[Federal Register Volume 72, Number 142 (Wednesday, July 25, 2007)]
[Proposed Rules]
[Pages 40818-40824]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 07-3651]


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FEDERAL COMMUNICATIONS COMMISSION

47 CFR Part 76

[CS Docket No. 97-80; PP Docket No. 00-67; FCC 07-120]


Commercial Availability of Bidirectional Navigation Devices 
(``Two-Way Plug-and-Play'')

AGENCY: Federal Communications Commission.

ACTION: Proposed rule.

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SUMMARY: In this document, the Commission takes steps to ensure that 
equipment used to access video programming and other services offered 
by cable television systems are available to consumers at retail. 
Specifically, the Commission seeks comment on proposed standards for 
this bidirectional capability, the absence of which may discourage some 
consumers from investing in new digital equipment. The Commission also 
seeks comment on whether any rules adopted in this proceeding should 
apply to non-cable Multichannel Video Programming Distributors 
(``MVPDs'').

DATES: Comments for this proceeding are due on or before August 24, 
2007; reply comments are due on or before September 10, 2007.

ADDRESSES: You may submit comments, identified by CS Docket No. 97-80, 
by any of the following methods:
    <bullet> Federal eRulemaking Portal: http://www.regulations.gov. 
Follow the instructions for submitting comments.
    <bullet> Federal Communications Commission's Web Site: http://www.fcc.gov/cgb/ecfs/. Follow the instructions for submitting comments.
    <bullet> People with Disabilities: Contact the FCC to request 
reasonable accommodations (accessible format documents, sign language 
interpreters, CART, etc.) by e-mail: <a href="/cdn-cgi/l/email-protection#064045453336324660656528616970"><span class="__cf_email__" data-cfemail="b7f1f4f4828783f7d1d4d499d0d8c1">[email protected]</span></a> or phone: 202-418-
0530 or TTY: 202-418-0432.
    For detailed instructions for submitting comments and additional 
information on the rulemaking process, see the SUPPLEMENTARY 
INFORMATION section of this document.

FOR FURTHER INFORMATION CONTACT: For additional information on this 
proceeding, contact Brendan Murray, <a href="/cdn-cgi/l/email-protection#c183b3a4afa5a0afef8cb4b3b3a0b881a7a2a2efa6aeb7"><span class="__cf_email__" data-cfemail="a6e4d4c3c8c2c7c888ebd3d4d4c7dfe6c0c5c588c1c9d0">[email protected]</span></a> of the Media 
Bureau, Policy Division, (202) 418-1573.

SUPPLEMENTARY INFORMATION: This is a summary of the Commission's Notice 
of Proposed Rulemaking, FCC 07-120, adopted on June 27, 2007, and 
released on June 29, 2007. The full text of this

[[Page 40819]]

document is available for public inspection and copying during regular 
business hours in the FCC Reference Center, Federal Communications 
Commission, 445 12th Street, SW., CY-A257, Washington, DC 20554. These 
documents will also be available via ECFS (http://www.fcc.gov/cgb/ecfs/
). (Documents will be available electronically in ASCII, Word 97, and/
or Adobe Acrobat.) The complete text may be purchased from the 
Commission's copy contractor, 445 12th Street, SW., Room CY-B402, 
Washington, DC 20554. To request this document in accessible formats 
(computer diskettes, large print, audio recording, and Braille), send 
an e-mail to <a href="/cdn-cgi/l/email-protection" class="__cf_email__" data-cfemail="6c0a0f0f595c582c0a0f0f420b031a">[email protected]</a> or call the Commission's Consumer and 
Governmental Affairs Bureau at (202) 418-0530 (voice), (202) 418-0432 
(TTY).

Initial Paperwork Reduction Act of 1995 Analysis

    This document does not contain proposed information collection 
requirements subject to the Paperwork Reduction Act of 1995, Public Law 
104-13. In addition, therefore, it does not contain any proposed 
information collection burden ``for small business concerns with fewer 
than 25 employees,'' pursuant to the Small Business Paperwork Relief 
Act of 2002, Public Law 107-198, see 44 U.S.C. 3506(c)(4).

