Advanced Television Systems

FEDERAL COMMUNICATIONS COMMISSION

47 CFR Part 73

[MM Docket No. MM 87-268; FCC 97-116]

Advanced Television Systems

AGENCY: Federal Communications Commission.

ACTION: Final rule.

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SUMMARY: This Report and Order amends the Commission's rules by

adopting service rules to implement digital television. The intended

effect of this action is to promote rapid conversion to and

implementation of digital television. This Report & Order contains new

or modified information collections subject to the Paperwork Reduction

Act of 1995 (PRA), Public Law 104-13. It will be submitted to the

Office of Management and Budget (OMB) for review under section 3507(d)

of the PRA. OMB, the general public, and other Federal agencies are

invited to comment on the new or modified information collections

contained in this proceeding.

DATES: Effective Dates: The new rules are effective June 16, 1997.

Written comments by the public on the new and/or modified information

collections are due July 15, 1997.

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ADDRESSES: In addition to filing comments with the Secretary, a copy of

any comments on the information collections contained herein should be

submitted to Judy Boley, Federal Communications Commission, Room 234,

1919 M Street, N.W., Washington, DC 20554, or via the Internet to

[email protected].

FOR FURTHER INFORMATION CONTACT: Saul Shapiro, Mass Media Bureau, (202)

418-2600, Gretchen Rubin, Mass Media Bureau, Policy and Rules Division,

(202) 418-2120; Mania K. Baghdadi, Mass Media Bureau, Policy and Rules

Division, Legal Branch, (202) 418-2130; Dan Bring, Mass Media Bureau,

Policy and Rules Division, Policy Analysis Branch, (202) 418-2170, or

Gordon Godfrey, Mass Media Bureau, Policy and Rules Division,

Engineering Policy Branch, (202) 418-2190. For additional information

concerning the information collections contained in this Report and

Order contact Judy Boley at 202-418-0214, or via the Internet at

[email protected].

SUPPLEMENTARY INFORMATION: This is a synopsis of the Commission's Fifth

Report and Order in MM Docket No. 87-268; FCC 97-116, adopted April 3,

1997 and released April 21, 1997. The full text of this Commission

decision is available for inspection and copying during normal business

hours in the FCC Reference Center (Room 239), 1919 M Street, N.W.,

Washington, D.C., and also may be purchased from the Commission's copy

contractor, International Transcription Service, Inc., 2100 M Street,

N.W., Suite 140, Washington, D.C., 20037, (202) 857-3800.

Synopsis of Report and Order

I. Introduction

1. Television has played a critical role in the United States in

the second half of the twentieth century. A technological

breakthrough--digital television--now offers the opportunity for

broadcast television service to meet the competitive and other

challenges of the twenty-first century.1

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\1\ This Fifth Report and Order follows the adoption of a

standard for the transmission of digital television. Fourth Report

and Order (62 FR 14006, March 25, 1997) in MM Docket No. 87-268, 11

FCC Rcd 17771 (1996) (``Fourth Report and Order''). We have

previously issued the following documents in this proceeding. Notice

of Inquiry (52 FR 34259, September 10, 1987) in MM Docket No. 87-

268, 2 FCC Rcd 5125, 5127 (1987) (``First Inquiry''); Tentative

Decision and Further Notice of Inquiry in MM Docket No. 87-268, 3

FCC Rcd 6520 (1988) (``Second Inquiry''); First Report and Order (55

FR 39275, September 26, 1990) in MM Docket No. 87-268, 5 FCC Rcd

5627 (1990) (``First Order''); Notice of Proposed Rule Making (56 FR

58207, November 18, 1991) in MM Docket No. 87-268, 6 FCC Rcd 7024

(1991) (``Notice''); Second Report and Order/Further Notice of

Proposed Rule Making in MM Docket No. 87-268, 7 FCC Rcd 3340 (1992)

(``Second Report/Further Notice''); Second Further Notice of

Proposed Rule Making (57 FR 38652, August 26, 1992) in MM Docket No.

87-268, 7 FCC Rcd 5376 (1992) (``Second Further Notice'');

Memorandum Opinion and Order/Third Report and Order/Third Further

Notice of Proposed Rule Making (57 FR 53588, November 12, 1992) in

MM Docket No. 87-268, 7 FCC Rcd 6924 (1992) (``Third Report/Further

Notice''); Fourth Further Notice of Proposed Rule Making/Third

Notice of Inquiry (60 FR 42130, August 15, 1995) in MM Docket No.

87-268, 10 FCC Rcd 10541 (1995) (``Fourth Further Notice/Third

Inquiry''); Fifth Further Notice of Proposed Rule Making (61 FR

26864, May 29, 1996) in MM Docket No. 87-268, 11 FCC Rcd 6235 (1996)

(``Fifth Further Notice''); Sixth Further Notice of Proposed Rule

Making (61 FR 43209, August 21, 1996) in MM Docket No. 87-268, 11

FCC Rcd 10968 (1996) (``Sixth Further Notice''). We note that we

also adopt today the Sixth Report and Order, MM Docket No. 87-268,

FCC 97-115, released April 21, 1997 (``Sixth Report and Order'').

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2. The Telecommunications Act of 1996 (``1996 Act'') provided that

initial eligibility for any advanced television licenses issued by the

Commission should be limited to existing broadcasters, conditioned on

the eventual return of either the current 6 MHz channel or the new

digital channel. Today we adopt rules to implement the statute. Our

rules are designed to give digital television the greatest chance to

meet its potential. We recognize the challenges that will be faced by

broadcasters in adopting this new technology. Accordingly, we have

generally refrained from regulation and have sought to maximize

broadcasters' flexibility to provide a digital service to meet the

audience's needs and desires. Where appropriate, however, we have

adopted rules we believe will ensure a smooth transition to digital

television for broadcasters and viewers. These rules include an

aggressive but reasonable construction schedule, a requirement that

broadcasters continue to provide a free, over-the-air television

service, and a simulcasting requirement phased in at the end of the

transition period. Further, we recognize that digital broadcasters

remain public trustees with a responsibility to serve the public

interest.

II. Issue Analysis

A. Goals

3. Digital technology holds great promise. It allows delivery of

brilliant, high-definition, multiple digital-quality programs, and

ancillary and supplementary services such as data transfer. In recent

years, competition in the video programming market has dramatically

intensified. Cable, Direct Broadcast Satellite (DBS), Local Multipoint

Distribution System (LMDS), wireless cable, Open Video Systems (OVS)

providers, and others vie, or will soon vie, with broadcast television

for audience. Many operators in those services are poised to use

digital. The viability of digital broadcast television will require

millions of Americans to purchase digital television equipment. Because

of the advantages to the American public of digital technology--both in

terms of services and in terms of efficient spectrum management--our

rules must strengthen, not hamper, the possibilities for broadcast

DTV's success.

4. In the Fourth Further Notice/Third Inquiry (60 FR 42130, August

15, 1995), we outlined the goals of: ``(1) preserving a free, universal

broadcasting service; (2) fostering an expeditious and orderly

transition to digital technology that will allow the public to receive

the benefits of digital television while taking account of consumer

investment in NTSC television sets; (3) managing the spectrum to permit

the recovery of contiguous blocks of spectrum, so as to promote

spectrum efficiency and to allow the public the full benefit of its

spectrum; and (4) ensuring that the spectrum--both ATV channels and

recovered channels--will be used in a manner that best serves the

public interest.'' In the context of the implementation of a DTV

standard, we also enumerated the goals: ``(1) to ensure that all

affected parties have sufficient confidence and certainty in order to

promote the smooth introduction of a free and universally available

digital broadcast television service; (2) to increase the availability

of new products and service to consumers through the introduction of

digital broadcasting; (3) to ensure that our rules encourage

technological innovation and competition; and (4) to minimize

regulation and assure that any regulations that we do adopt remain in

effect no longer than necessary.'' These goals can be distilled into

the two essential objectives that underlie the decisions we make today.

5. First, we wish to promote and preserve free, universally

available, local broadcast television in a digital world. Only if DTV

achieves broad acceptance can we be assured of the preservation of

broadcast television's unique benefit: free, widely accessible

programming that serves the public interest. DTV will also help ensure

robust competition in the video market that will bring more choices at

less cost to American consumers. Particularly given the intense

competition in video programming, and the move by other video

programming providers to adopt digital technology, it is desirable to

encourage broadcasters to offer digital

[[Page 26968]]

television as soon as possible. We make decisions today designed to

promote the viability of digital television services. Digital

broadcasters must be permitted the freedom to succeed in a competitive

market, and by doing so, attract consumers to digital. In addition,

broadcasters' ability to adapt their services to meet consumer demand

will be critical to a successful initiation of DTV.

6. Second, we wish to promote spectrum efficiency and rapid

recovery of spectrum. Decisions that promote the success of digital

television--our first goal--promote this goal as well. The more quickly

that broadcasters and consumers move to digital, the more rapidly

spectrum can be recovered and then be reallocated or reassigned, or

both. The faster broadcasters roll out digital television, the earlier

we can recover spectrum.

7. Our decisions today further these goals. They ensure that

broadcasters have more flexibility in their business. Broadcasters will

be able to experiment with innovative offerings and different service

packages as they continue to provide at least one free program service

and meet their public-interest obligations. We choose to impose few

restrictions on broadcasters and to allow them to make decisions that

will further their ability to respond to the marketplace. We leave to

broadcasters' business judgment such decisions as whether to provide

high definition television or whether, initially, to simulcast the NTSC

stream on DTV, and what and how many ancillary and supplementary

services to provide. To aid the launch of digital services, we provide

for a rapid construction of digital facilities by network-affiliated

stations in the top markets, in order to expose a significant number of

households, as early as possible, to the benefits of DTV. We require

those most able to bear the risks of introducing digital television to

proceed most quickly. Our decisions here will foster the swift

development of DTV, which should enable us to meet our target of ending

NTSC service by 2006. To permit careful monitoring of the development

of digital television and an opportunity to reassess the decisions we

make today, we intend to conduct a review of DTV every two years until

the cessation of NTSC service.

B. Channel Bandwidth

8. Background. In the Fourth Further Notice/Third Inquiry, (60 FR

42130, August 15, 1995), we noted that we had previously decided that

DTV would be introduced by assigning existing broadcasters a temporary

channel on which to operate a DTV station during the transition

period.2 We also noted that the DTV transmission system was

designed for a 6 MHz channel and added that ``we continue to believe

that providing 6 MHz channels for ATV purposes represents the optimum

balance of broadcast needs and spectrum efficiency.'' 3

Nonetheless, we invited comment on any means of achieving greater

spectrum efficiency, and, in this section, we will discuss whether 6

MHz channels should be allotted.

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\2\ Fourth Further Notice/Third Inquiry, (60 FR 42130, August

15, 1995) supra at 10543. We decided to continue use of the 6 MHz

channel early in this proceeding. Third Report/Further Notice (57 FR

53588, November 12, 1992), supra at 6926; see also First Order,

supra at 5627-29.

\3\ Fourth Further Notice/Third Inquiry (60 FR 42130, August 15,

1995), supra at 10543. Indeed, the DTV Standard subsequently adopted

in the Fourth Report and Order (62 FR 14006, March 25, 1997) (``DTV

Standard'') is predicated upon the use of a 6 MHz channel.

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9. Comments. All broadcasters filing comments support affording a

second 6 MHz channel per broadcaster for DTV. Joint Broadcasters, for

example, state that the entire 6 MHz is required; assigning less would

deprive the public of HDTV and set back the transition, because the

Grand Alliance system presupposes 6 MHz channels, and anything

different would require an entirely new design and testing program.

Additionally, equipment manufacturers generally support the provision

of 6 MHz channels for DTV purposes, noting that 6 MHz of spectrum is

required for HDTV broadcasts.

10. However, Media Access Project, et al. (``MAP'') argues that the

Commission should provide broadcasters only enough spectrum to provide

one ``free'' digital program service, either by allocating less than 6

MHz channels to broadcasters, by allocating the spectrum to others and

only affording broadcasters ``must carry'' rights; or by allocating the

spectrum to broadcasters but requiring them to lease out excess

capacity to unaffiliated programmers. Further, Home Box Office

(``HBO'') asserts that if the Commission determines that the public

interest demands Standard Definition Television (``SDTV'') or other

auxiliary applications, it must take another look at whether an entire

6 MHz slice of new spectrum should go to incumbent broadcasters.

11. Decision. We invited comment in the Fourth Further Notice/Third

Inquiry (60 FR 42130, August 15, 1995) on any means of achieving

greater spectrum efficiency. Based on the comments, we continue to

believe that providing 6 MHz channels for DTV purposes ``represents the

optimum balance of broadcast needs and spectrum efficiency.'' We do not

believe that greater spectrum efficiency can be achieved by adopting a

different channel size. Indeed, use of 6 MHz channels would facilitate

spectrum efficiency because making the DTV channel the same width as

the analog channel will afford greater flexibility at the end of the

transition in terms of the choice of channel the broadcaster retains

for DTV purposes.

12. Moreover, contrary to those comments that disagreed with

allotting 6 MHz channels for DTV, we believe that the use of 6 MHz

channels is necessary to provide viewers and consumers the full

benefits of digital television made possible by the DTV Standard,

including high definition television (``HDTV''), standard definition

television, and other digital services. The DTV Standard was premised

on the use of 6 MHz channels. To specify a different channel size at

this late date would not promote our goals in adopting the DTV Standard

and would prolong the conversion to DTV. Specifically, we believe that

failing to specify a 6 MHz channel would undermine our goals, expressed

in the Fourth Report and Order (62 FR 14006, March 25, 1997), of

fostering an expeditious and orderly transition to digital technology

and managing the spectrum to permit the recovery of contiguous blocks

of spectrum and promote spectrum efficiency. The conversion to DTV

would undoubtedly be significantly delayed if we set aside the

longstanding expectations of the parties, on which they have based the

technology and established their plans, and specified a different

channel bandwidth. Accordingly, we reaffirm our earlier judgment and

will allot 6 MHz channels for DTV.

C. Eligibility

13. Background. We proposed to limit initial eligibility for DTV

channels to existing broadcasters. Our proposed criteria for existing

broadcasters included full-service television broadcast station

licensees, permittees authorized as of October 24, 1991, and parties

with applications for a construction permit on file as of October 24,

1991, who are ultimately awarded a full-service broadcast license.

After release of the Fourth Further Notice/Third Inquiry (60 FR 42130,

August 15, 1995), Congress statutorily addressed eligibility in the

1996 Act. Congress instructed the Commission to limit the initial

eligibility for advanced television licenses to persons that, as of the

date

[[Page 26969]]

of the issuance of the licenses, are licensed to operate a television

broadcast station or hold a permit to construct such a station. The

1996 Act did not change the fact that the Commission lacks statutory

authority to auction broadcast spectrum.

14. Comments. We sought comment on the potential impact of the

eligibility restriction on the Commission's policy of fostering

programming and ownership diversity. Few commenters address this topic.

