**Before the**

**Federal Communications Commission**

**Washington, D.C. 20554**

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| In the Matter of:                | * | CS Docket No. 98-120         |
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second FURTHER notice of proposed rulemaking

**Adopted: April 25, 2007 Released: May 4, 2007**

**Comment Date: July 16, 2007**

**Reply Comment Date: August 16, 2007**

By the Commission: Chairman Martin and Commissioners Copps, Adelstein,
Tate and McDowell

> issuing separate statements.

# introduction

1.  In this Second Further Notice of Proposed Rulemaking ("*Second
    FNPRM*"), we address issues concerning the carriage of digital
    broadcast television signals after the conclusion of the digital
    television ("DTV") transition. Section 614(b)(4)(B) of the
    Communications Act of 1934, as amended (the "Act"), directs the
    Commission to revise the mandatory signal carriage rules to reflect
    changes necessitated by the transition from analog to digital
    broadcasting.[^1] We believe that this *Second FNPRM* is warranted
    at this time in light of the recently established deadline for the
    end of analog broadcasts by full-power television licensees.[^2]
    Further, addressing these issues now will provide digital
    broadcasters and cable operators with adequate time to prepare to
    comply with any rules that we adopt.

2.  In this *Second FNPRM*, we seek comment on the post-transition
    obligations of cable operators under Sections 614 (establishing
    mandatory carriage rights for local commercial television stations)
    and 615 (establishing mandatory carriage rights for noncommercial
    educational television stations) of the Communications Act of 1934,
    as amended (the "Act").[^3]

3.  First, we remind industry of our 2001 decision regarding material
    degradation:[^4] A broadcast signal delivered in HDTV
    \[high-definition television\] to a cable system must be carried by
    that system in HDTV.[^5] In addition, we seek comment on exactly
    what constitutes material degradation.

4.  Furthermore, we address the statutory requirement that cable
    operators must make the signal transmitted by a broadcaster electing
    mandatory carriage viewable by all of their subscribers,[^6] and
    seek comment on how cable operators can implement this requirement
    after the end of analog broadcasting on February 17, 2009.
    Specifically, we propose that cable operators must comply with this
    "viewability" provision and ensure that cable subscribers with
    analog television sets are able to continue to view all must-carry
    stations after the end of the DTV transition by either: (1) carrying
    the digital signal in analog format, or (2) carrying the signal only
    in digital format, provided that all subscribers have the necessary
    equipment to view the broadcast content. In the absence of such a
    requirement, analog cable subscribers (currently about 50% of all
    cable subscribers, or approximately 32 million house holds[^7])
    would no longer be able to view commercial must-carry stations or
    non-commercial stations after February 17, 2009. We believe such an
    outcome would adversely impact the DTV transition and would unduly
    burden millions of consumers.

5.  In interpreting both of these statutory provisions, we are mindful
    of the need to minimize the burden imposed upon consumers by the end
    of analog broadcasting in order to facilitate the successful and
    timely conclusion of the DTV transition. The prohibition against
    material degradation ensures that cable subscribers who invest in a
    HDTV are not denied the ability to view broadcast signals
    transmitted in this improved format. The requirement that cable
    operators make must-carry stations viewable by all cable subscribers
    ensures that analog cable subscribers, who today are able to view
    all of their broadcast stations, do not lose access to those
    stations as a result of the switch to digital-only broadcasting.

# background

6.  Pursuant to Section 614(b)(4)(B) of the Act,[^8] the Commission
    initiated this proceeding in 1998 to address the responsibilities of
    cable television operators with respect to carriage of digital
    broadcasters in light of the significant changes to the broadcasting
    and cable television industries resulting from the conversion to
    digital operations.[^9]

7.  In the 2001 *First Report and Order*, the Commission concluded that
    broadcasters operating digital-only television stations are entitled
    to mandatory carriage under the Act.[^10] In an effort to support
    the ultimate conversion of digital broadcast signals and facilitate
    the return of the analog spectrum, the Commission also decided to
    permit a digital-only station, on an interim basis, to "demand that
    one of its HDTV \[high-definition television\] or SDTV
    \[standard-definition television\] signals be carried on the cable
    system for delivery to subscribers in an analog format."[^11]

8.  Now that Congress has established February 17, 2009 as the date
    certain for the end of analog broadcasts by full-power television
    licensees, we believe that the time has come for us to address the
    post-transition carriage responsibilities of cable operators under
    Sections 614 and 615 -- particularly in light of the fact that there
    will continue to be a large number of cable subscribers with legacy,
    analog-only television sets after the end of the DTV
    transition.[^12]

# discussion

9.  As discussed below, the Communications Act requires that cable
    systems provide mandatory-carriage signals without material
    degradation and ensure that all subscribers can receive and view
    those signals.[^13] This *Second FNPRM* proposes to provide more
    detail on the material degradation requirements adopted by the
    Commission in 2001 and offers for comment two proposals for ensuring
    that cable subscribers with analog television sets can continue to
    view all must-carry stations after the end of the DTV transition. It
    also seeks comment on other issues that would be directly implicated
    by the proposals.

## Material Degradation -- Sections 614(b)(4)(A) and 615(g)(2)

10. The Communications Act requires (1) cable operators to carry local
    broadcast signals "without material degradation," and (2) the
    Commission to "adopt carriage standards to ensure that, to the
    extent technically feasible, the quality of signal processing and
    carriage provided by a cable system for the carriage of local
    commercial television stations will be no less than that provided by
    the system for carriage of any other type of signal."[^14] As noted
    above, Section 614(b)(4)(B) of the Act directs the Commission "to
    establish any changes in the signal carriage requirements of cable
    television systems necessary to ensure cable carriage of such
    broadcast signals of local commercial television stations which have
    been changed" as a result of the transition from analog to digital
    broadcasting.[^15]

11. In the *1998 NPRM*, we solicited comments to determine the extent to
    which this provision precludes cable operators from altering a
    digital broadcast station signal when the transmission is processed
    at the system headend or in customer premises equipment.[^16] Some
    broadcasters argued that a digital signal would be materially
    degraded if it were not transmitted to the viewer in the format that
    the broadcaster intended. Other broadcasters sought to preclude
    cable operators from blocking or deleting any of the bits
    constituting the broadcast material. The *First Report and Order*
    concluded that cable operators are required to ensure that consumers
    with DTV equipment (*e.g.*, Digital-Cable-Ready sets[^17] or
    DTV-ready sets connected to an HDTV digital cable set-top box) are
    able to view the digital signal in its original format -- *e.g*., in
    high definition ("HD") if delivered by the broadcaster in HD.[^18]

12. As noted above, we previously determined in the *First Report and
    Order* that a broadcast signal delivered to the cable headend in HD
    must be carried in HD in order to comply with the prohibition on
    material degradation.[^19] We continue to require such carriage and
    reiterate that requirement. We now propose revisions to the material
    degradation requirements set forth in the *First Report and Order*
    with respect to carriage of bits in the broadcast signal.[^20]
    Specifically*,* we propose to move from a subjective to objective
    measure. For instance, we seek comment on whether we should require
    that all primary video[^21] and program-related content bits
    transmitted by the broadcaster (the "content bits") be carried to
    avoid material degradation. Alternatively, we seek comment on
    whether the Commission\'s existing non-discrimination requirement is
    a better objective test for material degradation. In the *First
    Report and Order*, the Commission prohibited cable operators from
    treating cable programming services more favorably than broadcast
    signals for purposes of material degradation.[^22] We seek comment
    on the application of the existing or a new non-discrimination rule
    in this context. We also seek comment on how to verify that cable
    operators are abiding by this requirement. Should we identify
    specific measurement tools? If so, what should those measurement
    tools be? We also request comment and specific estimates regarding
    the costs of compliance with this proposal, particularly with
    respect to small cable operators, and whether there are alternative
    means that would minimize the economic impact for small cable
    operators while still complying with the statutory
    requirements.[^23]

13. Our option of carrying all content bits is responsive to the
    Petitions for Reconsideration filed in this docket in which
    broadcasters requested that we require cable operators to carry "the
    entire qualified digital bit stream of each station in the format in
    which the broadcaster originally transmitted it."[^24] It also is
    consistent with the requests for clarification made by the Broadcast
    Group and the Noncommercial Broadcasters that the material
    degradation requirements "ensure that cable subscribers do not
    receive DTV service, including HDTV, that is inferior in quality to
    the service available over the air."[^25] In addition, by seeking
    comment on measurement tools, this option is responsive to broadcast
    commenters' concern that the material degradation standard adopted
    in the *First Report and Order* did not provide an objective way to
    evaluate material degradation.[^26]

14. We request comment on this option. We specifically request comment
    on how cable operators are to distinguish between bits with content
    and so-called "null bits,"[^27] and whether material degradation
    could result from failure to carry these empty bits. We also
    recognize that bandwidth-conserving techniques commonly are used by
    cable operators to improve efficiency. Is there a way to permit the
    use of improved compression, statistical multiplexing, rate
    shaping,[^28] or other techniques that would not result in
    prohibited material degradation?

