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 Federal  Communications  Commission  FCC  03-  273 
 1 
 Before  the  Federal  Communications  Commission 
 Washington,  D.  C.  20554 


 In  the  Matter  of: 
 Digital  Broadcast  Content  Protection  1 
 )  ) 
 )  ) 
 ) 
 MB  Docket  02-  230 


 REPORT  AND  ORDER  AND 
 FURTHER  NOTICE  OF  PROPOSED  RULEMAKING 


 Adopted:  November  4,  2003  Released:  November  4,  2003 
 Comment  Date:  January  14,  2004  Reply  Comment  Date:  February  13,  2004 


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


 I.  INTRODUCTION  AND  SUMMARY...................................................................  1 
 II.  DIGITAL  BROADCAST  TELEVISION  AND  CONTENT  PROTECTION  .......  5 
 III.  CONTENT  PROTECTION  ALTERNATIVES...................................................  11 
 A.  The  ATSC  Flag  .......................................................................................  12 
 B.  Encryption  at  the  Source  .........................................................................  22 
 C.  Other  Mechanisms...................................................................................  25 
 IV.  COMMISSION  AUTHORITY  ............................................................................  27 


 V.  REDISTRIBUTION  CONTROL  OF  DIGITAL 


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


 television  content. 
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 BROADCAST  TELEVISION  .............................................................................  36 
 A.  Transmission  ...........................................................................................  37 
 B.  Reception.................................................................................................  39 
 1.  Demodulators  and  Demodulator  Products  .................................  42 
 2.  Peripheral  TSP  Products.............................................................  48 
 3.  Interim  Procedures  for  Content  Protection  and  Recording  Technologies  ..............................................................................  50 


 C.  MVPD  Retransmission............................................................................  58 
 VI.  FURTHER  NOTICE  OF  PROPOSED  RULEMAKING....................................  59 
 VII.  PROCEDURAL  MATTERS................................................................................  66 
 VIII.  ORDERING  CLAUSES.......................................................................................  74 


 Appendix  A:  List  of  Leading  Commenters  and  Leading  Reply  Commenters  Appendix  B:  Final  Rules 
 Appendix  C:  Final  Regulatory  Flexibility  Analysis  Appendix  D:  Initial  Regulatory  Flexibility  Analysis 


 I.  INTRODUCTION  AND  SUMMARY 
 1.  As  the  digital  television  (  DTV)  transition  progresses,  the  issue  of  content  protection  has  become  increasingly  important  and  contentious.  Content  owners  assert  that 


 content  protection  mechanisms  are  needed  to  assure  the  availability  of  high  value  digital  content  to  consumers  in  a  secure,  protected  format.  Others  express  concerns  that  the  use  of  technical 
 measures  to  protect  content  will  inhibit  consumers  ability  to  enjoy  programming  when  and  where  they  choose.  In  order  to  advance  the  DTV  transition,  a  delicate  balance  must  be  struck 
 between  these  sometimes  competing  interests. 
 2.  We  have  already  explored  this  dynamic  in  the  cable  and  multichannel  video  programming  distribution  (  MVPD)  context  in  our  recent  Second  Report  and  Order  and  Second 


 Further  Notice  of  Proposed  Rulemaking  relating  to  digital  cable  compatibility.  2  In  that  proceeding,  we  set  forth  technical  and  labeling  rules  designed  to  ensure  that  unidirectional  digital 
 cable  products  will  be  able  to  connect  to  and  interoperate  with  digital  cable  systems,  as  well  as  encoding  rules  that  establish  certain  parameters  within  which  MVPDs  may  implement  copy 
 protection  mechanisms.  3  Resolution  of  these  issues  in  the  MVPD  context,  however,  has 
 2  Implementation  of  Section  304  of  the  Telecommunications  Act  of  1996:  Commercial  Availability  of 
 Navigation  Devices  and  Compatibility  Between  Cable  Systems  and  Consumer  Electronics  Equipment,  CS  Docket  No.  97-  80  and  PP  Docket  NO.  00-  67,  FCC  No.  03-  225  (rel.  Oct.  9,  2003)  (  Digital  Cable 


 Compatibility  Order  and  FNPRM).  3 
 Digital  Cable  Compatibility  Order  and  FNPRM  at  Sections  III,  IV  and  V. 
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 highlighted  the  importance  of  content  protection  to  digital  broadcasting. 
 3.  Issues  relating  to  content  protection  are  particularly  acute  in  the  broadcast  realm  because  of  the  services  nature    it  is  transmitted  in  the  clear  via  the  public  airwaves.  In  our 


 Notice  of  Proposed  Rulemaking,  we  sought  comment  on  whether  some  mechanism  was  needed  to  protect  digital  broadcast  television  content  from  potential  unauthorized  redistribution  concerns.  4 
 We  also  sought  comment  on  the  appropriate  protection  mechanism,  including  the  Redistribution  Control  Descriptor  set  forth  in  ATSC  Standard  A/  65  (the  ATSC  flag  or  flag),  5  as  well  as  on 
 what  regulations  were  needed  on  the  transmission  or  reception  side  to  give  effect  to  such  mechanism.  6 


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


 II.  DIGITAL  BROADCAST  TELEVISION  AND  CONTENT  PROTECTION 
 5.  As  an  initial  matter,  we  must  address  the  appropriate  type  of  content  protection  for  digital  broadcast  television.  MPAA  advances  the  use  of  a  redistribution  control  system  which 


 would  limit  the  redistribution  of  digital  broadcast  television  content,  but  not  restrict  consumers  from  copying  programming  for  their  personal  use.  7  A  number  of  commenters  agree  in  principle 
 that  consumers  ability  to  record  digital  broadcast  television  should  not  be  restricted.  8  We  concur 
 4  Digital  Broadcast  Copy  Protection,  17  FCC  Rcd  16027  (2002)  (  NPRM). 
 5  See  ATSC  A/  65B,  Program  and  System  Information  Protocol  for  Terrestrial  Broadcast  and  Cable  (ATSC 
 2003)  (  ATSC  A/  65B).  6 
 Digital  Broadcast  Copy  Protection,  17  FCC  Rcd  at  16028-  29.  7 
 Motion  Picture  Association  of  America  (  MPAA)  Comments  at  6-  8.  8 
 Arizona  Consumers  Council,  et  al.  Comments  (  Joint  Consumer  Groups)  at  5-  6;  Center  for  Democracy  and  Technology  (  CDT)  Comments  at  1-  2;  Computer  and  Communications  Industry  Assoc.  (  CCIA) 


 Comments  at  5-  6,  16-  17,  19;  Consumer  Electronics  Assoc.  (  CEA)  Comments  at  2-  3,  7-  8;  CEA  Reply  (continued....) 
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 and  find  that  redistribution  control  is  a  more  appropriate  form  of  content  protection  for  digital  broadcast  television  than  copy  restrictions.  This  determination  is  in  keeping  with  our  earlier 
 decision  to  prohibit  copy  restrictions  on  unencrypted  digital  broadcast  television  when  retransmitted  on  MVPD  systems.  9 


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


 7.  Critics  suggest  that  this  threat  is  overstated  and  that  limits  to  existing  broadband  capacity  will  prevent  widespread  Internet  retransmission  of  high  definition  digital  content  for  the 
 immediate  future.  15  One  estimate  indicates  that  it  could  take  as  much  as  four  days  to  upload  a  one 


 (...  continued  from  previous  page)  Comments  at  1,  8;  DIRECTV,  Inc.  (  DIRECTV)  Reply  Comments  at  6-  7;  Electronic  Frontier  Foundation 
 (  EFF)  Reply  Comments  at  24-  25;  Home  Recording  Rights  Coalition  (  HRRC)  Comments  at  1-  2,  4;  Information  Technology  Assoc.  of  America  (  ITAA)  Comments  at  14;  Information  Technology  Industry 
 Council  (  ITIC)  Comments  at  4;  Internet  Commerce  Coalition,  et  al.  (  ICC)  Comments  at  6;  National  Cable  and  Telecommunications  Assoc.  (  NCTA)  Comments  at  2,  9,  12-  13;  National  Music  Publishers 
 Assoc.  (  NMPA)  Comments  at  9,  13;  NBC,  Inc.  (  NBC)  Comments  at  4;  North  American  Broadcasters  Assoc.  (  NABA)  Comments  at  1;  Philips  Electronics  North  America  (  Philips)  Comments  at  9-  11,  20, 
 27;  Thomson  Inc.  (  Thomson)  Comments  at  6-  9,  11;  TiVo  Inc.  (  TiVo)  Comments  at  2-  4.  9 
 Digital  Cable  Compatibility  Order  and  FNPRM  at  Section  V.  D.  10 
 Motorola  Comments  at  3;  Viacom  Comments  at  12-  15;  NFL,  et  al.  (  NFL)  Reply  Comments  at  2-  7  (  NFL). 


 11  American  Society  of  Composers,  Authors  and  Publishers,  et  al.  (  ASCAP)  Comments  at  1-  2;  CBS 
 Television  Affiliates  Assoc.  (  CBS  Affiliates)  Comments  at  2-  3;  Center  for  Public  Broadcasting,  et  al.  (  CPB)  Reply  Comments  at  2;  Directors  Guild  of  America,  Inc.  (  DGA)  Comments  at  1-  3;  Banks 


 Broadcasting,  Inc.,  et  al.  (  Banks)  Comments  at  2;  MPAA  Comments  at  6-  8;  MPAA  Reply  Comments  at  2-  13;  NMPA  Reply  Comments  at  2-  5;  NBC  Television  Affiliates  Assoc.  (  NBC  Affiliates)  Comments  at 
 1-  3;  NBC  Comments  at  2;  NFL  Comments  at  6-  12;  NFL  Reply  Comments  2-  7;  NABA  Comments  at  1.  12 
 Viacom  Comments  at  4-  6.  13 
 NFL  Comments  at  6-  12.  14 
 Letter  from  Bruce  E.  Boyden,  Council  for  MPAA,  Proskauer  Rose  LLP,  to  Marlene  Dortch,  Secretary,  FCC  at  Attachment  (May  7,  2003). 


 15  American  Library  Assoc.  (  Library  Group)  Comments  at  9;  Joint  Consumer  Groups  Comments  at  1-  5, 
 9;  CCIA  Comments  at  7-  10,  17,  20;  EFF  Comments  at  2-  7;  EFF  Reply  Comments  at  2-  9;  HRRC  (continued....) 
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 hour  HDTV  broadcast  program  to  the  Internet  at  standard  consumer  broadband  speeds.  16  In  direct  contrast  to  the  estimates  for  future  broadband  capacity  supplied  by  MPAA,  Public 
 Knowledge  suggests  that  there  are  hard  limits  on  the  possible  advances  in  video  compression  and  broadband  speed.  17  Indeed,  several  commenters  emphasize  that  programming  in  analog  or 
 standard  definition  is  more  susceptible  to  Internet  redistribution  than  high  definition  content.  18  To  the  extent  that  television  content  is  being  redistributed  over  the  Internet  today,  EFF  contends 
 that  such  content  does  not  come  from  DTV  broadcasts  but  rather  has  been  captured  from  analog  NTSC  broadcasts  or  cable  transmissions.  19 


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


 (...  continued  from  previous  page)  Comments  at  4-  5;  HRRC  Reply  Comments  at  1-  3;  ITAA  Reply  Comments  at  1,  4;  Law  Office  of  Adam 
 Hill  Comments  at  9;  Philips  Comments  at  2,  7,  11,  13-  15;  Philips  Reply  Comments  at  2,  12,  15-  19;  Public  Knowledge  and  Consumers  Union  (  PK  &  CU)  Comments  at  6-  12;  PK  &  CU  Reply  Comments  at  2,  4,  6- 
 11;  Raffi  Krikorian  Reply  Comments  at  14-  15.  16 
 Raffi  Krikorian  Reply  Comments  at  15.  17 
 Letter  from  Mike  Godwin,  Senior  Technology  Counsel,  Public  Knowledge,  to  Marlene  Dortch,  Secretary,  FCC  at  Attachment  (May  23,  2003)  (  How  to  Misuse  Tech  Statitstics). 


 18  CCIA  Comments  at  7-  8;  Philips  Reply  Comments  at  19-  20;  PK  &  CU  Reply  Comments  at  6-  11. 
 19  EFF  Reply  Comments  at  3. 
 20  See  Letter  from  Alan  Davidson,  Center  for  Democracy  and  Technology,  to  Marlene  Dortch,  Secretary, 
 FCC  at  Attachment  (Oct.  24,  2003)  ([  c]  ontent  provider  concerns  about  the  long-  term  risk  of  widespread  online  copying  of  DTV  content  have  merit,  and  it  is  reasonable  to  seek  a  solution  before  it  is  too  late); 


 Letter  from  Fritz  Attaway,  MPAA,  to  W.  Kenneth  Ferree,  FCC  at  Attachment  (Oct.  3,  2003)  (announcement  and  related  press  article  reporting  that  Comcast  is  doubling  its  downstream  speed  for 
 broadband  service  from  1.5  Mbps  to  3.  0  Mbps  at  no  additional  cost  to  consumers).  Experiments  to  further  increase  Internet  speeds  are  ongoing.  See  Letter  from  Mace  J.  Rosenstein,  Hogan  &  Hartson,  to  Marlene 
 Dortch,  Secretary,  FCC  at  Attachment  (Sept.  26,  2003)  (California  Institute  of  Technology  press  release  Caltech  computer  scientists  develop  FAST  protocol  to  speed  up  Internet). 
 21  See  Digital  Cable  Compatibility  Order  and  FNPRM  at  Section  III;  Review  of  the  Commissions  Rules 
 and  Policies  Affecting  the  Conversion  to  Digital  Television,  17  FCC  Rcd  15978  (2002)  (directing  that  television  sets  contain  digital  tuners  on  a  phased-  in  basis,  beginning  in  July  2004). 
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 only  alleviate  the  concerns  of  content  owners,  but  also  will  ensure  the  continued  availability  of  high  value  DTV  content  to  consumers  through  broadcast  outlets. 
 9.  In  light  of  our  decision  to  adopt  a  redistribution  control  scheme  and  to  avoid  any  confusion,  we  wish  to  reemphasize  that  our  action  herein  in  no  way  limits  or  prevents  consumers 
 from  making  copies  of  digital  broadcast  television  content.  Furthermore,  the  scope  of  our  decision  does  not  reach  existing  copyright  law.  The  creation  of  a  redistribution  control  regime 
 establishes  a  technical  protection  measure  that  broadcasters  may  use  to  protect  content.  However,  the  underlying  rights  and  remedies  available  to  copyright  holders  remain  unchanged.  In  the  same 
 manner,  this  decision  is  not  intended  to  alter  the  defenses  and  penalties  applicable  in  cases  of  copyright  infringement,  circumvention,  or  other  applicable  laws. 


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


 III.  CONTENT  PROTECTION  ALTERNATIVES 
 11.  In  our  Notice  of  Proposed  Rulemaking,  we  sought  comment  on  different  mechanisms  that  could  potentially  be  used  to  protect  DTV  broadcast  content  from  indiscriminate 


 redistribution,  including  but  not  limited  to  the  so-  called  broadcast  flag  proposal.  22  Although  most  commenters  focused  on  a  flag-  based  scheme,  several  alternative  protection  mechanisms 
 were  proffered.  We  conclude  that,  of  the  mechanisms  available  to  us  today,  an  ATSC  flag-  based  system  is  the  best  option  for  providing  a  reasonable  level  of  redistribution  protection  at  a  minimal 
 cost  to  consumers  and  industry. 


 22  NPRM,  17  FCC  Rcd  at  16028. 
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 A.  The  ATSC  Flag 
 12.  One  of  the  leading  proposals  for  a  DTV  broadcast  content  protection  mechanism  involves  the  use  of  a  redistribution  control  descriptor  or  flag  to  signal  DTV  reception  equipment 


 to  limit  the  indiscriminate  redistribution  of  digital  broadcast  content.  Development  of  an  ATSC  flag  system  occurred  in  the  Broadcast  Protection  Discussion  Subgroup  (  BPDG)  under  the 
 auspices  of  the  Copy  Protection  Technical  Working  Group  (  CPTWG).  From  November  2001  to  June  2002,  more  than  80  representatives  from  the  consumer  electronics,  information 
 technology,  motion  picture,  cable  and  broadcast  industries  took  part  in  the  BPDG  discussions.  23 
 13.  The  BPDG  Final  Report  states  that  there  was  agreement  among  the  participants  concerning  the  technological  means  for  signaling  protection  in  a  flag-  based  system,  which  has 


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


 14.  MPAA  advocates  adoption  of  the  ATSC  flag  system  and  characterizes  it  as  an  effective  and  unobtrusive  content  protection  mechanism  that  will  serve  as  a  speed  bump  to 
 ensure  that  DTV  broadcast  content  is  not  indiscriminately  redistributed.  27  MPAA  stresses  that  an  ATSC  flag  system  would  only  limit  redistribution  of  content  and  not  prevent  consumer  copying.  28 
 Compared  with  alternative  content  protection  systems,  MPAA  suggests  that  implementation  of  an  ATSC  flag  scheme  would  add  little  or  no  cost  to  reception  devices  as  it  would  piggy-  back  on 
 existing  content  protection  mechanisms  in  place  for  pay  television  content.  29  Legacy  devices 
 23  Final  Report  of  the  Co-  Chairs  of  the  Broadcast  Protection  Discussion  Subgroup  to  the  Copy  Protection 
 Technical  Working  Group  at  4  (June  3,  2002)  (  BPDG  Final  Report);  see  also  Letter  from  Mace  Rosenstein,  Hogan  &  Hartson,  to  Marlene  Dortch,  Secretary,  FCC  at  Attachment  1  (Sept.  26,  2003). 


 24  ATSC  A/  65B,  Program  and  System  Information  Protocol  for  Terrestrial  Broadcast  and  Cable  (ATSC 
 2003)  (referred  to  in  the  BPDG  Final  Report  as  its  predecessor  version  ATSC  A/  65A)  (  ATSC  A/  65B).  See  Philips  Comments  at  25-  26;  American  Federation  for  the  Blind  (  AFB)  Comments  at  2;  PK  &  CU 


 Comments  at  13-  18.  We  clarify  that  we  are  adopting  the  technical  parameters  of  the  redistribution  control  descriptor  identified  in  the  March  18,  2003  version  of  ATSC  A/  65B. 
 25  ATSC  A/  65B  at  79. 
 26  BPDG  Final  Report  at  11-  12. 
 27  MPAA  Comments  at  12. 
 28  Id.  at  6  n.  3. 
 29  MPAA  Reply  Comments  at  16.  See  also  Letter  from  David  H.  Arland,  Thomson,  to  Marlene  Dortch, 
 Secretary,  FCC  (Oct.  8,  2003)  (  there  is  very  little  cost  involved  for  a  manufacturer  to  implement  [flag  recognition],  assuming  that  existing  technologies  such  as  DTCP  (5C)  are  accepted  as  approved  Broadcast 


 Flag  protection  technologies)  (  Thomson  10/  8/  03  Letter);  Letter  from  John  Taylor,  Zenith,  to  Michael  K.  Powell,  FCC  (Oct.  30,  2003)  (  Zenith  expects  that  the  cost  of  implementing  the  broadcast  flag  in  its 
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 would  also  remain  functional  under  a  flag  regime,  allowing  consumers  to  continue  their  use  without  the  need  for  new  or  additional  equipment  to  receive  and  view  signals.  30 
 15.  Several  commenters  voice  qualified  support  for  a  flag-  based  system,  subject  to  certain  conditions.  CEA  indicates  that  it  would  not  object  to  a  flag-  based  system,  so  long  as  it  did 
 not  interfere  with  consumer  copying  abilities.  31  Multichannel  video  programming  distributors  (  MVPDs)  also  endorse  use  of  the  ATSC  flag,  although  the  cable  industry  would  prefer  an 
 express  limitation  restricting  its  use  to  the  prevention  of  Internet  retransmission  as  well  as  a  professional  equipment  exemption  for  MVPDs  that  can  protect  broadcast  content  through  other 
 mechanisms,  such  as  encryption.  32 
 16.  Critics  of  the  ATSC  flag  point  out  that  the  BPDG  Final  Report  did  not  reflect  widespread  consensus  among  the  groups  participants.  33  A  number  of  significant  issues  were  left 


 unresolved  by  the  participants,  including  the  identification  of  an  approval  process  for  content  protection  or  recording  technologies  (referred  to  as  the  Table  A  process)  and  defining  the  scope 
 of  which  downstream  consumer  electronics  devices  might  constitute  part  of  a  digital  home  network  under  an  ATSC  flag  redistribution  scheme.  34  Opponents  also  question  the 
 implementation  costs  involved  in  a  flag  system  by  suggesting  that  the  inclusion  of  technology  in  television  receivers  and  other  equipment  to  recognize  and  give  effect  to  the  flag  will  unfairly 
 burden  consumers.  35 
 17.  Other  criticisms  levied  at  the  proposed  ATSC  flag  involve  potential  holes  in  its  protection  system.  Consumer  groups  argue  that  the  ATSC  flag  is  an  inadequate  tool  to  protect 


 content  and  would  stifle  innovation.  36  Other  commenters  suggest  that  the  ATSC  flag  could  be  easily  circumvented,  potentially  through  the  use  of  digital  to  analog  converters.  37  Several 
 commenters  also  express  concern  that  the  presence  of  component  analog  outputs  on  reception  devices  would  vitiate  any  protection  offered  by  flag  recognition  technology.  38  The  term  analog 


 (...  continued  from  previous  page)  products  with  digital  outputs  to  be  very  small)  (  Zenith  10/  30/  03  Letter).  There  may  be  additional  cost  to 
 implement  the  flag  to  the  extent  manufacturers  cannot  or  do  not  rely  on  existing  content  protection  technologies.  See  Thomson  10/  8/  03  Letter. 
 30  MPAA  Comments  at  27. 
 31  CEA  Comments  at  3-  4. 
 32  DIRECTV  Comments  at  2-  3;  NCTA  Comments  at  2-  3,  8,  10-  11,  13-  14;  NCTA  Reply  Comments  at  1-  2, 
 4-  7.  33 
 See  Philips  Comments  at  25-  26;  AFB  Comments  at  2;  PK  &  CU  Comments  at  13-  18.  34 
 BPDG  Final  Report  at  18-  21.  35 
 Veridian  Corporation  (  Veridian)  Comments  at  12-  13;  Veridian  Reply  Comments  at  3-  4.  36 
 EFF  Comments  at  17-  19;  Joint  Consumer  Groups  Comments  at  1,  9;  PK  &  CU  Comments  at  2;  PK  &  CU  Reply  Comments  at  11-  15. 


 37  See  e.  g.,  IT  Coalition  Comments  at  17  n.  44;  PK  &  CU  Comments  at  15-  17. 
 38  Digimarc  Corporation  &  Macrovision  Corporation  (  Digimarc  &  Macrovision)  Comments  at  3-  6;  EFF 
 Comments  at  11-  12;  EFF  Reply  Comments  at  27;  HRRC  Comments  at  2;  ITIC  Comments  at  3;  NMPA  Reply  Comments  at  3,  13;  NFL  Comments  at  13-  14;  NFL  Reply  Comments  at  11-  12;  Philips  Comments  at 


 3,  11-  13,  Appendix  A;  Philips  Reply  Comments  at  3,  14-  15;  PK  &  CU  Comments  at  15-  17;  PK  &  CU  Reply  Comments  at  13-  15;  Verizon  Comments  at  3. 
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 hole  refers  to  the  fact  that  high  quality  content  can  be  transmitted  over  component  analog  outputs  without  content  protection.  39  Although  several  technological  approaches,  including 
 watermarks  and  forensic  fingerprints,  are  being  developed  to  potentially  address  this  problem  by  the  inter-  industry  Analog  Reconversion  Discussion  Group  (  ARDG),  the  record  in  this 
 proceeding  does  not  reflect  that  an  immediate  solution  is  forthcoming.  40  In  a  similar  vein,  critics  note  that  non-  compliant  legacy  devices  will  allow  content  to  be  output  without  giving  recognition 
 and  effect  to  the  ATSC  flag  and  that  non-  compliant  hardware  or  software  demodulators  could  be  produced  with  relative  ease  by  individuals  with  some  degree  of  technical  sophistication.  41 


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


 impossible  to  construct  a  content  protection  scheme  that  is  impervious  to  attack  or  circumvention.  We  believe,  however,  that  the  benefits  achieved  by  creation  of  a  flag-  based  system    creating  a 
 speed  bump  mechanism  to  prevent  indiscriminate  redistribution  of  broadcast  content  and 


 39  The  analog  hole  is  not  a  problem  specific  to  a  flag-  based  system;  it  also  exists  in  the  MVPD  context.  See 
 Digital  Cable  Compatibility  Order  and  FNPRM  at  Section  V.  B  and  V.  C.  40 
 The  ARDG  is  a  subgroup  of  the  Copy  Protection  Technology  Working  Group.  See  http://  www.  cptwg.  org. 


 41  EFF  Comments  at  10-  11;  Electronic  Privacy  Information  Center  (  EPIC)  Comments  at  2;  HRRC 
 Comments  at  7;  PK  &  CU  Comments  at  15-  17;  Veridian  Comments  at  2-  3.  42 
 Library  Group  Comments  at  6-  18.  43 
 Areas  of  particular  concern  include:  the  ability  to  access  and  manipulate  user-  level  controls  and  service  menus,  the  deconstruction  of  protected  material  in  order  to  re-  purpose  it  into  accessible  formats,  the 


 interconnection  of  devices  without  reduction  in  functionality  or  prohibitive  licensing  costs,  and  a  circumvention  exemption  to  facilitate  reverse  engineering.  AFB  Comments  at  2. 
 44  17  U.  S.  C.    1201(  d)-(  f). 
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 ensure  the  continued  availability  of  high  value  content  to  broadcast  outlets    outweighs  the  potential  vulnerabilities  cited  by  commenters.  For  example,  the  analog  hole  problem  is  not 
 specific  to  a  flag  based  regime,  but  rather  is  one  shared  by  cable  and  satellite  delivery  platforms.  As  noted  above,  various  industry  efforts  are  focusing  on  technological  and  other  potential 
 solutions  to  this  difficult  problem.  While  an  immediate  analog  hole  solution  is  not  forthcoming,  the  window  of  opportunity  for  adopting  a  flag  based  redistribution  control  regime 
 for  digital  broadcast  television  is  closing.  The  number  of  legacy  devices  existing  today  is  still  sufficiently  small  that  content  owners  remain  willing  to  provide  high  value  content  to  broadcast 
 outlets.  At  some  point,  however,  when  the  number  of  legacy  devices  becomes  too  great,  that  calculus  will  change.  By  acting  now,  the  Commission  can  protect  both  content  and  consumers 
 expectations.  45 
 20.  We  also  recognize  that  with  any  content  protection  system,  the  potential  exists  that  some  individuals  may  attempt  to  circumvent  the  protection  technology.  We  do  not  believe, 


 however,  that  individual  acts  of  circumvention  necessarily  undermine  the  value  or  integrity  of  an  entire  content  protection  system.  The  DVD  example  is  instructive  in  this  regard.  Although  the 
 CSS  copy  protection  system  for  DVDs  has  been  hacked  and  circumvention  software  is  available  on  the  Internet,  DVDs  remain  a  viable  distribution  platform  for  content  owners.  46  The 
 CSS  content  protection  system  serves  as  an  adequate  speed  bump  for  most  consumers,  allowing  the  continued  flow  of  content  to  the  DVD  platform.  We  believe  the  same  rationale  applies  here. 


