[Federal Register Volume 70, Number 1 (Monday, January 3, 2005)]
[Rules and Regulations]
[Pages 25-38]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 04-28173]


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FEDERAL COMMUNICATIONS COMMISSION

47 CFR Parts 73 and 76

[MM Docket No. 00-167; FCC 04-221]


Broadcast Services; Children's Television; Cable Operators

AGENCY: Federal Communications Commission.

ACTION: Final rule.

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SUMMARY: This document resolves a number of issues regarding the 
obligation of television broadcasters to protect and serve children in 
their audience. The document addresses matters related to two areas: 
the obligation of television broadcast licensees to provide educational 
and informational programming for children and the requirement that 
television broadcast licensees protect children from excessive and 
inappropriate commercial messages. The Commission goal is to provide 
television broadcasters with guidance regarding their obligation to 
serve children as we transition from an analog to a digital television 
environment, and to improve our children's programming rules and 
policies.

DATES: 47 CFR 73.670(a), (b) and (c) and Note 2, 47 CFR 73.673, and 47 
CFR 76.225(b) and (c) are effective February 1, 2005. 47 CFR 73.670, 
Note 1; 47 CFR 73.671 (c)(6), (c)(7), (d), (e), and (f) and Note 2; and 
47 CFR 76.225 (d) and Note 1 are effective January 1, 2006. 47 CFR 
73.671(c)(5) and 47 CFR 73.3526(e)(11)(iii) contain information 
collection requirements that have not been approved by the Office of 
Management and Budget (OMB). The FCC will publish a document announcing 
the effective date for these sections.

ADDRESSES: Federal Communications Commission, Washington, DC 20554.

FOR FURTHER INFORMATION CONTACT: Kim Matthews, Media Bureau, (202) 418-
2120.

[[Page 26]]


SUPPLEMENTARY INFORMATION: This is a summary of the Federal 
Communications Commission's Report and Order in MM Docket No. 00-167, 
FCC 04-221, adopted September 9, 2004, and released November 23, 2004. 
The complete 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: http://www.fcc.gov. To request materials in 
accessible formats for people with disabilities (braille, large print, 
electronic file, audio format), send an e-mail to [email protected] or 
call the Consumer & Governmental Affairs Bureau at (202) 418-0530 
(voice), (202) 418-0432 (TTY).
    Paperwork Reduction Act: This document contains modified 
information collections subject to the Paperwork Reduction Act of 1995 
(PRA), Public Law 104-13. It will be submitted to the Office of 
Management and Budget (OMB) for review under section 3507(d) of the 
PRA. OMB, the general public, and other Federal agencies will be 
invited to comment on the modified and proposed information collection 
requirements contained in this proceeding.

Summary of the Report and Order and Further Notice of Proposed Rule 
Making

    1. In this Report and Order we resolve a number of issues raised in 
the Notice of Proposed Rulemaking (65 FR 66951-01, November 8, 2000) 
regarding the obligation of television broadcasters to protect and 
serve children in their audience. We address matters related to two 
areas: The obligation of television broadcast licensees to provide 
educational and informational programming for children and the 
requirement that television broadcast licensees protect children from 
excessive and inappropriate commercial messages. For purposes of the 
Children's Television Act of 1990, which provides the basis for these 
limits on children's television commercial content, ``the term 
`commercial television broadcast licensee' includes a cable operator, 
as defined in section 602 of the Communications Act of 1934 (47 U.S.C. 
522).'' While some of the rules and policies we adopt herein apply only 
to digital broadcasters, others apply to both analog and digital 
broadcasters as well as cable operators. Our goals in resolving these 
issues are to provide television broadcasters with guidance regarding 
their obligation to serve children as we transition from an analog to a 
digital television environment, and to improve our children's 
programming rules and policies.
    2. First, we address the obligation of digital television (``DTV'') 
broadcasters to provide children's educational and informational 
programming and, specifically, how that obligation applies to DTV 
broadcasters that use the multicast capability of their ATSC digital 
service to broadcast multiple program services. We adopt an approach 
pursuant to which digital broadcasters that choose to provide streams 
or hours of free video programming in addition to their required free 
over-the-air video program service will have an increased core 
programming benchmark roughly proportional to the additional amount of 
free video programming they choose to provide. Second, for both analog 
and digital broadcasters, we limit the number of preemptions allowed 
under our processing guideline to no more than 10 percent of core 
programs in each calendar quarter. A station that fails to meet the 
processing guideline because of excessive preemptions may still receive 
staff-level approval of its renewal application if it demonstrates that 
it has aired a package of educational and informational programming, 
including specials, PSAs, short-form programs, and regularly scheduled 
non-weekly programs with a significant purpose of educating and 
informing children, that demonstrates a commitment to educating and 
informing children at least equivalent to airing the amount of core 
programming indicated by the processing guideline. Licensees that do 
not qualify for staff level approval will have their license renewal 
applications referred to the Commission where they will have an 
additional opportunity to demonstrate compliance with the CTA. Third, 
we amend our rule regarding on-air identification of core programming 
to require both analog and digital broadcasters to identify such 
programming with the same symbol, E/I, which must be displayed 
throughout the program in order for the program to qualify as core 
educational programming. Fourth, we clarify that the children's 
television commercial limits and policies apply to all digital video 
programming directed to children ages 12 and under. Fifth, we interpret 
the commercial time limits to require that the display of Internet Web 
site addresses during program material is permitted as within the time 
limits only if the Web site meets certain requirements, including the 
requirement that it offer a substantial amount of bona fide program-
related or other noncommercial content and is not primarily intended 
for commercial purposes. Sixth, we revise our definition of 
``commercial matter'' to include promotions of television programs or 
video programming services other than children's educational and 
informational programming. Educational and Informational Programming.

Digital Core Children's Programming Processing Guideline

    3. One of the questions posed in the Notice is how the current 
three-hour children's core educational programming processing guideline 
should apply to a DTV broadcaster that chooses to multicast. We asked 
if the processing guideline should apply to only one digital 
broadcasting program stream, to more than one program stream, or to all 
program streams the broadcaster chooses to provide. We also noted that 
DTV broadcasters may choose to devote a portion of their spectrum to 
either non-video services, such as datacasting, or to subscription 
video services available only to viewers who pay a fee, consistent with 
the requirement that they provide at least one free, over-the-air video 
program service to viewers. We asked whether the guideline should apply 
only to free broadcast services or also to services offered for a fee, 
and to video services only or also to non-video services. Finally, we 
asked how we should take into account the fact that DTV broadcasters 
have the flexibility to vary the amount and quality of broadcast 
programming they offer throughout the day. For example, a broadcaster 
could air 4 SDTV channels from 8 a.m. to 3 p.m., switch to two higher 
definition channels from 3 p.m. to 8 p.m., and finish with one HDTV 
channel for prime-time and late-night programming.
    4. We have three main goals in crafting children's educational and 
informational programming rules for digital broadcasting. First, we 
want to ensure that the needs of children continue to be served 
``through the licensee's overall programming.'' We agree with 
children's television advocates who strongly support the position that 
any increase in multicasting channel capacity that broadcasters choose 
to implement as a result of digital technology should translate to a 
commensurate increase in the amount of educational programming 
available to children. Second, we want to provide broadcasters with 
flexibility in meeting their children's core

[[Page 27]]

