[Federal Register Volume 62, Number 57 (Tuesday, March 25, 1997)]
[Rules and Regulations]
[Pages 14006-14015]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 97-7368]


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FEDERAL COMMUNICATIONS COMMISSION
47 CFR Part 73

[MM Docket No. 87-268, FCC 96-493]


Broadcast Services; Television Broadcast Stations; TV 
Transmission Standards

AGENCY: Federal Communications Commission.

ACTION: Final rule.

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SUMMARY: This document amends the Commission's Rules by adding a 
transmission standard for digital broadcast television signals. This 
action is necessary to ensure that the benefits of digital technology 
are available to terrestrial television broadcasting and to the 
American public. The intended effect of this action is to provide the 
certainty that many broadcasters, equipment manufacturers and consumers 
need to invest in new technology.

EFFECTIVE DATE: This regulation is effective May 27, 1997. The 
incorporation by reference of certain publications listed in the 
regulations is approved by the Director of the Federal Register as of 
May 27, 1997.

FOR FURTHER INFORMATION CONTACT: Saul Shapiro, Mass Media Bureau, (202) 
418-2600; Roger Holberg, Mass Media Bureau, Policy and Rules Division, 
Legal Branch, (202) 418-2130; Dan Bring, Mass Media Bureau, Policy and 
Rules Division, Policy Analysis Branch, (202) 418-2170; or Gordon 
Godfrey, Mass Media Bureau, Policy and Rules Division, Engineering 
Policy, (202) 418-2190.

SUPPLEMENTARY INFORMATION: This is a synopsis of the Fourth Report and 
Order in MM Docket No. 87-268, FCC 96-493, adopted December 24, 1996, 
and released December 27, 1996. The complete text of the Fourth Report 
and Order can be found on the internet at www.fcc.gov. It is available 
for inspection and copying during normal business hours in the FCC 
Reference Center (Room 239), 1919 M Street, NW., Washington, DC, and 
also may be purchased from the Commission's copy contractor, 
International Transcription Service, at (202) 857-3800, 2100 M Street, 
NW., Suite 140, Washington, DC 20037.

Synopsis of Fourth Report and Order

I. Introduction

    1. In the Fourth Report and Order of the Commission's digital 
television (``DTV'') proceeding, the Commission adopts a transmission 
standard for digital broadcast television signals. This standard is a 
modification of the Advanced Television System Committee Digital 
Television Standard (``ATSC DTV Standard'') proposed in the Fifth 
Further Notice of Proposed Rule Making and is consistent with a 
consensus agreement voluntarily developed by a broad cross-section of 
parties, including the broadcasting, consumer equipment manufacturing 
and computer industries. Specifically, the Commission requires the use 
of all layers of the ATSC DTV Standard, except the video format layer, 
which will remain optional. The adopted transmission standard (``DTV 
Standard'') is intended to provide the certainty that many 
broadcasters, equipment manufacturers and consumers need to invest in 
new technology.

II. Background

    2. The Commission issued a series of Notices and made a number of 
decisions since the proceeding began in 1987. 1 The Commission 
established the Advisory Committee on Advanced Television Service to 
provide recommendations concerning technical, economic and public 
policy issues associated with the introduction of advanced television 
service. As all-digital television systems were developed, advanced 
television became digital television. In February of 1993, the Advisory 
Committee reported that four competing digital systems would benefit 
from further development. In May of 1993, seven companies and 
institutions that had been proponents of the four digital systems, 
joined together in a ``Grand Alliance'' and developed the digital 
system documented in the ATSC DTV Standard. On November 28, 1995, the 
Advisory Committee voted to recommend the Commission's adoption of the 
ATSC DTV Standard.
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    \1\ Notice of Inquiry in MM Docket No. 87-268, 2 FCC Rcd 5127 
(1987) (``First Inquiry''). See also Tentative Decision and Further 
Notice of Inquiry in MM Docket No. 87-268, 3 FCC Rcd 6520 (1988) 
(``Second Inquiry''); First Report and Order in MM Docket No. 87-
268, 5 FCC Rcd 5627 (1990)(``First Order''); Notice of Proposed Rule 
Making in MM Docket No. 87-268, 6 FCC Rcd 7024 (1991) (``Notice''); 
Second Report and Order/Further Notice of Proposed Rule Making in MM 
Docket No. 87-268, 7 FCC Rcd 3340 (1992) (``Second Report/Further 
Notice''); Second Further Notice of Proposed Rule Making in MM 
Docket No. 87-268, 7 FCC Rcd 5376 (1992) (``Second Further 
Notice''); Memorandum Opinion and Order/Third Report and Order/Third 
Further Notice of Proposed Rule Making in MM Docket 87-268, 7 FCC 
Rcd 6924 (1992)(``Third Report/Further Notice''); Fourth Further 
Notice of Proposed Rule Making in MM Docket No. 87-268, 10 FCC Rcd 
10540 (1995) (``Fourth Further Notice''); Fifth Further Notice, 
supra; Sixth Further Notice of Proposed Rule Making in MM Docket No. 
87-268, 11 FCC Rcd 10968 (1996)(``Sixth Further Notice'').
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    3. The ATSC DTV Standard includes discrete subsystem descriptions, 
or ``layers,'' for video source coding and compression, audio source 
coding and compression, service multiplex and transport, and RF/
transmission. In addition to being able to broadcast one, and under 
some circumstances two, high definition television programs, the 
Standard allows for multiple streams of standard definition television 
programming at a visual quality better than the current analog signal. 
The Standard also allows for broadcast of dozens of CD-quality audio 
signals and permits rapid delivery of large amounts of data.
    4. On May 9, 1996, the Commission adopted the Fifth Further Notice 
of Proposed Rule Making, 61 FR 26864 (May 29, 1996), recommending 
adoption of the ATSC DTV Standard. The Commission also requested 
comment on alternative approaches to requiring a standard including: 
authorizing use of a

[[Page 14007]]

standard and prohibiting interference to it, but not requiring the use 
of that standard; and adopting a standard for allocation and assignment 
purposes only. In addition, the Commission sought comment on requiring 
use of some layers of the ATSC DTV Standard but making others optional.
    5. Several commenters, including representatives of the computer 
industry and film makers, objected to adoption of the ATSC DTV 
Standard. After several efforts to reach consensus among the industry 
groups failed, the groups came together again. On November 25, 1996, 
representatives of a broad cross section of the broadcast, computer and 
receiver manufacturing industries reached an agreement that the FCC 
should adopt the ATSC DTV Standard, except for the video format layer. 
On November 27, 1996, the Commission released a Public Notice 
soliciting comment on the agreement.