Summary of the Notice of Proposed Rulemaking

I. Introduction

    1. CableCARD-ready devices available at retail today are unable to 
access the two-way features available on cable systems, including 
electronic programming guides (``EPGs''), video-on-demand (``VOD''), 
pay-per-view (``PPV''), and other interactive television (``ITV'') 
capabilities. In this Third Further Notice of Proposed Rulemaking, we 
solicit comment on proposed standards to ensure bidirectional 
compatibility of cable television systems and consumer electronics 
equipment. We also seek comment on whether any rules we adopt in this 
proceeding should apply to non-cable Multichannel Video Programming 
Distributor (``MVPDs'') and whether there are technological solutions 
that are network agnostic and deployable across all MVPD platforms 
(e.g., cable, Direct Broadcast Satellite (``DBS''), Internet Protocol 
(``IP'') or hybrid Quadrature Amplitude Modulation/IP (``QAM/IP'')).

II. Background

    2. Section 629 of the Act directs the Commission to:

    Adopt regulations to assure the commercial availability, to 
consumers of multichannel video programming and other services 
offered over multichannel video programming systems, of converter 
boxes, interactive communications equipment, and other equipment 
used by consumers to access multichannel video programming and other 
services offered over multichannel video programming systems, from 
manufacturers, retailers, and other vendors not affiliated with any 
multichannel video programming distributor.

    Through section 629, Congress sought to provide consumers with the 
opportunity to purchase competitive navigation devices from sources 
other than their MVPD. Congress emphasized the importance of such 
competition, stating that ``[c]ompetition in the manufacturing and 
distribution of consumer devices has always led to innovation, lower 
prices and higher quality.'' At the same time, Congress recognized that 
MVPDs have ``a valid interest, which the Commission should continue to 
protect, in system or signal security and in preventing theft of 
service.''
    3. To carry out the directives of section 629, the Commission in 
1998 required cable operators to make available by July 1, 2000 a 
security element separate from the basic navigation device (the ``host 
device''). Cable operators were permitted to continue providing 
equipment with integrated security until January 1, 2005, so long as 
modular security components, known as point-of-deployment modules 
(``PODs'' or ``CableCARDs''), were also made available for use with 
host devices obtained through retail outlets. This requirement is 
generally referred to as ``common reliance,'' or the ``integration 
ban,'' is designed to enable unaffiliated manufacturers, retailers, and 
other vendors to commercially market host devices while allowing cable 
operators to retain control over their system security.
    4. In April 2003, in response to a request from cable operators, 
the Commission extended the effective date of the integration ban until 
July 1, 2006. Then, in 2005, again at the urging of cable operators, 
the Commission further extended that date until July 1, 2007. As of 
late 2003, ``non-integrated navigation devices [had] yet to gain 
adoption in the marketplace, thereby directly affecting subscriber 
demand for'' separated security elements. This was due to the lack of a 
technical standard for how the POD and host device would interface. In 
the Plug and Play Order, the Commission adopted an interface standard 
that the National Cable and Telecommunications Association and the 
Consumer Electronics Association had agreed upon in a Memorandum of 
Understanding (``MOU''), with certain modifications. And less than a 
year later, consumer electronics manufacturers brought CableCARD-
compatible devices to market. Devices made pursuant to this standard 
have the ability to receive encrypted digital cable programming, but do 
not have any upstream, or bidirectional, capabilities (i.e., consumer 
electronics manufacturers can only make unidirectional devices under 
the technical standard adopted in the Plug and Play Order). For 
example, such devices cannot support two-way services such as EPGs, 
VOD, PPV, and other ITV capabilities.
    5. It is apparent that consumers have not shown significant 
interest in one-way devices, which cannot access features such as EPGs, 
VOD, PPV, and other ITV capabilities provided by cable operators. 
Indeed, while over five million digital cable ready devices have been 
sold, cable operators have deployed fewer than 300,000 CableCARDs. The 
cable and consumer electronics industries have attempted to negotiate 
an agreement on how to achieve bidirectional compatibility, and since 
2003 the Commission has required National Cable and Telecommunications 
Association (``NCTA'') and Consumer Electronics Association (``CEA'') 
to file status reports regarding the status of those negotiations. In 
March 2005, the Commission described the progress of these negotiations 
as ``disappointing.'' Shortly before the Commission made that 
statement, senior executives from Microsoft, Time Warner, and Comcast 
committed to ``personally'' work together ``to supervise the efforts to 
reach an agreement amongst the cable, CE, IT, and other industries to 
ensure the availability of two-way cable products during calendar year 
2006.'' Despite this commitment, the industries appear to have made 
little progress and it does not appear that an agreement is imminent.
    6. On November 30, 2005, the cable industry filed a report that 
supported the OpenCable Application Platform (``OCAP'') as the 
foundation for two-way plug and play products. OCAP is a middleware 
software layer (based on the Java Execution Engine), which allows 
software developers to write applications and programs that would run 
on any OCAP-enabled device. While the cable and consumer electronics

