*Pages 1--91 from  Microsoft Word - 6260.doc*
 Federal  Communications  Commission  FCC  01-  22 
 1 
 Before  the 
 Federal  Communications  Commission  Washington,  D.  C.  20554 

 In  the  Matter  of:  ) 
 ) 
 Carriage  of  Digital  Television  Broadcast  )  CS  Docket  No.  98-  120 
 Signals  ) 
 ) 
 Amendments  to  Part  76  ) 
 of  the  Commission's  Rules  ) 
 ) 
 Implementation  of  the  Satellite  Home  ) 
 Viewer  Improvement  Act  of  1999:  ) 
 ) 
 Local  Broadcast  Signal  Carriage  Issues  )  CS  Docket  No.  00-  96 
 ) 
 Application  of  Network  Non-  Duplication,  )  CS  Docket  No.  00-  2 
 Syndicated  Exclusivity  and  Sports  Blackout  ) 
 Rules  to  Satellite  Retransmission  of  ) 
 Broadcast  Signals  ) 

 FIRST  REPORT  AND  ORDER  AND  FURTHER  NOTICE  OF  PROPOSED  RULE  RULEMAKING 
 Adopted:  January  18,  2001  Released:  January  23,  2001  * 
 Comment  Date:  (45  days  from  the  date  of  publication  in  the  Federal  Register)  Reply  Comment  Date: 
 (90  days  from  the  date  of  publication  in  the  Federal  Register) 

 By  the  Commission:  Commissioner  Ness  approving  in  part,  dissenting  in  part,  and  issuing  a  statement; 
 Commissioner  Furchtgott-  Roth  approving  in  part,  dissenting  in  part,  and  issuing  a 
 statement  at  a  later  date;  Commissioner  Powell  issuing  a  statement;  Commissioner 
 Tristani  dissenting  and  issuing  a  statement. 

 TABLE  OF  CONTENTS 
 Paragraph 
 I.  INTRODUCTION  1 
 II.  BACKGROUND  5 
 III.  CARRIAGE  DURING  THE  DTV  TRANSTITION  8 
 A.  Commercial  Television  Stations  13 
 B.  Noncommercial  Educational  Television  Stations  17 
 IV.  RETRANSMISSION  CONSENT  ISSUES  24 

 *  The  final  version  of  this  Report  and  Order  and  Further  Notice  of  Proposed  Rulemaking  was  approved  by  the 
 Commission  on  1/  19/  01. 
1
 Federal  Communications  Commission  FCC  01-  22 
 2 
 V.  DIGITAL  BROADCAST  SIGNAL  CARRIAGE  REQUIREMENTS  37 
 A.  Channel  Capacity  37 
 B.  Signal  Quality  44 
 C.  Content  of  Signals  Subject  to  Mandatory  Carriage  47 
 D.  Duplicative  Signals  66 
 E.  Material  Degradation  70 
 F.  Set  Top  Box  Availability  77 
 G.  Channel  Location  81 
 H.  Market  Modifications  84 
 I.  Digital  Signal  Carriage  on  PEG  Channels  86 
 J.  Complaints  and  Enforcement  87 
 VI.  CHANGES  TO  OTHER  PART  76  REQUIREMENTS  88 
 A.  Open  Video  Systems  88 
 B.  Subscriber  Notification  89 
 C.  Cable  Antenna  Relay  Service  90 
 D.  Program  Exclusivity  Rules  91 
 E.  Tiers  and  Rates  101 
 VII.  FURTHER  NOTICE  OF  PROPOSED  RULEMAKING  112 
 A.  Digital  Television  Transition  and  Mandatory  Carriage  117 
 B.  Channel  Capacity  123 
 C.  Voluntary  Carriage  Agreements  128 
 D.  Tier  Placement  132 
 E.  Per  Channel  Rate  Adjustments  133 
 F.  Satellite  Home  Viewer  Improvement  Act  Issues  135 
 VIII.  PROCEDURAL  MATTERS  138 

 Appendix  A:  Comments  Filed  in  CS  Dkt.  No.  98-  120 
 Appendix  B:  Final  Regulatory  Flexibility  Act  Analysis 
 Appendix  C:  Initial  Regulatory  Flexibility  Act  Analysis 
 Appendix  D:  Rule  Changes 

 I.  INTRODUCTION 
 1.  In  the  Notice  of  Proposed  Rulemaking  (  Notice)  in  this  docket,  we  sought  comment  on  a 
 variety  of  issues  relating  to  the  carriage  of  digital  television  broadcast  signals  by  cable  television 
 operators.  1  With  this  First  Report  and  Order  and  Further  Notice  of  Proposed  Rulemaking  (  Report  and 
 Order  /  FNPRM),  we  resolve  a  number  of  technical  and  legal  issues  related  to  the  carriage  of  digital 
 broadcast  signals  under  Sections  325  (retransmission  consent),  336  (broadcast  spectrum  flexibility  and 
 ancillary  and  supplementary  services),  614  (mandatory  carriage  of  commercial  television  stations)  and 
 615  (mandatory  carriage  of  noncommercial  educational  television  stations)  of  the  Communications  Act  of 
 1934  (  Act).  2  In  addition,  we  clarify  that  a  digital-  only  television  station  may  assert  its  right  to  carriage. 

 1  Carriage  of  the  Transmissions  of  Digital  Television  Broadcast  Stations,  Notice  of  Proposed  Rulemaking,  13  FCC 
 Rcd.  15092  (1998)  (  DTV  Must  Carry  Notice). 
 2  We  first  sought  and  received  comments  addressing  digital  broadcast  television  carriage  issues  in  1995  in  another 
 docket.  See  Advanced  Television  Systems  and  Their  Impact  Upon  the  Existing  Television  Broadcast  Service,  Fourth 
 Further  Notice  of  Proposed  Rulemaking  and  Third  Notice  of  Inquiry,  10  FCC  Rcd.  10540  (1995)  (  DTV  Fourth 
 FNPRM).  We  will  refer  to  all  Orders  in  Mass  Media  Docket  No.  87-  268,  such  as  this  one,  as  DTV  Notices  or 
 Orders,  depending  upon  the  item. 

 (continued.) 
2
 Federal  Communications  Commission  FCC  01-  22 
 3 
 Specifically,  new  television  stations  that  transmit  only  digital  signals,  and  current  television  stations  that 
 return  their  analog  spectrum  allocation  and  convert  to  digital  operations,  must  be  carried. 

 2.  In  this  Report  and  Order,  we  resolve  matters  relating  to  retransmission  consent,  content-to- 
 be-  carried,  channel  capacity,  channel  placement,  and  a  host  of  other  operational  issues.  Our  principal 
 goal  is  to  provide  a  framework  for  private  resolution  of  the  issues  raised  in  the  Notice,  wherever  possible, 
 and  to  give  guidance  on  technical  issues  relating  to  the  carriage  of  digital  television  signals.  Based  on 
 the  record  currently  before  us,  we  believe  that  the  statute  neither  mandates  nor  precludes  the  mandatory 
 simultaneous  carriage  of  both  a  television  stations  digital  and  analog  signals  (  dual  carriage). 

 3.  On  this  point,  we  tentatively  conclude  that,  based  on  the  existing  record  evidence,  a  dual 
 carriage  requirement  appears  to  burden  cable  operators  First  Amendment  interests  substantially  more 
 than  is  necessary  to  further  the  governments  substantial  interests  of  preserving  the  benefits  of  free  over-the- 
 air  local  broadcast  television;  promoting  the  widespread  dissemination  of  information  from  a 
 multiplicity  of  sources;  and  promoting  fair  competition  in  the  market  for  television  programming.  3 
 However,  in  order  to  ensure  that  we  have  a  sufficient  body  of  evidence  before  us  in  which  to  evaluate 
 this  issue  fully,  so  that  we  can  ultimately  resolve  the  issue  of  mandatory  dual  carriage,  we  find  it 
 necessary  to  issue  a  Further  Notice  of  Proposed  Rulemaking  addressing  several  critical  questions  at  the 
 center  of  the  carriage  debate  including,  inter  alia:  (1)  whether  a  cable  operator  will  have  the  channel 
 capacity  to  carry  the  digital  television  signal  of  a  station,  in  addition  to  the  analog  signal  of  that  same 
 station,  and  without  displacing  other  programming  or  services;  (2)  whether  market  forces,  through 
 retransmission  consent,  will  provide  cable  subscribers  access  to  digital  television  signals  and  television 
 stations  access  to  carriage  on  cable  systems;  and  (3)  how  the  resolution  of  the  carriage  issues  would 
 impact  the  digital  transition  process.  The  responses  to  these  and  other  inquiries  will  help  determine  the 
 answer  to  the  dual  carriage  issue.  4  In  the  Further  Notice,  we  also  raise  questions  concerning  the 
 applicability  of  the  rules  and  policies  we  adopt  herein  to  satellite  carriers  under  the  Satellite  Home 
 Viewer  Improvement  Act  of  1999  (  SHVIA).  5  These  and  other  matters  will  be  addressed  in  the  second 
 phase  of  this  proceeding. 

 4.  At  the  outset,  we  recognize  a  number  of  statutory  and  public  policy  goals  inherent  in 
 Section  614  and  615,  and  other  parts  of  the  Act.  These  include:  (1)  maximizing  incentives  for  inter- 

 (  continued  from  previous  page) 
 We  note  that  matters  concerning  compatibility  between  digital  cable  operations  and  digital  television  reception 
 equipment,  which  were  once  part  of  this  docket,  have  been  addressed  by  the  Commission  in  a  separate  proceeding. 
 See  Compatibility  Between  Cable  Systems  and  Consumer  Electronic  Equipment,  Report  and  Order  in  PP  Docket  No. 
 00-  67  (rel.  Sept.  15,  2000). 

 3  See  Turner  Broadcasting  System,  Inc.  v.  U.  S..,  520  U.  S.  180  (1997). 

 4  We  will  be  sending  out  a  channel  capacity  and  retransmission  consent  survey  to  16  cable  operators  in  a  separately 
 issued  item  (  Cable  Survey)(  see  below  for  more  information).  The  responses  from  the  survey  will  be  incorporated 
 into  the  Second  Report  and  Order  in  this  proceeding. 

 5  The  Commission  must  apply  the  cable  carriage  rules  in  a  comparable  manner  to  satellite  carriers.  Satellite  Home 
 Viewer  Improvement  Act  of  1999  (  SHVIA),  Pub.  L.  No.  106-  113,  113  Stat.  1501,  1501A-  526  to  1501A-  545  (Nov. 
 29,  1999);  See  also  Implementation  of  the  Satellite  Home  Viewer  Improvement  Act  of  1999:  Broadcast  Signal 
 Carriage  Issues,  Report  and  Order,  FCC  00-  417  (rel.  November  30,  2000).  See  also  Implementation  of  the  Satellite 
 Home  Viewer  Improvement  Act  of  1999:  Application  of  Network  Non-  duplication,  Syndicated  Exclusivity  and  Sports 
 Blackout  Rules  to  Satellite  Retransmission  of  Broadcast  Signals,  Report  and  Order,  FCC  00-  388,  (rel.  November  2, 
 2000). 
3
 Federal  Communications  Commission  FCC  01-  22 
 4 
 industry  negotiation;  (2)  minimizing  disruption  to  cable  subscribers  as  well  as  the  cable  industry;  (3) 
 promoting  efficiency  and  innovation  in  new  technologies  and  services;  (4)  advancing  multichannel  video 
 competition;  (5)  maximizing  the  introduction  of  digital  broadcast  television;  and  (6)  maintaining  the 
 strength  and  competitiveness  of  broadcast  television.  Our  goal  is  to  facilitate  an  efficient  market-oriented 
 structure  that  implements  the  Act  in  a  manner  that,  to  the  extent  possible,  permits  private 
 agreements  to  resolve  issues.  Based  on  the  importance  of  cable  television  in  the  video  programming 
 marketplace,  we  believe  that  the  cooperation  and  participation  by  the  cable  industry  during  the  transition 
 period  would  further  the  successful  introduction  of  digital  broadcast  television. 

 II.  BACKGROUND 
 5.  Pursuant  to  Section  614  of  the  Act,  and  the  implementing  rules  adopted  by  the  Commission 
 in  Implementation  of  the  Cable  Television  Consumer  Protection  and  Competition  Act  of  1992,  Broadcast 
 Signal  Carriage  Issues  Report  and  Order  (  Must  Carry  Order),  6  a  commercial  television  broadcast  station 
 is  entitled  to  request  carriage  on  cable  systems  located  within  the  stations  market.  A  stations  market  for 
 this  purpose  is  its  designated  market  area,  or  DMA,  as  defined  by  Nielsen  Media  Research.  7  The  Act  states 
 that  systems  with  more  than  12  usable  activated  channels  must  carry  local  commercial  television  stations, 
 up  to  one-  third  of  the  aggregate  number  of  usable  activated  channels  of  such  system[  s].  8  Beyond  this 
 requirement,  the  carriage  of  additional  television  stations  is  at  the  discretion  of  the  cable  operator.  In 
 addition,  cable  systems  are  obliged  to  carry  local  noncommercial  educational  television  stations  (  NCE 
 stations)  according  to  a  different  formula  and  based  upon  a  cable  systems  number  of  usable  activated 
 channels.  9  Low  power  television  stations,  including  Class  A  stations,  may  request  carriage  if  they  meet  six 
 statutory  criteria.  10  A  cable  operator,  however,  cannot  carry  a  low  power  television  station  in  lieu  of  a  full 
 power  television  station.  11 

 6  Broadcast  Signal  Carriage  Issues,  8  FCC  Rcd  2965  (1993)  ("  Must  Carry  Order");  See  also,  Broadcast  Signal 
 Carriage  Issues,  MM  Docket  92-  259,  9  FCC  Rcd  6723  (1994)  ("  Must  Carry  Reconsideration"). 
 7  A  DMA  is  a  geographic  market  designation  that  defines  each  television  market  exclusive  of  others,  based  on  measured 
 viewing  patterns. 

 8  47  U.  S.  C.  534(  b)(  1)(  B);  47  C.  F.  R.  76.56(  b)(  2).  A  cable  operator  of  a  cable  system  with  12  or  fewer  usable 
 activated  channels  shall  carry  the  signals  of  at  least  three  local  commercial  television  stations,  except  that  if  such  a 
 system  has  300  or  fewer  subscribers,  it  shall  not  be  subject  to  any  requirements  under  this  section  so  long  as  such 
 system  does  not  delete  from  carriage  by  that  system  any  signal  of  a  broadcast  television  station.  47  U.  S.  C. 
 534(  b)(  1)(  A);  47  C.  F.  R.  76.56(  b)(  1). 

 9  Noncommercial  television  stations  are  considered  qualified,  and  may  request  carriage  if  they:  (1)  are  licensed  to  a 
 community  within  fifty  miles  of  the  principal  headend  of  the  cable  system;  or  (2)  place  a  Grade  B  contour  over  the 
 cable  operator's  principal  headend.  Cable  systems  with:  (1)  12  or  fewer  usable  activated  channels  are  required  to 
 carry  the  signal  of  one  qualified  local  noncommercial  educational  station;  (2)  13-  36  usable  activated  channels  are 
 required  to  carry  no  more  than  three  qualified  local  noncommercial  educational  stations;  and  (3)  more  than  36  usable 
 activated  channels  shall  carry  at  least  three  qualified  local  noncommercial  educational  stations.  See  47  U.  S.  C. 
 535(  b)  and  (e);  47  C.  F.  R.  76.  56(  a). 

 10  See  47  U.  S.  C.  534(  h)(  2);  47  C.  F.  R.  76.55(  d). 

 11  47  U.  S.  C.    534(  b)(  1)(  A)  and  (h)(  2);  47  C.  F.  R.  76.  56(  b)(  1)  and  (b)(  4)(  i). 
4
 Federal  Communications  Commission  FCC  01-  22 
 5 
 6.  Cable  operators  are  currently  required  to  carry  local  television  stations  on  a  tier  of  service 
 provided  to  every  subscriber  12  and  on  certain  channel  positions  designated  in  the  Act.  13  Cable  operators 
 are  prohibited  from  degrading  a  television  stations  signal,  14  but  are  not  required  to  carry  duplicative 
 signals  15  or  video  that  is  not  considered  primary.  16  Television  stations  may  file  complaints  with  the 
 Commission  against  cable  operators  for  non-  compliance  with  Sections  614  and  Section  615.  17  In 
 addition,  both  cable  operators  and  television  stations  may  file  petitions  with  the  Commission  to  either 
 expand  or  contract  a  commercial  television  stations  market  for  broadcast  signal  carriage  purposes.  18 
 These  statutory  requirements  were  implemented  by  the  Commission  in  1993,  19  and  are  reflected  in 
 Sections  76.56-  64  of  the  Commissions  rules. 

 7.  In  a  recent  Memorandum  Opinion  and  Order  regarding  band-  clearing  of  the  700  MHz 
 spectrum  (  700  MHz  Order),  the  Commission  reiterated  that  cable  carriage  can  play  an  important  role 
 as  an  alternative  distribution  channel  during  the  transition  period  by  providing  continued  service  to 
 viewers  who  would  otherwise  be  deprived  of  broadcast  service.  20  Although  the  Commission  stated  that  it 
 would  be  considering  the  scope  and  manner  of  cable  carriage  of  digital  broadcast  signals  in  this 
 proceeding,  it  discussed  the  cable  industrys  carriage  obligations  for  future  digital  television  signals  in 
 the  700  MHz  Order.  First,  the  Commission  clarified  that  cable  systems  are  ultimately  obligated  to  accord 
 carriage  rights  to  local  broadcasters  digital  signals.  21  Specifically,  the  Commission  stated  that  existing 
 analog  stations  that  return  their  analog  spectrum  allocation  and  convert  to  digital  are  entitled  to 
 mandatory  carriage  for  their  digital  signals  consistent  with  applicable  statutory  and  regulatory 
 provisions.  22  The  Commission  also  stated  that  to  facilitate  the  continuing  availability  during  the  transition 
 of  the  analog  signal  of  a  broadcaster  who  is  party  to  a  voluntary  band  clearing  agreement  with  new  700 
 MHz  licensees,  such  a  broadcaster  could,  in  this  context  and  at  its  own  expense,  provide  its  broadcast 

 12  See  47  U.  S.  C.  534(  b)(  7);  47  U.  S.  C.  535(  h). 

 13  See  47  U.  S.  C.  534(  b)(  6);  47  U.  S.  C.  535(  g)(  5). 
 14  See  47  U.  S.  C.  534(  b)(  4)(  A);  47  U.  S.  C.  535(  g)(  2). 
 15  See  47  U.  S.  C.  534(  b)(  5);  47  U.  S.  C.  535(  b)(  3)(  C). 
 16  See  47  U.  S.  C.  534(  b)(  3)(  A);  47  U.  S.  C.  535(  g). 
 17  See  47  U.  S.  C.    534(  d)  and  535(  j).  See  also  47  C.  F.  R.  76.  61. 
 18  See  47  U.  S.  C.  534(  h)(  1)(  C).  See  also  47  C.  F.  R.  76.59. 
 19  See  Must  Carry  Order,  8  FCC  Rcd  2965. 
 20  See  Service  Rules  for  the  746-  764  and  776-  794  MHz  Bands,  and  Revisions  to  Part  27  of  the  Commissions  Rules, 
 Memorandum  Opinion  and  Order  and  Further  Notice  of  Proposed  Rulemaking,  FCC  00-  224  at  para.  65  (released 
 June  30,  2000)(  700  MHz  Order). 

 21  See  700  MHz  Order  at  para.  65. 

 22  Id. 
5
 Federal  Communications  Commission  FCC  01-  22 
 6 
 digital  signal  in  an  analog  format  for  carriage  on  cable  systems.  23  Specifically,  the  Commission  stated 
 that,  in  these  circumstances,  nothing  prohibits  the  cable  system  from  providing  such  signals  in  an  analog 
 format  to  subscribers,  in  addition  to  or  in  place  of  the  broadcast  digital  signal,  pursuant  to  an  agreement 
 with  the  broadcaster.  24 

 III.  CARRIAGE  DURING  THE  DTV  TRANSITION 
 8.  The  statutory  provision  triggering  this  rulemaking  is  found  in  Section  614(  b)(  4)(  b)  of  the 
 Act.  This  section  requires  that: 

 At  such  time  as  the  Commission  prescribes  modifications  of  the  standards  for 
 television  broadcast  signals,  the  Commission  shall  initiate  a  proceeding  to 
 establish  any  changes  in  the  signal  carriage  requirements  of  cable  television 
 systems  necessary  to  ensure  cable  carriage  of  such  broadcast  signals  of  local 
 commercial  television  stations  which  have  been  changed  to  conform  with  such 
 modified  standards.  25 

 9.  In  the  Notice,  we  recognized  that,  as  a  policy  matter,  the  most  difficult  carriage  issues 
 arise  during  the  transition  because  there  will  exist,  for  a  temporary  period,  approximately  twice  as  many 
 television  broadcast  signals  as  are  now  on  the  air.  26  We  noted  that  toward  the  end  of  the  transition 
 period,  there  would  be  an  increasing  redundancy  of  basic  content  between  the  analog  and  digital  signals 
 as  the  Commissions  simulcasting  requirements  are  phased  in.  27  We  recognized  that,  to  the  extent  that  the 
 Commission  imposes  a  dual  carriage  requirement,  cable  operators  could  be  required  to  carry  double  the 
 amount  of  television  signals,  that  will  eventually  carry  identical  content,  while  having  to  drop  various 
 and  varied  cable  programming  services  where  channel  capacity  is  limited.  28  We  sought  comment  on 
 several  carriage  options  that  address  the  needs  of  the  broadcasters  and  the  concerns  of  the  cable  operators 

 23  Id. 
 24  Id. 
 25  47  U.  S.  C.  534(  b)(  4)(  B).  There  is  little  discussion  of  this  provision  in  the  Act's  legislative  history.  However,  the 
 relevant  language  states  that  "when  the  FCC  adopts  new  standards  for  broadcast  television  signals,  such  as  the 
 authorization  of  broadcast  high  definition  television  (HDTV),  it  shall  conduct  a  proceeding  to  make  any  changes  in 
 the  signal  carriage  requirements  of  cable  systems  needed  to  ensure  that  cable  systems  will  carry  television  signals 
 complying  with  such  modified  standards  in  accordance  with  the  objectives  of  this  section."  H.  R.  Rep.  No.  102-  862, 
 102d  Cong.,  2d  Sess.  at  67  (1992);  see  also  H.  R.  Rep.  No.  102-  628,  102d  Cong.,  2d  Sess.  at  94  (1992)  (  The 
 Committee  recognizes  that  the  Commission  may,  in  the  future,  modify  the  technical  standards  applicable  to 
 television  broadcast  signals.  In  the  event  of  such  modifications,  the  Commission  is  instructed  to  initiate  a 
 proceeding  to  establish  technical  standards  for  cable  carriage  of  such  broadcast  signals  which  have  been  changed  to 
 conform  to  such  modified  signals.).  The  Senate  Committee  Report  describes  the  provision  as  providing  that  when 
 the  FCC  adopts  new  standards  for  broadcast  television  signals,  such  as  the  authorization  of  broadcast  HDTV,  it 
 shall  conduct  a  proceeding  to  make  any  changes  in  the  signal  carriage  requirements  of  cable  systems  needed  to 
 ensure  that  cable  systems  will  carry  television  signals  complying  with  such  modified  standards  in  accordance  with 
 the  objectives  of  new  Section  614.  See  S.  Rep.  No.  102-  92,  102d  Cong.,  1st  Sess.  at  85  (1991)  (  S.  Rep.  No.  102- 
 92). 

 26  DTV  Must  Carry  Notice,  13  FCC  Rcd  at  15113. 

 27  Id. 
 28  Id. 
6
 Federal  Communications  Commission  FCC  01-  22 
 7 
 as  well  as  the  timing  of  mandatory  digital  broadcast  signal  carriage  rules.  29  These  proposals  included  a 
 range  of  approaches  from  immediate  or  dual  carriage,  in  which  cable  systems  would  be  required  to 
 carry  both  analog  and  digital  commercial  television  signals  up  to  the  one-  third  capacity  limit;  30  the 
 either-  or  proposal,  in  which  broadcasters  could  choose  must  carry  for  either  their  analog  or  digital 
 signals  during  the  transition  years;  31  and  the  no  must  carry  proposal,  under  which  digital  signals  would 
 not  have  mandatory  carriage  rights  during  the  transition  period,  but  only  when  the  transition  is  over. 

 10.  The  broadcast  industry  generally  urges  the  Commission  to  impose  a  dual  carriage 
 requirement  during  the  transition  period  to  ensure  that  viewers  have  continued  access  to  all  available 
 local  television  programming.  32  In  contrast,  NCTA  and  other  cable  industry  participants  contend  that 
 digital  must  carry  will  dictate  technological  outcomes  before  the  market  is  ready.  33  Time  Warner 
 argues  that  if  cable  operators  were  required  to  carry  digital  broadcast  signals  during  the  transition,  an 
 operators  channel  line-  up  would  consist  of  blank  screens  because  most  consumers  will  not  have  digital 
 television  receivers  or  converters  allowing  them  to  display  digital  signals  on  their  analog  sets.  34  Cable 
 programmers  oppose  a  dual  carriage  requirement  because  they  fear  being  dropped  or  being  unable  to 
 gain  carriage  due  to  the  addition  of  digital  television  signals  to  a  cable  operators  channel  line-  up.  35 

 11.  There  was  support  for  the  either-  or  proposal,  particularly  from  the  public  interest 
 community.  The  United  Church  of  Christ  and  other  consumer  advocates,  filing  jointly  (  UCC),  believe 
 that  this  middle-  ground  proposal,  as  it  applies  to  commercial  television  stations,  is  the  most  market 
 friendly  and  statute  friendly  solution.  36  They  state  that  as  penetration  of  digital  receivers  increases, 
 compatibility  between  digital  television  receivers  and  cable  equipment  improves,  and  broadcasters 
 finalize  business  plans  for  their  new  digital  signal,  each  broadcaster  can  decide  which  of  its  signals  it 

 29  Id. 
 30  Id. 
 31  Id.  at  15116.  The  Commission  posited  that  the  mandatory  carriage  option  would  default  to  the  digital  signal  when 
 the  100  percent  simulcast  rule  goes  into  effect  in  2005.  Id. 

 32  See  Granite  Broadcasting  Comments  at  3;  Retlaw  Comments  at  5;  ALTV  Comments  at  22;  MSTV  Comments  at 
 52-  53;  Morgan  Murphy  Comments  at  13. 
 33  NCTA  Comments  at  3  and  39-  40;  AHN  et.  al.  Comments  at  32. 

 34  Time  Warner  Comments  at  8. 

 35  HGTV/  TV  Food,  for  example,  states  that  they  are  cable  programming  services  owned  by  the  E.  W.  Scripps 
 Company,  the  licensee  of  nine  television  broadcast  stations.  They  state  that  while  Scripps  supported  Congress' 
 analog  must  carry  requirement,  fundamental  changes  in  the  video  programming  marketplace,  now  force  it  to  oppose 
 a  digital  must  carry  requirement.  HGTV/  TV  Food  Comments  at  2. 

 36  UCC  Comments  at  11.  UCC  does  advocate,  however,  that  there  should  be  a  dual  carriage  requirement  for  non-duplicative 
 noncommercial  digital  broadcast  signals  as  those  particular  entities  truly  serve  the  public  interest.  Id.  at 
 13-  15. 
7
 Federal  Communications  Commission  FCC  01-  22 
 8 
 would  prefer  to  be  carried.  37  UCC  believes  this  option  will  help  speed  the  transition  to  digital,  preserve 
 local  broadcasting,  and  avoid  duplicative  signals  that  reduce  diversity.  38 

 12.  After  reviewing  the  extensive  comments  on  the  central  issue  of  dual  carriage  during  the 
 transition  period,  we  find  it  is  unjustified  for  the  Commission  to  act  at  this  time  in  light  of  the 
 constitutional  questions  the  subject  presents,  including  the  related  issues  of  economic  impact.  39  We  need 
 further  information  on  a  range  of  issues,  including  cable  system  channel  capacity  and  digital 
 retransmission  consent  agreements  to  build  a  substantial  record  upon  which  to  develop  the  best  policy  for 
 the  various  entities  impacted  in  this  area.  Notwithstanding  our  decision  to  obtain  further  comment  on 
 these  matters,  it  is  important  to  clarify  that  broadcast  stations  operating  only  with  digital  signals  are 
 entitled  to  mandatory  carriage  under  the  Act.  We  find  that  the  burden  on  a  cable  operator  to  carry  such 
 stations  is  de  minimis,  with  regard  to  new  digital-  only  stations,  and  is  essentially  a  trade-  off  in  the  case  of 
 a  station  substituting  its  digital  signal  in  the  place  of  its  analog  signal.  To  implement  this  clarification,  we 
 amend  Section  76.5,  the  definition  of  television  broadcast  station,  and  specifically  include  the  digital 
 television  Table  of  Allotments  found  at  Section  73.622  of  the  Commissions  rules.  40 

 A.  Commercial  Television  Stations 
 13.  Section  614(  a)  of  the  Communications  Act  of  1934,  as  amended,  provides: 
 Carriage  Obligations.    Each  cable  operator  shall  carry,  on  the  cable  system  of  that 
 operator,  the  signals  of  local  commercial  television  stations  and  qualified  low 
 power  stations  as  provided  by  this  section.  Carriage  of  additional  broadcast 
 television  signals  on  such  system  shall  be  at  the  discretion  of  such  operator,  subject 
 to  section  325(  b).  41 

 This  section  requires  carriage  for  local  commercial  stations  subject  to  the  other  provisions  of 
 Section  614.  This  section  does  not  distinguish  between  analog  and  digital  signals  and  supports  the 
 argument  that  digital  signals  are  entitled  to  mandatory  carriage.  42 

 37  Id. 
 38  UCC  Reply  Comments  at  23.  UCC,  however,  disagrees  with  the  Commission  proposal  to  the  extent  that  it 
 suggests  that  the  carriage  option  should  default  to  the  digital  signal  in  the  year  2005  as  digital  receiver  penetration 
 will  still  be  well  below  50%  at  that  time.  UCC  Comments  at  11. 

 39  Since  the  issue  of  dual  carriage  will  be  addressed  in  the  next  phase  of  this  proceeding,  we  need  not  consider  at  this 
 time  whether  we  should  adopt  separate,  specific  carriage  rules  for  small  cable  operators  as  requested  by  Americas 
 Cable  Association  (formerly  known  as  the  small  cable  business  association  or  SCBA)  and  others.  See  SCBA 
 Comments  at  9,  13,  14;  Pellegrin  Comments  at  5.  The  findings  below,  therefore,  shall  apply  with  equal  force  to 
 large  and  small  cable  systems. 

 40  See  Appendix  D. 

 41  47  U.  S.  C.    534(  a).  We  note  that  we  are  addressing  the  issue  of  whether  a  digital-  only  television  station  has  a 
 right  to  carriage,  under  Section  614(  a),  in  a  companion  proceeding.  See  WHDT-  DT,  Channel  59-  Stuart,  Florida, 
 Petition  for  Declaratory  Ruling  that  Digital  Broadcast  Stations  Have  Mandatory  Carriage  Rights,  FCC  No.  01-  23, 
 (adopted  Jan.  18,  2001). 

 42  A  similar  provision,  Section  615(  a),  requires  carriage  of  noncommercial  stations,  as  discussed  more  fully,  infra. 
 See  also  47  U.  S.  C.    535(  a). 
8
 Federal  Communications  Commission  FCC  01-  22 
 9 
 14.  More  specific  to  this  proceeding,  Section  614(  b)(  4)(  B)  provides  that  the  Commission 
 shall  initiate  a  proceeding  to  establish  any  changes  in  the  signal  carriage  requirements  of  cable 
 television  systems  necessary  to  ensure  cable  carriage  of  such  broadcast  signals  of  local  commercial 
 television  stations  which  have  been  changed  to  conform  with  such  modified  standards.  43  Commenters 
 offer  differing  interpretations  of  this  Section.  NAB  and  other  broadcasters  argue  that  Section 
 614(  b)(  1)(  B)  neither  distinguishes  between  digital  and  analog  signals  nor  establishes  a  transition  period. 
 Therefore,  they  contend,  both  should  be  carried  simultaneously  and  immediately.  44  In  contrast,  NCTA 
 and  others  in  the  cable  industry  argue  that  the  phrase,  which  have  been  changed,  means  that  cable 
 operators  should  be  required  to  carry  digital  signals  only  when  analog  signals  have  been  changed  to 
 digital  signals,  i.  e.,  when  the  broadcasters  no  longer  have  both.  45  NCTA  further  argues  that  the 
 Commission  may  not  order  mandatory  carriage  of  both  the  DTV  and  analog  signals  during  the  transition 
 period  because  the  Commission  is  not  expressly  authorized  to  do  so  in  the  Act,  and,  based  on  Section 
 624(  f),  the  Commissions  authority  may  not  be  inferred.  46  We  do  not  accept  the  arguments  of  either  those 
 commenters  who  say  that  the  statute  forbids  dual  carriage;  nor  those  who  argue  that  the  statute  compels 
 dual  carriage. 

 15.  With  respect  to  carriage  of  digital-  only  signals,  we  do  not  agree  with  NCTAs 
 interpretation  to  the  extent  that  it  is  intended  to  suggest  that  this  Section  requires  a  television  station  to 
 wait  until  the  end  of  the  transition  period  before  seeking  digital  signal  carriage.  There  is  nothing  in  the 
 plain  language  of  the  statute  or  the  legislative  history  to  require  such  a  restrictive  reading.  Indeed,  as  we 
 noted  above,  section  614(  a),  which  imposes  carriage  obligations  on  cable  systems,  does  not  distinguish 
 between  digital  and  analog  signals.  Thus,  when  a  television  station  seeks  carriage,  the  cable  system  must 
 oblige  regardless  of  whether  the  signal  is  in  an  analog  or  digital  format,  and  provided  that  the  station 
 satisfies  all  other  provisions  of  the  Act  and  the  Commissions  rules. 

 16.  We  also  disagree  with  NCTAs  argument  that  Section  624(  f)  of  the  Act  prohibits  us  from 
 requiring  the  carriage  of  digital  television  signals.  This  particular  section  forbids  Federal  agencies  and 
 others  from  requiring  the  content  of  cable  services  except  as  expressly  provided  for  in  Title  VI.  Given 
 that  Congress  has  spoken  to  the  issue  of  digital  broadcast  signal  carriage  in  Section  614(  b)(  4)(  B),  and 
 given  such  carriage  is  not  barred  under  another  statutory  provision,  digital  broadcast  signal  carriage  fits 
 within  the  express  requirement  of  section  614(  a)  and  thus  is  'expressly  authorized'  within  the  meaning  of 
 section  624(  f).  As  such  we  do  not  believe  that  the  Commission  is  outside  the  scope  of  its  authority  to 
 impose  such  requirements  simply  because  the  signals  in  question  are  in  a  digital  rather  than  in  an  analog 
 format. 

 B.  Noncommercial  Television  Stations 

 17.  The  importance  of  ensuring  that  noncommercial  educational  stations  are  accessible  to  the 
 viewing  public  is  consistently  emphasized  in  the  Act  itself  and  its  legislative  history.  Indeed,  the  Act 

 43  47  U.  S.  C.  534(  b)(  4)(  B). 
 44  NAB  Comments  at  3.  See  also  ALTV  Comments  at  7  and  MSTV  Comments  at  17. 
 45  NCTA  Comments  at  10-  11.  See  also  Time  Warner  Comments  at  31  and  BET  Reply  Comments  at  3. 
 46  NCTA  Comments  at  7.  (The  Commission's  authority  to  enact  regulations  affecting  cable  operators  is  strictly 
 limited  by  Section  624(  f)  of  the  Act  which  provides:  "Any  Federal  agency,  State  or  franchising  authority  may  not 
 impose  requirements  regarding  the  provision  of  or  content  of  cable  services,  except  as  expressly  provided  in  this 
 title.")  47  U.  S.  C.  544(  f)(  1). 
9
 Federal  Communications  Commission  FCC  01-  22 
 10 
 mandates  that  cable  operators  devote  additional  channel  capacity  for  the  carriage  of  noncommercial 
 educational  television  stations  (  NCEs).  47  Congress  found  a  substantial  governmental  and  First 
 Amendment  interest  in  ensuring  that  cable  subscribers  have  access  to  local  noncommercial  stations.  48 

 18.  As  stated  above,  Section  614(  b)(  4)(  B)  requires  the  Commission  to  initiate  a  proceeding  to 
 establish  any  changes  in  the  signal  carriage  requirements  of  cable  television  systems  that  are  necessary 
 to  ensure  cable  carriage  of  such  broadcast  signals  of  local  commercial  television  stations.  .  .  .  (emphasis 
 added).  49  In  the  Notice  we  asked  how,  if  at  all,  carriage  rights  for  digital  noncommercial  educational 
 stations  are  affected  given  that  they  are  not  explicitly  discussed  in  this  section.  50 

 19.  The  Association  of  Americas  Public  Television  Stations  (  AAPTS),  on  behalf  of  public 
 broadcasters,  states  that  the  Commission  has  the  authority  to  implement  carriage  requirements  for  all 
 public  television  stations  under  Section  615  of  the  Act.  51  It  asserts  that  Congress  has  not  prohibited  the 
 Commission  from  adopting  digital  signal  carriage  rules  for  NCE  stations.  52  It  believes  that  the  failure  to 
 include  a  provision  in  Section  615  that  parallels  Section  614(  b)(  4)(  B)  may  have  been  an  oversight,  or  it 
 may  have  reflected  the  view  that  such  a  provision  was  unnecessary.  53  AAPTS  argues  that  cable  operators 
 have  special  incentives  to  deny  carriage  to  public  television  stations  because  their  programming  is  not 
 aimed  at  mass  audiences.  54 

 20.  NCTA  asserts  that  Section  615  applies  only  to  qualified  noncommercial  television 
 stations.  The  Act  defines  those  stations  to  mean:  Any  television  broadcast  station  which  .  .  .  under  the 
 rules  and  regulations  of  the  Commission  in  effect  on  March  29,  1990,  is  licensed  by  the  Commission  as  a 
 noncommercial  educational  television  broadcast  station  and  which  is  owned  and  operated  by  a  public 
 agency,  nonprofit  foundation,  corporation,  or  association.  .  .    55  NCTA  argues  that  the  Commissions 
 digital  television  rules  were  not  in  effect  on  March  29,  1990,  and  the  rules  lending  public  television 
 stations  an  additional  channel  on  which  to  transmit  digital  signals  during  the  transition  were  not  adopted 
 until  seven  years  later.  Thus,  according  to  NCTA,  Congress  did  not  intend  for  cable  operators  to  carry  an 
 NCE  stations  digital  and  analog  signals  during  the  transition.  56 

 47  See  47  U.  S.  C.  535. 
 48  H.  R.  Rep.  No.  862,  102nd  Congress,  2d  Sess.  at  56  (1992) 
 49  47  U.  S.  C.  534(  b)(  4)(  B). 
 50  DTV  Must  Carry  Notice,  13  FCC  Rcd  at  15120. 
 51  AAPTS  Comments  at  13-  14. 
 52  Id. 
 53  Id. 
 54  Id.  at  18.  UCC  believes  that  the  Commission  has  ample  authority  to  mandate  must  carry  of  both  the  analog  and 
 digital  signals  of  noncommercial  stations.  However,  UCC  contends  that  this  must  carry  privilege  should  only  be 
 available  to  (1)  non-  duplicative,  non-  time  shifting  programming;  and  (2)  programming  that  is  not  advertiser 
 supported.  UCC  Comments  at  11. 

 55  See  47  U.  S.  C.  535(  l)(  1)(  A)(  ii). 

 56  NCTA  Reply  Comments  at  13. 
10
 Federal  Communications  Commission  FCC  01-  22 
 11 
 21.  We  believe  that  the  governments  interest  in  ensuring  the  availability  of  local 
 noncommercial  educational  television  on  cable  systems  is  manifest.  57  Section  615(  a)  states  that  [  E]  ach 
 cable  operator  of  a  cable  system  shall  carry  the  signals  of  qualified  noncommercial  educational  television 
 stations  in  accordance  with  the  provisions  of  this  section.  58  Section  615(  a)  does  not  distinguish  between 
 digital  and  analog  signals  with  regard  to  the  'signals'  that  must  be  carried.  The  Act  does  not  contain  any 
 words  or  provisions  specifically  excluding  the  carriage  of  NCE  digital  television  signals.  The  legislative 
 history  of  the  Act  is  also  void  of  any  language  suggesting  that  Congress  intended  to  deny  mandatory 
 carriage  to  digital  NCE  station  signals.  In  addition,  there  is  an  implication  in  Section  336  and  its 
 legislative  history  that  Congress  intended  the  Commission  to  address  all  must  carry  issues  in  the  Section 
 614(  b)(  4)(  B)  proceeding,  including  those  relating  to  noncommercial  educational  stations  covered  by 
 Section  615.  Section  336  applies  only  to  advanced  (digital)  television  services;  it  has  no  application  in 
 the  analog  context.  Section  336(  b)(  3)  specifies  that  ancillary  and  supplementary  services  have  no 
 mandatory  carriage  rights  under  Section  614  or  615,  which  necessarily  contemplates  some  consideration 
 of  must  carry  under  Section  615  for  noncommercial  educational  stations.  59  The  legislative  history  of  the 
 conference  agreement  for  this  section  states:  With  respect  to  (b)(  3),  the  conferees  do  not  intend  this 
 paragraph  to  confer  must  carry  status  on  advanced  [digital]  television  or  other  video  services  offered  on 
 designated  frequencies.  Under  the  1992  Cable  Act,  that  issue  is  to  be  the  subject  of  a  Commission 
 proceeding  under  section  614(  b)(  4)(  B)  of  the  Communications  Act.  60  The  most  logical  inference  is  that 
 Congress  contemplated  that  the  Commission  would  address  the  issue  of  must  carry  for  digital  signals  in 
 the  proceeding  authorized  by  Section  614(  b)(  4)(  B),  which  would  cover  both  local  commercial  and 
 noncommercial  television  stations.  61 

 22.  We  therefore  find  that  the  digital  signals  of  NCE  stations  are  to  be  treated  like  their 
 commercial  counterparts  for  cable  carriage  purposes.  Thus,  NCE  stations  that  broadcast  only  in  digital 
 are  entitled  to  immediate  carriage  by  cable  systems,  subject  to  the  parameters  set  forth  in  Section  615  of 
 the  Act  and  the  relevant  Commission  orders.  And,  like  our  decision  with  regard  to  commercial  television 
 stations,  we  decline  to  address  the  dual  carriage  issue  for  NCE  stations  in  this  phase  of  the  proceeding. 

 23.  AAPTS  argues  that  the  Commission  should  clarify  the  qualifying  statutory  term,  Grade 
 B  Service  Contour.  AAPTS  asserts  that  this  provision  should  be  read  to  refer  to  a  station  for  which 
 either  the  Grade  B  service  contour  of  the  station  or  its  digital  coverage  contour,  whichever  is  larger, 
 encompasses  the  principal  headend  of  the  cable  system  on  which  the  station  seeks  carriage.  62  Given  that 

 57  See,  e.  g.,  1992  Conference  Report  at  50,  53,  and  56.  See  also,  declaration  of  policy  underlying  establishment  and 
 public  funding  of  the  Corporation  for  Public  Broadcasting,  47  U.  S.  C.  396(  a)  (e.  g.,  "public  television  and  radio 
 stations  and  public  telecommunications  services  constitute  valuable  local  community  resources  for  utilizing 
 electronic  media  to  address  national  concerns  and  solve  local  problems  through  community  programs.  .  .  it  is  in  the 
 public  interest  for  the  Federal  Government  to  ensure  that  all  citizens  of  the  United  States  have  access  to  public 
 telecommunications  services  [which  includes  noncommercial  educational  and  cultural  television  programs]  through 
 all  appropriate  available  telecommunications  distribution  technologies")  47  U.  S.  C.    396(  a)(  8)  and  (9);  397(  14). 

 58  47  U.  S.  C.  535(  a). 

