460 Federal Register / Vol. 63, No. 3 / Tuesday, January 6, 1998 / Proposed Rules

FEDERAL COMMUNICATIONS

COMMISSION

47 CFR Part 1

[MM Docket No. 97–247; FCC 97–414]

Fees for Ancillary or Supplementary

Use of Digital Television Spectrum

Pursuant to Section 336(e)(1) of the

Telecommunications Act of 1996

AGENCY: Federal Communications

Commission.

ACTION: Proposed rule.

SUMMARY: This Notice of Proposed Rule

Making implements Section 336 of the

Telecommunications Act of 1996 (‘‘1996

Act’’) which requires the Commission to

establish a program to assess and collect

fees for digital television (DTV)

licensees’ use of DTV capacity for the

provision of ancillary or supplementary

services. The statute requires the

imposition of a fee where DTV licensees

use their capacity for services for which

the payment of a subscription fee is

required or where the licensee receives

revenues from a third party other than

advertising revenues in return for

transmitting material furnished by the

third party. With this Notice of

Proposed Rule Making, the Commission

seeks comment on various methods by

which such fees might be assessed

including a fee assessed as a percentage

of gross revenues received from the

ancillary or supplementary use of DTV

capacity, a fee based on net revenues or

incremental profits received from the

ancillary or supplementary services

provided, or a fee based upon a

combination of a flat rate and a

percentage of revenues.

DATES: Comments are due on or before

March 3, 1998 and Reply Comments are

due on or before April 2, 1998.

ADDRESSES: Comments should be sent to

the Office of Secretary, Federal

Communications Commission, 1919 M

St., N.W., suite 222, Washington, DC

20554.

FOR FURTHER INFORMATION CONTACT: Jerry

Duvall, Chief Economist, Mass Media

Bureau (202) 418–2600, Susanna

Zwerling, Policy and Rules Division,

Mass Media Bureau (202) 418–2140, or

Jonathan Levy, Office of Plans and

Policy (202) 418–2030.

SUPPLEMENTARY INFORMATION: This is a

summary of the Commission’s Notice of

Proposed Rule Making, FCC 97–414

adopted December 18, 1997 and

released December 19, 1997. The full

text of this Commission Notice is

available for inspection and copying

during normal business hours in the

FCC Dockets Branch (Room 239), 1919

M Street N.W., Washington, D.C. The

complete text of this Notice may also be

purchased from the Commission’s copy

contractor, International Transcription

Services (202) 857–3800 2100 M Street,

N.W., Suite 140, Washington, D.C.

20037.

Synopsis of Notice

I. Introduction

In April, 1997, the Federal

Communications Commission

(‘‘Commission’’) adopted rules

implementing a transition to digital

television (‘‘DTV’’) for all existing

television broadcasters. In accordance

with 1996 Act, established standards for

license eligibility, a transition and

construction schedule, and a

requirement that broadcasters continue

to provide one free, over-the-air

television service. As required by the

1996 Act, the Commission adopted rules

permitting DTV licensees to use this

spectrum to provide ancillary or

supplementary services, provided such

services do not derogate the free

television service. The 1996 Act further

requires the Commission to assess and

collect a fee for the ancillary or

supplementary use of the spectrum

when the licensee receives for these

services either subscription fees or other

compensation from third parties. With

this Notice of Proposed Rule Making,

the Commission identifies various

programs by which such fees may be

assessed.

II. Background

The 1996 Act set up the framework

for licensing DTV spectrum to existing

broadcasters and, in an earlier

proceeding, the Commission established

rules by which those licenses are

assigned and adopted regulations

regarding DTV licensees’ provision of

ancillary or supplementary services.

Specifically, Congress directed the

Commission to require that the

broadcast of any ancillary or

supplementary services on frequencies

designated for advanced television

services: (1) Must be consistent with the

advanced television technology

designated by the Commission; (2) must

not derogate any advanced television

services (including high definition

television (‘‘HDTV’’)) that the

Commission may require; and (3) may

be subject to Commission regulations

applicable to analogous services.

Moreover, Congress directed the

Commission to establish a fee program

for any ancillary or supplementary

services for which a licensee receives

any compensation other than

commercial advertisements used to

support non-subscription broadcasting.

The Commission adopted a technical

standard that supports the transmission

of HDTV as well as the transmission of

multiple programs of standard

definition television (‘‘SDTV’’) and nonvideo services. This standard permits

the provision of other services including

the transmission of CD quality audio

signals or large amounts of data. The

standard allows broadcasters to send

video, voice and data simultaneously

and to provide a range of services,

switching easily and quickly from one

type of service to another.

The Commission’s rules permit

broadcasters to use their DTV capacity

to provide ancillary and supplementary

services which do not interfere with the

required free service. Broadcasters

ability to provide ancillary or

supplementary services will allow the

broadcasters flexibility to respond to the

demands of their audience for such

services.

The 1996 Act required DTV licensees

receiving fees or certain other

compensation for ancillary or

supplementary services provided on the

DTV spectrum to return a portion of that

revenue to the public. The Commission

was charged with establishing a means

of assessing and collecting fees for those

ancillary or supplementary services

specified in the statute (‘‘feeable

ancillary or supplementary services’’).

These services are described more fully

below.

