[Federal Register Volume 67, Number 161 (Tuesday, August 20, 2002)]
[Proposed Rules]
[Pages 53903-53909]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 02-20957]


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FEDERAL COMMUNICATIONS COMMISSION

47 CFR Parts 73 and 76

[MB Docket No. 02-230; FCC 02-231]


Digital Broadcast Copy Protection

AGENCY: Federal Communications Commission.

[[Page 53904]]


ACTION: Notice of proposed rulemaking.

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SUMMARY: This document initiates a rulemaking exploring whether the FCC 
can and should mandate the use of a copy protection mechanism for 
digital broadcast television in order to facilitate the DTV transition.

DATES: Comments due October 30, 2002; reply comments are due December 
13, 2002.

ADDRESSES: Federal Communications Commission, 445 12th Street, SW., 
Washington, DC 20554. For further filing information, see SUPPLEMENTARY 
INFORMATION.

FOR FURTHER INFORMATION CONTACT: Susan Mort, 202-418-1043 or 
[email protected].

SUPPLEMENTARY INFORMATION: This is a synopsis of the Commission's 
Notice of Proposed Rulemaking (``NPRM''), FCC 02-231, adopted August 8, 
2002; released August 9, 2002. The full text of the Commission's NPRM 
is available for inspection and copying during normal business hours in 
the FCC Reference Center (Room CY-A257) at its headquarters, 445 12th 
Street, SW., Washington, DC 20554, or may be purchased from the 
Commission's copy contractor, Qualex International, (202) 863-2893, 
Portals II, Room CY-B402, 445 12th St., SW., Washington, DC 20554, or 
may be reviewed via Internet at http://www.fcc.gov/mb.

Synopsis of the Notice of Proposed Rulemaking

I. Introduction

    1. The ongoing digital television (``DTV'') transition poses many 
unique logistical and technological challenges. The current lack of 
digital broadcast copy protection may be a key impediment to the 
transition's progress. Digital copy protection, also referred to as 
digital rights management, seeks to prevent the unauthorized copying 
and redistribution of digital media. Without adequate protection, 
digital media, unlike its analog counterpart, is susceptible to piracy 
because an unlimited number of high quality copies can be made and 
distributed in violation of copyright laws. In the absence of a copy 
protection scheme for digital broadcast television, content providers 
have asserted that they will not permit high quality programming to be 
broadcast digitally. Without such programming, consumers may be 
reluctant to invest in DTV receivers and equipment, thereby delaying 
the DTV transition.
    Since 1996, an inter-industry group called the Copy Protection 
Technical Working Group (``CPTWG'') has served as a discussion forum 
for general copy protection issues. On November 28, 2001, the Broadcast 
Protection Discussion Subgroup (``BPDG'') was formed under the auspices 
of CPTWG in order to specifically address digital broadcast copy 
protection. According to the BPDG Final Report, more than 70 
representatives of the consumer electronics, information technology, 
motion picture, cable and broadcast industries took part in the group. 
As a result of its deliberations, the BPDG recently announced a 
consensus on the use of a ``broadcast flag'' standard for digital 
broadcast copy protection. This consensus would require use of the 
Redistribution Control Descriptor, as set forth in ATSC Standard A/65A 
(the ``ATSC flag''), to mark digital broadcast programming so as to 
limit its improper use. Despite the consensus reached on the technical 
standard to be implemented, final agreement was not reached on a set of 
compliance and robustness requirements to be associated with use of the 
ATSC flag, enforcement mechanisms, or criteria for approving the use of 
specific protection technologies in consumer electronics devices. While 
the BPDG Final Report indicated that a parallel discussion group may be 
established by CPTWG to continue discussions in some areas where BPDG 
participants were unable to reach a consensus, including enforcement 
mechanisms, it remains unclear whether such group will serve as a forum 
for ongoing industry negotiations.