 59  47  U.  S.  C.  336(  b)(  3). 
 60  S.  Rep.  No.  230,  104th  Congress,  2d  Sess.  at  161  (1996). 
 61  See  also  Ancillary  and  Supplementary  Use  of  Digital  Television  Capacity  by  Noncommercial  Licensees,  14  FCC 
 Rcd  537  (1998)  (stating  that    336  "does  not  distinguish  between  commercial  and  noncommercial  DTV  licensees, 
 nor  does  the  legislative  history  .  .  ."). 

 62  AAPTS  Comments  at  51. 
11
 Federal  Communications  Commission  FCC  01-  22 
 12 
 this  matter  is  tied  to  the  dual  carriage  issue,  we  decline  to  address  the  merits  of  AAPTSs  Grade  B 
 argument  at  this  juncture. 

 IV.  RETRANSMISSION  CONSENT  ISSUES 
 24.  Section  325  contains  the  Acts  retransmission  consent  provisions.  63  The  law  governing 
 retransmission  consent  generally  prohibits  cable  operators  and  other  multichannel  video  programming 
 distributors  from  retransmitting  the  signal  of  a  commercial  television  station  unless  the  station  whose 
 signal  is  being  transmitted  consents  or  chooses  mandatory  carriage.  64  Every  three  years,  analog 
 commercial  television  stations  must  elect  to  either  grant  retransmission  consent  or  pursue  their  mandatory 
 carriage  rights.  65 

 25.  The  Notice  raised  numerous  issues  related  to  retransmission  consent  that  can  be  resolved 
 in  this  Report  and  Order.  The  issues  are  as  follows:  (1)  whether  separate  retransmission  consent/  must 
 carry  elections  are  permitted  for  the  analog  and  digital  signals  of  a  broadcast  station;  66  (2)  whether  the 
 timing  of  the  election  cycle  must  be  modified;  (3)  whether  a  broadcaster  may  agree  to  partial  carriage  of 
 its  digital  signal;  67  (4)  whether  the  digital  replacement  signals  for  analog  superstations  should  be  treated 
 as  new  signals  for  purposes  of  the  retransmission  consent  provisions  or  should  have  the  same  status  as  the 
 ones  they  replace;  68  (5)  whether  to  extend  the  prohibition  on  analog  exclusive  retransmission  consent 
 agreements  to  the  digital  context;  69  (6)  whether  the  Commission  should  prohibit  analog-  digital  signal 
 tying  arrangements;  and  (7)  the  status  of  NCE  stations  under  Section  325. 

 26.  Separate  Analog  and  Digital  Carriage  Agreements.  Prior  to  the  Notice  in  this  docket, 
 many  broadcasters  commented  that  the  retransmission  consent  process  should  apply  separately  to  the 
 analog  and  digital  broadcast  signals.  Commenters  argued  that  separate  must  carry/  retransmission  consent 
 elections  should  be  allowed.  70  In  the  Notice,  we  renewed  this  inquiry.  71  NAB  argues  that  a  television 
 station  is  entitled  to  separate  elections  because  of  the  different  level  of  bargaining  power  between  the 
 broadcaster  and  the  cable  operator  with  regard  to  each  signal.  72  NCTA  asserts  that  a  broadcasters  digital 
 signal  is  not  entitled  to  must  carry  rights  during  the  transition:  therefore,  as  long  as  a  licensee  is 
 transmitting  an  analog  signal,  its  digital  signal  can  only  be  carried  pursuant  to  retransmission  consent. 
 NCTA  states  that,  in  this  respect,  the  digital  signal  is  no  different  from  any  other  signal,  such  as  a  distant 

 63  47  U.  S.  C.  325(  b)(  1). 
 64  47  U.  S.  C.    325(  b)(  1)(  A),  (B). 
 65  47  U.  S.  C.  325(  b)(  3)(  B). 
 66  DTV  Must  Carry  Notice,  13  FCC  Rcd.  at  15111. 
 67  Id. 
 68  Id.  at  15112. 
 69  Id. 
 70  Broadcaster  Comments  to  Fourth  FNPRM  in  MM  Dkt.  No.  87-  268  at  33. 
 71  DTV  Must  Carry  Notice,  13  FCC  Rcd  at  15111. 
 72  NAB  Comments  at  41;  see  also  ALTV  Comments  at  16. 
12
 Federal  Communications  Commission  FCC  01-  22 
 13 
 television  signal,  that  has  no  must  carry  rights;  for  those  signals,  as  well  as  the  transitional  digital  signal, 
 the  Act  simply  does  not  provide  for  a  choice.  73 

 27.  With  regard  to  those  stations  that  simultaneously  broadcast  analog  and  digital  television 
 signals,  we  conclude  that  a  broadcaster  is  permitted  to  treat  the  two  differently  for  carriage  purposes. 
 That  is,  a  television  station  may  choose  must  carry  or  retransmission  consent  for  its  analog  signal  and 
 retransmission  consent  for  its  digital  signal.  74  This  policy  permits  the  same  broadcaster  to  negotiate  a 
 retransmission  consent  agreement  for  some  or  all  of  its  digital  signal,  if  that  is  what  it  desires.  Our 
 decision  here  is  intended  to  further  the  digital  transition  because  we  believe  cable  operators  would  be 
 more  willing  to  carry  certain  streams  of  digital  content  or  ancillary  or  supplementary  data  if  it  is  offered 
 by  a  particular  television  station,  even  if  that  station  chose  must  carry  for  its  analog  signal.  We  believe 
 this  scenario  would  be  precluded  if  we  were  to  prohibit  a  station  from  making  such  a  selection. 

 28.  We  also  find  that  DTV-  only  stations  may  choose  either  retransmission  consent  or 
 mandatory  carriage  like  their  analog  counterparts.  The  retransmission  consent  rules  and  regulations 
 contained  in  Section  76.64  would  likewise  apply  to  digital  broadcast  television  signals. 

 29.  Modification  of  the  Election  Cycle  In  the  Notice,  we  indicated  that  the  Act  requires 
 local  commercial  television  stations  to  elect  either  must  carry  or  retransmission  consent  on  a  triennial 
 basis.  75  We  noted  that  new  television  stations  can  make  their  initial  election  anytime  between  60  days 
 prior  to  commencing  broadcast  and  30  days  after  commencing  broadcast  with  the  initial  election  taking 
 effect  90  days  after  it  is  made.  76  We  asked  whether  the  existing  cycle  should  be  altered  to  accommodate 
 the  introduction  of  digital  television  or  if  we  should  apply  the  current  new  station  rule  to  digital 
 signals.  77  Pappas  submits  that  a  station  commencing  digital  operations  during  the  middle  of  an  election 
 cycle  should  be  treated  as  a  new  station  and  permitted  to  make  its  election  for  the  DTV  transmission  at 
 any  time  between  the  60  th  day  prior  to  commencement  of  such  transmissions  and  the  30  th  day  thereafter. 
 We  believe  that  the  Commissions  existing  new  station  rules  should  be  used  in  the  digital  carriage 
 context.  The  existing  requirements  are  non-  controversial  and  both  cable  operators  and  broadcasters  are 
 well  accustomed  to  their  use.  Thus,  for  television  stations  broadcasting  only  a  digital  signal,  the  current 
 rules  applicable  to  new  analog  signals  would  apply.  Our  holding  here  would  also  apply  to  new  digital-only 
 noncommercial  television  signals,  even  though  they  are  not  specifically  covered  by  Section  76.64  of 
 the  Commissions  rules. 

 73  NCTA  Reply  Comments  at  25. 
 74  This  policy  approach  is  taken  under  Section  325(  b)(  1)(  A)  of  the  Act,  rather  than  Section  325(  b)(  1)(  B),  because  we 
 do  not  resolve  the  dual  carriage  question  as  this  time. 
 75  Digital  Must  Carry  Notice,  13  FCC  Rcd.  at  15111  (citing  47  U.  S.  C.  325(  b)(  3)(  B)  (".  .  .  television  stations,  within 
 one  year  after  the  date  of  enactment  of  the  Cable  Television  Consumer  Protection  and  Competition  Act  of  1992  and 
 every  three  years  thereafter,  make  an  election  between  the  right  to  grant  retransmission  consent  under  this  section 
 and  the  right  to  signal  carriage  under  section  614  [47  U.  S.  C.  534].");  and  47  C.  F.  R.    76.64(  f)(  1)  and  (2) 
 (providing  that  the  first  election  must  be  made  by  June  17,  1993  and  subsequent  elections  at  three  year  intervals,  the 
 second  by  October  1,  1996  to  take  effect  January  1,  1997,  the  third  by  October  1,  1999  to  take  effect  January  1, 
 2000,  and  so  on)). 

 76  Id.  (citing  47  C.  F.  R.  76.  64(  f)(  4)). 

 77  Id. 
13
 Federal  Communications  Commission  FCC  01-  22 
 14 
 30.  Retransmission  Consent  Agreements  for  Partial  Digital  Signal  Carriage.  In  the 
 Notice,  we  recognized  that  in  the  analog  context  any  broadcast  station  that  is  eligible  for  must  carry 
 status,  although  it  may  be  carried  pursuant  to  a  retransmission  consent  agreement  must  .  .  .  be  carried  in 
 the  entirety,  unless  carriage  of  specific  programming  is  prohibited  .  .  .  pursuant  to  our  rules.  78  We 
 stated,  however,  that  it  may  be  desirable  to  allow  partial  carriage  of  digital  signals  pursuant  to  the 
 retransmission  consent  process  if  that  is  what  the  parties  agree  to.  79  ALTV  argues  that  permitting  cable 
 operators  to  negotiate  for  partial  carriage  of  DTV  signals  would  place  broadcasters  in  an  untenable 
 position  because  cherry  picking  of  programming  would  harm  the  underlying  economics  of  free,  over-  the-air 
 television.  80  Morgan  Murphy  asserts  that,  in  the  event  a  broadcaster  elects  a  multicasting  format  for  its 
 DTV  signal,  retransmission  consent  should  apply  to  the  entire  digital  signal  not  for  each  programming 
 stream.  81 

 31.  We  conclude  that  for  purposes  of  promoting  the  transition  and  encouraging  voluntary 
 cable  carriage  of  broadcast  digital  signals  when  a  television  station  chooses  retransmission  consent,  the 
 broadcaster  and  cable  operator  may  negotiate  for  partial  carriage  of  a  local  digital  television  signal.  82  We 
 believe  that  this  policy,  which  applies  to  digital-  only  television  stations  and  television  stations  with  both 
 analog  and  digital  signals,  will  benefit  both  parties  and  help  to  accomplish  the  Congressional  goal  of 
 transitioning  to  digital  television.  In  this  instance,  the  broadcaster  gains  access  to  cable  subscribers  for 
 some  part  of  its  signal,  and  the  cable  operator  can  conserve  channel  capacity  and  carry  that  programming 
 which  it  believes  subscribers  will  want.  We  note  that  this  policy  is  a  departure  from  the  Commissions 
 analog  carriage  rules  that  require  a  cable  operator  to  carry  local  television  signals  in  their  entirety.  83  In 
 interpreting  the  statute  in  1994,  the  Commission  noted  that  the  statutory  language  would  appear  to  permit 
 broadcasters  to  negotiate  with  cable  operators  for  retransmission  consent  for  any  part  of  their  signal.  84 
 The  Commission  found  that  some  negotiated  partial  carriage  was  clearly  permitted  based  upon  the 
 language  in  Section  325  but  concluded  that,  as  a  matter  of  policy,  the  statutory  provisions  should  be  read 
 in  concert  to  require  carriage  of  must-  carry  qualified  stations  in  their  entirety  even  in  the  context  of 
 retransmission  consent.  85  We  adopt  a  different  approach  here  because  the  statute  gives  the  Commission 
 flexibility  to  devise  new  rules  for  digital  carriage  when  necessary.  86  We  believe  that  in  the  case  of  digital 

 78  Id.  (citing  47  C.  F.  R.  76.  62(  a));  see  also  Must  Carry  Reconsideration,  9  FCC  Rcd.  at  6745. 
 79  DTV  Must  Carry  Notice,  13  FCC  Rcd.  at  15111. 
 80  ALTV  Comments  at  18. 
 81  Morgan  Murphy  Comments  at  16. 
 82  Partial  carriage  may  be  considered  in  any  number  of  ways,  including  hours,  bits  or  programming  streams. 
 83  See  47  C.  F.  R.  76.  62(  a).  In  1994,  the  Commission  interpreted  Section  325  to  provide  that  broadcasters  may 
 bargain  with  cable  operators  for  the  right  to  carriage  of  any  part  of  the  broadcast  signal  only  when  such  station  is  not 
 eligible  under  the  provisions  of  Section  614,  either  because  it  is  not  a  local  commercial  broadcast  signal  or  it  does 
 not  qualify  for  mandatory  carriage.  See  Must  Carry  Reconsideration,  9  FCC  Rcd.  at  6745. 

 84  Id.  (Comparing  Section  325(  b)(  1)  with  Section  614(  b)(  3)(  b)). 

 85  Id. 
 86  See  47  U.  S.  C.    614(  b)(  4)(  B)  (requiring  the  Commission  to  establish  changes  in  the  signal  carriage  requirements 
 to  ensure  cable  carriage  of  digital  broadcast  signals).  See  also  Must  Carry  Reconsideration,  9  FCC  Rcd.  at  6745 
 (  Congress  recognized  the  interplay  between  [Sections  325  and  614]  and  gave  the  Commission  authority  to  fill  in 
 the  regulatory  gaps.). 
14
 Federal  Communications  Commission  FCC  01-  22 
 15 
 signal  carriage,  the  provisions  should  be  read  to  permit  the  parties  to  freely  negotiate  for  partial  carriage 
 in  the  context  of  retransmission  consent.  The  goal  of  facilitating  the  transition  to  digital  signals  is 
 furthered  by  this  interpretation  because  cable  operators  are  likely  to  negotiate  retransmission  consent 
 agreements  with  more  stations  if  carriage  of  something  less  than  the  full  complement  of  a  broadcasters 
 digital  signal  is  permitted.  This  outcome  may  accelerate  the  digital  transition  in  many  markets.  In 
 arriving  at  this  determination,  we  considered  that  prohibiting  partial  carriage  in  the  context  of 
 retransmission  consent  would  not  only  discourage  voluntary  carriage  of  programming  subject  to 
 mandatory  carriage,  but  would  also  be  likely  to  preclude  the  carriage  of  desirable  programming  streams  or 
 data  services  that  are  not  subject  to  mandatory  carriage.  We  do  not  find  cherry  picking  to  be  a  major 
 concern,  as  ALTV  believes,  as  long  as  the  cable  operator  has  the  broadcasters  permission  to  select  which 
 programming  will  be  carried.  We  conclude  that  permitting  partial  carriage  in  the  context  of 
 retransmission  consent  is  appropriate  at  least  for  the  duration  of  the  transition.  When  the  transition  is 
 completed  or  substantially  underway,  we  can  consider  whether  partial  carriage  continues  to  be  necessary 
 to  facilitate  carriage  of  digital  signals  over  the  long  term. 

 32.  Retransmission  Consent  Exemption  for  Superstations.  Section  325(  b)(  2)(  D)  exempts 
 cable  operators  from  the  obligation  to  obtain  retransmission  consent  from  superstations  87  whose  signals 
 were  available  by  a  satellite  or  common  carrier  on  May  1,  1991.  88  This  provisions  legislative  history 
 states  that  an  exemption  from  retransmission  consent  was  necessary  to  avoid  sudden  disruption  to 
 established  relationships  between  superstations  and  satellite  carriers.  89  United  Video  has  explained  that 
 the  exemption  permits  it  to  continue  to  uplink  superstations  signals  and  transmit  them  to  cable  operators 
 and  other  facilities-  based  multichannel  video  providers.  90  We  will  treat  the  digital  signals  of  superstations 
 the  same  as  their  analog  signals  for  retransmission  consent  purposes.  If  the  analog  signal  was  exempt 
 from  Section  325,  it  follows  that  the  stations  digital  signal  is  also  exempt.  We  believe  that  maintaining 
 the  status  quo  and  tracking  the  Acts  original  intent  will  permit  video  program  distributors  to  continue  to 
 uplink  superstation  signals  and  provide  them  to  cable  operators  and  their  subscribers.  This  policy  may 
 speed  the  transition,  and  the  purchase  of  digital  television  equipment,  because  cable  operators  may 
 transmit  digital  superstations  into  markets  where  a  full  array  of  digital  television  services  may  be  lacking. 

 33.  Prohibition  on  Exclusive  Agreements.  In  the  Must  Carry  Order,  we  specifically 
 prohibited  exclusive  retransmission  consent  agreements  between  television  broadcast  stations  and  cable 
 operators.  91  Congress  recently  codified  the  Commissions  exclusive  retransmission  consent  prohibition  as 
 one  of  the  many  amendments  to  Section  325  under  the  SHVIA.  92  The  Act  now  states  that  a  broadcaster 
 cannot  enter  into  an  exclusive  retransmission  consent  arrangement  with  any  MVPD  until  2006.  93  We  have 

 87  A  superstation  is  a  television  broadcast  station  other  than  a  network  station,  licensed  by  the  Commission  that  is 
 secondarily  transmitted  by  a  satellite  carrier.  47  C.  F.  R.  76.64(  c)(  2). 
 88  47  U.  S.  C.  325(  b)(  1). 

 89  S.  Rep.  No.  102-  92  at  27. 
 90  United  Video  Comments  to  Fourth  FNPRM  in  MM  Dkt.  No.  87-  268  at  5. 
 91  See  Must  Carry  Order,  8  FCC  Rcd.  at  3006.  Section  76.  64(  m)  of  the  Commission's  rules  provides  that  "exclusive 
 retransmission  consent  agreements  are  prohibited.  No  television  broadcast  station  shall  make  an  agreement  with  one 
 multichannel  distributor  for  carriage,  to  the  exclusion  of  other  multichannel  distributors."  47  C.  F.  R.  76.64(  m). 

 92  See  47  U.  S.  C.  325(  b)(  2)(  C)(  ii). 

 93  Id. 
15
 Federal  Communications  Commission  FCC  01-  22 
 16 
 recently  implemented  the  statutory  ban  on  exclusive  arrangements.  94  Consistent  with  the  new  provision 
 and  rule,  we  apply  the  current  prohibition  on  exclusive  retransmission  consent  agreements  to  negotiations 
 involving  the  carriage  of  digital  television  broadcast  signals  until  January  1,  2006. 

 34.  Retransmission  Consent  Tying  Arrangements.  With  regard  to  retransmission  consent 
 and  its  effect  on  small  cable  operators,  the  Notice  asked  whether  the  Commission  should  prohibit  tying 
 arrangements,  in  which  the  broadcaster  requires  the  operator  to  carry  the  broadcasters  digital  signal  as  a 
 precondition  for  carriage  of  the  analog  signal.  95  The  Small  Cable  Business  Association  (  SCBA)  states 
 that  unregulated  analog  retransmission  consent  demands,  and  tying  in  particular,  pose  a  major  threat  to 
 small  cables  financial  viability.  96  To  remedy  the  situation,  SCBA  urges  the  Commission  to  prohibit 
 broadcasters  from  tying  analog  carriage  to  digital  carriage.  97 

 35.  While  we  acknowledge  the  important  concerns  raised  by  SCBA,  we  will  not  adopt  rules 
 specifically  prohibiting  tying  arrangements  at  this  time.  In  coming  to  this  conclusion,  we  recognize  that 
 substantial  evidence  must  be  presented  to  support  a  claim  that  a  tying  arrangement  exists  and  that  the 
 operator  suffers  harm  as  a  result.  Without  proof  to  support  the  case,  it  is  difficult  for  the  Commission  to 
 formulate  an  appropriate  remedy.  We  also  note  that  broadcasters  now  must  bargain  in  good  faith  with 
 small  cable  operators,  or  any  other  MVPD,  under  recent  revisions  to  the  retransmission  consent  rules 
 pursuant  to  amendments  promulgated  under  the  SHVIA.  98  One  example  of  a  bargaining  proposal 
 presumptively  consistent  with  the  good  faith  negotiation  requirement  is  a  proposal  for  carriage  of  the 
 analog  broadcast  signal  conditioned  on  carriage  of  any  other  broadcaster-  owned  programming  stream, 
 such  as  the  digital  signal.  99  While  such  arrangements  are  now  permitted,  we  will  continue  to  monitor  the 
 situation  with  respect  to  potential  anticompetitive  conduct  by  broadcasters  in  this  context.  If,  in  the 
 future,  cable  operators  can  demonstrate  harm  to  themselves  or  their  subscribers  due  to  tying 
 arrangements,  we  will  be  in  a  better  position  to  consider  appropriate  courses  of  action. 

 36.  NCE  Stations.  Section  325  of  the  Act  expressly  states  that  NCE  stations  do  not  have 
 retransmission  consent  rights.  100  As  such,  an  NCE  station  cannot  withhold  its  signal  from  being  carried  by 
 any  MVPD.  An  NCE  station,  however,  is  free  to  negotiate  with  cable  systems  and  other  MVPDs  for 
 voluntary  carriage.  101  In  the  digital  context,  an  NCE  station  may  multiplex  its  digital  signal  and  air  several 
 video  programming  streams  at  once.  In  this  regard,  we  note  that  an  NCE  station,  because  it  is  not  covered 
 by  Section  325,  may  enter  into  an  exclusive  digital  carriage  arrangement  for  any  service  it  may  offer  or 

 94  See  Implementation  of  the  Satellite  Home  Viewer  Improvement  Act  of  1999,  Retransmission  Consent  Issues,  First 
 Report  and  Order,  15  FCC  Rcd  5445  (2000)  (  Retransmission  Consent  Order) 
 95  DTV  Must  Carry  Notice,  13  FCC  Rcd.  at  15118. 

 96  SCBA  Comments  at  24.  SCBA  is  now  known  as  American  Cable  Association  ("  ACA"). 
 97  Id.;  accord  Pellegrin  Comments  at  6. 
 98  See  Retransmission  Consent  Order,  15  FCC  Rcd  at  5449-  5473. 
 99  Id.  at  5469. 
 100  47  U.  S.  C.  325(  b)(  2)(  A)  (  The  provisions  of  this  subsection  shall  not  apply  to  retransmission  of  the  signal  of  a 
 noncommercial  broadcasting  station.) 
 101  We  note  that  Time  Warner  recently  reached  an  agreement  with  AAPTS  with  regard  to  the  carriage  if  digital 
 television  signals  of  certain  NCE  stations.  See  Public  Television  and  Time  Warner  Cable  Agree  to  Digital  Carriage, 
 Press  Release,  September  19,  2000. 
16
 Federal  Communications  Commission  FCC  01-  22 
 17 
 any  programming  stream  that  is  not  subject  to  a  mandatory  carriage  requirement  under  Section  615  and 
 our  findings  herein.  Against  this  backdrop,  we  expect  cable  operators  and  other  MVPDs  to  participate  in 
 discussions  with  NCE  stations  concerning  the  voluntary  carriage  of  their  digital  broadcast  signals. 

 V.  DIGITAL  BROADCAST  SIGNAL  CARRIAGE  REQUIREMENTS 
 A.  Channel  Capacity 
 37.  Definition.  Section  614(  b)(  1)(  B)  provides  that  a  cable  operator,  with  more  than  12 
 usable  activated  channels,  shall  not  have  to  devote  more  than  one-  third  of  the  aggregate  number  of 
 usable  activated  channels  102  for  the  carriage  of  commercial  television  stations.  103  Despite  this  language, 
 there  is  some  dispute  as  to  how  the  terms  usable  activated  channels  and  cable  system  capacity  should 
 be  defined  in  the  digital  context.  104  We  requested  comment  on  the  definition  of  usable  activated 
 channels  for  digital  television  carriage  purposes.  We  noted  that  many  cable  operators  now  have,  or  soon 
 will  have,  the  technical  ability  to  fit  several  programming  services  into  one  6  MHz  cable  channel.  Thus, 
 we  asked  how  advances  in  signal  compression  technology  should  affect  the  definition  of  channel 
 capacity.  105  We  also  asked  whether  the  one-  third  channel  capacity  requirement  for  digital  broadcast 
 television  carriage  purposes  means  one-  third  of  a  cable  operators  digital  channel  capacity  or  one-  third  of 
 all  6  MHz  blocks,  including  both  the  analog  and  digital  channels.  106 

 38.  ALTV  states  that  the  Commission  should  consider  the  operators  total  cable  channel 
 capacity  for  determining  its  carriage  obligations.  107  In  contrast,  Paxson  and  Sinclair  urge  that  for  purposes 
 of  defining  the  term  usable  activated  channels,  each  channel  should  be  a  6  MHz  block  of  spectrum.  108 
 They  also  state  that  by  defining  the  cable  channel  as  a  6  MHz  block  and  requiring  such  a  channel  to  be 
 made  available  to  each  local  commercial  station,  the  Commission  will  ensure  the  cable  distribution  of  all 
 DTV  signals  transmitted  by  the  respective  licensees.  Golden  Orange  states  that  most  broadcasters  will 
 likely  engage  in  some  form  of  multicasting  and  the  requirement  of  a  6  MHz  block  will  ensure  the  cable 
 carriage  of  a  diversity  of  signals.  109  On  a  different  track,  Morgan  Murphy  and  Pappas  assert  that  the 
 capacity  of  digital  cable  systems  should  be  determined  based  on  data  throughput,  i.  e.,  bits  per  second  of 
 useful  digital  data.  110 

 39.  Under  the  Act,  a  cable  operator  must  make  available  for  signal  carriage  purposes  up  to 
 one-  third  of  its  usable  activated  channels.  Because  of  the  development  of  digital  signal  processing  and 

 102  47  U.  S.  C.  534(  b)(  1)(  B);  47  C.  F.  R.  76.  56(  b)(  1). 
 103  In  the  DTV  Must  Carry  Notice,  we  noted  that  the  one-  third  capacity  limit  found  in  Section  614(  b)(  1)(  B)  applies  in 
 the  digital  context.  13  FCC  Rcd.  at  15117. 
 104  Id.  at  15120. 

 105  Id. 
 106  Id. 
 107  ALTV  Comments  at  61. 
 108  Paxson  Comments  at  28;  Sinclair  Comments  at  6. 
 109  Golden  Orange  Comments  at  6. 
 110  Morgan  Murphy  Comments  at  12;  Pappas  Comments  at  28. 
17
 Federal  Communications  Commission  FCC  01-  22 
 18 
 signal  compression  technologies,  the  number  of  video  services  carried  on  a  cable  system  is  no  longer  a 
 simple  calculation  and  may  change  dynamically  over  time  depending  on  the  amount  of  motion  in  the 
 video  content,  the  amount  of  compression  that  takes  place,  and  whether  the  service  in  question  is  carried 
 in  a  standard  or  high  definition  digital  format.  We  have  taken  these  developments  into  consideration  in 
 revising  the  channel  capacity  determination. 

 40.  The  channel  capacity  calculation  can  be  made  by  taking  the  total  usable  activated  channel 
 capacity  of  the  system  in  megahertz  and  dividing  it  by  three.  111  One  third  of  this  capacity,  defined  in 
 megahertz,  is  the  limit  on  the  amount  of  system  spectrum  that  a  cable  operator  must  make  available  for 
 commercial  broadcast  signal  carriage  purposes.  Carriage  requests  would  then  have  to  be  accommodated 
 to  the  extent  of  this  limit  in  whatever  format  and  by  whatever  technique  is  appropriate  and  is  otherwise 
 consistent  with  the  rules.  We  believe,  out  of  the  options  presented  in  the  Notice,  this  is  the  easiest  for  the 
 operator  to  calculate.  While  a  calculation  based  on  programming  or  bits  may  be  possible,  both  are  more 
 difficult  than  the  megahertz  method  to  quantify  cable  capacity  for  purposes  of  the  one-  third  statutory  cap. 
 In  a  digital  environment,  as  cable  operators  reallocate  spectrum  from  analog  to  digital,  the  digital 
 programming  and  bit  carrying  capacity  of  the  cable  system  changes.  112  Therefore,  neither  programming 
 nor  bits  provide  a  constant  that  can  easily  be  applied  to  determine  channel  capacity.  In  contrast,  the 
 number  of  megahertz  employed  by  a  cable  system  stays  constant  and  does  not  vary  as  the  allocation  of 
 spectrum  from  analog  to  digital  progresses. 

 41.  To  determine  the  one-  third  cap  for  broadcast  signal  carriage  purposes,  the  first  step  is  to 
 determine  the  number  of  usable  activated  channels  on  the  cable  system.  Activated  channels  would 
 continue  to  be  defined  by  Section  76.5(  nn),  per  Section  602(  1)  of  the  Act,  as  those  channels  engineered  at 
 the  headend  of  a  cable  system  for  the  provision  of  services  generally  available  to  residential  subscribers  of 
 the  cable  system,  regardless  of  whether  such  services  actually  are  provided,  including  any  channel 
 designated  for  public,  educational  or  governmental  use.  113  Usable  activated  channels,  would  continue 
 to  be  defined  by  Section  76.5(  oo),  per  Section  602(  19)  of  the  Act,  as  those  activated  channels  of  a  cable 
 system,  except  those  channels  whose  use  for  the  distribution  of  broadcast  signals  would  conflict  with 
 technical  and  safety  regulations.  114  Thus,  this  calculation  includes  but  is  not  limited  to  the  cable  spectrum 
 used  for  internet  service,  pay-  per-  view  and  video-  on-  demand,  and  telephony.  Next,  the  number  of  usable 
 activated  channels  is  expressed  in  megahertz  and  then  divided  by  three  to  determine  the  one  third  cap. 
 For  example,  if  a  cable  systems  downstream  operation  begins  at  54  MHz  and  continues  through  550 

 111  Megahertz  ("  MHz")  is  a  unit  of  frequency  denoting  one  million  Hertz  or  one  million  cycles  per  second  and  is 
 closely  tied  to  bandwidth.  The  telecommunications  bandwidth  is  typically  measured  in  Hertz  for  analog 
 communications.  For  example,  an  analog  NTSC  television  channel  occupies  a  bandwidth  of  6  MHz.  In  digital 
 communications,  bandwidth  is  typically  measured  in  bits  per  second  identified  by  a  specific  method  of  encoding. 
 For  example,  an  HDTV  channel  encoded  in  8  VSB,  would  occupy  a  digital  bandwidth  of  about  19.4  megabits  per 
 second  ("  mbps")  which,  in  turn,  would  require  a  6  MHz  bandwidth.  In  digital  cable  operations,  where  a  64  QAM 
 encoding  technique  is  used,  that  same  6  MHz  bandwidth  can  provide  up  to  27  mbps  of  digital  bandwidth.  That 
 would  mean  a  6  MHz  bandwidth  in  such  a  cable  system  can  carry  a  19.  4  mbps  HDTV  channel  and  still  be  able  to 
 provide  other  video  or  data  services  with  the  remaining  7.6  megabits  in  that  same  6  MHz  bandwidth.  See  also 
 Newton's  Telecom  Dictionary,  11th  ed.,  July  1996. 

 112  The  concept  of  bits  and  bit  rates  is  applicable  to  digital  programming  signals,  but  not  to  analog  programming 
 signals.  Thus,  there  is  no  way  to  express  the  part  of  a  cable  system's  capacity  attributable  to  analog  programming  in 
 terms  of  bits. 

 113  47  C.  F.  R.  76.  5(  nn);  47  U.  S.  C.  522(  1). 

 114  47  C.  F.  R.  76.  5(  oo);  47  U.  S.  C.  522(  19). 
18
 Federal  Communications  Commission  FCC  01-  22 
 19 
 MHz,  but  50  MHz  is  unactivated,  the  total  amount  of  usable  channels  on  a  system-  wide  basis  is  446  MHz 
 (i.  e.  550  MHz-  54  MHz-  50  MHz).  One-  third  of  this  figure,  approximately  149  MHz  in  this  example,  is  the 
 maximum  amount  of  megahertz  to  be  used  for  the  carriage  of  local  commercial  television  signals  for  such 
 a  system.  A  cable  operator  must  provide  each  local  television  station  that  is  entitled  to  mandatory 
 carriage  with  a  sufficient  amount  of  capacity  to  carry  its  primary  digital  video  signal.  The  amount  of 
 capacity  devoted  to  carriage  purposes  for  each  television  station  will  change  as  an  operator  upgrades  to  a 
 digital  cable  standard.  115 

 42.  Carriage  Priority.  In  the  Notice,  we  recognized  that  when  the  one-  third  capacity  limit 
 has  been  reached,  Section  614(  b)(  2)  provides  that  the  cable  operator  shall  have  discretion  in  selecting 
 which  such  stations  shall  be  carried  on  its  cable  system.  116  We  tentatively  concluded  that  this  statutory 
 directive  would  continue  to  apply  in  the  digital  context.  117  In  the  alternative,  we  asked  whether  it  would 
 be  desirable  to  adopt  carriage  priority  rules.  118  ALTV,  Trinity,  and  Univision  emphasize  that  if  the  one-third 
 cap  remains  in  place,  a  stations  analog  signal  should  not  be  displaced  in  order  to  accommodate  a 
 DTV  signal.  119  Sinclair  asserts  that  in  those  instances  in  which  carriage  of  all  analog  and  DTV  stations 
 would  occupy  more  than  one-  third  of  such  cable  systems  capacity,  the  Commission  should  forbear  from 
 applying  this  limit  and  require  full  carriage  of  these  broadcast  signals.  120  We  find  that  the  Act  provides  a 
 cable  operator  with  discretion  to  choose  which  signals  it  will  carry  if  it  has  met  its  carriage  quota.  Thus,  a 
 cable  operator  should  be  able  to  select  which  signals  to  carry  above  the  one-  third  limit.  Under  the  existing 
 carriage  structure,  121  all  local  commercial  television  signals  that  are  carried,  whether  they  have  chosen 
 retransmission  consent  or  must  carry,  are  counted  as  part  of  the  one-  third  cap  calculation.  This  policy  of 
 counting  retransmission  consent  stations  will  continue  to  apply  in  the  digital  carriage  context. 

 43.  NCE  Stations.  We  recognize  that  the  carriage  of  NCE  stations  is  not  included  in  the  one-third 
 statutory  cap.  Instead,  a  cable  operators  carriage  obligations  are  based  on  the  number  of  channels 
 on  a  particular  cable  system.  Generally,  cable  systems  with  12  or  fewer  activated  channels  shall  carry  1 
 qualified  NCE;  122  cable  systems  with  13-  36  channels  shall  carry  up  to  3  qualified  NCEs;  and  cable 
 systems  with  36  or  more  activated  channels  shall  carry  3  or  more  qualified  NCEs.  123  We  see  no  reason  to 
 depart  from  the  existing  rules  regarding  NCE  carriage.  As  such,  cable  systems  with  the  capacity  to  carry 
 36  or  more  channels  will  be  required  to  carry  3  or  more  qualified  NCE  stations,  subject  to  the  other 
 provisions  of  the  Act  and  our  rules. 

 115  For  example,  a  cable  operator  with  an  analog-  based  cable  system  would  devote  6  MHz  of  bandwidth  to  the 
 carriage  of  a  high  definition  television  signal,  but  a  cable  operator  using  the  64  QAM  digital  format  may  only  have 
 to  devote  4  MHz  to  the  carriage  of  that  same  high  definition  signal. 

 116  DTV  Must  Carry  Notice,  13  FCC  Rcd.  at  15117  (citing  47  U.  S.  C.  534(  b)(  2)). 

 117  Id. 
 118  Id. 
 119  ALTV  Comments  at  49,  n.  129;  Trinity  Comments  at  8;  and  Univision  Reply  Comments  at  10. 
 120  Sinclair  Comments  at  7. 
 121  See  Must  Carry  Order,  8  FCC  Rcd.  at  3003. 
 122  As  stated  earlier,  a  qualified  NCE  is  one  that  places  a  Grade  B  contour  over  the  principal  headend  of  the  cable 
 system  or  the  cable  systems  principal  headend  is  within  50  miles  of  the  NCE's  city  of  license. 
 123  47  U.  S.  C.    535(  b)(  2),  (3);  47  U.  S.  C.  535(  e). 
19
 Federal  Communications  Commission  FCC  01-  22 
 20 
 B.  Signal  Quality 
 44.  Section  614(  h)  of  the  Act  specifies  that,  to  qualify  for  carriage,  stations  must  deliver  a 
 good  quality  signal  to  the  principal  headend  of  the  cable  system.  124  For  local  commercial  television 
 stations,  this  is  defined  as  a  signal  level  of  45dBm  for  UHF  signals  and  49dBm  for  VHF  signals.  125  The 
 Act  delegated  to  the  Commission  the  authority  to  establish  good  quality  signal  criteria  for  low  power 
 television  stations  126  and  for  qualified  local  noncommercial  educational  television  stations.  127  We  held 
 that  the  commercial  television  station  definition  of  good  quality  signal  be  applied  in  the  same  manner  to 
 noncommercial  and  LPTV  television  stations  under  the  UHF/  VHF  paradigm.  128 

 45.  In  the  Notice,  we  asked  whether  the  signal  quality  standards  established  for  analog 
 signals  are  relevant  for  digital  signals  or  whether  new  parameters  for  good  signal  quality  should  be 
 established.  129  No  commenters  addressed  this  issue.  Absent  comment  for  or  against  either  alternative,  we 
 undertook  our  own  analysis  relying  on  the  digital  engineering  methods  and  expertise  developed  in  other 
 proceedings.  130  We  note  that  in  adopting  the  digital  television  transmission  standard,  the  Commission 
 recognized  the  differences  between  analog  and  digital  television  signals.  The  analog  NTSC  transmission 
 standard  is  engineered  so  that  even  when  a  stations  signal  strength  slowly  decreases,  a  television  set  is 
 still  able  to  display  the  video  and  audio  components,  albeit  at  a  degraded  level.  On  the  other  hand,  under 
 the  DTV  transmission  standard,  as  the  stations  signal  level  decreases,  the  digital  television  set  continues 
 to  display  a  good  picture,  but  then  may  abruptly  turn  blue  when  the  signal  strength  drops  below  a  certain 
 threshold.  131  Against  this  backdrop,  we  believe  it  is  necessary  to  develop  a  new  reception  standard  aptly 
 suited  to  the  new  digital  technology  used  to  transmit  digital  television  signals. 

 46.  We  conclude  that  the  signal  level  necessary  to  provide  a  good  quality  digital  television 
 signal  at  a  cable  systems  principal  headend  is  61  dBm.  We  continue  to  believe  that  the  principal 
 headend  132  should  remain  the  location  for  signal  quality  testing  purposes  because  that  is  the  single 
 location  where  all  available  signals  can  be  uniformly  measured  and  compared.  We  arrive  at  this  minimum 
 signal  level  by  using  the  following  planning  factors:  133 

 124  47  U.  S.  C.  534(  h)(  1)(  B)(  iii). 
 125  Id. 
 126  47  U.  S.  C.  534(  h)(  2)(  D). 
 127  47  U.  S.  C.  535(  g)(  4). 
 128  Must  Carry  Order,  8  FCC  Rcd.  at  2988. 
 129  DTV  Must  Carry  Notice,  13  FCC  Rcd.  at  15119-  15120. 
 130  See,  e.  g.,  DTV  Sixth  Report  and  Order,  12  FCC  Rcd.  14588. 
 131  This  is  known  as  the  "cliff  effect."  That  is,  if  a  signal  is  received,  a  good  quality  picture  can  be  constructed  at  the 
 television  receiver;  however,  once  the  signal  falls  below  a  minimum  signal  level  threshold,  no  picture  can  be 
 reconstructed  or  displayed  by  the  television  receiver.  There  are,  however,  certain  receiver  implementation  schemes 
 which  allow  the  receiver  to  display  and  hold  the  last  picture  received  before  the  signal  fell  below  the  threshold. 

 132  47  C.  F.  R.  76.  5(  pp). 

 133  See  DTV  Sixth  Report  and  Order,  12  FCC  Rcd.  at  Appendix  A. 
20
 Federal  Communications  Commission  FCC  01-  22 
 21 
 Thermal  Noise  in  6  MHz  bandwidth  Nt  -106.2  dBm 
 Receiver  Noise  Figure  Nf  10.0  dB 
 Required  Carrier  to  Noise  Ratio  C/  N  15.  2  dB 
 Propagation  and  implementation  margin  M  20.  0  dB 
 Receiver  input  =  (Nt+  Nf+  C/  N+  M)=  -61  dBm 

 We  believe  that  providing  for  a  20  dB  propagation  variability  and  signal  impairment  margin  (  margin) 
 above  the  minimum  signal-  to-  noise  ratio  is  sufficient  to  handle  most  over  the  air  transmission 
 disturbances  encountered  by  a  DTV  signal  at  a  cable  system  headend.  These  disturbances  will  likely 
 include  signal  impairments  such  as  multipath,  impulsive  (manmade)  134  noise,  and  co-  channel  and  adjacent 
 channel  interference.  The  video  and  audio  quality  of  a  digital  television  signal  remain  good  as  long  as  the 
 signal-  to-  noise  ratio  is  in  excess  of  the  minimum  signal-  to-  noise  ratio  applicable  to  the  transmission 
 system  after  consideration  of  the  summation  of  all  noise  factors  (such  as  channel  and  manmade  noise, 
 noise  generated  by  multipath  cancellation,  receiver  noise,  and  co-  channel  interference).  The  tradeoff  table 
 in  Section  73.623(  c)(  3)(  ii)  is  an  example  of  the  relationship  of  signal  margin  to  one  type  of  interference: 
 analog  signals  on  the  same  frequency.  135  The  table  shows  that,  as  the  margin  increases,  the  strength  of  the 
 desired  signal  can  be  much  less  when  compared  to  the  strength  of  the  interfering  signal,  and  still  produce 
 good  quality  video  and  audio.  The  primary  source  of  erosion  of  the  signal  margin  will  be  propagation 
 variations  of  the  received  signal  level  with  time.  These  variations  result  in  what  is  generally  called  signal 
 fading.  However,  we  believe  that  these  variations  of  the  received  signal  level  and  the  amount  of  signal 
 impairments  cumulatively,  should  be  significantly  less  than  the  allowed  20  dB  margin.  We  believe  that 
 when  a  signal  level  of  -61  dBm  is  delivered  to  the  cable  system  headend,  the  signal  will  be  of  sufficient 
 strength  that  the  cable  operator  can  deliver  a  good  quality  picture  to  its  subscribers.  A  television  station 
 that  does  not  agree  to  be  responsible  for  the  costs  of  delivering  to  the  cable  system  a  signal  of  good 
 quality,  under  the  revised  standard,  is  not  eligible  for  carriage.  136 

 C.  Content  of  Signals  Subject  to  Mandatory  Carriage 
 47.  We  now  address  the  specific  content  of  a  digital  television  signal  that  is  subject  to  the 
 mandatory  carriage  obligation.  We  note  that  analog  broadcast  stations  generally  have  one  video 
 broadcast  product.  That  is,  only  a  single  program  is  broadcast  at  a  time  and  that  program  is  the  main 
 feature  of  the  broadcast.  Only  a  relatively  minor  amount  of  communications  capacity  is  available  apart 
 from  that  program  transmission.  Some  capacity  is  available  in  the  vertical  blanking  interval  (  VBI)  for 
 the  transmission  of  communications  that  are  separate  from,  but  related  to,  the  principal  video  output  or  are 
 unrelated  to  that  content.  The  related  content  is  typically  closed  captioning  and  program  rating 
 information.  The  unrelated  content  would  be  typified  by  videotext  or  data-  type  communications. 

 48.  Digital  television  stations  will  operate  on  a  much  more  flexible  basis.  The  system 
 described  in  the  ATSC  DTV  Standard  includes  discrete  subsystem  descriptions,  or  layers,  for  video 
 source  coding  and  compression,  audio  source  coding  and  compression,  service  multiplex  and  transport, 
 and  RF/  transmission.  137  In  addition  to  being  able  to  broadcast  one,  and  under  some  circumstances  two, 

 134  Manmade  noise  includes  all  radio  noise  generated  by  noise  sources  located  in  the  vicinity  of  the  receiver,  such  as 
 electrical  transmission  lines,  automobile  ignitions,  and  electrical  motors. 
 135  47  C.  F.  R.  73.  623(  c)(  3)(  ii). 

