Before the

**Federal Communications Commission**

**Washington, D.C. 20554**

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| In the Matter of                 | * | **PP Docket No. 00-67**      |
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**REPORT AND ORDER**

**Adopted: September 14, 2000 Released: September 15, 2000**

By the Commission: Commissioner Ness is issuing a statement.

# Introduction

1.  The Commission opened this proceeding to "resolve outstanding issues
    regarding the compatibility of cable television systems, digital
    television receivers, set-top boxes, and other equipment used by
    consumers to receive and enjoy the ever-increasing array of
    programming and other services available over cable television
    systems."[^1] The *Notice* raised two primary issues: (1)
    requirements for a DTV receiver to be labeled "cable-compatible,"
    and (2) licensing terms for copy protection technology. We noted
    with approval that the industry parties had been negotiating about
    these and other compatibility issues and had reached agreement on
    some of them.[^2] We expressed "the hope and belief that
    comprehensive market-driven solutions were attainable and would be
    superior to a regulatory approach." Because the industries had not
    resolved these two issues, we "reluctantly" initiated the present
    rulemaking.

2.  Since the *Notice* was issued, the cable and consumer electronics
    industries accelerated the pace of their labeling discussions and,
    indeed, filed a joint letter announcing an agreement on two specific
    labels,[^3] but this announcement proved premature. Subsequent
    representations by the Consumer Electronics Association and by
    consumer electronics retailers[^4] made it clear that this letter
    did not embody the type of consensus required to resolve the
    labeling issue.[^5] In the absence of a clear consensus among all
    relevant parties, the Commission today adopts three labels for
    digital television (DTV) equipment.

3.  With regard to copy protection, the question that emerged in the
    comments relates to the Commission's navigation devices rules.[^6]
    Specifically, in order for a commercially available navigation
    device to display programming that has been encrypted, the
    navigation device must interface with a security module, known as a
    POD (point-of-deployment) device. Manufacturers of commercially
    available navigation devices need a technology license in order to
    build the interface, and some parties to this proceeding questioned
    whether copy protection measures could be included in this
    technology license. Since the question involves our navigation
    devices rules, we will resolve it in a companion item that we adopt
    today, the *Further* *Notice of Proposed Rulemaking and Memorandum
    Opinion & Order/Declaratory Ruling* in *Implementation of Section
    304 of the Telecommunications Act of 1996---Commercial Availability
    of Navigation Devices.* As detailed therein, we find that our
    navigation devices rules do permit some amount of copy protection to
    be included in commercially available navigation devices and in the
    technology license that manufacturers obtain in order to build the
    POD-host interface.[^7]

4.  The *Notice* in this proceeding also raised questions relating to
    scrambling channels on the basic service tier and our rules
    requiring cable operators to offer "supplemental equipment" to
    subscribers. Moreover, at least one commenter provided follow-up
    information on implementation of the February 22, 2000 agreement
    between CEA and NCTA on technical standards and PSIP.[^8] This
    *Report and Order* reviews these matters, but no rule changes are
    adopted.

# Labeling of DTV Equipment

## Comments[^9]

5.  In the *Notice*, we sought comment on whether a DTV receiver without
    an IEEE 1394 connector should be labeled "cable ready."[^10] In
    negotiations, the cable industry had taken the position that every
    cable-ready DTV should include the 1394 connector, while the
    consumer electronics industry opposed a blanket requirement for all
    "cable ready" DTVs to have one. Indeed, the consumer electronics
    industry wanted the option of producing a less expensive DTV without
    the 1394 connector. We noted that we were not wedded to the term
    "cable ready," and that different types of DTV receivers could be
    capable of accessing different combinations of cable services. We
    said that, in practical terms, "the issue is how to best indicate to
    consumers the capability of television receivers to operate with
    cable television systems."[^11]

6.  The May 24 letter from CEA and NCTA included labels for two types of
    DTV receivers. One type of receiver, labeled "Digital Television:
    Cable Connect," could be directly connected to a cable system
    offering digital service and receive digital basic and premium cable
    programming, with a POD from the cable operator required to access
    encrypted programming. This type of receiver would not include a
    1394 connector and would not have interactive (two-way) capability
    using cable facilities.[^12] The "Digital Television: Cable Connect"
    receiver would also carry a disclaimer indicating that it is not
    equipped with a 1394 digital connector, noting that users of the
    receiver "may not receive the cable operator's advanced and
    interactive digital services and High Definition programming, such
    as impulse pay-per-view, video-on-demand, enhanced program guide,
    and data-enhanced television services," and suggesting that the
    consumer contact the cable operator "for service and programming
    options."[^13] The second type of receiver, designated as "Digital
    Television---Cable Interactive," would include the same direct
    connection features as the first type of receiver, and would also
    feature a 1394 connector. The proposed description indicates that
    this receiver could be connected to a digital set-top box via the
    1394 connector and thus access any advanced and interactive services
    that the cable operator offered via the set-top box.

7.  In commenting on the May 24 letter, Circuit City made the point that
    the 1394 connector is not the only means of providing interactive
    services, and suggested that the draft labels were misleading to the
    extent that they implied otherwise.[^14] Circuit City also pointed
    out that the 1394 connector might be useful for functions other than
    connecting a DTV (digital television) receiver to a cable set-top
    box. And Circuit City also alleged that the cable industry was
    behind schedule in completing a specification for an integrated
    bidirectional DTV, [i.e.]{.underline}, a receiver that integrated
    advanced and interactive functions and could be directly connected
    to a cable system, without need for a set-top box.

8.  Subsequent communications from industry parties demonstrate the May
    24 labels do not represent industry-wide consensus. In a July 5
    letter to Chairman Kennard, the president of the Consumer
    Electronics Association noted that this proceeding "has stimulated a
    new and broader interest in the labeling issue," refers to "the
    objections registered by the retail community to the proposed
    labels," and states that "CEA will very shortly be meeting with
    other interested parties to discuss the matter and establish a
    timetable for the expeditious completion of a comprehensive labeling
    program."[^15] Interested parties have informed us that no agreement
    has been reached yet.

9.  Some commenters who oppose the May 24 labels have suggested
    alternative approaches. For example, NAB/MSTV asserts that "the FCC
    must *immediately* mandate IEEE 1394/5C interfaces for all DTV sets
    and set-top boxes (STB) for today's STB environment." (emphasis in
    original)[^16] NAB/MSTV argues that the 1394 connector is needed in
    order to transport HDTV signals from the cable STB to the DTV
    receiver and because consumers will need "a consumer-friendly
    ubiquitous connector for all digital television devices." NAB/MSTV
    endorses the idea of a direct connection DTV receiver as well but
    suggests that DTVs with the 1394 will be on the market earlier than
    direct connection receivers.

10. Several satellite industry commenters expressed concern that the
    proposed labels are too "cable-centric" and could leave consumers
    uncertain about whether their equipment can display
    satellite-delivered programming.[^17] These commenters worry that
    the labels could tilt the competitive balance in favor of cable and
    against satellite delivery. Echostar suggests "alternative
    designations which are delivery system neutral, such as "digital
    ready" and/or "digital compatible" to identify the functionality of
    new digital television receivers and other consumer equipment." NRTC
    proposes "the terms "Digital-TV Interactive" and/or "Digital-TV
    Non-Interactive" to identify the functionality of new digital
    television receivers and other consumer equipment."

11. Additionally, the Consumer Electronics Retailers Coalition ("CERC")
    proposes a labeling scheme.[^18] It suggests the following.

> Cable Interactive---Features two-way communication facility for
> receipt of advanced and interactive cable services via this receiver's
> remote control. Cable security card required for receipt of encrypted
> programming.
>
> Cable Direct---Features direct receipt of cable programming. Two-way
> communication not available via remote control. Cable security card
> required for receipt of encrypted programming.

