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 Federal  Communications  Commission  FCC  02-  230 
 Before  the  Federal  Communications  Commission 
 Washington,  D.  C.  20554 


 In  the  Matter  of 
 Review  of  the  Commissions  Rules  and  Policies 
 Affecting  the  Conversion  To  Digital  Television 


 )  ) 
 )  ) 
 )  )  MM  Docket  No.  00-  39 


 SECOND  REPORT  AND  ORDER  AND 
 SECOND  MEMORANDUM  OPINION  AND  ORDER 
 Adopted:  August  8,  2002  Released:  August  9,  2002 
 By  the  Commission:  Chairman  Powell,  Commissioners  Abernathy  and  Copps,  with  Commissioner  Martin  dissenting  and  Chairman  Powell,  Commissioners 
 Abernathy,  Copps  and  Martin  issuing  statements 
 TABLE  OF  CONTENTS  Paragraph 
 I.  INTRODUCTION..  1  II.  BACKGROUND  3 
 III.  DISCUSSION.  8  A.  DTV  Receiver  Standards  -  DTV  Reception  Requirement    8 
 B.  Update  of  the  DTV  Transmission  Standard.  47  C.  Other  Issues..  56 
 IV.  ADMINISTRATIVE  MATTERS  68  V.  ORDERING  CLAUSES...  71 
 Appendix  A:  Parties  Submitting  Comments,  Reply  Comments,  Petitions,  and  Responses  to  Petitions 
 Appendix  B:  Rule  Changes  Appendix  C:  Final  Regulatory  Flexibility  Analysis 


 I.  INTRODUCTION 
 1.  By  this  action,  the  Commission  is  resolving  several  issues  raised  in  the  Report  and  Order  and  Further  Notice  of  Proposed  Rule  Making  (Report  and  Order/  Further  Notice)  in  this 
 proceeding  with  respect  to  broadcast  digital  television  (DTV)  receiving  equipment  and  technical 
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 standards.  1  First,  we  are  amending  our  rules  to  require  that  new  broadcast  television  receiving  equipment  include  the  capability  to  receive  DTV  signals.  This  requirement  will  be  phased  in 
 over  time  to  avoid  imposing  undue  costs  on  manufacturers  or  consumers  and  to  minimize  any  disruption  of  the  TV  receiver  market.  We  are  taking  this  action  to  ensure  that:  1)  consumers  are 
 provided  the  capability  to  receive  broadcasters  digital  TV  signals  just  as  they  have  been  provided  the  capability  to  receive  analog  TV  signals;  2)  the  intent  of  the  1962  All  Channel 
 Receiver  Act  (ACRA),  as  codified  at  Section  303(  s)  of  the  Communications  Act  of  1934,  as  amended,  2  is  fulfilled;  and  3)  the  transition  of  the  broadcast  television  service  from  analog  to 
 digital  transmission  technology  can  progress  as  smoothly  and  rapidly  as  possible  towards  the  target  completion  date  set  forth  in  the  Communications  Act. 


 2.  We  also  are:  1)  amending  our  rules  to  reference  the  most  recent  version  of  the  Advanced  Television  System  Committees  (ATSC)  DTV  standard  and  to  include  the  ATSCs 
 Program  System  and  Information  Protocol  (PSIP)  specification  as  a  document  that  licensees  may  consult  for  guidance;  2)  refraining  at  this  time  from  adopting  labeling  requirements  for  TV 
 receivers  that  are  not  able  to  receive  any  over-  the-  air  broadcast  signals;  and  3)  denying  a  petition  for  reconsideration  requesting  that  we  consider  imposing  minimum  performance  thresholds  for 
 DTV  receivers  if  manufacturers  do  not  promptly  implement  performance  standards  on  their  own.  These  actions,  which  address  the  remaining  issues  in  our  first  review  of  the  DTV  transition,  will 
 provide  necessary  updates  to  our  technical  rules  and  remove  uncertainties  for  broadcasters  and  equipment  manufacturers.  We  also  recognize  the  benefits  for  broadcasters  and  consumers  of  the 
 service  features  offered  by  the  ATSC  PSIP  specification  and  will  address  the  possible  adoption  of  this  specification  into  the  rules  in  the  Notice  of  Proposed  Rule  Making  in  our  forthcoming 
 Second  Review  of  our  policies  for  the  DTV  transition. 


 II.  BACKGROUND 
 3.  In  the  Fifth  Report  and  Order  in  the  DTV  proceeding,  the  Commission  stated  that  it  intended  to  conduct  periodic  reviews  of  the  progress  of  the  conversion  to  digital  television  and  to 
 make  such  mid-  course  corrections  as  were  necessary  to  ensure  the  success  of  that  conversion.  3  We  commenced  this  proceeding,  the  first  periodic  review,  on  March  6,  2000,  with  a  Notice  of 
 Proposed  Rule  Making  (Notice)  that  invited  comment  on  a  number  of  issues  essential  to  resolve 


 1  Report  and  Order  and  Further  Notice  of  Proposed  Rule  Making  in  MM  Docket  No.  00-  39,  16  FCC  Rcd  5946 
 (2001).  In  the  Memorandum  Opinion  and  Order  (MO&  O)  in  this  proceeding,  we  indicated  that  the  proceeding  was  terminated.  However,  therein  we  also  indicated  that  the  Report  and  Order/  Further  Notice  in  this  proceeding 


 raised  several  major  technical  issues  that  were  not  resolved  in  the  MO&  O  and  that  would  be  resolved  in  a  separate  Report  and  Order.  See  Memorandum  Opinion  and  Order  in  MM  Docket  No.  00-  39,  16  FCC  Rcd  20594  (2001), 
 para.  2.  Accordingly,  we  are  correcting  the  inadvertent  closing  of  this  proceeding  in  the  MO&  O  and  are  addressing  the  outstanding  technical  issues  in  this  docket  herein. 


 2  All  Channel  Receiver  Act  of  1962,  P.  L.  No.  87-  529,  76  Stat.  150  (codified  at  47  U.  S.  C.  303(  s)). 
 3  Fifth  Report  and  Order  in  MM  Docket  No.  87-  268,  12  FCC  Rcd  12809  (1997)    41. 
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 if  the  transition  was  to  progress.  4  These  issues  concerned  station  services  areas,  selection  of  post  DTV  channels,  resolution  of  mutually  exclusive  DTV  and  DTV/  NTSC  applications,  and  several 
 technical  subjects. 
 4.  In  the  Report  and  Order/  Further  Notice  resolving  those  issues,  we  also  recognized  that  a  number  of  the  commenting  parties,  principally  entities  representing  broadcast  interests, 


 had  raised  questions  and  concerns  relating  to  DTV  reception  capability  in  television  receivers.  5  In  response  to  these  concerns,  we  proposed  to  require  that  new  television  receivers  have  the 
 capability  to  demodulate  and  decode  over-  the-  air  DTV  signals  by  a  date  certain.  We  sought  comment  on  how  to  best  implement  such  a  requirement,  including  alternatives  for  phasing  in 
 DTV  reception  capability  in  a  manner  that  would  minimize  costs  for  both  manufacturers  and  consumers. 


 5.  In  comments  responding  to  the  Notice,  the  ATSC  indicated  that  its  ATSC  DTV  standard  A/  53,  most  of  which  was  adopted  by  the  Commission  in  1996  as  the  U.  S.  broadcast 
 DTV  transmission  standard,  has  been  updated.  6  The  ATSC  therefore  requested  that  we  revise  the  rules  to  reference  the  most  recent  version  of  the  ATSC  DTV  Standard  A/  53.  It  further 
 indicated  that  it  has  developed  a  PSIP  specification  for  digital  television  (ATSC  Doc.  A/  65)  and  asked  that  we  require  broadcasters  to  transmit  PSIP  information  using  the  A/  65  specification.  In 
 the  Report  and  Order/  Further  Notice,  we  indicated  that  an  industry  administered  system  is  the  best  approach  for  managing  the  implementation  of  a  PSIP  system.  However,  we  also  recognized 
 that  the  transport  stream  identifiers  (TSIDs)  used  in  the  PSIP  system  must  be  unique  to  each  individual  television  station  and  that  there  is  a  need  to  coordinate  TSID  assignments  for  stations 
 in  the  border  areas  with  our  neighbors  in  Canada  and  Mexico.  We  therefore  agreed  that  TSID  assignments  should  be  made  part  of  the  Commission's  licensing  process  for  broadcast  television 
 stations  and  stated  that  we  would  begin  to  incorporate  this  function  into  that  process  in  the  near  future. 


 6.  We  also  observed  that  digital  television  receivers  could  be  marketed  without  the  capability  to  receive  over-  the-  air  broadcast  signals  and  sought  comment  on  whether  we  should 
 require  that  any  such  products  be  labeled  to  inform  consumers  of  this  limitation  on  product  functionality.  Finally,  in  their  Petition  for  Reconsideration  of  issues  addressed  in  the  Report  and 
 Order/  Further  Notice,  the  Association  for  Maximum  Service  Television,  Inc.,  the  National  Association  of  Broadcasters,  and  the  Association  of  Local  Television  Stations,  Inc. 
 (MSTV/  NAB/  ALTV),  requested  that  we  reconsider  our  decision  denying  their  request  that  we  establish  minimum  performance  standards  for  DTV  receivers. 


 7.  We  received  comments  on  the  new  proposals  in  the  Report  and  Order/  Further  Notice  from  seven  parties  and  replies  to  those  comments  from  two  parties.  In  addition,  we  received 
 4  Notice  of  Proposed  Rule  Making  in  MM  Docket  No.  00-  39,  15  FCC  Rcd  4257  (2000). 
 5  Report  and  Order/  Further  Notice    103-  110.  In  the  subsequent  MO&  O  the  Commission  addressed  petitions 
 for  reconsideration  of  the  service  rules  issues  addressed  in  the  Report  and  Order/  Further  Notice. 
 6  See  Fourth  Report  and  Order  in  MM  Docket  No.  87-  268,  11  FCC  Rcd  17771  (1996);  see  also  Report  and 
 Order/  Further  Notice    57-  61. 
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 Petitions  for  Reconsideration  concerning  our  proposal  to  require  DTV  reception  in  new  TV  receivers  from  three  parties  and  replies/  oppositions  to  those  petitions  from  two  parties.  These 
 parties  are  identified  in  Appendix  A. 


 III.  DISCUSSION 
 A.  DTV  Receiver  Standards    DTV  Reception  Requirement 
 8.  In  the  Report  and  Order/  Further  Notice,  we  recognized  the  arguments  of  the  NAB,  the  North  American  Broadcasters  Association  (NABA),  and  other  parties  that  DTV  receivers  are 


 not  yet  available  in  the  market  in  large  quantities,  and  certainly  not  in  sufficient  volume  to  support  a  rapid  transition  to  an  all-  digital  broadcast  television  service.  We  therefore  requested 
 comment  on  whether  a  requirement  to  include  DTV  reception  capability  (a  DTV  tuner)  in  new  television  sets  could  help  to  develop  the  production  volumes  needed  to  bring  DTV  prices  down 
 to  where  they  are  more  attractive  to  consumers  and  thereby  promote  the  more  rapid  development  of  high  DTV  set  penetration.  In  particular,  we  sought  comment  on  whether  we  should  require 
 that  new  TV  receivers  have  the  capability  to  demodulate  and  decode  over-  the-  air  DTV  signals.  We  stated  that  under  such  a  requirement,  TV  sets  would  have  to  provide  useable  picture  and 
 sound  quality  commensurate  with  their  video  display  and  audio  capabilities  when  receiving  any  of  the  recognized  ATSC  video  formats.  We  further  stated  that  a  DTV  reception  capability 
 requirement  would  not  necessitate  full  high  definition  television  (HDTV)  capability  in  TV  sets.  For  example,  a  TV  set  that  had  only  NTSC  level  display  capabilities  would  only  have  to  be  able 
 to  demodulate  and  decode  DTV  signals  and  present  them  at  a  standard  definition  display  level  equivalent  to  its  NTSC  capabilities.  We  also  expressed  concern  about  the  potential  impact  of  a 
 DTV  tuner  requirement  on  consumers,  especially  low-  income  consumers,  and  therefore  sought  comment  on  the  initial  projected  costs  of  such  a  requirement  and  realistic  estimates  of  its  costs 
 over  time. 
 9.  We  requested  comment  on  how  best  to  implement  a  DTV  reception  capability  requirement,  if  we  were  to  adopt  one.  Recognizing  the  lead  time  involved  in  product 


 development,  we  acknowledged  that  consumer  electronics  manufacturers  would  need  time  to  implement  such  a  requirement.  In  this  regard,  we  observed  that  the  cost  of  DTV  receiver 
 components  still  is  relatively  high  and  that  it  would  not  be  economically  feasible  at  this  point  to  include  DTV  capability  in  smaller  screen  receivers.  We  indicated  that  one  approach  for 
 minimizing  the  impact  of  a  DTV  tuner  requirement  would  be  to  phase  it  in  over  time  to  take  advantage  of  the  declining  costs  associated  with  increasing  electronics  manufacturing  volumes. 
 We  noted  that  one  such  approach  would  be  to  apply  the  requirement  initially  only  to  receivers  with  large  screen  sizes,  e.  g.,  32  inches  and  above.  We  also  stated  that  separate  set-  top  DTV 
 receivers  could  be  included  in  meeting  the  reception  capability  requirements.  We  further  requested  comment  on  whether  any  DTV  tuner  requirements  we  might  adopt  should  be  based  on 
 percentages  of  the  models  marketed  by  each  manufacturer,  rather  than  units  of  production.  Finally,  we  invited  interested  parties  to  submit  other  plans  that  would  result  in  new  TV  receivers 
 being  equipped  with  DTV  reception  capability  in  a  manner  that  would  lead  to  rapid  achievement  of  widespread  penetration  of  DTV  receivers  in  households. 


 10.  MSTV/  NAB/  ALTV,  Motorola  and  Paxson  support  adoption  of  a  requirement  for 
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 DTV  reception  capability  in  new  TV  receivers.  For  example,  Paxson  submits  that  DTV  receivers  are  too  expensive  and  too  few  for  this  nation  to  accomplish  a  timely  transition  to  digital 
 television  and  a  return  of  analog  spectrum.  7  MSTV,  NAB/  ALTV  argue  that  as  consumers  purchase  more  and  more  analog  receivers,  the  goal  of  having  digital  television  in  85%  of 
 households  becomes  more  difficult  to  achieve.  They  state  that  no  single  television  set  manufacturer  has  an  incentive  to  include  DTV  tuners  in  a  majority  of  its  sets  for  fear  of  a 
 competitive  cost  disadvantage  versus  manufacturers  who  decline  to  make  that  investment.  MSTV/  NAB/  ALTV  argue  that  we  should  adopt  a  DTV  tuner  requirement  that  applies  to  all,  or  at 
 least  a  substantial  number  of  new  television  sets.  They  submit  that  as  consumers  purchase  DTV  reception-  capable  sets  in  the  normal  course  of  replacing  their  existing  receivers,  DTV 
 penetration  levels  will  then  naturally  increase. 
 11.  With  regard  to  the  costs  involved,  MSTV/  NAB/  ALTV  and  Paxson  contend  that,  because  of  economies  of  scale,  concerns  about  increasing  equipment  costs  to  consumers  have 


 been  exaggerated.  8  MSTV/  NAB/  ALTV  state  that  if  we  were  to  decide  instead  to  adopt  a  size-based  phase  in  approach,  we  should  apply  the  DTV  tuner  requirement  first  to  all  new  sets  30 
 inches  and  larger;  in  two  years  extend  the  requirement  to  sets  19  inches  and  larger;  and  two  years  later  complete  the  phase  in  by  extending  the  requirement  to  all  sets  13  inches  and  larger.  9  They 
 submit  that  if  we  were  to  choose  the  percentage  of  a  manufacturers  production  approach,  we  should  initially  require  that  33%  of  a  manufacturers  new  television  sets  13  inches  and  larger 
 have  DTV  reception  capability  and  than  increase  that  percentage  to  67%  in  two  years  and  100%  in  four  years.  MSTV/  NAB/  ALTV  believe  that  a  plan  that  phased  in  the  requirement  too  slowly 
 would  undermine  the  effective  introduction  of  DTV  sets,  foster  consumer  uncertainty  regarding  the  DTV  transition,  and  delay  the  ultimate  release  of  the  analog  TV  spectrum.  They  also  submit 
 that  while  they  would  prefer  that  manufacturers  meet  a  DTV  tuner  requirement  by  integrating  tuners  into  receivers  that  include  an  audio/  video  display,  they  would  not  oppose  allowing 
 manufacturers  to  use  separate  set-  top  tuner  to  meet  a  DTV  tuner  requirement  so  long  as  the  set-top  DTV  tuner  is  part  of  an  indivisible  DTV  receiver  package.  10  Paxson,  on  the  other  hand, 
 argues  that  including  set-  top  DTV  tuner  in  the  measures  for  meeting  a  tuner  requirement  would  not  address  the  marketplace  failure  to  produce  integrated  DTV  receivers.  11 


 12.  Motorola  states  that  its  new  product  development  efforts  demonstrate  that  DTV  receivers  and  decoders  can  be  integrated  into  television  sets  at  a  relatively  low  cost.  12  Motorola 
 submits  that  it  has  developed  a  modular  design  for  DTV  receiver/  decoder  product  family  that  will  allow  manufacturers  to  rapidly  convert  an  existing  analog  TV  set  into  a  hybrid  analog/  digital 


 7  MSTV/  NAB/  ALTV  comments  at  1-  2;  Paxson  comments  at  7-  8. 
 8  MSTV/  NAB/  ALTV  comments  at  5. 
 9  Id.  at  6-  7. 
 10  Id.  at  7-  8. 
 11  Paxson  comments  at  9. 
 12  Motorola  comments  at  3. 
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 TV  set  at  a  price  approximately  $200  over  an  equivalent  NTSC  receiver.  13  Nonetheless,  Motorola  agrees  with  our  initial  concern  that  it  would  not  be  economically  feasible  at  this  time  to 
 require  DTV  capability  in  smaller  screen  TV  sets,  i.  e.,  sets  with  screens  smaller  than  27  inches.  It  states  that  the  cost  of  todays  DTV  receive  components  would  significantly  inflate  the  cost  of 
 such  sets.  It  states  that  for  higher  priced  sets,  however,  the  added  cost  would  be  commensurate  with  the  premium  that  consumers  expect  to  pay  for  a  DTV  set  over  an  analog  set.  Motorola 
 further  indicates  that  if  DTV  tuners  were  included  in  a  large  percentage  of  all  TV  sets,  economies  of  scale  could  reduce  the  retail  cost  differential  between  NTSC  sets  and  standard 
 definition/  enhanced  definition  television  (SDTV/  EDTV)  sets  to  approximately  $50  by  2006.  14 
 13.  Subsequent  to  the  formal  comment  and  reply  period  in  this  proceeding,  MSTV  and  NAB  submitted  a  study  by  Arthur  D.  Little,  Inc.  (ADL  Study)  that  developed  estimates  of  the 


 costs  for  the  incremental  materials  needed  to  enable  consumer  television  receivers  to  receive  over-  the-  air  DTV  transmissions  and  the  decline  of  those  costs  over  time.  15  The  ADL  Study  also 
 estimated  the  effect  of  those  incremental  costs  on  the  retail  prices  of  DTV  sets  and  the  production  costs  and  retail  prices  for  stand-  alone  set-  top  transverters  that  can  receive  DTV 
 signals  and  convert  them  for  display  on  analog  TV  receivers.  The  ADL  Study  examined  three  scenarios  for  DTV  receiver  implementation:  1)  a  baseline  case,  where  DTV  receiver 
 introduction  is  driven  solely  by  market  forces;  2)  a  mandate  case,  where  the  government  requires  inclusion  of  a  DTV  receiver  in  all  new  TV  sets  sold  after  January  1,  2004;  and  3)  a  phased 
 mandate  case,  where  the  government  would  first  require  that  high-  end  receivers  include  a  DTV  receiver  and  then  extend  the  requirement  to  include  lower-  end  models  over  time  such  that  all 
 new  TV  receivers  sold  in  the  year  2006  would  have  a  DTV  receiver.  The  DTV  capable  receivers  considered  under  each  of  these  scenarios  would  provide  standard  definition  (SDTV)  level  quality 
 of  video  service,  with  initial  prices  of  from  $169  (high-  end  models)  to  $180  (low-  end  models)  higher  than  comparable  analog  receivers.  16  Based  on  its  assessment  of  costs  and  expected  rate  of 
 consumer  acceptance  of  DTV  (i.  e.,  that  DTV  will  be  accepted  at  the  same  rate  as  color 
 13  Motorola  submits  that  its  M-  DTV  module  will  enable  standard  definition  TV  (SDTV)  sets  using  a  480  line 
 interlaced  NTSC  display  (480i)  to  decode  any  of  the  18  ATSC  video  formats  and  convert  them  to  480i  at  4:  3  or  16:  9  aspect  ratio.  It  states  that  this  module  will  also  decode  and  convert  Dolby  AC-  3  audio  data  to  stereo  audio 


 for  presentation  to  the  internal  audio  system  normally  used  for  analog  TV  or  output  digital  audio  data  for  5.1  channel  decoding  by  an  external  audio  decoder.  Motorola  further  states  that  its  M-  DTV  module  will  enable  low-cost 
 Enhanced  Definition  TV  (EDTV)  sets  using  a  480  line  progressive  scan  display  (480p).  Motorola  comments  at  4. 


