**Before the**

**Federal Communications Commission**

**Washington, D.C. 20554**

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| In the Matter of:                | *  | MB Docket 02-230             |
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**REPORT AND ORDER AND**

**FURTHER NOTICE OF PROPOSED RULEMAKING**

**Adopted: November 4, 2003 Released: November 4, 2003**

**Comment Date: January 14, 2004**

**Reply Comment Date: February 13, 2004**

By the Commission: Commissioner Abernathy issuing a separate statement;
Commissioners Copps and Adelstein approving in part, dissenting in part
and issuing separate statements.

Table of Contents

[Paragraph]{.underline} [Number]{.underline}

I. IntroductioN aND SUMMARY 1

II\. digital broadcast television and content protection 5

III\. CONTENT PROTECTION ALTERNATIVES 11

A. The ATSC Flag 12

B. Encryption at the Source 22

C. Other Mechanisms 25

IV\. COMMISSION AUTHORITY 27

V. REDISTRIBUTION CONTROL OF DIGITAL

BROADCAST TELEVISION 36

A. transmission 37

B. Reception 39

1\. Demodulators and Demodulator Products 42

2\. Peripheral TSP Products 48

3\. Interim Procedures for Content Protection and Recording Technologies
50

C. MVPD Retransmission 58

VI\. FURTHER NOTICE OF PROPOSED RULEMAKING 59

VII\. Procedural MATTERS 66

VIII\. Ordering clauses 74

Appendix A: List of Leading Commenters and Leading Reply Commenters

Appendix B: Final Rules

Appendix C: Final Regulatory Flexibility Analysis

Appendix D: Initial Regulatory Flexibility Analysis

# INTRODUCTION AND SUMMARY

1.  As the digital television ("DTV") transition progresses, the issue
    of content protection has become increasingly important and
    contentious. Content owners assert that content protection
    mechanisms are needed to assure the availability of high value
    digital content to consumers in a secure, protected format. Others
    express concerns that the use of technical measures to protect
    content will inhibit consumers' ability to enjoy programming when
    and where they choose. In order to advance the DTV transition, a
    delicate balance must be struck between these sometimes competing
    interests.

2.  We have already explored this dynamic in the cable and multichannel
    video programming distribution ("MVPD") context in our recent
    *Second Report and Order and Second Further Notice of Proposed
    Rulemaking* relating to digital cable compatibility.[^2] In that
    proceeding, we set forth technical and labeling rules designed to
    ensure that unidirectional digital cable products will be able to
    connect to and interoperate with digital cable systems, as well as
    encoding rules that establish certain parameters within which MVPDs
    may implement copy protection mechanisms.[^3] Resolution of these
    issues in the MVPD context, however, has highlighted the importance
    of content protection to digital broadcasting.

3.  Issues relating to content protection are particularly acute in the
    broadcast realm because of the service's nature -- it is transmitted
    in the clear via the public airwaves. In our *Notice of Proposed
    Rulemaking*, we sought comment on whether some mechanism was needed
    to protect digital broadcast television content from potential
    unauthorized redistribution concerns.[^4] We also sought comment on
    the appropriate protection mechanism, including the Redistribution
    Control Descriptor set forth in ATSC Standard A/65 (the "ATSC flag"
    or "flag"),[^5] as well as on what regulations were needed on the
    transmission or reception side to give effect to such mechanism.[^6]

4.  In this *Report and Order*, we conclude that the potential threat of
    mass indiscriminate redistribution will deter content owners from
    making high value digital content available through broadcasting
    outlets absent some content protection mechanism. Although the
    threat of widespread indiscriminate retransmission of high value
    digital broadcast content is not imminent, it is forthcoming and
    preemptive action is needed to forestall any potential harm to the
    viability of over-the-air television. Of the mechanisms available to
    us at this time, we believe that an ATSC flag-based regime will
    provide content owners with reasonable assurance that DTV broadcast
    content will not be indiscriminately redistributed while protecting
    consumers' use and enjoyment of broadcast video programming.
    Pursuant to the doctrine of ancillary jurisdiction, we adopt use of
    the ATSC flag as currently defined for redistribution control
    purposes and establish compliance and robustness rules for devices
    with demodulators to ensure that they respond and give effect to the
    ATSC flag. We decline to adopt similar compliance and robustness
    rules for devices with modulators as the record in this proceeding
    does not reflect a need for regulation in this sphere to protect the
    viability of over-the-air television. Finally, we defer decision on
    a permanent approval mechanism for content protection and recording
    technologies to be used in conjunction with device outputs. We
    initiate a *Further Notice of Proposed Rulemaking* to examine these
    issues in greater detail. As an interim procedure, however, we will
    allow proponents of a particular content protection or recording
    technology to certify to the Commission that such technology is an
    appropriate tool to give effect to the ATSC flag, subject to public
    notice and objection.

# digital BROADCAST television and content protection

5.  As an initial matter, we must address the appropriate type of
    content protection for digital broadcast television. MPAA advances
    the use of a redistribution control system which would limit the
    redistribution of digital broadcast television content, but not
    restrict consumers from copying programming for their personal
    use.[^7] A number of commenters agree in principle that consumers'
    ability to record digital broadcast television should not be
    restricted.[^8] We concur and find that redistribution control is a
    more appropriate form of content protection for digital broadcast
    television than copy restrictions. This determination is in keeping
    with our earlier decision to prohibit copy restrictions on
    unencrypted digital broadcast television when retransmitted on MVPD
    systems.[^9]

6.  In this context, we examine the potential vulnerability of digital
    broadcast content to indiscriminate redistribution. Supporters of a
    content protection system state that compelling digital broadcast
    programming is critical to the DTV transition and that such content
    is inherently at a greater risk of widespread redistribution as
    compared to its analog counterpart because digital media can be
    easily copied and distributed with little or no degradation in
    quality.[^10] Content owners and broadcasters uniformly assert that
    DTV broadcast content must be protected and that, in the absence of
    some protection mechanism, high value content will be withheld from
    broadcast television and migrate to pay services.[^11] Viacom
    specifically argues that a redistribution control system is needed
    in order to maintain multiple distribution channels for content as a
    means of recouping the content's cost.[^12] For example, if first
    run DTV broadcast content were freely available over the Internet,
    then secondary, international and webcast markets could be
    threatened.[^13] MPAA cautions that if current trends in compression
    efficiency, storage capacity and broadband speed persist, then in a
    few years it will take less time to download a high definition movie
    than to watch it.[^14]

7.  Critics suggest that this threat is overstated and that limits to
    existing broadband capacity will prevent widespread Internet
    retransmission of high definition digital content for the immediate
    future.[^15] One estimate indicates that it could take as much as
    four days to upload a one hour HDTV broadcast program to the
    Internet at standard consumer broadband speeds.[^16] In direct
    contrast to the estimates for future broadband capacity supplied by
    MPAA, Public Knowledge suggests that there are hard limits on the
    possible advances in video compression and broadband speed.[^17]
    Indeed, several commenters emphasize that programming in analog or
    standard definition is more susceptible to Internet redistribution
    than high definition content.[^18] To the extent that television
    content is being redistributed over the Internet today, EFF contends
    that such content does not come from DTV broadcasts but rather has
    been captured from analog NTSC broadcasts or cable
    transmissions.[^19]

8.  Although we acknowledge that technological constraints will inhibit
    the redistribution of HDTV over the Internet for the immediate
    future, we anticipate that the potential for piracy will increase as
    technology advances.[^20] As demonstrated by the presence today of
    analog broadcast content on peer-to-peer file sharing networks, we
    believe that content owners are justifiably concerned about
    protecting all DTV broadcast content, including both standard
    definition and high definition formats, from indiscriminate
    retransmission in the future. We recognize that piracy concerns are
    likely to be addressed through a number of approaches, including
    consumer education, law enforcement, and changed business models. In
    order to effectively address these concerns, however, we believe
    that technological steps must be taken now before the DTV transition
    matures any further. We are reaching a critical juncture in the
    transition -- the forthcoming availability of digital cable ready
    televisions with off-air reception capability will dramatically
    increase the number of consumers with access to DTV content and
    services.[^21] Rather than exacerbate the potential legacy problem,
    we believe that these devices must have some mechanism for
    protecting digital broadcast content. We conclude that by taking
    preventative action today, we can forestall the development of a
    problem in the future similar to that currently being experienced by
    the music industry. In so doing, we believe that this will not only
    alleviate the concerns of content owners, but also will ensure the
    continued availability of high value DTV content to consumers
    through broadcast outlets.

9.  In light of our decision to adopt a redistribution control scheme
    and to avoid any confusion, we wish to reemphasize that our action
    herein in no way limits or prevents consumers from making copies of
    digital broadcast television content. Furthermore, the scope of our
    decision does not reach existing copyright law. The creation of a
    redistribution control regime establishes a technical protection
    measure that broadcasters may use to protect content. However, the
    underlying rights and remedies available to copyright holders remain
    unchanged. In the same manner, this decision is not intended to
    alter the defenses and penalties applicable in cases of copyright
    infringement, circumvention, or other applicable laws.

10. We also wish to clarify our intent that the express goal of a
    redistribution control system for digital broadcast television be to
    prevent the indiscriminate redistribution of such content over the
    Internet or through similar means. This goal will not (1) interfere
    with or preclude consumers from copying broadcast programming and
    using or redistributing it within the home or similar personal
    environment as consistent with copyright law, or (2) foreclose use
    of the Internet to send digital broadcast content where it can be
    adequately protected from indiscriminate redistribution. In our
    *Further Notice of Proposed Rulemaking* below, we seek comment on
    the appropriate process and criteria for approving content
    protection technologies and recording methods to be used in
    conjunction with a flag-based redistribution control system. It is
    our intent and belief that these technologies can protect content
    while facilitating innovative consumer uses and practices, including
    use of the Internet as a secure means of transmission. We also
    anticipate that these technologies can promote consumer access to
    content in new and meaningful ways, such as helping to devise
    accessible formats of content for the blind and visually impaired.
    It is our hope, therefore, that many different content protection
    and recording technologies, including but not limited to digital
    rights management, software-based, and non-encryption alternatives,
    will emerge to facilitate these uses. Our *Further Notice of
    Proposed Rulemaking* also seeks comment on the usefulness of
    defining a personal digital network environment ("PDNE") within
    which consumers could freely redistribute digital broadcast
    television content. We do not, however, believe that it is necessary
    at this time to define the precise boundaries of a PDNE in order to
    initiate a redistribution control scheme for digital broadcast
    television. Our immediate concern is to adopt and begin
    implementation of a content protection scheme that will prevent the
    unfettered dissemination of digital broadcast content through means
    such as the Internet. Below we consider the various mechanisms
    advanced by commenters.

# CONTENT PROTECTION ALTERNATIVES

11. In our *Notice of Proposed Rulemaking*, we sought comment on
    different mechanisms that could potentially be used to protect DTV
    broadcast content from indiscriminate redistribution, including but
    not limited to the so-called "broadcast flag" proposal.[^22]
    Although most commenters focused on a flag-based scheme, several
    alternative protection mechanisms were proffered. We conclude that,
    of the mechanisms available to us today, an ATSC flag-based system
    is the best option for providing a reasonable level of
    redistribution protection at a minimal cost to consumers and
    industry.

    **A. The ATSC Flag**

12. One of the leading proposals for a DTV broadcast content protection
    mechanism involves the use of a redistribution control descriptor or
    flag to signal DTV reception equipment to limit the indiscriminate
    redistribution of digital broadcast content. Development of an ATSC
    flag system occurred in the Broadcast Protection Discussion Subgroup
    ("BPDG") under the auspices of the Copy Protection Technical Working
    Group ("CPTWG"). From November 2001 to June 2002, more than 80
    representatives from the consumer electronics, information
    technology, motion picture, cable and broadcast industries took part
    in the BPDG discussions.[^23]

13. The *BPDG Final Report* states that there was agreement among the
    participants concerning the technological means for signaling
    protection in a flag-based system, which has otherwise been adopted
    as a part of the ATSC A/65B standard, but disagreements remained on
    other aspects of a flag protection system.[^24] The ATSC flag itself
    represents a series of bits, several of which define the descriptor
    tag and length with others reserved for "optional additional
    redistribution control information that may be defined in the
    future."[^25] The *BPDG Final Report* anticipates that demodulators
    in DTV broadcast reception equipment would recognize the presence of
    the ATSC flag and then signal the device to output the marked
    content to connectors associated with approved content protection or
    recording technologies.[^26] In order for a flag-based protection
    system to work, therefore, all demodulators used in DTV broadcast
    reception equipment would need to have the ability to recognize and
    give effect to the ATSC flag and a list of approved content
    protection and recording technologies would need to be developed.

14. MPAA advocates adoption of the ATSC flag system and characterizes it
    as an effective and unobtrusive content protection mechanism that
    will serve as a "speed bump" to ensure that DTV broadcast content is
    not indiscriminately redistributed.[^27] MPAA stresses that an ATSC
    flag system would only limit redistribution of content and not
    prevent consumer copying.[^28] Compared with alternative content
    protection systems, MPAA suggests that implementation of an ATSC
    flag scheme would add little or no cost to reception devices as it
    would "piggy-back" on existing content protection mechanisms in
    place for pay television content.[^29] Legacy devices would also
    remain functional under a flag regime, allowing consumers to
    continue their use without the need for new or additional equipment
    to receive and view signals.[^30]

15. Several commenters voice qualified support for a flag-based system,
    subject to certain conditions. CEA indicates that it would not
    object to a flag-based system, so long as it did not interfere with
    consumer copying abilities.[^31] Multichannel video programming
    distributors ("MVPDs") also endorse use of the ATSC flag, although
    the cable industry would prefer an express limitation restricting
    its use to the prevention of Internet retransmission as well as a
    professional equipment exemption for MVPDs that can protect
    broadcast content through other mechanisms, such as encryption.[^32]

16. Critics of the ATSC flag point out that the *BPDG Final Report* did
    not reflect widespread consensus among the group's
    participants.[^33] A number of significant issues were left
    unresolved by the participants, including the identification of an
    approval process for content protection or recording technologies
    (referred to as the "Table A" process) and defining the scope of
    which downstream consumer electronics devices might constitute part
    of a digital home network under an ATSC flag redistribution
    scheme.[^34] Opponents also question the implementation costs
    involved in a flag system by suggesting that the inclusion of
    technology in television receivers and other equipment to recognize
    and give effect to the flag will unfairly burden consumers.[^35]

17. Other criticisms levied at the proposed ATSC flag involve potential
    holes in its protection system. Consumer groups argue that the ATSC
    flag is an inadequate tool to protect content and would stifle
    innovation.[^36] Other commenters suggest that the ATSC flag could
    be easily circumvented, potentially through the use of digital to
    analog converters.[^37] Several commenters also express concern that
    the presence of component analog outputs on reception devices would
    vitiate any protection offered by flag recognition technology.[^38]
    The term "analog hole" refers to the fact that high quality content
    can be transmitted over component analog outputs without content
    protection.[^39] Although several technological approaches,
    including watermarks and forensic fingerprints, are being developed
    to potentially address this problem by the inter-industry Analog
    Reconversion Discussion Group ("ARDG"), the record in this
    proceeding does not reflect that an immediate solution is
    forthcoming.[^40] In a similar vein, critics note that non-compliant
    legacy devices will allow content to be output without giving
    recognition and effect to the ATSC flag and that non-compliant
    hardware or software demodulators could be produced with relative
    ease by individuals with some degree of technical
    sophistication.[^41]

18. A number of parties have questioned whether adoption of a flag
    system would restrict legitimate activities relating to the use of
    digital broadcast content. The American Library Association stresses
    that public access to digital media for educational purposes is
    critical and that certain copyright law principles, including fair
    use, exemptions for preservation and archiving, and distance
    education, should be codified by the Commission.[^42] The American
    Foundation for the Blind expresses concern that a flag system could
    interfere with the ability of handicapped individuals to reverse
    engineer commercial hardware and software equipment or to manipulate
    digital broadcast content in order to produce assistive
    devices.[^43] As discussed above, our adoption of a flag
    redistribution control system for digital broadcast television
    content is not intended to alter or affect any underlying copyright
    principles, rights or remedies. It is therefore unnecessary for the
    Commission to independently codify existing copyright law. To the
    extent that the Digital Millennium Copyright Act prevents the
    circumvention of technical protection measures in some
    circumstances, we recognize that specific exceptions exist for
    nonprofit libraries, archives and educations institutions, as well
    as for reverse engineering in certain circumstances.[^44] Nothing in
    the rules we are adopting interferes with these exceptions or the
    ability of parties to make use of assistive technologies. To the
    extent allowed by other laws, we will administer our flag rules and,
    in particular, our approval process of output content protection
    technologies and recording methods to foster the continued
    availability of content to consumers in accessible formats.

19. We recognize the concerns of commenters regarding potential
    vulnerabilities in a flag-based protection system. We are equally
    mindful of the fact that it is difficult if not impossible to
    construct a content protection scheme that is impervious to attack
    or circumvention. We believe, however, that the benefits achieved by
    creation of a flag-based system -- creating a "speed bump" mechanism
    to prevent indiscriminate redistribution of broadcast content and
    ensure the continued availability of high value content to broadcast
    outlets -- outweighs the potential vulnerabilities cited by
    commenters. For example, the "analog hole" problem is not specific
    to a flag based regime, but rather is one shared by cable and
    satellite delivery platforms. As noted above, various industry
    efforts are focusing on technological and other potential solutions
    to this difficult problem. While an immediate "analog hole" solution
    is not forthcoming, the window of opportunity for adopting a flag
    based redistribution control regime for digital broadcast television
    is closing. The number of legacy devices existing today is still
    sufficiently small that content owners remain willing to provide
    high value content to broadcast outlets. At some point, however,
    when the number of legacy devices becomes too great, that calculus
    will change. By acting now, the Commission can protect both content
    and consumers' expectations.[^45]

20. We also recognize that with any content protection system, the
    potential exists that some individuals may attempt to circumvent the
    protection technology. We do not believe, however, that individual
    acts of circumvention necessarily undermine the value or integrity
    of an entire content protection system. The DVD example is
    instructive in this regard. Although the CSS copy protection system
    for DVDs has been "hacked" and circumvention software is available
    on the Internet, DVDs remain a viable distribution platform for
    content owners.[^46] The CSS content protection system serves as an
    adequate "speed bump" for most consumers, allowing the continued
    flow of content to the DVD platform. We believe the same rationale
    applies here.

21. Our approval of an ATSC flag content protection system for DTV
    broadcasts relies on a balancing of the level of protection gained
    relative to the cost and burdens associated with its implementation.
    When compared with the alternative proposals described below, we
    conclude that the ATSC flag provides a satisfactory level of
    redistribution control at a minimal cost to both consumers and
    manufacturers. In particular, we note that a flag based regime will
    not render today's consumer equipment obsolete -- existing devices
    will continue to work at their full functionality and will not
    require replacement.[^47] Current consumer uses of these products
    will therefore be accommodated to the greatest extent possible. The
    flag also has a distinct advantage over alternative mechanisms in so
    far as it can be implemented quickly, thereby minimizing the number
    of non-compliant legacy devices that might otherwise be deployed in
    the marketplace over the next several years. To the extent that
    certain commenters object to elements of the *BPDG Final Report* and
    MPAA's proposed rules in this proceeding, we believe that
    implementation of an ATSC flag system can and should be tailored to
    limit any harm to innovation and to consumers' home viewing
    abilities. As set forth in greater detail below, we are adopting
    certain aspects of the flag system advanced by MPAA, modifying some
    parts, and declining to act altogether on others. We believe that
    these actions are necessary to ensure the continued viability of
    over-the-air broadcasting in the digital age and the continued
    availability of high value content to consumers via the public
    airwaves.

    **B. Encryption at the Source**

22. Proponents of encryption at the source as an alternative protection
    mechanism assert that it is more effective than a flag system since
    encryption protects content at its transmission source rather than
    at the point of demodulation.[^48] Under an encryption regime, a
    specific encryption technology would need to be adopted by the
    Commission.[^49] Broadcasters and consumer electronics manufacturers
    would then need to integrate this technology into transmission and
    reception equipment to allow consumers to receive and view broadcast
    programming. As a result, broadcast television would no longer be
    transmitted in-the-clear.

23. Although content owners do not question the technical effectiveness
    of an encryption system, they express doubts about its timing.[^50]
    Estimates on a timeframe for the development and approval of an
    appropriate encryption algorithm vary from several years to the near
    term.[^51] Even if an encryption standard were developed in short
    order, several commenters question the cost burden associated with
    its implementation. Content owners and the consumer electronics
    industry express concern that encryption would render legacy devices
    obsolete and force all consumers to purchase new or additional
    equipment in order to receive and decrypt broadcast
    programming.[^52] Philips argues that an encryption regime should be
    considered critically because it could potentially limit the
    playback functionality of legacy recording equipment.[^53] Other
    commenters recognize that encryption would not resolve the analog
    hole problem.[^54]

24. Despite the robust security generally associated with encryption
    technologies, we conclude that the associated implementation costs
    and delays make it a less desirable content protection system for
    DTV broadcasts than the ATSC flag. We view the obsolescence of
    legacy equipment as particularly burdensome on consumers.
    Furthermore, the record in this proceeding lacks evidence suggesting
    that the security benefits gained from encryption on balance
    outweigh the costs that would be levied on consumers. Although the
    exact timeframe needed to develop and approve a particular
    encryption technology is unclear, we believe that a fair amount of
    advance time would be needed before an encryption scheme could be
    implemented. Given the anticipated growth in DTV equipment sales
    over the next few years, we conclude that the development time
    needed for an encryption system would exacerbate the existing legacy
    problem and frustrate early adopters. As such, we decline to adopt
    encryption at the source as a content protection mechanism for DTV
    broadcasts.

    **C. Other Mechanisms**

25. In addition to the flag and encryption at the source, several
    emerging content protection technologies have been suggested by
    commenters, notably watermarking and fingerprinting.[^55] Digimarc,
    Macrovision and Philips each favor the use of watermarking to secure
    DTV broadcast content.[^56] Proponents advance this technology as a
    more complete solution than the ATSC flag since watermarks are
    embedded within content and can survive digital and analog
    processing as well as format conversion.[^57] In addition to its
    potential use for redistribution control purposes, supporters
    suggest that a watermark can also be devised to address the analog
    hole.[^58] Indeed, several commenters that otherwise support
    implementation of the ATSC flag encourage the further development of
    watermarking technology as a complementary measure to deal with the
    issue of component analog outputs.[^59] Digimarc and Macrovision
    assert that the implementation costs for watermarking are similar to
    the costs associated with a flag regime and that watermarks can be
    made backwards-compatible with legacy devices.[^60] In a similar
    vein, Philips believes that a specific type of watermarking
    technology known as fingerprinting may evolve into an appropriate
    mechanism to address both redistribution control and analog hole
    concerns.[^61]

26. As new content protection technologies develop, watermarking and
    fingerprinting may emerge as useful tools to protect DTV broadcasts.
    At this time, however, the record reflects that these technologies
    are insufficiently mature for implementation. We recognize that the
    ARDG is discussing watermarking and fingerprinting among various
    alternative solutions to the analog hole.[^62] We encourage the
    further development of alternative mechanisms and technologies that
    could be used to protect digital broadcast content in the future. As
    discussed above, however, we conclude that a narrowly-tailored flag
    system in the near term will provide a sufficient level of
    redistribution control protection for DTV broadcasts at minimal cost
    to consumers and manufacturers.

