[Federal Register: February 28, 2008 (Volume 73, Number 40)]
[Proposed Rules]
[Page 10732-10738]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr28fe08-33]
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FEDERAL COMMUNICATIONS COMMISSION
47 CFR Part 76
[MB Docket No. 07-42; FCC 07-208]
Leased Commercial Access
AGENCY: Federal Communications Commission.
ACTION: Proposed rule.
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SUMMARY: In this document, the Commission seeks comment on the
application of the Commission's revised leased access rate methodology
and maximum allowable leased access rate to programmers that
predominantly transmit sales presentations or program length
commercials.
DATES: Comments for this proceeding are due on or before March 31,
2008; reply comments are due on or before April 14, 2008.
ADDRESSES: You may submit comments, identified by MB Docket No. 07-42,
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 Steven Broeckaert, Steven.Broeckaert@fcc.gov; or
Katie Costello, Katie.Costello@fcc.gov; of the Media Bureau, Policy
Division, 202-418-2120.
SUPPLEMENTARY INFORMATION: This is a summary of the Commission's Notice
of Proposed Rulemaking (NPRM), contained in MB Docket No. 07-42, FCC
07-208, adopted on November 27, 2007, and released on February 1, 2008.
The full text of this 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. This document 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 has been analyzed with respect to the Paperwork
Reduction Act of 1995 (``PRA''), Public Law No. 104-13, 109 Stat 163
(1995) (codified in Chapter 35 of title 44 U.S.C.), and contains no
proposed new or modified information collection requirements. 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 (``SBPRA''), Public Law No. 107-198, 116 Stat 729 (2002)
(codified in Chapter 35 of title 44 U.S.C.); see 44 U.S.C. 3506(c)(4).
Summary of Notice of Proposed Rulemaking
I. Application of Leased Access Rules to Certain Programmers
1. The commercial leased access requirements are set forth in
Section 612 of the Communications Act of 1934, as amended. The statute
and corresponding leased access rules require a cable operator to set
aside channel capacity for commercial use by unaffiliated video
programmers. The purposes of Section 612 are ``to promote competition
in the delivery of diverse
[[Page 10733]]
sources of video programming and to assure that the widest possible
diversity of information sources are made available to the public from
cable systems in a manner consistent with growth and development of
cable systems.'' In Report and Order, FCC 07-208, the Commission
modified the leased access rate methodology but did not apply the
changes to rates charged to programmers that predominantly transmit
sales presentations or program length commercials. These direct sales
programmers often ``pay'' for carriage--either directly or through some
form of revenue sharing with the cable operator. In this Notice of
Proposed Rulemaking (NPRM), the Commission seeks comment on whether the
new methodology should be applied to the rates charged to programmers
that predominantly transmit sales presentations or program length
commercials.
2. In the Report and Order, the Commission modified the method for
determining the leased access rate for full-time carriage on a tier and
harmonized the rate methodology for carriage on tiers with more than
50% subscriber penetration and carriage on tiers with lower levels of
penetration by calculating the leased access rate based upon the
characteristics of the tier on which the leased access programming will
be placed. Cable operators will calculate a leased access rate for each
cable system on a tier-by-tier basis which will adequately compensate
the operator for the net revenue that is lost when a leased access
programmer displaces an existing program channel on the cable system.
The Report and Order adopted a methodology to determine the ``marginal
implicit fee'' rather than the ``average implicit fee'' in calculating
leased access rates. The ``average implicit fee'' is calculated based
on the average value of all of the channels in a tier instead of the
value of the channels most likely to be replaced. The revised
methodology eliminates this excess recovery. In addition, the Report
and Order set a maximum allowable leased access rate of $0.10 per
subscriber per month to ensure that leased access remains a viable
outlet for programmers.