III. Comments

    6. Technical Standards for DTV. There is widespread agreement among 
commenters that selection of a DTV standard should be analyzed in terms 
of network effects, that is the indirect benefits that accrue to other 
DTV users when any particular user adopts DTV.2
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    \2\ In television broadcast systems, one user's adoption of DTV 
provides no direct benefit to other users, but may yield lagged, 
indirect benefits through the provision of new or improved 
programming. See comments of National Cable Television Association, 
``Declaration of Bruce M. Owen in Response to the Fifth Further 
Notice of Proposed Rule Making,'' at 4-11; comments of Broadcasters 
at 16; reply comments of Strategic Policy Research (on behalf of Cap 
Cities/ABC Inc., CBS Inc., Fox Television Stations, Inc., 
Association for Maximum Service Television (``MSTV''), National 
Association of Broadcasters (``NAB''), and the National Broadcasting 
Co., Inc.) at 4-8; and comments of the Computer Industry Coalition 
on Advanced Television, Volume 2, Exhibit D, at 3-4. For a 
discussion of network effects in broadcast television see Bruce M. 
Owen and Steven S. Wildman, Video Economics (Harvard University 
Press, 1992): 260-313.
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Broadcasters, computer interests and cable interests agree that 
broadcasting is a network product; that issues surrounding selection of 
a DTV standard are influenced by network effects; and that in order to 
evaluate the various alternatives, it is important to understand how 
network effects will operate. However, they disagreed on the relative 
severity of the startup, coordination and potential splintering 
problems facing digital broadcast television.3 Startup refers to 
the situation where everyone would be better off adopting DTV 
technology but no one has the incentive to move first.4 
Coordination is the collaborative effort by broadcasters, consumer 
equipment manufacturers, and program producers that is necessary to 
introduce DTV. Splintering refers to the breakdown of the consensus or 
agreement to use the DTV Standard.
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    \3\ See, comments of Broadcasters at 15-23, reply comments of 
Strategic Policy Research at 2-8, reply comments of National Cable 
Television Association at 10-17, and reply comments of Computer 
Industry Coalition on Advanced Television Service at 5-11.
    \4\ Startup is also referred to as the ``chicken and egg 
problem'' or ``wait and see behavior.''
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    7. Commenters also disagreed on the availability and effectiveness 
of market-based mechanisms to solve these problems and to facilitate 
the goals and objectives established in this proceeding. Broadcasters, 
equipment manufacturers and some consumer groups contend that DTV has 
startup, coordination and splintering problems that are more severe 
than those of other network industries and that a DTV standard adopted 
by the Commission is needed to overcome these problems.5 In 
contrast, cable and computer interests contend that all sectors of the 
broadcast industry have significant incentives to reach a consensus on 
transmission and reception standards without a government 
mandate.6
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    \5\ See, e.g., comments of Mitsubishi Consumer Electronics 
America, Inc., (``MCEA'') at 2-3; Philips Electronics North America 
Corporation (``Philips'') at 4-8; comments of Broadcasters at 15-24.
    \6\ See, e.g., comments of Tele-Communications, Inc. (``TCI'') 
at 6-8; comments of Compaq Computer Corporation at 6-14.
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    8. Broadcasters warn that a market-driven selection of a standard 
would result in barriers to the introduction of DTV if different 
incompatible systems develop.7 They maintain that a government-
mandated standard is essential to ensure a universally available, 
advertiser-supported over-the-air digital broadcast service in the 
future.8 In contrast, cable interests do not agree that there are 
unique characteristics or public policy goals attendant to broadcast 
DTV, or that there would be a market failure unless a mandatory 
transmission standard is adopted.9
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    \7\ See reply comments of Strategic Policy Research at 6.
    \8\ Id. at 14.
    \9\ See reply comments of National Cable Television Association, 
Inc., at 10-17.
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    9. There is likewise a range of opinion on the merits of the ATSC 
DTV Standard. Broadcasters, equipment manufacturers, the Grand 
Alliance, and ATSC urge the Commission to adopt the complete ATSC DTV 
Standard.10 They contend that only a Commission-adopted standard 
will supply the certainty needed by all parties to undertake the 
transition, the ATSC DTV Standard is the best DTV standard in the 
world,11 and it has ``unprecedented and unmatched interoperability 
with computers and telecommunications.'' 12 (Footnotes added.)
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    \10\ See, e.g., comments of Broadcasters at 34; comments of ATSC 
at 9; comments of Zenith at 7; comments of Sony at 12; comments of 
Thomson Consumer Electronics (``Thomson'') at 6; comments of Grand 
Alliance at 9.
    \11\ See, e.g., comments of Broadcasters at 18-19 and 34; 
comments of ATSC at 3, 6; Sony Electronics Inc. (``Sony'') at 8.
    \12\ Comments of HDTV Grand Alliance at 17-18. See also comments 
of ATSC at 3, and EIA at 9.
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    10. Computer interests, lead by Computer Industry Coalition on 
Advanced Television Service (``CICATS''), urge us not to adopt a DTV 
standard but state that if we decide to the contrary we should only 
mandate a minimum base-line standard based exclusively on progressive 
scanning technology.13 The National Telecommunications and 
Information Administration (``NTIA'') stresses the need for a single 
mandatory DTV standard, recommends limiting a standard to only those 
elements necessary to provide certainty, encourage adoption, ensure the 
opportunity for technological developments, and concludes that the best 
solution would be for interested parties to reach a consensus on 
disputed issues.14
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    \13\ Comments of CICATS at 31-37.7
    \14\ Reply comment of NTIA at 2.
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    11. While favoring a mandatory DTV standard, most commenting 
cinematographic and imaging interests (with the significant exception 
of the Motion Picture Association of America, Inc.15) oppose 
adoption of the ATSC DTV Standard in its current form because of its 
inclusion of interlaced scanning and other perceived deficiencies, 
particularly in its video and audio specifications.16 MPAA, 
however, supports all aspects of the Standard including its use of both 
interlaced and progressive scanning and its 16:9 aspect ratio.17 
The National Cable Television Association (``NCTA'') is not critical of 
the specific ATSC DTV Standard, but questions whether any standard 
should be dictated by government.18 Nevertheless, it recognizes 
the need for performance standards for controlling interference.19
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    \15\ Motion Picture Association of America, Inc. (``MPAA'') is a 
trade association representing seven of the largest U.S. producers, 
distributors, and exporters of theatrical motion pictures, 
television programming, and home video entertainment.
    \16\ See, e.g., Comments of Robert Primes, ASC, at 2 and 13; 
comments of the Coalition of Film Makers (``Film Makers'') at 2, 5-
9, and 11; comments of Harold Becker.
    \17\ Comments of MPAA at 2-8.
    \18\ Comments of NCTA at 2.
    \19\ Reply Comments of NCTA at 6-7.
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    12. Public interest groups generally favor adoption of a single 
mandatory standard although they differ on what

[[Page 14008]]