To implement this provision of the

1996 Act, the Commission seeks

comment on various methods of

assessing a fee. The Commission sets

forth possible fee assessment programs,

including a fee related to the amount

that would have been realized at

auction, a fee based upon net revenues

or incremental profits received from the

provision of feeable ancillary or

supplementary services, a fee assessed

as a percentage of gross revenues, and

a fee based upon a hybrid of a flat rate

and a percentage of revenues. The

Commission invites public comment on

these fee assessment programs.

III. Discussion

Goals and General Criteria for Assessing

Fees

The 1996 Act first directs that any fee

established should ‘‘recover for the

public a portion of the value of the

public spectrum’’ made available for

ancillary or supplementary use by DTV

licensees. This requirement echoes the

competitive bidding provisions of the

Communications Act of 1934

(‘‘Communications Act’’). Second, the
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1996 Act requires that the fee be

designed ‘‘to avoid unjust enrichment’’

of broadcast licensees by their use of the

spectrum for ancillary or supplementary

services for which they collect fees or

certain other compensation. DTV

licensees could be placed at an unfair

advantage if they paid no fee when

using their DTV capacity to provide

certain ancillary or supplementary

services, given that nonbroadcast

licensees providing analogous services

may have acquired their spectrum

through an auction process. Third, the

1996 Act requires that the fee recover

‘‘for the public an amount that, to the

extent feasible, equals but does not

exceed (over the term of the license) the

amount that would have been

recovered’’ in an auction.

Section 336(e)(1) of the 1996 Act

requires a fee to be assessed upon any

services ‘‘for which the payment of a

subscription fee is required in order to

receive such services’’ or ‘‘for which the

licensee directly or indirectly receives

compensation from a third party in

return for transmitting materials

furnished by such third party.’’ The Act

specifically exempts from the fee any

service which relies upon ‘‘commercial

advertisements used to support

broadcasting for which a subscription

fee is not required.’’ Further, the

Conference Report states that the

Commission must ‘‘establish a fee

program for any ancillary or

supplementary services if subscription

fees or any other compensation apart

from commercial advertisements are

required in order to receive such

services.’’ Thus, a fee must be assessed

on any ancillary or supplementary

services that are not supported entirely

by commercial advertisements. The

Commission recognizes that feeable

ancillary or supplementary services may

be offered simultaneously with other

services, including HDTV, SDTV, or

other video programming supported

entirely by commercial advertisements,

or other non-feeable ancillary or

supplementary services. The mere fact

that a feeable ancillary or

supplementary service is being

transmitted does not mean that all

simultaneously transmitted ancillary or

supplementary services are feeable.

In establishing a fee for the feeable

ancillary or supplementary use of DTV

capacity, the Commission is cognizant

of the administrative burden which

such a fee could entail. In order to

minimize this burden both for

broadcasters and for the Commission,

the fee should be simple to understand

and be calculable with readily available

information. An overly complex fee

program could be difficult to calculate

and enforce and could create

uncertainty that might undermine a

DTV licensee’s business planning.

The Commission intends to establish

a fee program consistent with the

criteria set forth in the 1996 Act. The

1996 Act evidences the intent of

Congress that broadcasters be allowed

the flexibility to provide such services.

In implementing the statutorily

mandated fee program, it is not the

Commission’s intention to dissuade

broadcasters from using the DTV

capacity to provide feeable ancillary or

supplementary services.

The Commission recognizes that there

may be some tension among our goals.

The means of assessing the fee may

affect whether ancillary or

supplementary services are offered at all

and which services are offered. A fee set

too high would serve as a disincentive

for broadcasters to provide feeable

ancillary or supplementary services. It

could reduce the benefits that

consumers receive from services

provided on the DTV capacity. On the

other hand, a fee that is set too low

might not prevent the unjust enrichment

of DTV licensees as required by the

1996 Act and might not recover an

amount approximating the amount that

would have been recovered at auction,

although it could recover for the public

a ‘‘portion of the value’’ of the spectrum.

Commenters are asked to address how

the proposals and options set forth

below strike the appropriate balance

among the goals outlined.

Proposals for Establishing Fees for

Feeable Ancillary or Supplementary

Services

Among the fee options consistent

with the guidelines of the 1996 Act are

first, a fee akin to the amount that

would have been received in an auction

of the spectrum; second, a fee based

upon the net revenues or incremental

profits from the ancillary or

supplementary use of a licensee’s DTV

capacity; third, a fee assessed as a

percentage of the gross revenues

received for the ancillary or

supplementary use of this capacity; and

fourth, a fee based upon a hybrid of a

flat rate and a percentage of revenues.

Revenue-based fees can affect the mix

of ancillary or supplementary services

provided, and also raise issues of

accounting, auditing, and cost

allocation. The choice of a fee structure

may affect the choices made by

consumers of feeable ancillary and

supplementary services. A fee based on

gross revenues does not require any cost

allocation, but does require auditing of

revenues to ensure that licensees do not

attribute revenues from feeable ancillary

or supplementary services to nonfeeable services in order to reduce their

fee liability. Because a fee based upon

gross revenues ignores variations in the

cost of providing different feeable

ancillary or supplementary services, it

will affect consumer choices among

feeable ancillary or supplementary

services. The magnitude of this effect

depends on how much variation there is

in the unit cost of different feeable

ancillary or supplementary services. If

the costs are quite similar, the effects

will be minor. Notwithstanding any

differences in cost, a smaller fee on

gross revenues will reduce the impact

on consumer choice. A variant on the

gross revenue fee is a hybrid fee,

consisting of a flat fee combined with a

percentage of gross revenues. This

structure would not further affect

consumers’ choices among feeable

ancillary or supplementary services and

would place a fixed floor under the

amount recovered in return for use of

the public spectrum. A fee based on net

revenues or incremental profits presents

additional accounting challenges,

because it requires assigning costs to

each feeable ancillary or supplementary

service. Apportioning common costs

among services may be quite difficult,

but determining service-specific

incremental costs could be less difficult.

