[Federal Register Volume 65, Number 82 (Thursday, April 27, 2000)]
[Proposed Rules]
[Pages 24671-24674]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 00-10448]


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FEDERAL COMMUNICATIONS COMMISSION

47 CFR Part 76

[PP Docket No. 00-67; FCC 00-137]


Compatibility Between Cable Systems and Consumer Electronics 
Equipment

AGENCY: Federal Communications Commission.

ACTION: Proposed rule.

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SUMMARY: The Federal Communications Commission has adopted a Notice of 
Proposed Rulemaking (NPRM) on compatibility between cable television 
systems and consumer electronics equipment. The NPRM is designed to 
resolve outstanding compatibility issues, in particular requirements 
for labeling digital television (DTV) receivers to describe their 
capabilities to operate with digital cable television systems and 
questions regarding licensing terms for copy protection technology. 
Resolving these issues will not only insure that consumers make 
informed purchasing decisions with respect to DTV equipment but also 
promote the overall transition from analog to digital television.

DATES: Comments must be received on or before May 24, 2000, and reply 
comments on or before June 8, 2000. Written comments by the public on 
the proposed information collections are due May 24, 2000. Written 
comments must be submitted by the Office of Management and Budget (OMB) 
on the proposed information collection(s) on or before June 26, 2000.

ADDRESSES: Federal Communications Commission, 445 12th Street, 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 1-C804, 445 12th Street, SW, 
Washington, DC 20554, or via the Internet to [email protected], and to 
Edward C. Springer, OMB Desk Officer, Room 10236 NEOB, 725 17th Street, 
NW, Washington, DC 20503 or via the Internet to 
[email protected].

FOR FURTHER INFORMATION CONTACT: Jonathan Levy (202-418-2030), Office 
of Plans and Policy. For additional information concerning the 
information collection(s) contained in this document, contact Judy 
Boley at 202-418-0214, or via the Internet at [email protected].

SUPPLEMENTARY INFORMATION: This Notice of Proposed Rulemaking, adopted 
April 13, 2000 and released April 14, 2000, addresses compatibility 
between cable television systems and digital television receivers, set 
top boxes, and other consumer electronics equipment, in accordance with 
Section 624A of the Communications Act of 1934, 47 U.S.C. 544A. The 
NPRM seeks comment on two issues: How to label digital television 
receivers with different features, including the proper designation for 
receivers providing two-way interactive capability; and licensing terms 
for copy protection technology.
    The NPRM recognizes that DTV receivers both with and without the 
IEEE 1394 two-way connector will be able to access an array of cable 
services. Hence the labeling challenge is to provide descriptions that 
are informative to consumers, rather than to distinguish among 
receivers that are and are not ``cable-ready.'' The NPRM does not 
propose specific nomenclature, but simply asks for comment on 
appropriate equipment labeling terminology, in accordance with the 
requirements of Section 624A. The NPRM also asks for comment on whether 
the transition from analog to digital requires any changes in 
Commission requirements for cable operators to offer supplemental 
equipment to subscribers to enable them to use special features of 
their television receivers (e.g., picture-in-picture).
    With respect to copy protection technology licensing, the NPRM asks 
if there are unresolved hardware issues that might prevent consumer 
electronics manufacturers from designing DTV receivers that will 
operate with cable systems delivering copy protected digital content. 
The NPRM also seeks comment on an issue related to the Commission's 
navigation devices rules. Whether the inclusion of copy protection 
technology provisions in question of whether certain proposed copy 
protection technology licensing terms violate the Commission's 
navigation devices rules.
    Pursuant to the navigation devices rules, cable operators are 
required by July 1, 2000 to offer separate security modules for use 
with commercially-available navigation devices, including television 
receivers and set top boxes. See 47 CFR 76.1200-1210. In order to build 
a DTV receiver that can receive and display encrypted cable

[[Page 24672]]

programming by means of a cable-supplied security module, consumer 
electronics manufacturers need a license for the security module 
technology so they can incorporate it in the interface that they build 
into the DTV receiver. Commission rules in essence forbid cable 
operators from imposing conditions on licensees of their security 
technology that prohibit those licensees from offering navigation 
devices that do not perform conditional access or security functions. 
It has been argued that licensing terms for security modules that 
impose obligations relating to copy protection, as opposed to 
conditional access, violate Commission rules. The NPRM seeks comment on 
this issue in order to ascertain whether any revision or clarification 
of those rules is needed.
    In order to ensure that consumers have clear information about the 
capabilities of DTV receivers on the market and in order to encourage 
the transition from analog to digital video delivery, it is important 
that the labeling and copy protection technology licensing issues be 
resolved promptly.