12. MPAA urges that "\[A\]ny designation that states or implies that the
    receiving apparatus is "cable-ready" should be restricted to
    receivers that provide effective content protection."[^19] The MPAA
    criteria for "effective content protection are as follows." The
    receiver would need to incorporate a POD module that employs
    encryption and authentication to protect content across the POD-host
    interface. The POD module would also need to be subject to licensing
    that imposes content protection obligations on the host device with
    which the POD is used.

## Discussion

### General Considerations

13. We agree that consumers will likely want what Circuit City refers to
    as a "box-to-box" connector to link digital appliances within the
    home and that a 1394 connector fulfills this function. However,
    Section 624A of the Communications Act authorizes us to adopt
    regulations requiring compatibility of cable systems with
    televisions receivers and videocassette recorders and not,
    [e.g.]{.underline}, DTV connections to a DVD player.[^20] Moreover,
    some consumers may want to use one or more of their television
    receivers solely to receive broadcast and cable programming. Those
    receivers would not necessarily need a 1394 connector to receive
    such signals. Additionally, it is not clear that DTV receivers with
    1394 connectors will reach the market earlier than direct connection
    one-way receivers.[^21] For these reasons, we decline to require all
    "cable-ready" DTV receivers or, indeed, all DTV receivers, to have a
    1394 connector. We are confident that the consumer electronics
    industry will respond to consumer demand and provide DTV receivers
    with the features that consumers desire, and that the labeling
    scheme we adopt today will permit consumers to make well-informed
    decisions about DTV equipment purchases based on a clear
    understanding of the capabilities of receivers with different
    labels.

14. We recognize the concerns of the satellite industry regarding
    "cable-centric" labels, but decline to adopt their suggestions for
    alternative nomenclature. First, the statute authorizes us
    specifically to require labeling of cable compatibility. Second, the
    cable and consumer electronics industries have agreed on technical
    standards for connection of certain types of DTV receiver
    (unidirectional) to cable systems.[^22] We are not aware of any
    comparable agreement between the consumer electronics industry and
    the direct-to-home satellite industry. Indeed, we are not aware of
    any agreement on transmission standards among the various satellite
    providers ([e.g.]{.underline}, DirecTv, Echostar, C-band). For these
    reasons we decline to adopt the suggested labels. We do note,
    however, that our navigation device rules make clear that no one can
    prohibit the inclusion of satellite reception capability in
    navigation devices, should a manufacturer wish to include this
    capability.[^23] Moreover, we note that, in response to satellite
    industry concerns, CEA has stated that it "views these issues as
    important and will work with the DBS industry to establish
    appropriate labeling standards with respect to satellite equipment
    and to resolve any compatibility concerns.[^24] We encourage the
    consumer electronics and satellite industries to work toward a
    consensus on such standards.

15. With regard to MPAA's argument that any cable ready receiver should
    provide effective copy protection, DTV receivers that connect
    directly to a cable system will, as the labels described below make
    clear, require a POD to receive encrypted programming. As our
    companion Declaratory Ruling makes clear, the host device license
    lawfully may include copy protection provisions.[^25] Such
    provisions may be used to ensure that content does not flow out of
    the host device via an unprotected output. The same regime applies
    to cable set-top boxes. These set-top boxes ("STBs") will require a
    POD in order to access encrypted programming. The STB will then
    connect to a DTV via an interface such as the 1394. Copy protection
    provisions incorporated in the host device license will be able to
    ensure that content delivered in encrypted form does not exit the
    STB via an unprotected output, including via the 1394 output. Hence,
    copy protection capability will be one of the characteristics of a
    receiver that is labeled "cable ready." We recognize that the
    content and consumer electronics industries have not yet agreed on
    licensing terms for a copy protection technology to protect the 1394
    interface. However, one such technology, the so-called "5C"
    technology, has been developed and standardized, and the industries
    are negotiating over terms to use it.[^26] For these reasons, we
    decline to include specific copy protection language in our labels.

16. We believe that a significant number of cable subscribers will
    choose to access cable programming via a digital STB and we believe
    that, at least initially, the 1394 interface will be the preferred
    connector for STBs and DTV receivers. These beliefs led us to ask
    specifically about labels for DTV receivers with and without the
    1394 connector. Because the CERC labels do not address 1394
    connectors at all, we decline to adopt them.

17. The comments make clear that the labeling question centers on two
    characteristics of DTV equipment. One is interactivity---there is a
    distinction between equipment that is "unidirectional" (can only
    receive one-way services from the cable system) and equipment that
    is "bidirectional" (can both receive one-way services and allow the
    subscriber to communicate back to the cable system to access
    additional or advanced services). The second characteristic is
    connectivity---consumers may want to connect their DTV receiver to
    other equipment. (Circuit City refers to this as "box-to-box"
    connectivity.) Although the industry has not agreed on a
    specification for it yet, many commenters anticipate the development
    of an integrated, bidirectional DTV receiver, with no 1394
    connector, but with the ability to access interactive (two-way)
    services via direct connection to the cable system without the need
    for a set-top box. For example, CEA states that it is "anxious to
    continue to work with NCTA to create open standards required for the
    direct connection to cable systems by receivers that possess full
    two-way data transmission and reception capability, and which
    support advanced and interactive services without the need for any
    set-top box," and notes that "the CEA Cable Compatibility Committee
    (R-8) has initiated work on standards for two-way operation."[^27]
    For its part, NCTA states that "an integrated bi-directional DTV set
    can be developed based on the specifications for the bi-directional
    set-top box which are available" and indicates that "\[F\]urther
    discussions are expected between the two industries on developing
    the specifications for the bi-directional (interactive) DTV sets
    which retailers are justifiably eager to sell."[^28] Although a
    bidirectional DTV receiver would not need a 1394 connector to access
    a cable STB, the owner of the receiver might want a 1394 connector
    in order to connect the DTV to other equipment in the home, perhaps
    a digital VCR or DVD player on the input side as well as on the
    output side to a VCR.

18. A subscriber with the device described in the May 24 letter as
    "Digital TV---Cable Interactive, [i.e.]{.underline}, a
    unidirectional DTV receiver equipped with a 1394 connector, could
    access advanced and interactive services via a set-top box. To the
    extent that cable operators are continually developing new services,
    and to the extent that some of those services may require
    capabilities not available in earlier models of DTV receiver, one
    can imagine a subscriber wanting a 1394 connector as an "insurance
    policy." Rather than replacing his or her DTV receiver in order to
    upgrade the capability to access advanced services, the subscriber
    might prefer to purchase an upgraded set-top box and connect it to
    the DTV using a 1394 connector.

19. Several commenters also point out that digital interfaces in
    addition to the 1394 are likely to become available. For example,
    Matsushita Electric Corporation of America MECA) states that its
    commitment to the copy-protected 1394 interface...has never been
    intended to be exclusive of utilization of, and support for, other
    present and future interfaces" and "anticipates that, ultimately,
    OpenCable documents and specifications will support such other
    interfaces as well."[^29] Sony notes that "\[O\]ther interfaces and
    means of delivering a signal already exist. Others no doubt will
    emerge. The labels ultimately adopted must take this into
    account."[^30] For its part, Fox states that, in addition to working
    with the 5C group, it is working on other "copyright-compliant
    digital technologies with Victor Company of Japan Ltd. ("JVC").[^31]
    Additionally, ATI refers to the "DVI (with HDCP or some other form
    of copy protection" as an alternative to 1394.[^32]

20. These considerations lead us to establish labels for three types of
    DTV receiver---a unidirectional receiver capable of direct
    connection to the cable system, a unidirectional receiver capable of
    direct connection but that also includes a 1394 connector, and a
    bidirectional receiver capable of direct connection to the cable
    system and of accessing interactive services using that direct
    connection. As suggested above, some consumers may want a DTV
    receiver that is both bidirectional and has a 1394 connector, and we
    assume that some manufacturers will cater to this preference. We
    wish to reemphasize that the 1394 connector is by no means the only
    digital connector that is, or will become available. DTV receivers
    and other devices that incorporate the 1394 connector may well also
    incorporate an additional digital connector or connectors.[^33] And,
    of course, manufacturers, retailers, and others are free to provide
    information to the consuming public about these connectors. We
    recognize that, at some point, technological developments may lead
    to an environment in which, for at least some consumers, another
    digital connector would be used in place of the 1394 connector. At
    that point in time, we would, of course, be able to consider adding
    to our list of labels.

