[Federal Register Volume 70, Number 1 (Monday, January 3, 2005)]
[Proposed Rules]
[Pages 63-68]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 04-28174]


-----------------------------------------------------------------------

FEDERAL COMMUNICATIONS COMMISSION

47 CFR Parts 73 and 76

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


Broadcast Services; Children's Television; Cable Operators; 
Satellite Service Providers

AGENCY: Federal Communications Commission.

[[Page 64]]


ACTION: Notice of proposed rulemaking.

-----------------------------------------------------------------------

SUMMARY: The Commission seeks comment on applying to Direct Broadcast 
Satellite (DBS) service providers its revised interpretation of the 
commercial time limits applicable to children's programming. 
Specifically, the Commission proposes to require that the display of 
Internet Web site addresses during DBS 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. In addition, the Commission 
proposes to apply to DBS its revised definition of ``commercial 
matter'' as including promotions of television programs or video 
programming services other than children's educational and 
informational programming. The Commission also seeks comment on how to 
tailor its rules to allow innovation in interactivity in children's 
television programming, while at the same time ensuring that parents 
can control what information their children can access.

DATES: Comments are due by March 1, 2005, and reply comments are due by 
April 1, 2005.

ADDRESSES: Federal Communications Commission, Washington, DC 20554.

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

SUPPLEMENTARY INFORMATION: This is a summary of the Federal 
Communications Commission's Further Notice of Proposed Rule Making 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 proposed and 
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 Further Notice of Proposed Rule Making

    1. In the final rule document in this proceeding, published 
elsewhere in the same issue of this Federal Register, we resolved 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. In the 
final rule document, we concluded that, for the time being, we will not 
prohibit the appearance of direct, interactive, links to commercial 
Internet sites in children's programming, as this technology is 
currently not being used in children's programming. Nonetheless, we are 
aware that the inclusion of interactive technology in television 
programming is on the horizon. We encourage broadcasters to develop 
interactive services that 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. Accordingly, we seek comment on how to tailor our rules to 
allow innovation in interactivity in children's television programming, 
while at the same time ensuring that parents can control what 
information their children can access.
    2. We tentatively conclude that we should prohibit interactivity 
during children's programming that connects viewers to commercial 
matter unless parents ``opt in'' to such services. We seek comment on 
how such a rule could be implemented technologically. We also seek 
comment on how we would implement such a rule in terms of the statutory 
limits on commercial time. In particular, we note that the time spent 
accessing the Internet or other interactive material during a program 
is not limited to the time that a link is displayed on the screen. For 
the same reason, we seek comment as to how such a rule would apply to 
commercials, given that interactive elements can cause a commercial to 
last much longer than a 30-second or 15-second spot. Finally, we seek 
comment on whether to change how we define commercial matter in this 
context.
    3. We also concluded in the Report and Order in this proceeding 
that 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. We stated 
that we will apply this revised definition to television licensees and 
cable operators. We tentatively conclude that we should also amend Part 
25 of the Commission's rules to apply this revised definition to Direct 
Broadcast Satellite (``DBS'') service providers, and seek comment on 
this tentative conclusion. In addition, in the Report and Order we 
interpreted 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). We propose to apply these restrictions on the 
displaying of commercial Web site information to DBS and require DBS 
providers to maintain records sufficient to verify compliance with the 
commercial limits requirements and to make such records available to 
the public. We believe that it is appropriate to require that children 
in DBS households receive the same protection from excessive 
commercialism on television as children in cable or over-the-air 
television households. We do not believe that compliance with these 
rules will be burdensome as many of the programming services carried by 
DBS providers are the same as are carried by cable systems around the 
country, which must comply with the revised commercial limits rules 
adopted in our decision today.

Administrative Matters

    4. This is a permit-but-disclose notice and comment rulemaking 
proceeding. Ex parte presentations are permitted, except during the 
Sunshine Agenda

[[Page 65]]