A fee based on net revenues or

incremental profits could make

consumers’ choices among feeable

ancillary or supplementary services

more efficient. The paragraphs below

describe each of these options, and

explain the Commission’s inclination to

favor a formula that incorporates gross

revenues as an element.

Auction-Related Fee

The statute requires that the fee ‘‘to

the extent feasible’’ equal but not

exceed, over the term of the license, the

amount that would have been realized

at auction. There are significant

obstacles, however, to basing the fee

directly on such a spectrum-auction

model. Were it possible to construct, an

auction model would provide some

guidance in valuing the DTV spectrum.

However, spectrum auctions that have

been held to date, such as those

conducted for licenses to provide

personal communications services, took

place in circumstances so different from

those in which a fee is to be assessed for

the ancillary or supplementary use of

DTV capacity that they are not

necessarily applicable. Depending upon

a variety of technological and regulatory

factors including what services are

authorized, auctioned spectrum may be

usable either for more or fewer kinds of

services than those authorized on the
462 Federal Register / Vol. 63, No. 3 / Tuesday, January 6, 1998 / Proposed Rules

DTV spectrum. Moreover, the process of

assessing a fee for feeable ancillary or

supplementary use of DTV capacity

involves setting a fee for the use of the

assigned spectrum for any number of

services at different times. The relative

market demand among services may

change month-to-month, day-to-day, or

hour-by-hour. In addition, different

types of services may require different

amounts of capacity. For example, at

any given instant HDTV may require the

entire 20 Mbps payload capacity while

standard definition television

programming requires far less capacity.

Moreover, a licensee providing free,

advertiser-supported programming on

its DTV channel, whether in the form of

HDTV or multiple SDTV streams, is

exempt from the statute’s fee

requirement. Thus, it is difficult to

identify market transactions that involve

the transfer of spectrum usage rights

equivalent to that capacity which DTV

licensees may use to provide feeable

ancillary or supplementary services. A

fee directly tied to the auction-model

estimate of the value of the capacity

used for particular feeable ancillary or

supplementary services would

necessarily be a moving target, would

involve innumerable unknown

variables, and would be difficult if not

impossible to assess. Given these

problems, the Commission is initially

disinclined to base the fees on a model

that would seek to simulate the revenue

that would be generated from an

auction. The language of the 1996 Act

provides flexibility in this regard,

stating that the Commission should use

the auction value ‘‘to the extent

feasible.’’

Relationship Between the Value of the

DTV Spectrum and Revenues

The Commission believes that a fee

program can be constructed that

satisfies the statutory directive through

the imposition of a fee based upon

revenues received from the feeable

ancillary or supplementary use of the

DTV capacity. The relationship between

the value of the DTV capacity used in

the provision of feeable ancillary or

supplementary services and the revenue

produced from the provision of those

services can be demonstrated using

microeconomic theory. It may,

therefore, be possible to establish a fee

program as required by the 1996 Act

based upon some measure of revenues

received from these services.

More specifically, where DTV

capacity is viewed in economic terms as

an input of production used to produce

a given ancillary or supplementary

service, and the capacity can be

combined with other inputs of

production, such as equipment,

programming, and labor in variable

proportions to produce the service, it is

possible to postulate a relationship

between variable quantities of DTV

capacity and the quantity of the service

actually produced, holding constant all

other inputs of production. Whatever

the nature of the actual empirical inputoutput relationship, it will reflect the

economic principle of diminishing

returns to DTV capacity as a variable

input of production, if the other inputs

of production are held constant. In other

words, all other things remaining the

same, an increase in the quantity of

digital capacity used to produce a given

feeable ancillary or supplementary

service will result in the production of

increasing quantities of the ancillary or

supplementary service although the rate

of increase will diminish as the

increasing quantity of capacity is forced

to work with fixed quantities of all other

inputs of production. The relationship

between the quantity of DTV capacity

used in production and the diminishing

rate of increase in total output is called,

in graphical terms, a marginal product

curve.

Microeconomic theory demonstrates

that the marginal product curve

represents a firm’s demand curve for a

single variable input of production, or,

here, a broadcaster’s demand for digital

capacity for producing feeable ancillary

or supplementary services. Theory also

shows that a profit-maximizing firm will

use an amount of the variable input of

production (DTV capacity) that equates

the marginal product (or incremental

change in total output produced

resulting from an incremental change in

the amount of DTV capacity used in

production) of the variable input or DTV

capacity, multiplied by the unit market

price of the specific ancillary or

supplementary service, with the unit

price of the input (DTV capacity) itself.