15. We further seek comment on whether, under the option of carrying all
    content bits, a cable operator that wishes to reduce the number of
    content bits in a digital broadcast signal first must demonstrate to
    the broadcaster that such reduction will not result in material
    degradation. In doing so, how might the cable operator demonstrate
    that, although not all of the content bits are being carried, the
    content will not be degraded in a material way? Would it be
    necessary and/or sufficient for the cable operator to demonstrate
    that the broadcast station's digital signal carriage does not differ
    from other broadcast or non-broadcast programmers? (We note that
    this latter comparison also would ensure that cable operators do not
    discriminate against some or all broadcast content as compared with
    non-broadcast content.) We seek comment on whether, under these
    circumstances, the cable operator must continue to pass through all
    of the content bits until an agreement has been reached with the
    broadcast station to permit the reduction in the number of bits.
    Similarly, we seek comment on a rule that when a broadcast station
    files a carriage complaint concerning material degradation, the
    cable operator must pass through all of the content bits during the
    pendency of the complaint.[^29] In situations where negotiations
    between cable operators and broadcasters reach an impasse, cable
    operators may notify the station in writing of that fact and the
    station will then have 30 days from receipt of the letter to file a
    complaint with the Commission in order to preserve its claim. We
    seek comment on these options and on the procedures and mechanisms
    for cable operators and stations to engage in such discussions short
    of filing a carriage complaint with the Commission.

## Availability of Signals -- Sections 614(b)(7) and 615(h)

16. Pursuant to Sections 614 and 615 of the Act, cable operators must
    ensure that all cable subscribers have the ability to view all local
    broadcast stations carried pursuant to mandatory carriage.
    Specifically, Section 614(b)(7) (for commercial stations) states
    that broadcast signals that are subject to mandatory carriage must
    be "viewable via cable on all television receivers of a subscriber
    which are connected to a cable system by a cable operator or for
    which a cable operator provides a connection."[^30] Similarly,
    Section 615(h) for noncommercial stations states that "Signals
    carried in fulfillment of the carriage obligations of a cable
    operator under this section shall be available to every subscriber
    as part of the cable system's lowest priced tier that includes the
    retransmission of local commercial television broadcast
    signals."[^31] These statutory requirements plainly apply to cable
    carriage of digital broadcast signals,[^32] and, as a consequence,
    cable operators must ensure that all cable subscribers -- including
    those with analog television sets -- continue to be able to view all
    commercial and non-commercial must-carry broadcast stations after
    February 17, 2009.[^33] Below we seek comment on how to implement
    this statutory requirement. We note that all cable subscribers today
    are able to view all of their must-carry stations, and we believe
    that it is critical to the successful and timely conclusion of the
    DTV transition that they are not disenfranchised by the switch to
    digital-only broadcasting. We therefore are mindful of the need to
    minimize the burden imposed on consumers, including cable
    subscribers with analog television sets, by the end of the DTV
    transition.

17. To achieve compliance with the viewability requirement of Sections
    614(b)(7) and 615(h) after the end of the DTV transition, we propose
    that, in order to ensure that subscribers with analog television
    sets remain able to view all local broadcast television stations
    electing mandatory carriage, cable operators must either: (1) carry
    the signals of commercial and non-commercial must-carry stations in
    analog format to all analog cable subscribers, or (2) for
    all-digital systems, carry those signals only in digital format,
    provided that all subscribers with analog television sets have the
    necessary equipment to view the broadcast content.[^34] This
    requirement would be in addition to the requirement that the cable
    operator pass through the HD signal to cable subscribers of an HD
    package, as discussed above. We believe that these proposals are
    consistent with our articulation of carriage requirements in the
    analog must-carry context, in which the Commission has made clear
    that mere transmission of the must-carry signal is not sufficient to
    meet the requirements of Section 614(b)(7). The Commission stated in
    1993 that:

> We believe that the 1992 Act is clear in its requirement that all
> local commercial television stations carried in fulfillment of the
> must-carry requirements must be provided to every cable subscriber and
> must be viewable on all television sets that are connected to the
> cable system by a cable operator for which the cable operator provides
> a connection. The Act does not give the Commission authority to exempt
> any class of subscribers from this requirement.[^35]

In other words, the signal must be "viewable" on all television sets
connected to the cable provider's system.[^36] We seek comment on these
proposals.

18. As we consider these issues, we are cognizant that the ultimate goal
    of Congress is that every customer should enjoy the benefits of the
    digital transition. That is, our policies should advance the goal of
    transitioning all consumers---including cable consumers---to
    digital. We seek comment on ways to promote this goal within the
    context of this proceeding. In particular, we seek comment on ways
    to move cable subscribers from analog to digital in a manner
    consistent with the statute and consumer expectations.

19. Under the Commission's interim down-conversion policy for
    digital-only stations during the transition, broadcasters that
    request carriage of an analog version of their digital signal must
    pay for the cost of down-conversion.[^37] Under the first option set
    forth in our proposal, however, cable operators themselves would
    elect to satisfy their obligations under Sections 614 and 615 by
    carrying a digital signal in analog format to ensure that the signal
    is viewable by all subscribers. Given the circumstances, should
    cable operators be responsible for any expense associated with
    down-conversion?

20. Finally, we note that, in the *First Report and Order*, the
    Commission concluded "not to require a cable operator to provide
    subscribers with a set top box capable of processing digital signals
    for display on analog sets."[^38] That decision, however, was
    premised on factual considerations that will not apply in a
    post-transition environment. Specifically, the Commission was
    reluctant to require cable subscribers to obtain such equipment
    because the content available on the digital signal likely would
    have been identical to analog programming to which subscribers
    already had access. In that same vein, the Commission pointed out
    that the obligation to simulcast -- which later was eliminated[^39]
    -- weighed against requiring the provision of equipment necessary to
    view a digital signal. However, given that our proposal here would
    apply to the carriage of digital signals *after* the end of analog
    broadcasting, we believe that the Commission's 2001 decision is not
    directly relevant since subscribers with analog sets after the
    transition will face the prospect of not being able to view the
    signals of must-carry stations unless they possess the necessary
    equipment (*i.e.*, a Digital-Cable-Ready television set or a digital
    cable set-top box). Nevertheless, we seek comment on this issue.

#  procedural matters

## Filing Requirements 

21. ***[Ex Parte Rules]{.underline}***. This proceeding will be treated
    as a "permit-but-disclose" proceeding subject to the
    "permit-but-disclose" requirements under Section 1.1206(b) of the
    Commission's rules.[^40] Ex parte presentations are permissible if
    disclosed in accordance with Commission rules, except during the
    Sunshine Agenda period when presentations, ex parte or otherwise,
    are generally prohibited. Persons making oral ex parte presentations
    are reminded that a memorandum summarizing a presentation must
    contain a summary of the substance of the presentation and not
    merely a listing of the subjects discussed. More than a one- or
    two-sentence description of the views and arguments presented is
    generally required.[^41] Additional rules pertaining to oral and
    written presentations are set forth in Section 1.1206(b).