3. The Commission concluded not to apply the new rate methodology
to programmers that predominantly transmit sales presentations or
program length commercials. These programmers often ``pay'' for
carriage--either directly or through some form of revenue sharing with
the cable operator. Previously to the Report and Order, the Commission
set the leased access rate for a la carte programmers at the ``highest
implicit fee'' partly out of a concern that lower rates would simply
lead these programmers to migrate to leased access if it were less
expensive than what they are currently ``paying'' for carriage. Such a
migration would not add to the diversity of voices and would
potentially financially harm the cable system. The a la carte rate
remains unchanged. Similarly, the Commission does not wish to set the
leased access rates at a point at which programmers that predominantly
transmit sales presentations or program length commercials simply
migrate to leased access because it is less expensive than their
current commercial arrangements. The Commission seeks on whether leased
access is affordable at current rates to programmers that predominantly
transmit sales presentations or program length commercials and whether
reduced rates would simply cause migration of existing services to
leased access.
4. The Commission is concerned about setting the leased access
rates at a point at which programmers that predominantly transmit sales
presentations or program length commercials simply migrate to leased
access because it is less expensive than their current commercial
arrangements. Accordingly, the Commission seeks comment regarding the
use of leased access by programmers that predominantly transmit sales
presentations and program length commercials. Specifically, is leased
access affordable to these programmers at current rates? Will applying
the modified rate formula discussed previously in this Report and Order
cause migration of existing services to leased access? What would be
the effect of such a migration? Is a separate category for direct sales
programmers appropriate?
II. Procedural Matters
A. Ex Parte Rules
5. Permit-But-Disclose. The NPRM in this proceeding will be treated
as ``permit-but-disclose'' 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).
B. Filing Requirements
6. Information. For additional information on this proceeding,
contact Katie Costello, Katie.Costello@fcc.gov of the Media Bureau,
Policy Division, (202) 418-2120.
7. Comment Information. Pursuant to Sec. Sec. 1.415 and 1.419 of
the Commission's rules, 47 CFR 1.415, 1.419, interested parties may
file comments and reply comments on or before the dates indicated on
the first page of this document. Comments may be filed using: (1) The
Commission's Electronic Comment Filing System (ECFS), (2) the Federal
Government's eRulemaking Portal, or (3) by filing paper copies. See
Electronic Filing of Documents in Rulemaking Proceedings, 63 FR 24121,
May 1, 1998.
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 website 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.
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
[[Page 10734]]
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 must be addressed to 445 12th Street, SW., Washington, DC 20554.
People With Disabilities: To request materials in
accessible formats for people with disabilities (braille, large print,
electronic files, audio format), send an e-mail to fcc504@fcc.gov or
call the Consumer & Governmental Affairs Bureau at 202-418-0530
(voice), 202-418-0432 (tty).
8. 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. Persons with disabilities who need assistance in the FCC
Reference Center may contact Bill Cline at (202) 418-0267 (voice),
(202) 418-7365 (TTY), or bill.cline@fcc.gov. These documents also will
be available from the Commission's Electronic Comment Filing System.
Documents are available electronically in ASCII, Word 97, and Adobe
Acrobat. Copies of filings in this proceeding may be obtained from Best
Copy and Printing, Inc., Portals II, 445 12th Street, SW., Room CY-
B402, Washington, DC 20554; they can also be reached by telephone, at
(202) 488-5300 or (800) 378-3160; by e-mail at fcc@bcpiweb.com; or via
their Web site at http://www.bcpiweb.com. To request materials in
accessible formats for people with disabilities (Braille, large print,
electronic files, audio format), send an e-mail to fcc504@fcc.gov or
call the Consumer and Governmental Affairs Bureau at (202) 418-0531
(voice), (202) 418-7365 (TTY).
C. Initial Paperwork Reduction Act of 1995 Analysis
9. The FNPRM has been analyzed with respect to the Paperwork
Reduction Act of 1995 (``PRA''), Public Law No. 104-13, 109 Stat 163
(1995) (codified in Chapter 35 of title 44 U.S.C.) and contains no
proposed new or modified information collection requirements. 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 (``SBPRA''), Public Law No. 107-198, 116 Stat 729 (2002)
(codified in Chapter 35 of title 44 U.S.C.); see 44 U.S.C. 3506(c)(4).