However, some commenters address the basic issue of the eligibility

restriction. For example, some argue that allowing broadcasters to

offer subscription services without opening up that opportunity to

competitors would violate the legal principles enunciated in Ashbacker

Radio Corporation v. FCC, 326 U.S. 327 (1945), discussed below. Others

maintain that the Commission faces an Ashbacker problem unless it

mandates that broadcasters provide HDTV. General Instrument argues that

``allowing existing broadcasters too much ``flexible use' of the 6 MHz

ATV allocation raises the Ashbacker problem by changing the primary

service provided rather than merely modifying existing licenses,'' but

that the Commission could avoid Ashbacker problems by requiring that

the predominant use of the DTV spectrum be for HDTV transmission. HBO

argues that if we were to allow the DTV channel to be put to uses other

than HDTV, for which broadcasters have no more established interest or

expertise than potential competing applicants, the public interest

rationale for granting the spectrum to incumbents without a competitive

process would evaporate.

15. Another eligibility issue raised by commenters concerns the

restriction of initial eligibility to full-service licensees. LPTV

commenters such as Abacus Television point out the contribution that

LPTV stations make in providing television service to underserved areas

as well as the local and specialized nature of the services they

provide. These comments also contend that the Commission has long found

that diversification of mass media ownership serves the public interest

by promoting diversity of program and service viewpoints and by

preventing undue concentration of economic power. According to Abacus

Television, excluding LPTV from the analog to digital transition would

undermine these principles. Further, Abacus argues, it would exclude

the vast majority of minority television licensees and permittees and

is antithetical to increasing ownership diversity. Abacus argues that

the Commission should perform a market-by-market analysis to determine

which LPTV stations could be accommodated; absent that, it could

minimize the effect on LPTV stations by adding a second phase to the

process of creating a Table of Allotments to address the accommodation

of LPTV service next, after it has begun the conversion process for

full power television licensees. It offers suggestions on how to carry

out this phase. WatchTV, Inc. also argues that the Commission should

make unused digital channels available to existing low power operators

on the same terms and conditions as it may adopt for small market

broadcasters and educational licensees before it allows new entrants to

apply. Additionally, White Eagle Partners believes that LPTV stations

should be eligible to receive 6 MHz DTV channels.

16. Still other LPTV commenters argue that neither LPTV stations

nor full service stations should be afforded a second 6 MHz channel.

Community Broadcasters Association (``CBA'') believes that a dual

channel DTV scenario would be an inefficient use of spectrum, requiring

not only immense private investment, but also leading to a host of

logistical and other problems that will negate many of the benefits of

DTV. CBA argues that full power and LPTV stations should be permitted

to convert to DTV on their present channel at any time.

17. Decision. In the 1996 Act, Congress specifically addressed the

eligibility issue. Congress provided that the Commission ``should limit

the initial eligibility for [DTV] licenses to persons that, as of the

date of such issuance, are licensed to operate a television broadcast

station or hold a permit to construct a station (or both) * * *. '' In

comments filed before passage of the 1996 Act, some parties argue that

granting incumbent broadcasters the exclusive right to apply for the

DTV spectrum raises potential problems under Ashbacker Radio

Corporation v. FCC, 326 U.S. 327 (1945), and its progeny. Other

commenters argue similarly that Ashbacker concerns are raised unless

the Commission imposes an HDTV mandate. However, given Congress'

explicit direction, there is now no statutory basis to question the

Commission's authority to limit initial eligibility to existing

broadcasters. Following Congress' direction, we determine that initial

eligibility should be limited to those broadcasters who, as of the date

of issuance of the initial licenses, hold a license to operate a

television broadcast station or a permit to construct such a station,

or both.4

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\4\ Our eligibility criteria are consistent with the provisions

of section 336 of the 1996 Act. 47 U.S.C. Sec. 336. We have made the

initial assignment of channels in the accompanying Sixth Report and

Order and adopted criteria for the allotment of additional DTV

channels. We will give particular consideration for assigning

temporary DTV channels to new licensees who applied on or before

October 24, 1991, given the reliance that these parties may have

placed on rules we adopted before passage of the 1996 Act. Second

Report/Further Notice (57 FR 21755, May 22, 1992), supra, at 3343,

clarified, Third Report/Further Notice (57 FR 53588, November 12,

1992), supra at 6932-33.

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18. We will continue our previously adopted policy to limit initial

eligibility for DTV licenses to existing full-power broadcasters. We

previously determined that there is insufficient spectrum to include

LPTV stations and translators, which are secondary under our rules and

policies, to be initially eligible for a DTV channel. As we noted in

the Sixth Further Notice (61 FR 43209), in order to provide DTV

allotments for existing full service stations, it will be necessary to

displace LPTV stations and TV translator stations to some degree,

especially in major markets. We have not been able to find a means of

resolving this problem. However, we note that limiting initial

eligibility to full-power broadcasters does not necessarily exclude

LPTV stations from the conversion to digital television. Moreover, in

the Sixth Further Notice (61 FR 43209), we made a number of proposals

to mitigate the impact on LPTV stations, and, in the Sixth Report and

Order, we adopt a number of measures intended to minimize the impact of

DTV implementation on LPTV service.

D. Definition of Service

1. Spectrum Use

19. Background. The Fourth Further Notice/Third Inquiry (60 FR

42130, August 15, 1995) reaffirmed our intention to preserve and

promote universal, free, over-the-air television. We recognized that

broadcast television has become an important part of American life and

thus stated ``we envision that the 6 MHz channel earmarked for [DTV]

will be used for free, over-the-air broadcasting.'' We also recognized

the increased flexibility that DTV offered broadcasters and noted that

``allowing at least some level of flexibility would increase the

ability of broadcasters to compete in an increasingly competitive

marketplace, and would allow them to serve the public with new and

innovative services.''

20. The DTV Standard, adopted by the Commission in the Fourth

Report and

[[Page 26970]]

Order (62 FR 14006, March 25, 1997), permits broadcasters to offer a

variety of services. It allows broadcasters to offer free television of

higher resolution than analog technology. It allows the broadcast of at

least one, and under some circumstances two, high definition television

programs; and it allows ``multicasting,'' the simultaneous transmission

of three, four, five, or more digital programs. The Standard also

allows for the broadcast of CD-quality audio signals. And it permits

the rapid delivery of large amounts of data: an entire edition of the

local newspaper in less than two seconds, sports information, computer

software, telephone directories, stock market updates, interactive

educational materials and, indeed, any information that can be

translated into digital bits. In addition to allowing broadcasters to

transmit video, voice, and data simultaneously, the DTV Standard allows

broadcasters to do so dynamically, meaning that they can switch back

and forth quickly and easily. For example, a broadcaster could transmit

a news program consisting of four separate SDTV programs for local

news, national news, weather and sports; while interrupting that

programming with a single high definition television commercial with

embedded data about the product; or transmit a motion picture in a high

definition format, while simultaneously using the excess capacity for

transmission of data unrelated to the movie.

21. In light of the flexibility and new capabilities of digital

television, we asked to what extent we should permit broadcasters to

use their DTV spectrum for uses other than free, over-the-air

television. Recognizing that broadcasters are currently allowed to use

a portion of their broadcast spectrum for ancillary or supplementary

uses that do not interfere with the primary broadcast signal, we asked

whether we should permit such uses of the DTV spectrum, and, if so, how

such uses should be defined and what portion of the DTV system's

capacity should be allowed for such ancillary and supplementary

services. Assuming we permitted ancillary and supplementary services,

we also asked to what extent we should allow broadcasters to use DTV

spectrum for services that go beyond traditional broadcast television

or ancillary and supplementary uses analogous to those allowed under

the current regulatory structure. We also asked whether broadcasters

should be permitted to provide nonbroadcast and/or subscription

services, and, if permitted, how such services should be defined, how

much of the DTV capacity should be allowed for such uses, and what, if

any, regulation would be appropriate for such services.

22. Comments. Most commenters support affording flexibility to

broadcasters to provide ancillary and supplementary services. Joint

Broadcasters favor the provision of any ancillary and supplementary

services other than those limited by the Telecommunications legislation

then pending. Viacom urges that DTV licensees should be authorized to

explore the full potential of the ATSC DTV system as long as those uses

do not adversely affect the broadcaster's free video service. AAPTS/PBS

favors ancillary broadcast and nonbroadcast use of the DTV channel,

noting that flexible use will serve the public interest by helping to

spur development of new technologies and to provide greater

opportunities for noncommercial stations to enhance their public

service to their respective communities. A noncommercial station could,

for example, utilize digital transmission to distribute program-related

course materials, textbooks, student and teacher guides, computer

software and content areas of the World Wide Web as part of the

station's instructional programming. Further, noncommercial stations

could use ancillary and supplementary services, without regard to the

educational content, as a revenue source to support nonprofit services

and operations and the transition to DTV.

23. Microsoft argues that licensees should be given maximum

flexibility to provide a wide variety of services and any definition of

free over-the-air broadcasting should be narrowly defined in the DTV

environment. Texas Instruments, Inc. (``Texas Instruments'') argues

that it is premature for the Commission to regulate the mix of DTV

services by requiring a certain amount of capacity to be used for video

programming; freedom from regulatory restraints will enhance

television's functionality and appeal beyond entertainment to encompass

new and unforeseen services.

24. Equipment manufacturers such as General Instrument, Motorola,

Thomson, and Zenith, and EIA urge that the Commission should permit

flexible use of the DTV channel consistent with the preservation of

free over-the-air television and as long as there is a substantial

commitment to HDTV. Motorola, however, supports a more restrictive

definition of ancillary services. The Digital Grand Alliance states

that, while the predominant use should be for free over-the-air

television and a minimum number of HDTV hours should be broadcast, the

Commission should permit flexible uses of the DTV channel. Cohen,

Dippell and Everist argues that a broadcaster should be permitted to

provide new and innovative services that do not cause objectionable

interference to existing users, provided that the primary use is

broadcasting to the general public.

25. NYNEX and Personal Communications Industry Association

(``PCIA'') urge that the primary use of the DTV channel should be free

over-the-air broadcasting. NYNEX urges that allowing broadcasters to

provide nonbroadcast and subscription services would threaten free,

universal broadcasting and should be permitted only as a residual use

of spectrum capacity. PCIA urges that a DTV licensee should be

permitted to offer broadcast-related services, such as closed

captioning, pay programming, broadcast or narrowcast audio service, and

home shopping, but should not be allowed to offer mobile radio services

like paging without open competition for DTV licenses by all qualified

applicants. Golden Orange suggests that the Commission should permit

all types of broadcast ancillary services that do not cause

interference to the primary HDTV requirement it urges the Commission to

adopt, but that the Commission should not permit nonbroadcast services

or non-TV subscription services. HBO argues that the second channel

should be used for HDTV and opposes affording broadcasters flexible use

of the channel, but adds that if the Commission permits flexibility in

the use of the channel, it should nonetheless require that a

substantial portion of the day be devoted to HDTV programming. The

Benton Foundation opposes spectrum flexibility as affording

broadcasters an unfair competitive advantage over competitors and

argues that the principal use of the second channel, defined as a

minimum of 75% of capacity, should be for broadcast.

26. Broadcasters, as a group, express their staunch support for the

continuation of our tradition of universal and free broadcast

television. For example, the comments of the Joint Broadcasters, a

group constituting a wide cross-section of broadcast television

stations and networks, emphasize broadcasters' commitment to provision

of free television service. ALTV, Pacific FM, and Busse argue that

broadcasters should be required to offer at least one free over-the-air

channel enhanced by digital technology but should otherwise be

unfettered as to the

[[Page 26971]]

services they provide. MAP and the Benton Foundation argue that because

broadcasters will receive free and exclusive use of the broadcast

spectrum, free, over-the-air broadcasting should comprise no less than

75% of a broadcaster's capacity.

27. Decision. As we have noted before, an overarching goal of this

proceeding is to promote the success of a free, local television

service using digital technology. Broadcast television's universal

availability, appeal, and the programs it provides--for example,

entertainment, sports, local and national news, election results,

weather advisories, access for candidates and public interest

programming such as education television for children--have made

broadcast television a vital service. It is a service available free of

charge to anyone who owns a television set, currently 98% of the

population.

28. We expect that the fundamental use of the 6 MHz DTV license

will be for the provision of free over-the-air television service. In

order to ease the transition from our current analog broadcasting

system to a digital system, we will require broadcasters to provide on

their digital channel the free over-the-air television service on which

the public has come to rely. Specifically, broadcasters must provide a

free digital video programming service the resolution of which is

comparable to or better than that of today's service and aired during

the same time periods that their analog channel is broadcasting.

5

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\5\ For example, a broadcaster who provides programming on its

analog channel from 6:00 am until midnight must provide a free over-

the-air digital signal during those hours.

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29. We wish to preserve for viewers the public good of free

television that is widely available today. At the same time, we

recognize the benefit of permitting broadcasters the opportunity to

develop additional revenue streams from innovative digital services.

This will help broadcast television to remain a strong presence in the

video programming market that will, in turn, help support a free

programming service. Thus, we will allow broadcasters flexibility to

respond to the demands of their audience by providing ancillary and

supplementary services that do not derogate the mandated free, over-

the-air program service. Ancillary and supplementary services could

include, but are not limited to, subscription television programming,

computer software distribution, data transmissions, teletext,

interactive services, audio signals, and any other services that do not

interfere with the required free service.

30. This decision is supported by the overwhelming weight of the

record. Consistent with precedent that has treated telecommunications

services provided by an NTSC station other than the regular television

program service as ancillary, we will consider as ancillary and

supplementary any service provided on the digital channel other than

free, over-the-air services. In addition, we will not impose a

requirement that the ancillary and supplementary services provided by

the broadcaster must be broadcast-related.

31. The approach we take here, of allowing broadcasters flexibility

to provide ancillary and supplementary services is supported both

generally and specifically by the 1996 Act, enacted after issuance of

the Fourth Further Notice/Third Inquiry (60 FR 42130, August 15, 1995).

In general, the 1996 Act seeks ``[t]o promote competition and reduce

regulation in order to secure lower prices and higher quality services

for American telecommunications consumers and encourage the rapid

deployment of new telecommunications technologies.'' More importantly,

the 1996 Act specifically gives the Commission discretion to determine,

in the public interest, whether to permit broadcasters to offer such

services. section 336(a)(2) of the Communications Act, contained in

section 201 of the 1996 Act, provides that if the Commission issues

additional licenses for advanced television services, it ``shall adopt

regulations that allow the holders of such licenses to offer such

ancillary or supplementary services on designated frequencies as may be

consistent with the public interest, convenience, and necessity.''

32. Section 336(b)(2) sets out the specific parameters of our

authority to permit ancillary and supplementary services, 6

and the approach we take here fully complies with those parameters.

Thus, under section 336(b)(2), the Commission is required to limit

ancillary and supplementary services to avoid derogation of any

advanced television services that the Commission may require. The

Commission has exercised its discretion and is requiring broadcasters

to continue to provide the free over-the-air service on which the

public has come to rely. We herein require that any ancillary and

supplementary services broadcasters provide will not derogate that

required service. Further, section 336(b)(1) requires that the

Commission may only permit broadcasters to offer ancillary or

supplementary services ``if the use of a designated frequency for such

services is consistent with the technology or method designated by the

Commission for the provision of advanced television services* * *.''

