[Federal Register: July 25, 2007 (Volume 72, Number 142)]
[Proposed Rules]
[Page 40818-40824]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr25jy07-28]
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FEDERAL COMMUNICATIONS COMMISSION
47 CFR Part 76
[CS Docket No. 97-80; PP Docket No. 00-67; FCC 07-120]
Commercial Availability of Bidirectional Navigation Devices
(``Two-Way Plug-and-Play'')
AGENCY: Federal Communications Commission.
ACTION: Proposed rule.
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SUMMARY: In this document, the Commission takes steps to ensure that
equipment used to access video programming and other services offered
by cable television systems are available to consumers at retail.
Specifically, the Commission seeks comment on proposed standards for
this bidirectional capability, the absence of which may discourage some
consumers from investing in new digital equipment. The Commission also
seeks comment on whether any rules adopted in this proceeding should
apply to non-cable Multichannel Video Programming Distributors
(``MVPDs'').
DATES: Comments for this proceeding are due on or before August 24,
2007; reply comments are due on or before September 10, 2007.
ADDRESSES: You may submit comments, identified by CS Docket No. 97-80,
by any of the following methods:
Federal eRulemaking Portal: http://www.regulations.gov.
Follow the instructions for submitting comments.
Federal Communications Commission's Web Site: http://www.fcc.gov/cgb/ecfs/.
Follow the instructions for submitting comments.
People with Disabilities: Contact the FCC to request
reasonable accommodations (accessible format documents, sign language
interpreters, CART, etc.) by e-mail: FCC504@fcc.gov or phone: 202-418-
0530 or TTY: 202-418-0432.
For detailed instructions for submitting comments and additional
information on the rulemaking process, see the SUPPLEMENTARY
INFORMATION section of this document.
FOR FURTHER INFORMATION CONTACT: For additional information on this
proceeding, contact Brendan Murray, Brendan.Murray@fcc.gov of the Media
Bureau, Policy Division, (202) 418-1573.
SUPPLEMENTARY INFORMATION: This is a summary of the Commission's Notice
of Proposed Rulemaking, FCC 07-120, adopted on June 27, 2007, and
released on June 29, 2007. The full text of this
[[Page 40819]]
document is available for public inspection and copying during regular
business hours in the FCC Reference Center, Federal Communications
Commission, 445 12th Street, SW., CY-A257, Washington, DC 20554. These
documents will also be available via ECFS (http://www.fcc.gov/cgb/ecfs/).
(Documents will be available electronically in ASCII, Word 97, and/
or Adobe Acrobat.) The complete text may be purchased from the
Commission's copy contractor, 445 12th Street, SW., Room CY-B402,
Washington, DC 20554. To request this document in accessible formats
(computer diskettes, large print, audio recording, and Braille), send
an e-mail to fcc504@fcc.gov or call the Commission's Consumer and
Governmental Affairs Bureau at (202) 418-0530 (voice), (202) 418-0432
(TTY).
Initial Paperwork Reduction Act of 1995 Analysis
This document does not contain proposed information collection
requirements subject to the Paperwork Reduction Act of 1995, Public Law
104-13. In addition, therefore, it does not contain any proposed
information collection burden ``for small business concerns with fewer
than 25 employees,'' pursuant to the Small Business Paperwork Relief
Act of 2002, Public Law 107-198, see 44 U.S.C. 3506(c)(4).
Summary of the Notice of Proposed Rulemaking
I. Introduction
1. CableCARD-ready devices available at retail today are unable to
access the two-way features available on cable systems, including
electronic programming guides (``EPGs''), video-on-demand (``VOD''),
pay-per-view (``PPV''), and other interactive television (``ITV'')
capabilities. In this Third Further Notice of Proposed Rulemaking, we
solicit comment on proposed standards to ensure bidirectional
compatibility of cable television systems and consumer electronics
equipment. We also seek comment on whether any rules we adopt in this
proceeding should apply to non-cable Multichannel Video Programming
Distributor (``MVPDs'') and whether there are technological solutions
that are network agnostic and deployable across all MVPD platforms
(e.g., cable, Direct Broadcast Satellite (``DBS''), Internet Protocol
(``IP'') or hybrid Quadrature Amplitude Modulation/IP (``QAM/IP'')).