III. Initial Regulatory Flexibility Analysis
10. The Regulatory Flexibility Act of 1980, as amended (``RFA''),
requires that a regulatory flexibility analysis be prepared for notice
and comment rule making proceedings, unless the agency certifies that
``the rule will not, if promulgated, have a significant economic impact
on a substantial number of small entities.'' The RFA generally 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. 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). As required by the RFA, the Commission has
prepared an Initial Regulatory Flexibility Analysis (``IRFA'') of the
possible significant economic impact on a substantial number of small
entities of the proposals addressed in the FNPRM Initial Regulatory
Flexibility Analysis.
11. As required by the Regulatory Flexibility Act of 1980, as
amended (the ``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
the Further Notice of Proposed Rulemaking (``FNPRM''). Written public
comments are requested on this IRFA. Comments must be identified as
responses to the IRFA and must be filed by the deadlines for comments
provided on the first page of the document. The Commission will send a
copy of the FNPRM, including this IRFA, to the Chief Counsel for
Advocacy of the Small Business Administration (``SBA''). In addition,
the FNPRM and IRFA (or summaries thereof) will be published in the
Federal Register.
A. Need for, and Objectives of, the Proposed Rules
12. Overview. The commercial leased access requirements set forth
in Section 612 of the Communications Act of 1934 require a cable
operator to set aside channel capacity for commercial use by video
programmers unaffiliated with the cable operator. The purposes of
Section 612 are ``to promote competition in the delivery of diverse
sources of video programming and to assure that the widest possible
diversity of information sources are made available to the public from
cable systems in a manner consistent with growth and development of
cable systems.''
13. In the Report and Order in MB Docket No. 07-42, the Commission
modified its formula used to calculate commercial leased access rates,
which will result in making leased access channels a more viable outlet
for leased access programming. The Order also provides that the maximum
leased access rate will not exceed $0.10 per subscriber per month for
any cable system. The Order, however, did not apply the modified rate
formula or the maximum allowable leased access rate to programmers that
predominantly transmit sales presentations or program length
commercials. These direct sales programmers often ``pay'' for
carriage--either directly or through some form of revenue sharing with
the cable operator.
14. In the FNPRM, the Commission notes its concern about setting
the leased access rates at a point at which programmers that
predominantly transmit sales presentations or program length
commercials simply migrate to leased access because it is less
expensive than their current commercial arrangements. Accordingly, the
FNPRM considers whether leased access at current rates is affordable to
programmers that predominantly transmit sales presentations and program
length commercials. The FNPRM considers whether applying the modified
leased access rate formula to programmers that predominantly transmit
sales presentations or program length commercials will cause migration
of these services to leased access. If these services do migrate to
leased access, the FNPRM considers the effect of such a migration. The
FNPRM also considers whether a separate category for direct sales
programmers is appropriate.
15. In the FNPRM, the Commission seeks comment on the foregoing
issues. In particular, the FNPRM invites comment on issues that may
impact small entities, including cable operators and leased access
programmers.
[[Page 10735]]
B. Legal Basis
16. The authority for the action proposed in the rulemaking is
contained in Section 4(i), 303, and 612 of the Communications Act of
1934, as amended, 47 U.S.C. 154(i), 303, and 532.
C. Description and Estimate of the Number of Small Entities to Which
the Proposed Rules Will Apply
17. The RFA directs agencies to provide a description of, and where
feasible, an estimate of the number of small entities that may be
affected by the proposed rules, if adopted. The RFA generally 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. 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'').
18. Wired Telecommunications Carriers. The 2007 North American
Industry Classification System (``NAICS'') defines ``Wired
Telecommunications Carriers'' (2007 NAISC code 517110) to include the
following three classifications which were listed separately in the
2002 NAICS: Wired Telecommunications Carriers (2002 NAICS code 517110),
Cable and Other Program Distribution (2002 NAISC code 517510), and
Internet Service Providers (2002 NAISC code 518111). The 2007 NAISC
defines this category as follows: ``This industry comprises
establishments primarily engaged in operating and/or providing access
to transmission facilities and infrastructure that they own and/or
lease for the transmission of voice, data, text, sound, and video using
wired telecommunications networks. Transmission facilities may be based
on a single technology or a combination of technologies. Establishments
in this industry use the wired telecommunications network facilities
that they operate to provide a variety of services, such as wired
telephony services, including VoIP services; wired (cable) audio and
video programming distribution; and wired broadband Internet services.