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\6\ Section 336(b) of the Communications Act, also added by

section 201 of the 1996 Act, provides that in prescribing the

regulations required by Section 336(a), the Commission shall:

(1) only permit such licensee or permittee to offer ancillary or

supplementary services if the use of a designated frequency for such

services is consistent with the technology or method designated by

the Commission for the provision of advanced television services;

(2) limit the broadcasting of ancillary or supplementary

services on designated frequencies so as to avoid derogation of any

advanced television services, including high definition television

broadcasts, that the Commission may require using such frequencies;

(3) apply to any other ancillary or supplementary service such

of the Commission's regulations as are applicable to the offering of

analogous services by any other person, except that no ancillary or

supplementary service shall have any rights to carriage under

section 614 or 615 or be deemed to be a multichannel video

programming distributor for purposes of section 628;

(4) adopt such technical or other requirements as may be

necessary or appropriate to assure the quality of the signal used to

provide advanced television services, and may adopt regulations that

stipulate the minimum number of hours per day that such signal must

be transmitted; and

(5) prescribe such other regulations as may be necessary for the

protection of the public interest, convenience, and necessity.

(6) 47 U.S.C. Sec. 336(b).

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33. Moreover, we believe that the approach we take here will serve

the public interest by fostering the growth of innovative services to

the public and by permitting the full possibilities of the DTV system

to be realized. One of our goals is to promote spectrum efficiency.

Encouraging an expeditious transition from analog to digital television

and a quick recovery of spectrum will promote that goal. By permitting

broadcasters to assemble packages of services that consumers desire, we

will promote the swift acceptance of DTV and the penetration of DTV

receivers and converters. That, in turn, will help promote the success

of the free television service. As discussed above, digital television

promises a wealth of possibilities in terms of the kinds and numbers of

enhanced services that could be provided to the public. Indeed, we

believe that giving broadcasters flexibility to offer whatever

ancillary and supplementary services they choose may help them attract

consumers to the service, which will, in turn, hasten the transition.

In addition, the flexibility we authorize should encourage

entrepreneurship and innovation. For example, it may encourage the

development of compression technologies that could allow even more

digital capacity on a 6 MHz channel, paving the way for multiple high

definition programs and more free

[[Page 26972]]

programming than would otherwise be offered.

34. There is no public interest harm in permitting ancillary and

supplementary services; indeed, to the contrary, allowing such services

contributes to efficient spectrum use and can expand and enhance use of

existing spectrum. In this case, technological advancements, i.e.,

digital technology, have made it possible for broadcasters to provide

continuing free, over-the-air service and still have the capacity to

provide other innovative services. It would be contrary to the public

interest to handicap broadcasters in providing these services and to

deprive consumers of the opportunity to purchase the services they

desire. We note, however, that we will review our flexible approach to

permitted ancillary and supplementary services during the periodic

reviews established herein and make adjustments to our rules as needed.

35. We note that the 1996 Act requires the Commission to establish

a fee program for ancillary or supplementary services provided by

digital licensees if subscription fees are required in order to receive

such services or if the licensee directly or indirectly receives

compensation from a third party in return for transmitting material

furnished by such third party (other than commercial advertisements

used to support broadcasting for which a subscription fee is not

required). We will issue a Notice to consider proposals as to how that

statutory provision should be implemented.

36. In addition, consistent with the 1996 Act, non-broadcast

services provided by digital licensees will be regulated in a manner

consistent with analogous services provided by other persons or

entities. We already follow such an approach with respect to ancillary

and supplementary services provided by NTSC licensees, for example, on

the VBI and the video portion of the analog signal.

2. High Definition

37. Background. In the Fourth Further Notice/Third Inquiry (60 FR

42130, August 15, 1995), the Commission noted that the Grand Alliance

system would provide broadcasters new flexibility and new capabilities

to provide not only high definition television but also multiple

program streams, as well as a variety of nonvideo and/or subscription-

based services. After noting that allowing at least some level of

flexibility would increase the ability of broadcasters to compete in an

increasingly competitive marketplace, would permit new and innovative

services to be provided to the public, and would allow for a more rapid

transition to digital broadcasting, the Commission requested comment as

to whether it should require broadcasters to provide a minimum amount

of high definition television and, if so, what minimum amount should be

required.

Comments. Many commenters are opposed to a minimum HDTV

requirement. Commenters urging the Commission not to apply a minimum

HDTV requirement but rather to leave that determination to the

marketplace and thus to broadcasters and viewers include the National

Association of Broadcasters (``NAB''), ALTV, the Benton Foundation,

Microsoft Corporation, Telemundo Group, Inc. (``Telemundo''), and

AAPTS/PBS. NAB notes that mandating a certain amount of HDTV could

impair broadcasters' ability rapidly to fuel development of the DTV

market with complementary program offerings and could prolong the

transition to digital television. NAB states: ``By providing maximum

latitude, the Commission will encourage development of diverse new

programming services that will facilitate the most rapid acceptance of

ATV and lead to the most rapid return of NTSC spectrum.'' ALTV states

that a minimum HDTV requirement would be burdensome and, moreover,

superfluous because the broadcast industry has maintained its

commitment to implement HDTV. According to ALTV, independent stations

rely on syndicated and local programming, which is less likely to be

produced in an HDTV format, so a minimum HDTV requirement would have a

disproportionately burdensome impact on independents. ALTV states that

any minimum HDTV requirement, if and when justified by future

circumstances, should be adopted later in the transition, as more HDTV

programming comes on the market. Telemundo notes that a minimum HDTV

requirement would negatively impact foreign language stations and

networks, many of which feature programming produced outside the United

States, where HDTV production is likely to lag domestic HDTV

production. AAPTS and PBS, in joint comments, oppose a minimum HDTV

requirement, noting that the Commission can rely on broadcasters and

public television's commitment to HDTV, and argue that if the

Commission adopts an HDTV requirement, it should be ``liberally

waived'' for noncommercial stations (particularly those analog stations

that may share a DTV channel in the transition). The Benton Foundation

argues that mandating an HDTV minimum serves no public interest because

it does not increase the number of voices in the marketplace or

contribute to the civic discourse of democracy.

39. Support for a minimum HDTV requirement is expressed by three

networks, HBO, NYNEX Corporation, receiver manufacturers, Viacom,

Golden Orange Broadcasting Co., Inc. (``Golden Orange''), and the

National Consumers League. Supporters of a minimum requirement

generally argue that a requirement will help promote the early

availability of HDTV programming, create demand for HDTV receivers,

stimulate the market, and speed the transition. Golden Orange, for

example, notes that without HDTV, the public will not be motivated to

buy receivers. HBO argues that the legal and policy principles that

justify awarding incumbent broadcasters a second channel for DTV do not

permit broadcasters to use this second channel for any thing other than

HDTV programming, and, if the FCC allows other than HDTV programming,

it should require that a substantial portion of the broadcast day,

especially during dayparts and prime time, be devoted exclusively to

HDTV. These commenters vary on the amount of HDTV programming that

should be required and on how the minimum should be implemented.

40. While believing that the marketplace is the best determinant of

the optimum balance between HDTV and other DTV services, Joint

Broadcasters support a minimum HDTV requirement if necessary to assure

HDTV a fair chance in the marketplace. Joint Broadcasters also declare

their support for HDTV as the ``centerpiece'' of the digital television

system and note the commitment of many broadcast organizations to

provide HDTV. MAP, which supports allotting only enough capacity to

broadcasters to provide one free, over-the-air, digital program

service, argues accordingly that there is little reason for the

Commission to mandate HDTV. However, MAP notes that the only

justification for affording broadcasters exclusive use of the entire 6

MHz of spectrum is that they will deliver significant amounts of HDTV

programming.

41. Decision. Our decisions today, and our previous adoption of the

DTV Standard, give broadcasters the opportunity to provide high

definition television programming, but we decline to impose a

requirement that broadcasters provide a minimum amount of such

programming and, instead, leave this decision to the discretion of

licensees. The DTV

[[Page 26973]]

Standard will allow broadcasters to offer the public high definition

television, as well as a broad variety of other innovative services. We

believe that we should allow broadcasters the freedom to innovate and

respond to the marketplace in developing the mix of services they will

offer the public. In this regard, we endeavor to carry out the premises

of the 1996 Act which, as noted above, seeks ``[t]o promote competition

and reduce regulation in order to secure lower prices and higher

quality services for American telecommunications consumers and

encourage the rapid deployment of new telecommunications

technologies.'' There is no reason to involve the government in a

decision that should properly be based on marketplace demand. The 1996

Act specifically affords the Commission discretion whether or not to

require minimum high resolution television programming.7

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\7\ 47 U.S.C. 336(b)(2), adopted by section 201 of the 1996 Act.

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

42. Our decisions to adopt the DTV Standard and to use 6 MHz

channels permit broadcasters to provide high definition television in

response to viewer demand. If we do not mandate a minimum amount of

high resolution television, we anticipate that stations may take a

variety of paths: some may transmit all or mostly high resolution

television programming, others a smaller amount of high resolution

television, and yet others may present no HDTV, only SDTV, or SDTV and

other services. We do not know what consumers may demand and support.

Since broadcasters have incentives to discover the preferences of

consumers and adapt their service offerings accordingly, we believe it

is prudent to leave the choice up to broadcasters so that they may

respond to the demands of the marketplace. A requirement now could

stifle innovation as it would rest on a priori assumptions as to what

services viewers would prefer. Broadcasters can best stimulate

consumers' interest in digital services if able to offer the most

attractive programs, whatever form those may take, and it is by

attracting consumers to digital, away from analog, that the spectrum

can be freed for additional uses. Further, allowing broadcasters

flexibility as to the services they provide will allow them to offer a

mix of services that can promote increased consumer acceptance of

digital television, which, in turn, will increase broadcasters'

profits, which, in turn, will increase incentives to proceed faster

with the transition.

43. We have also been persuaded by the arguments that a minimum

high definition television requirement would be burdensome on some

broadcasters. We note the arguments of ALTV and Telemundo as to the

difficulties a minimum high resolution television requirement might

impose on independent stations and foreign language stations,

respectively. We acknowledge the contributions of such stations and the

programming they provide to the diversity of our broadcast television

service and hesitate to impose a requirement that might make it more

difficult for such stations to convert to digital television, perhaps

even undermining their ability to do so. We are not convinced that high

definition television programming should be mandated where to mandate

it might impose significant burdens on stations, particularly where, as

will be discussed below, it appears that the marketplace will provide

high definition television programming even absent a governmental

requirement to that effect.

44. We note that some commenters argued that a high definition

television mandate is necessary to give program producers and equipment

manufacturers the necessary incentives to support high resolution

television, and to provide viewers and consumers enough high resolution

television programming to foster demand for such programming and to

drive DTV receiver purchases. To the contrary, however, we believe that

a minimum high definition television requirement is unnecessary to

achieve these goals. We note in this regard that broadcasters and

networks have emphasized their commitment to high definition

television. We find nothing in the record that identifies a market

failure or other reason to impose a governmental requirement for high

definition television. High definition television will afford

broadcasters an important tool in the increasingly competitive video

programming market. There is no reason to believe that a government

mandate is necessary to ensure that high definition television gets a

fair chance in the marketplace.

E. Public Interest Obligations

45. Background. As we stated in the Fourth Further Notice (60 FR

42130, August 15, 1995), the rules imposing public interest obligations

on broadcast licensees originate in the statutory mandate that

broadcasters serve the ``public interest, convenience, and necessity,''

as well as other provisions of the Communications Act. These

obligations include the requirements that broadcasters must provide

``reasonable access'' to candidates for federal elective office and

must afford ``equal opportunities'' to candidates for any public office

and that weekly they must provide three hours of children's educational

programming. Licensees must also adhere to restrictions on the airing

of indecent programming and must comply with the 1996 Act provisions

relating to the rating of video programming. In the Fourth Further

Notice/Third Inquiry, the Commission noted that these current public

interest rules were developed under the analog model and therefore were

shaped by the limitations inherent in analog technology. The Commission

sought comment on whether the greater capabilities afforded by digital

technology should affect licensees' obligations to serve the public

interest, and if so, how those obligations might be adapted to the

digital context.

46. Comments. Commenters generally agree that existing public

interest obligations should continue to apply, at the very least, to

free, over-the-air programming on DTV. They differ greatly, however, on

whether, and if so, how, the public interest obligation should be

applied and possibly expanded in a DTV world. Joint Broadcasters argue

that public interest obligations should continue to apply to NTSC

through the transition, and to all the DTV services, but that there is

no need to impose additional obligations on the transition channel.

ALTV comments that on DTV, free broadcast television service should

continue to be subject to the public interest obligations now applied

to NTSC, but that no public interest obligations should apply to

nonbroadcast services. General Instrument argues that public-interest

obligations should attach to free, over-the-air broadcasting on DTV,

but that for provision of subscription services, broadcasters should be

required to pay a fee to compensate the public.

47. Some commenters offered specific proposals on how the

broadcasters' public-interest obligations could be reconceptualized and

adapted in light of the new possibilities offered by digital

technology. MAP argues that public interest obligations should apply to

each program service, including subscription services, provided over

DTV spectrum. MAP proposes that broadcasters be required to provide

``new and different public service in exchange for the opportunity to

convert to digital television, including free time for political

candidates, noncommercial public access, and dedication of 20% of total

program time to children's educational and informational programming.''

Alliance for Community Media suggests that, at a minimum,

[[Page 26974]]

public interest guidelines should contain a quantitative measure of

programming including: local news and information; educational programs

for children and adults; material helpful to nonprofit, charitable,

health, or social-service organizations; and programs to allow elected

officials and nonprofit organizations to communicate to the community.

The Benton Foundation urges that broadcasters be required to provide,

for example, at least six hours of children's educational television,

free time for candidates, and access to programming time by members of

the community.

48. Decision. In this proceeding we seek to promote the successful

transition of analog broadcast television into a digital broadcast

television service that serves the public interest. Broadcasters have

long been subject to the obligation to serve the ``public interest,

convenience and necessity.'' 8 In the 1996 Act, Congress

provided that broadcasters' public interest obligations extend into the

digital environment:

\8\ 47 U.S.C. sections 307(a), 309(a); En Banc Programming

Inquiry, 44 FCC 2303, 2312 (1960).

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(d) Public Interest Requirement.--Nothing in this section shall

be construed as relieving a television broadcasting station from its

obligation to serve the public interest, convenience, and necessity.

In the Commission's review of any application for renewal of a

broadcast license for a television station that provides ancillary

or supplementary services, the television licensee shall establish

that all of its program services on the existing or advanced

television spectrum are in the public interest.

In enacting this provision, Congress clearly provided that broadcasters

have public interest obligations on the program services they offer,

regardless of whether they are offered using analog or digital

technology.

49. In the digital television era, although many aspects of the

business and technology of broadcasting may be different, broadcasters

will remain trustees of the public's airwaves. Our current rules were

developed when technology permitted broadcasters to provide just one

stream of programming over a 6 MHz channel. We recognize, however, that

digital technology expands the effective capacity of 6 MHz of spectrum.

For example, it permits, but does not require, licensees to provide

several program streams, as well as other digital services, on the 6

MHz channel of spectrum that we are assigning them. The dynamic and

flexible nature of digital technology creates the possibility of new

and creative ways for broadcasters to serve the country and the public

interest.

