Broadcast Services; Television Broadcast Stations; TV Transmission Standards

FEDERAL COMMUNICATIONS COMMISSION

47 CFR Part 73

[MM Docket No. 87-268, FCC 96-493]

Broadcast Services; Television Broadcast Stations; TV

Transmission Standards

AGENCY: Federal Communications Commission.

ACTION: Final rule.

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SUMMARY: This document amends the Commission's Rules by adding a

transmission standard for digital broadcast television signals. This

action is necessary to ensure that the benefits of digital technology

are available to terrestrial television broadcasting and to the

American public. The intended effect of this action is to provide the

certainty that many broadcasters, equipment manufacturers and consumers

need to invest in new technology.

EFFECTIVE DATE: This regulation is effective May 27, 1997. The

incorporation by reference of certain publications listed in the

regulations is approved by the Director of the Federal Register as of

May 27, 1997.

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

418-2600; Roger Holberg, 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, (202) 418-2190.

SUPPLEMENTARY INFORMATION: This is a synopsis of the Fourth Report and

Order in MM Docket No. 87-268, FCC 96-493, adopted December 24, 1996,

and released December 27, 1996. The complete text of the Fourth Report

and Order can be found on the internet at www.fcc.gov. It is available

for inspection and copying during normal business hours in the FCC

Reference Center (Room 239), 1919 M Street, NW., Washington, DC, and

also may be purchased from the Commission's copy contractor,

International Transcription Service, at (202) 857-3800, 2100 M Street,

NW., Suite 140, Washington, DC 20037.

Synopsis of Fourth Report and Order

I. Introduction

1. In the Fourth Report and Order of the Commission's digital

television (``DTV'') proceeding, the Commission adopts a transmission

standard for digital broadcast television signals. This standard is a

modification of the Advanced Television System Committee Digital

Television Standard (``ATSC DTV Standard'') proposed in the Fifth

Further Notice of Proposed Rule Making and is consistent with a

consensus agreement voluntarily developed by a broad cross-section of

parties, including the broadcasting, consumer equipment manufacturing

and computer industries. Specifically, the Commission requires the use

of all layers of the ATSC DTV Standard, except the video format layer,

which will remain optional. The adopted transmission standard (``DTV

Standard'') is intended to provide the certainty that many

broadcasters, equipment manufacturers and consumers need to invest in

new technology.

II. Background

2. The Commission issued a series of Notices and made a number of

decisions since the proceeding began in 1987. 1 The Commission

established the Advisory Committee on Advanced Television Service to

provide recommendations concerning technical, economic and public

policy issues associated with the introduction of advanced television

service. As all-digital television systems were developed, advanced

television became digital television. In February of 1993, the Advisory

Committee reported that four competing digital systems would benefit

from further development. In May of 1993, seven companies and

institutions that had been proponents of the four digital systems,

joined together in a ``Grand Alliance'' and developed the digital

system documented in the ATSC DTV Standard. On November 28, 1995, the

Advisory Committee voted to recommend the Commission's adoption of the

ATSC DTV Standard.

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\1\ Notice of Inquiry in MM Docket No. 87-268, 2 FCC Rcd 5127

(1987) (``First Inquiry''). See also Tentative Decision and Further

Notice of Inquiry in MM Docket No. 87-268, 3 FCC Rcd 6520 (1988)

(``Second Inquiry''); First Report and Order in MM Docket No. 87-

268, 5 FCC Rcd 5627 (1990)(``First Order''); Notice of Proposed Rule

Making 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 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 in MM Docket 87-268, 7 FCC

Rcd 6924 (1992)(``Third Report/Further Notice''); Fourth Further

Notice of Proposed Rule Making in MM Docket No. 87-268, 10 FCC Rcd

10540 (1995) (``Fourth Further Notice''); Fifth Further Notice,

supra; Sixth Further Notice of Proposed Rule Making in MM Docket No.

87-268, 11 FCC Rcd 10968 (1996)(``Sixth Further Notice'').

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3. The ATSC DTV Standard includes discrete subsystem descriptions,

or ``layers,'' for video source coding and compression, audio source

coding and compression, service multiplex and transport, and RF/

transmission. In addition to being able to broadcast one, and under

some circumstances two, high definition television programs, the

Standard allows for multiple streams of standard definition television

programming at a visual quality better than the current analog signal.

The Standard also allows for broadcast of dozens of CD-quality audio

signals and permits rapid delivery of large amounts of data.

4. On May 9, 1996, the Commission adopted the Fifth Further Notice

of Proposed Rule Making, 61 FR 26864 (May 29, 1996), recommending

adoption of the ATSC DTV Standard. The Commission also requested

comment on alternative approaches to requiring a standard including:

authorizing use of a

[[Page 14007]]

standard and prohibiting interference to it, but not requiring the use

of that standard; and adopting a standard for allocation and assignment

purposes only. In addition, the Commission sought comment on requiring

use of some layers of the ATSC DTV Standard but making others optional.

5. Several commenters, including representatives of the computer

industry and film makers, objected to adoption of the ATSC DTV

Standard. After several efforts to reach consensus among the industry

groups failed, the groups came together again. On November 25, 1996,

representatives of a broad cross section of the broadcast, computer and

receiver manufacturing industries reached an agreement that the FCC

should adopt the ATSC DTV Standard, except for the video format layer.

On November 27, 1996, the Commission released a Public Notice

soliciting comment on the agreement.

III. Comments

6. Technical Standards for DTV. There is widespread agreement among

commenters that selection of a DTV standard should be analyzed in terms

of network effects, that is the indirect benefits that accrue to other

DTV users when any particular user adopts DTV.2

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\2\ In television broadcast systems, one user's adoption of DTV

provides no direct benefit to other users, but may yield lagged,

indirect benefits through the provision of new or improved

programming. See comments of National Cable Television Association,

``Declaration of Bruce M. Owen in Response to the Fifth Further

Notice of Proposed Rule Making,'' at 4-11; comments of Broadcasters

at 16; reply comments of Strategic Policy Research (on behalf of Cap

Cities/ABC Inc., CBS Inc., Fox Television Stations, Inc.,

Association for Maximum Service Television (``MSTV''), National

Association of Broadcasters (``NAB''), and the National Broadcasting

Co., Inc.) at 4-8; and comments of the Computer Industry Coalition

on Advanced Television, Volume 2, Exhibit D, at 3-4. For a

discussion of network effects in broadcast television see Bruce M.

