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"i~'^09CSS999S]+9+/SSSSSSSSSS//]]]Ixnnxg]xx9?xgxx]xn]gxxxxg9/9MS9ISISI9SS//S/SSSS9?/SSxSSIP!PZ9+ZM999+99999999S/xIxIxIxIxIlnIgIgIgIgI9/9/9/9/xSxSxSxSxSxSxSxSxSxSxIxSxRxSxSxS]SxIxIxInInInZnIxigIgIgIgIxSxSxSxZxSxZxS9/9S999Su]ZZxSg/gCg9g9g/xSbxSxSxSxSxn9n9n9]?]?]?]ZgFg/gMxSxSxSxSxSxSxxZgIgIgIxSg9xS]?g9xSi+SS88WuuuuuuuuuuuuuuuuuuuuuuuuuuuuuuuuuuuuuuuuuuuuuuuuxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxN/>/>/>/x]SSSSx]x]x]x]xSxSx]SSxSxSf]xSxSxSxIxIxWxIx{nInInInISSSWS]a?/?]?9?]]WW]n/nKn9nCn/x]xx]x]SSxxIxIxI]?]?]?]WnUn9nax]x]x]x]x]x]xxWnInInIx]n9x]]?n9xSz+SS8-8WuuuuuuuuuuuuuuuuuuuuuuuuuuuuuuuuuuuuuuuuuuuuuuuuxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxN8HH"&H>XHH8HB8>HH^HH>"".2",2,2,"222N2222"&22H22,006"6."""""""""""2H,H,H,H,H,XAB,>,>,>,>,""""H2H2H2H2H2H2H2H2H2H2H,H2H1H2H2H282H,H,H,B,B,B6B,H?>,>,>,>,H2H2H2H6H2H6H2""2"""2F866H2>>(>">">H2;H2H2H2H2XHB"B"B"8&8&8&86>*>>.H2H2H2H2H2H2^HH6>,>,>,H2>"H28&>"H2?22!!WFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxN$<<$.2",2222`2 LL2 LL2L"",,2d"" yOy-ԍxReply comments of the Grand Alliance at 57; reply comments of ATSC at 55.z Proponents also argue that the specified aspect ratios are  xappropriate because 16:9 is already accepted worldwide, and 80% of motion pictures are shot at  xy1.85:1, which readily fits a 16:9 screen with negligible use of letterboxing. Even the widest films  X- x<can be accommodated by letterboxing only on the order of 25% of the screen height.~?X yO-ԍxReply comments of the Grand Alliance at 59; reply comments of ATSC at 5758.~ Adopting  xthe film makers' proposed 2:1 aspect ratio would still require letterboxing for films made in  xaspect ratios different than 2:1, which today includes most films, and would result in displays,  xfor a given picture height, 12.5% larger in picture area, 30 50% heavier and correspondingly  x=more expensive for consumers. Use of the CICATS proposal, which emphasizes SDTV, would  xyfurther diminish a film maker's product by foregoing consumer access to resolution comparable to that found in a theater.  X -  >x20. Review or Sunset of Standard. Most commenters addressing the issue advocate either  x-proceeding under our current processes for regulatory change or reviewing the Standard at some  xdefinite future time. Broadcasters and equipment manufacturers, for instance, believe that we  X - xxshould consider modifications but should not establish a specific review date or a sunset.y@  yOW-ԍxSee, e.g., comments of Broadcasters at 24; comments of Sony at 36.y They  xZargue that doing so would inject an element of uncertainty into the transition process, discourage  xconsumers, broadcasters and manufacturers from making investments, and be arbitrary because  xthe transition timetable, the timing of production of DTV sets, and the timing of consumer  Xb- xacceptance of DTV sets is unknown at the present time.Abx yO-ԍxSee, e.g., comments of Broadcasters at 24; comments of Sony at 36; comments of MCEA at 4. These parties emphasize the inherent  xkflexibility of the Standard and argue that this mitigates the need for a fixed review or sunset.  x=Sony and Schreiber propose that the Commission name an Advisory Committee, consisting of  xexperts, who would examine the Standard and recommend changes in accordance with the  X-Commission's existing procedures.B yO-  ԍxComments of Sony at 37 ("[T]he Commission could name an industry Advisory Committee comprised of  xthe experts of that day who would examine the standard in light of the real imperatives of the future and, after  xthoughtful deliberation of the perceived need, recommend changes which would again be subject to public discourse  xand review.") and Schreiber, Part II at 8 ("A small panel, appointed by the Commission, and composed exclusively of persons with no financial interest in the outcome, would seem appropriate.").   X-  Nx21. NTIA urges us to ensure that the industries involved develop a clearly defined plan  xto promote speedy migration to an allprogressive scan system that moves expeditiously and  X- xincludes a target date for full transition.IC  yO%-ԍxComments of NTIA at 23.I NTIA suggests that we periodically review the migration to an all progressive system. "| H C,N(N(ZZP"Ԍ X-  mx22. Incorporation of Standard into Commission's Rules. Little in the way of comment  xwas submitted on this issue. The Grand Alliance believes that the Commission should  x{incorporate the Standard by reference, as it did in 1995 with an ATSC standard for ghost  xycanceling in NTSC. The Standard, it adds, need not be incorporated in its entirety. It asks that  xthe Commission incorporate by reference ATSC Doc. A/53 ("ATSC Digital Television Standard,  x16 Sep 95") and ATSC Doc. A/52 ("ATSC Digital Audio Compression Standard (AC3), 20 Dec.  x95") but only mention and not incorporate ATSC Doc. A/54 ("Guide to the Use of the ATSC Digital Television Standard, 4 Oct 95").  XH-  X1-  x23. Audio Standard. Audio system proponents Digital Theater Systems ("DTS") and  xDolby Laboratories sharply differ on which is the superior technology and whether the standard  xwe adopt should specify an audio format. DTS argues that its audio system is superior to the  xzDolby system embodied in the ATSC DTV Standard and that the standard we adopt should  X - x\exclude audio formats.PD  yON-ԍxSee comments of DTS at 6.P Dolby responds that DTS has not demonstrated that its system is  X - xsuperior to the Dolby AC3 system.XE X yO-ԍxSee reply comments of Dolby at 3.X Dolby points out that its system has been widely tested,  xevaluated and accepted by numerous standards setting organizations and for numerous consumer  xelectronics products. Dolby argues that the multiple audio decoding system proposed by DTS  xwould burden products with unnecessary cost and complexity and that, while creating the ATSC  xDTV Standard document, the ATSC Specialist Group on Digital Services (T3/S3) discussed and  XK-rejected the approach suggested by DTS.@FK yO-ԍxId. at 5.@  X4-  X-  x24. Licensing Technology. Generally, commenting parties that addressed this issue agree  xyto the reasonable licensing of their relevant patents, including pending patents and intellectual  X- xproperty necessary for the successful construction of DTV equipment.Gx yO-ԍxSee, e.g., comments of Grand Alliance at 29, Dolby at 4, Zenith at 15, Thomson at 16. ATSC indicates that it  xsought and obtained from each member of the Grand Alliance and from Dolby a written  X- xZcommitment to abide by this requirement._H yOz-ԍxSee, e.g., comments of ATSC at 29._ ATSC and the other commenting parties suggest that no further Commission action is required.  X-  X|-  x25. Closed Captioning. Comments that addressed this issue, such as those of the Grand  xKAlliance, ATSC and Zenith, indicate that they have worked closely with the affected communities  xto provide for closed captioning in the ATSC DTV Standard. They each suggest that the ATSC  xDTV Standard provides all the capability necessary for broadcasters and receiver manufacturers  X -to provide closed captioning.I  yOi'-ԍxSee, e.g., comments of Grand Alliance at 31, ATSC at 32, Zenith at 17." ( I,N(N(ZZ"Ԍ X-  ęx26. November 26, 1996, Agreement. As noted above, some of the commenters have  xaltered their positions since the initial round of comments. After further discussions and  xnegotiations, the parties to the November 26, 1996, Agreement urge us to adopt the modified  xstandard we are calling the DTV Standard. The Grand Alliance and ATSC view it as a way to  X- x/resolve the controversy that has delayed adoption of a DTV standard.J yO-  jԍxFurther Comments of the Digital HDTV Grand Alliance at 2; Further Comments of the Advanced Television Systems Committee at 2. They believe that  xreliance on voluntary industry standards for the formats to be used for digital television is  x/preferable to the cost of the further delay that would result if we fail to act while the parties  X_- xZremain at an impasse.kK_  yO0 -ԍxFurther Comments of the Digital HDTV Grand Alliance at 2. k Full service broadcasters endorse the Agreement for similar reasons. The  xAssociation for Maximum Service Television, Inc., ("MSTV") believes the Agreement is a  x"workable compromise" that will permit the compatible development of progressive  X - xtechnologies.L  yO{-  ԍxComments of the Association for Maximum Service Television, Inc. on the Digital Television Standard Agreement at 2. One low power television broadcaster, International Broadcasting Network,  x=objects to the process that resulted in the Agreement and contends that low power television  X -broadcasters were excluded.uMX  yO-  >ԍxWhile not pointing to any specific prejudice it suffered, IBN contends that approval of a Standard during  x1996, in accordance with the terms of the Agreement, could prejudice the outcome of issues raised in our Sixth Further Notice, reply comments on which are not due until January 10, 1997.u  X -  x27. Equipment manufacturers endorse the Agreement as "an important step toward  xreducing reliance on Governmentmandated standards," that makes it likely that "the industry  X- xjstandard becom[es] the vehicle around which the marketplace organizes."N(  yOi-  ԍxComment on the Agreement of General Instrument at 1; see also comments on the Agreement of EIA, Matsushita, Philips, Thomson and Zenith, all of which endorse the agreement. They believe that  xxthe Agreement will provide sufficient certainty and that the video formats, although not mandated  xby the Commission, will remain viable nevertheless because there is a voluntary industry standard  XK-in place.OK  yO|-  ԍxComments on the Agreement of Philips Electronics North America Corporation and Thomson Consumer Electronics, Inc., at 2.  