[Federal Register Volume 72, Number 108 (Wednesday, June 6, 2007)]
[Proposed Rules]
[Pages 31244-31250]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: E7-10962]


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FEDERAL COMMUNICATIONS COMMISSION

47 CFR Part 76

[CS Docket No. 98-120; FCC 07-71]


Carriage of Digital Television Broadcast Signals: Amendment to 
Part 76 of the Commission's Rules

AGENCY: Federal Communications Commission.

ACTION: Proposed rule.

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SUMMARY: In this document, the Commission seeks comment on the 
obligations of cable operators under Sections 614 (establishing 
mandatory carriage rights for local commercial television stations) and 
615 (establishing mandatory carriage rights for noncommercial 
educational television stations) of the Communications Act of 1934 
concerning the carriage of digital broadcast television signals after 
the conclusion of the digital television (``DTV'') transition. The 
Commission reiterates that broadcast signal delivered in high-
definition to a cable system must be carried by that system in HDTV and 
requests comment on exactly what constitutes material degradation. The 
Commission proposes to provide more detail on the material degradation 
requirements adopted by the Commission in 2001 and requests comment on 
two alternatives. The Commission also offers for comment two proposals 
for ensuring that cable subscribers with analog television sets can 
continue to view all must-carry stations after the end of the DTV 
transition.

DATES: Comments for this proceeding are due on or before July 16, 2007; 
reply comments are due on or before August 16, 2007.

ADDRESSES: You may submit comments, identified by CS Docket No. 98-120, 
by any of the following methods:
     Federal eRulemaking Portal: http://www.regulations.gov. 
Follow the instructions for submitting comments.
     Federal Communications Commission's Web Site: http://www.fcc.gov/cgb/ecfs/. Follow the instructions for submitting comments.
     People with Disabilities: Contact the FCC to request 
reasonable accommodations (accessible format documents, sign language 
interpreters, CART, etc.) by e-mail: [email protected] or phone: 202-418-
0530 or TTY: 202-418-0432.
For detailed instructions for submitting comments and additional 
information on the rulemaking process, see the SUPPLEMENTARY 
INFORMATION section of this document.

FOR FURTHER INFORMATION CONTACT: For additional information on this 
proceeding, contact Eloise Gore, [email protected] of the Media 
Bureau, Policy Division, (202) 418-2120.

SUPPLEMENTARY INFORMATION: This is a summary of the Commission's Second 
Further Notice of Proposed Rulemaking (Second FNPRM), FCC 07-71, 
adopted on April 25, 2007, and released on May 4, 2007. The full text 
of this document is available for public inspection and copying during 
regular business hours in the FCC Reference Center, Federal 
Communications Commission, 445 12th Street, SW., CY-A257, Washington, 
DC 20554. These documents will also be available via ECFS (http://www.fcc.gov/cgb/ecfs/). (Documents will be available electronically in 
ASCII, Word 97, and/or Adobe Acrobat.) The complete text may be 
purchased from the Commission's copy contractor, 445 12th Street, SW., 
Room CY-B402, Washington, DC 20554. To request this document in 
accessible formats (computer diskettes, large print, audio recording, 
and Braille), send an e-mail to [email protected] or call the Commission's 
Consumer and Governmental Affairs Bureau at (202) 418-0530 (voice), 
(202) 418-0432 (TTY).

Initial Paperwork Reduction Act of 1995 Analysis

    The NPRM seeks comment on potential information collection 
requirements. The Commission will invite the general public to comment 
at a later date on any rules developed as a result of this proceeding 
that require the collection of information, as required by the 
Paperwork Reduction Act of 1995, Public Law 104-13. The Commission will 
publish a separate notice seeking these comments from the public. In 
addition, pursuant to the Small Business Paperwork Relief Act of 2002, 
Public Law 107-198, see 44 U.S.C. 3506(c)(4), we will seek specific 
comment on how we might ``further reduce the information collection 
burden for small business concerns with fewer than 25 employees.''