Owen and Steven S. Wildman, Video Economics (Harvard University

Press, 1992): 260-313.

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Broadcasters, computer interests and cable interests agree that

broadcasting is a network product; that issues surrounding selection of

a DTV standard are influenced by network effects; and that in order to

evaluate the various alternatives, it is important to understand how

network effects will operate. However, they disagreed on the relative

severity of the startup, coordination and potential splintering

problems facing digital broadcast television.3 Startup refers to

the situation where everyone would be better off adopting DTV

technology but no one has the incentive to move first.4

Coordination is the collaborative effort by broadcasters, consumer

equipment manufacturers, and program producers that is necessary to

introduce DTV. Splintering refers to the breakdown of the consensus or

agreement to use the DTV Standard.

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\3\ See, comments of Broadcasters at 15-23, reply comments of

Strategic Policy Research at 2-8, reply comments of National Cable

Television Association at 10-17, and reply comments of Computer

Industry Coalition on Advanced Television Service at 5-11.

\4\ Startup is also referred to as the ``chicken and egg

problem'' or ``wait and see behavior.''

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7. Commenters also disagreed on the availability and effectiveness

of market-based mechanisms to solve these problems and to facilitate

the goals and objectives established in this proceeding. Broadcasters,

equipment manufacturers and some consumer groups contend that DTV has

startup, coordination and splintering problems that are more severe

than those of other network industries and that a DTV standard adopted

by the Commission is needed to overcome these problems.5 In

contrast, cable and computer interests contend that all sectors of the

broadcast industry have significant incentives to reach a consensus on

transmission and reception standards without a government

mandate.6

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\5\ See, e.g., comments of Mitsubishi Consumer Electronics

America, Inc., (``MCEA'') at 2-3; Philips Electronics North America

Corporation (``Philips'') at 4-8; comments of Broadcasters at 15-24.

\6\ See, e.g., comments of Tele-Communications, Inc. (``TCI'')

at 6-8; comments of Compaq Computer Corporation at 6-14.

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8. Broadcasters warn that a market-driven selection of a standard

would result in barriers to the introduction of DTV if different

incompatible systems develop.7 They maintain that a government-

mandated standard is essential to ensure a universally available,

advertiser-supported over-the-air digital broadcast service in the

future.8 In contrast, cable interests do not agree that there are

unique characteristics or public policy goals attendant to broadcast

DTV, or that there would be a market failure unless a mandatory

transmission standard is adopted.9

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\7\ See reply comments of Strategic Policy Research at 6.

\8\ Id. at 14.

\9\ See reply comments of National Cable Television Association,

Inc., at 10-17.

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9. There is likewise a range of opinion on the merits of the ATSC

DTV Standard. Broadcasters, equipment manufacturers, the Grand

Alliance, and ATSC urge the Commission to adopt the complete ATSC DTV

Standard.10 They contend that only a Commission-adopted standard

will supply the certainty needed by all parties to undertake the

transition, the ATSC DTV Standard is the best DTV standard in the

world,11 and it has ``unprecedented and unmatched interoperability

with computers and telecommunications.'' 12 (Footnotes added.)

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\10\ See, e.g., comments of Broadcasters at 34; comments of ATSC

at 9; comments of Zenith at 7; comments of Sony at 12; comments of

Thomson Consumer Electronics (``Thomson'') at 6; comments of Grand

Alliance at 9.

\11\ See, e.g., comments of Broadcasters at 18-19 and 34;

comments of ATSC at 3, 6; Sony Electronics Inc. (``Sony'') at 8.

\12\ Comments of HDTV Grand Alliance at 17-18. See also comments

of ATSC at 3, and EIA at 9.

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10. Computer interests, lead by Computer Industry Coalition on

Advanced Television Service (``CICATS''), urge us not to adopt a DTV

standard but state that if we decide to the contrary we should only

mandate a minimum base-line standard based exclusively on progressive

scanning technology.13 The National Telecommunications and

Information Administration (``NTIA'') stresses the need for a single

mandatory DTV standard, recommends limiting a standard to only those

elements necessary to provide certainty, encourage adoption, ensure the

opportunity for technological developments, and concludes that the best

solution would be for interested parties to reach a consensus on

disputed issues.14

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\13\ Comments of CICATS at 31-37.7

\14\ Reply comment of NTIA at 2.

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11. While favoring a mandatory DTV standard, most commenting

cinematographic and imaging interests (with the significant exception

of the Motion Picture Association of America, Inc.15) oppose

adoption of the ATSC DTV Standard in its current form because of its

inclusion of interlaced scanning and other perceived deficiencies,

particularly in its video and audio specifications.16 MPAA,

however, supports all aspects of the Standard including its use of both

interlaced and progressive scanning and its 16:9 aspect ratio.17

The National Cable Television Association (``NCTA'') is not critical of

the specific ATSC DTV Standard, but questions whether any standard

should be dictated by government.18 Nevertheless, it recognizes

the need for performance standards for controlling interference.19

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\15\ Motion Picture Association of America, Inc. (``MPAA'') is a

trade association representing seven of the largest U.S. producers,

distributors, and exporters of theatrical motion pictures,

television programming, and home video entertainment.

\16\ See, e.g., Comments of Robert Primes, ASC, at 2 and 13;

comments of the Coalition of Film Makers (``Film Makers'') at 2, 5-

9, and 11; comments of Harold Becker.

\17\ Comments of MPAA at 2-8.

\18\ Comments of NCTA at 2.

\19\ Reply Comments of NCTA at 6-7.

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12. Public interest groups generally favor adoption of a single

mandatory standard although they differ on what

[[Page 14008]]

that standard should be.20 For example, Consumer Federation of

America/Media Access Project (``CFA/MAP'') believes that the public

interest will be served if the Commission adopts a digital television

standard that 1) reduces the cost of digital receivers and converters

and (2) permits the convergence of video and computer

technologies.21 In contrast, National Consumers League urges

adoption because it believes that in the absence of a standard,

consumers will be confused, demand for DTV equipment will be reduced,

and the price drops normally associated with consumer electronic

equipment will not materialize.