[[Page 40820]]

industries agree that OCAP should be part of the solution for two-way 
plug and play compatibility, the industries appear to disagree on how 
an OCAP solution should be implemented.
    7. When the Commission last addressed these issues in 2005 Deferral 
Order, the scheduled conclusion of the Digital Television (``DTV'') 
transition (i.e., December 31, 2006) could be extended in any given 
market if certain conditions were not met. Most relevant to this 
discussion, section 309(j)(14)(B)(iii) at the time stated that if more 
than 15 percent of the television households in a given market did not 
(1) subscribe to an MVPD carrying the digital signals of the local 
television stations in that market, and (2) have at least one 
television capable of viewing the digital signals of broadcasters in 
that market (either directly or through the use of a digital-to-analog 
converter), then the Commission was to grant an extension of that 
deadline upon request. Since the 2005 Deferral Order was adopted, 
however, the 85-percent test has been repealed, and the December 31, 
2006 soft deadline for the end of the DTV transition has been replaced 
with a hard deadline of February 17, 2009. We believe that the lack of 
two-way functionality on digital cable ready devices is deterring 
consumers from purchasing digital televisions, which are an essential 
part of an effective digital transition. Therefore, we believe that the 
impending hard deadline increases the urgency of examining proposed 
bidirectional standards at this time.

III. Discussion

    8. On November 7, 2006, the CEA, along with twelve consumer 
electronics and information technology companies, proposed a two-way 
plug and play solution. That proposal, attached to this item as 
Appendix B, recommends that the Commission take the following steps:
    (1) Adopt an enhanced CableCARD approach for basic interactive 
services, based largely on existing standards;
    (2) Provide oversight with respect to OCAP development, or allow 
consumer electronics companies and information technology companies to 
participate fully in the OCAP development process;
    (3) Direct CableLabs to approve all output technologies that the 
Digital Living Network Alliance (``DLNA'') approves, and require cable 
providers to provide digital set-top boxes that are fully compatible 
with DLNA networks;
    (4) Adopt testing requirements for two-way devices that are similar 
to the existing testing requirements for one-way devices (i.e., initial 
device testing and certification with subsequent self-certification), 
and require that the cable industry provide consumer electronics 
manufacturers any new OCAP applications for testing at least sixty days 
before widespread deployment; and
    (5) Permit consumer electronics devices to use a cable path for 
software upgrades equal to the path that cable operators use for their 
software upgrades.
    9. We hereby seek comment on the CEA proposal. We seek comment on 
the impact that the proposed solution would have on consumers, content 
providers, consumer electronics manufacturers, large and small cable 
operators, other MPVDs, and on the transition to digital television. We 
seek comment on whether the CEA proposal offers a reasonable and 
quickly implementable approach, and what specific rule changes would be 
necessary.
    10. As noted above, in November 2005, NCTA proposed a two-way 
solution based on the use of OCAP as a standardized middleware layer. 
The proposal, attached to this item as Appendix C, recommends that the 
Commission adopt a regulatory regime that includes:
    (1) Technical requirements for cable systems;
    (2) ``Limited but necessary'' content protection requirements for 
navigation devices;
    (3) Testing and certification/verification procedures to prevent 
harm to the cable network and services; and
    (4) Consumer education mandates.
    NCTA asserts that if combined with voluntary commitments and 
marketplace agreements, its proposal would bring consumers the benefits 
of two-way digital cable-ready products as quickly as possible.
    11. We hereby seek comment on NCTA's proposal. We seek comment on 
the impact that the proposed solution would have on consumers, content 
providers, consumer electronics manufacturers, large and small cable 
operators, other MPVDs, and on the transition to digital television. We 
seek comment on whether the NCTA proposal offers a reasonable and 
quickly implementable approach, and what specific rule changes would be 
necessary.
    12. We also seek comment on any other proposals or rule changes 
that we should consider in order to permit the development of two-way 
digital cable-ready devices.
    13. In addition, we seek comment on whether all MVPDs--including 
DBS and wireline video providers--should be subject to any rules that 
we adopt to promote bidirectional compatibility between cable 
television systems and consumer electronics equipment. Could non-
traditional cable operators and other MVPDs conform to the proposed 
solutions above, or would technical limitations preclude compliance? If 
technical limitations would preclude compliance, we seek comment on 
other approaches by which non-traditional cable operators and other 
MVPDs could achieve bidirectional compatibility between their systems 
and consumer electronics equipment. For example, NCTA notes that there 
has been exploration of an enhanced security device for all MVPDs that 
would permit a retail device to interoperate with all MVPD networks, 
whether traditional cable, satellite or telephone. We seek comment on 
such a solution, including whether such a device should be required to 
comply with specific attachment principles such as outputting the 
signal in conformance with certain open standards in order to permit 
home networking.
    14. As the digital television transition approaches, we do not want 
to lose the potential opportunity for consumers to purchase competitive 
devices before the last major holiday season prior to the transition. 
We seek comment on whether a competitive market would offer further 
incentive for consumers to transition from analog to digital devices. 
Ideally, we would like consumers to be able to purchase two-way digital 
cable ready devices at retail by Q4 2008, in time for the final holiday 
season before the February 17, 2009 over-the-air digital television 
transition. We seek comment on whether that goal is feasible and the 
steps we must adopt in order to achieve that goal. We also solicit 
comment on any specific rules we should adopt to ensure that we achieve 
a practical bidirectional solution that furthers the goals of section 
629 of the Act.

