[Federal Register Volume 71, Number 211 (Wednesday, November 1, 2006)]
[Rules and Regulations]
[Pages 64154-64165]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: E6-18401]


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

FEDERAL COMMUNICATIONS COMMISSION

47 CFR Parts 73 and 76

[MM Docket No. 00-167; FCC 06-143]


Broadcast Services; Children's Television; Cable Operators

AGENCY: Federal Communications Commission.

ACTION: Final rule.

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

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 item makes certain modifications 
to the rules and policies adopted in the Commission's 2004 order in 
this proceeding. These modifications respond to petitions for 
reconsideration filed in response to the 2004 rules as well as a joint 
proposal recommending modifications to those rules filed by a group of 
cable and broadcast industry representatives and children's television 
advocates, among others.

DATES: The stay is lifted on Sec.  73.670 paragraphs (b), (c) and Note 
1; Sec.  73.671 paragraphs (e) and (f) and Sec.  76.225 paragraphs (b), 
(c) and Note 1 effective January 2, 2007. The amendments in this final 
rule are effective January 2, 2007.

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

SUPPLEMENTARY INFORMATION: This is a summary of the Federal 
Communications Commission's Second Order on Reconsideration and Second 
Report and Order in MM Docket No. 00-167, FCC 06-143, adopted September 
26, 2006, and released September 29, 2006. 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: 
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).

Summary of the Second Order on Reconsideration and Second Report

    1. In this Second Order on Reconsideration and Second Report and 
Order (``Second Order'') we resolve issues 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 and cable operators protect children from excessive and 
inappropriate commercial messages. Some of the rules and policies 
adopted herein apply only to digital broadcasters, while 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, update 
our rules protecting children from overcommercialization in children's 
programming, and improve our children's programming rules and policies.
    2. Specifically, this Second Order makes certain modifications to 
the rules and policies adopted in our September 9, 2004 Report and 
Order and Further Notice of Proposed Rule Making (70 FR 25 and 63, 
January 3, 2005) (``2004 Order'') in this proceeding. The modifications 
we make today respond to petitions for reconsideration filed in 
response to the rules as well as a Joint Proposal of Industry and 
Advocates on Reconsideration of Children's Television Rules (``Joint 
Proposal'') filed by a group of cable and broadcast industry 
representatives and children's television advocates, among others.
    3. Our decision today does not alter the new children's core 
programming ``multicasting'' rule adopted in the 2004 Order, but does 
clarify the way in which repeats of core programs will be counted under 
the new rule. We do not make substantial changes to the four-prong Web 
site rule adopted in the 2004 Order, but do amend the host selling 
restrictions adopted in the 2004 Order to apply those restrictions less 
broadly and to exempt certain third party Web sites from the host 
selling restriction. We also revise the definition of ``commercial 
time'' adopted in the 2004 Order to limit the kinds of promotions of 
children's programs that must be counted under the advertising rules 
adopted in the 2004 Order. In addition, with regard to scheduling of 
core children's programming, we vacate the percentage cap on the number 
of permissible core program preemptions adopted in the 2004 Order and 
return to our prior practice of addressing the number of preemptions 
and rescheduling of core programming on a case-by-case basis. These 
modifications will serve the public interest by

[[Page 64155]]

ensuring an adequate supply of children's educational and informational 
programming as we transition to digital television technology, and 
protecting children from excessive and inappropriate commercial 
messages in broadcast and cable programming, without unduly impairing 
the scheduling flexibility of broadcasters and cable operators.

Discussion

    4. We commend the parties to the Joint Proposal for their hard work 
in negotiating a compromise among a group of entities with often widely 
divergent views on the appropriate rules and policies in the area of 
children's television. Negotiation among interested parties can often 
be productive in achieving a workable compromise proposal consistent 
with the public interest on issues before the Commission, and we 
encourage such efforts. This private agreement has now been subject to 
public scrutiny and we will, of course, consider all comments in 
determining what rules and policies are most consistent with the 
statute and best serve the public interest. Based on the full record 
before us, we conclude that the Joint Proposal appropriately balances 
the concerns and needs of children and parents with those of industry, 
advertisers, and others, and will result in swift implementation of the 
rules.
    5. We note that the Joint Proposal recommends only relatively minor 
clarifications to two of the rules adopted in the 2004 Order--the 
digital broadcasting processing guideline and the Web site address 
rule. While some of the comments filed in response to the Joint 
Proposal indicate that some parties remain concerned about aspects of 
the digital broadcasting processing guideline, by and large the 
comments support the Joint Proposal. In this item, we retain both the 
digital programming processing guideline and the Web site address rule 
with only minor modifications. These and the other modifications we 
make to the 2004 rules are consistent with the recommendations of the 
Joint Proposal and with our overall goals of ensuring the provision of 
sufficient children's educational programming and protecting children 
from excessive advertising as we transition to the digital era.

Digital Core Children's Programming Processing Guideline

    6. Under the core programming processing guideline adopted in 1996, 
analog broadcasters that air at least three hours per week of core 
children's educational programming are entitled to staff-level approval 
of the CTA portion of their license renewal application. With the 
advent of digital broadcasting and the multicasting ability that 
technology offers, the Commission determined in the 2004 Order that it 
would adopt a new method of quantifying the core programming guideline 
for digital broadcasters that choose to multicast. The Commission made 
clear that all digital broadcasters continue to be subject to the 
existing three hours per week core programming processing guideline on 
their main program stream. In addition, for DTV broadcasters that 
choose to multicast, the guideline increases in proportion to the 
additional hours of free programming offered on multicast channels--up 
to an additional three hours per week for each 24-hour free multicast 
program stream. Under the revised guideline adopted in the 2004 Order, 
digital broadcasters can choose to air some or all of the additional 
core programming on either the main stream or a multicast stream, as 
long as the multicast stream receives MVPD carriage comparable to the 
stream that generated the additional core programming obligation.
    7. In order to ensure that digital broadcasters do not simply 
replay the same core programming in order to meet this revised 
processing guideline, the Commission required in the 2004 Order that 
``at least 50 percent of core programming not be repeated during the 
same week in order to qualify as core.'' The Commission exempted from 
this requirement any program stream that merely time shifts the entire 
programming line-up of another program stream. In addition, the 
Commission stated that during the digital transition we would not count 
as repeated programming core programs that are aired on both the analog 
station and a digital program stream.
    8. A number of broadcast interests argued on reconsideration that 
requiring additional programming obligations for multicast streams 
would stifle the deployment of specialized channels. Broadcasters also 
claimed that there is no record evidence of a failure by commercial TV 
stations to meet children's educational programming needs. To counter 
the disincentive to air multicast channels, some petitioners supported 
an exemption for digital program streams that carry non-entertainment 
programming. Petitioners also argued that the Commission should waive 
the ``comparable carriage'' element of the guideline, at least until 
MVPDs are required to carry all free over-the-air channels. In 
response, children's television advocates argued that history shows 
that market forces do not ensure that broadcasters serve the 
educational needs of children and that the record in this proceeding 
demonstrates that the educational needs of children are not currently 
being met.
    9. The Joint Proposal generally accepts the new multicasting rule 
but recommends a clarification of the restriction on the number of 
repeated core programs that can count toward the new programming 
guideline. Specifically, the Joint Proposal would clarify that at least 
50 percent of the core programming counted toward meeting the 
additional programming guideline cannot consist of program episodes 
that had already aired within the previous seven days on either the 
station's main program stream or on another of the station's free 
digital program streams. This is not a change in the rule, but rather a 
clearer statement of what the rule was intended to cover. The Joint 
Proposal would also amend FCC Form 398 to collect information necessary 
to enforce this limit.
    10. We will retain the revised core programming processing 
guideline as adopted in the 2004 Order. As we stated then, we believe 
that the revised guideline translates the existing three-hour guideline 
to the digital environment in a manner that is both fair to 
broadcasters and meets the needs of the child audience. The previous 
core programming guideline represented the Commission's judgment as to 
what constituted a ``reasonable, achievable guideline'' that would not 
unduly burden broadcasters. Now that digital broadcasters have the 
capability to significantly increase their overall hours of 
programming, increasing the amount of core programming will not result 
in an unreasonable burden. For example, if a station chooses to 
broadcast a second stream of free video programming twenty-four hours a 
day, seven days a week, it can satisfy the new guideline by providing 
merely three additional hours per week of core programming--or less 
than two percent of the channel's 168 hours of additional weekly 
programming. In addition, we believe that a guideline that increases 
the amount of core programming in a manner roughly proportional to the 
increase in free video programming offered by broadcasters is 
consistent with the objective of the CTA ``to increase the amount of 
educational and informational broadcast television available to 
children.''
    11. We also conclude that the revised quantitative processing 
guideline we reaffirm today is consistent with the First Amendment. It 
is well established

