[Federal Register Volume 62, Number 22 (Monday, February 3, 1997)]
[Proposed Rules]
[Pages 4959-4965]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 97-2535]


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FEDERAL COMMUNICATIONS COMMISSION

47 CFR Parts 25, 26, 73, 76 and 100

[MM Docket No. 95-176; FCC 97-4]


Closed Captioning of Video Programming

AGENCY: Federal Communications Commission.

ACTION: Proposed rule.

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SUMMARY: The Telecommunications Act of 1996, Public Law 104-104, 110 
Stat. 56 (1996), added a new provision, Section 713, to the 
Communications Act of 1934, as amended, which requires the Commission 
to prescribe, by August 8, 1997, rules and implementation schedules for 
captioning of video programming. The Commission requests comment on 
proposed rules and timetables for mandatory closed captioning of video 
programming, as outlined in the Notice of Proposed Rulemaking 
(``NPRM''). The intended effect of this NPRM is to promote the 
accessibility of video programming to persons with hearing 
disabilities. Our proposals are based on comments and information 
submitted in response to a Notice of Inquiry (``NOI'') in this 
proceeding and additional data gathered by the Commission for our 
Report to Congress on video accessibility that was issued on July 29, 
1996.

DATES: Comments are due on or before February 28, 1997, and reply 
comments are due on or before March 24, 1997. Written comments by the 
public on the proposed information collections are due on or before 
February 28, 1997. Written comments must be submitted by the Office of 
Management and Budget (OMB) on the proposed collections on or before 
April 4, 1997.

ADDRESSES: Federal Communications Commission, Washington, D.C. 20554. 
In addition to filing comments with the Secretary, a copy of any 
comments on the information collections contained herein should be 
submitted to Dorothy Conway, Federal Communications Commission, Room 
234, 1919 M Street, N.W., Washington, D.C. 20554, or via the Internet 
to <a href="/cdn-cgi/l/email-protection#a9cdcac6c7dec8d0e9cfcaca87cec6df"><span class="__cf_email__" data-cfemail="2347404c4d54425a634540400d444c55">[email protected]</span></a>, and to Timothy Fain, OMB Desk Officer, 10236 NEOB, 
725--17th Street, N.W., Washington, DC 20503 or via the Internet to 
<a href="/cdn-cgi/l/email-protection#2b4d4a424574745f6b4a47054e445b054c445d"><span class="__cf_email__" data-cfemail="c9afa8a0a79696bd89a8a5e7aca6b9e7aea6bf">[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 NPRM, contact Dorothy Conway at 202-418-0217, or via 
the Internet at <a href="/cdn-cgi/l/email-protection#8befe8e4e5fceaf2cbede8e8a5ece4fd"><span class="__cf_email__" data-cfemail="4521262a2b32243c052326266b222a33">[email protected]</span></a>.

SUPPLEMENTARY INFORMATION: This is a synopsis of the Commission's 
Notice of Proposed Rulemaking, MM Docket No. 95-176, FCC 97-4, adopted 
January 9, 1997, and released January 17, 1997. The full text of this 
decision is available for inspection and copying during normal business 
hours in the FCC Reference Center (room 239), 1919 M Street, NW, 
Washington, D.C. 20554, and may be purchased from the Commission's copy 
contractor, International Transcription Service, (202) 857-3800, TTY 
(202) 293-8810, 1919 M Street, N.W., Washington, D.C. 20554. For copies 
in alternative formats, such as braille, audio cassette, or large 
print, please contact Sheila Ray at International Transcription 
Service.