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\20\ Citizens for HDTV Coalition and the National Consumers

League urge adoption of the ATSC DTV Standard while the Benton

Foundation (``Benton''), Consumer Federation of America and Media

Access Project (``CFA/ MAP'') recommend adoption of the CICATS

standard. However, CFA/MAP contend that the public interest would be

served by encouraging ATSC and CICATS to work out their

technological differences.

\21\ Comments of CFA/MAP at 1.

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13. Alternatives to Standards. Little comment was received

concerning the two alternative approaches to standards specifically

mentioned in the Fifth Further Notice: that we authorize use of and

prohibit interference to users of the ATSC DTV Standard, or adopt the

ATSC DTV Standard for allocation and assignment purposes only.

Equipment manufacturer Harris argues for mandating at least the RF/

transmission layer and basing allotment and assignment principles on it

in order to provide protection from objectionable interference.22

Some, such as the Benton Foundation, urge the Commission to adopt no

more than the minimal rules needed to protect spectrum users from

interference.23 Also, NCTA opposes adoption of a design standard

and suggests that we use performance standards to control

interference.24 The many parties that support adoption of the

complete standard generally believe that these less inclusive options

would not provide the certainty necessary for the successful launch of

DTV and would not provide an adequate basis for either the design or

the purchase of DTV receivers. In addition, the Advanced Television

Technology Center (``ATTC'') asserts that a DTV table of allotments

necessarily will depend on the extent to which DTV causes interference

to itself and other signals and resists interference from other

signals. Therefore, ATTC contends it is more realistic to mandate the

Standard for actual operation than to attempt to predict the impact of

hypothetical alternatives.25 Zenith and others suggest that using

the Standard only for allotment and assignment purposes would fail even

to guarantee interference protection.26

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\22\ Reply comment of Harris Corporation at 5.

\23\ Comments of Benton Foundation at 3.

\24\ Reply Comments of NCTA at 6-7.

\25\ Comments of ATTC at 4.

\26\ Comments of Zenith Electronics Corp. (''Zenith'') at 7.

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14. The ATSC DTV Standard. Substantial comment was received

concerning the merits of, and objections to, the ATSC DTV Standard.

Broadcasters, equipment manufacturers, the Grand Alliance, ATSC, and

the ATTC praise the Standard as representing the best digital

television system in the world and one that is unmatched in terms of

flexibility, extendibility, interoperability and headroom for

growth.27 They note it uses primarily progressive scan and square

pixels, making it the most computer-compatible digital television

system in the world. They argue that the Standard's inclusion of four

interlaced formats will benefit broadcasters by allowing for the use of

interlaced scan where broadcasters determine it desirable to do so,

such as when broadcasting archived material that was filmed in

interlaced scan or where interlaced scan may be superior, such as in

low-light conditions often accompanying electronic news gathering

(``ENG''). Additionally, they assert that the 16:9 wide-screen aspect

ratio 28 is internationally recognized and accepted and with

``letterboxing'' 29 will allow the display of motion pictures in

their original aspect ratio far better than is permitted by the current

4:3 aspect ratio.

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\27\ Comments of the Grand Alliance at 2-3; comments of ATSC at

3-4; comments of ATTC at 5-7; comments of Philips at 14-15; reply

comments of Grand Alliance at 15-33; reply comments of ATSC at 15-

32.

\28\ ``Aspect ratio'' is the ratio of picture width to picture

height.

\29\ ``Letterboxing'' is a technique in which the aspect ratio

of a film is preserved by blacking out portions of the screen,

typically at the top and bottom. Material, however, is not cut from

the frame. This is different than, so-called, ``pan-and-scan''

translation of widescreen movies to television in which moves and

cuts never intended in the original are introduced to help make the

action visible in a narrower frame. In pan-and-scan, less than the

complete frame is transmitted and portions of the picture are left

out.

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15. Commenters representing computer interests, cinematographers,

and some public interest groups generally oppose the standard.30

Computer interests object to discrete features of the Standard,

including the presence of interlaced scanning and the use of non-square

pixels in some formats, as well as the maximum frame (or ``refresh'')

rate of 60 Hz.31 These features, when taken together, assertedly

hinder the compatibility of the system with computer applications,

drive up the cost of receiving equipment, and delay the convergence of

computer and television technologies. CICATS recommends that the

Commission adopt a standard consisting of a single video format with

480 lines of progressive scanning, a broadcaster determined picture

aspect ratio, and the utilization of only square pixel spacing. Such a

standard would allow for an enhancement layer that would permit, but

not require, the transmission of high definition television by stations

equipped to do so. This approach, it contends, would enable all

consumers to receive, at a minimum, an SDTV picture on their digital

equipment, at equal or better quality and significantly lower costs

than under the ATSC DTV Standard. As mentioned above, most

cinematographic and imaging interests oppose the inclusion of

interlaced scanning as well because of its perceived deficiencies.

Public interest groups such as CFA and MAP believe that the ATSC DTV

Standard uses too many formats and that the baseline CICATS system will

be cheaper, promoting both a more rapid and orderly transition to DTV

(and the return of spectrum) and convergence of computer and television

technologies.32 Film interests maintain that the Standard's

specification of only two aspect ratios (4:3 and 16:9) will lead to

``pan and scan'' of wide screen films, cropping significant portions of

the original image and damaging the film makers' artistic

vision.33

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\30\ See, e.g., comments of CICATS, Coalition of Film Makers,

and Consumer Federation of America/Media Access Project. While

several film makers object to the Standard, the Motion Picture

Association of America supports its adoption by the Commission.

\31\ This is the number of frames transmitted per second.

\32\ Comments of CFA/MAP at 1, 5 and 6.

\33\ Comments of Film Makers Coalition at 5-7.

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16. Supporters of the Standard respond that it is far more computer

friendly than any other digital television system in use anywhere in

the world, that current technology prohibits the use of progressive

scanning for images of more than 1000 lines in the 6 MHz channel, and

that convergence will not be hampered because the Standard enables

consumers to choose the display formats they prefer, as interlaced

programs may be displayed on progressive receivers (and vice versa).

They contend that there are already PC/TV products on the market using

analog NTSC technology, which relies on interlace scanning, thus

proving that

[[Page 14009]]

interlaced scanning is not incompatible with computers.34

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\34\ Id.