II. The Broadcast Flag

    3. In light of the importance placed upon digital broadcast copy 
protection by some industry participants, and with a view towards 
facilitating the DTV transition, this NPRM seeks comment on whether a 
regulatory copy protection regime is needed within the limited sphere 
of digital broadcast television. As an initial matter, we seek comment 
on whether quality digital programming is now being withheld because of 
concerns over the lack of digital broadcast copy protection. In 
particular, we seek comment on the nature and extent of the piracy 
concerns expressed by content providers. If such programming is being 
withheld, will it continue to be withheld in the absence of a 
regulatory regime? To what extent would the absence of a digital 
broadcast copy protection scheme and the lack of high quality digital 
programming delay or prevent the DTV transition? Would the resulting 
dynamic threaten the viability of over-the-air television? What impact 
would this have on consumers?
    4. If a digital broadcast flag or other regulatory regime is 
needed, we seek comment on whether the Commission should adopt rules or 
create some other mechanism to resolve outstanding compliance, 
robustness and enforcement issues. We also seek comment on whether 
there are any technical impediments to implementation of a digital 
broadcast copy protection scheme. We ask commenters to elaborate on 
whether the ATSC flag is the appropriate technological model to be 
used, or whether there are alternatives to the ATSC flag. We seek 
comment on the effectiveness of any such technological model in 
protecting digital broadcast content from improper redistribution. For 
example, we seek comment on the technological robustness of the ATSC 
flag and whether it can be upgraded or improved upon over time. If the 
ATSC flag is the best means of protection currently available, but it 
still has technical flaws, is it better to mandate the flag now and 
monitor it as technology develops, or to wait until a more effective 
means of digital broadcast copy protection is developed? Would a 
regulatory copy protection regime create and maintain industry 
incentives to continually innovate to improve the method of digital 
content protection?
    5. With respect to the type of Commission regulations that would be 
appropriate in the digital broadcast copy protection area, we seek 
comment on whether a government mandate on the transmission side is 
needed. In other words, we seek comment on whether broadcasters and 
content providers should be required to embed the ATSC flag or another 
type of content control mark within digital broadcast programming, or 
whether they have sufficient incentive to protect such programming such 
that a government mandate is unnecessary.
    6. On the reception side, we seek comment on whether the Commission 
should mandate that consumer electronics devices recognize and give 
effect to the ATSC flag or another type of content control mark. If so, 
we seek comment on whether this mandate should include devices other 
than DTV broadcast receivers and what the resulting impact would be on 
consumers. More specifically, the BPDG Final Report anticipates that 
digital broadcast copy protection will begin at the point of 
demodulation. We seek comment on whether this is an appropriate point 
for digital broadcast copy protection to begin in consumer electronics 
devices. We also seek comment on whether and how

[[Page 53905]]

