**Before the**

**Federal Communications Commission**

**Washington, D.C. 20554**

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| In the Matter of:                | *  | CS Docket No. 97-80          |
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| Implementation of Section 304 of | ** | PP Docket No. 00-67          |
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| Telecommunications Act of 1996   | *) |                              |
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**FURTHER NOTICE OF PROPOSED RULEMAKING**

**Adopted: January 7, 2003 Released: January 10, 2003**

**Comment Date: March 28, 2003**

**Reply Comment Date: April 28, 2003**

By the Commission:

1.  In connection with the ongoing digital television ("DTV")
    transition, certain commenters in the above-captioned proceedings
    have expressed the need for adoption of a standard to ensure the
    compatibility of cable television systems with DTV receivers and
    related consumer electronics equipment. To this end, the consumer
    electronics and cable industries are engaged in ongoing
    inter-industry discussions seeking to establish a so-called "cable
    plug and play" standard. Such a standard would allow consumers to
    directly attach their DTV receivers to cable systems and receive
    cable television services without the need for an external
    navigation device.

2.  On December 19, 2002, the members of this discussion group, headed
    by the Consumer Electronics Association ("CEA") and the National
    Cable and Telecommunications Association ("NCTA"), filed with the
    Commission a Memorandum of Understanding ("MOU") which details an
    agreement on a cable compatibility standard for an integrated,
    unidirectional digital cable television receiver, as well as other
    unidirectional digital cable products.[^1] NCTA and CEA assert that
    unidirectional digital cable television receivers manufactured
    pursuant to the MOU would be capable of receiving analog basic,
    digital basic and digital premium cable television programming by
    direct connection to a cable system providing digital
    programming.[^2] The receivers would have a Digital Visual Interface
    ("DVI") connector with High-Bandwidth Digital Content Protection
    ("HDCP") to connect with other consumer electronics devices.[^3] The
    MOU also calls for such receivers to contain a point of deployment
    ("POD") interface slot into which a POD module provided by the cable
    operator would be inserted in order to view encrypted
    programming.[^4] Due to the unidirectional nature of this receiver
    specification, an external navigation device will still be needed to
    receive advanced features such as cable operator-enhanced electronic
    programming guides ("EPGs"), impulse pay per view ("IPPV") or video
    on demand ("VOD").[^5] The MOU indicates that the discussion group
    continues to work on a bidirectional receiver specification which
    would eliminate the need for an external navigation device to
    receive advanced services.[^6]

3.  The compromise reached in the MOU, appended with related supporting
    materials as Appendix B hereto, requires, *inter alia*, the consumer
    electronics and cable television industries to commit to certain
    voluntary acts and seeks the creation or revision of Commission
    rules in the following general areas:

    \(1\) Requiring digital cable systems with an activated channel
    capacity of 750 MHz or greater to support operation of
    unidirectional digital cable products and to ensure that navigation
    devices utilized in connection with such systems have an IEEE 1394
    interface and comply with specified technical standards;

    \(2\) Establishing a labeling regime for unidirectional digital
    cable television receivers and related digital cable products that
    meet certain technical specifications that would be voluntarily used
    by consumer electronics manufacturers. This regime would include
    testing and self-certification standards, as well as consumer
    information disclosures to purchasers of such receivers and
    products;

    \(3\) Prohibiting the use of selectable output controls by all
    multichannel video programming providers ("MVPDs"); and

    \(4\) Adopting encoding rules for audiovisual content applicable to
    all MVPDs.[^7]

4.  We hereby seek comment on the MOU and the proposed Commission rules
    contained therein. We also seek comment on the potential impact of
    the MOU and its proposed rules upon consumers, content providers,
    small cable operators and MVPDs other than cable operators, as well
    as the jurisdictional basis for Commission action in this area,
    including the creation of encoding rules for audiovisual content
    provided by MVPDs. As to issues not addressed by the MOU, such as
    the down-resolution of programming, we seek comment on whether
    Commission action is needed and authorized.[^8] We also seek comment
    on any other issues germane to the Commission's consideration of the
    MOU and these proposed rules.

# ADMINISTRATIVE MATTERS

5.  *Authority*. This *Further* *Notice of Proposed Rulemaking* is
    issued pursuant to authority contained in §§ 1, 4(i), 4(j), 303,
    403, 601, 624A and 629 of the Communications Act of 1934, as
    amended.