 14  Motorola  comments  at  5. 
 15  Assessment  of  the  Impact  of  DTV  on  the  Cost  of  Consumer  Television  Receivers,  Arthur  D.  Little,  Inc., 
 Cambridge,  Massachusetts,  September  10,  2001,  submitted  by  the  National  Association  of  Broadcasters. 
 16  The  ADL  Study  indicates  that  the  difference  in  price  increase  between  low-  end  and  high-  end  TV  sets  is  due  to: 
 1)  the  incremental  costs  of  adding  a  DTV  tuner  to  high-  end  models  are  typically  about  the  half  of  the  costs  of  adding  a  DTV  tuner  to  low-  end  models  because  high-  end  sets  already  include  some  internal  digital  signal 


 processing  and  memory  components  to  support  features  such  as  picture-  in-  picture,  line  doubling  resolution  enhancement,  etc.;  2)  high-  end  models  normally  have  a  higher  manufacturer  price  mark-  up  and  higher  retail  profit 
 margin.  The  study  states  that  these  differences  translate  to  an  incremental  retail  price  increase  to  add  a  DTV  receiver  to  a  high-  end  set  that  is  approximately  94%  of  the  retail  price  to  add  a  DTV  receiver  to  a  low-  end  model. 
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 television),  the  ADL  Study  finds  that  under  the  baseline  case,  DTV  receiver  penetration  would  reach  only  8.5%  by  2006,  with  the  price  of  a  DTV  capable  receiver  about  $35-  38  higher  than  a 
 comparable  analog  set.  Under  the  mandate  case,  DTV  penetration  would  reach  75.5%  by  2006  and  85%+  by  2007,  with  the  price  of  a  DTV  capable  receiver  about  $14-  15  higher  than  a 
 comparable  analog  set.  Under  the  phased  mandate  case,  the  ADL  Study  predicts  that  DTV  penetration  would  reach  65%  by  2006  and  85%  by  2007,  with  the  price  of  a  DTV  capable 
 receiver  about  $15-  16  more  than  a  comparable  analog  set.  With  regard  to  transverters  (it  assumes  these  devices  can  also  receive  cable  service),  the  ADL  study  estimates  that  a  DTV 
 capable  set-  top  box  would  cost  approximately  $380  in  2001,  and  by  2006  would  decline  to  $218  under  the  baseline  case  and  $195  under  the  mandate  case.  Under  the  studys  assumptions,  the 
 price  of  analog  addressable  set-  top  boxes  would  be  about  $180.  The  ADL  Study  further  concludes  that  the  retail  prices  of  DTV  capable  receivers  could  be  dramatically  lower  in  the 
 initial  years  of  production  if  manufacturers  would  adopt  a  forward  pricing  strategy.  17 
 14.  In  their  comments,  MSTV/  NAB/  ALTV  and  Paxson  also  submit  that  the  ACRA  authorizes  the  Commission  to  require  that  new  TV  sets  have  DTV  tuning  capability.  They  state 


 that  the  ACRA  language  is  plain  and  unambiguous:  the  Commission  has  the  authority  to  require  that  any  television  set  manufactured  for  sale  in  the  United  States  be  capable  of  adequately 
 receiving  all  frequencies  allocated  by  the  Commission  to  television  broadcasting.  18  They  argue  that  the  language  of  this  section  does  not  limit  our  authority  to  impose  tuning  requirements  to 
 only  analog  receivers. 
 15.  CEA  and  Thomson  Multimedia,  Inc.  (Thomson)  oppose  the  adoption  of  a  requirement  for  DTV  reception  capability  in  new  TV  receivers.  CEA  argues  that  a  DTV  tuner 


 requirement  would  seriously  impede  the  DTV  transition  through  consumer  reaction  to  the  significantly  higher  prices  of  television  sets  that  would  result  during  the  first  few  years.  19  It 
 submits  that  subsequent  to  the  issuance  of  the  Report  and  Order/  Further  Notice,  a  host  of  organizations  representing  consumers,  senior  citizens,  farmers  and  rural  residents  have  expressed 
 their  opposition  to  a  DTV  tuner  mandate  because  of  the  costs  such  a  requirement  would  impose  upon  their  constituents.  20  It  argues  that  market  incentives  are  much  more  efficient  and  should  be 
 relied  upon  to  drive  prices  down  and  quality  up.  In  this  regard,  CEA  submits  that  since  the  adoption  of  the  ATSC  standard,  manufacturers  have  introduced  hundreds  of  DTV  products  and 
 that  annual  growth  in  both  unit  and  dollar  sales  for  DTV  products  during  the  first  four  years  on  the  market  is  projected  to  surpass  that  of  computers,  VCRs,  CD  players,  and  color  TVs.  It  states 
 that  along  with  the  growth  in  diversity  of  products  and  consumer  sales,  unit  prices  for  DTV  products  have  declined  sharply.  21  CEA  states  that  any  regulatory  intervention  to  dictate  to 


 17  Forward  pricing  is  a  strategy  whereby  manufacturers  set  a  retail  price  lower  than  the  manufacturing  cost  in 
 anticipation  of  future  cost  reductions  to  stimulate  sales. 
 18  MSTV/  NAB/  ALTV  comments  at  9;  Paxson  comments  at  2.  See  also,  47  U.  S.  C.    303(  s). 


 19  CEA  comments  at  i  and  2;  Thomson  reply  comments  at  1. 
 20  CEA  comments  at  4. 
 21  In  its  comments,  CEA  submits  that  fully  integrated,  wide-  screen  television  sets  with  full  HDTV  display 
 capabilities  are  now  available  at  prices  under  $3,000  and  that  this  is  more  than  a  50%  price  reduction  since  their  (continued.) 
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 consumers  the  capabilities  they  can  or  cannot  have  in  television  sets  would  upset  this  vigorous  and  healthy  market.  It  argues  that  a  DTV  tuner  requirement  would  disrupt  normal  market 
 incentives  by  forcing  manufacturers  to  provide  consumers  with  capabilities  they  do  not  want  at  prices  they  do  not  wish  to  pay.  It  submits  that  in  response  to  such  a  requirement,  manufacturers 
 and  retailers  would  develop  and  sell  products  that  would  meet  the  standards,  but  without  any  economic  motivation  beyond  a  strict  compliance  of  the  rule.  CEA  therefore  argues  that  any 
 economies  of  scale  that  could  result  from  a  manufacturing  mandate  would  be  distorted. 
 16.  CEA  states  that  even  with  an  aggressive  cost  reduction  curve,  the  electronics  package  needed  to  receive,  decode,  and  display  digital  television  services  will  still  command  a  $200  per 


 unit  cost  premium  over  the  required  analog  circuitry  for  the  foreseeable  future.  22  It  submits  that  rather  than  purchase  sets  that  cost  more  than  they  wish  to  pay,  consumers  will  simply  put  off  the 
 purchase  of  new  sets  as  they  wait  for  an  eventual  price  decline,  which  will  disrupt  the  normal  demand  curve  and  deflate  sales  volumes  and  market  expectations.  CEA  states  that  for  sets  with 
 display  screens  of  21  to  27,  a  required  DTV  tuner  would  result  in  a  price  increase  of  67%  to  85%  for  most  sets  and  that  such  an  increase  would  have  a  serious  effect  on  demand.  CEA 
 indicates  that  for  the  40%  of  sets  sold  today  that  are  20  or  less,  including  a  DTV  tuner  would  double  or  triple  their  retail  price.  It  further  argues  that  likewise  phased  in  requirements  that 
 initially  focused  on  larger  screen  sizes  would  either  be  ineffective  or  severely  affect  consumer  costs.  In  an  ex  parte  letter  submitted  August  2,  2002,  Thomson  states  that  the  manufacturers 
 cost  of  DTV  reception/  decoding  capability  today  is  approximately  $250  and  that  this  cost  would  decrease  to  approximately  $75-  80  by  2006  and  $60  by  2007-  2008.  It  further  submits  that  the 
 final  cost  to  the  consumer  would  typically  include  a  markup  of  approximately  25%. 
 17.  In  its  reply  comments,  Thomson  argues  that  MSTV/  NAB/  ALTVs  claim  that  a  DTV  tuner  requirement  would  drive  manufacturing  costs  down  through  economies  is  overly  broad  and 


 simplistic.  23  It  submits  that  economies  of  scale  are  reached  only  over  time  and  that  such  economies  are  the  product  of  long  periods  of  cost  reductions  and  technological  advances.  It 
 notes  that  when  Congress  mandated  UHF-  reception  capability  in  all  TV  sets,  the  added  cost  was  minimized  by  the  fact  that  UHF  reception  did  not  require  the  introduction  of  a  new  technology, 
 but  rather  simply  an  extension  of  the  tuning  range  and  some  basic  performance  requirements.  It  states  that  DTV  reception,  on  the  other  hand,  is  an  entirely  new  technology  involving  many  more 
 components  and  chips  than  adding  UHF  reception  or,  for  that  matter,  V-  chip  or  closed  captioning  capability.  Thomson  also  points  out  that  there  are  other  issues  affecting  DTV 


 (Continued  from  previous  page)  introduction.  It  further  indicates  that  for  large  screen  projection  televisions,  consumers  can  now  purchase  DTV 
 tuners  and  display  units  in  approximately  the  same  price  range  that  existed  for  analog  products  several  years  ago.  It  submits  that  consumer  purchases  of  HDTV  monitors  have  moved  from  early  adopters  to  the  mainstream 
 viewing  public  largely  through  the  desire  to  view  high  quality  digital  content  available  on  DVD  recordings  and  satellite  transmissions.  CEA  indicates  that  despite  the  relatively  lower  demand  for  over-  the-  air  DTV  broadcast 
 receivers  that  it  believes  is  due  to  lack  of  programming,  a  broad  variety  of  DTV  tuners  and  set-  top  converter  boxes  are  now  available  at  prices  well  below  $1,000  and  approaching  half  that  amount.  It  states  that  receivers  with 
 integrated  DTV  tuner/  decoders  (DTV  tuner/  decoder  and  display  in  the  same  unit)  are  also  available. 
 22  CEA  comments  at  9-  10  and  i. 


 23  Thomson  reply  comments  at  7-  8. 
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 receivers  such  as  copy  protection  and  DTV  compatibility  with  cable  services  that  are  not  yet  resolved.  Thomson  states  that  while  economies  of  scale  will  develop  and  DTV  receiver  prices 
 will  fall,  how  fast  that  will  happen  will  depend  on:  1)  the  availability  of  a  great  quantity  of  unique,  high  quality  programming;  2)  final  agreement  on  standards  for  compatibility  between 
 consumer  DTV  receivers  and  cable  service;  and  3)  adoption  of  DTV  copy  protection  systems.  In  an  ex  parte  letter  submitted  August  1,  2002,  Thomson  states  that  it  now  supports  a  voluntary 
 plan  for  a  phased  integration  of  DTV  reception  capability  into  all  TV  sets  that  is  based  on  a  phase  in  plan  that  was  suggested  by  the  Commissions  Chairman  in  a  letter  of  April  4,  2002  to 
 Senator  Ernest  F.  Hollings  and  Congressman  W.  J.  Billy  Tauzin.  24  The  plan  suggested  by  Thomson  would  provide  for  inclusion  of  DTV  reception  capability  in  all  new  TV  sets,  beginning 
 with  the  largest  sets  and  ultimately  reaching  sets  with  screen  sizes  smaller  than  35  by  2007  or  2008.  Thomson  submits  that  its  plan  would  allow  DTV  technology  to  mature  and  reach 
 acceptable  cost  premiums  for  the  consumer. 
 18.  CEA  also  argues  that  we  should  reject  arguments  that  continued  production  of  analog-  only  sets  will  expand  the  embedded  base  of  NTSC  equipment  and  thus  create  an  obstacle 


 to  public  acceptance  of  DTV.  25  It  submits  that  when  consumers  become  attracted  in  numbers  to  DTV  programming  and  this  consumer  demand  and  continued  technical  improvements  and 
 innovation  further  reduce  prices  for  DTV  set-  top  converter  boxes,  those  analog  sets  can  make  the  transition  to  display  units  for  DTV  reception  as  a  matter  of  consumer  choice.  The  Florida  Action 
 Network  (FCAN)  and  the  Massachusetts  Consumers'  Coalition  (MCC),  representatives  of  consumer  interests,  oppose  a  requiring  DTV  in  new  TV  sets.  These  organizations  are  concerned 
 about  costs  to  consumers,  particularly  those  with  low-  incomes  such  as  the  elderly,  immigrants,  agricultural  laborers  and  poor  rural  families,  students,  and  minorities.  FCAN  argues  that  any 
 requirement  that  raises  costs  to  consumers  would  result  in  the  disenfranchisement  of  consumers.  It  states  that  once  DTV  programming  becomes  widely  available,  it  will  draw  consumers  and 
 there  will  be  a  move  toward  acceptance  of  DTV  as  the  national  standard.  MCC  submits  that  consumers  will  seek  out  new  televisions  with  DTV  reception  capability  if  they  know  that 
 extensive  program  delivery  facilities  are  available. 
 19.  In  an  ex  parte  letter  of  August  1,  2002,  CEA,  through  its  attorney  David  R.  Siddall,  submitted  a  paper  prepared  by  the  Analysis  Group/  Economics  (AGE  Comments)  commenting  on 


 the  ADL  Study  submitted  by  MSTV/  NAB/  ALTV.  26  The  AGE  Comments  concludes  that  the  ADL  Study  has  substantial  shortcomings  that  seriously  undermine  its  projections,  such  that  the 
 impact  of  a  DTV  tuner  mandate  on  television  sales,  prices  to  consumers,  and  manufacturing  costs  would  be  greater  and  last  longer  than  suggested  by  the  ADL  Studys  projections.  27 


 24  See  Letter  from  FCC  Chairman  Michael  K.  Powell  dated  April  4,  2002  to  Senator  Ernest  F.  Hollings  and 
 Congressman  W.  J.  Billy  Tauzin,  re:  Digital  Television  Plan. 
 25  CEA  comments  at  12. 


 26  See  ex  parte  letter  of  August  1,  2002,  by  David  R.  Siddall,  submitting  Comments  of  Coleman  D.  Bazelon  and 
 T.  Christopher  Borek  Relating  to  Arthur  D.  Little,  Inc.  s  Assessment  of  the  Impact  of  DTV  on  the  Cost  of  Consumer  Television  Receivers,  Analysis  Group/  Economics. 


 27  AGE  Comments  at  1. 
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 Specifically,  the  AGE  Comments  contend  that  the  ADL  Study  underestimated  the  costs  to  television  manufacturers  of  integrating  a  DTV  tuner  into  TV  sets.  It  compares  the  ADL  Study  to 
 estimates  by  Thomson  of  $200-  295  per  set  (although  in  its  recent  ex  parte  letter  above,  Thomson  indicates  that  the  incremental  price  of  an  integrated  DTV  tuner  would  be  about  $75  by  2007- 
 2008).  28  The  AGE  Comments  further  state  that  the  ADL  Study  ignored  the  decline  in  television  sales  that  would  accompany  an  increase  in  their  price  due  to  a  tuner  requirement  and  that  the 
 ADL  Studys  projections  overstate  the  time  required  for  costs  to  decline  as  a  result  of  sales  because  sales  are  overstated.  Finally,  the  AGE  Comments  argue  that  the  ADL  Study 
 inappropriately  assumes  that  television  manufacturers  can  fully  and  instantaneously  incorporate  the  cost-  saving  benefits  of  experience/  sales-  driven  efficiency  gains  from  as  much  as  25-  fold 
 increases  in  annual  sales  volume. 
 20.  CEA  and  Thomson  also  argue  that  the  Commission  lacks  the  authority  to  require  that  television  receivers  be  capable  of  adequately  receiving  digital  broadcast  signals.  29  CEA  and 


 Thomson  argue  that  the  tools  of  statutory  construction,  particularly  legislative  history  and  purpose,  demonstrate  that  Congress  did  not  intend  for  the  ACRA  to  apply  in  the  broad  manner 
 that  the  Commission  concludes  it  does  in  the  Report  and  Order/  Further  Notice.  In  this  regard,  they  state  that,  as  indicated  in  the  Senate  Commerce  Committee  Report  on  the  ACRA  (Senate 
 Report),  Congress  enacted  the  ACRA  for  the  sole  purpose  of  ensuring  the  viability  of  UHF  broadcasting  by  requiring  that  all  television  receivers  include  the  capability  to  receive  all  VHF 
 and  UHF  channels.  30  CEA  argues  that  the  purpose  and  legislative  history  of  the  ACRA  are  clear  that  all  frequencies  does  not  and  could  not  include  digital  signals.  Thomson  points  out  that  the 
 Senate  Report  does  not  touch  on  the  reception  of  digital  signals.  CEA  and  Thomson  also  argue  that  as  indicated  in  the  House  Interstate  and  Foreign  Commerce  Committee  Report  (House 
 Report)  accompanying  the  legislation,  Congress  explicitly  considered  but  rejected  broader  language  that  would  have  provided  the  Commission  with  authority  to  set  minimum  performance 
 standards.  31 
 21.  Thomson  further  contends  that  the  Commission  itself  has  expressly  recognized  the  limitations  of  its  authority  under  the  ACRA.  In  particular,  it  points  to  a  decision  by  the 


 Commission  in  the  mid-  1980s  on  a  request  by  Sanyo  Manufacturing  Corporation  for  waiver  of  the  all-  channel  receiver  requirements  (Sanyo  waiver)  that  a  video  display  device  for  personal 
 computers,  video  tape  recorders,  TV  games  and  other  devices  fell  outside  the  scope  the  ACRA.  (This  video  display  device  responded  to  signals  on  channels  3  and  4  only).  Thomson  notes  that 
 in  that  decision,  the  Commission  indicated  that  the  signal  sources  used  by  the  video  display  device  were  products  of  technologies  that  did  not  exist  at  the  time  that  the  statute  was  enacted 


 28  This  price  increase  is  computed  from  the  $60  increase  in  manufacturers  cost  plus  $15  for  a  25%  retail  markup. 
 29  CEA  Petition  for  Clarification  and  Reconsideration  at  3;  Thomson  Petition  for  Partial  Reconsideration  at  3. 
 30  Senate  Commerce  Committee  Report,  S.  Rep.  No.  87-  1526,  2d  Sess.  (1962),  reprinted  in  1962  U.  S.  C.  A.  A.  N. 
 Vol.  1,  1873. 
 31  H.  R.  Rep.  No.  87-  1559  at  1  (1962).  CEA  Petition  for  Clarification  and  Reconsideration  at  7;  Thomson  Petition 
 for  Partial  Reconsideration  at  5. 
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 and  stressed  that  the  concern  of  Congress  in  enacting  the  ACRA  was  to  remedy  a  situation  where  the  UHF  television  allocations  were  progressively  being  rendered  less  useful  because  fewer  and 
 fewer  television  sets  could  receive  anything  but  VHF  signals.  32  Thomson  argues  that  the  digital  tuner  of  today  did  not  exist  in  1962  and  that  a  television  receiver  that  is  manufactured  without 
 the  capability  of  receiving  DTV  signals  does  not  pose  any  threat  to  UHF  reception  and  thus  falls  outside  the  scope  of  the  ACRA.  33  CEA  further  asserts  that  the  Commission  itself  has  twice 
 declined  to  mandate  the  manufacture  of  television  receivers  that  are  capable  of  receiving  both  NTSC  and  DTV  signals,  citing  the  lack  of  a  mandate  under  the  ACRA.  34  It  notes  that  in  the 
 Third  Report  and  Order  and  Third  Further  Notice  of  Proposed  Rule  Making  in  the  DTV  proceeding,  the  Commission  stated  that  the  All  Channel  Receiver  Act  does  not  mandate  the 
 manufacture  of  dual-  mode  (DTV  and  NTSC)  receivers.  35 
 22.  In  an  ex  parte  submission  filed  after  the  formal  comment  and  reply  period  in  this  proceeding,  CEA  submitted  a  White  Paper  further  explaining  its  position  that  the  Commission 


 lacks  statutory  authority  to  require  that  television  sets  contain  digital  tuners.  36  In  this  White  Paper,  CEA  argues  that  the  phrase  all  frequencies  as  used  in  the  ACRA  does  not  encompass 
 digital  transmissions  since,  at  the  time  the  ACRA  was  enacted  in  1962,  digital  technology  did  not  yet  exist.  37  CEA  additionally  maintains  that  by  its  terms,  the  ACRA  addresses  only  the 
 reception  of  all  frequencies,  and  television  receivers  comply  with  this  requirement  even  if  they  do  not  display  all  broadcasts  on  these  frequencies.  38  CEA  seems  to  suggest  that  the  ACRA  does 
 not  require  receivers  to  respond  and  decode  all  broadcast  transmissions  offered  by  all  technologies,  but  rather  only  analog  transmissions  in  the  VHF  and  UHF  frequency  bands.  39  CEA 
 further  argues  that  the  omission  of  particular  language  referencing  new  video  technology  in  section  330(  a)  of  the  Communications  Act,  40  as  compared  to  the  inclusion  of  such  language  in 


 32  Sanyo  Manufacturing  Corp.,  58  R.  R.  2d  719  (1985)  (decision  on  reconsideration  of  Sanyo  Manufacturing 
 Corp.,  56  R.  R.  2d  681  (1984). 
 33  Thomson  Petition  for  Partial  Reconsideration  at  6. 


 34  CEA  cites  statements  by  the  Commissions  in  the  Fifth  Report  and  Order  in  the  DTV  proceeding  that  refer  to 
 statements  in  the  Memorandum  Opinion  and  Order/  Third  Report  and  Order/  Third  Further  Notice  of  Proposed  Rule  Making  (MO&  O/  Third  Report  and  Order/  Third  Further  Notice)  in  that  proceeding.  See  Fifth  Report  and 


 Order,  MM  Docket  No.  87-  268,  12  FCC  Rcd  12809  (1997)  (citing  Memorandum  Opinion  and  Order/  Third  Report  and  Order/  Third  Further  Notice  of  Proposed  Rule  Making,  MM  Docket  No.  87-  268,  7  FCC  Rcd  6924 
 (1992).  CEA  comments  at  13. 
 35  See  MO&  O/  Third  Report  and  Order/  Third  Further  Notice    81. 


 36  Consumer  Electronics  Association  White  Paper  regarding  Digital  Television  Tuner  Requirement,  dated  July  23, 
 2002  (  CEA  White  Paper). 
 37  CEA  White  Paper,  at  2-  3. 