# COMMISSION authority

27. Commenters disagree whether the Commission has authority to impose
    redistribution control regulations. Proponents of a flag-based
    system contend that Section 336 of the Communications Act confers
    direct authority on the Commission to prescribe rules requiring DTV
    reception equipment to have the ability to recognize and give effect
    to the ATSC flag.[^63] These commenters also argue that the
    Commission may promulgate such regulations on the basis of its
    ancillary jurisdiction and the Commission's plenary authority over
    broadcast transmissions.[^64]

28. Critics, on the other hand, argue that the Commission lacks clear
    jurisdiction to require manufacturers of consumer electronics and IT
    products to design this equipment to recognize and respond to the
    ATSC flag.[^65] According to these commenters, legal precedent
    requires a specific grant of authority by Congress before the
    Commission may impose regulatory requirements on consumer
    electronics manufacturers and such requisite statutory authority is
    absent here.[^66] Critics further maintain that Section 336 cannot
    be the source of authority for such requirements because the
    manufacturers are not broadcast licensees, and an ATSC flag
    requirement is beyond the regulatory scope of Section 336.[^67]
    Critics also argue that the Commission may not exercise ancillary
    authority because consumer electronics and computer manufacturers
    are unregulated entities, and imposing the ATSC flag requirement is
    not necessary to effectuate any specific provision or policy of the
    Communications Act.[^68] Critics claim that *reception* equipment,
    as opposed to *transmission* equipment, falls outside the
    Commission's general jurisdictional grant in Title I of the
    Communications Act.[^69]

29. We find that the Commission has ancillary authority to regulate
    equipment manufacturers in order to effectuate a redistribution
    control system for DTV broadcasts. Ancillary jurisdiction may be
    employed, in the Commission's discretion, where the Commission's
    general jurisdictional grant in Title I of the Communications Act
    covers the subject of the regulation[^70] and the assertion of
    jurisdiction is "reasonably ancillary to the effective performance
    of the \[its\] various responsibilities."[^71] Both predicates for
    jurisdiction are satisfied here. First, based on Sections 1 and 2(a)
    of the Communications Act, coupled with the definitions set forth in
    Section 3(33) ("radio communication") and section 3(52) ("wire
    communication"), we find that television reception equipment is
    covered by the Commission's general jurisdictional grant.
    Specifically, Section 1 states that the Commission is created
    "\[f\]or the purpose of regulating interstate and foreign commerce
    in communication by wire and radio so as to make available, so far
    as possible, to all the people of the United States . . . a rapid,
    efficient, Nation-wide, and world-wide wire and radio communication
    service with adequate facilities at reasonable charges," and that
    the agency "shall execute and enforce the provisions of th\[e\]
    Act."[^72] Section 2(a), in turn, confers on the Commission
    regulatory authority over all interstate communication by wire or
    radio.[^73] Under the Communications Act, the terms "radio
    communication" and "wire communication" are defined broadly to
    include not merely the transmission of the communication over the
    air or by wire, but also all incidental "instrumentalities,
    facilities, apparatus and services" that are used for the "receipt,
    forwarding and delivery" of such transmissions.[^74] Based on this
    language, we find that television receivers are covered by the
    statutory definitions and therefore come within the scope of the
    Commission's general authority outlined in Section 2(a) of the
    Communications Act.[^75]

30. The second step in our analysis requires us to evaluate whether
    imposing a flag-based regulatory system is reasonably ancillary to
    the effective performance of the Commission's various
    responsibilities. Based on the record in this matter, we find that
    the requisite nexus exists. The Communications Act charges the
    Commission with responsibility for developing a broadcasting system
    that is made available on a fair, efficient and equitable basis in
    communities throughout the United States.[^76] Within the
    Commission's mandate for the regulation of television broadcasting
    are the long-established regulatory goals of increasing the number
    of outlets for community self-expression and augmenting the public's
    choice of programs and types of services.[^77] In addition, the
    Commission is charged with the responsibility of shepherding the
    country's broadcasting system into the digital age[^78] -- a goal
    that has become central to the Commission's Section 303(g) mandate
    to "\[s\]tudy new uses for radio, provide for experimental uses of
    frequencies, and generally encourage the larger and more effective
    use of radio in the public interest."[^79] To further this goal,
    Congress has woven into the Communications Act an intricate and
    detailed set of provisions for the DTV transition.[^80] The
    legislative history of various statutory provisions reflects a clear
    Congressional expectation that the transition take place.[^81] The
    statutory framework for the transition, coupled with the support in
    the legislative history and the Commission's ongoing and prominent
    initiatives in the area, make it clear that advancing the DTV
    transition has become one of the Commission's primary
    responsibilities under the Communications Act at this time.

31. Here, the record shows that creation of a redistribution control
    protection system, including compliance and robustness rules for
    so-called "Demodulator Products," is essential for the Commission to
    fulfill its responsibilities under the Communications Act and
    achieve long-established regulatory goals in the field of television
    broadcasting. As discussed above, absent redistribution control
    regulation for DTV broadcasts, the record indicates that content
    providers will be reluctant to provide quality digital programming
    to broadcast outlets and will instead direct such content to pay
    television systems that can implement adequate content protection
    mechanisms.[^82] The diversion of high quality digital programming
    away from broadcast television will lead to an erosion of our
    national television structure. Moreover, not only will free,
    over-the-air broadcast television deteriorate, but a critical
    element necessary to the success of the DTV transition -- the
    availability of quality digital broadcast programming -- will not
    develop. We thus find adoption of redistribution control regulations
    necessary to accomplish various of our responsibilities under the
    Communications Act, such as our responsibilities to foster a diverse
    radio service that serves local communities throughout the country,
    to encourage the development of new and more effective radio
    service, and to lead the nation into a new era of free, over-the-air
    digital broadcasting.

32. We disagree with commenters that legal precedent requires an
    explicit grant of authority by Congress before the Commission may
    adopt redistribution control regulations. We recognize that the
    Commission's assertion of jurisdiction over manufacturers of
    equipment in the past has typically been tied to specific statutory
    provisions and that this is the first time the Commission has
    exercised ancillary jurisdiction over consumer equipment
    manufacturers in this manner.[^83] We are also aware of precedent
    that stresses the narrow scope of at least one of those statutory
    authorizations (*i.e.,* the All Channel Receiver Act ("ACRA")).[^84]
    However, in no case -- whether in connection with the ACRA or any of
    the other explicit grants -- did Congress indicate any intent to
    limit the Commission's ability to exercise its ancillary
    jurisdiction over manufacturers except, and only by implication, in
    the context of regulating manufacturers with respect to their
    activities that Congress specifically addressed by statute.
    Accordingly, Congressional admonitions and past Commission
    assurances of a narrow exercise of authority over manufacturers
    (such as those reflected in the ACRA and its legislative history)
    are properly limited to the context of those explicit
    authorizations.[^85] The regulations at issue here do not fall
    within the subject matter of those explicit authorizations. We thus
    find that under the appropriate circumstances not covered by
    explicit statutory direction, such as that presented here, the
    Commission may exercise its ancillary authority to regulate
    manufacturers.

33. Further, even though this may be the first time the Commission
    exercises its ancillary jurisdiction over equipment manufacturers in
    this manner, the nation now stands at a juncture where such exercise
    of authority is necessary. The fact that the circumstances may not
    have warranted an exercise of such jurisdiction at earlier stages
    does not undermine our authority to exercise ancillary jurisdiction
    at this point in time. In this respect, our experience with cable
    television -- where our ancillary jurisdiction did not form until
    long after that industry had come into existence -- is instructive.
    More specifically, that industry (then termed community antenna
    television, or "CATV") had been in existence almost 15 years before
    the Commission asserted its ancillary jurisdiction.[^86] In
    upholding the Commission's regulatory authority, the Supreme Court
    found that the Commission had "reasonably concluded that regulatory
    authority over CATV is imperative if it is to perform with
    appropriate effectiveness certain of its other responsibilities"
    including "'the obligation of providing a widely dispersed radio and
    television service' with a 'fair, efficient, and equitable
    distribution' of service among the 'several States and
    communities.'"[^87] We find ourselves faced with the same type of
    situation now with respect to equipment manufacturers in that up
    until this point, exercise of our ancillary authority was not
    necessary to fulfill our responsibilities under the Communications
    Act.

34. Moreover, we find our exercise of ancillary authority over
    manufacturers of television receiver equipment here to be in line
    with our prior legislative grants of such authority. As in prior
    instances, we have tailored our rules to cover a narrowly defined
    feature and function (*e.g.*, recognize and respond to the ATSC flag
    ) and a narrowly targeted class of equipment (*e.g.,* devices that
    contain a tuner capable of receiving over-the-air television
    broadcast signals). The rules that we adopt today will thus allow
    DTV broadcasters, who are vying for content in a highly competitive
    media marketplace, with the ability to assure program creators that
    their high definition programming and high value content is secure
    from indiscriminate redistribution.

35. We further note that we intend our redistribution control
    regulations to apply to any device or piece of equipment -- whether
    it be a consumer electronics, PC or IT device -- that contains a
    tuner capable of receiving over-the-air television broadcast
    signals. Application of our rules in this manner is necessary in
    order not to create arbitrary lines of distinction that would result
    in vitiating the regulatory regime altogether.

# REDISTRIBUTION CONTROL OF DIGITAL BROADCAST TELEVISION

36. Our *Notice of Proposed Rulemaking* in this proceeding sought
    comment on a number of issues relating to a content protection
    system for digital broadcast television, making specific reference
    to certain proposals raised in the *BPDG Final Report*.[^88] In
    response, MPAA submitted with its comments a revised version of its
    BPDG joint proposal with the 5C companies ("Joint Proposal").[^89]
    The Joint Proposal sets forth draft rules establishing a compliance
    and robustness regime for a flag-based system, as well as proposed
    criteria for the adoption of digital content protection and
    recording technologies to be used in conjunction with device
    outputs.[^90] Although the Joint Proposal represents one of several
    approaches contemplated by the *BPDG Final Report*, we believe that
    the Joint Proposal serves as a useful starting point in the crafting
    of certain elements of a flag protection system. However, we
    conclude that certain portions of the Joint Proposal are unnecessary
    in order to implement the ATSC flag and therefore decline to adopt
    them. Additional public comment is also needed in certain areas,
    particularly with regard to the approval of new content protection
    and recording technologies for use with device outputs. Below we
    initiate a *Further Notice of Proposed Rulemaking* to address a
    permanent solution to these so-called "Table A" issues and establish
    interim approval procedures while the *Further Notice of Proposed
    Rulemaking* is pending.

    **A. Transmission**

37. Most commenters were silent on the issue of whether use of the ATSC
    flag by broadcasters should be mandated. Of those commenters
    addressing this issue, each favored a discretionary approach that
    would generally allow broadcasters to decide whether or not to
    include the flag with specific types of programming.[^91] We concur.
    Broadcasters and content owners have strong incentives to implement
    the ATSC flag in order to limit the indiscriminate redistribution of
    high value content, rendering a mandate unnecessary. To the extent
    that broadcasters and content owners feel that it is unnecessary to
    insert the flag into certain types of content, we believe they
    should have the latitude to do so.

38. Given the strong incentive of broadcasters and content owners to
    make use of the ATSC flag, CEA and various commenters advocate a
    prohibition on use of the flag for news and public interest
    programming.[^92] The Corporation for Public Broadcasting, MPAA and
    NAB oppose a prohibition of this sort by suggesting that: (1) it
    would implicate FCC overview of content, and (2) news and public
    interest programming merits the same level of protection afforded to
    entertainment programming.[^93] Further, the NBC Television
    Affiliates Association and other broadcast interests argue that
    local broadcasters should have the right to protect news programming
    as it has inherent economic value and that to do otherwise could
    discourage its creation.[^94] We agree. We therefore decline to
    involve the Commission in the practical and legal difficulties of
    determining which types of broadcast content merit protection from
    indiscriminate redistribution and which do not.[^95] In so doing, we
    recognize that the ATSC flag was devised to address redistribution
    control and not other forms of content protection. We clarify here
    and in Part 73 of the Commission's rules that to the extent
    broadcasters wish to use the ATSC flag to protect unencrypted DTV
    broadcasts, they may do so provided they do not transmit the
    optional additional bits provided for in ATSC A/65B.[^96] We believe
    that this approach is commensurate with the encoding rules adopted
    in our recent *Digital Cable Compatibility Order and FNPRM* which
    prohibit MVPDs from encoding unencrypted broadcast content for copy
    control purposes.[^97] Thus consumers will continue to have the
    ability to make copies of broadcast content, including news and
    public interest programming.

    **B. Reception**

39. The keystone of a flag protection system is the ubiquitous ability
    of reception devices to respond and give effect to the
    redistribution control descriptor. Numerous commenters acknowledge
    the need for compliance and robustness requirements on some universe
    of reception devices; no consensus exists on its exact scope.[^98]
    For example, MPAA and the Digital Transmission Licensing
    Administrator, LLC ("DTLA") assert that all consumer electronics,
    personal computer ("PC") or information technology ("IT") products
    with demodulators that are used to receive DTV broadcast programming
    must respond and give effect to the ATSC flag.[^99] MPAA also seeks
    regulation over consumer modulators that could be used to create a
    "false flag" that would undermine other forms of content
    protection.[^100] For example, MPAA is concerned that a modulator
    could be used to insert a flag into DVD or premium pay television
    content that would override any associated copy protection and allow
    that content to be copied freely.[^101] CEA and CCIA take an overall
    more restrictive view of the Commission's ability to require flag
    compliance, citing Section 1201(c)(3) of the Digital Millennium
    Copyright Act ("DMCA") as prohibiting mandates on consumer
    electronics devices to respond to particular content protection
    technologies.[^102] EFF advocates excluding software demodulators
    from the scope of the flag compliance and robustness rules to
    encourage innovation in open source software for DTV
    applications.[^103]

40. We conclude that in order for a flag-based content protection system
    to be effective, demodulators integrated within, or produced for use
    in, DTV reception devices ("Demodulator Products") must recognize
    and give effect to the ATSC flag pursuant to the compliance and
    robustness rules described in greater detail below. This necessarily
    includes PC and IT products that are used for off-air DTV reception.
    We note, however, that the robustness rules we are adopting have
    been structured to account for technological differences between
    single purpose consumer electronics devices and general purpose PC
    and IT products. Further, we are not persuaded that our regulations
    should extend to cover consumer modulators. The express intent and
    scope of this proceeding is to ensure the viability of over-the-air
    broadcasting in the digital age and the continued availability of
    high value content to consumers via the public airwaves. By MPAA's
    own admission, the proposed regulation of consumer modulators is
    directed at protecting forms of content other than digital broadcast
    television.[^104] As such, we decline to adopt compliance and
    robustness rules relating to consumer modulators.

41. We do not interpret Section 1201(c)(3) of the DMCA to prohibit
    Commission action in this sphere. The scope of Section 1201(c)(3) is
    specifically limited with prefatory language:

    *\[n\]othing in this section shall require* that the design of, or
    the design and selection of parts and components for, a consumer
    electronics, telecommunications, or computing product provide for a
    response to any particular technological measure, so long as such
    part of component, or the product in which such part or component is
    integrated, does not otherwise fall within the prohibitions of
    subsection (a)(2) or (b)(1).[^105]

    The phrase "nothing in this section" reflects the fact that the
    prohibition on circumvention devices contained in Section 1201(a)
    was not intended to make manufacturers design their equipment to
    respond to any particular technological protection measure.[^106]
    Section 1201(c)(3) was therefore not a complete prohibition on the
    governmental implementation of particular content protection
    technologies. To the contrary, Section 1201(k) of the DMCA
    specifically requires manufacturers of analog video cassette
    recorders to design their products to respond to Macrovision's copy
    protection technology.[^107] We conclude that the DMCA does not
    forestall Commission adoption of an ATSC flag protection system.

    **1. Demodulators and Demodulator Products**

42. Compliance and robustness rules for Demodulator Products represent
    the means by which DTV reception and related devices would respond
    and give effect to the ATSC flag. A regulated Demodulator Product
    for purposes of this discussion includes both a demodulator and an
    associated transport stream processor ("TSP") that inspects the data
    structure of the DTV broadcast signal to determine the presence or
    absence of the ATSC flag.[^108] MPAA and the 5C companies propose
    Demodulator Product compliance rules which prescribe the manner in
    which DTV broadcast content is to be treated and output from devices
    where it has either not been screened for presence of the ATSC flag
    ("Unscreened Content") or where it has determined that the ATSC flag
    is present ("Marked Content").[^109] The proposed rules would
    require Demodulator Products to output both Unscreened and Marked
    Content in one the following ways: (1) to an analog output; (2) to
    an 8-VSB, 16-VSB, 64-QAM or 256-QAM modulated output; (3) to a
    digital output associated with an approved output content protection
    technology; (4) to an approved digital recording technology; and (5)
    to unprotected Digital Visual Interface ("DVI") outputs for
    resolutions no greater than standard digitally encoded component
    analog video signals.[^110] The approval of digital output content
    protection technologies and digital recording technologies under
    this scheme would occur as a part of the so-called "Table A" process
    described in a separate part of the Joint Proposal.[^111]

43. Although some parties acknowledge the need for compliance rules, few
    specific comments were received on this issue.[^112] We conclude
    that, with certain modifications set forth in Attachment B hereto,
    the compliance rules proposed by MPAA and the 5C companies form an
    appropriate basis for Demodulator Products to respond and give
    effect to the ATSC flag. Our adoption of these compliance rules does
    not extend to the Joint Proposal's approval process for digital
    output content protection technologies and digital recording
    technologies. As noted above, we believe that additional public
    comment is needed in order to formulate an open, objective approval
    process that will foster innovation and marketplace competition.
    Below we establish an interim policy for the approval of digital
    recording and output content protection technologies and initiate a
    *Further Notice of Proposed Rulemaking* to examine this issue in
    greater detail.

44. In their Joint Proposal, MPAA and the 5C companies also outline an
    extensive list of robustness rules which set forth how Demodulator
    Products, prior to directing the content to an output, must
    implement the compliance rules in a secure, reliable manner. The
    proposed robustness rules cover a wide scope of subject areas,
    including: (1) the construction of Demodulator Products; (2) how
    content may be transmitted on data paths within Demodulator
    Products; (3) the means by which content may be passed to other
    devices without being intercepted; (4) the use of different
    manufacturing techniques to frustrate attempts at defeating the
    content protection requirements of the compliance rules; (5) the
    level of protection needed to ensure that circumvention of the
    content protection requirements does not occur; and (6) how
    manufacturers must respond to new circumstances that render their
    previously compliant Demodulator Products insecure.[^113] In
    essence, the Joint Proposal seeks a high or expert level of
    robustness in order to ensure the security of DTV broadcast content.

45. Several commenters challenge the substance of the proposed
    robustness rules, noting that consensus had not been reached in the
    *BPDG Final Report* on the appropriate level of robustness needed to
    effectuate the ATSC flag.[^114] Several advocacy groups criticize
    the Joint Proposal's formulation by saying that it would threaten
    the interoperability of PCs and DTV devices and impede innovation in
    software development, particularly in open source software
    applications.[^115] As an alternative, the IT Coalition suggests
    that the appropriate level of robustness is one that assumes
    ordinary users as attackers rather than experts.[^116] NMPA also
    advocates the adoption of substantive robustness standards without
    detailed technical requirements.[^117]

46. We concur with those critics of the Joint Proposal that find an
    expert level of robustness exceeds that which is needed to
    effectively implement an ATSC flag regime. MPAA itself describes the
    flag as a limited mechanism to inhibit theft of content:

    A person who hacks their device will simply achieve the disabling of
    that single device, and no other impact. While hacks of individual
    devices will result in the theft of some content, it is wrong to
    presume that every consumer is a thief, and it is equally mistaken
    to assert that some burglars know how to pick locks, it is not
    worthwhile to lock the door. The Broadcast Flag will keep widespread
    unauthorized redistribution under control because most consumers
    will not hack their devices.[^118]

    We therefore conclude that an expert level of robustness is
    incongruous with the scope of protection offered by an ATSC flag
    system and that an "ordinary user" level is more appropriate in
    these circumstances. In lieu of the detailed robustness rules
    contained in the Joint Proposal, we are adopting a more generalized
    robustness standard that will afford consumer electronics, IT and PC
    manufacturers flexibility in determining how to effectuate our
    compliance rules and to ensure the security of content. We encourage
    manufacturers to consult with content owners on how to best achieve
    DTV content security and emphasize that this "ordinary user" level
    of robustness represents a floor that manufacturers are free to
    exceed. Should content owners or other interested parties believe
    that a particular manufacturer or product does not meet this
    baseline standard, we will consider complaints in this regard.

47. An additional enforcement mechanism is also needed to enable the
    commercial manufacture, sale and distribution of DTV demodulators
    that have not yet been associated with a TSP or incorporated into
    any consumer product and, thus, cannot demonstrate compliance with
    the Demodulator Product compliance and robustness obligations. To
    account for this situation, we will require manufacturers or
    importers of ATSC demodulators to obtain from buyers of such
    products a written commitment that they will: (1) only sell or
    distribute such products that are, or will be incorporated into,
    devices that meet our Demodulator Product compliance and robustness
    rules, and (2) only sell or distribute such products to another
    person that has committed in writing that they will abide by our
    Demodulator Product compliance and robustness rules.[^119] This
    requirement is based upon a similar construct set forth in the Joint
    Proposal; no comments were received on this issue.[^120] We believe
    that these written commitments, which must be filed with the
    Commission and will be made publicly available for inspection,
    should provide a streamlined framework for manufacturers, importers
    and resellers to verify compliance with the Commission's rules.
    Should a buyer violate their written commitment, it will be deemed a
    violation of the Commission's rules.

    **2. Peripheral TSP Products**

48. The Joint Proposal includes within the scope of its draft rules
    references to so-called "Downstream Products" which are a limited
    subset of products different from the universe of products
    traditionally considered to be downstream from a reception
    device.[^121] In this narrow context, "Downstream Products"
    encompass: (1) a single device within which the demodulator and the
    TSP are physically separate but connected using a robust method,
    or (2) two devices, one with a demodulator and a second with a TSP
    that is capable of connecting to the demodulator using a robust
    method. Because this definition differs greatly from the traditional
    concept of a downstream device -- any peripheral that can attach to
    or network with a reception device -- to avoid confusion we refer
    here to such products as "Peripheral TSP Products." We believe that
    the incorporation of this small group of devices within the scope of
    our Demodulator Product compliance and robustness rules will foster
    innovation and allow greater interoperability of devices.

49. In order to apply our Demodulator Product compliance and robustness
    rules to Peripheral TSP Products without demodulators, some
    enforcement mechanism is needed. To that end, we are adopting the
    written commitment procedures proposed in the Joint Proposal.[^122]
    No comments were received regarding these procedures. Manufacturers
    or importers of Peripheral TSP Products that wish to make their
    products available for use with DTV content and which are designed
    to be connected by a robust method to a covered demodulator shall
    file a written commitment with the Commission that they will abide
    by the Demodulator Product compliance and robustness rules and only
    output content in an authorized manner.[^123] As in the case of
    Demodulator Products, we believe that extension of this written
    commitment regime to Peripheral TSP Products will facilitate
    verification of compliance with the Commission's rules by
    manufacturers, importers and resellers and will consider violations
    of the commitments to be violations of the Commission's rules.

    **3. Interim Procedures for Content Protection and Recording
    Technologies**

50. As the digital transition accelerates, we anticipate that the
    primary means by which Demodulator Products will give effect to the
    flag will be to direct flag-marked content to digital outputs
    associated with approved content protection and recording
    technologies. The compliance rules which we are adopting for
    Demodulator Products permit content to be directed in this fashion
    and therefore need to specify the mechanism by which content
    protection and recording technologies would be approved for use with
    the ATSC flag. MPAA and the 5C companies included with their Joint
    Proposal a separate proposal for a set of so-called "Table A"
    criteria ("Table A Proposal") which established four ways in which a
    content protection or recording technology could be approved for use
    with the flag.[^124] These criteria include: (1) the use or approval
    of 3 major studios or major television broadcast groups (of which at
    least 2 are major studios); (2) the use or approval of 2 major
    studios and the licensing of the technology by 10 major device
    manufacturers (including software vendors); (3) the technology is
    "at least as effective" at protecting content from unauthorized
    redistribution as any previously-approved technologies; (4) the
    technology is expressly referenced as an acceptable output or
    recording mechanism in the licensing terms of another technology at
    the time it is approved.[^125] MPAA asserts that these criteria are
    appropriate as they rely on marketplace approval of
    technologies.[^126]

51. Commenters levy a number of objections against the Table A Proposal
    and offer their own formulations in its place. Advocacy groups
    question the preeminent role of content owners in making
    determinations under the Table A Proposal and advocate
    non-discriminatory approval criteria that would be administered by
    an independent decision-maker.[^127] NCTA concurs with the concept
    of a neutral decision maker and favors the use of market-based and
    technical criteria in approval decisions.[^128] Consumer
    electronics, IT and PC manufacturers advance the adoption of
    objective technical criteria that would allow manufacturers to
    self-certify their compliance thereto.[^129] DTLA also suggests the
    use of *prima facie* compliance notifications by technology
    proponents to the Commission, with dispute resolution procedures
    where objections arise.[^130]

52. As in our recent *Second Report and Order and Second Further Notice
    of Proposed Rulemaking* relating to digital cable compatibility, we
    are concerned with one industry segment exercising a significant
    degree of control over decisions regarding the approval and use of
    content protection and recording technologies in DTV-related
    equipment.[^131] Nor are our concerns alleviated by the "at least as
    effective" alternative, because such a test is limited by what has
    already been approved under other alternatives and thus amounts to
    an indirect form of control. Below we initiate a *Further Notice of
    Proposed Rulemaking* to seek additional comment on this issue. In
    the short term, we recognize that some technologies must be approved
    in order for manufacturers to be able to produce flag-compliant
    devices. To that end, we are establishing an interim procedure
    whereby proponents of a particular content protection or recording
    technology can certify to the Commission that such technology is
    appropriate for use in Demodulator Products to give effect to the
    ATSC flag, subject to public notice and objection.

53. Under this interim process, proponents must submit to the Commission
    the following information: (1) a general description of the how the
    technology works, including its scope of redistribution and
    information regarding relevant patents; (2) a detailed analysis of
    the level of protection the technology affords content, (3)
    information regarding whether content owners, broadcasters, or
    equipment manufacturers have approved or licensed the technology for
    use; and (4) if the technology is to be offered publicly, a copy of
    its licensing terms and fees, as well as evidence demonstrating that
    the technology will be licensed on a reasonable, non-discriminatory
    basis. Should any of this information be proprietary in nature,
    proponents may seek confidential treatment of the proprietary
    portion of their submissions.

54. Following the effective date of the rules we are adopting herein,
    the Commission will issue a public notice initiating an initial
    certification window allowing the proponents of content protection
    technologies and recording methods to file certifications pursuant
    to this interim process. Following close of the initial
    certification window, the Commission will issue a public notice
    identifying the certifications received and commencing a 20 day
    opposition window. If no objection is received on the merits of the
    proponent's submission within the 20 day opposition window, the
    Commission will expeditiously issue a determination indicating
    whether the technology is approved for use in Demodulator Products.
    If substantive objections are received with respect to a particular
    technology, proponents will have a 10 day window to reply before we
    will undertake a review of its merits. Should an objection be raised
    that the proponent's submission contains insufficient information to
    evaluate its appropriateness, proponents will again have a 10 day
    window to reply before we review such objections and determine
    whether to dismiss the submission without prejudice or undertake a
    full review of its merits. The Commission will consider the merits
    of each submission and issue a determination as expeditiously as
    possible. We expect that such decision will be made no later than 90
    days following close of the reply period. Certifications filed
    subsequent to this initial certification window will follow similar
    time frames and procedures.

