Closed Captioning of Video Programming

FEDERAL COMMUNICATIONS COMMISSION

47 CFR Parts 25, 26, 73, 76 and 100

[MM Docket No. 95-176; FCC 97-4]

Closed Captioning of Video Programming

AGENCY: Federal Communications Commission.

ACTION: Proposed rule.

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SUMMARY: The Telecommunications Act of 1996, Public Law 104-104, 110

Stat. 56 (1996), added a new provision, Section 713, to the

Communications Act of 1934, as amended, which requires the Commission

to prescribe, by August 8, 1997, rules and implementation schedules for

captioning of video programming. The Commission requests comment on

proposed rules and timetables for mandatory closed captioning of video

programming, as outlined in the Notice of Proposed Rulemaking

(``NPRM''). The intended effect of this NPRM is to promote the

accessibility of video programming to persons with hearing

disabilities. Our proposals are based on comments and information

submitted in response to a Notice of Inquiry (``NOI'') in this

proceeding and additional data gathered by the Commission for our

Report to Congress on video accessibility that was issued on July 29,

1996.

DATES: Comments are due on or before February 28, 1997, and reply

comments are due on or before March 24, 1997. Written comments by the

public on the proposed information collections are due on or before

February 28, 1997. Written comments must be submitted by the Office of

Management and Budget (OMB) on the proposed collections on or before

April 4, 1997.

ADDRESSES: Federal Communications Commission, Washington, D.C. 20554.

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

comments on the information collections contained herein should be

submitted to Dorothy Conway, Federal Communications Commission, Room

234, 1919 M Street, N.W., Washington, D.C. 20554, or via the Internet

to [email protected], and to Timothy Fain, OMB Desk Officer, 10236 NEOB,

725--17th Street, N.W., Washington, DC 20503 or via the Internet to

[email protected].

FOR FURTHER INFORMATION CONTACT: Marcia Glauberman, John Adams or

Alexis Johns, Cable Services Bureau, (202) 418-7200, TTY (202) 418-

7172. For additional information concerning the information collections

contained in this NPRM, contact Dorothy Conway at 202-418-0217, or via

the Internet at [email protected].

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

Notice of Proposed Rulemaking, MM Docket No. 95-176, FCC 97-4, adopted

January 9, 1997, and released January 17, 1997. The full text of this

decision is available for inspection and copying during normal business

hours in the FCC Reference Center (room 239), 1919 M Street, NW,

Washington, D.C. 20554, and may be purchased from the Commission's copy

contractor, International Transcription Service, (202) 857-3800, TTY

(202) 293-8810, 1919 M Street, N.W., Washington, D.C. 20554. For copies

in alternative formats, such as braille, audio cassette, or large

print, please contact Sheila Ray at International Transcription

Service.

Paperwork Reduction Act

This NPRM contains proposed information collections. The

Commission, as part of its continuing effort to reduce paperwork

burdens, invites the general public and the Office of Management and

Budget (OMB) to comment on the information collections contained in

this NPRM, as required by the Paperwork Reduction Act of 1995. Public

and agency comments are due at the same time as other comments on this

NPRM; OMB notification of action is due 60 days from date of

publication of this NPRM in the Federal Register. Comments should

address: (a) whether the proposed collections of information are

necessary for the proper performance of the functions of the

Commission, including whether the information shall have practical

utility; (b) the accuracy of the Commission's burden estimates; (c)

ways to enhance the quality, utility, and clarity of the information

collected; and (d) ways to minimize the burden of the collections of

information on the respondents, including the use of automated

collection techniques or other forms of information technology.

OMB Approval Number: 3060-XXXX Approval number to be assigned.

Title: Closed Captioning of Video Programming.

Type of Review: New collection.

Respondents: Individuals or households; businesses and other for-

profit entities.

Number of Respondents: 23,342. (3,000 complainants + 20,342 program

providers)

Estimated Time Per Response: 1-10 hours estimated as follows: We

estimate that program providers will initiate 100 waivers/petitions

each year requesting exemption from closed captioning requirements. At

this time, we estimate

[[Page 4960]]

that the average burden to complete each waiver/petition process will

be 5 hours. We estimate that 50% of program providers will use in-house

assistance. We estimate that 50% of program providers will use outside

legal assistance to complete waivers/petitions. These program providers

will undergo an average burden of 2 hours for each waiver/petition to

coordinate information with outside legal assistance. 50 (50% of

program providers using in-house assistance) x 5 hours=250 hours. 50

(50% of program providers using outside legal assistance) x 2

hours=100 hours.

