[Federal Register Volume 63, Number 239 (Monday, December 14, 1998)]
[Proposed Rules]
[Pages 68722-68729]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 98-33007]


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FEDERAL COMMUNICATIONS COMMISSION

47 CFR Part 73

[MM Docket No. 98-203; FCC 98-304]


Ancillary or Supplementary Use of Digital Television Capacity by 
Noncommercial Licensees

AGENCY: Federal Communications Commission.

ACTION: Proposed rule.

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SUMMARY: The Commission initiates this Notice of Proposed Rule Making 
to seek comment on whether we should impose limits on activities 
undertaken by noncommercial educational (``NCE'') television licensees 
on their DTV capacity. The request for clarification made by AAPTS/PBS 
raises significant issues regarding the service and funding 
opportunities made available to NCE stations as a result of the 
transition to digital transmission. We recognize the importance of this 
issue to the future of public television as it enters the digital age. 
Therefore, we believe it is appropriate to seek further comment on the 
AAPTS/PBS petition in order to establish a more complete record on the 
issues it raises.

EFFECTIVE DATES: Comments are due on or before January 28, 1999; reply 
comments are due on or before March 1, 1999.

ADDRESSES: Federal Communications Commission, 445 12th Street, Room TW-
A306, SW, Washington, DC 20554. In addition to filing comments with the 
Secretary, a copy of any comments on the information collections 
contained herein should be submitted to Judy Boley, Federal 
Communications Commission, Room C-1804, 445 12th Street, SW, 
Washington, DC 20554, or via the Internet to [email protected] and to 
Timothy Fain, OMB Desk Officer, 10236 NEOB, 725--17th Street, NW, 
Washington, DC 20503 or via the Internet to [email protected]. 
Comments may also be filed by using the Commission's Electronic Comment 
Filing System (ECFS), via the Internet to http://www.fcc.gov.e-file/
ecfs.html.

FOR FURTHER INFORMATION CONTACT: Jane Gross or Robert Somers, Policy 
and Rules Division, Mass Media Bureau (202) 418-2130.

SUPPLEMENTARY INFORMATION: This is a synopsis of the Commission's 
Notice of Proposed Rule Making, MM Docket No. 98-203, adopted November 
19, 1998 and released November 23, 1998. The full text of this 
Commission decision is available for inspection and copying during 
normal business hours in the FCC Reference Center (Room 239), 1919 M 
Street, NW, Washington, DC. The complete text of this decision may also 
be purchased from the Commission's copy contractor, International 
Transcription Services, Inc., 1231 20th Street, NW, Washington, DC, 
20036, (202) 857-3800.

Synopsis of Notice of Proposed Rulemaking

I. Introduction

    1. In our Fifth Report and Order, 62 FR 26966 (May 16, 1997), in 
the digital television (``DTV'') proceeding, we adopted rules 
implementing a transition to digital technology for all existing 
television broadcasters. Among other things, we established standards 
for license eligibility, a transition and construction schedule and a 
requirement that broadcasters continue to provide one free over-the-air 
television service in accordance with section 336 of the 
Telecommunications

[[Page 68723]]

Act of 1996 (``1996 Act''). We also adopted rules permitting DTV 
licensees, without distinguishing between commercial and noncommercial 
licensees, to use their DTV capacity to provide ancillary or 
supplementary services provided these services do not derogate the free 
digital television service.
    2. In their Petition for Reconsideration of the Fifth Report and 
Order, the Association of America's Public Television Stations and the 
Public Broadcasting Service (AAPTS/PBS) requested clarification on the 
ability of public television stations to use excess capacity on DTV 
channels for commercial purposes. In opposing this request in part, 
Media Access Project and other public interest parties (``MAP''), 
jointly argued that, while public television stations should be able to 
provide some revenue-generating ancillary and supplementary services, 
these services must be consistent with the noncommercial nature of 
public television as set forth in section 399B of the Communications 
Act, the provision restricting advertising by these stations.
    3. We initiate this Notice of Proposed Rule Making to seek comment 
on whether we should impose limits on remunerative activities 
undertaken by noncommercial educational (``NCE'') television licensees 
on their DTV capacity. The request for clarification made by AAPTS/PBS 
raises significant issues regarding the service and funding 
opportunities made available to NCE stations as a result of the 
transition to digital transmission. We recognize the importance of this 
issue to the future of public television as it enters the digital age. 
Therefore, we believe it is appropriate to seek further comment on the 
AAPTS/PBS petition in order to establish a more complete record on the 
issues it raises.
    4. In their Petition for Reconsideration AAPTS/PBS also requested 
that the Commission exempt public television licensees from any fee 
assessed in connection with use of digital spectrum for ancillary or 
supplementary services to the extent revenues from those services are 
used to support the licensee's mission-related activities. Section 
336(e) of the 1996 Act requires DTV licensees receiving fees or certain 
other compensation for ancillary or supplementary services provided on 
the DTV spectrum to return a portion of that revenue to the public. The 
Commission was charged with establishing a means of assessing and 
collecting fees for those ancillary or supplementary services specified 
in the statute. In the Notice of Proposed Rule Making, 63 FR 460 
(January 6, 1998), In the Matter of Fees for Ancillary or Supplementary 
Use of Digital Television Spectrum (``Fees Proceeding''), we sought 
comment on AAPTS/PBS's request. In the Fees Proceeding we determined 
that the request for such an exemption should be considered in this 
proceeding. We therefore seek additional comment on this issue in light 
of the comments received on this issue in the Fees Proceeding and the 
tentative proposals outlined below.

