contain a summary of the substance of
the presentation and not merely a listing of the subjects discussed.
More than a one- or two-sentence description of the views and arguments
presented is generally required. Additional rules pertaining to oral
and written presentations are set forth in Section 1.1206(b).
22. Comments and Reply Comments. Pursuant to Sections 1.415 and
1.419 of the Commission's rules, 47 CFR 1.415, 1.419, interested
parties may file comments on or before the dates indicated on the first
page of this document. Comments may be filed using the Commission's
Electronic Comment Filing System (``ECFS'') or by filing paper copies.
See Electronic Filing of Documents in Rulemaking Proceedings, 63 FR
24121 (1998). To request materials in accessible formats for people
with disabilities (braille, large print, electronic files, audio
format), send an e-mail to fcc504@fcc.gov or call the Consumer &
Governmental Affairs Bureau at 202-418-0530 (voice), 202-418-0432
(TTY).
23. Comments filed through ECFS can be sent as an electronic file
via the Internet to http://www.fcc.gov/e-file/ecfs.html. Generally,
only one copy of an electronic submission must be filed. In completing
the transmittal screen, commenters should include their full name, U.S.
Postal mailing address, and the applicable docket number. Parties may
also submit an electronic comment by Internet e-mail. To get filing
instructions for e-mail comments, commenters should send an e-mail to
ecfs@fcc.gov, and should include the following words in the body of the
message: ``get form .'' A sample form and
directions will be sent in reply.
24. Parties who choose to file by paper must file an original and
four copies of each filing. Filings can be sent by hand or messenger
delivery, by commercial overnight courier, or by first-class or
overnight U.S. Postal Service (although we continue to experience
delays in receiving U.S. Postal Service mail). The Commission's
contractor, Natek, Inc., will receive hand-delivered or messenger-
delivered paper filings for the Commission's Secretary at 236
Massachusetts Avenue, NE., Suite 110, Washington, DC 20002. The filing
hours at this location are 8 a.m. to 7 p.m. All hand deliveries must
[[Page 31248]]
be held together with rubber bands or fasteners. Any envelopes must be
disposed of before entering the building. Commercial overnight mail
(other than U.S. Postal Service Express Mail and Priority Mail) must be
sent to 9300 East Hampton Drive, Capitol Heights, MD, 20743. U.S.
Postal Service first-class mail, Express Mail, and Priority Mail,
should be addressed to 445 12th Street, SW., Washington, DC 20554. All
filings must be addressed to the Commission's Secretary: Office of the
Secretary, Federal Communications Commission.
25. Availability of Documents. Comments, reply comments, and ex
parte submissions will be available for public inspection during
regular business hours in the FCC Reference Center, Federal
Communications Commission, 445 12th Street, SW., CY-A257, Washington,
DC 20554. Persons with disabilities who need assistance in the FCC
Reference Center may contact Bill Cline at (202) 418-0267 (voice),
(202) 418-7365 (TTY), or bill.cline@fcc.gov. These documents also will
be available from the Commission's Electronic Comment Filing System.
Documents are available electronically in ASCII, Word 97, and Adobe
Acrobat. Copies of filings in this proceeding may be obtained from Best
Copy and Printing, Inc., Portals II, 445 12th Street, SW., Room CY-
B402, Washington, DC 20554; they can also be reached by telephone, at
(202) 488-5300 or (800) 378-3160; by e-mail at fcc@bcpiweb.com; or via
their Web site at http://www.bcpiweb.com. To request materials in
accessible formats for people with disabilities (braille, large print,
electronic files, audio format), send an e-mail to fcc504@fcc.gov or
call the Consumer and Governmental Affairs Bureau at (202) 418-0530
(voice), (202) 418-0432 (TTY).
B. Initial Regulatory Flexibility Analysis
26. As required by the Regulatory Flexibility Act of 1980, as
amended (RFA), the Commission has prepared this Initial Regulatory
Flexibility Analysis (IRFA) of the possible economic impact on a
substantial number of small entities by the policies and rules proposed
in this Second Further Notice of Proposed Rulemaking (``Second
FNPRM''). Written public comments are requested on this IRFA. Comments
must be identified as responses to the IRFA and must be filed by the
deadlines for comments on the Second FNPRM as indicated on the first
page of the Order. The Commission will send a copy of the Second FNPRM,
including this IRFA, to the Chief Counsel for Advocacy of the Small
Business Administration (SBA). In addition, the Second FNPRM and IRFA
(or summaries thereof) will be published in the Federal Register.
