[Federal Register Volume 62, Number 179 (Tuesday, September 16, 1997)]
[Rules and Regulations]
[Pages 48487-48496]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 97-24504]


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FEDERAL COMMUNICATIONS COMMISSION

47 CFR Part 79

[MM Docket No. 95-176; FCC 97-279]


Closed Captioning of Video Programming

AGENCY: Federal Communications Commission.

ACTION: Final rule.

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SUMMARY: The Commission adopts rules implementing Section 713 of the 
Communications Act of 1934, as amended. Section 713, Video Programming 
Accessibility, was added to the Communications Act by section 305 of 
the Telecommunications Act of 1996 and directed the Commission to adopt 
rules by August 8, 1998, that generally require the closed captioning 
of video programming. The rules adopted by the Commission generally 
assign responsibility for compliance with the closed captioning 
requirements to the entity which delivers the programming to the 
consumer, establish separate transition schedules for programming first 
published or exhibited on or after the effective date of these rules 
and for programming first published or exhibited prior to the effective 
date of the rules, provide for a number of exemptions authorized by 
Congress and establish mechanisms for enforcement and compliance 
review. These rules are intended to increase the accessibility of video 
programming for persons with hearing disabilities.

EFFECTIVE DATE: These requirements and regulations become effective 
January 1, 1998.

ADDRESSES: A copy of any comments on the information collections 
contained herein should be submitted to Timothy Fain, Office of 
Management and Budget, Room 10236 NEOB, Washington, DC 20503, (202) 
395-3561 or via Internet at <a href="/cdn-cgi/l/email-protection#2640474f4879795266474a0843495608414950"><span class="__cf_email__" data-cfemail="95f3f4fcfbcacae1d5f4f9bbf0fae5bbf2fae3">[email protected]</span></a>, and to Judy Boley, 
Federal Communications Commission, Room 234, 1919 M St., NW., 
Washington, DC 20554 or via Internet to <a href="/cdn-cgi/l/email-protection#1c767e737079655c7a7f7f327b736a"><span class="__cf_email__" data-cfemail="0268606d6e677b426461612c656d74">[email protected]</span></a>.

FOR FURTHER INFORMATION CONTACT: Marcia Glauberman, John Adams or 
Alexis Johns, Cable Services Bureau, (202) 418-7200, TTY (202) 418-
7172. For additional information concerning the information collections 
contained in this Report and Order, contact Judy Boley at (202) 418-
0217, or via the Internet at <a href="/cdn-cgi/l/email-protection#88e2eae7e4edf1c8eeebeba6efe7fe"><span class="__cf_email__" data-cfemail="375d55585b524e7751545419505841">[email protected]</span></a>.

SUPPLEMENTARY INFORMATION: This is a synopsis of the Report and Order 
in MM Docket No. 95-176, FCC 97-279, adopted August 7, 1997 and 
released August 22, 1997. The complete text of this Report and Order is 
available for inspection and copying during normal business hours in 
the FCC Reference Center (Room 239), 1919 M Street, NW, Washington, DC, 
and also may be purchased from the Commission's copy contractor, 
International Transcription Services, Inc. (``ITS'') at (202) 857-3800, 
1919 M Street, NW, Suite 246, Washington, DC 20554. For copies in 
alternative formats, such as braille, audio cassette or large print, 
please contact Sheila Ray at ITS.

Paperwork Reduction Act

    This rulemaking contains modified information collections. The 
Commission, as part of its continuing effort to reduce paperwork burden 
invites the general public and other Federal agencies to take this 
opportunity to comment on the following information collection, as 
required by the Paperwork Reduction Act of 1995, Public Law 104-13. 
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 shall 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.
    OMB Approval Number: 3060-0761.
    Title: Closed Captioning of Video Programming.
    Type of Review: Revision to an existing collection.
    Respondents: Individuals or households; business and other for-
profit entities.
    Number of Respondents: 100 petitions + 100 petition responses + 
1,500 viewer complaints to program providers + 1,500 complaint 
responses from program providers + 500 instructions to refile 
complaints + 300 viewer complaints to the Commission + 300 complaint 
responses to the Commission = 4,300.
    Estimated Time Per Response: .5-5 hours estimated for both the 
petition and complaint processes. Estimated annual burden to 
petitioners and respondents for petition processes: We estimate that 
program providers will annually initiate 100 petitions requesting 
exemption from the closed captioning requirements. We estimate that the 
average burden to complete all aspects of each petition process, 
including filing any possible reply comments and associated 
certifications, will be 5 hours. We estimate that 50% of petitions will 
be prepared using in-house assistance to draft petitions and that 50% 
of petitions will be prepared using outside legal assistance. Petitions 
prepared using outside legal assistance will undergo an average burden 
of 2 hours for each petition to coordinate information with outside 
legal assistance.

50 (50% of petitions prepared in-house assistance) x 5 hours = 250 
hours.

50 (50% of petitions prepared using outside legal assistance) x 2 hours 
= 100 hours.

    We estimate that there will be an average of one response to every 
petition filed. The average burden to complete all aspects of the 
response process, including making certification, is estimated to be 5 
hours. We estimate that 50% of responses will be prepared using in-
house assistance and that 50% of responses will be prepared using 
outside legal assistance.Commenters using outside legal assistance will 
undergo an average burden of 2 hours for each response to coordinate 
information with outside legal assistance.

50 (50% of responses prepared using in-house assistance) x 5 hours = 
250 hours.

50 (50% of responses prepared using outside legal assistance) x 2 hours 
= 100 hours.

    Estimated annual burden to viewers and program providers for the 
complaint process: We estimate there will be 1,500 annual complaints 
filed by viewers at the local level. The average burden for each 
complaint and response is estimated to be 1 hour per viewer and 1 hour 
per program provider. 1,500 viewer complaints x 1 hour and 1,500 
program provider responses x 1 hour = 3,000 hours. In the case of an 
alleged violation by a television broadcast station or other program 
distributor for which the programming distributor is exempt from closed 
captioning responsibility pursuant to Sec. 79.1(e)(9), the complaint 
shall be sent directly to the station or owner of the programming. A 
video programming distributor receiving a complaint regarding such 
programming must forward the complaint within seven days of receipt to 
the programmer or

