```
[Federal Register Volume 63, Number 135 (Wednesday, July 15, 1998)]
[Rules and Regulations]
[Pages 38089-38095]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 98-18838]

=======================================================================
-----------------------------------------------------------------------

FEDERAL COMMUNICATIONS COMMISSION

47 CFR Part 76

[CS Docket No. 97-80; FCC 98-116]

Commercial Availability of Navigation Devices

AGENCY: Federal Communications Commission.

ACTION: Final rule.

-----------------------------------------------------------------------

SUMMARY: These rules provide for the commercial availability of set top 
boxes and other consumer equipment used to receive video signals and 
other services. The intended effect of these rules is to expand 
opportunities for consumers to purchase this equipment from sources 
other than the service provider.

DATES: Effective upon approval by the Office of Management and Budget 
(``OMB''), but no sooner than August 14, 1998, except for Sec. 76.1204, 
which shall become effective July 1, 2000. When approval is received, 
the Commission will publish a document announcing the effective date. 
Written comments by the public on the modified information collection 
requirements should be submitted on or before September 14, 1998.

ADDRESSES: 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, NW, Washington, DC 
20554, or via the Internet to [email protected].

FOR FURTHER INFORMATION CONTACT: Thomas Horan, Cable Services Bureau, 
(202) 418-7200. For additional information concerning the information 
collections contained herein, contact Judy Boley at 202-418-0214, or 
via the Internet at [email protected].

PAPERWORK REDUCTION ACT: This Report and Order has been analyzed with 
respect to the Paperwork Reduction Act of 1995 (the ``1995 Act'') and 
found to impose new or modified information collection requirements on 
the public. The Commission, as part of its continuing effort to reduce 
paperwork burdens, invites the general public to take this opportunity 
to comment on the information collection requirements contained in this 
Report and Order, as required by the 1995 Act. Public comments are due 
September 14, 1998. Comments should address: (a) Whether the proposed 
collection of information is necessary for the proper performance of 
the functions of the Commission, including whether the information 
shall have practical utility; (b) the accuracy of the Commission's 
burden estimates; (c) ways to enhance the quality, utility, and clarity 
of the information collected; and (d) ways to minimize the burden of 
the collection of information on the respondents, including the use of 
automated collection techniques or other forms of information 
technology.
    OMB Approval Number: 3060-XXXX (new collection).
    Title: Commercial Availability of Navigation Devices.
    Type of Review: New collection.
    Respondents: Businesses or other for-profit entities.
    Number of Respondents: 200.
    Estimated Time Per Response: 10 minutes to 40 hours.
    Frequency of Response: On occasion.
    Total Annual Burden to Respondents: 3,266 hours.
    Total Annual Cost to Respondents: $29,632.
    Needs and Uses: The disclosure requirements set forth in this

[[Page 38090]]

proceeding will ensure that consumers can make informed decisions about 
the purchase and proper installation of navigation devices. The 
Sec. 76.1207 petition process will give providers of multichannel video 
programming and equipment providers a forum in which to request relief 
from regulations adopted under this part for a limited time, provided 
that there is an appropriate showing that such a waiver is necessary to 
assist the development or introduction of a new or improved 
multichannel video programming or other service offered over 
multichannel video programming systems, technology, or products. The 
Sec. 76.1208 petition process allows interested parties to petition the 
Commission to provide for a sunset of navigation devices regulations. 
The semiannual reports will be used by the Commission to monitor the 
progress of key industry entities of their efforts to assure the 
commercial availability of navigation devices.

SUPPLEMENTARY INFORMATION:
    1. The Report and Order addresses the issues raised in the Notice 
of Proposed Rulemaking in CS Docket No. 97-80, 62 FR 10011 (March 5, 
1997) (``NPRM''), regarding the mandate expressed in Section 629 of the 
Communications Act (47 U.S.C. Sec. 549) to ensure the commercial 
availability of ``navigation devices,'' the equipment used to access 
video programming and other services from multichannel video 
programming systems.
    2. Entities Covered by Section 629. The Commission concludes that 
Section 629 is jurisdictionally broad in terms of the multichannel 
video programming systems to which it applies. The rules adopted will 
be applied to multichannel video programming distributors (MVPDs) as 
defined by 47 U.S.C. Sec. 522(13). Section 76.1200 of the rules defines 
the entities to which the rules apply. 47 U.S.C. Sec. 573(c)(1) 
requires exclusion of open video systems operators from the 
requirements of Section 629.
