**Before the**

**Federal Communications Commission**

**Washington, D.C. 20554**

In the Matter of )

)

Ancillary or Supplementary Use of ) MM Docket No. 98-203

Digital Television Capacity by Noncommercial ) Licensees )

)

**REPORT AND ORDER**

**Adopted:** October 11, 2001 **Released:** October 17, 2001

By the Commission: Chairman Powell issuing a statement; Commissioner
Copps dissenting and issuing a statement.

**Table of Contents**

[Paragraph]{.underline}

I. INTRODUCTION 1

II\. BACKGROUND 2

III\. ISSUE ANALYSIS

A.  Application of Section 73.621 of the Commission's Rules to Entire

> Digital Bitstream of NCE Licensees 7

B. Advertising 19

C. Payment of fees 34

IV\. ADMINISTRATIVE MATTERS 46

Appendix A: Final Regulatory Flexibility Analysis

Appendix B: List of Commenters

Appendix C: Rule Changes

**I. INTRODUCTION**

1.  With this *Report and Order*, we clarify the manner in which
    noncommercial educational (\"NCE\") television licensees may use
    their excess digital television (\"DTV\") capacity for remunerative
    purposes. Among other things, we amend Section 73.621 of our rules
    to apply to the entire digital bitstream, including ancillary or
    supplementary services, thereby requiring NCE licensees to use their
    digital capacity primarily for a noncommercial, nonprofit,
    educational broadcast service. We also amend Sections 73.642 and
    73.644 of our rules to clarify that NCE licenses may offer
    subscription services on their excess digital capacity. We determine
    that Section 399B of the Communications Act of 1934, as amended, the
    provision restricting advertising by NCE licensees, continues to
    apply to all broadcasting by NCE licensees, but does not apply to
    nonbroadcast services, such as subscription services provided on
    their DTV channels. Finally, we amend Section 73.624(g) of our rules
    to apply to NCE licensees the program for assessing and collecting
    fees upon feeable ancillary or supplementary services provided on
    their DTV capacity that we have established for commercial
    licensees, as required by the Telecommunications Act of 1996 (\"1996
    Act\").[^1]

### II. BACKGROUND

2.  The 1996 Act provided that initial eligibility for any advanced
    television licenses that we issue should be limited to existing
    broadcasters, conditioned upon the requirement that \"either the
    additional license or the original license held by the licensee be
    surrendered to the Commission for reallocation or reassignment (or
    both) pursuant to Commission regulation.\"[^2] In our *Fifth Report
    and Order* in the DTV proceeding, we adopted rules to implement the
    statute, providing a specific transition process to digital
    technology for all existing television broadcasters.[^3] Among other
    things, we established standards for license eligibility, a
    transition and construction schedule, and a requirement that
    broadcasters continue to provide one free over-the-air video
    programming service.[^4] We also adopted rules permitting DTV
    licensees, without distinguishing between commercial and
    noncommercial licensees, to use their DTV capacity to provide
    ancillary or supplementary services, provided that these services do
    not derogate the free digital television service.

3.  In their Petition for Reconsideration of the *Fifth Report and
    Order*, the Association of America\'s Public Television Stations and
    the Public Broadcasting Service (AAPTS/PBS) requested clarification
    of public television stations\' authority to use excess capacity on
    DTV channels for commercial purposes. As neither Section 336 nor our
    DTV rules distinguishes between commercial and noncommercial
    stations, AAPTS/PBS argued that both are intended to allow public
    stations to offer ancillary or supplementary services for
    revenue-generating purposes.[^5] In opposing this request in part,
    Media Access Project and other public interest parties (\"MAP\")[^6]
    jointly argued that, while public television stations should be able
    to provide some revenue-generating ancillary or supplementary
    services, these services must be consistent with the noncommercial
    nature of public television as set forth in Section 399B of the
    Communications Act, the provision restricting advertising by these
    stations.

4.  This request for clarification made by AAPTS/PBS raised significant
    issues regarding the service and funding opportunities made
    available to NCE stations as a result of the transition to digital
    transmission. In recognition of the importance of this issue to the
    future of public television as it enters the digital age, in the
    Notice of Proposed Rulemaking in MM Docket No. 98-203 (\"*NPRM*\")
    in this proceeding,[^7] we sought further comment on the AAPTS/PBS
    petition in order to establish a more complete record on the issues
    it raised.

5.  In their Petition AAPTS/PBS also requested that we exempt public
    television licensees from any fee assessed in connection with use of
    digital spectrum for ancillary or supplementary services to the
    extent revenues from those service are used to support the
    licensee\'s mission-related activities.[^8] Section 336(e) of the
    1996 Act, which requires DTV licensees receiving fees or certain
    other compensation for ancillary or supplementary services provided
    on the DTV spectrum to return a portion of that revenue to the
    public, charged us with establishing a means of assessing and
    collecting fees for those ancillary or supplementary services.[^9]

6.  In a Notice of Proposed Rule Making in MM Docket No. 97-247 (\"*DTV
    Fees* Proceeding\"),[^10] we sought comment on AAPTS/PBS\'s request
    for such an exemption and subsequently determined that AAPTS/PBS\'s
    request should be considered in this proceeding.[^11] In the *DTV
    Fees Report and Order* we established a program for assessing and
    collecting fees for certain ancillary or supplementary services
    provided by commercial licensees on their DTV capacity. In the
    *NPRM* in this proceeding, MM Docket No. 98-203, we sought
    additional comment regarding an exemption for noncommercial
    licensees in light of the comments received on this issue in the
    *DTV Fees Proceeding*. We also sought comment on tentative proposals
    set forth in the *NPRM*.

### ISSUE ANALYSIS

# A. Application of Section 73.621 of the Commission's Rules to Entire Digital Bitstream of NCE Licensees

7.  *Background*. The Communications Act defines a \"noncommercial
    educational broadcast station\" and \"public broadcast station\" as
    a television or radio broadcast station that is eligible under the
    FCC\'s rules to be licensed as \"a noncommercial educational radio
    or television broadcast station which is owned and operated by a
    public agency or nonprofit private foundation, cooperation, or
    association\" or \"is owned and operated by a municipality and which
    transmits only noncommercial programs for educational
    purposes.\"[^12] In 1981, Congress amended the Communications Act to
    give public broadcasters more flexibility to generate funds for
    their operations.[^13] As amended, Section 399B of the Act permits
    public stations to provide facilities and services in exchange for
    remuneration as long as those uses do not interfere with the
    stations\' provision of public telecommunications services.[^14]
    Section 399B, however, does not permit public broadcast stations to
    make their facilities \"available to any person for the broadcasting
    of any advertisement.\"[^15] In addition, under Section 73.621 of
    the Commission\'s rules, public television stations are required to
    furnish primarily an educational as well as a nonprofit and
    noncommercial broadcast service.[^16]

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8.  In the *Fifth Report and Order*, we implemented Section 336 of the
    1996 Act, which sets forth the DTV licensing provisions of the 1996
    Act, by adopting Section 73.624 of our rules. Section 73.624(g)
    allows broadcasters the flexibility to respond to the demands of
    their audience by providing ancillary or supplementary services,
    including subscription television, provided that these services do
    not derogate the mandated free, over-the-air program service.[^17]
    In the *NPRM* in this proceeding, we invited comment on AAPTS/PBS\'s
    request that we clarify that Section 73.621 of our rules, which
    requires public stations to provide a primarily nonprofit,
    noncommercial, educational broadcast service, is not applicable to
    ancillary or supplementary services provided on DTV capacity, and on
    whether such a clarification is consistent with the nonderogation of
    services provisions of Section 399B.

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9.  In particular, we sought comment on a number of options with respect
    to whether and how we should amend Section 73.621 of our Rules. For
    example, we sought comment on whether we should extend the
    requirement to provide an educational nonprofit service to ancillary
    or supplementary services provided by noncommercial licensees on
    their DTV capacity, or whether we should clarify that the
    requirement applies only to the single, free-over-the-air broadcast
    service it is required to provide.

10. We also sought comment on whether and how we can permit NCE stations
    to provide remunerative ancillary or supplementary services in a
    manner that does \"not interfere with the provision of public
    telecommunications services\" by such stations as required by
    Section 399B of the Act.[^18] In particular we asked whether NCE DTV
    stations will have the capacity to provide ancillary or
    supplementary services without interfering with their ability to
    provide a primarily educational NCE broadcast service, and whether
    such ancillary or supplementary services can provide an important
    funding source that could facilitate the transition to DTV for NCE
    stations, and, more generally, enhance their primary mission of
    providing a robust noncommercial, educational broadcasting service.

11. *Comments*. In its comments, AAPTS modifies its original request,
    presented in its Petition for Reconsideration of the *Fifth Report
    and Order*, which would have exempted remunerative ancillary or
    supplementary services from Section 73.621 of our rules. AAPTS now
    agrees that, with respect to provision of remunerative ancillary or
    supplementary service, a public television station must be used
    primarily to provide a noncommercial educational broadcast service,
    and the offering of such service must not interfere with the
    provision of public telecommunications services. AAPTS also contends
    that its proposed standards are consistent with those we have
    applied in the analog environment in approving the offer by public
    television stations of a variety of ancillary services.[^19] AAPTS
    suggests that we only need clarify that Section 73.621 of our rules
    applies, without change, to the digital channel. It states that the
    requirement that the primary use of public television stations is to
    provide an educational and nonprofit, noncommercial broadcast
    service would still allow ancillary or supplementary service to be
    provided on NCE\'s excess digital capacity. AAPTS also requests
    that, since we concluded in the *Fifth Report and Order* that DTV
    broadcasters may offer subscription television as an ancillary or
    supplementary service, that we amend Sections 73.642 and 73.644 of
    our rules to clarify that public television stations may provide
    subscription television services.[^20]

12. AAPTS denies that provision of remunerative ancillary or
    supplementary services would change the essential nature of public
    television. It contends that digital technology will provide
    sufficient capacity for public television stations to offer a range
    of services while preserving their primary use for a noncommercial
    educational broadcast service. In addition, it argues that Section
    336 provides, via its prohibition against derogation of services,
    separate assurance that any ancillary or supplementary service will
    not interfere with a public television station\'s basic broadcast
    service.[^21] AAPTS submits that other limitations on the extent to
    which public televisions stations can engage in commercial ventures
    include their nonprofit educational mission upon which their tax
    exempt status is based, the need to preserve viewer and government
    support, the requirement to pay taxes on income unrelated to the
    exempt purpose of the organization, and the oversight of stations by
    responsible bodies.[^22] AAPTS also notes that although Section 336
    itself does not impose special restrictions on public television
    stations, two limitations must be applied to the provision of
    ancillary or supplementary service by these stations: first, a
    public television station must be used primarily to provide a
    noncommercial educational broadcast service under the Commission\'s
    rules; second, the offering of these services must not interfere
    with the provision of public telecommunications services under
    Section 399B of the Communications Act.[^23]