II. Background

    5. Ancillary or Supplementary Services on DTV Capacity. The DTV 
standard we adopted will allow for the simultaneous transmission of 
multiple streams of programming, information, and other non-broadcast 
services. To enable licensees to take full advantage of the 
opportunities provided by digital technology, the 1996 Act provided 
that DTV licensees may use a portion of their new DTV capacity for 
ancillary or supplementary services.
    6. Specifically, section 336 of the Communications Act authorizes 
the Commission to permit DTV licensees to offer ancillary or 
supplementary services on their DTV capacity as long as the provision 
of these services does not derogate any advanced television services 
the Commission may require and is ``consistent with the public 
interest, convenience, and necessity.'' The statute does not 
distinguish between commercial and noncommercial DTV licensees, nor 
does the legislative history of section 336 draw any such distinction.
    7. In the Fifth Report and Order in our DTV proceeding we adopted 
rules to allow broadcasters the flexibility to respond to the demands 
of their audience by providing ancillary or supplementary services, 
provided that these services do not derogate the mandated free, over-
the-air program service. We found that this approach would serve the 
public interest by fostering the provision of innovative services to 
the public and by permitting the realization of the full possibilities 
of DTV. We recognized the benefit of permitting broadcasters the 
opportunity to develop additional revenue streams from innovative 
digital services. We also found that allowing such services contributes 
to efficient spectrum use and can expand and enhance the use of 
existing spectrum. At the same time, we noted our expectation that the 
fundamental use of the DTV licenses will be for the provision of free 
over-the-air television.
    8. We clarified that ``we will consider as ancillary or 
supplementary any service provided on the digital channel other than 
free, over-the-air video services.'' We noted that this approach is 
consistent with Commission precedent that has treated 
telecommunications services provided by an NTSC station other than the 
regular television program service as ancillary. We also did not impose 
a requirement that the ancillary or supplementary services provided by 
the broadcaster must be broadcast-related. We explained that such 
ancillary or supplementary services could include, but are not limited 
to, subscription television programming, computer software 
distribution, data transmissions, teletext, interactive services, and 
audio signals.
    9. Section 336(e)(1) of the 1996 Act also requires that a fee be 
assessed upon any ancillary or supplementary services on DTV spectrum 
``for which the payment of a subscription fee is required in order to 
receive such services'' or ``for which the licensee directly or 
indirectly receives compensation from a third party in return for 
transmitting materials furnished by such third party.'' The Act 
specifically exempts from the fee any service which relies only upon 
``commercial advertisements used to support broadcasting for which a 
subscription fee is not required.'' In our Fees Proceeding we have 
adopted rules to implement this provision with respect to commercial 
DTV licensees.
    10. Noncommercial Educational Television. Throughout the DTV 
proceeding, the Commission has acknowledged that noncommercial 
licensees will face unique problems in the transition to DTV. In the 
Fifth Report and Order, we recognized the high quality programming 
service noncommercial stations have provided to American viewers over 
the years and reaffirmed our commitment to noncommercial educational 
television service. We also observed that public broadcasters have been 
pioneers in experimenting with the capabilities of digital technology. 
We further noted our awareness of the unique financial difficulties 
faced by noncommercial stations and reiterated our view that these 
stations will need and warrant special relief to assist them in the 
transition to DTV. In this regard, for example, we applied a six-year 
construction period timetable to noncommercial stations, the longest 
permitted to any category of DTV applicant. We also found, however, 
that at that time it was premature to attempt to resolve the issue of 
what additional special treatment, if any, should be afforded to 
noncommercial broadcasters. We stated that we would