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17. Proponents of the Standard challenge as greatly overstated the

cost estimates put forward by computer interests. With respect to

opponents' complaints regarding the Standard's maximum frame rate, the

Grand Alliance asserts that if the frame rate is increased to 72 Hz, as

proposed by CICATS, trade-offs in picture quality would result.35

Proponents also argue that the specified aspect ratios are appropriate

because 16:9 is already accepted worldwide, and 80% of motion pictures

are shot at 1.85:1, which readily fits a 16:9 screen with negligible

use of letterboxing. Even the widest films can be accommodated by

letterboxing only on the order of 25% of the screen height.36

Adopting the film makers' proposed 2:1 aspect ratio would still require

letterboxing for films made in aspect ratios different than 2:1, which

today includes most films, and would result in displays, for a given

picture height, 12.5% larger in picture area, 30-50% heavier and

correspondingly more expensive for consumers. Use of the CICATS

proposal, which emphasizes SDTV, would further diminish a film maker's

product by foregoing consumer access to resolution comparable to that

found in a theater.

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\35\ Reply comments of the Grand Alliance at 57; reply comments

of ATSC at 55.

\36\ Reply comments of the Grand Alliance at 59; reply comments

of ATSC at 57-58.

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18. Review or Sunset of Standard. Most commenters addressing the

issue advocate either proceeding under our current processes for

regulatory change or reviewing the Standard at some definite future

time and oppose establishment of a specific review date or a

sunset.37 They argue that doing so would inject an element of

uncertainty into the transition process, discourage consumers,

broadcasters and manufacturers from making investments, and be

arbitrary because the transition timetable, the timing of production of

DTV sets, and the timing of consumer acceptance of DTV sets is unknown

at the present time.38 Sony and Schreiber propose that the

Commission name an Advisory Committee, consisting of experts, who would

examine the Standard and recommend changes in accordance with the

Commission's existing procedures.39 NTIA urges us to ensure that

the industries involved develop a clearly defined plan to promote

speedy migration to an all-progressive scan system that moves

expeditiously and includes a target date for full transition 40

and suggests that we periodically review the migration to an all

progressive system.

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\37\ See, e.g., comments of Broadcasters at 24; comments of Sony

at 36.

\38\ See, e.g., comments of Broadcasters at 24; comments of Sony

at 36; comments of MCEA at 4.

\39\ Comments of Sony at 37 (``[T]he Commission could name an

industry Advisory Committee comprised of the experts of that day who

would examine the standard in light of the real imperatives of the

future and, after thoughtful deliberation of the perceived need,

recommend changes which would again be subject to public discourse

and review.'') and Schreiber, Part II at 8 (``A small panel,

appointed by the Commission, and composed exclusively of persons

with no financial interest in the outcome, would seem

appropriate.'').

\40\ Comments of NTIA at 2-3.

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19. Incorporation of Standard into Commission's Rules. Little in

the way of comment was submitted on this issue. The Grand Alliance

believes that the Commission should incorporate the Standard by

reference, as it did in 1995 with an ATSC standard for ghost canceling

in NTSC. It asks that the Commission incorporate by reference ATSC Doc.

A/53 (``ATSC Digital Television Standard, 16 Sep 95'') and ATSC Doc. A/

52 (``ATSC Digital Audio Compression Standard (AC-3), 20 Dec. 95'') but

only mention and not incorporate ATSC Doc. A/54 (``Guide to the Use of

the ATSC Digital Television Standard, 4 Oct 95'').

20. Audio Standard. Audio system proponents Digital Theater Systems

(``DTS'') and Dolby Laboratories sharply differ on which is the

superior technology and whether the standard we adopt should specify an

audio format. DTS argues that its audio system is superior to the Dolby

system embodied in the ATSC DTV Standard and that the standard we adopt

should exclude audio formats.41 Dolby responds that DTS has not

demonstrated that its system is superior to the Dolby AC-3

system.42 Dolby points out that its system has been widely tested,

evaluated and accepted by numerous standards setting organizations and

for numerous consumer electronics products. Dolby argues that the

multiple audio decoding system proposed by DTS would burden products

with unnecessary cost and complexity and that, while creating the ATSC

DTV Standard document, the ATSC Specialist Group on Digital Services

(T3/S3) discussed and rejected the approach suggested by DTS.43

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\41\ See comments of DTS at 6.

\42\ See reply comments of Dolby at 3.

\43\ Id. at 5.

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21. Licensing Technology. Generally, commenting parties that

addressed this issue agree to the reasonable licensing of their

relevant patents, including pending patents and intellectual property

necessary for the successful construction of DTV equipment.44 ATSC

indicates that it sought and obtained from each member of the Grand

Alliance and from Dolby a written commitment to abide by this

requirement.45 ATSC and the other commenting parties suggest that

no further Commission action is required.

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\44\ See, e.g., comments of Grand Alliance at 29, Dolby at 4,

Zenith at 15, Thomson at 16.

\45\ See, e.g., comments of ATSC at 29.

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22. Closed Captioning. Comments that addressed this issue, such as

those of the Grand Alliance, ATSC and Zenith, indicate that they have

worked closely with the affected communities to provide for closed

captioning in the ATSC DTV Standard. They each suggest that the ATSC

DTV Standard provides all the capability necessary for broadcasters and

receiver manufacturers to provide closed captioning.46

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\46\ See, e.g., comments of Grand Alliance at 31, ATSC at 32,

Zenith at 17.

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23. November 26, 1996, Agreement. Some of the commenters have

altered their positions since the initial round of comments. The

parties to the November 26, 1996, Agreement urge us to adopt the

modified standard we are calling the DTV Standard. The Grand Alliance

and ATSC view it as a way to resolve the controversy that has delayed

adoption of a DTV standard.47 They believe that reliance on

voluntary industry standards for the formats to be used for digital

television is preferable to the cost of the further delay that would

result if we fail to act while the parties remain at an impasse.48

Full service broadcasters endorse the Agreement for similar reasons.

The Association for Maximum Service Television, Inc., (``MSTV'')

believes the Agreement is a ``workable compromise'' that will permit

the compatible development of progressive technologies.49 One low

power television broadcaster, International Broadcasting Network,

objects to the process that resulted in the Agreement and contends that

low power television broadcasters were excluded.50

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\47\ Further Comments of the Digital HDTV Grand Alliance at 2;

Further Comments of the Advanced Television Systems Committee at 2.