that standard should be.20 For example, Consumer Federation of 
America/Media Access Project (``CFA/MAP'') believes that the public 
interest will be served if the Commission adopts a digital television 
standard that 1) reduces the cost of digital receivers and converters 
and (2) permits the convergence of video and computer 
technologies.21 In contrast, National Consumers League urges 
adoption because it believes that in the absence of a standard, 
consumers will be confused, demand for DTV equipment will be reduced, 
and the price drops normally associated with consumer electronic 
equipment will not materialize.
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    \20\ Citizens for HDTV Coalition and the National Consumers 
League urge adoption of the ATSC DTV Standard while the Benton 
Foundation (``Benton''), Consumer Federation of America and Media 
Access Project (``CFA/ MAP'') recommend adoption of the CICATS 
standard. However, CFA/MAP contend that the public interest would be 
served by encouraging ATSC and CICATS to work out their 
technological differences.
    \21\ Comments of CFA/MAP at 1.
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    13. Alternatives to Standards. Little comment was received 
concerning the two alternative approaches to standards specifically 
mentioned in the Fifth Further Notice: that we authorize use of and 
prohibit interference to users of the ATSC DTV Standard, or adopt the 
ATSC DTV Standard for allocation and assignment purposes only. 
Equipment manufacturer Harris argues for mandating at least the RF/
transmission layer and basing allotment and assignment principles on it 
in order to provide protection from objectionable interference.22 
Some, such as the Benton Foundation, urge the Commission to adopt no 
more than the minimal rules needed to protect spectrum users from 
interference.23 Also, NCTA opposes adoption of a design standard 
and suggests that we use performance standards to control 
interference.24 The many parties that support adoption of the 
complete standard generally believe that these less inclusive options 
would not provide the certainty necessary for the successful launch of 
DTV and would not provide an adequate basis for either the design or 
the purchase of DTV receivers. In addition, the Advanced Television 
Technology Center (``ATTC'') asserts that a DTV table of allotments 
necessarily will depend on the extent to which DTV causes interference 
to itself and other signals and resists interference from other 
signals. Therefore, ATTC contends it is more realistic to mandate the 
Standard for actual operation than to attempt to predict the impact of 
hypothetical alternatives.25 Zenith and others suggest that using 
the Standard only for allotment and assignment purposes would fail even 
to guarantee interference protection.26
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    \22\ Reply comment of Harris Corporation at 5.
    \23\ Comments of Benton Foundation at 3.
    \24\ Reply Comments of NCTA at 6-7.
    \25\ Comments of ATTC at 4.
    \26\ Comments of Zenith Electronics Corp. (''Zenith'') at 7.
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    14. The ATSC DTV Standard. Substantial comment was received 
concerning the merits of, and objections to, the ATSC DTV Standard. 
Broadcasters, equipment manufacturers, the Grand Alliance, ATSC, and 
the ATTC praise the Standard as representing the best digital 
television system in the world and one that is unmatched in terms of 
flexibility, extendibility, interoperability and headroom for 
growth.27 They note it uses primarily progressive scan and square 
pixels, making it the most computer-compatible digital television 
system in the world. They argue that the Standard's inclusion of four 
interlaced formats will benefit broadcasters by allowing for the use of 
interlaced scan where broadcasters determine it desirable to do so, 
such as when broadcasting archived material that was filmed in 
interlaced scan or where interlaced scan may be superior, such as in 
low-light conditions often accompanying electronic news gathering 
(``ENG''). Additionally, they assert that the 16:9 wide-screen aspect 
ratio 28 is internationally recognized and accepted and with 
``letterboxing'' 29 will allow the display of motion pictures in 
their original aspect ratio far better than is permitted by the current 
4:3 aspect ratio.
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    \27\ Comments of the Grand Alliance at 2-3; comments of ATSC at 
3-4; comments of ATTC at 5-7; comments of Philips at 14-15; reply 
comments of Grand Alliance at 15-33; reply comments of ATSC at 15-
32.
    \28\ ``Aspect ratio'' is the ratio of picture width to picture 
height.
    \29\ ``Letterboxing'' is a technique in which the aspect ratio 
of a film is preserved by blacking out portions of the screen, 
typically at the top and bottom. Material, however, is not cut from 
the frame. This is different than, so-called, ``pan-and-scan'' 
translation of widescreen movies to television in which moves and 
cuts never intended in the original are introduced to help make the 
action visible in a narrower frame. In pan-and-scan, less than the 
complete frame is transmitted and portions of the picture are left 
out.
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    15. Commenters representing computer interests, cinematographers, 
and some public interest groups generally oppose the standard.30 
Computer interests object to discrete features of the Standard, 
including the presence of interlaced scanning and the use of non-square 
pixels in some formats, as well as the maximum frame (or ``refresh'') 
rate of 60 Hz.31 These features, when taken together, assertedly 
hinder the compatibility of the system with computer applications, 
drive up the cost of receiving equipment, and delay the convergence of 
computer and television technologies. CICATS recommends that the 
Commission adopt a standard consisting of a single video format with 
480 lines of progressive scanning, a broadcaster determined picture 
aspect ratio, and the utilization of only square pixel spacing. Such a 
standard would allow for an enhancement layer that would permit, but 
not require, the transmission of high definition television by stations 
equipped to do so. This approach, it contends, would enable all 
consumers to receive, at a minimum, an SDTV picture on their digital 
equipment, at equal or better quality and significantly lower costs 
than under the ATSC DTV Standard. As mentioned above, most 
cinematographic and imaging interests oppose the inclusion of 
interlaced scanning as well because of its perceived deficiencies. 
Public interest groups such as CFA and MAP believe that the ATSC DTV 
Standard uses too many formats and that the baseline CICATS system will 
be cheaper, promoting both a more rapid and orderly transition to DTV 
(and the return of spectrum) and convergence of computer and television 
technologies.32 Film interests maintain that the Standard's 
specification of only two aspect ratios (4:3 and 16:9) will lead to 
``pan and scan'' of wide screen films, cropping significant portions of 
the original image and damaging the film makers' artistic 
vision.33
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    \30\ See, e.g., comments of CICATS, Coalition of Film Makers, 
and Consumer Federation of America/Media Access Project. While 
several film makers object to the Standard, the Motion Picture 
Association of America supports its adoption by the Commission.
    \31\ This is the number of frames transmitted per second.
    \32\ Comments of CFA/MAP at 1, 5 and 6.
    \33\ Comments of Film Makers Coalition at 5-7.
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    16. Supporters of the Standard respond that it is far more computer 
friendly than any other digital television system in use anywhere in 
the world, that current technology prohibits the use of progressive 
scanning for images of more than 1000 lines in the 6 MHz channel, and 
that convergence will not be hampered because the Standard enables 
consumers to choose the display formats they prefer, as interlaced 
programs may be displayed on progressive receivers (and vice versa). 
They contend that there are already PC/TV products on the market using 
analog NTSC technology, which relies on interlace scanning, thus 
proving that

[[Page 14009]]

interlaced scanning is not incompatible with computers.34
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    \34\ Id.
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    17. Proponents of the Standard challenge as greatly overstated the 
cost estimates put forward by computer interests. With respect to 
opponents' complaints regarding the Standard's maximum frame rate, the 
Grand Alliance asserts that if the frame rate is increased to 72 Hz, as 
proposed by CICATS, trade-offs in picture quality would result.35 
Proponents also argue that the specified aspect ratios are appropriate 
because 16:9 is already accepted worldwide, and 80% of motion pictures 
are shot at 1.85:1, which readily fits a 16:9 screen with negligible 
use of letterboxing. Even the widest films can be accommodated by 
letterboxing only on the order of 25% of the screen height.36 
Adopting the film makers' proposed 2:1 aspect ratio would still require 
letterboxing for films made in aspect ratios different than 2:1, which 
today includes most films, and would result in displays, for a given 
picture height, 12.5% larger in picture area, 30-50% heavier and 
correspondingly more expensive for consumers. Use of the CICATS 
proposal, which emphasizes SDTV, would further diminish a film maker's 
product by foregoing consumer access to resolution comparable to that 
found in a theater.
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    \35\ Reply comments of the Grand Alliance at 57; reply comments 
of ATSC at 55.
    \36\ Reply comments of the Grand Alliance at 59; reply comments 
of ATSC at 57-58.
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    18. Review or Sunset of Standard. Most commenters addressing the 
issue advocate either proceeding under our current processes for 
regulatory change or reviewing the Standard at some definite future 
time and oppose establishment of a specific review date or a 
sunset.37 They argue that doing so would inject an element of 
uncertainty into the transition process, discourage consumers, 
broadcasters and manufacturers from making investments, and be 
arbitrary because the transition timetable, the timing of production of 
DTV sets, and the timing of consumer acceptance of DTV sets is unknown 
at the present time.38 Sony and Schreiber propose that the 
Commission name an Advisory Committee, consisting of experts, who would 
examine the Standard and recommend changes in accordance with the 
Commission's existing procedures.39 NTIA urges us to ensure that 
the industries involved develop a clearly defined plan to promote 
speedy migration to an all-progressive scan system that moves 
expeditiously and includes a target date for full transition 40 
and suggests that we periodically review the migration to an all 
progressive system.
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    \37\ See, e.g., comments of Broadcasters at 24; comments of Sony 
at 36.
    \38\ See, e.g., comments of Broadcasters at 24; comments of Sony 
at 36; comments of MCEA at 4.
    \39\ Comments of Sony at 37 (``[T]he Commission could name an 
industry Advisory Committee comprised of the experts of that day who 
would examine the standard in light of the real imperatives of the 
future and, after thoughtful deliberation of the perceived need, 
recommend changes which would again be subject to public discourse 
and review.'') and Schreiber, Part II at 8 (``A small panel, 
appointed by the Commission, and composed exclusively of persons 
with no financial interest in the outcome, would seem 
appropriate.'').
    \40\ Comments of NTIA at 2-3.
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    19. Incorporation of Standard into Commission's Rules. Little in 
the way of comment was submitted on this issue. The Grand Alliance 
believes that the Commission should incorporate the Standard by 
reference, as it did in 1995 with an ATSC standard for ghost canceling 
in NTSC. It asks that the Commission incorporate by reference ATSC Doc. 
A/53 (``ATSC Digital Television Standard, 16 Sep 95'') and ATSC Doc. A/
52 (``ATSC Digital Audio Compression Standard (AC-3), 20 Dec. 95'') but 
only mention and not incorporate ATSC Doc. A/54 (``Guide to the Use of 
the ATSC Digital Television Standard, 4 Oct 95'').
    20. Audio Standard. Audio system proponents Digital Theater Systems 
(``DTS'') and Dolby Laboratories sharply differ on which is the 
superior technology and whether the standard we adopt should specify an 
audio format. DTS argues that its audio system is superior to the Dolby 
system embodied in the ATSC DTV Standard and that the standard we adopt 
should exclude audio formats.41 Dolby responds that DTS has not 
demonstrated that its system is superior to the Dolby AC-3 
system.42 Dolby points out that its system has been widely tested, 
evaluated and accepted by numerous standards setting organizations and 
for numerous consumer electronics products. Dolby argues that the 
multiple audio decoding system proposed by DTS would burden products 
with unnecessary cost and complexity and that, while creating the ATSC 
DTV Standard document, the ATSC Specialist Group on Digital Services 
(T3/S3) discussed and rejected the approach suggested by DTS.43
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    \41\ See comments of DTS at 6.
    \42\ See reply comments of Dolby at 3.
    \43\ Id. at 5.
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    21. Licensing Technology. Generally, commenting parties that 
addressed this issue agree to the reasonable licensing of their 
relevant patents, including pending patents and intellectual property 
necessary for the successful construction of DTV equipment.44 ATSC 
indicates that it sought and obtained from each member of the Grand 
Alliance and from Dolby a written commitment to abide by this 
requirement.45 ATSC and the other commenting parties suggest that 
no further Commission action is required.
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    \44\ See, e.g., comments of Grand Alliance at 29, Dolby at 4, 
Zenith at 15, Thomson at 16.
    \45\ See, e.g., comments of ATSC at 29.
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    22. Closed Captioning. Comments that addressed this issue, such as 
those of the Grand Alliance, ATSC and Zenith, indicate that they have 
worked closely with the affected communities to provide for closed 
captioning in the ATSC DTV Standard. They each suggest that the ATSC 
DTV Standard provides all the capability necessary for broadcasters and 
receiver manufacturers to provide closed captioning.46
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    \46\ See, e.g., comments of Grand Alliance at 31, ATSC at 32, 
Zenith at 17.
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    23. November 26, 1996, Agreement. Some of the commenters have 
altered their positions since the initial round of comments. The 
parties to the November 26, 1996, Agreement urge us to adopt the 
modified standard we are calling the DTV Standard. The Grand Alliance 
and ATSC view it as a way to resolve the controversy that has delayed 
adoption of a DTV standard.47 They believe that reliance on 
voluntary industry standards for the formats to be used for digital 
television is preferable to the cost of the further delay that would 
result if we fail to act while the parties remain at an impasse.48 
Full service broadcasters endorse the Agreement for similar reasons. 
The Association for Maximum Service Television, Inc., (``MSTV'') 
believes the Agreement is a ``workable compromise'' that will permit 
the compatible development of progressive technologies.49 One low 
power television broadcaster, International Broadcasting Network, 
objects to the process that resulted in the Agreement and contends that 
low power television broadcasters were excluded.50
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    \47\ Further Comments of the Digital HDTV Grand Alliance at 2; 
Further Comments of the Advanced Television Systems Committee at 2.
    \48\ Further Comments of the Digital HDTV Grand Alliance at 2.
    \49\ Comments of the Association for Maximum Service Television, 
Inc. on the Digital Television Standard Agreement at 2.
    \50\ While not pointing to any specific prejudice it suffered, 
IBN contends that approval of a Standard during 1996, in accordance 
with the terms of the Agreement, could prejudice the outcome of 
issues raised in our Sixth Further Notice, reply comments on which 
are not due until January 10, 1997.
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    24. Equipment manufacturers endorse the Agreement as ``an important 
step toward reducing reliance on