 21.  Our  approval  of  an  ATSC  flag  content  protection  system  for  DTV  broadcasts  relies  on  a  balancing  of  the  level  of  protection  gained  relative  to  the  cost  and  burdens  associated 
 with  its  implementation.  When  compared  with  the  alternative  proposals  described  below,  we  conclude  that  the  ATSC  flag  provides  a  satisfactory  level  of  redistribution  control  at  a  minimal 
 cost  to  both  consumers  and  manufacturers.  In  particular,  we  note  that  a  flag  based  regime  will  not  render  todays  consumer  equipment  obsolete    existing  devices  will  continue  to  work  at  their 
 full  functionality  and  will  not  require  replacement.  47  Current  consumer  uses  of  these  products 
 45  We  note  that  several  manufacturers  have  publicly  stated  that  they  intend  to  move  forward  with  inclusion 
 of  flag  recognition  technology  in  devices  for  the  2004  product  cycle,  one  year  prior  to  the  mandates  effective  date.  See  Thomson  10/  8/  03  Letter;  Zenith  10/  30/  03  Letter  (indicating  that  while  most  Zenith 


 2004  models  will  not  have  digital  outputs,  which  limits  the  number  of  legacy  devices  to  be  deployed,  Zenith  will  make  every  effort  to  accelerate  its  implementation  of  the  broadcast  flag  in  sets  with  digital 
 outputs);  Letter  from  Angela  Lee,  Mitsubishi  Electric,  to  Michael  Powell,  FCC  (Oct.  31,  2003)  (stating  that  Mitsubishi  may  be  in  a  position,  on  a  voluntary  basis,  to  incorporate  the  most  commonly  discussed 
 approach  to  reading  and  triggering  some  response  to  a  broadcast  flag  trigger  in  many  of  [its]  products  by  3Q  2004).  The  decisions  by  these  manufacturers  represent  additional  positive  steps  in  the  digital 
 transition  by  reducing  the  number  of  legacy  devices  available  prior  to  the  flag  becoming  mandatory  in  2005. 
 46  See  MPAA  Reply  Comments  at  43  (DVDs  are  now  the  fastest  growing  consumer  electronics  platform  in 
 history    with  new  titles  being  released  at  a  rate  of  roughly  100  every  week).  See  also  Letter  from  James  M.  Burger,  Dow,  Lohnes  &  Albertson,  to  Marlene  Dortch,  Secretary,  FCC  at  4  n.  8  (Oct.  2,  2003)  (noting 


 on  behalf  of  IT  Coalition  that  [  d]  espite  the  hack  of  CSS,  content  owners  using  CSS  protection  last  year  received  a  record  $11.6  billion  in  revenue  from  the  sale  and  rental  of  DVDs,  surpassing  the  $9.3  billion  in 
 box  office  revenue  garnered  by  the  movie  industry  in  2002).  47 
 We  recognize  that  currently,  content  recorded  onto  a  DVD  with  a  flag-  compliant  device  will  only  be  able  to  be  viewed  on  other  flag  compliant  devices  and  not  on  legacy  DVD  players.  While  we  are  sensitive  to 


 any  potential  incompatibilities  between  new  and  legacy  devices,  we  believe  that  this  single,  narrow  example  presented  to  us  is  not  unique  to  a  flag  system  and  is  outweighed  by  the  overall  benefits  gained  in 
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 will  therefore  be  accommodated  to  the  greatest  extent  possible.  The  flag  also  has  a  distinct  advantage  over  alternative  mechanisms  in  so  far  as  it  can  be  implemented  quickly,  thereby 
 minimizing  the  number  of  non-  compliant  legacy  devices  that  might  otherwise  be  deployed  in  the  marketplace  over  the  next  several  years.  To  the  extent  that  certain  commenters  object  to  elements 
 of  the  BPDG  Final  Report  and  MPAAs  proposed  rules  in  this  proceeding,  we  believe  that  implementation  of  an  ATSC  flag  system  can  and  should  be  tailored  to  limit  any  harm  to 
 innovation  and  to  consumers  home  viewing  abilities.  As  set  forth  in  greater  detail  below,  we  are  adopting  certain  aspects  of  the  flag  system  advanced  by  MPAA,  modifying  some  parts,  and 
 declining  to  act  altogether  on  others.  We  believe  that  these  actions  are  necessary  to  ensure  the  continued  viability  of  over-  the-  air  broadcasting  in  the  digital  age  and  the  continued  availability  of 
 high  value  content  to  consumers  via  the  public  airwaves. 
 B.  Encryption  at  the  Source 
 22.  Proponents  of  encryption  at  the  source  as  an  alternative  protection  mechanism  assert  that  it  is  more  effective  than  a  flag  system  since  encryption  protects  content  at  its 


 transmission  source  rather  than  at  the  point  of  demodulation.  48  Under  an  encryption  regime,  a  specific  encryption  technology  would  need  to  be  adopted  by  the  Commission.  49  Broadcasters  and 
 consumer  electronics  manufacturers  would  then  need  to  integrate  this  technology  into  transmission  and  reception  equipment  to  allow  consumers  to  receive  and  view  broadcast 
 programming.  As  a  result,  broadcast  television  would  no  longer  be  transmitted  in-  the-  clear. 
 23.  Although  content  owners  do  not  question  the  technical  effectiveness  of  an  encryption  system,  they  express  doubts  about  its  timing.  50  Estimates  on  a  timeframe  for  the 


 development  and  approval  of  an  appropriate  encryption  algorithm  vary  from  several  years  to  the  near  term.  51  Even  if  an  encryption  standard  were  developed  in  short  order,  several  commenters 
 question  the  cost  burden  associated  with  its  implementation.  Content  owners  and  the  consumer  electronics  industry  express  concern  that  encryption  would  render  legacy  devices  obsolete  and 
 force  all  consumers  to  purchase  new  or  additional  equipment  in  order  to  receive  and  decrypt  broadcast  programming.  52  Philips  argues  that  an  encryption  regime  should  be  considered 
 critically  because  it  could  potentially  limit  the  playback  functionality  of  legacy  recording  equipment.  53  Other  commenters  recognize  that  encryption  would  not  resolve  the  analog  hole 


 (...  continued  from  previous  page)  terms  of  consumer  access  to  high  value  content.  Changes  in  DVD  technology,  such  as  the  transition  to 
 high  definition  DVD  devices,  will  present  other  unrelated  format  incompatibilities.  48 
 ITIC  Comments  at  3;  IT  Coalition  Comments  at  17;  Motorola  Comments  at  4-  6;  Veridian  Comments  at  1-  3;  Veridian  Reply  Comments  at  2,  15-  16. 


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


 50  MPAA  Comments  at  17. 
 51  See  e.  g.,  Letter  from  Jon  Baumgarten,  Proskauer  Rose,  to  Marlene  Dortch,  Secretary,  FCC  at  4-  5  (Oct.  8, 
 2003)  (  MPAA  10/  8/  03  Letter).  52 
 MPAA  Comments  at  17;  CEA  Reply  Comments  at  1-  4.  53 
 Philips  Comments  at  21. 
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 problem.  54 
 24.  Despite  the  robust  security  generally  associated  with  encryption  technologies,  we  conclude  that  the  associated  implementation  costs  and  delays  make  it  a  less  desirable  content 


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


 C.  Other  Mechanisms 
 25.  In  addition  to  the  flag  and  encryption  at  the  source,  several  emerging  content  protection  technologies  have  been  suggested  by  commenters,  notably  watermarking  and 


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


 54  HRRC  Reply  Comment  at  3-  4;  ITIC  Comments  at  3;  EFF  Reply  Comments  at  27. 
 55  The  Corporation  for  National  Research  Initiatives  (  CNRI)  advocates  adoption  of  their  handle  system 
 technology.  CNRI  Reply  Comments  at  2.  This  system  resolves  unique  identifiers  to  handle  records  with  usage  conditions,  which  could  include  redistribution  control  as  well  as  other  content  protection  measures. 


 Id.  at  2-  3,  Appendix  C.  No  other  comments  were  received  discussing  CNRIs  proposal;  the  record  with  respect  to  this  technology  is  insufficient  to  merit  its  adoption  in  this  context. 
 56  Digimarc  and  Macrovision  Comments  at  3-  14;  Philips  Comments  at  2-  3,  15;  Philips  Reply  Comments  at 
 33-  34.  57 
 Digimarc  and  Macrovision  Comments  at  4.  58 
 Id.  at  7-  8.  59 
 NMPA  Reply  Comments  at  13-  14;  NBC  Comments  at  3;  NFL  Comments  at  6,  13-  14.  60 
 Digimarc  and  Macrovision  Comments  at  9-  10.  61 
 Philips  Comments  at  3. 
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 26.  As  new  content  protection  technologies  develop,  watermarking  and  fingerprinting  may  emerge  as  useful  tools  to  protect  DTV  broadcasts.  At  this  time,  however,  the 
 record  reflects  that  these  technologies  are  insufficiently  mature  for  implementation.  We  recognize  that  the  ARDG  is  discussing  watermarking  and  fingerprinting  among  various 
 alternative  solutions  to  the  analog  hole.  62  We  encourage  the  further  development  of  alternative  mechanisms  and  technologies  that  could  be  used  to  protect  digital  broadcast  content  in  the  future. 
 As  discussed  above,  however,  we  conclude  that  a  narrowly-  tailored  flag  system  in  the  near  term  will  provide  a  sufficient  level  of  redistribution  control  protection  for  DTV  broadcasts  at  minimal 
 cost  to  consumers  and  manufacturers. 
 IV.  COMMISSION  AUTHORITY 
 27.  Commenters  disagree  whether  the  Commission  has  authority  to  impose  redistribution  control  regulations.  Proponents  of  a  flag-  based  system  contend  that  Section  336  of 


 the  Communications  Act  confers  direct  authority  on  the  Commission  to  prescribe  rules  requiring  DTV  reception  equipment  to  have  the  ability  to  recognize  and  give  effect  to  the  ATSC  flag.  63 
 These  commenters  also  argue  that  the  Commission  may  promulgate  such  regulations  on  the  basis  of  its  ancillary  jurisdiction  and  the  Commissions  plenary  authority  over  broadcast 
 transmissions.  64 
 28.  Critics,  on  the  other  hand,  argue  that  the  Commission  lacks  clear  jurisdiction  to  require  manufacturers  of  consumer  electronics  and  IT  products  to  design  this  equipment  to 


 recognize  and  respond  to  the  ATSC  flag.  65  According  to  these  commenters,  legal  precedent  requires  a  specific  grant  of  authority  by  Congress  before  the  Commission  may  impose  regulatory 
 requirements  on  consumer  electronics  manufacturers  and  such  requisite  statutory  authority  is  absent  here.  66  Critics  further  maintain  that  Section  336  cannot  be  the  source  of  authority  for  such 
 requirements  because  the  manufacturers  are  not  broadcast  licensees,  and  an  ATSC  flag  requirement  is  beyond  the  regulatory  scope  of  Section  336.  67  Critics  also  argue  that  the 
 Commission  may  not  exercise  ancillary  authority  because  consumer  electronics  and  computer  manufacturers  are  unregulated  entities,  and  imposing  the  ATSC  flag  requirement  is  not  necessary 
 to  effectuate  any  specific  provision  or  policy  of  the  Communications  Act.  68  Critics  claim  that  reception  equipment,  as  opposed  to  transmission  equipment,  falls  outside  the  Commissions 


 62  See  www.  cptwg.  org/  Assets/  Presentations/  ARDG/  ARDG%  20page.  htm. 
 63  See  MPAA  Comments  at  31-  34. 
 64  Id.  at  35-  39. 
 65  See,  e.  g.,  Philips  Reply  Comments  at  34. 
 66  See,  e.  g.,  Philips  Comments  at  28-  31  ((  citing  1962  All  Channel  Receiver  Act  (codified  at  47  U.  S.  C.   
 303(  s),  330(  a))  (television  frequencies);  1990  Television  Decoder  Circuitry  Act  (codified  at  47  U.  S.  C.    303(  u),  330(  b))  (closed-  caption  transmissions);  Parental  Choice  in  Television  Programming  provisions  of 


 the  1996  Telecommunications  Act  (codified  at  47  U.  S.  C.    303(  x),  330(  c))  (V-  Chip);  Section  624A  of  the  Communications  Act,  47  U.  S.  C.    544a  (cable  compatibility);  Section  629  of  the  Communications  Act,  47 
 U.  S.  C.    549  (navigation  devices)).  67 
 See,  e.  g.,  Philips  Reply  Comments  at  36;  Written  Ex  Parte  Presentation  of  Philips  Electronics  at  1-  2  (Oct.  7,  2002). 


 68  See,  e.  g.,  Philips  Reply  Comments  at  36-  42. 
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 general  jurisdictional  grant  in  Title  I  of  the  Communications  Act.  69 
 29.  We  find  that  the  Commission  has  ancillary  authority  to  regulate  equipment  manufacturers  in  order  to  effectuate  a  redistribution  control  system  for  DTV  broadcasts. 


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


 69  See  Letter  from  Lawrence  Sidman,  Paul,  Hastings,  to  Marlene  Dortch,  Secretary,  FCC  (Oct.  16,  2003) 
 (  Philips  October  16,  2003  Ex  Parte).  70 
 United  States  v.  Southwestern  Cable  Co.,  392  U.  S.  157,  177-  78  (1968)  (  Southwestern  Cable).  Southwestern  Cable,  which  constitutes  the  lead  case  on  the  ancillary  jurisdiction  doctrine,  upheld  certain 


 regulations  applied  to  cable  television  systems  at  a  time  before  the  Commission  received  any  express  Congressional  grant  of  regulatory  authority  over  that  medium.  Id.  at  170-  71.  In  United  States  v.  Midwest 
 Video  Corp.,  406  U.  S.  649  (1972)  (  Midwest  Video  I),  the  Supreme  Court  expanded  upon  its  holding  in  Southwestern  Cable.  The  plurality  stated  that  the  critical  question  in  this  case  is  whether  the  Commission 
 has  reasonably  determined  that  its  origination  rule  will  further  the  achievement  of  long-  established  regulatory  goals  in  the  field  of  television  broadcasting  by  increasing  the  number  of  outlets  for  community 
 self-  expression  and  augmenting  the  publics  choice  of  programs  and  types  of  services  .  .  .  Id.  at  667-  68  (quoting  First  Report  and  Order,  20  FCC  2d  201,  202  (1969)).  The  Court  later  restricted  the  scope  of 
 Midwest  Video  I  by  finding  that  if  the  basis  for  jurisdiction  over  cable  is  that  the  authority  is  ancillary  to  the  regulation  of  broadcasting,  the  cable  regulation  cannot  be  antithetical  to  a  basic  regulatory  parameter 
 established  for  broadcast.  FCC  v.  Midwest  Video  Corporation,  440  U.  S.  689,  700  (1979)  (  Midwest  Video  II). 
 71  Southwestern  Cable,  392  U.  S.  at  178. 
 72  47  U.  S.  C.    151. 
 73  Id.    152(  a)  (stating  that  the  provisions  of  the  Communications  Act  shall  apply  to  all  interstate  and 
 foreign  communication  by  wire  or  radio  and  all  interstate  and  foreign  transmission  of  energy  by  radio,  which  originates  and/  or  is  received  within  the  United  States,  and  to  all  persons  engaged  within  the  Untied 


 States  in  such  communication  or  such  transmission  of  energy  by  radio).  74 
 More  specifically,  Section  3(  33)  of  the  Communications  Act  defines  the  term  radio  communication  or  communication  by  radio  to  mean  the  transmission  by  radio  of  writing,  signs,  signals,  pictures,  and 


 sounds  of  all  kinds,  including  all  instrumentalities,  facilities,  apparatus,  and  services  (among  other  things,  the  receipt,  forwarding,  and  delivery  of  communications)  incidental  to  such  transmission.  Id.    153(  33). 
 (continued....) 
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 covered  by  the  statutory  definitions  and  therefore  come  within  the  scope  of  the  Commissions  general  authority  outlined  in  Section  2(  a)  of  the  Communications  Act.  75 
 30.  The  second  step  in  our  analysis  requires  us  to  evaluate  whether  imposing  a  flag-based  regulatory  system  is  reasonably  ancillary  to  the  effective  performance  of  the  Commissions 
 various  responsibilities.  Based  on  the  record  in  this  matter,  we  find  that  the  requisite  nexus  exists.  The  Communications  Act  charges  the  Commission  with  responsibility  for  developing  a 
 broadcasting  system  that  is  made  available  on  a  fair,  efficient  and  equitable  basis  in  communities  throughout  the  United  States.  76  Within  the  Commissions  mandate  for  the  regulation  of  television 
 broadcasting  are  the  long-  established  regulatory  goals  of  increasing  the  number  of  outlets  for  community  self-  expression  and  augmenting  the  publics  choice  of  programs  and  types  of 
 services.  77  In  addition,  the  Commission  is  charged  with  the  responsibility  of  shepherding  the  countrys  broadcasting  system  into  the  digital  age  78    a  goal  that  has  become  central  to  the 
 Commissions  Section  303(  g)  mandate  to  [  s]  tudy  new  uses  for  radio,  provide  for  experimental  uses  of  frequencies,  and  generally  encourage  the  larger  and  more  effective  use  of  radio  in  the 


 (...  continued  from  previous  page)  Section  3(  52)  of  the  Communications  Act  defines  the  term  wire  communication  or  communication  by 
 wire  to  mean  the  transmission  of  writing,  signs,  signals,  pictures,  and  sounds  of  all  kinds  by  aid  of  wire,  cable,  or  other  like  connection  between  the  points  of  origin  and  reception  of  such  transmission,  including 
 all  instrumentalities,  facilities,  apparatus,  and  services  (among  other  things,  the  receipt,  forwarding,  and  delivery  of  communications)  incidental  to  such  transmission.  Id.    153(  52). 
 75  We  are  not  persuaded  by  commenters  argument  that  Section  3s  definition  of  radio  communication 
 refers  only  to  apparatus  used  for  the  transmission,  and  not  the  reception,  of  radio.  See  Philips  October  16,  2003  Ex  Parte.  In  so  reading,  commenters  ignore  the  broad  language  of  the  definition,  which  gives  a  fuller 


 meaning  to  the  concept  of  communication  so  as  to  include  all  instrumentalities,  facilities,  apparatus  and  services  that  may  be  incidental  to  the  literal  transmission,  but  which  are  a  part  of  an  overall  circuit  of 
 messages  that  are  sent  and  received.  Moreover,  commenters  reliance  on  Section  303(  e)  s  grant  of  Commission  authority  to  regulate  the  emissions  of  radio  station  apparatus  is  unavailing  for  at  least  two 
 reasons.  First,  the  Commissions  general  jurisdictional  grant  under  Title  I  is  much  broader  than  the  specific  grant  of  authority  in  Section  303(  e).  Second,  Section  303(  e)  contains  no  indication  that  Congress  intended 
 to  limit  the  Commissions  authority  over  radio  station  apparatus  to  the  terms  of  that  statutory  provision.  The  mere  fact  that  the  provision  grants  the  Commission  the  authority  to  regulate  radio  station  apparatus 
 along  certain  lines  does  not  imply  that  the  Commission  is  prohibited  from  regulating  such  apparatus  under  authority  drawn  from  other  portions  of  the  statute.  To  hold  otherwise  would  render  the  concept  of  ancillary 
 jurisdiction  largely  meaningless.  76 
 47  U.  S.  C.    151,  307(  b).  As  indicated  above,  we  are  not  relying  on  our  authority  under  Section  303(  e)  to  implement  the  broadcast  flag  regime.  Moreover,  our  actions  today  are  not  in  conflict  or  otherwise 


 inconsistent  with  our  authority  under  Section  303(  e).  Therefore,  the  fact  that  Section  303(  e)  focuses  on  transmission  apparatus  is  irrelevant  to  our  ancillary  jurisdiction  analysis. 
 77  See  Midwest  Video  I,  406  U.  S.  at  667-  668,  n.  27  (recognizing  that  it  has  long  been  a  basic  tenet  of 
 national  communications  policy  that  the  widest  possible  dissemination  of  information  from  diverse  and  antagonistic  sources  is  essential  on  the  welfare  of  the  public.  ). 


 78  See  47  U.  S.  C.    309(  j)(  14)(  A)  ([  a]  television  broadcast  license  that  authorizes  analog  television  service 
 may  not  be  renewed    for  a  period  that  extends  beyond  December  31,  2006).  See  also  Consumer  Electronics  Association  v.  FCC,  No.  02-  1312,  slip.  op.  at  15-  16  (D.  C.  Cir.  Oct.  28,  2003)  (the  DTV 


 transition  is  not  a  market-  driven  migration  to  a  new  technology,  but  rather  the  unambiguous  command  of  an  Act  of  Congress). 
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 public  interest.  79  To  further  this  goal,  Congress  has  woven  into  the  Communications  Act  an  intricate  and  detailed  set  of  provisions  for  the  DTV  transition.  80  The  legislative  history  of  various 
 statutory  provisions  reflects  a  clear  Congressional  expectation  that  the  transition  take  place.  81  The  statutory  framework  for  the  transition,  coupled  with  the  support  in  the  legislative  history  and 
 the  Commissions  ongoing  and  prominent  initiatives  in  the  area,  make  it  clear  that  advancing  the  DTV  transition  has  become  one  of  the  Commissions  primary  responsibilities  under  the 
 Communications  Act  at  this  time. 
 31.  Here,  the  record  shows  that  creation  of  a  redistribution  control  protection  system,  including  compliance  and  robustness  rules  for  so-  called  Demodulator  Products,  is  essential  for 


 the  Commission  to  fulfill  its  responsibilities  under  the  Communications  Act  and  achieve  long-established  regulatory  goals  in  the  field  of  television  broadcasting.  As  discussed  above,  absent 
 redistribution  control  regulation  for  DTV  broadcasts,  the  record  indicates  that  content  providers  will  be  reluctant  to  provide  quality  digital  programming  to  broadcast  outlets  and  will  instead 
 direct  such  content  to  pay  television  systems  that  can  implement  adequate  content  protection  mechanisms.  82  The  diversion  of  high  quality  digital  programming  away  from  broadcast  television 
 will  lead  to  an  erosion  of  our  national  television  structure.  Moreover,  not  only  will  free,  over-  the-air  broadcast  television  deteriorate,  but  a  critical  element  necessary  to  the  success  of  the  DTV 
 transition    the  availability  of  quality  digital  broadcast  programming    will  not  develop.  We  thus 
 79  47  U.  S.  C.    303(  g).  See  also  Midwest  Video  I,  406  U.  S.  at  669  (citing  Section  303(  g)  as  articulating  one 
 of  the  policies  of  the  Communications  Act  on  which  the  cable  origination  rule  is  specifically  premised).  80 


 See,  e.  g.,  47  U.  S.  C.    309(  j)(  14)  (aimed  at  the  recapture  of  broadcast  television  spectrum  used  for  analog  service  by  2007,  unless  one  of  three  conditions  exist);  Id.    337  (requires  the  removal  and  relocation 


 of  incumbent  analog  broadcast  licensees  operating  on  channels  60-  69  after  the  DTV  transition  period  terminates  in  order  that  frequencies  can  be  used  for  public  safety  and  commercial  services);  Id.    336 
 (directing  the  Commission  in  the  transition  to  digital  television);  Id.    396(  k)(  1)(  D)  (creating  $20  million  Fund  for  fiscal  year  2001  for  transition  from  analog  to  digital  technology  for  public  broadcasting  services); 
 Id.    614(  b)(  4)(  B)  (digital  must  carry);  Id.    544a(  c)(  2)  (subscriber  notification  requirements  regarding  the  impact  that  cable  converter  boxes  may  have  on  advanced  television  picture  generation  and  display 
 features).  81  In  1997,  the  legislative  history  to  the  newly  enacted  provisions  of  Sections  309  and  337  reflected  the 
 importance  Congress  attached  to  accomplishing  the  transition  from  analog  to  digital  technology.  See,  e.  g.,  H.  R.  Conf.  Rep.  No.  217,  105  th  Cong.,  1  st  Sess.  1997,  at  576  (stating  that  a  new  Section  309(  j)(  14)(  A)  was 
 added  to  the  Communications  Act  to  require  the  Commission  to  reclaim  the  6  MHz  each  broadcaster  now  uses  for  transmission  of  analog  television  service  signals  by  no  later  than  December  31,  2006);  Id.  at  578 
 (  New  section  309(  j)(  14)  requires  the  Commission  to  ensure  that  the  spectrum  now  used  for  analog  television  service  is  returned  as  required  by  Commission  direction  and  that  the  Commission  must  reclaim 
 and  reorganize  the  spectrum,  consistent  with  the  objectives  of  section  309(  j)(  3)  of  the  Communications  Act);  Id.  at  580  (  New  section  337(  e)  requires  the  Commission  to  clear  all  broadcast  television  licensees 
 from  the  spectrum  located  between  746  and  806  MHz  at  the  end  of  the  transition  to  digital  television.  The  conferees  recognize  that  in  clearing  this  band,  the  Commission  will  displace  not  only  full-  power  licensees 
 but  also  secondary  broadcast  services,  including  low-  power  licensees  and  television  translator  licensees).  See  also,  H.  R.  Conf.  Rep.  No.  148,  107  th  Cong.,  1  st  Sess.  2001,  at  71  (  The  conference  agreement  includes 
 a  provision  authorizing  the  use  of  fiscal  year  2001  funds  specifically  for  transition  from  the  use  of  analog  to  digital  technology  for  the  provision  of  public  broadcasting  services  for  fiscal  year  2001). 
 82  ASCAP  Comments  at  1-  2;  CBS  Affiliates  Comments  at  2-  3;  CPB  Reply  Comments  at  2;  DGA 
 Comments  at  1-  3;  Banks  Comments  at  2;  MPAA  Comments  at  6-  8;  MPAA  Reply  Comments  at  2-  13;  NMPA  Reply  Comments  at  2-  5;  NBC  Affiliates  Comments  at  1-  3;  NBC  Comments  at  2;  NFL  Comments 


 at  6-  12;  NFL  Reply  Comments  2-  7;  NABA  Comments  at  1. 
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 find  adoption  of  redistribution  control  regulations  necessary  to  accomplish  various  of  our  responsibilities  under  the  Communications  Act,  such  as  our  responsibilities  to  foster  a  diverse 
 radio  service  that  serves  local  communities  throughout  the  country,  to  encourage  the  development  of  new  and  more  effective  radio  service,  and  to  lead  the  nation  into  a  new  era  of  free,  over-  the-  air 
 digital  broadcasting. 
 32.  We  disagree  with  commenters  that  legal  precedent  requires  an  explicit  grant  of  authority  by  Congress  before  the  Commission  may  adopt  redistribution  control  regulations.  We 


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


 juncture  where  such  exercise  of  authority  is  necessary.  The  fact  that  the  circumstances  may  not  have  warranted  an  exercise  of  such  jurisdiction  at  earlier  stages  does  not  undermine  our  authority 
 to  exercise  ancillary  jurisdiction  at  this  point  in  time.  In  this  respect,  our  experience  with  cable 


 83  See,  e.  g.,  47  U.  S.  C.    302(  a)  (granting  authority  to  regulate  home  electronic  equipment  in  order  to  ensure 
 that  the  equipment  can  withstand  interference);  Id.    303(  s)  (granting  authority  to  regulate  television  receivers  in  order  to  ensure  that  all  such  receivers  adequately  receive  all  television  broadcasting  signals); 


 Id.    303(  u)  (instructing  Commission  to  require  that  television  receivers  be  equipped  to  display  closed-caption  television  transmissions);  Id.    303(  x),  330(  c))  (instructing  Commission  to  require  that  television 
 receivers  to  be  equipped  to  permit  viewers  to  block  the  reception  of  programs  with  a  common  rating).  84 
 Pub.  L.  No.  87-  529,  76  Stat.  150  (codified  at  47  U.  S.  C.    303(  s),  330(  a)).  See,  e.  g.,  Electronic  Industries  Association  Consumer  Electronics  Group  v.  FCC,  636  F.  2d  689  (D.  C.  Cir.  1980)  (providing  an 


 extensive  review  of  the  legislative  history  of  ACRA,  including  the  then-  FCC  Chairmans  assurances  to  Congress  regarding  the  limited  scope  of  authority  sought  in  supporting  the  legislation  leading  up  to  the 
 enactment  of  Section  303(  s)  of  the  Communications  Act).  85 
 See,  e.  g.,  Texas  Rural  Legal  Aid,  Inc.  v.  Legal  Services  Corp.,  940  F.  2d  685,  694  (D.  C.  Cir  1991)  (rejecting  the  simplistic  application  of  the  expressio  unius  est  exclusio  alterius  (  the  expression  of  one  is 


 the  exclusion  of  the  other)  canon  of  statutory  interpretation  in  the  administrative  law  context,  relying  instead  on  the  canon  of  interpretation  that  states  that  a  congressional  decision  to  prohibit  certain  activities 
 does  not  imply  an  intent  to  disable  the  relevant  administrative  body  from  taking  similar  action  with  respect  to  activities  that  pose  similar  danger;  and  observing  that  case  law  suggests  that  the  expressio  maxim  is 
 inappropriate  in  the  administrative  context  because  its  application  would  undermine  the  flexibility  sought  in  vesting  broad  rulemaking  authority  in  an  administrative  agency). 
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 television    where  our  ancillary  jurisdiction  did  not  form  until  long  after  that  industry  had  come  into  existence    is  instructive.  More  specifically,  that  industry  (then  termed  community  antenna 
 television,  or  CATV)  had  been  in  existence  almost  15  years  before  the  Commission  asserted  its  ancillary  jurisdiction.  86  In  upholding  the  Commissions  regulatory  authority,  the  Supreme  Court 
 found  that  the  Commission  had  reasonably  concluded  that  regulatory  authority  over  CATV  is  imperative  if  it  is  to  perform  with  appropriate  effectiveness  certain  of  its  other  responsibilities 
 including  the  obligation  of  providing  a  widely  dispersed  radio  and  television  service  with  a  fair,  efficient,  and  equitable  distribution  of  service  among  the  several  States  and 
 communities.    87  We  find  ourselves  faced  with  the  same  type  of  situation  now  with  respect  to  equipment  manufacturers  in  that  up  until  this  point,  exercise  of  our  ancillary  authority  was  not 
 necessary  to  fulfill  our  responsibilities  under  the  Communications  Act. 
 34.  Moreover,  we  find  our  exercise  of  ancillary  authority  over  manufacturers  of  television  receiver  equipment  here  to  be  in  line  with  our  prior  legislative  grants  of  such  authority. 