Estimated annual burden to complainants and program providers for

the complaint process: We estimate there will be 3,000 annual

complaints filed by viewers at the local level. The average burden for

each complaint and response is estimated to be 1 hour per complainant

and 1 hour per program provider. 3,000 viewer complaints x 1 hour and

3,000 program provider responses x 1 hour=6,000 hours.

We estimate that the majority of complaints will be resolved at the

local level and assume that approximately 600 (20% of 3,000) will go

unresolved, resulting in complaints and responses being filed with the

Commission. The average burden for each complaint and response in this

instance is estimated to be 2 hours per complainant and 4 hours per

program provider. 600 viewer complaints x 2 hours and 600 program

provider responses x 4 hours=3,600 hours. We estimate the average

annual burden for recordkeeping and making information available upon

request to viewers will be 10 hours for each program provider. The

estimated number of program providers is 20,342 as follows: 11,200

cable television systems, 1,532 commercial and non-commercial

television stations, 137 national cable video networks, 3 open video

system (``OVS'') operators, 8 direct broadcast satellite (``DBS'')

operators, 30 home satellite dish (``HSD'') program packagers, 5,200

satellite master antenna television systems (``SMATVs''), 200 wireless

cable operators, and 2,032 instructional television fixed service

(``ITFS'') providers. 20,342 x 10=203,420 hours.

Total Annual Burden: 213,370 hours. (250+100+6,000+ 3,600+203,420)

Estimated Costs for Respondents: $90,684 estimated as follows:

Program providers will use outside legal assistance paid at $150 per

hour to complete approximately 50 waivers/petitions. 50 waivers x 5

hours per waiver x $150 per hour=$37,500. Postage and stationery

costs for waivers are estimated at an average of $5 per waiver. 100

waivers x $5=$500. Postage and stationary costs for filing complaints

is estimated as follows: 3,000 viewer complaints filed at the local

level x $1=$3,000. 3,000 program provider responses x $1=$3,000.

600 viewer complaints filed at the Commission x $5 per complaint

(increased postage for mailing video logs or tapes)=$3,000. 600 program

provider responses x $5=$3,000. Postage and stationery costs for

recordkeeping and making records available upon request are estimated

at an average of $2 per program provider. 20,342 x $2=$40,684. Total

costs=$37,500+ $500+$3,000

+$3,000+$3,000+$3,000

+$40,684=$90,684.

Needs and Uses: This NPRM is adopted pursuant to Section 713 of the

Communications Act of 1934, as amended. The requirements set forth in

Section 713 are intended to further Congress' goal to ``ensure that all

Americans ultimately have access to video services and programs,

particularly as video programming becomes an increasingly important

part of the home, school and workplace.'' The requirements will be used

to ensure that video programming is accessible to individuals with

hearing disabilities through closed captioning, regardless of the

delivery mechanism used to reach consumers.

Synopsis of the Notice of Proposed Rulemaking

1. Closed captioning is an assistive technology designed to provide

access to television for persons with hearing disabilities. Closed

captioning is similar to subtitles. Captions also identify speakers,

sound effects, music and laughter. Currently, programming accessible to

persons with hearing disabilities through closed captioning is the

result of the voluntary efforts of program producers and providers,

although the Commission has encouraged these efforts in several

previous actions.

2. Section 305 of the Telecommunications Act of 1996 (``1996

Act''), Public Law 104-104, 110 Stat. 56 (1996), added a new Section

713, Video Programming Accessibility, to the Communications Act of

1934, as amended (``Communications Act''), 47 U.S.C. 613. Section 713

requires the Commission to prescribe, by August 8, 1997, rules and

implementation schedules for captioning of video programming. In this

NPRM, the Commission discusses and seeks comment on proposals intended

to maximize the amount of closed captioned programming, with

appropriate exemptions and implementation schedules that take into

account the relevant technical and costs issues involved. Our proposals

are based on comments and information submitted in response to the NOI

in this proceeding, summarized at 60 FR 65052 (December 18, 1995), and

additional data gathered by the Commission for our Report to Congress

on video accessibility that was issued on July 29, 1996, summarized at

61 FR 42249 (August 14, 1996), pursuant to the requirements of Section

713(a).

3. At the outset, we note that the provisions of Section 713 apply

to all types of video programming delivered electronically to

consumers, regardless of the entity that provides the programming or

the category of programming. We consider over-the-air broadcast

television service (both commercial and noncommercial), and all

multichannel video programming distributors (``MVPDs''), including:

cable television, direct-to-home (``DTH'') satellite services,

including DBS and HSD services; wireless cable systems using the

multichannel multipoint distribution service (``MMDS''), ITFS, or local

multipoint distribution (``LMDS''); SMATV systems; and OVS. Also, as

required by Section 713, we consider all sources of video programming

distributed by these technologies, including programming from

commercial and noncommercial broadcast television networks, basic and

premium cable networks, syndicated programming, and locally or

regionally produced broadcast and cable programming.

