[Federal Register Volume 77, Number 32 (Thursday, February 16, 2012)]
[Proposed Rules]
[Pages 9187-9197]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2012-3703]


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FEDERAL COMMUNICATIONS COMMISSION

47 CFR Part 76

[CS Docket No. 98-120; FCC 12-18]


Carriage of Digital Television Broadcast Signals: Amendment to 
the Commission's Rules

AGENCY: Federal Communications Commission.

ACTION: Proposed rule.

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SUMMARY: This Fourth FNPRM seeks comment on whether it would be in the 
public interest to extend the viewability rule and the HD carriage 
exemption, both of which are currently scheduled to sunset on June 12, 
2012. First, we seek comment on whether to extend, in its current form, 
the ``viewability'' rule, which implements the statutory requirement 
that all cable subscribers, including those with analog equipment, be 
able to view must carry television signals. Second, given the apparent 
widespread reliance of small cable

[[Page 9188]]

operators on the HD exemption, we propose to extend it for an 
additional three years, but ask whether this should be the final 
extension. We note that both rule and exemption would have expired on 
February 17, 2012 if the DTV transition had not been delayed by 
Congress. The Commission is therefore concurrently issuing a 
Declaratory Order clarifying that both the viewability rule and the HD 
Carriage Exemption will sunset on June 12, 2012, absent Commission 
action to extend them.

DATES: Submit comments on or before March 12, 2012. Submit replies on 
or before March 22, 2012.

FOR FURTHER INFORMATION CONTACT: Lyle Elder, <a href="/cdn-cgi/l/email-protection#377b4e5b5219725b5352457751545419505841"><span class="__cf_email__" data-cfemail="ace0d5c0c982e9c0c8c9deeccacfcf82cbc3da">[email protected]</span></a>, or 
Steven Broeckaert, <a href="/cdn-cgi/l/email-protection#6b381f0e1d0e05452919040e08000a0e191f2b0d0808450c041d"><span class="__cf_email__" data-cfemail="2d7e59485b4843036f5f42484e464c485f596d4b4e4e034a425b">[email protected]</span></a> of the Media Bureau, 
Policy Division, at (202) 418-2120.

SUPPLEMENTARY INFORMATION: The proceeding this Fourth FNPRM initiates 
shall be treated as a ``permit-but-disclose'' proceeding in accordance 
with the Commission's ex parte rules.\1\ Persons making ex parte 
presentations must file a copy of any written presentation or a 
memorandum summarizing any oral presentation within two business days 
after the presentation (unless a different deadline applicable to the 
Sunshine period applies). Persons making oral ex parte presentations 
are reminded that memoranda summarizing the presentation must (1) list 
all persons attending or otherwise participating in the meeting at 
which the ex parte presentation was made, and (2) summarize all data 
presented and arguments made during the presentation. If the 
presentation consisted in whole or in part of the presentation of data 
or arguments already reflected in the presenter's written comments, 
memoranda or other filings in the proceeding, the presenter may provide 
citations to such data or arguments in his or her prior comments, 
memoranda, or other filings (specifying the relevant page and/or 
paragraph numbers where such data or arguments can be found) in lieu of 
summarizing them in the memorandum. Documents shown or given to 
Commission staff during ex parte meetings are deemed to be written ex 
parte presentations and must be filed consistent with Sec.  1.1206(b). 
In proceedings governed by Sec.  1.49(f) or for which the Commission 
has made available a method of electronic filing, written ex parte 
presentations and memoranda summarizing oral ex parte presentations, 
and all attachments thereto, must be filed through the electronic 
comment filing system available for that proceeding, and must be filed 
in their native format (e.g., .doc, .xml, .ppt, searchable .pdf). 
Participants in this proceeding should familiarize themselves with the 
Commission's ex parte rules. Pursuant to Sec. Sec.  1.415 and 1.419 of 
the Commission's rules, 47 CFR 1.415, 1.419, interested parties may 
file comments and reply comments on or before the dates indicated on 
the first page of this document. Comments may be filed using the 
Commission's Electronic Comment Filing System (ECFS). See Electronic 
Filing of Documents in Rulemaking Proceedings, 63 FR 24121 (1998).
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    \1\ 47 CFR 1.1200 et seq.
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    [ssquf] Electronic Filers: Comments may be filed electronically 
using the Internet by accessing the ECFS: http://fjallfoss.fcc.gov/ecfs2/.
    [ssquf] Paper Filers: Parties who choose to file by paper must file 
an original and one copy of each filing. If more than one docket or 
rulemaking number appears in the caption of this proceeding, filers 
must submit two additional copies for each additional docket or 
rulemaking number.
    Filings can be sent by hand or messenger delivery, by commercial 
overnight courier, or by first-class or overnight U.S. Postal Service 
mail. All filings must be addressed to the Commission's Secretary, 
Office of the Secretary, Federal Communications Commission.
    [ssquf] All hand-delivered or messenger-delivered paper filings for 
the Commission's Secretary must be delivered to FCC Headquarters at 445 
12th St. SW., Room TW-A325, Washington, DC 20554. The filing hours are 
8 a.m. to 7 p.m. All hand deliveries must be held together with rubber 
bands or fasteners. Any envelopes and boxes must be disposed of before 
entering the building.
    [ssquf] Commercial overnight mail (other than U.S. Postal Service 
Express Mail and Priority Mail) must be sent to 9300 East Hampton 
Drive, Capitol Heights, MD 20743.
    [ssquf] U.S. Postal Service first-class, Express, and Priority mail 
must be addressed to 445 12th Street SW., Washington, DC 20554.
    People with Disabilities: To request materials in accessible 
formats for people with disabilities (braille, large print, electronic 
files, audio format), send an email to <a href="/cdn-cgi/l/email-protection#40262323757074002623236e272f36"><span class="__cf_email__" data-cfemail="04626767313430446267672a636b72">[email protected]</span></a> or call the 
Consumer & Governmental Affairs Bureau at 202-418-0530 (voice), 202-
418-0432 (tty).
    Availability of Documents. Comments, reply comments, and ex parte 
submissions will be available for public inspection during regular 
business hours in the FCC Reference Center, Federal Communications 
Commission, 445 12th Street SW., CY-A257, Washington, DC 20554. These 
documents will also be available via ECFS. Documents will be available 
electronically in ASCII, Microsoft Word, and/or Adobe Acrobat.

Summary of the Final Rule

I. Introduction

    1. In 2007, the Commission adopted certain rules to protect 
consumers as the transition to digital television (DTV) approached.\2\ 
Specifically, in order to ensure that cable operators continued to 
comply with the statutory obligation to make must-carry television 
stations \3\ ``viewable'' to all subscribers,\4\ the Commission adopted 
a rule providing cable operators two options to comply with the 
viewability requirement: (1) Carry the digital signal in analog format 
to all analog cable subscribers, or (2) carry the signal only in 
digital format, provided that all subscribers have the necessary 
equipment to view the broadcast content.\5\ In order to retain 
flexibility to deal with concerns arising after the DTV transition, the 
Commission stated that the viewability rule would sunset three years 
after the transition, subject to review during the last year of this 
period to determine if it should be extended, revised, or allowed to 
sunset.\6\ This rule will therefore expire on June 12, 2012 unless we 
take action to extend it.
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    \2\ See generally Carriage of Digital Television Broadcast 
Signals, CS Docket No 98-120, Third Report and Order and Third 
Further Notice of Proposed Rulemaking, 73 FR 6043, 22 FCC Rcd 21064 
(2007) (``Viewability Order'' or ``Third FNPRM''). As discussed 
below, the DTV transition was finalized on June 12, 2009.
    \3\ ``Must-carry'' stations are those stations subject to 
mandatory cable carriage (unless they elect to be carried only with 
their consent). These include both commercial (47 U.S.C. 534(a)) and 
non-commercial educational (47 U.S.C. 535(a)) full-power television 
stations.
    \4\ See 47 U.S.C. 534(b)(7) (``Signals carried in fulfillment of 
the requirements of this section [i.e., commercial must-carry 
signals] shall be provided to every subscriber of a cable system. 
Such signals shall be viewable via cable on all television receivers 
of a subscriber which are connected to a cable system by a cable 
operator or for which a cable operator provides a connection''); 47 
U.S.C. 535(h) (``Signals carried in fulfillment of the carriage 
obligations of a cable operator under this section [i.e., non-
commercial must-carry signals] shall be available to every 
subscriber'').
    \5\ 47 CFR 76.56(d)(3).
    \6\ 47 CFR 76.56(d)(5) (``The requirements set forth in 
paragraph (d)(3) of this section shall cease to be effective three 
years from the date on which all full-power television stations 
cease broadcasting analog signals, unless the Commission extends the 
requirements in a proceeding to be conducted during the year 
preceding such date.'').