22. ***[Comments and Reply Comments]{.underline}***. 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 the
    dates indicated on the first page of this document. 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). To
    request materials in accessible formats for people with disabilities
    (braille, large print, electronic files, audio format), send an
    e-mail to <fcc504@fcc.gov> or call the Consumer & Governmental
    Affairs Bureau at 202-418-0530 (voice), 202-418-0432 (TTY).

23. Comments filed through 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. In
    completing the transmittal screen, commenters should include their
    full name, U.S. Postal mailing address, and the applicable docket
    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.

24. Parties who choose to file by paper must file an original and four
    copies of each filing. Filings can be sent by hand or messenger
    delivery, by commercial overnight courier, or by first-class or
    overnight U.S. Postal Service (although we continue to experience
    delays in receiving U.S. Postal Service mail). The Commission's
    contractor, Natek, Inc., will receive hand-delivered or
    messenger-delivered paper filings for the Commission's Secretary at
    236 Massachusetts Avenue, NE, 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
    12^th^ Street, SW, Washington, D.C., 20554. All filings must be
    addressed to the Commission's Secretary: Office of the Secretary,
    Federal Communications Commission.

25. ***[Availability of Documents]{.underline}***. Comments, reply
    comments, and ex parte submissions will be available for public
    inspection during regular business hours in the FCC Reference
    Center, Federal Communications Commission, 445 12^th^ Street, S.W.,
    CY-A257, Washington, D.C., 20554. Persons with disabilities who need
    assistance in the FCC Reference Center may contact Bill Cline
    at (202) 418-0267 (voice), (202) 418-7365 (TTY), or
    <bill.cline@fcc.gov>. These documents also will be available from
    the Commission's Electronic Comment Filing System. Documents are
    available electronically in ASCII, Word 97, and Adobe Acrobat.
    Copies of filings in this proceeding may be obtained from Best Copy
    and Printing, Inc., Portals II, 445 12^th^ Street, S.W., Room
    CY-B402, Washington, D.C., 20554; they can also be reached by
    telephone, at (202) 488-5300 or (800) 378-3160; by e-mail at
    <fcc@bcpiweb.com>; or via their website at
    [http://www.bcpiweb.com](http://www.bcpiweb.com/). To request
    materials in accessible formats for people with disabilities
    (braille, large print, electronic files, audio format), send an
    e-mail to <fcc504@fcc.gov> or call the Consumer and Governmental
    Affairs Bureau at (202) 418-0530 (voice), (202) 418-0432 (TTY).

26. ***[Additional Information]{.underline}***. For additional
    information on this proceeding, contact Eloise Gore,
    <Eloise.Gore@fcc.gov>, of the FCC's Media Bureau, Policy
    Division, (202) 418-2120.

## Paperwork Reduction Act of 1995 Analysis 

27. This document contains proposed modified information collection
    requirements. The Commission, as part of its continuing effort to
    reduce paperwork burdens, invites the general public and the Office
    of Management and Budget (OMB) to comment on the information
    collection requirements contained in this document, as required by
    the Paperwork Reduction Act of 1995, Public Law 104-13. Public and
    agency comments are due 60 days after publication of this *Second
    Further Notice of Proposed Rulemaking* in the Federal Register. 
    Comments should address: (a) whether the proposed collection of
    information is necessary for the proper performance of the functions
    of the Commission, including whether the information shall have
    practical utility; (b) the accuracy of the Commission\'s burden
    estimates; (c) ways to enhance the quality, utility, and clarity of
    the information collected; and (d) ways to minimize the burden of
    the collection of information on the respondents, including the use
    of automated collection techniques or other forms of information
    technology. In addition, pursuant to the Small Business Paperwork
    Relief Act of 2002, Public Law 107-198, *see* 44 U.S.C. 3506(c)(4),
    we seek specific comment on how we might "further reduce the
    information collection burden for small business concerns with fewer
    than 25 employees."

## Initial Regulatory Flexibility Analysis 

28. The Initial Regulatory Flexibility Analysis for the *Second FNPRM*
    is found in the attached Appendix.

#  ordering clauses

29. **IT IS ORDERED** that, pursuant to authority contained in Sections
    4, 303, 614, and 615 of the Communications Act of 1934, as amended,
    47 U.S.C. §§ 154, 303, 534, and 535, this *Second Further Notice of
    Proposed Rulemaking* **IS HEREBY ADOPTED**.

30. **IT IS FURTHER ORDERED** that the Consumer and Governmental Affairs
    Bureau, Reference Information Center, **SHALL SEND** a copy of this
    *Second Further Notice of Proposed Rulemaking*, including the
    Initial Regulatory Flexibility Analysis, to the Chief Counsel for
    Advocacy of the Small Business Administration.

FEDERAL COMMUNICATIONS COMMISSION

Marlene H. Dortch

Secretary

**APPENDIX**

**Initial Regulatory Flexibility Analysis For the *Second FNPRM***

1\. As required by the Regulatory Flexibility Act of 1980, as amended
(RFA),[^42] the Commission has prepared this Initial Regulatory
Flexibility Analysis (IRFA) of the possible economic impact on a
substantial number of small entities by the policies and rules proposed
in this *Second Further Notice of Proposed Rulemaking* ("*Second
FNPRM*"). 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 *Second FNPRM* as indicated on the first
page of the Order. The Commission will send a copy of the *Second
FNPRM*, including this IRFA, to the Chief Counsel for Advocacy of the
Small Business Administration (SBA).[^43] In addition, the *Second
FNPRM* and IRFA (or summaries thereof) will be published in the Federal
Register.[^44]

**A.** **Need for, and Objectives of, the Proposals**

2\. This *Second FNPRM* seeks comment on several issues relating to the
carriage of digital television broadcast stations after the analog to
digital transition. Our goal in this proceeding is to determine how to
implement the statutory requirements under Sections 614 (local
commercial television station mandatory carriage) and 615 (noncommercial
educational television station mandatory carriage) of the Communications
Act of 1934, as amended (the "Act"), when digital broadcasters seek
mandatory carriage for their digital signal after February 17, 2009, the
date established by Congress as to when analog service must cease.[^45]
We remind industry of our 2001 decision regarding material degradation
(*i.e.*, that a broadcast signal delivered in HDTV to a cable system
must be carried by that system in HDTV).[^46] In addition, we seek
comment on the proposal that cable operators be required to carry all of
the primary video and program-related content bits transmitted by the
broadcaster and on the alternative proposal to rely on the existing
non-discrimination requirement or a new non-discrimination rule to
provide a better objective test for material degradation. We also seek
comment on procedures by which cable operators could demonstrate that,
although they were not carrying every content bit (*e.g.*, through the
use of improved compression or other efficiency maximizing techniques),
they nevertheless were providing must-carry digital signals without
material degradation.[^47] The *Second FNPRM* proposes that cable
operators can comply with the "viewability" provisions of Sections 614
and 615 (as discussed in the *Second FNPRM*) and ensure that cable
subscribers with analog television sets are able to continue to view all
must-carry stations after the end of the DTV transition by either: (1)
carrying the digital signal in analog format to ensure that the signal
is viewable by all subscribers, or (2) for all-digital systems, carry
those signals only in digital format, provided that all subscribers with
analog television sets have the necessary equipment to view the
broadcast content.[^48]

**B. Legal Basis**

3\. The authority for the action proposed in this rulemaking is
contained in Sections 1, 4(i) and (j), 614, and 615 of the
Communications Act of 1934, as amended, 47 U.S.C. §§ 151, 154(i) and
(j), 534, and 535.