programming obligations to permit them to explore the myriad potential 
uses of their broadcast spectrum made possible by digital technology. 
Third, we want to address what has been identified by many as a 
persistent problem in our rules and policies implementing the CTA: the 
continued lack of awareness on the part of parents and others of the 
availability of core programming. This concern about lack of public 
awareness of core programming applies to both the analog and digital 
broadcast environments.
    5. The current 3 hours per week processing guideline was adopted 
with the one channel per broadcaster analog model in mind. With the 
advent of digital broadcasting and the multicasting ability that 
technology offers, a new method of quantifying the current core 
programming guideline for digital broadcasting is both necessary and 
appropriate. We also believe that whatever additional requirements we 
impose should be as concrete and quantifiable as possible to remove 
uncertainty and facilitate enforcement.
    6. We adopt today an approach pursuant to which digital 
broadcasters that choose to provide additional channels or hours of 
free video programming in addition to their required free over-the-air 
video program service will have an increased core programming benchmark 
roughly proportional to the additional amount of free video programming 
they choose to provide. This approach is similar to that proposed by a 
number of commenters in response to the NOI and the Notice. Our revised 
guideline will work as follows. Digital broadcasters will continue to 
be subject to the existing three hours per week core programming 
processing guideline on their main program stream. DTV broadcasters 
that choose to provide additional streams or channels of free video 
programming will, in addition, have the following guideline applied to 
the additional programming: \1/2\ hour per week of additional core 
programming for every increment of 1 to 28 hours of free video 
programming provided in addition to the main program stream. Thus, 
digital broadcasters providing between 1 and 28 hours per week of free 
video programming in addition to their main program stream will have a 
guideline of \1/2\ hour per week of core programming in addition to the 
3 hours per week on the main program stream. Digital broadcasters 
providing between 29 and 56 hours per week of free video programming in 
addition to their main program stream will have a guideline of 1 hour 
per week of core programming in addition to the 3 hours per week on the 
main program stream. Digital broadcasters providing between 57 and 84 
hours per week of free video programming in addition to their main 
program stream will have a guideline of 1\1/2\ hours per week of core 
programming in addition to the 3 hours per week on the main program 
stream. The guideline will continue to increase in this manner for 
additional hours of free video programming. These benchmarks were 
derived by dividing the total number of hours in the week (168) by 6 
(the number of \1/2\ hour core programming increments required under 
our current guideline, as core programs must be at least 30 minutes in 
length), which equals 28. Thus, under the revised guideline, for every 
increment of 1 to 28 hours of additional free video programming offered 
in addition to the main digital program stream, the broadcaster must 
air at least an additional \1/2\ hour of core programming. Another way 
to look at this is that for each full time stream of additional free 
video programming (24 hours day 7 days per week), the licensee must air 
an additional 3 hours per week of core programming.
    7. Although we encourage stations to air more than an additional 
\1/2\ hour per week of core programming for every increment of 28 hours 
of additional free video programming, in order to receive staff level 
approval of the CTA portion of their license renewal application under 
our revised processing guideline digital broadcasters must air at least 
\1/2\ hour of core educational children's programming for every 
increment of 1 to 28 hours of free video programming provided in 
addition to the main program stream. As under our current processing 
guideline for the analog channel, a licensee will continue to be 
eligible for staff level approval if it demonstrates that it has aired 
a package of different types of educational and informational 
programming that, while containing somewhat less core programming than 
indicated by the revised guideline, demonstrates a level of commitment 
to educating and informing children at least equivalent to airing the 
amount of programming indicated by the guideline. In this regard, 
specials, PSAs, short-form programs, and regularly scheduled non-weekly 
programs with a significant purpose of educating and informing children 
may be counted toward the processing guideline. Licensees that do not 
meet these processing guidelines will be referred to the Commission, 
where they will have the opportunity to demonstrate compliance with the 
CTA in the same manner as under our current processing guideline.
    8. To be considered core, the programming must comply with all of 
the requirements for core programming specified in our rules: that is, 
it must have serving the educational and informational needs of 
children ages 16 and under as a significant purpose; it must be aired 
between the hours of 7 a.m. and 10 p.m.; it must be a regularly 
scheduled weekly program; it must be at least 30 minutes in length; the 
educational and informational objective and the target child audience 
must be specified in writing the licensee's Children's Television 
Programming Report; and instructions for listing the program as 
educational/informational, including an indication of the age group for 
which the program is intended, must be provided by the licensee to 
publishers of program guides.
    9. Our current 3 hours per week core programming processing 
benchmark is averaged over a six-month period in order to provide 
broadcasters with scheduling flexibility. We will also average the 
revised core programming processing benchmark to be applied to DTV 
broadcasters over a six-month period, thus providing some flexibility 
for digital broadcasters. The revised digital core programming 
guideline will become effective one year after release of this Report 
and Order.
    10. We are concerned that digital broadcasters do not simply replay 
the same core programming in order to meet our revised processing 
guideline, particularly if broadcasters offer multiple streams of free 
video programming and thereby face a higher core programming guideline. 
We recognize, however, that to some degree children can benefit from 
repeated viewing of the same core program, as the educational lesson or 
message is reinforced. Accordingly, we will not prohibit all repeats of 
core programming by digital broadcasters under our revised guideline, 
but will require that at least 50 percent of core programming not be 
repeated during the same week to qualify as core. Under our current 3 
hours per week processing guideline that applies to the analog channel, 
we allow repeats and reruns of core programming to be counted toward 
fulfillment of the guideline. We will exempt from this requirement any 
program stream that merely time shifts the entire programming line-up 
of another program stream. In addition, during the digital transition, 
we will not count as repeated programming core programs that are aired 
on both the analog station and a digital program stream.

[[Page 28]]

    11. In order to receive staff level approval of their license 
renewal application under our revised core programming processing 
guideline, digital broadcasters will be required to air at least three 
hours per week of core programming on their main program stream. To 
provide broadcasters with flexibility in choosing how best to serve 
their child audience, however, we will permit digital broadcasters to 
air all of their additional digital core programming, beyond the 3 hour 
baseline on the main digital program stream, on one free digital video 
channel or distribute it across multiple free digital video channels, 
at their discretion, as long as the stream/s on which the core 
programming is aired has comparable carriage on multichannel video 
programming distributors (``MVPDs'') as the stream whose programming 
generates the core programming obligation under the revised processing 
guideline. Educational and informational programming aired on 
subscription channels, however, will not be considered core under our 
processing guideline. In addition, the current three hours per week 
core programming processing guideline will continue to apply to analog 
stations until the analog channel is returned to the Commission at the 
end of the digital transition. Core programs aired on digital program 
streams will not be considered in evaluating whether a station has 
complied with the core programming processing guideline for its analog 
channel.
    12. We agree with those commenters who argue that, in some cases, 
children and parents may be best served by having core programming 
available on a channel that is devoted to programming appropriate for 
child or family viewing during all or part of the programming day or 
week. We also agree that requiring every programming stream to carry 
core programming could discourage broadcasters from experimenting with 
innovative multicasting services. If, for example, alternative content 
streams are used to directly expand the value of the main stream 
through the broadcasting of associated information or different camera 
angles or the alternative streams are used for low bit rate video 
services such as a dedicated weather channel, they may not be 
appropriate for the carriage of children's programming. Moreover, we do 
not want to discourage broadcasters from providing highly specialized 
channels on which content directed to children might depart from the 
specialized focus. It is our expectation that broadcasters will develop 
such programming services. In the next three years, we intend to 
revisit the issues addressed in this Report and Order in another 
proceeding. At that time, we will consider, among other things, whether 
we should give broadcasters who choose to multicast more flexibility in 
terms of placement of core programming.
    13. The revised guideline discussed above applies to digital 
broadcasters and the digital programming they provide. Up until the 
time that analog channels are returned to the Commission, we will 
continue to apply our current three hours per week core children's 
programming processing guideline to analog channels. Broadcasters will 
continue to file, on a quarterly basis, their Children's Television 
Programming Report, on FCC Form 398. We will revise current FCC Form 
398 to permit broadcasters to report both analog and digital core 
programming on that form. Once the new form has been approved for use, 
we will issue a Public Notice informing broadcasters of the 
availability of the form and the date on which the revised form must 
begin to be used in place of the current form. On that date, reports 
will also be required to include information about digital core 
programming. As we have done in the analog context, we will continue to 
exempt noncommercial television licensees from children's programming 
reporting requirements with respect to their digital programming.
    14. We also decline, at this time, to require high definition, 
interactivity, or other features made possible by digital technology to 
enhance core programming. We believe it would be premature to impose 
any requirement for use of technological advances in children's 
programming until broadcasters have had more opportunity to experiment 
with these features in other programming. However, we encourage 
broadcasters to provide high definition educational and informational 
programming for children as well as educational interactive features, 
to ensure that children benefit from the capabilities of digital 
technology. We agree with those commenters who argue that use of such 
features could improve the educational potential of core programming.
    15. Finally, we disagree with those commenters that argue that the 
Commission lacks legal authority to impose new children's educational 
and informational programming requirements. As noted above, digital 
broadcasters are subject to the CTA's educational and informational 
programming requirements. In the 1996 Children's Programming Report and 
Order, we concluded that a safe harbor processing guideline approach to 
implementing the CTA is consistent with both the language and the 
intent of the statute. The revised quantitative processing guideline we 
adopt today for digital broadcasters is also consistent with the CTA 
and the First Amendment. In adopting the three hours per week core 
programming processing guideline for analog broadcasters, we concluded 
that defining what qualifies as programming ``specifically designed'' 
to serve the educational needs of children and giving broadcasters 
clear but nonmandatory guidance on how to guarantee compliance is a 
constitutional means of giving effect to the CTA's programming 
requirement. The actions we take today extend the current processing 
guideline to digital broadcasters and increase the guideline only for 
broadcasters who choose to use their digital capacity to air more free 
video programming. Broadcasters continue to retain wide discretion in 
choosing the ways in which they will meet their CTA obligations. Our 
new guideline imposes reasonable parameters on a broadcaster's use of 
the public airwaves and is narrowly tailored to advance the 
government's substantial, and indeed compelling, interest in the 
protection and education of America's children.