X-  x28. Coalition of Film Makers objects to the Agreement for the same reasons it objected  X- x\to the ATSC DTV Standard in its initial comments.P yO$-ԍxComments of the Coalition of Film Makers (in response to the Public Notice) at 46. Most other commenters on this issue,  x=except DemoGraFX and Venture, see the Agreement as addressing Film Maker's objections by"hP,N(N(ZZ "  X- xKdropping any constraints on formats.PQX yOy-  ԍxSee, e.g., Comments on the Agreement of Zenith Electronics Corporation, Electronics Industries Association,  xCBS, Inc., and the Broadcasters Caucus' "Response to Cinematographers' November 26 Fax to Vice President Gore Concerning DTV Standard."P Beyond that, they believe that the question of how a film  x[is broadcast is not appropriately part of this proceeding, is a contractual matter, and should be  xleft to film owners and broadcasters, bargaining at arm's length. DemoGraFX, while stating that  x<it is pleased with some aspects of the Agreement, recommends additional measures. It urges that  xthe Standard require transmission of films in their original aspect ratio and colorimetry and  xprohibit cropping; it also objects to interlaced formats remaining in Table 3 of the ATSC DTV  xStandard. DemoGraFX also urges measures to require frame rates and horizontal resolutions not  xMcalled for in the Standard and advocates requiring receivers to display films in their original  XH- xxaspect ratios.RH yO -  ԍxComments of DemoGraFX in Response to the Commission Seeking Comments on Digital TV Standards Agreement Released 27 November 1996 at 27. Venture Technologies Group wants the DemoGraFX system incorporated into the  X1- xStandardS1@ yO"-ԍxVenture Technologies Group's Comments on the Digital Television Standards Agreement at 3. and Digital Imaging General opposes the Agreement which it contends was without  X -the full participation and knowledge of the public.T  yO-  ԍxDigital Imaging General, DIMAGE Inc, Comments on Fifth Notice of Proposed Rule Making (NPRM) and on Public Notice FCC 96465 at 2.  X -  !x29. Audio interests remain divided, as they were prior to the Agreement, for essentially  X - xthe same reasons.U (  yO-  ԍxSee generally Comments on the Agreement of Dolby Laboratories, The Academy for the Advancement of High End Audio, and Widescreen Review. Department of Defense does not directly address the Agreement but voices  X - x\its concern over any use of interlaced scanning and nonsquare pixels.V  yO-  =ԍxComments of the Department of Defense, The Under Secretary of Defense in response to the Public Notice at 1. It strongly favors  x\progressive scanning and square pixels because, it states, they result in operations that are  xcheaper, faster, and computer compatible for DOD information processing applications. William  xSchreiber opposes the Agreement on the ground that the process resulting in it may have violated  xthe Federal Advisory Committee Act. He also believes that without mandated formats  xprospective purchasers will not know what they are buying and that the penetration of digital  x>receivers will be slowed. In the public interest community, Benton Foundation urges quick  X- xadoption of the Agreement so that the Commission can turn to public interest standardsvW yO#-ԍxComments of Benton Foundation in response to the Public Notice.v while  xthe American Foundation for the Blind objects that the ATSC DTV Standard does not designate  xaudio bandwidth capacity for delivering video descriptions, thereby depriving the blind of equal"hW,N(N(ZZ "  X-access to video programming.{X yOy-ԍxComments of the American Foundation for the Blind December 6, 1996 at 1.{  X-IV. The Digital Television Standard  X-  x30. Adoption of the Digital Standard. In the Fifth Further Notice, we listed four  xobjectives regarding the authorization and implementation of a DTV standard: 1) to ensure that  x>all affected parties have sufficient confidence and certainty in order to promote the smooth  xintroduction of a free and universally available digital broadcast television service; 2) to increase  x.the availability of new products and services to consumers through the introduction of digital  xbroadcasting; 3) to ensure that our rules encourage technological innovation and competition; and  x4) to minimize regulation and assure that any regulations we do adopt remain in effect no longer  X - xzthan necessary.aY X yO -ԍxFifth Further Notice, supra at 6236.a In addition to these objectives, we stated our intentions to consider how  xadoption of the DTV Standard would affect other goals enumerated in this proceeding including  xfacilitating the provision of digital video services, spurring a rapid conversion from NTSC to  X -DTV, and recovering the analog broadcast spectrum after conversion.cZ  yOW-ԍxFourth Further Notice, supra at 10541.c  X-  x31. In the Fifth Further Notice, we proposed to adopt the ATSC DTV Standard. In  xaddition to requesting comment on our proposal, we requested comment on alternative approaches  xMto requiring a standard and specifically mentioned two options previously identified by the  xCommission: 1) authorizing use of a standard and prohibiting interference to it, but not requiring  X4- x.the use of that standard;\[4x yO]-ԍxSecond Inquiry, supra at 6535. \ and 2) adopting a standard for allocation and assignment purposes  X- x.only.;\ yO-ԍxId. ; We also sought comment on requiring use of some layers of the ATSC DTV Standard  X- x-but making others optional. In this Report and Order, we decide to adopt this last alternative and  xyto require the use of all layers of the ATSC DTV Standard, except the video format layer, which will remain optional.  X-  Ox32. Our decision today to adopt the ATSC DTV Standard, as modified, is based on a  xcareful weighing and balancing of the various goals and objectives outlined in this proceeding.  X|- xLWe conclude that adopting the DTV Standard will fulfill the four objectives set out in the Fifth  Xe-Further Notice.]e yO$-  0ԍxBy adopting a standard for the transmission of digital television, we are requiring its use by television licensees.  X7-  x 33. First, we conclude that the DTV Standard will serve our goal of ensuring that all"7 ],N(N(ZZ"  x]affected parties have sufficient confidence and certainty in order to promote the smooth  xintroduction of a free and universally available digital broadcast television service. As we have  xrecognized before, broadcast television is unique. It is free, available to nearly every American,  xand many Americans rely on broadcast television programming as a primary source of  xinformation and entertainment. Because of these characteristics, we stated that the goals of  xcertainty and reliability take on special significance and strengthen the case for our adoption of  Xv- xa DTV standard.a^v yO-ԍxFifth Further Notice, supra at 6249.a The DTV Standard we adopt today will help ensure that broadcast television remains available to all Americans in the digital era.  X1-  \x!34. Many commenters argued that startup, coordination and potential splintering problems  xjare so severe in digital broadcast television that they cannot be adequately solved without the  x.Commission adopting a single DTV standard. We recognize that these problems may be more  xtroublesome for digital broadcast television than cable, DBS, MMDS and other subscription video  xservices which have a greater degree of control over the equipment used by their customers.  xWhile we are not convinced that these problems are so severe that they would absolutely preclude  xzus from allowing the market to operate without a set standard, we are concerned that market  xsolutions may result in more than one sustainable transmission standard. Such an outcome might  xresult in compatibility problems and increase the risk that consumer DTV equipment purchased  xin one city would not work well in another city; that a receiver would not display all the  x[broadcast channels in a city; or that a digital television set purchased one year might not work  x[several years later. Such results would hurt consumers and make it more difficult to preserve a universally available broadcast television service.  X-   x"35. More than one transmission standard could also cause some consumers and licensees  xto postpone purchasing DTV equipment, because they do not wish to take the risk of investing  xin what may soon become obsolete technology, or because they believe better technologies will  xsoon become available. This could slow investment during the early stages of the transition to DTV and, thereby, slow the transition to DTV.  Xe-  x#36. In addition, more than one transmission standard would make it more difficult to  xfacilitate an efficient allotment of broadcast channels and protect against interference.  xDetermining interference performance becomes more complicated as the number of transmission  xsystems increases, because each system's interference characteristics must be tested against every  x\other system. This could complicate moving some licensees to new channels following the conversion to DTV and decrease the amount of spectrum recovered.  X -  Ax$37. For all of these reasons, we believe that adopting the DTV Standard provides  xadditional certainty that the public policy goals unique to broadcast DTV are realized. Simply  xprotecting a standard, or using a standard for allocation purposes would not address our concerns  x-with "waitandsee" behavior and preserving a universally available broadcast television service.  xWe also reject the argument that the Agreement is too restrictive and still includes too many"h$X^,N(N(ZZF#"  X- x.mandatory aspects of the DTV Standard._ yOy-  ԍxSee, e.g., comments of DemoGraFX and comments of The Academy for the Advancement of High End  yOA-Audio (both in response to the Public Notice). As more fully explained below, we believe that the entire DTV Standard is needed to achieve our goals.  