downstream devices would be required to protect the content. In 
addition, we seek comment on whether and how an ATSC flag or other 
system would work for broadcast stations carried on cable or direct 
broadcast satellite systems.
    7. As to the means by which digital broadcast copy protection would 
be achieved, we seek comment on whether to require the use of specific 
copy protection technologies, such as those identified in Table A to 
the BPDG Final Report, in consumer electronics devices. Table A 
identifies those copy protection technologies considered by BPDG for 
use in conjunction with digital outputs in consumer electronics 
devices, such as Digital Transmission Content Protection (``DTCP'' or 
``5C'') or High-Bandwidth Digital Content Protection (``HDCP''). 
However, BPDG members were unable to agree on the criteria by which a 
copy protection technology would be evaluated and approved for digital 
broadcast use and chose to reserve the topic for potential further 
discussion by a CPTWG parallel group. We seek comment on how a 
particular technology would receive approval for use in consumer 
electronics devices for digital broadcast copy protection purposes. We 
also seek comment on identifying the appropriate entity to make an 
approval determination.
    8. We also seek comment on the extent to which broadcast copy 
protection technologies raise privacy concerns and whether rules are 
needed to ensure that consumers' privacy interests are protected. In 
addition, we seek comment on whether there are First Amendment or any 
other constitutional issues that we should consider from the point of 
view of the industries involved or individual consumers.
    9. Finally, we seek comment on the impact of the ATSC flag or other 
digital broadcast copy protection mechanism on consumers. The BPDG 
Final Report asserts that a broadcast flag system would not interfere 
with consumers' ability to make secure copies of DTV content for their 
personal use, either on personal video recorders or removable media. 
Similarly, the BPDG Final Report states that the requirements to 
protect digital outputs should not interfere with consumers' ability to 
send DTV content across secure digital networks, such as ``home digital 
network connecting digital set top boxes, digital recorders, digital 
servers and digital display devices.'' We seek comment on these 
assertions. We also seek comment on the appropriate scope of protection 
to be accorded DTV broadcast content. In addition, some parties have 
raised concerns about the potential impact of a broadcast flag 
requirement on consumers' existing and future electronic equipment. We 
seek comment on these concerns, as well as the potential effect of a 
broadcast flag requirement on the development of new consumer 
technologies. Finally, we seek comment on the cost impact, if any, that 
a broadcast flag requirement would have on affected consumer 
electronics equipment.

III. Jurisdiction

    10. We seek comment on the jurisdictional basis for Commission 
rules dealing with digital broadcast television copy protection. Is 
this an area in which the Commission could exercise its ancillary 
jurisdiction under Title I of the Act? We ask commenters to identify 
provisions of the Act that provide the Commission with authority to 
implement its ancillary jurisdiction. If the Commission has ancillary 
jurisdiction over digital broadcast copy protection, are there any 
limits upon its scope? For example, does the Commission have authority 
to mandate the recognition of the ATSC flag in consumer electronics 
devices? We also ask commenters to identify any statutory provisions 
that might provide the Commission with more explicit authority to adopt 