[[Page 48488]]

send written instructions to the complainant on how to refile with the 
programmer. We estimate that one-third of complaints at the local level 
will have to be refiled in this manner, and that the average burden for 
programmers to either forward the complaint or send written 
instructions to the complainant on how to refile will have an average 
burden of 30 minutes (.5 hours) per complaint. 500 complaint x .5 hours 
= 250 hours.
    We estimate that the majority of complaints will be resolved at the 
local level between the respective viewer and program provider. We 
estimate that approximately 300 (20% of 1,500) will go unresolved, 
resulting in complaints and responses being filed with the Commission. 
A copy of the complaint and any supporting documentation that is filed 
with the Commission must also be served on the video programming 
distributor. Responses to complaints filed with the Commission must 
also be served on the complainant. The average burden for all aspects 
of each complaint and response in this instance is estimated to be 2 
hours per viewer and 4 hours per program provider. 300 viewer 
complaints x 2 hours and 30000 program provider responses x 4 hours = 
1,800 hours.
    Total Annual Burden to Respondents: 250 + 100 + 250 + 100 + 1,500 + 
1,500 + 1,800 = 5,750 hours.
    Total Annual Cost to Respondents: $42,100 estimated as follows: 
Program providers will use outside legal assistance paid at $150 per 
hour to complete approximately 50 petitions. 50 petitions x 5 hours per 
petition x $150 per hour = $37,500. Postage and stationery costs for 
petitions are estimated at an average of $5 per waiver. 100 petitions x 
$5 = $500. Viewers and program providers will undergo average postage 
and stationary costs for the complaint process estimated as follows: 
1,500 viewer complaints filed with program providers x $1 = $1,500. 
1,500 complaint responses x $1 = $1,500. 500 instructions to refile 
complaints x $1 = $500. 300 viewer complaints filed at the Commission x 
$1 per complaint = $300. 300 program provider responses x $1 = $300. 
Total annual cost to respondents: $37,500 + $500 + $1,500 + $1,500 + 
$500 + $300 + $600 = $42,100.
    Needs and Uses: This Report and Order is adopted pursuant to 
section 713 of the Communications Act of 1934, as amended. The 
requirements set forth in section 713 are intended to ensure that video 
programming is accessible to individuals with hearing disabilities 
through closed captioning, regardless of the delivery mechanism used to 
reach consumers.

Synopsis of Report and Order

    1. By the Report and Order (``R&O''), the Commission adopts rules 
to implement section 713 of the Communications Act, 47 U.S.C. 613, 
which generally requires video programming be closed captioned. In 
particular, this provision required the Commission to prescribe by 
August 8, 1997, rules and implementation schedules for the closed 
captioning of video programming and to establish appropriate 
exemptions. The rules we adopt are based on comments received in 
response to a Notice of Proposed Rulemaking in this proceeding 
summarized at 62 FR 4959 (February 3, 1997).
    2. In the R&O, we address: (a) The responsibility for compliance 
with the rules we adopt; (b) obligations as to programming first 
published or exhibited on or after the effective date of our rules 
(``new programming'') and programming first published or exhibited 
prior to the effective date of our rules (``pre-rule programming''), 
including phase-in schedules; (c) the measurement of compliance with 
our rules; (d) exemptions authorized by Congress, including those based 
on the ``economically burdensome standard, existing contracts, and the 
undue burden standard; (e) standards for quality and accuracy of closed 
captioning; (f) mechanisms for enforcement and compliance review; and 
(g) other issues relating to the implementation of section 713 and 
matters for future review. The rules will become effective January 1, 
1998.
    3. Video programming distributors, defined as all entities that 
provide video programming directly to customers' homes, regardless of 
distribution technology used (e.g., broadcasters, cable operators, DBS 
operators) will, generally, be responsible for compliance with the new 
closed captioning requirements. Video programming distributors, 
however, will not be responsible for the captioning of programming that 
is not subject to their editorial control. The responsibility for 
compliance with respect to such programming will be placed on the 
providers and owners of such programming.
    4. Section 713 requires the Commission to adopt rules to ensure 
that video programming first published or exhibited after the effective 
date of the rules be fully accessible through closed captioning. For 
this new programming that does not meet any of the criteria for 
exemption, we adopt an eight year transition period with benchmarks 
specified as a number of hours of required captioning at two year 
intervals. We will define full accessibility as the captioning of 95% 
of all new, nonexempt programming to provide for unforeseen 
difficulties that may arise. Compliance will be measured on a channel-
by-channel basis for multichannel video programming distributors 
(``MVPDs'') and will be measured over each calendar quarter. During the 
transition period, each channel of programming will be required to meet 
the specified benchmark unless the amount of new, nonexempt programming 
offered on the channel is less than the benchmark. In such instances, 
at least 95% of the nonexempt, new programming will be required to be 
captioned. The first benchmark becomes effective during the first 
calendar quarter of 2000 and requires that 450 hours of programming be 
captioned during each quarter of 2000 and 2001. During each calendar 
quarter of 2002 and 2003, 900 hours of new, nonexempt programming must 
be captioned. The benchmark for each calendar quarter of 2004 and 2005 
is 1350 hours of new, nonexempt programming.
    5. Section 713 also requires the Commission to maximize the 
accessibility of video programming first published or exhibited prior 
to the effective date of the rules. For programming first published or 
exhibited before January 1, 1998, that does not meet any of our 
criteria for exemption, we will require that at least 75% of such 
programming be captioned after the end of a ten year transition period. 
We will not set specific benchmarks for pre-rule programming. We will, 
however, monitor distributors' efforts to increase the amount of 
captioning of pre-rule programming to ensure that channels are 
progressing toward the 75% requirement. After four years, we will 
reevaluate our decision not to establish specific benchmarks and 
consider whether the 75% threshold is appropriate to meet the goals of 
the statute.
    6. We will also require video programming providers to continue to 
provide closed captioning at a level substantially the same as the 
average level of captioning that they provided during the first six 
months of 1997, even if the amount of captioned programming exceeds 
that required under the benchmarks. In addition, video programming 
distributors are required to pass through to consumers any programming 
they receive with closed captioning, when they do not edit the 
programming.
    7. Section 713 permits the Commission to exempt by regulation

[[Page 48489]]