55. In reaching determinations made under this interim process, whether
    during or subsequent to the initial certification window, the
    Commission will consider, where applicable, a number of factors
    relevant to content protection technologies and recording methods.
    When evaluating its technological features, we will look at specific
    evidence relating to how the content protection technology or
    recording method meets several broad categories of so-called
    "functional criteria." Functional criteria are key evaluative
    factors that are relevant to whether a particular technology is
    appropriate for use in Covered Demodulator Products. These criteria
    include: level of security, scope of redistribution, means of
    authentication, upgradability, renewability, interoperability, and
    ability to revoke compromised devices. In addition to these
    functional criteria, we will consider a technology's licensing
    terms, including its compliance and robustness rules, change
    provisions, approval procedures for downstream transmission and
    recording methods, and any relevant license fees. Where a content
    protection technology or recording method is to be publicly offered,
    we expect that it will be licensed on a reasonable and
    non-discriminatory basis. We also expect that publicly offered
    licenses will not be unreasonably withheld from parties. In order to
    fully evaluate the potential impact of approving specific content
    protection technologies or recording methods, we also believe it is
    appropriate to consider whether the technology accommodates
    consumers' use and enjoyment of DTV broadcast content. As discussed
    above, we anticipate that technologies can protect content while
    facilitating consumer uses and practices. We also believe that
    technologies can promote consumer access to content, particularly in
    formats accessible to the blind and visually impaired. To this end,
    it is our hope that proponents will certify many different
    technologies for approval, including but not limited to digital
    rights management, software-based, and non-encryption alternatives.

56. Finally, in the event that the security of an approved content
    protection or recording technology should be compromised while this
    interim policy is in effect, we will consider petitions for
    revocation. Parties seeking revocation should articulate in detail
    the extent to which the content protection or recording technology
    has been compromised and demonstrate why alternative revocation
    measures, such as those available under private licenses, are
    insufficient to address the breach in security.

57. Due to the fact that some content protection and recording
    technologies must be approved before device manufacturers can build
    flag-compliant devices, and the corresponding need to allow adequate
    time for device manufacturers to design products once a number of
    technologies are approved, we will require manufacturers to meet our
    Demodulator Product compliance and robustness rules commencing with
    the July 1, 2005 product cycle. We recognize, however, that some
    consumer electronics manufacturers may be able to voluntarily
    include flag recognition technology into devices on a more
    accelerated schedule, notably in new digital cable ready televisions
    set for the July 1, 2004 product cycle.[^132] We strongly encourage
    these efforts. To the extent that a manufacturer voluntarily
    includes flag recognition technology in any device prior to the
    effective date of our rules adopted herein, we clarify that these
    devices would fall outside the scope of such rules and any
    associated obligations.

    **C. MVPD Retransmission**

58. MVPD perpetuation of a flag content protection system for DTV
    broadcast retransmissions could occur in one of two ways: (1) by
    MVPD pass-through of the ATSC flag where the retransmission is
    unencrypted, or (2) where the retransmission is encrypted, by
    conveying the presence of the flag through the MVPD's system by some
    means that requires the consumer's reception equipment to protect
    the content as if the flag were present. DIRECTV asserts that it can
    pass-through the flag, but asks that MVPDs be given the discretion
    to decide how to carry and implement the ATSC flag.[^133] To ensure
    that the flag does not interfere with cable operators' home
    networking capabilities, NCTA seeks flexibility to provide DTV
    broadcast content with redistribution control protection through
    alternative means.[^134] The Joint Proposal allows for both
    mechanisms.[^135] We agree that MVPDs should have the latitude to
    implement the flag as appropriate for their distribution platforms,
    whether it be through direct pass-through or by effectuating the
    flag's intent through their own conditional access system. In our
    *Further Notice of Proposed Rulemaking* below, we seek comment on
    whether cable operators should be allowed to encrypt the digital
    basic tier in order to convey the presence of the ATSC flag through
    their conditional access system. We clarify, however, that MVPDs may
    not assert greater redistribution control protection for digital
    broadcast content than that which the broadcaster has selected. In
    the case of content which a broadcaster has not marked with the
    flag, MVPDs must deliver that content to subscribers in a manner
    that reflects and gives effect to its unflagged status.

# FURTHER NOTICE OF PROPOSED RULEMAKING

59. Although we believe that our adoption of a flag-based redistribution
    control system for digital broadcast television will further the
    digital transition and ensure the continued flow of high value
    content to broadcast outlets, further comment is needed on several
    issues. As an initial matter, we seek comment on whether cable
    operators that retransmit DTV broadcasts may encrypt the digital
    basic tier in order to convey the presence of the ATSC flag through
    their conditional access system. Section 76.630 of the Commission's
    rules generally prohibits cable operators from "scrambl\[ing\] or
    encrypt\[ing\] signals carried on the basic service tier" without
    distinguishing between analog and digital service.[^136] NCTA has
    suggested that allowing cable operators to encrypt the digital basic
    tier and "virtually" convey the presence of the flag will facilitate
    the offering of future home networking services.[^137] We seek
    comment on whether cable operators should be allowed to encrypt in
    this manner.

60. In response to our *Notice of Proposed Rulemaking*, EFF questioned
    the impact of a flag based regime on innovations in software
    demodulators and other DTV open source software applications.[^138]
    The Commission has actively promoted the development of software
    defined radio and other software demodulators as important
    innovations in the digital age.[^139] We seek further comment on the
    interplay between a flag redistribution control system and the
    development of open source software applications, including software
    demodulators, for digital broadcast television.

61. This *Further Notice of Proposed Rulemaking* also seeks comment on
    whether standards and procedures should be adopted for the approval
    of new content protection and recording technologies to be used with
    device outputs on Demodulator Products. If so, we seek comment on
    the various types of content protection technologies that should be
    considered as a part of this process, including but not limited to
    digital rights management, wireless and encryption-based
    technologies. We recognize that similar issues have been raised with
    respect to digital cable ready DTV receivers in the *Second Further
    Notice of Proposed Rulemaking* in the Commission's ongoing "Plug and
    Play" proceeding.[^140] We seek comment on whether a unified regime
    should be employed in both instances.

62. With respect to the particular standards and procedures to be
    employed, we seek comment on whether objective criteria should be
    used to evaluate new content protection and recording technologies
    and, if so, what specific criteria should be used. For example, in
    our recent *Second Report and Order and Second Further Notice of
    Proposed Rulemaking* relating to digital cable compatibility,
    Microsoft Corporation and Hewlett Packard Corporation submitted a
    detailed proposal suggesting functional requirements that could be
    used to evaluate digital rights management technologies for use with
    digital cable ready products.[^141] We seek comment on this proposal
    in the ATSC flag context, as well as on other proposals submitted in
    this proceeding relying on objective criteria,[^142] and any new
    proposals that commenters may submit to the Commission.

63. We also seek comment on the appropriate scope of redistribution that
    should be prevented. In general, we believe that a flag based system
    should prevent indiscriminate redistribution of digital broadcast
    content, however, we do not wish to foreclose use of the Internet to
    send digital broadcast content where robust security can adequately
    protect the content and the redistribution is tailored in nature. We
    see comment on the usefulness of defining a personal digital network
    environment ("PDNE") within which consumers could freely
    redistribute digital broadcast television content. If so, we seek
    comment on the various permutations of a PDNE that were proposed in
    the *BDPD Final Report* and whether any modifications are needed to
    maintain consumer's home viewing expectations.[^143] We also seek
    comment on possible new formulations of a PDNE.

64. We also seek comment on whether content owners are the appropriate
    entities to make initial approval determinations, or whether another
    entity should have decision-making authority. In particular, we seek
    comment on whether the Commission, a qualified third party, or an
    independent entity representing various industry and consumer
    interests should make approval and revocation determinations.

65. As to the issue of how approved content protection and recording
    technologies may be revoked should their security be compromised, we
    seek comment on the appropriate standard for revocation.
    Specifically, we seek comment on whether revocation is appropriate
    where a content protection or recording technology is perceived to
    be insecure, or whether the appropriate standard is where security
    has been compromised in a significant, widespread manner. Once a
    content protection or recording technology has been revoked, we seek
    comment on the appropriate mechanism by which revocation should be
    effectuated. For example, should revoked content protection or
    recording technologies be eliminated on a going-forward basis, while
    preserving their functionality for existing devices? We also seek
    comment on whether there are technological or other means of
    revoking content protection or recording technologies while
    preserving the functionality of consumer electronics devices.

# PROCEDURAL MATTERS

66. *Authority*. This *Further* *Notice of Proposed Rulemaking* is
    issued pursuant to authority contained in §§ Sections 1, 2, 4(i) and
    (j), 303, 307, 309(j), 336, 337, 396(k), 403, 601, 614(b) and 624a
    of the Communications Act of 1934, as amended.

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

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

69. *Comment Information*. Pursuant to Sections 1.415 and 1.419 of the
    Commission\'s rules, 47 C.F.R. §§ 1.415, 1.419, interested parties
    may file comments on or before **January 14, 2004**, and reply
    comments on or before **February 13, 2004**. All filings should
    refer to MB Docket No. 02-230. Comments may be filed using the
    Commission\'s Electronic Comment Filing System (ECFS) or by filing
    paper copies. See Electronic Filing of Documents in Rulemaking
    Proceedings, 63 Fed. Reg. 24121 (1998).

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

71. *Paperwork Reduction Act of 1995 Analysis*. The *Report and* *Order*
    portion of this *Report and* *Order and Further Notice of Proposed
    Rulemaking* contains new or modified information collection(s)
    subject to the Paperwork Reduction Act of 1995 (PRA), Public Law
    104-13. It will be submitted to the Office of Management and Budget
    (OMB) for review under Section 3507(d) of the PRA. OMB, the general
    public, and other Federal agencies are invited to comment on the new
    or modified information collection(s) contained in this proceeding.

72. Written comments by the public on the proposed information
    collection(s) are due 60 days from date of publication of this
    *Report and* *Order* in the Federal Register. Written comments must
    be submitted by the public, Office of Management and Budget and
    other interested parties on the proposed information collection(s)
    on or before 60 days from date of publication of this *Report and*
    *Order* in the Federal Register. In addition to filing comments with
    the Secretary, a copy of any comments on the information
    collection(s) contained herein should be submitted to Leslie Smith,
    Federal Communications Commission, Room 1-A804, 445 12^th^ Street,
    SW, Washington, DC 20554, or via the Internet to
    Leslie.Smith@fcc.gov, and to Kim A. Johnson, OMB Desk Officer, Room
    10236 NEOB, 725 17^th^ Street, NW, Washington, DC 20503, or via the
    Internet to Kim_A.\_Johnson@omb.eop.gov.

73. *Regulatory Flexibility Act*. As required by the Regulatory
    Flexibility Act,[^144] the Commission has prepared a Final
    Regulatory Flexibility Analysis ("FRFA") relating to the *Report and
    Order* portion of this *Report and* *Order and Further Notice of
    Proposed Rulemaking*. The FRFA is set forth in Appendix C. The
    Commission has also prepared an Initial Regulatory Flexibility
    Analysis ("IRFA") of the possible significant economic impact on a
    substantial number of small entities of the proposals addressed in
    *Further Notice* portion of this *Report and* *Order and Further
    Notice of Proposed Rulemaking*.[^145] The IRFA is set forth in
    Appendix D. Written public comments are requested on the IRFA. These
    comments must be filed in accordance with the same filing deadlines
    for comments on the *Further Notice*, and they should have a
    separate and distinct heading designating them as responses to the
    IRFA.

# ORDERING CLAUSES

74. **IT IS ORDERED** that pursuant to the authority contained in
    Sections 1, 2, 4(i) and (j), 303, 307, 309(j), 336, 337, 396(k),
    403, 601, 614(b) and 624a of the Communications Act of 1934, 47
    U.S.C §§ 151, 152, 154(i) and (j), 303, 307, 309(j), 336, 337,
    396(k), 403, 521, 534(b) and 544a that the Commission's rules **ARE
    HEREBY AMENDED** as set forth in Appendix B, and shall become
    effective 30 days after publication in the Federal Register except
    that rule sections 73.9002 and 73.9008 that contain information
    collection requirements under the PRA are not effective until
    approved by OMB. The FCC will publish a document in the Federal
    Register announcing the effective date for those sections.

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

    FEDERAL COMMUNICATIONS COMMISSION

> Marlene H. Dortch

#  Secretary {#secretary .unnumbered}

**APPENDIX A**

**[List of Leading Commenters]{.underline}**

American Conservative Union

American Foundation for the Blind

Arizona Consumer Council *et al*.

Banks, LIN, Midwest Television *et al*.

CBS Television Affiliates Assoc.

Center for Democracy and Technology

Computer & Communications Industry Assoc.

Consumer Electronics Assoc.

Digimarc Corp. & Macrovision Corp.

Digital Transmission Licensing Administrator, LLC

Directors Guild of America

DirecTV, Inc.

Electronic Frontier Foundation

Electronic Privacy Information Center

Free Software Foundation

Home Recording Rights Coalition

Information Technology Assoc. of America

Information Technology Industry Council

Internet Commerce Coaliition & United States Internet Service Provider
Assoc.

IT Coalition (Business Software Alliance & Computer Systems Policy
Project)

Law Office of Adam Hill

Library Associations

Motion Picture Association of America *et al.*

Motorola

National Broadcasting Company

National Cable & Telecommunications Assoc.

National Football League

National Music Publishers' Association, *et al*.

NBC Television Affiliates Assoc.

New Yorkers for Fair Use

North American Broadcasters Assoc.

Philips Electronics North America

Public Knowledge and Consumers Union

Thomson Inc.

TiVo Inc.

Veridian Corporation

Verizon

Viacom

Walt Disney Company & ABC Television Network

**[List of Leading Reply Commenters]{.underline}**

American Antitrust Institute

American Society of Composers, Authors & Publishers & Broadcast Music,
Inc.

Center for Public Broadcasting *et al*.

Consumer Electronics Assoc.

Corporation for National Research Initiatives

Digital Transmission Licensing Administrator, LLC

DirecTV, Inc.

Electronic Frontier Foundation

Home Recording Rights Coalition

IBM

Information Technology Association of America

International Association of Broadcast Monitors

IT Coalition (Business Software Alliance & Computer Systems Policy
Project)

Motion Picture Association of America *et al*.

National Cable & Telecommunications Assoc.

National Football League *et al*.

National Music Publishers' Association, *et al*.

New Yorkers for Fair Use

Philips Electronics North America Corporation

Public Knowledge and Consumers Union

Recording Industry Association of America

Thomson, Inc.

Veridian Corporation

Worldcom, Inc.

**APPENDIX B**

Part 73 of the Code of Federal Regulations is amended as follows:

PART 73 -- RADIO BROADCAST SERVICES

1.  The authority for Part 73 continues to read as follows:

    AUTHORITY: 47 U.S.C. 154, 303, 334 and 336.

2.  Add subpart L to read as follows:

    Subpart L -- Digital Broadcast Television Redistribution Control

    Sec.

    73.8000 Incorporations by Reference.

    [§73.8000 Incorporations by Reference]{.underline}.

    \(a\) The materials listed in this section are incorporated by
    reference in this part. These incorporations by reference were
    approved by the Director of the Federal Register in accordance with
    5 U.S.C. 552(a) and 1 CFR part 51. These materials are incorporated
    as they exist on the date of the approval, and notice of any change
    in these materials will be published in the Federal Register. The
    materials are available for purchase at the corresponding addresses
    noted below, and all are available for inspection at the Office of
    the Federal Register, 800 North Capitol Street, NW, suite 700,
    Washington, DC, at the Reference Information Center, Federal
    Communications Commission, 445 12th. St., SW, Room CY- A257,
    Washington, DC 20554.

    \(b\) The following materials are available for purchase from at
    least one of the following addresses: Global Engineering Documents,
    15 Inverness Way East, Englewood, CO 80112 or at
    http://global.ihs.com; or American National Standards Institute, 25
    West 43rd Street, 4th Floor, New York, NY 10036 or at
    http://webstore.ansi.org/ansidocstore/default.asp.

    \(1\) ATSC A/52: "ATSC Standard Digital Television Audio Compression
    (AC-3)," 1995, IBR approved for § 73.682.

    \(2\) ATSC A/53: "ATSC Digital Television Standard," 1995, IBR
    approved for § 73.682, except for section 5.1.2 of Annex A, and the
    phrase "see Table 3" in section 5.1.1. Table 2 and section 5.1.2
    Table 4.

    \(3\) ATSC A/65B: "ATSC Program and System Information Protocol for
    Terrestrial Broadcast and Cable," 2003, IBR approved for §§
    73.9000-73.9001.

    \(4\) International Standard ISO/IEC 13818-1:2000(E); "Information
    Technology -- Generic Coding of Moving Pictures and Associated Audio
    Information: Systems," 2000, IBR approved for § 73.9000.

    \* \* \* \* \*

3.  Add subpart M to read as follows:

    Subpart M -- Digital Broadcast Television Redistribution Control

    Sec.

    73.9000 Definitions.

    73.9001 Redistribution Control of Digital Television Broadcasts.

    73.9002 Sale or Distribution of Demodulators, Covered Demodulator
    Products, and Peripheral TSP Products.

    73.9003 Compliance Requirements for Covered Demodulator Products:
    Unscreened Content.

    73.9004 Compliance Requirements for Covered Demodulator Products:
    Marked Content.

    73.9005 Compliance Requirements for Covered Demodulator Products:
    Audio.

    73.9006 Add-in Covered Demodulator Products.

    73.9007 Robustness Requirements for Covered Demodulator Products.

    73.9008 Interim Approval of Authorized Digital Output Protection
    Technologies and Authorized Recording Methods.

    73.9009 Manufacture for Exportation.

    [§73.9000 Definitions]{.underline}.

> \(a\) \"Authorized Digital Output Protection Technology\" means a
> technology approved pursuant to the procedures in § 73.9008.
>
> \(b\) "Authorized Recording Method" means a recording method approved
> pursuant to the procedures in § 73.9008.
>
> \(c\) "Bona Fide Reseller" means a party regularly engaged, or about
> to become regularly engaged, in the lawful commercial enterprise of
> selling, reselling, manufacturing, or assembling Demodulators, or
> products incorporating Demodulators, in compliance with this subpart.
>
> \(d\) "Broadcast Flag" means the Redistribution Control descriptor
> (rc_descriptor()) described in ATSC Standard A/65B: "Program and
> System Information Protocol for Terrestrial Broadcast and Cable,"
> (incorporated by reference, see § 73.8000).
>
> \(e\) "Computer Product" means a product that is designed for or
> permits the end user to install a wide variety of commercially
> available software applications thereon, such as a personal computer,
> handheld "Personal Digital Assistant" and the like, and further
> includes a subsystem of such a product, such as a graphics card.
>
> \(f\) "Covered Demodulator Product" means a product that is required
> under §§ 73.9002(a)(1) or 73.9002(b)(1) to comply with the Demodulator
> Compliance Requirements, and to be manufactured in accordance with the
> Demodulator Robustness Requirements.
>
> \(g\) "Demodulator" means a component, or set of components, that is
> designed to perform the function of 8-VSB, 16-VSB, 64-QAM or 256-QAM
> demodulation and thereby produce a data stream for the purpose of
> digital television reception.
>
> \(h\) "Demodulator Compliance Requirements" means the requirements set
> out in §§ 73.9003 through 73.9006.
>
> \(i\) "Demodulator Robustness Requirements" means the requirements set
> out in § 73.9007.
>
> \(j\) "Peripheral TSP Product" means a product that is capable of
> accessing in usable form Unscreened Content or Marked Content passed
> to such product via a Robust Method where the manufacturer of such
> product has committed in writing in accordance with § 73.9002(c) that
> such product will comply with the Demodulator Compliance Requirements
> and be manufactured in accordance with the Demodulator Robustness
> Requirements.
>
> \(k\) "EIT" means Event Information Table as defined in ATSC Standard
> A/65B: "Program and System Information Protocol for Terrestrial
> Broadcast and Cable" (incorporated by reference, see § 73.8000).
>
> \(l\) "Marked Content" means, with respect to a Covered Demodulator
> Product, Unencrypted Digital Terrestrial Broadcast Content that such
> product has (1) received and demodulated and for which such product
> has inspected either the EIT or PMT and determined the Broadcast Flag
> to be present, or (2) where such product is a Peripheral TSP Product,
> received via a Robust Method and accessed in usable form, and for
> which such product either inspected the EIT or PMT and determined the
> Broadcast Flag to be present or determined through information
> robustly conveyed with such content that another Covered Demodulator
> Product had previously so screened such content and determined the
> Broadcast Flag to be present; provided, however, that, with respect to
> a Covered Demodulator Product, \"Marked Content\" shall not include
> content that has been passed from such product pursuant to §§
> 73.9004(a)(1), 73.9004(a)(2), 73.9004(a)(3), 73.9004(a)(5),
> 73.9004(a)(6), or 73.9006(b).
>
> \(m\) "PMT" means Program Map Table as defined in International
> Standard ISO/IEC 13818-1:2000(E): "Information Technology -- Generic
> Coding of Moving Pictures and Associated Audio Information: Systems"
> (incorporated by reference, see § 73.8000).
>
> \(n\) "Robust Method" means, with respect to the passing of Unscreened
> Content or Marked Content from one product to another, a content
> protection method that complies with § 73.9007.
>
> \(o\) "Transitory Image" means data that has been stored temporarily
> for the sole purpose of enabling a function not prohibited by this
> subpart but that (1) does not persist materially after such function
> has been performed and (2) is not stored in a way that permits copying
> or storing of such data for other purposes.
>
> \(p\) "Unencrypted Digital Terrestrial Broadcast Content" means
> audiovisual content contained in the signal broadcast by a digital
> television station without encrypting or otherwise making the content
> available through a technical means of conditional access, and
> includes such content when retransmitted in unencrypted digital form.
>
> \(q\) "Unscreened Content" means, with respect to a Covered
> Demodulator Product, Unencrypted Digital Terrestrial Broadcast Content
> that such product either (1) received and demodulated and for which
> such product has inspected neither the EIT nor the PMT for the
> Broadcast Flag or (2) where such product is a Peripheral TSP Product,
> received via a Robust Method and accessed in usable form, and for
> which such product has inspected neither the EIT nor the PMT for the
> Broadcast Flag and has not determined through information robustly
> conveyed with such content another Covered Demodulator Product had
> previously so screened such content and determined the Broadcast Flag
> to be present; provided, however, that, with respect to a Covered
> Demodulator Product, "Unscreened Content" shall not include content
> that has been passed from such product pursuant to §§ 73.9003(a)(1),
> 73.9003(a)(2), 73.9003(a)(3), 73.9003(a)(4), 73.9003(a)(6),
> 73.9003(a)(7), or 73.9006(b).
>
> \(r\) "User Accessible Bus" means a data bus that is designed for end
> user upgrades or access, such as an implementation of a smartcard
> interface, PCMCIA, Cardbus, or PCI that has standard sockets or
> otherwise readily facilitates end user access. A "User Accessible Bus"
> does not include memory buses, CPU buses, or similar portions of a
> device\'s internal architecture that do not permit access to content
> in a form usable by end users.
>
> [73.9001 Redistribution Control of Digital Television
> Broadcasts]{.underline}.
>
> Licensees of TV broadcast stations may utilize the Redistribution
> Control descriptor described in ATSC Standard A/65B: "Program and
> System Information Protocol for Terrestrial Broadcast and Cable,"
> (incorporated by reference, see § 73.8000) provided they do not
> transmit the optional additional redistribution control information.

[§73.9002 Sale or Distribution of Demodulators, Covered Demodulator
Products, and Peripheral TSP Products]{.underline}.