\48\ Further Comments of the Digital HDTV Grand Alliance at 2.

\49\ Comments of the Association for Maximum Service Television,

Inc. on the Digital Television Standard Agreement at 2.

\50\ While not pointing to any specific prejudice it suffered,

IBN contends that approval of a Standard during 1996, in accordance

with the terms of the Agreement, could prejudice the outcome of

issues raised in our Sixth Further Notice, reply comments on which

are not due until January 10, 1997.

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24. Equipment manufacturers endorse the Agreement as ``an important

step toward reducing reliance on

[[Page 14010]]

Government-mandated standards,'' that makes it likely that ``the

industry standard becom[es] the vehicle around which the marketplace

organizes.'' 51 They believe that the Agreement will provide

sufficient certainty and that the video formats, although not mandated

by the Commission, will remain viable nevertheless because there is a

voluntary industry standard in place.52

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\51\ Comment on the Agreement of General Instrument at 1; see

also comments on the Agreement of EIA, Matsushita, Philips, Thomson

and Zenith, all of which endorse the agreement.

\52\ Comments on the Agreement of Philips Electronics North

America Corporation and Thomson Consumer Electronics, Inc., at 2.

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25. Coalition of Film Makers objects to the Agreement for the same

reasons it objected to the ATSC DTV Standard in its initial

comments.53 Most other commenters on this issue, except DemoGraFX

and Venture, see the Agreement as addressing Film Maker's objections by

dropping any constraints on formats.54 Beyond that, they believe

that the question of how a film is broadcast is not appropriately part

of this proceeding, is a contractual matter, and should be left to film

owners and broadcasters, bargaining at arm's length. DemoGraFX, while

stating that it is pleased with some aspects of the Agreement, urges

that the Standard require transmission of films in their original

aspect ratio and objects to interlaced formats remaining in Table 3 of

the ATSC DTV Standard. DemoGraFX urges measures to require receivers to

display films in their original aspect ratios.55 Venture

Technologies Group wants the DemoGraFX system incorporated into the

Standard 56 and Digital Imaging General opposes the Agreement

which it contends was without the full participation and knowledge of

the public.57 Audio interests remain divided, as they were prior

to the Agreement, for essentially the same reasons.58

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\53\ Comments of the Coalition of Film Makers (in response to

the Public Notice) at 4-6.

\54\ See, e.g., Comments on the Agreement of Zenith Electronics

Corporation, Electronics Industries Association, CBS, Inc., and the

Broadcasters Caucus' ``Response to Cinematographers' November 26 Fax

to Vice President Gore Concerning DTV Standard.''

\55\ Comments of DemoGraFX in Response to the Commission Seeking

Comments on Digital TV Standards Agreement Released 27 November 1996

at 2-7.

\56\ Venture Technologies Group's Comments on the Digital

Television Standards Agreement at 3.

\57\ Digital Imaging General, DIMAGE Inc, Comments on Fifth

Notice of Proposed Rule Making (NPRM) and on Public Notice FCC 96-

465 at 2.

\58\ See generally Comments on the Agreement of Dolby

Laboratories, The Academy for the Advancement of High End Audio, and

Widescreen Review.

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26. William Schreiber opposes the Agreement on the ground that the

process resulting in it may have violated the Federal Advisory

Committee Act. He also believes that without mandated formats

prospective purchasers will not know what they are buying and that the

penetration of digital receivers will be slowed. In the public interest

community, Benton Foundation urges quick adoption of the Agreement so

that the Commission can turn to public interest standards 59 while

the American Foundation for the Blind objects that the ATSC DTV

Standard does not designate audio bandwidth capacity for delivering

video descriptions, thereby depriving the blind of equal access to

video programming.60

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\59\ Comments of Benton Foundation in response to the Public

Notice.

\60\ Comments of the American Foundation for the Blind--December

6, 1996 at 1.

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IV. The Digital Television Standard.

27. In the Fourth Report and Order, the Commission concludes that

requiring the use of the ATSC DTV Standard, as modified, will fulfill

four objectives listed in the Fifth Further Notice of Proposed Rule

Making: (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 services 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 we do adopt remain in effect no longer than necessary.

28. The Commission is concerned that market solutions to

transmission standards may result in more than one sustainable

transmission standard. Such an outcome might result in compatibility

problems and make it more difficult to preserve a universally available

broadcast television service; could slow investment during the early

stages of the transition to DTV and, thereby, slow the transition to

DTV; and would make it more difficult to facilitate an efficient

allotment of broadcast channels and protect against interference, which

could complicate moving some licensees to new channels following the

conversion to DTV and decrease the amount of spectrum recovered. Simply

protecting a standard, or using a standard for allocation purposes

would not address the Commission's concerns with ``wait-and-see''

behavior and preserving a universally available broadcast television

service. The Commission also rejects the argument that the adopted

transmission standard is too restrictive and still includes too many

mandatory aspects of the ATSC DTV Standard. The Commission believes

that the entire adopted standard is needed to achieve its goals.

29. The Commission concludes that adopting the DTV Standard will

increase the availability of new products and services for consumers.

The DTV Standard is flexible and extensible and permits data

broadcasting as well as new services.

30. The Commission concludes that incorporating the DTV Standard

into its Rules will encourage technological innovation and competition.

The DTV Standard provides ``headroom'' for further development without

requiring changes to the DTV Standard. In addition, the decision not to

specify video formats will allow computer equipment and software firms

more opportunity to compete by promoting interoperability.

31. Finally, the Commission concludes that adopting the DTV

Standard provides for the minimum of regulation needed to provide for a

smooth transition. A key point of contention throughout this proceeding

has been the desirability of allowing both interlaced and progressive

scanning. Adoption of the DTV Standard will allow video formats to be

tested and decided by the market.

32. Support for the DTV Standard was not unanimous. In response to

the Coalition of Film Maker's opposition to the DTV Standard because it

does not require the display of films in the films' original aspect

ratios, the Commission notes that the DTV Standard does not impose any

impediment to the display of films in their original aspect ratios.