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[[Page 9189]]

    2. Also in 2007, the Commission adopted a related rule regarding 
the prohibition on material degradation of broadcast signals when 
carried by cable systems. One aspect of this rule is the requirement 
that any signal broadcast in high definition (``HD'') also be carried 
by cable operators in HD. In response to concerns from commenters about 
cost and technical capacity, the Commission granted a three-year 
exemption from this HD carriage rule to the operators of certain small 
cable systems. As with the viewability rule, the Commission held that 
the small cable HD exemption would sunset in three years absent action 
by the Commission to revise or extend it. Thus, this exemption will 
also expire on June 12, 2012 unless the Commission takes action to 
extend it.
    3. We initiate this Fourth Further Notice of Proposed Rulemaking 
(Fourth FNPRM) in the DTV cable carriage docket to determine whether it 
would be in the public interest to extend this rule and exemption. For 
the reasons described below, we seek comment on whether to extend the 
``viewability'' rule for three more years to ensure that all cable 
subscribers, including those with analog equipment, continue to have 
access to must carry television signals. Given the apparent widespread 
reliance of small cable operators on the HD exemption, we propose to 
extend it for an additional three years, but ask whether this should be 
the final extension. We note that both rule and exemption would have 
expired on February 17, 2012 if the DTV transition had not been delayed 
by Congress. The Commission is therefore concurrently issuing a 
Declaratory Order clarifying that both the viewability rule and the HD 
Carriage Exemption will sunset on June 12, 2012, absent Commission 
action to extend them.\7\
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    \7\ As discussed in detail in Section V, infra.
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II. Background

    4. Pursuant to Section 614(b)(4)(B) of the Communications Act of 
1934, as amended (the ``Act''),\8\ the Commission initially opened this 
docket in 1998 to address the responsibilities of cable television 
operators with respect to carriage of digital broadcast stations in 
light of the nation's transition to digital television.\9\ The 2007 
Viewability Order, among other things, established a rule ensuring the 
viewability of must-carry signals on cable systems, as required by 
statute.\10\ That order also established the requirement for cable 
systems to carry HD broadcast signals in HD, in order for the signals 
to be carried without material degradation.\11\ Based on further 
comments, the follow-up Fourth Report & Order granted an exemption from 
this latter requirement for the operators of certain small cable 
systems.\12\ As mentioned above, both the viewability rule and the HD 
carriage exemption were scheduled to sunset three years after the 
conclusion of the full-power transition, subject to review during the 
last year of this period to determine whether they should be extended, 
revised, or allowed to sunset.\13\
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    \8\ 47 U.S.C. 534(b)(4)(B).
    \9\ Carriage of the Transmissions of Digital Television 
Broadcast Stations: Amendment to Part 76 of the Commission's Rules, 
CS Docket No. 98-120, Notice of Proposed Rulemaking, 13 FCC Rcd 
15092, 15093, paras. 1-2 (1998).
    \10\ See generally Viewability Order.
    \11\ Viewability Order at para. 4.
    \12\ See generally, Carriage of Digital Television Broadcast 
Signals, CS Docket No. 98-120, Fourth Report and Order, 23 FCC Rcd 
13618 (2008) (``Fourth Report & Order'').
    \13\ Viewability Order at para. 16; Fourth Report & Order at 
para. 12.
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III. Viewability Rule

    5. In the Viewability Order, the Commission found that 
``viewability'' of must-carry digital signals was mandated by the 
Communications Act just as it had been for must-carry analog signals, 
and adopted a rule to ensure that these signals would be available to 
all cable subscribers.\14\ The Commission recognized the need for 
flexibility in enforcing ``the most fundamental interest expressed in 
the must carry rules,''\15\ and that it is bound by statute to ensure 
that must-carry signals are actually viewable by all subscribers. This 
review provides an opportunity for us to determine whether extending 
the current rule is necessary to fulfill that statutory mandate, given 
the current state of technology and the marketplace.
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    \14\ Viewability Order at para. 15.
    \15\ Viewability Order at para. 34.
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    6. Since passage of the 1992 Cable Act, the Commission has 
consistently found that ``mere transmission of the must-carry signal is 
not sufficient to meet the requirements'' of the statute.\16\ As 
explained in 1993:
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    \16\ Carriage of Digital Television Broadcast Signals, CS Docket 
No. 98-120, Second Further Notice of Proposed Rulemaking, 22 FCC Rcd 
8803 (2007) (``Second FNPRM'').
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    We believe that the 1992 Act is clear in its requirement that 
all local commercial television stations carried in fulfillment of 
the must-carry requirements must be provided to every cable 
subscriber and must be viewable on all television sets that are 
connected to the cable system by a cable operator for which the 
cable operator provides a connection. The Act does not give the 
Commission authority to exempt any class of subscribers from this 
requirement.\17\
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    \17\ Implementation of the Cable Television Consumer Protection 
and Competition Act of 1992, etc., MM Docket No. 92-259, Report and 
Order, 8 FCC Rcd. 2965, 2974 (1993) (``Analog Must Carry Report and 
Order'').

Therefore, must-carry stations must be viewable.\18\ After the DTV 
transition, ``the signals of must-carry stations [would have been] 
completely unavailable to analog cable subscribers'' absent Commission 
action.\19\ That is, because after the transition these signals are 
broadcast only in digital, cable subscribers that do not own a digital 
television or subscribe to a digital tier (and therefore lease or own a 
digital navigation device) would no longer be able to view these 
stations through their cable operator. Although the digital signals of 
these must-carry stations could theoretically be accessed over-the-air 
with the use of a digital converter box, the statute does not require 
subscribers to take that approach.\20\ Moreover, even were the law to 
contemplate that approach, we note that, as a technical matter, not all 
analog cable subscribers are covered by the signals from their local 
must-carry stations or even own an antenna that would permit them to 
receive the signal if it were available. As stated in 2007, we remain 
``bound by statute to ensure that commercial and non-commercial 
mandatory carriage stations are actually viewable by all cable 
subscribers,''\21\ and ``[t]hese statutory requirements plainly apply 
to cable carriage of digital broadcast signals.''\22\
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    \18\ We note that although Sections 614(b)(7) (commercial) and 
615(h) (noncommercial) of the Act use different language, the 
Commission consistently has treated them as imposing identical 
obligations with regard to viewability. See e.g., Analog Must Carry 
Report and Order, 8 FCC Rcd. at 2974, at para. 32 (noting that all 
must-carry signals must be available to all subscribers); see also 
Implementation of Section 302 of the Telecommunications Act of 1996: 
Open Video Systems, CS Docket No. 96-46, Second Report and Order, 11 
FCC Rcd 18223, 18308, at para. 162 (1996) (``Pursuant to Section 
614(b)(7) and 615(h), the operator of a cable system is required to 
ensure that signals carried in fulfillment of the must-carry 
requirements are provided to every subscriber of the system.'').
    \19\ Viewability Order at para. 55.
    \20\ The Commission has long held, and the Supreme Court has 
agreed, that cable subscribers' use of an ``A/B switch'' to access 
over-the-air signals is not a legitimate replacement for access to 
those signals on the cable system itself. Turner Broadcasting 
System, Inc. v. FCC, 520 U.S. 180 at 219-221 (1997) (``Turner 
Two''). An ``A/B switch'' is a method of manually toggling between 
cable and broadcast programming without changing the viewing device.
    \21\ Viewability Order at para. 31.
    \22\ Viewability Order at para. 15; see also e.g., para. 22 (the 
digital viewability requirement is ``based on a straightforward 
reading of the relevant statutory text''); para. 24 (``this language 
reflects Congress's unambiguous determination that broadcast signals 
must be viewable by all cable subscribers''); para. 34 (``[i]f we 
declined to enforce the viewability requirement it would render the 
regime almost meaningless, contrary to the clearly expressed will of 
the Congress as upheld by the Supreme Court'').

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[[Page 9190]]

    7. As the Commission also made clear in 2007, viewability of 
broadcast signals is not only mandated by statute, but is also of vital 
importance to the broadcast stations that rely on the Commission's 
``must carry'' rules and to all consumers of television programming. 
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The Commission noted that,

[i]f cable operators did not downconvert the digital signals, 
broadcasters would stand to lose an audience of millions of 
households that are analog cable subscribers and the concomitant 
advertising revenues, thus jeopardizing their continued health and 
viability. Should these stations deteriorate or cease to exist, the 
impact of these lost programming options would fall most heavily on 
those that most need them: The roughly fifteen percent of Americans 
who rely solely on over-the-air television, which disproportionately 
consist of low-income and minority households.\23\
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    \23\ Id. at para. 55 (internal citations omitted).

