**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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**THIRD REPORT AND ORDER**

**AND THIRD FURTHER NOTICE OF PROPOSED RULE MAKING**

**Adopted: September 11, 2007 Released: November 30, 2007**

**Comment Date: \[30 days after date of publication in the Federal
Register\]**

**Reply Comment Date: \[45 days after date of publication in the Federal
Register\]**

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

Table of Contents

Heading Paragraph \#

I. Introduction 1

II\. THIRD REPORT AND ORDER 3

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

B. Availability of Signals -- Sections 614(b)(7) and 615(h) 15

C. Constitutional Issues 41

1\. The Viewability Requirements Are Consistent with the First Amendment
41

2\. The Viewability Requirements Are Consistent with the Fifth Amendment
64

D. Other Issues 72

E. Conclusion 74

III\. THIRD FURTHER NOTICE OF PROPOSED RULE MAKING 75

A. Issues Related to Downconversion 76

B. Material Degradation Issues 78

C. Availability of Signals 79

D. Small Business 80

E. Other Issues 88

IV\. procedural matters 89

A. Third Report and Order 89

1\. Final Regulatory Flexibility Analysis 89

2\. Final Paperwork Reduction Act Analysis 90

3\. Congressional Review Act 91

B. Third Further Notice of Proposed Rulemaking 92

1\. Initial Regulatory Flexibility Analysis 92

2\. Initial Paperwork Reduction Act Analysis 93

3\. Ex Parte Rules 94

4\. Filing Requirements 95

C. Additional Information 98

V. ordering clauses 99

APPENDIX A: Final Regulatory Flexibility Analysis

APPENDIX B: Initial Regulatory Flexibility Analysis\
APPENDIX C: Amended Rules

# Introduction

1.  Pursuant to Section 614(b)(4)(B) of the Communications Act of 1934,
    as amended (the "Act"),[^1] 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 Nation's transition to digital
    television.[^2] Now that Congress has established February 17, 2009,
    as the date certain for the end of analog broadcasts by full-power
    television licensees, we must address the post-transition carriage
    responsibilities of cable operators under Sections 614 and 615 --
    particularly in light of the expectation 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.[^3]

2.  In this *Third Report and Order and Third Further Notice of Proposed
    Rulemaking* ("*Third Report and Order"* and "*Third Further
    Notice*," respectively), we adopt rules to ensure that cable
    subscribers will continue to be able to view broadcast stations
    after the transition, and that they will be able to view those
    broadcast signals at the same level of quality in which they are
    delivered to the cable system.[^4] We announce these rules now to
    ensure that cable operators and broadcasters have sufficient time to
    prepare to comply with them. We also seek comment on several issues
    related to implementation of these rules. We are mindful that the
    mandatory carriage rules serve their purpose only when such stations
    are viewable by all cable subscribers, including those who will only
    have analog sets after the transition. Furthermore, we act with the
    knowledge that Congress intended that the benefits of the digital
    transition should accrue to all consumers.

# THIRD REPORT AND ORDER

3.  As discussed below, the Act requires that cable systems carry
    broadcast signals without material degradation and ensure that all
    subscribers can receive and view mandatory-carriage signals.[^5]
    This *Third Report and Order* finalizes the material degradation
    requirements adopted by the Commission in 2001, and establishes two
    alternative approaches that cable operators may use to meet their
    responsibility to ensure that cable subscribers with analog
    television sets can continue to view all must-carry stations after
    the end of the DTV transition. Cable operators may either carry such
    signals in analog, or, for all-digital systems, carry the signal in
    digital only.[^6]

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

4.  In this section, we adopt rules requiring that cable operators not
    discriminate in their carriage between broadcast and non-broadcast
    signals, and that they not materially degrade broadcast signals. As
    explained below, we reaffirm the approach adopted by the Commission
    in 2001 to determining whether material degradation has occurred, as
    well as the requirement that HD signals be carried in HD.

5.  The Act requires that cable operators carry local broadcast signals
    "without material degradation," and instructs 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." [^7]  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 DTV transition.[^8]

6.  In the *Second Further Notice*, we sought comment on proposals for
    ensuring that broadcast signals would not be materially degraded
    after the digital transition. We proposed that the measurement by
    which we determine whether an operator is degrading the broadcast
    signal change from a subjective to an objective standard or, in the
    alternative, to maintain the comparative standard established in the
    First Report and Order. We asked whether we should require cable
    operators to pass through all primary video and program-related bits
    ("content bits").[^9] In addition, we proposed a rule that would
    create a framework for negotiations between cable operators who
    wanted to carry fewer than all content bits and the broadcasters
    whose signals were at issue. Such a rule would require any operator
    that wished to carry fewer than all content bits to demonstrate to
    the broadcaster that it could meet the
    picture-quality-nondegradation standard without carriage of all
    content bits. [^10] Finally, in the *Second Further Notice*, we
    reminded commenters of the existing requirement to carry high
    definition signals in HD to those subscribers who have signed up for
    an HD package, and reiterated that this requirement will continue
    after the transition.[^11]

7.  We retain the requirement that HD signals be carried in HD, as well
    as the comparative approach to determining whether material
    degradation has occurred. In 2001, the *First Report and Order*
    established two requirements to avoid material degradation. First,
    \"a cable operator may not provide a digital broadcast signal in a
    lesser format or lower resolution than that afforded to any\" other
    signal on the system.[^12] Second, a cable operator must carry
    broadcast stations such that, when compared to the broadcast signal,
    \"the difference is not really perceptible to the viewer.\"[^13]
    Thus, \"a broadcast signal delivered in HDTV must be carried in
    HDTV.\"[^14] Because we decline to rely on measurement of bits to
    determine whether degradation has occurred, we do not require
    carriage of all content bits. Additionally, for the reasons
    described below, we decline to adopt the proposed negotiation
    framework.

8.  The Act requires that broadcast signals not be "materially
    degraded." It also requires 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."[^15] The Commission stated in 2001 that "\[f\]rom our
    perspective, the issue of material degradation is about the picture
    quality the consumer receives and is capable of perceiving." [^16]
    Cable commenters argued that this should remain the focus of the
    Commission's decision making, and we agree. [^17]

9.  We considered the "all content bits" proposal, the main benefit of
    which was a clear means of measurement and consequently ease of
    enforcement.[^18] Ultimately, we conclude, however, that the all
    content bits approach is likely to stifle innovation and the very
    efficiency that digital technology offers, and may be more exacting
    a standard than necessary to ensure that a given signal will be
    carried without *material* degradation. We also conclude that it is
    unnecessary at this time to impose such a requirement in light of
    the paucity of material degradation complaints over the 15 years
    since enactment of the Must Carry statute.[^19]

10. A number of commenters support the existing standard, and most argue
    that a comparative approach remains the best method of measuring
    material degradation.[^20] As these commenters point out, there is
    little evidence to indicate otherwise.[^21] We note Comcast's
    observations that there appear to have been no more than two
    material degradation complaints since the 1992 adoption of the
    prohibition, and that both of those were dismissed.[^22] Even if
    there has been limited opportunity to "test" these rules in a
    digital context,[^23] there is every reason to believe that they
    will prove just as robust in an environment of greater attention to
    picture quality.

11. Furthermore, there are technological benefits to the current
    comparative standard. Time Warner argues that the content bits
    standard proposed in the *Second Further Notice* would require
    devoting additional bandwidth to carriage even when it would not
    improve the quality of the transmitted image, hurting consumers by
    limiting other uses of the bandwidth.[^24] AT&T further argues that
    an "all content bits" standard could "dampen\[\] incentives to
    invest in video compression and other technologies...that would
    allow even greater transmission efficiencies and higher quality
    pictures."[^25] We recognize these concerns, and do not intend to
    impede improvements in technology. Some cable operators may,
    currently or in the future, rely on advanced compression
    technologies such as MPEG 4 to provide service to subscribers with
    greater efficiency. We particularly recognize the value of
    compression technologies that take the broadcast signal back to
    uncompressed baseband and then re-encode it in a more efficient
    manner without materially degrading the picture. Such advanced
    compression utilizes a minimum bit rate that does not reduce the
    quality of the resolution. We agree with commenters that a
    comparative standard is currently the best way to encourage and
    reward technological innovations, like MPEG4 compression, that allow
    for more efficient use of bandwidth without diminishing viewer
    experience.

12. We decline to adopt the proposal of Agape Church Inc., that we
    require carriage of secondary channels.[^26] Our rules here focus
    only on the broadcaster's primary video and program related content.
    The prohibition on material degradation adds no additional
    requirement to carry non-program-related content.

13. Commenters requested clarification that downconversion to analog
    does not constitute material degradation.[^27] We accordingly
    clarify that it is not material degradation to downconvert that
    signal to comply with the "viewability" requirement discussed below.

14. As noted above, we do not adopt the negotiation framework proposed
    in the *Second Further Notice*, and direct parties to continue to
    follow the rules as established in Section 76.61.[^28] Both
    broadcasters and cable operators, the parties who would be involved
    in these negotiations, raised serious objections to the proposal.
    The National Association of Broadcasters ("NAB") and The Association
    for Maximum Service Television ("MSTV") are highly critical of any
    required negotiations, particularly ones which would begin and end
    upon the request of operators. They state that the 30 day window for
    carriage complaints is too short, and that the proposal as a whole
    places the burden of ensuring compliance on the broadcasters, rather
    than on the operators who have the duty by statute. Finally, they
    argue that the requirements and penalties for noncompliance are
    insufficiently detailed or strict.[^29] Cable commenters object to
    the requirement that operators make a showing of non
    material-degradation to the satisfaction of the broadcaster. They
    express concern about what they anticipate would be: (1) a major
    shift in power to must-carry broadcasters, who do not have an
    incentive to bargain; and (2) an addition of significant transaction
    costs for operators, who currently do not negotiate with must carry
    stations at all. They argue that this would add an unnecessary
    complication to mandatory carriage.[^30] As NAB and MSTV note, the
    goal of these rules is to provide cable subscribers with the full
    benefits of the digital transition.[^31] Given the broad based
    objections to the proposal, we decline to establish a formal
    procedure by which broadcasters would waive the material degradation
    requirements.[^32]

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

15. In this section, we adopt rules requiring cable systems that are not
    "all-digital" to provide must-carry signals in analog, while
    "all-digital" systems may provide them in digital form only.[^33] We
    also require that the cost of any downconversion be borne by
    operators, but that downconverted signals may count toward the cap
    on commercial broadcast carriage.[^34] 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."[^35] Similarly, Section 615(h) for
    noncommercial stations states that "\[s\]ignals 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."[^36] These
    statutory requirements plainly apply to cable carriage of digital
    broadcast signals,[^37] 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.[^38]

16. These rules shall be in force for three years from the date of the
    digital transition, subject to review by the Commission during the
    last year of this period (i.e., between February 2011 and February
    2012). In light of the numerous issues associated with the
    transition, it is important to retain flexibility as we deal with
    emerging concerns. A three-year sunset ensures that both analog and
    digital cable subscribers will continue to be able to view the
    signals of must-carry stations, and provides the Commission with the
    opportunity after the transition to review these rules in light of
    the potential cost and service disruption to consumers, and the
    state of technology and the marketplace.[^39]

17. In the *Second Further Notice*, we sought comment on proposals that
    would ensure the viewability, for all subscribers, of signals
    carried pursuant to mandatory carriage. To that end, we proposed
    that

> 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.[^40]

We also proposed that the cost of any down conversion rendered necessary
by these rules be borne by the cable operators.[^41]

18. We adopt these proposals, and note that they apply to all operators,
    regardless of their rate-regulated status.[^42] In sum, cable
    operators must comply with the statutory mandate that must-carry
    broadcast signals "shall 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,"
    and they have two options of doing so.[^43] First, to the extent
    that such subscribers do not have the capability of viewing digital
    signals, cable systems must carry the signals of commercial and
    non-commercial must-carry stations in analog format to those
    subscribers, after downconverting the signals from their original
    digital format at the headend.[^44] This proposal is in line with
    the approach already voluntarily planned by many cable operators, as
    described in testimony by Time Warner CEO Glenn Britt before the
    House Subcommittee on Telecommunications and the Internet.[^45] In
    the alternative, operators may choose to operate "all-digital
    systems."[^46] Under this option, operators will not be required to
    downconvert the signal to analog, and may provide these stations
    only in a digital format. In any event, any downconversion costs
    will be borne by the operator.

19. To fulfill its must-carry obligations in cases where a cable
    operator uses digital-to-analog converter boxes that do not have
    analog tuners, the operator can deliver a standard definition
    digital version of a must-carry broadcaster's high definition
    digital signal, in addition to the analog and high definition
    signal, or use boxes that convert high definition signals for
    viewing on an analog television set, or use other technical
    solutions so long as cable subscribers have the ability to view the
    signals.

20. As NCTA notes, the congressionally mandated end of the Digital
    Television transition does not apply directly to cable
    operators.[^47] We thus recognize that there may be two different
    kinds of cable systems for some period of time after the DTV
    transition is complete.[^48] Some operators may choose to deliver
    programming in both digital and analog format. NAB and MSTV describe
    these systems as those in which they "keep an analog tier and
    continue to provide local television signals (and perhaps many cable
    channels as well) to analog receivers in a format that does not
    require additional equipment."[^49] Other operators may choose, as
    many already have, to operate or transition to "all-digital
    systems," and as NAB and MSTV further note, "virtually *all* cable
    operators ultimately *will* do so." [^50] Game Show Network, LLC
    ("GSN") questions why there should be any rules protecting owners of
    analog sets, since that is "a format the government itself has
    determined is no longer worthy of any spectrum."[^51] Congress did
    decide to end analog broadcasting, but declined to turn its backs on
    the millions of Americans with analog sets. Thus, they established
    the NTIA converter box program to protect the continued availability
    of over-the-air signals to all Americans;[^52] they accepted the
    claims of the cable industry that subscribers with analog sets would
    continue to be served;[^53] and we now establish these rules to
    ensure that those subscribers do continue to be served.[^54]

21. NAB proposes that cable operators carry all broadcasters on their
    systems in the same manner; i.e., if one must carry station is
    carried in analog, all broadcasters, whether carried pursuant to
    retransmission consent or must carry, would be carried in analog.
    Cable operators object to this proposal, and we decline to adopt
    it.[^55] Although a system that is not "all-digital" will be
    required to carry analog versions of all must-carry signals to
    ensure their viewability, retransmission consent stations may be
    carried in any manner that comports with the private agreements of
    the parties.

22. The "viewability" requirement that we adopt today is based on a
    straightforward reading of the relevant statutory text.[^56] While
    some cable commenters dispute our interpretation of Section
    614(b)(7), their arguments are at odds with both the plain meaning
    of the statutory text as well as the structure of the provision.
    These commenters principally argue that the viewability mandate is
    satisfied whenever cable operators transmit broadcast signals and
    "'*offer* to sell or lease... a converter box' to their customers"
    that will allow those signals to be viewed on their receivers. [^57]
    To the extent that such subscribers do not have the necessary
    equipment, however, the broadcast signals in question are not
    "viewable" on their receivers.[^58] To be sure, "\[i\]f a cable
    operator authorizes subscribers to install *additional* receiver
    connections, but does not provide the subscriber with such
    connections, or with the equipment and materials for such
    connections, the operator \[is only required to\] notify such
    subscribers of all broadcast stations carried on the cable system
    which cannot be viewed without a converter box and . . . offer to
    sell or lease such a converter box to such subscribers at rates in
    accordance with section 623(b)(3)."[^59] But these commenters
    confuse the separate mandates set forth in the second and third
    sentences of Section 614(b)(7), a distinction we clarified as early
    as 1993.[^60] As NAB and MSTV observe, "there is no evidence that
    the third sentence of Section 614(b)(7) was intended to narrow the
    scope of the viewability requirement for sets connected by cable
    operators."[^61] For every receiver "connected to a cable system by
    a cable operator or for which a cable operator provides a
    connection," that operator must ensure that the broadcast signals in
    question are actually viewable on their subscribers' receivers.[^62]

23. As we explained in the *Second Further Notice*, the operators of
    either all-digital or mixed digital-analog systems will be
    responsible under the statute for ensuring that mandatory carriage
    stations are actually viewable by all subscribers, "including those
    with analog television sets."[^63] Two commenters argued that our
    proposed rules were overbroad, because analog-only televisions will
    not "qualify as 'television receivers' after the transition for
    purposes of the viewability requirement."[^64] These arguments fail
    to recognize, however, that the hard deadline set by Congress does
    not apply to Low Power television stations, including translators
    and Class A stations. Thus, Low Power broadcasters, operating
    hundreds of channels, will still be lawfully transmitting analog
    signals on February 18, 2009, and for some period of time
    afterwards.[^65] Those consumers who rely on Low Power stations and
    turn on their over-the-air analog sets that morning to watch a local
    newscast will be using a device "engaged or able to engage in 'the
    process of...radio transmission.'"[^66] More broadly, as NAB and
    MSTV point out, the Commission's authority over these sets is not
    predicated merely on their ability to receive over the air
    signals.[^67] Rather, we believe that a device that allows
    subscribers to view signals sent by their cable operator is a
    television receiver for purposes of Section 614(b)(7) of the
    Act.[^68]

24. NCTA also argues that the situation in the early 1990s that spurred
    the creation of these viewability requirements was different from
    the situation that will be faced by consumers post-transition.[^69]
    Therefore, they posit, it is inappropriate to rely on Sections
    614(b)(7) and 615(h) to address viewability on analog receivers. To
    begin with, it is our primary task to implement the text of the
    statutory provision. While the enactment of a statute may be
    principally aimed at a particular set of circumstances present at
    the time, it is often written in general language so that it applies
    to similar sets of circumstances in the future. As the United States
    Supreme Court has instructed, "statutory prohibitions often go
    beyond the principal evil to cover reasonably comparable evils, and
    it is ultimately the provisions of our laws rather than the
    principal concerns of our legislators by which we are
    governed."[^70] In any event, the cable commenters' own descriptions
    of the driving force behind the statutory provision demonstrate that
    the situation at hand is directly analogous. NCTA explains that
    "\[a\]t the time \[of the provision's enactment\], certain
    television sets were not 'cable-ready' and could not receive
    \[some\] channels at all," and observes that the Commission
    therefore required converter boxes provided by cable operators to
    contain "the necessary channel capacity to permit a subscriber to
    access a UHF must-carry signal through the converter."[^71] Replace
    "cable-ready" with "digital cable-ready," and "UHF" with "digital,"
    and NCTA has described the problem at hand, and one of the options
    the Commission has again offered to resolve it.[^72] The
    Commission's charge is to implement the statutory language enacted
    by Congress, and this language reflects Congress's unambiguous
    determination that broadcast signals must be viewable by all cable
    subscribers. Indeed, as NAB and MSTV note, "the authority that
    Congress gave the Commission under Section 614(b)(4)(B) to make
    rules regarding advanced television reflects Congress' understanding
    that broadcast technology certainly would change over time, and that
    the Commission was expected to modify the carriage rules as
    needed."[^73] While the circumstances today differ from those
    present at the time of the provision's enactment, the basic issue,
    ensuring the viewability of broadcast signals, is the same.[^74]

25. Time Warner argues that we do not have the authority to read Section
    614(b)(7) as a "manner of carriage" requirement, even to offer
    analog carriage as one option for complying with the statute.[^75]
    They see the Commission's early interpretation of the viewability
    provision as a statement that operators must provide converter boxes
    "in a specific and limited context," and that the section cannot
    serve as the basis for a carriage requirement.[^76] On the contrary,
    the Commission has frequently allowed cable operators to meet their
    614(b)(7) obligations by placing must carry signals on a channel
    viewable to all subscribers instead of by providing boxes.[^77] The
    rules we adopt today are firmly grounded in longstanding Commission
    practice, and echo previous solutions to similar problems.

26. Some cable programmer commenters, such as the Weather Channel, argue
    that the proposal "unquestionably would consume vast amounts of
    cable system bandwidth" with duplicative programming.[^78] In
    actuality, as Time Warner admits, these rules will not have an
    impact on the carriage of most stations; the "vast majority of
    broadcasters opt for retransmission consent."[^79] Thus, as NAB
    notes in its reply, any incremental increase of bandwidth devoted to
    must-carry stations will be "negligible."[^80] Gospel Music Channel,
    LLC (Gospel) articulates a concern that flows from Weather
    Channel's: that these rules could reduce their chances of carriage
    on any given system.[^81] While we recognize Gospel's concerns,
    Congress already acknowledged them when it mandated that systems
    with more than 12 usable activated channels need carry local
    commercial television stations only "up to one-third of the
    aggregate number of usable activated channels of such
    system\[s\]."[^82] Furthermore, Gospel fails to recognize that to
    the extent operators choose the second option and become
    "all-digital," these rules could contribute to a very positive
    impact on independent programmers' ability to make carriage deals
    due to the concomitant effective increase in channel capacity. The
    Africa Channel, et al. ("TAC") also argue that the potential loss of
    independent cable programmers serving focused audiences "are digital
    transition issues as important as a consideration of what
    constitutes viewability or material degradation for broadcasters who
    are the least likely television market participants to be left
    behind with or without burdensome new must-carry rules."[^83] In
    essence, TAC argues that independent cable programmers deserve
    protections on par with must-carry broadcasters. Congress, however,
    disagrees, and the Supreme Court has upheld the must-carry regime to
    ensure the viewability and prevent the material degradation of the
    signals of those broadcasters.[^84]

27. Some commenters have incorrectly characterized our rule as "dual
    carriage."[^85] Comcast attempts to frame this requirement as "a
    requirement to carry broadcast signals in \[analog\]... in
    perpetuity."[^86] Not only is this not the Commission's rule,
    Comcast's proposal for avoiding "dual carriage" would read
    "viewability" itself out of the Act. Dual carriage, as considered
    and rejected by the Commission, would have required cable operators
    "to carry both the digital and analog signals of a station during
    the transition when television stations are still broadcasting
    analog signals"; that is, the mandatory simultaneous carriage of two
    different channels broadcast by the same station.[^87] The
    Commission ultimately rejected this concept.[^88] The rule we
    establish in this *Third Report and Order* is quite distinct. It
    requires carriage only of a single broadcast signal, and gives
    operators the freedom to choose how to ensure that signal is
    viewable by all subscribers. It does not require carriage of more
    than one broadcast signal from a given must-carry broadcaster, and
    it does not require carriage of an analog version of a signal unless
    an operator chooses not to operate an all-digital system.