II. Background
2. Section 629 of the Act directs the Commission to:
Adopt regulations to assure the commercial availability, to
consumers of multichannel video programming and other services
offered over multichannel video programming systems, of 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, from
manufacturers, retailers, and other vendors not affiliated with any
multichannel video programming distributor.
Through section 629, Congress sought to provide consumers with the
opportunity to purchase competitive navigation devices from sources
other than their MVPD. Congress emphasized the importance of such
competition, stating that ``[c]ompetition in the manufacturing and
distribution of consumer devices has always led to innovation, lower
prices and higher quality.'' At the same time, Congress recognized that
MVPDs have ``a valid interest, which the Commission should continue to
protect, in system or signal security and in preventing theft of
service.''
3. To carry out the directives of section 629, the Commission in
1998 required cable operators to make available by July 1, 2000 a
security element separate from the basic navigation device (the ``host
device''). Cable operators were permitted to continue providing
equipment with integrated security until January 1, 2005, so long as
modular security components, known as point-of-deployment modules
(``PODs'' or ``CableCARDs''), were also made available for use with
host devices obtained through retail outlets. This requirement is
generally referred to as ``common reliance,'' or the ``integration
ban,'' is designed to enable unaffiliated manufacturers, retailers, and
other vendors to commercially market host devices while allowing cable
operators to retain control over their system security.
4. In April 2003, in response to a request from cable operators,
the Commission extended the effective date of the integration ban until
July 1, 2006. Then, in 2005, again at the urging of cable operators,
the Commission further extended that date until July 1, 2007. As of
late 2003, ``non-integrated navigation devices [had] yet to gain
adoption in the marketplace, thereby directly affecting subscriber
demand for'' separated security elements. This was due to the lack of a
technical standard for how the POD and host device would interface. In
the Plug and Play Order, the Commission adopted an interface standard
that the National Cable and Telecommunications Association and the
Consumer Electronics Association had agreed upon in a Memorandum of
Understanding (``MOU''), with certain modifications. And less than a
year later, consumer electronics manufacturers brought CableCARD-
compatible devices to market. Devices made pursuant to this standard
have the ability to receive encrypted digital cable programming, but do
not have any upstream, or bidirectional, capabilities (i.e., consumer
electronics manufacturers can only make unidirectional devices under
the technical standard adopted in the Plug and Play Order). For
example, such devices cannot support two-way services such as EPGs,
VOD, PPV, and other ITV capabilities.
5. It is apparent that consumers have not shown significant
interest in one-way devices, which cannot access features such as EPGs,
VOD, PPV, and other ITV capabilities provided by cable operators.
Indeed, while over five million digital cable ready devices have been
sold, cable operators have deployed fewer than 300,000 CableCARDs. The
cable and consumer electronics industries have attempted to negotiate
an agreement on how to achieve bidirectional compatibility, and since
2003 the Commission has required National Cable and Telecommunications
Association (``NCTA'') and Consumer Electronics Association (``CEA'')
to file status reports regarding the status of those negotiations. In
March 2005, the Commission described the progress of these negotiations
as ``disappointing.'' Shortly before the Commission made that
statement, senior executives from Microsoft, Time Warner, and Comcast
committed to ``personally'' work together ``to supervise the efforts to
reach an agreement amongst the cable, CE, IT, and other industries to
ensure the availability of two-way cable products during calendar year
2006.'' Despite this commitment, the industries appear to have made
little progress and it does not appear that an agreement is imminent.