[[Page 68724]]

consider these issues in our periodic reviews examining the progress of 
the DTV transition.
    11. AAPTS/PBS's Request for Clarification--Use of DTV Capacity. In 
its Petition for Reconsideration of the Fifth Report and Order, AAPTS/
PBS requested clarification on the ability of public television 
stations to use capacity on DTV channels for commercial purposes. As 
neither section 336 nor the Commission's DTV rules distinguishes 
between commercial and noncommercial stations, AAPTS/PBS argued that 
both are intended to allow public stations to offer ancillary or 
supplementary services for revenue-generating purposes.
    12. AAPTS/PBS states that public television stations are exploring 
various revenue generating options such as: leasing capacity to other 
digital operators; joint ventures with commercial entities; and 
subscription channels for popular PBS programming. It emphasizes the 
importance of the revenue potential of these services in order to 
continue public television's commitment to providing a high quality 
noncommercial, educational broadcast service. AAPTS/PBS has noted that 
the multiple programming streams offered by the extra capacity of 
digital transmission will enable public broadcasters to extend the 
reach of their educational services. New expanded ``multicast'' 
programming channels planned by public television as a result of 
multicasting capabilities include: PBS's Ready-to-Learn service for 
children; K-12 instructional programming; college credit telecourses; 
workforce training; and local public affairs programming. AAPTS/PBS 
notes that many public stations are relying on the revenue from 
ancillary or supplementary services to help fund the construction of 
DTV facilities and the operation of both DTV and NTSC facilities. Such 
flexibility is crucial, it maintains, as federal and corporate funding 
have become increasingly difficult to obtain.
    13. Specifically, AAPTS/PBS requests that the Commission clarify 
that Sec. 73.621 of its rules, which requires public stations to 
provide a noncommercial service, is not applicable to ancillary or 
supplementary services provided on DTV capacity. It proposes that the 
Commission make clear that, as long as a public station provides one 
noncommercial broadcast service pursuant to Sec. 73.621, it can use its 
additional DTV capacity as a source of revenue, subject only to the 
requirement of non-derogation in Sec. 73.624.
    14. AAPTS/PBS notes that its proposal to use its additional DTV 
capacity as a source of revenue is consistent with existing 
Secs. 73.621(f) and (g), and 73.646(b) and (d) of the Commission's 
rules, which allow public television stations to use the vertical 
blanking interval (``VBI''), and auxiliary broadcast services for 
revenue generating activities. It argues that use of their DTV capacity 
as a source of revenue follows rationally from these provisions. 
Similarly, public television licensees seek the opportunity to use that 
portion of their DTV spectrum that is not necessary for their primary 
public television mission as a means of financing their DTV broadcast 
operations.
    15. In opposing AAPTS/PBS's request in part, MAP requests that the 
Commission make clear that any leased or joint-venture programming 
undertaken by public television licensees that is advertiser-supported 
would violate the advertising ban of section 399B of the Act. MAP 
argues that AAPTS/PBS's request is unclear as to what specific 
programming would be offered or whether it would comport with the 
requirements of section 399B. For example, MAP specifies programming 
that it believes would violate the advertising ban as ``programming 
that is predominantly utilized for the transmission of sales 
presentations or program length commercials, such as home shopping or 
infomercials, or that otherwise encourages or solicits the purchase of 
goods and services from commercial entities.'' MAP also argues that 
because section 336 of the Act does not explicitly permit noncommercial 
stations to broadcast advertisements on any ancillary or supplementary 
services, AAPTS/PBS's argument that section 336 extends to both 
commercial and noncommercial entities is possible only if the 
inconsistent requirements of section 399B were repealed. MAP notes 
that, while public television stations should be able to provide some 
revenue-generating ancillary services, these services must be 
consistent with the nature of noncommercial public television as set 
forth in that section.
    16. In reply, AAPTS/PBS acknowledges that the advertisement ban of 
section 399B will apply to the primary noncommercial broadcast service, 
but argues that it should not extend to the provision of ancillary and 
supplementary services on DTV spectrum. AAPTS/PBS points out that 
section 399B was enacted by Congress in 1981 in an effort to reduce 
public television's dependence on federal appropriations. Although 
Congress was also concerned that public broadcasting's primary 
broadcasting service remain noncommercial, AAPTS/PBS notes that the 
balance Congress struck in section 399B was to allow such remunerative 
activities, provided that the public broadcast service remained 
noncommercial.
    17. AAPTS/PBS also notes that previous Commission decisions have 
allowed noncommercial licensees to provide subsidiary communications 
services without regard to whether they include advertisements. AAPTS/
PBS maintains that even if the section 399B advertising restrictions 
are found to apply to these services, the Commission has discretion 
under section 336(a)(2) to allow public TV licensees to include 
advertiser-supported services if it finds these services to be in the 
public interest. AAPTS/PBS urges an interpretation in which the 
advertising ban in section 399B would continue to apply to the primary 
noncommercial broadcast service, while any ancillary and supplementary 
use of DTV channels would be free from the restrictions of this 
section.
    18. AAPTS/PBS's Request for Exemption From Fees under section 
336(e). In its Petition for Reconsideration of the Fifth Report and 
Order, AAPTS/PBS requested that the Commission exempt public television 
licensees from any fee assessed in connection with revenue-generating 
use of the ancillary or supplementary services on their DTV spectrum 
``to the extent that revenues from those services are used to support 
the licensee's mission-related activities.'' We sought comment in the 
Fees Proceeding on whether noncommercial television licensees should be 
exempt from such fees or subject to a nominal fee where they offer 
ancillary and supplementary services as a source of funding for public 
television.
    19. In its comments in the Fees Proceeding, AAPTS/PBS argues that 
public television stations should be exempt from such fees because the 
statutory purposes of section 336(e)(2) do not apply to services 
provided by public television licensees. AAPTS/PBS notes that if these 
revenues would be used to support noncommercial activities, there would 
be no need to ``recover'' a portion of the value of the spectrum for 
the public and that an exemption would not result in any ``unjust 
enrichment''. AAPTS/PBS also argues that, as public television stations 
are not auctioned, there is no equivalent amount that would have been 
received at auction. Further, AAPTS/PBS contends that such an exemption 
would be consistent with other Congressional