28. NCTA notes that the Act allows a cable operator to decline to carry
    signals from stations whose programming substantially duplicates
    that of a station it already carries.[^89] The commenter argues from
    this that the statute can not be read to require carriage of
    additional versions of a signal under any circumstances.[^90] The
    connection, however, is tenuous at best. Section 614(b)(5) speaks
    specifically to the issue of the carriage of different stations
    providing substantially identical programming, and does not address
    a requirement to carry multiple versions of a single station's
    signals. In the former case, subscribers would be receiving multiple
    channels all showing the same programs at virtually the same time.
    In this case, however, some subscribers will not be able to see any
    of a station's programming unless a downconverted version is
    carried. From the perspective of these subscribers, the actual
    people Sections 614 and 615 were designed to reach, there need not
    be more than one viewable version of a broadcaster's signal -- but
    there must be at least one.

29. Comcast argues that enforcement of the viewability provisions of the
    Act will force the Commission into conflict with other sections of
    the Act, particularly the effective competition provisions of
    Section 623(b).[^91] Comcast misstates the case, however, when it
    says that a deregulated system may provide must carry stations "in
    any format that it wishes."[^92] Indeed, as the Commission made
    clear in the 2001 Order, signals broadcast in HD must be carried by
    cable operators in HD, regardless of whether or not the system is
    rate-regulated.[^93] While some requirements are lifted when an
    operator is deregulated, deregulation is not an exemption from the
    carriage requirements of the statute.[^94] Stations electing
    mandatory carriage must be carried, they must not be materially
    degraded, and they must be made viewable.

30. If an operator chooses not to operate an "all-digital system" and
    therefore ensures viewability by providing a digital broadcast
    signal and a downconverted version of the signal for analog
    subscribers, it will in some cases use more than the 6 MHz of
    bandwidth occupied by an analog must-carry signal alone. Comcast
    argues that this improperly forecloses the use of the bandwidth for
    other purposes.[^95] Congress recognized the importance of
    preserving cable bandwidth for non-broadcast programmers when it
    mandated that systems with more than 12 usable activated channels
    need carry local commercial television stations only "up to
    one-third of the aggregate number of usable activated channels of
    such system\[s\]."[^96] This limit has been upheld by the courts and
    will continue to ensure that operators have sufficient bandwidth for
    carriage of non-broadcast programming and other services.[^97]
    Moreover, to the extent that a cable operator wishes to free
    bandwidth for other purposes, it may choose to operate an
    "all-digital" system.

31. We are bound by statute to ensure that commercial and non-commercial
    mandatory carriage stations are actually viewable by all cable
    subscribers. The Commission also believes, however, that it is
    important to provide cable operators flexibility in meeting the
    requirements of Sections 614(b)(7) and 615(h). Therefore, we have
    declined to require a specific approach, instead allowing operators
    to choose whether or not to operate "all-digital systems," and
    therefore whether or not to provide mandatory carriage stations in
    an analog format.[^98] This is in accord with the Commission's
    decision, in the *First Report and Order*, not to require operators
    to provide set-top boxes. [^99]

32. Time Warner argues that the requirement of Section 629, that
    navigation devices be available at retail, supersedes the
    requirements of Section 614(b)(7), which was enacted four years
    earlier.[^100] We disagree. Section 629(f) provides that
    "\[n\]othing in this section shall be construed as expanding or
    limiting any authority that the Commission may have under \[the\]
    law" prior to the 1996 Telecommunications Act. This includes the
    viewability provisions of Section 614(b)(7). Furthermore, Time
    Warner's argument is premised on an interpretation of Section
    614(b)(7) that we decline to adopt, namely that it requires cable
    operators to provide set top boxes. Indeed, the retail availability
    of set-top boxes should facilitate subscriber purchase of digital
    equipment and lessen the burden on all-digital cable operators to
    provide such boxes.[^101] However, we adopt the analog
    downconversion option to address these very concerns, and provide an
    option which does not even potentially implicate set-top boxes. An
    operator may choose not to go "all-digital," and instead satisfy its
    Section 614(b)(7) obligations by downconverting must carry stations
    to analog, until the operator concludes that the local market is
    ready for an all-digital cable system.

33. We note that Americans for Tax Reform, Ovation, LLC, and other
    commenters appear to misapprehend the functionality of the
    "converter boxes" that will be available through the NTIA coupon
    program.[^102] These boxes will, by design, be limited to use in
    converting over-the-air digital signals into analog signals that can
    be interpreted by an analog television.[^103] Because of differences
    in the modulation used by digital broadcasters and digital cable
    systems, these boxes will not be usable by digital cable subscribers
    to connect their analog receivers. Such converters will be
    available, but it is important to ensure that the public understands
    that there are different functionalities provided by different
    boxes.[^104]

34. Discovery observes that, during the transition period, a
    digital-only broadcaster has had the right to request carriage in
    digital only, rendering it non-viewable to analog subscribers.[^105]
    As the Commission explained in the *First Report and Order*,
    however, this is an interim policy, assisting both broadcasters and
    cable operators to adjust to digital broadcasting over a limited
    period of time.[^106] Discovery argues that the post-transition
    period will "similarly be limited," and indeed, eventually
    analog-only sets will be as rare as VHF tuner-only sets are
    today.[^107] There are still important differences, however. In the
    post-transition period, every channel subject to mandatory carriage
    will be broadcast solely in digital, while the use of analog
    receivers will continue for an indefinite time. Furthermore, making
    stations actually viewable to cable subscribers is the most
    fundamental interest expressed in the must carry rules that have
    been upheld by the Supreme Court. If we declined to enforce the
    viewability requirement it would render the regime almost
    meaningless, contrary to the clearly expressed will of the Congress
    as upheld by the Supreme Court.[^108]

35. Because the interim policy governing downconversion makes it an
    option exercised by broadcasters, they are responsible for any
    associated costs.[^109] Cequel argues that post-transition analog
    downconversion would only be necessary because the broadcaster
    itself is no longer providing an analog signal, and that any costs
    should therefore be borne by the broadcaster.[^110] Agape Church
    Inc. and other broadcast commenters agree with our proposal that,
    because the decision will shift to cable operators after the
    transition, so should the costs.[^111] NAB and MSTV further argue
    that these downconversion costs would be modest.[^112] ACA says that
    one of its members paid as much as \$4,390.25 per channel to
    downconvert from HD to analog, and argues in an ex parte that these
    costs could approach \$16,500 per channel. We find this estimate
    surprisingly high and note that \$12,000 of this total appears to be
    dedicated to format conversion, rather than digital to analog
    conversion. It is also unclear whether or not the prices or
    equipment quoted are industry standards, or whether some of the
    equipment costs presented cumulatively are actually redundant or
    usable for more than just analog downconversion of one broadcast
    signal. Nevertheless, we are taking up the issue of flexibility for
    small cable operators in the *Third Further Notice*, *infra*.
    Entravision Holdings, LLC (Entravision) notes that, while it
    supports our proposal, it would not object to a requirement that
    broadcasters pay the cost of downconversion if it became necessary
    in order to ensure the continued viewability of must-carry stations
    for analog subscribers.[^113] However, since the post-transition
    downconversion will be undertaken by operators at their discretion,
    in order to comply with the Act, we adopt the proposal that any
    expense necessary for an operator's compliance with the requirements
    of Sections 614(b)(7) and 615(h) shall be borne by the operator, and
    not the broadcaster.[^114] Specifically, operators of systems that
    provide analog service are responsible for the cost of
    downconverting a digital must-carry signal to analog at the
    headend.[^115]

36. Such downconverted signals will, however, count toward the one-third
    carriage cap. Section 614(b)(1)(B) of the Act requires that cable
    systems with more than "12 usable activated channels" devote "up to
    one-third of the aggregate number of usable activated channels of
    such system\[s\]" to the carriage of local commercial television
    stations.[^116] Beyond this requirement, the carriage of additional
    commercial television stations is at the discretion of the cable
    operator.[^117] The Commission determined in the *First Report and
    Order* that with respect to carriage of digital broadcast signals,
    the channel capacity calculation will be made by taking the total
    usable activated channel capacity of the system in megahertz and
    dividing it by three to find the limit on the amount of system
    spectrum that a cable operator must make available for commercial
    broadcast signal carriage purposes.[^118] After the transition, when
    calculating whether an operator has reached or exceeded the
    one-third cap, we will count the system spectrum occupied by all
    versions of a commercial broadcast signal (both digital and analog).

37. We also find that operators of systems with an activated channel
    capacity of 552 MHz or less that do not have the capacity to carry
    the additional digital must-carry stations may seek a waiver from
    the Commission.[^119]

38. We observe that a number of cable comments imply or state that it is
    not possible to transition from a system that provides analog
    service to an all-digital system without the agreement of all
    current subscribers.[^120] While each operator will choose to
    transition or not based on local market conditions and other
    business considerations, it is clear that this choice is fully
    within their discretion. Both of these options are available to all
    operators at any time, a fact unaffected by this rule. We do note,
    that as with any change in programming service, particularly one
    which will have an impact on the compatibility of subscriber
    equipment, cable operators must comply with certain notice
    requirements. We remind operators who transition their systems to
    all-digital that they must provide written notice to subscribers
    about the switch, containing any information they need or actions
    they will have to take to continue receiving service.[^121]

39. Entravision, licensee of a number of commercial broadcast stations,
    argues that analog downconversion is the best way to ensure
    continued viewability, but does not object to the use of other
    methods by cable operators so long as the result is the same. [^122]
    As an alternative to the option we proposed for systems that
    continue to carry analog programming, Entravision proposes that
    must-carry stations be provided in analog, but only until such time
    as 85% of subscribers in each zip code served by a given operator
    have the means to view those signals if provided in digital.[^123]
    As Entravision acknowledges, however, the statute requires that must
    carry broadcast stations be made available to all cable subscribers
    with analog television sets.[^124] As we have noted before, we do
    not believe we have the authority to exempt any class of subscribers
    from this requirement, no matter how few the analog
    subscribers.[^125] Therefore, we decline to adopt the proposal
    offered by Entravision.

40. The Consumer Electronics Association (CEA) asks that the Commission
    rely on technical solutions shaped by earlier rules and developed by
    the market to resolve concerns about viewability.[^126] CEA suggests
    that the agency can rely on the retail availability of sets with
    digital tuners to ensure continued viewability of high quality
    programming.[^127] It argues that this can be assured by requiring
    the carriage of must carry signals to conform to three
    requirements: (1) unencrypted, unscrambled, and in QAM (i.e., "in
    the clear"); (2) modulated using MPEG-2, a widely used and accepted
    codec; and (3) not in switched digital. [^128] CEA expresses concern
    that the requirement to carry must-carry stations "in the clear" is
    not sufficiently articulated outside the context of rate-regulated
    systems.[^129] Although we decline to reach the question of
    requiring MPEG-2 and prohibiting switched digital, as they are
    beyond the scope of this proceeding, we do address CEA's essential
    concern, which is at the heart of our viewability proceeding.[^130]
    Like CEA's proposals, our rules are designed to ensure that all
    subscribers to a cable system have "in the clear" access to all must
    carry stations.[^131]

## Constitutional Issues

### The Viewability Requirements Are Consistent with the First Amendment

41. A number of commenters assert that the rules we adopt herein
    constitute "mandatory dual carriage" and are unconstitutional.[^132]
    We disagree. The statutory must-carry provisions upheld by the
    Supreme Court in *Turner II*[^133] include the requirement that
    must-carry signals "shall be viewable" 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. [^134]
    The rules we adopt in this order do nothing more than ensure the
    continued fulfillment of this statutory mandate at the conclusion of
    the digital television ("DTV") transition in February 2009. The
    must-carry obligation is meaningful only if all cable subscribers
    are able to view local broadcasters' signals, even if they have
    analog televisions. If we fail to act, however, analog cable
    subscribers will be unable to view must-carry stations after the DTV
    transition. Rather than mandating downconversion to prevent this
    loss of signals after the transition, however, we offer cable
    operators a choice: those operators that choose not to operate an
    "all-digital system" must down-convert the broadcasters' digital
    signal for their analog subscribers. Cable operators that elect to
    operate "all-digital" systems, on the other hand, do not have to
    down-convert these signals and may provide them solely in a digital
    format. The choice rests with the individual cable operator. In this
    way, cable operators decide for themselves, taking into account
    their particular circumstances, how best to operate following the
    digital transition.[^135]

42. We reject the argument of cable commenters that the "second option
    is effectively no option at all,"[^136] or that we have presented
    cable operators with a "Hobson's Choice."[^137] Rather, we believe
    that the second option represents a viable choice for complying with
    the viewability mandate. Cable operators complain about the burden
    of transitioning to "all-digital systems." In particular, they
    object to requiring subscribers with analog television sets who do
    not yet have digital-set top boxes to use such boxes because, they
    argue, it is not "feasible" to require those customers to install
    set-top boxes, because customers do not want set-top boxes, or
    because of the expense associated with providing the boxes.[^138]
    After the DTV transition, however, some sort of set-top or converter
    box will be the rule rather than the exception for those Americans
    with analog television sets. Whether consumers currently obtain
    video programming through over-the-air broadcasts, cable, or DBS,
    they generally will need either set-top boxes or digital televisions
    to receive programming once the transition is complete.[^139] Thus,
    cable operators' fear that they will lose customers to other
    providers of video programming if they pursue this option seems
    misplaced.[^140] As to cable operators' concerns about the expense
    of providing set-top boxes, nothing in this order precludes them
    from recovering the costs of those boxes from subscribers, and cable
    operators offer no evidence to support their claim that they will
    lose a meaningful number of customers because of such charges.[^141]
    Indeed, such claims are rather ironic in light of the cable
    industry's recent practice of raising its prices at a rate
    significantly in excess of inflation.[^142]

43. Cable operators' complaints about the second option are also belied
    by these same parties' assurances that they have both the incentive
    and the means to "mak\[e\] the digital transition as seamless as
    possible for their customers."[^143] NCTA asserts, for example, that
    cable operators have committed to "ensure that cable viewers do not
    experience disruption after February 17, 2009," and that they
    "already have the means to ensure continuing service to analog
    television sets with no government intervention or subsidy
    required."[^144] Cequel Communications notes that it has every
    incentive to continue providing must-carry stations to all
    subscribers after the transition, if only because it welcomes free
    programming.[^145] Comcast similarly assures us that "cable
    operators have powerful incentives to meet their customers'
    demands"[^146] and that "no cable operator will allow its
    subscribers to become 'disenfranchised' since to do so would be
    economically irrational."[^147] If cable operators, in fact, "have
    every incentive to move customers to digital"[^148] and "equipment
    will be available to enable cable customers to view digital
    broadcast signals,"[^149] then we do not understand the cable
    companies' complaint that the all-digital option is so burdensome
    that it is merely a "fantasy."[^150] Indeed, numerous cable
    operators have indicated to the Commission their intent to convert
    to all-digital operations prior to February 2009.[^151] The record
    in this proceeding also demonstrates that cable operators are
    already reducing analog programming and moving it to digital
    tiers.[^152] For all of these reasons, we conclude that the second
    option set forth in this item offers cable operators a meaningful
    choice about how to fulfill their must-carry obligations.

44. Turning to the First Amendment challenge, we do not believe that the
    "all-digital" option for complying with the statute\'s viewability
    mandate implicates any First Amendment interest beyond that inherent
    in the must-carry mandate for digital signals already adopted by the
    Commission.[^153] We note, moreover, that this mandate is
    significantly less burdensome than the analog must-carry mandate
    upheld by the Supreme Court in *Turner II* because digital signals
    occupy much less bandwidth on a cable system than do analog signals.
    The "all-digital" option does not require cable operators to carry
    *any* additional signals over its system or to displace *any*
    additional programming beyond that required by the Commission's
    previously adopted digital must-carry mandate. Rather, it simply
    requires cable operators to take steps to ensure that all
    subscribers are able to view signals that will already be carried on
    their systems, and we do not believe that such a mandate can
    reasonably be described as an independent "infringement" of cable
    operators' free speech rights.

45. While cable commenters argue that the second option triggers
    additional First Amendment scrutiny, we do not find their claims to
    be persuasive. We do not agree that the second option coerces
    operators into downconverting broadcaster's digital signals or
    impermissibly penalizes them for failing to downconvert. The purpose
    and effect of the second option are neither to coerce operators into
    downconverting nor to penalize them for failing to do so. Rather,
    they are to provide cable operators with an alternative means of
    fulfilling the statutory requirement that the signals of must-carry
    stations must be viewable by all subscribers.[^154]

46. However, even if we were to find that the second option implicates a
    First Amendment interest beyond that inherent in the must-carry
    mandate for digital signals already adopted by the Commission or,
    for that matter, that the second option did not represent a
    realistic choice for cable operators, we would still conclude that
    our approach here is constitutional because we believe that *both*
    options for complying with the viewability mandate are fully and
    independently consistent with the First Amendment.

47. *Content-Neutral Regulation.* As articulated by the Supreme Court in
    *Turner II*, "\[a\] content-neutral regulation will be sustained
    under the First Amendment if it advances important governmental
    interests unrelated to the suppression of free speech and does not
    burden substantially more speech than necessary to further those
    interests."[^155] There can be little argument that must-carry
    obligations are content-neutral regulations. The Supreme Court held
    in *Turner I* that must-carry does not "distinguish favored speech
    from disfavored speech on the basis of the ideas or views expressed"
    but is instead a content-neutral regulation subject to
    intermediate-level scrutiny under the First Amendment.[^156]
    Similarly, with respect to the first option provided to cable
    operators today, requiring downconversion of digital signals does
    not distinguish speech on the basis of content; it merely requires
    cable operators to carry whatever message the must-carry stations
    choose to transmit. We thus reject the notion that ensuring that
    cable subscribers with analog television sets are able to view
    must-carry stations reflects an "'effort to exercise content
    control'" that triggers strict scrutiny.[^157] With respect to the
    "all-digital" option, we do not think that permitting cable
    operators to fulfill their must-carry obligations by providing
    digital must-carry signals that are viewable by all of their
    subscribers changes the analysis. This option does not distinguish
    speech on the basis of content; instead, it simply requires that
    subscribers can view broadcasters' digital signals -- regardless of
    the content those signals contain.

48. We also reject the argument that, in light of "enormous
    technological and market changes," a First Amendment challenge to
    must-carry regulations today would be subject to strict
    scrutiny.[^158] This argument is premised on the mistaken notion
    that the Supreme Court applied intermediate scrutiny to must-carry
    regulation due to the existence of cable market power. The Court
    made clear, however, that the applicable level of scrutiny was tied
    to the content-neutral character of must-carry regulation.[^159]
    Like the regulations upheld in the *Turner* decisions, requiring
    cable operators to down-convert digital must-carry signals or make
    such signals viewable by all subscribers is a content-neutral
    regulation that guarantees the carriage of broadcast programming
    regardless of content and is not designed to promote speech of a
    particular content.

49. Moreover, to the extent cable operators' arguments about market
    power are meant to suggest that they no longer represent the threat
    to free, over-the-air broadcasting that drove the *Turner*
    decisions, the evidence convinces us otherwise. Although it faces
    competition by DBS operators and others, the cable industry by far
    remains the dominant player in the MVPD market, commanding
    approximately 69 percent of all MVPD households.[^160] By contrast,
    the percentage of households that rely on over-the-air broadcast
    signals has declined significantly since the *Turner* decisions. In
    1992, 40 percent of American households continued to rely on
    over-the-air signals for television programming.[^161] Today,
    however, that figure has shrunk to 14 percent.[^162] The shift in
    the competitive balance between broadcast and cable can also be seen
    in viewership trends. Between 1995 and 2006, ad-supported cable
    channels' total day share of the market increased from 28 to 49.5
    percent, whereas the total day share of ABC, CBS, and NBC affiliates
    shrunk precipitously from 44 percent to 23.5 percent.[^163] As cable
    capacity and the number of cable programming networks have grown,
    the fragmentation of the market for video programming has
    accelerated, further weakening broadcast stations.[^164]

50. In addition, cable operators continue to "exercise 'control over
    most (if not all) of the television programming that is channeled
    into the subscriber's home \[and\] can thus silence the voice of
    competing speakers with a mere flick of the switch.'"[^165] As in
    1992, few consumers have the choice of more than one cable
    operator.[^166] Cable systems also are more clustered than they were
    in 1992.[^167] While clustering may have beneficial effects, the
    Supreme Court has recognized that it also may increase cable's
    threat to local broadcasters and the risk of anticompetitive
    carriage denials.[^168] Furthermore, the share of subscribers served
    by the 10 largest multiple system operators ("MSOs") has continued
    to accelerate since Congress recognized a trend toward horizontal
    concentration of the cable industry, "giving MSOs increasing market
    power."[^169] The figure was nearly 54 percent in 1989 and over 60
    percent in 1994.[^170] The figure remains over 60 percent in
    2005.[^171] And there remains a significant amount of vertical
    integration in the cable industry. In 2005, approximately 22 percent
    of the 531 nonbroadcast video programming networks were vertically
    integrated with at least one cable operator.[^172] "Congress
    concluded that vertical integration gives cable operators the
    incentive and ability to favor their affiliated programming
    services."[^173]

51. The incentives that the *Turner II* Court recognized for cable
    operators to drop local broadcasters in favor of other programmers
    less likely to compete with them for audience and advertisers also
    have steadily increased. The Court explained that:

> Independent local broadcasters tend to be the closest substitutes for
> cable programs, because their programming tends to be similar, and
> because both primarily target the same type of advertiser: those
> interested in cheaper (and more frequent) ad spots than are typically
> available on network affiliates. The ability of broadcast stations to
> compete for advertising is greatly increased by cable carriage, which
> increases viewership substantially. With expanded viewership,
> broadcast presents a more competitive medium for television
> advertising. Empirical studies indicate that cable-carried
> broadcasters so enhance competition for advertising that even modest
> increases in the numbers of broadcast stations carried on cable are
> correlated with significant decreases in advertising revenue for cable
> systems. Empirical evidence also indicates that demand for premium
> cable services (such as pay-per-view) is reduced when a cable system
> carries more independent broadcasters. Thus, operators stand to
> benefit by dropping broadcast stations.[^174]

In addition, the Court observed that "\[t\]he incentive to subscribe to
cable is lower in markets with many over-the-air viewing options."[^175]

52. Consistent with the *Turner II* Court's analysis, the evidence
    confirms that local advertising revenue has become an increasingly
    important source of revenue for the cable industry, "providing a
    steady, increasing incentive to deny carriage to local broadcasters
    in an effort to capture their advertising revenue."[^176] For
    example, between 1992 and 2003, cable revenue from local advertising
    rose dramatically, increasing by approximately 525 percent.[^177]
    Thus, cable operators have even greater incentives today to withhold
    carriage of broadcast stations.