Procedural Matters

    As required by the Regulatory Flexibility Act (RFA),\1\ the 
Commission has prepared this present Initial Regulatory Flexibility 
Analysis (IRFA) of the possible significant economic impact on small 
entities by the policies and rules proposed in this 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 
in accordance with the same filing deadlines as comments on the rest of 
the Notice. The Commission will send a copy of the Notice of Proposed 
Rulemaking, including this IRFA, to the Chief Counsel for Advocacy of 
the Small Business Administration. See 5 U.S.C. 603(a). In addition, 
the Notice of Proposed Rulemaking and IRFA (or summaries thereof) will 
be published in the Federal Register. See id.
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    \1\ See 5 U.S.C. 603. The RFA, see 5 U.S.C. 601 et seq., has 
been amended by the Contract With America Advancement Act of 1996, 
Public Law No. 104-121, 110 Stat. 847 (1996) (CWAAA). Title II of 
the CWAAA is the Small Business Regulatory Enforcement Fairness Act 
of 1996 (SBREFA).
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    Need for and Objectives of the Proposed Rules: This NPRM is 
designed to help ensure that digital television receivers and cable 
television systems will function smoothly together and to promote the 
implementation of digital television (``DTV'') service. In order to 
provide consumers with information about how digital television 
receivers will operate with cable television systems and thereby avoid 
consumer confusion, the NPRM seeks comment on labeling of digital 
television receivers. In order to encourage the provision of valuable 
digital content and to ensure that copy protection technology licensing 
issues do not stand in the way of designing DTV receivers that operate 
with cable television systems, the Notice seeks comment on some 
outstanding copy protection technology licensing issues as well.
    Legal Basis: Authority for this proposed rulemaking is contained in 
Sections 4(i), 4(j), 336, and 624A of the Communications Act of 1934, 
as amended, 47 U.S.C. 154(i), 154(j), 336, and 544a.
    Description and Estimate of Small Entities to Which the Proposed 
Rules Will 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.\2\ The Regulatory 
Flexibility Act defines the term ``small entity'' as having the same 
meaning as the terms ``small business,'' ``small organization,'' and 
``small business concern'' under section 3 of the Small Business 
Act.\3\ 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 SBA.\4\
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    \2\ 5 U.S.C. 603(b)(3).
    \3\ Id. 601(3).
    \4\ Id. 632.
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    Rules adopted in this proceeding could apply to manufacturers of 
DTV equipment, including television receivers, set-top boxes and 
``point of deployment'' modules. Distributors of this equipment, 
including retailers of consumer electronics equipment and, in the case 
of ``point of deployment'' modules, cable operators, would also be 
affected. Labeling rules would require all manufacturers, small and 
large, to adhere to certain terminology in the descriptive labels that 
they attach to the receivers that they produce. Regulations relating to 
copy protection licensing technology could affect the terms and 
conditions under which manufacturers, small and large, acquire copy 
protection technology licenses. However, with or without Commission 
regulations, all those entities would need a license for proprietary 
technology that they utilize. Cable operators will also be affected by 
any new requirements to offer supplementary equipment to subscribers to 
enable them to use special features of their DTV receivers. This 
proceeding seeks comment on whether the burden, if any, of compliance 
with rules adopted pursuant to this NPRM could be mitigated for small 
entities.
    Cable Systems: SBA has developed a definition of small entity for 
cable and other pay television services, which includes all such 
companies generating less than $11 million in revenue annually. This 
definition includes cable systems operators, closed circuit television 
services, direct broadcast satellite services, multipoint distribution 
systems, satellite master antenna systems and subscription television 
services. According to the Census Bureau, there were 1,323 such cable 
and other pay television services generating less than $11 million in 
revenue that were in operation for at least one year at the end of 
1992.\5\
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    \5\ U.S. Census Bureau, 1992 Economic Census, 1992 Census of 
Transportation, Communications and Utilities at Firm Size 1-123.
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    The Commission has developed its own definition of a small cable 
system operator for the purposes of rate regulation. Under the 
Commission's rules, a ``small cable company,'' is one serving fewer 
than 400,000 subscribers nationwide.\6\ Based on our most recent 
information, we estimate that there were 1,439 cable operators that 
qualified as small cable system operators at the end of 1995.\7\ Since 
then, some of those companies may have grown to serve over 400,000 
subscribers, and others may have been involved in transactions that 
caused them to be combined with other cable operators. Consequently, we 
estimate that there are fewer than 1,439 small entity cable system 
operators that may be affected by the decisions and rules proposed in 
this Notice.
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    \6\ 47 CFR 76.901(e). The Commission developed this definition 
based on its determinations that a small cable system operator is 
one with annual revenues of $100 million or less. Implementation of 
Sections of the 1992 Cable Act: Rate Regulation, Sixth Report and 
Order and Eleventh Order on Reconsideration, 10 FCC Rcd 7393 (1995).
    \7\ Paul Kagan Associates, Inc., Cable TV Investor, Feb. 29, 
1996 (based on figures for Dec. 30, 1995). 8 47 U.S.C. 543(m)(2).
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    The Communications Act also contains a definition of a small cable 
system operator, which is ``a cable operator that, directly or through 
an affiliate, serves in the aggregate fewer than 1% of all subscribers 
in the United States and is not affiliated with any entity or entities 
whose gross annual revenues in the aggregate exceed $250,000,000.'' \8\ 
The Commission has determined that there are 61,700,000 subscribers in 
the United States. Therefore, we found that an operator serving fewer 
than 617,000 subscribers shall be deemed a small operator, if its 
annual revenues, when combined with