In the case of DTV capacity as a variable

input of production, there is no marketdetermined price established by auction

which can be equated with the value of

marginal product (‘‘VMP’’), i.e.,

marginal product multiplied by the unit

market price of a specific ancillary or

supplementary service. Within the range

of efficient production described by the

empirical input-output relationship, the

value of marginal product curve

represents the implicit value to the

broadcaster of DTV capacity used to

produce feeable ancillary or

supplementary services. Moreover, it

can be shown that VMP may be

interpreted as a measure of incremental

revenue attributable to a one unit

increase in the quantity of DTV capacity

used to produce a given ancillary or

supplementary service. Multiplying the

implicit unit value of DTV capacity by

the corresponding quantity of capacity

actually used in providing a given

service provides an estimate of the

implicit market value of that particular

quantity of capacity for that particular

broadcaster providing that specific

service. The ratio of this implicit value

of DTV capacity to some measure of

revenues generated by the sale of the

specific feeable ancillary or

supplementary service provides a

conceptual basis for relating the value of

the capacity to service revenues.

This conceptual approach can only

approximate the implicit value of DTV

spectrum over a range of possible

quantities of the DTV capacity actually

used to produce specific ancillary or

supplementary services, since marketdetermined unit prices of DTV spectrum

are unavailable. The Commission

believes that the VMP curve provides

some evidence of the implicit value of

DTV capacity used to provide each

specific feeable ancillary or

supplementary service and, therefore,

provides a conceptual basis for

estimating the market value of such

spectrum within the range of efficient

production of feeable ancillary or

supplementary services.

Fee Based Upon Net Revenues

The value of the DTV capacity used

for feeable ancillary or supplementary

services may be estimated through the

net revenues from each such service

provided. Net revenue is defined as

revenue from a service less incremental

costs and a portion of joint and common

costs. The Commission believes that this

revenue proxy for the auction value is

one means of satisfying the criteria of

the 1996 Act. A fee could be computed

as a percentage of net revenues derived

from each feeable ancillary or

supplementary service. Such fee has the

additional effect of allowing

broadcasters to build their feeable

ancillary or supplementary services to

the break-even point without the

assessment of a fee, fostering the

development of these new services.

Ascertaining the costs involved in

calculation of net revenues may,

however, be problematic. Such a

determination would necessitate the

apportionment of common expenses

between and among free television

services offered on a licensee’s DTV

capacity and each feeable ancillary or

supplementary use of its DTV capacity.

The Commission has concerns as to

whether this information will be readily

and reliably available. The Commission

seeks comment on the burden such a fee
Federal Register / Vol. 63, No. 3 / Tuesday, January 6, 1998 / Proposed Rules 463

program would impose on broadcasters

and on Commission staff in the audit

and review process.

Fee Based Upon Incremental Profits

From Specific Services

An alternative to such a cost

accounting approach that would avoid

the problem of the allocation of costs

shared by multiple broadcasting and

ancillary or supplementary services is

assessing the fee on the difference

between the incremental gross revenues

for a given feeable ancillary or

supplementary service and the

incremental economic costs associated

with the production of the service. The

service-specific incremental cost would

include the costs of all directlyattributable inputs of production, such

as labor and equipment, and the

economic depreciation and rate of

return on any specific capital assets that

are used exclusively in the production

of a given feeable ancillary or

supplementary service. Any costs, either

variable or fixed, that are shared in the

production of the advertiser-supported

television service and an ancillary or

supplementary service would be

omitted in the calculation of profit. This

approach has an advantage over the net

revenue approach of reduced auditing

requirements since joint and common

costs do not have to be allocated.

Nevertheless, due to the accounting and

enforcement difficulties, especially the

potential need to conduct audits, the

Commission remains concerned about

the feasibility of the incremental profits

fee. The Commission seeks comment on

the costs to broadcasters and the

Commission of the specific proposal

that DTV spectrum fees be based on the

calculated profit for each feeable

ancillary or supplementary service. In

particular, what type of studies or

recordkeeping will be required to

estimate service-specific incremental

cost? Will the Commission need to

prescribe specific cost accounting rules

to insure consistent and uniform

calculations of incremental cost for

purposes of calculating service-specific

profit? Will the costs to broadcasters

and the Commission of calculating and

auditing the computation of servicespecific profit exceed the benefit of

avoiding whatever inefficiency in

consumption may be induced by a fee

based on gross revenues?

Fee Based Upon Gross Revenues

A fee assessed as a percentage of a

licensee’s gross revenues from the

provision of feeable ancillary or

supplementary services would be

consistent with the 1996 Act and would

avoid some of the infirmities of the fee

based upon net revenues described

above. Moreover, the Commission

believes a fee based upon a percentage

of gross revenues could foster our goal

of creating a fee structure which does

not dissuade broadcasters from offering

feeable ancillary and supplementary

services. Such a fee would be

straightforward to assess and calculate;

the licensee would be required to report

its gross revenues from feeable ancillary

or supplementary services and to

calculate a fee based upon a percentage

of these revenues. In addition, a fee set

at a percentage of gross revenues

provides broadcasters a more certain fee

amount to use in their long term

planning and decisions.