53. We also cannot conclude that the option of switching between cable
    and broadcast input significantly weakens cable operators' ability
    to harm broadcasters. With respect to the A/B switch, the Supreme
    Court found, *inter alia*, that many households lack adequate
    antennas to receive broadcast signals and that installation and use
    of such switches with other video equipment could be cumbersome or
    impossible.[^178] Notwithstanding technical improvements since then,
    moreover, there is no evidence of consumer acceptance of the
    switch,[^179] or that more households have adequate antennas to
    receive broadcast signals.[^180] And since the percentage of
    television viewers relying solely on broadcast signals has dropped
    from approximately 40 percent to 14 percent in the years since
    *Turner II*,[^181] the number of households with adequate antennas
    to receive broadcast signals through an A/B switch has almost
    certainly dropped. Thus, while A/B switches have largely moved from
    mechanical to electronic in the decade since the *Turner* decisions,
    switching signal sources still remains cumbersome or impossible for
    television viewers and does not represent an adequate alternative to
    must-carry regulation. In sum, we cannot conclude that technological
    and market changes dictate that must-carry obligations would now be
    subject to strict constitutional scrutiny.

54. *Important Governmental Interests.* The Supreme Court has already
    recognized that must-carry regulations serve important governmental
    interests. In particular, it held that there was substantial
    evidence to support a finding that must-carry requirements serve the
    important, and interrelated, governmental interests of (1)
    preserving the benefits of free, over-the-air local broadcast
    television; and (2) promoting the widespread dissemination of
    information from a multiplicity of sources.[^182] Congress found,
    and the Court agreed, that both these interests were threatened by
    cable operators' refusals to carry local broadcast stations.
    Broadcasters denied carriage on cable systems lose a substantial
    portion of their audience, which, in turn, translates into lost
    advertising revenues. [^183] As a result, the stations have less
    money to invest in equipment and programming, leading to further
    reductions in audience size. This cycle of audience loss followed by
    revenue loss repeats to the point that the stations "deteriorate to
    a substantial degree or fail altogether."[^184] Thus, the viability
    of local broadcast stations and, consequently, the availability of
    over-the-air broadcasts for non-cable households depend to a
    material extent on cable carriage.[^185] Furthermore, we note that
    the must-carry mandate found by the Court in *Turner II* to advance
    these governmental interests required that the signals of must-carry
    stations be viewable by all cable subscribers; it did not merely
    require cable operators to carry such signals and make them viewable
    to a limited class of their customers.

55. The steps we take here to ensure that cable operators comply with
    the statutory viewability requirement after the DTV transition serve
    these same interests. Cable operators are free to choose whether or
    not to operate as all-digital systems. We require cable operators
    that choose not to operate "all-digital systems" to down-convert the
    digital broadcast signals; otherwise, their analog subscribers will
    lose access to must-carry stations altogether on February 17, 2009.
    This fact distinguishes the present circumstances from those the
    Commission addressed in 2005 when it decided not to require cable
    operators to carry both the digital and analog signals of broadcast
    stations during the DTV transition, while television stations
    continue to broadcast analog signals.[^186] At that time, the
    Commission concluded that a dual carriage requirement was not needed
    to preserve over-the-air broadcasting for viewers who lack cable
    because local analog broadcasts were already carried on virtually
    every cable system.[^187] Therefore, the lack of a dual carriage
    requirement would not have any meaningful effect on a station's
    viewership, and there was thus no evidence that the absence of dual
    carriage would diminish the availability of broadcast signals to
    non-cable subscribers.[^188] In contrast, this order addresses the
    impact of the end of the DTV transition, where the signals of
    must-carry stations will be completely unavailable to analog cable
    subscribers, absent the actions we take here. This obviously poses a
    much more serious challenge for must-carry stations. For this
    reason, we do not agree that this order is at odds with the
    Commission's 2005 constitutional analysis.[^189] If cable operators
    did not downconvert the digital signals, broadcasters would stand to
    lose an audience of millions of households that are analog cable
    subscribers[^190] and the concomitant advertising revenues,[^191]
    thus jeopardizing their continued health and viability.[^192] Should
    these stations deteriorate or cease to exist, the impact of these
    lost programming options would fall most heavily on those that most
    need them: the roughly fifteen percent of Americans who rely solely
    on over-the-air television, which disproportionately consist of
    low-income and minority households.[^193] This is precisely the harm
    that Congress sought to prevent when it enacted the must-carry
    provisions upheld by the Supreme Court in *Turner II*, and no party
    has suggested a plausible argument that preserving free,
    over-the-air broadcast television no longer qualifies as an
    important governmental interest.[^194] The Court also recognized
    that "preserving a multiplicity of broadcasters"[^195] serves the
    related governmental interest of "promoting the widespread
    dissemination of information from a multiplicity of sources." All
    cable programming other than that carried in fulfillment of
    must-carry obligations is under the control of cable
    operators.[^196] Unless we act, analog cable subscribers and
    households that rely solely on over-the-air broadcast television may
    well face "a reduction in the number of media voices" and the loss
    of "the widest possible dissemination of information from diverse
    and antagonistic sources."[^197] Thus, this Order clearly advances
    the important governmental interests identified by Congress and
    upheld by the Supreme Court. Alternatively, cable operators may
    fulfill their must-carry and viewability obligations by providing
    digital signals that are viewable by all of their subscribers, thus
    serving the same governmental interests upheld in the *Turner*
    cases.

56. In addition, the actions we take here advance a separate, but also
    important, governmental interest of minimizing adverse consumer
    impacts associated with the DTV transition. The DTV transition
    results in the return of analog spectrum that can be allocated for
    other important, indeed critical, purposes,[^198] but Congress also
    recognized the need to protect consumers by ensuring that their
    television sets continue to work at the end of the transition just
    as they do today. To that end, Congress created a program to make
    available coupons that consumers can use to buy digital-to-analog
    converter boxes for the analog television sets in their homes.[^199]
    Just as Congress sought to minimize the burden of the DTV transition
    on consumers who rely on over-the-air broadcasting, we act here to
    minimize the impact of the DTV transition on cable subscribers.
    Analog downconversion minimizes the impact of the DTV transition on
    cable subscribers who do not own digital television sets. By
    ensuring that these consumers continue to receive local broadcast
    signals, we ensure that they experience little or no disruption in
    service due to the DTV transition.[^200] We do not agree that
    requiring cable systems offering analog programming to down-convert
    digital signals undermines, rather than promotes, the digital
    conversion by encouraging continued dependence on analog
    televisions.[^201] Just as Congress's set-top box program does not
    undermine but merely smoothes the transition for certain vulnerable
    consumers, we act here to promote widespread consumer acceptance of
    the DTV transition by addressing a major source of potential
    consumer confusion and frustration. Similarly, subscribers to cable
    systems that convert to all-digital operations will continue to
    receive local broadcast signals without interruption and thus will
    experience minimal disruption due to the DTV transition.[^202]

57. For all of these reasons, we conclude that both options available to
    cable operators -- downconversion of digital signals and the
    operation of all-digital systems -- advance numerous important
    governmental interests.

58. *Burden on Speech.* The thrust of the cable operators' objections to
    downconversion is the "severe burden" they allege it imposes on
    protected speech.[^203] They contend that a downconversion
    obligation imposes a greater burden than the must-carry rules upheld
    in *Turner II* because cable companies will now be required to
    transmit the must-carry stations' digital signal *and* down-convert
    it to analog, thus displacing additional speech.[^204] Even assuming
    that analog downconversion, together with digital must-carry,
    requires greater bandwidth than existing must-carry requirements, we
    do not agree that it burdens "substantially more speech than
    necessary" to further the government's important interests.[^205]

59. The relative burden that must-carry regulation places on cable
    operators must be measured in context. At the time of the *Turner*
    cases, cable capacity was significantly more constrained than it is
    today. In the early 1990s, most cable systems were all-analog and
    offered far fewer than 100 channels.[^206] In 1995, for example, the
    Commission defined a "high capacity" cable system as a system with
    54 or more channels.[^207] By contrast, analog carriage today
    accounts for only a small percentage of the total number of cable
    channels and spectrum capacity.[^208] By 2004, cable operators were
    providing, on average, 70 analog video channels and approximately
    150 digital video channels, with enough additional bandwidth to
    provide high-definition television, video-on-demand, Internet access
    services, and both circuit-switched and IP-based voice
    services.[^209] As a result, the *relative* burden of the first
    option set forth above on cable operators today would be far less of
    a burden than was the analog mandate upheld by the Supreme Court in
    *Turner II*.

60. The Supreme Court foresaw in 1994 that "rapid advances in fiber
    optics and digital compression technology" might one day result in
    "no practical limitation on the numbers of speakers that may use the
    cable medium."[^210] And today, we have every reason to expect that
    cable capacity will continue to expand in future years, thus further
    decreasing the relative burden on cable operators.[^211] Cable
    operators continue to develop ways to use their available capacity
    more efficiently. For example, cable operators, in order to keep
    pace with their competitors, are beginning to deploy "switched
    digital" capability in their networks. In a switched digital
    environment, a channel is transmitted via coaxial cable to a
    subscriber\'s premises only when the subscriber tunes to that
    channel. Time Warner already has deployed switched digital in three
    cities.[^212] Time Warner has said that switched digital gives cable
    operators the means of adding channels and never running out of
    capacity.[^213] Moreover, because digital cable systems offer so
    much more capacity, the proportion of overall bandwidth devoted to
    must-carry signals is that much smaller than was the case at the
    time of the *Turner* decisions. For example, NAB and MSTV explain
    that 18 basic analog channels, which includes all must-carry
    stations, represent about 4.2 percent of the total number of
    channels and about 6.8 percent of the total downstream spectrum of a
    typical cable system today. In 1993, by contrast, the same number of
    channels represented 33 percent of the capacity of a "high capacity"
    cable system.[^214] We believe that the typical cable operator
    electing to down-convert digital signals will devote significantly
    less than one-third of its channel capacity to local broadcasters,
    the cap that was upheld in *Turner II*.[^215]

61. We also conclude that the relative burden on speech of
    downconversion is outweighed by the benefits.[^216] Unless we act,
    subscribers of cable systems that choose not to operate "all-digital
    systems" will suffer both the loss of local broadcasts and confusion
    over that loss, and non-MVPD consumers risk deterioration, if not
    loss, of over-the-air broadcasting options. Preserving local
    television broadcasting will help these consumers more than a
    downconversion obligation will hurt cable operators, particularly
    given that downconversion is necessary only until cable operators
    complete the transition to all-digital systems. We also reject Time
    Warner's contention that a downconversion requirement burdens more
    speech than is necessary because the governmental interests at issue
    can be promoted in a less burdensome manner -- namely by providing
    digital set-top boxes to subscribers.[^217] Time Warner's objection
    proves too much, of course, for we have provided cable operators
    with precisely that choice: they may avoid analog downconversion by
    converting to all-digital systems, including by providing their
    subscribers with set-top boxes. Also, to the extent that cable
    operators do not take the necessary steps to ensure that the digital
    signals of must-carry stations can be viewed by all subscribers, the
    carriage of analog signals is necessary to advance the governmental
    interests identified above.[^218] Although we conclude that
    downconversion is in fact necessary to advance important
    governmental interests, we note that a regulation is not invalid
    under the intermediate scrutiny analysis even if the government's
    interest might be adequately served by some less-restrictive
    alternative.[^219] Finally, we note that the cable operators'
    arguments about the burdens of downconversion are undercut by their
    admission that they might down-convert on a purely voluntary
    basis.[^220] For all these reasons, we find that analog-down
    conversion does not burden "substantially more speech" than is
    necessary and, therefore, this option does not violate the First
    Amendment.[^221]

62. We also conclude that the "all-digital" option does not burden
    "substantially more speech than necessary" to further the important
    governmental interests discussed above. Indeed, this option imposes
    less of a burden on speech than the must-carry regulations upheld in
    *Turner II*. The transmission of digital signals requires far less
    bandwidth than that required for analog signals,[^222] so cable
    companies transmitting signals, including must-carry signals, in
    digital rather than analog will gain bandwidth. In addition, while
    cable operators complain that transitioning to "all-digital systems"
    will impose an onerous burden on them and therefore does not
    represent a meaningful choice, we reject those arguments for the
    reasons discussed above.[^223]

63. We conclude, therefore, that both analog downconversion and the
    "digital-only" options are consistent with the First Amendment on a
    stand-alone basis. By offering cable operators the flexibility to
    choose, based on their particular circumstances, either option to
    fulfill their must-carry obligations, moreover, we have minimized
    the burden imposed on any particular cable operator.

### The Viewability Requirements Are Consistent with the Fifth Amendment

64. In addition to the First Amendment issue, some parties contend that
    requiring downconversion of digital must-carry signals constitutes a
    taking of property without just compensation in violation of the
    Fifth Amendment.[^224] To begin with, as discussed above, we provide
    cable operators here with two options for complying with the
    statutory viewability requirement and do not mandate the
    downconversion of digital signals. But in any event, for the reasons
    stated below, we also conclude that requiring cable operators to
    down-convert the digital must-carry signals so that they are
    viewable by their subscribers with analog televisions would present
    no problems under the Fifth Amendment.

65. The "takings" clause of the Fifth Amendment provides: "\[N\]or shall
    private property be taken for public use, without just
    compensation."[^225] In general, there are two types of Fifth
    Amendment takings: "per se" takings and "regulatory" takings.[^226]
    Government authorization of a permanent physical occupation of
    property constitutes a per se taking.[^227] A permanent physical
    occupation of property is a taking without regard to the public
    interest that it may serve,[^228] the size of the occupation,[^229]
    or the economic impact on the property owner.[^230] NAB has argued
    elsewhere that must carry regulation cannot constitute a per se
    taking because no physical property is involved; rather the
    "property" taken consists of electronic bits.[^231] Moreover, we
    agree that the downconversion obligation does not affect the takings
    analysis.[^232] As NAB states:

> if requiring cable operators to carry channels of broadcast signals
> indeed takes 'private property for public use' without compensation,
> then the requirement is unconstitutional regardless of whether the
> cable companies must accommodate one, five, or one hundred
> channels.[^233]

66. Applying the above framework to the issue here, we believe that a
    court would find that a per se takings analysis would not apply. The
    Supreme Court has advised that a per se taking is "relatively rare
    and easily identified,"[^234] and this is not one of those rare and
    easily identifiable instances. Mandatory carriage regulation
    effectuates no permanent physical occupation of a cable operator's
    property, such as the installation of physical equipment that was at
    issue in *Loretto v. Teleprompter Manhattan CATV Corp*.[^235]
    Rather, multiple programming streams are simply transmitted in bits
    of data over cable bandwidth through electrons or photons at the
    speed of light while the cable operator retains complete control
    over its physical property (i.e., headend equipment). Courts have
    consistently rejected attempts to apply the concept of permanent
    physical occupation to the technological realm,[^236] and we believe
    these decisions to be consistent with the Supreme Court's admonition
    that a permanent physical occupation of property is easily
    identified and, where found, "presents relatively few problems of
    proof."[^237]

67. We therefore turn to whether requiring downconversion of digital
    must-carry signals would constitute a regulatory taking. An
    allegation that a regulation is so onerous as to constitute a
    regulatory taking is analyzed under the multi-factor inquiry set
    forth by the Supreme Court in *Penn Central Transportation Co. v.
    City of New York*.[^238] A court will examine the following factors
    identified in *Penn Central* to determine whether a regulatory
    taking has occurred: (1) the character of the governmental action;
    (2) its economic impact; and (3) its interference with reasonable
    investment-backed expectations.[^239] Applying this test here, we
    easily conclude that requiring downconversion of digital signals
    does not effectuate a regulatory taking.

68. First, looking at the character of the governmental action at issue
    here, we believe it to be a quite modest attempt to "adjust the
    benefits and burdens of economic life to promote the common
    good."[^240] As explained above, requiring downconversion of digital
    must-carry signals will likely impose only a modest burden on a
    cable operator's system as a whole and will materially advance the
    government's important interests in preserving over-the-air
    broadcasting, promoting the widespread dissemination of information
    from a multiplicity of sources, and minimizing any adverse consumer
    impacts associated with the DTV transition.[^241] Moreover, it is
    critical to recognize that the government action here involves what
    traditionally has been and remains a heavily regulated
    industry.[^242]

69. Second, there is no evidence in the record that the economic impact
    on cable operators of requiring downconversion will cause
    significant harm. As we explain above, mandatory carriage of analog
    signals accounts for only a small percentage of the total number of
    cable channels and total spectrum capacity. As cable operators
    continue to convert to digital programming, must-carry signals will
    impose a decreasing relative capacity burden. Given that the cable
    channels devoted to the mandatory carriage of commercial broadcast
    signals is capped at one-third of the cable system's usable capacity
    and in practice is likely to be significantly less than one-third,
    we find the economic burden on cable operators to be modest.

70. Third, there is no evidence in the record that requiring
    downconversion will interfere with reasonable investment-backed
    expectations. Based upon the statutory cap for commercial stations
    and the numerical limit for non-commercial stations, cable operators
    should reasonably expect to devote up to one-third of their capacity
    to carriage of local broadcast stations.[^243] Requiring
    downconversion of digital must-carry signals does not change this
    limit. Finally, cable operators should have reasonably expected that
    they would be required to comply with the statutory viewability
    mandate after the digital transition. For all of these reasons, we
    conclude that requiring downconversion does not interfere with
    reasonable investment-backed expectations.[^244]

71. We do not find evidence or persuasive argument in the record that
    requiring downconversion transforms must-carry regulation into a per
    se taking or a regulatory taking.

## Other Issues

72. In its comments, United Communications Corporation made an argument
    for a revision of the Must Carry rules generally, to increase the
    carriage rights of low power stations, particularly Class A stations
    that serve as local network affiliates.[^245] Ensuring the continued
    viability of low power broadcasters is a major concern of the
    Commission; these proposals, however, are beyond the scope of the
    current proceeding. We will consider whether there is some
    alternative or future proceeding in which they could be more fully
    addressed.

73. Given the statutory directive to treat OVS operators like cable
    operators with regard to broadcast signal carriage, we find that OVS
    operators must carry digital-only television stations pursuant to
    Section 76.1506 of the Commission\'s Rules. Thus, OVS operators must
    comply with all requirements set forth in this *Third Report and
    Order*. Section 653(c)(1) of the Act provides that any provision
    that applies to cable operators under Sections 614, 615, and 325,
    shall apply to open video system operators certified by the
    Commission.[^246] Section 653(c)(2)(A) provides that, in applying
    these provisions to open video system operators, the Commission
    "shall, to the extent possible, impose obligations that are no
    greater or lesser" than the obligations imposed on cable
    operators.[^247] The Commission, in implementing the statutory
    language, held that there are no public policy reasons to justify
    treating an open video system operator differently from a cable
    operator in the same local market for purposes of broadcast signal
    carriage.[^248] Thus, OVS operators generally have the same
    requirements for the carriage of local television stations as do
    cable operators except that these entities are under no obligation
    to place television stations on a basic service tier.[^249] OVS
    operators are also obligated to abide by Section 325 and the
    Commission\'s Rules implementing retransmission consent.[^250] We
    note that Section 76.1506(e) specifically emphasizes the mandate to
    make must carry signals viewable, and reiterates that the
    requirements established in this *Third Report and Order* apply
    equally to cable operators and OVS operators.

## Conclusion

74. For the reasons discussed above, we adopt these rules with respect
    to material degradation and viewability.[^251] A number of detailed
    issues must be addressed now that the broad framework of rules has
    been established. We believe it is appropriate to provide
    stakeholders and the public with an opportunity to weigh in on these
    matters; therefore the *Third Further Notice* seeks comment on some
    specific applications of these general rules.

# THIRD FURTHER NOTICE OF PROPOSED RULE MAKING

75. While this *Third Report and Order* resolves the major questions
    about material degradation and viewability after the transition, we
    now seek comment on a number of related issues which were not
    specifically raised in the *Second Further Notice*. Now that the
    general rules are in place, we believe it is appropriate to move
    toward an expeditious resolution of these outstanding matters so
    that all parties will have sufficient time to prepare for compliance
    with these new rules.