programs, classes of programs or services for which we determine a 
requirement to provide closed captioning will be economically 
burdensome. In creating these exemptions we intend to preserve the 
economic viability of certain classes of programming or certain 
entities associated with discreet classes of programming. We will, 
therefore, exempt non-English language programming and programming 
distributed between 2 a.m. and 6 a.m local time. We will also exempt 
primarily textual programming for which captioning would be largely 
redundant, including programming guide services or community bulletin 
boards, which provide the relevant information about program schedules 
or events in textual form. This exemption does not apply to 
programming, such as sports programming, home shopping or weather 
reports, where a significant amount of the relevant information is not 
readily available as text. Similarly, we will exempt programming which 
consists primarily of instrumental music such as a symphony or ballet. 
In such cases, where the majority of the program simply could not be 
captioned, we will also exempt any introductory discussion because the 
resources necessary to caption such minor portions of the program would 
outweigh any possible benefit. We will also exempt interstitial 
announcements, promotional programming and public service announcements 
that are ten minutes or less in duration. In this context, 
advertisements that are five minutes or less in duration are not 
considered programming and are not subject to our closed captioning 
rules. Similarly, we will exempt locally-produced and distributed non-
news programming with limited repeat value such as local parades, local 
high school or nonprofessional sports or community theater productions. 
This exemption does not include programming readily captioned using ENR 
or programs with repeat value. We also adopt several exemptions 
designed to protect certain classes of video programming providers 
which might otherwise be harmed if subject to our rules. Thus 
programming produced for the instructional television fixed service 
(``ITFS'') will be exempt regardless of whether it is distributed by an 
ITFS licensee or other video programming distributor. We further exempt 
the programming on a new network for its first four years of operation. 
In addition, we will not require any video programming provider from 
the closed captioning requirements where the provider had annual gross 
revenues for an individual channel during the proceeding year of less 
than three million dollars. Finally, we will not require any video 
programming provider to spend more than 2% of its annual gross revenues 
for the proceeding year on the captioning of any channel of video 
programming.
    8. Under section 713(d)(2), a video programming provider is exempt 
from captioning programming if such action would be inconsistent with a 
contract in effect on the date of enactment of the 1996 Act. 
Accordingly, we exempt programming subject to a contract in effect on 
February 8, 1998, for which compliance with our closed captioning 
requirements would constitute a breach of that contract.
    9. Under section 713(d)(3), the Commission is required to consider 
petitions for exemption from the closed captioning rules if the 
requirements would impose an undue burden, which is defined as a 
significant burden or expense. A petition may be submitted by any party 
in the programming distribution chain, including video programming 
producers, syndicators and providers. Petitions must include 
information that demonstrates how our closed captioning requirements 
would result in an undue burden. Factors we will consider include: (a) 
The nature and cost of the closed captions for the programming; (b) the 
impact on the operation of the provider or program owner; (c) the 
financial resources of the provider or program owner; and (d) the type 
of operations of the provider or program owner. Petitioners may also 
submit any other information they deem appropriate for our evaluation 
of their circumstances. Depending on the individual circumstance, we 
may grant partial exemptions and may consider proposals that 
programming be made more accessible through alternative means (e.g., 
additional text or graphics).
    10. The rules require video programming providers to deliver intact 
the closed captioning they receive as part of the programming they 
distribute to viewers, if the programming is not edited. They also must 
maintain their equipment to ensure the technical quality of the closed 
captioning they transmit. We will not, however, adopt standards for the 
non-technical aspects of closed captioning. We will monitor the 
captions that result from the implementation of our rules and may 
revisit this issue at a later date. We will not restrict the use of 
captioning methodology generally and will permit the use of electronic 
news room (``ENR'') capability to create captions from teleprompter 
scripts.
    11. We will enforce our rules through a complaint process modeled 
after existing complaint procedures. Complaints alleging violation of 
our closed captioning rules must first be directed in writing to the 
video programming distributor responsible for delivery of the 
programming directly to the customer's home. Complaints must be filed 
no later than the end of the calendar quarter following the calendar 
quarter in which the alleged violation occurred. The video programming 
distributor must respond to the complaint no later than 45 days after 
the end of the calendar quarter in which the violation is alleged to 
have occurred or 45 days after receipt of the written complaint, 
whichever is later. If a video programming distributor fails to respond 
to a complaint or a dispute remains following this initial procedure, a 
complaint may be filed with the Commission within 30 days after the 
time allotted for the video programming distributor to respond has 
ended. The video programming distributor will have 15 days to respond 
to any complaint filed with the Commission. We will not adopt any 
specific recordkeeping requirements. In response to a complaint, a 
video programming distributor is obligated to provide the Commission 
with sufficient records and documentation to demonstrate that it is in 
compliance with the rules. We also will permit video programming 
distributors to rely on certifications from program suppliers to 
demonstrate compliance.
    12. In addition, in the R&O, we indicated that there are several 
issues related to the implementation of closed captioning requirements 
that need to be studied further or reevaluated during our transition 
period. We intend to study further technological changes that may 
affect closed captioning in a subsequent proceeding, including issues 
relating to digital television and other technologies that may change 
the way captions are created and delivered. We also are concerned about 
providing viewers with hearing disabilities with accurate information 
regarding fast breaking news of great importance such as severe weather 
conditions, earthquakes and disruptions of the transportation system. 
As we did not receive sufficient information on this issue in this 
proceeding, we will initiate a proceeding to determine whether 
additional rules are needed in this area. Moreover, we will reexamine a 
number of our decisions during the transition period, including the 
captioning requirements for pre-rule programming, the appropriateness 
of certain

[[Page 48490]]

exemptions, the use of ENR and the decision not to adopt standards 
relating to non-technical quality.

Regulatory Flexibility Act Certification

    13. As required by the Regulatory Flexibility Act (RFA), an Initial 
Regulatory Flexibility Analysis (``IRFA'') was incorporated into the 
Notice of Proposed Rulemaking in this proceeding. We sought written 
public comment on the expected impact of the proposed policies and 
rules on small entities in the NPRM, including comments on the IRFA. 
This present Final Regulatory Flexibility Analysis (``FRFA'') conforms 
to the RFA.
    14. Need for Action and Objectives of the Rule: The 1996 Act added 
a new Section 713 to the Communications Act of 1934 that inter alia 
requires the Commission to develop rules to increase the availability 
of video programming with closed captioning. We are promulgating these 
rules in order to implement this provision of section 713. The 
statutory objective of the closed captioning provisions is to promote 
the increased accessibility of video programming for persons with 
hearing disabilities.
    15. Summary of Significant Issues Raised by the Public Comments in 
Response to the IRFA: The Small Cable Business Association (``SCBA'') 
filed the only comment specifically responsive to the IRFA. Several 
other commenters addressed the IRFA in their general comments. Other 
parties, while not specifically commenting on the IRFA, discuss the 
potential effect of the proposed rules on small entities.
    16. SCBA concurs with our estimates regarding the number of small 
cable operators that may be affected by our closed captioning 
requirements. SCBA offers several specific suggestions to minimize the 
effects of the closed captioning requirements on small cable operators. 
These proposals include: (a) Allocating the burden of compliance to 
programming producers and owners; (b) a class exemption for small cable 
operators serving 1,000 or fewer subscribers; (c) streamlined 
compliance and complaint rules for small cable systems serving 15,000 
or fewer subscribers including; (d) streamlined waiver procedures to 
permit qualifying small systems to access a simplified, low-cost waiver 
process; (e) a class exemption for PEG programming; (f) a class 
exemption for local origination programming.
    17. Cassidy asserts that our conclusions are overly inclusive and, 
if all small providers were exempted, Congress' intent to increase the 
availability of closed captioned programming would be circumvented. 
Commenters representing smaller captioning agencies suggest ways to 
minimize the effect of the new regulations on small captioners. 
Specifically, Para Technologies proposes that we adopt a phase-in 
schedule requiring video program providers to increase closed captioned 
programming 4% every three months over the eight year transition 
period. According to Para Technologies, this plan would increase 
competition in the captioning industry, leading to lower rates and more 
widely available captioned programming. MCS suggests that we should 
require that video producers and program providers use small captioning 
companies for a minimum of 25% of their real time captioning 
requirements.
    18. Kaleidoscope indicates that its proposal to define economic 
burden as a situation where the cost of captioning would exceed 10% of 
the relative program budget should minimize the burden on small 
entities. Kaleidoscope asserts that this is an objective test that 
would exempt small entities from closed captioning requirements that 
they may find economically burdensome.
    19. The Association of America's Public Television Stations 
(``APTS'') asserts that the closed captioning requirements would be 
especially onerous to its smaller members. APTS suggests that a $3 
million benchmark is generally accepted among noncommercial stations as 
indicative of a small station and urges us to adopt an economic burden 
exemption for local programming produced by such stations.
    20. Instructional Television Fixed Services (``ITFS'') licensees 
argue that their programming should not be subject to the closed 
captioning requirements as they represent a formidable economic burden. 
Several commenters argue that they are already obligated to ensure that 
their services are accessible under both the ADA and the Rehabilitation 
Act of 1973. These commenters propose excluding ITFS providers from the 
definition of ``video programming provider'' and exempting ITFS 
programming carried on wireless cable systems from any closed 
captioning requirements.
    21. Several low power television station (``LPTV'') operators 
assert that as small businesses, LPTV operators warrant an exemption 
based on the economic burden that closed captioning requirements would 
pose. The Community Broadcasters Association (``CBA'') suggests that 
specific classes of programming carried by some LPTV stations should be 
exempt in order to relieve these providers of an economic burden.
    22. Access centers and organizations providing governmental 
programming assert that their operations qualify as small entities. 
These commenters assert that, in many cases, the financial requirements 
for closed captioning would exceed or substantially consume their 
entire annual budgets. Several of these commenters state that mandatory 
captioning requirements could effectively eliminate public, educational 
and governmental (``PEG'') programming. Accordingly, these commenters 
seek an exemption based on the economic burden posed by closed 
captioning requirements unless an alternative funding mechanism becomes 
available. The Greater Metro Telecommunications Consortium (``GMTC'') 
suggests that PEG programmers should be allowed to weigh the costs and 
the benefits of providing captioning and consider alternatives. Several 
commenters representing multichannel video programming distribution 
systems (``MVPDs'') join the access centers in arguing that PEG 
channels should be exempt. These commenters concur that PEG channels 
generally operate on very limited budgets which preclude captioning.
    23. Description and Estimate of the Number of Small Entities to 
Which the Rules Will Apply: The RFA directs the Commission to provide a 
description of and, where feasible, an estimate of the number of small 
entities that will be affected by the proposed rules. The RFA 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. 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 
SBA.
    24. Small MVPDs: The 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. 
13 CFR 121.201 (SIC 4841). This definition includes cable system 
operators, closed circuit television services, direct broadcast 
satellite services (``DBS''), multichannel multipoint distribution 
systems (``MMDS''), satellite master antenna systems (``SMATV'') and 
subscription television services. According to the Bureau of the 
Census, there were 1,758 total cable and other pay television

