[Federal Register Volume 66, Number 227 (Monday, November 26, 2001)]
[Rules and Regulations]
[Pages 58973-58982]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 01-29232]


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FEDERAL COMMUNICATIONS COMMISSION

47 CFR Part 73

[MM Docket No. 98-203; FCC 01-306]


The Ancillary or Supplementary Use of Digital Television Capacity 
by Noncommercial Licensees

AGENCY: Federal Communications Commission.

ACTION: Final rule.

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SUMMARY: This document amends the Commission's rules to require that 
noncommercial educational (``NCE'') television licensees primarily 
provide a nonprofit, noncommercial educational service over their 
entire digital bitstream, including ancillary or supplementary 
services; clarify that they may provide subscription TV service as an 
ancillary or supplementary service; and apply to them the same program 
to assess and collect fees as that established for commercial DTV 
licensees' use of DTV capacity for the provision of ancillary or 
supplementary services. This document also determines that the 
Communications Act of 1934 prohibition against the provision of 
advertising by NCE licensees does not apply to nonbroadcast services, 
such as subscription services provided on their digital television 
(``DTV'') channels. The intended effect of these actions is to clarify 
the manner in which NCE licensees may use their excess DTV capacity for 
remunerative purposes.

DATES: Effective on the later of either December 26, 2001, or upon 
receipt by Congress of a report in compliance with Contract with 
America Advancement Act of 1996, Public Law 104-121, except for 
Sec. 73.624(g)(2)(i), which contains information collection 
requirements that have not been approved by the Office of Management 
and Budget (OMB). The Commission will publish documents in the Federal 
Register announcing the effective date of these rule and 
Sec. 73.624(g)(2)(i).

FOR FURTHER INFORMATION CONTACT: Jane Gross; Policy and Rules Division, 
Mass Media Bureau, at (202) 418-2130, TTY (202) 418-2989.

SUPPLEMENTARY INFORMATION: This is a summary of the Commission's Report 
and Order (R&O) in MM Docket No. 98-203, FCC 01-306, adopted on October 
11, 2001, and released on October 17, 2001. The full text of the 
Commission's R&O is available for inspection and copying during regular 
business hours in the FCC Reference Center, 445 Twelfth Street, SW., 
Room CY-A257, Washington DC, and also may be purchased from the 
Commission's copy contractor, Qualex International, (202) 863-2893, 445 
Twelfth Street, SW., Room CY-B402, Washington, DC. The complete text is 
also available under the file name fcc01306.pdf on the Commission's 
Internet site at www.fcc.gov.

Paperwork Reduction Act

    This document contains new or modified information collection 
requirements. The fee program established herein will require NCE TV 
licensees annually to file a new reporting form. Licensees will be 
required to report whether they provided ancillary or supplementary 
services, what ancillary or supplementary services they provided, which 
of those services are subject to a fee, and the gross revenues received 
from all feeable ancillary or ancillary services. NCE licensees 
providing service subject to a fee additionally will be required 
annually to file FCC Form 159 in remittance of the fee. So that the 
Commission may audit NCE licensees records supporting the calculation 
of the fees due, each NCE licensee will be required to retain such 
records for three years from the date of remittance of fees. In 
addition, each NCE TV licensee will be required to maintain 
documentation sufficient to show compliance at renewal time and in 
response to any complaint with the requirement to use their entire 
bitstream primarily for nonprofit, noncommercial, educational broadcast 
services on a weekly basis. Implementation of these new or modified 
reporting and recordkeeping requirements will be subject to approval by 
the Office of Management and Budget as prescribed by the Paperwork 
Reduction Act of 1995.

Synopsis of Report and Order

Introduction

    1. With this Report and Order, we clarify the manner in which 
noncommercial educational (``NCE'') television licensees may use their 
excess digital television (``DTV'') capacity for remunerative purposes. 
Among other things, we amend Sec. 73.621 of our rules to apply to the 
entire digital bitstream, including ancillary or supplementary 
services, thereby requiring NCE licensees to use their digital capacity 
primarily for a noncommercial, nonprofit, educational broadcast 
service. We also amend Secs. 73.642 and 73.644 of our rules to clarify 
that NCE licenses may offer subscription services on their excess 
digital capacity. We determine that section 399B of the Communications 
Act of 1934, as amended, the provision restricting advertising by NCE 
licensees, continues to apply to all broadcasting by NCE licensees, but 
does not apply to nonbroadcast services, such as subscription services 
provided on their DTV channels. Finally, we amend Sec. 73.624(g) of our 
rules to apply to NCE licensees the program for assessing and 
collecting fees upon feeable ancillary or supplementary services 
provided on their DTV capacity that we have established for commercial 
licensees, as required by the Telecommunications Act of 1996 (``1996 
Act''), Public Law 104-104, 110 Stat. 56 sec. 201 (1996), codified at 
47 U.S.C. 336.

Background

    2. The 1996 Act provided that initial eligibility for any advanced 
television licenses that we issue should be limited to existing 
broadcasters, conditioned upon the requirement that ``either the 
additional license or the original license held by the licensee be 
surrendered to the Commission for reallocation or reassignment (or 
both) pursuant to Commission regulation.'' In our Fifth Report and 
Order in the DTV proceeding, we adopted rules to implement the statute, 
providing a specific transition process to digital technology for all 
existing television broadcasters. 62 FR 26996, May 16, 1997. 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 video 
programming service. We also adopted rules

[[Page 58974]]

permitting DTV licensees, without distinguishing between commercial and 
noncommercial licensees, to use their DTV capacity to provide ancillary 
or supplementary services, provided that these services do not derogate 
the free digital television service.
    3. 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 of 
public television stations authority to use excess capacity on DTV 
channels for commercial purposes. As neither section 336 nor our 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. 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 or 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.
    4. This request for clarification made by AAPTS/PBS raised 
significant issues regarding the service and funding opportunities made 
available to NCE stations as a result of the transition to digital 
transmission. In recognition of the importance of this issue to the 
future of public television as it enters the digital age, in the Notice 
of Proposed Rulemaking (``NPRM'') in this proceeding, we sought further 
comment on the AAPTS/PBS petition in order to establish a more complete 
record on the issues it raised. 63 FR 68722, December 14, 1998.
    5. In their Petition AAPTS/PBS also requested that we 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 service are used to support the licensee's mission-
related activities. Section 336(e) of the 1996 Act, which 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, charged us with establishing a means of 
assessing and collecting fees for those ancillary or supplementary 
services.
    6. In a Notice of Proposed Rule Making in MM Docket No. 97-247 
(``DTV Fees Proceeding''), we sought comment on AAPTS/PBS's request for 
such an exemption and subsequently determined that AAPTS/PBS's request 
should be considered in this proceeding. 63 FR 460, January 6, 1998. In 
the DTV Fees Report and Order, we established a program for assessing 
and collecting fees for certain ancillary or supplementary services 
provided by commercial licensees on their DTV capacity. 63 FR 69208, 
December 16, 1998. In the NPRM in this proceeding, MM Docket No. 98-
203, we sought additional comment regarding an exemption for 
noncommercial licensees in light of the comments received on this issue 
in the DTV Fees Proceeding. 63 FR 68722, December 14, 1998. We also 
sought comment on tentative proposals set forth in the NPRM.