digital broadcast copy protection rules. For example, do sections 
336(b)(4) and (b)(5) impact upon the Commission's ability to adopt 
digital broadcast copy protection regulations?

IV. Administrative Matters

    11. Authority. This Notice of Proposed Rulemaking is issued 
pursuant to authority contained in sections 1, 4(i), 4(j), 303(r), 403 
and 601 of the Communications Act of 1934, as amended.
    12. Ex Parte Rules--Non-Restricted Proceeding. This is a non-
restricted notice and comment rulemaking proceeding. Ex parte 
presentations are permitted, except during the Sunshine Agenda period, 
provided that they are disclosed as provided in the Commission's rules. 
See generally 47 CFR 1.1202, 1.1203, and 1.1206(a).
    13. Accessibility Information. Accessible formats of this Notice of 
Proposed Rulemaking (computer diskettes, large print, audio recording 
and Braille) are available to persons with disabilities by contacting 
Brian Millin, of the Consumer & Governmental Affairs Bureau, at (202) 
418-7426, TTY (202) 418-7365, or at [email protected].
    14. Comment Information. Pursuant to Secs. 1.415 and 1.419 of the 
Commission's rules, 47 CFR 1.415, 1.419, interested parties may file 
comments on or before October 30, 2002, and reply comments on or before 
December 13, 2002. Comments may be filed using the Commission's 
Electronic Comment Filing System (ECFS) or by filing paper copies. See 
Electronic Filing of Documents in Rulemaking Proceedings, 63 Fed. Reg. 
24121 (1998).
    15. Comments filed through the ECFS can be sent as an electronic 
file via the Internet to http://www.fcc.gov/e-file/ecfs.html. 
Generally, only one copy of an electronic submission must be filed. If 
multiple docket or rulemaking numbers appear in the caption of this 
proceeding, however, commenters must transmit one electronic copy of 
the comments to each docket or rulemaking number referenced in the 
caption. In completing the transmittal screen, commenters should 
include their full name, U.S. Postal Service mailing address, and the 
applicable docket or rulemaking number. Parties may also submit an 
electronic comment by Internet e-mail. To get filing instructions for 
e-mail comments, commenters should send an e-mail to [email protected], and 
should include the following words in the body of the message, ``get 
form .'' A sample form and directions 
will be sent in reply. Parties who choose to file by paper must file an 
original and four copies of each filing. If more than one docket or 
rulemaking number appear in the caption of this proceeding, commenters 
must submit two additional copies for each additional docket or 
rulemaking number. Filings can be sent by hand or messenger delivery, 
by commercial overnight courier, or by first-class or overnight U.S. 
Postal Service mail (although we continue to experience delays in 
receiving U.S. Postal Service mail). The Commission's contractor, 
Vistronix, Inc., will receive hand-delivered or messenger-delivered 
paper filings for the Commission's Secretary at 236 Massachusetts 
Avenue, N.E., Suite 110, Washington, DC 20002. The filing hours at this 
location are 8 a.m. to 7 p.m. All hand deliveries must be held together 
with rubber bands or fasteners. Any envelopes must be disposed of 
before entering the building. Commercial overnight mail (other than 
U.S. Postal Service Express Mail and Priority Mail) must be sent to 
9300 East Hampton Drive, Capitol Heights, MD 20743. U.S. Postal Service 
first-class mail, Express Mail, and Priority Mail should be addressed 
to 445 12th Street, SW., Washington, DC 20554. All filings must be 
addressed to the Commission's Secretary, Office of the Secretary, 
Federal Communications Commission.