IV. Procedural Matters

A. Initial Regulatory Flexibility Analysis

    15. With respect to the Third Further Notice of Proposed 
Rulemaking, an Initial Regulatory Flexibility Analysis (``IRFA''), see 
generally 5 U.S.C. 603, is contained in Appendix A. Comments must be 
identified as responses to the IRFA and must be filed by the deadlines 
for comments on the Third Further Notice of Proposed Rulemaking 
specified infra. The Commission will send a copy of the Third Further 
Notice of Proposed Rulemaking, including the IRFA, to the Chief Counsel 
for Advocacy of the Small Business Administration.

[[Page 40821]]

B. Initial Paperwork Reduction Act of 1995 Analysis

    16. This document does not contain proposed information 
collection(s) subject to the Paperwork Reduction Act of 1995 (PRA), 
Public Law 104-13. In addition, therefore, it does not contain any new 
or modified ``information collection burden for small business concerns 
with fewer than 25 employees,'' pursuant to the Small Business 
Paperwork Relief Act of 2002, Public Law 107-198, see 44 U.S.C. 
3506(c)(4).

C. Ex Parte Rules

    17. Permit-But-Disclose. This proceeding will be treated as a 
``permit-but-disclose'' proceeding subject to the ``permit-but-
disclose'' requirements under Sec.  1.1206(b) of the Commission's 
rules. 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. Additional rules 
pertaining to oral and written presentations are set forth in Sec.  
1.1206(b).