Paperwork Reduction Act

    This NPRM contains proposed information collections. The 
Commission, as part of its continuing effort to reduce paperwork 
burdens, invites the general public and the Office of Management and 
Budget (OMB) to comment on the information collections contained in 
this NPRM, as required by the Paperwork Reduction Act of 1995. Public 
and agency comments are due at the same time as other comments on this 
NPRM; OMB notification of action is due 60 days from date of 
publication of this NPRM in the Federal Register. Comments should 
address: (a) whether the proposed collections of information are 
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 collections of 
information on the respondents, including the use of automated 
collection techniques or other forms of information technology.
    OMB Approval Number: 3060-XXXX Approval number to be assigned.
    Title: Closed Captioning of Video Programming.
    Type of Review: New collection.
    Respondents: Individuals or households; businesses and other for-
profit entities.
    Number of Respondents: 23,342. (3,000 complainants + 20,342 program 
providers)
    Estimated Time Per Response: 1-10 hours estimated as follows: We 
estimate that program providers will initiate 100 waivers/petitions 
each year requesting exemption from closed captioning requirements. At 
this time, we estimate

[[Page 4960]]

that the average burden to complete each waiver/petition process will 
be 5 hours. We estimate that 50% of program providers will use in-house 
assistance. We estimate that 50% of program providers will use outside 
legal assistance to complete waivers/petitions. These program providers 
will undergo an average burden of 2 hours for each waiver/petition to 
coordinate information with outside legal assistance. 50 (50% of 
program providers using in-house assistance)  x 5 hours=250 hours. 50 
(50% of program providers using outside legal assistance)  x 2 
hours=100 hours.
    Estimated annual burden to complainants and program providers for 
the complaint process: We estimate there will be 3,000 annual 
complaints filed by viewers at the local level. The average burden for 
each complaint and response is estimated to be 1 hour per complainant 
and 1 hour per program provider. 3,000 viewer complaints  x  1 hour and 
3,000 program provider responses  x  1 hour=6,000 hours.
    We estimate that the majority of complaints will be resolved at the 
local level and assume that approximately 600 (20% of 3,000) will go 
unresolved, resulting in complaints and responses being filed with the 
Commission. The average burden for each complaint and response in this 
instance is estimated to be 2 hours per complainant and 4 hours per 
program provider. 600 viewer complaints  x  2 hours and 600 program 
provider responses  x  4 hours=3,600 hours. We estimate the average 
annual burden for recordkeeping and making information available upon 
request to viewers will be 10 hours for each program provider. The 
estimated number of program providers is 20,342 as follows: 11,200 
cable television systems, 1,532 commercial and non-commercial 
television stations, 137 national cable video networks, 3 open video 
system (``OVS'') operators, 8 direct broadcast satellite (``DBS'') 
operators, 30 home satellite dish (``HSD'') program packagers, 5,200 
satellite master antenna television systems (``SMATVs''), 200 wireless 
cable operators, and 2,032 instructional television fixed service 
(``ITFS'') providers. 20,342 x 10=203,420 hours.
    Total Annual Burden: 213,370 hours. (250+100+6,000+ 3,600+203,420)
    Estimated Costs for Respondents: $90,684 estimated as follows: 
Program providers will use outside legal assistance paid at $150 per 
hour to complete approximately 50 waivers/petitions. 50 waivers  x  5 
hours per waiver  x  $150 per hour=$37,500. Postage and stationery 
costs for waivers are estimated at an average of $5 per waiver. 100 
waivers  x  $5=$500. Postage and stationary costs for filing complaints 
is estimated as follows: 3,000 viewer complaints filed at the local 
level  x  $1=$3,000. 3,000 program provider responses  x  $1=$3,000. 
600 viewer complaints filed at the Commission  x  $5 per complaint 
(increased postage for mailing video logs or tapes)=$3,000. 600 program 
provider responses  x  $5=$3,000. Postage and stationery costs for 
recordkeeping and making records available upon request are estimated 
at an average of $2 per program provider. 20,342 x $2=$40,684. Total 
costs=$37,500+ $500+$3,000
+$3,000+$3,000+$3,000
+$40,684=$90,684.
    Needs and Uses: This NPRM is adopted pursuant to Section 713 of the 
Communications Act of 1934, as amended. The requirements set forth in 
Section 713 are intended to further Congress' goal to ``ensure that all 
Americans ultimately have access to video services and programs, 
particularly as video programming becomes an increasingly important 
part of the home, school and workplace.'' The requirements will be used 
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 the Notice of Proposed Rulemaking