    3. Equipment Covered. The language of Section 629 indicates that 
Congress sought to have the marketplace offer consumers a choice over a 
broad range of equipment. Section 629(a) enumerates ``converter boxes, 
interactive communications equipment, and other equipment used by 
consumers to access multichannel video programming and other 
services.'' Section 629 neither exempts nor limits any category of 
equipment used to access multichannel video programming or services 
offered over such systems from its coverage. Equipment used to access 
video programming and other services offered over multichannel video 
programming systems include televisions, VCRs, cable set-top boxes, 
personal computers, program guide equipment and cable modems. Section 
76.1200(c) of the rules defines the equipment to which the rules apply.
    4. Right to Attach. The rules provide subscribers the right to 
attach any compatible navigation device to an MVPD system, regardless 
of its source, subject to the proviso that the attached equipment not 
cause harmful interference, injury to the system or compromise 
legitimate access control mechanisms. The Commission's rules make clear 
to subscribers that an MVPD is not the exclusive purveyor of navigation 
devices for its system. In addition to being directly restrained from 
attaching navigation equipment, consumers must also not be precluded 
from the possibility of obtaining equipment from commercial outlets by 
virtue of contractual or other restrictions on the availability of 
equipment that the service provider might seek to directly impose on 
suppliers of equipment. Section 76.1202 enforces the right to attach by 
precluding contractual or other arrangements, other than those 
involving equipment performing conditional access or security 
functions, that prevent navigation devices from being made available to 
subscribers from retailers, manufacturers, or other vendors that are 
unaffiliated with such service provider.
    5. Information on Technical Interface Specifications. The 
Commission will require that MVPDs provide to the requesting party the 
technical information concerning interface parameters necessary for a 
navigation device to operate with the services delivered by the MVPD's 
system. Section 76.1205 delineates these requirements. The Commission 
will not replicate the more complete interface specification rules used 
in the telephone context, but will monitor closely industry progress on 
development of standards for attaching equipment, as well as MVPD 
compliance with the network disclosure requirements.
    6. Protection of Network Facilities. The rules will allow MVPDs to 
restrict the attachment or use of equipment to their systems where 
electronic or physical harm would be caused by the attachment or 
operation of such equipment. MVPDs must publish, and provide to 
subscribers, standards and descriptions of devices that may not be used 
or attached to their systems because of the potential for harm. These 
requirements are contained in Sec. 76.1203. To the extent that there is 
a dispute whether an MVPD's equipment restrictions are unreasonable, 
the Commission's petition procedures are available.
    7. Security and Theft of Service. No Commission action in this 
proceeding should be construed to authorize or justify any use, 
manufacture, or importation of equipment that would violate Section 633 
of the Communications Act or any other provision of law precluding the 
unauthorized reception of MVPD service. Similarly, nothing in this 
proceeding should be construed as diminishing an operator's ability to 
seek civil damages against parties involved with navigation devices 
providing unauthorized reception of services.
    8. Signal Leakage. When combined with the 47 CFR 76 signal leakage 
requirements, the 47 CFR 15 provisions provide sufficient safeguards 
for signal leakage and interference concerns for retail navigation 
devices. The part 15 provisions include limitations on signal leakage 
from electronic equipment and also specify equipment authorization 
procedures.
    9. Rules for Equipment Providing Conditional Access. As of July 1, 
2000, MVPDs covered by Section 629 who wish to distribute devices using 
integrated security may do so only if they also make available security 
modules separately. The device supplied by the service provider must be 
designed to connect to and function with other navigation devices 
through the use of a commonly used interface or through an interface 
that conforms to appropriate technical standards promulgated by a 
national standards organization. The rule requiring separation of 
security functions does not apply to MVPDs that support navigation 
devices that are portable throughout the continental United States, and 
are available from retail outlets and other vendors. There is an 
exception in the rules (Sec. 76.1204(d)) for situations in which where 
separation is not feasible. This exception is intended, however, to be 
a narrow exception to the general rules to account for unusual types of 
equipment.
    10. The Commission is requiring the eight multiple system operators 
that are involved in the CableLabs/OpenCable project to advise the 
Commission semiannually--on January 7, 1999, July 7, 1999, January 7, 
2000, and July 7, 2000--as to the progress of their efforts and the 
efforts of CableLabs to assure the commercial availability, to 
consumers of equipment used to access multichannel video programming 
and other services offered over multichannel video programming systems, 
from

[[Page 38091]]

manufacturers, retailers, and other vendors not affiliated with any 
multichannel video programming distributor. The reports should detail 
the progress being made toward meeting the July 1, 2000 deadline. The 
information should advise the Commission of the status of any standards 
or certification process and any anticipated dates for approval.
    11. The Commission's rules permit MVPDs to continue to provide 
equipment on an integrated basis until January 1, 2005, so long as 
modular security components are also made available. MVPDs may continue 
to sell or lease boxes after this date provided the boxes have a 
severable security component rather than integrated security. In the 
year 2000, once separate security modules are available, the Commission 
will assess the state of the market to determine whether that time 
frame is appropriate and will review the mechanics of the phase out of 
integrated boxes.