6. On November 30, 2005, the cable industry filed a report that
supported the OpenCable Application Platform (``OCAP'') as the
foundation for two-way plug and play products. OCAP is a middleware
software layer (based on the Java Execution Engine), which allows
software developers to write applications and programs that would run
on any OCAP-enabled device. While the cable and consumer electronics
[[Page 40820]]
industries agree that OCAP should be part of the solution for two-way
plug and play compatibility, the industries appear to disagree on how
an OCAP solution should be implemented.
7. When the Commission last addressed these issues in 2005 Deferral
Order, the scheduled conclusion of the Digital Television (``DTV'')
transition (i.e., December 31, 2006) could be extended in any given
market if certain conditions were not met. Most relevant to this
discussion, section 309(j)(14)(B)(iii) at the time stated that if more
than 15 percent of the television households in a given market did not
(1) subscribe to an MVPD carrying the digital signals of the local
television stations in that market, and (2) have at least one
television capable of viewing the digital signals of broadcasters in
that market (either directly or through the use of a digital-to-analog
converter), then the Commission was to grant an extension of that
deadline upon request. Since the 2005 Deferral Order was adopted,
however, the 85-percent test has been repealed, and the December 31,
2006 soft deadline for the end of the DTV transition has been replaced
with a hard deadline of February 17, 2009. We believe that the lack of
two-way functionality on digital cable ready devices is deterring
consumers from purchasing digital televisions, which are an essential
part of an effective digital transition. Therefore, we believe that the
impending hard deadline increases the urgency of examining proposed
bidirectional standards at this time.
III. Discussion
8. On November 7, 2006, the CEA, along with twelve consumer
electronics and information technology companies, proposed a two-way
plug and play solution. That proposal, attached to this item as
Appendix B, recommends that the Commission take the following steps:
(1) Adopt an enhanced CableCARD approach for basic interactive
services, based largely on existing standards;
(2) Provide oversight with respect to OCAP development, or allow
consumer electronics companies and information technology companies to
participate fully in the OCAP development process;
(3) Direct CableLabs to approve all output technologies that the
Digital Living Network Alliance (``DLNA'') approves, and require cable
providers to provide digital set-top boxes that are fully compatible
with DLNA networks;
(4) Adopt testing requirements for two-way devices that are similar
to the existing testing requirements for one-way devices (i.e., initial
device testing and certification with subsequent self-certification),
and require that the cable industry provide consumer electronics
manufacturers any new OCAP applications for testing at least sixty days
before widespread deployment; and
(5) Permit consumer electronics devices to use a cable path for
software upgrades equal to the path that cable operators use for their
software upgrades.
9. We hereby seek comment on the CEA proposal. We seek comment on
the impact that the proposed solution would have on consumers, content
providers, consumer electronics manufacturers, large and small cable
operators, other MPVDs, and on the transition to digital television. We
seek comment on whether the CEA proposal offers a reasonable and
quickly implementable approach, and what specific rule changes would be
necessary.
10. As noted above, in November 2005, NCTA proposed a two-way
solution based on the use of OCAP as a standardized middleware layer.
The proposal, attached to this item as Appendix C, recommends that the
Commission adopt a regulatory regime that includes:
(1) Technical requirements for cable systems;
(2) ``Limited but necessary'' content protection requirements for
navigation devices;
(3) Testing and certification/verification procedures to prevent
harm to the cable network and services; and
(4) Consumer education mandates.
NCTA asserts that if combined with voluntary commitments and
marketplace agreements, its proposal would bring consumers the benefits
of two-way digital cable-ready products as quickly as possible.
11. We hereby seek comment on NCTA's proposal. We seek comment on
the impact that the proposed solution would have on consumers, content
providers, consumer electronics manufacturers, large and small cable
operators, other MPVDs, and on the transition to digital television. We
seek comment on whether the NCTA proposal offers a reasonable and
quickly implementable approach, and what specific rule changes would be
necessary.
12. We also seek comment on any other proposals or rule changes
that we should consider in order to permit the development of two-way
digital cable-ready devices.
