**Before the**

**Federal Communications Commission**

**Washington, D.C. 20554**

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| In the matter of                 | *  | ET Docket No. 05-24          |
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| Requirements for Digital         | ** |                              |
| Television Receiving Capability  |    |                              |
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**REPORT AND ORDER**

**AND**

**FURTHER NOTICE OF PROPOSED RULEMAKING**

**Adopted: June 9, 2005 Released: June 9, 2005**

**By the Commission:** Commissioners Abernathy and Copps issuing
separate statements.

**Comments Date: \[21 Days after Publication in the Federal Register\]**

**Reply Comments Date: \[35 Days after Publication in the Federal
Register\]**

# INTRODUCTION

1.  By this action, the Commission is modifying the schedule by which
    new broadcast television receivers with screen sizes 25-36" are
    required to include the capability to receive over-the-air digital
    television (DTV) broadcast signals. This provision of the rules is
    an element of the Commission's phase-in plan for requiring that all
    new broadcast television receivers include DTV reception
    capability.[^1] The DTV reception requirement, which is also often
    termed the "DTV tuner requirement," is being implemented by applying
    the requirement first to large screen receivers and then
    progressively to smaller screen units and other devices over a
    period of several years.[^2] Our decision herein maintains the
    existing plan to require that 50 percent of 25-36" receivers that
    are imported or shipped in interstate commerce include DTV tuners
    beginning July 1, 2005, but modifies the date on which 100 percent
    of such receivers must include DTV tuners by advancing that date
    from July 1, 2006 to March 1, 2006. This action was initiated in
    response to a Petition for Rulemaking from the Consumer Electronics
    Association and the Consumer Electronics Retailers Association
    (CEA-CERC) requesting that we eliminate the 50 percent requirement
    for the 25-36" mid-size receivers and instead advance the date by
    which 100 percent of these receivers would include DTV tuners to
    March 1, 2006.[^3] While we understand CEA-CERC's concern that the
    50 percent requirement may have posed some difficulties for
    manufacturers and retailers, we nonetheless conclude that
    maintaining this approach for the mid-size 25-36" receivers prior to
    March 1, 2006 will most effectively ensure that DTV tuner equipped
    sets are available to consumers this year, and especially for the
    2005 holiday and 2006 Super Bowl seasons. In this regard, we
    continue to believe that it is essential that DTV reception
    capability be provided to consumers in new TV receivers as rapidly
    as possible in order to promote an expeditious completion of the
    transition from analog to digital broadcast television service. We
    also conclude that advancing the date by which all 25-36" receivers
    must include DTV reception capability to March 1, 2006 will serve to
    minimize any difficulties with the 50 percent provision at the
    earliest practicable date and will also serve to expedite the
    provision of DTV reception capability to consumers.

2.  Consistent with our goal to provide DTV reception to consumers as
    rapidly as possible, we are also proposing to advance the date on
    which all new television receiving equipment must include the
    capability to receive over-the-air DTV broadcast signals from July
    1, 2007 to a date no later than December 31, 2006. This revision
    would require all television receivers to include DTV tuners on a
    schedule not later than the statutory target date for the end of the
    DTV transition, when analog television service is to end. This
    proposal is intended to apply the DTV tuner requirement to all TV
    receivers on an advanced schedule that will allow a more rapid
    completion of the DTV transition while providing manufacturers with
    adequate time to include DTV tuners in all their TV products.

# BACKGROUND

3.  The DTV tuner requirement was adopted by the Commission in the
    S*econd Report and Order and Second Memorandum Opinion and Order*
    (*DTV Review Second Report and Order*) in the DTV review
    proceeding."[^4] In that action, the Commission, *inter alia*,
    adopted rules requiring that all new TV broadcast receivers that are
    shipped in interstate commerce or imported into the United States,
    for sale or resale to the public, be capable of receiving the
    signals of DTV broadcast stations over-the-air no later than July 1,
    2007.[^5] Under these rules, TV broadcast receivers are required
    only to provide useable picture and sound commensurate with their
    video and audio capabilities when receiving DTV signals. The DTV
    tuner requirement was intended to facilitate the transition to
    digital television by promoting the availability of DTV reception
    equipment and to protect consumers by ensuring that their TV
    receivers will provide off-the-air TV reception of digital signals
    just as they have provided off-the-air TV reception of analog
    signals.[^6] In order to minimize the impact of the DTV tuner
    requirement on both manufacturers and consumers, the Commission
    adopted a phase-in schedule that applies the requirement first to
    receivers with the largest screens and then to progressively smaller
    screen receivers and other TV receiving devices that do not include
    a viewing screen, *i.e.*, VCRs and DVDRs. This phase-in plan was
    intended to allow increasing economies of scale with production
    volume to be realized so that DTV tuner costs will be lower when
    they are required to be included in smaller sets and other TV
    receiving devices. The phase-in plan is currently as follows:

    Receivers with screen sizes 36" and above \-- 50% of a responsible
    party's units must include DTV tuners effective July 1, 2004; 100%
    of such units must include DTV tuners effective July 1, 2005;

    Receivers with screen sizes 25-36" \-- 50% of a responsible party's
    units must include DTV tuners effective July 1, 2005; 100% of such
    units must include DTV tuners effective July 1, 2006;

    Receivers with screen sizes 13-24" \-- 100% of all such units must
    include DTV tuners effective July 1, 2007;

    Other receiving Devices (videocassette recorders (VCRs), digital
    versatile disk (DVD) players/recorders, etc.) that receive broadcast
    television signals \-- 100% of all such units must include DTV
    tuners effective July 1, 2007.

4.  In their petition for rulemaking, CEA-CERC requested that we
    eliminate the July 1, 2005 requirement for 50 percent of TV
    receivers with screen sizes 25-36" to include DTV reception
    capability and instead advance from July 1, 2006 to March 1, 2006,
    the date for all such receivers to include a DTV tuner. CEA-CERC
    submitted that manufacturers' and retailers' experience with the 50
    percent provision for 36" and larger receivers is that the 50
    percent aspect of the phase-in plan is antithetical to the purpose
    of the DTV tuner requirement. They stated that, in practice, the 50
    percent requirement has proven to be unduly disruptive in the
    marketplace in ways unforeseen and, in fact, threatens to slow,
    rather than speed, consumer migration to TV receivers with DTV
    tuners. They indicated that this is because the experience with 36"
    and larger sets is that consumers typically choose a lower-priced
    product with otherwise similar features except for the DTV tuner
    rather than a set with a DTV tuner. CEA-CERC argued that eliminating
    the 50 percent rule for 25-36" receivers and moving up the date for
    100 percent compliance by such receivers would better align the
    policy behind the DTV tuner rule with market forces and consumer
    expectations.

5.  In response to the CEA-CERC petition, we issued a *Notice of
    Proposed Rulemaking* (*Notice*) to consider adjusting the schedule
    by which new broadcast television receivers with screen sizes 25-36"
    are required to include the capability to receive digital television
    signals.[^7] In the *Notice*, we requested comment on whether there
    is need to revise the implementation schedule of the DTV tuner
    requirement for receivers with screen sizes 25-36" to address the
    concerns raised by CEA-CERC and, if so, how that schedule should be
    revised to achieve our goal that all new television receivers
    include DTV tuning capability by July 1, 2007. We specifically
    requested comment on the approach suggested by CEA-CERC whereby the
    requirement that 50 percent of receivers with screen sizes 25-36"
    incorporate a DTV tuner in the period from July 1, 2005 to July 1,
    2006 would be eliminated and replaced with a new provision requiring
    that all receivers with screen sizes 25-36" be required to include a
    DTV tuner effective March 1, 2006. We also invited alternative
    approaches for addressing the market situation described in the
    CEA-CERC petition and indicated that we intend to consider the full
    range of options that are consistent with our stated goals. However,
    we also advised commenting parties that we do not intend to extend
    the July 1, 2007 date by which all broadcast television receivers
    include DTV reception capability. We received 22 comments and 7
    reply comments in response to the *Notice*.[^8]

# DISCUSSION

6.  DTV receivers are a necessary element of digital broadcast
    television service. Consumers must be equipped with the capability
    to receive digital TV signals for the transition to move forward to
    successful completion. As indicated above, the DTV tuner requirement
    is intended to provide DTV off-the-air reception capability to the
    general population on a schedule that will promote a rapid
    completion of the DTV transition while minimizing the potential for
    the costs of that capability to disrupt the television receiver
    market. At the time we adopted the DTV tuner requirement, the 50
    percent phase-in provisions of the DTV tuner requirement were
    intended as intermediate increases that would gradually apply the
    tuner requirement to greater proportions of receivers as
    manufacturers develop efficiencies in production, thus minimizing
    the impact of the tuner requirement on both manufacturers/importers
    and consumers.[^9] Our goal in this matter remains to maximize the
    number of TV receivers with DTV tuners on the market as quickly as
    possible.

