[Federal Register Volume 68, Number 229 (Friday, November 28, 2003)]
[Rules and Regulations]
[Pages 66728-66738]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 03-29520]


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FEDERAL COMMUNICATIONS COMMISSION

47 CFR Parts 15 and 76

[CS Docket No. 97-80; PP Docket No. 00-67; FCC 03-225]


Commercial Availability of Navigation Devices and Compatibility 
Between Cable Systems and Consumer Electronics Equipment

AGENCY: Federal Communications Commission.

ACTION: Final rule.

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SUMMARY: In this document the Commission adopts rules that set 
technical and other criteria that manufacturers would have to meet in 
order to label or market unidirectional digital cable televisions and 
other unidirectional digital cable products as ``digital cable ready.'' 
The rules also require cable operators to support operation of 
unidirectional digital cable products on digital cable systems and set 
limits on the levels of content protection that could be triggered by 
MVPDs. This action is taken to further the digital television 
transition and the commercial availability of navigation devices 
pursuant to section 629 of the Communications Act.

DATES: Effective December 29, 2003, except for Sec. Sec.  15.123, 
76.1905, and 76.1906 which contains information collection requirements 
that are not effective until approved by the Office of Management and 
Budget. The FCC will publish a document in the Federal Register 
announcing the effective date for those sections. The incorporation by 
reference of certain publications listed in the regulations is approved 
by the Director of the Federal Register, as of December 29, 2003, 
except for the incorporation by reference in Sec.  15.123 which will be 
approved as of the effective date announced in the Federal Register.

FOR FURTHER INFORMATION CONTACT: Susan Mort, [email protected], (202) 
418-1043. For additional information concerning the information 
collection(s) contained in this document, contact Leslie Smith, Federal 
Communications Commission, Room 1-A804, 445 12th Street, SW., 
Washington, DC 20554, or via the Internet at [email protected]., or 
at 202-418-0217.

SUPPLEMENTARY INFORMATION: This is a summary of the Federal 
Communications Commission's Second Report and Order and Second Further 
Notice of Proposed Rulemaking, FCC 03-225, adopted on September 10, 
2003, and released on October 9, 2003. The full text of this document 
is available for inspection and copying during normal business hours in 
the FCC Reference Center, 445 12th Street, SW., Washington, DC 20554. 
The complete text may be purchased from the Commission's copy 
contractor, Qualex International, 445 12th Street, SW., Room CY-B402, 
Washington, DC 20554. The full text may also be downloaded at: 
www.fcc.gov. Alternative formats are available to persons with 
disabilities by contacting Brian Millin at (202) 418-7426 or TTY (202) 
418-7365 or at [email protected].

Paperwork Reduction Act

    The Second Report and Order portion of this document contains 
either a new or modified information collection(s). The Commission, as 
part of its continuing effort to reduce paperwork burdens, invites the 
general public and the Office of Management and Budget (OMB) to comment 
on the information collections contained in this Second Report and 
Order, as required by the Paperwork Reduction Act of 1995, Public Law 
104-13. Public and agency comments are due January 27, 2004.
    In addition to filing comments with the Secretary, a copy of any 
PRA comments on the information collections contained herein should be 
submitted to Leslie Smith, Federal Communications Commission, Room 1-
A804, 445 12th Street, SW., Washington, DC 20554, or via the Internet 
to [email protected], and to Kim A. Johnson, OMB Desk Officer, Room 
10236 NEOB, 725 17th Street, NW., Washington, DC 20503, or via the 
Internet to [email protected].

Summary of the Second Report and Order

    1. In the Second Report and Order portion of this Second Report and 
Order and Second Further Notice of Proposed Rulemaking, the Commission 
is adopting final rules that set technical and other criteria that 
manufacturers would have to meet in order to label or market 
unidirectional digital cable televisions and other unidirectional 
digital cable products as ``digital cable ready.'' This regime includes 
testing and self-certification standards. The final rules also require 
consumer information disclosures to purchasers of unidirectional 
digital cable televisions receivers in appropriate post-sale materials 
that describe the functionality of these devices and the need to obtain 
a security module from their cable operator. Cable operators with 
digital systems of 750 MHz or greater activated channel capacity will 
be required to support operation of unidirectional digital cable 
products on digital cable systems. Certain other technical support 
requirements apply to all digital cable systems, regardless of channel 
capacity, including those systems whole only digital programming comes 
from HITS. In addition, all cable operators will be required to supply 
digital subscribers with point-of-deployment modules (``PODs'') and 
high definition set-top boxes that comply with certain technical 
standards by April 1, 2004 and July 1, 2005 deadlines. Finally, all 
MVPDs would be prohibited from encoding content to activate selectable 
output controls on consumer premises equipment, or the down-resolution 
of unencrypted broadcast television programming. MVPDs would also be 
limited in the levels of copy protection

[[Page 66729]]

that could be applied to various categories of programming.
    2. Paperwork Reduction Act: This Second Report and Order contains 
either a new or modified information collection(s). The Commission, as 
part of its continuing effort to reduce paperwork burdens, invites the 
general public to comment on the information collection(s) contained in 
this Second Report and Order as required by the Paperwork Reduction Act 
of 1995, Public Law 104-13. Public and agency comments are due January 
27, 2004.
    3. Final Regulatory Flexibility Analysis: As required by the 
Regulatory Flexibility Act, the Commission has prepared a Final 
Regulatory Flexibility Analysis (``FRFA'') relating to this Second 
Report and Order. The FRFA is set forth within.
    4. Ordering Clauses: It is ordered that pursuant to the authority 
contained in sections 1, 4(i) and (j), 303, 403, 601, 624A and 629 of 
the Communications Act of 1934, 47 U.S.C 151, 154(i) and (j), 303, 403, 
521, 544a and 549, that the Commission's rules are hereby amended as 
set forth herein, and shall become effective December 29, 2003, except 
that Sec. Sec.  15.123, 76.1905, and 76.1906 that contain information 
collection requirements under the PRA is not effective until approved 
by OMB. The FCC will publish a document in the Federal Register 
announcing the effective date for those sections. The Commission's 
Consumer and Governmental Affairs Bureau, Reference Information Center, 
shall send a copy of this Second Report and Order, including the Final 
Regulatory Flexibility Analysis, to the Chief Counsel for Advocacy of 
the Small Business Administration.