6.  *Ex Parte Rules -- Non-Restricted Proceeding*. This is a
    non-restricted 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).

7.  *Accessibility Information*. Accessible formats of this *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]{.underline}.

8.  *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 **March 28, 2003**, and reply
    comments on or before **April 28, 2003**. 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).

9.  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 appear in the caption of
    this proceeding, 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 this
    proceeding, 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.

10. *Initial Paperwork Reduction Act of 1995 Analysis*. This *Further
    Notice of Proposed Rulemaking* contains proposed information
    collection(s) subject to the Paperwork Reduction Act of 1995 (PRA).
    It will be submitted to the Office of Management and Budget (OMB)
    for review under the PRA. OMB, the general public, and other Federal
    agencies are invited to comment on the proposed information
    collection(s) contained in this proceeding.

11. Written comments by the public on the proposed information
    collection(s) are due 60 days from date of publication of this
    *Further Notice of Proposed Rulemaking* in the Federal Register.
    Written comments must be submitted by the public, Office of
    Management and Budget and other interested parties on the proposed
    information collection(s) on or before 60 days from date of
    publication of this *Further Notice of Proposed Rulemaking* in the
    Federal Register. In addition to filing comments with the Secretary,
    a copy of any comments on the information collection(s) contained
    herein should be submitted to Judith Boley Herman, Federal
    Communications Commission, Room 1-C804, 445 12^th^ Street, SW,
    Washington, DC 20554, or via the Internet to <jboley@fcc.gov>, and
    to Kim A. Johnson, OMB Desk Officer, Room 10236 NEOB, 725 17^th^
    Street, NW, Washington, DC 20503, or via the Internet to
    Kim_A.\_Johnson@omb.eop.gov.

12. *Regulatory Flexibility Act*. As required by the Regulatory
    Flexibility Act,[^9] the Commission has prepared an Initial
    Regulatory Flexibility Analysis ("IRFA") of the possible significant
    economic impact on a substantial number of small entities of the
    proposals addressed in this *Further* *Notice of Proposed
    Rulemaking*. The IRFA is set forth in Appendix A. Written public
    comments are requested on the IRFA. These comments must be filed in
    accordance with the same filing deadlines for comments on the
    *Further* *Notice of Proposed Rulemaking*, and they should have a
    separate and distinct heading designating them as responses to the
    IRFA.

    **ORDERING CLAUSES**

13. **IT IS ORDERED** that, pursuant to Sections 1, 4(i) and (j), 303,
    403, 601, 624A and 629 of the Communications Act of 1934, as
    amended, 47 U.S.C. §§ 151, 154(i) and (j), 303, 403, 521, 544a, 549,
    **COMMENT IS HEREBY SOUGHT** on the proposals in this *Further
    Notice of Proposed Rulemaking*.

14. **IT IS FURTHER ORDERED** that the Commission's Consumer and
    Governmental Affairs Bureau, Reference Information Center, **SHALL
    SEND** a copy of this *Further Notice of Proposed Rulemaking*,
    including the IRFA, to the Chief Counsel for Advocacy of the Small
    Business Administration, in accordance with the Regulatory
    Flexibility Act.[^10]

    FEDERAL COMMUNICATIONS COMMISSION

> Marlene H. Dortch

#  Secretary

**APPENDIX A**

**INITIAL REGULATORY FLEXIBILITY ANALYSIS**

As required by the Regulatory Flexibility Act of 1980, as amended
(\"RFA\")[^11] the Commission has prepared this Initial Regulatory
Flexibility Analysis (\"IRFA\") of the possible significant economic
impact on small entities by the policies and rules proposed in this
Further Notice of Proposed Rulemaking ("Further Notice")^.^ 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 Further Notice provided above in paragraph 8. The Commission will
send a copy of the Further Notice, including this IRFA, to the Chief
Counsel for Advocacy of the Small Business Administration.[^12] In
addition, the Further Notice and IRFA (or summaries thereof) will be
published in the Federal Register.[^13]