[[Page 48491]]

services and 1,423 had less than $11 million in revenue as of 1992. We 
address below each service individually to provide a more precise 
estimate of small entities.
    25. Cable Systems: We have developed, with SBA's approval, our own 
definition of a small cable system operator for the purposes of rate 
regulation. Under our rules, a ``small cable company'' is one serving 
fewer than 400,000 subscribers nationwide. 47 CFR 76.901(e). Based on 
our most recent information, we estimate that there were 1439 cable 
operators that qualified as small cable companies at the end of 1995. 
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 
we are adopting.
    26. 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.'' 47 U.S.C. 543(m)(2). We have 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. Based on available data, we find that the number of cable 
operators serving 617,000 subscribers or less totals 1450. 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.
    27. MMDS: We refined the definition of ``small entity'' for the 
auction of MMDS spectrum as an entity that together with its affiliates 
has average gross annual revenues that are not more than $40 million 
for the preceding three calendar years. This definition of a small 
entity in the context of MMDS auctions has been approved by the SBA. 47 
CFR 21.961(b)(1).
    28. We completed the MMDS auction in March 1996 for authorizations 
in 493 basic trading areas (``BTAs''). Of 67 winning bidders, 61 
qualified as small entities. Five bidders indicated that they were 
minority-owned and four winners indicated that they were women-owned 
businesses. MMDS is an especially competitive service, with 
approximately 1573 previously authorized and proposed MMDS facilities. 
Information available to us indicates that no MMDS facility generates 
revenue in excess of $11 million annually. We conclude that, for 
purposes of this FRFA, there are approximately 1634 small MMDS 
providers as defined by the SBA and the auction rules.
    29. ITFS: There are presently 2032 ITFS licensees. All but 100 of 
these licenses are held by educational institutions. Educational 
institutions are included in the definition of a small business. 5 
U.S.C. 601(5). However, we do not collect annual revenue data for ITFS 
licensees and are not able to ascertain how many of the 100 non-
educational licensees would be categorized as small under the SBA 
definition.
    30. DBS: Because DBS provides subscription services, DBS falls 
within the SBA definition of cable and other pay television services 
(SIC 4841). As of December 1996, there were eight DBS licensees. We do 
not collect annual revenue data for DBS and, therefore, are unable to 
ascertain the number of small DBS licensees that could be affected by 
these rules. Estimates of 1996 revenues for various DBS operators are 
significantly greater than $11,000,000 and range from a low of 
$31,132,000 for Alphastar to a high of $1,100,000,000 for Primestar. 
Accordingly, we now conclude that no DBS operator qualifies as a small 
entity.
    31. Home Satellite Dish (``HSD''): The market for HSD service is 
difficult to quantify. 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 packager. According to the most recently available 
information, there are approximately 30 program packagers nationwide 
offering packages of scrambled programming to retail consumers. These 
program packagers provide subscriptions to approximately 2,314,900 
subscribers nationwide. This is an average of about 77,163 subscribers 
per program packager. This is substantially smaller than the 400,000 
subscribers used in the Commission's definition of a small multiple 
system operator (``MSO''). Furthermore, because this an average, it is 
likely that some program packagers may be substantially smaller.
    32. Open Video System (``OVS''): We have certified nine OVS 
operators. Of these nine, only two are providing service. They are Bell 
Atlantic serving its Dover, New Jersey system and Metropolitan Fiber 
Systems operating OVS systems in Boston and New York. Bell Atlantic and 
Metropolitan Fiber Systems have 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.
    33. SMATVs: Industry sources estimate that approximately 5200 SMATV 
operators were providing service as of December 1995. Other estimates 
indicate that SMATV operators serve approximately 1.05 million 
residential subscribers as of September 1996. The ten largest SMATV 
operators together pass 815,740 units. If we assume that these SMATV 
operators serve 50% of the units passed, the ten largest SMATV 
operators serve approximately 40% of the total number of SMATV 
subscribers. 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 
conclude that a substantial number of SMATV operators qualify as small 
entities.
    34. Local Multipoint Distribution System (``LMDS''): Unlike the 
above pay television services, LMDS technology and spectrum allocation 
will allow licensees to provide wireless telephony, data, and/or video 
services. Therefore, the definition of a small LMDS entity may be 
applicable to both cable and other pay television (SIC 4841) and/or 
radiotelephone communications companies (SIC 4812). The SBA definition 
for cable and other pay services is defined in paragraph 24 supra. A 
small radiotelephone entity is one with 1500 employees or less. 13 CFR 
121.1201. However, for the