    Furthermore, the Commission found that, without action, ``analog 
cable subscribers and households that rely solely on over-the-air 
broadcast television may well face `a reduction in the number of media 
voices' and the loss of `the widest possible dissemination of 
information from diverse and antagonistic sources.''' \24\ The 
Commission, in the Viewability Order, explained that at the time half 
of all consumers relied on the analog tuners in the equipment that they 
owned, and that the welfare of those consumers ``drives the 
Commission's decisions on viewability.'' \25\ Thus, in adopting the 
Viewability Order, the Commission acted in light of both the statutory 
directive and the important governmental interests of preserving the 
benefits of free, over-the-air local broadcast television for analog 
cable subscribers and over-the-air viewers alike, and promoting the 
widespread dissemination of information from a multiplicity of sources.
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    \24\ Id.
    \25\ Id. at n. 131.
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    8. In order to ensure that digital signals would be actually 
viewable by all subscribers, the Commission adopted a two-part rule and 
allowed systems to choose how they would comply. Section 76.56(d)(3) of 
the Commission's rules provides:

    (3) The viewability and availability requirements of this 
section require that, after the broadcast television transition from 
analog to digital service for full power television stations cable 
operators must either:
    (i) Carry the signals of commercial and non-commercial must-
carry stations in analog format to all analog cable subscribers, or
    (ii) For all-digital systems, carry those signals in digital 
format, provided that all subscribers, including those with analog 
television sets, that are connected to a cable system by a cable 
operator or for which the cable operator provides a connection have 
the necessary equipment to view the broadcast content.\26\
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    \26\ 47 CFR 76.56(d)(3).
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    This rule ensures that all subscribers are able to view must-carry 
programming, while still providing flexibility to operators who have 
been, and continue to be, transitioning to an all-digital system on 
their own schedules.\27\ Once a particular cable operator has begun 
transmitting its content exclusively in a digital format, all 
subscribers will have access to digital broadcast signals via the 
digital equipment necessary to view all of the other programming 
offered by the cable operator. Thus, under the current rule, an all-
digital cable operator can comply by transmitting all of its content in 
a digital format to all of its subscribers.
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    \27\ Under this rule, in combination with the material 
degradation rule, discussed infra, a ``hybrid'' system (providing 
both analog and digital service) would also have to carry an HD 
broadcast signal in HD. As the Commission has previously explained, 
``there should be no perceivable difference between'' SD digital and 
analog picture quality, so ``our rules do not require cable 
operators * * * to carry an SD digital version of a broadcast 
station's signal, in addition to the analog version'' as long as all 
subscribers can view the channel. See supra n. 12, Fourth Report & 
Order at para. 5.
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    9. We seek comment on whether we should extend the viewability rule 
or permit it to sunset.\28\ The proceeding we begin today provides an 
opportunity for us to consider whether extending this rule best 
fulfills the statutory mandate, by reviewing it ``in light of the 
potential cost and service disruption to consumers, and the state of 
technology and the marketplace.'' \29\ As discussed below, the 
available market evidence seems to indicate that the viewability 
requirements remain important to consumers.\30\ In 2007 there were 
approximately 40 million analog-only cable subscribers,\31\ and there 
are still millions today. According to data provided by NCTA, the rate 
at which customers switch to digital has slowed since the DTV 
transition,\32\ and as of the third quarter of 2011, more than twelve 
million cable households were reliant on analog cable delivery.\33\ 
Moreover, the vast majority of cable subscribers are served by 
``hybrid'' systems that provide both analog and digital service, even 
if they receive digital service to one or more television sets.\34\ A 
number of these digital subscribers still rely on analog cable for 
second televisions in the home, meaning that there are potentially 
millions more subscribers who rely on analog to some extent.\35\ We 
seek comment on whether the figures discussed above reflect the current 
market for cable service and how that should impact the Commission's 
decision on whether to allow the viewability rule to sunset.
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    \28\ If we decide to extend the term of the viewability rule, we 
propose that the Commission should conduct a further review of this 
rule prior to June 12, 2015, and if the Commission does not act to 
extend it by that date, the viewability rule will sunset.
    \29\ Viewability Order at para. 16.
    \30\ The data upon which we rely includes data gathered by the 
Commission via the Annual Cable Operator Report and the annual Cable 
Price Survey, and commercially produced data such as that provided 
by SNL Kagan. See e.g., infra notes 31-34.
    \31\ Viewability Order at note 3.
    \32\ NCTA Industry Data, http://www.ncta.com/Statistics.aspx, 
http://www.ncta.com/Stats/CableAvailableHomes.aspx, http://www.ncta.com/Stats/BasicCableSubscribers.aspx, visited 2/9/12.
    \33\ As of the third quarter of 2011, Kagan indicates that there 
are more than 58 million cable subscribers, of whom approximately 46 
million are digital cable subscribers. Q3 video subscriber trends 
improve but still lack real strength, Broadband Technology (SNL 
Kagan, Charlottesville, VA), November 25, 2011, at 2. The vast 
majority of these digital cable subscribers are served by hybrid, 
rather than all-digital, systems. Staff analysis of 2010 Annual 
Cable Operator Report (Form 325) (indicating fewer than eight 
million cable subscribers were served by all-digital systems).
    \34\ Staff analysis of 2010 Annual Cable Operator Report (Form 
325) (indicating fewer than eight million cable subscribers were 
served by all-digital systems). The Viewability Order stated that 
``[t]o assist the Commission in this review, we will include 
questions in our annual Cable Price Survey to assess, for example, 
digital cable penetration, cable deployment of digital set-top boxes 
with various levels of processing capabilities, and cable system 
capacity constraints.'' Id. at n. 39. Based on data submitted to the 
Commission as part of the 2010 Cable Price Survey, only 9.4% of 
subscribers are served by all-digital systems.
    \35\ A recent survey indicates that 31 percent of homes do not 
have a digital television. See CES: Over Two Thirds of U.S. Homes 
Have HDTVs, Broadcasting & Cable tvfax, Jan. 5, 2012, at 4-5 
(discussing the results of a survey conducted by the Leichtman 
Research Group, Inc.).
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    10. The sunset of the viewability rule would potentially impact 
millions of subscribers, and the broadcasters who would be unable to 
reach them.\36\ There are hundreds of broadcast stations that rely on 
the must carry rules to ensure carriage on cable systems--in 2010, 
almost 40 percent of all broadcast stations elected or defaulted to 
must carry rather than electing retransmission

[[Page 9191]]