Hybrid Fees

Another possible fee structure is a

two-part, tariff-like fee, in which the fee

is comprised of a combination of a flat

dollar amount and a percentage of gross

revenues. Compared to a fee based

purely on a percentage of gross

revenues, a hybrid fee would include an

element—the flat fee—that would

provide a uniform means of preventing

unjust enrichment and recover a portion

of the value of the spectrum consistent

with the statute. Moreover, a flat fee

component would permit us to set the

percentage rate of gross revenues at a

lower level, thus avoiding a fee program

that dissuades broadcasters from

offering feeable ancillary and

supplementary services. A flat amount,

however, would be an up-front cost,

which could serve as a disincentive to

broadcasters to provide ancillary or

supplementary services. Given the

statutory requirement that a fee be

imposed on feeable ancillary and

supplementary uses, a flat fee may be

appropriate even if it does discourage

some such uses. The addition of a

percentage of gross revenues to the flat

rate could prevent the unjust

enrichment that might result from a flat

fee, by recovering some percentage of

gross revenues in excess of the up-front

payment. The Commission invites

comment on the two-part fee proposal.

The Commission is especially interested

in comments that recommend what the

initial flat rate should be and explain

the basis of the recommendation. Would

the initial flat rate discourage

broadcasters’ institution of feeable

ancillary or supplementary services or

serve as an incentive to broadcasters to

further develop feeable ancillary or

supplementary services once

established?

Percentage Rate of Fee

If the fee is assessed as a percentage

of revenues or incremental profits, the

percentage rate of the fee, more than the

process by which it is derived will

determine the degree to which the fee

affects broadcasters’ decisions. The 1996

Act exempts free broadcasting services

from any such fees, thus to some extent

creating an incentive for DTV licensees

to use this capacity for free broadcasting

services in addition to the one FCCmandated free television service. This is

consistent with the Commission’s

previous statement that ‘‘the

fundamental use of the 6 MHz DTV

license will be for the provision of free

over-the-air television service.’’ The

greater the fee, the greater the incentive

created by the fee for a broadcaster to

use its assigned spectrum to provide

free, over-the-air broadcast

programming instead of subscription

programming or other feeable ancillary

or supplementary services. The lower

the fee, the more flexible the broadcaster

may be in serving audience demand for

services and in choosing the mix of

services it provides. The Commission

seeks comment as to the types of

services broadcasters may provide using

DTV capacity. The Commission is

particularly interested in DTV licensees’

plans for the provision of feeable

ancillary or supplementary services. To

the extent that commenters can estimate

revenues at this time, the Commission

seeks information as to the revenues

anticipated from the use of the DTV

capacity for feeable ancillary or

supplementary services.

The percentage rate of the fee must

reflect the statutory requirements that

the fee recover a portion of the value of

the spectrum used for these services,

avoid unjust enrichment, and

approximate the revenue that would

have been achieved had these services

been licensed through an auction. The

Commission asks commenters to take

the statutory requirements and policy

goals into account in proposing

particular percentage rates. The

Commission seeks comment on how to

factor in permitting broadcasters

flexibility to provide feeable ancillary or

supplementary services in establishing

an appropriate percentage rate for the

fee. The Commission is reluctant to set

the percentage rate so high that it would

dissuade broadcasters from providing

feeable ancillary or supplementary

services. The Commission asks

commenters to explain how the

percentages they propose implicate this

consideration. The Commission seeks

comment on what percentage would be

appropriate for the fee, taking into

account the various proposals for

assessing a fee. Clearly, a fee based upon

gross revenues will be set at a lower
464 Federal Register / Vol. 63, No. 3 / Tuesday, January 6, 1998 / Proposed Rules

percentage rate than a fee based upon

net revenues or incremental profits.

Similarly, the percentage rate of a fee

incorporated into a hybrid approach

will be lower than the percentage rate of

a fee that is not additional to an up-front

payment. Commenters are encouraged

to make specific recommendations as to

the level of the fee and type of fee

assessment program to which the fee is

to be tied and to provide evidence to

build a record supporting those

recommendations. For example, should

the fee be set at one percent or less of

gross revenues generated from feeable

ancillary and supplementary services, or

up to a more substantial ten percent of

gross revenues?

An additional consideration is

whether different feeable ancillary or

supplementary services should be

subject to fees set at different percentage

rates. A varying percentage rate could

have a number of disparate effects.

Different rates for different services

might create incentives for broadcasters

to offer services with lower fees over

services with higher fees and could

affect broadcasters’ choice from among

alternative feeable ancillary or

supplementary uses. On the other hand,

a varying percentage rate fee could be

used to adjust the costs to broadcasters

of providing feeable ancillary or

supplementary services to reflect the

different costs to competitors offering

analogous services on spectrum

purchased at auction or on spectrum not

obtained at auction or through

technologies that are not spectrumbased. Another consideration is whether

the percentage rate of the fee should

vary based upon the time of day during

which the service is being provided or

other factors. The Commission seeks

comment on the imposition of a varying

percentage rate fee.

The statute provides for the periodic

adjustment of the fee, requiring that the

fee ‘‘be adjusted by the Commission

from time to time in order to continue

to comply’’ with the 1996 Act. While

this provision generally gives us the

authority to recalculate the fee once

DTV is established and feeable ancillary

or supplementary services are being

offered, it also raises the possibility that

the fee be set at a lower percentage rate

at the outset. The assessment of a lower

initial percentage rate would allow

broadcasters a greater percentage of

gross revenues during the build-out of

DTV service and would also provide the

Commission the opportunity to adjust

the percentage rate after gaining more

information concerning the nature of the

services offered by licensees. The

periodic adjustment of the fee allows

the Commission to ensure that the fee

program continues to meet the

requirements of the statute, including

the prevention of unjust enrichment and

the recovery of a portion of the value of

the spectrum. For example, the fee

program could be adjusted where it is

shown that it has given DTV licensees

an unfair advantage in the provision of

their feeable ancillary or supplementary

services as compared with their

nonbroadcast competitors providing

analogous services on spectrum licensed

through a competitive bidding process.