 136  See  47  U.  S.  C.  534(  h)(  1)(  B)(  iii)  (stating  the  same  for  analog  signals). 
 137  See  ATSC  Digital  Television  Standard,  Doc.  A/  53. 
21
 Federal  Communications  Commission  FCC  01-  22 
 22 
 high  definition  digital  television  programs,  the  standard  allows  for  multiple  streams,  or  multicasting,  of 
 standard  definition  digital  television  programming  at  a  visual  quality  better  than  the  current  NTSC  analog 
 standard.  Multiple  programming  streams  may  be  broadcast  at  the  same  time  or  with  a  variety  of  data 
 streams  accompanying  the  main  video  content.  These  data  streams  may  be  either  associated  with  the 
 video  content  in  some  manner  or  completely  separate  from  it.  138 

 49.  A  critical  component  of  digital  broadcast  television  is  the  program  and  system 
 information  protocol  (  PSIP).  139  This  is  the  standard  protocol  for  transmission  of  the  relevant  data 
 tables,  describing  system  information  and  event  descriptions,  contained  within  digital  packets  carried  in 
 the  digital  broadcast  transport  stream  multiplex.  System  information  allows  navigation  of,  and  access  to, 
 each  of  the  channels  within  the  transport  stream,  whereas  event  descriptions  give  the  user  content 
 information  for  browsing  and  selection.  PSIP  is  composed  of  four  main  tables:  (1)  system  time  table;  (2) 
 ratings  region  table;  (3)  master  guide  table;  and  (4)  virtual  channel  table.  140  The  latter  table  is  of 
 particular  importance  in  the  carriage  context  because  it  contains  a  list  of  all  the  channels  that  are  or  will 
 be  on-  line,  plus  their  attributes.  Among  the  attributes  are  the  channel  name,  navigation  identifiers,  and 
 stream  components  and  types.  PSIP  allows  the  broadcaster  to  customize  information  to  guide  viewers  to 
 channel  numbers  they  are  familiar  with. 

 50.  Primary  Video.  In  the  analog  context  it  is  clear  that  a  cable  operator  subject  to  a 
 mandatory  carriage  obligation  is  not  required  to  carry  all  of  the  communications  output  of  a  television 
 broadcast  station.  Three  provisions  of  the  Act  provide  the  main  focus  of  the  arguments  regarding  this 
 question  in  the  context  of  digital  broadcast  signal  carriage.  First,  Section  614(  b)(  3)  of  the  Act  entitled 
 Content  to  be  Carried,  states  that  a  cable  operator  shall  carry  in  its  entirety  the  primary  video  of  the 
 station.  141  Second,  it  requires  carriage  of  the  accompanying  audio  and  line  21  closed  caption 
 transmission  of  each  station.  142  Third,  the  operator  must  carry  to  the  extent  technically  feasible, 
 program-  related  material  carried  in  the  vertical  blanking  interval  or  on  subcarriers.  143  The  statute  is 
 specific  that  Retransmission  of  other  material  in  the  vertical  blanking  interval  or  other  nonprogram-related 
 material  (including  teletext  and  other  subscription  and  advertiser-  supported  information  services) 
 shall  be  at  the  discretion  of  the  cable  operator.  144  Section  614  is  applicable  to  the  carriage  of  commercial 
 stations.  Largely  parallel  provisions  are  contained  in  Section  615  relating  to  the  carriage  of 
 noncommercial  stations.  145  In  addition  to  the  provisions  that  are  not  specific  to  digital  television 
 broadcasting,  Section  336(  b)(  3)  of  the  Act  which  has  specific  applicability  to  advanced  television 

 138  Geocast,  Iblast,  and  Dtcast  are  some  of  the  companies  planning  to  use  a  certain  amount  of  digital  television 
 spectrum  to  provide  high  speed  data  broadcast  services  to  personal  computers.  See,  e.  g.,  T.  Butts,  Disney,  GE  invest  in  Dotcast, 
 www.  digitalbroadcasting.  com,  November  8,  2000. 

 139  PSIP  is  a  requirement  for  broadcasters  using  the  ATSC  standard,  however,  it  is  not  required  by  the  Commission. 

 140  For  a  more  complete  description  of  PSIP,  see  J.  Whitaker  and  B.  Benson,  The  Standard  Handbook  of  Video  and 
 Television  Engineering,  3  rd  Ed.,  McGraw  Hill. 
 141  47  U.  S.  C.  534(  b)(  3). 

 142  Id. 
 143  Id. 
 144  Id. 
 145  47  U.  S.  C.  535(  g)(  1). 
22
 Federal  Communications  Commission  FCC  01-  22 
 23 
 services  provides  that  no  ancillary  or  supplementary  service  shall  have  any  right  to  carriage  under 
 section  614  or  615.  146 

 51.  In  the  Notice,  we  asked  how  we  should  define  primary  video  if  a  broadcaster  chooses 
 to  broadcast  multiple  standard  definition  digital  television  streams,  or  a  mixture  of  high  definition  and 
 standard  definition  digital  television  streams,  as  is  permitted  under  the  rules.  147  We  sought  input  on 
 which  video  programming  services  provided  by  a  licensee  should  be  considered  primary  and  should  be 
 entitled  to  carriage  if  the  primary  video  includes  less  than  all  of  the  streams  of  programming  broadcast.  148 
 We  asked  whether  the  definition  should  be  flexible,  allowing  the  broadcaster  to  choose  which 
 transmissions  it  considers  being  primary.  149 

 52.  Many  commenters  argue  for  an  expansive  approach  to  the  classification  of  primary  video 
 during  the  transition  that  would  include  much  of  a  broadcasters  digital  programming.  ALTV  argues  that 
 if  a  licensee  broadcasts  several  channels  of  free  over-  the-  air  standard  definition  programs,  all  of  these 
 channels  should  be  considered  to  be  the  primary  video  transmission  of  the  station.  NAB  states  that  there 
 can  be  no  primary  or  main  program  since  carriage  of  a  full  broadcast  signal,  including  multiplexed 
 program  streams,  will  enable  a  viewer  to  switch  between  channels  within  a  given  program.  150  AAPTS 
 asserts  that  all  mission-  related  programming  streams  transmitted  by  a  public  television  station  should 
 be  regarded  as  primary  and  subject  to  mandatory  carriage.  151  Ameritech  argues  to  the  contrary,  that  the 
 statutory  language  limiting  must  carry  to  a  broadcasters  primary  video  indicates  that  Congress  did  not 
 intend  to  require  cable  operators  to  carry  all  the  material  a  station  transmits.  Time  Warner  argues  that  a 
 stations  analog  signal  is  the  primary  video  during  the  transition  and  only  when  a  broadcaster  surrenders 
 its  analog  frequency  and  engages  exclusively  in  digital  transmissions  will  its  digital  signal  become  the 
 primary  video  transmission  and  thus  eligible  for  any  post-  transition  must  carry  requirements  adopted  by 
 the  Commission.  152 

 53.  We  recognize  that  the  terms  'primary  video'  as  used  in  sections  614(  b)(  3)  and  615(  g)(  1) 
 are  susceptible  to  different  interpretations.  Because  the  terms  are  not  expressly  defined  in  the  Act,  to 
 determine  the  meaning,  we  analyze  the  terms  'primary  video'  within  their  statutory  context,  consider  the 
 legislative  history,  and  examine  the  technological  developments  at  the  time  the  must  carry  provisions 
 were  enacted. 

 54.  The  term  primary  video,  as  found  in  Sections  614  and  615  of  the  Act,  suggests  that  there 
 is  some  video  that  is  primary  and  some  that  is  not.  153  In  this  instance,  we  rely  on  the  canon  of  statutory 

 146  47  U.  S.  C.  336(  b)(  3).  Section  336(  a)(  2)  provides  that  the  Commission  shall  allow  the  holders  of  licenses  for 
 advanced  television  service  stations  "to  offer  such  ancillary  or  supplementary  services  .  .  .  as  may  be  consistent  with 
 the  public  interest,  convenience,  and  necessity." 

 147  See,  e.  g.,  DTV  Fifth  Report  and  Order,  12  FCC  Rcd  at  12826. 

 148  DTV  Must  Carry  Notice,  13  FCC  Rcd  at  15125. 
 149  Id. 
 150  NAB  Comments  at  38. 
 151  AAPTS  Comments  at  36. 
 152  Time  Warner  Comments  at  51;  see  also  NCTA  Comments  at  14-  15. 
 153  47  U.  S.  C.    534(  b)(  3)  and  535(  g)(  1). 
23
 Federal  Communications  Commission  FCC  01-  22 
 24 
 construction  that  effect  must  be  given  to  every  word  of  a  statute  and  that  no  part  of  a  provision  will  be 
 read  as  superfluous.  154  Here,  we  must  give  effect  to  the  word  primary.  The  dictionary  definitions  of 
 primary  are  First  or  highest  in  rank,  quality,  or  importance  and  Being  or  standing  first  in  a  list, 
 series,  or  sequence.  155  Based  on  the  plain  words  of  the  Act,  we  conclude  that,  to  the  extent  a  television 
 station  is  broadcasting  more  than  a  single  video  stream  at  a  time,  only  one  of  such  streams  of  each 
 television  station  is  considered  primary.  The  choice  as  to  which,  among  several  possible  video 
 programming  streams,  should  be  considered  primary  is  a  decision  left  to  the  broadcaster. 

 55.  The  legislative  history  does  not  definitively  resolve  the  ambiguity  regarding  the  intended 
 application  of  the  term  'primary  video'  as  used  in  this  context.  The  legislative  history  does  indicate, 
 however,  that  the  must  carry  provisions  were  not  intended  to  cover  all  uses  of  a  signal.  Specifically,  the 
 legislative  history  provides  that  '[  c]  arriage  of  other  program-  related  material  in  the  vertical  blanking 
 interval  and  on  subcarriers  or  other  enhancements  of  the  primary  video  and  the  audio  signal  (such  as 
 teletext  and  other  subscription  and  advertiser-  supported  information)  is  left  to  the  discretion  of  the  cable 
 operator.  '  156  The  legislative  history  further  states  that  the  'Committee  does  not  intend  that  this  [must 
 carry]  provision  be  used  to  require  carriage  of  secondary  uses  of  the  broadcast  transmission,  including  the 
 lease  or  sale  of  time  on  subcarriers  or  the  vertical  blanking  interval  for  the  creation  or  distribution  of 
 material  by  persons  or  entities  other  than  the  broadcast  licensee.  '  157 

 56.  We  note  that  the  incorporation  of  the  primary  video  construct  into  the  Act  in  1992  was 
 reasonably  contemporaneous  with  the  gradual  change  in  common  understanding  of  the  new  television 
 service  from  ATV  (advanced  television)  and  HDTV  (high  definition  television)  which  focused  on 
 improving  the  technical  quality  of  traditional  analog  NTSC  television  to  DTV  (digital  television)  with 
 the  ability  to  broadcast  high  definition  television,  SDTV  (standard  definition  television)  with  multicasting 
 possibilities,  as  well  as  the  broadcast  of  non-  video  services.  158  Although  silent  on  the  issue  of 

 154  See  Sutherland,  Statutory  Construction,  Vol.  2A,  at  Section  46.  06  (  Each  word  given  effect). 

 155  See  The  American  Heritage  Dictionary  of  the  English  Language,  Third  Edition  (1996);  and  Black's  Law 
 Dictionary  (1983  edition)  (Primary  is  defined  as:  "First;  principal;  chief;  leading.  First  in  order  of  time,  or 
 development,  or  in  intention.").  We  note  that  Time  Warner  also  states  that  primary  means  first  in  rank  or 
 importance  according  to  Websters  Third  New  International  Dictionary.  Time  Warner  Comments  at  29.  In 
 response  to  some  broadcasters  suggestions  that  two  signals  can  simultaneously  be  first  in  rank  or  importance,   
 Time  Warner  argues  that  such  a  stance  is  contemptuous  of  the  clear  text  of  the  statute.  Id. 

 156  H.  R.  Rep.  No.  102-  628,  102nd  Cong.,  2nd  Sess.  1992. 

 157  Id. 

 158  See  e.  g.,  FCC  Puts  U.  S.  on  Schedule  For  HDTV  Broadcasting  By  2000,  Video  Technology  News,  Sept.  28, 
 1992,  Vol.  5,  No.  20  (quoting  then  FCC  Commissioner  Sherrie  Marshall,  'I  am  becoming  increasingly  convinced 
 that  the  real  key  to  broadcasters'  continued  competitiveness  lies  not  so  much  in  ATV  as  a  crisp  picture,  but  in  its 
 potential  for  spectrum-  efficient  multiplexing');  FCC  and  Broadcasters  Battle  Toward  Flexible  HDTV  Conversion, 
 Broadcasting  &  Cable,  Oct.  5,  1992  (according  to  then  FCC  Chairman  Alfred  Sikes,  the  drive  toward  digital  TV  is 
 not  based  on  'just  better  pictures  and  improved  sound.  '  Such  a  'flexible  digital  system  ...  will  mean  innovative  video. 
 For  instance,  the  signal  could  carry  multiple  scenes  and  camera  angles  or  multiple  programs.  Smart  receivers  would 
 allow  viewers  to  decide  which  to  select');  Do  Not  Be  Weak-  Kneed,  Sikes  Tells  Broadcasters  At  Conference  On 
 HDTV,  HDTV  Report,  Oct.  14,  1992,  Vol.  2,  No.  21  (Fox  Inc.  's  Executive  Vice  President  noted  during  a  panel 
 discussion  that  his  network  views  digital  broadcasting  as  a  'real  potential  avenue  for  opportunities.  Once  you  are 
 able  to  transmit  a  digital  signal  ...  and  perform  simulcast  requirements,  you  can  do  pretty  much  whatever  else  you 
 wish  to  do  with  that  channel  ...  including  additional  programs');  Pay  TV  Grows  Up  After  Two  Decades,  HBO  is  Still 
 Pushing  the  Envelope  on  Cable  TV,  Boston  Herald,  Dec.  20,  1992  ('One  idea  HBO  hopes  will  help  it  to  compete  is 
 something  called  multiplexing.  Instead  of  receiving  just  one  HBO  channel,  multiplex  subscribers  can  find  the 
 (continued.) 
24
 Federal  Communications  Commission  FCC  01-  22 
 25 
 multiplexing,  the  legislative  history  indicates  that  Congress  understood  that  HDTV  was  not  limited  to 
 improved  resolution  clarity,  and  color  parity  in  a  television  image,  or  large  television  sets.  Rather, 
 Congress  recognized  that  [  t]  his  advanced  technology  has  the  potential  to  open  new  and  expanded 
 markets  for  the  components  of  advanced  television  systems  (such  as  semiconductors,  fiber  optics,  and  flat 
 screen  displays),  and  to  enhance  the  integration  of  the  television  and  computer  industries.  159 

 57.  Based  on  the  record  currently  before  us,,  we  conclude  that  primary  video  means  a 
 single  programming  stream  and  other  program-  related  content.  With  the  advent  of  digital  television, 
 broadcast  stations  now  have  the  opportunity  to  include  in  their  video  service  a  panoply  of  program-  related 
 content.  Indeed,  far  more  video  content  is  possible  broadcasting  a  digital  signal  than  broadcasting  in  an 
 analog  format.  For  example,  a  digital  television  broadcast  of  a  sporting  event  could  include  multiple 
 camera  angles  from  which  the  viewer  may  select.  The  statute  contemplates  and  our  rules  require  that 
 cable  operators  provide  mandatory  carriage  for  this  program-  related  content.  In  contrast,  if  a  digital 
 broadcaster  elects  to  divide  its  digital  spectrum  into  several  separate,  independent  and  unrelated 
 programming  streams,  only  one  of  these  streams  is  considered  primary  and  entitled  to  mandatory  carriage. 
 The  broadcaster  must  elect  which  programming  stream  is  its  primary  video,  and  the  cable  operator  is 
 required  to  provide  mandatory  carriage  to  only  such  designated  stream.  While  we  do  not  believe  that 
 Congress  specifically  contemplated  programming  of  the  type  described  above  (i.  e.,  data  or  video  that  is 
 separate  from  but  associated  with  the  primary  video)  in  drafting  Section  614(  b)(  3),  the  policies  underlying 
 this  Section  are  consistent  with  our  conclusion  here  in  the  context  of  digital  signal  carriage.  Based  on  the 
 language  in  614(  b)(  3),  Congress  was  concerned  that  mandatory  carriage  be  limited  to  the  broadcasters 
 primary  program  stream  but  also  include  related  content  as  described  here.  160  In  the  FNPRM  we  seek 
 comment  on  the  appropriate  parameters  for  program-  related  in  the  digital  context. 

 58.  Ancillary  and  Supplementary  Services.  Section  336  of  the  Act  provides  that  no 
 ancillary  or  supplementary  service  shall  have  any  right  to  carriage  under  section  614  or  615.  161  Neither 
 the  Act  nor  the  legislative  history  define  the  terms  'ancillary  or  supplementary.  '  Section  614(  b)(  3)  of  the 
 Act  requires  cable  operators  to  carry  to  the  extent  technically  feasible,  program-  related  material  carried 
 in  the  vertical  blanking  interval  or  on  subcarriers  but  states  that  [  r]  etransmission  of  other  material  in  the 
 vertical  blanking  interval  or  other  nonprogram-  related  material  (including  teletext  and  other  subscription 
 and  advertiser-  supported  information  services)  shall  be  at  the  discretion  of  the  cable  operator.  162  We 
 sought  comment  on  possible  ancillary  and  supplementary  definitions  that  were  consistent  with  the 
 language  of  Section  614(  b)(  3).  Paxson  states  that  the  Commission  should  limit  the  definition  of  ancillary 
 or  supplementary  services  to  those  for  which  viewers  pay  subscription  fees  or  for  which  the  broadcaster 
 receives  compensation  from  non-  advertising  third  parties,  thereby  establishing  mandatory  carriage  for 

 (  continued  from  previous  page) 
 network's  programming  on  additional  channels  -  HBO2  and  HBO3.  The  movies  and  specials  are  all  the  same,  but 
 the  viewer  has  three  different  program  options  at  once,  much  like  a  multiscreen  theater'). 

 159  H.  R.  Rep.  101-  1026,  101st  Cong.,  2nd  Sess.  1990  at  133-  134. 

 160  See  revisions  to  Section  76.  62  in  Appendix  D. 
 161  47  U.  S.  C.  336(  b)(  3).  Section  336(  a)(  2)  provides  that  the  Commission  shall  allow  the  holders  of  licenses  for 
 advanced  television  service  station  "to  offer  such  ancillary  or  supplementary  services  .  .  .  as  may  be  consistent  with 
 the  public  interest,  convenience,  and  necessity." 

 162  See  47  U.  S.  C.  534(  b)(  3). 
25
 Federal  Communications  Commission  FCC  01-  22 
 26 
 free  over-  the-  air  local  multicasting.  163  On  the  other  hand,  Time  Warner  argues  that  all  digital  video 
 programming,  other  than  the  main  signal  which  the  Commission  requires  the  broadcaster  to  transmit, 
 are  ancillary  and  supplementary. 

 59.  With  respect  to  the  definition  of  ancillary  and  supplementary  services,  the  Commissions 
 DTV  Fifth  Report  and  Order  states  that  ancillary  and  supplementary  services  include  any  service 
 provided  on  the  digital  channel  other  than  free,  over-  the-  air  services.  164  Section  73.624(  c)  of  the 
 Commissions  rules  specifies  that  any  video  broadcast  signal  provided  at  no  direct  charge  to  viewers 
 shall  not  be  considered  ancillary  or  supplementary.  165  While  not  defining  the  class  exhaustively,  Section 
 73.624(  c)  indicates  that  ancillary  and  supplementary  services  include,  but  are  not  limited  to,  computer 
 software  distribution,  data  transmissions,  teletext,  interactive  materials,  aural  messages,  paging  services, 
 audio  signals,  [and]  subscription  video  [video  programming  for  which  the  broadcaster  charges  a 
 fee].  .  .  .  166  Section  73.646  of  the  Commissions  rules  states  that  telecommunications  services  provided 
 on  the  vertical  blanking  interval  (  VBI)  or  in  the  visual  signal,  in  either  analog  or  digital  mode,  are 
 ancillary.  167  Based  on  the  foregoing,  we  find  that  the  services  specified  in  Sections  73.624(  c)  and  73.646 
 are  ancillary  or  supplementary  in  the  context  of  digital  cable  carriage  and  are  not  entitled  to  mandatory 
 carriage. 

 60.  In  addition,  we  believe  there  may  be  certain  services  associated  with  broadcast  digital 
 video  programming,  while  not  ancillary  or  supplementary,  would  still  not  entitled  to  mandatory  carriage 
 because  they  are  not  program  related.  Currently,  in  addition  to  a  broadcasters  primary  analog  video 
 programming,  Section  614(  b)(  3)  requires  cable  operators  to  carry  to  the  extent  technically  feasible, 
 program-  related  material  carried  in  the  vertical  blanking  interval  or  on  subcarriers  .  .  .  168  However, 
 [  r]  etransmission  of  other  material  in  the  vertical  blanking  interval  or  other  nonprogram-  related  material 
 (including  teletext  and  other  subscription  and  advertiser-  supported  information  services)  shall  be  at  the 
 discretion  of  the  cable  operator.  In  the  analog  context,  we  have  specified  certain  factors  for  determining 
 what  material  carried  in  the  VBI  is  sufficiently  program-  related  as  to  qualify  for  must  carry  rights.  169  Due 
 to  the  technical  differences  between  digital  and  analog  transmission,  e.  g.,  there  is  no  VBI  in  a  digital 
 signal,  the  foregoing  concepts  cannot  transfer  directly  into  a  digital  environment.  What  is  anticipated  is 
 that  a  television  station  will  provide  internet-  based  services,  such  as  e-  commerce  applications,  to  the 
 public.  While  this  type  of  business  plan  promises  to  enhance  a  television  stations  digital  presence,  the 
 carriage  of  internet  offerings  by  a  cable  operator  likely  would  not  be  required  under  the  must  carry 
 provisions  unless  the  broadcaster  can  demonstrate  that  such  material  should  be  considered  program-related. 

 163  Paxson  Comments  at  27. 
 164  DTV  Fifth  Report  and  Order,  12  FCC  Rcd  at  12821  (establishing  the  DTV  transition  schedule  and  related 
 requirements);  on  reconsideration  14  FCC  Rcd  19931  (1999). 
 165  47  C.  F.  R.  73.  624(  c). 

 166  Id. 
 167  47  C.  F.  R.  73.  646;  see  also  DTV  Fifth  Report  and  Order,  12  FCC  Rcd  at  12821,  n.  54. 
 168  47  C.  F.  R.  76.  62(  f). 
 169  Must  Carry  Reconsideration,  9  FCC  Rcd.  at  6734  (adopting  in  part  factors  set  forth  in  WGN  Continental 
 Broadcasting,  Co.  v.  United  Video,  Inc.,  693  F.  2d  622  (7th  Cir.  1982))  (  WGN). 
26
 Federal  Communications  Commission  FCC  01-  22 
 27 
 61.  In  this  vein,  we  note  that  there  are  certain  over-  the-  air  digital  services  sufficiently  related 
 to  the  broadcasters  primary  digital  video  programming  that  are  entitled  to  carriage.  These  include,  but 
 are  not  limited  to,  closed  captioning  information,  program  ratings  data  for  use  in  conjunction  with  the  V-chip 
 functions  of  receivers,  Source  Identification  Codes  (  SID  Codes)  used  by  Nielsen  Media  Research 
 in  the  preparation  of  program  ratings,  and  the  channel  mapping  and  tuning  protocols  that  are  part  of  PSIP. 
 These  services  provide  useful  information  to  viewers,  broadcasters,  and/  or  cable  operators,  and  are 
 intended  for  use  in  direct  conjunction  with  the  programming.  170  In  general,  we  will  continue  to  use  the 
 same  factors  enumerated  in  WGN,  that  are  used  in  the  analog  context  to  determine  what  material  is 
 considered  program-  related.  171  The  WGN  court  set  out  a  three-  part  test  for  making  a  determination.  First, 
 the  broadcaster  must  intend  for  the  information  in  the  VBI  to  be  seen  by  the  same  viewers  who  are 
 watching  the  video  signal.  Second,  the  VBI  information  must  be  available  during  the  same  interval  of 
 time  as  the  video  signal.  Third,  the  VBI  information  must  be  an  integral  part  of  the  program.  The  court  in 
 WGN  held  that  if  the  information  in  the  VBI  is  intended  to  be  seen  by  the  viewers  who  are  watching  the 
 video  signal,  during  the  same  interval  of  time  as  the  video  signal,  and  as  an  integral  part  of  the  program 
 on  the  video  signal,  then  the  VBI  and  the  video  signal  must  both  be  carried  if  one  is  to  be  carried.  172 

 62.  As  noted,  digital  signals  do  not  contain  a  VBI.  The  Commissions  rule  in  Section 
 76.56(  e)  describes  what  cable  systems  may  carry  in  the  VBI.  This  subsection  is  revised  to  revise  the 
 reference  to  VBI  to  take  account  of  digital  technology.  173 

 63.  Program  Guides.  We  sought  comment  on  the  status  of  advanced  programming  retrieval 
 systems  and  other  digital  channel  selection  devices  that  filter  and  prioritize  video  programs  for  viewers.  174 
 To  prevent  anticompetitive  conduct  by  cable  operators,  Gemstar  urges  the  Commission  to  require  the 
 undisturbed  pass-  through  of  electronic  program  guide  (  EPG)  related  information  as  part  of  the 
 broadcasters  digital  transmission.  175  NCTA  claims  that  Gemstar  provides  no  evidence  that  Congress 
 intended  to  force  cable  operators  to  deliver  any  non-  programming  information  that  might  be  transmitted 
 along  with  a  broadcasters  digital  signal.  176  Ameritech  and  BellSouth  state  that  there  is  no  legal  basis  for 

 170  We  note  that  independent  of  the  "program  related"  and  "ancillary  or  supplementary"  concepts,  cable  operators  are 
 required  to  pass  through  closed  captioning  data  contained  in  analog  and  digital  video  programming.  47  C.  F.  R. 
   76.606,  79.  1(  c).  We  further  note  that  while  the  Commission  has  refrained  from  promulgating  regulations 
 requiring  delivery  of  the  codes  necessary  for  operation  of  the  "V-  chip,"  it  has  done  so  based  upon  the  voluntary 
 assumption  of  this  responsibility  by  video  program  distributors.  In  the  Matter  of  Technical  Requirements  to  Enable 
 Blocking  of  Video  Programming  based  on  Program  Ratings,  Report  and  Order,  13  FCC  Rcd  11248,  11259  (1998). 

 171  693  F.  2d  at  624-  25.  The  Commission  declined  to  further  define  "program-  related,"  apart  from  the  WGN  analysis, 
 noting  that  carriage  of  information  in  the  VBI  was  rapidly  evolving.  Must  Carry  Order,  8  FCC  Rcd  at  2986. 
 172  Id. 

 173  See  revised  Section  76.  56(  e)  in  Appendix  D. 
 174  DTV  Must  Carry  Notice,  13  FCC  Rcd  at  15129. 
 175  Gemstar  Comments  at  10-  14.  The  Broadcast  Group  agrees  with  Gemstar,  but  states  that  the  Commission  should 
 impose  a  rule  that  (1)  prohibits  cable  systems  from  excluding  any  local  broadcast  station  from,  or  from  otherwise 
 discriminating  against  any  local  broadcast  station  in,  any  EPG  or  navigation  device  provided  by  the  system;  and  (2) 
 requires  cable  systems  to  provide  an  EPG  that  contains  a  non-  discriminatory  listing  of  all  programming  services 
 available  on  the  system.  Broadcast  Group  Comments  at  22. 

 176  NCTA  Reply  Comments  at  22.  See  also  Time  Warner  Reply  Comments  at  34  (stating  that  the  Act  flatly  precludes 
 must  carry  rights  for  broadcasters'  EPGs  because  they  are  not  program  related.) 
27
 Federal  Communications  Commission  FCC  01-  22 
 28 
 the  Commission  to  give  program  guides  any  greater  carriage  rights  than  any  other  ancillary  or 
 supplementary  service  that  must  obtain  carriage  through  private  negotiations  with  individual  cable 
 operators. 

 64.  We  find  that  the  carriage  of  program  guide  information  is  a  matter  to  be  addressed  under 
 Sections  614(  b)(  3)  and  615(  g)(  1)  of  the  Act.  As  stated  earlier,  all  program-  related  broadcast  material 
 found  in  the  analog  signals  VBI  must  be  carried,  unless  it  is  technically  infeasible  for  the  operator  to  do 
 so.  177  In  the  digital  television  context,  there  is  no  VBI  for  EPG  information  to  be  carried  on,  rather,  the 
 EPG  data  would  be  part  of  the  PSIP.  178  In  this  circumstance,  we  find  that  program  guide  data  that  are  not 
 specifically  linked  to  the  video  content  of  the  digital  signal  being  shown  cannot  be  considered  program-related, 
 and,  therefore,  are  not  subject  to  a  carriage  requirement. 

 65.  Program  Access.  Section  336  of  the  Act  states  that  no  ancillary  or  supplementary 
 service  shall  .  .  .  .be  deemed  a  multichannel  video  programming  distributor  for  purposes  of  section  628. 
 Section  628  contains  the  program  access  requirements  pursuant  to  which  multichannel  video  programming 
 distributors  are  entitled  to  purchase  on  nondiscriminatory  rates,  terms,  and  conditions  satellite-  delivered 
 cable  programming  in  which  a  cable  operator  has  an  attributable  interest.  179  In  the  Notice,  we  sought 
 comment  on  the  meaning  of  this  language.  180  We  find  that  this  provision  was  intended  to  prevent  a  digital 
 broadcaster  from  asserting  rights  under  the  program  access  provisions  contained  in  Section  628.  This 
 provision  affords  certain  rights  to  MVPDs,  which  are  defined  as  entities  who  make  available  for 
 purchase,  by  subscribers  or  customers,  multiple  channels  of  video  programming.  181  We  hold  that  Section 
 336  precludes  a  digital  television  station  offering  video  services  for  a  fee  from  asserting  MVPD  status 
 under  our  rules  and  claiming  program  access  rights  pursuant  to  Section  628. 

 D.  Duplicative  Signals 
 66.  Section  614(  b)(  5)  of  the  Communications  Act  provides  that  a  cable  operator  shall  not  be 
 required  to  carry  the  signal  of  any  local  commercial  television  station  that  substantially  duplicates  the 
 signal  of  another  local  television  station  which  is  carried  on  the  cable  system,  or  to  carry  the  signals  of 
 more  than  one  local  commercial  television  station  affiliated  with  a  particular  broadcast  network  .  .  .  182  A 
 parallel  rule  applies  to  the  carriage  of  NCE  station  signals.  183  Congress  enacted  these  provisions  to 

 177  Must  Carry  Order,  8  FCC  Rcd  at  2986. 
 178  We  note  that  in  the  analog  carriage  context,  Gemstar  has  requested  a  ruling  from  the  Commission  that  its 
 electronic  program  guide  is  program-  related  and  must  be  carried  by  cable  operators.  See  Gemstar  Intl  Group.  Ltd. 
 and  Gemstar  Development  Corp.,  Petition  for  Special  Relief  Seeking  Commission  Order  to  Discontinue  Stripping 
 Information  from  Broadcast  VBI,  Public  Notice,  DA  00-  670  (rel.  March  24,  2000). 

 179  47  U.  S.  C.  548(  a);  47  C.  F.  R.    76.1000-  1004. 

 180  DTV  Must  Carry  Notice,  13  FCC  Rcd  at  15125. 
 181  47  C.  F.  R.  76.  1000(  e). 
 182  47  U.  S.  C.  534(  b)(  5). 
 183  See  47  U.  S.  C.  535(  b)(  3)(  C)  and  (e). 
28
 Federal  Communications  Commission  FCC  01-  22 
 29 
 preserve  a  cable  operators  editorial  discretion  while  ensuring  that  the  public  has  access  to  a  diversity  of 
 local  television  signals.  184 

 67.  In  the  Notice,  we  recognized  the  import  of  the  duplication  provisions  and  sought 
 comment  on  what  approach  the  Commission  should  take  with  regard  to  this  matter.  185  In  response, 
 NCTA  argues  that  in  Section  614(  b)(  5),  Congress  intended  that  a  cable  operator  not  be  compelled  to  carry 
 duplicative  signals.  186  NCTA  also  notes  that  Section  614  defines  a  local  station  as  a  television  broadcast 
 station.  .  .  .  licensed  and  operating  on  a  channel  regularly  assigned  to  its  community.  .  .  .  187  Because  the 
 digital  transmission  takes  place  on  a  channel  separate  from  the  analog  channel,  NCTA  asserts  that  two 
 stations,  not  one,  are  in  operation  during  the  transition  and  that  Section  614(  b)(  5)  should  apply  to 
 programming  duplicated  by  a  broadcaster  on  its  digital  signal.  UCC,  emphasizes  that  Congress  enacted 
 Section  614(  b)(  5)  in  order  to  preserve  the  cable  operators  discretion  while  ensuring  access  by  the  public 
 to  diverse  local  signals.  188  UCC  asserts  that  when  a  broadcasters  digital  programming  merely  duplicates 
 its  analog  programming,  mandatory  carriage  of  the  duplicative  digital  programming  reduces  the  diversity 
 of  local  signals  by  forcing  the  cable  operator  to  drop  cable  programming  in  order  to  free  capacity,  thereby 
 undermining  Congress  goals.  189  The  Broadcast  Group,  however,  argues  that  identical  program  content 
 transmitted  in  an  analog  and  digital  format  constitutes  two  distinct  program  forms  targeted  at  different 
 audiences  and  that  the  Commission  should  not  treat  it  as  duplicative  programming.  190  Pappas  maintains 
 that  the  Commission  should  not  construe  the  limitation  on  duplicative  signals  to  refer  to  the  content  of  a 
 program  transmitted  by  a  signal,  but  rather  to  refer  to  the  signal  itself. 

 68.  We  recognize  that  reaching  a  conclusion  on  this  matter  is  complicated  by  our 
 requirements  for  the  digital  transition.  The  Commission  established  a  staged  implementation  schedule  for 
 the  introduction  of  digital  television  in  the  rules  governing  the  transition.  In  the  early  stages  of  the 
 transition,  broadcasters  have  flexibility  in  selecting  the  digital  programming  they  offer.  The  Commission 
 refrained  from  imposing  simulcasting  requirements  during  this  phase  in  order  to  afford  broadcasters  the 
 freedom  to  experiment  with  program  and  service  offerings.  191  Thus,  for  example,  a  broadcasters  initial 
 digital  programming  may  be  entirely  original,  it  may  simply  duplicate  a  certain  amount  of  its  analog 
 programming,  or  it  may  combine  original  digital  content  with  analog  content.  Beginning  April  1,  2003, 
 the  rules  mandate  an  increasing  level  of  duplication  of  program  content  between  the  analog  and  digital 
 signals,  eventually  reaching  a  100%  simulcasting  requirement  which  continues  until  a  broadcasters 
 analog  channel  is  terminated  and  returned  to  the  Commission.  192 

 184  S.  Rep.  No.  92,  102d  Cong.,  1st  Sess.  at  85  (1991). 
 185  DTV  Must  Carry  Notice,  13  FCC  Rcd  at  15123. 
 186  NCTA  Comments  at  12-  13. 
 187  NCTA  Reply  Comments  at  19  (quoting  47  U.  S.  C.    534(  h)(  1)(  A)). 
 188  UCC  Comments  at  8  (citation  omitted). 
 189  Id.;  see  also  NCTA  Reply  Comments  at  16. 
 190  Broadcast  Group  Comments  at  10. 
 191  DTV  Fifth  Report  and  Order,  12  FCC  Rcd  at  12832. 
 192  Id.  These  simulcasting  requirements  are  intended  to  minimize  viewer  disruption  as  the  content  of  the  analog 
 signal  is  slowly  replicated  on  the  digital  signal. 
29
 Federal  Communications  Commission  FCC  01-  22 
 30 
 69.  We  will  not  revise  the  duplication  definitions  and  requirements  at  this  time.  More 
 information  is  needed  on  the  digital  programming  currently  made  available  by  broadcasters  before  we  act 
 in  this  regard.  Such  information,  which  is  solicited  in  the  FNPRM,  will  enable  us  to  determine  the 
 appropriate  duplication  definitions  to  apply  during  the  transition  period,  when  two  signals  of  the  same 
 station  are  available  over-  the-  air,  and  afterwards.  In  the  meantime,  we  will  continue  to  administer  the 
 duplication  requirements  set  forth  in  the  Act  and  the  Commissions  rules.  193  That  is,  two  commercial 
 television  stations  will  be  considered  to  substantially  duplicate  each  other  if  they  simultaneously 
 broadcast  identical  programming  for  more  than  50  percent  of  the  broadcast  week.  194  For  purposes  of  this 
 definition,  identical  programming  means  the  identical  episode  of  the  same  program  series.  195  With  regard 
 to  noncommercial  television  broadcasters,  an  NCE  station  does  not  substantially  duplicate  the 
 programming  of  another  NCE  station  if  at  least  50  percent  of  its  typical  weekly  programming  is  distinct 
 from  programming  on  the  other  station  either  during  prime  time  or  during  hours  other  than  prime  time.  196 
 This  rule  is  applicable  to  digital-  only  and  analog  noncommercial  stations  during  the  transition  period  as 
 well. 

 E.  Material  Degradation 
 70.  Section  614(  b)(  4)(  A)  of  the  Act  discusses  the  cable  operators  treatment  and  processing 
 of  analog  broadcast  station  signals  and  provides  that  the  signals  of  local  commercial  television  stations 
 shall  be  carried  without  material  degradation.  197  The  Notice  asked  to  what  extent  this  provision  precludes 
 cable  operators  from  altering  the  digital  format  of  digital  broadcast  television  signals  when  the 
 transmission  is  processed  at  the  system  headend  or  in  customer  premises  equipment.  198  Under  the  Act,  the 
 Commissions  carriage  standards  must  ensure  that,  to  the  extent  technically  feasible,  the  quality  of  signal 
 processing  and  carriage  provided  by  a  cable  system  for  the  carriage  of  local  commercial  television 
 stations  will  be  no  less  than  that  provided  by  the  system  for  carriage  of  any  other  type  of  signal.  199  To 
 address  this  provision,  the  Notice  sought  comment  on  whether  the  Act  requires  an  operator  to  carry  all 
 local  commercial  television  stations  that  broadcast  in  a  1080I  high  definition  format  if  it  carries  a  cable 
 programming  service  such  as  HBO  in  the  1080I  HDTV  format.  200 

 193  We  note  that  duplication  in  this  context  may  encompass  the  following  situations:  (1)  DTV-  only  station  v.  DTV-only 
 station;  (2)  DTV-  only  station  v.  analog  station;  or  (3)  analog  station  v.  analog  station. 
 194  Must  Carry  Order,  8  FCC  Rcd  at  2981. 

 195  Id.  at  2970. 
 196  47  C.  F.  R.  76.  56(  a)(  1)(  iii).  See  also,  Must  Carry  Order,  8  FCC  Rcd  at  2970.  In  the  cable  carriage  context,  the 
 Commission  treated  the  duplication  provisions  of  Sections  615(  b)(  2)  and  Section  614(  b)(  5)  separately.  The 
 Commission  noted  that  the  two  provisions  were  intended  to  accommodate  different  situations  and  are  addressed 
 separately  in  the  statute  and  its  legislative  history.  Id.  at  2980. 

 197  47  U.  S.  C.  534(  b)(  4)(  A).  See  also  47  U.  S.  C.  535(  g)(  2)  ("  A  cable  operator  shall  provide  each  qualified  local 
 noncommercial  educational  station  whose  signal  is  carried  in  accordance  with  this  section  with  bandwidth  and 
 technical  capacity  equivalent  to  that  provided  to  commercial  television  stations  carried  on  the  cable  system  and  shall 
 carry  the  signal  of  each  qualified  local  noncommercial  educational  television  station  without  material  degradation"); 
 47  C.  F.  R.  76.  62(  b)-(  d). 

 198  DTV  Must  Carry  Notice,  13  FCC  Rcd  at  15122. 

 199  See  47  U.  S.  C.  534(  b)(  4)(  A).  See  also  47  U.  S.  C.  535(  g)(  2). 
 200  DTV  Must  Carry  Notice,  13  FCC  Rcd  at  15123. 
30
 Federal  Communications  Commission  FCC  01-  22 
 31 
 71.  We  note  that  the  Advanced  Television  Systems  Committee  (  ATSC)  DTV  Standard 
 adopted  by  the  Commission  was  recommended  by  the  Advisory  Committee  on  Advanced  Television 
 Service  (  ACATS)  and  developed  by  the  Grand  Alliance.  201  It  provides  for  19.4  megabits  per  second 
 (  mbps)  for  each  6  MHz  channel  over-  the-  air.  202  The  Commission  neither  adopted  a  single  standard  for 
 high  definition  television  nor  imposed  a  HDTV  requirement  on  broadcasters.  203  Rather,  the  Commission 
 drew  the  distinction  between  standard  definition  (  SDTV)  and  high  definition  (  HDTV)  in  the  digital 
 context.  The  electronics  industry  and  ATSC  define  high  definition  television  as  having  a  vertical  display 
 resolution  of  720p,  1080I,  or  higher;  an  aspect  ratio  capable  of  displaying  a  16:  9  image  at  the  minimum 
 resolution  level;  and  receiving  and  reproducing  Dolby  digital  audio.  204  In  contrast,  standard  definition 
 digital  displays  resolution  lower  than  high  definition,  requires  no  specific  ratio,  and  produces  usable 
 audio  and  picture.  205 

 72.  NAB  argues  that  a  digital  signal  would  be  materially  degraded  if  it  were  not  transmitted 
 to  the  viewer  in  the  format  that  the  broadcaster  intended.  206  MSTV  states  that  cable  systems  should  not  be 
 permitted  to  block  or  delete  any  of  the  bits  comprising  the  free  over  the  air  broadcast  material.  207  Granite 
 adds  that  if  cable  operators  are  not  required  to  pass  through  the  entire  digital  signal,  the  ability  of  viewers 
 to  receive  and  experience  higher  quality  television  programming  formats  will  be  reduced.  208  We  believe 
 that  these  arguments  do  not  address  the  fundamental  concern  of  the  prohibition  against  material 

 201  DTV  Fourth  Report  and  Order,  11  FCC  Rcd  at  17772-  4.  The  Grand  Alliance  was  consortia  of  equipment 
 manufacturers,  including  AT&  T  and  General  Instruments,  working  together  to  develop  DTV  standards. 
 202  Id.  at  17789. 

 203  See  DTV  Fifth  Report  and  Order,  12  FCC  Rcd  at  12809,  12826-  27. 
 204  ATSC  Restates  Definitions  for  HDTV  and  SDTV  Transmission  Standards,  Press  Release  (Feb.  20,  1998)  at 
 http://  www.  atsc.  org/  Presshtml/  PR_  Def.  html  ("  The  Executive  Committee  of  the  Advanced  Television  Systems 
 Committee  has  approved  for  release  the  following  statement  regarding  the  identification  of  the  HDTV  and  SDTV 
 transmission  formats  within  the  ATSC  Digital  Television  Standard:  "There  are  six  video  formats  in  the  ATSC  DTV 
 standard  which  are  High  Definition.  They  are  the  1080  line  by  1920  pixel  formats  at  all  picture  rates  (24,  30  and  60 
 pictures  per  second),  and  the  720  line  by  1280  pixel  formats  at  these  same  picture  rates.  All  of  these  formats  have  a 
 16:  9  aspect  ratio.";  DTV  Fifth  Further  Notice  of  Proposed  Rule  Making,  11  FCC  Rcd.  6235,  6237  (1996)  (  DTV 
 Fifth  FNPRM)  (Noting  that  720-  line  and  1080-  line  formats  represent  high  resolution  video).  Both  high-  resolution 
 formats  use  a  picture  aspect  ratio  of  16  units  horizontally  by  9  units  vertically.  The  choices  of  1280  pixels  per  line 
 for  the  720-  line  format  and  1920  pixels  per  line  for  the  1080-  line  format  result  in  square  pixels  for  both  formats, 
 based  on  the  16:  9  aspect  ratio.  "I"  designates  "interlaced"  scanning  and  "P"  designates  "progressive"  scanning. 
 Progressive  scanning  lines  are  presented  in  succession  from  the  top  of  the  picture  to  the  bottom,  with  a  complete 
 image  sent  in  each  frame  as  is  commonly  found  in  computer  displays  today.  For  interlaced  scanning,  which  also  is 
 used  in  NTSC  (analog)  television,  odd  and  even  numbered  lines  of  the  picture  are  sent  consecutively,  as  two 
 separate  fields.  These  two  fields  are  superimposed  to  create  one  frame,  or  complete  picture,  at  the  receiver.  The 
 interlace  picture  rates  can  be  24,  30  or  60  fields  per  second.  Id.  at  11  FCC  Rcd  at  6237-  38.  See  also  CEA  Expands 
 Definitions  for  DTV  Products,  www.  digitalbroadcasting.  com,  September  6,  2000  (Definitions,  which  now  allow  for 
 DTV  to  be  defined  in  the  4:  3  aspect  ratio  standard,  are  expected  to  be  incorporated  into  new  products  in  time  for 
 holiday  buying  season) 

 205  http://  www.  dtvweb.  org;  and  DTV  Fifth  FNPRM,  at  11  FCC  Rcd  at  6237. 