13. In addition, we seek comment on whether all MVPDs--including
DBS and wireline video providers--should be subject to any rules that
we adopt to promote bidirectional compatibility between cable
television systems and consumer electronics equipment. Could non-
traditional cable operators and other MVPDs conform to the proposed
solutions above, or would technical limitations preclude compliance? If
technical limitations would preclude compliance, we seek comment on
other approaches by which non-traditional cable operators and other
MVPDs could achieve bidirectional compatibility between their systems
and consumer electronics equipment. For example, NCTA notes that there
has been exploration of an enhanced security device for all MVPDs that
would permit a retail device to interoperate with all MVPD networks,
whether traditional cable, satellite or telephone. We seek comment on
such a solution, including whether such a device should be required to
comply with specific attachment principles such as outputting the
signal in conformance with certain open standards in order to permit
home networking.
14. As the digital television transition approaches, we do not want
to lose the potential opportunity for consumers to purchase competitive
devices before the last major holiday season prior to the transition.
We seek comment on whether a competitive market would offer further
incentive for consumers to transition from analog to digital devices.
Ideally, we would like consumers to be able to purchase two-way digital
cable ready devices at retail by Q4 2008, in time for the final holiday
season before the February 17, 2009 over-the-air digital television
transition. We seek comment on whether that goal is feasible and the
steps we must adopt in order to achieve that goal. We also solicit
comment on any specific rules we should adopt to ensure that we achieve
a practical bidirectional solution that furthers the goals of section
629 of the Act.
IV. Procedural Matters
A. Initial Regulatory Flexibility Analysis
15. With respect to the Third Further Notice of Proposed
Rulemaking, an Initial Regulatory Flexibility Analysis (``IRFA''), see
generally 5 U.S.C. 603, is contained in Appendix A. Comments must be
identified as responses to the IRFA and must be filed by the deadlines
for comments on the Third Further Notice of Proposed Rulemaking
specified infra. The Commission will send a copy of the Third Further
Notice of Proposed Rulemaking, including the IRFA, to the Chief Counsel
for Advocacy of the Small Business Administration.
[[Page 40821]]
B. Initial Paperwork Reduction Act of 1995 Analysis
16. This document does not contain proposed information
collection(s) subject to the Paperwork Reduction Act of 1995 (PRA),
Public Law 104-13. In addition, therefore, it does not contain any new
or modified ``information collection burden for small business concerns
with fewer than 25 employees,'' pursuant to the Small Business
Paperwork Relief Act of 2002, Public Law 107-198, see 44 U.S.C.
3506(c)(4).
C. Ex Parte Rules
17. Permit-But-Disclose. This proceeding will be treated as a
``permit-but-disclose'' proceeding subject to the ``permit-but-
disclose'' requirements under Sec. 1.1206(b) of the Commission's
rules. 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. Additional rules
pertaining to oral and written presentations are set forth in Sec.
1.1206(b).
D. Filing Requirements
18. Comments and Replies. Pursuant to Sec. Sec. 1.415 and 1.419 of
the Commission's rules, interested parties may file comments on or
before the dates indicated on the first page of this document. Comments
may be filed using: (1) The Commission's Electronic Comment Filing
System (``ECFS''), (2) the Federal Government's eRulemaking Portal, or
(3) by filing paper copies.
19. Electronic Filers. Comments may be filed electronically using
the Internet by accessing the ECFS: http://www.fcc.gov/cgb/ecfs/ or the Federal eRulemaking Portal: http://www.regulations.gov. Filers should
follow the instructions provided on the Web site for submitting
comments. For ECFS filers, if multiple docket or rulemaking numbers
appear in the caption of this proceeding, filers must transmit one
electronic copy of the comments for each docket or rulemaking number
referenced in the caption. In completing the transmittal screen, filers
should include their full name, U.S. Postal Service mailing address,
and the applicable docket or rulemaking number. Parties may also submit
an electronic comment by Internet e-mail. To get filing instructions,
filers should send an e-mail to ecfs@fcc.gov, and include the following
words in the body of the message, ``get form.'' A sample form and
directions will be sent in response.