By exception, establishments providing satellite television
distribution services using facilities and infrastructure that they
operate are included in this industry.'' The SBA has developed a small
business size standard for Wired Telecommunications Carriers, which is
all firms having 1,500 employees or less. According to Census Bureau
data for 2002, there were a total of 27,148 firms in the Wired
Telecommunications Carriers category (2002 NAISC code 517110) that
operated for the entire year; 6,021 firms in the Cable and Other
Program Distribution category (2002 NAISC code 517510) that operated
for the entire year; and 3,408 firms in the Internet Service Providers
category (2002 NAISC code 518111) that operated for the entire year. Of
these totals, 25,374 of 27,148 firms in the Wired Telecommunications
Carriers category (2002 NAISC code 517110) had less than 100 employees;
5,496 of 6,021 firms in the Cable and Other Program Distribution
category (2002 NAISC code 517510) had less than 100 employees; and
3,303 of the 3,408 firms in the Internet Service Providers category
(2002 NAISC code 518111) had less than 100 employees. Thus, under this
size standard, the majority of firms can be considered small.
19. Cable and Other Program Distribution. The 2002 NAICS defines
this category as follows: ``This industry comprises establishments
primarily engaged as third-party distribution systems for broadcast
programming. The establishments of this industry deliver visual, aural,
or textual programming received from cable networks, local television
stations, or radio networks to consumers via cable or direct-to-home
satellite systems on a subscription or fee basis. These establishments
do not generally originate programming material.'' 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''). The SBA has developed a small business size standard for
Cable and Other Program Distribution, which is all such firms having
$13.5 million or less in annual receipts. According to Census Bureau
data for 2002, there were a total of 1,191 firms in this category that
operated for the entire year. Of this total, 1,087 firms had annual
receipts of under $10 million, and 43 firms had receipts of $10 million
or more but less than $25 million. Thus, under this size standard, the
majority of firms can be considered small.
20. Cable System Operators (Rate Regulation Standard). The
Commission has also developed its own small business size standards for
the purpose of cable rate regulation. Under the Commission's rules, a
``small cable company'' is one serving 400,000 or fewer subscribers
nationwide. As of 2006, 7,916 cable operators qualify as small cable
companies under this standard. In addition, under the Commission's
rules, a ``small system'' is a cable system serving 15,000 or fewer
subscribers. Industry data indicate that 6,139 systems have under
10,000 subscribers, and an additional 379 systems have 10,000-19,999
subscribers. Thus, under this standard, most cable systems are small.
21. Cable System Operators (Telecom Act Standard). The
Communications Act of 1934, as amended, also contains a size standard
for small cable system operators, which is ``a cable operator that,
directly or through an affiliate, serves in the aggregate fewer than 1
percent of all subscribers in the United States and is not affiliated
with any entity or entities whose gross annual revenues in the
aggregate exceed $250,000,000.'' There are approximately 65.4 million
cable subscribers in the United States today. Accordingly, an operator
serving fewer than 654,000 subscribers shall be deemed a small
operator, if its annual revenues, when combined with the total annual
revenues of all its affiliates, do not exceed $250 million in the
aggregate. Based on available data, we find that the number of cable
operators serving 654,000 subscribers or less totals approximately
7,916. We note that the Commission neither requests nor collects
information on whether cable system operators are affiliated with
entities whose gross annual revenues exceed $250 million. 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.