    12. Affiliation. Affiliation is defined based on common ownership 
or control as defined in the notes accompanying 47 CFR 76.501.
    13. Subsidies. Existing equipment rate rules applicable to cable 
television systems not facing effective competition address Section 
629(a)'s requirement that charges to consumers for such devices and 
equipment are separately stated and not subsidized by charges for any 
other service. While a cable operator subject to rate regulation may 
offer navigation devices necessary to receive regulated services, it 
may do so only within the parameters of 47 CFR 76.923. Section 76.923 
sets forth the rules for determining the rates for equipment and 
installation used to receive the basic service tier and states that 
cable operators subject to rate regulation are not permitted to charge 
subscribers for equipment beyond actual cost. The relevant rule is 
found in Sec. 76.1206.
    14. Waivers. A provider of multichannel video programming and other 
services offered over multichannel video programming systems, or an 
equipment provider, may petition the Commission for a waiver. The 
Commission may waive a regulation adopted under Section 629 if such 
service or equipment provider makes an appropriate showing that such 
waiver is necessary to assist the development or introduction of a new 
or improved multichannel video programming or other service offered 
over multichannel video programming systems, technology, or products. 
The Commission will apply the procedural rules set forth in 47 CFR 
76.7. The relevant rule is contained in Sec. 76.1207.
    15. Sunset of Regulations. The regulations adopted under this 
section shall cease to apply when, as stated in Section 629(e), the 
Commission determines that (1) the market for MVPDs is fully 
competitive; (2) the market for converter boxes and interactive 
communications equipment used in conjunction with that service is fully 
competitive; and (3) elimination of the regulations would promote 
competition and the public interest. An interested party may petition 
the Commission to determine that Section 629(e) has been satisfied. 
This rule is found in Sec. 76.1208.
    16. Digital Television Compatibility. In the context of this and 
other proceedings, the issue of transmitting digital television signals 
to consumers has been raised. Since the record on this issue in this 
proceeding is extremely limited, and the matter may more appropriately 
be addressed in another proceeding, the Commission will defer 
consideration here. The Commission intends to monitor developments with 
respect to the compatibility of set-top boxes and digital televisions.
    17. Electronic Program Guides. An issue was raised in this 
proceeding, regarding whether electronic program guide equipment and 
guide services are covered by the requirements of Section 629. Based on 
the plain language of Section 629, it appears clear that the equipment 
used to access such electronic program guides is ``equipment used by 
consumers to access . . . services offered over multichannel video 
programming systems'' and hence falls within the requirements of 
Section 629. While the Commission is committed to encouraging the 
development of the market for the provision of electronic program guide 
services as part of its broader goal of promoting consumer choice, the 
record in this proceeding is limited on this issue. Therefore, the 
Commission cannot adequately address at this time the extent of any 
obligation of multichannel video programming systems to make such 
services available pursuant to Section 629 or otherwise. The Commission 
will monitor developments with respect to the availability of 
electronic program guides to determine whether any action is 
appropriate in the future.

Final Regulatory Flexibility Analysis

    18. As required by the Regulatory Flexibility Act (RFA), an Initial 
Regulatory Flexibility Analysis (``IRFA'') was incorporated into the 
NPRM in this proceeding. The Commission sought written public comment 
on the possible impact of the proposed policies and rules on small 
entities in the NPRM, including comments on the IRFA. This Final 
Regulatory Flexibility Analysis (``FRFA'') in this Report and Order 
conforms to the RFA.
    19. Need for Action and Objectives of the Rules. The 1996 Act added 
a new Section 629 to the Communications Act of 1934, as amended, that 
requires the Commission to develop rules to assure competitive 
availability of navigation devices used in conjunction with 
multichannel video programming distributors (``MVPD''). The Commission 
is promulgating these rules in order to implement this provision of 
Section 629. The statutory objective of Section 629 is assure that 
navigation devices used by consumers to access a particular MVPD's 
programming are available to consumers from manufactures, retailers and 
other vendors not affiliated with that MVPD.
    20. Summary of Significant Issues Raised by the Public Comments in 
Response to the IRFA. No comments were filed specifically in response 
to the IRFA. The Commission, however, considered the economic impact on 
small entities through consideration of comments that pertain to issues 
of concern to MVPDs. Commenters cautioned that rules enacted to 
implement the requirements of Section 629 must not jeopardize the 
system and signal security of MVPDs and should not mandate technical 
standards that would interfere with innovation of navigation devices or 
development of new technologies. In the Report and Order, the 
Commission notes concern with system security and allows MVPDs to 
restrict the attachment or use of navigation equipment to their systems 
where electronic or physical harm would be caused by the attachment or 
operation of such equipment. As for signal security, the rules allow 
MVPDs to disconnect service to subscribers using a navigation device 
that assists in the unauthorized reception of service. The rules 
promulgated also note concern for inhibiting innovation or development 
of new technologies. The Commission does not mandate particular 
standards or require specific action, but seeks to recognize accepted 
industry standards that have evolved or are evolving.