[[Page 24673]]

the total annual revenues of all of its affiliates, do not exceed $250 
million in the aggregate.\9\ Based on available data, we find that the 
number of cable operators serving 617,000 subscribers or less totals 
1,450.\10\ Although it seems certain that some of these cable system 
operators are affiliated with entities whose gross annual revenues 
exceed $250,000,000, we are unable at this time to estimate with 
greater precision the number of cable system operators that would 
qualify as small cable operators under the definition in the 
Communications Act.
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    \8\ 47 U.S.C. 543(m)(2).
    \9\ 47 CFR 76.1403(b).
    \10\ Paul Kagan Associates, Inc., Cable TV Investor, Feb. 29, 
1996 (based on figures for Dec. 30, 1995).
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    Small Manufacturers: The SBA has developed definitions of small 
entity for manufacturers of household audio and video equipment (SIC 
3651) and for radio and television broadcasting and communications 
equipment (SIC 3663). In each case, the definition includes all such 
companies employing 750 or fewer employees.
    Electronic Equipment Manufacturers: The Commission has not 
developed a definition of small entities applicable to manufacturers of 
electronic equipment. Therefore, we will utilize the SBA definition of 
manufacturers of Radio and Television Broadcasting and Communications 
Equipment.\11\ 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.\12\ 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.\13\ 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 manufacturers of radio and 
television equipment.
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    \11\ 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.
    \12\ 13 CFR 121.201, (SIC) Code 3663.
    \13\ U.S. Dept. of Commerce, 1992 Census of Transportation, 
Communications and Utilities, Table 1D, (issued May 1995), SIC 
category 3663.
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    Electronic Household/Consumer Equipment: The Commission has not 
developed a definition of small entities applicable to manufacturers of 
electronic 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.\14\ 
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.\15\ 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.
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    \14\ 13 CFR 121.201, (SIC) Code 3651.
    \15\ 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).
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    Computer Manufacturers: The Commission has not developed a 
definition of small entities applicable to computer manufacturers. 
Therefore, we will utilize the SBA definition of Electronic Computers. 
According to SBA regulations, a computer manufacturer must have 1,000 
or fewer employees in order to qualify as a small entity.\16\ 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.\17\ 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.
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    \16\ 13 CFR 121.201, (SIC) Code 3571.
    \17\ 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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    Small Retailers: The Commission has not developed a definition of 
small entities applicable to retail sellers of navigation devices. 
Therefore, we will utilize the SBA definition. The 1992 Bureau of the 
Census data indicate: there were 9,663 U.S. firms classified as Radio, 
Television, and Consumer Electronic Stores (SIC 5731), and that 9,385 
of these firms had $4.999 million or less in annual receipts and 9,473 
of these firms had $7.499 million or less in annual receipts.\18\ 
Consequently, we tentatively conclude that there are approximately 
9,663 such small retailers that may be affected by the decisions and 
rules proposed in this NPRM.
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    \18\ U.S. Small Business Administration 1992 Economic Census 