Issue Analysis

A. Application of Sec. 73.621 of the Commission's Rules to Entire 
Digital Bitstream of NCE Licensees
    7. Background. The Communications Act defines a ``noncommercial 
educational broadcast station'' and ``public broadcast station'' as a 
television or radio broadcast station that is eligible under the FCC's 
rules to be licensed 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,'' 47 U.S.C. 397(6). In 
1981, Congress amended the Communications Act to give public 
broadcasters more flexibility to generate funds for their operations. 
Omnibus Budget Reconciliation Act of 1981, Public Law 97-35, sec. 1231, 
95 Stat. 357, 731 (codified at 47 U.S.C. 399B). See also H.R. Rep. No. 
97-82, at 13-14. 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. Section 399B, however, 
does not permit public broadcast stations to make their facilities 
``available to any person for the broadcasting of any advertisement.'' 
In addition, under Sec. 73.621 of our rules, public television stations 
are required to furnish primarily an educational as well as a nonprofit 
and noncommercial broadcast service.
    8. In the Fifth Report and Order, we implemented section 336 of the 
1996 Act, which sets forth the DTV licensing provisions of the 1996 
Act, by adopting Sec. 73.624 of our rules. 62 FR 26996, May 16, 1997. 
Section 73.624(g) allows broadcasters the flexibility to respond to the 
demands of their audience by providing ancillary or supplementary 
services, including subscription television, provided that these 
services do not derogate the mandated free, over-the-air program 
service. In the NPRM in this proceeding, we invited comment on AAPTS/
PBS's request that we clarify that Sec. 73.621 of our rules, which 
requires public stations to provide a primarily nonprofit, 
noncommercial, educational broadcast service, is not applicable to 
ancillary or supplementary services provided on DTV capacity, and on 
whether such a clarification is consistent with the nonderogation of 
services provisions of section 399B.
    9. In particular, we sought comment on a number of options with 
respect to whether and how we should amend Sec. 73.621 of our rules. 
For example, we sought comment on whether we should extend the 
requirement to provide an educational nonprofit service to ancillary or 
supplementary services provided by noncommercial licensees on their DTV 
capacity, or whether we should clarify that the requirement applies 
only to the single, free-over-the-air broadcast service it is required 
to provide.
    10. We also sought 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 asked 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 broadcast service, and 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.
    11. Comments. In its comments, AAPTS modifies its original request, 
presented in its Petition for Reconsideration of the Fifth Report and 
Order, which would have exempted remunerative ancillary or 
supplementary services from Sec. 73.621 of our rules. AAPTS now agrees 
that, with respect to provision of remunerative ancillary or 
supplementary service, a public television station must be used 
primarily to provide a noncommercial educational broadcast service, and 
the

[[Page 58975]]

offering of such service must not interfere with the provision of 
public telecommunications services. AAPTS also contends that its 
proposed standards are consistent with those we have applied in the 
analog environment in approving the offer by public television stations 
of a variety of ancillary services. AAPTS suggests that we only need 
clarify that Sec. 73.621 of our rules applies, without change, to the 
digital channel. It states that the requirement that the primary use of 
public television stations is to provide an educational and nonprofit, 
noncommercial broadcast service would still allow ancillary or 
supplementary service to be provided on NCE's excess digital capacity. 
AAPTS also requests that, since we concluded in the Fifth Report and 
Order that DTV broadcasters may offer subscription television as an 
ancillary or supplementary service, that we amend Secs. 73.642 and 
73.644 of our rules to clarify that public television stations may 
provide subscription television services.
    12. AAPTS denies that provision of remunerative ancillary or 
supplementary services would change the essential nature of public 
television. It contends that digital technology will provide sufficient 
capacity for public television stations to offer a range of services 
while preserving their primary use for a noncommercial educational 
broadcast service. In addition, it argues that section 336 provides, 
via its prohibition against derogation of services, separate assurance 
that any ancillary or supplementary service will not interfere with a 
public television station's basic broadcast service. AAPTS submits that 
other limitations on the extent to which public televisions stations 
can engage in commercial ventures include their nonprofit educational 
mission upon which their tax exempt status is based, the need to 
preserve viewer and government support, the requirement to pay taxes on 
income unrelated to the exempt purpose of the organization, and the 
oversight of stations by responsible bodies. AAPTS also notes that 
although section 336 itself does not impose special restrictions on 
public television stations, two limitations must be applied to the 
provision of ancillary or supplementary service by these stations: 
first, a public television station must be used primarily to provide a 
noncommercial educational broadcast service under the Commission's 
rules; second, the offering of these services must not interfere with 
the provision of public telecommunications services under section 399B 
of the Communications Act.
    13. AAPTS states that, at this point, public television stations do 
not have firm plans for the use of their digital spectrum, and it is 
impossible to predict what opportunities may be available to them or to 
what extent individual stations will take advantage of such 
opportunities. It urges us not to impose restrictions now on the 
activities of public television stations, but to wait until the 
scheduled biennial examination of digital regulations, set forth in the 
Fifth Report and Order, to determine whether changes are needed. The 
Office of the United Church of Christ and other public interest parties 
(``UCC et al.''), however, contend that AAPTS is unclear about its 
members'' plans to engage in advertiser supported ancillary or 
supplementary services and how much of their digital capacity they plan 
to commit to subscription and other remunerative services. UCC et al. 
urges us to draw a bright line and find that an NCE broadcaster 
``primarily'' serves the educational needs of a community when it 
provides free, not-for-profit over-the-air services over 50 percent or 
more of its digital capacity at any one time.
    14. National Datacast, Inc. (``National Datacast'') is a for-profit 
subsidiary of the Public Broadcasting Service that provides data 
services using the vertical blanking interval (VBI) on the analog 
signal of public television stations. It argues that the Commission 
imposed no restrictions on the commercial operation of data services 
using the VBI, including advertiser-supported services, by public 
television stations or entities affiliated with public television; that 
the force of this ruling remains unaltered by section 336; and that no 
restrictions should be applied to National Datacast's data transmission 
in the digital spectrum of public television stations. The analog 
spectrum requires the use of most of an NCE licensee's channel to carry 
their video broadcast signal, leaving only a very small portion, the 
VBI and the Visual Signal, available to be used for ancillary or 
supplementary services. The digital spectrum, however, allows NCE 
licensees to offer a number of ancillary or supplementary services on 
their excess digital capacity in addition to mandated free, over-the-
air program service. National Datacast points to its service as a 
``precursor to the successful use of digital spectrum'' for generating 
revenues to help support public television.
    15. Decision. We will amend Sec. 73.621 of our rules to clarify 
that the section's requirements apply to the entire digital bitstream 
of NCE licensees, including the provision of ancillary or supplementary 
services. We will require that NCE licensees use their entire digital 
capacity primarily for a nonprofit, noncommercial, educational 
broadcast service. This amendment will adapt Sec. 73.621 of our rules 
to the digital environment. Although we decline to quantify the term 
``primarily,'' we will consider it to mean a ``substantial majority'' 
of their entire digital capacity.
    16. We decline to adopt the suggestion of UCC et al. that we draw a 
bright line to require that NCE broadcasters provide free, not-for-
profit over-the-air services over 50 percent or more of their digital 
capacity at any one time. Such a decision would provide substantially 
less flexibility to NCE licensees in developing their digital services. 
For example, an NCE licensee might want to use most of its digital 
capacity for High Definition Television (``HDTV'') programming during 
certain times of the day and, at other times, various amounts of 
capacity for Standard Definition Television (``SDTV'') programming and 
remunerative ancillary or supplementary services. UCC et al.'s 
suggestion, by specifying 50 percent or more at all times, would seem 
to restrict their flexibility in this regard. We see no persuasive 
reason to impose such a limitation. While we believe that a ``minute by 
minute'' approach, such as that suggested by UCC et al., above, would 
restrict the flexibility of NCE licensees to too great an extent, we 
believe that some time period limitation is appropriate. Because 
stations typically schedule their programming on a weekly basis, we 
believe that requiring them to use their entire bitstream primarily for 
nonprofit, noncommercial, educational broadcast services on a weekly 
basis will provide them with sufficient flexibility. We will require 
NCE licensees to maintain documentation sufficient to show compliance 
with this requirement at renewal time and in response to any 
complaints.
    17. Our decision to apply Sec. 73.621 of our rules to the entire 
digital bitstream also is consistent with the 1996 Act, as well as our 
Fifth Report and Order, in which we stated that our overarching goal is 
to promote the success of a free, local television service using 
digital technology. We believe that this action will help to preserve 
the noncommercial educational nature of public broadcasting, while 
allowing NCE licensees some flexibility in remunerative use of their 
spectrum and indicating the boundaries that we will apply to such use. 
We agree with AAPTS that digital technology will