13. AAPTS states that, at this point, public television stations do not
    have firm plans for the use of their digital spectrum, and it is
    impossible to predict what opportunities may be available to them or
    to what extent individual stations will take advantage of such
    opportunities.[^24] It urges us not to impose restrictions now on
    the activities of public television stations, but to wait until the
    scheduled biennial examination of digital regulations, set forth in
    the *Fifth Report and Order,* to determine whether changes are
    needed.[^25] The Office of the United Church of Christ and other
    public interest parties (\"UCC *et al*.\")[^26], however, contend
    that AAPTS is unclear about its members\' plans to engage in
    advertiser supported ancillary or supplementary services and how
    much of their digital capacity they plan to commit to subscription
    and other remunerative services. UCC *et al*. urges us to draw a
    bright line and find that an NCE broadcaster \"primarily\" serves
    the educational needs of a community when it provides free,
    not-for-profit over-the-air services over 50 percent or more of its
    digital capacity at any one time.[^27]

14. National Datacast, Inc. (\"National Datacast\") is a for-profit
    subsidiary of the Public Broadcasting Service that provides data
    services using the vertical blanking interval (VBI) on the analog
    signal of public television stations. It argues that the Commission
    imposed no restrictions on the commercial operation of data services
    using the VBI, including advertiser-supported services, by public
    television stations or entities affiliated with public television;
    that the force of this ruling remains unaltered by Section 336; and
    that no restrictions should be applied to National Datacast\'s data
    transmission in the digital spectrum of public television
    stations.[^28] The analog spectrum requires the use of most of an
    NCE licensee\'s channel to carry their video broadcast signal,
    leaving only a very small portion, the VBI and the Visual Signal,
    available to be used for ancillary or supplementary services. The
    digital spectrum, however, allows NCE licensees to offer a number of
    ancillary or supplementary services on their excess digital capacity
    in addition to mandated free, over-the-air program service. National
    Datacast points to its service as a "precursor to the successful use
    of digital spectrum" for generating revenues to help support public
    television.[^29]

15. *Decision*. We will amend Section 73.621 of our rules to clarify
    that the Section\'s requirements apply to the entire digital
    bitstream of NCE licensees, including the provision of ancillary or
    supplementary services. We will require that NCE licensees use their
    entire digital capacity primarily for a nonprofit, noncommercial,
    educational broadcast service. This amendment will adapt Section
    73.621 of our rules to the digital environment. Although we decline
    to quantify the term "primarily," we will consider it to mean a
    "substantial majority" of their entire digital capacity.

16. We decline to adopt the suggestion of UCC *et al*. that we draw a
    bright line to require that NCE broadcasters provide free,
    not-for-profit over-the-air services over 50 percent or more of
    their digital capacity at any one time. Such a decision would
    provide substantially less flexibility to NCE licensees in
    developing their digital services. For example, an NCE licensee
    might want to use most of its digital capacity for High Definition
    Television (\"HDTV\") programming during certain times of the day
    and, at other times, various amounts of capacity for Standard
    Definition Television (\"SDTV\") programming and remunerative
    ancillary or supplementary services. UCC *et al*.\'s suggestion, by
    specifying 50 percent or more at all times, would seem to restrict
    their flexibility in this regard. We see no persuasive reason to
    impose such a limitation. While we believe that a "minute by minute"
    approach, such as that suggested by UCC *et al*., above, would
    restrict the flexibility of NCE licensees to too great an extent, we
    believe that some time period limitation is appropriate. Because
    stations typically schedule their programming on a weekly basis, we
    believe that requiring them to use their entire bitstream primarily
    for nonprofit, noncommercial, educational broadcast services on a
    weekly basis will provide them with sufficient flexibility. We will
    require NCE licensees to maintain documentation sufficient to show
    compliance with this requirement at renewal time and in response to
    any complaints.[^30]

17. Our decision to apply Section 73.621 of our rules to the entire
    digital bitstream also is consistent with the 1996 Act,[^31] as well
    as our *Fifth Report and Order*, in which we stated that our
    overarching goal is to promote the success of a free, local
    television service using digital technology.[^32] We believe that
    this action will help to preserve the noncommercial educational
    nature of public broadcasting, while allowing NCE licensees some
    flexibility in remunerative use of their spectrum and indicating the
    boundaries that we will apply to such use. We agree with AAPTS that
    digital technology will allow sufficient capacity for public
    television stations to offer a range of services while preserving
    their primary use for a nonprofit, noncommercial, educational
    broadcast service. We also note that Section 336 provides, via its
    prohibition against derogation of services, separate assurance that
    any ancillary or supplementary service will not interfere with a
    public television station\'s basic broadcast service.[^33] Moreover,
    NCE licensees are, of course, subject to the general requirement to
    provide one free over-the-air video programming service.[^34] In
    light of the other limitations on the extent to which public
    televisions stations can engage in commercial ventures,[^35] we will
    not, at this time, impose additional restrictions on an NCE
    licensee\'s ability to provide ancillary or supplementary services
    on its excess digital capacity. We will address any problems that
    might arise in the periodic reviews of our digital regulations set
    forth in the *Fifth Report and Order*,[^36] or on a case-by-case
    basis.

18. We will amend Sections 73.642 and 73.644 of our rules to clarify
    that NCE licenses may offer subscription services on their excess
    digital capacity. We included such services in our definition of
    ancillary or supplementary services in the *Fifth Report and
    Orde*r.[^37] Given our goal of providing NCE licensees with
    flexibility in the use of their digital spectrum, within certain
    boundaries, we see no reason to prohibit them from providing
    subscription services.

**B. Advertising**

19. *Background*. In its Petition for Reconsideration of the *Fifth
    Report and Order*, AAPTS/PBS requested that we clarify that public
    television stations may use their excess capacity on DTV channels
    for commercial purposes.[^38] In opposing this request in part, MAP
    argued that, while public television stations should be able to
    provide some revenue-generating ancillary or supplementary services,
    these services must be consistent with the noncommercial nature of
    public television as set forth in Section 399B, which restricts
    advertising by these stations.[^39] In reply, AAPTS/PBS argued for
    an interpretation in which the advertising ban of Section 399B would
    continue to apply to the primary noncommercial broadcast service,
    while any ancillary or supplementary use of DTV channels would be
    free from the restrictions of this section. It also argued that even
    if the Section 399B advertising restrictions are found to apply to
    these services, we have discretion under Section 336(a)(2) to allow
    public TV licensees to offer advertiser-supported services if we
    find these services to be in the public interest.[^40]

20. In the *NPRM* we sought comment on how the advertising ban set forth
    in Section 399B of the Communications Act implicates the provision
    of remunerative services by public DTV stations.[^41] Section 399B
    prohibits a public station from \"making its facilities available to
    any person for the broadcasting of any advertisement.\"[^42] By its
    plain language, we noted that this section would appear to prohibit
    advertisements on any service that would constitute broadcasting,
    while permitting a public DTV station to air advertisements on any
    nonbroadcast service.

21. We sought comment on our tentative conclusion that while Section
    399B continues to apply to all video broadcast programming streams
    provided by public DTV stations, it does not apply to any
    subscription services they provide on their DTV channels since such
    services do not constitute \"broadcasting.\" We also sought comment
    on the extent to which Section 399B applies to advertising carried
    on any other non-subscription ancillary or supplementary services
    carried by a public TV station. In addition, we asked parties to
    address AAPTS/PBS\'s argument that even if Section 399B\'s
    advertising restrictions apply to some ancillary or supplementary
    services, we have discretion under Section 336(a)(2) of the Act to
    allow public TV licensees to include advertiser-supported services
    if we find these services to be in the public interest.[^43]

22. *Comments*. UCC *et al*. contends that the plain language of 399B,
    its legislative history, and subsequent actions by Congress
    demonstrate that Congress as recently as the 1996 Act did not intend
    that NCE licensees carry commercial advertisements, including on any
    ancillary or supplementary services provided on their DTV capacity.
    An advertisement is defined in Section 399B(b) as \"any message or
    other programming material which is broadcast or otherwise
    transmitted in exchange for any remuneration.\" UCC *et al*.
    contends that this definition is incorporated by reference in
    Section 399B(b)(2), so that when the statute prohibits broadcasting
    of \"advertisements,\" it prohibits any message that is either
    broadcast or otherwise transmitted. Moreover, although Section 399B
    expressly prohibits only the \"broadcasting\" of advertisements, UCC
    *et al*. notes that in 1981 that was the only way NCE stations could
    carry advertising.[^44] UCC *et al*. urges us to not extend the
    *Subscription Video* decision to allow NCEs to provide
    advertiser-supported subscription services over public broadcast
    stations. It particularly would object to advertisements on NCE
    licensees\' free over-the-air services. UCC *et al*. contends that
    NCE licensees did not, and still do not, have the authority to
    provide advertiser-supported subscription services.[^45]

23. UCC *et al*. also contends that Section 336(a)(2) does not
    explicitly permit NCE licensees to carry commercial advertising
    based on the Commission\'s finding that it is in the public
    interest, nor does Section 336(a)(2) explicitly repeal the ban on
    advertising in Section 399B(b)(2). It argues that to interpret
    Section 336 in that manner would directly conflict with Section
    399B. UCC *et al*. submits that these sections can be harmonized by
    permitting NCE licensees only to provide non-advertiser-supported
    ancillary or supplementary services.[^46]

24. AAPTS and Family Stations of New Jersey, Inc. (\"Family NJ\")
    contend that the Section 399B ban on advertising by NCE stations
    applies only to the basic broadcast service, not to any ancillary or
    supplementary services.[^47] AAPTS acknowledges that the 399B
    definition of advertisement is broader, referring to material that
    is \"broadcast or otherwise transmitted,\" than the language of the
    prohibition. But AAPTS contends that it is the language of the
    prohibition, which only forbids \"broadcasting\" of an
    advertisement, not \"broadcasting or otherwise transmitting,\" that
    is relevant.[^48] AAPTS reasons that Congress adopted Section 399B
    in the context of analog broadcasting, where a station carries only
    a single broadcast service, and was concerned with insulating public
    television program control and content from the influence of special
    interests. AAPTS argues that digital technology would allow a
    station to offer advertiser-supported broadcast service on its
    ancillary or supplementary capacity that is completely unrelated to
    and has no influence over the station\'s primary noncommercial
    broadcast service.[^49]

25. AAPTS, Family NJ, and National Datacast also contend that our
    previous decisions have allowed NCEs to provide subsidiary
    communications services on the VBI without regard to whether they
    include advertisements.[^50] National Datacast argues that we
    authorized the use of the VBI for commercial services, including
    advertising, in *Teletext Transmission*. The only pertinent
    restriction was that any offering of services for remuneration
    \"shall not interfere with the provision of public
    telecommunications services\".[^51]

26. UCC *et al*., however, argues that the our 1980 decisions allowing
    NCE licensees to use their analog VBI for remunerative services do
    not support commenters\' assertions that we have allowed
    advertiser-supported ancillary services on noncommercial stations.
    UCC *et al*. contends that we never squarely addressed in those
    decisions whether Section 399B prohibits advertiser-supported
    services on the VBI, but always specified that the activity must be
    consistent with Section 399B. UCC *et al*. also contends that it
    would be arbitrary and capricious for us to apply decisions that
    affect a minuscule slice of analog capacity used only for text to
    digital services that could use as much as 80% of the bitstream at
    any one time for services that would include text, data, broadband
    and, most importantly, video services.[^52] UCC *et al*. cautions
    that providing advertiser-supported services would harm NCE
    licensees more than it would help them, leading to a loss of public
    and Congressional support.[^53] AAPTS, however, urges us to allow
    public television stations the flexibility to develop and implement
    remunerative ancillary or supplementary uses of the digital spectrum
    and avoid premature promulgation of rules that may be overbroad and
    unnecessary, addressing any concerns arising under Section 399B in a
    \"concrete context.\"[^54]