Preemption

    16. Related to the issue of digital broadcasters' educational and 
informational programming obligations under the CTA is the issue of how 
we will treat preemptions of core programs by DTV broadcasters. To 
qualify as ``core programming'' for purposes of the three-hour-per-week 
processing guideline, the Commission requires that a children's program 
be ``regularly scheduled''; that is, a core children's program must 
``be scheduled to air at least once a week'' and ``must air on a 
regular basis.'' In adopting the current educational programming rules, 
the Commission stated that television series typically air in the same 
time slot for 13 consecutive weeks, although some episodes may be 
preempted for programs such as breaking news or live sports events. The 
Commission noted that programming that is aired on a regular basis is 
more easily anticipated and located by viewers, and can build loyalty 
that will improve its chance for commercial success. The Commission 
stated that it would leave to the staff to determine, with guidance 
from the full Commission as necessary, what constitutes regularly 
scheduled

[[Page 29]]

programming and what level of preemption is allowable.
    17. We requested comment in the Notice on whether the Commission's 
policies regarding preemption of core programs should be revised in 
view of the greater programming capacity that will be available to DTV 
broadcasters. We noted that the ability of DTV broadcasters to 
multicast provides them with the option of airing multiple streams of 
programming simultaneously, thus increasing their flexibility to either 
avoid preempting core programs or to reschedule such programs to a 
regular ``second home.'' Given this capability, we asked if we should 
fashion a rule defining clearly the requirement that a ``core'' program 
be ``regularly scheduled,'' including the number of times a core 
program could be preempted and still count toward the three-hour-per-
week processing guideline, and the efforts that must be made to 
reschedule and promote preempted programs in order for these programs 
to contribute toward the core programming guideline. If we were to 
adopt such a rule, we asked if we should continue to exempt from the 
requirement that core programs be rescheduled core programs preempted 
for breaking news. We also sought comment on the kind of rescheduling 
practices and promotion of rescheduled programs that we could require 
from digital broadcasters.
    18. For both analog and digital broadcasters, to be considered core 
programming we will generally require that a preempted core program be 
rescheduled. In addition, we will consider, in determining whether the 
rescheduled program counts as a core educational program, the reason 
for the preemption, the licensee's efforts to promote the rescheduled 
program, the time when the rescheduled program is broadcast, and, as 
discussed below, the station's level of preemption of core programming. 
We will continue to exempt from the requirement that core programs be 
rescheduled core programs preempted for breaking news. Absent clear 
evidence that broadcasters are abusing this exemption, we intend to 
rely on broadcasters' journalistic judgment regarding the necessity of 
interrupting scheduled core programming because of a news alert.
    19. As a general matter, for digital broadcasters we will not 
consider a core program moved to the same time slot on another of the 
station's digital program streams to be preempted as long as the 
alternate program stream receives MVPD carriage comparable to the 
stream from which the program is being moved and the station provides 
adequate on-screen information about the move, including when and where 
the program will air, on both the original and the alternate program 
stream. This policy applies only to program moves from one digital 
stream to another digital stream on the same station. Thus, as long as 
viewers are adequately notified of the move and the program is moved to 
a program stream that is accessible to a comparable number of viewers, 
broadcasters may use their multicasting capability to avoid preempting 
core programming.
    20. For both analog and digital broadcasters, we will limit the 
number of preemptions under our processing guideline to no more than 10 
percent of core programs in each calendar quarter. Each preemption 
beyond the 10 percent limit will cause that program not to count as 
core under the processing guideline, even if the program is 
rescheduled. We will exempt from this preemption limit preemptions for 
breaking news.
    21. We believe that this preemption limit will help parents and 
children to locate core programming and to anticipate when it will be 
aired. We believe that most stations currently do not preempt more than 
10 percent of core programs in each calendar quarter. We also note that 
our processing guideline is averaged over a six-month period, which 
will provide broadcasters with some scheduling flexibility. In 
addition, a station that fails to meet the processing guideline because 
of excessive preemptions may still receive staff-level approval of its 
renewal application if it demonstrates that it has aired a package of 
educational and informational programming, including specials, PSAs, 
short-form programs, and regularly scheduled non-weekly programs with a 
significant purpose of educating and informing children, that 
demonstrates a commitment to educating and informing children at least 
equivalent to airing the amount of core programming indicated by the 
processing guideline. Licensees that do not qualify for staff level 
approval will have their license renewal applications referred to the 
Commission where they will have an additional opportunity to 
demonstrate compliance with the CTA.

Identification of Core Programming

    22. As we stated in the NPRM, studies of the effectiveness of our 
educational programming requirements show a continued lack of awareness 
on the part of parents regarding the availability of core programming. 
As one study observed:

Information about E/I programs remains hard for parents to find. 
Although commercial broadcasters are consistently using E/I icons, 
the on-air information is often brief and difficult to identify. 
Printed listing services do not carry the information. * * * Thus, 
there is a serious lack of information for parents about core 
educational and informational offerings, mostly because the popular 
press does not appear to be interested in or have the capacity to 
publish such information. Not surprisingly, only one in seven 
parents is able to correctly identify the meaning of the E/I symbol.

    23. As we noted when we adopted the current children's educational 
programming rules in 1996, parents can increase the audience of an 
educational program by encouraging their children to watch the show, 
but can only do so if they know in advance when the show will air and 
that the show is educational. The public information initiatives 
adopted by the Commission in 1996 were designed to maximize public 
access to information about core programming while minimizing the cost 
to licensees. In adopting the current on-air identification 
requirement, the Commission noted that on-air identifiers were likely 
to reach a larger audience than information published in program 
guides, at minimal cost to stations. We continue to believe that on-air 
identification of core programming is a cost-effective means of 
ensuring that core programming reaches the child audience, but agree 
with those commenters that argue that the use of different identifiers 
by different broadcasters is confusing parents and impairing their 
ability to choose core programming for their children.
    24. Accordingly, we will amend our rules regarding on-air 
identification of core programming to require both analog and digital 
broadcasters to identify such programming with the same symbol: E/I. We 
will also require that this symbol be displayed throughout the program 
in order for the program to qualify as core. We believe this change to 
our on-air identification requirement will not prove onerous to 
broadcasters, who already use on-screen identifiers for core programs, 
and could greatly improve the public's ability to recognize and locate 
core programs. We note that broadcasters now display icons and other 
on-screen information with increasing frequency in many kinds of 
programming, and the public is increasingly used to seeing such 
information displayed along with program material. Broadcasters' 
increasing voluntary use of onscreen identifiers, such as network 
logos, presumably reflects their judgment as to the effectiveness of 
this technique in communicating information. We believe that 
broadcasters can display the E/I

[[Page 30]]

icon in an unobtrusive manner that will help parents and others 
identify core programs without deterring potential child viewers.
    25. We will apply this revised on-air identification requirement to 
both commercial and noncommercial broadcasters. Although we have 
previously exempted noncommercial licensees from the requirement that 
they identify core programming, we believe that requiring all 
broadcasters to use the E/I symbol throughout the program to identify 
core programming will help reinforce viewer awareness of the meaning of 
this symbol. We will, however, continue to exempt noncommercial 
television licensees from the other public information initiatives 
adopted in the 1996 Children's Programming Report and Order. Thus, 
noncommercial television stations will not be required to prepare and 
file quarterly Children's Television Programming Reports or to provide 
information identifying programming specifically designed to educate 
and inform children to publishers of program guides. As is our current 
practice, we will require noncommercial broadcast stations to maintain 
documentation sufficient to show compliance with the CTA's programming 
obligations at renewal time in response to a challenge or to specific 
complaints.