Noncommercial Television Licensees

In their Petition for Reconsideration

of the Fifth Report and Order, the

Association of America’s Public

Television Stations and the Public

Broadcasting Service (‘‘APTS/PBS’’)

requested that the Commission exempt

public television licensees from any

obligation to pay fees when they offer

feeable ancillary or supplementary

services on their DTV capacity as a

source of funding for their public

television operation. APTS/PBS argue

that the revenues from the remunerative

provision of feeable ancillary or

supplementary services on their DTV

capacity may provide a revenue stream

to support their noncommercial

broadcasting activities.

To the extent public television

licensees ultimately offer feeable

ancillary and supplementary services,

the Commission must determine

whether and in what circumstances they

are subject to fees for these services. The

Commission seeks comment on the

argument that noncommercial television

licensees should be exempt from fees or

subject to lower fees. Is such relief

consistent with the 1996 Act’s

requirement that a fee be collected

where the DTV spectrum is used for

feeable ancillary or supplementary

services for which a subscription fee is

charged or compensation is received

other than advertising revenues? If so,

what form should such an exemption

take? Should noncommercial DTV

licensees be exempt from the fee where

they offer revenue producing feeable

ancillary or supplementary services as a

source of funding for public television?

If noncommercial licensees are subject

to a fee for the feeable ancillary or

supplementary use of the DTV capacity,

should the fee be assessed at the same

percentage as the fee for commercial

licensees or at a lower rate? If

noncommercial broadcasters are exempt

from the fee, or assessed a reduced fee

what effect would this have on

competing providers of these services?

Implementation

The Commission proposes to employ

similar procedures to those it currently

uses for the administration of its filing

fees, regulatory fees, and auction

revenue programs. Further, it proposes

to generally follow the same reporting

and filing requirements as currently

exist for other programs. The

Commission seeks comment on the

proposed means of implementing and

collecting the fee and on any special

circumstances that merit an exception to

current processes.

IV. Conclusion

The 1996 Act required the

Commission to assess fees on the

provision of feeable ancillary or

supplementary services over the DTV

spectrum. The Commission issues this

Notice of Proposed Rule Making to seek

comment on the fee assessment

programs proposed herein.

V. Administrative Matters

Initial Paperwork Reduction Act of 1995

This Notice proposes a new fee

assessment program which may contain

an information collection requirement.

As part of our continuing effort to

reduce paperwork burdens, the

Commission invites the general public

and the Office of Management and

Budget (‘‘OMB’’) to take this

opportunity to comment on the

information collection contained in this

Notice, as required by the Paperwork

Reduction Act of 1995, Public Law No.

104–13. Public and agency comments

are due at the same time as other

comments on this Notice; OMB

comments are due 60 days from the date

of publication of this Notice in the

Federal Register. Comments should

address: (a) Whether the proposed

collection of information is necessary

for the proper performance of the

functions of the Commission, including

whether the information shall have

practical utility; (b) the accuracy of the

Commission’s burden estimates; (c)

ways to enhance the quality, utility, and

clarity of the information collected; and

(d) ways to minimize the burden of the

collection of information on the

respondents, including the use of

automated collection techniques or

other forms of information technology.

In addition to filing comments with the

Secretary, a copy of any comments on

the information collections contained

herein should be submitted to Judy

Boley, Federal Communications

Commission, Room 234, 1919 M Street,

N.W., Washington, DC 20554, or via the

Internet to jboley@fcc.gov and to

Timothy Fain, OMB Desk Officer, 10236
Federal Register / Vol. 63, No. 3 / Tuesday, January 6, 1998 / Proposed Rules 465

NEOB, 725—17th Street, N.W.,

Washington, DC 20503 or via the

Internet to fainlt@al.eop.gov.

Ex Parte Rules

This proceeding will be treated as a

‘‘permit-but-disclose’’ proceeding

subject to the ‘‘permit-but-disclose’’

requirements under section 1.1206(b) of

the rules. 47 CFR 1.1206(b), as revised.

Ex parte presentations are permissible if

disclosed in accordance with

Commission rules, except during the

Sunshine Agenda period when

presentations, ex parte or otherwise, are

generally prohibited. Persons making

oral ex parte presentations are reminded

that a memorandum summarizing a

presentation must contain a summary of

the substance of the presentation and

not merely a listing of the subjects

discussed. More than a one or two

sentence description of the views and

arguments presented is generally

required. See 47 CFR 1.1206(b)(2), as

revised. Additional rules pertaining to

oral and written presentations are set

forth in section 1.1206(b).

Initial Regulatory Flexibility Analysis

With respect to this Notice, an Initial

Regulatory Flexibility Analysis

(‘‘IRFA’’) is contained in Appendix A

and summarized below. As required by

the Regulatory Flexibility Act, the

Commission has prepared an IRFA of

the expected significant economic

impact on small entities by the policies

and rules proposed in this Notice.

Written public comments are requested

on the IRFA. In order to fulfill the

mandate of the Contract with America

Advancement Act of 1996 regarding the

Final Regulatory Flexibility Analysis,

the Commission asks a number of

questions in our IRFA regarding the

prevalence of small businesses in the

industries covered by this Notice.