21. Additionally, because specifications for the bidirectional direct
    connection receiver have not yet been finalized, and because other
    digital interfaces that are suitable for connecting a cable set-top
    box to a DTV receiver may be developed, we will keep this docket
    open and require periodic reports from the cable and consumer
    electronics industries on the development of the specifications,
    approved by an accredited standards body, that we anticipate will be
    adopted. In paras. 35 and 36 [infra]{.underline}, we impose limited
    reporting requirements on the industries with respect to issues that
    were substantially but not completely resolved by the February 22,
    2000 agreements. We adopt a single timetable for the reports on all
    of these matters, requiring the cable and consumer electronics
    industries to report to us by October 31, 2000 and every six months
    thereafter until October 2002 on progress in developing standards to
    implement the integrated bidirectional receiver. By keeping this
    docket open and imposing these reporting requirements, we preserve
    the option of incorporating into our rules the formal standards that
    we expect will result from continuing industry efforts to implement
    the February 22, 2000 agreements and to develop specifications for a
    bidirectional direct connection digital television receiver.

22. Because our statutory labeling authority specifically mentions the
    terms "cable ready" and "cable compatible," and because we do not
    wish to constrain unduly the marketing flexibility of manufacturers
    and retailers, we will base our labels on the term "cable ready." We
    recognize that manufacturers and retailers may wish to use
    additional terminology to describe DTV receivers and, consistent
    with the rules we adopt today, they may do so.

23. Section 624A of the Communications Act, as amended (Act) provides,
    in part that "\[T\]he regulations prescribed by the Commission under
    this section shall include such regulations as are necessary (A) to
    specify the technical requirements with which a television receiver
    or video cassette recorder must comply in order to be sold as "cable
    compatible" or "cable ready."[^34] Section 624A also provides that
    "\[T}he Commission shall periodically review and, if necessary,
    modify the regulations issued pursuant to this section in light of
    any actions taken in response to such regulations and to reflect
    improvements and changes in cable systems, television receivers,
    video cassette recorders, and similar technology."[^35] These
    provisions were adopted in 1992, prior to the authorization of
    digital television service. At that time, analog cable systems
    incorporated a limited number of technical capabilities, so a single
    category of television receivers that could be called "cable ready"
    was appropriate. Today, cable television systems provide a more
    varied mix of services than before and that variety is likely to
    increase over time. Consequently, and consistent with the comments
    cited in this section, we believe it is appropriate to adopt labels
    for more than one type of DTV receiver. In addition to our Section
    624A authority referenced earlier in this paragraph, Section 336 of
    the Act also provides us the authority to go beyond the cable
    ready/not cable ready dichotomy. That section, which addresses the
    transition from analog to digital television, reads, in pertinent
    part: "\[I\]n prescribing the regulations required by subsection
    (a), the Commission shall ...(4) adopt such technical and other
    requirements as may be necessary or appropriate to assure the
    quality of the signal used to provide advanced television services,
    and may adopt regulations that may stipulate the minimum number of
    hours per day that such signal must be transmitted; and (5)
    prescribe such other regulations as may be necessary for the
    protection of the public interest, convenience, and necessity."[^36]

### Label Definitions

24. We will define "Digital Cable Ready 1" as follows: A consumer
    electronics TV receiving device capable of receiving analog basic,
    digital basic and digital premium cable television programming by
    direct connection to a cable system providing digital programming.
    This device does not have a 1394 connector or other digital
    interface. A security card (or POD) provided by the cable operator
    is required to view encrypted programming.

25. We will define "Digital Cable Ready 2" as follows: A consumer
    electronics TV receiving device capable of receiving analog basic,
    digital basic and digital premium cable television programming by
    direct connection to a cable system providing digital programming.
    This receiving device will incorporate all features defined in
    Digital Cable Ready 1 and will also include the 1394 digital
    interface connector. A security card/POD provided by the cable
    operator is required to view encrypted programming. (Note: The 1394
    connector may be used for attaching the receiving device to various
    other consumer appliances, including a digital cable set-top box
    that incorporates the 1394 connector. Connection of a Digital Cable
    Ready 2 receiver to a digital set-top box may support advanced and
    interactive digital services and programming delivered by the cable
    system via the set-top box.)

26. We will define "Digital Cable Ready 3 as follows: A consumer
    electronics TV receiving device capable of receiving analog basic,
    digital basic and digital premium cable television programming. This
    device will incorporate all features defined in Digital Cable Ready
    1 and will also receive advanced and interactive digital services by
    direct connection to a cable system providing digital programming
    and advanced and interactive digital services. A security card/POD
    provided by the cable operator is required to view encrypted
    programming.[^37]

27. Consumer electronics manufacturers currently are marketing DTV
    receivers capable of receiving off-the air digital terrestrial
    broadcasts. We note, however, that a DTV receiver could, in
    principle, comply with our Digital Cable Ready labeling requirements
    and not have the capability of receiving off-the-air digital
    signals. In the analog context consumers have the expectation that
    television sets they purchase to work with their cable systems will
    also receive over-the-air broadcast signals. We expect that in the
    digital world this will continue. If, however, manufacturers produce
    receivers that consumers can use with their digital cable systems,
    but that will not receive digital broadcast signals, we expect that
    they would be labeled as such to avoid consumer confusion.

28. Additionally, we wish to reiterate that manufacturers may choose to
    build television receiving devices that incorporate both the Digital
    2 and Digital 3 standards, because the 1394 connector may be used
    for purposes other than connecting a television receiving device to
    a cable set-top box ([e.g.]{.underline}, to connect a television
    receiving device and a DVD player or a digital recorder).[^38]
    Moreover, we wish to note that agreed-upon industry specifications
    for the Digital 3 set do not yet exist. We know that the consumer
    electronics manufacturers are interested in building such a
    receiver, the retailers are interested in marketing such a receiver,
    and the cable industry has expressed its willingness to complete the
    specifications.[^39] We encourage the interested parties to work
    together to complete the relevant specifications promptly.

29. In the *Notice*, we framed the labeling issue as "how to best
    indicate to consumers the capability of television receivers to
    operate with cable television systems."[^40] We continue to believe
    that avoiding consumer confusion is an important goal. This is
    consistent with our decision in the *Equipment Compatibility First
    Report and Order* to require cable operators to provide subscribers
    a consumer education program on compatibility issues, a requirement
    that is still in effect.[^41] In Section 624A, Congress expressed
    the concern that compatibility problems might reduce consumer demand
    for and manufacturer willingness to supply "television receivers and
    video cassette recorders with new and innovative features and
    functions."[^42] Although the specific reference was to receiver
    features that were disabled due to cable encryption implementation,
    the Congressional concern for fostering the availability of
    equipment with "new and innovative features and functions" is clear.
    Along the same lines, when discussing standards for digital cable
    transmissions, the Commission proclaimed the necessity of avoiding
    compatibility problems in order "to allow the mass production of
    economical consumer equipment that is compatible with cable digital
    services."[^43] Moreover, in the *Notice*, we also pointed out that
    "\[W\]ithout resolution of outstanding compatibility issues, the
    transition from analog to digital broadcasting will be slowed, and
    the reclamation and reallocation of portion of the spectrum now
    allocated for analog television service will be delayed.[^44]" These
    considerations\--avoiding consumer confusion and helping to speed
    the digital transition---lead us to take an additional step in
    labeling requirements. Based on our authority under Sections 624A,
    336, and 4(i), we will require that television receiving devices
    that provide any of the three sets of functions described above must
    indicate this by a notation of the form "Meets FCC labeling standard
    Digital Cable Ready **x,**" referencing the applicable designation
    or designations. The physical placement of the labels shall be
    governed by the terms of 47 C.F.R. §2.925(d) and (e).