    21. Description and Estimate of the Number of Small Entities to 
Which the Rules Will Apply. The RFA directs the Commission to provide a 
description of and, where feasible, an estimate of the number of small 
entities that might be affected by the rules here adopted. The

[[Page 38092]]

RFA defines the term ``small entity'' as having the same meaning as the 
terms ``small business,'' ``small organization,'' and ``small 
governmental jurisdiction.'' In addition, the term ``small business'' 
has the same meaning as the term ``small business concern'' under the 
Small Business Act. Under the Small Business Act, a small business 
concern is one which: (a) is independently owned and operated; (b) is 
not dominant in its field of operation; and (c) satisfies any 
additional criteria established by the SBA. The rules adopted in this 
Report and Order will affect cable systems, multipoint multichannel 
distribution systems, direct broadcast satellites, home satellite dish 
manufacturers, satellite master antenna television, local multipoint 
distribution systems, small manufacturers, electronic equipment 
manufacturers, computer manufacturers, and small retailers.
    22. Small Multichannel Video Programming Distributors (``MVPD''): 
The SBA has developed a definition of small entities for cable and 
other pay television services, which includes all such companies 
generating $11 million or less in annual receipts. This definition 
includes cable system operators, closed circuit television services, 
direct broadcast satellite services, multipoint distribution systems, 
satellite master antenna systems and subscription television services. 
According to the Bureau of the Census, there are approximately 1,758 
total cable and other pay television services and 1,423 had less than 
$11 million in revenue. Below each service is addressed to provide a 
more precise estimate of small entities.
    23. Cable Systems: The Commission has developed, with SBA's 
approval, our own definition of a small cable system operator for the 
purposes of rate regulation. Under the Commission's rules, a ``small 
cable company'' is one serving no more than 400,000 subscribers 
nationwide. Based on recent information, the Commission estimates that 
there were 1439 cable operators that qualified as small cable companies 
at the end of 1995. Since then, some of those companies may have grown 
to serve over 400,000 subscribers, and others may have been involved in 
transactions that caused them to be combined with other cable 
operators. Consequently, the Commission estimates that there are fewer 
than 1439 small entity cable system operators that may be affected by 
the decisions and rules we are adopting. The Commission concludes that 
only a small percentage of these entities currently provide qualifying 
``telecommunications services'' as required by the Communications Act 
and, therefore, estimate that the number of such entities are 
significantly fewer than noted.
    24. The Communications Act also contains a definition of a small 
cable system operator, which is ``a cable operator that, directly or 
through an affiliate, serves in the aggregate fewer than 1% of all 
subscribers in the United States and is not affiliated with any entity 
or entities whose gross annual revenues in the aggregate exceed 
$250,000,000.'' The Commission has determined that there are 61,700,000 
cable subscribers in the United States. Therefore, the Commission found 
that an operator serving fewer than 617,000 subscribers shall be deemed 
a small operator, if its annual revenues, when combined with the total 
annual revenues of all of its affiliates, do not exceed $250 million in 
the aggregate. Based on available data, the Commission finds that the 
number of cable operators serving 617,000 subscribers or less totals 
1450. Although it seems certain that some of these cable system 
operators are affiliated with entities whose gross annual revenues 
exceed $250,000,000, the Commission is unable at this time to estimate 
with greater precision the number of cable system operators that would 
qualify as small cable operators under the definition in the 
Communications Act.
    25. Multipoint Multichannel Distribution Systems (``MMDS''): The 
Commission refined its definition of ``small entity'' for the auction 
of MMDS as an entity that together with its affiliates has average 
gross annual revenues that are not more than $40 million for the 
preceding three calendar years. This definition of a small entity in 
the context of MMDS auctions has been approved by the SBA.
    26. The Commission completed its MMDS auction in March 1996 for 
authorizations in 493 basic trading areas (``BTAs''). Of 67 winning 
bidders, 61 qualified as small entities. Five bidders indicated that 
they were minority-owned and four winners indicated that they were 
women-owned businesses. MMDS is an especially competitive service, with 
approximately 1573 previously authorized and proposed MMDS facilities. 
Information available to us indicates that no MMDS facility generates 
revenue in excess of $11 million annually. The Commission concludes 
that, for purposes of this FRFA, there are approximately 1634 small 
MMDS providers as defined by the SBA and the Commission's auction 
rules.
    27. ITFS: There are presently 2032 ITFS licensees. All but 100 of 
these licenses are held by educational institutions. Educational 
institutions are included in the definition of a small business. 
However, the Commission does not collect annual revenue data for ITFS 
licensees and is not able to ascertain how many of the 100 non-
educational licensees would be categorized as small under the SBA 
definition. No commenters address these non-educational licensees. 