[[Page 14010]]

Government-mandated standards,'' that makes it likely that ``the 
industry standard becom[es] the vehicle around which the marketplace 
organizes.'' 51 They believe that the Agreement will provide 
sufficient certainty and that the video formats, although not mandated 
by the Commission, will remain viable nevertheless because there is a 
voluntary industry standard in place.52
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    \51\ Comment on the Agreement of General Instrument at 1; see 
also comments on the Agreement of EIA, Matsushita, Philips, Thomson 
and Zenith, all of which endorse the agreement.
    \52\ Comments on the Agreement of Philips Electronics North 
America Corporation and Thomson Consumer Electronics, Inc., at 2.
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    25. Coalition of Film Makers objects to the Agreement for the same 
reasons it objected to the ATSC DTV Standard in its initial 
comments.53 Most other commenters on this issue, except DemoGraFX 
and Venture, see the Agreement as addressing Film Maker's objections by 
dropping any constraints on formats.54 Beyond that, they believe 
that the question of how a film is broadcast is not appropriately part 
of this proceeding, is a contractual matter, and should be left to film 
owners and broadcasters, bargaining at arm's length. DemoGraFX, while 
stating that it is pleased with some aspects of the Agreement, urges 
that the Standard require transmission of films in their original 
aspect ratio and objects to interlaced formats remaining in Table 3 of 
the ATSC DTV Standard. DemoGraFX urges measures to require receivers to 
display films in their original aspect ratios.55 Venture 
Technologies Group wants the DemoGraFX system incorporated into the 
Standard 56 and Digital Imaging General opposes the Agreement 
which it contends was without the full participation and knowledge of 
the public.57 Audio interests remain divided, as they were prior 
to the Agreement, for essentially the same reasons.58
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    \53\ Comments of the Coalition of Film Makers (in response to 
the Public Notice) at 4-6.
    \54\ See, e.g., Comments on the Agreement of Zenith Electronics 
Corporation, Electronics Industries Association, CBS, Inc., and the 
Broadcasters Caucus' ``Response to Cinematographers' November 26 Fax 
to Vice President Gore Concerning DTV Standard.''
    \55\ Comments of DemoGraFX in Response to the Commission Seeking 
Comments on Digital TV Standards Agreement Released 27 November 1996 
at 2-7.
    \56\ Venture Technologies Group's Comments on the Digital 
Television Standards Agreement at 3.
    \57\ Digital Imaging General, DIMAGE Inc, Comments on Fifth 
Notice of Proposed Rule Making (NPRM) and on Public Notice FCC 96-
465 at 2.
    \58\ See generally Comments on the Agreement of Dolby 
Laboratories, The Academy for the Advancement of High End Audio, and 
Widescreen Review.
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    26. William Schreiber opposes the Agreement on the ground that the 
process resulting in it may have violated the Federal Advisory 
Committee Act. He also believes that without mandated formats 
prospective purchasers will not know what they are buying and that the 
penetration of digital receivers will be slowed. In the public interest 
community, Benton Foundation urges quick adoption of the Agreement so 
that the Commission can turn to public interest standards 59 while 
the American Foundation for the Blind objects that the ATSC DTV 
Standard does not designate audio bandwidth capacity for delivering 
video descriptions, thereby depriving the blind of equal access to 
video programming.60
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    \59\ Comments of Benton Foundation in response to the Public 
Notice.
    \60\ Comments of the American Foundation for the Blind--December 
6, 1996 at 1.
---------------------------------------------------------------------------