50. Some argue that broadcasters' public interest obligations in

the digital world should be clearly defined and commensurate with the

new opportunities provided by the digital channel broadcasters are

receiving. Others contend that our current public interest rules need

not change simply because broadcasters will be using digital technology

to provide the same broadcast service to the public. We are not

resolving this debate today. Instead, at an appropriate time, we will

issue a Notice to collect and consider all views. As we authorize

digital service, however, broadcast licensees and the public are on

notice that existing public interest requirements continue to apply to

all broadcast licensees. Broadcasters and the public are also on notice

that the Commission may adopt new public interest rules for digital

television. Thus as to the public interest, our action today forecloses

nothing from our consideration.

F. Transition

1. Simulcast

51. Background. In our 1992 Second Report/Further Notice (57 FR

21755, May 22, 1992), we determined that DTV licensees should simulcast

on their NTSC channel the programming offered on their DTV channel.

Specifically, we adopted, as a preliminary matter, a 50 percent

simulcasting requirement, beginning one year after the six-year

application and construction period, increasing to 100 percent two

years later.9 Our early simulcast decisions were based on

the expectation that DTV would primarily consist of the broadcast of a

single HDTV program service. However, as DTV technology developed, we

learned that DTV would be able to do much more than we initially

expected and that it would be possible to transmit multiple

simultaneous SDTV program services on a single 6 MHz channel.

Recognizing that a licensee would be unable to simulcast multiple

program services on its NTSC channel, we stated in the Fourth Further

Notice (60 FR 42130, August 15, 1995) that our simulcast requirement

must be revisited and we must consider alternatives. In addition, we

stated that we still perceived a need for a simulcast requirement,

albeit different from that first envisioned, and proposed to require

the simulcast of all material being broadcast on the licensee's NTSC

channel on a program service of the DTV channel. We requested comment

on this proposal.

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\9\ Additionally, we indicated that we would review this

schedule at the time of our initial review of the pace of conversion

at the end of the application/construction period and immediately

prior to the imposition of 100 percent simulcasting.

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

52. Comments. Broadcasters are divided on the necessity of a

simulcast requirement. Numerous comments note that simulcasting is

certain to occur even in the absence of a mandate. The Joint

Broadcasters emphasize that they believe that much simulcasting of NTSC

programming on the DTV channel would happen in the normal course.

However, because broadcasters have differing views on the need for a

requirement, the group declined to take a position on that issue. NAB

and ALTV maintain that a simulcast requirement would be

counterproductive and may delay development and penetration of DTV,

especially during the early stages of the transition. However, NAB

acknowledges that a phase-in of simulcasting near the end of the

transition could be an effective means of preventing disenfranchisement

of the remaining NTSC viewers. ABC and CBS argue that a simulcast

requirement should apply from the outset of the transition. CBS argues

that a simulcast requirement could spur the sale of DTV equipment and

ensure that DTV and NTSC broadcast services do not evolve into

separately programmed services. NBC supports a 50% simulcasting

requirement to allow for some innovation. Broadcasters and other

commenters arguing against the advisability of a simulcast requirement

maintain that rigid requirements would hamper broadcasters' ability to

promote and provide the programming that was most likely to draw

viewers to the DTV channel. They argue that transition to DTV would

occur most rapidly if broadcasters had the maximum flexibility to

experiment with new services and to put together offerings that would

best satisfy viewers. Commenters point out that simulcasting would slow

the transition by preventing broadcasters from enticing viewers to DTV

by making desirable programming available on DTV that is not available

on NTSC. ALTV also argues that any requirement would be based on

speculation about the development of digital service, and therefore

imposition of any rule, if necessary at all, should be postponed.

53. Equipment manufacturers recommend that a simulcast requirement

be tailored to promote a rapid transition to HDTV and DTV and recovery

of NTSC spectrum. The cable industry supports a simulcast HDTV service,

that is the broadcast of one program over two channels to the same area

at the same time. Public-interest groups generally support requiring

DTV broadcasters to simulcast their NTSC

[[Page 26975]]

service on the DTV channel. Commenters supporting a simulcast

requirement argue that such a requirement would expedite the transition

from analog to digital by guaranteeing that popular programming

services continue to be available, in enhanced technical quality, on

the DTV channel. They also point out that simulcasting would prevent

the development of two separately programmed services, which might

delay the transition. As to the question of phase-in, the Digital Grand

Alliance suggests that simulcast requirements be minimal in the early

years of the transition to facilitate innovative HDTV programming, and

more comprehensive in the later years to avoid perpetuating unique NTSC

programming that would make it difficult to cease NTSC broadcasts.

Throughout the transition, one DTV program stream should be identical

to the program stream carried on the NTSC channel.

54. Decision. We decline to adopt a simulcast requirement for the

early years of the transition. In order to help reclaim spectrum at the

end of the transition period, however, we adopt by the sixth year from

the date of adoption of this Report and Order a requirement of 50%

simulcasting of the video programming of the analog channel on the DTV

channel; by the seventh year, a 75% simulcasting requirement; by the

eighth year, a 100% simulcasting requirement, until the analog channel

is terminated and that spectrum returned.

55. We have previously recognized the need to afford broadcasters

flexibility to program their DTV channels to attract consumers,

especially during the critical launch phase of DTV. We do not adopt a

simulcast requirement during the early years of the transition in order

to give broadcasters the ability to experiment with program and service

offerings. We are convinced by commenters who argue that many

consumers' decisions to invest in DTV receivers will depend on the

programs, enhanced features, and services that are not available on the

NTSC service, and a simulcast requirement might limit broadcasters'

ability to experiment with the full range of digital capabilities.

Because the DTV channels represent valuable resources with large

opportunity costs, we believe licensees will have economic incentives

to provide programming and services that will attract consumers to DTV.

In any event, a simulcast requirement during this initial transition

phase appears to be unnecessary because the record suggests that

marketplace forces will ensure that the best NTSC programming will be

simulcast on the digital channel and broadcasters have indicated that

they will simulcast NTSC programs on the DTV channel even in the

absence of a requirement.

56. While we believe that a simulcast requirement is not warranted

during the early years of the transition, there are benefits to a

simulcast requirement near the end of the transition period. Such a

requirement will help ensure that consumers will enjoy continuity of

free over-the-air program service when we reclaim the analog spectrum

at the conclusion of the transition period. It may be difficult to

terminate analog broadcast service if broadcasters show programs on

their analog channels but not on their digital channels. We believe

that it will be easier to terminate analog services and reclaim the

spectrum at the end of the transition if most broadcast households are

capable of receiving DTV signals and these households do not suffer the

loss of a current program service only offered on analog channels.

Thus, we will require a phased-in simulcasting requirement as follows:

By the sixth year from the date of adoption of this Report and Order,

we adopt a 50% simulcasting requirement; by the seventh year, we adopt

a 75% simulcasting requirement; by the eighth year, we adopt a 100%

simulcasting requirement which will continue until the analog channel

is terminated and the analog spectrum returned. We recognize that we

will need to define clearly ``simulcasting'' in the context of DTV and

will do so as part of our two-year reviews or other appropriate

proceeding.

2. Licensing of DTV and NTSC Stations

57. Background. The Second Report/Further Notice (57 FR 21755, May

22, 1992) determined to treat the licensee as having two separate

licenses. In the Fourth Further Notice/Third Inquiry (60 FR 42130,

August 15, 1995), however, the Commission tentatively concluded that

substantial benefits could be obtained if the NTSC and ATV facilities

were instead authorized under a single, unified license. The Commission

tentatively decided that such a policy would ease administrative

burdens on the Commission and broadcasters alike by reducing the number

of applications that would have to be filled out, filed, and processed,

and would be consistent with our authority under section 316 of the Act

to modify an existing license. Licensing the two facilities under a

single license would also retain the policy announced in the Second

Report/Further Notice of treating both facilities the same for

revocation/nonrenewal purposes.

58. Comments. Those commenters, which include broadcasters,

networks, and equipment manufacturers, who address this issue largely

support our revised proposal for a single, paired license. One

commenter, broadcaster Golden Orange, argues that the DTV and NTSC

stations should have separate licenses.

59. Decision. We adopt our tentative conclusion, echoed by nearly

all those who commented, that the NTSC and DTV facilities should be

licensed under a single, paired license. As determined earlier, this

system will help the Commission and broadcasters alike by keeping

administrative burdens down. It is also consistent with our intention

to treat the DTV license and the NTSC license together for the purposes

of revoking or not renewing a license. Once broadcasters have satisfied

construction and transmission requirements, they will receive a single,

paired license for the DTV and NTSC facilities.

60. One of our objectives is to promote broadcasters' ability to

build digital businesses so that their valuable free programming

service will continue. We anticipate that some licensees may find it

beneficial to develop partnerships with others to help make the most

productive and efficient use of their channels. We intend to give

broadcasters flexibility in structuring business arrangements and

attracting capital to build a successful DTV business. One of our

overarching objectives is to promote the success of digital television.

We anticipate that some licensees may find it beneficial to develop

partnerships with others to help make the most productive and efficient

use of their channel, and we will look with favor on such arrangements.

Broadcasters may find it useful to work with other broadcasters or

others who have special expertise in exploiting digital technology.

Parties could come together for the sharing of facilities, costs, and

equipment, the development and provision of programming and service

offerings, access to capital and financing, the establishment of

business plans, and the like. Such arrangements will aid both

broadcaster and public, by helping the broadcaster achieve the most

competitive and beneficial business strategy and by ensuring for the

public the best use of the digital spectrum, including not only the

most efficient use of the spectrum but also the greatest array of

valuable services. Variations on partnerships have arisen in other

contexts, which indicates that they are efficient and useful. For

example, in the common network/affiliate relationship,

[[Page 26976]]

a network provides programming and advertising that its affiliates may

use. Another example is the Commission's authorization of Instructional

Television Fixed Services (ITFS) licensees to lease, for profit, their

excess capacity to other service providers. We are receptive to the

establishment of like arrangements in the DTV context. Whatever the

arrangement, it is the licensee who remains responsible for ensuring

the fulfillment of all obligations incumbent upon a broadcast licensee.

G. Application/Construction Period

61. Background. The Second Report/Further Notice (57 FR 21755, May

22, 1992) adopted a two year application period and an additional three

years for construction of a DTV facility. We were concerned that

without a specific timetable, some parties might delay construction

while waiting for others to take the lead, to the detriment of our goal

of expeditious DTV implementation. We clarified that broadcasters who

did not apply and construct within the established time period (and who

failed to obtain an extension of time) would lose their initial

eligibility for a DTV frequency. We noted that existing policies

regarding extensions of time would afford broadcasters adequate

flexibility to cope with unforeseen implementation

problems.10 We defined ``construction'' as the capability of

emitting DTV signals, regardless of the source of these signals (e.g.,

local origination, pass-through of a network signal, or other signal).

This definition of construction would allow broadcasters to ``phase-

in'' full DTV implementation as their individual circumstances and

markets permit.

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\10\ For additional clarification of our extension policies,

see, Second Report/Further Notice (57 FR 21755, May 22, 1992), supra

at 3347-48.

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62. In the Third Report/Further Notice (57 FR 53588, November 12,

1992), we adjusted the application deadline from a two-year to a three-

year period, and provided for a total six-year application and

construction period with those applying early having a longer portion

of the six-year period to devote to construction of DTV facilities. We

explained that the deadlines for application and construction would

assist in our reclamation of the reversion channel and our sliding

scale approach would provide sufficient relief to small-market stations

which produce less revenue. While we recognized that some stations

would be market leaders in the implementation of DTV, we remained

concerned that such leadership may not emerge, at least in certain

markets, unless we established a clear framework for the DTV

transition.

63. The Fourth Further Notice/Third Inquiry (60 FR 42130, August

15, 1995) proposed a procedure by which broadcasters would have six

months in which to make an election and confirm to the Commission that

they want a DTV license. After that, they would have the remainder of

the three-year period in which to supply any required supporting data,

and a total of six years to complete construction. If they would elect

not to construct a DTV facility, or would elect but then fail to

construct, their NTSC licenses would expire at the end of the DTV

conversion period, and they would be required to cease broadcasting. We

sought comment on all aspects of the construction period. We asked

whether certain classes of stations should be afforded special relief,

and if so, which classes.

64. Comments. While most commenters do not specifically address the

election period, some voice approval of a six-month election

period.11 The Digital Grand Alliance, however, suggests that

the six-month election period be accompanied by a mechanism to ensure

that this election represents real commitment to convert, such as the

imposition of a non-refundable application fee, a substantial deposit

refunded at commencement of DTV broadcast, or a fine if the broadcaster

fails to commence DTV broadcast. On the other hand, Busse and Pacific

FM argue that the 6-month election period is not a viable choice,

because those who do not want a DTV license have, in effect, elected to

go out of business since, under the Commission's proposal, all

licensees will be required to cease broadcasting in NTSC at the end of

the transition period.

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\11\ See, e.g., Comments of Joint Broadcasters at 12; Comments

of Thomson at 7; Comments of General Instrument at 16; Comments of

Golden Orange at 6; Comments of New World Television at 8.

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65. Commenters voice many views. Many generally support the

Commission's suggested timeframe, but suggest that the Commission take

account of the fact that practical impediments may arise to

implementation. While in support of the proposal for many stations,

Joint Broadcasters, joined by ALTV, propose that a less demanding

schedule and liberal waivers apply to help stations facing difficulty,

such as noncommercial stations, small stations, those in small or rural

markets, or in financial distress, as well as for those stations that

face FAA, zoning, or other similar problems. Busse points out that even

stations in large markets--such as those with religious or specialty

formats--may have difficulty making a timely transition. NAB suggests

that the construction deadline be staggered on a market-by-market

basis, in which large-market stations have six years, and small-market

stations have three or six additional years, to complete construction,

and in addition that waivers for problems such as zoning approvals also

be available. The Association of Federal Communications Consulting

Engineers argues that the six-year implementation period is inadequate,

given the number of stations that will need to acquire transmission

equipment, input/monitoring equipment, and tower structures during that

limited timeframe. Christian Communications of Chicagoland proposes

that the Commission recognize that the application/construction period

operate as a ``guideline subject to revision'' rather than a set

deadline.

66. Others maintain that, at least in some cases, the six-year

period is too long. Thomson and the Digital Grand Alliance propose that

the Commission shorten the application and construction periods at

least in the 25 largest markets, but do not specify what period would

be appropriate. General Instrument proposes that a three-year

construction period be considered for major markets, and a six-year

period for smaller markets. Motorola argues that, given the notice that

broadcasters have been afforded, the appropriate timetable is a six-

month application period, a six-month processing and grant period, and

a two-year construction period.

67. Decision. We will apply a streamlined three-stage application

process to the group of initially eligible analog permittees and

licensees allotted a paired channel in the DTV Table of

Allotments.12 We will soon issue a Public Notice detailing

the procedures to be followed, but will describe them briefly here.

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\12\ We note that under section 553(b)(A), notice and comment

are not necessary for rules of agency procedure or practice. 5

U.S.C. 553(b)(A).

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68. Stage One--Initial Modification License for DTV. Pursuant to

the 1996 Act and the eligibility criteria discussed above, we issue, by

this paragraph and the attached Appendix E, additional DTV licenses to

those initially eligible to receive them.