## Issues Related to Downconversion

76. **Channel Placement:** Section 614(b)(6) generally provides that
    commercial television stations carried pursuant to the mandatory
    carriage provision are entitled to be carried on a cable system on
    the same channel number on which the station broadcasts
    over-the-air.[^252] Under Section 615(g)(5) noncommercial television
    stations generally have the same right.[^253] The Act also permits
    commercial and noncommercial television stations to negotiate a
    mutually beneficial channel position with the cable operator.[^254]
    In the *First Report and Order*, the Commission found that it was
    unnecessary to place broadcast signals on a specific frequency in
    order to ensure nondiscriminatory treatment of television stations
    by cable operators.[^255] Instead, the Commission required that
    channel mapping information be passed through as part of the program
    and system information protocol ("PSIP"), linking the digital
    channel number with the appropriate primary video and
    program-related content.[^256] How should these channel positioning
    rules apply to operators carrying more than one version of a
    station's signal? We seek comment on this question. For systems that
    provide analog service, we propose that the analog version be
    physically located on the appropriate channel as determined by the
    channel placement rules, and that the version as broadcast appear on
    that same channel for digital subscribers who can view it.[^257] We
    seek comment on this proposal. We also seek comment on whether it
    will be technically possible for multiple digital versions to appear
    on the same channel from a subscriber perspective (e.g., channel 35
    in HD for subscribers with HD, and the same channel 35 in SD for
    subscribers with SD). If so, should we adopt such a requirement?

77. **Format:** NAB and MSTV raise the point that "\[w\]hen digital
    programming is broadcast in a 16:9 format, downconversion of the
    signal to analog generally requires that the program be reformatted
    to fit the 4:3 analog aspect ratio."[^258] Broadcasters may
    broadcast not only in different resolutions -- HD, ED, SD -- but
    also in different formats -- 16:9 or 4:3. When a digital signal is
    downconverted, particularly from HD to analog, it is likely to be a
    16:9 signal being adjusted for display on a 4:3 screen. However, at
    times, particularly during the early years of the post-transition
    period, even HD broadcasters are likely to occasionally show images
    in a 4:3 aspect ratio, adding static bars to the edge of the
    broadcast picture to compensate. How should the downconverted signal
    be adjusted (letterboxing, centering, etc.), and if the Commission
    does not adopt a rule, who should make that decision? NAB proposes
    that, for signals converted at the headend, broadcasters make the
    determination, and for signals converted at a converter box, the
    boxes be required to allow the consumer to determine the format (as
    in the NTIA boxes).[^259] NCTA responds with a proposal to allow
    operators to determine the format of downconverted signals, arguing
    that operators are best able to determine how to "serve the needs of
    their analog viewing customers."[^260] We seek comment on the
    appropriate approach for the Commission to take, and the costs and
    benefits of these proposals and any others offered by commenters.

## Material Degradation Issues

78. As NAB and MSTV note, the Commission found in 1993 that the material
    degradation rules apply equally to must carry stations and
    retransmission consent stations.[^261] They argue that this should
    be the case after the transition as well. NCTA, however, notes that
    in the *First Report and Order*, the Commission said that

> *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.[^262]

We seek comment on the applicability of the material degradation rules
adopted by this Order.

## Availability of Signals

79. **Notice**: As discussed above in paragraph 38, we will require that
    cable operators notify their subscribers if they decide to become an
    all-digital system. We believe that the existing notice provisions
    are sufficient to enforce this requirement.[^263] We request comment
    on these rules, and on whether we need more specific rules to govern
    notice to subscribers.

## Small Business

80. As we noted in the *Second Further Notice*, we particularly welcome
    comments offering alternative rules that would "minimize the
    economic impact for small cable operators while still complying with
    the statutory requirements."[^264] Several commenters argue that the
    rules we adopt in the *Third Report and Order* would impose high
    costs, particularly on small cable companies. ACA states that
    carriage of a single HD broadcast station could cost as much as
    \$34,000 under our rules. We observe that these estimates appear to
    involve duplication of equipment, and that 75% of the listed costs
    are for equipment dealing with format conversion, something not
    resolved by this Order because it was first raised in comments and
    which is the subject of this *Third Further Notice*, *supra*. ACA\'s
    estimates are in contrast to the comments of NAB, who describe the
    costs of downconversion as "modest." We welcome comment on these
    cost estimates. We also urge commenters to offer alternatives and
    explain how they would comply with the statute as well as minimize
    the impact on small operators.[^265]

81. The American Cable Association (ACA) offers three proposals, and
    argues that failing to adopt them, at least as to small cable
    operators, would cause "many" financial failures among independent
    cable companies.[^266]

82. They propose: (1) no change to the material degradation rules; (2)
    allowing operators to meet the viewability requirement by converting
    broadcast signals into a format that they can cablecast to all their
    subscribers; and (3) requiring must-carry broadcasters to pay the
    cost of any downconversion.[^267] The decisions made in the *Third
    Report and Order* largely track the first two of these proposals.
    Specifically, we retained the material degradation requirements
    described in the *First Report and Order*[^268] and expressly
    provided that cable systems may convert digital signals to analog
    format to be viewable for their subscribers.[^269] We also found
    that operators of systems with an activated channel capacity of 552
    MHz or less could seek a waiver from the Commission if they do not
    have the capacity to carry the additional digital versions of
    must-carry stations.[^270]

    We seek comment on whether it would be appropriate to adopt the
    other rules proposed by ACA, for small cable operators only. Would
    such rules for small operators comply with the statute?

83. Block Communications offers a viewability proposal essentially
    identical to ACA's. They suggest a rule that operators be allowed to
    downconvert must carry digital signals into a format they can
    deliver to all subscribers; in their case, this would be analog,
    although in an all-digital system this would presumably be SD.[^271]
    Block proposes that "\[i\]f the station wanted more, it could elect
    retransmission consent and negotiate for it."[^272] These proposals
    appear to seek reconsideration of the Commission's long-standing
    requirement of HD carriage.[^273] Although petitions for
    reconsideration of that requirement remain pending, we seek comment
    on this approach generally. ACA argues that if an operator provided
    carriage on identical terms to broadcasters and cable programmers it
    would not be in violation of Section 614(b)(4)(A).[^274] Given our
    interpretation of the statute set out in the Third Report and Order
    above, do we have any flexibility to alter the requirements for
    small cable operators?

84. Finally, ACA's last proposal is for must-carry broadcasters to bear
    the cost of downconversion. As NAB and MSTV have noted, this is a
    modest cost. Are the savings this would provide significant for
    small cable operators? Would the imposition of these costs on small
    broadcasters counteract the benefit to small business generally?

85. We also seek comment on the system characteristics that would be
    appropriate for relief; such as, number of subscribers, system
    capacity or something else. As discussed in the *Second Further
    Notice*, and in the Initial Regulatory Flexibility Analysis ("IRFA")
    at Appendix B, there are at least four different approaches to
    measuring the size of a cable operator, and resolving this question
    is essential if the Commission is to consider applying different
    rules for such operators.

86. Finally, we seek further proposals for means to minimize the impact
    on small cable operators, whether they be alternative rules,
    ameliorated timetables, or any other approaches that would conform
    to the requirements of the statute.

87. The Commission will complete an Order concerning these small cable
    systems within six months.

## Other Issues

88. We welcome comment on any other matters relating to material
    degradation and viewability, and particularly the proper and
    sufficient application of the rules in this Order.

# procedural matters

## Third Report and Order

### Final Regulatory Flexibility Analysis

89. As required by the Regulatory Flexibility Act of 1980 ("RFA"),[^275]
    the Commission has prepared a Final Regulatory Flexibility Analysis
    ("FRFA") relating to this *Third Report and Order*. The FRFA is set
    forth in Appendix A.

### Final Paperwork Reduction Act Analysis

90. This *Third Report and Order* contains modified information
    collection requirements subject to the Paperwork Reduction Act of
    1995 ("PRA"), Public Law 104-13.  The modified information
    collection requirements relate solely to Office of Management and
    Budget ("OMB") Control No. 3060-0647, the Commission's Annual Cable
    Price Survey.  They will be submitted to OMB for review under
    Section 3507(d) of the PRA.  OMB, the general public, and other
    Federal agencies will be invited to comment on the modified
    information collection requirements contained in this proceeding.
     In addition, we note that pursuant to the Small Business Paperwork
    Relief Act of 2002, Public Law 107-198, see 44 U.S.C. § 3506(c)(4),
    we have considered how the Commission might "further reduce the
    information collection burden for small business concerns with fewer
    than 25 employees."  We find that the modified requirements must
    apply fully to small entities (as well as to others) to protect
    consumers and further other goals, as described in the Order. 

### Congressional Review Act

91. The Commission will send a copy of this *Third Report and Order* in
    a report to be sent to Congress and the Government Accountability
    Office, pursuant to the Congressional Review Act.[^276]

## Third Further Notice of Proposed Rulemaking

### Initial Regulatory Flexibility Analysis

92. As required by the Regulatory Flexibility Act of 1980 ("RFA"),[^277]
    the Commission has prepared an Initial Regulatory Flexibility
    Analysis ("IRFA") relating to this *Third Further Notice of Proposed
    Rulemaking*. The IRFA is set forth in Appendix B.

### Initial Paperwork Reduction Act Analysis

93. This *Third Further Notice of Proposed Rulemaking* has been analyzed
    with respect to the PRA and does not contain proposed information
    collection requirements. In addition, therefore, it does not contain
    any new or modified "information collection burden for small
    business concerns with fewer than 25 employees," pursuant to the
    Small Business Paperwork Relief Act of 2002.[^278]

### Ex Parte Rules 

94. [Permit-But-Disclose]{.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.[^279] *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.[^280] Additional rules
    pertaining to oral and written presentations are set forth in
    Section 1.1206(b).

### Filing Requirements

95. [Comments and Replies]{.underline}. Pursuant to Sections 1.415 and
    1.419 of the Commission\'s Rules,[^281] interested parties may file
    comments on or before 30 days after publication in the Federal
    Register, and reply comments on or before 45 days after publication
    in the Federal Register using: (1) the Commission's Electronic
    Comment Filing System ("ECFS"), (2) the Federal Government's
    eRulemaking Portal, or (3) by filing paper copies.[^282]

-   [Electronic Filers]{.underline}: Comments may be filed
    electronically using the Internet by accessing the ECFS:
    http://www.fcc.gov/cgb/ecfs/ or the Federal eRulemaking Portal:
    http://www.regulations.gov. Filers should follow the instructions
    provided on the website for submitting comments.