A. Need for, and Objectives of, the Proposals
27. This Second FNPRM seeks comment on several issues relating to
the carriage of digital television broadcast stations after the analog
to digital transition. Our goal in this proceeding is to determine how
to implement the statutory requirements under Sections 614 (local
commercial television station mandatory carriage) and 615
(noncommercial educational television station mandatory carriage) of
the Communications Act of 1934, as amended (the ``Act''), when digital
broadcasters seek mandatory carriage for their digital signal after
February 17, 2009, the date established by Congress as to when analog
service must cease. We remind industry of our 2001 decision regarding
material degradation (i.e., that a broadcast signal delivered in HDTV
to a cable system must be carried by that system in HDTV). In addition,
we seek comment on the proposal that cable operators be required to
carry all of the primary video and program-related content bits
transmitted by the broadcaster and on the alternative proposal to rely
on the existing non-discrimination requirement or a new non-
discrimination rule to provide a better objective test for material
degradation. We also seek comment on procedures by which cable
operators could demonstrate that, although they were not carrying every
content bit (e.g., through the use of improved compression or other
efficiency maximizing techniques), they nevertheless were providing
must-carry digital signals without material degradation. The Second
FNPRM proposes that cable operators can comply with the ``viewability''
provisions of Sections 614 and 615 (as discussed in the Second FNPRM)
and ensure that cable subscribers with analog television sets are able
to continue to view all must-carry stations after the end of the DTV
transition by either: (1) Carrying the digital signal in analog format
to ensure that the signal is viewable by all subscribers, or (2) for
all-digital systems, carry those signals only in digital format,
provided that all subscribers with analog television sets have the
necessary equipment to view the broadcast content.
B. Legal Basis
28. The authority for the action proposed in this rulemaking is
contained in Sections 1, 4(i) and (j), 614, and 615 of the
Communications Act of 1934, as amended, 47 U.S.C. 151, 154(i) and (j),
534, and 535.
C. Description and Estimate of the Number of Small Entities To Which
the Proposals Will Apply
29. The RFA directs the Commission to provide a description of and,
where feasible, an estimate of the number of small entities that will
be affected by the proposed rules, if adopted. The RFA defines the term
``small entity'' as having the same meaning as the terms ``small
business,'' ``small organization,'' and ``small governmental
jurisdiction.'' In addition, the term ``small business'' has the same
meaning as the term ``small business concern'' under the Small Business
Act. A small business concern is one which: (1) Is independently owned
and operated; (2) is not dominant in its field of operation; and (3)
satisfies any additional criteria established by the Small Business
Administration (``SBA''). The rules we may adopt as a result of the
comments filed in response to this Second Further Notice of Proposed
Rulemaking will primarily affect cable operators and television
stations. A description of these small entities, as well as an estimate
of the number of such small entities, is provided below.
30. Cable and Other Program Distribution. The Census Bureau defines
this category as follows: ``This industry comprises establishments
primarily engaged as third-party distribution systems for broadcast
programming. The establishments of this industry deliver visual, aural,
or textual programming received from cable networks, local television
stations, or radio networks to consumers via cable or direct-to-home
satellite systems on a subscription or fee basis. These establishments
do not generally originate programming material.'' The SBA has
developed a small business size standard for Cable and Other Program
Distribution, which is: all such firms having $13.5 million or less in
annual receipts. According to Census Bureau data for 2002, there were a
total of 1,191 firms in this category that operated for the entire
year. Of this total, 1,087 firms had annual receipts of under $10
million, and 43 firms had receipts of $10 million or more but less than
$25 million. Thus, under this size standard, the majority of firms can
be considered small. We note, however, that the proposals at issue in
this Second FNPRM only apply at this time to cable operators, and not
other MVPD providers.
31. Cable Companies and Systems. The Commission has also developed
its own small business size standards, for the purpose of cable rate
regulation.
[[Page 31249]]
Under the Commission's rules, a ``small cable company'' is one serving
400,000 or fewer subscribers, nationwide. Industry data indicate that,
of 1,076 cable operators nationwide, all but eleven are small under
this size standard. In addition, under the Commission's rules, a
``small system'' is a cable system serving 15,000 or fewer subscribers.
Industry data indicate that, of 7,208 systems nationwide, 6,139 systems
have under 10,000 subscribers, and an additional 379 systems have
10,000-19,999 subscribers. Thus, under this second size standard, most
cable systems are small.