A.  **Need for, and Objectives of, the Proposed Rules.** The need for
    FCC regulation in this area derives from the lack of a so-called
    cable compatibility "plug and play" standard for a digital cable
    television receiver and related digital cable television consumer
    electronics equipment. The absence of such a standard has been
    identified as a key impediment to the anticipated rate and scope of
    the transition to digital television ("DTV"). Such a standard would
    allow consumers to directly attach their DTV receivers to cable
    systems and receive certain cable television services without the
    need for an external navigation device. Since more than sixty
    percent of television households subscribe to cable programming
    services, the availability of digital cable television receivers and
    products would encourage more consumers to convert to DTV, thereby
    furthering the transition. Private industry negotiations between
    cable operators and consumer electronics manufacturers have resulted
    in a Memorandum of Understanding ("MOU") on a cable compatibility
    standard for an integrated, unidirectional digital cable television
    receiver, as well as for other unidirectional digital cable
    products.[^14] The MOU requires the consumer electronics and cable
    television industries to each commit to certain voluntary acts and
    seeks the creation or revision of certain relevant Commission rules.
    The objective of the Proposed Rules, as embodied in the MOU, will be
    to facilitate the DTV transition.

B.  **Legal Basis.** The authority for the action proposed in this
    rulemaking is contained in Sections 1, 4(i) and (j), 303, 403, 601,
    624A and 629 of the Communications Act of 1934, as amended, 47
    U.S.C. §§ 151, 154(i) and (j), 303, 403, 521, 544a and 549.

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.[^15] The RFA generally defines the term \"small entity\" as
    having the same meaning as the terms \"small business,\" \"small
    organization,\" and \"small governmental entity\" under Section 3 of
    the Small Business Act.[^16] In addition, the term "small Business"
    has the same meaning as the term "small business concern" under the
    Small Business Act.[^17] 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\").[^18]

    **Television Broadcasting.** The proposed rules and policies could
    affect television broadcasting licensees, and potential licensees of
    television service. The Small Business Administration defines a
    television broadcasting station that has no more than \$12 million
    in annual receipts as a small business.[^19] Television broadcasting
    consists of establishments primarily engaged in broadcasting images
    together with sound, including the production or transmission of
    visual programming which is broadcast to the public on a
    predetermined schedule.[^20] Included in this industry are
    commercial, religious, educational, and other television
    stations.[^21] Also included are establishments primarily engaged in
    television broadcasting and which produce programming in their own
    studios.[^22] Separate establishments primarily engaged in producing
    programming are classified under other NAICS numbers.[^23]

    There were 1,509 television stations operating in the nation in
    1992.[^24] That number has remained fairly constant as indicated by
    the approximately 1,686 operating television broadcasting stations
    in the nation as of September 2001.[^25] For 1992, the number of
    television stations that produced less than \$10.0 million in
    revenue was 1,155 establishments.[^26] Thus, the new rules could
    affect approximately 1,686 television stations; approximately 77%,
    or 1,298 of those stations are considered small businesses.[^27]
    These estimates may overstate the number of small entities since the
    revenue figures on which they are based do not include or aggregate
    revenues from non-television affiliated companies.

    **Cable and Other Program Distribution.** The SBA has developed a
    small business size standard for cable and other program
    distribution services, which includes all such companies generating
    \$12.5 million or less in revenue annually.[^28] This category
    includes, among others, cable operators, direct broadcast satellite
    ("DBS") services, home satellite dish ("HSD") services, multipoint
    distribution services ("MDS"), multichannel multipoint distribution
    service ("MMDS"), Instructional Television Fixed Service ("ITFS"),
    local multipoint distribution service ("LMDS"), satellite master
    antenna television ("SMATV") systems, and open video systems
    ("OVS"). According to the Census Bureau data, there are 1,311 total
    cable and other pay television service firms that operate throughout
    the year of which 1,180 have less than \$10 million in revenue.[^29]
    We address below each service individually to provide a more precise
    estimate of small entities.

**Cable Operators.** The Commission has developed, with SBA\'s approval,
our own definition of a small cable system operator for the purposes of
rate regulation. Under the Commission\'s rules, a \"small cable
company\" is one serving fewer than 400,000 subscribers nationwide.[^30]
We last estimated that there were 1,439 cable operators that qualified
as small cable companies.[^31] Since then, some of those companies may
have grown to serve over 400,000 subscribers, and others may have been
involved in transactions that caused them to be combined with other
cable operators. Consequently, we estimate that there are fewer than
1,439 small entity cable system operators that may be affected by the
decisions and rules proposed in this Further Notice.