## Comments

7.  Commenting parties representing the interests of consumer
    electronics manufacturers and retailers support revising the DTV
    tuner requirement for television receivers with screen sizes 25-36"
    in accordance with the approach requested in CEA-CERC's
    petition.[^10] These parties generally assert that their experience
    with the 50 percent requirement for large screen receivers was that
    this met with market responses by consumers and retailers that
    inhibited, rather than promoted, the rapid introduction of receivers
    equipped with DTV tuners. They argue that similar, and greater,
    disruptive responses will occur if the 50 percent requirement is
    allowed to go into effect for receivers in the popular mid-size
    25-36" range. In statements generally expressive of the views of
    those supporting CEA-CERC's request, Panasonic, Philips, and Sharp
    submit that the 50 percent requirement for large screen receivers
    pushed retailers and consumers to stock and purchase TV sets without
    a digital tuner for two reasons. First, they state that retailers
    recognized that the less expensive sets without digital tuners would
    become scarce and difficult to obtain under the 50 percent
    requirement. Second, they state that the majority of consumers
    concluded that less expensive models without a DTV tuner would meet
    their needs since they receive programming delivered by cable or
    satellite. Panasonic, Philips, and Sharp state that because
    retailers were not under a mandate regarding what they may sell and
    are engaged in a highly competitive market, they ordered sets
    without tuners because such sets were most in demand.

8.  Parties supporting CEA-CERC's request argue that the 50 percent
    provision of the implementation plan for DTV tuners presents a
    difficult situation for manufacturers to overcome, since they do not
    exercise control over retailers or the DTV market. They submit that
    given this scenario, only a 100 percent requirement can work to
    deploy DTV tuners in the popular mid-size receivers without
    disrupting the market and having a detrimental impact to the DTV
    transition timetable. They agree with CEA-CERC that eliminating the
    50 percent requirement and accelerating the 100 percent requirement
    for 25-36" receivers would better align the Commission's rules with
    market forces and consumer expectations.[^11] In this regard, Sharp
    states that eliminating the 50 percent step will allow television
    manufacturers to concentrate their manufacturing and marketing
    efforts on dual tuner sets and that no amount of labeling or point
    of purchase explanation will allow the message of the need for these
    sets to be delivered clearly in a 50 percent environment. Panasonic
    and Sharp state that generally consumer electronics manufacturers
    need 18 months to respond to technology mandates, but because they
    must already serve the market for dual tuner products they do not
    need additional time to meet the advanced 100 percent date of March
    1, 2006, proposed by CEA-CERC. Panasonic, Samsung and Sharp also
    submit that considering the various aspects of manufacturing,
    arranging for volume production, and timely delivery of products to
    retailers, advancing the date for 100 percent compliance of
    receivers in this size range any sooner than March 1, 2006 would not
    be realistic. Panasonic, Samsung, SANYO, SANYO Fisher, and Sony
    further state that we should not delay the July 1, 2007 date by
    which virtually all new broadcast TV receivers are required to have
    DTV tuners.

9.  By contrast, broadcasters, consumers, and public safety interests
    oppose CEA-CERC's request.[^12] In statements representative of
    parties opposing modification of the DTV tuner implementation plan
    for 25-36" receivers, MSTV/NAB and Disney argue that elimination of
    the 50 percent requirement scheduled to become effective for these
    receivers on July 1, 2005 would curtail consumers' access to and
    acceptance of digital TV receivers at a crucial point in the DTV
    transition. MSTV/NAB and Motorola state that while they do not
    disagree that phased implementation of a given size receiver may be
    inefficient, the number of sets that would become available to
    consumers while the 50 percent requirement is in effect would
    certainly be greater than if there were no mandate during that time.
    They state that broadcasters have invested millions of dollars per
    station to broadcast a digital signal but to a very limited number
    of over-the-air digital receivers,[^13] while consumer electronics
    manufacturers continue to sell approximately 20 million analog
    television receivers each year.[^14] MSTV/NAB also argue that the
    25-36" screen size receiver category is critical to achieving mass
    market DTV acceptance.[^15] They argue that eliminating the 50
    percent requirement as requested by CEA-CERC would essentially
    guarantee that DTV sets in the 25-36" size range do not reach
    consumers between July 1, 2005 and whatever date is set for the 100
    percent requirement. In their reply comments, MSTV/NAB further
    express concern that if the 50 percent requirement is eliminated,
    retailers will increase their orders for analog-only mid-size TV
    sets to have inventory for sale even after the deadline for 100
    percent of such sets to have a DTV tuner.

10. Chris Llana, MSTV/NAB, and Motorola argue that American consumers
    need access to DTV receivers if the DTV transition is to succeed.
    APTS is similarly concerned that consumers are being encouraged to
    buy DTV monitors that do not have tuners and that this violates the
    spirit and intent of the DTV tuner requirements. MSTV/NAB state that
    if DTV-capable sets are readily available, consumers will purchase
    such sets in the normal course of replacing their analog sets so
    that DTV penetration levels will naturally increase. MSTV/NAB argue
    that every analog set sold to a consumer necessarily decreases the
    likelihood that a given television market will soon reach the 85
    percent statutory threshold for ending the transition.[^16] Chris
    Llana makes that point that every analog TV set sold is a blow to
    the DTV transition. MSTV/NAB contend that delay in providing DTV
    equipped receivers to consumers is even less acceptable given that
    Congress the Executive Branch, and the Commission have all recently
    made statements that bringing the DTV transition to a successful
    conclusion is a high priority.[^17] Motorola submits that
    implementing the CEA-CERC proposal could delay the full availability
    of the 700 MHz spectrum occupied by channels 52-69 for public safety
    and commercial services. In reply comments, the National Public
    Safety Telecommunications Commission (NPSTC) states that given the
    importance of the 700 MHz spectrum for public safety and the already
    lengthy delay in the DTV transition, the Commission should take all
    actions possible to advance the DTV transition and availability of
    the 700 band public safety spectrum.

11. MSTV/NAB and NPSTC submit that the best solution would be for the
    Commission to make the 100 percent requirement effective July
    2005.[^18] MSTV/NAB, Disney, and Motorola state that if we decide to
    eliminate the 50 percent requirement, we should advance the 100
    percent requirement to coincide with the late 2005/early 2006
    holiday and Super Bowl selling seasons.[^19] MSTV/NAB note that the
    Commission has recognized that 40 percent of all television
    receivers are sold in the holiday shopping season and state that
    consumers looking to the 2005 holiday and Super Bowl selling season
    to purchase a TV set would be faced with the same analog sets now
    available and would not likely again purchase a new television in
    the next year or two, thus frustrating the transition.[^20] Motorola
    submits that if we determine that eliminating the 50 percent
    requirement for 25-36" sets is in the public interest, it recommends
    that instead of advancing the date by only four months to March 1,
    2006, we advance the benchmark eight months to November 1, 2005. It
    states that this approach would ensure that the penetration of DTV
    tuner equipped TV sets remains consistent with the Commission's
    original tuner implementation schedule. Motorola believes that
    moving the 100 percent compliance date to November 1, 2005 would be
    attainable by television manufacturers. It observes that
    manufacturers have been including DTV tuners since at least July
    1, 2004. Pappas recommends that we move forward the full compliance
    date for 25-36" sets to no later than December 1, 2005.
    Mariano-Florentino Cuellar requests that we consider poor Americans
    who cannot initially afford digital tuners and that we craft this
    regulation in a way that will make it gradually more affordable for
    poor Americans.

12. Chris Llana and Harris state that in considering this matter, we
    should note that retailers are the most important interface with
    consumers and thereby should have a unique obligation to ensure that
    consumers are aware of the DTV transition and the ramifications it
    will have on their choice of television receivers. They argue that
    retailers should do a better job of educating their staff to support
    the education of consumers about the DTV transition and that they
    should be required to showcase and distribute CEA literature on the
    DTV transition in key areas within stores.

13. Chris Llana, Motorola and Pappas also argue that the date for
    implementation of DTV tuners in all size TV receivers should be
    advanced. Chris Llana and Pappas state that the date for final
    implementation should be changed from July 1, 2007 to December 31,
    2006 to coincide with the statutory target date for the end of the
    transition and cessation of analog broadcasts.[^21] Pappas states
    that this change in the context of the current rulemaking would
    permit manufacturers to alter their production schedules far in
    advance of the amount of time that they prefer (18 months) and to
    more closely conform equipment sales schedules to the DTV
    construction schedules imposed on broadcasters. Motorola believes
    that we should move the date for requiring all TV sets 13" and
    larger to November 1, 2006, two months prior to the target
    transition end date. Motorola argues that allowing manufacturers to
    continue to sell non-DTV equipped sets of any size after December
    31, 2006 is contrary to the statutory framework. In its reply
    comments, NPSTC also supports advancing the date by which 100
    percent of such receivers must include DTV tuners to earlier than
    March 1, 2006, arguing that allowing TV sets without a DTV tuner to
    enter the market after the targeted conclusion of the DTV transition
    would be inconsistent with policies to speed that transition and
    recovery of 700 MHz spectrum.