 38  CEA  White  Paper,  at  2. 
 39  CEA  White  Paper,  at  2-  3. 
 40  47  U.  S.  C.    330(  a)  (prohibiting  the  shipment  of  equipment  described  in  section  303(  s)  of  the  Act  that  does  not 
 comply  with  applicable  regulatory  requirements). 
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 sections  330(  b)  41  and  330(  c),  42  means  that  the  Commissions  authority  does  not  extend  to  digital  technology  under  the  ACRA. 
 23.  Decision.  In  addressing  this  issue,  we  consider  DTV  receivers  to  be  a  necessary  element  of  broadcast  television  service  in  the  same  way  that  analog  TV  receivers  have  been  a 
 necessary  element  of  that  service.  43  Although  analog  receivers  are  today  still  the  dominant  means  by  which  viewers  receive  over-  the-  air  broadcast  television  service,  that  dominance  will 
 change  as  we  progress  through  the  transition.  And,  of  course,  at  the  end  of  the  transition,  when  DTV  operation  fully  replaces  analog  operation,  all  TV  sets  will  have  to  be  able  to  receive  DTV 
 signals  in  order  to  receive  over-  the-  air  service. 
 24.  With  regard  to  our  authority  in  this  area,  the  language  of  the  ACRA  is  clear  in  providing  the  Commission  with  the  authority  to  require  that  television  sets  be  capable  of 


 adequately  receiving  all  frequencies  allocated  by  the  Commission  for  television  broadcasting.  44  Contrary  to  the  position  of  CEA  and  Thomson,  the  authority  provided  under  the  ACRA  applies 
 to  all  devices  used  to  receive  broadcast  television  service,  not  just  those  used  to  receive  analog  signals.  As  NAB  observes,  the  language  of  the  ACRA  does  not  limit  our  authority  to  impose 
 tuning  requirements  to  service  provided  using  any  specific  transmission  method.  In  fact,  there  is  no  mention  at  all  of  the  technology  used  for  transmission  of  television  service  in  the  ACRA  or  its 
 legislative  history,  and  in  fact  the  language  of  the  ACRA  is  crafted  neutrally  in  this  regard.  Inasmuch  as  the  Commission  has  allocated  channels  for  television  broadcasting  provided  with 
 DTV  technology,  the  ACRA  authority  empowers  the  Commission  to  adopt  requirements  that  television  receivers  be  able  to  receive  the  DTV  service  provided  on  those  channels. 


 25.  We  also  observe  that  the  legislative  history  of  the  ACRA  is  not  inconsistent  with  our  action  to  require  DTV  reception  capability  in  TV  receivers.  Inasmuch  as  DTV  stations  are 
 assigned  to  VHF  and  UHF  channels,  rules  requiring  TV  receivers  to  be  able  to  receive  all  DTV  channels  are  consistent  with  the  intent  of  Congress  in  enacting  the  ACRA,  i.  e.,  to  provide  the 
 Commission  with  the  authority  to  require  that  television  receivers  be  equipped  at  the  time  of  manufacture  to  receive  all  television  channels  in  the  allocated  television  broadcast  bands  (which 
 at  the  time  of  passage  were  found  in  both  the  VHF  and  UHF  bands).  45  Nothing  in  either  a  plain 
 41  47  U.  S.  C.    330(  b)  (prohibiting  the  shipment  of  equipment  described  in  303(  u)  of  the  Act  (closed  captioning) 
 that  does  not  comply  with  regulatory  requirements). 
 42  47  U.  S.  C.    330(  c)  (prohibiting  the  shipment  of  equipment  described  in  303(  x)  of  the  Act  (v-  chip)  that  does  not 
 comply  with  regulatory  requirements). 
 43  The  discussion  herein  pertains  only  to  broadcast  television  receivers  as  defined  in  Section  15.(  3)(  w),  i.  e.,  those 
 intended  for  reception  of  service  on  the  television  channels  authorized  for  service  under  Part  73  of  the  rules.  See  47  C.  F.  R.  15(  3)(  w).  The  requirements  adopted  in  this  action  do  not  apply  to  devices  such  as  cable  and  satellite 


 service  receivers  that  are  not  designed  to  receive  broadcast  TV  signals  over-  the-  air. 
 44  The  ACRA  states  that  the  Commission  shall  [  h]  ave  authority  to  require  that  apparatus  designed  to  receive 
 television  pictures  broadcast  simultaneously  with  sound  be  capable  of  adequately  receiving  all  frequencies  allocated  by  the  Commission  to  television  broadcasting  ....  47  U.  S.  C.  303(  s). 


 45  Senate  Report,  1873.  Even  accepting  arguendo  CEA  and  Thomsons  position  that  Congress  did  not  intend  the 
 ACRA  to  give  the  Commission  broad  authority  to  set  standards  for  television  receiver  performance  and  (continued.) 
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 language  reading  of  the  ACRA  or  the  legislative  history  suggests  that  the  ACRA  would  no  longer  apply  if  the  Commission  were  to  change  the  transmission  technology  used  for  television 
 service. 
 26.  More  broadly,  in  1962,  when  the  ACRA  was  enacted,  Congresss  focus  was  on  the  UHF/  VHF  aspect  of  the  general  issue  of  ensuring  that  TVs  would  receive  all  allocated  channels 


   the  specific  problem  at  that  time  was  the  lack  of  TV  sets  that  could  receive  UHF  channels.  While  Congress  discussed  the  need  for  a  statutory  remedy  in  that  context,  it  crafted  the  statutory 
 language  more  generally    to  address  analogous  situations  that  might  arise  in  the  future.  If  Congress  intent  had  been  to  limit  the  Commissions  power  only  to  the  extent  of  permitting 
 receiver  standards  that  would  require  the  reception  of  UHF  signals,  then  presumably  it  could  have  crafted  the  language  of  the  ACRA  much  more  narrowly. 


 27.  In  fact,  the  situation  we  face  now  with  regard  to  reception  of  DTV  channels  is  analogous  to  the  UHF  issue  with  which  Congress  was  grappling  when  it  promulgated  the  general 
 language  of  Section  303(  s).  According  to  the  legislative  history,  the  Senate  Committee  recognized  the  existence  in  1962  of  a  "vicious  cycle"  that  had  been  "strangling"  the  development 
 of  UHF  television,  that  is  the  "refusal  by  the  public  to  buy  UHF  sets  until  there  are  UHF  stations  offering  attractive  programs,  and  the  inability  of  UHF  broadcasters  to  provide  good 
 programming  in  the  absence  of  an  audience  which  will  attract  advertisers  and  networks."  46  The  Senate  Committee  determined  that  it  was  necessary  to  break  this  cycle  and  that  to  do  so  "must  be 
 done  by  striking  at  the  root  cause  of  the  problem    namely,  the  lack  of  television  receivers  capable  of  receiving  UHF  signals."  47  Here,  the  Commission  is  faced  with  a  similar  problem   
 that  is,  the  reluctance  of  the  public  to  buy  DTV  receivers  until  there  are  DTV  stations  offering  attractive  DTV  programs,  and  the  lack  of  incentive  of  for  broadcasters  to  provide  good  attractive 
 DTV  programming  in  the  absence  of  an  audience  which  will  attract  advertisers.  As  Congress  and  the  Commission  found  in  the  UHF  context,  requiring  the  manufacture  of  DTV  receivers  will 
 address  the  root  cause  of  the  problem,  namely  the  lack  of  television  receivers  capable  of  receiving  DTV  signals. 


 28.  While  Congress  did  not  intend  for  the  authority  granted  by  ACRA  to  be  exercised  in  an  unfettered  manner,  its  concern  was  that  the  Commission  would  place  requirements  on 
 (Continued  from  previous  page)  capabilities,  other  than  mandating  UHF/  VHF  receive  capability,  a  requirement  that  new  TV  sets  be  capable  of 
 receiving  DTV  signals  on  all  of  the  channels  the  Commission  has  allocated  for  television  service  is  fully  consistent  with  their  narrow  view  of  our  authority,  namely,  that  of  establishing  requirements  to  ensure  that 
 television  receivers  include  the  capability  to  adequately  receive  all  UHF  and  VHF  channels.  45  (CEA  Petition  for  Clarification  and  Reconsideration  at  p.  6;  Thomson  Petition  for  Partial  Reconsideration  at  p.  4.)  Inasmuch  as 
 DTV  stations  are  assigned  to  UHF  and  VHF  channels,  in  the  absence  of  such  requirements  mandating  UHF/  VHF  reception  capability  for  DTV,  consumers  would  not  necessarily  be  able  to  receive  all  UHF  and  VHF  channels  on 
 every  marketed  television  set.  For  example,  it  would  be  allowable  to  market  DTV  sets  that  could  only  receive  signals  on  VHF  channels,  or,  given  that  the  great  majority  of  DTV  operations  during  the  transition  are  on  UHF 
 channels,  to  market  sets  that  could  only  receive  DTV  signals  on  UHF  channels.  Nothing  in  the  ACRA  or  its  legislative  history  indicates  that  Congress  intended  such  a  result. 


 46  See  1962  U.  S.  C.  C.  A.  N.  at  1876. 
 47  Id. 
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 manufacturers  that  went  beyond  those  necessary  to  ensure  adequate  service  from  UHF  channels.  Thus,  the  statutory  language  uses  the  term  adequate  and  rejected  language  that  might  be 
 construed  to  require  something  more.  48  In  this  case,  the  issue  is  only  whether  DTV  signals  can  be  adequately  received. 


 29.  We  reject  CEAs  argument  that  the  statutory  phrase  all  frequencies  does  not  encompass  digital  transmissions  since,  at  the  time  the  ACRA  was  enacted  in  1962,  digital 
 technology  did  not  yet  exist.  49  As  the  federal  courts  have  recognized,  statutes  are  not  confined  in  application  to  contemporary  instances  and  their  principles  are  to  be  extended  to  embrace  new 
 factual  situations  and  new  technological  developments.  50  Like  its  analog  VHF  and  UHF  counterparts,  DTV  service  also  operates  on  a  frequency  and  thus  is  encompassed  within  the 
 provisions  of  the  ACRA.  Likewise,  to  the  extent  CEA  construes  the  ACRA  as  requiring  television  receivers  to  receive  all  frequencies,  but  not  to  display  broadcasts  on  those  frequencies, 
 we  believe  such  a  narrow  reading  would  defeat  the  statutes  very  purpose.  The  ACRA  was  intended  to  ensure  that  the  viewing  public  has  access  to  receivers  which  are  capable  of  receiving 
 all  broadcast  signals.  Thus,  to  suggest  that  the  statutory  requirements  are  somehow  satisfied  simply  where  a  receiver  picks  up  the  frequency  but  is  incapable  of  displaying  the  signal  in  a 
 viewable  format  strikes  us  as  an  absurd  reading  of  the  ACRA.  Indeed,  as  we  have  noted  previously,  the  legislative  history  indicates  that  the  word  adequately  was  added  to  the  ACRA 
 (i.  e.,  be  capable  of  adequately  receiving  all  frequencies)  to  ensure  that  all  receivers  would  be  constructed  with  equipment  sufficient  to  permit  satisfactory  and  usable  reception.  51 


 30.  Furthermore,  we  are  not  persuaded  by  CEAs  argument  that  the  omission  of  particular  language  referencing  new  video  technology  in  Section  330(  a)  of  the  Communications  Act,  52  as 
 compared  to  the  inclusion  of  such  language  in  Sections  330(  b)  53  and  330(  c),  54  means  that  the 


 48  In  Electronic  Industries  Association  Consumer  Electronics  Group  v.  FCC,  636  F/  2d  973  (D.  C.  Cir.  1988),  the 
 court  rejected  a  decision  by  the  Commission  mandating  certain  performance  standards  for  television  tuners  on  such  grounds    i.  e.,  that  the  prescribed  standards  werent  currently  attainable  and  that  the  Commission  had 


 mandated  specific  levels  of  performance  that  went  beyond  that  which  would  ensure  adequate  reception. 
 49  CEA  White  Paper,  at  2-  3. 


 50  Smith  v.  Pan  Air  Corp.,  684  F.  2d  1102,  1113  (5  th  Cir.  1982). 
 51  Senate  Report,  1879-  1880  (emphasis  added).  See  also,  In  the  Matter  of  Amendment  of  Part  15  of  the  Rules  and 
 Regulations  with  Regards  to  All-  Channel  Television  Broadcast  Receivers,  Report  and  Order,  21  FCC  2d  245  6  (1970).  See  EIA  vs.  FCC,  636  F.  2d  689,  695-  96  (D.  C.  Cir.  1980). 


 52  47  U.  S.  C.    330(  a)  (prohibiting  the  shipment  of  equipment  described  in  section  303(  s)  of  the  Act  that  does  not 
 comply  with  applicable  regulatory  requirements). 
 53  47  U.  S.  C.    330(  b)  (prohibiting  the  shipment  of  equipment  described  in  303(  u)  of  the  Act  (closed  captioning) 
 that  does  not  comply  with  regulatory  requirements). 
 54  47  U.  S.  C.    330(  c)  (prohibiting  the  shipment  of  equipment  described  in  303(  x)  of  the  Act  (v-  chip)  that  does  not 
 comply  with  regulatory  requirements). 
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 Commissions  authority  does  not  extend  to  digital  technology  under  the  ACRA.  55  CEA  relies  on  the  general  principle  of  statutory  construction  that  Congress  acts  intentionally  in  the  disparate 
 inclusion  or  exclusion  of  language  in  the  same  statute.  56  While  this  may  be  accurate  as  a  general  proposition,  here  the  absence  of  the  particular  language  in  section  330(  a)  does  not  compel  the 
 interpretation  urged  by  CEA.  57  The  three  sections  at  issue  were  enacted  as  part  of  entirely  different  Acts,  separated  by  a  significant  time  period.  Subsection  330(  a)  was  enacted  in  1962  as 
 part  of  the  ACRA,  approximately  28  years  prior  to  the  1990  enactment  of  subsection  330(  b)  (enacted  as  part  of  the  Television  Decoder  Circuitry  Act  of  1990),  and  approximately  34  years 
 prior  to  the  1996  enactment  of  subsection  330(  c)  (enacted  as  part  of  the  Telecommunications  Act  of  1996).  58  The  legislative  histories  of  the  provisions  offer  no  suggestion  that  any  such  limitation 
 on  section  303(  s)  was  intended  by  the  inclusion  of  the  new  video  technology  language  in  subsections  330(  b)  and  (c),  or  by  the  omission  of  the  new  video  technology  language  in 
 subsection  330(  a).  Moreover,  even  if  one  were  to  accept  CEAs  view  that  the  disparity  between  paragraph  (a)  and  paragraphs  (b)  and  (c)  were  intentional,  that  disparity  would  not  prevent  the 
 Commission  from  applying  paragraph  (a)  to  DTV.  Subsections  (b)  and  (c)  impose  a  mandate  upon  the  Commission    the  Commission  shall  take  such  action  as  the  Commission  determines 
 appropriate  to  ensure  that  [closed  captioning  and  blocking,  respectively]  continues  to  be  available  to  consumers.  The  absence  of  a  similar  mandate  to  update  its  ACRA  regulation  as 
 technology  changes  cannot  reasonably  be  read  to  preclude  the  Commission  from  doing  so.  We  thus  reject  CEAs  argument. 


 31.  CEA  and  Thomsons  reference  to  the  Commissions  1984  decision  on  the  Sanyo  waiver  ignores  the  fact  that  the  video  display  device  in  that  case  was  not  intended  for  use  as  a 
 receiver  of  broadcast  television  signals.  Rather,  the  Sanyo  device  was  intended  to  be  used  to  display  the  signals  of  video  game  devices  that  provided  their  output  signals  in  the  NTSC  analog 
 TV  format  on  the  frequencies  of  TV  channels  3  or  4.  59  Thus,  the  Commission  at  that  time  concluded  that  Sanyos  video  display  device  fell  outside  the  scope  of  the  ACRA.  In  any  event, 


 55  Section  330  deals  with  the  prohibition  against  shipment  of  certain  television  receivers.  Subsections  330(  b) 
 (which  covers  closed  captioning  devices)  and  330(  c)(  4)  (which  covers  v-  chip  capabilities)  contain  a  requirement  that  [  a]  s  new  video  technology  is  developed,  the  Commission  shall  take  such  action  as  the  Commission 


 determines  appropriate  to  ensure  such  services  continue  to  be  available  to  consumers.  47  U.  S.  C.    330(  b),  (c)(  4).  By  contrast,  subsection  330(  a),  which  covers  equipment  covered  under  the  ACRA,  does  not  contain  any 
 such  provision. 
 56  CEA  White  Paper,  at  3  (citing  U.  S.  v.  Juvenile  No.  1,  118  F.  3d  298  (5  th  Cir.  1997),  cert.  denied,  522  U.  S.  976 
 and  cert.  denied,  522  U.  S.  988  (1997)). 
 57  See  generally,  City  of  Columbus  v.  Ours  Garage  and  Wrecker  Service,  Inc.,  --  U.  S.  --,  122  S.  Ct.  2226  (2002) 
 (refusing  to  apply  presumption  that  the  presence  of  a  phrase  in  one  provision  and  its  absence  in  another  reveals  Congress  design,  where  there  is  otherwise  no  clear  indication  that  Congress  intended  such  a  result). 


 58  See,  U.  S.  v.  Price,  361,  U.  S.  304,  313  (1960)  (views  of  a  subsequent  Congress  form  a  hazardous  basis  for 
 inferring  the  intent  of  an  earlier  one). 
 59  Video  game  devices  typically  provide  output  signals  in  the  NTSC  format  on  the  frequencies  of  channels  3  and  4 
 so  that  they  can  be  viewed  on  regular  TV  receivers.  The  output  is  switchable  between  channels  these  two  channels  so  that  the  user  can  select  a  channel  that  is  not  in  use  by  a  TV  station  in  his/  her  local  area. 
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 our  authority  to  require  TV  sets  to  adequately  receive  all  of  the  frequencies  allocated  for  TV  service  is  discretionary  --  the  ACRA  allows  the  Commission  to  make  determinations  as  to 
 whether  and  how  to  apply  such  requirements  as  appropriate. 
 32.  As  CEA  observes,  the  Commission  previously  has  not  chosen  to  apply  requirements  for  television  receivers  to  include  DTV  tuning  capabilities.  We  believe  that  this  approach  was 


 appropriate  in  the  early  stages  of  the  transition.  Before  broadcast  stations  began  the  widespread  conversion  to  digital  transmission,  it  was  reasonable  to  allow  consumer  electronics 
 manufacturers  opportunity  to  develop  appropriate  products  and  to  introduce  them  to  the  market  gradually. 


 33.  Now,  however,  given  the  current  state  of  the  transition  and  considering  the  current  availability  of  equipment  that  can  receive  DTV  signals  over-  the-  air,  we  conclude  that 
 insufficient  progress  is  being  made  towards  bringing  to  market  the  equipment  consumers  need  to  receive  broadcasters  DTV  signals  over-  the-  air.  This  necessary  change  in  receiver  product 
 capabilities  is  not  yet  occurring  to  any  meaningful  degree,  and  the  lack  of  DTV  receiver  capability  is  delaying  the  transition  and  may  seriously  impede  the  transition  in  the  future.  We 
 are  now  well  into  the  DTV  transition  and  almost  two  years  beyond  the  concerns  with  the  initial  DTV  receivers  that  led  the  Commission  to  review  and  then  reaffirm  the  DTV  transmission 
 standard.  60  Manufacturers  have  thus  had  sufficient  time  to  develop  the  necessary  components  to  provide  for  DTV  tuning  and  indeed  such  components  are  now  available  from  multiple  sources. 
 In  order  for  the  transition  to  move  forward  as  quickly  and  smoothly  as  possible,  receivers  with  DTV  capability  need  to  be  on  the  market  in  quantity  and  at  reasonable  prices.  We  note  in  this 
 regard,  a  study  submitted  by  NAB  pursuant  to  the  Commissions  year  2001  Annual  Assessment  of  the  Status  of  Competition  in  the  Market  for  the  Delivery  of  Video  Programming  indicated 
 that  81  million  television  sets  in  the  U.  S.,  or  more  than  30  percent  of  the  267  million  total,  receive  programming  directly  from  free,  over-  the-  air  TV  stations.  61 


 34.  While  broadcasters  have  progressed  in  their  implementation  of  DTV  such  that  almost  a  third  of  all  stations  are  now  transmitting  DTV  service,  and  DTV  services  reach  more  than  86% 
 of  the  nation,  the  number  of  consumers  with  DTV  capable  receivers  is  still  very  low.  62  Data  on  market  research  reported  by  CEA  indicates  that  in  the  year  2001,  sales  of  set-  top  DTV  receivers 
 and  receivers  with  an  integrated  DTV  tuner  were  only  128,845  units  and  70,295  units  respectively.  This  contrasts  sharply  with  information  from  the  same  market  research  showing 
 that  sales  of  DTV-  ready  receivers,  i.  e.  receivers  that  can  display  DTV  programming  but  do  not  have  the  capability  to  tune  over-  the-  air  DTV  signals  or  decode  them  for  display,  exceeded  1.3 


 60  See  Report  and  Order/  Further  Notice,    88-  92. 
 61  See  Comments  of  the  National  Association  of  Broadcasters,  In  the  Matter  of  Annual  Assessment  of  the  Status  of 
 Competition  in  the  Market  for  the  Delivery  of  Video  Programming,  CS  Docket  01-  129,  filed  Aug.  3,  2001.  In  that  filing,  NAB  also  indicated  that  the  81  million  sets  includes  46.  5  million  sets  in  broadcast-  only  homes  and  34.  5 


 million  sets  in  households  that  subscribe  to  an  MVPD.  Its  study  further  found  that  broadcast-  only  homes  are  more  likely  to  be  lower  income  and  thus  less  able  to  afford  a  subscription  service. 


 62  Edward  O.  Fritts,  President  and  CEO,  National  Association  of  Broadcasters,  Broadcasters  Moving  Forward  on 
 DTV,  remarks  to  the  Advanced  Television  Systems  Committee  Annual  Membership  Meeting,  May  15,  2002. 
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 million  units  in  2001.  CEAs  market  research  report  also  indicates  that  sales  of  all  digital  television  products,  including  set-  top  DTV  tuner  units  and  receivers  with  an  integrated  DTV 
 tuner,  are  continuing  to  increase.  We  believe  the  overall  level  of  DTV  equipment  sales  provides  a  strong  indication  that  consumers  are  interested  in  higher  quality  video  and  DTV  service. 
 However,  they  are  not  yet  routinely  being  provided  with  the  capabilities  needed  to  receive  those  services  over-  the-  air  from  broadcast  television  stations. 