Commercial Limits

Application of Existing Commercial Limits Rules and Policies to DTV

    26. We sought comment in the Notice on how the limits on the amount 
of commercial matter in children's programming should apply in the 
digital environment and how we should interpret with respect to DTV 
broadcasters the policies set forth in the 1974 Policy Statement on 
children's programming. We asked whether children's advertising limits 
and policies should apply only to free over-the-air channels, or to all 
digital channels, both fee and pay. We sought comment specifically on 
the proposal by CME, et al. that the Commission prohibit all direct 
links to commercial Web sites during children's programming. If we were 
to permit certain kinds of commercial links during children's programs, 
we asked if such links should be permitted to appear during the program 
itself, or be limited to appearing during commercials adequately 
separated from program material as required by our separations policy.
    27. We will apply the commercial limits and policies, as clarified 
in today's Order, to all digital video programming directed to children 
ages 12 and under, whether that programming is aired on a free or pay 
digital stream. We note that the commercial limits and policies 
currently apply to cable operators and DBS providers and that cable 
operators are defined as ``broadcast licensees'' for purposes of the 
commercial matter limitations in the CTA. Therefore, the application of 
such limits and policies to pay broadcast channels provides for 
consistent treatment of these program delivery systems for purposes of 
children's advertising restrictions. We agree with those commenters 
that argue that the same concerns that led to adoption of the 
advertising restrictions in the 1974 Policy Statement and the CTA--the 
unique vulnerability of children as television viewers--apply 
regardless of the channel that a child viewer watches. Thus, any 
advertising restrictions for children's programming should apply to all 
such programming, regardless of the free or pay status of the channel. 
This determination is both consistent with and required by Section 336 
of the Communications Act, which states that the Commission ``shall 
adopt regulations that allow the holders of [DTV] licenses to offer 
such ancillary and supplementary services on designated frequencies as 
may be consistent with the public interest, convenience and 
necessity.'' Providing programs intended for children that do not 
comply with the advertising limits or commercial policies is contrary 
to the public interest because they could expose children to excessive 
and abusive advertising practices.
    28. We are aware that some broadcasters are currently displaying 
Internet Web site addresses that appear during children's program 
material (for example, in a crawl at the bottom of screen) which raises 
the issue of how the CTA commercial time limits should apply. We are 
concerned that the display of such addresses for Web sites established 
solely for commercial purposes in children's programs is inconsistent 
with our mandate under the CTA to protect children, who are 
particularly vulnerable to commercial messages and incapable of 
distinguishing advertising from program material. This is a concern 
that arises with respect to all broadcasters, both analog and digital, 
and to cable operators. Accordingly, we adopt a proposal similar to 
that advanced by Sesame Workshop with respect to this display of 
commercial Web site information in children's programs. Specifically, 
we will interpret the CTA commercial time limits to require that, with 
respect to programs directed to children ages 12 and under, the display 
of Internet Web site addresses during program material is permitted as 
within the CTA limitations only if the Web site: (1) Offers a 
substantial amount of bona fide program-related or other noncommercial 
content; (2) is not primarily intended for commercial purposes, 
including either e-commerce or advertising; (3) the Web site's home 
page and other menu pages are clearly labeled to distinguish the 
noncommercial from the commercial sections; and (4) the page of the Web 
site to which viewers are directed by the Web site address is not used 
for e-commerce, advertising, or other commercial purposes (e.g., 
contains no links labeled ``store'' and no links to another page with 
commercial material).
    29. For Web sites meeting these requirements, we will not limit the 
amount of time that the Web site address may be displayed during 
children's programs. In addition, we will permit the commercial 
portions of Web sites that comply with these requirements to sell or 
advertise products associated with the related television program. 
Because we require that permissible Web sites clearly separate the 
commercial portions of the site from the site's other content, we 
believe that children will be adequately protected from program-related 
merchandise sales. Because of the unique vulnerability of young 
children to host-selling, however, we will prohibit the display of Web 
site addresses in children's programs when the site uses characters 
from the program to sell products or services. This restriction on Web 
sites that use host-selling applies to Web site addresses displayed 
both during program material and during commercial material. We do not 
impose other restrictions at this time on the use of Web site addresses 
displayed only during commercials aired in children's programs.
    30. We believe that this approach to the display of Web site 
addresses in programs directed to children ages 12 and under fairly 
balances the interest of all broadcasters in exploring the potential 
uses of the Internet in connection with their children's programs with 
our mandate to protect children from over commercialization. We will 
require a broadcaster that chooses to air children's programs 
displaying Web site addresses during program material to certify, as 
part of its certification in its license renewal application of 
compliance with the commercial limits on children's

[[Page 31]]

programming, that it has also complied with the requirements concerning 
the display of Web site addresses in such programming. In addition, 
these broadcasters will be required to maintain in their public 
inspection file, until final action has been taken on the station's 
next license renewal application, records sufficient to substantiate 
the station's certification of compliance with the restrictions on Web 
site addresses in programs directed to children ages 12 and under. 
Cable operators airing children's programming must maintain records 
sufficient to verify compliance with these new rules and make such 
records available to the public. Such records must be maintained by 
cable operators for a period sufficient to cover the limitations period 
specified in 47 U.S.C. 503(b)(6)(B).
    31. With respect to the appearance of direct, interactive, links to 
commercial Internet sites in children's programming, we agree with 
those commenters that express concern that prohibiting such links at 
least at this stage in the digital transition is premature and 
unnecessary and could hamper the ability of broadcasters to experiment 
with potential uses of interactive capability in children's 
programming. There is little if any use of direct Internet connectivity 
today in television programming of the type that was contemplated when 
the Notice in this proceeding was issued. Accordingly, we find that it 
would be premature and unduly speculative to attempt to regulate such 
direct connectivity at this time. We agree that direct links to Web 
sites with program-related material could provide beneficial 
educational and informational content in children's programs and do not 
wish to place unnecessary barriers in the way of technical developments 
in this area that may take place.
    32. We encourage broadcasters to experiment with the capabilities 
digital television offers by developing interactive services that can 
be used to enhance the educational value of children's programming. 
With the benefits of interactivity, however, come potential risks that 
children will be exposed to additional commercial influences. We 
therefore seek comment in the Further Notice of Proposed Rulemaking 
that is part of this Report and Order about what kinds of services 
broadcasters and cable operators are developing and what rules would be 
appropriate to adopt. During the pendancy of this proceeding, however, 
we emphasize that broadcasters and cable operators may not circumvent 
our rules on commercial limits through technological developments in 
interactivity. We encourage broadcasters and cable operators to 
innovate and experiment with new uses of interactive technology that is 
educational in nature.

Definition of Commercial Matter

    33. The Notice also invited commenters to address a broader 
question related to our restriction on the duration of advertising 
during children's programming. This issue arises with respect to both 
analog and digital programming. We noted that, under our current 
policy, the limitation of 10.5 minutes per hour on weekends and 12 
minutes per hour on weekdays applies to ``commercial matter.'' 
``Commercial matter'' is defined to exclude certain types of program 
interruptions from counting toward the commercial limits, including 
promotions of upcoming programs that do not mention sponsors, public 
service messages promoting not-for-profit activities, and air-time sold 
for purposes of presenting educational and informational material. We 
observed in the Notice that there is a significant amount of time 
devoted to these types of announcements in children's programming, 
thereby often reducing the amount of time devoted to actual program 
material to an amount far less than the limitation on the duration of 
commercial matter alone might suggest.
    34. Accordingly, we invited comment in the Notice on whether the 
Commission should revise its definition of ``commercial matter'' to 
include some or all of these types of program interruptions that do not 
currently contribute toward the commercial limits. We noted that some 
of the types of program interruptions currently excluded from the 
commercial limits may contain information valuable to children, such as 
promotion of upcoming educational programs or certain types of public 
service messages. We asked if we should nonetheless require that the 
time devoted to these announcements count toward the commercial limits 
to maximize the amount of time devoted to program material and reduce 
the time taken by interruptions. We also asked whether, if we were to 
revise our definition of ``commercial matter,'' we should apply the new 
definition only to digital broadcasting or also to analog broadcasting. 
Finally, we asked commenters to address whether our ability to revise 
this definition is restricted by the CTA and its legislative history.
    35. We will revise our definition of ``commercial matter'' to 
include promotions of television programs or video programming services 
other than children's educational and informational programming. This 
revised definition will apply to analog and digital television stations 
and to cable operators. In the Further Notice of Proposed Rulemaking 
that is part of this Report and Order, we also propose to apply this 
revised definition to Direct Broadcast Satellite service providers. Our 
goals in making this revision to the definition of commercial matter 
are to reduce the number of commercial interruptions in children's 
programming and encourage the promotion of educational and 
informational programming for children.
    36. We agree with those commenters who argue that program 
promotions should fall within the scope of commercial matter because 
the station broadcasting the promotion receives significant 
consideration for airing these advertisements: specifically, the 
increased audiences for the promoted program which presumably leads to 
increased advertising rates for the station. Reducing the number of 
program promotions will help protect children from 
overcommercialization of programming consistent with the overall intent 
of Congress in the CTA. At the same time, exempting program promotions 
for children's educational and informational programming may encourage 
broadcasters to promote this programming, thereby increasing parents' 
awareness of the programming and possibly the program's audience, and 
thus extending the educational benefit of the programming. As noted 
above, there is evidence of a continued lack of awareness on the part 
of parents regarding the availability of core programming. Our action 
may lead to additional promotion of children's educational and 
informational programming, including core programming, thereby helping 
to address this problem.
    37. This decision is consistent with the CTA and its legislative 
history. The term ``commercial matter'' is not defined in the CTA. The 
House and Senate Reports state that the definition should be 
``consistent'' with the definition used in former Form 303-C, which 
defined commercial matter to include, among other things, promotional 
announcements by commercial stations for or on behalf of another 
commonly owned or controlled broadcast station serving the same 
community. Including program promotions in the definition of commercial 
matter is consistent with this aspect of the definition of commercial 
matter on former Form 303-

[[Page 32]]

C, as in either case the station is receiving indirect consideration 
for the program promotion.