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


 35.  We  further  note  that  we  intend  our  redistribution  control  regulations  to  apply  to  any  device  or  piece  of  equipment    whether  it  be  a  consumer  electronics,  PC  or  IT  device    that 
 contains  a  tuner  capable  of  receiving  over-  the-  air  television  broadcast  signals.  Application  of  our  rules  in  this  manner  is  necessary  in  order  not  to  create  arbitrary  lines  of  distinction  that  would 
 result  in  vitiating  the  regulatory  regime  altogether. 
 V.  REDISTRIBUTION  CONTROL  OF  DIGITAL  BROADCAST  TELEVISION 
 36.  Our  Notice  of  Proposed  Rulemaking  in  this  proceeding  sought  comment  on  a  number  of  issues  relating  to  a  content  protection  system  for  digital  broadcast  television,  making 


 specific  reference  to  certain  proposals  raised  in  the  BPDG  Final  Report.  88  In  response,  MPAA  submitted  with  its  comments  a  revised  version  of  its  BPDG  joint  proposal  with  the  5C  companies 
 (  Joint  Proposal).  89  The  Joint  Proposal  sets  forth  draft  rules  establishing  a  compliance  and  robustness  regime  for  a  flag-  based  system,  as  well  as  proposed  criteria  for  the  adoption  of  digital 
 content  protection  and  recording  technologies  to  be  used  in  conjunction  with  device  outputs.  90  Although  the  Joint  Proposal  represents  one  of  several  approaches  contemplated  by  the  BPDG 
 Final  Report,  we  believe  that  the  Joint  Proposal  serves  as  a  useful  starting  point  in  the  crafting  of  certain  elements  of  a  flag  protection  system.  However,  we  conclude  that  certain  portions  of  the 
 Joint  Proposal  are  unnecessary  in  order  to  implement  the  ATSC  flag  and  therefore  decline  to 


 86  See  Southwestern  Cable,  392  U.  S.  at  162-  167. 
 87  Id.  at  173-  174  (citations  omitted). 
 88  NPRM,  17  FCC  Rcd  at  16027-  29. 
 89  MPAA  Comments  at  Attachments  A-  C.  The  5C  companies  include  Sony,  Hitachi,  Intel,  Mitsubishi  and 
 Toshiba.  90 
 Id.  at  Attachments  B-  C. 
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 adopt  them.  Additional  public  comment  is  also  needed  in  certain  areas,  particularly  with  regard  to  the  approval  of  new  content  protection  and  recording  technologies  for  use  with  device  outputs. 
 Below  we  initiate  a  Further  Notice  of  Proposed  Rulemaking  to  address  a  permanent  solution  to  these  so-  called  Table  A  issues  and  establish  interim  approval  procedures  while  the  Further 
 Notice  of  Proposed  Rulemaking  is  pending. 
 A.  Transmission 
 37.  Most  commenters  were  silent  on  the  issue  of  whether  use  of  the  ATSC  flag  by  broadcasters  should  be  mandated.  Of  those  commenters  addressing  this  issue,  each  favored  a 


 discretionary  approach  that  would  generally  allow  broadcasters  to  decide  whether  or  not  to  include  the  flag  with  specific  types  of  programming.  91  We  concur.  Broadcasters  and  content 
 owners  have  strong  incentives  to  implement  the  ATSC  flag  in  order  to  limit  the  indiscriminate  redistribution  of  high  value  content,  rendering  a  mandate  unnecessary.  To  the  extent  that 
 broadcasters  and  content  owners  feel  that  it  is  unnecessary  to  insert  the  flag  into  certain  types  of  content,  we  believe  they  should  have  the  latitude  to  do  so. 


 38.  Given  the  strong  incentive  of  broadcasters  and  content  owners  to  make  use  of  the  ATSC  flag,  CEA  and  various  commenters  advocate  a  prohibition  on  use  of  the  flag  for  news  and 
 public  interest  programming.  92  The  Corporation  for  Public  Broadcasting,  MPAA  and  NAB  oppose  a  prohibition  of  this  sort  by  suggesting  that:  (1)  it  would  implicate  FCC  overview  of 
 content,  and  (2)  news  and  public  interest  programming  merits  the  same  level  of  protection  afforded  to  entertainment  programming.  93  Further,  the  NBC  Television  Affiliates  Association 
 and  other  broadcast  interests  argue  that  local  broadcasters  should  have  the  right  to  protect  news  programming  as  it  has  inherent  economic  value  and  that  to  do  otherwise  could  discourage  its 
 creation.  94  We  agree.  We  therefore  decline  to  involve  the  Commission  in  the  practical  and  legal  difficulties  of  determining  which  types  of  broadcast  content  merit  protection  from  indiscriminate 


 91  HRRC  Comments  at  6;  PK  &  CU  Comments  at  19;  Thomson  Comments  at  14;  MPAA  Comments  at  13; 
 NFL  Comments  at  14-  15.  92 
 CEA  Comments  at  6;  CEA  Reply  Comments  at  7;  PK  &  CU  Comments  at  19;  Library  Group  Comments  at  13-  18,  22;  HRRC  Comments  at  6,  8;  IT  Coalition  Comments  at  31;  International  Assoc.  of  Broadcast 


 Monitors  Reply  Comments  at  2-  3,  10-  14.  93 
 CPB  Reply  Comments  at  2;  see  also  MPAA  10/  8/  03  Letter  at  6-  7;  Letter  from  Lonna  Thompson,  APTS,  to  Kenneth  Ferree,  Chief,  Media  Bureau,  FCC  (Oct.  8,  2003);  Letter  from  Eddie  Fritts,  NAB,  to  Michael  K. 


 Powell,  FCC  (Oct.  27,  2003)  (opposing  any  exemption  for  news  and  public  affairs  programs).  94 
 Letter  from  Roger  Ogden,  NBC  Television  Affiliates  Association,  to  Marlene  Dortch,  Secretary,  FCC  (Oct.  6,  2003);  see  also  Letter  from  Bob  Lee,  CBS  Affiliates  Advisory  Board,  to  Michael  K.  Powell,  FCC 


 (Oct.  8,  2003)  (a  news  and  public  affairs  programming  exemption  would  seriously  threaten  the  continued  production  of  local  news  and  public  affairs,  and  make  it  difficult  for  the  CBS  network  to  support  high 
 quality  news  programming  like  60  Minutes);  Letter  from  Walter  C.  Liss,  ABC  Owned  Televisions  et  al.,  to  Michael  K.  Powell,  FCC  (Oct.  22,  2003)  (arguing  that  piracy  poses  same  risk  to  producers  of  news  and 
 public  affairs  programming  as  it  does  to  producers  of  other  programming,  and  that  failure  to  provide  protection  to  news  and  public  affairs  would  harm  local  stations  who  rely  on  the  economic  value  of  these 
 programs  to  maintain  a  viable  business);  Letter  from  Robert  Alan  Garrett,  Arnold  and  Porter,  to  Marlene  H.  Dortch,  FCC  (Oct.  24,  2003)  (on  behalf  of  Office  of  Commissioner  of  Baseball,  opposing  any  exemption 
 for  news  and  public  affairs  programming  that  would  include  telecasts  of  sports  events  or  sports-  related  programming). 
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 redistribution  and  which  do  not.  95  In  so  doing,  we  recognize  that  the  ATSC  flag  was  devised  to  address  redistribution  control  and  not  other  forms  of  content  protection.  We  clarify  here  and  in 
 Part  73  of  the  Commissions  rules  that  to  the  extent  broadcasters  wish  to  use  the  ATSC  flag  to  protect  unencrypted  DTV  broadcasts,  they  may  do  so  provided  they  do  not  transmit  the  optional 
 additional  bits  provided  for  in  ATSC  A/  65B.  96  We  believe  that  this  approach  is  commensurate  with  the  encoding  rules  adopted  in  our  recent  Digital  Cable  Compatibility  Order  and  FNPRM 
 which  prohibit  MVPDs  from  encoding  unencrypted  broadcast  content  for  copy  control  purposes.  97  Thus  consumers  will  continue  to  have  the  ability  to  make  copies  of  broadcast  content, 
 including  news  and  public  interest  programming. 
 B.  Reception 
 39.  The  keystone  of  a  flag  protection  system  is  the  ubiquitous  ability  of  reception  devices  to  respond  and  give  effect  to  the  redistribution  control  descriptor.  Numerous  commenters 


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


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


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


 97  See  Digital  Cable  Compatibility  Order  and  FNPRM  at  Section  VI.  C. 
 98  CBS  Affiliates  Comments  at  3;  CEA  Comments  at  5-  6;  DTLA  Comments  at  8;  DIRECTV  Comments  at 
 3;  DIRECTV  Reply  Comments  at  4-  5;  HRRC  Comments  at  6-  7;  MPAA  Comments  at  14-  18;  MPAA  Reply  Comments  at  23-  24,  39-  40;  NCTA  Comments  at  8;  NMPA  Comments  at  3,  5;  NMPA  Reply 


 Comments  at  6,  12-  13;  NBC  Comments  at  3;  NFL  Comments  at  14-  15;  Philips  Comments  at  6,  21-  22;  Thomson  Comments  at  3,  14-  17;  TiVo  Comments  at  6-  7. 
 99  MPAA  Comments  at  14-  18;  DTLA  Comments  at  8. 
 100  MPAA  Reply  Comments  at  39-  41;  but  see  IT  Coalition  Comments  at  29-  30;  EFF  Reply  Comments  at 
 26-  27.  101 
 MPAA  Reply  Comments  at  39-  41.  102 
 CEA  Comments  at  5-  6;  CCIA  Comments  at  18-  19;  see  17  U.  S.  C.    1201(  c)(  3). 
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 applications.  103 
 40.  We  conclude  that  in  order  for  a  flag-  based  content  protection  system  to  be  effective,  demodulators  integrated  within,  or  produced  for  use  in,  DTV  reception  devices 


 (  Demodulator  Products)  must  recognize  and  give  effect  to  the  ATSC  flag  pursuant  to  the  compliance  and  robustness  rules  described  in  greater  detail  below.  This  necessarily  includes  PC 
 and  IT  products  that  are  used  for  off-  air  DTV  reception.  We  note,  however,  that  the  robustness  rules  we  are  adopting  have  been  structured  to  account  for  technological  differences  between 
 single  purpose  consumer  electronics  devices  and  general  purpose  PC  and  IT  products.  Further,  we  are  not  persuaded  that  our  regulations  should  extend  to  cover  consumer  modulators.  The 
 express  intent  and  scope  of  this  proceeding  is  to  ensure  the  viability  of  over-  the-  air  broadcasting  in  the  digital  age  and  the  continued  availability  of  high  value  content  to  consumers  via  the  public 
 airwaves.  By  MPAAs  own  admission,  the  proposed  regulation  of  consumer  modulators  is  directed  at  protecting  forms  of  content  other  than  digital  broadcast  television.  104  As  such,  we 
 decline  to  adopt  compliance  and  robustness  rules  relating  to  consumer  modulators. 
 41.  We  do  not  interpret  Section  1201(  c)(  3)  of  the  DMCA  to  prohibit  Commission  action  in  this  sphere.  The  scope  of  Section  1201(  c)(  3)  is  specifically  limited  with  prefatory 


 language: 
 [n]  othing  in  this  section  shall  require  that  the  design  of,  or  the  design  and  selection  of  parts  and  components  for,  a  consumer  electronics, 


 telecommunications,  or  computing  product  provide  for  a  response  to  any  particular  technological  measure,  so  long  as  such  part  of  component,  or  the 
 product  in  which  such  part  or  component  is  integrated,  does  not  otherwise  fall  within  the  prohibitions  of  subsection  (a)(  2)  or  (b)(  1).  105 


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


 1.  Demodulators  and  Demodulator  Products 
 42.  Compliance  and  robustness  rules  for  Demodulator  Products  represent  the  means  by  which  DTV  reception  and  related  devices  would  respond  and  give  effect  to  the  ATSC  flag.  A 


 regulated  Demodulator  Product  for  purposes  of  this  discussion  includes  both  a  demodulator  and  an  associated  transport  stream  processor  (  TSP)  that  inspects  the  data  structure  of  the  DTV 


 103  EFF  Comments  at  19-  21;  EFF  Reply  Comments  at  26-  27,  29. 
 104  MPAA  Reply  Comments  at  39-  42. 
 105  17  U.  S.  C.    1201(  c)(  3)  (emphasis  added). 
 106  See  MPAA  10/  8/  03  Letter  at  5. 
 107  17  U.  S.  C.    1201(  k). 
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 broadcast  signal  to  determine  the  presence  or  absence  of  the  ATSC  flag.  108  MPAA  and  the  5C  companies  propose  Demodulator  Product  compliance  rules  which  prescribe  the  manner  in  which 
 DTV  broadcast  content  is  to  be  treated  and  output  from  devices  where  it  has  either  not  been  screened  for  presence  of  the  ATSC  flag  (  Unscreened  Content)  or  where  it  has  determined  that 
 the  ATSC  flag  is  present  (  Marked  Content).  109  The  proposed  rules  would  require  Demodulator  Products  to  output  both  Unscreened  and  Marked  Content  in  one  the  following  ways:  (1)  to  an 
 analog  output;  (2)  to  an  8-  VSB,  16-  VSB,  64-  QAM  or  256-  QAM  modulated  output;  (3)  to  a  digital  output  associated  with  an  approved  output  content  protection  technology;  (4)  to  an 
 approved  digital  recording  technology;  and  (5)  to  unprotected  Digital  Visual  Interface  (  DVI)  outputs  for  resolutions  no  greater  than  standard  digitally  encoded  component  analog  video 
 signals.  110  The  approval  of  digital  output  content  protection  technologies  and  digital  recording  technologies  under  this  scheme  would  occur  as  a  part  of  the  so-  called  Table  A  process 
 described  in  a  separate  part  of  the  Joint  Proposal.  111 
 43.  Although  some  parties  acknowledge  the  need  for  compliance  rules,  few  specific  comments  were  received  on  this  issue.  112  We  conclude  that,  with  certain  modifications  set  forth 


 in  Attachment  B  hereto,  the  compliance  rules  proposed  by  MPAA  and  the  5C  companies  form  an  appropriate  basis  for  Demodulator  Products  to  respond  and  give  effect  to  the  ATSC  flag.  Our 
 adoption  of  these  compliance  rules  does  not  extend  to  the  Joint  Proposals  approval  process  for  digital  output  content  protection  technologies  and  digital  recording  technologies.  As  noted  above, 
 we  believe  that  additional  public  comment  is  needed  in  order  to  formulate  an  open,  objective  approval  process  that  will  foster  innovation  and  marketplace  competition.  Below  we  establish  an 
 interim  policy  for  the  approval  of  digital  recording  and  output  content  protection  technologies  and  initiate  a  Further  Notice  of  Proposed  Rulemaking  to  examine  this  issue  in  greater  detail. 


 44.  In  their  Joint  Proposal,  MPAA  and  the  5C  companies  also  outline  an  extensive  list  of  robustness  rules  which  set  forth  how  Demodulator  Products,  prior  to  directing  the  content 
 to  an  output,  must  implement  the  compliance  rules  in  a  secure,  reliable  manner.  The  proposed  robustness  rules  cover  a  wide  scope  of  subject  areas,  including:  (1)  the  construction  of 
 Demodulator  Products;  (2)  how  content  may  be  transmitted  on  data  paths  within  Demodulator  Products;  (3)  the  means  by  which  content  may  be  passed  to  other  devices  without  being 


 108  The  connection  between  these  two  elements  of  a  Demodulator  Product  would  need  to  be  robust  for  the 
 flag  system  to  perform  its  intended  function.  109 
 MPAA  Comments  at  Attachment  B.  110 
 Id.  at  Attachment  B.  The  proposed  rules  permit  Marked  and  Unscreened  Content  to  be  output  over  modulated  outputs,  provided  that  the  ATSC  flag  is  retained  in  both  the  EIT  and  PMT.  Id.  According  to 


 MPAA,  the  inclusion  of  unprotected  DVI  outputs  with  a  resolution  equal  to  or  lower  than  that  in  ITU-  R,  BT  601.5  is  an  accommodation  for  legacy  PC  equipment  and  displays.  See  MPAA  10/  8/  03  Letter  at  4; 
 MPAA  Reply  Comments  at  Attachment  A  n.  2.  111 
 MPAA  Comments  at  Attachment  C.  112 
 EPIC  Comments  at  3,  5;  NMPA  Comments  at  7-  8,  11;  Philips  Comments  at  6,  21-  22,  25;  PK  &  CU  Comments  at  17.  NMPA  and  Recoding  Industry  Assoc.  of  America  (  RIAA)  express  concern  that  the 


 audio  component  of  the  A/  V  signal  could  be  digitally  output  without  protection  under  the  compliance  rules.  NMPA  Reply  Comments  at  4-  5,  12-  13;  RIAA  Reply  Comments  at  7.  In  response,  MPAA  states  that  its 
 Joint  Proposal  would  only  allow  a  certain  limited  type  of  unprotected  digital  output  to  transmit  audio  content  at  compact  disc-  level  quality  in  order  to  permit  the  continued  functionality  of  existing  legacy 
 devices.  Letter  from  Fritz  Attaway,  MPAA,  to  Marlene  Dortch,  Secretary,  FCC  (Sept.  29,  2003). 
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 intercepted;  (4)  the  use  of  different  manufacturing  techniques  to  frustrate  attempts  at  defeating  the  content  protection  requirements  of  the  compliance  rules;  (5)  the  level  of  protection  needed  to 
 ensure  that  circumvention  of  the  content  protection  requirements  does  not  occur;  and  (6)  how  manufacturers  must  respond  to  new  circumstances  that  render  their  previously  compliant 
 Demodulator  Products  insecure.  113  In  essence,  the  Joint  Proposal  seeks  a  high  or  expert  level  of  robustness  in  order  to  ensure  the  security  of  DTV  broadcast  content. 


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


 itself  describes  the  flag  as  a  limited  mechanism  to  inhibit  theft  of  content: 
 A  person  who  hacks  their  device  will  simply  achieve  the  disabling  of  that  single  device,  and  no  other  impact.  While  hacks  of  individual  devices  will  result  in  the 


 theft  of  some  content,  it  is  wrong  to  presume  that  every  consumer  is  a  thief,  and  it  is  equally  mistaken  to  assert  that  some  burglars  know  how  to  pick  locks,  it  is  not 
 worthwhile  to  lock  the  door.  The  Broadcast  Flag  will  keep  widespread  unauthorized  redistribution  under  control  because  most  consumers  will  not  hack 
 their  devices.  118 
 We  therefore  conclude  that  an  expert  level  of  robustness  is  incongruous  with  the  scope  of  protection  offered  by  an  ATSC  flag  system  and  that  an  ordinary  user  level  is  more  appropriate 


 in  these  circumstances.  In  lieu  of  the  detailed  robustness  rules  contained  in  the  Joint  Proposal,  we  are  adopting  a  more  generalized  robustness  standard  that  will  afford  consumer  electronics,  IT  and 
 PC  manufacturers  flexibility  in  determining  how  to  effectuate  our  compliance  rules  and  to  ensure  the  security  of  content.  We  encourage  manufacturers  to  consult  with  content  owners  on  how  to 
 best  achieve  DTV  content  security  and  emphasize  that  this  ordinary  user  level  of  robustness  represents  a  floor  that  manufacturers  are  free  to  exceed.  Should  content  owners  or  other 
 interested  parties  believe  that  a  particular  manufacturer  or  product  does  not  meet  this  baseline 
 113  MPAA  Comments  at  Attachment  B. 
 114  ITAA  Comments  at  11-  13;  Law  Office  of  Adam  Hill  Comments  at  7-  8;  NMPA  Comments  at  7-  8,  11; 
 PK  &  CU  Comments  at  17.  115 
 EFF  Comments  at  15-  17;  American  Antitrust  Institute  Comments  at  15-  16;  PK  &  CU  Reply  Comments  at  16-  20. 


 116  IT  Coalition  Comments  at  26-  29. 
 117  NMPA  Reply  Comments  at  9-  11 
 118  MPAA  Reply  Comments  at  16. 
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 standard,  we  will  consider  complaints  in  this  regard. 
 47.  An  additional  enforcement  mechanism  is  also  needed  to  enable  the  commercial  manufacture,  sale  and  distribution  of  DTV  demodulators  that  have  not  yet  been  associated  with  a 


 TSP  or  incorporated  into  any  consumer  product  and,  thus,  cannot  demonstrate  compliance  with  the  Demodulator  Product  compliance  and  robustness  obligations.  To  account  for  this  situation, 
 we  will  require  manufacturers  or  importers  of  ATSC  demodulators  to  obtain  from  buyers  of  such  products  a  written  commitment  that  they  will:  (1)  only  sell  or  distribute  such  products  that  are,  or 
 will  be  incorporated  into,  devices  that  meet  our  Demodulator  Product  compliance  and  robustness  rules,  and  (2)  only  sell  or  distribute  such  products  to  another  person  that  has  committed  in  writing 
 that  they  will  abide  by  our  Demodulator  Product  compliance  and  robustness  rules.  119  This  requirement  is  based  upon  a  similar  construct  set  forth  in  the  Joint  Proposal;  no  comments  were 
 received  on  this  issue.  120  We  believe  that  these  written  commitments,  which  must  be  filed  with  the  Commission  and  will  be  made  publicly  available  for  inspection,  should  provide  a  streamlined 
 framework  for  manufacturers,  importers  and  resellers  to  verify  compliance  with  the  Commissions  rules.  Should  a  buyer  violate  their  written  commitment,  it  will  be  deemed  a 
 violation  of  the  Commissions  rules. 
 2.  Peripheral  TSP  Products 
 48.  The  Joint  Proposal  includes  within  the  scope  of  its  draft  rules  references  to  so-called  Downstream  Products  which  are  a  limited  subset  of  products  different  from  the  universe 


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


 49.  In  order  to  apply  our  Demodulator  Product  compliance  and  robustness  rules  to  Peripheral  TSP  Products  without  demodulators,  some  enforcement  mechanism  is  needed.  To  that 
 end,  we  are  adopting  the  written  commitment  procedures  proposed  in  the  Joint  Proposal.  122  No 


 119  The  written  commitment  should  include  the  following  information:  (1)  the  manufacturer  or  importers 
 name  and  official  mailing  address;  and  either  (2)  a  commitment  that  the  manufacturer  or  importer  shall  abide  by  the  Commissions  compliance  and  robustness  rules  for  Demodulator  Products;  or  (3)  a 


 commitment  that  the  manufacturer  or  importer  will  only  sell  demodulators  to  another  person  who  has  committed  to  comply  with  the  Commissions  compliance  and  robustness  rules  for  Demodulator  Products. 
 A  written  commitment  would  not  be  required  in  the  case  of  buyers  who  are  bona  fide  resellers,  licensed  digital  television  broadcasters  or  MVPDs  who  retransmit  Unencrypted  Digital  Broadcast  Television 
 Content.  See  Attachment  B.  120 
 MPAA  Comments  at  Attachment  B.  121 
 Id.  at  Attachment  B;  MPAA  Reply  Comments  at  23-  24.  122 
 MPAA  Comments  at  Attachment  B;  MPAA  Reply  Comments  at  23-  24. 
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 comments  were  received  regarding  these  procedures.  Manufacturers  or  importers  of  Peripheral  TSP  Products  that  wish  to  make  their  products  available  for  use  with  DTV  content  and  which  are 
 designed  to  be  connected  by  a  robust  method  to  a  covered  demodulator  shall  file  a  written  commitment  with  the  Commission  that  they  will  abide  by  the  Demodulator  Product  compliance 
 and  robustness  rules  and  only  output  content  in  an  authorized  manner.  123  As  in  the  case  of  Demodulator  Products,  we  believe  that  extension  of  this  written  commitment  regime  to  Peripheral 
 TSP  Products  will  facilitate  verification  of  compliance  with  the  Commissions  rules  by  manufacturers,  importers  and  resellers  and  will  consider  violations  of  the  commitments  to  be 
 violations  of  the  Commissions  rules. 
 3.  Interim  Procedures  for  Content  Protection  and  Recording  Technologies 


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


 51.  Commenters  levy  a  number  of  objections  against  the  Table  A  Proposal  and  offer  their  own  formulations  in  its  place.  Advocacy  groups  question  the  preeminent  role  of  content 
 owners  in  making  determinations  under  the  Table  A  Proposal  and  advocate  non-  discriminatory  approval  criteria  that  would  be  administered  by  an  independent  decision-  maker.  127  NCTA 
 concurs  with  the  concept  of  a  neutral  decision  maker  and  favors  the  use  of  market-  based  and 


 123  The  written  commitment  should  include  the  following  information:  (1)  the  manufacturer  or  importers 
 name  and  official  mailing  address;  and  either  (2)  a  commitment  that  the  manufacturer  or  importer  shall  abide  by  the  Commissions  compliance  and  robustness  rules  for  Demodulator  Products;  or  (3)  a 


 commitment  that  the  manufacturer  or  importer  will  only  sell  demodulators  to  another  person  who  has  committed  to  comply  with  the  Commissions  compliance  and  robustness  rules  for  Demodulator  Products. 
 124  MPAA  Comments  at  Attachment  C. 
 125  Id.  at  Attachment  C. 
 126  MPAA  Reply  Comments  at  18-  20. 
 127  EPIC  Comments  at  6;  Law  Office  of  Adam  Hill  Comments  at  4-  7;  American  Antitrust  Institute  Reply 
 Comments  at  12-  15;  EFF  Reply  Comments  at  27-  29;  PK  &  CU  Reply  Comments  at  12-  13;  see  also  Philips  Comments  at  25-  27. 
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 technical  criteria  in  approval  decisions.  128  Consumer  electronics,  IT  and  PC  manufacturers  advance  the  adoption  of  objective  technical  criteria  that  would  allow  manufacturers  to  self-  certify 
 their  compliance  thereto.  129  DTLA  also  suggests  the  use  of  prima  facie  compliance  notifications  by  technology  proponents  to  the  Commission,  with  dispute  resolution  procedures  where 
 objections  arise.  130 
 52.  As  in  our  recent  Second  Report  and  Order  and  Second  Further  Notice  of  Proposed  Rulemaking  relating  to  digital  cable  compatibility,  we  are  concerned  with  one  industry 


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


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


 content  protection  technologies  and  recording  methods  to  file  certifications  pursuant  to  this  interim  process.  Following  close  of  the  initial  certification  window,  the  Commission  will  issue  a 
 public  notice  identifying  the  certifications  received  and  commencing  a  20  day  opposition  window.  If  no  objection  is  received  on  the  merits  of  the  proponents  submission  within  the  20 
 day  opposition  window,  the  Commission  will  expeditiously  issue  a  determination  indicating  whether  the  technology  is  approved  for  use  in  Demodulator  Products.  If  substantive  objections 
 are  received  with  respect  to  a  particular  technology,  proponents  will  have  a  10  day  window  to  reply  before  we  will  undertake  a  review  of  its  merits.  Should  an  objection  be  raised  that  the 
 proponents  submission  contains  insufficient  information  to  evaluate  its  appropriateness,  proponents  will  again  have  a  10  day  window  to  reply  before  we  review  such  objections  and 


 128  NCTA  Comments  at  8-  9,  12;  NCTA  Reply  Comments  at  7-  9. 
 129  ITAA  Comments  at  10;  ITIC  Comments  at  4;  ICC  Comments  at  6;  IT  Coalition  Comments  at  20-  23; 
 Philips  Comments  at  22-  23;  Thomson  Comments  at  10-  13;  TiVo  Comments  at  7-  9.  130 
 DTLA  Comments  at  10-  11;  DTLA  Reply  Comments  at  2-  3.  But  see  Letter  from  Michael  B.  Ayers,  DTLA,  to  Marlene  Dortch,  Secretary,  FCC  (Oct.  3,  2003)  (supporting  Table  A  Proposal  approach). 