[[Page 64156]]

that the broadcast media do not enjoy the same level of First Amendment 
protection as do other media. Under this more lenient scrutiny, it is 
also well established that the government may regulate broadcast speech 
in order to advance its compelling interest in promoting and protecting 
the well-being of children. As we discussed in the 2004 Order, 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. In enacting the CTA, Congress 
explicitly found that ``as part of their obligation to serve the public 
interest, television station operators and licensees should provide 
programming that serves the special needs of children.'' As noted 
above, the multicasting rule substantially advances that interest by 
furthering ``the objective of the CTA `to increase the amount of 
educational and informational broadcast television available to 
children.' '' Moreover, consistent with the First Amendment, the rule 
is narrowly tailored to achieve its objective. It increases the 
guideline only for broadcasters that choose to use their digital 
capacity to air additional free video programming. Broadcasters 
continue to retain wide discretion in choosing the ways in which they 
will meet their CTA obligations. Under the rule, the core programming 
guideline increases in a manner roughly proportional to the additional 
amount of free video programming multicasters choose to provide. That 
guideline, by ``giving broadcasters clear but nonmandatory guidance on 
how to guarantee compliance'' with the CTA, provides ``a constitutional 
means of giving effect to the CTA's programming requirement.'' We 
reject the State Broadcasters Associations' argument that our revised 
guideline is constitutionally unacceptable because it ``dictates the 
removal of one form of content over another.'' The CTA itself reflects 
a preference for children's educational and informational programming, 
and no party has challenged the constitutionality of the CTA's 
provisions for promoting such programming.
    12. A number of broadcast companies and industry associations, none 
of which are parties to the Joint Proposal, argue that the Commission 
either should not impose additional core programming requirements on 
digital multicast channels, or at least should exempt multicast 
channels that offer educational, informational, and/or public interest 
programming. These commenters argue that many local broadcasters are 
planning multicast channels that focus on a single genre of 
programming, such as weather or news, and that the multicast guideline 
as adopted would discourage the provision of such specialized channels. 
These commenters also argue that children are unlikely to watch 
programming aired on channels primarily devoted to news and other 
specialized adult programming.
    13. We decline to revise our processing guideline as suggested by 
these commenters. As we stated in the 2004 Order, we do not want to 
discourage broadcasters from providing channels with a specialized 
focus. However, we agree with the Children's Media Policy Coalition 
that the guideline provides broadcasters the flexibility to move core 
programming to either their main programming stream or other multicast 
streams, so long as the stream the programming is moved to receives 
comparable MVPD carriage to the stream triggering the additional 
obligation. Thus, the guideline preserves the principle that, in order 
to obtain staff level approval of their CTA compliance, broadcasters 
must provide three hours of children's core programming for every 168 
hours per week of free video programming that they air, while at the 
same time giving broadcasters flexibility to choose the multicast 
stream that will air that programming. In addition, broadcasters could 
meet the guideline by airing children's programming on specialized 
channels, such as a children's news program on a twenty-four hour news 
channel or a children's educational weather program on a twenty-four 
hour weather channel. Furthermore, we note that our rules provide 
flexibility for licensees that have aired somewhat less core 
programming than indicated by the guideline but that nonetheless 
demonstrate an adequate commitment to educating and informing children.
    14. Some broadcast commenters also point out that there is no 
requirement for cable carriage of multicast channels, thereby limiting 
the flexibility of broadcasters to consolidate their core programming 
on a multicast stream under the comparable MVPD carriage requirement. 
While we recognize that the comparable MVPD carriage requirement may 
limit the flexibility of some broadcasters to consolidate core 
programming on a single multicast channel, we believe that the 
comparable carriage requirement is necessary to ensure that, as 
additional free programming is made available to viewers in the 
station's service area, the level of children's programming increases 
as well.
    15. As noted, the Joint Proposal suggests a clarification of the 
number of permissible core program repeats under the processing 
guideline. Specifically, the Joint Proposal recommends that the 
Commission clarify that at least 50 percent of the core programming 
counted toward meeting the additional programming guideline cannot 
consist of program episodes that had already aired within the previous 
seven days on either the station's main program stream or on another of 
the station's free digital program streams. We will adopt this 
clarification; it makes the rule easier to understand and apply and is 
consistent with the intent of the 2004 Order. All of the commenters 
that addressed this aspect of the Joint Proposal supported this 
clarification. We will also adopt the Joint Proposal recommendation, 
supported by other commenters, that FCC Form 398 be amended to collect 
the information necessary to enforce the limit on repeats under the 
revised guideline. As suggested by commenters, we will permit licensees 
to certify on Form 398 that they have complied with the repeat 
restriction and will not require broadcasters to identify each program 
episode on Form 398. We will require licensees, however, to retain 
records sufficient to document the accuracy of their certification, 
including records of actual program episodes aired, and to make such 
documentation available to the public upon request. The children's 
programming liaison, whose name and phone number must be included on 
FCC Form 398, should be able to provide documentation to substantiate 
the certification if requested.

Preemption

    16. To qualify as ``core programming'' for purposes of the 
children's programming 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 its 1996 children's 
programming rules, the Commission stated that television series 
typically air in the same time slot for thirteen consecutive weeks, 
although some episodes may be preempted for programs such as breaking 
news or live sports events. The Commission stated in the 1996 Order 
that it would leave to the staff to determine, with guidance from the 
full Commission as necessary, what constitutes regularly scheduled 
programming and what level of preemption is allowable.