[[Page 48492]]

purposes of this R&O on closed captioning, we include only an estimate 
of LMDS video service providers.
    35. LMDS is a service that is expected to be auctioned by the FCC 
in 1997. The vast majority of LMDS entities providing video 
distribution could be small businesses under the SBA's definition of 
cable and pay television (SIC 4841). However, in the Third NPRM, CC 
Docket No. 92-297, 58 FR 6400 (January 28, 1993), we proposed to define 
a small LMDS provider as an entity that, together with affiliates and 
attributable investors, has average gross revenues for the three 
preceding calendar years of less than $40 million. We have not yet 
received approval by the SBA for this definition.
    36. There is only one company, CellularVision, that is currently 
providing LMDS video services. Although the Commission does not collect 
data on annual receipts, we assume that CellularVision is a small 
business under both the SBA definition and our proposed auction rules. 
We also conclude that a majority of the potential LMDS licensees will 
be small entities, as that term is defined by the SBA.
    37. Small Broadcast Stations: The SBA defines small television 
broadcasting stations as television broadcasting stations with $10.5 
million or less in annual receipts. 13 CFR 121.201.
    38. Estimates Based on Census and BIA Data: According to the Bureau 
of the Census, in 1992, 1155 out of 1478 operating television stations 
reported revenues of less than $10 million for 1992. This represents 
78% of all television stations, including noncommercial stations. The 
Bureau of the Census does not separate the revenue data by commercial 
and noncommercial stations in this report. Neither does it allow us to 
determine the number of stations with a maximum of $10.5 million in 
annual receipts. Census data also indicate that 81% of operating firms 
(that owned at least one television station) had revenues of less than 
$10 million.
    We also have performed a separate study based on the data contained 
in the BIA Publications, Inc. Master Access Television Analyzer 
Database, which lists a total of 1141 full power commercial television 
stations. It should be noted that, using the SBA definition of small 
business concern, the percentage figures derived from the BIA database 
may be underinclusive because the database does not list revenue 
estimates for noncommercial educational stations, and these therefore 
are excluded from our calculations based on the database. The BIA data 
indicate that, based on 1995 revenue estimates, 440 full power 
commercial television stations had an estimated revenue of $10.5 
million or less. That represents 54% of full power commercial 
television stations with revenue estimates listed in the BIA program. 
The database does not list estimated revenues for 331 stations. Using a 
worst case scenario, if those 331 stations for which no revenue is 
listed are counted as small stations, there would be a total of 771 
stations with an estimated revenue of $10.5 million or less, 
representing approximately 68% of the 1141 full power commercial 
television stations listed in the BIA data base.
    40. Alternatively, if we look at owners of commercial television 
stations as listed in the BIA database, there are a total of 488 
owners. The database lists estimated revenues for 60% of these owners, 
or 295. Of these 295 owners, 156 or 53% had annual revenues of less 
than $10.5 million. Using a worst case scenario, if the 193 owners for 
which revenue is not listed are assumed to be small, then small 
entities would constitute 72% of the total number of owners.
    41. In summary, based on the foregoing worst case analysis using 
Bureau of the Census data, we estimate that our rules will apply to as 
many as 1150 commercial and noncommercial television stations (78% of 
all stations) that could be classified as small entities. Using a worst 
case analysis based on the data in the BIA data base, we estimate that 
as many as 771 commercial television stations (about 68% of all 
commercial television stations) could be classified as small entities. 
As we noted above, these estimates are based on a definition that we 
tentatively believe greatly overstates the number of television 
broadcasters that are small businesses. Further, it should be noted 
that under the SBA's definitions, revenues of affiliates that are not 
television stations should be aggregated with the television station 
revenues in determining whether a concern is small. The estimates 
overstate the number of small entities since the revenue figures on 
which they are based do not include or aggregate such revenues from 
nontelevision affiliated companies.
    42. Program Producers and Distributors: The Commission has not 
developed a definition of small entities applicable to producers or 
distributors of television programs. Therefore, we will utilize the SBA 
classifications of Motion Picture and Video Tape Production (SIC 7812), 
Motion Picture and Video Tape Distribution (SIC 7822), and Theatrical 
Producers (Except Motion Pictures) and Miscellaneous Theatrical 
Services (SIC 7922). These SBA definitions provide that a small entity 
in the television programming industry is an entity with $21.5 million 
or less in annual receipts for SIC 7812 and 7822, and $5 million or 
less in annual receipts for SIC 7922. 13 CFR 121.201. The 1992 Bureau 
of the Census data indicate the following: (1) There were 7265 U.S. 
firms classified as Motion Picture and Video Production (SIC 7812), and 
that 6987 of these firms had $16,999 million or less in annual receipts 
and 7002 of these firms had $24,999 million or less in annual receipts; 
(2) there were 1139 U.S. firms classified as Motion Picture and Tape 
Distribution (SIC 7822), and that 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 (3) there were 5671 U.S. firms 
classified as Theatrical Producers and Services (SIC 7922), and that 
5627 of these firms had less than $5 million in annual receipts.
    43. Each of these SIC categories is very broad and includes firms 
that may be engaged in various industries including television. 
Specific figures are not available as to how many of these firms 
exclusively produce and/or distribute programming for television or how 
many are independently owned and operated. Consequently, we conclude 
that there are approximately 6987 small entities that produce and 
distribute taped television programs, 1013 small entities primarily 
engaged in the distribution of taped television programs, and 5627 
small producers of live television programs that may be affected by the 
rules adopted in this R&O.
    44. Description of Reporting, Recordkeeping and Other Compliance 
Requirements: We do not prescribe any reporting requirements. While 
several parties encouraged adoption of such requirements, we believe 
that our enforcement process alleviates the need for reporting. Thus, 
we are not imposing recordkeeping requirements for video programming 
distributors. Rather, we allow them to exercise their own discretion 
and only require that they retain records sufficient to demonstrate 
compliance with our rules (Sec. 79.1(g)(6)). In order to further 
relieve small video programming distributors of any unnecessary 
recordkeeping burden, we permit video programming distributors to rely 
on certifications from the programming suppliers to demonstrate 
compliance with our closed captioning rules (Sec. 79.1(g)(6)).
    45. Steps Taken to Minimize Significant Economic Impact On Small

[[Page 48493]]