Final Regulatory Flexibility Analysis

    5. As required by the Regulatory Flexibility Act of 1980, as 
amended (``RFA'') an Initial Regulatory Flexibility Analysis (``IRFA'') 
was incorporated in the Further Notice of Proposed Rulemaking 
(``FNPRM''). The Commission sought written public comment on the 
proposals in the FNPRM, including comment on the IRFA. Comments were 
received on the IRFA. This present Final Regulatory Flexibility 
Analysis (``FRFA'') conforms to the RFA.
    6. Need for, and Objectives of, the Second Report and Order and 
Second Further Notice of Proposed Rulemaking. The need for FCC 
regulation in this area derives from the lack of a so-called cable 
compatibility ``plug and play'' standard for a digital cable television 
receiver and related digital cable television consumer electronics 
equipment. The absence of such a standard has been identified as a key 
impediment to the anticipated rate and scope of the transition to 
digital television (``DTV''). Such a standard would allow consumers to 
directly attach their DTV receivers to cable systems and receive 
certain cable television services without the need for an external 
navigation device. Since more than sixty percent of television 
households subscribe to cable programming services, the availability of 
digital cable television receivers and products would encourage more 
consumers to convert to DTV, thereby furthering the transition. Private 
industry negotiations between cable operators and consumer electronics 
manufacturers resulted in a Memorandum of Understanding (``MOU'') on a 
cable compatibility standard for an integrated, unidirectional digital 
cable television receiver, as well as for other unidirectional digital 
cable products. The MOU requires the consumer electronics and cable 
television industries to each commit to certain voluntary acts and 
sought the creation or revision of certain relevant Commission rules. 
The objective of the final rules, as set forth in the Second Report and 
Order portion of the Second Report and Order and Further Notice of 
Proposed Rulemaking (``Second Report and Order''), is to facilitate the 
DTV transition.
    7. Summary of Significant Issues Raised by Public Comments in 
Response to the IRFA. The Commission received comments from the 
American Cable Association (``ACA'') in response to the IRFA 
accompanying the FNPRM. In these comments, ACA expresses its support 
for the Commission's efforts to advance the DTV transition, but asks 
that the Commission take into account the special circumstances of 
smaller cable companies in this proceeding. Specifically, ACA asks that 
the Commission consider: (1) the costs of compliance for smaller cable 
systems, (2) how plug-and-play requirements might affect smaller cable 
systems that use Comcast's Headend-in-the-Sky (``HITS'') programming, 
and (3) why some of the plug-and-play requirements are limited to 
systems having 750 MHz activated channel capacity or higher, while 
other requirements apply to all digital cable systems. To the extent 
that the Commission determines that there would be a disparate cost 
impact upon small cable systems, ACA asks that the Commission consider 
waivers and an extended phase-in for small system compliance. We have 
discussed compliance impacts in this FRFA in below.
    8. 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 encompassing the terms 
``small business,'' ``small organization,'' and ``small governmental 
entity.'' 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'').
    9. Television Broadcasting. The Small Business Administration 
defines a television broadcasting station that has no more than $12 
million in annual receipts as a small business. Business concerns 
included in this industry are those ``primarily engaged in broadcasting 
images together with sound.'' According to Commission staff review of 
the BIA Publications, Inc. Master Access Television Analyzer Database 
as of May 16, 2003, about 814 of the 1,220 commercial television 
stations in the United States have revenues of $12 million or less. We 
note, however, that, in assessing whether a business concern qualifies 
as small under the above definition, business (control) affiliations 
must be included. Our estimate, therefore, likely overstates the number 
of small entities that might be affected by our action, because the 
revenue figure on which it is based does not include or aggregate 
revenues from affiliated companies. There are also 2,127 low power 
television stations (LPTV). Given the nature of this service, we will 
presume that all LPTV licensees qualify as small entities under the SBA 
definition.
    10. In addition, 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 estimate 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. Also as noted, an additional element of the 
definition of ``small business'' is that the entity must be 
independently owned

[[Page 66730]]

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.
    11. 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.
    12. 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 grown to serve over 400,000 subscribers, and others 
may have been involved in transactions that caused them to be combined 
with other cable operators. Consequently, we estimate that there are 
fewer than 1,439 small entity cable system operators that may be 
affected by the decisions and rules proposed in this Second Report and 
Order.
    13. 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.
    14. 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.
    15. 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.
    16. 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.
    17. 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.
    18. 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,

[[Page 66731]]

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.
    19. 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.
    20. In sum, there are approximately a total of 2,000 MDS/MMDS/LMDS 
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.
    21. 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
    22. 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, D.C. 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.
    23. 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 
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.
    24. 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.
    25. Description of Projected Reporting, Recordkeeping and other 
Compliance Requirements. The final rules set technical and other 
criteria that manufacturers would have to meet in order to label or 
market unidirectional digital cable televisions and other 
unidirectional digital cable products as ``digital cable ready.'' This 
regime

[[Page 66732]]

includes testing and self-certification standards. The final rules also 
require consumer information disclosures to purchasers of 
unidirectional digital cable televisions receivers in appropriate post-
sale materials that describe the functionality of these devices and the 
need to obtain a security module from their cable operator. Cable 
operators with digital systems of 750 MHz or greater activated channel 
capacity will be required to support operation of unidirectional 
digital cable products on digital cable systems. Certain other 
technical support requirements apply to all digital cable systems, 
regardless of channel capacity, including those systems whose only 
digital programming comes from HITS. In addition, all cable operators 
will be required to supply digital subscribers with point-of-deployment 
modules (``PODs'') and high definition set-top boxes that comply with 
certain technical standards by April 1, 2004 and July 1, 2005 
deadlines. Finally, all MVPDs would be prohibited from encoding content 
to activate selectable output controls on consumer premises equipment, 
or the down-resolution of unencrypted broadcast television programming. 
MVPDs would also be limited in the levels of copy protection that could 
be applied to various categories of programming.
    26. 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 (among others): (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.
    27. Because the ``digital cable ready'' labeling regime does not 
require manufacturers to affix a label to devices, we do not anticipate 
that small manufacturers will be significantly affected. Although the 
consumer information disclosure in post-sale is mandatory, we do not 
believe that it will adversely affect small manufacturers since they 
already include owner's manuals and other documentation inside 
equipment packaging.
    28. The record in this proceeding did not provide the Commission 
with detailed cost information on the digital cable system support 
requirements. In an effort to take into account the concerns of small 
cable systems, the Commission has indicated that it will consider 
waiver requests for these requirements on a case-by-case basis. As to 
the POD-provisioning mandate, cable operators are already required to 
provide PODs to subscribers by request. We therefore do not believe 
that the new provisioning requirements will have a significant impact 
on small cable systems. Likewise, we anticipate that the upcoming high 
definition set-top box deadlines will not negatively impact small 
operators since the 2004 deadline only applies to output upgrades upon 
subscriber request, and the 2005 deadline will only apply to inventory 
acquired after that date.
    29. Finally, we anticipate that the encoding prohibitions on 
selectable output controls and the down-resolution of unencrypted 
broadcast programming will largely impact upon the DBS industry, which 
is primarily composed of large entities. While the caps on copy 
protection will affect all MVPDs, we do not believe they will 
negatively impact small entities.
    30. Federal Rules Which Duplicate, Overlap, or Conflict with the 
Commission's Proposals. None.
    31. Report to Congress: The Commission will send a copy of the 
Second Report and Order, including this FRFA, in a report to be sent to 
Congress pursuant to the Congressional Review Act. In addition, the 
Commission will send a copy of the Second Report and Order, including 
this FRFA, to the Chief Counsel for Advocacy of the SBA. A copy of the 
Second Report and Order and FRFA (or summaries thereof) will also be 
published in the Federal Register.