period, provided that they are disclosed as provided in the 
Commission's Rules. See generally 47 CFR 1.1202, 1.1203, and 1.1206(a).
    5. Pursuant to Sections 1.415 and 1.419 of the Commission's rules, 
47 CFR 1.415, 1.419, interested parties may file comments on or before 
March 1, 2005, and reply comments on or before April 1, 2005. Comments 
may be filed using the Commission's Electronic Comment Filing System 
(ECFS) or by filing paper copies. See Electronic Filing of Documents in 
Rulemaking Proceedings, 63 FR 24121 (1998). Documents filed through the 
ECFS can be sent as an electronic file via the Internet to http://www.fcc.gov/e-file/ecfs.html. Generally, only one copy of an electronic 
submission must be filed. If multiple docket or rulemaking numbers are 
referenced in the caption of the comments, however, commenters must 
transmit one electronic copy of the comments to each docket or 
rulemaking number referenced in the caption. In completing the 
transmittal screen, commenters should include their full name, U.S. 
Postal Service mailing address, and the applicable docket or rulemaking 
number. Parties may also submit an electronic comment by Internet e-
mail. To get filing instructions for e-mail comments, commenters should 
send an e-mail to [email protected], and should include the following words 
in the body of the message, ``get form .'' A 
sample form and directions will be sent in reply. Parties who choose to 
file by paper must file an original and four copies of each filing. If 
more than one docket or rulemaking number appear in the caption of the 
comment, commenters must submit two additional copies for each 
additional docket or rulemaking number. Filings can be sent by hand or 
messenger delivery, by commercial overnight courier, or by first-class 
or overnight U.S. Postal Service mail (although we continue to 
experience delays in receiving U.S. Postal Service mail). The 
Commission's contractor, Vistronix, Inc., will receive hand-delivered 
or messenger-delivered paper filings for the Commission's Secretary at 
236 Massachusetts Avenue, NE., Suite 110, Washington, DC 20002. The 
filing hours at this location are 8 a.m. to 7 p.m. All hand deliveries 
must be held together with rubber bands or fasteners. Any envelopes 
must be disposed of before entering the building. Commercial overnight 
mail (other than U.S. Postal Service Express Mail and Priority Mail) 
must be sent to 9300 East Hampton Drive, Capitol Heights, MD 20743. 
U.S. Postal Service first-class mail, Express Mail, and Priority Mail 
should be addressed to 445 12th Street, SW., Washington, DC 20554. All 
filings must be addressed to the Commission's Secretary, Office of the 
Secretary, Federal Communications Commission.
    6. This Further Notice of Proposed Rulemaking may contain either 
proposed or modified information collections subject to the Paperwork 
Reduction Act of 1995. As part of our continuing effort to reduce 
paperwork burdens, we invite OMB, the general public, and other Federal 
agencies to take this opportunity to comment on the information 
collections contained in this Further Notice, as required by the 
Paperwork Reduction Act of 1995. Public and agency comments are due at 
the same time as other comments on the Further Notice. Comments should 
address: (a) Whether the proposed collection of information is 
necessary for the proper performance of the functions of the 
Commission, including whether the information shall have practical 
utility; (b) ways to enhance the quality, utility, and clarity of the 
information collected; and (c) ways to minimize the burden of the 
collection of information on the respondents, including the use of 
automated collection techniques or other forms of information 
technology. In addition to filing comments with the Secretary, a copy 
of any comments on the information collections contained herein should 
be submitted to Cathy Williams, Federal Communications Commission, 445 
Twelfth Street, SW., Room 1-C823, Washington, DC 20554, or via the 
Internet to [email protected] and to Kristy L. LaLonde, OMB Desk 
Officer, 10234 NEOB, 725 17th Street, NW., Washington, DC 20503 or via 
the Internet to Kristy L. LaLonde @omb.eop.gov, or via fax at 202-395-
5167.
    7. As required by the Regulatory Flexibility Act, the Commission 
has prepared an Initial Regulatory Flexibility Analysis (IRFA) of the 
possible significant economic impact on a substantial number of small 
entities of the proposals addressed in this Further Notice of Proposed 
Rulemaking. Written public comments are requested on the IRFA. These 
comments must be filed in accordance with the same filing deadlines for 
comments on the Further Notice, and they should have a separate and 
distinct heading designating them as responses to the IRFA.
    8. 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). This 
document can also be downloaded in Word and Portable Document Format 
(PDF) at: http://www.fcc.gov.
    9. For additional information on this proceeding, please contact 
Kim Matthews, Policy Division, Media Bureau at (202) 418-2154.

Initial Regulatory Flexibility Analysis

    As required by the Regulatory Flexibility Act of 1980, as amended 
(``RFA''), the Commission has prepared this Initial Regulatory 
Flexibility Analysis (``IRFA'') of the possible significant economic 
impact on small entities by the policies and rules proposed in this 
Further Notice of Proposed Rulemaking (``NPRM''). Written public 
comments are requested on this IRFA. Comments must be identified as 
responses to the IRFA and must be filed by the deadlines for comments 
on the NPRM. The Commission will send a copy of the Notice, including 
this IRFA, to the Chief Counsel for Advocacy of the Small Business 
Administration. In addition, the Notice and IRFA (or summaries thereof) 
will be published in the Federal Register.