[[Page 58976]]

allow sufficient capacity for public television stations to offer a 
range of services while preserving their primary use for a nonprofit, 
noncommercial, educational broadcast service. We also note that section 
336 provides, via its prohibition against derogation of services, 
separate assurance that any ancillary or supplementary service will not 
interfere with a public television station's basic broadcast service. 
Moreover, NCE licensees are, of course, subject to the general 
requirement to provide one free over-the-air video programming service. 
In light of the other limitations on the extent to which public 
televisions stations can engage in commercial ventures, we will not, at 
this time, impose additional restrictions on an NCE licensee's ability 
to provide ancillary or supplementary services on its excess digital 
capacity. We will address any problems that might arise in the periodic 
reviews of our digital regulations set forth in the Fifth Report and 
Order, or on a case-by-case basis.
    18. We will amend Secs. 73.642 and 73.644 of our rules to clarify 
that NCE licenses may offer subscription services on their excess 
digital capacity. We included such services in our definition of 
ancillary or supplementary services in the Fifth Report and Order. 
Given our goal of providing NCE licensees with flexibility in the use 
of their digital spectrum, within certain boundaries, we see no reason 
to prohibit them from providing subscription services.
B. Advertising
    19. Background. In its Petition for Reconsideration of the Fifth 
Report and Order, AAPTS/PBS requested that we clarify that public 
television stations may use their excess capacity on DTV channels for 
commercial purposes. In opposing this request in part, MAP argued that, 
while public television stations should be able to provide some 
revenue-generating ancillary or supplementary services, these services 
must be consistent with the noncommercial nature of public television 
as set forth in section 399B, which restricts advertising by these 
stations. In reply, AAPTS/PBS argued for an interpretation in which the 
advertising ban of section 399B would continue to apply to the primary 
noncommercial broadcast service, while any ancillary or supplementary 
use of DTV channels would be free from the restrictions of this 
section. It also argued that even if the section 399B advertising 
restrictions are found to apply to these services, we have discretion 
under section 336(a)(2) to allow public TV licensees to offer 
advertiser-supported services if we find these services to be in the 
public interest.
    20. In the NPRM we sought 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, we noted that 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.
    21. We sought comment on our tentative conclusion 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 also sought 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. In addition, we asked parties to address AAPTS/PBS's 
argument that even if section 399B's advertising restrictions apply to 
some ancillary or supplementary services, we have discretion under 
section 336(a)(2) of the Act to allow public TV licensees to include 
advertiser-supported services if we find these services to be in the 
public interest.
    22. Comments. UCC et al. contends that the plain language of 399B, 
its legislative history, and subsequent actions by Congress demonstrate 
that Congress as recently as the 1996 Act did not intend that NCE 
licensees carry commercial advertisements, including on any ancillary 
or supplementary services provided on their DTV capacity. An 
advertisement is defined in section 399B(b) as ``any message or other 
programming material which is broadcast or otherwise transmitted in 
exchange for any remuneration.'' UCC et al. contends that this 
definition is incorporated by reference in section 399B(b)(2), so that 
when the statute prohibits broadcasting of ``advertisements,'' it 
prohibits any message that is either broadcast or otherwise 
transmitted. Moreover, although section 399B expressly prohibits only 
the ``broadcasting'' of advertisements, UCC et al. notes that in 1981 
that was the only way NCE stations could carry advertising. UCC et al. 
urges us to not extend the Subscription Video decision to allow NCEs to 
provide advertiser-supported subscription services over public 
broadcast stations. It particularly would object to advertisements on 
NCE licensees' free over-the-air services. UCC et al. contends that NCE 
licensees did not, and still do not, have the authority to provide 
advertiser-supported subscription services.
    23. UCC et al. also contends that section 336(a)(2) does not 
explicitly permit NCE licensees to carry commercial advertising based 
on the Commission's finding that it is in the public interest, nor does 
section 336(a)(2) explicitly repeal the ban on advertising in section 
399B(b)(2). It argues that to interpret section 336 in that manner 
would directly conflict with section 399B. UCC et al. submits that 
these sections can be harmonized by permitting NCE licensees only to 
provide non-advertiser-supported ancillary or supplementary services.
    24. AAPTS and Family Stations of New Jersey, Inc. (``Family NJ'') 
contend that the section 399B ban on advertising by NCE stations 
applies only to the basic broadcast service, not to any ancillary or 
supplementary services. AAPTS acknowledges that the 399B definition of 
advertisement is broader, referring to material that is ``broadcast or 
otherwise transmitted,'' than the language of the prohibition. But 
AAPTS contends that it is the language of the prohibition, which only 
forbids ``broadcasting'' of an advertisement, not ``broadcasting or 
otherwise transmitting,'' that is relevant. AAPTS reasons that Congress 
adopted section 399B in the context of analog broadcasting, where a 
station carries only a single broadcast service, and was concerned with 
insulating public television program control and content from the 
influence of special interests. AAPTS argues that digital technology 
would allow a station to offer advertiser-supported broadcast service 
on its ancillary or supplementary capacity that is completely unrelated 
to and has no influence over the station's primary noncommercial 
broadcast service.
    25. AAPTS, Family NJ, and National Datacast also contend that our 
previous decisions have allowed NCEs to provide subsidiary 
communications services on the VBI without regard to whether they 
include advertisements. National Datacast argues that we authorized the 
use of the VBI for commercial services, including advertising, in 
Teletext Transmission. The only pertinent restriction was that any 
offering of services for remuneration ``shall not interfere with the 
provision of public telecommunications services''.