    -   For ECFS filers, if multiple docket or rulemaking numbers appear
        in the caption of this proceeding, filers must transmit one
        electronic copy of the comments for each docket or rulemaking
        number referenced in the caption. In completing the transmittal
        screen, filers 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, filers should send
        an e-mail to ecfs@fcc.gov, and include the following words in
        the body of the message, "get form." A sample form and
        directions will be sent in response.

```{=html}
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```
-   [Paper Filers]{.underline}: 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 appears in the caption of this
    proceeding, filers 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). All filings must be addressed to the
> Commission's Secretary, Office of the Secretary, Federal
> Communications Commission.

-   The Commission's contractor will receive hand-delivered or
    messenger-delivered paper filings for the Commission's Secretary at
    236 Massachusetts Avenue, NE, Suite 110, Washington, DC 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]{.underline} 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, Express, and Priority mail must be
    addressed to 445 12^th^ Street, SW, Washington DC 20554.

96. [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. These documents will also be available via
    ECFS. Documents will be available electronically in ASCII, Word 97,
    and/or Adobe Acrobat.

97. [Accessibility Information]{.underline}*.* To request information in
    accessible formats (computer diskettes, large print, audio
    recording, and Braille), send an e-mail to fcc504@fcc.gov or call
    the FCC's Consumer and Governmental Affairs Bureau at (202) 418-0530
    (voice), (202) 418-0432 (TTY). This document can also be downloaded
    in Word and Portable Document Format (PDF) at: http://www.fcc.gov.

## Additional Information

98. For more information on this *Third Report and Order* *and Third
    Further Notice of Proposed Rule Making*, please contact Lyle Elder,
    Lyle.Elder@fcc.gov, or Eloise Gore, Eloise.Gore@fcc.gov, of the
    Media Bureau, Policy Division, (202) 418-2120.

# ordering clauses

99. IT IS ORDERED that, pursuant to the 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 Third Report and Order and
    Third Further Notice of Proposed Rule Making IS ADOPTED and the
    Commission's Rules ARE HEREBY AMENDED as set forth in Appendix C.

100. IT IS FURTHER ORDERED that this *Third Report and Order* and the
     rules in Appendix C ARE ADOPTED and SHALL BE EFFECTIVE 30 days
     after publication in the Federal Register, except that the modified
     information collection requirements concerning the Annual Cable
     Price Survey will become effective upon approval by the Office of
     Management and Budget and our publication in the Federal Register
     of a notice announcing the effective date of the modified
     requirements. 

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

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

FEDERAL COMMUNICATIONS COMMISSION

Marlene H. Dortch

Secretary

**APPENDIX A**

**Final Regulatory Flexibility Analysis For the *Third Report and
Order***

1.  As required by the Regulatory Flexibility Act of 1980, as amended
    ("RFA"),[^283] an Initial Regulatory Flexibility Analysis ("IRFA")
    was incorporated in the *Second* *Further Notice of Proposed
    Rulemaking* (*Second Further Notice*).[^284] The Commission sought
    written public comment on the proposals in the *Second Further
    Notice*, including comment on the IRFA. The comments responsive to
    the IRFA are discussed below. This present Final Regulatory
    Flexibility Analysis ("FRFA") conforms to the RFA.[^285]

## Need for, and Objectives of, the Report and Order

103. This *Third Report and Order* adopts rules implementing some of 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.[^286] The rules establish the
     requirements for avoiding material degradation of digital signals,
     and for ensuring their viewability by all subscribers. The rules
     pertaining to viewability shall be in force for three years from
     the date of the digital transition, subject to review by the
     Commission during the last year of this period (i.e., between
     February 2011 and February 2012).[^287]

104. The rules require that, in order to avoid material degradation of
     digital signals, a cable operator may not provide a digital
     broadcast signal in a lesser format or lower resolution than that
     afforded to any other signal on the system, and a cable operator
     must carry broadcast stations such that, when compared to the
     broadcast signal, the difference is not really perceptible to the
     viewer.[^288] Therefore, an HD broadcast signal must always be
     carried by the cable operator in HD format.

105. Cable operators must ensure that must-carry broadcast channels
     remain viewable to all subscribers after the transition. To the
     extent that cable operators choose not to operate all digital
     systems, and they have subscribers who do not have the capability
     of viewing digital signals, those cable operators must "carry the
     signals of commercial and non-commercial must-carry stations in
     analog format" to those subscribers in those systems, after
     downconverting the signals from their original digital format at
     the headend.[^289] In the alternative, operators have the choice of
     operating "all-digital systems."[^290] Under this option, operators
     will not be required to downconvert the signal to analog, and may
     provide these stations only in a digital format. A cable operator
     must provide a digital version of the signal that will be viewable
     to all digital subscribers. In any event, any downconversion costs
     will be borne by the operator. The Order also found that operators
     of systems with an activated channel capacity of 552 MHz or less
     could seek a waiver from the Commission if they do not have the
     capacity to carry the additional digital versions of must-carry
     stations.[^291]

106. These rules will ensure both that all operators remain in
     compliance with the requirements of the Communications Act after
     the Digital Transition, and that cable subscribers will also be
     able to experience the benefits of the digital transition.

## Summary of Significant Issues Raised by Public Comments in Response to the IRFA

107. The American Cable Association ("ACA") was the only commenter to
     reply specifically to the Initial Regulatory Flexibility Analysis.
     ACA made three specific proposals that it argues would "facilitate
     the digital transition in the smaller and rural communities served
     by ACA's members" by addressing the special concerns of those small
     member cable operators. ACA observes the important obligation the
     Commission has to fully consider the impact of its rules on small
     entities, and we welcome further comments on that question in the
     *Third Further Notice*. To that end, we have offered ACA's specific
     suggestions, two of which were echoed by other commenters, for
     comment in the *Third Further Notice* itself.

108. The Organization for the Promotion and Advancement of Small
     Telecommunications Companies ("OPASTCO") did not specifically file
     a comment in response to the IRFA, but did express some concern
     that Local Exchange Carriers ("LECs") were not specifically
     addressed in Section C of that previous IRFA. They explain that
     roughly half of their members offer video services to customers,
     and were concerned that the absence of LECs from the IRFA
     represented a failure to consider those operators. As a matter of
     statute, LECs who provide video service function as either cable
     system operators or Open Video System ("OVS") operators. Both types
     of systems will be governed by these rules, and were discussed in
     the IRFA. The interests of small operators like OPASTCO's members
     have been considered throughout the rulemaking process, and we note
     that the *Third Further Notice* asks for additional comment from
     and about all small operators.

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

**To Which the Proposals Will Apply**

109. 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 rules adopted herein.[^292] The RFA defines
     the term "small entity" as having the same meaning as the terms
     "small business," "small organization," and "small governmental
     jurisdiction."[^293] In addition, the term "small business" has the
     same meaning as the term "small business concern" under the Small
     Business Act.[^294] 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").[^295] The rules we
     adopt in this *Third Report and Order* 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.

110. *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."[^296] 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.[^297]
     According to Census Bureau data for 2002, there were a total of
     1,191 firms in this category that operated for the entire
     year.[^298] 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.[^299] Thus, under this size standard, the
     majority of firms can be considered small. We note, however, that
     the rules we adopt in this *Third Report and Order* only apply at
     this time to cable operators and OVS operators, and not other MVPD
     providers.[^300]

111. *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.[^301] Industry data indicate that, of 1,076 cable
     operators nationwide, all but eleven are small under this size
     standard.[^302] In addition, under the Commission's Rules, a "small
     system" is a cable system serving 15,000 or fewer
     subscribers.[^303] 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.[^304] Thus,
     under this second size standard, most cable systems are small.

112. *Cable System Operators*. The Act 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."[^305] 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.[^306] Industry data
     indicate that, of 1,076 cable operators nationwide, all but ten are
     small under this size standard.[^307] 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,[^308] and therefore we are unable to estimate
     more accurately the number of cable system operators that would
     qualify as small under this size standard.

113. *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.[^309] Business concerns included in
     this industry are those "primarily engaged in broadcasting images
     together with sound."[^310] 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[^311] (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[^312] 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.

114. 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.

115. *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.[^313] 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. The Commission
     estimates that the majority of providers in this category of Cable
     and Other Program Distribution are small businesses.

116. Concerning ITFS, we note that educational institutions are included
     in this analysis as small entities.[^314] 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.

117. *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."[^315] 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.[^316] According to Census
     Bureau data for 2002, there were a total of 1,041 establishments in
     this category that operated for the entire year.[^317] Of this
     total, 1,010 had employment of under 500, and an additional 13 had
     employment of 500 to 999.[^318] 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**

17\. The *Third Report and Order* establishes rules 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
new rules. The *Third Report and Order* requires that a cable operator
may not provide a digital broadcast signal in a lesser format or lower
resolution than that afforded to any other signal on the system and a
cable operator must carry broadcast stations such that, when compared to
the broadcast signal, the difference is not really perceptible to the
viewer.[^319] The 2001 *First Report and Order* recognized that the
material degradation requirements as to HD signals could impact small
cable operators disproportionately and made special provision for such
situations. This recognition is retained in these rules. The *Third
Report and Order* also requires 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 permits 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 rule. Small broadcast stations will also be affected by the rules
in the *Third Report and Order*, but we do not have any reason to expect
that the compliance burden will be any greater than under the prior
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**

18\. 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.[^320]

19\. The requirements established in the *Third Report and Order* 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 rules do not impose any significant burdens on small
television stations, nor were any comments submitted describing any
adverse impact on small television stations. Every effort has been and
is continuing to be made to minimize the impact of these rules on cable
operators, in particular finding that operators of systems with an
activated channel capacity of 552 MHz or less could seek a waiver from
the Commission if they do not have the capacity to carry the additional
digital versions of must-carry provided such systems commit to continue
carrying an analog version such that their subscribers are assured of
being able to view all must carry stations carried on the system.[^321]
In the IRFA, we sought comment on whether there is a specific legal
basis for affording operators that qualify as small systems special
consideration. While we did not receive comments on this question, we
have asked for additional further comment on this issue in the *Third
Further Notice*. As noted above, we also have asked for comment on
commenter's proposals for alternative rules that would apply to small
cable operators. Furthermore, we anticipate that more and more cable
systems will become all-digital cable systems in the coming years,
thereby minimizing any potential impact that these rules 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.

**F.** **Report to Congress**

20\. The Commission will send a copy of the *Third Report and Order*,
including this FRFA, in a report to be sent to Congress pursuant to the
Congressional Review Act.[^322] In addition, the Commission will send a
copy of the *Third Report and Order*, including this FRFA, to the Chief
Counsel for Advocacy of the SBA. A copy of the *Third Report and Order*
and FRFA (or summaries thereof) will also be published in the Federal
Register.[^323]

**APPENDIX B**

**Initial Regulatory Flexibility Analysis For the *Third Further
Notice***

1\. As required by the Regulatory Flexibility Act of 1980, as amended
("RFA"),[^324] 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 *Third Further Notice of Proposed Rulemaking* ("*Third Further
Notice"*). Written public comments are requested on this IRFA. Comments
must be identified as responses to the IRFA and must be filed by the
deadlines for comments on the *Third Further Notice* as indicated on the
first page of the Order. The Commission will send a copy of the *Third
Further Notice*, including this IRFA, to the Chief Counsel for Advocacy
of the Small Business Administration ("SBA").[^325] In addition, the
*Third Further Notice* and IRFA (or summaries thereof) will be published
in the Federal Register.[^326]

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

2\. This *Third Further Notice* seeks comment on several detailed issues
related to the major questions about material degradation and
viewability after the transition. Our goal in this proceeding is to
determine how best to implement the requirements adopted in the *Third
Report and Order* 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.[^327] We ask how the
channel positioning rules should apply to operators carrying more than
one version of a station's signal, and seek comment on a proposal that
on systems that provide analog service, the analog version be physically
located on the appropriate channel as determined by the channel
placement rules, and that the version as broadcast appear on that same
channel for digital subscribers who can view it. We also seek comment on
the practicality and wisdom of a proposal for multiple digital versions
of a signal to appear on the same channel from a subscriber perspective.
We generally seek comment on the issue of changing display formats
during downconversion, and note two proposals offered by commenters. We
seek comment on the applicability of the material degradation rules
adopted by the associated Report and Order. We ask whether the current
notice rules are sufficient to enforce the requirement that cable
operators notify their subscribers if they decide to become an
all-digital system, and if not what changes are necessary. We again ask
for alternative rules that would "minimize the economic impact for small
cable operators while still complying with the statutory
requirements,"[^328] request comment on the appropriate small business
size standard to use under these rules, and seek any further proposals
to minimize the impact on small cable operators, whether they are
alternative rules, ameliorated timetables, or any other approaches that
would conform to the requirements of the statute. We offer for comment
specific proposals raised by ACA and other commenters. Finally, we
welcome comment on any other matters relating to material degradation
and viewability, and particularly the proper and sufficient application
of the rules in this Order.

**B. Legal Basis**

3\. The authority for the action proposed in this rulemaking is
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.

**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.[^329] The RFA defines the
term "small entity" as having the same meaning as the terms "small
business," "small organization," and "small governmental
jurisdiction."[^330] In addition, the term "small business" has the same
meaning as the term "small business concern" under the Small Business
Act.[^331] 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 SBA.[^332] The
rules we may adopt as a result of the comments filed in response to this
*Third 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."[^333] 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.[^334] According to Census Bureau data for 2002, there
were a total of 1,191 firms in this category that operated for the
entire year.[^335] 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.[^336] Thus, under this size standard, the
majority of firms can be considered small. We note, however, that the
proposals at issue in this *Third FNPRM* only apply at this time to
cable operators,[^337] and not other MVPD providers.[^338]

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.[^339] Industry data
indicate that, of 1,076 cable operators nationwide, all but eleven are
small under this size standard.[^340] In addition, under the
Commission's rules, a "small system" is a cable system serving 15,000 or
fewer subscribers.[^341] 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.[^342] Thus, under
this second size standard, most cable systems are small.

7\. *Cable System Operators*. The Act 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."[^343] 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.[^344]
Industry data indicate that, of 1,076 cable operators nationwide, all
but ten are small under this size standard.[^345] 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,[^346] 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.[^347] Business concerns included in this
industry are those "primarily engaged in broadcasting images together
with sound."[^348] 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[^349] (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[^350] 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.[^351] 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.
The Commission estimates that the majority of providers in this category
of Cable and Other Program Distribution are small businesses.

11\. Concerning ITFS, we note that educational institutions are included
in this analysis as small entities.[^352] 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: "\[t\]his 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."[^353] 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.[^354] According to Census Bureau data for 2002,
there were a total of 1,041 establishments in this category that
operated for the entire year.[^355] Of this total, 1,010 had employment
of under 500, and an additional 13 had employment of 500 to 999.[^356]
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 *Third Further Notice* seeks comment on a number of proposals
and issues that deal with implementation of the rules adopted in the
*Third Report and Order*. 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, but if the proposed rules
are implemented we do not anticipate that this need will be any
different for small operators than for large operators. The *Third
Further Notice* solicits alternative approaches that would reduce the
burden on small cable operators of compliance with the rules established
in the *Third Report and Order* while still complying with statutory
requirements. Small broadcast stations would also be affected by the
proposed rules and other issues raised in the *Third Further Notice*,
and their costs could increase under some of the commenter proposals
discussed in the *Third Further Notice.* Also, 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.[^357] We seek comment on the applicability of any of these
alternatives to affected small entities.

15\. The requirements proposed in the *Third Further Notice* would in
most cases create minimal economic impact on small entities, and in some
cases could provide positive impact. 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. 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. 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 *Third Further Notice*, or those submitted
into the record, are ultimately adopted.

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

16\. None.

**APPENDIX C**

**Amended Rules**[^358]

Part 76 of Title 47 of the Code of Federal Regulations is amended as
follows:

> Part 76 -- Multichannel Video and Cable Television Service

**1.** **The authority citation 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, 315, 317, 325, 336, 338, 339, 503, 521, 522, 531, 532, 533,
534, 535, 536, 537, 543, 544, 544a, 545, 548, 549, 552, 554, 556, 558,
560, 561, 571, 572, 573.

#   {#section .unnumbered}

**2. Section 76.56 is amended by adding new subsections (d)(3), (d)(4)
and (d)(5) and revising subsection (e) to read as follows:**

**§ 76.56 Signal carriage obligations.\
**

**\* \* \* \* \***

\(d\) *Availability of signals.*

\* \* \* \* \*

**(3) The viewability and availability requirements of this section
require that, after the broadcast television transition from analog to
digital service for full power television stations cable operators must
either:**

> **(i) carry the signals of commercial and non-commercial must-carry
> stations in analog format to all analog cable subscribers, or**
>
> **(ii) for all-digital systems, carry those signals in digital format,
> provided that all subscribers, including those with analog television
> sets, that are connected to a cable system by a cable operator or for
> which the cable operator provides a connection have the necessary
> equipment to view the broadcast content.**

**(4) Any costs incurred by a cable operator in downconverting or
carrying alternative-format versions of signals under §76.56(d)(3)(i) or
(ii) shall be the responsibility of the cable operator.**

**(5) The requirements set forth in paragraph (d)(3) of this section
shall cease to be effective three years from the date on which all
full-power television stations cease broadcasting analog signals, unless
the Commission extends the requirements in a proceeding to be conducted
during the year preceding such date.**

**(e) *Calculation of Broadcast Signals Carried***

**When calculating the portion of a cable system devoted to carriage of
local commercial television stations under paragraph (b) of this
section, a cable operator may count the primary video and
program-related signals of all such stations, and any alternative-format
versions of those signals, that they carry.**

**3. Section 76.62 is amended by revising subsection (b) and adding
subsection (e) to read as follows:**

**§ 76.62 Manner of carriage.\
**

\* \* \* \* \*

\(b\) Each **digital** television broadcast signal carried shall be
carried without material degradation**. Each analog television broadcast
signal carried shall be carried without material degradation and** in
compliance with technical standards set forth in subpart K of this part.

\(c\) Each local commercial television station whose signal is carried
shall, to the extent technically feasible and consistent with good
engineering practice, be provided no less than the same quality of
signal processing and carriage provided for carriage of any other type
of standard television signal.

\(d\) Each qualified local noncommercial educational television station
whose signal is carried shall be provided with bandwidth and technical
capacity equivalent to that provided to commercial television broadcast
stations carried.

**(e) If a digital television broadcast signal is carried in accordance
with § 76.62(b) and either (c) or (d), the carriage of that signal in
additional formats does not constitute material degradation.**

**STATEMENT OF**

**CHAIRMAN KEVIN J. MARTIN**

**In the Matter of *Carriage of Digital Television Broadcast Signals:
Amendment to Part 76 of the Commission's Rules***

I am pleased with the action that the Commission takes today. With the
adoption of this Order, cable operators will be obligated to ensure that
all of their customers will be able to watch all broadcast stations
after the digital transition.

This item, at its core, is about the consumer. It is about ensuring that
all Americans with cable -- regardless of whether they are analog or
digital subscribers -- are able to watch the same broadcast stations the
day after the digital transition that they were watching the day before
the transition. If the cable companies had their way, you, your mother
and father, or your next door neighbor could go to sleep one night after
watching their favorite channel and wake up the next morning to a dark
fuzzy screen. This is because the cable operators believe that it is
appropriate for them to choose which stations analog cable customers
should be able watch. It is not acceptable as a policy matter or as a
legal matter. 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. Thus, they may not simply cut
off the signals of these must-carry broadcast stations after the digital
transition. The Order we adopt today prevents the cable operators from
doing just that.

To put this in perspective, according to Commission staff calculations,
there are approximately 15 million households with more than 30 million
television sets that rely on over-the-air signals - that is, do not
subscribe to any cable or satellite service. But there are over 40
million homes with 120 million analog cable television sets. Thus, in
the absence of the action we took today, some broadcast stations would
have become unwatchable on these 120 million television sets. And,
millions of consumers will be disenfranchised.

Importantly, in the item we adopt today, we do not dictate how cable
operators must fulfill their statutory requirement to make all broadcast
signals viewable to its subscribers. Rather, we give them a choice.
Accordingly, the Commission is not forcing consumers to purchase or
lease a set top box to continue watching their favorite channels. This
decision lies in the hands of the cable company. They can avoid the need
for new boxes by choosing to downconvert the digital signal into analog
at their headend. This downconversion would permit analog cable
subscribers to continue watching broadcast television just as they do
today without disruption. Of course, to the extent that a cable system