69. The statute directs us to limit initial eligibility for DTV

licenses to persons that, as of the date of the issuance of the

licenses, are licensed to operate a television broadcast station or

hold a permit to construct such a station, or both. As the statute

contemplates, we hereby issue a license

[[Page 26977]]

to all eligible licensees and permittees, a list of which is attached

to this Report and Order as Appendix E. We conclude that it more

effectively effectuates the congressional scheme to implement the

statute through a three-phased process, with the first phase consisting

of the initial DTV license, rather than through our conventional

procedure. Use of the conventional licensing process would prevent us

from establishing a date certain at which to determine initial

eligibility, a process that is necessary to allow us to establish the

Table of Allotments. Thus, we hereby issue a license, conditioned upon

satisfaction of the additional requirements set out in para. 70-75

below. This license will modify the analog television permit or

license; however, licensees may not begin construction or transmission

until the additional conditions are met.13 The license is

also conditioned upon the requirement that ``either the additional

license or the original license held by the licensee be surrendered to

the Commission for reallocation or reassignment (or both) pursuant to

Commission regulation.''

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\13\ As discussed below, we expect that the application or

certification process will be speedy and will not delay applicants

as they prepare to implement the build-out.

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70. Request for Cancellation. We presume that the recipients will

welcome receipt of their initial DTV License and will be fully

committed to the conversion to DTV. Nonetheless, there may be some

broadcasters who do not wish to receive a second channel to convert to

DTV. We wish to reclaim these second channels as quickly as possible so

that the spectrum may be awarded to those who would use it quickly and

effectively, and we earlier proposed a six-month election period to

accomplish this result. We now believe that a six-month election period

is too long. Given the length of this proceeding and the public

benefits of acting quickly, we believe that broadcasters have already

had ample time to consider many options, and will shorten the

``election'' period. In order to achieve the benefits of a rapid

election and in the interests of spectrum efficiency, we ask that

licensees who wish to cancel the initial DTV license do so by writing

the Commission within 90 days from the release date of the DTV Table of

Allotments adopted in the Sixth Report and Order.

71. Stage Two--Certification or Application for Construction

Permit. To receive authorization for commencement of construction, an

Initial DTV Licensee must file modified Form 301, attached as Appendix

D, and the appropriate fee to obtain a construction permit.

Noncommercial stations must file a modified Form 340. The application

must be filed before the mid-point in a particular applicant's required

construction period has expired. The Bureau will begin acting upon

applications as soon as this Report and Order becomes effective.

72. We will apply a certification procedure for applicants that

answer ``yes'' to a checklist of requirements contained in the

construction permit application; these certifications will be

automatically granted. Given the very rapid review permitted by this

streamlined procedure, we will be able to grant a construction permit

to broadcasters within a matter of days of submission of this form.

Other applicants will be required to furnish additional technical

information.

73. In the Fifth Further Notice (61 FR 26864, May 29, 1996), supra

at para. 59, we sought comment on whether specific TV technical and

procedural rules should be applied to DTV and whether modification of

the rules was needed. Among those NTSC TV rules were section 73.685 and

73.1030. No comments addressed these issues. We herein establish a

minimum set of technical requirements that will allow us to process

these DTV construction permit applications. Fundamentally, a DTV

application must conform to the DTV Table we are creating in the Sixth

Report and Order, specifying the indicated channel at a transmitter

site, effective radiated power (``ERP'') and antenna height meeting the

restrictions imposed in that document. As described in the Sixth Report

and Order, applications specifying a transmitter site within five

kilometers of the site assumed in the DTV Table and also specifying an

ERP and antenna height that do not exceed the values in the DTV Table

will be accepted and not subject to interference-protection processing.

Further, in order to avoid exposing the public to dangerous situations,

we will continue the NTSC TV practice of verifying that the FAA has

made any necessary determination that the proposed tower does not

represent a hazard to air navigation, and we will require DTV

applicants to certify as to no significant environmental impact or to

include an environmental statement as described in section 1.1307 of

our rules, including consideration of RF radiation levels. In addition,

to avoid altering an AM radio station's radiation pattern in a way that

could cause interference in the AM radio band, we will require DTV

applications to comply with section 73.658(h). To avoid interference to

our spectrum monitoring functions and to radio astronomy observations,

we will also require DTV applications to comply with section 73.1030.

Additionally, as discussed below, the DTV service contour will be

required to encompass the community of license.

74. To speed the process, we will consider the DTV applications or

certifications as involving a minor change in facilities 14

and will process them accordingly. Since this application will be for a

minor change, applicants will not have to supply full legal or

financial qualifications information.15 We will not

initially require full-replication of the analog station's coverage

area by DTV facilities. Accordingly, we will accept initial

construction permit applications from applicants who demonstrate that

their DTV coverage encompasses the community of license.16

In situations where applicants seek a waiver of any of our

requirements, we will entertain requests to allow them to begin

[[Page 26978]]

construction, at their own risk, prior to the grant of a construction

permit.

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\14\ Pursuant to section 73.3572(a)(1) of the Commission's

rules, a major change in a television station's facilities is any

change in frequency or community of license. 47 CFR

Sec. 73.3572(a)(1). The change involved in constructing and

operating a DTV facility does not constitute a change in frequency,

merely the implementation of the initial DTV License on a channel

assigned in the Sixth Report and Order. The analog site will remain

on the same frequency. Moreover, the DTV facility will, of course,

be licensed to the same community, since it will be part of one

license. We note that in our Notice, supra at 7026, we sought

comment as to whether, as an alternative to a dual licensing scheme,

we should treat the addition of a DTV channel as a major

modification. We now conclude that it should be treated as a minor

modification for the reasons discussed herein.

\15\ In the Third Report/Third Further Notice (57 FR 53588,

November 12, 1992), supra at 6945-46, we noted that we would not

relax the financial qualifications showing required for a broadcast

applicant. We were concerned that applicants that were not

financially qualified could tie up the spectrum without ever

obtaining the funds necessary to build the facility, thus negating a

reason for restricting eligibility to existing broadcasters--i.e.,

their ability to implement DTV swiftly. Our decision to treat the

construction permit as a minor modification, however, eliminates the

need for a financial qualifications showing. Moreover, Congress has

determined that we should limit eligibility to existing

broadcasters, and we have decided to streamline the application

process so that DTV can be implemented quickly.

\16\ While the Sixth Report and Order establishes the upper

limit for DTV facilities, we believe that we should allow

construction initially of DTV facilities that provide service to a

smaller area. At the same time, stations should not be able to claim

that they have completed required construction when they have built

facilities that are so low in power that they reach no meaningful

service area. Accordingly, as noted above, we establish the initial

required coverage area as the community of license. During the first

two-year review, we will consider whether to modify the build-out

requirement to require a full-replication facility as well as

adjustments to the protection of the full-replication facility.

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75. Stage Three--Application for License to Cover Construction

Permit for a DTV Facility. When construction of the DTV facility has

been completed, the permittee may commence program tests upon

notification to the FCC, provided that an application for a license to

cover the construction permit for the DTV facility, on Form 302, is

filed within ten days, along with the appropriate fee.17

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\17\ Pursuant to section 1.68(a) of the Commission's rules, 47

CFR Sec. 1.68(a), the Commission will grant the application where it

finds that ``all the terms, conditions, and obligations set forth in

the application and permit have been fully met, and that no cause or

circumstance arising or first coming to the knowledge of the

Commission since the granting of the permit would, in the judgment

of the Commission, make the operation of such station against the

public interest.''

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76. Construction Schedule. We have decided to adopt the following

construction requirements. Stations affiliated with ABC, CBS, Fox and

NBC must build digital facilities in the ten largest television markets

by May 1, 1999. Stations affiliated with ABC, CBS, Fox and NBC in the

top 30 television markets, not included above, must construct DTV

facilities by November 1, 1999. All other commercial stations must

construct DTV facilities by May 1, 2002. All noncommercial stations

must construct their DTV facilities by May 1, 2003. We note that 24

stations in the top ten markets have voluntarily committed in writing

to the Commission to building DTV facilities within 18 months. We

applaud these broadcasters' voluntary commitments to give a great

number of viewers access to a DTV signal in a very short period. This

important step means that a significant portion of the public will be

able to receive multiple signals by the holiday shopping season, when

nearly 40 percent of all receivers are sold. We ask that those stations

that have represented to the Commission that they will have completed

construction of the DTV facility by November 1, 1998, file reports at

six-month intervals, beginning on November 1, 1997, stating that their

plans to meet these deadlines are on schedule or specifying any

difficulties encountered in attempting to meet these deadlines.

77. We will grant an extension to the applicable deadline where a

broadcaster has been unable to complete construction due to

circumstances that are either unforeseeable or beyond the licensee's

control if the licensee has taken all reasonable steps to resolve the

problem expeditiously. Such circumstances include, but are not limited

to, the inability to construct and place in operation a facility

necessary for transmitting DTV, such as a tower, because of delays in

obtaining zoning or FAA approvals, or similar constraints, or the lack

of equipment necessary to transmit a DTV signal. We do not anticipate

that the circumstance of ``lack of equipment'' would include the cost

of such equipment. With respect to extensions of the applicable

construction deadline, the Commission will take into account problems

encountered that are unique to DTV conversion, and will modify its

existing policies regarding extensions accordingly. Authority is

delegated to the Chief of the Mass Media Bureau to grant an extension

of time of up to six months beyond the applicable construction

deadline, upon demonstration by the DTV licensee or permittee that the

standard discussed above is met, but the Bureau may grant no more than

two extension requests upon delegated authority. Subsequent extension

requests will be referred to the Commission.

78. Our decision to adopt different requirements for different

categories of broadcasters is similar to the market-staggered approach

favored by most broadcasters and equipment manufacturers. We agree that

the most viewed stations in the largest television markets can be

expected to lead the transition to DTV and that these stations are

better situated to invest the capital necessary to establish the first

DTV stations. We also agree that smaller market stations will find it

easier to begin DTV service after learning from the experience gained

by the larger market stations. In addition, we agree that our staggered

construction schedule will help keep costs lower for smaller market

stations, as equipment costs decrease as the market matures. In

addition, a tiered approach allows us to ensure that DTV quickly

reaches a large percentage of U.S. television households while placing

requirements on a relatively small number of stations.

79. Our earlier preliminary decision to provide for an across-the-

board six-year application/construction schedule is no longer

appropriate. We now believe that a general six-year construction

schedule would unnecessarily delay the realization of our goals of

free, universal DTV service and spectrum recovery. A six-year

construction schedule for all commercial stations anticipated neither

the rapid development of digital technologies nor the ability of

manufacturers and suppliers to provide DTV equipment. In light of these

changes, we now believe that the six-year construction period is too

long. Instead, we believe that an aggressive construction schedule

should be implemented for several reasons.

80. First, digital broadcast television stands a risk of failing

unless it is rolled out quickly. Many operators in other media such as

DBS, cable, and wireless cable use or plan to use digital technology.

Unless digital television broadcasting is available quickly, other

digital services may achieve levels of penetration that could preclude

the success of over-the-air, digital television. Viewers who have

leased or purchased digital set-top boxes from competing digital media

may be less likely to purchase DTV receivers or converters. If digital,

over-the-air television does not succeed, however, viewers will be

without a free, universally available digital programming service.

81. Second, a rapid construction period will promote DTV's

competitive strength internationally, as well as domestically. Other

countries are moving swiftly to establish their own terrestrial digital

television services. For example, the United Kingdom is scheduled to

begin broadcasting terrestrial digital television by 1998 or earlier.

Japan has recently announced that it will move from analog high

definition television to digital television. Neither European nor

Japanese digital standards are compatible with the U.S. standard. In

the DTV Standard proceeding, equipment manufacturers and labor unions

argued that quick and decisive action was necessary to permit American

companies to compete internationally. The National Telecommunications

and Information Administration and the Office of Science and Technology

Policy argued that absent quick action, America might relinquish its

technological lead to international competitors, while rapid adoption

would spur the American economy in terms of manufacturing, trade,

technological development, international investment, and job growth.

Rapid introduction of digital television in the U.S. will help

facilitate its adoption abroad.

82. Third, an aggressive construction schedule helps to offset

possible disincentives that any individual broadcaster may have to

begin digital transmissions quickly, as well as the possible absence of

market forces that might themselves ensure rapid construction. We

recognize that an individual broadcaster may consider implementation of

DTV to require it to invest funds in order to capture viewers for which

it is already receiving advertising revenue. Such a broadcaster

[[Page 26979]]

might prefer to wait until others have converted to digital for a

number of reasons, including lower equipment costs. On the other hand,

a broadcaster may recognize first-mover advantages, such as being first

to market with programs in higher definition or with ancillary data

services. Our schedule ensures rapid construction in major markets.

83. Fourth, a rapid build-out works to ensure that recovery of

broadcast spectrum occurs as quickly as possible. As we discuss in the

Sixth Report and Order, at the end of the transition we plan to recover

78 MHz of clear spectrum in addition to the 60 MHz of partially

encumbered spectrum we plan to recover in the near future from channels

60-69. We will also recover at the end of the transition that spectrum

within channels 60-69 that is still needed for analog and digital

television broadcasting during the transition.

84. By adopting construction requirements, we hope to give the

various industries involved the certainty to move forward. Penetration

of color television sets, for example, was limited until the three

major networks began transmitting prime time programming in color. This

provides evidence that consumers may not purchase great numbers of DTV

sets or converters until multiple stations in their market are

transmitting DTV, and that we therefore should adopt construction

requirements that ensure that there are multiple digital television

broadcasters operating. Television manufacturers plan to have the first

digital television sets ready for purchase by the public by mid-1998.

The construction schedule set forth here provides that multiple

stations in most of the top ten markets are operating at roughly that

time.

85. Our construction schedule will facilitate our goal of having at

least 40 facilities affiliated with the four top networks in the top 10

markets transmitting DTV by May 1, 1999. Within roughly 24 months in

each of the top 10 markets, which cover approximately 30 percent of

U.S. television households, viewers will have DTV transmissions

available from multiple stations. These signals will come from network

affiliates, which are generally the stations with the highest ratings

in the market. In the top 30 markets, network-affiliated stations must

construct digital facilities by November 1, 1999. These markets include

53 percent of U.S. television households. Stations in the second

category will benefit from the success of the stations in the first

category, as word spreads from the largest markets to those medium-

sized markets. The May 1, 1999, requirement applies to only 40 of the

country's approximately 1200 commercial television stations, and only

80 additional stations will be affected by the November 1, 1999,

deadline. Over one thousand commercial stations will have until May 1,

2002, to plan for and implement their DTV facilities. Noncommercial

stations will have until May 1, 2003, to construct.

86. We believe that our construction schedule is reasonable. We

note that the most aggressive requirements apply to stations that we

believe are most able to absorb the costs of conversion and are

otherwise situated to make the transition quickly: stations affiliated

with the four major networks in the largest markets. We base our

decision in this regard on several grounds. First, network affiliates

consistently garner the highest percentage of audience share, and thus

are likely to have substantial revenues that may be used to fund the

conversion. Second, network affiliates are in a stronger position than

independent stations because they obtain programming from their network

and may also receive economic, technical, and other support that would

help with respect to the conversion. Affiliates are consistently the

most highly watched and generally the most financially successful, with

better ratings and consequent higher advertising revenues. Their

greater strength should give them a strong position from which to

launch their digital service. Accordingly, we believe that network

affiliates in the largest markets will be in the best position to make

a rapid transition to DTV. We recognize that in some markets, a network

has two affiliates, one of which is much stronger, with a much larger

audience share, that the other. We have provided relief to the smaller

affiliate in such cases, by granting a longer construction deadline.