 35.  Moreover,  we  do  not  see  a  trend  developing  that  will  rapidly  provide  U.  S.  households  with  the  ability  to  receive  DTV  signals  and  bring  the  DTV  transition  to  completion.  The 
 approximately  200,000  TV  households  with  over-  the-  air  DTV  capability  in  the  year  2001  was  less  than  16%  of  the  number  of  DTV-  ready  receivers  and  only  .2%  of  the  105,444,330  total  U.  S. 
 households  reported  by  Nielsen  Media  Research  for  that  year.  63  We  further  observe  that  the  April,  2002,  DTV  Guide  published  by  the  Consumer  Electronics  Association  reports  that  there 
 are  17  models  of  set-  top  DTV  tuners  and  23  models  of  television  receivers  with  integrated  DTV  tuners  currently  on  the  market.  This  compares  with  351  models  of  HDTV  monitors  and  33 
 models  of  enhanced  definition  monitors.  64  The  DTV  Guide  also  shows  that  only  seven  manufacturers  are  currently  marketing  receivers  with  integrated  DTV  tuners,  while  42 
 manufacturers  are  producing  HDTV  and/  or  EDTV  monitors.  In  addition,  the  price  of  set-  top  DTV  tuners  is  still  generally  $500  or  more.  The  low  numbers  and  high  prices  of  DTV-  capable 
 receivers  that  are  on  the  market  are  simply  not  consistent  with  achieving  an  expeditious  completion  of  the  DTV  transition.  CEAs  suggestion  that  these  consumers  be  required  to 
 purchase  a  set-  top  converter  box  in  order  to  receive  DTV  broadcast  signals  would  be  a  more  expensive  option  than  an  integrated  tuner  and  is  a  solution  that  many  consumers  would  find 
 unattractive.  Finally,  we  are  concerned  that  continued  marketing  of  analog-  only  sets  can  only  serve  to  delay  the  transition  further.  Consistent  with  the  DTV  transition  plan  that  Congress 
 established  in  Section  309(  j)  of  the  Communications  Act  of  1934,  and  pursuant  to  our  authority  under  the  ACRA,  our  objective  in  establishing  a  DTV  tuner  requirement  is  therefore  to  ensure 
 that  television  receivers  with  screen  sizes  13  or  larger  and  other  television  receiving  equipment,  such  as  VCRs  and  DVD  players/  recorders,  manufactured  or  imported  after  a  specified  date  be 
 able  to  receive  over-  the-  air  DTV  signals. 
 36.  We  are  not  persuaded  that  we  should  delay  application  of  a  DTV  tuner  requirement  until  there  is  final  resolution  of  the  outstanding  controversies  over  copy  protection  and  standards 


 for  DTV  plug  and  play  cable  compatibility.  We  do  not  believe  that  those  issues  need  to  be  resolved  before  we  can  make  progress  on  DTV  broadcast  reception  capability.  Nevertheless,  we 
 do  believe  these  issues  are  important  and  we  are  taking  steps  to  resolve  them.  Concurrently  with  adoption  of  this  Order,  we  are  adopting  a  Notice  of  Proposed  Rulemaking  regarding  a  copy 


 63  U.  S.  TV  Household  Estimates,  Nielsen  Media  Research,  January  2002. 
 64  DTV  Guide,  a  supplement  to  TWICE  (This  Week  In  Consumer  Electronics),  Consumer  Electronics 
 Association,  April  2002.  HDTV  monitors  are  capable  of  displaying  HDTV  programs  (vertical  resolution  720  lines  or  higher,  33.75  kHz@  60  Hz  or  greater  scanning  frequency)  provided  through  an  external  DTV 


 tuner/  decoder;  enhanced  definition  are  capable  of  displaying  programming  at  enhanced  resolution  levels  (such  as  vertical  resolution  480p,  480i,  and  in  some  cases  720p  or  1080i,  31.5  kHz  or  higher  scanning  frequency). 
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 protection  system  for  digital  broadcast  television.  65  With  regard  to  cable  compatibility  -  i.  e.,  consumers'  ability  to  watch  digital  programming  over  their  cable  system  -  we  note  that  where 
 cable  subscribers  use  a  set-  top  box  capable  of  adequately  passing  through  the  digital  content,  they  can  watch  high  definition  and  other  digital  programming  over  their  cable  service  today. 
 Such  set-  top  boxes,  however,  are  not  yet  widely-  deployed,  though  are  in  commercial  production  and  the  top  ten  cable  operators  in  the  country  (representing  more  than  85%  of  subscribers 
 nationwide)  have  committed  to  deploying  them  in  the  future  in  response  to  Chairman  Powell's  voluntary  plan  for  accelerating  the  DTV  transition.  66 


 37.  Nevertheless,  we  agree  that  development  of  "plug  and  play"  cable  compatibility  is  one  of  the  key  remaining  goals  for  the  DTV  transition  for  those  cable  subscribers  who  do  not 
 have  set  top  boxes  available  or  do  not  want  to  use  a  set-  top  box.  The  Commission  will  address  this  issue  in  a  forth  coming  Second  Report  and  Order  in  the  proceeding  on  Commercial 
 Availability  of  Navigation  Devices,  CS  Docket  No.  97-  80. 
 38.  In  considering  how  to  implement  the  DTV  tuner  requirement,  we  remain  attentive  to  the  concerns  we  discussed  in  the  Report  and  Order/  Further  Notice  regarding  the  impact  it  could 


 have  on  manufacturers,  consumers  and  the  television  receiver  market  in  general.  As  CEA  Motorola  and  Thomson  indicate,  we  understand  that  including  DTV  tuners  in  new  TV  sets  may 
 affect  set  prices,  and  that  initially  it  will  not  be  economically  practical  to  include  DTV  tuners  in  sets  with  smaller  screens.  We  also  are  aware  that  manufacturers  will  need  lead  time  to  redesign 
 their  products  and  marketing  plans  to  comply  with  this  new  requirement.  We  believe  it  is  important  that  the  DTV  tuner  introduction  plan  we  adopt  allow  for  these  concerns  in  order  to 
 minimize  their  impact. 
 39.  We  continue  to  believe  that  a  plan  that  phases  in  a  DTV  tuner  requirement  for  new  TV  receiving  equipment  similar  to  the  approach  presented  in  the  Report  and  Order/  Further 


 Notice  will  provide  the  best  means  for  rapidly  providing  consumers  with  the  means  to  receive  the  DTV  signals  that  are  now  being  transmitted  by  broadcasters  while  minimizing  the  impact  of 
 this  requirement  on  equipment  manufacturers  and  consumers.  In  this  regard,  the  plan  we  are  adopting  reflects  and  accounts  for  the  following:  1)  including  DTV  reception  capability  in  new 
 television  receivers  will  require  the  redesign  of  product  lines,  2)  the  cost  of  including  that  capability  in  receivers  will  initially  result  in  a  cost  premium  of  approximately  $200  per  unit,  and 
 3)  prices  are  declining  and  will  decline  even  faster  as  economies  of  scale  are  achieved  with  increasing  volumes  of  production  and  production  efficiencies  are  introduced  over  time.  We  are 
 choosing  an  approach  that  will  require  that  a  party  responsible  for  television  receiving  equipment  (  responsible  party)  under  our  rules,  generally  the  manufacturer  or  importer,  include  DTV 
 tuners  in  a  certain  percentage  of  that  partys  entire  production  or  importation  of  receivers  in 


 65  See  Notice  of  Proposed  Rule  Making  in  MM  Docket  No.  02-  230,  Digital  Broadcast  Copy  Protection,  released 
 August  9,  2002,  FCC  02-  231. 
 66  See  letter  of  May  1,  2002  from  Robert  Sachs,  President  and  CEO  of  the  National  Cable  Television  Association 
 to  FCC  Chairman  Michael  K.  Powell. 
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 specific  categories.  67  We  believe  this  approach  will  better  serve  to  ensure  that  a  large  volume  of  DTV  tuner-  equipped  receivers  are  provided  to  the  market  than  an  approach  that  would  require 
 compliance  based  on  a  certain  percentage  of  a  responsible  partys  models  in  specific  categories. 
 40.  Under  the  phase  in  plan  we  are  adopting,  responsible  parties  will  be  required  to  equip  new  television  receiving  equipment  that  is  shipped  in  interstate  commerce  or  manufactured  in 


 the  United  States  and  for  which  they  are  responsible  with  the  capability  to  tune  and  decode  over-the-  air  DTV  signals  on  all  of  the  channels  allocated  for  broadcast  television  service  in 
 accordance  with  the  following  schedule: 
 Receivers  with  screen  sizes  36  and  above  --  50%  of  a  responsible  partys  units  must  include  DTV  tuners  effective  July  1,  2004;  100%  of  such  units  must  include  DTV 


 tuners  effective  July  1,  2005; 
 Receivers  with  screen  sizes  25  to  35  --  50%  of  a  responsible  partys  units  must  include  DTV  tuners  effective  July  1,  2005;  100%  of  such  units  must  include  DTV 


 tuners  effective  July  1,  2006; 
 Receivers  with  screen  sizes  13  to  24  --  100%  of  all  such  units  must  include  DTV  tuners  effective  July  1,  2007; 


 TV  Interface  Devices  (videocassette  recorders  (VCRs),  digital  versatile  disk  (DVD)  players/  recorders,  etc.)  that  receive  broadcast  television  signals  --  100%  of  all  such 
 units  must  include  DTV  tuners  effective  July  1,  2007. 
 For  purposes  of  this  implementation  schedule,  screen  sizes  are  to  be  measured  diagonally  across  the  picture  viewing  area.  In  developing  this  schedule,  we  observe  that  there  are  differences  in 


 screen  shapes  between  the  traditional  4:  3  aspect  ratio  and  the  more  rectangular  16:  9  DTV  aspect  ratio.  68  A  13  diagonal  screen  in  the  16:  9  aspect  ratio  is  considerably  smaller  in  appearance  than 
 a  13  diagonal  screen  in  the  4:  3  aspect  ratio.  To  allow  for  these  differences  in  establishing  the  minimum  receiver  screen  size  that  will  trigger  application  of  the  DTV  tuner  requirements,  we 
 will  specify  the  minimum  screen  size  to  which  the  tuner  requirement  apply  as  the  vertical  measurement  of  a  13  diagonal  4:  3  screen,  which  is  7.8  inches.  Thus,  the  rules  will  specify  that 
 the  DTV  tuner  requirement  does  not  apply  to  units  with  integrated  tuners/  displays  that  have  screens  measuring  less  than  7.8  vertically.  This  approach  is  the  same  as  that  which  the 
 Commission  adopted  in  applying  the  requirements  for  inclusion  of  closed  captioning  capability  in  DTV  receivers  in  ET  Docket  No.  99-  254.  We  will  also  allow  responsible  parties  to  include 
 combinations  of  DTV  monitors  and  set-  top  DTV  tuners  in  meeting  the  required  percentages  of  units  with  a  DTV  tuner  if  such  combinations  are  marketed  together  with  a  single  price.  We  see 


 67  See  47  C.  F.  R.  2.909.  Under  Section  2.209,  the  party  responsible  for  equipment  such  as  television  receivers  that 
 are  subject  to  our  verification  equipment  authorization  procedure  is  the  manufacturer  or,  in  the  case  of  imported  equipment,  the  importer.  If  subsequent  to  manufacture  and  importation,  the  equipment  is  modified  by  any  party 


 not  working  under  the  authority  of  the  responsible  party,  the  party  performing  the  modification  becomes  the  new  responsible  party. 


 68  The  aspect  ratio  of  a  display  screen  is  the  ratio  of  its  width  to  its  height. 
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 no  reason  to  mandate  that  the  ability  to  receive  and  view  DTV  signals  be  provided  through  a  receiver  with  integrated  tuning  and  display  features.  Where  set-  top  boxes  and  DTV  monitors  are 
 sold  as  a  combination,  the  screen  size  of  the  DTV  monitor  will  determine  the  receiver  size  category  towards  which  the  combination  may  be  counted. 


 41.  The  phase  in  schedule  we  are  adopting  is  intended  to  provide  time  for  manufacturers  and  importers  to  prepare  for  and  develop  economies  of  scale  in  producing  receivers  with  DTV 
 reception  capability.  The  initial  requirement  will  apply  only  to  sets  with  the  largest  displays-  those  with  screen  sizes  36  or  larger.  As  CEA  notes,  such  sets  are  the  smallest  segment  of  the 
 television  receiver  market  and  are  also  the  most  expensive.  69  The  incremental  cost  of  a  DTV  tuner  in  these  sets  will  be  relatively  small  portion  of  their  price  and  therefore  more  acceptable  to 
 consumers.  Indeed,  as  one  consumer  electronics  manufacturer  noted  in  a  recent  letter  to  the  Commission,  the  price  for  these  large-  screen  sets  have  been  declining  at  a  rate  of  approximately 
 $100  to  $800  per  year.  70  Thus,  any  incremental  cost  increase  attributable  to  a  tuner  requirement  may  be  partially  or  completely  offset  by  these  general  price  declines.  In  addition,  as  most  of  the 
 television  receivers  with  integrated  DTV  tuners  that  are  on  the  market  today  are  models  in  this  category,  the  impact  of  beginning  with  receivers  in  this  group  will  be  especially  low  for  those 
 manufacturers  who  already  produce  such  receivers.  The  intermediate  increases  in  proportions  of  receivers  will  gradually  apply  the  tuner  requirement  to  greater  numbers  of  receivers  as 
 manufacturers  develop  efficiencies  in  production.  Given  that  Congress  has  specified  December  1,  2006,  as  the  target  completion  date  for  the  end  of  the  transition,  we  believe  that 
 new  television  receivers  manufactured  or  imported  should  include  a  DTV  broadcast  tuner  before  that  date  or  as  close  to  that  date  as  economically  feasible.  In  the  case  of  the  smallest  and  least 
 expensive  sets  to  which  this  requirement  will  apply  (sets  with  screen  sizes  of  13  to  24),  we  will  not  require  compliance  until  July  1,  2007    slightly  beyond  the  target  date  for  the  end  of  the 
 transition    to  ensure  that  the  cost  impact  can  be  as  low  as  possible.  We  believe  the  five  year  phase-  in  period  will  be  sufficient  for  manufacturers  to  be  able  to  incorporate  a  DTV  tuner  into  all 
 of  these  television  receiver  products,  such  that  the  final  phase  can  be  completed  with  minimum  impact.  To  further  minimize  the  burden  on  manufacturers,  we  have  scheduled  the 
 implementation  dates  for  the  various  categories  of  receivers  to  correspond  to  the  July  1  date  each  year  when  consumer  electronics  manufacturers  traditionally  introduce  new  products.  71 


 42.  We  also  believe  that  the  five  year  period  we  are  providing  for  responsible  parties  to  include  a  DTV  tuner  in  all  receivers  is  sufficient  to  allow  them  to  develop  the  efficiencies  and 
 economies  of  scale  necessary  to  include  such  capability  at  reasonable  prices  that  will  be  attractive  to  consumers.  In  this  regard,  we  note  that  Zenith  predicts  that  by  that  time  the  cost  of 


 69  CEA  comments  at  11. 
 70  See  Letter  from  Richard  M.  Lewis,  Senior  Vice  President,  Zenith  Electronics  Corp.  to  FCC  Chairman  Michael 
 Powell,  dated  July  12,  2002  at  1  (  Zenith  letter). 
 71  For  example,  in  its  ex  parte  letter  of  August  2,  2002,  Thomson  states  that  new  DTV  models  and  features 
 historically  been  announced  by  manufacturers  in  July  of  every  year,  with  actual  retail  availability  coming  in  September.  Thomson  further  states  that  not  unlike  the  standard  18-  month  cycle  required  for  the  introduction  of 


 virtually  all  new  CE  products,  this  New  Product  Introduction  cycle  is  adhered  to  by  most  CE  manufacturers. 
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 producing  a  digital  receiver  can  be  about  the  same  as  an  analog  tuner.  72  Motorola  submits  that,  using  its  modular  design,  the  retail  price  differential  between  a  receiver  with  DTV  tuning 
 capability  and  a  model  that  tuned  only  analog  NTSC  signals  would  be  $50  by  2006  if  DTV  tuners  were  added  to  a  large  percentage  of  all  sets.  Thomson,  using  its  estimates  of 
 manufacturers  costs  plus  a  25%  markup,  predicts  that  the  incremental  effect  on  receiver  prices  would  be  about  $75  by  2007-  2008.  The  ADL  study  estimates  that  the  retail  price  differential 
 would  be  only  $16  by  2006  under  a  phased  mandate  approach.  The  estimates  of  all  of  these  sources  of  tuner  costs,  and  of  CEA  as  well,  begin  from  a  price  differential  for  a  receiver  with 
 DTV  tuning  capability  of  around  $200  or  slightly  less  in  2002.  Although  we  recognize  that  there  is  some  variability  in  these  forecasts,  we  see  no  reason  to  expect  that  the  actual  costs  of  DTV 
 tuners  will  exceed  these  ranges.  73  We  agree  that  there  may  be  some  methodological  shortcomings  in  the  ADL  study  that  could  have  an  impact  on  its  cost  estimates  under  certain 
 scenarios.  However,  the  estimates  of  receiver  price  increases  from  the  consumer  electronics  manufacturers  give  us  confidence  that  the  potential  price  increases  under  our  phase  in  plan  are 
 within  an  acceptable  range.  74 
 43.  Given  these  findings,  we  do  not  agree  with  CEAs  unsupported  assertion  that  a  DTV  tuner  requirement  will  lead  large  numbers  of  consumers  to  put  off  purchases  of  new  TV  sets  or 


 that  it  will  force  manufacturers  to  produce  products  without  any  motivation  beyond  a  strict  interpretation  of  the  rule.  The  strong  and  growing  sales  of  DTV  ready  receivers  provide  clear 
 indication  that  consumers  are  interested  in  higher  quality  television  service.  The  DTV  tuner  requirement  will  aid  this  market  trend  by  providing  certainty  to  manufacturers  about  the 
 introduction  of  a  necessary  product  feature.  While  we  recognize  Thomsons  argument  that  adding  of  DTV  tuners  to  sets  is  more  complex  than  adding  other  features  such  a  UHF  tuners,  V-chips, 
 and  closed  captioning  receivers,  it  has  been  six  years  since  the  DTV  transmission  system  was  adopted  in  1996  and  during  that  time  numerous  parties  have  developed  the  necessary 
 components  for  DTV  tuners.  We  therefore  conclude  that  the  plan  we  are  adopting  will  not  result  in  disruption  of  the  TV  receiver  market  or  undue  burden  on  either  consumers  or  consumer 
 electronics  manufacturers. 
 44.  To  the  contrary,  todays  decision  will  ensure  a  smoother  transition  by  limiting  consumer  confusion  and  conforming  the  emerging  DTV  marketplace  to  consumer  expectations. 


 It  has  now  been  almost  forty  years  since  ACRAs  enactment.  During  that  time,  every  broadcast  television  receiver  sold  in  the  U.  S.  has  had  the  ability  to  receive  every  frequency  assigned  to 
 broadcast  television,  despite  the  fact  that  a  growing  number  of  TV  households  subscribe  to  a  multichannel  video  service  and  thus  may  only  need  a  set  that  tunes  to  channel  3  or  4. 
 Nevertheless,  consumers  generally  still  expect  the  television  they  purchase  to  be  able  to  receive  over-  the-  air  broadcast  signals.  The  tuner  requirement  we  adopt  today  is  a  mechanism  for 


 72  Zenith  letter  at  1. 
 73  CEAs  assertion  that  a  DTV  tuner  mandate  would  increase  costs  by  $200  for  the  foreseeable  future  is 
 unsupported. 
 74  We  further  note  that  in  its  comments  at  footnote  6,  Motorola  indicates  that  consumers  would  pay  an  average 
 premium  of  22%  for  DTV  reception  capability. 
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 continuing  to  meet  those  expectations  as  broadcasting  transitions  from  analog  to  digital.  In  addition,  unless  cable  and  DBS  carriage  of  digital  broadcast  signals  increases  significantly,  a 
 digital  tuner  may  be  the  only  access  an  MVPD  household  has  to  many  digital  broadcast  services  during  the  transition.  Most  cable  and  DBS  systems  currently  are  carrying  few,  if  any,  digital 
 broadcast  signals.  As  long  as  carriage  of  digital  broadcast  signals  remains  voluntary  during  the  transition,  a  tuner  requirement  would  at  least  provide  MVPD  consumers  access  to  the  digital 
 broadcast  signals  in  their  market. 
 45.  Consistent  with  the  intent  of  Congress  that  we  not  use  our  authority  under  the  ACRA  to  set  broad  standards  for  television  receivers,  we  believe  that  the  rules  implementing  the  DTV 


 tuner  requirements  should  avoid  imposing  new  performance  standards  on  DTV  except  as  necessary  to  ensure  that  receivers  can  adequately  tune  DTV  signals  on  all  of  the  television 
 channels.  We  also  believe  that  in  crafting  the  specific  provisions  of  this  requirement  it  is  important  to  allow  manufacturers  and  importers  to  maintain  broad  discretion  in  determining  the 
 specific  features  and  performance  capabilities  of  their  DTV  receiving  equipment.  We  understand  that  manufacturers  and  importers  will  need  to  develop  DTV  receiver  products  for  a 
 wide  range  of  different  user  needs.  In  this  regard,  we  are  adopting  our  proposal  to  require  only  that  television  receivers  provide  useable  picture  and  sound  commensurate  with  their  video  and 
 audio  capabilities  when  receiving  digital  television  signals.  This  minimum  service  capability  requirement  will  allow  manufacturers  to  produce  a  full  range  of  products,  from  low-  end  units 
 with  only  standard  definition  video  capability  to  full  feature  devices  that  can  display  HDTV  and  provide  access  to  data  and  other  special  services  a  television  station  might  offer. 