27. *Decision*. We conclude that the Section 399B ban on advertising
    applies to all broadcast programming streams provided by NCE
    licensees, but does not apply to ancillary or supplementary services
    on their DTV channels, such as subscription services or data
    transmission services, to the extent that such services do not
    constitute \"broadcasting.\"[^55]

28. While the definition of \"advertisement\" in Section 399B refers to
    material that is \"broadcast or otherwise transmitted,\" the plain
    language of the specific prohibition only forbids the
    \"broadcasting\" of any advertisement. UCC *et al*. argues that
    limiting the prohibition on advertisements to "broadcasting" renders
    the "otherwise transmitted" language in the definition of
    "advertisement" meaningless and, thus, UCC *et al*. would read the
    prohibition as applying to all transmissions.[^56] Although UCC *et
    al.*'s argument is one way to read the statute, we believe that UCC
    *et al.*'s reading is problematic because, as noted, the prohibition
    in Section 399B(b)(2) refers to the "broadcasting of any
    advertisement," whereas the definition in (a)(1) treats broadcasting
    as only one means of transmitting advertising. We believe the better
    way to reconcile this disparity is the following: By defining an
    "advertisement" as "any message or other programming material which
    is broadcast or otherwise transmitted in exchange for any
    remuneration," Congress was arguably acknowledging that
    noncommercial stations were technologically capable of transmitting
    advertisements on a broadcast or nonbroadcast basis.[^57] When
    Congress set out the prohibition in Section 399B(b)(2), however, it
    expressly limited it to those advertisements provided on a
    *broadcast* basis. We thus believe that the better reading is the
    literal one: that Section 399B only prohibits public broadcast
    stations from making their facilities "available to any person for
    the *broadcasting* of any advertisement."[^58]

29. The term \"broadcasting\" is defined in the Communications Act as
    \"the dissemination of radio communications intended to be received
    by the public, directly or by the intermediary of relay
    stations.\"[^59] In 1986, we addressed this definition in our
    *Subscription Video* proceeding.[^60] In that decision we determined
    that the term \"broadcasting\" as defined by the Communications Act
    \"refers only to those signals which the sender intends to be
    received by the indeterminate public.\"[^61] We therefore found that
    \"a necessary condition for the classification of a service as
    broadcasting is that the licensee\'s programming is available to all
    members of the public, without any special arrangements or
    equipment.\"[^62] Based on these criteria, we ruled that
    subscription television does not constitute broadcasting. Applying
    these same criteria to the digital spectrum, we find that
    subscription television provided by NCE licensees on their excess
    digital spectrum does not constitute \"broadcasting.\" We conclude
    therefore that NCE licensees may include advertising in their
    subscription television offerings, as the Section 399B ban on
    advertising applies only to broadcast streams. We also conclude that
    these same criteria continue to apply to any DTV capacity that NCE
    licensee might lease to other parties.[^63]

30. With respect to the extent to which Section 399B applies to
    advertising carried on any other ancillary or supplementary services
    carried by a public TV station, we turn to the rules that we adopted
    in the *Fifth Report and Order.*[^64] These rules list examples of
    the kinds of services that may be offered as ancillary or
    supplementary services. They include, but are not limited to,
    \"computer software distribution, data transmissions, teletext,
    interactive materials, aural messages, paging services, audio
    signals, subscription video, and any other services that do not
    derogate DTV broadcast stations\' obligations\" to \"transmit at
    least one over-the-air video broadcast signal provided at no direct
    charge to viewers.\"[^65] We stated that such services may be
    provided on a broadcast, point-to-point or point-to-multipoint
    basis, provided, however, that \"no video broadcast signal provided
    at no direct charge to viewers shall be considered ancillary or
    supplementary.\"[^66]

31. This definition and illustrative list of ancillary or supplementary
    services makes clear, first, that over-the-air video programming
    provided at no charge to viewers is not ancillary or supplementary
    service, and, conversely, that services other than a free video
    broadcast signal are, by definition, ancillary or supplementary
    services. Although we received very little comment on the types of
    non-subscription ancillary or supplementary services parties
    contemplate providing, it is possible that NCE licensees may provide
    without a fee to viewers data, audio or other services.[^67] Such
    services, although ancillary or supplementary, if constituting \"the
    dissemination of radio communications intended to be received by the
    public, directly or by the intermediary of relay stations,\" would
    fall under the definition of \"broadcasting\" as defined in the
    Communications Act, and would be subject to the Section 399B
    advertising ban.[^68] To the extent that ancillary or supplementary
    services offered by DTV licensees are *not* broadcasting services,
    NCE licensees may include advertising in their ancillary or
    supplementary services on their excess DTV capacity, as the Section
    399B prohibition of advertising applies only to broadcast
    programming.[^69] Until we gain more experience in determining
    whether an ancillary or supplementary service is a broadcasting
    service, we will simply be guided by the statutory criteria as
    questions arise.

32. Finally, in the *NPRM,* we asked parties to address AAPTS/PBS\'s
    argument that even if Section 399B\'s advertising restrictions apply
    to some ancillary or supplementary services, we have discretion
    under Section 336(a)(2) of the Act to allow public TV licensees to
    include advertiser-supported services if we find these services to
    be in the public interest.[^70] Section 336(a)(2) states that if we
    issue additional licenses for DTV, we shall \"adopt such regulations
    that allow the holders of such licensees to offer such ancillary or
    supplementary services on designated frequencies as may be
    consistent with the public interest, convenience or
    necessity.\"[^71] Given our statutory interpretation of Section
    399B, which allows NCE licensees considerable flexibility to offer
    advertiser-supported subscription services and other ancillary or
    supplementary services, there is no need to interpret Section
    336(a)(2) as AAPTS/PBS suggests. More importantly, we conclude that
    the plain language of Section 336(a)(2) does not support the result
    AAPTS/PBS suggests.

33. As we stated in the *NPRM,* we are sympathetic to the relief
    requested in the AAPTS/PBS petition, which described a range of
    revenue-generating ancillary or supplementary services that could
    help NCE stations flourish in a digital age. We noted that the costs
    of converting to digital service will be considerable, and that many
    NCE stations rely on public funds for the digital build-out. Our
    decision regarding the provision of advertising on NCE licensees\'
    ancillary or supplementary services will permit NCE stations
    flexibility in providing such services as well as enhancing their
    ability to raise revenue for their support and the transition to
    digital television. We are mindful, however, of UCC *et al*.'s
    concern that allowing NCE licensees to provide advertiser-supported
    services will denigrate the noncommercial nature of the public
    television system.[^72] We emphasize that NCE licensees will
    continue to be prohibited from providing advertising on their free
    over-the-air service. Moreover, although we are allowing NCE
    licensees considerable flexibility in providing remunerative
    ancillary or supplementary services, they are, of course, required
    by our amendment of Section 73.621 in this *Report and Order* to use
    their entire digital capacity primarily for a nonprofit,
    noncommercial, educational broadcast service and to provide at least
    one free over-the-air video program signal.[^73] As noted above, NCE
    licensees are further constrained by such limitations as the
    nonprofit educational mission upon which their tax exempt status is
    based, the need to preserve viewer and government support, the
    requirement to pay taxes on income unrelated to the exempt purpose
    of the organization, and the oversight of stations by responsible
    bodies. If we find that these requirements are not sufficient to
    ensure the integrity of the noncommercial educational broadcast
    service, we will revisit our decision to allow NCE licensees to
    provide advertiser-supported ancillary or supplementary services.

**C. Payment of fees**

34. *Background*. Section 336(e) of the 1996 Act requires DTV licensees
    receiving fees or certain other compensation for ancillary or
    supplementary services provided on the DTV spectrum to return a
    portion of that revenue to the public.[^74] In the *DTV Fees Report
    and Order*, we established a program for assessing and collecting
    fees for the provision of ancillary or supplementary services by
    commercial DTV licensees as required by the 1996 Act.[^75] We
    defined as \"feeable ancillary or supplementary service\" any
    ancillary or supplementary services for which the payment of a
    subscription fee is required to receive such services or for which
    the licensee receives any compensation from a third party other than
    commercial advertisements used to support non-subscription
    broadcasting.[^76]

35. In its Petition for Reconsideration of the *Fifth Report and Order*,
    AAPTS/PBS requested that we exempt public television licensees from
    any fee assessed in connection with revenue-generating use of the
    ancillary or supplementary services on their DTV spectrum \"to the
    extent that revenues from those service are used to support the
    licensee\'s mission-related activities.\"[^77] We sought comment in
    the *DTV Fees Proceeding* on whether noncommercial television
    licensees should be exempt from such fees or subject to a nominal
    fee when they offer ancillary or supplementary services as a source
    of funding for public television.[^78] In the *DTV Fees Report and
    Order*, we decided to consider the request for exempting NCE
    licensees from DTV fees in this proceeding, which focuses
    specifically on questions related to the remunerative use by NCE
    licensees of their excess digital capacity.[^79]

36. In the *NPRM*, we sought additional comment on this issue in light
    of the comments received in the *DTV Fees Proceeding* and the
    tentative proposals outlined in the *NPRM*. We sought comment on
    whether NCE licensees should be exempt from DTV fees when they offer
    remunerative ancillary or supplementary services as a source of
    funding for their mission-related activities. We sought comment
    generally on AAPTS/PBS\'s arguments in the *DTV Fees Proceeding* to
    exempt noncommercial licensees from fees for remunerative ancillary
    or supplementary services offered on their excess digital capacity.
    We particularly sought comment on whether such an exemption is
    consistent with Section 336, which does not distinguish between
    commercial and noncommercial licensees. We also sought comment on
    whether, if such an exemption is inconsistent with the statute, a
    nominal or reduced fee would be consistent with the statute. We also
    asked parties to address MAP\'s argument that if we allow
    noncommercial licensees to include advertising in any ancillary or
    supplementary services, these licensees should pay a fee comparable
    to that imposed on commercial broadcasters.[^80]

37. *Comments*. All NCE licensees that responded to this issue support
    granting NCE licensees an exemption from any assessment of fees on
    revenues earned by use of their digital spectrum for ancillary or
    supplementary services when those revenues are used to fund
    mission-related activities.[^81] AAPTS argues that although Section
    336 requires us to collect a fee when a licensee uses its digital
    spectrum for ancillary or supplementary service, when the revenue is
    used to support noncommercial services that are in the public
    interest, there is no need to \"recover\" anything for the public,
    as the revenue is already devoted to that purpose.[^82] AAPTS also
    argues that because these revenues help to support noncommercial
    activities, the provision of ancillary or supplementary services
    would not result in any \"unjust enrichment\" of the stations.[^83]
    AAPTS asserts that the provision in Section 336 governing the amount
    to be recovered through any fee, *i.e.*, the amount that would have
    been received if the excess digital spectrum had been subject to
    competitive bidding, makes no sense in the context of public
    television, as our competitive bidding authority does not apply to
    licenses issued to public television.[^84] In addition, the Curators
    of the University of Missouri (\"Curators\"), the licensee of
    commercial VHF station KOMU-TV, an NBC affiliate, urge us to make
    clear that governmental licensees are exempt from paying fees for
    ancillary or supplementary DTV services.[^85]