22. Direct Broadcast Satellite (``DBS'') Service. DBS service is a
nationally distributed subscription service that delivers video and
audio programming via satellite to a small parabolic ``dish'' antenna
at the subscriber's location. Because DBS provides subscription
services, DBS falls within the SBA-recognized definition of Cable and
Other Program Distribution. This definition provides that a small
entity is one with $13.5 million or less in annual receipts. Currently,
three operators provide DBS service, which requires a great investment
of capital for operation: DIRECTV, EchoStar (marketed as the DISH
Network), and Dominion Video Satellite, Inc. (``Dominion'') (marketed
[[Page 10736]]
as Sky Angel). All three currently offer subscription services. Two of
these three DBS operators, DIRECTV and EchoStar Communications
Corporation (``EchoStar''), report annual revenues that are in excess
of the threshold for a small business. The third DBS operator,
Dominion's Sky Angel service, serves fewer than one million subscribers
and provides 20 family and religion-oriented channels. Dominion does
not report its annual revenues. The Commission does not know of any
source which provides this information and, thus, we have no way of
confirming whether Dominion qualifies as a small business. Because DBS
service requires significant capital, we believe it is unlikely that a
small entity as defined by the SBA would have the financial wherewithal
to become a DBS licensee. Nevertheless, given the absence of specific
data on this point, we recognize the possibility 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.
23. Private Cable Operators (PCOs) also known as Satellite Master
Antenna Television (SMATV) Systems. PCOs, also known as SMATV systems
or private communication operators, are video distribution facilities
that use closed transmission paths without using any public right-of-
way. PCOs acquire video programming and distribute it via terrestrial
wiring in urban and suburban multiple dwelling units such as apartments
and condominiums, and commercial multiple tenant units such as hotels
and office buildings. The SBA definition of small entities for Cable
and Other Program Distribution Services includes PCOs and, thus, small
entities are defined as all such companies generating $13.5 million or
less in annual receipts. Currently, there are approximately 150 members
in the Independent Multi-Family Communications Council (IMCC), the
trade association that represents PCOs. Individual PCOs often serve
approximately 3,000-4,000 subscribers, but the larger operations serve
as many as 15,000-55,000 subscribers. In total, PCOs currently serve
approximately one million subscribers. Because these operators are not
rate regulated, they are not required to file financial data with the
Commission. Furthermore, we are not aware of any privately published
financial information regarding these operators. Based on the estimated
number of operators and the estimated number of units served by the
largest ten PCOs, we believe that a substantial number of PCOs may
qualify as small entities.
24. Home Satellite Dish (``HSD'') Service. Because HSD provides
subscription services, HSD falls within the SBA-recognized definition
of Cable and Other Program Distribution, which includes all such
companies generating $13.5 million or less in revenue annually. HSD or
the large dish segment of the satellite industry is the original
satellite-to-home service offered to consumers, and involves the home
reception of signals transmitted by satellites operating generally in
the C-band frequency. Unlike DBS, which uses small dishes, HSD antennas
are between four and eight feet in diameter and can receive a wide
range of unscrambled (free) programming and scrambled programming
purchased from program packagers that are licensed to facilitate
subscribers' receipt of video programming. There are approximately 30
satellites operating in the C-band, which carry over 500 channels of
programming combined; approximately 350 channels are available free of
charge and 150 are scrambled and require a subscription. HSD is
difficult to quantify in terms of annual revenue. HSD owners have
access to program channels placed on C-band satellites by programmers
for receipt and distribution by MVPDs. Commission data shows that,
between June 2004 and June 2005, HSD subscribership fell from 335,766
subscribers to 206,358 subscribers, a decline of more than 38 percent.
The Commission has no information regarding the annual revenue of the
four C-Band distributors.
25. Broadband Radio Service and Educational Broadband Service.
Broadband Radio Service comprises Multichannel Multipoint Distribution
Service (MMDS) systems and Multipoint Distribution Service (MDS). MMDS
systems, often referred to as ``wireless cable,'' transmit video
programming to subscribers using the microwave frequencies of MDS and
Educational Broadband Service (EBS) (formerly known as Instructional
Television Fixed Service (ITFS)). We estimate that the number of
wireless cable subscribers is approximately 100,000, as of March 2005.
The SBA definition of small entities for Cable and Other Program
Distribution, which includes such companies generating $13.5 million in
annual receipts, appears applicable to MDS and ITFS.