33. The Commission is not persuaded by those who contend that not

specifying video formats in the DTV Standard will inject uncertainty

into the transition process and delay implementation of digital

television. The Commission believes that by adopting a transmission

standard, it is providing the appropriate level of certainty that the

digital television market will need to move forward. The Commission's

belief is supported by the fact that the major industries affected by

this decision have reached an agreement that video formats need not be

part of the DTV Standard.

34. Placing the ATSC DTV Standard in the Commission's Rules. In the

Fifth Further Notice of Proposed Rule Making, the Commission sought

comment on whether it should place a digital broadcast television

transmission standard into the Commission's Rules in

[[Page 14011]]

its entirety, incorporate it by reference, or publish it as an OET

technical bulletin. In the Fourth Report and Order, the Commission

decides to incorporate the DTV Standard into the Commission's Rules, by

reference. Incorporation by reference has been done before and is

warranted given the 194-page length of the Standard and its easy

availability.

35. Review. In the Fifth Further Notice of Proposed Rule Making,

the Commission set forth three options to encourage innovation: (1) To

proceed under current Commission processes which include consideration

of requests from parties to amend the Commission's Rules or review of

the Rules on the Commission's own initiative; (2) commit the Commission

to conduct a proceeding to review the Standard at some future time; and

(3) to establish a period of time after which the Standard no longer

would be required or exclusive (i.e., ``sunsetting'' it). In the Fourth

Report and Order, the Commission believes a sunset is not necessary.

The Advanced Television System Committee has committed to continue to

review the ATSC DTV Standard and the Commission has adopted a schedule

of periodic reviews to monitor the progress of DTV.

36. Audio Standard. The Commission is adopting the audio portion of

ATSC DTV Standard. In comments, some parties suggested that the audio

standard should not be adopted as a required audio standard. An

alternative standard was suggested but it did not go through extensive

testing and evaluation. The Commission also notes that the suggested

changes could delay implementation.

37. Licensing Technology. In earlier phases of this proceeding, the

Commission indicated that patents on the technology would have to be

licensed to other manufacturing companies on reasonable and

nondiscriminatory terms. Those holding patents on the DTV Standard have

submitted statements that they would comply with the American National

Standards Institute patent policies. In the Fifth Further Notice of

Proposed Rule Making, the Commission sought additional comment on

whether more detailed information on the specific terms of patent

licensing should be considered. It appears that licensing of the

patents for DTV technology will not be an impediment to the development

and deployment of DTV products for broadcasters and consumers.

38. Closed Captioning. In the Fifth Further Notice of Proposed Rule

Making, the Commission noted that the ATSC DTV Standard reserves a

fixed 9600 bits per second data rate for closed captioning. No comments

suggested that this would be insufficient. In the Fourth Report and

Order, the Commission concludes that adequate provision has been made

to allow closed captioning information to be carried by DTV stations.

V. Administrative Matters

Final Regulatory Flexibility Analysis

39. As required by Section 603 of the Regulatory Flexibility Act, 5

U.S.C. Sec. 603 (RFA), an Initial Regulatory Flexibility Analysis

(``IRFA'') was incorporated in the Fifth Further Notice of Proposed

Rule Making in this proceeding. The Commission sought written public

comments on the proposals in the Fifth Further Notice, including on the

IRFA. The Commission's Final Regulatory Flexibility Analysis (``FRFA'')

in this Fourth Report and Order conforms to the RFA, as amended by the

Contract With America Advancement Act of 1996, Pub. L. No. 104-121, 110

Stat. 847 (1996) (``CWAAA'').61

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\61\ Subtitle II of CWAAA is The Small Business Regulatory

Enforcement Fairness Act of 1996 (SBREFA), codified at 5 U.S.C.

Sec. 601 et seq.

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I. Need for and Objectives of Action

40. The Fourth Report and Order adopts, in modified form, the

Advanced Television Systems Committee (``ATSC'') digital television

(``DTV'') standard. Our ratification of this industry-developed

standard is intended to provide the certainty that some parties seek in

order to undertake the wholesale replacement of our analog system of

terrestrial broadcast television with DTV. At the same time, we seek to

ensure that governmental involvement is neither more extensive than

necessary nor inhibitory to innovation, experimentation, and

entrepreneurship. In the Fifth Further Notice in this proceeding, we

listed four objectives regarding the authorization and implementation

of a DTV standard: (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 services 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 we do adopt remain in effect no longer than

necessary. In addition to these objectives, we considered how adoption

of the standard would affect other goals enumerated in this proceeding,

including a rapid transition to DTV, ceasing broadcasting in NTSC, and

recovering spectrum. The Fourth Report and Order adopts the standard,

except for certain aspects as discussed in paragraphs 30-49, supra,

based on a careful weighing and balancing of these various goals.

II. Significant Issues Raised by the Public in Response to the Initial

Analysis

41. No comments were received specifically in response to the IRFA

contained in the Fifth Further Notice. Further, while no comments were

addressed specifically to small business issues, according to several

Low Power Television (``LPTV'') commenters, including Third Coast

Broadcasting, Inc. and Island Broadcasting Company, the Commission

should minimize the impact on LPTV to prevent LPTV from being forced

off the air by the transition to the new digital technology. Third

Coast and Roger E. Harders contend that LPTV serves niches not covered

by larger regional stations and should be able to provide this

important service on digital channels in the future. Further, Blue

Mountain Translator District argues that translators must be able to

receive interactive signals to be full partners in DTV systems. In

addition, not-for-profit and commercial translators must be treated

equally. As discussed in Section V of this FRFA, we have considered

these concerns. However, adoption of a standard for DTV will not

implicate the concerns raised by LPTV and translator stations. The role

of LPTV and translator stations in the transition to digital will be

considered separately.

III. Description and Number of Small Entities to Which the Rule Will

Apply

42. Definition of a ``Small Business''. Under the RFA, small

entities may include small organizations, small businesses, and small

governmental jurisdictions. 5 U.S.C. Sec. 601(6). The RFA, 5 U.S.C.

Sec. 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. Sec. 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

[[Page 14012]]

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.

43. Pursuant to 5 U.S.C. Sec. 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. 62 Accordingly, for purposes of this Fourth 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 Fourth Report and Order.

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\62\ We have pending proceedings seeking comment on the

definition of and data relating to small businesses. In our Notice

of Inquiry 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 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.

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44. 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.

45. 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.

46. With respect to applying the revenue cap, the SBA has defined

``annual receipts'' specifically in 13 C.F.R 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.