Summary of the NPRM of Proposed Rulemaking

I. Introduction

    1. In this Second Further Notice of Proposed Rulemaking (``Second 
FNPRM''), we address issues concerning the carriage of digital 
broadcast television signals after the conclusion of the digital 
television (``DTV'') transition.

[[Page 31245]]

Section 614(b)(4)(B) of the Communications Act of 1934, as amended (the 
``Act''), directs the Commission to revise the mandatory signal 
carriage rules to reflect changes necessitated by the transition from 
analog to digital broadcasting. We believe that this Second FNPRM is 
warranted at this time in light of the recently established deadline 
for the end of analog broadcasts by full-power television licensees. 
Further, addressing these issues now will provide digital broadcasters 
and cable operators with adequate time to prepare to comply with any 
rules that we adopt.
    2. In this Second FNPRM, we seek comment on the post-transition 
obligations of cable operators under Sections 614 (establishing 
mandatory carriage rights for local commercial television stations) and 
615 (establishing mandatory carriage rights for noncommercial 
educational television stations) of the Communications Act of 1934, as 
amended (the ``Act'').
    3. First, we remind industry of our 2001 decision regarding 
material degradation (67 FR 17015-01): A broadcast signal delivered in 
HDTV [high-definition television] to a cable system must be carried by 
that system in HDTV. In addition, we seek comment on exactly what 
constitutes material degradation.
    4. Furthermore, we address the statutory requirement that cable 
operators must make the signal transmitted by a broadcaster electing 
mandatory carriage viewable by all of their subscribers, and seek 
comment on how cable operators can implement this requirement after the 
end of analog broadcasting on February 17, 2009. Specifically, we 
propose that cable operators must comply with this ``viewability'' 
provision and ensure that cable subscribers with analog television sets 
are able to continue to view all must-carry stations after the end of 
the DTV transition by either: (1) Carrying the digital signal in analog 
format, or (2) carrying the signal only in digital format, provided 
that all subscribers have the necessary equipment to view the broadcast 
content. In the absence of such a requirement, analog cable subscribers 
(currently about 50% of all cable subscribers, or approximately 32 
million households; Kagan reports that as of June 2006, there were 65.3 
million cable subscribers) would no longer be able to view commercial 
must-carry stations or non-commercial stations after February 17, 2009. 
We believe such an outcome would adversely impact the DTV transition 
and would unduly burden millions of consumers.
    5. In interpreting both of these statutory provisions, we are 
mindful of the need to minimize the burden imposed upon consumers by 
the end of analog broadcasting in order to facilitate the successful 
and timely conclusion of the DTV transition. The prohibition against 
material degradation ensures that cable subscribers who invest in a 
HDTV are not denied the ability to view broadcast signals transmitted 
in this improved format. The requirement that cable operators make 
must-carry stations viewable by all cable subscribers ensures that 
analog cable subscribers, who today are able to view all of their 
broadcast stations, do not lose access to those stations as a result of 
the switch to digital-only broadcasting.

II. Background

    6. Pursuant to Section 614(b)(4)(B) of the Act, the Commission 
initiated this proceeding in 1998 to address the responsibilities of 
cable television operators with respect to carriage of digital 
broadcasters in light of the significant changes to the broadcasting 
and cable television industries resulting from the conversion to 
digital operations; 63 FR 42330-01.
    7. In the 2001 First Report and Order, the Commission concluded 
that broadcasters operating digital-only television stations are 
entitled to mandatory carriage under the Act. In an effort to support 
the ultimate conversion of digital broadcast signals and facilitate the 
return of the analog spectrum, the Commission also decided to permit a 
digital-only station, on an interim basis, to ``demand that one of its 
HDTV [high-definition television] or SDTV [standard-definition 
television] signals be carried on the cable system for delivery to 
subscribers in an analog format.''
    8. Now that Congress has established February 17, 2009 as the date 
certain for the end of analog broadcasts by full-power television 
licensees, we believe that the time has come for us to address the 
post-transition carriage responsibilities of cable operators under 
Sections 614 and 615--particularly in light of the fact that there will 
continue to be a large number of cable subscribers with legacy, analog-
only television sets after the end of the DTV transition. This will be 
the case despite the steady rise in DTV display sales over the last 
several years.