 206  NAB  Comments  at  40. 
 207  MSTV  Comments  at  30. 
 208  Granite  Broadcasting  at  9. 
31
 Federal  Communications  Commission  FCC  01-  22 
 32 
 degradation.  From  our  perspective,  the  issue  of  material  degradation  is  about  the  picture  quality  the 
 consumer  receives  and  is  capable  of  perceiving  and  not  about  the  number  of  bits  transmitted  by  the 
 broadcaster  if  the  difference  is  not  really  perceptible  to  the  viewer.  Such  an  interpretation  is  consistent 
 with  the  language  of  the  Act,  which  applies  to  material  degradation,  not  merely  technical  changes  in  the 
 signals.  209  Moreover,  as  discussed  above,  the  Act  prohibits  mandatory  carriage  for  ancillary  or 
 supplementary  services  210  and  our  rules  provide  that  material  that  is  not  program-  related  is  not  subject  to 
 the  mandatory  carriage  requirement.  211  If  such  bitstream  material  that  is  not  subject  to  mandatory 
 carriage  is  subtracted  from  the  entire  6  MHz  over-  the-  air  digital  signal,  by  necessity  there  will  be  fewer 
 than  19.4  mbps  to  be  carried  on  the  cable  system.  Moreover,  whenever  a  digital  signal  is  remodulated  for 
 carriage  on  a  cable  system,  fewer  bits  are  needed  than  to  transmit  the  signal  over  the  air.  212  Thus,  it  is 
 inappropriate  to  use  19.4  mbps,  or  any  specific  number  of  bits,  to  denote  what  constitutes  a  degraded 
 signal.  The  number  of  bits  appropriate  for  mandatory  carriage  will  vary  based  on  the  programming  and 
 service  choices  of  each  broadcaster. 

 73.  With  regard  to  defining  picture  quality  for  digital  carriage  purposes,  Microsoft  advocates 
 that  the  Commission  should  require  only  that  cable  operators  not  carry  non-  broadcast  signals  at  a  higher 
 quality  than  broadcast  signals.  213  Pappas  argues,  however,  that  a  subscriber  watching  a  HDTV  digital 
 program  on  cable  should  see  the  same  quality  picture  as  a  consumer  watching  a  HDTV  digital  program 
 over-  the-  air.  214  Adelphia  argues  that  as  long  as  high  definition  broadcast  signals  are  retransmitted  in  either 
 the  1080I  or  720p  format,  the  alteration  of  the  digital  television  signals  format  does  not  constitute 
 material  degradation.  215  We  agree  with  Microsoft  and  find  that  language  of  the  Act  provides  the  answer  to 
 the  material  degradation  question.  Section  614(  b)(  4)(  A)  requires  that  cable  operators  shall  provide  the 
 same  quality  of  signal  processing  and  carriage  for  broadcasters  signals  as  they  provide  for  any  other 
 type  of  signal.  Consequently,  in  the  context  of  mandatory  carriage  of  digital  broadcast  signals,  a  cable 
 operator  may  not  provide  a  digital  broadcast  signal  in  a  lesser  format  or  lower  resolution  than  that 
 afforded  to  any  digital  programmer  (e.  g.,  non-  broadcast  cable  programming,  other  broadcast  digital 
 program,  etc.)  carried  on  the  cable  system,  provided,  however,  that  a  broadcast  signal  delivered  in  HDTV 
 must  be  carried  in  HDTV.  216  This  result  also  protects  the  interests  of  cable  subscribers  by  focussing  on 

 209  47  U.  S.  C.  534(  b)(  4)(  A).  This  interpretation  is  also  consistent  with  the  Act's  general  mandate  of  ensuring  that 
 cable  operators  do  not  favor  their  own  cable  programming  video  services  over  those  video  services  provided  by 
 broadcasters. 

 210  47  U.  S.  C.  336(  b)(  3). 

 211  See  47  C.  F.  R.  76.62(  e). 
 212  A  broadcasters  over-  the-  air  HDTV  signal,  for  example,  requires  19.  4  mbps,  which  accounts  for  both  the 
 programming  or  data,  as  well  as  an  overhead  data  stream  that  includes  error  correction.  When  a  cable  system  carries 
 this  HDTV  signal  using  QAM  modulation,  it  removes  the  broadcasters  overhead  data  stream  and  replaces  it  with 
 the  overheada  stream  appropriate  for  the  specific  cable  system.  Generally  the  resulting  bit  rate  is  somewhat  less 
 than  19.  4.  This  reduction  in  bit  rate  does  not  affect  picture  quality  and  is  not  considered  material  degradation. 

 213  Microsoft  Comments  at  24. 

 214  Pappas  Comments  at  19-  20. 
 215  Adelphia  et.  al.  Comments  at  31. 
 216  We  recognize  that  it  may  be  especially  burdensome  for  small  systems  with  limited  channel  capacity  (such  as 
 systems  with  fewer  than  330  MHz)  to  carry  a  HDTV  signal  if  they  are  not  otherwise  providing  any  HDTV 
 programming.  In  this  regard,  we  note  that  mandatory  carriage  is  limited  to  one-  third  of  the  cable  systems  capacity, 
 as  defined  infra.  We  also  recognize  that  carriage  of  a  HDTV  signal  using  8  VSB  pass-  through  may  require  the 
 (continued.) 
32
 Federal  Communications  Commission  FCC  01-  22 
 33 
 the  comparable  resolution  of  the  picture,  as  visible  to  a  consumer,  rather  than  the  number  of  lines  or  bits 
 transmitted,  which  may  not  make  a  viewable  difference  on  a  consumers  equipment. 

 74.  We  also  find  that  for  purposes  of  supporting  the  ultimate  conversion  to  digital  signals  and 
 facilitating  the  return  of  the  analog  spectrum,  a  television  station  may  demand  that  one  of  its  HDTV  or 
 SDTV  television  signals  be  carried  on  the  cable  system  for  delivery  to  subscribers  in  an  analog  format. 
 We  do  not  believe  the  conversion  of  a  digital  signal  to  an  analog  format  under  these  specific  and 
 temporary  circumstances  is  precluded  by  the  nondegradation  requirement  in  sections  614(  b)(  4)(  A)  and 
 615(  g)(  2).  Many  cable  subscribers  do  not  yet  have  television  sets  capable  of  receiving  or  displaying 
 digital  signals  in  their  fully  advanced  format.  Thus,  if  we  were  to  mandate  digital-  to-  digital  transmission 
 at  this  stage  of  the  transition  period,  cable  subscribers  would  be  unable  to  properly  receive  the  signals. 
 Obviously  this  was  not  the  intended  goal  of  the  nondegradation  requirement  in  sections  614(  b)(  4)(  A)  and 
 615(  g)(  2).  Allowing  digital-  to-  analog  conversion  for  a  limited  time  during  a  critical  stage  of  the  transition 
 period  will  further  the  digital  transition  because  a  television  station  would  be  more  willing  to  return  its 
 analog  spectrum  to  the  government,  and  convert  to  digital  service,  knowing  that  cable  subscribers  without 
 digital  equipment  may  still  be  able  to  view  the  relevant  programming.  We  recognize,  that  permitting 
 digital-  to-  analog  conversion  will  not  provide  an  impetus  for  cable  subscribers  to  purchase  digital 
 television  sets,  but  will  allow  new  digital  stations  and  stations  that  return  their  analog  spectrum  to 
 continue  to  reach  cable  subscribers  who  have  only  analog  receivers  while  commencing  over-  the-  air 
 service  to  attract  and  reach  non-  cable  viewers  who  purchase  digital  television  sets.  With  these  points  in 
 mind,  we  will  allow  a  television  station  to  provide  one  of  its  digital  signals  to  cable  systems  in  an  analog 
 format  only  during  the  early  stages  of  the  transition  period.  We  will  revisit  this  policy  after  2003  to  ensure 
 that  this  policy  is  fostering  the  conversion  to  digital  television  service  and  to  determine  when  equipment 
 is  available  so  that  broadcast  signals  can  be  delivered  and  carried  in  digital  format.  217  As  the  transition 
 moves  forward,  television  broadcast  stations  will  be  required  to  deliver  their  signals  in  digital  format  and 
 cable  operators  will  be  required  to  carry  them  in  digital  format,  as  discussed  above. 

 75.  Measurement.  The  Notice  asked  what  standards  and  measurement  tools  were  available 
 to  address  disputes  relating  to  the  quality  of  the  digital  broadcast  television  signal.  218  We  also  asked  how, 
 and  where,  degradation  should  be  measured.  To  determine  if  an  operator  is  materially  degrading  a  digital 
 signal,  the  signal  should  be  tested  at  the  input  terminal  of  either  the  television  set  or  set-  top  box  if  the 
 subscriber  owns  that  piece  of  equipment.  The  signal  should  be  tested  at  the  output  point  of  the  set  top  box 
 if  the  subscriber  rents  that  equipment  from  the  cable  operator.  We  believe  that  this  location,  rather  than 
 the  headend,  will  best  capture  the  signals  strength  and  characteristics  after  being  processed  by  the  cable 

 (  continued  from  previous  page) 
 allocation  of  more  than  6  MHz  of  bandwidth  due  to  the  difference  in  channel  alignments  between  broadcast  over-the- 
 air  transmission  and  cable  carriage.  An  8-  VSB  pass-  through  of  a  broadcast  station  may  straddle  two  cable 
 channels  and  result  in  the  loss  of  additional  channels  in  the  system  (i.  e.,  the  cable  operator  is  not  able  to  use  these 
 additional  channels  to  carry  other  programming).  Therefore,  if  a  small  system,  which  is  not  otherwise  carrying  any 
 HDTV  signals,  is  required  to  carry  a  broadcast  signal  in  HDTV  such  that  it  straddles  two  channels  in  this  way,  it 
 may  include  all  of  its  lost  spectrum  when  calculating  its  one-  third  capacity. 

 217  We  understand  that  for  some  time  the  technology  has  been  available  to  manufacture  cable  boxes  that  can  either 
 deliver  a  digital  signal  to  the  subscribers  digital  equipment  or  downconvert  the  signal  to  be  displayed  on  analog 
 equipment.  See,  e.  g.,  AT&  T  ex  parte  of  October,  1999.  Apparently  there  is  not  as  yet  sufficient  demand  to  produce 
 these  boxes  for  retail  purchase  or  for  rental  from  the  cable  operator.  We  will  monitor  the  markets  progress  to 
 ensure  that  our  permission  for  analog  conversion  at  the  headend  does  not  interfere  with  the  marketplace  availability 
 of  such  boxes. 

 218  DTV  Must  Carry  Notice,  13  FCC  Rcd  at  15122. 
33
 Federal  Communications  Commission  FCC  01-  22 
 34 
 plant.  Broadcasters  and  cable  operators  may  use  commercially  available  devices  to  detect  signal 
 degradation.  We  do  not  endorse  any  particular  model,  but  stress  that  such  equipment  must  meet  sound 
 engineering  practices  and  good  equipment  specifications. 

 76.  Digital  Modulation  Techniques.  We  are  mindful  that  digital  television  signals  are 
 transmitted  in  the  8  VSB  219  digital  broadcast  modulation  technique  while  operators  will  use  either  64  or 
 256  QAM  220  as  the  cable  digital  modulation  technique.  Both  64  and  256  QAM  likely  will  provide  cable 
 operators  with  a  greater  degree  of  operating  efficiency  than  does  8  VSB,  and  also  permits  the  carriage  of  a 
 higher  data  rate,  with  less  bits  devoted  to  error  correction,  when  compared  with  the  digital  broadcast  system. 
 Therefore,  we  will  permit  cable  operators  to  remodulate  digital  broadcast  signals  from  8  VSB  to  64  or  256 
 QAM.  221  We  will  not  require  cable  operators  to  pass  through  8  VSB.  Notwithstanding  this  conclusion, 
 we  believe  that  cable  pass-  through  of  a  digital  broadcast  signal  without  alteration  is  an  option  for  allowing 
 the  first  purchasers  of  digital  television  sets  to  receive  digital  signals  from  their  cable  systems.  Under  this 
 scenario,  the  8  VSB  signal  could  pass  through  the  cable  system  and  the  cable  set-  top  box  without  change 
 and  connect  to  the  digital  television  set,  or  the  cable  could  bypass  the  set-  top  box  and  be  connected  to  a 
 cable  coaxial  connection  on  the  digital  television  receiver.  We  believe  that  pass-  through  is  an  option  for 
 operators  of  certain  cable  systems  222  that  wish  to  offer  subscribers  digital  broadcast  channels,  but 
 recognize  in  the  long  term,  that  pass-  through  is  not  an  effective  solution  for  the  majority  of  cable  systems. 

 F.  Set  Top  Box  Availability 
 77.  In  the  Notice,  we  observed  that  the  Act  mandates  that  all  commercial  television  signals 
 shall  be  provided  to  every  subscriber  of  a  cable  system  and  be  viewable  on  all  television  receivers  of 
 subscribers  that  are  connected  by  the  cable  operator  or  for  which  the  cable  operator  provides  a 

 219  VSB  is  a  form  of  amplitude  modulation  in  which  one  sideband  of  the  main  modulated  signal  and  a  small  part  of 
 the  other  sideband  of  the  same  signal  are  transmitted.  The  8  VSB  standard  has  been  optimized  for  terrestrial  broadcast 
 television  delivery  where  transmission  errors  and  data  loss  are  likely.  The  current  analog  television  standard  also  uses 
 VSB. 

 220  Quadrature  amplitude  modulation,  or  QAM,  is  a  complex  modulation  technique,  using  variations  in  both  signal 
 phase  and  amplitude.  We  note  that  256  QAM  has  a  38  Mpbs  data  rate  while  64  QAM  has  a  27  Mbps  data  rate. 

 221  The  ATSC  standards  on  which  the  8  VSB  digital  television  broadcasting  system  is  based,  involved  the 
 participation  of  the  cable  industry.  It  was  anticipated  in  the  ATSC  process  that  non-  broadcast  digital  video  program 
 providers  would  be  using  a  16  VSB  modulation  system.  Although  cable  operators  are  now  using  QAM,  rather  than 
 VSB,  it  was  clearly  contemplated  throughout  the  process  that  the  cable  industry  and  the  broadcasting  industry  would 
 not  be  using  the  same  modulation  technique.  On  this  point  MediaOne  (now  part  of  AT&  T  Broadband)  states  that  the 
 conversion  from  VSB  to  QAM  causes  no  degradation  of  broadcast  digital  video  quality;  rather  the  same  quality 
 signal  the  station  delivers  to  the  headend  will  be  received  by  cable  subscribers  with  digital  television  receivers. 
 MediaOne  Comments  at  12.  See  also  Mitsubishi  Reply  Comments  at  10-  11  (stating  that  the  remodulation  from  VSB 
 to  QAM  should  be  allowed).  For  purposes  of  Section  76.630  of  our  rules,  we  clarify  that  we  do  not  consider  the 
 utilization  of  QAM  modulation  by  a  cable  operator  in  the  provision  of  digital  cable  television  service  to  involve 
 scrambling,  encryption  or  similar  technologies  of  the  type  referenced  therein.  See  47  C.  F.  R.    76.  630. 

 222  This  may  be  applicable  to  cable  systems  that  will  not  be  providing  any  digital  cable  programming  or  systems  not 
 wanting  to  incur  the  additional  expense  of  8  VSB  to  either  64  or  256  QAM  conversion  at  the  headend  or  in  the  set-top 
 box. 
34
 Federal  Communications  Commission  FCC  01-  22 
 35 
 connection.  223  In  general,  most  cable  subscribers  are  able  to  view  analog  broadcast  stations  on  analog 
 cable-  ready  television  sets.  224  In  the  case  of  the  new  digital  television  service,  the  Commission  has 
 recently  adopted  labeling  requirements  for  digital  television  receivers.  Based  on  an  industry  agreement  on 
 technical  standards,  any  receiver  labeled  as  Digital  Cable  Ready  will  be  capable  of  receiving  analog 
 basic,  digital  basic,  and  digital  premium  cable  television  programming  by  direct  connection  to  a  cable 
 system  providing  digital  programming.  .  .  .  A  security  card  (or  POD)  provided  by  the  cable  operator  is 
 required  to  view  encrypted  programming.  225  The  digital  cable  ready  receivers  will  include  QAM 
 demodulation  capability.  In  the  case  of  digital  television  receivers  that  do  not  meet  the  digital  cable  ready 
 criteria,  a  subscriber  may  need  a  set  top  box  to  view  broadcast  digital  signals  delivered  via  cable. 

 78.  In  the  Notice,  we  asked  if  the  Act  requires  cable  operators  to  offer  set  top  boxes  to  every 
 subscriber  if  digital  television  signals  cannot  be  received  without  some  device  facilitating  reception.  226 
 We  also  asked  about  viewing  digital  television  signals  on  analog  equipment.  MediaOne  states  that 
 Congress  did  not  intend  for  all  cable  subscribers  to  incur  substantial  additional  costs  in  order  to  ensure 
 that  all  digital  broadcast  programming  is  viewable  on  their  televisions,  especially  when  most  of  the  digital 
 programming  would  be  duplicative  of  the  broadcasters  analog  feed.  227  ALTV,  on  the  other  hand,  believes 
 that  Section  614(  b)(  7)  should  be  applied  to  digital  signals  in  the  same  manner  as  it  is  applied  to  analog 
 signals.  228 

 79.  We  will  not  require  a  cable  operator  to  provide  subscribers  with  a  set  top  box  capable  of 
 processing  digital  signals  for  display  on  analog  sets.  We  recognize  that  if  we  were  to  impose  such  a 
 requirement,  all  subscribers  would  be  forced  to  pay  for  equipment  that  converts  digital  programming  that 
 may  be  identical  in  content  to  the  analog  programming  to  which  they  already  have  access  without  a  set 
 top  box.  The  result  would  be  that  subscribers  without  the  capability  of  viewing  digital  signals  and  who 
 will  receive  duplicate  analog  programming  when  the  Commissions  simulcasting  requirements  commence 
 in  2003,  229  would  be  required  to  pay  for  a  converter  box  to  receive  duplicate  digital  signals.  230  We  do  not 
 believe  that  this  result  is  what  Congress  intended  in  enacting  section  614(  b)(  7). 

 223  See  DTV  Must  Carry  Notice,  13  FCC  Rcd  at  15126  citing  47  U.  S.  C.  534(  b)(  7).  Section  615(  h)  provides  that 
 noncommercial  educational  stations,  that  are  entitled  to  carriage,  shall  be  "available  to  every  subscriber  as  part  of  the 
 cable  system's  lowest  price  service  tier  that  includes  the  retransmission  of  local  commercial  television  broadcast 
 signals."  47  U.  S.  C.  535(  h). 

 224  Some  cable  subscribers  have  older  televisions  that  are  not  capable  of  receiving  all  broadcast  stations  due  to  on-channel 
 placement  at  a  channel  number  beyond  the  range  of  the  receiver.  These  subscribers  rent  a  set-  top  box  from 
 the  cable  system  for  which  the  system  may  charge  a  monthly  fee  pursuant  to  47  U.  S.  C.  543(  b)(  3)(  A).  See  also  47 
 C.  F.  R.  76.  923.  See  also,  Complaint  of  WLIG,  CSR  3903-  M  (Cab.  Serv.  Bur.  rel.  Nov.  10,  1993)(  requiring  the  cable 
 operator  to  provide  boxes  to  subscribers  so  that  they  are  able  to  view  a  local  television  broadcast  signal). 

 225  See  Compatibility  Between  Cable  Systems  and  Consumer  Electronics  Equipment,  at    36.  In  this  proceeding,  the 
 cable  and  consumer  electronics  industries  are  required  to  report  on  their  progress  concerning  pending  technical 
 standards  issues,  including  such  standards  for  direct  connection  of  DTV  receivers  to  digital  cable  systems. 

 226  Digital  Must  Carry  Notice,  13  FCC  Rcd  at  15126. 

 227  MediaOne  Comments  at  35. 
 228  ALTV  Comments  at  71. 
 229  See  47  C.  F.  R.  624(  f)(  1). 
35
 Federal  Communications  Commission  FCC  01-  22 
 36 
 80.  Furthermore,  we  believe  that  requiring  cable  operators  to  make  available  set  top  boxes 
 capable  of  processing  digital  signals  for  display  on  analog  sets  might  be  inconsistent  with  section  629  of 
 the  Act.  Section  629  was  enacted  to  ensure  the  commercial  availability  of  navigation  devices,  the 
 equipment  used  to  access  video  programming  and  other  services  from  multichannel  video  programming 
 systems.  231  Pursuant  to  our  statutory  mandate,  we  adopted  rules  to  expand  opportunities  to  purchase  such 
 equipment  from  sources  other  than  the  service  provider.  232  Thus,  to  now  require  cable  operators  to  make 
 such  equipment  available  to  subscribers  would  impede  the  overarching  goal  of  the  Navigation  Devices 
 proceeding,  that  is  to  assure  competition  in  the  availability  of  set-  top  boxes  and  other  customer  premises 
 equipment.  233  Moreover,  we  believe  that  as  the  digital  television  transition  moves  forward,  subscribers 
 will  have  the  ability  to  purchase  or  lease  a  converter  to  permit  the  digital  signal  to  be  displayed  on  their 
 analog  televisions.  We  also  expect  that  a  conversion  function  is  one  which  manufacturers  may  consider 
 adding  to  digital  set-  top  boxes.  We  note  that  the  Commissions  navigation  devices  rules  allow 
 manufacturers  the  ability  to  incorporate  additional  features  and  functions  in  set-  top  boxes,  and  to  sell 
 those  boxes  at  retail.  234  As  such,  subscribers  will  be  able  to  view  both  the  analog  and  digital  signals  as 
 the  competitive  market  develops.  Further,  our  decision  ensures  that  the  option  to  pay  for  a  converter  or 
 digital  set-  top  box  with  that  function  remains  at  the  discretion  of  the  cable  subscriber  and  is  not  mandated 
 through  government  regulation. 

 G.  Channel  Location 
 81.  Section  614(  b)(  6)  generally  provides  that  commercial  television  stations  carried  pursuant 
 to  the  mandatory  carriage  provision  are  entitled  to  be  carried  on  a  cable  system  on  the  same  channel 
 number  on  which  the  station  broadcasts  over-  the-  air.  235  Under  Section  615(  g)(  5)  noncommercial 
 television  stations  generally  have  the  same  right.  236  The  Act  also  permits  commercial  and  noncommercial 

 (  continued  from  previous  page)  230 
 On  this  point,  NCTA  comments  that  a  strict  interpretation  of  Section  614(  b)(  7)  by  the  Commission  would  impose 
 $53  billion  to  $93  billion  ($  400-$  700  per  sub.)  in  set  top  equipment  costs  on  subscribers.  NCTA  Comments  at  49 

 231  47  U.  S.  C.    629. 

 232  Navigation  Devices  Report  and  Order,  13  FCC  Rcd.  14,  775  (para  1)  (1998). 
 233  Id.  at  para  7. 
 234  See  Commercial  Availability  of  Navigation  Devices,  Report  and  Order,  13  FCC  Rcd  14775  at  para.  49  (1998) 
 (  Navigation  Devices)  (promulgating  rules  to  facilitate  the  development  and  commercial  availability  of  navigation 
 equipment).  See  also  47  U.  S.  C.  544(  a);  47  C.  F.  R.    1200  et.  seq. 

 235  47  U.  S.  C.  534(  b)(  6);  47  C.  F.  R.  76.  57(  a).  There  are  three  channel  positioning  options  for  commercial  television 
 stations  but  only  the  on-  channel  option  is  relevant  to  the  new  digital  signals.  The  other  two  options  applicable  to 
 existing  analog  stations  are  the  channel  on  which  the  station  was  carried  on  July  19,  1985  and  the  channel  on  which 
 it  was  carried  on  January  1,  1992.  These  latter  two  channel  positioning  requirements  are  not  suitable  in  the  era  of 
 digital  television.  They  are  grounded  in  dates  applicable  only  to  analog  broadcasters  that  were  designed  to  ensure 
 that  subscribers  would  be  able  to  find  broadcast  programming  on  familiar  channel  positions.  Since  digital  signals 
 are  generally  new  products,  there  is  no  analogous  supporting  rationale  for  requiring  digital  channel  positioning  on 
 any  cable  channel  other  than  on  a  station's  over-  the-  air  channel.  Moreover,  each  television  station  now  has  a 
 different  digital  channel  assignment  under  the  Commission's  new  table  of  digital  allotments.  See  Sixth  Report  and 
 Order,  12  FCC  Rcd.  at  14699. 

 236  47  U.  S.  C.  535(  g)(  5);  47  C.  F.  R.  76.57(  b). 
36
 Federal  Communications  Commission  FCC  01-  22 
 37 
 television  stations  to  negotiate  a  mutually  beneficial  channel  position  with  the  cable  operator.  237  In 
 seeking  comment  on  the  applicability  of  these  types  of  requirements  in  the  digital  context,  we  noted  that 
 station  licensees  received  new  digital  broadcast  frequency  assignments  and  channel  numbers  that  are 
 different  from  their  analog  channel  numbers.  238  We  pointed  out  that  the  advent  of  advanced  programming 
 retrieval  systems  and  other  channel  selection  devices  may  alleviate  the  need  for  specific  channel 
 positioning  requirements.  239  In  this  regard,  the  ATSC  established  channel  identification  protocols,  or 
 PSIPs,  240  that  link  the  digital  channel  number  with  that  assigned  to  the  analog  channel.  241  Given  these 
 developments,  we  asked  whether  the  Commission  should  refrain  from  promulgating  digital  channel 
 positioning  requirements  and  allow  technology  to  resolve  the  matter.  242 

 82.  Entravision  and  Granite  submit  that  the  analog  channel  positioning  requirements  should 
 apply  to  DTV  signals.  243  ALTV  proposes  that  a  cable  operator  should  carry  DTV  signals  on  contiguous 
 channels.  244  MSTV  and  NAB  ask  the  Commission  to  rely  on  the  ATSC  PSIP  standard.  245  NBC  states  that 
 PSIP  information  or  other  DTV  navigation  instructions  must  be  carried  by  cable  operators  for  a  channel 
 mapping  system  to  work.  246  Matsushita  agrees  and  adds  that  should  the  Commission  permit  out-  of-  band 
 methods  to  provide  navigational  information,  the  Commission  should  (1)  require  that  cable  systems 
 transmit  to  the  DTV  set  any  and  all  the  PSIP  data  contained  in  the  digital  broadcast  signal  without  altering 
 or  limiting  the  effectiveness  of  that  PSIP  information  and  (2)  mandate  that  PSIP  be  provided  in  an 

 237  47  U.  S.  C.  534(  b)(  6),  535(  g)(  5). 
 238  Thus,  a  television  station  could  be  assigned  channel  4  as  its  analog  over-  the-  air  channel  number,  but  channel  24  as 
 its  digital  over-  the-  air  channel  number.  A  television  station  may  switch  back  to  channel  4  after  the  transition  and 
 core  consolidation  of  broadcast  signals  to  channels  2-  51. 

 239  DTV  Must  Carry  Notice,  13  FCC  Rcd.  at  15128. 

 240  See  Program  and  System  Information  Protocol  for  Terrestrial  Broadcast  and  Cable,  ATSC  Document  A/  65  (Dec. 
 23,  1997)  ("  For  broadcasters  with  existing  NTSC  licenses,  the  major  channel  number  for  the  existing  NTSC 
 channels,  as  well  as  the  Digital  TV  channels,  controlled  by  the  broadcaster,  shall  be  set  to  the  current  NTSC  RF 
 channel  number.  [  ]  Assume  a  broadcaster  who  has  an  NTSC  broadcast  license  for  RF  channel  13  is  assigned  RF 
 channel  39  for  Digital  ATSC  broadcast.  That  broadcaster  will  use  major  channel  number  13  for  identification  of  the 
 analog  NTSC  channel  on  RF  channel  13,  as  well  as  the  digital  channels  it  is  controlling  on  RF  channel  39.") 

 241  Id. 

 242  DTV  Must  Carry  Notice,  13  FCC  Rcd.  at  15129.  We  also  suggested  that  another  policy  alternative  would  be  to 
 allow  operators  to  place  digital  television  signals  on  any  cable  channel  of  their  choice,  subject  to  certain  conditions, 
 such  as:  (1)  that  the  digital  channel  identification  or  PSIP  information  be  clearly  available  for  use  by  the  subscriber's 
 receiver;  (2)  that  all  analog  and  digital  channel  placement  decisions  must  comply  with  tier  placement  requirements; 
 and  (3)  once  a  station  has  been  assigned  a  channel  position,  the  cable  operator  may  not  move  it  from  that  position 
 for  at  least  three  years  except  where  a  move  is  authorized  by  the  broadcaster.  Id 

 243  Entravision  Comments  at  10;  Granite  Broadcasting  at  11. 

 244  ALTV  Comments  at  73. 
 245  MSTV  Comments  at  32;  NAB  Comments  at  41.  See  ATSC  Program  and  System  Information  Protocol  for 
 Terrestrial  Broadcast  and  Cable,  Table  6.  4  "Bit  Stream  Syntax  for  the  Terrestrial  Virtual  Channel  Table,"  at  p.  20, 
 and  Table  6.  8  Bit  Stream  Syntax  for  the  Cable  Virtual  Channel  Table,"  at  p.  26  (12/  23/  97). 

 246  NBC  Comments  at  6. 
37
 Federal  Communications  Commission  FCC  01-  22 
 38 
 unscrambled,  unencrypted  form.  In  addition,  the  Commission  should  urge  industry  to  adopt  a  single 
 standard  for  out-  of-  band  PSIP  and  other  channel  navigation  information.  247 

 83.  In  the  digital  environment  it  is  generally  anticipated  that  broadcast  signals  will  be 
 identified  and  tuned  to  through  the  PSIP  information  process  rather  than  by  identification  with  the 
 specific  frequency  on  which  the  station  is  broadcasting.  Given  the  new  digital  table  of  allotments,  we  find 
 that  there  is  no  need  to  implement  channel  positioning  requirements  for  digital  television  signals  of  the 
 same  type  currently  applicable  to  analog  signals.  Rather,  as  the  majority  of  commenters  have  suggested, 
 we  find  that  the  channel  mapping  protocols  contained  in  the  PSIP  identification  stream  adequately  address 
 location  issues  consistent  with  Congresss  concerns  about  nondiscriminatory  treatment  of  television 
 stations  by  cable  operators.  We  believe  this  technology-  based  solution  will  resolve  broadcaster  concerns. 
 PSIP  assures  that  cable  subscribers  are  able  to  locate  a  desired  digital  broadcast  signal  and  ensures  that 
 digital  television  stations  are  able  to  fairly  compete  with  cable  programming  services  in  the  digital 
 environment.  Therefore,  as  stated  in  the  content-  to-  be-  carried  section  above,  a  cable  operator  will  be 
 required  to  pass-  through  channel  mapping  PSIP  information  as  it  is  considered  to  be  program-  related  to 
 the  primary  digital  video  signal.  248  We  point  out  that  quest  ions  related  to  the  technical  aspects  of  PSIP  are 
 being  dealt  with  by  the  cable  and  consumer  electronics  industry  as  they  proceed  with  establishing  digital 
 cable-  consumer  equipment  compatibility  standards.  We  note  again  that  the  Commission  has  asked  for 
 PSIP  progress  reports  as  part  of  the  digital  cable  compatibility  proceeding.  249 

 H.  Market  Modifications 
 84.  Commercial  television  stations  have  carriage  rights  throughout  the  market  to  which  they 
 are  assigned  by  Nielsen  Media  Research.  250  Pursuant  to  Section  614(  h)(  1)(  c)  of  the  Act,  at  the  request  of 
 either  a  broadcaster  or  a  cable  operator,  the  Commission  may,  with  respect  to  a  particular  television 
 broadcast  station,  include  additional  communities  within  its  television  market  or  exclude  communities 
 from  such  stations  television  market  to  better  effectuate  the  purposes  of  the  Acts  must  carry 
 provisions.  251  In  considering  such  market  modification  requests,  the  Act  provides  that  the  Commission 
 shall  afford  particular  attention  to  the  value  of  localism  by  taking  into  account  such  factors  as  (1) 
 whether  the  station,  or  other  stations  located  in  the  same  area,  have  been  historically  carried  on  the  cable 
 system  or  systems  within  such  community;  (2)  whether  the  television  station  provides  coverage  or  other 
 local  service  to  such  community;  (3)  whether  any  other  television  station  that  is  eligible  to  be  carried  by  a 
 cable  system  in  such  community  in  fulfillment  of  the  requirements  of  this  section  provides  news  coverage 
 of  issues  of  concern  to  such  community  or  provides  carriage  or  coverage  of  sporting  and  other  events  of 
 interest  to  the  community;  and  (4)  evidence  of  viewing  patterns  in  cable  and  noncable  households  within 
 the  areas  served  by  the  cable  system  or  systems  in  such  community.  252  The  inclusion  of  additional 
 communities  within  a  stations  market  imposes  new  must  carry  requirements  on  cable  operators  subject  to 
 the  modification  request  while  the  grant  to  exclude  communities  from  a  stations  market  removes  a  cable 
 operators  obligation  to  carry  a  certain  stations  signal  on  the  relevant  system.  We  sought  comment  on 

 247  Id. 
 248  See  revisions  to  Section  76.  57,  Channel  Positioning,  in  Appendix  D. 
 249  See  Compatibility  Between  Cable  Systems  and  Consumer  Electronics  Equipment,  15  FCC  Rcd  8776. 
 250  Nielsen  has  divided  the  United  States  into  210  designated  market  areas. 
 251  47  U.  S.  C.  534(  h)(  1)(  C). 
 252  47  U.  S.  C.  534(  h)(  1)(  C);  47  C.  F.  R.  76.  59. 
38
 Federal  Communications  Commission  FCC  01-  22 
 39 
 whether  any  change  to  the  market  modification  process  was  warranted  to  accommodate  the  difference 
 between  analog  and  digital  broadcasting.  253 

 85.  We  find  that  our  current  reliance  on  Nielsens  market  designations,  publications,  and 
 assignments  for  analog  signal  carriage  issues  should  continue  for  digital  signal  carriage  issues.  The 
 presumption,  therefore,  is  that  the  market  of  the  stations  digital  signal  is  coterminous  with  the  stations 
 market  area  for  its  analog  signal  during  the  transition  period.  254  In  addition,  we  find  that  the  statutory 
 factors  in  Section  614(  h),  the  current  process  for  requesting  market  modifications,  and  the  evidence 
 needed  to  support  such  petitions,  will  be  applicable  to  digital  television  cases  during  the  transition  period. 
 We  realize,  of  course,  that  the  technical  coverage  area  of  a  digital  television  signal  may  not  exactly 
 replicate  the  technical  coverage  area  of  the  analog  television  signal.  Therefore,  in  deciding  DTV  market 
 modification  cases,  we  will  take  into  consideration  changes  in  signal  strength  and  Grade  B  contour 
 coverage  because  of  new  digital  television  channel  assignments  and  power  limits.  All  other  matters 
 concerning  the  modification  process  for  digital  television  signals  will  be  decided  on  a  case-  by-  case  basis. 

 I.  Digital  Signal  Carriage  on  PEG  Channels 
 86.  The  Act  provides  that  a  cable  operator  required  to  add  the  signals  of  qualified  local 
 noncommercial  educational  stations  and  qualified  low  power  television  stations,  respectively,  may  do  so 
 by  placing  such  additional  stations  on  unused  public,  educational  or  governmental  (  PEG)  channels  not 
 in  use  for  their  designated  purposes,  subject  to  the  approval  of  local  franchising  authorities.  255  Pursuant  to 
 Section  611  of  the  Act,  the  local  franchising  authority,  in  discussions  with  a  cable  operator,  determines 
 how  much  channel  capacity,  if  any,  will  be  set  aside  for  PEG  use.  256  The  Commission,  when 
 implementing  the  analog  must  carry  rules,  declined  to  adopt  stringent  requirements  regarding  the  use  of 
 PEG  channels  for  must  carry  purposes  because  it  believed  that  these  matters  were  more  appropriately 
 resolved  by  local  franchising  authorities.  257  We  sought  comment  on  whether  DTV  signals  of  NCE 
 stations  and  LPTV  stations  should  be  allowed  on  PEG  channels  under  the  same  framework  accorded 
 analog  television  signals.  258  We  agree  with  comments  submitted  by  CBA  and  Pappas  that  the  carriage  of 
 digital  LPTV  and  NCE  stations  on  unused  PEG  channels  should  be  permitted.  259  We  find  that  this 
 approach  will  likely  advance  the  digital  transition  by  allowing  another  way  for  cable  subscribers  to  access 
 digital  NCE  signals.  We  also  find  that  continuing  this  policy  will  promote  program  diversity  by  enabling 
 LPTV  analog  signals  and  NCE  analog  and  digital  signals,  that  otherwise  may  not  be  afforded  carriage,  to 

 253  DTV  Must  Carry  Notice  at  15130. 
 254  We  note  that  in  adopting  technical  rules  for  the  digital  transmission  of  broadcast  signals,  the  Commission 
 attempted  to  insure  that  a  station's  digital  over-  the-  air  coverage  area  would  replicate  as  closely  as  possible  its  current 
 over-  the-  air  analog  coverage  area.  Sixth  DTV  Report  and  Order,  12  FCC  Rcd  14588,  14605  (1997). 

 255  See  47  U.  S.  C.  535(  d)  (noncommercial  educational  television  stations),  534(  c)(  2)  (low  power  television 
 stations);  see  also  47  C.  F.  R.  76.  56(  c). 
 256  See  47  U.  S.  C.  531(  d)  ("  In  the  case  of  any  franchise  under  which  channel  capacity  is  designated  [for  PEG 
 channels],  the  franchising  authority  shall  prescribe  (1)  rules  and  procedures  under  which  the  cable  operator  is 
 permitted  to  use  such  channel  capacity  for  the  provision  of  other  services  if  such  channel  capacity  is  not  being  used 
 for  the  purposes  designated,  and  (2)  rules  and  procedures  under  which  such  permitted  use  shall  cease.") 

 257  Must  Carry  Order,  8  FCC  Rcd.  at  2972,  2984. 

 258  DTV  Must  Carry  Notice,  13  FCC  Rcd.  at  15126. 
 259  CBA  Comments  at  5;  Pappas  Comments  at  32. 
39
 Federal  Communications  Commission  FCC  01-  22 
 40 
 reach  their  intended  audience.  To  this  end,  we  encourage  local  franchising  authorities  to  engage  digital 
 public  broadcasters  and  low  power  broadcasters  in  discussions  concerning  the  carriage  of  their  respective 
 broadcast  signals. 

 J.  Complaints  and  Enforcement 
 87.  Under  our  current  rules,  whenever  a  television  station  believes  that  a  cable  operator  has 
 failed  to  meet  its  must  carry  obligations,  the  station  may  file  a  complaint  with  the  Commission.  260  Section 
 614(  d)(  3)  requires  the  Commission  to  adjudicate  a  must  carry  complaint  within  120  days  from  the  date  it 
 is  filed.  261  The  Commission  may  grant  the  complaint  and  order  the  cable  operator  to  carry  the  station  or  it 
 may  dismiss  the  complaint  if  it  is  determined  that  the  cable  operator  has  fully  met  its  must  carry 
 obligations  with  regard  to  that  station.  262  We  sought  comment  on  whether  the  current  procedures  should 
 apply  to  DTV  must  carry  complaints.  263  We  agree  with  AAPTS  that  the  current  scheme  is  working  and 
 see  no  need  to  depart  from  it.  264  Therefore,  we  will  continue  to  use  the  existing  must  carry  complaint 
 process  for  digital  television  carriage  disputes. 

 VI.  CHANGES  TO  OTHER  PART  76  REQUIREMENTS 
 A.  Open  Video  Systems 
 88.  Section  653(  c)(  1)  of  the  Act  provides  that  any  provision  that  applies  to  cable  operators 
 under  Sections  614,  615  and  325,  shall  apply  to  open  video  system  operators  certified  by  the 
 Commission.  265  Section  653(  c)(  2)(  A)  provides  that,  in  applying  these  provisions  to  open  video  system 
 operators,  the  Commission  "shall,  to  the  extent  possible,  impose  obligations  that  are  no  greater  or  lesser" 
 than  the  obligations  imposed  on  cable  operators.  266  The  Commission,  in  implementing  the  statutory 
 language,  held  that  there  are  no  public  policy  reasons  to  justify  treating  an  open  video  system  operator 
 differently  from  a  cable  operator  in  the  same  local  market  for  purposes  of  broadcast  signal  carriage.  267 
 Thus,  OVS  operators  generally  have  the  same  requirements  for  the  carriage  of  local  television  stations  as 
 do  cable  operators  except  that  these  entities  are  under  no  obligation  to  place  television  stations  on  a  basic 
 service  tier.  268  OVS  operators  are  also  obligated  to  abide  by  Section  325  and  the  Commission's  rules 

 260  47  C.  F.  R.    76.7  and  76.61. 

 261  47  U.  S.  C.  534(  d)(  3). 
 262  DTV  Must  Carry  Notice,  13  FCC  Rcd  at  15131. 
 263  Id. 
 264  See  AAPTS  Comments  at  54. 
 265  47  U.  S.  C.  573(  c)(  1). 

 266  47  U.  S.  C.  573(  c)(  2)(  A). 
 267  See  Implementation  of  Section  302  of  the  Telecommunications  Act  of  1996,  Second  Report  and  Order,  11  FCC 
 Rcd  18223,  18307-  08  (1996). 

 268  Id.  at  18308-  09,  n.  371.  We  note,  however,  that  an  OVS  operator  must  make  qualified  local  commercial  and 
 noncommercial  educational  television  stations  available  to  every  subscriber.  See  47  C.  F.  R.  76.1506(  e). 
40
 Federal  Communications  Commission  FCC  01-  22 
 41 
 implementing  retransmission  consent.  269  In  the  Notice,  we  asked  whether  digital  carriage  rules  adopted  for 
 the  cable  industry  should  apply  to  OVS  Operators,  270  to  which  Paxson  commented  in  the  affirmative.  271 
 Given  the  statutory  directive  to  treat  OVS  operators  like  cable  operators  with  regard  to  broadcast  signal 
 carriage,  we  find  that  OVS  operators  must  carry  digital-  only  television  stations  pursuant  to  this  Report 
 and  Order  and  76.1506  of  the  Commissions  rules. 

 B.  Subscriber  Notification 
 89.  Cable  operators  are  required  to  notify  subscribers  of  any  changes  in  rates,  programming 
 services  or  channel  positions.  272  When  the  change  involves  the  addition  or  deletion  of  channels,  each 
 channel  added  or  deleted  must  be  separately  identified.  273  We  sought  comment  on  how  digital  broadcast 
 television  carriage  requirements  will  affect  the  notification  provisions  described  above.  274  Pappas  believes 
 that  cable  systems  should  be  required  to  notify  subscribers  whenever  a  DTV  signal  is  added  or  analog  is 
 withdrawn,  as  specified  in  the  Commission's  current  rules  for  system  notification  to  subscribers  of 
 channel  additions  or  deletions.  275  ALTV  agrees,  but  adds  that  an  operator  should  notify  subscribers 
 whenever  an  SDTV  programming  stream  is  available  on  the  cable  system.  276  We  will  require  a  cable 
 operator  to  notify  its  subscribers  whenever  a  digital  television  signal  is  added  to  the  cable  channel  line-  up 
 or  whenever  such  a  signal  is  moved  to  another  channel  location.  We  will  not  require  an  operator  to  notify 
 subscribers  of  the  actual  programming  available  on  each  possible  SDTV  digital  stream,  if  such  is  carried 
 under  retransmission  consent,  because  the  mix  of  programs  and  services  may  change  frequently.  We  find 
 it  would  be  unnecessarily  burdensome  for  operators  to  constantly  notify  their  subscribers,  especially  in 
 large  television  markets  where  there  is  a  potential  for  dozens  of  possible  programming  streams.  We  also 
 believe  that  EPGs,  or  other  cable  system  generated  guides,  will  provide  subscribers  with  relevant  and  up-to- 
 date  information  in  a  more  convenient  manner  than  if  we  were  to  require  operators  to  provide  separate 
 notifications.  Nevertheless,  we  encourage  operators  to  alert  subscribers  to  the  possibility  that  a 
 broadcaster  may  offer  several  programming  alternatives  over  the  course  of  the  day,  where  applicable. 