 131  Digital  Cable  Compatibility  Order  and  FNPRM  at  Sections  VI.  B  and  VII. 
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 determine  whether  to  dismiss  the  submission  without  prejudice  or  undertake  a  full  review  of  its  merits.  The  Commission  will  consider  the  merits  of  each  submission  and  issue  a  determination  as 
 expeditiously  as  possible.  We  expect  that  such  decision  will  be  made  no  later  than  90  days  following  close  of  the  reply  period.  Certifications  filed  subsequent  to  this  initial  certification 
 window  will  follow  similar  time  frames  and  procedures. 
 55.  In  reaching  determinations  made  under  this  interim  process,  whether  during  or  subsequent  to  the  initial  certification  window,  the  Commission  will  consider,  where  applicable,  a 


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


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


 57.  Due  to  the  fact  that  some  content  protection  and  recording  technologies  must  be  approved  before  device  manufacturers  can  build  flag-  compliant  devices,  and  the  corresponding 
 need  to  allow  adequate  time  for  device  manufacturers  to  design  products  once  a  number  of  technologies  are  approved,  we  will  require  manufacturers  to  meet  our  Demodulator  Product 
 compliance  and  robustness  rules  commencing  with  the  July  1,  2005  product  cycle.  We  recognize,  however,  that  some  consumer  electronics  manufacturers  may  be  able  to  voluntarily  include  flag 
 recognition  technology  into  devices  on  a  more  accelerated  schedule,  notably  in  new  digital  cable  ready  televisions  set  for  the  July  1,  2004  product  cycle.  132  We  strongly  encourage  these  efforts. 
 To  the  extent  that  a  manufacturer  voluntarily  includes  flag  recognition  technology  in  any  device  prior  to  the  effective  date  of  our  rules  adopted  herein,  we  clarify  that  these  devices  would  fall 
 outside  the  scope  of  such  rules  and  any  associated  obligations. 
 132  See  Thomson  10/  8/  03  Letter;  Zenith  10/  30/  03  Letter. 
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 C.  MVPD  Retransmission 
 58.  MVPD  perpetuation  of  a  flag  content  protection  system  for  DTV  broadcast  retransmissions  could  occur  in  one  of  two  ways:  (1)  by  MVPD  pass-  through  of  the  ATSC  flag 


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


 VI.  FURTHER  NOTICE  OF  PROPOSED  RULEMAKING 
 59.  Although  we  believe  that  our  adoption  of  a  flag-  based  redistribution  control  system  for  digital  broadcast  television  will  further  the  digital  transition  and  ensure  the  continued 


 flow  of  high  value  content  to  broadcast  outlets,  further  comment  is  needed  on  several  issues.  As  an  initial  matter,  we  seek  comment  on  whether  cable  operators  that  retransmit  DTV  broadcasts 
 may  encrypt  the  digital  basic  tier  in  order  to  convey  the  presence  of  the  ATSC  flag  through  their  conditional  access  system.  Section  76.630  of  the  Commissions  rules  generally  prohibits  cable 
 operators  from  scrambl[  ing]  or  encrypt[  ing]  signals  carried  on  the  basic  service  tier  without  distinguishing  between  analog  and  digital  service.  136  NCTA  has  suggested  that  allowing  cable 
 operators  to  encrypt  the  digital  basic  tier  and  virtually  convey  the  presence  of  the  flag  will  facilitate  the  offering  of  future  home  networking  services.  137  We  seek  comment  on  whether  cable 
 operators  should  be  allowed  to  encrypt  in  this  manner. 
 60.  In  response  to  our  Notice  of  Proposed  Rulemaking,  EFF  questioned  the  impact  of  a  flag  based  regime  on  innovations  in  software  demodulators  and  other  DTV  open  source 


 software  applications.  138  The  Commission  has  actively  promoted  the  development  of  software  defined  radio  and  other  software  demodulators  as  important  innovations  in  the  digital  age.  139  We 


 133  DIRECTV  Comments  at  3-  4;  DIRECTV  Reply  Comments  at  4-  5. 
 134  NCTA  Comments  at  10-  11;  NCTA  Reply  Comments  at  4-  7. 
 135  MPAA  Comments  at  Attachment  B. 


 136  47  C.  F.  R.    76.630. 
 137  NCTA  Reply  Comments  at  4-  7. 
 138  EFF  Comments  at  19-  21. 
 139  See  Authorization  and  Use  of  Software  Defined  Radios,  16  FCC  Rcd  17373  (2001). 
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 seek  further  comment  on  the  interplay  between  a  flag  redistribution  control  system  and  the  development  of  open  source  software  applications,  including  software  demodulators,  for  digital 
 broadcast  television. 
 61.  This  Further  Notice  of  Proposed  Rulemaking  also  seeks  comment  on  whether  standards  and  procedures  should  be  adopted  for  the  approval  of  new  content  protection  and 


 recording  technologies  to  be  used  with  device  outputs  on  Demodulator  Products.  If  so,  we  seek  comment  on  the  various  types  of  content  protection  technologies  that  should  be  considered  as  a 
 part  of  this  process,  including  but  not  limited  to  digital  rights  management,  wireless  and  encryption-  based  technologies.  We  recognize  that  similar  issues  have  been  raised  with  respect  to 
 digital  cable  ready  DTV  receivers  in  the  Second  Further  Notice  of  Proposed  Rulemaking  in  the  Commissions  ongoing  Plug  and  Play  proceeding.  140  We  seek  comment  on  whether  a  unified 
 regime  should  be  employed  in  both  instances. 
 62.  With  respect  to  the  particular  standards  and  procedures  to  be  employed,  we  seek  comment  on  whether  objective  criteria  should  be  used  to  evaluate  new  content  protection  and 


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


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


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


 140  See  Digital  Cable  Compatibility  Order  and  FNPRM  at  Section  VII. 
 141  Letter  from  Paula  H.  Boyd,  Microsoft  Corporation,  and  David  Isaacs,  Hewlett-  Packard  Corp.,  to 
 Marlene  Dortch,  Secretary,  FCC  (Aug.  8,  2003).  142 
 See  e.  g.,  Phillips  Comments  at  22-  23;  IT  Coalition  Comments  at  20-  23;  Letter  from  James  Burger,  Dow,  Lohnes  &  Albertson,  to  Marlene  Dortch,  Secretary,  FCC  (Oct.  2,  2003);  Letter  from  Richard  A.  Beutel, 


 Dell,  to  Marlene  Dortch,  Secretary,  FCC  (Oct.  22,  2003).  143 
 See  e.  g.,  BPDG  Final  Report  at  14. 
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 and  revocation  determinations. 
 65.  As  to  the  issue  of  how  approved  content  protection  and  recording  technologies  may  be  revoked  should  their  security  be  compromised,  we  seek  comment  on  the  appropriate 


 standard  for  revocation.  Specifically,  we  seek  comment  on  whether  revocation  is  appropriate  where  a  content  protection  or  recording  technology  is  perceived  to  be  insecure,  or  whether  the 
 appropriate  standard  is  where  security  has  been  compromised  in  a  significant,  widespread  manner.  Once  a  content  protection  or  recording  technology  has  been  revoked,  we  seek  comment 
 on  the  appropriate  mechanism  by  which  revocation  should  be  effectuated.  For  example,  should  revoked  content  protection  or  recording  technologies  be  eliminated  on  a  going-  forward  basis, 
 while  preserving  their  functionality  for  existing  devices?  We  also  seek  comment  on  whether  there  are  technological  or  other  means  of  revoking  content  protection  or  recording  technologies 
 while  preserving  the  functionality  of  consumer  electronics  devices. 
 VII.  PROCEDURAL  MATTERS 
 66.  Authority.  This  Further  Notice  of  Proposed  Rulemaking  is  issued  pursuant  to  authority  contained  in    Sections  1,  2,  4(  i)  and  (j),  303,  307,  309(  j),  336,  337,  396(  k),  403,  601, 


 614(  b)  and  624a  of  the  Communications  Act  of  1934,  as  amended. 
 67.  Ex  Parte  Rules    Non-  Restricted  Proceeding.  This  is  a  non-  restricted  notice  and  comment  rulemaking  proceeding.  Ex  parte  presentations  are  permitted,  except  during  the 


 Sunshine  Agenda  period,  provided  that  they  are  disclosed  as  provided  in  the  Commissions  Rules.  See  generally  47  C.  F.  R.    1.1202,  1.1203,  and  1.1206(  a). 


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


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


 70.  Comments  filed  through  the  ECFS  can  be  sent  as  an  electronic  file  via  the  Internet  to  <http://  www.  fcc.  gov/  e-  file/  ecfs.  html>.  Generally,  only  one  copy  of  an  electronic 
 submission  must  be  filed.  If  multiple  docket  or  rulemaking  numbers  appear  in  the  caption  of  this  proceeding,  however,  commenters  must  transmit  one  electronic  copy  of  the  comments  to  each 
 docket  or  rulemaking  number  referenced  in  the  caption.  In  completing  the  transmittal  screen,  commenters  should  include  their  full  name,  U.  S.  Postal  Service  mailing  address,  and  the 
 applicable  docket  or  rulemaking  number.  Parties  may  also  submit  an  electronic  comment  by  Internet  e-  mail.  To  get  filing  instructions  for  e-  mail  comments,  commenters  should  send  an  e-mail 
 to  ecfs@  fcc.  gov,  and  should  include  the  following  words  in  the  body  of  the  message,  "get  form  <your  e-  mail  address>."  A  sample  form  and  directions  will  be  sent  in  reply.  Parties  who 
 choose  to  file  by  paper  must  file  an  original  and  four  copies  of  each  filing.  If  more  than  one  docket  or  rulemaking  number  appear  in  the  caption  of  this  proceeding,  commenters  must  submit 
 two  additional  copies  for  each  additional  docket  or  rulemaking  number.  Filings  can  be  sent  by 
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 hand  or  messenger  delivery,  by  commercial  overnight  courier,  or  by  first-  class  or  overnight  U.  S.  Postal  Service  mail  (although  we  continue  to  experience  delays  in  receiving  U.  S.  Postal  Service 
 mail).  The  Commission's  contractor,  Vistronix,  Inc.,  will  receive  hand-  delivered  or  messenger-delivered  paper  filings  for  the  Commission's  Secretary  at  236  Massachusetts  Avenue,  N.  E.,  Suite 
 110,  Washington,  D.  C.  20002.  The  filing  hours  at  this  location  are  8:  00  a.  m.  to  7:  00  p.  m.  All  hand  deliveries  must  be  held  together  with  rubber  bands  or  fasteners.  Any  envelopes  must  be 
 disposed  of  before  entering  the  building.  Commercial  overnight  mail  (other  than  U.  S.  Postal  Service  Express  Mail  and  Priority  Mail)  must  be  sent  to  9300  East  Hampton  Drive,  Capitol 
 Heights,  MD  20743.  U.  S.  Postal  Service  first-  class  mail,  Express  Mail,  and  Priority  Mail  should  be  addressed  to  445  12th  Street,  SW,  Washington,  D.  C.  20554.  All  filings  must  be  addressed  to 
 the  Commission's  Secretary,  Office  of  the  Secretary,  Federal  Communications  Commission. 
 71.  Paperwork  Reduction  Act  of  1995  Analysis.  The  Report  and  Order  portion  of  this  Report  and  Order  and  Further  Notice  of  Proposed  Rulemaking  contains  new  or  modified 


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


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


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


 VIII.  ORDERING  CLAUSES 
 74.  IT  IS  ORDERED  that  pursuant  to  the  authority  contained  in  Sections  1,  2,  4(  i)  and  (j),  303,  307,  309(  j),  336,  337,  396(  k),  403,  601,  614(  b)  and  624a  of  the  Communications  Act 


 of  1934,  47  U.  S.  C    151,  152,  154(  i)  and  (j),  303,  307,  309(  j),  336,  337,  396(  k),  403,  521, 
 144  See  5  U.  S.  C.    604. 
 145  Id.    603. 
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 534(  b)  and  544a  that  the  Commissions  rules  ARE  HEREBY  AMENDED  as  set  forth  in  Appendix  B,  and  shall  become  effective  30  days  after  publication  in  the  Federal  Register  except 
 that  rule  sections  73.9002  and  73.9008  that  contain  information  collection  requirements  under  the  PRA  are  not  effective  until  approved  by  OMB.  The  FCC  will  publish  a  document  in  the  Federal 
 Register  announcing  the  effective  date  for  those  sections. 
 75.  IT  IS  FURTHER  ORDERED  that  the  Commissions  Consumer  and  Governmental  Affairs  Bureau,  Reference  Information  Center,  SHALL  SEND  a  copy  of  this 


 Report  and  Order  and  Further  Notice  of  Proposed  Rulemaking  including  the  Final  Regulatory  Flexibility  Analysis  to  the  Chief  Counsel  for  Advocacy  of  the  Small  Business  Administration. 


 FEDERAL  COMMUNICATIONS  COMMISSION 
 Marlene  H.  Dortch  Secretary 
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 APPENDIX  A 
 List  of  Leading  Commenters 
 American  Conservative  Union  American  Foundation  for  the  Blind 
 Arizona  Consumer  Council  et  al.  Banks,  LIN,  Midwest  Television  et  al. 
 CBS  Television  Affiliates  Assoc.  Center  for  Democracy  and  Technology 
 Computer  &  Communications  Industry  Assoc.  Consumer  Electronics  Assoc. 
 Digimarc  Corp.  &  Macrovision  Corp.  Digital  Transmission  Licensing  Administrator,  LLC 
 Directors  Guild  of  America  DirecTV,  Inc. 
 Electronic  Frontier  Foundation  Electronic  Privacy  Information  Center 
 Free  Software  Foundation  Home  Recording  Rights  Coalition 
 Information  Technology  Assoc.  of  America  Information  Technology  Industry  Council 
 Internet  Commerce  Coaliition  &  United  States  Internet  Service  Provider  Assoc.  IT  Coalition  (Business  Software  Alliance  &  Computer  Systems  Policy  Project) 
 Law  Office  of  Adam  Hill  Library  Associations 
 Motion  Picture  Association  of  America  et  al.  Motorola 
 National  Broadcasting  Company  National  Cable  &  Telecommunications  Assoc. 
 National  Football  League  National  Music  Publishers  Association,  et  al. 
 NBC  Television  Affiliates  Assoc.  New  Yorkers  for  Fair  Use 
 North  American  Broadcasters  Assoc.  Philips  Electronics  North  America 
 Public  Knowledge  and  Consumers  Union  Thomson  Inc. 
 TiVo  Inc.  Veridian  Corporation 
 Verizon  Viacom 
 Walt  Disney  Company  &  ABC  Television  Network 
 List  of  Leading  Reply  Commenters 
 American  Antitrust  Institute  American  Society  of  Composers,  Authors  &  Publishers  &  Broadcast  Music,  Inc. 
 Center  for  Public  Broadcasting  et  al. 
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 Consumer  Electronics  Assoc.  Corporation  for  National  Research  Initiatives 
 Digital  Transmission  Licensing  Administrator,  LLC  DirecTV,  Inc. 
 Electronic  Frontier  Foundation  Home  Recording  Rights  Coalition 
 IBM  Information  Technology  Association  of  America 
 International  Association  of  Broadcast  Monitors  IT  Coalition  (Business  Software  Alliance  &  Computer  Systems  Policy  Project) 
 Motion  Picture  Association  of  America  et  al.  National  Cable  &  Telecommunications  Assoc. 
 National  Football  League  et  al.  National  Music  Publishers  Association,  et  al. 
 New  Yorkers  for  Fair  Use  Philips  Electronics  North  America  Corporation 
 Public  Knowledge  and  Consumers  Union  Recording  Industry  Association  of  America 
 Thomson,  Inc.  Veridian  Corporation 
 Worldcom,  Inc. 
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 APPENDIX  B 
 Part  73  of  the  Code  of  Federal  Regulations  is  amended  as  follows: 
 PART  73    RADIO  BROADCAST  SERVICES 
 1.  The  authority  for  Part  73  continues  to  read  as  follows: 
 AUTHORITY:  47  U.  S.  C.  154,  303,  334  and  336. 
 2.  Add  subpart  L  to  read  as  follows: 
 Subpart  L    Digital  Broadcast  Television  Redistribution  Control 
 Sec.  73.8000  Incorporations  by  Reference. 


 73.8000  Incorporations  by  Reference. 
 (a)  The  materials  listed  in  this  section  are  incorporated  by  reference  in  this  part.  These  incorporations  by  reference  were  approved  by  the  Director  of  the  Federal  Register 
 in  accordance  with  5  U.  S.  C.  552(  a)  and  1  CFR  part  51.  These  materials  are  incorporated  as  they  exist  on  the  date  of  the  approval,  and  notice  of  any  change  in  these  materials  will 
 be  published  in  the  Federal  Register.  The  materials  are  available  for  purchase  at  the  corresponding  addresses  noted  below,  and  all  are  available  for  inspection  at  the  Office  of 
 the  Federal  Register,  800  North  Capitol  Street,  NW,  suite  700,  Washington,  DC,  at  the  Reference  Information  Center,  Federal  Communications  Commission,  445  12th.  St.,  SW, 
 Room  CY-  A257,  Washington,  DC  20554. 
 (b)  The  following  materials  are  available  for  purchase  from  at  least  one  of  the  following  addresses:  Global  Engineering  Documents,  15  Inverness  Way  East, 
 Englewood,  CO  80112  or  at  http://  global.  ihs.  com;  or  American  National  Standards  Institute,  25  West  43rd  Street,  4th  Floor,  New  York,  NY  10036  or  at 
 http://  webstore.  ansi.  org/  ansidocstore/  default.  asp. 
 (1)  ATSC  A/  52:  ATSC  Standard  Digital  Television  Audio  Compression  (AC-3),  1995,  IBR  approved  for    73.  682. 


 (2)  ATSC  A/  53:  ATSC  Digital  Television  Standard,  1995,  IBR  approved  for    73.682,  except  for  section  5.1.2  of  Annex  A,  and  the  phrase  see  Table  3  in  section 
 5.1.1.  Table  2  and  section  5.  1.2  Table  4. 
 (3)  ATSC  A/  65B:  ATSC  Program  and  System  Information  Protocol  for  Terrestrial  Broadcast  and  Cable,  2003,  IBR  approved  for    73.9000-  73.9001. 


 (4)  International  Standard  ISO/  IEC  13818-  1:  2000(  E);  Information  Technology    Generic  Coding  of  Moving  Pictures  and  Associated  Audio  Information:  Systems, 
 2000,  IBR  approved  for    73.9000. 
 *  *  *  *  * 
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 3.  Add  subpart  M  to  read  as  follows: 
 Subpart  M    Digital  Broadcast  Television  Redistribution  Control 
 Sec.  73.9000  Definitions. 
 73.9001  Redistribution  Control  of  Digital  Television  Broadcasts.  73.9002  Sale  or  Distribution  of  Demodulators,  Covered  Demodulator  Products,  and 
 Peripheral  TSP  Products.  73.9003  Compliance  Requirements  for  Covered  Demodulator  Products:  Unscreened 
 Content.  73.9004  Compliance  Requirements  for  Covered  Demodulator  Products:  Marked  Content. 
 73.9005  Compliance  Requirements  for  Covered  Demodulator  Products:  Audio.  73.9006  Add-  in  Covered  Demodulator  Products. 
 73.9007  Robustness  Requirements  for  Covered  Demodulator  Products.  73.9008  Interim  Approval  of  Authorized  Digital  Output  Protection  Technologies  and 
 Authorized  Recording  Methods.  73.9009  Manufacture  for  Exportation. 


 73.9000  Definitions. 
 (a)  "Authorized  Digital  Output  Protection  Technology"  means  a  technology  approved  pursuant  to  the  procedures  in    73.9008. 


 (b)  Authorized  Recording  Method  means  a  recording  method  approved  pursuant  to  the  procedures  in    73.  9008. 
 (c)  Bona  Fide  Reseller  means  a  party  regularly  engaged,  or  about  to  become  regularly  engaged,  in  the  lawful  commercial  enterprise  of  selling,  reselling, 
 manufacturing,  or  assembling  Demodulators,  or  products  incorporating  Demodulators,  in  compliance  with  this  subpart. 


 (d)  Broadcast  Flag  means  the  Redistribution  Control  descriptor  (rc_  descriptor())  described  in  ATSC  Standard  A/  65B:  Program  and  System  Information 
 Protocol  for  Terrestrial  Broadcast  and  Cable,  (incorporated  by  reference,  see    73.8000). 
 (e)  Computer  Product  means  a  product  that  is  designed  for  or  permits  the  end  user  to  install  a  wide  variety  of  commercially  available  software  applications  thereon, 
 such  as  a  personal  computer,  handheld  Personal  Digital  Assistant  and  the  like,  and  further  includes  a  subsystem  of  such  a  product,  such  as  a  graphics  card. 


 (f)  Covered  Demodulator  Product  means  a  product  that  is  required  under    73.9002(  a)(  1)  or  73.9002(  b)(  1)  to  comply  with  the  Demodulator  Compliance 
 Requirements,  and  to  be  manufactured  in  accordance  with  the  Demodulator  Robustness  Requirements. 


 (g)  Demodulator  means  a  component,  or  set  of  components,  that  is  designed  to  perform  the  function  of  8-  VSB,  16-  VSB,  64-  QAM  or  256-  QAM  demodulation  and 
 thereby  produce  a  data  stream  for  the  purpose  of  digital  television  reception. 
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 (h)  Demodulator  Compliance  Requirements  means  the  requirements  set  out  in    73.  9003  through  73.9006. 
 (i)  Demodulator  Robustness  Requirements  means  the  requirements  set  out  in    73.9007. 
 (j)  Peripheral  TSP  Product  means  a  product  that  is  capable  of  accessing  in  usable  form  Unscreened  Content  or  Marked  Content  passed  to  such  product  via  a  Robust 
 Method  where  the  manufacturer  of  such  product  has  committed  in  writing  in  accordance  with    73.9002(  c)  that  such  product  will  comply  with  the  Demodulator  Compliance 
 Requirements  and  be  manufactured  in  accordance  with  the  Demodulator  Robustness  Requirements. 


 (k)  EIT  means  Event  Information  Table  as  defined  in  ATSC  Standard  A/  65B:  Program  and  System  Information  Protocol  for  Terrestrial  Broadcast  and  Cable 
 (incorporated  by  reference,  see    73.8000). 
 (l)  Marked  Content  means,  with  respect  to  a  Covered  Demodulator  Product,  Unencrypted  Digital  Terrestrial  Broadcast  Content  that  such  product  has  (1)  received  and 
 demodulated  and  for  which  such  product  has  inspected  either  the  EIT  or  PMT  and  determined  the  Broadcast  Flag  to  be  present,  or  (2)  where  such  product  is  a  Peripheral 
 TSP  Product,  received  via  a  Robust  Method  and  accessed  in  usable  form,  and  for  which  such  product  either  inspected  the  EIT  or  PMT  and  determined  the  Broadcast  Flag  to  be 
 present  or  determined  through  information  robustly  conveyed  with  such  content  that  another  Covered  Demodulator  Product  had  previously  so  screened  such  content  and 
 determined  the  Broadcast  Flag  to  be  present;  provided,  however,  that,  with  respect  to  a  Covered  Demodulator  Product,  "Marked  Content"  shall  not  include  content  that  has  been 
 passed  from  such  product  pursuant  to    73.9004(  a)(  1),  73.9004(  a)(  2),  73.9004(  a)(  3),  73.9004(  a)(  5),  73.9004(  a)(  6),  or  73.  9006(  b). 


 (m)  PMT  means  Program  Map  Table  as  defined  in  International  Standard  ISO/  IEC  13818-  1:  2000(  E):  Information  Technology    Generic  Coding  of  Moving 
 Pictures  and  Associated  Audio  Information:  Systems  (incorporated  by  reference,  see    73.8000). 


 (n)  Robust  Method  means,  with  respect  to  the  passing  of  Unscreened  Content  or  Marked  Content  from  one  product  to  another,  a  content  protection  method  that 
 complies  with    73.  9007. 
 (o)  Transitory  Image  means  data  that  has  been  stored  temporarily  for  the  sole  purpose  of  enabling  a  function  not  prohibited  by  this  subpart  but  that  (1)  does  not  persist 
 materially  after  such  function  has  been  performed  and  (2)  is  not  stored  in  a  way  that  permits  copying  or  storing  of  such  data  for  other  purposes. 


 (p)  Unencrypted  Digital  Terrestrial  Broadcast  Content  means  audiovisual  content  contained  in  the  signal  broadcast  by  a  digital  television  station  without  encrypting 
 or  otherwise  making  the  content  available  through  a  technical  means  of  conditional  access,  and  includes  such  content  when  retransmitted  in  unencrypted  digital  form. 
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 (q)  Unscreened  Content  means,  with  respect  to  a  Covered  Demodulator  Product,  Unencrypted  Digital  Terrestrial  Broadcast  Content  that  such  product  either  (1) 
 received  and  demodulated  and  for  which  such  product  has  inspected  neither  the  EIT  nor  the  PMT  for  the  Broadcast  Flag  or  (2)  where  such  product  is  a  Peripheral  TSP  Product, 
 received  via  a  Robust  Method  and  accessed  in  usable  form,  and  for  which  such  product  has  inspected  neither  the  EIT  nor  the  PMT  for  the  Broadcast  Flag  and  has  not  determined 
 through  information  robustly  conveyed  with  such  content  another  Covered  Demodulator  Product  had  previously  so  screened  such  content  and  determined  the  Broadcast  Flag  to  be 
 present;  provided,  however,  that,  with  respect  to  a  Covered  Demodulator  Product,  Unscreened  Content  shall  not  include  content  that  has  been  passed  from  such  product 
 pursuant  to    73.9003(  a)(  1),  73.  9003(  a)(  2),  73.9003(  a)(  3),  73.9003(  a)(  4),  73.9003(  a)(  6),  73.9003(  a)(  7),  or  73.  9006(  b). 


 (r)  User  Accessible  Bus  means  a  data  bus  that  is  designed  for  end  user  upgrades  or  access,  such  as  an  implementation  of  a  smartcard  interface,  PCMCIA, 
 Cardbus,  or  PCI  that  has  standard  sockets  or  otherwise  readily  facilitates  end  user  access.  A  User  Accessible  Bus  does  not  include  memory  buses,  CPU  buses,  or  similar  portions 
 of  a  device's  internal  architecture  that  do  not  permit  access  to  content  in  a  form  usable  by  end  users. 


 73.9001  Redistribution  Control  of  Digital  Television  Broadcasts. 
 Licensees  of  TV  broadcast  stations  may  utilize  the  Redistribution  Control  descriptor  described  in  ATSC  Standard  A/  65B:  Program  and  System  Information 
 Protocol  for  Terrestrial  Broadcast  and  Cable,  (incorporated  by  reference,  see    73.8000)  provided  they  do  not  transmit  the  optional  additional  redistribution  control  information. 


 73.9002  Sale  or  Distribution  of  Demodulators,  Covered  Demodulator  Products,  and  Peripheral  TSP  Products. 
 (a)  Demodulators.  No  party  that  manufactures  or  imports  a  Demodulator  shall  sell  or  distribute  in  interstate  commerce  such  Demodulator  unless: 
 (1)  at  the  time  of  such  sale  or  distribution  such  Demodulator  is  itself,  or  is  incorporated  into,  a  product  that  complies  with  the  Demodulator  Compliance 
 Requirements  and  was  manufactured  in  accordance  with  the  Demodulator  Robustness  Requirements;  or 


 (2)  such  sale  or  distribution  is  to  a  party  that  has  committed  in  writing  pursuant  to  paragraph  (d)  of  this  section  not  to  sell  or  distribute  Demodulators  other  than  in 
 accordance  with  paragraphs  (a)(  1)  or  (a)(  2)  of  this  section. 
 (b)  Covered  Demodulator  Products.  No  party  shall  sell  or  distribute  in  interstate  commerce  a  Covered  Demodulator  Product  that  does  not  comply  with  the  Demodulator 
 Compliance  Requirements  and  Demodulator  Robustness  Requirements.  The  requirements  of  this  paragraph  shall  not  apply  to  the  sale  or  resale  of  a  product  that  was  manufactured 
 prior  to  the  effective  date  of  this  subpart  or  that  initially  was  sold  or  distributed  in  compliance  with  this  subpart. 


 (c)  Peripheral  TSP  Products.  No  party  that  manufactures  or  imports  a  Peripheral 
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 TSP  Product  shall  sell  or  distribute  such  Peripheral  TSP  Product  in  interstate  commerce  unless,  at  the  time  of  such  sale  or  distribution,  such  Peripheral  TSP  Product  complies 
 with  the  Demodulator  Compliance  Requirements  and  was  manufactured  in  accordance  with  the  Demodulator  Robustness  Requirements.  The  requirements  of  this  paragraph 
 shall  not  apply  to  the  sale  or  resale  of  a  product  that  was  manufactured  prior  to  the  effective  date  of  this  subpart  or  that  was  initially  was  sold  or  distributed  in  compliance 
 with  this  subpart. 
 (d)  Written  Commitments. 
 (1)  A  written  commitment  to  allow  sale  or  distribution  of  Demodulators  under  paragraph  (a)(  2)  of  this  section,  or  for  a  Peripheral  TSP  Product,  shall  be  submitted  to  the 
 Federal  Communications  Commission,  Chief,  Media  Bureau,  Attn:  Broadcast  Flag  Written  Commitment,  445  12  th  Street,  SW,  Washington,  DC,  20554. 