> \(a\) [Demodulators]{.underline}. No party that manufactures or
> imports a Demodulator shall sell or distribute in interstate commerce
> such Demodulator unless:
>
> \(1\) at the time of such sale or distribution such Demodulator is
> itself, or is incorporated into, a product that complies with the
> Demodulator Compliance Requirements and was manufactured in accordance
> with the Demodulator Robustness Requirements; or
>
> \(2\) such sale or distribution is to a party that has committed in
> writing pursuant to paragraph (d) of this section not to sell or
> distribute Demodulators other than in accordance with paragraphs
> (a)(1) or (a)(2) of this section.
>
> \(b\) [Covered Demodulator Products]{.underline}. No party shall sell
> or distribute in interstate commerce a Covered Demodulator Product
> that does not comply with the Demodulator Compliance Requirements and
> Demodulator Robustness Requirements. The requirements of this
> paragraph shall not apply to the sale or resale of a product that was
> manufactured prior to the effective date of this subpart or that
> initially was sold or distributed in compliance with this subpart.
>
> \(c\) [Peripheral TSP Products]{.underline}. No party that
> manufactures or imports a Peripheral TSP Product shall sell or
> distribute such Peripheral TSP Product in interstate commerce unless,
> at the time of such sale or distribution, such Peripheral TSP Product
> complies with the Demodulator Compliance Requirements and was
> manufactured in accordance with the Demodulator Robustness
> Requirements. The requirements of this paragraph shall not apply to
> the sale or resale of a product that was manufactured prior to the
> effective date of this subpart or that was initially was sold or
> distributed in compliance with this subpart.
>
> \(d\) [Written Commitments]{.underline}.
>
> \(1\) A written commitment to allow sale or distribution of
> Demodulators under paragraph (a)(2) of this section, or for a
> Peripheral TSP Product, shall be submitted to the Federal
> Communications Commission, Chief, Media Bureau, Attn: Broadcast Flag
> Written Commitment, 445 12^th^ Street, SW, Washington, DC, 20554.
>
> \(2\) The information to be provided by a party filing a written
> commitment to allow sale or distribution of Demodulators under
> paragraph (a)(2) of this section shall include a statement that one of
> the following conditions is true:
>
> \(i\) the party is a Bona Fide Reseller;
>
> \(ii\) the party is a licensed digital television broadcaster; or
>
> \(iii\) the party is a multichannel video programming distributor, or
> other party engaged, or about to become engaged, in the lawful
> retransmission of Unencrypted Digital Terrestrial Broadcast Content
> pursuant to § 76.1909 of this chapter.
>
> \(3\) The information to be provided by a party filing a written
> commitment for a Peripheral TSP Product shall include statements that
> that the party is engaged, or about to become engaged, in the lawful
> commercial enterprise of manufacturing such Peripheral TSP Product,
> and that such product will comply with the Demodulator Compliance
> Requirements and be manufactured in accordance with the Demodulator
> Robustness Requirements.
>
> \(4\) It shall be a violation of this subpart, enforceable by the
> Commission, for any person that has filed a written commitment
> pursuant to paragraph (d) of this section to:
>
> \(i\) in the case such commitment to allow sale or distribution of
> Demodulators under paragraph (a)(2) of this section, sell or
> distribute the Demodulator other than in accordance with paragraphs
> (a)(1) or (a)(2) of this section; or
>
> \(ii\) in the case of such commitment for a Peripheral TSP Product,
> sell or distribute the Peripheral TSP Product other than in compliance
> with paragraph (c) of this section.
>
> \(5\) Written commitments filed pursuant to paragraph (d) of this
> section will be publicly available in accordance with §§ 0.441 through
> 0.470 of this chapter.
>
> \(e\) The requirements of this section shall become applicable on July
> 1, 2005.
>
> [§ 73.9003 Compliance Requirements for Covered Demodulator Products:
> Unscreened Content]{.underline}.
>
> \(a\) A Covered Demodulator Product shall not pass, or direct to be
> passed, Unscreened Content to any output except:
>
> \(1\) to an analog output;
>
> \(2\) to an 8-VSB, 16-VSB, 64-QAM or 256-QAM modulated output,
> provided that the Broadcast Flag is retained in the both the EIT and
> PMT;
>
> \(3\) to a digital output protected by an Authorized Digital Output
> Protection Technology authorized for use with Unscreened Content, in
> accordance with any applicable obligations established as a part of
> its approval pursuant to § 73.9008;
>
> \(4\) where the stream containing such content has not been altered
> following demodulation and such Covered Demodulator Product outputs,
> or directs to be output, such content to a Peripheral TSP Product
> solely within the home or other, similar local environment, using a
> Robust Method;
>
> \(5\) where such Covered Demodulator Product outputs, or directs to be
> output, such content to another product and such Covered Demodulator
> Product exercises sole control (such as by using a cryptographic
> protocol), in compliance with the Demodulator Robustness Requirements,
> over the access to such content in usable form in such other product;
>
> \(6\) where such Covered Demodulator Product outputs, or directs to be
> output, such content for the purpose of making a recording of such
> content pursuant to paragraph (b)(2) of this section, where such
> content is protected by the corresponding recording method; or
>
> \(7\) where such Covered Demodulator Product is incorporated into a
> Computer Product and passes, or directs to be passed, such content to
> an unprotected output operating in a mode compatible with the Digital
> Visual Interface (DVI) Rev. 1.0 Specification as an image having the
> visual equivalent of no more than 350,000 pixels per frame (e.g. an
> image with resolution of 720 x 480 pixels for a 4:3 (non­square pixel)
> aspect ratio), and 30 frames per second. Such an image may be attained
> by reducing resolution, such as by discarding, dithering or averaging
> pixels to obtain the specified value, and can be displayed using video
> processing techniques such as line doubling or sharpening to improve
> the perceived quality of the image.
>
> \(b\) A Covered Demodulator Product shall not record or cause the
> recording of Unscreened Content in digital form unless such recording
> is made using one of the following methods:
>
> \(1\) a method that effectively and uniquely associates such recording
> with a single Covered Demodulator Product (using a cryptographic
> protocol or other effective means) so that such recording cannot be
> accessed in usable form by another product except where the content of
> such recording is passed to another product as permitted under this
> subpart; or
>
> \(2\) an Authorized Recording Method authorized for use with
> Unscreened Content in accordance with any applicable obligations
> established as a part of its approval pursuant to § 73.9008 (provided
> that for recordings made on removable media, only Authorized Recording
> Methods expressly approved pursuant to § 73.9008 for use in connection
> with removable media may be used).
>
> \(c\) Paragraph (b) of this section does not impose restrictions
> regarding the storage of Unscreened Content as a Transitory Image.
>
> \(d\) The requirements of this section shall become applicable on July
> 1, 2005.
>
> [§ 73.9004 Compliance Requirements for Covered Demodulator Products:
> Marked Content]{.underline}.
>
> \(a\) A Covered Demodulator Product shall not pass, or direct to be
> passed, Marked Content to any output except
>
> \(1\) to an analog output;
>
> \(2\) to an 8-VSB, 16-VSB, 64-QAM or 256-QAM modulated output,
> provided that the Broadcast Flag is retained in the both the EIT and
> PMT;
>
> \(3\) to a digital output protected by an Authorized Digital Output
> Protection Technology, in accordance with any applicable obligations
> established as a part of its approval pursuant to § 73.9008;
>
> \(4\) where such Covered Demodulator Product outputs, or directs to be
> output, such content to another product and such Covered Demodulator
> Product exercises sole control (such as by using a cryptographic
> protocol), in compliance with the Demodulator Robustness Requirements,
> over the access to such content in usable form in such other product;
>
> \(5\) where such Covered Demodulator Product outputs, or directs to be
> output, such content for the purpose of making a recording of such
> content pursuant to paragraph (b)(2) of this section, where such
> content is protected by the corresponding recording method; or
>
> \(6\) where such Covered Demodulator Product is incorporated into a
> Computer Product and passes, or directs to be passed, such content to
> an unprotected output operating in a mode compatible with the Digital
> Visual Interface (DVI) Rev. 1.0 Specification as an image having the
> visual equivalent of no more than 350,000 pixels per frame (e.g., an
> image with resolution of 720 x 480 pixels for a 4:3 (non­square pixel)
> aspect ratio), and 30 frames per second. Such an image may be attained
> by reducing resolution, such as by discarding, dithering or averaging
> pixels to obtain the specified value, and can be displayed using video
> processing techniques such as line doubling or sharpening to improve
> the perceived quality of the image.
>
> \(b\) A Covered Demodulator Product shall not record or cause the
> recording of Marked Content in digital form unless such recording is
> made using one of the following methods:
>
> \(1\) a method that effectively and uniquely associates such recording
> with a single Covered Demodulator Product (using a cryptographic
> protocol or other effective means) so that such recording cannot be
> accessed in usable form by another product except where the content of
> such recording is passed to another product as permitted under this
> subpart or
>
> \(2\) an Authorized Recording Method in accordance with any applicable
> obligations established as a part of its approval pursuant to §
> 73.9008 (provided that for recordings made on removable media, only
> Authorized Recording Methods expressly approved pursuant to § 73.9008
> for use in connection with removable media may be used).
>
> \(c\) Paragraph (b) of this section does not impose restrictions
> regarding the storage of Marked Content as a Transitory Image.
>
> \(d\) The requirements of this section shall become applicable on July
> 1, 2005.
>
> [§ 73.9005 Compliance Requirements for Covered Demodulator Products:
> Audio]{.underline}.
>
> Except as otherwise provided in §§ 73.9003(a) or 73.9004(a), Covered
> Demodulator Products shall not output the audio portions of Unscreened
> Content or of Marked Content in digital form except in compressed
> audio format (such as AC3) or in Linear PCM format in which the
> transmitted information is sampled at no more than 48 kHz and no more
> than 16 bits/sample. The requirements of this section shall become
> applicable on July 1, 2005.
>
> [§ 73.9006 Add-in Covered Demodulator Products]{.underline}.
>
> Where a Covered Demodulator Product passes Unscreened Content or
> Marked Content to another product, other than where such Covered
> Demodulator Product passes, or directs such content to be passed to an
> output (e.g., where a demodulator add-in card in a personal computer
> passes such content to an associated software application installed in
> the same computer), it shall pass such content:
>
> \(a\) using a Robust Method; or
>
> \(b\) protected by an Authorized Digital Output Protection Technology
> authorized for such content in accordance with any applicable
> obligations established as a part of its approval pursuant to §
> 73.9008. Neither Unscreened Content nor Marked Content may be so
> passed in unencrypted, compressed form via a User Accessible Bus.

The requirements of this section shall become applicable on July 1,
2005.

> [§ 73.9007 Robustness Requirements for Covered Demodulator
> Products]{.underline}.
>
> The content protection requirements set forth in the Demodulator
> Compliance Requirements shall be implemented in a reasonable method so
> that they cannot be defeated or circumvented merely by an ordinary
> user using generally-available tools or equipment. The requirements of
> this section shall become applicable on July 1, 2005.
>
> Note to §73.9007. Generally-available tools or equipment means tools
> or equipment that are widely available at a reasonable price,
> including but not limited to, screwdrivers, jumpers, clips and
> soldering irons. Generally-available tools or equipment also means
> specialized electronic tools or software tools that are widely
> available at a reasonable price, other than devices or technologies
> that are designed and made available for the specific purpose of
> bypassing or circumventing the protection technologies used to meet
> the requirements set forth in this subpart. Such specialized
> electronic tools or software tools includes, but is not limited to,
> EEPROM readers and writers, debuggers or decompilers.
>
> [§ 73.9008 Interim Approval of Authorized Digital Output Protection
> Technologies and Authorized Recording Methods]{.underline}.
>
> \(a\) [Certifications for Digital Output Protection Technologies and
> Authorized Recording Methods]{.underline}. The proponent of a specific
> digital output protection technology or recording method seeking
> approval for use in Covered Demodulator Products shall certify to the
> Commission that such digital output protection technology or recording
> method is appropriate for use in Covered Demodulator Products to give
> effect to the Broadcast Flag. Such certification shall include the
> following information:
>
> \(1\) a general description of how the digital output protection
> technology or recording method works, including its scope of
> redistribution;
>
> \(2\) a detailed analysis of the level of protection the digital
> output protection technology or recording method affords content;
>
> \(3\) information regarding whether content owners, broadcasters or
> equipment manufacturers have approved or licensed the digital output
> protection technology or recording method for use; and
>
> \(4\) if the technology is to be offered publicly, a copy of its
> licensing terms, and fees, as well as evidence demonstrating that the
> technology will be licensed on a reasonable, non-discriminatory basis.
>
> If any of the information is proprietary in nature, the proponent may
> seek confidential treatment of the proprietary portion of their
> certification pursuant to § 0.459 of this chapter.
>
> \(b\) [Initial certification window]{.underline}. Following the
> effective date of this subpart, the Commission shall issue a public
> notice commencing an initial certification window for digital output
> protection technologies or recording methods. Within thirty (30) days
> after the date of this public notice, proponents of digital output
> protection technologies or recording methods may file certifications
> pursuant to paragraph (a) of this section. Following close of the
> initial certification window, the Commission shall issue a public
> notice identifying the certifications received and commencing an
> opposition window. Within twenty (20) days after the date of this
> public notice, oppositions may be filed with respect to a
> certification.
>
> \(1\) If no objections are received in response to a proponent's
> certification within the twenty (20) day opposition window, the
> Commission shall expeditiously issue a determination indicating
> whether the underlying digital output protection technology or
> recording method is approved for use with Covered Demodulator
> Products.
>
> \(2\) If an objection is raised within the twenty (20) day opposition
> window alleging that a proponent's certification contains insufficient
> information to evaluate the appropriateness of the underlying digital
> output protection technology or recording method for use with Covered
> Demodulator Products, the proponent may file a reply within 10 days
> after the close of the twenty (20) day opposition window. The
> Commission shall determine whether to dismiss the certification
> without prejudice or to undertake a full review of the certification's
> merits pursuant to paragraph (d) of this section.
>
> \(3\) If an objection is raised within the twenty (20) day opposition
> window alleging that a proponent's digital output protection
> technology or recording method is inappropriate for use with Covered
> Demodulator Products, the Commission shall undertake a full review of
> the associated certification's merits pursuant to paragraph (d) of
> this section. The proponent may file a reply within 10 days after the
> close of the twenty (20) day opposition window. In such cases, the
> Commission shall issue a determination indicating whether the
> underlying digital output protection technology or recording method is
> approved for use with Covered Demodulator Products.
>
> \(c\) [Effect of subsequent certifications]{.underline}. Where a
> proponent of a digital output protection technology or recording
> method files a certification pursuant to paragraph (a) of this section
> subsequent to the initial certification window described in paragraph
> (b) of this section:
>
> \(1\) If no objections are received in response to a proponent's
> certification within twenty (20) days after the date of public notice
> of the filing of such certification, the Commission shall
> expeditiously issue a determination indicating whether the underlying
> digital output protection technology or recording method is approved
> for use with Covered Demodulator Products.
>
> \(2\) If an objection is raised within twenty (20) days after the date
> of public notice of the filing of a proponent's certification alleging
> that such certification contains insufficient information to evaluate
> the appropriateness of the underlying digital output protection
> technology or recording method for use with Covered Demodulator
> Products, the proponent may file a reply within 10 days after the
> close of the twenty (20) day opposition window. The Commission shall
> determine whether to dismiss the certification without prejudice or to
> undertake a full review of the certification's merits pursuant to
> paragraph (d) of this section.
>
> \(3\) If an objection is raised within twenty (20) days after the date
> of public notice of the filing of a proponent's certification alleging
> that the underlying digital output protection technology or recording
> method is inappropriate for use with Covered Demodulator Products, the
> proponent may file a reply within 10 days after the close of the
> twenty (20) day opposition window. The Commission shall undertake a
> full review of the certification's merits pursuant to paragraph (d) of
> this section. In such cases, the Commission shall issue a
> determination indicating whether the underlying digital output
> protection technology or recording method is approved for use with
> Covered Demodulator Products.
>
> \(d\) [Commission determinations]{.underline}. Where the Commission
> undertakes a full review of the merits of a certification for a
> digital output protection technology or recording method, the
> Commission may consider, where applicable, the following factors:
>
> \(1\) Technological factors including but not limited to the level of
> security, scope of redistribution, authentication, upgradability,
> renewability, interoperability, and the ability of the digital output
> protection technology to revoke compromised devices;
>
> \(2\) The applicable licensing terms, including compliance and
> robustness rules, change provisions, approval procedures for
> downstream transmission and recording methods, and the relevant
> license fees;
>
> \(3\) The extent to which the digital output protection technology or
> recording method accommodates consumers' use and enjoyment of
> Unencrypted Digital Terrestrial Broadcast Content; and
>
> \(4\) Any other relevant factors the Commission determines warrant
> consideration.
>
> \(e\) [Revocation of Approval]{.underline}.
>
> \(1\) If the security of a content protection technology or recording
> method approved for use in Covered Demodulator Products has been
> compromised, a person may seek revocation of such approval pursuant to
> §76.7 of this chapter.
>
> \(2\) Petitioners seeking revocation of a content protection
> technology or recording method's approval for use in Covered
> Demodulator Products shall articulate in detail the extent to which
> the content protection or recording technology has been compromised
> and demonstrate why alternative measures are insufficient to address
> the breach in security.
>
> [§ 73.9009 Manufacture for Exportation.]{.underline}
>
> The requirements of this subpart do not apply to Demodulators, Covered
> Demodulator Products or Peripheral TSP Products manufactured in the
> United States solely for export.

\*\*\*\*\*

Part 76 of the Code of Federal Regulations is amended as follows:

PART 76 -- MULTICHANNEL VIDEO AND CABLE TELEVISION SERVICE

4.  The authority for Part 76 continues to read as follows:

    AUTHORITY: 47 U.S.C. 151, 152, 153, 154, 301, 302, 303, 303a, 307,
    308, 309, 312, 317, 325, 338, 339, 503, 521, 522, 531, 532, 533,
    534, 535, 536, 537, 543, 544, 544a, 545, 548, 549, 552, 554, 556,
    558, 560, 531, 571, 572, and 573.

5.  Add new §76.1909 to read as follows:

[§ 76.1909 Redistribution Control of Unencrypted Digital Terrestrial
Broadcast Content]{.underline}.

> \(a\) For the purposes of this section, the terms Unencrypted Digital
> Terrestrial Broadcast Content, EIT, PMT, Broadcast Flag, Covered
> Demodulator Product, and Marked Content shall have the same meaning as
> set forth in § 73.9000 of this chapter.
>
> \(b\) [Encrypted Retransmission]{.underline}. Where a multichannel
> video programming distributor retransmits Unencrypted Digital
> Terrestrial Broadcast Content in encrypted form, such distributor
> shall, upon demodulation of the 8-VSB, 16-VSB, 64-QAM or 256-QAM
> signal, inspect either the EIT or PMT for the Broadcast Flag, and if
> the Broadcast Flag is present:
>
> \(1\) securely and robustly convey that information to the consumer
> product used to decrypt the distributor\'s signal information, and
>
> \(2\) require that such consumer product, following such decryption,
> protect the content of such signal as if it were a Covered Demodulator
> Product receiving Marked Content.
>
> \(c\) [Unencrypted Retransmission]{.underline}. Where a multichannel
> video programming distributor retransmits Unencrypted Digital
> Terrestrial Broadcast Content in unencrypted form, such distributor
> shall, upon demodulation:
>
> \(1\) preserve the Broadcast Flag, if present, in both the EIT and
> PMT; and
>
> \(2\) use 8-VSB, 16-­VSB, 64-QAM, or 256-QAM signal modulation for the
> retransmission.
>
> \(d\) [Unmarked Content]{.underline}. Where a multichannel video
> programming distributor retransmits Unencrypted Digital Terrestrial
> Broadcast Content that is not marked with the Broadcast Flag, the
> multichannel video programming distributor shall not Encode such
> content to restrict its redistribution.

\*\*\*\*\*

**APPENDIX C**

**FINAL REGULATORY FLEXIBILITY ANALYSIS**

As required by the Regulatory Flexibility Act of 1980, as amended
(\"RFA^\"^)[^146] an Initial Regulatory Flexibility Analysis (\"IRFA\")
was incorporated in the *Further Notice of Proposed Rulemaking*
("*FNPRM*")^.^[^147] The Commission sought written public comment on the
proposals in the *FNPRM*, including comment on the IRFA. No comments
were received on the IRFA. This present Final Regulatory Flexibility
Analysis ("FRFA") conforms to the RFA.[^148]

A.  **Need for, and Objectives of, the Report and Order.** The need for
    FCC regulation in this area derives from a forthcoming threat to
    over-the-air broadcast television in so far as high quality digital
    programming may be withheld from broadcast outlets by content owners
    fearful of the content's indiscriminate redistribution. The
    objective of the final rules, as set forth in the *Report and Order*
    portion of the *Report and Order and Further Notice of Proposed
    Rulemaking,* is to facilitate the DTV transition by creating a
    flag-based content protection system which will limit the
    indiscriminate redistribution of digital broadcast content and
    thereby protect the continued flow of high value content to
    consumers via over-the-air broadcasting.

B.  **Summary of Significant Issues Raised by Public Comments in
    Response to the IRFA.** No comments were received in response to the
    IRFA.

C.  **Description and Estimate of the Number of Small Entities to Which
    the Proposed Rules Will Apply^.^** The RFA directs the Commission to
    provide a description of and, where feasible, an estimate of the
    number of small entities that will be affected by the proposed
    rules.[^149] The RFA generally defines the term \"small entity\" as
    having the same meaning as the terms \"small business,\" \"small
    organization,\" and \"small governmental entity.[^150] In addition,
    the term "small Business" has the same meaning as the term "small
    business concern" under the Small Business Act.[^151] 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\").[^152]

    **Television Broadcasting.** The Small Business Administration
    defines a television broadcasting station that has no more than \$12
    million in annual receipts as a small business.[^153] Business
    concerns included in this industry are those "primarily engaged in
    broadcasting images together with sound."[^154] According to
    Commission staff review of the BIA Publications, Inc. Master Access
    Television Analyzer Database as of May 16, 2003, about 814 of the
    1,220 commercial television stations in the United States have
    revenues of \$12 million or less. We note, however, that, in
    assessing whether a business concern qualifies as small under the
    above definition, business (control) affiliations[^155] must be
    included. Our estimate, therefore, likely overstates the number of
    small entities that might be affected by our action, because the
    revenue figure on which it is based does not include or aggregate
    revenues from affiliated companies. There are also 2,127 low power
    television stations (LPTV).[^156] Given the nature of this service,
    we will presume that all LPTV licensees qualify as small entities
    under the SBA definition.

    In addition, an element of the definition of "small business" is
    that the entity not be dominant in its field of operation. We are
    unable at this time to define or quantify the criteria that would
    establish whether a specific television station is dominant in its
    field of operation. Accordingly, the estimate of small businesses to
    which rules may apply do not exclude any television station from the
    definition of a small business on this basis and are therefore
    over-inclusive to that extent. Also as noted, an additional element
    of the definition of "small business" is that the entity must be
    independently owned and operated. We note that it is difficult at
    times to assess these criteria in the context of media entities and
    our estimates of small businesses to which they apply may be
    over-inclusive to this extent.

    **Cable and Other Program Distribution.** The SBA has developed a
    small business size standard for cable and other program
    distribution services, which includes all such companies generating
    \$12.5 million or less in revenue annually.[^157] This category
    includes, among others, cable operators, direct broadcast satellite
    ("DBS") services, home satellite dish ("HSD") services, multipoint
    distribution services ("MDS"), multichannel multipoint distribution
    service ("MMDS"), Instructional Television Fixed Service ("ITFS"),
    local multipoint distribution service ("LMDS"), satellite master
    antenna television ("SMATV") systems, and open video systems
    ("OVS"). According to the Census Bureau data, there are 1,311 total
    cable and other pay television service firms that operate throughout
    the year of which 1,180 have less than \$10 million in
    revenue.[^158] We address below each service individually to provide
    a more precise estimate of small entities.

**Cable Operators.** The Commission has developed, with SBA\'s approval,
our own definition of a small cable system operator for the purposes of
rate regulation. Under the Commission\'s rules, a \"small cable
company\" is one serving fewer than 400,000 subscribers
nationwide.[^159] We last estimated that there were 1,439 cable
operators that qualified as small cable companies.[^160] Since then,
some of those companies may have grown to serve over 400,000
subscribers, and others may have been involved in transactions that
caused them to be combined with other cable operators. Consequently, we
estimate that there are fewer than 1,439 small entity cable system
operators that may be affected by the decisions and rules proposed in
this Further Notice.

The Communications Act, as amended, also contains a size standard for a
small cable system operator, which is \"a cable operator that, directly
or through an affiliate, serves in the aggregate fewer than 1% of all
subscribers in the United States and is not affiliated with any entity
or entities whose gross annual revenues in the aggregate exceed
\$250,000,000.\"[^161] The Commission has determined that there are
68,500,000 subscribers in the United States. Therefore, an operator
serving fewer than 685,000 subscribers shall be deemed a small operator
if its annual revenues, when combined with the total annual revenues of
all of its affiliates, do not exceed \$250 million in the
aggregate.[^162] Based on available data, we find that the number of
cable operators serving 685,000 subscribers or less totals approximately
1,450.[^163] Although it seems certain that some of these cable system
operators are affiliated with entities whose gross annual revenues
exceed \$250,000,000, we are unable at this time to estimate with
greater precision the number of cable system operators that would
qualify as small cable operators under the definition in the
Communications Act.

**Direct Broadcast Satellite ("DBS") Service.** Because DBS provides
subscription services, DBS falls within the SBA-recognized definition of
Cable and Other Program Distribution Services.[^164] This definition
provides that a small entity is one with \$12.5 million or less in
annual receipts.[^165] There are four licensees of DBS services under
Part 100 of the Commission\'s Rules. Three of those licensees are
currently operational. Two of the licensees that are operational have
annual revenues that may be in excess of the threshold for a small
business.[^166] The Commission, however, does not collect annual revenue
data for DBS and, therefore, is unable to ascertain the number of small
DBS licensees that could be impacted by these proposed rules. DBS
service requires a great investment of capital for operation, and we
acknowledge, despite the absence of specific data on this point, that
there are entrants in this field that may not yet have generated \$12.5
million in annual receipts, and therefore may be categorized as a small
business, if independently owned and operated.