4. Throughout this NPRM, we seek comment on our proposed closed

captioning requirements. We also invite commenters to provide

alternative proposals that will fulfill the congressional mandate to

ensure video accessibility to individuals with hearing disabilities.

5. Responsibility for Compliance with Captioning Requirements. In

order to implement any closed captioning requirements that we may

adopt, we must determine where the responsibility lies for ensuring

that video programming is closed captioned, and which parties shall be

required to comply with those requirements. Section 713(b)(1) focuses

on the result that new programming be closed captioned, rather than who

is responsible for accomplishing this goal, while Section 713(b)(2)

refers to both video programming providers and program owners as being

responsible for captioning of library programming. Our tentative

proposal is to require those entities that deliver video programming

[[Page 4961]]

directly to consumers (i.e., television broadcasters and MVPDs) to be

ultimately responsible for the rules we adopt. Although we propose to

place the compliance obligations on video programming providers, we

recognize, from a practical standpoint, that captioning is most

efficient at the production stage. Thus, we believe that producers

generally will have the responsibility for captioning programming,

regardless of who has the obligation to comply with our rules.

6. Transition Rules for New Programming. Section 713(b)(1) requires

the Commission to adopt rules to ensure that all non-exempt video

programming first published or exhibited after the effective date of

the our closed captioning rules (``new programming'') is fully

accessible through the provision of closed captions. Section 713(c)

further requires that the Commission's rules include an appropriate

schedule of deadlines by which non-exempt video programming must be

closed captioned. We propose to require that all non-exempt, new

programming be closed captioned within eight years. We propose to phase

in this captioning requirement by increasing the amount of required

captioning by 25% every two years. Thus, we would require 25% of such

programming to be captioned at the end of the second year, 50% at the

end of the fourth year, 75% at the end of the sixth year, and to have

all non-exempt, new programming captioned at the end of the eighth

year. Alternatively, we seek comment on a ten year period, with 25% of

new programming captioned after three years, 50% after five years, 75%

after seven years, and 100% after ten years. With respect to MVPDs, we

propose to apply the percentages of programming that must be captioned

on a system-wide basis. However, we also solicit comment on whether the

percentages of programming that must be captioned should apply to each

program service or channel transmitted by an MVPD. We ask whether the

determination that a percentage requirement has been met should be

based on the amount of programming with captioning that has been shown

over a month, a week, or some other period of time. We seek comment on

what the period of time should be if we apply the percentages on a

system-wide basis, and what it should be if we apply the percentages on

a per-channel basis.

7. Transition Rules For Library Programming. With respect to

programming that was first published or exhibited before the effective

date of our rules (``library programming''), Section 713(b)(2) requires

that our rules ensure that video programming providers or owners

maximize the accessibility of such programming through closed

captioning. In considering closed captioning requirements for library

programming, we do not believe that the statute requires that all such

programming be captioned, given the distinction between new programming

(``fully accessible'') and library programming (``maximize

accessibility'') evident in the statutory language of Sections 713

(b)(1) and (b)(2). We ask whether we should require that a percentage

of library programming (e.g., 75%) ultimately be captioned. We also

seek comment on what deadline should apply to captioning of library

programming and what the relevant time frames for the transition period

should be. Some commenters assert that captioning of previously

published programming is increasing, and thus it may be unnecessary to

require completion of closed captioned video libraries by a date

certain. We ask that commenters who support this approach indicate how

the Commission would ensure that video programming providers or owners

``maximize the accessibility'' of previously published programming, as

required by Section 713(b)(2).

8. Exemptions Based on Economic Burden. Section 713(d)(1) provides

for the exemption of classes of video programming or video providers

where the requirement to close caption programming would be

economically burdensome. While Section 713 and its legislative history

do not define the term ``economic burden,'' we interpret this provision

to permit us to exempt those classes of programming where the economic

burden of captioning these programming types outweighs the benefits to

be derived from captioning and, in some cases, the complexity of adding

the captions. We seek to establish a general classification or a number

of general classifications of programming for which captioning would be

economically burdensome. Thus, we need to determine when a closed

captioning requirement would be economically burdensome, and we seek

comment on whether a definition of economic burden should be based on

relative market size, degree of distribution, audience ratings or

share, relative programming budgets or revenue base, lack of repeat

value, or a combination of factors. We specifically discuss whether the

following types of programming should be included in our own general

exemptions: foreign language programs; programs which are primarily

textual; cable access programs; instructional programs; advertising;

home shopping; interstitials and promotional advertisements; political

advertising; noncommercial broadcasters' fundraising activities; music

programs; weather programs; and sports programs.