 (2)  The  information  to  be  provided  by  a  party  filing  a  written  commitment  to  allow  sale  or  distribution  of  Demodulators  under  paragraph  (a)(  2)  of  this  section  shall 
 include  a  statement  that  one  of  the  following  conditions  is  true: 
 (i)  the  party  is  a  Bona  Fide  Reseller; 
 (ii)  the  party  is  a  licensed  digital  television  broadcaster;  or 
 (iii)  the  party  is  a  multichannel  video  programming  distributor,  or  other  party  engaged,  or  about  to  become  engaged,  in  the  lawful  retransmission  of  Unencrypted 
 Digital  Terrestrial  Broadcast  Content  pursuant  to    76.1909  of  this  chapter. 
 (3)  The  information  to  be  provided  by  a  party  filing  a  written  commitment  for  a  Peripheral  TSP  Product  shall  include  statements  that  that  the  party  is  engaged,  or  about  to 
 become  engaged,  in  the  lawful  commercial  enterprise  of  manufacturing  such  Peripheral  TSP  Product,  and  that  such  product  will  comply  with  the  Demodulator  Compliance 
 Requirements  and  be  manufactured  in  accordance  with  the  Demodulator  Robustness  Requirements. 


 (4)  It  shall  be  a  violation  of  this  subpart,  enforceable  by  the  Commission,  for  any  person  that  has  filed  a  written  commitment  pursuant  to  paragraph  (d)  of  this  section  to: 
 (i)  in  the  case  such  commitment  to  allow  sale  or  distribution  of  Demodulators  under  paragraph  (a)(  2)  of  this  section,  sell  or  distribute  the  Demodulator  other  than  in 
 accordance  with  paragraphs  (a)(  1)  or  (a)(  2)  of  this  section;  or 
 (ii)  in  the  case  of  such  commitment  for  a  Peripheral  TSP  Product,  sell  or  distribute  the  Peripheral  TSP  Product  other  than  in  compliance  with  paragraph  (c)  of  this 
 section. 
 (5)  Written  commitments  filed  pursuant  to  paragraph  (d)  of  this  section  will  be  publicly  available  in  accordance  with    0.441  through  0.470  of  this  chapter. 


 (e)  The  requirements  of  this  section  shall  become  applicable  on  July  1,  2005. 
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   73.9003  Compliance  Requirements  for  Covered  Demodulator  Products:  Unscreened  Content. 
 (a)  A  Covered  Demodulator  Product  shall  not  pass,  or  direct  to  be  passed,  Unscreened  Content  to  any  output  except: 
 (1)  to  an  analog  output; 
 (2)  to  an  8-  VSB,  16-  VSB,  64-  QAM  or  256-  QAM  modulated  output,  provided  that  the  Broadcast  Flag  is  retained  in  the  both  the  EIT  and  PMT; 


 (3)  to  a  digital  output  protected  by  an  Authorized  Digital  Output  Protection  Technology  authorized  for  use  with  Unscreened  Content,  in  accordance  with  any 
 applicable  obligations  established  as  a  part  of  its  approval  pursuant  to    73.9008; 
 (4)  where  the  stream  containing  such  content  has  not  been  altered  following  demodulation  and  such  Covered  Demodulator  Product  outputs,  or  directs  to  be  output, 
 such  content  to  a  Peripheral  TSP  Product  solely  within  the  home  or  other,  similar  local  environment,  using  a  Robust  Method; 


 (5)  where  such  Covered  Demodulator  Product  outputs,  or  directs  to  be  output,  such  content  to  another  product  and  such  Covered  Demodulator  Product  exercises  sole 
 control  (such  as  by  using  a  cryptographic  protocol),  in  compliance  with  the  Demodulator  Robustness  Requirements,  over  the  access  to  such  content  in  usable  form  in  such  other 
 product; 
 (6)  where  such  Covered  Demodulator  Product  outputs,  or  directs  to  be  output,  such  content  for  the  purpose  of  making  a  recording  of  such  content  pursuant  to  paragraph 
 (b)(  2)  of  this  section,  where  such  content  is  protected  by  the  corresponding  recording  method;  or 


 (7)  where  such  Covered  Demodulator  Product  is  incorporated  into  a  Computer  Product  and  passes,  or  directs  to  be  passed,  such  content  to  an  unprotected  output 
 operating  in  a  mode  compatible  with  the  Digital  Visual  Interface  (DVI)  Rev.  1.0  Specification  as  an  image  having  the  visual  equivalent  of  no  more  than  350,  000  pixels 
 per  frame  (e.  g.  an  image  with  resolution  of  720  x  480  pixels  for  a  4:  3  (nonsquare  pixel)  aspect  ratio),  and  30  frames  per  second.  Such  an  image  may  be  attained  by  reducing 
 resolution,  such  as  by  discarding,  dithering  or  averaging  pixels  to  obtain  the  specified  value,  and  can  be  displayed  using  video  processing  techniques  such  as  line  doubling  or 
 sharpening  to  improve  the  perceived  quality  of  the  image. 
 (b)  A  Covered  Demodulator  Product  shall  not  record  or  cause  the  recording  of  Unscreened  Content  in  digital  form  unless  such  recording  is  made  using  one  of  the 
 following  methods: 
 (1)  a  method  that  effectively  and  uniquely  associates  such  recording  with  a  single  Covered  Demodulator  Product  (using  a  cryptographic  protocol  or  other  effective  means) 
 so  that  such  recording  cannot  be  accessed  in  usable  form  by  another  product  except  where  the  content  of  such  recording  is  passed  to  another  product  as  permitted  under  this 
 subpart;  or 
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 (2)  an  Authorized  Recording  Method  authorized  for  use  with  Unscreened  Content  in  accordance  with  any  applicable  obligations  established  as  a  part  of  its 
 approval  pursuant  to    73.9008  (provided  that  for  recordings  made  on  removable  media,  only  Authorized  Recording  Methods  expressly  approved  pursuant  to    73.9008  for  use  in 
 connection  with  removable  media  may  be  used). 
 (c)  Paragraph  (b)  of  this  section  does  not  impose  restrictions  regarding  the  storage  of  Unscreened  Content  as  a  Transitory  Image. 


 (d)  The  requirements  of  this  section  shall  become  applicable  on  July  1,  2005. 
   73.9004  Compliance  Requirements  for  Covered  Demodulator  Products:  Marked  Content. 


 (a)  A  Covered  Demodulator  Product  shall  not  pass,  or  direct  to  be  passed,  Marked  Content  to  any  output  except 
 (1)  to  an  analog  output; 
 (2)  to  an  8-  VSB,  16-  VSB,  64-  QAM  or  256-  QAM  modulated  output,  provided  that  the  Broadcast  Flag  is  retained  in  the  both  the  EIT  and  PMT; 


 (3)  to  a  digital  output  protected  by  an  Authorized  Digital  Output  Protection  Technology,  in  accordance  with  any  applicable  obligations  established  as  a  part  of  its 
 approval  pursuant  to    73.9008; 
 (4)  where  such  Covered  Demodulator  Product  outputs,  or  directs  to  be  output,  such  content  to  another  product  and  such  Covered  Demodulator  Product  exercises  sole 
 control  (such  as  by  using  a  cryptographic  protocol),  in  compliance  with  the  Demodulator  Robustness  Requirements,  over  the  access  to  such  content  in  usable  form  in  such  other 
 product; 
 (5)  where  such  Covered  Demodulator  Product  outputs,  or  directs  to  be  output,  such  content  for  the  purpose  of  making  a  recording  of  such  content  pursuant  to  paragraph 
 (b)(  2)  of  this  section,  where  such  content  is  protected  by  the  corresponding  recording  method;  or 


 (6)  where  such  Covered  Demodulator  Product  is  incorporated  into  a  Computer  Product  and  passes,  or  directs  to  be  passed,  such  content  to  an  unprotected  output 
 operating  in  a  mode  compatible  with  the  Digital  Visual  Interface  (DVI)  Rev.  1.0  Specification  as  an  image  having  the  visual  equivalent  of  no  more  than  350,  000  pixels 
 per  frame  (e.  g.,  an  image  with  resolution  of  720  x  480  pixels  for  a  4:  3  (nonsquare  pixel)  aspect  ratio),  and  30  frames  per  second.  Such  an  image  may  be  attained  by  reducing 
 resolution,  such  as  by  discarding,  dithering  or  averaging  pixels  to  obtain  the  specified  value,  and  can  be  displayed  using  video  processing  techniques  such  as  line  doubling  or 
 sharpening  to  improve  the  perceived  quality  of  the  image. 
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 (b)  A  Covered  Demodulator  Product  shall  not  record  or  cause  the  recording  of  Marked  Content  in  digital  form  unless  such  recording  is  made  using  one  of  the  following 
 methods: 
 (1)  a  method  that  effectively  and  uniquely  associates  such  recording  with  a  single  Covered  Demodulator  Product  (using  a  cryptographic  protocol  or  other  effective  means) 
 so  that  such  recording  cannot  be  accessed  in  usable  form  by  another  product  except  where  the  content  of  such  recording  is  passed  to  another  product  as  permitted  under  this 
 subpart  or 
 (2)  an  Authorized  Recording  Method  in  accordance  with  any  applicable  obligations  established  as  a  part  of  its  approval  pursuant  to    73.9008  (provided  that  for 
 recordings  made  on  removable  media,  only  Authorized  Recording  Methods  expressly  approved  pursuant  to    73.9008  for  use  in  connection  with  removable  media  may  be 
 used). 
 (c)  Paragraph  (b)  of  this  section  does  not  impose  restrictions  regarding  the  storage  of  Marked  Content  as  a  Transitory  Image. 


 (d)  The  requirements  of  this  section  shall  become  applicable  on  July  1,  2005. 
   73.9005  Compliance  Requirements  for  Covered  Demodulator  Products:  Audio. 
 Except  as  otherwise  provided  in    73.  9003(  a)  or  73.  9004(  a),  Covered  Demodulator  Products  shall  not  output  the  audio  portions  of  Unscreened  Content  or  of 
 Marked  Content  in  digital  form  except  in  compressed  audio  format  (such  as  AC3)  or  in  Linear  PCM  format  in  which  the  transmitted  information  is  sampled  at  no  more  than  48 
 kHz  and  no  more  than  16  bits/  sample.  The  requirements  of  this  section  shall  become  applicable  on  July  1,  2005. 


   73.9006  Add-  in  Covered  Demodulator  Products. 
 Where  a  Covered  Demodulator  Product  passes  Unscreened  Content  or  Marked  Content  to  another  product,  other  than  where  such  Covered  Demodulator  Product  passes, 
 or  directs  such  content  to  be  passed  to  an  output  (e.  g.,  where  a  demodulator  add-  in  card  in  a  personal  computer  passes  such  content  to  an  associated  software  application  installed  in 
 the  same  computer),  it  shall  pass  such  content: 
 (a)  using  a  Robust  Method;  or 
 (b)  protected  by  an  Authorized  Digital  Output  Protection  Technology  authorized  for  such  content  in  accordance  with  any  applicable  obligations  established  as  a  part  of  its 
 approval  pursuant  to    73.9008.  Neither  Unscreened  Content  nor  Marked  Content  may  be  so  passed  in  unencrypted,  compressed  form  via  a  User  Accessible  Bus. 


 The  requirements  of  this  section  shall  become  applicable  on  July  1,  2005. 
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   73.9007  Robustness  Requirements  for  Covered  Demodulator  Products. 
 The  content  protection  requirements  set  forth  in  the  Demodulator  Compliance  Requirements  shall  be  implemented  in  a  reasonable  method  so  that  they  cannot  be 
 defeated  or  circumvented  merely  by  an  ordinary  user  using  generally-  available  tools  or  equipment.  The  requirements  of  this  section  shall  become  applicable  on  July  1,  2005. 


 Note  to  73.  9007.  Generally-  available  tools  or  equipment  means  tools  or  equipment  that  are  widely  available  at  a  reasonable  price,  including  but  not  limited  to, 
 screwdrivers,  jumpers,  clips  and  soldering  irons.  Generally-  available  tools  or  equipment  also  means  specialized  electronic  tools  or  software  tools  that  are  widely  available  at  a 
 reasonable  price,  other  than  devices  or  technologies  that  are  designed  and  made  available  for  the  specific  purpose  of  bypassing  or  circumventing  the  protection  technologies  used 
 to  meet  the  requirements  set  forth  in  this  subpart.  Such  specialized  electronic  tools  or  software  tools  includes,  but  is  not  limited  to,  EEPROM  readers  and  writers,  debuggers  or 
 decompilers. 
   73.9008  Interim  Approval  of  Authorized  Digital  Output  Protection  Technologies  and  Authorized  Recording  Methods. 


 (a)  Certifications  for  Digital  Output  Protection  Technologies  and  Authorized  Recording  Methods.  The  proponent  of  a  specific  digital  output  protection  technology  or 
 recording  method  seeking  approval  for  use  in  Covered  Demodulator  Products  shall  certify  to  the  Commission  that  such  digital  output  protection  technology  or  recording 
 method  is  appropriate  for  use  in  Covered  Demodulator  Products  to  give  effect  to  the  Broadcast  Flag.  Such  certification  shall  include  the  following  information: 


 (1)  a  general  description  of  how  the  digital  output  protection  technology  or  recording  method  works,  including  its  scope  of  redistribution; 
 (2)  a  detailed  analysis  of  the  level  of  protection  the  digital  output  protection  technology  or  recording  method  affords  content; 
 (3)  information  regarding  whether  content  owners,  broadcasters  or  equipment  manufacturers  have  approved  or  licensed  the  digital  output  protection  technology  or 
 recording  method  for  use;  and 
 (4)  if  the  technology  is  to  be  offered  publicly,  a  copy  of  its  licensing  terms,  and  fees,  as  well  as  evidence  demonstrating  that  the  technology  will  be  licensed  on  a 
 reasonable,  non-  discriminatory  basis. 
 If  any  of  the  information  is  proprietary  in  nature,  the  proponent  may  seek  confidential  treatment  of  the  proprietary  portion  of  their  certification  pursuant  to    0.  459  of  this 
 chapter. 
 (b)  Initial  certification  window.  Following  the  effective  date  of  this  subpart,  the  Commission  shall  issue  a  public  notice  commencing  an  initial  certification  window  for 
 digital  output  protection  technologies  or  recording  methods.  Within  thirty  (30)  days  after  the  date  of  this  public  notice,  proponents  of  digital  output  protection  technologies  or 
 recording  methods  may  file  certifications  pursuant  to  paragraph  (a)  of  this  section. 
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 Following  close  of  the  initial  certification  window,  the  Commission  shall  issue  a  public  notice  identifying  the  certifications  received  and  commencing  an  opposition  window. 
 Within  twenty  (20)  days  after  the  date  of  this  public  notice,  oppositions  may  be  filed  with  respect  to  a  certification. 


 (1)  If  no  objections  are  received  in  response  to  a  proponents  certification  within  the  twenty  (20)  day  opposition  window,  the  Commission  shall  expeditiously  issue  a 
 determination  indicating  whether  the  underlying  digital  output  protection  technology  or  recording  method  is  approved  for  use  with  Covered  Demodulator  Products. 


 (2)  If  an  objection  is  raised  within  the  twenty  (20)  day  opposition  window  alleging  that  a  proponents  certification  contains  insufficient  information  to  evaluate  the 
 appropriateness  of  the  underlying  digital  output  protection  technology  or  recording  method  for  use  with  Covered  Demodulator  Products,  the  proponent  may  file  a  reply 
 within  10  days  after  the  close  of  the  twenty  (20)  day  opposition  window.  The  Commission  shall  determine  whether  to  dismiss  the  certification  without  prejudice  or  to 
 undertake  a  full  review  of  the  certifications  merits  pursuant  to  paragraph  (d)  of  this  section. 


 (3)  If  an  objection  is  raised  within  the  twenty  (20)  day  opposition  window  alleging  that  a  proponents  digital  output  protection  technology  or  recording  method  is 
 inappropriate  for  use  with  Covered  Demodulator  Products,  the  Commission  shall  undertake  a  full  review  of  the  associated  certifications  merits  pursuant  to  paragraph  (d) 
 of  this  section.  The  proponent  may  file  a  reply  within  10  days  after  the  close  of  the  twenty  (20)  day  opposition  window.  In  such  cases,  the  Commission  shall  issue  a 
 determination  indicating  whether  the  underlying  digital  output  protection  technology  or  recording  method  is  approved  for  use  with  Covered  Demodulator  Products. 


 (c)  Effect  of  subsequent  certifications.  Where  a  proponent  of  a  digital  output  protection  technology  or  recording  method  files  a  certification  pursuant  to  paragraph  (a) 
 of  this  section  subsequent  to  the  initial  certification  window  described  in  paragraph  (b)  of  this  section: 


 (1)  If  no  objections  are  received  in  response  to  a  proponents  certification  within  twenty  (20)  days  after  the  date  of  public  notice  of  the  filing  of  such  certification,  the 
 Commission  shall  expeditiously  issue  a  determination  indicating  whether  the  underlying  digital  output  protection  technology  or  recording  method  is  approved  for  use  with 
 Covered  Demodulator  Products. 
 (2)  If  an  objection  is  raised  within  twenty  (20)  days  after  the  date  of  public  notice  of  the  filing  of  a  proponents  certification  alleging  that  such  certification  contains 
 insufficient  information  to  evaluate  the  appropriateness  of  the  underlying  digital  output  protection  technology  or  recording  method  for  use  with  Covered  Demodulator  Products, 
 the  proponent  may  file  a  reply  within  10  days  after  the  close  of  the  twenty  (20)  day  opposition  window.  The  Commission  shall  determine  whether  to  dismiss  the  certification 
 without  prejudice  or  to  undertake  a  full  review  of  the  certifications  merits  pursuant  to  paragraph  (d)  of  this  section. 


 (3)  If  an  objection  is  raised  within  twenty  (20)  days  after  the  date  of  public  notice  of  the  filing  of  a  proponents  certification  alleging  that  the  underlying  digital  output 
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 protection  technology  or  recording  method  is  inappropriate  for  use  with  Covered  Demodulator  Products,  the  proponent  may  file  a  reply  within  10  days  after  the  close  of 
 the  twenty  (20)  day  opposition  window.  The  Commission  shall  undertake  a  full  review  of  the  certifications  merits  pursuant  to  paragraph  (d)  of  this  section.  In  such  cases,  the 
 Commission  shall  issue  a  determination  indicating  whether  the  underlying  digital  output  protection  technology  or  recording  method  is  approved  for  use  with  Covered 
 Demodulator  Products. 
 (d)  Commission  determinations.  Where  the  Commission  undertakes  a  full  review  of  the  merits  of  a  certification  for  a  digital  output  protection  technology  or 
 recording  method,  the  Commission  may  consider,  where  applicable,  the  following  factors: 


 (1)  Technological  factors  including  but  not  limited  to  the  level  of  security,  scope  of  redistribution,  authentication,  upgradability,  renewability,  interoperability,  and  the 
 ability  of  the  digital  output  protection  technology  to  revoke  compromised  devices; 
 (2)  The  applicable  licensing  terms,  including  compliance  and  robustness  rules,  change  provisions,  approval  procedures  for  downstream  transmission  and  recording 
 methods,  and  the  relevant  license  fees; 
 (3)  The  extent  to  which  the  digital  output  protection  technology  or  recording  method  accommodates  consumers  use  and  enjoyment  of  Unencrypted  Digital  Terrestrial 
 Broadcast  Content;  and 
 (4)  Any  other  relevant  factors  the  Commission  determines  warrant  consideration. 
 (e)  Revocation  of  Approval. 
 (1)  If  the  security  of  a  content  protection  technology  or  recording  method  approved  for  use  in  Covered  Demodulator  Products  has  been  compromised,  a  person  may 
 seek  revocation  of  such  approval  pursuant  to  76.7  of  this  chapter. 
 (2)  Petitioners  seeking  revocation  of  a  content  protection  technology  or  recording  methods  approval  for  use  in  Covered  Demodulator  Products  shall  articulate  in 
 detail  the  extent  to  which  the  content  protection  or  recording  technology  has  been  compromised  and  demonstrate  why  alternative  measures  are  insufficient  to  address  the 
 breach  in  security. 
   73.9009  Manufacture  for  Exportation. 
 The  requirements  of  this  subpart  do  not  apply  to  Demodulators,  Covered  Demodulator  Products  or  Peripheral  TSP  Products  manufactured  in  the  United  States 
 solely  for  export. 
 ***** 
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 Part  76  of  the  Code  of  Federal  Regulations  is  amended  as  follows: 
 PART  76    MULTICHANNEL  VIDEO  AND  CABLE  TELEVISION  SERVICE 
 4.  The  authority  for  Part  76  continues  to  read  as  follows: 
 AUTHORITY:  47  U.  S.  C.  151,  152,  153,  154,  301,  302,  303,  303a,  307,  308,  309,  312,  317,  325,  338,  339,  503,  521,  522,  531,  532,  533,  534,  535,  536,  537,  543,  544,  544a, 
 545,  548,  549,  552,  554,  556,  558,  560,  531,  571,  572,  and  573. 
 5.  Add  new  76.  1909  to  read  as  follows: 
   76.1909  Redistribution  Control  of  Unencrypted  Digital  Terrestrial  Broadcast  Content. 
 (a)  For  the  purposes  of  this  section,  the  terms  Unencrypted  Digital  Terrestrial  Broadcast  Content,  EIT,  PMT,  Broadcast  Flag,  Covered  Demodulator  Product,  and 
 Marked  Content  shall  have  the  same  meaning  as  set  forth  in    73.  9000  of  this  chapter. 
 (b)  Encrypted  Retransmission.  Where  a  multichannel  video  programming  distributor  retransmits  Unencrypted  Digital  Terrestrial  Broadcast  Content  in  encrypted 
 form,  such  distributor  shall,  upon  demodulation  of  the  8-  VSB,  16-  VSB,  64-  QAM  or  256-  QAM  signal,  inspect  either  the  EIT  or  PMT  for  the  Broadcast  Flag,  and  if  the  Broadcast 
 Flag  is  present: 
 (1)  securely  and  robustly  convey  that  information  to  the  consumer  product  used  to  decrypt  the  distributor's  signal  information,  and 


 (2)  require  that  such  consumer  product,  following  such  decryption,  protect  the  content  of  such  signal  as  if  it  were  a  Covered  Demodulator  Product  receiving  Marked 
 Content. 
 (c)  Unencrypted  Retransmission.  Where  a  multichannel  video  programming  distributor  retransmits  Unencrypted  Digital  Terrestrial  Broadcast  Content  in  unencrypted 
 form,  such  distributor  shall,  upon  demodulation: 
 (1)  preserve  the  Broadcast  Flag,  if  present,  in  both  the  EIT  and  PMT;  and 
 (2)  use  8-  VSB,  16-  VSB,  64-  QAM,  or  256-  QAM  signal  modulation  for  the  retransmission. 


 (d)  Unmarked  Content.  Where  a  multichannel  video  programming  distributor  retransmits  Unencrypted  Digital  Terrestrial  Broadcast  Content  that  is  not  marked  with  the 
 Broadcast  Flag,  the  multichannel  video  programming  distributor  shall  not  Encode  such  content  to  restrict  its  redistribution. 


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 APPENDIX  C  FINAL  REGULATORY  FLEXIBILITY  ANALYSIS 
 As  required  by  the  Regulatory  Flexibility  Act  of  1980,  as  amended  ("  RFA  "  )  1  an  Initial  Regulatory  Flexibility  Analysis  ("  IRFA")  was  incorporated  in  the  Further  Notice  of  Proposed 
 Rulemaking  (  FNPRM)  .2  The  Commission  sought  written  public  comment  on  the  proposals  in  the  FNPRM,  including  comment  on  the  IRFA.  No  comments  were  received  on  the  IRFA.  This 
 present  Final  Regulatory  Flexibility  Analysis  (  FRFA)  conforms  to  the  RFA.  3 
 A.  Need  for,  and  Objectives  of,  the  Report  and  Order.  The  need  for  FCC  regulation  in  this  area  derives  from  a  forthcoming  threat  to  over-  the-  air  broadcast  television  in  so 
 far  as  high  quality  digital  programming  may  be  withheld  from  broadcast  outlets  by  content  owners  fearful  of  the  contents  indiscriminate  redistribution.  The  objective  of  the  final  rules,  as 
 set  forth  in  the  Report  and  Order  portion  of  the  Report  and  Order  and  Further  Notice  of  Proposed  Rulemaking,  is  to  facilitate  the  DTV  transition  by  creating  a  flag-  based  content 
 protection  system  which  will  limit  the  indiscriminate  redistribution  of  digital  broadcast  content  and  thereby  protect  the  continued  flow  of  high  value  content  to  consumers  via  over-  the-  air 
 broadcasting. 
 B.  Summary  of  Significant  Issues  Raised  by  Public  Comments  in  Response  to  the  IRFA.  No  comments  were  received  in  response  to  the  IRFA. 


 C.  Description  and  Estimate  of  the  Number  of  Small  Entities  to  Which  the  Proposed  Rules  Will  Apply  .  The  RFA  directs  the  Commission  to  provide  a  description  of  and, 
 where  feasible,  an  estimate  of  the  number  of  small  entities  that  will  be  affected  by  the  proposed  rules.  4  The  RFA  generally  defines  the  term  "small  entity"  as  having  the  same  meaning  as  the 
 terms  "small  business,"  "small  organization,"  and  "small  governmental  entity.  5  In  addition,  the  term  small  Business  has  the  same  meaning  as  the  term  small  business  concern  under  the 
 Small  Business  Act.  6  A  small  business  concern  is  one  which:  (1)  is  independently  owned  and 
 1  See  5  U.  S.  C.    603.  The  RFA,  see  5  U.  S.  C.    601-  612,  has  been  amended  by  the  Small  Business 
 Regulatory  Enforcement  Fairness  Act  of  1996  (SBREFA),  Pub.  L.  No.  104-  121,  Title  II,  110  Stat.  857  (1996). 


 2  Digital  Broadcast  Copy  Protection,  17  FCC  Rcd  16027  (2002)  (  FNPRM). 
 3  See  5  U.  S.  C.    604. 
 4  5  U.  S.  C.    603(  b)(  3). 
 5  5  U.  S.  C.    601(  3)  (incorporating  by  reference  the  definition  of  small  business  concern  in  15  U.  S.  C.   
 632).  Pursuant  to  the  RFA,  the  statutory  definition  of  a  small  business  applies,  unless  an  agency,  after  consultation  with  the  Office  of  Advocacy  of  the  SBA  and  after  opportunity  for  public  comment,  establishes 


 one  or  more  definitions  of  such  the  term  which  are  appropriate  to  the  activities  of  the  agency  and  publishes  such  definition(  s)  in  the  Federal  Register. 
 6  5  U.  S.  C.    601(  3)  (incorporating  by  reference  the  definition  of  small  business  concern  in  the  Small 
 Business  Act,  15  U.  S.  C.    632).  Pursuant  to  5  U.  S.  C.    601(  3),  the  statutory  definition  of  a  small  business  applies  unless  an  agency,  after  consultation  with  the  Office  of  Advocacy  of  the  Small  Business 


 Administration  and  after  opportunity  for  public  comment,  establishes  one  or  more  definitions  of  such  term  which  are  appropriate  to  the  activities  of  the  agency  and  publishes  such  definition(  s)  in  the  Federal 
 Register. 
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 operated;  (2)  is  not  dominant  in  its  field  of  operation;  and  (3)  satisfies  any  additional  criteria  established  by  the  Small  Business  Administration  ("  SBA").  7 
 Television  Broadcasting.  The  Small  Business  Administration  defines  a  television  broadcasting  station  that  has  no  more  than  $12  million  in  annual  receipts  as  a  small  business.  8 
 Business  concerns  included  in  this  industry  are  those  primarily  engaged  in  broadcasting  images  together  with  sound.  9  According  to  Commission  staff  review  of  the  BIA  Publications,  Inc. 
 Master  Access  Television  Analyzer  Database  as  of  May  16,  2003,  about  814  of  the  1,220  commercial  television  stations  in  the  United  States  have  revenues  of  $12  million  or  less.  We 
 note,  however,  that,  in  assessing  whether  a  business  concern  qualifies  as  small  under  the  above  definition,  business  (control)  affiliations  10  must  be  included.  Our  estimate,  therefore,  likely 
 overstates  the  number  of  small  entities  that  might  be  affected  by  our  action,  because  the  revenue  figure  on  which  it  is  based  does  not  include  or  aggregate  revenues  from  affiliated  companies. 
 There  are  also  2,127  low  power  television  stations  (LPTV).  11  Given  the  nature  of  this  service,  we  will  presume  that  all  LPTV  licensees  qualify  as  small  entities  under  the  SBA  definition. 