X-   x%38. Second, we conclude that adopting the DTV Standard will increase the availability  x=of new products and services for consumers. The DTV Standard is flexible and extensible and  xpermits data broadcasting as well as new services. With respect to data broadcasting, the DTV  xzStandard provides for multiple 19 Mega (Million) bits per second ("Mbps") digital pipelines  xdirectly into the home of every American. While we would anticipate that licensees would, at  xthe very least, continue to provide tomorrow what consumers have come to expect today that  xis, at least one free program per 6 MHz channel we also expect to authorize its use to transmit,  x>for example, newspapers, stock market or sports data and, perhaps of greatest significance,  X -software applications directly to computing devices.n`x  yO-  0ԍxBy way of example, the transmission of one HDTV or several SDTV video programs may still leave  xJmillions of bits per second of system data capacity unused. This "opportunistic data" capability can be used for data  xtransmission at the same time a viewer is watching a program. The extent of any limitations on nonbroadcast data  xtransmission, in terms of the amount of time or system capacity that may be used for data transmission purposes,  xand the public interest obligations which will attach to DTV licensees irrespective of the use of the system for data  yO- xtransmission are issues that were raised in the Fourth Further Notice, supra, and will be resolved in a subsequent Report and Order.n  X -  x&39. Third, we conclude that incorporating the DTV Standard into our Rules will  xxencourage technological innovation and competition. In particular, we conclude that our decision  xnot to specify video formats will result in greater choice and diversity of equipment, allow  xcomputer equipment and software firms more opportunity to compete by promoting  x<interoperability, and result in greater consumer benefits by allowing an increase in the availability  xof new products and services. By not adopting video formats, we are allowing consumers to  xchoose which formats are most important to them. Thus, we avoid the possibility that we could  xinhibit development of services which might, in fact, draw consumers more readily to embrace  xdigital broadcasting and thus, hasten its adoption. By not specifying video formats in this respect  xwe foster competition among those aspects of the technology where we are least able to predict the outcome, choosing instead to rely upon the market and consumer demand.  X-  !x'40. Moreover, the DTV Standard itself is highly extensible. The DTV Standard remains  xfully digital and incorporates packet identifiers ("PIDs") which provide a large amount of  x"headroom" for further development without requiring changes to the DTV Standard. We note  xthat ATSC is already at work on technical standards to facilitate data broadcasting with DTV  xsystems. It has formed a new ATSC Specialist Group on Data Broadcasting to develop data  xbroadcasting standards that "will provide the mechanism for distribution of computer files  X7-including programs (executable code) and data."a7`  yOH'-ԍx"ATSC Initiates Development of Data Broadcasting Standards," ATSC, July 22, 1996. "7 a,N(N(ZZ{"Ԍ X-  _ԙx(41. Furthermore, there is little risk in such extensibility making obsolete consumer  x!investment in digital receivers or decoders. While not all receivers would be capable of  xjinterpreting new PIDs, we are satisfied that, "[b]ackward compatibility is assured when new bit  x[streams are introduced into the transport system as existing decoders will automatically ignore  X- x-new PIDs"Lb yO-ԍxATSC A/54, Section 8.1.1.3.L and continue to decode and display the intended material. The resultant conditions  x=would be reminiscent of the introduction of color or stereo sound to the NTSC system. Earlier  xequipment continued to work unimpaired even as newer equipment provided additional or improved features.  X1-  Ax)42. Finally, we conclude that adopting this Standard provides for the minimum of  xregulation needed to provide for a smooth transition. At the same time, we provide the certainty  x<needed for the transition. The DTV Standard eliminates an unnecessary government requirement  xZby not specifying video formats. A key point of contention throughout this proceeding has been  x\the migration to progressive scan transmission formats. While almost all parties agree that,  xultimately, progressive scanning is superior to interlaced across a variety of dimensions, the  xrecord has been marked by dissent and contradiction about the desirability of allowing both  x/interlaced and progressive scanning, given the overtheair bandwidth limitation of 6 MHz.  xjAdoption of the DTV Standard, which will allow video formats to be tested and decided by the  xmarket, avoids the risk of a mistaken government intervention in the market and is consistent  XK-with the deregulatory direction of the Telecommunications Act of 1996.cKX yOT-ԍxSee the Telecommunications Act of 1996, Pub. L. No. 104104, 110 Stat. 56 (1996).  X-  \x*43. The consensus among the broadcast, set manufacturing and computer industries gives  xus confidence that the DTV Standard we are adopting does not reflect overreaching or  xjoverregulation by government. The Agreement itself recognizes that the ATSC DTV Standard  x[is a "voluntary" one, selected by private parties under the auspices of the ATSC, an American  X- xiNational Standards Institute ("ANSI")accredited organization.Fd yOZ-ԍxThe Agreement at (1).F That parties representing major  xsegments of such widely divergent industries have forged a consensus over the appropriate  xxstandard at once furthers our confidence in the DTV Standard itself and ameliorates concerns that adoption of a standard might retard competition and innovation.  XN-  x+44. We recognize that although there was substantial praise among members of the  x<broadcasting, equipment manufacturing and computer industries, support for the Agreement was  xnot unanimous. The Coalition of Film Makers was party to the negotiations that resulted in the  xAgreement, but did not join in its support and opposes the Agreement because it does not require  xthe display of films in the films' original aspect ratios. We note, however, that consistent with  xMthe Agreement, we are not adopting Table 3 of the ATSC DTV Standard as part of the DTV  xStandard, and thus not adopting any particular aspect ratio. This goes far in meeting the Film  xMakers' initially expressed concerns that by adopting Table 3 we might prevent films from being"!xd,N(N(ZZ "  X- xdisplayed in their original aspect ratio.zeX yOy-  \ԍxThe Coalition also argues that the DTV Standard will contain a "pan and scan" feature of MPEG2. Dec.  x 6 Comments at 4. However, this feature does not appear to affect or limit the transmitted aspect ratio. Dec. 8 Letter of Bob Rast to Arthur Cole, submitted by the Digital HDTV Grand Alliance.z We are sensitive to the concerns of film makers but  xnote that the standard we adopt will allow passthrough of films in whatever format they are  xprovided to broadcasters by distributors. The DTV Standard we are adopting not only does not  ximpose any impediment to the display of films in their original aspect ratios, but to the extent that  xresolution of displays is improved and a wide aspect ratio is adopted by consumers, the display of films in their original aspect ratios might be promoted.  X_-  x ,45. International Broadcast Network, a low power broadcaster, expressed displeasure  XH- xZwith the Agreement for not doing enough to protect their interests.fH yO -ԍxSee International Broadcasting Network's Comments (in response to Public Notice). We disagree. As a general  xmatter, it appears to be directed more toward the transition to digital television rather than the  x[transmission standard itself. This portion of the proceeding is concerned with the adoption of  xsuch a standard. More wide ranging issues, many of which are of direct concern to LPTV  X - xbroadcasters, will be dealt with in response to the Fourth and Sixth Further Notices, supra.  xAdditionally, we note that the Commission has previously determined that it would not mandate  X - xLPTV service conversion to DTV by a date certain.hg x yO-ԍxThird Report/Further Notice, supra at 6955.h Accordingly, their interest in the transmission standard is more remote.  Xy-  x-46. We are not persuaded by those who contend that not specifying video formats in the  xDTV Standard will inject uncertainty into the transition process and delay implementation of  XK- xdigital television.}hK yO-ԍxSee, e.g., comments of MIT at 12; comments of Schreiber at 23.} As explained above, we believe that by adopting a transmission standard ,  X4- xjwe are providing the appropriate level of certainty that the digital television market will need to  xmove forward. Our belief in this regard is supported by the fact that the major industries  xyaffected by this decision have reached an agreement that video formats need not be part of the  xDTV Standard. The confidence expressed by these parties gives us reasonable assurance it is not  xinecessary to require video formats. We recognize that some parties contend that the Commission  xKshould not rely on the Agreement in considering an appropriate digital standard. As the analysis  xlabove shows, we are not relying solely on the fact that these parties reached agreement.  xNevertheless, we believe the consensus flows from a sufficiently broad segment of the affected industries to warrant our recognition of the end result and factor it into our analysis.  