D. Filing Requirements

    18. Comments and Replies. Pursuant to Sec. Sec.  1.415 and 1.419 of 
the Commission's rules, interested parties may file comments on or 
before the dates indicated on the first page of this document. Comments 
may be filed using: (1) The Commission's Electronic Comment Filing 
System (``ECFS''), (2) the Federal Government's eRulemaking Portal, or 
(3) by filing paper copies.
    19. Electronic Filers. Comments may be filed electronically using 
the Internet by accessing the ECFS: http://www.fcc.gov/cgb/ecfs/ or the 
Federal eRulemaking Portal: http://www.regulations.gov. Filers should 
follow the instructions provided on the Web site for submitting 
comments. For ECFS filers, if multiple docket or rulemaking numbers 
appear in the caption of this proceeding, filers must transmit one 
electronic copy of the comments for each docket or rulemaking number 
referenced in the caption. In completing the transmittal screen, filers 
should include their full name, U.S. Postal Service mailing address, 
and the applicable docket or rulemaking number. Parties may also submit 
an electronic comment by Internet e-mail. To get filing instructions, 
filers should send an e-mail to <a href="/cdn-cgi/l/email-protection#4c292f2a3f0c2a2f2f622b233a"><span class="__cf_email__" data-cfemail="7f1a1c190c3f191c1c51181009">[email protected]</span></a>, and include the following 
words in the body of the message, ``get form.'' A sample form and 
directions will be sent in response.
    20. Paper Filers. Parties who choose to file by paper must file an 
original and four copies of each filing. If more than one docket or 
rulemaking number appears in the caption of this proceeding, filers 
must submit two additional copies for each additional docket or 
rulemaking number. Filings can be sent by hand or messenger delivery, 
by commercial overnight courier, or by first-class or overnight U.S. 
Postal Service mail (although we continue to experience delays in 
receiving U.S. Postal Service mail). All filings must be addressed to 
the Commission's Secretary, Office of the Secretary, Federal 
Communications Commission.
    <bullet> The Commission's contractor will receive hand-delivered or 
messenger-delivered paper filings for the Commission's Secretary at 236 
Massachusetts Avenue, NE., Suite 110, Washington, DC 20002. The filing 
hours at this location are 8 a.m. to 7 p.m. All hand deliveries must be 
held together with rubber bands or fasteners. Any envelopes must be 
disposed of before entering the building.
    <bullet> Commercial overnight mail (other than U.S. Postal Service 
Express Mail and Priority Mail) must be sent to 9300 East Hampton 
Drive, Capitol Heights, MD 20743.
    <bullet> U.S. Postal Service first-class, Express, and Priority 
mail should be addressed to 445 12th Street, SW., Washington, DC 20554.
    21. Availability of Documents. Comments, reply comments, and ex 
parte submissions will be available for public inspection during 
regular business hours in the FCC Reference Center, Federal 
Communications Commission, 445 12th Street, SW., CY-A257, Washington, 
DC 20554. These documents will also be available via ECFS. Documents 
will be available electronically in ASCII, Microsoft Word, and/or Adobe 
Acrobat.
    22. Accessibility Information. To request information in accessible 
formats (computer diskettes, large print, audio recording, and 
Braille), send an e-mail to <a href="/cdn-cgi/l/email-protection" class="__cf_email__" data-cfemail="7d1b1e1e484d493d1b1e1e531a120b">[email protected]</a> or call the FCC's Consumer 
and Governmental Affairs Bureau at (202) 418-0530 (voice), (202) 418-
0432 (TTY). This document can also be downloaded in Word and Portable 
Document Format (PDF) at: http://www.fcc.gov.
    23. Additional Information. For additional information on this 
proceeding, contact Brendan Murray, <a href="/cdn-cgi/l/email-protection#c88abaada6aca9a6e685bdbabaa9b188aeababe6afa7be"><span class="__cf_email__" data-cfemail="e7a5958289838689c9aa929595869ea7818484c9808891">[email protected]</span></a>, or, Steven 
Broeckaert, <a href="/cdn-cgi/l/email-protection#0251766774676c2c40706d67616963677076426461612c656d74"><span class="__cf_email__" data-cfemail="297a5d4c5f4c47076b5b464c4a42484c5b5d694f4a4a074e465f">[email protected]</span></a>, of the Media Bureau, Policy 
Division, (202) 418-2120.
Initial Regulatory Flexibility Analysis
    As required by the Regulatory Flexibility Act of 1980, as amended 
(``RFA'') the Commission has prepared this Initial Regulatory 
Flexibility Analysis (``IRFA'') of the possible significant economic 
impact on small entities by the policies and rules proposed in this 
Third Further Notice of Proposed Rulemaking and Order on Review 
(``Further Notice''). Written public comments are requested on this 
IRFA. Comments must be identified as responses to the IRFA and must be 
filed by the deadlines for comments on the Further Notice provided 
above in paragraph 8. The Commission will send a copy of the Further 
Notice, including this IRFA, to the Chief Counsel for Advocacy of the 
Small Business Administration. In addition, the Further Notice and IRFA 
(or summaries thereof) will be published in the Federal Register.