[[Page 58977]]

    26. UCC et al., however, argues that our 1980 decisions allowing 
NCE licensees to use their analog VBI for remunerative services do not 
support commenters' assertions that we have allowed advertiser-
supported ancillary services on noncommercial stations. UCC et al. 
contends that we never squarely addressed in those decisions whether 
section 399B prohibits advertiser-supported services on the VBI, but 
always specified that the activity must be consistent with section 
399B. UCC et al. also contends that it would be arbitrary and 
capricious for us to apply decisions that affect a minuscule slice of 
analog capacity used only for text to digital services that could use 
as much as 80% of the bitstream at any one time for services that would 
include text, data, broadband and, most importantly, video services. 
UCC et al. cautions that providing advertiser-supported services would 
harm NCE licensees more than it would help them, leading to a loss of 
public and Congressional support. AAPTS, however, urges us to allow 
public television stations the flexibility to develop and implement 
remunerative ancillary or supplementary uses of the digital spectrum 
and avoid premature promulgation of rules that may be overbroad and 
unnecessary, addressing any concerns arising under section 399B in a 
``concrete context.''
    27. Decision. We conclude that the section 399B ban on advertising 
applies to all broadcast programming streams provided by NCE licensees, 
but does not apply to ancillary or supplementary services on their DTV 
channels, such as subscription services or data transmission services, 
to the extent that such services do not constitute ``broadcasting.''
    28. While the definition of ``advertisement'' in section 399B 
refers to material that is ``broadcast or otherwise transmitted,'' the 
plain language of the specific prohibition only forbids the 
``broadcasting'' of any advertisement. UCC et al. argues that limiting 
the prohibition on advertisements to ``broadcasting'' renders the 
``otherwise transmitted'' language in the definition of 
``advertisement'' meaningless and, thus, UCC et al. would read the 
prohibition as applying to all transmissions. Although UCC et al.'s 
argument is one way to read the statute, we believe that UCC et al.'s 
reading is problematic because, as noted, the prohibition in section 
399B(b)(2) refers to the ``broadcasting of any advertisement,'' whereas 
the definition in (a)(1) treats broadcasting as only one means of 
transmitting advertising. We believe the better way to reconcile this 
disparity is the following: By defining an ``advertisement'' as ``any 
message or other programming material which is broadcast or otherwise 
transmitted in exchange for any remuneration,'' Congress was arguably 
acknowledging that noncommercial stations were technologically capable 
of transmitting advertisements on a broadcast or nonbroadcast basis. 
AAPTS argues that (t)he phrase `otherwise transmitted' also has clear 
meaning, given the technologies available in 1981 when the legislation 
was under consideration. At the time the statute was being deliberated, 
several forms of `non-broadcast' transmission services were being used 
or had been used by television stations. It is therefore reasonable to 
suppose that Congress was fully aware of these developments and 
intentionally considered them when legislating. Ex parte letter of 
AAPTS, October 8, 1999, at 2; see id. at 2-7 (describing such 
nonbroadcast services as use of the vertical blanking interval, 
teletext, the instructional television fixed service, and the broadcast 
auxiliary service). When Congress set out the prohibition in section 
399B(b)(2), however, it expressly limited it to those advertisements 
provided on a broadcast basis. We thus believe that the better reading 
is the literal one: that section 399B only prohibits public broadcast 
stations from making their facilities ``available to any person for the 
broadcasting of any advertisement.''
    29. 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,'' 47 
U.S.C. 153(6). In 1986, we addressed this definition in our 
Subscription Video proceeding. Subscription Video, 52 FR 6152, March 2, 
1987, aff'd sub nom. National Association for Better Broadcasting v. 
FCC, 849 F.2d 665 (D.C. Cir. 1988). We recognize that section 399B was 
enacted before Subscription Video. Congress gave no indication in 
section 399B, however, that it intended to lock in the Commission's 
prior interpretation of the statutory definition of the term 
``broadcasting.'' See Lukhard v. Reed, 481 U.S. 368, 379 (1987) (``It 
is of course not true that whenever Congress enacts legislation using a 
word that has a given administrative interpretation it means to freeze 
that administrative interpretation in place.''). In Subscription Video 
we 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, we ruled that subscription television does not 
constitute broadcasting. Applying these same criteria to the digital 
spectrum, we find that subscription television provided by NCE 
licensees on their excess digital spectrum does not constitute 
``broadcasting.'' We conclude therefore that NCE licensees may include 
advertising in their subscription television offerings, as the section 
399B ban on advertising applies only to broadcast streams. We also 
conclude that these same criteria continue to apply to any DTV capacity 
that NCE licensee might lease to other parties. For example, a public 
television station would not be permitted to enter into an agreement 
that would allow ``Network A'' to broadcast its advertiser-supported 
``Popular Program B'' over the public television station's excess 
digital capacity, while an agreement that would allow ``Network A'' to 
transmit its ``Popular Program B'' on a subscription basis would be 
permitted.
    30. With respect to the extent to which section 399B applies to 
advertising carried on any other ancillary or supplementary services 
carried by a public TV station, we turn to the rules that we adopted in 
the Fifth Report and Order. These rules list examples of the kinds of 
services that may be offered as ancillary or supplementary services. 
They include, but are not limited to, ``computer software distribution, 
data transmissions, teletext, interactive materials, aural messages, 
paging services, audio signals, subscription video, and any other 
services that do not derogate DTV broadcast stations' obligations'' to 
``transmit at least one over-the-air video broadcast signal provided at 
no direct charge to viewers.'' We stated that such services may be 
provided on a broadcast, point-to-point or point-to-multipoint basis, 
provided, however, that ``no video broadcast signal provided at no 
direct charge to viewers shall be considered ancillary or 
supplementary.''
    31. This definition and illustrative list of ancillary or 
supplementary services makes clear, first, that over-the-air video 
programming provided at no charge to viewers is not ancillary or 
supplementary service, and, conversely, that services other than a free 
video broadcast signal are, by definition,