14. In separate reply comments, CEA and CERC generally state that the
    supporters of their proposal accurately express current realities
    and that modifying the rules as recommended in their petition would
    be the appropriate solution to the marketplace disruption caused by
    the 50 percent requirement. CEA submits that the 50 percent rule
    does not work because manufacturers have no control over what
    television sets retailers will purchase and that retailers
    ultimately must respond to consumer demand. CEA and CERC also argue
    that it is incorrect to assume that in the absence of a 50 percent
    requirement the result will be no TV sets with DTV tuners will be
    available. CERC contends that this assumption ignores that fact that
    there is always some demand for dual tuner products and that
    manufacturers would meet that demand, but that it is just not 50
    percent of the market. CEA states that there is necessarily a
    substantial lead-in period during which manufacturers will be
    increasing the number of mid-size receivers that include DTV tuners.
    It states that with an accelerated 100 percent date of March 1,
    2006, this lead-in period naturally would include the holiday season
    about which broadcasters are concerned. In its reply comments, TTE
    similarly states that acceleration of the 100 percent requirement to
    March 1, 2006 will have a positive effect on January and February
    sales of sets equipped with DTV tuners, including the Super Bowl
    period as well as March, including "March Madness," because
    retailers will decrease their inventories of analog sets throughout
    the first quarter of 2006 in anticipation of the 100-percent
    requirement taking effect. In an *ex parte* statement subsequent to
    the comment period in this proceeding, CEA and CERC suggest that if
    the Commission determines not to accept the original CEA-CERC
    proposal, it instead accelerate to March 1, 2006 the date by which
    all mid-size television sets include digital tuners and delay the 50
    percent requirement by four months, to take effect on November 1,
    2005.[^22]

15. CEA, CERC, Panasonic and Philips contend that the proposals by
    several parties to accelerate the deadline to late 2005 are not
    feasible.[^23] They submit that television manufacturers would have
    only four months to comply with a November 1, 2005 deadline for
    including DTV tuners in all receivers and seventeen months to comply
    with a December 1, 2006 date. Panasonic and TTE state that it is a
    time-consuming and expensive process to establish specifications for
    each product, change manufacturing lines, secure orders from
    retailers, order parts consistent with manufacturing and shipping
    schedules, etc. TTE submits that these considerations make
    acceleration of the 100 percent requirement to before March 1, 2006
    impossible without threatening to cause television receiver
    shortages during the 2005 holiday shopping season.[^24] CEA, CERC,
    Panasonic, Philips and TTE therefore argue that at this late date,
    manufacturers cannot reasonably meet any further acceleration of the
    tuner mandate schedules. CEA and CERC further argue that the DTV
    tuner implementation schedule is already very aggressive. They
    express concern that any further acceleration of the tuner schedules
    could force some manufacturers to increase their production of
    tuner-less models and/or drop certain models altogether because of
    their inability to meet the deadlines. In this regard, they note
    that the DTV tuner requirement only applies to devices that have an
    analog tuner and that the reality is that most displays are now used
    to show video programming (via cable, DBS, games, PCs, the internet,
    etc) that does not involve the use of any broadcast tuner. In their
    reply comments, MSTV/NAB contend that manufacturer's reference to
    their 18-month production schedules is a false argument. They state
    that manufacturers should have already been preparing to include a
    DTV tuner in at least 50 percent of their mid-size sets by July 1,
    2005.

## 25-36" Receiver Decision

16. After review of the record in this proceeding, we conclude that
    while the partial production elements of our DTV tuner
    implementation plan may have caused some confusion in the market,
    that approach remains workable and will best serve to ensure that
    DTV tuner equipped receivers in the 25-36" mid-size range are
    available to consumers until the 100 percent DTV tuner requirement
    goes into effect. We also find that it is in the interests of
    consumer electronics manufacturers and retailers and consistent with
    our goals as stated above to advance the 100 compliance date for
    mid-size receivers from July 1, 2006 to March 1, 2006.

17. With regard to the 50 percent provision, we find that postponing
    application of the DTV tuner requirement to the 25-36" receivers
    until March 1, the earliest date on which manufacturers state that
    they can meet the 100 percent requirement, would unacceptably delay
    the general availability of DTV reception capability in these
    products. While eliminating the 50 percent requirement for mid-size
    receivers until the 100 percent compliance requirement becomes
    effective might be more convenient for manufacturers and retailers,
    such an approach would also delay the wider dissemination of DTV
    tuners in products of this size range. It remains our intent that
    the implementation schedule aim for the most rapid introduction of
    DTV reception capability in this size range and indeed all new
    television receivers. Postponing the requirement for inclusion of
    DTV tuners in mid-size TV sets would be inconsistent with our
    efforts to advance the DTV transition as rapidly as possible. Our
    intent is to stem the flow of analog-only products as soon as
    possible for, as Chris Llana aptly states, every analog-only TV set
    sold is a blow to the DTV transition.

18. Initiating the DTV tuner requirement for mid-size receivers on March
    1, 2006, the date that CEA-CERC and manufacturers submit is the
    earliest feasible time by which manufacturers could meet the 100
    percent compliance requirement, would undermine our goal of the most
    rapid introduction of DTV reception capability. As MSTV/NAB and
    others point out, the full eight months delay in which no mid-size
    TV sets would be required to include DTV tuners under that approach
    would miss the entire holiday and Super Bowl seasons this fall and
    next winter. Similarly, postponing the initiation of the 50 percent
    requirement until November 1, 2005 as suggested by CEA-CERC in their
    *ex parte* letter would miss the summer and most of the fall season
    and would also allow a large number of analog tuners to enter
    retailers' inventories for sale just before the holiday season.
    Moreover, as MSTV/NAB, Chris Llana and others note, consumers who
    purchase new receivers in the coming holiday and Super Bowl seasons
    would not likely return to the market again to purchase a new
    receiver for several years and so would be without a DTV tuner
    equipped device until they purchased a new set or until they
    obtained a separate set-top DTV tuner unit.

19. We recognize that there are DTV tuner-equipped mid-size TV receivers
    on the market now and that if we were to eliminate the 50 percent
    requirement in favor of a delayed 100 percent requirement there
    would still be DTV tuner equipped sets for consumers to acquire.
    Nonetheless, we expect that the quantity of DTV tuner equipped sets
    sold under that approach would be significantly lower than that
    under the 50 percent approach, given manufacturers' and retailers'
    description of the market. We also believe that it would further
    consumer awareness if manufacturers and retailers would provide
    point-of-sale and other marketing information to consumers and/or
    clearly label new television sets to indicate whether they can
    receive off-the-air DTV signals or only off-the-air analog
    signals.[^25] We believe that such efforts would result in more
    informed consumer choices about whether to buy DTV tuner equipped
    sets. We therefore encourage manufacturers and retailers to
    clearly label and identify the tuning capabilities of new TV sets
    and/or employ other means to disseminate to consumers information
    regarding whether or not specific models are able to receive
    off-the-air digital television signals.[^26]

20. With respect to the 100 percent compliance date, we conclude that it
    will ameliorate the concern of the consumer electronics
    manufacturers and retailers and further our goal of promoting DTV
    reception availability to advance the date on which 100 percent of
    25-36" receivers will be required to include a DTV tuner to March
    1, 2006. Manufacturers have indicated that they will be able to
    equip 100 percent of new mid-size TV sets with DTV tuners by this
    date and both manufacturers and retailers support changing the 100
    percent compliance date as a step to minimize the difficulties posed
    by the 50 percent requirement. We do not believe it would be
    feasible or practicable to advance the 100 percent requirement to a
    date earlier than that suggested by CEA-CERC. We recognize
    manufacturers' arguments that the lead time associated with
    development of new products, and particularly the time needed to
    establish specifications, change manufacturing lines, and order
    parts, would not allow the industry generally to meet a 100 percent
    compliance requirement before March 1, 2006. It makes little sense
    to require products to be on the market before the general
    population of manufacturers can deliver them. As many commenting
    parties observe, if manufacturers were not able to meet our
    deadline, they might cease production of mid-range sets or switch to
    monitor products that do not include TV tuners. Such a result would
    be disruptive to our goal of ensuring that consumers are able to
    receive DTV signals and could serve to delay the DTV transition.
    Accordingly, we are maintaining the provision of the current rules
    requiring that 50 percent of 25-36" television receivers include DTV
    tuners effective July 1, 2005 and advancing the date on which 100
    percent of such receivers must include DTV tuners to March 1, 2006.

## Further Notice of Proposed Rulemaking

21. Consistent with the need to promote a rapid end to the DTV
    transition, we now believe it would also be appropriate to advance
    the date on which all new television receiving equipment must
    include the capability to receive over-the-air broadcast DTV signals
    from July 1, 2007 to a date no later than December 31, 2006. This
    change would advance the date for all TV receivers to include a DTV
    tuner to a date not later than the statutory target date for the end
    of the transition.[^27] We specifically request suggestions for a
    date no later than December 31, 2006 that would be appropriate for
    requiring all new television receivers to include DTV reception
    capability. We believe that including DTV tuners in smaller screen
    and other traditionally low priced receiver products would not force
    substantial increases in the price of such products. The majority of
    all televisions are sets 25" and larger.[^28] We believe that the
    economies of scale needed to support reductions on the incremental
    price of DTV tuner equipped products will therefore be achieved in
    the introduction of DTV tuners in these mid-size and large screen
    products, which will occur more than a year earlier. We therefore
    believe that the price increases for small screen and other
    receivers will be more modest. In this regard, we observe that Zoran
    Corporation has indicated to the Commission in an *ex parte* contact
    that it has developed a reference board that includes a low-cost DTV
    receiver. It states that this board could be used to manufacture a
    set-top box that provides DTV reception at the standard definition
    display level to allow analog-only receivers to display DTV signals
    for about \$65. Zoran further states that the DTV tuning capability
    of this board could be incorporated into a TV receiver with display
    at this time for about a \$80-100 retail price increase and that
    this price would decrease dramatically with increasing volume.[^29]
    We request comment on this proposal and suggestions for alternative
    approaches for including DTV reception capability in all TV
    receiving devices on a schedule reflective of the statutory target
    date for the end of the DTV transition.[^30]

22. We also seek comment on whether the requirement to include a DTV
    tuner in new receivers should be extended to receivers with screen
    sizes less than 13" inches. We note that if such devices are to
    provide off-the-air reception of TV signals after the transition,
    they too must be able to receive DTV signals and that it is less
    likely that such products, and particularly handheld and similar
    portable devices, would be used with a separate device for receiving
    DTV signals.