 46.  The  only  other  specific  requirements  we  are  adopting  under  our  DTV  reception  capability  plan  are  those  necessary  to  ensure  that  television  sets  be  able  to  adequately  receive 
 DTV  signals  on  all  of  the  channels  allocated  to  television  service.  The  requirements  that  we  currently  apply  to  ensure  that  analog  television  receivers  are  able  to  adequately  receive  all  of  TV 
 channels  are  set  forth  in  Section  15.117  of  the  rules.  75  We  find  that  the  generic  portions  of  the  all-  channel  reception  provisions  of  Section  15.117  that  are  not  specific  to  analog  receivers, 
 specifically,  paragraphs  (a)-(  e)  of  that  section,  also  are  appropriate  for  DTV  tuning  capabilities.  These  provisions  require  that  a  television:  1)  be  able  to  adequately  receive  all  television 
 channels,  2)  provide  approximately  the  same  degree  of  tuning  accuracy  and  ease  for  VHF  and  UHF  channels;  3)  have  UHF  tuning  controls  and  channel  readout  indicators  that  are  comparable 
 in  size,  location,  accessibility  and  legibility  to  VHF  controls  and  readout  indicators;  4)  if  any  equipment  and  controls  to  simplify,  expedite,  or  perfect,  the  reception  of  signals  that  are 
 provided  to  tune  VHF  channels,  must  also  provided  to  tune  UHF  channels;  and  5)  if  an  antenna  is  affixed  to  its  VHF  terminals  or  a  VHF  antenna  is  provided  with  the  set  but  not  affixed,  shall 
 also  have  an  antenna  designed  to  receive  all  UHF  channels  affixed  to  its  UHF  terminals  or  be  provided  with  a  UHF  antenna,  as  appropriate.  These  provisions  were  implemented  pursuant  to 
 the  authority  provided  by  the  ACRA  and  are  intended  to  ensure  that  television  sets  provide  adequate  reception  of  all  stations,  regardless  of  which  portion  of  the  TV  spectrum,  i.  e.,  UHF  or 


 75  47  C.  F.  R.    15.117. 
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 VHF,  in  which  they  operate.  76  They  are  not  dependent  on  the  technology  used  to  transmit  television  signals  and  are  as  appropriate  and  applicable  for  DTV  sets  as  they  are  for  analog 
 sets.  77  Accordingly,  we  will  apply  paragraphs  (a)-(  e)  of  Section  15.117  to  DTV  receivers.  As  we  determined  in  the  Report  and  Order/  Further  Notice  and  are  affirming  elsewhere  herein,  we  see 
 no  need  for  technical  performance  standards  for  DTV  receivers  at  this  time.  78 
 B.  Update  of  the  DTV  Transmission  Standard 
 47.  The  DTV  Transmission  Standard.  In  comments  responding  to  the  Notice  of  Proposed  Rule  Making  (Notice)  in  this  proceeding,  ATSC  indicated  that  it  has  made  a  number  of  changes 


 to  its  ATSC  Digital  Television  Standard  (A/  53),  since  1996,  when  that  standard  was  adopted  by  the  Commission  as  the  standard  for  terrestrial  DTV  broadcast  service.  79  ATSC  indicated  that 
 these  changes  include  removing  constraints  associated  with  the  program  paradigm,  updating  references  to  the  underlying  MPEG  standards,  replacing  references  to  obsolete  ATSC  standards 
 for  Electronic  Program  Guide  and  System  Information  with  a  reference  to  the  subsequently  developed  ATSC  Program  and  System  Information  Protocol  (PSIP)  Standard,  A/  65,  80  and 
 requiring  a  signal  to  identify  colorimetry.  It  further  noted  that  it  was  considering  an  increase  in  the  maximum  allowable  audio  bit  rate.  ATSC  requests  that  we  revise  the  rules  to  reference  the 
 latest  version  of  the  ATSC  DTV  Standard  A/  53.  81  We  sought  comment  on  whether  we  should  revise  our  rules  to  include  reference  the  latest  version  of  the  standard  as  requested  by  ATSC. 


 48.  In  its  comments,  ATSC  urges  that  we  revise  our  rules  to  reference  the  new  version  of  the  DTV  standard.  It  submits  that  all  of  the  modifications  in  the  new  version  have  been  made 
 only  after  careful  consideration  and  deliberation  within  the  technical  committees  of  the  ATSC  and  so  reflect  the  inputs  and  viewpoints  of  all  interested  parties  in  all  segments  of  the  industry. 
 It  states  that  the  changes  to  A/  53  (which  is  now  designated  as  A/  53B)  were  developed  through  an  industry  consensus  in  the  affected  areas  and  implemented  by  the  industry  on  a  voluntary  basis. 


 76  The  requirements  of  Section  15.117  of  the  rules  were  originally  adopted  by  the  Commission  in  1963  and  have 
 been  amended  numerous  times  over  the  years  to  reflect  improvements  in  technology.  See  Report  and  Order  in  Docket  No.  18433,  18  R.  R.  2d  1577  (1970). 


 77  47  C.  F.  R.    15.117(  a)-(  e)  and  (h).  Paragraphs  (f)  and  (g)  of  Section  15.117  of  the  rules  specify  performance 
 standards  for  the  UHF  portion  of  an  analog  TV  receiver  and  therefore  are  not  appropriate  for  DTV  receivers.  47  C.  F.  R.    15.117(  f)  and  (g). 


 78  Report  and  Order/  Further  Notice    93-  96. 
 79  See  Notice  of  Proposed  Rule  Making  in  MM  Docket  No.  00-  39,  15  FCC  Rcd  5257  (2000).  The  version 
 currently  specified  in  Section  73.682(  d)  of  the  rules,  47  C.  F.  R.  73.682(  d),  is  dated  September  16,  1995.  Section  73.682(  d)  also  specifies  that  DTV  transmissions  are  not  required  to  comply  with  portions  of  the  ATSC  DTV 


 Standard  that  make  reference  to  18  specific  mandatory  video  formats,  defined  in  terms  of,  e.  g.,  screen  aspect  ratios,  frame  rates  and  type  of  scanning. 


 80  See  Program  and  System  Information  for  Broadcast  and  Cable,  Advanced  Television  Systems  Committee, 
 Doc.  A/  65,  December  23,  1997.  This  document  is  available  on  the  Internet  at  www.  atsc.  org. 
 81  Use  of  the  ATSC  PSIP  standard  (A/  65)  is  addressed  in  the  following  section  herein. 
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 ATSC  indicates  that  the  standard  now  also  includes  the  latest  change  in  the  maximum  bit  rate.  It  further  submits  that  there  are  other  minor  changes  that  are  currently  being  considered  by  the 
 technical  committees  of  the  ATSC  and  that  it  expects  additional  modifications  and  clarifications  will  be  agreed  upon  as  the  digital  transition  progresses.  It  therefore  asks  that  we:  1)  recognize 
 the  likelihood  of  further  changes  over  time;  2)  reaffirm  our  intention  to  give  great  weight  to  proposed  changes  that  reflect  the  kind  of  broad  industry  consensus  developed  through  ATSCs 
 standards-  making  procedures;  and  3)  establish  streamlined  rule  making  procedures  for  considering  changes  in  the  rules  to  reflect  anticipated  changes  in  the  ATSC  DTV  standard.  In  a 
 recent  ex  parte  discussion  with  our  staff,  ATSC  indicated  that  the  current  version  of  the  standard  is  ATSC  DTV  Standard  A/  53B,  August  7,  2001. 


 49.  CEA,  MSTV/  NAB/  ALTV  and  Thomson  state  that  they  fully  support  updating  all  references  in  the  rules  to  the  current  version  of  the  ATSC  DTV  Standard.  Motorola  opposes 
 updating  the  rules  to  reflect  the  new  version  of  the  ATSC  standard  on  the  basis  that  the  standard  is  still  fluctuating.  It  states  that  while  it  supports  the  existing  voluntary  ATSC  standards  and 
 ongoing  standards  development  work  of  the  ATSC,  including  current  activity  that  may  lead  to  further  changes  in  document  A/  53,  it  sees  no  compelling  need  for  an  update  at  the  this  time. 


 50.  We  find  that  it  is  desirable  and  appropriate  to  revise  the  rules  to  update  our  DTV  rules  to  specify  the  August  7,  2001,  version  of  ATSC  DTV  Standard  A/  53B  in  place  of  the  September 
 16,  1995,  version  originally  adopted.  Updating  the  rules  to  reflect  improvements  in  the  standard  will  benefit  both  the  public  and  broadcasters  by  allowing  broadcasters  to  make  technical 
 improvements  in  their  service  that  will  enhance  the  quality  of  DTV  services  they  provide.  As  ATSC  and  others  point  out,  the  revisions  in  the  new  version  of  the  ATSC  DTV  Standard  were 
 developed  through  careful  consideration  and  deliberation  within  the  technical  committees  of  the  ATSC  and  thus  reflect  a  consensus  agreement  based  on  the  inputs  and  viewpoints  of  all 
 interested  parties  in  all  segments  of  the  industry.  Although  we  recognize  Motorolas  concern  that  the  standard  remain  fixed  until  final  revisions  are  made,  the  changes  reflected  in  the  new 
 version  presented  by  ATSC  are  improvements  that  will  not  adversely  affect  the  operation  of  any  of  the  DTV  receivers  currently  on  the  market  or  owned  by  consumers. 


 51.  We  also  acknowledge  the  likelihood  that  there  will  be  further  improvements  made  to  the  DTV  standards  over  time  and  indeed,  encourage  ATSC  and  other  interested  parties  to 
 continue  their  work  and  efforts  in  these  areas.  In  this  regard,  we  reaffirm  our  intention  to  give  significant  weight  to  proposed  changes  that  reflect  the  kind  of  broad  industry  consensus 
 developed  through  ATSCs  standards-  making  procedures.  While  it  will  be  necessary  to  conduct  rule  making  activity  to  incorporate  such  changes  in  the  rules,  we  nonetheless  will  endeavor  to 
 pursue  such  rule  making  as  quickly  as  possible,  either  through  our  periodic  review  of  the  DTV  transition  or  through  separate  proceedings  as  may  be  appropriate.  Accordingly,  we  are  revising 
 Section  73.682(  d)  of  the  rules  to  specify  ATSC  Doc  A/  53B  (ATSC  Digital  Television  Standard,  7  Aug  01),  except  for  Section  5.1.2  (  Compression  format  constraints)  of  Annex  A  (  Video 
 Systems  Characteristics)  and  the  phrase  see  Table  3  in  Section  5.1.1  Table  2  and  Section  5.1.2  Table  4.  These  exceptions  are  as  provided  in  the  current  Section  73.682(  d)  and  were  set 
 forth  in  the  Commissions  decision  adopting  the  ATSC  standards  for  DTV  service  in  Fourth 
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 Report  and  Order  in  the  DTV  proceeding.  82 
 52.  The  Program  System  and  Information  Protocol  Standard.  As  noted  above,  in  its  comments  responding  to  the  Notice,  ATSC  also  requested  that  we  require  use  of  the  ATSC  PSIP 


 Standard  as  part  of  the  DTV  transmission  standard.  The  ATSC  PSIP  specification  provides  for  the  transmission  of  system  information  and  program  guide  data  for  broadcast  DTV  stations, 
 enabling  the  identification  of  service  channels  and  digital  bit  streams,  and  allowing  receivers  to  generate  electronic  program  guides.  Through  the  program  guide  function,  it  also  provides  for 
 selection  through  the  program  guide  function  of  the  type  and  language  of  closed  captioning  to  be  viewed,  and  for  the  transmission  of  program  ratings  information  to  allow  parents  to  use  V-  chip 
 technology.  ATSC  further  requested  Commission  action  to  assure  that:  1)  major  channel  numbers  in  the  PSIP  are  used  properly;  2)  the  assignment  of  transport  stream  identifier  (TSID) 
 parameters  is  properly  administered;  and  3)  DTV  closed  captioning  and  content  advisory  information  conforms  with  the  PSIP  Standard.  83 


 53.  In  responding  to  these  requests  in  the  Report  and  Order/  Further  Notice,  we  stated  that  we  believe  that  an  industry  approach  is  generally  the  most  appropriate  means  for  managing 
 the  implementation  of  a  PSIP  system.  However,  we  recognized  that  the  TSIDs  must  be  unique  to  each  individual  television  station  and  that  there  is  a  need  to  coordinate  TSID  assignments  for 
 stations  in  the  border  areas  with  our  neighbors  in  Canada  and  Mexico.  We  therefore  agreed  that  TSID  assignments  should  be  made  part  of  our  process  for  broadcast  television  stations  and  stated 
 that  we  will  begin  the  process  to  incorporate  this  function  into  that  process  in  the  near  future.  We  further  indicated  that  until  negotiations  with  Canada  and  Mexico  on  the  DTV  matter  are 
 complete  and  we  have  modified  our  licensing  process  and  records  management  systems,  we  would  continue  to  rely  on  the  industry  to  make  TSID  assignments. 


 54.  CEA  and  Thomson  support  adoption  of  the  ATSC  PSIP  specification,  arguing  that  this  system  is  essential  to  the  proper  operation  of  receivers.  84  CEA  indicates  that  PSIP  is  the 
 portion  of  the  DTV  bitstream  that  enables  receivers  to  identify,  locate,  and  process  the  various  types  of  content  being  broadcast,  including  video,  audio  (in  multiple  languages),  closed  captions, 
 content  advisory  (V-  chip)  information,  ancillary  data,  etc.  It  submits  that  adoption  of  PSIP  is  therefore  needed  to  facilitate  consumers  using  their  television  receivers  to  readily  and  easily 
 identify  the  free  over-  the-  air  programming  carried  by  broadcasters  on  multiple  streams,  to  activate  use  of  V-  chip  functionality,  and  to  enable  use  of  the  closed  captioning  functionality.  It 
 argues  that  to  the  extent  that  our  action  on  PSIP  is  limited  to  identification  of  TSID  numbering, 
 82  See  Fourth  Report  and  Order  in  MM  Docket  No.  87-  268,  11  FCC  Rcd  17771  (1996). 
 83  Major  channel  number  is  part  of  the  DTV  bit  stream  specified  in  the  PSIP  standard  and  used  to  identify  the 
 terrestrial  broadcast  station  (or  cable  or  satellite  source)  providing  the  DTV  program(  s).  Where  a  station  is  transmitting  multiple  programs,  it  uses  minor  channel  numbers  to  distinguish  among  them.  Within  each 


 television  market,  each  programming  source  (terrestrial  DTV  broadcast  stations  as  well  as  cable  or  satellite  DTV  channels)  must  have  a  unique  major  channel  number  so  DTV  receivers  can  be  tuned  to  the  desired  stations  and 
 programs.  In  addition,  the  PSIP  standard  uses  a  TSID  to  uniquely  identify  transport  streams,  again  to  allow  DTV  receivers  to  tune  between  programs  arriving  from  different  sources. 


 84  CEA  Petition  at  12-  14. 
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 that  action  is  not  sufficient  to  enable  tuning  of  digital  channels,  including  especially  multiple  program  streams  carried  by  the  same  digital  signal  (multicasting).  It  states  that  to  accomplish 
 this,  the  tables  and  descriptors  defined  in  the  PSIP  standard  also  must  be  transmitted.  CEA  further  indicates  that  a  recent  survey  conducted  by  NAB  of  the  161  stations  that  were  on  the  air 
 in  November  of  2000,  showed  that  less  than  half  (46.3%)  of  those  responding  were  transmitting  PSIP  information.  It  therefore  argues  that  PSIP  cannot  be  optional  and  it  must  be  required.  It 
 submits  that  if  PSIP  information  is  not  transmitted,  different  television  sets  may  very  well  assign  different  numbering  to  various  multiple  streams  and  thereby  engender  consumer  confusion  and 
 frustration.  CEA  states  that  while  it  believes  that  we  should  adopt  the  PSIP  standard  in  its  entirety  in  order  to  maximize  the  benefits  to  the  public  of  DTV,  we  should  at  a  minimum  require 
 broadcasters  to  transmit  the  System  Information  component  of  PSIP.  Specifically,  it  states  that  we  should  require  transmission  of  the  Master  Guide  Table  (MGT),  System  Time  Table  (STT), 
 Virtual  Channel  Table  (VCT),  and  Service  Location  Descriptor  at  all  times  and  transmission  of  the  Content  Advisory  and  Caption  Service  Descriptors  when  a  program  is  rated  or  captioned.  In 
 their  Opposition  to  Petitions  for  Reconsideration  of  the  Report  and  Order/  Further  Notice,  MSTV/  NAB/  ALTV  submit  that  they  agree  that  the  Commission  should  adopt  the  PSIP 
 specification  in  its  entirety.  85 
 55.  We  recognize  the  benefits  for  broadcasters  and  consumers  of  the  service  features  offered  by  the  ATSC  PSIP  specification.  We  do  not,  however,  have  sufficient  information  at  this 


 time  to  make  a  determination  as  to  whether  there  are  reasons  that  would  warrant  that  we  should  include  the  PSIP  specification  in  our  rules  and,  if  so,  the  service  obligations  that  would  also 
 attach  to  its  use.  In  view  of  the  broadcast  and  consumer  electronics  industries  support  for  incorporation  of  this  specification  in  the  rules,  we  therefore  will  address  the  possible  adoption  of 
 the  ATSC  PSIP  specification  into  the  rules  in  the  Notice  of  Proposed  Rule  Making  in  our  forthcoming  Second  Review  of  our  policies  for  the  DTV  transition.  In  the  interim,  we  will 
 continue  to  support  and  encourage  the  voluntary  use  of  the  PSIP  specification  by  broadcasters  and  cable  operators  and  its  inclusion  in  consumer  electronics  equipment.  We  also  will  include  a 
 reference  to  the  ATSC  PSIP  Standard  in  Section  73.682(  d)  of  the  rules  as  a  document  that  licensees  may  consult  for  guidance. 


 C.  Other  Issues 
 56.  Receiver  Labeling.  In  the  Report  and  Order/  Further  Notice,  we  observed  that  digital  television  receivers,  i.  e.  devices  with  integrated  displays  as  opposed  to  set-  top  receiving  devices 


 that  do  not  include  displays,  could  be  marketed  that  do  not  have  the  capability  to  receive  over-the-  air  broadcast  signals.  For  example,  receivers  intended  only  for  use  in  receiving  digital  cable 
 or  direct  broadcast  satellite  service  might  not  include  the  capability  to  tune  over-  the-  air  broadcast  television  signals.  We  indicated  that  while  we  are  not  aware  that  any  such  receivers  are  being 
 marketed  at  this  time,  such  devices  would  be  permissible  under  our  rules.  86  We  stated  that  if 
 85  MSTV/  NAB/  ALTV  Opposition  to  Petitions  for  Reconsideration  at  2. 
 86  The  all-  channel  reception  provisions  of  Section  15.117(  b)  of  the  rules,  and  indeed  the  ACRA  authority 
 underlying  those  provisions,  would  not  apply  to  receivers  that  did  not  have  any  capability  for  receiving  broadcast  signals  over-  the-  air.  See  47  CFR    15.117(  b). 
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 manufacturers  chose  to  produce  receivers  that  could  be  used  with  digital  cable  systems  but  could  not  receive  digital  broadcast  signals,  we  believed  that  consumers  should  be  so  notified  prior  to 
 purchase.  We  therefore  sought  comment  on  whether  any  manufacturers  are  producing  or  plan  to  produce  digital  television  receivers  that  can  receive  digital  cable  transmissions,  but  are  incapable 
 of  receiving  digital  broadcast  signals  over-  the-  air.  We  also  sought  comment  on  whether  we  should  require  any  digital  television  receivers  that  cannot  receive  over-  the-  air  digital  broadcast 
 signals  to  carry  a  label  informing  consumers  of  this  limitation  on  the  receivers'  functionality. 
 57.  MSTV/  NAB/  ALTV  agree  with  our  assessment  that  consumers  will  continue  to  expect  that  broadcast  digital  television  receivers  will  be  able  to  receive  over-  the-  air  DTV 


 broadcast  signals.  They  state  that  the  expectation  that  a  television  set  will  receive  over-  the-  air  signals  is  so  universally  held  and  deeply  ingrained  that  consumers  must  be  made  aware  if  this 
 expectation  will  not  be  met.  MSTV/  NAB/  ALTV  therefore  submit  that  we  should  require  that  manufacturers  label  DTV  sets  that  are  not  capable  of  receiving  over-  the-  air  DTV  signals.  They 
 state  that  to  the  extent  that  the  Commission  already  has  defined  labels  for  DTV  receivers  marketed  as  cable  ready  or  cable  compatible,  we  should  adapt  those  labels  as  follows: 


 Digital  Cable  [or  DBS]  Ready  [1,2,  or  3]  Only  Will  Not  Receive 
 Over-  The-  Air  Broadcast  Signals 
 They  state  that  these  labels  would  be  strictly  factual  and  would  not  make  any  value  judgment  about  the  lack  of  over-  the-  air  reception  capability. 