Inappropriate Promotions in Children's Programming

    38. Another issue raised both in the Notice and in the NOI relates 
to the airing, in programs viewed by children, of promotions for other 
upcoming programs that may be unsuitable for children to watch because 
either the promotions themselves or the programs they refer to contain 
sexual or violent content or inappropriate language. This issue arises 
with respect to both analog and digital broadcasting and applies not 
only to educational and informational children's programming but to any 
programming that is viewed by a substantial number of children. We 
sought comment in the Notice on steps the Commission could take to 
ensure that programs designed for children or families do not contain 
promotions that are unsuitable for children to watch. We noted that the 
broadcast, cable, and motion picture industries voluntarily rate video 
programming that contains sexual, violent, or other indecent material 
and broadcast signals containing these ratings so that these programs 
can be screened by ``V-Chip'' technology available in television sets. 
The ratings identify the age group for which a particular program is 
suitable and indicate when the program contains violence, sexual 
content, or suggestive or coarse language. We asked in the Notice 
whether the ratings of programs promoted by broadcasters should be 
consistent with the ratings of the program during which the promotions 
run. We also asked whether we should require that promotions themselves 
be rated and encoded so they can be screened by V-Chip technology, or 
that promotions be rated and that programs with a significant child 
audience contain only promotions consistent with the rating of the 
program in which they appear.
    39. In light of the consensus among commenters that voluntary 
efforts rather than Commission action are preferable to ensure that 
age-inappropriate promotions are not aired in children's programs, we 
will not take action on this issue at this time. Instead, we urge 
broadcasters to ensure that industry mechanisms are in place and are 
used effectively to prevent the airing of promotions in children's 
programs that are inappropriate for child viewing. We also urge the 
public to continue to monitor promotions aired in children's 
programming and to notify us of instances in which broadcasters air 
age-inappropriate promotions. If we receive information suggesting that 
age-inappropriate promotions have become a systemic problem, we will 
revisit this issue.
    40. We agree with those commenters that argue that DTV technical 
standards should not foreclose the implementation of changes to or 
improvements in the V-Chip system. We also believe that DTV technical 
standards should not foreclose the option of using V-Chip technology to 
support multiple rating systems. In our Report and Order in the Second 
Periodic Review of the Commission's Rules and Policies Affecting the 
Conversion to Digital Television, we adopted rules to ensure that V-
Chip functionality is available in the digital world. In that 
proceeding, we stated our belief that the ability to modify the content 
advisory rating system is beneficial and required that television 
receivers be able to process new ratings should they be developed. We 
also adopted standards that do not preclude manufacturers from 
incorporating additional blocking standards or techniques into 
receivers, thereby permitting manufacturers to develop V-Chip 
technology that can be used in conjunction with additional ratings 
systems.
    41. We will not at this time adopt the other V-Chip proposals 
advanced by commenters. Nonetheless, we encourage broadcasters to 
consider various ways of improving V-Chip utility, including making 
available in their programming a link to a Web site where parents and 
other viewers can get additional information about program ratings and 
the V-Chip, once such technology or functionality is available to 
consumers. We also encourage the broadcast, cable, and motion picture 
industries to consider whether any revisions to the ratings system 
would make it more accurate and easier to understand.
    42. In our next periodic review of the status of the digital 
transition, we plan to address whether we should require digital 
broadcasters to embed E/I information in the core program stream so 
that this information can be sought by V-Chip or other technology. 
Given the lack of information in the record of this proceeding about 
how this information would be used and the potential benefits of this 
technology in helping parents locate core programming, and the 
potential costs such a requirement would impose, we do not address this 
issue today.

Future Proceedings

    43. We intend to revisit the issues addressed in this item in the 
next three years and consider whether the determinations made herein 
should be changed in light of technological developments. In 
particular, we will consider whether broadcasters should be given more 
flexibility to determine the program stream on which core programming 
is placed.
    44. In addition, we intend to issue a Public Notice in the near 
future seeking comment on whether broadcasters are complying with the 
letter and intent of the CTA in terms of, among other things, the 
amount and quality of core children's programming being provided and 
the extent of preemption of such programming. The Commission staff also 
intends to conduct a review of broadcaster compliance with the CTA and 
our rules and to issue a report on the results of this review and the 
comments filed in response to the Public Notice. The Commission last 
issued a report on compliance with the CTA in 2001. The Commission 
plans to conduct similar reviews and issue similar reports on a regular 
basis roughly every three years.

Effective Dates and Transition Period

    45. Our revised policies and rules regarding application of the 
commercial limits and policies to digital programming as well as those 
regarding the display of Internet addresses in analog and digital 
programming and in programming aired by cable operators, will become 
effective February 1, 2005. We will begin to evaluate compliance with 
these requirements in renewal applications filed after that date. Thus, 
the first renewal applications to which these new requirements will be 
applied are those required to be filed by April 1, 2005, by television 
stations located in the states of Indiana, Kentucky, and Tennessee. 
Licensee performance during any portion of the renewal term that 
predates February 1, 2005, will be evaluated under the current rules 
and policies and performance that post-dates the rules will be judged 
under the new provisions.
    46. Our rules regarding on-air identification of core programming 
will become effective after approval by the Office of Management and 
Budget (``OMB'') under the Paperwork Reduction Act of 1995 (``PRA''). 
Upon OMB approval, we will issue a Public Notice announcing the 
effective date of this rule. The effective date will be no earlier than 
February 1, 2005. Similarly, we will issue a Public Notice announcing 
when the revised FCC Form 398, also subject to OMB approval under the 
PRA, will be available for use by licensees and when licensees must 
commence using the revised form to report digital core programming.

[[Page 33]]

    47. Our revised definition of commercial matter will become 
effective January 1, 2006. This transition period will give programmers 
time to produce sufficient children's programming and other material to 
include within children's programming that would not be considered 
commercial matter. Similarly, our revised safe harbor processing 
guideline for digital broadcasters will become effective January 1, 
2006. The limit on the number of preemptions for digital broadcasters 
under our processing guideline to no more than 10 percent of core 
programs in each calendar quarter and the limit for digital 
broadcasters on the number of repeats of core programming to no more 
than 50 percent of core programming during the same week will also 
become effective January 1, 2006. These requirements relate to the 
calculation of hours of core programming under our revised guideline 
and therefore should become effective at the same time as the revised 
guideline. In addition, to give analog broadcasters time to come into 
compliance with our rule limiting the number of preemptions under the 
current analog processing guideline to no more than 10 percent of core 
programs in each calendar quarter, we will also delay the effective 
date of that rule as applied to analog broadcasters until January 1, 
2006. We believe that this transition period is appropriate to give 
licensees time to develop programming or to renegotiate or allow 
expiration of existing program contracts as necessary. Renewal 
applications filed earlier than January 1, 2006, will be evaluated for 
compliance with the CTA based on our current rules and the policies 
expressed in the 1996 Children's Programming Report and Order and the 
1991 Report and Order, as modified upon reconsideration. License 
renewal applications filed after January 1, 2006, will be evaluated to 
determine whether broadcasters are providing core programming using the 
revised definition of commercial matter and processing guideline 
adopted herein and are complying with the revised rules concerning 
preemption and repeats of core programming. Thus, the first renewal 
applications to which these new requirements will be applied are those 
required to be filed by February 1, 2006, by stations located in the 
states of Kansas, Nebraska, and Oklahoma. Licensee performance during 
any portion of the renewal term that predates January 1, 2006, will be 
evaluated under the current rules and policies and performance that 
post-dates the new rules will be judged under the new provisions.

Conclusion

    48. We adopt this Report and Order and Further Notice of Proposed 
Rule Making to address the obligation of DTV broadcasters under the CTA 
to air educational programming for children and to protect children 
from excessive and inappropriate commercial messages. Our goals are to 
ensure that parents and children benefit from broadcasters' use of 
digital technology to provide multiple broadcast streams and to permit 
broadcasters flexibility to explore the potential uses of the broadcast 
spectrum made possible by digital technology, including the use of 
direct Web site links in children's programming, consistent with the 
mandate of the CTA. We believe that the rules and policies adopted 
herein further the mandate of the CTA that broadcast television fulfill 
its potential to teach the nation's children and that broadcasters 
protect children from over commercialization.