 C.  Cable  Antenna  Relay  Service 

 90.  In  the  Notice,  we  recognized  that  cable  operators  are  frequently  dependent  on  cable 
 television  relay  service  ("  CARS")  microwave  stations  to  relay  broadcast  television  signals  to  and  within 
 their  cable  systems.  277  CARS  stations  distribute  signals  to  microwave  hubs  where  it  may  be  physically 
 impossible  or  too  expensive  to  run  actual  cable  wire.  In  many  instances,  a  cable  operator  may  not  be  able 

 269  See  47  U.  S.  C.  573(  c)(  1)(  B);  11  FCC  Rcd  at  18311-  13. 

 270  DTV  Must  Carry  Notice,  13  FCC  Rcd  at  15119. 
 271  Paxson  Comments  at  30. 
 272  47  C.  F.  R.  76.  964(  a). 
 273  Id. 
 274  DTV  Must  Carry  Notice,  13  FCC  Rcd.  at  15135. 
 275  Pappas  Comments  at  37. 
 276  ALTV  Comments  at  82-  83. 
 277  See  47  C.  F.  R.    78.  1-  78.  115. 
41
 Federal  Communications  Commission  FCC  01-  22 
 42 
 to  string  cable  through  an  area  because  of  geographic  impediments  such  as  rivers,  mountains  or 
 superhighways  or  due  to  other  restrictions,  such  as  the  inability  or  the  expense  of  laying  underground 
 cable.  Under  such  circumstances,  the  cable  operator  may  be  able  to  use  CARS  band  microwave  for  point-to- 
 point  and  point-  to-  multi-  point  locations  to  intra-  connect  the  cable  system.  For  example,  a  cable  system 
 may  run  cable  up  to  a  CARS  transmitter  site,  convert  all  the  radio  frequency  (RF)  channels  to  microwave 
 frequencies  for  transmission,  receive  the  microwave  at  a  receive  location,  downconvert  back  to  the  RF 
 channels,  and  complete  delivery  of  the  channels  via  physical  wiring  to  the  subscribers.  We  sought 
 comment  on  whether  the  introduction  of  digital  broadcast  television  affects  the  CARS  system,  and,  if  so, 
 how.  We  did  not  receive  any  comments  on  CARS  and  the  transition  to  digital  television.  We  have  no 
 reason  to  expect  that  digital  television  service  will  interfere  with  CARS,  and  we  decline  to  revise  our  Part 
 78  rules  at  this  time.  However,  if  issues  arise  as  the  transition  progresses,  we  will  revisit  the  matter.  278 

 D.  Program  Exclusivity  Rules 
 91.  The  program  exclusivity  regulations,  as  implemented  in  Sections  76.92  and  76.101  of  the 
 Commission's  rules,  protect  exclusive  distribution  rights  afforded  to  network  and  syndicated 
 programming  through  private  contractual  arrangements.  279  Television  broadcast  station  licensees  with 
 exclusive  programming  rights  are  entitled  to  protect  such  programming  by  exercising  blackout  rights 
 against  local  cable  systems  importing  the  same  programming  from  distant  television  broadcast  stations. 
 Licensees  may  assert  their  rights  regardless  of  whether  their  signals  are  actually  carried  on  the  cable 
 system  in  question. 

 92.  Currently,  television  stations  are  entitled  to  exercise  network  and  syndicated  blackout 
 rights  within  certain  geographic  areas.  280  In  Implementation  of  the  Satellite  Home  Viewer  Improvement 
 Act  of  1999:  Application  of  Network  Non-  duplication,  Syndicated  Exclusivity  and  Sports  Blackout  Rules 
 to  Satellite  Retransmission  of  Broadcast  Signals,  Report  and  Order,  the  Commission  recently  applied  to 
 satellite  carriers  retransmission  of  nationally  distributed  superstations  the  network  non-  duplication, 
 syndicated  exclusivity  and  sports  blackout  requirements  that  currently  apply  to  cable  operators.  281 

 93.  In  general,  a  local  television  broadcast  station  may  assert  its  exclusivity  rights  against 
 cable  systems  located  within  35  miles  of  the  broadcaster's  city  of  license.  By  exercising  its  rights,  a  local 
 television  broadcast  station  that  has  secured  exclusive  distribution  rights  to  programming,  can  prohibit 
 cable  systems  within  35  miles  from  importing  that  same  programming  from  distant  television  stations.  A 
 cable  operator,  however,  importing  the  same  programming  from  an  otherwise  distant  station,  is  not 
 required  to  honor  a  blackout  request  from  a  local  broadcaster  if  the  distant  station  is  "significantly 
 viewed"  in  the  cable  community.  282  The  concept  of  significant  viewing  is  defined  in  Section  76.5(  i)  of 

 278  The  Commission  is  currently  considering  expanding  eligibilty  for  CARS  licenses  to  include  all  MVPDs.  To  the 
 extent  issues  related  to  the  digital  transition  are  raised  in  that  proceeding,  they  will  be  addressed  in  a  forthcoming 
 Report  and  Order.  See  Petition  for  Rulemaking  to  Amend  Eligibility  Requirements  in  Part  78  Regarding  12  GHz 
 Cable  Television  Relay  Service,  14  FCC  Rcd.  11967  (1999). 

 279  47  C.  F.  R.    76.  92,  76.  101. 

 280  47  C.  F.  R.    76.  92(  a),  76.  151. 
 281  SHVIA  Non-  duplication,  Syndicated  Exclusivty  and  Sports  Blackout  Order,  FCC  No.  00-  388  (rel.  Nov.  2,  2000). 
 282  47  C.  F.  R.    76.  92(  f),  76.  156(  a). 
42
 Federal  Communications  Commission  FCC  01-  22 
 43 
 the  Commission's  rules.  283  In  addition  to  the  Commission's  network  and  syndicated  exclusivity  rules, 
 significant  viewing  is  also  applicable  to  the  Commission  sports  blackout  rule,  284  and,  through 
 incorporation  by  reference,  to  the  compulsory  copyright  licensing  process.  285 

 94.  In  the  Notice,  we  sought  comment  on  how  the  transition  to  digital  television  may  affect 
 these  rules.  286  We  specifically  asked  how  digital  broadcast  multiplexing  impacts  these  rules  and  whether 
 the  cable  operator  will  be  able  to  accommodate  such  black-  out  requests  on  various  programming 
 streams.  287  We  also  asked  whether  these  rules  were  applicable  in  the  digital  age,  with  or  without  must 
 carry,  and  whether  it  would  be  possible  to  repeal  these  rules  and  instead  rely  on  the  retransmission 
 consent  provisions  of  Section  325  of  the  Act  to  protect  the  rights  in  question.  288 

 95.  Commenters  make  a  strong  case  for  preserving  the  exclusivity  rules  during  the  transition 
 to  digital  television.  Indeed,  there  are  no  comments  supporting  repeal  of  the  existing  rules  although  NAB 
 asserts  that  the  question  of  repeal  should  be  addressed  in  a  separate  docket.  289  ALTV  believes  that  the 
 Commission  should  apply  the  existing  network  and  syndicated  exclusivity  rules  to  a  local  station's  TV 
 signals  because  the  economic  rationale  behind  the  rules  is  the  same  for  digital  and  analog.  290  NAB  states 
 that  there  is  nothing  inherent  in  the  digital  transition  that  should  result  in  any  changes  to  network 
 nonduplication,  syndicated  exclusivity,  or  sports  blackout;  there  are,  in  fact,  stronger  reasons  to  apply  the 
 rules  in  the  digital  context  because  the  transition  presents  greater  financial  challenges  to  local  stations.  291 

 283  A  significantly  viewed  station  is  defined  as  one  that  is  viewed  "in  other  than  cable  television  households  as 
 follows:  (1)  For  a  full  or  partial  network  station--  a  share  of  viewing  hours  of  at  least  3  percent  (total  week  hours), 
 and  a  net  weekly  circulation  of  at  least  25  percent;  and  (2)  for  an  independent  station--  a  share  of  viewing  hours  of  at 
 least  2  percent  (total  week  hours)  and  a  net  weekly  circulation  of  at  least  5  percent."  47  C.  F.  R.  76.  5(  i). 

 284  47  C.  F.  R.  76.  67.  The  application  of  this  rule  to  cause  the  deletion  of  certain  sports  events  carried  beyond  the 
 Grade  B  contour  of  the  station  broadcasting  the  event  is  through  reference  to  Section  76.  5(  g)  of  the  rules.  47  C.  F.  R. 
 76.5(  g). 

 285  17  U.  S.  C.  111. 

 286  DTV  Must  Carry  Notice,  13  FCC  Rcd.  at  15135. 
 287  Id. 
 288  Id. 
 289  NAB  Comments  at  50-  51;  accord  ABA  Comments  at  9-  11,  Hildreth  Comments  at  11-  12. 
 290  ALTV  Comments  at  83.  Pappas  opposes  changing  the  exclusivity  rules  for  several  reasons:  (1)  retransmission 
 consent  is  not  practically  available  to  a  large  number  of  stations,  including  all  but  one  of  its  own  stations,  because 
 they  do  not  have  bargaining  leverage;  (2)  relying  on  retransmission  consent  unravels  Congress's  intent  to  provide 
 must  carry  as  an  alternative  choice  for  carriage  on  a  local  cable  system;  (3)  current  program  exclusivity  rules  give 
 stations  that  are  not  carried  on  cable  systems  the  right  to  enforce  the  rules,  and  thus  prevent  an  operator  from 
 sidestepping  a  station's  exclusivity  rights;  and  (4)  a  cable  operator  could  refuse  to  enter  into  a  retransmission  consent 
 agreement,  and  if  there  were  no  exclusivity  rules  in  place,  the  station  would  be  without  a  remedy  to  enforce  its 
 exclusive  programming  arrangements  against  imported  distant  network  signals.  Pappas  also  states  that  the 
 Commission  should  treat  as  significantly  viewed  in  any  area  a  digital  signal  whose  companion  analog  station  has 
 been  declared  to  be  significantly  viewed  in  that  same  area.  Pappas  Comments  at  40-  41. 

 291  NAB  Comments  at  50. 
43
 Federal  Communications  Commission  FCC  01-  22 
 44 
 NAB  also  states  that  the  Commission  should  use  a  station's  analog  status  to  determine  exclusivity  issues 
 for  a  station's  digital  signal,  at  least  throughout  the  transition.  292 

 96.  MSTV  states  that  it  makes  little  sense  for  the  Commission  to  allocate  spectrum  for  all 
 local  stations  and  then  fail  to  allow  them  to  enforce  contractual  exclusivity  rights,  thereby  undermining 
 their  competitiveness  and  financial  viability.  293  Without  exclusivity  rules,  MSTV  posits,  broadcasters 
 would  be  at  a  competitive  disadvantage  vis-  a-  vis  cable  operators  who  can  enforce  exclusive  contracts 
 while  broadcasters  who  have  negotiated  for  exclusivity  face  duplicative  programming  from  distant  signals 
 imported  by  the  local  cable  system,  thus  diverting  audience  and  advertising  revenue.  294 

 97.  With  regard  to  the  effect  of  Section  325  on  the  need  for  exclusivity  rules,  MSTV  stresses 
 that  a  broadcaster's  exclusivity  rights  cannot  be  protected  through  contractual  relationships  because:  (1) 
 Congress  enacted  retransmission  consent  intending  that  network  nonduplication  and  syndicated 
 exclusivity  would  apply  and  (2)  relegating  the  exclusivity  rules  to  contract  terms  would  reinstate  the 
 competitive  imbalance  that  the  Commission  sought  to  eliminate  when  it  adopted  the  current  rules.  295 
 MSTV  asserts  that  local  stations  will  not  have  sufficient  negotiating  power  to  insist  on  exclusivity  where 
 the  cable  system  wants  to  carry  a  distant  television  signal  from  a  large  market  because  Section  76.64(  m) 
 prohibits  local  television  stations  from  entering  into  exclusive  retransmission  consent  agreements  with  a 
 cable  system.  296 

 98.  We  find  that  there  is  an  inadequate  record  in  this  proceeding  upon  which  to  base  a  change 
 or  repeal  of  the  exclusivity  rules.  In  addition,  we  note  that  the  Act,  as  amended  by  the  SHVIA,  required 
 the  Commission  to  implement  program  exclusivity  rules  for  satellite  carriers  that  import  certain  defined 
 superstations.  297  Therefore,  we  agree  with  numerous  commenters  that  the  topic  of  changing  the  rules  be 
 addressed  at  a  future  date,  where  a  more  complete  and  focused  record  can  be  developed.  Until  that  time 
 occurs,  we  will  maintain  our  existing  exclusivity  framework  for  digital  television  signals.  In  addition,  we 
 shall  make  the  appropriate  change  to  Section  76.5  as  suggested  by  MSTV.  With  respect  to  how  SDTV 
 multiplexing  impacts  the  exclusivity  rules  and  whether  the  cable  operator  will  be  able  to  accommodate 
 blackout  requests  on  various  programming  streams,  we  believe  that  it  is  not  necessary  to  resolve  this  issue 
 here. 

 292  Id.  at  51. 
 293  MSTV  Comments  at  21-  22  and  n.  59.  MSTV  states  that  if  a  local  station  cannot  obtain  exclusivity  protection 
 from  cable  operators,  then  the  Champaign,  IL  cable  system,  for  example,  could  import  the  Chicago  television  signal 
 that  duplicates  the  Champaign  station's  programming  for  which  the  Champaign  station  has  negotiated  exclusivity 
 within  the  Champaign  market.  Id. 

 294  Id. 

 295  MSTV  Comments  at  24-  25  and  n.  67,  68. 
 296  Id.  ABA  and  Hildreth  also  assert  that  repealing  the  Commission's  exclusivity  rules,  and  instead  relying  on 
 retransmission  consent,  is  based  on  the  faulty  premise  that  most  or  all  stations  will  elect  retransmission  consent.  The 
 repeal  of  the  exclusivity  rules  is  an  imperfect  idea  because  even  stations  that  are  not  carried  on  a  cable  system  can 
 demand  exclusivity  on  that  system  under  current  rules.  Repeal  of  the  rules  might  also  lead  to  more  carriage  of 
 "distant"  television  stations  and  less  of  local.  ABA  Comments  at  9-  11;  Hildreth  Comments  at  11-  12. 

 297  47  U.  S.  C.  339(  b) 
44
 Federal  Communications  Commission  FCC  01-  22 
 45 
 99.  As  we  stated  in  the  SHVIA  Non-  Duplication,  Syndicated  Exclusivity  and  Sports  Blackout 
 Order,  only  those  exclusive  contracts  that  provide  for  exclusivity  vis  a  vis  signals  delivered  by  satellite 
 carriers  or  are  broad  enough  to  encompass  the  delivery  of  duplicating  programming  by  any  delivery 
 means  entitle  a  station  to  assert  exclusivity  rights  under  the  rules.  298  Likewise,  in  the  digital  context,  only 
 those  exclusive  contracts  that  specifically  cover  digital  signals  entitle  a  station  to  assert  exclusivity  rights. 
 We  note  also  that,  in  the  SHVIA  Non-  Duplication,  Syndicated  Exclusivity  and  Sports  Blackout  Order,  we 
 stated  that  we  were  disinclined,  in  the  early  stage  of  the  DTV  transition,  to  allow  a  broadcaster  to  use  an 
 exclusive  contract  for  digital  programming  only  to  prevent  a  cable  system  or  satellite  carrier  from 
 providing  that  programming  in  analog  form  to  its  subscribers.  299  Therefore,  neither  satellite  carriers  nor 
 cable  operators  are  permitted  to  carry  the  digital  version  of  a  program  when  the  contract  expressly 
 provides  exclusivity  for  both,  any  or  all  formats. 

 100.  Significantly  Viewed.  In  the  Notice,  we  stated  that  the  significant  viewing  standard 
 supplements  other  "local"  station  definitions  by  permitting  stations  that  would  otherwise  be  considered 
 "distant,"  for  program  exclusivity  purposes,  to  be  considered  local  based  on  viewing  surveys  directly 
 demonstrating  that  over-  the-  air  viewers  have  access  to  the  signals  in  question.  300  Because  digital 
 broadcast  television  stations  will  not,  in  the  early  stages  of  their  deployment,  have  a  significant  over-  the-air 
 audience,  we  sought  comment  on  methods  to  address  the  kinds  of  issues  that  the  significant  viewing 
 standard  addresses  in  the  analog  environment.  301  We  asked,  for  example,  whether  a  new  method  should 
 be  developed  that  measures  viewing  in  places  that  are  equipped  with  digital  receivers.  302  In  the 
 alternative,  we  asked  whether  the  "significant  viewing"  status  of  analog  stations  should  be  transferred  to 
 their  digital  counterparts.  303  With  respect  to  these  rules,  we  note  that  in  adopting  technical  rules  for  the 
 digital  transmission  of  broadcast  signals,  the  Commission  attempted  to  insure  that  a  station's  digital  over-the- 
 air  coverage  area  would  replicate  as  closely  as  possible  its  current  over-  the-  air  analog  coverage  area. 
 In  view  of  this,  and  consistent  with  the  comments  received  on  this  subject,  we  believe  that  the  public 
 interest  is  best  served  by  according  the  digital  signal  of  a  television  broadcast  station  the  same 
 significantly  viewed  status  accorded  the  analog  signal.  We  note,  however,  that  DTV-  only  television 
 stations  must  petition  the  Commission  for  significantly  viewed  status  under  the  same  requirements  for 
 analog  stations  in  Section  76.54  of  the  Commissions  rules. 

 E.  Tiers  and  Rates 
 101.  Tier  Placement.  Sections  614  and  615  are  silent  on  the  question  of  where  signals  subject 
 to  mandatory  carriage  must  be  placed,  but  Section  623(  b)(  7),  one  of  the  Acts  rate  regulation  provisions, 
 requires  that  all  signals  carried  in  fulfillment  of  the  requirements  of  section  614  and  615  must  be 
 provided  to  subscribers  on  a  separately  available  basic  service  tier  to  which  subscription  is  required  for 
 access  to  any  other  tier  of  service.  304  In  the  Notice,  we  sought  comment  on  whether  a  cable  operator  must 

 298  SHVIA  Non-  duplication,  Syndicated  Exclusivity,  and  Sports  Blackout  Order  at  para.  36. 
 299  Id.  at  para.  76. 
 300  DTV  Must  Carry  Notice,  13  FCC  Rcd.  at  15136. 
 301  Id. 
 302  Id. 
 303  Id. 
 304  47  U.  S.  C.  543(  b)(  7)(  A).  See  also  47  U.  S.  C.  534(  b)(  7);  535(  h);    543(  c). 
45
 Federal  Communications  Commission  FCC  01-  22 
 46 
 place  a  broadcaster's  digital  signal  on  the  same  basic  tier  where  the  analog  signals  are  found  or  whether  a 
 separate  digital  basic  service  tier  could  be  established  that  would  be  available  only  to  subscribers  capable 
 of  viewing  digital  broadcast  signals.  305  Adelphia  argues  that  cable  operators  should  be  allowed  to  create  a 
 separate  digital  tier  that  could  be  purchased  as  an  accompaniment  to  the  analog  basic  tier  for  an  extra 
 fee.  306  ALTV,  on  the  other  hand,  submits  that  the  Act  applies  to  local  television  stations'  DTV  signals  just 
 as  it  applies  to  analog  signals;  that  is,  DTV  signals  must  be  placed  on  the  cable  system's  basic  service  tier 
 and  made  available  to  every  subscriber.  307 

 102.  In  the  context  of  analog  must  carry,  it  has  been  the  Commissions  view  that  the  Act 
 contemplates  there  be  one  basic  service  tier.  308  We  believe  that  in  the  context  of  the  new  digital  carriage 
 requirements,  it  is  consistent  with  the  statutory  language  to  require  that  a  broadcaster's  digital  signal  must 
 be  available  on  a  basic  tier  such  that  all  broadcast  signals  are  available  to  all  cable  subscribers  at  the 
 lowest  priced  tier  of  service,  as  Congress  envisioned.  The  basic  service  tier,  including  any  broadcast 
 signals  carried,  will  continue  to  be  under  the  jurisdiction  of  the  local  franchising  authority,  and  as  such, 
 will  be  rate  regulated  if  the  local  franchising  authority  has  been  certified  under  Section  623  of  the  Act.  309 
 We  note,  however,  that  if  a  cable  system  faces  effective  competition  under  one  of  the  four  statutory 
 tests,  310  and  is  deregulated  pursuant  to  a  Commission  order,  the  cable  operator  is  free  to  place  a 
 broadcaster's  digital  signal  on  upper  tiers  of  service  or  on  a  separate  digital  service  tier.  This  finding  is 
 based  upon  the  belief  that  Section  623(  b)(  7)  is  one  of  those  rate  regulation  requirements  that  sunsets  once 
 competition  is  present  in  a  given  franchise  area.  We  believe  that  the  decision  in  Time  Warner  v.  FCC 
 supports  this  interpretation.  311 

 103.  Rates.  As  noted  above,  digital  broadcast  signal  carriage  also  has  potential  consequences 
 for  the  cable  television  rate  regulation  process.  In  communities  where  there  has  not  been  a  finding  of 
 effective  competition  or  where  there  is  no  local  rate  enforcement,  rates  for  the  basic  service  tier  (  BST) 
 are  subject  to  regulation  by  local  franchise  authorities.  312  Regulated  cable  systems  have  established  initial 

 305  Digital  Must  Carry  Notice  at  15126-  27. 
 306  Adelphia  et.  al.  Comments  at  32. 
 307  ALTV  Comments  at  71;  accord  Golden  Orange  Comments  at  8,  Morgan  Murphy  Comments  at  15,  and  UPN 
 Affiliates  Comments  at  5. 
 308  In  its  First  Rate  Report  and  Order,  the  Commission,  citing  provisions  in  the  1992  Cable  Act  that  consistently 
 refer  to  "basic  tier"  in  the  singular,  concluded  that  the  Act  contemplates  that  each  cable  operator  must  offer  only  one 
 basic  tier.  See  Implementation  of  Sections  of  the  Cable  Television  Consumer  Protection  and  Competition  Act  of 
 1992:  Rate  Regulation,  Report  and  Order  and  Further  Notice  of  Proposed  Rulemaking,  8  FCC  Rcd.  5631,  5744 
 (1993)  (  First  Rate  Report  and  Order).  The  U.  S.  Court  of  Appeals  for  the  District  of  Columbia  Circuit  found  that 
 the  Commission's  single  basic  tier  requirement  constituted  a  permissible  interpretation  of  the  1992  Cable  Act.  See 
 Time  Warner  v.  FCC,  56  F.  3d  151,  199  (D.  C.  Cir.  1995). 

 309  See  47  U.  S.  C.  543(  a)(  3). 

 310  See  47  U.  S.  C.  543(  l)(  1). 
 311  Time  Warner,  56  F.  3d  at  192  (holding  that  other  provisions  of  Section  623,  such  as  the  Acts  tier  buy-  through 
 requirements,  apply  only  in  the  absence  of  effective  competition). 
 312  47  U.  S.  C.  543(  b)(  7)(  B);  see  also  47  C.  F.  R.  76.901  et  seq.  The  rates  of  cable  programming  service  tiers 
 ("  CPST")  were  subject  to  Commission  regulation  on  a  complaint  basis,  but  these  regulations  sunsetted  on  March  31, 
 1999.  See  47  U.  S.  C.  543(  c)(  4). 
46
 Federal  Communications  Commission  FCC  01-  22 
 47 
 regulated  rates  using  either  the  "benchmark"  or  "cost  of  service"  methodologies  pursuant  to  the 
 Commission's  rules.  313  Once  initial  rates  are  established,  cable  operators  are  permitted  to  adjust  rates  for 
 changes  in  external  costs  and  inflation.  Regulated  cable  operators  seeking  to  adjust  their  BST  rates  to 
 reflect  these  changes  must  justify  rate  increases  using  the  applicable  forms.  314  There  are  also  cost  pass-through 
 mechanisms  for  defined  categories  of  "external"  costs,  including  franchise  fees  and  certain  local 
 franchise  costs,  as  well  as  fees  paid  for  programming,  retransmission  consent,  and  copyright.  315 
 Compliance  costs  associated  with  must  carry  are  not  covered  by  the  definition  of  external  costs.  316 

 104.  The  Commission  is  charged  with  adopting  a  rate  regulation  scheme  appropriate  for  the 
 BST.  317  The  present  rate  rules  take  into  account,  inter  alia,  "the  direct  costs  (if  any)  of  obtaining, 
 transmitting,  and  otherwise  providing  signals  carried  on  the  basic  service  tier  .  .  .  and  changes  in  such 
 costs."  318  In  the  Notice,  we  sought  comment  on  what,  if  any,  changes  in  the  Commission's  rate  rules  may 
 be  necessary  or  desirable.  319  We  also  asked  parties  to  refresh  the  record  on  the  specific  technical 
 modifications  needed  to  enable  cable  systems  to  deliver  digital  broadcast  television  to  subscribers.  320 
 Relatively  few  parties  addressed  the  rate  regulation  issues  we  raised  or  provided  data  on  the  anticipated 
 costs  of  providing  digital  broadcast  programming  to  subscribers.  Therefore,  it  is  difficult  to  specify  how 
 costs  attributable  to  providing  digital  programming,  if  any,  might  be  reflected  in  cable  rates.  Armstrong, 
 a  mid-  size  cable  operator,  states  that  the  costs  for  digital  conversion  will  include  upgrading  tower 
 capacity,  building  or  leasing  additional  tower  space,  and  adding  new  digital  antennas.  321  SCBA  estimates 
 the  cost  for  digital  broadcast  signal  carriage  will  be  at  least  $2,000  per  digital  channel  at  the  headend, 
 which  would  amount  to  $10,000  or  more  for  the  average  television  market  with  five  local  stations.  322  In 
 contrast,  ALTV  contends  there  is  only  a  marginal  cost  to  add  a  few  additional  DTV  signals.  323  As  to  the 
 issue  of  whether  the  carriage  costs  could  be  passed  along  to  subscribers,  ALTV  cautions  that  the 

 313  See  47  C.  F.  R.  76.922(  a).  Initial  rates  recover  the  costs  of  the  cable  network  and  are  adjusted  for  inflation.  A 
 "cost  of  service"  mechanism  is  also  available  to  cable  system  operators  that  believe  the  benchmark  process  fails  to 
 adequately  account  for  system  costs.  See  47  C.  F.  R.  76.  922(  i). 

 314  FCC  Form  1210,  Updating  Maximum  Permitted  Rates  for  Regulated  Cable  Service  (May  1994),  FCC  Form  1240, 
 Annual  Updating  for  Maximum  Permitted  Rates  For  Regulated  Cable  Service  (July  1996);  see  also  47  C.  F.  R. 
   76.922(  d),  (e),  47  C.  F.  R.  76.  933,  and  FCC  Form  1235,  Abbreviated  Cost  of  Service  Filing  for  Cable  Network 
 Upgrades. 

 315  47  C.  F.  R.    76.  922(  c)(  3),  (f). 

 316  See  47  C.  F.  R.  76.922(  f). 
 317  See  47  U.  S.  C.  543(  b)(  1). 
 318  47  U.  S.  C.  543(  b)(  2)(  C)(  ii). 
 319  DTV  Must  Carry  Notice,  13  FCC  Rcd.  at  15134-  35. 
 320  Id.  at  15134-  35. 
 321  Armstrong  notes  that  digital  towers  require  a  1:  1  ratio  for  channels  to  antennas,  so  that  five  digital  signals  carried 
 would  require  five  more  additional  antennas.  Armstrong  states  that  it  has  no  room  on  some  of  its  towers  and  will 
 need  new  $100,000  stand-  alone  towers  in  certain  circumstances.  Armstrong  Comments  at  40. 

 322  SCBA  Comments  at  6.  SCBA  adds  that  if  each  of  the  five  stations  chose  to  broadcast  three  digital  signals  and  the 
 cable  system  had  to  carry  all  of  them,  the  cost  could  increase  to  $30,  000  at  the  headend.  Id. 
 323  ALTV  Comments  at  82  and  n.  191. 
47
 Federal  Communications  Commission  FCC  01-  22 
 48 
 Commission  should  not  allow  the  cable  industry  to  exploit  fears  of  rate  increases  due  to  digital  carriage.  324 
 AAPTS  asserts  that  even  without  must  carry  requirements,  cable  operators  will  be  buying  equipment  to 
 carry  digital  signals,  so  there  is  no  basis  to  impose  these  costs  on  smaller  broadcasters,  especially 
 noncommercial  educational  television  stations.  325 

 105.  With  regard  to  the  rate  issues,  we  first  note  that  there  are  costs  for  carrying  digital 
 television  signals  at  different  stages  of  the  cable  system  transmission  process.  First,  antennas  and/  or  other 
 equipment  necessary  to  receive  the  broadcast  signal  at  the  cable  headend  are  required.  In  the  must  carry 
 context,  these  costs  are  the  broadcasters  responsibility  under  the  Act.  326  In  the  retransmission  consent 
 context,  the  broadcaster  and  the  cable  operator  may  agree  to  any  cost  arrangement  that  is  mutually 
 agreeable.  Then  there  are  costs  for  processing  the  digital  television  signal  in  the  cable  headend  and  at 
 other  points  in  the  cable  system  up  to  the  point  in  which  the  cable  is  installed  inside  the  cable  subscribers 
 premises.  The  treatment  of  these  kinds  of  costs  is  considered  below.  Finally,  there  are  costs  associated 
 with  providing  subscribers  with  customer  premises  equipment,  such  as  set  top  boxes.  As  explained 
 below,  we  find  no  need  to  change  the  rules  relating  to  such  equipment.  We  also  note  that  we  are 
 considering  adopting  a  per  channel  adjustment  methodology  for  those  operators  that  add  digital  broadcast 
 signals  to  their  channel  line-  ups.  This  topic  is  discussed  in  the  FNPRM. 

 106.  In  general,  rate  adjustments  for  channels  added  to  the  BST  are  limited  to  the  recovery  of 
 external  costs,  including  a  7.  5%  mark-  up  for  new  programming  costs.  "External  costs"  have  been 
 specifically  limited  to  taxes,  franchise  fees,  franchise  compliance  costs  (including  PEG),  retransmission 
 and  copyright  fees,  other  programming  costs,  and  Commission  regulatory  fees.  327  There  are  also  rules  and 
 forms  in  place  that  address  situations  where  cable  systems  are  upgrading  physical  plant  to  provide  digital 
 programming  to  cable  subscribers.  Section  76.922(  j)(  1)  of  the  Commission's  rules  states:  Cable 
 operators  that  undertake  significant  network  upgrades  requiring  added  capital  investment  may  justify  an 
 increase  in  rates  for  regulated  services  by  demonstrating  that  the  capital  investment  will  benefit 
 subscribers.  328  FCC  Form  1235  is  an  abbreviated  cost  of  service  filing  used  for  network  upgrades 
 pursuant  to  Section  76.922(  j).  This  form  permits  operators  to  adjust  rates  by  reporting  the  cost  of  a 
 system  upgrade,  which  is  added  to  a  system's  tier  rate  to  generate  a  maximum  permitted  rate.  329  The 
 benchmark  rates  and  price  cap  adjustments  for  inflation  will  generally  allow  systems  to  recover  normal 
 capital  costs,  but  cable  operators  may  use  Form  1235  to  recover  costs  for  "significant"  upgrades,  such  as 
 expansion  of  bandwidth,  conversion  to  fiber  optics,  or  system  rebuilds,  without  doing  a  cost  of  service 
 analysis  for  the  whole  system.  330  The  original  goals  of  the  abbreviated  cost-  of-  service  showing  for 

 324  Id. 

 325  AAPTS  Comments  at  52. 
 326  47  U.  S.  C.  534(  b)(  10)(  A). 
 327  See  47  C.  F.  R.  76.922(  f). 
 328  47  C.  F.  R.  76.  922(  j)(  1). 
 329  See  Rate  Regulation  and  Adoption  of  Uniform  Accounting  System  for  Provision  of  Regulated  Cable  Service, 
 Second  Report  and  Order,  First  Order  on  Reconsideration,  and  Further  Notice  of  Proposed  Rulemaking,  11  FCC 
 Rcd.  2220,  2295  (1996)  ("  Final  Cost  Order");  see  also  Marcus  Cable  Associates,  L.  P.:  City  of  Glendale. 
 Memorandum  Opinion  and  Order,  12  FCC  Rcd.  23216  (1997)  ("  Marcus")  (upgrade  form  allows  cable  operators  to 
 justify  rate  increases  related  to  significant  capital  expenditures  to  improve  rate-  regulated  services). 
48
 Federal  Communications  Commission  FCC  01-  22 
 49 
 network  upgrades,  to  "promote  the  availability  of  diverse  cable  services  and  facilities  [and]  encourage 
 economically  justified  upgrades,"  are  as  relevant  now  as  they  were  in  1994.  331 

 107.  For  an  operator  to  justify  rate  adjustments  using  the  FCC  Form  1235,  the  Commission 
 currently  requires:  (1)  that  the  upgrade  be  significant  and  require  added  capital  investment,  such  as 
 expansion  of  bandwidth  capacity,  conversion  to  fiber  optics  or  system  rebuilds;  (2)  that  the  upgrade 
 actually  benefit  subscribers  through  improvements  in  the  regulated  services  subject  to  the  rate  increase; 
 (3)  that  the  upgrade  rate  increase  not  be  assessed  until  the  upgrade  is  complete  and  providing  benefits  to 
 subscribers  of  regulated  services;  (4)  that  the  operator  demonstrate  its  net  increase  in  costs,  taking  into 
 account  current  depreciation  expense,  projected  changes  in  maintenance  and  other  expenses,  and  changes 
 in  other  revenues;  and  (5)  that  the  operator  allocate  its  costs  to  ensure  that  only  costs  allocable  to 
 subscribers  of  regulated  services  are  imposed  upon  them.  332  Based  on  the  lack  of  comment  about  the 
 need  for  rate  adjustments,  we  expect  that  many  cable  systems  will  be  able  to  accommodate  digital 
 television  signals  through  the  normal  improvements  and  expansions  of  service  that  are  reflected  in  the 
 rate  adjustments  allowed  by  FCC  Forms  1210  and  1240.  However,  some  systems  are  also  undertaking 
 significant  overall  system  upgrades,  a  part  of  which  will  include  a  digital  buildout,  and  for  which  a  Form 
 1235  upgrade  rate  adjustment  would  be  appropriate. 

 108.  There  may  also  be  systems,  requiring  significant  technical  improvements  to  carry  digital 
 signals,  that  do  not  necessarily  qualify  as  an  upgrade  under  FCC  Form  1235.  For  these  kinds  of 
 systems  as  well,  we  believe  it  will  be  appropriate  for  operators  to  use  FCC  Form  1235  for  a  rate 
 adjustment.  Allowing  operators  to  pursue  this  option  may  hasten  the  digital  transition  as  it  will  provide 
 an  incentive  to  add  headend  and  other  system  equipment  to  accommodate  the  carriage  of  digital  television 
 signals. 

 109.  The  current  instructions  for  Form  1235  require  the  cable  operator  to  qualify  for  an 
 upgrade  rate  adjustment  by  (1)  certifying  that  the  upgrade  meets  the  Minimum  Technical  Specifications  333 
 or  (2)  describing  how  the  upgrade  will  be  significant  and  will  benefit  subscribers.  The  instructions  for  the 
 second  option  include,  where  applicable,  the  number  of  channels  added  to  a  tier  and  the  level  of 
 improvement  in  picture  quality.  334  Thus,  we  find  that  Form  1235  can  be  an  appropriate  vehicle  for 
 allowing  a  cable  operator  to  adjust  rates  commensurate  with  their  upgrade  costs  to  the  extent  such 
 upgrades  are  necessary  to  provide  digital  broadcast  programming  to  its  subscribers.  We  note,  however, 
 that  an  operator  may  file  a  Form  1235,  even  if  it  had  done  so  before,  if  it  can  demonstrate  new  costs  are 

 (  continued  from  previous  page)  330 
 See  Rate  Regulation  and  Adoption  of  Uniform  Accounting  System  for  Provision  of  Regulated  Cable  Service, 
 Report  and  Order  and  Further  Notice  of  Proposed  Rulemaking,  9  FCC  Rcd.  4527,  4675  (1994)  ("  Interim  Cost 
 Order"). 

 331  Id.  at  4674. 

 332  Id.;  see  also  Marcus,  12  FCC  Rcd.  at  4. 
 333  The  Minimum  Technical  Specifications  are  (1)  an  increase  in  usable  bandwidth  to  at  least  550  MHz  capacity  with 
 upgrade  capability  to  750  MHz,  fiber  to  the  node  or  beyond,  and  no  more  than  1,500  homes  per  node;  or  (2)  for 
 "small  systems,"  an  increase  in  usable  bandwidth  to  at  least  550  MHz,  fiber  to  the  node  or  beyond,  and  no  more  than 
 3,000  homes  per  node.  See  FCC  Form  1235,  p.  5. 

 334  Id. 
49
 Federal  Communications  Commission  FCC  01-  22 
 50 
 not  being  recovered  through  the  surcharge  calculation  on  a  previous  Form  1235.  Section  76.922(  j)  is 
 amended  to  clarify  that  it  is  appropriate  to  use  the  network  upgrade  form  in  these  circumstances.  335 

 110.  While  these  upgrades  will  make  digital  broadcast  programming  available  to  all  basic 
 cable  television  subscribers,  we  believe  the  rate  adjustments  should  only  apply  to  those  that  purchase 
 digital  programming.  We  note  that  rate  increases  based  on  upgrades  shall  not  be  assessed  on  these 
 subscribers  until  the  upgrade  is  complete  and  the  subscriber  is  receiving  digital  television  signals.  336  If  the 
 digital  broadcast  programming  were  offered  on  the  BST,  the  basic  tier  rate  would  consist  of  the  maximum 
 permitted  rate  for  the  basic  tier  plus  the  FCC  Form  1235  surcharge  which  represents  the  portion  of  the 
 digital  upgrade  cost  allocated  to  the  basic  tier.  An  operator  could  continue  to  allocate  all  of  its  digital 
 upgrade  costs  to  the  CPST. 

 111.  Finally,  we  note  that  regulated  cable  systems  may  charge  subscribers  for  customer 
 premises  equipment,  such  as  the  set-  top  box,  that  may  likely  be  necessary  for  digital  subscribers.  337  In 
 communities  where  there  has  not  been  a  finding  of  effective  competition,  these  equipment  rates  are 
 subject  to  regulation.  Our  rules  permit  cable  operators  to  charge  subscribers  for  set  top  boxes  and  other 
 equipment  provided  the  charges  do  not  exceed  actual  costs.  338  In  addition,  the  Act  provides  that  cable 
 operators  can  aggregate  their  equipment  costs  on  a  franchise,  system,  regional,  or  company  level  and  can 
 aggregate  the  costs  into  broad  categories,  regardless  of  the  varying  levels  of  functionality  of  the 
 equipment  within  these  broad  categories.  339  As  we  find  that  the  regulatory  framework  in  place  for  cable 
 subscriber  premises  equipment  is  adequate  to  account  for  the  costs  of  adding  digital  television  signals, 
 there  is  no  need  to  make  rule  adjustments  here. 

 VII.  FURTHER  NOTICE  OF  PROPOSED  RULEMAKING 
 112.  As  noted  above,  after  reviewing  the  comments  submitted  in  this  proceeding,  we  arrive  at 
 the  tentative  conclusion  that,  based  on  the  current  record,  a  dual  carriage  requirement  may  burden  cable 
 operators  First  Amendment  interests  more  than  is  necessary  to  further  the  important  governmental 
 interests  they  would  promote.  However,  we  seek  to  gather  substantial  evidence  on  this  matter  so  that  we 
 may  evaluate  the  issues  on  a  complete  and  full  record.  Accordingly,  we  request  further  information  on  a 
 number  of  matters,  including,  but  not  limited  to:  (1)  the  need  for  dual  carriage  for  a  successful  transition 
 to  digital  television  and  return  of  the  analog  spectrum;  (2)  cable  system  channel  capacity;  and  (3)  digital 
 retransmission  consent.  Much  has  changed  since  we  first  opened  this  docket  in  July  of  1998,  and  it  is 
 necessary  to  update  the  record  to  reflect  events  pertinent  to  the  carriage  issues  being  debated.  In  addition, 

 335  See  amended  rule  in  Appendix  D  (cable  operators  that  undertake  significant  network  upgrades  requiring  added 
 capital  investment  may  justify  an  increase  in  rates  for  regulated  services  by  demonstrating  that  the  capital 
 investment  will  benefit  subscribers,  including  providing  television  broadcast  programming  in  a  digital  format). 

 336  See  47  C.  F.  R.  76.922(  j)(  2).  The  process  whereby  operators  can  file  for  pre-  approval  based  on  projected  costs  at 
 any  time  before  the  upgrade  services  become  available  is  unchanged.  The  pre-  approval  upgrade  incentive  add-  on 
 may  be  charged  to  subscribers  as  subsections  of  the  system  are  completed  and  the  upgraded  service  is  provided  to 
 subscribers.  Operators  using  this  option  must  refile  the  Form  1235  when  the  upgrade  is  complete,  using  actual  costs 
 where  applicable.  See  FCC  Form  1235,  Instructions  for  Completion  of  Abbreviated  Cost  of  Service  Filing  for  Cable 
 Network  Services  at  2  (Feb.  1996). 

 337  See  47  U.  S.  C.  543(  b)(  3)(  A),  47  C.  F.  R.  76.923. 

 338  See  47  C.  F.  R.  76.923(  a)(  2). 
 339  47  U.  S.  C.  543(  a)(  7). 
50
 Federal  Communications  Commission  FCC  01-  22 
 51 
 we  ask  whether  cable  operators  should  be  allowed  to  increase  subscriber  rates  for  each  6  MHz  of  capacity 
 devoted  to  the  carriage  of  digital  broadcast  signals. 