III. Discussion

    9. As discussed below, the Communications Act requires that cable 
systems provide mandatory-carriage signals without material degradation 
and ensure that all subscribers can receive and view those signals. 
This Second FNPRM proposes to provide more detail on the material 
degradation requirements adopted by the Commission in 2001 and offers 
for comment two proposals for ensuring that cable subscribers with 
analog television sets can continue to view all must-carry stations 
after the end of the DTV transition. It also seeks comment on other 
issues that would be directly implicated by the proposals.

A. Material Degradation--Sections 614(b)(4)(A) and 615(g)(2)

    10. The Communications Act requires (1) cable operators to carry 
local broadcast signals ``without material degradation,'' and (2) the 
Commission to ``adopt carriage standards to ensure that, to the extent 
technically feasible, the quality of signal processing and carriage 
provided by a cable system for the carriage of local commercial 
television stations will be no less than that provided by the system 
for carriage of any other type of signal.'' As noted above, Section 
614(b)(4)(B) of the Act directs the Commission ``to establish any 
changes in the signal carriage requirements of cable television systems 
necessary to ensure cable carriage of such broadcast signals of local 
commercial television stations which have been changed'' as a result of 
the transition from analog to digital broadcasting.
    11. In the 1998 NPRM, we solicited comments to determine the extent 
to which this provision precludes cable operators from altering a 
digital broadcast station signal when the transmission is processed at 
the system headend or in customer premises equipment. Some broadcasters 
argued that a digital signal would be materially degraded if it were 
not transmitted to the viewer in the format that the broadcaster 
intended. Other broadcasters sought to preclude cable operators from 
blocking or deleting any of the bits constituting the broadcast 
material. The First Report and Order concluded that cable operators are 
required to ensure that consumers with DTV equipment (e.g., Digital-
Cable-Ready sets or DTV-ready sets connected to an HDTV digital cable 
set-top box) are able to view the digital signal in its original 
format--e.g., in high definition (``HD'') if delivered by the 
broadcaster in HD.
    12. As noted above, we previously determined in the First Report 
and Order that a broadcast signal delivered to the cable headend in HD 
must be carried in HD in order to comply with the prohibition on 
material degradation.

[[Page 31246]]