9. While the statute also allows us to exempt classes of video

providers, we believe that a blanket exemption even for very small

providers is unnecessary, because the various providers distribute the

same types of programming to consumers, and all classes of providers

appear to have the technical capability to deliver closed captioning to

viewers intact.

10. Exemptions Based on Existing Contracts. Section 713(d)(2)

exempts programming from any closed captioning requirements we may

adopt, if applying such requirements would be ``inconsistent'' with a

contract in existence as of February 8, 1996, the enactment date of the

1996 Act. We tentatively conclude that contracts which affirmatively

prohibit closed captioning would fall within this exemption and we seek

comment on this conclusion. Such contracts do not appear to be typical

but may be entered into when the program creator wishes to maintain

total creative control over the product involved. However, we recognize

that it is possible that contracts may contain more general language,

not explicitly mentioning closed captioning, that might nonetheless be

inconsistent with captioning. We seek comment on the types of

provisions that might be contained in programming contracts that would

be inconsistent with a captioning requirement.

11. Exemptions Based on Undue Burden. Section 713(d)(3) provides

for a program owner or provider of video programming to petition the

Commission for an exemption from the closed captioning requirements

based on a showing of undue burden. In determining whether closed

captioning requirements would be an undue burden, the statute indicates

that the factors the Commission must consider include: (1) the nature

and cost of the closed captions for the programming; (2) the impact on

the operation of the provider or program owner; (3) the financial

resources of the provider or program owner; and (4) the type of

operations of the provider or program owner. The Commission seeks

comment on how to apply these factors and whether there are any other

factors which should be considered when determining that closed

captioning would result in an undue burden for an individual

programming provider.

[[Page 4962]]

Commenters are also asked to address whether or not we should require

parties to provide specific facts or meet objective tests to prove an

undue burden or whether petitioners should have wider discretion in

demonstrating that under their specific circumstances, the closed

captioning requirements would constitute an undue burden. We also seek

comment on what specific information petitioners should provide in

order to demonstrate the factors needed to prove an undue burden. In

addition, we request comment on a proposal to use standard ``special

relief'' or waiver-type procedures for these types of requests.

12. Standards for Quality and Accuracy. Section 713 does not

require the Commission to adopt rules or standards for the accuracy or

quality of closed captioning. However, in the NOI, we sought comment on

these issues based on reported problems with existing closed captions.

We propose to extend to other programming providers the rule (47 CFR

76.606) that requires cable operators to deliver existing closed

captions intact. However, we tentatively conclude that we should not

adopt standards for the non-technical aspects of captioning, including

accuracy of transcription, spelling, placement and style, at the start

of our phase in period for closed captioning. We propose to monitor the

closed captioning that results from our requirements and, if necessary,

revisit this issue at a later date. We also do not propose to establish

minimum credentials for captioners or to place any limits on the method

used to create captions.

13. The Enforcement Process. We propose to rely on complaints as a

primary enforcement mechanism for the rules we adopt. Further, all

complaints would initially be directed to the program provider in an

attempt to resolve problems privately within a specified time period in

order to minimize administrative resources devoted to matters that are

better resolved through informal processes. We also seek comment on

other methods or information needed to verify compliance, such as a

requirement that each entity responsible for compliance with the rules

retain in its files, or have available upon appropriate request,

records sufficient to verify compliance.

Initial Regulatory Flexibility Analysis

14. Pursuant to Section 603 of the Regulatory Flexibility Act

(``RFA''), 5 U.S.C. 603, as amended, the Commission has prepared the

following initial regulatory flexibility analysis (``IRFA'') of the

expected impact of these proposed policies and rules on small entities.

Written public comments are requested on the IRFA. These comments must

be filed in accordance with the same filing deadlines as comments on

the rest of the NPRM but they must have a separate and distinct heading

designating them as responses to the IRFA. The Secretary shall cause a

copy of this NPRM to be sent to the Chief Counsel for Advocacy of the

Small Business Administration (``SBA'') in accordance with Section

603(a) of the RFA, 5 U.S.C. 603(a).

15. Reason for Action and Objectives of the Proposed Rule. The 1996

Act requires the Commission to promulgate rules designed to maximize

the availability of closed captioned programming. 47 U.S.C. 613. The

Commission is issuing this NPRM to seek comment on proposed rules

intended to implement this provision of the 1996 Act.

16. Legal Basis. This NPRM is adopted pursuant to Sections 4(i),

4(j) and 713 of the Communications Act of 1934, as amended, 47 U.S.C.

154(i), 154(j), 613.