Finally, our construction schedule also focuses on network affiliates

because we believe that the sale of receivers and thus the conversion

to DTV will be accelerated by the early availability of network

programming in DTV.18

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\18\ We have recognized the value and appeal of network

programming in a number of previous decisions. See Channel 41, Inc.,

6 FCC Rcd 4109, 4111 (1991) (rule waiver granted in order to

preserve ABC programming); Herald Publishing Co., 6 FCC 2d 631

(1967) (waiver granted in part because station proposed to bring NBC

network programming to a large number of viewers for the first

time).

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87. Thus, the roughly two-year construction requirement that

applies to these affiliates will both serve the public and be

nonburdensome to these broadcasters. By May 1, 1999, markets including

fully 30 percent of television households will have access to multiple

streams of digital television. The vast majority of commercial

broadcasters will have five years in which to construct, and

noncommercial stations will have six years in which to construct their

digital facilities. We agree with commenters arguing for a shorter

construction schedule, especially for broadcasters in the largest

television markets. As these commenters point out, broadcasters have

been on notice throughout this proceeding of the impending need to

convert to DTV. With their greater population coverage and scope of

operations, we agree that broadcasters in the largest markets generally

will be better able to afford and support a more rapid construction

schedule.

88. Moreover, the construction timetable appears to be consistent

with the announced plans of the large networks. CBS has received an

experimental authorization from the Commission and plans to transmit a

DTV signal from the Empire State Building in the spring of 1997. ABC

plans to have stations experimenting with digital transmission in early

1998. Fox ordered digital transmitters for its O & O's fully five years

ago from Harris Corporation, and plans to have digital transmission

between the network and affiliates in place by third quarter 1998. NBC

said it would begin broadcasting digital signals 18 months after

licenses are awarded. NBC already has designed and is building a $55

million dollar state-of-the-art digital infrastructure at its

headquarters at 30 Rockefeller Plaza that will be commissioned this

year. On February 2, 1997, WHD-TV, NBC's owned-and-operated model DTV

station in Washington, D.C., broadcast ``Meet the Press'' in high

resolution, using the new DTV standard. NBC has also announced that it

intends ``to move as aggressively and expeditiously as is technically

feasible'' to enable all of its owned and operated stations around the

country to transmit DTV and is ``encouraging and helping'' its NBC

affiliates across the nation in making the transition to DTV.

89. Our confidence in the willingness of licensees to move rapidly

is also supported by a recent survey of broadcasters which shows that

28 percent of respondents plan to convert to DTV within two years and

79 percent of respondents plan to convert to DTV within five years. In

fact, some broadcasters have already completed arrangements for their

digital transmission facilities. For example, the network affiliates in

San Francisco have arranged to place their antennae for

[[Page 26980]]

digital transmission on Sutro Tower. Similarly, in New York City, the

CBS-owned station has already arranged to place an antenna for digital

transmission atop the Empire State Building.

90. In addition, two experimental digital television stations are

already up and running, and were able to begin transmissions just four

months after announcing their plans to do so: WHD-TV in Washington, DC,

the model station sponsored by the broadcast and equipment industries,

and WRAL, in Raleigh, North Carolina. We have also already granted

eight requests for experimental facilities, at least five of which are

now operating, and we expect to grant another five experimental

licenses soon. These efforts reflect the ability of broadcasters to set

up facilities, and they have given broadcasters experience with digital

television equipment that should help speed its introduction elsewhere.

Finally, equipment manufacturers' recent statements that they plan to

sell digital television sets by Christmas 1998 is a further expression

of confidence and expectation that DTV will be widely available by that

time so as to ensure consumer demand.

91. While we recognize that conversion to digital will impose some

burden on broadcasters, we have taken steps to ease broadcasters'

introduction of digital service by requiring them at the outset only to

emit a DTV signal strong enough to encompass the community of license,

and not requiring them to begin transmission to achieve full

replication. Many broadcasters will be able to use existing towers for

digital transmission and reduce the costs of constructing a DTV

facility. Many commenters who argued in favor of a longer construction

schedule did so based on their contention that construction of full-

replication facilities would require more than six years due to

hardware supply constraints, insufficient personnel resources, or lack

of adequate new tower sites. However, our construction requirement is

satisfied by the emission of a DTV signal strong enough to encompass

the community of license, rather than the more difficult requirement

that broadcasters replicate their existing service areas. Therefore,

licensees need not initially construct full-replication facilities. We

believe that the establishment of a construction requirement that is

more easily satisfied, as well as our staggered approach, will

alleviate the difficulties raised by some commenters.

92. One of the most significant issues in converting to digital

broadcasting is the construction of new towers or the upgrade of

existing towers. As explained above, this burden will be eased by our

limited build-out requirement. In addition, while we recognize that

there may not be sufficient equipment available in the earliest days to

allow for a full-fledged DTV operation to be implemented by all 1,600

television licensees, we are confident that minimal facilities for the

handful of licensees in the top ten markets can be assembled in a

timely fashion. These facilities need only meet our requirements of

serving the community of license, which can be accomplished by the use

of existing equipment or prototypes certain to be introduced soon.

93. As for noncommercial stations, we allow them until May 1, 2003,

to construct DTV facilities. There is strong support in the record for

giving noncommercial stations greater leeway in the construction of DTV

facilities. As discussed more fully below, noncommercial stations need

and warrant special relief to assist them in the transition. And, as

noted above, there are some noncommercial stations at the forefront of

DTV. However, we are convinced by the record that noncommercial

stations, as a group, may have more difficulty with the transition to

DTV than commercial stations. Therefore, we permit noncommercial

stations a longer period of time to construct DTV facilities than

commercial DTV stations.

H. Recovery Date

94. Background. Earlier in this proceeding, the Commission made the

preliminary decision to establish a recovery date 15 years from the

date of the adoption of an ATV system or the date a final Table of ATV

Allotments is effective, whichever is later. At the end of this period,

all analog broadcast would cease, and the spectrum used for NTSC would

be returned to the Commission. The Commission emphasized that, given

the uncertainties surrounding the conversion process and the possible

changes in the data on which we relied, setting the recovery date at 15

years was necessarily preliminary. In order to avoid making a decision

that would be overtaken by events, the Commission adopted a schedule of

periodic reviews to make whatever adjustments might be necessary. The

Commission made clear that broadcasters who do not convert to ATV will

have to cease broadcasting in NTSC at the end of the 15-year transition

period. The Commission explained that establishment of a firm date for

full transition would be in the public interest because it would keep

administration simple, assure progress toward spectrum recovery on a

timely basis, and give parties a clearly defined planning horizon. The

Fourth Further Notice/Third Inquiry (60 FR 42130, August 15, 1995)

explained that a more rapid conversion to ATV might be possible than

previously expected. The broadcast industry, including equipment

manufacturers, have been aggressive in developing digital television

technology, as have alternative programming providers such as Direct

Broadcast Satellite (DBS), cable systems, wireless technology, and

others. Because of the developing competition, and the drop in prices

resulting from the proliferation of digitally based media, the Fourth

Further Notice/Third Inquiry anticipated that conversion might occur

more rapidly than originally anticipated. Commenters were asked to

address whether some objective benchmark(s) could be used to determine

when broadcasters should cease NTSC transmission.

95. Comments. Numerous commenters note that the high degree of

uncertainty surrounding the successful establishment of DTV makes it

difficult to set an end-point for NTSC service. Many urge us therefore

to postpone setting a transition date. Joint Broadcasters argue, for

instance, that: ``Even the enterprise of setting self-enforcing

benchmarks at this point is highly speculative in the absence of market

experience. There are simply too many unknowns that will need to be

factored into any such decision--the cost and availability of digital

sets, the cost and availability of converters, and ATV penetration

levels both in terms of households and sets.'' Some commenters propose

that the Commission set a nominal target date for the cessation of NTSC

broadcasts, with periodic reviews to monitor the progress of

implementation. Others support a settled ``date certain'' approach.

96. If the Commission were to set objective benchmarks, comments

suggest several possible benchmarks: a measurement of the total number

of sets and total number of households capable of displaying DTV; a

measurement of the number of stations transmitting digital signals and

the number of households with digital receivers, including set-top

boxes; a ``sets-sold'' methodology so that once DTV sets reach some

percentage, e.g., 70%, of current TV households, NTSC transmissions

would cease three years later; or when a certain percentage, e.g., 80%,

of television households no longer rely solely on analog broadcasting.

[[Page 26981]]

97. Decision. One of our overarching goals in this proceeding is

the rapid establishment of successful digital broadcast services that

will attract viewers from analog to DTV technology, so that the analog

spectrum can be recovered. Accomplishment of this goal requires that

the NTSC service be shut down at the end of the transition period and

that spectrum be surrendered to the Commission. Indeed, Congress

required the Commission to condition the grant of a digital license on

the Commission's recovery of 6 MHz from each licensee. The Act

provides:

``(c) Recovery of License. --If the Commission grants a license

for advanced television services to a person that, as of the date of

such issuance, is licensed to operate a television broadcast station

or holds a permit to construct such a station (or both), the

Commission shall, as a condition of such license, require that

either the additional license or the original license held by the

licensee be surrendered to the Commission for reallocation or

reassignment (or both) pursuant to Commission regulation.''

The question we face is at what point in time the surrender should

occur.

98. We continue to believe that it is desirable to identify a

target end-date of NTSC service. Doing so will lend certainty to the

introduction of digital by making clear to the public that analog

television service will indeed cease on a date certain. A target will

provide broadcasters and manufacturers with a defined planning horizon

that will help them gauge their business plans to the introduction of

DTV.

99. While the Commission has previously considered a 15-year end-

point for NTSC service, we now believe that broadcasters should be able

to convert to digital broadcast much more rapidly. Specifically, we

believe that a target of 2006 for the cessation of analog service is

reasonable. As the Fourth Further Notice/Third Inquiry (60 FR 42130,

August 15, 1995) explained, as digital technology has developed, we

have had reason to expect that DTV may be adopted more quickly than

originally anticipated. Competitors in the video programming market,

such as DBS, cable, and wireless cable, have aggressively pursued the

potential of digital technology. This competitive pressure has lent

urgency to the need for broadcasters to convert rapidly. Furthermore,

technological advances have worked to lower the introductory costs to

broadcasters; for example, new technology may allow many broadcasters

to use existing towers for digital transmission, thus easing the

expense of converting to digital equipment. And, due to the

introduction of other services, broadcasters who need new towers, will

be able to lease space on their new towers to mobile service providers,

further lowering the costs of converting. On the viewers' side,

technological advances in converter-box technology will lower the

consumer costs of the introduction of digital technology. The dramatic

drop anticipated in converter-box prices will permit consumers

inexpensively to continue to use existing equipment, thus easing the

introduction of digital services. Based on our current information, we

believe 2006 is a reasonable target.

100. As we discuss below, we will conduct reviews of the progress

of DTV every two years. This will allow us to monitor the progress of

DTV and to make adjustments to the 2006 target, if necessary. In

evaluating the appropriateness of the 2006 target date, key factors for

consideration will include viewer acceptance of digital television,

penetration of digital receivers and digital-to-analog converter set-

top boxes, the availability of digital-to-analog conversion by

retransmission media such as cable, DBS, and wireless cable, and

generally the number of television households that continue to rely

solely on over-the-air analog broadcasting. We emphasize, as we have

throughout this proceeding, that at the designated date, broadcasters

who do not receive extensions must return one of their two channels.

I. Noncommercial Stations

101. Background. In the Fourth Further Notice/Third Inquiry (60 FR

42130, August 15, 1995), we noted that noncommercial licensees would

face unique problems in their transition to DTV, particularly in the

area of funding. Accordingly, we asked for comment on what relief would

be appropriate for noncommercial broadcasters. We also noted comments

by noncommercial broadcasters that the six-year application/

construction period was insufficient, but expressed our preference to

establish a firm transition schedule, dealing with unique problems on a

case-by-case basis, rather than establishing two sets of broadcasters,

each with its own schedule. Finally, we asked what other relief could

be afforded to noncommercial broadcasters to assist them in the

conversion to DTV, such as by mandating that only the minimum required

broadcast programming must be ``noncommercial,'' and to minimize

restrictions on their operations and allow them greater flexibility.

102. Comments. AAPTS/PBS state that their biggest concern is the

ability of noncommercial stations to raise sufficient funds to support

current operations and the transition to DTV. Toward that end, they

assert that they have worked with Congress to propose legislation that

would replace the current system of federal funding for public

television stations with new sources of funding. In their Comments,

AAPTS/PBS seek flexibility in the application and construction period

in light of the financial constraints faced by noncommercial

broadcasters, including relaxation or elimination of the financial

qualifications requirement and establishment of a less demanding

construction schedule for noncommercial stations--requiring only that

they construct and begin operating DTV facilities some time prior to

the ultimate conversion deadline. Finally, they urge that noncommercial

stations that share a channel under their legislative proposal be

afforded flexibility to convert to full-time DTV operation on their

NTSC channels at any time during the transition period and that the

Commission should adopt a waiver policy under which noncommercial

stations that operate their own DTV channels would be permitted, on a

case-by-case basis to convert to DTV operation on one of the station's

6 MHz channels and cease NTSC operations earlier than the conversion

date.

103. MAP also supports relaxing the construction and transition

timetables and financial qualifications for public broadcasters.

General Instrument notes its general support for government action that

would ``mitigate financial problems faced by noncommercial stations in

converting to ATV technology, and would lead to conversion as early as

possible.'' Further, The Digital Grand Alliance agrees with AAPTS/PBS

that the Commission should modify its approach as necessary to promote

the conversion of noncommercial stations to DTV. It does not object to

affording less demanding construction schedules for noncommercial

broadcasters as long as they are operating their DTV channel by the end

of the transition period, and it endorses giving them the option to

convert to full-time DTV on their NTSC channels at any time during the

transition period.

104. Decision. At the outset, we note our commitment to

noncommercial educational television service and our recognition of the

high quality programming service noncommercial stations have provided

to American viewers over the years. We also acknowledge the financial

difficulties faced by noncommercial stations and reiterate our view

that noncommercial

[[Page 26982]]

stations will need and warrant special relief measures to assist them

in the transition to DTV. Accordingly, we intend to grant such special

treatment to noncommercial broadcasters to afford them every

opportunity to participate in the transition to digital television, and

we will deal with them in a lenient manner. As discussed above, we will

not require a financial showing of any broadcaster seeking a

construction permit to build a DTV station, and, accordingly, no

special treatment will be required of noncommercial broadcasters in

this regard. With respect to the construction deadline, discussed

above, we will apply a six-year construction period timetable to

noncommercial stations, the longest permitted to any category of DTV

applicant. We believe, however, that it would be premature to attempt

to resolve the issue of what additional special treatment, if any,

should be afforded to noncommercial broadcasters at this early date,

and we will consider this issue in our periodic reviews. At the same

time, however, we wish to note that public broadcasting service was the

first to establish a digital satellite transmission system and that

public broadcasting licensees are in the forefront of experimenting

with digital television. Public broadcasters have taken an innovative

approach in experimenting with the capabilities of digital technology.