[[Page 64157]]

    17. In the 2004 Order, the Commission stated that core programs 
moved to the same time slot on another digital program stream would not 
be considered preempted, as long as the alternate stream has comparable 
MVPD carriage and the station provides notice of the move on both the 
original and the alternate program stream. In addition, the 2004 Order 
limited the number of core programming preemptions for analog and 
digital broadcasters to no more than ten percent of core programs in 
each calendar quarter. Any preemption beyond the ten percent limit 
would cause that program not to count as core under the processing 
guideline, even if the program were rescheduled. The 2004 Order 
exempted preemptions for breaking news from the preemption limit and 
rescheduling requirement.
    18. On reconsideration, a number of petitioners argued that the 
preemption cap is unworkable in light of broadcasters' commitments to 
air live sports programming on Saturdays, particularly on the West 
coast. In lieu of the new rules, some petitioners urged the Commission 
to continue its prior practice of case-by-case staff approval of 
network preemption practices. Other petitioners supported exempting 
from the preemption cap live sports programming or children's programs 
rescheduled in accordance with the Media Bureau's current preemption 
policies. In their original opposition to these petitions, children's 
advocates agreed that a modest modification of the new preemption rule 
would be appropriate to accommodate major sporting events such as the 
Olympics and World Cup.
    19. The Joint Proposal recommends that the Commission not adopt any 
percentage or other numerical limit on preemptions and instead return 
to the Commission practice of ensuring, on a case-by-case basis, that 
broadcasters do not engage in excessive preemptions of core 
programming. All of the commenters that addressed the issue of 
preemptions supported the Joint Proposal recommendation to eliminate 
the cap on the number of preemptions and return to a case-by-case 
approach.
    20. We are persuaded that the burden created by the ten percent cap 
on preemptions outweighs the benefits the Commission sought to achieve, 
and therefore hereby repeal the ten percent cap on preemptions adopted 
in the 2004 Order. We will instead institute a procedure similar to 
that used by the Media Bureau and the Commission following adoption of 
the 1996 children's television Order whereby networks sought informal 
approval of their preemption plans each year. Under the policy formerly 
developed by the Commission staff, a program counted as preempted only 
if it was not aired in a substitute time slot (otherwise known as a 
``second home'') with an on-air notification of the schedule change 
occurring at the time of preemption during the previously scheduled 
episode. The on-air notification must announce the alternate date and 
time when the preempted show will air. As part of this policy, we will 
require all networks requesting preemption flexibility to file a 
request with the Media Bureau by August 1 of each year stating the 
number of preemptions the network expects, when the program will be 
rescheduled, whether the rescheduled time is the program's second home, 
and the network's plan to notify viewers of the schedule change. We 
will presume that non-network stations are complying with the three 
hour core programming requirement, and do not need broad preemption 
relief. We intend to monitor the number, rescheduling, and promotion of 
preemptions of all stations under this policy by our quarterly review 
of their Children's Programming Reports to ensure that the interests of 
the child audience are being served. We find this approach to be a 
reasonable compromise for programmers that routinely face conflicts 
between their children's television blocks and sports programming as 
the result of time differences. We note that the concept of a ``second 
home'' is familiar to viewers, and are persuaded that those core 
programs that must be preempted are consistently rescheduled and 
promoted. Indeed, the Media Bureau has previously found that children's 
educational and informational programming efforts have not been 
``unduly affected by the limited preemption flexibility granted'' under 
the existing standard.

Limit on Display of Internet Web Site Addresses

    21. The CTA requires that commercial television broadcasters and 
cable operators limit the amount of commercial matter in children's 
programs to no more than 101/2 minutes per hour on weekends and 12 
minutes per hour on weekdays. The Commission noted in the 2004 Order 
that some broadcasters are displaying Internet Web site addresses 
during children's program material (for example, in a crawl at the 
bottom of the screen) and expressed concern that the display of such 
addresses for Web sites established for commercial purposes in 
children's programs was inconsistent with the CTA's mandate to protect 
children from excessive and inappropriate commercial messages. 
Accordingly, the 2004 Order required that, with respect to programs 
directed to children ages 12 and under, the display of Internet Web 
site addresses during program material is permitted only if: (1) The 
Web site offers a substantial amount of bona fide program-related or 
other noncommercial content; (2) the Web site 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). This restriction applies to 
analog and digital broadcasters as well as cable operators.
    22. On reconsideration, a number of petitioners claimed that the 
rule exceeds the Commission's authority because the CTA does not 
authorize regulation of Web site addresses, which petitioners assert 
are not commercials. We disagree. As the children's television 
advocates asserted, the Commission has the authority to enact these 
restrictions because they do not regulate Internet content, but rather 
the advertising of commercial Web sites in children's programming, a 
subject clearly within the scope of the Commission's jurisdiction. 
Several petitioners also challenged the rule on notice grounds. In 
response, child advocates argued that the Commission gave adequate 
notice of the potential restriction, because it sought comment on 
whether to prohibit all direct links to commercial Web sites and the 
term Web site links can refer to either passive displays or interactive 
links. We agree that adoption of the Web site display rules was within 
the scope of the NPRM. Furthermore, the Second FNPRM sought comment 
``on the rules and policies adopted in the [2004] Order in light of the 
recommendations reflected in the Joint Proposal'' and asked for ``any 
alternative modifications'' to the 2004 rules, in addition to the 
modifications proposed in the Joint Proposal. Thus, the notice issue is 
moot.
    23. The Joint Proposal does not propose material changes to the Web 
site rule adopted in the 2004 Order but requests two clarifications: 
(1) That the rule applies only when Internet addresses are displayed 
during program material or during promotional material

[[Page 64158]]