26. The Commission has also defined small MDS (now BRS) entities in
the context of Commission license auctions. For purposes of the 1996
MDS auction, the Commission defined a small business as an entity that
had annual average gross revenues of less than $40 million in the
previous three calendar years. This definition of a small entity in the
context of MDS auctions has been approved by the SBA. In the MDS
auction, 67 bidders won 493 licenses. Of the 67 auction winners, 61
claimed status as a small business. At this time, the Commission
estimates that of the 61 small business MDS auction winners, 48 remain
small business licensees. In addition to the 48 small businesses that
hold BTA authorizations, there are approximately 392 incumbent MDS
licensees that have gross revenues that are not more than $40 million
and are thus considered small entities. MDS licensees and wireless
cable operators that did not receive their licenses as a result of the
MDS auction fall under the SBA small business size standard for Cable
and Other Program Distribution, which includes all such entities that
do not generate revenue in excess of $13.5 million annually.
Information available to us indicates that there are approximately 850
of these licensees and operators that do not generate revenue in excess
of $13.5 million annually. Therefore, we estimate that there are
approximately 850 small entity MDS (or BRS) providers, as defined by
the SBA and the Commission's auction rules.
27. Educational institutions are included in this analysis as small
entities; however, the Commission has not created a specific small
business size standard for ITFS (now EBS). We estimate that there are
currently 2,032 ITFS (or EBS) licensees, and all but 100 of the
licenses are held by educational institutions. Thus, we estimate that
at least 1,932 ITFS licensees are small entities.
28. Local Multipoint Distribution Service. Local Multipoint
Distribution Service (LMDS) is a fixed broadband point-to-multipoint
microwave service that provides for two-way video telecommunications.
The SBA definition of small entities for Cable and Other Program
Distribution, which includes such companies generating $13.5 million in
annual receipts, appears applicable to LMDS. The Commission has also
defined small LMDS entities in the context of Commission license
auctions. In the 1998 and 1999 LMDS auctions, the Commission defined a
small business as an entity that had annual average gross revenues of
less than $40 million in the previous three calendar years. Moreover,
the Commission added an additional classification for a ``very small
business,'' which was defined as an entity that had annual average
gross revenues of less than $15 million in the
[[Page 10737]]
previous three calendar years. These definitions of ``small business''
and ``very small business'' in the context of the LMDS auctions have
been approved by the SBA. In the first LMDS auction, 104 bidders won
864 licenses. Of the 104 auction winners, 93 claimed status as small or
very small businesses. In the LMDS re-auction, 40 bidders won 161
licenses. Based on this information, we believe that the number of
small LMDS licenses will include the 93 winning bidders in the first
auction and the 40 winning bidders in the re-auction, for a total of
133 small entity LMDS providers as defined by the SBA and the
Commission's auction rules.
29. Open Video Systems (``OVS''). The OVS framework provides
opportunities for the distribution of video programming other than
through cable systems. Because OVS operators provide subscription
services, OVS falls within the SBA-recognized definition of Cable and
Other Program Distribution Services, which provides that a small entity
is one with $ 13.5 million or less in annual receipts. The Commission
has approved approximately 120 OVS certifications with some OVS
operators now providing service. Broadband service providers (BSPs) are
currently the only significant holders of OVS certifications or local
OVS franchises, even though OVS is one of four statutorily-recognized
options for local exchange carriers (LECs) to offer video programming
services. As of June 2005, BSPs served approximately 1.4 million
subscribers, representing 1.49 percent of all MVPD households. Among
BSPs, however, those operating under the OVS framework are in the
minority. As of June 2005, RCN Corporation is the largest BSP and 14th
largest MVPD, serving approximately 371,000 subscribers. RCN received
approval to operate OVS systems in New York City, Boston, Washington,
D.C. and other areas. The Commission does not have financial
information regarding the entities authorized to provide OVS, some of
which may not yet be operational. We thus believe that at least some of
the OVS operators may qualify as small entities.
30. Cable and Other Subscription Programming. The Census Bureau
defines this category as follows: ``This industry comprises
establishments primarily engaged in operating studios and facilities
for the broadcasting of programs on a subscription or fee basis * *.