XN-  1x.47. Placing the ATSC DTV Standard in the Commission's Rules. In the Fifth Further  X7- xNotice, we sought comment on whether, assuming we required use of the ATSC DTV Standard,  X - xwe should place it into our Rules in its entirety or, instead, should incorporate it by reference.di  yOi'-ԍxFifth Further Notice, supra at p. 6250.d " ( i,N(N(ZZ"  x We also asked whether, alternatively, we should publish the Standard as an OET technical  xbulletin rather than putting it in our Rules either in its entirety or by reference. For the foregoing  x.four reasons, we have decided to adopt the DTV Standard. We have also determined that we  xwill incorporate into the Commission's Rules, by reference, ATSC Doc. A/53 ("ATSC Digital  X- xTelevision Standard, 16 Sep 95"), except for Section 5.1.2 ("Compression format constraints")  x-including Table 3, "Compression Format Constraints," as contained in Annex A ("Video Systems  xCharacteristics") and the references to that Table contained in the "Allowed Value" columns of  xSection 5.1.1 Table 2 and Section 5.1.3 Table 4. We will also incorporate by reference ATSC  x\Doc. A/52 ("ATSC Digital Audio Compression Standard (AC3), 20 Dec. 95") in its entirety.  X1- xIncorporation into the Commission's Rules by reference has been done beforej1 yO -  ԍxSee, e.g., Section 73.682(a)(21)(iv) ("ghost cancelling"), 73.682(c)(3) and 73.681("BTSC stereo sound"),  xK73.682(a)(14)("circular and elliptical polarization"), and 15.31(a)(6)("intentional and unintentional radiators").  xAlthough they do not specifically incorporate material by reference, the ghost cancelling and stereo sound provisions  xreference Office of Engineering and Technology Bulletins which, in turn, incorporated ATSC and Broadcast  xTelevision Systems Committee ("BTSC") standards and recommendations. The polarization provision references an IEEE Standard and the radiator provision references an ANSI Standard.  and, in this  xmatter, is particularly warranted given the 194page length of the Standard and its easy  X -availability.k @ yO-  kԍxThe Standard documents can be ordered through the Commission's contract copy service and the full text is available on the Internet at the ATSC site (http://www.atsc.org).  X -  Ox/48. Review. In the Fifth Further Notice, while proposing adoption of the ATSC DTV  xStandard, we also expressed our desire "to encourage further innovation by those who have  X - xdevised the ATSC DTV Standard as well as new entrants."al  yO-ԍxFifth Further Notice, supra at 6251.a To that end, we set forth three  xxoptions that arguably could accomplish this goal. The three were: 1) to proceed under our current  xprocesses for regulatory evolution and change, which include consideration, as appropriate, of  xrequests from parties to amend our rules or review of the Rules on the Commission's own  xinitiative; 2) to commit ourselves to conduct a proceeding to review the Standard at some future  xtime (either a specific date or upon the happening of an objective event); and 3) to establish a  x^period of time after which the Standard no longer would be required or exclusive (i.e.,  x"sunsetting" it) thereby allowing digital licensees freedom to use any technology that does not interfere with users of the Standard.  X-  x049. We believe that in view of the DTV Standard that we are adopting, a sunset is not  xnecessary. Nonetheless, unforeseeable innovations eventually may require modification of this  x-standard. We want to be sure that we do not inadvertently deter experimentation and innovation  xby adopting the DTV Standard. Our concern is lessened substantially by the broad range of  xparties who have agreed that deleting the video format constraints will permit experimentation  xand innovation and eliminate the need for either a sunset or a scheduled review. Moreover, the  xATSC has committed to continue to review the ATSC DTV Standard and to implement  x<compatible extensions of, and deviations from, the ATSC DTV Standard that evolve in the future. " ( l,N(N(ZZz"  xWe also have adopted a schedule of periodic reviews to monitor the progress of DTV  X- xyimplementation and have requested comment on updating that schedule.m yOb-ԍxSee Third Report/Further Notice, supra at 69646966 and Fourth Further Notice, supra at 1054810549. We intend to keep  xMabreast of developments and will review our rules as appropriate based upon technological developments and marketplace conditions.  X- V. Audio Standard  X_-  x150. As indicated by the foregoing, we are adopting ATSC Document A/52 which pertains  xto audio standards. Although audio standards are not addressed in the Agreement, it implicitly  xsupports adopting ATSC A/52 because it seeks adoption of ATSC DTV Standard A/53. Annex  xB of the ATSC DTV Standard A/53 includes extensive normative references to ATSC Document  x=A/52. In comments, some parties have suggested that this DTV audio standard should not be adopted as a required audio standard.  X -  x251. We are not convinced that the approach suggested by DTS is desirable, so we are  xjadopting the audio portion of ATSC DTV Standard. We note that DTS did not go through the  xextensive testing and evaluation where the Dolby system prevailed. While claims and  x<testimonials were submitted in comments, there is no supporting, independent testing or analysis  x[to form a basis for determining whether the DTS system represents a substantial improvement.  xWe also note that the suggested changes could delay implementation as affected parties modify  xthe documentation. Also, while there is disagreement about how significant it would be, it does appear that implementing the DTS proposal would involve additional costs.  X-  /x352. We do not agree that the DTS proposal is consistent with the Agreement on excluding  xspecifications of the video formats. The DTV video will still be coded and compressed as  xspecified in the ATSC DTV Standard, generally required to conform to the MPEG2 Video  xStandard. In contrast, the DTS proposal would exclude audio formats, coding and compression  xspecifications. The suggested audio changes to the documentation are significantly more  xextensive than the accepted video changes. Furthermore, as noted by Dolby, the DTS  xdownloading approach appears to present practical problems either with audio acquisition time delays or inefficient use of the spectrum.  X -  2x453. Finally, the flexibility and extensibility of the ATSC DTV Standard does allow  xjbroadcasters to transmit DTS system audio data as ancillary data that could be recognized and  xused by suitable receiving equipment. The DTS system could be advanced as a possible  x=subsequent extension to the ATSC standard for providing alternative DTV audio linked to the  xKassociated video or independent audio services. Contrary to the view expressed in the December  x6, 1996, DTS comments, we believe this is consistent with the spirit expressed in paragraph 3  xand Attachment A of the Agreement. Although some of the DTV signal would be devoted to  xthe audio signal specified in the DTV Standard this does provide an avenue for the introduction  xof a new system that might offer a substantial improvement. A sufficiently superior system has"h$Xm,N(N(ZZF#"  xan opportunity to succeed in the marketplace. Under the rules we are adopting, such dual audio system transmissions are permitted consistent with the DTV Standard.  X-VI. Licensing Technology  X-  x554. In earlier phases of this proceeding we indicated that, in order for DTV to be  xsuccessfully implemented, the patents on the technology would have to be licensed to other  X_- xmanufacturing companies on reasonable and nondiscriminatory terms.n_ yO-  LԍxNotice, supra at 7035; Second Report/Further Notice, supra at 3358; and Third Report/Further Notice, supra at 6982. We noted that the  xLsystem proponents that participated in the Advisory Committee's competitive testing process  xwere required to submit a statement that they would comply with the ANSI patent policies. The  xproponents agreed to make any relevant patents that they owned available either free of charge  xxor on a reasonable, nondiscriminatory basis and we stated that we intended to condition selection  X - xMof a DTV system on such commitments.jo  yO-ԍxThird Report/Further Notice, supra at 6983. j In the Fifth Further Notice, we sought additional  xcomment on whether more detailed information on the specific terms of such patent licensing,  xhow pending patents will be licensed, or any other intellectual property issues should be  X -considered.ap  yO-ԍxFifth Further Notice, supra at 6261.a  Xy-  x655. It appears that licensing of the patents for DTV technology will not be an impediment  xto the development and deployment of DTV products for broadcasters and consumers. We  xxreiterate that adoption of this standard is premised on reasonable and nondiscriminatory licensing  xof relevant patents, but believe that greater regulatory involvement is not necessary at this time.  xWe remain committed to this principle and if a future problem is brought to our attention, we will consider it and take appropriate action.  X-VII. Closed Captioning  X-  x756. In the Fifth Further Notice, we noted that the requirement contained in Section 305  X- xof the Telecommunications Act of 1996Zq@ yO -ԍxPub. L. No. 104104, 110 Stat. 56 (1996).Z for the Commission to assure that video programming  x-is fully accessible through the provision of closed captions is being examined in MM Docket No.  