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    16. Regulatory Flexibility Act. As required by the Regulatory 
Flexibility Act, the Commission has prepared an Initial Regulatory 
Flexibility Analysis (IRFA) of the possible significant economic impact 
on a substantial number of small entities of the proposals addressed in 
this NPRM. The IRFA is set forth below. Written public comments are 
requested on the IRFA. These comments must be filed in accordance with 
the same filing deadlines for comments on the NPRM, and they should 
have a separate and distinct heading designating them as responses to 
the IRFA.

Initial Regulatory Flexibility Analysis

    17. As required by the Regulatory Flexibility Act of 1980, as 
amended (``RFA''), the Commission has prepared this Initial Regulatory 
Flexibility Analysis (``IRFA'') of the possible significant economic 
impact on small entities by the policies and rules proposed in this 
Notice of Proposed Rulemaking (``NPRM''). Written public comments are 
requested on this IRFA. Comments must be identified as responses to the 
IRFA and must be filed by the deadlines for comments on the NPRM 
provided above in paragraph 15. The Commission will send a copy of the 
NPRM, including this IRFA, to the Chief Counsel for Advocacy of the 
Small Business Administration. In addition, the Notice and IRFA (or 
summaries thereof) will be published in the Federal Register.
    18. Need for, and Objectives of, the Proposed Rules. The need for 
FCC regulation in this area is that the lack of digital broadcast copy 
protection has been identified as a key impediment to anticipated rate 
and scope of the transition for digital television (``DTV''). In the 
absence of a digital copy protection scheme preventing the unauthorized 
copying and redistribution of digital media, content providers have 
asserted that they will not permit high quality programming to be 
broadcast digitally. Without such programming, consumers may be 
reluctant to invest in DTV receivers and equipment, thereby delaying 
the DTV transition. While private industry negotiations have reached 
consensus on the technical ``broadcast flag'' standard to be 
implemented, ATSC Standard A65/A, agreement was not universally reached 
on compliance and robustness requirements to be associated with the 
flag's use. Agreement was also not reached on enforcement mechanisms 
for digital broadcast copy protection. The NPRM seeks comment on 
whether the Commission can and should mandate a regulatory copy 
protection regime for digital broadcast television. The objective of 
the Proposed Rules will be to facilitate the DTV transition.
    19. Legal Basis. The authority for the action proposed in this 
rulemaking is contained in sections 1, 4(i) and (j), 303, 403 and 601 
of the Communications Act of 1934, as amended, 47 U.S.C. 151, 154(i) 
and (j), 303, 403, and 521.
    20. Description and Estimate of the Number of Small Entities to 
Which the Proposed Rules Will Apply. The RFA directs the Commission to 
provide a description of and, where feasible, an estimate of the number 
of small entities that will be affected by the proposed rules. The RFA 
generally defines the term ``small entity'' as having the same meaning 
as the terms ``small business,'' ``small organization,'' and ``small 
governmental entity'' under section 3 of the Small Business Act. 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'').
    21. In this context, the application of the statutory definition to 
television stations is of concern. An element of the definition of 
``small business'' is that the entity not be dominant in its field of 
operation. We are unable at this time to define or quantify the 
criteria that would establish whether a specific television station is 
dominant in its field of operation. Accordingly, the estimates that 
follow of small businesses to which rules may apply do not exclude any 
television station from the definition of a small business on this 
basis and are therefore over-inclusive to that extent.
    22. An additional element of the definition of ``small business'' 
is that the entity must be independently owned and operated. We note 
that it is difficult at times to assess these criteria in the context 
of media entities and our estimates of small businesses to which they 
apply may be over inclusive to this extent.
    23. Television Broadcasting. The proposed rules and policies could 
apply to television broadcasting licensees, and potential licensees of 
television service. The Small Business Administration defines a 
television broadcasting station that has no more than $12 million in 
annual receipts as a small business. Television broadcasting consists 
of establishments primarily engaged in broadcasting images together 
with sound, including the production or transmission of visual 
programming which is broadcast to the public on a predetermined 
schedule. Included in this industry are commercial, religious, 
educational, and other television stations. Also included are 
establishments primarily engaged in television broadcasting and which 
produce programming in their own studios. Separate establishments 
primarily engaged in producing programming are classified under other 
NAICS numbers.
    24. There were 1,509 television stations operating in the nation in 
1992. That number has remained fairly constant as indicated by the 
approximately 1,686 operating television broadcasting stations in the 
nation as of September 2001. For 1992, the number of television 
stations that produced less than $10.0 million in revenue was 1,155 
establishments. Thus, the new rules could affect approximately 1,686 
television stations; approximately 77%, or 1,298 of those stations are 
considered small businesses. These estimates may overstate the number 
of small entities since the revenue figures on which they are based do 
not include or aggregate revenues from non-television affiliated 
companies.
    25. Cable and Other Program Distribution. The SBA has developed a 
small business size standard for cable and other program distribution 
services, which includes all such companies generating $12.5 million or 
less in revenue annually. This category includes, among others, cable 
operators, direct broadcast satellite (``DBS'') services, home 
satellite dish (``HSD'') services, multipoint distribution services 
(``MDS''), multichannel multipoint distribution service (``MMDS''), 
Instructional Television Fixed Service (``ITFS''), local multipoint 
distribution service (``LMDS''), satellite master antenna television 
(``SMATV'') systems, and open video systems (``OVS''). According to the 
Census Bureau data, there are 1,311 total cable and other pay 
television service firms that operate throughout the year of which 
1,180 have less than $10 million in revenue. We address below each 
service individually to provide a more precise estimate of small 
entities.
    26. Cable Operators. The Commission has developed, with SBA's 
approval, our 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. We last estimated that there were 1,439 cable operators 
that qualified as small cable companies. Since then, some of those 
companies may have

[[Page 53907]]