consent.\37\ Without the viewability rule, many cable subscribers would 
be required to pay more for access to must-carry broadcast stations, by 
replacing existing and still-functional analog equipment with digital 
equipment or leasing set top boxes to view the complete service they 
currently pay for and receive in analog.\38\ As the Supreme Court has 
made clear, ``preserving the benefits of free, over the air local 
broadcast television'' is an ``important governmental interest'' at the 
very heart of the must-carry regime.\39\ In this regard, we seek 
comment on how the sunset of the viewability requirement would impact 
the financial resources of must carry stations. We seek specific 
information that will allow us to build a solid record that supports 
either the retention or the sunset of the viewability rule. Also, given 
that ``viewability'' of must-carry digital signals is mandated by the 
Communications Act, we seek comment on whether it is necessary to 
extend the rule in its current form as opposed to relying on stations 
to file carriage complaints to enforce compliance with the statutory 
mandate.\40\
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    \36\ See In the Matter of TiVo, Inc, 26 FCC Rcd 12743, 12747 
(2011) (``NCTA notes, however, that although the cable industry has 
significantly increased the penetration of its digital services 
since the Commission adopted the Digital Plug and Play Order in 
2003, many cable systems `continue to carry substantial numbers of 
channels only in analog,' and `even on systems that simulcast all 
channels in digital, some customers may subscribe only to analog 
service.''') (NCTA Comments at 2-3).
    \37\ Staff analysis of 2010 Annual Cable Operator Report (Form 
325) (indicating approximately 780 of approximately 2000 stations 
elected or defaulted to must carry). Based on data submitted to the 
Commission as part of the 2010 Cable Price Survey, over 96% of cable 
systems carry at least one must-carry station, and, on average, each 
system carries more than seven must-carry stations.
    \38\ Subscribers to Direct Broadcast Satellite systems must have 
boxes for all televisions in the home; this requirement was not 
changed as a result of the DTV transition. Similarly, subscribers to 
all-digital cable systems must either have a box for each set, or 
own equipment capable of displaying digital signals without a box. 
In this case, subscribers face no additional expense or effort to 
receive must-carry signals in digital.
    \39\ Turner Two, supra n. 21.
    \40\ Carriage complaints may only be filed by the affected 
station, not by viewers or other parties. 47 CFR 76.61.
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    11. As discussed in the Viewability Order, compliance with this 
rule may result in some costs to cable operators.\41\ In some cases 
operators may be required to carry more than one version of a channel, 
using more bandwidth than they would if they carried only a single 
version, and in some cases they may be required to down-convert a 
broadcast signal to make the additional version available to analog 
subscribers. At the time of the Viewability Order, however, these costs 
were not only determined to be necessary to carry out the statutory 
``viewability'' directive, but were determined to be outweighed by the 
benefits of the viewability rule. Although many broadcast stations 
elect must-carry status, a cable system carries many more non-broadcast 
channels. The Commission explained that the comparatively small number 
of must-carry stations carried by any given system meant that the 
incremental additional bandwidth consumed by compliance with this 
requirement would be ``negligible'' \42\ even for hybrid systems, which 
are required by this rule to devote at least one 6 MHz channel to each 
must-carry station.\43\ We seek comment on the extent to which these 
conclusions still hold true today.
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    \41\ Viewability Order, at paras. 26-35.
    \42\ Viewability Order, at para. 26.
    \43\ The bandwidth that must be allotted (due to the related 
prohibition on material degradation, discussed infra) increases only 
slightly if the must-carry station is broadcasting in high 
definition, due to the efficiencies of digital carriage.
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    12. Furthermore, the Commission affirmed in the Viewability Order 
that the ``one-third carriage cap,'' under which cable operators need 
dedicate no more than one-third of their channel capacity to commercial 
broadcast stations, remains in effect in the digital carriage context, 
and that all versions of a signal would count toward this cap.\44\ As a 
result, no cable system need ever dedicate more than one-third of their 
bandwidth to carriage of commercial broadcast stations, and may choose 
which signals not to carry if they ever reach this cap. We seek comment 
on whether the situation has changed regarding bandwidth usage, and 
whether any cable system has reached the one-third carriage cap. 
Regarding the cost of downconversion, some commenters in the 2007 
viewability proceeding claimed they would face large costs to down-
convert broadcast signals.\45\ The Commission was skeptical of at least 
some of these claims, all of which concerned up-front expenses. Given 
the up-front nature of the claimed expenses, they presumably would have 
already been incurred by now and would not impose an additional cost. 
We seek comment on the accuracy of this presumption in the current 
marketplace. Would retention of the viewability rule impose any 
additional expenses on cable operators? If so, we request a detailed 
description of any claimed expenditures and associated cost 
information.
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    \44\ Viewability Order, at para. 36.
    \45\ Viewability Order, at para. 35.
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    13. We note that some cable operators, such as RCN and 
BendBroadband, transmit only digital signals and have eliminated analog 
service in all of their systems.\46\ As discussed above, these 
providers can comply fully with their viewability obligations by simply 
carrying a must-carry signal in digital, often in the same manner as it 
is provided by the broadcast station. We therefore also seek comment 
about costs associated with transitioning to an all-digital system, 
rather than carrying analog versions of must-carry signals. According 
to information in the 2007 record, virtually all cable operators are 
planning to eventually transition to all-digital systems, regardless of 
our decision on the viewability rule.\47\ How many hybrid systems plan 
to go all-digital in the near future, and how many subscribers will be 
impacted by this shift? What is the range of costs per digital box for 
cable operators, and the range of rental fees charged to subscribers 
who are first-time digital subscribers? How has the rate at which 
consumers voluntarily drop analog service changed in the time since the 
DTV transition? What is the current rate at which they are doing so? We 
seek comment on the business environment in which hybrid systems 
operate. Are competitive pressures on these systems such that they are 
transitioning to all-digital service at a faster rate than customers 
are switching on their own? Are any cable operators considering 
transitioning to an all-digital system more quickly than originally 
planned specifically because of the viewability obligations? What 
additional costs would be associated with an early transition? 
Commenters stating that they intend to or know of cable systems that 
intend to transition early due to the viewability rule should provide a 
detailed description of the claimed expenditures and cost information 
that they would face as the result of this early transition.
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    \46\ Basic Service Tier Encryption; Compatibility Between Cable 
Systems and Consumer Electronics Equipment, FCC 11-153, Notice of 
Proposed Rulemaking, 26 FCC Rcd 14870, 14876, para.8 (2011).
    \47\ Viewability Order, at para. 20.
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    14. We seek comment on whether to extend the existing viewability 
rule. To the extent the Commission decides to retain the rule, we seek 
comment on whether it should be retained for another three years or a 
different period of time. Is three years too long or is a sunset at 
some later date more advisable? The Commission considered possible 
alternative rules in the Viewability Order, but each was rejected. The 
alternatives were rejected in each case because the Commission did 
``not believe we have the authority to exempt any class of subscribers 
from this requirement,'' \48\ and each of these alternative approaches 
would result in some subscribers losing access to must-carry 
signals.\49\
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    \48\ Viewability Order, at para. 39.
    \49\ For instance, Entravision, licensee of a number of 
commercial broadcast stations, proposed requiring all must-carry 
stations to be provided in analog to all of a cable system's 
subscribers until 85 percent of the served population had the means 
to view a digital signal. At that point, the operator could drop the 
analog version of all must-carry signals. Viewability Order at para. 
39. The Commission rejected this proposal because it concluded that 
its statutory authority precluded the exemption of any class of 
subscribers from the viewability rule no matter how small that class 
might be. Id. Comcast and other cable operators proposed a rule that 
would allow them to carry must-carry signals in digital so long as 
they made equipment available for lease or sale to subscribers that 
would allow the subscribers to view the digital signal. Id. at para. 
22. The Commission rejected this proposal because it would 
essentially require current analog subscribers to pay extra for the 
digital tier to watch must-carry signals they have a statutory right 
to receive on every tier of service, noting that ``[f]or every 
receiver `connected to a cable system by a cable operator or for 
which a cable operator provides a connection,' that operator must 
ensure that the broadcast signals in question are actually viewable 
on their subscribers' receivers.'' Id., citing 47 U.S.C. 534(b)(7). 
The National Association of Broadcasters proposed a rule that would 
require all broadcast signals to be carried in the same manner by a 
cable system--that is, ``if one must carry station is carried in 
analog, all broadcasters, whether carried pursuant to retransmission 
consent or must carry, would be carried in analog.'' Id. at para. 
21. A system could therefore decline to provide any broadcast 
signals in analog without violating this comparative rule, even if 
that disenfranchised all of its analog subscribers. In each of the 
proposals outlined above, there is the potential, if not a 
certainty, that must-carry signals would not be viewable by analog 
subscribers.

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[[Page 9192]]

    15. Unlike the alternatives proposed, the rule the Commission 
adopted in 2007 ensures viewability by all subscribers, while 
simultaneously giving cable operators the flexibility to choose the 
best option for complying with their viewability obligations.\50\ We 
seek comment on whether this rule is still necessary to ensure 
subscriber access to must-carry signals and support the continued 
viability of must-carry stations. What are the costs and benefits, for 
subscribers, broadcasters, and cable operators, of retaining this rule 
for another three years? To the extent feasible, commenters should 
quantify in dollars any asserted costs or benefits. We have not 
received any complaints under this rule, nor have we received any 
requests to waive it, from cable systems large or small. This speaks 
well of the compliance efforts of operators. It also seems to indicate 
that the burden of compliance has been relatively minimal and that the 
actual costs of compliance have likely not been onerous. We seek 
comment on whether this observation is accurate. How many subscribers, 
particularly those with some digital service, still rely in part on 
analog cable service? We seek comment generally on the cost and service 
disruption to consumers if the current rule was allowed to sunset. In 
particular, we seek comment on the number of cable subscribers whose 
residences lie outside the digital noise limited service contour of 
their local broadcast must-carry stations and therefore would have 
difficulty receiving a quality broadcast signal over the air.\51\ 
Further, we seek comment on the number of cable subscribers that own 
antennas capable of receiving their local broadcast must-carry stations 
where such signals are available.
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    \50\ Viewability Order at para. 38.
    \51\ See e.g., 47 CFR 73.622(e).
---------------------------------------------------------------------------

    16. Finally, we seek comment on any other proposals that would 
achieve the results necessary to assure the viewability of must-carry 
signals through an approach different than that of our existing rule. 
To the extent any parties find the current rule burdensome, we seek 
comment on proposals that will satisfy the statute in a less burdensome 
manner. Is any rule necessary to effectuate the statutory intent? If 
so, any proposals for an alternative rule to ensure the actual 
viewability of must-carry signals should include specific proposed 
wording, as well as an analysis of how the proposal is consistent with 
the statute.\52\ In the Viewability Order, we previously determined 
that the viewability rule was consistent with constitutional 
requirements.\53\ We seek comment on any marketplace or other changes 
that have since occurred that may impact our analysis of the 
constitutional issues. To the extent that we allow the rule to sunset, 
we seek comment on how, as a legal and technical matter, the Commission 
would ensure cable operators' compliance with the statutory requirement 
to make all must-carry broadcast signals actually viewable to all 
subscribers.\54\
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    \52\ To the extent we retain the rule for a specified period, we 
believe that it is appropriate to again consider the state of the 
marketplace before allowing the rule to sunset.
    \53\ Viewability Order, 22 FCC Rcd at 21083-21099.
    \54\ 47 U.S.C. 534(b)(7); 47 U.S.C. 535(h).
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IV. HD Carriage Exemption