 In  addition,  an  element  of  the  definition  of  small  business  is  that  the  entity  not  be  dominant  in  its  field  of  operation.  We  are  unable  at  this  time  to  define  or  quantify  the  criteria  that 
 would  establish  whether  a  specific  television  station  is  dominant  in  its  field  of  operation.  Accordingly,  the  estimate  of  small  businesses  to  which  rules  may  apply  do  not  exclude  any 
 television  station  from  the  definition  of  a  small  business  on  this  basis  and  are  therefore  over-inclusive  to  that  extent.  Also  as  noted,  an  additional  element  of  the  definition  of  small  business 
 is  that  the  entity  must  be  independently  owned  and  operated.  We  note  that  it  is  difficult  at  times  to  assess  these  criteria  in  the  context  of  media  entities  and  our  estimates  of  small  businesses  to 
 which  they  apply  may  be  over-  inclusive  to  this  extent. 
 Cable  and  Other  Program  Distribution.  The  SBA  has  developed  a  small  business  size  standard  for  cable  and  other  program  distribution  services,  which  includes  all  such  companies 


 7  15  U.  S.  C.    632.  Application  of  the  statutory  criteria  of  dominance  in  its  field  of  operation,  and 
 independence  are  sometime  difficult  to  apply  in  the  context  of  broadcast  television.  Accordingly,  the  Commissions  statistical  account  of  television  stations  may  be  over-  inclusive. 


 8  See  OMB,  North  American  Industry  Classification  System:  United  States,  1997  at  509  (1997)  (NAICS 
 code  513120,  which  was  changed  to  code  515120  in  October  2002)  9 
 OMB,  North  American  Industry  Classification  System:  United  States,  1997,  at  509  (1997)  (NAICS  code  513120,  which  was  changed  to  code  51520  in  October  2002).  This  category  description  continues,  These 


 establishments  operate  television  broadcasting  studios  and  facilities  for  the  programming  and  transmission  of  programs  to  the  public.  These  establishments  also  produce  or  transmit  visual  programming  to  affiliated 
 broadcast  television  stations,  which  in  turn  broadcast  the  programs  to  the  public  on  a  predetermined  schedule.  Programming  may  originate  in  their  own  studios,  from  an  affiliated  network,  or  from  external 
 sources.  Separate  census  categories  pertain  to  businesses  primarily  engaged  in  producing  programming.  See  id.  at  502-  05,  NAICS  code  51210.  Motion  Picture  and  Video  Production:  code  512120,  Motion 
 Picture  and  Video  Distribution,  code  512191,  Teleproduction  and  Other  Post-  Production  Services,  and  code  512199,  Other  Motion  Picture  and  Video  Industries. 
 10  Concerns  are  affiliates  of  each  other  when  one  concern  controls  or  has  the  power  to  control  the  other  or 
 a  third  party  or  parties  controls  or  has  to  power  to  control  both.  13  C.  F.  R.    121.103(  a)(  1).  11 
 FCC  News  Release,  Broadcast  Station  Totals  as  of  September  30,  2002. 
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 generating  $12.5  million  or  less  in  revenue  annually.  12  This  category  includes,  among  others,  cable  operators,  direct  broadcast  satellite  (  DBS)  services,  home  satellite  dish  (  HSD)  services, 
 multipoint  distribution  services  (  MDS),  multichannel  multipoint  distribution  service  (  MMDS),  Instructional  Television  Fixed  Service  (  ITFS),  local  multipoint  distribution  service 
 (  LMDS),  satellite  master  antenna  television  (  SMATV)  systems,  and  open  video  systems  (  OVS).  According  to  the  Census  Bureau  data,  there  are  1,311  total  cable  and  other  pay 
 television  service  firms  that  operate  throughout  the  year  of  which  1,180  have  less  than  $10  million  in  revenue.  13  We  address  below  each  service  individually  to  provide  a  more  precise 
 estimate  of  small  entities. 
 Cable  Operators.  The  Commission  has  developed,  with  SBA's  approval,  our  own  definition  of  a  small  cable  system  operator  for  the  purposes  of  rate  regulation.  Under  the 


 Commission's  rules,  a  "small  cable  company"  is  one  serving  fewer  than  400,000  subscribers  nationwide.  14  We  last  estimated  that  there  were  1,439  cable  operators  that  qualified  as  small 
 cable  companies.  15  Since  then,  some  of  those  companies  may  have  grown  to  serve  over  400,000  subscribers,  and  others  may  have  been  involved  in  transactions  that  caused  them  to  be  combined 
 with  other  cable  operators.  Consequently,  we  estimate  that  there  are  fewer  than  1,439  small  entity  cable  system  operators  that  may  be  affected  by  the  decisions  and  rules  proposed  in  this 
 Further  Notice. 
 The  Communications  Act,  as  amended,  also  contains  a  size  standard  for  a  small  cable  system  operator,  which  is  "a  cable  operator  that,  directly  or  through  an  affiliate,  serves  in  the 
 aggregate  fewer  than  1%  of  all  subscribers  in  the  United  States  and  is  not  affiliated  with  any  entity  or  entities  whose  gross  annual  revenues  in  the  aggregate  exceed  $250,000,000."  16  The 
 Commission  has  determined  that  there  are  68,500,000  subscribers  in  the  United  States.  Therefore,  an  operator  serving  fewer  than  685,000  subscribers  shall  be  deemed  a  small  operator  if 
 its  annual  revenues,  when  combined  with  the  total  annual  revenues  of  all  of  its  affiliates,  do  not  exceed  $250  million  in  the  aggregate.  17  Based  on  available  data,  we  find  that  the  number  of  cable 
 operators  serving  685,000  subscribers  or  less  totals  approximately  1,450.  18  Although  it  seems  certain  that  some  of  these  cable  system  operators  are  affiliated  with  entities  whose  gross  annual 
 revenues  exceed  $250,000,  000,  we  are  unable  at  this  time  to  estimate  with  greater  precision  the 


 12  13  C.  F.  R.    121.201,  NAICS  code  517510  (formerly  513220).  This  NAICS  code  applies  to  all  services 
 listed  in  this  paragraph.  13 
 Economics  and  Statistics  Administration,  Bureau  of  Census,  U.  S.  Department  of  Commerce,  1997  Economic  Census,  Subject  Series    Establishment  and  Firm  Size,  Information  Sector  51,  Table  4  at  50 


 (2000).  The  amount  of  $10  million  was  used  to  estimate  the  number  of  small  business  firms  because  the  relevant  Census  categories  stopped  at  $9,  999,999  and  began  at  $10,000,  000.  No  category  for  $12.  5  million 
 existed.  Thus,  the  number  is  as  accurate  as  it  is  possible  to  calculate  with  the  available  information.  14 
 47  C.  F.  R.    76.  901(  e).  The  Commission  developed  this  definition  based  on  its  determinations  that  a  small  cable  system  operator  is  one  with  annual  revenues  of  $100  million  or  less.  Sixth  Report  and  Order 


 and  Eleventh  Order  on  Reconsideration,  10  FCC  Rcd.  7393  (1995).  15 
 Paul  Kagan  Associates,  Inc.,  Cable  TV  Investor,  Feb.  29,  1996  (based  on  figures  for  Dec.  30,  1995).  16 
 47  U.  S.  C.    543(  m)(  2).  17 
 47  C.  F.  R.    76.1403(  b).  18 
 Paul  Kagan  Associates,  Inc.,  Cable  TV  Investor,  Feb.  29,  1996  (based  on  figures  for  Dec.  30,  1995). 
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 number  of  cable  system  operators  that  would  qualify  as  small  cable  operators  under  the  definition  in  the  Communications  Act. 
 Direct  Broadcast  Satellite  (  DBS)  Service.  Because  DBS  provides  subscription  services,  DBS  falls  within  the  SBA-  recognized  definition  of  Cable  and  Other  Program 
 Distribution  Services.  19  This  definition  provides  that  a  small  entity  is  one  with  $12.5  million  or  less  in  annual  receipts.  20  There  are  four  licensees  of  DBS  services  under  Part  100  of  the 
 Commission's  Rules.  Three  of  those  licensees  are  currently  operational.  Two  of  the  licensees  that  are  operational  have  annual  revenues  that  may  be  in  excess  of  the  threshold  for  a  small 
 business.  21  The  Commission,  however,  does  not  collect  annual  revenue  data  for  DBS  and,  therefore,  is  unable  to  ascertain  the  number  of  small  DBS  licensees  that  could  be  impacted  by 
 these  proposed  rules.  DBS  service  requires  a  great  investment  of  capital  for  operation,  and  we  acknowledge,  despite  the  absence  of  specific  data  on  this  point,  that  there  are  entrants  in  this  field 
 that  may  not  yet  have  generated  $12.5  million  in  annual  receipts,  and  therefore  may  be  categorized  as  a  small  business,  if  independently  owned  and  operated. 


 Home  Satellite  Dish  (  HSD)  Service.  Because  HSD  provides  subscription  services,  HSD  falls  within  the  SBA-  recognized  definition  of  Cable  and  Other  Program  Distribution 
 Services.  22  This  definition  provides  that  a  small  entity  is  one  with  $12.5  million  or  less  in  annual  receipts.  23  The  market  for  HSD  service  is  difficult  to  quantify.  Indeed,  the  service  itself  bears 
 little  resemblance  to  other  MVPDs.  HSD  owners  have  access  to  more  than  265  channels  of  programming  placed  on  C-  band  satellites  by  programmers  for  receipt  and  distribution  by 
 MVPDs,  of  which  115  channels  are  scrambled  and  approximately  150  are  unscrambled.  24  HSD  owners  can  watch  unscrambled  channels  without  paying  a  subscription  fee.  To  receive  scrambled 
 channels,  however,  an  HSD  owner  must  purchase  an  integrated  receiver-  decoder  from  an  equipment  dealer  and  pay  a  subscription  fee  to  an  HSD  programming  package.  Thus,  HSD  users 
 include:  (1)  viewers  who  subscribe  to  a  packaged  programming  service,  which  affords  them  access  to  most  of  the  same  programming  provided  to  subscribers  of  other  MVPDs;  (2)  viewers 
 who  receive  only  non-  subscription  programming;  and  (3)  viewers  who  receive  satellite  programming  services  illegally  without  subscribing.  Because  scrambled  packages  of 
 programming  are  most  specifically  intended  for  retail  consumers,  these  are  the  services  most  relevant  to  this  discussion.  25 


 Multipoint  Distribution  Service  (  MDS),  Multichannel  Multipoint  Distribution  Service  (  MMDS)  Instructional  Television  Fixed  Service  (  ITFS)  and  Local 
 Multipoint  Distribution  Service  (  LMDS).  MMDS  systems,  often  referred  to  as  wireless  cable,  transmit  video  programming  to  subscribers  using  the  microwave  frequencies  of  the  MDS 


 19  13  C.  F.  R.    121.  201,  NAICS  code  517510  (formerly  513220). 
 20  Id. 
 21  Id. 
 22  13  C.  F.  F.    121.  201,  NAICS  code  517510  (formerly  513220). 
 23  Id. 
 24  Annual  Assessment  of  the  Status  of  Competition  in  Markets  for  the  Delivery  of  Video  Programming,  12 
 FCC  Rcd  4358,  4385  (1996)  (  Third  Annual  Report).  25 
 Id.  at  4385. 
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 and  ITFS.  26  LMDS  is  a  fixed  broadband  point-  to-  multipoint  microwave  service  that  provides  for  two-  way  video  telecommunications.  27 
 In  connection  with  the  1996  MDS  auction,  the  Commission  defined  small  businesses  as  entities  that  had  annual  average  gross  revenues  of  less  than  $40  million  in  the  previous  three 
 calendar  years.  28  This  definition  of  a  small  entity  in  the  context  of  MDS  auctions  has  been  approved  by  the  SBA.  29  The  MDS  auctions  resulted  in  67  successful  bidders  obtaining  licensing 
 opportunities  for  493  Basic  Trading  Areas  (  BTAs).  Of  the  67  auction  winners,  61  met  the  definition  of  a  small  business.  MDS  also  includes  licensees  of  stations  authorized  prior  to  the 
 auction.  As  noted,  the  SBA  has  developed  a  definition  of  small  entities  for  pay  television  services,  which  includes  all  such  companies  generating  $12.5  million  or  less  in  annual  receipts.  30 
 This  definition  includes  multipoint  distribution  services,  and  thus  applies  to  MDS  licensees  and  wireless  cable  operators  that  did  not  participate  in  the  MDS  auction.  Information  available  to  us 
 indicates  that  there  are  approximately  850  of  these  licensees  and  operators  that  do  not  generate  revenue  in  excess  of  $12.5  million  annually.  Therefore,  for  purposes  of  the  IRFA,  we  find  there 
 are  approximately  850  small  MDS  providers  as  defined  by  the  SBA  and  the  Commissions  auction  rules. 


 The  SBA  definition  of  small  entities  for  Cable  and  Other  Program  Distribution  Services,  which  includes  such  companies  generating  $12.5  million  in  annual  receipts,  seems  reasonably 
 applicable  to  ITFS.  31  There  are  presently  2,032  ITFS  licensees.  All  but  100  of  these  licenses  are  held  by  educational  institutions.  Educational  institutions  are  included  in  the  definition  of  a  small 
 business.  32  However,  we  do  not  collect  annual  revenue  data  for  ITFS  licensees,  and  are  not  able  to  ascertain  how  many  of  the  100  non-  educational  licensees  would  be  categorized  as  small  under 
 the  SBA  definition.  Thus,  we  tentatively  conclude  that  at  least  1,932  licensees  are  small  businesses. 


 Additionally,  the  auction  of  the  1,030  LMDS  licenses  began  on  February  18,  1998,  and  closed  on  March  25,  1998.  The  Commission  defined  small  entity  for  LMDS  licenses  as  an 
 entity  that  has  average  gross  revenues  of  less  than  $40  million  in  the  three  previous  calendar  years.  33  An  additional  classification  for  very  small  business  was  added  and  is  defined  as  an 
 entity  that,  together  with  its  affiliates,  has  average  gross  revenues  of  not  more  than  $15  million 


 26  Amendment  of  Parts  21  and  74  of  the  Commissions  Rules  with  Regard  to  Filing  Procedures  in  the 
 Multipoint  Distribution  Service  and  in  the  Instructional  Television  Fixed  Service  and  Implementation  of  Section  309(  j)  of  the  Communications  Act    Competitive  Bidding,  10  FCC  Rcd  at  9589,  9593  (1995)  (  ITFS 


 Order).  27 
 See  Local  Multipoint  Distribution  Service,  12  FCC  Rcd  12545  (1997)  (  LMDS  Order).  28 
 47  C.  F.  R.    21.961(  b)(  1).  29 
 See  ITFS  Order,  10  FCC  Rcd  at  9589.  30 
 13  C.  F.  R.    121.  201,  NAICS  code  517510  (formerly  513220).  31 
 Id.  32 
 SBREFA  also  applies  to  nonprofit  organizations  and  governmental  organizations  such  as  cities,  counties,  towns,  townships,  villages,  school  districts,  or  special  districts,  with  populations  of  less  than  50,  000.  5 


 U.  S.  C.    601(  5).  33 
 See  LMDS  Order,  12  FCC  Rcd  at  12545. 
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 for  the  preceding  calendar  years.  34  These  regulations  defining  small  entity  in  the  context  of  LMDS  auctions  have  been  approved  by  the  SBA.  35  There  were  93  winning  bidders  that  qualified 
 as  small  entities  in  the  LMDS  auctions.  A  total  of  93  small  and  very  small  business  bidders  won  approximately  277  A  Block  licenses  and  387  B  Block  licenses.  On  March  27,  1999,  the 
 Commission  re-  auctioned  161  licenses;  there  were  40  winning  bidders.  Based  on  this  information,  we  conclude  that  the  number  of  small  LMDS  licenses  will  include  the  93  winning 
 bidders  in  the  first  auction  and  the  40  winning  bidders  in  the  re-  auction,  for  a  total  of  133  small  entity  LMDS  providers  as  defined  by  the  SBA  and  the  Commissions  auction  rules. 


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


 Satellite  Master  Antenna  Television  ("  SMATV")  Systems.  The  SBA  definition  of  small  entities  for  Cable  and  Other  Program  Distribution  Services  includes  SMATV  services  and, 
 thus,  small  entities  are  defined  as  all  such  companies  generating  $12.5  million  or  less  in  annual  receipts.  36  Industry  sources  estimate  that  approximately  5,200  SMATV  operators  were  providing 
 service  as  of  December  1995.  37  Other  estimates  indicate  that  SMATV  operators  serve  approximately  1.5  million  residential  subscribers  as  of  July  2001.  38  The  best  available  estimates 
 indicate  that  the  largest  SMATV  operators  serve  between  15,000  and  55,000  subscribers  each.  Most  SMATV  operators  serve  approximately  3,000-  4,000  customers.  Because  these  operators 
 are  not  rate  regulated,  they  are  not  required  to  file  financial  data  with  the  Commission.  Furthermore,  we  are  not  aware  of  any  privately  published  financial  information  regarding  these 
 operators.  Based  on  the  estimated  number  of  operators  and  the  estimated  number  of  units  served  by  the  largest  ten  SMATVs,  we  believe  that  a  substantial  number  of  SMATV  operators  qualify  as 
 small  entities 
 Open  Video  Systems  (  OVS).  Because  OVS  operators  provide  subscription  services,  39  OVS  falls  within  the  SBA-  recognized  definition  of  Cable  and  Other  Program  Distribution 


 Services.  40  This  definition  provides  that  a  small  entity  is  one  with  $  12.5  million  or  less  in  annual  receipts.  41  The  Commission  has  certified  25  OVS  operators  with  some  now  providing  service. 
 Affiliates  of  Residential  Communications  Network,  Inc.  ("  RCN")  received  approval  to  operate  OVS  systems  in  New  York  City,  Boston,  Washington,  D.  C.  and  other  areas.  RCN  has  sufficient 
 revenues  to  assure  us  that  they  do  not  qualify  as  small  business  entities.  Little  financial 


 34  Id. 
 35  See  Letter  to  Daniel  Phythyon,  Chief,  Wireless  Telecommunications  Bureau  (FCC)  from  A.  Alvarez, 
 Administrator,  SBA  (January  6,  1998).  36 
 13  C.  F.  R.    121.  201,  NAICS  code  517510  (formerly  513220).  37 
 See  Third  Annual  Report,  12  FCC  Rcd  at  4403-  4.  38 
 See  Annual  Assessment  of  the  Status  of  Competition  in  Markets  for  the  Delivery  of  Video  Programming,  17  FCC  Rcd  1244,  1281  (2001)  (  Eighth  Annual  Report). 


 39  See  47  U.  S.  C.    573. 
 40  13  C.  F.  R.    121.  201,  NAICS  code  517510  (formerly  513220). 
 41  Id. 
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 information  is  available  for  the  other  entities  authorized  to  provide  OVS  that  are  not  yet  operational.  Given  that  other  entities  have  been  authorized  to  provide  OVS  service  but  have  not 
 yet  begun  to  generate  revenues,  we  conclude  that  at  least  some  of  the  OVS  operators  qualify  as  small  entities. 


 Electronics  Equipment  Manufacturers.  Rules  adopted  in  this  proceeding  could  apply  to  manufacturers  of  DTV  receiving  equipment  and  other  types  of  consumer  electronics 
 equipment.  The  SBA  has  developed  definitions  of  small  entity  for  manufacturers  of  audio  and  video  equipment  42  as  well  as  radio  and  television  broadcasting  and  wireless  communications 
 equipment.  43  These  categories  both  include  all  such  companies  employing  750  or  fewer  employees.  The  Commission  has  not  developed  a  definition  of  small  entities  applicable  to 
 manufacturers  of  electronic  equipment  used  by  consumers,  as  compared  to  industrial  use  by  television  licensees  and  related  businesses.  Therefore,  we  will  utilize  the  SBA  definitions 
 applicable  to  manufacturers  of  audio  and  visual  equipment  and  radio  and  television  broadcasting  and  wireless  communications  equipment,  since  these  are  the  two  closest  NAICS  Codes  applicable 
 to  the  consumer  electronics  equipment  manufacturing  industry.  However,  these  NAICS  categories  are  broad  and  specific  figures  are  not  available  as  to  how  many  of  these  establishments 
 manufacture  consumer  equipment.  According  to  the  SBAs  regulations,  an  audio  and  visual  equipment  manufacturer  must  have  750  or  fewer  employees  in  order  to  qualify  as  a  small 
 business  concern.  44  Census  Bureau  data  indicates  that  there  are  554  U.  S.  establishments  that  manufacture  audio  and  visual  equipment,  and  that  542  of  these  establishments  have  fewer  than 
 500  employees  and  would  be  classified  as  small  entities.  45  The  remaining  12  establishments  have  500  or  more  employees;  however,  we  are  unable  to  determine  how  many  of  those  have  fewer  than 
 750  employees  and  therefore,  also  qualify  as  small  entities  under  the  SBA  definition.  Under  the  SBAs  regulations,  a  radio  and  television  broadcasting  and  wireless  communications  equipment 
 manufacturer  must  also  have  750  or  fewer  employees  in  order  to  qualify  as  a  small  business  concern.  46  Census  Bureau  data  indicates  that  there  1,215  U.  S.  establishments  that  manufacture 
 radio  and  television  broadcasting  and  wireless  communications  equipment,  and  that  1,150  of  these  establishments  have  fewer  than  500  employees  and  would  be  classified  as  small  entities.  47 
 The  remaining  65  establishments  have  500  or  more  employees;  however,  we  are  unable  to 


 42  13  CFR    121.201,  NAICS  code  334310. 
 43  13  CFR    121.201,  NAICS  code  334220. 
 44  13  CFR    121.201,  NAICS  code  334310. 
 45  Economics  and  Statistics  Administration,  Bureau  of  Census,  U.  S.  Department  of  Commerce,  1997 
 Economic  Census,  Industry  Series    Manufacturing,  Audio  and  Video  Equipment  Manufacturing,  Table  4  at  9  (1999).  The  amount  of  500  employees  was  used  to  estimate  the  number  of  small  business  firms 


 because  the  relevant  Census  categories  stopped  at  499  employees  and  began  at  500  employees.  No  category  for  750  employees  existed.  Thus,  the  number  is  as  accurate  as  it  is  possible  to  calculate  with  the 
 available  information.  46 
 13  C.  F.  R.    121.  201,  NAICS  code  334220.  47 
 Economics  and  Statistics  Administration,  Bureau  of  Census,  U.  S.  Department  of  Commerce,  1997  Economic  Census,  Industry  Series    Manufacturing,  Radio  and  Television  Broadcasting  and  Wireless 


 Communications  Equipment  Manufacturing,  Table  4  at  9  (1999).  The  amount  of  500  employees  was  used  to  estimate  the  number  of  small  business  firms  because  the  relevant  Census  categories  stopped  at  499 
 employees  and  began  at  500  employees.  No  category  for  750  employees  existed.  Thus,  the  number  is  as  accurate  as  it  is  possible  to  calculate  with  the  available  information. 
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 determine  how  many  of  those  have  fewer  than  750  employees  and  therefore,  also  qualify  as  small  entities  under  the  SBA  definition.  We  therefore  conclude  that  there  are  no  more  than  542  small 
 manufacturers  of  audio  and  visual  electronics  equipment  and  no  more  than  1,150  small  manufacturers  of  radio  and  television  broadcasting  and  wireless  communications  equipment  for 
 consumer/  household  use. 
 Computer  Manufacturers.  The  Commission  has  not  developed  a  definition  of  small  entities  applicable  to  computer  manufacturers.  Therefore,  we  will  utilize  the  SBA  definition  of 


 electronic  computers  manufacturing.  According  to  SBA  regulations,  a  computer  manufacturer  must  have  1,000  or  fewer  employees  in  order  to  qualify  as  a  small  entity.  48  Census  Bureau  data  indicates 
 that  there  are  563  firms  that  manufacture  electronic  computers  and  of  those,  544  have  fewer  than  1,000  employees  and  qualify  as  small  entities.  49  The  remaining  19  firms  have  1,000  or  more 
 employees.  We  conclude  that  there  are  approximately  544  small  computer  manufacturers. 
 Description  of  Projected  Reporting,  Recordkeeping  and  other  Compliance  Requirements.  On  the  transmission  side,  the  final  rules  do  not  require  the  use  of  the  ATSC  flag  by  broadcasters, 


 but  instead  permit  the  use  of  the  flag  at  the  broadcasters  discretion  for  redistribution  control  purposes. 


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


 Administratively,  the  final  rules  adopt  a  written  commitment  regime  whereby  manufacturers  or  importers  of  demodulators  obtain  from  buyers  a  written  commitment  that  they 
 will  incorporate  such  demodulators  into  compliant  and  robust  devices,  or  sell  or  distribute  to  third  parties  that  have  also  made  such  written  commitment.  The  Report  and  Order  also  adopts  a 
 written  commitment  regime  to  ensure  that  manufacturers  or  importers  of  Peripheral  TSP  Products  that  can  be  used  in  connection  with  demodulators  will  abide  by  the  Demodulator 
 Product  compliance  and  robustness  rules. 
 The  Report  and  Order  also  establishes  interim  procedures  by  which  proponents  of  a  particular  content  protection  or  recording  technology  can  certify  to  the  Commission  that  such 
 technology  is  appropriate  for  use  in  Demodulator  Products.  Upon  review  of  a  proponents  submission,  the  Commission  will  issue  a  public  notice.  If  no  objection  is  received  within  20 
 days,  the  Commission  will  expeditiously  determine  whether  the  technology  is  approved  for  use  in  Demodulator  Products.  If  substantive  objections  are  received  with  respect  to  a  particular 
 technology,  the  Commission  will  undertake  an  expedited  review  of  its  merits.  The  interim  procedures  also  provide  for  the  revocation  of  insecure  or  compromised  content  protection  and 


 48  13  C.  F.  R.    121.  201,  NAICS  code  334111. 
 49  Economics  and  Statistics  Administration,  Bureau  of  Census,  U.  S.  Department  of  Commerce,  1997 
 Economic  Census,  Industry  Series    Manufacturing,  Electronic  Computer  Manufacturing,  Table  4  at  9  (1999). 
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 recording  technologies. 
 Finally,  the  Report  and  Order  permits  MVPDs  to  perpetuate  the  flag  in  two  ways  on  their  systems:  (1)  by  MVPD  pass-  through  of  the  ATSC  flag  where  the  retransmission  is  unencrypted; 


 or  (2)  where  the  retransmission  is  encrypted,  by  conveying  the  presence  of  the  flag  by  some  means  that  requires  the  consumers  reception  equipment  to  protect  the  content  as  if  the  flag  were 
 present. 
 D.  Steps  Taken  to  Minimize  Significant  Economic  Impact  on  Small  Entities,  and  Significant  Alternatives  Considered.  The  RFA  requires  an  agency  to  describe  any 


 significant  alternatives  that  it  has  considered  in  reaching  its  proposed  approach,  which  may  include  the  following  four  alternatives  (among  others):  (1)  the  establishment  of  differing 
 compliance  or  reporting  requirements  or  timetables  that  take  into  account  the  resources  available  to  small  entities;  (2)  the  clarification,  consolidation,  or  simplification  of  compliance  or  reporting 
 requirements  under  the  rule  for  small  entities;  (3)  the  use  of  performance,  rather  than  design,  standards;  and  (4)  an  exemption  from  coverage  of  the  rule,  or  any  part  thereof,  for  small  entities.  50 


 Because  use  of  the  ATSC  flag  is  voluntary  on  the  part  of  broadcasters,  we  do  not  believe  that  small  broadcast  stations  will  be  significantly  economically  affected  by  the  final  rules.  On  the 
 reception  side,  while  all  consumer  electronics,  information  technology,  and  personal  computer  manufacturers  will  be  required  to  integrate  flag  recognition  capability  into  devices  designed  for 
 television  reception,  we  do  not  believe  that  small  manufacturers  will  be  adversely  affected  since  the  cost  of  integrating  the  necessary  technology  is  de  minimis.  51  The  written  commitment  regime 
 should  likewise  have  no  significant  effect  on  small  manufacturers  or  importers  as  there  is  little  cost  involved  in  preparing  and  filing  a  written  commitment.  As  to  the  interim  procedures  for 
 approval  of  new  content  protection  and  recording  technologies,  we  do  not  believe  that  small  entities  seeking  approval  will  be  significantly  economically  affected  by  the  applicable  procedures. 
 Finally,  we  believe  that  the  flexibility  afforded  MVPDs  in  how  to  effectuate  the  flag  will  mitigate  any  potential  significant  economic  impact  on  smaller  MVPDs. 