Entities and Significant Alternatives Considered: In formulating our 
closed captioning rules, we have taken steps to minimize the effect on 
small entities while making video programming more accessible to 
persons with hearing disabilities. These efforts are consistent with 
the Congressional goal of increasing the availability of closed 
captioned programming while preserving the diversity of available 
programming.
    46. Generally, we do not specifically exempt any class of video 
programming distributor because we have determined that all video 
programming distributors are technically capable of delivering 
captioning. We do, however, recognize that ITFS licensees serve a 
particular, well defined niche as distributors of specialized 
programming directed at specified sites and not generally intended for 
residential use. We also recognize that the general public benefits 
from the redistribution of this programming by MMDS operators. We 
therefore determine that ITFS operators warrant a blanket exemption. 
Accordingly, we exempt programming originated by ITFS licensees, 
regardless of the facility used to distribute this programming 
(Sec. 79.1(d)(7)).
    47. We also recognize the significance of locally produced and 
distributed non-news programming of primarily local interest and 
limited repeat value. Much of this programming is produced on a low 
budget as a public service and our closed captioning requirements might 
impose a significant economic burden that could result in such 
programming not being televised. We therefore create a limited 
exemption for such programming (Sec. 79.1(d)(8)).
    48. We recognize that many new video programming services will 
often qualify as small entities. We also recognize the need to allow 
new and innovative services designed to serve emerging or niche markets 
greater flexibility than more established services serving well defined 
markets. Accordingly, our rules provide an exemption to relieve new 
services from our captioning requirements for their first four years of 
operation (Sec. 79.1(d)(9)).
    49. We do not require any video programming provider to spend more 
than 2% of its annual gross revenues received from a channel on closed 
captioning (Sec. 79.1(d)(11)). This will require video programming 
providers to devote a reasonable portion of their revenue stream to 
closed captioning. This mechanism will help to avoid an ``all or 
nothing'' approach thus ensuring that accessibility to captioned 
programming is increased without creating an economic burden on video 
programming providers.
    50. Furthermore, we exempt from our closed captioning requirements 
any video programming provider with less than $3 million in annual 
gross revenues except that it will be required to pass through any 
captioning it may receive (Sec. 79.1(d)(12)). This provision is 
intended to address the problems of small video programming providers 
that are not in a position to devote significant resources towards 
captioning and who would, even if they expended 2% of their revenues on 
captioning, provide only a minimal amount of captioned programming. 
This will relieve the smallest of entities of any burdensome obligation 
to provide captioning without significantly reducing the availability 
of captioning.
    51. In order to further minimize the impact of any unanticipated 
burdens that may be created by our closed captioning requirements, we 
adopt a petition process that permits us to consider requests for 
individual exemptions from these rules based on the statutory undue 
burden standard (Sec. 79.1(f)). This mechanism will allow us to address 
the impact of these rules on individual entities and modify the rules 
to accommodate individual circumstances. We have specifically designed 
these procedures to ameliorate the impact of the closed captioning 
rules in a manner consistent with the objective of increasing the 
availability of captioned programming.

Ordering Clauses

    52. Accordingly, it is ordered  that, pursuant to authority found 
in sections 4(i), 303(r), and 713 of the Communications Act of 1934, as 
amended, 47 U.S.C. 154(i), 303(r), and 613, the Commission's rules are 
hereby amended by adding a new part 79 as set forth below. The 
amendments set forth below shall become effective January 1, 1998.
    53. It is further ordered that the Secretary shall send a copy of 
this Report and Order, including the Final Regulatory Flexibility 
Analysis, to the Chief Counsel for Advocacy of the Small Business 
Administration in accordance with paragraph 603(a) of the Regulatory 
Flexibility Act, Pub. L. 96-354, 94 Stat. 1164, 5 U.S.C. 601 et seq. 
(1981).

List of Subjects in 47 CFR Part 79

    Cable television, Closed captioning, Television.

Federal Communications Commission.
William F. Caton,
Acting Secretary.
    Title 47 of the Code of Federal Regulations is amended by adding a 
new Part 79 consisting of Sec. 79.1 to read as follows:

PART 79--CLOSED CAPTIONING OF VIDEO PROGRAMMING

Sec.
79.1 Closed captioning of video programming.

    Authority: 47 U.S.C. 613.


Sec. 79.1  Closed captioning of video programming.

    (a) Definitions. For purposes of this section the following 
definitions shall apply:
    (1) Video programming. Programming provided by, or generally 
considered comparable to programming provided by, a television 
broadcast station that is distributed and exhibited for residential 
use. Video programming includes advertisements of more than five 
minutes in duration but does not include advertisements of five 
minutes' duration or less.
    (2) Video programming distributor. Any television broadcast station 
licensed by the Commission and any multichannel video programming 
distributor as defined in Sec. 76.1000(e) of this chapter, and any 
other distributor of video programming for residential reception that 
delivers such programming directly to the home and is subject to the 
jurisdiction of the Commission. An entity contracting for program 
distribution over a video programming distributor that is itself exempt 
from captioning that programming pursuant to paragraph (e)(9) of this 
section shall itself be treated as a video programming distributor for 
purposes of this section To the extent such video programming is not 
otherwise exempt from captioning, the entity that contracts for its 
distribution shall be required to comply with the closed captioning 
requirements of this section.
    (3) Video programming provider. Any video programming distributor 
and any other entity that provides video programming that is intended 
for distribution to residential households including, but not limited 
to broadcast or nonbroadcast television network and the owners of such 
programming.
    (4) Closed captioning. The visual display of the audio portion of 
video programming contained in line 21 of the vertical blanking 
interval (VBI) pursuant to the technical specifications set forth in 
Sec. 15.119 of this chapter or the equivalent thereof.

[[Page 48494]]