[[Page 68725]]

and regulatory policies, and that the Commission has concluded in other 
proceedings that the imposition of a fee on public broadcasting would 
dilute the financial support paid to public broadcasting by Congress.
    20. MAP generally supports allowing public broadcasters to be 
exempt from such fees, but only if they do not provide advertiser-
supported ancillary and supplementary services. MAP asserts that the 
statute makes no distinction between noncommercial and commercial 
licensees, either in their ability to provide advertiser-supported 
ancillary and supplementary services, or in their obligation to pay 
fees on such services. We have determined that AAPTS/PBS's request for 
such exemption should be considered in this proceeding. Accordingly, we 
seek additional comment on this issue in light of the comments received 
in the Fees Proceeding and the tentative proposals set forth in this 
Notice.

III. Request for Comments

    21. Noncommercial Educational Television. Public broadcasting's 
mission has long been to provide quality educational and cultural 
programming to a wide and diverse audience. Noncommercial educational 
television stations have also been at the forefront of exploring 
innovative services and new technologies to accomplish this mission. 
These stations also appear poised to take full advantage of the 
opportunities made available by digital technology. We fully recognize 
the public interest benefits inherent in the services that may be 
offered by NCE licensees on the digital spectrum.
    22. As we stated in the Fifth Report and Order, granting 
broadcasters the flexibility to offer the ancillary or supplementary 
services they choose will help them attract consumers to the service, 
which will, in turn, speed the transition to digital television. We 
stated that such flexibility will encourage entrepreneurship and 
innovation, will contribute to efficient spectrum use, and will expand 
and enhance use of existing spectrum. We seek comment on whether these 
same considerations apply to the NCE context.
    23. Throughout the development of the public broadcasting system, 
both Congress and the Commission have continually balanced the desire 
to maintain the integrity of its noncommercial status with the fact 
that public television must have access to adequate funding in order to 
survive. Congress enacted the Public Broadcasting Act of 1967 in 
response to increasing public demand for the government to sponsor 
independent sources of broadcast programming as an alternative to 
commercial broadcasting. This legislation sought to promote the 
development of noncommercial, educational broadcasting stations and 
established the framework for today's public broadcasting system.
    24. Public television has since flourished and developed from an 
experimental educational service into the valuable and unique 
programming service that exists today. The Commission has supported the 
goals of the public broadcasting system and promulgated rules to 
implement the public broadcasting provisions of the Communications Act. 
For example, in 1952, recognizing the important and unique role to be 
served by public television, the Commission reserved spectrum 
exclusively for the noncommercial broadcasting service.
    25. We are consequently sympathetic to the relief requested in the 
AAPTS/PBS petition. The petition describes a range of revenue-
generating ancillary or supplementary services that could help NCE 
stations flourish in a digital age. We seek comment on these new 
services and specifically on NCE stations' plans for using excess 
digital capacity. We note that the costs of converting to digital 
service will be considerable, and that many NCE stations rely on public 
funds to provide the build-out to DTV service. At the same time we are 
sensitive to the concerns raised by MAP that in permitting NCE stations 
flexibility in providing such services we must be consistent with 
section 399B and also not undermine their fundamental mission of 
providing a noncommercial educational broadcast service. To help us 
determine the limits, if any, on the remunerative activities of NCE 
licensees on their DTV capacity, we seek comment below on a number of 
issues.
    26. Noncommercial Educational Television: Funding Issues. Many NCE 
stations have traditionally received most of their funding from 
federal, state and local government sources in addition to corporate 
and viewer contributions. In its request for clarification, AAPTS/PBS 
notes the uncertainty of continued federal financial support and the 
tightening of support from the corporate sector. We seek comment on 
such funding trends and on NCE licensees' specific funding needs to 
convert to digital and maintain a robust NCE television service. We 
also seek comment on the appropriate role of the Commission in ensuring 
that such funding needs are met.
    27. Ancillary or Supplementary Services. In the Fifth Report and 
Order, we adopted rules implementing section 336 to allow broadcasters 
the flexibility to respond to the demands of their audience by 
providing ancillary or supplementary services, including subscription 
television, providing that these services do not derogate the mandated 
free, over-the-air program service. As an initial matter, we generally 
invite comment on AAPTS/PBS's request that we clarify that Sec. 73.621 
of our rules, which requires public stations to provide a noncommercial 
service, is not applicable to ancillary or supplementary services 
provided on DTV capacity. We also seek comment on whether such a 
clarification is consistent with the provisions of section 399B.
    28. The Communications Act defines a ``noncommercial educational 
broadcast station'' and ``public broadcast station,'' as ``a 
noncommercial educational radio or television broadcast station which 
is owned and operated by a public agency or nonprofit private 
foundation, cooperation, or association'' or ``is owned and operated by 
a municipality and which transmits only noncommercial programs for 
educational purposes.'' In 1981, Congress amended the Communications 
Act to give public broadcasters more flexibility to generate funds for 
their operations. As amended, section 399B of the Act permits public 
stations to provide facilities and services in exchange for 
remuneration as long as those uses do not interfere with the stations' 
provision of public telecommunications services. In addition, under 
Sec. 73.621 of the Commission's rules, public television stations are 
required to furnish primarily an educational as well as a nonprofit and 
noncommercial broadcast service.
    29. We have previously been called on to determine the extent to 
which public television stations can transmit subscription television 
(``STV'') or other revenue-generating services on their analog channels 
consistent with the statutory and regulatory requirements we have just 
described. In particular, in 1984, the Commission considered amending 
its rules to permit public television stations to engage in 
subscription television operations. The Commission stated that it 
``clearly has the authority [under section 399B of the Act] in 
particular instances and under certain circumstances to permit STV 
operation by public television.'' But the Commission expressed sympathy 
with concerns expressed by some parties in that proceeding that such a 
rule change could result in public television service, then operating 
with analog technology, being ``dominated'' by STV. It therefore