J. Must-Carry and Retransmission Consent

In the Fourth Further Notice/Third Inquiry (60 FR 42130, August 15,

1995), we requested comment on questions relating to the issues of what

must-carry obligations and retransmission consent provisions should

apply to DTV stations, both during the transition and as a consequence

of DTV having replaced NTSC broadcasting. We received comments on these

issues from several entities. Subsequent to the issuance of the Fourth

Further Notice/Third Inquiry, Congress, in the 1996 Act, gave the

Commission some direction as to the scope of must-carry, indicating

that no ancillary or supplementary DTV services should have must-carry

rights.

106. On March 31, 1997, the Supreme Court upheld the

constitutionality of the must-carry provisions contained in the Cable

Television Consumer Protection and Competition Act of 1992, in Turner

Broadcasting System, Inc. v. FCC (``Turner II''). In upholding the

constitutionality of must-carry, the Court emphasized that preserving

the benefits of free, over-the-air broadcast television and promoting

the widespread dissemination of information from a multiplicity of

sources were important governmental interests. The Turner II case did

not expressly address the issue of must-carry of digital television

signals. In order to obtain a full and updated record on the

applicability of the must-carry and retransmission consent provisions

in the digital context, particularly in light of the Turner II

decision, we intend to issue a Notice to seek additional comments on

these issues.

K. All-Channel Receiver Issues

107. Background. Traditionally, we have not regulated broadcast

receivers except insofar as they incidentally radiate energy. However,

the All Channel Receiver Act authorizes us to require that television

receivers ``be capable of adequately receiving all frequencies

allocated by the Commission to television broadcasting.'' While we

require that all TV broadcast receivers be capable of adequately

receiving all channels allocated by the Commission to the television

broadcast service, we previously determined in this proceeding that the

All Channel Receiver Act does not mandate the manufacture of dual-mode

(DTV and NTSC) receivers. We were concerned that such a requirement

might burden consumers, and sought comment on whether there is any need

to require that manufacturers produce receivers capable of both NTSC

and DTV reception during the transition to DTV.

108. In the Fourth Further Notice of Proposed Rule Making (60 FR

42130, August 15, 1995), we noted that DTV would have the capability to

deliver both HDTV and SDTV and sought comment on whether permitting the

manufacture and sale of receivers that receive and display only NTSC,

SDTV, or HDTV signals, or some combination, would be consistent with

the All Channel Receiver Act and in the public interest. We also

requested comment on whether we should regulate how a signal should be

displayed, the need for a labeling requirement for television

receivers, and limiting the sale of NTSC receivers.

109. Comments. Most broadcasters support a requirement that all DTV

receivers and set-top converters be able to receive and display NTSC

signals, and receive all DTV signals included in the DTV transmission

standard and display them in the highest quality format which the

particular set is designed to accommodate. Golden Orange argues that

the Commission should allow market forces to determine receiver design.

The Digital Grand Alliance and most equipment manufacturers argue that

manufacturers will build digital receivers that receive all DTV

formats, including HDTV, along with NTSC broadcasts, without any FCC

requirement. The Digital Grand Alliance states that it would support a

requirement that all DTV receivers receive all DTV formats including

HDTV, if it were coupled with a requirement that broadcasters transmit

minimum amounts of HDTV programming.

110. While most broadcasters and Motorola favor regulations

governing how DTV signals are displayed on DTV receivers, most

equipment manufacturers and other commenters favor a market-driven

approach. Comments are also mixed on the need for labeling

requirements. Joint Broadcasters state that the Commission should

consider a notice requirement on NTSC-only sets warning consumers that

NTSC transmissions will end. New World states that the FCC should

require every NTSC-only set to come with a prominent warning that the

set will not receive broadcasts after a date certain without

modifications. MAP argues that the burdens of labeling are far

outweighed by the need to protect consumers. Equipment manufacturers

maintain that labeling requirements are unnecessary. EIA states that

informational programs and consumer education are critical components

of the manufacturer-consumer relationship, so manufacturers will be

certain to educate consumers regarding their equipment options during

the transition to DTV. On the issue of limiting the sale of NTSC

receivers, New World and the AAPTS/PBS favor a requirement that all

televisions sold after some date be capable of receiving and displaying

digital broadcast transmissions. The Digital Grand Alliance and EIA

argue that the Commission should not ban or limit the sale of NTSC-only

receivers. During the transition to digital, and perhaps even after,

the Digital Grand Alliance contends, there is likely to be a demand for

NTSC-only sets driven by cable services, wireless cable services,

direct broadcast satellite services, digital video disc players, and

VCRs.

111. Decision. The digital broadcast transmission standard which we

adopted in the Fourth Report and Order (62 FR 14006, March 25, 1997)

differed from the standard we proposed in the Fifth Further Notice (61

FR 26864, May 29, 1996). Many of the comments we received in response

to the Fifth Further Notice assumed that the Commission would adopt a

DTV transmission standard that included specific video formats.

However, the standard we

[[Page 26983]]

adopted in the Fourth Report and Order did not specify video formats.

We chose instead to allow video formats to be determined by the market

and consumer demand. Because of this important modification, we believe

that some of the arguments made by the commenters on specific all-

channel receiver issues are no longer applicable.

112. We have decided that, at this time, equipment manufacturers

should have maximum latitude to determine which video formats DTV

equipment will receive. We believe that it is likely that market forces

will provide incentives for broadcasters and equipment manufacturers to

work closely together to produce the receiver and converter designs

most valued by consumers.

113. We do not believe that our goals would be advanced by

mandating that all digital receivers receive and display NTSC signals

and DTV signals, regardless of format, aspect ratio, or progressive or

interlaced scanning, as broadcasters argue. We expect that equipment

manufacturers will make available to consumers digital receivers that

receive both NTSC and DTV signals. However, we will not preclude

equipment manufacturers from designing digital receivers that do not

receive NTSC signals. In addition, we believe that equipment

manufacturers should be allowed to offer lower-cost, digital receivers

that receive only progressive scan or SDTV formats. Our two-year

reviews will give us an opportunity to monitor DTV receiver designs and

address any problems that may arise.

114. We have decided to postpone any decision concerning a labeling

requirement. We are providing broadcasters flexibility in their choice

of video formats and equipment manufacturers flexibility in their

choice of receiver designs and we are hopeful that this will result in

products and services that draw consumers to DTV. At this early stage

of the transition process, we will rely on consumer electronics

manufacturers and retailers to provide the information necessary for

consumers to make informed choices. Should problems arise, and

consumers become confused, as the transition moves forward, we will

have opportunity to revisit labeling requirement issues through our

review process. Finally, we recognize that there is an enormous

embedded base of video cassette recorders, cable decoder boxes, laser

disc players, and other video equipment that use NTSC receivers for

non-broadcast purposes. This suggests that there may be a continuing

market for the sale of NTSC display devices, even after the conversion

to DTV. Therefore, we decline to limit the sale of NTSC-only display

devices.

L. Review Issues

115. In the Third Report/Further Notice (57 FR 53588, November 12,

1992), the Commission set deadlines for the application and

construction period, the simulcast requirements, and the transition

end-date. The Commission also adopted a timetable, with specific years,

for the review of information relating to these time periods, under the

assumption that the ATV standard and a table of ATV allotments would be

adopted by late 1993. The Commission emphasized that the adoption of

certain dates would give parties a measure of certainty, while a

schedule for review would permit government and industry to adapt, if

necessary, to unforeseen circumstances.

116. While the specific dates established in the Third Report/

Further Notice (57 FR 53588, November 12, 1992) have been overtaken by

events and are no longer applicable, we continue to believe that

regular reviews of the progress of DTV are highly desirable. Given the

importance of digital television's introduction, we conclude that a

periodic review every two years until the cessation of analog service

is necessary to allow the Commission the opportunity to ensure that the

introduction of digital television and the recovery of spectrum at the

end of the transition fully serves the public interest. During these

reviews, we will address any new issues raised by technological

developments, necessary alterations in our rules, or other changes

necessitated by unforeseen circumstances. The Commission will address

such issues as the appropriateness of 2006 as a target recovery date,

the proper application of the simulcast requirement, the special needs

of noncommercial stations, issues related to DTV receiver designs and

set labelling, and any other issue that requires examination. Our

decisions today, at the very outset of the introduction of digital

television, are in some respects necessarily preliminary. A periodic

review will permit us to make whatever adjustments will be required.

III. Conclusion

117. Digital television will enter a highly competitive,

challenging telecommunications marketplace. Our decisions in this

Report and Order, designed to foster technological innovation and

competition, while minimizing government regulation, will, we hope,

increase the likelihood that we will see a digital television service

that provides a host of new and beneficial services to the American

public, while preserving free universal television service that serves

the ``public interest, convenience, and necessity.''

IV. Administrative Matters

118. The Commission has submitted to OMB an emergency request for

approval of: (1) an information collection regarding the cancellation

of the Initial DTV License and (2) the form attached to this Report and

Order to be used to apply for a DTV construction permit. The first

request will be used only once and the Commission will not seek

extension of the approval for this collection. The second will continue

to be used by the public. OMB approved this emergency request and

assigned 3060-0766 as the control number. Additionally, this Report and

Order contains a requirement that those stations that voluntarily

committed to building DTV facilities within 18 months are required to

submit progress reports on construction of facilities. As required by

the Regulatory Flexibility Act (``RFA''), 5 U.S.C. 603, an Initial

Regulatory Flexibility Analysis (``IRFA'') was incorporated in the

Fourth Further Notice of Proposed Rule Making and Third Notice of

Inquiry (60 FR 42130, August 15, 1995) in this proceeding. The

Commission sought written public comments on the proposals in the

Fourth Further Notice, including on the IRFA. The Commission's Final

Regulatory Flexibility Analysis (``FRFA'') in this Fifth Report and

Order conforms to the RFA, as amended by the Contract With America

Advancement Act of 1996, Public Law 104-121, 110 Stat. 847 (1996)

(``CWAAA'').19

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

\19\ See generally 5 U.S.C. Sec. 1 et seq. (RFA). Title II of

CWAAA is The Small Business Regulatory Enforcement Fairness Act of

1996 (SBREFA).

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

V. Final Paperwork Reduction Act of 1995 Analysis

119. This Report and Order contains either a new or modified

information collection. The Commission, as part of its continuing

effort to reduce paperwork burdens, invites the general public to

comment on the information collections contained in this R&O as

required by the Paperwork Reduction Act of 1995, Public Law 104-13.

Public and agency comments are due 60 days from date of publication of

this R&O in the Federal Register. Comments should address: (a) Whether

the new or modified collection of information is necessary for the

proper performance of the functions of the Commission,

[[Page 26984]]

including whether the information shall have practical utility; (b) the

accuracy of the Commission's burden estimates; (c) ways to enhance the

quality, utility, and clarity of the information collected; and (d)

ways to minimize the burden of the collection of information on the

respondents, including the use of automated collection techniques or

other forms of information technology.

OMB Approval Number: 3060-0027.

Title: Application for Construction Permit for Commercial Broadcast

Station.

Form No.: FCC 301.

Type of Review: Revision of a currently approved collection.

Respondents: Businesses or other for-profit.

Number of Respondents: 1,996.

Estimated time per response: 37 hours--159 hours (This time varies

depending of the type of application filed. This collection is

contracted out to communications attorneys and consulting engineers for

completion of the form.)

Total annual burden: 8,071.

Needs and Uses: FCC 301 is used to apply for authority to construct

a new commercial AM, FM or TV broadcast station, or to make changes in

the existing facilities of such a station. In addition, FM licensees or

permittees may request, by application on FCC 301, upgrades on adjacent

and co-channels, modifications to adjacent channels of the same class

and downgrades to adjacent channels without first submitting a petition

for rulemaking. All applicants using this one-step process must

demonstrate that a suitable site exists which would comply with

allotment standards with respect to minimum distance separation and

city-grade coverage and that it would be suitable for tower

construction.

120. To receive authorization for commencement of operation, an

initial DTV licensee must file FCC 301 for a construction permit. This

application may be filed anytime after receiving the initial DTV

license but must be filed before the mid-point in a particular

applicant's required construction period. The Commission has developed

a new section V-D for DTV engineering which will be added to the FCC

301. The Commission will consider these applications as minor changes

in facilities. Applicants will not have to supply full legal or

financial qualification information.

121. On 3/7/96, the Commission adopted an Order which amended the

Commission's rules to eliminate current national multiple radio

ownership restrictions and to relax local radio ownership restrictions

(the ``radio contour overlap'' rule). This action was necessary to

conform the rules to section 202(a) and 202(b)(1) of the

Telecommunications Act of 1996. This action will revise the FCC 301 by

removing the Exhibit dealing with market and audience share

information.

122. The FCC 301 will also be revised to add the new requirements

regarding antenna tower registration. This unique antenna registration

number identifies an antenna structure and must be used on all filings

related to the antenna structure. Several questions will be added to

the engineering portions of the this form to collect this information.

This requirement was approved by OMB under control number 3060-0714.

123. The data is used by FCC staff to determine whether the

applicant meets basic statutory requirements to become a Commission

licensee.

OMB Approval Number: 3060-0034.

Title: Application for Construction Permit for Noncommercial

Educational Broadcast Station.

Form No.: FCC 340.

Type of Review: Revision of a currently approved collection.

Respondents: Not for-profit institutions.

Number of Respondents: 646.

Estimated time per response: 37 hours--114 hours (This time varies

depending of the type of application filed. This collection is

contracted out to communications attorneys and consulting engineers for

completion of the form.)

Total annual burden: 2,736.

Needs and Uses: FCC 340 is used to apply for authority to construct

a new noncommercial educational AM, FM and TV broadcast station, or to

make changes in the existing facilities of such a station.

124. To receive authorization for commencement of operation, an

initial DTV licensee must file FCC 340 for a construction permit. This

application may be filed anytime after receiving the initial DTV

license but must be filed before the mid-point in a particular

applicant's required construction period. The Commission has developed

a new section V-D for DTV engineering which will be added to the FCC

340. The Commission will consider these applications as minor changes

in facilities. Applicants will not have to supply full legal or

financial qualification information.

125. This form will be revised to add the new requirements

regarding antenna tower registration. This unique antenna registration

number identifies an antenna structure and must be used on all filings

related to the antenna structure. Several questions will be added to

the engineering portions of the FCC 340 to collect this information.

This requirement was approved by OMB under control number 3060-0714.

126. The data is used by FCC staff to determine whether the

applicant meets basic statutory requirements to become a Commission

licensee.

OMB Approval Number: 3060-None.

Title: DTV Report on Construction Progress.

Form No.: None.

Type of Review: New Collection.

Respondents: Business or other for-profit.

Number of Respondents: 24.

Estimated time per response: 0.33 hours (2 times per year).

Total annual burden: 16 hours.

Needs and Uses: By letter to the Commission, 24 stations have

voluntarily committed to building DTV facilities within 18 months. The

Commission is requesting that these 24 stations file reports at six-

month intervals, beginning on November 1, 1997, stating that their

plans to meet these deadlines are on schedule or specifying any

difficulties encountered in attempting to meet these deadlines.

127. The data will be used by FCC staff to monitor the progress of

DTV applicants in the construction of their DTV facilities.