not counted as commercial time; and (2) that if an Internet address for 
a Web site that does not meet the four-prong test is displayed during a 
promotion, in addition to counting against the commercial time limits, 
the promotion will be clearly separated from programming material. The 
comments filed in response to the Second FNPRM generally support the 
Joint Proposal approach.
    24. We will retain the rule on Web site addresses and, in addition, 
adopt the clarifications proposed in the Joint Proposal. As the 
Commission stated in the 2004 Order, the Web site address rule fairly 
balances the interest of broadcasters in exploring the potential uses 
of the Internet with our mandate to protect children from over-
commercialization. The display of the address of a Web site that sells 
a product is the equivalent of a commercial encouraging children to go 
to the store and buy the product. Thus, including the display during 
program material converts that program material into commercial matter 
just as a host telling children to race to their local toy store would. 
We note that broadcasters are free to display the addresses of Web 
sites that do not comply with the test during the allowable commercial 
time, as long as it is adequately separated from the program material; 
thus, the burden is minimal and outweighed by the benefits discussed 
above. The minor clarifications recommended by the Joint Proposal make 
this point clear.
    25. We also disagree with petitioners, and conclude that the Web 
site rule we modify today is consistent with the First Amendment. 
Because this rule regulates commercial speech, it is subject to less 
First Amendment protection than noncommercial speech. The rule is 
therefore permissible under the First Amendment if it ``directly 
advances'' a ``substantial'' governmental interest in a manner that 
``is not more extensive than necessary to serve that interest.'' The 
Web site rule satisfies these criteria. By limiting the display of 
commercial Web site addresses during children's programming, the Web 
site rule advances the government's substantial interest in protecting 
children from overcommercialization. Numerous Web sites sell products 
with special appeal to children. Televised references to commercial Web 
sites are no different from other forms of advertising. A television 
commercial encouraging children to go to a toy store Web site, for 
example, is substantially similar to an advertisement telling children 
to go to their local toy store. As such, a limit on televised 
advertising of commercial Web sites during children's programming is 
necessary ``to protect children, who are particularly vulnerable to 
commercial messages.'' The rule is narrowly tailored. It only limits 
when certain types of Web site addresses may be televised; it places no 
limits on displays of Web sites that are not commercial in nature. In 
addition, these restrictions apply only during non-commercial portions 
of children's programs, which represent a tiny fraction of a 
broadcaster's programming. The rule does nothing to prevent 
broadcasters and cable programmers from publicizing their Web sites as 
often as they wish during their many hours of other programming or 
during properly buffered commercial portions of children's programming, 
regardless of whatever content those Web sites may contain. Further, 
despite petitioner's passing assertions, the Web site rule as modified 
is not constitutionally suspect on vagueness grounds. We find that the 
four-part test is sufficiently clear to give broadcasters reasonable 
notice of what conduct is proscribed.
    26. A number of commenters, including the Ad Council, request that 
public service announcements (``PSAs'') be exempt from the four-prong 
Web site rule. The Ad Council states that the rule has created 
confusion within the broadcast industry and has had a chilling effect 
on broadcasters' willingness to run PSAs. We agree that further 
clarification of this issue could help avoid confusion. We agree with 
the Children's Media Policy Coalition that we should clarify that 
certain PSAs, which are not commercial matter under our rules, are 
exempt from the Web site display rules. The Commission has historically 
encouraged licensees to air PSAs as part of their obligation to fulfill 
the public interest. Indeed, in the children's television context, as 
discussed above, licensees that have not aired at least three hours of 
core programming may count educational and informational PSAs toward 
the three hour processing guideline. Thus, the Commission has already 
adopted a policy of encouraging the airing of PSAs during programming 
directed to children. For these purposes, we will define PSAs exempt 
from the Web site display rules as suggested by the Coalition: PSAs 
aired on behalf of independent non-profit or government organizations, 
or media companies in partnership with non-profits or government 
entities, that display Web sites not under the control of the licensee 
or cable company. We believe it is unlikely that PSAs meeting this 
definition will display addresses for commercially-oriented Web sites, 
and we are persuaded by commenters that if we do not carve out an 
exception for PSAs licensees and cable operators will be discouraged 
from airing them because they do not want to incur the obligation of 
ensuring that any Web site addresses displayed comply with the four 
prong test. Given the non-profit nature of PSAs, we do not expect abuse 
of this exemption. But we will revisit this issue if the need arises.
    27. For similar reasons, we also clarify that station 
identifications and emergency announcements are not subject to the 
rules governing the display of Web site addresses as long as the 
display is consistent with the purpose of the announcement. The four 
prong Web site address rule applies to Web site addresses displayed 
during program material and, as clarified above, to promotional 
material not counted as commercial time. Station identifications and 
emergency announcements are neither program material nor promotions for 
purposes of the Web site rule. Rather, both are announcements required 
under the Commission's rules and must comport with certain requirements 
regarding their composition and timing. To the extent a licensee 
includes a Web site address to provide more information about an 
emergency or about how to contact the station, we find it unnecessarily 
restrictive to require that such a Web site comply with the four prong 
test.
    28. We decline to exempt closing credits from application of the 
Web site address rules as requested by some commenters. Closing credits 
are part of the television program material and should, therefore, be 
subject to the Web site restrictions.
    29. We decline at this point to further define terms in the Web 
site rule. NAB argues that certain terms in the rule are vague and do 
not provide sufficient guidance to broadcasters on whether a Web site 
would comply with the Web site rule. We believe that the rule, as 
clarified herein, is sufficiently clear to guide broadcasters' 
compliance. Isolated concerns about the clarity of the Web site rule 
can be addressed by the Commission staff on a case-by-case basis.
    30. We also decline to allow broadcasters to avoid liability by 
relying on representations from program providers that web addresses 
meet the four-prong test. We do not expect compliance to be burdensome, 
but we will revisit this issue if we receive evidence that this is 
imposing an undue burden on broadcasters.

[[Page 64159]]

Host Selling

    31. The Commission's long standing host selling policy prohibits 
the use of program characters or show hosts to sell products in 
commercials during or adjacent to shows in which the character or host 
appears. Because of the unique vulnerability of children to host 
selling, the 2004 Order prohibits the display of Web site addresses in 
children's programs when the site uses characters from the program to 
sell products or services. In the 2004 Order, the Commission stated 
that the restriction on Web sites that use host selling applies to Web 
site addresses displayed both during program material and during 
commercial material.
    32. Several parties argued on reconsideration that the host selling 
restriction is unnecessarily restrictive. These petitioners contended 
that familiar television characters are often used in Web sites in ways 
that are not commercial in nature, such as to adorn a webpage or guide 
children from one page to the next. Petitioners also argued that any 
Web site promotion of any product or service incorporating a program-
related character appears to violate the rule even though the 2004 
Order permits the sale of program-related merchandise on appropriately 
cabined commercial sections of a Web site. In response, children's 
advocates argued that there are clear examples of problems with host 
selling on Web sites, and that the Commission can address any concerns 
about the clarity of its rules on a case-by-case basis.
    33. The Joint Proposal proposes that the host selling rule in the 
2004 Order be vacated and replaced with the following rule:

    Entities subject to commercial time limits under the Children's 
Television Act (``CTA'') will not display a Web site address during 
or adjacent to a program if, at that time, on pages that are 
primarily devoted to free noncommercial content regarding that 
specific program or a character appearing in that program: (1) 
Products are sold that feature a character appearing in that 
program; or (2) a character appearing in that program is used to 
actively sell products.
    To clarify, this rule does not apply to: (1) Third-party sites 
linked from the companies' web pages; (2) on-air third-party 
advertisements with Web site references to third-party Web sites; or 
(3) pages that are primarily devoted to multiple characters from 
multiple programs.

    Commenters that addressed the host selling issue generally support 
the Joint Proposal recommendation.
    34. We continue to believe that it is important to restrict the 
practice of host selling in children's programming. As we have stated 
before, the trust that children place in program characters allows 
advertisers to take unfair advantage of the relationship between the 
hosts and young children. This can occur whether the host selling 
occurs on the air or on a Web site to which the television program 
refers children.
    35. We agree, however, with those who argue that our original 
formulation of the host selling rule was overly restrictive, and that 
we should revise it as recommended by the Joint Proposal. We believe 
the revised rule achieves a better balance than the existing rule 
between the goals of protecting children and permitting broadcasters 
and cable operators to make appropriate use of Web site displays. The 
2004 Order expressly states that commercial portions of Web sites that 
comply with the Web site display rules may sell or advertise products 
associated with the related television program. As several parties 
noted, the host selling rule as originally written appeared to prohibit 
the sale of any merchandise incorporating a program-related character 
anywhere on a Web site, even if that portion of the site was clearly 
identified as commercial in nature and the site otherwise complied with 
the four-prong Web site rule. The revised host selling rule we adopt 
today permits the sale of merchandise featuring a program-related 
character in parts of the Web site that are sufficiently separated from 
the program itself to mitigate the impact of host selling.
    36. Univision supports the Joint Proposal revision but states that 
the revised rule is vague with respect to the proposed exemption for 
certain third party sites as it fails to provide a definition of the 
term ``third party.'' We decline to adopt a definition of ``third 
party'' at this time as we believe that the purpose of the third party 
exemption from the host selling restriction is sufficiently clear to 
provide guidance to broadcasters and cable operators about the kinds of 
ads and Web sites to which the exemption applies. As stated by the 
Coalition, the intent behind the third party exemption to the rule is 
to alleviate the need for companies to police third party Web sites 
over which the company has no control. In addition, the third party Web 
site would not be included in the relevant children's programming; 
rather the third party Web site would be displayed in a commercial 
(subject to the commercial limits) or would merely be linked to from 
the company's Web site. Advertisements with or without Web site 
addresses must be separated from programming material by use of 
bumpers, as currently required under the Commission's existing 
commercial limits rules and policies. As such, there will be multiple 
layers of separation between the program and the third party Web site, 
which will sufficiently attenuate the commercial content from the 
relevant programming.
    37. Television licensees currently certify their compliance with 
the children's advertising commercial limits on their license renewal 
forms and are required to maintain in their public inspection file 
records sufficient to substantiate the certification. As the Commission 
stated in the 2004 Order, licensees will be required also to certify 
that they have complied with the requirements concerning the display of 
Web site addresses in such programming. In addition, licensees 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 the Web site address and host selling 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).