[[Page 68726]]

concluded at the time that it should not generally authorize such 
operation through a rule change.
    30. The Commission nonetheless recognized that STV operations can 
benefit public stations as a supplementary funding source. It 
consequently stated that it would permit individual public television 
stations to engage in STV operations on a waiver basis. The Commission 
has also given public television stations flexibility in their use of 
the analog channels in other ways. In particular, the Commission has 
ruled that noncommercial spectrum, like commercial spectrum, can be 
used for remunerative ancillary services such as data delivery or 
teletext provided by NTSC licensees on the vertical blanking interval 
(VBI) and the video portion of the analog signal in accordance with 
section 399B of the Act.
    31. The AAPTS/PBS petition raises many of the same legal and policy 
questions raised by our previous consideration of requests to provide 
STV and other revenue-generating ancillary services on analog NCE 
channels. Unlike the previous requests, however, the AAPTS/PBS petition 
concerns digital television, which offers significant new challenges 
and opportunities to NCE stations. We are inclined to permit NCE 
stations to take advantage of these opportunities and offer innovative 
ancillary and supplementary services that are remunerative and 
consistent with their educational mission. We therefore seek comment on 
whether, and under what conditions, NCE licensees should be permitted 
to use their DTV capacity to offer ancillary or supplementary services, 
including STV, on a remunerative basis.
    32. In particular, we seek comment on whether and how we should 
amend Sec. 73.621 of our Rules, which requires NCE stations to provide 
a noncommercial service that ``primarily'' serves the educational needs 
of the community. For example, should we extend this requirement to 
ancillary or supplementary services provided by noncommercial licensees 
on their DTV capacity? Should we clarify that an NCE licensee's 
obligation to provide a primarily educational service applies to its 
entire DTV bitstream? Under this proposal, NCE stations would be 
permitted to provide ancillary or supplementary services, but still 
would be required to ensure that their overall digital bitstream was 
primarily devoted to serving the educational needs of the community. 
Should we clarify that the requirement to provide a primarily 
educational service applies only to the single, free-over-the-air 
broadcast service it is required to provide? We seek comment on these 
and any other options for amending Sec. 73.621 in this regard.
    33. We also seek comment on whether and how we can permit NCE 
stations to provide remunerative ancillary or supplementary services in 
a manner that does ``not interfere with the provision of public 
telecommunications services'' by such stations as required by section 
399B of the Act. In particular, we seek comment on whether NCE DTV 
stations will have the capacity to provide ancillary or supplementary 
services without interfering with their ability to provide a primarily 
educational NCE service. We also seek comment on whether such ancillary 
or supplementary services can provide an important funding source that 
could facilitate the transition to DTV for NCE stations, and, more 
generally, enhance their primary mission of providing a robust 
noncommercial, educational broadcasting service.
    34. We ask commenters specifically to address how the provision of 
ancillary or supplementary services would affect our noncommercial 
channel reservation policies, regulatory treatment of noncommercial 
licensees, and other government support for noncommercial stations. 
While we are inclined to give NCE stations some flexibility in offering 
remunerative ancillary or supplementary services, we will continue to 
expect these stations to adhere to their fundamental mission of 
providing a noncommercial, educational broadcast service, as required 
by Sec. 73.621(a) of the Commission's rules. We therefore seek comment 
on whether parties believe our proposed amendment to Sec. 73.621 should 
incorporate any particular safeguards regarding a public television 
station's use of its DTV capacity to provide remunerative services to 
ensure that its DTV license is primarily being used for a noncommercial 
educational broadcast service, and that the proceeds of such services 
are used to support its NCE programming. We also ask commenters to 
address whether the accounting procedures and funding restrictions 
outlined in section 399B should apply to the provision of ancillary or 
supplementary services by NCE licensees on DTV capacity.
    35. We note that in addition to those restrictions imposed by 
provisions in the Communications Act and the Commission's rules, the 
commercial activities of NCE stations are also restricted by their 
status as nonprofit corporations, as well as by state and local 
government oversight. We seek comment on the scope of these existing 
limits and oversight and on the extent to which they help ensure that 
public television stations offering remunerative ancillary or 