IV. The Digital Television Standard.

    27. In the Fourth Report and Order, the Commission concludes that 
requiring the use of the ATSC DTV Standard, as modified, will fulfill 
four objectives listed in the Fifth Further Notice of Proposed Rule 
Making: (1) To ensure that all affected parties have sufficient 
confidence and certainty in order to promote the smooth introduction of 
a free and universally available digital broadcast television service; 
(2) to increase the availability of new products and services to 
consumers through the introduction of digital broadcasting; (3) to 
ensure that our rules encourage technological innovation and 
competition; and (4) to minimize regulation and assure that any 
regulations we do adopt remain in effect no longer than necessary.
    28. The Commission is concerned that market solutions to 
transmission standards may result in more than one sustainable 
transmission standard. Such an outcome might result in compatibility 
problems and make it more difficult to preserve a universally available 
broadcast television service; could slow investment during the early 
stages of the transition to DTV and, thereby, slow the transition to 
DTV; and would make it more difficult to facilitate an efficient 
allotment of broadcast channels and protect against interference, which 
could complicate moving some licensees to new channels following the 
conversion to DTV and decrease the amount of spectrum recovered. Simply 
protecting a standard, or using a standard for allocation purposes 
would not address the Commission's concerns with ``wait-and-see'' 
behavior and preserving a universally available broadcast television 
service. The Commission also rejects the argument that the adopted 
transmission standard is too restrictive and still includes too many 
mandatory aspects of the ATSC DTV Standard. The Commission believes 
that the entire adopted standard is needed to achieve its goals.
    29. The Commission concludes that adopting the DTV Standard will 
increase the availability of new products and services for consumers. 
The DTV Standard is flexible and extensible and permits data 
broadcasting as well as new services.
    30. The Commission concludes that incorporating the DTV Standard 
into its Rules will encourage technological innovation and competition. 
The DTV Standard provides ``headroom'' for further development without 
requiring changes to the DTV Standard. In addition, the decision not to 
specify video formats will allow computer equipment and software firms 
more opportunity to compete by promoting interoperability.
    31. Finally, the Commission concludes that adopting the DTV 
Standard provides for the minimum of regulation needed to provide for a 
smooth transition. A key point of contention throughout this proceeding 
has been the desirability of allowing both interlaced and progressive 
scanning. Adoption of the DTV Standard will allow video formats to be 
tested and decided by the market.
    32. Support for the DTV Standard was not unanimous. In response to 
the Coalition of Film Maker's opposition to the DTV Standard because it 
does not require the display of films in the films' original aspect 
ratios, the Commission notes that the DTV Standard does not impose any 
impediment to the display of films in their original aspect ratios.
    33. The Commission is not persuaded by those who contend that not 
specifying video formats in the DTV Standard will inject uncertainty 
into the transition process and delay implementation of digital 
television. The Commission believes that by adopting a transmission 
standard, it is providing the appropriate level of certainty that the 
digital television market will need to move forward. The Commission's 
belief is supported by the fact that the major industries affected by 
this decision have reached an agreement that video formats need not be 
part of the DTV Standard.
    34. Placing the ATSC DTV Standard in the Commission's Rules. In the 
Fifth Further Notice of Proposed Rule Making, the Commission sought 
comment on whether it should place a digital broadcast television 
transmission standard into the Commission's Rules in

[[Page 14011]]

its entirety, incorporate it by reference, or publish it as an OET 
technical bulletin. In the Fourth Report and Order, the Commission 
decides to incorporate the DTV Standard into the Commission's Rules, by 
reference. Incorporation by reference has been done before and is 
warranted given the 194-page length of the Standard and its easy 
availability.
    35. Review. In the Fifth Further Notice of Proposed Rule Making, 
the Commission set forth three options to encourage innovation: (1) To 
proceed under current Commission processes which include consideration 
of requests from parties to amend the Commission's Rules or review of 
the Rules on the Commission's own initiative; (2) commit the Commission 
to conduct a proceeding to review the Standard at some future time; and 
(3) to establish a period of time after which the Standard no longer 
would be required or exclusive (i.e., ``sunsetting'' it). In the Fourth 
Report and Order, the Commission believes a sunset is not necessary. 
The Advanced Television System Committee has committed to continue to 
review the ATSC DTV Standard and the Commission has adopted a schedule 
of periodic reviews to monitor the progress of DTV.
    36. Audio Standard. The Commission is adopting the audio portion of 
ATSC DTV Standard. In comments, some parties suggested that the audio 
standard should not be adopted as a required audio standard. An 
alternative standard was suggested but it did not go through extensive 
testing and evaluation. The Commission also notes that the suggested 
changes could delay implementation.
    37. Licensing Technology. In earlier phases of this proceeding, the 
Commission indicated that patents on the technology would have to be 
licensed to other manufacturing companies on reasonable and 
nondiscriminatory terms. Those holding patents on the DTV Standard have 
submitted statements that they would comply with the American National 
Standards Institute patent policies. In the Fifth Further Notice of 
Proposed Rule Making, the Commission sought additional comment on 
whether more detailed information on the specific terms of patent 
licensing should be considered. It appears that licensing of the 
patents for DTV technology will not be an impediment to the development 
and deployment of DTV products for broadcasters and consumers.
    38. Closed Captioning. In the Fifth Further Notice of Proposed Rule 
Making, the Commission noted that the ATSC DTV Standard reserves a 
fixed 9600 bits per second data rate for closed captioning. No comments 
suggested that this would be insufficient. In the Fourth Report and 
Order, the Commission concludes that adequate provision has been made 
to allow closed captioning information to be carried by DTV stations.

V. Administrative Matters

Final Regulatory Flexibility Analysis
    39. As required by Section 603 of the Regulatory Flexibility Act, 5 
U.S.C. Sec. 603 (RFA), an Initial Regulatory Flexibility Analysis 
(``IRFA'') was incorporated in the Fifth Further Notice of Proposed 
Rule Making in this proceeding. The Commission sought written public 
comments on the proposals in the Fifth Further Notice, including on the 
IRFA. The Commission's Final Regulatory Flexibility Analysis (``FRFA'') 
in this Fourth Report and Order conforms to the RFA, as amended by the 
Contract With America Advancement Act of 1996, Pub. L. No. 104-121, 110 
Stat. 847 (1996) (``CWAAA'').61
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    \61\ Subtitle II of CWAAA is The Small Business Regulatory 
Enforcement Fairness Act of 1996 (SBREFA), codified at 5 U.S.C. 
Sec. 601 et seq.
---------------------------------------------------------------------------

I. Need for and Objectives of Action
    40. The Fourth Report and Order adopts, in modified form, the 
Advanced Television Systems Committee (``ATSC'') digital television 
(``DTV'') standard. Our ratification of this industry-developed 
standard is intended to provide the certainty that some parties seek in 
order to undertake the wholesale replacement of our analog system of 
terrestrial broadcast television with DTV. At the same time, we seek to 
ensure that governmental involvement is neither more extensive than 
necessary nor inhibitory to innovation, experimentation, and 
entrepreneurship. In the Fifth Further Notice in this proceeding, we 
listed four objectives regarding the authorization and implementation 
of a DTV standard: (1) To ensure that all affected parties have 
sufficient confidence and certainty in order to promote the smooth 
introduction of a free and universally available digital broadcast 
television service; (2) to increase the availability of new products 
and services to consumers through the introduction of digital 
broadcasting; (3) to ensure that our rules encourage technological 
innovation and competition; and (4) to minimize regulation and assure 
that any regulations we do adopt remain in effect no longer than 
necessary. In addition to these objectives, we considered how adoption 
of the standard would affect other goals enumerated in this proceeding, 
including a rapid transition to DTV, ceasing broadcasting in NTSC, and 
recovering spectrum. The Fourth Report and Order adopts the standard, 
except for certain aspects as discussed in paragraphs 30-49, supra, 
based on a careful weighing and balancing of these various goals.
II. Significant Issues Raised by the Public in Response to the Initial 
Analysis
    41. No comments were received specifically in response to the IRFA 
contained in the Fifth Further Notice. Further, while no comments were 
addressed specifically to small business issues, according to several 
Low Power Television (``LPTV'') commenters, including Third Coast 
Broadcasting, Inc. and Island Broadcasting Company, the Commission 
should minimize the impact on LPTV to prevent LPTV from being forced 
off the air by the transition to the new digital technology. Third 
Coast and Roger E. Harders contend that LPTV serves niches not covered 
by larger regional stations and should be able to provide this 
important service on digital channels in the future. Further, Blue 
Mountain Translator District argues that translators must be able to 
receive interactive signals to be full partners in DTV systems. In 
addition, not-for-profit and commercial translators must be treated 
equally. As discussed in Section V of this FRFA, we have considered 
these concerns. However, adoption of a standard for DTV will not 
implicate the concerns raised by LPTV and translator stations. The role 
of LPTV and translator stations in the transition to digital will be 
considered separately.
III. Description and Number of Small Entities to Which the Rule Will 
Apply
    42. Definition of a ``Small Business''. Under the RFA, small 
entities may include small organizations, small businesses, and small 
governmental jurisdictions. 5 U.S.C. Sec. 601(6). The RFA, 5 U.S.C. 
Sec. 601(3), generally defines the term ``small business'' as having 
the same meaning as the term ``small business concern'' under the Small 
Business Act, 15 U.S.C. Sec. 632. 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''). According 
to the SBA's regulations, entities engaged in television broadcasting 
Standard Industrial Classification (``SIC'') Code 4833--Television 
Broadcasting Stations, may have a maximum of $10.5 million