Definition of Commercial Matter

    38. The limitation on the duration of advertising in children's 
programming of 10 \1/2\ minutes per hour on weekends and 12 minutes per 
hour on weekdays applies to ``commercial matter.'' Prior to the 2004 
Order, the term ``commercial matter'' was defined to exclude certain 
types of program interruptions, including promotions of upcoming 
programs that do not mention sponsors. The Commission noted in the 2004 
Order that a significant amount of time is devoted to these types of 
announcements in children's programming, thereby reducing the amount of 
actual program material far more than the commercial limits alone might 
suggest. To address this problem, the 2004 Order revised the definition 
of ``commercial matter'' to include promotions of television programs 
or video programming services other than children's educational and 
informational programming. The revised definition applies to analog and 
digital broadcasters and to cable operators.
    39. On reconsideration, petitioners generally argued that the 
revised definition of commercial matter would lead to lost ad sales in 
children's programming and reduced revenues

[[Page 64160]]

from such programming as well as diminished opportunities to promote 
programming. Petitioners claimed that reducing the number of program 
promotions would reduce the number of children watching the programs. 
Petitioners also argued that there is no evidence that counting 
internal promotions as commercials would increase the amount of content 
in children's shows or reduce program interruptions as programs are 
produced in a specific length. Children's advocates claimed that new 
children's programs can be made longer and that the amount of program 
material in existing shows can be increased by supplementing existing 
programs with short-form programming, that is, programming lasting less 
than thirty minutes.
    40. As noted above, the 2004 Order included all program promotions 
other than children's educational and informational programming in the 
definition of commercial matter. The Joint Proposal would change the 
revised definition of ``commercial matter'' to exclude (1) promotions 
for any children's or other age-appropriate programming appearing on 
the same channel, and (2) promotions for children's educational and 
informational programming appearing on any channel. Commenters express 
general support for the Joint Proposal recommendation.
    41. We will revise our definition of ``commercial matter'' as 
recommended by the Joint Proposal. We believe that the revised 
definition of commercial matter is consistent with the public interest, 
provides additional flexibility for broadcasters and cable operators, 
and furthers our goal of making high quality children's programming 
available to the public. We also note that the CTA explicitly 
authorizes the Commission to review and evaluate the advertising 
duration limits; the Commission is therefore authorized to change the 
definition of ``commercial matter'' consistent with the intent of the 
CTA and the public interest. Thus, we disagree with parties that argue 
the revised definition is inconsistent with the CTA.
    42. While the revised rule may not limit program promotions in 
children's programming to the same extent as the rule adopted in the 
2004 Order, the revision will still reduce the number of interruptions 
that were permissible under the original rule and encourage the 
promotion of programming appropriate for children, including 
educational and informational programming. As we stated in the 2004 
Order, we believe that reducing the number of program promotions will 
help protect children from overcommercialization of programming 
consistent with overall intent of the CTA. In addition, exempting 
program promotions for programming appropriate for children may 
encourage broadcasters to promote children's programming with 
educational and informational value, thereby increasing public 
awareness of the availability of this programming.

Conclusion

    43. The rules and policies adopted herein will serve the public 
interest by both protecting children from excessive and inappropriate 
advertising on television and ensuring an adequate supply of children's 
educational programming as we transition from an analog to a digital 
television environment. Our actions today further the public interest 
and the mandate of the CTA and provide a reasonable balance between the 
concerns of industry and protecting the well-being of the nation's 
children.

Administrative Matters

    44. Final Regulatory Flexibility Analysis As required by the 
Regulatory Flexibility Act, the Commission has prepared a Final 
Regulatory Flexibility Analysis (``FRFA'') relating to this Report and 
Order.
    45. Final Paperwork Reduction Act Analysis. This Second Order 
contains information collection requirements which were proposed in the 
Second FNPRM, 21 FCC Rcd 3642 (2006), 71 FR 15145 (March 27, 2006), and 
are subject to the Paperwork Reduction Act of 1995 (``PRA''). The 
Second FNPRM proposed to revise FCC Form 398 and modify/add new 
information collection requirements. These proposals were submitted to 
the Office of Management and Budget (OMB) for review under Section 
3507(d) of the PRA. The revised FCC Form 398 and modified/new 
information collection requirements were approved by OMB on June 23, 
2006, OMB Control No. 3060-0754. This Second Order adopts the 
information collection requirements and FCC Form 398 as proposed.
    46. Our requirements regarding the requests that may be filed with 
the Media Bureau by networks seeking preemption flexibility will become 
effective after approval by the Office of Management and Budget 
(``OMB''). The Commission will publish a separate Federal Register 
Notice seeking public comment on this new information collection 
requirement at a later date. Upon OMB approval, we will issue a Public 
Notice announcing the effective date of this rule.
    47. In addition, the general public and other Federal agencies were 
invited to comment on the information collection requirements in the 
Second FNPRM. We further note that pursuant to the Small Business 
Paperwork Relief Act of 2002, the Commission previously sought specific 
comment on how the Commission might ``further reduce the information 
collection burden for small business concerns with fewer than 25 
employees.'' We received no comments concerning these information 
collection requirements. For additional information concerning the 
information collection requirements contained in this Report and Order, 
contact Cathy Williams at 202-418-2918, or via the Internet to 
[email protected].
    48. Congressional Review Act. The Commission will send a copy of 
this Second Order in a report to be sent to Congress and the Government 
Accountability Office pursuant to the Congressional Review Act, see 5 
U.S.C. Sec.  801(a)(1)(A).
    49. Additional Information. For additional information on this 
proceeding, please contact Kim Matthews, Policy Division, Media Bureau 
at (202) 418-2154, or Holly Saurer, Policy Division, Media Bureau at 
(202) 418-7283.