We continue to require such carriage and reiterate that requirement. We 
now propose revisions to the material degradation requirements set 
forth in the First Report and Order with respect to carriage of bits in 
the broadcast signal. Specifically, we propose to move from a 
subjective to objective measure. For instance, we seek comment on 
whether we should require that all primary video and program-related 
content bits transmitted by the broadcaster (the ``content bits'') be 
carried to avoid material degradation. Alternatively, we seek comment 
on whether the Commission's existing non-discrimination requirement is 
a better objective test for material degradation. In the First Report 
and Order, the Commission prohibited cable operators from treating 
cable programming services more favorably than broadcast signals for 
purposes of material degradation. We seek comment on the application of 
the existing or a new non-discrimination rule in this context. We also 
seek comment on how to verify that cable operators are abiding by this 
requirement. Should we identify specific measurement tools? If so, what 
should those measurement tools be? We also request comment and specific 
estimates regarding the costs of compliance with this proposal, 
particularly with respect to small cable operators, and whether there 
are alternative means that would minimize the economic impact for small 
cable operators while still complying with the statutory requirements. 
As noted in the First Report and Order, it may be especially burdensome 
for small systems with limited channel capacity (such as systems with 
fewer than 330 MHz) to carry an HDTV signal if they are not otherwise 
providing HDTV programming. Therefore, if a small system that is not 
otherwise carrying any HDTV signals is required to carry a broadcast 
signal in HDTV, such that the signal straddles two 6 MHz channels 
(i.e., if they are passing through the broadcaster's 8-VSB modulated 
signal), the system may include all of the lost spectrum when 
calculating its one-third capacity for purposes of the statutory cap.
    13. Our option of carrying all content bits is responsive to the 
Petitions for Reconsideration filed in this docket in which 
broadcasters requested that we require cable operators to carry ``the 
entire qualified digital bit stream of each station in the format in 
which the broadcaster originally transmitted it.'' It also is 
consistent with the requests for clarification made by the Broadcast 
Group and the Noncommercial Broadcasters that the material degradation 
requirements ``ensure that cable subscribers do not receive DTV 
service, including HDTV, that is inferior in quality to the service 
available over the air.'' In addition, by seeking comment on 
measurement tools, this option is responsive to broadcast commenters' 
concern that the material degradation standard adopted in the First 
Report and Order did not provide an objective way to evaluate material 
degradation.
    14. We request comment on this option. We specifically request 
comment on how cable operators are to distinguish between bits with 
content and so-called ``null bits'' (so-called ``null bits'' need not 
be passed through or included in the signal as carried, as they are, as 
the name implies, empty of any content), and whether material 
degradation could result from failure to carry these empty bits. We 
also recognize that bandwidth-conserving techniques commonly are used 
by cable operators to improve efficiency. Is there a way to permit the 
use of improved compression, statistical multiplexing, rate shaping 
(Rate shaping ``describes bit rate adaptation techniques applied to 
MPEG-2 encoded streams, to further enhance bandwidth efficiency. This 
technique can substitute for decoding-encoding operations that are 
expensive, space consuming and ultimately harmful to content 
quality''), or other techniques that would not result in prohibited 
material degradation?
    15. We further seek comment on whether, under the option of 
carrying all content bits, a cable operator that wishes to reduce the 
number of content bits in a digital broadcast signal first must 
demonstrate to the broadcaster that such reduction will not result in 
material degradation. In doing so, how might the cable operator 
demonstrate that, although not all of the content bits are being 
carried, the content will not be degraded in a material way? Would it 
be necessary and/or sufficient for the cable operator to demonstrate 
that the broadcast station's digital signal carriage does not differ 
from other broadcast or non-broadcast programmers? (We note that this 
latter comparison also would ensure that cable operators do not 
discriminate against some or all broadcast content as compared with 
non-broadcast content.) We seek comment on whether, under these 
circumstances, the cable operator must continue to pass through all of 
the content bits until an agreement has been reached with the broadcast 
station to permit the reduction in the number of bits. Similarly, we 
seek comment on a rule that when a broadcast station files a carriage 
complaint concerning material degradation, the cable operator must pass 
through all of the content bits during the pendency of the complaint. 
The Commission is required to resolve carriage complaints within 120 
days after the filing of a complaint. In situations where negotiations 
between cable operators and broadcasters reach an impasse, cable 
operators may notify the station in writing of that fact and the 
station will then have 30 days from receipt of the letter to file a 
complaint with the Commission in order to preserve its claim. We seek 
comment on these options and on the procedures and mechanisms for cable 
operators and stations to engage in such discussions short of filing a 
carriage complaint with the Commission.

B. Availability of Signals--Sections 614(b)(7) and 615(h)

    16. Pursuant to Sections 614 and 615 of the Act, cable operators 
must ensure that all cable subscribers have the ability to view all 
local broadcast stations carried pursuant to mandatory carriage. 
Specifically, Section 614(b)(7) (for commercial stations) states that 
broadcast signals that are subject to mandatory carriage must be 
``viewable via cable on all television receivers of a subscriber which 
are connected to a cable system by a cable operator or for which a 
cable operator provides a connection.'' Similarly, Section 615(h) for 
noncommercial stations states that ``Signals carried in fulfillment of 
the carriage obligations of a cable operator under this section shall 
be available to every subscriber as part of the cable system's lowest 
priced tier that includes the retransmission of local commercial 
television broadcast signals.'' These statutory requirements plainly 
apply to cable carriage of digital broadcast signals, and, as a 
consequence, cable operators must ensure that all cable subscribers--
including those with analog television sets--continue to be able to 
view all commercial and non-commercial must-carry broadcast stations 
after February 17, 2009. Analog-only television sets plainly qualify as 
``television receivers'' under Section 614(b)(7) at the present time, 
and we think that it is eminently reasonable to conclude that they will 
continue to fall within the scope of that term as it is used in Section 
614(b)(7) after the transition. Below we seek comment on how to 
implement this statutory requirement. We note that all cable 
subscribers today are able to view all of their must-carry stations, 
and we believe that it is critical to the successful and timely 
conclusion of the DTV transition that they are not disenfranchised by 
the