These establishments produce programming in their own facilities or
acquire programming from external sources. The programming material is
usually delivered to a third party, such as cable systems or direct-to-
home satellite systems, for transmission to viewers.'' The SBA has
developed a small business size standard for firms within this
category, which is all firms with $13.5 million or less in annual
receipts. According to Census Bureau data for 2002, there were 270
firms in this category that operated for the entire year. Of this
total, 217 firms had annual receipts of under $10 million and 13 firms
had annual receipts of $10 million to $24,999,999. Thus, under this
category and associated small business size standard, the majority of
firms can be considered small.
31. Motion Picture and Video Production. The Census Bureau defines
this category as follows: ``This industry comprises establishments
primarily engaged in producing, or producing and distributing motion
pictures, videos, television programs, or television commercials.'' The
SBA has developed a small business size standard for firms within this
category, which is all firms with $27 million or less in annual
receipts. According to Census Bureau data for 2002, there were 7,772
firms in this category that operated for the entire year. Of this
total, 7,685 firms had annual receipts of under $24,999,999 and 45
firms had annual receipts of between $25,000,000 and $49,999,999. Thus,
under this category and associated small business size standard, the
majority of firms can be considered small. Each of these NAICS
categories is very broad and includes firms that may be engaged in
various industries, including cable programming. Specific figures are
not available regarding how many of these firms exclusively produce
and/or distribute programming for cable television or how many are
independently owned and operated.
32. Motion Picture and Video Distribution. The Census Bureau
defines this category as follows: ``This industry comprises
establishments primarily engaged in acquiring distribution rights and
distributing film and video productions to motion picture theaters,
television networks and stations, and exhibitors.'' The SBA has
developed a small business size standard for firms within this
category, which is all firms with $27 million or less in annual
receipts. According to Census Bureau data for 2002, there were 377
firms in this category that operated for the entire year. Of this
total, 365 firms had annual receipts of under $24,999,999 and 7 firms
had annual receipts of between $25,000,000 and $49,999,999. Thus, under
this category and associated small business size standard, the majority
of firms can be considered small. Each of these NAICS categories is
very broad and includes firms that may be engaged in various
industries, including cable programming. Specific figures are not
available regarding how many of these firms exclusively produce and/or
distribute programming for cable television or how many are
independently owned and operated.
33. Small Incumbent Local Exchange Carriers. We have included small
incumbent local exchange carriers in this present RFA analysis. A
``small business'' under the RFA is one that, inter alia, meets the
pertinent small business size standard (e.g., a telephone
communications business having 1,500 or fewer employees), and ``is not
dominant in its field of operation.'' The SBA's Office of Advocacy
contends that, for RFA purposes, small incumbent local exchange
carriers are not dominant in their field of operation because any such
dominance is not ``national'' in scope. We have therefore included
small incumbent local exchange carriers in this RFA, although we
emphasize that this RFA action has no effect on Commission analyses and
determinations in other, non-RFA contexts.
34. Incumbent Local Exchange Carriers (``LECs''). Neither the
Commission nor the SBA has developed a small business size standard
specifically for incumbent local exchange services. The appropriate
size standard under SBA rules is for the category Wired
Telecommunications Carriers. Under that size standard, such a business
is small if it has 1,500 or fewer employees. According to Commission
data, 1,307 carriers have reported that they are engaged in the
provision of incumbent local exchange services. Of these 1,307
carriers, an estimated 1,019 have 1,500 or fewer employees and 288 have
more than 1,500 employees. Consequently, the Commission estimates that
most providers of incumbent local exchange service are small
businesses.
35. Competitive Local Exchange Carriers, Competitive Access
Providers (CAPs), Shared-Tenant Service Providers,'' and ``Other Local
Service Providers.'' Neither the Commission nor the SBA has developed a
small business size standard specifically for these service providers.
The appropriate size standard under SBA rules is for the category Wired
Telecommunications Carriers. Under that size standard, such a business
is small if it has 1,500 or fewer employees. According to Commission
data, 859 carriers have reported that they are engaged in the provision
of either competitive access provider services or competitive local
exchange carrier services. Of these 859 carriers, an estimated 741 have
1,500 or
[[Page 10738]]
fewer employees and 118 have more than 1,500 employees. In addition, 16
carriers have reported that they are ``Shared-Tenant Service
Providers,'' and all 16 are estimated to have 1,500 or fewer employees.