38. Go, Inc., Goodlife Broadcasting, Inc. and Central Florida
    Educational Foundation (filing collectively as \"Hardy & Carey
    Clients\") and AAPTS contend that such an exemption would be
    consistent with Congressional policy to provide support to public
    television.[^86] AAPTS notes that Congress has exempted public
    television from fees on various occasions, and it would be
    counterproductive to detract from the federal financial assistance
    for public broadcasting and place additional pressure on that
    support by imposing a DTV fee.[^87] Hardy & Carey Clients and Family
    Stations of New Jersey, Inc. (\"Family NJ\") also contend that
    imposing such fees could slow the transition to DTV and undermine
    the ability of noncommercial stations to sustain their
    operations.[^88]

39. UCC *et al*., however, supports exempting NCE licensees from DTV
    fees only if the licensees are not permitted to provide
    advertiser-supported ancillary or supplementary services. It
    contends that the plain language of Section 336(e) requires that
    fees be paid to recover a portion of the public spectrum resource
    made available for commercial use, and that AAPTS is inconsistent in
    arguing that Section 336 makes no distinction between noncommercial
    and commercial broadcasters for the purpose of offering ancillary or
    supplementary services, but then reading into the statute a
    distinction to exempt NCEs from paying fees for providing such
    services.[^89]

40. *Decision*. We conclude that NCE licensees are not exempt from the
    requirement to pay fees on revenues generated by the remunerative
    use of their excess digital capacity, even when those revenues are
    used to support their mission-related activities. Section 336(e)(1)
    of the 1996 Act does not support exempting NCE licensees from DTV
    fees or charging them nominal fees when they offer feeable ancillary
    or supplementary services as a source of funding for their
    mission-related activities. It draws no distinction between
    commercial and noncommercial stations, stating that we \"shall
    establish a program to assess and collect . . . . an annual fee\"
    from DTV licensees offering subscription-based ancillary or
    supplementary services.[^90] The statute requires that a fee be
    assessed upon any ancillary or supplementary services on DTV
    spectrum \"for which the payment of a subscription fee is required
    in order to receive such services\" or \"for which the licensee
    directly or indirectly receives compensation from a third party in
    return for transmitting materials furnished by such third
    party.\"[^91]

41. As noted above, Section 336 requires, among other things, that the
    amount of the fee be designed to recover for the public an amount
    that would have been received had feeable ancillary or supplementary
    services been licensed pursuant to competitive bidding.[^92] We are
    not persuaded by AAPTS\'s argument that this provision makes no
    sense in the context of public television licensees because they are
    not subject to competitive bidding.[^93] The Commission was not
    directed to take into account the amount of money that would have
    been recovered had *broadcasters* purchased *this* spectrum through
    competitive bidding. Rather, the provision refers to the amount of
    money that would have been recovered if spectrum had been made
    available for these kinds of ancillary or supplementary services and
    had been licensed pursuant to auction. Indeed, existing commercial
    broadcasters were also statutorily exempt from competitive bidding
    for initial digital television licenses.[^94] Thus, under AAPTS\'s
    reading, all existing commercial broadcasters that received initial
    DTV licenses under Section 336(a) would also be exempt from the fee,
    making the fee provision almost meaningless. We therefore reject
    AAPTS\'s argument.

42. Consequently, we will amend Section 73.624(g) of our rules to apply
    to NCE licensees the same program for assessing and collecting fees
    upon feeable ancillary or supplementary services provided on their
    DTV capacity that we established for commercial licensees in the
    *Fees Proceeding*,[^95] as required by the 1996 Act. NCE licensees
    will be required to report to us annually on December 1 on their use
    of their digital bitstreams, and remit fees of five percent of their
    gross revenues received for feeable ancillary or supplementary
    services provided on their digital bitstreams. For the first report
    filed on December 1, 2002, NCE licensees are to report only on
    services provided from the effective date of this *Report and Order*
    through September 30, 2002. We will amend form FCC 317, which
    currently is used to collect information on DTV ancillary or
    supplementary use by commercial TV licensees, to include NCE
    licenses. We will release a Public Notice with a copy of the revised
    form once it is approved by the Office of Management and Budget.

43. Finally, we also conclude that the Curators of the University of
    Missouri, the licensee of commercial VHF station KOMU-TV, an NBC
    affiliate, is not exempt from the requirement to pay fees on
    revenues generated by the remunerative use of its excess digital
    capacity, even when those revenues are used to support noncommercial
    services that are in the public interest. Although Curators is a
    not-for-profit governmental entity that we have exempted from paying
    certain application and regulatory fees,[^96] Section 336(e)(1) does
    not distinguish between governmental and nongovernmental licensees
    with respect to the requirement to pay DTV fees. Curators are
    therefore subject to the program for assessing and collecting fees
    upon feeable ancillary or supplementary services provided on their
    DTV capacity that we established for commercial licensees in the
    *Fees Report and Order* in MM Docket No. 97-247,[^97] and apply to
    NCE licenses in this proceeding.

44. We are sensitive to NCE licensees\' need to provide funding to
    support their programming and operations and their transition to
    DTV. As described above, NCE licensees will be able to use their
    ancillary or supplementary services for remunerative purposes, and
    earn advertising revenue, as well, on ancillary or supplementary
    services.

45. We also note that we have previously recognized the financial
    difficulties often faced by NCE licensees. For example, the
    construction timetable we adopted in the *Fifth Report and Order*
    provides noncommercial stations a six-year period within which to
    construct their DTV facilities, the longest construction period
    allotted to any category of DTV applicant. In the *Fifth Report and
    Order*, we also stated that special relief measures may eventually
    be warranted to assist public television stations to make the
    transition to DTV, but we concluded that it was premature to
    determine what those specific measures should be. We stated then,
    and we continue to believe, that determining the specific nature of
    whatever special relief may be needed for noncommercial educational
    broadcasters is best considered during our periodic reviews.[^98]

**D. Administrative Matters**

46. *Paperwork Reduction Act of 1995 Analysis*. The action contained
    herein has been analyzed with respect to the Paperwork Reduction Act
    of 1995 and found to impose new or modified reporting and
    recordkeeping requirements or burdens on the public. Implementation
    of these new or modified reporting and recordkeeping requirements
    will be subject to approval by the Office of Management and Budget
    as prescribed by the Act.

47. Accordingly, IT IS ORDERED that, pursuant to authority contained in
    Sections 4(i), 303, 336 and 399B of the Communications Act of 1934,
    as amended, 47 U.S.C. §§ 154(i), 303, 307, 336 and 399B, Part 73 of
    the Commission\'s rules IS AMENDED as set forth in Appendix C,
    below.

48. A Final Regulatory Flexibility Analysis (\"FRFA\"), *see* 5 U.S.C. §
    604, is contained in Appendix A. IT IS FURTHER ORDERED that the
    Commission\'s Compliance and Information Bureau, Reference
    Information Center, SHALL SEND a copy of this *Report and Order*,
    including the FRFA, to the Chief Counsel for Advocacy of the Small
    Business Administration.

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49. IT IS FURTHER ORDERED that, pursuant to the Contract with America
    Advancement Act of 1996, the rule amendments set forth in Appendix C
    SHALL BE EFFECTIVE the later of either thirty days after publication
    in the Federal Register, or upon receipt by Congress of a report in
    compliance with the Contract with America Advancement Act of 1996,
    Pub. L. No. 104‑121.

50. IT IS FURTHER ORDERED that implementation of the new or modified
    reporting and recordkeeping requirements imposed by this action
    SHALL BE EFFECTIVE upon approval by the Office of Management and
    Budget as prescribed by the Paperwork Reduction Act of 1995.

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51. IT IS FURTHER ORDERED that this proceeding IS TERMINATED.

FEDERAL COMMUNICATIONS COMMISSION

Magalie Roman Salas

Secretary

**APPENDIX A**

**Final Regulatory Flexibility Analysis**

As required by the Regulatory Flexibility Act (RFA),[^99] an Initial
Regulatory Flexibility Analysis (IRFA), was incorporated in the *Notice
of Proposed Rule Making* (*NPRM*) in this proceeding.[^100] The
Commission sought written public comment on the proposals in the *NPRM*,
including comment on the IRFA. This present Final Regulatory Flexibility
Analysis (FRFA) conforms to the RFA.[^101]

**A. Need for, and Objectives of, the Report and Order:** With this
*Report and Order*, the Commission clarifies the manner in which
noncommercial educational (NCE) television licensees may use their
excess digital television (DTV) capacity for remunerative purposes. The
objectives of this *Report and Order* are to: (1) require NCE licensees
to use their entire digital capacity primarily for a nonprofit,
noncommercial, educational broadcast service; (2) clarify that NCE
licensees may provide subscription television services; (3) determine
that although NCE licensees are prohibited form including advertising on
their broadcasting services, they may include advertising on
nonbroadcast services, such as subscription services, provided on their
DTV channels; and (4) require NCE licensees to pay fees on revenues
generated by the remunerative use of their excess digital capacity.

The action taken with respect to the first objective amends Section
73.621 of the Commission's rules to require NCE licensees to use their
entire digital capacity primarily for a nonprofit, noncommercial,
educational broadcast service. Although the Report and Order declined to
quantify the term "primarily," it states that it considers it to mean a
"substantial majority" of NCE licensees' entire digital capacity.
Because stations typically schedule their programming on a weekly basis,
it requires NCE TV licensees to use their entire bitstream primarily for
nonprofit, noncommercial, educational broadcast services on a weekly
basis. This action adapts Section 73.621 of the Commission's rules to
the digital environment.

The action taken with respect to the second objective amends Sections
73.642 and 73.644 of the Commission's rules to allow NCE licensees to
provide subscription television services. It is taken because the
Commission included subscription services in its definition of ancillary
and supplementary services in the *Fifth Report and Order*[^102] that
may be provided by DTV licensees, and because such action advances the
Commission's goal of providing NCE licensees with flexibility in the use
of their digital spectrum, within certain boundaries.

The action taken with respect to the third objective determines that
Section 399B, the provision of the Communications Act restricting
advertising by NCE licensees, continues to apply to all broadcasting by
NCE licensees, but does not apply to nonbroadcast services, such as
subscription services, provided on their DTV channels. This action
maintains the integrity of NCE licensees' nonprofit, noncommercial,
educational service on their free over-the-air video programming, while
allowing NCE licensees some flexibility to use their ancillary and
supplementary services for remunerative purposes.

The action taken with respect to the fourth objective amends Section
73.624(g) of the Commission's rules to apply to NCE licensees the
program for assessing and collecting fees upon feeable ancillary or
supplementary services provided on their DTV capacity that the
Commission established for commercial DTV licensees. This action is
taken because Section 336(e) of the Telecommunications Act of 1996
requires the Commission, without distinguishing between commercial and
NCE DTV licensees, to return to the public a portion of the fees or
certain other compensation earned by DTV licensees for ancillary and
supplementary services provided on their DTV spectrum.