[[Page 31247]]

switch to digital-only broadcasting. We therefore are mindful of the 
need to minimize the burden imposed on consumers, including cable 
subscribers with analog television sets, by the end of the DTV 
transition.
    17. To achieve compliance with the viewability requirement of 
Sections 614(b)(7) and 615(h) after the end of the DTV transition, we 
propose that, in order to ensure that subscribers with analog 
television sets remain able to view all local broadcast television 
stations electing mandatory carriage, cable operators must either: (1) 
Carry the signals of commercial and non-commercial must-carry stations 
in analog format to all analog cable subscribers, or (2) for all-
digital systems, carry those signals only in digital format, provided 
that all subscribers with analog television sets have the necessary 
equipment to view the broadcast content. In the 2001 First Report and 
Order, the Commission afforded a digital-only station mandatory 
carriage rights pursuant to Sections 614 and 615, coupled with the 
option to request that its digital signal be carried on the cable 
system for delivery to subscribers in an analog format, at the 
station's expense (a mechanism also referred to as ``down-
conversion.''). This requirement would be in addition to the 
requirement that the cable operator pass through the HD signal to cable 
subscribers of an HD package, as discussed above. We believe that these 
proposals are consistent with our articulation of carriage requirements 
in the analog must-carry context, in which the Commission has made 
clear that mere transmission of the must-carry signal is not sufficient 
to meet the requirements of Section 614(b)(7). The Commission stated in 
1993 that:

    We believe that the 1992 Act is clear in its requirement that 
all local commercial television stations carried in fulfillment of 
the must-carry requirements must be provided to every cable 
subscriber and must be viewable on all television sets that are 
connected to the cable system by a cable operator for which the 
cable operator provides a connection. The Act does not give the 
Commission authority to exempt any class of subscribers from this 
requirement.
In other words, the signal must be ``viewable'' on all television sets 
connected to the cable provider's system. We seek comment on these 
proposals.

    18. As we consider these issues, we are cognizant that the ultimate 
goal of Congress is that every customer should enjoy the benefits of 
the digital transition. That is, our policies should advance the goal 
of transitioning all consumers--including cable consumers--to digital. 
We seek comment on ways to promote this goal within the context of this 
proceeding. In particular, we seek comment on ways to move cable 
subscribers from analog to digital in a manner consistent with the 
statute and consumer expectations.
    19. Under the Commission's interim down-conversion policy for 
digital-only stations during the transition, broadcasters that request 
carriage of an analog version of their digital signal must pay for the 
cost of down-conversion. Under the first option set forth in our 
proposal, however, cable operators themselves would elect to satisfy 
their obligations under Sections 614 and 615 by carrying a digital 
signal in analog format to ensure that the signal is viewable by all 
subscribers. Given the circumstances, should cable operators be 
responsible for any expense associated with down-conversion?
    20. Finally, we note that, in the First Report and Order, the 
Commission concluded ``not to require a cable operator to provide 
subscribers with a set top box capable of processing digital signals 
for display on analog sets.'' That decision, however, was premised on 
factual considerations that will not apply in a post-transition 
environment. Specifically, the Commission was reluctant to require 
cable subscribers to obtain such equipment because the content 
available on the digital signal likely would have been identical to 
analog programming to which subscribers already had access. In that 
same vein, the Commission pointed out that the obligation to 
simulcast--which later was eliminated--weighed against requiring the 
provision of equipment necessary to view a digital signal. However, 
given that our proposal here would apply to the carriage of digital 
signals after the end of analog broadcasting, we believe that the 
Commission's 2001 decision is not directly relevant since subscribers 
with analog sets after the transition will face the prospect of not 
being able to view the signals of must-carry stations unless they 
possess the necessary equipment (i.e., a Digital-Cable-Ready television 
set or a digital cable set-top box). Nevertheless, we seek comment on 
this issue.