    1. Closed captioning is an assistive technology designed to provide 
access to television for persons with hearing disabilities. Closed 
captioning is similar to subtitles. Captions also identify speakers, 
sound effects, music and laughter. Currently, programming accessible to 
persons with hearing disabilities through closed captioning is the 
result of the voluntary efforts of program producers and providers, 
although the Commission has encouraged these efforts in several 
previous actions.
    2. Section 305 of the Telecommunications Act of 1996 (``1996 
Act''), Public Law 104-104, 110 Stat. 56 (1996), added a new Section 
713, Video Programming Accessibility, to the Communications Act of 
1934, as amended (``Communications Act''), 47 U.S.C. 613. Section 713 
requires the Commission to prescribe, by August 8, 1997, rules and 
implementation schedules for captioning of video programming. In this 
NPRM, the Commission discusses and seeks comment on proposals intended 
to maximize the amount of closed captioned programming, with 
appropriate exemptions and implementation schedules that take into 
account the relevant technical and costs issues involved. Our proposals 
are based on comments and information submitted in response to the NOI 
in this proceeding, summarized at 60 FR 65052 (December 18, 1995), and 
additional data gathered by the Commission for our Report to Congress 
on video accessibility that was issued on July 29, 1996, summarized at 
61 FR 42249 (August 14, 1996), pursuant to the requirements of Section 
713(a).
    3. At the outset, we note that the provisions of Section 713 apply 
to all types of video programming delivered electronically to 
consumers, regardless of the entity that provides the programming or 
the category of programming. We consider over-the-air broadcast 
television service (both commercial and noncommercial), and all 
multichannel video programming distributors (``MVPDs''), including: 
cable television, direct-to-home (``DTH'') satellite services, 
including DBS and HSD services; wireless cable systems using the 
multichannel multipoint distribution service (``MMDS''), ITFS, or local 
multipoint distribution (``LMDS''); SMATV systems; and OVS. Also, as 
required by Section 713, we consider all sources of video programming 
distributed by these technologies, including programming from 
commercial and noncommercial broadcast television networks, basic and 
premium cable networks, syndicated programming, and locally or 
regionally produced broadcast and cable programming.
    4. Throughout this NPRM, we seek comment on our proposed closed 
captioning requirements. We also invite commenters to provide 
alternative proposals that will fulfill the congressional mandate to 
ensure video accessibility to individuals with hearing disabilities.
    5. Responsibility for Compliance with Captioning Requirements. In 
order to implement any closed captioning requirements that we may 
adopt, we must determine where the responsibility lies for ensuring 
that video programming is closed captioned, and which parties shall be 
required to comply with those requirements. Section 713(b)(1) focuses 
on the result that new programming be closed captioned, rather than who 
is responsible for accomplishing this goal, while Section 713(b)(2) 
refers to both video programming providers and program owners as being 
responsible for captioning of library programming. Our tentative 
proposal is to require those entities that deliver video programming

[[Page 4961]]