17. Description and Number of Small Entities Affected. The

Regulatory Flexibility Act defines the term ``small entity'' as having

the same meaning as the terms ``small business,'' ``small

organization,'' and ``small business concern'' under Section 3 of the

Small Business Act, 5 U.S.C. 601(3). 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 SBA. 15 U.S.C. 632.

18. Small MVPDs. SBA has developed a definition of a small entity

for cable and other pay television services, which includes all such

companies generating $11 million or less in annual receipts, 13 CFR

121.201 (SIC 4841). This definition includes cable system operators,

closed circuit television services, DBS services, MMDS systems, SMATV

systems and subscription television services. According to the Bureau

of the Census, there were 1423 such cable and other pay television

services generating less than $11 million in revenue that were in

operation for at least one year at the end of 1992. We will address

each service individually to provide a more succinct estimate of small

entities. We seek comment on the tentative conclusions below.

19. Cable Systems. The Commission has developed its own definition

of a small cable company for the purposes of rate regulation. Under the

Commission's rules, a ``small cable company,'' is one serving fewer

than 400,000 subscribers nationwide. 47 CFR 76.901(e). Based on our

most recent information, we estimate that there were 1,439 cable

operators that qualified as small cable companies at the end of 1995.

Since then, some of those companies may have grown to serve over

400,000 subscribers, and others may have been involved in transactions

that caused them to be combined with other cable operators.

Consequently, we estimate that there are fewer than 1,439 small entity

cable system operators that may be affected by the decisions and rules

proposed in this NPRM.

20. The Communications Act also contains a definition of a small

cable system operator, which is ``a cable operator that, directly or

through an affiliate, serves in the aggregate fewer than 1% of all

subscribers in the United States and is not affiliated with any entity

or entities whose gross annual revenues in the aggregate exceed

$250,000,000.'' 47 U.S.C. 543(m)(2). The Commission has determined that

there are 61,700,000 subscribers in the United States. Therefore, we

found that an operator serving fewer than 617,000 subscribers shall be

deemed a small operator, if its annual revenues, when combined with the

total annual revenues of all of its affiliates, do not exceed $250

million in the aggregate. 47 CFR 76.1403(b). Based on available data,

we find that the number of cable operators serving 617,000 subscribers

or less totals 1,450. Although it seems certain that some of these

cable system operators are affiliated with entities whose gross annual

revenues exceed $250,000,000, we are unable at this time to estimate

with greater precision the number of cable system operators that would

qualify as small cable operators under the definition in the

Communications Act.

21. MMDS. The Commission refined the definition of ``small entity''

for the auction of MMDS as an entity that together with its affiliates

has average gross annual revenues that are not more than $40 million

for the preceding three calendar years. 47 CFR 21.961(b)(1). This

definition of a small entity in the context of the Commission's Report

and Order, summarized at 60 FR 36524 (July 17, 1995), concerning MMDS

auctions that has been approved by the SBA.

22. The Commission completed its MMDS auction in March 1996 for

authorizations in 493 basic trading areas (``BTAs''). Of 67 winning

bidders, 61 qualified as small entities. Five bidders indicated that

they were minority-owned and four winners indicated that they were

women-owned businesses. MMDS is an especially competitive service, with

approximately 1,573 previously authorized and proposed MMDS facilities.

Information available

[[Page 4963]]

to us indicates that no MDS facility generates revenue in excess of $11

million annually. We tentatively conclude that for purposes of this

IRFA, there are approximately 1634 small MMDS providers as defined by

the SBA and the Commission's auction rules.

23. ITFS. There are presently 2,032 ITFS licensees. All but one

hundred of these licenses are held by educational institutions.

Educational institutions are included in the definition of a small

business. 5 U.S.C. 601(5). However, we do not collect annual revenue

data for ITFS licensees, and are not able to ascertain how many of the

100 non-educational licensees would be categorized as small under the

SBA definition. Thus, we tentatively conclude that at least 1932

licensees are small businesses.

24. DBS. As of December 1996, there were eight DBS licensees.

However, the Commission does not collect annual revenue data for DBS

and, therefore, is unable to ascertain the number of small DBS

licensees that could be impacted by these proposed rules. Although DBS

service requires a great investment of capital for operation, we

acknowledge that there are several new entrants in this field that may

not yet have generated $11 million in annual receipts, and therefore

may be categorized as a small business, if independently owned and

operated.