**Home Satellite Dish ("HSD") Service.** Because HSD provides
subscription services, HSD falls within the SBA-recognized definition of
Cable and Other Program Distribution Services.[^167] This definition
provides that a small entity is one with \$12.5 million or less in
annual receipts.[^168] The market for HSD service is difficult to
quantify. Indeed, the service itself bears little resemblance to other
MVPDs. HSD owners have access to more than 265 channels of programming
placed on C‑band satellites by programmers for receipt and distribution
by MVPDs, of which 115 channels are scrambled and approximately 150 are
unscrambled.[^169] HSD owners can watch unscrambled channels without
paying a subscription fee. To receive scrambled channels, however, an
HSD owner must purchase an integrated receiver‑decoder from an equipment
dealer and pay a subscription fee to an HSD programming package. Thus,
HSD users include: (1) viewers who subscribe to a packaged programming
service, which affords them access to most of the same programming
provided to subscribers of other MVPDs; (2) viewers who receive only
non‑subscription programming; and (3) viewers who receive satellite
programming services illegally without subscribing. Because scrambled
packages of programming are most specifically intended for retail
consumers, these are the services most relevant to this
discussion.[^170]

**Multipoint Distribution Service ("MDS"), Multichannel Multipoint
Distribution Service ("MMDS") Instructional Television Fixed Service
("ITFS") and Local Multipoint Distribution Service ("LMDS").** MMDS
systems, often referred to as "wireless cable," transmit video
programming to subscribers using the microwave frequencies of the MDS
and ITFS.[^171] LMDS is a fixed broadband point-to-multipoint microwave
service that provides for two-way video telecommunications.[^172]

In connection with the 1996 MDS auction, the Commission defined small
businesses as entities that had annual average gross revenues of less
than \$40 million in the previous three calendar years.[^173] This
definition of a small entity in the context of MDS auctions has been
approved by the SBA.[^174] The MDS auctions resulted in 67 successful
bidders obtaining licensing opportunities for 493 Basic Trading Areas
("BTAs"). Of the 67 auction winners, 61 met the definition of a small
business. MDS also includes licensees of stations authorized prior to
the auction. As noted, the SBA has developed a definition of small
entities for pay television services, which includes all such companies
generating \$12.5 million or less in annual receipts.[^175] This
definition includes multipoint distribution services, and thus applies
to MDS licensees and wireless cable operators that did not participate
in the MDS auction. Information available to us indicates that there are
approximately 850 of these licensees and operators that do not generate
revenue in excess of \$12.5 million annually. Therefore, for purposes of
the IRFA, we find there are approximately 850 small MDS providers as
defined by the SBA and the Commission's auction rules.

The SBA definition of small entities for Cable and Other Program
Distribution Services, which includes such companies generating \$12.5
million in annual receipts, seems reasonably applicable to ITFS.[^176]
There are presently 2,032 ITFS licensees. All but 100 of these licenses
are held by educational institutions. Educational institutions are
included in the definition of a small business.[^177] However, we do not
collect annual revenue data for ITFS licensees, and are not able to
ascertain how many of the 100 non-educational licensees would be
categorized as small under the SBA definition. Thus, we tentatively
conclude that at least 1,932 licensees are small businesses.

Additionally, the auction of the 1,030 LMDS licenses began on February
18, 1998, and closed on March 25, 1998. The Commission defined "small
entity" for LMDS licenses as an entity that has average gross revenues
of less than \$40 million in the three previous calendar years.[^178] An
additional classification for "very small business" was added and is
defined as an entity that, together with its affiliates, has average
gross revenues of not more than \$15 million for the preceding calendar
years.[^179] These regulations defining "small entity" in the context of
LMDS auctions have been approved by the SBA.[^180] There were 93 winning
bidders that qualified as small entities in the LMDS auctions. A total
of 93 small and very small business bidders won approximately 277 A
Block licenses and 387 B Block licenses. On March 27, 1999, the
Commission re-auctioned 161 licenses; there were 40 winning bidders.
Based on this information, we conclude that the number of small LMDS
licenses will include the 93 winning bidders in the first auction and
the 40 winning bidders in the re-auction, for a total of 133 small
entity LMDS providers as defined by the SBA and the Commission's auction
rules.

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

**Satellite Master Antenna Television (\"SMATV\") Systems.** The SBA
definition of small entities for Cable and Other Program Distribution
Services includes SMATV services and, thus, small entities are defined
as all such companies generating \$12.5 million or less in annual
receipts.[^181] Industry sources estimate that approximately 5,200 SMATV
operators were providing service as of December 1995.[^182] Other
estimates indicate that SMATV operators serve approximately 1.5 million
residential subscribers as of July 2001.[^183] The best available
estimates indicate that the largest SMATV operators serve between 15,000
and 55,000 subscribers each. Most SMATV operators serve approximately
3,000-4,000 customers. Because these operators are not rate regulated,
they are not required to file financial data with the Commission.
Furthermore, we are not aware of any privately published financial
information regarding these operators. Based on the estimated number of
operators and the estimated number of units served by the largest ten
SMATVs, we believe that a substantial number of SMATV operators qualify
as small entities

**Open Video Systems ("OVS").** Because OVS operators provide
subscription services,[^184] OVS falls within the SBA-recognized
definition of Cable and Other Program Distribution Services.[^185] This
definition provides that a small entity is one with \$ 12.5 million or
less in annual receipts.[^186] The Commission has certified 25 OVS
operators with some now providing service. Affiliates of Residential
Communications Network, Inc. (\"RCN\") received approval to operate OVS
systems in New York City, Boston, Washington, D.C. and other areas. RCN
has sufficient revenues to assure us that they do not qualify as small
business entities. Little financial information is available for the
other entities authorized to provide OVS that are not yet operational.
Given that other entities have been authorized to provide OVS service
but have not yet begun to generate revenues, we conclude that at least
some of the OVS operators qualify as small entities.

**Electronics Equipment Manufacturers.** Rules adopted in this
proceeding could apply to manufacturers of DTV receiving equipment and
other types of consumer electronics equipment. The SBA has developed
definitions of small entity for manufacturers of audio and video
equipment[^187] as well as radio and television broadcasting and
wireless communications equipment.[^188] These categories both include
all such companies employing 750 or fewer employees. The Commission has
not developed a definition of small entities applicable to manufacturers
of electronic equipment used by consumers, as compared to industrial use
by television licensees and related businesses. Therefore, we will
utilize the SBA definitions applicable to manufacturers of audio and
visual equipment and radio and television broadcasting and wireless
communications equipment, since these are the two closest NAICS Codes
applicable to the consumer electronics equipment manufacturing industry.
However, these NAICS categories are broad and specific figures are not
available as to how many of these establishments manufacture consumer
equipment. According to the SBA's regulations, an audio and visual
equipment manufacturer must have 750 or fewer employees in order to
qualify as a small business concern.[^189] Census Bureau data indicates
that there are 554 U.S. establishments that manufacture audio and visual
equipment, and that 542 of these establishments have fewer than 500
employees and would be classified as small entities.[^190] The remaining
12 establishments have 500 or more employees; however, we are unable to
determine how many of those have fewer than 750 employees and therefore,
also qualify as small entities under the SBA definition. Under the SBA's
regulations, a radio and television broadcasting and wireless
communications equipment manufacturer must also have 750 or fewer
employees in order to qualify as a small business concern.[^191] Census
Bureau data indicates that there 1,215 U.S. establishments that
manufacture radio and television broadcasting and wireless
communications equipment, and that 1,150 of these establishments have
fewer than 500 employees and would be classified as small
entities.[^192] The remaining 65 establishments have 500 or more
employees; however, we are unable to determine how many of those have
fewer than 750 employees and therefore, also qualify as small entities
under the SBA definition. We therefore conclude that there are no more
than 542 small manufacturers of audio and visual electronics equipment
and no more than 1,150 small manufacturers of radio and television
broadcasting and wireless communications equipment for
consumer/household use.

**Computer Manufacturers**. The Commission has not developed a
definition of small entities applicable to computer manufacturers.
Therefore, we will utilize the SBA definition of electronic computers
manufacturing. According to SBA regulations, a computer manufacturer
must have 1,000 or fewer employees in order to qualify as a small
entity.[^193] Census Bureau data indicates that there are 563 firms that
manufacture electronic computers and of those, 544 have fewer than 1,000
employees and qualify as small entities.[^194] The remaining 19 firms
have 1,000 or more employees. We conclude that there are approximately
544 small computer manufacturers.

**Description of Projected Reporting, Recordkeeping and other Compliance
Requirements.** On the transmission side, the final rules do not require
the use of the ATSC flag by broadcasters, but instead permit the use of
the flag at the broadcaster's discretion for redistribution control
purposes.

With respect to the reception side of the equation, the final rules
require that demodulators integrated within, or produced for use in, DTV
reception devices, including PC and IT products, (*i.e.*, "Covered
Demodulator Products"), must recognize and give effect to the ATSC flag
pursuant to certain compliance and robustness rules. The compliance
rules detail the appropriate manner in which Demodulator Products may
output flag-marked content. As to robustness, the generalized "ordinary
user" standard contained in the final rules should afford consumer
electronics, and IT and PC manufacturers, flexibility in determining how
to protect flag-marked content.

Administratively, the final rules adopt a written commitment regime
whereby manufacturers or importers of demodulators obtain from buyers a
written commitment that they will incorporate such demodulators into
compliant and robust devices, or sell or distribute to third parties
that have also made such written commitment. The *Report and* *Order*
also adopts a written commitment regime to ensure that manufacturers or
importers of "Peripheral TSP Products" that can be used in connection
with demodulators will abide by the Demodulator Product compliance and
robustness rules.

The *Report and* *Order* also establishes interim procedures by which
proponents of a particular content protection or recording technology
can certify to the Commission that such technology is appropriate for
use in Demodulator Products. Upon review of a proponent's submission,
the Commission will issue a public notice. If no objection is received
within 20 days, the Commission will expeditiously determine whether the
technology is approved for use in Demodulator Products. If substantive
objections are received with respect to a particular technology, the
Commission will undertake an expedited review of its merits. The interim
procedures also provide for the revocation of insecure or compromised
content protection and recording technologies.

Finally, the *Report and* *Order* permits MVPDs to perpetuate the flag
in two ways on their systems: (1) by MVPD pass-through of the ATSC flag
where the retransmission is unencrypted; or (2) where the retransmission
is encrypted, by conveying the presence of the flag by some means that
requires the consumer's reception equipment to protect the content as if
the flag were present.

D.  **Steps Taken to Minimize Significant Economic Impact on Small
    Entities, and Significant Alternatives Considered.** The RFA
    requires an agency to describe any significant alternatives that it
    has considered in reaching its proposed approach, which may include
    the following four alternatives (among others): (1) the
    establishment of differing compliance or reporting requirements or
    timetables that take into account the resources available to small
    entities; (2) the clarification, consolidation, or simplification of
    compliance or reporting requirements under the rule for small
    entities; (3) the use of performance, rather than design, standards;
    and (4) an exemption from coverage of the rule, or any part thereof,
    for small entities.[^195]

    Because use of the ATSC flag is voluntary on the part of
    broadcasters, we do not believe that small broadcast stations will
    be significantly economically affected by the final rules. On the
    reception side, while all consumer electronics, information
    technology, and personal computer manufacturers will be required to
    integrate flag recognition capability into devices designed for
    television reception, we do not believe that small manufacturers
    will be adversely affected since the cost of integrating the
    necessary technology is de minimis.[^196] The written commitment
    regime should likewise have no significant effect on small
    manufacturers or importers as there is little cost involved in
    preparing and filing a written commitment. As to the interim
    procedures for approval of new content protection and recording
    technologies, we do not believe that small entities seeking approval
    will be significantly economically affected by the applicable
    procedures. Finally, we believe that the flexibility afforded MVPDs
    in how to effectuate the flag will mitigate any potential
    significant economic impact on smaller MVPDs.

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

    **Report to Congress**: The Commission will send a copy of the
    *Report and* *Order and Further Notice of Proposed Rulemaking*,
    including this FRFA, in a report to be sent to Congress pursuant to
    the Congressional Review Act.[^197] In addition, the Commission will
    send a copy of the *Report and* *Order*, including this FRFA, to the
    Chief Counsel for Advocacy of the SBA. A copy of the *Report and*
    *Order* and FRFA (or summaries thereof) will also be published in
    the Federal Register.[^198]

    **APPENDIX D**

    **INITIAL REGULATORY FLEXIBILITY ANALYSIS**

    As required by the Regulatory Flexibility Act of 1980, as amended
    (\"RFA\")[^199] the Commission has prepared this present Initial
    Regulatory Flexibility Analysis (\"IRFA\") of the possible
    significant economic impact on a substantial number of small
    entities by the policies and rules proposed in the *Further Notice
    of Proposed Rulemaking* portion of this item. Written public
    comments are requested on this IRFA. Comments must be identified as
    responses to the IRFA and must be filed by the deadlines for
    comments on the *Further Notice of Proposed Rulemaking* portion of
    this item provided in paragraph 69. The Commission will send a copy
    of this entire *Report and* *Order and Further Notice of Proposed
    Rulemaking* ("*Report and* *Order and Further Notice*"), including
    this IRFA, to the Chief Counsel for Advocacy of the Small Business
    Administration ("SBA").[^200] In addition, the *Further Notice of
    Proposed Rulemaking* portion of this item and the IRFA (or summaries
    thereof) will be published in the Federal Register.[^201]

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A.  **Need for, and Objectives of, the Proposed Rules.** Content
    providers have suggested that they should have the ability to make
    determinations about which new content protection and recording
    technologies may be used in connection with demodulator products
    under an ATSC flag-based redistribution control system. Commenters
    have indicated that content providers should not be the sole
    arbiters of such decisions. However, the record currently before the
    Commission is insufficient on this matter. In order to ensure the
    connectivity and interoperability of Demodulator Products and
    peripheral devices, we are initiating the *Further Notice* to seek
    comment on the process and criteria by which new content protection
    and recording technologies can be evaluated and approved for use in
    this context. The *Further Notice* also seeks comment on whether
    cable operators should be allowed to encrypt the digital basic tier
    in order to be able to give effect to the ATSC flag through cable
    operators' conditional access system. The *Further Notice* also
    seeks comment on the interplay between an ATSC flag system and open
    source software for DTV applications, such as software defined
    radio.

B.  **Legal Basis.** The authority for this proposed rulemaking is
    contained in Sections 1, 2, 4(i) and (j), 303, 307, 309(j), 336,
    337, 396(k), 403, 601, 614(b) and 624a of the Communications Act of
    1934, 47 U.S.C §§ 151, 152, 154(i) and (j), 303, 307, 309(j), 336,
    337, 396(k), 403, 521, 534(b) and 544a.

C.  **Description and Estimate of the Number of Small Entities to Which
    the Proposed Rules Will Apply^.^** The RFA directs the Commission to
    provide a description of and, where feasible, an estimate of the
    number of small entities that will be affected by the proposed
    rules.[^202] The RFA generally defines the term \"small entity\" as
    encompassing the terms \"small business,\" \"small organization,\"
    and \"small governmental entity.^\"^[^203] In addition, the term
    "small Business" has the same meaning as the term "small business
    concern" under the Small Business Act.[^204] 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\").[^205]

    **Television Broadcasting.** The Small Business Administration
    defines a television broadcasting station that has no more than \$12
    million in annual receipts as a small business.[^206] Business
    concerns included in this industry are those "primarily engaged in
    broadcasting images together with sound."[^207] According to
    Commission staff review of the BIA Publications, Inc. Master Access
    Television Analyzer Database as of May 16, 2003, about 814 of the
    1,220 commercial television stations in the United States have
    revenues of \$12 million or less. We note, however, that, in
    assessing whether a business concern qualifies as small under the
    above definition, business (control) affiliations[^208] must be
    included. Our estimate, therefore, likely overstates the number of
    small entities that might be affected by our action, because the
    revenue figure on which it is based does not include or aggregate
    revenues from affiliated companies. There are also 2,127 low power
    television stations (LPTV).[^209] Given the nature of this service,
    we will presume that all LPTV licensees qualify as small entities
    under the SBA definition.

    In addition, an element of the definition of "small business" is
    that the entity not be dominant in its field of operation. We are
    unable at this time to define or quantify the criteria that would
    establish whether a specific television station is dominant in its
    field of operation. Accordingly, the estimate of small businesses to
    which rules may apply do not exclude any television station from the
    definition of a small business on this basis and are therefore
    over-inclusive to that extent. Also as noted, an additional element
    of the definition of "small business" is that the entity must be
    independently owned and operated. We note that it is difficult at
    times to assess these criteria in the context of media entities and
    our estimates of small businesses to which they apply may be
    over-inclusive to this extent.

    **Cable and Other Program Distribution.** The SBA has developed a
    small business size standard for cable and other program
    distribution services, which includes all such companies generating
    \$12.5 million or less in revenue annually.[^210] This category
    includes, among others, cable operators, direct broadcast satellite
    ("DBS") services, home satellite dish ("HSD") services, multipoint
    distribution services ("MDS"), multichannel multipoint distribution
    service ("MMDS"), Instructional Television Fixed Service ("ITFS"),
    local multipoint distribution service ("LMDS"), satellite master
    antenna television ("SMATV") systems, and open video systems
    ("OVS"). According to the Census Bureau data, there are 1,311 total
    cable and other pay television service firms that operate throughout
    the year of which 1,180 have less than \$10 million in
    revenue.[^211] We address below each service individually to provide
    a more precise estimate of small entities.

**Cable Operators.** The Commission has developed, with SBA\'s approval,
our own definition of a small cable system operator for the purposes of
rate regulation. Under the Commission\'s rules, a \"small cable
company\" is one serving fewer than 400,000 subscribers
nationwide.[^212] We last estimated that there were 1,439 cable
operators that qualified as small cable companies.[^213] Since then,
some of those companies may have grown to serve over 400,000
subscribers, and others may have been involved in transactions that
caused them to be combined with other cable operators. Consequently, we
estimate that there are fewer than 1,439 small entity cable system
operators that may be affected by the decisions and rules proposed in
this Further Notice.

The Communications Act, as amended, also contains a size standard for a
small cable system operator, which is \"a cable operator that, directly
or through an affiliate, serves in the aggregate fewer than 1% of all
subscribers in the United States and is not affiliated with any entity
or entities whose gross annual revenues in the aggregate exceed
\$250,000,000.\"[^214] The Commission has determined that there are
68,500,000 subscribers in the United States. Therefore, an operator
serving fewer than 685,000 subscribers shall be deemed a small operator
if its annual revenues, when combined with the total annual revenues of
all of its affiliates, do not exceed \$250 million in the
aggregate.[^215] Based on available data, we find that the number of
cable operators serving 685,000 subscribers or less totals approximately
1,450.[^216] Although it seems certain that some of these cable system
operators are affiliated with entities whose gross annual revenues
exceed \$250,000,000, we are unable at this time to estimate with
greater precision the number of cable system operators that would
qualify as small cable operators under the definition in the
Communications Act.

**Direct Broadcast Satellite ("DBS") Service.** Because DBS provides
subscription services, DBS falls within the SBA-recognized definition of
Cable and Other Program Distribution Services.[^217] This definition
provides that a small entity is one with \$12.5 million or less in
annual receipts.[^218] There are four licensees of DBS services under
Part 100 of the Commission\'s Rules. Three of those licensees are
currently operational. Two of the licensees that are operational have
annual revenues that may be in excess of the threshold for a small
business.[^219] The Commission, however, does not collect annual revenue
data for DBS and, therefore, is unable to ascertain the number of small
DBS licensees that could be impacted by these proposed rules. DBS
service requires a great investment of capital for operation, and we
acknowledge, despite the absence of specific data on this point, that
there are entrants in this field that may not yet have generated \$12.5
million in annual receipts, and therefore may be categorized as a small
business, if independently owned and operated.

**Home Satellite Dish ("HSD") Service.** Because HSD provides
subscription services, HSD falls within the SBA-recognized definition of
Cable and Other Program Distribution Services.[^220] This definition
provides that a small entity is one with \$12.5 million or less in
annual receipts.[^221] The market for HSD service is difficult to
quantify. Indeed, the service itself bears little resemblance to other
MVPDs. HSD owners have access to more than 265 channels of programming
placed on C‑band satellites by programmers for receipt and distribution
by MVPDs, of which 115 channels are scrambled and approximately 150 are
unscrambled.[^222] HSD owners can watch unscrambled channels without
paying a subscription fee. To receive scrambled channels, however, an
HSD owner must purchase an integrated receiver‑decoder from an equipment
dealer and pay a subscription fee to an HSD programming package. Thus,
HSD users include: (1) viewers who subscribe to a packaged programming
service, which affords them access to most of the same programming
provided to subscribers of other MVPDs; (2) viewers who receive only
non‑subscription programming; and (3) viewers who receive satellite
programming services illegally without subscribing. Because scrambled
packages of programming are most specifically intended for retail
consumers, these are the services most relevant to this
discussion.[^223]

**Multipoint Distribution Service ("MDS"), Multichannel Multipoint
Distribution Service ("MMDS") Instructional Television Fixed Service
("ITFS") and Local Multipoint Distribution Service ("LMDS").** MMDS
systems, often referred to as "wireless cable," transmit video
programming to subscribers using the microwave frequencies of the MDS
and ITFS.[^224] LMDS is a fixed broadband point-to-multipoint microwave
service that provides for two-way video telecommunications.[^225]

In connection with the 1996 MDS auction, the Commission defined small
businesses as entities that had annual average gross revenues of less
than \$40 million in the previous three calendar years.[^226] This
definition of a small entity in the context of MDS auctions has been
approved by the SBA.[^227] The MDS auctions resulted in 67 successful
bidders obtaining licensing opportunities for 493 Basic Trading Areas
("BTAs"). Of the 67 auction winners, 61 met the definition of a small
business. MDS also includes licensees of stations authorized prior to
the auction. As noted, the SBA has developed a definition of small
entities for pay television services, which includes all such companies
generating \$12.5 million or less in annual receipts.[^228] This
definition includes multipoint distribution services, and thus applies
to MDS licensees and wireless cable operators that did not participate
in the MDS auction. Information available to us indicates that there are
approximately 850 of these licensees and operators that do not generate
revenue in excess of \$12.5 million annually. Therefore, for purposes of
the IRFA, we find there are approximately 850 small MDS providers as
defined by the SBA and the Commission's auction rules.

The SBA definition of small entities for Cable and Other Program
Distribution Services, which includes such companies generating \$12.5
million in annual receipts, seems reasonably applicable to ITFS.[^229]
There are presently 2,032 ITFS licensees. All but 100 of these licenses
are held by educational institutions. Educational institutions are
included in the definition of a small business.[^230] However, we do not
collect annual revenue data for ITFS licensees, and are not able to
ascertain how many of the 100 non-educational licensees would be
categorized as small under the SBA definition. Thus, we tentatively
conclude that at least 1,932 licensees are small businesses.

Additionally, the auction of the 1,030 LMDS licenses began on February
18, 1998, and closed on March 25, 1998. The Commission defined "small
entity" for LMDS licenses as an entity that has average gross revenues
of less than \$40 million in the three previous calendar years.[^231] An
additional classification for "very small business" was added and is
defined as an entity that, together with its affiliates, has average
gross revenues of not more than \$15 million for the preceding calendar
years.[^232] These regulations defining "small entity" in the context of
LMDS auctions have been approved by the SBA.[^233] There were 93 winning
bidders that qualified as small entities in the LMDS auctions. A total
of 93 small and very small business bidders won approximately 277 A
Block licenses and 387 B Block licenses. On March 27, 1999, the
Commission re-auctioned 161 licenses; there were 40 winning bidders.
Based on this information, we conclude that the number of small LMDS
licenses will include the 93 winning bidders in the first auction and
the 40 winning bidders in the re-auction, for a total of 133 small
entity LMDS providers as defined by the SBA and the Commission's auction
rules.

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

**Satellite Master Antenna Television (\"SMATV\") Systems.** The SBA
definition of small entities for Cable and Other Program Distribution
Services includes SMATV services and, thus, small entities are defined
as all such companies generating \$12.5 million or less in annual
receipts.[^234] Industry sources estimate that approximately 5,200 SMATV
operators were providing service as of December 1995.[^235] Other
estimates indicate that SMATV operators serve approximately 1.5 million
residential subscribers as of July 2001.[^236] The best available
estimates indicate that the largest SMATV operators serve between 15,000
and 55,000 subscribers each. Most SMATV operators serve approximately
3,000-4,000 customers. Because these operators are not rate regulated,
they are not required to file financial data with the Commission.
Furthermore, we are not aware of any privately published financial
information regarding these operators. Based on the estimated number of
operators and the estimated number of units served by the largest ten
SMATVs, we believe that a substantial number of SMATV operators qualify
as small entities

**Open Video Systems ("OVS").** Because OVS operators provide
subscription services,[^237] OVS falls within the SBA-recognized
definition of Cable and Other Program Distribution Services.[^238] This
definition provides that a small entity is one with \$ 12.5 million or
less in annual receipts.[^239] The Commission has certified 25 OVS
operators with some now providing service. Affiliates of Residential
Communications Network, Inc. (\"RCN\") received approval to operate OVS
systems in New York City, Boston, Washington, D.C. and other areas. RCN
has sufficient revenues to assure us that they do not qualify as small
business entities. Little financial information is available for the
other entities authorized to provide OVS that are not yet operational.
Given that other entities have been authorized to provide OVS service
but have not yet begun to generate revenues, we conclude that at least
some of the OVS operators qualify as small entities.

**Electronics Equipment Manufacturers.** Rules adopted in this
proceeding could apply to manufacturers of DTV receiving equipment and
other types of consumer electronics equipment. The SBA has developed
definitions of small entity for manufacturers of audio and video
equipment[^240] as well as radio and television broadcasting and
wireless communications equipment.[^241] These categories both include
all such companies employing 750 or fewer employees. The Commission has
not developed a definition of small entities applicable to manufacturers
of electronic equipment used by consumers, as compared to industrial use
by television licensees and related businesses. Therefore, we will
utilize the SBA definitions applicable to manufacturers of audio and
visual equipment and radio and television broadcasting and wireless
communications equipment, since these are the two closest NAICS Codes
applicable to the consumer electronics equipment manufacturing industry.
However, these NAICS categories are broad and specific figures are not
available as to how many of these establishments manufacture consumer
equipment. According to the SBA's regulations, an audio and visual
equipment manufacturer must have 750 or fewer employees in order to
qualify as a small business concern.[^242] Census Bureau data indicates
that there are 554 U.S. establishments that manufacture audio and visual
equipment, and that 542 of these establishments have fewer than 500
employees and would be classified as small entities.[^243] The remaining
12 establishments have 500 or more employees; however, we are unable to
determine how many of those have fewer than 750 employees and therefore,
also qualify as small entities under the SBA definition. Under the SBA's
regulations, a radio and television broadcasting and wireless
communications equipment manufacturer must also have 750 or fewer
employees in order to qualify as a small business concern.[^244] Census
Bureau data indicates that there 1,215 U.S. establishments that
manufacture radio and television broadcasting and wireless
communications equipment, and that 1,150 of these establishments have
fewer than 500 employees and would be classified as small
entities.[^245] The remaining 65 establishments have 500 or more
employees; however, we are unable to determine how many of those have
fewer than 750 employees and therefore, also qualify as small entities
under the SBA definition. We therefore conclude that there are no more
than 542 small manufacturers of audio and visual electronics equipment
and no more than 1,150 small manufacturers of radio and television
broadcasting and wireless communications equipment for
consumer/household use.