Comments on the IRFA must be filed in

accordance with the same filing

deadlines as comments on the Notice,

but they must have a distinct heading

designating them as responses to the

IRFA.

VI. Initial Regulatory Flexibility

Analysis

As required by the Regulatory

Flexibility Act (RFA), the Commission

has prepared this present Initial

Regulatory Flexibility Analysis (IRFA)

of the expected significant economic

impact on small entities by the policies

and rules proposed in this Notice.

Written public comments are requested

on this IRFA. Comments must be

identified as responses to the IRFA and

must be filed by the deadlines for

comments on the Notice provided

above. The Commission will send a

copy of the Notice, including this IRFA,

to the Chief Counsel for Advocacy of the

Small Business Administration.

Reasons Why Agency Action Is Being

Considered

The 1996 Act directed the

Commission to adopt regulations

allowing licensees to use a portion of

the DTV spectrum to provide feeable

ancillary or supplementary services and

to establish a program to assess and

collect a fee for these services. In the

Fifth Report and Order the Commission

established rules permitting

broadcasters to offer feeable ancillary or

supplementary services on the DTV

spectrum. As directed by Congress, in

this proceeding the Commission

proposes a means of assessing and

collecting a fee for the feeable ancillary

or supplementary use of the DTV

spectrum.

Need For and Objectives of the

Proposed Rule Changes

The 1996 Act specified that the

Commission shall establish a program to

assess and collect fees for the feeable

ancillary or supplementary use of the

DTV capacity. Congress set forth the

following objectives to be achieved by

the assessment of the fee: First, that the

fee recover a portion of the value of the

DTV capacity; second, that the fee

prevent the unjust enrichment of

broadcast licensees using the DTV

capacity to provide services for which

they receive revenues other than

advertising revenues; third, that the fee

recover ‘‘for the public an amount that,

to the extent feasible, equals but does

not exceed (over the term of the license)

the amount that would have been

recovered’’ in an auction of the

spectrum; and finally, that any free

broadcasting service which relies upon

commercial advertisements rather than

subscription fees or other compensation

for its revenues be exempt from the fee

requirement. In the Fifth Report and

Order the Commission expressed its

objective that broadcasters develop

innovative uses of the DTV spectrum

and be free to respond to market

demand for feeable ancillary or

supplementary services provided over

this spectrum. This proceeding should

achieve the objectives set forth in the

1996 Act and in the Fifth Report and

Order.

Legal Basis

Authority for the actions proposed in

this Notice may be found in sections

4(i), 303(r), 336 and 403 of the

Communications Act of 1934, as

amended, 47 U.S.C. 154(i), 303(r), 336

and 403.

Recording, Recordkeeping, and Other

Compliance Requirements

The Notice proposes a new fee

assessment program which may contain

an information collection requirement.

In general, the proposed fee assessment

programs which would assess a fee for

feeable ancillary or supplementary

services based upon revenues derived

from these services would require

broadcasters to report their revenues

derived from these services. Certain

alternative fee assessment proposals

may require more information from

broadcasters than would other

proposals. In the Notice, the

Commission has proposed a fee

assessment program that seeks to

minimize the administrative and

reporting burdens on broadcast

licensees.

Description and Estimate of the Number

of Small Entities to Which the Proposed

Rules Will Apply

Under the RFA, small entities may

include small organizations, small

businesses, and small governmental

jurisdictions. The RFA generally defines

the term ‘‘small organization’’ to mean

‘‘any not-for-profit enterprise which is

independently owned and operated and

is not dominant in its field.’’ In

addition, the RFA, generally defines the

term ‘‘small business’’ as having the

same meaning as the term ‘‘small

business concern’’ under the Small

Business Act, 15 U.S.C. 632. 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’’). Pursuant to 5

U.S.C. 601(3), the statutory definition of

a small business applies ‘‘unless an

agency after consultation with the Office

of Advocacy of the SBA and after

opportunity for public comment,

establishes one or more definitions of

such term which are appropriate to the

activities of the agency and publishes

such definition(s) in the Federal

Register.’’

The proposed rules and policies will

apply to television broadcasting

licensees. The Small Business

Administration defines a television

broadcasting station that has no more

than $10.5 million in annual receipts as

a small business. Television

broadcasting stations consist of

establishments primarily engaged in

broadcasting visual programs by

television to the public, except cable

and other pay television services.
466 Federal Register / Vol. 63, No. 3 / Tuesday, January 6, 1998 / Proposed Rules

Included in this industry are

commercial, religious, educational, and

other television stations. Also included

are establishments primarily engaged in

television broadcasting and which

produce taped television program

materials. There were 1,509 television

stations operating in the nation in 1992.

That number has remained fairly

constant as indicated by the

approximately 1,563 operating

television broadcasting stations in the

nation as of October 31, 1997. For 1992

the number of television stations that

produced less than $10.0 million in

revenue was 1,155 establishments.

Thus, the proposed rules will affect

many of the approximately 1,563

television stations; approximately 1,200

of those stations are considered small

businesses. These estimates may

overstate the number of small entities

since the revenue figures on which they

are based do not include or aggregate

revenues from non-television or nonradio affiliated companies. In addition to owners of operating

television stations, any entity who seeks

or desires to obtain a television

broadcast license may be affected by the

proposals contained in this item. The

number of entities that may seek to

obtain a television broadcast license is

unknown.