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 adopted in this Report and Order.
    27. The Communications Act, as amended, also contains a size 
standard for 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.'' The Commission has determined that 
there are 68,500,000 subscribers in the United States. Therefore, an 
operator serving fewer than 685,000 subscribers shall be deemed a small 
operator if its annual revenues, when combined with the total annual 
revenues of all of its affiliates, do not exceed $250 million in the 
aggregate. Based on available data, we find that the number of cable 
operators serving 685,000 subscribers or less totals approximately 
1,450. 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.
    28. Direct Broadcast Satellite (``DBS'') Service. Because DBS 
provides subscription services, DBS falls within the SBA-recognized 
definition of cable and other program distribution services. This 
definition provides that a small entity is one with $12.5 million or 
less in annual receipts. There are four licensees of DBS services under 
Part 100 of the Commission's Rules. Three of those licensees are 
currently operational. Two of the licensees that are operational have 
annual revenues that may be in excess of the threshold for a small 
business. The Commission, however, does not collect annual revenue data 
for DBS and, therefore, is unable to ascertain the number of small DBS 
licensees that could be impacted by these proposed rules. DBS service 
requires a great investment of capital for operation, and we 
acknowledge, despite the absence of specific data on this point, that 
there are entrants in this field that may not yet have generated $12.5 
million in annual receipts, and therefore may be categorized as a small 
business, if independently owned and operated.
    29. Home Satellite Dish (``HSD'') Service. Because HSD provides 
subscription services, HSD falls within the SBA-recognized definition 
of cable and other program distribution services. This definition 
provides that a small entity is one with $12.5 million or less in 
annual receipts. The market for HSD service is difficult to quantify. 
Indeed, the service itself bears little resemblance to other MVPDs. HSD 
owners have access to more than 265 channels of programming placed on 
C-band satellites by programmers for receipt and distribution by MVPDs, 
of which 115 channels are scrambled and approximately 150 are 
unscrambled. HSD owners can watch unscrambled channels without paying a 
subscription fee. To receive scrambled channels, however, an HSD owner 
must purchase an integrated receiver-decoder from an equipment dealer 
and pay a subscription fee to an HSD programming package. Thus, HSD 
users include: (1) Viewers who subscribe to a packaged programming 
service, which affords them access to most of the same programming 
provided to subscribers of other MVPDs; (2) viewers who receive only 
non-subscription programming; and (3) viewers who receive satellite 
programming services illegally without subscribing. Because scrambled 
packages of programming are most specifically intended for retail 
consumers, these are the services most relevant to this discussion.
    30. Multipoint Distribution Service (``MDS''), Multichannel 
Multipoint Distribution Service (``MMDS'') Instructional Television 
Fixed Service (``ITFS'') and Local Multipoint Distribution Service 
(``LMDS''). MMDS systems, often referred to as ``wireless cable,'' 
transmit video programming to subscribers using the microwave 
frequencies of the MDS and ITFS. LMDS is a fixed broadband point-to-
multipoint microwave service that provides for two-way video 
telecommunications.
    31. In connection with the 1996 MDS auction, the Commission defined 
small businesses as entities that had annual average gross revenues of 
less than $40 million in the previous three calendar years. This 
definition of a small entity in the context of MDS auctions has been 
approved by the SBA. The MDS auctions resulted in 67 successful bidders 
obtaining licensing opportunities for 493 Basic Trading Areas 
(``BTAs''). Of the 67 auction winners, 61 met the definition of a small 
business. MDS also includes licensees of stations authorized prior to 
the auction. As noted, the SBA has developed a definition of small 
entities for pay television services, which includes all such companies 
generating $12.5 million or less in annual receipts. This definition 
includes multipoint distribution services, and thus applies to MDS 
licensees and wireless cable operators that did not participate in the 
MDS auction. Information available to us indicates that there are 
approximately 850 of these licensees and operators that do not generate 
revenue in excess of $12.5 million annually. Therefore, for purposes of 
the IRFA, we find there are approximately 850 small MDS providers as 
defined by the SBA and the Commission's auction rules.
    32. The SBA definition of small entities for cable and other 
program distribution services, which includes such companies generating 
$12.5 million in annual receipts, seems reasonably applicable to ITFS. 
There are presently 2,032 ITFS licensees. All but 100 of these licenses 
are held by educational institutions. Educational institutions are 
included in the definition of a small business. However, we do not 
collect annual revenue data for ITFS licensees, and are not able to 
ascertain how many of the 100 non-educational licensees would be 
categorized as small under the SBA definition. Thus, we tentatively 
conclude that at least 1,932 licensees are small businesses.
    33. Additionally, the auction of the 1,030 LMDS licenses began on 
February 18, 1998, and closed on March 25, 1998. The Commission defined 
``small entity'' for LMDS licenses as an entity that has average gross 
revenues of less than $40 million in the three previous calendar years. 
An additional classification for ``very small business'' was added and 
is defined as an entity that, together with its affiliates, has average 
gross revenues of not more than $15 million for the preceding calendar 
years. These regulations defining ``small entity'' in the context of 
LMDS auctions have been approved by the SBA. There were 93 winning 
bidders that qualified as small entities in the LMDS auctions. A total 
of 93 small and very small business bidders won approximately 277 A 
Block licenses and 387 B Block licenses. On March 27, 1999, the 
Commission re-auctioned 161 licenses; there were 40 winning bidders. 
Based on this information, we conclude that the number of small LMDS 
licenses will include the 93 winning bidders in the first auction and 
the 40 winning bidders in the re-auction, for a total of 133 small 
entity LMDS providers as defined by the SBA and the Commission's 
auction rules.
    34. In sum, there are approximately a total of 2,000 MDS/MMDS/LMDS