List of Subjects

47 CFR Part 15

    Cable television, Incorporation by reference, Television.

47 CFR Part 76

    Cable television, Incorporation by reference, Recordings, 
Television.

Federal Communications Commission.
Marlene H. Dortch,
Secretary.

0
For the reasons discussed in the preamble, the Federal Communications 
Commission amends 47 CFR parts 15 and 76 as follows:

PART 15--RADIO FREQUENCY DEVICES

0
1. The authority for part 15 continues to read as follows:

    Authority: 47 U.S.C. 154, 302, 303, 304, 307, 336, and 544a.


0
2. Amend Sec.  15.19 by revising paragraph (d) to read as follows:


Sec.  15.19  Labelling requirements.

* * * * *
    (d) Consumer electronics TV receiving devices, including TV 
receivers, videocassette recorders, and similar devices, that 
incorporate features intended to be used with cable television service, 
but do not fully comply with the technical standards for cable ready 
equipment set forth in Sec.  15.118, shall not be marketed with 
terminology that describes the device as ``cable ready'' or ``cable 
compatible,'' or that otherwise conveys the impression that the device 
is fully compatible with cable service. Factual statements about the 
various features of a device that are intended for use with cable 
service or the quality of such features are acceptable so long as such 
statements do not imply that the device is fully compatible with cable 
service. Statements relating to product features are generally 
acceptable where they are limited to one or more specific features of a 
device, rather than the device as a whole. This requirement applies to 
consumer TV receivers, videocassette recorders and similar devices 
manufactured or imported for sale in this country on or after October 
31, 1994.

0
3. Add Sec.  15.38 to subpart A to read as follows:


Sec.  15.38  Incorporation by reference.

    (a) The materials listed in this section are incorporated by 
reference in this part. These incorporations by reference were approved 
by the Director of the Federal Register in accordance with 5 U.S.C. 
552(a) and 1 CFR part 51. These materials are incorporated as they 
exist on the date of the approval, and notice of any change in these 
materials will be published in the Federal Register. The materials are 
available for purchase at the corresponding addresses as noted, and all 
are available for inspection at the Office of the Federal Register, 800 
North Capitol Street, NW., suite 700, Washington, DC, and at the 
Federal Communications Commission, 445 12th. St., SW., Reference 
Information Center, Room CY-A257, Washington, DC 20554.
    (b) The following materials are available for purchase from at 
least one of the following addresses: Global

[[Page 66733]]

Engineering Documents, 15 Inverness Way East, Englewood, CO 80112 or at 
http://global.ihs.com; or American National Standards Institute, 25 
West 43rd Street, 4th Floor, New York, NY 10036 or at http://webstore.ansi.org/ansidocstore/default.asp; or Society of Cable 
Telecommunications Engineers at http://www.scte.org/standards/index.cfm.
    (1) SCTE 28 2003 (formerly DVS 295): ``Host-POD Interface 
Standard,'' 2003, IBR approved for Sec.  15.123.
    (2) SCTE 41 2003 (formerly DVS 301): ``POD Copy Protection 
System,'' 2003, IBR approved for Sec.  15.123.
    (3) ANSI/SCTE 54 2003 (formerly DVS 241): ``Digital Video Service 
Multiplex and Transport System Standard for Cable Television,'' 2003, 
IBR approved for Sec.  15.123.
    (4) ANSI/SCTE 65 2002 (formerly DVS 234): ``Service Information 
Delivered Out-of-Band for Digital Cable Television,'' 2002, IBR 
approved for Sec.  15.123.
    (5) SCTE 40 2003 (formerly DVS 313): ``Digital Cable Network 
Interface Standard,'' 2003, IBR approved for Sec.  15.123.
    (6) ANSI C63.4-1992: ``Methods of Measurement of Radio-Noise 
Emissions from Low-Voltage Electrical and Electronic Equipment in the 
Range of 9 kHz to 40 GHz,'' 1992, IBR approved for Sec.  15.31, except 
for sections 5.7, 9 and 14.
    (7) EIA IS-132: ``Cable Television Channel Identification Plan,'' 
1994, IBR approved for Sec.  15.118.
    (8) EIA-608: ``Recommended Practice for Line 21 Data Service,'' 
1994, IBR approved for Sec.  15.120.
    (9) EIA-744: ``Transport of Content Advisory Information Using 
Extended Data Service (XDS),'' 1997, IBR approved for Sec.  15.120.
    (10) EIA-708-B: ``Digital Television (DTV) Closed Captioning,'' 
1999, IBR approved for Sec.  15.122.
    (11) Third Edition of the International Special Committee on Radio 
Interference (CISPR), Pub. 22, ``Information Technology Equipment--
Radio Disturbance Characteristics--Limits and Methods of Measurement,'' 
1997, IBR approved for Sec.  15.109.
    (c) The following materials are freely available from at least one 
of the following addresses: Consumer Electronics Association, 2500 
Wilson Blvd., Arlington, VA 22201 or at http://www.ce.org/publicpolicy: 
Uni-Dir-PICS-I01-030903: ``Uni-Directional Receiving Device: 
Conformance Checklist: PICS Proforma,'' 2003, IBR approved for Sec.  
15.123.

0
4. Add Sec.  15.123 to subpart B to read as follows:


Sec.  15.123  Labeling of digital cable ready products.