 113.  To  date  in  this  proceeding,  we  have  received  comments  arguing  that  the  statute  requires 
 dual  carriage  or  that  the  statute  forbids  it.  It  is  our  view,  having  deliberated  extensively  on  this  question, 
 that  neither  of  these  views  prevail.  Based  on  the  record  currently  before  us,  we  believe  that  the  statute 
 neither  compels  dual  carriage;  nor  prohibits  it.  It  is  precisely  the  ambiguity  of  the  statute  that  has  driven 
 this  policy  debate.  In  order  to  weigh  the  constitutional  questions  inherent  in  a  statutory  construction  that 
 would  permit  dual  carriage,  we  believe  it  is  appropriate  and  necessary  to  more  fully  develop  the  record  in 
 this  regard.  Because  any  decision  requiring  dual  carriage  would  likely  be  subject  to  a  constitutional 
 challenge,  and  because  an  administrative  agency  can  consider  potential  constitutional  infirmities  in 
 deciding  between  possible  interpretations  of  a  statute,  we  are  compelled  to  further  develop  the  record  on 
 the  impact  dual  carriage  would  have  on  broadcast  stations,  cable  operators  and  cable  programmers,  as 
 well  as  consumers.  We  believe  that  more  evidence  is  necessary  because  the  Supreme  Court  sustained  the 
 Act's  analog  broadcast  signal  carriage  requirements  against  a  First  Amendment  challenge  principally 
 because  Congress  and  the  broadcasting  industry  built  a  substantial  record  of  the  harm  to  television 
 stations  in  the  absence  of  mandatory  analog  carriage  rules.  340  We  are  also  mindful  that  the  record  must 
 substantially  reflect  how  Commission  action  in  this  proceeding  will  serve  the  three  identified 
 governmental  interests  supporting  mandatory  carriage  in  Turner,  which  are:  (1)  the  preservation  of  the 
 benefits  of  free  over-  the-  air  television;  (2)  the  promotion  of  the  widespread  dissemination  of  information 
 from  a  multiplicity  of  sources;  and  (3)  the  promotion  of  fair  competition.  341 

 114.  We  also  recognize  that  the  intermediate  scrutiny  factors  established  in  U.  S.  v.  OBrien  342 
 and  applied  in  the  Turner  cases,  for  determining  whether  a  content-  neutral  rule  or  regulation  violates  the 
 Constitution,  must  also  be  satisfied  here.  A  content-  neutral  regulation  will  be  upheld  if:  (1)  it  furthers  an 
 important  or  substantial  government  interest;  (2)  the  government  interest  is  unrelated  to  the  suppression  of 
 free  expression;  and  (3)  the  incidental  restriction  on  alleged  First  Amendment  freedoms  is  no  greater  than 
 is  essential  to  the  furtherance  of  that  interest.  343  In  sum,  under  the  OBrien  test,  a  regulation  must  not 
 burden  substantially  more  speech  than  is  necessary  to  further  the  governments  legitimate  interests.  Thus, 
 a  dual  carriage  rule  must  satisfy  the  Turner  factors  and  meet  the  OBrien  test.  We  invite  commenters  that 
 support  a  dual  carriage  requirement  to  provide  specific  empirical  information  to  demonstrate  how 
 mandatory  dual  carriage  would  satisfy  the  requirements  of  both  Turner  and  OBrien.  We  request  that 
 commenters  that  have  previously  submitted  legal  arguments  on  these  points  in  response  to  the  Notice,  not 
 repeat  these  arguments. 

 115.  In  the  case  of  dual  carriage,  we  believe  that  the  record  is  insufficient  to  demonstrate  the 
 degree  of  harm  broadcasters  will  suffer  without  the  carriage  of  both  signals.  In  addition,  we  must 
 carefully  consider  the  burden  such  a  requirement  would  impose  on  the  cable  operator.  We  seek 
 information  on  digital  retransmission  consent  agreements  to  determine  the  degree  to  which  cable 
 operators  are  carrying  digital  signals  on  a  voluntary  basis.  If  broadcasters  are  being  carried  by  agreement, 
 then  they  may  not  be  harmed  in  the  absence  of  a  digital  carriage  requirement.  In  addition,  First 
 Amendment  precedent  requires  that  we  tailor  the  carriage  requirement  to  avoid  burdening  more  speech 

 340  Turner  Broadcasting  System,  Inc.  v.  U.  S.,  117  S.  Ct.  1174,  1189,  520  US  180  (1997)  (  Turner  II). 
 341  Turner  Broadcasting  System,  Inc.  v.  U.  S.,  512  U.  S.  622,  662  (1994)  (  Turner  I);  Turner  II,  117  S.  Ct.  at  1186. 
 342  391  U.  S.  367,  377  (1968). 
 343  Id. 
51
 Federal  Communications  Commission  FCC  01-  22 
 52 
 than  necessary.  In  this  regard,  the  impact  of  mandatory  carriage  on  cable  systems  was  relevant  in  Turner. 
 We  therefore  seek  substantive  information  to  determine  cable  system  channel  capacity. 

 116.  Concurrently  with  this  FNPRM,  we  are  sending  out  a  survey  to  cable  operators  that  asks 
 specific  questions  concerning  retransmission  consent  as  well  as  cable  system  channel  capacity.  344  We 
 believe  that  this  form  of  inquiry  is  necessary  because  we  need  particularized  system  information  that  can 
 only  be  obtained  through  a  survey.  The  answers  to  this  survey  will  be  used  to  supplement  the  general 
 responses  we  receive  as  a  result  of  the  questions  we  ask  in  the  FNPRM.  The  cable  operators  answers  to 
 the  survey  questions  will  be  included  in  the  record  and  available  for  public  comment.  We  expect  that  the 
 information  provided  by  the  cable  operators  will  provide  further  insight  regarding  the  constitutional 
 questions  inherent  in  the  dual  carriage  discussion. 

 A.  Digital  Television  Transition  and  Mandatory  Carriage 
 117.  Both  Congress  and  the  Commission  have  worked  to  develop  a  digital  television  transition 
 that  accounts  for  the  needs  of  the  broadcast  industry,  while  recognizing  the  government's  interest  in  the 
 prompt  return  of  the  analog  broadcast  spectrum.  The  Commissions  stated  expectation  when  the  DTV 
 rules  were  adopted  was  that  analog  television  broadcasting  would  cease  no  later  than  the  end  of  2006. 
 With  passage  of  the  Balanced  Budget  Act  of  1997,  Congress  codified  the  December  31,  2006  analog 
 television  termination  date,  but  also  adopted  certain  exceptions  to  it.  345  The  Notice  in  this  proceeding 

 344  We  note  that  the  National  Association  of  Telecommunications  Officers  and  Advisors  (  NATOA)  commented 
 that  the  Commission  should  carefully  study  channel  capacity  and  retransmission  consent  issues  before  acting  on  the 
 issue  of  dual  carriage.  NATOA  Reply  Comments  at  3-  4. 

 345  Section  309(  j)(  14)  of  the  Communications  Act  now  provides: 

 (A)  Limitations  on  terms  of  terrestrial  television  broadcast  licenses.  -  A  television  broadcast  license  that  authorizes 
 analog  television  service  may  not  be  renewed  to  authorize  such  service  for  a  period  that  extends  beyond  December 
 31,  2006. 

 (B)  Extension.  -  The  Commission  shall  extend  the  date  described  in  subparagraph  (A)  for  any  station  that  requests 
 such  extension  in  any  television  market  if  the  Commission  finds  that-  -( 

 i)  one  or  more  of  the  stations  in  such  market  that  are  licensed  to  or  affiliated  with  one  of  the  four  largest 
 national  television  networks  are  not  broadcasting  a  digital  television  service  signal,  and  the  Commission  finds  that 
 each  such  station  has  exercised  due  diligence  and  satisfies  the  conditions  for  an  extension  of  the  Commission's 
 applicable  construction  deadlines  for  digital  television  service  in  that  market; 

 (ii)  digital-  to-  analog  converter  technology  is  not  generally  available  in  such  market;  or 
 (iii)  in  any  market  in  which  an  extension  is  not  available  under  clause  (i)  or  (ii),  15  percent  or  more  of  the 
 television  households  in  such  market-  -( 

 I)  do  not  subscribe  to  a  multichannel  video  programming  distributor  (as  defined  in  section  522  of 
 this  title)  that  carries  one  of  the  digital  television  service  programming  channels  of  each  of  the  television 
 stations  broadcasting  such  a  channel  in  such  market;  and 

 (II)  do  not  have  either-  - 
 (a)  at  least  one  television  receiver  capable  of  receiving  the  digital  television  service 
 signals  of  the  television  stations  licensed  in  such  market;  or 

 (continued.) 
52
 Federal  Communications  Commission  FCC  01-  22 
 53 
 discussed  must  carry  rules  for  possible  application  during  a  temporary  transitional  period  prior  to  the 
 cessation  of  analog  broadcasting.  Because  of  the  nature  of  the  exceptions  set  forth  in  the  Balanced  Budget 
 Act  of  1997,  questions  have  arisen  as  to  how  long  the  transition  period  might  last  either  with  or  without  a 
 dual  carriage  requirement.  Some  have  expressed  doubt  that  the  return  of  the  analog  broadcast  spectrum 
 will  be  completed  by  the  end  of  2006,  regardless  of  whether  there  is  a  digital  carriage  requirement.  346 
 Others  have  argued  that  dual  carriage  is  necessary  to  enable  broadcasters  to  meet  the  statutory  tests  and 
 complete  the  transition  on  time.  347  None  of  the  participants  in  this  proceeding,  however,  have  provided  a 
 concise  plan  for  how  and  when  the  transition  will  be  completed.  As  such,  a  number  of  questions 
 concerning  the  transition  have  arisen.  For  example,  under  what  circumstances  and  statutory 
 interpretations  will  the  statutory  criteria  for  the  auction  of  recaptured  broadcast  television  spectrum  be 
 satisfied?  Will  the  analog  television  license  be  returned  when  85%  or  more  of  the  television  households 
 in  a  market  either  subscribe  to  an  MVPD  that  carries  all  of  the  digital  broadcast  stations  in  the  market  or 
 have  a  DTV  receiver  or  digital  downconverter  to  receive  the  digital  signal  over  the  air?  Or  is  there  a 
 different  interpretation  of  the  statutory  exceptions?  Will  the  spectrum  be  returned  if  some  of  the  MVPD 
 subscribers  are  unable  to  receive  and  view  the  DTV  programming  notwithstanding  that  it  is  carried  by  the 
 MVPD  because  they  do  not  have  a  digital  receiver  or  converter?  How  does  the  growth  of  competitive 
 non-  cable  MVPDs  change  the  analysis?  Alternatively,  would  the  analog  licenses  be  returned  in  a  market 
 in  which  85%  of  the  television  households  had  a  DTV  receiver  or  digital-  to-  analog  converter,  but  only 
 30%  subscribed  to  a  MVPD  that  carried  all  of  the  digital  television  stations  in  the  market? 

 118.  Understanding  how  the  affected  parties  expect  to  complete  the  transition,  and  exactly 
 how  the  law  applies,  substantially  affects  the  Commission's  policy  approach  to  the  digital  television 
 transition  as  well  as  to  the  overall  issue  of  cable  carriage.  A  mandatory  dual  carriage  requirement,  for 
 example,  would  place  a  more  significant  and  lasting  burden  on  a  cable  operator's  constitutional  rights  if  in 
 fact  there  will  be  a  substantially  extended  transition  to  a  digital-  only  environment.  We  seek  comment  on 
 these  transition  issues  and  ask  for  more  specific  comment  on  when  the  analog  spectrum  is  likely  to  be 
 returned  under  both  mandatory  and  non-  mandatory  dual  carriage  scenarios.  We  also  seek  comment  on 
 whether  and  how  the  dual  carriage  burden  on  cable  operators  may  be  lessened  by  using  a  transitional 
 approach  limiting  dual  carriage  to  a  specified  period  of  time.  For  example,  in  this  regard,  how  would  a 
 three  year  limit  on  dual  carriage  affect  the  constitutional  question? 

 119.  There  are  several  other  issues  concerning  the  rollout  of  digital  broadcast  television  that 
 still  remain.  For  example,  a  number  of  digital  television  licensees  in  markets  11-  30,  that  were  required  to 
 begin  digital  broadcasting  on  November  1,  1999  have  asked  for  extensions  of  time  to  build  out  their 
 facilities.  348  Such  petitions  assert  that  these  extensions  may  have  been  necessary  because  local  zoning 
 requirements  have  hindered  the  construction  of  digital  broadcast  towers  or  because  there  are  construction 
 and  equipment  delays.  Whatever  the  case  may  be,  it  is  difficult  to  proceed  with  the  dual  carriage  question 

 (  continued  from  previous  page) 
 (b)  at  least  one  television  receiver  of  analog  television  service  signals  equipped  with 
 digital-  to-  analog  converter  technology  capable  of  receiving  the  digital  television  service  signals  of 
 the  television  stations  licensed  in  such  market. 

 346  Ex  Parte  meeting  between  NAB  and  Commission  Staff,  October  26,  1999;  see  also,  Peter  J.  Brown,  2006:  A  DTV 
 Odyssey  Broadcasters,  Manufacturers  Agree  Spectrum  Giveback  in  Six  Years  Highly  Unlikely,  Digital  Television, 
 December,  1999  at  1,  6. 

 347  ALTV  Comments  at  23-  34. 

 348  DTV  Application  Processing  Status  November  15,  2000,  http://  www.  fcc.  gov/  mmb/  vsd/  dtvstatus.  html. 
53
 Federal  Communications  Commission  FCC  01-  22 
 54 
 if  it  remains  unclear  how  and  when  digital  signals  will  become  available  in  any  particular  market. 
 Because  an  operator  is  only  required  to  carry  broadcast  signals  up  to  one-  third  of  its  channel  capacity,  to 
 rule  on  the  dual  carriage  issue  now  may  result  in  on-  air  digital  signals  being  carried,  at  the  expense  of 
 those  yet-  to-  air  digital  signals  that  may  not  be  carried  because  the  operator's  one-  third  cap  has  been  met 
 and  the  operator  is  reluctant  to  disrupt  viewers  by  changing  signals  carried.  In  this  regard,  we  ask  whether 
 we  should  wait  for  all  or  a  more  significant  number  of  broadcasters  to  build  out  their  facilities  before 
 considering  a  dual  carriage  rule  to  avoid  this  potential  disruption. 

 120.  We  also  note  that  there  appears  to  be  a  limited  amount  of  original  digital  programming 
 being  broadcast.  This  calls  into  question  the  practicality  of  imposing  a  dual  carriage  rule  at  this  time. 
 Cable  subscribers  would  not  immediately  benefit  from  a  dual  carriage  rule  if  there  is  little  to  view  but 
 duplicative  material.  In  addition,  there  is  a  risk  that  if  carriage  were  mandated,  cable  subscribers  would 
 lose  existing  cable  programming  services  that  would  be  replaced  on  the  channel  line-  up  by  digital 
 television  signals  with  less  programming.  It  is  difficult  to  decide  definitional  issues,  such  as  what  would 
 be  considered  a  "duplicative  signal"  without  more  information.  349  We  ask  broadcasters  to  describe  what 
 part  of  their  planned  digital  programming  streams  will  be  devoted  to  simulcast  of  their  analog 
 programming  and  what  parts  are,  or  will  be  used,  for  other  programming.  350  We  ask  broadcasters  to 
 provide  us  with  information  on  the  exact  amount  of  digital  programming,  on  a  weekly  basis,  being  aired 
 in  a  high  definition  format  and  the  exact  amount  of  original  digital  programming.  We  also  seek  comment 
 on  the  number  of  hours,  in  an  average  day,  that  a  broadcaster  currently  airs  digital  television,  and 
 specifically  high  definition  digital  programming. 

 121.  We  also  seek  further  comment  on  issues  relevant  to  the  carriage  of  digital  signals  by 
 small  operators.  As  described  in  the  Order,  above,  the  SCBA  expressed  concern  that  allowing 
 broadcasters  to  tie  analog  and  digital  retransmission  consent  could  have  a  negative  financial  effect  on 
 small  cable  operators.  351  The  current  record  does  not  contain  adequate  evidence  on  this  point.  We 
 specifically  request  information  on  small  cable  operators  equipment  costs  to  deliver  digital  signals  to 
 subscribers  and  experiences  thus  far  with  retransmission  consent  negotiations  involving  both  analog  and 
 digital  signals. 

 122.  Program-  related.  In  addition,  as  discussed  above,  cable  operators  are  required  to  carry 
 program-  related  material  as  part  of  the  broadcasters  primary  video.  352  We  seek  comment  on  the  proper 
 scope  of  program-  related  in  the  digital  context.  As  we  note  in  the  Order  above,  we  believe  that  digital 
 television  offers  the  ability  to  enhance  video  programming  in  a  number  of  ways.  For  example,  a  digital 
 television  broadcast  of  a  sporting  event  could  include  multiple  camera  angles  from  which  the  viewer  may 
 select.  In  addition,  a  digital  broadcast  could  enable  viewers  to  select  other  embedded  information  such  as 
 sports  statistics  to  complement  a  sports  broadcast  or  detailed  financial  information  to  complement  a 
 financial  news  broadcast.  We  seek  comment  on  whether  such  information  or  interactive  enhancements 
 like  playing  along  with  a  game  or  chatting  during  a  TV  program  should  qualify  as  program  related. 
 What  are  broadcasters  plans  in  this  regard?  What  are  the  technical  requirements  for  broadcasting, 
 receiving  and  viewing  this  programming  material?  Would  they  be  viewed  on  a  screen  simultaneously  or 

 349  47  U.  S.  C.  534(  b)(  5),  see  also  DTV  Must  Carry  Notice,  13  FCC  Rcd.  at  15123. 
 350  See  DTV  Fifth  Report  and  Order,  12  FCC  Rcd.  at  12832  (requiring  broadcasters  to  begin  phasing  in  simulcasting 
 in  2003  (50%)  and  complete  100%  simulcasting  in  2006). 
 351  See  discussion  at    34,  supra. 

 352  See,  supra,    57. 
54
 Federal  Communications  Commission  FCC  01-  22 
 55 
 is  it  necessary  to  change  channels  or  select  a  different  view  on  the  same  screen?  What  is  the  proper 
 relationship  between  program-  related  and  ancillary  or  supplementary  in  terms  of  the  statutory 
 objectives?  To  what  extent,  if  any,  is  program-  related  limited  by  ancillary  or  supplementary?  We  also 
 note  that  the  statutory  language  that  describes  program-  related  in  the  context  of  NCE  stations  differs  in 
 some  respects  from  the  language  regarding  program-  related  content  for  commercial  stations.  353 
 Specifically,  Section  615(  g)(  1),  establishing  the  content  of  NCE  stations  to  be  carried  by  cable  operators, 
 tracks  the  language  of  Section  614(  b)(  3)(  A),  the  provision  for  commercial  broadcasters,  except  that  the 
 NCE  provision  goes  on  to  include  in  the  definition  of  program  related  material:  that  may  be  necessary 
 for  receipt  of  programming  by  handicapped  persons  or  for  educational  or  language  purposes.  354  In  light 
 of  the  foregoing,  we  seek  comment  on  how  to  define  program  related  material  for  NCE  stations.  How, 
 if  at  all,  should  it  differ  from  program-  related  in  the  context  of  commercial  stations?  For  example, 
 some  commenters  have  argued  that  if  an  NCE  station  multicasts  programming  for  educational  purposes 
 the  cable  operator  should  carry  all  such  program  streams.  355  We  seek  comment  on  whether  these 
 educational  program  streams  should  qualify  as  program  related  in  the  context  of  must  carry, 
 particularly  in  light  of  the  language  in  615(  g)(  1)  noted  above. 

 B.  Channel  Capacity 
 123.  In  the  Notice,  we  sought  quantified  estimates  and  forecasts  of  available  usable  channel 
 capacity.  356  We  asked  whether  there  were  differences  in  channel  capacity  that  are  based  on  franchise 
 requirements,  patterns  of  ownership,  geographic  location,  or  other  factors.  357  We  also  inquired  about  the 
 average  number  of  channels  dedicated  to  various  categories  of  programming,  such  as  pay-  per-  view, 
 leased  access,  local  and  non-  local  broadcast  channels,  and  others  that  would  assist  us  in  understanding  the 
 degree  to  which  capacity  is,  and  will  be,  available  over  the  next  several  years.  358  We  sought  system 
 upgrade  information.  359  For  example,  we  asked  for  comment  on  whether  750  MHz  is  the  proper  cutoff 
 for  defining  an  upgraded  system  or  should  a  lower  number,  such  as  450  MHz,  be  used  instead.  360  We  also 
 asked  commenters  to  provide  information  on  the  expected  growth  rate  for  cable  channel  capacity  between 
 now  and  2003.  361  In  addition,  we  sought  comment  about  cable  programmer  plans  to  convert  to  digital  and 
 what  additional  carriage  needs  these  programmers  would  have  in  the  future.  362  These  questions  were 
 posed  to  generate  a  record  on  available  channel  capacity  for  digital  carriage  purposes  and  help  the 
 Commission  determine  the  speech  burden  on  cable  operators  under  the  First  Amendment  and  the  Turner 
 cases. 

 353  Compare  Section  614(  b)(  3)(  A)  and  615(  g)(  1). 
 354  47  U.  S.  C.    535(  g)(  1). 
 355  See  e.  g.,  Letter  from  the  Association  of  Americas  Public  Television  Stations,  January  18,  2001. 
 356  DTV  Must  Carry  Notice,  13  FCC  Rcd.  at  15121. 
 357  Id. 
 358  Id. 
 359  Id.  at  15115. 
 360  Id. 
 361  Id. 
 362  Id. 
55
 Federal  Communications  Commission  FCC  01-  22 
 56 
 124.  We  received  widely  divergent  information  concerning  cable  channel  capacity  availability. 
 For  example,  NAB  asserts  that  current  channel  capacity  is  substantial  and  a  significant  number  of 
 channels  are  unutilized,  particularly  in  large  markets  where  the  Commission  has  required  the  construction 
 of  the  first  DTV  stations.  363  NCTA  disputes  this  claim  and  asserts  that  what  matters  is  not  whether  a  cable 
 system  has  adequate  capacity  to  add  new  digital  must  carry  signals  during  the  transition,  but  whether  a 
 significant  number  of  actual  systems  serving  a  significant  number  of  customers  will  be  forced  to  remove 
 services  to  accommodate  both  analog  and  digital  must  carry  signals.  364  We  find  the  comments  and 
 analyses  provided  by  the  commenters  are  useful  for  establishing  the  framework  for  this  inquiry. 
 However,  a  number  of  the  commenters  rely  on  data  sources  that  are  either  incomplete,  or  draw  upon  an 
 unrepresentative  sample  of  cable  systems.  365  Moreover,  some  of  the  data  is  outdated,  for  future  channel 
 capacity  estimates.  For  all  of  these  reasons,  as  well  as  the  fact  that  accurate  capacity  information  is 
 essential  for  a  well  articulated  and  constitutionally  sustainable  dual  carriage  decision  under  OBrien  and 
 Turner,  we  seek  further  information  on  current  capacity  and  forecasts  for  capacity  growth  in  the  future. 

 125.  We  first  reiterate  the  questions  we  posed  in  the  Notice,  as  summarized  in  paragraph  121, 
 above.  We  then  note  that  the  NCTA,  on  its  website,  has  stated  the  following:  "It  is  estimated  that  82%  of 
 all  cable  homes  now  are  passed  by  at  least  550  MHz  plant  with  65%  of  cable  homes  passed  by  systems 
 with  750  MHz  or  higher,  positioning  cable  to  compete  more  effectively  with  DBS  companies,  who 
 typically  offer  more  than  100  channels."  366  While  this  information  is  more  recent  than  the  data  submitted 
 by  the  NAB,  it  is  still  tabulated  from  reports  in  1999.  Thus,  we  ask  for  any  information  on  system 
 upgrades  current  through  this  month.  We  specifically  seek  comment  on  the  number  of  cable  systems 
 nationwide,  on  a  percentage  basis,  that  are  now,  or  soon  will  be,  upgraded  to  750  MHz.  With  regard  to 
 these  kinds  of  systems,  we  ask  how  many  channels  are  now,  or  soon  will  be  available  for  video 
 programming.  We  seek  comment  on  whether  it  is  possible  for  750  MHz  systems  to  be  channel-  locked 
 and  have  no  capacity  to  carry  additional  digital  broadcast  signals.  We  seek  comment  on  cable  industry 
 plans  to  build  systems  of  greater  capacity  in  the  future. 

 126.  We  also  seek  comment  on  techniques  that  conserve  or  recapture  cable  channel  capacity. 
 Data  on  this  matter  is  important  because  it  may  belie  the  cable  industry's  claim  that  there  is,  or  will  be,  no 
 channel  capacity  to  add  more  programming.  For  example,  an  operator  that  uses  256  QAM  will  have  40% 
 more  capacity  than  an  operator  that  does  not.  With  this  noted,  we  ask  how  many  cable  systems  are  now, 
 or  soon  will  be,  using  256  QAM.  In  addition,  we  ask  if  there  are  certain  set  top  boxes  or  related  software 
 that  can  further  increase  capacity  for  systems  using  256  QAM.  Some  operators  are  also  using  specialized 
 techniques  that  can  comb  packages  of  digital  cable  programming  sent  by  digital  compression  operations 
 such  as  Headend  in  the  Sky  ("  HITS")  or  other  digital  compression  program  delivery  services.  367  Using 
 such  filtering  technology,  an  operator  can  select  the  digital  cable  programming  it  wants  to  carry  and 

 363  NAB  Comments  at  27. 
 364  Id.  at  53. 
 365  See  Time  Warner  Comments  at  Exhibit  E  (listing  a  select  few  cable  system  clusters  to  exemplify  the  burden  a 
 dual  carriage  requirement  would  impose). 
 366  See  http://  www.  ncta.  com/  glance.  html  (citing  Paul  Kagan  Associates,  Inc.,  Cable  TV  Technology,  May  28,  1999, 
 p.  3). 
 367  Digital  programming  packages  sent  via  satellite  come  in  clusters  of  services  known  as  pods.  A  pod  may  consist 
 of  3-  8  thematically  similar  programming  services,  such  as  sports  or  movies.  Until  recently,  cable  operators  had  to 
 receive  the  entire  pod  and  could  not  parse  out  individual  services. 
56
 Federal  Communications  Commission  FCC  01-  22 
 57 
 discard  that  programming  it  prefers  not  to  carry.  368  Through  this  process,  an  operator  can  save  as  much 
 as  10  MHz  of  cable  channel  capacity.  369  We  seek  comment  on  how  many  operators  are  currently  using 
 combing  technology  to  recapture  spectrum.  A  third  technique  used  by  some  cable  operators  to  save 
 channel  capacity  is  to  shift  certain  services  from  an  analog  tier  to  a  digital  tier  where  such  programming 
 will  be  digitally  compressed.  By  doing  this,  an  operator  could  free  up  additional  analog  space  for  other 
 uses.  We  seek  comment  on  this  technique  and  ask  how  many  operators  are  now  exercising  this  option. 

 127.  In  its  comments,  New  World  Paradigm  (  NWP)  states  that  the  Commission  should 
 adopt  digital  carriage  rules  that  allow  or  motivate  cable  operators  to  deliver  services  from  video  servers 
 through  the  internet's  channel  addressing  methodology.  According  to  NWP,  channel  addressing  uses 
 existing  capacity  very  efficiently  and  asserts  that  adoption  of  the  internet's  channel  addressing  method 
 would  serve  the  public  interest  because  it  expands  cable  channel  capacity  to  accommodate  an  infinite 
 amount  of  services.  370  NWP  believes  that  accessing  programming  residing  in  a  video  server,  and  then 
 sending  that  specific  programming  to  the  subscriber,  is  a  far  more  efficient  way  of  using  channel  capacity 
 than  shipping  all  channels  to  the  subscriber  at  the  same  time.  371  NWP  states  that  a  channel  should  be 
 defined  as  "any  internet  addressable  video  service  engineered  for  the  electromagnetic  spectrum  carried 
 solely  in  wired  networks  from  the  producer  of  the  video  service  and  delivered  through  a  video  server  and 
 made  available  for  and  to  subscribers  of  a  cable  system.  372  NWP  argues  that  expanding  the  definition  of 
 cable  channel  would  position  cable  to  be  a  communications  medium  merging  voice,  internet  and  video 
 services  into  a  characterless  digital  data  stream.  373  We  seek  comment  on  NWPs  proposal,  in  general,  and 
 ask  whether  it  is  technically  feasible  for  cable  operators  to  cache  broadcast  programming  in  this  manner. 
 We  also  ask  what  statutory  or  rule  changes  would  be  necessary  to  accomplish  what  NWP  proposes. 
 Finally,  we  ask  what  copyright  issues  may  arise  in  this  context,  how  this  approach  would  affect  the 
 advertising  rate  structure  for  broadcasters,  and  whether  cable  operators  are  contractually  or  otherwise 
 restricted  from  implementing  a  video  server  model  of  distributing  local  broadcast  programming. 

 C.  Voluntary  Carriage  Agreements 
 128.  In  the  Notice,  we  recognized  that  most  commercial  broadcast  stations,  at  least  80%  in 
 1993  for  example,  were  carried  by  cable  systems  through  retransmission  consent  and  asked  whether  this 
 general  pattern  would  be  repeated  with  respect  to  digital  broadcast  television  signals  during  the  transition 
 period.  374  We  stated  that  the  broadcasters  that  are  most  likely  to  elect  must  carry  are  those  stations  that 
 are  not  affiliated  with  the  four  major  networks.  Many  of  these  stations  will  not  commence  digital 
 operations  until  2002  when  they  are  required  to  do  so  under  the  Commission's  rules.  375  We  sought 
 comment  on  these  general  suppositions  and  on  the  effect  these  market  factors  would  have  on  the  need  to 

 368  Imedia  is  one  such  company  that  provides  cable  operators  with  the  technology  to  filter  digital  program  packages. 

 369  This  statistic  was  taken  from  ex  parte  comments  made  by  Cox  Communications  on  November  15,  1999. 
 370  Id. 
 371  Id. 
 372  Id. 

 373  Id.  at  3. 
 374  DTV  Must  Carry  Notice,  13  FCC  Rcd.  at  15110. 
 375  Id. 
57
 Federal  Communications  Commission  FCC  01-  22 
 58 
 implement  a  digital  carriage  requirement.  376  We  also  asked  what  effect  not  setting  rules  would  have  on 
 television  stations  not  affiliated  with  the  top  four  networks  that  want  to  commence  digital  broadcasting 
 before  2002.  377  We  sought  comment  on  how  retransmission  consent,  rather  than  mandatory  carriage, 
 could  speed  the  transition  to  digital  television.  378 

 129.  According  to  the  cable  commenters,  several  digital  retransmission  consent  agreements 
 have  been  reached.  For  example,  AT&  T  Broadband  has  arrangements  with  NBC  and  FOX  to  carry  their 
 owned  and  operated  stations  digital  signals  for  the  next  several  years.  379  Time  Warner  states  it  has  digital 
 carriage  arrangements  with  all  four  major  networks  some  network  affiliate  owners,  380  as  well  as  a  group 
 of  public  broadcasters.  381  While  we  are  encouraged  that  some  broadcasters,  such  as  those  noted  above, 
 have  been  able  to  obtain  cable  carriage  through  retransmission  consent  agreements,  outstanding  questions 
 remain  concerning  the  scope  and  pace  of  the  retransmission  consent  process.  For  example,  MSTV  reports 
 that  cable  operators  have  negotiated  digital  carriage  with  network  owned  and  operated  stations  but  have 
 refused  to  discuss  digital  retransmission  consent  with  several  network  affiliated  station  groups.  382  We 
 seek  comment  on  whether  this  statement  is  correct.  If  so,  why  havent  cable  operators  entered  into 
 negotiations  with  network  affiliated  broadcast  groups? 

 130.  With  regard  to  the  retransmission  consent  deals  already  concluded,  we  seek  comment  on 
 the  scope  of  such  agreements.  For  example,  while  Time  Warner  has  deals  with  CBS,  ABC,  NBC,  FOX, 
 and  several  PBS  affiliates,  we  seek  comment  on  how  many  digital  television  signals  are  now  available  for 
 purchase  by  subscribers.  Moreover,  on  what  tier  of  service  are  these  signals  being  carried?  We  also  ask 
 whether  such  signals  are  being  carried  in  8  VSB  or  in  QAM.  What  television  markets  do  these  deals 
 affect?  And  in  those  markets,  what  percentage  of  cable  subscribers  are  served  by  a  Time  Warner  system? 
 And  of  those  systems,  do  the  deals  apply  only  to  upgraded  750  MHz  systems  or  all  systems  regardless  of 
 capacity?  At  first  glance,  Time  Warners  efforts  seem  to  satisfy  our  goal  of  providing  cable  subscribers' 
 access  to  digital  television  signals  on  a  voluntary  basis,  but  if  the  agreements  only  concern  certain  areas 
 and  certain  systems,  it  would  call  into  question  the  extent  to  which  the  marketplace  is  actually  working. 
 We  pose  the  same  set  of  questions  and  concerns  to  the  other  publicly  announced  arrangements  involving 
 other  cable  operators,  such  as  AT&  T  and  its  respective  broadcast  station  partners. 

 131.  We  also  note  that  in  August  of  1999,  the  Commission  adopted  new  ownership  rules  that 
 affect  the  number  of  television  stations  in  any  given  market  that  can  be  owned  or  controlled  by  a  single 

 376  Id. 
 377  Id.  at  15111. 
 378  Id. 
 379  See  AT&  T-  NBCs  Digital  Dance,  Broadcasting  &  Cable,  June  14,  1999,  at  9;  AT&  T  Broadband  &  Internet 
 Services  and  Fox  Entertainment  Group  Enter  Into  Long-  Term  Retransmission  and  Digital  Agreement  for  Fox 
 Owned-  and-  Operated  Stations,  AT&  T  News  Release,  September  2,  1999. 

 380  See,  e.  g.,  Time  Warner  Cable  and  Belo  Announce  Texas  News  Partnerships,  Press  Release,  September  25,  2000; 
 Hearst-  Argyle  Television  and  Time  Warner  Cable  Reach  Agreement  on  Carriage  of  Local  Television  Stations,  Press 
 Release,  August  14,  2000. 

 381  See  Public  Television  and  Time  Warner  Cable  Agree  on  Digital  Carriage,  Press  Release,  September  19,  2000. 

 382  Ex  Parte  letter  submitted  by  MSTV,  November  9,  1999. 
58
 Federal  Communications  Commission  FCC  01-  22 
 59 
 broadcaster.  383  We  seek  comment  on  the  effect  of  these  ownership  changes  on  carriage  of  broadcast 
 signals  and  ask  how  the  potential  changes  in  the  broadcast  industry  will  affect  the  retransmission  consent 
 process. 

 D.  Tier  Placement 
 132.  As  discussed  above,  Section  623(  b)(  7)(  A)  of  the  Act  requires  that  the  basic  tier  on  a  rate 
 regulated  system  include  all  signals  carried  to  fulfill  the  must  carry  requirements  of  Sections  614  and  615 
 and  any  signal  of  any  television  broadcast  station  that  is  provided  by  the  cable  operator  to  any 
 subscriber.  .  .  384  We  believe  that  it  would  facilitate  the  digital  transition  to  permit  cable  operators  that 
 are  carrying  a  broadcast  stations  analog  signal  on  the  basic  tier  to  carry  that  broadcast  stations  digital 
 signal  on  a  digital  tier  pursuant  to  retransmission  consent.  We  seek  comment  on  permitting  such  carriage 
 and  whether  it  would  encourage  more  cable  operators  to  voluntarily  carry  a  broadcasters  digital  signal. 
 We  believe  that  such  an  approach,  which  is  necessarily  limited  to  the  duration  of  the  transition  in  a  given 
 market,  is  consistent  with  the  flexibility  given  the  Commission  by  Section  614(  b)(  4)(  B)  to  prescribe  rules 
 for  the  transition.  We  seek  comment  on  this  interpretation.  We  also  seek  comment  on  limiting  this 
 approach  to  those  situations  in  which  the  digital  programming  is  a  simulcast  of  the  analog  programming 
 available  on  the  basic  tier.  We  reiterate  that,  as  discussed  above,  if  a  cable  operator  is  carrying  only  the 
 broadcasters  digital  signal,  and  not  the  analog  signal,  the  digital  signal  must  be  available  to  subscribers 
 on  a  basic  tier  to  which  subscription  is  required  for  access  to  any  other  tier. 

 E.  Per  Channel  Rate  Adjustments 

 133.  We  recognize  that  cable  operators  will  be  adding  digital  broadcast  services  to  their 
 channel  line-  ups  in  the  years  ahead.  While  the  addition  of  such  channels  implicates  our  rate  regulation 
 rules,  we  received  no  comment  on  what  impact  this  occurrence  will  have  on  our  per  channel  rate 
 adjustment  methodology.  385  Thus,  in  addition  to  providing  for  the  direct  recovery  of  costs  associated  with 
 adding  digital  broadcast  programming,  as  explained  above,  we  now  propose  to  permit  cable  operators  to 
 adjust  BST  rates  to  reflect  the  addition  of  channels  of  digital  broadcast  programming,  if  the  operator 
 decides  to  place  such  programming  on  that  tier.  When  developing  rate  regulations  pursuant  to  the  1992 
 Cable  Act,  the  Commission  recognized  that  pricing  incentives  were  important  to  encouraging  voluntary 
 increases  in  the  number  of  channels  of  programming  offered  to  cable  subscribers.  386  The  Commission  also 
 recognized  that,  even  in  a  competitive  environment,  service  increases  would  result  in  higher  prices,  just  as 
 service  decreases  should  result  in  lower  prices.  The  Commission  developed  a  table  of  per  channel  rate 
 adjustment  factors  based  on  an  econometric  model  of  the  pricing  behavior  of  systems  facing 
 competition.  387  The  amount  of  the  permitted  adjustment  varied  with  the  number  of  channels  offered  on 
 the  system,  the  permitted  adjustment  per  channel  decreasing  as  the  number  of  channels  increases.  388  After 

 383  See  Review  of  the  Commissions  Regulations  Governing  Television  Broadcasting,  14  FCC  Rcd.  12903  (1999). 
 384  47  U.  S.  C.    543(  b)(  7)(  A). 
 385  See  47  C.  F.  R.  76.922(  g). 
 386  See  Implementation  of  Sections  of  the  Cable  Television  Consumer  Protection  and  Competition  Act  of  1992:  Rate 
 Regulation,  Second  Order  on  Reconsideration,  Fourth  Report  and  Order  and  Fifth  Notice  of  Proposed  Rulemaking, 
 9  FCC  Rcd.  4119,  4237  (1994)  (  Second  Rate  Reconsideration  Order). 

 387  See  47  C.  F.  R.  76.  922(  g);  see  also  Second  Rate  Reconsideration  Order,  9  FCC  Rcd.  at  Table  A-  3. 

 388  Second  Rate  Reconsideration  Order,  9  FCC  Rcd.  at  4239-  45. 
59
 Federal  Communications  Commission  FCC  01-  22 
 60 
 gaining  experience  with  rate  regulation,  the  Commission  concluded  that  optional  additional  incentives 
 should  be  available  to  stimulate  the  addition  of  new  services  to  the  CPST  or  to  the  BST  when  it  was  the 
 only  tier  of  service  offered.  389  The  Commission  also  recognized  that  the  base  cost  for  a  tier  should  be 
 adjusted  under  some  circumstances  to  reflect  the  reallocation  of  system  costs  to  programming  tiers  when 
 channels  are  moved  between  tiers.  390 

 134.  We  believe  that  cable  operators  should  have  sufficient  incentives  to  add  digital  television 
 broadcast  programming,  particularly  where  operators  carrying  a  broadcast  stations  analog  signal  during 
 the  transition  period  must  assign  spectrum  to  accommodate  digital  signals.  Because  the  cable  industry 
 operates  in  an  increasingly  competitive  environment,  we  tentatively  conclude  that  subscribers  who 
 purchase  digital  programming,  including  digital  broadcast  programming,  should  bear  a  fair  share  of  the 
 overall  system  costs  associated  with  the  number  of  channels  delivered  on  the  tier  relative  to  the  systems 
 overall  capacity,  and  that  subscriber  rates  be  reasonable.  Thus,  we  propose  to  allow  cable  operators 
 adding  digital  broadcast  signals  to  their  channel  line-  ups,  to  increase  rates  for  each  6  MHz  of  capacity 
 devoted  to  carriage  of  such  signals.  We  seek  comment  on  this  general  policy  and  ask  for  comment  on  the 
 proper  adjustment  methodology  the  Commission  should  adopt.  For  example,  should  the  Commission 
 revise  Section  76.922(  g),  and  the  accompanying  per  channel  adjustment  table,  for  this  purpose? 
 Alternatively,  is  the  Form  1235  process  outlined  above,  adequate  to  account  for  such  costs?  We  also  seek 
 comment  on  how  channels  should  be  counted  in  light  of  the  sunset  of  CPST  rate  regulation.  What 
 methods  are  there  for  valuing  cable  channels?  How  would  they  work? 

 F.  Satellite  Home  Viewer  Improvement  Act  of  1999 
 135.  Section  338  of  the  Act,  adopted  as  part  of  the  SHVIA,  391  requires  satellite  carriers,  by 
 January  1,  2002,  to  carry  upon  request  all  local  television  broadcast  stations  signals  in  local  markets  in 
 which  the  satellite  carriers  carry  at  least  one  television  broadcast  station  signal,  subject  to  the  other 
 carriage  provisions  contained  in  the  Act.  Until  January  1,  2002,  satellite  carriers,  such  as  DirecTV  and 
 Echostar,  are  granted  a  royalty-  free  copyright  license  to  retransmit  television  broadcast  signals  on  a 
 station-  by-  station  basis,  subject  to  obtaining  a  broadcasters  retransmission  consent.  This  transition 
 period  is  intended  to  provide  the  satellite  industry  with  time  to  begin  providing  local  television  signals 

 389  The  Commission  established  a  per  channel  adjustment  factor  of  up  to  20  cents  per  channel  exclusive  of 
 programming  costs  for  channels  added  to  CPSTs  ,  subject  to  a  cap  of  $1.  20  on  rate  increases  through  December  31, 
 1996  and  $1.  40  through  December  31,  1997.  An  additional  capped  amount  was  allowed  for  license  fees  associated 
 with  the  channels.  Operators  were  required  to  offset  any  revenues  received  from  a  channel  from  the  programming 
 costs  and  per-  channel  adjustment  associated  with  the  channel.  Implementation  of  Sections  of  the  Cable  Television  Consumer  Protection  and  Competition  Act  of  1992:  Rate  Regulation, 
 Sixth  Order  on  Reconsideration,  Fifth  Report 
 and  Order,  and  Seventh  Notice  of  Proposed  Rulemaking,  10  FCC  Rcd.  1226,  1248-  57  (1994)  (  Sixth 
 Reconsideration  Order  ).  The  Commission  limited  the  per  channel  adjustment  incentive  to  the  CPST  to  maximize 
 subscriber  choice  where  cable  operators  could  choose  between  the  BST  and  the  CPST  when  selecting  a  tier  for  a 
 new  nonbroadcast  service  and  also  to  avoid  increasing  the  complexity  of  the  regulatory  task  faced  by  local 
 regulatory  authorities. 

 390  See  Sixth  Reconsideration  Order,  10  FCC  Rcd.  at  1256-  57. 

 391  Pub.  Law  106-  113,  113  Stat.  1501,  1501A-  526  to  1501A-  545  (Nov.  29,  1999).  The  Commission  adopted  the 
 Notice  of  Proposed  Rulemaking  to  implement  Section  338  on  May  31,  2000.  See  Implementation  of  the  Satellite 
 Home  Viewer  Improvement  Act  of  1999  Broadcast  Signal  Carriage  Issues,  Notice  of  Proposed  Rulemaking,  15 
 FCC  Rcd  12147  (2000). 
60
 Federal  Communications  Commission  FCC  01-  22 
 61 
 into  local  markets,  otherwise  known  as  local-  into-  local  satellite  service.  We  recently  adopted  rules  to 
 implement  the  satellite  carriage  provisions  contained  in  Section  338.  392 

 136.  The  rules  we  adopted  in  the  satellite  carriage  proceeding  specifically  concerned  the 
 carriage  of  a  television  stations  analog  signal  by  a  satellite  carrier.  While  issues  related  to  the  carriage  of 
 a  television  stations  digital  signal  were  discussed,  the  Commission  stated  that  the  digital  carriage 
 requirements  for  satellite  carriers  should  be  addressed  in  the  context  of  this  docket.  393  Herein,  we  have 
 adopted  policies  governing  the  cable  carriage  of  digital  television  signals.  Given  the  SHVIAs  general 
 thrust  that  the  Commission  issue  satellite  carriage  rules  comparable  to  the  cable  carriage  rules,  394  we  seek 
 comment  on  how  we  should  apply  the  digital  cable  carriage  rules  to  satellite  carriers.  We  note  that 
 satellite  carriers  provide  video  programming  on  a  national  basis  through  a  space-  based  delivery  facility 
 while  cable  operators  provide  video  service  on  a  local  franchise-  area  basis  through  a  terrestrial  delivery 
 facility.  Given  these  distinctions,  we  ask  whether  we  should  take  into  account  the  differences  between  the 
 two  technologies  when  implementing  digital  broadcast  signal  carriage  rules  for  satellite  carriers. 
 Interested  parties  need  not  file  additional  comments  on  the  constitutional  or  public  policy  aspects  of 
 satellite  digital  broadcast  signal  carriage,  as  we  shall  incorporate  the  relevant  statements  made  in  the 
 satellite  carriage  proceeding  into  this  docket. 