VII. Administrative Matters

    49. This Report and Order contains new or modified information 
collection(s) subject to the Paperwork Reduction Act of 1995 (PRA), 
Public Law 104-13. It will be submitted to the Office of Management and 
Budget (OMB) for review under Section 3507(d) of the PRA. OMB, the 
general public, and other Federal agencies are invited to comment on 
the new or modified information collection(s) contained in this 
proceeding. Written comments by the public on the proposed new and 
modified information collection(s) are due 60 days from date of 
publication of this Report and Order in the Federal Register. In 
addition to filing comments with the Secretary, a copy of any comments 
on the information collection(s) contained herein should be submitted 
to Cathy Williams, Federal Communications Commission, Room 1-C823, 445 
12th Street, SW., Washington, DC 20554, or via the Internet to Cathy 
[email protected], and to Kristy L. LaLonde, OMB Desk Officer, Room 
10234 NEOB, 725 17th Street, NW., Washington, DC 20503, or via the 
Internet to KristyL. [email protected], or via fax at 202-395-5167.
    50. As required by the Regulatory Flexibility Act,\1\ the 
Commission has prepared a Final Regulatory Flexibility Analysis 
(``FRFA'') relating to this Report and Order. The FRFA is set forth 
below.
---------------------------------------------------------------------------

    \1\ See 5 U.S.C. Sec.  604.
---------------------------------------------------------------------------

    51. The Commission will send a copy of the Report and Order in a 
report to be sent to Congress and the General Accounting Office 
pursuant to the Congressional Review Act, see 5 U.S.C. 801(a)(1)(A).
    52. For additional information on this proceeding, please contact 
Kim Matthews, Policy Division, Media Bureau at (202) 418-2154.

Final Regulatory Flexability Analysis

    53. As required by the Regulatory Flexibility Act of 1980, as 
amended (``RFA''), an Initial Regulatory Flexibility Analysis 
(``IRFA'') was incorporated in the Notice of Proposed Rule Making 
(``NPRM''). The Commission sought written public comment on the 
proposals in the Notice, including comment on the IRFA. One comment was 
received on the IRFA. This Final Regulatory Flexibility Analysis 
(``FRFA'') conforms to the RFA.

I. Need for, and Objectives of, the Report and Order

    The purpose of this proceeding is to determine how the existing 
children's educational television programming obligations and 
limitations on advertising in children's programs should be interpreted 
and adapted to apply to digital television broadcasting in light of the 
new capabilities made possible by that technology. First, we address 
the obligation of digital television (``DTV'') broadcasters to provide 
children's educational and informational programming and, specifically, 
how that obligation applies to DTV broadcasters that use the multicast 
capability of their ATSC digital service to broadcast multiple program 
services. We adopt an approach pursuant to which digital broadcasters 
that choose to provide streams or hours of free video programming in 
addition to their required free over-the-air video program service will 
have an increased core programming benchmark roughly proportional to 
the additional amount of free video programming they choose to provide. 
Second, for both analog and digital broadcasters, we limit the number 
of preemptions allowed under our processing guideline to no more than 
10 percent of core programs in each calendar quarter. Third, we amend 
our rule regarding on-air identification of core programming to require 
both analog and digital broadcasters to identify such programming with 
the same symbol, E/I, which must be displayed throughout the program in 
order for the program to qualify as core

[[Page 34]]

educational programming. Fourth, we clarify that the children's 
television commercial limits and policies apply to all digital video 
programming directed to children ages 12 and under. Fifth, we interpret 
the commercial time limits to require that the display of Internet Web 
site addresses during program material is permitted as within the time 
limits only if the Web site meets certain requirements, including the 
requirement that it offer a substantial amount of bona fide program-
related or other noncommercial content and is not primarily intended 
for commercial purposes. Sixth, we revise our definition of 
``commercial matter'' to include promotions of television programs or 
video programming services other than children's educational and 
informational programming. Finally, we seek comment on several 
additional proposals concerning the children's programming commercial 
limits and indicate our intention to issue a Public Notice in the near 
future seeking comment on broadcaster compliance with the Children's 
Television Act of 1990 (``CTA''). Our objectives in resolving these 
issues are to provide television broadcasters with guidance regarding 
their obligation to serve children as we transition from an analog to a 
digital television environment and to improve our children's 
programming rules and policies.

II. Summary of Significant Issues Raised by Public Comments in Response 
to the IRFA

    The U.S. Small Business Administration (``SBA'') filed the only 
comment in this proceeding responding to the IRFA. According to the 
SBA, the IRFA does not satisfy the requirements of the RFA, as it does 
not describe many of the ``compliance requirements'' contained in the 
NPRM and their impact on small firms. The SBA also argues that the IRFA 
does not discuss significant alternatives that would accomplish the 
objectives while minimizing the significant economic impact on small 
entities. SBA states that it does not question the Commission's goals 
in this proceeding, but instead asks that the Commission seek ways to 
minimize the burdens on small business while still accomplishing its 
goals.
    The NPRM described a number of possible ways of applying the 
current core programming processing guideline to digital broadcasters. 
These proposals were suggested by commenters responding to the NOI in 
this docket. It was not possible for the Commission to develop detailed 
estimates of the cost of adopting each of these proposals because the 
details of how any of the proposals would be implemented were not 
known. The NPRM sought comment on these various proposals in large part 
to determine, in the view of broadcasters and others, which would be 
the preferable means of adapting our current rules. Commenters 
responding to the NPRM address, among other issues, the cost of the 
various proposals and the advantages, from cost and other perspectives, 
of the approach they advocate. In determining what approach to adopt, 
the Commission carefully considered all of the comments, particularly 
those offering less burdensome means of accomplishing our stated 
objectives. The approach adopted in the Report and Order attempts to 
balance the need to adapt our current rules to the digital environment 
and to improve our children's programming rules and policies with the 
need to minimize costs where possible and provide broadcasters with 
flexibility to continue to explore different ways of employing digital 
technology.

III. Description and Estimate of the Number of Small Entities to Which 
the Rules Will Apply

    The RFA directs agencies to provide a description of and, where 
feasible, an estimate of the number of small entities that will be 
affected by the rules. The RFA generally defines the term ``small 
entity'' as having the same meaning as the terms ``small business,'' 
``small organization,'' and ``small governmental jurisdiction'' 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 SBA.
    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.
    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 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.
    There are also 380 non-commercial TV stations in the BIA database. 
Since these stations do not receive advertising revenue, there are no 
revenue estimates for these stations. We believe that virtually all of 
these stations would be considered ``small businesses'' given that they 
are generally owned by non-commercial entities including local schools 
and governments and, for the most part, rely on public donations and 
funding.
    Cable Operators. 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. 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 in this Report and Order.
    The Communications Act, as amended, also contains a size standard 
for a small cable system operator, which

[[Page 35]]

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.