23. In order to allow the Commission to conclude action in these
    proposals in a expeditious manner so as to afford manufacturers the
    maximum time to prepare to comply with new rules, we are limiting
    the comment and reply comment periods on these proposals to 21 days
    and 14 days respectively.

# procedural MATTERS

## Report and Order

24. *Accessibility Information*. Accessible formats of this Report and
    Order and Further Notice of Proposed Rulemaking (computer diskettes,
    large print, audio recording and Braille) are available to persons
    with disabilities by contacting Brian Millin, of the Consumer &
    Governmental Affairs Bureau, at (202) 418-7426, TTY (202) 418-7365,
    or at bmillin@fcc.gov.

25. *Paperwork Reduction Act of 1995 Analysis*. This Report and Order
    and Further Notice of Proposed Rulemaking contains no new or
    modified information collection(s) subject to the Paperwork
    Reduction Act of 1995 (PRA), Public Law 104-13.

26. *Final Regulatory Flexibility Analysis*. As required by the
    Regulatory Flexibility Act,[^31] the Commission has prepared a Final
    Regulatory Flexibility Analysis ("FRFA") relating to the Report and
    Order section of this action. The FRFA is set forth in Appendix D.

## Further Notice of Proposed Rulemaking

27. *Ex Parte Rules*. This is a permit-but-disclose notice and comment
    rulemaking proceeding. Ex parte presentations are permitted, except
    during the Sunshine Agenda period, provided that they are disclosed
    as provided in the Commission's Rules. *See generally* 47 C.F.R. §§
    1.1202, 1.1203, and 1.1206(a).

28. *Comment Information*. Pursuant to Sections 1.415 and 1.419 of the
    Commission\'s rules, 47 C.F.R. §§ 1.415, 1.419, interested parties
    may file comments on or before \[**21 days after publication in the
    Federal Register**\], and reply comments on or before \[**35 days
    after publication in the Federal Register**\]. Comments may be filed
    using the Commission\'s Electronic Comment Filing System (ECFS) or
    by filing paper copies. [See]{.underline} [Electronic Filing of
    Documents in Rulemaking Proceedings]{.underline}, 63 Fed. Reg. 24121
    (1998). Accessible formats (computer diskettes, large print, audio
    recording and Braille) are available to persons with disabilities by
    contacting the Consumer & Governmental Affairs Bureau, at
    (202)418-7426, TTY (202) 418-7365.

29. Comments filed through the ECFS can be sent as an electronic file
    via the Internet to \<http://www.fcc.gov/e-file/ecfs.html\>.
    Generally, only one copy of an electronic submission must be filed.
    If multiple docket or rulemaking numbers are referenced in the
    caption of the comments, however, commenters must transmit one
    electronic copy of the comments to each docket or rulemaking number
    referenced in the caption. In completing the transmittal screen,
    commenters should include their full name, U.S. Postal Service
    mailing address, and the applicable docket or rulemaking number.
    Parties may also submit an electronic comment by Internet e-mail. To
    get filing instructions for e-mail comments, commenters should send
    an e-mail to ecfs@fcc.gov, and should include the following words in
    the body of the message, \"get form \<your e-mail address\>.\" A
    sample form and directions will be sent in reply. Parties who choose
    to file by paper must file an original and four copies of each
    filing. If more than one docket or rulemaking number appear in the
    caption of the comment, commenters must submit two additional copies
    for each additional docket or rulemaking number. Filings can be sent
    by hand or messenger delivery, by commercial overnight courier, or
    by first-class or overnight U.S. Postal Service mail (although we
    continue to experience delays in receiving U.S. Postal Service
    mail). The Commission\'s contractor, Vistronix, Inc., will receive
    hand-delivered or messenger-delivered paper filings for the
    Commission\'s Secretary at 236 Massachusetts Avenue, N.E., Suite
    110, Washington, D.C. 20002. The filing hours at this location are
    8:00 a.m. to 7:00 p.m. All hand deliveries must be held together
    with rubber bands or fasteners. Any envelopes must be disposed of
    before entering the building. Commercial overnight mail (other than
    U.S. Postal Service Express Mail and Priority Mail) must be sent to
    9300 East Hampton Drive, Capitol Heights, MD 20743. U.S. Postal
    Service first-class mail, Express Mail, and Priority Mail should be
    addressed to 445 12th Street, SW, Washington, D.C. 20554. All
    filings must be addressed to the Commission\'s Secretary, Office of
    the Secretary, Federal Communications Commission.

30. *Initial Paperwork Reduction Act Analysis*. This document contains
    no proposed new or modified information collection requirements.

31. *Regulatory Flexibility Act*. As required by the Regulatory
    Flexibility Act,[^32] the Commission has prepared an Initial
    Regulatory Flexibility Analysis (IRFA) of the possible significant
    economic impact on a substantial number of small entities of the
    proposals addressed in this Report and Order and Further Notice of
    Proposed Rulemaking. The IRFA is set forth in Appendix E. Written
    public comments are requested on the IRFA. These comments must be
    filed in accordance with the same filing deadlines for comments on
    the Notice portion of this action, and they should have a separate
    and distinct heading designating them as responses to the IRFA.

32. *Additional Information*. For additional information on this
    proceeding, please contact Alan Stillwell, Office of Engineering and
    Technology at (202) 418-2925.

# ordering CLAUSES

33. Accordingly, **IT IS ORDERED** that, pursuant to the authority
    contained in Sections 2(a), 4(i) & (j), 7, 151 and 303 of the
    Communications Act of 1934 as amended, 47 U.S.C. §§ 152(a), 154(i) &
    (j), 151, 157, and 303, this Report and Order and Further Notice of
    Proposed Rulemaking **IS ADOPTED** and the Commission's rules **ARE
    HEREBY AMENDED** as set forth in Appendix B*,* and shall become
    effective 30 days after publication in the Federal Register. In
    addition, **IT IS PROPOSED** that the Commission's rules **BE
    AMENDED** as set forth in Appendix C.

34. **IT IS FURTHER ORDERED** that the Petition for Rulemaking submitted
    by the Consumer Electronics Association and the Consumer Electronics
    Retailers Association in this matter on November 5, 2004 **IS
    DENIED** in part and **IS GRANTED** in part as indicated herein.

35. **IT IS FURTHER ORDERED** that the Commission's Consumer and
    Governmental Affairs Bureau, Reference Information Center, **SHALL
    SEND** a copy of this Report and Order and Further Notice of
    Proposed Rulemaking, including the Initial Regulatory Flexibility
    Analysis, to the Chief Counsel for Advocacy of the Small Business
    Administration. [^33]

36. **IT IS FURTHER ORDERED** that the Commission **SHALL SEND** a copy
    of this Report and Order and Further Notice of Proposed Rulemaking
    in a report to be sent to Congress and the General Accounting Office
    pursuant to the Congressional Review Act, *see* 5 U.S.C. §
    801(a)(1)(A).

    FEDERAL COMMUNICATIONS COMMISSION

    Marlene H. Dortch

    Secretary

    **APPENDIX A**

    **PARTIES SUBMITTING COMMENTS AND/OR REPLY COMMENTS**

    [Parties Submitting Comments]{.underline}

    1\. Joint Comments of the Association for Maximum Service Television
    and the National Association of Broadcasters

    2 Association of Public Television Stations

    3\. Best Buy Co., Inc.

    4\. Circuit City Stores, Inc.

    5\. Mariano-Florentino Cuellar

    6\. Dell, Inc. (*ex parte submission*)

    7\. Harris Corporation

    8\. Hewlett Packard Company

    9\. Chris Llana

    10\. Motorola. Inc.

    11\. Panasonic Corporation of North America

    12\. Pappas Telecasting, Inc.

    13\. Philips North America Corporation

    14\. RadioShack Corporation

    15\. Samsung Electronics Corporation

    16\. Sanyo Manufacturing Corporation

    17\. Sanyo Fisher Company

    18\. Sharp Electronics Corporation

    19\. Sony Electronics, Inc.

    20\. TTE Corporation (*ex parte*)

    21\. Wal-Mart Stores, Inc.

    22\. The Walt Disney Company

    [Parties Submitting Reply Comments]{.underline}

    1\. Joint Reply Comments of the Association for Maximum Service
    Television and the National Association of Broadcasters

    2\. Chris Llana

    3\. Dell, Inc. (*ex parte*)

    2\. The Consumer Electronics Association

    3\. The Consumer Electronics Retailers Coalition

    4\. The National Public Safety Telecommunications Commission

    5\. Panasonic Corporation of North America

    6\. Philips Electronics North America Corporation

    7\. TTT Corporation

    **APPENDIX B**

    **AMENDMENTS TO THE COMMISSION'S RULES**

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

    1\. The authority citation for Part 15 continues to read as follows:

    Authority: 47 U.S.C. 154, 303, 303, 304, 307, and 554A.