32. Cable System Operators. The Communications Act of 1934, as
amended, also contains a size standard for small cable system
operators, which is ``a cable operator that, directly or through an
affiliate, serves in the aggregate fewer than 1 percent of all
subscribers in the United States and is not affiliated with any entity
or entities whose gross annual revenues in the aggregate exceed
$250,000,000.'' The Commission has determined that an operator serving
fewer than 677,000 subscribers shall be deemed a small operator, if its
annual revenues, when combined with the total annual revenues of all
its affiliates, do not exceed $250 million in the aggregate. Industry
data indicate that, of 1,076 cable operators nationwide, all but ten
are small under this size standard. We note that the Commission neither
requests nor collects information on whether cable system operators are
affiliated with entities whose gross annual revenues exceed $250
million, and therefore we are unable to estimate more accurately the
number of cable system operators that would qualify as small under this
size standard.
33. Television Broadcasting. The proposed rules and policies apply
to digital television broadcast licensees, and potential licensees of
digital television service. The SBA defines a television broadcast
station as a small business if such station has no more than $13
million in annual receipts. Business concerns included in this industry
are those ``primarily engaged in broadcasting images together with
sound.'' According to Commission staff review of the BIA Publications,
Inc. Master Access Television Analyzer Database (BIA) on October 18,
2005, about 873 of the 1,307 commercial television stations (or about
67 percent) have revenues of $12 million or less and thus qualify as
small entities under the SBA definition. We note, however, that, in
assessing whether a business concern qualifies as small under the above
definition, business (control) affiliations must be included. Our
estimate, therefore, likely overstates the number of small entities
that might be affected by our action, because the revenue figure on
which it is based does not include or aggregate revenues from
affiliated companies.
34. In addition, an element of the definition of ``small business''
is that the entity not be dominant in its field of operation. We are
unable at this time to define or quantify the criteria that would
establish whether a specific television station is dominant in its
field of operation. Accordingly, the estimate of small businesses to
which rules may apply do not exclude any television station from the
definition of a small business on this basis and are therefore over-
inclusive to that extent. Also as noted, an additional element of the
definition of ``small business'' is that the entity must be
independently owned and operated. We note that it is difficult at times
to assess these criteria in the context of media entities and our
estimates of small businesses to which they apply may be over-inclusive
to this extent.
35. Other Program Distribution. The SBA-recognized definition of
Cable and Other Program Distribution includes other MVPDs, such as HSD,
MDS/MMDS, ITFS, LMDS and OVS. This definition provides that a small
entity is one with $13.5 million or less in annual receipts. As
previously noted, according to the Census Bureau data for 2002, there
were a total of 1,191 firms that operated for the entire year in the
category of Cable and Other Program Distribution. Of this total, 1,087
firms had annual receipts of under $10 million and an additional 43
firms had receipts of $10 million or more, but less than $25 million.
The Commission estimates that the majority of providers in this
category of Cable and Other Program Distribution are small businesses.
36. While SBA approval for a Commission-defined small business size
standard applicable to ITFS is pending, educational institutions are
included in this analysis as small entities. There are currently 2,032
ITFS licensees, and all but 100 of these licenses are held by
educational institutions. Thus, the Commission estimates that at least
1,932 ITFS licensees are small businesses.
37. Radio and Television Broadcasting and Wireless Communications
Equipment Manufacturing. The Census Bureau defines this category as
follows: ``This industry comprises establishments primarily engaged in
manufacturing radio and television broadcast and wireless
communications equipment. Examples of products made by these
establishments are: transmitting and receiving antennas, cable
television equipment, GPS equipment, pagers, cellular phones, mobile
communications equipment, and radio and television studio and
broadcasting equipment.'' The SBA has developed a small business size
standard for Radio and Television Broadcasting and Wireless
Communications Equipment Manufacturing, which is: all such firms having
750 or fewer employees. According to Census Bureau data for 2002, there
were a total of 1,041 establishments in this category that operated for
the entire year. Of this total, 1,010 had employment of under 500, and
an additional 13 had employment of 500 to 999. Thus, under this size
standard, the majority of firms can be considered small.