# Other Matters

30. The *Notice* sought comment on current cable industry practices with
    respect to digital services[^45], including whether these services
    are ever provided on the basic service tier, whether they are
    generally scrambled, and whether we should permit scrambling of
    nonbroadcast digital channels on the basic tier. We also noted that
    the question of whether retransmitted local digital broadcast
    signals must be provided on the same tier that includes local analog
    broadcast signals is open in the digital must carry proceeding. With
    regard to current practice, NCTA notes that

> It is premature at this early stage of the digital transition to
> forecast what services will be encrypted in the future and which will
> not. As for cable's "current practice," as a general rule, and based
> on very limited experience, all digital services---with the exception
> of retransmitted non-encrypted local broadcast signals---are encrypted
> to provide for basic signal security. These digital services are
> provided on separate cable programming service ("CPS") digital tiers,
> not the basic tier.[^46]

Time Warner Cable suggests that the "Commission should decline to
consider issues relating to scrambling and tier positions of digital
broadcast stations in this proceeding, deferring them instead to the
pending Digital Must Carry proceeding."[^47] On the other hand, the Home
Recording Rights Coalition suggests that a prohibition on scrambling
basic services is not needed in the digital domain, "*provided* that
such scrambling is not used to *deny viewing* to consumers as a clumsy
form of copy protection." (emphasis in original).[^48]

31. Joint comments from the four largest commercial broadcasting
    networks assert their belief in "the critical importance of adequate
    copy protection for broadcast television, not only for the rapid
    implementation of DTV but for the future of our medium."[^49] The
    networks express concern at the possibility of unfettered Internet
    retransmission of their programming and go on to state that

> The Commission should not preclude any digital program service,
> including broadcast programming, from being carried on the basic
> programming tier simply because it is encrypted...The ability to
> encrypt need not affect the universality of broadcast television nor
> its status as a free to the consumer program service. Because it may
> well be necessary to require conditional access in order to utilize
> available copy protection technology, broadcasters and other digital
> programming services should be afforded the flexibility to encrypt
> their signals. Accordingly, the Commission should adopt a flexible
> approach, and should not impose or retain any regulation that would
> preclude any digital programming service (broadcast or non-broadcast)
> from being included in a basic programming tier simply because such
> digital programming service is delivered on a conditional access
> basis.[^50]

Time Warner Cable opines that "\[B\]roadcasters should not be permitted
to demand that cable operators encrypt their retransmitted signals if
such signals are not also encrypted when delivered over-the-air.[^51]
CEA asserts that it "has received indications from certain large MSOs
that they plan to scramble all channels, including the broadcast signal
on all systems" and argues that cable operators should be required to
provide in the clear all "over-the-air broadcast and basic cable
programming channels that are generally not subject to scrambling in the
analog cable environment."[^52]

32. We agree that this proceeding is not the proper venue for resolving
    issues related to scrambling of digital broadcast signals and their
    placement on cable service tiers. Tiering and signal carriage issues
    are more properly considered in our pending digital must carry
    proceeding.[^53] To the extent that commenters such as the Broadcast
    Networks, Fox Entertainment Group, and the Professional and
    Collegiate Sports Leagues[^54] are raising issues relating to
    encryption of over-the-air DTV transmissions by broadcast licensees,
    we believe that the record is insufficient to come to a
    conclusion.[^55]

33. The *Notice* also sought comment on "whether the transition to
    digital necessitates any amendment to our requirements for cable
    operators to offer supplemental equipment to subscribers, to enable
    them to use special features of their digital television receivers."
    (citation omitted)[^56] Examples of special features include
    "picture in picture" and the ability to view one channel while
    taping a program on another. Our rules currently require cable
    operators that scramble any of their signals to provide
    "supplemental equipment that will enable the simultaneous reception
    of multiple signals."[^57] No commenter suggested modifying our
    rules and only one commenter addressed the issue. CEA notes that

> Currently, a subscriber to digital cable service would find it
> impossible to fully utilize the picture-in-picture, channel-shift
> consecutive recording, and record-while watch functionalities of
> digital consumer electronics equipment without the provision of one or
> more operator-supplied set-top boxes. In a modular security
> environment, two or more PODs and complementary POD interfaces on the
> host devices will be necessary to effect these functions, because PODs
> are capable of passing only one channel at a time for display.[^58]

This situation is parallel to what exists now in the analog domain, and
47 C.F.R. §76.630(c) reflects this situation. We see no need to impose
different requirements for digital television at this time. Hence we
will not modify our supplementary equipment rules.

34. A few commenters provide opinions on the two compatibility issues
    that are the subject of the February 22, 2000 agreement between CEA
    and NCTA[^59], issues on which comment was not sought in the
    *Notice*. One issue addressed in the February 22 agreement is
    provision of tuning and program schedule information to support the
    navigation function of DTV receivers, including on-screen program
    guides. This information is generally referred to as "PSIP" (Program
    and System Information Protocol) information. The February 22
    agreement outlined a series of steps that the industries need to
    take in order to ensure provision of this information to DTV
    receivers. CEA notes that while "significant progress has been made
    between the cable and consumer electronics industries regarding
    electronic program guides ("EPGs"), there remain several issues
    regarding implementation of the February 22, 2000 agreement." CEA
    goes on to specify two matters relating to PSIP, noting that
    "program producers must insert guide\...information into each
    program before it is delivered to cable for distribution" and "the
    cable industry must implement the technical means to ensure that
    each program's PSIP information is delivered to the DTV set with out
    corruption, through any and all cable plants."[^60] CEA "urges the
    Commission to support and help promote industry efforts on both
    actions, each of which will take some time to implement reliably,
    even as terrestrial broadcasters and their program suppliers have
    been learning to do over time." [^61] Thomson opines that the PSIP
    agreement reflects "very significant progress," but notes that
    further work is needed in terms of "filling in important
    details."[^62] NAB/MSTV notes that the PSIP agreement is not
    complete and asserts that "the Commission must establish quick
    deadlines for completing the standard and implementation."[^63]

35. As noted, the *Notice* did not propose Commission action with
    respect to PSIP. Moreover, the parties to the agreement express some
    confidence in their ability to finalize it and do not seek FCC
    intervention. Nevertheless we are eager to see the agreement
    finalized and become the basis for actual DTV equipment. Moreover,
    we indicated our continuing interest in the development of EPGs in
    our Navigation Devices Report and Order.[^64] We anticipate that the
    implementation of the PSIP agreement will result in the adoption of
    certain standards by an accredited standards organization or
    organizations. Since we are keeping this docket open, we will
    require the cable and consumer electronics industries to report to
    us by October 31, 2000 and every six months thereafter until October
    2002 on progress in implementing the PSIP agreement.