**C.** **Description and Estimate of the Number of Small Entities**

**To Which the Proposals Will Apply**

4\. 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, if adopted.[^49] The RFA defines the
term "small entity" as having the same meaning as the terms "small
business," "small organization," and "small governmental
jurisdiction."[^50] In addition, the term "small business" has the same
meaning as the term "small business concern" under the Small Business
Act.[^51] 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").[^52] The rules we may adopt as a result of the
comments filed in response to this *Second Further Notice of Proposed
Rulemaking* will primarily affect cable operators and television
stations. A description of these small entities, as well as an estimate
of the number of such small entities, is provided below.

5\. *Cable and Other Program Distribution.* The Census Bureau defines
this category as follows: "This industry comprises establishments
primarily engaged as third-party distribution systems for broadcast
programming. The establishments of this industry deliver visual, aural,
or textual programming received from cable networks, local television
stations, or radio networks to consumers via cable or direct-to-home
satellite systems on a subscription or fee basis. These establishments
do not generally originate programming material."[^53] The SBA has
developed a small business size standard for Cable and Other Program
Distribution, which is: all such firms having \$13.5 million or less in
annual receipts.[^54] According to Census Bureau data for 2002, there
were a total of 1,191 firms in this category that operated for the
entire year.[^55] Of this total, 1,087 firms had annual receipts of
under \$10 million, and 43 firms had receipts of \$10 million or more
but less than \$25 million.[^56] Thus, under this size standard, the
majority of firms can be considered small. We note, however, that the
proposals at issue in this *Second FNPRM* only apply at this time to
cable operators,[^57] and not other MVPD providers.[^58]

6\. *Cable Companies and Systems.* The Commission has also developed its
own small business size standards, for the purpose of cable rate
regulation. Under the Commission's rules, a "small cable company" is one
serving 400,000 or fewer subscribers, nationwide.[^59] Industry data
indicate that, of 1,076 cable operators nationwide, all but eleven are
small under this size standard.[^60] In addition, under the Commission's
rules, a "small system" is a cable system serving 15,000 or fewer
subscribers.[^61] Industry data indicate that, of 7,208 systems
nationwide, 6,139 systems have under 10,000 subscribers, and an
additional 379 systems have 10,000-19,999 subscribers.[^62] Thus, under
this second size standard, most cable systems are small.

7\. *Cable System Operators*. The Communications Act of 1934, as
amended, also contains a size standard for small cable system operators,
which is "a cable operator that, directly or through an affiliate,
serves in the aggregate fewer than 1 percent 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."[^63] The
Commission has determined that an operator serving fewer than 677,000
subscribers shall be deemed a small operator, if its annual revenues,
when combined with the total annual revenues of all its affiliates, do
not exceed \$250 million in the aggregate.[^64] Industry data indicate
that, of 1,076 cable operators nationwide, all but ten are small under
this size standard.[^65] We note that the Commission neither requests
nor collects information on whether cable system operators are
affiliated with entities whose gross annual revenues exceed \$250
million,[^66] and therefore we are unable to estimate more accurately
the number of cable system operators that would qualify as small under
this size standard.

8\. *Television Broadcasting.* The proposed rules and policies apply to
digital television broadcast licensees, and potential licensees of
digital television service. The SBA defines a television broadcast
station as a small business if such station has no more than \$13
million in annual receipts.[^67] Business concerns included in this
industry are those "primarily engaged in broadcasting images together
with sound."[^68] According to Commission staff review of the BIA
Publications, Inc. Master Access Television Analyzer Database (BIA) on
October 18, 2005, about 873 of the 1,307 commercial television
stations[^69] (or about 67 percent) have revenues of \$12 million or
less and thus qualify as small entities under the SBA definition. We
note, however, that, in assessing whether a business concern qualifies
as small under the above definition, business (control)
affiliations[^70] 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.

9\. 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.

10\. *Other Program Distribution.* The SBA-recognized definition of
Cable and Other Program Distribution includes other MVPDs, such as HSD,
MDS/MMDS, ITFS, LMDS and OVS. This definition provides that a small
entity is one with \$13.5 million or less in annual receipts.[^71] As
previously noted, according to the Census Bureau data for 2002, there
were a total of 1,191 firms that operated for the entire year in the
category of Cable and Other Program Distribution. Of this total, 1,087
firms had annual receipts of under \$10 million and an additional 43
firms had receipts of \$10 million or more, but less than \$25
million.[^72] The Commission estimates that the majority of providers in
this category of Cable and Other Program Distribution are small
businesses.

11\. While SBA approval for a Commission-defined small business size
standard applicable to ITFS is pending, educational institutions are
included in this analysis as small entities.[^73] There are currently
2,032 ITFS licensees, and all but 100 of these licenses are held by
educational institutions. Thus, the Commission estimates that at least
1,932 ITFS licensees are small businesses.

12\. *Radio and Television Broadcasting and Wireless Communications
Equipment Manufacturing.* The Census Bureau defines this category as
follows: "This industry comprises establishments primarily engaged in
manufacturing radio and television broadcast and wireless communications
equipment. Examples of products made by these establishments are:
transmitting and receiving antennas, cable television equipment, GPS
equipment, pagers, cellular phones, mobile communications equipment, and
radio and television studio and broadcasting equipment."[^74] The SBA
has developed a small business size standard for Radio and Television
Broadcasting and Wireless Communications Equipment Manufacturing, which
is: all such firms having 750 or fewer employees.[^75] According to
Census Bureau data for 2002, there were a total of 1,041 establishments
in this category that operated for the entire year.[^76] Of this total,
1,010 had employment of under 500, and an additional 13 had employment
of 500 to 999.[^77] Thus, under this size standard, the majority of
firms can be considered small.

**D. Description of Projected Reporting, Record Keeping, and other**

**Compliance Requirements for Small Entities**

13\. The *Second Further Notice of Proposed Rulemaking* seeks comment on
statutory interpretations and proposals to address post-transition
obligations of cable operators with respect to carriage of digital
broadcast signals pursuant to the must carry requirements in the
Communications Act. Small cable operators currently have obligations
with respect to carriage of local commercial and non-commercial
broadcast stations which vary according to the size of the cable system.
As with existing statutory and regulatory requirements, small cable
operators will need engineering and legal services to comply with the
proposed rules. The *Second FNPRM* reiterates the Commission's 2001
decision regarding material degradation and requests comment on
requiring cable operators be required to carry all of the primary video
and program-related content bits transmitted by the broadcaster and on
an alternative proposal to rely on the existing non-discrimination
requirement or a new non-discrimination rule to provide a better
objective test for material degradation. The 2001 *First Report and
Order* recognized that the material degradation requirements could
impact small cable operators disproportionately and made special
provision for such situations. This recognition is retained in the
proposals set forth in the *Second FNPRM*. The *Second FNPRM* also notes
that cable operators must make the primary video and any program-related
material transmitted by a digital broadcaster electing mandatory
carriage viewable by all of their subscribers and proposes to permit
cable operators to comply with the "viewability" provisions by either:
(1) carrying the signals of commercial and non-commercial must-carry
stations in analog format to all analog cable subscribers, or (2) for
all-digital systems, carry those signals only in digital format,
provided that all subscribers with analog television sets have the
necessary equipment to view the broadcast content. Small cable operators
will need engineering and legal analysis to comply with this proposal.
The *Second FNPRM* seeks comment on the cost of compliance to small
cable operators and solicits alternative approaches that would reduce
the burden on small cable operators while still complying with statutory
requirements. Small broadcast stations will also be affected by the
proposed rules and other issues raised in the *Second FNPRM*, but we do
not have any reason to expect that the compliance burden will be any
greater than under the existing rules, except that initially,
broadcasters may need additional legal services.

**E.** **Steps Taken to Minimize Significant Economic Impact on Small
Entities, and**

**Significant Alternatives Considered**

14\. 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.[^78] We seek comment on the applicability of any of these
alternatives to affected small entities.