    17. The Act also requires that cable operators carry broadcast 
signals ``without material degradation.'' \55\ As the Commission has 
interpreted the Act in the context of carriage of digital signals, this 
requirement has two parts: Cable operators may not discriminate in 
their carriage between broadcast and non-broadcast signals, and HD 
broadcast signals must be carried to viewers in HD.\56\ In the Third 
FNPRM, the Commission sought comment on alternatives to these rules 
\57\ that would ``minimize the economic impact for small cable 
operators while still complying with the statutory requirements.'' \58\
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    \55\ See 47 U.S.C. 534(b)(4)(A) (``The signals of local 
commercial television stations that a cable operator carries shall 
be carried without material degradation. The Commission shall adopt 
carriage standards to ensure that, to the extent technically 
feasible, the quality of signal processing and carriage provided by 
a cable system for the carriage of local commercial television 
stations will be no less than that provided by the system for 
carriage of any other type of signal.'') and 535(g)(2) (``A cable 
operator shall provide each qualified local noncommercial 
educational television station whose signal is carried in accordance 
with this section with bandwidth and technical capacity equivalent 
to that provided to commercial television broadcast stations carried 
on the cable system and shall carry the signal of each qualified 
local noncommercial educational television station without material 
degradation.'').
    \56\ Viewability Order, at para. 4.
    \57\ See 47 CFR 76.62.
    \58\ Third FNPRM at para. 80, citing the Second FNPRM at para. 
12.
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    18. Based on the comments received in response to the Third FNPRM, 
and in consideration of the effect of this requirement on operators of 
small cable systems, the Fourth Report & Order adopted a temporary 
exemption from the HD carriage requirement for certain small 
systems.\59\ Commenters in that proceeding argued that, without an 
exemption from the material degradation rules, ``small systems [would] 
be forced to absorb or impose significant and unsustainable price 
increases, or in some instances to shut down altogether.'' \60\ This is 
because some small systems did not have the technical capability or 
system capacity to carry high definition digital signals, and in some 
cases had so few subscribers that per-subscriber costs to upgrade to 
that capacity would be so high as to make it not worthwhile to continue 
operating the system.\61\ The exemption adopted by the Commission 
applies to operators of cable systems with 2,500 or fewer subscribers 
that are not affiliated with a cable operator serving more than 10 
percent of all MVPD subscribers, and to those with an activated channel 
capacity of 552 MHz or less. It permits such systems to carry broadcast 
signals in standard definition (SD) digital or analog, even if the 
signals are provided in HD.\62\
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    \59\ See generally Fourth Report & Order.
    \60\ National Cable & Telecommunications Association Comments at 
12 (March 3, 2008).
    \61\ Fourth Report & Order at paras. 6-7.
    \62\ Fourth Report & Order at para. 18.
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    19. The exemption was not intended to be permanent, however. The 
Commission instead provided it for a three-year window, in order to 
give small systems ``a clear opportunity to come into compliance with 
the rules by spreading their effort and costs over an extended 
period.'' \63\ Recognizing the connection to the viewability rule,

[[Page 9193]]

which was adopted at the same time as the HD carriage requirement and 
also has an impact on cable carriage of broadcast signals, the 
Commission determined that this exemption should be reviewed in 
conjunction with that rule.\64\
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    \63\ Fourth Report & Order at para. 11.
    \64\ Id. at para. 12.
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    20. We tentatively conclude that it is in the public interest to 
extend the small-system HD exemption for another three years because 
the number of systems relying on the exemption indicates that three 
years did not provide sufficient time for some small systems to come 
into compliance in a cost-effective way.\65\ As discussed above, the 
Commission originally declined to make this exemption permanent in 
order to retain flexibility, and in order to have an opportunity to 
review the state of the marketplace several years after the digital 
broadcast transition.\66\ Although the Commission anticipated that the 
three year exemption would give small systems an opportunity to come 
into compliance by making relatively large expenditures over a longer 
period of time, based on the most recent available data from the Annual 
Cable Operator Report, 37 percent of small systems that reported data, 
and that would be eligible for the exemption, were still not providing 
any HD service.\67\ To the extent that most markets have at least one 
station broadcasting in HD, a system is almost certainly relying on the 
exemption if it is not carrying any signals in HD.\68\ Thus, the Form 
325 data indicate that a large number of small systems are relying on 
the exemption.\69\ Form 325 does not provide information about why 
these small systems are not providing HD service, but at the time the 
exemption was adopted the Commission anticipated that the most likely 
reason would be the savings from not upgrading the cable plant to 
provide digital signals. We seek comment on this analysis. How many 
small cable operators are currently relying on this exemption? We seek 
comment on why they are doing so, rather than offering HD programming 
to their subscribers. We seek comment on the business environment in 
which these systems operate; are competitive pressures from direct 
broadcast satellite providers and over builders on these systems such 
that they would be carrying broadcast signals in HD if it were cost 
effective? As we stated we would in the Fourth Report & Order, we seek 
comment on the ``cost and service disruption to consumers'' who 
subscribe to these cable systems and do not receive any high definition 
programming, and on any disruptions that would occur if we retain the 
exemption. Have any broadcasters or cable operators received viewer 
complaints concerning the lack of HD programming from subscribers to 
such systems?
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    \65\ We propose to have the Commission conduct a further review 
of this exemption during the last year of the three year period 
(between June 12, 2014 and June 12, 2015), and if the Commission 
does not decide to extend it, the exemption will sunset.
    \66\ Fourth Report & Order at para. 11.
    \67\ Staff analysis of 2010 Annual Cable Operator Report (Form 
325).
    \68\ Approximately 99% of non-eligible cable systems are 
carrying at least one HD signal. Staff analysis of 2010 Annual Cable 
Operator Report (Form 325).
    \69\ See infra Appendix B (discussing our analysis of FCC Form 
325 data).
---------------------------------------------------------------------------

    21. As noted above, the central purpose of the exemption was to 
provide small systems with additional time to upgrade and, where 
necessary, expand their systems to come into full compliance with the 
material degradation provisions of the carriage rules by carrying HD 
versions of all HD broadcast signals without making relatively large 
expenditures over a short period of time.\70\ Have systems taken, or 
are systems taking, the opportunity to do so? As discussed above, 
commenters cited in the Fourth Report & Order argued that the costs of 
providing digital service were simply too high for some systems to 
bear.\71\ Will any of these systems still lack sufficient opportunity 
to upgrade if the exemption is extended for three years? Given that not 
all eligible systems are taking advantage of the exemption,\72\ and no 
non-eligible system has sought an exemption from this requirement, 
should the definition of ``small system'' for the purposes of this 
exemption be narrowed? Are there any systems providing some HD service 
but not carrying all broadcast signals in high definition? Should we 
consider revising the exemption such that stations would be required to 
carry all local broadcast signals in HD if they provide any HD service? 
We particularly seek data regarding any systems that have taken 
advantage of the exemption, but either already have begun or have firm 
plans to begin providing HD broadcast signals in HD. We also seek 
comment more generally on the costs and benefits of the exemption, for 
subscribers, broadcasters, and small cable operators. For example, has 
the exemption benefited small cable system operators by allowing them 
to direct capital expenditures to upgrade or introduce new services? 
Conversely, has the exemption unnecessarily allowed small cable 
operators simply to delay compliance with their material degradation 
obligations, thereby denying subscribers access to HD broadcast 
signals? To the extent feasible, commenters should quantify in dollars 
any asserted costs or benefits.
---------------------------------------------------------------------------

    \70\ Fourth Report & Order at para. 11.
    \71\ See supra para. 16.
    \72\ See infra Appendix B.
---------------------------------------------------------------------------

    22. Comments at the time of the initial grant of this exemption 
indicated that it was necessary to protect the economic health of some 
small systems, and indeed that some systems might become too expensive 
to continue operation without the exemption.\73\ We seek comment on 
whether and to what extent this remains the situation today. We seek 
comment more generally on ``the state of technology and the 
marketplace'' as they relate to this exemption. Finally, we seek 
comment on whether the benefits to the operators of small cable systems 
of extending this exemption for three years would outweigh the costs to 
subscribers and broadcasters. In proposing to extend the HD carriage 
exemption, we are guided by the Commission's determination in the 
Fourth Report and Order that ``[a] three-year sunset provides the 
Commission with the opportunity after the transition to review these 
rules in light of the potential cost and service disruptions to 
consumers, and the state of technology and the marketplace.'' \74\ We 
are unaware of any marketplace changes that would make extension of the 
exemption for three additional years inadvisable. However, we assume 
the need for this exemption will not be permanent; if we extend the 
exemption, should we clarify that the Commission will not consider 
another extension? If the proposal to extend for three more years is 
adopted, small systems will have had a total of six additional years to 
come into compliance with the HD carriage requirement. We seek comment 
on whether three years is an appropriate amount of time, or if the HD 
carriage exemption should be retained for a different period of time.
---------------------------------------------------------------------------

    \73\ Fourth Report & Order at para. 7.
    \74\ Fourth Report & Order, at para. 11.
---------------------------------------------------------------------------

V. Declaratory Order

    23. Subsequent to the Commission's adoption of the Viewability 
Order and the Fourth Report and Order, the full-power transition was 
successfully completed on June 12, 2009, after Congress chose to delay 
it from the originally scheduled conclusion on February 17, 2009.\75\ 
When adopting the Viewability Order, the Commission