 E.  Federal  Rules  Which  Duplicate,  Overlap,  or  Conflict  with  the  Commission's  Proposals.  None. 
 Report  to  Congress:  The  Commission  will  send  a  copy  of  the  Report  and  Order  and  Further  Notice  of  Proposed  Rulemaking,  including  this  FRFA,  in  a  report  to  be  sent  to  Congress  pursuant 
 to  the  Congressional  Review  Act.  52  In  addition,  the  Commission  will  send  a  copy  of  the  Report  and  Order,  including  this  FRFA,  to  the  Chief  Counsel  for  Advocacy  of  the  SBA.  A  copy  of  the 


 50  5  U.  S.  C.    603(  b). 
 51  MPAA  Reply  Comments  at  16. 
 52  See  5  U.  S.  C.    801(  a)(  1)(  A). 
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 Report  and  Order  and  FRFA  (or  summaries  thereof)  will  also  be  published  in  the  Federal  Register.  53 
 53  See  5  U.  S.  C.    604(  b). 
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 APPENDIX  D  INITIAL  REGULATORY  FLEXIBILITY  ANALYSIS 
 As  required  by  the  Regulatory  Flexibility  Act  of  1980,  as  amended  ("  RFA")  1  the  Commission  has  prepared  this  present  Initial  Regulatory  Flexibility  Analysis  ("  IRFA")  of  the  possible  significant  economic 
 impact  on  a  substantial  number  of  small  entities  by  the  policies  and  rules  proposed  in  the  Further  Notice  of  Proposed  Rulemaking  portion  of  this  item.  Written  public  comments  are  requested  on  this  IRFA. 
 Comments  must  be  identified  as  responses  to  the  IRFA  and  must  be  filed  by  the  deadlines  for  comments  on  the  Further  Notice  of  Proposed  Rulemaking  portion  of  this  item  provided  in  paragraph  69.  The 
 Commission  will  send  a  copy  of  this  entire  Report  and  Order  and  Further  Notice  of  Proposed  Rulemaking  (  Report  and  Order  and  Further  Notice),  including  this  IRFA,  to  the  Chief  Counsel  for 
 Advocacy  of  the  Small  Business  Administration  (  SBA).  2  In  addition,  the  Further  Notice  of  Proposed  Rulemaking  portion  of  this  item  and  the  IRFA  (or  summaries  thereof)  will  be  published  in  the  Federal 
 Register.  3 
 A.  Need  for,  and  Objectives  of,  the  Proposed  Rules.  Content  providers  have  suggested  that  they  should  have  the  ability  to  make  determinations  about  which  new  content  protection  and 
 recording  technologies  may  be  used  in  connection  with  demodulator  products  under  an  ATSC  flag-  based  redistribution  control  system.  Commenters  have  indicated  that  content  providers  should  not  be  the  sole 
 arbiters  of  such  decisions.  However,  the  record  currently  before  the  Commission  is  insufficient  on  this  matter.  In  order  to  ensure  the  connectivity  and  interoperability  of  Demodulator  Products  and  peripheral 
 devices,  we  are  initiating  the  Further  Notice  to  seek  comment  on  the  process  and  criteria  by  which  new  content  protection  and  recording  technologies  can  be  evaluated  and  approved  for  use  in  this  context.  The 
 Further  Notice  also  seeks  comment  on  whether  cable  operators  should  be  allowed  to  encrypt  the  digital  basic  tier  in  order  to  be  able  to  give  effect  to  the  ATSC  flag  through  cable  operators  conditional  access 
 system.  The  Further  Notice  also  seeks  comment  on  the  interplay  between  an  ATSC  flag  system  and  open  source  software  for  DTV  applications,  such  as  software  defined  radio. 


 B.  Legal  Basis.  The  authority  for  this  proposed  rulemaking  is  contained  in  Sections  1,  2,  4(  i)  and  (j),  303,  307,  309(  j),  336,  337,  396(  k),  403,  601,  614(  b)  and  624a  of  the  Communications  Act  of 
 1934,  47  U.  S.  C    151,  152,  154(  i)  and  (j),  303,  307,  309(  j),  336,  337,  396(  k),  403,  521,  534(  b)  and  544a. 
 C.  Description  and  Estimate  of  the  Number  of  Small  Entities  to  Which  the  Proposed  Rules  Will  Apply  .  The  RFA  directs  the  Commission  to  provide  a  description  of  and,  where  feasible,  an 


 estimate  of  the  number  of  small  entities  that  will  be  affected  by  the  proposed  rules.  4  The  RFA  generally  defines  the  term  "small  entity"  as  encompassing  the  terms  "small  business,"  "small  organization,"  and 
 "small  governmental  entity.  "5  In  addition,  the  term  small  Business  has  the  same  meaning  as  the  term  small  business  concern  under  the  Small  Business  Act.  6  A  small  business  concern  is  one  which:  (1)  is 


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


 2  See  5  U.  S.  C.    603(  a). 
 3  See  5  U.  S.  C.    603(  a). 
 4  5  U.  S.  C.    603(  b)(  3). 
 5  5  U.  S.  C.    601(  6). 
 6  5  U.  S.  C.    601(  3)  (incorporating  by  reference  the  definition  of  small  business  concern  in  the  Small  Business  Act, 
 15  U.  S.  C.    632).  Pursuant  to  5  U.  S.  C.    601(  3),  the  statutory  definition  of  a  small  business  applies  unless  an  agency,  after  consultation  with  the  Office  of  Advocacy  of  the  Small  Business  Administration  and  after  opportunity 


 (continued....) 
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 independently  owned  and  operated;  (2)  is  not  dominant  in  its  field  of  operation;  and  (3)  satisfies  any  additional  criteria  established  by  the  Small  Business  Administration  ("  SBA").  7 
 Television  Broadcasting.  The  Small  Business  Administration  defines  a  television  broadcasting  station  that  has  no  more  than  $12  million  in  annual  receipts  as  a  small  business.  8  Business  concerns 
 included  in  this  industry  are  those  primarily  engaged  in  broadcasting  images  together  with  sound.  9  According  to  Commission  staff  review  of  the  BIA  Publications,  Inc.  Master  Access  Television  Analyzer 
 Database  as  of  May  16,  2003,  about  814  of  the  1,220  commercial  television  stations  in  the  United  States  have  revenues  of  $12  million  or  less.  We  note,  however,  that,  in  assessing  whether  a  business  concern 
 qualifies  as  small  under  the  above  definition,  business  (control)  affiliations  10  must  be  included.  Our  estimate,  therefore,  likely  overstates  the  number  of  small  entities  that  might  be  affected  by  our  action, 
 because  the  revenue  figure  on  which  it  is  based  does  not  include  or  aggregate  revenues  from  affiliated  companies.  There  are  also  2,127  low  power  television  stations  (LPTV).  11  Given  the  nature  of  this 
 service,  we  will  presume  that  all  LPTV  licensees  qualify  as  small  entities  under  the  SBA  definition. 
 In  addition,  an  element  of  the  definition  of  small  business  is  that  the  entity  not  be  dominant  in  its  field  of  operation.  We  are  unable  at  this  time  to  define  or  quantify  the  criteria  that  would  establish 


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


 Cable  and  Other  Program  Distribution.  The  SBA  has  developed  a  small  business  size  standard  for  cable  and  other  program  distribution  services,  which  includes  all  such  companies  generating  $12.5 
 million  or  less  in  revenue  annually.  12  This  category  includes,  among  others,  cable  operators,  direct  broadcast  satellite  (  DBS)  services,  home  satellite  dish  (  HSD)  services,  multipoint  distribution 
 services  (  MDS),  multichannel  multipoint  distribution  service  (  MMDS),  Instructional  Television 


 (...  continued  from  previous  page)  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.  7 
 15  U.  S.  C.    632.  8 
 See  OMB,  North  American  Industry  Classification  System:  United  States,  1997  at  509  (1997)  (NAICS  code  513120,  which  was  changed  to  code  515120  in  October  2002) 


 9  OMB,  North  American  Industry  Classification  System:  United  States,  1997,  at  509  (1997)  (NAICS  code  513120, 
 which  was  changed  to  code  51520  in  October  2002).  This  category  description  continues,  These  establishments  operate  television  broadcasting  studios  and  facilities  for  the  programming  and  transmission  of  programs  to  the 


 public.  These  establishments  also  produce  or  transmit  visual  programming  to  affiliated  broadcast  television  stations,  which  in  turn  broadcast  the  programs  to  the  public  on  a  predetermined  schedule.  Programming  may  originate  in 
 their  own  studios,  from  an  affiliated  network,  or  from  external  sources.  Separate  census  categories  pertain  to  businesses  primarily  engaged  in  producing  programming.  See  id.  at  502-  05,  NAICS  code  51210.  Motion  Picture 
 and  Video  Production:  code  512120,  Motion  Picture  and  Video  Distribution,  code  512191,  Teleproduction  and  Other  Post-  Production  Services,  and  code  512199,  Other  Motion  Picture  and  Video  Industries. 
 10  Concerns  are  affiliates  of  each  other  when  one  concern  controls  or  has  the  power  to  control  the  other  or  a  third 
 party  or  parties  controls  or  has  to  power  to  control  both.  13  C.  F.  R.    121.  103(  a)(  1).  11 
 FCC  News  Release,  Broadcast  Station  Totals  as  of  September  30,  2002. 
 12  13  C.  F.  R.    121.201,  NAICS  code  517510  (formerly  513220).  This  NAICS  code  applies  to  all  services  listed  in 
 this  paragraph. 
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 Fixed  Service  (  ITFS),  local  multipoint  distribution  service  (  LMDS),  satellite  master  antenna  television  (  SMATV)  systems,  and  open  video  systems  (  OVS).  According  to  the  Census  Bureau  data, 
 there  are  1,311  total  cable  and  other  pay  television  service  firms  that  operate  throughout  the  year  of  which  1,180  have  less  than  $10  million  in  revenue.  13  We  address  below  each  service  individually  to  provide  a 
 more  precise  estimate  of  small  entities. 
 Cable  Operators.  The  Commission  has  developed,  with  SBA's  approval,  our  own  definition  of  a  small  cable  system  operator  for  the  purposes  of  rate  regulation.  Under  the  Commission's  rules,  a  "small 


 cable  company"  is  one  serving  fewer  than  400,000  subscribers  nationwide.  14  We  last  estimated  that  there  were  1,439  cable  operators  that  qualified  as  small  cable  companies.  15  Since  then,  some  of  those 
 companies  may  have  grown  to  serve  over  400,000  subscribers,  and  others  may  have  been  involved  in  transactions  that  caused  them  to  be  combined  with  other  cable  operators.  Consequently,  we  estimate  that 
 there  are  fewer  than  1,439  small  entity  cable  system  operators  that  may  be  affected  by  the  decisions  and  rules  proposed  in  this  Further  Notice. 


 The  Communications  Act,  as  amended,  also  contains  a  size  standard  for  a  small  cable  system  operator,  which  is  "a  cable  operator  that,  directly  or  through  an  affiliate,  serves  in  the  aggregate  fewer 
 than  1%  of  all  subscribers  in  the  United  States  and  is  not  affiliated  with  any  entity  or  entities  whose  gross  annual  revenues  in  the  aggregate  exceed  $250,000,000."  16  The  Commission  has  determined  that  there  are 
 68,500,000  subscribers  in  the  United  States.  Therefore,  an  operator  serving  fewer  than  685,000  subscribers  shall  be  deemed  a  small  operator  if  its  annual  revenues,  when  combined  with  the  total  annual 
 revenues  of  all  of  its  affiliates,  do  not  exceed  $250  million  in  the  aggregate.  17  Based  on  available  data,  we  find  that  the  number  of  cable  operators  serving  685,000  subscribers  or  less  totals  approximately  1,450.  18 
 Although  it  seems  certain  that  some  of  these  cable  system  operators  are  affiliated  with  entities  whose  gross  annual  revenues  exceed  $250,000,  000,  we  are  unable  at  this  time  to  estimate  with  greater  precision 
 the  number  of  cable  system  operators  that  would  qualify  as  small  cable  operators  under  the  definition  in  the  Communications  Act. 


 Direct  Broadcast  Satellite  (  DBS)  Service.  Because  DBS  provides  subscription  services,  DBS  falls  within  the  SBA-  recognized  definition  of  Cable  and  Other  Program  Distribution  Services.  19  This 
 definition  provides  that  a  small  entity  is  one  with  $12.5  million  or  less  in  annual  receipts.  20  There  are  four  licensees  of  DBS  services  under  Part  100  of  the  Commission's  Rules.  Three  of  those  licensees  are 
 currently  operational.  Two  of  the  licensees  that  are  operational  have  annual  revenues  that  may  be  in 


 13  Economics  and  Statistics  Administration,  Bureau  of  Census,  U.  S.  Department  of  Commerce,  1997  Economic 
 Census,  Subject  Series    Establishment  and  Firm  Size,  Information  Sector  51,  Table  4  at  50  (2000).  The  amount  of  $10  million  was  used  to  estimate  the  number  of  small  business  firms  because  the  relevant  Census  categories  stopped 


 at  $9,999,999  and  began  at  $10,000,000.  No  category  for  $12.5  million  existed.  Thus,  the  number  is  as  accurate  as  it  is  possible  to  calculate  with  the  available  information. 
 14  47  C.  F.  R.    76.  901(  e).  The  Commission  developed  this  definition  based  on  its  determinations  that  a  small  cable 
 system  operator  is  one  with  annual  revenues  of  $100  million  or  less.  Sixth  Report  and  Order  and  Eleventh  Order  on  Reconsideration,  10  FCC  Rcd.  7393  (1995). 


 15  Paul  Kagan  Associates,  Inc.,  Cable  TV  Investor,  Feb.  29,  1996  (based  on  figures  for  Dec.  30,  1995). 
 16  47  U.  S.  C.    543(  m)(  2). 
 17  47  C.  F.  R.    76.1403(  b). 
 18  Paul  Kagan  Associates,  Inc.,  Cable  TV  Investor,  Feb.  29,  1996  (based  on  figures  for  Dec.  30,  1995). 
 19  13  C.  F.  R.    121.  201,  NAICS  code  517510  (formerly  513220). 
 20  Id. 
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 excess  of  the  threshold  for  a  small  business.  21  The  Commission,  however,  does  not  collect  annual  revenue  data  for  DBS  and,  therefore,  is  unable  to  ascertain  the  number  of  small  DBS  licensees  that  could 
 be  impacted  by  these  proposed  rules.  DBS  service  requires  a  great  investment  of  capital  for  operation,  and  we  acknowledge,  despite  the  absence  of  specific  data  on  this  point,  that  there  are  entrants  in  this  field 
 that  may  not  yet  have  generated  $12.5  million  in  annual  receipts,  and  therefore  may  be  categorized  as  a  small  business,  if  independently  owned  and  operated. 


 Home  Satellite  Dish  (  HSD)  Service.  Because  HSD  provides  subscription  services,  HSD  falls  within  the  SBA-  recognized  definition  of  Cable  and  Other  Program  Distribution  Services.  22  This 
 definition  provides  that  a  small  entity  is  one  with  $12.5  million  or  less  in  annual  receipts.  23  The  market  for  HSD  service  is  difficult  to  quantify.  Indeed,  the  service  itself  bears  little  resemblance  to  other 
 MVPDs.  HSD  owners  have  access  to  more  than  265  channels  of  programming  placed  on  C-  band  satellites  by  programmers  for  receipt  and  distribution  by  MVPDs,  of  which  115  channels  are  scrambled 
 and  approximately  150  are  unscrambled.  24  HSD  owners  can  watch  unscrambled  channels  without  paying  a  subscription  fee.  To  receive  scrambled  channels,  however,  an  HSD  owner  must  purchase  an  integrated 
 receiver-  decoder  from  an  equipment  dealer  and  pay  a  subscription  fee  to  an  HSD  programming  package.  Thus,  HSD  users  include:  (1)  viewers  who  subscribe  to  a  packaged  programming  service,  which  affords 
 them  access  to  most  of  the  same  programming  provided  to  subscribers  of  other  MVPDs;  (2)  viewers  who  receive  only  non-  subscription  programming;  and  (3)  viewers  who  receive  satellite  programming  services 
 illegally  without  subscribing.  Because  scrambled  packages  of  programming  are  most  specifically  intended  for  retail  consumers,  these  are  the  services  most  relevant  to  this  discussion.  25 


 Multipoint  Distribution  Service  (  MDS),  Multichannel  Multipoint  Distribution  Service  (  MMDS)  Instructional  Television  Fixed  Service  (  ITFS)  and  Local  Multipoint 
 Distribution  Service  (  LMDS).  MMDS  systems,  often  referred  to  as  wireless  cable,  transmit  video  programming  to  subscribers  using  the  microwave  frequencies  of  the  MDS  and  ITFS.  26  LMDS  is  a  fixed 
 broadband  point-  to-  multipoint  microwave  service  that  provides  for  two-  way  video  telecommunications.  27 
 In  connection  with  the  1996  MDS  auction,  the  Commission  defined  small  businesses  as  entities  that  had  annual  average  gross  revenues  of  less  than  $40  million  in  the  previous  three  calendar  years.  28 


 This  definition  of  a  small  entity  in  the  context  of  MDS  auctions  has  been  approved  by  the  SBA.  29  The  MDS  auctions  resulted  in  67  successful  bidders  obtaining  licensing  opportunities  for  493  Basic  Trading 
 Areas  (  BTAs).  Of  the  67  auction  winners,  61  met  the  definition  of  a  small  business.  MDS  also  includes  licensees  of  stations  authorized  prior  to  the  auction.  As  noted,  the  SBA  has  developed  a 
 definition  of  small  entities  for  pay  television  services,  which  includes  all  such  companies  generating 


 21  Id. 
 22  13  C.  F.  F.    121.  201,  NAICS  code  517510  (formerly  513220). 
 23  Id. 
 24  Annual  Assessment  of  the  Status  of  Competition  in  Markets  for  the  Delivery  of  Video  Programming,  12  FCC  Rcd 
 4358,  4385  (1996)  (  Third  Annual  Report).  25 
 Id.  at  4385.  26 
 Amendment  of  Parts  21  and  74  of  the  Commissions  Rules  with  Regard  to  Filing  Procedures  in  the  Multipoint  Distribution  Service  and  in  the  Instructional  Television  Fixed  Service  and  Implementation  of  Section  309(  j)  of  the 


 Communications  Act    Competitive  Bidding,  10  FCC  Rcd  at  9589,  9593  (1995)  (  ITFS  Order).  27 
 See  Local  Multipoint  Distribution  Service,  12  FCC  Rcd  12545  (1997)  (  LMDS  Order).  28 
 47  C.  F.  R.    21.961(  b)(  1).  29 
 See  ITFS  Order,  10  FCC  Rcd  at  9589. 
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 $12.5  million  or  less  in  annual  receipts.  30  This  definition  includes  multipoint  distribution  services,  and  thus  applies  to  MDS  licensees  and  wireless  cable  operators  that  did  not  participate  in  the  MDS  auction. 
 Information  available  to  us  indicates  that  there  are  approximately  850  of  these  licensees  and  operators  that  do  not  generate  revenue  in  excess  of  $12.5  million  annually.  Therefore,  for  purposes  of  the  IRFA,  we 
 find  there  are  approximately  850  small  MDS  providers  as  defined  by  the  SBA  and  the  Commissions  auction  rules. 


 The  SBA  definition  of  small  entities  for  Cable  and  Other  Program  Distribution  Services,  which  includes  such  companies  generating  $12.5  million  in  annual  receipts,  seems  reasonably  applicable  to 
 ITFS.  31  There  are  presently  2,032  ITFS  licensees.  All  but  100  of  these  licenses  are  held  by  educational  institutions.  Educational  institutions  are  included  in  the  definition  of  a  small  business.  32  However,  we  do 
 not  collect  annual  revenue  data  for  ITFS  licensees,  and  are  not  able  to  ascertain  how  many  of  the  100  non-educational  licensees  would  be  categorized  as  small  under  the  SBA  definition.  Thus,  we  tentatively 
 conclude  that  at  least  1,932  licensees  are  small  businesses. 
 Additionally,  the  auction  of  the  1,030  LMDS  licenses  began  on  February  18,  1998,  and  closed  on  March  25,  1998.  The  Commission  defined  small  entity  for  LMDS  licenses  as  an  entity  that  has  average 


 gross  revenues  of  less  than  $40  million  in  the  three  previous  calendar  years.  33  An  additional  classification  for  very  small  business  was  added  and  is  defined  as  an  entity  that,  together  with  its  affiliates,  has 
 average  gross  revenues  of  not  more  than  $15  million  for  the  preceding  calendar  years.  34  These  regulations  defining  small  entity  in  the  context  of  LMDS  auctions  have  been  approved  by  the  SBA.  35 
 There  were  93  winning  bidders  that  qualified  as  small  entities  in  the  LMDS  auctions.  A  total  of  93  small  and  very  small  business  bidders  won  approximately  277  A  Block  licenses  and  387  B  Block  licenses.  On 
 March  27,  1999,  the  Commission  re-  auctioned  161  licenses;  there  were  40  winning  bidders.  Based  on  this  information,  we  conclude  that  the  number  of  small  LMDS  licenses  will  include  the  93  winning 
 bidders  in  the  first  auction  and  the  40  winning  bidders  in  the  re-  auction,  for  a  total  of  133  small  entity  LMDS  providers  as  defined  by  the  SBA  and  the  Commissions  auction  rules. 


 In  sum,  there  are  approximately  a  total  of  2,000  MDS/  MMDS/  LMDS  stations  currently  licensed.  Of  the  approximate  total  of  2,000  stations,  we  estimate  that  there  are  1,595  MDS/  MMDS/  LMDS 
 providers  that  are  small  businesses  as  deemed  by  the  SBA  and  the  Commissions  auction  rules. 
 Satellite  Master  Antenna  Television  ("  SMATV")  Systems.  The  SBA  definition  of  small  entities  for  Cable  and  Other  Program  Distribution  Services  includes  SMATV  services  and,  thus,  small 


 entities  are  defined  as  all  such  companies  generating  $12.5  million  or  less  in  annual  receipts.  36  Industry  sources  estimate  that  approximately  5,200  SMATV  operators  were  providing  service  as  of  December 
 1995.  37  Other  estimates  indicate  that  SMATV  operators  serve  approximately  1.5  million  residential 


 30  13  C.  F.  R.    121.  201,  NAICS  code  517510  (formerly  513220). 
 31  Id. 
 32  SBREFA  also  applies  to  nonprofit  organizations  and  governmental  organizations  such  as  cities,  counties,  towns, 
 townships,  villages,  school  districts,  or  special  districts,  with  populations  of  less  than  50,  000.  5  U.  S.  C.    601(  5).  33 
 See  LMDS  Order,  12  FCC  Rcd  at  12545.  34 
 Id.  35 
 See  Letter  to  Daniel  Phythyon,  Chief,  Wireless  Telecommunications  Bureau  (FCC)  from  A.  Alvarez,  Administrator,  SBA  (January  6,  1998). 


 36  13  C.  F.  R.    121.  201,  NAICS  code  517510  (formerly  513220). 
 37  See  Third  Annual  Report,  12  FCC  Rcd  at  4403-  4. 
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 subscribers  as  of  July  2001.  38  The  best  available  estimates  indicate  that  the  largest  SMATV  operators  serve  between  15,000  and  55,000  subscribers  each.  Most  SMATV  operators  serve  approximately  3,000-4,000 
 customers.  Because  these  operators  are  not  rate  regulated,  they  are  not  required  to  file  financial  data  with  the  Commission.  Furthermore,  we  are  not  aware  of  any  privately  published  financial 
 information  regarding  these  operators.  Based  on  the  estimated  number  of  operators  and  the  estimated  number  of  units  served  by  the  largest  ten  SMATVs,  we  believe  that  a  substantial  number  of  SMATV 
 operators  qualify  as  small  entities 
 Open  Video  Systems  (  OVS).  Because  OVS  operators  provide  subscription  services,  39  OVS  falls  within  the  SBA-  recognized  definition  of  Cable  and  Other  Program  Distribution  Services.  40  This 


 definition  provides  that  a  small  entity  is  one  with  $  12.5  million  or  less  in  annual  receipts.  41  The  Commission  has  certified  25  OVS  operators  with  some  now  providing  service.  Affiliates  of  Residential 
 Communications  Network,  Inc.  ("  RCN")  received  approval  to  operate  OVS  systems  in  New  York  City,  Boston,  Washington,  D.  C.  and  other  areas.  RCN  has  sufficient  revenues  to  assure  us  that  they  do  not 
 qualify  as  small  business  entities.  Little  financial  information  is  available  for  the  other  entities  authorized  to  provide  OVS  that  are  not  yet  operational.  Given  that  other  entities  have  been  authorized  to  provide 
 OVS  service  but  have  not  yet  begun  to  generate  revenues,  we  conclude  that  at  least  some  of  the  OVS  operators  qualify  as  small  entities. 


 Electronics  Equipment  Manufacturers.  Rules  adopted  in  this  proceeding  could  apply  to  manufacturers  of  DTV  receiving  equipment  and  other  types  of  consumer  electronics  equipment.  The 
 SBA  has  developed  definitions  of  small  entity  for  manufacturers  of  audio  and  video  equipment  42  as  well  as  radio  and  television  broadcasting  and  wireless  communications  equipment.  43  These  categories  both 
 include  all  such  companies  employing  750  or  fewer  employees.  The  Commission  has  not  developed  a  definition  of  small  entities  applicable  to  manufacturers  of  electronic  equipment  used  by  consumers,  as 
 compared  to  industrial  use  by  television  licensees  and  related  businesses.  Therefore,  we  will  utilize  the  SBA  definitions  applicable  to  manufacturers  of  audio  and  visual  equipment  and  radio  and  television 
 broadcasting  and  wireless  communications  equipment,  since  these  are  the  two  closest  NAICS  Codes  applicable  to  the  consumer  electronics  equipment  manufacturing  industry.  However,  these  NAICS 
 categories  are  broad  and  specific  figures  are  not  available  as  to  how  many  of  these  establishments  manufacture  consumer  equipment.  According  to  the  SBAs  regulations,  an  audio  and  visual  equipment 
 manufacturer  must  have  750  or  fewer  employees  in  order  to  qualify  as  a  small  business  concern.  44  Census  Bureau  data  indicates  that  there  are  554  U.  S.  establishments  that  manufacture  audio  and  visual 
 equipment,  and  that  542  of  these  establishments  have  fewer  than  500  employees  and  would  be  classified  as  small  entities.  45  The  remaining  12  establishments  have  500  or  more  employees;  however,  we  are 


 38  See  Annual  Assessment  of  the  Status  of  Competition  in  Markets  for  the  Delivery  of  Video  Programming,  17  FCC 
 Rcd  1244,  1281  (2001)  (  Eighth  Annual  Report).  39 
 See  47  U.  S.  C.    573.  40 
 13  C.  F.  R.    121.  201,  NAICS  code  517510  (formerly  513220).  41 
 Id.  42 
 13  CFR    121.201,  NAICS  code  334310.  43 
 13  CFR    121.201,  NAICS  code  334220.  44 
 13  CFR    121.201,  NAICS  code  334310.  45 
 Economics  and  Statistics  Administration,  Bureau  of  Census,  U.  S.  Department  of  Commerce,  1997  Economic  Census,  Industry  Series    Manufacturing,  Audio  and  Video  Equipment  Manufacturing,  Table  4  at  9  (1999).  The 


 amount  of  500  employees  was  used  to  estimate  the  number  of  small  business  firms  because  the  relevant  Census  categories  stopped  at  499  employees  and  began  at  500  employees.  No  category  for  750  employees  existed.  Thus, 
 the  number  is  as  accurate  as  it  is  possible  to  calculate  with  the  available  information. 
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 unable  to  determine  how  many  of  those  have  fewer  than  750  employees  and  therefore,  also  qualify  as  small  entities  under  the  SBA  definition.  Under  the  SBAs  regulations,  a  radio  and  television  broadcasting 
 and  wireless  communications  equipment  manufacturer  must  also  have  750  or  fewer  employees  in  order  to  qualify  as  a  small  business  concern.  46  Census  Bureau  data  indicates  that  there  1,215  U.  S.  establishments 
 that  manufacture  radio  and  television  broadcasting  and  wireless  communications  equipment,  and  that  1,150  of  these  establishments  have  fewer  than  500  employees  and  would  be  classified  as  small  entities.  47 
 The  remaining  65  establishments  have  500  or  more  employees;  however,  we  are  unable  to  determine  how  many  of  those  have  fewer  than  750  employees  and  therefore,  also  qualify  as  small  entities  under  the  SBA 
 definition.  We  therefore  conclude  that  there  are  no  more  than  542  small  manufacturers  of  audio  and  visual  electronics  equipment  and  no  more  than  1,150  small  manufacturers  of  radio  and  television 
 broadcasting  and  wireless  communications  equipment  for  consumer/  household  use. 
 Computer  Manufacturers.  The  Commission  has  not  developed  a  definition  of  small  entities  applicable  to  computer  manufacturers.  Therefore,  we  will  utilize  the  SBA  definition  of  electronic  computers 


 manufacturing.  According  to  SBA  regulations,  a  computer  manufacturer  must  have  1,000  or  fewer  employees  in  order  to  qualify  as  a  small  entity.  48  Census  Bureau  data  indicates  that  there  are  563  firms  that 
 manufacture  electronic  computers  and  of  those,  544  have  fewer  than  1,000  employees  and  qualify  as  small  entities.  49  The  remaining  19  firms  have  1,000  or  more  employees.  We  conclude  that  there  are  approximately 
 544  small  computer  manufacturers. 
 D.  Description  of  Projected  Reporting,  Recordkeeping  and  other  Compliance  Requirements.  At  this  time,  we  do  not  expect  that  the  proposed  rules  would  impose  any  additional 


 reporting  or  recordkeeping  requirements.  However,  compliance  with  the  rules,  if  they  are  adopted,  may  require  consumer  electronics  manufacturers  to  seek  approval  for  content  protection  technologies  and 
 recording  methods  to  be  used  in  conjunction  with  demodulator  products.  50  These  requirements  will  have  an  impact  on  consumer  electronics  manufacturers,  including  small  entities.  We  seek  comment  on  the 
 possible  burden  these  requirements  would  place  on  small  entities.  Also,  we  seek  comment  on  whether  a  special  approach  toward  any  possible  compliance  burdens  on  small  entities  might  be  appropriate.  The 
 proposed  rules  would  also  allow  cable  operators  to  encrypt  the  digital  basic  tier,  however,  we  do  not  believe  that  this  voluntary  provision  would  have  an  impact  on  small  entities. 