**Computer Manufacturers**. The Commission has not developed a
definition of small entities applicable to computer manufacturers.
Therefore, we will utilize the SBA definition of electronic computers
manufacturing. According to SBA regulations, a computer manufacturer
must have 1,000 or fewer employees in order to qualify as a small
entity.[^246] Census Bureau data indicates that there are 563 firms that
manufacture electronic computers and of those, 544 have fewer than 1,000
employees and qualify as small entities.[^247] The remaining 19 firms
have 1,000 or more employees. We conclude that there are approximately
544 small computer manufacturers.

D.  **Description of Projected Reporting, Recordkeeping and other
    Compliance Requirements.** At this time, we do not expect that the
    proposed rules would impose any additional reporting or
    recordkeeping requirements. However, compliance with the rules, if
    they are adopted, may require consumer electronics manufacturers to
    seek approval for content protection technologies and recording
    methods to be used in conjunction with demodulator products.[^248]
    These requirements will have an impact on consumer electronics
    manufacturers, including small entities. We seek comment on the
    possible burden these requirements would place on small entities.
    Also, we seek comment on whether a special approach toward any
    possible compliance burdens on small entities might be appropriate.
    The proposed rules would also allow cable operators to encrypt the
    digital basic tier, however, we do not believe that this voluntary
    provision would have an impact on small entities.

E.  **Steps Taken to Minimize Significant Impact on Small Entities, and
    Significant Alternatives Considered.** The RFA requires an agency to
    describe any significant alternatives that it has considered in
    reaching its proposed approach, which may include the following four
    alternatives (among others): (1) the establishment of differing
    compliance or reporting requirements or timetables that take into
    account the resources available to small entities; (2) the
    clarification, consolidation, or simplification of compliance or
    reporting requirements under the rule for small entities; (3) the
    use of performance, rather than design, standards; and (4) an
    exemption from coverage of the rule, or any part thereof, for small
    entities.[^249]

    As indicated above, the *Further Notice* seeks comment on whether
    the Commission should adopt rules establishing an approval mechanism
    for new content protection and recording technologies to be used
    with demodulator products. Consumer electronics manufacturers may be
    required to seek such approval prior to implementing content
    protection and recording technologies in demodulator products. We
    welcome comment on modifications of this proposal to lessen any
    potential impact on small entities, while still remaining consistent
    with our policy goals. The *Further Notice* also seeks comment on
    whether cable operators should be allowed to encrypt the digital
    basic tier in order to be able to give effect to the ATSC flag
    through cable operators' conditional access system. While we do not
    believe that this rule change would have a potential impact on small
    entities because it would be voluntary in nature, we seek comment on
    whether a special approach toward any possible compliance burdens on
    small entities might be appropriate.

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

**SEPARATE STATEMENT OF**

**COMMISSIONER KATHLEEN Q. ABERNATHY\
**

*Re: Digital Broadcast Content Protection, Report and Order and Further
Notice of Proposed Rulemaking, MB Docket 02-230 (adopted November 4,
2003)*

Today's decision is illustrative of the complex policy debates that
arise as we move forward with the digital transition. In this instance,
the debate centers on potential piracy problems that arise when digital
content is delivered by free over-the-air broadcast signals. Not
surprisingly, content providers do not want their digital TV programs
pirated and retransmitted over the Internet. Critics of the broadcast
flag proposal, on the other hand, warn against placing too much control
over technology choice in the hands of the studios. Mindful of our
ongoing obligation to speed the digital transition and to promote the
viability of free over-the-air broadcasting in the digital age, we have
navigated a solution that embraces protection and deters piracy without
sacrificing innovation or frustrating consumer expectations.

I do recognize that there are costs, both actual and in terms of
consumer expectations, that must be measured against the benefits
associated with a broadcast flag solution. In this case, however, we
have ensured that the costs imposed on consumers will be minimal. Unlike
encryption at the source, a broadcast flag solution will not render
legacy devices obsolete and will not force consumers to purchase new or
additional equipment to receive their broadcast programming. Consumers
will be able to continue receiving broadcast programs over their
existing television receivers. In addition, existing recorders and
playback devices will continue to work, and digital recordings made on
legacy devices will play on future compliant machines.[^250] Thus, we
are accommodating to the greatest extent possible current consumer
expectations and uses. Furthermore, members of the consumer electronics
industry have indicated that the costs associated with implementing the
broadcast flag will be minimal. By protecting against digital piracy, we
also encourage entertainment companies to deliver via free over-the-air
broadcast its most valuable programs.

I am generally cautious when it comes to government prescribing
technologies or putting too much control in the hands of one industry in
making such determinations. I am able to support today's decision,
however, because of the changes we have made to the way transmission and
recording technologies are approved. While we are asking for further
comment on this issue, we set up on an interim basis a transparent, open
and objective approval process that will promote the development of
competition in the marketplace and foster innovation. I am hopeful that
through this process and the final rules we adopt, new technologies will
develop that will allow consumers flexibility in how they distribute
content without allowing indiscriminate redistribution of broadcast
television content over the Internet.

Finally, I have previously expressed concerns about whether we have
jurisdiction to adopt a broadcast flag solution, or whether this is an
issue best left for Congress. As a general rule, the Commission should
be wary of adopting significant new regulations where Congress has not
spoken. On balance, though, I believe that given the broad congressional
direction to promote the transition to digital broadcasting, a critical
part of that obligation involves protection of content that is
transmitted via free over-the-air broadcasting. I am hopeful that any
court review of this decision can occur before the effective date of our
rules.

STATEMENT OF

COMMISSIONER MICHAEL J. COPPS

APPROVING IN PART, DISSENTING IN PART

*Re:* *Digital Broadcast Content Protection*

Striking a balance between consumers' expectations that they will be
able to turn new technologies to their advantage and content producers'
expectations that they will be able to protect the products of their
creative genius is a real and growing challenge as we enter the digital
age. There is broad agreement about the need to protect content in this
new age if we are going to enjoy the full fruits of artistic creativity.
But there is the equally compelling need to guarantee that consumers are
able to enjoy the expanded opportunities that accompany the development
of liberating new technologies. Our world changes, old boundaries are
blurred and then shattered, and new rules have to be developed that
preserve traditional rights even as they accommodate new realities.

Even though today's decision does not, cannot and should not settle
these huge questions of public policy that must ultimately be decided in
venues other than the FCC, the larger backdrop should be kept in mind as
a reminder that we are at least approaching matters of great long-term
significance to the American people. An important goal of today's
Commission action is to expedite the nation's long-delayed transition to
digital television, but in a way that preserves a workable balance as we
await longer-term guidance from Congress and the Executive Branch. We
attempt to achieve this goal today by resolving a long deadlock over
technologies designed to provide digital broadcast content protection.
Commission action here strikes me as warranted because we are fast
approaching a situation wherein new technologies will provide arguably
too much power to those who would infringe and pirate the rights of
digital creativity. Such digital chaos benefits neither the creators nor
the consumers of what is sure to be dramatic new content.

Given digital media's susceptibility to indiscriminate mass online
distribution, content producers may have significantly greater
incentives to broadcast high-value content if there are in place at
least basic protection technologies. If denied such protection in one
medium (*e.g.*, free, over-the-air broadcast television), they will
migrate their new content to other media (*e.g.*, subscription cable
television). Such a result would likely discourage new digital content
in the broadcast medium and also retard the statutorily-mandated
transition to digital television. Neither outcome is acceptable.

But I am also guided by the need to protect consumers in our quest to
encourage digital content and to expedite the digital transition. The
reason we are promoting digital television, after all, is to benefit
consumers, not companies. Granting a small set of companies the power to
control all digital video content through a government-mandated
technology in order to promote digital television is neither necessary
nor wise. A broadcast flag mandate that lacked adequate protections and
limits would be reprehensible public policy.

We have worked to avoid this danger with today's Order. Our decision is
not ideal. No one will walk away with everything on their wish list.
What we have instead is an honest attempt at a workable compromise that
responds to the concerns raised by multiple commenters. We afford at
least some level of content protection. We preserve a balance between
the rights of consumers and the rights of creative content producers.
And we resolve one challenge attending the digital television transition
even as we await further guidance on the larger policy framework from
Congress and the Executive Branch.

This Order is substantially different from the proposal originally
submitted to the Commission. And I appreciate the constructive dialogue
among my colleagues that has allowed us to reach this decision. The item
we adopt today is better balanced, more sensitive to the concerns raised
by consumer groups, and supportive of multiple technologies and open
processes for product certification. The creators of copyrighted works
are provided tools and processes with which to protect their
intellectual property in the digital age. Consumers should reap the
benefits of significantly more digital content on their television
receivers. Tens of millions of American households depend upon
free-over-the-air broadcast for their television reception and a central
purpose of this decision is to ensure that they do not become
second-class consumers of second-class content.

This item has been improved so that competition between protection
technologies will hopefully preserve, for the most part, consumers'
reasonable expectations. Consumers have a right to expect that
technological advances will afford them expanded opportunities
generally, and that the freedom and vitality of digital technology will
open up new options for the ways in which they can receive and utilize
new products and services. I discuss below those places wherein I
believe we fail to protect consumer interests.

I am pleased that this Order encourages openness and competition in the
digital broadcast flag system. If only one protection technology was to
be available to consumers in the future, or if one technology was
granted a first-mover advantage allowing it to entrench itself so firmly
that new and better technologies are given no chance, we would have an
intolerable result. Consumers would be forced to use a technology not
because it provides consumer options or preserves fair use, but because
they have no choice. Corporate interests would have trumped consumer
interests. Reasonable uses of content by viewers could \-- probably
would \-- be restricted, costs would rise and technology innovation
would be hindered. I believe that today's item, although not perfect,
creates an opportunity wherein consumers will have a choice of
user-friendly digital content protection systems and wherein the reality
of competition will encourage content providers and equipment
manufacturers to develop technologies that allow reasonable consumer
uses of programming such as copying, recording, and sending digital
content securely over the Internet. A technology that blocks reasonable
personal use of digital content will not be chosen by consumers. Nor
will a technology that hampers innovation be accepted by the
manufacturers of consumer electronics products.

So the fact that today's Order now allows multiple firms to have many
different technologies that meet our rules was critical to our decision.
We reject the notion that one industry segment should have gatekeeper
control over digital content protection. Instead, we seek to establish a
streamlined, open approval process with a neutral arbiter based on
objective criteria. We seek multiple interoperable technologies that
will promote competition and consumer choice. We seek to preserve
reasonable and flexible consumer expectations and uses. And we seek to
avoid stranding legacy equipment that must be replaced to receive
protected content.

Words written in a Commission Order will not alone guarantee success. We
must remain vigilant during the interim procedures established today and
work expeditiously to develop a longer term process that includes clear
technical criteria with a transparent road to approval. That is one of
the principal purposes of the Further Notice that we approve today. As
we move forward, we must also be careful not to chill development of
software solutions generally, particularly for beneficial purposes such
as software defined radio.

The competition that we build into the system and the changes from the
original proposal allow me to support much of this Order. But I must
dissent in part because I believe that we fail to protect consumer
interests in important parts of the decision.

I dissent in part, first, because the Commission does not preclude the
use of the flag for news or for content that is already in the public
domain. This means that even broadcasts of government meetings could be
locked behind the flag. Broadcasters are given the right to use the
public's airwaves in return for serving their communities. The widest
possible dissemination of news and information serves the best interests
of the community. We should therefore be promoting the widest possible
dissemination of news and information consistent, of course, with the
copyright laws. And neither the FCC nor the broadcast flag should
interfere with the free flow of non-copyrightable material. As discussed
above, this Order attempts to strike a balance between preserving
consumers' reasonable and flexible uses and permitting content providers
a technological means to protect their copyright. But on the scale of
the public interest, we must accord great weight to enabling lawful
consumer and educational use of content when we are talking about
something that goes to the core of America's public discourse and its
civic dialogue. I understand the arguments of those who caution that
precluding the flag for news and information could entail some difficult
and sensitive decisions about what constitutes news and public
information and what does not. Even if we are confronted with some
difficult decisions, I would rather attempt the difficult than deny the
free flow of news and information the widest possible dissemination.

Second, I dissent in part because the criteria we adopt for accepting
digital content protection technologies fail to address some critical
issues. For example, we do not expressly consider the impact of a
technology on personal privacy. Improper use of the technologies could
arguably allow such things as tracking personal information. The
broadcast flag should be about protecting digital content, not about
tracking Americans' viewing habits. Protecting personal privacy is too
important to leave to chance. We should state explicitly that we will
consider this issue in the approval process and what action we would
take if some approved technologies collect information about users and
their viewing habits. I believe the Commission will be forced to address
this anon; it would have been far preferable to do so here.

As a final matter, I note that I vote for today's Order with the
understanding that it will not affect the rights or remedies available
under our nation's copyright laws and cognizant that it is Congress that
ultimately sets national policy in this critical and sensitive area.

Again, my thanks to the Bureau for working through an immensely complex
and controversial proceeding and to my colleagues for their spirit of
dialogue and cooperation that permitted us to achieve a satisfactory
outcome today. We still have much to do in working through the
implementation of today's Order and developing answers to the many
"going forward" questions raised in the further notice. I urge all
interested parties -- and they are, as we know, many -- to participate
fully as we attempt to develop policies and procedures for moving ahead
in an area wherein about the only certain thing is change.

**STATEMENT OF**

**COMMISSIONER JONATHAN S. ADELSTEIN**

**APPROVING IN PART, DISSENTING IN PART**

*Re: Digital Broadcast Content Protection, Report and Order and Further
Notice of Proposed Rulemaking, MB Docket 02-230*

Today's action presents a difficult and complex challenge. It is no
small matter to require for the first time a content protection system
for free broadcast television delivered over the public airwaves.
Presented, as we have been, with a perceived threat that stands to
undermine the very broadcast system that has benefited our society since
its inception in 1927, I am willing to take that bold step. And being a
firm believer in technological innovation, I believe this step can be
done in a way that benefits all and ushers in a new and innovative era
of digital television.

But this step deserves careful consideration and broad public debate. I
dissent in part, as I do not believe we have fully achieved our goal of
creating an effective and appropriately tailored pro-consumer digital
broadcast television protection regime.

Although we have recently endorsed a copy protection system for cable
plug-and-play devices, we should not automatically assume that such a
model should apply directly in the broadcast context. Instead, we should
start by taking a step back and examining the nature of broadcast
television and the implications of requiring a content protection
regime. Indeed, not all consumers have the desire or ability to afford
cable or other pay television services. These are the very consumers who
may find it difficult to replace equipment as content protection
technologies change over time. Yet, these are also the people who would
benefit the most from high value content being available on the public
airwaves. It is these stakeholders whose interest is foremost in my mind
as I analyze today's Order.

This item confronts us with the current conditions facing the
entertainment industry. Without question, the indiscriminate mass
redistribution of copyrighted works over the Internet may well violate
our nation's copyright laws and strikes at the core economic equation
for creators. Such redistribution is happening today with analog and
downresolutioned entertainment content. While the entertainment industry
acknowledges that the actual economic threat attributable to the
widespread indiscriminate sharing of digital television files is not
imminent, they ask us to act today as a precaution for the future. They
say without protection, high value content will not be made available on
the broadcast medium. Given the circumstances and the potential harm to
creators, it is appropriate to offer some baseline protection.

At the same time, our action should not give content providers a sense
of complacency to avoid actively seeking out new and evolving business
models that embrace exciting new technologies and unleash opportunities
for eager consumers. There is no telling what effect the prominent
offering and marketing of lawful and affordable Internet-based
alternatives could have on offsetting piracy, particularly in light of
recent efforts to step up consumer education and enforcement.

Taking preemptive action to impose a mandated content protection regime
inherently carries some risk. It is well known that the entertainment
industry in the past has feared technological advances that have matured
to the benefit of their industry. We must be careful not to cut off
through preemptive regulation innovation that would lead to products and
technologies that benefit consumers, manufacturers, and the creative
community alike.

I have confidence that if we do this right, a digital broadcast content
protection system can carry out this vision and become a winning
solution for all. I appreciate the willingness of my colleagues and the
Bureau to engage in a constructive dialogue on the implications of
various proposals. I believe today's result is better because of that
dialogue. I continue to have concerns with certain aspects of this
decision, which I outline below.

Today we put in place a regime to afford basic protection against the
mass indiscriminate online redistribution of digital television content.
Our action makes several important improvements over some proposals that
were initially offered. Most notably, we have taken steps to assure that
no single technology or set of companies is given a government
endorsement to control all digital television reception and downstream
distribution and recording. Our procedures ensure that no industry
segment has veto power over the approval of technologies for use with
the flag. As we seek further comment on a long-term technology approval
process, we have sought to establish interim procedures that are open
and transparent. We have specified that the initial approval of
technologies will be pursuant to functional requirements and a
non-exhaustive list of objective criteria, without providing any entity
a potentially dangerous first-mover advantage. Recognizing the steady
convergence of computing and consumer electronics equipment in the home,
our procedures are not intended to provide a regulatory advantage to
anyone.

As technologies come forward for approval, I will pay particular
attention to the competitive impact and the manner in which the content
protection technology binds other downstream networking or recording
technologies, and the impact of the particular authentication method on
consumers and their privacy protections. Given the potential use of
licensing terms to stifle competition, I expect licenses will be made
available on fair, reasonable and nondiscriminatory terms, and will
contain adequate dispute resolution procedures where objections arise.
Should any one technology become the *de facto* standard for all digital
television equipment, a closer examination by the Commission may be
required.

It is my fervent hope that a variety of strategies and technologies will
be deployed to help reach our ultimate goal of preserving high value
content on broadcast television while providing maximum
interoperability, portability, and ease of use for consumers. Consumers
will benefit from broad choice among competing interoperable content
delivery and protection technologies, as manufacturers can be expected
to build the products most likely to be embraced by consumers. I would
be concerned if technologies came before us that presumed that every
consumer engaged in unlawful redistribution or that restricted or
required a payment for legitimate activities that consumers do today.

Nor should the current analog world necessarily be the model for what
consumers can reasonably expect to do in a digital world. We are
undertaking the digital television transition to benefit consumers and
usher in opportunities for new and innovative ways consumers can watch,
record and enjoy television. A digital world is likely to accommodate
more consumer uses of content that do not run afoul of the copyright
laws, and as-yet-undetermined innovative features for time and space
shifting, excerpting, and transferring content lawfully. We have no way
of knowing who or what will be the next TiVo-like innovation to come
forward and be enthusiastically embraced by consumers.

My fear with today's action is that one technology could become the
gatekeeper across various communications platforms and could curtail
technological innovation. That one technology, for example, could bind
consumers to watch content at particular times, on particular devices,
or subject to other terms and conditions that are more than a "speed
bump" in a consumer's viewing and enjoying of digital television. Should
that occur, consumer frustration and backlash is likely, and would serve
neither product manufacturers nor the entertainment industry. Another
fear of mine is that consumers, reporters, libraries, educators, the
disabilities community, or other entities who today use copyrighted
material in numerous lawful ways without the prior permission of the
copyright owner, will be subjected to a system of preapproval or payment
for the continued exercise of those legally protected uses. Worse yet,
that the resulting technologies could intrude upon the personal privacy
of consumers by collecting information about users or their viewing
habits.

Thousands of people contacted us and urged us not to take this
preemptive action. Many consumers are concerned about the effect on
their use and enjoyment of television, as well as their personal
privacy. Given the possibility that the Digital Millennium Copyright Act
might apply, content protection technologies have the potential to
override lawful uses of digital content. With the case-specific and
evolutionary nature of fair use, it is a hard concept to define
technologically and not impact it legally. Yet the Commission has no
authority to do the latter.

Under the regime adopted today, the Commission has not yet examined the
full impact of any particular content protection technology. Provided
alternatives exist, a technology that unduly restricts reasonable
personal use of television content is not likely to be embraced by
consumers. On the other hand, we can expect consumers to gravitate
toward technologies that preserve flexible consumer uses of digital
content. By locking down content too tightly or imposing too great a
cost on consumers, consumer adoption suffers, resulting in manufacturers
losing incentives to innovate and the entertainment industry failing to
benefit from new channels for content delivery. For this reason, I
expect technologies will come forward that will preserve consumers'
reasonable expectations, including the secure distribution of broadcast
television excerpts or files over the Internet in a manner consistent
with copyright law. In the end, I hope our adoption of a broadcast flag
protection regime does not end up costing consumers greatly, through
direct expense, reduced functionality of legacy devices, or the loss of
innovative ways of watching, recording, or using digital television.

Everyone benefits if consumers embrace and invest in digital television
equipment. I would not want to see our adoption of the flag slow
consumer acceptance of the digital transition or discourage computer
developers from enabling the reception and downstream use of digital
television through computing hardware and software solutions. To the
extent that today's action adds to the complexities of buying digital
television equipment or home networking solutions, I encourage all
parties to work with retailers to increase consumer awareness.

I would have preferred to step gradually into this delicate space. I am
concerned, for instance, that our action today will adversely affect
accountability of the broadcast media. Despite technological advances,
the public airwaves are still limited in the number of interference-free
channels that can broadcast in each community. Adding a content
protection regime that restricts the flow of digital television content
could very well lead to less public accountability of what is broadcast
over the air. For example, absent a mandated content protection regime,
consumers might have been in a position to e-mail the Commission an
excerpt of a show they believe is in violation of our indecency rules.
It remains unclear whether consumers can do so after today's action.

I dissent in part because I believe we fail to protect the public
interest in some key ways. First, I must dissent from the unlimited
scope of today's protection regime. The Order does not rule out the use
of the flag for content that is in the public domain. The flag was
presented as a means of preventing the illegal mass redistribution of
digital broadcast content over the Internet. By not limiting use of the
flag only to copyrighted works, I believe our scope not only exceeds the
purposes for which we take preemptive action but also fails to reflect
the record before us of the perceived threat and potentially supersedes
the balance of copyright law. While the item professes not to affect
copyright law, by mandating a technological protection regime that can
be used to restrict the flow of content that is in the public domain, or
is not subject to copyright protection for other reasons, I am not
convinced that we have adhered to our well-meaning pronouncements.
Presumably, there is some greater public good in the wide dissemination
of non-copyrightable works or works for which the copyright protection
has expired. If the barrier to the unleashing of high value content on
digital broadcast television is Internet piracy, then I fail to see how
a regime that could end up locking up public domain or non-copyrightable
works is carefully focused to achieve that result.

Nor do I take lightly a government-required protection regime that could
restrict the free flow of news or public affairs programming which is at
the heart of public discourse in our society. Our country has a long
history of promoting widespread public access to broadcast television.
In return for the free use of the spectrum, broadcasters are expected to
serve their local communities. Consistent with copyright law, the wider
the dissemination of news and public affairs programming, the better our
communities and our democracy are served. The lawful consumer and
educational use of content for scholarship, commentary, criticism,
teaching, research, or other socially beneficial purposes should not be
hindered. I see little threat to content creators from a parent
e-mailing to family members and friends a local television news clip of
a son or daughter receiving a community service award, or a teacher
choosing to show his or her classroom a rebroadcast of a space shuttle
launch using an Internet connection.

Nor do I see a persuasive reason to restrict the free flow of political
speech which yields important societal benefits. By subjecting, say, the
State of the Union address to mandated redistribution control
technologies, have we not undermined a core value of our society? I
search in vain for record support or a reason to lock up political
speech from widespread distribution. Because I believe the Order's
boundless scope insufficiently addresses these values, I dissent.

I also dissent to the failure of our interim criteria for examining
digital content protection technologies to address important consumer
issues. I would have explicitly indicated that the Commission will
consider the impact of a technology on personal privacy and not accept
any technology that intrudes too greatly into this space. While we are
free to examine privacy implications under our non-exhaustive list of
criteria, given the importance of improper use of information about
consumers' viewing habits, I would have made our intention to protect
consumer privacy explicit and unmistakable.

By going forward with today's adoption of a broadcast flag regime to
address a perceived threat, the Commission could have put in place a way
to evaluate whether we are achieving the goal that underlies our
regulatory action -- the availability of high value content on free
over-the-air broadcast television. Such efforts would benefit the
Commission should the flag be the just the first in a series of requests
to mandate even further content protection measures.

Content providers have raised a real concern that the threat of
indiscriminate online redistribution of digital television content will
hold back high value content from our nation's public airwaves. By
providing some basic assurance that the high value content that is
broadcast over digital television will not be widely and
indiscriminately redistributed online, we give greater incentive for
content producers to make that content available on free over-the-air
television.

Not many people a decade ago foresaw the Internet's rapid evolution into
a tool of consumer empowerment for both legitimate and harmful uses. As
we take steps to protect free over-the-air digital broadcast television
against the powers of the Internet, we must be cautious, for the sake of
consumers and the entertainment industry itself, not to trample its
lawful use or inadvertently stifle the next innovative distribution
model that could revolutionize the entertainment industry.