[[Page 53908]]

stations currently licensed. Of the approximate total of 2,000 
stations, we estimate that there are 1,595 MDS/MMDS/LMDS providers that 
are small businesses as deemed by the SBA and the Commission's auction 
rules.
    35. Satellite Master Antenna Television (``SMATV'') Systems. The 
SBA definition of small entities for cable and other program 
distribution services includes SMATV services and, thus, small entities 
are defined as all such companies generating $12.5 million or less in 
annual receipts. Industry sources estimate that approximately 5,200 
SMATV operators were providing service as of December 1995. Other 
estimates indicate that SMATV operators serve approximately 1.5 million 
residential subscribers as of July 2001. The best available estimates 
indicate that the largest SMATV operators serve between 15,000 and 
55,000 subscribers each. Most SMATV operators serve approximately 
3,000-4,000 customers. Because these operators are not rate regulated, 
they are not required to file financial data with the Commission. 
Furthermore, we are not aware of any privately published financial 
information regarding these operators. Based on the estimated number of 
operators and the estimated number of units served by the largest ten 
SMATVs, we believe that a substantial number of SMATV operators qualify 
as small entities.
    36. Open Video Systems (``OVS''). Because OVS operators provide 
subscription services, OVS falls within the SBA-recognized definition 
of cable and other program distribution services. This definition 
provides that a small entity is one with $ 12.5 million or less in 
annual receipts. The Commission has certified 25 OVS operators with 
some now providing service. Affiliates of Residential Communications 
Network, Inc. (``RCN'') received approval to operate OVS systems in New 
York City, Boston, Washington, DC and other areas. RCN has sufficient 
revenues to assure us that they do not qualify as small business 
entities. Little financial information is available for the other 
entities authorized to provide OVS that are not yet operational. Given 
that other entities have been authorized to provide OVS service but 
have not yet begun to generate revenues, we conclude that at least some 
of the OVS operators qualify as small entities.
    37. Electronics Equipment Manufacturers. Rules adopted in this 
proceeding could apply to manufacturers of DTV receiving equipment and 
other types of consumer electronics equipment. The SBA has developed 
definitions of small entity for manufacturers of audio and video 
equipment as well as radio and television broadcasting and wireless 
communications equipment. These categories both include all such 
companies employing 750 or fewer employees. 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 definitions applicable to manufacturers of audio and 
visual equipment and radio and television broadcasting and wireless 
communications equipment, since these are the two closest NAICS Codes 
applicable to the consumer electronics equipment manufacturing 
industry. However, these NAICS categories are broad and specific 
figures are not available as to how many of these establishments 
manufacture consumer equipment. According to the SBA's regulations, an 
audio and visual equipment manufacturer must have 750 or fewer 
employees in order to qualify as a small business concern. Census 
Bureau data indicates that there are 554 U.S. establishments that 
manufacture audio and visual equipment, and that 542 of these 
establishments have fewer than 500 employees and would be classified as 
small entities. The remaining 12 establishments 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. Under the SBA's regulations, a radio and 
television broadcasting and wireless communications equipment 