    (5) New programming. Video programming that is first published or 
exhibited on or after January 1, 1998.
    (6) Pre-rule programming. (i) Video programming that was first 
published or exhibited before January 1, 1998. (ii) Video programming 
first published or exhibited for display on television receivers 
equipped for display of digital transmissions or formatted for such 
transmission and exhibition prior to the date on which such television 
receivers must, by Commission rule, be equipped with built-in decoder 
circuitry designed to display closed-captioned digital television 
transmissions.
    (7) Nonexempt programming. Video programming that is not exempt 
under paragraph (d) of this section and, accordingly, is subject to 
closed captioning requirements set forth in this section.
    (b) Requirements for closed captioning of video programming--(1) 
Requirements for new programming. Video programming distributors must 
provide closed captioning for nonexempt video programming that is being 
distributed and exhibited on each channel during each calendar quarter 
in accordance with the following requirements:
    (i) Between January 1, 2000, and December 31, 2001, video 
programming distributors shall provide at least 450 hours of captioned 
video programming, or if the video programming distributor provides 
less than 450 hours of new nonexempt video programming, then 95% of its 
new nonexempt video programming must be provided with captions;
    (ii) Between January 1, 2002, and December 31, 2003, video 
programming distributors shall provide at least 900 hours of captioned 
video programming, or if the video programming distributor provides 
less than 900 hours of new nonexempt video programming, then 95% of its 
new nonexempt video programming must be provided with captions;
    (iii) Between January 1, 2004, and December 31, 2005, video 
programming distributors shall provide at least an average of 1350 
hours of captioned video programming, or if the video programming 
distributor provides less than 1350 hours of new nonexempt video 
programming, then 95% of its new nonexempt video programming must be 
provided with captions; and
    (iv) As of January 1, 2006, and thereafter, 95% of the programming 
distributor's new nonexempt video programming must be provided with 
captions.
    (2) Requirements for pre-rule programming. As of January 1, 2008, 
and thereafter, 75% of the programming distributor's pre-rule nonexempt 
video programming being distributed and exhibited on each channel 
during each calendar quarter must be provided with closed captioning.
    (3) Video programming distributors shall continue to provide 
captioned video programming at substantially the same level as the 
average level of captioning that they provided during the first 6 
months of 1997 even if that amount of captioning exceeds the 
requirements otherwise set forth in this section.
    (c) Obligation to pass through captions of already captioned 
programs.--All video programming distributors shall deliver all 
programming received from the video programming owner or other 
origination source containing closed captioning to receiving television 
households with the original closed captioning data intact in a format 
that can be recovered and displayed by decoders meeting the standards 
of Sec. 15.119 of this chapter unless such programming is recaptioned 
or the captions are reformatted by the programming distributor.
    (d) Exempt programs and providers.--For purposes of determining 
compliance with this section, any video programming or video 
programming provider that meets one or more of the following criteria 
shall be exempt to the extent specified in this paragraph.
    (1) Programming subject to contractual captioning restrictions. 
Video programming that is subject to a contract in effect on or before 
February 8, 1996, but not any extension or renewal of such contract, 
for which an obligation to provide closed captioning would constitute a 
breach of contract.
    (2) Video programming or video programming provider for which the 
captioning requirement has been waived. Any video programming or video 
programming provider for which the Commission has determined that a 
requirement for closed captioning imposes an undue burden on the basis 
of a petition for exemption filed in accordance with the procedures 
specified in paragraph (f) of this section.
    (3) Non-english language programming. All programming for which the 
audio is in a language other than English, except that scripted 
programming that can be captioned using the ``electronic news room'' 
technique is not exempt.
    (4) Primarily textual programming. Video programming or portions of 
video programming for which the content of the soundtrack is displayed 
visually through text or graphics (e.g., program schedule channels or 
community bulletin boards).
    (5) Programming distributed in the late night hours. Programming 
that is being distributed to residential households between 2 a.m. and 
6 a.m. local time. Video programming distributors providing a channel 
that consists of a service that is distributed and exhibited for 
viewing in more than a single time zone shall be exempt from closed 
captioning that service for any continuous 4 hour time period they may 
select, commencing not earlier than 12 a.m. local time and ending not 
later than 7 a.m. local time in any location where that service is 
intended for viewing. This exemption is to be determined based on the 
primary reception locations and remains applicable even if the 
transmission is accessible and distributed or exhibited in other time 
zones on a secondary basis. Video programming distributors providing 
service outside of the 48 contiguous states may treat as exempt 
programming that is exempt under this paragraph when distributed in the 
contiguous states.
    (6) Interstitials, promotional announcements and public service 
announcements. Interstitial material, promotional announcements, and 
public service announcements that are 10 minutes or less in duration.
    (7) ITFS programming. Video programming produced for the 
instructional television fixed service (ITFS).
    (8) Locally produced and distributed non-news programming with 
limited repeat value. Programming that is locally produced by the video 
programming distributor, has no repeat value, is of local public 
interest, is not news programming, and for which the ``electronic news 
room'' technique of captioning is unavailable.
    (9) Programming on new networks. Programming on a video programming 
network for the first four years after it begins operation.
    (10) Primarily non-vocal musical programming. Programming that 
consists primarily of non-vocal music.
    (11) Captioning expense in excess of 2% of gross revenues. No video 
programming provider shall be required to expend any money to caption 
any video programming if such expenditure would exceed 2% of the gross 
revenues received from that channel during the previous calendar year.
    (12) Channels producing revenues of under $3,000,000. No video 
programming provider shall be required to expend any money to caption 
any channel of video programming producing annual gross revenues of 
less

[[Page 48495]]

than $3,000,000 during the previous calendar year other than the 
obligation to pass through video programming already captioned when 
received pursuant to paragraph (c) of this section.
    (e) Responsibility for and determination of compliance.--(1) 
Compliance shall be calculated on a per channel, calendar quarter 
basis;
    (2) Open captioning or subtitles in the language of the target 
audience may be used in lieu of closed captioning;
    (3) Live programming or repeats of programming originally 
transmitted live that are captioned using the so-called ``electronic 
news room'' technique will be considered captioned. The live portions 
of noncommercial broadcasters' fundraising activities that use 
automated software to create a continuous captioned message will be 
considered captioned;
    (4) Compliance will be required with respect to the type of video 
programming generally distributed to residential households. 
Programming produced solely for closed circuit or private distribution 
is not covered by these rules;
    (5) Video programming that is exempt pursuant to paragraph (d) of 
this section that contains captions, except video programming exempt 
pursuant to paragraph (d)(5) of this section (late night hours 
exemption), can count towards the compliance with the requirements for 
new programming prior to January 1, 2006. Video programming that is 
exempt pursuant to paragraph (d) of this section that contains 
captions, except that video programming exempt pursuant to paragraph 
(d)(5) of this section (late night hours exemption), can count towards 
compliance with the requirements for pre-rule programming.
    (6) For purposes of paragraph (d)(11) of this section, captioning 
expenses include direct expenditures for captioning as well as 
allowable costs specifically allocated by a programming supplier 
through the price of the video programming to that video programming 
provider. To be an allowable allocated cost, a programming supplier may 
not allocate more than 100% of the costs of captioning to individual 
video programming providers. A programming supplier may allocate the 
captioning costs only once and may use any commercially reasonable 
allocation method;
    (7) For purposes of paragraphs (d)(11) and (d)(12) of this section, 
annual gross revenues shall be calculated for each channel individually 
based on revenues received in the preceding calendar year from all 
sources related to the programming on that channel. Revenue for 
channels shared between network and local programming shall be 
separately calculated for network and for non-network programming, with 
neither the network nor the local video programming provider being 
required to spend more than 2% of its revenues for captioning. Thus, 
for example, compliance with respect to a network service distributed 
by a multichannel video service distributor, such as a cable operator, 
would be calculated based on the revenues received by the network 
itself (as would the related captioning expenditure). For local service 
providers such as broadcasters, advertising revenues from station-
controlled inventory would be included. For cable operators providing 
local origination programming, the annual gross revenues received for 
each channel will be used to determine compliance. Evidence of 
compliance could include certification from the network supplier that 
the requirements of the test had been met. Multichannel video 
programming distributors, in calculating non-network revenues for a 
channel offered to subscribers as part of a multichannel package or 
tier, will not include a pro rata share of subscriber revenues, but 
will include all other revenues from the channel, including advertising 
and ancillary revenues. Revenues for channels supported by direct sales 
of products will include only the revenues from the product sales 
activity (e.g., sales commissions) and not the revenues from the actual 
products offered to subscribers. Evidence of compliance could include 
certification from the network supplier that the requirements of this 
test have been met.
    (8) If two or more networks (or sources of programming) share a 
single channel, that channel shall be considered to be in compliance if 
each of the sources of video programming are in compliance where they 
are carried on a full time basis;
    (9) Video programming distributors shall not be required to provide 
closed captioning for video programming that is by law not subject to 
their editorial control, including but not limited to the signals of 
television broadcast stations distributed pursuant to sections 614 and 
615 of the Communications Act or pursuant to the compulsory copyright 
licensing provisions of sections 111 and 119 of the Copyright Act 
(Title 17 U.S.C. 111 and 119); programming involving candidates for 
public office covered by sections 315 and 312 of the Communications Act 
and associated policies; commercial leased access, public access, 
governmental and educational access programming carried pursuant to 
sections 611 and 612 of the Communications Act; video programming 
distributed by direct broadcast satellite (DBS) services in compliance 
with the noncommercial programming requirement pursuant to section 
335(b)(3) of the Communications Act to the extent such video 
programming is exempt from the editorial control of the video 
programming provider; and video programming distributed by a common 
carrier or that is distributed on an open video system pursuant to 
section 653 of the Communications Act by an entity other than the open 
video system operator. To the extent such video programming is not 
otherwise exempt from captioning, the entity that contracts for its 
distribution shall be required to comply with the closed captioning 
requirements of this section.
    (f) Procedures for exemptions based on undue burden.--(1) A video 
programming provider, video programming producer or video programming 
owner may petition the Commission for a full or partial exemption from 
the closed captioning requirements. Exemptions may be granted, in whole 
or in part, for a channel of video programming, a category or type of 
video programming, an individual video service, a specific video 
program or a video programming provider upon a finding that the closed 
captioning requirements will result in an undue burden.
    (2) A petition for an exemption must be supported by sufficient 
evidence to demonstrate that compliance with the requirements to closed 
caption video programming would cause an undue burden. The term ``undue 
burden'' means significant difficulty or expense. Factors to be 
considered when determining whether the requirements for closed 
captioning impose an undue burden include:
    (i) The nature and cost of the closed captions for the programming;
    (ii) The impact on the operation of the provider or program owner;
    (iii) The financial resources of the provider or program owner; and
    (iv) The type of operations of the provider or program owner.
    (3) In addition to these factors, the petition shall describe any 
other factors the petitioner deems relevant to the Commission's final 
determination and any available alternatives that might constitute a 
reasonable substitute for the closed captioning requirements including, 
but not limited to, text or graphic display of the content of the audio 
portion of the programming. Undue burden shall be evaluated with regard 
to the individual outlet.