    (a) The requirements of this section shall apply to unidirectional 
digital cable products. Unidirectional digital cable products are one-
way devices that accept a Point of Deployment module (POD) and which 
include, but are not limited to televisions, set-top-boxes and 
recording devices connected to digital cable systems. Unidirectional 
digital cable products do not include interactive two-way digital 
television products.
    (b) A unidirectional digital cable product may not be labeled with 
or marketed using the term ``digital cable ready,'' or other 
terminology that describes the device as ``cable ready'' or ``cable 
compatible,'' or otherwise indicates that the device accepts a POD or 
conveys the impression that the device is compatible with digital cable 
service unless it implements at a minimum the following features:
    (1) Tunes NTSC analog channels transmitted in-the-clear.
    (2) Tunes digital channels that are transmitted in compliance with 
SCTE 40 2003 (formerly DVS 313): ``Digital Cable Network Interface 
Standard'' (incorporated by reference, see Sec.  15.38), provided, 
however, that with respect to Table B.11 of that standard, the phase 
noise requirement shall be -86 dB/Hz including both in-the-clear 
channels and channels that are subject to conditional access.
    (3) Allows navigation of channels based on channel information 
(virtual channel map and source names) provided through the cable 
system in compliance with ANSI/SCTE 65 2002 (formerly DVS 234): 
``Service Information Delivered Out-of-Band for Digital Cable 
Television'' (incorporated by reference, see Sec.  15.38), and/or PSIP-
enabled navigation (ANSI/SCTE 54 2003 (formerly DVS 241): ``Digital 
Video Service Multiplex and Transport System Standard for Cable 
Television'' (incorporated by reference, see Sec.  15.38)).
    (4) Includes the POD-Host Interface specified in SCTE 28 2003 
(formerly DVS 295): ``Host-POD Interface Standard'' (incorporated by 
reference, see Sec.  15.38), and SCTE 41 2003 (formerly DVS 301): ``POD 
Copy Protection System'' (incorporated by reference, see Sec.  15.38), 
or implementation of a more advanced POD-Host Interface based on 
successor standards. Support for Internet protocol flows is not 
required.
    (5) Responds to emergency alerts that are transmitted in compliance 
with ANSI/SCTE 54 2003 (formerly DVS 241): ``Digital Video Service 
Multiplex and Transport System Standard for Cable Television'' 
(incorporated by reference, see Sec.  15.38).
    (6) In addition to the requirements of paragraphs (b)(1) through 
(5) of this section, a unidirectional digital cable television may not 
be labeled or marketed as digital cable ready or with other terminology 
as described in paragraph (b) of this section, unless it includes a DTV 
broadcast tuner as set forth in Sec.  15.117(i) and employs at least 
one specified interface in accordance with the following schedule:
    (i) For 480p grade unidirectional digital cable televisions, either 
a DVI/HDCP, HDMI/HDCP, or 480p Y,Pb,Pr interface:
    (A) Models with screen sizes 36 inches and above: 50% of a 
manufacturer's or importer's models manufactured or imported after July 
1, 2004; 100% of such models manufactured or imported after July 1, 
2005.
    (B) Models with screen sizes 32 to 35 inches: 50% of a 
manufacturer's or importer's models manufactured or imported after July 
1, 2005; 100% of such models manufactured or imported after July 1, 
2006.
    (ii) For 720p/1080i grade unidirectional digital cable televisions, 
either a DVI/HDCP or HDMI/HDCP interface:
    (A) Models with screen sizes 36 inches and above: 50% of a 
manufacturer's or importer's models manufactured or imported after July 
1, 2004; 100% of such models manufactured or imported after July 1, 
2005.
    (B) Models with screen sizes 25 to 35 inches: 50% of a 
manufacturer's or importer's models manufactured or imported after July 
1, 2005; 100% of such models manufactured or imported after July l, 
2006.
    (C) Models with screen sizes 13 to 24 inches: 100% of a 
manufacturer's or importer's models manufactured or imported after July 
1, 2007.
    (c) Before a manufacturer's or importer's first unidirectional 
digital cable product may be labeled or marketed as digital cable ready 
or with other terminology as described in paragraph (b) of this 
section, the manufacturer or importer shall verify the device as 
follows:
    (1) The manufacturer or importer shall have a sample of its first 
model of a unidirectional digital cable product tested to show 
compliance with the procedures set forth in Uni-Dir-PICS-I01-030903: 
``Uni-Directional Receiving Device: Conformance Checklist: PICS 
Proforma'' (incorporated by reference, see Sec.  15.38) at a qualified 
test facility. The manufacturer or importer shall have

[[Page 66734]]

any modifications to the product to correct failures of the procedures 
in Uni-Dir-PICS-I01-030903: ``Uni-Directional Receiving Device: 
Conformance Checklist: PICS Proforma'' (incorporated by reference, see 
Sec.  15.38) retested at a qualified test facility.
    (2) A qualified test facility is a facility representing cable 
television system operators serving a majority of the cable television 
subscribers in the United States or an independent laboratory with 
personnel knowledgeable with respect to the standards referenced in 
paragraph (b) of this section concerning the procedures set forth in 
Uni-Dir-PICS-I01-030903: ``Uni-Directional Receiving Device: 
Conformance Checklist: PICS Proforma'' (incorporated by reference, see 
Sec.  15.38).
    (3) Subsequent to the testing of its initial unidirectional digital 
cable product model, a manufacturer or importer is not required to have 
other models of unidirectional digital cable products tested at a 
qualified test facility for compliance with the procedures of Uni-Dir-
PICS-I01-030903: ``Uni-Directional Receiving Device: Conformance 
Checklist: PICS Proforma'' (incorporated by reference, see Sec.  
15.38). However, the manufacturer or importer shall ensure that all 
subsequent models of unidirectional digital cable products comply with 
the procedures in the Uni-Dir-PICS-I01-030903: ``Uni-Directional 
Receiving Device: Conformance Checklist: PICS Proforma'' (incorporated 
by reference, see Sec.  15.38) and all other applicable rules and 
standards. The manufacturer or importer shall maintain records 
indicating such compliance in accordance with the verification 
procedure requirements in part 2, subpart J of this chapter. The 
manufacturer or importer shall further submit documentation verifying 
compliance with the procedures in the Uni-Dir-PICS-I01-030903: ``Uni-
Directional Receiving Device: Conformance Checklist: PICS Proforma'' 
(incorporated by reference, see Sec.  15.38) to a facility representing 
cable television system operators serving a majority of the cable 
television subscribers in the United States.
    (d) Manufacturers and importers shall provide in appropriate post-
sale material that describes the features and functionality of the 
product, such as the owner's guide, the following language: ``This 
digital television is capable of receiving analog basic, digital basic 
and digital premium cable television programming by direct connection 
to a cable system providing such programming. A security card provided 
by your cable operator is required to view encrypted digital 
programming. Certain advanced and interactive digital cable services 
such as video-on-demand, a cable operator's enhanced program guide and 
data-enhanced television services may require the use of a set-top box. 
For more information call your local cable operator.''

PART 76--MULTICHANNEL VIDEO AND CABLE TELEVISION SERVICE

0
5. The authority citation for part 76 continues to read as follows:

    Authority: 47 U.S.C. 151, 152, 153, 154, 301, 302, 303, 303a, 
307, 308, 309, 312, 317, 325, 338, 339, 503, 521, 522, 531, 532, 
533, 534, 535, 536, 537, 543, 544, 544a, 545, 548, 549, 552, 554, 
556, 558, 560, 531, 571, 572, and 573.

0
6. Add Sec.  76.602 to subpart K to read as follows:


Sec.  76.602  Incorporation by reference.