20. Paper Filers. Parties who choose to file by paper must file an
original and four copies of each filing. If more than one docket or
rulemaking number appears in the caption of this proceeding, filers
must submit two additional copies for each additional docket or
rulemaking number. Filings can be sent by hand or messenger delivery,
by commercial overnight courier, or by first-class or overnight U.S.
Postal Service mail (although we continue to experience delays in
receiving U.S. Postal Service mail). All filings must be addressed to
the Commission's Secretary, Office of the Secretary, Federal
Communications Commission.
The Commission's contractor will receive hand-delivered or
messenger-delivered paper filings for the Commission's Secretary at 236
Massachusetts Avenue, NE., Suite 110, Washington, DC 20002. The filing
hours at this location are 8 a.m. to 7 p.m. All hand deliveries must be
held together with rubber bands or fasteners. Any envelopes must be
disposed of before entering the building.
Commercial overnight mail (other than U.S. Postal Service
Express Mail and Priority Mail) must be sent to 9300 East Hampton
Drive, Capitol Heights, MD 20743.
U.S. Postal Service first-class, Express, and Priority
mail should be addressed to 445 12th Street, SW., Washington, DC 20554.
21. Availability of Documents. Comments, reply comments, and ex
parte submissions will be available for public inspection during
regular business hours in the FCC Reference Center, Federal
Communications Commission, 445 12th Street, SW., CY-A257, Washington,
DC 20554. These documents will also be available via ECFS. Documents
will be available electronically in ASCII, Microsoft Word, and/or Adobe
Acrobat.
22. Accessibility Information. To request information in accessible
formats (computer diskettes, large print, audio recording, and
Braille), send an e-mail to fcc504@fcc.gov or call the FCC's Consumer
and Governmental Affairs Bureau at (202) 418-0530 (voice), (202) 418-
0432 (TTY). This document can also be downloaded in Word and Portable
Document Format (PDF) at: http://www.fcc.gov.
23. Additional Information. For additional information on this
proceeding, contact Brendan Murray, Brendan.Murray@fcc.gov, or, Steven
Broeckaert, Steven.Broeckaert@fcc.gov, of the Media Bureau, Policy
Division, (202) 418-2120.
Initial Regulatory Flexibility Analysis
As required by the Regulatory Flexibility Act of 1980, as amended
(``RFA'') the Commission has prepared this Initial Regulatory
Flexibility Analysis (``IRFA'') of the possible significant economic
impact on small entities by the policies and rules proposed in this
Third Further Notice of Proposed Rulemaking and Order on Review
(``Further 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 Further Notice provided
above in paragraph 8. The Commission will send a copy of the Further
Notice, including this IRFA, to the Chief Counsel for Advocacy of the
Small Business Administration. In addition, the Further Notice and IRFA
(or summaries thereof) will be published in the Federal Register.
Need for, and Objectives of, the Proposed Rules
24. The need for FCC regulation in this area derives from the lack
of a two-way plug and play standard for cable television systems and
consumer electronics equipment. The absence of such a standard has been
identified as a possible impediment to the approaching deadline for the
transition to digital television (``DTV'') and to the realization of
Congressional goals set out in section 629 of the Communications Act of
1934. Such a standard would allow consumer electronics manufacturers to
develop navigation devices (such as televisions and set-top boxes) that
could be connected directly to cable systems and make use of
bidirectional cable services without the need for a cable-operator
provided navigation device. Since almost 86 percent of television
households subscribe to a multichannel video programming distributor
(``MVPD'') service, the availability of such bidirectional
compatibility would encourage more consumers to purchase DTV compatible
devices, thereby furthering the transition. Private industry
negotiations between the Consumer Electronics Association (``CEA'') and
twelve consumer electronics and information technology companies have
resulted in a proposal for a two-way plug and play standard.