    2\. Section 15.117 of the rules is amended by revising paragraph
    (i)(1) to read as follows:

    § 15.117 TV broadcast receivers.

    \* \* \* \* \*

    \(i\) Digital television reception capability implementation
    schedule. (1) Responsible parties, as defined in Section 2.909 of
    this chapter, are required to equip new TV broadcast receivers that
    are shipped in interstate commerce or imported from any foreign
    country into the United States and for which they are responsible to
    comply with the provisions of this section in accordance with the
    following schedule:

-   Receivers with screen sizes 36" and above- 50% of all of a
    responsible party's units must include DTV tuners effective July 1,
    2004; 100% of such units must include DTV tuners effective July 1,
    2005

-   Receivers with screen sizes 25" to less than 36"- 50% of all of a
    responsible party's units must include DTV tuners effective July 1,
    2005; 100% of such units must include DTV tuners effective March 1,
    2006

-   Receivers with screen sizes 13" to less than 25"- 100% of all such
    units must include DTV tuners effective July 1, 2007

-   Other devices (videocassette recorders (VCRs), digital video disk
    and digital versatile disk (DVD) players/recorders, etc.) that
    receive television signals- 100% of all such units must include DTV
    tuners effective July 1, 2007.

    \* \* \* \* \*

    **APPENDIX C**

    **PROPOSED AMENDMENTS TO THE COMMISSION'S RULES**

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

    1\. The authority citation for Part 15 would continue to read as
    follows:

    Authority: 47 U.S.C. 154, 303, 303, 304, 307, and 554A.

    2\. Section 15.117 of the rules would be amended by revising
    paragraph (i)(1) to read as follows:

    § 15.117 TV broadcast receivers.

    \* \* \* \* \*

    \(i\) Digital television reception capability implementation
    schedule. (1) Responsible parties, as defined in Section 2.909 of
    this chapter, are required to equip new TV broadcast receivers that
    are shipped in interstate commerce or imported from any foreign
    country into the United States and for which they are responsible to
    comply with the provisions of this section in accordance with the
    following schedule:

-   Receivers with screen sizes 36" and above- 50% of all of a
    responsible party's units must include DTV tuners effective July 1,
    2004; 100% of such units must include DTV tuners effective July 1,
    2005

-   Receivers with screen sizes 25" to less than 36"- 50% of all of a
    responsible party's units must include DTV tuners effective July 1,
    2005; 100% of such units must include DTV tuners effective March 1,
    2006

-   Receivers with screen sizes 13" to less than 25"- 100% of all such
    units must include DTV tuners effective December 31, 2006

-   Other devices (videocassette recorders (VCRs), digital video disk
    and digital versatile disk (DVD) players/recorders, etc.) that
    receive television signals- 100% of all such units must include DTV
    tuners effective December 31, 2006.

    \* \* \* \* \*

    **APPENDIX D**

    **FINAL REGULATORY FLEXIBILITY ANALYSIS**

A.  As required by the Regulatory Flexibility Act of 1980, as amended
    ("RFA"),[^34] an Initial Regulatory Flexibility Analysis (IRFA) was
    incorporated into the *Notice of Proposed Rulemaking* in ET Docket
    No. 05-24 (*Notice*). The Commission sought written public comment
    on the proposals on the *Notice* concerning modification of the plan
    for applying the DTV tuner requirement to TV receivers with screen
    sizes 25-36", including comment on the IRFA. This Final Regulatory
    Flexibility Analysis (FRFA) conforms to the RFA.[^35]

B.  **Need for and Objectives of the Proposed Rules.** As described in
    the *Notice*, the changes to the rules considered in this proceeding
    are intended to ensure a smooth transition of the nation\'s
    television system to digital television. Beginning in 1987, the
    Commission undertook to bring the most up-to-date technology to
    broadcast television.[^36] That effort resulted in several
    Commission decisions, including those adopting a digital television
    (DTV) standard,[^37] DTV service rules,[^38] and a Table of DTV
    Allotments.[^39] The Table of DTV Allotments provides each existing
    television broadcaster with a second channel on which to operate a
    DTV station for a transition period in which stations will operate
    both analog and digital TV service, after which analog service will
    cease and one of each station's two channels will revert to the
    government for use in other services. The transition deadline
    established by Congress is December 31, 2006.

    Consistent with its efforts to promote the expeditious completion of
    the DTV transition, the Commission adopted a requirement that all
    new television receivers imported or shipped in interstate commerce
    after July 1, 2007 include the capability to receive DTV signals
    off-the-air. In order to minimize the impact of the DTV tuner
    requirement on both manufacturers and consumers, the Commission
    adopted a phase-in schedule that applies the DTV tuner requirement
    first to receivers with the screens and then to progressively
    smaller screen receivers and other TV receiving devices. The
    Consumer Electronics Association and the Consumer Electronics
    Retailers Coalition (CEA-CERC) submitted a petition for rule making
    requesting that the Commission eliminate the portion of the phase-in
    schedule requiring that 50 percent of TV receivers with screen sizes
    25-36" include DTV reception capability from July 1, 2005 to July 1,
    2006 and instead advance the date for requiring all such receivers
    to include a DTV tuner to March 1, 2006 from July 1, 2006. CEA-CERC
    argued that the 50 percent requirement has proven to be disruptive
    to the market in the case of larger screen receivers. We are issuing
    this Report and Order to modify the portion of the DTV tuner
    requirement phase-in plan that applies to receivers with screen
    sizes 24" to 36". Specifically, we are amending the rules to advance
    the date on which all 24-36" receivers must include a DTV tuner to
    March 1, 2006 from the current date of July 1, 2006. Maintaining the
    50 percent requirement for the period from July 1, 2005 to February
    28, 2005 and advancing the 100 percent compliance date for mid-size
    receivers to March 1, 2006 will ameliorate the concerns of the
    consumer electronics manufacturers and retailers with respect to the
    50 percent approach and further our goal of promoting DTV reception
    availability.

C.  **Summary of Significant Issues Raised by Public Comments in
    Response to the IRFA:** No comments were filed in response to the
    IRFA.

D.  **Description and Estimate of the Number of Small Entities to Which
    the Proposed Rules Will Apply.** The RFA directs the Commission to
    provide a description of and, where feasible, an estimate of the
    number of small entities that will be affected by the proposed
    rules.[^40] The RFA generally defines the term "small entity" as
    having the same meaning as the terms "small business," "small
    organization," and "small governmental entity."^.^[^41] In addition,
    the term "small business" has the same meaning as the term "small
    business concern" under the Small Business Act.[^42] 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").[^43]

    **Electronics Equipment Manufacturers.** Rules adopted in this
    proceeding will apply to manufacturers of DTV receiving equipment
    and other types of consumer electronics equipment. The SBA has
    developed definitions of small entity for manufacturers of audio and
    video equipment[^44] as well as radio and television broadcasting
    and wireless communications equipment.[^45] These categories both
    include all such companies employing 750 or fewer employees. The
    Commission has not developed a definition of small entities
    applicable to manufacturers of electronic equipment used by
    consumers, as compared to industrial use by television licensees and
    related businesses. Therefore, we will utilize the SBA definitions
    applicable to manufacturers of audio and visual equipment and radio
    and television broadcasting and wireless communications equipment,
    since these are the two closest NAICS Codes applicable to the
    consumer electronics equipment manufacturing industry. However,
    these NAICS categories are broad and specific figures are not
    available as to how many of these establishments manufacture
    consumer equipment. According to the SBA's regulations, an audio and
    visual equipment manufacturer must have 750 or fewer employees in
    order to qualify as a small business concern.[^46] Census Bureau
    data indicates that there are 554 U.S. establishments that
    manufacture audio and visual equipment, and that 542 of these
    establishments have fewer than 500 employees and would be classified
    as small entities.[^47] The remaining 12 establishments have 500 or
    more employees; however, we are unable to determine how many of
    those have fewer than 750 employees and therefore, also qualify as
    small entities under the SBA definition. Under the SBA's
    regulations, a radio and television broadcasting and wireless
    communications equipment manufacturer must also have 750 or fewer
    employees in order to qualify as a small business concern.[^48]
    Census Bureau data indicates that there 1,215 U.S. establishments
    that manufacture radio and television broadcasting and wireless
    communications equipment, and that 1,150 of these establishments
    have fewer than 500 employees and would be classified as small
    entities.[^49] The remaining 65 establishments have 500 or more
    employees; however, we are unable to determine how many of those
    have fewer than 750 employees and therefore, also qualify as small
    entities under the SBA definition. We therefore conclude that there
    are no more than 542 small manufacturers of audio and visual
    electronics equipment and no more than 1,150 small manufacturers of
    radio and television broadcasting and wireless communications
    equipment for consumer/household use.

    **Computer Manufacturers**. The Commission has not developed a
    definition of small entities applicable to computer manufacturers.
    Therefore, we will utilize the SBA definition of electronic
    computers manufacturing. According to SBA regulations, a computer
    manufacturer must have 1,000 or fewer employees in order to qualify
    as a small entity.[^50] Census Bureau data indicates that there are
    563 firms that manufacture electronic computers and of those, 544
    have fewer than 1,000 employees and qualify as small entities.[^51]
    The remaining 19 firms have 1,000 or more employees. We conclude
    that there are approximately 544 small computer manufacturers.