Federal Rules That Overlap, Duplicate,

or Conflict With the Proposed Rules

The initiatives and proposed rules

raised in this proceeding do not overlap,

duplicate or conflict with any other

rules.

Any Significant Alternatives Minimizing

the Impact on Small Entities and

Consistent with the Stated Objectives

This Notice solicits comment on a

variety of alternatives discussed herein.

Any significant alternatives presented in

the comments will be considered. The

proposed rules and policies are required

to implement provisions of the 1996

Act. These proposed rules and policies

may affect broadcast television

licensees, some of which are small

businesses. The Commission believes

that the proposed rules and policies

may be necessary to the recovery of a

portion of the value of the public

spectrum and to promote the

development of innovative uses of the

DTV capacity. The Commission seeks

comment on the alternatives proposed

in the Notice and on whether there is a

significant economic impact on any

class of small licensee or permittee as a

result of any of the proposed

approaches.

List of Subjects in 47 CFR Part 1

Television, Television broadcasting.

Federal Communications Commission.

Magalie Roman Salas,

Secretary.

[FR Doc. 98–144 Filed 1–5–98; 8:45 am]

BILLING CODE 6712–01–P

DEPARTMENT OF COMMERCE

National Oceanic and Atmospheric

Administration

50 CFR Part 648

[I.D. 122397D]

New England Fishery Management

Council; Meeting

AGENCY: National Marine Fisheries

Service (NMFS), National Oceanic and

Atmospheric Administration (NOAA),

Commerce.

ACTION: Public meeting.

SUMMARY: The New England Fishery

Management Council (Council) will

hold a 2-day public meeting on January

14 and 15, 1998, to consider actions

affecting New England fisheries in the

exclusive economic zone.

DATES: The meeting is scheduled for

Wednesday, January 14, 1998, at 10

a.m., and Thursday, January 15, 1998, at

8:30 a.m.

ADDRESSES: The meeting will be held at

the Colonial Hilton Resort, 427 Walnut

Street, Wakefield, MA; telephone (617)

245-9300. Requests for special

accommodations should be addressed to

the New England Fishery Management

Council, 5 Broadway, Saugus, MA

01906-1097; telephone: (781) 231-0422.

FOR FURTHER INFORMATION CONTACT: Paul

J. Howard, Executive Director, New

England Fishery Management Council

(781) 231-0422.

SUPPLEMENTARY INFORMATION:

Wednesday, January 14, 1998

After introductions the Council

meeting will begin with a Stock

Assessment Workshop advisory report

on the status of spiny dogfish, surf

clams, weakfish, and striped bass.

Following the report, the Monkfish

Committee will provide information on

recent changes to the management

measures proposed for inclusion in

Amendment 9 to the Northeast

Multispecies Fishery Management Plan

(Multispecies FMP) and review the

concerns of the Mid-Atlantic Fishery

Management Council. During the afternoon session, the

Interspecies Committee will outline its

priorities for the upcoming year: Longterm objectives and a Council strategic

plan; approaches to easing management

restrictions; consistency of Multispecies

FMP objectives; the Multispecies FMP

exempted fisheries program; concerns

over latent effort in some fisheries;

inconsistencies in vessel upgrading,

replacement, and permit-splitting

restrictions; policy statement on the

introduction of harvesting innovations,

and new fisheries technology; NMFS’s

proposed list of authorized gear/

fisheries; area management of fisheries;

and the Atlantic Coastal Cooperative

Statistics Program fishing vessel logbook

form.

The Overfishing Definition Review

Panel will discuss new overfishing

definitions developed to comply with

the Sustainable Fisheries Act (SFA);

species will include Atlantic sea

scallops, sea herring, silver hake, and

possibly other groundfish species. The

Sea Scallop Committee will review its

discussions on alternatives to reach the

new SFA-mandated overfishing targets,

mechanisms for opening and closing

management areas, and the inclusion of

days-at-sea (DAS) leasing as a measure

to be implemented through a framework

adjustment to the Atlantic Sea Scallop

Fishery Management Plan (Scallop

FMP). The Council also will discuss

further the recommendation to close

mid-Atlantic areas to protect small

scallops and the development of a

framework adjustment to allow

scalloping in areas where it is currently

prohibited because of groundfish

conservation concerns. Finally, the

Council will consider additional

management measures for

implementation in 1998, such as other

reductions in DAS to meet the Scallop

FMP fishing mortality objectives.

Thursday, January 15, 1998

Thursday’s meeting will begin with

reports from the Council Chairman,

Executive Director, NMFS Regional

Administrator, Northeast Fisheries

Science Center and Mid-Atlantic

Fishery Management Council liaisons,

and representatives of the Coast Guard

and the Atlantic States Marine Fisheries

Commission. The Council will discuss

and seek approval of final action on

Framework Adjustment 25 to the

Multispecies FMP. The adjustment will

include the following measures to meet

the 1998 fishing year rebuilding plan

objectives: One or a combination of

three options for area closures in the

Gulf of Maine (sequential one or two

month closures that progress from the

Cape Cod to Penobscot Bay areas during

March through September, with

additional areas closed seasonally or, in

one option, year-round); 400-1,000 lb/

day (181.4–453.6 kg/day) trip limit for