directly to consumers (i.e., television broadcasters and MVPDs) to be 
ultimately responsible for the rules we adopt. Although we propose to 
place the compliance obligations on video programming providers, we 
recognize, from a practical standpoint, that captioning is most 
efficient at the production stage. Thus, we believe that producers 
generally will have the responsibility for captioning programming, 
regardless of who has the obligation to comply with our rules.
    6. Transition Rules for New Programming. Section 713(b)(1) requires 
the Commission to adopt rules to ensure that all non-exempt video 
programming first published or exhibited after the effective date of 
the our closed captioning rules (``new programming'') is fully 
accessible through the provision of closed captions. Section 713(c) 
further requires that the Commission's rules include an appropriate 
schedule of deadlines by which non-exempt video programming must be 
closed captioned. We propose to require that all non-exempt, new 
programming be closed captioned within eight years. We propose to phase 
in this captioning requirement by increasing the amount of required 
captioning by 25% every two years. Thus, we would require 25% of such 
programming to be captioned at the end of the second year, 50% at the 
end of the fourth year, 75% at the end of the sixth year, and to have 
all non-exempt, new programming captioned at the end of the eighth 
year. Alternatively, we seek comment on a ten year period, with 25% of 
new programming captioned after three years, 50% after five years, 75% 
after seven years, and 100% after ten years. With respect to MVPDs, we 
propose to apply the percentages of programming that must be captioned 
on a system-wide basis. However, we also solicit comment on whether the 
percentages of programming that must be captioned should apply to each 
program service or channel transmitted by an MVPD. We ask whether the 
determination that a percentage requirement has been met should be 
based on the amount of programming with captioning that has been shown 
over a month, a week, or some other period of time. We seek comment on 
what the period of time should be if we apply the percentages on a 
system-wide basis, and what it should be if we apply the percentages on 
a per-channel basis.
    7. Transition Rules For Library Programming. With respect to 
programming that was first published or exhibited before the effective 
date of our rules (``library programming''), Section 713(b)(2) requires 
that our rules ensure that video programming providers or owners 
maximize the accessibility of such programming through closed 
captioning. In considering closed captioning requirements for library 
programming, we do not believe that the statute requires that all such 
programming be captioned, given the distinction between new programming 
(``fully accessible'') and library programming (``maximize 
accessibility'') evident in the statutory language of Sections 713 
(b)(1) and (b)(2). We ask whether we should require that a percentage 
of library programming (e.g., 75%) ultimately be captioned. We also 
seek comment on what deadline should apply to captioning of library 
programming and what the relevant time frames for the transition period 
should be. Some commenters assert that captioning of previously 
published programming is increasing, and thus it may be unnecessary to 
require completion of closed captioned video libraries by a date 
certain. We ask that commenters who support this approach indicate how 
the Commission would ensure that video programming providers or owners 
``maximize the accessibility'' of previously published programming, as 
required by Section 713(b)(2).
    8. Exemptions Based on Economic Burden. Section 713(d)(1) provides 
for the exemption of classes of video programming or video providers 
where the requirement to close caption programming would be 
economically burdensome. While Section 713 and its legislative history 
do not define the term ``economic burden,'' we interpret this provision 
to permit us to exempt those classes of programming where the economic 
burden of captioning these programming types outweighs the benefits to 
be derived from captioning and, in some cases, the complexity of adding 
the captions. We seek to establish a general classification or a number 
of general classifications of programming for which captioning would be 
economically burdensome. Thus, we need to determine when a closed 
captioning requirement would be economically burdensome, and we seek 
comment on whether a definition of economic burden should be based on 
relative market size, degree of distribution, audience ratings or 
share, relative programming budgets or revenue base, lack of repeat 
value, or a combination of factors. We specifically discuss whether the 
following types of programming should be included in our own general 
exemptions: foreign language programs; programs which are primarily 
textual; cable access programs; instructional programs; advertising; 
home shopping; interstitials and promotional advertisements; political 
advertising; noncommercial broadcasters' fundraising activities; music 
programs; weather programs; and sports programs.
    9. While the statute also allows us to exempt classes of video 
providers, we believe that a blanket exemption even for very small 
providers is unnecessary, because the various providers distribute the 
same types of programming to consumers, and all classes of providers 
appear to have the technical capability to deliver closed captioning to 
viewers intact.
    10. Exemptions Based on Existing Contracts. Section 713(d)(2) 
exempts programming from any closed captioning requirements we may 
adopt, if applying such requirements would be ``inconsistent'' with a 
contract in existence as of February 8, 1996, the enactment date of the 
1996 Act. We tentatively conclude that contracts which affirmatively 
prohibit closed captioning would fall within this exemption and we seek 
comment on this conclusion. Such contracts do not appear to be typical 
but may be entered into when the program creator wishes to maintain 
total creative control over the product involved. However, we recognize 
that it is possible that contracts may contain more general language, 
not explicitly mentioning closed captioning, that might nonetheless be 
inconsistent with captioning. We seek comment on the types of 
provisions that might be contained in programming contracts that would 
be inconsistent with a captioning requirement.
    11. Exemptions Based on Undue Burden. Section 713(d)(3) provides 
for a program owner or provider of video programming to petition the 
Commission for an exemption from the closed captioning requirements 
based on a showing of undue burden. In determining whether closed 
captioning requirements would be an undue burden, the statute indicates 
that the factors the Commission must consider include: (1) the nature 
and cost of the closed captions for the programming; (2) the impact on 
the operation of the provider or program owner; (3) the financial 
resources of the provider or program owner; and (4) the type of 
operations of the provider or program owner. The Commission seeks 
comment on how to apply these factors and whether there are any other 
factors which should be considered when determining that closed 
captioning would result in an undue burden for an individual 
programming provider.