I. Need for and Objectives of the Proposed Rules

    Our goal in commencing this proceeding is to seek comment on two 
issues: (1) Whether and how we should limit the use of interactivity 
for commercial purposes in children's television programming; and (2) 
whether we should apply to Direct Broadcast Satellite service providers 
the same revised definition of ``commercial matter'' adopted in the 
Report and Order.
    We seek comment in the Notice on the tentative conclusion that we 
should prohibit interactivity during children's programming that 
connects viewers to commercial matter unless parents ``opt in'' to such 
services. We seek comment on how such a rule could be implemented 
technologically. We also seek comment on how we would implement such a 
rule in terms of the statutory limits on commercial time.
    We concluded in the Report and Order that 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. We stated that we will apply 
this revised definition to television licensees and cable operators. We 
tentatively conclude in the Notice that we should also amend

[[Page 66]]

Part 25 of the Commission's rules to apply this revised definition to 
Direct Broadcast Satellite service providers, and seek comment on this 
tentative conclusion.
    In addition, the Report and Order interprets 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). The Report and Order applies 
this restriction to broadcasters and cable operators. We propose in the 
NPRM to apply this restriction to DBS. In addition, we propose to 
require DBS providers to maintain records sufficient to verify 
compliance with the commercial limits in children's programming and to 
make such records available to the public.

II. Legal Basis

    The authority for the action proposed in this rulemaking is 
contained in Sections 4(i) & (j), 303, 303a, 303b, 307, 309 and 336 of 
the Communications Act of 1934, as amended, 47 U.S.C. 154(i) & (j), 
303, 303a, 303b, 307, 309 and 336.

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

    The RFA directs the Commission to provide a description of and, 
where feasible, an estimate of the number of small entities that will 
be affected by the proposed rules, if adopted. The RFA generally 
defines the term ``small entity'' as having the same meaning as the 
terms ``small business,'' ``small organization,'' and ``small 
governmental jurisdiction.'' In addition, the term ``small business'' 
has the same meaning as the term ``small business concern'' under the 
Small Business Act. A small business concern is one which: (1) Is 
independently owned and operated; (2) is not dominant in its field of 
operation; and (3) satisfies any additional criteria established by the 
Small Business Administration (``SBA'').
    In this context, the application of the statutory definition to 
television stations is of concern. An element of the definition of 
``small business'' is that the entity not be dominant in its field of 
operation. We are unable at this time to define or quantify the 
criteria that would establish whether a specific television station is 
dominant in its field of operation. Accordingly, the estimates that 
follow of small businesses to which rules may apply do not exclude any 
television station from the definition of a small business on this 
basis and therefore might be over-inclusive.
    An additional element of the definition of ``small business'' is 
that the entity must be independently owned and operated. It is 
difficult at times to assess these criteria in the context of media 
entities and our estimates of small businesses might therefore be over 
inclusive.
    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 and Other Program Distribution. The SBA has developed a small 
business size standard for cable and other program distribution 
services, which includes all such companies generating $12.5 million or 
less in revenue annually. This category includes, among others, cable 
operators, direct broadcast satellite (``DBS'') services, home 
satellite dish (``HSD'') services, multipoint distribution services 
(``MDS''), multichannel multipoint distribution service (``MMDS''), 
Instructional Television Fixed Service (``ITFS''), local multipoint 
distribution service (``LMDS''), satellite master antenna television 
(``SMATV'') systems, and open video systems (``OVS''). According to 
Census Bureau data, there are 1,311 total cable and other pay 
television service firms that operate throughout the year of which 
1,180 have less than $10 million in revenue. We address below each 
service individually to provide a more precise estimate of small 
entities.
    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 is ``a cable operator that, 
directly or

[[Page 67]]