**B. Summary of Significant Issues Raised by Public Comments in Response
to the IRFA:** No comments were received specifically in response to the
IRFA attached to the *NPRM*. No small business issues were raised
specifically in the comments responsive to the *NPRM.*

**C.** **Description and Estimate of the Number of Small Entities to
Which the Rules Would Apply**

The RFA directs agencies to provide a description of and, where
feasible, an estimate of the number of small entities that may be
affected by the proposed rules, if adopted.[^103] The RFA generally
defines the term \"small entity\" as having the same meaning as the
terms \"small business,\" \"small organization,\" and \"small
governmental jurisdiction.\"[^104] In addition, the term "small
business" has the same meaning as the term "small business concern"
under the Small business Act.[^105] 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).[^106] The
RFA[^107] generally defines the term \"small organization\" to mean
\"any not-for-profit enterprise which is independently owned and
operated and is not dominant in its field.\" A small organization is
generally \"any not-for-profit enterprise which is independently owned
and operated and is not dominant in its field.\"[^108]

The rules and policies adopted in this Report and Order will apply to
noncommercial educational (NCE) television licensees, particularly those
television stations licensed to operate on channels reserved as
\"noncommercial educational.\" For RFA purposes, television broadcasting
stations consist of establishments primarily engaged in broadcasting
visual programs by television to the public, except cable and other pay
television services.[^109] Included in this industry are commercial,
religious, educational, and other television stations.[^110] Also
included are establishments primarily engaged in television broadcasting
and that produce taped television program materials.[^111] There were
1,678 operating television broadcasting stations in the nation as of
June 30, 2001, of which 374 were noncommercial educational
stations.[^112] The SBA has determined that television broadcasters are
considered small when they have \$10.5 million or less in annual
revenue.[^113]

NCE TV licensees, by virtue of their nonprofit, noncommercial,
educational broadcasting operations, generate less revenue than
commercial TV licensees and are more likely than commercial TV
broadcasters to experience financial difficulties in constructing their
DTV facilities and making the transition to DTV broadcasting. NCE TV
licensees depend partially on fundraising activities and grants from the
Corporation for Public Broadcasting to support their programming and
operations and their transition to DTV. Based on such differences
between typical commercial TV licensees and typical NCE TV licensees,
and based on the concern that NCE TV licensees may be differently
impacted by the rule amendments and other actions taken in this Report
and Order, we choose to separate out NCE TV licensees as smaller
entities in the context established herein by the RFA. Therefore, of the
1,678 television stations previously noted, we will consider the 374 NCE
TV stations to be smaller entities in the context established herein by
the RFA.[^114]

**D. Description of Projected Reporting, Recordkeeping, and Other
Compliance Requirements:** The *Report and Order* adopts modifications
to existing reporting and recordkeeping requirements. The fee program
established herein will require NCE TV licensees annually to file a new
reporting form. Licensees will be required to report whether they
provided ancillary or supplementary services, what ancillary or
supplementary services they provided, which of those services are
subject to a fee, and the gross revenues received from all feeable
ancillary or ancillary services. NCE licensees providing service subject
to a fee additionally will be required annually to file FCC Form 159 in
remittance of the fee. So that we may audit NCE licensees records
supporting the calculation of the fees due, each NCE licensee will be
required to retain such records for three years from the date of
remittance of fees. In addition, each NCE TV licensee will be required
to maintain documentation sufficient to show compliance at renewal time
and in response to any complaint with the requirement to use their
entire bitstream primarily for nonprofit, noncommercial, educational
broadcast services on a weekly basis.

All these new recordkeeping and reporting requirements will apply to all
NCE TV licensees in the same way. Therefore, the action taken here
imposes no separate or greater compliance burdens on smaller commercial
or non-commercial TV stations within the group of all stations hereby
affected.

**E. Steps Taken to Minimize Significant Economic Impact on Small
Entities, and Significant Alternatives Considered:** With respect to
steps taken to minimize significant economic impact on small entities,
the actions taken herein will enhance NCE TV licensees' ability to
provide funding to support their programming and operations and their
transition to DTV. As described above, NCE licensees will be able to use
a portion of their digital capacity for remunerative purposes, including
the provision of advertising on their non-broadcast ancillary and
supplementary services. We also note that the Commission has previously
recognized the financial difficulties often faced by NCE licensees. For
example, the construction timetable adopted in the *Fifth Report and
Order* provides noncommercial stations a six-year period within which to
construct their DTV facilities, the longest construction period allotted
to any category of DTV applicant. The *Fifth Report and Order* also
stated that special relief measures may eventually be warranted to
assist public television stations to make the transition to DTV, but
concluded that it was premature to determine what those specific
measures should be. The Commission stated then, and continues to
believe, that determining the specific nature of whatever special relief
may be needed for noncommercial educational broadcasters is best
considered during the Commission's periodic reviews.[^115] Lastly, we
are considering all NCE broadcasters to be small for the purposes of
this RFA analysis.

With respect to significant alternatives considered with respect to the
first objective, the Commission considered applying Section 73.621 of
the Commission's rules to only the one free-over-the-air video broadcast
required of all DTV licensees, allowing NCE TV licensees commercial use
on their remaining digital capacity. This alternative was not adopted
because the Commission believed that it would conflict with Section
73.621, which requires that public television stations furnish primarily
an educational as well as a nonprofit and noncommercial broadcast
service.

Another significant alternative to the first objective considered
requiring NCE TV licensees to provide free, not-for-profit over-the-air
services over 50 percent or more of their digital capacity at any one
time. This alternative was not adopted as such a decision would provide
substantially less flexibility to NCE licensees in developing their
digital services. For example, an NCE licensee might want to use most of
its digital capacity for High Definition Television (\"HDTV\")
programming during certain times of the day and, at other times, various
amounts of capacity for Standard Definition Television (\"SDTV\")
programming and remunerative ancillary or supplementary services.

With respect to the second objective, a significant alternative
considered prohibiting NCE TV licensees from providing subscription
services on their excess digital capacity. This alternative was not
adopted because the Commission had included such services in the
definition of ancillary or supplementary services in the *Fifth Report
and Orde*r. Moreover, given the Commission's goal of providing NCE
licensees with flexibility in the use of their digital spectrum, within
certain boundaries, there seemed to be no reason to prohibit them from
providing subscription services. Moreover, the ability to provide such a
remunerative service is positive.

With respect to significant alternatives considered to the third
objective, the Commission considered interpreting Section 399B of the
Communications Act as prohibiting all advertising on all of NCE TV
licensees' digital capacity. This alternative was not adopted because
the Commission decided that the better interpretation of the statute was
that the broadcasting of advertising is prohibited to NCE TV licensees,
but that they may include advertising on their non-broadcast ancillary
and supplementary services. Moreover, as the action allows all stations
affected to earn money from the provision of advertising, the effect is
positive.

With respect to significant alternatives to the fourth action taken, the
Commission considered collecting a reduced fee or no fee on the gross
revenues earned by NCE TV licenses from all feeable ancillary and
supplementary services. The Commission did not adopt either of these
alternatives because the Telecommunications Act of 1996, without
distinguishing between commercial TV licensees and NCE TV licensees,
requires it to collect fees from such revenues from DTV licensees. The
Commission will apply to NCE TV licensees the program for assessing and
collecting such fees that it established for commercial DTV licensees.
Although all NCE TV licensees, including small entity licensees, will be
required to pay these fees, they will be allowed to retain 95 percent of
such revenues, which is a positive, impact.

**Report to Congress**: The Commission will send a copy of this *Report
and Order*, including this FRFA, in a report to Congress pursuant to the
Congressional Review Act.[^116] In addition, the Commission will send a
copy of this *Report and Order,* including this FRFA, to the Chief
Counsel for Advocacy of the SBA. A copy of this *Report and Order*,
including this FRFA, will also be published in the Federal
Register.[^117]

**APPENDIX B**

**LIST OF COMMENTERS**

The Association of America\'s Public Television Stations

Curators of the University of Missouri

Go, Inc., Goodlife Broadcasting, Inc. and Central Florida Educational
Foundation (filed collectively as \"Hardy & Carey Clients\")

National Datacast, Inc.

The Office of Communication of the United Church of Christ, Inc., the
Alliance for Community Media, the Benton Foundation, the Center for
Media Education, Independent Television Service, Libraries for the
Future, Media Access Project, Native American Public Telecommunications,
Inc, and the Screen Actors Guild (\"UCC *et al.*\")

**LIST OF REPLY COMMENTERS**

The Association of America\'s Public Television Stations

Family Stations of New Jersey, Inc.

National Datacast, Inc.

UCC *et al*.

**APPENDIX C**

**Rule Changes**

Part 73 of Title 47 of the U.S. Code of Federal Regulations is amended
as follows:

1\. Section 73.621 is amended by adding paragraph (i) to read as
follows:

§ 73.621 Noncommercial educational TV stations.

\* \* \* \* \*

\(i\) With respect to the provision of advanced television services, the
requirements of this Section will apply to the entire digital bitstream
of noncommercial educational television stations, including the
provision of ancillary or supplementary services.

\* \* \* \* \*

2\. Section 73.624(g) is amended by revising paragraphs (g)(1),
(g)(2)(i), and (g)(2)(ii) to read as follows:

§ 73.624 Digital Television Broadcast Stations.

\* \* \* \* \*

(g)(1) Commercial and noncommercial DTV licensees must annually remit a
fee of five percent of the gross revenues derived from all ancillary or
supplementary services, as defined by paragraph (b) hereof, which are
feeable, as defined in paragraphs (i) - (ii) hereof. \* \* \*

\* \* \* \* \*

(g)(2) Payment of Fees

\(i\) Each December 1, all commercial and noncommercial DTV licensees
will electronically report whether they provided ancillary or
supplementary services in the twelve-month period ending on the
preceding September 30. \* \* \*

\(ii\) If a commercial or noncommercial DTV licensee has provided
feeable ancillary or supplementary services at any point during a
twelve-month period ending on September 30, the licensee must
additionally file the FCC\'s standard remittance form (Form 159) on the
subsequent December 1. \* \* \*

\* \* \* \* \*

3\. Section 73.642 is amended by revising paragraphs (a), (b) and (e) to
read as follows:

§ 73.642 Subscription TV service.

\(a\) Subscription TV service may be provided by:

\(1\) Licensees and permittees of commercial and noncommercial TV
stations, and

\(2\) Licensees and permittees of low power TV stations.

\(b\) A licensee or permittee of a commercial or noncommercial TV
station or a low power TV station may begin subscription TV service upon
installation of encoding equipment having advance FCC approval. \* \* \*

\* \* \* \* \*

\(e\) A licensee or permittee of a commercial or noncommercial TV
broadcast or low power TV station may not transmit a subscription
service if it has a contract, arrangement, or understanding expressed or
implied, that: \* \* \*

\* \* \* \* \*

4\. Section 73.644 is amended by revising paragraph (a) to read as
follows:

§ 73.644 Subscription TV transmission systems.

\(a\) Licensees and permittees of commercial and noncommercial TV
broadcast and low power TV stations may conduct subscription operations
only by using an encoding system that has been approved in advance by
the FCC. \* \* \*

\* \* \* \* \*

STATEMENT OF MICHAEL K. POWELL, CHAIRMAN

*Re: Report and Order in MM Docket No. 98-203---In the Matter of
Ancillary or Supplemental Use of Digital Television Capacity by
Noncommercial Licensees*

The *Report and Order* we adopt today will help bring public television
into the digital age.

First, we enhance the benefits of public television by providing
stations with the flexibility to fulfill their mission through
innovative uses of digital technology. Public television is on the
cutting edge of some of the most exciting new digital programming and I
am pleased that the O*rder* we adopt today supports their continued
exploration of this new medium.

Second, we provide a limited but critical additional funding source that
can facilitate the transition of public TV stations to digital
television. These stations expect to spend about 1.7 billion dollars on
the transition. So far, only 11% of them have completed the required DTV
build-out. Additional revenue streams, beyond those employed today, have
become essential for public television to successfully make the
transition to digital television.