15\. The requirements proposed in the *Second FNPRM* are the result of
statutory requirements that do not expressly provide exceptions for
small entities. Broadcast stations, including small entity stations, are
afforded the flexibility to elect mandatory carriage of their digital
signal or elect to negotiate carriage with cable systems. The proposals
do not contemplate imposing any significant burdens on small television
stations, but station licensees and other parties are encouraged to
submit comment on the proposals' impact on small television stations.
Every effort will be made to minimize the impact of any adopted
proposals on cable operators. In this IRFA, we seek comment on whether
there is a specific legal basis for affording operators that qualify as
small systems special consideration in this regard. We anticipate that
more and more cable systems will become all-digital cable systems,
thereby minimizing any potential impact that our proposals, if adopted,
might have. Finally, we are mindful of the potential concerns of small
entities and will, therefore, continue to carefully scrutinize our
policy determinations going forward. We invite small entities to submit
comment on how the Commission could further minimize potential burdens
on small entities if the proposals provided in the *Second FNPRM*, or
those submitted into the record, are ultimately adopted.

**F. Federal Rules that May Duplicate, Overlap, or Conflict with the
Proposed Rules**

16\. None.

**STATEMENT OF**

**CHAIRMAN KEVIN J. MARTIN**

*Re: Cable Carriage of Digital Television Broadcast Signals* (CS Docket
No. 98-120)

The digital transition in February 2009 will offer television viewers
expanded choice in programming and an overall enhanced viewing
experience. Without the proper policies in place, however, some viewers
may be left in the dark or be unable to realize the full opportunities
offered by digital technology. Such a result would be unacceptable.

A lot of attention has appropriately been placed on the estimated 15
percent of Americans that do not subscribe to a multichannel video
programming service, such as cable. The federal government has proposed
an ambitious and important program to ensure that they are not left
behind after the transition. It is equally important, however, to
remember that about 50 percent of cable subscribers today -- at least 32
million people -- subscribe to analog, not digital cable. These
consumers also risk losing their broadcast signals after the digital
transition unless the Commission acts. The Commission has a statutory
responsibility to ensure that these customers are also able to watch
broadcast television after the transition.

The 1992 Cable Act is very clear. Cable operators must ensure that all
local broadcast stations carried pursuant to this Act are "viewable" by
*all* cable subscribers. These commercial and non-commercial must-carry
broadcast stations provide consumers with valuable local news,
information, and entertainment. Under the statute, cable operators
cannot simply cut off these broadcast signals to any of their customers
after the transition to digital.

In this item, the Commission proposes to ensure that cable subscribers
will not lose access to broadcast signals because of the digital
transition. Rather, cable operators should continue to carry these
broadcast signals in analog format to the millions of analog cable
customers. Alternatively, for cable operators who have chosen go all
digital, they should provide their subscribers with the necessary
equipment to view the broadcast and other channels.

Importantly, I do not believe that every consumer should be forced to
rent a set-top box. Many consumers do not want the expense or hassle of
having to get a set-top box. Instead, the cable operator should ensure
that all of its customers have access to the broadcast signals,
including those customers that do not want to rent a digital box.
Today's Commission action ensures that cable subscribers will not be
forced to rent a set top box to view the broadcast signals.

One of the most exciting features of digital technology is the advent of
HDTV. Broadcasters are providing all sorts of sports, news and
entertainment content in this format and increasing numbers of consumers
are purchasing televisions to watch this programming. Consumers with
these sets should be able to fully experience this enhanced viewing
opportunity. If consumers buy a new expensive HDTV, they reasonably
expect to get high-definition signals. Thus, the Commission reaffirms
that broadcast signals delivered in HDTV must be able to be seen in HDTV
by cable subscribers with a high-definition set.

I am pleased that the Commission is doing everything in its power to
make sure that no American is left behind in this part of the digital
revolution and that all Americans reap its rewards.

**STATEMENT OF**

**COMMISSIONER MICHAEL J. COPPS**

 

*Re: Carriage of Digital Broadcast Signals* (CS Docket 98-120)

 

            These are tough issues.  We start with a must-carry statute
that was written in the analog world.  Our job is to apply it to
digital.  That's difficult enough.  But then add the fact that
broadcasters are facing a hard DTV transition date in less than two
years while cable's digital transition could go on much longer, and the
web of technical, legal, and policy issues grows ever more complex. 

            In untangling these issues, I'm guided by two principles. 
First, Congress intended the fruits of the digital television transition
to be shared by all Americans, not just over-the-air viewers.  Cable
subscribers, like all consumers, deserve to have access to the benefits
digital is capable of bringing us.  Indeed, given that most households
in the U.S. subscribe to cable, it's doubtful that we could have a
successful digital television transition without the full participation
of the cable industry.  I therefore do not treat the digitization of
over-the-air broadcasting, cable, and satellite as separate
transitions.  There is one national digital television transition of
which these services are all a part.  

            Second, while advancing the DTV transition is a national
goal, we must take extra care not to leave any of our fellow citizens
behind.  In the over-the-air context, that means doing everything we can
to ensure that no one wakes up on February 18, 2009 to a blank screen. 
There has been a lot of focus on the broadcast aspects of this.   But a
similar question confronts analog cable subscribers on that winter's
day.  When they wake up on February 18, 2009 and turn on their sets,
will they still be able to see their local broadcast stations?  Many
consumers are probably unaware that they may not.   

            So as we engage in technical discussions about the impact of
statistical multiplexing on a broadcaster's bit stream, pore over the
legislative history of the 1992 Cable Act, and debate the fine points of
First Amendment jurisprudence, we'd better be asking some other
questions, too:

 

> 1.      What about those cable viewers?
>
>  
>
> 2.      How do we really make sure ***no*** viewer is left behind?
>
>  
>
> 3.       What policies and programs can get us there?

 

With that as background, this notice seeks comment on two specific
issues -- the meaning of the statutory terms "material degradation" and
"viewability" in the digital world.  As for material degradation, I
support the proposal to move to an objective test and away from a
subjective "I know it when I see it" standard.  I think both of the
options identified in the item -- a requirement that cable operators
pass through all content bits or a requirement that they not
discriminate between cable and broadcast programming -- have some
appeal.  In any event, the rule will remain that HD broadcast
programming must be passed through in HD.  The only issue is how to
measure it.  That part of the item advances my first principle set forth
above. 

"Viewability" is really about my second principle -- ensuring that the
legitimate expectations of analog cable subscribers are respected, even
as we are doing everything we can to move all of our services to
digital.  The current proposal does that.  No cable subscribers should
lose a single broadcast service when they wake up on February 18, 2009. 
   

I recognize that some may argue there are practical or constitutional
reasons we cannot achieve both goals simultaneously, that choices need
to be made between access to digital services and ensuring that no one
is left behind.  While I don't rule anything out, for those who would
make such arguments let me put this as mildly as I can -- I will have to
be convinced.    

>  

 

**STATEMENT OF**

**COMMISSIONER JONATHAN S. ADELSTEIN**

*Re: Cable Carriage of Digital Television Broadcast Signals* (CS Docket
No. 98-120)

I support this *Notice* to seek comment on cable operators' carriage
obligations in the post-transition era. It is clear that under section
614 and 615 of the Communications Act, both today and post-transition,
cable operators must not degrade the primary video signal transmitted by
must-carry stations and must make the primary video viewable by all of
their subscribers. It also seems clear that, beyond these legal
requirements, cable operators have a direct financial incentive to make
sure that their subscribers get good quality pictures.

In the analog world, we apply a comparative, non-discriminatory standard
to determine whether cable operators are satisfying their obligation to
refrain from materially degrading the picture quality of must-carry
stations. To date, I do not believe we have a record of any complaints
alleging material degradation. In fact, for many households cable
service improved substantially their television's picture compared to
over-the-air transmission.

In the digital world, where picture quality will be a significant
product differentiator in a competitive video marketplace, the financial
incentive seems just as strong as it is in the analog world.