Xe- x95176.re yO#-  ԍxNotice of Inquiry in MM Docket No. 95176, 11 FCC Rcd 4912 (1995) and Order in MM Docket No. 95176, 11 FCC Rcd 5783 (1996). We also noted that the ATSC DTV Standard reserves a fixed 9600 bits per second  x=data rate for closed captioning and that we understood an EIA subcommittee was considering  xthe syntax for the data and how to include closed captioning information for multichannel SDTV  xtransmissions. We sought additional comments concerning the ability of DTV to include" ( r,N(N(ZZ"  xjcaptioning and how the Commission should implement captioning requirements for DTV in the  X-event it does not adopt a mandatory DTV standard.as yOb-ԍxFifth Further Notice, supra at 6261.a  X-  x857. The DTV Standard we are adopting includes the reserved 9600 bits-per-second of  xdata for closed captioning. No comments suggested that this would be insufficient. We conclude  xjthat adequate provision has been made to allow closed captioning information to be carried by  xDTV stations using the standard we are adopting today. We expect the issues of receiver  x]requirements and mandating transmission of closed captioning data will be subjects in a subsequent Report and Order in this proceeding or in MM Docket No. 95176.  X -  @x958. On the related topic of video descriptions, as raised in the comments filed by the  xLAmerican Foundation for the Blind in response to the November 26, 1996, Agreement, we note  xlthat the audio system of the DTV Standard allows data to be specifically identified as an  xassociated audio service for the visually impaired. In addition, the DTV Standard allows a  xseparate complete audio service that includes video description. However, while the Standard can  xaccommodate video descriptions, unlike closed captioning there is no data capacity reserved  xjexclusively for it. This treatment of video description in the ATSC DTV Standard is consistent  xywith the current regulatory status of the two services. Closedcaptioning capability is required  xby law and regulation while video description is not. In the context of adopting the DTV  xLStandard we are satisfied that it provides a method of including video descriptions. Imposing  xrequirements for video description is an appropriate subject for consideration in MM Docket No.  x95176. If, in the future, video description capability is required, we expect ATSC to consider  x-appropriate changes to the ATSC DTV Standard and we will consider appropriate changes to the rules.  X-VIII. Miscellaneous Matter  X-  x:59. William Schreiber, in his comments on the Agreement, alleges that the agreement was  xa result of an "apparent violation of the Federal Advisory Committee Act (FACA) in spirit, if not  xLin letter." Professor Schreiber argues that, since the parties to the agreement met at the urging  xiof the Commission, the "group" constituted an "advisory committee." International Broadcasting  xMNetwork raises similar concerns in its comments on the Agreement arguing that the "ATSC  x>standard was developed in a closed process which excluded the participation of low power  xLtelevision broadcasters." It is unclear whether International Broadcasting Network is referring  x]to the ACATS process or the recent interindustry meetings that lead to the Agreement.  xHowever, we will consider it to be in reference to the latter because the comment was filed in  X -response to our Public Notice seeking comment only on the Agreement.  X"-  x;60. We disagree with such comments. Section 3(2) of the FACA defines an "advisory committee" subject to the Act as follows: "h$Xs,N(N(ZZF#"Ԍ Xx. . . any committee, board, commission, council, conference, panel, task force, or  other similar group, or any subcommittee or other subgroup thereof . . . which is  B. . . established or utilized by one or more agencies, in the interest of obtaining  Aadvice or recommendations for . . . one or more agencies or officers of the Federal Government.   x>5 U.S.C. App. II  3(2). The parties that reached the Agreement do not meet this definition.  X_- xUnlike ACATS, this "group" was neither established nor utilized by the Commission. t_ yO-  zԍxSee generally Croley, Practical Guidance on the Applicability of the Federal Advisory Committee Act, 10  yO -Admin. L.J. Am. U. 111 (1996) and cases cited therein.h  The  xCommission did not appoint its members nor form them into a group with a structure or fixed  X1- xjmembership.huX1  yO -  MԍxSee Association of American Physicians & Surgeons v. Clinton, 997 F.2d 898, 914 (D.C. Cir. 1993) ("In  xLorder to implicate FACA, [an agency] must create an advisory group that has, in large measure, an organized structure, a fixed membership, and a specific purpose.").h Nor were the parties, individually or as a group, under the influence, control, or  X - xymanagement by the Commission or its staff, and thus were not "utilized" by the Commission.v @ yO -  >ԍxSee Washington Legal Foundation v. U.S. Sentencing Comm'n, 17 F.3d 1446, 1450 (D.C. Cir. 1994) and cases cited therein.  xNot only was the membership of the negotiating parties not determined by the Commission and  xno member of the Commission or its staff attended any of the meetings or otherwise directed any  xactions, but the parties themselves explicitly agreed to not discuss the substantive proposals with  xjoutside parties, including the Commission and its staff. The fact that we are adopting the DTV  xStandard, which is consistent with the Agreement, does not indicate that the Commission  X- x-"utilized" the group as an advisory committee within the meaning of the FACA. The courts have  Xy- x<rejected such literalistic definitions of the term "utilized."w y yO-  ԍxPublic Citizen v. Department of Justice, 491 U.S. 464 (1989) (rejecting a "literalistic definition of the term  xutilized," the Court held that the Department of Justice did not "utilize" the American Bar Association's Standing  xCommittee on Federal Judiciary, from which the Department regularly sought advice on potential nominees for federal judgeships.)  Accordingly, we conclude that it was not an "advisory committee" within the meaning of the Act.  X4-IX. Conclusion  X-  x<61. This Report and Order is one of the crucial milestones in our effort to ensure that the  xbenefits of digital technology are available to terrestrial television broadcasting and to the  xyAmerican public. We believe that the course we are taking will provide the certainty that many  x=broadcasters, equipment manufacturers and consumers need to invest with confidence in new  xktechnology while at the same time preserving the flexibility to accommodate innovation and  xexperimentation. In doing so, we believe our decision will provide many benefits to American  xconsumers. We believe that the interindustry agreement has provided us with a valuable  xroadmap to resolve seemingly conflicting goals. After thorough review of the record and"e w,N(N(ZZ"  xreflection on these issues, we believe our decision strikes a proper balance in achieving all of our  xgoals. Accordingly, we will incorporate into our Rules, by reference, the ATSC Digital  X-Television Standard with the modifications more fully described above and in Appendix A.(#(#X  X-ADMINISTRATIVE MATTERSă  Xv-  x=62. Paperwork Reduction Act of 1995 Analysis. The decision herein has been analyzed  x.with respect to the Paperwork Reduction Act of 1995, Pub. L. No. 10413, and found to impose or propose no modified information collection requirements on the public.  X -Ordering Clauses   X -  x>63. Accordingly, IT IS ORDERED that, pursuant to Sections 4(i) & (j) and 303(r) of the  x@Communications Act of 1934 as amended, 47 U.S.C.  154(i), (j) 303(r), Part 73 of the Commission's Rules is amended as set forth in Appendix A, below.  X-  Cx?64. IT IS FURTHER ORDERED that, pursuant to the Contract with America  xAdvancement Act of 1996, the rule amendments set forth in Appendix A SHALL BE  x{EFFECTIVE either 60 days after publication in the Federal Register or after the receipt by  xCongress and the General Accounting Office of a report in compliance with the Contract with America Advancement Act of 1996, Pub. L. No. 104121, whichever is later.  X-  Px@65. IT IS FURTHER ORDERED that the Secretary shall send a copy of this Fourth  X- xReport and Order, including the Final Regulatory Flexibility Analysis, to the Chief Counsel for  xAdvocacy of the Small Business Administration in accordance with Section 603(a) of the  X-Regulatory Flexibility Act, Pub. L. No. 96354, 94 Stat. 1164, 5 U.S.C.  601 et. seq.  X-  xA66. For additional information concerning this proceeding, contact Saul Shapiro, Mass  xLMedia Bureau, (202) 4182600, Roger Holberg, Mass Media Bureau, Policy and Rules Division,  xLegal Branch, (202) 4182130; Dan Bring, Mass Media Bureau, Policy and Rules Division,  xPolicy Analysis Branch, (202) 4182170; or Gordon Godfrey, Mass Media Bureau, Policy and Rules Division, Engineering Policy, (202) 4182190.  h<x` `  hh@FEDERAL COMMUNICATIONS COMMISSION x x` `  hh@William F. Caton x` `  hh@Acting Secretary "h$w,N(N(ZZ(#"  X- )APPENDIX A ă   xPart 73 of the Commission's Rules and Regulations (Chapter I of Title 47 of the Code of Federal Regulations) is amended to read as follows: x1. A new Section 73.682(d) is added to read as follows: Xx 73.682 TV transmission standards  x*****  X - Xx(d) Digital broadcast television transmission standard. Transmission of digital  broadcast television (DTV) signals shall comply with the standards for such  transmissions set forth in ATSC Doc. A/53 ("ATSC Digital Television Standard,  16 Sep 95") and ATSC Doc. A/52 ("ATSC Digital Audio Compression Standard  (AC3), 20 Dec 95"), which are incorporated by reference pursuant to 5 U.S.C.   