The Communications Act, as amended, also contains a size standard for a
small cable system operator, which is \"a cable operator that, directly
or through an affiliate, serves in the aggregate fewer than 1% of all
subscribers in the United States and is not affiliated with any entity
or entities whose gross annual revenues in the aggregate exceed
\$250,000,000.\"[^32] The Commission has determined that there are
68,500,000 subscribers in the United States. Therefore, an operator
serving fewer than 685,000 subscribers shall be deemed a small operator
if its annual revenues, when combined with the total annual revenues of
all of its affiliates, do not exceed \$250 million in the
aggregate.[^33] Based on available data, we find that the number of
cable operators serving 685,000 subscribers or less totals approximately
1,450.[^34] Although it seems certain that some of these cable system
operators are affiliated with entities whose gross annual revenues
exceed \$250,000,000, we are unable at this time to estimate with
greater precision the number of cable system operators that would
qualify as small cable operators under the definition in the
Communications Act.

**Direct Broadcast Satellite ("DBS") Service.** Because DBS provides
subscription services, DBS falls within the SBA-recognized definition of
cable and other program distribution services.[^35] This definition
provides that a small entity is one with \$12.5 million or less in
annual receipts.[^36] There are four licensees of DBS services under
Part 100 of the Commission\'s Rules. Three of those licensees are
currently operational. Two of the licensees that are operational have
annual revenues that may be in excess of the threshold for a small
business.[^37] The Commission, however, does not collect annual revenue
data for DBS and, therefore, is unable to ascertain the number of small
DBS licensees that could be impacted by these proposed rules. DBS
service requires a great investment of capital for operation, and we
acknowledge, despite the absence of specific data on this point, that
there are entrants in this field that may not yet have generated \$12.5
million in annual receipts, and therefore may be categorized as a small
business, if independently owned and operated.

**Home Satellite Dish ("HSD") Service.** Because HSD provides
subscription services, HSD falls within the SBA-recognized definition of
cable and other program distribution services.[^38] This definition
provides that a small entity is one with \$12.5 million or less in
annual receipts.[^39] The market for HSD service is difficult to
quantify. Indeed, the service itself bears little resemblance to other
MVPDs. HSD owners have access to more than 265 channels of programming
placed on C‑band satellites by programmers for receipt and distribution
by MVPDs, of which 115 channels are scrambled and approximately 150 are
unscrambled.[^40] HSD owners can watch unscrambled channels without
paying a subscription fee. To receive scrambled channels, however, an
HSD owner must purchase an integrated receiver‑decoder from an equipment
dealer and pay a subscription fee to an HSD programming package. Thus,
HSD users include: (1) viewers who subscribe to a packaged programming
service, which affords them access to most of the same programming
provided to subscribers of other MVPDs; (2) viewers who receive only
non‑subscription programming; and (3) viewers who receive satellite
programming services illegally without subscribing. Because scrambled
packages of programming are most specifically intended for retail
consumers, these are the services most relevant to this discussion.[^41]

**Multipoint Distribution Service ("MDS"), Multichannel Multipoint
Distribution Service ("MMDS") Instructional Television Fixed Service
("ITFS") and Local Multipoint Distribution Service ("LMDS").** MMDS
systems, often referred to as "wireless cable," transmit video
programming to subscribers using the microwave frequencies of the MDS
and ITFS.[^42] LMDS is a fixed broadband point-to-multipoint microwave
service that provides for two-way video telecommunications.[^43]

In connection with the 1996 MDS auction, the Commission defined small
businesses as entities that had annual average gross revenues of less
than \$40 million in the previous three calendar years.[^44] This
definition of a small entity in the context of MDS auctions has been
approved by the SBA.[^45] The MDS auctions resulted in 67 successful
bidders obtaining licensing opportunities for 493 Basic Trading Areas
("BTAs"). Of the 67 auction winners, 61 met the definition of a small
business. MDS also includes licensees of stations authorized prior to
the auction. As noted, the SBA has developed a definition of small
entities for pay television services, which includes all such companies
generating \$12.5 million or less in annual receipts.[^46] This
definition includes multipoint distribution services, and thus applies
to MDS licensees and wireless cable operators that did not participate
in the MDS auction. Information available to us indicates that there are
approximately 850 of these licensees and operators that do not generate
revenue in excess of \$12.5 million annually. Therefore, for purposes of
the IRFA, we find there are approximately 850 small MDS providers as
defined by the SBA and the Commission's auction rules.