[[Page 14012]]

in annual receipts in order to qualify as a small business concern. 
This standard also applies in determining whether an entity is a small 
business for purposes of the RFA.
    43. Pursuant to 5 U.S.C. Sec. 601(3), the statutory definition of a 
small business applies ``unless an agency after consultation with the 
Office of Advocacy of the SBA and after opportunity for public comment, 
establishes one or more definitions of such term which are appropriate 
to the activities of the agency and publishes such definition(s) in the 
Federal Register.'' While we tentatively believe that the foregoing 
definition of ``small business'' greatly overstates the number of 
television broadcast stations that are small businesses and is not 
suitable for purposes of determining the impact of the new rules on 
small television stations, we did not propose an alternative definition 
in the IRFA. 62 Accordingly, for purposes of this Fourth Report 
and Order, we utilize the SBA's definition in determining the number of 
small businesses to which the rules apply, but we reserve the right to 
adopt a more suitable definition of ``small business'' as applied to 
television broadcast stations and to consider further the issue of the 
number of small entities that are television broadcasters in the 
future. Further, in this FRFA, we will identify the different classes 
of small television stations that may be impacted by the rules adopted 
in this Fourth Report and Order.
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    \62\ We have pending proceedings seeking comment on the 
definition of and data relating to small businesses. In our Notice 
of Inquiry in GN Docket No. 96-113 (In the Matter of Section 257 
Proceeding to Identify and Eliminate Market Entry Barriers for Small 
Businesses), FCC 96-216, released May 21, 1996, we requested 
commenters to provide profile data about small telecommunications 
businesses in particular services, including television, and the 
market entry barriers they encounter, and we also sought comment as 
to how to define small businesses for purposes of implementing 
Section 257 of the Telecommunications Act of 1996, which requires us 
to identify market entry barriers and to prescribe regulations to 
eliminate those barriers. Additionally, in our Order and Notice of 
Proposed Rule Making in MM Docket No. 96-16 (In the Matter of 
Streamlining Broadcast EEO Rule and Policies, Vacating the EEO 
Forfeiture Policy Statement and Amending Section 1.80 of the 
Commission's Rules to Include EEO Forfeiture Guidelines), 11 FCC Rcd 
5154 (1996), we invited comment as to whether relief should be 
afforded to stations: (1) based on small staff and what size staff 
would be considered sufficient for relief, e.g., 10 or fewer full-
time employees; (2) based on operation in a small market; or (3) 
based on operation in a market with a small minority work force. We 
have not concluded the foregoing rule makings.
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    44. Issues in Applying the Definition of a ``Small Business''. As 
discussed below, we could not precisely apply the foregoing definition 
of ``small business'' in developing our estimates of the number of 
small entities to which the rules will apply. Our estimates reflect our 
best judgments based on the data available to us.
    45. An element of the definition of ``small business'' is that the 
entity not be dominant in its field of operation. We were 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 following estimates of small businesses to 
which the new rules will apply do not exclude any television station 
from the definition of a small business on this basis and are therefore 
overinclusive to that extent. An additional element of the definition 
of ``small business'' is that the entity must be independently owned 
and operated. As discussed further below, we could not fully apply this 
criterion, and our estimates of small businesses to which the rules may 
apply may be overinclusive to this extent. The SBA's general size 
standards are developed taking into account these two statutory 
criteria. This does not preclude us from taking these factors into 
account in making our estimates of the numbers of small entities.
    46. With respect to applying the revenue cap, the SBA has defined 
``annual receipts'' specifically in 13 C.F.R 121.104, and its 
calculations include an averaging process. We do not currently require 
submission of financial data from licensees that we could use in 
applying the SBA's definition of a small business. Thus, for purposes 
of estimating the number of small entities to which the rules apply, we 
are limited to considering the revenue data that are publicly 
available, and the revenue data on which we rely may not correspond 
completely with the SBA definition of annual receipts.
    47. Under SBA criteria for determining annual receipts, if a 
concern has acquired an affiliate or been acquired as an affiliate 
during the applicable averaging period for determining annual receipts, 
the annual receipts in determining size status include the receipts of 
both firms. 13 C.F.R. 121.104(d)(1). The SBA defines affiliation in 13 
C.F.R. 121.103. In this context, the SBA's definition of affiliate is 
analogous to our attribution rules. Generally, under the SBA's 
definition, concerns are affiliates of each other when one concern 
controls or has the power to control the other, or a third party or 
parties controls or has the power to control both. 13 C.F.R. 
121.103(a)(1). The SBA considers factors such as ownership, management, 
previous relationships with or ties to another concern, and contractual 
relationships, in determining whether affiliation exists. 13 C.F.R. 
121.103(a)(2). Instead of making an independent determination of 
whether television stations were affiliated based on SBA's definitions, 
we relied on the data bases available to us to provide us with that 
information.
    48. Television Station Estimates Based on Census Data. The rules 
amended by this Fourth Report and Order will apply to full service 
television stations and may have an effect on TV translator facilities 
and low power TV stations (``LPTV''). The Small Business Administration 
defines a television broadcasting station that has no more than $10.5 
million in annual receipts as a small business.63 Television 
broadcasting stations consist of establishments primarily engaged in 
broadcasting visual programs by television to the public, except cable 
and other pay television services.64 Included in this industry are 
commercial, religious, educational, and other television 
stations.65 Also included are establishments primarily engaged in 
television broadcasting and which produce taped television program 
materials.66 Separate establishments primarily engaged in 
producing taped television program materials are classified under 
another SIC number.67
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    \63\ 13 C.F.R. Sec. 121.201, Standard Industrial Code (SIC) 4833 
(1996).
    \64\ Economics and Statistics Administration, Bureau of Census, 
U.S. Department of Commerce, 1992 Census of Transportation, 
Communications and Utilities, Establishment and Firm Size, Series 
UC92-S-1, Appendix A-9 (1995).
    \65\ Id. See Executive Office of the President, Office of 
Management and Budget, Standard Industrial Classification Manual 
(1987), at 283, which describes ``Television Broadcasting Stations 
(SIC Code 4833) as:
    Establishments primarily engaged in broadcasting visual programs 
by television to the public, except cable and other pay television 
services. Included in this industry are commercial, religious, 
educational and other television stations. Also included here are 
establishments primarily engaged in television broadcasting and 
which produce taped television program materials.
    \66\ Economics and Statistics Administration, Bureau of Census, 
U.S. Department of Commerce, 1992 Census of Transportation, 
Communications and Utilities, Establishment and Firm Size, Series 
UC92-S-1, Appendix A-9 (1995).
    \67\ Id.; SIC 7812 (Motion Picture and Video Tape Production); 
SIC 7922 (Theatrical Producers and Miscellaneous Theatrical Services 
(producers of live radio and television programs).
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    49. There were 1,509 television stations operating in the nation in 
1992.68 That number has remained fairly constant as indicated by 
the approximately 1,550 operating television broadcasting stations in 
the