Need for, and Objectives of, the Proposed Rules

    24. The need for FCC regulation in this area derives from the lack 
of a two-way plug and play standard for cable television systems and 
consumer electronics equipment. The absence of such a standard has been 
identified as a possible impediment to the approaching deadline for the 
transition to digital television (``DTV'') and to the realization of 
Congressional goals set out in section 629 of the Communications Act of 
1934. Such a standard would allow consumer electronics manufacturers to 
develop navigation devices (such as televisions and set-top boxes) that 
could be connected directly to cable systems and make use of 
bidirectional cable services without the need for a cable-operator 
provided navigation device. Since almost 86 percent of television 
households subscribe to a multichannel video programming distributor 
(``MVPD'') service, the availability of such bidirectional 
compatibility would encourage more consumers to purchase DTV compatible 
devices, thereby furthering the transition. Private industry 
negotiations between the Consumer Electronics Association (``CEA'') and 
twelve consumer electronics and information technology companies have 
resulted in a proposal for a two-way plug and play standard.

[[Page 40822]]

The proposal requires adherence to certain technical standards outlined 
in Appendix B. The objectives any rules adopted will be to create a 
competitive market for navigation devices and to facilitate the DTV 
transition.
Legal Basis
    25. The authority for the action proposed in this rulemaking is 
contained in sections 1, 4(i) and (j), 303, 403, 601, and 629 of the 
Communications Act of 1934, as amended, 47 U.S.C. 151, 154(i) and (j), 
303, 403, 521, and 549.
Description and Estimate of the Number of Small Entities To Which the 
Proposed Rules Will Apply
    26. The RFA directs the Commission to provide a description of and, 
where feasible, an estimate of the number of small entities that will 
be affected by the proposed rules. The RFA generally defines the term 
``small entity'' as having the same meaning as the terms ``small 
business,'' ``small organization,'' and ``small governmental entity'' 
under section 3 of the Small Business Act. In addition, the term 
``small business'' has the same meaning as the term ``small business 
concern'' 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'').
    27. Television Broadcasting. The proposed rules and policies could 
affect television broadcasting licensees, and potential licensees of 
television service. The Small Business Administration defines a 
television broadcasting station that has no more than $13 million in 
annual receipts as a small business. Television broadcasting consists 
of establishments primarily engaged in broadcasting images together 
with sound, including the production or transmission of visual 
programming which is broadcast to the public on a predetermined 
schedule. Included in this industry are commercial, religious, 
educational, and other television stations. Also included are 
establishments that are primarily engaged in television broadcasting 
and produce programming in their own studios. Separate establishments 
primarily engaged in producing programming are classified under other 
NAICS numbers.
    28. There were 1,509 television stations operating in the nation in 
1992. That number has remained fairly constant as indicated by the 
approximately 1,747 operating television broadcasting stations in the 
nation as of June 2005. For 1992, the number of television stations 
that produced less than $10.0 million in revenue was 1,155 
establishments. Thus, the new rules could affect approximately 1,747 
television stations; approximately 77%, or 1,345 of those stations are 
considered small businesses. 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.
    29. Cable and Other Program Distribution. The SBA has developed a 
small business size standard for cable and other program distribution 
services, which includes all such companies generating $13.5 million or 
less in revenue annually. This category includes, among others, cable 
operators, direct broadcast satellite (``DBS'') services, home 
satellite dish (``HSD'') services, satellite master antenna television 
(``SMATV'') systems, and open video systems (``OVS''). According to the 
Census Bureau data, there are 1,191 total cable and other pay 
television service firms that operate throughout the year of which 
1,087 have less than $10 million in revenue. We address below each 
service individually to provide a more precise estimate of small 
entities.
    30. Cable Operators. The Commission has developed, with SBA's 
approval, our own definition of a small cable system operator for the 
purposes of rate regulation. Under the Commission's rules, a ``small 
cable company'' is one serving fewer than 400,000 subscribers 
nationwide. As of 2006, 7,916 cable operators qualify as small cable 
companies.
    31. The Communications Act, as amended, also contains a size 
standard for a small cable system operator, which is ``a cable operator 
that, directly or through an affiliate, serves in the aggregate fewer 
than 1% of all subscribers in the United States and is not affiliated 
with any entity or entities whose gross annual revenues in the 
aggregate exceed $250,000,000.'' The Commission has determined that 
there are 65,600,000 subscribers in the United States. Therefore, an 
operator serving fewer than 656,000 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. Based on available data, we find that the number of cable 
operators serving 656,000 subscribers or less totals approximately 
7,917. 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.
    32. Direct Broadcast Satellite (``DBS'') Service. Because DBS 
provides subscription services, DBS falls within the SBA-recognized 
definition of cable and other program distribution services. This 
definition provides that a small entity is one with $13.5 million or 
less in annual receipts. There are four licensees of DBS services under 
part 100 of the Commission's rules. Three of those licensees are 
currently operational. Two of the licensees that are operational have 
annual revenues that may be in excess of the threshold for a small 
business. The Commission, however, does not collect annual revenue data 
for DBS and, therefore, is unable to ascertain the number of small DBS 
licensees that could be impacted by these proposed rules. DBS service 
requires a great investment of capital for operation, and we 
acknowledge, despite the absence of specific data on this point, that 
there are entrants in this field that may not yet have generated $13.5 
million in annual receipts, and therefore may be categorized as a small 
business, if independently owned and operated.
    33. Home Satellite Dish (``HSD'') Service. Because HSD provides 
subscription services, HSD falls within the SBA-recognized definition 
of cable and other program distribution services. This definition 
provides that a small entity is one with $13.5 million or less in 
annual receipts. The market for HSD service is difficult to quantify. 
Indeed, the service itself bears little resemblance to other MVPDs. As 
of June 2005, there were 206,358 households authorized to receive HSD 
service, a decrease of 38.5 percent from the 335,766 we reported the 
previous year. 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. 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