IV. Description of Projected Reporting, Recordkeeping, and Other 
Compliance Requirements

    The Order adopts a revised core children's programming processing 
guideline for digital television broadcasters. Our revised guideline 
will work as follows. Digital broadcasters providing only one stream of 
free digital video programming will continue to be subject to the 
existing 3 hours per week core programming processing guideline. DTV 
broadcasters that choose to provide additional streams or channels of 
free video programming will, in addition, have the following guideline 
applied to the additional programming: \1/2\ hour per week of 
additional core programming for every increment of 1 to 28 hours of 
free video programming provided in addition to the main program stream. 
Thus, digital broadcasters providing between 1 and 28 hours per week of 
free video programming in addition to their main program stream will 
have a guideline of \1/2\ hour per week of core programming in addition 
to the 3 hours per week on the main program stream. Digital 
broadcasters providing between 29 and 56 hours per week of free video 
programming in addition to their main program stream will have a 
guideline of 1 hour per week of core programming in addition to the 3 
hours per week on the main program stream. Digital broadcasters 
providing between 57 and 84 hours per week of free video programming in 
addition to their main program stream will have a guideline of 1\1/2\ 
hours per week of core programming in addition to the 3 hours per week 
on the main program stream. The guideline will continue to increase in 
this manner for additional hours of free video programming. In 
addition, for digital broadcasters, we will require that at least 50 
percent of core programming not be repeated during the same week to 
qualify as core.
    The revised guideline discussed above applies to digital 
broadcasters and the digital programming they provide. Up until the 
time that analog channels are returned to the Commission, we will 
continue to apply our current 3 hours per week core children's 
programming processing guideline to analog channels. Broadcasters will 
continue to file, on a quarterly basis, their Children's Television 
Programming Report, on FCC Form 398. We will revise current FCC Form 
398 to permit broadcasters to report both analog and digital core 
programming on that form. Once the new form has been approved for use, 
we will issue a public notice informing broadcasters of the 
availability of the form and the date on which the revised form must 
begin to be used in place of the current form. On that date, reports 
will also be required to include information about digital core 
programming. As we have done in the analog context, we will continue to 
exempt noncommercial television licensees from children's programming 
reporting requirements with respect to their digital programming.
    As a general matter, for digital broadcasters we will not consider 
a core program moved to the same time slot on another of the station's 
digital program streams to be preempted as long as the alternate 
program stream receives MVPD carriage comparable to the stream from 
which the program is being moved and the station provides adequate on-
screen information about the move, including when and where the program 
will air, on both the original and the alternate program stream. Thus, 
as long as viewers are adequately notified of the move and the program 
is moved to a program stream that is accessible to a comparable number 
of viewers, broadcasters may use their multicasting capability to avoid 
preempting core programming. For both analog and digital broadcasters, 
however, we will limit the number of preemptions under our processing 
guideline to no more than 10 percent of core programs in each calendar 
quarter. Each preemption beyond the 10 percent limit will cause that 
program not to count as core under the processing guideline, even if 
the program is rescheduled. We will exempt from this preemption limit 
preemptions for breaking news.
    In addition, the item amends our rules regarding on-air 
identification of core programming to require both analog and digital 
broadcasters to identify such programming with the same symbol: E/I. We 
will also require that this symbol be displayed throughout the program 
in order for the program to qualify as core. We will apply this revised 
on-air identification requirement to both commercial and noncommercial 
broadcasters.
    The item applies the commercial limits and policies to all digital 
video programming directed to children ages 12 and under, whether that 
programming is aired on a free or pay digital stream. In addition, we 
interpret the CTA commercial time limits to require that, for both 
analog and digital broadcasters, with respect to programs directed to 
children ages 12 and under, the display of Internet Web site addresses 
during program material is permitted as within the CTA limitations only 
if the Web site: (1) Offers a substantial amount of bona fide program-
related or other noncommercial content; (2) is not primarily intended 
for commercial purposes, including either e-commerce or advertising; 
(3) the Web site's home page and other menu pages are clearly labeled 
to distinguish the noncommercial from the commercial sections; and (4) 
the page of the Web site to which viewers are directed by the Web site 
address is not used for e-commerce, advertising, or other commercial 
purposes (e.g., contains no links labeled ``store'' and no links to 
another page with commercial material). Finally, the item also revises 
our definition of ``commercial matter'' to include promotions of 
television programs or video programming services other than children's 
educational and informational programming.

V. Steps Taken To Minimize Significant Economic Impact on Small 
Entities and Significant Alternatives Considered

    Several steps were taken to minimize significant impact on small 
entities. For the many broadcasters simulcasting the core programming 
offered on their analog channel on a single digital program stream and 
offering no other digital free video programming, compliance with the 
new processing guideline should be automatic, as the digital stream 
will simulcast the core programming aired on the analog stream and the 
current 3 hours/week guideline will apply to both streams. For 
broadcasters choosing to provide additional streams of digital free 
video

[[Page 36]]

programming, the revised guideline establishes a series of graduated 
benchmarks which increase the core programming obligation in relation 
to the number of hours of additional free video programming offered by 
the licensee. Thus, only those stations choosing to provide additional 
free video programming are subject to the revised processing guideline. 
We rejected the ``pay or play'' and ``menu'' alternatives to the 
revised guideline largely because these approaches were more 
administratively burdensome to stations. Under the current and revised 
guideline, stations have and will continue to have the option of 
sponsoring core programming on other stations in the market.
    In addition, for digital broadcasters we require under the new 
processing guideline that at least 50 percent of core programming not 
be repeated during the same week to qualify as core. However, we exempt 
from this requirement any program stream that merely time shifts the 
entire programming line-up of another program stream. Also, during the 
transition, we will not count as repeated programming core programs 
that are aired on both the analog station and a digital program stream.
    For both analog and digital broadcasters, however, the item limits 
the number of preemptions under our processing guideline to no more 
than 10 percent of core programs in each calendar quarter. We exempt 
from this preemption limit preemptions for breaking news, however. We 
believe that most stations currently do not preempt more than 10 
percent of core programs in each calendar quarter. We also note that 
our processing guideline is averaged over a six-month period, which 
will provide broadcasters with some scheduling flexibility. In 
addition, a station that fails to meet the processing guideline because 
of excessive preemptions may still receive staff-level approval of its 
renewal application if it demonstrates that it has aired a package of 
educational and informational programming, including specials, PSAs, 
short-form programs, and regularly scheduled non-weekly programs with a 
significant purpose of educating and informing children, that 
demonstrates a commitment to educating and informing children at least 
equivalent to airing the amount of core programming indicated by the 
processing guideline. Licensees that do not qualify for staff level 
approval will have their license renewal applications referred to the 
Commission where they will have an additional opportunity to 
demonstrate compliance with the CTA.
    Although we have previously exempted noncommercial licensees from 
the requirement that they identify core programming, we believe that 
requiring all broadcasters to use the E/I symbol throughout the program 
to identify core programming will help reinforce viewer awareness of 
the meaning of this symbol. We will, however, continue to exempt 
noncommercial television licensees from the other public information 
initiatives adopted in the 1996 Children's Programming Report and 
Order. Thus, noncommercial television stations will not be required to 
prepare and file quarterly Children's Television Programming Reports or 
to provide information identifying programming specifically designed to 
educate and inform children to publishers of program guides. As is our 
current practice, we will require noncommercial broadcast stations to 
maintain documentation sufficient to show compliance with the CTA's 
programming obligations at renewal time in response to a challenge or 
to specific complaints. We also decline to require licensees to use 
high definition, interactivity, or other features to enhance core 
programming.
    Although the Order limits the display in children's programming of 
Internet Web site addresses to sites established solely for commercial 
purposes, it does not prohibit the display of all Web site addresses. 
In addition, the item does not prohibit direct Internet links in 
children's programs as several commenters advocated. This approach was 
adopted in an attempt to balance the interest of digital broadcasters 
in exploring the potential uses of interactivity with our mandate to 
protect children from over commercialization. The Order also declines 
to do more than urge voluntary action on the part of broadcasters to 
ensure that age-inappropriate promotions are not aired in children's 
programs.

VI. Report to Congress

    The Commission will send a copy of the Report and Order, including 
this FRFA, in a report to be sent to Congress pursuant to the 
Congressional Review Act, see 5 U.S.C. 801(a)(1)(A). In addition, the 
Commission will send a copy of the Report and Order, including this 
FRFA, to the Chief Counsel for Advocacy of the Small Business 
Administration. A copy of the Report and Order and FRFA (or summaries 
thereof) will also be published in the Federal Register. See 5 U.S.C. 
604(b).

List of Subjects

47 CFR Part 73

    Television.

47 CFR Part 76

    Cable television.

Federal Communications Commission.
Marlene H. Dortch,
Secretary.

Rule Changes

0
For the reasons discussed in the preamble 47 CFR Parts 73 and 76 of the 
Code of Federal Regulations are amended as follows:

PART 73--RADIO BROADCAST SERVICES

0
1. The authority citation for part 73 continues to read as follows:

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

0
2. Section 73.670 is revised to read as follows:


Sec.  73.670  Commercial limits in children's programs.

    (a) No commercial television broadcast station licensee shall air 
more than 10.5 minutes of commercial matter per hour during children's 
programming on weekends, or more than 12 minutes of commercial matter 
per hour on weekdays.
    (b) The display of Internet Web site addresses during program 
material is permitted only if the Web site:
    (1) Offers a substantial amount of bona fide program-related or 
other noncommercial content;
    (2) Is not primarily intended for commercial purposes, including 
either e-commerce or advertising;
    (3) The Web site's home page and other menu pages are clearly 
labeled to distinguish the noncommercial from the commercial sections; 
and
    (4) The page of the Web site to which viewers are directed by the 
Web site address is not used for e-commerce, advertising, or other 
commercial purposes (e.g., contains no links labeled ``store'' and no 
links to another page with commercial material).
    (c) The display of Web site addresses in children's programs is 
prohibited during both program material and commercial material when 
the site uses characters from the program to sell products or services.

    Note 1: Commercial matter means air time sold for purposes of 
selling a product or service and promotions of television programs 
or video programming services other than children's educational and 
informational programming.



[[Page 37]]


    Note 2: For purposes of this section, children's programming 
refers to programs originally produced and broadcast primarily for 
an audience of children 12 years old and younger.

* * * * *

0
3. Section 73.671 is amended by revising paragraphs (c)(5) and (c)(6), 
adding paragraphs (c)(7), (d), (e), and (f), and removing Note 2 to 
read as follows:


Sec.  73.671  Educational and informational programming for children.