is all-digital, like DBS systems are, all consumers are given a box that
allows them to watch all of the broadcast stations.

Significantly, the statute's viewability requirements do not contain an
exception for small cable operators. And, there was not much in our
record to justify carving out some subset of such operators from the
rules we adopt today. Although I believe that the benefits of the
digital transition should be shared by all Americans, I also have
sympathy for the constraints of very small cable systems. For this
reason, we will allow these providers to file waivers to the extent they
can show that they do not have the capacity to carry another digital
channel. And, we have sought comment in a FNPRM as to whether we should
adopt some different rules for a small subset of cable operators. I look
forward to completing this proceeding in the next six months - well in
advance of the February 2009 transition - so that these operators have
sufficient notice of their obligations.

Today's item guarantees that consumers will be able to watch all
broadcast stations at least until February 2012. In advance of this
date, the Commission will review whether these rules continue to be
necessary to protect consumers. Some of the factors that I believe are
important for the Commission to consider in its review are the extent to
which consumers still rely on analog cable service, the state of the
cable systems' conversion to digital, how customers have fared under the
digital transition (including any added costs or service disruption they
may experience), and the extent to which additional resources have been
allocated by Congress to help consumers manage the transition.

The American consumer is, and continues to be, our highest priority.
Without the proper policies in place, some viewers may be left in the
dark or be unable to realize the full opportunities offered by digital
technology. This is just one of numerous policy proceedings that the
Commission has undertaken to facilitate the nation's transition from
analog to digital television. During the next 17 months, we plan to
issue additional orders that will adjust our rules and policies in
anticipation of the transition on February 17, 2009. We are committed to
taking whatever actions are necessary to minimize the potential burden
the digital transition could impose on consumers and maximize their
ability to benefit from it.

**STATEMENT OF**

**COMMISSIONER MICHAEL J. COPPS**

**In the Matter of *Carriage of Digital Television Broadcast Signals:
Amendment to Part 76 of the Commission's Rules***

The Digital Television Transition, as Americans will come to
understand---I hope sooner rather than later---brings new services to
consumers, but new challenges, too.  It can be a multi-faceted
opportunity or a hydra-headed monster.  We'll know which it is in 17
months and seven days.  And which it is depends entirely on the efforts
of industry and government between now and February 2009.  Today's Order
broaches an important part of the transition that has not received the
nation's attention to the degree it merits.  It is the role of cable and
making sure that consumers (1) continue to receive signals when the
transition occurs and (2) that these services include the best that
digital technology has to offer.  While this Order may seem crammed with
legalisms---some might even allege technical mumbo-jumbo---it contains
important news for consumers.  

            First, it ensures that no cable subscriber will lose access
to a single broadcast station when the DTV transition occurs on February
17, 2009.  That is, cable subscribers can rest easy that night knowing
they will awaken in the morning to the same complement of broadcast
stations on cable they received the night before.  This Order provides
much needed assurance for the large percentage of U.S. households that
receive their programming via cable.

            Second, although the obligation imposed today to make
broadcast signals viewable on analog sets presumptively expires in 2012,
the Commission pledges to conduct a formal review of the rule during its
final year.  That is, like the program access exclusivity ban we are
considering today, the Commission will examine the viewability
requirement to determine whether and how it should be extended.  This
review will need to focus on such relevant factors as:  (1) minimizing
potential cost and service disruption to consumers; (2) the state of
cable systems' conversion to digital; (3) technological and other
marketplace developments; and (4) the impact on other cable services.  I
am pleased that my colleagues have agreed to begin collecting, via
industry reporting, some of the key underlying data that will inform the
Commission's ongoing decision-making process.

            Third, the Order ensures that cable subscribers have access
to broadcasters' pristine digital signals on day one.  So if a
broadcaster has made the investment to transmit in HD, that's exactly
what cable subscribers will get.  That obligation never sunsets and
should provide an additional incentive for cable subscribers to purchase
digital equipment.  While I would have preferred an accommodation for
small cable systems in the present Order, I am pleased that we agree to
complete the Further Notice within six months---well before the February
2009 effective date of the requirement.

            We have 525 days until the end of analog broadcasting.  In a
transition this massive and with so many moving parts, that's precious
little time.  With such little time, so many people to inform and so
much to do, it's time to get everyone's focus and everyone's efforts on
making the DTV transition something we can look back on with pride
rather than sour memories.  Again, it can go either way. 

I know the Bureau worked mightily on this item and I thank them for
that, and I am grateful to my colleagues who worked so hard and clocked
so many miles walking the Eighth floor to achieve workable agreement. 
(I notice the carpet is wearing out up there, which is another reason to
modify the closed meeting rule so we can come together as a body and
achieve consensus without all the inter-office commuting.)

**STATEMENT OF**

**COMMISSIONER JONATHAN S. ADELSTEIN**

**Approving in Part, Dissenting in Part**

**In the Matter of *Carriage of Digital Television Broadcast Signals:
Amendment to Part 76 of the Commission's Rules***

Today, the Commission acts to ensure that, at the end of the national
transition to digital television (DTV), cable operators will not
disenfranchise their viewers. We take important steps to ensure that
digital broadcast signals of must-carry stations will be carried on
cable systems and consumers, including analog cable subscribers, will be
able to view the signals. In short, we preserve the vitality of the free
over the air broadcasting system, and ensure that the critical public
interest value of broadcast television is enjoyed by cable consumers.

The useful attention we are providing to protecting the vitality of our
over-the-air system stands in stark contrast to the outright dereliction
of our duty in fulfilling the obligation to protect other interests of
American viewers during this DTV transition. Since 1999, the Commission
has failed to act on defining the public interest obligations of digital
TV broadcasters. Today, I again implore my colleagues to act on this
critical issue.

Since, as the *Order* makes clear, "must-carry requirements serve the
important and interrelated governmental interests of (1) preserving the
benefits of free, over-the-air local broadcast television; and (2)
promoting the widespread dissemination of information from multiplicity
of sources," *Order* at ¶ 54, we should fulfill the congressional
mandate to define the "benefits" broadcasters are required to provide
the American viewer. The *Order* dwells on the point that
"\[b\]roadcasters denied carriage on cable systems lose a substantial
portion of their audience, which, in turn, translates into lost
advertising revenues." *Id.* There is no mention, however, about how
broadcasters will serve the public in the digital era. This stark
omission belies the integrity of this Commission's commitment to
advancing the DTV transition in the interests of American consumers.
*See* Recommendations of the FCC Consumer Advisory Committee.

The Commission's hitherto lackluster participation in educating
over-the-air viewers about the DTV transition is also troubling. While
the firm DTV transition cut-off date was signed into law since February
8, 2006, the Commission has yet to develop a comprehensive, coordinated
plan to educate over-the-viewers, which include some of the most
vulnerable members of society. In fact, it was only last month -- more
than a year after the hard date was set -- and only after prodding from
Members of Congress \-- that the Commission contemplated issuing a
Notice of Proposed Rulemaking on proposals relating to DTV consumer
education.

While the Commission's effort to date -- in terms of protecting
consumers -- has been disappointing, the broadcast, cable and consumer
electronics industries have picked up the slack, and they have economic
incentives to do so. The DTV Transition Coalition has done an admirable
job in attempting to coordinate the efforts of industry and consumer
advocacy groups. With only 525 days left, the Commission has no more
time to waste.

In today's *Order*, we endeavor to not only protect must-carry stations,
but also ensure that we minimize the potential cost and service
disruption to consumers. Accordingly, the Commission's action today has
much to do with allocating the burden and costs associated with the
national DTV transition. But, to be sure, our guiding principle is that
no over-the-air viewer or analog cable subscriber is left behind.

In this regard, the Commission has permitted a limited number of
over-the-air broadcasters to turn off their analog signals and to
transmit in digital only. Moreover, in the Third Periodic proceeding,
the Commission is also considering whether to permit broadcasters to
reduce the power of their analog signals during the transition, in order
to minimize the costs associated with transmitting in both analog and
digital. The net effect of these actions is that many over-the-air
viewers are today required to either purchase digital TV sets or pay for
a digital-to-analog converter box. If an over-the-air viewer does
neither, he may be left behind before February 17, 2009.

In the cable context, the Congress, the courts, and the Commission have
recognized that the relationship between a cable operator and a
subscriber is different than that of the broadcaster and over-the-air
viewer. Nevertheless, the Commission is required to ensure that cable
subscribers are not left behind after the DTV transition. We must ensure
that cable subscribers will receive a signal that is "viewable,"
pursuant to Section 617(b)(7). The instant *Order* accomplishes this
important goal.

Because the Commission has twice rejected mandatory dual carriage and
multicast must-carry, it is important to recognize that the *Order* is
not intended to be mandatory dual or multicast carriage disguised as
"viewability". The requirement that cable operators must deliver a
"viewable" signal to cable subscribers is not a mandate for the
Commission to specify the ways in which an operator can deliver a
"viewable" signal. Nevertheless, if a cable operator fails to deliver a
"viewable" signal to any cable subscriber, the Commission is obligated
to protect the consumer. Cable operators must ensure that all customers
can obtain the necessary equipment to view the signal. This is analogous
to the need for over-the-air viewers to purchase digital TV sets or
invest in a digital-to-analog converter box in order to view
over-the-air signals.

Within this context of "viewability", the *Order* provides cable
operators with hybrid analog/digital systems the flexibility to carry
the signals of must-carry stations in different ways, as long as all
customers receive a "viewable" signal. The practical effect of this
flexibility is that some cable operators could carry the analog, SD and
HD signals to viewers. Other operators could carry the analog and the HD
signal to viewers, when the must-carry stations broadcasts in HD only.
The operator could also decide to go "all digital" and invest in set-top
boxes for all of their subscribers. This solution protects consumers'
right to a "viewable" signal, and it ensures that must carry stations
will be "viewable" by all cable subscribers.

We encourage cable operators to upgrade their systems and deploy
solutions, such as switched digital, QAM or IPTV, to increase system
capacity for more channels, enhanced services and faster broadband
speeds. Such technological innovations promote efficient network
management and the greater diversity of programming. But even as cable
operators deploy these and other approaches, they must protect cable
subscribers' ability to view signals. Nothing in this *Order* precludes
a cable operator from making available equipment -- preferably for free
\-- that would enable subscribers to take advantage of these
innovations.

In 1992, Congress determined that the preservation of free over the air
television, for the benefit of cable and non-cable households, required
mandating cable systems to carry all local television broadcast stations
up to no more than one-third of a cable system's capacity. The *Order*
achieves this goal.

Beyond achieving the statutory goal of "viewability," the *Order* should
have better advanced the interrelated goal of promoting broadband,
pursuant to section 706 of the Communications Act. The
telecommunications and cable industries are the principal providers of
broadband services to most Americans. And, as the Commission has stated
repeatedly, encouraging the deployment of broadband is one of our
primary goals

I must dissent in part because the *Order* does not provide small, often
rural, cable operators a much-needed exemption from the carriage
obligations in this *Order*. Unlike the major MSOs and LECs, small
system operators face serious financial and technological resource
constraints, and the Commission should consider these limitations moving
forward. We cannot achieve our goal of promoting rural broadband if the
Commission forces small rural cable operators to use their limited
capacity for uses other than what the market and their customers demand,
including broadband. While I am pleased that the *Order* provides for
waivers, it is not fair to ask these tiny rural systems to engage
lawyers in Washington when a simple exemption would have sufficed.

In terms of broadband, other than the failure to provide for small rural
systems, this *Order* has come a long way to balance the needs of these
systems to have the capacity to deliver the higher speeds consumers are
demanding, along with the diversity of channels that they also enjoy.
Some of the proposals considered, such as shoving "all the bits" down
operators' throats, even though the human eye cannot tell the
difference, would have been an enormous waste of capacity that can be
better deployed for broadband and programming diversity. I am pleased
that reason prevailed in terms of the standard we employ to ensure there
is no material degradation of the signals. Consumers are the big winners
when such gratuitous regulation does not distort the marketplace
incentives operators have to deliver what their customers want.
Moreover, there have never been actionable complaints upheld to date
complaining of material degradation.

In short, I thank all my colleagues for working together to craft a
reasonable proposal that has dramatically improved from what was
presented to us. Together, we achieved the paramount goal of ensuring
that all cable subscribers can continue to view broadcast signals after
the digital transition is complete. Now, we must attend to the overdue
work of rolling up our sleeves to ensure that over-the-air viewers are
better informed about the ongoing DTV transition.

**STATEMENT OF**

**COMMISSIONER DEBORAH TAYLOR TATE**

**In the Matter of *Carriage of Digital Television Broadcast Signals:
Amendment to Part 76 of the Commission's Rules***

The 2009 digital transition presents this Commission with a number of
technical legal and policy issues. At the heart of the Commission's
responsibility is ensuring that American consumers continue to receive
uninterrupted television signals. This goal requires us to work
together- and not just as Commissioners, but as an entire industry. From
cable operators to programmers to broadcasters to members of Congress,
we must focus on how we can best effect a smooth and efficient
transition. This item responds to concerns regarding the continued
viewability of must-carry broadcast signals carried by cable operators.
The Commission has made clear that such signals must be viewable on all
television sets of all cable subscribers both now and after the dtv
transition.

This item appropriately reinforces the requirement that must-carry
broadcast signals be carried at as good a quality of signal carriage as
all other signals. There can be no discrimination by cable operators
between signals from a must-carry broadcaster and a cable-affiliated
programmer. All have the right to the same level of viewability.

In addition, it is critical that those cable subscribers with
analog-only television sets continue to receive digital signals after
the transition. Requiring carriage of must-carry digital signals in both
analog and digital formats for three years following the transition will
give the Commission an opportunity to review the status of changes
within the cable industry, as well as allow consumers to adjust to the
upgraded technology. The world of digital technology is experiencing
evolutionary changes. Developments in new compression technology, such
as switched digital, allow cable operators to conserve valuable spectrum
while providing quality video service. Other technological changes we
likely cannot even anticipate at this point. For this reason we must
remain flexible as we approach our rulemaking procedures. Most
importantly, we must continue to approach this transition with a
consumer mindset, understanding that viewers depend on television for
vital news and information.

**STATEMENT OF**

**COMMISSIONER ROBERT M. McDOWELL**

**In the Matter of *Carriage of Digital Television Broadcast Signals:
Amendment to Part 76 of the Commission's Rules***

We at the Commission have worked hard to establish rules and policies to
ensure a smooth digital transition for broadcast television. We now turn
towards a separate but related issue: addressing carriage of
broadcasters' digital signals by cable operators. The Communications Act
directs the Commission to ensure both that cable operators carry
broadcasters' signals without "material degradation" and all cable
subscribers have the ability to view their local must-carry station
broadcast signals.

Regarding material degradation, the Order retains the nondiscrimination
standard adopted by the Commission in 2001 with respect to digital
signals and the requirement that HD signals be carried in HD. We do not
adopt the "all content bits" proposal upon which we sought comment. In
my opinion, our decision strikes the appropriate balance between
ensuring that broadcast signals are not materially degraded and
permitting cable operators to use their technology efficiently to
produce both high quality video and high-speed broadband offerings for
consumers. The standard we reaffirm today will permit cable operators to
take advantage of technological innovations, such as switched digital
and advanced compression technologies, to continue providing service to
consumers with greater efficiency.

With respect to viewability, my colleagues and I endeavored to ensure
that analog cable subscribers -- I am one, by the way -- do not lose
their local must-carry stations from their channel line-ups after the
digital transition. The order requires cable systems that are not
"all-digital" to provide must-carry signals in analog format to their
analog subscribers. This requirement will sunset three years after the
broadcast digital transition hard date, with review by the Commission of
the rule within the final year. However, I am concerned about the effect
this Order may have on smaller cable operators, particularly those with
systems of 552 MHz or less. I will urge the Commission to consider
waiver requests expeditiously and grant waivers for such providers,
where relief is warranted.

I thank my colleagues and the Bureau for their hard work on this item.

[^1]: 47 U.S.C. § 534(b)(4)(B).

[^2]: *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*").

[^3]: This will be the case despite the steady rise in DTV display sales
    over the last several years. About 35 percent of all television
    homes, or approximately 40 million households, are analog-only cable
    subscribers. These 98 million television viewers depend on cable to
    provide all of the programming for their roughly 120 million
    television sets. Moreover, many digital cable subscribers have one
    or more television sets that currently only receive analog cable
    service. *See* Nielsen Media Services estimates for 2006/2007 season
    and Nielsen 2007 2nd Quarter Home Technology Report.

[^4]: *See* Appendix C, *infra*.

[^5]: 47 U.S.C. §§ 534(b)(4)(A), (b)(7).

[^6]: *See* Appendix C, *infra*.

[^7]: 47 U.S.C. § 534(b)(4)(A). *See* Section 615(g)(2) of the Act, 47
    U.S.C. § 535(g)(2) (material degradation requirements applicable to
    noncommercial stations). *See also* [H.R.]{.smallcaps} Conf. Rep.
    No. 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.]{.smallcaps} Rep. No[.]{.smallcaps} 102-92, at 85
    (1991) (same).

[^8]: 47 U.S.C. § 534(b)(4)(B).

[^9]: *Carriage of Digital Television Broadcast Signals:* *Amendment to
    Part 76 of the Commission's Rules*, CS Docket No. 98-120, Second
    Further Notice of Proposed Rulemaking, FCC 07-71 (Rel. May 4, 2007)
    ("*Second Further Notice*") at ¶ 12; (explaining that verification
    that all content bits are passing through would serve as proof that
    an operator is meeting the material degradation standard).

[^10]: *Second Further Notice* at paragraph 15. During any such
    discussions/negotiations, the operator would be required to continue
    to pass through all content bits. This "pass through" requirement
    would also apply, until the time of the Commission ruling, if a
    broadcaster filed a material degradation carriage complaint. If an
    operator decided to end negotiations under this framework, it would
    notify the broadcaster in writing. The broadcaster would then have
    thirty days to file a material degradation carriage complaint, if it
    believed such degradation was occurring despite the absence of the
    required agreement. Failure to file such a complaint within thirty
    days would preclude the broadcaster from so filing during that
    carriage cycle.

[^11]: *Second Further Notice* at para. 3 (citing *First Report and
    Order*, 16 FCC Rcd at 2629, para. 73).

[^12]: *First Report and Order,* 16 FCC Rcd at 2629, para. 73.

[^13]: *First Report and Order,* 16 FCC Rcd at 2628, para. 72.

[^14]: *First Report and Order,* 16 FCC Rcd at 2629, para. 73.

[^15]: 47 U.S.C. § 534(b)(4)(A).

[^16]: *First Report and Order*, 16 FCC Rcd at 2628, para. 72.

[^17]: Comments of NCTA at 27; Comments of AT&T at 2.

[^18]: Broadcast Group Petition for Reconsideration at 20 (the
    "Broadcast Group" comprises Arizona State University, Benedek
    Broadcasting Corp., Midwest Television, Inc., and Raycom Media,
    Inc.).

[^19]: Comcast points out that only two carriage complaints have been
    filed alleging material degradation of an analog signal, and that
    there have been no carriage complaints filed alleging material
    degradation of a digital signal. Comments of Comcast at 12. We note,
    however, that we do not place much weight on the latter, as there
    are few, if any, stations carried pursuant to must-carry in a
    digital format.

[^20]: *See, e.g.*, Comments of Time Warner at 24-26, Comments of
    Comcast at 8, Reply of Verizon at 2-3.

[^21]: Comments of NCTA at 28.

[^22]: Comments of Comcast at 12, note 29.

[^23]: Comments of NAB and MSTV at 21-22.

[^24]: Comments of Time Warner at 26-27.

[^25]: Comments of AT&T at 4. *See also* Reply of OPASTCO at 4 (agreeing
    and noting particularly that small MVPDs use broadband technologies
    to deliver video, and that increasing the bandwidth necessary to
    deliver video could slow the deployment of other broadband-based
    services, limiting the ability of small operators to "bundle"
    services and compete effectively).

[^26]: Comments of Agape Church, Inc. at 1.

[^27]: Comments of Block at 4. *See also* Testimony of Kyle E.
    McSlarrow, Chairman and CEO of NCTA at note 67, *infra*. *But see*
    Testimony of Glenn Britt, CEO of Time Warner, at note 44, *infra*
    (expressing confidence that downconversion is legally permissible).

[^28]: 47 C.F.R. § 76.61.

[^29]: Comments of NAB and MSTV at 28.

[^30]: The cable commenters also strongly dislike the requirement for
    full carriage during pending complaints, which Comcast describes as
    "sentence first, verdict afterwards." Comments of Comcast at 15.

[^31]: Comments of NAB and MSTV at 18.

[^32]: We note that enforcement of the material degradation requirements
    is initiated by a broadcaster's carriage complaint, and that the
    rules provide for the broadcaster to complain first to the cable
    operator before filing such a complaint. This gives the parties an
    opportunity to informally address material degradation disputes, and
    if the station is satisfied with the resultant carriage, no
    complaint will be filed. No additional formal process is necessary.
    47 C.F.R. § 76.61.

[^33]: We note that the some cable commenters appear to express concern
    that these rules will require carriage of, and provide "more
    marketplace power" to "major broadcast networks" who already use
    "retransmission consent leverage" to ensure carriage of affiliated
    cable networks. *See* Reply of The Africa Channel, et al., at 31. On
    the contrary, these rules apply exclusively to stations that elect
    must-carry, and therefore likely have very limited "leverage" and
    "marketplace power."

[^34]: 47 U.S.C. § 534(b)(1)(B) (providing for one-third cap on
    mandatory carriage of commercial stations).

[^35]: 47 U.S.C. § 534(b)(7) (emphasis added).

[^36]: *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,*
    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").

[^37]: *See* 47 U.S.C. § 534(b)(4)(B).

[^38]: Analog-only television sets plainly qualify as "television
    receivers" under Section 614(b)(7) at the present time, and will
    continue to fall within the scope of that term as it is used in
    Section 614(b)(7) after the transition. *See also* paragraph 23,
    *infra*.

[^39]: To assist the Commission in this review, we will include
    questions in our annual Cable Price Survey to assess, for example,
    digital cable penetration, cable deployment of digital set-top boxes
    with various levels of processing capabilities, and cable system
    capacity constraints.

[^40]: *Second Further Notice* at para. 17.

[^41]: *Second Further Notice* at para. 19.

[^42]: *See* Appendix C, *infra*.

[^43]: Consistent with Section 614(b)(7) of the Act, the viewability
    requirement set forth here does not apply to situations where "a
    cable operator authorizes subscribers to install additional receiver
    connections, but does not provide the subscriber with such
    connections, or with the equipment and materials for such
    connections." Under these circumstances, "the operator shall notify
    such subscribers of all broadcast stations carried on the cable
    system which cannot be viewed via cable without a converter box and
    shall offer to sell or lease such a converter box to such
    subscribers." *See* 47 U.S.C. § 534(b)(7). Even in situations where
    a subscriber does not need to lease or purchase a box, the notice
    requirement of Section 614(b)(7) is still fully in effect.

[^44]: In accordance with the material degradation rules discussed in
    Section II(A), *supra*, an operator of a system providing analog
    service must also carry the signal in its original digital format.

[^45]: *See* Testimony of Glenn Britt, CEO of Time Warner, before the
    Subcommittee on Telecommunications and the Internet, U.S. House of