[^1]: The name of this proceeding has been changed from Digital
    Broadcast Copy Protection to Digital Broadcast Content Protection to
    reflect that the redistribution control regime adopted herein for
    digital broadcast television in no way limits or prevents consumers
    from making copies of digital broadcast television content.

[^2]: *Implementation of Section 304 of the Telecommunications Act of
    1996:* *Commercial Availability of Navigation Devices and
    Compatibility Between Cable Systems* *and Consumer Electronics
    Equipment*, CS Docket No. 97-80 and PP Docket NO. 00-67, FCC No.
    03-225 (rel. Oct. 9, 2003) ("*Digital Cable Compatibility Order and
    FNPRM*").

[^3]: *Digital Cable Compatibility Order and FNPRM* at Sections III, IV
    and V.

[^4]: *Digital Broadcast Copy Protection*, 17 FCC Rcd 16027 (2002)
    ("*NPRM*").

[^5]: *See* ATSC A/65B, Program and System Information Protocol for
    Terrestrial Broadcast and Cable (ATSC 2003) ("ATSC A/65B").

[^6]: *Digital Broadcast Copy Protection*, 17 FCC Rcd at 16028-29.

[^7]: Motion Picture Association of America ("MPAA") Comments at 6-8.

[^8]: Arizona Consumers Council, *et al*. Comments ("Joint Consumer
    Groups") at 5-6; Center for Democracy and Technology ("CDT")
    Comments at 1-2; Computer and Communications Industry Assoc.
    ("CCIA") Comments at 5-6, 16-17, 19; Consumer Electronics Assoc.
    ("CEA") Comments at 2-3, 7-8; CEA Reply Comments at 1, 8; DIRECTV,
    Inc. ("DIRECTV") Reply Comments at 6-7; Electronic Frontier
    Foundation ("EFF") Reply Comments at 24-25; Home Recording Rights
    Coalition ("HRRC") Comments at 1-2, 4; Information Technology Assoc.
    of America ("ITAA") Comments at 14; Information Technology Industry
    Council ("ITIC") Comments at 4; Internet Commerce Coalition, *et
    al*. ("ICC") Comments at 6; National Cable and Telecommunications
    Assoc. ("NCTA") Comments at 2, 9, 12-13; National Music Publishers
    Assoc. ("NMPA") Comments at 9, 13; NBC, Inc. ("NBC") Comments at 4;
    North American Broadcasters Assoc. ("NABA") Comments at 1; Philips
    Electronics North America ("Philips") Comments at 9-11, 20, 27;
    Thomson Inc. ("Thomson") Comments at 6-9, 11; TiVo Inc. ("TiVo")
    Comments at 2-4.

[^9]: *Digital Cable Compatibility Order and FNPRM* at Section V.D.

[^10]: Motorola Comments at 3; Viacom Comments at 12-15; NFL, *et al.*
    ("NFL") Reply Comments at 2-7 ("NFL").

[^11]: American Society of Composers, Authors and Publishers, *et al*.
    ("ASCAP") Comments at 1-2; CBS Television Affiliates Assoc. ("CBS
    Affiliates") Comments at 2-3; Center for Public Broadcasting, *et
    al*. ("CPB") Reply Comments at 2; Directors Guild of America, Inc.
    ("DGA") Comments at 1-3; Banks Broadcasting, Inc., *et al.*
    ("Banks") Comments at 2; MPAA Comments at 6-8; MPAA Reply Comments
    at 2-13; NMPA Reply Comments at 2-5; NBC Television Affiliates
    Assoc. ("NBC Affiliates") Comments at 1-3; NBC Comments at 2; NFL
    Comments at 6-12; NFL Reply Comments 2-7; NABA Comments at 1.

[^12]: Viacom Comments at 4-6.

[^13]: NFL Comments at 6-12.

[^14]: Letter from Bruce E. Boyden, Council for MPAA, Proskauer Rose
    LLP, to Marlene Dortch, Secretary, FCC at Attachment (May 7, 2003).

[^15]: American Library Assoc. ("Library Group") Comments at 9; Joint
    Consumer Groups Comments at 1-5, 9; CCIA Comments at 7-10, 17, 20;
    EFF Comments at 2-7; EFF Reply Comments at 2-9; HRRC Comments at
    4-5; HRRC Reply Comments at 1-3; ITAA Reply Comments at 1, 4; Law
    Office of Adam Hill Comments at 9; Philips Comments at 2, 7, 11,
    13-15; Philips Reply Comments at 2, 12, 15-19; Public Knowledge and
    Consumers Union ("PK & CU") Comments at 6-12; PK & CU Reply Comments
    at 2, 4, 6-11; Raffi Krikorian Reply Comments at 14-15.

[^16]: Raffi Krikorian Reply Comments at 15.

[^17]: Letter from Mike Godwin, Senior Technology Counsel, Public
    Knowledge, to Marlene Dortch, Secretary, FCC at Attachment (May 23,
    2003) ("*How to Misuse Tech Statitstics*").

[^18]: CCIA Comments at 7-8; Philips Reply Comments at 19-20; PK & CU
    Reply Comments at 6-11.

[^19]: EFF Reply Comments at 3.

[^20]: *See* Letter from Alan Davidson, Center for Democracy and
    Technology, to Marlene Dortch, Secretary, FCC at Attachment (Oct.
    24, 2003) ("\[c\]ontent provider concerns about the long-term risk
    of widespread online copying of DTV content have merit, and it is
    reasonable to seek a solution before it is too late"); Letter from
    Fritz Attaway, MPAA, to W. Kenneth Ferree, FCC at Attachment (Oct.
    3, 2003) (announcement and related press article reporting that
    Comcast is doubling its downstream speed for broadband service from
    1.5 Mbps to 3.0 Mbps at no additional cost to consumers).
    Experiments to further increase Internet speeds are ongoing. *See*
    Letter from Mace J. Rosenstein, Hogan & Hartson, to Marlene Dortch,
    Secretary, FCC at Attachment (Sept. 26, 2003) (California Institute
    of Technology press release "Caltech computer scientists develop
    FAST protocol to speed up Internet").

[^21]: *See* *Digital Cable Compatibility Order and FNPRM* at Section
    III; *Review of the Commission's Rules and Policies Affecting the
    Conversion to Digital Television*, 17 FCC Rcd 15978 (2002)
    (directing that television sets contain digital tuners on a
    phased-in basis, beginning in July 2004).

[^22]: *NPRM*, 17 FCC Rcd at 16028.

[^23]: Final Report of the Co-Chairs of the Broadcast Protection
    Discussion Subgroup to the Copy Protection Technical Working Group
    at 4 (June 3, 2002) ("*BPDG Final Report*"); *see also* Letter from
    Mace Rosenstein, Hogan & Hartson, to Marlene Dortch, Secretary, FCC
    at Attachment 1 (Sept. 26, 2003).

[^24]: ATSC A/65B, Program and System Information Protocol for
    Terrestrial Broadcast and Cable (ATSC 2003) (referred to in the
    *BPDG Final Report* as its predecessor version ATSC A/65A) ("ATSC
    A/65B"). *See* Philips Comments at 25-26; American Federation for
    the Blind ("AFB") Comments at 2; PK & CU Comments at 13-18. We
    clarify that we are adopting the technical parameters of the
    redistribution control descriptor identified in the March 18, 2003
    version of ATSC A/65B.

[^25]: ATSC A/65B at 79.

[^26]: *BPDG Final Report* at 11-12.

[^27]: MPAA Comments at 12.

[^28]: *Id*. at 6 n.3.

[^29]: MPAA Reply Comments at 16. *See also* Letter from David H.
    Arland, Thomson, to Marlene Dortch, Secretary, FCC (Oct. 8, 2003)
    ("there is very little cost involved for a manufacturer to implement
    \[flag recognition\], assuming that existing technologies such as
    DTCP (5C) are accepted as approved Broadcast Flag protection
    technologies) ("Thomson 10/8/03 Letter"); Letter from John Taylor,
    Zenith, to Michael K. Powell, FCC (Oct. 30, 2003) ("Zenith expects
    that the cost of implementing the broadcast flag in its products
    with digital outputs to be very small") ("Zenith 10/30/03 Letter").
    There may be additional cost to implement the flag to the extent
    manufacturers cannot or do not rely on existing content protection
    technologies. *See* Thomson 10/8/03 Letter.

[^30]: MPAA Comments at 27.

[^31]: CEA Comments at 3-4.

[^32]: DIRECTV Comments at 2-3; NCTA Comments at 2-3, 8, 10-11, 13-14;
    NCTA Reply Comments at 1-2, 4-7.

[^33]: *See* Philips Comments at 25-26; AFB Comments at 2; PK & CU
    Comments at 13-18.

[^34]: *BPDG Final Report* at 18-21.

[^35]: Veridian Corporation ("Veridian") Comments at 12-13; Veridian
    Reply Comments at 3-4.

[^36]: EFF Comments at 17-19; Joint Consumer Groups Comments at 1, 9; PK
    & CU Comments at 2; PK & CU Reply Comments at 11-15.

[^37]: *See e.g*., IT Coalition Comments at 17 n.44; PK & CU Comments at
    15-17.

[^38]: Digimarc Corporation & Macrovision Corporation ("Digimarc &
    Macrovision") Comments at 3-6; EFF Comments at 11-12; EFF Reply
    Comments at 27; HRRC Comments at 2; ITIC Comments at 3; NMPA Reply
    Comments at 3, 13; NFL Comments at 13-14; NFL Reply Comments at
    11-12; Philips Comments at 3, 11-13, Appendix A; Philips Reply
    Comments at 3, 14-15; PK & CU Comments at 15-17; PK & CU Reply
    Comments at 13-15; Verizon Comments at 3.

[^39]: The analog hole is not a problem specific to a flag-based system;
    it also exists in the MVPD context. *See* *Digital Cable
    Compatibility Order and FNPRM* at Section V.B and V.C.

[^40]: The ARDG is a subgroup of the Copy Protection Technology Working
    Group. *See* http://www.cptwg.org.

[^41]: EFF Comments at 10-11; Electronic Privacy Information Center
    ("EPIC") Comments at 2; HRRC Comments at 7; PK & CU Comments at
    15-17; Veridian Comments at 2-3.

[^42]: Library Group Comments at 6-18.

[^43]: Areas of particular concern include: the ability to access and
    manipulate user-level controls and service menus, the deconstruction
    of protected material in order to re-purpose it into accessible
    formats, the interconnection of devices without reduction in
    functionality or prohibitive licensing costs, and a circumvention
    exemption to facilitate reverse engineering. AFB Comments at 2.

[^44]: 17 U.S.C. §§ 1201(d)-(f).

[^45]: We note that several manufacturers have publicly stated that they
    intend to move forward with inclusion of flag recognition technology
    in devices for the 2004 product cycle, one year prior to the
    mandate's effective date. *See* Thomson 10/8/03 Letter; Zenith
    10/30/03 Letter (indicating that while most Zenith 2004 models will
    not have digital outputs, which limits the number of legacy devices
    to be deployed, "Zenith will make every effort to accelerate its
    implementation of the broadcast flag in sets with digital outputs");
    Letter from Angela Lee, Mitsubishi Electric, to Michael Powell, FCC
    (Oct. 31, 2003) (stating that Mitsubishi "may be in a position, on a
    voluntary basis, to incorporate the most commonly discussed approach
    to reading and triggering some response to a 'broadcast flag'
    trigger in many of \[its\] products by 3Q 2004"). The decisions by
    these manufacturers represent additional positive steps in the
    digital transition by reducing the number of legacy devices
    available prior to the flag becoming mandatory in 2005.

[^46]: *See* MPAA Reply Comments at 43 (DVDs are "now the fastest
    growing consumer electronics platform in history -- with new titles
    being released at a rate of roughly 100 every week"). *See also*
    Letter from James M. Burger, Dow, Lohnes & Albertson, to Marlene
    Dortch, Secretary, FCC at 4 n.8 (Oct. 2, 2003) (noting on behalf of
    IT Coalition that "\[d\]espite the hack of CSS, content owners using
    CSS protection last year received a record \$11.6 billion in revenue
    from the sale and rental of DVDs," surpassing the \$9.3 billion in
    box office revenue garnered by the movie industry in 2002).

[^47]: We recognize that currently, content recorded onto a DVD with a
    flag-compliant device will only be able to be viewed on other flag
    compliant devices and not on legacy DVD players. While we are
    sensitive to any potential incompatibilities between new and legacy
    devices, we believe that this single, narrow example presented to us
    is not unique to a flag system and is outweighed by the overall
    benefits gained in terms of consumer access to high value content.
    Changes in DVD technology, such as the transition to high definition
    DVD devices, will present other unrelated format incompatibilities.

[^48]: ITIC Comments at 3; IT Coalition Comments at 17; Motorola
    Comments at 4-6; Veridian Comments at 1-3; Veridian Reply Comments
    at 2, 15-16.

[^49]: Some encryption supporters advocate use of advisory committee and
    negotiated rulemaking procedures to achieve consensus around an
    encryption standard. *See* Motorola Comments at 10-11; Veridian
    Reply Comments at 20-23.

[^50]: MPAA Comments at 17.

[^51]: *See e.g.*, Letter from Jon Baumgarten, Proskauer Rose, to
    Marlene Dortch, Secretary, FCC at 4-5 (Oct. 8, 2003) ("MPAA 10/8/03
    Letter").

[^52]: MPAA Comments at 17; CEA Reply Comments at 1-4.

[^53]: Philips Comments at 21.

[^54]: HRRC Reply Comment at 3-4; ITIC Comments at 3; EFF Reply Comments
    at 27.

[^55]: The Corporation for National Research Initiatives ("CNRI")
    advocates adoption of their "handle system" technology. CNRI Reply
    Comments at 2. This system resolves unique identifiers to handle
    records with usage conditions, which could include redistribution
    control as well as other content protection measures. *Id*. at 2-3,
    Appendix C. No other comments were received discussing CNRI's
    proposal; the record with respect to this technology is insufficient
    to merit its adoption in this context.

[^56]: Digimarc and Macrovision Comments at 3-14; Philips Comments at
    2-3, 15; Philips Reply Comments at 33-34.

[^57]: Digimarc and Macrovision Comments at 4.

[^58]: *Id*. at 7-8.

[^59]: NMPA Reply Comments at 13-14; NBC Comments at 3; NFL Comments at
    6, 13-14.

[^60]: Digimarc and Macrovision Comments at 9-10.

[^61]: Philips Comments at 3.

[^62]: *See* www.cptwg.org/Assets/Presentations/ARDG/ARDG%20page.htm.

[^63]: *See* MPAA Comments at 31-34.

[^64]: *Id*. at 35-39.

[^65]: *See, e.g.,* Philips Reply Comments at 34.

[^66]: *See, e.g.,* Philips Comments at 28-31 ((*citing* 1962 All
    Channel Receiver Act (codified at 47 U.S.C. §§ 303(s), 330(a))
    (television frequencies); 1990 Television Decoder Circuitry Act
    (codified at 47 U.S.C. §§ 303(u), 330(b)) (closed-caption
    transmissions); Parental Choice in Television Programming provisions
    of the 1996 Telecommunications Act (codified at 47 U.S.C. §§ 303(x),
    330(c)) (V-Chip); Section 624A of the Communications Act, 47 U.S.C.
    § 544a (cable compatibility); Section 629 of the Communications Act,
    47 U.S.C. § 549 (navigation devices)).

[^67]: *See, e.g.,* Philips Reply Comments at 36; Written Ex Parte
    Presentation of Philips Electronics at 1-2 (Oct. 7, 2002).

[^68]: *See, e.g.,* Philips Reply Comments at 36-42.

[^69]: *See* Letter from Lawrence Sidman, Paul, Hastings, to Marlene
    Dortch, Secretary, FCC (Oct. 16, 2003) ("Philips October 16, 2003
    *Ex Parte*").

[^70]: *United States v. Southwestern Cable Co.*, 392 U.S. 157, 177-78
    (1968) ("*Southwestern Cable*"). *Southwestern Cable*, which
    constitutes the lead case on the ancillary jurisdiction doctrine,
    upheld certain regulations applied to cable television systems at a
    time before the Commission received any express Congressional grant
    of regulatory authority over that medium. *Id*. at 170-71. In
    *United States v. Midwest Video Corp.*, 406 U.S. 649 (1972)
    ("*Midwest Video I*"), the Supreme Court expanded upon its holding
    in *Southwestern Cable*. The plurality stated that "the critical
    question in this case is whether the Commission has reasonably
    determined that its origination rule will 'further the achievement
    of long-established regulatory goals in the field of television
    broadcasting by increasing the number of outlets for community
    self-expression and augmenting the public's choice of programs and
    types of services . . .'" *Id.* at 667-68 (quoting *First Report and
    Order*, 20 FCC 2d 201, 202 (1969)). The Court later restricted the
    scope of *Midwest Video I* by finding that if the basis for
    jurisdiction over cable is that the authority is ancillary to the
    regulation of broadcasting, the cable regulation cannot be
    antithetical to a basic regulatory parameter established for
    broadcast. *FCC v. Midwest Video Corporation*, 440 U.S. 689, 700
    (1979) ("*Midwest Video II*").

[^71]: *Southwestern Cable*, 392 U.S. at 178.

[^72]: 47 U.S.C. § 151.

[^73]: *Id*. § 152(a) (stating that the provisions of the Communications
    Act "shall apply to all interstate and foreign communication by wire
    or radio and all interstate and foreign transmission of energy by
    radio, which originates and/or is received within the United States,
    and to all persons engaged within the Untied States in such
    communication or such transmission of energy by radio").

[^74]: More specifically, Section 3(33) of the Communications Act
    defines the term "radio communication" or "communication by radio"
    to mean "the transmission by radio of writing, signs, signals,
    pictures, and sounds of all kinds, including all instrumentalities,
    facilities, apparatus, and services (among other things, the
    receipt, forwarding, and delivery of communications) incidental to
    such transmission." *Id*. § 153(33). Section 3(52) of the
    Communications Act defines the term "wire communication" or
    "communication by wire" to mean "the transmission of writing, signs,
    signals, pictures, and sounds of all kinds by aid of wire, cable, or
    other like connection between the points of origin and reception of
    such transmission, including all instrumentalities, facilities,
    apparatus, and services (among other things, the receipt,
    forwarding, and delivery of communications) incidental to such
    transmission." *Id*. § 153(52).

[^75]: We are not persuaded by commenters' argument that Section 3's
    definition of "radio communication" refers only to apparatus used
    for the *transmission*, and not the *reception*, of radio. *See*
    Philips October 16, 2003 *Ex Parte*. In so reading, commenters
    ignore the broad language of the definition, which gives a fuller
    meaning to the concept of "communication" so as to include all
    "instrumentalities, facilities, apparatus and services" that may be
    "incidental" to the literal transmission, but which are a part of an
    overall circuit of messages that are sent and received. Moreover,
    commenters' reliance on Section 303(e)'s grant of Commission
    authority to regulate the emissions of radio station apparatus is
    unavailing for at least two reasons. First, the Commission's general
    jurisdictional grant under Title I is much broader than the specific
    grant of authority in Section 303(e). Second, Section 303(e)
    contains no indication that Congress intended to limit the
    Commission's authority over radio station apparatus to the terms of
    that statutory provision. The mere fact that the provision grants
    the Commission the authority to regulate radio station apparatus
    along certain lines does not imply that the Commission is prohibited
    from regulating such apparatus under authority drawn from other
    portions of the statute. To hold otherwise would render the concept
    of ancillary jurisdiction largely meaningless.

[^76]: 47 U.S.C. §§ 151, 307(b). As indicated above, we are not relying
    on our authority under Section 303(e) to implement the broadcast
    flag regime. Moreover, our actions today are not in conflict or
    otherwise inconsistent with our authority under Section 303(e).
    Therefore, the fact that Section 303(e) focuses on transmission
    apparatus is irrelevant to our ancillary jurisdiction analysis.

[^77]: *See Midwest Video I,* 406 U.S. at 667-668, n.27 (recognizing
    that "it has long been a basic tenet of national communications
    policy that 'the widest possible dissemination of information from
    diverse and antagonistic sources is essential on the welfare of the
    public.'").

[^78]: *See* 47 U.S.C. § 309(j)(14)(A) ("\[a\] television broadcast
    license that authorizes analog television service may not be renewed
    ... for a period that extends beyond December 31, 2006"). *See also*
    *Consumer Electronics Association v. FCC*, No. 02-1312, slip. op. at
    15-16 (D.C. Cir. Oct. 28, 2003) (the DTV "transition is not a
    market-driven migration to a new technology, but rather the
    unambiguous command of an Act of Congress").

[^79]: 47 U.S.C. § 303(g). *See also* *Midwest Video I*, 406 U.S. at 669
    (citing Section 303(g) as articulating one of the policies of the
    Communications Act on which the cable origination rule "is
    specifically premised").

[^80]: *See, e.g.,* 47 U.S.C. §§ 309(j)(14) (aimed at the recapture of
    broadcast television spectrum used for analog service by 2007,
    unless one of three conditions exist); *Id*. § 337 (requires the
    removal and relocation of incumbent analog broadcast licensees
    operating on channels 60-69 after the DTV transition period
    terminates in order that frequencies can be used for public safety
    and commercial services); *Id*. § 336 (directing the Commission in
    the transition to digital television); *Id*. § 396(k)(1)(D)
    (creating \$20 million Fund for fiscal year 2001 for transition from
    analog to digital technology for public broadcasting services);
    *Id*. § 614(b)(4)(B) (digital must carry); *Id*. § 544a(c)(2)
    (subscriber notification requirements regarding the impact that
    cable converter boxes may have on advanced television picture
    generation and display features).

[^81]: In 1997, the legislative history to the newly enacted provisions
    of Sections 309 and 337 reflected the importance Congress attached
    to accomplishing the transition from analog to digital technology.
    *See, e.g.,* H.R. Conf. Rep. No. 217, 105^th^ Cong., 1^st^ Sess.
    1997, at 576 (stating that a new Section 309(j)(14)(A) was added to
    the Communications Act "to require the Commission to reclaim the 6
    MHz each broadcaster now uses for transmission of analog television
    service signals by no later than December 31, 2006); *Id.* at 578
    ("New section 309(j)(14) requires the Commission to ensure that the
    spectrum now used for analog television service is returned as
    required by Commission direction and that the Commission must
    reclaim and reorganize the spectrum, consistent with the objectives
    of section 309(j)(3) of the Communications Act"); *Id.* at 580 ("New
    section 337(e) requires the Commission to clear all broadcast
    television licensees from the spectrum located between 746 and 806
    MHz at the end of the transition to digital television. The
    conferees recognize that in clearing this band, the Commission will
    displace not only full-power licensees but also secondary broadcast
    services, including low-power licensees and television translator
    licensees"). *See also,* H. R. Conf. Rep. No. 148, 107^th^ Cong.,
    1^st^ Sess. 2001, at 71 ("The conference agreement includes a
    provision authorizing the use of fiscal year 2001 funds specifically
    for transition from the use of analog to digital technology for the
    provision of public broadcasting services for fiscal year 2001").

[^82]: ASCAP Comments at 1-2; CBS Affiliates Comments at 2-3; CPB Reply
    Comments at 2; DGA Comments at 1-3; Banks Comments at 2; MPAA
    Comments at 6-8; MPAA Reply Comments at 2-13; NMPA Reply Comments at
    2-5; NBC Affiliates Comments at 1-3; NBC Comments at 2; NFL Comments
    at 6-12; NFL Reply Comments 2-7; NABA Comments at 1.

[^83]: *See, e.g.,* 47 U.S.C. § 302(a) (granting authority to regulate
    home electronic equipment in order to ensure that the equipment can
    withstand interference); *Id*. § 303(s) (granting authority to
    regulate television receivers in order to ensure that all such
    receivers adequately receive all television broadcasting signals);
    *Id*. § 303(u) (instructing Commission to require that television
    receivers be equipped to display closed-caption television
    transmissions); *Id*. §§ 303(x), 330(c)) (instructing Commission to
    require that television receivers to be equipped to permit viewers
    to block the reception of programs with a common rating).

[^84]: Pub. L. No. 87-529, 76 Stat. 150 (codified at 47 U.S.C. §§
    303(s), 330(a)). *See, e.g., Electronic Industries Association
    Consumer Electronics Group v. FCC*, 636 F.2d 689 (D.C.Cir. 1980)
    (providing an extensive review of the legislative history of ACRA,
    including the then-FCC Chairman's assurances to Congress regarding
    the limited scope of authority sought in supporting the legislation
    leading up to the enactment of Section 303(s) of the Communications
    Act).

[^85]: *See, e.g., Texas Rural Legal Aid, Inc. v. Legal Services Corp.,*
    940 F.2d 685, 694 (D.C. Cir 1991) (rejecting the simplistic
    application of the *expressio unius est exclusio alterius* ("the
    expression of one is the exclusion of the other") canon of statutory
    interpretation in the administrative law context, relying instead on
    the canon of interpretation that states that a congressional
    decision to prohibit certain activities does not imply an intent to
    disable the relevant administrative body from taking similar action
    with respect to activities that pose similar danger; and observing
    that case law suggests that the *expressio* maxim is inappropriate
    in the administrative context because its application would
    undermine the flexibility sought in vesting broad rulemaking
    authority in an administrative agency).

[^86]: *See Southwestern Cable,* 392 U.S. at 162-167.

[^87]: *Id.* at 173-174 (*citations omitted*).

[^88]: *NPRM*, 17 FCC Rcd at 16027-29.

[^89]: MPAA Comments at Attachments A-C. The 5C companies include Sony,
    Hitachi, Intel, Mitsubishi and Toshiba.

[^90]: *Id*. at Attachments B-C.