Third, the *Order* has established strong safeguards to insure that the
fundamental nature of public broadcasting will not suffer. However, I am
of the strong belief that regardless of any regulatory safeguards,
public television will continue to do in the digital age what it has
done so well in the past; serve the public interest by producing superb,
noncommercial educational programming.

DISSENTING statement

OF COMMISSIONER MICHAEL J. COPPS

*Re: Report and Order in MM Docket No. 98-203 In the Matter of the
Ancillary or Supplementary Use of Digital Television Capacity by
Noncommercial Licensees*

This is a difficult issue. I've talked to many people about it, pro and
con; I've read the pro-public TV press release that's going out today;
I've tried to come at it from every perspective I can. But I just cannot
convince myself that this is what we ought to be doing.

I am impugning no one's commitment to public television today. I believe
that each of the Commissioners wants public television to succeed. We
differ on strategy.

For my part, I am deeply troubled by this proposal. I think it is in
some respects contrary to law. Additionally, it has the potential to
warp the nation's image of public television and to endanger the
identity and even the viability of a national treasure. Public
television is the gem of broadcast television. It has a rich record of
program success, a clearly identifiable niche in our national life, and
unmatched credibility thanks to the tireless work of thousands of
dedicated Americans.

I begin with the premise that Congress did not establish public
television to be the same as commercial television, nor even to be a
little different than commercial television. Public broadcasting was to
be what commercial broadcasting was not. Commercial television is about
appealing to and entertaining the broadest possible market. Public
television is about serving the better angels of our nature. It is about
sustaining the virtues of education, civic involvement and American
democracy. It in no way denigrates commercial television to say that
public television is supposed to be, and is, different. When it begins
to lose this different identity, it begins to lose its soul.

In establishing the Corporation for Public Broadcasting, and public
television as we know it, Congress reported that public broadcasters
"will not be in economic competition with commercial broadcasters.
\[They\] will be filling the gaps that commercial broadcasters do not
fill. As Dr. Frank Stanton, president of CBS, observed:

They will do special things that we don\'t do in quantity at the present
time...they will appeal at certain times of the day to very small parts
of the total audience. Because we are organized as a mass medium,
because we have to serve the greatest number of people in order to do
our job, they will be able to do special interest kinds of programming
that we can\'t do."[^118]

Here at the FCC, we are talking quite a lot about convergence --
convergence of technologies, convergence of capital, convergence of
regulatory schemes. We need to deal with convergence. But there may be
some convergences that are neither inevitable nor good. The sort of
convergence we ***don't*** want to see is convergence of our public and
commercial television services until they become indistinguishable one
from another.

It's advertising that has me upset. The sale of advertising puts on the
block one of the very things that makes public television special and
different from commercial broadcasting. I believe that permitting
advertisements on the digital spectrum of public television is contrary
to statute, contrary to the will of Congress and contrary to the mission
of public television.

Section 399B of the Communications Act prohibits public television
stations from using any of their facilities for the broadcast of
advertisements.[^119] This section defines "advertisement" for the
purposes of the section as "material which is broadcast or otherwise
transmitted in exchange for any remuneration." That the Commission today
may determine that this prohibition does not apply to advertisements
carried on the non-broadcast portion of the bitstream -- the spectrum
used for subscription or data services -- seems to me to contravene the
clear language of the statute. And it is certainly inconsistent with the
heritage, and indeed the integrity, of public television.

I agree with the apparent majority in its conclusion that non-commercial
educational television stations should devote the majority of their
capacity to the provision of non-commercial educational programming.
That is consistent with the mission of public broadcasting and with the
goals of Congress in establishing and funding the Corporation for Public
Broadcasting.

I am mindful of the argument that public television needs these dollars
in order to transition to digital. I support giving public television
the opportunity to avail itself of the tremendous potential of digital
technology, to give public broadcasters the opportunity to use their
digital spectrum flexibly, for creative, innovative and even
remunerative services. Some of the proposed uses I have been told about
are quite impressive. Some stations intend to allow college students in
rural areas to enroll in courses and subscribe to televised lectures on
their local public television station. Others intend to bring up-to-the
minute classroom materials to children through the transmission of data
over public television stations' bitstream. These are creative and
remunerative uses of public television's capacity -- and they further
the mission of public television to serve the public interest. I want
these stations to be able to collect subscription or lease fees for
these services. What we must avoid, however, is turning this national
treasure into just another commercial broadcast service.

Because public television stations ***are*** different, they should be
able to use every penny they collect for the development of new and
innovative programming. I would hope that, consistent with the law,
public television could be exempted from the five per cent federal
government fee for such services.

But it is also true that we have not heard from many public broadcasters
about how they plan to use their digital spectrum. And I have even heard
one or two schemes that I think would be counter-productive. So I am
fearful that once we start down the road of commercialization, the Law
of Unintended Consequences will kick in and ere long we will be dealing
with revenue-raising schemes that will detract from and endanger the
integrity of public television.

One of these unintended consequences could be the endangerment of
current public television funding. If people see public television
making money through advertising, what happens to their receptivity to
appeals for contributions from the stations? What happens to foundation
support and corporate contributions? Do the people's elected
representatives begin to look differently at the levels of support they
provide? And what about our commercial broadcast friends? Won't they
take a jaundiced, although understandable, view against multiple revenue
streams flowing to public television? Should we expect them to sit idly
by while this happens?

I don't know the answers to these questions. I do know that it would be
a shame if today's action undermines support for this precious national
resource.

I am also troubled by the lack of consensus from the public television
community. Some are full speed ahead. Some are clearly worried. Some, I
think, sense danger but are reluctant to express it. I hope that there
was, and will continue to be, at least a sustained dialogue among the
friends of public television on this important issue.

While there are parts of the Report and Order that I support, I don't
see this as the time for a mixed message. When the vote is called, I am
going to dissent.

[^1]: ^?^ *Report and Order* in MM Docket No. 97-247, In the Matter of
    Fees for Ancillary or Supplementary Use of Digital Television
    Spectrum Pursuant to Section 336(e)(1) of the Telecommunications Act
    of 1996, 14 FCC Rcd 3259, 3272-73 (1998) (\"*DTV Fees Report and
    Order*\"), *Memorandum Opinion and Order on Reconsideration*, FCC
    99-362 (released November 24, 1999) (*see* n. 11, *infra*). Pub.L.
    No. 104-104, 110 Stat. 56 § 201 (1996), *codified* at 47 U.S.C. §
    336.

[^2]: ^?^ 47 U.S.C. 336(c).

[^3]: ^?^ *Fifth Report and Order* in MM Docket No. 87-268, In the
    Matter of Advanced Television Systems and Their Impact upon the
    Existing Television Broadcast Service, 12 FCC Rcd 12809 (1997)
    (\"*Fifth Report and Order*\"). We subsequently adopted a Memorandum
    Opinion and Order on Reconsideration of the Fifth Report and Order
    in the DTV proceeding, *Reconsideration of Fifth Report and Order*
    in MM Docket No. 87-268, In the Matter of Advanced Television
    Systems and Their Impact upon the Existing Television Broadcast
    Service, 13 FCC Rcd. 6860 (1998) (\"*Reconsideration of Fifth Report
    and Order*\"), and a Second Memorandum Opinion and Order of the
    Fifth and Sixth Report and Orders in the DTV proceeding, *Second
    Reconsideration of the Fifth and Sixth Report and Orders* in MM
    Docket No. 87-268, In the Matter of Advanced Television Systems and
    Their Impact upon the Existing Television Broadcast Service, 14 FCC
    Rcd. 1348 (1998) (\"*Second Reconsideration of the Fifth and Sixth
    Report and Orders*\"). We address the ancillary and supplementary
    use of DTV by noncommercial licensees in this proceeding.

[^4]: ^?^ The digital spectrum provides capacity for a number of
    standard definition channels on the spectrum allotted to each DTV
    broadcaster. *Fifth Report and Order* in MM Docket No. 87-268, 12
    FCC Rcd at 12820-23.

[^5]: ^?^ Petition for Reconsideration and Clarification of Association
    of America\'s Public Television Stations and Public Broadcasting
    Service in MM Docket No. 87-268, 26-27, filed June 13, 1997
    (\"*AAPTS/PBS Petition for Reconsideration*\").

[^6]: ^?^ Media Access Project filed jointly with the Center for Media
    Education, the Consumer Federation of America, the Minority Media
    and Telecommunications Council, and the National Federation of
    Community Broadcasters.

[^7]: ^?^ *Notice of Proposed Rulemaking* in MM Docket No. 98-203, In
    the Matter of Ancillary or Supplementary Use of Digital Television
    Capacity by Noncommercial Licensees, 14 FCC Rcd 537 (rel. Nov. 23,
    1998) (\"*NPRM*\").

[^8]: ^?^ AAPTS/PBS Petition for Reconsideration at p. 28, n. 29.

[^9]: ^?^ 47 U.S.C. at § 336(e)(1)(A)-(B). *See also* H.R. Conf. Rep.
    No. 458, 104th Cong., 2nd Sess. 160 (1996).

[^10]: ^?^ *Notice of Proposed Rule Making* in MM Docket No. 97-247, In
    the Matter of Fees for Ancillary or Supplementary Use of Digital
    Television Spectrum Pursuant to Section 336(e)(1) of the
    Telecommunications Act of 1996, 12 FCC Rcd 22821 (1997) (\"*DTV Fees
    Proceeding*\").

[^11]: ^?^ *Report and Order* in MM Docket No. 97-247, In the Matter of
    Fees for Ancillary or Supplementary Use of Digital Television
    Spectrum Pursuant to Section 336(e)(1) of the Telecommunications Act
    of 1996, 14 FCC Rcd 3259, 3272-73 (1998) (\"*DTV Fees Report and
    Order*\"). We subsequently adopted *a Memorandum Opinion and Order
    on Reconsideration* in MM Docket No. 97-247, In the Matter of Fees
    for Ancillary or Supplementary Use of Digital Television Spectrum
    Pursuant to Section 336(e)(1) of the Telecommunications Act of 1996,
    FCC 99-362 (released November 24, 1999) (\"*Reconsideration of DTV
    Fees Report and Order*\").

[^12]: ^?^ 47 U.S.C. § 397(6).

[^13]: ^?^ Omnibus Budget Reconciliation Act of 1981, Pub. Law No.
    97-35, § 1231, 95 Stat. 357, 731 (codified at 47 U.S.C. §399B). *See
    also* H.R. Rep. No. 97-82, at 13-14.

[^14]: ^?^ Section 399B also requires that public stations engaged in
    revenue generating activities comply with accounting procedures
    designed to separately identify these commercial revenues and costs,
    and it prohibits Corporation for Public Broadcasting funds from
    being used to defray any costs associated with these activities. 47
    U.S.C. § 399B.

[^15]: ^?^ 47 U.S.C. § 399B(a)(2).

[^16]: ^?^ Section 73.621 of the Commission\'s Rules, 47 C.F.R. §
    73.621, provides in pertinent part:

    \(a\) . . . noncommercial educational broadcast stations will be
    licensed only to nonprofit educational organizations upon a showing
    that the proposed stations will be used primarily to serve the
    educational needs of the community; for the advancement of
    educational programs; and to furnish a nonprofit and noncommercial
    television broadcast service.