 IV. Procedural Matters

 A. Filing Requirements

    21. Ex Parte Rules. This proceeding will be treated as a ``permit-
but-disclose'' proceeding subject to the ``permit-but-disclose'' 
requirements under Section 1.1206(b) of the Commission's rules. Ex 
parte presentations are permissible if disclosed in accordance with 
Commission rules, except during the Sunshine Agenda period when 
presentations, ex parte or otherwise, are generally prohibited. Persons 
making oral ex parte presentations are reminded that a memorandum 
summarizing a presentation must contain a summary of the substance of 
the presentation and not merely a listing of the subjects discussed. 
More than a one- or two-sentence description of the views and arguments 
presented is generally required. Additional rules pertaining to oral 
and written presentations are set forth in Section 1.1206(b).
    22. Comments and Reply Comments. 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 the dates indicated on the first 
page of this document. 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). To request materials in accessible formats for people 
with disabilities (braille, large print, electronic files, 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).
    23. Comments filed through 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. In completing 
the transmittal screen, commenters should include their full name, U.S. 
Postal mailing address, and the applicable docket 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.
    24. Parties who choose to file by paper must file an original and 
four copies of each filing. Filings can be sent by hand or messenger 
delivery, by commercial overnight courier, or by first-class or 
overnight U.S. Postal Service (although we continue to experience 
delays in receiving U.S. Postal Service mail). The Commission's 
contractor, Natek, 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

[[Page 31248]]

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.
    25. Availability of Documents. Comments, reply comments, and ex 
parte submissions will be available for public inspection during 
regular business hours in the FCC Reference Center, Federal 
Communications Commission, 445 12th Street, SW., CY-A257, Washington, 
DC 20554. Persons with disabilities who need assistance in the FCC 
Reference Center may contact Bill Cline at (202) 418-0267 (voice), 
(202) 418-7365 (TTY), or [email protected]. These documents also will 
be available from the Commission's Electronic Comment Filing System. 
Documents are available electronically in ASCII, Word 97, and Adobe 
Acrobat. Copies of filings in this proceeding may be obtained from Best 
Copy and Printing, Inc., Portals II, 445 12th Street, SW., Room CY-
B402, Washington, DC 20554; they can also be reached by telephone, at 
(202) 488-5300 or (800) 378-3160; by e-mail at [email protected]; or via 
their Web site at http://www.bcpiweb.com. To request materials in 
accessible formats for people with disabilities (braille, large print, 
electronic files, audio format), send an e-mail to [email protected] or 
call the Consumer and Governmental Affairs Bureau at (202) 418-0530 
(voice), (202) 418-0432 (TTY).

B. Initial Regulatory Flexibility Analysis

    26. 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 economic impact on a 
substantial number of small entities by the policies and rules proposed 
in this Second Further Notice of Proposed Rulemaking (``Second 
FNPRM''). 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 Second FNPRM as indicated on the first 
page of the Order. The Commission will send a copy of the Second FNPRM, 
including this IRFA, to the Chief Counsel for Advocacy of the Small 
Business Administration (SBA). In addition, the Second FNPRM and IRFA 
(or summaries thereof) will be published in the Federal Register.