VI. Final Regulatory Flexibility Analysis

128. As required by the Regulatory Flexibility Act (``RFA''), 5

U.S.C. 603, an Initial Regulatory Flexibility Analysis (``IRFA'') was

incorporated in the Fourth Further Notice of Proposed Rule Making and

Third Notice of Inquiry in this proceeding.20 The Commission

sought written public comments on the proposals in the Fourth Further

Notice, including on the IRFA. The Commission's Final Regulatory

Flexibility Analysis (``FRFA'') in this Fifth Report and Order conforms

to the RFA, as amended by the Contract With America Advancement Act of

1996, Public Law 104-121, 110 Stat. 847 (1996)

(``CWAAA'').21

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\20\ 10 FCC Rcd 10540, 10555 (1995).

\21\ See generally 5 U.S.C. 1 et seq. (RFA). Title II of CWAAA

is The Small Business Regulatory Enforcement Fairness Act of 1996

(SBREFA).

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Need for Objectives of Action

The Fifth Report and Order adopts several rules with the following

objectives: (1) To promote and preserve free, universally available,

local broadcast television in a digital world, thereby preserving free,

widely accessible programming that serves the public interest; and (2)

to promote

[[Page 26985]]

spectrum efficiency and rapid recovery of spectrum.

Significant Issues Raised by the Public in Response to the Initial

Analysis

No comments were received specifically in response to the IRFA

contained in the Fifth Further Notice. However, some comments

indirectly addressed small business issues. In addition, most

commenters agreed that DTV licensees should have the discretion to

provide a wide variety of ancillary and supplemental services, thereby

providing an additional revenue stream that would benefit small

entities. Finally, several low power television (``LPTV'')

broadcasters, many of which are small entities, want the Commission to

extend initial eligibility to LPTV licensees.

Discription and Number of Small Entities to Which the Rule Will Apply

Definition of a ``Small Business''. Under the RFA, small entities

may include small organizations, small businesses, and small

governmental jurisdictions. 5 U.S.C. 601(6). The RFA, 5 U.S.C. 601(3),

generally defines the term ``small business'' as having the same

meaning as the term ``small business concern'' under the Small Business

Act, 15 U.S.C. 632. A small business concern is one which: (1) Is

independently owned and operated; (2) is not dominant in its field of

operation; and (3) satisfies any additional criteria established by the

Small Business Administration (``SBA''). According to the SBA's

regulations, entities engaged in television broadcasting Standard

Industrial Classification (``SIC'') Code 4833--Television Broadcasting

Stations, may have a maximum of $10.5 million in annual receipts in

order to qualify as a small business concern. This standard also

applies in determining whether an entity is a small business for

purposes of the RFA.

129. Pursuant to 5 U.S.C. 601(3), the statutory definition of a

small business applies ``unless an agency after consultation with the

Office of Advocacy of the SBA and after opportunity for public comment,

establishes one or more definitions of such term which are appropriate

to the activities of the agency and publishes such definition(s) in the

Federal Register.'' While we tentatively believe that the foregoing

definition of ``small business'' greatly overstates the number of

television broadcast stations that are small businesses and is not

suitable for purposes of determining the impact of the new rules on

small television stations, we did not propose an alternative definition

in the IRFA.22 Accordingly, for purposes of this Fifth

Report and Order, we utilize the SBA's definition in determining the

number of small businesses to which the rules apply, but we reserve the

right to adopt a more suitable definition of ``small business'' as

applied to television broadcast stations and to consider further the

issue of the number of small entities that are television broadcasters

in the future. Further, in this FRFA, we will identify the different

classes of small television stations that may be impacted by the rules

adopted in this Fifth Report and Order.

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

\22\ We have pending proceedings seeking comment on the

definition of and data relating to small businesses. In our Notice

of Inquiry (61 FR 33066, June 26, 1996) in GN Docket No. 96-113 (In

the Matter of section 257 Proceeding to Identify and Eliminate

Market Entry Barriers for Small Businesses), FCC 96-216, released

May 21, 1996, we requested commenters to provide profile data about

small telecommunications businesses in particular services,

including television, and the market entry barriers they encounter,

and we also sought comment as to how to define small businesses for

purposes of implementing section 257 of the Telecommunications Act

of 1996, which requires us to identify market entry barriers and to

prescribe regulations to eliminate those barriers. Additionally, in

our Order and Notice of Proposed Rule Making (61 FR 09964, March 12,

1996) in MM Docket No. 96-16 (In the Matter of Streamlining

Broadcast EEO Rule and Policies, Vacating the EEO Forfeiture Policy

Statement and Amending section 1.80 of the Commission's Rules to

Include EEO Forfeiture Guidelines), 11 FCC Rcd 5154 (1996), we

invited comment as to whether relief should be afforded to stations:

(1) based on small staff and what size staff would be considered

sufficient for relief, e.g., 10 or fewer full-time 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.

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

130. Issues in Applying the Definition of a ``Small Business''. As

discussed below, we could not precisely apply the foregoing definition

of ``small business'' 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.

131. An element of the definition of ``small business'' is that the

entity not be dominant in its field of operation. We were unable at

this time to define or quantify the criteria that would establish

whether a specific television station is dominant in its field of

operation. Accordingly, the following estimates of small businesses to

which the new rules will apply do not exclude any television station

from the definition of a small business on this basis and are therefore

overinclusive to that extent. An additional element of the definition

of ``small business'' is that the entity must be independently owned

and operated. As discussed further below, we could not fully apply this

criterion, and our estimates of small businesses to which the rules may

apply may be overinclusive to this extent. The SBA's general size

standards are developed taking into account 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.

132. With respect to applying the revenue cap, the SBA has defined

``annual receipts'' specifically in 13 CFR 121.104, and its

calculations include an averaging process. We do not currently require

submission of financial data from licensees that we could use in

applying the SBA's definition of a small business. Thus, for purposes

of estimating the number of small entities to which the rules apply, we

are limited to considering the revenue data that are publicly

available, and the revenue data on which we rely may not correspond

completely with the SBA definition of annual receipts.

133. Under SBA criteria for determining annual receipts, if a

concern has acquired an affiliate or been acquired as an affiliate

during the applicable averaging period for determining annual receipts,

the annual receipts in determining size status include the receipts of

both firms. 13 CFR 121.104(d)(1). The SBA defines affiliation in 13 CFR

121.103. In this context, the SBA's definition of affiliate is

analogous to our attribution rules. Generally, under the SBA's

definition, concerns are affiliates of each other when one concern

controls or has the power to control the other, or a third party or

parties controls or has the power to control both. 13 CFR

121.103(a)(1). The SBA considers factors such as ownership, management,

previous relationships with or ties to another concern, and contractual

relationships, in determining whether affiliation exists. 13 CFR

121.103(a)(2). Instead of making an independent determination 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.

134. Television Station Estimates Based on Census Data. The rules

amended by this Fifth Report and Order will apply to all full service

television stations and may have an effect on TV translator facilities

and LPTV stations. The Small Business Administration defines a

television broadcasting station that has no more than $10.5 million in

annual receipts as a small business. Television broadcasting stations

consist of establishments primarily engaged in broadcasting visual

programs by television to the public, except cable

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and other pay television services.23 Included in this

industry are commercial, religious, educational, and other television

stations.24 Also included are establishments primarily

engaged in television broadcasting and which produce taped television

program materials.25 Separate establishments primarily

engaged in producing taped television program materials are classified

under another SIC number.26

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\23\ Economics and Statistics Administration, Bureau of Census,

U.S. Department of Commerce, 1992 Census of Transportation,

Communications and Utilities, Establishment and Firm Size, Series

UC92-S-1, Appendix A-9 (1995).

\24\ Id. 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:

Establishments primarily engaged in broadcasting visual programs

by television to the public, except cable and other pay television

services. Included in this industry are commercial, religious,

educational and other television stations. Also included here are

establishments primarily engaged in television broadcasting and

which produce taped television program materials.

\25\ Economics and Statistics Administration, Bureau of Census,

U.S. Department of Commerce, supra note 250.

\26\ Id.; SIC 7812 (Motion Picture and Video Tape Production);

SIC 7922 (Theatrical Producers and Miscellaneous Theatrical Services

(producers of live radio and television programs).

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135. There were 1,509 television stations operating in the nation

in 1992.27 That number has remained fairly constant as

indicated by the approximately 1,551 operating television broadcasting

stations in the nation as of February 28, 1997.28 For 1992

29 the number of television stations that produced less than

$10.0 million in revenue was 1,155 establishments, or 77% of 1,509

establishments.30 Thus, the proposed rules will affect

approximately 1,551 television stations; approximately 1,194 of those

stations are considered small businesses.31 These estimates

may overstate the number of small entities since the revenue figures on

which they are based do not include or aggregate revenues from non-

television affiliated companies. We recognize that the proposed rules

may also impact minority and women owned stations, some of which may be

small entities. In 1995, minorities owned and controlled 37 (3.0%) of

1,221 commercial television stations in the United States.32

According to the U.S. Bureau of the Census, in 1987 women owned and

controlled 27 (1.9%) of 1,342 commercial and non-commercial television

stations in the United States.33

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\27\ FCC News Release No. 31327, Jan. 13, 1993; Economics and

Statistics Administration, Bureau of Census, U.S. Department of

Commerce, supra note 250, Appendix A-9.

\28\ FCC News Release No. 7033, March 6, 1997.

\29\ Census for Communications' establishments are performed

every five years ending with a ``2'' or ``7''. See Economics and

Statistics Administration, Bureau of Census, U.S. Department of

Commerce, supra note 250, III.

\30\ The amount of $10 million was used to estimate the number

of small business establishments because the relevant 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.

\31\ We use the 77 percent figure of TV stations operating at

less than $10 million for 1992 and apply it to the 1997 total of

1551 TV stations to arrive at 1,194 stations categorized as small

businesses.

\32\ Minority Commercial Broadcast Ownership in the United

States, U.S. Dep't of Commerce, National Telecommunications and

Information Administration, The Minority Telecommunications

Development Program (``MTDP'') (April 1996). MTDP considers minority

ownership as ownership of more than 50% of a broadcast corporation's

stock, voting control in a broadcast partnership, or ownership of a

broadcasting property as an individual proprietor. Id. The minority

groups included in this report are Black, Hispanic, Asian, and

Native American.

\33\ See Comments of American Women in Radio and Television,

Inc. in MM Docket No. 94-149 and MM Docket No. 91-140, at 4 n.4

(filed May 17, 1995), citing 1987 Economic Censuses, Women-Owned

Business, WB87-1, U.S. Dep't of Commerce, Bureau of the Census,

August 1990 (based on 1987 Census). After the 1987 Census report,

the Census Bureau did not provide data by particular communications

services (four-digit Standard Industrial Classification (SIC) Code),

but rather by the general two-digit SIC Code for communications

(48). Consequently, since 1987, the U.S. Census

Bureau has not updated data on ownership of broadcast facilities by

women, nor does the FCC collect such data. However, we sought

comment on whether the Annual Ownership Report Form 323 should be

amended to include information on the gender and race of broadcast

license owners. Policies and Rules Regarding Minority and Female

Ownership of Mass Media Facilities, Notice of Proposed Rulemaking,

10 FCC Rcd 2788, 2797 (1995).

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136. It should also be noted that the foregoing estimates do not

distinguish between network-affiliated 34 stations and

independent stations. As of April, 1996, the BIA Publications, Inc.,

Master Access Television Analyzer Database indicates that about 73

percent of all commercial television stations were affiliated with the

ABC, CBS, NBC, Fox, UPN, or WB networks. Moreover, seven percent of

those affiliates have secondary affiliations.35

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\34\ In this context, ``affiliation'' refers to any local

broadcast television station that has a contractual arrangement with

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.

\35\ Secondary affiliations are secondary to the primary

affiliation of the station and generally afford the affiliate

additional choice of programming.

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137. There are currently 4,977 TV translator stations and 1,952

LPTV stations which would be affected by the new rules, if they decide

to convert to digital television.36 The Commission does not

collect financial information of any broadcast facility and the

Department of Commerce does not collect financial information on these

broadcast facilities. We will assume for present purposes, however,

that most of these broadcast facilities, including LPTV stations, could

be classified as small businesses. As we indicated earlier, 77% of

television stations are designated as small businesses. Given this

situation, LPTV and translator stations would not likely have revenues

that exceed the SBA maximum to be designated as small businesses.

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\36\ FCC News Release No. 7033, March 6, 1997.

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138. Alternative Classification of Small Television Stations. An

alternative way to classify small television stations is by the number

of employees. The Commission currently applies a standard based on the

number of employees in administering its Equal Employment Opportunity

(``EEO'') rule for broadcasting.37 Thus, radio or television

stations with fewer than five full-time employees are exempted from

certain EEO reporting and recordkeeping requirements.38 We

estimate that the total number of commercial television stations with 4

or fewer employees is 132 and that the total number of noncommercial

educational television stations with 4 or fewer employees is

136.39

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\37\ The Commission's definition of a small broadcast station

for purposes of applying its EEO rule was adopted prior to the

requirement of approval by the Small Business Administration

pursuant to section 3(a) of the Small Business Act, 15 U.S.C.

632(a), as amended by section 222 of the Small Business Credit and

Business Opportunity Enhancement Act of 1992, Public Law 102-366,

section 222(b)(1), 106 Stat. 999 (1992), as further amended by the

Small Business Administration Reauthorization and Amendments Act of

1994, Public Law 103-403, section 301, 108 Stat. 4187 (1994).

However, this definition was adopted after public notice and an

opportunity for comment. See Report and Order in Docket No. 18244,

23 FCC 2d 430 (1970).

\38\ See, e.g., 47 CFR 73.3612 (Requirement to file annual

employment reports on Form 395-B applies to licensees with five or

more full-time employees); First Report and Order in Docket No.

21474 (In the Matter of Amendment of Broadcast Equal Employment

Opportunity Rules and FCC Form 395), 70 FCC 2d 1466 (1979). The

Commission is currently considering how to decrease the

administrative burdens imposed by the EEO rule on small stations

while maintaining the effectiveness of our broadcast EEO

enforcement. Order and Notice of Proposed Rule Making in MM Docket

No. 96-16 (In the Matter of Streamlining Broadcast EEO Rule and

Policies, Vacating the EEO Forfeiture Policy Statement and Amending

Section 1.80 of the Commission's Rules to Include EEO Forfeiture

Guidelines), 11 FCC Rcd 5154 (1996). One option under consideration

is whether to define a small station for purposes of affording such

relief as one with ten or fewer full-time employees. Id. at para.

21.

\39\ We base this estimate on a compilation of 1995 Broadcast

Station Annual Employment Reports (FCC Form 395-B), performed by

staff of the Equal Opportunity Employment Branch, Mass Media Bureau,

FCC.

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[[Page 26987]]

Projected Compliance Requirements of the Rule

The Fifth Report and Order adopts a number of rules, procedures,

and policies, most of which are not expected to involve the imposition

of new compliance requirements upon licensees or other entities. These

include the rules: (1) Providing 6 MHz channels for each DTV channel;

(2) limiting the initial eligibility for DTV channels to existing full-

power broadcasters; (3) requiring licensees to provide at least one

free digital video programming service that is at least comparable in

resolution to

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