    (a) The materials listed in this section are incorporated by 
reference in this part. These incorporations by reference were approved 
by the Director of the Federal Register in accordance with 5 U.S.C. 
552(a) and 1 CFR part 51. These materials are incorporated as they 
exist on the date of the approval, and notice of any change in these 
materials will be published in the Federal Register. The materials are 
available for purchase at the corresponding addresses as noted, and all 
are available for inspection at the Office of the Federal Register, 800 
North Capitol Street, NW., suite 700, Washington, DC, and at the 
Federal Communications Commission, 445 12th. St., SW., Reference 
Information Center, Room CY-A257, Washington, DC 20554.
    (b) The following materials are available for purchase from at 
least one of the following addresses: Global Engineering Documents, 15 
Inverness Way East, Englewood, CO 80112 or at http://global.ihs.com; or 
American National Standards Institute, 25 West 43rd Street, 4th Floor, 
New York, NY 10036 or at http://webstore.ansi.org/ansidocstore/default.asp; or Society of Cable Telecommunications Engineers at http://www.scte.org/standards/index.cfm; or Advanced Television Systems 
Committee, 1750 K Street, NW., Suite 1200, Washington, DC 20006 or at 
http://www.atsc.org/standards.
    (1) ANSI/SCTE 26 2001 (formerly DVS 194): ``Home Digital Network 
Interface Specification with Copy Protection,'' 2001, IBR approved for 
Sec.  76.640.
    (2) SCTE 28 2003 (formerly DVS 295): ``Host-POD Interface 
Standard,'' 2003, IBR approved for Sec.  76.640.
    (3) SCTE 41 2003 (formerly DVS 301): ``POD Copy Protection 
System,'' 2003, IBR approved for Sec.  76.640.
    (4) ANSI/SCTE 54 2003 (formerly DVS 241), ``Digital Video Service 
Multiplex and Transport System Standard for Cable Television,'' 2003, 
IBR approved for Sec.  76.640.
    (5) ANSI/SCTE 65 2002 (formerly DVS 234), ``Service Information 
Delivered Out-of-Band for Digital Cable Television,'' 2002, IBR 
approved for Sec.  76.640.
    (6) CEA-931-A, ``Remote Control Command Pass-through Standard for 
Home Networking,'' 2003, IBR approved for Sec.  76.640.
    (7) SCTE 40 2003 (formerly DVS 313), ``Digital Cable Network 
Interface Standard,'' 2003, IBR approved for Sec.  76.640.
    (8) ATSC A/65B: ``ATSC Standard: Program and System Information 
Protocol for Terrestrial Broadcast and Cable (Revision B),'' March 18, 
2003, IBR approved for Sec.  76.640.
    (9) EIA IS-132: ``Cable Television Channel Identification Plan,'' 
1994, IBR approved for Sec.  76.605.

0
7. Add Sec.  76.640 to subpart B to read as follows:


Sec.  76.640  Support for unidirectional digital cable products on 
digital cable systems.

    (a) The requirements of this section shall apply to digital cable 
systems. For purposes of this section, digital cable systems shall be 
defined as a cable system with one or more channels utilizing QAM 
modulation for transporting programs and services from its headend to 
receiving devices. Cable systems that only pass through 8 VSB broadcast 
signals shall not be considered digital cable systems.
    (b) No later than July 1, 2004, cable operators shall support 
unidirectional digital cable products, as defined in Sec.  15.123 of 
this chapter, through the provisioning of Point of Deployment modules 
(PODs) and services, as follows:
    (1) Digital cable systems with an activated channel capacity of 750 
MHz or greater shall comply with the following technical standards and 
requirements:
    (i) SCTE 40 2003 (formerly DVS 313): ``Digital Cable Network 
Interface Standard'' (incorporated by reference, see Sec.  76.602), 
provided however that with respect to Table B.11, the Phase Noise 
requirement shall be -86 dB/Hz, and also provided that the ``transit 
delay for most distant customer'' requirement in Table B.3 is not 
mandatory.
    (ii) ANSI/SCTE 65 2002 (formerly DVS 234): ``Service Information 
Delivered Out-of-Band for Digital Cable Television'' (incorporated by 
reference, see Sec.  76.602), provided however that the

[[Page 66735]]

referenced Source Name Subtable shall be provided for Profiles 1, 2, 
and 3.
    (iii) ANSI/SCTE 54 2003 (formerly DVS 241): ``Digital Video Service 
Multiplex and Transport System Standard for Cable Television'' 
(incorporated by reference, see Sec.  76.602).
    (iv) For each digital transport stream that includes one or more 
services carried in-the-clear, such transport stream shall include 
virtual channel data in-band in the form of ATSC A/65B: ``ATSC 
Standard: Program and System Information Protocol for Terrestrial 
Broadcast and Cable (Revision B)'' (incorporated by reference, see 
Sec.  76.602), when available from the content provider. With respect 
to in-band transport:
    (A) The data shall, at minimum, describe services carried within 
the transport stream carrying the PSIP data itself;
    (B) PSIP data describing a twelve-hour time period shall be carried 
for each service in the transport stream. This twelve-hour period 
corresponds to delivery of the following event information tables: EIT-
0, -1, -2 and -3;
    (C) The format of event information data format shall conform to 
ATSC A/65B: ``ATSC Standard: Program and System Information Protocol 
for Terrestrial Broadcast and Cable (Revision B)'' (incorporated by 
reference, see Sec.  76.602);
    (D) Each channel shall be identified by a one- or two-part channel 
number and a textual channel name; and
    (E) The total bandwidth for PSIP data may be limited by the cable 
system to 80 kbps for a 27 Mbits multiplex and 115 kbps for a 38.8 
Mbits multiplex.
    (v) When service information tables are transmitted out-of-band for 
scrambled services:
    (A) The data shall, at minimum, describe services carried within 
the transport stream carrying the PSIP data itself;
    (B) A virtual channel table shall be provided via the extended 
channel interface from the POD module. Tables to be included shall 
conform to ANSI/SCTE 65 2002 (formerly DVS 234): ``Service Information 
Delivered Out-of-Band for Digital Cable Television'' (incorporated by 
reference, see Sec.  76.602).
    (C) Event information data when present shall conform to ANSI/SCTE 
65 2002 (formerly DVS 234): ``Service Information Delivered Out-of-Band 
for Digital Cable Television'' (incorporated by reference, see Sec.  
76.602) (profiles 4 or higher).
    (D) Each channel shall be identified by a one-or two-part channel 
number and a textual channel name; and
    (E) The channel number identified with out-of-band signaling 
information data should match the channel identified with in-band PSIP 
data for all unscrambled in-the-clear services.
    (2) All digital cable systems shall comply with:
    (i) SCTE 28 2003 (formerly DVS 295): ``Host-POD Interface 
Standard'' (incorporated by reference, see Sec.  76.602).
    (ii) SCTE 41 2003 (formerly DVS 301): ``POD Copy Protection 
System'' (incorporated by reference, see Sec.  76.602).
    (3) Cable operators shall ensure, as to all digital cable systems, 
an adequate supply of PODs that comply with the standards specified in 
paragraph (b)(2) of this section to ensure convenient access to such 
PODS by customers. Without limiting the foregoing, cable operators may 
provide more advanced PODs (i.e., PODs that are based on successor 
standards to those specified in paragraph (b)(2) of this section) to 
customers whose unidirectional digital cable products are compatible 
with the more advanced PODs.
    (4) Cable operators shall:
    (i) Effective April 1, 2004, upon request of a customer, replace 
any leased high definition set-top box, which does not include a 
functional IEEE 1394 interface, with one that includes a functional 
IEEE 1394 interface or upgrade the customer's set-top box by download 
or other means to ensure that the IEEE 1394 interface is functional.
    (ii) Effective July 1, 2005, include both a DVI or HDMI interface 
and an IEEE 1394 interface on all high definition set-top boxes 
acquired by a cable operator for distribution to customers.
    (iii) Ensure that these cable operator-provided high definition 
set-top boxes shall comply with ANSI/SCTE 26 2001 (formerly DVS 194): 
``Home Digital Network Interface Specification with Copy Protection'' 
(incorporated by reference, see Sec.  76.602), with transmission of 
bit-mapped graphics optional, and shall support the CEA-931-A: ``Remote 
Control Command Pass-through Standard for Home Networking'' 
(incorporated by reference, see Sec.  76.602), pass through control 
commands: tune function, mute function, and restore volume function. In 
addition these boxes shall support the power control commands (power 
on, power off, and status inquiry) defined in A/VC Digital Interface 
Command Set General Specification Version 4.0 (as referenced in ANSI/
SCTE 26 2001 (formerly DVS 194): ``Home Digital Network Interface 
Specification with Copy Protection'' (incorporated by reference, see 
Sec.  76.602)).