 58.  CEA,  Motorola  and  Thomson  oppose  a  labeling  requirement  for  television  receivers  that  are  not  equipped  to  receive  over-  the-  air  broadcast  TV  signals,  arguing  that  voluntary 
 industry  labeling  can  adequately  address  concerns  regarding  information  on  DTV  set  capabilities  and  that  no  further  government  regulation  is  necessary.  87  CEA  submits  that,  at  present,  it  is  not 
 aware  of  any  commercially  available  digital  cable  receivers,  i.  e.,  navigation  devices,  on  the  market,  as  important  issues  of  compatibility  and  conditions  for  interconnection,  such  as  copy 
 protection  requirements,  remain  unresolved.  It  submits  that  when  such  products  do  become  available,  a  labeling  requirement  will  be  unnecessary  because  consumers  are  quite  capable  of 
 distinguishing  among  the  broad  categories  of  video  reception,  such  as  broadcast,  cable  and  satellite.  CEA  further  states  that  manufacturers  and  retailers  have  no  incentive  to  mislead 
 consumers  about  the  relative  capabilities  of  various  video  products,  but  do  possess  powerful  incentives  to  inform  consumers  accurately  about  such  products  so  as  to  ensure  customer 
 satisfaction,  avoid  returns  of  sales,  and  make  sales  of  complementary  products.  CEA  and  Thomson  also  point  out  that  settling  on  the  exact  phrasing  of  such  a  label  and  its  applicability 
 could  be  very  difficult  to  resolve. 
 59.  Upon  reviewing  the  record  on  this  issue,  we  will  not,  at  this  time,  require  television  receivers  that  cannot  receive  over-  the-  air  digital  broadcast  signals  to  carry  a  label  informing 


 consumers  of  this  limitation.  At  this  point,  we  do  not  know  when    or  if    such  products  will 


 87  CEA  comments  at  15-  16;  Motorola  comments  at  6. 
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 become  commercially  available  or  how  they  will  be  marketed.  We  will  continue  to  monitor  the  state  of  the  marketplace  and  will  take  additional  steps  if  necessary  to  protect  consumers 
 interests. 
 60.  DTV  Receiver  Performance  Standards.  In  the  Report  and  Order/  Further  Notice,  we  denied  a  request  by  parties  representing  broadcast  television  interests  that  we  establish  minimum 


 performance  standards  for  DTV  receivers.  In  making  this  decision,  we  reiterated  the  position  we  took  on  this  issue  in  the  DTV  proceeding,  namely  that  we  believe  competitive  market  forces  will 
 ensure  that  DTV  receivers  perform  adequately.  88  We  noted  that  receiver  performance  involves  trade-  offs  among  many  different  factors  and  that  manufacturers  are  generally  in  the  best  position 
 to  determine  how  these  trade-  offs  should  best  be  made  to  meet  consumer  demand.  We  also  observed  that  TV  receiver  manufacturers,  driven  by  market  forces,  are  continuing  to  make 
 significant  improvements  in  their  products,  particularly  in  the  area  of  indoor  reception  and  multipath  signal  handling  capabilities.  In  this  regard,  we  agreed  with  parties  representing  TV 
 receiver  manufacturers  that  the  effect  of  setting  DTV  receiver  standards  at  this  point  would  be  to  stifle  innovation  and  limit  performance  to  current  capabilities.  We  further  observed  that,  as 
 acknowledged  by  those  pressing  for  DTV  receiver  standards,  more  work  is  needed  before  it  would  even  be  possible  to  make  specific  proposals  for  such  standards.  In  addition,  we  noted  that 
 further  enhancements  to  the  8-  VSB  modulation  standard  are  being  developed  through  the  ATSC  process.  We  did  indicate,  however,  that  we  would  continue  to  monitor  receiver  issues 
 throughout  the  transition  and  would  take  appropriate  action  on  receiver  standards  if  necessary. 
 61.  In  its  Petition  for  Reconsideration,  MSTV/  NAB/  ALTV  asks  that  we  reconsider  our  decision  not  to  impose  minimum  performance  thresholds  for  DTV  receivers  if  manufacturers  do 


 not  promptly  implement  performance  standards  on  their  own.  89  They  contend  that  mandatory  receiver  performance  standards  are  needed  to  protect  consumers  and  provide  a  realistic 
 opportunity  for  the  public  to  experience  DTV  services.  MSTV/  NAB/  ALTV  argues  that  their  in-depth  study  of  8-  VSB  receiver  performance  includes  data  that  contradicts  our  assessment  that 
 market  forces  are  driving  manufacturers  to  achieve  adequate  performance  levels  in  their  sets.  90  They  argue  that  the  data  from  their  study  indicates  that  while  receiver  improvements  are  being 
 made,  progress  is  slow  and  inadequate.  They  further  argue  that  we  provided  no  support  for  our  position  that  performance  thresholds  would  stifle  innovation  and  limit  performance  to  current 
 capabilities,  noting,  for  example,  that  after  the  Commission  imposed  UHF  noise  figure  thresholds  for  analog  TV  receivers  in  1962,  receiver  noise  figure  performance  continued  to 
 improve  substantially  beyond  those  requirements.  91  Finally,  MSTV/  NAB/  ALTV  argue  that  we  provided  no  support  for  our  position  that  more  work  was  needed  before  it  would  be  possible  to 


 88  See  Memorandum  Opinion  and  Order  on  Reconsideration  of  the  Sixth  Report  and  Order  in  MM  Docket  No. 
 87-  268,  supra,  at  7486-  87. 
 89  MSTV/  NAB/  ALTV  Petition  at  10  and  i. 


 90  MSTV/  NAB/  ALTV  Petition  at  12.  See  also,  VSB/  COFDM  Project  Investigation  of  VSB  Improvements, 
 December  2000,  at  2. 
 91  See  First  Report  and  Order  in  Docket  No.  14760  (the  All  Channel  Receiver  Act  proceeding),  27  Fed.  Reg. 
 11698  (November  28,  1962). 
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 formulate  specific  proposals  for  performance  thresholds. 
 62.  MSTV/  NAB/  ALTV  argue  that  we  should  adopt  the  same  minimum  levels  of  performance  for  DTV  receivers  with  respect  to  receiver  noise  figures,  carrier-  to-  noise  ratios,  and 


 co-  channel/  adjacent  channel/  taboo  channel  desired-  to-  undesired  (D/  U)  ratios  that  were  assumed  when  creating  the  coverage  and  interference  figures  used  in  developing  the  DTV  Table  of 
 Allotments.  92  They  state  that  these  thresholds  would  ensure  a  minimum  level  of  receiver  quality  and  would  not  dictate  to  manufacturers  how  they  are  to  be  met.  They  are  concerned  that  unless 
 DTV  receivers  are  capable  of  operating  at  the  performance  levels  used  in  the  Commissions  DTV  planning  factors,  the  coverage  and  interference  predictions  developed  in  the  DTV 
 proceeding  will  not  accurately  reflect  the  service  available  to  American  viewers.  MSTV/  NAB/  ALTV  submit  that  adopting  these  thresholds  as  receiver  performance  standards 
 would  be  the  first  step  in  remedying  many  of  the  performance  shortfalls  experienced  by  DTV  viewers.  They  further  argue  that  multipath  immunity  thresholds  are  necessary  and  that  we 
 should  commit  to  adopting  such  standards  once  MSTV/  NAB/  ALTV  has  completed  them. 
 63.  CEA  submits  that  we  were  correct  in  our  decision  in  the  First  Report  and  Order  declining  to  adopt  mandatory  minimum  DTV  receiver  performance  standards.  93  It  argues  that 


 such  standards  are  not  necessary  as  a  matter  of  policy  and  that  we  do  not  have  authority  to  impose  them  on  manufacturers  in  any  event.  CEA  submits  that  the  DTV  equipment  market  is 
 thriving,  consumer  purchases  of  DTV  equipment  are  increasing  almost  exponentially,  and  that  this  progress  will  only  be  compounded  now  that  the  DTV  transmission  standards  debate  has  been 
 resolved.  It  states  that  receivers  produced  in  the  competitive  consumer  electronics  marketplace  almost  constantly  are  being  redesigned  and  improved.  It  argues  that  if  minimum  performance 
 standards  were  imposed,  what  was  intended  to  be  a  floor  on  performance  would  in  effect  become  a  ceiling,  to  the  detriment  of  consumers.  94  CEA  submits  that  if  left  to  compete, 
 manufacturers  will  have  the  incentive  to  raise  the  bar  on  receiver  performance.  It  points  to  a  recently  released  study  by  the  ATSC  Task  Force  on  RF  System  Performance  that  states  that   
 more  recently  designed  receivers  demonstrate  significant  [emphasis  in  original]  improvements  in  multipath  tolerance  compared  to  first-  generation  receivers  and  that  improvements  have  been 
 made  in  other  areas  of  receiver  design  including  the  RF  front  end,  the  automatic  gain  control  (AGC)  and  other  tracking  loops.  95  It  further  notes  our  Office  of  Engineering  and  Technologys 


 92  MSTV/  NAB/  ALTV  Petition  at  11.  See  also,  Sixth  Report  and  Order  in  MM  Docket  No.  87-  268,  12  FCC  Rcd 
 14588  (1997),  at  Appendix  A.  As  noted  by  NAB,  the  DTV  Table  of  Allotments  was  developed  based  on  assumptions  that  DTV  receivers  would  typically  exhibit  the  following  performance  levels:  noise  figures  (NB)  of 


 10  dB  for  high  VHF  and  7  dB  for  UHF;  a  carrier-  to-  noise  ratio  of  =15.19  dB;  a  DTV-  into-  DTV  co-  channel  D/  U  signal  ratio  of  +15.27  dB;  a  lower  DTV-  into-  DTV  adjacent  channel  D/  U  signal  ratio  of  41.98  dB  and  an  upper 
 DTV-  into-  DTV  adjacent  channel  D/  U  ratio  43.17  dB;  and  DTV-  into-  DTV  taboo  channel  D/  U  signal  ratios  specified  in  Appendix  A  of  the  Sixth  Report  and  Order. 


 93  CEA  opposition  at  2. 
 94  Id.  at  9. 
 95  Id.  at  10.  See  also,  Performance  Assessment  of  the  ATSC  Transmission  System,  Equipment  and  Future 
 Directions  Report  of  the  VSB  Ad  Hoc  Group  to  the  ATSC  Task  Force  on  the  RF  System  Performance,  VSB  Ad  Hoc  Group  to  the  ATSC  Task  Force  on  the  RF  System  Performance  (2001)  (VSB  Performance  Report). 
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 field  study  of  DTV  receiver  performance  (OET  DTV  Receiver  Study)  indicates  that  there  are  statistically  significant  differences  in  performance  between  first-  generation  and  third-  generation 
 receivers.  96 
 64.  We  believe  that  competitive  forces  are  generally  the  best  approach  for  ensuring  that  DTV  receivers  perform  adequately.  This  position  is  consistent  with  our  longstanding  approach 


 to  authorization  of  radio  services  in  which  we  generally  define  service  areas,  operating  limits  for  transmitters,  and  interference  protection  criteria  and  then  allow  manufacturers  to  design  and 
 market  receiving  equipment  to  operate  within  the  specified  operating  environment.  This  approach  permits  the  marketing  of  receiving  equipment  that  meets  a  broad  range  of  consumer 
 needs  in  terms  of  price,  quality,  performance,  and  features.  In  order  to  maximize  the  opportunity  for  development  of  a  variety  of  products  that  meet  these  needs,  we  believe  it  is  best  to  limit  our 
 intervention  in  the  receiver  market  to  instances  where  there  are  clear  problems  of  performance  or  capability  that  could  affect  the  successful  operation  of  an  important  service.  Such  was  the  case 
 with  the  UHF  tuner  requirements  and  the  associated  noise  figure  standards  for  UHF  tuners  that  the  Commission  adopted  under  the  ACRA.  More  recently,  we  addressed  the  issue  of  multipath 
 performance  in  DTV  receivers.  In  each  of  these  cases,  we  limited  our  involvement  to  the  minimum  necessary  to  address  specific  receiver  performance  deficiencies. 


 65.  We  see  no  apparent  problems  in  the  performance  of  the  current  generation  of  DTV  receivers  that  would  warrant  further  intervention  on  our  part  at  this  time.  As  shown  by  the 
 results  of  the  OET  DTV  Receiver  Study,  the  third  generation  DTV  receivers  provided  unimpaired  service  at  97%  of  the  locations  tested  with  an  antenna  30  high  and  85%  of  the 
 locations  tested  with  an  antenna  7  high.  97  We  also  observe  that  the  TV  service  model  does  not  assume  service  at  all  locations  within  a  stations  predicted  service  area,  recognizing  that  terrain, 
 structures  and  foliage  will  affect  propagation.  For  example,  at  the  Grade  B  contour  (the  edge  of  a  stations  service  area)  service  is  expected  at  only  50%  of  the  locations  90%  of  the  time 
 (F(  50,90))  and  at  the  Grade  A  contour  (closer  in  towards  the  transmitter)  service  is  expected  at  only  70%  of  the  locations  90%  of  the  time  F(  70,90)).  98  The  OET  study  results,  which  were  taken 
 over  a  number  of  sites  randomly  selected,  appear  well  within  the  performance  expectations  for  DTV  service  with  respect  to  noise  and  equalizer  performance.  We  further  observe  that  the  OET 
 DTV  Receiver  Study  found  that  the  DTV  receivers  tested  performed  considerably  better  in  comparison  to  the  NTSC  receiver  that  was  tested  simultaneously  at  the  at  the  same  sites.  The 
 NTSC  receiver  provided  an  acceptable  picture  at  66%  of  the  test  locations  with  the  30  antenna  and  27%  of  the  locations  with  the  7  antenna.  We  also  note  CEAs  comment  that  the  broadcast 
 industrys  8-  VSB/  COFDM  Project  found  that  [  n]  early  half  of  all  indoor  reception  failures  in  the 
 96  CEA  opposition  at  10.  See  also,  A  Study  of  ATSC  (8-  VSB)  DTV  Coverage  in  Washington,  D.  C.  and 
 Generational  Changes  in  DTV  Receiver  Performance,  project  TRB-  00-  01,  Interim  Report,  FCC  Office  of  Engineering  and  Technology,  April  9,  2001. 


 97  The  TV  service  model  assumes  reception  with  an  outdoor  antenna  mounted  30  high.  See  47  C.  F.  R. 
   73.686(  b)(  2). 
 98  The  F(  50,90)  standard  is  used  for  both  analog  and  digital  TV  service;  the  F(  70,90)  level  is  used  principally  with 


 analog  service,  but  is  nonetheless  relevant  also  to  DTV  service  for  comparison  purposes.  See  47  C.  F.  R.  73.622(  e)  and  73.683. 
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 MSTV/  NAB  tests  were  due  simply  to  insufficient  signal  strength.  99  While  these  field  measures  did  not  provide  specific  information  on  receivers  ability  to  perform  in  the  presence  of  signals  on 
 adjacent  channels  and  taboo  channels,  i.  e.  channels  more  than  plus  or  minus  one  channels  away  from  the  channel  on  which  a  station  is  operating,  there  were  both  DTV  and  NTSC  signals  at 
 significant  levels  on  adjacent  and  taboo  channels  during  all  of  these  field  testing  efforts.  Again,  the  high  levels  of  successful  reception  observed  in  the  testing  appear  to  indicate  that  DTV 
 receivers  perform  acceptably. 
 66.  We  do,  however,  recognize  the  interests  of  broadcasters  in  seeking  to  improve  the  performance  of  DTV  receivers  generally  in  order  to  maximize  the  ability  of  all  consumers  in  a 


 stations  service  area  to  actually  be  able  to  receive  service.  In  this  regard,  we  encourage  them  to  continue  to  work  with  consumer  electronics  manufacturers  to  further  improve  the  performance 
 levels  of  DTV  receivers.  Receiver  manufacturers  are  continuing  their  work  in  this  area  and  so  there  is  opportunity  for  broadcasters  to  participate  in  that  process.  One  aspect  of  broadcasters 
 involvement  could  be  to  determine  whether  voluntary  industry  receiver  performance  standards  are  needed  and  if  so,  to  develop  such  standards. 


 67.  While  the  DTV  planning  factors  suggested  by  MSTV/  NAB/  ALTV  reflect  the  industry  and  Commissions  view  of  what  could  be  considered  typical  DTV  receiver  performance 
 and  might  serve  as  a  starting  place  for  discussions  with  consumer  electronics  manufacturers,  there  are  other  considerations  such  as  price  and  a  consumers  location  within  a  stations  service 
 area  that  might  not  make  those  performance  specifications  ideal  for  all  receivers.  Again,  we  believe  these  matters  are  best  left  to  the  industries  to  resolve.  Accordingly,  we  are  denying 
 MSTV/  NAB/  ALTVs  request  that  we  act  to  impose  minimum  performance  thresholds  for  DTV  receivers  if  manufacturers  do  not  promptly  implement  performance  standards  on  their  own. 


 IV.  ADMINISTRATIVE  MATTERS 
 68.  Paperwork  Reduction  Act  Analysis.  This  Second  Report  and  Report  and  Order  and  Second  Memorandum  Opinion  and  Order  has  been  analyzed  with  respect  to  the  Paperwork 
 Reduction  Act  of  1995,  and  found  to  impose  no  new  or  modified  reporting  and  recordkeeping  requirements  or  burdens  on  the  public. 


 69.  Accessibility.  Accessible  formats  (computer  diskettes,  large  print,  audio  recording  and  Braille)  are  available  to  persons  with  disabilities  by  contacting  Brian  Millin,  of  the 
 Consumer  &  Governmental  Affairs  Bureau,  at  (202)  418-  7426,  TTY  (202)  418-  7365,  or  at  bmillin@  fcc.  gov. 


 70.  Final  Regulatory  Flexibility  Analysis.  As  required  by  the  Regulatory  Flexibility  Act  (RFA),  100  the  Commission  has  prepared  a  Final  Regulatory  Flexibility  Analysis  (FRFA)  of  the 
 possible  impact  on  small  entities  of  the  rules  adopted  in  this  Second  Report  and  Order  and 


 99  CEA  opposition  at  10,  citing  the  VSB  Performance  Report    6.2.2.2. 
 100  5  U.  S.  C.    601  et  seq. 
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 Second  Memorandum  Opinion  and  Order.  101  The  FRFA  is  set  forth  in  Appendix  C. 
 71.  Additional  Information.  For  additional  information  on  this  proceeding,  please  contact  Alan  Stillwell  of  the  Office  of  Engineering  and  Technology  at  (202)  418-  2470. 


 V.  ORDERING  CLAUSES 
 72.  Accordingly,  IT  IS  ORDERED  that,  pursuant  to  the  authority  contained  in  Sections  1,  2(  a),  4(  i),  7,  and  303  of  the  Communications  Act  of  1934  as  amended,  47  U.  S.  C.    1,  2(  a),  4(  i), 
 7  and  303,  Part  73  of  the  Commissions  rules,  47  C.  F.  R.  Part  73,  IS  AMENDED  as  set  forth  in  Appendix  B  of  this  Second  Report  and  Order  and  Second  Memorandum  Opinion  and  Order. 


 73.  IT  IS  FURTHER  ORDERED  that  the  Petition  for  Clarification  and  Reconsideration  filed  by  the  Consumer  Electronics  Association,  the  Petition  for  Partial  Reconsideration  filed  by 
 Thomson  Multimedia,  Inc.,  and  Petition  for  Reconsideration  filed  by  the  Association  for  Maximum  Service  Television,  Inc,  the  National  Association  of  Broadcasters,  and  the  Association 
 of  Local  Television  Stations  regarding  issues  in  the  Report  and  Order  and  Further  Notice  of  Proposed  Rule  Making  in  this  proceeding  ARE  DENIED. 


 74.  IT  IS  FURTHER  ORDERED  that,  pursuant  to  the  Contract  with  America  Advancement  Act  of  1996,  the  rule  amendments  set  forth  in  Appendix  A  SHALL  BE 
 EFFECTIVE  sixty  days  after  publication  in  the  Federal  Register. 
 75.  IT  IS  FURTHER  ORDERED  that  the  Commissions  Consumer  and  Governmental  Affairs  Bureau,  Reference  Information  Center,  SHALL  SEND  a  copy  of  this  Second  Report  and 


 Order  and  Second  Memorandum  Opinion  and  Order,  including  the  Final  Regulatory  Flexibility  Analysis,  to  the  Chief  Counsel  for  Advocacy  of  the  Small  Business  Administration. 


 FEDERAL  COMMUNICATIONS  COMMISSION 


 Marlene  H.  Dortch  Secretary 


 101  5  U.  S.  C.    604. 
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 APPENDIX  A  PARTIES  SUBMITTING  COMMENTS,  RELY  COMMENTS,  PETITIONS  AND 
 RESPONSES  TO  PETITIONS 


 Commenting  Parties 
 1.  Advanced  Television  Systems  Committee  2.  The  Association  for  Maximum  Service  Television,  Inc.,  the  National  Association  of 
 Broadcasters,  and  the  Association  for  Local  Television  Stations,  Inc.  (filing  jointly)  3.  The  Consumer  Electronics  Association 
 4.  Florida  Consumer  Action  Network  5.  Massachusetts  Consumers  Coalition 
 6.  Motorola,  Inc.  7.  Paxson  Communications  Corporation 


 Replying  Parties 
 1.  The  Association  for  Maximum  Service  Television,  Inc.,  the  National  Association  of  Broadcasters  and  the  Association  for  Local  Television  Stations,  Inc.  (filing  jointly) 
 2.  Thomson  Multimedia,  Inc. 
 Petition  for  Reconsideration 
 1.  The  Association  for  Maximum  Service  Television,  Inc.,  the  National  Association  of  Broadcasters,  and  the  Association  for  Local  Television  Stations,  Inc.  (filing  jointly) 
 2.  The  Consumer  Electronics  Association  (  Petition  for  Clarification  and  Reconsideration)  3.  Thomson  Multimedia,  Inc.  (titled  Petition  for  Partial  Reconsideration) 


 Responses  to  Petition  for  Reconsideration 
 1.  The  Association  for  Maximum  Service  Television,  Inc.,  the  National  Association  of  Broadcasters,  and  the  Association  for  Local  Television  Stations,  Inc.  (filing  jointly, 
 Opposition  to  Petition  for  Reconsideration)  2.  The  Consumer  Electronics  Association  (  Opposition  .  to  the  Petition  for  Reconsideration 
 filed  By  MSTV/  NAB/  ALTV) 
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 APPENDIX  B  RULE  CHANGES 
 Part  15  of  Title  47  of  the  Code  of  Federal  Regulations  is  amended  as  follows: 
 1.  The  authority  citation  for  Part  15  continues  to  read  as  follows: 
 Authority:  47  U.  S.  C.  154,  303,  303,  304,  307,  and  554A. 
 2.  Section  15.117  of  the  rules  is  amended  by  revising  paragraph  (a),  adding  new  paragraphs  (h)  and  (i)  and  re-  designating  the  existing  paragraph  (h)  as  paragraph  (j)  to  read  as  follows: 


   15.117  TV  broadcast  receivers. 
 (a)  All  TV  broadcast  receivers  shipped  in  interstate  commerce  or  imported  into  the  United  States,  for  sale  or  resale  to  the  public,  shall  comply  with  the  provisions  of  this  section,  except 


 that  paragraphs  (f)  and  (g)  shall  not  apply  to  the  features  of  such  sets  that  provide  for  reception  of  digital  television  signals.  The  reference  in  this  section  to  TV  broadcast  receivers  also  includes 
 devices,  such  as  TV  interface  devices  and  set-  top  devices  that  are  intended  to  provide  audio-video  signals  to  a  video  monitor,  that  incorporate  the  tuner  portion  of  a  TV  broadcast  receiver 
 and  that  are  equipped  with  an  antenna  or  antenna  terminals  that  can  be  used  for  off-  the-  air  reception  of  TV  broadcast  signals,  as  authorized  under  part  73  of  this  chapter. 