[[Page 58978]]

ancillary or supplementary services. Although we received very little 
comment on the types of non-subscription ancillary or supplementary 
services parties contemplate providing, it is possible that NCE 
licensees may provide without a fee to viewers data, audio or other 
services. For example, an NCE licensee might provide data services that 
could be accessed by the general public using a personal computer or 
provide, through interactive DTV programming, sports scores that could 
be accessed by the public viewing a broadcast sports event. Such 
services, although ancillary or supplementary, if constituting ``the 
dissemination of radio communications intended to be received by the 
public, directly or by the intermediary of relay stations,'' would fall 
under the definition of ``broadcasting'' as defined in the 
Communications Act, and would be subject to the section 399B 
advertising ban. To the extent that ancillary or supplementary services 
offered by DTV licensees are not broadcasting services, NCE licensees 
may include advertising in their ancillary or supplementary services on 
their excess DTV capacity, as the section 399B prohibition of 
advertising applies only to broadcast programming. Section 399B also 
requires that public stations engaged in revenue generating activities 
comply with accounting procedures designed to separately identify these 
commercial revenues and costs, and it prohibits Corporation for Public 
Broadcasting funds from being used to defray any costs associated with 
these activities. Until we gain more experience in determining whether 
an ancillary or supplementary service is a broadcasting service, we 
will simply be guided by the statutory criteria as questions arise.
    32. Finally, in the NPRM, we asked parties to address AAPTS/PBS's 
argument that even if section 399B's advertising restrictions apply to 
some ancillary or supplementary services, we have discretion under 
section 336(a)(2) of the Act to allow public TV licensees to include 
advertiser-supported services if we find these services to be in the 
public interest. Section 336(a)(2) states that if we issue additional 
licenses for DTV, we shall ``adopt such regulations that allow the 
holders of such licensees to offer such ancillary or supplementary 
services on designated frequencies as may be consistent with the public 
interest, convenience or necessity.'' Given our statutory 
interpretation of section 399B, which allows NCE licensees considerable 
flexibility to offer advertiser-supported subscription services and 
other ancillary or supplementary services, there is no need to 
interpret section 336(a)(2) as AAPTS/PBS suggests. More importantly, we 
conclude that the plain language of section 336(a)(2) does not support 
the result AAPTS/PBS suggests.
    33. As we stated in the NPRM, we are sympathetic to the relief 
requested in the AAPTS/PBS petition, which described a range of 
revenue-generating ancillary or supplementary services that could help 
NCE stations flourish in a digital age. We noted that the costs of 
converting to digital service will be considerable, and that many NCE 
stations rely on public funds for the digital build-out. Our decision 
regarding the provision of advertising on NCE licensees' ancillary or 
supplementary services will permit NCE stations flexibility in 
providing such services as well as enhancing their ability to raise 
revenue for their support and the transition to digital television. We 
are mindful, however, of UCC et al.'s concern that allowing NCE 
licensees to provide advertiser-supported services will denigrate the 
noncommercial nature of the public television system. We emphasize that 
NCE licensees will continue to be prohibited from providing advertising 
on their free over-the-air service. Moreover, although we are allowing 
NCE licensees considerable flexibility in providing remunerative 
ancillary or supplementary services, they are, of course, required by 
our amendment of Sec. 73.621 in this Report and Order to use their 
entire digital capacity primarily for a nonprofit, noncommercial, 
educational broadcast service and to provide at least one free over-
the-air video program signal. Although we decline to quantify the term 
``primarily,'' we will consider it to mean a ``substantial majority'' 
of their entire digital capacity. As noted above, NCE licensees are 
further constrained by such limitations as the nonprofit educational 
mission upon which their tax exempt status is based, the need to 
preserve viewer and government support, the requirement to pay taxes on 
income unrelated to the exempt purpose of the organization, and the 
oversight of stations by responsible bodies. If we find that these 
requirements are not sufficient to ensure the integrity of the 
noncommercial educational broadcast service, we will revisit our 
decision to allow NCE licensees to provide advertiser-supported 
ancillary or supplementary services.
C. Payment of Fees
    34. Background. 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. In the DTV Fees Report and Order in MM 
Docket No. 97-247, we established a program for assessing and 
collecting fees for the provision of ancillary or supplementary 
services by commercial DTV licensees as required by the 1996 Act. 63 FR 
69208, December 16, 1998. We defined as ``feeable ancillary or 
supplementary service'' any ancillary or supplementary services for 
which the payment of a subscription fee is required to receive such 
services or for which the licensee receives any compensation from a 
third party other than commercial advertisements used to support non-
subscription broadcasting.
    35. In its Petition for Reconsideration of the Fifth Report and 
Order, AAPTS/PBS requested that we 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 service are used to support the 
licensee's mission-related activities.'' We sought comment in the DTV 
Fees Proceeding on whether noncommercial television licensees should be 
exempt from such fees or subject to a nominal fee when they offer 
ancillary or supplementary services as a source of funding for public 
television. 63 FR 460, January 6, 1998. In the DTV Fees Report and 
Order, we decided to consider the request for exempting NCE licensees 
from DTV fees in this proceeding, which focuses specifically on 
questions related to the remunerative use by NCE licensees of their 
excess digital capacity.
    36. In the NPRM in this proceeding, we sought additional comment on 
this issue in light of the comments received in the DTV Fees Proceeding 
and the tentative proposals outlined in the NPRM. We sought comment on 
whether NCE licensees should be exempt from DTV fees when they offer 
remunerative ancillary or supplementary services as a source of funding 
for their mission-related activities. We sought comment generally on 
AAPTS/PBS's arguments in the DTV Fees Proceeding to exempt 
noncommercial licensees from fees for remunerative ancillary or 
supplementary services offered on their excess digital capacity. We 
particularly sought comment on whether such an exemption is consistent 
with section 336, which does not distinguish between commercial and 
noncommercial licensees. We also sought comment on whether, if such an 
exemption is inconsistent with the

[[Page 58979]]