0
8. Add subpart W to read as follows:

Subpart W--Encoding Rules

Sec.
76.1901 Applicability.
76.1902 Definitions.
76.1903 Interfaces.
76.1904 Encoding rules for defined business models.
76.1905 Petitions to modify encoding rules for new services within 
defined business models.
76.1906 Encoding rules for undefined business models.
76.1907 Temporary bona fide trials.
76.1908 Certain practices not prohibited.


Sec.  76.1901  Applicability.

    (a) Each multi-channel video programming distributor shall comply 
with the requirements of this subpart.
    (b) This subpart shall not apply to distribution of any content 
over the Internet, nor to a multichannel video programming 
distributor's operations via cable modem or DSL.
    (c) With respect to cable system operators, this subpart shall 
apply only to cable services. This subpart shall not apply to cable 
modem services, whether or not provided by a cable system operator or 
affiliate.


Sec.  76.1902  Definitions.

    (a) Commercial advertising messages shall mean, with respect to any 
service, program, or schedule or group of programs, commercial 
advertising messages other than:
    (1) Advertising relating to such service itself or the programming 
contained therein,
    (2) Interstitial programming relating to such service itself or the 
programming contained therein, or
    (3) Any advertising which is displayed concurrently with the 
display of any part of such program(s), including but not limited to 
``bugs,'' ``frames'' and ``banners.''
    (b) Commercial audiovisual content shall mean works that consist of 
a series of related images which are intrinsically intended to be shown 
by the use of machines, or devices such as projectors, viewers, or 
electronic equipment, together with accompanying sounds, if any, 
regardless of the nature of the material objects, such as films or 
tapes, in which the works are embodied, transmitted by a covered entity 
and that are:
    (1) Not created by the user of a covered product, and

[[Page 66736]]

    (2) Offered for transmission, either generally or on demand, to 
subscribers or purchasers or the public at large or otherwise for 
commercial purposes, not uniquely to an individual or a small, private 
group.
    (c) Commercially adopted access control method shall mean any 
commercially adopted access control method including digitally 
controlled analog scrambling systems, whether now or hereafter in 
commercial use.
    (d) Copy never shall mean, with respect to commercial audiovisual 
content, the encoding of such content so as to signal that such content 
may not to be copied by a covered product.
    (e) Copy one generation shall mean, with respect to commercial 
audiovisual content, the encoding of such content so as to permit a 
first generation of copies to be made by a covered product but not 
copies of such first generation of copies.
    (f) Copy no more shall mean, with respect to commercial audiovisual 
content, the encoding of such content so as to reflect that such 
content is a first generation copy of content encoded as copy one 
generation and no further copies are permitted.
    (g) Covered product shall mean a device used by consumers to access 
commercial audiovisual content offered by a covered entity (excluding 
delivery via cable modem or the Internet); and any device to which 
commercial audiovisual content so delivered from such covered product 
may be passed, directly or indirectly.
    (h) Covered entity shall mean any entity that is subject to this 
subpart.
    (i) Defined business model shall mean video-on-demand, pay-per 
view, pay television transmission, non-premium subscription television, 
free conditional access delivery and unencrypted broadcast television.
    (j) Encode shall mean, in the transmission of commercial 
audiovisual content, to pass, attach, embed, or otherwise apply to, 
associate with, or allow to persist in or remain associated with such 
content, data or information which when read or responded to in a 
covered device has the effect of preventing, pausing, or limiting 
copying, or constraining the resolution of a program when output from 
the covered device.
    (k) Encoding rules shall mean the requirements or prohibitions 
describing or limiting encoding of audiovisual content as set forth in 
this subpart.
    (l) Free conditional access delivery shall mean a delivery of a 
service, program, or schedule or group of programs via a commercially-
adopted access control method, where viewers are not charged any fee 
(other than government-mandated fees) for the reception or viewing of 
the programming contained therein, other than unencrypted broadcast 
television.
    (m) Non-premium subscription television shall mean a service, or 
schedule or group of programs (which may be offered for sale together 
with other services, or schedule or group of programs), for which 
subscribers are charged a subscription fee for the reception or viewing 
of the programming contained therein, other than pay television, 
subscription-on-demand and unencrypted broadcast television. By way of 
example, ``basic cable service'' and ``extended basic cable service'' 
(other than unencrypted broadcast television) are ``non-premium 
subscription television.''
    (n) Pay-per-view shall mean a delivery of a single program or a 
specified group of programs, as to which each such single program is 
generally uninterrupted by commercial advertising messages and for 
which recipients are charged a separate fee for each program or 
specified group of programs. The term pay-per-view shall also include 
delivery of a single program for which multiple start times are made 
available at time intervals which are less than the running time of 
such program as a whole. If a given delivery qualifies both as pay-per-
view and a pay television transmission, then, for purposes of this 
subpart, such delivery shall be deemed pay-per-view rather than a pay 
television transmission.
    (o) Pay television transmission shall mean a transmission of a 
service or schedule of programs, as to which each individual program is 
generally uninterrupted by commercial advertising messages and for 
which service or schedule of programs subscribing viewers are charged a 
periodic subscription fee, such as on a monthly basis, for the 
reception of such programming delivered by such service whether 
separately or together with other services or programming, during the 
specified viewing period covered by such fee. If a given delivery 
qualifies both as a pay television transmission and pay-per-view, 
video-on-demand, or subscription-on-demand then, for purposes of this 
subpart, such delivery shall be deemed pay-per-view, video-on-demand or 
subscription-on-demand rather than a pay television transmission.
    (p) Program shall mean any work of commercial audiovisual content.
    (q) Subscription-on-demand shall mean the delivery of a single 
program or a specified group of programs for which:
    (1) A subscriber is able, at his or her discretion, to select the 
time for commencement of exhibition thereof,
    (2) Where each such single program is generally uninterrupted by 
commercial advertising messages; and
    (3) For which program or specified group of programs subscribing 
viewers are charged a periodic subscription fee for the reception of 
programming delivered by such service during the specified viewing 
period covered by the fee. In the event a given delivery of a program 
qualifies both as a pay television transmission and subscription-on-
demand, then for purposes of this subpart, such delivery shall be 
deemed subscription-on-demand rather than a pay television 
transmission.
    (r) Undefined business model shall mean a business model that does 
not fall within the definition of a defined business model.
    (s) Unencrypted broadcast television means any service, program, or 
schedule or group of programs, that is a further transmission of a 
broadcast transmission (i.e., an over-the-air transmission for 
reception by the general public using radio frequencies allocated for 
that purpose) that substantially simultaneously is made by a 
terrestrial television broadcast station located within the country or 
territory in which the entity further transmitting such broadcast 
transmission also is located, where such broadcast transmission is not 
subject to a commercially-adopted access control method (e.g., is 
broadcast in the clear to members of the public receiving such 
broadcasts), regardless of whether such entity subjects such further 
transmission to an access control method.
    (t) Video-on-demand shall mean a delivery of a single program or a 
specified group of programs for which:
    (1) Each such individual program is generally uninterrupted by 
commercial advertising messages;
    (2) Recipients are charged a separate fee for each such single 
program or specified group of programs; and
    (3) A recipient is able, at his or her discretion, to select the 
time for commencement of exhibition of such individual program or 
specified group of programs. In the event a delivery qualifies as both 
video-on-demand and a pay television transmission, then for purposes of 
this subpart, such delivery shall be deemed video-on-demand.