Ordering Clauses

    50. It is ordered that, pursuant to the authority contained in 
Sections 1, 2, 4(i), 303, 303a, 303b, and 307of the Communications Act 
of 1934, 47 U.S.C 151, 152, 154(i), 303, 303a, 303b, and 307, this 
Second Order on Reconsideration and Second Report and Order is adopted.
    51. It is further ordered that pursuant to the authority contained 
in Sections 1, 2, 4(i), 303, 303a, 303b, and 307 of the Communications 
Act of 1934, 47 U.S.C 151, 152, 154(i), 303, 303a, 303b, and 307, the 
Commission's rules are hereby amended as set forth in the rule changes. 
It is our intention in adopting these rule changes that, if any 
provision of the rules is held invalid by any court of competent 
jurisdiction, the remaining provisions shall remain in effect to the 
fullest extent permitted by law.
    52. It is further ordered that the rules as revised in the rule 
changes shall be effective 60 days after publication of the Second 
Order in the Federal Register. With respect to renewal applications, we 
will evaluate compliance with these requirements in applications filed 
after that date. Licensee performance during any portion of the renewal 
term that predates the effective date of the rules in the Second Order 
will be evaluated

[[Page 64161]]

under current rules, and licensee performance that post-dates the 
effective date of the revised rules will be judged under the new 
provisions.
    53. It is further ordered that the Media Bureau make available to 
the public an electronic version of FCC Form 398, Children's Television 
Programming Report, that reflects the changes adopted in this Second 
Order. A revised version of this form has already been approved by OMB. 
Licensees will be required to use the revised electronic version of FCC 
Form 398 to report their children's core programming, including their 
digital core programming, for the first quarter of 2007. Thus, 
licensees must use the revised electronic version of FCC Form 398 for 
their quarterly filing due no later than April 10, 2007.
    54. It is further ordered that the Petitions for Reconsideration 
and Oppositions to Petition for Reconsideration filed in response to 
the 2004 Report and Order and Further Notice of Proposed Rule Making in 
this docket are granted in part and denied in part, as discussed above, 
and otherwise dismissed as moot.
    55. It is further ordered that the Commission's Consumer and 
Governmental Affairs Bureau, Reference Information Center, shall send a 
copy of this Second Order on Reconsideration and Second Report and 
Order, including the Final Regulatory Flexibility Analysis, to the 
Chief Counsel for Advocacy of the Small Business Administration.
    56. It is further ordered that the Commission shall send a copy of 
this Second Order on Reconsideration and Second 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).

Final Regulatory Flexibility Act Analysis

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

Need for, and Objectives of, the Second 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. The Second Report 
and Order and Second Order on Reconsideration (``Second Order'') makes 
certain modifications to the rules and policies adopted in our 
September 9, 2004 Report and Order and Further Notice of Proposed Rule 
Making (``2004 Order'') in this proceeding. The modifications we make 
today respond in part to a Joint Proposal of Industry and Advocates on 
Reconsideration of Children's Television Rules (``Joint Proposal'') 
filed by a group of cable and broadcast industry representatives and 
children's television advocates, among others. The Commission sought 
comment on the Joint Proposal in the Second FNPRM.
    In the 2004 Order, the Commission updated the children's television 
rules and policies to ensure that they continue to serve the interests 
of children and parents as the country transitions from analog to 
digital television. Among other things, the Commission revised the 
three-hour core programming processing guideline as it applies to DTV 
broadcasters that choose to multicast. Specifically, the 2004 Order 
increased the core programming benchmark for digital broadcasters in a 
manner roughly proportional to the increase in free video programming 
offered by the broadcaster on multicast channels. The 2004 Order also 
permitted the display of Internet Web site addresses during children's 
programming only if the Web site meets a four-prong test limiting 
commercial matter on the site, and prohibited broadcasters from 
displaying Web site addresses during both children's programs and 
commercials appearing in those programs if the Web site uses host 
selling. The 2004 Order also imposed a percentage cap on the number of 
preemptions of core children's programs and revised the definition of 
``commercial matter'' for purposes of the commercial limits to include 
promotions of other television programs unless they are children's 
educational or informational programs.
    Our decision today does not alter the new children's core 
programming ``multicasting'' rule adopted in the 2004 Order, but does 
clarify the way in which repeats of core programs will be counted under 
the new rule. We do not make substantial changes to the four-prong Web 
site rule adopted in the 2004 Order, but do amend the host selling 
restrictions adopted in the 2004 Order to apply those restrictions less 
broadly and to exempt certain third party Web sites from the host 
selling restriction. We also revise the definition of ``commercial 
time'' adopted in the 2004 Order to limit the kinds of promotions of 
children's programs that must be counted under the advertising rules 
adopted in the 2004 Order. In addition, with regard to scheduling of 
core children's programming, we vacate the percentage cap on the number 
of permissible core program preemptions adopted in the 2004 Order and 
return to our prior practice of addressing the number of preemptions 
and rescheduling of core programming on a case-by-case basis. These 
modifications will serve the public interest by ensuring an adequate 
supply of children's educational and informational programming as we 
transition to digital television technology, and protecting children 
from excessive and inappropriate commercial messages in broadcast and 
cable programming, without unduly impairing the scheduling flexibility 
of broadcasters and cable operators.

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. The SBA notes that 
several alternatives were suggested to the FCC by various members of 
industry which could, according to the SBA, offer significant cost 
savings to smaller broadcasters while potentially serving the FCC's 
goals. First, the SBA notes that the Local Broadcasters Alliance 
(``LBA'') recommends that the FCC limit the applicability of the new 
core programming requirements to multicast streams that do not already 
offer educational, informational, and/or public affairs programming. 
According to the SBA, providing an exemption for small broadcasters who 
are already providing public affairs content, and who do not yet have 
the technical capabilities to insert children's programming on their 
multicast channels, could serve the FCC's goals and provide a 
reasonable amount of flexibility for small business. Second, the SBA 
notes that the National Association of Broadcasters (``NAB'') and 
others recommend that the FCC allow broadcasters to rely on 
certifications from programming providers that Web site addresses 
displayed during core programming meet the FCC requirements, instead of 
requiring stations to continuously monitor and edit programming

[[Page 64162]]

containing Web site addresses. According to the SBA, adopting this 
alternative could offer significant cost savings to small broadcasters. 
Third, the SBA notes that the multicasting rule would require that at 
least 50 percent of the core programming counted toward meeting the 
additional core programming requirements not consist of program 
episodes that have already aired within the previous seven days. The 
SBA notes that the NAB recommends that the FCC amend Form 398 to allow 
broadcasters to certify compliance with the limitation. According to 
the SBA, adopting this alternative could provide significant compliance 
cost savings to both small and large broadcasters.
    With respect to LBA's argument that the Commission limit the 
applicability of the new core programming requirements to multicast 
streams that do not already offer educational or public affairs 
programming, as noted in paragraph 20 of the Second Order a number of 
commenters joined the LBA in arguing that the Commission either should 
not impose additional core programming requirements on digital 
multicast channels, or at least should exempt multicast channels that 
offer educational, informational, and/or public interest programming. 
As discussed in paragraphs 18-21 of the Second Order, we decline to 
revise the guideline as suggested by these commenters. The Commission 
believes that the revised processing guideline translates the existing 
three-hour guideline to the digital environment in a manner that is 
both fair to broadcasters and meets the needs of the child audience. 
Now that digital broadcasters have the capability to significantly 
increase their overall hours of programming, increasing the amount of 
core programming will not result in an unreasonable burden. For 
example, if a station chooses to broadcast a second stream of free 
video programming twenty-four hours a day, seven days a week, it can 
satisfy the new guideline by providing merely three additional hours 
per week of core programming--or less than two percent of the channel's 
168 hours of additional weekly programming. That additional programming 
can be aired on the main program stream or on a multicast stream, at 
the discretion of the broadcaster. In addition, we believe that a 
guideline that increases the amount of core programming in a manner 
roughly proportional to the increase in free video programming offered 
by broadcasters is consistent with the objective of the CTA ``to 
increase the amount of educational and informational broadcast 
television available to children.''
    The digital programming processing guideline provides broadcasters 
flexibility to move core programming to either their main programming 
stream or other multicast streams, so long as the stream the 
programming is moved to receives comparable MVPD carriage to the stream 
triggering the additional obligation. Thus, the guideline preserves the 
principle that, in order to obtain staff level approval of their CTA 
compliance, broadcasters must provide three hours of children's core 
programming for every 168 hours per week of free video programming that 
they air, while at the same time giving broadcasters flexibility to 
choose the multicast stream that will air that programming. In 
addition, broadcasters could meet the guideline by airing children's 
programming on specialized channels, such as a children's news program 
on a twenty-four hour news channel or a children's educational weather 
program on a twenty-four hour weather channel. Furthermore, we note 
that our rules provide flexibility for licensees that have aired 
somewhat less core programming than indicated by the guideline but that 
nonetheless demonstrate an adequate commitment to educating and 
informing children. With respect to the recommendation of NAB and 
others regarding reliance on certifications from program providers, as 
discussed in paragraph 38 of the item we decline to allow broadcasters 
to avoid liability by relying on representations from program providers 
that web addresses meet the four-prong test. We do not expect 
compliance to be burdensome, but we will revisit this issue if we 
receive evidence that this is imposing an undue burden on broadcasters.
    Finally, as discussed in paragraph 23 the item adopts NAB's 
recommendation, which was echoed by other commenters, that FCC Form 398 
allow broadcasters to certify compliance with the revised limitation on 
the repeat of core digital programming adopted under the multicasting 
guideline rather than requiring broadcasters to identify each program 
episode on Form 398. We will require licensees, however, to retain 
records sufficient to document the accuracy of their certification, 
including records of actual program episodes aired, and to make such 
documentation available to the public upon request.