25. HSD. The market for HSD service is difficult to quantify.

Indeed, the service itself bears little resemblance to other MVPDs. HSD

owners have access to more than 265 channels of programming placed on

C-band satellites by programmers for receipt and distribution by MVPDs,

of which 115 channels are scrambled and approximately 150 are

unscrambled. HSD owners can watch unscrambled channels without paying a

subscription fee. To receive scrambled channels, however, an HSD owner

must purchase an integrated receiver-decoder from an equipment dealer

and pay a subscription fee to an HSD programming packager. Thus, HSD

users include: (1) Viewers who subscribe to a packaged programming

service, which affords them access to most of the same programming

provided to subscribers of other MVPDs; (2) viewers who receive only

non-subscription programming; and (3) viewers who receive satellite

programming services illegally without subscribing. Because scrambled

packages of programming are most specifically intended for retail

consumers, these are the services most relevant to this discussion.

26. According to the most recently available information, there are

approximately 30 program packagers nationwide offering packages of

scrambled programming to retail consumers. These program packagers

provide subscriptions to approximately 2,314,900 subscribers

nationwide. This is an average of about 77,163 subscribers per program

packager. This is substantially smaller than the 400,000 subscribers

used in the Commission's definition of a small MSO. Furthermore,

because this an average, it is likely that some program packagers may

be substantially smaller. We seek comment on these tentative

conclusions.

27. OVS. The Commission has certified three OVS operators. On

October 17, 1996, Bell Atlantic received approval for its certification

to convert its Dover, New Jersey Video Dialtone (``VDT'') system to

OVS. Bell Atlantic subsequently purchased the division of Futurevision

which had been the only operating program package provider on the Dover

system, and has begun offering programming on this system using these

resources. Metropolitan Fiber Systems was granted certifications on

December 9, 1996, for the operation of OVS systems in Boston and New

York, both of which are being used to provide programming. On October

10, 1996, Digital Broadcasting Open Video Systems received approval to

offer OVS service in southern California. Because these services have

been introduced so recently, little financial information is available.

Bell Atlantic and Metropolitan Fiber Systems have sufficient revenues

to assure us that they do not qualify as small business entities.

Digital Broadcasting Open Video Systems however is a general

partnership just beginning operations. Accordingly, we tentatively

conclude that one OVS licensee qualifies as a small business concern.

28. SMATVs. Industry sources estimate that approximately 5200 SMATV

operators were providing service as of December 1995. Other estimates

indicate that SMATV operators serve approximately 1.05 million

residential subscribers as of September 1996. The ten largest SMATV

operators together pass 815,740 units. If we assume that these SMATV

operators serve 50% of the units passed, the ten largest SMATV

operators serve approximately 40% of the total number of SMATV

subscribers. Because these operators are not rate regulated, they are

not required to file financial data with the Commission. Furthermore,

we are not aware of any privately published financial information

regarding these operators. Based on the estimated number of operators

and the estimated number of units served by the largest ten SMATVs, we

tentatively conclude that a substantial number of SMATV operators

qualify as small entities.

29. LMDS. Unlike the above pay television services, LMDS technology

and spectrum allocation will allow licensees to provide wireless

telephony, data, and/or video services. A LMDS provider is not limited

in the number of potential applications that will be available for this

service. Therefore, the definition of a small LMDS entity may be

applicable to both cable and other pay television (SIC 4841) and/or

radiotelephone communications companies (SIC 4812). The SBA definition

for cable and other pay services is defined above. A small

radiotelephone entity is one with 1,500 employees or less. 13 CFR

Sec. 121.201. However, for the purposes of this NPRM on closed

captioning, we include only an estimate of LMDS video service

providers.

30. LMDS is a service that is expected to be auctioned by the FCC

in 1997. The vast majority of LMDS entities providing video

distribution could be small businesses under the SBA's definition of

cable and pay television (SIC 4841). However, in the Third NPRM, CC

Docket No. 92-297, summarized at 60 FR 43740 (July 23, 1995), we

proposed to define a small LMDS provider as an entity that, together

with affiliates and attributable investors, has average gross revenues

for the three preceding calendar years of less than $40 million. We

have not yet received approval by the SBA for this definition.

31. There is only one company, CellularVision, that is currently

providing LMDS video services. Although the Commission does not collect

data on annual receipts, we assume that CellularVision is a small

business under both the SBA definition and our proposed auction rules.

We tentatively conclude that a majority of the potential LMDS licensees

will be small entities, as that term is defined by the SBA.

32. Small Broadcast Stations. The SBA defines small television

broadcasting stations as television broadcasting stations with $10.5

million or less in annual receipts. 13 CFR 121.201.

33. Estimates Based on Census and BIA Data. According to the Bureau

of the Census, in 1992, 1155 out of 1478 operating television stations

reported revenues of less than $10 million for 1992. This represents

78% of all television stations, including noncommercial stations. The

Bureau of

[[Page 4964]]

the Census does not separate the revenue data by commercial and

noncommercial stations in this report. Neither does it allow us to

determine the number of stations with a maximum of 10.5 million dollars

in annual receipts. Census data also indicates that 81% of operating

firms (that owned at least one television station) had revenues of less

than $10 million.