The SBA definition of small entities for cable and other program
distribution services, which includes such companies generating \$12.5
million in annual receipts, seems reasonably applicable to ITFS.[^47]
There are presently 2,032 ITFS licensees. All but 100 of these licenses
are held by educational institutions. Educational institutions are
included in the definition of a small business.[^48] However, we do not
collect annual revenue data for ITFS licensees, and are not able to
ascertain how many of the 100 non-educational licensees would be
categorized as small under the SBA definition. Thus, we tentatively
conclude that at least 1,932 licensees are small businesses.

Additionally, the auction of the 1,030 LMDS licenses began on February
18, 1998, and closed on March 25, 1998. The Commission defined "small
entity" for LMDS licenses as an entity that has average gross revenues
of less than \$40 million in the three previous calendar years.[^49] An
additional classification for "very small business" was added and is
defined as an entity that, together with its affiliates, has average
gross revenues of not more than \$15 million for the preceding calendar
years.[^50] These regulations defining "small entity" in the context of
LMDS auctions have been approved by the SBA.[^51] There were 93 winning
bidders that qualified as small entities in the LMDS auctions. A total
of 93 small and very small business bidders won approximately 277 A
Block licenses and 387 B Block licenses. On March 27, 1999, the
Commission re-auctioned 161 licenses; there were 40 winning bidders.
Based on this information, we conclude that the number of small LMDS
licenses will include the 93 winning bidders in the first auction and
the 40 winning bidders in the re-auction, for a total of 133 small
entity LMDS providers as defined by the SBA and the Commission's auction
rules.

In sum, there are approximately a total of 2,000 MDS/MMDS/LMDS stations
currently licensed. Of the approximate total of 2,000 stations, we
estimate that there are 1,595 MDS/MMDS/LMDS providers that are small
businesses as deemed by the SBA and the Commission's auction rules.

**Satellite Master Antenna Television (\"SMATV\") Systems.** The SBA
definition of small entities for cable and other program distribution
services includes SMATV services and, thus, small entities are defined
as all such companies generating \$12.5 million or less in annual
receipts.[^52] Industry sources estimate that approximately 5,200 SMATV
operators were providing service as of December 1995.[^53] Other
estimates indicate that SMATV operators serve approximately 1.5 million
residential subscribers as of July 2001.[^54] The best available
estimates indicate that the largest SMATV operators serve between 15,000
and 55,000 subscribers each. Most SMATV operators serve approximately
3,000-4,000 customers. Because these operators are not rate regulated,
they are not required to file financial data with the Commission.
Furthermore, we are not aware of any privately published financial
information regarding these operators. Based on the estimated number of
operators and the estimated number of units served by the largest ten
SMATVs, we believe that a substantial number of SMATV operators qualify
as small entities

**Open Video Systems ("OVS").** Because OVS operators provide
subscription services,[^55] OVS falls within the SBA-recognized
definition of cable and other program distribution services.[^56] This
definition provides that a small entity is one with \$ 12.5 million or
less in annual receipts.[^57] The Commission has certified 25 OVS
operators with some now providing service. Affiliates of Residential
Communications Network, Inc. (\"RCN\") received approval to operate OVS
systems in New York City, Boston, Washington, D.C. and other areas. RCN
has sufficient revenues to assure us that they do not qualify as small
business entities. Little financial information is available for the
other entities authorized to provide OVS that are not yet operational.
Given that other entities have been authorized to provide OVS service
but have not yet begun to generate revenues, we conclude that at least
some of the OVS operators qualify as small entities.