[[Page 4962]]

Commenters are also asked to address whether or not we should require 
parties to provide specific facts or meet objective tests to prove an 
undue burden or whether petitioners should have wider discretion in 
demonstrating that under their specific circumstances, the closed 
captioning requirements would constitute an undue burden. We also seek 
comment on what specific information petitioners should provide in 
order to demonstrate the factors needed to prove an undue burden. In 
addition, we request comment on a proposal to use standard ``special 
relief'' or waiver-type procedures for these types of requests.
    12. Standards for Quality and Accuracy. Section 713 does not 
require the Commission to adopt rules or standards for the accuracy or 
quality of closed captioning. However, in the NOI, we sought comment on 
these issues based on reported problems with existing closed captions. 
We propose to extend to other programming providers the rule (47 CFR 
76.606) that requires cable operators to deliver existing closed 
captions intact. However, we tentatively conclude that we should not 
adopt standards for the non-technical aspects of captioning, including 
accuracy of transcription, spelling, placement and style, at the start 
of our phase in period for closed captioning. We propose to monitor the 
closed captioning that results from our requirements and, if necessary, 
revisit this issue at a later date. We also do not propose to establish 
minimum credentials for captioners or to place any limits on the method 
used to create captions.
    13. The Enforcement Process. We propose to rely on complaints as a 
primary enforcement mechanism for the rules we adopt. Further, all 
complaints would initially be directed to the program provider in an 
attempt to resolve problems privately within a specified time period in 
order to minimize administrative resources devoted to matters that are 
better resolved through informal processes. We also seek comment on 
other methods or information needed to verify compliance, such as a 
requirement that each entity responsible for compliance with the rules 
retain in its files, or have available upon appropriate request, 
records sufficient to verify compliance.