statute, a nominal or reduced fee would be consistent with the statute. 
We also asked 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.
    37. Comments. All NCE licensees that responded to this issue 
support granting NCE licensees an exemption from any assessment of fees 
on revenues earned by use of their digital spectrum for ancillary or 
supplementary services when those revenues are used to fund mission-
related activities. AAPTS argues that although section 336 requires us 
to collect a fee when a licensee uses its digital spectrum for 
ancillary or supplementary service, when the revenue is used to support 
noncommercial services that are in the public interest, there is no 
need to ``recover'' anything for the public, as the revenue is already 
devoted to that purpose. AAPTS also argues that because these revenues 
help to support noncommercial activities, the provision of ancillary or 
supplementary services would not result in any ``unjust enrichment'' of 
the stations. AAPTS asserts that the provision in section 336 governing 
the amount to be recovered through any fee, i.e., the amount that would 
have been received if the excess digital spectrum had been subject to 
competitive bidding, makes no sense in the context of public 
television, as our competitive bidding authority does not apply to 
licenses issued to public television. In addition, the Curators of the 
University of Missouri (``Curators''), the licensee of commercial VHF 
station KOMU-TV, an NBC affiliate, urge us to make clear that 
governmental licensees are exempt from paying fees for ancillary or 
supplementary DTV services.
    38. Go, Inc., Goodlife Broadcasting, Inc. and Central Florida 
Educational Foundation (filing collectively as ``Hardy & Carey 
Clients'') and AAPTS contend that such an exemption would be consistent 
with Congressional policy to provide support to public television. 
AAPTS notes that Congress has exempted public television from fees on 
various occasions, and it would be counterproductive to detract from 
the federal financial assistance for public broadcasting and place 
additional pressure on that support by imposing a DTV fee. Hardy & 
Carey Clients and Family Stations of New Jersey, Inc. (``Family NJ'') 
also contend that imposing such fees could slow the transition to DTV 
and undermine the ability of noncommercial stations to sustain their 
operations.
    39. UCC et al., however, supports exempting NCE licensees from DTV 
fees only if the licensees are not permitted to provide advertiser-
supported ancillary or supplementary services. It contends that the 
plain language of section 336(e) requires that fees be paid to recover 
a portion of the public spectrum resource made available for commercial 
use, and that AAPTS is inconsistent in arguing that section 336 makes 
no distinction between noncommercial and commercial broadcasters for 
the purpose of offering ancillary or supplementary services, but then 
reading into the statute a distinction to exempt NCEs from paying fees 
for providing such services.
    40. Decision. We conclude that NCE licensees are not exempt from 
the requirement to pay fees on revenues generated by the remunerative 
use of their excess digital capacity, even when those revenues are used 
to support their mission-related activities. Section 336(e)(1) of the 
1996 Act does not support exempting NCE licensees from DTV fees or 
charging them nominal fees when they offer feeable ancillary or 
supplementary services as a source of funding for their mission-related 
activities. It draws no distinction between commercial and 
noncommercial stations, 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. The 
statute 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.''
    41. As noted above, section 336 requires, among other things, that 
the amount of the fee be designed to recover for the public an amount 
that would have been received had feeable ancillary or supplementary 
services been licensed pursuant to competitive bidding. We are not 
persuaded by AAPTS's argument that this provision makes no sense in the 
context of public television licensees because they are not subject to 
competitive bidding. The Commission was not directed to take into 
account the amount of money that would have been recovered had 
broadcasters purchased this spectrum through competitive bidding. 
Rather, the provision refers to the amount of money that would have 
been recovered if spectrum had been made available for these kinds of 
ancillary or supplementary services and had been licensed pursuant to 
auction. Indeed, existing commercial broadcasters were also statutorily 
exempt from competitive bidding for initial digital television 
licenses. Thus, under AAPTS's reading, all existing commercial 
broadcasters that received initial DTV licenses under section 336(a) 
would also be exempt from the fee, making the fee provision almost 
meaningless. We therefore reject AAPTS's argument.
    42. Consequently, we will amend Sec. 73.624(g) of our rules to 
apply to NCE licensees the same program for assessing and collecting 
fees upon feeable ancillary or supplementary services provided on their 
DTV capacity that we established for commercial licensees in the DTV 
Fees Proceeding, as required by the 1996 Act. NCE licensees will be 
required to report to us annually on December 1 on their use of their 
digital bitstreams, and remit fees of five percent of their gross 
revenues received for feeable ancillary or supplementary services 
provided on their digital bitstreams. For the first report filed on 
December 1, 2002, NCE licensees are to report only on services provided 
from the effective date of this Report and Order through September 30, 
2002. We will amend form FCC 317, which currently is used to collect 
information on DTV ancillary or supplementary use by commercial TV 
licensees, to include NCE licenses. We will release a Public Notice 
with a copy of the revised form once it is approved by the Office of 
Management and Budget.
    43. Finally, we also conclude that the Curators of the University 
of Missouri, the licensee of commercial VHF station KOMU-TV, an NBC 
affiliate, is not exempt from the requirement to pay fees on revenues 
generated by the remunerative use of its excess digital capacity, even 
when those revenues are used to support noncommercial services that are 
in the public interest. Although Curators is a not-for-profit 
governmental entity that we have exempted from paying certain 
application and regulatory fees, section 336(e)(1) does not distinguish 
between governmental and nongovernmental licensees with respect to the 
requirement to pay DTV fees. Curators are therefore subject to the 
program for assessing and collecting fees upon feeable ancillary or 
supplementary services provided on their DTV capacity that we 
established for commercial licensees in the DTV Fees Report and Order 
in MM Docket No. 97-247, and apply to NCE licenses in this proceeding.

[[Page 58980]]

    44.We are sensitive to NCE licensees' need to provide funding to 
support their programming and operations and their transition to DTV. 
As described above, NCE licensees will be able to use their ancillary 
or supplementary services for remunerative purposes, and earn 
advertising revenue, as well, on ancillary or supplementary services.
    45. We also note that we have previously recognized the financial 
difficulties often faced by NCE licensees. For example, the 
construction timetable we adopted in the Fifth Report and Order 
provides noncommercial stations a six-year period within which to 
construct their DTV facilities, the longest construction period 
allotted to any category of DTV applicant. In the Fifth Report and 
Order, we also stated that special relief measures may eventually be 
warranted to assist public television stations to make the transition 
to DTV, but we concluded that it was premature to determine what those 
specific measures should be. We stated then, and we continue to 
believe, that determining the specific nature of whatever special 
relief may be needed for noncommercial educational broadcasters is best 
considered during our periodic reviews.
D. Administrative Matters
    46. Paperwork Reduction Act of 1995 Analysis. The action contained 
herein has been analyzed with respect to the Paperwork Reduction Act of 
1995 and found to impose new or modified reporting and recordkeeping 
requirements or burdens on the public. Implementation of these new or 
modified reporting and recordkeeping requirements will be subject to 
approval by the Office of Management and Budget as prescribed by the 
Act.
    47. Accordingly, it is ordered that, pursuant to authority 
contained in sections 4(i), 303, 336 and 399B of the Communications Act 
of 1934, as amended, 47 U.S.C. 154(i), 303, 307, 336 and 399B, part 73 
of the Commission's rules is amended as set forth.
    48. A Final Regulatory Flexibility Analysis (``FRFA''), see 5 
U.S.C. 604, is included in this Report and Order. It is further ordered 
that the Commission's Compliance and Information Bureau, Reference 
Information Center, shall send a copy of this Report and Order, 
including the FRFA, to the Chief Counsel for Advocacy of the Small 
Business Administration.
    49. It is further ordered that, pursuant to the Contract with 
America Advancement Act of 1996, the rule amendments set forth shall be 
effective on the later of either December 26, 2001, or upon receipt by 
Congress of a report in compliance with the Contract with America 
Advancement Act of 1996, Public Law 104-121.
    50. It is further ordered that implementation of the new or 
modified reporting and recordkeeping requirements imposed by this 
action shall be effective upon approval by the Office of Management and 
Budget as prescribed by the Paperwork Reduction Act of 1995.
    51. It is further ordered that this proceeding is terminated.