47. 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 C.F.R. 121.104(d)(1). The SBA defines affiliation in 13

C.F.R. 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 C.F.R.

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 C.F.R.

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.

48. Television Station Estimates Based on Census Data. The rules

amended by this Fourth Report and Order will apply to full service

television stations and may have an effect on TV translator facilities

and low power TV stations (``LPTV''). The Small Business Administration

defines a television broadcasting station that has no more than $10.5

million in annual receipts as a small business.63 Television

broadcasting stations consist of establishments primarily engaged in

broadcasting visual programs by television to the public, except cable

and other pay television services.64 Included in this industry are

commercial, religious, educational, and other television

stations.65 Also included are establishments primarily engaged in

television broadcasting and which produce taped television program

materials.66 Separate establishments primarily engaged in

producing taped television program materials are classified under

another SIC number.67

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\63\ 13 C.F.R. Sec. 121.201, Standard Industrial Code (SIC) 4833

(1996).

\64\ 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).

\65\ 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.

\66\ 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).

\67\ 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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49. There were 1,509 television stations operating in the nation in

1992.68 That number has remained fairly constant as indicated by

the approximately 1,550 operating television broadcasting stations in

the

[[Page 14013]]

nation as of August, 1996.69 For 1992 70 the number of

television stations that produced less than $10.0 million in revenue

was 1,155 establishments.71 Thus, the proposed rules will affect

approximately 1,550 television stations; approximately 1,194 of those

stations are considered small businesses.72 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.73

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.74

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\68\ FCC News Release No. 31327, Jan. 13, 1993; Economics and

Statistics Administration, Bureau of Census, U.S. Department of

Commerce, supra note 4, Appendix A-9.

\69\ FCC News Release No. 64958, Sept. 6, 1996.

\70\ 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 4, III.

\71\ 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.

\72\ We use the 77 percent figure of TV stations operating at

less than $10 million for 1992 and apply it to the 1996 total of

1550 TV stations to arrive at 1,194 stations categorized as small

businesses.

\73\ 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.

\74\ 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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50. It should also be noted that the foregoing estimates do not

distinguish between network-affiliated 75 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.76

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\75\ 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.

\76\ Secondary affiliations are secondary to the primary

affiliation of the station and generally afford the affiliate

additional choice of programming.

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51. There are currently 4926 TV translators, and 1,921 LPTV

stations which may be affected by the new rules, if they decide to

convert to digital television.77 The FCC 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, if

not all, LPTV stations and translator stations, could be classified as

small businesses, if considered by themselves. We also recognize that

most, if not virtually all translators are owned by a parent station

which is a full-service station. Thus, translator stations generally

can be considered affiliates, as that term is defined in the SBA

regulations, with full-service stations. Given this situation, these

stations would likely have annual revenues that exceed the SBA maximum

to be designated as small businesses.

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\77\ FCC News Release, Broadcast Station Totals as of August 31,

1996.

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52. 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.78 Thus, radio or television

stations with fewer than five full-time employees are exempted from

certain EEO reporting and recordkeeping requirements.79 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

136.80

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\78\ 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.

Sec. 632(a), as amended by Section 222 of the Small Business Credit

and Business Opportunity Enhancement Act of 1992, Pub. L. No. 102-

366, Sec. 222(b)(1), 106 Stat. 999 (1992), as further amended by the

Small Business Administration Reauthorization and Amendments Act of

1994, Pub. L. No. 103-403, Sec. 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).

\79\ See, e.g., 47 C.F.R. 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.

\80\ 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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53. Other Industry Groups. Television Equipment Manufacturers: The

Commission has not developed a definition of small entities applicable

to manufacturers of television equipment. Therefore, we will utilize

the SBA definition of manufacturers of Radio and Television

Broadcasting and Communications Equipment.81 According to the

SBA's regulations, a TV equipment manufacturer must have 750 or fewer

employees in order to qualify as a small business concern.82

Census Bureau data indicates that there are 858 U.S. firms that

manufacture radio and television broadcasting and communications

equipment, and that 778 of these firms have fewer than 750 employees

and would be classified as small entities.83 The Census Bureau

category is very broad, and specific figures are not available as to

how many of these firms are exclusive manufacturers of television

equipment or how many are independently owned and operated. We conclude

that there are approximately 778 small

[[Page 14014]]

manufacturers of radio and television equipment.

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\81\ This category excludes establishments primarily engaged in

the manufacturing of household audio and visual equipment which is

categorized as SIC 3651. See infra for SIC 3651 data.

\82\ 13 C.F.R. 121.201, (SIC) Code 3663.

\83\ U.S. Dept. of Commerce, 1992 Census of Transportation,

Communications and Utilities, Table 1D (issued May 1995), SIC

category 3663.

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54. Household/Consumer Television Equipment: The Commission has not

developed a definition of small entities applicable to manufacturers of

television equipment used by consumers, as compared to industrial use

by television licensees and related businesses. Therefore, we will

utilize the SBA definition applicable to manufacturers of Household

Audio and Visual Equipment. According to the SBA's regulations, a

household audio and visual equipment manufacturer must have 750 or

fewer employees in order to qualify as a small business concern.84

Census Bureau data indicates that there are 410 U.S. firms that

manufacture radio and television broadcasting and communications

equipment, and that 386 of these firms have fewer than 500 employees

and would be classified as small entities.85 The remaining 24

firms have 500 or more employees; however, we are unable to determine

how many of those have fewer than 750 employees and therefore, also

qualify as small entities under the SBA definition. Furthermore, the

Census Bureau category is very broad, and specific figures are not

available as to how many of these firms are exclusive manufacturers of

television equipment for consumers or how many are independently owned

and operated. We conclude that there are approximately 386 small

manufacturers of television equipment for consumer/household use.

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\84\ 13 C.F.R. 121.201, (SIC) Code 3651.

\85\ U.S. Small Business Administration 1995 Economic Census

Industry and Enterprise Report, Table 3, SIC Code 3651 (Bureau of

the Census data adapted by the Office of Advocacy of the U.S. Small

Business Administration).

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55. Computer Manufacturers: The Commission has not developed a

definition of small entities applicable to computer manufacturers.