Initial Regulatory Flexibility Analysis

    14. Pursuant to Section 603 of the Regulatory Flexibility Act 
(``RFA''), 5 U.S.C. 603, as amended, the Commission has prepared the 
following initial regulatory flexibility analysis (``IRFA'') of the 
expected impact of these proposed policies and rules on small entities. 
Written public comments are requested on the IRFA. These comments must 
be filed in accordance with the same filing deadlines as comments on 
the rest of the NPRM but they must have a separate and distinct heading 
designating them as responses to the IRFA. The Secretary shall cause a 
copy of this NPRM to be sent to the Chief Counsel for Advocacy of the 
Small Business Administration (``SBA'') in accordance with Section 
603(a) of the RFA, 5 U.S.C. 603(a).
    15. Reason for Action and Objectives of the Proposed Rule. The 1996 
Act requires the Commission to promulgate rules designed to maximize 
the availability of closed captioned programming. 47 U.S.C. 613. The 
Commission is issuing this NPRM to seek comment on proposed rules 
intended to implement this provision of the 1996 Act.
    16. Legal Basis. This NPRM is adopted pursuant to Sections 4(i), 
4(j) and 713 of the Communications Act of 1934, as amended, 47 U.S.C. 
154(i), 154(j), 613.
    17. Description and Number of Small Entities Affected. The 
Regulatory Flexibility Act defines the term ``small entity'' as having 
the same meaning as the terms ``small business,'' ``small 
organization,'' and ``small business concern'' under Section 3 of the 
Small Business Act, 5 U.S.C. 601(3). 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. 15 U.S.C. 632.
    18. Small MVPDs. SBA has developed a definition of a small entity 
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, DBS services, MMDS systems, SMATV 
systems and subscription television services. According to the Bureau 
of the Census, there were 1423 such cable and other pay television 
services generating less than $11 million in revenue that were in 
operation for at least one year at the end of 1992. We will address 
each service individually to provide a more succinct estimate of small 
entities. We seek comment on the tentative conclusions below.
    19. Cable Systems. The Commission has developed its own definition 
of a small cable company for the purposes of rate regulation. Under the 
Commission's 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 1,439 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 1,439 small entity 
cable system operators that may be affected by the decisions and rules 
proposed in this NPRM.
    20. 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). The Commission has determined that 
there are 61,700,000 subscribers in the United States. Therefore, we 
found that 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. 47 CFR 76.1403(b). Based on available data, 
we find that the number of cable operators serving 617,000 subscribers 
or less totals 1,450. 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.
    21. MMDS. The Commission refined the definition of ``small entity'' 
for the auction of MMDS 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. 47 CFR 21.961(b)(1). This 
definition of a small entity in the context of the Commission's Report 
and Order, summarized at 60 FR 36524 (July 17, 1995), concerning MMDS 
auctions that has been approved by the SBA.
    22. The Commission completed its 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 1,573 previously authorized and proposed MMDS facilities. 
Information available

[[Page 4963]]

to us indicates that no MDS facility generates revenue in excess of $11 
million annually. We tentatively conclude that for purposes of this 
IRFA, there are approximately 1634 small MMDS providers as defined by 
the SBA and the Commission's auction rules.
    23. ITFS. There are presently 2,032 ITFS licensees. All but one 
hundred 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. Thus, we tentatively conclude that at least 1932 
licensees are small businesses.
    24. DBS. As of December 1996, there were eight DBS licensees. 
However, the Commission 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. Although DBS 
service requires a great investment of capital for operation, we 
acknowledge that there are several new entrants in this field that may 
not yet have generated $11 million in annual receipts, and therefore 
may be categorized as a small business, if independently owned and 
operated.
    25. HSD. The market for HSD service is difficult to quantify. 
Indeed, the service itself bears little resemblance to other MVPDs. HSD 
owners have access to more than 265 channels of programming placed on 
C-band satellites by programmers for receipt and distribution by MVPDs, 
of which 115 channels are scrambled and approximately 150 are 
unscrambled. 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. Thus, HSD 
users include: (1) Viewers who subscribe to a packaged programming 
service, which affords them access to most of the same programming 
provided to subscribers of other MVPDs; (2) viewers who receive only 
non-subscription programming; and (3) viewers who receive satellite 
programming services illegally without subscribing. Because scrambled 
packages of programming are most specifically intended for retail 
consumers, these are the services most relevant to this discussion.
    26. 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 MSO. Furthermore, 
because this an average, it is likely that some program packagers may 
be substantially smaller. We seek comment on these tentative 
conclusions.
    27. OVS. The Commission has certified three OVS operators. On 
October 17, 1996, Bell Atlantic received approval for its certification 
to convert its Dover, New Jersey Video Dialtone (``VDT'') system to 
OVS. Bell Atlantic subsequently purchased the division of Futurevision 
which had been the only operating program package provider on the Dover 
system, and has begun offering programming on this system using these 
resources. Metropolitan Fiber Systems was granted certifications on 
December 9, 1996, for the operation of OVS systems in Boston and New 
York, both of which are being used to provide programming. On October 
10, 1996, Digital Broadcasting Open Video Systems received approval to 
offer OVS service in southern California. Because these services have 
been introduced so recently, little financial information is available. 
Bell Atlantic and Metropolitan Fiber Systems have sufficient revenues 
to assure us that they do not qualify as small business entities. 
Digital Broadcasting Open Video Systems however is a general 
partnership just beginning operations. Accordingly, we tentatively 
conclude that one OVS licensee qualifies as a small business concern.
    28. 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 
tentatively conclude that a substantial number of SMATV operators 
qualify as small entities.
    29. LMDS. Unlike the above pay television services, LMDS technology 
and spectrum allocation will allow licensees to provide wireless 
telephony, data, and/or video services. A LMDS provider is not limited 
in the number of potential applications that will be available for this 
service. 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 above. A small 
radiotelephone entity is one with 1,500 employees or less. 13 CFR 
Sec. 121.201. However, for the purposes of this NPRM on closed 
captioning, we include only an estimate of LMDS video service 
providers.
    30. 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, summarized at 60 FR 43740 (July 23, 1995), 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.
    31. 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 tentatively conclude that a majority of the potential LMDS licensees 
will be small entities, as that term is defined by the SBA.
    32. 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.
    33. 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