**Electronics Equipment Manufacturers.** Rules adopted in this
proceeding could apply to manufacturers of DTV receiving equipment and
other types of consumer electronics equipment. The SBA has developed
definitions of small entity for manufacturers of audio and video
equipment[^58] as well as radio and television broadcasting and wireless
communications equipment.[^59] 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.[^60] 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.[^61] 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.[^62] 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.[^63]
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.[^64] 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.[^65] 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
    proposed rules would impose any additional reporting or
    recordkeeping requirements. However, compliance with the rules, if
    they are adopted, may require the manufacture of digital cable
    television receivers and other digital cable television consumer
    electronics equipment. Consumer electronics manufacturers may be
    required to establish a voluntary labeling regime for unidirectional
    digital cable television receivers and related digital cable
    products that meet certain technical specifications.[^66] This
    regime would include testing and self-certification standards, as
    well as consumer information disclosures to purchasers of such
    receivers and products.[^67] Compliance may also require
    multichannel video programming distributors to encode certain
    commercial audiovisual content to prevent or limit its copying and
    prohibit the use of selectable output controls.[^68] Cable operators
    with systems of 750 MHz or greater activated channel capacity may be
    required to support operation of unidirectional digital cable
    products on digital cable systems and to ensure that navigation
    devices utilized in connection with such systems have an IEEE 1394
    interface and comply with specified technical standards.[^69] While
    these requirements could have an impact on consumer electronics
    manufacturers and multichannel video programming distributors, it
    remains unclear weather there would be a differential impact on
    small entities. We seek comment on whether the burden of these
    requirements 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.[^70]

    As indicated above, the Further Notice seeks comment on whether the
    Commission should adopt or revise rules relating to the creation of
    a cable "plug and play" standard for digital cable television
    receivers and other digital cable television consumer electronics
    equipment in order to facilitate the DTV transition. This regime may
    require may require the manufacture of digital cable television
    receivers and other digital cable television consumer electronics
    equipment. Consumer electronics manufacturers may be required to
    establish a labeling regime for unidirectional digital cable
    television receivers and related digital cable products that meet
    certain technical specifications. This regime would include testing
    and self-certification standards, as well as consumer information
    disclosures to purchasers of such receivers and products. Compliance
    may also require multichannel video programming distributors to
    encode certain commercial audiovisual content to prevent or limit
    its copying and prohibit the use of selectable output controls.
    Cable operators with systems of 750 MHz or greater activated channel
    capacity may be required to support operation of unidirectional
    digital cable products on digital cable systems and to ensure that
    navigation devices utilized in connection with such systems have an
    IEEE 1394 interface and comply with specified technical standards.
    However, we welcome comment on modifications of the proposals if
    based on evidence of potential differential impact on smaller
    entities. In addition, the Regulatory Flexibility Act requires
    agencies to seek comment on possible small entity-related
    alternatives, as noted above. We therefore seek comment on
    alternatives to the proposed rules that would assist small entities
    while maintaining the compromise reached in the Memorandum of
    Understanding.[^71]

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

# APPENDIX B

**CONSENSUS CABLE MSO-CONSUMER ELECTRONICS**

**INDUSTRY AGREEMENT ON "PLUG & PLAY" CABLE COMPATIBILITY**

**AND RELATED ISSUES**

[^1]: *See* Letter from Carl E. Vogel, President and CEO, Charter
    Communications, *et al.*, to Michael K. Powell, Chairman, FCC (Dec.
    19, 2002) ("NCTA/CEA Letter"); *Memorandum of Understanding Among
    Cable MSOs and Consumer Electronics Manufacturers* ("NCTA/CEA MOU")
    (signed by Charter Communications, Inc., Comcast Cable
    Communications, Inc., Cox Communications, Inc., Time Warner Cable,
    CSC Holdings, Inc., Insight Communications Company, L.P., Cable One,
    Inc., Advance/Newhouse Communications, Hitachi America, Ltd., JVC
    Americas Corp., Mitsubishi Digital Electronics America, Inc.,
    Matsushita Electric Corp. of America (Panasonic), Philips Consumer
    Electronics North America, Pioneer North America, Inc., Runco
    International, Inc., Samsung Electronics Corporation, Sharp
    Electronics Corporation, Sony Electronics, Inc., Thomson, Toshiba
    America Consumer Electronics, Inc., Yamaha Electronics Corporation,
    USA, and Zenith Electronics Corporation).

[^2]: NCTA/CEA MOU at 4.

[^3]: *Id*. at 5-6.

[^4]: *Id*. at 5.

[^5]: *Id*. at 4.

[^6]: *Id*. at 10.