36. NAB/MSTV also expressed concern about implementation of the February
    22, 2000 agreement on technical requirements for direct connection
    of digital television receivers to digital cable systems,
    complaining that the agreement is embodied in not one but two
    separate RF interconnection standards.[^65] In order to monitor the
    completion of the agreement, which we expect will lead to standards
    adopted by an accredited standards organization, we will require the
    cable and consumer electronics industries to report to us on
    progress in implementing the technical requirements agreement,
    according to the same schedule established for tracking progress on
    the PSIP agreement. These reporting requirements, along with our
    decision to keep this docket open, will give the Commission the
    option of incorporating into our rules any formal standards that the
    industries adopt with respect to technical connection requirements
    and/or PSIP.

37. Several commenters also raised issues in connection with closed
    captioning, another issue that was not part of the *Notice* in this
    proceeding.[^66] These matters are the subject of another Commission
    proceeding in which a Report and Order was recently adopted.[^67]
    Hence this decision will not address closed captioning.

# Procedural matters

38. In order to provide manufacturers sufficient lead time to
    incorporate the new labels into their DTV product lines, the new
    labeling rules will take effect on July 1, 2001.

39. [Final Regulatory Flexibility Certification]{.underline}. A Final
    Regulatory Flexibility Certification, *see 5 U.S.C.* §605 , is
    contained in Appendix C.

# ORDEring Clauses

40. *Ordering Clauses.* **IT IS ORDERED** that, pursuant to Sections 1,
    4(i) and (j), 336, and 624A of the Communications Act of 1934, as
    amended, 47 U.S.C. §§ 151, 154(i) and (j), 336, and 544a, the
    Commission's rules **ARE AMENDED**, as set forth in Appendix A.

41. **IT IS FURTHER ORDERED** that the Consumer Information Bureau,
    Reference Information Center, **SHALL SEND** a copy of this Report &
    Order, including the Final Regulatory Flexibility Certification, to
    the Chief Counsel for Advocacy of the Small Business Administration.

> **Federal Communications Commission**
>
> Magalie Roman Salas
>
> Secretary
>
> **APPENDIX A**

Part 15 of Title 47 of the Code of Federal Regulations is amended as
follows:

47 C.F.R. §15.3(aa) is amended adding at the end of the last sentence
the following.

and the provisions of §15.19(d).

47 C.F.R. §15.19(d) is amended by redesignating the text as 47 C.F.R.
§15.19(d)(1) and adding a new 47 C.F.R. §15.19(d)(2) as follows.

(d)(2)(i) Consumer electronics TV receiving devices, including TV
receivers, videocassette recorders, and similar devices, that include
digital video signal processing capability and incorporate features
intended to be used with digital cable television service, but do not
provide one or more of the feature sets described in §15.19(d)(2)(ii) of
this Chapter, shall not be marketed with terminology that describes the
device as "cable ready" or "cable compatible" or otherwise conveys the
impression that the device is fully compatible with digital cable
service. Devices marketed as "digital cable ready" or "digital cable
compatible" or otherwise conveying the impression that the device is
fully compatible with digital cable service must offer one or more of
the feature sets ([i.e.]{.underline}, Digital Cable Ready 1, Digital
Cable Ready 2, Digital Cable Ready 3) specified in §15.19(d)(2)(ii) of
this Chapter and carry the corresponding descriptive label or labels.
With respect to their analog signal processing capabilities, these
devices must also comply with the technical standards for cable ready
equipment set forth in §15.118 of this Chapter. Devices not marketed as
"digital cable ready" or "digital cable compatible" may be accompanied
by factual statements about the various features of the devices that are
intended for use with digital cable service and/or the quality of such
features, provided that such statements do not imply that the devices is
fully compatible with digital cable service. Statements relating to
product features are generally acceptable where they are limited to one
or more specific features of a device, rather than the device as a
whole.

(d)(2)(ii) Descriptive Labels for consumer electronics TV receiving
devices with digital signal processing capability.

Digital Cable Ready 1 refers to a consumer electronics TV receiving
device capable of receiving analog basic, digital basic and digital
premium cable television programming by direct connection to a cable
system providing digital programming. This device does not have a 1394
connector or other digital interface. A security card (or POD) provided
by the cable operator is required to view encrypted programming.

Digital Cable Ready 2 refers to a consumer electronics TV receiving
device capable of receiving analog basic, digital basic and digital
premium cable television programming by direct connection to a cable
system providing digital programming. This receiving device will
incorporate all features defined in Digital Cable Ready 1 and will also
include the 1394 digital interface connector. A security card (or POD)
provided by the cable operator is required to view encrypted
programming.

Digital Cable Ready 3 refers to a consumer electronics TV receiving
device capable of receiving analog basic, digital basic and digital
premium cable television programming. This device will incorporate all
features defined in Digital Cable Ready 1and will also receive advanced
and interactive digital services by direct connection to a cable system
providing digital programming and advanced and interactive digital
services and programming. A security card (or POD) provided by the cable
operator is required to view encrypted programming.

(d)(2)(iii) Consumer electronics TV receiving devices, including TV
receivers, videocassette recorders, and similar devices, that include
digital video signal processing capability and that provide one or more
of the feature sets ([i.e.]{.underline}, Digital Cable Ready 1, Digital
Cable Ready 2, Digital Cable Ready 3)described in §15.19(d)(2)(ii) of
this Chapter, **must** carry the label or labels from 47 C.F.R.
§15.19(d)(2)(ii) that describe the feature sets offered by the device.
The format of the label or labels shall conform to the provisions of
§§2.925(d) and (e) of this Chapter.

(d)(2)(iv) The requirements of this section apply to consumer TV
receivers, videocassette recorders and similar devices manufactured or
imported for sale in this country on or after July 1, 2001.

47 C.F.R. §15.118(a) is amended by adding the following sentence at the
end.

Until such time as generally accepted testing standards are developed,
§§15.118(c) and (d) of this Chapter will apply only to the analog
portion of covered consumer electronics TV receiving equipment.

**APPENDIX B**

**COMMENTERS**

Association of Local Television Stations, Inc.

ATI Technologies

5C Digital Transmission License Administrator

Broadcast Networks (ABC,CBS, Fox, NBC)

Cable Networks (Turner, HBO, Disney, Fox Cable Networks, MTV Networks)

Circuit City Stores

Consumer Electronics Association

Echostar Communications Corporation

Fox Entertainment Group, Inc.

Home Recording Rights Coalition

Information Industry Technology Council

Julio Loza, Private Citizen

Media Access Group at the WGBH Educational Foundation

Metro Goldwyn Mayer Studios Inc.

Motion Picture Association of America

Motorola, Inc.

National Association of Broadcasters and the Association for Maximum
Service

Television, Inc.

National Cable Television Association (Comments plus separate letter)

Office of Advocacy, US Small Business Administration

Philips Electronics North America Corporation

Professional and Collegiate Sports Leagues

Satellite Broadcasting and Communications Association

Thomson Consumer Electronics

Time Warner Cable

Viacom, Inc.

**REPLY COMMENTERS**

Association of Local Television Stations, Inc.

Circuit City Stores

Consumer Electronics Association

Consumer Electronics Retailers Association

Digital Transmission Licensing Administrator

Echostar Communications Corporation

Fox Entertainment Group, Inc.

Home Recording Rights Coalition

Matsushita Electric Corporation of America

Motion Picture Association of America

National Association of Broadcasters and the Association for Maximum
Service

Television, Inc.

National Cable Television Association

National Rural Telecommunications Cooperative

Sony Electronics Inc.

Thomson Consumer Electronics, Inc.