[[Page 14013]]

nation as of August, 1996.69 For 1992 70 the number of 
television stations that produced less than $10.0 million in revenue 
was 1,155 establishments.71 Thus, the proposed rules will affect 
approximately 1,550 television stations; approximately 1,194 of those 
stations are considered small businesses.72 These estimates may 
overstate the number of small entities since the revenue figures on 
which they are based do not include or aggregate revenues from non-
television affiliated companies. We recognize that the proposed rules 
may also impact minority and women owned stations, some of which may be 
small entities. In 1995, minorities owned and controlled 37 (3.0%) of 
1,221 commercial television stations in the United States.73 
According to the U.S. Bureau of the Census, in 1987 women owned and 
controlled 27 (1.9%) of 1,342 commercial and non-commercial television 
stations in the United States.74
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    \68\ FCC News Release No. 31327, Jan. 13, 1993; Economics and 
Statistics Administration, Bureau of Census, U.S. Department of 
Commerce, supra note 4, Appendix A-9.
    \69\ FCC News Release No. 64958, Sept. 6, 1996.
    \70\ Census for Communications' establishments are performed 
every five years ending with a ``2'' or ``7''. See Economics and 
Statistics Administration, Bureau of Census, U.S. Department of 
Commerce, supra note 4, III.
    \71\ The amount of $10 million was used to estimate the number 
of small business establishments because the relevant Census 
categories stopped at $9,999,999 and began at $10,000,000. No 
category for $10.5 million existed. Thus, the number is as accurate 
as it is possible to calculate with the available information.
    \72\ We use the 77 percent figure of TV stations operating at 
less than $10 million for 1992 and apply it to the 1996 total of 
1550 TV stations to arrive at 1,194 stations categorized as small 
businesses.
    \73\ Minority Commercial Broadcast Ownership in the United 
States, U.S. Dep't of Commerce, National Telecommunications and 
Information Administration, The Minority Telecommunications 
Development Program (``MTDP'') (April 1996). MTDP considers minority 
ownership as ownership of more than 50% of a broadcast corporation's 
stock, voting control in a broadcast partnership, or ownership of a 
broadcasting property as an individual proprietor. Id. The minority 
groups included in this report are Black, Hispanic, Asian, and 
Native American.
    \74\ See Comments of American Women in Radio and Television, 
Inc. in MM Docket No. 94-149 and MM Docket No. 91-140, at 4 n.4 
(filed May 17, 1995), citing 1987 Economic Censuses, Women-Owned 
Business, WB87-1, U.S. Dep't of Commerce, Bureau of the Census, 
August 1990 (based on 1987 Census). After the 1987 Census report, 
the Census Bureau did not provide data by particular communications 
services (four-digit Standard Industrial Classification (SIC) Code), 
but rather by the general two-digit SIC Code for communications 
(#48). Consequently, since 1987, the U.S. Census Bureau has not 
updated data on ownership of broadcast facilities by women, nor does 
the FCC collect such data. However, we sought comment on whether the 
Annual Ownership Report Form 323 should be amended to include 
information on the gender and race of broadcast license owners. 
Policies and Rules Regarding Minority and Female Ownership of Mass 
Media Facilities, Notice of Proposed Rulemaking, 10 FCC Rcd 2788, 
2797 (1995).
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    50. It should also be noted that the foregoing estimates do not 
distinguish between network-affiliated 75 stations and independent 
stations. As of April, 1996, the BIA Publications, Inc. Master Access 
Television Analyzer Database indicates that about 73 percent of all 
commercial television stations were affiliated with the ABC, CBS, NBC, 
Fox, UPN, or WB networks. Moreover, seven percent of those affiliates 
have secondary affiliations.76
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    \75\ In this context, ``affiliation'' refers to any local 
broadcast television station that has a contractual arrangement with 
a programming network to carry the network's signal. This definition 
of affiliated station includes both stations owned and operated by a 
network and stations owned by other entities.
    \76\ Secondary affiliations are secondary to the primary 
affiliation of the station and generally afford the affiliate 
additional choice of programming.
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    51. There are currently 4926 TV translators, and 1,921 LPTV 
stations which may be affected by the new rules, if they decide to 
convert to digital television.77 The FCC does not collect 
financial information of any broadcast facility and the Department of 
Commerce does not collect financial information on these broadcast 
facilities. We will assume for present purposes, however, that most, if 
not all, LPTV stations and translator stations, could be classified as 
small businesses, if considered by themselves. We also recognize that 
most, if not virtually all translators are owned by a parent station 
which is a full-service station. Thus, translator stations generally 
can be considered affiliates, as that term is defined in the SBA 
regulations, with full-service stations. Given this situation, these 
stations would likely have annual revenues that exceed the SBA maximum 
to be designated as small businesses.
---------------------------------------------------------------------------

    \77\ FCC News Release, Broadcast Station Totals as of August 31, 
1996.
---------------------------------------------------------------------------

    52. Alternative Classification of Small Television Stations. An 
alternative way to classify small television stations is by the number 
of employees. The Commission currently applies a standard based on the 
number of employees in administering its Equal Employment Opportunity 
(``EEO'') rule for broadcasting.78 Thus, radio or television 
stations with fewer than five full-time employees are exempted from 
certain EEO reporting and recordkeeping requirements.79 We 
estimate that the total number of commercial television stations with 4 
or fewer employees is 132 and that the total number of noncommercial 
educational television stations with 4 or fewer employees is 
136.80
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    \78\ The Commission's definition of a small broadcast station 
for purposes of applying its EEO rule was adopted prior to the 
requirement of approval by the Small Business Administration 
pursuant to Section 3(a) of the Small Business Act, 15 U.S.C. 
Sec. 632(a), as amended by Section 222 of the Small Business Credit 
and Business Opportunity Enhancement Act of 1992, Pub. L. No. 102-
366, Sec. 222(b)(1), 106 Stat. 999 (1992), as further amended by the 
Small Business Administration Reauthorization and Amendments Act of 
1994, Pub. L. No. 103-403, Sec. 301, 108 Stat. 4187 (1994). However, 
this definition was adopted after public notice and an opportunity 
for comment. See Report and Order in Docket No. 18244, 23 FCC 2d 430 
(1970).
    \79\ See, e.g., 47 C.F.R. 73.3612 (Requirement to file annual 
employment reports on Form 395-B applies to licensees with five or 
more full-time employees); First Report and Order in Docket No. 
21474 (In the Matter of Amendment of Broadcast Equal Employment 
Opportunity Rules and FCC Form 395), 70 FCC 2d 1466 (1979). The 
Commission is currently considering how to decrease the 
administrative burdens imposed by the EEO rule on small stations 
while maintaining the effectiveness of our broadcast EEO 
enforcement. Order and Notice of Proposed Rule Making in MM Docket 
No. 96-16 (In the Matter of Streamlining Broadcast EEO Rule and 
Policies, Vacating the EEO Forfeiture Policy Statement and Amending 
Section 1.80 of the Commission's Rules to Include EEO Forfeiture 
Guidelines), 11 FCC Rcd 5154 (1996). One option under consideration 
is whether to define a small station for purposes of affording such 
relief as one with ten or fewer full-time employees. Id. at para. 
21.
    \80\ We base this estimate on a compilation of 1995 Broadcast 
Station Annual Employment Reports (FCC Form 395-B), performed by 
staff of the Equal Opportunity Employment Branch, Mass Media Bureau, 
FCC.
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    53. Other Industry Groups. Television Equipment Manufacturers: The 
Commission has not developed a definition of small entities applicable 
to manufacturers of television equipment. Therefore, we will utilize 
the SBA definition of manufacturers of Radio and Television 
Broadcasting and Communications Equipment.81 According to the 
SBA's regulations, a TV equipment manufacturer must have 750 or fewer 
employees in order to qualify as a small business concern.82 
Census Bureau data indicates that there are 858 U.S. firms that 
manufacture radio and television broadcasting and communications 
equipment, and that 778 of these firms have fewer than 750 employees 
and would be classified as small entities.83 The Census Bureau 
category is very broad, and specific figures are not available as to 
how many of these firms are exclusive manufacturers of television 
equipment or how many are independently owned and operated. We conclude 
that there are approximately 778 small