[^7]: *Recommended Regulations to Ensure Compatibility Between Digital
    Cable Systems and Unidirectional Digital Cable Products and to
    Provide for Appropriate Labeling of Such Products* at 1-6; *Encoding
    Rules As Proposed to the FCC* at 1-10.

[^8]: NCTA/CEA Letter at 3.

[^9]: *See* 5 U.S.C. § 603.

[^10]: *See* 5 U.S.C. § 603(a).

[^11]: *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).

[^12]: *See* 5 U.S.C. § 603(a).

[^13]: *See id.*

[^14]: *See* ¶ 2, *supra,* and associated footnotes.

[^15]: 5 U.S.C. § 603(b)(3).

[^16]: 5 U.S.C. § 601(3) (incorporating by reference the definition of
    "small business concern" in 15 U.S.C. § 632). Pursuant to the RFA,
    the statutory definition of a small business applies, "unless an
    agency, after consultation with the Office of Advocacy of the SBA
    and after opportunity for public comment, establishes one or more
    definitions of such the term which are appropriate to the activities
    of the agency and publishes such definition(s) in the Federal
    Register.

[^17]: 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."

[^18]: 15 U.S.C. § 632. Application of the statutory criteria of
    dominance in its field of operation, and independence are sometime
    difficult to apply in the context of broadcast television.
    Accordingly, the Commission's statistical account of television
    stations may be over-inclusive.

[^19]: 13 C.F.R. § 121.201, North American Industry Classification
    System ("NAICS") code 515120.

[^20]: Economics and Statistics Administration, Bureau of Census, U.S.
    Department of Commerce, 1997 Economic Census, Subject Series --
    Source of Receipts, Information Sector 51, Appendix B at B-7-8
    (2000).

[^21]: *Id*. *See* Executive Office of the President, Office of
    Management and Budget, Standard Industrial Classification Manual
    (1987), at 283, which describes \"Television Broadcasting Stations
    (SIC code 4833)\" as:

    > Establishments primarily engaged in broadcasting visual programs
    > by television to the public, except cable and other pay television
    > services. Included in this industry are commercial, religious,
    > educational and other television stations. Also included here are
    > establishments primarily engaged in television broadcasting and
    > which produce taped television program materials.

    NAICS code 513120, by its terms, supercedes the former SIC code
    4833, but incorporates the foregoing inclusive definitions of
    different types of television stations. *See* Economics and
    Statistics Administration, Bureau of Census, U.S. Department of
    Commerce, 1997 Economic Census, Subject Series -- Source of
    Receipts, Information Sector 51, Appendix B at B-7-8 (2000).

[^22]: Economics and Statistics Administration, Bureau of Census, U.S.
    Department of Commerce, 1997 Economic Census, Subject Series --
    Source of Receipts, Information Sector 51, Appendix B at B-7 (2000).

[^23]: NAICS code 512110 (Motion Picture and Video Production); NAICS
    code 512120 (Motion Picture and Video Distribution); NAICS code
    512191 (Teleproduction and Other Post-Production Services); NAICS
    code 512199 (Other Motion Picture and Video Industries). We note,
    however, that these entities are not FCC regulatees or licensees and
    are not subject to the RFA in this context.

[^24]: FCC News Release No. 31327, Jan. 13, 1993; Economics and
    Statistics Administration, Bureau of Census, U.S. Department of
    Commerce, Appendix A-9.

[^25]: FCC News Release, Broadcast Station Totals as of September 30,
    2001 (rel. Oct. 30, 2001).

[^26]: The amount of \$10 million was used to estimate the number of
    small business establishments because the relevant Census categories
    stopped at \$9,999,999 and began at \$10,000,000. No category for
    \$12 million existed. Thus, the number is as accurate as it is
    possible to calculate with the available information.

[^27]: We use the 77 percent figure of TV stations operating at less
    than \$10 million for 1992 and apply it to the 2001 total of 1,686
    TV stations to arrive at 1,298 stations categorized as small
    businesses.

[^28]: 13 C.F.R. § 121.201, NAICS code 517510 (formerly 513220). This
    NAICS code applies to all services listed in this paragraph.