E.  **Description of Projected Reporting, Recordkeeping and other
    Compliance Requirements.** The rule changes adopted in the Report
    and Order impose no additional recordkeeping or recordkeeping
    requirements on manufacturers of television receiving equipment,
    large or small. While the modifications adopted therein may have a
    small impact on consumer electronics manufacturers, any such impact
    would be similar for both large and small entities.

F.  **Steps Taken to Minimize Significant Impact on Small Entities, and
    Significant Alternatives Considered.** The RFA requires an agency to
    describe any significant alternatives that it has considered in
    reaching its proposed approach, which may include the following four
    alternatives (among others): (1) the establishment of differing
    compliance or reporting requirements or timetables that take into
    account the resources available to small entities; (2) the
    clarification, consolidation, or simplification of compliance or
    reporting requirements under the rule for small entities; (3) the
    use of performance, rather than design, standards; and (4) an
    exemption from coverage of the rule, or any part thereof, for small
    entities.[^52]

    The modification of the provisions for implementing the DTV tuner
    requirement in TV receivers with screen sizes in the 25-36" mid-size
    range set forth herein are intended to ameliorate certain market
    difficulties described by consumer electronics manufacturers and
    consumer electronics products retailers and to expedite the
    availability of DTV tuners in new mid-size television receivers that
    are offered to consumers. The revisions adopted preserve the
    requirement for DTV tuners in 50 percent of the new mid-size range
    of receivers for the period July 1, 2005 to February 28, 2005 in
    order to ensure that such receivers are available as soon as
    possible and particularly during the 2005 holiday season and 2006
    Super Bowl season. The consumer electronics has indicated that it
    prefers the 100 percent requirement to become effective on March 1,
    2006 rather than the original July 1, 2006 date. Advancing the date
    for 100 percent compliance by mid-size receivers will ameliorate the
    challenges of the 50 percent provision for manufacturers and
    retailers and will also serve to promote the availability of DTV
    tuner equipped TV sets to consumers.

    Other approaches considered included various suggestions by
    broadcasters and others to advance the deadline for DTV tuners in
    25-36" sets to dates between November 1, 2005 and January 1, 2005.
    We rejected the options to advance the 100 percent requirement to a
    date earlier than March 1, 2006 on the basis that the 5 to 6 month
    lead-times available to manufacturers under those scenarios would be
    too short for manufacturers to meet with new products, especially
    given the lead-times associated with obtaining parts and components
    from suppliers. Extending the deadline beyond March 1, 2006 would be
    inconsistent with the need to expedite the DTV transition.