[[Page 4964]]

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 dollars 
in annual receipts. Census data also indicates that 81% of operating 
firms (that owned at least one television station) had revenues of less 
than $10 million.
    34. 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 dollars or less, 
representing approximately 68% of the 1141 full power commercial 
television stations listed in the BIA data base.
    35. 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, of small entities 
would constitute 72% of the total number of owners.
    36. 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 approximately 771 commercial television stations (about 68% 
of all commercial televisions 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.
    37. 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--
``Establishments primarily engaged in the production of theatrical and 
nontheatrical motion pictures and video tapes for exhibition or sale,'' 
including ``establishments engaged in both production and 
distribution''), Motion Picture and Video Tape Distribution (SIC 7822--
``Establishments primarily engaged in the distribution * * * of 
theatrical and nontheatrical motion picture films or in the 
distribution of video tapes and disks, except to the general public''), 
and Theatrical Producers (Except Motion Pictures) and Miscellaneous 
Theatrical Services (SIC 7922--``Establishments primarily engaged in 
providing live theatrical presentations,'' including ``producers of * * 
* live television programs.''). 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 Sec. 121.201. 
The 1992 Bureau of the Census data indicates 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. The Census data does not include a category for $21.5 
million; therefore, we have reported the closest increment below and 
above the $21.5 million threshold.
    38. Each of these SIC categories are very broad and includes firms 
that may be engaged in various industries including television. We 
tentatively conclude that cable networks that are essentially program 
distributors are included in this category. 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 tentatively 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 proposed rules in 
this NPRM.
    39. Reporting, Recordkeeping and Compliance Requirements. The NPRM 
tentatively proposes requiring video programming providers (including 
broadcast licensees and MVPDs) to substantially increase the volume of 
closed captioned video programming carried over a period of time. 
Virtually all future programming and a gradually increasing volume of 
previously released programming is expected to be captioned over time. 
If this proposal is adopted, video programming providers may be choose 
to maintain records of the volume of closed captioned programming 
carried in order to resolve any disputes which may arise regarding 
compliance.
    40. In addition to seeking comment on a complaint process, the 
Commission invites comments regarding alternative enforcement 
procedures including a requirement that video programming providers 
their compliance with by placing information regarding the amount of 
closed captioning they distribute in a public file. The Commission 
invites commenters to address the possible effectiveness of this 
alternative enforcement mechanisms and how it might be implemented.
    41. Federal Rules Which Overlap, Duplicate or Conflict With the 
Commission's Proposal. None.
    42. Any Significant Alternatives Minimizing the Impact On Small 
Entities and Consistent With the Stated Objectives. The statutory 
language provides for exemptions from any closed captioning 
requirements the Commission may adopt, when imposing those requirements 
would create an economic burden. 47 U.S.C. 613(e). Consistent with this 
directive, the NPRM seeks comment on several