[[Page 40822]]
The proposal requires adherence to certain technical standards outlined
in Appendix B. The objectives any rules adopted will be to create a
competitive market for navigation devices and to facilitate the DTV
transition.
Legal Basis
25. The authority for the action proposed in this rulemaking is
contained in sections 1, 4(i) and (j), 303, 403, 601, and 629 of the
Communications Act of 1934, as amended, 47 U.S.C. 151, 154(i) and (j),
303, 403, 521, and 549.
Description and Estimate of the Number of Small Entities To Which the
Proposed Rules Will Apply
26. The RFA directs the Commission to provide a description of and,
where feasible, an estimate of the number of small entities that will
be affected by the proposed rules. The RFA generally defines the term
``small entity'' as having the same meaning as the terms ``small
business,'' ``small organization,'' and ``small governmental entity''
under section 3 of the Small Business Act. In addition, the term
``small business'' has the same meaning as the term ``small business
concern'' under the Small Business Act. A small business concern is one
which: (1) Is independently owned and operated; (2) is not dominant in
its field of operation; and (3) satisfies any additional criteria
established by the Small Business Administration (``SBA'').
27. Television Broadcasting. The proposed rules and policies could
affect television broadcasting licensees, and potential licensees of
television service. The Small Business Administration defines a
television broadcasting station that has no more than $13 million in
annual receipts as a small business. Television broadcasting consists
of establishments primarily engaged in broadcasting images together
with sound, including the production or transmission of visual
programming which is broadcast to the public on a predetermined
schedule. Included in this industry are commercial, religious,
educational, and other television stations. Also included are
establishments that are primarily engaged in television broadcasting
and produce programming in their own studios. Separate establishments
primarily engaged in producing programming are classified under other
NAICS numbers.
28. There were 1,509 television stations operating in the nation in
1992. That number has remained fairly constant as indicated by the
approximately 1,747 operating television broadcasting stations in the
nation as of June 2005. For 1992, the number of television stations
that produced less than $10.0 million in revenue was 1,155
establishments. Thus, the new rules could affect approximately 1,747
television stations; approximately 77%, or 1,345 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 affiliated
companies.
29. Cable and Other Program Distribution. The SBA has developed a
small business size standard for cable and other program distribution
services, which includes all such companies generating $13.5 million or
less in revenue annually. This category includes, among others, cable
operators, direct broadcast satellite (``DBS'') services, home
satellite dish (``HSD'') services, satellite master antenna television
(``SMATV'') systems, and open video systems (``OVS''). According to the
Census Bureau data, there are 1,191 total cable and other pay
television service firms that operate throughout the year of which
1,087 have less than $10 million in revenue. We address below each
service individually to provide a more precise estimate of small
entities.
30. Cable Operators. 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 fewer than 400,000 subscribers
nationwide. As of 2006, 7,916 cable operators qualify as small cable
companies.
31. The Communications Act, as amended, also contains a size
standard for 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 65,600,000 subscribers in the United States. Therefore, an
operator serving fewer than 656,000 subscribers shall be deemed a small
operator if its annual revenues, when combined with the total annual
revenues of all of its affiliates, do not exceed $250 million in the
aggregate. Based on available data, we find that the number of cable
operators serving 656,000 subscribers or less totals approximately
7,917. Although it seems certain that some of these cable system
operators are affiliated with entities whose gross annual revenues
exceed $250,000,000, we are unable at this time to estimate with
greater precision the number of cable system operators that would
qualify as small cable operators under the definition in the
Communications Act.
32. Direct Broadcast Satellite (``DBS'') Service. Because DBS
provides subscription services, DBS falls within the SBA-recognized
definition of cable and other program distribution services. This
definition provides that a small entity is one with $13.5 million or
less in annual receipts. There are four licensees of DBS services under
part 100 of the Commission's rules. Three of those licensees are
currently operational. Two of the licensees that are operational have
annual revenues that may be in excess of the threshold for a small
business. The Commission, however, does not collect annual revenue data
for DBS and, therefore, is unable to ascertain the number of small DBS
licensees that could be impacted by these proposed rules. DBS service
requires a great investment of capital for operation, and we
acknowledge, despite the absence of specific data on this point, that
there are entrants in this field that may not yet have generated $13.5
million in annual receipts, and therefore may be categorized as a small
business, if independently owned and operated.