While we ought to be able to quantify what material degradation is or is
not, to date we have not identified what percentage of content bits, if
not transmitted to the consumer, would constitute degradation in picture
quality that is *material* to the average viewer. It is not sufficient
to simply declare, "carry all the program bits." Such a standard would
establish the ceiling -- the best resolution possible -- not the floor,
which is more akin to statutory meaning of "material degradation." I
believe the Commission should refrain from making a proposal that is
essentially reverses our 2001 decision before we have had a chance to
review a refreshed record.

I think it is also important for the Commission to refrain from
tentatively and prematurely reversing prior Commission decisions before
we have had a chance to get public comment and deliberate over a
complete and refreshed record.

Regarding the viewability of broadcast signals, on two separate
occasions the Commission previously decided, for various reasons, to
refrain from imposing dual carriage obligations on cable operators.
There are important constitutional, technical, economic, and
equity-based concerns that have been thoughtfully considered. Before the
Commission publicly supports a new proposal that will likely lead us to
a previously-rejected dual carriage regime, we should first seek comment
on a set of objective questions that considers all options and does not
pre-judge the outcome or weigh heavily against viable alternatives.

We should consider fully the consequences before limiting ourselves and
an entire industry to options that could have unintended consequences
for technological development and consumer choice. Today's proposal
could force cable operators to move more and more channels from their
expanded basic tier in order to reclaim capacity that will, in turn, be
used to provide more high-definition programming -- the main reason
consumers are purchasing expensive HDTV sets. This migration of popular
channels to the digital tier will likely force cable subscribers to rent
digital set-top boxes. We may inadvertently be forcing set-top boxes on
many consumers who have strived mightily to avoid them.

What are we telling consumers if we limit cable operators' options to
either carry dual broadcast signals or deploy expensive digital set-top
boxes, while the Media Bureau has rejected operators' pleas to provide
cheaper, low-end set top boxes to consumers? We are potentially putting
consumers in a squeeze where they will be forced to pay for expensive
new digital cable boxes at a time when they are already complaining
about steep hikes in cable prices.

Limiting cable operators to a choice of dual carriage or deploying
expensive digital set-top boxes throughout their footprint rejects
outright the possibility of other workable, negotiated solutions that
have been contemplated and supported by many Members of Congress, and
negotiated by interested stakeholders. At this point, all proposals
should be on the table.

The fact is that, personally, I have not decided the right outcome. But
I am open-minded and willing to consider the facts in an objective
manner. That is why I have advocated for all proposals to be considered
on a level playing field. I am hopeful all of us on this Commission will
keep an open mind as we review comments filed in this proceeding.

**STATEMENT OF**

**COMMISSIONER DEBORAH TAYLOR TATE**

*Re: Cable Carriage of Digital Television Broadcast Signals* (CS Docket
No. 98-120)

Pursuant to Sections 614 and 615 of the Communications Act of 1934, as
amended, cable operators are required to make the signals of local
television stations that are subject to mandatory carriage "viewable on
all television receivers of a subscriber" and provide such signals
"without material degradation." The interplay of these two statutory
provisions raises a number of difficult, but important, questions
concerning how cable subscribers will view "must-carry" television
signals after the digital transition, now set by Congress to occur on
February 17, 2009. At that point, broadcasters will transmit in digital
format only, but many cable systems still will have a significant number
of subscribers who receive only analog cable service. I believe that the
item asks the right questions concerning how cable operators can abide
by their statutory obligations until they have completed their own
transition to fully digital operations, so that consumers remain able to
receive news, information, entertainment, and even emergency alerts.

**STATEMENT OF**

**COMMISSIONER ROBERT M. MCDOWELL**

*Re: Cable Carriage of Digital Television Broadcast Signals* (CS Docket
No. 98-120)

Given Congress' DTV deadline, the natural next step for the Commission
is to review how cable operators will carry the broadcasters' digital
signals. In this Notice, we seek comment on the obligations of cable
operators, after the conclusion of the digital transition, to ensure
that the digital signals of "must carry" stations are not materially
degraded and are viewable by all cable subscribers, as required by law.
Even though broadcasters will be all digital by the deadline, some
analog cable equipment will remain in cable systems and in the homes of
cable subscribers. Accordingly, we must address how to ensure that cable
subscribers are able to view the higher quality signals provided by the
broadcast stations in their communities. This Notice initiates our
review.

Ideally, I would have preferred that we refrain from making specific
proposals about these issues at this juncture. In my view, we should
first build a record about the marketplace solutions being developed to
address cable operators' statutory obligations with respect to material
degradation and viewability before we make judgments about what
standards the government should impose. I have questions about the
possible statutory and constitutional implications involved in this
proposed endeavor, particularly with respect to mandating carriage of a
broadcast signal in both analog and digital formats. I hope that
commenting parties will enlighten us with their views of these issues. I
look forward to working with my colleagues to set the appropriate
standards to accomplish our common goal through this proceeding in a
legally sustainable way.

I thank the Bureau for their hard work and I support this Notice.

[^1]: 47 U.S.C. § 534(b)(4)(B) ("At such time as the Commission
    prescribes modifications of the standards for television broadcast
    signals, the Commission shall initiate a proceeding to establish any
    changes in the signal carriage requirements of cable television
    systems necessary to ensure cable carriage of such broadcast signals
    of local commercial television stations which have been changed to
    conform with such modified standards.").

[^2]: *See* Deficit Reduction Act of 2005, Pub. L. No. 109-171 (2006).
    Among other things, Title III of that legislation, entitled the
    Digital Television Transition and Public Safety Act of 2005,
    established a hard deadline of Feb. 17, 2009 for the end of analog
    transmissions by full power television stations.

[^3]: *See* 47 U.S.C. §§ 534, 535.

[^4]: *See Carriage of Digital Television Broadcast Signals*, etc., CS
    Docket No. 98-120, First Report and Order and First Notice of
    Proposed Rulemaking, 16 FCC Rcd 2598, 2627-31, paras. 70-76 (2001)
    ("*First Report and Order*" or "*Further Notice*").

[^5]: *Id.* at 2629, para. 73.

[^6]: 47 U.S.C. § 534(b)(7).

[^7]: Kagan reports that as of June 2006, there were 65.3 million cable
    subscribers. Kagan Research, LLC, *Kagan\'s 10-Year Cable TV
    Industry Projections*, Broadband Cable Financial Databook 2006, at
    11. NCTA reports that as of June 2006, there were 32.9 million
    digital cable subscribers. NCTA Comments in Video Competition
    Proceeding. Also, we note that many digital cable subscribers have
    one or more television sets that only receive analog cable service.

[^8]: 47 U.S.C. § 534(b)(4)(B).

[^9]: *See Carriage of the Transmissions of Digital Television Broadcast
    Stations*, CS Docket No. 98-120, Notice of Proposed Rulemaking, 13
    FCC Rcd 15092, 15093, paras. 1-2 (1998) ("*1998 NPRM*").

[^10]: *See First Report and Order*, 16 FCC Rcd at 2606, para. 15.

[^11]: *Id*. at 2630, para. 74.

[^12]: This will be the case despite the steady rise in DTV display
    sales over the last several years. *See, e.g.*, Julie Kearney,
    Consumer Electronics Association, DTV Update (March 22, 2006);
    Consumer Electronics Association, HDTV Guide, Winter 2006, available
    at http://www.ce.org/PDF/hdtvguidewinter06.pdf (noting that the
    number of DTV set purchases increased from 1.5 million in 2001 to
    projected sales of nearly 30 million units in 2006); *Annual
    Assessment of the Status of Competition in the Market for the
    Delivery of Video* Programming, MB Docket No. 05-255, Twelfth Annual
    Report, FCC 06-11, para. 110 (rel. Mar. 3, 2006) ("*Twelfth Annual
    Video Competition Report*")("CEA reports that during the first six
    months of 2005, DTV products sold at a faster rate than during any
    previous comparable period of time, with 3.8 million DTV products
    sold, accounting for \$4.6 billion in sales, a 40 percent increase
    in unit sales from the same time period in 2004."); CEA DTV Update
    at 30; CEA HDTV Guide at 3 (stating that digital television sales
    will account for 62 percent of the television sets sold in 2006,
    surpassing sales of analog TV sets for the first time).