X- 552(a). Except that: Section 5.1.2 ("Compression format constraints") including  `Table 3 ("Compression Format Constraints") as contained in Annex A ("Video  Systems Characteristics") of the ATSC Digital Television Standard, and references  XO- $to Table 3 contained in Section 5.1.1 Table 2 and Section 5.1.3 Table 4, are not  incorporated herein. Although not incorporated herein by reference, licensees may  also consult ATSC Doc. A/54 ("Guide to the Use of the ATSC Digital Television  Standard, 4 Oct 95"). Copies of ATSC A/53, A/52, and A/54 can be obtained  4from the Commission's contract copier and can be inspected during normal  ~business hours at the following location: 1919 M Street, N.W., Room 239 (FCC  Reference Center), Washington, DC 20554. These documents also are available  X-in their entirety on the Internet at http://www.atsc.org. "w,N(N(ZZ"  X-) APPENDIX B  X-  X- Final Regulatory Flexibility Analysis ă   mxAs required by Section 603 of the Regulatory Flexibility Act, 5 U.S.C.  603 (RFA), an  Xv- x=Initial Regulatory Flexibility Analysis ("IRFA") was incorporated in the Fifth Further Notice of  X_- xProposed Rule Making in this proceeding. The Commission sought written public comments on  XH- xthe proposals in the Fifth Further Notice, including on the IRFA. The Commission's Final  X1- xRegulatory Flexibility Analysis ("FRFA") in this Fourth Report and Order conforms to the RFA,  xLas amended by the Contract With America Advancement Act of 1996, Pub. L. No. 104121, 110  X -Stat. 847 (1996) ("CWAAA").x  yO| -  ЍxSubtitle II of CWAAA is The Small Business Regulatory Enforcement Fairness Act of 1996 (SBREFA), codified at 5 U.S.C.  601 et seq.  X - I. Need For and Objectives of Action:  X -  X -  xThe Fourth Report and Order adopts, in modified form, the Advanced Television Systems  xCommittee ("ATSC") digital television ("DTV") standard. Our ratification of this industry xdeveloped standard is intended to provide the certainty that some parties seek in order to  x-undertake the wholesale replacement of our analog system of terrestrial broadcast television with  xDTV. At the same time, we seek to ensure that governmental involvement is neither more  x-extensive than necessary nor inhibitory to innovation, experimentation, and entrepreneurship. In  X- xthe Fifth Further Notice in this proceeding, we listed four objectives regarding the authorization  xand implementation of a DTV standard: (1) to ensure that all affected parties have sufficient  xLconfidence and certainty in order to promote the smooth introduction of a free and universally  xavailable digital broadcast television service; (2) to increase the availability of new products and  xservices to consumers through the introduction of digital broadcasting; (3) to ensure that our rules  xencourage technological innovation and competition; and (4) to minimize regulation and assure  xthat any regulations we do adopt remain in effect no longer than necessary. In addition to these  xobjectives, we considered how adoption of the standard would affect other goals enumerated in  xlthis proceeding, including a rapid transition to DTV, ceasing broadcasting in NTSC, and  XN- xrecovering spectrum. The Fourth Report and Order adopts the standard, except for certain aspects  X7- xas discussed in paragraphs 3049, supra, based on a careful weighing and balancing of these various goals.  X- II. Significant Issues Raised by the Public in Response to the Initial Analysis:  X -  xNo comments were received specifically in response to the IRFA contained in the Fifth  X!- xKFurther Notice. Further, while no comments were addressed specifically to small business issues,  xaccording to several Low Power Television ("LPTV") commenters, including Third Coast  xMBroadcasting, Inc. and Island Broadcasting Company, the Commission should minimize the"# x,N(N(ZZe""  ximpact on LPTV to prevent LPTV from being forced off the air by the transition to the new  xzdigital technology. Third Coast and Roger E. Harders contend that LPTV serves niches not  xZcovered by larger regional stations and should be able to provide this important service on digital  xjchannels in the future. Further, Blue Mountain Translator District argues that translators must  xbe able to receive interactive signals to be full partners in DTV systems. In addition, notfor xprofit and commercial translators must be treated equally. As discussed in Section V of this  xLFRFA, we have considered these concerns. However, adoption of a standard for DTV will not  ximplicate the concerns raised by LPTV and translator stations. The role of LPTV and translator stations in the transition to digital will be considered separately.  X - III. Description and Number of Small Entities To Which the Rule Will Apply: 1. Definition of a "Small Business"   ^xUnder the RFA, small entities may include small organizations, small businesses, and  xsmall governmental jurisdictions. 5 U.S.C.  601(6). The RFA, 5 U.S.C.  601(3), generally  xdefines the term "small business" as having the same meaning as the term "small business  xconcern" under the Small Business Act, 15 U.S.C.  632. A small business concern is one which:  x(1) is independently owned and operated; (2) is not dominant in its field of operation; and (3)  x satisfies any additional criteria established by the Small Business Administration ("SBA").  X4- xAccording to the SBA's regulations, entities engaged in television broadcasting Standard  xMIndustrial Classification ("SIC") Code 4833 Television Broadcasting Stations, may have a  xmaximum of $10.5 million in annual receipts in order to qualify as a small business concern.  xjThis standard also applies in determining whether an entity is a small business for purposes of the RFA.   xPursuant to 5 U.S.C.  601(3), the statutory definition of a small business applies "unless  xyan agency after consultation with the Office of Advocacy of the SBA and after opportunity for  xpublic comment, establishes one or more definitions of such term which are appropriate to the  xzactivities of the agency and publishes such definition(s) in the Federal Register." While we  xxtentatively believe that the foregoing definition of "small business" greatly overstates the number  xof television broadcast stations that are small businesses and is not suitable for purposes of  x>determining the impact of the new rules on small television stations, we did not propose an  X - xalternative definition in the IRFA.y  yO -  kԍxWe have pending proceedings seeking comment on the definition of and data relating to small businesses.  yOJ!- xjIn our Notice of Inquiry in GN Docket No. 96113 (In the Matter of Section 257 Proceeding to Identify and  xEliminate Market Entry Barriers for Small Businesses), FCC 96216, released May 21, 1996, we requested  xcommenters to provide profile data about small telecommunications businesses in particular services, including  x-television, and the market entry barriers they encounter, and we also sought comment as to how to define small  xbusinesses for purposes of implementing Section 257 of the Telecommunications Act of 1996, which requires us to  yO2%- xwidentify market entry barriers and to prescribe regulations to eliminate those barriers. Additionally, in our Order and  yO%- x;Notice of Proposed Rule Making in MM Docket No. 9616 (In the Matter of Streamlining Broadcast EEO Rule and  xPolicies, Vacating the EEO Forfeiture Policy Statement and Amending Section 1.80 of the Commission's Rules to"&x,N(N(!'"  xxInclude EEO Forfeiture Guidelines), 11 FCC Rcd 5154 (1996), we invited comment as to whether relief should be  yOX- xafforded to stations: (1) based on small staff and what size staff would be considered sufficient for relief, e.g., 10  xor fewer fulltime employees; (2) based on operation in a small market; or (3) based on operation in a market with a small minority work force. We have not concluded the foregoing rule makings.  Accordingly, for purposes of this Fourth Report and Order," xy,N(N(ZZ"  xwe utilize the SBA's definition in determining the number of small businesses to which the rules  xapply, but we reserve the right to adopt a more suitable definition of "small business" as applied  xto television broadcast stations and to consider further the issue of the number of small entities  xthat are television broadcasters in the future. Further, in this FRFA, we will identify the different  X- xclasses of small television stations that may be impacted by the rules adopted in this Fourth  X-Report and Order. x 2. Issues in Applying the Definition of a "Small Business"   "xAs discussed below, we could not precisely apply the foregoing definition of "small  xzbusiness" in developing our estimates of the number of small entities to which the rules will apply. Our estimates reflect our best judgments based on the data available to us.   ?xAn element of the definition of "small business" is that the entity not be dominant in its  xfield of operation. We were unable at this time to define or quantify the criteria that would  xestablish whether a specific television station is dominant in its field of operation. Accordingly,  xthe following estimates of small businesses to which the new rules will apply do not exclude any  xtelevision station from the definition of a small business on this basis and are therefore  xjoverinclusive to that extent. An additional element of the definition of "small business" is that  xthe entity must be independently owned and operated. As discussed further below, we could not  x-fully apply this criterion, and our estimates of small businesses to which the rules may apply may  xkbe overinclusive to this extent. The SBA's general size standards are developed taking into  xaccount these two statutory criteria. This does not preclude us from taking these factors into account in making our estimates of the numbers of small entities.  