    Each station shall furnish a nonprofit and noncommercial broadcast
    service. . . . .

[^17]: ^?^ *Fifth Report and Order* in MM Docket No. 87-268, 12 FCC Rcd
    at 12820-21, 12859, Appendix A, Part 73, Section 73.624 (c),
    *amending* Part 73 of the U.S. Code of Federal Regulations.

[^18]: ^?^ 47 U.S.C. § 399B(c). *See* ¶ 7, *supra*, for definition of a
    \"noncommercial educational broadcast station\" and \"public
    broadcast station\" under Section 397(6) of the Communications Act
    of 1934, 47 U.S.C. § 397(6). Section 73.621(a) of the our rules, 47
    C.F.R. § 73.621(a), reiterates the purpose of public television
    stations, stating that such licenses will be granted only upon a
    showing that the stations will be used primarily to serve the
    educational needs of the community; for the advancement of
    educational programs; and to furnish a nonprofit and noncommercial
    television broadcast service.

[^19]: ^?^ Comments of AAPTS at 20-22 *citing* 47 C.F.R. § 73.621(a); 47
    U.S.C. § 399B(c).

[^20]: ^?^ Comments of AAPTS at 26-27.

[^21]: ^?^ Comments of AAPTS at 23-24.

[^22]: ^?^ Comments of AAPTS at 27-29.

[^23]: ^?^ *See* 47 C.F.R. § 73.621(a); 47 U.S.C. 399B(c). *See also* 47
    U.S.C. 336(b) (non-derogation requirements). *Ex parte* letter of
    AAPTS, October 20, 1988 (Voluntary Guidelines assuring that
    ancillary of supplementary services will not interfere with a
    station's primary noncommercial educational broadcast service in
    terms of either quantity or quality.)

[^24]: ^?^ AAPTS notes that its recent survey of public television
    licensees indicates that nearly 30 percent of licensees do not
    intend to use any of their digital capacity for non-mission-related
    services. In any case, AAPTS contends that there is no question that
    any remunerative ancillary or supplementary services offered by
    public television stations will be subsidiary to their noncommercial
    mission-related activities. Comments of AAPTS at 9.

[^25]: ^?^ Examination of our digital television regulations are
    scheduled every two years until the transition to the digital
    spectrum is completed. Comments of AAPTS at 30. *Fifth Report and
    Order*, 12 FCC Rcd at 12856-57.

[^26]: ^?^ The Office of Communication of the United Church of Christ,
    Inc., filed jointly with the Alliance for Community Media, the
    Benton Foundation, the Center for Media Education, Independent
    Television Service, Libraries for the Future, Media Access Project,
    Native American Public Telecommunications, Inc, and the Screen
    Actors Guild.

[^27]: ^?^ Reply comments of UCC *et al*. at 7-8.

[^28]: ^?^ Comments of National Datacast at 3-4 *citing Teletext
    Transmission*, 53 R.R. 2d 1309, 1322 (1983).

[^29]: ^?^ Reply comments of National Datacast, Inc. at 2. National
    Datacast also contends that its commercial data transmissions, which
    help support public television, should not be classified as
    ancillary or supplementary services, reasoning that its data
    services advance the statutory mission of public television no less
    than do NCE stations\' programs and other services. Comments of
    National Datacast, Inc. at 5. It is clear from the *Fifth Report and
    Order*, however, that such services are ancillary or supplementary
    services. *Fifth Report and Order*, 12 FCC Rcd at 12859, Appendix A,
    Part 73, Section 73.624(c), *amending* Part 73 of Title 47 of the
    U.S. Code of Federal Regulations. To the extent National Datacast is
    seeking reconsideration of the *Fifth Report and Order*, its
    pleading is untimely. Moreover, it is not clear how a determination
    whether National Datacast's services are or are not ancillary or
    supplementary relates to the issues in this proceeding. If its
    arguments relate to future must carry status of its services, they
    should be directed to the must carry proceeding, *In the Matter of
    Carriage of the Transmissions of Digital Television Broadcast
    Stations, Amendments to Part 76 of the Commission\'s Rules*, CS
    Docket No. 98‑120 ("*Must Carry Proceeding*").

[^30]: ^?^ *See, e.g.,* In the Matter of Policies and Rules Concerning
    Children\'s Television Programming, Revision of Programming Policies
    for Television Broadcast Stations in MM Docket No. 93-48, 11 FCC Rcd
    10660, 10711 (1996).

[^31]: ^?^ 47 U.S.C. 336(b).

[^32]: ^?^ *Fifth Report and Order*, 12 FCC Rcd at 12820.

[^33]: ^?^ 47 U.S.C. 336(b).

[^34]: ^?^ *Fifth Report and Order* in MM Docket No. 87-268, 12 FCC Rcd
    at 12820-23.

[^35]: ^?^ Examples of such limitations include NCE licensees\'
    nonprofit educational mission upon which their tax exempt status is
    based, the need to preserve viewer and government support, the
    requirement to pay taxes on income unrelated to the exempt purpose
    of the organization, and the oversight of stations by responsible
    bodies. *See* ¶ 12, *supra*.

[^36]: ^?^ *Fifth Report and Order* at 12852.

[^37]: ^?^ *Fifth Report and Order*, 12 FCC Rcd at 12859, Appendix A,
    Part 73, Section 73.624(c), *amending* Part 73 of Title 47 of the
    U.S. Code of Federal Regulations.

[^38]: ^?^ AAPTS/PBS Petition on Reconsideration of the *Fifth Report
    and Order* at 26-28.

[^39]: ^?^ MAP Opposition to AAPTS/PBS Petition for Reconsideration of
    the *Fifth Report and Order* at 8-9.

[^40]: ^?^ AAPTS/PBS Reply at 6-7 (*citing* 47 U.S.C. § 336 (a)(2)).

[^41]: ^?^ 14 FCC Rcd at 549-50.

[^42]: ^?^ 47 U.S.C. § 399B. An advertisement is defined as a \"message
    or other programming material which is broadcast or otherwise
    transmitted in exchange for any remuneration, and which is intended
    (1) to promote any service, facility, or product offered by any
    person who is engaged in such offering for profit; (2) to express
    the views of any person with respect to any matter of public
    importance or interest; or (3) to support or oppose any candidate
    for political office.\" Under Section 399A, public stations may
    acknowledge underwriting contributions with brief messages that
    identify but do not promote underwriters and their products (e.g.,
    do not provide information on sales or discounts, call upon the
    viewer to take action, provide qualitative claims such as \"the
    best.\") 47 U.S.C. § 399A.

[^43]: ^?^ AAPTS/PBS Reply at 6-7. Section 336(a)(2) requires us to
    \"adopt regulations that allow \[DTV licensees\] to offer such
    ancillary or supplementary services on designated frequencies as may
    be consistent with the public interest, convenience, and
    necessity.\" 47 U.S.C. § 336(a)(2).

[^44]: ^?^ Comments of UCC *et al*. at 5-9. Reply comments of UCC *et
    al*. at 3-5.

[^45]: ^?^ Comments of UCC *et al*. at 5-9. Reply comments of UCC *et
    al*. at 1-2.

[^46]: ^?^ Comments of UCC *et al*. at 8-9.

[^47]: ^?^ Comments of AAPTS at 24-25. Reply comments of Family Stations
    of New Jersey, Inc. (\"Family NJ\") at 2.

[^48]: ^?^ Reply comments of AAPTS at 4-5. *Ex parte* letter of AAPTS,
    October 8, 1999, at 1-2.

[^49]: ^?^ Comments of AAPTS at 24-25. Reply comments of AAPTS at 5-6.

[^50]: ^?^ Comments of AAPTS at 24-25. Reply comments of Family NJ at 2
    *citing Teletext Transmission by TV Stations*, 53 R.R. 2d 1309, 1322
    (1983)). *See also* reply comments of National Datacast at 1-2.

[^51]: ^?^ Reply comments of National Datacast at 1-2 *citing Teletext
    Transmission by TV Stations*, 53 R.R. 2d 1309, 1322 (1983).

[^52]: ^?^ Reply comments of UCC *et al*. at 5-7.

[^53]:
    > Comments of UCC *et al*. at 13-15.

[^54]: ^?^ AAPTS comments at 25-26.

[^55]: ^?^ As discussed in the following paragraphs, some ancillary or
    supplementary services may fit the definition of \"broadcasting.\"

[^56]: ^?^ Comments of UCC *et al*. at 8.

[^57]: ^?^ AAPTS argues that "\[t\]he phrase 'otherwise transmitted'
    also has clear meaning, given the technologies available in 1981
    when the legislation was under consideration. At the time the
    statute was being deliberated, several forms of 'non-broadcast'
    transmission services were being used or had been used by television
    stations. It is therefore reasonable to suppose that Congress was
    fully aware of these developments and intentionally considered them
    when legislating." *Ex parte* letter of AAPTS, October 8, 1999, at
    2; *see id*. at 2-7 (describing such nonbroadcast services as use of
    the vertical blanking interval, teletext, the instructional
    television fixed service, and the broadcast auxiliary service).

[^58]: ^?^ 399B(b)(2) (emphasis added).

[^59]: ^?^ 47 U.S.C. § 153(6).

[^60]: ^?^ *Subscription Video*, 2 FCC Rcd 1001 (1987), *aff\'d sub nom.
    National Association for Better Broadcasting v. FCC*, 849 F.2d 665
    (D.C. Cir. 1988). We recognize that Section 399B was enacted before
    *Subscription Video*. Congress gave no indication in Section 399B,
    however, that it intended to lock in the Commission's prior
    interpretation of the statutory definition of the term
    "broadcasting." *See Lukhard v. Reed*, 481 U.S. 368, 379 (1987) ("It
    is of course not true that whenever Congress enacts legislation
    using a word that has a given administrative interpretation it means
    to freeze that administrative interpretation in place.").

[^61]: ^?^ *Id*. at 1004.

[^62]: ^?^ *Id*.

[^63]: ^?^ For example, a public television station would not be
    permitted to enter into an agreement that would allow \"Network A\"
    to *broadcast* its advertiser-supported \"Popular Program B\" over
    the public television station\'s excess digital capacity, while an
    agreement that would allow \"Network A\" to transmit its \"Popular
    Program B\" on a *subscription basis* would be permitted.

[^64]: ^?^ *Fifth Report and Order*, 12 FCC Rcd at 12859, Appendix A,
    Part 73, Section 73.624 (c), *amending* Part 73 of Title 47 of the
    U.S. Code of Federal Regulations.

[^65]: ^?^ *Fifth Report and Order*, 12 FCC Rcd at 12859, Appendix A,
    Part 73, Section 73.624(b) & (c), *amending* Part 73 of Title 47 of
    the U.S. Code of Federal Regulations.

[^66]:
    > *Fifth Report and Order*, 12 FCC Rcd at 12859, Appendix A, Part
    > 73, Section 73.624 (c), *amending* Part 73 of Title 47 of the U.S.
    > Code of Federal Regulations.

[^67]: ^?^ For example, an NCE licensee might provide data services that
    could be accessed by the general public using a personal computer or
    provide, through interactive DTV programming, sports scores that
    could be accessed by the public viewing a broadcast sports event.

[^68]: ^?^ 47 U.S.C. § 153(6).

[^69]: ^?^ Section 399B also requires that public stations engaged in
    revenue generating activities comply with accounting procedures
    designed to separately identify these commercial revenues and costs,
    and it prohibits Corporation for Public Broadcasting funds from
    being used to defray any costs associated with these activities. 47
    U.S.C. § 399B.