Sec.  76.1903  Interfaces.

    A covered entity shall not attach or embed data or information with 
commercial audiovisual content, or otherwise apply to, associate with, 
or

[[Page 66737]]

allow such data to persist in or remain associated with such content, 
so as to prevent its output through any analog or digital output 
authorized or permitted under license, law or regulation governing such 
covered product.


Sec.  76.1904  Encoding rules for defined business models.

    (a) Commercial audiovisual content delivered as unencrypted 
broadcast television shall not be encoded so as to prevent or limit 
copying thereof by covered products or, to constrain the resolution of 
the image when output from a covered product.
    (b) Except for a specific determination made by the Commission 
pursuant to a petition with respect to a defined business model other 
than unencrypted broadcast television, or an undefined business model 
subject to the procedures set forth in Sec.  76.1906:
    (1) Commercial audiovisual content shall not be encoded so as to 
prevent or limit copying thereof except as follows:
    (i) To prevent or limit copying of video-on-demand or pay-per-view 
transmissions, subject to the requirements of paragraph (b)(2) of this 
section; and
    (ii) To prevent or limit copying, other than first generation of 
copies, of pay television transmissions, non-premium subscription 
television, and free conditional access delivery transmissions; and
    (2) With respect to any commercial audiovisual content delivered or 
transmitted in form of a video-on-demand or pay-per-view transmission, 
a covered entity shall not encode such content so as to prevent a 
covered product, without further authorization, from pausing such 
content up to 90 minutes from initial transmission by the covered 
entity (e.g., frame-by-frame, minute-by-minute, megabyte by megabyte).


Sec.  76.1905  Petitions to modify encoding rules for new services 
within defined business models.

    (a) The encoding rules for defined business models in Sec.  76.1904 
reflect the conventional methods for packaging programs in the MVPD 
market as of December 31, 2002, and are presumed to be the appropriate 
rules for defined business models. A covered entity may petition the 
Commission for approval to allow within a defined business model, other 
than unencrypted broadcast television, the encoding of a new service in 
a manner different from the encoding rules set forth in Sec.  
76.1904(b)(1) and (2). No such petition will be approved under the 
public interest test set forth in paragraph (c)(4) of this section 
unless the new service differs from existing services provided by any 
covered entity under the applicable defined business model prior to 
December 31, 2002.
    (b) Petitions. A petition to encode a new service within a defined 
business model other than as permitted by the encoding rules set forth 
in Sec.  76.1904(b)(1) and (2) shall describe:
    (1) The defined business model, the new service, and the proposed 
encoding terms, including the use of copy never and copy one generation 
encoding, and the encoding of content with respect to ``pause'' set 
forth in Sec.  76.1904(b)(2).
    (2) Whether the claimed benefit to consumers of the new service, 
including, but not limited to, the availability of content in earlier 
release windows, more favorable terms, innovation or original 
programming, outweighs the limitation on the consumers' control over 
the new service;
    (3) The ways in which the new service differs from existing 
services offered by any covered entity within the applicable defined 
business model prior to December 31, 2002;
    (4) All other pertinent facts and considerations relied on to 
support a determination that grant of the petition would serve the 
public interest.
    (5) Factual allegations shall be supported by affidavit or 
declaration of a person or persons with actual knowledge of the facts, 
and exhibits shall be verified by the person who prepares them.
    (c) Petition process--(1) Public notice. The Commission shall give 
public notice of any such petition.
    (2) Comments. Interested persons may submit comments or oppositions 
to the petition within thirty (30) days after the date of public notice 
of the filing of such petition. Comments or oppositions shall be served 
on the petitioner and on all persons listed in petitioner's certificate 
of service, and shall contain a detailed full statement of any facts or 
considerations relied on. Factual allegations shall be supported by 
affidavit or declaration of a person or persons with actual knowledge 
of the facts, and exhibits shall be verified by the person who prepares 
them.
    (3) Replies. The petitioner may file a reply to the comments or 
oppositions within ten (10) days after their submission, which shall be 
served on all persons who have filed pleadings and shall also contain a 
detailed full showing, supported by affidavit or declaration, of any 
additional facts or considerations relied on. There shall be no further 
pleadings filed after petitioner's reply, unless authorized by the 
Commission.
    (4) Commission determination as to encoding rules for a new service 
within a defined business model.
    (i) Proceedings initiated by petitions pursuant to this section 
shall be permit-but-disclose proceedings, unless otherwise specified by 
the Commission. The covered entity shall have the burden of proof to 
establish that the proposed change in encoding rules for a new service 
is in the public interest. In making its determination, the Commission 
shall take into account the following factors:
    (A) Whether the benefit to consumers of the new service, including 
but not limited to earlier release windows, more favorable terms, 
innovation or original programming, outweighs the limitation on the 
consumers' control over the new service;
    (B) Ways in which the new service differs from existing services 
offered by any covered entity within the applicable defined business 
model prior to December 31, 2002; and
    (ii) The Commission may specify other procedures, such as oral 
argument, evidentiary hearing, or further written submissions directed 
to particular aspects, as it deems appropriate.
    (iii) A petition may, upon request of the petitioner, be dismissed 
without prejudice as a matter of right prior to the adoption date of 
any final action taken by the Commission with respect to the petition. 
A petitioner's request for the return of a petition will be regarded as 
a request for dismissal.
    (d) Complaint regarding a new service not subject to petition. In 
an instance in which an interested party has a substantial basis to 
believe and does believe in good faith that a new service within a 
defined business model has been launched without a petition as required 
by this section, such party may file a complaint pursuant to Sec.  
76.7.