A. Need for, and Objectives of, the Proposals

    27. This Second FNPRM seeks comment on several issues relating to 
the carriage of digital television broadcast stations after the analog 
to digital transition. Our goal in this proceeding is to determine how 
to implement the statutory requirements under Sections 614 (local 
commercial television station mandatory carriage) and 615 
(noncommercial educational television station mandatory carriage) of 
the Communications Act of 1934, as amended (the ``Act''), when digital 
broadcasters seek mandatory carriage for their digital signal after 
February 17, 2009, the date established by Congress as to when analog 
service must cease. We remind industry of our 2001 decision regarding 
material degradation (i.e., that a broadcast signal delivered in HDTV 
to a cable system must be carried by that system in HDTV). In addition, 
we seek comment on the proposal that cable operators be required to 
carry all of the primary video and program-related content bits 
transmitted by the broadcaster and on the alternative proposal to rely 
on the existing non-discrimination requirement or a new non-
discrimination rule to provide a better objective test for material 
degradation. We also seek comment on procedures by which cable 
operators could demonstrate that, although they were not carrying every 
content bit (e.g., through the use of improved compression or other 
efficiency maximizing techniques), they nevertheless were providing 
must-carry digital signals without material degradation. The Second 
FNPRM proposes that cable operators can comply with the ``viewability'' 
provisions of Sections 614 and 615 (as discussed in the Second FNPRM) 
and ensure that cable subscribers with analog television sets are able 
to continue to view all must-carry stations after the end of the DTV 
transition by either: (1) Carrying the digital signal in analog format 
to ensure that the signal is viewable by all subscribers, or (2) for 
all-digital systems, carry those signals only in digital format, 
provided that all subscribers with analog television sets have the 
necessary equipment to view the broadcast content.

B. Legal Basis

    28. The authority for the action proposed in this rulemaking is 
contained in Sections 1, 4(i) and (j), 614, and 615 of the 
Communications Act of 1934, as amended, 47 U.S.C. 151, 154(i) and (j), 
534, and 535.

C. Description and Estimate of the Number of Small Entities To Which 
the Proposals Will Apply

    29. 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 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''). The rules we may adopt as a result of the 
comments filed in response to this Second Further Notice of Proposed 
Rulemaking will primarily affect cable operators and television 
stations. A description of these small entities, as well as an estimate 
of the number of such small entities, is provided below.
    30. 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. We note, however, that the proposals at issue in 
this Second FNPRM only apply at this time to cable operators, and not 
other MVPD providers.
    31. Cable Companies and Systems. The Commission has also developed 
its own small business size standards, for the purpose of cable rate 
regulation.

[[Page 31249]]

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.
    32. 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.
    33. Television Broadcasting. The proposed rules and policies apply 
to digital television broadcast licensees, and potential licensees of 
digital 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.
    34. 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.
    35. Other Program Distribution. The SBA-recognized definition of 
Cable and Other Program Distribution includes other MVPDs, such as HSD, 
MDS/MMDS, ITFS, LMDS and OVS. This definition provides that a small 
entity is one with $13.5 million or less in annual receipts. As 
previously noted, according to the Census Bureau data for 2002, there 
were a total of 1,191 firms that operated for the entire year in the 
category of Cable and Other Program Distribution. Of this total, 1,087 
firms had annual receipts of under $10 million and an additional 43 
firms had receipts of $10 million or more, but less than $25 million. 
The Commission estimates that the majority of providers in this 
category of Cable and Other Program Distribution are small businesses.
    36. While SBA approval for a Commission-defined small business size 
standard applicable to ITFS is pending, educational institutions are 
included in this analysis as small entities. There are currently 2,032 
ITFS licensees, and all but 100 of these licenses are held by 
educational institutions. Thus, the Commission estimates that at least 
1,932 ITFS licensees are small businesses.
    37. Radio and Television Broadcasting and Wireless Communications 
Equipment Manufacturing. The Census Bureau defines this category as 
follows: ``This industry comprises establishments primarily engaged in 
manufacturing radio and television broadcast and wireless 
communications equipment. Examples of products made by these 
establishments are: transmitting and receiving antennas, cable 
television equipment, GPS equipment, pagers, cellular phones, mobile 
communications equipment, and radio and television studio and 
broadcasting equipment.'' The SBA has developed a small business size 
standard for Radio and Television Broadcasting and Wireless 
Communications Equipment Manufacturing, which is: all such firms having 
750 or fewer employees. According to Census Bureau data for 2002, there 
were a total of 1,041 establishments in this category that operated for 
the entire year. Of this total, 1,010 had employment of under 500, and 
an additional 13 had employment of 500 to 999. Thus, under this size 
standard, the majority of firms can be considered small.