supplementary services continue to serve their mission of providing a 
noncommercial educational broadcasting service?
    36. Advertising. We also seek comment on how the advertising ban 
set forth in section 399B of the Communications Act implicates the 
provision of remunerative services by public DTV stations. Section 399B 
prohibits a public station from ``making its facilities available to 
any person for the broadcasting of any advertisement.'' By its plain 
language, this section would appear to prohibit advertisements on any 
service that would constitute ``broadcasting,'' while permitting a 
public DTV station to air advertisements on any ``nonbroadcast'' 
service. The term ``broadcasting'' is defined in the Communications Act 
as ``the dissemination of radio communications intended to be received 
by the public, directly or by the intermediary of relay stations.'' The 
Commission further clarified the definition of ``broadcasting'' in its 
1986 Subscription Video proceeding. In that decision the Commission 
determined that the term ``broadcasting'' as defined by the 
Communications Act ``refers only to those signals which the sender 
intends to be received by the indeterminate public.'' We therefore 
found that ``a necessary condition for the classification of a service 
as broadcasting is that the licensee's programming is available to all 
members of the public, without any special arrangements or equipment.'' 
Based on these criteria, the Commission ruled that subscription 
television does not constitute broadcasting.
    37. Applying these factors to the issue before us, we tentatively 
conclude that while section 399B continues to apply to all video 
broadcast programming streams provided by public DTV stations, it does 
not apply to any subscription services they provide on their DTV 
channels since such services do not constitute ``broadcasting.'' We 
seek comment on this view. We also seek comment on the extent to which 
section 399B applies to advertising carried on any other non-
subscription ancillary or supplementary services carried by a public TV 
station. Finally, we ask parties to address AAPTS/PBS's argument that 
even if section 399B's advertising restrictions apply to some ancillary 
or supplementary services, the Commission has discretion under section 
336(a)(2) of the Act to allow public TV licensees to include 
advertiser-supported services if it finds

[[Page 68727]]

these services to be in the public interest.
    38. Fees Under section 336. In the Fees Proceeding we determined 
that the issue of whether ancillary or supplementary services offered 
by noncommercial licensees are subject to fees should be considered in 
this proceeding. We take this opportunity to seek additional comment in 
light of the comments received in the Fees Proceeding and the tentative 
proposals outlined above. In the event that we clarify that Sec. 73.621 
does not apply to ancillary or supplementary services provided by 
noncommercial licensees on their DTV capacity, we seek comment on 
whether noncommercial licensees should be exempt from DTV fees when 
they offer ancillary or supplementary services as a source of funding 
for their mission related activities.
    39. AAPTS/PBS submitted comments in the Fees Proceeding arguing 
that there is no need to ``recover'' a portion of the value of the DTV 
spectrum for the public if the revenue is used to support noncommercial 
services that Congress has declared to be in the public interest. 
AAPTS/PBS also argues that exemption would not result in any ``unjust 
enrichment'' because these revenues would be used to support 
noncommercial activities, and that as public television stations are 
not auctioned, there is no equivalent amount that would have been 
received at auction. An exemption from fees would allow public 
television stations to dedicate greater resources to their mission. 
Indeed, this reasoning has prompted Congress and the Commission to 
exempt public television stations from other regulatory and filing 
fees. We seek comment generally on AAPTS/PBS's arguments to exempt 
noncommercial licensees from fees for remunerative ancillary or 
supplementary services offered on their excess digital capacity.
    40. We particularly seek comment on whether such an exemption is 
consistent with section 336. Specifically, section 336(e)(1) draws no 
distinction between commercial and noncommercial stations in stating 
that the Commission ``shall establish a program to assess and collect * 
* * an annual fee'' from DTV licensees offering subscription-based 
ancillary or supplementary services. Can this provision, or the 
criteria for establishing the fee set forth in section 336(e)(2) be 
interpreted to permit an exemption from such fees for noncommercial 
licensees? If an exemption is inconsistent with the statute, would a 
nominal or reduced fee be consistent with the statute? We also ask 
parties to address MAP's argument that if we allow noncommercial 
licensees to include advertising in any ancillary or supplementary 
services, these licensees should pay a fee comparable to that imposed 
on commercial broadcasters.