[^91]: HRRC Comments at 6; PK & CU Comments at 19; Thomson Comments at
    14; MPAA Comments at 13; NFL Comments at 14-15.

[^92]: CEA Comments at 6; CEA Reply Comments at 7; PK & CU Comments at
    19; Library Group Comments at 13-18, 22; HRRC Comments at 6, 8; IT
    Coalition Comments at 31; International Assoc. of Broadcast Monitors
    Reply Comments at 2-3, 10-14.

[^93]: CPB Reply Comments at 2; *see also* MPAA 10/8/03 Letter at 6-7;
    Letter from Lonna Thompson, APTS, to Kenneth Ferree, Chief, Media
    Bureau, FCC (Oct. 8, 2003); Letter from Eddie Fritts, NAB, to
    Michael K. Powell, FCC (Oct. 27, 2003) (opposing any exemption for
    news and public affairs programs).

[^94]: Letter from Roger Ogden, NBC Television Affiliates Association,
    to Marlene Dortch, Secretary, FCC (Oct. 6, 2003); *see also* Letter
    from Bob Lee, CBS Affiliates Advisory Board, to Michael K. Powell,
    FCC (Oct. 8, 2003) (a news and public affairs programming exemption
    would seriously threaten the continued production of local news and
    public affairs, and make it difficult for the CBS network to support
    high quality news programming like 60 Minutes); Letter from Walter
    C. Liss, ABC Owned Televisions *et al.*, to Michael K. Powell, FCC
    (Oct. 22, 2003) (arguing that piracy poses same risk to producers of
    news and public affairs programming as it does to producers of other
    programming, and that failure to provide protection to news and
    public affairs would harm local stations who rely on the economic
    value of these programs to maintain a viable business); Letter from
    Robert Alan Garrett, Arnold and Porter, to Marlene H. Dortch, FCC
    (Oct. 24, 2003) (on behalf of Office of Commissioner of Baseball,
    opposing any exemption for news and public affairs programming that
    would include telecasts of sports events or sports-related
    programming).

[^95]: *See* Letter from Barbara S. Cochran, President, Radio-Television
    News Directors Association, to Michael K. Powell, FCC (Oct. 27,
    2003) (segregating news and public affairs programming would prove
    unwieldy, constitutionally dubious, and serve as a disincentive to
    its creation).

[^96]: To the extent that content providers and broadcasters wish to
    employ the optional additional bits within the redistribution
    control descriptor in ATSC A/65B, we will consider petitions to that
    effect which demonstrate that such use is in the public interest.

[^97]: *See* *Digital Cable Compatibility Order and FNPRM* at Section
    VI.C.

[^98]: CBS Affiliates Comments at 3; CEA Comments at 5-6; DTLA Comments
    at 8; DIRECTV Comments at 3; DIRECTV Reply Comments at 4-5; HRRC
    Comments at 6-7; MPAA Comments at 14-18; MPAA Reply Comments at
    23-24, 39-40; NCTA Comments at 8; NMPA Comments at 3, 5; NMPA Reply
    Comments at 6, 12-13; NBC Comments at 3; NFL Comments at 14-15;
    Philips Comments at 6, 21-22; Thomson Comments at 3, 14-17; TiVo
    Comments at 6-7.

[^99]: MPAA Comments at 14-18; DTLA Comments at 8.

[^100]: MPAA Reply Comments at 39-41; *but see* IT Coalition Comments at
    29-30; EFF Reply Comments at 26-27.

[^101]: MPAA Reply Comments at 39-41.

[^102]: CEA Comments at 5-6; CCIA Comments at 18-19; *see* 17 U.S.C. §
    1201(c)(3).

[^103]: EFF Comments at 19-21; EFF Reply Comments at 26-27, 29.

[^104]: MPAA Reply Comments at 39-42.

[^105]: 17 U.S.C. § 1201(c)(3) (emphasis added).

[^106]: *See* MPAA 10/8/03 Letter at 5.

[^107]: 17 U.S.C. § 1201(k).

[^108]: The connection between these two elements of a Demodulator
    Product would need to be robust for the flag system to perform its
    intended function.

[^109]: MPAA Comments at Attachment B.

[^110]: *Id*. at Attachment B. The proposed rules permit Marked and
    Unscreened Content to be output over modulated outputs, provided
    that the ATSC flag is retained in both the EIT and PMT. *Id.*
    According to MPAA, the inclusion of unprotected DVI outputs with a
    resolution equal to or lower than that in ITU-R, BT 601.5 is an
    accommodation for legacy PC equipment and displays. *See* MPAA
    10/8/03 Letter at 4; MPAA Reply Comments at Attachment A n.2.

[^111]: MPAA Comments at Attachment C.

[^112]: EPIC Comments at 3, 5; NMPA Comments at 7-8, 11; Philips
    Comments at 6, 21-22, 25; PK & CU Comments at 17. NMPA and Recoding
    Industry Assoc. of America ("RIAA") express concern that the audio
    component of the A/V signal could be digitally output without
    protection under the compliance rules. NMPA Reply Comments at 4-5,
    12-13; RIAA Reply Comments at 7. In response, MPAA states that its
    Joint Proposal would only allow a certain limited type of
    unprotected digital output to transmit audio content at compact
    disc-level quality in order to permit the continued functionality of
    existing legacy devices. Letter from Fritz Attaway, MPAA, to Marlene
    Dortch, Secretary, FCC (Sept. 29, 2003).

[^113]: MPAA Comments at Attachment B.

[^114]: ITAA Comments at 11-13; Law Office of Adam Hill Comments at 7-8;
    NMPA Comments at 7-8, 11; PK & CU Comments at 17.

[^115]: EFF Comments at 15-17; American Antitrust Institute Comments at
    15-16; PK & CU Reply Comments at 16-20.

[^116]: IT Coalition Comments at 26-29.

[^117]: NMPA Reply Comments at 9-11

[^118]: MPAA Reply Comments at 16.

[^119]: The written commitment should include the following information:
    (1) the manufacturer or importer's name and official mailing
    address; and either (2) a commitment that the manufacturer or
    importer shall abide by the Commission's compliance and robustness
    rules for Demodulator Products; or (3) a commitment that the
    manufacturer or importer will only sell demodulators to another
    person who has committed to comply with the Commission's compliance
    and robustness rules for Demodulator Products. A written commitment
    would not be required in the case of buyers who are bona fide
    resellers, licensed digital television broadcasters or MVPDs who
    retransmit Unencrypted Digital Broadcast Television Content. *See*
    Attachment B.

[^120]: MPAA Comments at Attachment B.

[^121]: *Id*. at Attachment B; MPAA Reply Comments at 23-24.

[^122]: MPAA Comments at Attachment B; MPAA Reply Comments at 23-24.

[^123]: The written commitment should include the following information:
    (1) the manufacturer or importer's name and official mailing
    address; and either (2) a commitment that the manufacturer or
    importer shall abide by the Commission's compliance and robustness
    rules for Demodulator Products; or (3) a commitment that the
    manufacturer or importer will only sell demodulators to another
    person who has committed to comply with the Commission's compliance
    and robustness rules for Demodulator Products.

[^124]: MPAA Comments at Attachment C.

[^125]: *Id*. at Attachment C.

[^126]: MPAA Reply Comments at 18-20.

[^127]: EPIC Comments at 6; Law Office of Adam Hill Comments at 4-7;
    American Antitrust Institute Reply Comments at 12-15; EFF Reply
    Comments at 27-29; PK & CU Reply Comments at 12-13; *see also*
    Philips Comments at 25-27.

[^128]: NCTA Comments at 8-9, 12; NCTA Reply Comments at 7-9.

[^129]: ITAA Comments at 10; ITIC Comments at 4; ICC Comments at 6; IT
    Coalition Comments at 20-23; Philips Comments at 22-23; Thomson
    Comments at 10-13; TiVo Comments at 7-9.

[^130]: DTLA Comments at 10-11; DTLA Reply Comments at 2-3. *But see*
    Letter from Michael B. Ayers, DTLA, to Marlene Dortch, Secretary,
    FCC (Oct. 3, 2003) (supporting Table A Proposal approach).

[^131]: *Digital Cable Compatibility Order and FNPRM* at Sections VI.B
    and VII.

[^132]: *See* Thomson 10/8/03 Letter; Zenith 10/30/03 Letter.

[^133]: DIRECTV Comments at 3-4; DIRECTV Reply Comments at 4-5.

[^134]: NCTA Comments at 10-11; NCTA Reply Comments at 4-7.

[^135]: MPAA Comments at Attachment B.

[^136]: 47 C.F.R. § 76.630.

[^137]: NCTA Reply Comments at 4-7.

[^138]: EFF Comments at 19-21.

[^139]: *See* *Authorization and Use of Software Defined Radios*, 16 FCC
    Rcd 17373 (2001).

[^140]: *See Digital Cable Compatibility Order and FNPRM* at Section
    VII.

[^141]: Letter from Paula H. Boyd, Microsoft Corporation, and David
    Isaacs, Hewlett-Packard Corp., to Marlene Dortch, Secretary, FCC
    (Aug. 8, 2003).

[^142]: *See e.g.*, Phillips Comments at 22-23; IT Coalition Comments at
    20-23; Letter from James Burger, Dow, Lohnes & Albertson, to Marlene
    Dortch, Secretary, FCC (Oct. 2, 2003); Letter from Richard A.
    Beutel, Dell, to Marlene Dortch, Secretary, FCC (Oct. 22, 2003).

[^143]: *See e.g.*, *BPDG Final Report* at 14.

[^144]: *See* 5 U.S.C. § 604.

[^145]: *Id*. § 603.

[^146]: *See* 5 U.S.C. § 603. The RFA, *see* 5 U.S.C. §§ 601-612, has
    been amended by the Small Business Regulatory Enforcement Fairness
    Act of 1996 (SBREFA), Pub. L. No. 104-121, Title II, 110 Stat. 857
    (1996).

[^147]: *Digital Broadcast Copy Protection*, 17 FCC Rcd 16027 (2002)
    ("*FNPRM*").

[^148]: *See* 5 U.S.C. § 604.

[^149]: 5 U.S.C. § 603(b)(3).

[^150]: 5 U.S.C. § 601(3) (incorporating by reference the definition of
    "small business concern" in 15 U.S.C. § 632). Pursuant to the RFA,
    the statutory definition of a small business applies, "unless an
    agency, after consultation with the Office of Advocacy of the SBA
    and after opportunity for public comment, establishes one or more
    definitions of such the term which are appropriate to the activities
    of the agency and publishes such definition(s) in the Federal
    Register.

[^151]: 5 U.S.C. § 601(3) (incorporating by reference the definition of
    "small business concern" in the Small Business Act, 15 U.S.C. §
    632). Pursuant to 5 U.S.C. § 601(3), the statutory definition of a
    small business applies "unless an agency, after consultation with
    the Office of Advocacy of the Small Business Administration and
    after opportunity for public comment, establishes one or more
    definitions of such term which are appropriate to the activities of
    the agency and publishes such definition(s) in the Federal
    Register."

[^152]: 15 U.S.C. § 632. Application of the statutory criteria of
    dominance in its field of operation, and independence are sometime
    difficult to apply in the context of broadcast television.
    Accordingly, the Commission's statistical account of television
    stations may be over-inclusive.

[^153]: *See* OMB, North American Industry Classification System: United
    States, 1997 at 509 (1997) (NAICS code 513120, which was changed to
    code 515120 in October 2002)

[^154]: OMB, North American Industry Classification System: United
    States, 1997, at 509 (1997) (NAICS code 513120, which was changed to
    code 51520 in October 2002). This category description continues,
    "These establishments operate television broadcasting studios and
    facilities for the programming and transmission of programs to the
    public. These establishments also produce or transmit visual
    programming to affiliated broadcast television stations, which in
    turn broadcast the programs to the public on a predetermined
    schedule. Programming may originate in their own studios, from an
    affiliated network, or from external sources." Separate census
    categories pertain to businesses primarily engaged in producing
    programming. *See id.* at 502-05, NAICS code 51210. Motion Picture
    and Video Production: code 512120, Motion Picture and Video
    Distribution, code 512191, Teleproduction and Other Post-Production
    Services, and code 512199, Other Motion Picture and Video
    Industries.

[^155]: "Concerns are affiliates of each other when one concern controls
    or has the power to control the other or a third party or parties
    controls or has to power to control both." 13 C.F.R. §
    121.103(a)(1).

[^156]: FCC News Release, "Broadcast Station Totals as of September 30,
    2002."

[^157]: 13 C.F.R. § 121.201, NAICS code 517510 (formerly 513220). This
    NAICS code applies to all services listed in this paragraph.

[^158]: Economics and Statistics Administration, Bureau of Census, U.S.
    Department of Commerce, 1997 Economic Census, Subject Series --
    Establishment and Firm Size, Information Sector 51, Table 4 at 50
    (2000). The amount of \$10 million was used to estimate the number
    of small business firms because the relevant Census categories
    stopped at \$9,999,999 and began at \$10,000,000. No category for
    \$12.5 million existed. Thus, the number is as accurate as it is
    possible to calculate with the available information.

[^159]: 47 C.F.R. § 76.901(e). The Commission developed this definition
    based on its determinations that a small cable system operator is
    one with annual revenues of \$100 million or less. *Sixth Report and
    Order and Eleventh Order on Reconsideration*, 10 FCC Rcd. 7393
    (1995).

[^160]: Paul Kagan Associates, Inc., Cable TV Investor, Feb. 29, 1996
    (based on figures for Dec. 30, 1995).

[^161]: 47 U.S.C. § 543(m)(2).

[^162]: 47 C.F.R. § 76.1403(b).

[^163]: Paul Kagan Associates, Inc., Cable TV Investor, Feb. 29, 1996
    (based on figures for Dec. 30, 1995).

[^164]: 13 C.F.R. § 121.201, NAICS code 517510 (formerly 513220).

[^165]: *Id.*

[^166]: *Id*.

[^167]: 13 C.F.F. § 121.201, NAICS code 517510 (formerly 513220).

[^168]: *Id.*

[^169]: *Annual Assessment of the Status of Competition in Markets for
    the Delivery of Video Programming,* 12 FCC Rcd 4358, 4385 (1996)
    ("*Third Annual Report").*

[^170]: *Id.* at 4385.

[^171]: *Amendment of Parts 21 and 74 of the Commission's Rules with
    Regard to Filing Procedures in the Multipoint Distribution Service
    and in the Instructional Television Fixed Service and Implementation
    of Section 309(j) of the Communications Act -- Competitive Bidding*,
    10 FCC Rcd at 9589, 9593 (1995) ("*ITFS Order*").

[^172]: *See Local Multipoint Distribution Service,* 12 FCC Rcd 12545
    (1997) ("*LMDS Order*").

[^173]: 47 C.F.R. § 21.961(b)(1).

[^174]: *See ITFS* *Order*, 10 FCC Rcd at 9589.

[^175]: 13 C.F.R. § 121.201, NAICS code 517510 (formerly 513220).

[^176]: *Id*.

[^177]: SBREFA also applies to nonprofit organizations and governmental
    organizations such as cities, counties, towns, townships, villages,
    school districts, or special districts, with populations of less
    than 50,000. 5 U.S.C. § 601(5).

[^178]: *See LMDS* *Order,* 12 FCC Rcd at 12545.

[^179]: *Id.*

[^180]: *See* Letter to Daniel Phythyon, Chief, Wireless
    Telecommunications Bureau (FCC) from A. Alvarez, Administrator, SBA
    (January 6, 1998).

[^181]: 13 C.F.R. § 121.201, NAICS code 517510 (formerly 513220).

[^182]: *See Third Annual Report*, 12 FCC Rcd at 4403-4.

[^183]: *See Annual Assessment of the Status of Competition in Markets
    for the Delivery of Video Programming*, 17 FCC Rcd 1244, 1281 (2001)
    ("*Eighth Annual Report*").

[^184]: *See* 47 U.S.C. § 573.

[^185]: 13 C.F.R. § 121.201, NAICS code 517510 (formerly 513220).

[^186]: *Id.*

[^187]: 13 CFR § 121.201, NAICS code 334310.

[^188]: 13 CFR § 121.201, NAICS code 334220.

[^189]: 13 CFR § 121.201, NAICS code 334310.

[^190]: Economics and Statistics Administration, Bureau of Census, U.S.
    Department of Commerce, 1997 Economic Census, Industry Series --
    Manufacturing, Audio and Video Equipment Manufacturing, Table 4 at 9
    (1999). The amount of 500 employees was used to estimate the number
    of small business firms because the relevant Census categories
    stopped at 499 employees and began at 500 employees. No category for
    750 employees existed. Thus, the number is as accurate as it is
    possible to calculate with the available information.

[^191]: 13 C.F.R. § 121.201, NAICS code 334220.

[^192]: Economics and Statistics Administration, Bureau of Census, U.S.
    Department of Commerce, 1997 Economic Census, Industry Series --
    Manufacturing, Radio and Television Broadcasting and Wireless
    Communications Equipment Manufacturing, Table 4 at 9 (1999). The
    amount of 500 employees was used to estimate the number of small
    business firms because the relevant Census categories stopped at 499
    employees and began at 500 employees. No category for 750 employees
    existed. Thus, the number is as accurate as it is possible to
    calculate with the available information.

[^193]: 13 C.F.R. § 121.201, NAICS code 334111.

[^194]: Economics and Statistics Administration, Bureau of Census, U.S.
    Department of Commerce, 1997 Economic Census, Industry Series --
    Manufacturing, Electronic Computer Manufacturing, Table 4 at 9
    (1999).

[^195]: 5 U.S.C. § 603(b).

[^196]: MPAA Reply Comments at 16.

[^197]: *See* 5 U.S.C. § 801(a)(1)(A).

[^198]: *See* 5 U.S.C. § 604(b).

[^199]: *See* 5 U.S.C. § 603. The RFA, *see* 5 U.S.C. §§ 601-612, has
    been amended by the Small Business Regulatory Enforcement Fairness
    Act of 1996 (SBREFA), Pub. L. No. 104-121, Title II, 110 Stat. 857
    (1996).

[^200]: *See* 5 U.S.C. § 603(a).

[^201]: *See* 5 U.S.C. § 603(a).

[^202]: 5 U.S.C. § 603(b)(3).

[^203]: 5 U.S.C. § 601(6).

[^204]: 5 U.S.C. § 601(3) (incorporating by reference the definition of
    "small business concern" in the Small Business Act, 15 U.S.C. §
    632). Pursuant to 5 U.S.C. § 601(3), the statutory definition of a
    small business applies "unless an agency, after consultation with
    the Office of Advocacy of the Small Business Administration and
    after opportunity for public comment, establishes one or more
    definitions of such term which are appropriate to the activities of
    the agency and publishes such definition(s) in the Federal
    Register."

[^205]: 15 U.S.C. § 632.

[^206]: *See* OMB, North American Industry Classification System: United
    States, 1997 at 509 (1997) (NAICS code 513120, which was changed to
    code 515120 in October 2002)

[^207]: OMB, North American Industry Classification System: United
    States, 1997, at 509 (1997) (NAICS code 513120, which was changed to
    code 51520 in October 2002). This category description continues,
    "These establishments operate television broadcasting studios and
    facilities for the programming and transmission of programs to the
    public. These establishments also produce or transmit visual
    programming to affiliated broadcast television stations, which in
    turn broadcast the programs to the public on a predetermined
    schedule. Programming may originate in their own studios, from an
    affiliated network, or from external sources." Separate census
    categories pertain to businesses primarily engaged in producing
    programming. *See id.* at 502-05, NAICS code 51210. Motion Picture
    and Video Production: code 512120, Motion Picture and Video
    Distribution, code 512191, Teleproduction and Other Post-Production
    Services, and code 512199, Other Motion Picture and Video
    Industries.

[^208]: "Concerns are affiliates of each other when one concern controls
    or has the power to control the other or a third party or parties
    controls or has to power to control both." 13 C.F.R. §
    121.103(a)(1).

[^209]: FCC News Release, "Broadcast Station Totals as of September 30,
    2002."

[^210]: 13 C.F.R. § 121.201, NAICS code 517510 (formerly 513220). This
    NAICS code applies to all services listed in this paragraph.

[^211]: Economics and Statistics Administration, Bureau of Census, U.S.
    Department of Commerce, 1997 Economic Census, Subject Series --
    Establishment and Firm Size, Information Sector 51, Table 4 at 50
    (2000). The amount of \$10 million was used to estimate the number
    of small business firms because the relevant Census categories
    stopped at \$9,999,999 and began at \$10,000,000. No category for
    \$12.5 million existed. Thus, the number is as accurate as it is
    possible to calculate with the available information.

[^212]: 47 C.F.R. § 76.901(e). The Commission developed this definition
    based on its determinations that a small cable system operator is
    one with annual revenues of \$100 million or less. *Sixth Report and
    Order and Eleventh Order on Reconsideration*, 10 FCC Rcd. 7393
    (1995).

[^213]: Paul Kagan Associates, Inc., Cable TV Investor, Feb. 29, 1996
    (based on figures for Dec. 30, 1995).

[^214]: 47 U.S.C. § 543(m)(2).

[^215]: 47 C.F.R. § 76.1403(b).

[^216]: Paul Kagan Associates, Inc., Cable TV Investor, Feb. 29, 1996
    (based on figures for Dec. 30, 1995).

[^217]: 13 C.F.R. § 121.201, NAICS code 517510 (formerly 513220).

[^218]: *Id.*

[^219]: *Id*.

[^220]: 13 C.F.F. § 121.201, NAICS code 517510 (formerly 513220).

[^221]: *Id.*

[^222]: *Annual Assessment of the Status of Competition in Markets for
    the Delivery of Video Programming,* 12 FCC Rcd 4358, 4385 (1996)
    ("*Third Annual Report").*

[^223]: *Id.* at 4385.

[^224]: *Amendment of Parts 21 and 74 of the Commission's Rules with
    Regard to Filing Procedures in the Multipoint Distribution Service
    and in the Instructional Television Fixed Service and Implementation
    of Section 309(j) of the Communications Act -- Competitive Bidding*,
    10 FCC Rcd at 9589, 9593 (1995) ("*ITFS Order*").

[^225]: *See Local Multipoint Distribution Service,* 12 FCC Rcd 12545
    (1997) ("*LMDS Order*").

[^226]: 47 C.F.R. § 21.961(b)(1).

[^227]: *See ITFS* *Order*, 10 FCC Rcd at 9589.

[^228]: 13 C.F.R. § 121.201, NAICS code 517510 (formerly 513220).

[^229]: *Id*.

[^230]: SBREFA also applies to nonprofit organizations and governmental
    organizations such as cities, counties, towns, townships, villages,
    school districts, or special districts, with populations of less
    than 50,000. 5 U.S.C. § 601(5).

[^231]: *See LMDS* *Order,* 12 FCC Rcd at 12545.

[^232]: *Id.*

[^233]: *See* Letter to Daniel Phythyon, Chief, Wireless
    Telecommunications Bureau (FCC) from A. Alvarez, Administrator, SBA
    (January 6, 1998).

[^234]: 13 C.F.R. § 121.201, NAICS code 517510 (formerly 513220).

[^235]: *See Third Annual Report*, 12 FCC Rcd at 4403-4.

[^236]: *See Annual Assessment of the Status of Competition in Markets
    for the Delivery of Video Programming*, 17 FCC Rcd 1244, 1281 (2001)
    ("*Eighth Annual Report*").

[^237]: *See* 47 U.S.C. § 573.

[^238]: 13 C.F.R. § 121.201, NAICS code 517510 (formerly 513220).

[^239]: *Id.*

[^240]: 13 CFR § 121.201, NAICS code 334310.

[^241]: 13 CFR § 121.201, NAICS code 334220.

[^242]: 13 CFR § 121.201, NAICS code 334310.

[^243]: Economics and Statistics Administration, Bureau of Census, U.S.
    Department of Commerce, 1997 Economic Census, Industry Series --
    Manufacturing, Audio and Video Equipment Manufacturing, Table 4 at 9
    (1999). The amount of 500 employees was used to estimate the number
    of small business firms because the relevant Census categories
    stopped at 499 employees and began at 500 employees. No category for
    750 employees existed. Thus, the number is as accurate as it is
    possible to calculate with the available information.

[^244]: 13 C.F.R. § 121.201, NAICS code 334220.

[^245]: Economics and Statistics Administration, Bureau of Census, U.S.
    Department of Commerce, 1997 Economic Census, Industry Series --
    Manufacturing, Radio and Television Broadcasting and Wireless
    Communications Equipment Manufacturing, Table 4 at 9 (1999). The
    amount of 500 employees was used to estimate the number of small
    business firms because the relevant Census categories stopped at 499
    employees and began at 500 employees. No category for 750 employees
    existed. Thus, the number is as accurate as it is possible to
    calculate with the available information.

[^246]: 13 C.F.R. § 121.201, NAICS code 334111.

[^247]: Economics and Statistics Administration, Bureau of Census, U.S.
    Department of Commerce, 1997 Economic Census, Industry Series --
    Manufacturing, Electronic Computer Manufacturing, Table 4 at 9
    (1999).

[^248]: *See Further Notice* at ¶¶ 61-65.

[^249]: 5 U.S.C. § 603(b).

[^250]: I do recognize, though, that a recording made to a DVD on a new
    compliant device will not currently be able to be viewed on a legacy
    DVD player. That recording, however, can be played on the compliant
    device, and the existing non-compliant DVD recorder will continue to
    both record content and playback content recorded on that machine.
    As we note in the Order, moreover, this problem is not unique to the
    broadcast flag. For instance, other changes to DVD technology, such
    as a transition to high definition DVD devices, will create format
    compatibility problems.