[[Page 48496]]

    (4) An original and two (2) copies of a petition requesting an 
exemption based on the undue burden standard, and all subsequent 
pleadings, shall be filed in accordance with Sec. 0.401(a) of this 
chapter.
    (5) The Commission will place the petition on public notice.
    (6) Any interested person may file comments or oppositions to the 
petition within 30 days of the public notice of the petition. Within 20 
days of the close of the comment period, the petitioner may reply to 
any comments or oppositions filed.
    (7) Comments or oppositions to the petition shall be served on the 
petitioner and shall include a certification that the petitioner was 
served with a copy. Replies to comments or oppositions shall be served 
on the commenting or opposing party and shall include a certification 
that the commenter was served with a copy.
    (8) Upon a showing of good cause, the Commission may lengthen or 
shorten any comment period and waive or establish other procedural 
requirements.
    (9) All petitions and responsive pleadings shall contain a 
detailed, full showing, supported by affidavit, of any facts or 
considerations relied on.
    (10) The Commission may deny or approve, in whole or in part, a 
petition for an undue burden exemption from the closed captioning 
requirements.
    (11) During the pendency of an undue burden determination, the 
video programming subject to the request for exemption shall be 
considered exempt from the closed captioning requirements.
    (g) Complaint procedures.--(1) No complaint concerning an alleged 
violation of the closed captioning requirements of this section shall 
be filed with the Commission unless such complaint is first sent to the 
video programming distributor responsible for delivery and exhibition 
of the video programming. A complaint must be in writing, must state 
with specificity the alleged Commission rule violated and must include 
some evidence of the alleged rule violation. In the case of an alleged 
violation by a television broadcast station or other programming for 
which the video programming distributor is exempt from closed 
captioning responsibility pursuant to paragraph (e)(9) of this section, 
the complaint shall be sent directly to the station or owner of the 
programming. A video programming distributor receiving a complaint 
regarding such programming must forward the complaint within seven days 
of receipt to the programmer or send written instructions to the 
complainant on how to refile with the programmer.
    (2) A complaint will not be considered if it is filed with the 
video programming distributor later than the end of the calendar 
quarter following the calendar quarter in which the alleged violation 
has occurred.
    (3) The video programming distributor must respond in writing to a 
complaint no later than 45 days after the end of the calendar quarter 
in which the violation is alleged to have occurred or 45 days after 
receipt of a written complaint, whichever is later.
    (4) If a video programming distributor fails to respond to a 
complaint or a dispute remains following the initial complaint 
resolution procedures, a complaint may be filed with the Commission 
within 30 days after the time allotted for the video programming 
distributor to respond has ended. An original and two (2) copies of the 
complaint, and all subsequent pleadings shall be filed in accordance 
with Sec. 0.401(a) of this chapter. The complaint shall include 
evidence that demonstrates the alleged violation of the closed 
captioning requirements of this section and shall certify that a copy 
of the complaint and the supporting evidence was first directed to the 
video programming distributor. A copy of the complaint and any 
supporting documentation must be served on the video programming 
distributor.
    (5) The video programming distributor shall have 15 days to respond 
to the complaint. In response to a complaint, a video programming 
distributor is obligated to provide the Commission with sufficient 
records and documentation to demonstrate that it is in compliance with 
the Commission's rules. The response to the complaint shall be served 
on the complainant.
    (6) Certifications from programming suppliers, including 
programming producers, programming owners, networks, syndicators and 
other distributors, may be relied on to demonstrate compliance. 
Distributors will not be held responsible for situations where a 
program source falsely certifies that programming delivered to the 
distributor meets our captioning requirements if the distributor is 
unaware that the certification is false. Video programming providers 
may rely on the accuracy of certifications. Appropriate action may be 
taken with respect to deliberate falsifications.
    (7) The Commission will review the complaint, including all 
supporting evidence, and determine whether a violation has occurred. 
The Commission shall, as needed, request additional information from 
the video programming provider.
    (8) If the Commission finds that a violation has occurred, 
penalties may be imposed, including a requirement that the video 
programming distributor deliver video programming containing closed 
captioning in an amount exceeding that specified in paragraph (b) of 
this section in a future time period.
    (h) Private rights of action prohibited.--Nothing in this section 
shall be construed to authorize any private right of action to enforce 
any requirement of this section. The Commission shall have exclusive 
jurisdiction with respect to any complaint under this section.

[FR Doc. 97-24504 Filed 9-15-97; 8:45 am]
BILLING CODE 6712-01-P


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