Description and Estimate of the Number of Small Entities To Which the 
Proposed 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 proposed rules and policies apply to 
television broadcast licensees, and potential licensees of television 
service. The SBA defines a television broadcast station as a small 
business if such station has no more than $13 million in annual 
receipts. 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 (BIA) on October 18, 2005, 
about 873 of the 1,307 commercial television stations (or about 67 
percent) have revenues of $12 million or less and thus qualify as small 
entities under the SBA definition. 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

[[Page 64163]]

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.
    Cable and Other Program Distribution. The Census Bureau defines 
this category as follows: ``This industry comprises establishments 
primarily engaged as third-party distribution systems for broadcast 
programming. The establishments of this industry deliver visual, aural, 
or textual programming received from cable networks, local television 
stations, or radio networks to consumers via cable or direct-to-home 
satellite systems on a subscription or fee basis. These establishments 
do not generally originate programming material.'' The SBA has 
developed a small business size standard for Cable and Other Program 
Distribution, which is: all such firms having $13.5 million or less in 
annual receipts. According to Census Bureau data for 2002, there were a 
total of 1,191 firms in this category that operated for the entire 
year. Of this total, 1,087 firms had annual receipts of under $10 
million, and 43 firms had receipts of $10 million or more but less than 
$25 million. Thus, under this size standard, the majority of firms can 
be considered small.
    1. Cable Companies and Systems. The Commission has also developed 
its own small business size standards, for the purpose of cable rate 
regulation. Under the Commission's rules, a ``small cable company'' is 
one serving 400,000 or fewer subscribers, nationwide. Industry data 
indicate that, of 1,076 cable operators nationwide, all but eleven are 
small under this size standard. In addition, under the Commission's 
rules, a ``small system'' is a cable system serving 15,000 or fewer 
subscribers. Industry data indicate that, of 7,208 systems nationwide, 
6,139 systems have under 10,000 subscribers, and an additional 379 
systems have 10,000-19,999 subscribers. Thus, under this second size 
standard, most cable systems are small.
    2. Cable System Operators. The Communications Act of 1934, as 
amended, also contains a size standard for small cable system 
operators, which is ``a cable operator that, directly or through an 
affiliate, serves in the aggregate fewer than 1 percent 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 an operator serving 
fewer than 677,000 subscribers shall be deemed a small operator, if its 
annual revenues, when combined with the total annual revenues of all 
its affiliates, do not exceed $250 million in the aggregate. Industry 
data indicate that, of 1,076 cable operators nationwide, all but ten 
are small under this size standard. We note that the Commission neither 
requests nor collects information on whether cable system operators are 
affiliated with entities whose gross annual revenues exceed $250 
million, and therefore we are unable to estimate more accurately the 
number of cable system operators that would qualify as small under this 
size standard.

Description of Projected Reporting, Recordkeeping and Other Compliance 
Requirements

    The Second Order retains the revised core programming processing 
guideline for digital stations adopted in the 2004 Order but clarifies 
the number of permissible core program repeats under the guideline. 
Specifically, we clarify that at least 50 percent of the core 
programming counted toward meeting the additional programming guideline 
cannot consist of program episodes that had already aired within the 
previous seven days on either the station's main program stream or on 
another of the station's free digital program streams. We also amend 
FCC Form 398 to collect the information necessary to enforce the limit 
on repeats under the revised guideline. We permit licensees to certify 
on Form 398 that they have complied with the repeat restriction and do 
not require broadcasters to identify each program episode on Form 398. 
Licensees must retain records sufficient to document the accuracy of 
their certification, including records of actual program episodes 
aired, and make such documentation available to the public upon 
request. The children's programming liaison identified in the FCC Form 
398 must be able to provide documentation to substantiate the 
certification if requested.
    The Second Order repeals the ten percent cap on preemptions of core 
children's programming adopted in the 2004 Order and instead institutes 
a procedure similar to that used by the Media Bureau and the Commission 
following adoption of the 1996 children's television Order whereby 
networks sought informal approval of their preemption plans each year. 
Under the policy formerly developed by the Commission staff, a program 
counted as preempted only if it was not aired in a substitute time slot 
(otherwise known as a ``second home'') with an on-air notification of 
the schedule change occurring at the time of preemption during the 
previously scheduled episode. The on-air notification must announce the 
alternate date and time when the preempted show will air. As part of 
this policy, we will require all networks requesting preemption 
flexibility to file a request with the Media Bureau by August 1 of each 
year stating the number of preemptions the network expects, when the 
program will be rescheduled, whether the rescheduled time is the 
program's second home, and the network's plan to notify viewers of the 
schedule change. We will presume that non-network stations are 
complying with the three hour core programming requirement, and do not 
need broad preemption relief.
    The Second Order retains the rule on Web site addresses adopted in 
the 2004 Order with two clarifications: (1) The rule applies only when 
Internet addresses are displayed during program material or during 
promotional material not counted as commercial time; and (2) if an 
Internet address for a Web site that does not meet the four-prong test 
is displayed during a promotion, in addition to counting against the 
commercial time limits, the promotion will be clearly separated from 
programming material. We exempt from the Web site display rules certain 
PSAs, which are not commercial matter under our rules. Specifically, we 
define PSAs exempt from the Web site display rules as: PSAs aired on 
behalf of independent non-profit or government organizations, or media 
companies in partnership with non-profits or government entities, that 
display Web sites not under the control of the licensee or cable 
company. We also clarify that station identifications and emergency 
announcements are not subject to the rules governing the display of Web 
site addresses as long as the display is consistent with the purpose of 
the announcement. Closing credits are not exempt from application of 
the Web site address rules.
    The Commission's host selling policy prohibits the use of program 
characters or show hosts to sell products in commercials during or 
adjacent to shows in which the character or host appears. The Second 
Order adopts the following host selling rule with respect to Web site 
addresses:

    Entities subject to commercial time limits under the Children's 
Television Act (``CTA'') will not display a Web site address during 
or adjacent to a program if, at that time, on pages that are 
primarily devoted to free noncommercial content regarding that 
specific program or a character appearing in that program: (1) 
Products are sold that feature a character appearing in that 
program; or (2) a character appearing in that program is used to 
actively sell products.
    To clarify, this rule does not apply to: (1) Third-party sites 
linked from the companies'

[[Page 64164]]

web pages; (2) on-air third-party advertisements with Web site 
references to third-party Web sites; or (3) pages that are primarily 
devoted to multiple characters from multiple programs.