Time Warner Cable

Zenith Electronics Corporation

**APPENDIX C**

**FINAL REGULATORY FLEXIBILITY CERTIFICATION**

1.  The Regulatory Flexibility Act (RFA)[^68] requires that an agency
    prepare a regulatory flexibility analysis for notice-and-comment
    rulemaking proceedings, unless the agency certifies that \"the rule
    will not, if promulgated, have a significant economic impact on a
    substantial number of small entities.\"[^69] The *Notice of Proposed
    Rulemaking (Notice)*[^70] in this proceeding proposed rules to
    resolve outstanding compatibility issues between cable television
    systems and consumer electronics equipment, in particular,
    requirements for labeling digital television (DTV) receivers to
    describe their capabilities to operate with digital cable television
    systems, and questions regarding licensing terms for copy protection
    technology. Out of an abundance of caution, the Commission published
    an Initial Regulatory Flexibility Analysis (IRFA) in the *Notice*,
    even though the Commission was reasonably confident that any
    economic effect on small entities would be minimal. The IRFA sought
    written public comment on the proposed rules and our tentative
    conclusions in the IRFA. We received one written comment in response
    to the IRFA, from the U.S. Small Business Administration (SBA).[^71]

```{=html}
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```
42. As noted, the *Notice* in this proceeding raised two issues \--
    labeling of digital television receivers and copy protection
    technology licensing terms. The second issue has now been moved to
    another proceeding and resolved therein via a declaratory
    ruling.[^72] The present *Report and Order* addresses only the
    labeling of "consumer electronics TV receiving devices, including TV
    receivers, videocassette recorders, and similar devices, that
    include digital video signal processing capability and incorporate
    features intended to be used with digital cable television service."
    The impact of the rules adopted is thus on manufacturers of consumer
    electronics TV receiving devices. The rules do not mandate any
    particular design or set of features for this equipment. They merely
    require manufacturers to attach specified labels to receiving
    devices that provide certain sets of features. Of course,
    manufacturers of consumer electronics TV receiving devices already
    package and label their products with various descriptive captions.
    Moreover, we believe that manufacturers generally find it in their
    interest to ensure that consumers understand the capabilities of the
    product being offered for sale. Hence, manufacturers actually have
    commercial incentives to label their products clearly.
    (Concomitantly, consumers also benefit from the information in
    product labels.) For these reasons, and for reasons we discuss
    additionally below, we certify, pursuant to the RFA, that the
    labeling requirements adopted in the present *Report and Order* will
    not have a significant economic impact on a substantial number of
    small entities.

43. On the labeling issue as described in the IRFA, the SBA stated, "The
    Commission . . . asserts that its labeling rules would have a
    minimal impact, because labeling would be standardized, costs would
    be spread over sufficient quantities of goods as to be
    insubstantial, and manufacturers could pass costs on to their
    subscribers. But this ignores the differences in output or customer
    base that may exist between a small company and a large company. A
    business with less output or fewer customers might find its per unit
    costs are higher. The Commission should explore any such potential
    cost discrepancies based on business size, not simply dismiss them
    as minimal." As described in the *Report and Order*, pursuant to the
    new rule, manufacturers must label the pertinent products with
    labels that meet the requirements of Section 2.925 of the
    Commission's Rules, 47 C.F.R. § 2.925. Manufacturers of transceivers
    must already label their equipment to demonstrate compliance with
    the Commission's equipment authorization rules. Such labels must "be
    permanently affixed to the equipment and . . . be readily visible to
    the purchaser at the time of purchase." Section 2.925(d). The
    manufacturer may choose the means to make the label permanent,
    including using a nameplate (of material of the manufacturer's
    choosing) fastened to the equipment with a permanent adhesive. While
    we do not wish to favor one type of labeling choice over another, we
    note that use of an adhesive label containing the additional
    information at issue should not create a significant economic impact
    for any manufacturer, and in fact probably represents an
    insignificant economic impact. The cost of paper labels with
    adhesive, containing brief information specified by rule, would
    appear to be minimal. Finally, the rules permit manufacturers to
    request alternative means of labeling. Section 2.925(e).

44. The Commission will send a copy of the present *Report and Order*,
    including a copy of this final certification, in a report to be sent
    to Congress pursuant to the Small Business Regulatory Enforcement
    Fairness Act, *see* 5 U.S.C. § 801(a)(1)(A). In addition, the
    Commission will send a copy of the *Report and Order*, including a
    copy of this final certification, to the Chief Counsel for Advocacy
    of the SBA. In addition, a copy of the *Report and Order* (or a
    summary thereof) and this final certification will be published in
    the Federal Register. *See* 5 U.S.C. § 605(b).

**APPENDIX D**

Sample Comparison Chart for Digital Cable Ready TV Receiving Devices

+----------------+-----------------+----------------+-----------------+
|                | Digital Cable   | Digital Cable  | Digital Cable   |
|                | Ready 1         | Ready 2        | Ready 3         |
+----------------+-----------------+----------------+-----------------+
| Receives       | **•**           | **•**          | **•**           |
| analog         |                 |                |                 |
|                |                 |                |                 |
| basic cable    |                 |                |                 |
|                |                 |                |                 |
| service via    |                 |                |                 |
| direct         |                 |                |                 |
|                |                 |                |                 |
| connection     |                 |                |                 |
+----------------+-----------------+----------------+-----------------+
| Receives       | **•**           | **•**          | **•**           |
| digital        |                 |                |                 |
|                |                 |                |                 |
| basic cable    |                 |                |                 |
| service via    |                 |                |                 |
| direct         |                 |                |                 |
|                |                 |                |                 |
| connection     |                 |                |                 |
+----------------+-----------------+----------------+-----------------+
| Receives       | **•**           | **•**          | **•**           |
| digital        |                 |                |                 |
|                |                 |                |                 |
| premium cable  |                 |                |                 |
|                |                 |                |                 |
| service via    |                 |                |                 |
| direct         |                 |                |                 |
|                |                 |                |                 |
| connection     |                 |                |                 |
+----------------+-----------------+----------------+-----------------+
| Requires a     | **•**           | **•**          | **•**           |
|                |                 |                |                 |
| security card  |                 |                |                 |
| (or            |                 |                |                 |
|                |                 |                |                 |
| "POD") to      |                 |                |                 |
| receive        |                 |                |                 |
|                |                 |                |                 |
| encrypted      |                 |                |                 |
|                |                 |                |                 |
| programming    |                 |                |                 |
+----------------+-----------------+----------------+-----------------+
| Includes the   |                 | **•**          | **Not           |