    **F. Federal Rules Which Duplicate, Overlap, or Conflict with the
    Commission's Proposals.** None.

    **APPENDIX E**

    **INITIAL REGULATORY FLEXIBILITY ANALYSIS**

    As required by the Regulatory Flexibility Act of 1980, as amended
    (RFA),[^53] the Commission has prepared this Initial Regulatory
    Flexibility Analysis (IRFA) of the possible significant economic
    impact on small entities by the policies and rules proposed in the
    Further Notice of Proposed Rulemaking (Notice) portion of this
    action.[^54] 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 Notice provided above in
    paragraph 11. The Commission will send a copy of the Notice,
    including this IRFA, to the Chief Counsel for Advocacy of the Small
    Business Administration.[^55] In addition, the Notice and IRFA (or
    summaries thereof) will be published in the Federal Register.[^56]

```{=html}
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A.  **Need for and Objectives of the Proposed Rules.** As described in
    the Notice, the changes to the rules being considered in this
    proceeding are intended to ensure a smooth transition of the
    nation\'s television system to digital television. Beginning in
    1987, the Commission undertook to bring the most up-to-date
    technology to broadcast television.[^57] That resulted in several
    Commission decisions, including those adopting a digital television
    (DTV) standard,[^58] DTV service rules,[^59] and a Table of DTV
    Allotments.[^60] The Table of DTV Allotments provides each existing
    television broadcaster with a second channel on which to operate a
    DTV station for the transition period, after which one of its
    channels will revert to the government for use in other services.
    The transition deadline established by Congress is December 31,
    2006.

    Consistent with its efforts to promote the expeditious completion of
    the DTV transition, the Commission adopted a requirement that all
    new television receivers imported or shipped in interstate commerce
    after July 1, 2007 include the capability to receive DTV signals
    off-the-air. In order to minimize the impact of the DTV tuner
    requirement on both manufacturers and consumers, the Commission
    adopted a phase-in schedule that applies the DTV tuner requirement
    first to receivers with the screens and then to progressively
    smaller screen receivers and other TV receiving devices. Consistent
    with the need to promote a rapid end to the DTV transition, we now
    believe it would also be appropriate to advance the date on which
    all new television receiving equipment must include the capability
    to receive over-the-air broadcast DTV signals from July 1, 2007 to
    December 31, 2006. This change would move the date for all TV
    receivers to include a DTV tuner forward six months to coincide with
    the statutory end of the transition and also provide adequate time
    for manufacturers to modify their products to include DTV tuners in
    all new television sets.[^61]

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

C.  **Description and Estimate of the Number of Small Entities to Which
    the Proposed Rules Will Apply.** The RFA directs the Commission to
    provide a description of and, where feasible, an estimate of the
    number of small entities that will be affected by the proposed
    rules.[^62] The RFA generally defines the term "small entity" as
    having the same meaning as the terms "small business," "small
    organization," and "small governmental entity."^.^[^63] In addition,
    the term "small business" has the same meaning as the term "small
    business concern" under the Small Business Act.[^64] 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").[^65]

    **Electronics Equipment Manufacturers.** Rules adopted in this
    proceeding would apply to manufacturers of DTV receiving equipment
    and other types of consumer electronics equipment. The SBA has
    developed definitions of small entity for manufacturers of audio and
    video equipment[^66] as well as radio and television broadcasting
    and wireless communications equipment.[^67] These categories both
    include all such companies employing 750 or fewer employees. The
    Commission has not developed a definition of small entities
    applicable to manufacturers of electronic equipment used by
    consumers, as compared to industrial use by television licensees and
    related businesses. Therefore, we will utilize the SBA definitions
    applicable to manufacturers of audio and visual equipment and radio
    and television broadcasting and wireless communications equipment,
    since these are the two closest NAICS Codes applicable to the
    consumer electronics equipment manufacturing industry. However,
    these NAICS categories are broad and specific figures are not
    available as to how many of these establishments manufacture
    consumer equipment. According to the SBA's regulations, an audio and
    visual equipment manufacturer must have 750 or fewer employees in
    order to qualify as a small business concern.[^68] Census Bureau
    data indicates that there are 554 U.S. establishments that
    manufacture audio and visual equipment, and that 542 of these
    establishments have fewer than 500 employees and would be classified
    as small entities.[^69] The remaining 12 establishments have 500 or
    more employees; however, we are unable to determine how many of
    those have fewer than 750 employees and therefore, also qualify as
    small entities under the SBA definition. Under the SBA's
    regulations, a radio and television broadcasting and wireless
    communications equipment manufacturer must also have 750 or fewer
    employees in order to qualify as a small business concern.[^70]
    Census Bureau data indicates that there 1,215 U.S. establishments
    that manufacture radio and television broadcasting and wireless
    communications equipment, and that 1,150 of these establishments
    have fewer than 500 employees and would be classified as small
    entities.[^71] The remaining 65 establishments have 500 or more
    employees; however, we are unable to determine how many of those
    have fewer than 750 employees and therefore, also qualify as small
    entities under the SBA definition. We therefore conclude that there
    are no more than 542 small manufacturers of audio and visual
    electronics equipment and no more than 1,150 small manufacturers of
    radio and television broadcasting and wireless communications
    equipment for consumer/household use.

    **Computer Manufacturers**. The Commission has not developed a
    definition of small entities applicable to computer manufacturers.
    Therefore, we will utilize the SBA definition of electronic
    computers manufacturing. According to SBA regulations, a computer
    manufacturer must have 1,000 or fewer employees in order to qualify
    as a small entity.[^72] Census Bureau data indicates that there are
    563 firms that manufacture electronic computers and of those, 544
    have fewer than 1,000 employees and qualify as small entities.[^73]
    The remaining 19 firms have 1,000 or more employees. We conclude
    that there are approximately 544 small computer manufacturers.

D.  **Description of Projected Reporting, Recordkeeping and other
    Compliance Requirements.** At this time, we do not expect that the
    rule changes being considered in this proceeding would impose any
    additional recordkeeping or recordkeeping requirements. While the
    modifications being considered in the Notice could have an impact on
    consumer electronics manufacturers and broadcasters, we anticipate
    at this time that such impact would be similarly costly for both
    large and small entities. We seek comment on whether others perceive
    a need for recordkeeping under specific options for addressing the
    issues in this Notice and, if so, whether the burden would fall on
    large and small entities differently.

E.  **Steps Taken to Minimize Significant Impact on Small Entities, and
    Significant Alternatives Considered.** The RFA requires an agency to
    describe any significant alternatives that it has considered in
    reaching its proposed approach, which may include the following four
    alternatives (among others): (1) the establishment of differing
    compliance or reporting requirements or timetables that take into
    account the resources available to small entities; (2) the
    clarification, consolidation, or simplification of compliance or
    reporting requirements under the rule for small entities; (3) the
    use of performance, rather than design, standards; and (4) an
    exemption from coverage of the rule, or any part thereof, for small
    entities.[^74]

    The rule changes under consideration in this proceeding propose a
    revision in the schedule for implementation of the requirement that
    new television receivers include the capability for reception of
    broadcast DTV signals. We requested comment on a proposal that would
    advance to December 31, 2006 (from the current July 1, 2007) the
    date by which all television receivers with screen sizes 13" and
    larger that are imported into the United States or shipped in
    interstate commerce must include the capability to receive
    over-the-air DTV broadcast signals. Because of our concern for
    advancing the full compliance date in a manner that would pose no
    unnecessary economic burden on smaller entities, we invited
    interested parties to submit alternative suggestions for revising
    and suggestions for alternative approaches for including DTV
    reception capability in all TV receivers on a schedule to coincide
    with statutory end of the DTV transition. We also invited comment on
    whether we should also extend the DTV tuner requirement to TV
    receivers with screen sizes less than 13".

    **F. Federal Rules Which Duplicate, Overlap, or Conflict with the
    Commission's Proposals.** None.

STATEMENT OF\
COMMISSIONER KATHLEEN Q. ABERNATHY

> *Re: Requirements for Digital Television Receiving Capability, Report
> and Order and Further Notice of Proposed Rulemaking, ET Docket No.
> 05-24*

Congress's decision to mandate the digital television transition
requires the Commission to take an unusually direct role in overseeing
the manufacturing and sale of television receivers. Having embarked on
this important transition ― which will deliver high-value broadcasting
services to consumers, enable exciting new broadband applications to be
developed, and provide more spectrum for public safety uses ― we cannot
take any steps backward. Rather, we need to push the transition to its
conclusion as expeditiously as possible.

I am therefore pleased that this Order declines to delay the date by
which manufacturers must incorporate digital tuners in television sets
with screen sizes of 25-36 inches. While I am sympathetic to the claims
that requiring only 50% compliance will cause some unanticipated
problems in the marketplace, the proposed delay simply would exact too
great a cost on the overall progress of the DTV transition. Yet I
applaud the Consumer Electronics Association and Consumer Electronics
Retailers Association for ultimately recognizing the independent value
of accelerating the end point of this transition, independent of the
delay they sought on the front end. With these stakeholders' support,
this Order makes important progress by ensuring that all sets in the
relevant size range will have digital tuners by March 2006, rather than
the original deadline of July 2006.

I also support the issuance of a further notice seeking comment on the
acceleration of the remaining phases of the tuner mandate. By
establishing a record on such changes, the Commission will be better
equipped to work with Congress on the rapid completion of the DTV
transition and the many consumer benefits it entails.

**STATEMENT OF**

**COMMISSIONER MICHAEL J. COPPS**

*Re: Requirements for Digital Television Receiving Capability, Report
and Order and Further Notice of Proposed Rulemaking, ET Docket No.
05-24*

Today's order makes clear that this Commission is committed to moving
the digital transition forward. Each time a consumer purchases a set
with a digital tuner, we move one step closer towards accomplishing the
transition.

I am pleased that this order highlights the importance of manufacturers
and retailers providing needed consumer information to buyers before
they become owners of sets. We will only succeed in accelerating the
digital transition when we---government and industry both---confront
head-on the significant consumer confusion that exists in this area. For
our part, I know the Chairman and my colleagues are all committed to
continuing and expanding our consumer education and outreach efforts as
the transition proceeds.

The bottom line is to ensure that the DTV transition remains on track. I
believe this order is a good step in the right direction.

[^1]: *See* 47 C.F.R. §§ 15.117(a), (h), and (i).

[^2]: DTV reception capability involves more circuitry than just a
    tuner. To provide this capability requires a tuner to receive the
    digital signal, an MPEG decoder/formatter, and associated processing
    capability and memory.

[^3]: *See* Petition for Rulemaking filed by the Consumer Electronics
    Association and the Consumer Electronics Retailers Association on
    November 5, 2004.

[^4]: *See* S*econd Report and Order and Second Memorandum Opinion and