[[Page 9194]]

stated that, barring later action, the sunset of the viewability rule 
would occur ``three years from the date on which all full-power 
television stations cease broadcasting analog signals,'' which will be 
June 12, 2012.\76\ The HD carriage exemption was intended to be ``in 
force for three years from the date of the digital transition'' and 
reviewed ``simultaneously with the viewability rule[ ].'' \77\ The 
Commission stated that the exemption would therefore be in force ``from 
February 18, 2009 through February 17, 2012,'' or three years after the 
originally scheduled conclusion of the transition.\78\ The Commission 
expressed a clear intent to have the HD carriage exemption and 
viewability sunsets running in parallel, and did not at the time 
anticipate the subsequent congressionally mandated extension of analog 
broadcasting. It is clear from the text of the Viewability Order and 
the Fourth Report and Order that the Commission intended the rule/
exemption to remain in effect 3 full years from the conclusion of the 
transition, and thus having them sunset four months early in February 
2012 would be contrary to the stated intent of the Commission.\79\ 
Therefore, we hereby issue this Declaratory Order that the HD carriage 
exemption, like the viewability rule, will be in effect up to and until 
June 12, 2012, absent further Commission action.
---------------------------------------------------------------------------

    \75\ Full-Power TV Broadcasters Go All-Digital, Federal 
Communications Commission, Press Release (June 13, 2009).
    \76\ Viewability Order at para. 16.
    \77\ Fourth Report & Order at paras. 11-12.
    \78\ Id. at paras. 12, 18.
    \79\ See Viewability Order, at para. 16; Fourth Report and 
Order, at para. 11.
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VI. Procedural Matters

A. Initial Paperwork Reduction Act of 1995 Analysis

    24. The Fourth FNPRM has been analyzed with respect to the 
Paperwork Reduction Act of 1995 (``PRA'').\80\ This document does not 
contain new or modified information collection requirements subject to 
the PRA, Public Law 104-13. In addition, therefore, it does not contain 
any new or modified ``information collection burden for small business 
concerns with fewer than 25 employees,'' pursuant to the Small Business 
Paperwork Relief Act of 2002, Public Law 107-198, see 44 U.S.C. 
3506(c)(4).
---------------------------------------------------------------------------

    \80\ Paperwork Reduction Act of 1995 (``PRA''), Public Law 104-
13, 109 Stat 163 (1995) (codified in Chapter 35 of Title 44 U.S.C.).
---------------------------------------------------------------------------

B. Initial Regulatory Flexibility Analysis

    25. As required by the Regulatory Flexibility Act of 1980, as 
amended (``RFA'') \81\ the Commission has prepared this Initial 
Regulatory Flexibility Analysis (``IRFA'') of the possible economic 
impact on a substantial number of small entities by the policies and 
rules proposed in this Fourth Notice of Proposed Rulemaking (``Fourth 
FNPRM''). Written public comments are requested on this IRFA. Comments 
must be identified as responses to the IRFA and must be filed by the 
deadlines for comments on the Fourth FNPRM as indicated on its first 
page. The Commission will send a copy of the Fourth FNPRM, including 
this IRFA, to the Chief Counsel for Advocacy of the Small Business 
Administration (``SBA'').\82\ In addition, the Fourth FNPRM and IRFA 
(or summaries thereof) will be published in the Federal Register.\83\
---------------------------------------------------------------------------

    \81\ See 5 U.S.C. 603. The RFA, see 5 U.S.C. 601-612, has been 
amended by the Small Business Regulatory Enforcement Fairness Act of 
1996 (``SBREFA''), Public Law 104-121, Title II, 110 Stat. 857 
(1996).
    \82\ See 5 U.S.C. 603(a).
    \83\ See id.
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1. Need for, and Objectives of, the Proposals
    26. This Fourth FNPRM seeks comment on rules relating to the manner 
in which broadcast DTV content will be displayed when it is carried by 
a cable system. The current viewability rule and the exemption from the 
HD carriage rule for certain small systems were both intended to expire 
three years after the conclusion of the transition, subject to a 
simultaneous review during the prior year. This Fourth FNPRM seeks 
comment on whether to extend for three years the current viewability 
rule, which requires that cable operators must either carry the signals 
of commercial and non-commercial must-carry stations in analog format 
to all analog cable subscribers, or, for all-digital systems, carry 
those signals in digital format, provided that all subscribers, 
including those with analog television sets, that are connected to a 
cable system by a cable operator or for which the cable operator 
provides a connection have the necessary equipment to view the 
broadcast content. Viewability of must-carry signals is required by the 
Communications Act, and as a result the current rule must be extended 
or replaced by an alternative that provides the same level of 
subscriber access to must-carry programming. The Fourth FNPRM also 
proposes to extend for three years the HD carriage exemption, which 
exempts certain small systems from the obligation to carry HD broadcast 
signals in HD. The exemption applies to operators of cable systems with 
2,500 or fewer subscribers that are not affiliated with a cable 
operator serving more than 10% of all MVPD subscribers, and to those 
with an activated capacity of 552 MHz or less. The Fourth FNPRM seeks 
comment on the exemption's impact and importance.
2. Legal Basis
    27. The authority for the action proposed in this rulemaking is 
contained in Sections 4, 303, 614, and 615 of the Communications Act of 
1934, as amended, 47 U.S.C. 154, 303, 534, and 535.
3. Description and Estimate of the Number of Small Entities to Which 
the Proposals Will Apply
    28. 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 if adopted.\84\ The RFA generally 
defines the term ``small entity'' as having the same meaning as the 
terms ``small business,'' ``small organization,'' and ``small 
governmental jurisdiction.'' \85\ In addition, the term ``small 
business'' has the same meaning as the term ``small business concern'' 
under the Small Business Act.\86\ A ``small business concern'' is one 
which: (1) Is independently owned and operated; (2) is not dominant in 
its field of operation; and (3) satisfies any additional criteria 
established by the Small Business Administration (SBA).\87\ The rule 
changes proposed herein will directly affect small television broadcast 
stations and small cable operators. A description of these small 
entities, as well as an estimate of the number of such small entities, 
is provided below.
---------------------------------------------------------------------------

    \84\ 5 U.S.C. 603(b)(3).
    \85\ 5 U.S.C. 601(b).
    \86\ 5 U.S.C. 601(3) (incorporating by reference the definition 
of ``small-business concern'' in the Small Business Act, 15 U.S.C. 
632). Pursuant to 5 U.S.C. 601(3), the statutory definition of a 
small business applies ``unless an agency, after consultation with 
the Office of Advocacy of the Small Business Administration and 
after opportunity for public comment, establishes one or more 
definitions of such term which are appropriate to the activities of 
the agency and publishes such definition(s) in the Federal 
Register.''
    \87\ 15 U.S.C. 632.
---------------------------------------------------------------------------

    29. Television Broadcasting. The SBA defines a television 
broadcasting station as a small business if such station has no more 
than $14.0 million in annual receipts.\88\ Business concerns included 
in this industry are those ``primarily engaged in broadcasting images 
together with sound.'' \89\ The Commission has

[[Page 9195]]

estimated the number of licensed commercial television stations to be 
1,392.\90\ According to Commission staff review of the BIA/Kelsey, 
MAPro Television Database (``BIA'') as of April 7, 2010, about 1,015 of 
an estimated 1,380 commercial television stations \91\ (or about 74 
percent) have revenues of $14 million or less and, thus, qualify as 
small entities under the SBA definition. The Commission has estimated 
the number of licensed noncommercial educational (NCE) television 
stations to be 390.\92\ We note, however, that, in assessing whether a 
business concern qualifies as small under the above definition, 
business (control) affiliations \93\ must be included. Our estimate, 
therefore, likely overstates the number of small entities that might be 
affected by our action, because the revenue figure on which it is based 
does not include or aggregate revenues from affiliated companies. The 
Commission does not compile and otherwise does not have access to 
information on the revenue of NCE stations that would permit it to 
determine how many such stations would qualify as small entities.
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    \88\  See 13 CFR 121.201, NAICS Code 515120 (2007).
    \89\ Id. This category description continues, ``These 
establishments operate television broadcasting studios and 
facilities for the programming and transmission of programs to the 
public. These establishments also produce or transmit visual 
programming to affiliated broadcast television stations, which in 
turn broadcast the programs to the public on a predetermined 
schedule. Programming may originate in their own studios, from an 
affiliated network, or from external sources.'' Separate census 
categories pertain to businesses primarily engaged in producing 
programming. See Motion Picture and Video Production, NAICS code 
512110; Motion Picture and Video Distribution, NAICS Code 512120; 
Teleproduction and Other Post-Production Services, NAICS Code 
512191; and Other Motion Picture and Video Industries, NAICS Code 
512199.
    \90\ See News Release, ``Broadcast Station Totals as of December 
31, 2009,'' 2010 WL 676084 (F.C.C.) (dated Feb. 26, 2010) 
(``Broadcast Station Totals''); also available at http://hraunfoss.fcc.gov/edocs_public/attachmatch/DOC-296538A1.pdf.
    \91\ We recognize that this total differs slightly from that 
contained in Broadcast Station Totals, supra note 83; however, we 
are using BIA's estimate for purposes of this revenue comparison.
    \92\ See Broadcast Station Totals, supra note 83.
    \93\ ``[Business concerns] are affiliates of each other when one 
concern controls or has the power to control the other or a third 
party or parties controls or has to power to control both.'' 13 CFR 
121.103(a)(1).
---------------------------------------------------------------------------