| 1394 connector |                 |                | Required**      |
+----------------+-----------------+----------------+-----------------+
| Supports       |                 | **•**          | **•**           |
|                |                 |                |                 |
| interactive    |                 |                |                 |
| and            |                 |                |                 |
|                |                 |                |                 |
| two-way        |                 |                |                 |
| services       |                 |                |                 |
|                |                 |                |                 |
| **over cable** |                 |                |                 |
+----------------+-----------------+----------------+-----------------+
| Direct         |                 |                | **•**           |
| Connection to  |                 |                |                 |
|                |                 |                |                 |
| cable for      |                 |                |                 |
| interactive    |                 |                |                 |
|                |                 |                |                 |
| and two-way    |                 |                |                 |
|                |                 |                |                 |
| services       |                 |                |                 |
+----------------+-----------------+----------------+-----------------+

**NOTES:**

(1) **The Cable Ready Digital 2 receiving device [may]{.underline}
    incorporate other digital interfaces in addition to the 1394
    connector. The Cable Ready Digital 3 connector [may]{.underline}
    incorporate the 1394 digital connector and/or other digital
    interfaces.**

(2) **The 1394 connector may be used for attaching the receiving device
    to various other consumer appliances, including a digital cable set
    top box that incorporates the 1394 connector.**

Separate Statement of Commissioner Susan Ness

In Re: Compatibility Between Cable Systems and

*Consumer Electronics Equipment*

*(PP Docket No. 00-67)*

While I support this item as a necessary step to further the digital
transition, I am concerned that our new labeling regime -- which is
intended to protect consumers \-- will not do so.

Consumers today fully expect to have the capability to receive analog
over-the-air signals when they purchase a television set. The same will
be true of consumers buying integrated digital TV sets in the future.
They will naturally expect a digital TV set to be *capable* of receiving
a digital over-the-air signal, even if they initially intend to connect
it to the cable system.

Manufacturers may be designing digital TV sets that, under the rules we
adopt today, will bear the "digital cable ready" label but are unable to
receive an over-the-air digital signal. In other words, what will look
like a TV set actually will be incapable of ever receiving an
over-the-air digital signal.

Our cable compatibility labels should not exacerbate this problem. By
placing the FCC imprimatur on a device that, while cable compatible, is
incapable of receiving a digital over-the-air signal, we add to consumer
confusion -- and consternation. In my opinion, a digital television
receiver that carries a label blessed by the Federal Communications
Commission should be able to receive an over-the-air digital signal.

The marketplace works best when consumers can make *informed* choices.
They should have the opportunity to buy a cheaper TV set if they want
to; but they should be told if that set cannot perform the basic
function that consumers have grown up to expect.

We can solve this problem. Any integrated, cable-compatible digital
television receiver that is incapable of receiving an over-the-air
signal should bear a warning to that effect. Consumers then will be
alerted at the point of sale whether the costly device they are about to
buy has the functionality they expect.

To do otherwise is inconsistent with our duty to the American public and
inconsistent with our desire to ensure a smooth transition from analog
to digital that works for the American public.

I intend to work with my colleagues, along with the consumer
electronics, cable, and broadcasting industries over the next few weeks
to address what I believe is a critical issue in the transition to
digital broadcasting. Hopefully, we can forge an agreement to address
this problem; otherwise I am prepared to take further FCC action to
protect the American consumer.

[^1]: *Notice of Proposed Rulemaking* in PP Docket No. 00-67, 15 FCC Rcd
    8776 (2000) ("*Notice*")

[^2]: *See Notice* at 8776-77. The Commission noted therein that
    agreements between the Consumer Electronics Association and the
    National Cable Television Association in February 2000 had resolved
    two of the four major compatibility issues then
    outstanding---technical requirements for direct connection of
    digital television receivers to digital cable systems, and provision
    of tuning and program scheduling information to support the
    navigation function of digital television receivers, including
    on-screen program guides. The other two issues, labeling and copy
    protection technology licensing, were addressed in the *Notice*.

[^3]: *See* Letter from Robert Sachs, President and CEO, National Cable
    Television Association and Gary Shapiro, President and CEO, Consumer
    Electronics Association to William Kennard, Chairman, FCC (May 24,
    2000) ("*May 24 Letter")*.

[^4]: *See* Consumer Electronics Association Reply Comments at 2-7,
    Letter from Michael Petricone to Magalie R. Salas, Federal
    Communications Commission, Office of the Secretary (June 27, 2000)
    in PP Docket No. 00-67 (asserting that "as practical matter,
    implementation of labels by manufacturers over retailer opposition
    would be difficult."), Consumer Electronics Retailers Coalition
    Reply Comments at 2 (asserting that the CEA/NCTA labels "would
    mislead consumers, would impede competition, and would undermine,
    rather than strengthen, the crucial OpenCable initiative that it was
    intended to support."), Circuit City Stores, Inc. Reply Comments at
    1-4.

[^5]: We note that NCTA regards the May 24 agreement as responsive to
    the Commission's call in the *Notice* and stands by the agreement.
    *See* Letter from Robert Sachs, President and CEO, National Cable
    Television Association to William Kennard, Chairman, FCC (June 13,
    2000).

[^6]: 47 C.F.R. §§76.1200-1210.

[^7]: We incorporate by reference all comments and reply comments in PP
    Docket No. 00-67 into CS Docket No. 97-80.

[^8]: *See* Letter from Robert Sachs, President and CEO, NCTA and Gary
    Shapiro, President and CEO, CEA to William Kennard, Chairman FCC
    (Feb. 22, 2000) ("February 22 Letter")The letter and its two
    appendices detail agreements on technical requirements for direct
    connection of digital television receivers to digital cable systems
    and on provision of tuning and program scheduling information to
    support the navigation function, including on-screen tuning guides.
    The term "PSIP" stands for Program and System Information Protocol.
    PSIP is a set of specifications for how to transmit tuning,
    scheduling, and related information about programs.

[^9]: Appendix B contains a list of comments and reply comments.

[^10]: *See Notice* at 8783-84. The IEEE 1394 standard describes a
    two-way "bus" connector capable of carrying a compressed digital
    video bitstream.

[^11]: *See Notice* at 8781 (ftn. 34).

[^12]: For example, a cable subscriber with such a receiver could not
    use cable facilities to order a pay-per-view movie. Depending on the
    capabilities of the cable system, however, the subscriber might be
    able to perform this function using his/her telephone line.

[^13]: *See* Letter from Robert Sachs, President and CEO, National Cable
    Television Association and Gary Shapiro, President and CEO, Consumer
    Electronics Association to William Kennard, Chairman, FCC (May 24,
    2000), Attachment.

[^14]: Circuit City Reply Comments at 3

[^15]: Letter from Gary Shapiro, President and CEO, Consumer Electronics
    Association to William Kennard, Chairman, FCC (July 5, 2000). *See
    also* Reply Comments of CERC at 8 ("if there are to be any further
    FCC industry consultations with respect to this proceeding, CERC
    members would like to be included.")

[^16]: NAB/MSTV Comments at ii. *See also* Julio Loza Reply Comments at
    4. The term "5C" refers to a copy protection technology developed by
    Intel, Matsushita, Sony, Hitachi, and Toshiba. *See* Comments of the
    "5" Digital Transmission License Administrator.

[^17]: *See* Satellite Broadcasting and Communications Association
    Comments at 4, Echostar Communications Corporation Comments at 3-4,
    National Rural Telecommunications Cooperative Reply Comments at
    4-5..

[^18]: CERC Reply Comments at 7.

[^19]: *See* MPAA Comments at 4-5. details the criteria for "effective