IV. Administrative matters

    41. To file paper copies formally in this proceeding, you must file 
an original plus four copies of all comments, reply comments, and 
supporting comments. If you want each Commissioner to receive a copy of 
your comments, you must file an original plus nine copies. You should 
send comments and reply comments to Office of the Secretary, Federal 
Communications Commission, 445 Twelfth Street, S.W.; TW-A306; 
Washington, D.C. 20554. Comments and reply comments will be available 
for public inspection during regular business hours in the FCC 
Reference Center (Room 239), 1919 M Street, N.W., Washington, D.C. 
20554.
    42. Comments filed through the 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. If 
multiple docket or rulemaking numbers appear in the caption of this 
proceeding, however, commenters must transmit one electronic copy of 
the comments to each docket or rulemaking number referenced in the 
caption. In completing the transmittal screen, commenters should 
include their full name, Postal Service mailing address, and the 
applicable docket or rulemaking number. Parties may also submit an 
electronic comment by Internet e-mail. To get filing instructions for 
e-mail comments, commenters should send am e-mail to [email protected], and 
should include the following words in the body of the message, ``get 
form [email protected] and to Timothy 
Fain, OMB Desk Officer, 10236 NEOB, 725-17th Street, NW, Washington, DC 
20503 or via the Internet to [email protected].
    44. Ex Parte Rules. This proceeding will be treated as a ``permit-
but-disclose'' proceeding. 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. See 47 CFR 
1.1206(b)(2), as revised. Additional rules pertaining to oral and 
written presentations are set forth in Sec. 1.1206(b).
    45. Initial Regulatory Flexibility Analysis. As required by the 
Regulatory Flexibility Act, see 5 U.S.C. 603, the Commission has 
prepared an Initial Regulatory Flexibility Analysis (IRFA) of the 
possible impact on small entities of the proposals suggested in this 
document. The IRFA is set forth as Attachment A. Written public 
comments are requested with respect to the IRFA. These comments must be 
filed in accordance with the same filing deadlines for comments on the 
rest of the NPRM, but they must have a separate and distinct heading,

[[Page 68728]]

designating the comments as responses to the IRFA. The Office of Public 
Affairs, Reference Operations Division, will send a copy of this NPRM, 
including the IRFA, to the Chief Counsel for Advocacy of the Small 
Business Administration, in accordance with the Regulatory Flexibility 
Act.
    46. Accordingly, it is ordered that pursuant to authority contained 
in section 4(i), 303, and 336 of the Communications Act of 1934, as 
amended, 47 U.S.C. 154(i), 303, 307 and 336, this Notice of Proposed 
Rulemaking is adopted.
    47. It is further ordered that the Commission's Office of Public 
Affairs, Reference Operations Division, SHALL SEND a copy of this 
Notice, including the Initial Regulatory Flexibility Analysis, to the 
Chief Counsel for Advocacy of the Small Business Administration.
    48. Additional Information. For additional information on this 
proceeding, please contact Jane Gross or Robert Somers, Policy and 
Rules Division, Mass Media Bureau (202) 418-2130.