D. Description of Projected Reporting, Recordkeeping, and Other 
Compliance Requirements for Small Entities

    38. The Second Further Notice of Proposed Rulemaking seeks comment 
on statutory interpretations and proposals to address post-transition 
obligations of cable operators with respect to carriage of digital 
broadcast signals pursuant to the must carry requirements in the 
Communications Act. Small cable operators currently have obligations 
with respect to carriage of local commercial and non-commercial 
broadcast stations which vary according to the size of the cable 
system. As with existing statutory and regulatory requirements, small 
cable operators will need engineering and legal services to comply with 
the proposed rules. The Second FNPRM reiterates the Commission's 2001 
decision regarding material degradation and requests comment on 
requiring cable operators be required to carry all of the primary video 
and program-related content bits transmitted by the broadcaster and on 
an alternative proposal to rely on the existing non-discrimination 
requirement or a new non-discrimination rule to provide a better 
objective test for material degradation. The 2001 First Report and 
Order recognized that the material degradation requirements could 
impact small cable operators disproportionately and made special 
provision for such situations. This recognition is retained in the 
proposals set forth in the Second FNPRM. The Second FNPRM also notes 
that cable operators must make the primary video and any program-
related material transmitted by a digital broadcaster electing 
mandatory carriage viewable by all of their subscribers and proposes to 
permit cable operators to

[[Page 31250]]

comply with the ``viewability'' provisions by either: (1) Carrying the 
signals of commercial and non-commercial must-carry stations in analog 
format to all analog cable subscribers, or (2) for all-digital systems, 
carry those signals only in digital format, provided that all 
subscribers with analog television sets have the necessary equipment to 
view the broadcast content. Small cable operators will need engineering 
and legal analysis to comply with this proposal. The Second FNPRM seeks 
comment on the cost of compliance to small cable operators and solicits 
alternative approaches that would reduce the burden on small cable 
operators while still complying with statutory requirements. Small 
broadcast stations will also be affected by the proposed rules and 
other issues raised in the Second FNPRM, but we do not have any reason 
to expect that the compliance burden will be any greater than under the 
existing rules, except that initially, broadcasters may need additional 
legal services.

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

    39. 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. We seek comment on the applicability of any of these 
alternatives to affected small entities.
    40. The requirements proposed in the Second FNPRM are the result of 
statutory requirements that do not expressly provide exceptions for 
small entities. Broadcast stations, including small entity stations, 
are afforded the flexibility to elect mandatory carriage of their 
digital signal or elect to negotiate carriage with cable systems. The 
proposals do not contemplate imposing any significant burdens on small 
television stations, but station licensees and other parties are 
encouraged to submit comment on the proposals' impact on small 
television stations. Every effort will be made to minimize the impact 
of any adopted proposals on cable operators. In this IRFA, we seek 
comment on whether there is a specific legal basis for affording 
operators that qualify as small systems special consideration in this 
regard. We anticipate that more and more cable systems will become all-
digital cable systems, thereby minimizing any potential impact that our 
proposals, if adopted, might have. Finally, we are mindful of the 
potential concerns of small entities and will, therefore, continue to 
carefully scrutinize our policy determinations going forward. We invite 
small entities to submit comment on how the Commission could further 
minimize potential burdens on small entities if the proposals provided 
in the Second FNPRM, or those submitted into the record, are ultimately 
adopted.

F. Federal Rules That May Duplicate, Overlap, or Conflict With the 
Proposed Rules

    41. None.

V. Ordering Clauses

    42. It is ordered that, pursuant to authority contained in Sections 
4, 303, 614, and 615 of the Communications Act of 1934, as amended, 47 
U.S.C. 154, 303, 534, and 535, this Second Further Notice of Proposed 
Rulemaking is hereby adopted.
    43. It is further ordered that the Consumer and Governmental 
Affairs Bureau, Reference Information Center, shall send a copy of this 
Second Further Notice of Proposed Rulemaking, including the Initial 
Regulatory Flexibility Analysis, to the Chief Counsel for Advocacy of 
the Small Business Administration.

Federal Communications Commission.
Marlene H. Dortch,
Secretary.
 [FR Doc. E7-10962 Filed 6-5-07; 8:45 am]
BILLING CODE 6712-01-P