X-  _ xWith respect to applying the revenue cap, the SBA has defined "annual receipts"  xspecifically in 13 C.F.R  121.104, and its calculations include an averaging process. We do not  x=currently require submission of financial data from licensees that we could use in applying the  x/SBA's definition of a small business. Thus, for purposes of estimating the number of small  xentities to which the rules apply, we are limited to considering the revenue data that are publicly  xyavailable, and the revenue data on which we rely may not correspond completely with the SBA definition of annual receipts.   ?xUnder SBA criteria for determining annual receipts, if a concern has acquired an affiliate  xor been acquired as an affiliate during the applicable averaging period for determining annual  xzreceipts, the annual receipts in determining size status include the receipts of both firms. 13  x{C.F.R.  121.104(d)(1). The SBA defines affiliation in 13 C.F.R.  121.103. In this context,  xthe SBA's definition of affiliate is analogous to our attribution rules. Generally, under the SBA's"!xy,N(N(ZZ "  xLdefinition, concerns are affiliates of each other when one concern controls or has the power to  xcontrol the other, or a third party or parties controls or has the power to control both. 13 C.F.R.  x 121.103(a)(1). The SBA considers factors such as ownership, management, previous  xrelationships with or ties to another concern, and contractual relationships, in determining whether  xkaffiliation exists. 13 C.F.R.  121.103(a)(2). Instead of making an independent determination  x=of whether television stations were affiliated based on SBA's definitions, we relied on the data bases available to us to provide us with that information. 3. Television Station Estimates Based on Census Data  X -  xThe rules amended by this Fourth Report and Order will apply to full service television  xstations and may have an effect on TV translator facilities and low power TV stations ("LPTV").  xThe Small Business Administration defines a television broadcasting station that has no more than  X - x$10.5 million in annual receipts as a small business.tz  yON-ԍx13 C.F.R.  121.201, Standard Industrial Code (SIC) 4833 (1996).t Television broadcasting stations consist  xof establishments primarily engaged in broadcasting visual programs by television to the public,  X - x/except cable and other pay television services.){X X yO-  kԍxEconomics and Statistics Administration, Bureau of Census, U.S. Department of Commerce, 1992 Census  x<of Transportation, Communications and Utilities, Establishment and Firm Size, Series UC92S1, Appendix A9 (1995).) Included in this industry are commercial,  X- xxreligious, educational, and other television stations.|xx yO-  "ԍxId. See Executive Office of the President, Office of Management and Budget, Standard Industrial Classification Manual (1987), at 283, which describes "Television Broadcasting Stations (SIC Code 4833) as:  XxEstablishments primarily engaged in broadcasting visual programs by television to the public,  mexcept cable and other pay television services. Included in this industry are commercial, religious,  meducational and other television stations. Also included here are establishments primarily engaged in television broadcasting and which produce taped television program materials.  Also included are establishments primarily  Xy- xengaged in television broadcasting and which produce taped television program materials.)}Xy  yO-  kԍxEconomics and Statistics Administration, Bureau of Census, U.S. Department of Commerce, 1992 Census  x<of Transportation, Communications and Utilities, Establishment and Firm Size, Series UC92S1, Appendix A9 (1995).)  xjSeparate establishments primarily engaged in producing taped television program materials are  XK-classified under another SIC number.~K yO!-  "ԍxId.; SIC 7812 (Motion Picture and Video Tape Production); SIC 7922 (Theatrical Producers and Miscellaneous Theatrical Services (producers of live radio and television programs).  X-  ?xThere were 1,509 television stations operating in the nation in 1992.0 yO%-  zԍxFCC News Release No. 31327, Jan. 13, 1993; Economics and Statistics Administration, Bureau of Census,  yO&-U.S. Department of Commerce, supra note 4, Appendix A9. That number has" ,N(N(ZZ "  xremained fairly constant as indicated by the approximately 1,550 operating television broadcasting  X- x.stations in the nation as of August, 1996.[ yOb-ԍxFCC News Release No. 64958, Sept. 6, 1996.[ For 1992/X yO-  kԍxCensus for Communications' establishments are performed every five years ending with a "2" or "7". See  yO-Economics and Statistics Administration, Bureau of Census, U.S. Department of Commerce, supra note 4, III./ the number of television stations that  X- xproduced less than $10.0 million in revenue was 1,155 establishments.X yO3-  >ԍxThe amount of $10 million was used to estimate the number of small business establishments because the  xrelevant Census categories stopped at $9,999,999 and began at $10,000,000. No category for $10.5 million existed. Thus, the number is as accurate as it is possible to calculate with the available information. Thus, the proposed  xrules will affect approximately 1,550 television stations; approximately 1,194 of those stations  X- xare considered small businesses. yO% -  ԍxWe use the 77 percent figure of TV stations operating at less than $10 million for 1992 and apply it to the 1996 total of 1550 TV stations to arrive at 1,194 stations categorized as small businesses. These estimates may overstate the number of small entities  xsince the revenue figures on which they are based do not include or aggregate revenues from non xtelevision affiliated companies. We recognize that the proposed rules may also impact minority  xand women owned stations, some of which may be small entities. In 1995, minorities owned and  XH- xLcontrolled 37 (3.0%) of 1,221 commercial television stations in the United States.H(  yO!-  ԍxMinority Commercial Broadcast Ownership in the United States, U.S. Dep't of Commerce, National  xTelecommunications and Information Administration, The Minority Telecommunications Development Program  x("MTDP") (April 1996). MTDP considers minority ownership as ownership of more than 50% of a broadcast  x[corporation's stock, voting control in a broadcast partnership, or ownership of a broadcasting property as an  yOA- xjindividual proprietor. Id. The minority groups included in this report are Black, Hispanic, Asian, and Native American. According  xto the U.S. Bureau of the Census, in 1987 women owned and controlled 27 (1.9%) of 1,342  X -commercial and noncommercial television stations in the United States.  yOk-  ԍxSee Comments of American Women in Radio and Television, Inc. in MM Docket No. 94149 and MM  yO3- xDocket No. 91140, at 4 n.4 (filed May 17, 1995), citing 1987 Economic Censuses, WomenOwned Business, WB87 x-1, U.S. Dep't of Commerce, Bureau of the Census, August 1990 (based on 1987 Census). After the 1987 Census  xreport, the Census Bureau did not provide data by particular communications services (fourdigit Standard Industrial  xClassification (SIC) Code), but rather by the general twodigit SIC Code for communications (#48). Consequently,  xisince 1987, the U.S. Census Bureau has not updated data on ownership of broadcast facilities by women, nor does  xthe FCC collect such data. However, we sought comment on whether the Annual Ownership Report Form 323  yO- xZshould be amended to include information on the gender and race of broadcast license owners. Policies and Rules  yO - xRegarding Minority and Female Ownership of Mass Media Facilities, Notice of Proposed Rulemaking, 10 FCC Rcd 2788, 2797 (1995).   xIt should also be noted that the foregoing estimates do not distinguish between network X - xzaffiliatedX 8 yO%-  ԍxIn this context, "affiliation" refers to any local broadcast television station that has a contractual arrangement  xwith a programming network to carry the network's signal. This definition of affiliated station includes both stations owned and operated by a network and stations owned by other entities. stations and independent stations. As of April, 1996, the BIA Publications, Inc." !X,N(N(ZZ "  xjMaster Access Television Analyzer Database indicates that about 73 percent of all commercial  xtelevision stations were affiliated with the ABC, CBS, NBC, Fox, UPN, or WB networks.  X-Moreover, seven percent of those affiliates have secondary affiliations. yOK-  ԍxSecondary affiliations are secondary to the primary affiliation of the station and generally afford the affiliate additional choice of programming.   0xThere are currently 4926 TV translators, and 1,921 LPTV stations which may be affected  X- xzby the new rules, if they decide to convert to digital television.r  yO^ -ԍxFCC News Release, Broadcast Station Totals as of August 31, 1996.r The FCC does not collect  xfinancial information of any broadcast facility and the Department of Commerce does not collect  xfinancial information on these broadcast facilities. We will assume for present purposes,  xhowever, that most, if not all, LPTV stations and translator stations, could be classified as small  xbusinesses, if considered by themselves. We also recognize that most, if not virtually all  x<translators are owned by a parent station which is a fullservice station. Thus, translator stations  xgenerally can be considered affiliates, as that term is defined in the SBA regulations, with full xservice stations. Given this situation, these stations would likely have annual revenues that exceed the SBA maximum to be designated as small businesses. x x4. Alternative Classification of Small Television Stations   xAn alternative way to classify small television stations is by the number of employees.  