[[Page 40823]]

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.
    34. Satellite Master Antenna Television (``SMATV'') Systems. The 
SBA definition of small entities for cable and other program 
distribution services includes SMATV services and, thus, small entities 
are defined as all such companies generating $13.5 million or less in 
annual receipts. Industry sources estimate that approximately 5,200 
SMATV operators were providing service as of December 1995. Other 
estimates indicate that SMATV operators serve approximately 1.5 million 
residential subscribers as of July 2001. The best available estimates 
indicate that the largest SMATV operators serve between 15,000 and 
55,000 subscribers each. Most SMATV operators serve approximately 
3,000-4,000 customers. Because these operators are not rate regulated, 
they are not required to file financial data with the Commission. 
Furthermore, we are not aware of any privately published financial 
information regarding these operators. Based on the estimated number of 
operators and the estimated number of units served by the largest ten 
SMATVs, we believe that a substantial number of SMATV operators qualify 
as small entities.
    35. Open Video Systems (``OVS''). Because OVS operators provide 
subscription services, OVS falls within the SBA-recognized definition 
of cable and other program distribution services. This definition 
provides that a small entity is one with $13.5 million or less in 
annual receipts. The Commission has certified 25 OVS operators with 
some now providing service. Affiliates of Residential Communications 
Network, Inc. (``RCN'') received approval to operate OVS systems in New 
York City, Boston, Washington, DC 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.
    36. Electronics Equipment Manufacturers. Rules adopted in this 
proceeding could apply to manufacturers of DTV receiving equipment and 
other types of consumer electronics equipment. The SBA has developed 
definitions of small entities for manufacturers of audio and video 
equipment, as well as radio and television broadcasting and wireless 
communications equipment. These categories both include all such 
companies employing 750 or fewer employees. The Commission has not 
developed a definition of small entities applicable to manufacturers of 
electronic equipment used by consumers, as compared to industrial use 
by television licensees and related businesses. Therefore, we will 
utilize the SBA definitions applicable to manufacturers of audio and 
visual equipment and radio and television broadcasting and wireless 
communications equipment, since these are the two closest NAICS Codes 
applicable to the consumer electronics equipment manufacturing 
industry. However, these NAICS categories are broad and specific 
figures are not available as to how many of these establishments 
manufacture consumer equipment. According to the SBA's regulations, an 
audio and visual equipment manufacturer must have 750 or fewer 
employees in order to qualify as a small business concern. Census 
Bureau data indicates that there are 571 U.S. establishments that 
manufacture audio and visual equipment, and that 560 of these 
establishments have fewer than 500 employees and would be classified as 
small entities. The remaining 11 establishments have 500 or more 
employees; however, we are unable to determine how many of those have 
fewer than 750 employees and therefore, also qualify as small entities 
under the SBA definition. Under the SBA's regulations, a radio and 
television broadcasting and wireless communications equipment 
manufacturer must also have 750 or fewer employees in order to qualify 
as a small business concern. Census Bureau data indicates that there 
are 1,041 U.S. establishments that manufacture radio and television 
broadcasting and wireless communications equipment, and that 1,010 of 
these establishments have fewer than 500 employees and would be 
classified as small entities. The remaining 31 establishments have 500 
or more employees; however, we are unable to determine how many of 
those have fewer than 750 employees and therefore, also qualify as 
small entities under the SBA definition. We therefore conclude that 