Sec.  76.1906  Encoding rules for undefined business models.

    (a) Upon public notice and subject to requirements as set forth 
herein, a covered entity may launch a program service pursuant to an 
undefined business model. Subject to Commission review upon complaint, 
the covered entity may initially encode programs pursuant to such 
undefined business model without regard to limitations set forth in 
Sec.  76.1904(b).
    (1) Notice. Concurrent with the launch of an undefined business 
model by a covered entity, the covered entity shall issue a press 
release to the PR Newswire so as to provide public notice of the 
undefined business model, and the proposed encoding terms. The notice 
shall provide a concise summary

[[Page 66738]]

of the commercial audiovisual content to be provided pursuant to the 
undefined business model, and of the terms on which such content is to 
be available to consumers. Immediately upon request from a party 
entitled to be a complainant, the covered entity shall make available 
information that indicates the proposed encoding terms, including the 
use of copy never or copy one generation encoding, and the encoding of 
content with respect to ``pause'' as defined in Sec.  76.1904(b)(2).
    (2) Complaint process. Any interested party (``complainant'') may 
file a complaint with the Commission objecting to application of 
encoding as set forth in the notice.
    (i) Pre-complaint resolution. Prior to initiating a complaint with 
the Commission under this section, the complainant shall notify the 
covered entity that it may file a complaint under this section. The 
notice must be sufficiently detailed so that the covered entity can 
determine the specific nature of the potential complaint. The potential 
complainant must allow a minimum of thirty (30) days from such notice 
before filing such complaint with the Commission. During this period 
the parties shall endeavor in good faith to resolve the issue(s) in 
dispute. If the parties fail to reach agreement within this 30 day 
period, complainant may initiate a complaint in accordance with the 
procedures set forth herein.
    (ii) Complaint. Within two years of publication of a notice under 
paragraph (a)(1) of this section, a complainant may file a complaint 
with the Commission objecting to application of the encoding terms to 
the service at issue. Such complaint shall state with particularity the 
basis for objection to the encoding terms.
    (A) The complaint shall contain the name and address of the 
complainant and the name and address of the covered entity.
    (B) The complaint shall be accompanied by a certification of 
service on the named covered entity.
    (C) The complaint shall set forth with specificity all information 
and arguments relied upon. Specific factual allegations shall be 
supported by a declaration of a person or persons with actual knowledge 
of the facts, and exhibits shall be verified by the person who prepares 
them.
    (D) The complaint shall set forth attempts made by the complainant 
to resolve its complaint pursuant to paragraph (a)(2)(i) of this 
section.
    (iii) Public notice. The Commission shall give public notice of the 
filing of the complaint. Once the Commission has issued such public 
notice, any person otherwise entitled to be a complainant shall instead 
have the status of a person submitting comments under paragraph 
(a)(2)(iv) of this section rather than a complainant.
    (iv) Comments and reply.
    (A) Any person may submit comments regarding the complaint within 
thirty (30) days after the date of public notice by the Commission. 
Comments shall be served on the complainant and the covered entity and 
on any persons listed in relevant certificates of service, and shall 
contain a detailed full statement of any facts or considerations relied 
on. Specific factual allegations shall be supported by a declaration of 
a person or persons with actual knowledge of the facts, and exhibits 
shall be verified by the person who prepares them.
    (B) The covered entity may file a response to the complaint and 
comments within twenty (20) days after the date that comments are due. 
Such response shall be served on all persons who have filed complaints 
or comments and shall also contain a detailed full showing, supported 
by affidavit or declaration, of any additional facts or considerations 
relied on. Replies shall be due ten (10) days from the date for filing 
a response.
    (v) Basis for Commission determination as to encoding terms for an 
undefined business model. In a permit-but-disclose proceeding, unless 
otherwise specified by the Commission, to determine whether encoding 
terms as noticed may be applied to an undefined business model, the 
covered entity shall have the burden of proof to establish that 
application of the encoding terms in the undefined business model is in 
the public interest. In making any such determination, the Commission 
shall take into account the following factors:
    (A) Whether the benefit to consumers of the new service, including 
but not limited to earlier release windows, more favorable terms, 
innovation or original programming, outweighs the limitation on the 
consumers' control over the new service;
    (B) Ways in which the new service differs from services offered by 
any covered entity prior to December 31, 2002;
    (vi) Determination procedures. The Commission may specify other 
procedures, such as oral argument, evidentiary hearing, or further 
written submissions directed to particular aspects, as it deems 
appropriate.
    (b) Complaint regarding a service not subject to notice. In an 
instance in which an interested party has a substantial basis to 
believe and believes in good faith that a service pursuant to an 
undefined business model has been launched without requisite notice, 
such party may file a complaint pursuant to Sec.  76.7.


Sec.  76.1907  Temporary bona fide trials.

    The obligations and procedures as to encoding rules set forth in 
Sec. Sec.  76.1904(b) and (c) and 76.1905(a) and (b) do not apply in 
the case of a temporary bona fide trial of a service.


Sec.  76.1908  Certain practices not prohibited.

    Nothing in this subpart shall be construed as prohibiting a covered 
entity from:
    (a) Encoding, storing or managing commercial audiovisual content 
within its distribution system or within a covered product under the 
control of a covered entity's commercially adopted access control 
method, provided that the outcome for the consumer from the application 
of the encoding rules set out in Sec.  76.1904(a) and (b) is unchanged 
thereby when such commercial audiovisual content is released to 
consumer control, or
    (b) Causing, with respect to a specific covered product, the output 
of content from such product in a format as necessary to match the 
display format of another device connected to such product, including 
but not limited to providing for content conversion between widely-used 
formats for the transport, processing and display of audiovisual 
signals or data, such as between analog and digital formats and between 
PAL and NTSC or RGB and Y,Pb,Pr.

[FR Doc. 03-29520 Filed 11-26-03; 8:45 am]
BILLING CODE 6712-01-P