Accordingly, the Commission concludes that at least 1932 licensees are 
small businesses.
    28. Direct Broadcast Satellite (``DBS''): Because DBS provides 
subscription services, DBS falls within the SBA definition of cable and 
other pay television services (SIC 4841). As of December 1996, there 
were eight DBS licensees. However, the Commission does not collect 
annual revenue data for DBS and, therefore, is unable to ascertain the 
number of small DBS licensees that could be affected by these proposed 
rules. Although DBS service requires a great investment of capital for 
operation, in the NPRM, the Commission acknowledged that there are 
several new entrants in this field that may not yet have generated $11 
million in annual receipts, and therefore may be categorized as a small 
business, if independently owned and operated. Since the publication of 
the NPRM, however, more information has become available. In light of 
the 1997 gross revenue figures for the various DBS operators, the 
Commission concludes that no DBS operator qualifies as a small entity.
    29. Home Satellite Dish (``HSD''): The market for HSD service is 
difficult to quantify. Indeed, the service itself bears little 
resemblance to other MVPDs. HSD owners have access to more than 500 
channels of programming placed on C-band satellites by programmers for 
receipt and distribution by MVPDs, of which 350 channels are scrambled 
and approximately 150 are unscrambled. HSD owners can watch unscrambled 
channels without paying a subscription fee. To receive scrambled 
channels, however, an HSD owner must purchase an integrated receiver-
decoder from an equipment dealer and pay a subscription fee to an HSD 
programming packager. Thus, HSD users include: (1) Viewers who 
subscribe to a packaged programming service, which affords them access 
to most of the same programming provided to subscribers of other MVPDs; 
(2) viewers who receive only nonsubscription programming; and (3) 
viewers who receive satellite

[[Page 38093]]

programming services illegally without subscribing.
    30. According to the most recently available information, there are 
approximately 20 to 25 program packagers nationwide offering packages 
of scrambled programming to retail consumers. These program packagers 
provide subscriptions to approximately 2,184,470 subscribers 
nationwide. This is an average of about 77,163 subscribers per program 
packager. This is substantially smaller than the 400,000 subscribers 
used in the Commission's definition of a small multiple system operator 
(``MSO'').
    31. Satellite Master Antenna Television (``SMATVs''): Industry 
sources estimate that approximately 5200 SMATV operators were providing 
service as of December 1995. Other estimates indicate that SMATV 
operators serve approximately 1.162 million residential subscribers as 
of June 30, 1997. The ten largest SMATV operators together pass 848,450 
units. Assuming that these SMATV operators serve 50% of the units 
passed, the ten largest SMATV operators serve approximately 40% of the 
total number of SMATV subscribers. Because these operators are not rate 
regulated, they are not required to file financial data with the 
Commission. Furthermore, the Commission is not aware of any privately 
published financial information regarding these operators. Based on the 
estimated number of operators and the estimated number of units served 
by the largest ten SMATVs, the Commission concludes that a substantial 
number of SMATV operators qualify as small entities.
    32. Local Multipoint Distribution System (``LMDS''): Unlike the 
above pay television services, LMDS technology and spectrum allocation 
will allow licensees to provide wireless telephony, data, and/or video 
services. A LMDS provider is not limited in the number of potential 
applications that will be available for this service. Therefore, the 
definition of a small LMDS entity may be applicable to both cable and 
other pay television (SIC 4841) and/or radiotelephone communications 
companies (SIC 4812). The SBA approved definition for cable and other 
pay services that qualify as a small business is defined above. A small 
radiotelephone entity is one with 1500 employees or fewer. However, for 
the purposes of this Report and Order on navigation devices, the 
Commission includes only an estimate of LMDS video service providers.
    33. An auction for licenses to operate LMDS systems was recently 
completed by the Commission. The vast majority of the LMDS license 
auction winners were small businesses under the SBA's definition of 
cable and pay television (SIC 4841). The Commission adopted a small 
business definition for entities bidding for LMDS licenses as an entity 
that, together with affiliates and controlling principles, has average 
gross revenues not exceeding $40 million for each of the three 
preceding years. The Commission has not yet received approval by the 
SBA for this definition.
    34. There is only one company, CellularVision, that is currently 
providing LMDS video services. In the IRFA, the Commission assumed that 
CellularVision was a small business under both the SBA definition and 
our auction rules. No commenters addressed the tentative conclusions 
reached in the NPRM. Accordingly, the Commission affirms the tentative 
conclusion that a majority of the potential LMDS licensees will be 
small entities, as that term is defined by the SBA.
    35. Small Manufacturers: The SBA has developed definitions of small 
entity for manufacturers of household audio and video equipment (SIC 
3651) and for radio and television broadcasting and communications 
equipment (SIC 3663). In each case, the definition includes all such 
companies employing 750 or fewer employees.