    Order* in MM Docket No. 00-39, 17 FCC Rcd 15978 (2002) at ¶¶ 8-46.

[^5]: *See* *DTV Review Second Report and Order*, at ¶ 40. For purposes
    of these rules, TV broadcast receivers also include other devices
    such as TV interface devices that do not include a viewing screen,
    *e.g.*, devices that are intended to provide audio-video signals to
    a video monitor with an antenna or antenna terminals that can be
    used for off-the-air TV reception. However, in the case of receivers
    that have display capabilities, the DTV tuner requirement applies
    only to units that have screen sizes 13" or larger.

[^6]: *Id*. at ¶ 44.

[^7]: *See* *Notice of Proposed Rulemaking* in ET Docket No. 05-24, FCC
    05-17, released February 14, 2005.

[^8]: A list of the parties filing comments and reply comments is
    provided in Appendix A.

[^9]: *See* *DTV Review Second Report and Order*, at ¶ 41.

[^10]: Consumer electronics manufacturers and retailers that support
    CEA-CERC's proposal in this matter include Best Buy Co., Inc.,
    Circuit City Stores, Inc., Dell, Inc., Hewlett-Packard Company,
    Panasonic Corporation of North America (Panasonic), Philips
    Electronics North America Corporation (Philips), RadioShack
    Corporation, Samsung Electronics Corporation (Samsung), SANYO
    Manufacturing Company (SANYO), SANYO Fisher Company (SANYO Fisher),
    Sharp Electronics Company (Sharp), Sony Electronics, Inc. (Sony),
    TTE Corporation (manufacturer of RCA television products), and
    Wal-Mart Stores. Harris Corporation, a manufacturer of broadcast
    station transmission equipment, also supports the CEA-CERC request.

[^11]: Philips states that it has plans to phase-out analog tuner-only
    sets in the 25-36" range during the coming fall and winter and to
    eliminate completely its analog-only tuner line in these sizes by
    March 1, 2006 if we adopt CEA-CERC's proposal.

[^12]: Those opposing elimination of the 50 percent requirement include:
    the Association for Maximum Service Television and the National
    Association of Broadcasters, in joint comments (MSTV/NAB),
    Association of Public Television Stations (APTS), Mariano-Florentine
    Cuellar, Chris Llana, Motorola, Inc., Pappas Telecasting Companies
    (Pappas), and the Walt Disney Company (Disney).

[^13]: MSTV/NAB observe that the Commission recently reported that 1,497
    of the 1,697 U.S. television stations with a DTV construction permit
    or license are broadcasting a digital signal with the result that
    off-the-air DTV service is available in virtually every corner of
    the country. They cite the Commission's report "Summary of DTV
    Applications Filed and DTV Build Out Status, April 7, 2005," which
    is available at [http://www.fcc.gov/mb/video/
    files/dtvsum.html](http://www.fcc.gov/mb/video/ files/dtvsum.html)
    (April 12, 2005).

[^14]: MSTV/NAB cite the Commission's report "Media Bureau Staff Report
    Concerning Over-the-Air Broadcast Television Viewers," MB Docket No.
    04-210, at para. 21.

[^15]: MSTV/NAB note CEA's comments in MB Docket No. 00-39 stating that
    in 1999, of TV sets with screen sizes larger than 20", over 90
    percent had displays 25, 26, or 27" (CEA's comments in MB Docket No.
    00-39 (filed April 6, 2001), at 10, n.15). They further observe that
    a 2004 study by Knowledge Networks/SRI found that in 54 percent of
    U.S. homes, the largest TV set is between 25-35" (Knowledge
    Networks/SRI's "Home Technology Monitor, 2004 Ownership Survey,"
    (Spring 2004)).

[^16]: *See* 47 U.S.C. § 309(j)(14)(B)(iii).

[^17]: MSTV/NAB note for example, that Congressman Barton has stated his
    intention to ask the Commission to accelerate the deadline for final
    implementation of the DTV tuner mandate to July 1, 2006, rather than
    July 1, 2007, as currently scheduled, *see* "Barton Wants to Move Up
    the DTV Tuner Deadlines," Communications Daily, April 13, 2005.

[^18]: MSTV/NAB observe that the innovations of some manufacturers have
    achieved production efficiencies ahead of the schedule in the rules
    and point out that RCA has announced a 27" set, to be available this
    summer, that will sell for less than \$300.

[^19]: NPSTC urges that we maintain the 50 percent requirement for
    25-36" receivers effective July 1, 2005 and also advance the date
    for the 100 requirement for these receivers to earlier than March 1,
    2006.

[^20]: *See Fifth Report and* Order in MM Docket No. 87-268, 12 FCC Rcd
    12809, 12841 (1997).

[^21]: In his reply comments, Llana states that he now believes that the
    100 percent requirement should apply to all TV receivers on November
    1, 2006.

[^22]: *See* Letter from Julie Kearney (Consumer Electronics
    Association) affirming *ex parte* meeting of Gary Shapiro (President
    and CEO of the Consumer Electronics Association), Mike Vitelli
    (Senior Vice President, Best Buy), Robert Schwartz (McDermott Will &
    Emory and counsel to the Consumer Electronics Retailers
    Association), and Steve Cannon (Constantine Cannon and counsel to
    Circuit City) with FCC Chairman Kevin Martin and Catherine Bohigian,
    June 2, 2005.

[^23]: CEA submits that Motorola itself earlier endorsed a minimum lead
    time of 18 months for cable operators to order, deliver, and deploy
    CableCard enabled set-top boxes. CEA cites the National Cable
    Television Association's letter from Neal M. Goldberg, General
    Counsel, to Ms. Marlene Dortch, Secretary, Federal Communications
    Commission, in CS Docket No. 9780 (November 17, 2004) that Motorola
    endorsed in *ex parte* appearances.

[^24]: TTE states that the largest barrier to advancing production
    schedules is the lead time to order and receive necessary parts and
    components from suppliers.

[^25]: Other information might be provided through point-of-sale
    materials and displays, Internet websites, or some other appropriate
    format designed to reach consumers before they make purchasing
    decisions.

[^26]: We note that the issue of whether to require manufacturers and
    retailers to label television equipment (including analog-only
    sets) concerning digital capabilities or limitations remains pending
    in the Second DTV Periodic Review, MB Docket No.
    03-15).  *See* *Second Periodic Review of the Commission's Rules &
    Policies Affecting the Conversion To Digital Television, Report &
    Order* in MB Docket No. 03-15, 19 FCC 18280 (2004), ¶¶ 98-106.

[^27]: *See* 47 U.S.C. § 309(j)(14)(A).

[^28]: Information provided to the Commission's staff on May 11, 2005
    show that in 2004, there were 17,433, 000 sets sold in the 25" and
    larger size range and 13, 140,000 sets sold with screens smaller
    than 25".

[^29]: *See* *Ex Parte* presentation by Zoran Corporation to Office of
    Engineering and Technology staff on May 16, 2005. Zoran believes
    that by the winter of 2006, the additional retail price for
    including a DTV tuner in new receivers would fall below \$70. It
    further states that a number of functions currently in analog sets
    could be incorporated into a single chip further reducing the price
    differential below, if not resulting in a lower cost set than
    current analog models after a few years.

[^30]: The proposed rule changes are set forth in Appendix B.

[^31]: *See* 5 U.S.C. § 604.

[^32]: *See* 5 U.S.C. § 603.

[^33]: *See* 5 U.S.C. § 603(a).

[^34]: *See* 5 U.S.C. § 603. The RFA, *see* 5 U.S.C. §§ 601-612, has
    been amended by the Small Business Regulatory Enforcement Fairness
    Act of 1996 (SBREFA), Pub. L. No. 104-121, Title II, 110 Stat. 857
    (1996).

[^35]: *See* 5 U.S.C. § 604.

[^36]: *See Notice of Inquiry* in MM Docket No. 87-268, 2 FCC Rcd 5125
    (1987); *see also* *Tentative Decision and Further Notice of
    Proposed Rulemaking* in MM Docket No. 87-268, 3 FCC Rcd 6520 (1988).

[^37]: *See* *Fourth Report and Order* in MM Docket No. 87-268, 11 FCC
    Rcd 17771 (1996).

[^38]: *See* *Fifth Report and Order* in MM Docket No. 87-268, 12 FCC
    Rcd 12809 (1997).

[^39]: *See* *Sixth Report and Order* in MM Docket No. 87-268, 12 FCC
    Rcd 14588 (1997).

[^40]: 5 U.S.C. § 603(b)(3).

[^41]: 5 U.S.C. § 601(6).

[^42]: 5 U.S.C. § 601(3) (incorporating by reference the definition of
    "small business concern" in the Small Business Act, 15 U.S.C. §
    632). Pursuant to 5 U.S.C. § 601(3), the statutory definition of a
    small business applies "unless an agency, after consultation with
    the Office of Advocacy of the Small Business Administration and
    after opportunity for public comment, establishes one or more
    definitions of such term which are appropriate to the activities of
    the agency and publishes such definition(s) in the Federal
    Register."

[^43]: 15 U.S.C. § 632.

[^44]: 13 CFR § 121.201 (NAICS Code 334310).

[^45]: 13 CFR § 121.201 (NAICS Code 334220).

[^46]: 13 CFR § 121.201 (NAICS Code 334310).

[^47]: Economics and Statistics Administration, Bureau of Census, U.S.
    Department of Commerce, 1997 Economic Census, Industry Series --
    Manufacturing, Audio and Video Equipment Manufacturing, Table 4 at 9
    (1999). The amount of 500 employees was used to estimate the number
    of small business firms because the relevant Census categories
    stopped at 499 employees and began at 500 employees. No category for
    750 employees existed. Thus, the number is as accurate as it is
    possible to calculate with the available information.

[^48]: 13 C.F.R. § 121.201 (NAICS Code 513220).

[^49]: Economics and Statistics Administration, Bureau of Census, U.S.
    Department of Commerce, 1997 Economic Census, Industry Series --
    Manufacturing, Radio and Television Broadcasting and Wireless
    Communications Equipment Manufacturing, Table 4 at 9 (1999). The
    amount of 500 employees was used to estimate the number of small
    business firms because the relevant Census categories stopped at 499
    employees and began at 500 employees. No category for 750 employees
    existed. Thus, the number is as accurate as it is possible to
    calculate with the available information.

[^50]: 13 C.F.R. § 121.201 (NAICS Code 334111).

[^51]: Economics and Statistics Administration, Bureau of Census, U.S.
    Department of Commerce, 1997 Economic Census, Industry Series --
    Manufacturing, Electronic Computer Manufacturing, Table 4 at 9
    (1999).

[^52]: 5 U.S.C. § 603.

[^53]: *See* 5 U.S.C. § 603. The RFA, *see* 5 U.S.C. §§ 601-612, has
    been amended by the Small Business Regulatory Enforcement Fairness
    Act of 1996 (SBREFA), Pub. L. No. 104-121, Title II, 110 Stat. 857
    (1996).

[^54]: *See* Report and Order and Further Notice of Proposed Rulemaking
    in ET Docket No. 05-24, FCC 05-121, released June 9, 2005.

[^55]: *See* 5 U.S.C. § 603(a).

[^56]: *See id.*

[^57]: *See Notice of Inquiry* in MM Docket No. 87-268, 2 FCC Rcd 5125
    (1987); *see also* *Tentative Decision and Further Notice of
    Proposed Rulemaking* in MM Docket No. 87-268, 3 FCC Rcd 6520 (1988).

[^58]: *See* *Fourth Report and Order* in MM Docket No. 87-268, 11 FCC
    Rcd 17771 (1996).

[^59]: *See* *Fifth Report and Order* in MM Docket No. 87-268, 12 FCC
    Rcd 12809 (1997).

[^60]: *See* *Sixth Report and Order* in MM Docket No. 87-268, 12 FCC
    Rcd 14588 (1997).

[^61]: *See* 47 U.S.C. § 309(j)(14)(A).

[^62]: 5 U.S.C. § 603(b)(3).

[^63]: 5 U.S.C. § 601(6).

[^64]: 5 U.S.C. § 601(3) (incorporating by reference the definition of
    "small business concern" in the Small Business Act, 15 U.S.C. §
    632). Pursuant to 5 U.S.C. § 601(3), the statutory definition of a
    small business applies "unless an agency, after consultation with
    the Office of Advocacy of the Small Business Administration and
    after opportunity for public comment, establishes one or more
    definitions of such term which are appropriate to the activities of
    the agency and publishes such definition(s) in the Federal
    Register."

[^65]: 15 U.S.C. § 632.

[^66]: 13 CFR § 121.201 (NAICS Code 334310).

[^67]: 13 CFR § 121.201 (NAICS Code 334220).

[^68]: 13 CFR § 121.201 (NAICS Code 334310).

[^69]: Economics and Statistics Administration, Bureau of Census, U.S.
    Department of Commerce, 1997 Economic Census, Industry Series --
    Manufacturing, Audio and Video Equipment Manufacturing, Table 4 at 9
    (1999). The amount of 500 employees was used to estimate the number
    of small business firms because the relevant Census categories
    stopped at 499 employees and began at 500 employees. No category for
    750 employees existed. Thus, the number is as accurate as it is
    possible to calculate with the available information.

[^70]: 13 C.F.R. § 121.201 (NAICS Code 513220).

[^71]: Economics and Statistics Administration, Bureau of Census, U.S.
    Department of Commerce, 1997 Economic Census, Industry Series --
    Manufacturing, Radio and Television Broadcasting and Wireless
    Communications Equipment Manufacturing, Table 4 at 9 (1999). The
    amount of 500 employees was used to estimate the number of small
    business firms because the relevant Census categories stopped at 499
    employees and began at 500 employees. No category for 750 employees
    existed. Thus, the number is as accurate as it is possible to
    calculate with the available information.

[^72]: 13 C.F.R. § 121.201 (NAICS Code 334111).

[^73]: Economics and Statistics Administration, Bureau of Census, U.S.
    Department of Commerce, 1997 Economic Census, Industry Series --
    Manufacturing, Electronic Computer Manufacturing, Table 4 at 9
    (1999).

[^74]: 5 U.S.C. § 603.