[[Page 14014]]

manufacturers of radio and television equipment.
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    \81\ This category excludes establishments primarily engaged in 
the manufacturing of household audio and visual equipment which is 
categorized as SIC 3651. See infra for SIC 3651 data.
    \82\ 13 C.F.R. 121.201, (SIC) Code 3663.
    \83\ U.S. Dept. of Commerce, 1992 Census of Transportation, 
Communications and Utilities, Table 1D (issued May 1995), SIC 
category 3663.
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    54. Household/Consumer Television Equipment: The Commission has not 
developed a definition of small entities applicable to manufacturers of 
television equipment used by consumers, as compared to industrial use 
by television licensees and related businesses. Therefore, we will 
utilize the SBA definition applicable to manufacturers of Household 
Audio and Visual Equipment. According to the SBA's regulations, a 
household audio and visual equipment manufacturer must have 750 or 
fewer employees in order to qualify as a small business concern.84 
Census Bureau data indicates that there are 410 U.S. firms that 
manufacture radio and television broadcasting and communications 
equipment, and that 386 of these firms have fewer than 500 employees 
and would be classified as small entities.85 The remaining 24 
firms have 500 or more employees; however, we are unable to determine 
how many of those have fewer than 750 employees and therefore, also 
qualify as small entities under the SBA definition. Furthermore, the 
Census Bureau category is very broad, and specific figures are not 
available as to how many of these firms are exclusive manufacturers of 
television equipment for consumers or how many are independently owned 
and operated. We conclude that there are approximately 386 small 
manufacturers of television equipment for consumer/household use.
---------------------------------------------------------------------------

    \84\ 13 C.F.R. 121.201, (SIC) Code 3651.
    \85\ U.S. Small Business Administration 1995 Economic Census 
Industry and Enterprise Report, Table 3, SIC Code 3651 (Bureau of 
the Census data adapted by the Office of Advocacy of the U.S. Small 
Business Administration).
---------------------------------------------------------------------------

    55. Computer Manufacturers: The Commission has not developed a 
definition of small entities applicable to computer manufacturers. 
Therefore, we will utilize the SBA definition. According to SBA 
regulations, a computer manufacturer must have 1,000 or fewer employees 
in order to qualify as a small entity.86 Census Bureau data 
indicates that there are 716 firms that manufacture electronic 
computers and of those, 659 have fewer than 500 employees and qualify 
as small entities.87 The remaining 57 firms have 500 or more 
employees; however, we are unable to determine how many of those have 
fewer than 1,000 employees and therefore also qualify as small entities 
under the SBA definition. We conclude that there are approximately 659 
small computer manufacturers.
---------------------------------------------------------------------------

    \86\ 13 CFR 121.201, (SIC) Code 3571.
    \87\ U.S. Small Business Administration 1995 Economic Census 
Industry and Enterprise Report, Table 3, SIC Code 3571, (Bureau of 
the Census data adapted by the Office of Advocacy of the U.S. Small 
Business Administration).
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IV. Projected Compliance Requirements of the Rule
    56. The Fourth Report and Order adopts a rule incorporating by 
reference the digital television broadcast standard (``Standard'') 
recommended to the Commission by its Advisory Committee on Advanced 
Television Service (``ACATS''), with the exception of the video 
formats. The Fourth Report and Order imposes no new reporting or 
recordkeeping requirements.
V. Significant Alternatives Considered Minimizing the Economic Impact 
on Small Entities and Consistent With the Stated Objectives
    57. The Fourth Report and Order adopts a rule that requires 
transmission of DTV signals to comply with the Standard adopted except 
for the video format layer and incorporates that Standard, except for 
the video format layer, into the Commission's rules. We believe that 
adopting a standard is essential to the goal of universal television 
service and to facilitating the conversion to digital television 
service. Not requiring the use of the video format layer advances the 
goals of minimizing regulation and facilitating technological 
innovation. The alternatives considered, including authorizing use of 
the Standard and prohibiting interference to its users, and adopting 
the Standard for allocation and assignment purposes only, received no 
express support in the Comments. Moreover, careful evaluation of these 
alternatives showed that each failed to advance one or more of the 
important goals of this proceeding. The Commission determined that not 
mandating video formats sufficiently addressed its concerns with 
stifling innovation so that neither a sunset of the Standard nor formal 
periodic review of the Standard would be required. Instead, it 
indicated that its scheduled reviews of the progress of DTV 
implementation would be sufficient to keep the Commission abreast of 
technological developments and marketplace conditions. No additional 
action is taken on the issues of licensing of patents for DTV 
technology or provision for closed captioning information to be carried 
by DTV stations using the standard adopted.
    58. Pursuant to the RFA, 5 U.S.C. Sec. 603(c), we have considered 
whether there is a significant economic impact on a substantial number 
of small entities. The action taken does not impose additional burdens 
on small entities. The Fourth Report and Order in itself does not 
mandate a conversion to digital television, only requiring that digital 
television signals that are transmitted conform to certain standards. 
The details of requiring the conversion will be taken up in a future 
Report and Order, which will consider alternatives to minimize the 
economic impact of that conversion on small entities.
VI. Report to Congress
    59. The Commission shall send a copy of this Final Regulatory 
Flexibility Analysis along with this Fourth Report and Order in a 
report to Congress pursuant to the Small Business Regulatory 
Enforcement Fairness Act of 1996, codified at 5 U.S.C. 
Sec. 801(a)(1)(A). A copy of this FRFA will also be published in the 
Federal Register.
    Paperwork Reduction Act. 60. No impact.
    Contract With America Advancement Act. 61. Major rule.
    Ordering Clauses. 62. Accordingly, it is ordered that, pursuant to 
Sections 4(i) & (j) and 303(r) of the Communications Act of 1934 as 
amended, 47 U.S.C. Secs. 154(i), (j) 303(r), Part 73 of the 
Commission's Rules is amended as set forth in ``Rule Changes,'' below.
    63. It is further ordered that, pursuant to the Contract with 
America Advancement Act of 1996, the rule amendments set forth in 
``Rule Changes'' shall be effective [either 60 days after publication 
in the Federal Register or after the receipt by Congress and the 
General Accounting Office of a report] in compliance with the Contract 
with America Advancement Act of 1996, Pub. L. No. 104-121, whichever is 
later.
    64. It is further ordered that the Secretary shall send a copy of 
this Fourth Report and Order, including the Final Regulatory 
Flexibility Analysis, to the Chief Counsel for Advocacy of the Small 
Business Administration in accordance with Section 603(a) of the 
Regulatory Flexibility Act, Pub. L. No. 96-354, 94 Stat. 1164, 5 U.S.C. 
Sec. 601 et. seq.

List of Subjects in 47 CFR Part 73

    Radio broadcast services.

Federal Communications Commission.
William F. Caton,
Acting Secretary.

Rule Changes

    Part 73 of Title 47 of the Code of Federal Regulations is amended 
as follows:

[[Page 14015]]

PART 73--RADIO BROADCAST SERVICES

    1. The authority citation for Part 73 continues to read as follows:

    Authority: Secs. 303, 48 Stat., as amended, 1082; 47 U.S.C. 154, 
as amended.

    2. Section 73.682 is amended by adding paragraph (d) as follows:


Sec. 73.682  TV transmission standards.

* * * * *
    (d) Digital broadcast television transmission standard. 
Transmission of digital broadcast television (DTV) signals shall comply 
with the standards for such transmissions set forth in Advanced 
Television Systems Committee (ATSC) Doc. A/52 (``ATSC Standard Digital 
Audio Compression (AC-3), 20 Dec 95'') and ATSC Doc A/53 (``ATSC 
Digital Television Standard, 16 Sep 95''), except for Section 5.1.2 
(``Compression format constraints'') of Annex A (``Video Systems 
Characteristics'') and the phrase ``see Table 3'' in Section 5.1.1 
Table 2 and Section 5.1.2 Table 4. Although not incorporated herein by 
reference, licensees may also consult ATSC Doc. A/54 (``Guide to the 
Use of the ATSC Digital Television Standard, 4 Oct 95'') for guidance. 
This incorporation by reference was approved by the Director of the 
Federal Register in accordance with 5 U.S.C. 552(a) and 1 CFR part 51. 
Copies may be inspected at the Federal Communications Commission, 1919 
M Street, NW., Washington, DC 20554 or at the Office of the Federal 
Register, 800 N. Capitol Street, NW., Washington, DC. Copies of ATSC A/
52, A/53, and A/54 can be obtained from the Commission's contract 
copier or from the Advanced Television Systems Committee, 1750 K 
Street, NW., Suite 800, Washington, DC 20006. They are also available 
in their entirety on the Internet at http://www.atsc.org.

[FR Doc. 97-7368 Filed 3-24-97; 8:45 am]
BILLING CODE 6712-01-P