    36. Electronic Equipment Manufacturers: The Commission has not 
developed a definition of small entities applicable to manufacturers of 
electronic equipment, and therefore, will use the SBA definition of 
manufacturers of Radio and Television Broadcasting and Communications 
Equipment. According to the SBA's regulations, a TV equipment 
manufacturer must have 750 or fewer employees in order to qualify as a 
small business concern. Census Bureau data indicates that there are 858 
U.S. firms that manufacture radio and television broadcasting and 
communications equipment, and that 778 of these firms have fewer than 
750 employees and would be classified as small entities. The Census 
Bureau category is very broad, and specific figures are not available 
as to how many of these firms are exclusive manufacturers of television 
equipment or how many are independently owned and operated. The 
Commission concludes that there are approximately 778 small 
manufacturers of radio and television equipment.
    37. Electronic Household/Consumer Equipment: The Commission has not 
developed a definition of small entities applicable to manufacturers of 
electronic equipment used by consumers, as compared to industrial use 
by television licensees and related businesses, and therefore will 
utilize the SBA definition applicable to manufacturers of Household 
Audio and Visual Equipment. According to the SBA's regulations, a 
household audio and visual equipment manufacturer must have 750 or 
fewer employees in order to qualify as a small business concern. Census 
Bureau data indicates that there are 410 U.S. firms that manufacture 
radio and television broadcasting and communications equipment, and 
that 386 of these firms have fewer than 500 employees and would be 
classified as small entities. The remaining 24 firms have 500 or more 
employees; however, the Commission is unable to determine how many of 
those have fewer than 750 employees and therefore, also qualify as 
small entities under the SBA definition. Furthermore, the Census Bureau 
category is very broad, and specific figures are not available as to 
how many of these firms are exclusive manufacturers of television 
equipment for consumers or how many are independently owned and 
operated. The Commission concludes that there are approximately 386 
small manufacturers of television equipment for consumer/household use.
    38. Computer Manufacturers: The Commission has not developed a 
definition of small entities applicable to computer manufacturers, and 
therefore will use the SBA definition of Electronic Computers. 
According to SBA regulations, a computer manufacturer must have 1,000 
or fewer employees in order to qualify as a small entity. Census Bureau 
data indicates that there are 716 firms that manufacture computers and 
of those, 659 have fewer than 500 employees and qualify as small 
entities. The remaining 57 firms have 500 or more employees; however, 
the Commission is unable to determine how many of those have fewer than 
1,000 employees and therefore also qualify as small entities under the 
SBA definition. The Commission concludes that there are approximately 
659 small computer manufacturers.
    39. Small Retailers: The Commission has not developed a definition 
of small entities applicable to navigation retail devices, and 
therefore will utilize the SBA definition. The 1992 Bureau of the 
Census data indicates: there were 9,663 U.S. firms classified as Radio, 
TV & electronic stores (SIC 5731), and that 9,385 of these firms had 
$4.999 million or less in annual receipts and 9,473 of these firms had 
$7.499 million or less in annual receipts. Consequently, the Commission 
concludes that there are approximately 9,663 small entities that

[[Page 38094]]

produce and distribute radio, television, and electronic equipment that 
may be affected by the decisions in the Report and Order.
    40. Description of Reporting, Recordkeeping and Other Compliance 
Requirements. This analysis examines the costs and administrative 
burdens associated with our rules and requirements. The rules adopted 
require MVPDs to make available, upon request, technical information 
concerning interface parameters. The Commission believes, however, that 
this requirement would not necessitate any additional professional, 
engineering, or customer service skills beyond those already utilized 
in the ordinary course of business by MVPDs.
    41. Steps Taken to Minimize Significant Economic Impact On Small 
Entities and Significant Alternatives Considered. The Commission 
believes that the rules, implemented to assure commercial availability 
of navigation devices, will have the positive result of opening up to 
small retailers the market to sell or lease navigation devices to MVPD 
subscribers. Section 629 includes provisions which may lessen 
compliance impact on small entities affected by the rules adopted in 
this Report and Order. Section 629(c) specifies that the Commission 
shall waive the regulations developed to implement Section 629 when 
necessary for an MVPD to develop new or improved services offered over 
its system. Second, Section 629(e) requires the Commission to sunset 
the rules adopted in the Report and Order once a determination is made 
that (1) the market for MVPDs is fully competitive; (2) the market for 
convertor boxes and interactive communications equipment used in 
conjunction with that service is fully competitive; and (3) elimination 
of the regulations would promote competition and the public interest. 