    The limitation on the duration of advertising in children's 
programming of 10\1/2\ minutes per hour on weekends and 12 minutes per 
hour on weekdays applies to ``commercial matter.'' Prior to the 2004 
Order, the term ``commercial matter'' was defined to exclude certain 
types of program interruptions, including promotions of upcoming 
programs that do not mention sponsors. The 2004 Order revised the 
definition of ``commercial matter'' to include promotions of television 
programs or video programming services other than children's 
educational and informational programming. The revised definition 
applies to analog and digital broadcasters and to cable operators.
    The Second Order revises the definition of ``commercial matter'' to 
exclude (1) promotions for any children's or other age-appropriate 
programming appearing on the same channel, and (2) promotions for 
children's educational and informational programming appearing on any 
channel.

Steps Taken To Minimize Significant Impact on Small Entities, and 
Significant Alternatives Considered

    The RFA requires an agency to describe any significant, 
specifically small business, 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 and 
reporting requirements under the rule for such 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 such small 
entities.''
    Several steps were taken to minimize the impact on small entities. 
As noted above, the Second Order adopts the alternative recommended by 
NAB and others that broadcasters be permitted to certify on FCC Form 
398 their compliance with the limit on the number of repeats of digital 
core programming under the revised processing guideline. See paragraph 
23, supra. Thus, broadcasters will not be obligated to identify each 
program episode on Form 398, but will be required to retain 
documentation sufficient to substantiate the certification on Form 398. 
This step will make compliance with the rules easier for all 
broadcasters, including smaller broadcasters. The Commission 
considered, but rejected, the approach of requiring broadcasters to 
identify each program episode on the Form 398. That approach, if 
adopted, would have imposed a greater burden on broadcasters.
    The Second Order also lifts the cap on the number of preemptions of 
core programs adopted in the 2004 Order and instead returns to the 
prior practice of permitting networks that need scheduling flexibility 
to accommodate sports and other programming to request such flexibility 
from the Media Bureau. This change should help all broadcasters, 
including small broadcasters, by providing more scheduling flexibility. 
The Commission considered, but rejected, keeping the cap on the number 
of preemptions as adopted in the 2004 Order, which would have been more 
burdensome to broadcasters.
    In addition, the Second Order also revises the definition of ``host 
selling'' adopted in the 2004 Order with respect to Web site address 
displays in children's programming. The revised definition is less 
restrictive than that adopted in 2004 and permits the sale of 
merchandise featuring a program-related character in parts of the Web 
site that are sufficiently separated from the program itself to protect 
children from the unique impact of host selling. This change should 
provide more flexibility to all broadcasters and cable operators, 
including smaller entities, and should be less burdensome to all 
affected entities.
    Another change made in the Second Order that will ease the burden 
on all entities in complying with the rules is the change in the 
definition of ``commercial matter.'' The revised definition provides 
additional flexibility for broadcasters and cable operators and permits 
them to air program promotions that would not have been permitted under 
the rule adopted in 2004.

Report to Congress

    The Commission will send a copy of the Second Order, including this 
FRFA, in a report to be sent to Congress and the Government 
Accountability Office 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 Second Order, including this FRFA, to the Chief Counsel for 
Advocacy of the Small Business Administration. See 5 U.S.C. 604(b). A 
copy of the Second 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, the Federal Communications 
Commission amends 47 CFR parts 73 and 76 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 amended by revising paragraph (b) introductory 
text and paragraph (c), adding paragraph (d), and revising Note 1 to 
read as follows (Note 2 remains unchanged):


Sec.  73.670  Commercial limits in children's programs.

* * * * *
    (b) The display of Internet Web site addresses during program 
material or promotional material not counted as commercial time is 
permitted only if the Web site:
* * * * *
    (c) If an Internet address for a Web site that does not meet the 
test in paragraph (b) of this section is displayed during a promotion 
in a children's program, in addition to counting against the commercial 
time limits in paragraph (a) of this section the promotion must be 
clearly separated from program material.
    (d)(1) Entities subject to commercial time limits under the 
Children's Television Act shall not display a Web site address during 
or adjacent to a program if, at that time, on pages that are primarily 
devoted to free noncommercial content regarding that specific program 
or a character appearing in that program:
    (i) Products are sold that feature a character appearing in that 
program; or
    (ii) A character appearing in that program is used to actively sell 
products.
    (2) The requirements of this paragraph do not apply to:
    (i) Third-party sites linked from the companies' Web pages;

[[Page 64165]]

    (ii) On-air third-party advertisements with Web site references to 
third-party Web sites; or
    (iii) Pages that are primarily devoted to multiple characters from 
multiple programs.

    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 or other age-
appropriate programming appearing on the same channel or promotions 
for children's educational and informational programming on any 
channel.

* * * * *


0
3. Section 73.671 is amended by revising paragraph (e)(3) and by 
removing paragraph (f) to read as follows:


Sec.  73.671  Educational and informational programming for children.

* * * * *
    (e) * * *
    (3) For purposes of the guideline described in paragraph (e)(2) of 
this section, at least 50 percent of the core programming counted 
toward meeting the additional programming guideline cannot consist of 
program episodes that had already aired within the previous seven days 
on either the station's main program stream or on another of the 
station's free digital program streams. 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.
* * * * *

PART 76--MULTICHANNEL VIDEO AND CABLE TELEVISION SERVICE

0
4. 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
5. Section 76.225 is amended by revising paragraphs (b) introductory 
text, (c), and (d), by adding paragraph (e), and by revising Note 1 to 
Sec.  76.225 to read as follows:


Sec.  76.225  Commercial limits in children's programs.

* * * * *
    (b) The display of Internet Web site addresses during program 
material or promotional material not counted as commercial time is 
permitted only if the Web site:
* * * * *
    (c) If an Internet address for a Web site that does not meet the 
test in paragraph (b) of this section is displayed during a promotion 
in a children's program, in addition to counting against the commercial 
time limits in paragraph (a) of this section the promotion must be 
clearly separated from program material.
    (d)(1) Entities subject to commercial time limits under the 
Children's Television Act shall not display a Web site address during 
or adjacent to a program if, at that time, on pages that are primarily 
devoted to free noncommercial content regarding that specific program 
or a character appearing in that program:
    (i) Products are sold that feature a character appearing in that 
program; or
    (ii) A character appearing in that program is used to actively sell 
products.
    (2) The requirements of this paragraph do not apply to:
    (i) Third-party sites linked from the companies' Web pages;
    (ii) On-air third-party advertisements with Web site references to 
third-party Web sites; or
    (iii) Pages that are primarily devoted to multiple characters from 
multiple programs.
    (e) The requirements of this section 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 or other age-appropriate programming appearing on the 
same channel or promotions for children's educational and 
informational programming on any channel.

* * * * *
 [FR Doc. E6-18401 Filed 10-31-06; 8:45 am]
BILLING CODE 6712-01-P