Final Regulatory Flexibility Analysis

    As required by the Regulatory Flexibility Act (RFA), an Initial 
Regulatory Flexibility Analysis (IRFA), was incorporated in the Notice 
of Proposed Rule Making (NPRM) in this proceeding. The Commission 
sought written public comment on the proposals in the NPRM, including 
comment on the IRFA. This present Final Regulatory Flexibility Analysis 
(FRFA) conforms to the RFA.
    A. Need for, and Objectives of, the Report and Order: With this 
Report and Order, the Commission clarifies the manner in which 
noncommercial educational (NCE) television licensees may use their 
excess digital television (DTV) capacity for remunerative purposes. The 
objectives of this Report and Order are to: (1) Require NCE licensees 
to use their entire digital capacity primarily for a nonprofit, 
noncommercial, educational broadcast service; (2) clarify that NCE 
licensees may provide subscription television services; (3) determine 
that although NCE licensees are prohibited form including advertising 
on their broadcasting services, they may include advertising on 
nonbroadcast services, such as subscription services, provided on their 
DTV channels; and (4) require NCE licensees to pay fees on revenues 
generated by the remunerative use of their excess digital capacity.
    The action taken with respect to the first objective amends 
Sec. 73.621 of the Commission's rules to require NCE licensees to use 
their entire digital capacity primarily for a nonprofit, noncommercial, 
educational broadcast service. Although the Report and Order declined 
to quantify the term ``primarily,'' it states that it considers it to 
mean a ``substantial majority'' of NCE licensees' entire digital 
capacity. Because stations typically schedule their programming on a 
weekly basis, it requires NCE TV licensees to use their entire 
bitstream primarily for nonprofit, noncommercial, educational broadcast 
services on a weekly basis. This action adapts Sec. 73.621 of the 
Commission's rules to the digital environment.
    The action taken with respect to the second objective amends 
Secs. 73.642 and 73.644 of the Commission's rules to allow NCE 
licensees to provide subscription television services. It is taken 
because the Commission included subscription services in its definition 
of ancillary and supplementary services in the Fifth Report and Order 
that may be provided by DTV licensees, and because such action advances 
the Commission's goal of providing NCE licensees with flexibility in 
the use of their digital spectrum, within certain boundaries.
    The action taken with respect to the third objective determines 
that section 399B, the provision of the Communications Act restricting 
advertising by NCE licensees, continues to apply to all broadcasting by 
NCE licensees, but does not apply to nonbroadcast services, such as 
subscription services, provided on their DTV channels. This action 
maintains the integrity of NCE licensees' nonprofit, noncommercial, 
educational service on their free over-the-air video programming, while 
allowing NCE licensees some flexibility to use their ancillary and 
supplementary services for remunerative purposes.
    The action taken with respect to the fourth objective amends 
Sec. 73.624(g) of the Commission's rules to apply to NCE licensees the 
program for assessing and collecting fees upon feeable ancillary or 
supplementary services provided on their DTV capacity that the 
Commission established for commercial DTV licensees. This action is 
taken because section 336(e) of the Telecommunications Act of 1996 
requires the Commission, without distinguishing between commercial and 
NCE DTV licensees, to return to the public a portion of the fees or 
certain other compensation earned by DTV licensees for ancillary and 
supplementary services provided on their DTV spectrum.
    B. Summary of Significant Issues Raised by Public Comments in 
Response to the IRFA: No comments were received specifically in 
response to the IRFA attached to the NPRM. No small business issues 
were raised specifically in the comments responsive to the NPRM.
    C. 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

[[Page 58981]]

governmental jurisdiction.'' In addition, the term ``small business'' 
has the same meaning as the term ``small business concern'' under the 
Small Business Act. A ``small business concern'' is one which: (1) Is 
independently owned and operated; (2) is not dominant in its field of 
operation; and (3) satisfies any additional criteria established by the 
Small Business Administration (SBA). The 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.''
    The rules and policies adopted in this Report and Order will apply 
to noncommercial educational (NCE) television licensees, particularly 
those television stations licensed to operate on channels reserved as 
``noncommercial educational.'' For RFA purposes, 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 that produce taped television program materials. There 
were 1,678 operating television broadcasting stations in the nation as 
of June 30, 2001, of which 374 were noncommercial educational stations. 
FCC News Release ``Broadcast Station Totals as of June 30, 2001,'' 
issued July 19, 2001. The SBA has determined that television 
broadcasters are considered small when they have $10.5 million or less 
in annual revenue. 13 CFR 121, NAICS Code 51312.
    NCE TV licensees, by virtue of their nonprofit, noncommercial, 
educational broadcasting operations, generate less revenue than 
commercial TV licensees and are more likely than commercial TV 
broadcasters to experience financial difficulties in constructing their 
DTV facilities and making the transition to DTV broadcasting. NCE TV 
licensees depend partially on fundraising activities and grants from 
the Corporation for Public Broadcasting to support their programming 
and operations and their transition to DTV. Based on such differences 
between typical commercial TV licensees and typical NCE TV licensees, 
and based on the concern that NCE TV licensees may be differently 
impacted by the rule amendments and other actions taken in this Report 
and Order, we choose to separate out NCE TV licensees as smaller 
entities in the context established herein by the RFA. Therefore, of 
the 1,678 television stations previously noted, we will consider the 
374 NCE TV stations to be smaller entities in the context established 
herein by the RFA.
    At this time, the Commission does not have access to information 
about the annual revenues of NCE stations. The Commission is therefore 
unable to distinguish between NCE broadcasters based on their annual 
revenues. However, based on the differences between typical commercial 
TV licensees and typical NCR TV licensees, and based on the concern 
that NCE TV licensees may be differently impacted by the rule 
amendments and other actions taken in this Report and Order, we choose 
to separate out NCE TV licensees as smaller entities in the context 
established herein by the RFA.
    D. Description of Projected Reporting, Recordkeeping, and Other 
Compliance Requirements: The Report and Order adopts modifications to 
existing reporting and recordkeeping requirements. The fee program 
established herein will require NCE TV licensees annually to file a new 
reporting form. Licensees will be required to report whether they 
provided ancillary or supplementary services, what ancillary or 
supplementary services they provided, which of those services are 
subject to a fee, and the gross revenues received from all feeable 
ancillary or ancillary services. NCE licensees providing service 
subject to a fee additionally will be required annually to file FCC 
Form 159 in remittance of the fee. So that we may audit NCE licensees 
records supporting the calculation of the fees due, each NCE licensee 
will be required to retain such records for three years from the date 
of remittance of fees. In addition, each NCE TV licensee will be 
required to maintain documentation sufficient to show compliance at 
renewal time and in response to any complaint with the requirement to 
use their entire bitstream primarily for nonprofit, noncommercial, 
educational broadcast services on a weekly basis.
    All these new recordkeeping and reporting requirements will apply 
to all NCE TV licensees in the same way. Therefore, the action taken 
here imposes no separate or greater compliance burdens on smaller 
commercial or non-commercial TV stations within the group of all 
stations hereby affected.
    E. Steps Taken to Minimize Significant Economic Impact on Small 
Entities, and Significant Alternatives Considered: With respect to 
steps taken to minimize significant economic impact on small entities, 
the actions taken herein will enhance NCE TV licensees' ability to 
provide funding to support their programming and operations and their 
transition to DTV. As described above, NCE licensees will be able to 
use a portion of their digital capacity for remunerative purposes, 
including the provision of advertising on their non-broadcast ancillary 
and supplementary services. We also note that the Commission has 
previously recognized the financial difficulties often faced by NCE 
licensees. For example, the construction timetable adopted in the Fifth 
Report and Order provides noncommercial stations a six-year period 
within which to construct their DTV facilities, the longest 
construction period allotted to any category of DTV applicant. The 
Fifth Report and Order also stated that special relief measures may 
eventually be warranted to assist public television stations to make 
the transition to DTV, but concluded that it was premature to determine 
what those specific measures should be. The Commission stated then, and 
continues to believe, that determining the specific nature of whatever 
special relief may be needed for noncommercial educational broadcasters 
is best considered during the Commission's periodic reviews. Lastly, 
the Commission is considering all NCE broadcasters to be small for the 
purposes of this RFA analysis.
    With respect to significant alternatives considered with respect to 
the first objective, the Commission considered applying Sec. 73.621 of 
the Commission's rules to only the one free-over-the-air video 
broadcast required of all DTV licensees, allowing NCE TV licensees 
commercial use on their remaining digital capacity. This alternative 
was not adopted because the Commission believed that it would conflict 
with Sec. 73.621, which requires that public television stations 
furnish primarily an educational as well as a nonprofit and 
noncommercial broadcast service.
    Another significant alternative to the first objective considered 
requiring NCE TV licensees to provide free, not-for-profit over-the-air 
services over 50 percent or more of their digital capacity at any one 
time. This alternative was not adopted as such a decision would provide 
substantially less flexibility to NCE licensees in developing their 
digital services. For example, an NCE licensee might want to use most 
of its digital capacity for High Definition Television (``HDTV'') 
programming during certain times of the day and, at