33. Home Satellite Dish (``HSD'') Service. Because HSD provides
subscription services, HSD falls within the SBA-recognized definition
of cable and other program distribution services. This definition
provides that a small entity is one with $13.5 million or less in
annual receipts. The market for HSD service is difficult to quantify.
Indeed, the service itself bears little resemblance to other MVPDs. As
of June 2005, there were 206,358 households authorized to receive HSD
service, a decrease of 38.5 percent from the 335,766 we reported the
previous year. HSD owners have access to more than 265 channels of
programming placed on C-band satellites by programmers for receipt and
distribution by MVPDs, of which 115 channels are scrambled and
approximately 150 are unscrambled. HSD owners can watch unscrambled
channels without paying a subscription fee. To receive scrambled
channels, however, an HSD owner must purchase an integrated receiver-
decoder from an equipment dealer and pay a subscription fee to an HSD
programming package. 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
[[Page 40823]]
other MVPDs; (2) viewers who receive only non-subscription programming;
and (3) viewers who receive satellite programming services illegally
without subscribing. Because scrambled packages of programming are most
specifically intended for retail consumers, these are the services most
relevant to this discussion.
34. Satellite Master Antenna Television (``SMATV'') Systems. The
SBA definition of small entities for cable and other program
distribution services includes SMATV services and, thus, small entities
are defined as all such companies generating $13.5 million or less in
annual receipts. Industry sources estimate that approximately 5,200
SMATV operators were providing service as of December 1995. Other
estimates indicate that SMATV operators serve approximately 1.5 million
residential subscribers as of July 2001. The best available estimates
indicate that the largest SMATV operators serve between 15,000 and
55,000 subscribers each. Most SMATV operators serve approximately
3,000-4,000 customers. Because these operators are not rate regulated,
they are not required to file financial data with the Commission.
Furthermore, we are not aware of any privately published financial
information regarding these operators. Based on the estimated number of
operators and the estimated number of units served by the largest ten
SMATVs, we believe that a substantial number of SMATV operators qualify
as small entities.
35. Open Video Systems (``OVS''). Because OVS operators provide
subscription services, OVS falls within the SBA-recognized definition
of cable and other program distribution services. This definition
provides that a small entity is one with $13.5 million or less in
annual receipts. The Commission has certified 25 OVS operators with
some now providing service. Affiliates of Residential Communications
Network, Inc. (``RCN'') received approval to operate OVS systems in New
York City, Boston, Washington, DC and other areas. RCN has sufficient
revenues to assure us that they do not qualify as small business
entities. Little financial information is available for the other
entities authorized to provide OVS that are not yet operational. Given
that other entities have been authorized to provide OVS service but
have not yet begun to generate revenues, we conclude that at least some
of the OVS operators qualify as small entities.
36. Electronics Equipment Manufacturers. Rules adopted in this
proceeding could apply to manufacturers of DTV receiving equipment and
other types of consumer electronics equipment. The SBA has developed
definitions of small entities for manufacturers of audio and video
equipment, as well as radio and television broadcasting and wireless
communications equipment. These categories both include all such
companies employing 750 or fewer employees. 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. Therefore, we will
utilize the SBA definitions applicable to manufacturers of audio and
visual equipment and radio and television broadcasting and wireless
communications equipment, since these are the two closest NAICS Codes
applicable to the consumer electronics equipment manufacturing
industry. However, these NAICS categories are broad and specific
figures are not available as to how many of these establishments
manufacture consumer equipment. According to the SBA's regulations, an
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 571 U.S. establishments that
manufacture audio and visual equipment, and that 560 of these
establishments have fewer than 500 employees and would be classified as
small entities. The remaining 11 establishments have 500 or more
employees; however, we are unable to determine how many of those have
fewer than 750 employees and therefore, also qualify as small entities
under the SBA definition. Under the SBA's regulations, a radio and
television broadcasting and wireless communications equipment
manufacturer must also have 750 or fewer employees in order to qualify
as a small business concern. Census Bureau data indicates that there
are 1,041 U.S. establishments that manufacture radio and television
broadcasting and wireless communications equipment, and that 1,010 of
these establishments have fewer than 500 employees and would be
classified as small entities. The remaining 31 establishments have 500
or more employees; however, we are unable to determine how many of
those have fewer than 750 employees and therefore, also qualify as
small entities under the SBA definition. We therefore conclude that
there are no more than 560 small manufacturers of audio and visual
electronics equipment and no more than 1,010 small manufacturers of
radio and television broadcasting and wireless communications equipment
for consumer/household use.