Initial Regulatory Flexibility Analysis

    49. As required by the Regulatory Flexibility Act (RFA), the 
Commission has prepared this Initial Regulatory Flexibility Analysis 
(IRFA) of the possible significant economic impact on small entities by 
the policies and rules proposed in the present Notice of Proposed 
Rulemaking. 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 IRFA provided above in paragraph 
46. The Commission will send a copy of the NPRM, including this IRFA, 
to the Chief Counsel for Advocacy of the Small Business Administration. 
See 5 U.S.C. 603(a). In addition, the NPRM and IRFA (or summaries 
thereof) will be published in the Federal Register. See id.
Need For and Objectives of the Proposed Rule Change
    50. In the Fifth Report and Order the Commission adopted rules 
permitting broadcasters to offer feeable ancillary or supplementary use 
of digital television (DTV) capacity. In their Petition for 
Reconsideration, the Association of America's Public Television 
Stations and the Public Broadcasting Service (AAPTS/PBS) requested 
clarification on the ability of public television stations to use 
excess capacity on DTV channels for commercial purposes. Media Access 
Project and other public interest parties jointly opposed this request, 
arguing that while public television stations should be able to provide 
some revenue-generating ancillary and supplementary services, these 
services must be consistent with the noncommercial nature of public 
television as set forth in section 399B of the Communications Act, the 
provision restricting advertising by these stations. AAPTS/PBS also 
requested that the Commission exempt, to the extent feasible, public 
television licensees from any obligation to pay fees when they offer 
ancillary services on their DTV capacity as a source of funding for 
their public television operation.
    51. The petition describes a range of revenue-generating ancillary 
or supplementary services that could help noncommercial educational 
(``NCE'') stations flourish in a digital age. The Notice in this 
proceeding notes that the costs of converting to digital service will 
be considerable, and that many NCE stations rely on public funds to 
provide the build-out to DTV service. This Notice seeks comment on 
these new services and on whether, and under what conditions, NCE 
licensees should be permitted to use their DTV capacity to offer 
ancillary or supplementary services, including subscription television, 
on a remunerative basis. This Notice also seeks comment on whether and 
in what circumstances NCE stations should be subject to fees for these 
ancillary or supplementary services.
    52. Legal Basis: Authority for the actions proposed in this Notice 
may be found in section 4(i), 303 and 336 of the Commissions Act of 
1934, as amended, 47 U.S.C. 154(i), 303, 307 and 336.
    53. Description and Estimate of the Number of Small Entities to 
Which the Rules Would Apply: The RFA directs agencies to provide a 
description of and, where feasible, an estimate of the number of small 
entities that may be affected by the proposed rules, if adopted. The 
RFA generally defines the term ``small entity `` as having the same 
meaning as the terms ``small business,'' ``small organization,'' and 
``small governmental jurisdiction.'' The RFA generally defines the term 
``small organization'' to mean ``any not-for-profit enterprise which is 
independently owned and operated and is not dominant in its field.'' A 
small organization is generally ``any not-for-profit enterprise which 
is independently owned and operated and is not dominant in its field.'' 
Nationwide, as of 1992, there were approximately 275,801 small 
organizations. Below, we further describe and estimate the number of 
small entity licensees and regulatees that may be affected by the 
proposed rules, if adopted.
    54. The proposed rules and policies will apply to television 
broadcasting licensees, particularly those television stations licensed 
to operate on channels reserved as ``noncommercial educational.'' 
Television broadcasting stations consist of 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 are establishments primarily engaged in 
television broadcasting and which produce taped television program 
materials. There were 1,509 television stations operating in the nation 
in 1992, of which 362 were noncommercial educational stations. That 
number has remained fairly constant as indicated by the approximately 
1,583 operating television broadcasting stations in the nation as of 
August 31, 1998, of which 368 were noncommercial educational stations.
    55. In addition to owners of operating television stations, any 
entity who seeks or desires to obtain a television broadcast license, 
particularly for a noncommercial educational station, may be affected 
by the proposals contained in this item. The number of entities that 
may seek to obtain a noncommercial educational television broadcast 
license is unknown.
    56. We seek comment on these estimates and data regarding the 
number of small entities affected by the proposals in this Notice.
Reporting, Recordkeeping, and Other Compliance Requirements
    57. The Commission is not proposing any new or modified reporting, 
recordkeeping, information collection, or compliance requirements in 
this proceeding.
Any Significant Alternatives Minimizing the Impact on Small Entities 
and Consistent with the Stated Objectives
    58. This Notice solicits comment on a variety of alternatives 
discussed herein. Any significant alternatives presented in the 
comments will be considered. This proposal may ultimately benefit all 
noncommercial educational television stations. We seek comment on the 
alternatives proposed in this Notice and on whether there is a 
significant economic impact on any class of small licensees or 
permittees as a result of any of our proposed approaches.

[[Page 68729]]

Federal Rules that Overlap, Duplicate, or Conflict with the Proposed 
Rules
    59. The initiatives and proposed rules raised in this proceeding do 
not overlap, duplicate or conflict with any other rules.

List of Subjects in 47 CFR Part 73

    Radio broadcasting.

Federal Communications Commission.
Magalie Roman Salas,
Secretary.
[FR Doc. 98-33007 Filed 12-11-98; 8:45 am]
BILLING CODE 6712-01-P