xKThe Commission currently applies a standard based on the number of employees in administering  XK- xits Equal Employment Opportunity ("EEO") rule for broadcasting.xK yO-  ԍxThe Commission's definition of a small broadcast station for purposes of applying its EEO rule was adopted  x<prior to the requirement of approval by the Small Business Administration pursuant to Section 3(a) of the Small  x,Business Act, 15 U.S.C.  632(a), as amended by Section 222 of the Small Business Credit and Business Opportunity  xEnhancement Act of 1992, Pub. L. No. 102366,  222(b)(1), 106 Stat. 999 (1992), as further amended by the Small  xBusiness Administration Reauthorization and Amendments Act of 1994, Pub. L. No. 103403,  301, 108 Stat. 4187  yO- x,(1994). However, this definition was adopted after public notice and an opportunity for comment. See Report and  yO\-Order in Docket No. 18244, 23 FCC 2d 430 (1970). Thus, radio or television  xstations with fewer than five fulltime employees are exempted from certain EEO reporting and  X- x/recordkeeping requirements.  yO-  ԍxSee, e.g., 47 C.F.R.  73.3612 (Requirement to file annual employment reports on Form 395B applies to  yO - xZlicensees with five or more fulltime employees); First Report and Order in Docket No. 21474 (In the Matter of  xAmendment of Broadcast Equal Employment Opportunity Rules and FCC Form 395), 70 FCC 2d 1466 (1979). The  xCommission is currently considering how to decrease the administrative burdens imposed by the EEO rule on small  yO"- xhstations while maintaining the effectiveness of our broadcast EEO enforcement. Order and Notice of Proposed Rule  yO#- xxMaking in MM Docket No. 9616 (In the Matter of Streamlining Broadcast EEO Rule and Policies, Vacating the  xEEO Forfeiture Policy Statement and Amending Section 1.80 of the Commission's Rules to Include EEO Forfeiture  xGuidelines), 11 FCC Rcd 5154 (1996). One option under consideration is whether to define a small station for  yO%-purposes of affording such relief as one with ten or fewer fulltime employees. Id. at  21. We estimate that the total number of commercial television  xmstations with 4 or fewer employees is 132 and that the total number of noncommercial"",N(N(ZZ"  X-educational television stations with 4 or fewer employees is 136. yOy- LԍWe base this estimate on a compilation of 1995 Broadcast Station Annual Employment Reports (FCC Form 395B), performed by staff of the Equal Opportunity Employment Branch, Mass Media Bureau, FCC. x5. Other Industry Groups  X-  xTelevision Equipment Manufacturers: The Commission has not developed a definition  x.of small entities applicable to manufacturers of television equipment. Therefore, we will utilize  xthe SBA definition of manufacturers of Radio and Television Broadcasting and Communications  X_- xEquipment. _  yO0 - ԍThis category excludes establishments primarily engaged in the manufacturing of household audio and visual  yO -equipment which is categorized as SIC 3651. See infra for SIC 3651 data.  According to the SBA's regulations, a TV equipment manufacturer must have 750  XH- xor fewer employees in order to qualify as a small business concern.YHx yOq-ԍx13 C.F.R.  121.201, (SIC) Code 3663.Y Census Bureau data  xindicates that there are 858 U.S. firms that manufacture radio and television broadcasting and  x\communications equipment, and that 778 of these firms have fewer than 750 employees and  X - xwould be classified as small entities.  yO-  ԍxU.S. Dept. of Commerce, 1992 Census of Transportation, Communications and Utilities, Table 1D, (issued May 1995), SIC category 3663. The Census Bureau category is very broad, and specific  xfigures are not available as to how many of these firms are exclusive manufacturers of television  xequipment or how many are independently owned and operated. We conclude that there are approximately 778 small manufacturers of radio and television equipment.  X-  xHousehold/Consumer Television Equipment: The Commission has not developed a  xdefinition of small entities applicable to manufacturers of television equipment used by  xconsumers, as compared to industrial use by television licensees and related businesses.  XK- xTherefore, we will utilize the SBA definition applicable to manufacturers of Household Audio  xand Visual Equipment. According to the SBA's regulations, a household audio and visual  xNequipment manufacturer must have 750 or fewer employees in order to qualify as a small  X- x-business concern.Y`  yO-ԍx13 C.F.R.  121.201, (SIC) Code 3651.Y Census Bureau data indicates that there are 410 U.S. firms that manufacture  xradio and television broadcasting and communications equipment, and that 386 of these firms  X- xhave fewer than 500 employees and would be classified as small entities.)X  yOy"-  /ԍxU.S. Small Business Administration 1995 Economic Census Industry and Enterprise Report, Table 3, SIC  x0Code 3651, (Bureau of the Census data adapted by the Office of Advocacy of the U.S. Small Business Administration).) The remaining 24  xkfirms have 500 or more employees; however, we are unable to determine how many of those  xhave fewer than 750 employees and therefore, also qualify as small entities under the SBA  xjdefinition. Furthermore, the Census Bureau category is very broad, and specific figures are not"#,N(N(ZZo"  xavailable as to how many of these firms are exclusive manufacturers of television equipment for  xconsumers or how many are independently owned and operated. We conclude that there are approximately 386 small manufacturers of television equipment for consumer/household use.  X-  xComputer Manufacturers: The Commission has not developed a definition of small  x\entities applicable to computer manufacturers. Therefore, we will utilize the SBA definition.  xAccording to SBA regulations, a computer manufacturer must have 1,000 or fewer employees  X_- xin order to qualify as a small entity.Y_ yO-ԍx13 C.F.R.  121.201, (SIC) Code 3571.Y Census Bureau data indicates that there are 716 firms that  xmanufacture electronic computers and of those, 659 have fewer than 500 employees and qualify  X1- xas small entities.)X1X yO: -  /ԍxU.S. Small Business Administration 1995 Economic Census Industry and Enterprise Report, Table 3, SIC  x0Code 3571, (Bureau of the Census data adapted by the Office of Advocacy of the U.S. Small Business Administration).) The remaining 57 firms have 500 or more employees; however, we are  xunable to determine how many of those have fewer than 1,000 employees and therefore also  xqualify as small entities under the SBA definition. We conclude that there are approximately 659 small computer manufacturers.  X - IV. Projected Compliance Requirements of the Rule:  X-  >xThe Fourth Report and Order adopts a rule incorporating by reference the digital television  x<broadcast standard ("Standard") recommended to the Commission by its Advisory Committee on  Xb- xAdvanced Television Service ("ACATS"), with the exception of the video formats. The Fourth  XK-Report and Order imposes no new reporting or recordkeeping requirements.  X- x)" V. Significant Alternatives Considered Minimizing the Economic Impact on Small Entities  X-and Consistent with the Stated Objectives:  X-  ?xThe Fourth Report and Order adopts a rule that requires transmission of DTV signals to  xcomply with the Standard adopted except for the video format layer and incorporates that  xStandard, except for the video format layer, into the Commission's rules. We believe that  xadopting a standard is essential to the goal of universal television service and to facilitating the  x-conversion to digital television service. Not requiring the use of the video format layer advances  xthe goals of minimizing regulation and facilitating technological innovation. The alternatives  xconsidered, including authorizing use of the Standard and prohibiting interference to its users, and  x-adopting the Standard for allocation and assignment purposes only, received no express support  xin the Comments. Moreover, careful evaluation of these alternatives showed that each failed to  x-advance one or more of the important goals of this proceeding. The Commission determined that  xnot mandating video formats sufficiently addressed its concerns with stifling innovation so that  x.neither a sunset of the Standard nor formal periodic review of the Standard would be required.  xInstead, it indicated that its scheduled reviews of the progress of DTV implementation would be  xsufficient to keep the Commission abreast of technological developments and marketplace"!$x,N(N(ZZ "  d(#conditions. No additional action is taken on the issues of licensing of patents for DTV  d(#jtechnology or provision for closed captioning information to be carried by DTV stations using the standard adopted.   xPursuant to the RFA, 5 U.S.C.  603(c), we have considered whether there is a significant  d(#economic impact on a substantial number of small entities. The action taken does not impose  Xv- d(#jadditional burdens on small entities. The Fourth Report and Order in itself does not mandate a  d(#conversion to digital television, only requiring that digital television signals that are transmitted  d(#conform to certain standards. The details of requiring the conversion will be taken up in a future  X1- d(#Report and Order, which will consider alternatives to minimize the economic impact of that conversion on small entities.  X - VI. Report to Congress  v The Commission shall send a copy of this Final Regulatory Flexibility Analysis along with  X - xthis Fourth Report and Order in a report to Congress pursuant to the Small Business Regulatory  d(#\Enforcement Fairness Act of 1996, codified at 5 U.S.C.  801(a)(1)(A). A copy of this FRFA  Xy-will also be published in the Federal Register.