Industry and Enterprise Report, Table 2D, SIC 7812, (Bureau of the 
Census data adapted by the Office of Advocacy of the U.S. Small 
Business Administration)(SBA 1992 Census Report). The Census data 
does not include a category for $6.5 million therefore, we have 
reported the closest increment below and above the $6.5 million 
threshold. There is a difference of 88 firms between the $4.999 and 
$7.499 million annual receipt categories. It is possible that these 
88 firms could have annual receipts of $6.5 million or less and 
therefore, would be classified as small businesses.
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    Reporting, Recordkeeping, and Other Compliance Requirements: The 
proposed actions may require manufacturers of DTV equipment to adhere 
to some labeling standards. Moreover, the proposed actions may affect 
the terms under which manufacturers acquire licenses to utilize certain 
copy protection technology in their products. We believe that the 
impact of any rules that might be adopted pursuant to this NPRM would 
be minimal. We seek comment on this.
    Steps Taken to Minimize Significant Economic Impact on Small 
Entities, and Significant Alternatives Considered: The RFA, see 5 
U.S.C. 603, requires an agency to describe any significant alternatives 
that it has considered in reaching its proposed approach, which may 
include the following four alternatives: the establishment of differing 
compliance or reporting requirements or timetables that take into 
account the resources available to small entities; the clarification, 
consolidation, or simplification of compliance or reporting 
requirements under the rule for small entities; the use of performance, 
rather than design, standards; and an exemption from coverage of the 
rule, or any part thereof, for small entities.
    We believe that our proposals would have the positive result of 
providing consumers with clear information about the capabilities of 
DTV equipment and promote the implementation of DTV service. We believe 
that labeling requirements would have a minimal impact on manufacturers 
and retailers and that not applying requirements adapted to all 
manufacturers would

[[Page 24674]]

defeat the basic purpose of the requirements. Given that manufacturers 
would need to license copy protection technology that they incorporate 
in their equipment regardless of our rules, the potential impact of any 
rules appears to be minimal.\19\ We do not believe that different 
treatment of small and large entities with respect to their technology 
licensing is warranted. Any supplementary equipment that cable 
operators might be required to offer to subscribers is likely to be 
standardized and manufactured in large enough quantities that the cost 
to small cable operators is unlikely to be substantial.\20\ Moreover, 
cable operators are entitled to recover from subscribers the cost of 
supplementary equipment offered. Should commenters disagree with any of 
our conclusions, we welcome comments suggesting ways in which any 
perceived burden upon small entities could be mitigated.
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    \19\ See Notice ar paras. 18-20.
    \20\ Id at paras. 14, 17.
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    Federal Rules that May Duplicate, Overlap, or Conflict With the 
Proposed Rules: None.
    This NPRM contains proposed information collection(s) subject to 
the Paperwork Reduction Act of 1995 (PRA). It has been submitted to the 
Office of Management and Budget (OMB) for review under the PRA. OMB, 
the general public, and other Federal agencies are invited to comment 
on the proposed information collections contained in this proceeding.

List of Subjects in 47 CFR Part 76

    Cable television.

Federal Communications Commission.
William F. Caton,
Deputy Secretary.
[FR Doc. 00-10448 Filed 4-26-00; 8:45 am]
BILLING CODE 6712-01-U