34. We also have performed a separate study based on the data

contained in the BIA Publications, Inc. Master Access Television

Analyzer Database, which lists a total of 1141 full power commercial

television stations. It should be noted that, using the SBA definition

of small business concern, the percentage figures derived from the BIA

database may be underinclusive because the database does not list

revenue estimates for noncommercial educational stations, and these

therefore are excluded from our calculations based on the database. The

BIA data indicate that, based on 1995 revenue estimates, 440 full power

commercial television stations had an estimated revenue of $10.5

million or less. That represents 54% of full power commercial

television stations with revenue estimates listed in the BIA program.

The database does not list estimated revenues for 331 stations. Using a

worst case scenario, if those 331 stations for which no revenue is

listed are counted as small stations, there would be a total of 771

stations with an estimated revenue of 10.5 million dollars or less,

representing approximately 68% of the 1141 full power commercial

television stations listed in the BIA data base.

35. Alternatively, if we look at owners of commercial television

stations as listed in the BIA database, there are a total of 488

owners. The database lists estimated revenues for 60% of these owners,

or 295. Of these 295 owners, 156 or 53% had annual revenues of less

than $10.5 million. Using a worst case scenario, if the 193 owners for

which revenue is not listed are assumed to be small, of small entities

would constitute 72% of the total number of owners.

36. In summary, based on the foregoing worst case analysis using

Bureau of the Census data, we estimate that our rules will apply to as

many as 1150 commercial and noncommercial television stations (78% of

all stations) that could be classified as small entities. Using a worst

case analysis based on the data in the BIA data base, we estimate that

as many as approximately 771 commercial television stations (about 68%

of all commercial televisions stations) could be classified as small

entities. As we noted above, these estimates are based on a definition

that we tentatively believe greatly overstates the number of television

broadcasters that are small businesses. Further, it should be noted

that under the SBA's definitions, revenues of affiliates that are not

television stations should be aggregated with the television station

revenues in determining whether a concern is small. The estimates

overstate the number of small entities since the revenue figures on

which they are based do not include or aggregate such revenues from

nontelevision affiliated companies.

37. Program Producers and Distributors. The Commission has not

developed a definition of small entities applicable to producers or

distributors of television programs. Therefore, we will utilize the SBA

classifications of Motion Picture and Video Tape Production (SIC 7812--

``Establishments primarily engaged in the production of theatrical and

nontheatrical motion pictures and video tapes for exhibition or sale,''

including ``establishments engaged in both production and

distribution''), Motion Picture and Video Tape Distribution (SIC 7822--

``Establishments primarily engaged in the distribution * * * of

theatrical and nontheatrical motion picture films or in the

distribution of video tapes and disks, except to the general public''),

and Theatrical Producers (Except Motion Pictures) and Miscellaneous

Theatrical Services (SIC 7922--``Establishments primarily engaged in

providing live theatrical presentations,'' including ``producers of * *

* live television programs.''). These SBA definitions provide that a

small entity in the television programming industry is an entity with

$21.5 million or less in annual receipts for SIC 7812 and 7822, and $5

million or less in annual receipts for SIC 7922. 13 CFR Sec. 121.201.

The 1992 Bureau of the Census data indicates the following: (1) there

were 7265 U.S. firms classified as Motion Picture and Video Production

(SIC 7812), and that 6987 of these firms had $16,999 million or less in

annual receipts and 7002 of these firms had $24,999 million or less in

annual receipts; (2) there were 1139 U.S. firms classified as Motion

Picture and Tape Distribution (SIC 7822), and that 1007 of these firms

had $16,999 million or less in annual receipts and 1013 of these firms

had $24,999 million or less in annual receipts; and (3) there were 5671

U.S. firms classified as Theatrical Producers and Services (SIC 7922),

and that 5627 of these firms had less than $5 million in annual

receipts. The Census data does not include a category for $21.5

million; therefore, we have reported the closest increment below and

above the $21.5 million threshold.

38. Each of these SIC categories are very broad and includes firms

that may be engaged in various industries including television. We

tentatively conclude that cable networks that are essentially program

distributors are included in this category. Specific figures are not

available as to how many of these firms exclusively produce and/or

distribute programming for television or how many are independently

owned and operated. Consequently, we tentatively conclude that there

are approximately 6987 small entities that produce and distribute taped

television programs, 1013 small entities primarily engaged in the

distribution of taped television programs, and 5627 small producers of

live television programs that may be affected by the proposed rules in

this NPRM.