    Representatives (March 27, 2007). *See also* Ted Hearn, *Britt
    Unsure About Local HDTV for Basic-Only Subs*, Multichannel News,
    March 28, 2007 ("In another exchange, \[Rep.\] Boucher referred to
    February 2005 House testimony by Insight Communications CEO Michael
    Willner that after an analog-TV cutoff, cable operators intended to
    send local TV signals from their headends to homes both in analog
    and digital.

    'Do you agree with that? Is that still the industry's plan?' Boucher
    asked. Affirming a commitment to voluntary dual mustcarry \[sic\],
    Britt replied: 'Yes, I do.'

    Afterward, a reporter asked Britt if he believed his company had
    legal authority to convert digital-TV signals to analog at the
    headend. 'We think we have flexibility to do what we need to do,'
    Britt said.")

[^46]: "All-digital" systems are systems that do not carry analog
    signals or provide analog service.

[^47]: Comments of NCTA at 7. *But see*, *Bend Cable Communications, LLC
    d/b/a BendBroadband Request for Waiver of Section 76.1204(a)(1) of
    the Commission\'s Rules*, 22 FCC Rcd 209 (2007), *GCI Cable, Inc.
    Request for Waiver of Section 76.1204(a)(1) of the Commission\'s
    Rules*, CSR-7130-Z, Memorandum Opinion and Order, DA 07-1020 (MB
    rel. May 4, 2007), and *Consolidated Requests for Waiver of Section
    76.1204(a)(1) of the Commission's Rules*, Memorandum Opinion and
    Order, 22 FCC Rcd 11780 (MB Jun. 29, 2007), among others (receiving
    a waiver from the separable security requirements in exchange for an
    agreement to go all-digital by February 17, 2009).

[^48]: Because of the nondegradation requirements of the Act, all
    operators will be required to provide at least some digital service
    to subscribers. *See* paragraph 7, *supra*.

[^49]: Comments of NAB and MSTV at 10.

[^50]: Reply of NAB and MSTV at 5 (emphasis in original); *see also*
    note 73, *supra*.

[^51]: Reply of Game Show Network, LLC at 2.

[^52]: Rules to Implement and Administer a Coupon Program for Digital to
    Analog Converter Boxes, NTIA Docket No. 0612242667705101, Final
    Rule, 72 FR 12097 at paragraph 8 ("NTIA Coupon Program Final
    Rule\'\'); 47 C.F.R. § 301.

[^53]: *See* note 67, *infra*. *See also* Testimony of Glenn Britt at
    note 44, *supra*.

[^54]: *See* Appendix C, *infra*.

[^55]: Reply of NCTA at 8; Reply of Comcast at 11.

[^56]: *See* 47 U.S.C. §§ 534(b)(7), 535(h). Indeed, some cable
    operators were already planning to carry downconverted versions of
    broadcast signals, in addition to the broadcast version, in order to
    ensure that subscribers continue to be able to view them. *See,
    e.g.*, Reply of Cequel at 3. *See also* Testimony of Glenn Britt at
    note 44, *supra*. Our discussion of material degradation clarifies
    that this is not a violation of Commission Rules. *See* Paragraph
    13, *supra*.

[^57]: Reply of Comcast at 9-10, partially quoting 47 U.S.C. § 534(b)(7)
    (emphasis added by commenter).

[^58]: In addition, it is important to note that the relevant question
    under the statute is not whether subscribers can view over-the-air
    broadcast signals using their receivers. Rather, it is whether
    subscribers can view the signals of broadcast stations that are
    carried through their cable system. *See* 47 U.S.C. § 534(b)(7).

[^59]: *See* 47 U.S.C. § 534(b)(7) (emphasis added). By referring to
    "additional" receivers that are attached without operator
    involvement, the provision contemplates that at least one receiver
    is connected by the operator. We note further that a box (or
    television) purchased at retail by the subscriber is nevertheless
    covered by the viewability requirement if the cable operator
    provides the connection.

[^60]: *Implementation of the Cable Television Consumer Protection and
    Competition Act of 1992*, 8 FCC Rcd 2965 at FN 99 (1993) (*"Must
    Carry Order"*). *See also* Reply of NAB and MSTV at 8 (citing
    *Barnhart v. Sigmon,* 534 U.S. 438 (2002), for the premise that
    "\[w\]here Congress chooses to use different language in separate
    sentences of a statute, it is presumed to have intended different
    results").

[^61]: Reply of NAB and MSTV at 8.

[^62]: 47 U.S.C. § 534(b)(7); *see also* Reply of NAB at 7-8.
    ("\[W\]here the cable operator *does* provide the connections for
    television receivers, including analog receivers, the operator does
    not satisfy the viewability requirement... by making the signal
    available in a format that cannot be viewed").

[^63]: *Second Further Notice* at para. 16.

[^64]: Comments of Comcast at 23; *see also* Comments of NCTA at 12,
    note 14.

[^65]: *See In re Amendment of Parts 73 and 74 of the Commission\'s
    Rules To Establish Rules for Digital Low Power Television,
    Television Translator, and Television Booster Stations and To Amend
    Rules for Digital Class A Television Stations, Report & Order*, 19
    FCC Rcd 19331, 19338, ¶ 17 (2004).

[^66]: Comments of Comcast at 23.

[^67]: "The Commission is correct (*Notice* n. 33) that analog
    television sets will, after the transition, continue to be
    'television receivers' for purposes of the viewability provision. If
    a cable operator provides any video service to an analog set or a
    connection to an analog receiver for video service, then that set
    falls squarely within Congress' expectations that must-carry signals
    will be provided universally to all cable subscribers. Certainly,
    when Congress directed the Commission to modify its must-carry rules
    in Section 614(b)(4)(B), it did not expect the Commission to use
    that authority to eliminate Congress' core goal of universal
    availability of local must-carry signals. Redefining 'receiver' to
    exclude analog sets that otherwise receive video from cable
    operators would thus be directly contrary to Congressional intent."
    Comments of NAB and MSTV at 7, fn 7.

[^68]: Additionally, contrary to the suggestion made by Comcast, the
    ability to purchase a subsidized converter box for over-the-air
    digital signals does not alter the ongoing statutory responsibility
    of cable operators to make must-carry broadcast signals viewable by
    their subscribers. The converter box program was limited to
    over-the-air signals in part because of the Congress' confidence
    that cable companies would continue to fully serve their
    subscribers. This confidence was based in part on assurances by the
    cable industry. *See, e.g.*, Testimony of Kyle E. McSlarrow,
    Chairman and CEO of NCTA, before the Subcommittee on
    Telecommunications and the Internet, U.S. House of
    Representatives.("And when we get to a transition, whenever that
    transition takes place, and we are faced with what do we do with the
    analog customers, *what we are proposing is to allow us to
    down-convert, in some circumstances, just for the limited number of
    must-carry stations*. In the meantime, you are exactly right. The
    converter boxes, or the more elaborate boxes that some people may
    want, particularly if they want high definition or DVRs, or those
    kinds of things, are increasingly going to penetrate the
    subscribership. So what you have a universe which, you know, we have
    gone through the numbers ad nauseam right now, but I think we all
    agree, the largest television universe is the cable customer
    universe, 66 million people, and *what we are offering is to incur
    the cost themselves*. It is not going to cost the government a dime.
    We will take care of the problem. No one on day one of the
    transition will see any difference from the day before. In the
    meantime, the digital transition is taking place. *And when it comes
    to must-carry, I guess our concern is this. We are saying we will
    step up, we will do this. We are not asking you to place an
    obligation on anybody else. And near as I can tell, everybody at
    this table would love to place obligations on cable or some other
    industry. We are not going to ask you to do that. We will take care
    of it*.") (emphasis added).

[^69]: Comments of NCTA at 10-11.

[^70]: *Oncale v. Sundowner Offshore Services, Inc.*, 523 U.S. 75, 79
    (1998).

[^71]: Comments of NCTA at 10-11.

[^72]: *See also* Comments of Time Warner at 18-24.

[^73]: *See* 47 U.S.C. § 534(b)(4)(B) (requiring us to update carriage
    requirements for "advanced television services," now known as
    Digital Television).

[^74]: *See*, *e.g.*, *Requirements for Digital Television Receiving
    Capability, Second Report & Order*, 20 FCC Rcd 18607 (2005) ("*DTV
    Tuner Requirement Order*") (relying on the All Channel Receiver Act
    to require that all TV receivers include a digital tuner). The same
    problems that led Congress to pass the ACRA in 1962 arose again in
    the digital context, and their earlier solution proved just as
    effective. In viewability, just as with tuners, Congress' concern
    and foresight remain relevant and controlling. *See also* Reply of
    NAB and MSTV at 9 and note 15.

[^75]: Comments of Time Warner at 19-20.

[^76]: *Implementation of the Cable Television Consumer Protection and
    Competition Act of 1992; Broadcast Signal Carriage Issues*,
    Memorandum Opinion & Order, 9 FCC Rcd 6723 (1994).

[^77]: *See, e.g.*, *In* *the Matter of Paxson Hawaii License, Inc*, 14
    FCC Rcd 9105 (1999); *In re: Complaint of Adell Broadcasting
    Corporation against Harron Communications*, 12 FCC Rcd 15169 (1997);
    *In re: Complaint of Fouce Amusement Enterprises, Inc., Licensee of
    Television Station KRCA, Riverside, California*, 10 FCC Rcd 668
    (1995).

[^78]: Reply of The Weather Channel at 6.

[^79]: Comments of Time Warner at 16. *See also* Reply of The Africa
    Channel, et al., at 2 (recognizing that a significant amount, almost
    certainly a clear majority, of what is described as "duplicative
    programming" is in place due to market decisions by cable companies
    and voluntary agreements between cable operators and cable
    programmers. TAC particularly attacks cable carriage deals inked by
    retransmission consent stations and networks, which are unrelated to
    the rules we establish today, which are designed to ensure the
    viewability of stations that do not have the "leverage" that worries
    TAC and other independent cable programmers).

[^80]: Reply of NAB at 13.

[^81]: Reply of Gospel at 1; *see also* Reply of Comcast at 6.

[^82]: 47 U.S.C. § 534(b)(1)(B); *see also* paragraphs 30 and 36,
    *infra*.

[^83]: Reply of The Africa Channel at 34.

[^84]: *Turner Broadcasting System, Inc. v. FCC*, 520 U.S. 180 (1997)
    ("*Turner II"*).

[^85]: Comments of Comcast at 15, et. seq., Comments of Time Warner at
    3, and Comments of NCTA at 4.

[^86]: Comments of Comcast at 24.

[^87]: *Second Report and Order*, 20 FCC Rcd at 4516, para. 1.

[^88]: *Id.* at para. 27

[^89]: *See* 47 U.S.C. § 534(b)(5).

[^90]: Reply of NCTA at 5-6.

[^91]: Comments of Comcast at 24.

[^92]: *Id.*

[^93]: *First Report and Order*, 16 FCC Rcd at 2629, para. 73.

[^94]: Nothing in Sections 614 or 615 suggest that must-carry
    requirements apply only to rate-regulated systems. Section 615(h)
    specifically requires provision on the "lowest priced tier," a
    requirement distinct from the "basic tier" created in Section 623
    and an indication that Congress intended that all cable subscribers
    be able to see must-carry signals, regardless of whether their cable
    operator faced effective competition.

[^95]: Comments of Comcast at 34; *See also* Reply of NCTA at 3-4.

[^96]: 47 U.S.C. § 534(b)(1)(B).

[^97]: *See generally*, *Turner II*, 520 U.S. 180.

[^98]: *See* Appendix C, *infra*.

[^99]: *First Report and Order*, 16 FCC Rcd at 2632-3, paras. 79-80. We
    neither require nor reject boxes in this Order, and our rule is
    totally agnostic as to their use. Allowing operators the discretion
    to pursue either viewability option will give them the flexibility
    they need to respond to their local market while ensuring the
    continued availability, to all consumers, of must-carry stations.

[^100]: Comments of Time Warner at 22.

[^101]: Comcast observes that the ongoing and accelerating move by
    consumers to digital cable will continue for the remainder of the
    transition. Therefore, there will be fewer than 32 million analog
    subscribers remaining as the nation approaches February 17, 2009,
    and the cost of transitioning to an all-digital system at that time
    will be concomitantly lower. Comments of Comcast at 29, note 88. We
    note also that many operators are promoting the subscriber-level
    switch to digital. *See, e.g.*, Reply of Cequel at 2.

[^102]: Reply of Americans for Tax Reform at 1; Reply of Ovation LLC at
    4 (citing to Comments of NAB and MSTV at 11 that clearly deal with
    over-the-air converter boxes when discussing the easy availability
    of converter boxes to cable subscribers).

[^103]: Rules to Implement and Administer a Coupon Program for Digital
    to Analog Converter Boxes, NTIA Docket No. 0612242667705101, Final
    Rule, 72 FR 12097 at paragraph 8 ("NTIA Coupon Program Final
    Rule\'\'); 47 C.F.R. § 301.

[^104]: We note also that use of over-the-air converter boxes and
    antennas, contrary to the suggestion of TAC, cannot fulfill the
    statutory mandate that must-carry signals be "viewable via cable."
    *See* Reply of The Africa Channel, et al. at 34-35.

[^105]: Comments of Discovery at 4-5.

[^106]: *First Report and Order,*16 FCC Rcd at 2606, para. 15. This is
    also exactly the kind of flexibility Congress gave the Commission in
    Section 614(b)(4)(B) to ensure that the nation would make a smooth
    transition from analog to digital.

[^107]: Comments of Discovery at note 16.

[^108]: *Turner II*, 520 U.S. 180.

[^109]: *First Report and Order*, 16 FCC Rcd at 2602, para. 7.

[^110]: Reply of Cequel at 12-13.

[^111]: Comments of NAB and MSTV at 11, Comments of Entravision at 5,
    Reply of Agape at 1.

[^112]: Comments of NAB and MSTV at 11, note 11.

[^113]: Comments of Entravision at 5.

[^114]: *See* Appendix C, *infra*.

[^115]: To the extent that a standard definition digital subscriber is
    unable to view a high definition signal via their equipment,
    operators have a similar responsibility to ensure that the signal is
    viewable.

[^116]: 47 U.S.C. § 534(b)(1)(B).

[^117]: 47 U.S.C. § 534(b)(2). Section 615 also requires carriage of
    noncommercial stations. *See* 47 U.S.C. § 535(a).

[^118]: *First Report and Order*, 16 FCC Rcd at 2614-5, paras. 39-40.

[^119]: Such systems must, however, commit to continue carrying an
    analog version such that their subscribers are assured of being able
    to view all must-carry stations carried on the system.

[^120]: Comments of Comcast at 34, n. 102, Comments of Time Warner at
    23-4, and Comments of NCTA at 1-2; *but see* Reply of Americans for
    Prosperity, et al., at 2 (recognizing that the decision to become an
    all-digital system rests with the operator).

[^121]: 47 C.F.R. §§ 76.1603, 76.1622.

[^122]: Comments of Entravision at 3-4.

[^123]: *Id.* at 4-5.

[^124]: *Id.* at 2.

[^125]: *Second Further Notice* at para. 17.

[^126]: Comments of CEA at 1; *see* also Reply of Chris Llana.

[^127]: Comments of CEA at 4-5.

[^128]: *Id.* at 6-10.

[^129]: *Id.* at 7-8.

[^130]: As discussed in note 93, *supra*, the "viewability" language in
    615(h) expressly refers to carriage on the "lowest priced tier." 47
    U.S.C. § 535(h).

[^131]: We note in passing that CEA appears to misunderstand the
    statistic that roughly half of current cable subscribers are analog
    subscribers, cited by the Commission in paragraph 4 of the *Second
    Further Notice*. CEA believes this number stands for the proposition
    that "50 percent of all cable subscribers do *not* take a
    proprietary set-top box" and that "\[t\]his means that half of all
    subscribers... look to the competitive retail market for their
    devices." Comments of CEA at 3 (emphasis in original). This number
    does not actually speak to the number of subscribers who rely on set
    top boxes, proprietary or not. Many analog subscribers do use a
    set-top box, and the growing use of Cablecards means that more and
    more digital subscribers do not use a box. The statistic CEA cites
    actually means that "half of all subscribers" choose to look neither
    to their cable operator nor to the "competitive retail market" for
    their "devices." Instead, they choose to rely on the equipment they
    have already purchased. It is the interests of these consumers, and
    their full access to programming, that drives the Commission's
    decisions on viewability.

[^132]: *See, e.g.,* Comments of NCTA at 7, 13-14; Comments of Comcast
    at 6, 15.

[^133]: *Turner II*, 520 U.S. 180.

[^134]: 47 U.S.C. § 534(b)(7) ("Signals carried in fulfillment of the
    requirements of this section \[must-carry signals\] shall be
    provided to every subscriber of a cable system. Such signals shall
    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").

[^135]: *See* Comments of NAB and MSTVat 5-10.

[^136]: Comments of NCTA at 2; *see also* Comments of Time Warner at 3
    ("to most cable operators and subscribers, the NPRM single carriage
    proposal will be unavailable"); Comments of Comcast at 34, note 102.

[^137]: Comments of NCTA at 23 (contending that forcing cable
    subscribers to install digital boxes on their television sets to
    receive must-carry broadcasts is "no choice at all").

[^138]: *See* Comments of Time Warner at 3; Comments of NCTA at 2-3, 23;
    Reply of Cequel Communications at 4 (expressing concern over the
    "uncertainty" caused by new rules).

[^139]: Only those consumers of cable systems that continue to offer
    analog programming after the transition can avoid the need for a
    set-top box (or a digital television). In addition, while analog
    television sets will continue to receive signals from Low Power
    broadcasters, who will still be lawfully transmitting analog signals
    on February 18, 2009, and for some time afterwards, we doubt very
    much that cable subscribers, because they object to using a set-top
    box, will choose instead to rely solely on over-the-air signals from
    Low Power broadcasters.

[^140]: *See, e.g.,* Comments of NCTA, Appendix A, 35-36.

[^141]: For this reason, we also reject any notion that the all-digital
    option results in an unconstitutional taking of property without
    just compensation. *See* Comments of Comcast at 35-36; Comments of
    NCTA at 25-26. We address the cable operators' Fifth Amendment
    arguments in greater detail below. *See infra* paras. 64-71.

[^142]: *See* *Implementation of Section 3 of the Cable Television
    Consumer Protection and Competition Act of 1992, Statistical Report
    on Average Rates for Basic Service, Cable Programming Service, and
    Equipment*, MM Docket No. 92-266, Report on Cable Industry Prices,
    21 FCC Rcd 15087, 15087-88, para. 2 ("*2006 Cable Price Report"*).

[^143]: Comments of NCTA at 8.

[^144]: Comments of NCTA at 2; *see also* note 67, *supra*.

[^145]: Reply of Cequel at 2.

[^146]: Comments of Comcast at 16-17.

[^147]: *Id.* at 16, 17 ("consumers will go elsewhere" if cable
    operators do not provide them the channels they want or make
    available to them the equipment needed to view those channels).

[^148]: Comments of NCTA at 5.

[^149]: Comments of NCTA at 24; *id.* at 32 ("Every signal will be
    carried, the signal will be viewable from day one with the right
    receiving equipment (as half of U.S. cable households already
    have)").

[^150]: Comments of NCTA at 5.

[^151]: *See, e.g., Consolidated Requests for Waiver of Section
    76.1204(a)(1) of the Commission's Rules; Implementation of Section
    304 of the Telecommunications Act of 1996; Commercial Availability
    of Navigation Devices,* CS Docket No. 97080, Memorandum Opinion and
    Order, 22 FCC Rcd 11780 (MB Jun. 29, 2007) ("*All-Digital Waiver
    Order"*) (granting limited waiver of ban on integrated set-top boxes
    to over 100 cable MVPDs that operate all-digital systems or will
    transition to all-digital systems by February 17, 2009). The Media
    Bureau previously granted similar waivers to three other MVPDs that
    had committed to all-digital operations. *Id.* at para. 4.

[^152]: *See* Comments of NCTA at 19 & n.35 (noting Comcast plans to
    eliminate 38 channels on its expanded basic analog tier to reclaim
    the bandwidth for digital signals).

[^153]: *First Report and Order*, 16 FCC Rcd at 2602, para. 7 (citing
    *Service Rules for the 746-764 and 776-794 MHz Bands, and Revisions
    to Part 27 of the Commission\'s Rules,* WT Docket No. 99-168, *et
    al.,* Memorandum Opinion and Order and Further Notice of Proposed
    Rulemaking, 15 FCC Rcd 20845, 20871, para. 65 (2000) (clarifying
    that cable systems ultimately are obligated to accord \"must-carry\"
    rights to local broadcasters\' digital signals)).

[^154]: NCTA\'s contention that the second option represents an
    impermissible "time, place and manner restriction" is also
    inapposite. Comments of NCTA, Appendix A at 32-33. To the extent
    that cable operators wish to continue transmitting analog signals to
    their customers, they are free to do so under the first option set
    forth above. If, however, cable operators choose to comply with the
    viewability mandate by ensuring that all customers are able to view
    digital signals rather than downconverting, then there is no
    legitimate reason why such operators would continue to transmit any
    analog signals. Indeed, NCTA itself admits that the purpose of such
    analog transmissions would be to provide service to "those
    television households who rely on analog TVs and who do not want
    converter boxes cluttering up their homes... . " *Id*. at 33.
    Continuing analog service to subscribers who do not have digital
    equipment, purporting to satisfy the second option, would constitute
    a clear circumvention of the statute's viewability mandate.

[^155]: *Turner II*, 520 U.S. at 189 (citing *United States v. O'Brien,*
    391 U.S. 367, 377 (1968)).

[^156]: *Turner Broadcasting System, Inc. v. FCC*, 512 U.S. 622, 643
    (1994)("*Turner I*"). *See also Satellite Broadcasting and
    Communications Ass'n v. FCC,* 275 F.3d 337, 353-55 (concluding that
    "carry one, carry all" rule is a content-neutral measure and thus
    subject to intermediate scrutiny).

[^157]: *See* Comments of Time Warner at 11 (quoting *Turner I*, 512
    U.S. at 652).

[^158]: Comments of NCTA at 15-16, Appendix A, 6-13.

[^159]: *See Turner I*, 512 U.S. at 647 (rejecting argument that the
    must-carry regulations are content- based because Congress's
    overriding objective of preserving access to free television
    programming "is unrelated to the content of expression disseminated
    by cable and broadcast speakers"); *id.* ("The design and operation
    of the challenged provisions confirm that the purposes underlying
    the enactment of the must-carry scheme are unrelated to the content
    of speech."); *Turner II*, 520 U.S. at 225-26 (Breyer, J.,
    concurring in part) (joining the majority opinion (and providing the
    fifth vote) "except insofar as \[it\] . . . relies on an
    anticompetitive rationale").

[^160]: *Annual Assessment of the Status of Competition in the Market
    for the Delivery of Video Programming*, MB Docket No. 05-255,
    Twelfth Annual Report, 21 FCC Rcd 2503, 2506, para. 8 (2006)
    ("*Twelfth Annual Video Competition Report*") (69.4 percent of MVPD
    subscribers received video programming from a cable operator). While
    the number of DBS subscribers has increased since the Supreme
    Court's *Turner* decisions, there is no evidence in the record that
    DBS places meaningful pressure on cable operators to carry all
    broadcast stations.

[^161]: *Turner II*, 520 U.S. at 190.

[^162]: *Twelfth Annual Video Competition Report*, 21 FCC Rcd at 2552,
    para. 96, 2617, Appendix B, Table B-1.

[^163]: NCTA 2007 Industry Overview at 9 (available at
    http://i.ncta.com/ncta_com/PDFs/NCTA_Annual_Report_04.24.07.pdf)
    (visited August 15, 2007). The total day share of all other TV
    sources declined slightly between 1995 and 2006 from 28 to 27
    percent. *Id. See Twelfth Annual Video Competition Report*, 21 FCC
    Rcd at 2579, para. 165 (for two years, the combined audience share
    of all cable programmers has been higher than the combined share of
    all broadcast TV stations for daytime and prime time viewing).

[^164]: *See* Letter from Helgi C. Walker, Wiley, Rein & Fielding, LLP,
    to Marlene H. Dortch, Secretary, FCC, CS Docket No. 98-120 (filed
    June 2, 2006), attaching study titled *Promoting the Public Interest
    Benefits of Broadcasting in the New Millenium: The FCC Can and
    Should Update Its Existing Carriage Regulation to Meet the Demands
    of the Digital Age* ("*Promoting the Public Interest"*), at 12 ("The
    increase in the number of available sources of video programming \--
    which remains ongoing due to innovation \-- has fundamentally
    altered the environment that broadcasters face by placing them in
    the midst of an increasingly fragmented market.").

[^165]: *Turner II,* 520 U.S. at 197 (internal quotes and citations
    omitted).

[^166]: *Twelfth Annual Video Competition Report*, 21 FCC Rcd at 2570,
    para. 144 ("Relatively few consumers ... have a second wireline
    alternative, such as an overbuild cable system, as indicated by the
    small number of subscribers to BSPs \[broadband service providers\]
    and the limited entry by LEC\[s\] thus far. Several other MVPD
    technologies, such as private cable systems and wireless cable
    systems, offer consumers alternatives to incumbent cable services,
    but only in limited areas, and their overall share of the MVPD
    market has declined from 3.29 percent to 2.88 percent over the last
    year" (internal citations omitted)). *See Turner II,* 520 U.S. at
    197.

[^167]: *Carriage of Digital Television Broadcast Signals, Amendments to
    Part 76 of the Commission's Rules*, CS Docket No. 98-120, Petition
    for Reconsideration of ABC Television Affiliates Association, CBS
    Television Network Affiliates Association, NBC Television
    Affiliates, ABC Owned Television Stations, NBC and Telemundo
    Stations (April 21, 2005) ("*Network Affiliates Petition*") at 18;
    *Twelfth Annual Video Competition Report*, 21 FCC Rcd at 2509, para.
    20 (at the end of 2004, there were 118 clusters with approximately
    51.5 million subscribers). *See Turner II*, 520 U.S. at 206 (noting
    evidence on remand of trend toward clustering).

[^168]: *See Turner II*, 520 U.S. at 207 ("The FTC study the dissent
    cites ... concedes the risk of anticompetitive carriage denials is
    'most plausible' when 'the cable system's franchise area is large
    relative to the local area served by the affected broadcast
    station,' and when 'a system's penetration rate is both high and
    relatively unresponsive to the system's carriage decisions.' That
    describes 'precisely what is happening' as large cable operators
    expand their control over individual markets through clustering. As
    they do so, they are better able to sell their own reach to
    potential advertisers, and to limit the access of broadcast
    competitors by denying them access to all or substantially all the
    cable homes in the market area") (citations omitted); *Twelfth
    Annual Video Competition Report*, 21 FCC Rcd at 2574, para. 154
    (noting that, in the license transfer proceeding relating to the
    sale of Adelphia's systems to Comcast and Time Warner, in which the
    transfer of systems will enlarge or consolidate various clusters
    owned by Comcast and Time Warner, BellSouth "argues that
    consolidation and clustering in the cable industry increases the
    ability of cable operators to gain exclusive contracts with
    unaffiliated cable networks" (citation omitted)).

[^169]: *Turner II*, 520 U.S. at 197.

[^170]: *Id.* at 197, 206.

[^171]: *See Twelfth Annual Video Competition Report*, 21 FCC Rcd at
    2620, Appendix B, Table B-3. This figure includes cable MSOs only.
    Including DBS operators DirecTV and Echostar, the top 10 MSOs serve
    88 percent of subscribers. *Id*.

[^172]: *Twelfth Annual Video Competition Report,* 21 FCC Rcd at 2575,