[^70]: ^?^ AAPTS/PBS Reply at 6-7. Section 336(a)(2) requires us to
    \"adopt regulations that allow \[DTV licensees\] to offer such
    ancillary or supplementary services on designated frequencies as may
    be consistent with the public interest, convenience, and
    necessity.\" 47 U.S.C. § 336(a)(2).

[^71]: ^?^ 47 U.S.C. § 336(a)(2).

[^72]: ^?^ Comments of UCC *et al*. at 14 ("While permitting
    advertiser-supported ancillary or supplementary services over
    noncommercial stations may bring some short-term financial gains for
    those stations, they could very well lead to the long-term erosion
    of the entire system.").

[^73]: ^?^ Although we decline to quantify the term "primarily," we will
    consider it to mean a "substantial majority" of their entire digital
    capacity. *See* ¶¶ 15- 16, *supra*.

[^74]: ^?^ 47 U.S.C. § 336

    \(e\) FEES

    \(1\) SERVICES TO WHICH FEES APPLY \-- If the regulations prescribed
    pursuant to subsection (a) permit a licensee to offer ancillary or
    supplementary services on a designated frequency \--

    \(A\) for which the payment of a subscription fee is required in
    order to receive such services, or

    \(B\) for which the licensee directly or indirectly receives
    compensation from a third party in return for transmitting material
    furnished by such third party (other than commercial advertisements
    used to support broadcasting for which a subscription fee is not
    required),

    the Commission shall establish a program to assess and collect from
    the licensee for such designated frequency an annual fee or other
    schedule or method of payment that promotes the objectives described
    in subparagraphs (A) and (B) of paragraph (2).

    \(2\) COLLECTION OF FEES.\-- The program required by paragraph (1)
    shall\--

    \(A\) be designed (i) to recover for the public a portion of the
    value of the public spectrum resource made available for such
    commercial use, and (ii) to avoid unjust enrichment through the
    method employed to permit such uses of that resource;

    \(B\) recover for the public an amount that, to the extent feasible,
    equals but does not exceed (over the term of the license) the amount
    that would have been recovered had such services been licensed
    pursuant to the provisions of section 309(j) of this Act and the
    Commission's regulations thereunder; and

    \(C\) be adjusted by the Commission from time to time in order to
    continue to comply with the requirements of this paragraph.

[^75]: ^?^ *Report and Order* in MM Docket No. 97-247, In the Matter of
    Fees for Ancillary or Supplementary Use of Digital Television
    Spectrum Pursuant to Section 336(e)(1) of the Telecommunications Act
    of 1996, 14 FCC Rcd 3259 (1998) (\"*DTV Fees Report and Order*\").
    We subsequently adopted a *Memorandum Opinion and Order* on
    Reconsideration in MM Docket No. 97-247, In the Matter of Fees for
    Ancillary or Supplementary Use of Digital Television Spectrum
    Pursuant to Section 336(e)(1) of the Telecommunications Act of 1996,
    FCC 99-362 (released November 24, 1999) (\"*Reconsideration of DTV
    Fees Report and Order*\").

[^76]: ^?^ *DTV Fees Report and Order* in MM Docket No. 97-247, 14 FCC
    Rcd 3259, 3260. *See also* 47 U.S.C. § 336(e)(1)(A)-(B); H.R. Conf.
    Rep. No. 458, 104th Cong., 2nd Sess. 160 (1996).

[^77]: ^?^ Petition for Reconsideration and Clarification of Association
    of America\'s Public Television Stations and Public Broadcasting
    Service in MM Docket No. 87-268 filed June 13, 1997, p. 28, n. 29.

[^78]: ^?^ *Notice of Proposed Rule Making* in MM Docket No. 97-247, In
    the Matter of Fees for Ancillary or Supplementary Use of Digital
    Television Spectrum Pursuant to Section 336(e)(1) of the
    Telecommunications Act of 1996, 12 FCC Rcd 22821 (1997) (\"*DTV Fees
    NPRM*\").

[^79]: ^?^ *Fees Report and Order* in MM Docket No. 97-247, 14 FCC Rcd
    at 3272-73.

[^80]: ^?^ Comments of MAP in MM Docket No. 97-247 at 15-17.

[^81]: ^?^ Comments of AAPTS/PBS in MM Docket No. 97-247, filed as an
    attachment to comments of AAPTS in this proceeding. *See also* Go,
    Inc., Goodlife Broadcasting, Inc. and Central Florida Educational
    Foundation (filed collectively as \"Hardy & Carey Clients\"). *See
    also* Reply Comments of AAPTS; Family Stations of New Jersey, Inc.
    (\"Family NJ\").

[^82]: ^?^ Comments of AAPTS/PBS in MM Docket No. 97-247 at 6-12. *See
    also* comments of Curators at 4; reply comments of AAPTS at 8-10.

[^83]: ^?^ Comments of AAPTS/PBS in MM Docket No. 97-247 at 6-7*. See
    also* comments of Curators at 4.

[^84]: ^?^ Comments of AAPTS/PBS in MM Docket No. 97-247 at 6-7.

[^85]: ^?^ Comments of the Curators of the University of Missouri
    (\"Curators\") at 1.

[^86]: ^?^ Comments of Hardy & Carey Clients at 6-8; reply comments of
    AAPTS at 8-10. With respect to governmental entities, *see also*
    Curators at 5.

[^87]: ^?^ Comments of Hardy & Carey Clients at 6-8. Reply comments of
    AAPTS at 8-10. With respect to governmental entities, *see also*
    comments of Curators at 5.

[^88]: ^?^ Comments of Hardy & Carey Clients at 4-6, 8-9. Reply comments
    of Family NJ at 2-3. With respect to governmental entities, *see
    also* comments of Curators at 6.

[^89]: ^?^ Comments of The Office of Communication of the United Church
    of Christ, Inc., filed with the Alliance for Community Media, the
    Benton Foundation, the Center for Media Education, Independent
    Television Service, Libraries for the Future, Media Access Project,
    Native American Public Telecommunications, Inc, and the Screen
    Actors Guild (\"UCC *et al*.\") at 15-16.

[^90]: ^?^ 47 U.S.C. § 336(e)(1)(B).

[^91]: ^?^ 47 U.S.C. § 336(e)(1)(A)&(B).

[^92]: ^?^ 47 U.S.C. § 336(e)(2)(B).

[^93]: ^?^ Comments of AAPTS/PBS in MM Docket No. 97-247 at 6-7.

[^94]: ^?^ 47 U.S.C. § 309(j)(2)(B) (exempting from competitive bidding
    \"initial licenses or construction permits for digital television
    service given to existing terrestrial broadcast licensees to replace
    their analog television service licenses\").

[^95]: ^?^ *Fees Report and Order* in MM Docket No. 97-247, In the
    Matter of Fees for Ancillary or Supplementary Use of Digital
    Television Spectrum Pursuant to Section 336(e)(1) of the
    Telecommunications Act of 1996, 14 FCC Rcd at 3275-76, *Memorandum
    Opinion and Order*, FCC 99-362, (released November 24, 1999).

[^96]: ^?^ *Public Notice*, Fee Decisions of the Managing Director
    Available to the Public, 10 FCC Rcd 5168 (1995).

[^97]: ^?^ *Id*.

[^98]: ^?^ *Fifth Report and Order*, 12 FCC Rcd at 12852.

[^99]: ^?^ *See* 5 U.S.C. § 603. The RFA, *see* 5 U.S.C. § 601 *et.
    seq*., has been amended by the Contract With America Advancement Act
    of 1996, Pub. L. No. 104-121, 110 Stat. 847 (1996) (CWAAA). Title II
    of the CWAAA is the Small Business Regulatory Enforcement Fairness
    Act of 1996 (SBREFA).

[^100]: ^?^ *Notice of Proposed Rulemaking* in MM Docket No. 98-203, In
    the Matter of Ancillary or Supplementary Use of Digital Television
    Capacity by Noncommercial Licensees, 14 FCC Rcd 537, 553-55 (rel.
    Nov. 23, 1998) (\"*NPRM*\").

[^101]: ^?^ *See* 5 U.S.C. § 604.

[^102]: ^?^ *Fifth Report and Order*, in MM Docket No. 87-268, In the
    Matter of Advanced Television Systems and Their Impact upon the
    Existing Television Broadcast Service, 12 FCC Rcd 12809, 12859
    (1997).

[^103]: ^?^ 5 U.S.C. § 603(b)(3).

[^104]: ^?^ *Id*. § 601(6).

[^105]: ^?^ 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 definitions in the Federal Resister."

[^106]: ^?^ 15 U.S.C. § 632.

[^107]: ^?^ 5 U.S.C. § 601(4).

[^108]: ^?^ *Id*.

[^109]: ^?^ Economics and Statistics Administration, Bureau of Census,
    U.S. Department of Commerce, 1992 CENSUS OF TRANSPORTATION,
    COMMUNICATIONS AND UTILITIES, ESTABLISHMENT AND FIRM SIZE, Series
    UC92-S-1, Appendix A-9 (1995).

[^110]: ^?^ *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.

[^111]: ^?^ Economics and Statistics Administration, Bureau of Census,
    U.S. Department of Commerce, 1992 CENSUS OF TRANSPORTATION,
    COMMUNICATIONS AND UTILITIES, ESTABLISHMENT AND FIRM SIZE, Series
    UC92-S-1, Appendix A-9 (1995). Separate establishments primarily
    engaged in producing taped television program materials are
    classified under another SIC number. SIC 7812 (Motion Picture and
    Video Tape Production); SIC 7922 (Theatrical Producers and
    Miscellaneous Theatrical Services (producers of live radio and
    television programs).

[^112]: ^?^ FCC News Release \"Broadcast Station Totals as of June 30,
    2001,\" issued July 129, 2001.

[^113]: ^?^ 13 C.F.R. § 121.201, NAICS Code 51312.

[^114]: ^?^ At this time, the Commission does not have access to
    information about the annual revenues of NCE stations. The
    Commission is therefore unable to distinguish between NCE
    broadcasters based on their annual revenues. However, based on the
    differences between typical commercial TV licensees and typical NCE
    TV licensees, and based on the concern that NCE TV licensees may be
    differently impacted by the rule amendments and other actions taken
    in this Report and Order, we choose to separate out NCE TV licensees
    as smaller entities in the context established herein by the RFA.

[^115]: ^?^ *Fifth Report and Order*, 12 FCC Rcd at 12852.

[^116]: ^?^ *See* 5 U.S.C. § 801(a)(1)(A).

[^117]: ^?^ *See* 5 U.S.C. § 604 (b).

[^118]: ^?^ P.L. 90-129, Public Broadcasting Act Of 1967, House Report
    No. 90-572 (Aug. 21, 1967).

[^119]: ^?^ 47 U.S.C. § 399b. ((b)(2) "No public broadcast station may
    make its facilities available to any person for the broadcasting of
    any advertisement." (a) "For the purposes of this section the term
    "advertisement" is defined as a message or other programming
    material which is broadcast or otherwise transmitted in exchange for
    any remuneration and which is intended (1) to promote any service,
    facility or product offered by any person who is engaged in such
    offering for profit; (2) to express the views of any person with
    respect to any matter of public importance or interest; or (3) to
    support or oppose any candidate for political office.")