39. Reporting, Recordkeeping and Compliance Requirements. The NPRM

tentatively proposes requiring video programming providers (including

broadcast licensees and MVPDs) to substantially increase the volume of

closed captioned video programming carried over a period of time.

Virtually all future programming and a gradually increasing volume of

previously released programming is expected to be captioned over time.

If this proposal is adopted, video programming providers may be choose

to maintain records of the volume of closed captioned programming

carried in order to resolve any disputes which may arise regarding

compliance.

40. In addition to seeking comment on a complaint process, the

Commission invites comments regarding alternative enforcement

procedures including a requirement that video programming providers

their compliance with by placing information regarding the amount of

closed captioning they distribute in a public file. The Commission

invites commenters to address the possible effectiveness of this

alternative enforcement mechanisms and how it might be implemented.

41. Federal Rules Which Overlap, Duplicate or Conflict With the

Commission's Proposal. None.

42. Any Significant Alternatives Minimizing the Impact On Small

Entities and Consistent With the Stated Objectives. The statutory

language provides for exemptions from any closed captioning

requirements the Commission may adopt, when imposing those requirements

would create an economic burden. 47 U.S.C. 613(e). Consistent with this

directive, the NPRM seeks comment on several

[[Page 4965]]

mechanisms which would allow small entities to be exempt in whole or in

part from the closed captioning requirements. These measures are

intended, in part, to minimize the regulatory impact on small entities.

43. Section 713(d)(1) provides that the Commission may exempt

classes of video programming or video providers where closed captioning

would be economically burdensome. Pursuant to this provision, the

Commission proposes to establish a general classification or a number

of classifications of programming for which captioning would be

economically burdensome. Thus, the Commission seeks comment on whether

a definition of economic burden should be based on relative size,

degree of distribution, audience ratings or share, relative programming

budgets or revenue base, lack of repeat value, or a combination of

factors.

44. Section 713(d)(3) permits video programming providers or

program owners to petition the Commission for an exemption where our

video captioning requirements would constitute an undue burden. 47

U.S.C. 613(d)(3). Section 713(d)(3) further provides specific factors

to be considered when resolving such petitions. Accordingly, the

Commission seeks comment on how to apply these factors and whether

there are any factors which should be considered when determining if a

requirement for closed captioning results in an undue burden for an

individual video programming provider or program owner.

Ex Parte

45. Ex parte Rules--Non-Restricted Proceeding. This is a non-

restricted notice and comment rulemaking proceeding. Ex parte

presentations are permitted, except during the Sunshine Agenda period,

provided that they are disclosed as provided in the Commission's rules.

See generally, 47 CFR 1.1202, 1.1203, and 1.1206(a).

Comment Dates

46. Pursuant to applicable procedures set forth in Sections 1.415

and 1.419 of the Commission's rules, interested parties may file

comments on or before February 28, 1997, and reply comments on or

before March 24, 1997. To file formally in this proceeding, you must

file an original plus six copies of all comments, reply comments, and

supporting comments. If you would like each Commissioner to receive a

personal copy of your comments and reply comments, you must file an

original plus 11 copies. You should send comments and reply comments to

the Office of the Secretary, Federal Communications Commission, 1919 M

Street, NW., Washington, DC 20554. Comments and reply comments will be

available for public inspection during regular business hours in the

FCC Reference Center, Room 239, Federal Communications Commission, 1919

M Street, NW., Washington, DC 20554.

Ordering Clauses

47. Authority for this proposed rulemaking is contained in Sections

4(i), 4(j), and 713 of the Communications Act of 1934, as amended, 47

U.S.C. 154(i), 154(j) and 613.

48. It is ordered that the Secretary shall send a copy of the

Notice of Proposed Rulemaking, including the Regulatory Flexibility

Analysis, to the Chief Counsel for Advocacy of the Small Business

Administration, in accordance with paragraph 603(a) of the Regulatory

Flexibility Act, Public Law No. 96-354, 94 Stat. 1164, 5 U.S.C. 601 et

seq. (1981).

List of Subjects

47 CFR Part 25

Communications common carriers, Reporting and recordkeeping

requirements, Satellites.

47 CFR Part 26

Communications common carriers, Reporting and recordkeeping

requirements, Satellites.

47 CFR Part 73

Education, Political candidates, Reporting and recordkeeping

requirements, Television.

47 CFR Part 76

Cable television, Political candidates, Reporting and recordkeeping

requirements.

47 CFR Part 100

Satellites.

Federal Communications Commission.

William F. Caton,

Acting Secretary.

[FR Doc. 97-2535 Filed 1-31-97; 8:45 am]

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