Therefore, we will utilize the SBA definition. According to SBA

regulations, a computer manufacturer must have 1,000 or fewer employees

in order to qualify as a small entity.86 Census Bureau data

indicates that there are 716 firms that manufacture electronic

computers and of those, 659 have fewer than 500 employees and qualify

as small entities.87 The remaining 57 firms have 500 or more

employees; however, we are unable to determine how many of those have

fewer than 1,000 employees and therefore also qualify as small entities

under the SBA definition. We conclude that there are approximately 659

small computer manufacturers.

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\86\ 13 CFR 121.201, (SIC) Code 3571.

\87\ U.S. Small Business Administration 1995 Economic Census

Industry and Enterprise Report, Table 3, SIC Code 3571, (Bureau of

the Census data adapted by the Office of Advocacy of the U.S. Small

Business Administration).

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IV. Projected Compliance Requirements of the Rule

56. The Fourth Report and Order adopts a rule incorporating by

reference the digital television broadcast standard (``Standard'')

recommended to the Commission by its Advisory Committee on Advanced

Television Service (``ACATS''), with the exception of the video

formats. The Fourth Report and Order imposes no new reporting or

recordkeeping requirements.

V. Significant Alternatives Considered Minimizing the Economic Impact

on Small Entities and Consistent With the Stated Objectives

57. The Fourth Report and Order adopts a rule that requires

transmission of DTV signals to comply with the Standard adopted except

for the video format layer and incorporates that Standard, except for

the video format layer, into the Commission's rules. We believe that

adopting a standard is essential to the goal of universal television

service and to facilitating the conversion to digital television

service. Not requiring the use of the video format layer advances the

goals of minimizing regulation and facilitating technological

innovation. The alternatives considered, including authorizing use of

the Standard and prohibiting interference to its users, and adopting

the Standard for allocation and assignment purposes only, received no

express support in the Comments. Moreover, careful evaluation of these

alternatives showed that each failed to advance one or more of the

important goals of this proceeding. The Commission determined that not

mandating video formats sufficiently addressed its concerns with

stifling innovation so that neither a sunset of the Standard nor formal

periodic review of the Standard would be required. Instead, it

indicated that its scheduled reviews of the progress of DTV

implementation would be sufficient to keep the Commission abreast of

technological developments and marketplace conditions. No additional

action is taken on the issues of licensing of patents for DTV

technology or provision for closed captioning information to be carried

by DTV stations using the standard adopted.

58. Pursuant to the RFA, 5 U.S.C. Sec. 603(c), we have considered

whether there is a significant economic impact on a substantial number

of small entities. The action taken does not impose additional burdens

on small entities. The Fourth Report and Order in itself does not

mandate a conversion to digital television, only requiring that digital

television signals that are transmitted conform to certain standards.

The details of requiring the conversion will be taken up in a future

Report and Order, which will consider alternatives to minimize the

economic impact of that conversion on small entities.

VI. Report to Congress

59. The Commission shall send a copy of this Final Regulatory

Flexibility Analysis along with this Fourth Report and Order in a

report to Congress pursuant to the Small Business Regulatory

Enforcement Fairness Act of 1996, codified at 5 U.S.C.

Sec. 801(a)(1)(A). A copy of this FRFA will also be published in the

Federal Register.

Paperwork Reduction Act. 60. No impact.

Contract With America Advancement Act. 61. Major rule.

Ordering Clauses. 62. Accordingly, it is ordered that, pursuant to

Sections 4(i) & (j) and 303(r) of the Communications Act of 1934 as

amended, 47 U.S.C. Secs. 154(i), (j) 303(r), Part 73 of the

Commission's Rules is amended as set forth in ``Rule Changes,'' below.

63. It is further ordered that, pursuant to the Contract with

America Advancement Act of 1996, the rule amendments set forth in

``Rule Changes'' shall be effective [either 60 days after publication

in the Federal Register or after the receipt by Congress and the

General Accounting Office of a report] in compliance with the Contract

with America Advancement Act of 1996, Pub. L. No. 104-121, whichever is

later.

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

this Fourth Report and Order, including the Final Regulatory

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

Business Administration in accordance with Section 603(a) of the

Regulatory Flexibility Act, Pub. L. No. 96-354, 94 Stat. 1164, 5 U.S.C.

Sec. 601 et. seq.

List of Subjects in 47 CFR Part 73

Radio broadcast services.

Federal Communications Commission.

William F. Caton,

Acting Secretary.

Rule Changes

Part 73 of Title 47 of the Code of Federal Regulations is amended

as follows:

[[Page 14015]]

PART 73--RADIO BROADCAST SERVICES

1. The authority citation for Part 73 continues to read as follows:

Authority: Secs. 303, 48 Stat., as amended, 1082; 47 U.S.C. 154,

as amended.

2. Section 73.682 is amended by adding paragraph (d) as follows:

Sec. 73.682 TV transmission standards.

* * * * *

(d) Digital broadcast television transmission standard.

Transmission of digital broadcast television (DTV) signals shall comply

with the standards for such transmissions set forth in Advanced

Television Systems Committee (ATSC) Doc. A/52 (``ATSC Standard Digital

Audio Compression (AC-3), 20 Dec 95'') and ATSC Doc A/53 (``ATSC

Digital Television Standard, 16 Sep 95''), except for Section 5.1.2

(``Compression format constraints'') of Annex A (``Video Systems

Characteristics'') and the phrase ``see Table 3'' in Section 5.1.1

Table 2 and Section 5.1.2 Table 4. Although not incorporated herein by

reference, licensees may also consult ATSC Doc. A/54 (``Guide to the

Use of the ATSC Digital Television Standard, 4 Oct 95'') for guidance.

This incorporation by reference was approved by the Director of the

Federal Register in accordance with 5 U.S.C. 552(a) and 1 CFR part 51.

Copies may be inspected at the Federal Communications Commission, 1919

M Street, NW., Washington, DC 20554 or at the Office of the Federal

Register, 800 N. Capitol Street, NW., Washington, DC. Copies of ATSC A/

52, A/53, and A/54 can be obtained from the Commission's contract

copier or from the Advanced Television Systems Committee, 1750 K

Street, NW., Suite 800, Washington, DC 20006. They are also available

in their entirety on the Internet at http://www.atsc.org.

[FR Doc. 97-7368 Filed 3-24-97; 8:45 am]

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