[^13]: 47 U.S.C. §§ 534(b)(4)(A), (b)(7).

[^14]: 47 U.S.C. § 534(b)(4)(A). *See* Section 615(g)(2) of the
    Communications Act, 47 U.S.C. § 535(g)(2) (material degradation
    requirements applicable to noncommercial stations). *See also* [H.R.
    Conf. Rep. No.]{.smallcaps} 102-862, at 67 (1992) ("The FCC is
    directed to adopt any carriage standards which are needed to ensure
    that, so far as is technically feasible, cable systems afford
    off-the-air broadcast signals the same quality of signal processing
    and carriage that they employ for any other type of programming
    carried on the cable system."); [S. Rep. No.]{.smallcaps} 102-92, at
    85 (1991) (same).

[^15]: 47 U.S.C. § 534(b)(4)(B).

[^16]: *See* *1998 NPRM*, 13 FCC Rcd at 15122-23, paras. 63-68.

[^17]: *See* *Implementation of Section 304 of the Telecommunications
    Act of 2006, Commercial Availability of Navigation Devices,
    Compatibility Between Cable Systems and Consumer Electronics
    Equipment*, CS Docket No. 97-80, Second Report and Order and Second
    Further Notice of Proposed Rulemaking, 18 FCC Rcd 20885, 20900,
    para. 32 (2003) (describing the basic requirements for digital cable
    televisions or products to be labeled "digital cable ready"); *see
    also* 47 C.F.R. § 15.123.

[^18]: *See First Report and Order*, 16 FCC Rcd at 2629, para. 73
    (finding that the Act "requires that cable operators provide the
    same 'quality of signal processing and carriage' for broadcast
    signals as they provide for any other type of signal," and that HDTV
    signals must be carried by the cable operator and delivered to the
    subscriber in HDTV). Several parties filed petitions for
    reconsideration of the Commission's interpretation of the material
    degradation prohibition in the *First Report and Order*. Those
    petitions remain pending.

[^19]: *See First Report and Order*, 16 FCC Rcd at 2629, para. 73.

[^20]: *See First Report and Order,* 16 FCC Rcd at 2629, para 72 ("From
    our perspective, the issue of material degradation is about the
    picture quality the consumer receives and is capable of perceiving
    and not about the number of bits transmitted by the broadcaster if
    the difference is not really perceptible to the viewer.").

[^21]: *See id.* at 2620-22, paras. 51-57; *see also* *Carriage of
    Digital Television Broadcast Signals; Amendments to Part 76 of the
    Commission's Rules*, CS Docket No 98-120, Second Report and Order
    and First Order on Reconsideration, 20 FCC Rcd at 4534-37, paras.
    28-44 (2005). Bits that are not part of the primary video or
    program-related content need not be carried. *See First Report and
    Order*, 16 FCC Rcd at 2622, para. 57 ("\[W\]e conclude that 'primary
    video' means a single programming stream and other program-related
    content.").

[^22]: *See First Report and Order*, 16 FCC Rcd at 2629, para. 73
    ("Consequently, in the context of mandatory carriage of digital
    broadcast signals, a cable operator may not provide a digital
    broadcast signal in a lesser format or lower resolution than that
    afforded to any digital programmer (e.g., non-broadcast cable
    programming, other broadcast digital program, etc.) carried on the
    cable system, provided, however, that a broadcast signal delivered
    in HDTV must be carried in HDTV.") footnote omitted). *See also* 47
    C.F.R. § 76.62.

[^23]: As noted in the *First Report and Order*, it may be especially
    burdensome for small systems with limited channel capacity (such as
    systems with fewer than 330 MHz) to carry an HDTV signal if they are
    not otherwise providing HDTV programming. *See First Report and
    Order*, 16 FCC Rcd. at 2629, para. 73 n.216. Therefore, if a small
    system that is not otherwise carrying any HDTV signals is required
    to carry a broadcast signal in HDTV, such that the signal straddles
    two 6 MHz channels (*i.e.*, if they are passing through the
    broadcaster's 8-VSB modulated signal), the system may include all of
    the lost spectrum when calculating its one-third capacity for
    purposes of the statutory cap. *See id. See also* 47 U.S.C. §
    534(b)(1).

[^24]: *See* Broadcast Group Petition at 7; *see also id*. at 7-8
    (advocating a standard requiring that cable operators "pass all the
    content bits" to assure no material degradation) (the "Broadcast
    Group" comprises Arizona State University, Benedek Broadcasting
    Corp., Midwest Television, Inc., and Raycom Media, Inc.). The
    Broadcast Group, Commercial Broadcasters (comprising the National
    Association of Broadcasters, the Association of Maximum Service
    Television, and the now-defunct Association of Local Television
    Stations), Noncommercial Broadcasters (comprising the Association of
    America's Noncommercial Broadcasters, Public Broadcasting Service,
    and Corporation for Public Broadcasting), and Tribune seek
    reconsideration and/or clarification of our rules concerning
    material degradation. *See* Broadcast Group Petition at 7;
    Noncommercial Broadcasters Petition at 18-20. *Accord* Tribune
    Reconsideration Comments at 3 (the Commission should "strengthen its
    material degradation definition in the DTV context to require cable
    operators to pass all the program related bits in the DTV transport
    stream to their subscribers"). *But see* NCTA Opposition at 4, 5-17;
    Time Warner Opposition at 23-24**.**

[^25]: *See* Broadcast Group Petition at 7. *See also* Noncommercial
    Broadcasters Petition at 18-19.

[^26]: *See* Broadcast Group Petition at 20.

[^27]: So-called "null bits" need not be passed through or included in
    the signal as carried, as they are, as the name implies, empty of
    any content.

[^28]: Rate shaping "describes bit rate adaptation techniques applied to
    MPEG-2 encoded streams, to further enhance bandwidth efficiency.
    This technique can substitute for decoding-encoding operations that
    are expensive, space consuming and ultimately harmful to content
    quality." Sylvain Riviere, "Seamless, Scalable HDTV Roll-Outs Over
    Today's Headends" (June 10, 2003), *at*
    http://www/bigbandnet.com/technology/tech_whitepaper_hdtv\_ roll.php
    (visited April 28, 2006).

[^29]: The Commission is required to resolve carriage complaints within
    120 days after the filing of a complaint. *See* 47 U.S.C. §§
    534(d)(3) (for commercial stations) and 535(j)(3) (for noncommercial
    stations).

[^30]: 47 U.S.C. § 534(b)(7).

[^31]: *See* 47 U.S.C. § 535(h). Although Sections 534(b)(7) and 535(h)
    use different language, the Commission consistently has treated them
    as imposing identical obligations. *See, e.g., Implementation of the
    Cable Television Consumer Protection and Competition Act of 1992,*
    etc., MM Docket No. 92-259, Report and Order, 8 FCC Rcd. 2965, 2974,
    para. 32 (1993) ("*Analog Must Carry Report and Order*") (noting
    that all must-carry signals must be available to all subscribers);
    *see also Implementation of Section 302 of the Telecommunications
    Act of 1996:* *Open Video Systems*, CS Docket No. 96-46, Second
    Report and Order, 11 FCC Rcd 18223, 18308, para. 162 (1996)
    ("Pursuant to Section 614(b)(7) and 615(h), the operator of a cable
    system is required to ensure that signals carried in fulfillment of
    the must-carry requirements are provided to every subscriber of the
    system.").

[^32]: *See* 47 U.S.C. § 534(b)(4)(B).

[^33]: Analog-only television sets plainly qualify as "television
    receivers" under Section 614(b)(7) at the present time, and we think
    that it is eminently reasonable to conclude that they will continue
    to fall within the scope of that term as it is used in Section
    614(b)(7) after the transition.