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


 46  13  C.  F.  R.    121.  201,  NAICS  code  334220. 
 47  Economics  and  Statistics  Administration,  Bureau  of  Census,  U.  S.  Department  of  Commerce,  1997  Economic 
 Census,  Industry  Series    Manufacturing,  Radio  and  Television  Broadcasting  and  Wireless  Communications  Equipment  Manufacturing,  Table  4  at  9  (1999).  The  amount  of  500  employees  was  used  to  estimate  the  number  of 


 small  business  firms  because  the  relevant  Census  categories  stopped  at  499  employees  and  began  at  500  employees.  No  category  for  750  employees  existed.  Thus,  the  number  is  as  accurate  as  it  is  possible  to  calculate  with  the 
 available  information.  48 
 13  C.  F.  R.    121.  201,  NAICS  code  334111.  49 
 Economics  and  Statistics  Administration,  Bureau  of  Census,  U.  S.  Department  of  Commerce,  1997  Economic  Census,  Industry  Series    Manufacturing,  Electronic  Computer  Manufacturing,  Table  4  at  9  (1999). 


 50  See  Further  Notice  at    61-  65. 
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 small  entities.  51 
 As  indicated  above,  the  Further  Notice  seeks  comment  on  whether  the  Commission  should  adopt  rules  establishing  an  approval  mechanism  for  new  content  protection  and  recording  technologies  to  be 


 used  with  demodulator  products.  Consumer  electronics  manufacturers  may  be  required  to  seek  such  approval  prior  to  implementing  content  protection  and  recording  technologies  in  demodulator  products. 
 We  welcome  comment  on  modifications  of  this  proposal  to  lessen  any  potential  impact  on  small  entities,  while  still  remaining  consistent  with  our  policy  goals.  The  Further  Notice  also  seeks  comment  on 
 whether  cable  operators  should  be  allowed  to  encrypt  the  digital  basic  tier  in  order  to  be  able  to  give  effect  to  the  ATSC  flag  through  cable  operators  conditional  access  system.  While  we  do  not  believe  that 
 this  rule  change  would  have  a  potential  impact  on  small  entities  because  it  would  be  voluntary  in  nature,  we  seek  comment  on  whether  a  special  approach  toward  any  possible  compliance  burdens  on  small 
 entities  might  be  appropriate. 
 Federal  Rules  Which  Duplicate,  Overlap,  or  Conflict  with  the  Commission's  Proposals.  None. 


 51  5  U.  S.  C.    603(  b). 
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 SEPARATE  STATEMENT  OF  COMMISSIONER  KATHLEEN  Q.  ABERNATHY 
 Re:  Digital  Broadcast  Content  Protection,  Report  and  Order  and  Further  Notice  of  Proposed  Rulemaking,  MB  Docket  02-  230  (adopted  November  4,  2003) 
 Todays  decision  is  illustrative  of  the  complex  policy  debates  that  arise  as  we  move  forward  with  the  digital  transition.  In  this  instance,  the  debate  centers  on  potential  piracy  problems  that  arise  when 
 digital  content  is  delivered  by  free  over-  the-  air  broadcast  signals.  Not  surprisingly,  content  providers  do  not  want  their  digital  TV  programs  pirated  and  retransmitted  over  the  Internet.  Critics  of  the  broadcast 
 flag  proposal,  on  the  other  hand,  warn  against  placing  too  much  control  over  technology  choice  in  the  hands  of  the  studios.  Mindful  of  our  ongoing  obligation  to  speed  the  digital  transition  and  to  promote  the 
 viability  of  free  over-  the-  air  broadcasting  in  the  digital  age,  we  have  navigated  a  solution  that  embraces  protection  and  deters  piracy  without  sacrificing  innovation  or  frustrating  consumer  expectations. 


 I  do  recognize  that  there  are  costs,  both  actual  and  in  terms  of  consumer  expectations,  that  must  be  measured  against  the  benefits  associated  with  a  broadcast  flag  solution.  In  this  case,  however,  we  have 
 ensured  that  the  costs  imposed  on  consumers  will  be  minimal.  Unlike  encryption  at  the  source,  a  broadcast  flag  solution  will  not  render  legacy  devices  obsolete  and  will  not  force  consumers  to  purchase 
 new  or  additional  equipment  to  receive  their  broadcast  programming.  Consumers  will  be  able  to  continue  receiving  broadcast  programs  over  their  existing  television  receivers.  In  addition,  existing  recorders  and 
 playback  devices  will  continue  to  work,  and  digital  recordings  made  on  legacy  devices  will  play  on  future  compliant  machines.  52  Thus,  we  are  accommodating  to  the  greatest  extent  possible  current  consumer 
 expectations  and  uses.  Furthermore,  members  of  the  consumer  electronics  industry  have  indicated  that  the  costs  associated  with  implementing  the  broadcast  flag  will  be  minimal.  By  protecting  against  digital 
 piracy,  we  also  encourage  entertainment  companies  to  deliver  via  free  over-  the-  air  broadcast  its  most  valuable  programs. 


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


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


 52  I  do  recognize,  though,  that  a  recording  made  to  a  DVD  on  a  new  compliant  device  will  not  currently  be  able  to  be 
 viewed  on  a  legacy  DVD  player.  That  recording,  however,  can  be  played  on  the  compliant  device,  and  the  existing  non-  compliant  DVD  recorder  will  continue  to  both  record  content  and  playback  content  recorded  on  that  machine. 


 As  we  note  in  the  Order,  moreover,  this  problem  is  not  unique  to  the  broadcast  flag.  For  instance,  other  changes  to  DVD  technology,  such  as  a  transition  to  high  definition  DVD  devices,  will  create  format  compatibility  problems. 
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 STATEMENT  OF  COMMISSIONER  MICHAEL  J.  COPPS 
 APPROVING  IN  PART,  DISSENTING  IN  PART 
 Re:  Digital  Broadcast  Content  Protection 
 Striking  a  balance  between  consumers  expectations  that  they  will  be  able  to  turn  new  technologies  to  their  advantage  and  content  producers  expectations  that  they  will  be  able  to  protect  the 
 products  of  their  creative  genius  is  a  real  and  growing  challenge  as  we  enter  the  digital  age.  There  is  broad  agreement  about  the  need  to  protect  content  in  this  new  age  if  we  are  going  to  enjoy  the  full  fruits 
 of  artistic  creativity.  But  there  is  the  equally  compelling  need  to  guarantee  that  consumers  are  able  to  enjoy  the  expanded  opportunities  that  accompany  the  development  of  liberating  new  technologies.  Our 
 world  changes,  old  boundaries  are  blurred  and  then  shattered,  and  new  rules  have  to  be  developed  that  preserve  traditional  rights  even  as  they  accommodate  new  realities. 


 Even  though  todays  decision  does  not,  cannot  and  should  not  settle  these  huge  questions  of  public  policy  that  must  ultimately  be  decided  in  venues  other  than  the  FCC,  the  larger  backdrop  should  be 
 kept  in  mind  as  a  reminder  that  we  are  at  least  approaching  matters  of  great  long-  term  significance  to  the  American  people.  An  important  goal  of  todays  Commission  action  is  to  expedite  the  nations  long-delayed 
 transition  to  digital  television,  but  in  a  way  that  preserves  a  workable  balance  as  we  await  longer-term  guidance  from  Congress  and  the  Executive  Branch.  We  attempt  to  achieve  this  goal  today  by 
 resolving  a  long  deadlock  over  technologies  designed  to  provide  digital  broadcast  content  protection.  Commission  action  here  strikes  me  as  warranted  because  we  are  fast  approaching  a  situation  wherein  new 
 technologies  will  provide  arguably  too  much  power  to  those  who  would  infringe  and  pirate  the  rights  of  digital  creativity.  Such  digital  chaos  benefits  neither  the  creators  nor  the  consumers  of  what  is  sure  to  be 
 dramatic  new  content. 
 Given  digital  medias  susceptibility  to  indiscriminate  mass  online  distribution,  content  producers  may  have  significantly  greater  incentives  to  broadcast  high-  value  content  if  there  are  in  place  at  least 
 basic  protection  technologies.  If  denied  such  protection  in  one  medium  (e.  g.,  free,  over-  the-  air  broadcast  television),  they  will  migrate  their  new  content  to  other  media  (e.  g.,  subscription  cable  television).  Such  a 
 result  would  likely  discourage  new  digital  content  in  the  broadcast  medium  and  also  retard  the  statutorily-mandated  transition  to  digital  television.  Neither  outcome  is  acceptable. 


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


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


 This  Order  is  substantially  different  from  the  proposal  originally  submitted  to  the  Commission.  And  I  appreciate  the  constructive  dialogue  among  my  colleagues  that  has  allowed  us  to  reach  this 
 decision.  The  item  we  adopt  today  is  better  balanced,  more  sensitive  to  the  concerns  raised  by  consumer  groups,  and  supportive  of  multiple  technologies  and  open  processes  for  product  certification.  The 
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 creators  of  copyrighted  works  are  provided  tools  and  processes  with  which  to  protect  their  intellectual  property  in  the  digital  age.  Consumers  should  reap  the  benefits  of  significantly  more  digital  content  on 
 their  television  receivers.  Tens  of  millions  of  American  households  depend  upon  free-  over-  the-  air  broadcast  for  their  television  reception  and  a  central  purpose  of  this  decision  is  to  ensure  that  they  do  not 
 become  second-  class  consumers  of  second-  class  content. 
 This  item  has  been  improved  so  that  competition  between  protection  technologies  will  hopefully  preserve,  for  the  most  part,  consumers  reasonable  expectations.  Consumers  have  a  right  to  expect  that 
 technological  advances  will  afford  them  expanded  opportunities  generally,  and  that  the  freedom  and  vitality  of  digital  technology  will  open  up  new  options  for  the  ways  in  which  they  can  receive  and  utilize 
 new  products  and  services.  I  discuss  below  those  places  wherein  I  believe  we  fail  to  protect  consumer  interests. 


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


 So  the  fact  that  todays  Order  now  allows  multiple  firms  to  have  many  different  technologies  that  meet  our  rules  was  critical  to  our  decision.  We  reject  the  notion  that  one  industry  segment  should 
 have  gatekeeper  control  over  digital  content  protection.  Instead,  we  seek  to  establish  a  streamlined,  open  approval  process  with  a  neutral  arbiter  based  on  objective  criteria.  We  seek  multiple  interoperable 
 technologies  that  will  promote  competition  and  consumer  choice.  We  seek  to  preserve  reasonable  and  flexible  consumer  expectations  and  uses.  And  we  seek  to  avoid  stranding  legacy  equipment  that  must  be 
 replaced  to  receive  protected  content. 
 Words  written  in  a  Commission  Order  will  not  alone  guarantee  success.  We  must  remain  vigilant  during  the  interim  procedures  established  today  and  work  expeditiously  to  develop  a  longer  term  process 
 that  includes  clear  technical  criteria  with  a  transparent  road  to  approval.  That  is  one  of  the  principal  purposes  of  the  Further  Notice  that  we  approve  today.  As  we  move  forward,  we  must  also  be  careful  not 
 to  chill  development  of  software  solutions  generally,  particularly  for  beneficial  purposes  such  as  software  defined  radio. 


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


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


 As  a  final  matter,  I  note  that  I  vote  for  todays  Order  with  the  understanding  that  it  will  not  affect  the  rights  or  remedies  available  under  our  nations  copyright  laws  and  cognizant  that  it  is  Congress  that 
 ultimately  sets  national  policy  in  this  critical  and  sensitive  area. 
 Again,  my  thanks  to  the  Bureau  for  working  through  an  immensely  complex  and  controversial  proceeding  and  to  my  colleagues  for  their  spirit  of  dialogue  and  cooperation  that  permitted  us  to  achieve  a 
 satisfactory  outcome  today.  We  still  have  much  to  do  in  working  through  the  implementation  of  todays  Order  and  developing  answers  to  the  many  going  forward  questions  raised  in  the  further  notice.  I  urge 
 all  interested  parties    and  they  are,  as  we  know,  many    to  participate  fully  as  we  attempt  to  develop  policies  and  procedures  for  moving  ahead  in  an  area  wherein  about  the  only  certain  thing  is  change. 
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 STATEMENT  OF  COMMISSIONER  JONATHAN  S.  ADELSTEIN 
 APPROVING  IN  PART,  DISSENTING  IN  PART 


 Re:  Digital  Broadcast  Content  Protection,  Report  and  Order  and  Further  Notice  of  Proposed  Rulemaking,  MB  Docket  02-  230 
 Todays  action  presents  a  difficult  and  complex  challenge.  It  is  no  small  matter  to  require  for  the  first  time  a  content  protection  system  for  free  broadcast  television  delivered  over  the  public  airwaves. 
 Presented,  as  we  have  been,  with  a  perceived  threat  that  stands  to  undermine  the  very  broadcast  system  that  has  benefited  our  society  since  its  inception  in  1927,  I  am  willing  to  take  that  bold  step.  And  being  a 
 firm  believer  in  technological  innovation,  I  believe  this  step  can  be  done  in  a  way  that  benefits  all  and  ushers  in  a  new  and  innovative  era  of  digital  television. 


 But  this  step  deserves  careful  consideration  and  broad  public  debate.  I  dissent  in  part,  as  I  do  not  believe  we  have  fully  achieved  our  goal  of  creating  an  effective  and  appropriately  tailored  pro-  consumer 
 digital  broadcast  television  protection  regime. 
 Although  we  have  recently  endorsed  a  copy  protection  system  for  cable  plug-  and-  play  devices,  we  should  not  automatically  assume  that  such  a  model  should  apply  directly  in  the  broadcast  context. 
 Instead,  we  should  start  by  taking  a  step  back  and  examining  the  nature  of  broadcast  television  and  the  implications  of  requiring  a  content  protection  regime.  Indeed,  not  all  consumers  have  the  desire  or  ability 
 to  afford  cable  or  other  pay  television  services.  These  are  the  very  consumers  who  may  find  it  difficult  to  replace  equipment  as  content  protection  technologies  change  over  time.  Yet,  these  are  also  the  people 
 who  would  benefit  the  most  from  high  value  content  being  available  on  the  public  airwaves.  It  is  these  stakeholders  whose  interest  is  foremost  in  my  mind  as  I  analyze  todays  Order. 


 This  item  confronts  us  with  the  current  conditions  facing  the  entertainment  industry.  Without  question,  the  indiscriminate  mass  redistribution  of  copyrighted  works  over  the  Internet  may  well  violate 
 our  nations  copyright  laws  and  strikes  at  the  core  economic  equation  for  creators.  Such  redistribution  is  happening  today  with  analog  and  downresolutioned  entertainment  content.  While  the  entertainment 
 industry  acknowledges  that  the  actual  economic  threat  attributable  to  the  widespread  indiscriminate  sharing  of  digital  television  files  is  not  imminent,  they  ask  us  to  act  today  as  a  precaution  for  the  future. 
 They  say  without  protection,  high  value  content  will  not  be  made  available  on  the  broadcast  medium.  Given  the  circumstances  and  the  potential  harm  to  creators,  it  is  appropriate  to  offer  some  baseline 
 protection. 
 At  the  same  time,  our  action  should  not  give  content  providers  a  sense  of  complacency  to  avoid  actively  seeking  out  new  and  evolving  business  models  that  embrace  exciting  new  technologies  and 
 unleash  opportunities  for  eager  consumers.  There  is  no  telling  what  effect  the  prominent  offering  and  marketing  of  lawful  and  affordable  Internet-  based  alternatives  could  have  on  offsetting  piracy, 
 particularly  in  light  of  recent  efforts  to  step  up  consumer  education  and  enforcement. 
 Taking  preemptive  action  to  impose  a  mandated  content  protection  regime  inherently  carries  some  risk.  It  is  well  known  that  the  entertainment  industry  in  the  past  has  feared  technological  advances 
 that  have  matured  to  the  benefit  of  their  industry.  We  must  be  careful  not  to  cut  off  through  preemptive  regulation  innovation  that  would  lead  to  products  and  technologies  that  benefit  consumers,  manufacturers, 
 and  the  creative  community  alike. 
 I  have  confidence  that  if  we  do  this  right,  a  digital  broadcast  content  protection  system  can  carry  out  this  vision  and  become  a  winning  solution  for  all.  I  appreciate  the  willingness  of  my  colleagues  and 
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 the  Bureau  to  engage  in  a  constructive  dialogue  on  the  implications  of  various  proposals.  I  believe  todays  result  is  better  because  of  that  dialogue.  I  continue  to  have  concerns  with  certain  aspects  of  this 
 decision,  which  I  outline  below. 
 Today  we  put  in  place  a  regime  to  afford  basic  protection  against  the  mass  indiscriminate  online  redistribution  of  digital  television  content.  Our  action  makes  several  important  improvements  over  some 
 proposals  that  were  initially  offered.  Most  notably,  we  have  taken  steps  to  assure  that  no  single  technology  or  set  of  companies  is  given  a  government  endorsement  to  control  all  digital  television 
 reception  and  downstream  distribution  and  recording.  Our  procedures  ensure  that  no  industry  segment  has  veto  power  over  the  approval  of  technologies  for  use  with  the  flag.  As  we  seek  further  comment  on  a 
 long-  term  technology  approval  process,  we  have  sought  to  establish  interim  procedures  that  are  open  and  transparent.  We  have  specified  that  the  initial  approval  of  technologies  will  be  pursuant  to  functional 
 requirements  and  a  non-  exhaustive  list  of  objective  criteria,  without  providing  any  entity  a  potentially  dangerous  first-  mover  advantage.  Recognizing  the  steady  convergence  of  computing  and  consumer 
 electronics  equipment  in  the  home,  our  procedures  are  not  intended  to  provide  a  regulatory  advantage  to  anyone. 


 As  technologies  come  forward  for  approval,  I  will  pay  particular  attention  to  the  competitive  impact  and  the  manner  in  which  the  content  protection  technology  binds  other  downstream  networking  or 
 recording  technologies,  and  the  impact  of  the  particular  authentication  method  on  consumers  and  their  privacy  protections.  Given  the  potential  use  of  licensing  terms  to  stifle  competition,  I  expect  licenses  will 
 be  made  available  on  fair,  reasonable  and  nondiscriminatory  terms,  and  will  contain  adequate  dispute  resolution  procedures  where  objections  arise.  Should  any  one  technology  become  the  de  facto  standard 
 for  all  digital  television  equipment,  a  closer  examination  by  the  Commission  may  be  required. 
 It  is  my  fervent  hope  that  a  variety  of  strategies  and  technologies  will  be  deployed  to  help  reach  our  ultimate  goal  of  preserving  high  value  content  on  broadcast  television  while  providing  maximum 
 interoperability,  portability,  and  ease  of  use  for  consumers.  Consumers  will  benefit  from  broad  choice  among  competing  interoperable  content  delivery  and  protection  technologies,  as  manufacturers  can  be 
 expected  to  build  the  products  most  likely  to  be  embraced  by  consumers.  I  would  be  concerned  if  technologies  came  before  us  that  presumed  that  every  consumer  engaged  in  unlawful  redistribution  or  that 
 restricted  or  required  a  payment  for  legitimate  activities  that  consumers  do  today. 
 Nor  should  the  current  analog  world  necessarily  be  the  model  for  what  consumers  can  reasonably  expect  to  do  in  a  digital  world.  We  are  undertaking  the  digital  television  transition  to  benefit  consumers 
 and  usher  in  opportunities  for  new  and  innovative  ways  consumers  can  watch,  record  and  enjoy  television.  A  digital  world  is  likely  to  accommodate  more  consumer  uses  of  content  that  do  not  run  afoul 
 of  the  copyright  laws,  and  as-  yet-  undetermined  innovative  features  for  time  and  space  shifting,  excerpting,  and  transferring  content  lawfully.  We  have  no  way  of  knowing  who  or  what  will  be  the  next 
 TiVo-  like  innovation  to  come  forward  and  be  enthusiastically  embraced  by  consumers. 
 My  fear  with  todays  action  is  that  one  technology  could  become  the  gatekeeper  across  various  communications  platforms  and  could  curtail  technological  innovation.  That  one  technology,  for  example, 
 could  bind  consumers  to  watch  content  at  particular  times,  on  particular  devices,  or  subject  to  other  terms  and  conditions  that  are  more  than  a  speed  bump  in  a  consumers  viewing  and  enjoying  of  digital 
 television.  Should  that  occur,  consumer  frustration  and  backlash  is  likely,  and  would  serve  neither  product  manufacturers  nor  the  entertainment  industry.  Another  fear  of  mine  is  that  consumers,  reporters, 
 libraries,  educators,  the  disabilities  community,  or  other  entities  who  today  use  copyrighted  material  in  numerous  lawful  ways  without  the  prior  permission  of  the  copyright  owner,  will  be  subjected  to  a  system 
 of  preapproval  or  payment  for  the  continued  exercise  of  those  legally  protected  uses.  Worse  yet,  that  the  resulting  technologies  could  intrude  upon  the  personal  privacy  of  consumers  by  collecting  information 
 about  users  or  their  viewing  habits. 
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 Thousands  of  people  contacted  us  and  urged  us  not  to  take  this  preemptive  action.  Many  consumers  are  concerned  about  the  effect  on  their  use  and  enjoyment  of  television,  as  well  as  their 
 personal  privacy.  Given  the  possibility  that  the  Digital  Millennium  Copyright  Act  might  apply,  content  protection  technologies  have  the  potential  to  override  lawful  uses  of  digital  content.  With  the  case-specific 
 and  evolutionary  nature  of  fair  use,  it  is  a  hard  concept  to  define  technologically  and  not  impact  it  legally.  Yet  the  Commission  has  no  authority  to  do  the  latter. 


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


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


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


 I  dissent  in  part  because  I  believe  we  fail  to  protect  the  public  interest  in  some  key  ways.  First,  I  must  dissent  from  the  unlimited  scope  of  todays  protection  regime.  The  Order  does  not  rule  out  the  use 
 of  the  flag  for  content  that  is  in  the  public  domain.  The  flag  was  presented  as  a  means  of  preventing  the  illegal  mass  redistribution  of  digital  broadcast  content  over  the  Internet.  By  not  limiting  use  of  the  flag 
 only  to  copyrighted  works,  I  believe  our  scope  not  only  exceeds  the  purposes  for  which  we  take  preemptive  action  but  also  fails  to  reflect  the  record  before  us  of  the  perceived  threat  and  potentially 
 supersedes  the  balance  of  copyright  law.  While  the  item  professes  not  to  affect  copyright  law,  by  mandating  a  technological  protection  regime  that  can  be  used  to  restrict  the  flow  of  content  that  is  in  the 
 public  domain,  or  is  not  subject  to  copyright  protection  for  other  reasons,  I  am  not  convinced  that  we  have  adhered  to  our  well-  meaning  pronouncements.  Presumably,  there  is  some  greater  public  good  in  the  wide 
 dissemination  of  non-  copyrightable  works  or  works  for  which  the  copyright  protection  has  expired.  If  the  barrier  to  the  unleashing  of  high  value  content  on  digital  broadcast  television  is  Internet  piracy,  then  I  fail 
 to  see  how  a  regime  that  could  end  up  locking  up  public  domain  or  non-  copyrightable  works  is  carefully  focused  to  achieve  that  result. 
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 Nor  do  I  take  lightly  a  government-  required  protection  regime  that  could  restrict  the  free  flow  of  news  or  public  affairs  programming  which  is  at  the  heart  of  public  discourse  in  our  society.  Our  country 
 has  a  long  history  of  promoting  widespread  public  access  to  broadcast  television.  In  return  for  the  free  use  of  the  spectrum,  broadcasters  are  expected  to  serve  their  local  communities.  Consistent  with 
 copyright  law,  the  wider  the  dissemination  of  news  and  public  affairs  programming,  the  better  our  communities  and  our  democracy  are  served.  The  lawful  consumer  and  educational  use  of  content  for 
 scholarship,  commentary,  criticism,  teaching,  research,  or  other  socially  beneficial  purposes  should  not  be  hindered.  I  see  little  threat  to  content  creators  from  a  parent  e-  mailing  to  family  members  and  friends  a 
 local  television  news  clip  of  a  son  or  daughter  receiving  a  community  service  award,  or  a  teacher  choosing  to  show  his  or  her  classroom  a  rebroadcast  of  a  space  shuttle  launch  using  an  Internet 
 connection. 
 Nor  do  I  see  a  persuasive  reason  to  restrict  the  free  flow  of  political  speech  which  yields  important  societal  benefits.  By  subjecting,  say,  the  State  of  the  Union  address  to  mandated  redistribution 
 control  technologies,  have  we  not  undermined  a  core  value  of  our  society?  I  search  in  vain  for  record  support  or  a  reason  to  lock  up  political  speech  from  widespread  distribution.  Because  I  believe  the 
 Orders  boundless  scope  insufficiently  addresses  these  values,  I  dissent. 
 I  also  dissent  to  the  failure  of  our  interim  criteria  for  examining  digital  content  protection  technologies  to  address  important  consumer  issues.  I  would  have  explicitly  indicated  that  the 
 Commission  will  consider  the  impact  of  a  technology  on  personal  privacy  and  not  accept  any  technology  that  intrudes  too  greatly  into  this  space.  While  we  are  free  to  examine  privacy  implications  under  our 
 non-  exhaustive  list  of  criteria,  given  the  importance  of  improper  use  of  information  about  consumers  viewing  habits,  I  would  have  made  our  intention  to  protect  consumer  privacy  explicit  and  unmistakable. 


 By  going  forward  with  todays  adoption  of  a  broadcast  flag  regime  to  address  a  perceived  threat,  the  Commission  could  have  put  in  place  a  way  to  evaluate  whether  we  are  achieving  the  goal  that 
 underlies  our  regulatory  action    the  availability  of  high  value  content  on  free  over-  the-  air  broadcast  television.  Such  efforts  would  benefit  the  Commission  should  the  flag  be  the  just  the  first  in  a  series  of 
 requests  to  mandate  even  further  content  protection  measures. 
 Content  providers  have  raised  a  real  concern  that  the  threat  of  indiscriminate  online  redistribution  of  digital  television  content  will  hold  back  high  value  content  from  our  nations  public  airwaves.  By 
 providing  some  basic  assurance  that  the  high  value  content  that  is  broadcast  over  digital  television  will  not  be  widely  and  indiscriminately  redistributed  online,  we  give  greater  incentive  for  content  producers  to 
 make  that  content  available  on  free  over-  the-  air  television. 
 Not  many  people  a  decade  ago  foresaw  the  Internets  rapid  evolution  into  a  tool  of  consumer  empowerment  for  both  legitimate  and  harmful  uses.  As  we  take  steps  to  protect  free  over-  the-  air  digital 
 broadcast  television  against  the  powers  of  the  Internet,  we  must  be  cautious,  for  the  sake  of  consumers  and  the  entertainment  industry  itself,  not  to  trample  its  lawful  use  or  inadvertently  stifle  the  next 
 innovative  distribution  model  that  could  revolutionize  the  entertainment  industry. 
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