37. Computer Manufacturers. The Commission has not developed a
definition of small entities applicable to computer manufacturers.
Therefore, we will utilize the SBA definition of electronic computers
manufacturing. 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 485 firms that
manufacture electronic computers and of those, 476 have fewer than
1,000 employees and qualify as small entities. The remaining 9 firms
have 1,000 or more employees. We conclude that there are approximately
476 small computer manufacturers.
Description of Projected Reporting, Recordkeeping and Other Compliance
Requirements
38. At this time, we do not expect that the proposal would impose
any additional reporting or recordkeeping requirements. In the past,
however, compliance with plug and play rules required consumer
electronics manufacturers to establish a voluntary labeling regime for
unidirectional digital cable television receivers and related digital
cable products that meet certain technical specifications. While these
requirements could have an impact on consumer electronics manufacturers
and multichannel video programming distributors, it remains unclear
weather there would be a differential impact on small entities. We seek
comment on whether the burden of these requirements would fall on large
and small entities differently. We also seek comment on any aspect of
the proposal or its impact that we may have overlooked.
Steps Taken To Minimize Significant Impact on Small Entities, and
Significant Alternatives Considered
39. The RFA requires an agency to describe any significant
alternatives that it has considered in reaching its proposed approach,
which may include the following four alternatives (among others): (1)
The establishment of differing compliance or reporting requirements or
timetables that take into account the resources available to small
entities; (2) the clarification, consolidation, or simplification of
compliance or reporting requirements under the rule for small entities;
(3) the use of performance, rather than design, standards; and (4) an
exemption from
[[Page 40824]]
coverage of the rule, or any part thereof, for small entities.
40. As indicated above, the Further Notice seeks comment on whether
the Commission should adopt or revise rules relating to the proposed
creation of a two-way plug and play standard for digital cable
television systems and other digital cable television consumer
electronics equipment in order to facilitate the DTV transition.
Consumer electronics manufacturers may be required to establish a
labeling regime for bidirectional digital cable television receivers
and related digital cable products that meet certain technical
specifications. However, we welcome comment on modifications of the
proposal if based on evidence of potential differential impact on
smaller entities. In addition, the Regulatory Flexibility Act requires
agencies to seek comment on possible small entity-related alternatives,
as noted above. We therefore seek comment on alternatives to the
proposed rules that would assist small entities while ensuring
bidirectional compatibility between cable operators and consumer
electronics manufacturers.
Federal Rules Which Duplicate, Overlap, or Conflict With the
Commission's Proposals
41. None.
V. Ordering Clauses
42. It is ordered that, pursuant to sections 1, 4(i) and (j), 303,
403, 601, and 629 of the Communications Act of 1934, as amended, 47
U.S.C. 151, 154(i) and (j), 303, 403, 521, 549, comment is hereby
sought on the proposals in this Third Further Notice Of Proposed
Rulemaking.
Federal Communications Commission.
Marlene H. Dortch,
Secretary.
[FR Doc. 07-3651 Filed 7-24-07; 8:45 am]
BILLING CODE 6712-01-P