there are no more than 560 small manufacturers of audio and visual 
electronics equipment and no more than 1,010 small manufacturers of 
radio and television broadcasting and wireless communications equipment 
for consumer/household use.
    37. Computer Manufacturers. The Commission has not developed a 
definition of small entities applicable to computer manufacturers. 
Therefore, we will utilize the SBA definition of electronic computers 
manufacturing. According to SBA regulations, a computer manufacturer 
must have 1,000 or fewer employees in order to qualify as a small 
entity. Census Bureau data indicates that there are 485 firms that 
manufacture electronic computers and of those, 476 have fewer than 
1,000 employees and qualify as small entities. The remaining 9 firms 
have 1,000 or more employees. We conclude that there are approximately 
476 small computer manufacturers.
Description of Projected Reporting, Recordkeeping and Other Compliance 
Requirements
    38. At this time, we do not expect that the proposal would impose 
any additional reporting or recordkeeping requirements. In the past, 
however, compliance with plug and play rules required consumer 
electronics manufacturers to establish a voluntary labeling regime for 
unidirectional digital cable television receivers and related digital 
cable products that meet certain technical specifications. While these 
requirements could have an impact on consumer electronics manufacturers 
and multichannel video programming distributors, it remains unclear 
weather there would be a differential impact on small entities. We seek 
comment on whether the burden of these requirements would fall on large 
and small entities differently. We also seek comment on any aspect of 
the proposal or its impact that we may have overlooked.
Steps Taken To Minimize Significant Impact on Small Entities, and 
Significant Alternatives Considered
    39. The RFA requires an agency to describe any significant 
alternatives that it has considered in reaching its proposed approach, 
which may include the following four alternatives (among others): (1) 
The establishment of differing compliance or reporting requirements or 
timetables that take into account the resources available to small 
entities; (2) the clarification, consolidation, or simplification of 
compliance or reporting requirements under the rule for small entities; 
(3) the use of performance, rather than design, standards; and (4) an 
exemption from

[[Page 40824]]

coverage of the rule, or any part thereof, for small entities.
    40. As indicated above, the Further Notice seeks comment on whether 
the Commission should adopt or revise rules relating to the proposed 
creation of a two-way plug and play standard for digital cable 
television systems and other digital cable television consumer 
electronics equipment in order to facilitate the DTV transition. 
Consumer electronics manufacturers may be required to establish a 
labeling regime for bidirectional digital cable television receivers 
and related digital cable products that meet certain technical 
specifications. However, we welcome comment on modifications of the 
proposal if based on evidence of potential differential impact on 
smaller entities. In addition, the Regulatory Flexibility Act requires 
agencies to seek comment on possible small entity-related alternatives, 
as noted above. We therefore seek comment on alternatives to the 
proposed rules that would assist small entities while ensuring 
bidirectional compatibility between cable operators and consumer 
electronics manufacturers.
Federal Rules Which Duplicate, Overlap, or Conflict With the 
Commission's Proposals
    41. None.

V. Ordering Clauses

    42. It is ordered that, pursuant to sections 1, 4(i) and (j), 303, 
403, 601, and 629 of the Communications Act of 1934, as amended, 47 
U.S.C. 151, 154(i) and (j), 303, 403, 521, 549, comment is hereby 
sought on the proposals in this Third Further Notice Of Proposed 
Rulemaking.

Federal Communications Commission.
Marlene H. Dortch,
Secretary.
[FR Doc. 07-3651 Filed 7-24-07; 8:45 am]
BILLING CODE 6712-01-P


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