    30. In addition, an element of the definition of ``small business'' 
is that the entity not be dominant in its field of operation. We are 
unable at this time to define or quantify the criteria that would 
establish whether a specific television station is dominant in its 
field of operation. Accordingly, the estimate of small businesses to 
which rules may apply do not exclude any television station from the 
definition of a small business on this basis and are therefore over-
inclusive to that extent. Also, as noted, an additional element of the 
definition of ``small business'' is that the entity must be 
independently owned and operated. We note that it is difficult at times 
to assess these criteria in the context of media entities and our 
estimates of small businesses to which they apply may be over-inclusive 
to this extent.
    31. Cable and Other Program Distribution. Since 2007, these 
services have been defined within the broad economic census category of 
Wired Telecommunications Carriers; that category is defined as follows: 
``This industry comprises establishments primarily engaged in operating 
and/or providing access to transmission facilities and infrastructure 
that they own and/or lease for the transmission of voice, data, text, 
sound, and video using wired telecommunications networks. Transmission 
facilities may be based on a single technology or a combination of 
technologies.'' \94\ The SBA has developed a small business size 
standard for this category, which is: All such firms having 1,500 or 
fewer employees.\95\ According to Census Bureau data for 2007, there 
were a total of 955 firms in this previous category that operated for 
the entire year.\96\ Of this total, 939 firms had employment of 999 or 
fewer employees, and 16 firms had employment of 1000 employees or 
more.\97\ Thus, under this size standard, the majority of firms can be 
considered small and may be affected by rules adopted pursuant to the 
Fourth FNPRM.
---------------------------------------------------------------------------

    \94\ U.S. Census Bureau, 2007 NAICS Definitions, ``517110 Wired 
Telecommunications Carriers'' (partial definition), http://www.census.gov/naics/2007/def/ND517110.HTM#N517110.
    \95\ 13 CFR 121.201, NAICS code 517110 (2007).
    \96\ U.S. Census Bureau, 2007 Economic Census, Subject Series: 
Information, Table 5, Employment Size of Firms for the United 
States: 2007, NAICS code 5171102 (issued Nov. 2010).
    \97\ See id.
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    32. Cable Companies and Systems. The Commission has developed its 
own small business size standards, for the purpose of cable rate 
regulation. Under the Commission's rules, a ``small cable company'' is 
one serving 400,000 or fewer subscribers, nationwide.\98\ Industry data 
indicate that, of 1,076 cable operators nationwide, all but eleven are 
small under this size standard.\99\ In addition, under the Commission's 
rules, a ``small system'' is a cable system serving 15,000 or fewer 
subscribers.\100\ Industry data indicate that, of 7,208 systems 
nationwide, 6,139 systems have under 10,000 subscribers, and an 
additional 379 systems have 10,000-19,999 subscribers.\101\ Thus, under 
this second size standard, most cable systems are small and may be 
affected by rules adopted pursuant to the Fourth FNPRM.
---------------------------------------------------------------------------

    \98\ See 47 CFR 76.901(e). The Commission determined that this 
size standard equates approximately to a size standard of $100 
million or less in annual revenues. See Implementation of Sections 
of the 1992 Cable Television Consumer Protection and Competition 
Act: Rate Regulation, MM Docket Nos. 92-266, 93-215, Sixth Report 
and Order and Eleventh Order on Reconsideration, 10 FCC Rcd 7393, 
7408 para. 28 (1995).
    \99\ These data are derived from R.R. Bowker, Broadcasting & 
Cable Yearbook 2006, ``Top 25 Cable/Satellite Operators,'' pages A-8 
& C-2 (data current as of June 30, 2005); Warren Communications 
News, Television & Cable Factbook 2006, ``Ownership of Cable Systems 
in the United States,'' pages D-1805 to D-1857.
    \100\ See 47 CFR 76.901(c).
    \101\ Warren Communications News, Television & Cable Factbook 
2006, ``U.S. Cable Systems by Subscriber Size,'' page F-2 (data 
current as of Oct. 2005). The data do not include 718 systems for 
which classifying data were not available.
---------------------------------------------------------------------------

    33. Cable System Operators. The Act also contains a size standard 
for small cable system operators, which is ``a cable operator that, 
directly or through an affiliate, serves in the aggregate fewer than 1 
percent 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.'' \102\ The Commission has determined 
that an operator serving fewer than 677,000 subscribers shall be deemed 
a small operator, if its annual revenues, when combined with the total 
annual revenues of all its affiliates, do not exceed $250 million in 
the aggregate.\103\ Industry data indicate that, of 1,076 cable 
operators nationwide, all but ten are small under this size 
standard.\104\ We note that the Commission neither requests nor 
collects information on whether cable system operators are affiliated 
with entities whose gross annual revenues exceed $250 million,\105\ and 
therefore we are unable to estimate more accurately the number of cable 
system operators that would qualify as small under this size standard.
---------------------------------------------------------------------------

    \102\ 47 U.S.C. 543(m)(2); see also 47 CFR 76.901(f) & nn.1-3.
    \103\ 47 CFR 76.901(f); see FCC Announces New Subscriber Count 
for the Definition of Small Cable Operator, Public Notice, 16 FCC 
Rcd 2225 (Cable Services Bureau 2001).
    \104\ These data are derived from R.R. Bowker, Broadcasting & 
Cable Yearbook 2006, ``Top 25 Cable/Satellite Operators,'' pages A-8 
& C-2 (data current as of June 30, 2005); Warren Communications 
News, Television & Cable Factbook 2006, ``Ownership of Cable Systems 
in the United States,'' pages D-1805 to D-1857.
    \105\ The Commission does receive such information on a case-by-
case basis if a cable operator appeals a local franchise authority's 
finding that the operator does not qualify as a small cable operator 
pursuant to 76.901(f) of the Commission's rules.
---------------------------------------------------------------------------

    34. Open Video Services. The open video system (``OVS'') framework 
was established in 1996, and is one of four statutorily recognized 
options for the provision of video programming

[[Page 9196]]

services by local exchange carriers.\106\ The OVS framework provides 
opportunities for the distribution of video programming other than 
through cable systems. Because OVS operators provide subscription 
services,\107\ OVS falls within the SBA small business size standard 
covering cable services, which is ``Wired Telecommunications 
Carriers.'' \108\ The SBA has developed a small business size standard 
for this category, which is: All such firms having 1,500 or fewer 
employees. According to Census Bureau data for 2007, there were a total 
of 3,188 firms in this previous category that operated for the entire 
year.\109\ Of this total, 3,144 firms had employment of 999 or fewer 
employees, and 44 firms had employment of 1,000 employees or more.\110\ 
Thus, under this size standard, most cable systems are small and may be 
affected by rules adopted pursuant to the Fourth FNPRM. In addition, we 
note that the Commission has certified some OVS operators, with some 
now providing service.\111\ Broadband service providers (``BSPs'') are 
currently the only significant holders of OVS certifications or local 
OVS franchises.\112\ The Commission does not have financial or 
employment information regarding the entities authorized to provide 
OVS, some of which may not yet be operational. Thus, again, at least 
some of the OVS operators may qualify as small entities.
---------------------------------------------------------------------------

    \106\ 47 U.S.C. 571(a)(3)-(4). See Annual Assessment of the 
Status of Competition in the Market for the Delivery of Video 
Programming, MB Docket No. 06-189, Thirteenth Annual Report, 24 FCC 
Rcd 542, 606 para. 135 (2009) (``Thirteenth Annual Cable Competition 
Report'').
    \107\ See 47 U.S.C. 573.
    \108\ U.S. Census Bureau, 2007 NAICS Definitions, ``517110 Wired 
Telecommunications Carriers''; http://www.census.gov/naics/2007/def/ND517110.HTM#N517110.
    \109\ U.S. Census Bureau, 2007 Economic Census, Subject Series: 
Information, Table 5, Employment Size of Firms for the United 
States: 2007, NAICS code 5171102 (issued Nov. 2010).
    \110\ See id.
    \111\ A list of OVS certifications may be found at http://www.fcc.gov/mb/ovs/csovscer.html.
    \112\ See Thirteenth Annual Cable Competition Report, 24 FCC Rcd 
at 606-07 para. 135. BSPs are newer firms that are building state-
of-the-art, facilities-based networks to provide video, voice, and 
data services over a single network.
---------------------------------------------------------------------------

4. Description of Projected Reporting, Recordkeeping, and Other 
Compliance Requirements for Small Entities
    35. The Fourth FNPRM seeks comment on a rule revision that would 
extend for three years the existing viewability rule, which would 
affect small television broadcast stations and cable operators by 
requiring cable systems to continue to make must-carry broadcast 
signals viewable in analog on hybrid systems, or in digital on all-
digital systems. This should impose no compliance burden on small cable 
systems, because they will simply be continuing current practices, and 
should continue to have a positive impact on small television broadcast 
stations. The Fourth FNPRM also seeks comment on extending the HD 
carriage exemption, which would affect small television broadcast 
stations and cable operators. It is beneficial to small cable operators 
by providing them with flexibility, and imposes no compliance burden on 
small television broadcast stations who need take no action as a result 
of this proposed extension.
5. Steps Taken To Minimize Significant Economic Impact on Small 
Entities, and Significant Alternatives Considered
    36. The RFA requires an agency to describe any significant 
alternatives that it has considered in reaching its proposed approach, 
which may include the following four alternatives (among others): (1) 
The establishment of differing compliance or reporting requirements or 
timetables that take into account the resources available to small 
entities; (2) the clarification, consolidation, or simplification of 
compliance or reporting requirements under the rule for small entities; 
(3) the use of performance, rather than design, standards; and (4) an 
exemption from coverage of the rule, or any part thereof, for small 
entities.\113\ We seek comment on the applicability of any of these 
alternatives to affected small entities.
---------------------------------------------------------------------------