 137.  Pursuant  to  the  SHVIA,  the  Commission  also  adopted  rules  implementing  Section  339(  b) 
 of  the  Act.  This  provision  directs  the  Commission  to  apply  the  cable  television  network  non-  duplication, 
 syndicated  program  exclusivity,  and  sports  blackout  requirements  to  satellite  carriers.  395  Congress 
 directed  the  Commission  to  implement  the  new  satellite  rules  so  that  they  will  be  as  similar  as  possible 
 to  the  rules  applicable  to  cable  operators.  396  In  general,  the  new  network  non-  duplication,  syndicated 
 program  exclusivity,  and  sports  blackout  rules  require  a  satellite  carrier  to  delete  programming  when  it 
 retransmits  a  nationally  distributed  superstation  to  a  household  within  the  relevant  zone  of  protection,  and 
 the  nationally  distributed  superstation  carries  a  program  to  which  the  local  station  or  the  rights  holder  to  a 
 sporting  event  has  exclusive  rights.  In  addition,  the  SHVIA  requires  that  the  Commission  apply  the  sports 
 blackout  rule  to  satellite  carriage  of  network  stations.  In  all  cases  covered  by  the  statute  and  the  rules,  the 
 entity  holding  exclusive  rights  may  require  the  satellite  carrier  to  black  out  these  particular  programs  for 
 the  satellite  subscriber  households  within  the  protected  zone.  In  the  Report  and  Order  implementing 
 Section  339(  b),  the  Commission  noted  that  it  would  consider  the  application  of  the  satellite  exclusivity 
 rules  to  digital  broadcast  signals  in  another  proceeding.  397  We  now  seek  comment  on  the  application  of 
 the  Section  339(  b)  provisions,  and  our  implementing  rules,  to  the  carriage  of  digital  television  signals  by 
 satellite  carriers.  We  specifically  seek  comment  on  the  application  of  the  exclusivity  requirements  in  light 
 of  the  statements  made  above.  The  comments  filed  on  this  subject  in  CS  Docket  00-  2  will  be  incorporated 
 by  reference  in  this  proceeding. 

 392  Implementation  of  the  Satellite  Home  Viewer  Improvement  Act  of  1999:  Broadcast  Signal  Carriage  Issues,  Report 
 and  Order,  FCC  00-  417  (adopted  November  29,  2000). 
 393  Id.  at  paras.  125-  129. 

 394  47  U.  S.  C.  338(  g). 
 395  See  SHVIA  Non-  duplication,  Syndicated  Exclusivity,  and  Sports  Blackout  Order  FCC  No.  00-  388  at  para.  36. 
 396  Joint  Explanatory  Statement  of  the  Committee  of  Conference  on  H.  R.  1554,  106  th  Cong.  ,  145  Cong.  Rec. 
 H11793,  H11796  (daily  ed.  Nov.  9,  1999).  See  also,  47  U.  S.  C.  339(  b)(  1)(  B). 
 397  See  SHVIA  Non-  duplication,  Syndicated  Exclusivity,  and  Sports  Blackout  Order  at  para.  75. 
61
 Federal  Communications  Commission  FCC  01-  22 
 62 
 VIII.  PROCEDURAL  MATTERS 
 A.  Paperwork  Reduction  Act  of  1995  Analysis 
 138.  The  requirements  contained  in  this  Report  and  Order  and  Further  Notice  of  Proposed 
 Rulemaking  have  been  analyzed  with  respect  to  the  Paperwork  Reduction  Act  of  1995  (the  "1995  Act") 
 and  would  impose  new  and  modified  information  collection  requirements  on  the  public.  The 
 Commission,  as  part  of  its  continuing  effort  to  reduce  paperwork  burdens,  invites  the  general  public  and 
 the  Office  of  Management  and  Budget  (OMB)  to  take  this  opportunity  to  comment  on  the  proposed 
 information  collection  requirements  contained  in  this  Report  and  Order  and  Further  Notice  of  Proposed 
 Rulemaking,  as  required  by  the  1995  Act.  Public  comments  are  due  60  days  from  date  of  publication  of 
 this  Report  and  Order  and  Further  Notice  of  Proposed  Rulemaking  in  the  Federal  Register.  Comments 
 should  address:  (a)  whether  the  proposed  collection  of  information  is  necessary  for  the  proper 
 performance  of  the  functions  of  the  Commission,  including  whether  the  information  would  have  practical 
 utility;  (b)  the  accuracy  of  the  Commission's  burden  estimates;  (c)  ways  to  enhance  the  quality,  utility, 
 and  clarity  of  the  information  collected;  and  (d)  ways  to  minimize  the  burden  of  the  collection  of 
 information  on  the  respondents,  including  the  use  of  automated  collection  techniques  or  other  forms  of 
 information  technology.  Written  comments  by  the  public  on  the  new  and/  or  modified  information 
 collections  are  due  on  or  before  60  days  after  the  date  of  publication  in  the  Federal  Register.  Any 
 comments  on  the  information  collections  contained  herein  should  be  submitted  to  Judy  Boley,  Federal 
 Communications  Commission,  445  12th  St,  S.  W.,  Room  1-  0804,  Washington,  D.  C.  20554,  or  via  the 
 Internet  to  jboley@  fcc.  gov.  For  additional  information  on  the  proposed  information  collection 
 requirements,  contact  Judy  Boley  at  202-  418-  0214  or  via  the  Internet  at  the  above  address. 

 B.  Ex  Parte  Rules 
 139.  This  proceeding  will  be  treated  as  a  "permit-  but-  disclose"  proceeding  subject  to  the 
 "permit-  but-  disclose"  requirements  under  Section  1.1206(  b)  of  the  rules.  398  Ex  parte  presentations  are 
 permissible  if  disclosed  in  accordance  with  Commission  rules,  except  during  the  Sunshine  Agenda  period 
 when  presentations,  ex  parte  or  otherwise,  are  generally  prohibited.  Persons  making  oral  ex  parte 
 presentations  are  reminded  that  a  memorandum  summarizing  a  presentation  must  contain  a  summary  of 
 the  substance  of  the  presentation  and  not  merely  a  listing  of  the  subjects  discussed.  More  than  a  one  or 
 two  sentence  description  of  the  views  and  arguments  presented  is  generally  required.  399  Additional  rules 
 pertaining  to  oral  and  written  presentations  are  set  forth  in  Section  1.1206(  b). 

 C.  Filing  of  Comments  and  Reply  Comments 
 140.  Pursuant  to  applicable  procedures  set  forth  in  Sections  1.415  and  1.419  of  the 
 Commission's  Rules,  47  C.  F.  R.    1.  415  and  1.  419,  interested  parties  may  file  comments  on  the  Notice  on 
 or  before  the  date  45  days  from  the  date  of  publication  in  the  Federal  Register  and  reply  comments  on  or 
 before  the  date  90  days  from  the  date  of  publication  in  the  Federal  Register.  Comments  may  be  filed 
 using  the  Commission's  Electronic  Comment  Filing  System  ("  ECFS")  or  by  filing  paper  copies.  400 

 398  47  C.  F.  R.  1.1206(  b)  (as  revised). 
 399  See  47  C.  F.  R.  1.  1206(  b)(  2)  (as  revised). 
 400  See  In  re  Electronic  Filing  of  Documents  in  Rulemaking  Proceedings,  13  FCC  Rcd.  11322  (1998)  (amending 
 Parts  0  and  1  of  the  Commissions  rules  to  allow  electronic  filing  of  comments  and  other  pleadings). 
62
 Federal  Communications  Commission  FCC  01-  22 
 63 
 Comments  filed  through  the  ECFS  can  be  sent  as  an  electronic  file  via  the  Internet  to  <http://  www.  fcc/  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,  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. 

 141.  Parties  who  choose  to  file  by  paper  must  file  an  original  and  four  copies  of  each  filing.  If 
 participants  want  each  Commissioner  to  receive  a  personal  copy  of  their  comments,  an  original  plus  nine 
 copies  must  be  filed.  If  more  than  one  docket  or  rulemaking  number  appears  in  the  caption  of  this 
 proceeding  commenters  must  submit  two  additional  copies  for  each  additional  docket  or  rulemaking 
 number.  All  filings  must  be  sent  to  the  Commission's  Secretary,  Magalie  Roman  Salas,  Office  of  the 
 Secretary,  Federal  Communications  Commission,  445  12th  Street,  S.  W.,  Washington,  D.  C.  20554.  The 
 Cable  Services  Bureau  contact  for  this  proceeding  is  Eloise  Gore  at  (202)  418-  7200,  TTY  (202)  418- 
 7172,  or  at  egore@  fcc.  gov  . 

 142.  Parties  who  choose  to  file  by  paper  should  also  submit  their  comments  on  diskette. 
 Parties  should  submit  diskettes  to  Eloise  Gore  Cable  Services  Bureau,  445  12th  Street  N.  W.,  Room  4- 
 A803,  Washington,  D.  C.  20554.  Such  a  submission  should  be  on  a  3.5-  inch  diskette  formatted  in  an  IBM 
 compatible  form  using  MS  DOS  5.0  and  Microsoft  Word,  or  compatible  software.  The  diskette  should  be 
 accompanied  by  a  cover  letter  and  should  be  submitted  in  "read  only"  mode.  The  diskette  should  be 
 clearly  labeled  with  the  party's  name,  proceeding  (including  the  lead  docket  number  in  this  case  [CS 
 Docket  No.  98-  120]),  type  of  pleading  (comments  or  reply  comments),  date  of  submission,  and  the  name 
 of  the  electronic  file  on  the  diskette.  The  label  should  also  include  the  following  phrase  "Disk  Copy  -  Not 
 an  Original."  Each  diskette  should  contain  only  one  party's  pleadings,  referable  in  a  single  electronic  file. 
 In  addition,  commenters  must  send  diskette  copies  to  the  Commission's  copy  contractor,  International 
 Transcription  Service,  1231  20th  Street,  N.  W.,  Washington,  D.  C.  20036 

 D.  Final  Regulatory  Flexibility  Act  Analysis 
 143.  The  Regulatory  Flexibility  Analysis  for  the  Report  and  Order  is  found  in  Appendix  B, 
 attached. 

 E.  Initial  Regulatory  Flexibility  Act  Analysis 
 144.  The  Regulatory  Flexibility  Analysis  for  the  FNPRM  is  found  in  Appendix  C,  attached. 
63
 Federal  Communications  Commission  FCC  01-  22 
 64 
 F.  Ordering  Clauses 
 145.  Accordingly,  IT  IS  ORDERED  that,  pursuant  authority  found  in  Sections  4(  i)  4(  j), 
 303(  r),  325,  336,  614,  and  615  of  the  Communications  Act  of  1934,  as  amended,  47  U.  S.  C.    154(  i), 
 154(  j),  303(  r),  325,  336,  534,  and  535,  the  Commissions  rules  ARE  HEREBY  AMENDED  as  set  forth 
 in  Appendix  D. 

 146.  IT  IS  FURTHER  ORDERED  that  the  Consumer  Information  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. 

 147.  IT  IS  FURTHER  ORDERED  that  the  rules  adopted  in  this  Report  and  Order  and 
 Further  Notice  of  Proposed  Rulemaking  SHALL  TAKE  EFFECT  upon  publication  in  the  Federal 
 Register. 

 FEDERAL  COMMUNICATIONS  COMMISSION 

 Magalie  Roman  Salas 
 Secretary 
64
 Federal  Communications  Commission  FCC  01-  22 
 65 
 Appendix  A 
 Comments  Filed  in  CS  98-  120 
 A  &  E  Television  Networks  ("  A&  E") 
 Adelphia  et.  al.  (including  Arizona  Cable  Television  Ass'n;  Insight  Comm.;  Suburban  Cable; 
 MediaCom;  PrimeCo;  and  Telemedia) 
 America's  Health  Network  et.  al.  (including  Great  American  Country;  Knowledge  TV; 
 Outdoor  Life;  Speedvision;  the  Golf  Channel)  ("  AHN") 
 Ameritech  New  Media  ("  Ameritech") 
 Arkansas  Broadcasters  Ass'n  ("  ABA") 
 Armstrong  Holdings  and  Intermountain  Cable  Inc.  ("  Armstrong") 
 Association  of  America's  Public  Television  Stations,  the  Public  Broadcasting  System,  and  the 
 Corporation  for  Public  Broadcasting  ("  AAPTS") 
 Association  of  Local  Television  Stations  ("  ALTV") 
 Atlanta  Interfaith  Broadcasters,  Inc. 
 BellSouth  Corp.  and  BellSouth  Interactive  Media  Services  ("  BellSouth") 
 Black  Entertainment  Television  ("  BET") 
 Broadcast  Group  (includes  Benedek;  Chronicle;  Draper;  LIN;  Midwest;  Paxton;  Raycom;  and  Spartan) 
 Community  Broadcasters  Association  ("  CBA") 
 C-  Span  Networks 
 Citizen  Comments  (38  individual  C-  Span  viewers) 
 Cable  Telecommunications  Ass'n  ("  CATA") 
 Cablevision  Systems  Corp. 
 Capitol  Broadcasting 
 Chris-  Craft/  United  Group 
 Circuit  City  Stores 
 Congressionals  (Letters  from  Congress  supporting/  opposing  DTV  Must  Carry) 
 Consumer  Electronics  Manufacturers  Ass'n  ("  CEMA") 
 Cordillera  Comm. 
 Corporation  for  General  Trade  ("  CGT") 
 Courtroom  Television  Network 
 Discovery  Networks 
 Encore  Media  Group 
 Entravision  Holdings 
 Gemstar/  Starsight 
 General  Instruments  ("  GI") 
 Golden  Orange  Broadcasting 
 Granite  Broadcasting 
 GTE 
 Harris  Corp. 
 Home  Box  Office  and  Turner  Broadcasting  System 
 Home  and  Garden  Television  ("  HGTV")  and  TV  Food 
 Hildreth  Comments  (including  Pikes  Peak  Broadcasting  Company;  Jasas  Corp.;  GRK  Productions; 
 Morris  Network;  Palazuelos;  Thomas  Broadcasting  Company;  Guenter  Marksteiner) 
 International  Broadcasting  Network 
 International  Cable  Channels  Partnership 
 King  World  Productions 
 KSLS,  Inc./  KHLS,  Inc. 
65
 Federal  Communications  Commission  FCC  01-  22 
 66 
 Lifetime  Entertainment  Services  ("  Lifetime") 
 Lee  Enterprises 
 Maranatha  Broadcasting 
 Media  Institute 
 MediaOne 
 Michigan  Government  Television 
 Microsoft 
 Mitsubishi 
 Morgan  Murphy  and  Cosmo  Broadcasting 
 Motion  Picture  Association  of  America  ("  MPAA") 
 MSTV  (Association  for  Maximum  Service  Television) 
 National  Ass'n  of  Broadcasters  ("  NAB") 
 National  Ass'n  for  the  Deaf 
 National  Cable  Television  Ass'n  ("  NCTA") 
 National  Datacast 
 NBC 
 Network  Affiliates  Station  Alliance  ("  NASA") 
 New  World  Paradigm 
 Ovation,  Inc. 
 Pappas  Telecasting 
 Paxson  Comm.  Corp. 
 Pegasus  Comm.  Corp. 
 Pellegrin  Comments  (on  behalf  of  small  cable  systems) 
 Pennsylvania  Cable  Networks 
 Phillips  Electronics  North  America  Corp. 
 Polar  Broadcasting 
 Retlaw  Enterprises 
 Shwartz,  Woods,  and  Miller  Comments  (representing  13  public  broadcasting  entities)  ("  Shwartz") 
 Shockley  Communications  Corp. 
 Sinclair  Broadcast  Group 
 Small  Cable  Business  Ass'n  ("  SCBA") 
 Sony  Electronics  Inc. 
 State  Broadcasters  Associations  (representing  26  separate  associations) 
 Station  Representatives  Ass'n 
 TCI  (now  AT&  T  Broadband) 
 Thompson  Consumer  Electronics 
 Time  Warner  Cable 
 Trinity  Broadcasting  Network 
 United  Church  of  Christ  ("  UCC")  et.  al.  (including  Media  Access  Project;  Benton  Foundation;  Center  for 
 Media  Education;  and  the  Civil  Rights  Forum) 
 UPN  Affiliates  Association 
 Weather  Channel 
 Wireless  Communications  Association  Int'l  ("  WCA") 
 Wisdom  Network 
 ZDTV 
 Zenith  Electronics 
 5C  (including  Hitachi,  Intel,  Matsushita,  Sony  and  Toshiba) 
66
 Federal  Communications  Commission  FCC  01-  22 
 67 
 Reply  Comments  filed  in  CS  Docket  98-  120 
 A  &  E  Television  Networks 
 Adelphia  et.  al. 
 Ameritech  New  Media 
 American  Chestnut  Television 
 America's  Voice 
 Armstrong  Holdings  and  Intermountain  Cable  Inc. 
 AAPTS 
 ALTV 
 BellSouth 
 BET 
 Broadcast  Group 
 C-  Span  Networks 
 CATA 
 Cablevision  Systems  Corp. 
 California  Channel 
 Carolina  Christian  Broadcasting 
 Circuit  City  Stores 
 Consumer  Electronics  Manufacturers  Ass'n 
 Corday  Media  Group 
 Council  of  Organizational  Representatives  of  National  Issues  Concerning  People  Who  are  Deaf  or  Hard 
 of  Hearing 
 Discovery  Networks 
 Gemstar/  Starsight 
 General  Instruments 
 Golden  Orange  Broadcasting 
 GRK  Productions  Joint  Venture 
 GTE 
 Home  Box  Office  and  Turner  Broadcasting  System 
 International  Cable  Channels  Partnership 
 LeSea  Broadcasting 
 Lifetime 
 Lincoln  Broadcasting  Company 
 Maranatha  Broadcasting 
 Matsushita 
 Michigan  Gov't  Television 
 Microsoft 
 Mitsubishi 
 Morgan  Murphy  and  Cosmo  Broadcasting 
 MSTV 
 NAB 
 National  Association  of  Telecommunications  Officers  and  Advisors  ("  NATOA") 
 NCTA 
 National  Datacast 
 New  World  Paradigm 
 Pappas  Telecasting 
 Paxson  Comm.  Corp. 
 Phillips  Electronics  North  America  Corp. 
 Prevue  Networks 
67
 Federal  Communications  Commission  FCC  01-  22 
 68 
 Retlaw  Enterprises 
 Sinclair  Broadcasting 
 SCBA 
 Sony  Electronics  Inc. 
 Thompson  Consumer  Electronics 
 Time  Warner  Cable 
 UCC 
 Univision  Communications,  Inc. 
 Weather  Channel 
 Wireless  Communications  Association  Int'l 
 Zenith  Electronics 
 5C  (including  Hitachi,  Intel,  Matsushita,  Sony  and  Toshiba) 
68
 Federal  Communications  Commission  FCC  01-  22 
 69 
 Appendix  B 
 Final  Regulatory  Flexibility  Act  Analysis  For  the  Report  and  Order 
 1.  As  required  by  the  Regulatory  Flexibility  Act  ("  RFA"),  1  the  Commission  has  prepared 
 this  Final  Regulatory  Flexibility  Analysis  ("  FRFA")  of  the  possible  significant  economic  impact  on  small 
 entities  by  the  policies  and  rules  found  in  this  Report  and  Order.  The  Report  and  Order  and  FRFA  (or 
 summaries  thereof)  will  be  published  in  the  Federal  Register.  2 

 2.  Need  for,  and  Objectives  of,  the  Proposed  Rule  Changes.  The  objective  of  the  Report 
 and  Order  is  to  make  certain  technical  and  substantive  rule  changes  that  bear  on  the  issue  of  carriage  of 
 digital  broadcast  signals. 

 3.  Summary  of  Significant  Issues  Raised  by  Public  Comments  in  Response  to  the  IRFA.  The 
 Small  Cable  Business  Association  (  SCBA,  now  known  as  the  American  Cable  Association,  ACA)  filed 
 comments  as  described  in  the  Report  and  Order,  supra.  SCBA  stated  that  unregulated  analog 
 retransmission  consent  demands,  and  tying  in  particular,  threatens  small  cable  operators  financial 
 viability.  3  To  remedy  the  situation,  the  SCBA  urged  the  Commission  to  prohibit  broadcasters  from  tying 
 analog  carriage  to  digital  carriage.  4 

 4.  Description  and  Estimate  of  the  Number  of  Small  Entities  To  Which  the  Proposed  Rules 
 Will  Apply.  The  FRFA  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.  5  The  FRFA  defines 
 the  term  "small  entity"  as  having  the  same  meaning  as  the  terms  "small  business,"  "small  organization," 
 and  "small  business  concern"  under  Section  3  of  the  Small  Business  Act.  6  Under  the  Small  Business  Act, 
 a  small  business  concern  is  one  which:  (1)  is  independently  owned  and  operated;  (2)  is  not  dominant  in 
 its  field  of  operation;  and  (3)  satisfies  any  additional  criteria  established  by  the  Small  Business 
 Administration  ("  SBA").  7  The  rules  we  adopt  in  this  Report  &  Order  will  affect  cable  operators  and  OVS 
 operators. 

 5.  Small  MVPDs.  SBA  has  developed  a  definition  of  small  entities  for  cable  and  other  pay 
 television  services,  which  includes  all  such  companies  generating  $11  million  or  less  in  annual  receipts.  8 

 1  See  5  U.  S.  C.  604.  The  RFA  has  been  amended  by  the  Contract  With  America  Advancement  Act  of  1996,  Pub.  L. 
 No.  104-  121,  110  Stat.  847  (1996)  (  CWAAA).  See  5  U.  S.  C.  601  et.  seq.  Title  II  of  the  CWAAA  is  the  Small 
 Business  Regulatory  Enforcement  Fairness  Act  of  1996  (  SBREFA). 

 2  See  id. 

 3  SCBA  Comments  at  24.  SCBA  is  now  known  as  American  Cable  Association  ("  ACA"). 
 4  Id.;  accord  Pellegrin  Comments  at  6. 
 5  5  U.  S.  C.  604(  b). 
 6  5  U.  S.  C.  601(  3)  and  (6). 
 7  15  U.  S.  C.  632. 
 8  13  C.  F.  R.  121.  201  (SIC  4841). 
69
 Federal  Communications  Commission  FCC  01-  22 
 70 
 This  definition  includes  cable  system  operators,  closed  circuit  television  services,  direct  broadcast  satellite 
 services,  multipoint  distribution  systems,  satellite  master  antenna  systems  and  subscription  television 
 services.  According  to  the  Census  Bureau  data  from  1992,  there  were  1,758  total  cable  and  other  pay 
 television  services  and  1,423  had  less  than  $11  million  in  revenue.  9  We  address  below  each  service 
 individually  to  provide  a  more  precise  estimate  of  small  entities. 

 6.  Cable  Systems.  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.  10  We  last 
 estimated  that  there  were  1439  cable  operators  that  qualified  as  small  cable  companies.  11  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  1439  small  entity  cable  system  operators  that  may  be  affected  by  the 
 decisions  and  rules  adopted  in  this  Report  and  Order. 

 7.  The  Communications  Act  also  contains  a  definition  of  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."  12  The  Commission  has  determined  that  there  are 
 61,700,  000  subscribers  in  the  United  States.  Therefore,  an  operator  serving  fewer  than  617,000 
 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.  13  Based  on  available  data,  we 
 find  that  the  number  of  cable  operators  serving  617,000  subscribers  or  less  totals  approximately  1450.  14 
 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. 

 8.  Open  Video  Systems.  The  Commission  has  certified  31  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. 

 9  U.  S.  Department  of  Commerce,  Bureau  of  the  Census,  Industry  and  Enterprise  Receipts  Size  report,  Table  2D,  SIC 
 4841  (Bureau  of  the  Census  data  under  contract  to  the  Office  of  Advocacy  of  the  SBA). 
 10  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,  MM  Dkt  Nos.  92-  266  and  93-  215,  10  FCC  Rcd.  7393  (1995). 

 11  Paul  Kagan  Associates,  Inc.,  Cable  TV  Investor,  Feb.  29,  1996  (based  on  figures  for  Dec.  30,  1995). 

 12  47  U.  S.  C.  543(  m)(  2). 
 13  47  C.  F.  R.  76.  1403(  b). 
 14  Paul  Kagan  Associates,  Inc.,  Cable  TV  Investor,  Feb.  29,  1996  (based  on  figures  for  Dec.  30,  1995). 
70
 Federal  Communications  Commission  FCC  01-  22 
 71 
 9.  Program  Producers  and  Distributors.  The  Commission  has  not  developed  a  definition  of 
 small  entities  applicable  to  producers  or  distributors  of  cable  television  programs.  Therefore,  we  will  use 
 the  SBA  classifications  of  Motion  Picture  and  Video  Tape  Production  (SIC  7812),  15  Motion  Picture  and 
 Video  Tape  Distribution  (SIC  7822),  16  and  Theatrical  Producers  (Except  Motion  Pictures)  and 
 Miscellaneous  Theatrical  Services  (SIC  7922).  17  These  SBA  definitions  provide  that  a  small  entity  in  the 
 cable  television  programming  industry  is  an  entity  with  $21.5  million  or  less  in  annual  receipts  for  SIC 
 7812  and  SIC  7822,  and  $5  million  or  less  in  annual  receipts  for  SIC  7922.  18  Census  Bureau  data  indicate 
 the  following:  (a)  there  were  7,265  firms  in  the  United  States  classified  as  Motion  Picture  and  Video 
 Production  (SIC  7812),  and  that  6,987  of  these  firms  had  $16.999  million  or  less  in  annual  receipts  and 
 7,002  of  these  firms  had  $24.999  million  or  less  in  annual  receipts;  19  (b)  there  were  1,139  firms  classified 
 as  Motion  Picture  and  Video  Tape  Distribution  (SIC  7822),  and  1007  of  these  firms  had  $16.999  million 
 or  less  in  annual  receipts  and  1013  of  these  firms  had  $24.999  million  or  less  in  annual  receipts;  and  (c) 
 there  were  5,671  firms  in  the  United  States  classified  as  Theatrical  Producers  and  Services  (SIC  7922), 
 and  5627  of  these  firms  had  $4.999  million  or  less  in  annual  receipts.  20 

 10.  Each  of  these  SIC  categories  is  very  broad  and  includes  firms  that  may  be  engaged  in 
 various  industries,  including  cable  programming.  Specific  figures  are  not  available  regarding  how  many 
 of  these  firms  exclusively  produce  and/  or  distribute  programming  for  cable  television  or  how  many  are 
 independently  owned  and  operated.  Thus,  we  estimate  that  our  rules  may  affect  approximately  6,987 
 small  entities  primarily  engaged  in  the  production  and  distribution  of  taped  cable  television  programs  and 
 5,627  small  producers  of  live  programs  that  may  be  affected  by  the  rules  adopted  in  this  proceeding. 

 11.  Television  Stations.  The  proposed  rules  and  policies  will  apply  to  television  broadcasting 
 licensees,  and  potential  licensees  of  television  service.  The  Small  Business  Administration  defines  a 
 television  broadcasting  station  that  has  no  more  than  $10.  5  million  in  annual  receipts  as  a  small  business.  21 
 Television  broadcasting  stations  consist  of  establishments  primarily  engaged  in  broadcasting  visual 

 15  "Establishments  primarily  engaged  in  the  production  of  theatrical  and  nontheatrical  motion  pictures  and  video 
 tapes  for  exhibition  or  sale,  including  educational,  industrial,  and  religious  films.  Included  in  the  industry  are 
 establishments  engaged  in  both  production  and  distribution.  Producers  of  live  radio  and  television  programs  are 
 classified  in  Industry  7922.  Standard  Industrial  Classification  Manual,  SIC  7812,  Executive  Office  of  the  President, 
 Office  of  Management  and  Budget  (1987)  (  OMB  SIC  Manual). 

 16  "Establishments  primarily  engaged  in  the  distribution  (rental  or  sale)  of  theatrical  and  nontheatrical  motion  picture 
 films  or  in  the  distribution  of  video  tapes  and  disks,  except  to  the  general  public."  OMB  SIC  Manual,  SIC  7822. 
 17  "Establishments  primarily  engaged  in  providing  live  theatrical  presentations,  such  as  road  companies  and  summer 
 theaters.  .  .  .  Also  included  in  this  industry  are  producers  of  .  .  .  live  television  programs."  OMB  SIC  Manual,  SIC 
 7922. 

 18  13  C.  F.  R.  121.  201. 

 19  U.  S.  Small  Business  Administration  1992  Economic  Census  Industry  and  Enterprise  Report,  Table  2D,  SIC  7812, 
 (U.  S.  Bureau  of  the  Census  data  adapted  by  the  Office  of  Advocacy  of  the  U.  S.  Small  Business  Administration) 
 ("  SBA  1992  Census  Report").  Because  the  Census  data  do  not  include  a  category  for  $21.5  million,  we  have 
 reported  the  closest  increment  below  and  above  the  $21.  5  million  threshold.  There  is  a  difference  of  15  firms 
 between  the  $16,  999  and  $24,999  million  annual  receipt  categories.  It  is  possible  that  these  15  firms  could  have 
 annual  receipts  of  $21.5  million  or  less  and  would  therefore  be  classified  as  small  businesses. 

 20  SBA  1992  Census  Report,  SIC  7922. 

 21  13  C.  F.  R.    121.201,  Standard  Industrial  Code  (SIC)  4833  (1996). 
71
 Federal  Communications  Commission  FCC  01-  22 
 72 
 programs  by  television  to  the  public,  except  cable  and  other  pay  television  services.  22  Included  in  this 
 industry  are  commercial,  religious,  educational,  and  other  television  stations.  23  Also  included  are 
 establishments  primarily  engaged  in  television  broadcasting  and  which  produce  taped  television  program 
 materials.  24  Separate  establishments  primarily  engaged  in  producing  taped  television  program  materials  are 
 classified  under  another  SIC  number.  25 

 12.  Pursuant  to  5  U.  S.  C.    601(  3),  the  statutory  definition  of  a  small  business  applies  "unless  an 
 agency  after  consultation  with  the  Office  of  Advocacy  of  the  SBA  and  after  opportunity  for  public 
 comment,  establishes  one  or  more  definitions  of  such  term  which  are  appropriate  to  the  activities  of  the 
 agency  and  publishes  such  definition(  s)  in  the  Federal  Register." 

 13.  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  estimates  that  follow  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  overinclusive  to  that  extent.  An  additional  element  of  the 
 definition  of  "small  business"  is  that  the  entity  must  be  independently  owned  and  operated.  As  discussed 
 further  below,  we  could  not  fully  apply  this  criterion,  and  our  estimates  of  small  businesses  to  which  rules 
 may  apply  may  be  overinclusive  to  this  extent.  The  SBA's  general  size  standards  are  developed  taking  into 
 account  these  two  statutory  criteria.  This  does  not  preclude  us  from  taking  these  factors  into  account  in 
 making  our  estimates  of  the  numbers  of  small  entities. 

 14.  There  were  1,509  television  stations  operating  in  the  nation  in  1992.  26  That  number  has 
 remained  fairly  constant  as  indicated  by  the  approximately  1,  616  operating  television  broadcasting  stations 
 in  the  nation  as  of  September  30,  1999.  27  For  1992,  the  number  of  television  stations  that  produced  less  than 

 22  Economics  and  Statistics  Administration,  Bureau  of  Census,  U.  S.  Department  of  Commerce,  1992  Census  of 
 Transportation,  Communications  and  Utilities,  Establishment  and  Firm  Size,  Series  UC92-  S-  1,  Appendix  A-  9 
 (1995). 

 23  Id.  See  Executive  Office  of  the  President,  Office  of  Management  and  Budget,  Standard  Industrial  Classification 
 Manual  (1987),  at  283,  which  describes  "Television  Broadcasting  Stations  (SIC  Code  4833)"  as: 

 Establishments  primarily  engaged  in  broadcasting  visual  programs  by  television  to  the  public,  except  cable 
 and  other  pay  television  services.  Included  in  this  industry  are  commercial,  religious,  educational  and  other 
 television  stations.  Also  included  here  are  establishments  primarily  engaged  in  television  broadcasting  and 
 which  produce  taped  television  program  materials. 

 24  Economics  and  Statistics  Administration,  Bureau  of  Census,  U.  S.  Department  of  Commerce,  1992  Census  of 
 Transportation,  Communications  and  Utilities,  Establishment  and  Firm  Size,  Series  UC92-  S-  1,  Appendix  A-  9 
 (1995). 

 25  Id.;  SIC  7812  (Motion  Picture  and  Video  Tape  Production);  SIC  7922  (Theatrical  Producers  and  Miscellaneous 
 Theatrical  Services  (producers  of  live  radio  and  television  programs). 

 26  FCC  News  Release  No.  31327,  Jan.  13,  1993;  Economics  and  Statistics  Administration,  Bureau  of  Census,  U.  S. 
 Department  of  Commerce,  Appendix  A-  9. 

 27  FCC  News  Release,  Broadcast  Station  Totals  as  of  September  30,  1999  (released  November  22,  1999). 
72
 Federal  Communications  Commission  FCC  01-  22 
 73 
 $10.  0  million  in  revenue  was  1,155  establishments.  28  Thus,  the  new  rules  will  affect  approximately  1,616 
 television  stations;  approximately  77%,  of  those  stations  are  considered  small  businesses.  29  These  estimates 
 may  overstate  the  number  of  small  entities  since  the  revenue  figures  on  which  they  are  based  do  not  include 
 or  aggregate  revenues  from  non-  television  affiliated  companies. 

 15.  Small  Manufacturers.  The  SBA  has  developed  definitions  of  small  entity  for 
 manufacturers  of  household  audio  and  video  equipment  (SIC  3651)  and  for  radio  and  television 
 broadcasting  and  communications  equipment  (SIC  3663).  In  each  case,  the  definition  includes  all  such 
 companies  employing  750  or  fewer  employees.  Census  Bureau  data  indicates  that  there  are  858  U.  S. 
 firms  that  manufacture  radio  and  television  broadcasting  and  communications  equipment,  and  that  778  of 
 these  firms  have  fewer  than  750  employees  and  would  be  classified  as  small  entities.  30 

 16.  Electronic  Equipment  Manufacturers.  The  Commission  has  not  developed  a  definition  of 
 small  entities  applicable  to  manufacturers  of  electronic  equipment.  Therefore,  we  will  use  the  SBA 
 definition  of  manufacturers  of  Radio  and  Television  Broadcasting  and  Communications  Equipment.  31 
 According  to  the  SBA's  regulations,  a  TV  equipment  manufacturer  must  have  750  or  fewer  employees  in 
 order  to  qualify  as  a  small  business  concern.  32  The  Census  Bureau  category  is  very  broad,  and  specific 
 figures  are  not  available  as  to  how  many  of  these  firms  are  exclusive  manufacturers  of  television 
 equipment  or  how  many  are  independently  owned  and  operated.  We  conclude  that  there  are 
 approximately  778  small  manufacturers  of  radio  and  television  equipment. 

 17.  Electronic  Household/  Consumer  Equipment.  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  use  the  SBA 
 definition  applicable  to  manufacturers  of  Household  Audio  and  Visual  Equipment.  According  to  the 
 SBA's  regulations,  a  household  audio  and  visual  equipment  manufacturer  must  have  750  or  fewer 
 employees  in  order  to  qualify  as  a  small  business  concern.  33  Census  Bureau  data  indicates  that  there  are 
 410  U.  S.  firms  that  manufacture  radio  and  television  broadcasting  and  communications  equipment,  and 
 that  386  of  these  firms  have  fewer  than  500  employees  and  would  be  classified  as  small  entities.  34  The 
 remaining  24  firms  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 

 28  The  amount  of  $10  million  was  used  to  estimate  the  number  of  small  business  establishments  because  the  relevant 
 Census  categories  stopped  at  $9,999,999  and  began  at  $10,  000,  000.  No  category  for  $10.  5  million  existed.  Thus, 
 the  number  is  as  accurate  as  it  is  possible  to  calculate  with  the  available  information. 

 29  We  use  the  77  percent  figure  of  TV  stations  operating  at  less  than  $10  million  for  1992  and  apply  it  to  the  1999 
 total  of  1,616  TV  stations  to  arrive  at  the  total  number  of  stations  categorized  as  small  businesses. 

 30  U.  S.  Dept.  of  Commerce,  1992  Census  of  Transportation,  Communications  and  Utilities,  Table  1D,  (issued  May 
 1995),  SIC  category  3663. 
 31  This  category  excludes  establishments  primarily  engaged  in  the  manufacturing  of  household  audio  and  visual 
 equipment  which  is  categorized  as  SIC  3651. 
 32  13  C.  F.  R.  121.  201,  SIC  Code  3663. 

 33  13  C.  F.  R.  121.  201,  SIC  Code  3651. 
 34  U.  S.  Small  Business  Administration  1995  Economic  Census  Industry  and  Enterprise  Report,  Table  3,  SIC  Code 
 3651,  (Bureau  of  the  Census  data  adapted  by  the  Office  of  Advocacy  of  the  U.  S.  Small  Business  Administration). 
73
 Federal  Communications  Commission  FCC  01-  22 
 74 
 definition.  Furthermore,  the  Census  Bureau  category  is  very  broad,  and  specific  figures  are  not  available 
 as  to  how  many  of  these  firms  are  exclusive  manufacturers  of  television  equipment  for  consumers  or  how 
 many  are  independently  owned  and  operated.  We  conclude  that  there  are  approximately  386  small 
 manufacturers  of  television  equipment  for  consumer/  household  use. 

 18.  Computer  Manufacturers.  The  Commission  has  not  developed  a  definition  of  small 
 entities  applicable  to  computer  manufacturers.  Therefore,  we  will  use  the  SBA  definition  of  Electronic 
 Computers.  According  to  SBA  regulations,  a  computer  manufacturer  must  have  1,000  or  fewer  employees 
 in  order  to  qualify  as  a  small  entity.  35  Census  Bureau  data  indicates  that  there  are  716  firms  that 
 manufacture  electronic  computers  and  of  those,  659  have  fewer  than  500  employees  and  qualify  as  small 
 entities.  36  The  remaining  57  firms  have  500  or  more  employees;  however,  we  are  unable  to  determine 
 how  many  of  those  have  fewer  than  1,000  employees  and  therefore  also  qualify  as  small  entities  under  the 
 SBA  definition.  We  conclude  that  there  are  approximately  659  small  computer  manufacturers. 

 19.  Description  of  Projected  Reporting,  Record  Keeping  and  other  Compliance 
 Requirements.  There  are  compliance  requirements  for  cable  operators  and  OVS  operators  as  a  result  of 
 the  Report  and  Order.  An  attempt  has  been  made  to  streamline  compliance  requirements.  For  example, 
 we  have  declined  to  adopt  specific  channel  positioning  requirements  for  digital  television  signals. 

 20.  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:  (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.  The 
 Small  Cable  Business  Association  (  SCBA,  now  known  as  the  American  Cable  Association,  ACA)  filed 
 comments  as  described  in  the  Report  and  Order,  supra.  SCBA  stated  that  unregulated  analog 
 retransmission  consent  demands,  and  tying  in  particular,  threatens  small  cable  operators  financial 
 viability.  37  To  remedy  the  situation,  the  SCBA  urged  the  Commission  to  prohibit  broadcasters  from  tying 
 analog  carriage  to  digital  carriage.  38  We  have  deferred  imposing  a  dual  analog  and  digital  broadcast  signal 
 carriage  requirement  on  cable  operators,  including  small  cable  operators,  as  well  as  OVS  operators,  at  this 
 time.  However,  we  have  adopted  several  retransmission  consent  policies  and  digital-  only  carriage 
 requirements  applicable  to  all  cable  operators  and  OVS  operators.  Due  to  lack  of  sufficient  evidence  on 
 the  record,  we  have  decided  not  to  prohibit  retransmission  consent  tying  arrangements,  as  requested  by 
 the  SCBA.  However,  we  are  seeking  further  comment  on  this  issue  in  the  FNPRM.  In  the  aggregate,  we 
 believe  that  there  will  be  minimal  impact  on  small  entities  as  a  result  of  the  Report  and  Order.  However, 
 we  are  mindful  of  the  concerns  raised  by  small  entities  throughout  this  proceeding  and  will  carefully 
 scrutinize  our  policy  determinations  as  we  go  forward. 

 35  13  C.  F.  R.  121.  201,  SIC  Code  3571. 
 36  U.  S.  Small  Business  Administration  1995  Economic  Census  Industry  and  Enterprise  Report,  Table  3,  SIC  Code 
 3571,  (Bureau  of  the  Census  data  adapted  by  the  Office  of  Advocacy  of  the  U.  S.  Small  Business  Administration). 
 37  SCBA  Comments  at  24.  SCBA  is  now  known  as  American  Cable  Association  ("  ACA"). 

 38  Id.;  accord  Pellegrin  Comments  at  6. 
74
 Federal  Communications  Commission  FCC  01-  22 
 75 
 21.  Federal  Rules  Which  Duplicate,  Overlap,  or  Conflict  with  the  Commission's  Proposals. 
 None. 

 22.  Report  to  Congress.  The  Commission  will  send  a  copy  of  the  Report  and  Order, 
 including  this  FRFA,  in  a  report  to  be  sent  to  Congress  pursuant  to  the  Small  Business  Regulatory 
 Enforcement  Fairness  Act  of  1996.  39  In  addition,  the  Commission  will  send  a  copy  of  the  Report  and 
 Order,  including  FRFA,  to  the  Chief  Counsel  for  Advocacy  of  the  Small  Business  Administration.  A 
 copy  of  the  Report  and  Order  and  FRFA  (or  summaries  thereof)  will  also  be  published  in  the  Federal 
 Register.  40 

 39  See  5  U.  S.  C.  801(  a)(  1)(  A). 
 40  See  5  U.  S.  C.  604(  b). 
75
 Federal  Communications  Commission  FCC  01-  22 
 76 
 Appendix  C 
 Initial  Regulatory  Flexibility  Act  Analysis  For  the  Further  Notice 

 1.  As  required  by  the  Regulatory  Flexibility  Act  ("  RFA"),  1  the  Commission  has  prepared 
 this  Initial  Regulatory  Flexibility  Analysis  ("  IRFA")  of  the  possible  significant  economic  impact  on  small 
 entities  by  the  policies  and  rules  referenced  in  this  Further  Notice.  The  Commission  will  send  a  copy  of 
 the  Further  Notice,  including  this  IRFA,  to  the  Chief  Counsel  for  Advocacy  of  the  Small  Business 
 Administration.  2  In  addition,  the  IRFA  (or  summaries  thereof)  will  be  published  in  the  Federal  Register.  3 

 2.  Need  for,  and  Objectives  of,  the  Proposed  Rule  Changes.  The  objective  of  the  Further 
 Notice  is  to  gather  more  information,  and  build  the  necessary  record,  in  order  to  implement  a 
 constitutionally  sustainable  digital  broadcast  signal  carriage  policy. 

 3.  Legal  Basis.  The  authority  for  the  action  proposed  in  this  rulemaking  is  contained  in 
 Sections  1,  4(  i)  and  (j),  309(  j),  325,  336,  614,  and  615  of  the  Communications  Act  of  1934,  as  amended, 
 47  U.  S.  C.    151,  154(  i)  and  (j),  309(  j),  325,  336,  534,  and  535. 

 4.  Description  and  Estimate  of  the  Number  of  Small  Entities  To  Which  the  Proposed  Rules 
 Will  Apply.  The  IRFA  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  IRFA  defines 
 the  term  "small  entity"  as  having  the  same  meaning  as  the  terms  "small  business,"  "small  organization," 
 and  "small  business  concern"  under  Section  3  of  the  Small  Business  Act.  5  Under  the  Small  Business  Act, 
 a  small  business  concern  is  one  which:  (1)  is  independently  owned  and  operated;  (2)  is  not  dominant  in 
 its  field  of  operation;  and  (3)  satisfies  any  additional  criteria  established  by  the  Small  Business 
 Administration  ("  SBA").  6  The  rules  we  are  considering  in  this  proceeding  generally,  will  affect  cable 
 operators,  OVS  operators,  and  television  station  licensees. 