[[Page 58982]]

other times, various amounts of capacity for Standard Definition 
Television (``SDTV'') programming and remunerative ancillary or 
supplementary services.
    With respect to the second objective, a significant alternative 
considered prohibiting NCE TV licensees from providing subscription 
services on their excess digital capacity. This alternative was not 
adopted because the Commission had included such services in the 
definition of ancillary or supplementary services in the Fifth Report 
and Order. Moreover, given the Commission's goal of providing NCE 
licensees with flexibility in the use of their digital spectrum, within 
certain boundaries, there seemed to be no reason to prohibit them from 
providing subscription services. Moreover, the ability to provide such 
a remunerative service is positive.
    With respect to significant alternatives considered to the third 
objective, the Commission considered interpreting section 399B of the 
Communications Act as prohibiting all advertising on all of NCE TV 
licensees' digital capacity. This alternative was not adopted because 
the Commission decided that the better interpretation of the statute 
was that the broadcasting of advertising is prohibited to NCE TV 
licensees, but that they may include advertising on their non-broadcast 
ancillary and supplementary services. Moreover, as the action allows 
all stations affected to earn money from the provision of advertising, 
the effect is positive.
    With respect to significant alternatives to the fourth action 
taken, the Commission considered collecting a reduced fee or no fee on 
the gross revenues earned by NCE TV licenses from all feeable ancillary 
and supplementary services. The Commission did not adopt either of 
these alternatives because the Telecommunications Act of 1996, without 
distinguishing between commercial TV licensees and NCE TV licensees, 
requires it to collect fees from such revenues from DTV licensees. The 
Commission will apply to NCE TV licensees the program for assessing and 
collecting such fees that it established for commercial DTV licensees. 
Although all NCE TV licensees, including small entity licensees, will 
be required to pay these fees, they will be allowed to retain 95 
percent of such revenues, which is a positive, impact.
    Report to Congress: The Commission will send a copy of this Report 
and Order, including this FRFA, in a report to Congress pursuant to the 
Congressional Review Act. In addition, the Commission will send a copy 
of this Report and Order, including this FRFA, to the Chief Counsel or 
Advocacy of the SBA. A copy of this Report and Order, including this 
FRFA, will also be published in the Federal Register.

List of Subjects in 47 CFR Part 73

    Radio Broadcast Services.

Federal Communications Commission.
Magalie Roman Salas,
Secretary.

Rule Changes

    For the reasons discussed in the preamble, the Federal 
Communications Commission amends 47 CFR part 73 as follows:

PART 73--RADIO BROADCAST SERVICES

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

    Authority: 47 U.S.C. 154, 303, 334, and 336.

    2. Section 73.621 is amended by adding paragraph (i) to read as 
follows:


Sec. 73.621  Noncommercial educational TV stations.

* * * * *
    (i) With respect to the provision of advanced television services, 
the requirements of this section will apply to the entire digital 
bitstream of noncommercial educational television stations, including 
the provision of ancillary or supplementary services.

    3. Section 73.624 is amended by revising paragraph (g) introductory 
text, and the first sentence in paragraphs (g)(2)(i) and (g)(2)(ii) to 
read as follows:


Sec. 73.624  Digital television broadcast stations.

* * * * *
    (g) Commercial and noncommercial DTV licensees must annually remit 
a fee of five percent of the gross revenues derived from all ancillary 
or supplementary services, as defined by paragraph (b) of this section, 
which are feeable, as defined in paragraphs (g)(2)(i) through (ii) of 
this section.
* * * * *
    (2) Payment of fees. Each December 1, all commercial and 
noncommercial DTV licensees will electronically report whether they 
provided ancillary or supplementary services in the twelve-month period 
ending on the preceding September 30. * * *
    (ii) If a commercial or noncommercial DTV licensee has provided 
feeable ancillary or supplementary services at any point during a 
twelve-month period ending on September 30, the licensee must 
additionally file the FCC's standard remittance form (Form 159) on the 
subsequent December 1. * * *
* * * * *

    4. Section 73.642 is amended by revising paragraph (a)(1), the 
first sentence in paragraph (b) and paragraph (e) introductory text, to 
read as follows:


Sec. 73.642  Subscription TV service.

    (a) * * *
    (1) Licensees and permittees of commercial and noncommercial TV 
stations, and
* * * * *
    (b) A licensee or permittee of a commercial or noncommercial TV 
station or a low power TV station may begin subscription TV service 
upon installation of encoding equipment having advance FCC approval. * 
* *
* * * * *
    (e) A licensee or permittee of a commercial or noncommercial TV 
broadcast or low power TV station may not transmit a subscription 
service if it has a contract, arrangement, or understanding expressed 
or implied, that:
* * * * *

    5. Section 73.644 is amended by revising the first sentence in 
paragraph (a) to read as follows:


Sec. 73.644  Subscription TV transmission systems.

    (a) Licensees and permittees of commercial and noncommercial TV 
broadcast and low power TV stations may conduct subscription operations 
only by using an encoding system that has been approved in advance by 
the FCC. * * *
* * * * *
[FR Doc. 01-29232 Filed 11-23-01; 8:45 am]
BILLING CODE 6712-01-P