[[Page 4965]]

mechanisms which would allow small entities to be exempt in whole or in 
part from the closed captioning requirements. These measures are 
intended, in part, to minimize the regulatory impact on small entities.
    43. Section 713(d)(1) provides that the Commission may exempt 
classes of video programming or video providers where closed captioning 
would be economically burdensome. Pursuant to this provision, the 
Commission proposes to establish a general classification or a number 
of classifications of programming for which captioning would be 
economically burdensome. Thus, the Commission seeks comment on whether 
a definition of economic burden should be based on relative size, 
degree of distribution, audience ratings or share, relative programming 
budgets or revenue base, lack of repeat value, or a combination of 
factors.
    44. Section 713(d)(3) permits video programming providers or 
program owners to petition the Commission for an exemption where our 
video captioning requirements would constitute an undue burden. 47 
U.S.C. 613(d)(3). Section 713(d)(3) further provides specific factors 
to be considered when resolving such petitions. Accordingly, the 
Commission seeks comment on how to apply these factors and whether 
there are any factors which should be considered when determining if a 
requirement for closed captioning results in an undue burden for an 
individual video programming provider or program owner.

Ex Parte

    45. Ex parte Rules--Non-Restricted Proceeding. This is a non-
restricted notice and comment rulemaking proceeding. Ex parte 
presentations are permitted, except during the Sunshine Agenda period, 
provided that they are disclosed as provided in the Commission's rules. 
See generally, 47 CFR 1.1202, 1.1203, and 1.1206(a).

Comment Dates

    46. Pursuant to applicable procedures set forth in Sections 1.415 
and 1.419 of the Commission's rules, interested parties may file 
comments on or before February 28, 1997, and reply comments on or 
before March 24, 1997. To file formally in this proceeding, you must 
file an original plus six copies of all comments, reply comments, and 
supporting comments. If you would like each Commissioner to receive a 
personal copy of your comments and reply comments, you must file an 
original plus 11 copies. You should send comments and reply comments to 
the Office of the Secretary, Federal Communications Commission, 1919 M 
Street, NW., Washington, DC 20554. Comments and reply comments will be 
available for public inspection during regular business hours in the 
FCC Reference Center, Room 239, Federal Communications Commission, 1919 
M Street, NW., Washington, DC 20554.

Ordering Clauses

    47. Authority for this proposed rulemaking is contained in Sections 
4(i), 4(j), and 713 of the Communications Act of 1934, as amended, 47 
U.S.C. 154(i), 154(j) and 613.
    48. It is ordered that the Secretary shall send a copy of the 
Notice of Proposed Rulemaking, including the 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, Public Law No. 96-354, 94 Stat. 1164, 5 U.S.C. 601 et 
seq. (1981).

List of Subjects

47 CFR Part 25

    Communications common carriers, Reporting and recordkeeping 
requirements, Satellites.

47 CFR Part 26

    Communications common carriers, Reporting and recordkeeping 
requirements, Satellites.

47 CFR Part 73

    Education, Political candidates, Reporting and recordkeeping 
requirements, Television.

47 CFR Part 76

    Cable television, Political candidates, Reporting and recordkeeping 
requirements.

47 CFR Part 100

    Satellites.

Federal Communications Commission.
William F. Caton,
Acting Secretary.
[FR Doc. 97-2535 Filed 1-31-97; 8:45 am]
BILLING CODE 6712-01-P


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