    \113\ 5 U.S.C. 603(c)(1)-(c)(4).
---------------------------------------------------------------------------

    37. The requirements proposed in the Fourth FNPRM would in most 
cases create minimal economic impact on small entities, and in some 
cases would provide positive impact. The viewability requirement has 
been mandated by Congress, and continuation of the current rule could 
minimize economic impact on small cable systems and television 
broadcast stations by maintaining the status quo and not requiring any 
additional investment in engineering or legal services. The HD carriage 
exemption does not impose a negative economic impact on any small cable 
operator, and provides a positive economic impact to any operator of a 
system that chooses to take advantage of the exemption. The exemption 
does not impose any significant burdens on small television stations. 
We invite small entities to submit comment on the impact of extension 
or sunset of the viewability rule and the HD carriage exemption, and on 
how the Commission could further minimize potential burdens on small 
entities.
6. Federal Rules That May Duplicate, Overlap, or Conflict With the 
Proposed Rules
    38. None.

VII. Ordering Clauses

    39. It is ordered that, pursuant to sections 4, 303, 614, and 615 
of the Communications Act of 1934, as amended, 47 U.S.C. 154, 303, 534, 
and 535, this Fourth Further Notice Of Proposed Rulemaking and 
Declaratory Order is adopted.
    40. It is further ordered that, pursuant to sections 5(d) of the 
Administrative Procedure Act, Sections 4, 303, 614, and 615 of the 
Communications Act of 1934, as amended, and 1.2 of the Commission's 
rules, 5 U.S.C. 554(e); 47 U.S.C. 154, 303, 534, 535; 47 CFR 1.2, the 
viewability rule and the HD Carriage exemption will be in effect up to 
and until June 12, 2012, absent further Commission action.
    41. It is ordered that the Reference Information Center, Consumer 
and Governmental Affairs Bureau, shall send a copy of this Notice of 
Proposed Rulemaking, including the Initial Regulatory Flexibility 
Analysis, to the Chief Counsel for Advocacy of the Small Business 
Administration.

List of Subjects in 47 CFR Part 76

    Administrative practice and procedure, Cable television, Equal 
employment opportunity, Political candidates, Reporting and 
recordkeeping requirements.

Federal Communications Commission.
Marlene H. Dortch,
Secretary.
    For the reasons discussed in the preamble, the Federal 
Communications Commission proposes to amend 47 CFR part 76 as follows:

[[Page 9197]]

PART 76--MULTICHANNEL VIDEO AND CABLE TELEVISION SERVICE

    1. The authority citation for part 76 continues to read as follows:

    Authority: 47 U.S.C. 151, 152, 153, 154, 301, 302, 302a, 303, 
303a, 307, 308, 309, 312, 315, 317, 325, 339, 340, 341, 503, 521, 
522, 531, 532, 534, 535, 536, 537, 543, 544, 544a, 545, 548, 549, 
552, 554, 556, 558, 560, 561, 571, 572, 573.

    2. Section 76.56 is amended by revising paragraph (d)(5) to read as 
follows:


Sec.  76.56  Signal carriage obligations.

* * * * *
    (d) * * *
    (5) The requirements set forth in paragraph (d)(3) of this section 
shall cease to be effective June 12, 2015, unless the Commission 
extends the requirements prior to that date.
* * * * *
    The following pages will not appear in the Code of Federal 
Regulations.

Appendix

325 Data Analysis for Viewability Sunset

    1. The FCC collects data from cable operators annually on the 
``Annual Report of Cable Systems'' also called ``Form 325.'' Through 
this form, the FCC collects basic operational information from cable 
television systems nationwide, including data about their 
architecture, capacity and number of subscribers. Each year the FCC 
designates a sample of cable systems having fewer than 20,000 
subscribers and all systems having 20,000 or more subscribers to 
file Form 325. Staff performed an analysis of the Form 325 data from 
the 2010 filing year for use in the viewability proceeding.

Must Carry/Retransmission Consent

    2. Filers of Form 325 report information on the channels 
carried, including for broadcast channels whether the channel is 
carried pursuant to a must-carry designation or a retransmission 
consent agreement. Staff analyzed the 2010 filings and found that 
approximately 780 of 2000 full-service and low-power stations 
elected or defaulted to must carry.
    3. To make this approximation, staff first extracted from the 
Form 325 database all records where a cable operator marked a 
channel as either retransmission-consent or must-carry. A single 
broadcast station often has multiple entries on the Form 325 if the 
operator carried multiple versions to comply with the viewability 
requirements or if the operator chose to carry multicast streams of 
a single station. For example, WXXX-TV was reported 92 times by 25 
cable systems with 7 different spellings.

------------------------------------------------------------------------
 
-------------------------------------------------------------------------
WXXX
WXXX WEATHER NOW
WXXX 7
WXXX-TV
WXXX WEATHER
WXXX HD
WXXX RETRO TV NETWORK
------------------------------------------------------------------------

    4. Next, the staff reduced the number of entries per cable 
system to one by considering that if at any one of those entries was 
marked as must-carry, then that station was must-carry on that cable 
system. The dataset for WXXX was then reduced to one report for each 
of the 25 cable systems. If any one of the entries for a cable 
system was marked as must-carry, the report for that cable system 
was must-carry.
    5. Due to either different elections on different cable systems 
or accidental misreporting by cable operators, many stations had a 
mixture of must-carry and retransmission-consent reports.

------------------------------------------------------------------------
                                                               Retrans-
                                                 Must-Carry    mission-
                                                               Consent
------------------------------------------------------------------------
WXXX..........................................            2           23
------------------------------------------------------------------------

    6. The staff aggregated the reports, and if operators reported a 
station as must-carry as or more often as operators reported that 
station as retransmission-consent, the staff considered that station 
to prefer must-carry. In this case, the majority of cable systems 
reports retransmission consent, so WXXX was assigned a single 
preference:

------------------------------------------------------------------------
 
------------------------------------------------------------------------
WXXX................................  Retransmission-
                                      Consent
------------------------------------------------------------------------

    7. The process was repeated for each of the approximately 2000 
broadcast stations listed in the 325 reports. In the event of an 
equal number of systems reporting must-carry and retransmission 
consent, the station was considered to have chosen must-carry.

Subscribers Served by Hybrid Cable Systems

    8. Staff analyzed the ``number of digital channels activated'' 
and ``number of analog channels activated'' data fields in the Form 
325 reports from filing year 2010. A hybrid system has at least one 
activated analog channel and at least one activated digital channel. 
As the Form 325 is collected by a sample of cable systems, staff 
performed the below analysis to determine that 56.8 million of the 
62 million cable subscribers are on hybrid systems.
    9. Of the 565 systems that reported more than 20,000 
subscribers, 542 were hybrid systems, with those systems serving 
46.6 million subscribers. No scaling factor was necessary as reports 
must be filed by all systems with more than 20,000 subscribers.
    10. Of the 249 systems that reported between 5,000 and 20,000 
subscribers, 233 were hybrid systems serving 2.7 million 
subscribers. A representative sample of systems with between 5,000 
and 20,000 is asked to file reports each year. Based on previous 
years' Form 325 reports and other research, staff estimated that 
there are 451 such systems in total. When the data was extrapolated, 
staff estimated that 422 of the 451 systems are hybrid. Thus, the 
2.7 million subscribers were scaled by a multiple of (422/233), 
yielding an estimated total of 4.9 million subscribers.
    11. Of the 154 systems that reported fewer than 5000 
subscribers, 91 were hybrid systems serving 184 thousand 
subscribers. A representative sample of systems with fewer than 5000 
subscribers is asked to file reports each year. Based on previous 
years' Form 325 reports and other research, staff estimated that 
there are 4450 such systems in total. When the data was 
extrapolated, staff estimated that 2630 of the 4450 systems are 
hybrid. When scaled by a multiple of (2630/91), staff estimated that 
there are a total of 5.3 million subscribers served by these 
systems.
    12. Staff summed the total number of subscribers served by 
hybrid systems and came up with a result of 56.8 million such 
subscribers (46.6 million + 4.9 million + 5.3 million).
    Staff used a similar process as described above to estimate the 
total number of cable subscribers in the U.S. as approximately 62 
million. This total is close to other publicly available estimates 
of cable subscribers.

[FR Doc. 2012-3703 Filed 2-15-12; 8:45 am]
BILLING CODE 6712-01-P


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