In addition, 44 carriers have reported that they are ``Other Local
Service Providers.'' Of the 44, an estimated 43 have 1,500 or fewer
employees and one has more than 1,500 employees. Consequently, the
Commission estimates that most providers of competitive local exchange
service, competitive access providers, ``Shared-Tenant Service
Providers,'' and ``Other Local Service Providers'' are small entities.
36. Electric Power Generation, Transmission and Distribution. The
Census Bureau defines this category as follows: ``This industry group
comprises establishments primarily engaged in generating, transmitting,
and/or distributing electric power. Establishments in this industry
group may perform one or more of the following activities: (1) Operate
generation facilities that produce electric energy; (2) operate
transmission systems that convey the electricity from the generation
facility to the distribution system; and (3) operate distribution
systems that convey electric power received from the generation
facility or the transmission system to the final consumer.'' The SBA
has developed a small business size standard for firms in this
category: ``A firm is small if, including its affiliates, it is
primarily engaged in the generation, transmission, and/or distribution
of electric energy for sale and its total electric output for the
preceding fiscal year did not exceed 4 million megawatt hours.''
According to Census Bureau data for 2002, there were 1,644 firms in
this category that operated for the entire year. Census data do not
track electric output and we have not determined how many of these
firms fit the SBA size standard for small, with no more than 4 million
megawatt hours of electric output. Consequently, we estimate that 1,644
or fewer firms may be considered small under the SBA small business
size standard.
D. Description of Proposed Reporting, Recordkeeping and Other
Compliance Requirements
37. The rules ultimately adopted as a result of this FNPRM may
contain new or modified information collections. We anticipate that
none of the changes would result in an increase to the reporting and
recordkeeping requirements of small entities. We invite small entities
to comment in response to the FNPRM.
E. Steps Taken To Minimize Significant Impact on Small Entities and
Significant Alternatives Considered
38. The RFA requires an agency to describe any significant
alternatives that it has considered in proposing regulatory approaches,
which may include the following four alternatives (among others): (1)
The establishment of differing compliance or reporting requirements or
timetables that take into account the resources available to small
entities; (2) the clarification, consolidation, or simplification of
compliance or reporting requirements under the rule for small entities;
(3) the use of performance, rather than design, standards; and (4) an
exemption from coverage of the rule, or any part thereof, for small
entities.
39. In response to the FNPRM, the Commission may choose to continue
to apply its current leased access rates to programmers that
predominantly transmit sales presentations or program length
commercials; it may choose to apply the modified rate formula and the
maximum allowable leased access rate of $0.10 per subscriber per month
to these programmers; or it may adopt an alternative approach. We
invite comment on the options the Commission is considering, or
alternatives thereto as referenced above, and on any other alternatives
commenters may wish to propose for the purpose of minimizing any
significant economic impact on smaller entities.
F. Federal Rules Which Duplicate, Overlap, or Conflict With the
Commission's Proposals
40. None.
IV. Additional Information
41. For additional information on this proceeding, contact Steven
Broeckaert, Steven.Broeckaert@fcc.gov; or Katie Costello,
Katie.Costello@fcc.gov; of the Media Bureau, Policy Division, (202)
418-2120.
V. Ordering Clauses
42. Accordingly, it is ordered, pursuant to the authority found in
sections 4(i), 303(r), and 628 of the Communications Act of 1934, as
amended, 47 U.S.C. 154(i), 303(r), and 532, this Notice of Proposed
Rulemaking Is Adopted.
43. It is further ordered that the Commission's Consumer and
Governmental Affairs Bureau, Reference Information Center, shall send a
copy of this Notice of Proposed Rulemaking, including the Initial
Regulatory Flexibility Analysis, to the Chief Counsel for Advocacy of
the Small Business Administration.
Federal Communications Commission.
Marlene H. Dortch,
Secretary.
[FR Doc. 08-871 Filed 2-27-08; 8:45 am]
BILLING CODE 6712-01-P