 5.  Small  MVPDs.  SBA  has  developed  a  definition  of  small  entities  for  cable  and  other  pay 
 television  services,  which  includes  all  such  companies  generating  $11  million  or  less  in  annual  receipts.  7 
 This  definition  includes  cable  system  operators,  closed  circuit  television  services,  direct  broadcast  satellite 
 services,  multipoint  distribution  systems,  satellite  master  antenna  systems  and  subscription  television 
 services.  According  to  the  Census  Bureau  data  from  1992,  there  were  1,758  total  cable  and  other  pay 

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

 2  See  5  U.  S.  C.  603(  a). 

 3  See  id. 
 4  5  U.  S.  C.  603(  b)(  3). 
 5  5  U.  S.  C.  601(  3)  and  (6). 
 6  15  U.  S.  C.  632. 
 7  13  C.  F.  R.  121.  201  (SIC  4841). 
76
 Federal  Communications  Commission  FCC  01-  22 
 77 
 television  services  and  1,423  had  less  than  $11  million  in  revenue.  8  We  address  below  each  service 
 individually  to  provide  a  more  precise  estimate  of  small  entities. 

 6.  Cable  Systems.  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.  9  We  last 
 estimated  that  there  were  1439  cable  operators  that  qualified  as  small  cable  companies.  10  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  1439  small  entity  cable  system  operators  that  may  be  affected  by  the 
 decisions  and  rules  adopted  in  this  Report  and  Order. 

 7.  The  Communications  Act  also  contains  a  definition  of  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."  11  The  Commission  has  determined  that  there  are 
 61,700,  000  subscribers  in  the  United  States.  Therefore,  an  operator  serving  fewer  than  617,000 
 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.  12  Based  on  available  data,  we 
 find  that  the  number  of  cable  operators  serving  617,000  subscribers  or  less  totals  approximately  1450.  13 
 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. 

 8.  Open  Video  Systems.  The  Commission  has  certified  31  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. 

 9.  Program  Producers  and  Distributors.  The  Commission  has  not  developed  a  definition  of 
 small  entities  applicable  to  producers  or  distributors  of  cable  television  programs.  Therefore,  we  will  use 

 8  U.  S.  Department  of  Commerce,  Bureau  of  the  Census,  Industry  and  Enterprise  Receipts  Size  report,  Table  2D,  SIC 
 4841  (Bureau  of  the  Census  data  under  contract  to  the  Office  of  Advocacy  of  the  SBA). 
 9  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,  MM  Dkt  Nos.  92-  266  and  93-  215,  10  FCC  Rcd  7393  (1995). 

 10  Paul  Kagan  Associates,  Inc.,  Cable  TV  Investor,  Feb.  29,  1996  (based  on  figures  for  Dec.  30,  1995). 

 11  47  U.  S.  C.  543(  m)(  2). 
 12  47  C.  F.  R.  76.  1403(  b). 
 13  Paul  Kagan  Associates,  Inc.,  Cable  TV  Investor,  Feb.  29,  1996  (based  on  figures  for  Dec.  30,  1995). 
77
 Federal  Communications  Commission  FCC  01-  22 
 78 
 the  SBA  classifications  of  Motion  Picture  and  Video  Tape  Production  (SIC  7812),  14  Motion  Picture  and 
 Video  Tape  Distribution  (SIC  7822),  15  and  Theatrical  Producers  (Except  Motion  Pictures)  and 
 Miscellaneous  Theatrical  Services  (SIC  7922).  16  These  SBA  definitions  provide  that  a  small  entity  in  the 
 cable  television  programming  industry  is  an  entity  with  $21.5  million  or  less  in  annual  receipts  for  SIC 
 7812  and  SIC  7822,  and  $5  million  or  less  in  annual  receipts  for  SIC  7922.  17  Census  Bureau  data  indicate 
 the  following:  (a)  there  were  7,265  firms  in  the  United  States  classified  as  Motion  Picture  and  Video 
 Production  (SIC  7812),  and  that  6,987  of  these  firms  had  $16.999  million  or  less  in  annual  receipts  and 
 7,002  of  these  firms  had  $24.999  million  or  less  in  annual  receipts;  18  (b)  there  were  1,139  firms  classified 
 as  Motion  Picture  and  Video  Tape  Distribution  (SIC  7822),  and  1007  of  these  firms  had  $16.999  million 
 or  less  in  annual  receipts  and  1013  of  these  firms  had  $24.999  million  or  less  in  annual  receipts;  and  (c) 
 there  were  5,671  firms  in  the  United  States  classified  as  Theatrical  Producers  and  Services  (SIC  7922), 
 and  5627  of  these  firms  had  $4.999  million  or  less  in  annual  receipts.  19 

 10.  Each  of  these  SIC  categories  is  very  broad  and  includes  firms  that  may  be  engaged  in 
 various  industries,  including  cable  programming.  Specific  figures  are  not  available  regarding  how  many 
 of  these  firms  exclusively  produce  and/  or  distribute  programming  for  cable  television  or  how  many  are 
 independently  owned  and  operated.  Thus,  we  estimate  that  our  rules  may  affect  approximately  6,987 
 small  entities  primarily  engaged  in  the  production  and  distribution  of  taped  cable  television  programs  and 
 5,627  small  producers  of  live  programs  that  may  be  affected  by  the  rules  adopted  in  this  proceeding. 

 11.  DBS:  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  which  may  be  in  excess  of  the  threshold  for  a  small  business.  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  that  there  are  entrants  in  this  field  that  may  not 

 14  "Establishments  primarily  engaged  in  the  production  of  theatrical  and  nontheatrical  motion  pictures  and  video 
 tapes  for  exhibition  or  sale,  including  educational,  industrial,  and  religious  films.  Included  in  the  industry  are 
 establishments  engaged  in  both  production  and  distribution.  Producers  of  live  radio  and  television  programs  are 
 classified  in  Industry  7922."  Standard  Industrial  Classification  Manual,  SIC  7812,  Executive  Office  of  the  President, 
 Office  of  Management  and  Budget  (1987)  (OMB  SIC  Manual). 

 15  "Establishments  primarily  engaged  in  the  distribution  (rental  or  sale)  of  theatrical  and  nontheatrical  motion  picture 
 films  or  in  the  distribution  of  video  tapes  and  disks,  except  to  the  general  public."  OMB  SIC  Manual,  SIC  7822. 
 16  "Establishments  primarily  engaged  in  providing  live  theatrical  presentations,  such  as  road  companies  and  summer 
 theaters.  .  .  .  Also  included  in  this  industry  are  producers  of  .  .  .  live  television  programs."  OMB  SIC  Manual,  SIC 
 7922. 

 17  13  C.  F.  R.  121.  201. 

 18  U.  S.  Small  Business  Administration  1992  Economic  Census  Industry  and  Enterprise  Report,  Table  2D,  SIC  7812, 
 (U.  S.  Bureau  of  the  Census  data  adapted  by  the  Office  of  Advocacy  of  the  U.  S.  Small  Business  Administration) 
 ("  SBA  1992  Census  Report").  Because  the  Census  data  do  not  include  a  category  for  $21.5  million,  we  have 
 reported  the  closest  increment  below  and  above  the  $21.  5  million  threshold.  There  is  a  difference  of  15  firms 
 between  the  $16,  999  and  $24,999  million  annual  receipt  categories.  It  is  possible  that  these  15  firms  could  have 
 annual  receipts  of  $21.5  million  or  less  and  would  therefore  be  classified  as  small  businesses. 

 19  SBA  1992  Census  Report,  SIC  7922. 
78
 Federal  Communications  Commission  FCC  01-  22 
 79 
 yet  have  generated  $11  million  in  annual  receipts,  and  therefore  may  be  categorized  as  a  small  business,  if 
 independently  owned  and  operated. 

 12.  HSD:  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.  20  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.  21 

 13.  According  to  the  most  recently  available  information,  there  are  approximately  30 
 program  packagers  nationwide  offering  packages  of  scrambled  programming  to  retail  consumers.  22  These 
 program  packagers  provide  subscriptions  to  approximately  2,314,900  subscribers  nationwide.  23  This  is  an 
 average  of  about  77,163  subscribers  per  program  package.  This  is  substantially  smaller  than  the  400,000 
 subscribers  used  in  the  commission's  definition  of  a  small  MSO.  Furthermore,  because  this  is  an  average, 
 it  is  likely  that  some  program  packagers  may  be  substantially  smaller. 

 14.  Television  Stations.  The  proposed  rules  and  policies  will  apply  to  television  broadcasting 
 licensees,  and  potential  licensees  of  television  service.  The  Small  Business  Administration  defines  a 
 television  broadcasting  station  that  has  no  more  than  $10.  5  million  in  annual  receipts  as  a  small  business.  24 
 Television  broadcasting  stations  consist  of  establishments  primarily  engaged  in  broadcasting  visual 
 programs  by  television  to  the  public,  except  cable  and  other  pay  television  services.  25  Included  in  this 
 industry  are  commercial,  religious,  educational,  and  other  television  stations.  26  Also  included  are 

 20  Annual  Assessment  of  the  Status  of  Competition  in  Markets  for  the  Delivery  of  Video  Programming,  Third  Annual 
 Report,  CS  Docket  No.  96-  133,  12  FCC  Rcd  4358,  4385  (1996)(  Third  Annual  Report). 
 21  Third  Annual  Report,  12  FCC  Rcd  at  4385. 

 22  Id. 
 23  Id. 
 24  13  C.  F.  R.    121.201,  Standard  Industrial  Code  (SIC)  4833  (1996). 

 25  Economics  and  Statistics  Administration,  Bureau  of  Census,  U.  S.  Department  of  Commerce,  1992  Census  of 
 Transportation,  Communications  and  Utilities,  Establishment  and  Firm  Size,  Series  UC92-  S-  1,  Appendix  A-  9 
 (1995). 

 26  Id.  See  Executive  Office  of  the  President,  Office  of  Management  and  Budget,  Standard  Industrial  Classification 
 Manual  (1987),  at  283,  which  describes  "Television  Broadcasting  Stations  (SIC  Code  4833)"  as: 

 Establishments  primarily  engaged  in  broadcasting  visual  programs  by  television  to  the  public,  except  cable 
 and  other  pay  television  services.  Included  in  this  industry  are  commercial,  religious,  educational  and  other 
 television  stations.  Also  included  here  are  establishments  primarily  engaged  in  television  broadcasting  and 
 which  produce  taped  television  program  materials. 
79
 Federal  Communications  Commission  FCC  01-  22 
 80 
 establishments  primarily  engaged  in  television  broadcasting  and  which  produce  taped  television  program 
 materials.  27  Separate  establishments  primarily  engaged  in  producing  taped  television  program  materials  are 
 classified  under  another  SIC  number.  28 

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

 16.  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  estimates  that  follow  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  overinclusive  to  that  extent.  An  additional  element  of  the 
 definition  of  "small  business"  is  that  the  entity  must  be  independently  owned  and  operated.  As  discussed 
 further  below,  we  could  not  fully  apply  this  criterion,  and  our  estimates  of  small  businesses  to  which  rules 
 may  apply  may  be  overinclusive  to  this  extent.  The  SBA's  general  size  standards  are  developed  taking  into 
 account  these  two  statutory  criteria.  This  does  not  preclude  us  from  taking  these  factors  into  account  in 
 making  our  estimates  of  the  numbers  of  small  entities. 

 17.  There  were  1,509  television  stations  operating  in  the  nation  in  1992.  29  That  number  has 
 remained  fairly  constant  as  indicated  by  the  approximately  1,  616  operating  television  broadcasting  stations 
 in  the  nation  as  of  September  30,  1999.  30  For  1992,  the  number  of  television  stations  that  produced  less  than 
 $10.  0  million  in  revenue  was  1,155  establishments.  31  Thus,  the  new  rules  will  affect  approximately  1,616 
 television  stations;  approximately  77%,  of  those  stations  are  considered  small  businesses.  32  These  estimates 
 may  overstate  the  number  of  small  entities  since  the  revenue  figures  on  which  they  are  based  do  not  include 
 or  aggregate  revenues  from  non-  television  affiliated  companies. 

 18.  Small  Manufacturers.  The  SBA  has  developed  definitions  of  small  entity  for 
 manufacturers  of  household  audio  and  video  equipment  (SIC  3651)  and  for  radio  and  television 
 broadcasting  and  communications  equipment  (SIC  3663).  In  each  case,  the  definition  includes  all  such 

 27  Economics  and  Statistics  Administration,  Bureau  of  Census,  U.  S.  Department  of  Commerce,  1992  Census  of 
 Transportation,  Communications  and  Utilities,  Establishment  and  Firm  Size,  Series  UC92-  S-  1,  Appendix  A-  9 
 (1995). 

 28  Id.;  SIC  7812  (Motion  Picture  and  Video  Tape  Production);  SIC  7922  (Theatrical  Producers  and  Miscellaneous 
 Theatrical  Services  (producers  of  live  radio  and  television  programs). 

 29  FCC  News  Release  No.  31327,  Jan.  13,  1993;  Economics  and  Statistics  Administration,  Bureau  of  Census,  U.  S. 
 Department  of  Commerce,  Appendix  A-  9. 

 30  FCC  News  Release,  Broadcast  Station  Totals  as  of  September  30,  1999  (released  November  22,  1999). 

 31  The  amount  of  $10  million  was  used  to  estimate  the  number  of  small  business  establishments  because  the  relevant 
 Census  categories  stopped  at  $9,999,999  and  began  at  $10,  000,  000.  No  category  for  $10.  5  million  existed.  Thus, 
 the  number  is  as  accurate  as  it  is  possible  to  calculate  with  the  available  information. 

 32  We  use  the  77  percent  figure  of  TV  stations  operating  at  less  than  $10  million  for  1992  and  apply  it  to  the  1999 
 total  of  1,616  TV  stations  to  arrive  at  the  total  number  of  stations  categorized  as  small  businesses. 
80
 Federal  Communications  Commission  FCC  01-  22 
 81 
 companies  employing  750  or  fewer  employees.  Census  Bureau  data  indicates  that  there  are  858  U.  S. 
 firms  that  manufacture  radio  and  television  broadcasting  and  communications  equipment,  and  that  778  of 
 these  firms  have  fewer  than  750  employees  and  would  be  classified  as  small  entities.  33 

 19.  Electronic  Equipment  Manufacturers.  The  Commission  has  not  developed  a  definition  of 
 small  entities  applicable  to  manufacturers  of  electronic  equipment.  Therefore,  we  will  use  the  SBA 
 definition  of  manufacturers  of  Radio  and  Television  Broadcasting  and  Communications  Equipment.  34 
 According  to  the  SBA's  regulations,  a  TV  equipment  manufacturer  must  have  750  or  fewer  employees  in 
 order  to  qualify  as  a  small  business  concern.  35  The  Census  Bureau  category  is  very  broad,  and  specific 
 figures  are  not  available  as  to  how  many  of  these  firms  are  exclusive  manufacturers  of  television 
 equipment  or  how  many  are  independently  owned  and  operated.  We  conclude  that  there  are 
 approximately  778  small  manufacturers  of  radio  and  television  equipment. 

 20.  Electronic  Household/  Consumer  Equipment.  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  use  the  SBA 
 definition  applicable  to  manufacturers  of  Household  Audio  and  Visual  Equipment.  According  to  the 
 SBA's  regulations,  a  household  audio  and  visual  equipment  manufacturer  must  have  750  or  fewer 
 employees  in  order  to  qualify  as  a  small  business  concern.  36  Census  Bureau  data  indicates  that  there  are 
 410  U.  S.  firms  that  manufacture  radio  and  television  broadcasting  and  communications  equipment,  and 
 that  386  of  these  firms  have  fewer  than  500  employees  and  would  be  classified  as  small  entities.  37  The 
 remaining  24  firms  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.  Furthermore,  the  Census  Bureau  category  is  very  broad,  and  specific  figures  are  not  available 
 as  to  how  many  of  these  firms  are  exclusive  manufacturers  of  television  equipment  for  consumers  or  how 
 many  are  independently  owned  and  operated.  We  conclude  that  there  are  approximately  386  small 
 manufacturers  of  television  equipment  for  consumer/  household  use. 

 21.  Description  of  Projected  Reporting,  Recordkeeping  and  other  Compliance  Requirements. 
 There  are  compliance  requirements  for  cable  operators  and  OVS  operators.  An  attempt  has  been  made  to 
 propose  streamlined  compliance  requirements,  especially  for  small  cable  operators,  in  this  docket. 

 22.  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:  (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 

 33  U.  S.  Dept.  of  Commerce,  1992  Census  of  Transportation,  Communications  and  Utilities,  Table  1D,  (issued  May 
 1995),  SIC  category  3663. 
 34  This  category  excludes  establishments  primarily  engaged  in  the  manufacturing  of  household  audio  and  visual 
 equipment  which  is  categorized  as  SIC  3651. 
 35  13  C.  F.  R.  121.  201,  SIC  Code  3663. 

 36  13  C.  F.  R.  121.  201,  SIC  Code  3651. 
 37  U.  S.  Small  Business  Administration  1995  Economic  Census  Industry  and  Enterprise  Report,  Table  3,  SIC  Code 
 3651,  (Bureau  of  the  Census  data  adapted  by  the  Office  of  Advocacy  of  the  U.  S.  Small  Business  Administration). 
81
 Federal  Communications  Commission  FCC  01-  22 
 82 
 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.  We 
 have  proposed  streamlined  rules  for  the  carriage  of  digital  broadcast  signals  for  small  cable  operators  in 
 this  proceeding.  We  will  examine  this  alternative  in  more  detail  in  the  next  phase  of  this  rulemaking. 

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

 24.  Report  to  Congress.  The  Commission  will  send  a  copy  of  the  Report  and  Order,  including 
 this  IRFA,  in  a  report  to  be  sent  to  Congress  pursuant  to  the  Small  Business  Regulatory  Enforcement 
 Fairness  Act  of  1996.  38  In  addition,  the  Commission  will  send  a  copy  of  the  Further  Notice,  including 
 IRFA,  to  the  Chief  Counsel  for  Advocacy  of  the  Small  Business  Administration.  A  copy  of  the  Further 
 Notice  and  IRFA  (or  summaries  thereof)  will  also  be  published  in  the  Federal  Register.  39 

 38  See  5  U.  S.  C.  801(  a)(  1)(  A). 
 39  See  5  U.  S.  C.  604(  b). 
82
 Federal  Communications  Commission  FCC  01-  22 
 83 
 Appendix  D--  Rule  Changes 
 Part  76  of  Title  47  of  the  Code  of  Federal  Regulations  is  amended  as  follows: 
 Part  76    Multichannel  Video  and  Cable  Television  Service 
 1.  The  authority  citation  for  Part  76  reads  as  follows: 
 AUTHORITY:  47  U.  S.  C.  151,  152,  153,  154,  301,  302,  303,  303a,  307,  308,  309,  312,  315,  317,  325, 
 336,  338,  339,  503,  521,  522,  531,  532,  533,  534,  535,  536,  537,  543,  544,  544a,  545,  548,  549,  552,  554, 
 556,  558,  560,  561,  571,  572,  573. 

 2.  Section  76.5  is  amended  as  follows: 
 (b)  Television  station;  television  broadcast  station.  Any  television  broadcast  station  operating  on  a 
 channel  regularly  assigned  to  its  community  by    73.  606  or  73.  622  of  this  chapter,  and  any  television 
 broadcast  station  licensed  by  a  foreign  government:  Provided,  however,  That  a  television  broadcast  station 
 licensed  by  a  foreign  government  shall  not  be  entitled  to  assert  a  claim  to  carriage,  program  exclusivity,  or 
 retransmission  consent  authorization  pursuant  to  subpart  D  or  F  of  this  part,  but  may  otherwise  be  carried  if 
 consistent  with  the  rules  on  any  service  tier.  Further  provided  that  a  television  broadcast  station  operating  on 
 channels  regularly  assigned  to  its  community  by  both  Sections  73.606  and  73.622  of  this  chapter  may  assert  a 
 claim  for  carriage  pursuant  to  subpart  D  of  this  part  only  for  a  channel  assigned  pursuant  to  73.606. 

 ***  ***  ***  ***  ***  *** 
 3.  Section  76.56  is  amended  as  follows: 
 (f)  Carriage  of  additional  broadcast  television  signals  on  such  system  shall  be  at  the  discretion  of  the  cable 
 operator,  subject  to  the  retransmission  consent  rules,    76.  64.  A  cable  system  may  also  carry  any 
 ancillary  or  other  transmission  contained  in  the  broadcast  television  signal. 

 ***  ***  ***  ***  ***  *** 
 4.  Section  76.57  is  amended  as  follows: 

 A  new  subsection  (c)  is  added,  as  follows,  and  subsections  (c),  (d),  (e)  are  renumbered  (d),  (e),  and  (f), 
 respectively. 

 (c)  With  respect  to  digital  signals  of  a  television  station  carried  in  fulfillment  of  the  must-  carry 
 obligations,  a  cable  operator  shall  carry  the  information  necessary  to  identify  and  tune  to  the  broadcast 
 television  signal. 

 ***  ***  ***  ***  *** 
 5.  Section  76.62  is  amended  as  follows: 
 Subsection  (b)  is  amended  and  a  new  subsection  (g)  is  added,  as  follows: 
 (b)  Each  such  television  broadcast  signal  carried  shall  be  carried  without  material  degradation,  and,  for 
 analog  signals,  in  compliance  with  technical  standards  set  forth  in  subpart  K  of  this  part. 
83
 Federal  Communications  Commission  FCC  01-  22 
 84 
 *  *  * 
 (g)  With  respect  to  carriage  of  digital  signals,  operators  are  not  required  to  carry  ancillary  or 
 supplementary  transmissions  or  non-  program  related  video  material. 

 ***  ***  ***  ***  *** 
 6.  Section  76.64  is  amended  as  follows: 
   76.64  Retransmission  consent. 
 *  *  * 
 (f)  Commercial  television  stations  are  required  to  make  elections  between  retransmission  consent  and 
 must-  carry  status  according  to  the  following  schedule: 
 *  *  * 
 (4)  New  television  stations  and  stations  that  return  their  analog  spectrum  allocation  and  broadcast  in 
 digital  only  shall  make  their  initial  election  any  time  between  60  days  prior  to  commencing  broadcast 
 and  30  days  after  commencing  broadcast  or  commencing  broadcasting  in  digital  only;  such  initial 
 election  shall  take  effect  90  days  after  it  is  made. 

 *  *  * 
 (k)  Retransmission  consent  agreements  between  a  broadcast  station  and  a  multichannel  video 
 programming  distributor  shall  be  in  writing  and  shall  specify  the  extent  of  the  consent  being  granted, 
 whether  for  the  entire  signal  or  any  portion  of  the  signal.  This  rule  applies  for  either  the  analog  or  the 
 digital  signal  of  a  television  station. 

 ***  ***  ***  ***  ***  *** 
 7.  Section  76.  922(  f)  is  amended  as  follows: 
   76.922(  f)  External  Costs 
 New  sub-  section  is  added. 
 (vii)  Headend  equipment  costs  necessary  for  the  carriage  of  digital  broadcast  signals. 
 ***  ***  ***  ***  ***  *** 
 8.  Section  76.922(  j)  is  amended  as  follows: 
   76.  922  Rates  for  the  basic  service  tier  and  cable  programming  services  tiers. 
 (j)  Network  upgrade  rate  increase. 
 (1)  Cable  operators  that  undertake  significant  network  upgrades  requiring  added  capital  investment 
 may  justify  an  increase  in  rates  for  regulated  services  by  demonstrating  that  the  capital  investment  will 
 benefit  subscribers,  including  providing  television  broadcast  programming  in  a  digital  format. 
84
 Federal  Communications  Commission  FCC  01-  22 
 85 
 ***  ***  ***  ***  ***  *** 
 9.  Section  76.964  is  amended  as  follows: 
 76.964  Written  Notification  of  Changes  in  Rates  and  Services. 
 (a)  In  addition  to  the  requirement  of  76.309(  c)(  3)(  i)(  B)  regarding  advance  notification  to 
 customers  of  any  changes  in  rates,  programming  services  or  channel  positions,  cable  systems  shall  give 
 30  days  written  notice  to  both  subscribers  and  local  franchising  authorities  before  implementing  and  rate 
 or  service  change.  Such  notice  shall  state  the  precise  amount  of  any  rate  change  and  briefly  explain  in 
 readily  understandable  fashion  the  cause  of  the  rate  change  (e.  g.,  inflation,  change  in  external  costs  or  the 
 addition/  deletion  of  channels).  When  the  change  involves  the  addition  or  deletion  of  channels,  each 
 channel  added  or  deleted  must  be  separately  identified.  For  purposes  of  the  carriage  of  digital  broadcast 
 signals,  the  operator  need  only  identify  for  subscribers,  the  television  signal  added  and  not  whether  that 
 signal  may  be  multiplexed  during  certain  dayparts. 
85
 Federal  Communications  Commission  FCC  01-  22 
 86 
 STATEMENT  OF  COMMISSIONER  SUSAN  NESS  APPROVING  IN  PART  AND  DISSENTING  IN  PART 
 Re:  Carriage  of  Digital  Television  Broadcast  Signals,  CS  Docket  Nos.  98-  120,  00-  96,  00-  2 
 After  a  long  wait,  we  finally  are  addressing  some  of  the  issues  involving  the  carriage  of  digital 
 broadcast  signals  on  cable.  I  would  have  hoped  that  this  digital  must  carry  proceeding  would  provide 
 finality  and  clarity  for  industry  participants  who  need  sufficient  lead-  time  to  develop  business  plans. 
 Unfortunately,  it  does  not.  While  I  support  the  majority  of  decisions  in  this  Order,  along  with  the  Further 
 Notice  to  establish  a  better  record  on  the  effect  of  a  dual  carriage  requirement,  I  dissent  to  the  tentative 
 conclusion  regarding  dual  carriage.  I  also  write  separately  to  emphasize  the  importance  of  our  Further 
 Notice  regarding  program  related  material  in  the  digital  context. 

 I.  DUAL  CARRIAGE 

 I  support  the  Further  Notice  to  collect  additional  information  regarding  cable  operators  system 
 capacity,  the  status  of  digital  retransmission  negotiations,  and  the  practical  effects  of  a  dual  carriage 
 requirement.  I  dissent,  however,  from  the  Majoritys  tentative  conclusion  on  a  matter  of  law,  which  in 
 effect  states  that  industry  has  failed  to  meet  its  constitutional  burden.  1 

 First,  drawing  such  a  tentative  conclusion  is  gratuitous.  The  item  concedes  that  the  record  is 
 insufficient  to  accurately  discern  the  impact  on  cable  operators  speech  posed  by  a  dual  carriage 
 requirement.  Indeed,  the  Commission  now  asks  for  the  very  information  --  including  cable  system 
 channel  capacity  --  that  I  have  been  asking  the  Commission  to  collect  for  over  two  years.  This 
 information  is  significant  especially  in  light  of  the  upgrades  being  executed  by  the  major  MSOs,  many 
 pursuant  to  Social  Contracts  with  this  agency.  Such  system  capacity  information  is  solely  at  the  disposal 
 of  cable  operators.  We  also  request  important  data  on  the  status  and  scope  of  digital  retransmission 
 consent  agreements.  To  what  extent  are  cable  operators  voluntarily  carrying  digital  broadcasts?  The 
 Majority  should  not  form  an  opinion,  even  a  tentative  one,  without  first  considering  such  fundamental 
 data. 

 Second,  the  tentative  conclusion  addresses  only  one  aspect  of  the  intermediate  scrutiny  test. 
 Specifically,  the  intermediate  scrutiny  standard  established  under  U.  S.  v.  OBrien,  as  applied  in  the 
 Turner  decisions,  requires  that  a  content-  neutral  law  affecting  speech  further  a  substantial  or  important 
 government  interest.  2  As  the  item  points  out,  that  interest  in  the  must  carry  context  boils  down  to  (1)  the 
 preservation  of  free  over-  the-  air  television;  (2)  the  promotion  of  the  widespread  dissemination  of 
 information  from  many  sources;  and  (3)  the  promotion  of  fair  competition.  3  Would  a  dual  carriage 
 requirement  further  that  substantial  government  interest?  The  item  is  silent  on  this  point.  Such 
 willingness  to  put  the  ball  in  industrys  court  while  punting  on  the  subject  of  our  own  legal  burden  is 

 1  Para.  3. 

 2  Para.  114,  citing  U.  S.  v.  OBrien,  391  U.  S.  367,  377  (1968). 
 3  Para.  113,  citing  Turner  Broadcasting  System,  Inc.  v.  U.  S.,  512  U.  S.  622,  662  (1997)  (Turner  II).  It  is  important 
 to  note  that  the  deference  the  Supreme  Court  afforded  Congress  in  Turner  II  might  not  extend  to  this  Agency. 
 Therefore,  we  cannot  be  assured  that,  even  if  we  assemble  a  voluminous  record,  the  Turner  II  decision  would  sustain 
 a  dual  carriage  decision,  especially  given  the  relatively  scant  legislative  history  concerning  digital  broadcasting. 
86
 Federal  Communications  Commission  FCC  01-  22 
 87 
 emblematic,  I  believe,  of  the  Commissions  need  to  develop  a  clearer,  more  visionary  picture  of  its  own 
 role  in  the  digital  transition,  regardless  of  what  we  ultimately  decide  on  the  question  of  dual  carriage. 

 The  government  has  a  substantial  interest  in  facilitating  a  successful  digital  transition  for  the 
 American  public.  As  all  communications  media  go  digital,  broadcasting  must  follow  suit  or  find  its  place 
 in  the  history  books  along  with  the  Passenger  Pigeon.  A  successful  digital  transition  thus  would  ensure 
 that  the  public  has  access  to  free,  over-  the-  air  broadcasting  in  the  digital  age  and  beyond.  A  successful 
 digital  transition  also  would  serve  the  governments  interest  in  promoting  viewpoint  diversity  by 
 providing  a  greater  variety  of  independent  programming  sources. 

 Finally,  there  is  no  need  to  state  a  tentative  conclusion  at  this  time.  The  item  states  that  the 
 statute  neither  compels  dual  carriage;  nor  prohibits  it  and  that  in  order  to  weigh  the  constitutional 
 questions  inherent  in  a  statutory  construction  that  would  permit  dual  carriage,  we  believe  it  is  appropriate 
 and  necessary  to  more  fully  develop  the  record  in  this  regard.  4  I  agree.  I  therefore  believe  that  it  is 
 unnecessary,  and  ill-  timed,  for  the  government  to  weigh  in  with  a  premature  assessment  of  the 
 constitutionality  of  dual  carriage  before  we  have  collected  and  analyzed  the  evidence  that  would  address 
 this  question.  Moreover,  such  a  determination  might  prejudice  the  outcome  of  any  ongoing  market-  based 
 carriage  discussions.  I  also  seriously  question  whether  a  federal  court  would  entertain  review  of  such  a 
 tentative  conclusion,  since  it  is  not  a  final  agency  action.  Accordingly,  I  would  have  issued  the  Further 
 Notice  without  drawing  a  tentative  conclusion  on  the  issue  of  the  burden  to  cable  operators  posed  by  a 
 dual  carriage  requirement. 

 I  caution  parties  not  to  view  my  dissent  as  addressing,  pro  or  con,  the  merits  of  a  dual  carriage 
 requirement.  I  have  great  sympathy  for  the  many  independent  cable  networks  whose  efforts  to  obtain 
 carriage  may  be  adversely  affected  by  broadcast  digital  carriage.  My  preference,  therefore,  has  been  and 
 will  continue  to  be  the  fostering  of  market-  based  solutions.  In  that  vein,  over  the  past  few  years,  I 
 repeatedly  have  urged  broadcasters  and  cable  operators  at  gatherings  I  attend,  both  public  and  private,  to 
 negotiate  in  good  faith  on  carriage  of  digital  broadcasts  during  this  transition  period.  I  also  have  argued 
 that  as  the  carriage  capacity  of  cable  systems  expands,  with  upgrades  and  the  addition  of  digital 
 capabilities,  the  burden  of  carrying  broadcast  programming  diminishes  accordingly. 

 II.  PRIMARY  VIDEO 

 I  reluctantly  conclude  that  the  best  reading  of  the  statutory  term,  primary  video,  refers  to  one 
 programming  stream.  I  believe  that  this  interpretation  is  the  most  easily  defensible,  but  it  is  by  no  means 
 the  only  reasonable  one. 

 A  single-  stream  interpretation  of  primary  video  could  have  the  odd  result  of  requiring 
 broadcasters  and  cable  operators  to  continuously  examine  broadcasters  content  to  determine  whether  the 
 signal  is  primary  video,  program  related,  or  something  else.  For  example,  if  a  broadcaster  in  a  tri-  state 
 area  offers  a  main  news  program,  and  then  breaks  away  to  three  video  streams  to  cover  local  news  in  each 
 state,  would  the  entire  news  program  be  primary  video,  would  the  breakout  streams  be  program  related,  or 
 neither?  A  cable  operator  would  have  to  draw  these  conclusions.  In  contrast,  a  definition  of  primary 
 video  that  includes  all  free,  non-  subscription  video  programming  streams  would  be  easier  to  administer. 

 4  Para.  113. 
87
 Federal  Communications  Commission  FCC  01-  22 
 88 
 Ironically,  a  single  stream  interpretation  of  primary  video  results  in  cable  operators  using  less,  not 
 more,  spectrum  for  broadcast  must-  carry  at  the  end  of  the  digital  transition  than  they  do  today.  Each 
 analog  signal  requires  6  MHz  of  spectrum  on  the  cable  system.  By  contrast,  with  digital  compression, 
 and  if  broadcasters  offer  multiple  program  streams,  it  is  possible  that  the  primary  video  will  require  2 
 MHz  or  less  of  capacity,  not  six. 

 Of  course,  retransmission  consent  agreements  might  resolve  these  issues.  For  example,  the  cable 
 operator  might  agree  voluntarily  to  carry  the  entire  free,  over-  the-  air  video  programming  signal.  Absent  a 
 must-  carry  requirement,  a  broadcaster  might  be  more  willing  to  enter  into  retransmission  consent 
 arrangements  to  carry  a  portion  of  the  digital  signal  in  addition  to  the  full  analog  signal  during  the 
 transition  period. 

 While  I  support  the  decision  to  limit  the  definition  of  primary  video  to  one  digital  programming  stream 
 based  on  the  current  state  of  the  record,  I  would  entertain  on  reconsideration  new  or 
 refined  support  for  a  statutory  construction  that  justifies  the  carriage  of  multiplexed  free 
 video  programming.  Although  the  statute  mandates  that  the  primary  video  be  carried, 
 and  expressly  excludes  mandatory  carriage  of  ancillary  and  supplementary  services,  is 
 there  discretion  under  the  statute  for  the  Commission  to  find  it  in  the  public  interest  (and 
 not  unduly  burdensome)  for  the  cable  operator  to  carry  a  stations  multiplexed  free  video 
 channels?  While  the  statute  does  not  preclude  carriage  of  multiplexed  programming 
 streams,  it  is  hard  to  find  legislative  support  for  a  more  expansive  mandatory  carriage 
 requirement. 

 Finally,  I  am  particularly  concerned  about  public  broadcasters.  As  reflected  in  the  record,  and 
 cited  briefly  in  the  item,  5  public  broadcasters  have  developed  innovative  digital  strategies  that  rely  heavily 
 on  multicasting.  These  include  a  24-  hour  childrens  programming  channel;  an  educational  channel 
 devoted  to  instructional  video  and  adult  education;  a  channel  focused  on  local  legislative  and  public 
 interest  issues;  and  the  award-  winning  national  programming  schedule  distributed  by  PBS.  6  To  what 
 extent  does  our  construction  of  the  primary  video  term  allow  for  such  multicasting,  especially  given  the 
 apparently  broader  definition  of  program  related  for  noncommercial,  educational  broadcasters?  7 

 III.  CONCLUSION 

 Given  the  complexity  and  importance  of  these  issues,  the  Commission  must  proceed  carefully  and 
 expeditiously.  I  intend  to  continue  working  with  broadcasters,  cable  operators,  content  producers,  and 
 consumer  electronics  manufacturers,  along  with  my  colleagues  on  the  Commission,  to  facilitate  a 
 transition  to  digital  broadcasting  that  works  for  the  American  people. 

 5  Para.  112,  n.  4. 
 6  Letter  from  the  Association  of  Americas  Public  Television  Stations,  January  18,  2001. 
 7  See  Para.  112  (citing  sections  614(  b)(  3)(  A)  and  615(  g)(  1)  of  the  Act). 
88
 Federal  Communications  Commission  FCC  01-  22 
 89 
 SEPARATE  STATEMENT  OF  COMMISSIONER  MICHAEL  K.  POWELL 
 RE:  IN  THE  MATTER  OF  CARRIAGE  OF  DIGITAL  TELEVISION  BROADCAST  SIGNALS 
 (CS  Docket  No.  98-  129);  Amendments  to  Part  76  of  the  Commissions  Rules;  Implementation  of  the 
 Satellite  Home  Viewer  Improvement  Act  of  1999;  Local  Broadcast  Signal  Carriage  Issues  (CS  Docket  No. 
 00-  96);  Application  of  Network  Non-  Duplication,  Syndicated  Exclusivity  and  Sports  Blackout  Rules  to 
 Satellite  Retransmission  of  Broadcast  Signals  (CS  Docket  No.  00-  2)  FCC  No.  01-  22 

 I  am  pleased  to  support  this  item  which  I  believe  provides  the  clarity  that  the  cable  and  broadcast 
 sectors  have  been  anxiously  awaiting  from  the  Commission.  While  this  order  does  not  put  to  rest  all  of 
 the  fundamental  issues  integral  to  the  transition  to  a  digital  world,  we  have,  I  believe,  eliminated  some 
 uncertainties  in  our  posture.  As  such,  the  order  enhances  our  development  of  policy  as  we  go  forward  to 
 decide  the  larger,  more  constitutionally  complex  issues. 

 I  write  separately,  however,  to  address  our  decision  on  primary  video  and  its  effect  on  those 
 broadcasters  that  plan  to  multicast,  particularly  public  broadcasters.  I  believe  our  decision  is  compelled 
 by  the  language  of  the  statute,  leaving  us  little  choice  but  to  interpret  it  faithfully.  Regrettably,  this  may 
 make  it  more  difficult  for  digital  broadcasters  to  obtain  cable  carriage,  though  I  sincerely  hope  cable 
 operators  will  negotiate  fairly  in  an  effort  to  accommodate  creative  broadcast  offerings,  particularly  the 
 good  works  of  public  broadcasters  who  have  a  unique  public  mission,  and  to  help  facilitate  the  transition 
 to  digital  television.  If  the  Commissions  construction  of  this  statute  should  negatively  impact  the 
 development  of  digital  television,  recourse  to  Congress  for  redress  may  be  warranted,  given  that  the 
 statute  clearly  did  not  contemplate  must  carry  in  a  digital  world. 

 In  a  related  context,  I  question  the  interpretation  of  Section  615(  g)(  1)  suggested  in  the  FNPRM  as 
 to  program  related  content  of  noncommercial  educational  programming  that  is  required  to  be  carried  by 
 cable  operators.  As  have  others,  I  struggled  with  an  appropriate  interpretation  of  the  statute.  Public 
 broadcasters  indicated  in  comments  on  the  record  their  plans  to  multicast  a  range  of  programming  streams 
 delivering  a  variety  of  content  for  different  audiences.  Inasmuch  as  these  programming  streams  represent 
 separate,  distinct  and  multiple  transmissions,  I  am  unable  to  defensibly  conclude  that  they  are  entitled  to 
 must  carry  as  program  related  content.  To  do  so  would  not  comport  with  what  I  derive  to  be  the 
 congressional  directive:  that  a  broadcaster  must  select  only  one  programming  stream  as  primary  and  a 
 cable  operator  is  required  to  provide  mandatory  carriage  to  only  one  such  designated  stream.  This  is  a 
 question  of  statutory  interpretation,  and  I  might  accept  a  more  flexible  definition  if  it  were  a  discretionary 
 policy  judgement. 

 Finally,  I  urge  continued  flexibility  on  the  part  of  broadcasters  and  cable  operators  to  bring  these 
 issues  to  a  successful  outcome.  I  am  pleased  that  we  can  bring  to  closure  in  this  item  those  matters  that 
 we  truly  suppose  to  be  clear.  We  can  all  advance  to  the  decisions  we  will  be  called  to  make  another  day. 
89
 Federal  Communications  Commission  FCC  01-  22 
 90 
 Dissenting  Statement  of  Commissioner  Gloria  Tristani 
 In  the  Matter  of  the  Carriage  of  Digital  Television  Broadcast  Signals  and  Related  Matters 

 CS  Docket  Nos.  98-  120;  00-  96;  00-  2. 
 The  transition  from  analog  television  to  digital  television  poses  fundamental  policy  questions. 
 Two  issues  are  not  open  to  question.  First,  Congress  has  determined  the  public  interest  obligations  of 
 broadcasters  prevailing  in  the  analog  era  will  carry  over  to  the  digital  era.  1  Second,  this  Commission 
 must  continue  to  ensure  cable  communications  systems  are  responsive  to  the  needs  and  interest  of  the 
 local  community  and  are  encouraged  to  provide  the  widest  possible  diversity  of  information  sources 
 and  services  to  the  public.  2  Yet  the  majority  today  disposes  of  the  question  of  the  meaning  of  primary 
 video  in  the  must-  carry  context  without  reference  to  these  explicit  statutory  purposes.  In  fact,  there  is  no 
 mention  of  the  public  interest  in  this  section  of  the  Order  at  all.  By  prematurely  deciding  that  Congress 
 intended  to  foreclose  even  public  non-  commercial  stations  from  using  their  digital  spectrum  to  broadcast 
 several  channels  of  programming  with  mandatory  carriage  on  local  cable  systems,  the  Commission  harms 
 every  American.  3 

 While  I  do  not  question  the  majoritys  authority  to  settle  on  some  definition  of  the  term  primary 
 video,  doing  so  without  substantial  discussion  of  other  applicable  sections  of  the  Communications  Act  or 
 related  case-  law  determinations  is  untenable.  As  the  Supreme  Court  noted  in  Turner  Broadcasting  System 
 Inc.,  v.  FCC,  520  U.  S.  180,  189  (1994),  must-  carry  provisions  serve  "three  interrelated  interests:  (1) 
 preserving  the  benefits  of  free,  over-  the-  air  local  broadcast  television,  (2)  promoting  the  widespread 
 dissemination  of  information  from  a  multiplicity  of  sources,  and  (3)  promoting  fair  competition  in  the 
 market  for  television  programming."  As  a  result,  our  deliberation  should  have  explicitly  considered  these 
 key  concerns. 

 Moreover,  the  Communications  Act  subjects  that  portion  of  the  broadcast  signal  that  is  not 
 primary  video  but  nonetheless  is  program  related  to  the  same  must-  carry  requirements.  Despite  this 
 requirement  the  majority  determined  to  put  off  a  decision  on  the  meaning  of  the  term  program  related.  4 
 Leaving  aside  the  wisdom  of  defining  only  one  of  two  key  terms,  I  fear  todays  attempt  to  state  a  bright-line 
 definition  of  primary  video  while  leaving  the  related  definition  of  program  related  video  open, 
 will  work  more  mischief  than  it  avoids.  As  a  result,  this  Commission  may  soon  face  a  torrent  of  content-related 
 disputes  that  we  are  ill-  equipped  to  resolve. 

 1  47  U.  S.  C.  336(  d)(  Nothing  in  this  section  shall  be  construed  as  relieving  a  television  broadcast  station  from  its 
 obligation  to  serve  the  public  interest,  convenience,  and  necessity.) 
 2  47  U.  S.  C.  521(  2)  and  (4) 

 3  Order  at  pgs.  24-  28  (construing  47  U.  S.  C.  614(  b)(  3)(  requiring  cable  operators  to  carry  the  primary  video 
 signal  of  a  broadcast  station.) 
 4  Order  at  pg.  28 
90
 Federal  Communications  Commission  FCC  01-  22 
 91 
 One  final  point  bears  mentioning.  Despite  the  length  of  time  this  docket  has  been  open,  I  believe 
 we  would  have  benefited  from  a  more  deliberative  approach  than  rushing  the  Order  out  the  door  at  the 
 end  of  this  administration.  The  affected  parties  and  the  staff  did  their  best  to  present  and  consider  the 
 merits  of  these  issues,  but  the  press  of  business  rendered  the  effort  insufficient.  I  hope  in  any  future 
 proceedings  that  reflective  deliberation  rather  than  student-  like  cramming  characterizes  our  processes. 
 For  the  foregoing  reasons,  I  respectfully  dissent. 
91