D. Description of Projected Reporting, Recordkeeping, and Other
Compliance Requirements for Small Entities
38. The Second Further Notice of Proposed Rulemaking seeks comment
on statutory interpretations and proposals to address post-transition
obligations of cable operators with respect to carriage of digital
broadcast signals pursuant to the must carry requirements in the
Communications Act. Small cable operators currently have obligations
with respect to carriage of local commercial and non-commercial
broadcast stations which vary according to the size of the cable
system. As with existing statutory and regulatory requirements, small
cable operators will need engineering and legal services to comply with
the proposed rules. The Second FNPRM reiterates the Commission's 2001
decision regarding material degradation and requests comment on
requiring cable operators be required to carry all of the primary video
and program-related content bits transmitted by the broadcaster and on
an alternative proposal to rely on the existing non-discrimination
requirement or a new non-discrimination rule to provide a better
objective test for material degradation. The 2001 First Report and
Order recognized that the material degradation requirements could
impact small cable operators disproportionately and made special
provision for such situations. This recognition is retained in the
proposals set forth in the Second FNPRM. The Second FNPRM also notes
that cable operators must make the primary video and any program-
related material transmitted by a digital broadcaster electing
mandatory carriage viewable by all of their subscribers and proposes to
permit cable operators to
[[Page 31250]]
comply with the ``viewability'' provisions by either: (1) Carrying the
signals of commercial and non-commercial must-carry stations in analog
format to all analog cable subscribers, or (2) for all-digital systems,
carry those signals only in digital format, provided that all
subscribers with analog television sets have the necessary equipment to
view the broadcast content. Small cable operators will need engineering
and legal analysis to comply with this proposal. The Second FNPRM seeks
comment on the cost of compliance to small cable operators and solicits
alternative approaches that would reduce the burden on small cable
operators while still complying with statutory requirements. Small
broadcast stations will also be affected by the proposed rules and
other issues raised in the Second FNPRM, but we do not have any reason
to expect that the compliance burden will be any greater than under the
existing rules, except that initially, broadcasters may need additional
legal services.
E. Steps Taken To Minimize Significant Economic Impact on Small
Entities, and Significant Alternatives Considered
39. The RFA requires an agency to describe any significant
alternatives that it has considered in reaching its proposed approach,
which may include the following four alternatives (among others): (1)
The establishment of differing compliance or reporting requirements or
timetables that take into account the resources available to small
entities; (2) the clarification, consolidation, or simplification of
compliance or reporting requirements under the rule for small entities;
(3) the use of performance, rather than design, standards; and (4) an
exemption from coverage of the rule, or any part thereof, for small
entities. We seek comment on the applicability of any of these
alternatives to affected small entities.
40. The requirements proposed in the Second FNPRM are the result of
statutory requirements that do not expressly provide exceptions for
small entities. Broadcast stations, including small entity stations,
are afforded the flexibility to elect mandatory carriage of their
digital signal or elect to negotiate carriage with cable systems. The
proposals do not contemplate imposing any significant burdens on small
television stations, but station licensees and other parties are
encouraged to submit comment on the proposals' impact on small
television stations. Every effort will be made to minimize the impact
of any adopted proposals on cable operators. In this IRFA, we seek
comment on whether there is a specific legal basis for affording
operators that qualify as small systems special consideration in this
regard. We anticipate that more and more cable systems will become all-
digital cable systems, thereby minimizing any potential impact that our
proposals, if adopted, might have. Finally, we are mindful of the
potential concerns of small entities and will, therefore, continue to
carefully scrutinize our policy determinations going forward. We invite
small entities to submit comment on how the Commission could further
minimize potential burdens on small entities if the proposals provided
in the Second FNPRM, or those submitted into the record, are ultimately
adopted.
F. Federal Rules That May Duplicate, Overlap, or Conflict With the
Proposed Rules
41. None.
V. Ordering Clauses
42. It is ordered that, pursuant to authority contained in Sections
4, 303, 614, and 615 of the Communications Act of 1934, as amended, 47
U.S.C. 154, 303, 534, and 535, this Second Further Notice of Proposed
Rulemaking is hereby adopted.
43. It is further ordered that the Consumer and Governmental
Affairs Bureau, Reference Information Center, shall send a copy of this
Second Further Notice of Proposed Rulemaking, including the Initial
Regulatory Flexibility Analysis, to the Chief Counsel for Advocacy of
the Small Business Administration.
Federal Communications Commission.
Marlene H. Dortch,
Secretary.
[FR Doc. E7-10962 Filed 6-5-07; 8:45 am]
BILLING CODE 6712-01-P