    para. 157.

[^173]: *Turner II*, 520 U.S. at 198 (internal quotes and citations
    omitted); *id.* at 200 (noting evidence on remand of "cable industry
    favoritism for integrated programmers").

[^174]: *Turner II*, 520 U.S. at 200-01 (citations omitted). *See id.*
    at 203-04 (finding substantial evidence that advertising revenue
    would be of increasing importance to cable operators as cable
    systems mature and penetration levels off). Cable subscribership has
    been declining slightly. *See* *Twelfth Annual Video Competition
    Report,* 21 FCC Rcd at 2617, Appendix B, Table B-1.

[^175]: *Turner II,* 520 U.S. at 201.

[^176]: *Id.* at 203. *See Twelfth Annual Video Competition Report*, 21
    FCC Rcd at 2521, Table 4 (showing 12% increases in cable industry
    local advertising revenues from 2003 to 2004 and from 2004 to 2005),
    2551, para. 94 (cable programming networks experienced a 17.7%
    increase, to \$16.4 billion, in advertising revenue in 2004,
    compared to \$14 billion in 2002); *Network Affiliates Petition* at
    18 n.67 ("The industry's revenue from local advertising increased an
    estimated 13.5% from 2003 to 2004") (citations omitted); *Carriage
    of Digital Broadcast Signals,* CS Docket No. 98-120, Special Factual
    Submission in Support of Multicast Carriage by the NBC Television
    Affiliates Ass'n (filed Jan. 8, 2004) ("*NBC Factual Submission*"),
    at 11-12, 15 n.39 (cable operators are encroaching on broadcasters'
    advertising base); *Carriage of Digital Broadcast Signals,* CS
    Docket No. 98-120, Special Factual Submission by the CBS Television
    Network Affiliates Association in Support of Multicast Carriage
    Requirement (filed Jan. 13, 2004) ("*CBS Factual Submission*") at
    14-15 ("cable operators have experienced a dramatic rise in
    advertising revenue to the detriment of local broadcasters").

[^177]: *See* http://www.ncta.com/ContentView.aspx?contentId=70 (viewed
    Aug. 16, 207) (showing increase in cable network local/spot
    advertising revenue from \$818 to \$4,296 (in millions) between 1992
    and 2006).

[^178]: *See Turner II,* 520 U.S. at 219-220.

[^179]: *See id.* at 220-21 (Congress reasonably decided that use of A/B
    switches was not a real alternative to must-carry based in part on
    lack of consumer acceptance where evidence showed that "it is rare
    for \[cable subscribers\] ever to switch to receive an over-the-air
    signal," even after FCC-mandated technical improvements and an
    extensive educational program on the use of A/B switches) (internal
    quotes and citations omitted). NCTA dismisses these findings as
    dated, *see* Comments of NCTA, App. A at 12 ("that was fifteen years
    ago -- an epoch in terms of electronic technology"), and asserts
    that today's television viewer can use a universal remote control
    "to switch seamlessly" from a cable signal to a broadcast signal to
    a DBS signal, *id.*, but it provides no data to demonstrate that
    consumers have accepted this technology and use it widely.

[^180]: *See id.* at 219 (data before Congress showed that "many
    households lacked adequate antennas to receive broadcast signals").
    *See also Promoting the Public Interest*, *supra* n.164, at 14, note
    82 (in adopting the Satellite Home Viewer Improvement Act, Pub. L.
    No. 106-113, 113 Stat. 1501 (1999), "Congress recognized the need to
    ensure that satellite television subscribers would not be 'required
    to go to the trouble and expense of installing off-air antennas to
    improve their reception of local television signals,' in recognition
    of the fact that the use of such equipment is, at best,
    inconvenient") (quoting S. Rep. No. 106-51, at 5 (1999)).

[^181]: *See Turner II*, 520 U.S. at 221; *Twelfth Annual Video
    Competition* *Report*, 21 FCC Rcd at 2552, para. 96.

[^182]: *Turner II,* 512 U.S. at 189-90, 209.

[^183]: *Id.* at 208-09.

[^184]: *Id.* at 208 (quoting *Turner I*, 512 U.S. at 666).

[^185]: *Id.*

[^186]: *See Carriage of Digital 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 4516
    (2005).

[^187]: *Id.* at 4525.

[^188]: *Id.*

[^189]: *See, e.g.,* Comments of Comcast at 25; Comments of NCTA at
    14-15; Comments of Time Warner at 15.

[^190]: *Second Further Notice* at para. 4 and note 7. Comcast suggests
    that the 32 million households that are currently analog cable
    subscribers is "far from an accurate guess" as to how many
    households will be unable to view must-carry stations after the
    transition, because cable customers are "rapidly adopting digital
    services." Comments of Comcast at 29 n.88. In addition to supporting
    our conclusion that conversion to all-digital is a reality, not a
    "fantasy," as NCTA contends, (note 150, *supra*) Comcast does not
    offer any alternative figure. Even if, as we expect, there are fewer
    analog cable subscribers by 2009, the loss of millions of households
    predictably will have an adverse financial impact on broadcasters.

[^191]: *See, e.g.,* Comments of Religious Voices in Broadcasting at 2-3
    (reducing audience share affects advertising revenue for local
    broadcast stations and substantially hinders the stations' ability
    to continue offering quality programming).

[^192]: We note that the economic health of local broadcasters is
    substantially weaker than it was when Congress imposed the
    must-carry requirements in 1992. Among other things, broadcasters
    face increasing competition from cable operators for advertising
    dollars. *See* *NBC Factual Submission* at 15 n.39 ("\[t\]rends
    confirm that increasingly consolidated cable operators are making
    troubling inroads into the local advertising market -- a critical
    source of support for free, over-the-air television"); *CBS Factual
    Submission* at 14 (citing Kathleen Anderson, Cablers Wage War for Ad
    Dollars: Industry Economics Making Ops Competitive with Local
    Stations, Hollywood Reporter, Dec. 8, 2003). Additional financial
    demands have resulted from the costs associated with purchasing the
    transmitters and other equipment needed to broadcast a digital
    signal. *See* *NBC Factual Submission* at 15-16 & n.40; *CBS Factual
    Submission* at 15. For example, it has been estimated that it would
    cost broadcasters between \$2.3 million and \$3.1 million per
    station to comply with the Commission's initial requirements for
    digital transmission, a figure that represents up to 242% of annual
    station revenues and does not even take into account additional
    program production or acquisition costs. *See* General Accounting
    Office, *Many Broadcasters Will Not Meet May 2002 Digital Television
    Deadline*, GAO 02-466 (April 2002), at 16-18. Overall, it is
    estimated that broadcasters will spend between \$10 billion and \$16
    billion on the digital transition. *See Digital Television
    Transition: Hearing Before the Senate Committee on Commerce,
    Science, and Transportation*, 109th Cong. 2 (2005) (Testimony of
    Edward O. Fritts, President & CEO, NAB, at 2). The economic health
    of independent broadcasters, those that are most likely to benefit
    from must-carry regulation, is particularly tenuous. According to
    recent figures, at least 25 percent of independent stations across
    the country had a negative cash flow, and one-quarter of independent
    stations had a pre-tax loss of over half a million dollars. *See
    Station Revenues, Expenses, and Profit: Television Financial Report,
    2005 Edition*, at 157. Moreover, the economic difficulties
    experienced by independent stations are not limited to those in
    small markets. In the top twenty-five markets, for example, at least
    25 percent of independent stations experienced a negative cash flow,
    and one-quarter of independent stations had a pre-tax loss that
    exceeded \$800,000. *See id.* at 159. The hardship is also
    particularly great for broadcasters in smaller markets, who
    generally have more restricted revenue opportunities, and stations
    affiliated with minor networks. In non-top 25 markets, for example,
    most WB affiliates reported a pre-tax loss in 2004, with twenty-five
    percent of such stations reporting a loss of over one million
    dollars. *See id*. at 155. Twenty-five percent of all UPN affiliates
    reported a pre-tax loss of over \$290,000. *See id*. at 145. And
    outside of the top 100 markets, twenty-five percent of Fox
    affiliates registered a pre-tax loss of over \$220,000. *See id*. at
    131. Additionally, according to NBC, "in markets 51-175, the
    fourth-ranked station went from an average revenue gain in 1997 of
    \$2.4 million to an average loss of \$2.7 million in 2001." *NBC
    Factual Submission*, at 16. *See generally* Ottina, *The Declining
    Financial Position of Television Stations in Medium and Small
    Markets* (Dec. 2002) (Attachment C to Comments of NAB in MB Docket
    No. 02-277 (Jan. 2, 2003)). *See also* Letter from Brandon Burgess,
    President and Chief Executive Officer, ION Media Networks, Inc., to
    Chairman Kevin J. Martin, *et al.*, FCC, CS Docket No. 98-120, at
    2-3 (filed Aug. 28, 2007) (continued full carriage of broadcast
    signals is critical to continued viability of independent
    broadcasters post-DTV transition; the only way to fulfill
    congressional intent is to ensure that \"no television viewers
    suffer exclusion from over-the-air broadcasting in the DTV
    transition\"); Letter from Frank Wright, President & CEO, National
    Religious Broadcasters, to the Honorable Kevin Martin, FCC, CS
    Docket No. 98-120 (filed Aug. 21, 2007) (failure to ensure that all
    cable subscribers are able to view all local broadcast television
    stations in the post-analog world \"would cause significant hardship
    for religious and other non-profit broadcasters, making it difficult
    to fulfill their educational mission\").

[^193]: *Annual Assessment of the Status of Competition in the Market
    for the Delivery of Video Programming*, MB Docket No. 06-189,
    Comments of the NAB (filed Nov. 29, 2006), at 3.

[^194]: Although cable operators frame their arguments in terms of the
    absence of an important governmental interest, their real quarrel is
    with the means chosen to advance that interest. *See, e.g.,*
    Comments of Comcast at 29 (over-the-air signals will continue to be
    available through the use of converter boxes); Comments of NCTA at
    21 (carrying digital signal only is sufficient because any customer
    who wants to view the signal can do so, presumably through the use
    of converter boxes); Comments of Time Warner at 12 n.39 ("the goal
    of ensuring that cable subscribers with analog television sets are
    able to continue viewing must-carry stations . . . could be fully
    achieved by providing digital set-top boxes to subscribers"). Of
    course, cable operators have the option under this order to avoid
    downconversion by becoming "all-digital" systems.

[^195]: *Turner II*, 520 U.S. at 194.

[^196]: *See id.* at 197.

[^197]: *Id.* at 192-93 (internal citations and quotations omitted).
    *See also* Letter from Joe Uva, Chief Executive Officer, Univision
    Communications, Inc., to Marlene Dortch, Secretary, FCC, CS Docket
    No. 98-120, at 2 (filed Aug. 24, 2007) (Univision is the primary
    source of local news and informational programming, as well as
    public affairs programming for \"millions of Spanish-speaking homes
    in dozens of local markets;\" this \"already- underserved population
    therefore is at significant risk of being disenfranchised if the
    Commission does not ensure that cable systems continue to make
    broadcast programming available on analog sets following the DTV
    transition\").

[^198]: *See Carriage of Digital 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 4528 ("A
    swift digital transition and the return of the analog spectrum for
    other uses are important governmental concerns.").

[^199]: Title III of the Deficit Reduction Act of 2005, Pub. L. No.
    109-171, § 3005, 120 Stat. 4, 23-24 (2006).

[^200]: *See Requirements for Digital Television Receiving Capability*,
    ET Docket No. 05-24, Second Report and Order, 20 FCC Rcd 18607,
    18609, para. 6 (2005) (stating that "consumers must be able to
    receive digital TV signals for the transition to move forward to a
    successful completion"); *recon.,* *Requirements for Digital
    Television Receiving Capability*, 21 FCC Rcd 9478, 9480, para. 7
    (2006)(same); *see also* Comments of NAB and MSTV at 2, 4-7
    (Commission's proposed actions will "ameliorate adverse consumer
    effects from the DTV transition").

[^201]: *See* Comments of NCTA at 23 ("Perpetuating analog carriage
    makes it *unnecessary* for customers to transition to digital in
    order to watch must-carry channels") (emphasis in original);
    Comments of Discovery at 9-11; Comments of Comcast at 31; Comments
    of Time Warner at 13.

[^202]: *See Requirements for Digital Television Receiving Capability*,
    ET Docket No. 05-24, Second Report and Order, 20 FCC Rcd 18607,
    18609, para. 6 (2005) (stating that "consumers must be able to
    receive digital TV signals for the transition to move forward to a
    successful completion"); *recon.,* *Requirements for Digital
    Television Receiving Capability*, 21 FCC Rcd 9478, 9480, para. 7
    (2006)(same); *see also* Comments of NAB and MSTV at 2, 4-7
    (Commission's proposed actions will "ameliorate adverse consumer
    effects from the DTV transition").

[^203]: *See* Comments of NCTA at 17-20; *see also* Comments of Comcast
    at 33-35.

[^204]: Comments of NCTA at 17.

[^205]: *See Turner II*, 520 U.S. at 213-14.

[^206]: Comments of NAB and MSTV at 13.

[^207]: *Id*.

[^208]: *Id*.

[^209]: *The Commission's Cable Horizontal and Vertical Ownership
    Limits*, MM Docket No. 92-264, Second Further Notice of Proposed
    Rulemaking, 20 FCC Rcd 9374, 9403, para. 50 (2005) (citing *Annual
    Assessment on the Status of Competition in the Market for the
    Delivery of Video Programming*, MB Docket No. 04-227, Eleventh
    Annual Report, 20 FCC Rcd 2755, 2772, Table 3 (2005)). *See also*
    *Network Affiliates Petition* at 15 (cable capacity has doubled or
    tripled since analog carriage rules were adopted).

[^210]: *Turner I*, 512 U.S. at 639. *See also Turner II*, 520 U.S. at
    228 (Breyer, J., concurring in part)("the burden the statute imposes
    upon the cable system, potential cable programmers, and cable
    viewers is limited and will diminish as typical cable system
    capacity grows over time").

[^211]: *See generally Carriage of Digital Broadcast Television
    Signals*, CS Docket No. 98-120, Letter from NBC Television
    Affiliates Group, NBC Television Station, CBS Television Network
    Affiliates Association, and ABC Television Affiliates Association to
    Chairman Michael Powell, FCC (filed Apr. 16, 2004), Attachment
    (*Network Affiliates Capacity White Paper*).

[^212]: *See* USA Today,
    [http://www.usatoday.com/tech/products/services/2006-06-04-cable-hdtv_x.htm]{.underline}
    (visited Jun. 12, 2006) (noting that Time Warner plans to use
    switched digital on all of its systems and that Cox and Cablevision
    are developing plans for its use as well).

[^213]: *Id.* (quoting Mike LaJoie, Time Warner Cable Chief Technology
    Officer, as saying that "\[o\]nce I have the switching fabric in
    place, I can add as many channels as I want and never overload").

[^214]: Comments of NAB and MSTV at 13-14.

[^215]: *See* 47 U.S.C. § 534(b)(1)(B).

[^216]: *See Turner II*, 520 U.S. at 228-29 (Breyer, J., concurring in
    part) (because Congress could reasonably conclude that must-carry
    helps the typical over-the-air viewer more than it hurts the typical
    cable subscriber, the First Amendment does not dictate a result that
    favors cable viewers).

[^217]: Comments of Time Warner at 12 n.39.

[^218]: *See supra* paras. 54-57. *See also* note 44, *supra*
    (describing cable's plans to voluntarily carry an analog version of
    broadcast signals).

[^219]: *Turner II*, 520 U.S. at 217-18.

[^220]: *See* Comments of NCTA at 8 ("[This is not to say that cable
    operators will necessarily choose to provide must-carry signals only
    in a digital format.]{.underline} Cable operators have every
    interest in making the digital transition as seamless as possible
    for customers . . . . If significant numbers of customers wish to
    receive broadcast signals in an analog format, operators will have
    every incentive to provide them.")(emphasis in original).

[^221]: U.S. C[onst]{.smallcaps}. amend. I.

[^222]: *See* Comments of Time Warner at 6.

[^223]: *See supra* para 42.

[^224]: *See* Comments of Comcast at 35-36; Comments of NCTA at 25-26.

[^225]: U.S. C[onst]{.smallcaps}. amend. V.

[^226]: *See generally Yee v. City of Escondido*, 503 U.S. 519, 522-23
    (1992).

[^227]: *Loretto v. Teleprompter Manhattan CATV Corp*., 458 U.S. 419,
    435 (1982). *See also Lucas v. South Carolina Coastal Council*, 505
    U.S. 1003, 1015 (1992) (in addition to a permanent physical
    occupation, a *per se* taking is effected by a government action
    that \"denies all economically beneficial or productive use of
    land\").

[^228]: *Loretto*, 458 U.S. at 426 ("We conclude that a permanent
    physical occupation authorized by government is a taking without
    regard to the public interests that it may serve").

[^229]: *Id*. at 436-37 ("\[C\]onstitutional protection for the rights
    of private property cannot be made to depend on the size of the area
    permanently occupied").

[^230]: *Id*. at 434 ("\[O\]ur cases uniformly have found a taking to
    the extent of the occupation, without regard to whether the action
    achieves an important public benefit or has only minimal economic
    impact on the owner."). *See also Yee*, 503 U.S. at 527; *Nollan v.
    California Coastal Comm.*, 483 U.S. 825, 831 (1987); *Keystone
    Bituminous Coal Ass'n v. DeBenedictis*, 480 U.S. 470, 489 n.18
    (1987).

[^231]: *See* Letter from Jack N. Goodman, NAB, to Marlene H. Dortch,
    Secretary, FCC, CS Docket No. 98-120 (filed Aug. 5, 2002) (*NAB
    August 2002* *Ex Parte*), at 18-20 (citing *Loretto*, 458 U.S. at
    419 ("carriage requirements in no way resemble the type of
    'permanent physical occupations of real property' subject to
    Loretto's per se rule")).

[^232]: We note that Congress expressly stated in 1992 that the
    must-carry requirements do not constitute an unconstitutional
    taking. *See* H. Rep. 102-628, at 67 (1992).

[^233]: *NAB August 2002* *Ex Parte* at 17.

[^234]: *Tahoe-Sierra Pres. Council, Inc. v. Tahoe Reg'l Planning
    Agency*, 535 U.S. 302, 324 (2002).

[^235]: *Loretto v. Teleprompter Manhattan CATV Corp.,* 458 U.S. 419
    (1992).

[^236]: *See, e.g.,* *Qwest Corp. v. United States*, 48 Fed. Cl. 672,
    693 (2001).

[^237]: *Loretto*, 458 U.S. at 437.

[^238]: *See Florida Power*, 480 U.S. at 252 (citing *Penn Central
    Transp. Co. v. New York City,* 438 U.S. 104 (1978)).

[^239]: *Penn Cent. Transp. Co. v. City of New York*, 438 U.S. 104, 124
    (1978). *See also Yee*, 503 U.S. at 523; *Pruneyard Shopping Ctr. v.
    Robins*, 447 U.S. 74, 83 (1980).

[^240]: *Penn Cent. Transp. Co.*, 438 U.S. at 124.

[^241]: *See supra* paras 35, 54, and 56.

[^242]: *See Connolly v. Pension Benefit Guar. Corp.*, 475 U.S. 211, 227
    (1986) ("Those who do business in the regulated field cannot object
    if the legislative scheme is buttressed by subsequent amendments to
    achieve the legislative end") (quoting *FHA v. Darlington, Inc.*,
    358 U.S. 84, 91 (1958)).

[^243]: *See* 47 U.S.C. §§ 534(b) and 535(b).

[^244]: *See, e.g., Multi-Channel TV Cable Corp. v. Charlottesville*, 65
    F.3d 1113, 1124 (4th Cir. 1995). *See also Park Avenue Tower Assoc.
    v. City of New York*, 746 F.2d 135, 138 (2d Cir. 1984).

[^245]: *See generally*, Comments of United Communications Corporation.

[^246]: 47 U.S.C. § 573(c)(1).

[^247]: 47 U.S.C. § 573(c)(2)(A).

[^248]: *See Implementation of Section 302 of the Telecommunications Act
    of 1996, Second Report and Order*, 11 FCC Rcd 18223, 18307-08
    (1996).

[^249]: *Id*. at 18308-09, n.371. We note, however, that an OVS operator
    must make qualified local commercial and noncommercial educational
    television stations available to every subscriber. *See* 47 C.F.R. §
    76.1506(e).

[^250]: *See* 47 U.S.C. § 573(c)(1)(B); *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 at 18311-13
    (1996).

[^251]: *See* Appendix C, *infra*.

[^252]: 47 U.S.C. § 534(b)(6); 47 C.F.R. § 76.57(a). There are three
    channel positioning options for commercial television stations but
    in the *First Report and Order* the Commission decided that only the
    on-channel option is relevant to the new digital signals. *First
    Report and Order* (motions for reconsideration have been filed on
    this issue).

[^253]: 47 U.S.C. § 535(g)(5); 47 C.F.R. § 76.57(b).

[^254]: 47 U.S.C. §§ 534(b)(6), 535(g)(5).

[^255]: *First Report and Order*, 16 FCC Rcd at 2633-36, paras. 81-83.

[^256]: *Id.*

[^257]: The PSIP provides for display of the "major channel number"
    which in most cases is the station's former analog channel. *See*
    *Program and System Information Protocol for Terrestrial Broadcast
    and Cable*, ATSC Document A/65 (Dec. 23, 1997).

[^258]: Comments of NAB and MSTV at 24.

[^259]: *Id.*

[^260]: Reply of NCTA at 19.

[^261]: Comments of NAB and MSTV at 17-18 (citing *Implementation of the
    Cable Television Consumer Protection and Competition Act of 1992*,
    Report & Order, 8 FCC Rcd 2965, 3004 (1993).

[^262]: Comments of NCTA at 27-28 (citing *First Report and Order*, 16
    FCC Rcd at 2629, paras. 73) (emphasis added). They also point to
    Section 325(b)(3)(C)(4) of the Act, which provides that "if an
    originating television station elects... to exercise its right to
    grant retransmission consent under this subsection with respect to a
    cable system, the provisions of section 614 shall not apply to
    carriage of the signal of such station by the cable system." See
    Reply of NCTA at 14.

[^263]: 47 C.F.R. §§ 76.1601, 76.1603, and 76.1622.

[^264]: *Second Further Notice* at para. 12.

[^265]: *See, e.g.*, Comments of NCTA at 6 and Comments of Time Warner
    at 6.

[^266]: Comments of ACA at 5-6.

[^267]: *Id*. at 10.

[^268]: *See* paragraph 7, *supra.*

[^269]: *See, e.g.,* note 55, *supra.*

[^270]: *See* paragraph 37 and note 119, *supra.*

[^271]: Comments of Block at 4

[^272]: *Id.*

[^273]: Comments of ACA at 6-8; *See also* note 46, *supra*.

[^274]: Comments of ACA at 6-7.

[^275]: *See* 5 U.S.C. § 604. The RFA, *see* 5 U.S.C. § 601 et. seq.,
    has been amended by the Small Business Regulatory Enforcement
    Fairness Act of 1996 ("SBREFA"), Pub. L. No. 104-121, Title II, 110
    Stat. 847 (1996). The SBREFA was enacted as Title II of the Contract
    With America Advancement Act of 1996 ("CWAAA").

[^276]: 5 U.S.C. § 801(a)(1)(A).

[^277]: *See* 5 U.S.C. § 603.

[^278]: The Small Business Paperwork Relief Act of 2002 ("SBPRA"), Pub.
    L. No. 107-198, 116 Stat 729 (2002) (codified in Chapter 35 of title
    44 U.S.C.); *see* 44 U.S.C. § 3506(c)(4).

[^279]: *See* 47 C.F.R. § 1.1206(b); *see also* 47 C.F.R. §§ 1.1202,
    1.1203.

[^280]: *See id*. § 1.1206(b)(2).

[^281]: *See* 47 CFR §§ 1.415, 1.419.

[^282]: *See* *Electronic Filing of Documents in Rulemaking
    Proceedings*, 13 FCC Rcd 11322 (1998).

[^283]: *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).

[^284]: *Carriage of Digital Television Broadcast Signals:* *Amendment
    to Part 76 of the Commission's Rules*, CS Docket No. 98-120, Second
    Further Notice of Proposed Rulemaking, FCC 07-71 (Rel. May 4, 2007)
    ("*Second Further Notice*").

[^285]: *See* 5 U.S.C. § 604.

[^286]: *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.

[^287]: *See* para. 16, *supra*.

[^288]: *See* para. 7, *supra.*

[^289]: *See Third Report and Order*, paragraph 18, *supra.*

[^290]: "All-digital" systems are systems that do not carry analog
    signals or provide analog service.

[^291]: *See* para. 37, *supra*.

[^292]: 5 U.S.C. § 603(b)(3).

[^293]: 5 U.S.C. § 601(6).

[^294]: 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.".

[^295]: 15 U.S.C. § 632.

[^296]: U.S. Census Bureau, 2002 NAICS Definitions, "517510 Cable and
    Other Program Distribution";
    http://www.census.gov/epcd/naics02/def/NDEF517.HTM.

[^297]: 13 C.F.R. § 121.201, NAICS code 517510.

[^298]: 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).

[^299]: *Id*. An additional 61 firms had annual receipts of \$25 million
    or more.

[^300]: On this point, we note that the rules do not, for example, apply
    to DBS services.

[^301]: 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).

[^302]: 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.

[^303]: 47 C.F.R. § 76.901(c).

[^304]: 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.

[^305]: 47 U.S.C. § 543(m)(2); *see* 47 C.F.R. § 76.901(f) & nn. 1-3.

[^306]: 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).

[^307]: 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.

[^308]: 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. §
    76.901(f).

[^309]: *See* 13 C.F.R. § 121.201, NAICS Code 515120.

[^310]: *Id*. This category description continues, "\[t\]hese
    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.

[^311]: 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.

[^312]: "\[Business concerns\] 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).

[^313]: 13 C.F.R. § 121.201, NAICS code 517510. This NAICS code applies
    to all services listed in this paragraph.

[^314]: 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.

[^315]: 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.

[^316]: 13 C.F.R. § 121.201, NAICS code 334220.

[^317]: 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.

[^318]: *Id*. An additional 18 establishments had employment of 1,000 or
    more.

[^319]: *See Third Report and Order,* paragraph 7*, supra.*

[^320]: 5 U.S.C. §§ 603(c)(1)-(c)(4)

[^321]: *See Third Report and Order,* paragraph 37, note 119, *supra.*

[^322]: *See* 5 U.S.C. § 801(a)(1)(A).

[^323]: *See* 5 U.S.C. § 604(b).

[^324]: *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).

[^325]: *See* 5 U.S.C. § 603(a).

[^326]: *See* *id.*

[^327]: *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.

[^328]: *Second Further Notice* at para. 12.

[^329]: 5 U.S.C. § 603(b)(3).

[^330]: 5 U.S.C. § 601(6).

[^331]: 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".

[^332]: 15 U.S.C. § 632.

[^333]: U.S. Census Bureau, 2002 NAICS Definitions, "517510 Cable and
    Other Program Distribution";
    http://www.census.gov/epcd/naics02/def/NDEF517.HTM.

[^334]: 13 C.F.R. § 121.201, NAICS code 517510.

[^335]: 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).

[^336]: *Id*. An additional 61 firms had annual receipts of \$25 million
    or more.

[^337]: The proposals would also apply to OVS operators.

[^338]: On this point, we note that the proposals do not, for example,
    apply to DBS services.

[^339]: 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).

[^340]: 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.

[^341]: 47 C.F.R. § 76.901(c).

[^342]: 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.

[^343]: 47 U.S.C. § 543(m)(2); *see* 47 C.F.R. § 76.901(f) & nn. 1-3.

[^344]: 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).

[^345]: 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.

[^346]: 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).

[^347]: *See* 13 C.F.R. § 121.201, NAICS Code 515120.

[^348]: *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.

[^349]: 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.

[^350]: "\[Business concerns\] 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).

[^351]: 13 C.F.R. § 121.201, NAICS code 517510. This NAICS code applies
    to all services listed in this paragraph.

[^352]: 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.

[^353]: 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.

[^354]: 13 C.F.R. § 121.201, NAICS code 334220.

[^355]: 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.

[^356]: *Id*. An additional 18 establishments had employment of 1,000 or
    more.

[^357]: 5 U.S.C. § 603(c)(1) -- (c)(4).

[^358]: Changes are indicated in **bold**.