[^29]: Economics and Statistics Administration, Bureau of Census, U.S.
    Department of Commerce, 1997 Economic Census, Subject Series --
    Establishment and Firm Size, Information Sector 51, Table 4 at 50
    (2000). The amount of \$10 million was used to estimate the number
    of small business firms because the relevant Census categories
    stopped at \$9,999,999 and began at \$10,000,000. No category for
    \$12.5 million existed. Thus, the number is as accurate as it is
    possible to calculate with the available information.

[^30]: 47 C.F.R. § 76.901(e). The Commission developed this definition
    based on its determinations that a small cable system operator is
    one with annual revenues of \$100 million or less. *Sixth Report and
    Order and Eleventh Order on Reconsideration*, 10 FCC Rcd. 7393
    (1995).

[^31]: Paul Kagan Associates, Inc., Cable TV Investor, Feb. 29, 1996
    (based on figures for Dec. 30, 1995).

[^32]: 47 U.S.C. § 543(m)(2).

[^33]: 47 C.F.R. § 76.1403(b).

[^34]: Paul Kagan Associates, Inc., Cable TV Investor, Feb. 29, 1996
    (based on figures for Dec. 30, 1995).

[^35]: 13 C.F.R. § 121.201, NAICS code 517510 (formerly 513220).

[^36]: *Id.*

[^37]: *Id*.

[^38]: 13 C.F.F. § 121.201, NAICS code 517510 (formerly 513220).

[^39]: *Id.*

[^40]: *Annual Assessment of the Status of Competition in Markets for
    the Delivery of Video Programming,* 12 FCC Rcd 4358, 4385 (1996)
    ("*Third Annual Report").*

[^41]: *Id.* at 4385.

[^42]: *Amendment of Parts 21 and 74 of the Commission's Rules with
    Regard to Filing Procedures in the Multipoint Distribution Service
    and in the Instructional Television Fixed Service and Implementation
    of Section 309(j) of the Communications Act -- Competitive Bidding*,
    10 FCC Rcd at 9589, 9593 (1995) ("*ITFS Order*").

[^43]: *See Local Multipoint Distribution Service,* 12 FCC Rcd 12545
    (1997) ("*LMDS Order*").

[^44]: 47 C.F.R. § 21.961(b)(1).

[^45]: *See ITFS* *Order*, 10 FCC Rcd at 9589.

[^46]: 13 C.F.R. § 121.201, NAICS code 517510 (formerly 513220).

[^47]: *Id*.

[^48]: SBREFA also applies to nonprofit organizations and governmental
    organizations such as cities, counties, towns, townships, villages,
    school districts, or special districts, with populations of less
    than 50,000. 5 U.S.C. § 601(5).

[^49]: *See LMDS* *Order,* 12 FCC Rcd at 12545.

[^50]: *Id.*

[^51]: *See* Letter to Daniel Phythyon, Chief, Wireless
    Telecommunications Bureau (FCC) from A. Alvarez, Administrator, SBA
    (January 6, 1998).

[^52]: 13 C.F.R. § 121.201, NAICS code 517510 (formerly 513220).

[^53]: *See Third Annual Report*, 12 FCC Rcd at 4403-4.

[^54]: *See Annual Assessment of the Status of Competition in Markets
    for the Delivery of Video Programming*, 17 FCC Rcd 1244, 1281 (2001)
    ("*Eighth Annual Report*").

[^55]: *See* 47 U.S.C. § 573.

[^56]: 13 C.F.R. § 121.201, NAICS code 517510 (formerly 513220).

[^57]: *Id.*

[^58]: 13 CFR § 121.201, NAICS code 334310.

[^59]: 13 CFR § 121.201, NAICS code 334220.

[^60]: 13 CFR § 121.201, NAICS code 334310.

[^61]: 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.

[^62]: 13 C.F.R. § 121.201, NAICS code 334220.

[^63]: 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.

[^64]: 13 C.F.R. § 121.201, NAICS code 334111.

[^65]: 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).

[^66]: *See Recommended Regulations to Ensure Compatibility Between
    Digital Cable Systems and Unidirectional Digital Cable Products and
    to Provide for Appropriate Labeling of Such Products* at 1-6
    ("*Proposed Technical Rules*").

[^67]: *Id*.

[^68]: *See Encoding Rules As Proposed to the FCC* at 1-10.

[^69]: *Proposed Technical Rules* at 1-6*.*

[^70]: 5 U.S.C. § 603(b).

[^71]: *See also* ¶ 2, *supra*.