The rules also consider situations and offer relief where the 
commercial availability of navigation devices performing conditional 
access functions could adversely impact an MVPD. An MVPD is not subject 
to the rules requiring the commercial availability of navigation 
devices if: (1) it is not reasonably feasible to separate conditional 
access functions from other functions; or (2) it is not reasonably 
feasible to prevent the unauthorized reception of service by 
subscribers using navigation devices obtained from other sources.
    42. In the NPRM, the Commission asked for comment as to other means 
for achieving a competitive market for navigation devices. Commenters 
suggest means which would lead to more governmental involvement in the 
equipment design process and the retail marketplace. For instance, some 
commenters advocate that the Commission require MVPDs to license 
proprietary design specifications to manufacturers of navigation 
devices. The Commission has determined that allowing for technical 
innovation and flexible design standards would be the best means of 
meeting Section 629's statutory mandate of maximizing consumer choice 
in consumer electronics equipment. The Commission noted the ongoing 
activities of several industry organizations to develop open equipment 
standards. Accordingly, the Commission has adopted a regulatory regime 
to implement Section 629's requirements that causes minimum intrusion 
into the commercial marketplace.
    43. It is ordered that, pursuant to authority found in Sections 
4(i), 303(r), and 629 of the Communications Act of 1934, as amended, 47 
U.S.C. Secs. 154(i), 303(r), and 549, the Commission's rules are hereby 
amended as set forth below.
    44. It is further ordered that the rules as amended shall become 
effective upon approval by OMB, but no sooner than August 14, 1998, 
except for Sec. 76.1204, which shall become effective July 1, 2000.
    45. It is further ordered that Tele-Communications, Inc., Time 
Warner Cable, Jones Intercable, U S WEST Media Group, Marcus Cable, 
Advance/Newhouse Communications, Cox Communications, and Comcast 
Corporation Shall file reports on January 7, 1999, July 7, 1999, 
January 7, 2000, and July 7, 2000 detailing the progress of their 
efforts and the efforts of CableLabs to assure the commercial 
availability, to consumers of equipment used to access multichannel 
video programming and other services offered over multichannel video 
programming systems, from manufacturers, retailers, and other vendors 
not affiliated with any multichannel video programming distributor.
    46. It is further ordered that the Commission's Office of Public 
Affairs, Reference Operations Division, shall send a copy of this 
Report and Order, including the Final Regulatory Flexibility Analysis, 
to the Chief Counsel for Advocacy of the Small Business Administration.

List of Subjects in 47 CFR Part 76

    Cable television.

Federal Communications Commission.
Magalie Roman Salas,
Secretary.

Rule Changes

    Part 76 of title 47 of the Code of Federal Regulations is amended 
as follows:

PART 76--MULTICHANNEL VIDEO AND CABLE TELEVISION SERVICE

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

    Authority: 47 U.S.C. 151, 152, 153, 154, 301, 302, 303, 303a, 
307, 308, 309, 312, 315, 317, 325, 503, 521, 522, 531, 532, 533, 
534, 535, 536, 537, 543, 544, 544a, 545, 548, 549, 552, 554, 556, 
558, 560, 561, 571, 572, 573.

    2. Subpart P is added to read as follows:

Subpart P--Competitive Availability of Navigation Devices

Sec. 76.1200  Definitions.

    As used in this subpart:
    (a) Multichannel video programming system. A distribution system 
that makes available for purchase, by customers or subscribers, 
multiple channels of video programming other than an open video system 
as defined by Sec. 76.1500(a). Such systems include, but are not 
limited to, cable television systems, multichannel multipoint 
distribution systems, direct broadcast satellite systems, other systems 
for providing direct-to-home multichannel video programming via 
satellite, and satellite master antenna systems.
    (b) Multichannel video programming distributor. A person such as, 
but not limited to, a cable operator, a multichannel multipoint 
distribution service, a direct broadcast satellite service, or a 
television receive-only satellite program distributor, who owns or 
operates a multichannel video programming system.
    (c) Navigation devices. Devices such as converter boxes, 
interactive communications equipment, and other equipment used by 
consumers to access multichannel video programming and other services 
offered over multichannel video programming systems.
    (d) Affiliate. A person or entity that (directly or indirectly) 
owns or controls, is owned or controlled by, or is under common 
ownership or control with, another person, as defined in the notes 
accompanying Sec. 76.501.
    (e) Conditional access. The mechanisms that provide for selective 
access and denial of specific services and make use of signal security 
that can prevent a signal from being received except by authorized 
users.

[[Page 38095]]

Sec. 76.1201  Rights of subscribers to use or attach navigation 
devices.

    No multichannel video programming distributor shall prevent the 
connection or use of navigation devices to or with its multichannel 
video programming system, except in those circumstances where 
electronic or physical harm would be caused by the attachment or 
operation of such devices or such devices may be used to assist or are 
intended or designed to assist in the unauthorized receipt of service.

Sec. 76.1202  Availability of navigation devices.