* * * * *
    (c) * * *
    (5) The program is identified as specifically designed to educate 
and inform children by the display on the television screen throughout 
the program of the symbol E/I;
    (6) The educational and informational objective and the target 
child audience are specified in writing in the licensee's Children's 
Television Programming Report, as described in Sec.  
73.3526(e)(11)(iii); and
    (7) Instructions for listing the program as educational/
informational, including an indication of the age group for which the 
program is intended, are provided by the licensee to publishers of 
program guides, as described in Sec.  73.673.
    (d) Until analog channels are returned to the Commission, the 
Commission will apply the following processing guideline to analog 
stations in assessing whether a television broadcast licensee has 
complied with the Children's Television Act of 1990 (``CTA'') on its 
analog channel. A licensee that has aired at least three hours per week 
of Core Programming (as defined in paragraph (c) of this section and as 
averaged over a six month period) will be deemed to have satisfied its 
obligation to air such programming and shall have the CTA portion of 
its license renewal application approved by the Commission staff. A 
licensee will also be deemed to have satisfied this obligation and be 
eligible for such staff approval if the licensee demonstrates that it 
has aired a package of different types of educational and informational 
programming that, while containing somewhat less than three hours per 
week of Core Programming, demonstrates a level of commitment to 
educating and informing children that is at least equivalent to airing 
three hours per week of Core Programming. In this regard, specials, 
PSAs, short-form programs, and regularly scheduled non-weekly programs 
with a significant purpose of educating and informing children can 
count toward the three hour per week processing guideline. Licensees 
that do not meet these processing guidelines will be referred to the 
Commission, where they will have full opportunity to demonstrate 
compliance with the CTA (e.g., by relying in part on sponsorship of 
Core educational/informational programs on other stations in the market 
that increases the amount of Core educational and informational 
programming on the station airing the sponsored program and/or on 
special nonbroadcast efforts which enhance the value of children's 
educational and informational television programming).
    (e) The Commission will apply the following processing guideline to 
digital stations in assessing whether a television broadcast licensee 
has complied with the Children's Television Act of 1990 (``CTA'') on 
its digital channel(s).
    (1) A digital television licensee providing only one stream of free 
digital video programming will be subject to the 3 hour/week Core 
Programming processing guideline discussed in paragraph (d) of this 
section on that channel; i.e., a licensee that has aired at least three 
hours per week of Core Programming (as defined in paragraph (c) of this 
section and as averaged over a six month period) on its main program 
stream will be deemed to have satisfied its obligation to air such 
programming and shall have the CTA portion of its license renewal 
application approved by the Commission staff. A licensee will also be 
deemed to have satisfied this obligation and be eligible for such staff 
approval if the licensee demonstrates that it has aired a package of 
different types of educational and informational programming that, 
while containing somewhat less than three hours per week of Core 
Programming, demonstrates a level of commitment to educating and 
informing children that is at least equivalent to airing three hours 
per week of Core Programming. In this regard, specials, PSAs, short-
form programs, and regularly scheduled non-weekly programs with a 
significant purpose of educating and informing children can count 
toward the three hour per week processing guideline. Licensees that do 
not meet these processing guidelines will be referred to the 
Commission, where they will have full opportunity to demonstrate 
compliance with the CTA (e.g., by relying in part on sponsorship of 
Core educational/informational programs on other stations in the market 
that increases the amount of Core educational and informational 
programming on the station airing the sponsored program and/or on 
special nonbroadcast efforts which enhance the value of children's 
educational and informational television programming).
    (2)(i) A digital television licensee providing streams of free 
digital video programming in addition to its main program stream will 
be subject to the processing guideline described in paragraph (e)(1) of 
this section on its main program stream and to the following guideline 
applied to the additional programming: \1/2\ hour per week of 
additional Core Programming (as defined in paragraph (c) of this 
section and as averaged over a six month period) for every increment of 
1 to 28 hours of free video programming provided in addition to the 
main program stream. Thus, digital broadcasters providing between 1 and 
28 hours per week of free video programming in addition to their main 
program stream will have a guideline of \1/2\ hour per week of core 
programming in addition to the 3 hours per week on the main program 
stream. Digital broadcasters providing between 29 and 56 hours per week 
of free video programming in addition to their main program stream will 
have a guideline of 1 hour per week of core programming in addition to 
the 3 hours per week on the main program stream. Digital broadcasters 
providing between 57 and 84 hours per week of free video programming in 
addition to their main program stream will have a guideline of 1\1/2\ 
hours per week of core programming in addition to the 3 hours per week 
on the main program stream. The guideline will continue to increase in 
this manner for additional hours of free video programming.
    (ii) Broadcasters providing more than one stream of free digital 
video programming may air all of their additional core programming, 
apart from the 3 hours of core programming that must be aired on the 
main program stream, on one free video channel, or distribute it across 
multiple free video channels, at their discretion, as long as the 
stream on which the core programming is aired has comparable MVPD 
carriage as the stream whose programming generates the core programming 
obligation under the processing guideline described in paragraph 
(e)(2)(i) of this section.
    (3) For purposes of the guideline described in paragraphs (e)(1) 
and (e)(2) of this section at least 50 percent of core programming 
cannot be repeated during the same week to qualify as core. This 
requirement does not apply to any program stream that merely time 
shifts the entire programming line-up of another program stream and, 
during the digital transition, to core programs aired on both the 
analog station and a digital program stream.

[[Page 38]]

    (f) No more than 10 percent of Core Programs may be preempted in 
each calendar quarter to qualify as Core Programming.
* * * * *


Sec.  73.673  [Amended]

0
4. Section 73.673 is amended by removing and reserving paragraph (b).

0
5. Section 73.3526 is amended by revising paragraph (e)(11)(iii) to 
read as follows:


Sec.  73.3526  Local public inspection file of commercial stations.

    (e) * * *
    (11) * * *
    (iii) Children's television programming reports. For commercial TV 
broadcast stations, both analog and digital, on a quarterly basis, a 
completed Children's Television Programming Report (``Report''), on FCC 
Form 398, reflecting efforts made by the licensee during the preceding 
quarter, and efforts planned for the next quarter, to serve the 
educational and informational needs of children. The Report for each 
quarter is to be placed in the public inspection file by the tenth day 
of the succeeding calendar quarter. By this date, a copy of the Report 
for each quarter is also to be filed electronically with the FCC. The 
Report shall identify the licensee's educational and informational 
programming efforts, including programs aired by the station that are 
specifically designed to serve the educational and informational needs 
of children, and it shall explain how programs identified as Core 
Programming meet the definition set forth in Sec.  73.671(c). The 
Report shall include the name of the individual at the station 
responsible for collecting comments on the station's compliance with 
the Children's Television Act, and it shall be separated from other 
materials in the public inspection file. The Report shall also identify 
the program guide publishers to which information regarding the 
licensee's educational and informational programming was provided as 
required in Sec.  73.673, as well as the station's license renewal 
date. These Reports shall be retained in the public inspection file 
until final action has been taken on the station's next license renewal 
application. Licensees shall publicize in an appropriate manner the 
existence and location of these Reports.
* * * * *

PART 76--MULTICHANNEL VIDEO AND CABLE TELEVISION SERVICE

0
6. 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, 561, 571, 572, and 573.


0
7. Section 76.225 is amended by revising paragraph (b) and Note 1 and 
by adding paragraphs (c) and (d) to read as follows:


Sec.  76.225  Commercial limits in children's programs.

* * * * *
    (b) The display of Internet Web site addresses during program 
material is permitted only if the Web site:
    (1) Offers a substantial amount of bona fide program-related or 
other noncommercial content;
    (2) Is not primarily intended for commercial purposes, including 
either e-commerce or advertising;
    (3) The Web site's home page and other menu pages are clearly 
labeled to distinguish the noncommercial from the commercial sections; 
and
    (4) The page of the Web site to which viewers are directed by the 
Web site address is not used for e-commerce, advertising, or other 
commercial purposes (e.g., contains no links labeled ``store'' and no 
links to another page with commercial material).
    (c) The display of Web site addresses in children's programs is 
prohibited during both program material and commercial material when 
the site uses characters from the program to sell products or services.
    (d) This rule shall not apply to programs aired on a broadcast 
television channel which the cable operator passively carries, or to 
access channels over which the cable operator may not exercise 
editorial control, pursuant to 47 U.S.C. 531(e) and 532(c)(2).

    Note 1 to Sec.  76.225: Commercial matter means air time sold 
for purposes of selling a product or service and promotions of 
television programs or video programming services other than 
children's educational and informational programming.

* * * * *
[FR Doc. 04-28173 Filed 12-30-04; 8:45 am]
BILLING CODE 6712-01-P