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.
    Direct Broadcast Satellite (``DBS'') Service. Because DBS provides 
subscription services, DBS falls within the SBA-recognized definition 
of Cable and Other Program Distribution services. This definition 
provides that a small entity is one with $12.5 million or less in 
annual receipts. There are four licensees of DBS services under Part 
100 of the Commission's Rules. Three of those licensees are currently 
operational. Two of the licensees that are operational have annual 
revenues that may be in excess of the threshold for a small business. 
The Commission, however, does not collect annual revenue data for DBS 
and, therefore, is unable to ascertain the number of small DBS 
licensees that could be impacted by these proposed rules. DBS service 
requires a great investment of capital for operation, and we 
acknowledge, despite the absence of specific data on this point, that 
there are entrants in this field that may not yet have generated $12.5 
million in annual receipts, and therefore may be categorized as a small 
business, if independently owned and operated. Therefore, we will 
assume all four licensees are small, for the purpose of this analysis.
    Electronics Equipment Manufacturers. Rules adopted in this 
proceeding could apply to manufacturers of DTV receiving equipment and 
other types of consumer electronics equipment. The SBA has developed 
definitions of small entity for manufacturers of audio and video 
equipment as well as radio and television broadcasting and wireless 
communications equipment. These categories both include all such 
companies employing 750 or fewer employees. The Commission has not 
developed a definition of small entities applicable to manufacturers of 
electronic equipment used by consumers, as compared to industrial use 
by television licensees and related businesses. Therefore, we will 
utilize the SBA definitions applicable to manufacturers of audio and 
visual equipment and radio and television broadcasting and wireless 
communications equipment, since these are the two closest NAICS Codes 
applicable to the consumer electronics equipment manufacturing 
industry. However, these NAICS categories are broad and specific 
figures are not available as to how many of these establishments 
manufacture consumer equipment. According to the SBA's regulations, an 
audio and visual equipment manufacturer must have 750 or fewer 
employees in order to qualify as a small business concern. Census 
Bureau data indicates that there are 554 U.S. establishments that 
manufacture audio and visual equipment, and that 542 of these 
establishments have fewer than 500 employees and would be classified as 
small entities. The remaining 12 establishments have 500 or more 
employees; however, we are unable to determine how many of those have 
fewer than 750 employees and therefore, also qualify as small entities 
under the SBA definition. Under the SBA's regulations, a radio and 
television broadcasting and wireless communications equipment 
manufacturer must also have 750 or fewer employees in order to qualify 
as a small business concern. Census Bureau data indicates that there 
1,215 U.S. establishments that manufacture radio and television 
broadcasting and wireless communications equipment, and that 1,150 of 
these establishments have fewer than 500 employees and would be 
classified as small entities. The remaining 65 establishments have 500 
or more employees; however, we are unable to determine how many of 
those have fewer than 750 employees and therefore, also qualify as 
small entities under the SBA definition. We therefore conclude that 
there are no more than 542 small manufacturers of audio and visual 
electronics equipment and no more than 1,150 small manufacturers of 
radio and television broadcasting and wireless communications equipment 
for consumer/household use.
    Computer Manufacturers. The Commission has not developed a 
definition of small entities applicable to computer manufacturers. 
Therefore, we will utilize the SBA definition of electronic computers 
manufacturing. According to SBA regulations, a computer manufacturer 
must have 1,000 or fewer employees in order to qualify as a small 
entity. Census Bureau data indicates that there are 563 firms that 
manufacture electronic computers and of those, 544 have fewer than 
1,000 employees and qualify as small entities. The remaining 19 firms 
have 1,000 or more employees. We conclude that there are approximately 
544 small computer manufacturers.

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

    At this time, we do not expect that the proposed rules would impose 
significant additional reporting or recordkeeping requirements. While 
the requirements proposed in the Notice would have an impact on Direct 
Broadcast Satellite providers and others, we do not expect the impact 
to be significant in terms of time or expense to comply. At this time, 
we expect the requirements to be the same for large and small entities. 
We seek comment on whether others perceive a need for less extensive 
recordkeeping or compliance requirements for small entities.

V. Steps Taken to Minimize Significant Impact on Small Entities, and 
Significant Alternatives Considered

    The RFA requires an agency to describe any significant alternatives 
that it has considered in reaching its proposed approach, which may 
include the following four alternatives (among others): (1) The 
establishment of differing compliance or reporting requirements or 
timetables that take into account the resources available to small 
entities; (2) the clarification, consolidation, or simplification of 
compliance or reporting requirements under the rule for small entities; 
(3) the use of performance, rather than design, standards; and (4) an 
exemption from coverage of the rule, or any part thereof, for small 
entities.
    The proposals in the NPRM would apply equally to large and small 
entities. We welcome comment on modifications of the proposals if such 
modifications might assist small entities and especially if such are 
based on evidence of potential differential impact.

VI. Federal Rules Which Duplicate, Overlap, or Conflict With the 
Commission's Proposals

    None.

[[Page 68]]

List of Subjects

47 CFR Part 73

    Television.

47 CFR Part 76

    Cable television.

Federal Communications Commission.
Marlene H. Dortch,
Secretary.
[FR Doc. 04-28174 Filed 12-30-04; 8:45 am]
BILLING CODE 6712-01-P