[^34]: In the 2001 *First Report and Order*, the Commission afforded a
    digital-only station mandatory carriage rights pursuant to Sections
    614 and 615, coupled with the option to request that its digital
    signal be carried on the cable system for delivery to subscribers in
    an analog format, at the station's expense (a mechanism also
    referred to as "down-conversion."). *See First Report and Order,* 16
    FCC Rcd at 2605-082630, paras. 13-16, 74. *See also WHDT-DT, Channel
    59, Stuart, Florida: Petition for Declaratory Ruling that Digital
    Stations Have Mandatory Carriage Rights*, CSR-5562-Z, Memorandum
    Opinion and Order, 16 FCC Rcd 2692 (2001) (petition for
    reconsideration pending). This interim "down-conversion" option will
    continue to be available to broadcasters until the end of the
    transition on Feb. 17, 2009. The pending petitions for
    reconsideration of the *First Report and Order* request
    reconsideration of this down-conversion option. We will address the
    merits of those arguments in a separate order.

[^35]: 8 FCC Rcd 2965, 2974.

[^36]: *See Analog Must Carry Report and Order,* 8 FCC Rcd at 2974,
    para. 34; *see also* 47 C.F.R. § 76.56(d).

[^37]: *See First Report and Order*, 16 FCC Rcd at 2602, para. 7.

[^38]: *First Report and Order*, 16 FCC Rcd at 2632, para. 79.

[^39]: *See* *Second Periodic Review of the Commission's Rules and
    Policies Affecting the Conversion to Digital Television*, 19 FCC Rcd
    18279, 18282, para. 5 (2004).

[^40]: *See* 47 C.F.R. § 1.1206(b)**.**

[^41]: *See id.,* § 1.1206(b)(2).

[^42]: *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).

[^43]: *See* 5 U.S.C. § 603(a).

[^44]: *See* *id.*

[^45]: *See* Deficit Reduction Act of 2005, Pub. L. No. 109-171 (2006).
    Among other things, Title III, entitled the Digital Television
    Transition and Public Safety Act of 2005, establishes a hard
    deadline of February 17, 2009 for the end of analog transmissions by
    full power television stations.

[^46]: *See id*., ¶¶ 2, 8. *See also Carriage of Digital Television
    Broadcast Signals*, etc., CS Docket No. 98-120, *et al.,* First
    Report and Order, 16 FCC Rcd 2598, 2727-31 (2001).

[^47]: *See Second FNPRM*, ¶¶ 2, 10-15.

[^48]: *See id*., ¶¶ 16-19.

[^49]: 5 U.S.C. § 603(b)(3).

[^50]: 5 U.S.C. § 601(6).

[^51]: 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."(6).

[^52]: 15 U.S.C. § 632.

[^53]: U.S. Census Bureau, 2002 NAICS Definitions, "517510 Cable and
    Other Program Distribution";
    <http://www.census.gov/epcd/naics02/def/NDEF517.HTM>.

[^54]: 13 C.F.R. § 121.201, NAICS code 517510.

[^55]: U.S. Census Bureau, 2002 Economic Census, Subject Series:
    Information, Table 4, Receipts Size of Firms for the United States:
    2002, NAICS code 517510 (issued November 2005).

[^56]: *Id*. An additional 61 firms had annual receipts of \$25 million
    or more.

[^57]: The proposals would also apply to OVS operators.

[^58]: On this point, we note that the proposals do not, for example,
    apply to DBS services.

[^59]: 47 C.F.R. § 76.901(e). The Commission determined that this size
    standard equates approximately to a size standard of \$100 million
    or less in annual revenues. *Implementation of Sections of the 1992
    Cable Act: Rate Regulation,* Sixth Report and Order and Eleventh
    Order on Reconsideration, 10 FCC Rcd 7393, 7408 (1995).

[^60]: These data are derived from: R.R. Bowker, *Broadcasting & Cable
    Yearbook 2006*, "Top 25 Cable/Satellite Operators," pages A-8 & C-2
    (data current as of June 30, 2005); Warren Communications News,
    *Television & Cable Factbook 2006*, "Ownership of Cable Systems in
    the United States," pages D-1805 to D-1857.

[^61]: 47 C.F.R. § 76.901(c).

[^62]: Warren Communications News, *Television & Cable Factbook 2006*,
    "U.S. Cable Systems by Subscriber Size," page F-2 (data current as
    of Oct. 2005). The data do not include 718 systems for which
    classifying data were not available.

[^63]: 47 U.S.C. § 543(m)(2); *see* 47 C.F.R. § 76.901(f) & nn. 1-3.

[^64]: 47 C.F.R. § 76.901(f); *see* Public Notice*, FCC Announces New
    Subscriber Count for the Definition of Small Cable Operator*, DA
    01‑158 (Cable Services Bureau, Jan. 24, 2001).

[^65]: These data are derived from: R.R. Bowker, *Broadcasting & Cable
    Yearbook 2006*, "Top 25 Cable/Satellite Operators," pages A-8 & C-2
    (data current as of June 30, 2005); Warren Communications News,
    *Television & Cable Factbook 2006*, "Ownership of Cable Systems in
    the United States," pages D-1805 to D-1857.

[^66]: The Commission does receive such information on a case-by-case
    basis if a cable operator appeals a local franchise authority's
    finding that the operator does not qualify as a small cable operator
    pursuant to § 76.901(f) of the Commission's rules. *See* 47 C.F.R. §
    76.909(b).

[^67]: *See* 13 C.F.R. § 121.201, NAICS Code 515120.

[^68]: *Id*. 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* Motion
    Picture and Video Production, NAICS code 512110; Motion Picture and
    Video Distribution, NAICS Code 512120; Teleproduction and Other
    Post-Production Services, NAICS Code 512191; and Other Motion
    Picture and Video Industries, NAICS Code 512199.

[^69]: Although we are using BIA's estimate for purposes of this revenue
    comparison, the Commission has estimated the number of licensed
    commercial television stations to be 1,368. *See* *News Release*,
    "Broadcast Station Totals as of June 30, 2005" (dated Aug. 29,
    2005); *see* <http://www.fcc.gov/mb/audio/totals/bt050630.html>.

[^70]: "\[Business concerns\] 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).

[^71]: 13 C.F.R. § 121.201, NAICS code 517510. This NAICS code applies
    to all services listed in this paragraph.

[^72]: *See* notes 72-73 and accompanying text, *supra.*

[^73]: In addition, the term "small entity" under SBREFA applies to
    small organizations (nonprofits) and to small governmental
    jurisdictions (cities, counties, towns, townships, villages, school
    districts, and special districts with populations of less than
    50,000). 5 U.S.C. §§ 601(4)-(6). We do not collect annual revenue
    data on ITFS licensees.

[^74]: U.S. Census Bureau, 2002 NAICS Definitions, "334220 Radio and
    Television Broadcasting and Wireless Communications Equipment
    Manufacturing";
    http://www.census.gov/epcd/naics02/def/NDEF334.HTM#N3342.

[^75]: 13 C.F.R. § 121.201, NAICS code 334220.

[^76]: U.S. Census Bureau, American FactFinder, 2002 Economic Census,
    Industry Series, Industry Statistics by Employment Size, NAICS code
    334220 (released May 26, 2005); http://factfinder.census.gov. The
    number of "establishments" is a less helpful indicator of small
    business prevalence in this context than would be the number of
    "firms" or "companies," because the latter take into account the
    concept of common ownership or control. Any single physical location
    for an entity is an establishment, even though that location may be
    owned by a different establishment. Thus, the numbers given may
    reflect inflated numbers of businesses in this category, including
    the numbers of small businesses. In this category, the Census
    breaks-out data for firms or companies only to give the total number
    of such entities for 2002, which was 929.

[^77]: *Id*. An additional 18 establishments had employment of 1,000 or
    more.

[^78]: 5 U.S.C. § 603(c)(1) -- (c)(4).