    content protection." The receiver would need to incorporate a POD
    module that employs encryption and authentication to protect content
    across the POD-host interface. The POD module would also need to be
    subject to licensing that imposes content protection obligations on
    the host device with which the POD is used.

[^20]: *see* 47 U.S.C. §544a(b)

[^21]: *See* "Audio Notes" in *Audio Week* Vol. 12, \# 24 (June 12,
    2000).

[^22]: *See February 22 Letter*.

[^23]: *See* 47 C.F.R. §76.1204(c).

[^24]: CEA Reply Comments at 3.

[^25]: To deploy the POD module, the host device must have an
    appropriate interface, and, to build that interface, the
    manufacturer of the host device will need a license for the
    necessary technology.

[^26]: The 5C technology is "a cryptographic protocol for protecting
    audio/video entertainment content from unauthorized copying,
    intercepting and tampering as it traverses high performance digital
    interfaces. *See* Comments of the "5C" Digital Transmission License
    Administrator at 2.

[^27]: CEA Reply Comments at 8. *See also* Sony Reply Comments at 3
    (noting that the May 24 labeling recommendation "does not address
    the appropriate label that should accompany a fully integrated DTV:
    one with a built-in receiver, monitor, and navigation device
    functionality, capable of supporting advanced and interactive
    digital cable services through direct connection to the cable
    system. Given consumer desire for simplicity in consumer electronics
    products, as well as the expected attractiveness of such services,
    we anticipate that the market for such television receivers will be
    significant.") and Philips Comments at 6, ftn 8 ("...defining only
    two levels of "cable-ready" may not be sufficient to effectively
    inform the consumer of all the different possibilities and
    limitations of the different combinations of DTV receivers, analog
    TV receivers and STBs.")

[^28]: *See* Status Report in CS Docket 97-80 at 10-11 (filed July 7,
    2000 by NCTA et al.). *See also* Time Warner Cable Reply Comments at
    3 (raising the possibility that when the bidirectional receiver has
    been "invented," then a label for it might refer to interactive
    functions).

[^29]: Matsushita Electric Company of America Comments at 3.

[^30]: Sony Comments at 3.

[^31]: Fox Comments at 3. *See also* "JVC Announces Copy Protection
    System for Digital VHS" (JVC News Release,
    [www.jvc-victor.co.jp/english/products/vcr/D-security.html](http://www.jvc-victor.co.jp/english/products/vcr/D-security.html)
    (noting that Fox has endorsed for its own HD content a copy
    protection system including Intel's HDCP (High-bandwidth Digital
    Content Protection) and DVI (Digital Visual Interface) technologies
    for delivering and copy-protecting uncompressed digital signals.)

[^32]: ATI Comments at 2. In fact, ATI argues that a "high resolution
    display device should only be labeled "cable compatible" if it
    includes either a YPrPb or DVI (with HDCP or some other form of copy
    protection) connector. This will enable consumers to take full
    advantage of their high resolution display devices by displaying
    high resolution computer graphics data in addition to high
    resolution video data." DVI , or "Digital Video Interface" is a
    high-speed digital baseband interface that can pass through
    uncompressed high definition video content. HDCP, or "High-Bandwidth
    Digital Content Protection" is a copy protection technology suitable
    for implementation over DVI. We believe that our statutory mandate
    does not extend to labeling "high resolution display devices" to
    describe their ability to display computer graphics data. The
    question of how high resolution content is delivered to computer
    monitors is one that should be left to the marketplace.

[^33]: *See*, [e.g.]{.underline}, Letter from Marc Berejka and Nicos
    Tsilas, Microsoft Corporation, to Magalie R. Salas, Federal
    Communications Commission, Office of the Secretary (Sept. 7, 2000),
    referring to "other standards, such as the Digital Visual Interface
    ("DVI"), Universal Serial Bus ("USB"), or Internet Protocol ("IP")
    standard that could facilitate the offering of advanced digital
    services to American consumers." (ftn omitted).

[^34]: 47 USC §544a(c)(2)

[^35]: 47 USC §544a(d)

[^36]: 47 USC§336)(a)(4), (a)(5).

[^37]: See Appendix D for a "Sample Comparison Chart for Digital Cable
    Ready TV Receiving Devices."

[^38]: Equipment meeting both the Digital 2 and Digital 3 standards
    should carry both labels.

[^39]: *See* Sony Reply Comments at 3, Circuit City Comments at 5-10,
    Status Report in CS Docket 97-80 at 10-11 (filed July 7, 2000 by
    NCTA et al.).

[^40]: *Notice* at 8781 (ftn. 34).

[^41]: *See* *Equipment Compatibility First Report and Order*, 9 FCC Rcd
    1981, 1993 ("We continue to believe that a requirement for cable
    operators to provide their subscribers a consumer education program
    at regular intervals is necessary and desirable to inform
    subscribers of compatibility issues and solutions..."). *See also*
    47 C.F.R. §76.630(d).

[^42]: 17 U.S.C. §544a(a)(2).

[^43]: *Equipment Compatibility First Report and Order*, 9 FCC Rcd at
    2005.

[^44]: *Notice* at 8777-78.

[^45]: *Notice* at 8783.

[^46]: NCTA Comments at 25.

[^47]: Time Warner Cable Comments at iv.

[^48]: Home Recording Rights Coalition Comments at 9, ftn 24.

[^49]: Broadcast Networks Comments at 2.

[^50]: *Id.* at 3-4. *See also* Fox Entertainment Group Comments at 5
    (employment of encryption and other content protection measures by
    broadcasters "should not affect the availability of free,
    over-the-air television," and digital broadcasts should be allowed
    on the basic tier even if "they are delivered on a conditional
    access basis.") The 5C Digital Transmission Licensing Administrator
    raises some technical implementation issues with respect to applying
    5C encryption to broadcast TV content. *See* Reply Comments of the
    "5C" Digital Transmission Licensing Administrator at 3-4.

[^51]: Time Warner Cable Reply Comments at ii.

[^52]: CEA Comments at 20.

[^53]: *See* *Carriage of the Transmissions of Digital Television
    Broadcast Stations* CS Docket No. 98-120, 13 FCC Rcd 15092 (1998).

[^54]: *See* Comments of the Professional and Collegiate Sports Leagues
    at 2-4.

[^55]: We note that, in our *Subscription Video* decision, we addressed
    the difference between broadcast and non-broadcast services, finding
    generally that services available without subscription fee or the
    need for specialized equipment are broadcasting. We stated that "the
    encryption of programming [to make it unusable by the
    public]{.underline} is an indicia of the intent to limit access to
    the signal." (emphasis added). *See* *Report and Order* in Gen.
    Docket No. 85-305, 2 FCC Rcd 1001, 1006 (1987).

[^56]: *Notice* at 8783.

[^57]: 47 C.F.R. §76.630(c).

[^58]: CEA Comments at 4.

[^59]: Letter from Robert Sachs, President and CEO, NCTA and Gary
    Shapiro, President and CEO, CEA to William Kennard, Chairman FCC
    (Feb. 22, 2000).

[^60]: CEA Comments at iii. *See also* Philips Comments at 2, ftn. 2
    ("the NCTA/CEA agreement in principle on carriage of PSIP data will
    require additional work regarding its implementation---work that is
    already underway. Philips is confident these efforts will proceed
    swiftly and urges the Commission to remain involved in ensuring that
    industry-developed solutions are reached as quickly as possible and
    without a need for formal government involvement.").

[^61]: CEA Comments at iii.

[^62]: Thomson Comments at 4.

[^63]: NAB/MSTV Comments at 14.

[^64]: *Report and Order* in CS Docket No. 97-80, 13 FCC Rcd 14775
    (1998) at para. 116.

[^65]: NAB/MSTV Comments at 12-13.

[^66]: *See, [e.g.]{.underline}* Comments of Motorola, Inc., Comments of
    the Media Access Group at the WGBH Educational Foundation, and CEA
    Comments at 4-5.

[^67]: *See* *Report and Order* in ET Docket No. 99-254 and MM Docket
    No. 95-176, adopted July 31, 2000.

[^68]: The RFA, *see* 5 U.S.C. § 601 *et seq*., has been amended by the
    Contract With America Advancement Act of 1996, Pub. L. No. 104-121,
    110 Stat. 847 (1996) (CWAAA). Title II of the CWAAA is the Small
    Business Regulatory Enforcement Fairness Act of 1996 (SBREFA).

[^69]: *See* 5 U.S.C. § 605(b).

[^70]: *Notice of Proposed Rulemaking*, Compatibility Between Cable
    Systems and Consumer Electronics Equipment, PP Docket No. 00-67, FCC
    00-137 (rel. April 14, 2000); *see also* 65 Fed.Reg.. 24671 (April
    27, 2000).

[^71]: Comment by the Office of Advocacy, SBA, dated May 24, 2000.

[^72]: *See* *Further* *Notice of Proposed Rulemaking, Memorandum
    Opinion & Order, and Declaratory Ruling* in CS Docket No. 97-80,
    Implementation of Section 304 of the Telecommunications Act of
    1996---Commercial Availability of Navigation Devices, FCC 00-341,
    adopted Sept. 14, 2000.