 ***** 
 (h)  Digital  television  reception  capability.  TV  broadcast  receivers  are  required  only  to  provide  useable  picture  and  sound  commensurate  with  their  video  and  audio  capabilities  when  receiving 


 digital  television  signals.  (i)  Digital  television  reception  capability  implementation  schedule.  (1)  Responsible  parties,  as 
 defined  in  Section  2.909  of  this  chapter,  are  required  to  equip  new  TV  broadcast  receivers  that  are  shipped  in  interstate  commerce  or  imported  from  any  foreign  country  into  the  United  States 
 and  for  which  they  are  responsible  to  comply  with  the  provisions  of  this  section  in  accordance  with  the  following  schedule: 
 -  Receivers  with  screen  sizes  36  and  above-  50%  of  all  of  a  responsible  partys  units  must  include  DTV  tuners  effective  July  1,  2004;  100%  of  such  units  must 
 include  DTV  tuners  effective  July  1,  2005  -  Receivers  with  screen  sizes  25  to  36-  50%  of  all  of  a  responsible  partys  units 
 must  include  DTV  tuners  effective  July  1,  2005;  100%  of  such  units  must  include  DTV  tuners  effective  July  1,  2006 
 -  Receivers  with  screen  sizes  13  to  24-  100%  of  all  such  units  must  include  DTV  tuners  effective  July  1,  2007 
 -  Other  devices  (videocassette  recorders  (VCRs),  digital  video  disk  and  digital  versatile  disk  (DVD)  players/  recorders,  etc.)  that  receive  television  signals- 
 100%  of  all  such  units  must  include  DTV  tuners  effective  July  1,  2007.  (2)  For  purposes  of  this  implementation  schedule,  screen  sizes  are  to  be  measured  diagonally 
 across  the  picture  viewing  area.  The  requirement  for  equipping  new  TV  broadcast  receivers  with  DTV  reception  capability  does  not  apply  to  units  with  integrated  tuners/  displays  that  have  screen 
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 sizes  measuring  less  than  7.8  inches  vertically,  i.  e.,  the  vertical  measurement  of  a  screen  in  the  4:  3  aspect  ratio  that  measures  13  diagonally  across  the  picture  viewing  area. 
 (3)  Responsible  parties  may  include  combinations  of  DTV  monitors  and  set-  top  DTV  tuners  in  meeting  the  required  percentages  of  units  with  a  DTV  tuner  if  such  combinations  are  marketed 
 together  with  a  single  price. 
 (j)  *** 
 Part  73  of  Title  47  of  the  Code  of  Federal  Regulations  is  amended  as  follows: 
 3.  The  authority  citation  for  Part  73  continues  to  read  as  follows: 
 Authority:  47  U.  S.  C.  154,  303,  334,  336 
 4.  Section  73.682,  paragraph  (d)  is  amended  by  revising  it  to  read  as  follows: 
   73.682  TV  transmission  standards. 
 *  *  *  *  * 
 (d)  Digital  broadcast  television  transmission  standard.  Transmission  of  digital  broadcast  television  (DTV)  signals  shall  comply  with  the  standards  for  such  transmissions  set  for  in 


 Advanced  Television  Systems  Committee  (ATSC)  Doc.  A/  52  (  ATSC  Standard  Audio  Compression  (AC-  3),  20  Dec  95)  and  ATSC  Doc.  A/  53B  (  ATSC  Digital  Television  Standard, 
 7  Aug  01,  except  for  Section  5.1.2  (  Compression  format  constraints)  of  Annex  A  (  Video  Systems  Characteristics)  and  the  phrase  see  Table  3  in  Section  5.1.1  Table  2  and  Section 
 5.1.2  Table  4.  Although  not  incorporated  herein  by  reference,  licensees  may  also  consult  ATSC  Doc.  A/  54  (Guide  to  Use  of  the  ATSC  Digital  Television  Standard,  4  Oct  95)  and  ATSC  Doc. 
 A/  65  (Program  System  and  Information  Protocol  (PSIP)  Standard,  23  Dec  97)  for  guidance.  This  incorporation  by  reference  was  approved  by  the  Director  of  the  Federal  Register  in 
 accordance  with  5  U.  S.  C.(  a)  and  1  CFR  part  51.  Copies  may  be  inspected  at  the  Federal  Communications  Commission,  445  12  th  St.,  SW,  Washington,  DC  20554  or  at  the  Office  of  the 
 Federal  Register,  800  N.  Capitol  St.,  NW,  Washington,  DC.  Copies  of  ATSC  A/  52,  A/  53,  A/  53,  and  A/  65  can  be  obtained  from  the  Commissions  contract  copier  or  from  the  Advanced 
 Television  Systems  Committee,  1750  K  St.,  NW,  Washington,  DC  20006.  They  are  also  available  in  their  entirety  on  the  Internet  at  http//:  www.  atsc.  org. 
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 APPENDIX  C  FINAL  REGULATORY  FLEXIBILITY  ANALYSIS 
 As  required  by  the  Regulatory  Flexibility  Act  (RFA),  102  an  Initial  Regulatory  Flexibility  Analysis  (IRFA)  was  incorporated  in  the  Report  and  Order  and  Further  Notice  of  Proposed  Rule  Making 
 in  MM  Docket  No.  00-  39  (Report  and  Order/  Further  Notice).  103  The  Commission  sought  written  public  comment  on  several  issues  concerning  the  transition  to  digital  television  (DTV), 
 including  comment  on  the  IRFA.  This  Final  Regulatory  Flexibility  Analysis  (FRFA)  conforms  to  the  RFA.  104 


 A.  Need  for,  and  Objectives  of,  the  Report  and  Order: 
 Beginning  in  1987,  the  Commission  undertook  to  bring  the  most  up-  to-  date  technology  to  broadcast  television.  That  resulted  in  several  Commission  decisions  including  those  adopting  a 
 digital  television  (DTV)  standard,  DTV  service  rules,  and  a  Table  of  DTV  Allotments.  The  Table  of  DTV  Allotments  provides  each  existing  television  broadcaster  with  a  second  channel  on 
 which  to  operate  a  DTV  station  for  the  transition  period  after  which  one  of  its  channels  will  revert  to  the  government  for  use  in  other  services.  The  transition  deadline  established  by 
 Congress  is  December  31,  2006.  The  Commission  is  permitted  to  extend  that  deadline  on  a  market-  by  market  basis  if  more  than  15  percent  of  viewers  will  be  left  without  service  from  1)  a 
 digital  television  receiver;  2)  an  analog  television  receiver  equipped  with  a  digital/  analog  converter;  or  3)  a  multi-  channel  video  provider  that  carries  local  broadcast  stations.  The 
 Commission  has  determined  that  a  requirement  to  include  DTV  reception  capability  in  new  television  sets  is  necessary  due  to  the  lack  of  progress  by  the  market  in  including  DTV  reception 
 capability  in  new  television  receivers.  In  particular,  the  Commission  is  concerned  that  continued  marketing  of  analog-  only  TV  sets  can  only  serve  to  delay  the  transition.  In  order  for  the  DTV 
 transition  to  move  forward  towards  the  year  2006  target  completion  date  established  by  Congress,  or  thereafter  as  close  to  that  date  as  possible,  receivers  with  DTV  capability  need  to  be 
 on  the  market  in  quantity  and  at  reasonable  prices  very  soon. 
 Since  it  was  adopted  by  the  Commission  in  1996,  the  DTV  transmission  standard  has  been  updated  by  its  developers  to  include  new  features  and  to  improve  several  aspects  of  its 
 performance.  The  rules  need  to  be  revised  to  allow  television  stations  to  implement  these  new  features  and  improvements. 


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


 103  Report  and  Order  and  Further  Notice  of  Proposed  Rule  Making  in  MM  Docket  No.  00-  39,  16  FCC  Rcd  5946 
 (2001). 
 104  See  5  U.  S.  C.    604. 
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 B.  Summary  of  Significant  Issues  Raised  by  Public  Comments  in  Response  to  the  IRFA: 
 No  comments  were  filed  in  response  to  the  IRFA. 
 C.  Description  and  Estimate  of  the  Number  of  Small  Entities  to  Which  the  Proposed  Rules  Will  Apply: 


 The  RFA  directs  agencies  to  provide  a  description  of,  and,  where  feasible,  an  estimate  of  the  number  of  small  entities  that  may  be  affected  by  the  proposed  rules,  if  adopted.  105  The  RFA 
 defines  the  term  small  entity  as  having  the  same  meaning  as  the  terms  small  business,  small  organization,  and  small  governmental  jurisdiction.  106  In  addition,  the  term  small  business  has 
 the  same  meaning  as  the  term  small  business  concern  under  section  3  of  the  Small  Business  Act.  107  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.  108 
 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  [SBA]  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.  A  small 
 organization  is  generally  any  not-  for-  profit  enterprise  which  is  independently  owned  and  operated  and  is  not  dominant  in  its  field.  109  Nationwide,  as  of  1992,  there  were  approximately 
 275,801  small  organizations.  110  Small  governmental  jurisdiction  generally  means  governments  of  cities,  counties,  towns,  townships,  villages,  school  districts,  or  special  districts  with  a  population 
 of  less  than  50,000.  111  As  of  1992,  there  were  approximately  85,006  local  governments  in  the  United  States.  112  This  number  includes  38,978  counties,  cities,  and  towns;  of  these,  37,566,  or  96 
 percent,  have  populations  of  fewer  than  50,000.  113  The  Census  Bureau  estimates  that  this  ratio  is  approximately  accurate  for  all  governmental  entities.  Thus,  of  the  85,006  governmental  entities, 
 we  estimate  that  81,600  (91  percent)  are  small  entities. 


 105  5  U.  S.  C.    603(  b)(  3). 
 106  Id.    601(  6). 
 107  Id.    601(  3). 
 108  15  U.  S.  C.    632. 
 109  5  U.  S.  C.    601(  4). 
 110  1992  Economic  Census,  U.  S.  Bureau  of  the  Census,  Table  6  (special  tabulation  of  data  under  contract  to 
 Office  of  Advocacy  of  the  U.  S.  Small  Business  Administration). 
 111  5  U.  S.  C.    601(  5). 


 112  U.  S.  Dept.  of  Commerce,  Bureau  of  the  Census,  1992  Census  of  Governments. 
 113  Id. 
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 Rules  adopted  in  this  proceeding  will  apply  to  manufacturers  of  television  transmitting  and  receiving  equipment  and  to  television  stations.  The  SBA  has  established  a  small  business  size 
 standard  for  Radio  and  Television  Broadcasting  and  Wireless  Communications  Equipment  Manufacturing.  Under  this  standard,  business  firms  are  considered  small  if  they  have  750  or 
 fewer  employees.  114  Census  data  for  1997  indicate  that,  for  that  year,  there  were  a  total  of  1,215  establishments  115  in  this  category.  116  Of  those,  there  were  1150  that  had  employment  under  500, 
 and  an  additional  37  that  had  employment  of  500  to  999.  The  percentage  of  broadcast  equipment  manufacturers  to  others  in  this  category  is  approximately  22%,  117  so  we  estimate  that  the  number 
 of  broadcast  equipment  manufacturers  with  employment  under  500  was  actually  closer  to  253,  with  an  additional  8  establishments  having  employment  of  between  500  and  999.  Television 
 manufacturers  alone  (i.  e.,  without  radio)  accounted  for  yet  smaller  numbers.  Given  the  above,  we  estimate  that  the  great  majority  of  television  broadcasting  equipment  manufacturers  are 
 small. 
 The  SBA  has  also  established  a  small  business  size  standard  for  Audio  and  Video  Manufacturing,  which  includes  the  manufacturing  of  television  sets.  Under  this  standard, 
 business  firms  are  considered  small  if  they  have  750  or  fewer  employees.  118  Census  data  for  1997  indicate  that,  for  that  year,  there  were  a  total  of  554  establishments  in  this  category.  119  Of 
 those,  there  were  542  that  had  employment  under  500,  and  an  additional  9  that  had  employment  of  500  to  999.  120  The  percentage  of  television  set  manufacturers  to  others  in  this  category  is 
 approximately  6.3%,[  FN  H]  so  we  estimate  that  the  number  of  broadcast  equipment  manufacturers  with  employment  under  500  was  actually  closer  to  34,  with  an  additional  zero  or 
 one  establishment  having  employment  of  between  500  and  999.  Given  the  above,  we  estimate  that  virtually  all  television  set  manufacturers  are  small. 


 The  SBA  defines  small  television  broadcasting  stations  as  television  broadcasting  stations  with 
 114  13  C.  F.  R.    121.201,  NAICS  code  334220. 
 115  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  1997,  which  was  1,089. 
 116  U.  S.  Census  Bureau,  1997  Economic  Census,  Industry  Series:  Manufacturing,  "Industry  Statistics  by 
 Employment  Size,"  Table  4,  NAICS  code  334220  (issued  Aug.  1999). 
 117  Id.  Table  5,  "Industry  Statistics  by  Industry  and  Primary  Product  Class  Specialization:  1997." 


 118  13  C.  F.  R.    121.201,  NAICS  code  334310. 
 119  U.  S.  Census  Bureau,  1997  Economic  Census,  Industry  Series:  Manufacturing,  "Industry  Statistics  by 
 Employment  Size:  1997,"  Table  4,  NAICS  code  334310  (issued  Aug.  1999).  In  this  category,  the  census  breaks-out  data  for  firms  or  companies  only  to  give  the  total  number  of  such  entities  for  1997,  which  was  524. 


 120  Id.  Table  5,  "Industry  Statistics  by  Industry  and  Primary  Product  Class  Specialization:  1997." 
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 $10.5  million  or  less  in  annual  receipts.  121  According  to  Commission  staff  review  of  the  BIA  Publications,  Inc.,  Master  Access  Television  Analyzer  Database,  fewer  than  800  commercial  TV 
 broadcast  stations  (65%)  subject  to  our  proposal  have  revenues  of  less  than  $10.5  million  dollars.  We  note,  however,  that  under  SBAs  definition,  revenues  of  affiliates  that  are  not  television 
 stations  should  be  aggregated  with  the  television  station  revenues  in  determining  whether  a  concern  is  small.  Therefore,  our  estimate  may  overstate  the  number  of  small  entities  since  the 
 revenue  figure  on  which  it  is  based  does  not  include  or  aggregate  revenues  from  non-  television  affiliated  companies.  It  would  appear  that  there  will  be  no  more  than  800  entities  affected. 


 D.  Description  of  Projected  Reporting,  Recordkeeping,  and  Other  Compliance  Requirements: 
 The  actions  taken  in  the  Second  Report  and  Order  and  Second  Memorandum  Opinion  and  Order  impose  no  reporting  or  recordkeeping  requirements  on  television  broadcast  stations,  large  or 
 small,  or  on  manufacturers  of  television  transmitting  or  receiving  equipment,  large  or  small.  The  only  compliance  burden  adopted  in  this  Second  Report  and  Order  and  Second  Memorandum 
 Opinion  and  Order  is  the  requirement  that  new  television  receivers  be  capable  of  tuning  over-the-  air  DTV  signals,  which  is  described  in  Section  E,  infra.  122 


 E.  Steps  Taken  to  Minimize  Significant  Impact  on  Small  Entities,  and  Significant  Alternatives  Considered: 
 The  RFA  requires  an  agency  to  describe  any  significant  alternatives  that  it  has  considered  in  reaching  its  proposed  approach,  which  may  include  the  following  four  alternatives  (among 
 others):  (1)  the  establishment  of  differing  compliance  or  reporting  requirements  or  timetables  that  take  into  account  the  resources  available  to  small  entities;  (2)  the  clarification,  consolidation, 
 or  simplification  of  compliance  or  reporting  requirements  under  the  rule  for  small  entities;  (3)  the  use  of  performance,  rather  than  design,  standards;  and  (4)  an  exemption  from  coverage  of  the 
 rule,  or  any  part  thereof,  for  small  entities.  123 
 The  Commission  recognizes  that  requiring  DTV  reception  capability  in  new  television  receivers  that  action  will  pose  new  burdens  on  consumer  electronics  manufacturers,  especially  in  the  initial 
 period  when  production  volumes  are  relatively  low.  It  further  recognizes  that  the  cost  considerations  associated  with  DTV  reception  capability  are  such  that  it  would  not  be 
 economically  feasible  at  this  point  in  time  to  include  DTV  capability  in  smaller  screen  receivers.  However,  as  production  increases,  the  price  and  size  of  the  components  needed  for  DTV 
 reception  will  decline  substantially,  so  that  the  incremental  cost  of  including  that  capability  in  TV  receivers  will  eventually  become  low. 


 The  plan  for  implementing  the  DTV  tuner  requirement  adopted  in  the  Second  Report  and  Order 
 121  13  C.  F.  R.    121.201  (NACIS  Code  513120). 
 122  See  also  para.  42,  supra,  describing  receiver  cost/  price  increases. 
 123  5  U.  S.  C.    603(  c). 
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 and  Second  Memorandum  Opinion  and  Order  is  designed  to  be  as  simple  and  inexpensive  to  manufacturers  as  possible,  including  any  small  entities.  This  plan  will  minimize  the  impact  on 
 receiver  manufacturers  by  phasing  the  requirement  in  over  time.  By  applying  the  requirement  first  to  large  screen  receivers,  some  models  of  which  now  already  include  an  integrated  DTV 
 tuner,  the  plan  will  provide  time  for  manufacturers  to  develop  the  economic  efficiencies  needed  to  produce  TV  sets  with  DTV  tuners  at  lower  cost.  Over  time  the  percentage  of  units  that  will 
 have  to  have  DTV  reception  capability  will  increase  and  the  requirement  would  also  be  extended  to  smaller  screen  units  in  the  same  incremental  manner.  To  minimize  the  impact  on  costs  to 
 manufacturers,  receivers  will  only  be  required  to  have  the  capability  to  receive  and  decode  over-the-  air  DTV  signals.  Thus,  TV  sets  subject  to  the  requirement  will  only  have  to  provide  useable 
 picture  and  sound  commensurate  with  their  video  and  sound  capabilities  when  receiving  any  of  the  recognized  ATSC  video  formats;  there  is  no  requirement  for  full  HDTV  capability. 


 While  extending  the  phase  in  period  beyond  July  1,  2007,  124  would  have  provided  additional  time  for  manufacturers  to  develop  cost  reductions,  the  Commission  found  that  imposing  the 
 requirement  on  all  receivers  by  this  date  was  necessary  in  order  to  be  consistent  with  the  statutory  specification  of  this  date  as  the  target  for  completing  the  DTV  transition.  The 
 Commission  also  chose  not  to  adopt  an  alternative  that  would  have  based  the  measure  of  compliance  on  the  percentage  of  models  that  a  manufacturer  produces  with  DTV  tuners.  The 
 plan  adopted  bases  the  measure  of  compliance  on  a  manufacturers  total  production  of  TV  receivers.  However,  the  Commission  did  allow  manufacturers  to  include  set-  top  DTV  tuners 
 marketed  together  with  a  DTV-  ready  receiver  in  the  number  of  units  that  count  towards  meeting  this  requirement. 


 The  Commissions  action  to  update  the  DTV  transmission  standard  to  reflect  the  most  recent  version  that  has  been  issued  by  the  Advanced  Television  Systems  Committee  is  expected  to  have 
 no  adverse  on  any  small  entity.  In  this  regard,  the  changes  in  the  most  recent  version  are  all  backwards  compatible  with  the  specifications  of  the  version  of  the  standard  that  was  previously 
 adopted  and  thereby  with  the  capabilities  of  existing  DTV  transmission  and  receiving  equipment. 
 As  noted,  we  received  comments  asking,  inter  alia,  that  requirements  we  adopt  be  phased  in  more  quickly,  125  and  we  chose  instead  to  adopt  the  phase  in  schedule  described.  We  believe  that 
 rejecting  the  alternative  of  a  quicker  transition  will  assist  those  manufacturers  that  are  also  small  entities. 


 F.  Report  to  Congress 
 The  Commission  shall  send  a  copy  of  the  Second  Report  and  Order  and  Second  Memorandum  Opinion  and  Order  in  MM  Docket  No.  00-  39,  including  this  FRFA,  in  a  report  to  be  sent  to 
 Congress  pursuant  to  the  Congressional  Review  Act,  see  5  U.  S.  C.    801(  a)(  1)(  A).  In  addition,  the  Commission  shall  send  a  copy  of  the  Second  Report  and  Order  and  Second  Memorandum 


 124  See  para.  40,  supra,  describing  the  implementation  schedule  for  the  DTV  tuner  requirement. 
 125  See  paras.  11  and  13,  supra. 
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 Opinion  and  Order  in  MM  Docket  No.  00-  39,  including  the  FRFA,  to  the  Chief  Counsel  for  Advocacy  of  the  SBA.  A  copy  of  the  Second  Report  and  Order  and  Second  Memorandum 
 Opinion  and  Order  in  MM  Docket  No.  00-  39  and  FRFA  (or  summaries  thereof)  will  also  be  published  in  the  Federal  Register.  See  5  U.  S.  C.    604(  b). 
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 SEPARATE  STATEMENT  OF  CHAIRMAN  MICHAEL  K.  POWELL 
 In  the  Matter  of  Review  of  the  Commissions  Rules  and  Policies  Affecting  the  Conversion  to  Digital  Television    MM  Docket  No.  00-  39 


 Every  year,  25  million  analog  sets  are  sold  in  this  country,  their  purchasers  blissfully  unaware  that  their  new  sets  come  with  a  government-  mandated  expiration  date. 
 Someday,  analog  broadcasting  will  cease.  When  that  time  comes,  consumers  will  expect  their  television  sets  to  go  on  working  in  the  digital  world  just  as  they  do  today.  This 
 includes  the  ability  to  receive  broadcast  signals.  Indeed,  the  expectation  that  TV  sets  receive  broadcast  signals  is  so  ingrained  that  consumers  simply  assume  this  functionality 
 is  incorporated  into  their  television  set.  That  is  what  todays  Order  is  all  about. 
 There  are  approximately  81  million  television  sets  in  the  U.  S.  (over  30%  of  the  total)  that  are  not  connected  to  any  subscription  video  service  and  rely  solely  on  free, 
 over-  the-  air  broadcasting.  Of  those  sets  that  rely  on  over-  the-  air  service,  about  46.5  million  are  in  broadcast-  only  homes  and  34.5  million  are  in  homes  that  subscribe  to  a 
 multichannel  video  programming  service.  Thus,  over-  the-  air  tuners  affect  tens  of  millions  of  consumers. 