    No multichannel video programming distributor shall by contract, 
agreement, patent right, intellectual property right or otherwise 
prevent navigation devices that do not perform conditional access or 
security functions from being made available to subscribers from 
retailers, manufacturers, or other vendors that are unaffiliated with 
such owner or operator, subject to Sec. 76.1209.

Sec. 76.1203  Incidence of harm.

    A multichannel video programming distributor may restrict the 
attachment or use of navigation devices with its system in those 
circumstances where electronic or physical harm would be caused by the 
attachment or operation of such devices or such devices that assist or 
are intended or designed to assist in the unauthorized receipt of 
service. Such restrictions may be accomplished by publishing and 
providing to subscribers standards and descriptions of devices that may 
not be used with or attached to its system. Such standards shall 
foreclose the attachment or use only of such devices as raise 
reasonable and legitimate concerns of electronic or physical harm or 
theft of service. In any situation where theft of service or harm 
occurs or is likely to occur, service may be discontinued.

Sec. 76.1204  Availability of equipment performing conditional access 
or security functions.

    (a)(1) A multichannel video programming distributor that utilizes 
navigation devices to perform conditional access functions shall make 
available equipment that incorporates only the conditional access 
functions of such devices. Commencing on January 1, 2005, no 
multichannel video programming distributor subject to this section 
shall place in service new navigation devices for sale, lease, or use 
that perform both conditional access and other functions in a single 
integrated device.
    (2) The foregoing requirement shall not apply to a multichannel 
video programming distributor that supports the active use by 
subscribers of navigation devices that: (i) operate throughout the 
continental United States, and (ii) are available from retail outlets 
and other vendors throughout the United States that are not affiliated 
with the owner or operator of the multichannel video programming 
system.
    (b) Conditional access function equipment made available pursuant 
to paragraph (a)(1) of this section shall be designed to connect to and 
function with other navigation devices available through the use of a 
commonly used interface or an interface that conforms to appropriate 
technical standards promulgated by a national standards organization.
    (c) No multichannel video programming distributor shall by 
contract, agreement, patent, intellectual property right or otherwise 
preclude the addition of features or functions to the equipment made 
available pursuant to this section that are not designed, intended or 
function to defeat the conditional access controls of such devices or 
to provide unauthorized access to service.
    (d) Notwithstanding the foregoing, navigation devices need not be 
made available pursuant to this section where:
    (1) It is not reasonably feasible to prevent such devices from 
being used for the unauthorized reception of service; or
    (2) It is not reasonably feasible to separate conditional access 
from other functions without jeopardizing security.
    (e) The requirements of this section shall become applicable on 
July 1, 2000.

Sec. 76.1205  Availability of interface information.

    Technical information concerning interface parameters that are 
needed to permit navigation devices to operate with multichannel video 
programming systems shall be provided by the system operator upon 
request in a timely manner.

Sec. 76.1206  Equipment sale or lease charge subsidy prohibition.

    Multichannel video programming distributors offering navigation 
devices subject to the provisions of Sec. 76.923 for sale or lease 
directly to subscribers, shall adhere to the standards reflected 
therein relating to rates for equipment and installation and shall 
separately state the charges to consumers for such services and 
equipment.

Sec. 76.1207  Waivers.

    The Commission may waive a regulation adopted under this subpart 
for a limited time, upon an appropriate showing by a provider of 
multichannel video programming and other services offered over 
multichannel video programming systems, or an equipment provider that 
such a waiver is necessary to assist the development or introduction of 
a new or improved multichannel video programming or other service 
offered over multichannel video programming systems, technology, or 
products. Such waiver requests should be made pursuant to Sec. 76.7. 
Such a waiver shall be effective for all service providers and products 
in the category in which the waiver is granted.

Sec. 76.1208  Sunset of regulations.

    The regulations adopted under this subpart shall cease to apply 
when the Commission determines that (1) the market for multichannel 
video distributors is fully competitive; (2) the market for converter 
boxes, and interactive communications equipment, used in conjunction 
with that service is fully competitive; and (3) elimination of the 
regulations would promote competition and the public interest. Any 
interested party may petition the Commission for such a determination.

Sec. 76.1209  Theft of service.

    Nothing in this subpart shall be construed to authorize or justify 
any use, manufacture, or importation of equipment that would violate 47 
U.S.C. 553 or any other provision of law intended to preclude the 
unauthorized reception of multichannel video programming service.

Sec. 76.1210  Effect on other rules.

    Nothing in this subpart affects Sec. 64.702(d) of the Commission's 
regulations or other Commission regulations governing interconnection 
and competitive provision of customer premises equipment used in 
connection with basic common carrier communications services.

[FR Doc. 98-18838 Filed 7-14-98; 8:45 am]
BILLING CODE 6712-01-P
```