manufacturer must also have 750 or fewer employees in order to qualify 
as a small business concern. Census Bureau data indicates that there 
are 1,215 U.S. establishments that manufacture radio and television 
broadcasting and wireless communications equipment, and that 1,150 of 
these establishments have fewer than 500 employees and would be 
classified as small entities. The remaining 65 establishments 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. We therefore conclude that 
there are no more than 542 small manufacturers of audio and visual 
electronics equipment and no more than 1,150 small manufacturers of 
radio and television broadcasting and wireless communications equipment 
for consumer/household use.
    38. 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 
manufacturing. According to SBA regulations, a computer manufacturer 
must have 1,000 or fewer employees in order to qualify as a small 
entity. Census Bureau data indicates that there are 563 firms that 
manufacture electronic computers and of those, 544 have fewer than 
1,000 employees and qualify as small entities. The remaining 19 firms 
have 1,000 or more employees. We conclude that there are approximately 
544 small computer manufacturers.
    39. Description of Projected Reporting, Recordkeeping and other 
Compliance Requirements. At this time, we do not expect that the 
proposed rules would impose any additional reporting or recordkeeping 
requirements. However, compliance may require the manufacture of 
broadcast flag-compliant DTV receivers and other consumer electronics 
equipment. Compliance may also require broadcasters and/or content 
providers to include a content control mark within digital broadcast 
television programs. While these requirements could have an impact on 
consumer electronics manufacturers, broadcasters and content providers, 
such impact would be similarly costly for both large and small 
entities. We seek comment on whether others perceive a need for 
extensive recordkeeping and, if so, whether the burden would fall on 
large and small entities differently.
    40. Steps Taken to Minimize Significant Impact on Small Entities, 
and Significant Alternatives Considered. The RFA requires an agency to 
describe any significant alternatives that it has considered in 
reaching its proposed approach, which may include the following four 
alternatives: (1) the establishment of differing compliance or 
reporting requirements or timetables that take into account the 
resources available to small entities; (2) the clarification, 
consolidation, or simplification of compliance or reporting 
requirements under the rule for small entities; (3) the use of 
performance, rather than design, standards; and (4) an exemption from 
coverage of the rule, or any part thereof, for small entities.
    41. As indicated above, the NPRM seeks comment on whether the 
Commission can and should mandate a regulatory copy protection regime 
for digital broadcast television in order to

[[Page 53909]]

facilitate the DTV transition. This regime may require the manufacture 
of broadcast flag-compliant DTV receivers and other consumer 
electronics equipment. It may also require broadcasters and/or content 
providers to include a content control mark within digital broadcast 
television programs. At this writing, no alternatives to our proposals 
herein have been mentioned because we anticipate no differential impact 
on smaller entities. However, we welcome comment on modifications of 
the proposals if based on evidence of potential differential impact.
    42. Federal Rules Which Duplicate, Overlap, or Conflict with the 
Commission's Proposals. None.

Federal Communications Commission.
Marlene H. Dortch,
Secretary.
[FR Doc. 02-20957 Filed 8-19-02; 8:45 am]
BILLING CODE 6712-01-P