 The  Consumer  Electronics  Association  (  CEA  or  Trade  Association)  has  been  vehemently  opposed  to  phasing  in  DTV  tuners  in  television  sets.  The  Trade  Association 
 argues  that  those  who  want  to  watch  over-  the-  air  digital  broadcasting  should  be  required  to  purchase  an  external  set-  top  box.  This  would  be  a  far  more  expensive  proposition  for 
 consumers,  given  that  these  boxes  currently  cost  about  $500.  It  is  incredible  that  CEA  supports  an  alternative  that  would  cost  consumers  150%  more  than  CEAs  own  cost 
 projections  for  the  DTV  tuner  ($  500  for  the  set  tot  box  vs.  $200  for  the  tuner).  If  the  Trade  Associations  concern  about  the  cost  of  integrated  tuners  is  sincere,  one  wonders 
 why  they  would  suggest  a  solution  that  would  cost  consumers  more  than  twice  as  much.  Moreover,  this  is  the  same  group  that  insists  in  other  contexts  --  e.  g.,  the  need  for  plug 
 and  play  sets    that  consumers  do  not  want  a  set-  top  box  and  will  not  tolerate  such  an  inconvenience.  It  is  odd  that  they  can  be  so  solicitous  of  consumer  expectations  in  one 
 context  and  so  tone  deaf  to  them  here. 
 Furthermore,  CEAs  claim  that  a  tuner  requirement  would  be  an  unreasonable  burden  on  television  manufacturers  is  refuted  by  the  willingness  of  Thomson  and  Zenith 
 to  voluntarily  incorporate  DTV  tuners  on  a  phased-  in  basis.  In  fact,  Thomson  is  the  leading  television  and  digital  satellite  receiver  manufacturer  in  the  United  States  selling 
 each  year  more  than  4  million  televisions  and  2  million  digital  satellite  receivers.  It  strains  credulity  to  believe  that  either  of  these  companies  would  voluntarily  agree  to  a 
 course  of  action  likely  to  result  in  the  consequences  suggested  by  the  Trade  Association.  I  applaud  Zenith  and  Thomson  for  their  commitment  to  the  DTV  transition. 


 We  recognize  that  a  DTV  tuner  will  initially  add  costs,  but  CEAs  exclusive  focus 
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 on  this  incremental  cost  ignores  the  critical  functionality  the  tuner  adds  to  the  TV  set.  This  Order  simply  gives  consumers  what  they  receive  today  when  they  buy  a  box  with 
 pictures  that  claims  to  be  a  TV  set.  The  tuner  is  what  makes  that  box  a  television  set.  A  true  TV  may  cost  a  small  amount  more  than  a  monitor,  but  the  consumer  is  getting  much 
 more  capability.  Imagine  tuning  in  to  an  emergency  broadcast  of  an  impending  hurricane  on  an  HDTV  monitor.  What  is  that  worth  to  consumers? 


 Furthermore,  we  are  confident  that  economies  and  efficiencies  of  scale  will  drive  these  costs  down.  Historical  trends  demonstrate  this  fact,  which  CEA  inexplicably 
 ignores.  Ironically,  CEA,  in  its  opposition  to  the  1962  All  Channel  Receiver  Act,  claimed  the  UHF  requirement  would  increase  the  cost  of  television  sets  by  14%.  In  fact, 
 set  prices  actually  declined  following  passage  of  the  legislation. 
 Price  sensitivity  led  us  to  phase  in  the  tuner  requirement  over  a  five  year  period.  Initially  it  will  only  apply  to  the  largest  sets,  where  the  price  impact  would  be  the  lowest. 
 In  fact,  the  prices  of  these  large  sets  have  been  declining  at  a  rate  of  $100  to  $800  per  year,  so  the  additional  cost  of  the  DTV  tuner  may  be  partially  or  completely  offset  by  the 
 general  price  decline.  Most  projections  are  within  a  general  range,  from  about  the  same  as  an  analog  tuner  by  the  time  a  requirement  would  apply  to  small-  screen  TVs  (Zenith), 
 to  $16  by  2006  (Arthur  D.  Little),  to  $50  by  2006  (Motorola),  to  $75  by  2007-  2008  (Thomson).  CEA,  by  contrast,  declares  that  DTV  tuners  will  retain  a  $200  premium  for 
 the  foreseeable  future.  Although  a  precise  estimate  of  future  cost  is  difficult,  it  is  not  difficult  to  discern  which  projections  are  within  a  zone  of  reasonableness  and  which  is 
 hyperbole. 
 Ultimately,  the  DTV  transition  will  shift  into  high  gear  when  three  factors  come  together:  (1)  a  critical  mass  of  compelling  digital  content;  (2)  distribution  of  that  content 
 to  consumers;  and  (3)  reception  equipment  in  consumers  hands.  We  have  been  working  on  these  issues  through  our  voluntary  call  to  action  and  through  Commission  proceedings 
 such  as  the  broadcast  copy  protection  NPRM  we  initiate  today.  Todays  decision  promotes  the  availability  of  reception  equipment,  without  which  the  first  two  factors  are 
 meaningless.  We  readily  admit  that  there  are  additional  steps  to  take,  such  as  the  development  of  plug  and  play  sets  for  those  cable  subscribers  who  do  not  want  to  use  a 
 set-  top  box.  But  simply  because  there  is  more  work  to  be  done  does  not  mean  that  we  should  defer  the  progress  we  can  make  today. 


 In  the  end,  we  have  to  make  a  judgment  about  what  is  in  consumers  best  interest;  not  in  a  vacuum,  not  in  a  hypothetical  marketplace,  but  in  the  real  world.  The  All 
 Channel  Receiver  Act  and  the  DTV  transition  are  national  commitments  in  which  the  FCC  must  play  a  prominent  role.  I  support  todays  action. 
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 SEPARATE  STATEMENT  OF  COMMISSIONER  KATHLEEN  Q.  ABERNATHY 
 Re:  Review  of  the  Commissions  Rules  and  Policies  Affecting  the  Conversion  to  Digital  Television,  MM  Docket  No.  00-  39  (adopted  August  8,  2002) 
 Todays  decision  is  a  difficult  balancing  act  between  the  need  to  continue  to  promote  the  DTV  transition  and  a  desire  to  protect  consumers  from  excessive  price  increases  for 
 television  sets.  In  addition,  our  decision  involves  significant  regulatory  intervention  in  the  marketplace,  something  that  I  generally  do  not  advocate  because  it  can  distort 
 competition  and  drive  up  prices  for  consumers.  Nevertheless,  I  support  this  decision  for  the  following  reasons:  1)  the  transition  from  analog  to  digital  television  is  statutorily 
 mandated  and  is  not  driven  by  market  forces;  2)  without  the  mass  availability  of  television  sets  that  can  receive  over-  the  air  digital  signals  the  transition  remains  stalled; 
 3)  the  phase-  out  of  analog  only  television  sets  from  the  market  gives  consumers  access  to  digital  broadcast  signals  during  the  transition  and  protects  consumers  from  disruption  of 
 service  at  the  end  of  the  transition;  and  4)  consumers  necessarily  will  face  additional  costs  as  a  result  of  the  transition  and  it  is  our  job  to  mitigate  those  costs  to  the  extent 
 possible. 
 The  transition  to  digital  has  never  been  a  marketplace  transition,  but  one  mandated  by  Congress.  Congress  set  a  target  date  of  December  31,  2006  for  the  return  of  the  spectrum 
 used  by  broadcasters  for  their  analog  channel,  unless  85%  of  homes  in  a  market  cannot  receive  local  digital  broadcast  television  signals.  Until  such  time,  the  spectrum  that  is 
 currently  used  for  analog  channels  cannot  be  made  available  for  public  safety  and  other  wireless  uses.  Yet,  I  dont  believe  we  will  reach  85%  of  homes  if  analog  only  sets 
 continue  to  be  introduced  into  the  market  and  television  sets  that  can  receive  over-  the-  air  digital  signals  are  not  widely  available.  Fewer  than  16%  of  the  DTV  ready  receivers  sold 
 in  2001  had  the  capability  to  receive  over-  the-  air  digital  signals  (through  a  set-  top  box  or  an  integrated  tuner).  This  represents  only  0.2%  of  television  households.  There  also  has 
 been  little  support  from  the  consumer  electronics  industry  as  a  whole  for  a  voluntary  inclusion  of  DTV  tuners  in  television  sets.  Thus,  market  forces  alone  are  not  providing 
 consumers  with  access  to  digital  signals  and  it  is  therefore  appropriate  and  indeed  necessary  at  this  time  for  the  Commission  to  step  in. 


 Moreover,  consumers  expect  to  receive  over-  the-  air  signals  on  the  television  sets  that  they  purchase    whether  it  is  the  receipt  of  digital  signals  during  the  transition,  or  the 
 receipt  of  any  broadcast  signal  after  the  transition  is  over.  Adopting  a  tuner  requirement  will  ensure  that  consumer  expectations  are  met  and  will  limit  the  number  of  new  sets 
 being  purchased  today  that  will  become  obsolete  at  the  end  of  the  transition.  Despite  the  increasing  proliferation  of  cable  television  and  direct  broadcast  satellite  service,  a 
 significant  number  of  American  households  continue  to  rely  on  over-  the-  air  transmissions  as  their  sole  source  of  television  programming.  Even  households 
 subscribing  to  a  MVPD  frequently  rely  on  over-  the-  air  transmissions  on  one  or  more  of  their  receivers.  In  fact,  over  30%  of  television  sets  in  the  U.  S.  (81  million)  are  not 
 connected  to  any  MVPD  service  and  receive  all  broadcast  signals  over-  the-  air. 
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 Furthermore,  unless  cable  and  DBS  carriage  of  digital  broadcast  signals  increases  significantly,  a  digital  tuner  may  be  the  only  access  an  MVPD  household  has  to  many 
 digital  broadcast  services  during  the  transition. 
 I  recognize  that  consumers  necessarily  will  face  additional  costs  as  a  result  of  the  transition  and  it  is  our  job  to  mitigate  those  costs  to  the  extent  possible.  I  believe  that  the 
 five  year  phase  in  approach  adopted  by  the  Commission  today  will  mitigate  such  concerns  and  drive  down  the  costs  of  digital  television  equipment  more  quickly.  The 
 incremental  costs  in  the  larger  sets  at  the  earlier  stages  will  make  up  a  relatively  small  portion  of  the  price  of  the  set.  Market  efficiencies  will  drive  the  price  of  tuners  down  so 
 that  by  the  time  tuners  are  required  for  smaller  television  sets,  the  costs  will  have  greatly  decreased.  Furthermore,  the  price  of  digital  television  sets  has  been  declining  steadily 
 (according  to  one  consumer  electronics  manufacturer,  at  a  rate  of  approximately  $100  to  $800  per  year  for  the  large  screen  sets),  which  could  offset  any  increased  costs  associated 
 with  inclusion  of  a  DTV  tuner.  Imposing  a  tuner  mandate  also  will  ensure  that  consumer  electronic  manufacturers  can  compete  on  a  level  playing  field  such  that  the  cost  structure 
 will  be  the  same  for  all,  and  the  increased  volumes  will  drive  down  the  costs  for  the  benefit  of  all. 


 Today,  we  are  taking  a  step  forward  in  the  digital  transition,  but  it  is  one  of  many  steps  that  must  be  taken.  The  Commission  also  has  been  considering  copyright,  plug 
 and  play  cable  compatibility,  and  must-  carry  issues.  I  do  not  believe,  however,  that  we  should  be  at  a  standstill  until  all  these  issues  are  resolved  at  once.  Such  inaction  now  will 
 only  serve  to  delay  the  transition,  rather  than  act  as  a  catalyst  for  advancing  the  transition.  I  also  am  pleased  that  we  will  address  inclusion  of  PSIP  as  a  mandatory  part  of  the 
 standard  in  the  next  DTV  periodic  review.  I  am  particularly  concerned  about  whether  PSIP  is  necessary  for  the  use  of  V-  chip  technology  and  I  look  forward  to  continuing  the 
 dialogue  on  this  issue. 
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 SEPARATE  STATEMENT  OF  COMMISSIONER  MICHAEL  J.  COPPS 
 Re:  In  the  Matter  of  Review  of  the  Commissions  Rules  and  Policies  Affecting  the  Conversion  To  Digital  Television,  MB  Docket  No.  00-  39 


 This  second  item  of  the  day  reiterates  the  commitment  of  this  Commission  to  accelerate  the  countrys  transition  to  digital  television.  I  support  the  item  because  I 
 believe  it  is  a  necessary  step  toward  realizing  our  statutory  obligations  with  regard  to  DTV. 


 Let  me  say  at  the  outset  that  I  am  altogether  aware  of  the  concern  that  has  been  expressed  over  the  initial  impact  a  DTV  tuner  requirement  could  have  on  consumer 
 prices.  Far  from  turning  a  blind  eye  to  valid  consumer  concerns  by  supporting  this  item,  I  believe  that  the  action  that  we  take  today  will  make  DTV  sets  affordable  for  all 
 consumers  more  quickly  than  would  be  possible  without  todays  Commission  action.  History  indicates,  and  some  of  the  major  manufacturers  agree,  that  the  costs  of 
 incorporating  DTV  tuners  into  televisions  set  should  fall  fairly  rapidly  as  all  sets  include  these  tuners.  In  addition,  the  five  year  phase-  in  schedule  does  not  require  the  smallest 
 and  least  expensive  sets  to  include  tuners  until  2007,  by  which  time  the  cost  of  this  technology  will  no  doubt  be  dramatically  reduced.  So  the  phased-  in  requirement  we 
 adopt  today,  rather  than  increasing  the  costs  of  sets,  should  significantly  reduce  the  costs  of  DTV  technology,  which  we  hope  and  expect  will  ameliorate  what  might  otherwise  be 
 significant  consumer  sticker  shock.  Additionally,  those  of  us  who  purchase  new  sets  between  now  and  2007  wont  have  to  go  out  right  after  2007,  when  these  relatively  new 
 receivers  are  still  performing  well,  and  buy  another  set  in  order  to  receive  digital  programming.  That  would  be  sticker  shock,  too. 


 There  is  no  question  that  DTV  is  the  wave  of  the  future:  Congress  has  mandated  the  return  of  analog  spectrum  and  the  transition  to  digital  broadcasting;  this  Commission 
 and  its  Chairman  are  committed  to  moving  the  transition  forward;  and  there  are  already  some  400  stations  across  the  country  broadcasting  digital  signals.  But  the  high  price  and 
 scarcity  of  DTV-  capable  receivers  that  are  on  the  market  now  are  not  consistent  with  realizing  the  Congressional  goal  of  transitioning  to  digital  television  at  such  time  as  85% 
 of  homes  have  digital  reception  capability.  Each  time  a  consumer  purchases  an  analog-only  set,  we  move  further  from  reaching  that  85%  and  further  away  from  the 
 Congressional  objective. 
 The  acknowledgement  by  some  manufacturers  that  a  DTV  tuner  phase-  in  requirement  such  as  the  one  established  in  the  Order  is  reasonable  and  doable  is  a  great 
 boon  to  our  efforts  here.  In  addition,  the  rolling  phase-  in  requirement  provides  manufacturers  with  the  flexibility  to  reach  the  goal  post  on  a  faster  schedule.  Although 
 manufacturers  will  not  be  required  to  fully  complete  the  phase-  in  until  2007,  there  is  nothing  to  prevent  them  from  taking  advantage  of  manufacturing,  technological,  or  other 
 advances  that  might  arise  over  the  course  of  the  schedule  that  would  allow  manufacturers  to  incorporate  DTV  tuners  into  more  sets  sooner. 
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 The  bottom  line  is  that  we  must  get  the  DTV  transition  back  on  track.  I  believe  this  Order  is  a  good  step  in  the  right  direction. 
 Finally,  I  wish  to  emphasize  that  this  Order  is  by  no  means  the  end  of  the  process.  With  some  70%  of  U.  S.  households  subscribing  to  cable  television  services,  we  must 
 quickly  address  cable  compatibility  issues  for  the  digital  transition  to  succeed.  Ideally  a  solution  on  those  issues  would  track  the  time-  frames  established  in  todays  Order. 
 Consumers  deserve,  and  must  have,  that  kind  of  certainty.  I  understand  that,  from  a  technical  standpoint,  this  may  be  a  bit  farther  from  resolution  than  the  digital  broadcast 
 tuner.  But  I  hope  the  players  can  speed  up  their  progress  on  the  cable  compatibility  issues,  and  I  look  forward  to  working  with  my  colleagues,  the  industry,  and  all  interested 
 stakeholders  to  resolve. 
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 DISSENTING  STATEMENT  OF  COMMISSIONER  KEVIN  J.  MARTIN 
 Re:  Review  of  the  Commissions  Rules  and  Policies  Affecting  the  Conversion  To  Digital  Television,  Second  Report  and  Order  and  Second  Memorandum  Opinion 
 and  Order,  MM  Docket  No.  00-  39,  Adopted  August  8,  2002 
 First,  I  commend  the  Chairman  for  bringing  this  tough  issue  to  a  vote.  As  I  have  said  previously,  I  believe  it  is  extremely  important  for  the  Commission  to  resolve  outstanding 
 DTV-  related  issues  quickly  so  that  affected  industries  and  consumers  know  the  rules  of  the  road.  While  I  believe  the  costs  of  this  isolated  proposal  outweigh  the  benefits,  as  I 
 explain  below,  I  appreciate  that  with  every  DTV-  related  decision  this  Commission  makes,  we  further  clarify  those  rules  of  the  road.  Indeed,  I  would  have  gone  farther.  I 
 firmly  believe  that  such  clarity  is  what  is  needed  to  spur  the  digital  transition,  and  I  encourage  the  Commission  to  continue  to  actively  resolve  outstanding  issues. 


 Generally,  I  prefer  market-  based  forces  to  government  regulation,  and  I  am  particularly  cautious  when  regulation  imposes  a  cost  to  consumers  or  requires  consumers  to  purchase 
 a  product  they  may  not  use.  In  such  situations,  I  believe  the  better  course  of  action  usually  is  to  refrain  from  regulation  and  instead  to  provide  consumers  with  a  choice.  If 
 government  intervention  is  necessary,  however,  I  believe  it  must  be  clear  that  the  benefits  outweigh  the  costs. 


 Currently,  consumers  can  choose  whether  to  spend  the  extra  money  to  purchase  a  television  that  includes  a  digital  tuner.  This  Order  sets  out  deadlines  by  when  television 
 manufacturers  must  include  digital  tuners,  so  that  all  but  the  smallest  televisions  will  be  able  to  receive  digital  broadcast  signals  over  the  air.  Today,  however,  few  consumers 
 receive  their  video  programming  only  through  over  the  air  broadcasting.  Instead,  the  vast  majority  of  consumers  receive  broadcast  programming  through  their  cable  or  satellite 
 provider.  Even  as  the  transition  to  digital  is  made,  these  consumers  will  probably  prefer  to  continue  to  receive  their  video  programming  through  cable  or  satellite.  Thus,  taking 
 action  on  digital  broadcast  tuners  alone,  as  we  do  to  today,  confers  a  real  benefit  only  on  the  relatively  small  percentage  of  consumers  (approximately  fifteen  percent)  who  do  not 
 rely  on  cable  or  satellite  for  broadcast  reception.  The  costs,  however,  will  be  borne  by  every  consumer  who  buys  a  television.  I  therefore  fear  that  the  costs  of  this  requirement, 
 as  an  isolated  action,  exceed  the  benefits,  and  I  am  not  persuaded  that  it  is  the  right  step. 
 On  the  other  hand,  if  we  were  to  resolve  the  digital  cable  and  broadcast  tuner  issues  together,  we  would  create  a  significantly  greater  benefit  for  consumers  with  relatively 
 little  additional  cost.  It  is  my  understanding  that  manufacturers  can  integrate  digital  broadcast  and  cable  reception  capabilities,  thereby  incorporating  these  functions  into 
 televisions  for  approximately  the  same  cost  as  the  digital  broadcast  tuner  alone.  The  value  of  being  able  to  view  digital  programming,  however,  would  accrue  not  just  to 
 consumers  who  rely  on  over-  the-  air  broadcast,  but  to  the  approximately  70  percent  of  consumers  who  access  their  programming  (including  broadcast)  via  cable.  Indeed,  many 
 of  those  consumers  would  have  additional  savings  as  they  would  no  longer  need  to  rent  a  set-  top  or  converter  box.  Thus,  if  we  were  to  ensure  equipment  functionality  and 
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 interoperability  for  all  digital  cable  systems  by  requiring  the  cable  industry  to  adopt  a  single  standard,  then  manufacturers  could  build  digital  cable  ready  sets  that  also 
 incorporate  broadcast  tuners.  This  action  would  impose  approximately  the  same  cost  on  consumers  as  the  Order  does  today,  yet  would  enable  significantly  more  consumers  to 
 receive  more  digital  programming.  And  if  we  were  also  to  resolve  outstanding  cable  carriage  issues,  we  could  further  increase  the  amount  of  digital  broadcast  programming 
 these  consumers  could  access. 
 I  nevertheless  am  hopeful  that,  in  addition  to  concluding  this  proceeding  today,  we  will  resolve  outstanding  issues  relating  to  cable  carriage  and  cable  compatibility  in  the  very 
 near  future.  I  believe  that  such  steps  will  facilitate  and  accelerate  this  countrys  transition  to  digital  television. 
49